$16,545,000 CITY OF ALACHUA, FLORIDA Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016

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1 NEW ISSUE FULL BOOK-ENTRY See "RATINGS" herein In the opinion of bond counsel, assuming compliance by the City with certain covenants, under existing statutes, regulations, and judicial decisions, the interest on the Series 2016 Bonds will be excluded from gross income for federal income tax purposes of the holders thereof and will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. However, interest on the Series 2016 Bonds shall be taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax on corporations. See "TAX MATTERS" herein for a description of other tax consequences to holders of the Series 2016 Bonds. $16,545,000 CITY OF ALACHUA, FLORIDA Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 Dated: Date of Delivery Due: October 1, as shown on inside cover The City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 (the "Series 2016 Bonds") will be issued by the City of Alachua, Florida (the "City") only as fully registered bonds and will be initially registered only in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Series 2016 Bonds. The Series 2016 Bonds will be available to purchasers in denominations of $5,000 or multiples thereof only under the book-entry system maintained by DTC through brokers and dealers who are, or act through, DTC Participants. Purchasers will not receive delivery of the Series 2016 Bonds. So long as any purchaser is the Beneficial Owner (as defined herein) of a Series 2016 Bond, he must maintain an account with a broker or dealer who is, or acts through, a DTC Participant to receive payment of principal of and interest on such Series 2016 Bond. See "DESCRIPTION OF THE SERIES 2016 BONDS - Book-Entry Only System" herein. Interest on the Series 2016 Bonds will be payable semiannually on October 1 and April 1 of each year, commencing on October 1, The Bank of New York Mellon Trust Company, N.A., Jacksonville, Florida shall serve as initial Registrar and Paying Agent for the Series 2016 Bonds. The Series 2016 Bonds are being issued pursuant to Resolution No , adopted by the City Commission on March 14, 2016, as supplemented by Resolution No , adopted by the City Commission on March 14, 2016 (collectively, the "Resolution"), together with other legally available funds of the City, for the purpose of (i) financing the acquisition, construction and equipping of a Public Services Operations Center/Warehouse, (ii) financing the acquisition, construction and equipping of a multi-purpose building to be built on a portion of 105 acres that is contiguous to the City's existing recreation center, known as Project Legacy Phase I (the "Project"), (iii) refunding all of the City's outstanding Capital Improvement and Refunding Revenue Bonds, Series 2006, and (iv) paying certain expenses related to the issuance of the Series 2016 Bonds. The Series 2016 Bonds are subject to redemption prior to maturity, as described herein. The Series 2016 Bonds are payable from the Non-Ad Valorem Revenues (as defined herein) budgeted and appropriated by the City for purposes of payment of the debt service on the Series 2016 Bonds in the manner and to the extent provided in the Resolution and deposited into the Debt Service Fund created under the Resolution, and until applied in accordance with the provisions of the Resolution, all moneys, including the investments thereof, in the funds and accounts established under the Resolution except the Rebate Fund (collectively, the "Pledged Funds"). "Non-Ad Valorem Revenues" means all legally available revenues of the City, other than Ad Valorem Revenues. "Ad Valorem Revenues" means all revenues of the City derived from the levy and collection of ad valorem revenues. The City has covenanted and agreed in the Resolution to appropriate in its annual budget, by amendment, if necessary, and deposit into the Debt Service Fund sufficient amounts of Non-Ad Valorem Revenues for the payment of principal of and interest on the Series 2016 Bonds and to make all other payments required under the Resolution in each Fiscal Year. THE SERIES 2016 BONDS SHALL NOT BE OR CONSTITUTE GENERAL OBLIGATIONS OR INDEBTEDNESS OF THE CITY AS "BONDS" WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION, BUT SHALL BE SPECIAL OBLIGATIONS OF THE CITY, PAYABLE SOLELY FROM AND SECURED BY A LIEN UPON AND PLEDGE OF THE PLEDGED FUNDS. NO HOLDER OF ANY SERIES 2016 BOND SHALL EVER HAVE THE RIGHT TO COMPEL THE EXERCISE OF ANY AD VALOREM TAXING POWER OR THE USE OF AD VALOREM REVENUES TO PAY SUCH SERIES 2016 BOND, FOR THE PAYMENT OF ANY AMOUNTS PAYABLE UNDER THE RESOLUTION, OR IN ORDER TO MAINTAIN ANY SERVICES OR PROGRAMS THAT GENERATE NON-AD VALOREM REVENUES OR BE ENTITLED TO PAYMENT OF SUCH SERIES 2016 BOND FROM ANY MONEYS OF THE CITY EXCEPT FROM THE PLEDGED FUNDS IN THE MANNER PROVIDED IN THE RESOLUTION. Concurrently with the issuance of the Series 2016 Bonds, Build America Mutual Assurance Company (the "Insurer") will issue its Municipal Bond Insurance Policy with respect to the Series 2016 Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Series 2016 Bonds when due as set forth in the form of the Policy included as APPENDIX G attached hereto. This cover page contains information for quick reference only. It is not, and is not intended to be, a summary of this issue. Investors must read the entire Official Statement, and Appendices hereto, to obtain information essential to making an informed investment decision. The Series 2016 Bonds are offered when, as and if issued by the City, subject to the approving legal opinion of Bryant Miller Olive P.A., Tampa, Florida, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the City by Marian Rush, Esq., Gainesville, Florida, City Attorney, and Bryant Miller Olive P.A., Tampa, Florida, Disclosure Counsel. Public Financial Management, Inc., Orlando, Florida, has served as financial advisor to the City with respect to the offering of the Series 2016 Bonds. It is expected that settlement for the Series 2016 Bonds will occur through the facilities of DTC in New York, New York on or about April 11, UBS FINANCIAL SERVICES, INC. Dated: March 29, 2016

2 Maturity (October 1) $16,545,000 CITY OF ALACHUA, FLORIDA Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, YIELDS, PRICES AND INITIAL CUSIP NUMBERS Principal Amount $11,685,000 Serial Bonds Interest Rate Yield Price Initial CUSIP Number (1) 2016 $100, % 0.600% N AU , N AV , N AW , N AX , N AY , N AZ , N BA , N BB , N BC , N BD , (2) (2) 01071N BE , (2) (2) 01071N BF , (2) (2) 01071N BG , (2) (2) 01071N BH , N BJ , N BK , N BL , N BM , N BN , N BP5 $1,995, % Term Bond Due October 1, 2040, Yield 3.371%, Price Initial CUSIP Number 01071N BQ3 $2,865, % Term Bond Due October 1, 2046, Yield 3.482%, Price Initial CUSIP Number 01071N BR1 (1) The City is not responsible for the use of the CUSIP Numbers referenced herein nor is any representation made by the City as to their correctness. The CUSIP Numbers provided herein are included solely for the convenience of the readers of this Official Statement. (2) Yield and Price to first optional redemption date of October 1, 2025.

3 CITY OF ALACHUA, FLORIDA NW 142 nd Terrace Post Office Box 9 Alachua, Florida (386) OFFICIALS Gib Coerper, Mayor Ben Boukari, Jr., Vice Mayor Shirley Green Brown, Commissioner Gary Hardacre, Commissioner Robert W. Wilford, Commissioner CITY MANAGER AND CITY CLERK Traci Gresham CITY ATTORNEY Marian Rush, Esq. FINANCE DIRECTOR Robert Bonetti BOND COUNSEL Bryant Miller Olive P.A. Tampa, Florida DISCLOSURE COUNSEL Bryant Miller Olive P.A. Tampa, Florida FINANCIAL ADVISOR Public Financial Management, Inc. Orlando, Florida

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5 No dealer, broker, salesman or other person has been authorized by the City to give any information or to make any representations in connection with the Series 2016 Bonds, other than as contained in this Official Statement, and, if given or made, such information or representations must not be relied upon as having been authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2016 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the City, The Depository Trust Company, the Insurer and other sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness by and is not to be construed as a representation by the City with respect to any information provided by others. The information and expressions of opinion stated herein are subject to change, and neither the delivery of this Official Statement nor any sale made hereunder shall create, under any circumstances, any implication that there has been no change in the matters described herein since the date hereof. The Insurer makes no representation regarding the Series 2016 Bonds or the advisability of investing in the Series 2016 Bonds. In addition, the Insurer 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 the Insurer supplied by the Insurer presented under the heading "MUNICIPAL BOND INSURANCE" and in "APPENDIX G Specimen Municipal Bond Insurance Policy." NO REGISTRATION STATEMENT RELATING TO THE SERIES 2016 BONDS HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR WITH ANY STATE SECURITIES COMMISSION. IN MAKING ANY INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATIONS OF THE CITY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE SERIES 2016 BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. THE FOREGOING AUTHORITIES HAVE NOT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. CERTAIN STATEMENTS INCLUDED OR INCORPORATED BY REFERENCE IN THIS OFFICIAL STATEMENT CONSTITUTE "FORWARD LOOKING STATEMENTS." SUCH STATEMENTS GENERALLY ARE IDENTIFIABLE BY THE TERMINOLOGY USED, SUCH AS "PLAN," "EXPECT," "ESTIMATE," "BUDGET" OR OTHER SIMILAR WORDS. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING STATEMENTS. THE CITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR, SUBJECT TO ANY CONTRACTUAL OR LEGAL RESPONSIBILITIES TO THE CONTRARY.

6 THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE A CONTRACT BETWEEN THE CITY AND ANY ONE OR MORE OF THE OWNERS OF THE SERIES 2016 BONDS. All summaries herein of documents and agreements are qualified in their entirety by reference to such documents and agreements, and all summaries herein of the Series 2016 Bonds are qualified in their entirety by reference to the form thereof included in the aforesaid documents and agreements.

7 TABLE OF CONTENTS Page INTRODUCTORY STATEMENT... 1 THE PROJECT... 2 THE REFUNDING PLAN... 2 DESCRIPTION OF THE SERIES 2016 BONDS... 3 General... 3 Redemption Provisions... 3 Book-Entry Only System... 6 Interchangeability, Negotiability and Transfer... 8 Series 2016 Bonds Mutilated, Destroyed, Stolen or Lost... 9 SECURITY FOR THE SERIES 2016 BONDS... 9 Series 2016 Bonds Not General Obligations... 9 Pledged Funds Covenant to Budget and Appropriate Anti-Dilution Test Debt Service Fund Flow of Funds Construction Fund No Debt Service Reserve Fund Rebate Fund Investments Bond Insurer Consent to Supplemental Resolution and Direction of Remedies GENERAL INFORMATION REGARDING NON-AD VALOREM REVENUES General Taxes Intergovernmental Revenues Permits, Fees and Special Assessments Charges for Services Fines and Forfeitures Miscellaneous Revenues Legislation and Court Ruling Regarding Sales Tax and State Communication Services Tax Historical Non-Ad Valorem Revenues Other Debt of the City LIABILITIES OF THE CITY Other Post-Employment Benefits FRS Pension Plan Insurance Considerations Affecting the City Ability to be Sued, Judgments Enforceable FLORIDA CONSTITUTIONAL LIMITATIONS AND PROPERTY TAX REFORM ESTIMATED SOURCES AND USES OF FUNDS i

8 DEBT SERVICE REQUIREMENTS THE CITY RISK FACTORS MUNICIPAL BOND INSURANCE Bond Insurance Policy Build America Mutual Assurance Company MUNICIPAL BOND INSURANCE RISK FACTORS TAX MATTERS General Information Reporting and Backup Withholding Other Tax Matters Tax Treatment of Original Issue Discount Tax Treatment of Bond Premium LITIGATION COMPETITIVE SALE LEGAL MATTERS FINANCIAL ADVISOR VERIFICATION OF ARITHMETICAL COMPUTATIONS RATINGS CONTINUING DISCLOSURE FINANCIAL STATEMENTS General Implementation of GASB DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS CONTINGENT FEES ENFORCEABILITY OF REMEDIES MISCELLANEOUS CERTIFICATE CONCERNING OFFICIAL STATEMENT APPENDIX A - General Information Concerning the City APPENDIX B - City of Alachua, Florida Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2014 APPENDIX C - Form of Resolution APPENDIX D - Form of Disclosure Dissemination Agent Agreement APPENDIX E - Proposed Form of Opinion of Bond Counsel APPENDIX F - FRS Pension Plan and HIS Program Information APPENDIX G - Specimen Municipal Bond Insurance Policy ii

9 OFFICIAL STATEMENT relating to the issuance of $16,545,000 CITY OF ALACHUA, FLORIDA Capital Improvement Revenue and Revenue Refunding Bonds, SERIES 2016 INTRODUCTORY STATEMENT This Official Statement, including the cover page and Appendices, is provided by the City of Alachua, Florida (the "City"), in order to set forth certain information regarding the City, and the issuance and sale of its $16,545,000 aggregate principal amount of Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 (the "Series 2016 Bonds") authorized pursuant to Resolution No , adopted by the City Commission of the City on March 14, 2016, as supplemented by Resolution No , adopted on March 14, 2016 (collectively, the "Resolution"). The form of the Resolution is included as "APPENDIX C Form of Resolution" hereto. The Series 2016 Bonds are being issued, together with other legally available funds of the City, for the purpose of (i) financing the acquisition, construction and equipping of a Public Services Operations Center/Warehouse, (ii) financing the acquisition, construction and equipping of a multipurpose building to be built on a portion of 105 acres that is contiguous to the City's existing recreation center, known as Project Legacy Phase I (the "Project"), (iii) refunding all of the City s outstanding Capital Improvement and Refunding Revenue Bonds, Series 2006 (the "Refunded Bonds"), and (iv) paying certain expenses related to the issuance of the Series 2016 Bonds. The Series 2016 Bonds are being issued pursuant to the Constitution and laws of the State of Florida (the "State"), including particularly, Chapter 166, Part II, Florida Statutes, the City Charter (the "Charter") and other applicable provisions of law. The Series 2016 Bonds are payable from the Non-Ad Valorem Revenues budgeted and appropriated by the City for purposes of payment of the debt service on the Series 2016 Bonds in the manner and to the extent provided in the Resolution and deposited into the Debt Service Fund created under the Resolution, and until applied in accordance with the provisions of the Resolution, all moneys, including the investments thereof, in the funds and accounts established under the Resolution except the Rebate Fund (collectively, the "Pledged Funds"). "Non-Ad Valorem Revenues" means all legally available revenues of the City, other than Ad Valorem Revenues. Ad Valorem Revenues means all revenues of the City derived from the levy and collection of ad valorem taxes. The City has covenanted and agreed in the Resolution to appropriate in its annual budget, by amendment, if necessary, and deposit into the Debt Service Fund sufficient amounts of Non-Ad Valorem Revenues for the payment of principal of and interest on the Series 2016 Bonds and make all other payments required under the Resolution in each Fiscal Year. THE SERIES 2016 BONDS SHALL NOT BE OR CONSTITUTE GENERAL OBLIGATIONS OR INDEBTEDNESS OF THE CITY AS "BONDS" WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION, BUT SHALL BE SPECIAL OBLIGATIONS OF THE CITY, PAYABLE SOLELY FROM AND SECURED BY A LIEN UPON AND PLEDGE OF THE PLEDGED FUNDS. NO HOLDER OF ANY SERIES 2016 BOND SHALL EVER HAVE THE RIGHT TO COMPEL THE EXERCISE

10 OF ANY AD VALOREM TAXING POWER OR THE USE OF AD VALOREM REVENUES TO PAY SUCH SERIES 2016 BOND, FOR THE PAYMENT OF ANY AMOUNTS PAYABLE UNDER THE RESOLUTION, OR TO MAINTAIN ANY SERVICES OR PROGRAMS THAT GENERATE NON-AD VALOREM REVENUES OR BE ENTITLED TO PAYMENT OF SUCH SERIES 2016 BOND FROM ANY MONEYS OF THE CITY EXCEPT FROM THE PLEDGED FUNDS IN THE MANNER PROVIDED IN THE RESOLUTION. Concurrently with the issuance of the Series 2016 Bonds, Build America Mutual Assurance Company (the Insurer ) will issue its municipal bond insurance policy with respect to the Series 2016 Bonds (the Policy ). The Policy guarantees the scheduled payment of principal of and interest on the Series 2016 Bonds when due as set forth in the form of the Policy included as APPENDIX G hereto The City has covenanted to provide certain continuing disclosure information pursuant to Rule 15c2-12 of the Securities and Exchange Commission relating to the Series 2016 Bonds. See "CONTINUING DISCLOSURE" herein. Certain capitalized terms used in this Official Statement have the meanings assigned to such terms in the Resolution, except as otherwise indicated herein. The form of the Resolution is attached to this Official Statement as "APPENDIX C Form of Resolution". The descriptions of the Series 2016 Bonds, the documents authorizing and securing the same, and the information from various reports and statements contained herein are not comprehensive or definitive. All references herein to such documents, reports and statements are qualified by the entire, actual content of such documents, reports and statements. Copies of such documents, reports and statements referred to herein that are not included in their entirety in this Official Statement may be obtained from the City. THE PROJECT The Project consists of the acquisition, construction and equipping of a Public Services Operations Center/Warehouse and a multi-purpose building to be built on a portion of 105 acres that is contiguous to the City's existing recreation center, known as Project Legacy Phase I. THE REFUNDING PLAN The City has determined that it can achieve present value savings in debt service payments by providing for payment of the Refunded Bonds. Provision for payment will be accomplished through the issuance of the Series 2016 Bonds and the use of a portion of the proceeds thereof, together with other legally available funds of the City, to refund the Refunded Bonds. The Refunded Bonds will be redeemed prior to maturity, at a redemption price of one hundred percent (100%) of the principal amount thereof, plus accrued interest to the redemption date. Upon delivery of the Series 2016 Bonds, The Bank of New York Mellon Trust Company, as escrow agent (the "Escrow Agent"), will enter into an Escrow Deposit Agreement (the "Escrow Agreement") with the City to provide for the refunding of the Refunded Bonds. The Escrow Agreement will create an irrevocable escrow account (the "Escrow Account") which will be held by the Escrow Agent. The money held in the Escrow Account is to be applied to the payment of principal of and interest on the Refunded Bonds, as the same become due upon redemption prior to maturity. Immediately upon the issuance and delivery of the Series 2016 Bonds, the City will deposit a 2

11 portion of the proceeds from the sale of the Series 2016 Bonds into the Escrow Account, together with any legally available funds provided by the City for that purpose. Such amounts will be held in cash and (i) will be sufficient to pay the principal of and interest on the Refunded Bonds on their redemption date according to the schedules prepared by Public Financial Management, Inc. (the "Financial Advisor") and verified by Robert Thomas, CPA (the "Verification Agent"), (ii) will be pledged solely for the benefit of the holders of the Refunded Bonds, and (iii) will not be available for payment of debt service on the Series 2016 Bonds. See "VERIFICATION OF ARITHMETICAL COMPUTATIONS" herein. In reliance upon the above-referenced schedules, at the time of delivery of the Series 2016 Bonds, Bond Counsel will deliver to the City an opinion to the effect that the pledge of and lien on pledged revenues in favor of the holders of the Refunded Bonds under the resolution pursuant to which such Refunded Bonds were issued is no longer in effect. General DESCRIPTION OF THE SERIES 2016 BONDS The Series 2016 Bonds are issuable only in the form of fully registered bonds in denominations of $5,000 principal amount or any integral multiple thereof. The Series 2016 Bonds will be dated their date of delivery and will bear interest at the rates and will mature on the dates and in the amounts set forth on the inside cover page of this Official Statement. Interest on the Series 2016 Bonds is payable semiannually on the first day of October and April commencing on October 1, 2016 (each, an "Interest Date"). Interest on the Series 2016 Bonds shall be calculated based upon a 360-day year consisting of 12, 30 day months. Principal of and interest on the Series 2016 Bonds will be payable in the manner described under "Book-Entry Only System" herein. The Bank of New York Mellon Trust Company, Jacksonville, Florida, will act as Paying Agent and Registrar for the Series 2016 Bonds (the "Paying Agent" or "Registrar"). Redemption Provisions Optional Redemption. The Series 2016 Bonds maturing on or before October 1, 2025 are not subject to redemption prior to their maturity. The Series 2016 Bonds maturing after October 1, 2025, shall be subject to redemption prior to their stated dates of maturity at the option of the City in whole or in part, from such maturities selected by the City (and by lot within a maturity if less than a full maturity) on October 1, 2025, or any date thereafter, at a redemption price equal to 100% of the principal amount thereof to be redeemed together with accrued interest to the date fixed for redemption and without premium. [Remainder of page intentionally left blank] 3

12 Mandatory Redemption. The 2016 Bonds maturing on October 1, 2040 are subject to mandatory redemption in part at a redemption price equal to 100% of the principal amount thereof plus accrued interest thereon without premium from Amortization Installments on the dates and in the principal amounts set forth below: Redemption Dates (October 1) Principal Amounts 2036 $375, , , , * 425,000 *Final Maturity The 2016 Bonds maturing on October 1, 2046 are subject to mandatory redemption in part at a redemption price equal to 100% of the principal amount thereof plus accrued interest thereon without premium from Amortization Installments on the dates and in the principal amounts set forth below: Redemption Dates (October 1) Principal Amounts 2041 $435, , , , , * 520,000 *Final Maturity Selection of Series 2016 Bonds to be Redeemed. The Series 2016 Bonds shall be redeemed only in the principal amount of $5,000 each and integral multiples thereof. The City shall, at least 60 days prior to the redemption date (unless a shorter time period shall be satisfactory to the Registrar) notify the Registrar of such redemption date and of the principal amount of Series 2016 Bonds to be redeemed. For purposes of any redemption of less than all of the Outstanding Series 2016 Bonds of a single maturity, the particular Series 2016 Bonds or portions of Series 2016 Bonds to be redeemed shall be selected not more than 45 days prior to the redemption date by the Registrar from the Outstanding Series 2016 Bonds of the maturity or maturities designated by the City by such method as the Registrar shall deem fair and appropriate and which may provide for the selection for redemption of Series 2016 Bonds or portions of Series 2016 Bonds in principal amounts of $5,000 and integral multiples thereof. If less than all of the Outstanding Series 2016 Bonds of a single maturity are to be redeemed, the Registrar shall promptly notify the City and Paying Agent (if the Registrar is not the Paying Agent for such Bonds) in writing of the Series 2016 Bonds or portions of Series 2016 Bonds selected for redemption and, in the case of any Series 2016 Bond selected for partial redemption, the principal amount thereof to be redeemed. Notice of Redemption. Unless waived by any Holder of Series 2016 Bonds to be redeemed, notice of any redemption shall be given by the Registrar on behalf of the City by mailing a copy of an official redemption notice by registered or certified mail at least thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption to each Holder of Series 2016 Bonds to be redeemed at the 4

13 address of such Holder shown on the registration books maintained by the Registrar or at such other address as shall be furnished in writing by such Holder to the Registrar; provided, however, that no defect in any notice given as described in this paragraph to any Holder of Series 2016 Bonds to be redeemed nor failure to give such notice shall in any manner defeat the effectiveness of a call for redemption as to all other Owners of Series 2016 Bonds to be redeemed. Every official notice of redemption shall be dated and shall state: (1) the redemption date, (2) the Redemption Price, (3) if less than all Outstanding Series 2016 Bonds are to be redeemed, the number (and, in the case of a partial redemption of any Series 2016 Bond, the principal amount) of each Series 2016 Bond to be redeemed, (4) any conditions to such redemption and, if applicable, a statement to the effect that such notice is subject to rescission by the City, (5) that, on the redemption date, subject to the satisfaction of any conditions to such redemption set forth in the notice of redemption, the Redemption Price will become due and payable upon each such Series 2016 Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (6) that such Series 2016 Bonds to be redeemed, whether as a whole or in part, are to be surrendered for payment of the Redemption Price at the designated office of the Registrar. A notice of redemption may be contingent upon the occurrence of certain conditions and if such conditions do not occur, the notice will be deemed rescinded and of no force or effect. A notice of redemption may also be subject to rescission in the discretion of the City; provided that such notice of such rescission shall be mailed to all affected Owners no later than three (3) Business Days prior to the date of redemption. Redemption of Portions of Series 2016 Bonds. Any Series 2016 Bond which is to be redeemed only in part shall be surrendered at any place of payment specified in the notice of redemption (with due endorsement by, or written instrument of transfer in form satisfactory to, the Registrar duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the City shall execute and the Registrar shall authenticate and deliver to the Holder of such Series 2016 Bond, without service charge, a new Series 2016 Bond or Bonds, of the same interest rate and maturity, and of any authorized denomination, as requested by such Holder in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Series 2016 Bonds so surrendered. Payment of Redeemed Series 2016 Bonds. Notice of redemption having been given substantially as aforesaid, the Series 2016 Bonds or portions of Series 2016 Bonds so to be redeemed shall, subject to any conditions to such redemption set forth in the notice of redemption, on the redemption date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the City shall default in the payment of the Redemption Price) such Series 2016 Bonds or portions of Series 2016 Bonds shall cease to bear interest. Upon surrender of such Series 2016 Bonds for redemption in accordance with said notice, such Series 2016 Bonds shall be paid by the Registrar and/or Paying Agent at the appropriate Redemption Price, plus accrued interest. All Series 2016 Bonds which have been redeemed shall be cancelled by the Registrar and shall not be reissued. 5

14 Book-Entry Only System THE FOLLOWING INFORMATION CONCERNING DTC AND DTC'S BOOK-ENTRY ONLY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE CITY BELIEVES TO BE RELIABLE, BUT THE CITY TAKES NO RESPONSIBILITY FOR THE ACCURACY THEREOF. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE SERIES 2016 BONDS, AS NOMINEE OF DTC, CERTAIN REFERENCES IN THIS OFFICIAL STATEMENT TO THE SERIES 2016 BONDHOLDERS OR REGISTERED OWNERS OF THE SERIES 2016 BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE SERIES 2016 BONDS. THE DESCRIPTION WHICH FOLLOWS OF THE PROCEDURES AND RECORD KEEPING WITH RESPECT TO BENEFICIAL OWNERSHIP INTERESTS IN THE SERIES 2016 BONDS, PAYMENT OF INTEREST AND PRINCIPAL ON THE SERIES 2016 BONDS TO DIRECT PARTICIPANTS (AS HEREINAFTER DEFINED) OR BENEFICIAL OWNERS OF THE SERIES 2016 BONDS, CONFIRMATION AND TRANSFER OF BENEFICIAL OWNERSHIP INTERESTS IN THE SERIES 2016 BONDS, AND OTHER RELATED TRANSACTIONS BY AND BETWEEN DTC, THE DIRECT PARTICIPANTS AND BENEFICIAL OWNERS OF THE SERIES 2016 BONDS IS BASED SOLELY ON INFORMATION FURNISHED BY DTC. ACCORDINGLY, THE CITY NEITHER MAKES NOR CAN MAKE ANY REPRESENTATIONS CONCERNING THESE MATTERS. DTC will act as securities depository for the Series 2016 Bonds. The Series 2016 Bonds 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 Series 2016 Bond certificate will be issued for each maturity of the Series 2016 Bonds as set forth in the inside cover of this Official Statement, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Direct Participants and the Indirect Participants are collectively referred to herein as the "DTC Participants." DTC has a Standard & Poor's Ratings Services ("S&P") rating of AA+. The DTC Rules applicable to its DTC Participants are on file with the SEC. More information about DTC can be found at 6

15 Purchases of Series 2016 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2016 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2016 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2016 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2016 Bonds, except in the event that use of the book-entry system for the Series 2016 Bonds is discontinued. To facilitate subsequent transfers, all Series 2016 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Series 2016 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2016 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2016 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2016 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2016 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Series 2016 Bonds may wish to ascertain that the nominee holding the Series 2016 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Series 2016 Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2016 Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Series 2016 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Series 2016 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Paying Agent on the payment date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by 7

16 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 nor its nominee, the Paying Agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest on the Series 2016 Bonds, as applicable, to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the 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 Series 2016 Bonds at any time by giving reasonable notice to the City or paying agent. Under such circumstances, in the event that a successor depository is not obtained, the Series 2016 Bond certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, the Series 2016 Bond certificates will be printed and delivered to DTC. Interchangeability, Negotiability and Transfer So long as the Series 2016 Bonds are registered in the name of DTC or its nominee, the following paragraphs relating to registration, transfer and exchange of Series 2016 Bonds do not apply to the Series 2016 Bonds. Series 2016 Bonds, upon surrender thereof at the office of the Registrar with a written instrument of transfer satisfactory to the Registrar, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing, may, at the option of the Holder thereof, be exchanged for an equal aggregate principal amount of registered Series 2016 Bonds of the same maturity of any other authorized denominations. The Series 2016 Bonds issued under the Resolution shall be and have all the qualities and incidents of negotiable instruments under the commercial laws and the Uniform Commercial Code of the State, subject to the provisions for registration and transfer contained in the Resolution and in the Series 2016 Bonds. So long as any of the Series 2016 Bonds shall remain Outstanding, the City shall maintain and keep, at the office of the Registrar, books for the registration and transfer of the Series 2016 Bonds. Each Series 2016 Bond shall be transferable only upon the books of the City, at the office of the Registrar, under such reasonable regulations as the City may prescribe, by the Holder thereof in person or by such Holder's attorney duly authorized in writing upon surrender thereof together with a written instrument of transfer satisfactory to the Registrar duly executed and guaranteed by the Holder or such Holder's duly authorized attorney. Upon the transfer of any such Series 2016 Bond, the City shall issue, and cause to be authenticated, in the name of the transferee a new Series 2016 Bond or Bonds of the same aggregate principal amount and maturity as the surrendered Series 2016 Bond. The City, the Registrar and any Paying Agent or fiduciary of the City may deem and treat the Person in whose name any Outstanding Series 2016 Bond shall be registered upon the books of the City as the absolute owner of such Series 2016 Bond, whether such Series 2016 Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal or Redemption Price, if applicable, and interest on such Series 2016 Bond and for all other purposes, and all such payments so made to any such Holder or upon such Holder's order shall be valid and effectual to satisfy and discharge the liability upon such 8

17 Series 2016 Bond to the extent of the sum or sums so paid and neither the City nor the Registrar nor any Paying Agent or other fiduciary of the City shall be affected by any notice to the contrary. The Registrar, in any case where it is not also the Paying Agent in respect to the Series 2016 Bonds, forthwith (A) following the fifteenth (15th) day prior to an Interest Date; (B) following the fifteenth (15th) day next preceding the date of first mailing of notice of redemption of any Series 2016 Bonds; and (C) at any other time as reasonably requested by the Paying Agent, shall certify and furnish to such Paying Agent the names, addresses and holdings of Bondholders and any other relevant information reflected in the registration books. Any Paying Agent of any fully registered Series 2016 Bond shall effect payment of interest on such Series 2016 Bonds by mailing a check or draft to the Holder entitled thereto or may, in lieu thereof, upon the request and at the expense of such Holder, transmit such payment by bank wire transfer for the account of such Holder. In all cases in which the privilege of exchanging Series 2016 Bonds or transferring Series 2016 Bonds is exercised, the City shall execute Series 2016 Bonds and the Registrar shall authenticate and deliver such Series 2016 Bonds in accordance with the provisions of the Resolution. Execution of Series 2016 Bonds for purposes of exchanging, replacing or transferring Series 2016 Bonds may occur at the time of the original delivery of the Series 2016 Bonds. All Series 2016 Bonds surrendered in any such exchanges or transfers shall be held by the Registrar in safekeeping until directed by the City to be cancelled by the Registrar. For every such exchange or transfer of Series 2016 Bonds, the City or the Registrar may make a charge sufficient to reimburse it for any tax, fee, expense or other governmental charge required to be paid with respect to such exchange or transfer. The City and the Registrar shall not be obligated to make any such exchange or transfer of Series 2016 Bonds during the 15 days next preceding an Interest Date on the Series 2016 Bonds, or, in the case of any proposed redemption of Series 2016 Bonds, then, for the Series 2016 Bonds subject to redemption, during the 15 days next preceding the date of the first mailing of notice of such redemption and continuing until such redemption date. Series 2016 Bonds Mutilated, Destroyed, Stolen or Lost In case any Series 2016 Bond shall become mutilated, or be destroyed, stolen or lost, the City may, in its discretion, issue and deliver, and the Registrar shall authenticate, a new Series 2016 Bond of like tenor as the Series 2016 Bond so mutilated, destroyed, stolen or lost, in exchange and substitution for such mutilated Series 2016 Bond upon surrender and cancellation of such mutilated Series 2016 Bond or in lieu of and substitution for the Series 2016 Bond destroyed, stolen or lost, and upon the Holder furnishing the City and the Registrar proof of such Holder's ownership thereof and satisfactory indemnity and complying with such other reasonable regulations and conditions as the City or the Registrar may prescribe and paying such expenses as the City and the Registrar may incur. All Series 2016 Bonds so surrendered or otherwise substituted shall be cancelled by the Registrar. If any of the Series 2016 Bonds shall have matured or be about to mature, instead of issuing a substitute Series 2016 Bond, the City may pay the same or cause the Series 2016 Bond to be paid, upon being indemnified as aforesaid, and if such Series 2016 Bonds be lost, stolen or destroyed, without surrender thereof. Series 2016 Bonds Not General Obligations SECURITY FOR THE SERIES 2016 BONDS THE SERIES 2016 BONDS SHALL NOT BE OR CONSTITUTE GENERAL OBLIGATIONS OR INDEBTEDNESS OF THE CITY AS "BONDS" WITHIN THE MEANING OF ANY CONSTITUTIONAL 9

18 OR STATUTORY PROVISION, BUT SHALL BE SPECIAL OBLIGATIONS OF THE CITY, PAYABLE SOLELY FROM AND SECURED BY A LIEN UPON AND PLEDGE OF THE PLEDGED FUNDS. NO HOLDER OF ANY SERIES 2016 BOND SHALL EVER HAVE THE RIGHT TO COMPEL THE EXERCISE OF ANY AD VALOREM TAXING POWER OR THE USE OF AD VALOREM REVENUES TO PAY SUCH SERIES 2016 BOND, FOR THE PAYMENT OF ANY AMOUNTS PAYABLE UNDER THE RESOLUTION, OR IN ORDER TO MAINTAIN ANY SERVICES OR PROGRAMS THAT GENERATE NON-AD VALOREM REVENUES OR BE ENTITLED TO PAYMENT OF SUCH SERIES 2016 BOND FROM ANY MONEYS OF THE CITY EXCEPT FROM THE PLEDGED FUNDS IN THE MANNER PROVIDED IN THE RESOLUTION. Pledged Funds The Series 2016 Bonds are payable from the Pledged Funds, which include Non-Ad Valorem Revenues budgeted and appropriated by the City and deposited into the Debt Service Fund and moneys in the funds and accounts held under the Resolution, except the Rebate Fund. Covenant to Budget and Appropriate The City has covenanted and agreed in the Resolution to appropriate in its annual budget, by amendment if necessary, for each Fiscal Year in which the Series 2016 Bonds remain Outstanding, and deposit into the Debt Service Fund, sufficient amounts of Non-Ad Valorem Revenues for the payment of principal of and interest on the Series 2016 Bonds and to make all other payments required under the Resolution in each such Fiscal Year. Such covenant and agreement on the part of the City are cumulative and shall continue and carry over from Fiscal Year to Fiscal Year until all payments of principal of and interest on the Series 2016 Bonds shall have been budgeted, appropriated, deposited and actually paid. The City has agreed that such covenant and agreement is deemed to be entered into for the benefit of the Holders of the Series 2016 Bonds and the Bond Insurer, if any, and may be enforced in a court of competent jurisdiction. Notwithstanding the foregoing or any provision of the Resolution to the contrary, the City has not covenanted to maintain any services or programs now maintained or provided by the City, including those programs and services which generate Non-Ad Valorem Revenues. Other than as provided in the anti-dilution test in the Resolution, as described below under "- Anti-Dilution Test," such covenant and agreement is not to be construed as a limitation on the ability of the City to pledge all or a portion of such Non-Ad Valorem Revenues or to covenant to budget and appropriate Non-Ad Valorem Revenues for other legally permissible purposes. Nothing herein shall be deemed to pledge Ad Valorem Revenues or to permit or constitute a mortgage or lien upon any assets owned by the City and no Holder of Series 2016 Bonds or other Person may compel the levy of ad valorem taxes on real or personal property within the boundaries of the City for the payment of the City's obligations hereunder. However, the covenant to budget and appropriate in its annual budget for the purposes and in the manner stated in the Resolution has the effect of making available for the payment of the Series 2016 Bonds the Non-Ad Valorem Revenues of the City in the manner provided in the Resolution and placing on the City a positive duty to appropriate and budget, by amendment if necessary, amounts sufficient to meet its obligations under the Resolution; subject, however, in all respects to the restrictions of Section , Florida Statutes, insofar as there are not sufficient Non-Ad Valorem Revenues to comply with such covenant after the satisfaction of the funding requirements for obligations having an express lien on or pledge of such revenues and the funding requirements for essential governmental services of the City. The obligation of the City to make such payments from its Non-Ad Valorem Revenues is subject in all 10

19 respects to the payment of obligations secured by a pledge of such Non-Ad Valorem Revenues and funding requirements for essential public purposes affecting the health, welfare and safety of the inhabitants of the City. The City has previously and, subject to the anti-dilution test in the Resolution described below under "- Anti-Dilution Test," may hereafter provide a covenant to budget and appropriate Non-Ad Valorem Revenues or pledge all or a portion of such Non-Ad Valorem Revenues to provide for the payment of obligations (including debt obligations) incurred by the City. No priority of payment among such obligations is established by the provision of a covenant to budget and appropriate Non-Ad Valorem Revenues for the payment thereof. Such covenant to budget and appropriate does not create any lien upon or pledge of such Non- Ad Valorem Revenues until such funds are deposited in the Debt Service Fund, nor, subject to satisfaction of the anti-dilution test in the Resolution described below under "- Anti-Dilution Test," does it preclude the City from pledging in the future or covenanting to budget and appropriate in the future its Non-Ad Valorem Revenues, nor does it require the City to levy and collect any particular Non-Ad Valorem Revenues, nor does it give the Holders of the Series 2016 Bonds a prior claim on the Non-Ad Valorem Revenues as opposed to claims of general creditors of the City. The payment of the debt service of all of the Series 2016 Bonds shall be secured forthwith equally and ratably by a pledge of and a lien upon the Pledged Funds, as now or hereafter constituted. The City does hereby irrevocably pledge such Pledged Funds to the payment of the principal of and interest on the Series 2016 Bonds issued pursuant to the Resolution, and the City does hereby irrevocably agree to the deposit of Non-Ad Valorem Revenues into the Debt Service Fund at the times provided of the sums required to make payments required under the Resolution, and the payment of the principal of and interest thereon when due. The Pledged Funds shall immediately be subject to the lien of the pledge under the Resolution without any physical delivery thereof or further act, and the lien of such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the City. Anti-Dilution Test The City may incur additional debt secured by all or a portion of the Non-Ad Valorem Revenues only if the total amount of Non-Ad Valorem Revenues for the prior Fiscal Year were at least 3.50 times the maximum annual debt service of all debt (including all long-term financial obligations appearing on the City's most recent audited financial statements and the debt proposed to be incurred) to be paid from Non-Ad Valorem Revenues other than debt exclusively paid from electric, water and sewer revenues (collectively, "Debt"), including any Debt payable from one or several specific revenue sources. For purposes of calculating maximum annual debt service if the terms of the Debt are such that interest thereon for any future period of time is to be calculated at a rate which is not then susceptible of precise determination ("Variable Rate Debt"), interest on such Variable Rate Debt shall be computed as follows: (a) if the principal amount of Variable Rate Debt (including any Variable Rate Debt proposed to be incurred) is less than or equal to 25% of the principal amount of all Debt (including the Debt proposed to be incurred), an interest rate equal to the higher of 12% per annum or The Bond Buyer 40 Index shall be assumed; or (b) if the principal amount of Variable Rate Debt (including any Variable Rate Debt proposed to be incurred) is more than 25% of the principal amount of all Debt (including the Debt proposed to be incurred), the maximum rate which could be borne by such Variable Rate Debt shall be assumed. 11

20 For purposes of calculating maximum annual debt service, balloon indebtedness shall be assumed to amortize in up to 20 years on a level debt service basis. In the event that the City is required to fund a reserve fund, the funding of such reserve fund shall be included in the calculation of debt service. For purposes of this paragraph, "balloon indebtedness" includes indebtedness if 25% or more of the principal amount thereof comes due in any one year. Debt Service Fund The City has covenanted and agreed to establish a separate fund to be known as the "City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 Debt Service Fund" (the "Debt Service Fund"). The City shall maintain in the Debt Service Fund three accounts: the "Interest Account," the "Principal Account," and the "Bond Amortization Account." Moneys in the aforementioned funds and accounts, until applied in accordance with the provisions of the Resolution, shall be subject to a lien and charge in favor of the Holders and for the further security of the Holders. Flow of Funds Non-Ad Valorem Revenues appropriated for such purpose shall be deposited or credited at least one (1) Business Day prior to the applicable due date, in the following manner: (a) Interest Account. The City shall deposit into or credit to the Interest Account the sum which, together with the balance in said Account, shall be equal to the interest on the Series 2016 Bonds accrued and unpaid and to accrue on such Interest Date. Moneys in the Interest Account shall be used to pay interest on the Series 2016 Bonds as and when the same become due, whether by redemption or otherwise, and for no other purpose. (b) Principal Account. The City shall deposit into or credit to the Principal Account the sum which, together with the balance in said Account, shall equal the portion of the principal on the Series 2016 Bonds next due. Moneys in the Principal Account shall be used to pay the principal of the Series 2016 Bonds as and when the same shall mature, and for no other purpose. (c) Bond Amortization Account. The City shall deposit into or credit to the Bond Amortization Account the sums which, together with the balance in said Account, shall equal the portion of the Amortization Installments of the Series 2016 Bonds next due. Moneys in the Bond Amortization Account shall be used to purchase or redeem Term Bonds in the manner herein provided, and for no other purpose. Payments to the Bond Amortization Account shall be on a parity with payments to the Principal Account. On the date established for payment of any principal of or Redemption Price, if applicable, or interest on the Series 2016 Bonds, the City shall withdraw from the appropriate account of the Debt Service Fund sufficient moneys to pay such principal or Redemption Price, if applicable, or interest and deposit such moneys with the Paying Agent for the Series 2016 Bonds to be paid. Construction Fund The City has covenanted and agreed in the Resolution to establish a separate fund to be known as the "City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 12

21 2016 Construction Fund," which shall be used only for payment of the Costs of the Project, including reimbursing the City for certain expenditures previously made for Costs of the Project, if any. Moneys in the Construction Fund, until applied in payment of any item of the Cost of the Project in the manner provided in the Resolution, are required to be held in trust by the City, and are subject to a lien and charge in favor of the Holders of the Series 2016 Bonds and for the further security of such Holders. The proceeds of insurance maintained against physical loss of or damage to the Project, or the contractors' performance bonds with respect thereto pertaining to the period of construction thereof, are required to be deposited into the Construction Fund. The City has covenanted that the acquisition, construction and installation of the Project will be completed without delay and in accordance with sound engineering practices. The City is required to make disbursements or payments from the Construction Fund to pay the Costs of the Project, to keep adequate records of such disbursements and payments and to retain all of such records for at least three years from their dates. Notwithstanding any of the other provisions in this heading, to the extent that other moneys are not available therefor, amounts in the Construction Fund must be applied to the payment of principal and interest on the Series 2016 Bonds, when due. The date of completion of acquisition and construction of the Project shall be determined by an Authorized Issuer Officer who shall certify such fact in writing. Promptly after the date of the completion of the Project, and after paying or making provisions for the payment of all unpaid items of the Costs of the Project, the City is required to apply such monies to the payment of interest on the Series 2016 Bonds or, upon receipt of an opinion of Bond Counsel, the City may use any such balance for any lawful purpose. No Debt Service Reserve Fund Rebate Fund The Series 2016 Bonds are not secured by a debt service reserve fund. The City has created and established pursuant to the Resolution a special fund to be known as the "City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 Rebate Fund." Moneys in the Rebate Fund are not subject to a lien and charge in favor of the Holders of the Series 2016 Bonds. Investments Moneys on deposit in the Debt Service Fund and the Construction Fund shall be continuously secured in the manner by which the deposit of public funds are authorized to be secured by the laws of the State. Moneys on deposit in the Debt Service Fund and the Construction Fund may be invested and reinvested in Permitted Investments, maturing not later than the date on which the moneys therein will be needed. Any and all income received from the investment of moneys in the Debt Service Fund (and the Interest Account, the Principal Account and the Bond Amortization Account thereof) and the Construction Fund shall be retained in such respective Fund or in the respective accounts therein unless otherwise required by applicable law. Permitted Investments shall be valued at cost. 13

22 Nothing contained in the Resolution prevents any Permitted Investments acquired as investments of or security for funds held under the Resolution from being issued or held in book-entry form on the books of the Department of the Treasury of the United States. Bond Insurer Consent to Supplemental Resolution and Direction of Remedies If the Insurer is not then in default in the performance of any of its obligations under the Policy, the approvals, consents and notifications required by Section 7.02 of the Resolution to be given by or to the Owners of the Series 2016 Bonds, as the case may be, may be given solely by or to the Insurer, as the case may be, and the instrument contemplated thereby shall be executed solely by the Insurer, and the Owners of the Series 2016 Bonds subject to such Policy shall have no right to receive such notification or give such approvals and consents or to execute such certificate except that the adoption of Supplemental Resolutions that permit or require (A) an extension of the maturity of the principal of or the payment of the interest on any Series 2016 Bond issued under the Resolution, (B) reduction in the principal amount of any Series 2016 Bond or the Redemption Price or the rate of interest thereon, (C) the creation of a lien upon or a pledge of other than the lien and pledge created by the Resolution which adversely affects any Bondholders, (D) a preference or priority of any Series 2016 Bond or Series 2016 Bonds over any other Series 2016 Bond or Series 2016 Bonds, or (E) a reduction in the aggregate principal amount of the Series 2016 Bonds required for consent to such Supplemental Resolution, unless such Supplemental Resolution has the approval of one hundred percent (100%) of the Bondholders and the Insurer. So long as the Series 2016 Bonds are Outstanding and insured by the Insurer, the Insurer, acting alone, shall have the right to direct all remedies in the event of a default. General GENERAL INFORMATION REGARDING NON-AD VALOREM REVENUES The City generally receives two primary sources of revenue: ad valorem taxes and non-ad valorem revenues. Ad valorem taxes may not be pledged for the payment of debt obligations of the City maturing more than twelve months from the date of issuance thereof without approval of the electorate of the City. Non-Ad Valorem Revenues include several major categories described below. The Ad Valorem Revenues of the City are not pledged as security for the payment of the Series 2016 Bonds. As more fully described herein under "SECURITY FOR THE SERIES 2016 BONDS," the City has covenanted and agreed in the Resolution, subject to certain restrictions and limitations, to budget and appropriate sufficient Non-Ad Valorem Revenues in each Fiscal Year to pay debt service on the Series 2016 Bonds. The term "Non-Ad Valorem Revenues" does not include all non-ad valorem revenues of the City, but instead includes only those which are legally available to make the payments required under the Resolution, which analysis is based upon the components of the Project and the capital projects financed or refinanced with proceeds of the Refunded Bonds. As described herein under "SECURITY FOR THE SERIES 2016 BONDS," the obligation of the City to budget and appropriate Non-Ad Valorem Revenues is subject to a variety of factors, including the payment of essential governmental services of the City and the obligation of the City to have a balanced budget. See "SECURITY FOR THE SERIES 2016 BONDS Covenant to Budget and Appropriate" herein and "APPENDIX C Form of Resolution" attached hereto for the full definition of "Non-Ad Valorem Revenues". 14

