PIPER JAFFRAY & CO. BOENNING & SCATTERGOOD, INC NW CAPITAL MARKETS, INC.

Transcription

1 NEW ISSUE BOOK-ENTRY ONLY Insured Bond Rating: S&P Global Ratings AA (stable outlook) Insured By: Build America Mutual Assurance Company Underlying Bond Rating: S&P Global Ratings A+ (stable outlook) (See Bond Insurance and Ratings herein) In the opinion of Bond Counsel, under existing law and assuming continuing compliance by the Municipal Authority of Westmoreland County (the Authority ) with certain covenants related to the Internal Revenue Code of 1986, as amended (the Code ) interest on the 2016 Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax; however, interest with respect to the 2016 Bonds may be taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax on certain corporations. Bond Counsel s opinion assumes compliance by the Authority with all requirements of the Code that must be satisfied subsequent to the issuance of the 2016 Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. Furthermore, in the opinion of Bond Counsel, the 2016 Bonds are exempt from personal property taxes in Pennsylvania, and the interest on the 2016 Bonds is exempt from Pennsylvania corporate net income tax and personal income tax. See TAX EXEMPTION AND OTHER TAX MATTERS. $184,475,000 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY (Westmoreland County, Pennsylvania) Municipal Service Revenue Bonds, Series of 2016 Dated: Date of Settlement Due: February 15 and August 15, as shown on the inside front cover Interest Due: February 15 and August 15 First Interest Payment Due: February 15, 2017 The Municipal Service Revenue Bonds, Series of 2016 (the 2016 Bonds ) are issuable only in fully registered form without coupons, and when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). So long as Cede & Co. is the registered Bank of New York Mellon Trust Company, N.A., as Trustee. So long as Cede & Co. is the registered owner, the Trustee will pay principal of, premium, if any, Redemption: The 2016 Bonds are subject to optional and mandatory redemption prior to their stated maturity as more fully set forth herein. See Purpose: The proceeds to be derived by the Authority from the issuance and sale of the 2016 Bonds will be used to: (a) currently refund a portion of its outstanding Municipal Service Revenue Bonds, Refunding Series A of 2006, (b) fund certain of the Authority s budgeted capital expenditures (together, the THE 2016 BONDS ARE LIMITED OBLIGATIONS OF THE MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY (THE AUTHORITY ) PAYABLE SOLELY FROM THE RECEIPTS AND REVENUES OF THE AUTHORITY DERIVED FROM THE OPERATION OF ITS MUNICIPAL SERVICE SYSTEM. NEITHER THE GENERAL CREDIT NOR THE TAXING POWER OF THE COUNTY OF WESTMORELAND OR THE COMMONWEALTH OF PENNSYLVANIA OR ANY OTHER POLITICAL SUBDIVISION OR INSTRUMENTALITY THEREOF IS PLEDGED FOR THE PAYMENT OF THE 2016 BONDS. THE AUTHORITY HAS NO TAXING POWER. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY. Authority for Issuance: The 2016 Bonds have been executed and delivered by the Authority pursuant to the provisions of the Municipality Authorities Act, Statement to obtain information essential to the making of an informed investment decision. Company, New York, New York, on or about August 15, PIPER JAFFRAY & CO. BOENNING & SCATTERGOOD, INC NW CAPITAL MARKETS, INC.

2 $184,475,000 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY (Westmoreland County, Pennsylvania) Municipal Service Revenue Bonds, Series of 2016 Maturity Schedule Date: Date of Settlement Due: As shown below Maturity Date Principal Amount Rate Yield Price CUSIPs (1) 02/15/2017 $1,285, % 0.760% QB5 08/15/ , % 0.840% QC7 08/15/ , % 0.970% QD5 08/15/ , % 1.080% QE3 08/15/ , % 1.260% QF0 08/15/ , % 1.420% QG8 08/15/ , % 1.620% QH6 08/15/ , % 1.770% QJ2 08/15/2024 6,960, % 1.850% QK9 08/15/ ,785, % 1.950% QL7 08/15/ ,385, % 2.040% (2) QM5 08/15/ ,020, % 2.130% (2) QN3 08/15/ ,660, % 2.200% (2) QP8 $37,830, % Term Bond due August 15, 2038 (3) at (2) to Yield 2.640% QQ6 (1) $12,500, % Term Bond due August 15, 2042 (3)(4) at to Yield 3.110% QR4 (1) $74,255, % Term Bond due August 15, 2042 (3)(4) at (2) to Yield 2.680% QS2 (1) (1) The CUSIP numbers set forth in this Official Statement are copyrighted by the American Bankers Association. CUSIP data herein is provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc., and neither the Authority nor the Underwriters takes any responsibility for the accuracy thereof. These data are not intended to create a database and do not serve in any way as a substitute for the CUSIP Service Bureau. (2) Priced to the first optional call date of August 15, (3) Term Bonds. (4) Maturities are bifurcated.

3 Municipal Authority of Westmoreland County (Westmoreland County, Pennsylvania) 124 Park & Pool Road New Stanton, PA Phone: (724) Fax: (724) MEMBERS OF THE AUTHORITY BOARD Board Member Office Held Term Expiration Randy Roadman... Chairman December 31, 2016 Bruce A. Robinson... Vice Chairman.December 31, 2017 Jerome DeFabo, Sr.... Secretary..December 31, 2018 Dr. Jawdat Nikoula... Treasurer..December 31, 2020 Vicki Vittone... Assistant Secretary/Treasurer...December 31, 2019 MANAGER Resource Development and Management, Inc. Pittsburgh, Pennsylvania SOLICITOR Scott E. Avolio, Esq. Greensburg, Pennsylvania CONSULTING ENGINEER Gibson Thomas Engineers, Inc. Latrobe, Pennsylvania TRUSTEE The Bank of New York Mellon Trust Company, N.A. Pittsburgh, Pennsylvania AUDITORS DeLuzio & Company, LLP Greensburg, Pennsylvania BOND COUNSEL Campbell & Levine, LLC Pittsburgh, Pennsylvania UNDERWRITERS' COUNSEL Obermayer Rebmann Maxwell & Hippel LLP Pittsburgh, Pennsylvania UNDERWRITERS Piper Jaffray & Co. Boenning & Scattergood, Inc. NW Capital Markets, Inc. DISSEMINATION AGENT Digital Assurance Certification, LLC Orlando, Florida

4 This Official Statement does not constitute an offering of any security other than the 2016 Bonds specifically offered hereby. No dealer, broker, salesman or other person has been authorized to give any information or make any representations other than those contained in this Official Statement in connection with the offering made hereby, and if given or made, such information or representations must not be relied upon as having been authorized by the Authority or the Underwriters. Neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Authority since the date hereof. This Official Statement does not constitute an offer or solicitation in any State in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. The information set forth herein has been obtained from sources which are believed to be reliable, but no guarantee is made as to the accuracy or completeness of such information and its inclusion herein is not to be construed as a representation by the Underwriters. This Official Statement contains statements which, to the extent they are not recitations of historical fact, constitute forward looking statements. In this respect, the words estimate, project, anticipate, expect, intend, believe and similar expressions are intended to identify forward looking statements. A number of important factors affecting the Authority and its programs could cause actual results to differ materially from those stated in the forward looking statements. The information set forth herein relative to The Depository Trust Company, New York, New York ( DTC ) has been supplied to the Authority by DTC for inclusion herein. Such information has not been independently verified by the Authority, and the Authority makes no representation as to the accuracy or completeness of such information. References in this Official Statement to statutes, laws, rules, regulations, resolutions, agreements, reports and documents do not purport to be comprehensive or definitive, and all such references are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein. This Official Statement is distributed in connection with the sale of the 2016 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2016 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE ORDER AND PLACEMENT OF MATERIALS IN THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES, ARE NOT DEEMED TO BE A DETERMINATION OF RELEVANCE, MATERIALITY OR IMPORTANCE, AND THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES, MUST BE CONSIDERED IN ITS ENTIRETY. THE OFFERING OF THE 2016 BONDS IS MADE ONLY BY MEANS OF THIS ENTIRE OFFICIAL STATEMENT. The Underwriters have reviewed the information in this Official Statement pursuant to their responsibilities to investors under the federal securities laws, but the Underwriters do not guarantee the accuracy or completeness of such information. THE UNDERWRITERS HAVE PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT: THE UNDERWRITERAS HAVE REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT PURSUANT TO THEIR RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS, BUT THE UNDERWRITERS DO NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. Build America Mutual Assurance Company ( BAM ) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading Bond Insurance and Appendix F - Specimen Municipal Bond Insurance Policy.

5 TABLE OF CONTENTS Page Introduction... 1 Authority... 1 Security for the 2016 Bonds... 2 Purposes of the 2016 Bonds... 2 Sources and Uses of Funds... 3 The 2016 Bonds... 3 Book-Entry-Only System... 4 Redemption... 6 Bond Insurance... 7 Bond Insurance Risk Factors... 8 Description of the Service Area... 9 History and Present Operations of the Water System Capital Projects The Trust Indenture Management Agreement Risk Factors Tax Exemption and Other Tax Matters Continuing Disclosure Undertaking Financial Statements Negotiability of 2016 Bonds No Litigation Certificate Legal Matters Ratings Underwriting Miscellaneous APPENDICES: Engineer's Annual Report and Budget 5 Year Capital Expenditure Plan... Appendix A Demographic and Economic Information... Appendix B Authority's Audited Financial Statements 2015 and Appendix C Form of Opinion of Bond Counsel... Appendix D Form of Continuing Disclosure Certificate... Appendix E Specimen Municipal Bond Insurance Policy... Appendix F Form of Disclosure Dissemination Agent Agreement... Appendix G

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7 OFFICIAL STATEMENT $184,475,000 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY (Westmoreland County, Pennsylvania) Municipal Service Revenue Bonds, Series of 2016 INTRODUCTION This Official Statement, including the Cover Page hereof and the Appendices hereto, is furnished by the Municipal Authority of Westmoreland County, Westmoreland County, Pennsylvania (the "Authority"), in connection with the offering of the Authority's $184,475,000 principal amount of Municipal Service Revenue Bonds, Series of 2016 (the "2016 Bonds"). The 2016 Bonds are being issued pursuant to the Pennsylvania Municipality Authorities Act, 53 Pennsylvania Consolidated Statutes Annotated 5601 et seq., as amended (the "Authorities Act"), and pursuant to a Trust Indenture, dated as of October 1, 1993 (the "1993 Indenture") as amended and supplemented by a First Supplemental Trust Indenture dated as of July 15, 1995 (the "First Supplemental Indenture"), a Second Supplemental Trust Indenture dated as of July 15, 1996 (the "Second Supplemental Indenture")' a Third Supplemental Trust Indenture dated as of February 15, 1998 (the "Third Supplemental Indenture")' a Fourth Supplemental Trust Indenture dated May 18, 1999 (the "Fourth Supplemental Indenture"), a Fifth Supplemental Trust Indenture dated December 1, 2000 (the "Fifth Supplemental Indenture"), a Sixth Supplemental Trust Indenture dated August 1, 2001, (the "Sixth Supplemental Indenture") a Seventh Supplemental Trust Indenture dated August 15, 2003 (the "Seventh Supplemental Indenture"), an Eighth Supplemental Indenture dated as of November 1, 2005 (the "Eighth Supplemental Indenture"), a Ninth Supplemental Trust Indenture dated as of November 1, 2006 (the "Ninth Supplemental Indenture"), a Tenth Supplemental Trust Indenture dated as of December 15, 2009 (the "Tenth Supplemental Indenture"), an Eleventh Supplemental Trust Indenture dated as of May 13, 2010 (the Eleventh Supplemental Indenture ), a Twelfth Supplemental Trust Indenture dated as of May 1, 2013 (the Twelfth Supplemental Indenture ), a Thirteenth Supplemental Trust Indenture dated as of March 1, 2015 (the Thirteenth Supplemental Indenture ) and a Fourteenth Supplemental Trust Indenture dated as of August 15, 2016 (the Fourteenth Supplemental Indenture and together with the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh Supplemental Indenture, the Twelfth Supplemental Indenture and the Thirteenth Supplemental Indenture, and the Original Trust Indenture, the "Trust Indenture ), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as successor trustee (the "Successor Trustee"). The 2016 Bonds and the Fourteenth Supplemental Trust Indenture have been authorized by a Resolution of the Authority adopted on April 13, 2016 (the "Resolution"). The Authority has previously issued various series of bonds under the Trust Indenture, of which a portion will remain Outstanding on the date of issuance of the 2016 Bonds which, together with the 2016 Bonds, are referred to herein as the "Bonds." The 2016 Bonds are issuable only as fully registered bonds without coupons, and when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company ("DTC"), New York, New York. See "THE 2016 Bonds Book-Entry-Only System" herein. Neither delivery of this Official Statement nor any sale of the 2016 Bonds made hereunder shall, under any circumstances, create any implication that there have been no changes in the affairs of the Authority, the townships, boroughs, communities and other areas serviced by the Authority since the date of this Official Statement or the earliest date as of which certain information contained herein is given. AUTHORITY The Municipal Authority of Westmoreland County was incorporated on April 15, 1942 under the Authorities Act pursuant to a resolution adopted by the Commissioners of Westmoreland County on April 9, 1942 and now exists under and is governed by the Authorities Act. The term of existence of the Authority was extended to December 29,

8 The Authority is authorized by law and by its charter to acquire, hold, construct, improve, maintain, operate, own and lease, either in the capacity of lessor or lessee, water works, water supply works, water distribution systems, sewers, sewer systems, or part thereof, and sewage treatment works, including works for treating and disposing of industrial waste and facilities and equipment for the collection, removal or disposal of ashes, garbage, rubbish and other refuse materials, by incineration, landfill, or other methods. The Authority is governed by a Board of five members who are appointed by the Commissioners of Westmoreland County. Each member serves for a term of five years, and the terms of the members are staggered so that the term of one member expires each year. SECURITY FOR THE 2016 BONDS Under the Trust Indenture, the principal of and interest on the 2016 Bonds is payable solely from the Receipts and Revenues of the Authority's Municipal Service System and all moneys deposited and held under the Trust Indenture (except for the Rebate Fund), all to the extent provided in the Trust Indenture. The Trust Indenture contains a covenant of the Authority to maintain, charge and collect allowable rates, rentals and other charges for the use of the Municipal Service System which will be sufficient at all times to pay the Authority's administrative and operating expenses and 110% of the debt service requirements with respect to all Outstanding Bonds (see "THE TRUST INDENTURE-Rate Covenant"). The Municipal Service System includes both the Water System and the Wastewater System. Since the Water System generates more than 88% of the Municipal Service System Receipts and Revenues, the following sections focus on the Water System. See Appendix A - "Engineer's Annual Report and Budget and 5 Year Capital Expenditure Plan for data regarding the Wastewater System and see Appendix C "Authority's Audited Financial Statements 2015 and 2014" for combined Municipal Service System financial data. The Trust Indenture creates a Debt Service Reserve Fund, in which is to be maintained by the Trustee an amount equal to the Maximum Annual Debt Service on all Outstanding Bonds. The Authority is required to make quarterly deposits with the Trustee in amounts sufficient to pay the debt service of all Bonds Outstanding when due. Under the Trust Indenture, the Authority is required to maintain on deposit with the Trustee for the credit of the Debt Service Reserve Fund, an amount equal to the Reserve Requirement. See THE TRUST INDENTURE Debt Service Reserve Fund. Municipal Service Rates The Authorities Act affords the Authority the exclusive power and right, subject to court review on a customer's petition, to fix, alter, charge and collect reasonable and uniform rates and other charges, in the area served by its facilities for the purpose of providing for the payment of the expenses of the Authority, the construction, improvement, repair, maintenance and operation of its facilities and properties, the payment of the principal of and interest on its obligations, and to fulfill the terms and provisions of any agreements made with the purchasers or holders of any such obligations. Water System. Pennsylvania law provides that the Authority may, in the event of nonpayment of its rates by any customer, shut off service to such customer's premises until such time as water rates have been paid in full. The Authority's collection methods, including the termination of service under certain circumstances, are similar to methods which have been upheld by the courts in Pennsylvania, and the Authority believes its methods are reasonable and appropriate. The Authority may also terminate water service if notified to do so by a provider of sewer service to a customer of the Authority. The Authority's current residential rates reflect a 25% increase from the previous year and have been in effect since April 1, The current rate schedules appear in Display III of the Engineer's Annual Report and Budget (the "Engineer's Annual Report and Budget") included in this Official Statement as Appendix A. The current residential rates will be subject to increases of 7% in 2017 and PURPOSES OF THE 2016 BONDS The proceeds to be derived by the Authority from the issuance and sale of the 2016 Bonds will be used to (a) currently refund a portion of its outstanding Municipal Service Refunding Revenue Bonds, Series A of 2006 (the "2006A Refunded Bonds"), (b) fund certain of the Authority's budgeted capital expenditures (together, the "Capital Projects"), (c) funding a deposit to the Debt Service Reserve Fund (the Project ) and (d) pay the costs of issuing the 2016 Bonds. 2

9 Refunding Program Upon delivery of the 2016 Bonds, the Authority will deposit a portion of the proceeds of the 2016 Bonds with The Bank of New York Mellon Trust Company, N.A., Pittsburgh, Pennsylvania, as paying agent for the Authority s Municipal Service Refunding Revenue Bonds, Series A of 2006 in an amount sufficient to currently refund the 2006A Refunded Bonds and pay the principal and interest due on the 2006A Refunded Bonds on the redemption date of August 15, Capital Projects Funded with 2016 Bonds Upon delivery of the 2016 Bonds, the Authority will deposit a portion of the proceeds of the 2016 Bonds in the Capital Project Fund pursuant to the Indenture for the purpose of financing certain Capital Projects of the Authority. For a discussion of the Capital Projects, see CAPITAL PROJECTS. SOURCES AND USES OF FUNDS The estimated uses of 2016 Bond proceeds are summarized as follows: Sources of Funds Bond Principal... $184,475, Plus Net Original Issue Premium... 34,347, Plus GIC Termination Payment... 1,175, Total Sources... $219,997, Uses of Funds: Capital Project Fund Deposit... $150,893, Debt Service Reserve Fund Deposit... 5,979, Cash Refunding Deposit... 61,648, Costs of Issuance (1)... 1,472, Additional Proceeds... 3, Total Uses... $219,997, (1) Includes the Underwriters' discount, legal fees and expenses, printing fees, rating fee, Trustee fees, verification agent fee, insurance premium and other related fees. Description THE 2016 BONDS The 2016 Bonds will be dated the date of settlement. The 2016 Bonds will bear interest at the rates set forth in the inside front cover hereof, payable on each February 15 and August 15 (each an "Interest Payment Date") and are issuable in denominations of $5,000 or any whole multiple thereof. The 2016 Bonds mature on the dates and in the amounts set forth on the inside front cover page hereof. Each 2016 Bond shall be dated the date of its delivery and shall bear interest (computed on a 360 day year comprised of twelve months of 30 days) from the Interest Payment Date next preceding the date of authentication of such 2016 Bonds unless (a) the 2016 Bond is authenticated as of an Interest Payment Date, in which event the 2016 Bond shall bear interest from said Interest Payment Date; or (b) such 2016 Bond is authenticated prior to the first Interest Payment Date, in which event such 2016 Bond shall bear interest from August 15, 2016; or (c) such 2016 Bond is authenticated after the last day of the month next preceding an Interest Payment Date (the "Regular Record Date") and before the next succeeding Interest Payment Date, in which event such 2016 Bond shall bear interest from such next succeeding Interest Payment Date; or (d) as shown by the records of the Trustee, interest on such 2016 Bond is in default, in which event such 2016 Bond shall bear interest from the date on which interest was last paid on such 2016 Bond. 3

10 BOOK-ENTRY-ONLY SYSTEM The 2016 Bonds will be issued as fully-registered bonds in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York ( DTC ), as registered owners of the 2016 Bonds. Purchasers of such 2016 Bonds will not receive physical delivery of bond certificates. For purposes of this Official Statement, so long as all of the 2016 Bonds are immobilized in the custody of DTC, references to holders or owners of the 2016 Bonds (except under TAX EXEMPTION AND OTHER TAX MATTERS ) mean DTC or its nominee. The information in this section has been obtained from materials provided by DTC for such purpose. The Authority (herein referred to as the "Issuer, and the Underwriters do not guaranty the accuracy or completeness of such information and such information is not to be construed as a representation of the Authority or the Underwriters. 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. (DTC'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 maturity of the Securities, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market 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 whollyowned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's rating 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 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 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. 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 affect 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. 4

11 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. 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. 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). Principal, premium and interest 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 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, the Paying Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 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. 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. Discontinuance of Book-Entry-Only System The book-entry system for registration of the ownership of the 2016 Bonds may be discontinued at any time if: (i) DTC determines to resign as securities depository for the 2016 Bonds; or (ii) the Authority determines that continuation of the system of book-entry transfers through DTC (or through a successor securities depository) is not in the best interests of the Beneficial Owners. In either such event (unless the Authority appoints a successor securities depository), 2016 Bonds will then be delivered in registered certificate form to such persons, and in such maturities and principal amounts, as may be designated by DTC, but without any liability on the part of the Authority, or the Paying Agent for the accuracy of such designation. Whenever DTC requests the Authority or the Paying Agent to do so, the Authority or the Paying Agent shall cooperate with DTC in taking appropriate action after reasonable notice to arrange for another securities depository to maintain custody of certificates evidencing the 2016 Bonds. 5

12 REDEMPTION Optional Redemption The 2016 Bonds maturing on or after August 15, 2026 shall be subject to redemption prior to maturity at the option of the Authority on any date on or after August 15, 2025 in whole or in part, in any order of maturity and by lot within a maturity, in each case, upon payment of the redemption price of 100% of the par value of such 2016 Bonds together with interest accrued to the date set for redemption. Mandatory Redemption The 2016 Bonds maturing on August 15 of the years set forth in the schedule below are subject to mandatory sinking fund redemption in accordance with the schedule below, such redemption (or payments at maturity) to be made at a redemption price of 100% of the principal amount thereof plus accrued interest to the date fixed for redemption on August 15 of the years and in the principal amount set forth as follows: 2016 Bonds Maturing August 15, 2038 Redemption Date (August 15) Principal Amount to be Redeemed 2037 $14,415, * 23,415, Bonds Maturing August 15, 2042 (OID) Redemption Date (August 15) Principal Amount to be Redeemed 2039 $3,350, ,525, ,125, * 2,500, Bonds Maturing August 15, 2042 (OIP) Redemption Date (August 15) Principal Amount to be Redeemed 2039 $21,230, ,245, ,035, * 6,745,000 * Stated Maturity. Manner of Redemption If a 2016 Bond is of a denomination larger than $5,000, a portion of such 2016 Bond may be redeemed. For the purposes of redemption, a 2016 Bond shall be treated as representing that number of 2016 Bonds which is obtained by dividing the principal amount thereof by $5,000, each $5,000 portion of such 2016 Bond being subject to redemption. In the case of partial redemption of a 2016 Bond, payment of the redemption price shall be made only upon surrender of such 2016 Bond in exchange for 2016 Bonds of authorized denominations in aggregate principal amount equal to the unredeemed portion of the principal amount thereof. 6

13 BOND INSURANCE BOND INSURANCE POLICY Concurrently with the issuance of the 2016 Bonds, Build America Mutual Assurance Company ( BAM ) will issue its Municipal Bond Insurance Policy for the 2016 Bonds (the Policy ). The Policy guarantees the scheduled payment of principal of and interest on the 2016 Bonds when due as set forth in the form of the Policy included as an appendix to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. BUILD AMERICA MUTUAL ASSURANCE COMPANY BAM is a New York domiciled mutual insurance corporation. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM. The address of the principal executive offices of BAM is: 200 Liberty Street, 27 th Floor, New York, New York 10281, its telephone number is: , and its website is located at: BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law. BAM s financial strength is rated AA/Stable by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ). An explanation of the significance of the rating and current reports may be obtained from S&P at The rating of BAM should be evaluated independently. The rating reflects the S&P s current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the 2016 Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the 2016 Bonds. BAM only guarantees scheduled principal and scheduled interest payments payable by the issuer of the 2016 Bonds on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the Policy), and BAM does not guarantee the market price or liquidity of the 2016 Bonds, nor does it guarantee that the rating on the 2016 Bonds will not be revised or withdrawn. Capitalization of BAM BAM s total admitted assets, total liabilities, and total capital and surplus, as of March 31, 2016 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $475.0 million, $41.6 million and $433.4 million, respectively. BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions. BAM s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM s website at is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published. BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading BOND INSURANCE. 7

14 Additional Information Available from BAM Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM s analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM's website at buildamerica.com/creditinsights/. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.) Credit Profiles. Prior to the pricing of bonds that BAM has been selected to insure, BAM may prepare a pre-sale Credit Profile for those bonds. These pre-sale Credit Profiles provide information about the sector designation (e.g. general obligation, sales tax); a preliminary summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. Subsequent to closing, for any offering that includes bonds insured by BAM, any pre-sale Credit Profile will be updated and superseded by a final Credit Profile to include information about the gross par insured by CUSIP, maturity and coupon. BAM pre-sale and final Credit Profiles are easily accessible on BAM's website at buildamerica.com/obligor/. BAM will produce a Credit Profile for all bonds insured by BAM, whether or not a pre-sale Credit Profile has been prepared for such bonds. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.) Disclaimers. The Credit Profiles and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and statements in the Credit Profiles and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Credit Profiles and Credit Insight videos are prepared by BAM; they have not been reviewed or approved by the issuer of or the underwriter for the Bonds, and the issuer and underwriter assume no responsibility for their content. BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initial offering or otherwise. BOND INSURANCE RISK FACTORS In the event of a default in the payment of principal or interest with respect to the 2016 Bonds when any such payment becomes due, any owner of the 2016 Bonds will have a claim under the Policy for such payment. However, in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or resulting from any default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, any payments to be made pursuant to the Policy will be made in such amounts and at such times as such payments would have been due had there not been any such acceleration. In addition, the Policy does not insure the payment of any redemption premium. To the extent that any payment of principal and interest by the Authority in connection with a mandatory or optional prepayment of the 2016 Bonds is recovered by the Authority from any owner of the 2016 Bonds as a voidable preference under applicable bankruptcy law, such payments are covered by the Policy. However, such payments will be made by BAM at such times and in such amounts as such payments would have been due had there been no such prepayment by the Authority, unless BAM chooses to pay such amounts at an earlier date. Under most circumstances, any default in the payment of principal and interest does not accelerate the obligations of BAM without its consent. BAM may direct, and must consent to, any remedies that the Paying Agent exercises following such a default and BAM s consent may be required in connection with amendments to the Resolution in those circumstances. In the event that BAM becomes obligated to make payments with respect to the 2016 Bonds, no assurance is given that such event will not adversely affect the market price of the 2016 Bonds or the marketability (liquidity) for the 2016 Bonds. The insured long-term ratings on the 2016 Bonds are dependent on the financial strength of BAM and its claims paying ability. BAM s financial strength and claims paying ability are predicated upon a number of factors that could change over time. No assurance is given that the long-term ratings of BAM and, therefore, the ratings on the 2016 Bonds insured will not be subject to downgrade, and such event could adversely affect the market price of the 2016 Bonds or the marketability (liquidity) for the 2016 Bonds. 8

15 The obligations of BAM under the Policy are general obligations of BAM and, upon an event of default by BAM, the remedies available to the Paying Agent may be limited by applicable bankruptcy law or other similar laws related to the insolvency of entities like BAM. Neither the Authority nor the Underwriters have made an independent investigation into the claims paying ability of BAM and no assurance or representation regarding the financial strength or projected financial strength of BAM is given. Thus, when making an investment decision, potential investors should carefully consider the ability of the Authority to pay principal of and interest on the 2016 Bonds and the claims paying ability of BAM, particularly over the life of their investment. See BOND INSURANCE herein for further information provided by BAM with respect to itself and the Policy, which includes further instructions for obtaining current financial information concerning BAM. DESCRIPTION OF THE SERVICE AREA The water system serves approximately 121,000 customers, encompassing more than 350,000 residents, with approximately 24 billion gallons of potable water and about 730 million gallons of unfiltered water annually in five counties. The principal county served is Westmoreland; portions of Allegheny, Armstrong, Fayette and Indiana Counties are also served. Westmoreland County (the "County") is bordered on the north and east by Armstrong, Butler, Indiana, Cambria and Somerset Counties and on the west and south by Allegheny, Washington and Fayette Counties. The City of Greensburg, the County seat, lies 30 miles east of the City of Pittsburgh. Westmoreland County is comprised of 1,033 square miles and has a population of 365,169 persons as established by the 2010 U.S. Census Bureau. The service area of the Authority includes the municipalities of Greensburg, Jeannette, Vandergrift, Irwin, Scottdale, Mt. Pleasant, McKeesport, Port Vue, White Oak, Youngwood, Murrysville, New Stanton, West Newton, Leechburg and Ligonier which, together with their satellite township residential communities, form the population centers. The largest township, Hempfield, has a population of 43,241 (2010 U.S. Census) residents. In total, over 75 municipalities are included in the service area. These municipalities are well established communities offering residential neighborhoods and commercial districts to supply the needs of the residents. The City of Greensburg, as the County seat, serves as the County's principal professional, business and banking center. The other towns were originally established to serve as the principal place of residence for persons associated with industry located there. herein. For a further description of the County, see "APPENDIX B: Demographic and Economic Information" While the principal business of the Authority is the operation of a water collection, treatment and distribution system, the Authority also maintains a nonoperating landfill in Loyalhanna Township, Westmoreland County. On April 1, 2001, the Authority entered the wastewater business through the purchase of the assets of the Municipal Authority of the Borough of Avonmore. The Authority subsequently purchased the wastewater system of the Ligonier Township Municipal Authority on December 29, 2006, and the wastewater system of the Borough of White Oak on January 8, On March 1, 2011, the Authority acquired the assets of the Smithton 1-70 Industrial Park Wastewater System from the Westmoreland County Industrial Park Authority. The present wastewater system serves approximately 10,000 customers (as opposed to the approximately 121,000 water system customers) and in the following pages the operating data presented are with respect to the water system only. Financial statement and budgetary data included herein, in the consulting engineer s Annual Report Year Ending March 31, 2016 and Budget Year Ending March 31, 2017 and the Authority 5 Year Capital Expenditure Plan January 2016 included in this Official Statement as Appendix A and in the Authority s audited financial statements for the years ended March 31, 2014 and March 31, 2015 included in this Official Statement as Appendix C include all operations and assets of the Authority. On April 1, 2015, the Authority acquired the assets of the City of Jeannette Municipal Sewer Authority ( COJMSA ) for approximately 23 million dollars. As part of the transaction, the Authority assumed approximately 18 million dollars of COJMSA s outstanding debt and made an approximately 4 million dollar cash payment to the City of Jeanette. The acquisition of the COJMSA assets was funded from the proceeds of the Authority s 2013 bond issue. The COJMSA sewer system services 4,300 customers, with historic yearly revenues of approximately 2.9 million dollars. Annual rate increases through 2018 to pay for mandated updates to the system were implemented prior to the sale by COJMSA. The Authority assumed operation of the system on April 13,