23 The Holders of the Series 2016 Bonds do not have a lien on any specific Non-Ad Valorem Revenues of the City and the City currently has, and may have in the future, outstanding certain other debt obligations payable from a prior lien upon and pledge of certain of the Non-Ad Valorem Revenues of the City. In addition, the City currently has, and may have in the future, certain other debt obligations payable in the same manner as the Series 2016 Bonds. See " Other Debt of the City" and " Historical Non-Ad Valorem Revenues" below. A large percentage of the revenues of the City (other than enterprise fund revenues), including ad valorem taxes and non-ad valorem revenues, are deposited in the General Fund. The General Fund is the general operating fund of the City. It accounts for all financial resources except for those required to be accounted for in another fund. The largest source of revenue in the General Fund is ad valorem taxation (ad valorem taxes are not legally available to pay debt service on the Series 2016 Bonds). Revenues deposited in the General Fund do not directly correspond to the Non-Ad Valorem Revenues from which debt service on the Series 2016 Bonds is payable as some General Fund revenues are not legally available to pay debt service on the Series 2016 Bonds. Although the Series 2016 Bonds are not payable from ad valorem taxation, approximately 58% of General Fund revenues which are collected by the City came from ad valorem taxes in Fiscal Year ended To the extent that the future collection of ad valorem taxes or Non-Ad Valorem Revenues is adversely affected, a larger portion of Non-Ad Valorem Revenues would be required to balance the budget and provide for the payment of services and programs which are for essential public purposes affecting the health, safety and welfare of the inhabitants of the City or which are mandated by applicable law. The Florida Department of Financial Services has developed, as part of the Uniform Accounting System Manual's Chart of Accounts, six major categories of local government revenues: taxes, intergovernmental revenues, permits, fees and special assessments, charges for services, fines and forfeitures, and miscellaneous revenues. Using that organization, the major sources of the City's Non- Ad Valorem Revenues are described below. Taxes Utility Tax. The "Utility Tax" (also commonly referred to as the "Public Service Tax") is imposed by the City pursuant to the Constitution of the State, Section , Florida Statutes, the Utility Tax Ordinance (hereinafter defined) and other applicable provisions of law. Florida law authorizes any municipality in the State to levy a public service tax on the purchase within such municipality of electricity, metered natural gas, liquefied petroleum gas either metered or bottled, manufactured gas either metered or bottled, and water service. Pursuant to Ordinance No enacted by the City on November 18, 1975, as amended (the "Utility Tax Ordinance"), codified in Chapter 34, Article III of the City Code of Ordinances (the "City Code"), the City levies a public service tax on the purchase of electricity, metered or bottled gas (natural, liquefied petroleum gas, or manufactured), water service and fuel oil, at a rate of ten percent (10%) of the charge made by the seller of such service or commodity. This tax is required to be paid by the purchaser thereof to the seller at the time of paying the charge therefor, but not less than monthly. Fuel oil is taxed at a rate not to exceed 4 cents (.04) per gallon. Florida law provides that a municipality may exempt from the public service tax the first 500 kilowatts of electricity per month purchased for residential use. The City has not exempted the first 500 kilowatt hours of electricity purchased for residential use. Pursuant to the Utility Tax Ordinance, the City has exempted purchases by the United States of America, the State, all political subdivisions, agencies, boards, commissions and instrumentalities thereof and purchases by any State recognized 15

24 church. In addition, the Utility Tax is not applied against any fuel adjustment charge. The term "fuel adjustment charge" means all increases in the cost of utility services to the ultimate consumer resulting from an increase in the cost of fuel to the utility subsequent to October 1, The amount of Utility Tax collected by the City may fluctuate as the price of electricity fluctuates and a sustained increase in the price thereof may have an adverse effect on the amount of revenues collected from the Utility Tax. Business Tax. The City is authorized to levy and collect a business tax (also commonly referred to as the Occupational License Tax) for the privilege of engaging in or managing any business, profession or occupation within the jurisdiction of the City pursuant to Section , Florida Statutes, and Ordinance No , enacted by the City on October 19, 2009, as amended, codified in Chapter 10, Article II of the City Code (the "Business Tax Ordinance"). Each person engaged in a business, occupation or profession within the City is required to obtain an occupational license on an annual basis on or prior to September 30 of, each year. Fees charged to those obtaining a business license vary by occupation as set forth in the Business Tax Ordinance. After September 30, any unpaid license is delinquent and a delinquency penalty accrues, commencing October 1. The penalty is 10% for the month of October, plus an additional 5% per month thereafter, up to a maximum penalty of 25% of the total tax due. Communications Services Tax. Pursuant to Chapter 202, Florida Statutes (the "Communications Services Tax Act"), counties and municipalities may levy a discretionary communications services tax (the "Local CST") on "Communications Services". The rate set can be adjusted for cities, such as the City, that do not levy a permit fee to service providers. The City levies the Local CST pursuant to Chapter 34, Article II of the City Code. The current rate is 5.22%. Communication Services are defined in the Communications Services Tax Act as the transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals, including video services, to a point, or between or among points, by or through any electronic, radio, satellite, cable, optical, microwave, or other medium or method now in existence or hereafter devised, regardless of the protocol used for such transmission or conveyance. The term includes such transmission, conveyance or routing in which computer processing applications are used to act on the form, code or protocol of the content for purposes of transmission, conveyance or routing without regard to whether such service is referred to as voice-over-internet-protocol ("VoIP") services or is classified by the Federal Communications Commission as enhanced or value-added. The term does not include, (a) information services, (b) installation or maintenance of wiring or equipment on a customer's premises, (c) the sale or rental of tangible personal property, (d) the sale of advertising, including, but not limited to, directory advertising, (e) bad check charges, (f) late payment charges, (g) billing and collection services, and (h) internet access service, electronic mail service, electronic bulletin board service, or similar on-line computer services. The sale of Communications Services to (i) the federal government, or any instrumentality or agency thereof, or any entity that is exempt from State taxes under federal law, (ii) the State or any county, municipality or political subdivision of the State when payment is made directly to the dealer by the governmental entity, and (iii) any home for the aged or educational institution (which includes state tax-supported and nonprofit private schools, colleges and universities and nonprofit libraries, art galleries and museums, among others) or religious institutions (which includes, but is not limited to, organizations having an established physical place for worship at which nonprofit religious services and 16

25 activities are regularly conducted) that is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), are exempt from the Local CST. In addition, the Local CST does not apply to any direct home satellite service. Under the Communications Services Tax Act, local governments must work with the Florida Department of Revenue (the "FDOR") to properly identify service addresses in each municipality and county. If a jurisdiction fails to provide the FDOR with accurate service address information, the local government risks losing tax proceeds that it should properly receive. The City believes it has provided the FDOR with all information that the FDOR has requested as of the date hereof and that such information is accurate. Providers of Communications Services collect the Local CST and may deduct 0.75% as a collection fee (or 0.25% in the case of providers who do not employ an enhanced zip code data base or a data base that is either supplied or certified by the FDOR). The communications services providers remit the remaining proceeds to the FDOR for deposit into the Local Communications Services Tax Clearing Trust Fund (the "CST Trust Fund") and the FDOR then makes monthly contributions from the CST Trust Fund to the appropriate local governments after deducting up to 1% of the total revenues generated as an administrative fee. The Communications Services Tax Act provides that, to the extent that a provider of Communications Services is required to pay to another state or a local taxing jurisdiction a tax, charge, or other fee under any franchise agreement or ordinance with respect to the services or revenues that are also subject to the Local CST, such provider is entitled to a credit against the amount of such Local CST payable to the State in the amount of such tax, charge, or fee with respect to such service or revenues. The amount of such credit is deducted from the amount that such state or local taxing jurisdiction is entitled to receive. The amount of Local CST revenues received by the City is subject to increase or decrease due to (i) increases or decreases in the dollar volume of taxable sales within the City, (ii) legislative changes, and/or (iii) technological advances which could affect consumer preferences, such as VoIP. VoIP is a less expensive technology that allows telephone calls to be made in digital form using a broadband internet connection, rather than an analog phone line, and has the potential to supplant traditional telephone service. It is possible that VoIP could either reduce the dollar volume of taxable sales within the City or will be a non-taxable service altogether. The amount of the Local CST revenues collected within the City may also be adversely affected by de-annexation. Such de-annexation would decrease the number of addresses contained within the City. At this time there are no de-annexations anticipated within the City. In the 2012 Florida Legislative session, pursuant to Chapter , Laws of Florida ("Chapter "), a number of provisions of the Communications Services Tax Act were modified, including revision of the definition of "sales price" to expand the existing provisions relating to what charges a communications services dealer may exclude from the taxable sales price of communications services; and modifications to requirements relating to a dealer that does not use one of the three approved local tax situsing methods. The liability of a communications services tax dealer in the cases of underpayment of the tax resulting from that dealer assigning a service address to the incorrect local taxing jurisdiction is limited to only those situations where the dealer did not use an approved situsing method and the FDOR has determined the amount underpaid by that dealer between all jurisdictions. Chapter made these revised definitions and liability provisions retroactive and remedial. The extent of the impact of the 17

26 amendments contained in Chapter on the collection of Local CST revenues cannot be readily determined at this time. Intergovernmental Revenues All revenues received by a local unit from federal, state, and other local government sources in the form of grants, shared revenues, and payments in lieu of taxes would be included in the intergovernmental revenues category. The category is further classified into eight subcategories: federal grants, federal payments in lieu of taxes (PILOT), state grants, state shared revenues, state PILOT, local grants, local shared revenues, and local PILOT. If a particular grant is funded from separate intergovernmental sources, then the revenue is recorded proportionately. The largest component is the Local Government Half-Cent Sales Tax. Local Government Half-Cent Sales Tax. Section , Florida Statutes (the "Sales Tax Act") authorizes the levy and collection by the State of a sales tax upon, among other things, the sales price of each item or article of tangible personal property sold at retail in the State, subject to certain exceptions and dealer allowances. In 1982, with the enactment of Chapter 218, Part VI, Florida Statutes, the Florida Legislature created the Local Government Half-Cent Sales Tax Program (the "Half-Cent Sales Tax Program") which distributes a portion of the sales tax revenue and money from the State's General Revenue Fund to counties and municipalities that meet strict eligibility requirements. In 1982, when the Half-Cent Sales Tax Program was created, the general rate of sales tax in the State was increased from 4% to 5%, and one-half of the fifth cent was devoted to the Half-Cent Sales Tax Program, thus giving rise to the name "Half-Cent Sales Tax." Although the amount of sales tax revenue deposited into the Half-Cent Sales Tax Program is no longer one-half of the fifth cent of every dollar of the sales price of an item subject to sales tax, the name "Half-Cent Sales Tax" has continued to be utilized. As of October 1, 2001, the Half-Cent Sales Tax Trust Fund (hereinafter defined) began receiving a portion of certain taxes imposed by the State on Communications Services pursuant to Chapter 202, Florida Statutes. Accordingly, moneys distributed from the Half-Cent Sales Tax Trust Fund now consist of funds derived from both general sales tax proceeds and certain taxes imposed by the State on the sales of communications services required to be deposited into the Half-Cent Sales Tax Trust Fund. The Half-Cent Sales Tax is collected on behalf of the State by businesses at the time of sale at retail, use, consumption, or storage for use or consumption, of taxable property and remitted to the State on a monthly basis. The Sales Tax Act provides for penalties and fines, including criminal prosecution, for non-compliance with the provisions thereof. The general rate of sales tax in the State is currently 6%. Section , Florida Statutes, provides for the distribution of % of sales tax revenues to the Half-Cent Sales Tax Clearing Trust Fund (the "Half-Cent Sales Tax Trust Fund"), after providing for certain transfers to the State's General Revenue Fund and Public Employees Relations Commission Trust Fund. Such amount deposited in the Half-Cent Sales Tax Trust Fund is earmarked for distribution to the governing body of such county and each participating municipality within that county pursuant the following distribution formula: 18

27 County Share (percentage of total Half-Cent Sales Tax receipts) = unincorporated area population + 2/3 incorporated area population total county population + 2/3 incorporated area population Municipality Share (percentage of total Half-Cent = municipality population Sales Tax receipts) total county population + 2/3 incorporated area population For purposes of the foregoing formula, "population" is based upon the latest official State estimate of population certified prior to the beginning of the local government fiscal year. Should the City annex any area or should any area of the City de-annex from the City, the share of the Half-Cent Sales Tax received by the City would be respectively increased or decreased according to the foregoing formula. The City has no annexation or de-annexation plans at this time. The Half-Cent Sales Taxes are distributed from the Half-Cent Sales Tax Trust Fund on a monthly basis to participating units of local government in accordance with the Sales Tax Act. The Sales Tax Act permits the City to pledge its share of the Half-Cent Sales Tax for the payment of principal of and interest on any capital project. To be eligible to participate in the Half-Cent Sales Tax Program, each municipality and county is required to have satisfied the Eligibility Requirements (defined below). Those requirements include, but are not limited to, the following: (i) reported its finances for its most recently completed fiscal year to the Florida Department of Financial Services ("FDFS") as required by Florida law; (ii) made provisions for annual post audits of financial accounts in accordance with provisions of law; (iii) levied, as shown on its most recent financial report, ad valorem taxes, exclusive of taxes levied for debt service or other special millages authorized by the voters, to produce the revenue equivalent to a millage rate of 3 mills on the dollar based upon 1973 taxable values or, in order to produce revenue equivalent to that which would otherwise be produced by such 3 mill ad valorem tax, to have received certain revenues from a county (in a case of a municipality), collected an occupational license tax or utility tax, or levied an ad valorem tax, or any combination of those four sources; (iv) certified that persons in its employ as law enforcement officers meet certain qualifications for employment, and receive certain compensation; (v) certified that persons in its employ as firefighters meet certain employment qualifications and are eligible for certain compensation; (vi) certified that each dependent special district that is budgeted separately from the general budget of such county or municipality has met the provisions for annual post audit of its financial accounts in accordance with law; and (vii) certified to the FDOR that it has complied with certain procedures regarding the establishment of the ad valorem tax millage of the county or municipality as required by law. The requirements described in (i) through (vii) are referred to herein as the "Eligibility Requirements". If the City does not comply with the Eligibility Requirements, the City would lose its Half-Cent Sales Tax Trust Fund distributions for twelve (12) months following a "determination of noncompliance" by FDOR. The City has continuously maintained eligibility to receive the Half-Cent Sales Tax. Although the Sales Tax Act does not impose any limitation on the number of years during which the City can receive distribution of the Half-Cent Sales Tax from the Half-Cent Sales Tax Trust Fund, there may be amendments to the Sales Tax Act in subsequent years imposing additional requirements of 19

28 eligibility for counties and municipalities participating in the Half-Cent Sales Tax Program, or the distribution formulas may be revised. The amount of Half-Cent Sales Tax received by the City is subject to increase or decrease due to (i) increases or decreases in the dollar volume of taxable sales within Alachua County, Florida (the "County"), (ii) legislative changes relating to the overall sales tax, which may include changes in the scope of taxable sales, changes in the tax rate and changes in the amount of sales tax revenue deposited into the Half-Cent Sales Tax Trust Fund, (iii) changes in the relative population of the City, which affect the percentage of Half-Cent Sales Tax received by the City, and (iv) other factors which may be beyond the control of the City, including but not limited to the potential for increased use of electronic commerce and other internet-related sales activity that could have a material adverse impact upon the amount of sales tax collected by the State and then distributed to the City. See "-- Legislation and Court Ruling Regarding Sales Tax and State Communication Services Tax" below for recent legislation and a court ruling that could impact the amounts received from the Half-Cent Sales Tax Trust Fund. State Revenue Sharing. A portion of certain taxes levied and collected by the State is shared with local governments under provisions of Chapter , Florida Statutes, from amounts deposited by the State into a fund held by the State referred to as the Revenue Sharing Trust Fund for Municipalities ("State Revenue Sharing Trust Fund for Municipalities"). The amount deposited by the FDOR into the State Revenue Sharing Trust Fund for Municipalities is % of available sales and use tax collections after certain required distributions, and the net collections from the one-cent municipal fuel tax. The amount of the State Revenue Sharing Trust Fund for Municipalities distributed to any one municipality is based on an apportionment factor using a formula consisting of three equally weighted factors: (i) adjusted municipal population; (ii) derived municipal sales tax collections; and (iii) a municipality s relative ability to raise revenue, all as more fully described in Section , Florida Statutes. The following are sources of revenues that are deposited into the State Revenue Sharing Trust Fund for Municipalities. Sales Tax Revenues. Prior to July 1, 2000, a state tax was levied on cigarette packages at varying rates, depending upon the length and number of cigarettes in a package and, pursuant to Section (2)(a), Florida Statutes, certain amounts derived from such cigarette taxes were deposited to the Revenue Sharing Trust Fund for Municipalities after deducting therefrom certain charges for administration and collection. Effective July 1, 2000, the cigarette tax revenues were eliminated from distribution to the Revenue Sharing Trust Fund for Municipalities and replaced with sales and use tax proceeds. The sales and use tax provides the majority of the receipts for the guaranteed entitlement from the Revenue Sharing Trust Fund for Municipalities. For the State's 2015 fiscal year, approximately 75.14% of the deposits of the State Revenue Sharing Trust Fund for Municipalities were from sales and use taxes and approximately 24.86% were from the municipal fuel tax. As of January 1, 2014, alternative fuel fees are no longer deposited into the Revenue Sharing Trust Fund for Municipalities. 20

29 Municipal Fuel Tax. The proceeds of the municipal fuel tax imposed pursuant to Section (1)(c), Florida Statutes, after deducting certain service charges and administrative costs is transferred into the Revenue Sharing Trust Fund for Municipalities. Funds derived from the municipal fuel tax on motor fuel may only be used to pay debt service allocable to transportation facilities. The City estimates that a maximum of 4% of the debt service on the Series 2016 Bonds is allocable to transportation facilities. To be eligible for State Revenue Sharing funds beyond the minimum entitlement (defined as the amount necessary to meet obligations to which the City has pledged amounts received from the State Revenue Sharing Trust Fund for Municipalities), a local government must have satisfied the Eligibility Requirements. If the City fails to comply with the Eligibility Requirements, the FDOR may utilize the best information available to it, if such information is available, or take any necessary action including disqualification, either partial or entire, and the City shall further waive any right to challenge the determination of the FDOR as to its distribution, if any. No unit of local government which was eligible to participate in revenue sharing in the 3 years prior to initially participating in the Half-Cent Sales Tax shall be ineligible to participate in revenue sharing solely due to a millage or utility tax reduction afforded by the Half-Cent Sales Tax. See "-- Legislation and Court Ruling Regarding Sales Tax and State Communication Services Tax" below for recent legislation and a court ruling that could impact the amounts received from the Revenue Sharing Trust Fund for Municipalities. Permits, Fees and Special Assessments General. These are revenues derived from the issuance of landlord licenses plus other miscellaneous licenses, permit fees and franchise fees. Electric Franchise Fees. Pursuant to Chapter 38 of the City Code, the City charges franchise fees to entities providing certain utility services in the City pursuant to franchise agreements. Such franchises must be granted by ordinance enacted by the Commission. The following non-exclusive electric franchises were granted to private electric companies doing business in the City. The respective franchise fees under each franchise are equal to 6.0% of base revenues of the franchisee during the franchise term and are payable to the City on a monthly basis. Franchisee Ordinance No. Term of Franchise Expiration Date Gainesville Regional Utilities years October 6, 2027 Duke Energy (formerly Florida Power Corporation) years September 4, 2026 Clay Electric Corporation years September 4, 2026 The electric franchises described above expire prior to the final maturity of the Series 2016 Bonds. There can be no assurance that replacement or extensions of such franchises will be enacted. Solid Waste Franchise Fees. A non-exclusive franchise was granted by the City to franchisees who agree to collect both solid waste and recyclable materials from commercial properties, or provide containers for both solid waste and recyclable materials from commercial properties pursuant to Ordinance No enacted on February 18, 2004, which franchise was extended pursuant to Ordinance 21

30 Nos , and The franchisees include Waste Pro USA, Inc., WCA of Florida LLC, Republic Services of FL, L.P. and Waste Management Inc. of Florida. The franchise expires for all franchises on September 30, 2016, and the City expects to renew them. The franchise fee for each solid waste franchisee is equal to 8.0% of such franchisee s gross revenues and is payable to the City on a monthly basis. The solid waste franchise described above expires prior to the final maturity of the Series 2016 Bonds. There can be no assurance that replacement or extensions of such franchises will be enacted. Charges for Services General. Charges for various services provided by the City to residents, property owners, and grants received from other governments, including the following: (a) Public Safety: fees for police services, false alarm charges and extra duty charges. (b) Planning and Zoning: fees for inspections such as plumbing, electrical, elevator and mechanical inspections. (c) Recreational Department: fees for parks and recreation activities and events. (d) Other: fees for services not specifically mentioned above, i.e. traffic signal maintenance fees; site rental fees; median rental fees; and fuel tax refunds. (e) Environmental (solid waste disposal fees). Surplus Utility Revenues. The City owns and operates a combined electric, water and sewer system. In each Fiscal Year, the City receives surplus utility revenues after the payment of the debt service on bonds payable from the revenues of such combined system and making other deposits required under the resolution pursuant to which the such bonds were issued. Such surplus utility revenues are available to the City for use for its lawful purposes. Fines and Forfeitures Fines and forfeitures reflect those penalties and fines imposed for the commission of statutory offenses, violation of lawful administrative rules and regulations, and for neglect of official duty. Forfeitures include revenues resulting from ordinance violation fines, filing fees and tax billed penalties. Miscellaneous Revenues This category includes a variety of revenues and transfers from other funds, including, but not limited to, donations, COBRA health insurance reimbursements, administrative copies, penalties, interest income, vending machine revenue, disposition of surplus equipment and legal settlements. Legislation and Court Ruling Regarding Sales Tax and State Communication Services Tax Recent Legislation Regarding Sales Tax and State Communication Services Tax. On June 15, 2015, the Florida Legislature passed House Bill 33A ("HB 33A"), relating to taxation. On June 16, 2015, Governor Rick Scott signed into law HB 33A. Among the several provisions contained in HB 33A are expanded sales tax exemptions and a reduction in the State communications services tax. Some of the moneys distributed from the Half-Cent Sales Tax Trust Fund and the State Revenue Sharing Trust Fund for Municipalities include certain proceeds of the State communications services tax. The provisions of HB 33A with respect to the reduction of the State communications services tax ensure that local 22

31 governments will continue to receive the same amount of revenues they receive under current law. The City does not believe that HB 33A will have a material adverse impact on the City's receipt of revenues from the Half-Cent Sales Tax Trust Fund and the State Revenue Sharing Fund for Municipalities. Recent Court Ruling Concerning State Communications Services Tax. On June 11, 2015, the First District Court of Appeal held, in DirectTV, Inc. v. State, Section (1), Florida Statutes, unconstitutional as a violation of the dormant commerce clause. This relates to the State communications services tax. The State appealed this decision to the Florida Supreme Court on July 7, 2015 and the First District Court of Appeal granted a stay of its decision pending the appeal. The Florida Supreme Court granted certiorari in Oral argument was granted on February 2, 2016 and is scheduled for April 6, Some of the moneys distributed from the State Revenue Sharing Trust Fund for Municipalities and the Half-Cent Sales Tax Trust Fund include proceeds of the State communications services tax. If the decision is upheld, it is possible the amount of revenues received by the City from the State Revenue Sharing Trust Fund for Municipalities and the Half-Cent Sales Tax Trust Fund will be reduced. At this time the City cannot predict whether such decision will be upheld, and if upheld what effect it will have on the revenues received from the State Revenue Sharing Trust Fund for Municipalities and the Half- Cent Sales Tax Trust Fund. The City also cannot predict whether the basis for an unfavorable ruling could also apply to the Local CST and, if so, what effect it could have on the Local CST collections of the City. [Remainder of page intentionally left blank] 23

32 Historical Non-Ad Valorem Revenues Set forth below is a table showing the major sources of historical non-ad valorem revenues of the City for Fiscal Years ended September 30, 2010 through 2014 (audited) and Fiscal Year ended September 30, 2015 (unaudited), whether legally available to pay debt service on the Series 2016 Bonds, or not. Historical Non-Ad Valorem Revenues Revenue Source (unaudited) Franchise Fees (1) $303,255 $312,719 $290,351 $281,845 $286,282 $306,332 State Revenue Sharing (1) (2) 90,152 95,109 98, , , ,389 Local Communication Services Tax (3) 428, , , , , ,275 Half Cent Sales Tax (1) 420, , , , , ,152 Utility Tax (3) 959,321 1,233,555 1,191,592 1,120,707 1,118,050 1,165,926 Business Tax 47,034 48,780 49,897 49,723 46,691 49,645 Mobile Home License 4,266 3,713 4,041 4,110 4,753 5,495 Alcoholic Beverage Tax 3,783 7,027 4,667 1,003 9,631 3,800 Planning and Zoning Fees 73,577 82,573 56,290 58,050 31,192 64,852 Traffic Enforcement Contract Revenue False Alarm Charges 3,955 3,045 2,695 3,401 1,750 3,220 Extra Duty Charges 4,848 1, ,200 4,419 Solid Waste Disposal Fees 810, , , , , ,524 Traffic Signal Maintenance Fees 11,499 11,843 12,200 12,565 13,370 14,656 Recreation Department Fees 43,050 31,174 40,295 32,615 27,083 31,901 Court Fines 46,308 43,196 32,232 42,814 57,006 40,199 Gain on Sale of Property 5, , Penalty Revenue 13,788 14,053 14,068 13,935 14,157 13,156 Site Rental Income 19,641 20, , Median Rental 2, ,325 2, Administrative Clerk Fees Fuel Tax Refunds 8,060 7,517 7,512 7,859 8,397 8,309 Transfers from Utility 1,821,117 1,621,117 1,621,117 1,621,117 1,621,117 1,621,117 TOTAL $5,121,237 (4) $5,324,970 $5,636,631 $4,981,735 $5,003,757 $5,185,072 (1) These revenue sources are pledged to the payment of the City s outstanding $1,150,000 HUD Fixed Rate Note for Series 2015A Certificates. See " Other Debt of the City" below. (2) Does not include municipal fuel tax portion of the guaranteed entitlement.. (3) These revenue sources are pledged to the payment of the City s outstanding $375,000 Utility Acquisition Bonds, Series 1993 and $2,750,000 Utility Refunding Revenue Bond, Series See " Other Debt of the City" below. The City is unable to determine whether any decrease in collections of the Communications Services Tax is attributable to the changes implemented under Chapter described above or increased use of communication services through nontaxed services such as and cell phones and reductions in the use of taxable services such as landline phones and long distance telephone plans. (4) In Fiscal Years ended 2009 and 2010, due to financial difficulties, the City experienced deficits in unrestricted fund balances that resulted in the City s use of restricted resources to satisfy cash flow needs. This was noted in the audited financial statements of the City in both such Fiscal Years. Following recommendations of the auditor, the City took measures to reduce expenses and eliminate deficits, including, but not limited to, raising tax rates and utility rates to increase revenues. In the audited financial statements for Fiscal Year ended 2011, the auditor stated that corrective action had been taken to correct all such prior findings and recommendations. Source: City of Alachua, Florida Finance Department. 24

33 The table above is only an indication of the relative amounts of non-ad valorem revenues of the City which may be available for the payment of principal of and interest on the Series 2016 Bonds and other general governmental expenditures. The ability of the City to appropriate Non-Ad Valorem Revenues in sufficient amounts to pay the principal of and the interest on the Series 2016 Bonds is subject to a variety of factors, including the City's satisfaction of funding requirements for obligations having an express lien on or pledge of such revenues and after satisfaction of funding requirements for essential governmental services of the City. No representation is being made by the City that any particular Non- Ad Valorem Revenues will be available in future years, or if available, will be budgeted to pay debt service on the Series 2016 Bonds. Continued consistent receipt of Non-Ad Valorem Revenues is dependent upon a variety of factors, including annexation and/or de-annexation policies by the City or greater growth in the unincorporated areas of the County as compared to the City which could have an adverse effect on Non- Ad Valorem Revenues. The amounts and availability of any of the Non-Ad Valorem Revenues to the City are also subject to change, including reduction or elimination by change of State law or changes in the facts or circumstances according to which certain of the Non-Ad Valorem Revenues are allocated. In addition, the amount of certain Non-Ad Valorem Revenues collected by the City is directly related to the general economy of the City. Accordingly, adverse economic conditions could have a material adverse effect on the amount of Non-Ad Valorem Revenues collected by the City. The City may also specifically pledge certain of the Non-Ad Valorem Revenues or covenant to budget and appropriate Non-Ad Valorem Revenues of the City to future obligations. In the case of a specific pledge, such Non-Ad Valorem Revenues would be required to be applied to such obligations prior to paying the principal of and interest on the Series 2016 Bonds. Other Debt of the City Other than the Refunded Bonds, as of the date hereof the City does not have any outstanding debt that is payable solely from a covenant to budget and appropriate Non-Ad Valorem Revenues of the City. As of the date hereof, the City has approximately $12,245, aggregate principal amount of Debt outstanding that has a lien upon and a pledge of a specific Non-Ad Valorem Revenue as described below. The City issued its HUD Fixed Rate Note for Series 2015A Certificates (the "HUD Note"), which HUD Note is currently outstanding in the principal amount of $1,150,000. The HUD Note is secured by a lien on the City's Half-Cent Sales Tax; State Revenue Sharing and Franchise Fees (collectively, the "HUD Note Pledged Revenues"). Pursuant to the resolution under which such HUD Note was issued, the City is required to satisfy debt service and other requirements with respect to such HUD Note from the HUD Note Pledged Revenues prior to using such Non-Ad Valorem Revenues to pay debt service on the Series 2016 Bonds. The City may issue other Debt similar to the HUD Note in the future that would also have a prior lien on and pledge of specific Non-Ad Valorem Revenues subject to complying with the anti-dilution test set forth in the Resolution. See "SECURITY FOR THE SERIES 2016 BONDS - Anti- Dilution Test" herein. The City has entered into an agreement with the State regarding the State Revolving Fund Construction Loan #WW790080, which contains a covenant to budget and appropriate from Non-Ad Valorem Revenues in the event the pledged revenue source, as indicated, is not sufficient to pay amounts due. Such loan is payable from net water and sewer system revenues and is currently outstanding in the principal amount of $8,345,

34 The City issued its Utility Acquisition Bonds, Series 1993, currently outstanding in the amount of $375,000 and its Utility Revenue Refunding Bond, Series 2013, currently outstanding in the amount of $2,750,000 (the "Outstanding Utility Bonds") which are secured by the net revenues of the City s combined water, electric and sewer utility system as well as by the Utility Tax and the Local CST. Proceeds of the Utility Tax and the Local CST are required to be used if necessary, to pay debt service on the Outstanding Utility Bonds prior to using such Non-Ad Valorem Revenues to pay debt service on the Series 2016 Bonds. Other Post-Employment Benefits LIABILITIES OF THE CITY General. The City has previously established and maintains an employee group health insurance plan (the "Plan") that it makes available to eligible retirees in accordance with State law and City ordinance. The Plan is a single employer, experience rated insurance plan that provides medical, dental and vision benefits to eligible retirees and their eligible dependents. The postretirement benefit portion of the Plan refers to the medical, dental and vision benefits applicable to current and future retirees and their eligible dependents. The Plan does not issue a stand-alone report for the Other Post-Employment Benefits ("OPEB") and is not included in the report of a Public Employee Retirement System or another entity. Funding Policy. To-date, the City has followed a pay-as-you-go funding policy with respect to OPEB benefits, contributing only those amounts necessary to provide for its portion of current year benefit cost and expenses. The contribution requirements of plan members, if any, are established by the City. Eligible retirees pay the full cost of blended rate premiums associated with the medical plan elected; no direct City subsidy is currently applicable. However, there are implicit costs of the medical plan for retirees, as their claims experience is higher than the blended rate premiums. The City assigns eligible active employees and eligible retirees equal, blended-rate premiums and makes available to both groups the same plan options. Although both groups are assigned the same blended rate premiums, Generally Accepted Accounting Principles requires the actuarial liabilities presented below to be calculated using age-adjusted premiums approximating claim costs for eligible retirees separate from active eligible members. Annual OPEB Cost and Net OPEB Obligation. The Annual OPEB Cost is the amount that was expensed for the Fiscal Year. Since the City s OPEB plan is currently unfunded, the offset to that expense comes from subsidies paid on behalf of the current retirees and their dependents for the current year. This offset is called the Employer Contribution, and equals the total age-adjusted premiums paid by the City for coverage for the retirees and their dependents for the year (net of the retiree s own payments for the year). The cumulative difference between the Annual OPEB Cost for the year and the Employer Contribution for the year is called the Net OPEB Obligation. The Net OPEB Obligation is reflected as a liability in the statement of net position. 26

35 Following are the Net OPEB Obligation amounts for the City's prior three Fiscal Years: Fiscal Year Ended September 30 Annual OPEB Cost Percentage Annual OPEB Cost Net OPEB Obligation 2015 $31, % $53, , , , ,834 Source: For Fiscal Year ended 2013 and 2014: City of Alachua, Florida Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, For Fiscal Year Ended September 30, 2015, GASB 45 Actuarial Valuation October 1, 2014 Liability Information and 2015 Annual Required Contribution. Funded Status and Funding Progress. As of October 1, 2014, the latest actuarial valuation date, the City s OPEB plan was 0% funded. The actuarial accrued liability for benefits was $284,548. The expected payroll of active participants was $4,620,542, and the ratio of the UAAL to the expected payroll was 6%. Actuarial valuations of 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 the healthcare cost trend. Amounts determined regarding the funding status of a 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 following table summarizes the actuarial methods and assumptions as of the latest actuarial valuation date: Valuation Date October 1, 2014 Actuarial Cost Method Projected Unit Credit Cost Amortization Method Level Percentage of Projected Payroll Remaining Amortization Period 24 Years, Closed Asset Valuation Method N/A Actuarial Assumptions: Payroll Inflation Rate 4.0% Investment Return 4.0% Healthcare Cost Trend Rate Gradually Decreasing from 7.0% to 5.0% Source: GASB 45 Actuarial Valuation October 1, 2014 Liability Information and 2015 Annual Required Contribution. FRS Pension Plan General. Employees of the City who are employed in a full-time regularly established position participate in the statewide Florida Retirement System ("FRS Pension Plan"), a multiple-employer, cost sharing defined benefit plan. All rates, benefits and amendments are established by the State through its legislative body. See "APPENDIX F - FRS Pension Plan and HIS Program Information" hereto for information regarding the FRS Pension Plan and the health insurance subsidy (HIS) program. 27

36 Contributions. The City contributed amounts to the FRS Pension Plan were $708,205.45, $755, and $539, for Fiscal Years ended 2015, 2014 and 2013, respectively, equal to the required contribution for each such year. These amounts include a 3% employee paid contribution. GASB 68. As a result of the implementation of GASB No. 68, the information contained in the City s audited financial statements for the fiscal year ended September 30, 2014 and related notes included relating to pension fund liability is not indicative of how pension fund liability will be reported by the City going forward. See FINANCIAL STATEMENTS Implementation of GASB 68 herein. Insurance Considerations Affecting the City The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the City carries insurance. The City has not had any significant reduction in insurance coverage and the amounts of insurance settlements have not exceeded insurance cover for any of the last three years. Insurance against losses is provided by Florida Municipal Insurance Trust (FMIT) for the following types of risk: Florida Municipal Insurance Trust Workers' Compensation and Employer's Liability General Liability and Automobile Liability Real and Personal Property Damage Automobile Physical Damage Public Employees' Blanket Bond Boiler Officials' Liability Law Enforcement Officers' Professional Liability and Other Mandated Coverage Accidental Death and Dismemberment Auxiliary Reserve Policy Law Enforcement Officers' Professional Liability The City s coverage for workers compensation is under a retrospectively related policy. Premiums are accrued based on the ultimate cost to date of the City s experience. Section , Florida Statutes, provides limits on the liability of the State, its subdivisions and municipalities of $200,000 to any one person, or $300,000 for any single incident or occurrence. See " Ability to be Sued, Judgments Enforceable" below. Under the protection of this limit and Chapter 440, Florida Statutes, covering Workmen's Compensation, the City currently is covered for workers' compensation and property and casualty liability losses by FMIT. There is a $5,000 deductible for general liability, law enforcement liability and property losses, zero liability deductible for vehicle and $1,000 deductible for vehicle damage or loss. Third-party coverage is currently maintained for statutory workers' compensation. The limit of liability of coverage of $200,000 bodily injury and/or property damage per person or $300,000 bodily injury and/or property damage per occurrence is increased to $3,000,000 (combined single limit) per occurrence, solely for any liability resulting from entry of a claim bill pursuant to Section (5), Florida Statutes or liability/settlement for which no claim bill has been filed or liability is imposed pursuant to federal law or for actions outside the State. Settlements have not exceeded insurance coverage for each of the last three years. 28

37 Ability to be Sued, Judgments Enforceable Notwithstanding the liability limits described below, the laws of the State provide that each city has waived sovereign immunity for liability in tort to the extent provided in Section , Florida Statutes. Therefore, the City is liable for tort claims in the same manner and, subject to limits stated below, to the same extent as a private individual under like circumstances, except that the City is not liable for punitive damages or interest for the period prior to judgment. Such legislation also limits the liability of a city to pay a judgment in excess of $200,000 to any one person or in excess of $300,000 because of any single incident or occurrence. Judgments in excess of $200,000 and $300,000 may be rendered, but may be paid from City funds only pursuant to further action of the Florida Legislature in the form of a "claims bill." See " Insurance Considerations Affecting the City" above. Notwithstanding the foregoing, the City may agree, within the limits of insurance coverage provided, to settle a claim made or a judgment rendered against it without further action by the Florida Legislature, but the City shall not be deemed to have waived any defense of sovereign immunity or to have increased the limits of its liability as a result of its obtaining insurance coverage for tortuous acts in excess of the $200,000 or $300,000 waiver provided by Florida Statutes. FLORIDA CONSTITUTIONAL LIMITATIONS AND PROPERTY TAX REFORM Several constitutional and legislative amendments affecting ad valorem taxes have been approved by voters in the past including the following: Save Our Homes Amendment. By voter referendum held on November 3, 1992, Article VII, Section 4 of the State Constitution was amended by adding thereto a subsection which, in effect, limits the increases in assessed just value of homestead property to the lesser of (1) three percent of the assessment for the prior year or (2) the percentage change in the Consumer Price Index for all urban consumers, U.S. City Average, all items 1967=100, or successor reports for the preceding calendar year as initially reported by the United States Department of Labor, Bureau of Labor Statistics. Further, the amendment provides that (1) no assessment shall exceed just value, (2) after any change of ownership of homestead property or upon termination of homestead status such property shall be reassessed at just value as of January 1 of the year following the year of sale or change of status, (3) new homestead property shall be assessed at just value as of January 1 of the year following the establishment of the homestead, and (4) changes, additions, reductions or improvements to homestead shall initially be assessed as provided for by general law, and thereafter as provided in the amendment. This amendment is known as the "Save Our Homes Amendment." The effective date of the amendment was January 5, 1993 and, pursuant to a ruling by the Florida Supreme Court, it began to affect homestead property valuations commencing January 1, 1995, with 1994 assessed values being the base year for determining compliance. Limitations on State Revenue Amendment. In the 1994 general election, State voters approved an amendment to the State Constitution which is commonly referred to as the "Limitation on State Revenues Amendment." This amendment provides that state revenues collected for any fiscal year shall be limited to state revenues allowed under the amendment for the prior fiscal year plus an adjustment for growth. Growth is defined as an amount equal to the average annual rate of growth in State personal income over the most recent twenty quarters times the state revenues allowed under the amendment for the prior fiscal year. State revenues collected for any fiscal year in excess of this limitation are required to be transferred to a budget stabilization fund until the fund reaches the maximum balance specified in the amendment to the State Constitution, and thereafter is required to be refunded to taxpayers as provided 29

38 by general law. The limitation on state revenues imposed by the amendment may be increased by the Florida Legislature, by a two-thirds vote in each house. The term "state revenues," as used in the amendment, means taxes, fees, licenses, and charges for services imposed by the Florida Legislature on individuals, businesses, or agencies outside state government. However, the term "state revenues" does not include: (1) revenues that are necessary to meet the requirements set forth in documents authorizing the issuance of bonds by the State; (2) revenues that are used to provide matching funds for the federal Medicaid program with the exception of the revenues used to support the Public Medical Assistance Trust Fund or its successor program and with the exception of State matching funds used to fund elective expansions made after July 1, 1994; (3) proceeds from the State lottery returned as prizes; (4) receipts of the Florida Hurricane Catastrophe Fund; (5) balances carried forward from prior fiscal years; (6) taxes, licenses, fees and charges for services imposed by local, regional, or school district governing bodies, or (7) revenue from taxes, licenses, fees and charges for services required to be imposed by any amendment or revision to the Florida Constitution after July 1, This amendment took effect on January 1, 1995, and was first applicable to the State's fiscal year Millage Rollback Legislation. In 2007, the Florida Legislature adopted Chapter , Laws of Florida, a property tax plan which significantly impacted ad valorem tax collections for Florida local governments. One component of the adopted legislation required counties, cities and special districts to rollback their millage rates for the fiscal year to a level that, with certain adjustments and exceptions, would generate the same level of ad valorem tax revenue as in fiscal year ; provided, however, depending upon the relative growth of each local government's own ad valorem revenues from 2001 to 2006, such rolled back millage rates were determined after first reducing ad valorem revenues by zero to nine percent (0% to 9%). In addition, the legislation limited how much the aggregate amount of ad valorem revenues may increase in future fiscal years. A local government may override certain portions of these requirements by a supermajority, and for certain requirements, a unanimous vote of its governing body. Amendments Related to Ad Valorem Exemptions. On January 29, 2008, in a special election held in conjunction with the State's presidential primary, the requisite number of voters approved amendments to the Florida Constitution exempting certain portions of a property's assessed value from taxation. These amendments were effective for the 2008 tax year (fiscal year for local governments). The following is a brief summary of certain important provisions contained in such amendments: 1. Provides for an additional exemption for the assessed value of homestead property between $50,000 and $75,000, thus doubling the existing homestead exemption for property with an assessed value equal to or greater than $75, Permits owners of homestead property to transfer their Save Our Homes Amendment benefit (up to $500,000) to a new homestead property purchased within two years of the sale of their previous homestead property to which such benefit applied if the just value of the new homestead is greater than or is equal to the just value of the prior homestead. If the just value of the new homestead is less than the just value of the prior homestead, then owners of homestead property may transfer a proportional amount of their Save Our Homes Amendment benefit, such proportional amount equaling the just value of the new homestead divided by the just value of the prior homestead multiplied by the assessed value of the prior homestead. As discussed above, the Save Our Homes Amendment generally 30

39 limits annual increases in ad valorem tax assessments for those properties with homestead exemptions to the lesser of three percent (3%) or the annual rate of inflation. 3. Exempts from ad valorem taxation $25,000 of the assessed value of property subject to tangible personal property tax. 4. Limits increases in the assessed value of non-homestead property to 10% per year, subject to certain adjustments. The cap on increases would be in effect for a 10-year period, subject to extension by an affirmative vote of electors. Over the last few years, the Save Our Homes Amendment assessment cap and portability provisions described above have been subject to legal challenge. The plaintiffs in such cases have argued that the Save Our Homes Amendment assessment cap constitutes an unlawful residency requirement for tax benefits on substantially similar property in violation of the equal protection provisions of the Florida Constitution and the Privileges and Immunities Clause of the Fourteenth Amendment to the United States Constitution. The plaintiffs also argued that the portability provision simply extends the unconstitutionality of the tax shelters granted to long-term homeowners by Save Our Homes Amendment. The courts in each case have rejected such constitutional arguments and upheld the constitutionality of such provisions; however, there is no assurance that any future challenges to such provisions will not be successful. In addition, the constitutionally mandated Florida Taxation and Budget Reform Commission (required to be convened every 20 years) (the "TBRC") completed its meetings on April 25, 2008 and placed several constitutional amendments on the November 4, 2008 General Election ballot. Three of such amendments were approved by the voters of Florida, which, among other things, do the following: (a) allow the Florida Legislature, by general law, to exempt from assessed value of residential homes, improvements made to protect property from wind damage and installation of a new renewable energy source device; (b) assess specified working waterfront properties based on current use rather than highest and best use; (c) provide a property tax exemption for real property that is perpetually used for conservation (began in 2010); and, (d) for land not perpetually encumbered, require the Florida Legislature to provide classification and assessment of land use for conservation purposes solely on the basis of character or use. Exemption for Deployed Military Personnel. In the November 2010 General Election, voters approved a constitutional amendment which provides an additional homestead exemption for deployed military personnel. The exemption equals the percentage of days during the prior calendar year that the military homeowner was deployed outside of the United States in support of military operations designated by the Florida Legislature. This constitutional amendment took effect on January 1, Other Proposals Affecting Ad Valorem Taxation. During the Florida Legislature's 2011 Regular Session, it passed Senate Joint Resolution 592 ("SJR 592"). SJR 592 allows totally or partially disabled veterans who were not Florida residents at the time of entering military service to qualify for the combatrelated disabled veteran's ad valorem tax discount on homestead property. The amendment was approved and took effect on January 1, During the Florida Legislature s 2016 Regular Session, it passed House Joint Resolution 7099 ("HJR 7099"). HJR 7099 provides that a totally or partially disabled veteran who received the exemption but moves his or her homestead to another property after January 1 of the following year, may transfer the exemption to the new property if he or she completes certain requirements. The amendment will take effect on July 1,

40 During the Florida Legislature's 2012 Regular Session, it passed House Joint Resolution 93 ("HJR 93"). HJR 93 allows the Florida Legislature to provide ad valorem tax relief to the surviving spouse of a veteran who died from service-connected causes while on active duty as a member of the United States Armed Forces and to the surviving spouse of a first responder who died in the line of duty. The amount of tax relief, to be defined by general law, can equal the total amount or a portion of the ad valorem tax otherwise owed on the homestead property. The amendment took effect on January 1, HJR 7099 allows the surviving spouse of a veteran who died from service-connected causes while on active duty to receive property tax relief in Florida, regardless of the veteran s state of residence on January 1 of the year in which the veteran died. Furthermore, HJR 7099 allows the qualified surviving spouse of a veteran who had a service related total and permanent disability at the time of death to receive property tax relief in Florida, if at the time of the veteran s death, the veteran or the veteran s spouse owned the veteran s homestead property in another state and such property would have qualified as a homestead in Florida if located in this state on January 1 of the year the veteran died. Also during the Florida Legislature's 2012 Regular Session, it passed House Joint Resolution 169 ("HJR 169") allowing the Florida Legislature by general law to permit counties and municipalities, by ordinance, to grant an additional homestead tax exemption equal to the assessed value of homestead property to certain low income seniors. To be eligible for the additional homestead exemption the county or municipality must have granted the exemption by ordinance to allow either or both of the following additional homestead exemptions: (i) up to $50,000 for any person who has the legal or equitable title to real estate and maintains thereon the permanent residence of the owner, who has attained age 65 and whose household income does not exceed $20,000; or (ii) the amount of the assessed value of the property for any person who has the legal or equitable title to real estate with a just value less than $250,000 and has maintained thereon the permanent residence of the owner for at least 25 years, who has attained age 65, and whose household income does not exceed the income limitation prescribed in (i) above, adjusted annually as prescribed by Section (3). The additional homestead tax exemption authorized by HJR 169 would not apply to school property taxes. The City has enacted an ordinance granting the homestead exemption to any person who has the legal or equitable title to real estate and maintains thereon the permanent residence of the owner, who has attained age 65, and whose household income does not exceed $20,000, adjusted as prescribed therein and in Section (3). Each of the above described proposals was approved as an amendment to the Florida Constitution by the voters on November 6, During the Florida Legislature's 2013 Regular Session, it passed Senate Bill 1830 ("SB 1830"), which was signed into law by the Governor and creates a number of changes affecting ad valorem taxation and which became effective July 1, SB 1830 (i) provides long-term lessees the ability to retain their homestead exemption and related assessment limitations and exemptions in certain instances and extends the time for property owners to appeal value adjustment board decisions on transfers of assessment limitations to conform with general court filing timeframes, (ii) inserts the term "algaculture" in the definition of "agricultural purpose" and inserts the term "algacultural crops" in the provision specifying the valuation of certain annual agricultural crops, nonbearing fruit trees and nursery stock, (iii) allows for an automatic renewal for assessment reductions related to certain additions to homestead properties used as living quarters for a parent or grandparent and aligns related appeal and penalty provisions to those for other homestead exemptions, (iv) deletes a statutory requirement that the owner of the property must reside upon the property to qualify for a homestead exemption, (v) clarifies the property tax exemptions counties and cities may provide for certain low income persons age 65 and older, (vi) removes a residency requirement that a senior disabled veteran must have been a Florida 32

41 resident at the time they entered the service to qualify for certain property tax exemptions, (vii) repeals the ability for certain limited liability partnerships to qualify for the affordable housing property tax exemption, and (viii) exempts property used exclusively for educational purposes when the entities that own the property and the educational facility are owned by the same natural persons. Also during the Florida Legislature's 2013 Regular Session, the Florida Legislature passed House Bill 277 ("HB 277"), which was signed into law by the Governor. HB 277 provides that certain renewable energy devices are exempt from being considered when calculating the assessed value of residential property. HB 277 only applies to devices installed on or after January 1, HB 277 took effect on July 1, Also during the Florida Legislature's 2013 Regular Session, the Florida Legislature passed House Bill 1193 ("HB 1193"), which was signed into law by the Governor. HB 1193 eliminated three ways in which the property appraiser had authority to reclassify agricultural land as non-agricultural land. Additionally, HB 1193 relieves the value adjustment board of the authority to review certain property classifications of the property appraisers. HB 1193 is effective immediately and will apply retroactively to January 1, There can be no assurance that similar or additional legislative or other proposals will not be introduced or enacted in the future that would, or might apply to, or have a material adverse effect upon, the City's finances. Legislative Proposals Relating to Ad Valorem Taxation. During recent years, various other legislative proposals and constitutional amendments relating to ad valorem taxation and revenue limitation have been introduced in the Florida Legislature. Many of these proposals provide for new or increased exemptions to ad valorem taxation, limit increases in assessed valuation of certain types of property or otherwise restrict the ability of local governments in the State to levy ad valorem taxes at recent, historical levels. There can be no assurance that similar or additional legislative or other proposals will not be introduced or enacted in the future that would, or might apply to, or have a material adverse effect upon, the City's finances. To the extent ad valorem tax collections are reduced or restricted, the effect could be a reduction in the amount of Non-Ad Valorem Revenues available to be budgeted and appropriated under the Resolution. [Remainder of page intentionally left blank] 33

42 ESTIMATED SOURCES AND USES OF FUNDS The proceeds received from the sale of the Series 2016 Bonds, together with other legally available funds of the City, are expected to be applied as follows: SOURCES OF FUNDS: Principal Amount of Series 2016 Bonds $16,545, Plus Net Original Issue Premium 1,004, TOTAL SOURCES $17,549, USES OF FUNDS: Deposit to Construction Fund $10,000, Deposit to Escrow Account 7,134, Costs of Issuance (1) 414, TOTAL USES $17,549, (1) Includes the original purchaser's discount (which excludes the municipal bond insurance premium paid separately by the original purchaser), legal fees, registrar and paying agent fees, financial advisor fees and printing costs. [Remainder of page intentionally left blank] 34

43 DEBT SERVICE REQUIREMENTS The following table sets forth the debt service on the Series 2016 Bonds. Year Ending October 1 Principal Interest Total Debt Service 2016 $100,000 $298, $398, , , , , , , , , , , , , , , , , , ,096, , , ,094, , , ,091, , , ,086, , , ,096, , , ,093, , , ,094, , , ,095, , , ,095, , , ,091, , , ,097, , , ,097, , , ,097, , , ,094, , , , , , , , , , , , , , , , ,000 96, , ,000 82, , ,000 66, , ,000 50, , ,000 34, , ,000 17, , TOTAL $16,545,000 $9,483, $26,028, [Remainder of page intentionally left blank] 35

44 THE CITY The City, located in the County, was originally incorporated as Newnansville in 1839 and established as the City of Alachua in 1905 under the legal authority of Chapter 165, Florida Statutes. Under its Charter, the City functions under a City Manager-Commission form of government. The elected officials of the City are the five commissioners, each of whom is elected for three-year terms. The elections are staggered so that two members of the Commission are elected at one time, two are elected one year later and one is elected one year later and one is elected in the following year, in order to provide continuity of service by the Commission. Commission members run for specific seats and all elections are non-partisan. For additional information concerning the City, see "APPENDIX A - General Information Concerning the City" attached hereto. RISK FACTORS The purchase of the Series 2016 Bonds involves a degree of risk, as is the case with all investments. Factors that could affect the City's ability to perform its obligations under the Resolution, including the timely payment of principal of and interest on the Series 2016 Bonds, include, but are not limited to, the following: 1. There is no assurance that any rating assigned to the Series 2016 Bonds by the rating agencies will continue for any given period of time or that it will not be lowered or withdrawn entirely by such rating agency, if in its judgment, circumstances warrant. A downgrade change in or withdrawal of any rating may have an adverse effect on the market price of the Series 2016 Bonds. 2. In the event of a default in the payment of principal of and interest on the Series 2016 Bonds, the remedies of the owners of the Series 2016 Bonds are limited under the Resolution. 3. The City is not required and does not covenant to maintain any services or programs which generate Non-Ad Valorem Revenues. Cancellation of any services or programs which are not essential services that generate Non-Ad Valorem Revenues could have an adverse effect on the City fulfilling its covenant obligations under the Resolution. Prospective purchasers of the Series 2016 Bonds should review carefully the provisions of the Resolution, the form of which is included as Appendix C to this Official Statement. Bond Insurance Policy MUNICIPAL BOND INSURANCE 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 The Insurer is a New York domiciled mutual insurance corporation. The Insurer provides credit enhancement products solely to issuers in the U.S. public finance markets. The Insurer will only insure 36

45 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 the Insurer is liable for the obligations of the Insurer. The address of the principal executive offices of the Insurer is: 200 Liberty Street, 27 th Floor, New York, New York 10281, its telephone number is: , and its website is located at: The Insurer 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. The Insurer'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 the Insurer should be evaluated independently. The rating reflects the S&P's current assessment of the creditworthiness of the Insurer and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the Series 2016 Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of the Insurer in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Series 2016 Bonds. The Insurer only guarantees scheduled principal and scheduled interest payments payable by the Authority 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 the Insurer does not guarantee the market price or liquidity of the Series 2016 Bonds, nor does it guarantee that the rating on the Series 2016 Bonds will not be revised or withdrawn. Capitalization of Insurer The Insurer's total admitted assets, total liabilities, and total capital and surplus, as of December 31, 2015 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $479.6 million, $42.3 million and $437.3 million, respectively. The Insurer 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 the Insurer, subject to certain limitations and restrictions. The Insurer's most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on the Insurer's website at is incorporated herein by reference and may be obtained, without charge, upon request to the Insurer at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published. The Insurer makes no representation regarding the Series 2016 Bonds or the advisability of investing in the Series 2016 Bonds. In addition, the Insurer 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 the Insurer, supplied by the Insurer and presented under the heading "MUNICIPAL BOND INSURANCE." 37

46 Additional Information Available from the Insurer Credit Insights Videos. For certain Insurer-insured issues, the Insurer produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors the Insurer's analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on the Insurer's website at buildamerica.com/creditinsights/. (The preceding website 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 the 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 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 the Insurer; they have not been reviewed or approved by the City or the original purchaser of the Series 2016 Bonds, and the City and the original purchaser assume no responsibility for their content. The Insurer receives compensation (an insurance premium) for the insurance that it is providing with respect to the Series 2016 Bonds. Neither the Insurer nor any affiliate of the Insurer has purchased, or committed to purchase, any of the Series 2016 Bonds, whether at the initial offering or otherwise. MUNICIPAL BOND INSURANCE RISK FACTORS In the event of default of the payment of principal or interest with respect to the Series 2016 Bonds when all or some becomes due, any owner of the Series 2016 Bonds shall have a claim under the Policy for such payments. However, in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments are to be made in such amounts and at such times as such payments would have been due had there not been any such acceleration. The Policy does not insure against redemption premium, if any. The payment of principal and interest in connection with mandatory or optional prepayment of the Series 2016 Bonds by the City which is recovered by the City from the bond owner as a voidable preference under applicable bankruptcy law is covered by the Policy, however, such payments will be made by the Insurer at such time and in such amounts as would have been due absence such prepayment by the City unless the Insurer chooses to pay such amounts at an earlier date. 38

47 Under most circumstances, default of payment of principal and interest does not obligate acceleration of the obligations of the Insurer without appropriate consent. The Insurer may direct and must consent to any remedies and the Insurer s consent may be required in connection with amendments to the Resolution. In the event the Insurer is unable to make payment of principal and interest as such payments become due under the Policy, the Series 2016 Bonds are payable solely from the moneys received pursuant to the Resolution. In the event the Insurer becomes obligated to make payments with respect to the Series 2016 Bonds, no assurance is given that such event will not adversely affect the market price of the Series 2016 Bonds or the marketability (liquidity) for the Series 2016 Bonds. The long-term ratings on the Series 2016 Bonds are dependent in part on the financial strength of the Insurer and its claim paying ability. The Insurer s financial strength and claims paying ability are predicated upon a number of factors which could change over time. No assurance is given that the longterm ratings of the Insurer and of the ratings on the Series 2016 Bonds will not be subject to downgrade and such event could adversely affect the market price of the Series 2016 Bonds or the marketability (liquidity) for the Series 2016 Bonds. See "RATINGS" herein. The obligations of the Insurer are contractual obligations and in an event of default by the Insurer, the remedies available may be limited by applicable bankruptcy law or state law related to insolvency of insurance companies. General TAX MATTERS The Code establishes certain requirements which must be met subsequent to the issuance of the Series 2016 Bonds in order that interest on the Series Bonds be and remain excluded from gross income for purposes of federal income taxation. Non-compliance may cause interest on the Series 2016 Bonds to be included in federal gross income retroactive to the date of issuance of the Series 2016 Bonds, regardless of the date on which such non-compliance occurs or is ascertained. These requirements include, but are not limited to, provisions which prescribe yield and other limits within which the proceeds of the Series 2016 Bonds and the other amounts are to be invested and require that certain investment earnings on the foregoing must be rebated on a periodic basis to the Treasury Department of the United States. The City has covenanted in the Resolution with respect to the Series 2016 Bonds to comply with such requirements in order to maintain the exclusion from federal gross income of the interest on the Series 2016 Bonds. In the opinion of Bond Counsel, assuming compliance with certain covenants, under existing laws, regulations, judicial decisions and rulings, interest on the Series 2016 Bonds is excluded from gross income for purposes of federal income taxation. Interest on the Series 2016 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals or corporations; however, interest on the Series 2016 Bonds may be subject to the federal alternative minimum tax when any Series 2016 Bond is held by a corporation. The federal alternative minimum taxable income of a corporation must be increased by seventy-five percent (75%) of the excess of such corporation's adjusted current earnings over its alternative minimum taxable income (before this adjustment and the alternative tax net operating loss deduction). "Adjusted Current Earnings" will include interest on the Bonds. 39

48 Except as described above, Bond Counsel will express no opinion regarding other federal income tax consequences resulting from the ownership of, receipt or accrual of interest on, or disposition of Series 2016 Bonds. Prospective purchasers of Series 2016 Bonds should be aware that the ownership of Series 2016 Bonds may result in collateral federal income tax consequences, including (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase or carry Series 2016 Bonds; (ii) the reduction of the loss reserve deduction for property and casualty insurance companies by fifteen percent (15%) of certain items, including interest on Series 2016 Bonds; (iii) the inclusion of interest on Series 2016 Bonds in earnings of certain foreign corporations doing business in the United States for purposes of the branch profits tax; (iv) the inclusion of interest on Series 2016 Bonds in passive income subject to federal income taxation of certain Subchapter S corporations with Subchapter C earnings and profits at the close of the taxable year; and (v) the inclusion of interest on Series 2016 Bonds in "modified adjusted gross income" by recipients of certain Social Security and Railroad Retirement benefits for the purposes of determining whether such benefits are included in gross income for federal income tax purposes. As to questions of fact material to the opinion of Bond Counsel, Bond Counsel will rely upon representations and covenants made on behalf of the City, certificates of appropriate officers and certificates of public officials (including certifications as to the use of proceeds of the Series 2016 Bonds and of the property financed or refinanced thereby), without undertaking to verify the same by independent investigation. PURCHASE, OWNERSHIP, SALE OR DISPOSITION OF THE SERIES 2016 BONDS AND THE RECEIPT OR ACCRUAL OF THE INTEREST THEREON MAY HAVE ADVERSE FEDERAL TAX CONSEQUENCES FOR CERTAIN INDIVIDUAL AND CORPORATE BONDHOLDERS, INCLUDING, BUT NOT LIMITED TO, THE CONSEQUENCES DESCRIBED ABOVE. PROSPECTIVE BONDHOLDERS SHOULD CONSULT WITH THEIR TAX SPECIALISTS FOR INFORMATION IN THAT REGARD. Information Reporting and Backup Withholding Interest paid on tax-exempt bonds, such as the Series 2016 Bonds, is subject to information reporting to the Internal Revenue Service in a manner similar to interest paid on taxable obligations. This reporting requirement does not affect the excludability of interest on the Series 2016 Bonds from gross income for federal income tax purposes. However, in conjunction with that information reporting requirement, the Code subjects certain non-corporate owners of Series 2016 Bonds, under certain circumstances, to "backup withholding" at the rate specified in the Code with respect to payments on the Series 2016 Bonds and proceeds from the sale of Series 2016 Bonds. Any amount so withheld would be refunded or allowed as a credit against the federal income tax of such owner of Series 2016 Bonds. This withholding generally applies if the owner of Series 2016 Bonds (i) fails to furnish the payor such owner's social security number or other taxpayer identification number ("TIN"), (ii) furnished the payor an incorrect TIN, (iii) fails to properly report interest, dividends, or other "reportable payments" as defined in the Code, or (iv) under certain circumstances, fails to provide the payor or such owner's securities broker with a certified statement, signed under penalty of perjury, that the TIN provided is correct and that such owner is not subject to backup withholding. Prospective purchasers of the Series 2016 Bonds may also wish to consult with their tax advisors with respect to the need to furnish certain taxpayer information in order to avoid backup withholding. 40

49 Other Tax Matters During recent years, legislative proposals have been introduced in Congress, and in some cases enacted, that altered certain federal tax consequences resulting from the ownership of obligations that are similar to the Series 2016 Bonds. In some cases, these proposals have contained provisions that altered these consequences on a retroactive basis. Such alteration of federal tax consequences may have affected the market value of obligations similar to the Series 2016 Bonds. From time to time, legislative proposals are pending which could have an effect on both the federal tax consequences resulting from ownership of the Series 2016 Bonds and their market value. No assurance can be given that legislative proposals will not be enacted that would apply to, or have an adverse effect upon, the Series 2016 Bonds. For example, in connection with federal deficit reduction, job creation and tax law reform efforts, proposals have been and others are likely to be made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income of interest on obligations like the Series 2016 Bonds. There can be no assurance that any such legislation or proposal will be enacted, and if enacted, what form it may take. The introduction or enactment of any such legislative proposals may affect, perhaps significantly, the market price for, or marketability of, the Series 2016 Bonds. Prospective purchasers of the Series 2016 Bonds should consult their own tax advisors as to the tax consequences of owning the Series 2016 Bonds in their particular state or local jurisdiction and regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Tax Treatment of Original Issue Discount Under the Code, the difference between the maturity amount of the Series 2016 Bonds maturing on October 1 in the years 2031 through and including 2046 (collectively, the "Discount Bonds"), and the initial offering price to the public, excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers, at which price a substantial amount of the Discount Bonds of the same maturity and, if applicable, interest rate, was sold is "original issue discount." Original issue discount will accrue over the term of the Discount Bonds at a constant interest rate compounded periodically. A purchaser who acquires the Discount Bonds in the initial offering at a price equal to the initial offering price thereof to the public will be treated as receiving an amount of interest excludable from gross income for federal income tax purposes equal to the original issue discount accruing during the period he or she holds the Discount Bonds, and will increase his or her adjusted basis in the Discount Bonds by the amount of such accruing discount for purposes of determining taxable gain or loss on the sale or disposition of the Discount Bonds. The federal income tax consequences of the purchase, ownership and redemption, sale or other disposition of the Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those above. Holders of the Discount Bonds should consult their own tax advisors with respect to the precise determination for federal income tax purposes of interest accrued upon sale, redemption or other disposition of the Discount Bonds and with respect to the State and local tax consequences of owning and disposing of the Discount Bonds. Tax Treatment of Bond Premium The difference between the principal amount of the Series 2016 Bonds maturing on October 1 in the years 2016 through and including 2029 (collectively, the "Premium Bonds"), and the initial offering price to the public (excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of such Premium Bonds of 41

50 the same maturity and, if applicable, interest rate, was sold constitutes to an initial purchaser amortizable bond premium which is not deductible from gross income for federal income tax purposes. The amount of amortizable bond premium for a taxable year is determined actuarially on a constant interest rate basis over the term of each of the Premium Bonds, which ends on the earlier of the maturity or call date for each of the Premium Bonds which minimizes the yield on such Premium Bonds to the purchaser. For purposes of determining gain or loss on the sale or other disposition of a Premium Bond, an initial purchaser who acquires such obligation in the initial offering is required to decrease such purchaser's adjusted basis in such Premium Bond annually by the amount of amortizable bond premium for the taxable year. The amortization of bond premium may be taken into account as a reduction in the amount of tax-exempt income for purposes of determining various other tax consequences of owning such Premium Bonds. Holders of the Premium Bonds are advised that they should consult with their own tax advisors with respect to the state and local tax consequences of owning such Premium Bonds. LITIGATION There is no litigation pending or, to the knowledge of the City, threatened, seeking to restrain or enjoin the issuance or delivery of the Series 2016 Bonds or questioning or affecting the validity of the Series 2016 Bonds or the proceedings and authority under which they are to be issued. Neither the creation, organization or existence, nor the title of the present members or other officers of the City to their respective offices is being contested. In the opinion of the City Attorney, except as described above, any pending, or to her knowledge after due inquiry, threatened, litigation against the City, which represents potential liability for the City, will not have a material effect on its financial position or its ability to perform its obligations to the Series 2016 Bondholders. COMPETITIVE SALE The Series 2016 Bonds have been purchased at competitive sale by UBS Financial Services, Inc. (the "Purchaser") at an aggregate price of $17,362, (representing the par amount of the Series 2016 Bonds less an underwriting discount of $186, (excludes the bond insurance premium to be paid by the Purchaser), plus net original issue premium of $1,004,178.90). The Purchaser s obligations are subject to certain conditions precedent described in the Official Notice of Sale and it will be obligated to purchase all of the Series 2016 Bonds if any Series 2016 are purchased. The yields shown on the inside cover page hereof were furnished by the Purchaser. All other information concerning the nature and terms of any re-offering should be obtained from the Purchaser. LEGAL MATTERS Legal matters incident to the authorization, issuance and sale of the Series 2016 Bonds are subject to the approval of Bryant Miller Olive P.A., Tampa, Florida, Bond Counsel. The proposed legal opinion, in the form attached hereto as APPENDIX E, will be delivered with the Series 2016 Bonds. The actual legal opinion to be delivered by Bond Counsel may vary from the form attached hereto if necessary to reflect facts and law on the date of delivery of the opinion. The opinion will speak only as of its date, and subsequent distribution by recirculation of this Official Statement or otherwise shall create no implication that Bond Counsel has renewed or expressed any opinion concerning any of the matters 42

51 referenced in the opinion subsequent to the date of the opinion. Certain other legal matters will be passed upon for the City by the City Attorney, Marian Rush, Esq., Alachua, Florida, and by Bryant Miller Olive P.A., Tampa, Florida, Disclosure Counsel. The legal opinions to be delivered concurrently with the delivery of the Series 2016 Bonds express the professional judgment of the attorneys rendering the opinions regarding the legal issues expressly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of the result indicated by that expression of professional judgment of the transaction on which the opinion is rendered or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. FINANCIAL ADVISOR The City has retained Public Financial Management, Inc., as financial advisor (the "Financial Advisor") in connection with the City's financing plans and with respect to the authorization and issuance of the Series 2016 Bonds. The Financial Advisor is not obligated to, and has not undertaken to, independently verify or to assume responsibility for the accuracy, completeness, or fairness of the information contained in the Official Statement. The Financial Advisor may receive a fee for bidding certain investments to be deposited into the Escrow Account. VERIFICATION OF ARITHMETICAL COMPUTATIONS At the time of the delivery of the Series 2016 Bonds, the Verification Agent, will deliver a report on the arithmetical accuracy of the computations contained in schedules provided to them and prepared by the Financial Advisor on behalf of the City relating to (a) the sufficiency of the anticipated cash to pay, when due, the principal, whether at maturity or upon prior redemption, interest and call premium requirements, if any, of the Escrow Bonds and (b) the "yield" on the Series 2016 Bonds considered by Bond Counsel in connection with its opinion that the Series 2016 Bonds are not "arbitrage bonds" within the meaning of Section 148 of the Code, as amended. RATINGS S&P is expected to assign its rating of "AA" (stable outlook) to the Series 2016 Bonds based upon the issuance of the Policy by the Insurer at the time of delivery of the Series 2016 Bonds. In addition, Moody's Investors Service has assigned its underlying municipal bond rating of "A1" to the Series 2016 Bonds without regard to the Policy. Such ratings reflect only the views of such rating agencies. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that such rating will continue for any given period of time or that the same will not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Series 2016 Bonds. An explanation of the significance of the rating may be obtained only from the rating agencies at the following addresses: Standard & Poor's Ratings Services, 25 Broadway, New York, New York and/or Moody's Investor Services, Inc., 7 World Trade Center, 250 Greenwich Street, 23 rd Floor, New York, New York

52 CONTINUING DISCLOSURE The City has covenanted for the benefit of the Beneficial Owners of the Series 2016 Bonds to provide certain financial information relating to the Non-Ad Valorem Revenues and the Series 2016 Bonds in each year, and to provide notices of the occurrence of certain enumerated events. Annual financial information and operating data and the audited financial statements will be filed by the City with the Municipal Securities Rulemaking Board ("MSRB"). The notices of events, when and if they occur, shall be timely filed by the City with the MSRB. The specific nature of the financial information, and of the type of events which trigger a disclosure obligation, and other details of the undertaking are described in "APPENDIX D - Form of Disclosure Dissemination Agent Agreement" attached hereto. The Disclosure Dissemination Agent Agreement between the City and Digital Assurance Certification L.L.C. ("DAC") will be executed on or prior to the issuance of the Series 2016 Bonds. The City has contracted with and designated DAC as dissemination agent under the Disclosure Dissemination Agent Agreement. Such dissemination services may be discontinued at any time. Information concerning the Series 2016 Bonds may be found at DAC's website Under prior continuing disclosure undertakings, the City is obligated to file with the MSRB audited or, if unavailable, unaudited, financial statements and operating data for the Fiscal Year ended September 30, 2015, by March 31, Neither the audited nor unaudited financial statements were available to meet the filing deadline due to the implementation of the Governmental Accounting Standards Board Statement No. 68 Accounting and Financial Reporting for Pensions for fiscal year ended September 30, The City has not yet received from the State of Florida its financial information related to its pension obligations for its participation in the Florida Retirement System. Completion of such financial statements is dependent on receipt by the City of such financial information. The City filed a notice of failure to file its annual report with the MSRB, and upon completion of its financial statements, the City will file such financial statements with the MSRB. General FINANCIAL STATEMENTS The Comprehensive Annual Financial Report of the City, at and for the fiscal year ended September 30, 2014, including the City s Financial Statements for such fiscal year and report thereon of the City's independent certified public accountants (the "Auditor"), has been included as APPENDIX B to this Official Statement as a matter of public record and the consent of the Auditors to include such documents was not requested. The Auditor was not requested to perform and has not performed any services in connection with the preparation of this Official Statement or the issuance of the Series 2016 Bonds. Implementation of GASB 68 The Governmental Accounting Standards Board (GASB) issued Statement No. 68, "Accounting and Financial Reporting for Pensions" ("GASB No. 68") an amendment to GASB Statement No. 27, "Accounting for Pensions by State and Local Governmental Employers", which is effective for the City s Fiscal Year ended September 30, As a participating employer, the City implemented GASB No. 68, which requires employers participating in cost-sharing multiple-employer defined benefit pension plans to report the employers proportionate share of the net pension liabilities of the defined benefit pension 44

53 plans. The greatest impact of GASB No. 68 to the City will be the inclusion of the City s proportionate share of the FRS Net Pension Liability, which will reduce the City s unrestricted net position and total net position. As a result of the implementation of GASB No. 68, the information contained in the City s audited financial statements for the fiscal year ended September 30, 2014 and related notes included relating to pension fund liability is not indicative of how pension fund liability will be reported by the City going forward. Reductions are accrual based accounting changes and do not represent reductions in cash or liquidity positions. The City does not expect that implementation of GASB 68 will adversely affect the City's ability to pay debt service on the Series 2016 Bonds. DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS Pursuant to Section , Florida Statutes, as amended, no person may directly or indirectly offer or sell securities of the City except by an offering circular containing full and fair disclosure of all defaults as to principal or interest on its obligations since December 31, 1975, as provided by rule of the Office of Financial Regulation within the Florida Financial Services Commission (the "FFSC"). Pursuant to administrative rulemaking, the FFSC has required the disclosure of the amounts and types of defaults, any legal proceedings resulting from such defaults, whether a trustee or receiver has been appointed over the assets of the City, and certain additional financial information, unless the City believes in good faith that such information would not be considered material by a reasonable investor. The City is not and has not been in default on any bond issued since December 31, 1975 that would be considered material by a reasonable investor. CONTINGENT FEES The City has retained Bond Counsel, the Financial Advisor and Disclosure Counsel with respect to the authorization, sale, execution and delivery of the Series 2016 Bonds. Payment of the fees of such professionals is contingent upon the issuance of the Series 2016 Bonds. ENFORCEABILITY OF REMEDIES The remedies available to the owners of the Series 2016 Bonds upon an event of default under the Resolution or the Policy are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically the federal bankruptcy code, the remedies specified by the Resolution, the Series 2016 Bonds or the Policy, may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Series 2016 Bonds, including Bond Counsel's approving opinion, will be qualified, as to the enforceability of the remedies provided in the various legal instruments, by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors enacted before or after such delivery. See "APPENDIX C Form of Resolution" attached hereto for a description of events of default and remedies. MISCELLANEOUS The City has furnished all information in this Official Statement except where attributed to other sources. 45

54 References herein to the Resolution, the Series 2016 Bonds and certain other contracts, agreements and other materials not purporting to be quoted in full are brief summaries of certain provisions thereof, and do not purport to describe all the provisions thereof. Reference is hereby made to such documents and other materials for the complete provisions thereof, copies of which will be furnished by the City upon written request. The information herein is subject to change without notice and neither the delivery of the Official Statement nor any sale of the Series 2016 Bonds made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City, except as stated herein, since the date hereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. Statements herein, while not guaranteed, are based upon information which the City believes to be reliable. CERTIFICATE CONCERNING OFFICIAL STATEMENT The undersigned Mayor and City Manager and City Clerk of the City of Alachua, Florida, do hereby certify that (i) the delivery of the Official Statement has been duly authorized by the Commission; (ii) to the best of their knowledge and belief, the statements herein are true and correct; and (iii) nothing has come to their attention which would lead them to believe that the Official Statement (excluding the information regarding the Insurer, the Policy and DTC and its book-entry only system of registration as to all of which no opinion is expressed), as of its date and as of the date of delivery of the Series 2016 Bonds, contains an untrue statement of a material fact or omits to state a material fact which should be included herein for the purpose for which the Official Statement is intended to be used, or which is necessary to make the statements contained herein, in light of the circumstances under which they were made, not misleading. CITY OF ALACHUA, FLORIDA By: /s/ Gib Coerper Mayor By: /s/ Traci Gresham City Manager and City Clerk 46

55 APPENDIX A General Information Concerning the City

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57 APPENDIX A GENERAL INFORMATION CONCERNING THE CITY General The City is located in the central portion of peninsular Florida in Alachua County. The City lies approximately 70 miles southwest of Jacksonville (Duval County), 146 miles northeast of Tampa and St. Petersburg, 122 miles north of Orlando, 346 miles north of Miami and 128 miles south of Tallahassee. The 2014 population estimate for the City was 9,300. The City is one of nine incorporated municipalities in Alachua County. The largest being the City of Gainesville, the county seat. The City's major operations include various utility services, electric, water and wastewater, as well as police protection, road and street maintenance, parks, recreation, and other general government services. The City contracts with Alachua County for the provision of fire service at a fixed cost which is renegotiated annually. The City leases the fire station and equipment to Alachua County at no cost. Sanitation services are provided by private company, but billed by the City to its customers. The City retains an administrative fee on sanitation services. Ad Valorem Taxes Set forth below is information concerning ad valorem taxes assessed and collected by the City for the fiscal years ended September 30, 2006 through and including 2015 and the principal taxpayers for the fiscal year ended September 30, A-1

58 Fiscal Year Ended September 30 Assessed Value and Estimated Actual Value of Taxable Property Personal and Centrally Assessed Property Residential Property Commercial Property Agricultural Property Industrial Property Non-Taxable Real Property Less: Tax Exempt Property Total Taxable Assessed Value Total Direct Tax Rate 2006 $365,001,800 $67,234,800 $30,265,500 $86,254,300 $62,440,300 $82,886,340 $199,049,550 $495,033, % ,024,100 85,797,400 32,490,500 85,250,300 72,842,900 93,854, ,711, ,548, ,100, ,112,900 35,005, ,646,800 77,307,900 99,036, ,998, ,211, ,343, ,092,400 37,888, ,769,900 97,840, ,181, ,977, ,137, ,600, ,537,800 69,227, ,400, ,260, ,482, ,027, ,482, ,077, ,257,104 60,791, ,987, ,136, ,519, ,288, ,481, ,660, ,238,080 59,247, ,060, ,266, ,380, ,929, ,923, ,161, ,282,970 57,665, ,863, ,179, ,588, ,987, ,763, ,698, ,926,610 56,734, ,789, ,937, ,914, ,927, ,072, ,733, ,342,560 57,151, ,327, ,459, ,433, ,232, ,215, Source: City of Alachua, Florida Finance Department. A-2

59 Fiscal Year Ended September 30 Property Tax Levies and Collections Collected within the Fiscal year of the Levy Collections in Subsequent Years Total Collections to Date Taxes Levied for the Fiscal Year Amount Percentage of Levy Amount Percentage of Levy 2006 $2,821,691 $2,715, % $6,363 $2,721, % ,209,518 3,063, ,648 3,077, ,175,566 3,056, ,354 3,071, ,598,243 3,459, ,073 3,464, ,408,153 4,234, ,473 4,241, ,199,149 4,042, ,578 4,051, ,860,579 3,688, ,729 3,695, ,749,700 3,612, ,712 3,650, ,778,901 3,643, ,521 3,650, ,757,685 3,632, ,669 3,638, Source: City of Alachua, Florida Finance Department. Principal Property Taxpayers Percentage of Total Name Taxable Assessed Value (1) City Taxable Assessed Value Wal-Mart Stores East LP $65,489, % Dolgencorp, Inc. 56,415, Baugh Southeast Cooperative, Inc. 30,718, Regeneration Technologies, Inc. 23,802, SNH Medical Office Properties, Trust 11,372, Waco of Alabama, Inc. 10,514, Alachua Development, LLC 10,206, South Redistribution Center, Inc. 9,225, Lowes Home Centers, Inc. 8,091, MAS Holding Company 5,029, $230,865, % (1) The total taxable assessed value of the City for the fiscal year ended September 30, 2015 was $683,215,371. Source: City of Alachua, Florida Finance Department. A-3

60 Demographics The following tables provide population and income, projected population, principal employers, unemployment rates, employment by sector and building permit activity for the period shown: Population and Income Year City Population Gainesville MSA Population Per Capita Income (1) , ,779 31, , ,985 32, , ,099 32, , ,625 32, , ,030 34, , ,475 35, , ,369 34, , ,232 36, , ,382 38, , ,377 38,462 (1) Per Capital Income figures are based on Gainesville Metropolitan Statistical Area. Source: City of Alachua, Florida Finance Department. Principal Employers Number of Name Employees Walmart Distribution Center 762 Dollar General Distribution Center 600 Regeneration Technologies, Inc. 540 School Board of Alachua County 323 Lowes 143 State of Florida 139 Baugh Southeast Cooperative, Inc. 131 Sandvik Mining & Construction USA, LLC* 129 City of Alachua 119 Greenway Health (Vitera)** 102 * Formerly Drilltech ** Formerly Medical Manger Source: City of Alachua, Florida Finance Department. A-4

61 Unemployment Rates Alachua County, State of Florida and the United States Fiscal Year Ended September 30 County State United States % 3.7% 5.1% Source: Florida Research and Economic Information Database Application, Labor Market Statistics, Local Area Unemployment Statistics Program. [Remainder of page intentionally left blank] A-5

62 The following chart shows the average monthly employment in the various sectors of the labor force in actual numbers of people employed in the County and the average weekly wage: Employment By Sector Industry Title Average Employment Average Weekly Wage Accommodation and Food Services 11,954 $296 Administration and Waste Services 5, Agriculture, Forestry, Fishing and Hunting 1, Arts, Entertainment, and Recreation 1, Construction 4, Educational Services 23,982 1,095 Finance and Insurance 3,795 1,053 Health Care and Social Assistance 26, Information 1,641 1,089 Management of Companies and Enterprises 561 1,399 Manufacturing 4, Other Services, Ex. Public Administration 3, Professional and Technical Services 5,519 1,030 Public Administration 6, Real Estate and Rental and Leasing 2, Retail Trade 13, Transportation and Warehousing 2, Unclassified Wholesale Trade 2,382 1,096 Source: Florida Department of Economic Opportunity, Florida Employment and Wages by County, Annual NAICS Sector (2014). A-6

63 Building Permit Revenue Fiscal Year Ended Residential Commercial 2006 $120,589 $96, , , ,342 61, ,989 55, ,307 23, ,066 39, ,189 29, ,533 53, ,276 99, ,128 67,172 Source: City of Alachua, Florida Finance Department. Fiscal Policies Debt Management Policy. The City s debt management policy was adopted September 23, 2013 (the "Debt Management Policy") to establish guidance for the issuance and management of the debt of the City. The Debt Management Policy provides guidance for the issuance of short term and long term debt, the manner of sale of debt, the amortization structure, and the issuance of variable rate debt. The Debt Management Policy is to be reviewed and revised as needed not less than every three (3) years. Investment Policy. The City s investment policy (the "Investment Policy") is designed to ensure the prudent management of public funds, the availability of operating and capital funds when needed, and an investment return competitive with comparable funds and financial market indices. The Investment Policy applies to all cash and investments held or controlled by the City with the exception of Pension Funds and funds related to the issuance of debt where there are other existing policies or indentures in effect for such funds. The Investment Policy s objective is the safety of the principal of those funds within the portfolios and management to preserve liquidity to meet reasonably anticipated cash flow requirements in an orderly manner. Periodical cash flow analyses are required to be completed in order to ensure that the portfolios are positioned to provide sufficient liquidity. The Investment Policy requires the Finance Director to establish a system of internal controls and operational procedures that are in writing and made a part of the City s operational procedures which are review as a normal part of the financial audit. Authorized City staff and Investment Advisors may only purchase securities from financial institutions, which are qualified as public depositories by the Treasurer of the State of Florida, institutions designated as "Primary Securities Dealers" by the Federal Reserve Bank of New York, or from direct issuers of commercial paper and bankers acceptances and may only enter into repurchase agreements with financial institutions that are state qualified public depositories and primary securities dealers as designated by the Federal Reserve Bank of New York. To the extent possible, an attempt must be made to match investment maturities with known cash needs and anticipated cash flow requirements. Investments of current operating funds shall have maturities of no longer than twenty-four (24) months. Investments of bond reserves, construction funds, and other non-operating funds shall have a term appropriate to the need for funds and in accordance with debt covenants, but in no event shall exceed five (5) years. The maturities of the underlying securities of a repurchase agreement must follow the requirements of the Master Repurchase Agreement. A-7

64 The Investment Policy sets forth policies regarding competitive selection of investment instruments as well as performance measurement standards and internal reporting requirements. Subject to certain portfolio allocation limits, the following are the investment requirements. Investments not listed in the Investment Policy are prohibited. A. The Florida Local Government Surplus Funds Trust Fund ("SBA") B. United States Government Securities, including Cash Management Bills Treasury Securities State and Local Government Series ("SLGS") Treasury Bills Treasury Notes Treasury Bonds Treasury Strips C. United States Government Agencies, including bonds, debentures, notes or callables issued or guaranteed by the United States Governments agencies, provided such obligations are backed by the full faith and credit of the United States Government. Such securities will include, but not be limited to the following: United States Export Import Bank Direct obligations or fully guaranteed certificates of beneficial ownership Farmer Home Administration Certificates of beneficial ownership Federal Financing Bank Discount notes, notes and bonds Federal Housing Administration Debentures General Services Administration United States Maritime Administration Guaranteed Title XI Financing New Communities Debentures United States Government guaranteed debentures United States Public Housing Notes and Bonds United States Government guaranteed public housing notes and bonds United States Department of Housing and Urban Development Project notes and local authority bonds D. Federal Instrumentalities (United States Government sponsored agencies), including bonds, debentures, notes or callables issued or guaranteed by United States Government sponsored agencies (Federal Instrumentalities) which are non-full faith and credit agencies limited to the following: Federal Farm Credit Bank (FFCB) Federal Home Loan Bank or its district banks (FHLB) Federal National Mortgage Association (FNMA) Federal Home Loan Mortgage Corporation (Freddie-Macs) including Federal - Home Loan Mortgage Corporation participation certificates Student Loan Marketing Association (Sallie-Mae) A-8

65 E. Interest Bearing Time Deposit or Saving Accounts, including non-negotiable interest bearing time certificates of deposit or savings accounts in banks organized under the laws of this state and/or in national banks organized under the laws of the United States and doing business and situated in the State of Florida, provided that any such deposits are secured by the Florida Security for Public Deposits Act, Chapter 280, Florida Statutes. Additionally, the bank shall not be listed with any recognized credit watch information service. F. Repurchase Agreements composed of only those investments based on the requirements set forth by the City s Master Repurchase Agreement. All firms are required to sign the Master Repurchase Agreement prior to the execution of a repurchase agreement transaction. G. Registered Investment Companies (Money Market Funds) open-end and no-load money market funds provided such funds are registered under the Federal Investment Company Act of 1940 and operated in accordance with 17 C.F.R a-7. H. Intergovernmental Investment Pools that are authorized pursuant to the Florida Interlocal Cooperation Act, as provided in Section , Florida Statutes and provided that said funds contain no derivatives. Investments in any derivative products or the use of reverse repurchase agreements are prohibited, with the exception of those risk mitigation actions transacted in accordance with the Bulk Power Purchase Risk Management Policy. Budget Adoption Process and Requirements. An annual City budget is prepared, approved and adopted for each fiscal year. The budget controls the levy of taxes and expenditure of money for all City purposes. The budget is conducted in accordance with Chapters 166, 200 and 218 of the Florida Statutes, as amended. By July 1, the Property Appraiser must certify the (initial) taxable value of property within each taxing district. Within 35 days of either July 1, or the date the Property Appraiser certifies the taxable value of property, whichever is later, the Commission must set proposed millage rates. At that time, a date, time and place is set for a public hearing on the proposed budget and millage rates. Within 65 to 80 days of July 1, or the date the Property Appraiser certifies the taxable value, the Commission must hold a public hearing, after 5:00 p.m., to hear public testimony and to adopt a proposed budget and proposed millage rates. The percentage increase in the proposed millage rate over the rolled-back rate and the specific purpose for which Ad Valorem Revenues are being increased must be discussed in a public hearing. The Commission may amend the proposed budget as it deems necessary, adopt the amended proposed budget, recompute its proposed millage rates and publicly announce the percent, if any, by which the recomputed proposed millage exceeds the rolled-back rate. A date, time, and place for a second public hearing is set at this hearing, also to be held after 5:00 p.m. Within two to five days after the advertisements are published, a second public hearing is held to hear public testimony and to adopt a final budget and final millage rates. If, for any reason, the adoption of the final budget is delayed beyond the start of the next fiscal year, the Commission can expend moneys as outlined in Chapter (2) (g) of the Florida Statutes, as amended. A-9

66 Upon final adoption of the budget, the budget regulates the expenditures of the City and the budget shall not be amended, except as provided for in Chapter 166, Florida Statutes, as amended, unless otherwise specified in the Charter. The City will establish and maintain practices for the administration and amendment of the annual budget to: 1. Provide that all budget amendments/transfers will first be reviewed by the director (or authorized designee) of the requesting department/division, followed by a second review from the Finance Department, prior to the subsequent approval/denial by the City Manager and/or the Commission, as set forth by the following provisions of this policy. 2. Budgetary Levels of Authority: a. Budget Transfer: Transfers requested within a major expenditure categories, and/or between divisions within the same Department, or between activity codes within the same department require approval by the Finance Director and City Manager. b. Budget Amendment: Transfers between Departments or from Reserve for Contingency require Commission approval. c. Budget Amendment: Establishing a budget for revenues that were not anticipated during the annual budget process requires that the Commission adopt a resolution to recognize the revenue, appropriate the revenue, and establish a new fund if appropriate. d. Budget Adjustments: Upon completion of the prior fiscal year s Comprehensive Annual Financial Report, the operating budget may be adjusted to reflect actual beginning fund balances if deemed necessary by the Finance Director. Amendments not specifically authorized in F.S. Chapter (2)(a-e) require the amendment by authorized by resolution or ordinance of the Commission and adopted following a public hearing. The public hearing must be advertised at least 2 days, but not more than 5 days, before the date of the hearing. The advertisement and adoption procedures are similar to those required for adoption of the annual budget. Use of Contingency Reserves. Contingency reserves are established to provide for the following: Funding for authorized mid-year increases that will provide for a level of service that was not anticipated during the budget process. Funding for unexpected increases in the cost of providing existing levels of service. Temporary and nonrecurring funding for unanticipated projects. Funding of a local match for public or private grants. Funding to off-set losses in revenue caused by actions of other governmental bodies and/or unanticipated economic downturns. Funding to accommodate unanticipated program mandates from other governmental bodies. Funding for emergencies, whether economic, natural disaster or act of war. A-10

67 a. Reserve for contingency requests must be approved by the Commission. Such requests must be evaluated to insure consistency with other City policies; the urgency of the request; the scope of services to be provided; the short and long-term fiscal impact of the request; a review of alternative methods of funding or providing the services; a review for duplication of services with other agencies; a review of efforts to secure non-city funding; a discussion of why funding was not sought during the normal budget cycle; and a review of the impact of not funding or delaying funding to the next fiscal year. b. A reserve for contingency must be calculated and established by the Finance Department for each operating fund in an amount not greater than 10% of the total budget and in accordance with Florida Statutes (2)(c). c. The reserve for contingency must be separate from any cash carry forward balances. d. The City s budget will be amended at such time as the Commission authorizes the use of contingency reserves. All requests for the use of any reserve for contingency shall be accompanied by information prepared by the Finance Department showing the year-todate activity of the reserve account as well as the current account balance and the net effect on the account balance. e. The City is required to maintain an annual unappropriated or cash carry forward balance at a level sufficient to maintain adequate cash flow and to eliminate the need for short-term borrowing. The unappropriated fund balance must be separate from the reserve for contingency. f. The amount of cash carry forward to be budgeted must be analyzed and determined during the annual budget process; the carry forward balances must be jointly agreed upon by the Finance Director and City Manager. A-11

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69 APPENDIX B City of Alachua, Florida Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2014

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71 CITY OF ALACHUA, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014 I. INTRODUCTORY SECTION TABLE OF CONTENTS CITY OF ALACHUA, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014 II. List of Principal Officials... i Certificate of Achievement... ii Letter of Transmittal... iii-viii Organization Chart... ix FINANCIAL SECTION Independent Auditors Report Management s Discussion and Analysis B-1 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Fund Net Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Notes to Financial Statements Required Supplementary Information Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Community Redevelopment Agency Schedule of Funding Progress Notes to Required Supplementary Information Prepared by Department of Finance

72 CITY OF ALACHUA, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014 CITY OF ALACHUA, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014 TABLE OF CONTENTS (Continued) TABLE OF CONTENTS (Concluded) II. FINANCIAL SECTION (Concluded) IV. OTHER INDEPENDENT AUDITORS REPORTS AND SCHEDULES Combining and Individual Fund Information and Other Supplementary Information Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Governmental Funds Combining Balance Sheet - Nonmajor Special Revenue Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Special Revenue Funds Combining Balance Sheet - Nonmajor Capital Projects Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Capital Projects Funds Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual: Debt Service Fund - Nonmajor Special Revenue Funds - Nonmajor Capital Projects Funds - Nonmajor Additional Elements of Report Prepared in Accordance with Government Auditing Standards, Issued by the Comptroller General of the United States; the Rules of the Auditor General of the State of Florida; and Other Contract Requirements Schedule of Expenditures of Federal and State Awards Notes to the Schedule of Expenditures of Federal and State Awards Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Management Letter Independent Accountants Report on Compliance with Section , Florida Statutes III. STATISTICAL SECTION (UNAUDITED) B-2 Financial Trends Information Schedule 1 Net Position by Component Schedule 2 Changes in Net Position Schedule 3 Fund Balances, Governmental Funds Schedule 4 Changes in Fund Balances, Governmental Funds Revenue Capacity Information Schedule 5 Assessed Value and Actual Value of Taxable Property Schedule 6 Direct and Overlapping Property Tax Rates Schedule 7 Principal Property Tax Payers Schedule 8 Property Tax Levies and Collections Debt Capacity Information Schedule 9 Ratios of Outstanding Debt by Type Schedule 10 Direct and Overlapping Governmental Activities Debt Schedule 11 Pledged-Revenue Coverage - General Government Debt Schedule 12 Pledged-Revenue Coverage - Sales Tax Revenues Notes Schedule 13 Pledged-Revenue Coverage - Tax Increment Revenue Notes Schedule 14 Pledged-Revenue Coverage - Utility System Bonds Demographic and Economic Information Schedule 15 Demographic and Economic Statistics Schedule 16 Principal Employers Operating Information Schedule 17 Full-time Equivalent City Government Employees by Function/Program Schedule 18 Operating Indicators by Function/Program Schedule 19 Capital Asset Statistics by Function/Program