16 On February 4, 2016, the Authority acquired the assets of the Borough of Youngwood Sewer Authority for approximately 3 million dollars. As part of the transaction, the Authority assumed approximately 2.4 million dollars of the Borough of Youngwood Sewer Authority s outstanding debt and made an approximately $600, cash payment to the Borough of Youngwood. The Youngwood Sewer system services 1,365 customers, with historic yearly revenues of approximately $620, HISTORY AND PRESENT OPERATIONS OF THE WATER SYSTEM The water system of the Authority was developed by the integration of established systems acquired from: The Citizens Water Company of Scottdale in 1943; the Westmoreland Water Company and the Vandergrift Water Company in 1950; the North Huntingdon Township Authority, the West Newton Water Company, and the Rostraver Construction Company in 1956; the McKeesport Water Authority, the White Oak Water Authority, and the Village of Herminie in 1986; the Borough of Port Vue in 1987; the Borough of Wall, Forward Township and Bell Township in 1993; the Village of Moween, Village of Truxall and Loyalhanna Township in 1994; North Versailles Township in May 1996; Kiski Township Water Authority in 1997; Saltsburg Borough in 2000, and Ligonier Borough in January In February of 1999, the Authority entered into an agreement with Resource Development and Management, Inc. under which such company is responsible for providing management services to the Authority in connection with the Authority's water system. See "Management Agreement" herein. Since 1950, the Authority has developed two new supply sources with modern treatment and pumping facilities and has installed approximately 2,100 miles of mains to serve new customers and interconnect the various parts of the service area. The service area, as now comprised, extends approximately 25 miles from east to west and 40 miles from north to south, and incorporates approximately 2,400 miles of pipeline. The Beaver Run Reservoir, which is one of the Authority's principal sources of water supply, was constructed by the Authority and first placed in service in 1952 and then enlarged in It has a present capacity of approximately 11 billion gallons, and an estimated safe permitted yield of 35 million gallons of water per day. The Youghiogheny River is the second principal source of water supply, with a drainage area of 1,326 square miles and a minimum flow of 213 million gallons of water per day. The newest treatment facility was constructed at Beaver Run Reservoir and went on line in July of It has a rated capacity of 24 million gallons per day. The Authority also operates two other water treatment plants in the southern and western parts of its service area. The facility near Connellsville (known as the Indian Creek Supply Filtration Plant) has a rated capacity of 40 million gallons per day and draws its water supply from both Indian Creek and the Youghiogheny River. The facility at McKeesport was completed in 1990 with a rated capacity of 10 million gallons a day to replace the eighty-year-old plant which formerly served that city. The McKeesport plant draws its water supply from the lower Youghiogheny River just before it joins the Monongahela River. The Ligonier portion of the service district, which currently uses 0.4 million gallons per day, is supplied by a 16 waterline from the Greater Johnstown Water Authority. The supply has a capacity of 3.0 million gallons per day. This district can also be served by the Mellon Wells which has a capacity of 0.5 million gallons per day. The Authority has entered into agreements with the Plum Borough and Monroeville water authorities to provide them a minimum of 5.1 million gallons per day beginning March 27, It is estimated that the contract will generate a minimum of $2 million in additional water revenue annually. The Authority has also entered into a contract with an energy provider to supply it with an average annual supply of 6.0 million gallons of water per day also beginning in The contract is expected to generate a minimum of $2.2 million in additional water revenue annually. A notice to proceed was issued in April 2016 from the energy provider to the Authority to upgrade its infrastructure. The costs of such upgrade are to be funded by the energy provider. The Authority has also entered into an agreement with the Municipal Authority of Belle Vernon to provide them with a minimum of 400,000 gallons per day beginning approximately September It is estimated that the contract will generate a minimum of $375, in additional water revenue annually The Authority has amended an agreement with PA American to provide a minimum of 2 million gallons of water per day beginning approximately September It is estimated that the contract will generate approximately an additional $1,100,

17 Employee Relations The Authority's operators and field crews are represented by Utility Workers of America, AFL-CIO. The collective bargaining agreement expires October 15, The Authority has never experienced a work stoppage and considers its employee relations to be excellent. WATER SYSTEM INFORMATION Ten Largest Customers for the 12 months ended March 31, 2016 Customer Gallons Revenues % of Total Allegheny Ludlum Corp. 1,302,040 $ 872, % Allegheny Ludlum Corp. 227, , % Pennsylvania American Water Co 303, , % City of Duquesne 162, , % Parks Twp. Municipal Authority 86, , % Pleasant Valley Water Authority 85, , % Gilpin Twp. Municipal Authority 49, , % Pennsylvania American Water Co 67, , % Allegheny Ludlum Corp 37, , % UPMC Health System 19, , % Source: Authority s Manager Water Customers As of March 31, 2016, the Authority served 120,238 water customers. The Number of water customers served, the average daily water demand (in gallons), the miles of main in the water system and the operating revenues, for the years ended March 31, 2005 through 2016, are shown in the following table: Water Average Daily Water Year ended Customers Delivery Miles of Operating March 31 Served (million gals) Main Revenue , ,122 43,963, , ,133 44,913, , ,141 48,076, , ,219 53,909, , ,238 53,658, , ,240 55,069, , ,248 55,319, , ,252 55,302, , ,262 61,798, , ,279 71,170, , ,284 68,118, , ,284 66,315,473 Source: Authority's Manager and Daily Delivery Reports 11

18 Raw Water Supply (Surface Water Sources) Name of Source Type of Source Quality of Water Maximum Amount of Available Water Maximum Allowable (Consumptive Permit) Beaver Run Reservoir Good 11,000,000,000 Gals 34 MGD Youghiogheny River Good 14,000,000,000 Gals 50 MGD McKeesport River Good 14,000,000,000 Gals 10 MGD Mellon Wells Reservoir/Wells Good 2,000,000,000 Gals 0.5 MGD Source: Authority s Manager Water Treatment Supply Name of Facility Age Maximum Capacity Condition of Facility Beaver Run 20 years 24 MGD Good Indian Creek 46 years 45 MGD Good McKeesport 26 years 10 MGD Good Mellon Wells 24 years 0.5 MGD Good Greater Johnstown WA 3 year 3.0 MGD Good Source: Authority s Manager Water Storage Facilities Number of Storage Facilities Aggregate Capacity ,210 MG Rates The following table shows current and historic water rates, as well as increases for 2017 and Allowance Charge per Quarterly Provided for 1,000 gallons Effective Date Minimum Rate Minimum Gallons Over Minimum April 1, 2018 $61.79 /quarter 3,000 gallons $8.57 April 1, 2017 $57.75 /quarter 3,000 gallons $8.01 April 1, 2016 $53.98 /quarter 3,000 gallons $7.49 February 11, 2013 $44.18 /quarter 3,000 gallons 5.99 April 1, 2009 $35.54 /quarter 3,000 gallons 4.79 April 1, 2006 $29.78 /quarter 3,000 gallons 3.99 April 1, 2002 $23.79 /quarter 3,000 gallons 3.30 October 1, 1998 $22.66 /quarter 3,000 gallons 3.14 October 1, 1993 $22.00 /quarter 3,000 gallons 3.05 As of April 1, 2003, the Authority implemented a $1.00 quarterly capital improvement surcharge to every customer. Source: Authority's Manager 12

19 Comparative Table of Residential Rates by Supplier Name of Supplier 2016 Monthly Cost for 4,000 gallons* Municipal Authority of Westmoreland County $40.46 Indiana County Municipal Authority $64.00 Sewickley Water Authority $57.98 New Kensington Municipal Authority $48.29 Pennsylvania American Water Company $55.84 Pittsburgh Water and Sewer Authority $42.03 Greater Johnstown Water Authority $49.90 *Based on 4,000 gallons monthly Usage. Usage Source: Authority's Manager [INTENTIONALLY LEFT BLANK] 13

20 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY Comparative Summary of Net Assets and Liabilities Fiscal Year Ended March 31 Audited 2011 Audited 2012 Restated Audited 2013 Audited 2014 Audited 2015 ASSETS Current Assets: Cash and Equivalents $ 14,343,976 $ 12,016,652 $9,721,553 $15,053,682 $12,977,409 Accounts Receivable (Net of Doubtful Accounts) 3,681,407 3,720,899 4,418,637 5,261,966 4,906,342 Unbilled Water & Sewer Service 5,973,792 5,785,182 6,882,748 6,984,950 6,908,985 Surcharges Receivable 4,313,790 3,973, , , ,000 Inventory Materials & Supplies 1,745,048 1,742,804 1,835,972 1,766,335 2,133,062 Prepaid Expenses 1,704,774 1,724,413 24,736 80,323 79,083 Total Current Assets $31,762,787 $28,963,879 $23,233,646 $29,497,256 27,354,881 Non-Current Assets: Property, Plant & Equipment $456,066,251 $470,604,064 $475,924,297 $499,479,688 $532,270,047 Less: Accumulated Depreciation (144,542,858) (151,641,912) (157,100,500) (163,581,100) (171,510,597) Total Non-Current Assets $311,523,393 $318,962,152 Property, Plant and Equipment, net $318,823,797 $335,898,588 $360,759,450 Restricted Assets: Special Funds Held by Trustee $57,320,653 $49,443,642 Assets Held in Trust for Bond Holders 0 0 Restricted Cash Held by Authority 38, ,902 Total Restricted Assets $57,358,940 $50,060,544 TOTAL ASSETS $ 400,645,120 $ 397,986,575 Non-Current Assets Surcharges receivable, net of current portion $3,276,654 $ 2,999,513 $ 2,635,263 Restricted assets: Special funds held by trustee (Note 4&5) 46,235, ,884, ,079,311 Restricted cash held by authority (Note 6) 2,385,353 1,267,417 2,814,781 Total Non-Current Assets $51,897,118 $189,151, ,529,355 Total Assets 393,954, ,547, ,643,686 Deferred Outflows of Resources Deferred losses on bond refundings, net of $ 2,007,789 $ 1,841,666 1,675,543 amortization Total Deferred Outflows of Resources $ 2,007,789 $ 1,841,666 1,675,543 LIABILITIES & NET ASSETS Current Liabilities Current Portion of Long-Term Debt $ 11,936,975 $ 12,283,559 $ 12,753,904 $12,755,847 $12,874,307 Accounts Payable 2,088,554 2,324,529 2,128,015 4,999,599 4,489,677 Customer Service Deposits 1,157,917 1,279,345 1,375,950 1,462,500 1,562,720 Accrued Compensation 2,278,734 2,512,191 2,661,184 2,652,227 2,724,746 Accrued Interest 391, , ,651 1,298,699 1,295,181 Capital Lease Obligation, Current 403, , , ,105 93,497 Other Accrued Liabilities 1,109, , , , ,430 Accrued Pension 0 0 6,136 8,968 16,813 Total Current Liabilities $19,366,445 $20,020,228 $20,273,156 $24,228,457 23,826,371 Non-Current Liabilities Long-Term Debt, Net of Current Portion & Amortized Discount $201,323,347 $198,040,835 $198,962,058 $343,703,416 $337,508,269 Capital Lease Obligation, Noncurrent 683, , , , ,785 Accrued Landfill Closure Costs 820, , , , ,000 Advances for Construction 16,253,922 12,468,165 6,770,132 6,417,678 6,061,344 Accrued Other Post Employee Benefits 14,591,787 20,767,810 26,501,851 32,465,254 37,412,478 Total Non-Current Liabilities $233,672,801 $232,589,423 $233,341,656 $383,711,230 $381,742,876 Total Liabilities $253,039,246 $252,609,651 $253,614,812 $407,939,687 $405,569,247 14

21 Audited 2011 Audited 2012 Restated Audited 2013 Audited 2014 Audited 2015 Deferred gains on bond refundings, net of 29,842 27,224 24,606 amortization Total Deferred Inflows of Resources 29,842 27,224 24,606 Net Assets Invested in Capital Assets (Net of Related Debt) 90,639,204 97,611,936 Restricted 47,733,246 47,907,889 Unrestricted 9,233,424 (142,901) Total Net Assets 147,605, ,376,924 TOTAL LIABILITIES & NET ASSETS $ 400,645,120 $ 397,986,575 Net Position Net investment in capital assets 101,899,963 95,379,533 99,450,325 Restricted for capital projects 2,385,354 1,267,417 2,814,781 Unrestricted 38,032,379 51,775,496 49,460,270 Total Net Position $142,317,696 $148,422,446 $151,725,376 Source: Authority audited financial statements, FYs Note: As set forth in Note 2 to the Authority s Financial Statements for the years ended March 31, 2015 and 2014 set forth in Appendix C hereto (the Appendix C Financial Statements ), the Authority implemented Governmental Accounting Standards Board ( GASB ) 63 for its fiscal year ended March 31, 2013 which caused its Statement of Net Assets to become its Statement of Net Position and added two new classifications separate from assets and liabilities. The Authority also adopted GASB 65 for its fiscal year ended March 31, 2014, giving rise to certain reclassifications, which also required a restatement of certain data included in Appendix C with respect to the fiscal year ended March 31, Accordingly some of the data presented in this and the following table vary in manner of presentation as between the two earlier fiscal years and the two later fiscal years. The Authority during the fiscal year ended March 31, 2014 also identified certain prior errors in accounting treatment and adjusted comparative financial statements of prior years (including the data included in Appendix C with respect to the fiscal year ended March 31, 2013) to apply the corrected accounting treatment retrospectively to conform with generally accepted accounting principles. [INTENTIONALLY LEFT BLANK] 15

22 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY Comparative Summary of Statement of Revenues, Expenses and Changes in Net Assets Fiscal Year Ended March 31 Restated Audited Audited Audited Audited Audited OPERATING REVENUES Water Sales $54,528,788 $52,896,829 $55,830,260 $64,130,131 $62,758,390 Wastewater Sales 2,115,960 2,367,150 2,577,254 2,983,509 2,951,275 Other Operating Revenues 911,869 2,195,212 4,948,930 7,334,665 5,539,226 TOTAL OPERATING REVENUES $57,556,617 $57,459,191 $63,356,444 $74,448,305 $71,248,891 OPERATING EXPENSES Source of Supply $ 556,047 $ 733,282 $ 634,848 $ 912,303 $ 846,272 Treatment System 6,562,459 6,782,230 6,883,626 7,243,179 7,439,001 Distribution 12,634,572 13,200,396 15,193,272 15,727,566 15,710,701 Engineering 829, ,171 1,027,930 1,055,550 1,091,766 Wastewater System 1,856,345 2,070,594 2,219,075 2,489,182 2,651,953 Landfill 45,918 47,741 37,827 48,273 (232,390) Depreciation and Amortization 14,830,331 15,822,202 7,718,689 8,272,967 8,752,072 Commercial and General 21,771,051 23,715,930 23,599,217 24,138,224 24,234,933 Management Fee 949, , ,000 1,012,500 1,000,000 TOTAL OPERATING EXPENSES $60,035,343 $64,273,546 $58,254,484 $60,899,744 $61,494,308 OPERATING INCOME (LOSS) BEFORE NONOPERATING REVENUES AND EXPENSES ($2,478,726) ($6,814,355) $5,101,960 $13,548,561 $9,754,583 NONOPERATING REVENUES (EXPENSES) Investment Income $1,517,317 $1,701,188 $1,804,877 $2,188,043 $2,711,974 Net Increase (decrease in the fair Value of investments 0 0 5,106 (905,362) (775,782) Interest Expense (1,933,750) (3,452,327) (10,500,005) (11,243,412) (11,232,975) Gain on Sale of Property 8, , ,000 (144,643) (198,977) TOTAL NONOPERATING EXPENSES ($408,065) ($1,518,417) ($7,754,022) ($10,175,374) ($9,495,760) INCOME (LOSS) BEFORE CAPITAL CONRIBUTIONS ($2,886,791) ($8,332,772) ($2,652,062) $ 3,373,187 $ 258,823 CAPITAL CONTRIBUTIONS 3,010,802 6,103,822 4,659,600 2,731,563 3,044,107 INCREASE (LOSS) IN NET POSITION $124,011 ($2,228,950) $2,007,538 $6,104,750 $3,302,930 NET ASSETS, BEGINNING OF YEAR $147,481,863 $147,605,874 $145,376,924 $142,317,696 $148,422,446 Prior Period Adjustment* 0 0 (5,066,766) 0 0 TOTAL NET POSITION, BEGINNING OF YEAR, AS RESTATED $147,481,863 $147,605,874 $140,310,158 $142,317,696 $148,422,446 TOTAL NET POSITION, END OF YEAR $147,605,874 $145,376,924 $142,317,696 $148,422,446 $151,725,376 *See Note 16 in DeLuzio & Company, LLP March 2014 and 2013 Financial Statements. Source: Authority audited financial statements, FYs

23 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY OPERATING BUDGET FOR FISCAL YEAR ENDING MARCH 31, 2017 QUARTER ENDING 6/ QUARTER ENDING 9/30/2016 QUARTER ENDING QUARTER ENDING 3131/2017 YEAR ENDING 3/31/2017 TOTAL OPERATING REVENUES $20,490,500 $21,757,100 $20,755,400 $22,692,000 $85,695,000 OPERATING EXPENSES Source of Supply $212,700 $244,600 $223,800 $192,400 $873,500 Treatment System 1,705,000 1,833,300 1,864,400 2,030,800 7,433,500 Distribution 3,085,200 4,078,100 3,337,800 2,723,900 13,225,000 Engineering 242, , , ,400 1,085,000 Distribution Facilities 856, , ,950 1,064,550 3,805,500 Wastewater System 817, , , ,100 3,650,000 Commercial and General 5,156,700 5,088,000 5,157,100 10,030,200 25,432,000 TOTAL OPERATING EXPENSES $12,075,650 $13,376,550 $12,767,950 $17,284,350 $55,504,500 OPERATING INCOME $8,414,850 $8,380,550 $7,987,450 $5,407,650 $30,190,500 OTHER INCOME* 1,303,900 1,403,900 1,358,400 1,183,800 5,250,000 GROSS INCOME $9,718,750 $9,784,450 $9,345,850 $6,591,450 $35,440,500 DEBT EXPENSE Interest $2,058,600 $2,076,700 $2,158,800 $2,265,900 $8,560,000 Bond Discount Amortization 1,484,000 1,478,000 1,468,000 1,470,000 5,900,000 Trustee Fees and Expenses 14,500 14,100 28,000 13,400 70,000 TOTAL DEBT EXPENSE $3,557,100 $3,568,800 $3,654,800 $3,749,300 $14,530,000 EARNINGS BEFORE MANAGEMENT FEE, ADMINISTRATION EXPENSES AND DEPRECIATION $6,161,650 $6,215,650 $5,691,050 $2,842,150 $20,910,500 MANAGEMENT FEES $300,000 $300,000 $300,000 $300,000 $1,200,000 ADMINISTRATIVE EXPENSES Officers Compensation $0 $0 $0 $0 $0 Legal Fees 42,500 42,500 42,500 42, ,000 Engineering Fees 2,500 2,500 2,500 2,500 10,000 Accounting Fees 11,900 23,400 11,700 13,000 60,000 Other Administrative Expenses 2,490 2,490 2,490 2,530 10,000 TOTAL ADMINISTRATIVE EXPENSES $59,390 $70,890 $59,190 $60,530 $250,000 TOTAL MANAGEMENT FEE AND ADMINISTRATIVE EXPENSES $359,390 $370,890 $359,190 $360,530 $1,450,000 EARNINGS BEFORE DEPRECIATION $5,802,260 $5,844,760 $5,331,860 $2,481,620 $19,460,500 DEPRECIATION PROVISION 2,295,000 2,295,000 2,295,000 2,315,000 9,200,000 NET INCOME (LOSS) $3,507,260 $3,549,760 $3,036,860 $166,620 $10,260,500 * Includes interest income, contributed capital, and tapping fees Source: Authority FY 2017 Budget. 17

24 Consulting Engineer s Annual Report The duties of the Authority's consulting engineer include, among other things, the preparation of an annual report, to be filed with the Authority, the Trustee, and the Bond Insurer, concerning the maintenance, repair, condition and operation of the Municipal Service System, capital additions to be constructed or acquired, estimated Current Expenses and Gross Revenues, and necessary or advisable rate changes. The consulting engineer's Annual Report and Recommended Budget for the fiscal year beginning April 1, 2016 is included herein at Appendix A. The recommendations of the consulting engineer contained in such report have been accepted and are being implemented by the Authority. Outstanding Indebtedness The outstanding indebtedness of the Authority at March 31, 2015 is shown in its audited financial statements as of and for the years ended March 31, 2015 and March 31, 2014 included as APPENDIX C hereto. Such indebtedness includes the Bonds and certain subordinate Other Obligations (as hereinafter defined). The Other Obligations include loans from the Pennsylvania Infrastructure Investment Authority ( Pennvest ). CAPITAL PROJECTS The Authority s 5 Year Capital Expenditure Plan, dated January, 2016, prepared by the Consulting Engineer with the cooperation of Authority staff and the Manager (the Capital Expenditure Plan ), which is also included in this Official Statement at Appendix A, details an estimated $130 Million of recommended system maintenance, enhancement and upgrade capital projects to be undertaken over a five-year period beginning in The plan states that it comprises a flexible framework in that over its term other high priority capital improvement needs may become known and require funding proceeds in lieu of some of the listed projects. Funding for such plan is expected to come from the 2016 Bonds, the Authority s annual operating revenues (see the Consulting Engineer Annual Report and Operating Budget document also included herein in Appendix A) and Pennvest and other loans, as detailed in the Notes to the Authority s audited financial statements for the years ended March 31, 2015 and 2014, attached hereto as Appendix C. Acquisitions Approximately 25 million dollars of the proceeds of the Bonds will be used for future acquisitions of water and wastewater systems. THE TRUST INDENTURE The following summarizes certain of the provisions of the Trust Indenture. This summary does not purport to be complete and is qualified in its entirety by reference to the actual Trust Indenture. Any capitalized term not otherwise defined in this Official Statement has the same meaning as such term has in the Trust Indenture. A copy of the Trust Indenture is available for inspection at the designated corporate trust office of the Trustee. Application of Revenues As stated below, the Authority is required to deposit all Receipts and Revenues from the ownership and operation of the Municipal Service System to the credit of the Revenue Fund. The Trust Indenture provides that the moneys to the credit of the Revenue Fund will be applied for the following purposes and in the following order of priority: (1) To the payment of the current expenses of operating and maintaining the Municipal Service System, such payments to be made in accordance with the currently effective budget of current expenses; (2) To make transfers to the Debt Service Fund, to pay principal of and interest on the Bonds when due, at the times and in the amounts stated in the Trust Indenture; (3) To make up any deficiency in the Debt Service Reserve Fund, in no more than four (4) quarterly, substantially equal installments; 18

25 (4) An amount equal to 3-1/2% of the Operating Revenues of the Water System during the preceding fiscal quarter shall be deposited quarterly to the credit of the Capital Expenditures Fund; (5) Subject to making the foregoing payments and transfers the Authority may pay from the Revenue Fund the amounts due, from time to time, on other obligations. Funds and Accounts of the Authority Pursuant to the Trust Indenture, the following funds have been established for purposes specified by, and in compliance with, the Trust Indenture. Revenue Fund Deposited with an Authorized Depository, not held by the Trustee under the Trust Indenture; generally, the Authority deposits all of its Receipts and Revenues into the Revenue Fund. From the Revenue Fund, the Authority first pays its current operating expenses and maintenance expenses and then transfers moneys from the Revenue Fund to other Funds which, with the exception of the Capital Expenditures Fund are Funds established under the Trust Indenture (see "Application of Revenues" above). Debt Service Fund The Debt Service Fund is held by the Trustee. The Authority transfers, in quarterly installments, money out of the Revenue Fund into the Debt Service Fund. The Trustee uses the money in the Debt Service Fund to pay the debt service requirement on the Bonds, i.e., principal, interest, maturity value, accreted value and/or contributions to bond sinking funds. Debt Service Reserve Fund The Debt Service Reserve Fund is held by the Trustee. The Debt Service Reserve Fund is required to be maintained in an amount equal to the Reserve Requirement (i.e., the Maximum Debt Service Requirement on all Bonds Outstanding under the Indenture). Generally, the Authority transfers money to this fund on the date the Authority issues a new series of Bonds in the amount required to increase the balance in such fund to equal the Reserve Requirement computed as of the date of issuance of such new series of Bonds. The purpose of the Debt Service Reserve Fund is to provide a reserve in the event there are insufficient funds in the Debt Service Fund to pay principal, interest, maturity value and/or accreted value, when due, on any one or more series of Bonds issued by the Authority. Following the issuance of the 2016 Bonds, the Reserve Requirement will be $28,224, Sinking Funds Various sinking funds have been established and are being held by the Trustee to effect the mandatory redemption of certain prior series of Bonds. Moneys in such sinking funds are not available to pay debt service on the 2016 Bonds. Capital Expenditures Fund The Authority is required to deposit to the credit of this Fund, which is held by an Authorized Depositary and not the Trustee, the amounts required under item four under the subheading "Application of Revenues" as set forth above. The moneys deposited to the credit of the Capital Expenditures Fund are to be applied by the Authority for the purposes set forth in the currently effective budget of capital expenditures or, if the moneys to the credit of the Debt Service Fund shall at any time be insufficient to pay the principal, compound accreted value of and the interest on Bonds as such principal, compound accreted value and interest shall become due, to the transfer of the amount of the deficiency to the credit of the Debt Service Fund. Construction Funds Various Construction Funds have been established under the Trust Indenture, funded with proceeds of various series of Bonds which funds are to be applied to payment of the cost of the construction program described in the applicable Supplemental Indenture. 19

26 Rebate Fund The estimated amounts of rebate liability of the Authority are to be deposited into this fund and paid to the United States Treasury in compliance with Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"). Clearing Fund The Clearing Fund is held by the Trustee. The Authority is to deliver the proceeds from the sale of any Bonds to the Clearing Fund. From the Clearing Fund, the Trustee shall pay the costs and expenses associated with the each Bond issuance, and transfer the accrued interest on each Bond issuance (at the time of issuance) to the Debt Service Fund, the required reserve amount to the Debt Service Reserve Fund and all other transfers required by the Indenture or any Supplemental Indenture authorizing the issuance of such Bonds, including capitalized interest into the Debt Service Fund. Issue of Additional Bonds In addition to the Bonds Outstanding, upon satisfying certain requirements set forth in the Trust Indenture, including, but not limited to, those set forth below, the Authority may from time to time issue Additional Bonds for the following purposes and in the following amounts: (1) For the purpose of acquiring or constructing capital additions, upon delivery to the Trustee of, among other things: (a) a report of an independent public accountant demonstrating that the Net Revenues of the Municipal Service System for any period of twelve (12) consecutive months during the eighteen (18) month period immediately preceding the first day of the month in which such Additional Bonds are issued is not less than 110% of the Average Annual Debt Service Requirements on the Bonds Outstanding during that period, and (b) a Consulting Engineer's certificate stating, among other things, that (i) the estimated Net Revenues which will be derived by the Authority from the Municipal Service System, including the Capital Additions, which estimate shall be based upon any period of twelve (12) consecutive months in the twenty-four (24) month period following the date of issuance of the Additional Bonds on the basis of rates projected to be in effect during that period and on the basis of customers estimated to be served during that period and (ii) the percentage derived by dividing the sum of such amounts referred to in (i) by the Average Annual Debt Service Requirement on all Bonds which will be Outstanding immediately after the issuance of the Additional Bonds, which percentage shall not be less than 110%. (2) For the purpose of completing the 1993 Project or any Capital Additions financed with the proceeds of Additional Bonds in an amount necessary to complete such project, but not in excess of 15% of the principal amount of the Bonds previously issued to pay the cost of such project. (3) For the purpose of refunding Outstanding Bonds, upon delivery to the Trustee of, among other things, (i) an Officers Certificate stating, among other things, the amount of proceeds to be received from the Additional Bonds, the cost of issuing the Additional Bonds, and the Maximum Annual Debt Service Requirement on all Bonds after the issuance of the Additional Bonds, (ii) if only a portion of the Outstanding Bonds is to be refunded, and if such refunding extends the term of the Bonds being refunded or if the Average Annual Debt Service Requirements on the Bonds being refunded is increased, a Consulting Engineer's Certificate setting forth the estimated amount of the average Net Revenues of the Municipal Service System for any period of twelve (12) months following the issuance of such Additional Bonds, which shall be not less than 110% of the Average Annual Debt Service Requirement on all Bonds which will be Outstanding immediately after the issuance of such Additional Bonds, and (iii) cash, Defeased Tax-Exempt Securities and/or Government Obligations. Additional Bonds for Working Capital Purposes The Authority may issue Additional Bonds to provide funds for working capital provided that the total aggregate amount of Outstanding Bonds issued for working capital purposes may not exceed 10% of the Authority's Gross Revenues for the immediately preceding Fiscal Year, and further provided that no Additional Bonds may be Outstanding for working capital purposes during the last seven (7) Business Days of any Fiscal Year. 20

27 Other Obligations The Authority may issue bonds, notes or other obligations (the "Other Obligations") under indentures, resolutions or agreements other than the Trust Indenture, provided that if such Other Obligations have a claim on or are otherwise secured by the Receipts and Revenues derived from the Municipal Service System, the security for such Other Obligations must be subordinate to the payment of all Bonds. An event of default with respect to Other Obligations constitutes an Event of Default under the Indenture. Rate Covenant The Authority covenants in the Trust Indenture that among other things, so long as any Bonds shall remain Outstanding, it will maintain, charge, and collect reasonable rates, rents and other charges for the use of the Municipal Service System, which rates, rents and other charges, together with other Receipts and Revenues and any balance in the Revenue Fund at the end of the preceding fiscal year, shall be at least sufficient, after making due and reasonable allowance for contingencies and a margin of error in the estimates, to provide annually at all times (i) sufficient funds to pay the current expenses of the Authority, and (ii) an amount equal to 110% of the Debt Service Requirements on Outstanding Bonds in the current fiscal year; provided, however, that in the event such 110% requirement is not met in any fiscal year, the Authority will promptly revise its rates, with the approval of the Consulting Engineer, so that the requirement will be met. Insurance Covenant The Authority covenants in the Trust Indenture that it will at all times keep insured, by a reputable insurance company, all property included in the Municipal Service System against loss or damage by fire, or other hazards, to the extent customarily insured against by persons engaged in operating similar properties in the same area. The insurance policies shall be held for the benefit of the Authority and the Trustee and shall provide that all claims in excess of five hundred thousand dollars ($500,000) shall be made payable to the Trustee. Consulting Engineer Covenant The Authority covenants in the Trust Indenture that, for the purpose of performing and carrying out the duties imposed on the consulting engineer by the Trust Indenture, it will employ an independent engineer or engineering firm who or which is qualified to pass on engineering questions relating to the operation and maintenance of municipal service systems. The duties of the Consulting Engineer include, among other things, the preparation of an annual report, to be filed with the Authority, the Trustee, and the Bond Insurer, concerning the maintenance, repair, condition and operation of the Municipal Service System, capital additions to be constructed or acquired, estimated Current Expenses and Gross Revenues, and necessary or advisable rate changes. Budget Covenant The Authority covenants in the Trust Indenture to adopt a budget of Current Expenses and Gross Revenues for each fiscal year, on or before thirty (30) days prior to the beginning of such Fiscal Year. Independent Audit Covenant The Authority covenants in the Trust Indenture that April 1 each year it will cause an audit to be made of its books and accounts pertaining to the Municipal Service System for the preceding fiscal year by an independent certified accountant and will file, or cause to be filed, copies of such audit report with the Authority, the Trustee, and the Consulting Engineer. Modifications of Provisions of Trust Indenture Certain modifications and alterations of the Trust Indenture not adversely affecting the rights of the holders of the Bonds Outstanding thereunder may be made without the consent of the holders of such Bonds, but with the prior consent of the Bond Insurer and in the manner and upon the terms and conditions provided in the Trust Indenture. Any other modifications or alterations of the Trust Indenture and of the rights and obligations of the Authority and of the holders of the Bonds outstanding thereunder may be made with the consent of the holders (i) of not less than 66-2/3% of the aggregate principal amount of the Bonds then Outstanding, (ii) of the Bond Insurer, and (iii) of the holders of not less than 662/3% of the aggregate principal amount of the Bonds of each series then outstanding and affected by any such modification or alteration, in case one or more but less than all of the Series of the Bonds then Outstanding are so affected; provided, however, that no such modification or alteration shall (i) extend the fixed maturity date of any Bond, or reduce any premium payable upon the redemption thereof, without the consent of the holder of each Bond so affected, or (ii) permit the creation by the Authority of any lien upon any property which shall be a part of the Municipal Service System or any lien prior to or on a parity with the 21