73 City of Alachua Mayor and City Commissioners Gib Coerper, Mayor Gary Hardacre, Vice Mayor Ben Boukari, Jr., Commissioner Robert Wilford, Commissioner Shirley Green Brown, Commissioner Traci L. Cain, City Manager Marian Rush, City Attorney INTRODUCTORY SECTION B-3 i

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76 B-6

77 CITY OF ALACHUA GOVERNMENT CITY OF ALACHUA CITIZENS MAYOR & CITY COMMISSIONERS Gib Coerper, Mayor Gary Hardacre, Vice Mayor Ben Boukari Jr. Robert Wilford Shirley Green Brown CITY ATTORNEY Marian Rush CITY MANAGER Traci L. Cain ASSISTANT CITY MANAGER Adam Boukari B-7 RECREATION AND PARKS DEPARTMENT Hal Brady DEPUTY CITY CLERK Alan Henderson INFORMATION TECHNOLOGY ADMINISTRATIVE SERVICES PLANNING AND FINANCE POLICE COMMUNITY DEPARTMENT DEPARTMENT DEVELOPMENT DEPARTMENT Kathy Winburn Marcian K. Brown Joel Decoursey, Jr. COMPLIANCE AND RISK MANAGEMENT DEPARTMENT Grafton Wilson PUBLIC SERVICES DEPARTMENT Vacant ix

78 INDEPENDENT AUDITORS REPORT B-8 FINANCIAL SECTION Honorable Mayor, City Commissioners and City Manager Alachua, Florida Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Alachua, Florida (the City), as of and for the year ended September 30, 2014, and the related notes to the financial statements, which collectively comprise the City s basic financial 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 financial 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 opinions 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 from 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 City 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 City 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 the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1

79 B-9 Honorable Mayor, City Commissioners and City Manager Alachua, Florida INDEPENDENT AUDITORS REPORT (Continued) Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of September 30, 2014, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, budgetary comparison information, and the other postemployment benefits schedule of funding progress on pages 4 through 15 and 54 through 57 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 Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, statistical section, and schedule of expenditures of federal awards and state financial assistance are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules, and the schedule of expenditures of federal awards and state financial assistance are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to basic the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules, and the schedule of expenditures of federal awards and state financial assistance are fairly stated, in all material respects, in relation to the financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. 2 Honorable Mayor, City Commissioners and City Manager Alachua, Florida INDEPENDENT AUDITORS REPORT (Concluded) Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 25, 2015, on our consideration of the City s internal control over financial 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 City s internal control over financial reporting and compliance. February 25, 2015 Gainesville, Florida 3

80 B-10 CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 The City of Alachua's (the City ) Management s Discussion and Analysis (MD&A) is designed to: (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the City s financial activity, (c) identify changes in the City s financial position (its ability to address the next and subsequent year challenges), (d) identify any material deviations from the financial plan (the approved budget), and (e) identify individual fund issues or concerns. Since the MD&A is designed to focus on the current year s activities, resulting changes, and currently known facts, it should be read in conjunction with the City s financial statements (beginning on page 16). Please note the City provides prior year comparative financial information as required by Governmental Accounting Standards Board (GASB) Statement No. 34. Financial Highlights The following graph is provided to assist in understanding the component parts of the financial statements: Required components of City's Annual Financial Report Government-wide Financial Statements The City of Alachua s assets and deferred outflows of resources exceeded its liabilities at September 30, 2014, by $52.7 million, which is a 5.33% increase from the previous year. Unrestricted net position was at $8.7 million, which is a 47.4% increase from the previous year. The City s total net position increased by $2,670,120. This increase was accomplished through expense reductions, increased charges for services collections, and increased business activity fees during the current fiscal year. The City of Alachua s total long-term debt (due in more than one year) decreased by $466,115 during the current fiscal year. This decrease is due to scheduled debt service payments. Management's Discussion and Analysis Basic Financial Statements Government-wide Fund Financial Statements Financial Statements Notes to Financial Statements Required Supplementary Information Total net position ($52.7 million) is comprised of the following: 1. The $42.0 million net investment in capital assets includes property and equipment, net of accumulated depreciation, and reduced for outstanding debt related to the purchase or construction of those capital assets. 2. $2.0 million of net position is restricted by constraints imposed from outside of the City such as debt covenants, grantors, laws, or regulations, or by enabling legislation. 3. $8.7 million of unrestricted net position. Fund Financial Statements CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 At September 30, 2014, the City's governmental funds reported combined ending fund balances of $5.8 million, a decrease of $254 thousand, in comparison with the prior fiscal year. Governmental fund revenues were $8,147,127 or $153 thousand more than the previous fiscal year. The increase was due to higher collections in Intergovernmental Revenues (grants and state revenue sharing) and Permits, Fees, and Special Assessments (franchise fees and building permits). Overview of the Financial Statements This MD&A is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements consist of three components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private sector business, and consist of the following two statements: The statement of net position presents information on all of the City's assets, liabilities, deferred outflows of resources, and deferred inflows of resources, with the difference between these elements reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is strengthening or weakening. The statement of activities presents information showing how the City s net position changed during the most recent fiscal year, focusing on both the gross and net costs of various activities, both governmental and business-type, that are supported by the government s general tax and other revenues. This is intended to summarize and simplify the user s analysis of the cost of various governmental services and/or subsidy to various business-type activities. Both of these financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, physical environment, transportation, economic environment, and parks and recreation. The business-type activities of the City include physical environment (electric, water, wastewater, and mosquito control utilities). The government-wide financial statements include not only the City itself (known as the primary government), but also one component unit. The City of Alachua Public Finance Authority for Affordable Housing, a legally separate entity created by the City Commission, has had no financial transactions since its creation; therefore no amounts related to its operations are reported in the accompanying financial statements. The Community Redevelopment Agency, which is not a legally separate entity, was created by the City Commission and has been reported in the basic financial statements as a major governmental fund (pages 18 and 20). The government-wide financial statements can be found on pages of this report. 4 5

81 B-11 CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All City funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. The City does not report any fiduciary funds. Scope Examples Required financial statements Accounting basis and measurement focus Type of asset/liability information Type of inflow/ outflow information Fund Financial Statements Governmental Funds Proprietary Funds Includes the City's basic Services provided by the services such as police, City that are operated cultural activities, traffic similar to private control, and parks. businesses and for which the City charges a fee. Police, street maintenance, Electric, water, sewer, parks, recreational activities. mosquito control. Balance sheet; Statement of Statement of net position; revenues, expenditures, and Statement of revenues, changes in fund balances. expenses and changes in net position; Statement of Modified accrual accounting and current financial resources focus. Only assets expected to be used up and liabilities that come due during the year or soon thereafter, no capital assets included. Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter. cash flows. Accrual accounting and economic resources focus. All assets and liabilities, both financial and capital, and short and long-term. All revenues and expenses during the year, regardless of when cash is received or paid. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for the governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Because of the different measurement focus (current financial resources versus total economic resources), a reconciliation of the governmental fund Balance Sheet to the government-wide Statement of Net Position and a reconciliation of the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances to the government-wide Statement of Activities is provided (see pages 19 and 21) 6 CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 to facilitate the comparison between governmental funds and governmental activities. The flow of current financial resources will reflect bond proceeds and inter-fund transfers as other financial sources as well as capital expenditures and bond principal payments as expenditures. The reconciliation will eliminate these transactions and incorporate the capital assets and long-term obligations (bonds and others) into the Governmental Activities column (in the Government-wide statements). The City reports sixteen (16) individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund and Community Redevelopment Agency, which are considered to be major funds. Data from the other governmental funds are combined into a single aggregated presentation. Individual fund data for non-major governmental funds is provided in the form of combining statements in the supplementary information section of this report. The City adopts an annual budget for its general, special revenue, debt service, and capital projects funds. Budgetary comparison schedules have been provided as required supplementary information for the General Fund and Community Redevelopment Agency to demonstrate budgetary compliance. Budgetary comparison schedules have been provided for all of the other governmental funds that have adopted budgets in the supplementary information section. The basic governmental fund statements can be found on pages 18 and 20 of this report. Proprietary Funds The City maintains two different types of proprietary funds. Enterprise Funds are used to report business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its Public Utilities System (Electric, Water, Wastewater, and Mosquito Control). Internal Service Funds are used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its Utility Billing, Utility Administration, Utility Operations, Warehouse Operations, and postage services. These services have been included within the government-wide financial statements as business-type activities. Proprietary funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The proprietary fund statements provide the same type of information as the government-wide financial statements, only in more detail. The Enterprise Fund financial statements provide separate information for the Public Utility System. The Internal Service Fund is also presented in the proprietary fund financial statements. The basic proprietary fund financial statements can be found on pages Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 28 through 53 of this report. Other Information The combining statements referred to earlier, present a more detailed view of the non-major governmental funds. Also included are budgetary comparison schedules for the debt service, special revenue, and capital project funds. The combining statements and budgetary comparisons can be found on pages 58 through 74 of this report. Government-wide Financial Analysis Net position may serve over time as a useful indicator of a government's financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities by $52.7 million at the close of the fiscal year ended September 30, A portion of the City s net position, $2,017,486, represents resources that are subject to external restriction on how they may be used. 7

82 B-12 CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 The largest portion of the City's net position ($41,985,994 or 80%) reflects its investment in capital assets (e.g., land, infrastructure, buildings and equipment), less any related outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Reported below is a condensed Statement of Net Position to demonstrate the changes from year to year. For more detailed information, see the Statement of Net Position on page 16. City of Alachua Statement of Net Position As of September 30, 2014 and 2013 Normal Impacts There are six (6) basic (normal) transactions that will affect the comparability of the Statement of Net Position summary presentation. Governmental Activities Business-type Activities Total Total % Change Current Assets & Other Assets $ 7,041,614 7,651,937 11,703,919 10,465,429 18,745,533 18,117, % Capital Assets 25,602,082 24,594,866 38,657,687 39,036,643 64,259,769 63,631, % Deferred Outflows , , , , % Total Assets and Deferred Outflows of Resources 32,643,696 32,246,803 50,751,402 49,969,829 83,395,098 82,216, % Long-term liabilities outstanding 10,270,368 10,049,020 13,177,374 13,846,300 23,447,742 23,895, % Other liabilities 1,427,616 1,787,794 5,784,166 6,468,064 7,211,782 8,255, % Total Liabilities 11,697,984 11,836,814 18,961,540 20,314,364 30,659,524 32,151, % Net Position Net Investment in Capital Assets 15,864,924 15,054,392 26,121,070 25,916,493 41,985,994 40,970, % Restricted 1,328,668 2,104, ,818 1,067,119 2,017,486 3,172, % Unrestricted 3,752,120 3,250,642 4,979,974 2,671,853 8,732,094 5,922, % Total Net Position 20,945,712 20,409,989 31,789,862 29,655,465 52,735,574 50,065, % Net Results of Activities: will impact (increase/decrease) current assets and liabilities, and unrestricted net position. Borrowing of Capital: will increase current assets and long-term debt. Spending Borrowed Proceeds on New Capital: will reduce current assets and increase capital assets. There is a second impact, an increase in invested in capital assets, and an increase in related net debt will not change the net investment in capital assets. Spending of Non-Borrowed Current Assets on New Capital: will reduce current assets, increase capital assets, reduce unrestricted net position, and increase net investment in capital assets. Principal Payment on Debt: will reduce current assets and reduce long-term debt, reduce unrestricted net position, and increase net investment in capital assets. Reduction of Capital Assets through Depreciation: will reduce net investment in capital assets. 8 Governmental Activities CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 The City's total net position increased $2,670,120 over the previous year with an increase of $535,723 resulting from governmental activities and an increase of $2,134,397 resulting from business-type activities. Major changes in revenues were caused by the following: City of Alachua Changes in Net Position For the Years Ended September 30, 2014 and 2013 Governmental Activities Business-type Activities Totals Totals % change Revenues: Program Revenues: Charges for Services $ 1,479,014 1,404,490 18,578,087 16,272,839 20,057,101 17,677, % Operating Grants and Contributions 251, ,027 24, , , , % Capital grants and Contributions 577, , ,887 1,321,644 1,240,880 2,077, % General Revenues: Property Tax 3,650,563 3,650, ,650,563 3,650, % Other Tax 360, , , , % Utility Tax 1,118,050 1,120, ,118,050 1,120, % Intergovernmental 657, , , , % Other 123, , ,584 92, , , % Total Revenues 8,218,646 8,375,375 19,371,085 18,238,313 27,589,731 26,613, % Expenses: General Government 2,719,659 2,809, ,719,659 2,809, % Public Safety 3,164,017 3,085, ,164,017 3,085, % Parks and Recreation 1,318, , ,318, , % Transportation 758, , , , % Physical Environment 789, , , , % Economic Environment 212, , , , % Electric ,863,813 10,083,138 11,863,813 10,083, % Water and Sewer - - 3,621,216 3,634,733 3,621,216 3,634, % Mosquito Control ,461 49,446 53,461 49, % Interest on long-term debt 418, , , , % Total Expenses 9,381,121 8,761,125 15,538,490 13,767,317 24,919,611 22,528, % Increase (decrease) in net position before transfers (1,162,475) (385,750) 3,832,595 4,470,996 2,670,120 4,085, % Transfers 1,698,198 1,698,102 (1,698,198) (1,698,102) % Increase (decrease) in net position 535,723 1,312,352 2,134,397 2,772,894 2,670,120 4,085, % Net position - beginning 20,409,989 19,097,637 29,655,465 26,882,571 50,065,454 45,980, % Net position - ending $ 20,945,712 20,409,989 31,789,862 29,655,465 52,735,574 50,065, % For fiscal year ending September 30, 2014, other taxes decreased $22,645 due to lower communication services tax collections. Intergovernmental revenue increased $30,852 due to increased half-cent sales tax and state shared revenue collections. Capital grants and contributions decreased by $178,342 due to public safety grants received by the City for the purchase of equipment for the police department. Also, in the prior year, stormwater and roadway right-of-ways were donated to the City for the NW 142 Terrace roadway project. 9

83 CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 Major changes in expenses were caused by the following: Expenses for governmental activities increased due to increases in Public Safety and Parks and Recreation expenses. A significant part of the increase was due to expenses related to the renovation of recreation-related structures along with a $500,000 liability and expenditure related to land purchase for recreational fields. These funds were provided by the Alachua County Board of County Commissioners. $3,500,000 $3,000,000 Expenses and Program Revenues - Governmental Activities Business-type Activities Net position for business-type activities increased $2,134,397. Business-type revenues increased $1,132,772 due to more Charges for Services. Business-type expenses increased $1,771,173 largely due to higher purchased power costs related to the electric utility. The Electric Utility of the City operates at 7.2/12.47kV. The City purchases power from Gainesville Regional Utilities (GRU) at two different locations. The majority of the customers are supplied from the Alachua No. 1 Substation, which is connected to GRU s 138 kv transmission system. The second point of services, identified as Hague Point of Service, exists as a distribution source supplied by GRU. Millions $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 General Government Public Safety Transportation Physical Environment Economic Environment Parks & Recreation Interest on L.T. Debt Revenues (excluding tax support) Expenditures The Water Utility obtains its water supply from the upper portion of the Floridan Aquifer. Three wells with depths of approximately 365 feet withdraw water from the Ocala limestone and discharge it into the City s distribution system. The quality of the City s water supply is such that chlorination and fluoridation are the only treatments, which the water requires prior to distribution. The system s wells range in age from 23 to 46 years old. Wastewater generated through the utility is collected through a gravity sewer system and pumped to the City s wastewater treatment plant. The collected wastewater is treated in an activated sludge treatment facility, which has a current capacity of 1,500,000 gallons per day. The effluent from the treatment facility is chlorinated and disposed of by spray irrigation, and is also resold as reclaimed water. B-13 Operating Grants & Contributions 2% Capital Grants & Contributions 6% Programs Revenue by Source - Governmental Activities $18,000,000 $16,000,000 $14,000,000 $12,000,000 Expenses and Program Revenues - Business-Type Activities Unrestricted Investment Earnings 0% Transfers 17% Taxes Intergovernmental Charges for Services Millions $10,000,000 $8,000,000 $6,000,000 $4,000,000 Revenues Expenditures Miscellaneous 1% Taxes 52% Miscellaneous Transfers Unrestricted Investment Earnings $2,000,000 $0 Electric Water Wastewater Mosquito Control Charges for Services 15% Intergovernmental 7% Operating Grants & Contributions Capital Grants & Contributions Programs 10 11

84 CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 B-14 Revenue By Source-Business-Type Activites Operating Grants & Contributions 0% Unrestricted Investment Earnings 0% Miscellaneous 1% Capital Grants & Contributions 3% Charges for Services 96% Charges for Services Miscellaneous Unrestricted Investment Earnings Operating Grants & Contributions Capital Grants & Contributions Fund Financial Analysis The City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The primary purpose of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, assigned and unassigned fund balance may serve as a useful measure of a government's net resources, available for spending, at the end of the fiscal year. As of the end of fiscal year 2014, the City's governmental funds reported combined ending fund balances of $5,789,689, a decrease of $254,289 in comparison with the prior year. Major Funds The General Fund and Community Redevelopment Agency are major governmental funds. The fund balance for the Community Redevelopment Agency decreased by $789,069 from The decrease is due to planned expenditures for roadway-drainage projects completed in The General Fund is the chief operating fund of the City. The General Fund had an increase in fund balance of $414,000. This increase was due to expenditures being lower than budget, and the City s continued emphasis to enhancing its position by budgeting $200,000 towards fund balance. The total fund balance was $5,588,932 of which $4,161,957 was unassigned. The cash balance at the end of the year was $4,451,973. As a measure of the General Fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund revenues. Unassigned fund balance represents 54% of the total General Fund operating revenue, while total fund balance also represents 73% of that same amount. The Government Finance Officers Association, Best Practices guidelines calls for an unassigned fund balance level of two (2) months of operating revenues. Total fund balance includes committed, assigned, and unassigned fund balance. 12 Proprietary Funds The City's proprietary fund statements provide the same type of information found in the government-wide financial statements, but in more detail. The Electric, Water, and Wastewater Funds, are reported as major funds. The various utility system funds are used to account for the operations of the City's electric, water, wastewater, and mosquito control utilities. Each utility operates like a business, where the rates established by the City generally generate sufficient funds to pay the costs of current operations and provide for long-term asset acquisitions. Total assets and deferred outflows of resources as of September 30, 2014, were $53 million, total liabilities were $22 million, and net position was $31 million. General Fund Budgetary Highlights with Variances The difference between the General Fund s original budget balances and final amended budget balances was an increase of $196,933 and was caused by the amendments listed below: Revenues: $48,923: Increase in Licenses and Permits. $75,785: Increase in Intergovernmental Revenue. $34,979: Increase in Charges for Services. $17,006: Increase in Fines and Forfeitures. $20,240: Increase in Miscellaneous Revenue. Expenditures: $21,847: Increase in Alachua Police Department to cover expenses related to an Edward Byrne Grant. $115,541: Increase in Parks and Recreation to cover expenses related to structure renovation projects. $101,980: Increase in Special Expense to increase Contribution to Fund Balance. ($45,785): Decrease in Special Expense to decrease Contingency for recreation expenses. $3,350: Increase in Public Services-Solid Waste to cover expenses related to residential garbage collection. 13

85 B-15 CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 General Fund Actual Results Highlights with Variances At September 30, 2014, the City s General Fund experienced a negative variance between its final operating revenue budget and actual operating revenue in the amount of $193,023. This was mainly due to decrease in the taxes and charges for services collected in the fiscal year ending September 30, The City s General Fund experienced a positive variance between its final operating expenditure budget and actual operating expenditures in the amount of $908,443. This was due to unspent operating and capital expense funds. Also, there were several vacancies carried throughout the fiscal year in Transportation, Recreation, and Public Safety-related programs. Capital Asset and Debt Administration The City s capital assets for its governmental and business-type activities as of September 30, 2014, totaled $64 million (net of accumulated depreciation), and includes land, buildings, improvements other than buildings, equipment, infrastructure, and construction in progress. City of Alachua Capital Assets (in thousands) Governmental Activities Business-type Activities Totals Totals % change Land $ 7,409 7, ,665 7, % Buildings 8,469 8,464 4,872 4,872 13,341 13, % Improvements other than buildings 3,632 2,995 3,835 3,329 7,467 6, % Infrastructure 12,107 9,812 40,871 40,378 52,978 50, % Furniture, fixtures, and equipment 2,726 2,582 2,393 2,327 5,119 4, % Construction in progress 271 1,694 2,257 2,346 2,528 4, % Less: accumulated depreciation (9,012) (8,362) (15,827) (14,472) (24,839) (22,834) 8.8% Total Assets 25,602 24,594 38,657 39,036 64,259 63, % Major capital asset events during the current fiscal year for governmental activities include the completion of Phase II of the NW 150 Avenue road reconstruction project and the start of the NW 142 Terrace drainage and road improvement project. Major capital asset events for the business-type activities included electric underground and overhead feeder and substation improvements. Additional information on the City s capital assets can be found in Note 6 starting on page 39 of this report. CITY OF ALACHUA, FLORIDA MANAGEMENT S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2014 Long-term Debt At the end of fiscal year 2014, the City had total long-term debt outstanding of approximately $22.7 million. The City's debt represents bonds, notes, and loans secured by specific revenue sources (i.e., revenue bonds/notes). The City s outstanding debt decreased $466,115 during fiscal year Debt activity included normal principal and interest payments. Also, the City recorded a long-term liability due to the Alachua County Board of County Commissioners related to an interlocal agreement in the amount of $500,000. Additional information on the City s debt can be found in Note 7 starting on page 40 of this report. Economic Factors and Next Year's Budgets and Rates CITY OF ALACHUA OUTSTANDING DEBT GENERAL OBLIGATION, REVENUE BONDS/NOTES, AND LOANS Total % Change Revenue Bonds $ 11,825,000 12,635, % Revenue Notes 805, , % Loans 10,061,413 9,637, % TOTAL $ 22,692,292 23,158, % The unemployment rate for the Gainesville MSA at September 30, 2014, was 5.5%, which includes the City of Alachua. This is a 14.5% decrease from the previous fiscal year s rate of 4.8%. The final certified citywide taxable value of property increased to $687 million, representing an increase of 0.78%. The population increased approximately 1.81% from the prior year to an estimate of 9,300 at September 30, During the current fiscal year, ad valorem taxes decreased by $2 to $3,650,563. The ad valorem tax rate was at mills. Requests for Information This financial report is designed to present users with a general overview of the City's finances and to demonstrate the City's accountability. If you have questions concerning any of the information provided in this report or need additional financial information, contact the Finance Department, P.O. Box 9, Alachua, Florida Additional information can be found on our website:

86 CITY OF ALACHUA, FLORIDA STATEMENT OF NET POSITION SEPTEMBER 30, 2014 B-16 BASIC FINANCIAL STATEMENTS Primary Government Governmental Business-type Activities Activities Total Assets Cash and Cash Equivalents $ 4,543,828 $ 5,695,142 $ 10,238,970 Receivables, Net of Allowance 108,232 2,544,190 2,652,422 Due from Other Governments 88, ,575 Inventories 0 586, ,888 Prepaid Items 111,323 56, ,939 Restricted Assets: Cash and Cash Equivalents 2,263,617 2,107,043 4,370,660 Investments 0 640, ,079 Capital Assets Not Being Depreciated: Land 7,409, ,940 7,665,433 Construction in Progress 271,007 2,257,357 2,528,364 Depreciable Capital Assets, Net 17,921,582 36,144,390 54,065,972 Internal Balances (73,961) 73,961 0 Total Assets 32,643,696 50,361,606 83,005,302 Deferred Outflows of Resources Unamortized Refunding Loss 0 389, ,796 Total Assets and Deferred Outflows 32,643,696 50,751,402 83,395,098 Liabilities Accounts Payable 276, ,488 1,245,112 Accrued Expenses 77,027 26, ,316 Due to Other Governments 81,015 73, ,673 Accrued Interest Payable 5, ,779 Unearned Revenue 39, ,725 Rate Stabilization Credit 0 2,657,427 2,657,427 Liabilities Payable from Restricted Assets: Accrued Interest Payable 169, , ,158 Customer Deposit 0 1,291,979 1,291,979 Unearned Revenue 777, ,534 Decommisioning Costs 0 640, ,079 Noncurrent Liabilities: Due Within One Year 504, ,965 1,446,402 Due in More Than One Year 9,677,800 12,189,991 21,867,791 Other Postemployment Benefits Liability 88,131 45, ,549 Total Liabilities 11,697,984 18,961,540 30,659,524 Net Position Net Investment in Capital Assets 15,864,924 26,121,070 41,985,994 Restricted for: Debt Service 745, ,818 1,184,757 Renewal and Replacement 0 250, ,000 Economic Environment 493, ,434 Other Purposes 89, ,295 Unrestricted 3,752,120 4,979,974 8,732,094 Total Net Position $ 20,945,712 $ 31,789,862 $ 52,735,574 See accompanying notes. 16

87 CITY OF ALACHUA, FLORIDA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2014 Net (Expense) Revenue and Changes in Net Assets Program Revenues Primary Government Charges for Operating Grants Capital Grants Governmental Business-type Function/Program Expenses Services and Contributions and Contributions Activities Activities Total Governmental Activities General Government $ 2,719,659 $ 317,475 $ 20,000 $ 0 $ (2,382,184) $ 0 $ (2,382,184) Public Safety 3,164, ,144 18,020 21,952 (2,826,901) 0 (2,826,901) Physical Environment 789, , ,896 41, ,274 Transportation 758,198 13, , ,525 (374,960) 0 (374,960) Economic Environment 212, , , ,642 Parks and Recreation 1,318,191 27,243 19,590 50,000 (1,221,358) 0 (1,221,358) Interest on Long-term Debt 418, (418,674) 0 (418,674) Total Governmental Activities 9,381,121 1,479, , ,993 (7,072,161) 0 (7,072,161) Business-type Activities Electric 11,863,813 15,171, , ,970,397 3,970,397 Water 1,223,211 1,339,516 24, , ,832 Wastewater 2,398,005 2,010, (387,048) (387,048) Mosquito Control 53,461 56, ,830 2,830 Total Business-type Activities 15,538,490 18,578,087 24, , ,727,011 3,727,011 Total Primary Government $ 24,919,611 $ 20,057,101 $ 276,480 $ 1,240,880 (7,072,161) 3,727,011 (3,345,150) General Revenues Ad Valorem 3,650, ,650,563 Utility Service Taxes 1,118, ,118,050 Communication Service Taxes 313, ,826 Business License Taxes 46, ,691 Half-cent Sales Tax 496, ,497 State Revenue Sharing 160, ,815 Investment Earnings 8,321 7,330 15,651 Miscellaneous 114,923 98, ,177 Transfers 1,698,198 (1,698,198) 0 Total General Revenues and Transfers 7,607,884 (1,592,614) 6,015,270 Change in Net Position 535,723 2,134,397 2,670,120 Net Position, Beginning of Year 20,409,989 29,655,465 50,065,454 Net Position, End of Year $ 20,945,712 $ 31,789,862 $ 52,735,574 See accompanying notes. 17 [THIS PAGE INTENTIONALLY LEFT BLANK] B-17

88 CITY OF ALACHUA, FLORIDA BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2014 CITY OF ALACHUA, FLORIDA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2014 B-18 Community Total Redevelopment Nonmajor Governmental General Agency Governmental Funds Assets Cash and Cash Equivalents $ 4,451,973 $ 481,288 $ 1,611,743 $ 6,545,004 Cash with Fiscal Agent , ,441 Receivables: Accounts 52, ,026 Taxes 26, ,436 Franchise Fees 28, ,770 Due from Other Governments 88, ,575 Prepaid Items 91,937 19, ,323 Advances to Other Funds 1,319,576 4, ,323,797 Total Assets 6,059, ,895 1,875,034 8,439,372 Liabilities and Fund Balances Liabilities Accounts Payable 272,621 3, ,624 Accrued Expenses 77, ,027 Due to Other Governments 81, ,015 Unearned Revenue 39, , ,259 Advances from Other Funds 123 7,958 1,389,677 1,397,758 Total Liabilities 470,511 11,461 2,167,711 2,649,683 Fund Balances Nonspendable: Prepaids 91,937 19, ,323 Advances to Other Funds 1,319,576 4, ,323,797 Restricted for: Comprehensive Planning 0 0 2,508 2,508 Law Enforcement 15, ,361 28,823 Physical Environment ,708 14,708 Economic Environment 0 469, ,827 Parks and Recreation ,256 43,256 Debt Service , ,851 Assigned for: Subsequent Year Budget 727, ,248 Unassigned 3,434,709 0 (1,282,361) 2,152,348 Total Fund Balances 5,588, ,434 (292,677) 5,789,689 Total Liabilities and Fund Balances $ 6,059,443 $ 504,895 $ 1,875,034 $ 8,439,372 Fund Balance - Total Governmental Funds $ 5,789,689 Amounts Reported for Governmental Activities in the Statement of Net Position are Different Because: Capital assets reported for governmental activities are not financial resources and, therefore, are not reported in the governmental funds: Cost of Assets $ 34,614,544 (Accumulated Depreciation) (9,012,462) 25,602,082 Long-term liabilities are not due and payable in the current period and, accordingly, are not reported as fund liabilities. All liabilities, both current and long-term, are reported in the statement of net position. Long-term liabilities at year-end consist of: 2001A Section 108 Loan (1,150,000) 2006 Capital Improvement and Refunding Bonds (7,310,000) 2013 Redevelopment Note (805,879) Less Discount 28,721 Due to Alachua County (500,000) Compensated Absences (445,079) (10,182,237) Other postemployment benefits liability does not require the use of current financial resources and, therefore, is not reported as a liability in the governmental funds. (88,131) Interest on long-term debt is accrued as a liability in the statement of net position, but is not recognized in the governmental funds until paid: Accrued Interest Payable (175,691) Net Position of Governmental Activities $ 20,945,712 See accompanying notes. 18 See accompanying notes. 19

89 B-19 CITY OF ALACHUA, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2014 Community Total Redevelopment Nonmajor Governmental General Fund Governmental Funds Revenues Taxes $ 5,344,809 $ 0 $ 0 $ 5,344,809 Permits, Fees and Special Assessments 500, , ,102 Intergovernmental Revenues 792, ,053 82,911 1,149,737 Charges for Services 900, , ,045 Fines and Forfeitures 57, ,387 63,393 Investment Income 6,574 1, ,321 Miscellaneous 60,207 50,000 61, ,720 Total Revenues 7,662, , ,896 8,147,127 Expenditures Current: General Government 2,508, ,226 2,511,783 Public Safety 2,998, ,350 3,004,179 Physical Environment 749, , ,349 Transportation 474, ,618 Economic Environment 0 197, ,491 Parks and Recreation 705, , ,454 Debt Service: Principal 0 79, , ,621 Interest and Fiscal Charges 0 21, , ,513 Capital Outlay 590, ,430 96,161 1,685,606 (Total Expenditures) (8,026,555) (1,298,235) (774,824) (10,099,614) (Deficiency) of Revenues (Under) Expenditures (364,485) (973,074) (614,928) (1,952,487) Other Financing Sources (Uses) Transfers in 1,625, , ,411 2,557,976 Transfers (out) (847,075) 0 (12,703) (859,778) Total Other Financing Sources (Uses) 778, , ,708 1,698,198 Net Change in Fund Balance 414,000 (789,069) 120,780 (254,289) Fund Balance, Beginning of Year 5,174,932 1,282,503 (413,457) 6,043,978 Fund Balance, End of Year $ 5,588,932 $ 493,434 $ (292,677) $ 5,789,689 CITY OF ALACHUA, FLORIDA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2014 Net Change in Fund Balance - Total Governmental Funds $ (254,289) Amounts Reported for Governmental Activities in the Statement of Activities are Different Because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives and reported as depreciation expense: Expenditures for Capital Assets $ 1,685,606 Depreciation Expense (741,803) 943,803 Donations of capital assets are not recorded in governmental funds. However, in the statement of activities, the fair values of those assets are recorded as revenue. 71,519 Governmental funds report proceeds from sales of capital assets as current financial resources. The gain or loss on disposal of capital assets is not reflected in the governmental funds: (Loss) on Disposal of Capital Assets (8,106) Repayment of long-term liabilities are expenditures in the governmental funds but the repayment reduces long-term liabilities in the statement of net position. 304,621 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds: Return of Grant Funds to Alachua County (500,000) Amortization of Bond Discount (1,305) Change in Accrued Interest Payable 4,144 Change in Compensated Absences Liability (6,267) Change in Other Postemployment Benefit Obligation (18,397) (521,825) Change in Net Position of Governmental Activities $ 535,723 See accompanying notes. 20 See accompanying notes. 21

90 CITY OF ALACHUA, FLORIDA STATEMENT OF FUND NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2014 CITY OF ALACHUA, FLORIDA STATEMENT OF FUND NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2014 (Concluded) B-20 Assets Business-type Activities - Enterprise Funds Major Funds Nonmajor Business-type Fund Total Activities Mosquito Enterprise Internal Electric Water Wastewater Control Funds Service Fund Current Assets: Cash and Cash Equivalents $ 4,123,389 $ 546,642 $ 446,065 $ 12,129 $ 5,128,225 $ 566,917 Receivables 2,138, , ,029 4,842 2,544,190 0 Prepaid Items 8,106 13,366 29, ,775 4,841 Inventories 514,361 68,954 3, ,888 0 Restricted Assets: Cash and Cash Equivalents 235, , , ,064 0 Total Current Assets 7,019, , ,390 17,282 8,876, ,758 Noncurrent Assets: Restricted Assets: Cash and Cash Equivalents 1,062, , , ,541,979 0 Investment 640, ,079 0 Total Restricted Assets 1,702, , , ,182,058 0 Capital Assets: Land 92, , ,940 0 Construction in Progress 1,356, , , ,252,534 4,823 Property, Plant and Equipment 12,968,806 6,407,089 32,279,418 58,403 51,713, ,168 (Accumulated Depreciation) (6,336,204) (4,137,242) (5,131,842) (47,563) (15,652,851) (174,643) Total Net Capital Assets 8,082,154 2,937,152 27,539,053 10,980 38,569,339 88,348 Other Assets: Advances to Other Funds 3,160, ,793 3,237, ,065 Total Other Assets 3,160, ,793 3,237, ,065 Total Noncurrent Assets 12,945,732 3,144,670 27,811,179 87,773 43,989, ,413 Total Assets 19,965,400 4,041,472 28,753, ,055 52,865, ,171 Deferred Outflows of Resources Unamortized Refunding Loss 195,162 51, , ,796 0 Total Assets and Deferred Outflows $ 20,160,562 $ 4,092,864 $ 28,896,811 $ 105,055 $ 53,255,292 $ 875,171 Liabilities Nonmajor Business-type Fund Total Activities Mosquito Enterprise Internal Electric Water Wastewater Control Funds Service Fund Current Liabilities: Accounts Payable $ 918,166 $ 12,788 $ 27,174 $ 407 $ 958,535 $ 9,953 Accrued Expenses 16,310 2,468 3, ,341 3,948 Due to Other Governments 73, ,658 0 Rate Stabilization Credit 2,657, ,657,427 0 Payable from Restricted Assets: Accrued Interest Payable 22,211 13,583 90, ,246 0 Current Portion of Long-term Debt 212,927 86, , ,818 0 Compensated Absences 39,669 14,513 25, ,919 41,334 Current Portion of Long-term Debt 212,927 38, , ,894 0 Total Current Liabilities 4,153, , , ,738,838 55,235 Noncurrent Liabilities: Payable from Restricted Assets: Customer Deposits 898, , , ,291,979 0 CR-3 Decommissioning Costs 640, ,079 0 Advances from Other Funds 4,098 1,458,413 1,915, ,379,061 0 Other Postemployment Benefits Liability 10,735 7,701 8, ,884 18,534 Compensated Absences 27,576 10,088 17, ,556 28,734 Long-term Debt 2,240, ,173 9,446, ,105,701 0 Total Noncurrent Liabilities 3,822,083 2,071,893 11,604, ,499,260 47,268 Total Liabilities 7,975,378 2,240,468 12,020,839 1,413 22,238, ,503 Net Position Business-type Activities - Enterprise Funds Major Funds Net Investment in Capital Assets 5,610,711 2,445,148 17,965,883 10,980 26,032,722 88,348 Restricted for: Renewal and Replacement Fund 163,790 29,701 56, ,000 0 Debt Service 212,927 86, , ,818 0 Unrestricted 6,197,756 (709,065) (1,285,699) 92,662 4,295, ,320 Total Net Position 12,185,184 1,852,396 16,875, ,642 31,017, ,668 Total Liabilities and Net Position $ 20,160,562 $ 4,092,864 $ 28,896,811 $ 105,055 $ 53,255,292 $ 875,171 Net Position - Above $ 31,017,194 Internal Service Fund Net Position in the Enterprise Funds 772,668 Net Position of Business-type Activities $ 31,789,862 See accompanying notes. 22 See accompanying notes. 23

91 CITY OF ALACHUA, FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2014 Business-type Activities Major Funds Nonmajor Fund Total Mosquito Enterprise Internal Electric Water Wastewater Control Funds Service Fund Operating Revenues Charges for Services $ 15,171,323 $ 1,339,516 $ 2,010,957 $ 56,291 $ 18,578,087 $ 0 Interfund Charges ,160,586 Total Operating Revenues 15,171,323 1,339,516 2,010,957 56,291 18,578,087 1,160,586 Operating Expenses Electric Power Expenses: Nuclear Power 14, ,123 0 Purchased Power 9,707, ,707,684 0 Personal Services 689, , ,372 6,295 1,487, ,182 Contractual Services 77,957 62,312 69, ,615 79,876 Supplies 56,862 35,278 91,051 18, ,560 82,497 Repairs and Maintenance 142,698 76, , ,459 11,909 Billing and Administrative 580, , ,541 23,211 1,160,586 0 Depreciation 347, , ,731 4,701 1,348,173 13,885 Other Expenses 173, , ,136 1, ,604 49,046 (Total Operating Expenses) (11,790,893) (1,203,587) (2,127,894) (54,645) (15,177,019) (1,101,395) CITY OF ALACHUA, FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2014 (Concluded) Business-type Activities Major Funds Nonmajor Fund Total Mosquito Enterprise Internal Electric Water Wastewater Control Funds Service Fund Capital Contributions $ 662,887 $ 0 $ 0 $ 0 $ 662,887 $ 0 Transfers (out) (1,621,117) 0 (72,638) 0 (1,693,755) (4,443) Change in Net Position 2,396, ,963 (454,422) 1,667 2,078,210 56,187 Total Net Position, Beginning of Year 9,789,182 1,717,433 17,330, ,975 28,938, ,481 Total Net Position, End of Year $ 12,185,184 $ 1,852,396 $ 16,875,972 $ 103,642 $ 31,017,194 $ 772,668 Change in Net Position - Above $ 2,078,210 Internal Service Fund Activities in the Enterprise Funds 56,187 Change in Net Position of Business-type Activities $ 2,134,397 B-21 Operating Income (Loss) 3,380, ,929 (116,937) 1,646 3,401,068 59,191 Nonoperating Revenues (Expenses) Investment Gain 5, , Interest and Fiscal Charges (102,515) (33,830) (284,317) 0 (420,662) 0 Miscellaneous 71,018 32,123 19, , Total Nonoperating Revenues (Expenses) (26,198) (966) (264,847) 21 (291,990) 1,439 Income Before Capital Contributions and Transfers 3,354, ,963 (381,784) 1,667 3,109,078 60,630 See accompanying notes. 24 See accompanying notes. 25

92 B-22 CITY OF ALACHUA, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2014 Business-type Activities - Enterprise Funds Nonmajor Business-type Major Funds Fund Total Activities Mosquito Enterprise Internal Electric Water Wastewater Control Funds Service Fund Cash Flows from Operating Activities Receipts from Customers $ 14,323,826 $ 1,359,179 $ 1,982,103 $ 55,864 $ 17,720,972 $ 0 Receipts from Interfund Services Provided ,160,586 Cash from Other Sources 71,018 32,123 19, , Payments to Suppliers for Goods and Services (10,005,425) (408,280) (790,359) (21,329) (11,225,393) (252,081) Payments for Interfund Services Used (580,293) (278,541) (278,541) (23,211) (1,160,586) 0 Payments to Employees for Services (683,561) (379,797) (411,171) (6,295) (1,480,824) (878,005) Net Cash Provided by (Used in) Operating Activities 3,125, , ,152 5,029 3,976,430 31,020 Cash Flows from Noncapital Financing Activities Loans/Advances and Repayments from (to) Other Funds 10,409 (45,273) 87, ,426 0 Transfers in (out) (1,621,117) 0 (72,638) 0 (1,693,755) (4,443) Net Cash Provided by (Used in) Noncapital Financing Activities (1,610,708) (45,273) 14,652 0 (1,641,329) (4,443) Cash Flows from Capital and Related Financing Activities Acquisition and Construction of Capital Assets (806,945) (50,783) (99,777) (140) (957,645) (25,457) Capital Contributions 662, ,887 0 Debt Principal Payments (416,027) (120,443) (173,530) 0 (710,000) 0 Debt Interest Payments and Other Charges (52,377) (30,182) (209,913) 0 (292,472) 0 Net Cash Provided by (Used in) Capital and Related Financing Activities (612,462) (201,408) (483,220) (140) (1,297,230) (25,457) Cash Flows from Investing Activities Interest Received 5, , Net Cash Provided by (Used in) Investing Activities 5, , Net Increase (Decrease) in Cash and Cash Equivalents 907,694 78,744 52,934 4,910 1,044,282 2,039 Cash and Cash Equivalents, Beginning of Year 4,513, , ,988 7,219 6,190, ,878 Cash and Cash Equivalents, End of Year $ 5,421,161 $ 854,056 $ 947,922 $ 12,129 $ 7,235,268 $ 566,917 Business-type Activities - Enterprise Funds Nonmajor Business-type Major Funds Fund Total Activities Mosquito Enterprise Internal Electric Water Wastewater Control Funds Service Fund Reconciliation of Cash and Cash Equivalents to Statement of Net Position Current Assets: Cash and Cash Equivalents $ 4,123,389 $ 546,642 $ 446,065 $ 12,129 $ 5,128,225 $ 566,917 Restricted Assets: Cash and Cash Equivalents 235, , , ,064 0 Noncurrent Assets: Restricted Assets: Cash and Cash Equivalents 1,062, , , ,541,979 0 Total $ 5,421,161 $ 854,056 $ 947,922 $ 12,129 $ 7,235,268 $ 566,917 Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities Operating Income (Loss) $ 3,380,430 $ 135,929 $ (116,937) $ 1,646 $ 3,401,068 $ 59,191 Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization 347, , ,731 4,701 1,348,173 13,885 Miscellaneous Income 71,018 32,123 19, , (Increase) Decrease in: Accounts Receivable, Net (199,424) 5,475 (15,428) (427) (209,804) 0 Prepaid Items (8,106) (13,366) (28,929) (311) (50,712) 1,343 Inventory 53,538 (14,132) (732) 0 38,674 0 Increase (Decrease) in: Accounts Payable 144,588 6,423 (136,007) (339) 14,665 (1,711) Accrued Expenses (22,390) (11,903) (12,441) (241) (46,975) (28,385) Due to Other Governments 15, ,824 0 Rate Stabilization Credit (721,860) (721,860) 0 Unearned Revenue 0 0 (62,635) 0 (62,635) 0 Compensated Absences 3,997 5,251 (8,352) (17,646) Customer Deposits 57,963 14,188 49, ,360 0 OPEB Liability 2,150 1,792 1, ,495 3,823 Net Cash Provided by (Used in) Operating Activities $ 3,125,565 $ 324,684 $ 521,152 $ 5,029 $ 3,976,430 $ 31,020 Noncash Investing, Capital and Financing Activities CITY OF ALACHUA, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2014 (Concluded) Amortization of Discount and Refunding Loss $ 53,611 $ 5,853 $ 18,497 $ 0 $ 77,961 $ 0 Reclassification of Loan Payments Between Principal and Interest Expense per Grantor $ 0 $ 0 $ 48,506 $ 0 $ 48,506 $ 0 See accompanying notes. 26 See accompanying notes. 27

93 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Note 1 - Summary of Significant Accounting Policies Note 1 - Summary of Significant Accounting Policies (Continued) B-23 The financial statements of the City of Alachua, Florida, (the City) have been prepared in conformity with generally accepted accounting principles (GAAP) in the United States of America as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Significant City accounting policies are described below: Reporting Entity The City is a political subdivision of the State of Florida, established in 1905 under the legal authority of Chapter 165, Florida Statutes, and is located in Alachua County. The legislative branch of the City is composed of a five-member elected commission. The City Commission is governed by the City Charter and by state and local laws and regulations. The City Commission is responsible for the establishment and adoption of policy. The execution of such policy is the responsibility of the City Manager, who is appointed by the Commission. The City s major operations include various utility services, electric, water and wastewater, as well as police protection, road and street maintenance, parks, recreation, and other general government services. The City contracts with Alachua County for the provision of fire service at a fixed cost to the City which is renegotiated annually. The City leases the fire station and equipment to Alachua County at no cost. Sanitation services are provided by a private company, but billed by the City to its customers. The City retains an administrative fee on sanitation services. In accordance with the Codification of Governmental Accounting and Financial Reporting Standards, the accompanying financial statements include all funds for which the City is financially accountable. The City has also considered all other potential organizations for which the nature and significance of their relationships with the City are such that exclusion would cause the City s financial statements to be misleading or incomplete. GASB has set forth criteria for consideration in determining financial accountability. These criteria include appointing a majority of an organization s governing body and: (1) the ability of the City to impose its will on that organization; or, (2) the potential for that organization to provide specific benefits to or impose specific financial burdens on the City. Other considerations are whether the organization is legally separate, whether the City holds the corporate powers of the organization, and whether there is fiscal dependency by the organization on the City. Community Redevelopment Agency The Community Redevelopment Agency (the Agency) was created by the City Commission in 1982 pursuant to Ordinance 82-5 to carry out the community redevelopment purposes of Florida Statute, Chapter 163. Subsequent amendments were made to the Agency through Ordinances 98-14, 98-24, 99-03, and This Agency is not to be a separate legal entity, and thus, not a component unit by definition. Therefore, the Agency is reported as part of the primary government in the basic financial statements of the City as a major governmental fund. Reporting Entity (Concluded) Public Finance Authority for Affordable Housing The Public Finance Authority for Affordable Housing (the Authority) was created by the City Commission in The Authority is a separate legal entity capable of suing and being sued, and able to purchase property in its own name. By charter, the Authority s Board is composed of the City Commission and, the City Commission has oversight over all financial activities. Accordingly, the Authority is a component unit of the City. However, there have been no financial transactions by the Authority during 2014, or since its creation; therefore, no amounts related to the Authority are reported in the accompanying basic financial statements. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all activities of the City. For the most part, the effect of the interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment; and, (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, postemployment benefits, and claims and judgments, are recorded only when payment is due