28 lien of the Trust Indenture upon any part of the Receipts and Revenues of the Municipal Service System, or reduce the aforesaid percentage of Bonds, the holders of which are required to consent to any such modification or alteration, without the consent of the holders of all Bonds then Outstanding. Defaults and Remedies The Trust Indenture defines an "Event of Default" to include, among other things: (a) failure to pay the principal of, or the premium (if any) payable upon the redemption of, any Bond when due and payable either at maturity, or by proceedings for redemption; or (b) failure to pay any installment of interest on any Bond when payable; or (c) the entry of an order or decree appointing a receiver or receivers of the Municipal Service System or of the Receipts and Revenues thereof with the consent or acquiescence of the Authority, or, if such order or decree shall have been entered without the acquiescence or consent of the Authority, the failure of the Authority to cause such order or decree to be vacated or discharged or stayed on appeal within sixty (60) days after entry; or (d) the institution of any proceeding with the consent or acquiescence of the Authority for the purpose of effecting a composition between the Authority and its creditors, or for the purpose of adjusting the claims of such creditors pursuant to any Federal or State statute now or hereafter enacted, if the claims of such creditors are under any circumstances payable out of the Receipts and Revenues of the Municipal Service System, or if such proceeding shall have been instituted without the consent or acquiescence of the Authority, the failure of the Authority to have such proceeding withdrawn, or any order entered therein vacated or discharged, within sixty (60) days after the institution of such proceeding or the entry of such order; or (e) the entry of a final judgment against the Authority, which judgment constitutes or could result in a lien or charge upon the Municipal Service System or the Receipts and Revenues thereof, or which materially and adversely affects the ownership, control or operation of the Municipal Service System, if such judgment shall not be discharged within sixty (60) days from the entry thereof, or if an appeal shall not be taken therefrom, or from the order, decree or process upon which or pursuant to which such judgment was granted or entered, in such manner as to conclusively set aside the execution or levy under such judgment, order, decree or process, or the enforcement thereof; or (f) the failure of the Authority to repair or replace, with reasonable dispatch, any part of the Municipal Service System necessary for its efficient operation which shall have been destroyed or damaged; or (g) the failure or refusal of the Authority to comply with any provisions of the Authorities Act or the rendering of the Authority, for any reason, incapable of fulfilling its obligations under the Trust Indenture or the Authorities Act; or (h) the failure of the Authority to observe any other covenant, condition or agreement of the Authority contained in the Bonds or in the Trust Indenture and the continuation of such failure for a period of thirty (30) days after written notice of such failure from the Trustee, which may give such notice in its discretion and shall give such notice at the written request of the Registered Owners of not less than twenty-five per centum (25%) in aggregate principal amount of the Bonds then Outstanding, provided that, the failure of the rate schedule adopted by the Authority pursuant to the Trust Indenture to produce an amount sufficient to pay the Authority's Current Expenses plus 110% of the Debt Service Requirements on the Bonds will not constitute an Event of Default. Subject to the Bond Insurer's ability to control remedies, upon the happening and continuance of certain Events of Default, then in every such case, the Trustee may declare the principal of all Outstanding Bonds, together with accrued interest thereon immediately due and payable and upon such declaration, such amounts shall immediately become due and payable. Upon the happening and continuance of any event of default, the Trustee may, and upon the request of the holders of not less than 25% of the Bonds then Outstanding, shall, accelerate the maturity of all Outstanding Bonds. 22

29 The Trust Indenture provides that all moneys received by the Trustee or by any receiver from the operation of the Municipal Service System or otherwise upon the exercise of the remedies provided in the Trust Indenture shall, after payment of the costs and expenses of the operation thereof, be applied: First: to the payment of the fees, counsel fees and expenses of the Trustee and of the receivers, if any, and all costs and disbursements allowed by the court, if there be any court action; Second: to the payment of the whole amount of principal and interest which shall then be owing or unpaid upon the Bonds, and in case such amounts shall be insufficient to pay in full the whole sum so due and unpaid, then to the payment of such principal and interest ratably, subject to certain exceptions, without preference or priority of principal over interest or of interest over principal or of any installment of interest over any other installment of interest; Third: to the payment of the surplus, if any, to the Authority or to whomever is lawfully entitled to receive the same or as a court of competent jurisdiction may direct. MANAGEMENT AGREEMENT The Authority has entered into a management agreement effective as of January 21, 1999 (the "Management Agreement") with Resource Development and Management, Inc. (hereinafter called the "Manager"). The Management Agreement is for a term of fourteen years beginning on February 1, In November 2015, the Authority amended the Management Agreement extending the term to December 31, The Authority has utilized an outside management service to manage the Authority's water system since Duties of the Manager Under the Management Agreement, subject to the general supervision, discretion and control of the Authority in the exercise and discharge of its public duties under the law, the Manager shall have full charge and direction of the Authority Municipal Services business, and shall (acting in cooperation with, and subject to the supervision, discretion and control of the Board of the Authority which will be communicated to the Manager from time to time by the Chairman) render to the Authority the following services: (a) The Manager, in exercising its duties and responsibilities under the Agreement, will regularly consult with and discuss its services with the Chairman and/or the board. (b) The Manager shall supervise all departments, divisions and phases of the Municipal Services Business of the Authority. (c) The Manager shall, with periodic consultation with the Chairman and/or the Board, supervise and keep all accounts and records related to the Authority water system and the water supply business of the Authority, in accordance with the system of accounts approved by the Independent Public Accountant pursuant to the provisions of the Trust Indenture, and shall countersign all checks upon funds of the Authority. The Manager shall make periodic internal audits of books and records of the water supply business of the Authority, in addition to the annual audit by the Independent Public Accountant, and shall prepare and furnish to the Board of the Authority, quarterly, statements of the income and expenses of the water supply business of the Authority. The Manager shall also prepare and furnish to the Authority all such additional statements with respect to the financial affairs of the Authority water system as may reasonably be requested by the Board of the Authority for its own use or for the use of any interested party. (d) The Manager shall maintain and monitor a staff development program intended to improve the internal management of the system. (e) The Manager shall review all assets of the Authority and recommend future courses of action relative to the disposition, retention and/or utilization in order to reduce costs and increase revenue. (f) The Manager shall prepare management statistics on the Authority's operations and make written reports and recommendations for increasing general efficiency of such operations, to the Board of the Authority. (g) The Manager shall review all trust indentures and comply with all requirements and provisions of the indentures. 23

30 (h) The Manager shall, with periodic consultation with the Chairman and/or the Board, hire, discharge and direct the work of all employees of the Authority connected with the Authority water system and the water supply business, and, from time to time, fix, determine and negotiate the rates of pay, and the number of employees reasonably proper for efficient operation, maintenance, extension and development of the Authority Municipal Services Business and the water supply business and for the furnishing of adequate and satisfactory Municipal Services to consumers. (i) The Manager shall, with periodic consultation with the Chairman and/or the board, prepare for and conduct all labor negotiations with the Authority's employees or the collective bargaining representatives of the Authority's employees. (i) The Manager shall assist in the preparation of all rate schedules, and shall make a periodic examination of such schedules to determine whether revenue is being fully developed from such rates, and shall direct the preparation of any and all reports required to be filed with any governmental agency. (k) The Manager shall assist the Consulting Engineer, and/or other engineers retained by the Authority, in preparing plans, cost estimates and work orders for Capital Additions (as defined in the Trust Indenture) which have been authorized by the Authority. (l) The Manager shall assist in the preparation of all necessary applications for permits or priority ratings. (m) The Manager shall, in cooperation with the Consulting Engineer or other professionals deemed necessary by the Manager and Chairman and/or the board, supervise acceptance tests of all new machinery and equipment, and shall inspect all construction work during the progress thereof and after the completion thereof, and shall make reports to the Authority with respect thereto. (n) The Manager shall, in cooperation with the Consulting Engineer, make, or cause to be made, a complete review and general inspection of the operating records, policies and methods of the Authority and of the Authority Municipal Services Business and all of the facilities thereof, and file with the Authority, during the last quarter of each fiscal year, a written report in appropriate detail showing the results of such inspection and containing such recommendations and suggestions as to operating methods, renewals, extensions and improvements to the Authority Municipal Services Business as may be deemed advisable by the Manager and the Consulting Engineer. Contemporaneously with the filing of such report, the Manager shall submit suggestions for an operating budget for the Authority Municipal Services Business for the next succeeding calendar year. (o) The Manager shall render to the Authority all reasonable assistance in the promotion of satisfactory relations and good will between it and the municipalities in which the Municipal Services Business of the Authority shall be carried on, and between the Authority and its customers, and shall make periodic surveys of the Municipal Service Business in an effort to secure new and additional Municipal Services customers to benefit the Authority and stimulate economic development in the region the Authority serves. (p) Whenever the Authority shall be required to take any action by the provisions of the Trust Indenture, the Manager, if such action shall be within the scope of its duties under this Agreement, shall take such action on behalf of the Authority in such manner and within such time as to comply with such provisions of the Trust Indenture, or, if such action shall not be within the scope of the Manager's duties hereunder, shall give written notice to the Authority to take the requisite action so provided for by the Trust Indenture; and in general shall render all reasonable assistance to the Authority in order to enable the Authority to perform and fulfill its obligations under the Trust Indenture, to secure efficient and economical administration and operation of the Authority Municipal Services Business, and to assure adequate and efficient Municipal Services at reasonable rates and charges to consumers. (q) All of the aforementioned duties and responsibilities shall be performed by the Manager. In conjunction with the primary objective of the Management Agreement, the Manager will provide a Management Team which includes the Resident Manager of the Authority. It is the intention of this provision to facilitate the management of the Authority in its day to day affairs through the Resident Manager. (r) The Manager shall arrange for the purchase of all materials and supplies required for the operation of the Authority Municipal Services Business and, in cooperation with the Consulting Engineer, shall determine the amount of, and shall place all insurance required by the provisions of the Trust Indenture or deemed desirable by the board of the Authority. 24

31 (s) When the Authority undertakes any project to provide wastewater services to its customers in its service delivery area, the Manager will make recommendations to the Authority regarding the entry into the wastewater services business and will make recommendations to the Authority for the Authority's implementation. (t) When the Authority implements the recommendation by the Manager to provide wastewater services, then the Manager will provide the same type of managerial services in the wastewater system as the manager provides in the water delivery system. Compensation of the Manager As compensation for its services under the Management Agreement, the Manager receives an annual fee of $1,200, annually for years 2016 and 2017, $1,300, for years 2018, through 2020 and $1,500, for years 2021 through 2025, paid in monthly installments. Assignment The Management Agreement may not be assigned by either party without the written consent of the other party. Independent Contractor Under the Management Agreement, the Manager is an independent contractor and is not an employee of the Authority. The Manager has no authority to bind the Authority by any promise or representation unless specifically authorized in a particular transaction. The Manager has acknowledged that the provisions of the United States Social Security Act, the Pennsylvania Unemployment Compensation Act or the Pennsylvania Workmen's Compensation Act, or any similar act or legislation wherein coverage is based upon the relations of employer/employee, are not applicable under the terms of the Management Agreement. Previous Negotiations The Management Agreement merges all previous negotiations between the parties thereto, and persons affiliated with the parties thereto, with respect to the subject matter covered thereby, and is binding upon and inures to the benefit of the successors and assigns of the parties thereto. RISK FACTORS The following section describes certain risk and investment considerations affecting the payment of and security for the 2016 Bonds. The following discussion is not meant to be an exhaustive list of the risks and investment considerations associated with the purchase of the 2016 Bonds and does not necessarily reflect the relative importance of the various issues. Potential investors are advised to consider the following factors, along with all other information in this Official Statement, in evaluating the 2016 Bonds. There can be no assurance that other risk factors will not become material in the future. General The payment of principal of and interest on the 2016 Bonds is secured solely from the Receipts and Revenues of the Authority derived from the Municipal Service System. The realization of the Receipts and Revenues is subject to, among other things, the demand for water and wastewater services, the capabilities of management of the Authority, the ability of the Authority to provide water and wastewater services to its users, and the ability of the Authority to establish and maintain fees and charges sufficient to provide the required debt service coverage as well as pay for expenses. Among other matters, drought, general and local economic conditions and changes in law and government regulations (including initiatives and moratoriums on growth) could adversely affect the amount of Receipts and Revenues realized by the Authority. 25

32 Limited Obligations The 2016 Bonds are limited obligations of the Authority and are not secured by a legal or equitable pledge or charge or lien upon any property of the Authority or any of its income, except the Receipts and Revenues. The obligation of the Authority to pay the 2016 Bonds does not constitute an obligation of the County of Westmoreland or the Commonwealth of Pennsylvania or any other political subdivision or instrumentality to levy or pledge any form of taxation. The Authority has no taxing power. No bondholder shall ever have the right to compel the exercise of taxation in any form on any real or personal property to pay the 2016 Bonds or interest thereon, nor shall any bondholder be entitled to the payment of such principal and interest from any other funds of the Authority other than the Receipts and Revenues in the manner and to the extent provided in the Trust Indenture. In addition, no recourse shall be had for the payment of the principal or interest on the 2016 Bonds or for any claim based thereon or the Trust Indenture against any member of the board of trustees for the Authority or any other officer of the Authority or any person executing the 2016 Bonds. Therefore, the security for the punctual payment of the principal of and interest on the 2016 Bonds is dependent on the Authority s ability to generate such Receipts and Revenues in an amount sufficient to meet the debt service requirements of the 2016 Bonds and all other parity obligations. The Authority is obligated under the Trust Indenture to pay the 2016 Bonds solely from the Receipts and Revenues. There is no assurance that the Authority can succeed in operating the Municipal Service System such that sufficient Receipts and Revenues in the future will be realized. Permits and Environmental Regulation The operations of the Authority are subject to permits from state regulatory agencies. Non-compliance with such permits may result in significant penalties from such state agencies or other enforcement actions that could have a material adverse effect on the finances and operations of the Authority. The Municipal Service System is subject to various federal, State and local laws and regulations governing health and the environment. In general, these laws and regulations could result in liability to the Authority as owner of the Municipal Service System for remediating adverse environmental conditions on or relating to the Municipal Service System, whether arising from preexisting conditions or conditions arising as a result of the activities conducted in connection with the ownership, operation, and maintenance of the Municipal Service System. Costs incurred by the Authority with respect to environmental remediation or liability could adversely impact its financial condition and its ability to own, operate, and maintain the Municipal Service System and its ability to produce Receipts and Revenues of the Municipal Service System. The kind and degree of treatment and quality affected through the Municipal Service System is regulated, to a large extent, by the federal government and/or the Commonwealth of Pennsylvania. In the event that the federal government, acting through the Environmental Protection Agency, or the Commonwealth of Pennsylvania, acting through the Department of Environmental Protection, or additional federal or state agencies, should impose stricter quality standards upon the Municipal Service System, the Authority s expenses could increase accordingly and rates and charges would have to be increased to offset those expenses. It is not possible to predict the direction federal or state regulation will take with respect to quality or treatment standards, although it is likely that, over time, both will impose more stringent standards with attendant higher costs. Water Quality Control Contamination of the Authority s water supply may result in disruption in its services and litigation which could adversely affect its operating results and financial condition. The Authority s water supplies are subject to contamination, including contamination from the development of naturally-occurring compounds and chemicals in groundwater systems, and pollution resulting from manmade sources. In the event that its water supply is contaminated, the Authority may have to interrupt the use of that water supply until it is able to substitute the flow of water from an uncontaminated water source. In addition, the Authority may incur significant costs in order to treat the contaminated source through expansion of its current treatment facilities, or development of new treatment methods. If the Authority is unable to substitute water supply from an uncontaminated water source, or to treat adequately the contaminated water source in a cost-effective manner, there may be an adverse effect on its revenues, operating results and financial condition. The costs it incurs to decontaminate a water source or an underground water system could be significant and could adversely affect the Authority s operating results and financial condition. 26

33 In addition to the potential pollution of its water supply as described above, in the wake of the September 11, 2001 terrorist attacks and the ensuing threats to the nation s health and security, the Authority has taken steps to increase security measures at its facilities and heighten employee awareness of threats to its water supply. The Authority also has tightened its security measures regarding the delivery and handling of certain chemicals used in its business. The Authority has and will continue to bear increased costs for security precautions to protect its facilities, operations and supplies. These costs may be significant. The Authority currently is not aware of any specific threats to its facilities, operations or supplies; however, there can be no assurance that the Authority would be able to exert any control over the effects of terrorist events should they occur. The Authority also could be held liable for consequences arising out of human exposure to hazardous substances in its water supplies or other environmental damage. For example, private plaintiffs have the right to bring personal injury or other toxic tort claims arising from the presence of hazardous substances in its drinking water supplies. The Authority s insurance policies may not be sufficient to cover the costs of these claims. Investment of Funds All funds and accounts held under the Trust Indenture are required to be invested in investments permitted under the Trust Indenture. All investments, including those permitted under the Trust Indenture and those authorized by law from time to time for investments by public agencies, contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected, loss of market value and loss or delayed receipt of principal. The occurrence of these events with respect to amounts held under the Trust Indenture or by the Authority could have a material adverse effect on the security of the 2016 Bonds. Limitations on Remedies and Limited Recourse upon Default The ability of the Authority to comply with its covenants under the Trust Indenture and to generate Receipts and Revenues sufficient to pay the 2016 Bonds may be adversely affected by actions and events outside of the control of the Authority and may be adversely affected by actions taken (or not taken) by persons obligated to pay rates, fees and charges imposed by the Authority on the Municipal Service System customers, elected officials, voters, property owners, or taxpayers. Failure by the Authority to pay the 2016 Bonds as required under the Trust Indenture constitutes an event of default under the Trust Indenture and the Trustee is permitted to pursue remedies at law or in equity to enforce the Authority obligation to make such payments. The remedies available to the owners of the 2016 Bonds upon the occurrence of an event of default under the Trust Indenture are in many respects dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time consuming to obtain. If the Authority fails to comply with its covenants under the Trust Indenture or fails to pay the 2016 Bonds, there can be no assurance of the availability of remedies adequate to protect the interest of the holders of the 2016 Bonds. The enforcement of the remedies provided in the Trust Indenture could prove both expensive and time consuming. Bankruptcy In addition to the limitations on remedies contained in the Trust Indenture, the rights and remedies provided in the Trust Indenture may be limited by and are subject to bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance, and other similar laws relating to or affecting creditors' rights, to the application of equitable principles, if equitable remedies are sought, and to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the Commonwealth of Pennsylvania. The opinion to be delivered by Bond Counsel concurrently with the issuance of the 2016 Bonds will be subject to such limitations and the various other legal opinions to be delivered concurrently with the issuance of the 2016 Bonds will be similarly qualified. See APPENDIX D: PROPOSED FORM OF OPINION OF BOND COUNSEL. 27

34 The Authority is not currently authorized under current Pennsylvania law to file a petition for the adjustment of its obligations under Chapter 9 of the Bankruptcy Code (Title 11, United States Code). If current Pennsylvania law were changed to authorize such a filing, the rights and remedies provided in the Trust Indenture may be limited by and become subject to provisions of the federal bankruptcy laws, hereafter enacted, and to other laws or equitable principles that may affect creditors' rights. Upon such a change in Pennsylvania law, if the Authority were to file a petition under Chapter 9 of the Bankruptcy Code, the Bondholders and the Trustee could be prohibited or severely restricted from taking any steps to enforce their rights under the Trust Indenture. System Demand The demand for water and wastewater services is subject to seasonal fluctuations. Demand for water during the warmer months is generally greater than during the cooler months due primarily to additional requirements for water in connection with cooling systems, swimming pools, irrigation systems and other outside water use. Throughout the year, and particularly during the typically warmer months, demand will vary with temperature and rainfall levels. In the event the temperatures during the typically warmer months are cooler than expected, or if there is more rainfall than expected, the demand for water may decrease. Reduction in levels of demand could require an increase in rates or charges in order to comply with the covenants to fix rates and charges for the Municipal Service System. System Expenses There can be no assurance that the Authority s operating expenses will be consistent with the descriptions in this Official Statement. Increases in expenses could require an increase in rates or charges in order to comply with the rate covenant. Earthquakes, Floods and Other Natural Disasters Earthquakes, floods or other natural disasters could interrupt operation of the Municipal Service System and cause increased costs and thereby interrupt the ability of the Authority to realize Receipts and Revenues. The Authority is not obligated under the Trust Indenture to have earthquake or flood insurance. Governmental Restrictions on Water Use Drought conditions may impact the ability of the Authority to serve its current and future customers, and may impact its customers use of its water, which may adversely affect its financial condition and results of operations. The Authority depends on an adequate water supply to meet the present and future demands of its customers. Drought conditions could interfere with its sources of water supply and could adversely affect its ability to supply water in sufficient quantities to its existing and future customers. An interruption in its water supply could have a material adverse effect on the Authority s financial condition and results of operations. Moreover, governmental restrictions on water usage during drought conditions may result in a decreased demand for the Authority s water, even if its water reserves are sufficient to serve its customers during these drought conditions, which may adversely affect its revenues and earnings. Secondary Market for Bonds There can be no guarantee that there will be a secondary market for the 2016 Bonds or, if a secondary market exists, that any 2016 Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price. Failure to Provide Ongoing Disclosure The failure of the Authority to comply with the form of Continuing Disclosure Agreement described herein may adversely affect the transferability and liquidity of the 2016 Bonds and their market price. See CONTINUING DISCLOSURE UNDERTAKING herein. 28

35 Bond Audits Officials with the Internal Revenue Service (the IRS ) have indicated that more resources will be invested in audits of tax-exempt bonds. The 2016 Bonds may be, from time to time, subject to audits by the IRS. The Authority believes that the 2016 Bonds properly comply with applicable tax laws. In addition, Campbell & Levine, LLC, as Bond Counsel, will render an opinion with respect to the tax-exempt status of interest on the 2016 Bonds, as described under the heading TAX EXEMPTION AND OTHER TAX MATTERS below. Such opinion speaks only as of its date and Bond Counsel has no obligation to monitor compliance following the issuance of the 2016 Bonds. No ruling with respect to the tax-exempt status of interest on the 2016 Bonds has been or will be sought from the IRS, however, and opinions of counsel are not binding on the IRS or the courts and are not guarantees. There can be no assurance that an audit of the 2016 Bonds will not adversely affect the tax-exempt status of interest on the 2016 Bonds. Tax Compliance The Code provides that interest on obligations such as the 2016 Bonds is excludable from gross income for federal income tax purposes if certain requirements are met with respect to the terms, amount and purpose of the obligations and the use of funds generated by the issuance of the obligations. Failure to comply with such requirements could cause the interest on the 2016 Bonds to become includible in gross income for federal income tax purposes retroactive to their date of issue. See TAX EXEMPTION AND OTHER TAX MATTERS herein. The Trust Indenture does not provide for the payment of any additional interest or penalty in event of the taxability of the interest on the 2016 Bonds. The 2016 Bonds are not subject to optional or mandatory redemption prior to maturity in the event of such taxability of interest on the 2016 Bonds, although the 2016 Bonds are subject to optional redemption at the direction of the Authority on or after August 15, See REDEMPTION herein. Federal Tax Exemption TAX EXEMPTION AND OTHER TAX MATTERS Bond Counsel is expected to issue an opinion on the date of issuance and delivery of the 2016 Bonds to the effect that, under existing law, interest on the 2016 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest with respect to the 2016 Bonds may be taken into account in determining "adjusted current earnings" for purposes of computing the alternative minimum tax on certain corporations. For purposes of rendering the opinion described in this paragraph, Bond Counsel will assume, among other things, the accuracy of certain representations made by the Authority and continuing compliance by the Authority with requirements of the Code (including regulations promulgated thereunder) that must be met subsequent to the issuance of the 2016 Bonds in order that interest thereon be and remain excludable from gross income for federal income tax purposes. The Authority has covenanted to comply with such requirements. Inaccuracy of the Authority's representations, or failure by the Authority to comply with such requirements, could cause the interest on the 2016 Bonds to be included in gross income retroactive to the date of issuance of the 2016 Bonds. Bond Counsel expresses no opinion regarding other federal tax consequences arising with respect to the 2016 Bonds. Ownership of the 2016 Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with "excess net passive income," foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the 2016 Bonds. Bond Counsel expresses no opinion as to any collateral tax consequences. Prospective purchasers of the 2016 Bonds should consult their tax advisors as to collateral federal income tax consequences. The form of Bond Counsel opinion is attached hereto as APPENDIX D. 29

36 Original Issue Discount In the opinion of Bond Counsel, under existing law, the original issue discount in the selling price of the 2016 Bonds maturing on August 15, 2042 and identified as CUSIP number QR4 ("OID Bonds"), to the extent properly allocable to each owner of such 2016 Bond, is excludable from gross income for federal income tax purposes with respect to such owner. The original issue discount of each OID Bond is the excess of the stated redemption price at maturity of such OID Bond over the initial offering price to the public, excluding Underwriters and other intermediaries, at which price a substantial amount of the 2016 Bonds of such maturity was sold. Under Section 1288 of the Code, original issue discount on tax-exempt bonds accrues on a compound basis. The amount of original issue discount that accrues to an owner of an OID Bond during any accrual period generally equals (i) the issue price of such OID Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity of such OID Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest payable on such OID Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excluded from gross income for federal income tax purposes, and will increase the owner's tax basis in such OID Bond. Purchasers of OID Bonds should consult their own tax advisors with respect to the determination and treatment of original issue discount for federal income tax purposes, and with respect to state and local tax consequences of owning such OID Bonds. Original Issue Premium An amount equal to the excess of the purchase price of a 2016 Bond over its stated redemption price at maturity constitutes premium on such 2016 Bond. Those maturities of the 2016 Bonds sold at such a premium are referred to herein as "OIP Bonds." A purchaser of an OIP Bond must amortize any premium over such OIP Bond's term using constant yield principles, based on the purchaser's yield to maturity. As premium is amortized, the purchaser's basis in such OIP 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 OIP Bond prior to its maturity. Even though the purchaser's basis is reduced, no federal income tax deduction is allowed. Purchasers of any OIP 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 OIP Bonds. Pennsylvania Tax Exemption Bond Counsel also is expected to issue an opinion on the date of issuance and delivery of the 2016 Bonds to the effect that, under the laws of the Commonwealth of Pennsylvania, as presently enacted and construed, the 2016 Bonds are exempt from personal property taxes in Pennsylvania and the interest on the 2016 Bonds is exempt from Pennsylvania corporate net income tax and personal income tax. CONTINUING DISCLOSURE UNDERTAKING In accordance with the Securities and Exchange Commission Rule 15c2-12 (the "Rule"), the Authority will enter into a written agreement for the benefit of the holders of the 2016 Bonds, see APPENDIX E: Form of Continuing Disclosure Certificate herein, to undertake the following: 1. To file annually with the Municipal Securities Rulemaking Board ("MSRB") Electronic Municipal Market Access (EMMA) System, or such other system as may be designated by the MSRB (the "Repository") not later than 270 days following the end of the fiscal year of the Authority beginning with the fiscal year ending March 31, 2017, certain annual financial information, namely the Authority's annual audited financial statements and such operating data as provided in this Official Statement in specified tables under the heading: "History and Present Operations of the Water System Water System Information. 30

37 2. To file a notice with the Repository, in a timely manner not in excess of 10 Business Days after the occurrence of an event, in the event of the occurrence of any of the following events, with respect to the 2016 Bonds: Default; Remedies a. Principal and interest payment delinquencies; b. Non-payment related defaults, if material; c. Unscheduled draws on debt service reserves reflecting financial difficulties; d. Unscheduled draws on credit enhancements reflecting financial difficulties; e. Substitution of credit or liquidity providers, or their failure to perform; f. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax exempt status of the Bonds, or other material events affecting the tax status of the Bonds; g. Modifications to rights of owners of the Bonds, if material; h. Bond calls (other than mandatory sinking fund redemptions); i. Defeasance of the Bonds or any portion thereof; j. Release, substitution or sale of property securing repayment of the Bonds; k. Rating changes; l. Bankruptcy, insolvency, receivership or similar event of the Obligated Person; m. The consummation of a merger, consolidation, or acquisition involving an Obligated Person or the sale of all or substantially all of the assets of the Obligated Person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and n. Appointment of a successor or additional trustee or the change of name of a trustee, if material. The continuing disclosure undertakings described above are for the benefit of the holders of the 2016 Bonds or beneficial owners of the 2016 Bonds (determined in a manner permitted under Rule 15c2-12). Unless otherwise required by law, no owners of the 2016 Bonds or beneficial owner is entitled to damages resulting from the Authority's noncompliance with its continuing disclosure undertakings; however, owners of the 2016 Bonds may take action to require performance of such obligation by any judicial proceeding available. Breach of the continuing disclosure undertakings of the Authority does not constitute an event of default under the Trust Indenture and any rights and remedies provided in the Trust Indenture in the event of default are not applicable to a breach of the continuing disclosure undertakings. Termination of Report Obligations The continuing disclosure undertakings of the Authority described herein will be in effect from and after the issuance and delivery of the 2016 Bonds, and will extend to the earlier of (a) the date all principal and interest on the 2016 Bonds have been deemed paid pursuant to the terms of the Trust Indenture, or (b) the date on which those portions of the Rule which required this written undertaking are held to be invalid by a court of competent jurisdiction in a non-appealable action, have been repealed retroactively or otherwise do not apply to the 2016 Bonds. The Authority's continuing disclosure obligations with respect to a particular Obligated Person will be terminated when that person no longer meets the objective criteria for an Obligated Person. Amendment; Waiver As provided in the form of Continuing Disclosure Agreement, the Authority's continuing disclosure undertakings may be amended from time to time by the Authority without the consent of the owners of the 2016 Bonds, if such amendment would not, in and of itself, cause the continuing disclosure undertakings (or action of the purchasers of the 2016 Bonds in reliance on the undertakings of the Authority) to violate the Rule, as amended or officially interpreted from time to time by the SEC. The Authority will provide notice of such amendment to EMMA with its Annual Financial Information, as provided in the Disclosure Certificate. 31

38 Compliance The Authority has entered into prior undertakings to provide certain annual information, as defined in the continuing disclosure agreements or certificates associated with each issue listed below, and audited financial statements. The following table provides information regarding the annual filing deadlines and history of filing for the Authority bond issues outstanding at any time during the last five years. Fiscal Year Ended Financial and Operating Data Filing Deadline Annual Audited Financial Statements Filing Date Annual Operating and Financial Filing Date March 31, 2011 December 31, 2011 September 14, 2011 September 8, 2014 March 31, 2012 December 31, 2012 September 25, 2012 September 8, 2014 March 31, 2013 December 31, 2013 August 9, 2013 September 8, 2014 March 31, 2014 December 31, 2014 February 10, 2015 September 3, 2014 March 31, 2015 December 31, 2015 July 22, 2015 July 29, 2015 March 31, 2016 December 31, 2016 NA NA Except as described in the following sentences, during the past five years the Authority has complied with its continuing disclosure obligations with respect to its outstanding bonds and other indebtedness on a timely basis. The Authority failed to timely file certain operating data for fiscal years ended March 31, 2009 through and including March 31, While the information was filed, it was not timely filed. The Authority s audited financial statements for fiscal year ended March 31, 2010 were provided on time to the Authority s dissemination agent to be filed, but such financial statements were not posted on EMMA on a timely basis. The annual financial and operating information for the fiscal year ended March 31, 2014, was timely submitted to the EMMA system, but was apparently not connected by EMMA to all CUSIP numbers pertaining to all bonds of the Authority. This annual financial and operating information has since been connected to all CUSIP numbers of the Authority s bonds. The Authority has undertaken, and will continue to undertake, actions to ensure that all required filings are made in a timely manner pursuant to its Continuing Disclosure Agreements. The Authority has also implemented internal procedures which it believes will enable it to make future filings in a timely manner. Disclosure Dissemination Agent The Authority has entered into a Disclosure Dissemination Agent Agreement ( Disclosure Dissemination Agreement ) with Digital Assurance Certification, LLC ( DAC ) as its Disclosure Dissemination Agent for the purpose of ensuring ongoing compliance with its continuing disclosure filing requirements. DAC provides its clients with automated filing of rating events, templates consolidating all outstanding filing requirements that accompany reminder notices of annual or interim mandatory filings, review of all template filings by professional accountants, as well as a time and date stamp record of each filing along with the unique ID from EMMA accompanying the copy of the actual document filed. DAC also offers its clients a series of training webinars each year qualified for NASBA certified CPE credits, as well as model secondary market compliance policies and procedures. The form of Disclosure Dissemination Agreement is attached as Appendix G. FINANCIAL STATEMENTS The audited financial statements of the Authority for the year ended March 31, 2015 have been audited by DeLuzio & Company, LLP, independent certified public accountants, as stated in their report dated July 10, 2015 appearing in Appendix C. The financial statements of the Authority for the year ended March 31, 2014 were audited by DeLuzio & Company, LLP whose report dated July 21, 2014 expressed an unmodified opinion on such statements. 32

39 The financial statements of the Authority for the year ended March 31, 2013, before the restatement described in Note 16, were audited by another auditor whose report dated August 1, 2013 expressed an unmodified opinion on these statements. As part of the audit of the for the year ended March 31, 2014, DeLuzio & Company, LLP audited the adjustments described in Note 16 that were applied to restate the March 31, 2013 financial statements. In the opinion of DeLuzio & Company, LLP, such adjustments are appropriate and have been properly applied. DeLuzio & Company, LLP was not engaged to audit, review, or apply any procedures to the financial statements of the Authority for the year ended March 31, 2013 other than with respect to the adjustments and, accordingly, the firm did not express an opinion or any other form of assurance with respect to the financial statements for the year ended March 31, 2013 as a whole. NEGOTIABILITY OF 2016 BONDS The 2016 Bonds have all the qualities and incidents of securities under Article 8 of the Uniform Commercial Code and are negotiable instruments, subject to the provisions for registration contained in the Trust Indenture. NO LITIGATION CERTIFICATE At Closing, the Authority will deliver a certificate stating that there is no litigation pending or, to its knowledge, threatened against the Authority which, in any way, questions or might affect the existence of the Authority, the validity of or the security for the 2016 Bonds or their issuance, sale or delivery. LEGAL MATTERS All legal matters incident to the authorization, issuance and sale of the 2016 Bonds are subject to the approval of Campbell & Levine, LLC, Pittsburgh, Pennsylvania, Bond Counsel. See Appendix D - Form of Opinion of Bond Counsel. Scott E. Avolio, Esquire, of Greensburg, Pennsylvania, the Authority's Solicitor, will pass upon certain legal matters for the Authority and Obermayer Rebmann Maxwell & Hippel LLP, Pittsburgh, Pennsylvania, will pass upon certain legal matters for the Underwriters. The various legal opinions to be delivered concurrently with the delivery of the 2016 Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering the legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to such transaction. Nor does the rendering of an opinion guaranty the outcome of any legal dispute that may arise out of the transaction. RATINGS S&P Global Ratings ( S&P ) has assigned its credit rating of AA (stable outlook), conditioned upon delivery of the insurance policy by BAM for the Bonds at the time of delivery of the 2016 Bonds. S&P Global Ratings has also assigned an underlying rating, based on the creditworthiness of the Authority, of A+ (stable outlook) to the 2016 Bonds. Such rating reflects only the views of such organization and an explanation of the significance of such rating may be obtained only from S&P Global Ratings at the following address: S&P Global Ratings, 55 Water Street, New York, New York There is no assurance that these credit ratings will be maintained for any given period of time, or that they may not be lowered or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward change or withdrawal of such credit ratings may have an adverse effect on the market price of the 2016 Bonds. UNDERWRITING The Underwriters for the 2016 Bonds are Piper Jaffray & Co., Boenning & Scattergood, Inc. and NW Capital Markets, Inc. (the Underwriters ). The Underwriters have agreed, subject to certain conditions, to purchase the 2016 Bonds from the Authority at a purchase price of $218,293,541.60, (representing the face amount of the 2016 Bonds, plus net original issue premium of $34,347, less Underwriters discount of $(529,443.25). The Underwriters' obligation to purchase the 2016 Bonds is subject to certain conditions precedent; however, the Underwriters are obligated to purchase all such 2016 Bonds if any such 2016 Bonds are purchased. The 2016 Bonds may be offered and sold to certain dealers (including dealers depositing such 2016 Bonds into investment trusts) at prices lower than such public offering prices, and such public offering prices may be changed, from time to time, by the Underwriters. 33

40 The Underwriters have entered into distribution agreements with other broker-dealers that have not been designated by the Authority as Underwriter for the distribution of the 2016 Bonds, at the original issue prices. Such agreements generally provide that the Underwriters will share a portion of its underwriting compensation or selling concession with such broker-dealers. The Underwriters have read and participated in the preparation of certain portions of this Official Statement and has supervised the compilation and editing thereof. The Underwriters have reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. MISCELLANEOUS Officials of the Authority have furnished certain information in this Official Statement relating to the Authority and the purposes for which the 2016 Bonds are being issued. The Authority will certify to the Underwriters that the final Official Statement does not contain any untrue statement of a fact or omit any statement of any material fact required to be stated therein. Certain information contained in the Official Statement has been obtained from sources other than the Authority. All references to other materials not purporting to be quoted in full are only brief outlines of certain provisions thereof and do not constitute complete statements of such documents or provisions, and reference is hereby made to the complete documents relating to such matters for further information. Copies of such complete documents will be furnished by the Authority on request. Use of the words shall, will, must, or other words of similar import or meaning in summaries of documents or law in this Official Statement to describe future events or continuing obligations is not intended as a representation that such events will occur or such obligations will be fulfilled, but only that the document or law requires or contemplates such event to occur or such obligation to be fulfilled. The Authority has authorized the execution and distribution of this Official Statement. MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY By: /s/ Randy Roadman Name: Randy Roadman Title: Chairman 34

41 APPENDIX A Engineer s Annual Report and Budget 5 Year Capital Expenditure Plan

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75 Municipal Authority of Westmoreland County Westmoreland County, Pennsylvania 5 Year Capital Expenditure Plan January 2016 Meadowbrook Pump Station Prepared by: Prepared by: Established 1916 Harrisburg Pittsburgh Indiana Clarion Richmond Ft. Myers

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77 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY 5 Year Capital Expenditure Plan Transmittal Letter Table of Contents: Introduction 1 Proposed Plan 3 MAWC Annual Capital Maintenance Improvement Budget 10 Appendices: Appendix 1 Appendix 2 Appendix 3 Appendix 4 Appendix 5 Appendix 6 Existing Water Treatment Plants - Capital Projects Distribution Facilities - Water Storage Tank Projects and Repairs Pump Station Replacement Distribution Facilities Control Valve Sites Chronic Leak Areas Transite Pipe Replacement

78 INTRODUCTION The following report is the recommended Five Year Capital Expenditure Plan for system maintenance, system enhancement and system upgrades for the Municipal Authority of Westmoreland County. This plan provides a comprehensive analysis of all existing production, transmission, distribution, collection and treatment facilities and a framework to improve and maintain existing facilities adding redundancy and reliability to major components of the water and wastewater systems where required. With significant input from the Authority Manager (RDM) and the (MAWC) operations and engineering staff this report addresses major system components and develops costs of the plan for the Authority to consider when budgeting required revenue for the next five (5) years. From 2006 to the present, the Municipal Authority of Westmoreland County has performed capital improvements and made system acquisitions of over $210 million dollars. This work to maintain, upgrade and extend the Authority s system was funded through various sources including PENNVEST and a 2006 and 2012 Bond Issue. The 2012 Bond Issue for approximately $150 million dollars were specifically for this purpose. In addition, the Authority has expended approximately $30 million dollars over five (5) years ($6 million dollars/year) allocated from regular operating revenues for funding routine capital additions such as valve replacements, hydrant replacements, leak repairs, line relocations due to PADOT projects, meter replacements and miscellaneous water and sewer line replacements throughout the system. In order to maintain the system integrity and high standards of performance that have traditionally been the benchmark of the Municipal Authority of Westmoreland County, the Authority must address the need for the significant capital expenditures. This capital expenditure plan addresses six (6) major categories, in the attempt to provide an estimate of the investment necessary to keep the system functioning at a high level of performance and reliability. Page 1

79 The categories addressed are: 1. Treatment Plant Upgrades and Expansions: a. Water Treatment Plants 2. Water Storage Tanks: a. Maintenance and Upgrades b. Additional Storage or Replacement 3. Pump Stations: a. Upgrades b. Replacements 4. System Flow Control Vaults and Pressure Control Valves: a. Replacements b. Upgrades 5. Distribution: a. Areas with chronic leak issues b. Major Transmission Line redundancy and upgrades c. Meter Replacement d. Transite Pipe Replacement e. GIS Development 6. Dams and Reservoirs: a. Beaver Run Reservoir b. Mill Creek Dam c. Furnace Run Dam Page 2

80 The cost estimates have been developed using local knowledge and recent bids as basis for the totals, assuming current rates of inflation over the five (5) year period. The summary costs for each category are divided by five (5) to develop an annual cost followed by a debt service calculation that can be used for budgetary reference and rate development. Although capital will be needed to implement any acquisition or interconnection, it is anticipated that the subsequent sale of water through bulk purchase and or additional customers would offset the debt service expense for these projects. There are no new acquisitions noted in this Plan at this time. PROPOSED PLAN The following system components have been highlighted as major issues that should be addressed within the next five (5) years to maintain the MAWC system in good working order. 1. TREATMENT PLANTS MAWC presently operates three (3) water treatment plants at McKeesport, the Sweeney Plant at Beaver Run Reservoir and Indian Creek in Connellsville. Additionally MAWC operates four (4) wastewater treatment plants at Ligonier, Avonmore, White Oak and I- 70 Industrial Park. The Furnace Run Plant was decommissioned once the Ligonier Interconnection with the Greater Johnstown Water Authority was completed in the fall of The decommissioning and breach of the Furnace Run Dam is included in the 2012 Plan. The other plants must receive regular upgrades due to normal wear and tear on equipment and treatment improvements to meet changing regulatory requirements and increased capacity needs due to either demand or recommended redundancy. The five (5) year total for proposed improvements to the facilities is $40,100,000. The proposed upgrades for each plant with estimated costs are listed in Appendix 1. Page 3

81 With the addition of major customers in Monroeville/Plum Borough, Tenaska, Belle Vernon and PA American Water in Fayette County, it is imperative for the Authority to maximize their production capabilities in all parts of the system. The availability of the new 48 line to move water throughout the system to meet demand at each plant is limited if the production is not maximized. A review of present treatment capacity versus allocation availability indicates that the Sweeney plant has production limits of approximately 24 mgd with allocation available of 35 mgd.; the Indian Creek plant present treatment capacity of 40 mgd with allocation available at 50 mgd.; and the McKeesport plant has 5 mgd more capacity than usage with allocation limits that are expandable. Given these conditions, priorities would be to maximize the Sweeney plant and Indian Creek plant through a combination of expansion and re-rate and to establish additional pumping and transmission capability out of McKeesport prior to any expansion or reallocation from that plant in the next five years. In addition to expansion, it should be noted that the newest plant (Sweeney Plant), was constructed in 1997 and is almost 20 years old. All of the plants need upgrades to major equipment, electrical devices and solids handling/disposal. It should be particularly noted that the McKeesport water treatment plant has significant areas of concern due to age of portions of the facility. The raw water pump station and sludge handling facilities at the existing water treatment plant were not upgraded with the plant reconstruction in 1990 and are in need of refurbishment due to their age and use. These items should receive priority for improvement. Not only are they operating liabilities, but the conditions present potential safety concerns to operating personnel. Though some of this work can be done with in-house labor, the majority of this work will need to be bid to outside contractors due to the size and complexity of the projects. Page 4

82 2. TANK RENOVATIONS AND CONSTRUCTION MAWC presently has sixty-four (64) water storage tanks in service. Of these, one is being replaced and two new tanks are under construction. Of these tanks, five (5) are concrete tanks, two (2) of which are recently renovated; seven (7) are fiberglass fused to steel construction; one (1) is powder-coated, bolted steel; and the remaining fifty-two (52) tanks are painted welded steel. Allowing for approximately years of coating life on the tanks and the practicality of removing approximately three (3) per year from service for renovation, requires that the Authority must regularly schedule a rotation of tanks for refurbishment each year in order to keep them in good condition. Water storage tank types are shown and described in Appendix 2. A budget amount of $1,350,000/year has been estimated, to address various tank sizes and configurations. Permitting and weather conditions are the primary delays faced with getting the work completed. Budgeting a regular rotation will allow permitting to advance ahead of the need to perform the work. The sequence for renovation is established through annual inspections that are used to establish the priority of the work. The Authority has also developed a list of tanks which are in need of redundancy due to regular need for maintenance, cleaning or repair. Some of the tanks should have a twin/replacement tank construction as a fail-safe condition for being out of service. Approximately 24 of these exist throughout the system. Five of these have been budgeted for the next five years at an estimated cost of $6,250,000. A list of tanks age and size and a list of those needing redundancy are included in Appendix PUMP STATION REPLACEMENT Of the forty-two (42) stations MAWC operates, sixteen (16) of them needed significant improvements due to age, system operation issues and additional demand. Of these, eleven (11) have been or will be replaced under the 2012 system renovations The remaining pump stations shown and listed in Appendix 3 should be considered for complete replacement in the next five (5) years. Many are underground units with confined space issues which will be revised to above ground units. The average cost to do this is approximately $725,000/per station, or $3,625,000 for the 5-Year Plan. Page 5

83 Significant time is involved with design and permitting of these station replacements. These time restraints will permit the remaining five (5) stations to be replaced in the next five years. It is recommended that these units be bid using outside contractors to construct and install. Additional improvements are required in two of the larger stations in the system. Clelian Heights and Alverton Estates. The estimated cost of improvements is $1,325,000 for a total estimate of $4,950, SYSTEM FLOW CONTROL VAULTS AND PRESSURE CONTROL VALVES There are presently sixty-nine (69) control valve vaults which regulate pressure and flow throughout the system. The vaults are primarily below ground structures that are maintained and upgraded with in house personnel. Of these units, approximately eighteen (18) units need replaced due to structural, safety considerations and age. Another twenty-three (23) units need mechanical, SCADA or flow measurement upgrades to stay current with technology and maintain reliability. Due to the present in-house staffing and work load, it is estimated that approximately 3 units/year can be upgraded at an estimated cost of $40,000/unit. Replacement costs are estimated to be approximately $110,000/unit. Provided the replacement units can be installed through bidding and use of outside labor, it is estimated that approximately 9 units per year could be replaced taking into consideration permitting and bidding time restraints. This results in a total expense of approximately $1,110,000/year or $5,550,000 through the 5 year plan. The upgrades and replacements are listed in Appendix DISTRIBUTION The water distribution system of MAWC is extremely large, complicated and aging. Due to size and age, the Authority must annually invest significant funds in order to simply maintain the integrity of the system. Five (5) major categories are addressed with the proposed Five Year Capital Expenditure Plan. They are: Page 6

84 a. Chronic Leak Areas where operational manpower is regularly dispatched to make repeated repairs due to leaks in the system. The cause of the leaks is due to any number of reasons. The most common ones being age, type of pipe material and flow characteristics, such as pumping and increased usage. The proposed areas for replacement are listed in Appendix 5 with a cost of approximately $22,000,000 over the Five-Year Plan b Redundancy of Major Transmission Mains. In 2006, the Authority began constructing a 48 transmission main through the center of the service area to improve flow characteristics throughout the distribution system and add redundancy throughout the system in support of the present 30 and 24 main transmission lines. These lines have replaced sections of the system that are more than eighty (80) years old. The Authority has already invested $35,870,000 to date. An additional $10,000,000 is required to complete this vital project by completing the final section from the Omnova property in Jeannette to the Adamsburg tank. Once the 48 line is complete, the next major project relative to system-wide transmission is to upgrade the 24 /30 /36 line which extends across the entire system from Connellsville to the Sweeney Plant at Beaver Run. This line presently acts as the backbone of the entire system and though the cost and scope to totally replace this line far exceeds the funds available at this time, $10,000,000 of the next 5-Year Plan have been designated to replace areas of the line that have become chronic problems in difficult areas of the service system. Locations will be defined by the Authority s Distribution Group., Each section will be located based on maximum impact on improving the existing system. Due to the importance and size of this project, the replacement of the line should begin as soon as the funds are available. c. Meters. The Authority presently serves approximately 125,000 customers. In an effort to upgrade the meter reading system to use more efficient methods, approximately $1,300,000 per year, is proposed to be used to purchase 6,000 meters/year for installation by Authority personnel. This would permit complete upgrade of the system every 20 years, essentially encompassing the entire useful life expectancy of the meters. Page 7

85 d. Replacement of significant amounts of transite pipe (Asbestos Cement Pipe). As noted in Appendix 6, approximately 3,300,000 l.f. of this type of pipe exists in all portions of the service area. This pipe has become a major liability as it ages and as other adjacent utility involvement becomes more prevalent throughout the region. The pipe slowly degenerates physically over time by softening and is very fracture critical when other utilities disturb the immediate area of the ditch line either parallel or perpendicular to the line. Though the failures will be intermittent and not involve a system-wide catastrophe, the significant size of the task warrants that it be addressed annually in order to eliminate the problem. Appendix 6 indicates the size, cost, and total price of this task. This work can be completed using MAWC labor and or contract labor. The size of this task warrants the use of both in order to make any significant progress on the pipe replacement. This five (5) year plan proposes funding $10,000,000 of the total line replacement. e. GIS (Geographic Information System Development The Authority has begun developing a geographic information system for locating, logging in data and developing data distribution and interconnection between Authority departments. The work includes complete mapping and location of all water and sewer infrastructure adding attributes and historical records to each identified item, providing update equipment to field and office personnel to allow them access to the records and history information that best suits their needs relative to building maintenance and system changes or development. The funds needed are estimated to be $5,500, DAMS AND RESERVOIRS The Authority maintains three (3) major water reservoirs at Beaver Run, Mill Dam and Furnace Run. Rehabilitation at Beaver Run Dam will include the installation of a toe drain as per PA DEP request. The estimated cost is $2,000,000. Furnace Run Dam is required by PA DEP to be breached at an estimated cost of $400,000. Page 8

86 FINANCIAL The total cost of the recommended 5 Year Capital Expenditure Plan is $130,000,000. Page 8 is a summary of the items previously described and listed in the appendices. The recommend source of these funds is a long term bond issue. Based on current conditions, we are assuming a 3.6% rate for 30 years, this will require an annual debt service of approximately $7.2 million/year. Based on the current number of customers and the current rate, a rate increase of 25% and an additional 7% increase in the following two years would be needed to insure proper coverage on the debt payments in the event that the downward trend of water usage/customers continues. CONCLUSION This plan is a framework to be used to provide the costs and time for necessary capital improvements. It is flexible in that other high priority improvements may be required because of catastrophic system failure, PADOT relocations or any unanticipated deficiency of existing facilities. Page 9

87 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY Five Year Capital Expenditure Budget 1 Treatment Plant Upgrades and Expansions $ 40,100, Water Storage Tanks Maintenance and Upgrades $ 6,750, New Construction $ 6,250, Pump Station Replacement $ 4,950, System Flow Control Vaults and Control Valves $ 5,550, Distribution Chronic Leak Repairs $ 22,000, Transmission Redundancy/Repairs $ 20,000, Meter Replacement $ 6,500, Transite Pipe Replacement $ 10,000, GIS System Upgrades and Development $ 5,500, Dams/Reservoirs $ 2,400, TOTAL $ 130,000, Page 10

88 Indian Creek Water Treatment Plant The Indian Creek Supply Water Filtration Plant, located near the City of Connellsville, has a rated capacity of 45 million gallons per day and draws its water supply from both Indian Creek and the Youghiogheny River and serves the Southern portion of the MAWC service territory. This facility was constructed in 1973 and was upgraded in The proposed improvements include expansion of the plant capacity to the maximum allowable water allocation of 50 mgd. The cost with related upgrades in filtration, clarification, solids handing, and electrical improvements is estimated to be $25,450,000. APPENDIX 1, Page 1

89 PROPOSED CAPITAL PROJECTS McKeesport Water Treatment Plant The McKeesport Water Treatment Plant, located in the City of McKeesport, was completed in 1990 with a rated capacity of 10 million gallons per day. The McKeesport Plant draws its water supply from the Youghiogheny River and serves the Western portion of the MAWC service territory. With a capacity at the plant capable of increasing to 12 mgd and 4-5 mgd available after present demand, the addition of pumping and a transmission lien to move water into the Adamsburg storage facilities is recommended. Replacement of the raw water pumping station which was not included in the 1990 improvements is also recommended. The total cost of the project is estimated at $23,400,000. Of this amount, $6,900,000 is proposed for the 2016 Five- Year Plan. APPENDIX 1, Page 2

90 George R. Sweeney Water Treatment Plant The George R. Sweeney Water Treatment Plant is located at the Beaver Run Reservoir in Bell Township. This facility went on line in July 1997 and has a rated capacity of 24 million gallons per day. This facility serves the Northern portion of the MAWC service territory. The proposed plan is to maximize production at the plant to 30 mgd. This will be done by either expanding the plant or obtaining a re-rate of the filters based on a PA DEP authorized Pilot Study. Expansion of the filter capacity is estimated to require approximately $8 - $10 million in improvements. If the re-rate is validated, costs to make the plant function at the increased flow rate could drop significantly. Proposed improvements under the 2016 Five-Year Plan total $3,750,000, until the re-rate is validated or disapproved.w APPENDIX 1, Page 3

91 PROJECTS INDIAN CREEK WTP PLANT PIPE RECOATING IC $ 500, REPLACE FILTER VALVES IC $ 400, SLUDGE CROSS COLLECTORS/CONTROLS IC $ 200, DEHUMIDIFIERS IC $ 200, HIGH SERVICE MCC'S IC $ 1,000, LOW SERVICE MCC'S IC $ 800, MGD HIGH SERVICE PUMP W/ VFD IC $ 250, POT PERM FEED TO INTAKE IC $ 100, CLARIFIER CONTROLS IC $ 200, STORAGE BLDG./flood wall IC $ 300, YOUGH RIVER DAM REPAIRS IC $ 350, MILL RUN DAM REPAIRS IC $ 200, INTAKE WALL/RAW WATER SCREENS IC $ 350, CONE VALVES REPLACED IC $ 300, FLOW METERING AT MILL RUN DAM IC $ 100, FLOCCULATORS REPLACED IC $ 1,200, MGD EXPANSION IC $ 16,000, SLUDGE PRESSING AND HANDLING IC $ 2,000, GENERATOR IC $ 1,000, APPENDIX 1, Page 4

92 PROJECTS MCKEESPORT WTP ROUNDHOUSE MCC REPLACED AND MOVED MCK $ 100, SLUDGE LAYDOWN - MCK MCK $ 100, ROAD REPAIRS - MCK MCK $ 200, CAUSTIC STORAGE MCK $ 250, SCADA MCK $ 300, #3 HIGH SERVICE REPLACED AND VFD MCK $ 200, COVER CLARIFIERS MCK $ 100, ADD RAW WATER SCREEN MCK $ 1,000, RAW WATER PUMP STATION MCK $ 4,000, HIGH SERVICE FLOW METERS REPLACED MCK $ 250, FILTER VALVES REPLACEDw MCK $ 150, AIRWASH MCK $ 250, Additional improvements recommended for future consideration Waterline to Adamsburg $ 14,000, Pump Station to Adamsburg $ 2,500, APPENDIX 1, Page 5

93 PROJECTS SWEENEY WTP GENERATOR SW $ 1,000, ADAMSBURG PUMP W/ VFD SW $ 250, RAW WATER PUMP W/ VFD SW $ 250, SLUDGE DRYING BEDS DRAIN TILES SW $ 200, SLUDGE DRYING BEDS COVER SW $ 100, SLUDGE GRIT POND & LAYDOWN AREA SW $ 150, SCADA SW $ 400, REBUILD RAW WATER SCREENS SW $ 250, RESERVOIR AERATION SW $ 400, DATA MANAGEMENT SYSTEM ALL $ 250, CHEMICAL FEED SYSTEM UPGRADES SW $ 500, $ 36,100, % CONTINGENCY $ 4,000, TOTAL 2016 FIVE-YEAR PLAN $ 40,100, APPENDIX 1, Page 6

94 STORAGE TANK SITE EXISTING DISTRIBUTION FACILITIES WATER STORAGE TANKS PROJECTS AND REPAIRS CAPACITY IN MG YEAR BUILT INSIDE COATING OUTSIDE COATING ARLINGTON CHARTER OAK # E. GREENSBURG # MURRYSVILLE Concrete 1980 RUFFSDALE Concrete 1989 NASER ROAD # AVONMORE N/A NO RECORD NO RECORD ARDARA ARDARA # Glass Fused to Steel KISKI # NEW ALEX SHEARSBURG NO SHEARSBURG NO Glass Fused to Steel ALPINE SLICKVILLE 2015 Glass Fused N. GREENSBURG NO N. GREENSBURG NO Powder Coated Steel HEMPFIELD ADAMSBURG # ADAMSBURG # ARMBURST BRUSH CREEK CABIN HILL CHARTER OAK # CLELIAN HTS. # Concrete 1997 CLELIAN HTS. # E. GREENSBURG # Glass-Fused to Steel FORWARD TWP # Concrete 1998 FORWARD TWP # Concrete 1998 GIBSON # GIBSON # GREENGATE APPENDIX 2, Page 1

95 GREENSBURG PIKE HANKEY FARMS KISKI # LAUREL MT. PARK # Glass-Fused to Steel LAUREL MT. PARK # Glass-Fused to Steel LEECHBURG LEWIS ROAD Glass-Fused to Steel LINCOLN HTS MOCKINGBIRD MT. PLEASANT # MT. PLEASANT # NASER ROAD # N. JEANNETTE N. WASHINGTON PORT-VUE REAGANTOWN # REAGANTOWN # RENZIE # RENZIE # ROSTRAVER SALTSBURG Glass-Fused to Steel STEWARTSVILLE SUNRISE ESTATES TARRS TRUXALL VANDERGRIFT* # VANDERGRIFT # Glass-Fused to Steel WCIDC WEST LEECHBURG # WEST LEECHBURG # WEST POINT WHITE OAK Water storage tanks are evaluated annually to ensure that the most critical tanks receive required maintenance. The estimated cost of this work is $1,350,000 per year based on current and estimated construction values. Total Cost: $1,350,000 per year x 5 years = $6,750,000 APPENDIX 2, Page 2

96 TANKS IN NEED OF REDUNDANCY STORAGE TANK SITE SIZE (mg) GRADIENT 1. KISKI # KISKI # LEECHBURG N. WASHINGTON Add.25 mgd * TRUXAL AVONMORE SALTSBURG HANKEY FARMS Add 1.0 mgd. * MURRYSVILLE Add 2.0 mgd. * PORT VUE WHITE OAK STEWARTSVILLE SUNRISE ESTATES BRUSH CREEK ARLINGTON LINCOLN HEIGHTS Add 1.0 mgd. * GREENGATE HEMPFIELD CABIN HILL NEW ALEXANDRIA WEST POINT ARMBURST TARRS Add 1.0 mgd. * ROSTRAVER Add.85 md. * *Redundancy construction in the proposed 5-Year Plan using approximately 1 mgd, or less, supplemental storage at each site APPENDIX 2, Page 3

97 Types of Water Storage Tanks APPENDIX 2, Page 4

98 GLASS-FUSED TO STEEL Glass-fused-to-steel tanks are bolted together and sealed with a cured urethane compound. The factory applied silica glass coating is fused into high strength steel at 1600 F creating a hard, inert barrier for both the interior and exterior surface of the tank, protecting the steel core against corrosion cost-effective construction and installation. Glass-fused-to steel tanks positive features are: Lowest maintenance requirements over tank lifetime Cost effective designs to any local design codes Corrosion resistant tank and dome that never needs sandblasting or repainting which equates to a greater lifetime value APPENDIX 2, Page 5

99 Faster and safer construction schedule utilizing specialized jacking system without the need for scaffolding and crane CONCRETE TANKS Cement water storage tanks are reinforced with several strands of steel wire meshing. The reinforced walls are sprayed with concrete using high pressure spraying systems. Tanks are then spray painted on the outside. Concrete tanks positive features are: Working life will exceed that of metal or plastic Walls do not puncture good for remote locations Can be partially subterranean and hidden from view Does not taint water with metal or plastic by products Large volume capacities Keeps water cool APPENDIX 2, Page 6

100 WELDED STEEL Welded steel tanks are constructed of strong factory-welded steel or factory-coated carbon steel. They are radiologically and vacuum tested for tightness and structural integrity. The tanks are then sand blasted and received a 3-coat epoxy paint system for corrosion protection. Welded steel tanks positive features are: Long-term material strength. Able to handle stresses from all load conditions, including wind and seismic activity. Impermeable to vapors and fluids of all types. Adaptable to tank designs of virtually unlimited shape and capacity., glass and plastic combined APPENDIX 2, Page 7

101 Existing Pump Stations To be Replaced Appendix 3 Page 1

102 Site #1 Pleasantview The Pleasantview Station is an EFI hydrostatic station with three pumps 2 service pumps and one fire pump which serves 20+ homes. The station has no SCADA, back-up generator or temporary power. This station is a candidate for replacement within the next five (5) years due to its age and configuration. Appendix 3 Page 2

103 Site #2 Wegley External View Site #2 Wegley Internal View The Wegley Station feeds from the Beaver Run Treatment Plant. Two pumps provide constant pressure to ten homes on First Street. The station has no SCADA, no back-up generator or temporary power connection. This station is a candidate for replacement with an above ground facility. Appendix 3 Page 3

104 Site #3 Lincoln Heights #1 External View The Lincoln Heights #2 Station is supplied from the Beaver Run Treatment Plant and pumps to the Lincoln Heights Tank (2.5 MG). The station has two vertical turbines underground, tank level controls, and a flow meter in pit. The Venturi meter is outdated. The station has no SCADA, no back-up generator or temporary power connection. This station is a candidate for replacement within the next five (5) years. Appendix 3 Page 4

105 Site #4 Alpine External View Site #4 Alpine Internal View The Alpine Station feeds from the McKeesport Treatment Plant to the two Renzie #1 and #2 Tanks (2 MG each) and the Alpine Tank (1 MG). The station is a Dakota station with SCADA, monitored tank controls, two centrifugal pumps, and intrusion protection. The station has no back-up generator or temporary power connection. This station can be used to bring North Huntingdon flow back to McKeesport. This station is a candidate for replacement with an above ground unit in the next five (5) years. Appendix 3 Page 5

106 Site #5 Ice Plant Hill Station External View The Ice Plant Hill Station, a Dakota station, is used as an emergency back-up which feeds off the Wilkinsburg-Penn Joint Water Authority and pumps to both the Greensburg Pike Tank (.54 MG) and the Naser Road #1 / #2 Tanks (.16 /.76 MG). It has back flow prevention but no back feed to Wilkinsburg-Penn. The station is not used often but is an important backup source. The station has no SCADA, no meter, no back-up generator or temporary power connection. This plant is a candidate for replacement with an above ground station in the next five (5) years. Appendix 3 Page 6