94 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Note 1 - Summary of Significant Accounting Policies (Continued) Note 1 - Summary of Significant Accounting Policies (Continued) B-24 Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the numerous individual programs are used as guidance. There are, however, essentially two types of these revenues. In one, such as in grants and similar items, monies must be expended on the specific purpose or project before any amounts will be paid to the City; therefore, revenues are recognized based upon the expenditures recorded and the availability criteria. In the other, monies are virtually unrestricted as to purpose of expenditure, and are usually revocable only for failure to comply with prescribed requirements. These resources are reflected as revenues at the time of receipt, or earlier if the susceptible to accrual criteria are met. Licenses and permits, fines and forfeitures, charges for sales and services (other than utility), and miscellaneous revenues are generally recorded as revenue when received in cash, because they are generally not measureable until actually received. Utility services, investment earnings, franchise fees, and utility taxes are recorded as earned, since they are measureable and available. Property taxes are recognized as revenue at the time an enforceable legal claim is established. This is determined to occur November 1, of each year. The assessment roll is validated July 1, and the millage resolution is approved by September 30. The City s property tax becomes a lien on October 1, and the tax is levied by Alachua County each November 1, for real and personal property located in the City. Property taxes are due before April 1, with the maximum discount available, if payment is made on or before November 30. If payment remains delinquent, a tax certificate for the full amount of any unpaid taxes is sold no later than June 1. Under this arrangement, there are no property tax receivables at the end of the fiscal year on September 30. The government reports the following major governmental funds: General Fund The General Fund is the government s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. Community Redevelopment Agency The Agency is a special revenue fund used to account for the expenditure of incremental tax funds contributed by Alachua County and the City for the Agency district. The government reports the following major proprietary funds: Electric Fund The Electric Fund accounts for the revenues and expenses associated with the City s electric utility service. Water Fund The Water Fund accounts for the revenues and expenses associated with the City s water distribution system. 30 Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Concluded) Wastewater Fund The Wastewater Fund accounts for the revenues and expenses associated with the City s wastewater treatment plant, wastewater pumping stations, and collection system. In addition, the government reports the following fund type: Internal Service Fund The Internal Service Fund accounts for goods or services provided by the Utility Administration and Operations, Utility Billing, Warehouse Operations, and Postage Services divisions to the Electric, Water, Wastewater, and Mosquito Control funds. The effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the government s electric, water and wastewater function, and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the City s enterprise funds are charges to customers for sales and services. The City s enterprise funds also recognize as operating revenues the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for the enterprise funds 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 nonoperating revenues and expenses. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Equity Deposits and Investments The City maintains a cash pool that is available for use by all funds. Interest income earned as a result of pooling is distributed monthly to the appropriate funds based on average daily balances. The government s cash and cash equivalents are considered to be cash on hand, demand deposits, and highly liquid instruments with original maturities of three months or less from the date of acquisition. Florida Statutes require state and local governmental units to deposit monies with financial institutions classified as qualified public depositories, a multiple financial institution pool whereby groups of securities pledged by the various financial institutions provide common collateral for their deposits of public funds. This pool is provided as additional insurance to the federal depository insurance and allows for additional assessments against the member institutions providing full insurance for public deposits. The City had deposits only with qualifying institutions as of September 30,

95 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Note 1 - Summary of Significant Accounting Policies (Continued) Note 1 - Summary of Significant Accounting Policies (Continued) Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Equity (Continued) Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Equity (Continued) Deposits and Investments (Concluded) Investments are held in the proprietary funds and consist of marketable securities reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales quote at current exchange rates. Investments that do not have an established market are reported at estimated fair value based on market indicators regarded as measures of equity or fixed income performance results. Capital Assets (Concluded) The costs of normal maintenance and repairs that do not add to the value of the asset, or materially extend assets lives, are not capitalized. Property, plant and equipment of the primary government are depreciated using the straight-line method over the following estimated useful lives: B-25 Receivable and Payables Outstanding balances between funds are reported as due to/from other funds or advances to/from other funds. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. Receivables are reported net of an allowance of uncollectibles. The City has recorded a $36,098 allowance for uncollectibles in the Electric Fund and $46,140 in the General Fund. Inventory Inventory for governmental-type activities is valued at the lower of cost, using the first-in, first-out (FIFO) method, or market value. Generally, the costs of governmental fund type inventories are recorded as expenditures when consumed (consumption method) rather than when purchased. Business-type activities, utility supplies and plant inventory are valued at lower of cost, as determined by the average unit cost method, or market value. Prepaids Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. Prepaid items are accounted for by use of the consumption method. Restricted Assets Certain resources are set aside for debt reserves, customer deposits, power plant decommissioning costs, and other purposes. These resources are classified as restricted assets on the statement of net position because their use is limited by applicable bond covenants, ordinances, or regulations. Capital Assets Capital assets, which include property, plant and equipment, and infrastructure assets (i.e., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $1,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. 32 Buildings Improvements Infrastructure Furniture, Fixtures, and Equipment Years Years Years 3-20 Years Compensated Absences Accumulated unpaid vacation time, compensatory time, and sick time amounts, including the related direct and incremental salary-related payments, accrues in the enterprise funds, and appear as increases in salary expenses in the proprietary financial statements. In the governmental funds, these costs are recognized when payments are made to employees or when the costs mature as a result of an employee resignation or retirement. All vacation, compensatory and sick pay accrues when incurred in the government-wide financial statements. Long-term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities and business-type activities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the bond premium or discount. Bond issuance costs are expensed when incurred, with the exception of bond insurance, which is amortized over the term of the related debt. In the fund financial statements, governmental fund types record bond premiums and discounts, as well as bond issuance costs in the year incurred. The face amount of debt issued is reported as other financing sources, while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds, are reported as debt service expenditures. Unamortized Refunding Loss Losses resulting from the refunding of debt are reported as a deferred outflow of resources and recognized as a component of interest expense over the remaining life of the refunded debt or the new debt, whichever is shorter. Fund Balance Fund balance classifications comprise a hierarchy based primarily on the extent to which the organization is bound to honor constraints on the specific purpose for which amounts in the funds can be spent. Fund balance is reported in five components: nonspendable, restricted, committed, assigned and unassigned: 33

96 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Note 1 - Summary of Significant Accounting Policies (Continued) Note 1 - Summary of Significant Accounting Policies (Concluded) Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Equity (Continued) Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Equity (Concluded) B-26 Fund Balance (Concluded) Nonspendable This component of fund balance consists of amounts that cannot be spent because: (a) they are not expected to be converted to cash; or (b) they are legally or contractually required to remain intact. Examples of this classification are prepaid items, inventories, and principal (corpus) of an endowment fund. On the governmental funds balance sheet, the inventory balance reported is offset by a nonspendable fund balance classification which indicates it does not constitute available spendable resources even though it is a component of net current position. Restricted This component of fund balance consists of amounts that are constrained either: (a) externally by third parties (creditors, grantors, contributors, or laws or regulations of other governments); or (b) by law through constitutional provisions or enabling legislation. Committed This component of fund balance consists of amounts that can only be used for specific purposes pursuant to constraints imposed by formal action (i.e., by ordinance) of the organization s governing authority (the City Council). These committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use by taking the same type of action employed to constrain those amounts. Assigned This component of fund balance consists of amounts that the City intends to use for a specific purpose as determined by the City Council in accordance with the City s fiscal policies. In addition, residual balances in capital projects and debt service funds are considered assigned for the general purpose of the respective fund. Unassigned This classification is used for: (a) deficit unrestricted fund balances in any governmental fund; or (b) fund balances within the general fund that are not restricted, committed or assigned. When both restricted and unrestricted resources are available for use, it is generally the practice of the City to use restricted resources first, then unrestricted resources as they are needed. When unrestricted resources (committed, assigned and unassigned) are available for use in any governmental fund, it is the City s practice to use committed resources first, then assigned, and then unassigned as needed. Net Position Net position invested in capital assets, net of related debt, consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction, or improvement of those assets. Net position invested in capital assets, net of related debt excludes unspent debt proceeds. Net position is reported as restricted when there are limitations imposed on its use either through enabling legislation or through external restrictions imposed by creditors, grantors, laws, or regulations. Net position not reported as net position invested in capital assets, net of related debt or restricted net position, are reported as unrestricted net position. 34 Note 2 - Net Position (Concluded) When both restricted and unrestricted resources are available for use, it is the government s policy to use restricted resources first, then unrestricted resources as needed. Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America as applied to governmental units, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates. New Accounting Standards In June 2012, the GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27, effective for the City s fiscal year ending September 30, 2015, which establishes standards for measuring and recognizing liabilities, deferred outflows and inflows of resources, and expenses/expenditures for pensions. This statement requires recognition of the liability of employers to employees for defined benefit pensions (net pension liability) to be measured as the portion of the present value of projected benefit payments to be provided through the pension plan to current active and inactive employees that is attributed to those employees past periods of service (total pension liability), less the amount of the pension plan s fiduciary net position. As described in Note 13, the City participates in the FRS, a cost-sharing, multiple-employer defined benefit public retirement plan. Upon implementation of GASB Statement No. 68, the City will be required to recognize a liability for its proportionate share of the collective net pension liability of all employers for benefits provided through the pension plan, and related pension expense/expenditure and deferred outflows and inflows of resources. The effect of the application of GASB Statement No. 68 has not yet been determined. Stewardship, Compliance, and Accountability Budgetary Information The City s procedures in preparing and adopting the annual budgets are as follows: The City Manager is responsible for preparing a proposed operating budget for the upcoming year prior to September 30 that includes estimated revenues, proposed expenditures, and other financing sources and uses. Two public hearings are held to obtain taxpayer comments and suggestions. The budget is enacted through passage of a resolution. The City Manager is authorized to transfer budgeted amounts within any department, but may not revise total departmental expenditures without the approval of the City Commission. 35

97 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Note 2 - Stewardship, Compliance, and Accountability (Concluded) Note 3 - Cash, Cash Equivalents, and Investments (Continued) Budgetary Information (Concluded) The budget is prepared by fund, function, and department. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the department level for the general fund and the fund level for all other governmental funds. Unused appropriations lapse at the end of the year. Budgets are adopted on a basis consistent with GAAP. Budgeted amounts in the accompanying financial statements are as originally adopted, or as amended by the appropriate authority. Deposits All of the City s cash deposits are held in banks that qualify as a public depository under the Florida Security for Public Deposits Act as required by Chapter 280, Florida Statutes. Under the Act, all qualified public depositories are required to pledge eligible collateral having a market value equal to or greater than the average daily or monthly balance of all public deposits, times the depository s collateral pledged level. The pledging level may range from 25% to 125% depending upon the depository s financial condition and establishment period. All collateral must be deposited with an approved financial institution. In event of default by a qualified public depository, all claims for public deposits would be satisfied by the State Treasurer from the proceeds of federal deposit insurance, pledged collateral of the public depository in default and, if necessary, a pro rata assessment to the other qualified public depositories in the collateral pool. Therefore, all cash and time deposits held by banks are fully insured and collateralized. B-27 Note 3 - Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve a portion of the applicable appropriation, is employed throughout the fiscal year as an operating tool for budgeted funds. Encumbrances outstanding at year-end are reported as assigned, committed or restricted fund balance in the governmental funds. Deficit Fund Equity At September 30, 2014, the following funds had deficit fund balances: Fund Type Deficit Neighborhood Community Center Nonmajor Governmental $ (157,454) Municipal Complex Nonmajor Governmental (935,324) The City anticipates that the deficits for the Neighborhood Community Center Fund and Municipal Complex Fund will be recovered through the future sale of the old City Hall property and transfers from the General Fund. Cash, Cash Equivalents, and Investments Deposits and investments as of September 30, 2014, are classified in the accompanying financial statements as follows: Statement of Net Position Cash and Cash Equivalents $ 10,238,970 Restricted: Cash and Cash Equivalents 4,370,660 Investments 640,079 Total Cash and Investments $ 15,249,709 Deposits and investments consist of the following: Cash Deposits $ 13,617,456 Investments 1,632,253 Total Cash and Investments $ 15,249,709 Investments Following are the investments, credit ratings, and maturities of the City s governmental and business-type activities at September 30, 2014: Investment Maturities Investment Credit Fair Less Type Rating Value Than Total Florida PRIME AAAm $ 985,709 $ 985,709 $ 0 $ 0 $ 985,709 Fund B Surplus Trust Funds Investment Pool Unrated 6,465 6, ,465 FMPA CR-3 Pooled Investments Unrated 640, , ,079 Total $ 1,632,253 $ 1,632,253 $ 0 $ 0 $ 1,632,253 The Florida State Board of Administration (SBA) administers and provides regulatory oversight over the Florida PRIME and the Fund B Surplus Funds Trust Fund (Fund B). The SBA has interpreted that the Florida PRIME is currently considered a 2a7-like fund. The City s investment in the Florida PRIME is reported at amortized cost. The fair value of the position in the pool is equal to the value of the pool shares. Fund B investments are restricted on how participants can access portions of their surplus and are being distributed to participants as they become available from surplus funds maturities, sales, and received income. As of September 30, 2014, the original principal balances have been distributed in full to each Fund B participant. Fund B is reported at fair value, determined by the fair value per share of the pool s underlying portfolio. Separate financial reports for the SBA investments can be obtained from the Florida State Board of Administration, 1801 Hermitage Blvd., Tallahassee, Florida The Florida Municipal Power Agency (FMPA) account represents a 2.087% interest in an investment pool, which invests primarily in money market funds, U.S. government and agency bonds, and corporate obligations. Investments in the FMPA account are reported at fair value. The securities in the pool are registered in the name of SunTrust, NA, as trustee for the FMPA CR-3 participants. The investments are managed by FMPA

98 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Note 3 - Cash, Cash Equivalents, and Investments (Concluded) Note 5 - Inventory B-28 Note 4 - Investments (Concluded) Credit Risk The City s policy limits investments of governmental and business-type funds to the Florida Local Government Surplus Trust Fund administered by the SBA, U.S. Treasury and agency obligations, federal instrumentalities, interest-bearing time deposit or saving accounts, repurchase agreements, money market funds, and intergovernmental investment pools. Investments in mutual funds must maintain a rating of AAm or AAm-G or better by Standard & Poor s, or the equivalent by another rating agency. Interest Rate Risk The City s investment policy permits the investment of current operating funds with maturities of no longer than two years. Investments of nonoperating funds such as bond reserves shall have a term appropriate to the need for funds and in accordance with debt covenants, but not exceeding five years. Custodial Credit Risk For an investment, custodial credit risk is the risk that in the event of failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City generally utilizes third party custodians to help manage custodial credit risk. Custodians are primarily bank trust departments, insurance companies, brokerage firms, the State of Florida, and SBA. Concentration of Credit Risk The City s investment policy requires diversification of investments in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. All of the City s investments are in external investment pools. Restricted Assets Restricted cash and investments at September 30, 2014, are as follows: Governmental Business-type Activities Activities Cash and Cash Equivalents Debt Service Reserve and Sinking Funds $ 653,410 $ 435,238 Cash with Fiscal Agent 262, ,826 Customer Deposit 0 1,291,979 Renewal and Replacement 0 250,000 Economic Environment 481,288 0 Parks and Recreation 30,166 0 Public Safety 28,612 0 Physical Environment 14,678 0 Infrastructure 777,534 0 Other 15,488 0 Net Restricted Cash and Cash Equivalents $ 2,263,617 $ 2,107,043 Investments CR-3 Decommissioning $ 0 $ 640,079 The CR-3 Decommissioning Account is required by state law to accumulate funds for the City s share of the decommissioning costs of the CR-3 nuclear power plant. The required cash balance in the decommissioning account is offset by a deferred credit on the balance sheet. Note 6 - Inventory at September 30, 2014, consists of the following: Business-type Activities Balance Electric Utility Supplies $ 349,444 Transformers 151,206 Meters 13,711 Water/Wastewater Supplies 72,527 Total $ 586,888 Capital Assets The following is a summary of changes in capital assets for the governmental activities for the year ended September 30, 2014: Beginning Ending Balance Additions Disposals Balance Governmental Activities Capital Assets, Not Being Depreciated: Land $ 7,409,493 $ 0 $ 0 $ 7,409,493 Construction in Progress 1,694,160 1,022,555 (2,445,708) 271,007 Total Capital Assets Not Being Depreciated 9,103,653 1,022,555 (2,445,708) 7,680,500 Capital Assets Being Depreciated: Building 8,463,570 5, ,468,926 Improvements Other Than Buildings 2,994, , ,632,472 Infrastructure 9,812,496 2,294, ,106,757 Furniture, Fixtures, and Equipment 2,582, ,157 (99,516) 2,725,889 Total Capital Assets Being Depreciated 23,853,282 3,180,278 (99,516) 26,934,044 Less Accumulated Depreciation for: Building (1,391,677) (181,564) 0 (1,573,241) Improvements Other Than Buildings (647,567) (112,623) 0 (760,190) Infrastructure (4,600,514) (238,613) 0 (4,839,127) Furniture, Fixtures, and Equipment (1,722,311) (209,003) 91,410 (1,839,904) Total Accumulated Depreciation (8,362,069) (741,803) 91,410 (9,012,462) Total Capital Assets, Being Depreciated, Net 15,491,213 2,438,475 (8,106) 17,921,582 Governmental Activities Capital Assets, Net $ 24,594,866 $ 3,461,030 $ (2,453,814) $ 25,602,082 Depreciation expense was charged to functions of the governmental activities as follows: Governmental Activities General Government $ 207,055 Public Safety 133,048 Physical Environment 55 Transportation 283,396 Economic Environment 15,487 Parks and Recreation 102,762 Total $ 741,

99 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) B-29 Note 6 - Capital Assets (Concluded) The following is a summary of changes in capital assets for the business-type activities for the year ended September 30, 2014: Beginning Ending Balance Additions Disposals Balance Business-type Activities Capital Assets, Not Being Depreciated: Land $ 255,940 $ 0 $ 0 $ 255,940 Construction in Progress 2,346, ,696 (726,432) 2,257,357 Total Capital Assets Not Being Depreciated 2,602, ,696 (726,432) 2,513,297 Capital Assets Being Depreciated: Building 4,872, ,872,383 Improvements Other Than Buildings 3,329, , ,835,458 Infrastructure 40,377, , ,870,912 Furniture, Fixtures, and Equipment 2,326,959 72,455 (6,283) 2,393,131 Total Capital Assets Being Depreciated 50,906,329 1,071,838 (6,283) 51,971,884 Less Accumulated Depreciation for: Building (3,547,907) (121,300) 0 (3,669,207) Improvements Other Than Buildings (1,902,771) (127,259) 0 (2,030,030) Infrastructure (7,554,579) (962,482) 0 (8,517,061) Furniture, Fixtures, and Equipment (1,466,462) (151,017) 6,283 (1,611,196) Total Accumulated Depreciation (14,471,719) (1,362,058) 6,283 (15,827,494) Total Capital Assets, Being Depreciated, Net 36,434,610 (290,220) 0 36,144,390 Business-type Activities Capital Assets, Net $ 39,036,643 $ 347,476 $ (726,432) $ 38,657,687 Note 7 - Long-term Liabilities Governmental Activities The following schedule summarizes the changes in the City s governmental long-term liabilities during the year ended September 30, 2014: Due Beginning Ending Within Balance Additions Reductions Balance One Year Section 108 Government Guaranteed Participation Certificates, Series HUD 2001A $ 1,275,000 $ 0 $ (125,000) $ 1,150,000 $ 135,000 Capital Improvement and Refunding Revenue Bonds, Series ,410,000 0 (100,000) 7,310, ,000 (Less Discount) (30,026) 0 1,305 (28,721) Redevelopment Note 885,500 0 (79,621) 805,879 81,841 Due to Alachua County 0 500, ,000 0 Compensated Absences 438, ,893 (186,626) 445, ,596 Total $ 9,979,286 $ 692,893 $ (489,942) $ 10,182,237 $ 504, Note 7 - Long-term Liabilities (Continued) Governmental Activities (Continued) Section 108 Government Guaranteed Participation Certificates, Series HUD 2001A On August 2, 2001, the City executed a loan agreement with the U.S. Department of Housing and Urban Development (the Sponsor) to borrow $2,250,000 from the Sponsor s $313,756,000 Section 108 Government Guaranteed Participation Certificates, Series HUD 2001A. The Sponsor guarantees timely payment of the notes issued by local governmental agencies. The City used the proceeds of the note to repay the outstanding balances on its Taxable Sales Tax Revenue Note, Series 1999A, and Sales Tax Revenue Note, Series 1999B and finance other costs related to economic development. The note is secured by the City s local government half-cent sales tax, utility franchise fees and state revenue sharing. Principal is payable annually and interest semiannually for twenty years. Interest accrues at the certificates rates which vary from 3.66% to 6.67% over the life of the note. Capital Improvement and Refunding Revenue Bonds, Series 2006 On January 26, 2006, the City issued bonds in the amount of $8,095,000 to pay the cost of: (1) the construction of the new City Hall and Police Administration Building, including the acquisition and installation of furniture, fixtures, and equipment; (2) the refunding of the City s outstanding Governmental Unit Note evidencing a loan to the City from the City of Arcadia, Florida, from its Local Government Revenue Bonds, Series 1993, Dedicated Pool, Sales Tax Revenue Note, Series 1995, and Sales Tax Revenue Note, Series 2000 outstanding in the aggregate principal amount of $871,171; and (3) to pay certain costs of issuance incurred with respect to the issue. The bonds are secured by a lien upon and pledge of the legally available non-ad valorem revenues of the City. Interest is payable semiannually on April 1 and October 1, each year at interest rates ranging from 3.25% to 4.5%. Principal payments are due annually on October 1, with final maturity occurring October 1, Redevelopment Revenue Note, Series 2013 On May 23, 2013, the City executed a loan agreement with BB&T Governmental Finance for the purposes of funding or financing redevelopment activities within the Redevelopment District. The City is required to expend the funds, together with the investment earnings thereon, within three years of the date of issue to pay the costs of the redevelopment project according to the City s Redevelopment Plan. The note is secured by a lien upon the tax increment revenues of the Redevelopment District. Interest is payable semiannually for ten years on June 1 and December 1 at a fixed interest rate of 2.22%. Principal payments are also due semiannually on June 1 and December 1. Due to Alachua County Pursuant to an Interlocal Agreement with Alachua County Board of County Commissioners (the County), the City received $500,000 to purchase land in exchange for a commitment to construct recreational fields on the land by January 1, The City was unable to meet the required timeline, and on December 9, 2014, the County voted not to extend the time to construct the facilities, thus requiring the City to return the $500,000. The repayment is due in annual installments over a period of six years beginning December 31,

100 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Note 7 - Long-term Liabilities (Continued) Note 7 - Long-term Liabilities (Continued) B-30 Governmental Activities (Concluded) Compensated Absences Compensated absences reported as governmental activities in the statement of net position are liquidated by the general fund. The following schedule summarizes the retirement of the governmental long-term debt by fiscal year (excluding compensated absences and discount): Fiscal Year Ending September 30, Principal Interest Total 2015 $ 321,841 $ 405,046 $ 726, , , , , , , , , , , , , ,082,994 1,449,573 3,532, ,020,000 1,049,978 3,069, ,510, ,225 3,063, ,165,000 52,988 1,217,988 Total $ 9,765,879 $ 4,979,971 $ 14,745,850 Business-type Activities The following schedule summarizes the changes in the City s business-type long-term liabilities during the year ended September 30, 2014: Due Beginning Ending Within Balance Additions Reductions Balance One Year Utility Acquisition Bonds, Series 1993 $ 530,000 $ 0 $ (75,000) $ 455,000 $ 80, State Revolving Fund Loan - Florida Department of Environmental Protection 8,362,907 48, ,411,413 90,712 Utility Refunding Bonds, ,695,000 0 (635,000) 4,060, ,000 Compensated Absences 222,293 96,574 (113,324) 205, ,253 Total $ 13,810,200 $ 145,080 $ (823,324) $ 13,131,956 $ 941,965 Utility Acquisition Bonds, Series 1993 On October 18, 1993, the City adopted Resolution R authorizing the issuance of $1,300,000 Utility Acquisition Bonds, Series 1993 to provide the necessary funds for the acquisition of the private water and wastewater systems in the Turkey Creek recreational residential community in the City. The bonds are secured by the net utility revenues of the combined electric, water, and wastewater utility systems of the City, but are subordinate to the secured interests of the bondholders in the other outstanding revenue bonds of the City. The bonds were issued without premium or discount and are payable at 7% interest. Interest is payable semiannually on October 1 and April 1, and principal is payable annually on October 1 until final maturity at October 1, Business-type Activities (Concluded) 2009 State Revolving Fund Loan Florida Department of Environmental Protection In June 2009, the City authorized a loan agreement to finance construction costs related to the wastewater control facility in the amount of $10,000,000 with additional increases in 2010 and 2011 of $10,000,000 and $550,074, respectively. The total loan was $20,550,074, of which $11,841,733 was forgiven pursuant to the loan agreement. Principal and interest are payable semiannually on November 15 and May 15 of each year until all amounts due under the agreement have been fully paid. Interest is payable at rates ranging from 2.24% to 2.67%. Net utility revenues of the system and excise taxes are pledged as collateral for the loan. These pledged revenues are subordinate to the Utility Acquisition Bonds, Series 1993 and the Utility Systems Utility Revenue Bonds, Series Utility Systems Utility Revenue Bonds, Series 2013 On January 30, 2013, the City adopted Resolution R-13-07, authorizing the issuance of the Utility Systems Utility Revenue Bonds, Series The bonds were issued at a par amount of $4,800,000 to provide the funds required to refund the City s outstanding Utilities Revenue Bond of 1979 and Utility Refunding Revenue Bonds, Series 2003 and to pay certain expenses related to the issuance of the Series 2013 bonds. The bonds bear interest from 1.67% and mature annually on April 1 until final maturity April 1, Interest is payable semiannually on April 1 and October 1 of each year. Net utility revenues of the system and excise taxes are pledged as collateral for the revenue bonds. The Series 2013 Bonds are superior to the City s outstanding Utility Acquisition Bonds, Series 1993 and 2009 State Revolving Fund Loan as to lien upon and pledge of the pledged funds. The following schedule summarizes the principal retirement for bonds and notes for businesstype debt by fiscal year (excluding compensated absences and discounts): Fiscal Year Ending September 30, Principal Interest Total 2015 $ 820,712 $ 300,106 $ 1,120, , ,185 1,142, , ,117 1,158, , ,969 1,184, , ,383 1,204, ,086, ,499 2,961, ,604, ,915 2,286, ,809, ,016 2,286, ,040, ,783 2,286, ,366 27, ,397 Total $ 12,926,413 $ 3,596,004 $ 16,522,417 43

101 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Note 7 - Long-term Liabilities (Concluded) Note 8 - Pledged Revenues (Concluded) Interest During the year, the City incurred $711,735 of interest costs, all of which was charged to expense. Debt Covenants The City has covenanted to establish and collect fees from users of the Utility System (gross revenues of the System, as defined in the bond ordinance) sufficient to pay the costs of operation and maintenance of the System (as defined in the bond ordinance) plus 100% of the bond service requirements for that year. In addition, the rate covenants require the City to establish and collect fees from users of the System and excise taxes sufficient to pay the costs of operation and maintenance of the System plus 120% of the bond service requirements. Principal Outstanding and Estimated Principal Pledged Description of Revenue Interest Percentage and Pledged Revenue Bonds Received Paid Pledged Interest Through Half-cent Sales Tax $ 496,497 Utility Franchise Fees 286,283 State Revenue Sharing 223,696 Section 108, HUD 2001A Series $ 1,006,476 $ 207, % $ 1,472, Capital Improvement and Refunding Non-Ad Valorem Revenues Revenue Bonds, Series 2006 $ 5,814,449 $ 416, % $ 11,879, The debt purchase agreement rate covenant requires that the City establish and collect fees from users of the System sufficient to provide supplemental pledged revenues (as defined in the debt purchase agreement) equal to or exceeding 115% of the State Revolving Fund (SRF) loan debt service requirements. Incremental Tax Revenue 2013 Redevelopment Note $ 458,058 $ 99, % $ 893, Net Utility Revenues $ 4,871,547 Excise Taxes 1,431,876 Utility Bonds - Series 1993, and 2013 $ 6,303,423 $ 822, % $ 4,839, B-31 On November 5, 2008, Moody s Investor Service (Moody s) downgraded Ambac Assurance Corporation, the provider of the municipal bond insurance policy on the City s Series 2006 Capital Improvement and Refunding Revenue Bonds from Aa3 to Baa1. Pursuant to the bond covenants, if the bond insurer falls below Moody s A rating, the City shall either: (1) deposit cash to meet the reserve requirement to be paid over the ensuing year in equal monthly installments; or (2) replace its existing policy with a surety bond, insurance policy, or letter of credit meeting the bond requirements within six months of such occurrence. The City has fully funded the reserve requirement. State Revolving Fund Loans , 2009, Net Utility Revenues and 2011 $ 4,871,547 $ 178, % $ 11,682, Non-ad valorem revenues consist of local government half-cent sales tax, franchise fees, solid waste disposal fees, occupational license taxes, local communication services tax, guaranteed entitlement funds, utility tax, mobile home license fees, alcoholic beverages license fees, fines and forfeitures, licenses and permits, certain fees and charges, and surplus utility revenues. Note 8 - The City has also covenanted to establish a special fund called the Bond and Interest Sinking Fund, to be used exclusively for debt service payments on certain bonds. As of September 30, 2014, the City has met its debt covenants. Pledged Revenues The City has pledged certain revenues to repay bonds and notes outstanding as of September 30, The following table reports the revenues, sometimes net of related operating expenses, pledged for each debt issue, the amounts of such revenues received in the current year, the current year principal and interest paid on the debt, the approximate percentage of each revenue which is pledged to meet the debt obligation, the date through which the revenue is pledged under the debt agreement, and the total pledged future revenues for each debt, which is the amount of the remaining principal and interest on the bonds and notes at September 30, 2014: Note 9 - Interfund Receivables, Payables, and Transfers The following is a summary of interfund receivables and payables at September 30, 2014: Receivable Fund Payable Fund Amount General Fund Redevelopment Agency $ 200 General Fund Nonmajor Governmental Funds 565,551 General Fund Water Utility 471,327 General Fund Wastewater Utility 282,498 Redevelopment Agency General Fund 123 Redevelopment Agency Electric Utility 4,098 Electric Utility Redevelopment Agency 7,459 Electric Utility Nonmajor Governmental Funds 824,126 Electric Utility Water Utility 695,228 Electric Utility Wastewater Utility 1,633,115 Electric Utility Nonmajor Enterprise Fund 937 Water Utility Redevelopment Agency 299 Nonmajor Enterprise Fund Water Utility 76,793 Internal Service Fund Water Utility 215,065 Total $ 4,776,

102 Note 9 - CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Interfund Receivables, Payables, and Transfers (Concluded) Note 10 - Contingent Liabilities (Concluded) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) B-32 The outstanding balances between funds result from the time lag between the dates that: (1) interfund goods and services are provided, or reimbursable expenditures occur; (2) transactions are recorded in the accounting system; and (3) payments between funds are made. Additionally, certain interfund loans were made to fund deficit unrestricted equity in pooled cash. All outstanding interfund balances are reported as long-term advances as of September 30, Interfund Transfers: Transfers In Community Nonmajor General Redevelopment Governmental Transfers Out Fund Agency Funds Total General Fund $ 0 $ 171,302 $ 675,773 $ 847,075 Electric Utility 1,621, ,621,117 Wastewater Utility ,638 72,638 Nonmajor Governmental Funds 0 12, ,703 Internal Service Fund 4, ,443 Total $ 1,625,560 $ 184,005 $ 748,411 $ 2,557,976 Transfers are normally recurring and are approved by the City commission during the budget process. A transfer in the amount of $1,621,117 from the Electric Fund to the General Fund is in support of general government operations to the extent moneys are available after paying operating expenses and debt service on outstanding bonds. A transfer in the amount of $552,182 from the General Fund to the Nonmajor Governmental Funds is for debt service. Additional transfers of $123,591 from the General Fund to the Nonmajor Governmental Funds were made to reduce deficit net position in the Building Operations and Neighborhood Community Center funds. A transfer in the amount of $171,302 from the General Fund to the Community Redevelopment Agency is the City s required portion of tax incremental funding. Note 10 - Contingent Liabilities Amounts received or receivable for grants are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures or expenses that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. The developer of Heritage Oaks subdivision has sued the City for damages alleging a breach of contract. The development was started in 2003, and to-date, the subdivision improvements have not been completed. The City has not formally accepted the subdivision improvements as part of the City s public infrastructure. This case went to trial in August 2012 and the jury rendered a verdict against the City of approximately $3.9 million. The City filed four posttrial motions and motions for the court to reconsider the motions for summary judgment. A motion for a new trial was granted by the court and the developer subsequently appealed the order. As of September 30, 2014, no loss has been accrued since the amount of the loss is not reasonably estimable. The ultimate resolution of this case could result in a loss to the City of up to $3.9 million plus attorneys fees. 46 The City is a defendant in various other lawsuits. Although the outcome of these lawsuits is not presently determinable, it is the opinion of the government s counsel that resolution of these matters will not have a material adverse effect on the financial condition of the government. Note 11 - Restricted Net Position Net position is restricted within governmental activities and business-type activities as follows: Governmental Business-type Activities Activities Debt Service $ 745,939 $ 438,818 Renewal and Replacement 0 250,000 Economic Environment 493,434 0 Law Enforcement 28,823 0 Physical Environment 14,708 0 Comprehensive Planning 2,508 0 Parks and Recreation 43,256 0 Total $ 1,328,668 $ 688,818 The City s restricted net position includes $493,434 restricted by enabling legislation. Note 12 - Electric Power Agreements City of Gainesville The City entered into a wholesale electric service contract with the City of Gainesville, Florida, on January 21, 1987, for the purchase of the majority of the City s electric power requirements beginning January 6, The City constructed a 138 x Y/7.2kV substation to receive the power, which was placed into operation on that date. The substation is located in such a manner that the City has reasonable access to the transmission lines of both the City of Gainesville and Florida Power Corporation. A portion of the substation is owned by the City of Gainesville. The initial term of the contract was five years, with options for additional annual extensions. The contract was renegotiated on October 2, 1992, and extended for an additional fifteen years, beginning on December 31, 1992, with automatic extensions for succeeding periods of one year each. This contract was amended again on November 22, 2010, extending the contract for an initial ten-year term, with automatic extensions for up to three succeeding periods of one year each. Total payments to the City of Gainesville for 2014 were $9,486,452. Provisions in the contract include a fuel charge, which is adjusted monthly, and is based 50% on the City of Gainesville s retail fuel adjustment and 50% on the NYMEX price of natural gas. Crystal River Unit No. 3 Participation Agreement On July 31, 1975, the City entered into a participation agreement with Florida Power Corporation, which became Progress Energy. Under terms of the agreement, the City acquired a % ownership interest and generation entitlement share in Crystal River Unit No. 3 (CR3), a nuclear steam electric generating unit. The City received power from the power generating facility via Florida s transmission grid and paid an allocated share of operating, maintenance, capital, and retirement costs. Total payments for 2014 were $14,

103 B-33 Note 12 - Electric Power Agreements (Concluded) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Crystal River Unit No. 3 Participation Agreement (Concluded) On February 5, 2013, Duke Energy Corporation, the parent of Progress Energy, announced its intention to retire the Crystal River 3 (CR3) nuclear power plant prior to the license expiration in CR3 has been shut down and offline since late 2009 due to a delamination, or crack, that occurred in the outer layer of the containment building s concrete wall. The City selected the Florida Municipal Power Agency (FMPA) to negotiate on its behalf with Duke concerning the failed CR3 plant. After more than a year of negotiations with Duke, the eight municipal minority owners, including the City, and the seven wholesale purchasers have reached a settlement. The terms of the settlement provide for the following: (1) $55,000,000 lump sum cash settlement to the minority owners at closing, of which $606,403 will be paid to the City; (2) minority owners allowed to withdraw $429,560 of the decommissioning funds previously set aside, prior to transfer to Duke, of which $5,132 will be refunded to the City; (3) as of October 1, 2013, minority owners are not responsible for payment of any CR3 related costs that would otherwise be payable pursuant to the CR3 Participation Agreement, and additionally Duke will refund monies paid subsequent to October 1, 2013, in the amount of $1,311,402 of which $24,233 will be refunded to the City; and (4) additional indemnities and release from obligations of undetermined long-term costs. Also, as part of the settlement, all minority owners will transfer decommissioning funds to Duke. The City s decommissioning account balance at September 30, 2014, is $640,079 and is offset by a deferred credit of the same amount. Once the settlement agreement is executed by all minority owners and wholesale customers, Duke will file a license amendment application with the Nuclear Regulatory Commission (NRC) in order to transfer the minority owners license to Duke. The closing will take place upon approval of the license transfer by the NRC, at which time the City will convey the CR3 ownership interest and decommissioning trust funds to Duke, and Duke will make the settlement payments. The City will record receipt of the settlement funds and transfer of the decommissioning funds once all required closing documents have been executed. St. Lucie No. 2 Power Purchase Agreement The City has negotiated a long-term agreement with Florida Power and Light Corporation through FMPA to purchase megawatts of generating capacity and a corresponding amount of energy monthly from the St. Lucie No. 2 nuclear generating plant. The plant became operational in Total payments for 2014 were $211,870. Note 13 - Pension Plans The City participates in the Florida Retirement System (FRS, the System) created by the Florida Legislature and administered by the State of Florida, Department of Administration, Division of Retirement. The System is a cost-sharing, multiple-employer defined benefit public retirement plan available to governmental units within the State of Florida. The System issues a publicly available financial report that includes financial statements and required supplementary information for the System. The report may be obtained by writing to the Florida Retirement System, Division of Retirement, P.O. Box 9000, Tallahassee, Florida Note 13 - Pension Plans (Concluded) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) If employed prior to July 1, 2011, the System provides for vesting of benefits after six years of creditable service. The vesting requirement changes to eight years of creditable service for those employed on or after July 1, For those employed prior to July 1, 2011, normal retirement is after thirty years of service or age sixty-two except for the Special Risk service class. Those hired prior to July 1, 2011, who are assigned the Special Risk service class must have twenty-five years of service or must reach age fifty-five. If employed on or after July 1, 2011, normal retirement is after thirty-three years of service or age sixty-five except for the Special Risk service class. Those hired on or after July 1, 2011, who are assigned the Special Risk service class must have thirty years of service or must reach age sixty. Early retirement may be taken after meeting the appropriate vesting requirement with a 5% benefit reduction for each year prior to the normal retirement requirement. The FRS also offers eligible employees the ability to participate in an alternative defined contribution plan (the Investment Plan). Employees participating in the Investment Plan are vested after one year of service with no age requirement. Generally, membership is compulsory for all full-time and part-time employees, except for elected officials who may elect not to participate in the System. Prior to July 1, 2011, retirement coverage for an employee was noncontributory. Effective July 1, 2011, all FRS members (except those in DROP) are required to contribute 3% of their gross compensation on a pre-tax basis. The Deferred Retirement Option Program (DROP) is available under the FRS Pension Plan when the member first reaches eligibility for normal retirement. DROP allows a member to retire while continuing employment for up to sixty months. While in the DROP, the member s retirement benefits accumulate in the FRS trust fund (increased by a cost-of-living adjustment each July). DROP participants starting the program prior to July 1, 2011 earn monthly interest equivalent to an annual rate of 6.5%. Participants starting the program on or after July 1, 2011 earn an effective annual rate of 1.3%. When the DROP period ends, the DROP account is paid out as a lump-sum payment, a rollover, or a combination, and monthly benefits are subsequently paid to the member in the amount as calculated upon entry into DROP, plus costof-living adjustments for intervening years. In most cases, the DROP participant must cease employment when the DROP period ends. The contribution requirements of plan members are established, and may be amended, by the Florida Legislature. The City and its employees are required to contribute at an actuarially determined rate. The rates at September 30, 2014, are as follows: Employee Employer Total FRS Contribution Contribution Contribution Membership Class Rate Rate Rate Regular Employees 3.00% 7.37% 10.37% Special Risk Employees 3.00% 19.82% 22.82% Rehired Employees 3.00% 7.37% 10.37% Elected Officials 3.00% 33.17% 36.17% Senior Management Services 3.00% 21.14% 24.14% Deferred Retirement Option Program (DROP) N/A 12.28% 12.28% The City s contributions to the System for the years ended September 30, 2014, 2013, and 2012 were $568,620, $394,857, and $343,643, respectively. Employee contributions to the System for the years ended September 30, 2014, 2013, and 2012 were $153,698, $144,210, and $142,645, respectively. Contributions are equal to the required contributions for those years. 49

104 B-34 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Note 14 - Other Postemployment Benefits (OPEB) Plan Description The City of Alachua has previously established and maintains an employee group health insurance plan (the Plan) that it makes available to eligible retirees in accordance with the State of Florida law and City ordinance. The Plan is a single employer, experience rated insurance plan that provides medical, dental and vision benefits to eligible retirees and their eligible dependents. The postretirement benefit portion of the Plan refers to the medical, dental and vision benefits applicable to current and future retirees and their eligible dependents. The Plan does not issue a stand-alone report and is not included in the report of a Public Employee Retirement System or another entity. Membership of the Plan consisted of the following: Date of Actuarial Valuation: 9/30/11 Retirees and Beneficiaries Receiving Benefits 2 DROP Participant 1 Active Plan Members 110 Total 113 Funding Policy To-date, the City has followed a pay-as-you-go funding policy, contributing only those amounts necessary to provide for its portion of current year benefit cost and expenses. The contribution requirements of plan members, if any, are established by the City. Eligible retirees pay the full cost of blended rate premiums associated with the medical plan elected; no direct City subsidy is currently applicable. However, there are implicit costs of the medical plan for retirees, as their claims experience is higher than the blended rate premiums. State of Florida Law prohibits the City from separately rating retirees and active employees specifically for medical plan benefits. The City, therefore, assigns eligible active employees and eligible retirees equal, blended-rate premiums and makes available to both groups the same plan options. Although both groups are assigned the same blended rate premiums, GAAP requires the actuarial liabilities presented below to be calculated using age-adjusted premiums approximating claim costs for eligible retirees separate from active eligible members. The use of age-adjusted premiums results in the full expected retiree obligation recognized in this disclosure. Annual OPEB Costs and Net OPEB Obligation The Annual OPEB Cost is the amount that was expensed for the fiscal year. Since the City s OPEB plan is currently unfunded, the offset to that expense comes from subsidies paid on behalf of the current retirees and their dependents for the current year. This offset is called the Employer Contribution, and equals the total age-adjusted premiums paid by the City for coverage for the retirees and their dependents for the year (net of the retiree s own payments for the year). The cumulative difference between the Annual OPEB Cost for the year and the Employer Contribution for the year is called the Net OPEB Obligation. The Net OPEB Obligation is reflected as a liability in the statement of net position. CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Note 14 - Other Postemployment Benefits (OPEB) (Continued) Annual OPEB Costs and Net OPEB Obligation (Concluded) The following table shows the components of the City s Annual OPEB Cost for the year and the Net OPEB Obligation. Annual Required Contribution (ARC) $ 38,616 Interest on Net OPEB Obligation (NOO) 4,233 Adjustment to ARC 0 Annual OPEB Cost 42,849 Employer Contributions Made (15,134) Increase/Decrease in NOO 27,715 Net OPEB Obligation, Beginning of Year 105,834 Net OPEB Obligation, End of Year $ 133,549 Net OPEB obligation reported in governmental activities in the statement of net position is generally liquidated by the general fund. Schedule of Employer Contributions Percentage Fiscal Annual Of Annual Net Year OPEB OPEB Cost OPEB Ended Cost Contributed Obligation 9/30/14 $ 42, % $ 133,549 9/30/13 39, % 105,834 9/30/12 34, % 78,868 Funded Status and Funding Progress Unfunded (Overfunded) Actuarial Actuarial Actuarial Accrued Annual UAAL as a Valuation Value of Accrued Liability Funded Covered Percentage Date Assets Liability (UAAL) Ratio Payroll of Payroll 9/30/11 $ 0 $ 307,455 $ 307, % $ 4,670, % The schedule of funding progress, included as required supplementary information immediately 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 Actuarial valuations of 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 the healthcare cost trend. Amounts determined regarding the funding status of a 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

105 B-35 CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Continued) Note 14 - Other Postemployment Benefits (OPEB) (Concluded) Actuarial Methods and Assumptions (Concluded) 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 the valuation and the historical pattern of sharing of benefit costs between the employer and Plan members. 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 of assets, consistent with the long-term perspective of the calculations. The following table summarizes the actuarial methods and assumptions as of the latest actuarial valuation date: Note 15 - Risk Management Valuation Date September 30, 2011 Actuarial Cost Method Projected Unit Credit Cost Amortization Method Level Percentage of Projected Payroll Remaining Amortization Period 27 Years, Closed Asset Valuation Method N/A Actuarial Assumptions: Payroll Inflation Rate 4.0% Investment Return 4.0% Healthcare Cost Trend Rate Gradually Decreasing from 7.0% to 5.0% Over 71 Years The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the City carries insurance. The City has not had any significant reduction in insurance coverage and the amounts of insurance settlements have not exceeded insurance coverage for any of the last three years. Insurance against losses is provided by Florida Municipal Investment Trust for the following types of risk: Florida Municipal Insurance Trust Workers Compensation and Employer s Liability General Liability and Automobile Liability Real and Personal Property Damage Automobile Physical Damage Public Employees Blanket Bond Boiler Officials Liability Law Enforcement Officers Professional Liability and Other Mandated Coverage Accidental Death and Dismemberment Auxiliary Reserve Policy Law Enforcement Officers Professional Liability The City s coverage for workers compensation is under a retrospectively related policy. Premiums are accrued based on the ultimate cost to date of the City s experience. Note 16 - Commitments As of September 30, 2014, the City had the following commitments related to significant unfinished construction projects: Note 16 - Commitments (Concluded) CITY OF ALACHUA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (Concluded) Expended as of Remaining 9/30/14 Commitment Underground Distribution R&R Project $ 137,011 $ 47,149 Water Treatment Facility Projects 0 45,042 Liftstation No. 1 R&R Project 0 43,875 Nanotherapeutic Road Improvement Project 82,911 13,839 Total $ 219,922 $ 149,905 Note 17 - Subsequent Events On December 8, 2011, the City purchased land for the purpose of expanding the Hal Brady Recreation Complex to include three multipurpose sports arenas with athletic fields that can be used for soccer, football, lacrosse, rugby, and other multi-day events. The County granted $500,000 to the City to assist with the purchase, in exchange for a commitment from the City to construct the recreational fields by January 1, The City was unable to construct the fields within the required timeline. On December 9, 2014, the County voted not to amend the Interlocal Agreement extending the time to construct the facilities, thus requiring the City to return the $500,000 over six years, beginning December 31, A long-term liability and expense have been recorded in the government-wide statements

106 CITY OF ALACHUA, FLORIDA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2014 B-36 REQUIRED SUPPLEMENTARY INFORMATION Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Taxes $ 5,496,406 $ 5,496,406 $ 5,344,809 $ (151,597) Permits, Fees and Special Assessments 455, , ,206 (3,717) Intergovernmental Revenues 722, , ,773 (5,110) Charges for Services 908, , ,495 (42,840) Fines and Forfeitures 40,000 57,006 57,006 0 Investment Income 5,000 5,000 6,574 1,574 Miscellaneous 31,300 51,540 60,207 8,667 Total Revenues 7,658,160 7,855,093 7,662,070 (193,023) Expenditures Current: General Government: Legislative 138, , ,971 5,614 Executive 508, , ,290 17,390 Finance 973, , ,431 52,309 Information Technology 197, , ,740 27,937 Legal 171, , ,629 40,068 Planning and Zoning 717, , , ,552 Other 152, , ,066 51,723 Public Safety: Police 2,437,067 2,458,914 2,334, ,253 Fire 671, , ,934 42,953 Protective Inspections 159, , ,057 1,290 Physical Environment: Solid Waste 750, , ,060 4,612 Transportation: Streets and Roads 1,010,029 1,010, , ,941 Parks and Recreation 861, , ,765 15,266 Reserve for Contingency 100,000 43, ,535 (Total Expenditures) (8,850,725) (8,934,998) (8,026,555) 908,443 (Deficiency) of Revenues (Under) Expenditures (1,192,565) (1,079,905) (364,485) 715,420 Other Financing Sources (Uses) Transfers in 1,625,643 1,625,643 1,625,560 (83) Transfers (out) (986,751) (997,431) (990,403) 7,028 Total Other Financing Sources (Uses) 1 638, , ,157 6,945 Net Change in Fund Balance (553,673) (451,693) 270, ,365 Fund Balance, Beginning of Year 4,685,412 4,685,412 5,174, ,520 Fund Balance, End of Year 2 $ 4,131,739 $ 4,233,719 $ 5,445,604 $ 1,211,885 1 Explanation of differences in Other Financing Sources (Uses) between budgetary basis and GAAP included in the notes to required supplementary information. 2 Fund Balance, End of Year includes the City's budgeted contribution to fund balance in the amount of $100,000 in the original budget and $201,980 in the final budget. 54

107 CITY OF ALACHUA, FLORIDA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL COMMUNITY REDEVELOPMENT AGENCY FOR THE YEAR ENDED SEPTEMBER 30, 2014 Variance With Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues Intergovernmental $ 270,114 $ 274,053 $ 274,053 $ 0 Interest and Other Revenue 2,300 2,300 1,108 (1,192) Miscellaneous ,000 50,000 Total Revenues 272, , ,161 48,808 Other Postemployment Benefit Plan CITY OF ALACHUA, FLORIDA SCHEDULE OF FUNDING PROGRESS SEPTEMBER 30, 2014 Unfunded (Overfunded) Actuarial Actuarial Actuarial Accrued Annual UAAL as Valuation Value of Accrued Liability Funded Covered Percent of Date Assets Liability (AAL) (UAAL) Ratio Payroll Payroll 9/30/ , , % 4,670, % 9/30/ , , % 4,686, % Expenditures Current: Economic Environment 207, , ,491 56,414 Debt Service: Principal 79,622 79,622 79,621 1 Interest and Fiscal Charges 19,658 21,693 21,693 0 Capital Outlay 1,518,489 1,474, , ,739 Reserve for Contingency 15,000 15, ,000 (Total Expenditures) (1,840,450) (1,844,389) (1,298,235) 546,154 B-37 (Deficiency) of Revenues (Under) Expenditures (1,568,036) (1,568,036) (973,074) 594,962 Other Financing Sources (Uses) Transfers in 205, , ,005 (21,399) Total Other Financing Sources (Uses) 205, , ,005 (21,399) Net Change in Fund Balance (1,362,632) (1,362,632) (789,069) 573,563 Fund Balance, Beginning of Year 1,362,632 1,362,632 1,282,503 (80,129) Fund Balance, End of Year $ 0 $ 0 $ 493,434 $ 493,

108 CITY OF ALACHUA, FLORIDA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2014 Note 1 - Basis of Presentation The budget was prepared on the modified accrual basis of accounting. The budget was adopted on a basis consistent with generally accepted accounting principles, except as noted below. Pursuant to GASB 54, certain funds do not meet the definition of a Special Revenue fund and have been consolidated with the general fund for financial statement reporting purposes, but not for budgetary purposes. Explanation of differences between General Fund Budgetary Revenue, Expenditures, and Other Financing Sources (Uses) and GAAP Revenues, Expenditures, and Other Financing Sources (Uses): Actual Other Financing Sources (Uses)-Budgetary Basis $ 635,157 Transfers in to Alachua Transit Corridor Fund 132,648 Transfers in to Hazard Mitigation Grant Fund 10,680 Total Other Financial Sources (Uses) as Reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds $ 778,485 Expenditures were controlled at the department level. All annual appropriations lapse at yearend. There were no supplemental budget appropriations. [THIS PAGE INTENTIONALLY LEFT BLANK] B-38 Note 2 - Legally Adopted Budgets The City legally adopted budgets for all funds with activity during the year. No budget has been legally adopted for the Municipal Complex capital project funds. Note 3 - Other Postemployment Benefit Plan The information presented in the required supplementary schedules was determined as part of actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation Date September 30, 2011 Actuarial Cost Method Projected Unit Credit Cost Amortization Method Level Percentage of Projected Payroll Remaining Amortization Period 27 Years, Closed Asset Valuation Method N/A Actuarial Assumptions: Payroll Inflation Rate 4.0% Investment Return 4.0% Healthcare Cost Trend Rate Gradually Decreasing from 7.0% to 5.0% Over 71 Years 57

109 NONMAJOR GOVERNMENTAL FUNDS DEBT SERVICE FUND The Debt Service Fund accounts for the resources accumulated and payments made for the principal and interest on long-term debt of governmental funds. SPECIAL REVENUE FUNDS The Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes. The Building Operations Fund is used to account for the revenues and expenditures generated by the activities of the City s building division which include plan reviews, permitting, and inspections. The Additional Court Costs Fund is used to account for the revenues and expenditures of funds received from court costs assessed under Florida Statute (11)(d) for certain noncriminal traffic infractions. These revenues will be used to fund criminal justice education degree programs and training courses. The Donations Fund is used to account for the revenues and expenditures of donated funds from private sources for the intended purpose designated by the donor. The Tree Bank Fund is used to account for revenues and expenditures related to violations of Ordinance The revenue received will be used for tree mitigation related to development. B-39 COMBINING AND INDIVIDUAL FUND INFORMATION AND OTHER SUPPLEMENTARY INFORMATION The Police Explorers Fund is used to account for the revenues and expenditures of funds received from the Alachua Police Explorers Program. The TK Basin Special Assessment Fund is used to account for the revenues and expenditures of funds received from a special assessment to property owners for stormwater maintenance services. CAPITAL PROJECT FUNDS The Capital Project Funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. The Neighborhood Community Center Fund is used to account for the renovation of the Neighborhood Community Center. The Municipal Complex Fund is used to account for the bond proceeds and construction expenditures related to the new municipal complex. The San Felasco Conservation Corridor Fund is used to account for improvements made to the San Felasco Corridor. The Recreation Surtax Fund is used to account for discretionary sales tax revenues and expenditures for recreation improvements. The Project Legacy Fund is used to account for donations and expenditures for the acquisition and future development of land for recreation use. The Heritage Oaks Improvement Fund is used to account for expenditures for infrastructure improvements in the Heritage Oaks subdivision. The Economic Development Transportation Fund is used to account for grant revenues and capital expenditures for new road construction and reconstruction of existing road.