107 PROJECTS INDIAN CREEK WTP PLANT PIPE RECOATING IC $ 500, REPLACE FILTER VALVES IC $ 400, SLUDGE CROSS COLLECTORS/CONTROLS IC $ 200, DEHUMIDIFIERS IC $ 200, HIGH SERVICE MCC'S IC $ 1,000, LOW SERVICE MCC'S IC $ 800, MGD HIGH SERVICE PUMP W/ VFD IC $ 250, POT PERM FEED TO INTAKE IC $ 100, CLARIFIER CONTROLS IC $ 200, STORAGE BLDG./flood wall IC $ 300, YOUGH RIVER DAM REPAIRS IC $ 350, MILL RUN DAM REPAIRS IC $ 200, INTAKE WALL/RAW WATER SCREENS IC $ 350, CONE VALVES REPLACED IC $ 300, FLOW METERING AT MILL RUN DAM IC $ 100, FLOCCULATORS REPLACED IC $ 1,200, MGD EXPANSION IC $ 16,000, SLUDGE PRESSING AND HANDLING IC $ 2,000, GENERATOR IC $ 1,000, Appendix 3 Page 7

108 PROJECTS MCKEESPORT WTP ROUNDHOUSE MCC REPLACED AND MOVED MCK $ 100, SLUDGE LAYDOWN - MCK MCK $ 100, ROAD REPAIRS - MCK MCK $ 200, CAUSTIC STORAGE MCK $ 250, SCADA MCK $ 300, #3 HIGH SERVICE REPLACED AND VFD MCK $ 200, COVER CLARIFIERS MCK $ 100, ADD RAW WATER SCREEN MCK $ 1,000, RAW WATER PUMP STATION MCK $ 4,000, HIGH SERVICE FLOW METERS REPLACED MCK $ 250, FILTER VALVES REPLACED MCK $ 150, AIRWASH MCK $ 250, Additional improvements recommended for future consideration Waterline to Adamsburg $ 14,000, Pump Station to Adamsburg $ 2,500, Appendix 3 Page 8

109 PROJECTS SWEENEY WTP GENERATOR SW $ 1,000, ADAMSBURG PUMP W/ VFD SW $ 250, RAW WATER PUMP W/ VFD SW $ 250, SLUDGE DRYING BEDS DRAIN TILES SW $ 200, SLUDGE DRYING BEDS COVER SW $ 100, SLUDGE GRIT POND & LAYDOWN AREA SW $ 150, SCADA SW $ 400, REBUILD RAW WATER SCREENS SW $ 250, RESERVOIR AERATION SW $ 400, DATA MANAGEMENT SYSTEM ALL $ 250, CHEMICAL FEED SYSTEM UPGRADES SW $ 500, $ 36,100, % CONTINGENCY $ 4,000, TOTAL 2016 FIVE-YEAR PLAN $ 40,100, Appendix 3 Page 9

110 DISTRIBUTION FACILITIES CONTROL VALVE LOCATIONS PROPOSED REPLACEMENT/UPGRADES AND/OR MODIFICATIONS Locations by Priority Existing Site Upgrade 1 CLELIAN HEIGHTS X 2 ALPINE WAY X 3 PORT VUE TANK CONTROL X 4 PORT VUE-LIBERTY BORO X 5 CHAMBERS AVENUE X 6 WALTON TEA ROOM ROAD X 7 PLEASANT UNITY - RT 981 X 8 ARMEL ROAD X 9 COAL HOLLOW ROAD X 10 HEMPFIELD SQUARE X 11 SOUTH VERSAILLES X 12 CEDAR CREEK FINLEY ROAD X 13 LINCOLN HEIGHTS P.R.V.(PS) X 14 SALTSBURG (ROUTE 286) X New Site Construction 15 DUTCH HOLLOW ROAD X 16 GREENRIDGE X 17 VAN METER X 18 BROWNSTOWN ROAD X Mechanical, electrical and control system integration Mechanical, electrical and control system integration Mechanical and SCADA integration only Mechanical, electrical and control system integration Mechanical, electrical and control system integration Mechanical and SCADA integration only Mechanical, electrical and control system integration Mechanical, electrical and control system integration Mechanical, electrical and control system integration Mechanical, electrical and control system integration Mechanical and SCADA integration only Mechanical, electrical and control system integration Mechanical, electrical and control system integration Mechanical and SCADA integration only New replacement installation required New replacement installation required New replacement installation required New replacement installation required APPENDIX 4, Page 1

111 Locations by Priority Existing Site Upgrade 19 SCOTCH HILL X New Site Construction 20 HERMINIE (RESERVOIR) X 21 SMITHTON (TANK) X 22 JACOBS CREEK SMITHTON X 23 SALINA X 24 WEST LEECHBURG X 25 SUGAR HOLLOW ROAD X 26 PARKS TWP X 27 BRYANT STREET X 28 EMERSON ST. X 29 OWENS X 30 ELWOOD ROAD KISKI TWP. X PENNSYLVANIA & LOMBARD 31 ST. X RT. 30 EAST & GEORGIA 32 STATION X 33 SCOTTDALE(SURGE VALVE) X 34 WEST/ALLGNY COUNTY LINE X WHITE OAK LINCOLN WAY 35 (SURGE) X ALLEGHENY LUDLUM 36 (SURGE) X 37 NORTH IRWIN TO IRWIN X 38 OLD JACKS RUN ROAD X Mechanical, electrical and control system integration New replacement installation required New replacement installation required New replacement installation required Mechanical, electrical and control system integration Mechanical and SCADA integration only Mechanical and SCADA integration only Mechanical, electrical and control system integration New replacement installation required New replacement installation required New replacement installation required New replacement installation required New replacement installation required New replacement installation required New replacement installation required New replacement installation required Mechanical, electrical and control system integration Mechanical, electrical and control system integration New replacement installation required New replacement installation required APPENDIX 4, Page 2

112 Locations by Priority Existing Site Upgrade 39 SPRING & FINLEY ROAD X 40 THIRTEENTH STREET X New Site Construction 41 DEPOT STREET X System will require modifications with the Belle Vernon system expansion Mechanical, electrical and control system integration New replacement installation required TOTAL SITES: 41 Existing Sites with 18 Replacements and 23 Upgrades Required The cost of this work is $1,100,000 per year x 5 years = $5,550, APPENDIX 4, Page 3

113 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY PROPOSED PROJECTS FOR THE 2016 BOND WITH ESTIMATED COSTS Bridgeport 22, PVC 1,320,000 Overhead Bridge Rd. YWD 6,000 12" PVC 325,000 Penn Ave. & Brush Hill Irwin 3,700' 12 PVC 400,000 Apollo River Xing to #1 PS 2,000' 12 PVC (w 24" river crossing) 1,750,000 North Huntington: County Rd. (Clay Pike) 30,000' 8 PVC 3,000,000 Washington Ave (Penn Shaft) 1,100' 8 PVC 85,000 Bethel Rd. 2,800' 8 PVC 290,000 Wren Drive 1,200' 6 PVC 90,000 Harmony PVC 70,000 Bluebird PVC 85,000 Melody PVC 70,000 SR 3045 (Rillton) 1,150 8 PVC 190,000 McClellan St.. (Shafton) 1500' 8" PVC 135,000 Jeannette: Penn Adamsburg Rd. 2,500' 8" PVC 270,000 Murrysville: Lillian Ave. + side Streets 1,300 6 PVC 125,000 Kentucky & Virginia Sts. 1,700 6 PVC 155,000 T 772 Elrico PVC 65,000 North Hills Rd. Murrysville 1,200 8 PVC 150,000 Prospect Ave. Murrysville PVC 95,000 Berry Ln. Delmont PVC 40,000 APPENDIX 5, Page 1

114 County Rd. Slickville PS to 819 5, PVC 420,000 1st. St. Slick. 1,100 8 PVC 90,000 SR 819 Slick. 2 nd to Tank 2, PVC 250,000 Vandergrift Area: S 66 (Pegtown) bore PVC 85,000 Eckman Kiski Twp 540 PVC 55,000 Cecil St. Salina PVC 35,000 Sugar Hol. Apollo 2,900 8 PVC 290,000 McKeesport Area: New York PortVue 1,270 8 PVC 105,000 Foster Rd. NV 1,320 8 PVC 137,000 Pleasant Dr WO 1,040 6 PVC 90,000 Gordon St. McK PVC 70,000 Greensburg: Marguerite 2,300 6 PVC 2,300' 8 PVC 390,000 Stone St.. Gbg PVC 50,000 Southwest. Vine & Steck PVC 85,000 Grant St. 2,000 8 PVC 195,000 Maple Ave PVC 50,000 St.. Clair PVC 50,000 Brown Ave PVC 85,000 Luxor Rd. 3, PVC 270, PVC 65,000 Woodward. Dr/South Greengate Road 3,000 8 PVC 250,000 Broadway (Midway) 3,500 8 PVC 210,000 APPENDIX 5, Page 2

115 Tie-ins for 1315 to 1360 Sony /Brusters: 30" x 6" at Bridge St. Hunker 9,500 Borough Line Rd./ Broadview New Stanton 3,250 8 PVC 250,000 St.an Ave. 1, PVC 80,000 Scottdale/Rostraver: SR3039 Suttersville 14,640 12" PVC 1,470,000 Gratztown 1,100 6 PVC 90,000 Circle Dr. Rostvr PVC 85,000 Luna St. W. New PVC 33,000 Center Ave. W. New PVC 74,000 Sr819 5 th Ave Scott. 1,100 8 PVC 115,000 Railroad 7 Rocktown Rd. Tarrs 5, PVC 500,000 Hecla Ln. Hecla PVC 27,000 Crest. Ave ,000 Academy Ln. Hecla PVC 53,000 Yukon: Henry, Lumber, Herron Sts. 3,790 6 PVC 400,000 Not previously Identified TR, A/C problematic mains Oak St.. Yukon 1,230 6 PVC 150,700 Hammondville Flatts 3,800' 12 PVC 390,000 Jantosic St., 3rd., 2nd, W. Leech. 2,100 6 PVC 199,000 SR2010 Stone Church Hemp. 1, DI 153,000 Fennell St., Bowman, Church St. New Alex 2, PVC 240,000 4,000 6 PVC 370,000 3rd. & 4th Street Youngwood 3,000,000 Service Replacements for Bond related projects 2,100,000 TOTAL ESTIMATED COST 21,876,200 USE 22,000,000 APPENDIX 5, Page 3

116 APPENDIX 5, Page 4

117 Transite Pipe Typical Installation and Failure Transite originated as trade name that The Johns-Manville Corporation created for a line of asbestos-cement products, including pipes. In time, it became something of a generic term for other companies' similar asbestos-cement products. Asbestos-cement (AC) pipe was used extensively in the mid-1900s in potable water distribution systems in the United States. The primary reason for use was low cost and durability in aggressive soils that would cause iron or steel pipe to corrode. However, other problems with this material caused it to be phased out of production in the 1980 s. Over time, AC pipe undergoes gradual degradation in the form of corrosion (i.e., internal calcium leaching due to conveyed water and/or external leaching due to groundwater). Such leaching leads to reduction in effective cross-section, which results in pipe softening and loss of mechanical strength which makes the pipe brittle and, as the water distribution system ages, the number of AC pipe failures increases with time. In light of these risks, an AC pipe condition assessment is essential to determine the remaining useful service life and develop a suitable, proactive replacement plan for the distribution system. Appendix 6 Page 1

118 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY Transite Pipe And Small Diameter Pipe Replacement Pipe Size Pipe Length (LF) Unit Price ($/LF) Cost Estimate Service Area Sub-Totals McKeesport 659,678 x $100 = $65,967,800 Service Area 8" 842 x $100 = $84,200 10" & 12" 0 x $115 = $0 16" 0 x $140 = $0 18" & 20" 0 x $160 = $0 $66,052,000 Beaver Run 1,229,252 x $100 = $122,925,200 Service Area 8" 497,089 x $100 = $49,708,900 10" & 12" 248,378 x $115 = $28,563,470 16" 0 x $140 = $0 18" & 20" 2,042 x $160 = $326,720 $201,524,290 Indian Creek 1,426,892 x $100 = $142,689,200 Service Area 8" 780,429 x $100 = $78,042,900 10" & 12" 379,115 x $115 = $43,598,225 16" 28,890 x $140 = $4,044,600 18" & 20" 47,278 x $160 = $7,564,480 $275,939,405 Total: $543,515, Five-Year Plan includes more than $10,000,000 for replacement of transite pipe in the system. Appendix 6 Page 2

119 APPENDIX B Demographic and Economic Information

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121 THE COUNTY OF WESTMORELAND (Commonwealth of Pennsylvania) General Information Westmoreland County (the County ) was organized as the 11 th county of Pennsylvania on February 26, Greensburg, located in the center of the County, is the County Seat. The County occupies 1,033 square miles. The County is bordered by Allegheny County on the west, the Laurel Mountains on the east, and the Allegheny and Monongahela Rivers on its northwestern and southwestern corners, respectively. Geographically located within the County are five cities, thirty-seven boroughs, twenty-one townships and three home rule communities. Each of these municipalities is governed by elected officials. Westmoreland's neighboring counties are Allegheny, Washington, Fayette, Somerset, Cambria, Indiana and Armstrong. History and Background Located in Southwestern Pennsylvania, the County provides a combination of suburban, urban and rural living. The County occupies 1,033 square miles and stretches from the border of Allegheny County on the west to the Laurel Mountains on the east and the Allegheny and Monongahela Rivers on the northwestern and southwestern corners. In terms of acreage, the County is the eighth largest county in the Commonwealth of Pennsylvania. According to the 2010 U.S. Census Bureau, the County has a population of 365,169. Located within the County are six third class cities, thirty-eight boroughs or home rule municipalities and twenty-one townships. Two of the largest cities are Greensburg, which is the county seat, and New Kensington. Other growing municipalities are Murrysville and the townships of Allegheny, Penn, Hempfield, Unity and North Huntingdon. Settlement in the eastern end of the County is the least dense due to the barrier created by the Chestnut Ridge. Two-thirds of the County's population resides in the western one-third of the County because of the close proximity to Pittsburgh. Westmoreland County is a major tourist region rich in colonial history commemorated at various sites throughout the region. Prime hunting and fishing areas add to the leisure value of the area, as well as easy access to the urban amenities of the City of Pittsburgh. County Government The County of Westmoreland, a County of the third class under Pennsylvania law, has a Board of three County Commissioners elected to a four year term as its governing body. Other elected officials having a four year term include: Controller, Treasurer, District Attorney, Sheriff, Coroner, Prothonotary, Clerk of Courts, Register of Wills, Recorder of Deeds and two Jury Commissioners. The eleven County Common Pleas Judges are elected to ten year terms. The County is represented in the General Assembly of the Commonwealth of Pennsylvania by five State Senators and nine Representatives. The Board of County Commissioners has power of appointment of various other officials including the County Solicitor, Public Defender and various departmental directors. The major functions within County government are: General Government-Administration, Judicial Administration, Public Safety, Human Services, and Public Works. The major increase in the cost of delivery of County services over the past four years have been in Public Safety, Judicial Administration and Human Services. B-1

122 DEMOGRAPHIC CHARACTERISTICS Population The County s population decreased by 0.06% from 1990 to 2000; by 1.3% from 2000 to 2010; and is estimated to have decreased by 0.2% from 2010 to The tables below show population comparisons for Westmoreland County, Pennsylvania and the United States. Land Area in Sq. Miles Percentage Population Increase/(Decrease) Density (Persons/ Sq. Miles Westmoreland Co. 1, , , ,169 (0.06)% (1.3)% Pennsylvania 44, ,881,643 12,281,054 12,702, U.S. 3,531, ,709, ,421, ,745, Source: Pennsylvania State Data Center; U.S. Bureau of Census Population Estimates Estimate 2015 Estimated Percentage Increase/(Decrease) Estimated 2015 Density (Persons/ Sq. Miles) Westmoreland Co. 357,956 (3.3)% (0.2)% Pennsylvania 12,802, U.S. 321,418, Source: U.S. Census, Age Composition Median Age Percent Under 18 Percent Percent 65 and Over (1) (1) (1) (1) Westmoreland Co % 18.8% 61.3% 60.5% 18.9% 19.6% Pennsylvania U.S Source: Pennsylvania State Data Center; U.S. Bureau of Census. (1) 2014 American Community Survey 1-year estimates. B-2

123 Income Per Capita (1) Household Median (1) Family Median (1) Percentage of Families in Poverty (1) (2) (2) (2) (2) Westmoreland Co. $ 24,917 $ 28,654 $ 46,361 $ 51,593 $ 58,644 $ 66, % 7.0% Pennsylvania 26,374 28,912 49,288 53,115 61,890 67, U.S. 26,059 28,555 50,046 53,482 60,609 65, Source: Pennsylvania State Data Center; U.S. Bureau of Census. (1) U.S. Census, American Community Survey estimates. (2) 2014 American Community Survey 1-year estimates. Housing Characteristics Municipality Total Housing Units Percent Occupied Percent Vacant (1) Median Value Owner Occupied (2) (2) (2) (2) Westmoreland Co. 168, , % 90.0% 8.6% 10.0% $135,000 $137,200 Pennsylvania 5,567,315 5,578, , ,900 U.S. 131,704, ,741, , ,700 Source: Pennsylvania State Data Center; U.S. Bureau of Census. (1) Includes seasonal, recreational or occasional use housing units. (2) 2014 American Community Survey 1-year estimates. Occupied Housing Total Occupied Housing Units (1) Westmoreland County 153, ,489 Pennsylvania 5,018,904 4,957,736 U.S. 116,706, ,211,092 Total Owner Occupied Total Renter Occupied Units % of Total Units % of Total (1) (1) (1) (1) Westmoreland Co. 117,72 115, % 76.0% 35,924 36, % 24.0% Pennsylvania 3,491,72 3,446, % 69.5% 1,527,182 1,511, % 30.5% U.S. 75,986,07 74,787, % 64.4% 40,730,218 41,423, % 35.7% Source: Pennsylvania State Data Center; U.S. Bureau of Census. (1) 2014 American Community Survey 1-year estimates. B-3

124 Medical facilities There are currently three general acute care hospitals, one specialty hospital (long-term acute care) and one psychiatric hospital that serve Westmoreland County. These hospitals, their licensed bed capacities and number of employees (full-time and part-time) are as follows: Institution Location Licensed Beds Staff (1) Full-Time Part-Time Exela Health Frick Hospital Mount Pleasant Exela Health Latrobe Hospital Latrobe Exela Health Westmoreland Hospital Greensburg 373 1, Select Special Hospital Laurel Highlands Latrobe Torrance State Hospital Torrance Source: Pennsylvania Department of Health, Bureau of Health Statistics; 2014/2015 reporting period. (1) Does not include non-employee consultant personnel. The health care system of the County is complemented by 19 nursing home facilities with a total of 2,417 beds. Transportation The Westmoreland County Airport Authority operates both Arnold Palmer Regional Airport at Latrobe and Rostraver Airport near Belle Vernon. Palmer Regional is classified as a primary commercial service facility while Rostraver is a general aviation reliever. Utilities Multiple municipalities or authorities provide sewage throughout the county. Water service is provided from private and municipal companies. Primary among these companies is the Municipal Authority of Westmoreland County. In Pennsylvania, the markets for natural gas supply, electrical service and local telephone service are open to competition. Gas companies include; Peoples Natural Gas, Columbia Gas of Pennsylvania, T.W. Phillips Gas & Oil Company, and Equitable Gas Company. Electric service (generation, transmission and distribution) is provided by such firms as Duquesne Light, West Penn Power, Penelec and a number of other suppliers. Telephone services are provided by Verizon Inc., AT&T, MCI Telecommunications Corp., SPRINT of Pennsylvania, Comcast, and several independents. Education The Public School Systems in Westmoreland County provide excellent elementary, secondary and vocational educational facilities. Professional staffs governed by 19 elected local school boards administer these schools. Within the County, there are a number of higher-education institutions. The University of Pittsburgh at Greensburg, Seton Hill University, Saint Vincent College and Penn State University at New Kensington all offer four-year degree programs as well as selected graduate degree opportunities. The Westmoreland County Community College, with its main campus located in Youngwood, offers two-year programs as well as a nursing school and has an enrollment of approximately 5,595 full-time and part-time students. Outside, but in close proximity to the County, are Carnegie-Mellon University, the University of Pittsburgh, Duquesne University, Robert Morris College, Point Park University, Carlow University and Indiana University of Pennsylvania. Besides offering quality educational systems, the County has many training and vocational schools. B-4

125 Recreation Westmoreland County boasts a wide variety of recreational and conservation areas, including dozens of county and state parks, country clubs, state game lands, state forests, and nature preserves. In addition, there are many fine parks and recreation areas maintained by townships and localities. Here we present but a few of the major resources and facilities that will help you enjoy the outdoors in Westmoreland County. The Westmoreland County Bureau of Parks and Recreation encompasses nine diversified parks and two trails maintained to provide visitors with a wide variety of benefits and experiences. The parks, encompassing over 2,700 acres of land are open year round providing walking and hiking trails, picnic and play areas, recreation programs, fishing areas, active sports facilities, as well as plenty of open fields, forests and streams for you to discover. Hempfield Park is located in northern Hempfield Township just off Route 66, 4 miles north of Greensburg. Covering 94.5 acres, the park features a one mile walking track, lighted tennis courts, basketball and volleyball courts, baseball fields, horseshoe pits, a bocce court and 5 handicapped accessible pavilions for rent. Latrobe Parks & Recreation sees as its mission to provide a variety of safe, modern, affordable parks & recreation facilities, programs and services that will enhance the quality of life by promoting good health and well being for the citizens of Latrobe. With 1,200 acres, including a 78 acre lake, Keystone State Park is great for family vacations year-round. Camping, modern cabins, trails and a swimming beach provide an ideal setting for a summer outing. The park is off Route 981 south of Route 22 in New Alexandria. Laurel Summit in Westmoreland County provides a scenic picnic area 2,739 feet above sea level operated by the Bureau of State Parks. The 6-acre park includes picnic tables and a pavilion, water and provides trailhead parking for Spruce Flats bog and Wolf Rocks Trail. Linn Run State Park is 612 acres on the western side of Laurel Mountain and borders Forbes State Forest. A mixed hardwood and evergreen forest make this park a scenic place for picnicking, hiking and cabin rentals. Linn Run is an excellent trout stream complete with its own small waterfall, Adams Falls. ECONOMY Industry Boasting familiar industrial names such as Alcoa, Kennametal, and Elliott, Co., Westmoreland County continues to move forward in economic development. Westmoreland County success stories have included United Parcel Service, ABB, Inc., Reinhart Food Service, Inc., Precision Metal Crafters, Bacharach, Inc., Leeds World and many more. With the constant progress of the Westmoreland County Industrial Development Corporation's (WCIDC) economic development strategy, the County now owns and operates fifteen industrial parks. Four of the parks are redeveloped brownfield sites, all of which offer new and existing companies a plethora of choices in location, transportation (i.e., highway, rail, and barge access) topography and acreage for expansion and growth. Specialty machine shops continue to thrive in the County and reflect the workmanship of skilled labor. In addition, the County has become attractive to such industry groups as fabrication, electronics, plastics, medical equipment, food processing and hardwoods. Glass and steel industries have represented the County's industrial base for many years and are still a viable part of the economic base. Such industries include Latrobe Steel and Allegheny Ludlum. In addition to the glass and steel industry, the County has one county-based brewery, which is City Brewing. Overall, the County is home to a diverse spectrum of manufacturing and distribution companies. B-5

126 Top 10 Employers in Westmoreland County Company Product/Service Wal-Mart Stores... Retail State Government... County Government Westmoreland Regional Hospital... Hospital United Parcel Service... Package Delivery Westmoreland County... County Government Respironics Inc.... Medical Equipment Giant Eagle Inc... Retail Grocery Elliot Turbomachinery Co., Inc.... Manufacturing Westinghouse Electric Co., LLC... Electrical Equipment Latrobe Area Hospital Inc.... Health Care Source: L & I, 3 rd Quarter 2015 (Initial data). L & I does not report employee numbers due to employer privacy. Trends in Westmoreland County Employment and Unemployment Year County Civilian Labor Force Percentage Unemployed (1) Total Employment County Pennsylvania U.S (April) , , , , % % % , , , , , , , , , , , , , , , , , , , , , , , , Source: Pennsylvania Department of Labor & Industry. (1) Not seasonally adjusted. B-6

127 Classification of Employment by Industry The Pittsburgh Metropolitan Statistical Area includes the County as well as the Allegheny, Armstrong, Beaver, Butler, Fayette and Washington Counties. The following table shows the latest non-farm employment statistics for the Pittsburgh Metropolitan Statistical Area available from the Pennsylvania Department of Labor and Industry. Industry Number Employed (1) Total Non-Farm 1,165,800 Goods Producing Industries Mining & Logging 9,800 Construction 53,900 Manufacturing 85,300 Total Goods Producing Industries 149,000 Service Producing Industries Trade, Transportation & Utilities 214,600 Information 18,000 Financial Activities 69,800 Professional & Business Services 180,300 Educational & Health Services 244,000 Leisure & Hospitality 199,100 Other Services 52,200 Government 118,800 Total Service Producing Industries 1,096,800 Source: Center for Workforce Information and Analysis, Pennsylvania Department of Labor and Industry ( L&I ), 2016 April, data. B-7

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129 APPENDIX C Authority s Audited Financial Statements 2015 and 2014

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131 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2015 AND 2014 DELUZIO & COMPANY, LLP CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS

132 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY March 31, 2015 AND 2014 TABLE OF CONTENTS Page(s) Independent Auditors Report Management s Discussion and Analysis Financial Statements Statements of Net Position Statements of Revenues, Expenses, and Changes in Net Position... 9 Statements of Cash Flows Notes to the Financial Statements Required Supplementary Information Schedule of Funding Progress Pension Plan Schedule of Contributions from Employer and Other Contributing Entities Pension Plan 50 Notes to Required Supplementary Information Pension Plan Schedule of Funding Progress Other Post-Employment Benefits (OPEB) Schedule of Employer Contributions Other Post-Employment Benefits (OPEB) Post-Employment Benefits Other Than Pension Benefits (OPEBs) Factors and Trends Used in Actuarial Valuation Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements in Accordance With Government Auditing Standards

133 Tax // Audit & Attestation // Consulting // Planning DC & DELUZIO COMPANY, LLP 351 Harvey Avenue, Suite A Greensburg, PA Charles A. Deluzio, CPA Jeffrey P. Anzovino, CPA, MSA Joseph E. Petrillo, CPA Stacey A. Sanders, CPA, CSEP Lisa M. Altschaffl, CPA INDEPENDENT AUDITORS' REPORT To the Members of the Board of Municipal Authority of Westmoreland County New Stanton, Pennsylvania Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities of the Municipal Authority of Westmoreland County (Authority), as of and for the years ended March 31, 2015 and 2014, and the related notes to the financial statements, which collectively comprise the Authority's basic fmancial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these fmancial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. (Continued) - 1 -

134 DC DELUZIO & COMPANY, LLP Opinion INDEPENDENT AUDITORS' REPORT (Continued) In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities of the Authority, as of March 31, 2015 and 2014, and the respective changes in financial position and cash flows thereof for the years then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementapy Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 3 through 6 and the pension and other post-employment benefit information on pages 49 through 54 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information, in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information, because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated July 10, 2015 on our consideration of the Authority's internal control over fmancial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority's internal control over financial reporting and compliance. Greensburg, Pennsylvania July 10, 2015 GLIKpa 1--LP - 2 -

135 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS MARCH 31, 2015 AND 2014 As management of the Municipal Authority of Westmoreland County (Authority), we offer readers of the Authority's financial statements this narrative overview and analysis of the financial performance of the Authority for the year ended March 31, Please read this Management's Discussion and Analysis in conjunction with the financial statements to obtain a thorough understanding of the Authority s financial condition at March 31, OVERVIEW OF THE FINANCIAL STATEMENTS The Authority s basic financial statements are comprised of: 1) statement of net position, 2) statement of revenues, expenses and changes in net position, 3) statement of cash flows, and 4) notes to the financial statements. This report also includes required supplementary information in addition to the basic financial statements themselves. The Authority s financial statements are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles promulgated by the Governmental Accounting Standards Board (GASB). The enterprise fund financial statements are designed to provide readers with a broad overview of the Authority's finances. The statements are presented in a manner similar to private-sector businesses. Statement of net position The statement of net position presents the financial position of the Authority. This statement provides information about the nature and amount of investments in resources (assets) and the obligations to the Authority s creditors (liabilities). It presents information on all of the Authority s assets plus deferred outflows of resources less liabilities and deferred inflows of resources to arrive at net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial condition of the Authority is improving or deteriorating. Statement of revenues, expenses and changes in net position The statement of revenues, expenses and changes in net position presents information showing how the Authority s net position changed during the most recent fiscal year. This statement measures the success of the Authority s operations over the last year and can be used to determine whether the Authority has successfully recovered all of its costs through its user fees. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Revenues are recognized when earned, not when they are received. Expenses are recognized when incurred, not when they are paid. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused vacation and sick leave). Statement of cash flows The statement of cash flows presents and reports cash receipts, cash payments and net changes in cash resulting from operations, investing and financing activities. This statement provides answers to such questions as where did cash come from, what was the cash used for and what was the change in the cash balance during the reporting period. Notes to the financial statements The notes provide additional information that is essential to obtain a full understanding of the data provided in the Authority s financial statements

136 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS MARCH 31, 2015 AND 2014 FINANCIAL ANALYSIS OF THE AUTHORITY Financial Highlights The total assets of the Authority at March 31, 2015 are $555,643,686. This represents an increase in total assets of $1,095,995 from March 31, Total assets consist of current assets of $27,354,881 (decrease of $2,142,375), property, plant and equipment of $360,759,450 (increase of $24,860,862) and non-current assets of $167,529,355 (decrease of $21,622,492). The Authority's cash and cash equivalents balance at March 31, 2015 was $12,977,409 which represents a decrease of $2,076,273 from March 31, The total liabilities of the Authority at March 31, 2015 are $405,569,247. Total liabilities of the Authority decreased $2,370,440 from March 31, The total liabilities consist of the Authority's current liabilities of $23,826,371 (decrease of $402,086) and non-current liabilities of $381,742,876 (decrease of $1,968,354). The assets and deferred outflows of resources of the Authority exceeded its liabilities and deferred inflows of resources at March 31, 2015 by $151,725,376 (net position). This represents an increase in net position of $3,302,930 from March 31, The net position of the Authority includes the amount of net investment in capital assets of $99,450,325 (increase of $4,070,792), restricted net position of $2,814,781 (increase of $1,547,364) and unrestricted net position of $49,460,270 (decrease of $2,315,226). The Authority had operating revenues of $71,248,891 (decrease of $3,199,414), operating expenses of $61,494,308 (increase of $594,564) and net non-operating expenses of $9,495,760 (decrease of $679,614) for the fiscal year ended March 31, The Authority recorded capital contributions of $3,044,107 which represents an increase of $312,544 from March 31, Financial Analysis Net position may serve over time as a useful indicator of a government's financial position. In the case of the Authority, assets plus deferred outflows of resources exceeded liabilities and deferred inflows of resources by $151,725,376 at March 31, The largest portion of the Authority's assets, 65%, reflects capital assets, net of accumulated depreciation (e.g. distribution system, treatment plants, pumping stations). The Authority uses these capital assets to provide services to its customers. During the current fiscal year ending March 31, 2015, the capital assets of the Authority increased by $24,860,862. Operating revenue decreased by $3,199,414, due mostly to decreased customer usage and royalty income. Operating expenses increased $594,564 due to increased health insurance costs and pension costs. Capital contributions increased $312,544 from the prior year. A loss on sales of property was recognized in the current year of $198,977 compared to a loss of $144,643 in the prior year

137 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS MARCH 31, 2015 AND 2014 Condensed financial information as of and for the fiscal year ended March 31, 2015 and 2014 is as follows: Condensed Statement of Net Position Current assets $ 27,354,881 $ 29,497,256 Property, plant and equipment 360,759, ,898,588 Non-current assets 167,529, ,151,847 Total assets 555,643, ,547,691 Deferred outflows of resources 1,675,543 1,841,666 Current liabilities 23,826,371 24,228,457 Non-current liabilities 381,742, ,711,230 Total liabilities 405,569, ,939,687 Deferred inflows of resources 24,606 27,224 Net position Net investment in capital assets 99,450,325 95,379,533 Restricted 2,814,781 1,267,417 Unrestricted 49,460,270 51,775,496 Total net position $ 151,725,376 $ 148,422,446 Condensed Statement of Revenues, Expenses and Changes in Net Position Operating revenues $ 71,248,891 $ 74,448,305 Operating expenses 61,494,308 60,899,744 Operating income 9,754,583 13,548,561 Non operating revenues (expenses) (9,495,760) (10,175,374) Capital contributions 3,044,107 2,731,563 Increase in net position $ 3,302,930 $ 6,104,750 Capital Asset and Debt Administration Capital Assets As of March 31, 2015, the Authority's capital assets amounted to $360,759,450 (net of accumulated depreciation). This investment in capital assets includes distribution system, water and wastewater treatment plants, pumping stations, water storage facilities, sewage collection systems, equipment, vehicles, land improvements, buildings and building improvements. Additional information on the Authority's capital assets can be found in Note 2 of the notes to the financial statements. Long-Term Debt As of March 31, 2015, the Authority has outstanding, long-term debt and capital leases of $337,719,054 and $12,967,804 of debt that is due and payable within one year

138 Review of Operations MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS MARCH 31, 2015 AND 2014 The largest component of the total operating expense of the Authority is employee costs. These expenditures consist of wages and fringe benefits. The Authority currently has a five year agreement with the bargaining unit that will not expire until October 15, This agreement will allow the Authority to continue to provide services to our customers at a reasonable cost. The Authority has an agreement in effect with Resource Development and Management, Inc. to manage the Authority, initially, for a fourteen year period. The agreement was effective February 1, 2000 and was amended on September 11, 2008 and July 11, The agreement provides for a fixed annual management fee of $750,000 until March 31, 2009; $850,000 until March 31, 2013 and then $1,000,000 until the contract expiration date of March 31, This agreement will also allow the Authority to control administrative costs. In November 2005, the Authority issued $57,450,000 of 2005 Series Municipal Service Revenue Bonds. The Bonds were issued for financing improvements at both the Indian Creek and George R. Sweeney Treatment Plants, purchase of real estate for and construction of new water storage facilities, improvements and upgrades to transmission and distribution systems, and construction of new office and distribution center. As of March 31, 2015, this capital improvement program has been completed. In May 2013, the Authority issued $132,110,000 of 2013 Series Municipal Service Bonds. The Bonds were issued for financing a five year Capital Projects plan established in September 2012 for improvements to distribution systems, upgrades to meters, maintenance to main distribution lines and other improvements and repairs. The Capital Projects plan began in 2013 and is expected to continue through In April 2015, the Authority issued $10,000,000 of Municipal Service Revenue Bonds, Series of 2015, to currently refund a portion of the outstanding Municipal Service Revenue Bonds, Series of 2009, advance refund all of the outstanding Municipal Service Revenue Bonds, Series B of 2006 and to refinance debt held by the U.S. Army Corps of Engineers. This bond issuance is expected to provide cash flow savings in excess of $700,000 through In April 2015, the Authority acquired Jeannette Municipal Authority for a total cost of approximately $22,000,000. This acquisition has increased the Authority s customer base approximately 4,200 sewage customers. Request for Information The financial report is designed to provide a general overview of the Authority's finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Business Manager, Municipal Authority of Westmoreland County, PO Box 730, Greensburg, PA

139 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY STATEMENTS OF NET POSITION MARCH 31, 2015 AND Current Assets Cash and cash equivalents, unrestricted (Note 3) $ 12,977,409 $ 15,053,682 Accounts receivable, customers (net of allowance for doubtful accounts of $179,000 in 2015 and in 2014) 4,906,342 5,261,966 Unbilled water and sewer service 6,908,985 6,984,950 Surcharges receivable, current portion 350, ,000 Inventory - material and supplies 2,133,062 1,766,335 Prepaid expenses 79,083 80,323 Total Current Assets 27,354,881 29,497,256 Property, Plant and Equipment Property, plant and equipment (Note 2) 532,270, ,479,688 Less accumulated depreciation (171,510,597) (163,581,100) Property, Plant and Equipment, net 360,759, ,898,588 Non-Current Assets Surcharges receivable, net of current portion 2,635,263 2,999,513 Restricted assets: Special funds held by trustee (Note 4 & 5) 162,079, ,884,917 Restricted cash held by authority (Note 6) 2,814,781 1,267,417 Total Non-Current Assets 167,529, ,151,847 Total Assets 555,643, ,547,691 Deferred Outflows of Resources Deferred losses on bond refundings, net of amortization 1,675,543 1,841,666 Total Deferred Outflows of Resources 1,675,543 1,841,666 (Continued) The accompanying notes are an integral part of these financial statements

140 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY STATEMENTS OF NET POSITION MARCH 31, 2015 AND 2014 (Continued) Current Liabilities Current portion of long-term debt (Note 8) 12,874,307 12,755,847 Accounts payable 4,489,677 4,999,599 Customer service deposits 1,562,720 1,462,500 Accrued compensation 2,724,746 2,652,227 Accrued interest 1,295,181 1,298,699 Capital lease obligation, current (Note 9) 93, ,105 Other accrued liabilities 769, ,512 Accrued pension 16,813 8,968 Total Current Liabilities 23,826,371 24,228,457 Non-Current Liabilities Long-term debt, net of current portion and unamortized premiums and discounts (Note 8) 337,508, ,703,416 Capital lease obligation, non-current (Note 9) 210, ,282 Accrued landfill closure costs (Note 10) 550, ,600 Advances for construction (Note 7) 6,061,344 6,417,678 Accrued other post employment benefits (Note 15) 37,412,478 32,465,254 Total Non-Current Liabilities 381,742, ,711,230 Total Liabilities 405,569, ,939,687 Deferred Inflows of Resources Deferred gains on bond refundings, net of amortization 24,606 27,224 Total Deferred Inflows of Resources 24,606 27,224 Net Position Net investment in capital assets 99,450,325 95,379,533 Restricted for capital projects 2,814,781 1,267,417 Unrestricted 49,460,270 51,775,496 Total Net Position $ 151,725,376 $ 148,422,446 The accompanying notes are an integral part of these financial statements

141 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND Operating Revenues Water sales $ 62,758,390 $ 64,130,131 Wastewater sales 2,951,275 2,983,509 Other operating revenues 5,539,226 7,334,665 Total Operating Revenues 71,248,891 74,448,305 Operating Expenses Source of supply 846, ,303 Treatment system 7,439,001 7,243,179 Distribution 15,710,701 15,727,566 Engineering 1,091,766 1,055,550 Wastewater system 2,651,953 2,489,182 Landfill (232,390) 48,273 Depreciation and amortization 8,752,072 8,272,967 Commercial and general expenses 24,234,933 24,138,224 Management fee 1,000,000 1,012,500 Total Operating Expenses 61,494,308 60,899,744 Operating Income before Non Operating Revenues (Expenses) 9,754,583 13,548,561 Non Operating Revenue (Expenses) Investment income 2,711,974 2,118,043 Net decrease in the fair value of investments (775,782) (905,362) Interest expense (11,232,975) (11,243,412) Loss on sales of property (198,977) (144,643) Total Non Operating Expenses (9,495,760) (10,175,374) Income before Capital Contributions 258,823 3,373,187 Capital contributions 3,044,107 2,731,563 Increase in Net Position 3,302,930 6,104,750 Total Net Position, Beginning of Year 148,422, ,317,696 Total Net Position, End of Year $ 151,725,376 $ 148,422,446 The accompanying notes are an integral part of these financial statements

142 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND Cash Flows from Operating Activities Cash received from customers $ 71,780,700 $ 73,589,324 Cash payments to employees (18,349,070) (18,140,498) Cash payments to suppliers, vendors and professional services (31,048,066) (26,276,524) Net Cash Provided by Operating Activities 22,383,564 29,172,302 Cash Flows from Capital and Related Financing Activities Net proceeds from issuance of debt 845, ,424,318 Acquisition, construction, and improvement of capital assets (35,353,833) (25,663,569) Proceeds from sale of assets 68,035 95,000 Principal paid on long term-debt (12,980,950) (13,316,606) Interest paid on long-term debt (4,669,472) (3,957,127) Cash payments received on surcharges receivable 364, ,141 Capital contributions 2,687,773 2,379,109 Net Cash Provided by (Used in) Capital and Related Financing Activities (49,038,301) 111,238,266 Cash Flows from Investing Activities Earnings on investments 1,043, ,601 Purchasing of investments (26,819,425) (173,174,962) Redemption of investments 50,354,407 37,746,922 Net Cash Provided by (Used in) Investing Activities 24,578,464 (135,078,439) Increase (Decrease) in Cash and Cash Equivalents (2,076,273) 5,332,129 Cash and Cash Equivalents, Beginning of Year 15,053,682 9,721,553 Cash and Cash Equivalents, End of Year $ 12,977,409 $ 15,053,682 (Continued) The accompanying notes are an integral part of these financial statements

143 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 (Continued) Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income $ 9,754,583 $ 13,548,561 Adjustments to reconcile operating income to net cash provided by operating activities Depreciation and amortization 8,752,072 8,272,967 Change in allowance for doubtful accounts - 92,000 (Increase) decrease in: Accounts receivable, customers 355,624 (935,329) Unbilled water and sewer service 75,965 (102,202) Inventory (366,727) 69,637 Prepaid expenses 1,240 (55,587) Increase (decrease) in: Accounts payable (931,319) 2,108,233 Customer service deposits 100,220 86,550 Accrued compensation 72,519 (8,957) Accrued liabilities (115,082) 130,194 Accrued pension 7,845 2,832 Accrued other post employment benefits 4,947,224 5,963,403 Accrued landfill costs (270,600) - Net Cash Provided by Operating Activities $ 22,383,564 $ 29,172,302 Accounting Policies Supplemental Disclosures For the purposes of this statement, cash and cash equivalents includes cash on hand and interest bearing demand deposits that are not restricted for specific uses by external parties. Non-Cash Capital and Related Financing Activities As of March 31, 2015 and 2014, $1,184,748 and $763,351, respectively, has been included in accounts payable for ongoing construction projects under the 2013 Capital Projects Budget. The Authority traded in vehicles during fiscal year ended March 31, 2014 for new vehicles. The trade in allowance on the old vehicles was $121,934. The Authority traded in copiers during fiscal year ended March 31, 2014 for new copiers acquired under a capital lease. The trade in value on the copiers was $230,784. The Authority financed the new copiers under a capital lease totaling $403,846. The accompanying notes are an integral part of these financial statements

144 NOTE 1 ORGANIZATION MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 The Municipal Authority of Westmoreland County (Authority) was incorporated as a public corporation of the Commonwealth of Pennsylvania on April 15, 1942, organized under the Act of Assembly approved June 28, 1935, P.L. 463 as amended and supplemented by the Municipal Authorities Act of 1945 which has been repealed by Act 22 which was signed into law on June 19, 2001, and merged into the Pennsylvania Consolidated Statutes, Title 53, Chapter 56. The Authority is organized for the purpose of providing municipal services, principally consisting of operation of a water collection, treatment, and distribution system. The Authority also maintains a nonoperation landfill in Loyalhanna Township Westmoreland County. On April 1, 2001, the Authority entered the wastewater business through the purchase of the assets of the Municipal Authority of the Borough of Avonmore. The Authority subsequently purchased the wastewater system of the Ligonier Township Municipal Authority on December 29, 2006, and the wastewater system of the Borough of White Oak on January 8, On March 1, 2011, the Authority acquired the assets of the Smithton 1-70 Industrial Park Wastewater System from the Westmoreland County Industrial Park Authority. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The Authority has adopted GASB Statement No. 61, The Financial Reporting Entity: Omnibus, with regards to evaluating component units. Component units are legally separate organizations for which the Authority is financially accountable. The Authority is financially accountable for an organization if the Authority appoints a voting majority of the organization s governing body and 1) the Authority is able to significantly influence the programs or services performed or provided by the organization, 2) the Authority is legally entitled to or can otherwise access the organization s resources; the Authority is legally obligated or has otherwise assumed the responsibility to finance the deficits of, or provide financial support to, the organization, or the Authority is obligated for the debt of the organization. Component units may also include organizations that are fiscally dependent on the Authority or that the Authority approves the budget or the issuance of debt. Based on the foregoing criteria, the Authority has determined that no organizations are controlled by or dependent on the Authority during the fiscal years ended March 31, 2015 or The Municipal Authority of Westmoreland County is not included as a component unit on the financial statements of the County of Westmoreland. Measurement Focus, Basis of Accounting, and Financial Statement Presentation For financial reporting purposes, the Authority is considered a special-purpose government engaged only in business-type activities. Accordingly, the Authority s financial statements have been presented using the economic resources measurement focus and accrual basis of accounting. Under the accrual basis, revenues are recognized when earned and expenses are recorded when an obligation has been incurred

145 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The financial statements of the Authority are prepared in accordance with generally accepted accounting principles (GAAP). The Authority s reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The Authority reports in accordance with GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance in Pre-November 30, 1989 FASB and AICPA Pronouncements. The purpose of this Statement is to incorporate information from the GASB s authoritative literature, FASB Statements and Interpretations, APB Opinions and Accounting Research Bulletins of the AICPA Committee on Accounting Procedure issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements. With the implementation of GASB 63 in 2013, the Statement of Net Assets became the Statement of Net Position. Along with the name change, the Statement of Net Position included two new classifications separate from assets and liabilities. Amounts reported as deferred outflows of resources are required to be reported in a Statement of Net Position in a separate section following assets. Likewise, amounts reported as deferred inflows of resources are required to be reported in a Statement of Net Position in a separate section following liabilities. The Statement of Net Position represents the difference between all other elements in a statement of financial position and is displayed in three components: net investment in capital assets, restricted (distinguishing between major categories of restrictions), and unrestricted. The Authority has adopted GASB 65 in fiscal year ended March 31, 2014, Items Previously Reported as Assets and Liabilities. This statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. The primary impact of this statement was to classify the deferred gains and losses on refundings as deferred outflows and inflows of resources on the statements of net position. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary fund's principal ongoing operations. The principal operating revenues of the Authority are charges to customers for sales and services and royalty income. Operating expenses include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Basis of Accounting The accrual basis of accounting was used to prepare the accompanying comparative financial statements. The significant accounting policies followed by the Authority in preparation of the accompanying comparative financial statements are described as follows:

146 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Basis of Accounting (continued) Revenues and Expenses Revenues from customers are recognized when earned, regardless of the period of collection subsequent to year end. Federal, state, and local grants in aid are recognized as revenues when the grants are earned. However, intergovernmental grants are subject to audit and adjustment by the grantor agency. Grant revenues received for expenses which are disallowed are repayable to the grantor. Royalty income is recognized as revenue when earned and is included in Other operating revenues. Investment income is recognized as revenue when earned. Expenses are recognized when incurred. Interest costs are recorded when incurred. Cash and Cash Equivalents The Authority is authorized to invest in U.S. Treasury Bills (short term obligations of the Federal Government) and time deposits of insured institutions. The Authority considers all investments with a maturity date of three months or less and are not restricted for specific uses by external parties to be cash equivalents. Receivables The customer receivable balances presented in the accompanying statements of net position are recorded at net realizable value. The Authority has established an allowance for doubtful accounts for the fiscal years ended March 31, 2015 and 2014, of $179,000. Unbilled water and sewer service represents the estimated customer receivables from the date of their last billing to the end of the fiscal year. Inventory Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value) and consist of replacement parts, supplies and meters. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive levels, deterioration and other factors in evaluating net realizable value. Prepaid Expenses Prepaid expenses consist of prepaid insurance, other miscellaneous expenses and refundable deposits

147 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Basis of Accounting (continued) Investments/Restricted Assets Investments are recorded at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Investments consist of certificates of deposit, bonds, investment contracts or other short term investments. The Authority complies with the investment guidelines set forth by the Pennsylvania Municipal Authorities Act. Property, Plant, and Equipment Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. The capital assets of the Authority are depreciated using the straight line method over the estimated useful lives of the asset as follows. No depreciation expense is recorded for land or construction-in-progress. Treatment plants Pumping stations Dams, reservoirs, and tanks Distribution systems, meters, and hydrants Equipment Autos and trucks Office buildings and improvements Office furniture Landfills Intangible assets Miscellaneous years years years years 5-10 years 4 years 40 years 4-10 years years 30 years 1-5 years (This space is intentionally left blank)

148 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The following is a summary of property, plant, and equipment transactions for the fiscal year ended March 31, 2015: Beginning Balance March 31, 2014 Additions Ending Balance Disposals Transfers March 31, 2015 Capital assets not being depreciated Land $ 2,605,962 $ - $ - $ 5,562 $ 2,611,524 Land improvements 421, ,721 Construction in progress 17,188,398 25,570,013 - (22,950,774) 19,807,637 Subtotal 20,216,081 25,570,013 - (22,945,212) 22,840,882 Capital assets being depreciated Treatment plants 93,061, ,509-4,612,590 98,498,314 Pumping stations 72,305,072 45,414-11,854,497 84,204,983 Dams, reservoirs, and tanks 39,691, , ,888,863 Distribution systems, meters, and hydrants 237,301,067 5,620, ,738 6,478, ,647,488 Equipment 5,134, , ,863,954 Autos and trucks 6,158, , ,850-6,500,638 Office buildings and improvements 16,906, , ,017,780 Office furniture 2,575, , ,676,078 Landfills 3,061, ,061,057 Intangible assets 2,557, ,557,949 Miscellaneous 512, ,061 Subtotal 479,263,608 8,309,933 1,089,588 22,945, ,429,165 Less: Accumulated depreciation and amortization (163,581,101) (8,752,072) (822,576) - (171,510,597) Net, capital assets being depreciated 315,682,507 (442,139) 267,012 22,945, ,918,568 Total capital assets - net of depreciation $ 335,898,588 $ 25,127,874 $ 267,012 $ - $ 360,759,

149 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Depreciation and amortization expense for the fiscal years ended March 31, 2015 and 2014 was $8,752,072 and $8,272,967, respectively. Construction in progress is capitalized and depreciated as projects are completed. Contributed Capital Current year grants in aid and other contributed capital are accounted for as "other sources of funds" and are reported on the Statement of Revenues, Expenses, and Changes in Net Position as Contributed Capital. Capitalized Interest The Authority capitalizes interest based on the criteria outlined in GASB Statement No. 62 which applies to taxable borrowings and tax-exempt non-project specific debt. The objective is to obtain a measure of the acquisition cost that more closely reflects the Authority s total investment in the asset and to charge a cost that relates to the acquisition of a resource that will benefit future periods against revenues of the periods benefited. The amount to be capitalized is the amount of interest expense that would have been avoided during the asset s acquisition period if the asset had not been acquired, whether or not the asset had been acquired through incurring debt. Interest on long-term debt used for acquisition and construction of property, plant, and equipment is capitalized during the construction period. Total interest charged to expense for the fiscal years ended March 31, 2015 and 2014, was $11,232,975 and $11,243,412, respectively. Total interest expense capitalized for the fiscal years ended March 31, 2015 and 2014 was $4,817,728 and $5,153,167, respectively. In accordance with GASB Statement No. 62, $1,384,031 and $1,042,975 of interest income earned during the fiscal years ended March 31, 2015 and 2014, respectively, was also capitalized and offset the capitalized interest expense, leading to net capitalized interest of $3,433,697 and $4,110,192, respectively. Net Position The financial statements utilize a net position presentation. Net position is categorized as follows: Net investment in capital assets This component of net position consists of capital assets, net of accumulated depreciation and reduced by any debt outstanding, net of unspent proceeds, related to the acquisition, construction, or improvement of those assets. Restricted This component of net position consists of constraints placed on net position use through external restrictions. Unrestricted This component of net position consists of net position that does not meet the definition of net investment in capital assets and restricted

150 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Restricted Resources It is the Authority's practice to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available. NOTE 3 CASH AND CASH EQUIVALENTS Various restrictions on deposits and investments are imposed by state statutes. These are summarized as follows: Deposits - The Authority is required by the Deposits of Public Monies Act 72 of the Commonwealth of Pennsylvania, dated August 6, 1971, to maintain deposits that are properly collateralized. Collateralization is permitted to be on a "pooled" basis. Custodial Credit Risk - Custodial credit risk is the risk that, in the event of a bank failure, the Authority's deposits might not be recovered. The Authority does not have a policy regarding custodial credit risk; however, deposits are in compliance with Act 72. As of March 31, 2015, $12,487,199 of the Authority's bank balance of $13,632,368 was exposed to custodial credit risk as follows: Collateralized with securities held by pledging financial institution's trust department or agent on a pooled basis or individual basis $ 12,487,199 As of March 31, 2015, $1,145,169 of the Authority's bank balances were covered by FDIC insurance. Concentration of Credit Risk - Authority deposits greater than five percent of total Authority deposits were with the institutions following at March 31, First National Bank $ 10,969, % PLGIT 1,072, % PNC Bank 695, %

151 NOTE 4 INVESTMENTS MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 Interest Rate Risk - Interest rate risk arises from investments and is defined as "the risk that changes in interest rates will adversely affect the fair value of the investment. The Authority does not have a specific policy that addresses Interest Rate Risk. Concentration of Credit Risk - The Authority places no limit on the amount the Authority can invest in any one issuer. More than five percent of the Authority's investments are in the following investments: Goldman Sachs Financial Square Government $ 61,135, % Bear Stearns Capital Markets, Inc. $ 28,315, % Federal Home Ln Bks $ 28,053, % Federal National Mortgage Association $ 20,768, % Federal Home Ln Mtg Corp $ 20,631, % Credit Risk - Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligation to the Authority. The Authority is authorized by the Municipal Authorities Act to invest in Treasury Bills and short term obligations of the Federal Government or its instrumentality obligations. The Authority further addresses credit risk through the Trust Indenture, dated as of October 1, 1993, to invest in various "permitted investments," provided they meet various requirements which include: 1. Direct obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America, provided, that the full faith and credit of the United States of America must be pledged to any such direct obligation or guarantee "Direct Obligations"; 2. Direct obligations and fully guaranteed certificates of beneficial interest of the Export-Import Bank of the United States; consolidated debt obligations and letter of credit-backed issues of the Federal Home Loan Banks; participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation ("FHLMCs") debentures of the Federal Housing Administration; mortgagebacked securities (except stripped mortgage securities which are valued greater than par on the portion of unpaid principal) and senior debt obligations of the Federal National Mortgage Association ("FNMAs"); participation certificates of the General Services Administration; guaranteed mortgagebacked securities and guaranteed participation certificates of the Government National Mortgage Association ("GNMAs"); guaranteed participation certificates and guaranteed pool certificates of the Small- Business Administration; debt obligations and letter of credit-backed issues of the Student Loan Marketing Association; local authority bonds of the U.S. Department of Housing and Urban Development; guaranteed Title XI financing of the U.S. Maritime Administration; guaranteed transit bonds of the Washington Metropolitan Area Transit Authority, Resolution Funding Corporation securities. 3. Direct obligations of any state of the United States of America or any subdivision or agency thereof whose unsecured, uninsured, and unguaranteed general obligation debt is rated, at the time of purchase, "A" or better by Moody's Investors Service and "A" or better by Standard & Poor's Corporation, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured, uninsured, and unguaranteed general obligation debt is rated, at the time of purchase, "A" or better by Moody's Investors Service and "A" or better by Standard & Poor's Corporation;

152 NOTE 4 INVESTMENTS (continued) Credit Risk (continued) MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND Commercial paper (having original maturities of not more than 270 days) rated, at the time of purchase, "P-1" by Moody's Investors Service and "A-1" or better by Standard & Poor's Corporation; 5. Federal funds, unsecured certificates of deposit, time deposits or bankers acceptances (in each case having maturities of not more than 365 days) of any domestic bank including a branch office of a foreign bank which branch office is located in the United States, provided legal opinions are received to the effect that full and timely payment of such deposit or similar obligation is enforceable against the principal office or any branch of such bank, which, at the time of purchase, has a short-term "Bank Deposit" rating of "P-1" by Moody's Investors Service and a "Short-Term CD" rating of "A-1" or better by Standard & Poor's Corporation. 6. Deposits of any bank or savings and loan association which has combined capital, surplus and undivided profits of not less than $3 million, provided such deposits are continuously and fully insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation; 7. Investments in money-market funds rated "AAAm" or "AAAm-G" by Standard & Poor's Corporation, including those funds for which the Trustee or an affiliate perform services for a fee, whether as custodian, transfer agent, investment advisor or otherwise. It is acknowledged that such shares are not obligations of or endorsed by the Trustee and are not insured by FDIC. 8. Repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs, or FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated at the time of purchase "P-1" or "A3" or better by Moody's Investors Service, and "A-1" or "A-" or better by Standard & Poor's Corporation, provided: a. a master repurchase agreement or specific written repurchase agreement governs the transaction; and b. the securities are held free and clear of any lien by the Trustee or an independent third party acting solely as agent ("Agent") for the Trustee, and such third party is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million or (iii) a bank approved in writing for such purpose by Financial Guaranty Insurance Company, and the Trustee shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Trustee; and c. a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R et s. or 31 C.F.R et seq. in such securities is created for the benefit of the Trustee; and

153 NOTE 4 INVESTMENTS (continued) Credit Risk (continued) MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 d. the repurchase agreement has a term of 180 days or less, and the Trustee or the Agent will value the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required collateral is not restored within two (2) business days of such valuation; and e. the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103%. Custodial Credit Risk - is the risk that in the event of failure of the counterparty (e.g. broker-dealer) to a transaction, the Authority will not be able to recover the value of its investments in collateral securities that are held in the possession of another party. The Authority's balances of these investments at March 31, 2015, were not subject to custodial credit risk. These investments are collateralized, insured, or held by the counterparty's trust department or agent in the Authority's name. The net decrease in fair value of investments for the fiscal year ended March 31, 2015 relates to investments in the 2013 Bond Fund and Debt Service Reserve Fund. These investments are expected to be held to maturity. Therefore, losses on these investments will more than likely not be realized. The presentation of net increase (decrease) in the fair value of investments is required by and in accordance with GASB Statement No. 31: Accounting and Financial Reporting for Certain Investments and for External Investment Pools. (This space is intentionally left blank)

154 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 4 INVESTMENTS (continued) As of March 31, 2015, the Authority s investments consisted of the following: No 12 Months Fair Value Rating Maturity Date or Less 13 to 24 Months 25 to 60 Months Greater Than 60 Months Special Funds Held by Trustee Money market funds $ 61,135,253 AAAm $ 61,135,253 $ - $ - $ - $ - FHLMCs and FNMAs 69,453,196 Aaa - 23,618,221 12,908,497 32,926,478 - Commercial paper 3,175,375 P-1-3,175, Investment contract 28,315,487 N/A ,315,487 Total Special Funds Held by Trustee 162,079,311 61,135,253 26,793,596 12,908,497 32,926,478 28,315,487 Included in Cash and Cash Equivalents PLGIT 1,072,787 AAAm 1,072, PA Invest 250,201 AAAm 250, Total Included in Cash and Cash Equivalents 1,322,988 1,322, Total Investments $ 163,402,299 $ 62,458,241 $ 26,793,596 $ 12,908,497 $ 32,926,478 $ 28,315,487 In accordance with GASB Statement No. 62: Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, restricted investments were classified as non-current due to these investments being restricted as to withdrawal or use for expenditures in the acquisition or construction of non-current assets or are segregated for the liquidation of long-term debt

155 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 5 SPECIAL FUNDS HELD BY TRUSTEE As required by various trust indentures to secure bonds, various monies are required to be deposited in the following funds: Debt Service Fund - To accumulate funds for the payment of various bonds principal and interest payments prior to maturity. Debt Service Reserve Fund - To accumulate funds as required by the original and subsequent bond indentures equal to the maximum annual debt service requirement on bonds outstanding. The balance in this fund meets the maximum annual debt service requirement as defined in the bond indentures as of March 31, 2015 and Construction Fund - Created from the proceeds of the 2005 bonds to be held in trust by the Trustee as security under the Indenture and disbursed by the Trustee pursuant to Section 4.01 of the Indenture in payment of the cost of the 2005 project. This fund was closed during fiscal year ended March 31, 2015 as all funds were expended in accordance with the Indenture. 2000/2001 Escrow Fund - Created from the transfer of the balance of funds previously held in a Capital Reserve Fund. This fund is to be used to timely pay all outstanding principal and interest on the 2000 and 2001 bonds upon maturity Capital Projects Fund - Created from the proceeds of the 2013 bonds to be held in trust by the Trustee as security under the Indenture and disbursed by the Trustee pursuant to Section 4.01 in payment of the costs of the 2013 Capital Project. All of the requirements of the Trust Indenture have been met as of March 31, 2015 and Special funds held by the Trustee at March 31, 2015 and 2014, include: Investments $ 144,877,537 $ 169,489,524 Accrued interest receivable 17,201,774 15,395,393 Total $ 162,079,311 $ 184,884,917 Investments are recorded at fair market value based on quoted prices in active markets. Accrued interest receivable is calculated using the current interest method. NOTE 6 RESTRICTED CASH HELD BY AUTHORITY The Capital Expenditures Fund was created pursuant to the 1993 Bond Indenture to provide funds for capital additions (other than those financed from the Construction Fund), extraordinary repairs and maintenance, and refunds under line deposit agreements. The Authority is required to make quarterly deposits with the Trustee into the Capital Expenditures Fund in an amount equal to 3.50% of the operating revenues of the preceding fiscal quarter and such additional amounts as are provided in the capital expenditures budget

156 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 7 ADVANCES FOR CONSTRUCTION Amounts advanced for construction projects, which are to be refunded either wholly or in part, are credited to advances for construction. Generally, advances not refunded within a ten-year period are transferred to capital contributions. Contributions not subject to refund are credited directly to capital contributions. NOTE 8 LONG-TERM DEBT 1993 Series A, B and C Revenue Bonds: On November 9, 1993, the Authority issued the 1993 Series A, B, and C Revenue Bonds (Capital Appreciation and Current Interest bonds), with a face value of $259,185,000. A portion of the 1993 Series Revenue Bonds were issued to advance refund a portion of the Series J, K, M, O, P and Q Revenue Bonds. The remaining proceeds of the 1993 Series Revenue Bonds were issued to provide funds for water system construction projects. The 1993 Series A Revenue Bonds matured on August 15, The 1993 Series B Revenue Bonds matured August 15, A portion of the 1993 Series C Capital Appreciation Bonds were defeased in prior years. The 1993 Series C Capital Appreciation bonds that were not defeased and are outstanding at March 31, 2015 and 2014 have yields to maturity of 5.05% to 5.30%, maturing in varying amounts on August 15 of the years 2011 through First Supplemental Trust Indenture Dated July 15, 1995: 1995 Series A and B Revenue Bonds: On July 27, 1995, the Authority issued the 1995 Series A and B Revenue Bonds (collectively called the 1995 Revenue Bonds), with a face value of $89,335,000. The 1995 Series A Revenue Bonds were issued to advance refund a portion of the 1993 Series C Capital Appreciation Bonds. The 1995 Series B Revenue Bonds were issued to provide funds for water system construction projects and to provide for the cost of issuance of the 1995 Series A and B Bonds. The advance refunding of the aforementioned Bonds resulted in a gain on refunding of $689,883, which is being amortized over the life of the 1995 Series A Bonds, and the unamortized gain is included in deferred inflows of resources in accordance with GASB 65. At March 31, 2015 and 2014, the unamortized gain on the advance refunding was $24,606 and $27,224, respectively. A portion of the 1995 Series A Revenue Bonds (Capital Appreciation) were defeased in The 1995 Series A Revenue Bonds that were not defeased and are outstanding at March 31, 2015 and 2014 have a yield to maturity of 6.19%, maturing on August 15, The 1995 Series B Revenue Bonds were refunded as part of an advance refunding provided for with the issuance of the 1998 Series Revenue Bonds