110 CITY OF ALACHUA, FLORIDA COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS SEPTEMBER 30, 2014 Additional Building Court Operations Costs Donations Assets Cash and Cash Equivalents $ 0 $ 7,140 $ 15,395 Accounts Receivable Total Assets 0 7,410 15,645 TK Basin Tree Police Special Bank Explorers Assessment Total $ 93 $ 6,010 $ 14,678 $ 43, ,310 14,708 44,166 Liabilities and Fund Balances B-40 Liabilities Accounts Payable Total Liabilities Fund Balances Restricted for: Comprehensive Planning 0 0 2,415 Law Enforcement 0 6, Physical Environment Parks and Recreation ,089 Total Fund Balances 0 6,910 15,645 Total Liabilities and Fund Balances $ 0 $ 7,410 $ 15, , , , ,708 14, , ,310 14,708 43,666 $ 93 $ 6,310 $ 14,708 $ 44,

111 CITY OF ALACHUA, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2014 Revenues Additional Building Court Operations Costs Donations TK Basin Tree Police Special Bank Explorers Assessment Total Permits, Fees and Special Assessments $ 0 $ 0 $ 0 Charges for Services Fines and Forfeitures 0 6,387 0 Investment Income Miscellaneous ,590 Total Revenues 0 6,394 19,613 $ 0 $ 0 $ 6,896 $ 6, , , , , ,057 6,919 34,983 Expenditures B-41 Current: General Government 0 0 3,226 Public Safety 0 3,859 1,491 Physical Environment Parks and Recreation 0 0 3,578 Capital Outlay 0 0 6,000 Total (Expenditures) 0 (3,859) (14,295) Excess of Revenues Over Expenditures 0 2,535 5,318 Other Financing Sources (Uses) Transfers in 85, Total Other Financing Sources (Uses) 85, Net Change in Fund Balances 85,904 2,535 5,318 Fund Balance, Beginning of Year (85,904) 4,375 10,327 Fund Balance, End of Year $ 0 $ 6,910 $ 15, , , ,123 6, , , (6,123) (24,277) 0 2, , , , , , ,253 13,912 (52,944) $ 93 $ 6,310 $ 14,708 $ 43,

112 CITY OF ALACHUA, FLORIDA COMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECTS FUNDS SEPTEMBER 30, 2014 Assets Neighborhood San Felasco Community Municipal Conservation Center Complex Corridor Economic Development Recreation Project Heritage Oaks Transportation Surtax Legacy Improvement Project Total Cash and Cash Equivalents $ 0 $ 0 $ 9,302 Total Assets 0 0 9,302 $ 19,848 $ 1,017 $ 777,534 $ 0 $ 807,701 19,848 1, , ,701 Liabilities and Fund Balances B-42 Liabilities Unearned Revenue Advances from Other Funds 157, ,324 0 Total Liabilities 157, ,324 0 Fund Balances Restricted for: Parks and Recreation 0 0 9,302 Unassigned (157,454) (935,324) 0 Total Fund Balances (157,454) (935,324) 9,302 Total Liabilities and Fund Balances $ 0 $ 0 $ 9, , , ,092, , ,870,312 19,848 1, , (1,092,778) 19,848 1, (1,062,611) $ 19,848 $ 1,017 $ 777,534 $ 0 $ 807,

113 CITY OF ALACHUA, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECTS FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2014 Neighborhood San Felasco Community Municipal Conservation Center Complex Corridor Revenues Intergovernmental Revenues $ 0 $ 0 $ 0 Investment Income Miscellaneous Total Revenues Economic Development Recreation Project Heritage Oaks Transportation Surtax Legacy Improvement Project Total $ 0 $ 0 $ 0 $ 82,911 $ 82, , , ,416 82, ,366 Expenditures B-43 Current: Physical Environment Parks and Recreation 0 0 1,400 Capital Outlay (Total Expenditures) 0 0 (1,400) (Deficiency) Excess of Revenues (Under) Over Expenditures 0 0 (1,385) Other Financing Sources (Uses) Transfers in 37, Transfers (out) Total Other Financing Sources (Uses) 37, Net Change in Fund Balances 37,687 0 (1,385) Fund Balance, Beginning of Year (195,141) (935,324) 10,687 Fund Balance, End of Year $ (157,454) $ (935,324) $ 9, , , , ,250 82,911 90, (41,416) (82,911) (125,727) (1,361) ,687 (12,703) (12,703) (12,703) ,984 (12,679) ,623 32,527 1, (1,086,234) $ 19,848 $ 1,017 $ 0 $ 0 $ (1,062,611) 66 67

114 CITY OF ALACHUA, FLORIDA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL DEBT SERVICE FUND - NONMAJOR FOR THE YEAR ENDED SEPTEMBER 30, 2014 Variance Final With Budget Actual Final Budget Revenues Interest $ 480 $ 547 $ 67 Total Revenues Expenditures Debt Service: Principal 225, ,000 0 Interest and Fiscal Charges 400, , Debt Reserves (Total Expenditures) (625,300) (624,820) 480 B-44 [THIS PAGE INTENTIONALLY LEFT BLANK] (Deficiency) of Revenues (Under) Expenditures (624,820) (624,273) 547 Other Financing Sources (Uses) Transfers in 624, ,820 0 Total Other Financing Sources (Uses) 624, ,820 0 Net Change in Fund Balance Fund Balance, Beginning of Year 0 725, ,721 Fund Balance, End of Year $ 0 $ 726,268 $ 726,268 68

115 CITY OF ALACHUA, FLORIDA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL SPECIAL REVENUE FUNDS - NONMAJOR FOR THE YEAR ENDED SEPTEMBER 30, 2014 Page 1 of 2 B-45 Building Operations Additional Court Costs Variance Variance Final With Final With Budget Actual Final Budget Budget Actual Final Budget Revenues Permits, Fees and Special Assessments $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Charges for Services Fines and Forfeitures ,220 6,387 2,167 Investment Income (Loss) (13) Miscellaneous Total Revenues ,240 6,394 2,154 Expenditures Current: General Government Public Safety 91, ,397 6,400 3,859 2,541 Physical Environment Parks and Recreation Capital Outlay (Total Expenditures) (91,397) 0 91,397 (6,400) (3,859) 2,541 Excess (Deficiency) of Revenues Over (Under) Expenditures (91,397) 0 91,397 (2,160) 2,535 4,695 Other Financing Sources (Uses) 91,397 85,904 (5,493) Net Change in Fund Balance 0 85,904 85,904 (2,160) 2,535 4,695 Fund Balance, Beginning of Year 0 (85,904) (85,904) 3,493 4, Donations Tree Bank Police Explorers Variance Variance Variance Final With Final With Final With Budget Actual Final Budget Budget Actual Final Budget Budget Actual Final Budget $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ ,550 1, ,250 19,590 3, ,250 19,613 3, ,057 2,057 8,166 3,226 4, ,732 1, , , ,511 3,578 5, ,469 6, (25,878) (14,295) 11,583 (93) 0 93 (3,803) 0 3,803 (9,628) 5,318 14,946 (93) 0 93 (3,803) 2,057 5, (9,628) 5,318 14,946 (93) 0 93 (3,803) 2,057 5,860 9,628 10, ,803 4, Fund Balance, End of Year $ 0 $ 0 $ 0 $ 1,333 $ 6,910 $ 5,577 $ 0 $ 15,645 $ 15,645 $ 0 $ 93 $ 93 $ 0 $ 6,310 $ 6,

116 Page 2 of 2 CITY OF ALACHUA, FLORIDA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL SPECIAL REVENUE FUNDS - NONMAJOR FOR THE YEAR ENDED SEPTEMBER 30, 2014 (Concluded) TK Basin Special Assessment Variance Final With Budget Actual Final Budget Revenues Permits, Fees and Special Assessments $ 7,000 $ 6,896 $ (104) Investment Income (Loss) (12) Total Revenues 7,035 6,919 (116) Expenditures Current: Physical Environment 12,200 6,123 6,077 (Total Expenditures) (12,200) (6,123) 6,077 [THIS PAGE INTENTIONALLY LEFT BLANK] Excess of Revenues Over Expenditures (5,165) 796 5,961 Other Financing Sources (Uses) B-46 Net Change in Fund Balance (5,165) 796 5,961 Fund Balance, Beginning of Year 14,389 13,912 (477) Fund Balance, End of Year $ 9,224 $ 14,708 $ 5,484 71

117 CITY OF ALACHUA, FLORIDA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL CAPITAL PROJECTS FUNDS - NONMAJOR FOR THE YEAR ENDED SEPTEMBER 30, 2014 Page 1 of 2 B-47 San Felasco Neighborhood Community Center Conservation Corridor Variance Variance With With Final Final Final Final Budget Actual Budget Budget Actual Budget Revenues Intergovernmental Revenues $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Investment Income (Loss) (15) Miscellaneous Total Revenues (15) Expenditures Current: Physical Environment Parks and Recreation 37, ,687 10,712 1,400 9,312 Capital Outlay (Total Expenditures) (37,687) 0 37,687 (10,712) (1,400) 9,312 (Deficiency) Excess of Revenues (Under) Over Expenditures (37,687) 0 37,687 (10,682) (1,385) 9,297 Other Financing Sources (Uses) Transfers in 37,687 37, Transfers (out) Total Other Financing Sources (Uses) 37,687 37, Net Change in Fund Balance 0 37,687 37,687 (10,682) (1,385) 9,297 Fund Balance, Beginning of Year 0 (195,141) (195,141) 10,682 10,687 5 Fund Balance, End of Year $ 0 $ (157,454) $ (157,454) $ 0 $ 9,302 $ 9,302 Recreation Surtax Project Legacy Heritage Oaks Improvement Variance Variance Variance With With With Final Final Final Final Final Final Budget Actual Budget Budget Actual Budget Budget Actual Budget $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ (16) ,000 41,416 (779,584) (16) ,000 41,416 (779,584) ,457 34,166 9, , , ,543 7, , (1,016) 0 1,016 (821,000) (41,416) 779, (16) (1,016) 0 1, (32,568) (12,703) 19, (32,568) (12,703) 19, (32,528) (12,679) 19,849 (1,016) 0 1, ,528 32,527 (1) 1,016 1, $ 0 $ 19,848 $ 19,848 $ 0 $ 1,017 $ 1,017 $ 0 $ 0 $

118 Page 2 of 2 CITY OF ALACHUA, FLORIDA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL CAPITAL PROJECTS FUNDS - NONMAJOR FOR THE YEAR ENDED SEPTEMBER 30, 2014 (Concluded) Economic Development Transportation Project Variance With Final Final Budget Actual Budget Revenues Intergovernmental Revenues $ 1,085,000 $ 82,911 $ (1,002,089) Investment Income (Loss) Miscellaneous Total Revenues 1,085,000 82,911 (1,002,089) B-48 Expenditures Current: Physical Environment Parks and Recreation Capital Outlay 1,085,000 82,911 1,002,089 (Total Expenditures) (1,085,000) (82,911) 1,002,089 (Deficiency) Excess of Revenues (Under) Over Expenditures Other Financing Sources (Uses) Transfers in Transfers (out) Total Other Financing Sources (Uses) STATISTICAL SECTION (UNAUDITED) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year $ 0 $ 0 $ 0 74

119 STATISTICAL SECTION (unaudited) This part of the City of Alachua, Florida's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements and note disclosures says about the City's overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. 75 Revenue Capacity These schedules contain information to help the reader assess the factors affecting the City's most significant local revenue source, which is property taxes. 85 Debt Capacity B-49 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. The City has no legal debt margin, thus it is not reported in these schedules. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place and to help make comparisons over time and with other governments FINANCIAL TRENDS INFORMATION Operating Information These schedules contain information about the City's operations and resources to help the reader understand how the City's financial information relates to the services the City provides and the activities it performs. 99 Sources: Unless otherwise noted, the information in these schedules is derived from the annual financial reports for the relevant year. The City implemented GASB Statement No. 34 in 2003; schedules presenting government-wide information include information beginning in that year.

120 Schedule 1 CITY OF ALACHUA, FLORIDA NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (accrual basis of accounting) Fiscal Year Governmental Activities Invested in capital assets, net of related debt $ 1,006,106 5,231,567 7,345,392 7,995,820 Restricted 175, , , ,767 Unrestricted 1,193, , ,323 33,531 Total governmental activities net position $ 2,375,138 5,997,333 7,690,381 8,139,118 Fiscal Year ,727,737 12,924,412 13,306,758 14,518,014 15,054,392 15,864,924 2,298,952 2,642,617 2,768,100 2,302,270 2,104,955 1,328,668 ( 1,212,629) ( 487,329) 1,321,909 2,461,909 3,250,642 3,752,120 12,814,060 15,079,700 17,396,767 19,282,193 20,409,989 20,945,712 Business-type Activities Invested in capital assets, net of related debt $ 1,042,838 3,343,956 6,524,660 7,859,209 Restricted 946, ,861 1,006,659 1,053,894 Unrestricted 6,990,100 7,036,767 3,492,497 1,553,135 Total business-type activities net position $ 8,979,111 11,351,584 11,023,816 10,466,238 Primary Government Invested in capital assets, net of related debt $ 2,048,944 8,575,523 13,870,052 15,855,029 Restricted 1,121,662 1,150,173 1,247,325 1,163,661 Unrestricted 8,183,643 7,623,221 3,596,820 1,586,666 Total primary government net position $ 11,354,249 17,348,917 18,714,197 18,605,356 9,201,971 21,128,470 22,062,135 21,041,023 25,448,736 26,121,070 1,269,753 1,274,753 2,934,138 2,927,873 1,067, ,818 ( 316,896) 12,635 2,294,312 2,992,216 3,139,610 4,979,974 10,154,828 22,415,858 27,290,585 26,961,112 29,655,465 31,789,862 20,929,708 34,052,882 35,368,893 35,559,037 40,503,128 41,985,994 3,568,705 3,917,370 5,702,238 5,230,143 3,172,074 2,017,486 ( 1,529,525) ( 474,694) 3,616,221 5,454,125 6,390,252 8,732,094 22,968,888 37,495,558 44,687,352 46,243,305 50,065,454 52,735,574 B

121 Schedule 2 CITY OF ALACHUA, FLORIDA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) B-51 Fiscal Year Expenses Governmental activities: General government $ 2,193,976 2,505,211 3,998,405 3,373,717 Public safety 3,202,102 2,621,162 2,869,023 2,916,964 Physical environment 1,004, , , ,763 Transportation 772, , , ,867 Economic environment 82, ,385 1,258, ,543 Parks and recreation 564, , , ,645 Interest on long-term debt 197, , , ,028 Total governmental activities expenses 8,018,419 8,000,685 10,578,479 9,080,527 Business-type Activities Electric 8,946,756 10,122,932 11,111,055 12,611,445 Water and sewer 2,771,163 2,518,848 2,793,493 2,964,692 Mosquito control 24,449 36,914 30,375 44,395 Total business-type activities 11,742,368 12,678,694 13,934,923 15,620,532 Total primary government expenses 19,760,787 20,679,379 24,513,402 24,701,059 Program Revenues Governmental activities: Charges for services: General government 394, , , ,856 Public safety 126, , , ,106 Physical environment 540, , , ,104 Transportation Economic environment Parks and recreation 62,779 29,070 57,014 60,078 Operating grants and contributions 1,388, ,235 1,434, ,360 Capital grants and contributions 231,662 2,876,553 2,309, ,576 Total governmental activities program revenues $ 2,744,562 4,655,535 4,889,792 2,115,150 Business-type activities: Charges for services: Electric $ 10,105,732 11,595,733 11,350,370 14,563,814 Water and sewer 2,097,604 2,045,446 2,412,960 2,252,644 Mosquito Control 41,255 42,959 45,927 49,071 Operating grants and contributions , Capital grants and contributions ,117, Total business-type activities program revenues 12,244,591 13,684,138 14,942,075 16,865,529 Total primary government program revenues 14,989,153 18,339,673 19,831,867 18,980,679 Net (Expense) Revenue Governmental activities ( 5,273,857) ( 3,345,150) ( 5,688,687) ( 6,965,377) Business-type activities 502,223 1,005,444 1,007,152 1,244,997 Total primary government net expense $ ( 4,771,634) ( 2,339,706) ( 4,681,535) ( 5,720,380) Fiscal Year ,565,490 2,771,143 2,897,711 3,080,777 2,813,888 2,719,659 2,853,035 3,031,037 2,882,263 3,009,977 3,085,939 3,164, , , , , , , , , , , , , , , , , , , , , , , ,883 1,318, , , , , , ,674 9,112,268 8,810,789 8,561,076 8,860,284 8,761,125 9,381,121 11,805,050 11,841,903 10,903,730 9,745,061 10,083,138 11,863,813 2,941,214 2,893,843 3,121,021 4,715,831 3,634,733 3,621,216 43,684 45,886 47,326 55,105 49,446 53,461 14,789,948 14,781,632 14,072,077 14,515,997 13,767,317 15,538,490 23,902,216 23,592,421 22,633,153 23,376,281 22,528,442 24,919, , , , , , , , , , ,036 54, , , , , , , ,782 11,165 11,720 11,843 12,200 12,565 13, ,666 43,050 31,174 40,295 32,615 27, , , , , , , ,967 1,590,710 1,168,258 1,033, , ,993 2,432,400 3,317,229 2,766,252 2,622,268 2,430,852 2,308,960 12,835,626 14,673,991 14,392,269 12,519,393 13,073,827 15,171,323 2,148,928 2,251,328 3,257,081 2,952,806 3,144,427 3,350,473 49,655 49,775 49,877 50,073 54,585 56, ,627, ,284 24, ,635 11,420,846 2,139, ,066 1,321, ,887 15,359,844 28,395,940 21,465,935 15,660,338 18,145,767 19,265,501 17,792,244 31,713,169 24,232,187 18,282,606 20,576,619 21,574,461 ( 6,679,868) ( 5,493,560) ( 5,794,824) ( 6,238,016) ( 6,330,273) ( 7,072,161) 569,896 13,614,308 7,393,858 1,144,341 4,378,450 3,727,011 ( 6,109,972) 8,120,748 1,599,034 ( 5,093,675) ( 1,951,823) ( 3,345,150) 77 78

122 Schedule 2 (Concluded) CITY OF ALACHUA, FLORIDA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) Fiscal Year Fiscal Year General Revenues and Other Changes in Net Position B-52 Governmental activities: Taxes Property taxes $ 2,389,945 2,721,884 3,072,173 3,071,384 Communications services taxes 220, , , ,990 Utility taxes 643, , , ,621 Local option gas tax 140, , , ,363 Business license tax ,545 Franchise fees 226, , , ,562 Intergovernmental revenue 615, , , ,998 Unrestricted investment earnings 61, , ,747 56,825 Miscellaneous 252, ,171 77, ,202 Capital asset transfers -- ( 827,839) -- ( 694,401) Gain on disposal of capital assets Special item - insurance claim proceeds , Transfers 992,475 1,100,595 1,765,801 2,708,025 Total governmental activities 5,543,132 5,204,235 7,381,735 7,414,114 Business-type activities: Unrestricted investment earnings 89, , , ,148 Miscellaneous 163,464 8,213 50,244 78,901 Capital asset transfers , ,401 Gain on disposal of capital assets Special item Transfers ( 992,475) ( 1,100,595) ( 1,765,801) ( 2,708,025) Total business-type activities ( 739,364) 193,502 ( 1,334,920) ( 1,802,575) Total primary government $ 4,803,768 5,397,737 6,046,815 5,611,539 Change in Net Position Governmental activities $ 269,275 1,859,085 1,693, ,737 Business-type activities ( 237,141) 1,198,946 ( 327,768) ( 557,578) Total primary government $ 32,134 3,058,031 1,365,280 ( 108,841) 3,464,378 4,241,001 4,051,946 3,695,306 3,650,565 3,650, , , , , , , , ,321 1,233,554 1,191,592 1,120,707 1,118, ,050 47,034 48,780 49,898 49,723 46, , , , , , ,312 ( 13,557) 31,071 11,159 15,289 13,401 8,321 90,752 72,712 90, , , , , ,087,990 1,431,153 1,691,792 1,553,882 1,698,102 1,698,198 7,335,110 7,759,200 8,111,891 8,123,442 7,642,625 7,607,884 ( 26,740) 7,931 10,154 17,395 11,665 7,330 83,957 69,944 83,366 62,673 80,881 98, ( 921,611) ( 2,087,990) ( 1,431,153) ( 1,691,792) ( 1,553,882) ( 1,698,102) ( 1,698,198) ( 2,030,773) ( 1,353,278) ( 2,519,131) ( 1,473,814) ( 1,605,556) ( 1,592,614) 5,304,337 6,405,922 5,592,760 6,649,628 6,037,069 6,015, ,242 2,265,640 2,317,067 1,885,426 1,312, ,723 ( 1,460,877) 12,261,030 4,874,727 ( 329,473) 2,772,894 2,134,397 ( 805,635) 14,526,670 7,191,794 1,555,953 4,085,246 2,670,

123 Schedule 3 CITY OF ALACHUA, FLORIDA FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) Fiscal Year Fiscal Year General Fund Nonspendable $ Restricted Assigned Unassigned Reserved 6,178 46,537 47, ,704 Unreserved 1,337, , ,387 90,672 Total general fund $ 1,343, , , , ,754,694 1,768,547 1,819,012 1,411, ,769 15,478 12,626 15, , , , , ,438,093 2,384,803 2,689,621 3,434,709 1,451,124 2,446, ( 400,601) ( 362,329) ,050,523 2,083,887 3,400,180 4,326,318 5,174,932 5,588,932 All Other Governmental Funds B-53 Nonspendable $ Restricted Assigned Unassigned Reserved 314,306 4,532, , ,736 Unreserved, reported in: Special revenue funds 212, , , ,922 Debt Service funds Capital Projects funds ( 139,632) 1,559,883 ( 967,350) ( 1,331,239) Total all other governmental funds $ 387,483 6,503,032 12,128 ( 266,581) ,285 9,549 13,621 23, ,884,071 2,453,267 2,072,294 1,459, ( 1,646,843) ( 1,402,080) ( 1,216,869) ( 1,282,361) 110,241 98, ,034,916 1,162, , , ( 901,994) ( 718,530) , ,070 1,255,513 1,060, , ,757 GASB Statement No. 54 was implemented in fiscal year 2011, which changed the presentation of fund balance components

124 Schedule 4 CITY OF ALACHUA, FLORIDA CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) Revenues Fiscal Year Fiscal Year Taxes $ 3,622,127 3,936,747 4,341,099 4,300,903 Permits, fees, and special assessments 303, , , ,749 Fines and forfeitures 126,064 89,005 70,338 64,719 Intergovernmental revenues 2,038,632 4,225,378 3,290,350 1,645,224 Charges for services 702, , , ,308 Interest 61, , ,747 56,825 Miscellaneous 408, , , ,912 Total revenues 7,263,108 9,605,573 9,118,522 7,515,640 5,173,394 6,341,335 6,111,452 5,531,359 5,364,716 5,344, , , , , , , ,367 51,071 47,813 41,023 48,181 63,393 1,001,259 1,509, ,409 1,481,397 1,038,824 1,149, , , , , , ,045 ( 13,556) 31,071 11,159 15,289 13,401 8, , , , , , ,720 7,679,521 9,568,817 8,599,669 9,191,828 7,993,693 8,147,127 Expenditures B-54 General government 2,124,477 2,447,896 3,499,993 3,124,553 Public safety 2,993,477 2,532,882 2,732,214 2,771,926 Physical environment 995, , , ,710 Transportation 494, , , ,818 Economic environment 78, ,006 1,257, ,962 Parks and recreation 514, , , ,312 Debt service: Principal 190, ,310 2,195, ,409 Interest and fiscal charges 197, , , ,570 Capital outlay 703,303 6,159,969 6,123,414 1,879,943 Total expenditures 8,291,831 14,238,011 17,976,682 10,436,203 Excess (deficiency) of revenues over (under) expenditures ( 1,028,723) ( 4,632,438) ( 8,858,160) ( 2,920,563) Other Financing Sources (Uses) Proceeds from the sale of capital assets ,325 Proceeds from borrowing 297,633 9,786, Payments to refunding bond escrow agent -- ( 683,836) Insurance proceeds , Transfers in 1,343,002 1,883,777 2,855,631 3,567,534 Transfers out ( 350,527) ( 783,182) ( 1,089,830) ( 859,509) Total other financing sources (uses) 1,290,108 10,202,855 2,146,400 2,717,350 Net change in fund balances $ 261,385 5,570,417 ( 6,711,760) ( 203,213) Debt service as a percentage of noncapital expenditures 5.1% 10.2% 22.5% 8.0% 3,304,566 2,515,519 2,667,416 2,798,685 2,534,198 2,511,783 2,698,133 2,867,877 2,755,777 2,869,912 2,916,255 3,004, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,846 1,446, ,301 1,733,572 1,746,650 1,685,606 8,834,366 9,711,809 8,533,468 10,027,569 9,931,641 10,099,614 ( 1,154,845) ( 142,992) 66,201 ( 835,741) ( 1,937,948) ( 1,952,487) 15,397 38, ,743 13,220 11, , ,950,565 2,728,129 2,852,909 3,182,229 2,454,088 2,557,976 ( 858,575) ( 1,291,454) ( 1,161,117) ( 1,628,347) ( 755,986) ( 859,778) 2,107,387 1,475,663 1,859,535 1,567,102 2,594,872 1,698, ,542 1,332,671 1,925, , ,924 ( 254,289) 7.9% 8.2% 8.1% 7.6% 7.9% 8.6% Source: City of Alachua Financial Reports Note: In 2001, the outstanding balances on the Sales Tax Notes 1999A and 1999B were paid off with proceeds from the Section 108 loan

125 [THIS PAGE INTENTIONALLY LEFT BLANK] REVENUE CAPACITY INFORMATION B-55

126 Schedule 5 CITY OF ALACHUA ASSESSED VALUE AND ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Fiscal Year Ended Residential Commercial Agricultural Industrial September 30 Property Property Property Property 2005 $304,669,400 58,459,200 24,485,700 81,063, ,001,800 67,234,800 30,265,500 86,254, ,024,100 85,797,400 32,490,500 85,250, ,100, ,112,900 35,005, ,646, ,343, ,092,400 37,888, ,769, ,600, ,537,800 69,227, ,400, ,077, ,257,104 60,791, ,987, ,660, ,238,080 59,247, ,060, ,161, ,282,970 57,665, ,863, ,698, ,926,610 56,734, ,789,230 Personal and Centrally Less: Tax Non-Taxable Assessed Exempt Total Taxable Total Direct Real Property Property Property Assessed Value Tax Rate 52,295,000 79,854, ,686, ,140, ,440,300 82,886, ,049, ,033, ,842,900 93,854, ,711, ,548, ,307,900 99,036, ,998, ,211, ,840, ,181, ,977, ,137, ,260, ,482, ,027, ,482, ,136, ,519, ,288, ,481, ,266, ,380, ,929, ,923, ,179, ,588, ,978, ,763, ,937, ,914, ,927, ,072, Source: Alachua County Property Appraiser B

127 B-57 Schedule 6 CITY OF ALACHUA, FLORIDA DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS (rate per $1,000 of assessed value) Direct Fiscal Alachua Suwannee St. Johns Year Alachua County Library Library River Water River Water Ended Alachua BOCC Library Capital Debt School Management Management Sept. 30, City BOCC GO Debt District Outlay Service Board District District Source: Alachua County Property Appraiser Overlapping Schedule 7 CITY OF ALACHUA, FLORIDA PRINCIPAL PROPERTY TAX PAYERS CURRENT YEAR AND TEN YEARS AGO Fiscal Year 2014 Fiscal Year 2005 Percentage of Percentage of Total City Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Wal-Mart Stores East LP $ 74,952, % Dolgencorp, Inc. 50,838, % 42,073, % Dollar General Store # ,042, % Baugh Southeast Cooperative, Inc. 30,910, % South Redistribution Center, Inc. 10,120, % Regeneration Technologies, Inc. 23,123, % 12,294, % Waco of Alabama, Inc. 10,918, % Lowes Home Centers, Inc. 8,534, % Alachua Development, LLC 9,328, % Hunter Marine Corporation MAS Holding Company, Inc. 5,213, % 4,886, % Wigshaw, LLC Wachovia Trust Comp., Ntnl Assn Tr ,231, % Maronda Homes, Inc Hitchcock & Sons, Inc ,615, % Atlantic Financial Group, Ltd Sage Software ,616, % SNH Medical Office Properties, Trust 15,491, % Innovation Partners, Ltd ,369, % Hipp Construction Malboro Industry Park, Inc Sandvik Mining & Construction USA, LLC Alltel Florida, Inc ,427, % Citizens & Southern ,411, % Apalachee Development Co Heritage Links Golf Co Oakhill Plaza Associates, LP Plantation Oaks GC, Inc Apalachee Development Co Curagen Corp $ 239,432, % 106,969, % Source: Alachua County Property Appraiser Note: Sage Software formerly known as Medical Manager Research and Development

128 Schedule 8 CITY OF ALACHUA, FLORIDA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS Collected within the Fiscal Year of the Levy Total Collections to Date Fiscal Year Taxes Levied Collections in Ended for the Percentage Subsequent Percentage September 30 Fiscal Year Amount of Levy Years Amount of Levy 2005 $2,486,002 $2,376, % $13,112 $2,389, % ,821,691 2,715, % 6,363 2,721, % ,209,518 3,063, % 13,648 3,077, % ,175,566 3,056, % 15,354 3,071, % ,598,243 3,459, % 5,073 3,464, % ,408,153 4,234, % 6,473 4,241, % ,199,149 4,042, % 9,578 4,051, % ,860,579 3,688, % 6,729 3,695, % ,749,700 3,612, % 37,712 3,650, % ,778,901 3,643, % 7,521 3,650, % Sources: City of Alachua Financial System Data Department of Revenue Alachua County Property Appraiser Alachua County Tax Collector DEBT CAPACITY INFORMATION B-58 89

129 Schedule 9 CITY OF ALACHUA, FLORIDA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Governmental Activities Tax General Sales Tax Increment Fiscal Government Revenue Revenue Financing Year Bonds Notes Note Loans 2005 $ 2,735, , , , ,035, ,523 2,007, ,875, ,043 6, ,695, , ,505, , ,310, , ,110, ,900, ,685, , ,460, , ,000 Business-Type Activities Utility Utility Utility Loans/ Total Percentage of Acquisition Refunding Revenue Capital Primary Personal Per Bonds Bonds Bonds Leases Government Income Capita 975,000 10,030, ,000 55,990 15,023, % 1, ,000 9,460, ,000 57,501 23,127, % 3, ,000 8,860, , ,522 20,527, % 2, ,000 8,230, , ,456 20,174, % 2, ,000 7,675, ,000 1,148,009 19,555, % 2, ,000 7,105, ,000 6,839,409 24,357, % 2, ,000 6,515, ,000 9,504,289 26,113, % 2, ,000 5,905, ,000 10,193,010 25,884, % 2, ,000 4,695, ,362,905 23,158, % 2, ,000 4,060, ,411,411 22,692, % 2,440 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. B

130 B-60 Schedule 10 CITY OF ALACHUA, FLORIDA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF SEPTEMBER 30, 2014 Governmental Unit Estimated Percentage Applicable Direct: Capital Improvement and Refunding Revenue Bonds, 2006 $ 7,310, % $ 7,310,000 Redevelopment Revenue Note, , % 805,879 HUD Section 108 Loan 1,150, % 1,150,000 Total direct debt 9,265,879 Overlapping: Alachua County Board of County Commissioners Alachua County Forever Bank Loan, ,870, % 297,208 Alachua County Library District, ,072, % 187,471 Total overlapping debt 484,679 Total direct and overlapping debt $ 9,750,557 Sources: City of Alachua Finance Department and the Alachua County Finance Department. Notes: Debt Outstanding (1) Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and the businesses of Alachua. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt of each overlapping government. (2) Ratio of assessed valuation of taxable property in overlapping unit to that within the City of Alachua. Estimated Share of Overlapping Debt Schedule 11 CITY OF ALACHUA, FLORIDA PLEDGED-REVENUE COVERAGE GENERAL GOVERNMENT DEBT LAST TEN FISCAL YEARS Section 108 Loan Debt Service Fiscal Year Pledged Revenue Principal Interest Coverage 2005 $ 823,125 65, , ,839 70, , ,115 75, , ,277 80, , ,193 90, , ,314 95, , , , , , ,000 96, , ,000 89, ,006, ,000 82, Series 2006 Capital Improvement Debt Service Fiscal Year Pledged Revenue Principal Interest Coverage 2005 $ ,890, , ,437,562 85, , ,929, , , ,536, , , ,871, , , ,681, , , ,795, , , ,255, , , ,123, , , Notes: (1) Pledged revenue for the Section 108 Loan consists of Half Cent Sales Tax, Franchise Fees and Guaranteed Entitlement Revenue. (2) Pledged revenue for the Series 2006 bonds consists of various non ad valorem revenue

131 B-61 Schedule 12 CITY OF ALACHUA, FLORIDA PLEDGED-REVENUE COVERAGE SALES TAX REVENUE NOTES LAST TEN FISCAL YEARS Sales Tax Rev Note-1995 Sales Tax Rev Note-1999A Debt Service Debt Service Fiscal Sales Tax Year Revenue Principal Interest Coverage Principal Interest Coverage 2005 $ 394,033 28,466 11, , ,604 4, Sales Tax Rev Note-1999B Sales Tax Rev Note-2000 Debt Service Debt Service Fiscal Sales Tax Year Revenue Principal Interest Coverage Principal Interest Coverage 2005 $ ,418 2, , Schedule 13 CITY OF ALACHUA, FLORIDA PLEDGED-REVENUE COVERAGE TAX INCREMENT REVENUE NOTES LAST TEN FISCAL YEARS Debt Service Requirements Tax Fiscal Year Increment Revenue Principal Interest Total Coverage 2005 $ 235,645 26,974 15,111 42, ,358 28,697 13,388 42, ,465 34,480 7,642 42, ,952 35,951 6,134 42, ,439 37,525 4,559 42, ,191 39,169 2,915 42, ,621 27,399 1,389 28, , N/A , N/A ,355 79,622 19,658 99, Notes: (1) The Tax Increment Revenue Notes are backed by the property tax revenue produced by the property tax rate of the City of Alachua and Alachua County applied to the increase in taxable assessed values above the base year taxable assessed valued multiplied by 95%. (2) 2000 Tax Increment Note paid off during Fiscal Year (3) 2013 Redevelopment Note Debt Service payment began in Fiscal Year Notes: (1) The Sales Tax 1995 and 2000 were paid off in Fiscal Year 2006 with proceeds from Series 06 Capital Improvement/ Refunding Bonds. (2) The Sales Tax 1999A and 1999B were paid off in Fiscal Year 2001 with proceeds from Section 108 Loan

132 Schedule 14 CITY OF ALACHUA, FLORIDA PLEDGED-REVENUE COVERAGE UTILITY SYSTEM BONDS LAST TEN FISCAL YEARS Net Debt Service Requirements Net Utility Revenue Available Fiscal Revenue Excise for Debt Year Available Taxes Service Total Debt Coverage 2005 $ 2,874, ,914 3,739,272 1,150, ,201, ,854 3,020,464 1,150, ,067, ,103 1,956,175 1,144, ,474, ,610 3,462,135 1,153, ,499,996 1,138,248 2,638,244 1,100, ,464,866 1,387,476 4,852,342 1,143, ,035,639 1,641,968 6,677,607 1,114, ,921,653 1,570,939 5,492,592 1,040, ,555,312 1,454,146 6,009,458 1,162, ,840,677 1,431,876 5,272,553 1,000, Source: City of Alachua Financial Statements (Combining Statements of Revenues, Expenses, and Changes In Fund Net Position) DEMOGRAPHIC AND ECONOMIC INFORMATION B-62 96

133 Schedule 15 CITY OF ALACHUA, FLORIDA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Schedule 16 CITY OF ALACHUA, FLORIDA PRINCIPAL EMPLOYERS CURRENT YEAR PER CAPITA TOTAL CITY GAINESVILLE MSA PERSONAL PERSONAL UNEMPLOYMENT YEAR POPULATION POPULATION INCOME INCOME RATE , ,764 30, ,997, % , ,779 31, ,360, % , ,985 32, ,438, % , ,099 32, ,328, % , ,625 32, ,427, % , ,030 34, ,159, % , ,475 35, ,957, % , ,369 34, ,495, % , ,232 36, ,458, % , ,382 38, ,818, % Notes: (1) Per Capita Personal Income figures are based on Gainesville Metropolitan Statistical Area. Fiscal Year 2014 Number of % of Employer Type of Business Employees Rank Total Walmart Distribution Center Retail % Dollar General Distribution Center Retail % Regeneration Technologies, Inc. Orthopedic/Cardio Implants % School Board of Alachua County Public Education % Sage Software* Healthcare Management % Sandvik Mining & Construction USA, LLC** Manufacturing % State of Florida State Government % Baugh Southeast Cooperative, Inc. Retail % Hitchcock & Sons, Inc. Grocery % City of Alachua City Government % Source: Individual Employers, Council for Economic Opportunity Total City Employment 4,630 Notes: Employer information was not available in 1999 * Formerly Medical Manager ** Formerly Drilltech Total City Employment figure from Census figure estimates (2) Unemployment rate figures are based on the Gainesville Metropolitan Statistical Area. B

134 Schedule 17 CITY OF ALACHUA, FLORIDA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Program General Administration Culture and Recreation Finance Police Community Development and Planning Public Services Total Source: City of Alachua Annual Budget Book Note: Community Development and Planning includes Compliance & Risk Management. OPERATING INFORMATION B-64 99

135 Schedule 18 CITY OF ALACHUA, FLORIDA OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS B-65 Function/Program Public Safety: Arrests Traffic citations issued 4,068 3,199 2,815 2,745 Planning and Development: New local business tax receipts issued Building permits issued Culture and Recreation: Participants in Summer Recreation Program Electric Utility: Number of residential customers 2,846 2,927 3,385 3,421 Kilowatts per hour sold-residential 35,808,522 38,600,040 38,666,688 39,462,034 Number of commercial customers Kilowatts per hour sold-commercial 59,570,598 62,878,622 66,665,752 73,845,006 Water Utility: Number of residential customers 2,710 2,796 2,934 3,028 Gallons sold 213,915, ,896, ,969, ,898,486 Number of commercial customers Gallons sold 149,569, ,785, ,969, ,192,218 Wastewater Utility: Number of customers 2,302 2,377 2,511 2,578 Gallons of wastewater billed to customers 173,470, ,627, ,296, ,736,513 Reclaimed Water: Number of customers Gallons of wastewater billed to customers Solid Waste: Number of customers 2,949 3,031 3,162 3, ,968 2,594 2,516 2,307 3,149 3, ,478 3,561 3,569 3,605 3,645 3,721 41,447,673 43,832,940 42,672,474 39,334,834 39,441,390 41,192, ,247,962 80,307,626 79,834,390 78,085,867 73,371,218 75,053,504 3,071 3,082 3,127 3,166 3,244 3, ,906, ,781, ,392, ,178, ,798, ,179, ,061, ,245, ,406, ,035, ,422, ,610,000 2,633 2,642 2,656 2,702 2,755 2, ,531, ,937, ,628, ,098, ,707, ,160, ,205,640 3,238 3,247 3,269 3,300 3,343 3,411 Source: Various City Departments Notes: (1) The Summer Recreation Program was contracted out to the YMCA for Fiscal Year (2) Reclaimed Water became available for sale in Fiscal Year

136 Schedule 19 CITY OF ALACHUA, FLORIDA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Function/Program Public Safety: Police: Police stations Police sub-stations Fire: Fire stations Public Services: Streets (miles) Culture and Recreation: Parks Tennis courts Ball fields Community centers Skate park Spray pool B-66 Electric Utility: Substations Water Utility: Wells Wastewater Utility: Treatment capacity (millions of gallons per day) OTHER INDEPENDENT AUDITORS REPORTS AND SCHEDULES Source: Various City Departments 102