157 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 8 LONG-TERM DEBT (continued) Fourth Supplemental Trust Indenture Dated May 18, 1999: 1999 Series A and B Revenue Bonds: On May 18, 1999, the Authority issued the 1999 Series A and B Revenue Bonds, with a face value of $60,345,000. The 1999 Series Revenue Bonds were issued to advance refund a portion of the 1993 Series C Capital Appreciation Bonds and to provide for the principal and interest due August 15, 1999 on the 1993 Series A, B, and C current interest bonds. The 1999 Series B Revenue Bonds were issued to advance refund a portion of the 1995 Series A Capital Appreciation Bonds and to provide $1,352,138 of funding for various construction projects. The advance refunding of the aforementioned bonds resulted in an economic gain of $1,255,165 on all of the offerings of the Fourth Supplemental Trust Indenture dated May 18, 1999 and a realized loss of $1,005,065 on the 1999 Series A and B Revenue Bonds. The realized loss is being amortized over the life of the 1999 Series A and B Bonds and is included in deferred outflows of resources on the financial statements, which is in accordance with GASB 65. At March 31, 2015 and 2014, the unamortized loss on the advance refunding was $248,837 and $390,283, respectively. The 1999 Series A Revenue Bonds (Capital Appreciation) outstanding at March 31, 2015 and 2014, have a yield to maturity of 5.20% to 5.30%, maturing in various amounts on August 15, 2016, 2022, and The 1999 Series B Revenue Bonds matured August 15, Series Revenue Bonds: On August 15, 2000, the Authority issued the 2000 Series Revenue Bonds (Capital Appreciation) with a face value of $27,615,000. The 2000 Series Revenue Bonds were issued for the purpose of providing funding for principal and interest on the 1993 Series A, B, and C Current Interest Bonds maturing August 15, At March 31, 2015 and 2014, the 2000 Series Revenue Bonds (Capital Appreciation) have a yield to maturity of 5.70%, maturing in various amounts on August 15, 2019, 2020, and Series Revenue Bonds: On August 15, 2001, the Authority issued the 2001 Series Tax-Exempt Revenue Bonds (Capital Appreciation) with a face value of $19,635,000. The 2001 Series Tax-Exempt Revenue Bonds were issued for the purpose of providing funding for principal and interest on the 1993 Series A, B, and C Current Interest Bonds, principal and interest on the 1998 Series Current Interest Bonds, and principal on the 1999 Series B Capital Appreciation Bonds maturing on August 15, At March 31, 2015 and 2014, the 2001 Series Tax Exempt Revenue Bonds (Capital Appreciation) have a yield to maturity of 5.65% to 5.80%, maturing in various amounts on August 15, 2015, 2017, and

158 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 8 LONG-TERM DEBT (continued) Fifth Supplemental Trust Indenture Dated December 1, 2000: 2000A Series Revenue Bonds: On December 27, 2000, the Authority issued the 2000A Series Tax-Exempt (Capital Appreciation) and the 2000A Series Taxable Municipal Service Revenue Bonds (collectively called the 2000A Revenue Bonds, with a face value of $25,110,000). The 2000A Series Tax-Exempt Revenue Bonds were issued to fund the payment of interest on the 1993 Series A, B, and C Current Interest Bonds and the 1998 Series Current Interest Bonds due February 15, The 2000A Series Tax-Exempt Revenue Bonds were also issued to provide funding for various construction projects. The 2000A Series Taxable Revenue Bonds were issued to primarily fund the creation of the 2000A Capital Reserve Fund. The 2000A Series Tax-Exempt Revenue Bonds (Capital Appreciation) have a yield to maturity of 5.70%, maturing in various amounts on August 15, 2023 and The 2000A Series Taxable Municipal Service Revenue Bonds matured on August 15, Sixth Supplemental Trust Indenture Dated November 1, 2001: 2001A Series Revenue Bonds: On August 15, 2001, the Authority issued the 2001A Series Tax-Exempt Revenue Bonds (Capital Appreciation) with a face value of $30,710,000. The 2001A Series Tax-Exempt Revenue Bonds were issued for the purpose of providing funding for principal and interest on the 1993 Series A, B, and C Current Interest Bonds, principal and interest on the 1998 Series Current Interest Bonds, and principal on the 1999 Series B Capital Appreciation Bonds maturing on August 15, At March 31, 2015 and 2014, the 2001A Series Tax-Exempt Revenue Bonds (Capital Appreciation) have a yield to maturity of 6.17%, maturing in various amounts on August 15, 2019 to Ninth Supplemental Trust Indenture Dated November 1, Series A and B Revenue Bonds On November 1, 2006, the Authority issued the 2006 Series A and B Revenue Bonds (collectively called the 2006 Revenue Bonds), with a face value of $73,383,154. The 2006 Series A Revenue Bonds were issued to (1) advance refund all outstanding Municipal Service Revenue Bonds, Series of 2005; (2) fund additional capital projects; and (3) pay the costs of issuing the Series A Bonds including the cost of bond issuance. The 2006 Series B Revenue Bonds were issued to (1) fund various project improvements, acquisitions and renovations to the Authority's facilities; and (2) pay the costs of issuing the Series B Bonds including the cost of bond insurance. As a result of the advance refunding, the Authority realized a loss of $300,751, which is being amortized over the life of the 2006 Series A Revenue Bonds, and the unamortized loss is included in deferred outflows of resources on the financial statements, which is in accordance with GASB 65. At March 31, 2015 and 2014, the unamortized loss on the advance refunding was $185,521 and $199,348, respectively. The 2006 Series A Revenue Bonds outstanding at March 31, 2015 and 2014, have a stated interest rate of 3.50% to 5.00%, maturing in varying amounts on August through Interest is paid semiannually on February 15 and August 15, commencing on February 15,

159 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 8 LONG-TERM DEBT (continued) The 2006 Series B Revenue Bonds consist of current interest and capital appreciation bonds. The 2006 Series B Current Interest Bonds outstanding at March 31, 2015 and 2014, have a stated interest rate of 5.00%, maturing on August 15, Interest is paid semiannually on February 15 and August 15, commencing February 15, The 2006 Series B Capital Appreciation Bonds outstanding at March 31, 2015 and 2014 have a yield to maturity of 4.80% to 4.82%, maturing in varying amounts on August 15, 2029 and Optional Redemption The current interest Series A of 2006 Bonds and Series B Current Interest Bonds may be redeemed prior to maturity at the option of the Authority on any date on or after August 15, 2016, in whole or in part, in any order of maturity and by lot within a maturity, in each case, upon payment of the redemption price of 100% of the principal amount to be redeemed together with interest accrued to the date fixed for redemption in accordance with the provisions of Article IV of the Original Indenture. Mandatory Redemption The Series A of 2006 Bonds maturing on August 15, 2022, are subject to mandatory redemption through operation of the 2006A Bond Sinking Fund at 100% of the principal amount being redeemed, together with accrued interest to the date fixed for redemption in the following amounts on August 15 of the following years: Year Amount 2021 $ 310, (Final Maturity) $ 320,000 The Series A of 2006 Bonds maturing on August 15, 2025, are subject to mandatory redemption through operation of the 2006A Bond Sinking Fund at 100% of the principal amount being redeemed, together with accrued interest to the date fixed for, redemption in the following amounts on August 15 of the following years: Year Amount 2024 $ 7,155, (Final Maturity) $11,915,000 The Series B of 2006 Capital Appreciation Bonds will not be redeemable prior to their stated maturities. Tenth Supplemental Trust Indenture Dated December 15, 2009: 2009 Series Revenue Bonds On December 15, 2009, the Authority issued the Series of 2009 Municipal Service Revenue Bonds (collectively called the 2009 Revenue Bonds), with a face value of $6,115,000. The 2009 Revenue Bonds were issued to (1) currently refund all of the Authority's outstanding Municipal Service Revenue Bonds, Series of 1998; (2) reimburse the Authority for a portion of its expenditures incurred within the previous 60 days in connection with the Ringerstown emergency repair project; (3) finance certain new capital projects; and (4) pay the costs of issuing the 2009 bonds. At March 31, 2015 and 2014, the unamortized loss on the advance refunding included in deferred outflows of resources was $116,486 and $128,

160 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 8 LONG-TERM DEBT (continued) The current interest 2009 Series Revenue Bonds outstanding at March 31, 2015 and 2014 have a stated interest rate of 2.00% to 4.00%, maturing in varying amounts on August 15, 2010 through Interest is paid semiannually on February 15 and August 15, commencing on February 15, Optional Redemption The 2009 Bonds may be redeemed prior to maturity at the option of the Authority on any date on or after February 15, 2015 in whole or in part, in any order of maturity and by lots within a maturity, in each case, upon payment of the redemption price of 100% of the principal amount to be redeemed together with interest accrued to the date fixed for redemption in accordance with the provisions of Article IV of the Original Indenture. Mandatory Redemption The 2009 Bonds maturing on August 15, 2024, are subject to mandatory redemption through operation of the 2009 Bond Sinking Fund at 100% of the principal amount being redeemed, together with accrued interest to the date fixed for redemption in the following amounts on August 15 of the following years: Year Amount 2022 $ 160, $ 170, * $4,285,000 *Maturity Twelfth Supplemental Trust Indenture Dated May 1, 2013: 2013 Series Revenue Bonds On May 1, 2013, the Authority issued Series of 2013 Municipal Services Revenue Bonds with a face value of $132,110,000. The 2013 Municipal Service Revenue Bonds were issued to finance the Authority s five year capital expenditure plan dated September The current interest 2013 Municipal Service Revenue Bonds outstanding at March 31, 2015 have stated interest rates from 2.00% to 5.00%, mature in various amounts from August 15, 2015 through August 15, Interest is paid semi-annually on February 15 and August 15 commencing on August 15, Optional Redemption The 2013 Bonds maturing on or after August 15, 2024 may be redeemed prior to maturity at the option of the Authority on any date on or after August 15, 2023 in whole or in part, in any order of maturity and by lot within a maturity, in each case, upon payment of the redemption price of 100% of the principal amount to be redeemed together with interest accrued to the date fixed for redemption in accordance with the provisions of Article IV of the Original Indenture. Mandatory Redemption The 2013 Bonds maturing on August 15, 2031 and August 15, 2037 are subject to mandatory redemption through operation of the 2013 Bonds Sinking Fund created pursuant to Section 5.05 hereof, at 100% of the principal amount being redeemed, together with accrued interest to the date fixed for redemption in the following amounts on August 15 of the following years:

161 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 8 LONG-TERM DEBT (continued) Bonds Maturing August 15, 2031 Year Amount 2030 $ 3,705, * $16,500,000 Bonds Maturing August 15, 2037 Year Amount 2034 $19,170, $20,155, $21,185, * $ 7,855,000 *Maturity During prior years, the Authority refunded certain bonds by placing the proceeds of new bonds in irrevocable trusts to provide for all future debt service payments on the refunded bonds. Accordingly, neither the assets held in trust nor the refunded bonds appear in the accompanying financial statements. The outstanding balances of the defeased bonds and related investments in the irrevocable trusts as of March 31, 2015 were as follows: Total Principal Total Interest Escrow Fund Bond Description Maturities Maturities Balance 1992 Series Q Current Interest Bonds $ 4,225,000 $ 776,344 $ 4,568, Series C Capital Appreciation Bonds 87,145,000-82,944, Series K Capital Appreciation Bonds 23,000,000-22,885, Series A Capital Appreciation Bonds 78,380,000-74,430, Series Current Interest Bonds 57,450,000 1,508,063 58,309,284 Total $ 250,200,000 $ 2,284,407 $ 243,138,128 Notes Payable In March of 2000, the Authority was granted Pennvest note #81002 for up to $2,595,325 for the purpose of water line construction projects. Total borrowings were $2,517,930 under the note. The outstanding borrowings under the note bear interest at the rate of 1.00% per annum from August 1, 2001, through July 1, 2006, and 1.349% per annum, thereafter to July 1, Interest and principal payments are due in monthly installments of $11,936 beginning August 1, 2001, through May 1, 2006, and $11,702 thereafter to July 1, In May of 2000, the Authority borrowed $568,325 through Pennvest note #80058 for a water line extension construction project for the acquisition of the Saltsburg Water System. The note bears interest of the 1.00% per annum from May 1, 2000, through September 1, 2004, and 1.211% per annum, thereafter to September 1, Interest and principal payments are due in monthly installments of $2,694 beginning May 1, 2000, through September 1, 2004, and $2,736 thereafter to September 1,

162 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 8 LONG-TERM DEBT (continued) In July of 2000, the Authority was granted Pennvest note #81003 for up to $1,008,399 for the purpose of water line construction projects. Total borrowings were $683,845 under the note. The outstanding borrowings under the note bear interest at the rate of 1.00% per annum from February 1, 2002, through January 1, 2007, and 1.349% per annum, thereafter to January 1, Interest and principal payments are due in monthly installments of $4,638 beginning February 1, 2002, through March 1, 2007, and $2,641 thereafter to January 1, On March 21, 2001, the Authority was granted Pennvest note #25077 for up to $337,000, for the purpose of water line construction projects. Total borrowings were $268,027 under the note. The outstanding borrowings under the note bear interest at a rate of 1.00% per annum from January 1, 2003, through December 1, Interest and principal payments are due in monthly installments of $1,550 beginning January 1, 2003, through April 1, 2006 and $1,167 thereafter to December 1, On July 18, 2001, the Authority was granted Pennvest note #12581 for up to $960,990 for the purpose of water line construction projects. Total borrowings were $510,268 under the note. The outstanding borrowings under the note bear interest at a rate of 1.00% per annum from March 1, 2003, through February 1, 2008, and 1.156% per annum, thereafter. Interest and principal payments are due in monthly installments of $3,212 beginning March 1, 2003, through May 1, 2006, $2,157 from June 1, 2006 through February 1, 2008, and $2,182 thereafter to February 1, On October 15, 2003, the Authority was granted Pennvest note #12592 for up to $651,850, for the purpose of water line construction projects. Total borrowings were $519,614 under the note. The outstanding borrowings under the note bear interest at a rate of 1.00% per annum from November 1, 2003, through December 1, 2008, and 1.156% per annum, thereafter to December 1, Interest and principal payments are due in monthly installments of $2,998 beginning January 1, 2004, through February 1, 2006, $2,300 from March 1, 2006 through December 1, 2008, and $2,327 thereafter to December 1, In September of 2003, the Authority was granted Pennvest note #80118 for up to $5,397,911 for the purpose of water line construction projects. Total borrowings were $5,397,911 under the note. The outstanding borrowings under the note bear interest at a rate of 1.00% per annum from October 1, 2003, through September 30, 2008, and 1.156% per annum, thereafter to December 1, Interest and principal payments are due in monthly installments of $24,825 beginning January 1, 2006, through July 1, 2008, and $24,786 through December 1, 2010, and $25,072 thereafter to December 1, In January of 2004, the Authority was granted Pennvest note #80114 for up to $762,000 for the purpose of water line construction projects. Total borrowings were $653,156 under the note. The outstanding borrowings under the note bear interest at a rate of 1.387% per annum from January 1, 2005, through March 1, 2010, and 2.774% per annum, thereafter to March 1, Interest and principal payments are due in monthly installments of $3,638 beginning April 1, 2005, through June 1, 2007, $3,031 beginning July 1, 2007, through March 1, 2010, and $3,347 thereafter to March 1,

163 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 8 LONG-TERM DEBT (continued) On October 19, 2006, the Authority was granted Pennvest note #85124 for up to $1,617,500, for the purpose of water line construction and replacement projects. Total borrowings were $1,617,500 under the note. The outstanding borrowings under the note bear interest at a rate of 1.278% per annum from April 1, 2007 through March 1, 2011, and 2.556% per annum, thereafter. Interest only payments shall be made on the unpaid outstanding principal balance through September 1, Interest and principal payments are due in monthly installments of $7,641 beginning October 1, 2007, through February 1, 2011, $7,593 beginning March 1, 2011 through September 1, 2011, and $8,322 thereafter to September 1, On December 28, 2006, the Authority was granted Pennvest note #80147 for up to $2,443,000, for the purpose of water line construction and replacement projects. Total borrowings were $2,443,000 under the note. The outstanding borrowings under the note bear interest at a rate of 1.324% per annum from April 1, 2007, through June 1, 2010, and 2.512% per annum, thereafter to March 1, Interest and principal payments are due in monthly installments of $11,592 beginning April 1, 2008, through February 1, 2011, and $11,501 beginning March 1, 2011 through March 1, 2013, and $12,524 thereafter to March 1, On July 1, 2005, the Authority was granted Pennvest note #80123 for up to $101,090 for the construction of improvements to the water supply system. Total borrowings were $79,996 under the note. The outstanding borrowings under the note bear interest at a rate of 1.387% per annum from August 1, 2006, through July 1, 2011, and 2.774% per annum, thereafter to July 1, Interest and principal payments are due in monthly installments of $484 beginning September 1, 2006, through February 1, 2011, $345 beginning March 1, 2011 through August 1, 2011, and $381 thereafter to July 1, On March 22, 2005, the Authority was granted Pennvest note #12641 for up to $545,000 for the purpose of water line construction projects. Total borrowings were $406,304 under the note. The outstanding borrowings under the note bear interest at a rate of 1.387% per annum from August 1, 2006, through April 1, 2011, and 2.774% per annum, thereafter to April 1, Interest and principal payments are due in monthly installments of $2,640 beginning September 1, 2006, through April 1, 2011, $1,729 beginning March 1, 2011 through August 1, 2011, and $1,905 thereafter to April 1, In December of 2006, the Authority entered into an agreement to purchase the wastewater system from Ligonier Township Municipal Authority. In procuring the Ligonier Township Municipal Authority, the Authority assumed Pennvest Loan #12605 from the Ligonier Township Municipal Authority. Total borrowings were $451,301 under this note. The outstanding borrowings under the note bear interest at a rate of 1.387% per annum from January 1, 2007, through February 1, 2009, and 2.774% per annum thereafter to February 1, Interest and principal payments are due in monthly installments of $2,463 through February 1, 2009, and $2,720 thereafter to February 1, On May 24, 2006, the Authority was granted Pennvest note #89168 for up to $363,652 (loan portion) and $318,348 (grant portion) for a total of $682,000 for construction of the System, in Conemaugh Township, Indiana County. Total borrowings were $363,652 under the note. The outstanding borrowings under the note bear interest at a rate of 1.000% per annum from September 1, 2007 through September 1, Interest and principal payments are due in monthly installments of $1,170, beginning October 1, 2007 through October 1, 2010, and $1,168 thereafter to September 1,

164 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 8 LONG-TERM DEBT (continued) On April 20, 2009, the Authority was granted Pennvest note #12699 for up to $4,750,000 for the purpose of water line replacement projects. Total borrowings were $4,125,083 under the note. The outstanding borrowings under the note bear interest at a rate of 1.559% for the first five years and 2.690% until maturity. Interest and principal payments are due in monthly installments of $18,966 from April 1, 2015 through April 1, 2016 and $20,559 thereafter to April 1, Currently, the Authority is making preliminary amortization payments to Pennvest on this note as they continue to draw on this note. In January 2012, the Authority was granted Pennvest note #12725 for up to $100,000 for the purpose of a water line extension project. As of March 31, 2015, the Authority had borrowed $83,774 under the note. The outstanding borrowings under the note bear interest at a rate of 2.255% per annum from October 1, 2012 through October 1, 2017 and 3.395% per annum thereafter. Interest and principal payments are due monthly in installments of $436 through May 1, 2018, and $471 thereafter to September 1, Currently, the Authority is making preliminary amortization payments to Pennvest on this note as they continue to draw on this note. Other Notes Payable In January of 2010, the Authority entered into a $2,557,949 Water Storage Agreement with Department of the Army, represented by the U.S. Army Corps of Engineers, Pittsburgh District, for the use of storage of water in the Youghiogheny River Lake, Pennsylvania. The agreement went into effect April 1, 2010 and gives the Authority the right to utilize an undivided percentage of usable storage space and allows for the renegotiation of the agreement for the purchase of additional storage space. The term of the agreement is 30 years and calls for annual interest and principal payments based on a yield rate adjusted at five-year intervals as determined by the Secretary of the Treasury. For fiscal year 2015, the rate was 4.125%. The Authority is recognizing an intangible asset for the acquisition of the water storage rights. The asset is being amortized over 30 years in an amount equal to the principal portion of the fiscal year's annual payment. As of March 31, 2015 and 2014, the net balance of the intangible asset was $2,223,700 and $2,274,123, respectfully. In March 2011, the Authority obtained a loan from S&T Bank in the amount of $575,000, which was used to acquire various vehicles. Each vehicle was purchased at different times at varying amounts; therefore the Authority accounts for each portion of the loan separately. The terms of the loan are the same for each acquisition and require total monthly payments of $10,584 for five years at a fixed interest rate of 2.65%. In April 2012, the Authority obtained a loan from S&T Bank in the amount of $750,000, which was used to acquire various vehicles. Each vehicle was purchased at different times at varying amounts; therefore the Authority accounts for each portion of the loan separately. The terms of the loan are the same for each acquisition and require total monthly payments of $12,940 for five years at a fixed interest rate of 2.16%. In May 2013, the Authority obtained a loan from S&T Bank in the amount of $1,000,000, which was used to acquire various vehicles. Each vehicle was purchased at different times at varying amounts; therefore, the Authority accounts for each portion of the loan separately. The terms of the loan are the same for each acquisition and require total monthly payments of $16,668 for five years at a fixed interest rate of 2.17%

165 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 8 LONG-TERM DEBT (continued) During 2015, the Authority obtained various loans from S&T Bank to acquire various vehicles. Each vehicle was purchased at different times at varying amounts; therefore, the Authority accounts for each loan separately. Total new loans were $658,825 during The terms of the loans are the same for each acquisition and require total monthly payments of $11,595 for five years at a fixed interest rate of 2.12%. The following is a summary of changes in long-term obligations for the fiscal year ended March 31, 2015: Final Maturity Date March 31, 2014 Bonds Issued/ Principal Payments/ March 31, 2015 Outstanding Bonds Payable Balance Additions Amortization Balance 1993 Series C Cap App Bonds August 2016 $ 21,655,000 $ - $ 10,880,000 $ 10,775, Series A Cap App Bonds August ,025, ,025, Series A Cap App Bonds August ,140, ,140, Series Cap App Bonds August ,615, ,615, Series Tax-Exempt Cap App August ,365, ,365, A Series Tax-Exempt Cap App August ,890, ,890, A Series Tax-Exempt Cap App August ,710, ,710, Series A Revenue Bonds August ,005, ,000 60,770, Series B Current Interest Bonds August ,985, ,985, Series B Cap App Bonds August ,255, ,255, Series Current Interest Bonds August ,745, ,000 5,615, Series Current Interest Bonds August ,110, ,110,000 Total Face Value of Bonds Outstanding 378,500,000-11,245, ,255,000 Premiums on Current Interest Bonds 18,371, ,588 17,722,867 Accretion - Capital Appreciation Bonds (57,034,367) - (6,535,635) (50,498,732) Discounts on Current Interest Bonds (59,823) - (5,215) (54,608) Recorded Value of Bonds Payable 339,777,265-5,352, ,424,527 (continued)

166 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 8 LONG-TERM DEBT (continued) Final Maturity Date March 31, 2014 Balance Bonds Issued/ Additions Principal Payments/ Amortization March 31, 2015 Balance Recorded Value of Bonds Payable (continued from prior page) 339,777,265-5,352, ,424,527 Notes Payable Pennvest Note #81002 July , , ,984 Pennvest Note #80058 September ,635-30, ,742 Pennvest Note #81003 January ,424-28, ,741 Pennvest Note #25077 December ,295-12, ,401 Pennvest Note #12581 February ,744-23, ,997 Pennvest Note #12592 December ,312-25, ,240 Pennvest Note #80118 December ,304, ,094 3,039,946 Pennvest Note #80114 March ,341-29, ,358 Pennvest Note #85124 September ,139,181-71,587 1,067,594 Pennvest Note #80147 March ,772, ,992 1,665,314 Pennvest Note #80123 July ,714-3,292 44,422 Pennvest Note #12641 April ,488-16, ,919 Pennvest Note #12605 February ,652-25, ,539 Pennvest Note #89168 September ,343-11, ,242 Pennvest Note #12699 April ,266,889-31,157 3,235,732 Pennvest Note #12725 December , ,609 US Army Corp of Engineers April ,274,122-50,423 2,223,699 S&T Bank loans Various 1,624, , ,052 1,760,570 Total Notes Payable 16,681, ,825 1,382,774 15,958,049 Total Outstanding 356,459,263 $ 658,825 $ 6,735, ,382,576 Less: current maturities 12,755,847 12,874,307 Total Long-term debt $ 343,703,416 $ 337,508,

167 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 8 LONG-TERM DEBT (continued) Annual requirements of all outstanding debt as of March 31, 2015, including interest payments, are as follows: Fiscal Years Ending March 31, 2016 $ Principal 12,874,307 $ Interest 9,942,034 $ Total 22,816, ,591,835 9,935,630 15,527, ,094,769 9,893,771 18,988, ,558,067 9,851,817 22,409, ,588,214 9,811,918 29,400, ,274,119 48,173, ,447, ,249,705 37,814, ,064, ,113,216 23,507, ,621, ,868,817 3,156,367 53,025,184 Totals $ 383,213,049 $ 162,087,354 $ 545,300,403 NOTE 9 CAPITAL LEASES The Authority leases vehicles and office equipment for use in operations. At March 31, 2015, there were various leases outstanding. The leases are accounted for as capital leases due to the existence of bargain purchase options at the end of each term. The vehicles and equipment have been capitalized and are being depreciated over 4 to 5 years. The cost of vehicles and equipment acquired under capital leases at March 31, 2015 and 2014 was $1,207,354 and $1,318,002, respectively. Accumulated amortization on these assets was $890,045 and $910,254 as of March 31, 2015 and 2014, respectively. Future minimum lease payments are as follows: Years Ending March 31, 2016 $ Principal 93,497 $ Interest 9,142 $ Total 102, ,099 6,101 88, ,035 3,165 88, , ,100 $ 304,282 $ 18,857 $ 323,139 Amortization expense related to capital assets acquired under capital leases is included in depreciation expense

168 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 10 LANDFILL CLOSURE AND POSTCLOSURE CARE COSTS The Municipal Authority of Westmoreland County is the operator and settlor of the Loyalhanna Landfill. Currently, the Loyalhanna Landfill is closed and not operating. State and federal laws and regulations require that the Municipal Authority of Westmoreland County place a final cover on its landfill when closed and perform certain maintenance and monitoring functions at the landfill for ten years after closure. In addition to operating expenses related to current activities of the landfill, an expense provision and related liability are being recognized based on the future closure and post closure care costs that will be incurred near or after the date the landfill no longer accepts waste. The following schedule contains the estimated detailed closure information for the closed landfill. Loyalhanna Estimated Total Closure and Postclosure Costs $ 550,000 Percent of Usage (FILLED) % Estimated Liability for Closure and Postclosure Costs $ 550,000 The estimated liability for landfill closure and post closure care costs has a balance of $550,000 and $820,600 as of March 31, 2015 and 2014, respectively, which is based on 100% usage (filled). The estimated total closure and post closure costs of $550,000, which has already been incurred, is based on the amount that would be paid for all equipment, facilities, and services required to close, monitor, and maintain the landfill. During 2015, the Authority began working on a finalization plan for the landfill which led to a reduction in the total post-closure care costs liability of $270,600 in consideration of the fact that the Authority should be able to reduce testing over the next six years. This reduction is included in the statement of activities as a reduction of Landfill operating expenditures. The Authority is also required to maintain a Collateralized Line of Credit which is held by PNC Bank in the amount of $610,176 as of March 31, However, the actual cost of closure and post closure costs may be higher or lower due to inflation, or deflation, changes in technology or changes in landfill laws and regulations. NOTE 11 SELF-FUNDED HEALTH INSURANCE The Authority has a loss sensitive health plan with specific and aggregate stop loss limits. As of March 31, 2015 and 2014, a liability, net of the imprest cash balance, of $413,000 and $302,000, respectively, is recorded due to estimated required payments to be paid during future fiscal years for claims incurred but not paid at year end. NOTE 12 PENSION Plan Description The Municipal Authority of Westmoreland County sponsors the Municipal Authority of Westmoreland County Pension Plan, a single employer defined benefit pension plan, established on April 1, 1953, as last amended on October 15, Plan provisions are established by the Authority for contributions required by Act 205 of the Commonwealth of Pennsylvania

169 NOTE 12 PENSION (continued) MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 The Plan issues a separate stand-alone financial report that includes financial statements and required supplementary information, which is available for inspection at the Authority's office. The defined benefit pension plan covers all union and non-union, non-uniformed employees of the Authority, hired prior to October 15, 2012, who have completed one year of continuous employment. The Authority makes contributions to the plan based on actuarial evaluations. Employees become vested in their accrued benefits after five years of continuous service. The Authority's payroll for employees covered by the pension plan for the year ended December 31, 2014, was $19,491,399, which is 93.82% of total payroll of $20,774,936. Plan assets consist of cash and investments held by the Bank of Charles Schwab & Company "the Depository. The plan is administered by a retirement plan committee, consisting of the board of directors with Cowden & Associates as actuary. The latest Actuarial Valuation Report available for the Municipal Authority of Westmoreland County pension plan is as of January 1, Actuarial reports are required biennially. The plan year is a calendar year; however, the Authority has a fiscal year ending March 31. As of January 1, 2013, the latest valuation report date pension plan membership consisted of: Participants Count Active 249 Terminated - Vested 14 Retired 144 Disabled 6 Survivors 49 Total 462 The plan pays benefits in the event of disability, death, or retirement of participants who meet the eligibility requirements. Normal retirement occurs at age 65. The normal retirement benefit for participants retiring after October 15, 1997, is the sum of (a) 1.85% of average compensation not in excess of the "covered compensation" multiplied by years of service to a maximum of 25 years plus (b) 2.10% of average compensation in excess of the "covered compensation" multiplied by years of service to a maximum of 25 years plus (c) 0.90% of average compensation multiplied by years of service in excess of 25 years. Average compensation is defined as the average of total compensation for the last 60 months of employment. Covered compensation is the average of the ten most recent Social Security Wage Bases as of the date of determination. Summary of Significant Accounting Policies Financial information of the Authority's pension plan is presented on the accrual basis of accounting. Employer contributions to the plan are recognized when due as required by the Act. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan

170 NOTE 12 PENSION (continued) Cost Method MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 The actuarial accrued liability and normal cost under the Entry Age Normal actuarial cost method are used to determine the contribution level. This cost method is required for use by Act 205. Under this method, the normal cost percentage is determined separately for each active participant as the level percent of expected career earnings required to fund expected plan benefits. The participant's actuarial accrued liability is the difference between the present value of all future plan benefits expected to be paid on his behalf and the present value of his future normal costs. This actuarial accrued liability represents the amount of assets that would theoretically be on hand at the valuation date if the current plan provisions and assumptions had always been in effect, historical experience conformed exactly to assumptions, and the participant's individual normal cost had been contributed each year. Actuarial accrued liability for non-active participants is determined as the actuarial present value of the benefits expected to be paid; no normal cost is determined for these participants. The normal cost and actuarial accrued liability for the plan are the sum of the individual normal costs (plus expenses expected to be paid from the trust during the plan year) and accrued liabilities. Asset Valuation Method In determining the preliminary actuarial value of assets, the preceding year's market value of assets is increased by contributions and expected interest at the valuation rate and reduced by benefit payments and expenses. This preliminary value of assets is then compared to the market value of trust assets and 20% of the difference is recognized in year 1, 40% in year 2, 60% in year 3 and 80% in year 4 to produce the final actuarial value of assets. If the resulting actuarial value of assets is outside a corridor of 80% to 120% of the market value, an adjustment is made to maintain the actuarial value of assets at the appropriate corridor limit. Economic Assumptions Interest Rate Salary Increase Expenses Social Security Wage Base Inflation 7.50% per annum, gross return Nonbargaining unit: 3.75% per year Bargaining Unit Employees: Years of Service: Rate 0-1 years 9.25% 1-4 years 8.75% 4-5 years 20.25% 5-8 years 7.25% 9+ years 3.75% Most recent year's expenses 3.50% per annum 2.50% per annum