137 CITY OF ALACHUA SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2014 CFDA/ CSFA Grant/Contract Federal Awards Number Number Expenditures U. S. Department of Justice Indirect Program: Passed Through Florida Department of Law Enforcement: Edward Byrne Memorial Justice Assistance Grant (JAG) Program JAGD-ALC-1-E6-012 $ 1,605 Edward Byrne Memorial Justice Assistance Grant (JAG) Program JAGC-ALAC-6-E ,897 Passed Through Alachua County Sheriff's Office: Edward Byrne Memorial Justice Assistance Grant (JAG) Program - Problem Oriented Policing JAGC-ALAC-4-E ,926 Subtotal CFDA ,428 Total U. S. Department of Justice 16,428 B-67 ADDITIONAL ELEMENTS OF REPORT PREPARED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS, ISSUED BY THE COMPTROLLER GENERAL OF THE UNITED STATES; THE RULES OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA; AND OTHER CONTRACT REQUIREMENTS Total Expenditures of Federal Awards 16,428 State Awards Florida Department of Transportation Economic Development Transportation Projects - Road Fund ,911 Total Florida Department of Transportation 82,911 Total Expenditures of State Awards 82,911 Total Federal and State Awards $ 99,

138 CITY OF ALACHUA, FLORIDA NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS SEPTEMBER 30, 2014 Note 1 - General Note 2 - Note 3 - The accompanying schedule of expenditures of federal and state awards presents the federal awards activity of the City of Alachua, Florida (the City). The City s reporting entity is defined in Note 1 of the City s basic financial statements. All federal and state awards received directly from federal and state agencies, as well as federal and state awards passed through other governmental agencies, are included in these schedules. Basis of Accounting The accompanying schedule of expenditures of federal and state awards is presented using the accrual basis of accounting, which is described in Note 1 of the City s basic financial statements. Loans Outstanding The City had the following loan balances outstanding at September 30, 2014: INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor, City Commissioners and City Manager Alachua, Florida We have audited, in accordance with the 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 governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Alachua, Florida (the City), as of and for the year ended September 30, 2014, and the related notes to the financial statements, which collectively comprise the City s basic financial statements and have issued our report thereon dated February 25, B-68 CFDA Amount Federal Program Name Number Outstanding Section 108 Loan Guarantee $ 1,150,000 Capitalization Grants for Clean Water State Revolving Funds ,411,413 Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City s internal control. Accordingly, we do not express an opinion on the effectiveness of the City 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 City 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 was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified

139 Honorable Mayor, City Commissioners and City Manager Alachua, Florida B-69 INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS (Concluded) Compliance and Other Matters As part of obtaining reasonable assurance about whether the City 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 City 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 City s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. February 25, 2015 Gainesville, Florida Honorable Mayor, City Commissioners and City Manager Alachua, Florida MANAGEMENT LETTER Report on the Financial Statements We have audited the financial statements of the City of Alachua, Florida, (the City) as of and for the fiscal year ended September 30, 2014, and have issued our report thereon dated February 25, Auditors Responsibility We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and Chapter , Rules of the Florida Auditor General. Other Reports and Schedule We have issued our Independent Auditors Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards, and Independent Accountant s Report on an examination conducted in accordance with AICPA Professional Standards, Section 601, regarding compliance requirements in accordance with Chapter , Rules of the Auditor General. Disclosures in that report, which is dated February 25, 2015, should be considered in conjunction with this management letter. Prior Audit Findings Section (1)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. There were no such findings in the preceding audit report. Official Title and Legal Authority Section (1)(i)4., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. This information is included in Note 1 to the financial statements. Financial Condition Section (1)(i)5.(a)., Rules of the Auditor General, requires that we report the results of our determination as to whether or not the City has met one or more of the conditions described in Section (1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that the City did not meet any of the conditions described in Section (1), Florida Statutes. Pursuant to Sections (1)(i)5.(c). and (8), Rules of the Auditor General, we applied financial condition assessment procedures. It is management s responsibility to monitor the City s financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same

140 Honorable Mayor, City Commissioners and City Manager Alachua, Florida MANAGEMENT LETTER (Concluded) B-70 Annual Financial Report Section (1)(i)5.(b)., Rules of the Auditor General, requires that we report the results of our determination as to whether the annual financial report for the City for the fiscal year ended September 30, 2014, filed with the Florida Department of Financial Services pursuant to Section (1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, In connection with our audit, we determined that these two reports were in agreement. Other Matters Section (1)(i)2., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we did not have any such recommendations. Section (1)(i)3., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our audit, we did not have any such findings. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, the Commissioners, and applicable management, and is not intended to be and should not be used by anyone other than these specified parties. We wish to take this opportunity to thank you and your staff for the cooperation and courtesies extended to us during the course of our audit. Please let us know if you have any questions or comments concerning this letter, our accompanying reports, or other matters. INDEPENDENT ACCOUNTANTS REPORT ON COMPLIANCE WITH SECTION , FLORIDA STATUTES To the Mayor and City Commissioners City of Alachua, Florida We have examined the City of Alachua, Florida s (the City) compliance with the requirements of Section , Florida Statutes, as of and for the year ended September 30, 2014, as required by Section (10)(a), Rules of the Auditor General. Management is responsible for the City s compliance with those requirements. Our responsibility is to express an opinion on the City s compliance based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included examining, on a test basis, evidence about the City s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination on the City s compliance with specified requirements. In our opinion, the City complied, in all material respects, with the aforementioned requirements for the year ended September 30, This report is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, the City Commissioners, and management and is not intended to be and should not be used by anyone other than these specified parties. February 25, 2015 Gainesville, Florida February 25, 2015 Gainesville, Florida

141 APPENDIX C Form of Resolution

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143 Legislation Legislation C-1 RESOLUTION A RESOLUTION OF THE CITY OF ALACHUA, FLORIDA AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $18,000,000 IN AGGREGATE PRINCIPAL AMOUNT OF THE CITY OF ALACHUA, FLORIDA CAPITAL IMPROVEMENT REVENUE AND REVENUE REFUNDING BONDS, SERIES 2016 FOR THE PURPOSE OF REFUNDING ALL OF THE CITY'S OUTSTANDING CAPITAL IMPROVEMENT AND REFUNDING REVENUE BONDS, SERIES 2006 IN ORDER TO ACHIEVE DEBT SERVICE SAVINGS, AND TO FINANCE THE ACQUISITION, CONSTRUCTION, EQUIPPING AND INSTALLATION OF VARIOUS CAPITAL IMPROVEMENTS WITHIN THE CITY; ESTABLISHING ITS INTENT TO REIMBURSE SUCH CAPITAL EXPENDITURES WITH THE PROCEEDS OF SUCH SERIES 2016 BONDS; COVENANTING TO BUDGET, APPROPRIATE AND DEPOSIT LEGALLY AVAILABLE NON-AD VALOREM REVENUES TO PROVIDE FOR THE PAYMENT THEREOF; MAKING CERTAIN COVENANTS AND AGREEMENTS FOR THE BENEFIT OF THE OWNERS OF SUCH SERIES 2016 BONDS; AUTHORIZING CERTAIN OFFICIALS AND EMPLOYEES OF THE CITY TO EXECUTE ANY DOCUMENT AND TAKE ALL ACTIONS REQUIRED IN CONNECTION WITH THE COMPETITIVE SALE, ISSUANCE AND DELIVERY OF SUCH SERIES 2016 BONDS; TAKING CERTAIN OTHER ACTIONS WITH RESPECT TO SUCH BONDS; PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE. NOW, THEREFORE, BE IT RESOLVED BY THE CITY OF ALACHUA COMMISSION: ARTICLE I GENERAL Section 1.01 Definitions.When used in this Resolution, the following terms shall have the following meanings, unless the context clearly otherwise requires: "Act" shall mean, collectively, the Constitution and laws of the State of Florida, including particularly, Chapter 166, Part II, Florida Statutes, the City Charter, and other applicable provisions of law. "Ad Valorem Revenues" shall mean all revenues of the Issuer derived from the levy and collection of ad valorem taxes. "Amortization Installment" shall mean an amount designated as such by Supplemental Resolution of the Issuer and established with respect to any Term Bonds. "Authorized Issuer Officer" shall mean the Mayor, the City Manager, the Finance Director and when used in reference to any act or document, also means any other person authorized by resolution of the Issuer to perform such act or sign such document. "Bond Amortization Account" shall mean the separate account in the Debt Service Fund established pursuant to Section 4.03 hereof. "Bond Counsel" shall mean initially, Bryant Miller Olive P.A., and thereafter, any attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the exclusion from gross income for federal income tax purposes of interest on obligations issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United States of America. "Bond Insurance Policy" shall mean the municipal Series 2016 Bond new issue insurance policy issued by the Bond Insurer, if any, that guarantees payment of principal of and interest on the Series 2016 Bonds. "Bond Insurer" shall mean the municipal bond insurance company as specified in this Resolution, if any. All references to Bond Insurer shall only be applicable and effective during any period when its Bond Insurance Policy is in full force and effect and only as to Bonds which it insures. "Bondholder" or "Owner" or "Holder" or any similar term, when used with reference to a Series 2016 Bond or Series 2016 Bonds, shall mean any Person who shall be the registered owner of any Outstanding Series 2016 Bond or Series 2016 Bonds as provided in the registration books of the Issuer. "Business Day" means a day other than (i) a Saturday, Sunday, legal holiday or day on which banking institutions in the city in which the Paying Agent has its principal office are authorized by law or executive order to close, or (ii) a day on which the New York Stock Exchange is closed. "City Attorney" means the City Attorney of the City or any Assistant or Deputy City Attorney, or his or her designee. "City Clerk" means the City Clerk of the City or any Assistant or Deputy City Clerk, or his or her designee. "City Commission" means the City Commission of the City of Alachua, Florida. City of Alachua Page 1 City of Alachua Page 2

144 Legislation Legislation C-2 "City Manager" means the City Manager of the City or any Assistant or Deputy City Manager, or his or her designee. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the regulations and rules thereunder in effect or proposed. "Construction Fund" shall mean the City of Alachua Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 Construction Fund established and maintained pursuant to Section 4.07 hereof. "Cost," when used in connection with the Project, shall mean: (1) the Issuer's cost of physical construction, (2) the costs of acquisition by or for the Issuer of the Project, (3) the costs of land and interests therein and the cost of the Issuer incidental to such acquisition; (4) the cost of any indemnity and surety bonds and premiums for insurance during construction, (5) all interest due to be paid on the Series 2016 Bonds during the period of acquisition, construction and equipping of the Project and for such period subsequent to completion as the Issuer shall determine; (6) engineering, legal and other consultant fees and expenses, (7) costs and expenses of the financing, including audits, fees and expenses of any Paying Agent, Registrar or depository, (8) payments, when due (whether at the maturity-of principal or the due date of interest or upon redemption) on any indebtedness of the Issuer (other than the Series 2016 Bonds) incurred for the Project, (9) the costs of machinery, equipment and supplies and reserves required by the Issuer for the commencement of operation of the Project, and (10) any other costs properly attributable to such acquisition, construction and equipping, as determined by generally accepted accounting principles applicable to the Issuer, and shall include reimbursement to the Issuer for any such items of Cost heretofore paid by the Issuer and interest on any inter-fund loan related thereto. "Debt Service Fund" shall mean the City of Alachua Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 Debt Service Fund established and maintained pursuant to Section 4.03 hereof. "Federal Securities" shall mean direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, which are not redeemable prior to maturity at the option of the obligor. "Finance Director" means the Finance Director of the City or any Assistant or Deputy Finance Director, or his or her designee. "Fiscal Year" shall mean the period commencing on October 1 of each year and continuing through the next succeeding September 30, or such other period as may be prescribed by law. "Interest Account" shall mean the separate account in the Debt Service Fund established pursuant to Section 4.03 hereof. "Interest Date" shall be the dates specified in a Supplemental Resolution adopted prior to the issuance of the Series 2016 Bonds. "Issuer" shall mean the City of Alachua, Florida. "Mayor" shall mean the Mayor of the Issuer, or in his or her absence or unavailability, the Vice-Mayor of the Issuer. "Non-Ad Valorem Revenues" shall mean all legally available revenues of the Issuer other than Ad Valorem Revenues. "Outstanding" when used with reference to Series 2016 Bonds and as of any particular date, shall describe all Series 2016 Bonds theretofore and thereupon being authenticated and delivered except, (1) any Series 2016 Bond in lieu of which another Series 2016 Bond or other Series 2016 Bonds have been issued under an agreement to replace lost, mutilated or destroyed Series 2016 Bonds, (2) any Series 2016 Bond surrendered by the Holder thereof in exchange for another Series 2016 Bond or other Bonds under Section 2.07 hereof, (3) Series 2016 Bonds canceled after purchase in the open market or because of payment at or redemption prior to maturity, and (4) Series 2016 Bonds deemed paid in accordance with Section 8.01 hereof. "Paying Agent" shall mean any paying agent for Series 2016 Bonds appointed by or pursuant to this Resolution and its successors or assigns, and any other Person which may at any time be substituted in its place pursuant to this Resolution. "Permitted Investments" shall mean investments permitted by the Issuer's written investment policy, if any, and applicable law. "Person" shall mean an individual, a corporation, a partnership, an association, a joint stock company, a trust, any unincorporated organization or governmental entity. "Pledged Funds" shall mean (1) Non-Ad Valorem Revenues budgeted and appropriated by the Issuer in accordance with Section 4.02 hereof and deposited into the Debt Service Fund, and (2) until applied in accordance with the provisions of this Resolution, all moneys, including the investments thereof, in the funds and accounts established hereunder, with the exception of the Rebate Fund. "Principal Account" shall mean the separate account in the Debt Service Fund established pursuant to Section 4.03 hereof. "Project" shall mean: (i) the acquisition, construction and equipping of a Public Services Operations Center/Warehouse, and (ii) the acquisition, construction and equipping of a multipurpose building to be built on a portion of 105 acres that is contiguous to the Issuer's existing recreation center, known as Project Legacy Phase I, each as more particularly described in the City of Alachua Page 3 City of Alachua Page 4

145 Legislation Legislation C-3 plans and specifications on file or to be on file with the Issuer, as the same may be modified or amended from time to time. "Rebate Amount" means the excess of the future value, as of a computation date, of all receipts on nonpurpose investments (as defined in Section (b) of the Income Tax Regulations) over the future value, as of that date, of all payments on nonpurpose investments, all as provided by regulations under the Code implementing Section 148 thereof. "Rebate Fund" shall mean the City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 Rebate Fund established pursuant to Section 5.05 hereof. "Redemption Price" shall mean, with respect to any Series 2016 Bond or portion thereof, the principal amount or portion thereof, plus the applicable premium, if any, payable upon redemption thereof pursuant to such Series 2016 Bond or this Resolution. "Refunded Bonds" shall mean all of the outstanding Series 2006 Bonds, as more fully described pursuant to a Supplemental Resolution. "Registrar" shall mean any registrar for the Series 2016 Bonds appointed by or pursuant to a Supplemental Resolution and its successors and assigns, and any other Person which may at any time be substituted in its place pursuant to a Supplemental Resolution. "Resolution" shall mean this Resolution, as the same may from time to time be amended, modified or supplemented by Supplemental Resolution. "Serial Bonds" shall mean all of the Series 2016 Bonds other than the Term Bonds. "Series 2006 Bonds" shall mean the $8,095,000 original aggregate principal amount City of Alachua, Florida Capital Improvement and Refunding Revenue Bonds, Series "Series 2016 Bonds" shall mean the City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016, issued pursuant to this Resolution. "State" shall mean the State of Florida. "Supplemental Resolution" shall mean any resolution of the Issuer amending or supplementing this Resolution adopted and becoming effective in accordance with the terms of Sections 7.01 and 7.02 hereof. "Term Bonds" shall mean those Series 2016 Bonds which shall be designated as Term Bonds hereby or by Supplemental Resolution of the Issuer and which are subject to mandatory redemption by Amortization Installments. City of Alachua Page 5 The terms "herein," "hereunder," "hereby," "hereto," "hereof" and any similar terms, shall refer to this Resolution; the term heretofore shall mean before the date of adoption of this Resolution; and the term "hereafter" shall mean after the date of adoption of this Resolution. Words importing the masculine gender include every other gender. Words importing the singular number include the plural number, and vice versa. Section 1.02 provisions of the Act. Authority for Resolution. This Resolution is adopted pursuant to the Section 1.03 Resolution to Constitute Contract. In consideration of the purchase and acceptance of any or all of the Series 2016 Bonds by those who shall hold the same from time to time, the provisions of this Resolution shall be a part of the contract of the Issuer with the Owners of the Series 2016 Bonds and shall be deemed to be and shall constitute a contract between the Issuer and the Owners from time to time of the Series 2016 Bonds. The pledge made in this Resolution and the provisions, covenants and agreements herein set forth to be performed by or on behalf of the Issuer shall be for the equal benefit, protection and security of the Owners of any and all of said Series 2016 Bonds. All of the Series 2016 Bonds, regardless of the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Series 2016 Bonds over any other thereof except as expressly provided in or pursuant to this Resolution. Section 1.04 follows: Findings. It is hereby ascertained, determined and declared as (1) The Issuer previously issued the Series 2006 Bonds. (2) The proceeds of the Series 2006 Bonds were used by the Issuer to pay the cost of: (i) construction of a new City Hall and Police Administration Building, including the acquisition and installation of furniture, fixtures and equipment necessary and appurtenant thereto, (ii) the refunding of the Issuer's outstanding Governmental Unit Note evidencing a loan to the Issuer from the City of Arcadia, Florida from its Local Government Revenue Bonds, Series 1993, Dedicated Pool, Sales Tax Revenue Note, Series 1995 and Sales Tax Revenue Note, Series 2000, the proceeds of which were used to finance the cost of a capital project, and (iii) payment of certain expenses related to the issuance of the Refunded Bonds. (3) The Issuer has various capital improvement needs and requirements in the form of the Project that should be acquired, constructed and equipped in order to improve and maintain the health, safety and welfare of the Issuer and its inhabitants. (4) To obtain substantial debt service savings and to improve and maintain the health, safety and welfare of the Issuer and its inhabitants, it is in the best interests of the Issuer to provide for the issuance of the Series 2016 Bonds, in an aggregate principal amount not to City of Alachua Page 6

146 Legislation Legislation C-4 exceed $18,000,000, the proceeds of which, together with other legally available funds of the Issuer, will be used to: (i) refund the Refunded Bonds, (ii) finance the Project, and (iii) pay certain expenses related to the issuance of the Series 2016 Bonds. (5) The issuance of the Series 2016 Bonds will, therefore, have a substantial public benefit and serve a public purpose of the Issuer. (6) The Issuer is authorized under the Act to issue the Series 2016 Bonds and to use the proceeds thereof, together with other legally available funds of the Issuer, to: (i) refund the Refunded Bonds, (ii) finance the Project, and (iii) pay certain expenses related to the issuance of the Series 2016 Bonds. (7) Debt service on the Series 2016 Bonds will be secured by a covenant to budget, appropriate and deposit Non-Ad Valorem Revenues as provided herein and a lien on Pledged Funds. The Pledged Funds are expected to be sufficient to pay the principal and interest on the Series 2016 Bonds herein authorized, as the same become due, and to make all deposits required by this Resolution. (8) The Issuer shall never be required to levy ad valorem taxes or use the proceeds thereof to pay debt service on the Series 2016 Bonds or to make any other payments to be made hereunder or to maintain or continue any of the activities of the Issuer which generate user service charges, regulatory fees or any other Non-Ad Valorem Revenues. The Series 2016 Bonds shall not constitute a lien on any property owned by or situated within the limits of the Issuer. (9) It is estimated that the Non-Ad Valorem Revenues will be available after satisfying funding requirements for obligations having an express lien on or pledge thereof and after satisfying funding requirements for essential governmental services of the Issuer, in amounts sufficient to provide for the payment of the principal of and interest on the Series 2016 Bonds and all other payment obligations hereunder. (10) The principal of and interest on the Series 2016 Bonds and all other payments provided for in this Resolution will be paid solely from the Pledged Funds, and the ad valorem taxing power or ad valorem tax revenues of the Issuer will never be necessary or required to pay the principal of and interest on the Series 2016 Bonds and, except as otherwise provided herein, the Series 2016 Bonds shall not constitute a lien upon any property of the Issuer. Section 1.05 Authorization of the Project and Refunding of Refunded Bonds. The Issuer does hereby authorize the acquisition, construction and equipping of the Project and the refunding of the Refunded Bonds. Section 1.06 Declaration of Official Intent. The Issuer does hereby express its intention to be reimbursed from proceeds of the Series 2016 Bonds, or a future series of tax- exempt bonds, for certain capital expenditures to be paid by the Issuer for the purpose of acquiring, constructing and equipping the Project. The Issuer expects to use legally available funds, if any, to pay such costs, including the costs of design, and other costs associated with the incurrence of debt. It is reasonably expected that the total amount of debt to be incurred by the Issuer with respect to the Project will not exceed $11,000,000. This Resolution is intended to constitute a "declaration of official intent" within the meaning of Section of the Income Tax Regulations which were promulgated pursuant to the Internal Revenue Code of 1986, as amended, with respect to the debt incurred, in one or more financings, to finance the Project. ARTICLE II AUTHORIZATION, TERMS, EXECUTION AND REGISTRATION OF BONDS Section 2.01 Authorization of Bonds. The Issuer hereby authorizes a series of bonds of the Issuer to be designated as "City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016" in an aggregate principal amount of not to exceed $18,000,000. The proceeds of the Series 2016 Bonds, together with other legally available funds of the Issuer, including certain funds held under the funds and accounts securing the Refunded Bonds, shall be used to (i) refund the Refunded Bonds, (ii) finance the Project, and (iii) pay certain expenses related to the issuance of the Series 2016 Bonds. The Series 2016 Bonds may, if and when authorized by the Issuer pursuant to this Resolution, be issued with such further appropriate particular designations added to or incorporated in such title for the Series 2016 Bonds as the Issuer may determine. The Series 2016 Bonds shall bear interest at such rate or rates not exceeding the maximum rate permitted by law; and shall be payable in lawful money of the United States of America on such dates; all as determined hereunder and by Supplemental Resolution of the Issuer. The Series 2016 Bonds shall be issued in denominations of $5,000 or integral multiples thereof, in such form, whether coupon or registered; shall be dated such date; shall bear such numbers; shall be payable at such place or places; shall contain such redemption provisions; shall have such Paying Agent and Registrar; and shall mature in such years and amounts; all as determined hereunder and by the Supplemental Resolution. Section 2.02 Description of Bonds. The Series 2016 Bonds shall be numbered consecutively from one upward in order of maturity preceded by the letter "RA," shall bear interest at a rate or rates not exceeding the maximum rate allowed by Florida law, payable in such manner and on such dates, shall consist of such amounts of Serial Bonds and Term Bonds maturing in such amounts or Amortization Installments and on such dates, shall be payable in such place or places; shall have such Paying Agent and Registrar, and shall contain such redemption provisions, all as the Issuer shall provide hereafter by Supplemental Resolution. City of Alachua Page 7 City of Alachua Page 8

147 Legislation Legislation C-5 The principal of or Redemption Price, if applicable, on the Series 2016 Bonds are payable upon presentation and surrender of the Series 2016 Bonds at the designated office of the Paying Agent. Interest payable on any such Series 2016 Bond on any Interest Date will be paid by check or draft of the Paying Agent to the Holder in whose name such Series 2016 Bond shall be registered at the close of business on the date which shall be the fifteenth (15 th ) day (whether or not a Business Day) of the calendar month next preceding such Interest Date, or, unless otherwise provided by Supplemental Resolution, at the option of the Paying Agent, and at the request and expense of such Holder, by bank wire transfer for the account of such Holder. In the event the interest payable on any such Series 2016 Bond is not punctually paid or duly provided for by the Issuer on such Interest Date, such defaulted interest will be paid to the Holder in whose name such Series 2016 Bond shall be registered at the close of business on a special record date for the payment of such defaulted interest as established by notice to such Holder, not less than ten days preceding such special record date. All payments of principal of or Redemption Price, if applicable, and interest on the Series 2016 Bonds shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. Section 2.03 Application of Series 2016 Bond Proceeds. The proceeds derived from the sale of the Series 2016 Bonds, including net premium, if any, together with certain funds held in the funds and accounts securing the Refunded Bonds shall, simultaneously with the delivery of the Series 2016 Bonds to the purchaser or purchasers thereof, be applied by the Issuer (i) to the payment of costs and expenses, including underwriting, legal and financial advisory fees and expenses relating to the issuance of the Series 2016 Bonds, (ii) to pay, taking into account investment earnings, if any, the principal of and interest and redemption premiums, if any, on the Refunded Bonds when due in accordance with the schedules to be attached to an escrow deposit agreement, the form of which is to be approved by Supplemental Resolution, and (iii) to the payment of the Cost of the Project. Section 2.04 Execution of Bonds. The Series 2016 Bonds shall be executed in the name of the Issuer by the Mayor and attested and countersigned by its City Manager and City Clerk, either manually or with their facsimile signatures, and the corporate seal of the Issuer or a facsimile thereof shall be affixed thereto or reproduced thereon. The Certificate of Authentication of the Registrar shall appear on the Series 2016 Bonds, and no Series 2016 Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this Resolution unless such certificate shall have been duly executed on such Series 2016 Bond. The authorized signature for the Registrar shall be either manual or in facsimile; provided, however, that at least one of the above signatures, including that of the authorized signature for the Registrar, appearing on the Series 2016 Bonds shall at all times be a manual signature. In case any one or more of the officers who shall have signed or sealed any of the Series 2016 Bonds shall cease to be such officer of the Issuer before the Series 2016 Bonds so signed and sealed shall have been actually sold and delivered, such Series 2016 Bonds may nevertheless be sold and delivered as herein provided and may be issued as if the person who signed or sealed such Series 2016 Bonds had not ceased to hold such office. Any Series 2016 Bonds may be signed and sealed on behalf of the Issuer by such person as at the actual time of the execution of such Series 2016 Bonds shall hold the proper office, although at the date of such Series 2016 Bonds such person may not have held such office or may not have been so authorized. Section 2.05 Authentication. No Series 2016 Bond shall be secured hereunder or be entitled to the benefit hereof or shall be valid or obligatory for any purpose unless there shall be manually endorsed on such Series 2016 Bond a certificate of authentication by the Registrar or such other entity as may be approved by the Issuer for such purpose. Such certificate on any Series 2016 Bond shall be conclusive evidence that such Series 2016 Bond has been duly authenticated and delivered under this Resolution. The form of such certificate shall be substantially in the form provided in Section 2.09 hereof. Section 2.06 Bonds Mutilated, Destroyed, Stolen or Lost. In case any Series 2016 Bond shall become mutilated, or be destroyed, stolen or lost, the Issuer may, in its discretion, issue and deliver, and the Registrar shall authenticate, a new Series 2016 Bond of like tenor as the Series 2016 Bond so mutilated, destroyed, stolen or lost, in exchange and substitution for such mutilated Series 2016 Bond upon surrender and cancellation of such mutilated Series 2016 Bond or in lieu of and substitution for the Series 2016 Bond destroyed, stolen or lost, and upon the Holder furnishing the Issuer and the Registrar proof of such Holder's ownership thereof and satisfactory indemnity and complying with such other reasonable regulations and conditions as the Issuer or the Registrar may prescribe and paying such expenses as the Issuer and the Registrar may incur. All Series 2016 Bonds so surrendered or otherwise substituted shall be canceled by the Registrar. If any of the Series 2016 Bonds shall have matured or be about to mature, instead of issuing a substitute Bond, the Issuer may pay the same or cause the Series 2016 Bond to be paid, upon being indemnified as aforesaid, and if such Series 2016 Bonds be lost, stolen or destroyed, without surrender thereof. Any such duplicate Bonds issued pursuant to this Section 2.06 shall constitute original, additional contractual obligations on the part of the Issuer whether or not the lost, stolen or destroyed Series 2016 Bond be at any time found by anyone, and such duplicate Series 2016 Bond shall be entitled to equal and proportionate benefits and rights as to lien on the Pledged Funds to the same extent as all other Bonds issued hereunder. Section 2.07 Transfer. Series 2016 Bonds, upon surrender thereof at the office of the Registrar with a written instrument of transfer satisfactory to the Registrar, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing, may, at the option of the Holder thereof, be exchanged for an equal aggregate principal amount of registered Bonds of the same maturity of any other authorized denominations. The Series 2016 Bonds issued under this Resolution shall be and have all the qualities and incidents of negotiable instruments under the commercial laws and the Uniform Commercial Code of the State, subject to the provisions for registration and transfer contained in this Resolution and in the Series 2016 Bonds. So long as any of the Series 2016 Bonds shall remain City of Alachua Page 9 City of Alachua Page 10

148 Legislation Legislation C-6 Outstanding, the Issuer shall maintain and keep, at the office of the Registrar, books for the registration and transfer of the Series 2016 Bonds. Each Series 2016 Bond shall be transferable only upon the books of the Issuer, at the office of the Registrar, under such reasonable regulations as the Issuer may prescribe, by the Holder thereof in person or by such Holder's attorney duly authorized in writing upon surrender thereof together with a written instrument of transfer satisfactory to the Registrar duly executed and guaranteed by the Holder or such Holder's duly authorized attorney. Upon the transfer of any such Series 2016 Bond, the Issuer shall issue, and cause to be authenticated, in the name of the transferee a new Series 2016 Bond or Series 2016 Bonds of the same aggregate principal amount and Series and maturity as the surrendered Bond. The Issuer, the Registrar and any Paying Agent or fiduciary of the Issuer may deem and treat the Person in whose name any Outstanding Series 2016 Bond shall be registered upon the books of the Issuer as the absolute owner of such Series 2016 Bond, whether such Series 2016 Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal or Redemption Price, if applicable, and interest on such Series 2016 Bond and for all other purposes, and all such payments so made to any such Holder or upon such Holder's order shall be valid and effectual to satisfy and discharge the liability upon such Series 2016 Bond to the extent of the sum or sums so paid and neither the Issuer nor the Registrar nor any Paying Agent or other fiduciary of the Issuer shall be affected by any notice to the contrary. The Registrar, in any case where it is not also the Paying Agent in respect to the Series 2016 Bonds, forthwith (A) following the fifteenth (15 th ) day prior to an Interest Date; (B) following the fifteenth (15 th ) day next preceding the date of first mailing of notice of redemption of any Series 2016 Bonds; and (C) at any other time as reasonably requested by the Paying Agent, shall certify and furnish to such Paying Agent the names, addresses and holdings of Bondholders and any other relevant information reflected in the registration books. Any Paying Agent of any fully registered Series 2016 Bond shall effect payment of interest on such Series 2016 Bonds by mailing a check or draft to the Holder entitled thereto or may, in lieu thereof, upon the request and at the expense of such Holder, transmit such payment by bank wire transfer for the account of such Holder. In all cases in which the privilege of exchanging Series 2016 Bonds or transferring Series 2016 Bonds is exercised, the Issuer shall execute and the Registrar shall authenticate and deliver such Series 2016 Bonds in accordance with the provisions of this Resolution. Execution of Bonds in the same manner as is provided in Section 2.04 hereof for purposes of exchanging, replacing or transferring Bonds may occur at the time of the original delivery of the Series 2016 Bonds. All Series 2016 Bonds surrendered in any such exchanges or transfers shall be held by the Registrar in safekeeping until directed by the Issuer to be canceled by the Registrar. For every such exchange or transfer of Series 2016 Bonds, the Issuer or the Registrar may make a charge sufficient to reimburse it for any tax, fee, expense or other governmental charge required to be paid with respect to such exchange or transfer. The Issuer and the Registrar shall not be obligated to make any such exchange or transfer of Series 2016 Bonds during the fifteen days next preceding an Interest Date on the Series 2016 Bonds, or, in the case of any proposed redemption of Series 2016 Bonds, then during the fifteen days next preceding the date of the first mailing of notice of such redemption and continuing until such redemption date. Section 2.08 Book Entry. A blanket issuer letter of representations dated September 3, 2003 (the "Blanket Letter") was entered into by the Issuer with The Depository Trust Company ("DTC"). It is intended that the Series 2016 Bonds be registered so as to participate in a global book-entry system with DTC as set forth herein and in such Blanket Letter. The terms and conditions of such Blanket Letter shall govern the registration of the Series 2016 Bonds. The Series 2016 Bonds shall be initially issued in the form of a single fully registered Series 2016 Bond for each maturity. Upon initial issuance, the ownership of such Series 2016 Bonds shall be registered by the Registrar in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. So long as any Series 2016 Bond is registered in the name of DTC (or its nominee), the Issuer, the Registrar and the Paying Agent may treat DTC (or its nominee) as the sole and exclusive holder of such Series 2016 Bonds registered in its name, and all payments with respect to the principal or redemption price of, if any, and interest on such Series 2016 Bond ("Payments") and all notices with respect to such Series 2016 Bond ("Notices") shall be made or given, as the case may be, to DTC. Transfers of Payments and delivery of Notices to DTC Participants shall be the responsibility of DTC and not of the Issuer, subject to any statutory and regulatory requirements as may be in effect from time to time. Transfers of Payments and delivery of Notices to beneficial owners of the Series 2016 Bonds by DTC Participants shall be the responsibility of such participants, indirect participants and other nominees of such beneficial owners and not of the Issuer, subject to any statutory and regulatory requirements as may be in effect from time to time. Upon (I) (a) receipt by the Issuer of written notice from DTC: (i) to the effect that a continuation of the requirement that all of the Outstanding Series 2016 Bonds be registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee of DTC, is not in the best interest of the beneficial owners of the Series 2016 Bonds, or (ii) to the effect that DTC is unable or unwilling to discharge its responsibilities and no substitute depository willing to undertake the functions of DTC hereunder can be found which is willing and able to undertake such functions upon reasonable and customary terms, (b) termination, for any reason, of the agreement among the Issuer, the Registrar and Paying Agent and DTC evidenced by the Blanket Letter, or (c) determination by the Issuer that such book-entry only system should be discontinued by the Issuer, and (II) compliance with the requirements of any agreement between the Issuer and DTC with respect thereto, the Series 2016 Bonds shall no longer be restricted to being registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or names Holders shall designate, in accordance with the provisions hereof. In such event, the Issuer shall issue and the Registrar shall authenticate, transfer and exchange Series 2016 Bonds consistent with the terms hereof, in denominations of $5,000 or any integral multiple thereof to the Holders thereof. The foregoing notwithstanding, until such time as participation in the book-entry only system is discontinued, the provisions set forth in the Blanket City of Alachua Page 11 City of Alachua Page 12

149 Legislation Legislation Letter shall apply to the registration and transfer of the Series 2016 Bonds and to Payments and Notices with respect thereto. Section 2.09 Form of Bonds. The text of the Series 2016 Bonds shall be in substantially the following form with such omissions, insertions and variations as may be necessary and/or desirable and approved by the Mayor and City Manager prior to the issuance thereof (which necessity and/or desirability and approval shall be presumed by the Issuer's delivery of the Series 2016 Bonds to the purchaser or purchasers thereof): No. R- $ CITY OF ALACHUA, FLORIDA CAPITAL IMPROVEMENT REVENUE AND REVENUE REFUNDING BONDS, SERIES 2016 Interest Rate Maturity Date Date of Original Issue CUSIP % October 1,, 2016 Registered Holder: Principal Amount: C-7 KNOW ALL MEN BY THESE PRESENTS, that the City of Alachua, Florida, a municipal corporation organized under the laws of the State of Florida (the "Issuer"), for value received, hereby promises to pay, solely from the Pledged Funds hereinafter described, to the Registered Holder identified above, or registered assigns as hereinafter provided, on the Maturity Date identified above, the Principal Amount identified above and interest on such Principal Amount from the Date of Original Issue identified above or from the most recent interest payment date to which interest has been paid at the Interest Rate per annum identified above on October 1 and April 1 of each year commencing October 1, 2016 until such Principal Amount shall have been paid, except as the provisions hereinafter set forth with respect to redemption prior to maturity may be or become applicable hereto. The principal of and redemption premium, if applicable, on this Series 2016 Bond is payable upon presentation and surrender of this Series 2016 Bond at the designated office of the Paying Agent. Interest payable on this Series 2016 Bond on any interest date will be paid by check or draft of the Paying Agent to the Registered Holder in whose name this Series 2016 Bond shall be registered at the close of business on the date which shall be the fifteenth day (whether or not a Business Day) of the calendar month next preceding such interest payment date, or, at the option of the Paying Agent, and at the request and expense of such Registered Holder, by bank wire transfer for the account of such Registered Holder. In the event the interest payable on this Series 2016 Bond is not punctually paid or duly provided for by the Issuer on such interest payment date, such defaulted interest will be paid to the Registered Holder in whose name this Series 2016 Bond shall be registered at the close of business on a special record date for the payment of such defaulted interest as established by notice to such Registered Holder, not less than ten days preceding such special record date. All payments of principal of and redemption premium, if applicable, and interest on this Series 2016 Bond shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. City of Alachua Page 13 City of Alachua Page 14

150 Legislation Legislation C-8 This Series 2016 Bond is one of an authorized issue of Bonds in the aggregate principal amount of $ (the "Series 2016 Bonds") of like date, tenor and effect, except as to maturity date, interest rate, denomination and number, issued for the purpose of refunding certain indebtedness and paying certain other costs (as more particularly described in the hereinafter defined Resolution), under the authority of and in full compliance with the Constitution and laws of the State of Florida, including particularly, Chapter 166, Part II, Florida Statutes, the City Charter, and other applicable provisions of law (collectively, the "Act"), and Resolution No duly adopted by the City Commission of the Issuer on March 14, 2016, as it may be amended and supplemented from time to time, and as particularly supplemented by Resolution No duly adopted by the City Commission of the Issuer on March 14, 2016 (collectively, the "Resolution"), and is subject to the terms and conditions of this Resolution. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Resolution. The Series 2016 Bonds and the interest thereon are payable solely from and secured by an irrevocable pledge of the Pledged Funds. Pledged Funds consist of: (1) Non-Ad Valorem Revenues budgeted and appropriated by the Issuer in accordance with Section 4.02 of the Resolution and deposited into the Debt Service Fund, and (2) until applied in accordance with the provisions of the Resolution, all moneys, including the investments thereof, in the funds and accounts established thereunder, with the exception of the Rebate Fund. The Issuer has covenanted and agreed to appropriate in its annual budget for each Fiscal Year sufficient amounts of Non-Ad Valorem Revenues for the payment of principal of and interest on the Series 2016 Bonds in each Fiscal Year, and to make certain other payments required by the Resolution, subject to the limitations described in the Resolution. Reference is made to the Resolution for more complete description of the security for the Series 2016 Bonds. IT IS EXPRESSLY AGREED BY THE REGISTERED HOLDER OF THIS SERIES 2016 BOND THAT NEITHER THE FULL FAITH AND CREDIT OF THE ISSUER, THE STATE OF FLORIDA, NOR ANY POLITICAL SUBDIVISION THEREOF, ARE PLEDGED TO THE PAYMENT OF THE PRINCIPAL, PREMIUM, IF ANY, AND INTEREST ON THIS SERIES 2016 BOND AND THAT SUCH HOLDER SHALL NEVER HAVE THE RIGHT TO REQUIRE OR COMPEL THE EXERCISE OF ANY AD VALOREM TAXING POWER OR THE USE OF AD VALOREM TAX REVENUES OF THE ISSUER, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF, TO THE PAYMENT OF SUCH PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. THIS SERIES 2016 BOND AND THE OBLIGATION EVIDENCED HEREBY SHALL NOT CONSTITUTE A LIEN UPON ANY PROPERTY OF THE ISSUER, BUT SHALL CONSTITUTE A LIEN ONLY ON, AND SHALL BE PAYABLE SOLELY FROM, THE PLEDGED FUNDS. This Series 2016 Bond is transferable in accordance with the terms of this Resolution only upon the books of the Issuer kept for that purpose at the designated corporate trust office of the Registrar by the Registered Holder hereof in person or by such Holder's attorney duly authorized in writing, upon the surrender of this Series 2016 Bond together with a written instrument of transfer satisfactory to the Registrar duly executed by the Registered Holder or such Holder's attorney duly authorized in writing, and thereupon a new Series 2016 Bond or Series 2016 Bonds in the same aggregate principal amount shall be issued to the transferee in exchange therefor, and upon the payment of the charges, if any, therein prescribed. The Series 2016 Bonds are issuable in the form of fully registered bonds in the denominations of $5,000 and integral multiples thereof, not exceeding the aggregate principal amount of the Series 2016 Bonds maturing on the same date. The Issuer, the Registrar and any Paying Agent may treat the Registered Holder of this Series 2016 Bond as the absolute owner hereof for all purposes, whether or not this Series 2016 Bond shall be overdue, and shall not be affected by any notice to the contrary. The Issuer and the Registrar shall not be obligated to make any exchange or transfer of the Series 2016 Bonds during the fifteen days next preceding an interest payment date, or in the case of any proposed redemption of the Series 2016 Bonds, then, during the fifteen days next preceding the date of the first mailing of notice of such redemption. [INSERT REDEMPTION PROVISIONS] Notice of redemption is to be given in the manner provided in the Resolution. It is hereby certified and recited that all acts, conditions and things required to exist, to happen and to be performed precedent to and in the issuance of this Bond, exist, have happened and have been performed, in regular and due form and time as required by the laws and Constitution of the State of Florida applicable thereto, and that the issuance of the Series 2016 Bonds does not violate any constitutional or statutory limitations or provisions. Neither the members of the governing body of the Issuer nor any Person executing this Series 2016 Bond shall be liable personally hereon or be subject to any personal liability or accountability by reason of the issuance hereof. This Series 2016 Bond shall not be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by the Registrar. [Remainder of Page Intentionally Left Blank] City of Alachua Page 15 City of Alachua Page 16

151 Legislation Legislation IN WITNESS WHEREOF, the City of Alachua, Florida, has issued this Series 2016 Bond and has caused the same to be signed by the Mayor, and attested and countersigned to by the City Manager and City Clerk, and its seal or facsimile thereof to be affixed, impressed, imprinted, lithographed or reproduced hereon, all as of the day of,. (SEAL) CITY OF ALACHUA, FLORIDA ATTESTED AND COUNTERSIGNED: Mayor City Manager and City Clerk [INSERT STATEMENT OF INSURANCE, IF INSURED] ASSIGNMENT FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto Insert Social Security or Other Identifying Number of Assignee (Name and Address of Assignee) the within Series 2016 Bond and does hereby irrevocably constitute and appoint as attorneys to register the transfer of the said Series 2016 Bond on the books kept for registration thereof with full power of substitution in the premises. Dated: Signature Guaranteed: C-9 CERTIFICATE OF AUTHENTICATION This Series 2016 Bond is one of the Series 2016 Bonds of the issue described in the within-mentioned Resolution. DATE OF AUTHENTICATION: NOTICE: The signature to this Assignment must correspond with the name of the registered owner as it appears upon the face of the within bond in every particular without alteration or enlargement or any change whatsoever. NOTICE: The signature to this Assignment must be guaranteed by an institution that is a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program., 2016 Registrar By: Authorized Officer City of Alachua Page 17 City of Alachua Page 18

152 Legislation Legislation C-10 The following abbreviations, when used in the inscription on the face of the within Bond, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF TRANS MIN ACT -- Custodian for (Cust.) under Uniform Transfer to Minors Act of (State) Additional abbreviations may also be used though not in the list above. [Remainder of Page Intentionally Left Blank] ARTICLE III REDEMPTION OF BONDS Section 3.01 Privilege of Redemption. The Series 2016 Bonds may be subject to optional and/or mandatory redemption at the times and in the amounts provided by or pursuant to a Supplemental Resolution. Section 3.02 Selection of Bonds to be Redeemed. The Series 2016 Bonds shall be redeemed only in the principal amount of $5,000 each and integral multiples thereof. The Issuer shall, at least sixty (60) days prior to the redemption date (unless a shorter time period shall be satisfactory to the Registrar) notify the Registrar of such redemption date and of the principal amount of Series 2016 Bonds to be redeemed. For purposes of any redemption of less than all of the Outstanding Series 2016 Bonds of a single maturity, the particular Series 2016 Bonds or portions of Series 2016 Bonds to be redeemed shall be selected not more than forty-five (45) days prior to the redemption date by the Registrar from the Outstanding Series 2016 Bonds of the maturity or maturities designated by the Issuer by such method as the Registrar shall deem fair and appropriate and which may provide for the selection for redemption of Series 2016 Bonds or portions of Series 2016 Bonds in principal amounts of $5,000 and integral multiples thereof. If less than all of the Outstanding Series 2016 Bonds of a single maturity are to be redeemed, the Registrar shall promptly notify the Issuer and Paying Agent (if the Registrar is not the Paying Agent for such Series 2016 Bonds) in writing of the Series 2016 Bonds or portions of Series 2016 Bonds selected for redemption and, in the case of any Series 2016 Bond selected for partial redemption, the principal amount thereof to be redeemed. Section 3.03 Notice of Redemption. Unless waived by any Holder of Series 2016 Bonds to be redeemed, notice of any redemption made pursuant to this section shall be given by the Registrar on behalf of the Issuer by mailing a copy of an official redemption notice by registered or certified mail at least thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption to each Holder of Series 2016 Bonds to be redeemed at the address of such Holder shown on the registration books maintained by the Registrar or at such other address as shall be furnished in writing by such Holder to the Registrar; provided, however, that no defect in any notice given pursuant to this Section to any Holder of Series 2016 Bonds to be redeemed nor failure to give such notice shall in any manner defeat the effectiveness of a call for redemption as to all other Owners of Series 2016 Bonds to be redeemed. A notice of redemption may be contingent upon the occurrence of certain conditions and if such conditions do not occur, the notice will be deemed rescinded and of no force or effect. A notice of redemption may also be subject to rescission in the discretion of the Issuer; provided that such notice of such rescission shall be mailed to all affected Owners no later than three (3) Business Days prior to the date of redemption. City of Alachua Page 19 City of Alachua Page 20