171 NOTE 12 PENSION (continued) MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 Demographic Assumptions Retirement Age: Actives: 5% from ages 55 to 59; 15% from ages 60 to 61; 25% from ages 62 to 64 and 100% thereafter Terminated Vested: Age 65 Turnover: Rates of withdrawals are based on the APHB T-1 tables less GAM 51. Sample rates are shown below: Age % Expected to Withdraw Age % Expected to Withdraw % % % % % % % Mortality: Pre-retirement: RP-2000 Non-Annuitant with projections for future improvement through 2007 by scale AA. Post-retirement: RP-2000 Healthy Annuitant with projections for future improvement through 2007 by scale AA. Post-disablement: RP-2000 Disability Table. Disability: Sample rates are as follows: Age Male Female Marital Characteristics: 80% of male and 50% of female active participants are assumed to have a covered spouse at retirement. The female spouse of a male employee is assumed to be 2 years younger. The male spouse of a female employee is assumed to be 3 years older

172 NOTE 12 PENSION (continued) MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 Investment Concentrations Investments that exceed 5% of total Plan Net Assets at December 31, 2013, were as follows: Vanguard 500 Index 40% Vanguard Total International Stock Index 10% Federated Ultra Short Bond CL IS 7% Fidelity Ultra Short BD 7% Vanguard Total Bond Market Index 6% PIMCO Total Return Bond 6% In addition, the plan did not have any investment transactions with related parties during the year. Contributions and Funding Policy Act 205 requires that annual contributions be based upon the calculation of the Minimum Municipal Obligation (MMO). The MMO calculation is based upon the biennial actuarial valuation. Employees are not required to contribute under the Act. The plan may also be eligible to receive an allocation of state aid from the General Municipal Pension System State Aid Program which must be used for pension funding. Any funding requirements established by the MMO in excess of employee contributions and state aid must be paid by the municipality in accordance with Act 205. In 2014 and 2013, the MMO for the Plan was $4,619,700 and $3,566,000, respectively. The Authority paid 100% of the MMO, which was equal to the annual pension cost and annual required contribution. Administrative costs, including the investment manager, custodial trustee and actuarial services, are charged to the plan and funded through investment earnings. The Authorities funded status and related information as of the latest actuarial valuation date, January 1, 2013, is as follows: ( b - a ) (( b - a ) / c ) ( a ) ( b ) Unfunded UAAL as a Actuarial Actuarial Actuarial Actuarial ( a / b ) ( c ) Percentage of Valuation Value of Accrued Liability Funded Covered Covered Date Plan Assets Liabilities (UAAL) Ratio Payroll Payroll 1/1/2013 $ 38,098,004 $ 71,687,906 $ 33,589, % $ 18,077, %

173 NOTE 12 PENSION (continued) MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 The required schedule of funding progress included as required supplementary information immediately following the notes to financial statements presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The schedule of funding progress also lists key changes in assumptions that occurred for the January 1, 2013, actuarial valuation. NOTE 13 COMPENSATED ABSENCES Employees of the Authority are entitled to vacation and sick days based on their years of service. The Authority has established a liability of $1,727,853 and $1,728,649 for the fiscal years ended March 31, 2015 and 2014, respectively, for compensated absences. It is the Authority's policy to recognize these costs in operations when compensated absences are earned. NOTE 14 DEFINED CONTRIBUTION PLANS The Authority maintains two defined contribution plans. Employees hired prior to October 15, 2012, are eligible to participate in a section 457 plan. Contributions under the 457 plan are made only by employees on a voluntary basis. Employees hired on or after October 15, 2012, are eligible to participate in a 401(k) plan. Under the 401(k) plan employees elect salary deferrals between five and fifteen percent with the Authority contributing four percent of the employee's annual compensation. For the fiscal years ended March 31, 2015 and 2014, total employer contributions to the 401(k) plan were $39,802, and $20,207, respectively. NOTE 15 OTHER POST RETIREMENT BENEFITS Description In addition to providing the pension benefits described, the Authority provides single-employer postemployment medical and life insurance benefits (OPEB) for retired employees. The benefit levels, employee contributions, and employer contributions are governed by the Authority and can be amended by the Authority through its personnel manual and union contracts. The Authority has chosen an unfunded pay as you go plan whereby all benefits are paid out of the general assets of the Authority. Stand-alone financial statements are not issued for this plan. Benefits Provided & Funding Policy Post-Retirement Medical Benefits Eligibility - All members collecting a pension from MAWC and who retired from active service with MAWC are eligible for post-retirement medical benefits for themselves and their spouse until the death of the member. A surviving spouse of an eligible member who dies may elect to continue coverage under COBRA and pay the entire COBRA premium. Eligibility for retirement is age 65 with 5 years of service or age 50 provided the combination of age and service is 70 years. Disability retirement eligibility is 5 years of service. Effective for employees hired after October 14, 2012, the same age and service requirements of the defined benefit pension plan and voluntarily terminate from active service with MAWC

174 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 15 OTHER POST RETIREMENT BENEFITS (continued) Benefits - Medical (including Rx) for the retired participant and spouse payable for the life of the eligible member. Dental and Vision are not available to retirees. Member Cost Sharing - None. The Authority pays the entire cost for retirees and spouses except that surviving spouses pay the COBRA premium during the period of coverage. Post-Retirement Death Benefits Eligibility - All members collecting a pension from MAWC and who retired from active service with MAWC are eligible for life insurance. Effective for employees hired after October 14, 2012, same age and service requirements of the defined benefit pension plan and voluntarily terminate from active service with MAWC. Benefits - $40,000 reducing $4,000 per year at each anniversary of the date of retirement until $20,000 is reached after 5 years. The $20,000 is maintained for the rest of the eligible retiree s lifetime. Member Cost Sharing - None. Funding Policy Postretirement insurance benefits are currently funded on a pay-as-you-go basis. The Authority funds on a cash basis as benefits are paid. No assets have been segregated and restricted to provide postretirement benefits. In 2015, the Authority contributed approximately $1,780,000 to the OPEB Plan, all of which was for current premiums. Annual OPEB Cost and Net OPEB Obligation The Authority s annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years

175 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 15 OTHER POST RETIREMENT BENEFITS (continued) Annual OPEB Cost and Net OPEB Obligation The following table shows the components of the Authority s annual OPEB cost for the year, the amount actually contributed to the OPEB Plan, and changes in the Authority s net OPEB obligation: Annual OPEB Cost and Net OPEB Obligation March 31, March 31, Development of annual OPEB cost for fiscal years ending: Annual Required Contribution (ARC) $ 7,232,007 $ 7,878,086 Interest on beginning of year net OPEB obligation 1,298,610 1,060,074 Adjustment to ARC (1,805,258) (1,154,812) Annual OPEB cost 6,725,359 7,783,348 Development of net OPEB obligation for fiscal years ending Annual OPEB cost 6,725,359 7,783,348 Contribution made in relation to the ARC* (1,778,135) (1,819,945) Increase in net OPEB obligation 4,947,224 5,963,403 Net OPEB obligation - beginning of year 32,465,254 26,501,851 Net OPEB obligation - end of year $ 37,412,478 $ 32,465,254 * Expected contributions used take into account rate subsidy for retirees

176 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 15 OTHER POST RETIREMENT BENEFITS (continued) Membership at March 31, 2015, the date of the most recent actuarial report, membership consisted of: Classification of Participants Active Members 270 Retired Members Covered under medical and life 122 Covered for life insurance only 5 Total Retired Members 127 Disabled Members Eligible for medical and life 5 Total Disabled Members 5 Spouses of Retired Members with Medical Coverage Spouses of retired members 78 Spouses of disabled members 1 Total Spouses of Retired Members 79 Total 481 Spouses of active members are not included in the above participant counts, but benefits have been valued for future eligible spouses and included in the OPEB Obligation. SCHEDULE OF EMPLOYER CONTRIBUTIONS Annual Required Net OPEB Fiscal Year Contribution Percentage Obligation Ending (ARC) Contributed or Asset 3/31/15 $ 7,232, % $ 37,412,478 3/31/14 7,878, % 32,465,254 3/31/13 7,553, % 26,501,851 3/31/12 7,320, % 20,767,810 3/31/11 7,079, % 14,591,

177 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 15 OTHER POST RETIREMENT BENEFITS (continued) Funded Status and Funding Progress As of March 31, 2015, the most recent actuarial valuation date, the OPEB Plan is unfunded. The actuarial accrued liability for benefits was $80,479,237, and the OPEB Plan had no assets, resulting in an unfunded actuarial accrued liability (UAAL) of $80,479,237. The covered payroll (annual payroll of active employees covered by the OPEB Plan) was $20,185,725, and the ratio of the UAAL to the covered payroll was 399% during the period covered by the actuarial report. Actuarial valuations on an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members at that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value assets, consistent with the long-term perspective of the calculations. Discount Rate: Since the plan has not yet accumulated appreciable assets, the discount rate is the estimated long term invest yield on employer assets that are expected to pay for benefits. This does not generally result in a market-consistent present value measurement. Prior Valuation Current Valuation 4.00% 4.00% Mortality: Healthy Lives - The RP-2000 Healthy Annuitant Mortality Table, sex-distinct, separate pre/post commencement, fully generational, projected using two dimensional Scale BB. Disabled Lives The RP-2000 Disabled Retiree Mortality Table without projection is used. Turnover: Light turnover (T-1) for all Employees. Active Retirement: 5% from ages 55 to 59; 15% from ages 60 to 61; 25% from ages 62 to 64; and 100% thereafter. Inactive Retirement: It is assumed that members who quit and do not retire from active service are not eligible for retiree medical or life

178 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 15 OTHER POST RETIREMENT BENEFITS (continued) Disability: Same as pension valuation Marital Status: 80% of male and 50% of female active participants are assumed to have a covered spouse at retirement. The female spouse of a male employee is assumed to be 2 years younger. The male spouse of a female employee is assumed to be 3 years older. Participation: Medical Medicare Part B Life Insurance 100% of eligible employees are assumed to elect single member coverage at retirement and 100% are assumed to cover their spouse. 0% of eligible retirees are assumed to submit future claims to the Authority for premium reimbursement. 100% of eligible employees assumed to participate in the post retirement life insurance program. Trends: Blended rates of future inflation for medical and prescription drug benefits are as follows: Year Blended Rate % % % % % % 2064 and later 4.0% *Long-term trends were developed using the Society of Actuaries Long Term Healthcare Cost Trends Resource Model (updated November 2012). Excise Tax on High Cost Plans under ACA ( Cadillac tax): Certain provisions of the Act are not well defined and may be clarified through future legislation or guidance. This provision of the law is not effective until 2018 and presumable many employers will alter their benefits if necessary to avoid the effects of the tax. Under current accounting standards, we cannot reflect any presumptions that the plan will be altered. Projected retiree-coverage thresholds for 2018 are shown below. The amounts include adjustment for assumed cost increases in the Federal Employees Health Benefits Plan that are projected to exceed 55% for the period : Estimated 2018 limit on self only coverage $10,200 Estimated 2018 limit on other than self only coverage $27,500 Changes in CPI-U 2.7 % A 1% additional increase is used in 2019, as specified by law

179 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 15 OTHER POST RETIREMENT BENEFITS (continued) Amortization Period: 30 year amortization. Amortization Method: Level Dollar, open amortization. Actuarial Cost Method: Projected Unit Credit Claims Cost Development and Assumptions Expected Per Capita Annual Claims Cost: An annual per capita claims cost was developed for the under 65 population by taking a weighted average of estimate medical and prescription drug claims cost for the fiscal years 2013, 2014 and 2015 adjusted for trend and administrative costs. Prior year claims were trended at 11% from 2012 to 2013, 10% from 2013 to 2014 and 10% (11% for prescription drug) from 2014 to Trended claims were then increased for estimated stop loss premium and administrative costs. The overall average members per contract are assumed to be 2.1. This weighted average was then spread to reflect lower expected claims cost at younger ages and higher claims cost at older ages using aging factors shown below. The estimated per capital claims cost at age 64 is $14,700. At age 65 the Freedom Blue PPO annual premium of $4,716 was used without aging factor adjustments. Aging Factors: Age Factor % % % % % % % % % % % % % % %

180 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED MARCH 31, 2015 AND 2014 NOTE 16 COMMITMENTS AND CONTINGENCIES The Authority, in its normal course of business, has been named as a defendant in various lawsuits. As of March 31, 2015, the Authority intends to contest all claims vigorously and is currently unable to evaluate the likelihood of potential outcomes. The Authority has not accrued any contingent liability for these claims. NOTE 17 SUBSEQUENT EVENTS The Authority evaluated its March 31, 2015 financial statements for subsequent events through July 10, 2015, the date the financial statements were available to be issued. On April 1, 2015, the Authority entered into a new bond to refund, advance refund and pay off previously issued bonds and notes payable. On April 13, 2015, the Authority purchased the Jeannette Municipal Authority. At the time of this report, the Authority is working on consolidating the Jeannette Municipal Authority s operations and approximately 4,200 customers. Except for these matters, there were no material subsequent events that required recognition or additional disclosure in these financial statements

181 REQUIRED SUPPLEMENTARY INFORMATION

182 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY SCHEDULE OF FUNDING PROGRESS - PENSION PLAN MARCH 31, 2015 AND 2014 ( b - a ) (( b - a ) / c ) ( a ) ( b ) Unfunded UAAL as a Actuarial Actuarial Actuarial Actuarial ( a / b ) ( c ) Percentage of Valuation Value of Accrued Liability Funded Covered Covered Date Plan Assets Liabilities (UAAL) Ratio Payroll Payroll 1/1/2013 $ 38,098,004 $ 71,687,906 $ 33,589, % $ 18,077, % 1/1/ ,496,319 62,054,433 20,558, % 16,841, % 1/1/ ,445,262 57,973,237 12,527, % 15,873, % 1/1/ ,350,048 50,099,418 4,749, % 15,105, % The mortality assumption was changed since the last valuation to reflect future mortality improvements. This change increased the UAL $2,484,623. See Independent Auditors Report and accompanying notes to required supplementary information

183 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY SCHEDULE OF CONTRIBUTIONS FROM EMPLOYERS AND OTHER CONTRIBUTING ENTITIES PENSION PLAN MARCH 31, 2015 AND 2014 *Annual Year Required Ended Contribution Percent December 31, (ARC) Contributed 2014 $ 4,619, % ,566, % ,075, % ,955, % ,843, % ,813, % ,728, % ,638, % ,602, % ,028, % *In accordance with Act 205, the Annual Required Contribution is based on the Minimum Municipal Obligation (MMO) calculation based upon the biennial actuarial valuation. See Independent Auditors Report and accompanying notes to required supplementary information

184 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY NOTES TO REQUIRED SUPPLEMENTARY INFORMATION PENSION PLAN MARCH 31, 2015 AND 2014 The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation Date January 1, 2013 Actuarial Cost Method Entry age normal Amortization Method Level dollar closed Remaining Amortization Period Calculated separately, based on the layers of actuarial accrued liability Asset Valuation Method Moving average appreciation Actuarial Assumptions: Investment Rate of Return 7.50 percent per annum gross return Salary Increase Nonbargaining unit: 3.75% per year Bargaining Unit Employees: Years of Service: Rate 0-1 years 9.25% 1-4 years 8.75% 4-5 years 20.25% 5-8 years 7.25% 9+ years 3.75% Social Security wage base 3.50% per annum Inflation 2.50% per annum Vested eligibility 5 years of service See Independent Auditors Report

185 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY SCHEDULE OF FUNDING PROGRESS OTHER POST EMPLOYMENT BENEFIT PLANS MARCH 31, 2015 and 2014 ( b - a ) (( b - a ) / c ) ( a ) ( b ) Unfunded UAAL as a Actuarial Actuarial Actuarial Actuarial ( a / b ) ( c ) Percentage of Valuation Value of Accrued Liability Funded Covered Covered Date Plan Assets Liabilities (UAAL) Ratio Payroll Payroll 3/31/2015 $ - $ 80,479,237 $ 80,479, % $ 20,185, % 3/31/ ,050,083 86,050, % 18,590, % 3/31/ ,102,871 76,102, % 17,353, % 3/31/ ,535,564 54,535, % 16,185, % The following actuarial assumptions were revised since the prior valuations: Mortality improvement rates were changed from Scale AA to two-dimensional Scale BB to better reflect recent trends in mortality improvement. The accrued liability increased by approximately $5.0 million due to this change. Trend rates have been updated to reflect expectations of the period of time to reach the ultimate trend of 4%. The accrued liability decreased by approximately $8.6 million due to this change. Other minor changes include an update to aging factors based on a 2013 Society of Actuaries report and the addition of an assumption that there will be no future claims for Part B reimbursements from pre- 10/14/1997 retirees. The accrued liability decreased by approximately $0.4 million due to these changes. See Independent Auditors Report and trends used in actuarial valuations

186 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY SCHEDULE OF EMPLOYER CONTRIBUTIONS OTHER POST EMPLOYMENT BENEFIT PLANS MARCH 31, 2015 and 2014 Year Ended March 31, Annual Required Contribution (ARC) Percent Contributed 2015 $ 7,232, % ,878, % ,553, % ,320, % ,079, % ,643, % See Independent Auditors Report and trends used in actuarial valuations

187 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY POST EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS (OPEBs) FACTORS TRENDS USED IN ACTUARIAL VALUATION MARCH 31, 2015 and 2014 The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Amortization period 30 year amortization Amortization Method Level Dollar, open amortization Actuarial Cost Method Projected Unit Credit Actuarial Value of Plan Assets The Authority does not accumulate assets in a dedicated trust, or an equivalent arrangement, for purposes of funding its retiree healthcare obligation. Therefore the actuarial value of plan assets is zero. Type of Entity Single-employer plan: A plan that covers the current and former employees, including beneficiaries of only one employer. See Independent Auditors Report

188 Tax // Audit & Attestation // Consulting // Planning DELUZIO 8z COMPANY, LLP 351 Harvey Avenue, Suite A Greensburg, PA Charles A. Deluzio, CPA Jeffrey P. Anzovino, CPA, MSA Joseph E. Petrillo, CPA Stacey A. Sanders, CPA, CSEP Lisa M. Altschaffl, CPA Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements in Accordance with Government Auditing Standards Independent Auditors' Report The Board of Directors Municipal Authority of Westmoreland County We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the business-type activities of the Municipal Authority of Westmoreland County (Authority) as of and for the year ended March 31, 2015, and the related notes to the fmancial statements, which collectively comprise the Authority's basic financial statements, and have issued our report thereon dated July 10, Internal Control over Financial Reporting In planning and performing our audit of the fmancial statements, we considered the Authority's internal control over fmancial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Municipal Authority of Westmoreland County's internal control. Accordingly, we do not express an opinion on the effectiveness of the Municipal Authority of Westmoreland County's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. (Continued)

189 DC DELUZIO & COMPANY, LLP Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements in Accordance with Government Auditing Standards Independent Auditors' Report Compliance and Other Matters (Continued) As part of obtaining reasonable assurance about whether the Municipal Authority of Westmoreland County's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. (-0 Giutp LL_P Greensburg, PA July 10,

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191 APPENDIX D Form of Opinion of Bond Counsel

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193 Campbell & Levine, LLC Attorneys at Law 1700 Grant Building Pittsburgh, PA Phone: Fax: August, 2016 $184,475,000 MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY Westmoreland County, Pennsylvania Municipal Service Revenue Bonds, Series of 2016 To the Purchasers of the Above-Captioned 2016 Bonds: We have acted as Bond Counsel to Municipal Authority of Westmoreland County (the "Authority") in connection with the issuance and sale by the Authority of its Municipal Service Revenue Bonds, Series of 2016 (the "2016 Bonds") in the aggregate principal amount of $184,475,000. The 2016 Bonds are issued pursuant to a Trust Indenture dated as of October 1, 1993 by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as successor Trustee, as previously supplemented and as further supplemented by a Fourteenth Supplemental Trust Indenture dated as of August 15, 2016 (collectively, the "Indenture"). The 2016 Bonds are limited obligations of the Authority payable solely from the Receipts and Revenues (as defined in the Indenture) pledged under the Indenture, on parity with all other bonds issued and outstanding under the Indenture (collectively, the "Bonds"). The 2016 Bonds have been issued to provide funds to (i) currently refund a portion of the Authority s outstanding Municipal Service Revenue Bonds, Refunding Series A of 2006, (ii) fund certain of the Authority s budgeted capital expenditures, (iii) fund the Debt Service Reserve Fund requirement with respect to the 2016 Bonds, and (iv) pay the costs of issuing the 2016 Bonds (collectively, the "2016 Project"). We have examined an executed copy of the Indenture, the form of 2016 Bond and such law and other certified proceedings and other documents as we deemed necessary to render this opinion. In rendering this opinion, other than with respect to the Authority, we have assumed the genuineness of all signatures on all documents and certificates that we examined, the legal capacity and authority of all persons executing such documents, the authenticity of all documents submitted to us as originals and the conformity to originals of all documents submitted to us as copies and the authenticity of the originals of said copies. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. We express no opinion herein as to the accuracy, adequacy or completeness of the Official Statement or other disclosure document prepared in connection with the sale of the 2016 Bonds, and make no representation that we have independently verified the contents of such Official Statement or other disclosure document. Based on the foregoing, it is our opinion as of the date hereof that, under existing law: 1. The Authority is a public instrumentality and body corporate and politic duly organized pursuant to the Pennsylvania Municipality Authorities Act, with the power and authority to enter into the Indenture and to issue, sell and deliver the 2016 Bonds to finance the 2016 Project. 2. The Indenture creates a valid lien upon the Receipts and Revenues and other funds pledged by the Indenture for the security of the 2016 Bonds, which lien is on parity with all other series of Bonds previously issued and currently outstanding under the Indenture. Pittsburgh, Pennsylvania Wilmington, Delaware

194 Campbell & Levine, LLC To the Purchasers of the Above-Captioned 2016 Bonds August, 2016 Page 2 3. The 2016 Bonds have been duly authorized, executed, and delivered by the Authority and are valid and binding limited obligations of the Authority, entitled to the benefit and security of the Indenture. 4. Interest on the 2016 Bonds (including any original issue discount properly allocable to an owner thereof) is (a) excludable from gross income for federal income tax purposes and (b) is not an item of tax preference within the meaning of Section 57 of the Internal Revenue Code of 1986, as amended (the "Code"), for purposes of the federal alternative minimum tax imposed by Section 55 of the Code on individuals and corporations; however, interest with respect to the 2016 Bonds may be taken into account in determining "adjusted current earnings" for purposes of computing the alternative minimum tax imposed by Section 55 of the Code on certain corporations (as defined for federal income tax purposes). The opinion set forth in the preceding sentence is subject to the condition that the Authority comply with all requirements of the Code that must be satisfied subsequent to the issuance of the 2016 Bonds in order that interest thereon be and remain excludable from gross income for federal income tax purposes. The Authority has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause interest on the 2016 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the 2016 Bonds. The 2016 Bonds are exempt from personal property tax in Pennsylvania and the interest on the 2016 Bonds is exempt from Pennsylvania personal income tax and Pennsylvania corporate net income tax. It is to be understood that the rights of the owners of the 2016 Bonds and the enforceability of the Indenture and the 2016 Bonds may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and by equitable principles, whether considered at law or in equity. The scope of our engagement has not extended beyond the examinations and the rendering of the opinions expressed hereon. This opinion is given as of the date hereof and we assume no obligation to update or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Sincerely, CAMPBELL & LEVINE, LLC

195 APPENDIX E Form of Continuing Disclosure Certificate

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197 CONTINUING DISCLOSURE CERTIFICATE On this 15th day of August, 2016, this Continuing Disclosure Certificate (the Disclosure Certificate ) is executed and delivered by the Municipal Authority of Westmoreland County (the Issuer ), in connection with the issuance of the Issuer's $184,475,000 aggregate principal amount, Municipal Service Revenue Bonds, Series of 2016 (the Bonds ). The Bonds are being issued pursuant to a Resolution (the Resolution ) adopted by the Issuer on April 13, 2016 and a Trust Indenture dated as of October 1, 1993, as amended and supplemented to date, including by a Fourteenth Supplemental Trust Indenture, dated as of August 15, 2016 (the Indenture ), between the Issuer and The Bank of New York Mellon Trust Company, N. A., as successor Trustee. The Issuer, intending to be legally bound, hereby covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is the written undertaking for the benefit of the beneficial holders of the Bonds as required by Section (b)(5)(i) of Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as the same may be amended from time to time (the Rule ). SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Commonwealth shall mean the Commonwealth of Pennsylvania. Disclosure Agent shall mean any agent of the Issuer designated in writing by the Issuer, which agent has filed with the Issuer a written acceptance of such designation. EMMA System shall mean the MSRB s Electronic Municipal Market Access system, in electronic format and accompanied by such identifying information as prescribed by the MSRB. MSRB shall mean the Municipal Securities Rulemaking Board. Obligated Person shall have the meaning set forth in Rule 15c2-12, Under Rule 15c2-12 an issuer may establish independent criteria for determining the Obligated Persons for which annual financial information will be provided. The Issuer has determined that an Obligated Person is a person that produces 15% of the debt service on the Bonds, The Issuer does not anticipate that there will be any Obligated Person with respect to the Bonds other than the Issuer. Official Statement shall mean the official statement of the Issuer dated July 14, Participating Underwriter shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with the offering of the Bonds. Repository shall mean the EMMA System and each State Repository, Submission Date shall mean the date which is not later than 270 days after the end of each fiscal year of the Issuer, commencing with the fiscal year ending on the first March 31 after the date of issuance of the Bonds. E-1

198 SECTION 3. Provision of Annual Report. By each Submission Date the Issuer shall file or cause to be filed within 270 days following the end of the Issuer s fiscal year commencing with the fiscal year ending March 31, 2017 with the EMMA System (within the meaning of the Rule), for each of the Issuer's fiscal years, audited financial statements for the Issuer and for each Obligated Person, prepared in accordance with generally accepted accounting principles, audited by a firm of independent certified public accountants; and, to the extent not included in the audited financial statements, the financial information and operating data set forth under the heading: History and Present Operations of the Water System Water System Information, in the Official Statement (the Annual Financial Information ). Such Annual Financial Information may be provided by crossreference to documents previously filed with the EMMA System. The Issuer will clearly identify each such other document so included by reference. The Issuer shall notify the MSRB, if any, of the failure by the Issuer to provide the Annual Financial Information required herein. SECTION 4. Reporting of Material Events. The Issuer shall, in a timely manner give, or cause to be given, to the MSRB, if any, notice of any of the following events with respect to the Bonds, if such event is material: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the Issuer; (13) the consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such E-2

199 an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; and (14) appointment of a successor or additional trustee or the change of name of a trustee. The Issuer may from time to time choose to provide notice of the occurrence of certain other events, in addition to those listed above, if, in the judgment of the Issuer, such other event is material with respect to the Bonds but the Issuer does not undertake to commit to provide any such notice of the occurrence of any material event except those events listed above. SECTION 5. Default. The continuing disclosure undertakings described above are for the benefit of the holders of the Bonds or beneficial owners of the Bonds (determined in a manner permitted under Rule 15c2-12). Unless otherwise required by law, no owners of the Bonds or beneficial owner is entitled to damages resulting from the Issuer's non-compliance with its continuing disclosure undertakings; however, owners of the Bonds may take action to require performance of such obligations by any judicial proceeding available. A failure by the Issuer to comply with any continuing disclosure undertaking set forth herein will not constitute an event of default under the Indenture and any rights and remedies provided in the Indenture in the event of default are not applicable to a breach of the continuing disclosure undertakings. SECTION 6. Termination of Report Obligations. The continuing disclosure undertakings of the Issuer described herein will be in effect from and after the issuance and delivery of the Bonds, and will extend to the earlier of (a) the date all principal and interest on the Bonds have been deemed paid pursuant to the terms of the Indenture, or (b) the date on which those portions of the Rule which required this written undertaking are held to be invalid by a court of competent jurisdiction in a non-appealable action, have been repealed retroactively or otherwise do not apply to the Bonds. The Issuer's continuing disclosure obligations with respect to a particular Obligated Person will be terminated when that person no longer meets the objective criteria for an Obligated Person. SECTION 7. Concerning the Disclosure Agent. The Issuer may from time to time, appoint or engage a Disclosure Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such agent, with or without appointing a successor Disclosure Agent. SECTION 8. addressed as follows: Notices. All notices to be given to the Issuer shall be in writing and shall be Municipal Authority of Westmoreland County 124 Park and Pool Road New Stanton, PA Attn: Authority Manager SECTION 9. Governing Law. This Disclosure Certificate shall by governed by and interpreted in accordance with the laws of the Commonwealth of Pennsylvania; provided that, to the extent that the Securities and Exchange Commission, the MSRB or any other federal or state agency or regulatory body with jurisdiction of the Bonds shall have promulgated any rule or regulation governing the subject matter hereof, this Disclosure Certificate shall be interpreted and construed in a manner consistent therewith. E-3

200 SECTION 10. Severability. If any provision hereof shall be held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions hereof shall survive and continue in full force and effect. SECTION 11. Beneficiaries. The continuing disclosure undertakings of the Issuer herein are intended to be for the benefit of the beneficial owners of the Bonds and shall be enforceable by any one or more beneficial owners of the Bonds; provided that the beneficial owners' right to enforce the provisions of these undertakings shall be limited to a right to obtain specific enforcement of the obligations of the Issuer. SECTION 12. Termination of Reporting Obligation and Disclosure Certificate. The Issuer reserves the right to terminate its obligations to provide annual financial information and notices of material events, as summarized above, if and when the Issuer no longer remains an obligated person with respect to the Bonds within the meaning of the Rule. The continuing disclosure undertakings of the Issuer shall terminate immediately once the Bonds are no longer outstanding. SECTION 13. Amendment. The Issuer s continuing disclosure undertakings may be amended from time to time by the Issuer without the consent of the owners of the Bonds, if such amendment would not, in and of itself, cause the continuing disclosure undertakings (or action of the purchasers of the Bonds in reliance on the undertakings of the Issuer) to violate the Rule, as amended or officially interpreted from time to time by the SEC. The Issuer will provide notice of such amendment to the EMMA System with its Annual Financial Information as provided in the Disclosure Certificate. IN WITNESS WHEREOF, the Issuer has caused its duly authorized officer to execute this Disclosure Certificate as of the day and year first written above. ATTEST: MUNICIPAL AUTHORITY OF WESTMORELAND COUNTY (Assistant) Secretary By: Chairman E-4

201 APPENDIX F Specimen Municipal Bond Insurance Policy

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203 MUNICIPAL BOND INSURANCE POLICY ISSUER: [NAME OF ISSUER] Policy No: MEMBER: [NAME OF MEMBER] BONDS: $ in aggregate principal amount of [NAME OF TRANSACTION] [and maturing on] Effective Date: Risk Premium: $ Member Surplus Contribution: $ Total Insurance Payment: $ BUILD AMERICA MUTUAL ASSURANCE COMPANY ( BAM ), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the Trustee ) or paying agent (the Paying Agent ) for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner s right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner s rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner s right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. Business Day means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer s Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. Due for Payment means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. Nonpayment means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. Nonpayment shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. Notice means delivery to BAM of a notice of claim and certificate, by certified mail, or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. Owner means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that Owner shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.