153 Legislation Legislation C-11 Every official notice of redemption shall be dated and shall state: (1) the redemption date, (2) the Redemption Price, (3) if less than all Outstanding Series 2016 Bonds are to be redeemed, the number (and, in the case of a partial redemption of any Bond, the principal amount) of each Series 2016 Bond to be redeemed, (4) any conditions to such redemption and, if applicable, a statement to the effect that such notice is subject to rescission by the Issuer, (5) that, on the redemption date, subject to the satisfaction of any conditions to such redemption set forth in the notice of redemption, the Redemption Price will become due and payable upon each such Series 2016 Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (6) that such Series 2016 Bonds to be redeemed, whether as a whole or in part, are to be surrendered for payment of the Redemption Price at the designated office of the Registrar. Section 3.04 Redemption of Portions of Bonds. Any Series 2016 Bond which is to be redeemed only in part shall be surrendered at any place of payment specified in the notice of redemption (with due endorsement by, or written instrument of transfer in form satisfactory to, the Registrar duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Issuer shall execute and the Registrar shall authenticate and deliver to the Holder of such Series 2016 Bond, without service charge, a new Series 2016 Bond or Series 2016 Bonds, of the same interest rate and maturity, and of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Series 2016 Bonds so surrendered. Section 3.05 Payment of Redeemed Bonds. Notice of redemption having been given substantially as aforesaid, the Series 2016 Bonds or portions of Series 2016 Bonds so to be redeemed shall, subject to any conditions to such redemption set forth in the notice of redemption, on the redemption date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Issuer shall default in the payment of the Redemption Price) such Series 2016 Bonds or portions of Series 2016 Bonds shall cease to bear interest. Upon surrender of such Series 2016 Bonds for redemption in accordance with said notice, such Series 2016 Bonds shall be paid by the Registrar and/or Paying Agent at the appropriate Redemption Price, plus accrued interest. All Series 2016 Bonds which have been redeemed shall be canceled by the Registrar and shall not be reissued. ARTICLE IV SECURITY, SPECIAL FUNDS AND APPLICATION THEREOF Section 4.01 Bonds not to be Indebtedness of Issuer. THE SERIES 2016 BONDS SHALL NOT BE OR CONSTITUTE GENERAL OBLIGATIONS OR INDEBTEDNESS OF THE ISSUER AS "BONDS" WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION, BUT SHALL BE SPECIAL OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM AND SECURED BY A LIEN UPON AND PLEDGE OF THE PLEDGED FUNDS. NO HOLDER OF ANY SERIES 2016 BOND SHALL EVER HAVE THE RIGHT TO COMPEL THE EXERCISE OF ANY AD VALOREM TAXING POWER OR THE USE OF AD VALOREM TAX REVENUES TO PAY SUCH SERIES 2016 BOND, FOR THE PAYMENT OF ANY AMOUNTS PAYABLE HEREUNDER, OR IN ORDER TO MAINTAIN ANY SERVICES OR PROGRAMS THAT GENERATE NON-AD VALOREM REVENUES, OR BE ENTITLED TO PAYMENT OF SUCH SERIES 2016 BOND FROM ANY MONEYS OF THE ISSUER EXCEPT FROM THE PLEDGED FUNDS IN THE MANNER PROVIDED HEREIN. Section 4.02 Pledged Funds. Covenant to Budget and Appropriate; Bonds Secured by Pledge of (1) The Issuer covenants and agrees to appropriate in its annual budget, by amendment if necessary, for each Fiscal Year in which the Series 2016 Bonds remain Outstanding, and deposit into the Debt Service Fund, sufficient amounts of Non-Ad Valorem Revenues for the payment of principal of and interest on the Series 2016 Bonds and to make all other payments required hereunder in each such Fiscal Year. Such covenant and agreement on the part of the Issuer shall be cumulative and shall continue and carry over from Fiscal Year to Fiscal Year until all payments of principal of and interest on the Series 2016 Bonds shall have been budgeted, appropriated, deposited and actually paid. The Issuer agrees that this covenant and agreement shall be deemed to be entered into for the benefit of the holders of the Series 2016 Bonds and the Bond Insurer, if any, and that this obligation may be enforced in a court of competent jurisdiction. Notwithstanding the foregoing or any provision of this Resolution to the contrary, the Issuer does not covenant to maintain any services or programs now maintained or provided by the Issuer, including those programs and services which generate Non-Ad Valorem Revenues. Other than as provided in Section 5.01 hereof, this covenant and agreement shall not be construed as a limitation on the ability of the Issuer to pledge all or a portion of such Non-Ad Valorem Revenues or to covenant to budget and appropriate Non-Ad Valorem Revenues for other legally permissible purposes. Nothing herein shall be deemed to pledge ad valorem tax revenues or to permit or constitute a mortgage or lien upon any assets owned by the Issuer and no Holder of Series 2016 Bonds or other Person may compel the levy of ad valorem taxes on real or personal property within the boundaries of the Issuer for the payment of the Issuer's obligations hereunder. However, this covenant to budget and appropriate in its annual budget for the purposes and in the manner stated herein has the effect of making available for the payment of the Series City of Alachua Page 21 City of Alachua Page 22

154 Legislation Legislation C Bonds the Non-Ad Valorem Revenues of the Issuer in the manner provided herein and placing on the Issuer a positive duty to appropriate and budget, by amendment if necessary, amounts sufficient to meet its obligations hereunder; subject, however, in all respects to the restrictions of Section , Florida Statutes, insofar as there are not sufficient Non-Ad Valorem Revenues to comply with such covenant after the satisfaction of the funding requirements for obligations having an express lien on or pledge of such revenues and the funding requirements for essential governmental services of the Issuer. The obligation of the Issuer to make such payments from its Non-Ad Valorem Revenues is subject in all respects to the payment of obligations secured by a pledge of such Non-Ad Valorem Revenues and funding requirements for essential public purposes affecting health, welfare and safety of the inhabitants of the Issuer. The Issuer has previously and, subject to Section 5.01 hereof, may hereafter provide a covenant to budget and appropriate Non-Ad Valorem Revenues or pledge all or a portion of such Non-Ad Valorem Revenues to provide for the payment of obligations (including debt obligations) incurred by the Issuer. No priority of payment among such obligations is established by the provision of a covenant to budget and appropriate Non-Ad Valorem Revenues for the payment thereof. Such covenant to budget and appropriate does not create any lien upon or pledge of such Non-Ad Valorem Revenues until such funds are deposited in the Debt Service Fund established pursuant to Section 4.03 hereof, nor, subject to satisfaction of Section 5.01 hereof, does it preclude the Issuer from pledging in the future or covenanting to budget and appropriate in the future its Non-Ad Valorem Revenues, nor does it require the Issuer to levy and collect any particular Non-Ad Valorem Revenues, nor does it give the Holders of the Series 2016 Bonds a prior claim on the Non-Ad Valorem Revenues as opposed to claims of general creditors of the Issuer. The payment of the debt service of all of the Series 2016 Bonds issued hereunder shall be secured forthwith equally and ratably by a pledge of and a lien upon the Pledged Funds, as now or hereafter constituted. The Issuer does hereby irrevocably pledge such Pledged Funds to the payment of the principal of and interest on the Series 2016 Bonds issued pursuant to this Resolution, and the Issuer does hereby irrevocably agree to the deposit of Non-Ad Valorem Revenues into the Debt Service Fund at the times provided of the sums required to make payments required hereunder, and the payment of the principal of and interest thereon when due. The Pledged Funds shall immediately be subject to the lien of this pledge without any physical delivery thereof or further act, and the lien of this pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the Issuer. (2) Until applied in accordance with this Resolution, the Non-Ad Valorem Revenues deposited by the Issuer in the Debt Service Fund and other amounts on deposit from time to time in the funds and accounts established pursuant to Section 4.03 hereof, plus any earnings thereon, shall be pledged to the repayment of the Series 2016 Bonds. Section 4.03 Debt Service Fund.The Issuer covenants and agrees to establish a separate fund to be known as the "City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 Debt Service Fund" (the "Debt Service Fund"). The Issuer shall maintain in the Debt Service Fund three accounts: the "Interest Account," the "Principal Account," and the "Bond Amortization Account." (2) Moneys in the aforementioned funds and accounts, until applied in accordance with the provisions hereof, shall be subject to a lien and charge in favor of the Holders and for the further security of the Holders. Section 4.04 Flow of Funds. (1) Pursuant to Section 4.02 hereof, Non-Ad Valorem Revenues appropriated for such purpose shall be deposited or credited at least one (1) Business Day prior to the applicable due date, in the following manner: (a) Interest Account. The Issuer shall deposit into or credit to the Interest Account the sum which, together with the balance in said Account, shall be equal to the interest on the Series 2016 Bonds accrued and unpaid and to accrue on such Interest Date. Moneys in the Interest Account shall be used to pay interest on the Series 2016 Bonds as and when the same become due, whether by redemption or otherwise, and for no other purpose. (b) Principal Account. The Issuer shall deposit into or credit to the Principal Account the sum which, together with the balance in said Account, shall equal the portion of the principal on the Series 2016 Bonds next due. Moneys in the Principal Account shall be used to pay the principal of the Series 2016 Bonds as and when the same shall mature, and for no other purpose. (c) Bond Amortization Account. The Issuer shall deposit into or credit to the Bond Amortization Account the sums which, together with the balance in said Account, shall equal the portion of the Amortization Installments of the Series 2016 Bonds next due. Moneys in the Bond Amortization Account shall be used to purchase or redeem Term Bonds in the manner herein provided, and for no other purpose. Payments to the Bond Amortization Account shall be on a parity with payments to the Principal Account. (2) On the date established for payment of any principal of or Redemption Price, if applicable, or interest on the Series 2016 Bonds, the Issuer shall withdraw from the appropriate account of the Debt Service Fund sufficient moneys to pay such principal or Redemption Price, if applicable, or interest and deposit such moneys with the Paying Agent for the Series 2016 Bonds to be paid. Section 4.05 Investments.The Debt Service Fund and the Construction Fund shall be continuously secured in the manner by which the deposit of public funds are authorized to be secured by the laws of the State. Moneys on deposit in the Debt Service Fund and the Construction Fund may be invested and reinvested in Permitted Investments maturing not later than the date on which the moneys therein will be needed. Any and all income received by the Issuer from the investment of moneys in the Construction Fund, the Debt Service Fund, the City of Alachua Page 23 City of Alachua Page 24

155 Legislation Legislation C-13 Interest Account, the Principal Account, and the Bond Amortization Account shall be retained in such respective Fund or Account unless otherwise required by applicable law. Nothing contained in this Resolution shall prevent any Permitted Investments acquired as investments of or security for funds held under this Resolution from being issued or held in book-entry form on the books of the Department of the Treasury of the United States. Permitted Investments shall be valued at cost. Section 4.06 Separate Accounts.The moneys required to be accounted for in each of the foregoing funds and accounts established herein may be deposited in a single bank account, and funds allocated to the various funds and accounts established herein may be invested in a common investment pool, provided that adequate accounting records are maintained to reflect and control the restricted allocation of the moneys on deposit therein and such investments for the various purposes of such funds and accounts as herein provided. The designation and establishment of the various funds and accounts in and by this Resolution shall not be construed to require the establishment of any completely independent, self-balancing funds as such term is commonly defined and used in governmental accounting, but rather is intended solely to constitute an earmarking of certain revenues for certain purposes and to establish certain priorities for application of such revenues as herein provided. Section 4.07 Construction Fund.The Issuer covenants and agrees to establish a separate fund to be known as the "City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 Construction Fund" (the "Construction Fund"), which shall be used only for payment of the Costs of the Project, including reimbursing the Issuer for certain expenditures previously made for Costs of the Project, if any. (1) Moneys in the Construction Fund, until applied in payment of any item of the Cost of the Project in the manner hereinafter provided, shall be held in trust by the Issuer, and shall be subject to a lien and charge in favor of the Holders of the Series 2016 Bonds and for the further security of such Holders. (2) The proceeds of insurance maintained against physical loss of or damage to the Project, or the contractors' performance bonds with respect thereto pertaining to the period of construction thereof, shall be deposited into the Construction Fund. (3) The Issuer covenants that the acquisition, construction and installation of the Project will be completed without delay and in accordance with sound engineering practices. The Issuer shall make disbursements or payments from the Construction Fund to pay the Costs of the Project. The Issuer shall keep adequate records of such disbursements and payments and shall retain all of such records for at least three years from their dates. Notwithstanding any of the other provisions of this Section 4.07, to the extent that other moneys are not available therefor, amounts in the Construction Fund shall be applied to the payment of principal and interest on Series 2016 Bonds, when due. (4) The date of completion of acquisition and construction of the Project shall be determined by an Authorized Issuer Officer who shall certify such fact in writing. Promptly after the date of the completion of the Project, and after paying or making provisions for the payment of all unpaid items of the Costs of the Project, the Issuer shall apply such monies to the payment of interest on the Series 2016 Bonds or, upon receipt of an opinion of Bond Counsel, the Issuer may use any such balance for any lawful purpose. ARTICLE V OTHER OBLIGATIONS AND COVENANTS OF ISSUER Section 5.01 Anti-Dilution Test. The Issuer may incur additional debt secured by all or a portion of the Non-Ad Valorem Revenues only if the total amount of Non-Ad Valorem Revenues for the prior Fiscal Year were at least 3.50 times the maximum annual debt service of all debt (including all long-term financial obligations appearing on the Issuer's most recent audited financial statements and the debt proposed to be incurred) to be paid from Non-Ad Valorem Revenues other than debt exclusively paid from electric, water and sewer revenues (collectively, "Debt"), including any Debt payable from one or several specific revenue sources. For purposes of calculating maximum annual debt service if the terms of the Debt are such that interest thereon for any future period of time is to be calculated at a rate which is not then susceptible of precise determination ("Variable Rate Debt"), interest on such Variable Rate Debt shall be computed as follows: (a) if the principal amount of Variable Rate Debt (including any Variable Rate Debt proposed to be incurred) is less than or equal to 25% of the principal amount of all Debt (including the Debt proposed to be incurred), an interest rate equal to the higher of 12% per annum or The Bond Buyer 40 Index shall be assumed; or (b) if the principal amount of Variable Rate Debt (including any Variable Rate Debt proposed to be incurred) is more than 25% of the principal amount of all Debt (including the Debt proposed to be incurred), the maximum rate which could be borne by such Variable Rate Debt shall be assumed. For purposes of calculating maximum annual debt service, balloon indebtedness shall be assumed to amortize in up to 20 years on a level debt service basis. In the event that the Issuer is required to fund a reserve fund, the funding of such reserve fund shall be included in the calculation of debt service. For purposes of this paragraph, "balloon indebtedness" includes indebtedness if 25% or more of the principal amount thereof comes due in any one year. Notwithstanding anything herein to the contrary, the provisions of this Section 5.01 may be amended, supplemented, or waived from time to time only with the prior written consent of the Bond Insurer, if any, and without the consent of the Bondholders, only if all the Series 2016 Bonds Outstanding are insured by the Bond Insurer. City of Alachua Page 25 City of Alachua Page 26

156 Legislation Legislation C-14 Section 5.02 Books and Records. The Issuer shall keep proper books, records and accounts of the receipt of the Non-Ad Valorem Revenues in accordance with generally accepted accounting principles, and any Holder or Owners shall have the right at all reasonable times to inspect such books, records, accounts and data of the Issuer relating thereto. Section 5.03 Annual Audit. (1) The Issuer shall require that an annual audit of its accounts and records be completed by March 31 following the end of each Fiscal Year by an independent certified public accountant of recognized standing. Such audit shall be conducted in accordance with generally accepted accounting principles as applied to governments. (2) A copy of the Issuer's audited financial statements shall be available for inspection at the offices of the Issuer and shall be mailed to any Bondholder requesting the same upon payment by such Bondholder of the cost of reproduction and mailing. The Issuer shall be permitted to make a reasonable charge for furnishing such audited financial statements. Section 5.04 No Impairment. The pledging of the Pledged Funds in the manner provided herein shall not be subject to repeal, modification or impairment by any subsequent ordinance, resolution or other proceedings of the City Commission. Section 5.05 Federal Income Tax Covenants. (1) It is the intention of the Issuer and all parties under its control that the interest on the Series 2016 Bonds issued hereunder be and remain excluded from gross income for federal income tax purposes and, to this end, the Issuer hereby represents to and covenants with each of the Owners of the Series 2016 Bonds issued hereunder that it will comply with the requirements applicable to it contained in Section 103 and Part IV of Subchapter B of Chapter 1 of Subtitle A of the Code to the extent necessary to preserve the exclusion of interest on the Series 2016 Bonds issued hereunder from gross income for federal income tax purposes. Specifically, without intending to limit in any way the generality of the foregoing, the Issuer covenants and agrees: (a) to make or cause to be made all necessary determinations and calculations of the Rebate Amount and required payments of the Rebate Amount; (b) to set aside sufficient moneys in the Rebate Fund or elsewhere, from Non- Ad Valorem Revenues or other legally available funds of the Issuer, to timely pay the Rebate Amount to the United States of America; (c) to pay the Rebate Amount to the United States of America from Non-Ad Valorem Revenues or from any other legally available funds, at the times and to the extent required pursuant to Section 148(f) of the Code; (d) to maintain and retain all records pertaining to the Rebate Amount with respect to the Series 2016 Bonds issued hereunder and required payments of the Rebate Amount City of Alachua Page 27 for at least three (3) years after the final maturity of the Series 2016 Bonds issued hereunder or such other period as shall be necessary to comply with the Code; (e) to refrain from using proceeds from the Series 2016 Bonds issued hereunder in a manner that might cause the Series 2016 Bonds to be classified as private activity bonds under Section 141(a) of the Code; and (f) to refrain from taking any action that would cause the Series 2016 Bonds issued hereunder to become arbitrage bonds under Section 148 of the Code. The Issuer understands that the foregoing covenants impose continuing obligations on the Issuer that will exist as long as the requirements of Section 103 and Part IV of Subchapter B of Chapter 1 of Subtitle A of the Code are applicable to the Series 2016 Bonds. Notwithstanding any other provision of this Resolution, the obligation of the Issuer to pay the Rebate Amount to the United States of America and to comply with the other requirements of this Section 5.05 shall survive the defeasance or payment in full of the Series 2016 Bonds issued hereunder. (2) There is hereby created and established a fund to be known as the "City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 Rebate Fund" (the "Rebate Fund"). The Issuer shall deposit into the Rebate Fund, from investment earnings on moneys deposited in the other funds and accounts created hereunder, or from any other legally available funds of the Issuer, an amount equal to the Rebate Amount for such Rebate Year. The Issuer shall use such moneys deposited in the Rebate Fund only for the payment of the Rebate Amount to the United States as required by this Section In complying with the foregoing, the Issuer may rely upon any instructions or opinions from Bond Counsel. If any amount shall remain in the Rebate Account after payment in full of all Series 2016 Bonds issued hereunder and after payment in full of the Rebate Amount to the United States in accordance with the terms hereof, such amounts shall be available to the Issuer for any lawful purpose. The Rebate Fund shall be held separate and apart from all other funds and accounts of the Issuer, shall not be impressed with a lien in favor of the Bondholders and the moneys therein shall be available for use only as herein provided. City of Alachua Page 28

157 Legislation Legislation C-15 Section 6.01 "Event of Default": ARTICLE VI DEFAULTS AND REMEDIES Events of Default. The following events shall each constitute an (1) Default shall be made in the payment of the principal of, Amortization Installment, redemption premium or interest on any Series 2016 Bond when due. (2) There shall occur the dissolution or liquidation of the Issuer, or the filing by the Issuer of a voluntary petition in bankruptcy, or the commission by the Issuer of any act of bankruptcy, or adjudication of the Issuer as a bankrupt, or assignment by the Issuer for the benefit of its creditors, or appointment of a receiver for the Issuer, or the entry by the Issuer into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Issuer in any proceeding for its reorganization instituted under the provisions of the Federal Bankruptcy Act, as amended, or under any similar act in any jurisdiction which may now be in effect or hereafter enacted. (3) The Issuer shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Series 2016 Bonds or in this Resolution on the part of the Issuer to be performed, and such default shall continue for a period of thirty (30) days after written notice of such default shall have been received from the Bond Insurer or Owners of not less than twenty-five percent (25%) of the aggregate principal amount of Bonds Outstanding of the Bond Insurer of such amount of Bonds. Notwithstanding the foregoing, the Issuer shall not be deemed in default hereunder if such default can be cured within a reasonable period of time and if the Issuer in good faith institutes curative action and diligently pursues such action until the default has been corrected. In determining whether a payment default has occurred hereunder or whether payment of the Series 2016 Bonds has been made hereunder, no effect shall be given to payments made under the Bond Insurance Policy. Section 6.02 Remedies. Any Bondholder or any trustee or receiver acting for such Bondholders may either at law or in equity, by suit, action, mandamus or other proceedings in any court of competent jurisdiction, protect and enforce any and all rights under the laws of the State, or granted and contained in this Resolution, and may enforce and compel the performance of all duties required by this Resolution or by any applicable statutes to be performed by the Issuer or by any officer thereof. The Holder or Owners of Series 2016 Bonds in an aggregate principal amount of not less than twenty-five percent (25%) of the Series 2016 Bonds then Outstanding may by a duly executed certificate in writing appoint a trustee for Owners of Bonds issued pursuant to this Resolution with authority to represent such Bondholders in any legal proceedings for the enforcement and protection of the rights of such Bondholders and such certificate shall be executed by such Bondholders or their duly authorized attorneys or representatives, and shall be filed in the office of the City Clerk. Notice of such appointment, together with evidence of the requisite signatures of the Owners of not less than twenty-five percent (25%) in aggregate principal amount of Series 2016 Bonds Outstanding and the trust instrument under which the trustee shall have agreed to serve shall be filed with the Issuer and the trustee and notice of appointment shall be given to all Owners of Series 2016 Bonds in the same manner as notices of redemption are given hereunder. After the appointment of the first trustee hereunder, no further trustees may be appointed; however, the Owners of a majority in aggregate principal amount of all the Series 2016 Bonds then Outstanding may remove the trustee initially appointed and appoint a successor and subsequent successors at any time. So long as the Series 2016 Bonds are Outstanding and insured by the Bond Insurer, the Bond Insurer, acting alone, shall have the right to direct all remedies in the event of a default. Notwithstanding the foregoing, acceleration is not a remedy available to the Owners of the Series 2016 Bonds upon the occurrence of an Event of Default. Section 6.03 Directions to Trustee as to Remedial Proceedings. The Owners of a majority in principal amount of the Series 2016 Bonds then Outstanding or, if the Series 2016 Bonds are insured, the Bond Insurer, acting alone, shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the trustee, to direct the method and place of conducting all remedial proceedings to be taken by the trustee hereunder, provided that such direction shall not be otherwise than in accordance with law or the provisions hereof, and that the trustee shall have the right to decline to follow any such direction which in the opinion of the trustee would be unjustly prejudicial to Owners of Series 2016 Bonds not parties to such direction. Section 6.04 Remedies Cumulative. No remedy herein conferred upon or reserved to the Bondholders is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Section 6.05 Waiver of Default. No delay or omission of any Bondholder to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default, or an acquiescence therein; and every power and remedy given by Section 6.02 of this Resolution to the Bondholders may be exercised from time to time, and as often as may be deemed expedient. Section 6.06 Application of Moneys After Default. If an Event of Default shall happen and shall not have been remedied, the Issuer or a trustee or receiver appointed for the purpose shall apply all Pledged Funds as follows and in the following order: (1) To the payment of the reasonable and proper charges, expenses and liabilities of the trustee or receiver, Registrar and Paying Agent hereunder; and City of Alachua Page 29 City of Alachua Page 30

158 Legislation Legislation C-16 (2) To the payment of the interest and principal or Redemption Price, if applicable, then due on the Series 2016 Bonds, as follows: (a) Unless the principal of all the Series 2016 Bonds shall have become due and payable by reason other than acceleration, all such moneys shall be applied: FIRST: to the payment to the Persons entitled thereto of all installments of interest then due, in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or preference; SECOND: to the payment to the Persons entitled thereto of the unpaid principal of any of the Series 2016 Bonds which shall have become due at maturity or upon mandatory redemption prior to maturity (other than Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of Section 8.01 of this Resolution), in the order of their due dates, with interest upon such Series 2016 Bonds from the respective dates upon which they became due, and, if the amount available shall not be sufficient to pay in full Series 2016 Bonds due on any particular date, together with such interest, then to the payment first of such interest, ratably according to the amount of such interest due on such date, and then to the payment of such principal, ratably according to the amount of such principal due on such date, to the Persons entitled thereto without any discrimination or preference; and THIRD: to the payment of the Redemption Price of any Series 2016 Bonds called for optional redemption pursuant to the provisions of this Resolution. (b) If the principal of all the Series 2016 Bonds shall have become due and payable by reason other than acceleration, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Series 2016 Bonds, with interest thereon as aforesaid, 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, or of any Series 2016 Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or preference. (3) Notwithstanding the foregoing, acceleration is not a remedy available to the Owners of the Series 2016 Bonds upon the occurrence of an Event of Default. ARTICLE VII SUPPLEMENTAL RESOLUTIONS Section 7.01 Supplemental Resolutions without Bondholders' Consent. The Issuer, from time to time and at any time, may adopt such Supplemental Resolutions without the consent of the Bondholders (which Supplemental Resolutions shall thereafter form a part hereof) for any of the following purposes: (a) To cure any ambiguity or formal defect or omission or to correct any inconsistent provisions in this Resolution or to clarify any matters or questions arising hereunder. (b) To grant to or confer upon the Bondholders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Bondholders. (c) To add to the conditions, limitations and restrictions on the issuance of Bonds under the provisions of this Resolution other conditions, limitations and restrictions thereafter to be observed. (d) To add to the covenants and agreements of the Issuer in this Resolution other covenants and agreements thereafter to be observed by the Issuer or to surrender any right or power herein reserved to or conferred upon the Issuer. (e) To specify and determine the matters and things referred to in Sections 2.01 or 2.02 hereof, and also any other matters and things relative to such Series 2016 Bonds which are not contrary to or inconsistent with this Resolution as theretofore in effect, or to amend, modify or rescind any such authorization, specification or determination at any time prior to the first delivery of such Series 2016 Bonds. (f) To make any other change that, in the reasonable opinion of the Issuer, would not materially adversely affect the security for the Series 2016 Bonds. If the Bond Insurer of the Series 2016 Bonds is not then in default in the performance of any of its obligations under its Bond Insurance Policy, it shall receive notice of all Supplemental Resolutions adopted pursuant to this Section Section 7.02 Supplemental Resolutions with Bondholders' Consent. Subject to the terms and provisions contained in this Section 7.02 and Section 7.01 hereof, the Owner or Owners of not less than a majority in aggregate principal amount of the Series 2016 Bonds then Outstanding shall have the right, from time to time, anything contained in this Resolution to the contrary notwithstanding, to consent to and approve the adoption of such Supplemental Resolution or resolutions hereto as shall be deemed necessary or desirable by the Issuer for the purpose of supplementing, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Resolution. Any Supplemental Resolution which is adopted in accordance with the provisions of this Section 7.02 shall also require the written consent of any Bond Insurer of any Series 2016 Bonds which are Outstanding at the time such Supplemental Resolution shall take effect. No Supplemental Resolution may be approved or adopted which shall permit or require (A) an extension of the maturity of the principal of or the payment of the interest on any Series 2016 Bond issued hereunder, (B) reduction in the principal amount of any Series 2016 Bond or the Redemption Price or the rate of interest thereon, (C) the creation of a lien upon or a pledge of other than the lien and pledge created by this Resolution which adversely affects any Bondholders, (D) a preference or priority City of Alachua Page 31 City of Alachua Page 32

159 Legislation Legislation C-17 of any Series 2016 Bond or Series 2016 Bonds over any other Series 2016 Bond or Series 2016 Bonds, or (E) a reduction in the aggregate principal amount of the Series 2016 Bonds required for consent to such Supplemental Resolution, unless such Supplemental Resolution has the approval of one hundred percent (100%) of the Bondholders and any Bond Insurer of the Series 2016 Bonds. Nothing herein contained, however, shall be construed as making necessary the approval by Bondholders of the adoption of any Supplemental Resolution as authorized in Section 7.01 hereof. If, at any time the Issuer shall determine that it is necessary or desirable to adopt any Supplemental Resolution pursuant to this Section 7.02, the City Clerk shall cause the Registrar to give notice of the proposed adoption of such Supplemental Resolution and the form of consent to such adoption to be mailed, postage prepaid, to all Bondholders at their addresses as they appear on the registration books. Such notice shall briefly set forth the nature of the proposed Supplemental Resolution and shall state that copies thereof are on file at the offices of the City Clerk and the Registrar for inspection by all Bondholders. The Issuer shall not, however, be subject to any liability to any Bondholder by reason of its failure to cause the notice required by this Section 7.02 to be mailed and any such failure shall not affect the validity of such Supplemental Resolution when consented to and approved as provided in this Section Whenever the Issuer shall deliver to the City Clerk an instrument or instruments in writing purporting to be executed by the Owners or Bond Insurer, as the case may be, of not less than a majority in aggregate principal amount of the Series 2016 Bonds then Outstanding, which instrument or instruments shall refer to the proposed Supplemental Resolution described in such notice and shall specifically consent to and approve the adoption thereof in substantially the form of the copy thereof referred to in such notice, thereupon, but not otherwise, the Issuer may adopt such Supplemental Resolution in substantially such form, without liability or responsibility to any Holder, whether or not such Holder shall have consented thereto. If the Owners of not less than a majority in aggregate principal amount of the Series 2016 Bonds Outstanding at the time of the adoption of such Supplemental Resolution shall have consented to and approved the adoption thereof as herein provided, no Holder of any Series 2016 Bond shall have any right to object to the adoption of such Supplemental Resolution, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the adoption thereof, or to enjoin or restrain the Issuer from adopting the same or from taking any action pursuant to the provisions thereof. Upon the adoption of any Supplemental Resolution pursuant to the provisions of this Section 7.02, this Resolution shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Resolution of the Issuer and all Owners of Series 2016 Bonds then Outstanding shall thereafter be determined, exercised and enforced in all respects under the provisions of this Resolution as so modified and amended. Section 7.03 Supplemental Resolutions with Bond Insurer's Consent in Lieu of Bondholders' Consent. Notwithstanding any provisions of Section 7.02 above to the contrary, if the Bond Insurer of the Series 2016 Bonds is not then in default in the performance of any of its City of Alachua Page 33 obligations under its Bond Insurance Policy, the approvals, consents and notifications required by Section 7.02 above to be given by or to the Owners of the Series 2016 Bonds, as the case may be, may be given solely by or to the Bond Insurer, as the case may be, and the instrument contemplated by Section 7.02 above shall be executed solely by the Bond Insurer, and the Owners of the Series 2016 Bonds subject to such Bond Insurance Policy shall have no right to receive such notification or give such approvals and consents or to execute such certificate except that the adoption of Supplemental Resolutions that would have any of the effects described in (A) through (E) in Section 7.02 above shall require the approval and consent of all Owners of Bonds then Outstanding and the Bond Insurer. ARTICLE VIII MISCELLANEOUS; SALE OF BONDS Section 8.01 Defeasance. If the Issuer shall pay or cause to be paid, or there shall otherwise be paid to the Owners of all Series 2016 Bonds, the principal or Redemption Price, if applicable, and interest due or to become due thereon, at the times and in the manner stipulated therein and in this Resolution, then the pledge of the Pledged Funds, and all covenants, agreements and other obligations of the Issuer to the Bondholders, shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Paying Agents shall pay over or deliver to the Issuer all money or securities held by them pursuant to this Resolution which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption. Any Series 2016 Bonds or interest installments appertaining thereto, whether at or prior to the maturity or redemption date of such Series 2016 Bonds, shall be deemed to have been paid within the meaning of this Section 8.01 if (A) in case any such Series 2016 Bonds are to be redeemed prior to the maturity thereof, there shall have been taken all action necessary to call such Series 2016 Bonds for redemption and notice of such redemption shall have been duly given or provision shall have been made for the giving of such notice, and (B) there shall have been deposited in irrevocable trust with a banking institution or trust company by or on behalf of the Issuer either moneys in an amount which shall be sufficient, or Federal Securities the principal of and the interest on which when due will provide moneys which, together with the moneys, if any, deposited with such bank or trust company at the same time shall be sufficient, to pay the principal of or Redemption Price, if applicable, and interest due and to become due on said Series 2016 Bonds on and prior to the redemption date or maturity date thereof, as the case may be. The Bond Insurer shall be provided with an opinion of counsel acceptable to the Bond Insurer that the Series 2016 Bonds have been legally defeased and that the escrow agreement establishing such defeasance operates to legally defease the Series 2016 Bonds within the meaning of this Resolution. In addition, the Bond Insurer will be entitled to receive (i) 15 business days' notice of any advance refunding of the Series 2016 Bonds, and (ii) an accountant's report with respect to the sufficiency of the amounts deposited in escrow to defease the Series 2016 Bonds. Except as hereafter provided, neither the Federal Securities nor any moneys so deposited with such bank or trust company nor any moneys received by such bank or trust company on account of principal of or Redemption Price, if applicable, or interest on said City of Alachua Page 34

160 Legislation Federal Securities shall be withdrawn or used for any purpose other than, and all such moneys shall be held in trust for legal purposes for and be applied to, the payment, when due, of the principal of or Redemption Price, if applicable, of the Series 2016 Bonds for the payment or redemption of which they were deposited and the interest accruing thereon to the date of maturity or redemption; provided, however, the Issuer may substitute new Federal Securities and moneys for the deposited Federal Securities and moneys if the new Federal Securities and moneys are sufficient to pay the principal of or Redemption Price, if applicable, and interest on the refunded Series 2016 Bonds. In the event the Series 2016 Bonds for which moneys are to be deposited for the payment thereof in accordance with this Section 8.01 are not by their terms subject to redemption within the next succeeding sixty (60) days, the Issuer shall cause the Registrar to mail a notice to the Owners of such Series 2016 Bonds that the deposit required by this Section 8.01 of moneys or Federal Securities has been made and said Series 2016 Bonds are deemed to be paid in accordance with the provisions of this Section 8.01 and stating such maturity or redemption date upon which moneys are to be available for the payment of the principal of or Redemption Price, if applicable, and interest on said Series 2016 Bonds. Legislation Section 8.05 Severability and Invalid Provisions. If any one or more of the covenants, agreements or provisions herein contained shall be held contrary to any express provision of law or contrary to the policy of express law, though not expressly prohibited or against public policy, or shall for any reason whatsoever be held invalid, then such covenants, agreements or provisions shall be null and void and shall be deemed separable from the remaining covenants, agreements or provisions of this Resolution and shall in no way affect the validity of any of the other provisions hereof or of the Series 2016 Bonds. Section 8.06 Inconsistent Resolutions; Resolution to Continue in Force. All resolutions or parts thereof in conflict herewith are hereby superseded and rescinded to the extent of such conflict. Section 8.07 Effective Date. The provisions of this Resolution shall be effective immediately upon its adoption. DULY ADOPTED in regular session, this 14 th day of March, C-18 Nothing herein shall be deemed to require the Issuer to call any of the Outstanding Series 2016 Bonds for redemption prior to maturity pursuant to any applicable optional redemption provisions, or to impair the discretion of the Issuer in determining whether to exercise any such option for early redemption. Section 8.02 Interested Parties. Nothing in this Resolution expressed or implied is intended or shall be construed to confer upon, or to give to, any Person or entity, other than the Issuer, the Bond Insurer, the Paying Agent, and the Owners of the Series 2016 Bonds, any right, remedy or claim under or by reason of this Resolution or any covenant, condition or stipulation thereof, and all covenants, stipulations, promises and agreements in this Resolution contained by and on behalf of the Issuer shall be for the sole and exclusive benefit of the Issuer, the Bond Insurer, the Paying Agent, and the Owners of the Series 2016 Bonds. ATTEST: CITY COMMISSION OF THE CITY OF ALACHUA, FLORIDA Gib Coerper, Mayor SEAL Section 8.03 No Personal Liability. Neither the members of the City Commission nor any Person executing the Series 2016 Bonds shall be personally liable therefor or be subject to any personal liability or accountability by reason of the issuance thereof. Traci L. Gresham, City Manager/Clerk Section 8.04 General Authority. The members of the City Commission of the Issuer, the City Manager, the Finance Director, the City Attorney, the City Clerk and the Issuer's officers, attorneys and other agents and employees are hereby authorized to perform all acts and things required of them by the Resolution or desirable or consistent with the requirements hereof for the full, punctual and complete performance of all of the terms, covenants and agreements contained in the Series 2016 Bonds and the Resolution, and they are hereby authorized to execute and deliver all documents which shall be required by Bond Counsel or the initial purchasers of the Series 2016 Bonds to effectuate the sale of the Series 2016 Bonds to said initial purchasers. City of Alachua Page 35 City of Alachua Page 36

161 Legislation Legislation C-19 RESOLUTION A RESOLUTION OF THE CITY OF ALACHUA, FLORIDA, SUPPLEMENTING A RESOLUTION OF THE CITY ADOPTED ON EVEN DATE HEREWITH AND AUTHORIZING THE AWARD OF ITS NOT TO EXCEED $18,000,000 AGGREGATE PRINCIPAL AMOUNT OF THE CITY OF ALACHUA, FLORIDA CAPITAL IMPROVEMENT REVENUE AND REVENUE REFUNDING BONDS, SERIES 2016 UPON THE SATISFACTION OF CERTAIN PARAMETERS DESCRIBED HEREIN, FOR THE PURPOSE OF REFUNDING ALL OF THE CITY'S OUTSTANDING CAPITAL IMPROVEMENT AND REFUNDING REVENUE BONDS, SERIES 2006 IN ORDER TO ACHIEVE DEBT SERVICE SAVINGS, AND TO FINANCE THE ACQUISITION, CONSTRUCTION, EQUIPPING AND INSTALLATION OF VARIOUS CAPITAL IMPROVEMENTS WITHIN THE CITY; AUTHORIZING A COMPETITIVE BID AND APPROVING THE FORM OF THE OFFICIAL NOTICE OF SALE AND SUMMARY NOTICE OF SALE PERTAINING TO SUCH BONDS; MAKING CERTAIN PROVISIONS AND DELEGATING CERTAIN RESPONSIBILITIES WITH RESPECT TO THE NOTICE, BIDDING AND SALE OF THE BONDS; AUTHORIZING THE CITY TO INSURE ALL, SOME OR NONE OF THE BONDS WITH FINANCIAL GUARANTY INSURANCE, WHICHEVER IS IN THE BEST FINANCIAL INTEREST OF THE CITY; APPROVING THE FORM AND AUTHORIZING THE EXECUTION AND DELIVERY OF A DISCLOSURE DISSEMINATION AGENT AGREEMENT AND AN ESCROW DEPOSIT AGREEMENT; APPROVING THE FORM OF AND THE DISTRIBUTION OF A PRELIMINARY OFFICIAL STATEMENT AND AUTHORIZING THE EXECUTION AND DELIVERY OF A FINAL OFFICIAL STATEMENT PERTAINING TO SAID BONDS; APPOINTING A PAYING AGENT, REGISTRAR AND ESCROW AGENT; MAKING CERTAIN COVENANTS AND AGREEMENTS IN CONNECTION THEREWITH; AUTHORIZING CERTAIN OFFICIALS OF THE CITY TO EXECUTE ANY DOCUMENT OR TO TAKE ANY ACTIONS REQUIRED IN CONNECTION WITH THE ISSUANCE OF SAID BONDS; PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City of Alachua, Florida (the "Issuer") has the power and authority under the Constitution and laws of the State of Florida, including, particularly, Chapter 166, Part II, Florida Statutes, the City Charter, and other applicable provisions of law (collectively, the "Act"), to issue bonds, notes and other obligations, including those hereinafter described; and WHEREAS, on even date herewith, the Issuer duly and validly adopted an authorizing resolution (as amended and supplemented from time to time, the "Bond Resolution") pursuant to which the Issuer has authorized a series of bonds of the Issuer to be designated as "Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016" in an aggregate principal amount of not to exceed $18,000,000 (the "Series 2016 Bonds"); and WHEREAS, all capitalized undefined terms used herein shall have the meanings ascribed thereto in the Bond Resolution; and WHEREAS, because of current volatile market conditions and conditions surrounding the current credit ratings of the various municipal bond insurance companies, the Issuer desires to opt to insure all, some, or none of the Series 2016 Bonds, whichever is in the best financial interests of the Issuer based on the discretion of the bidder, with a policy of financial guaranty insurance, and to authorize the Finance Director, based on the advice of Public Financial Management, Inc., as financial advisor to the Issuer (the "Financial Advisor"), to take any actions and do all things necessary in order to accept any such policy in connection with the issuance of the Series 2016 Bonds; and WHEREAS, the Issuer has determined it to be in its best interests and to serve a public purpose of the Issuer to provide in this Bond Resolution for the issuance of the Series 2016 Bonds for the purpose of: (i) refunding the Refunded Bonds, (ii) financing the Project, and (iii) paying certain expenses related to the issuance of the Series 2016 Bonds; and WHEREAS, the Issuer has been advised by its Financial Advisor as to the market appropriateness of preparing for the competitive sale of the Series 2016 Bonds in light of the current market levels and conditions and as to the acceptance of the most favorable bid by delegating to the Finance Director the authority to accept the most favorable bid for the purchase of the Series 2016 Bonds as provided herein; and WHEREAS, the Issuer desires to approve a Summary Notice of Sale and Official Notice of Sale in connection with the competitive sale of the Series 2016 Bonds, the forms of which are attached hereto as Exhibit A; and WHEREAS, in connection with the offering and sale of the Series 2016 Bonds, the Issuer desires to approve the distribution of the Preliminary Official Statement, a form of which is attached hereto as Exhibit B, delegate the authority to deem the Preliminary Official Statement "final" for purposes of Rule 15c2-12 of the Securities Exchange Act of 1943, as amended (the "Rule"), and authorize the execution and delivery of a final Official Statement with respect to the Series 2016 Bonds (the "Official Statement"); and WHEREAS, the Issuer desires to approve the form of and authorize the execution and delivery of a Disclosure Dissemination Agent Agreement, a proposed form of which is attached hereto as Exhibit C (the "Disclosure Dissemination Agent Agreement"); and WHEREAS, the Issuer desires to approve the form of and authorize the execution of an Escrow Deposit Agreement, a proposed form of which is attached hereto as Exhibit D (the "Escrow Deposit Agreement"); and WHEREAS, the Issuer desires to appoint The Bank of New York Mellon Trust Company, N.A., as "Escrow Agent" pursuant to the Escrow Deposit Agreement; and City of Alachua Page 37 City of Alachua Page 38

162 Legislation Legislation C-20 WHEREAS, the Issuer desires to appoint The Bank of New York Mellon Trust Company, N.A., as Registrar and Paying Agent relating to the Series 2016 Bonds; and WHEREAS, the Issuer finds it desirable to authorize the issuance and sale of the Series 2016 Bonds in the aggregate principal amount not to exceed the amount provided herein pursuant to the terms and conditions of the Bond Resolution. NOW, THEREFORE, BE IT RESOLVED BY THE CITY OF ALACHUA COMMISSION: Section 1.1. ARTICLE I AUTHORITY Authority. This Supplemental Resolution is adopted pursuant to the Act. ARTICLE II DEFINITIONS Section 2.1. Definitions. All terms used herein in capitalized form, unless otherwise defined herein, shall have the same meanings as ascribed to them in the Bond Resolution. As used herein, unless the context otherwise requires: "Parity System" means the Parity electronic competitive bidding system. "Refunded Bonds" shall have the meaning ascribed thereto in the Escrow Deposit Agreement. ARTICLE III FINDINGS Section 3.1. Findings Ratified. The findings and declarations of the Issuer contained in the Bond Resolution are hereby expressly approved, reaffirmed and ratified. Section 3.2. Authorization. The Issuer is authorized under the Act to issue the Series 2016 Bonds and use the proceeds thereof to: (i) refund the Refunded Bonds, (ii) finance the Project, and (iii) pay certain expenses related to the issuance of the Series 2016 Bonds. The Series 2016 Bonds will be issued under the Bond Resolution. Section 3.3. Award of Sale of the Series 2016 Bonds. In an effort to encourage a significant number of bidders for the Series 2016 Bonds to participate and in order to take advantage of technological developments in the electronic sale of bonds, the competitive sale of the Series 2016 Bonds shall be conducted via the Parity System or such other system of electronic bid submittal under the direction of the Financial Advisor. Because the Issuer desires to sell the Series 2016 Bonds at the most advantageous time, the Issuer hereby delegates to the City of Alachua Page 39 Finance Director the authority to establish a bid date, provide the Official Notice of Sale to interested bidders and to award the sale of the Series 2016 Bonds to the lowest conforming bidder in accordance with the Official Notice of Sale based upon the parameters set forth herein. It is hereby ascertained, determined and declared that it is in the best interest of the Issuer to provide for the sale by competitive bid of the Series 2016 Bonds, maturing and bearing interest, having such redemption features and such other terms as set forth herein and in the Official Notice of Sale, and the bid proposal of the lowest conforming bidder selected on a subsequent date pursuant to the terms hereof. The Finance Director is hereby authorized to return any good faith checks presented by any unsuccessful bidders, and to cash and deposit into a special account, with right of investment with interest accruing to the benefit of the Issuer, the good faith check of the original purchaser, or in lieu of the delivery of such check, to receive such amount pursuant to wire transfer in accordance with the terms of the Official Notice of Sale. ARTICLE IV CONTRACTUAL OBLIGATIONS; COVENANTS IN BOND RESOLUTION APPLICABLE Section 4.1. Contractual Obligations; Covenants in Bond Resolution Applicable. Upon and in consideration of the acceptance of the Series 2016 Bonds by the registered owners thereof, the Resolution shall be deemed to be and shall constitute a contract between the Issuer and the Bondholders. The covenants and agreements set forth herein and in the Bond Resolution to be performed by the Issuer shall be for the equal and proportionate benefit, protection and security of the holders of the Series 2016 Bonds issued pursuant to the Resolution and the Bond Insurer, without preference, priority or distinction over any other. ARTICLE V TERMS OF BONDS Section 5.1. Bond Resolution. The Series 2016 Bonds shall be issued in the not to exceed aggregate original principal amount set forth herein in accordance with the terms and provisions of the Bond Resolution, as supplemented hereby, for the purpose of: (i) refunding the Refunded Bonds, (ii) financing the Project, and (iii) paying certain expenses related to the issuance of the Series 2016 Bonds, including, without limitation, the premium for a financial guaranty insurance policy, if any. Section 5.2. Supplemental Terms of Bonds. A. The Series 2016 Bonds shall be dated the date of their delivery, or such other date as shall be designated by the Finance Director, shall bear interest from their dated date payable semiannually on the first day of October and the first day of April of each year, commencing on October 1, 2016, or such other date as set forth in the Series 2016 Bonds, at the interest rates, and City of Alachua Page 40

163 Legislation Legislation C-21 shall mature annually on October 1 of each year substantially in accordance with the maturity schedule, in accordance with the hereinafter defined Certificate of Award. Interest on the Series 2016 Bonds shall be calculated based upon a 360-day year consisting of 12, 30-day months. The Series 2016 Bonds shall be issued as fully registered bonds in the denomination of $5,000 each or any integral multiple thereof. B. The payment of the principal of and interest on the Series 2016 Bonds shall be secured equally and ratably by an irrevocable lien on the Pledged Funds, moneys deposited into the funds and accounts created by the Bond Resolution, and all earnings thereon, all in the manner and to the extent provided in the Bond Resolution. C. The Series 2016 Bonds shall be subject to such optional and mandatory redemption provisions as are determined in accordance with the Certificate of Award. D. The Series 2016 Bonds shall be numbered from one upward preceded by the letters "RA" prefixed to the number. E. The Series 2016 Bonds may be issued as Serial Bonds and/or Term Bonds (with such Amortization Installments) to be determined in accordance with the Certificate of Award. ARTICLE VI APPLICATION OF PROCEEDS; ESCROW Section 6.1. Application; Certain Investments. Proceeds from the sale of the Series 2016 Bonds shall be disposed of as provided in the Bond Resolution. Notwithstanding the provisions of the Bond Resolution, the Finance Director is hereby authorized to supplement and amend the application of proceeds of the Series 2016 Bonds provided in the Bond Resolution above, as evidenced by a certificate of the Finance Director executed in connection with the issuance of the Series 2016 Bonds. Section 6.2. Escrow; Notices; Transfer of Funds. Subject to the execution and delivery of the Series 2016 Bonds for the purpose of refunding the Refunded Bonds, the Issuer agrees to call the Refunded Bonds for early redemption on May 12, 2016, or such other date as determined in the Escrow Deposit Agreement, at a redemption price of 100% of the principal amount to be redeemed, plus accrued interest to such redemption date. The form of the Escrow Deposit Agreement attached hereto as Exhibit D is hereby approved, subject to such changes, insertions and omissions and such filling of blanks therein as may be approved and made in such Escrow Deposit Agreement by the Mayor and City Manager, in a manner consistent with the provisions of this Supplemental Resolution, such execution to be conclusive evidence of such approval. Subject to satisfaction of the parameters in Section 7.1. hereof relating to the Series 2016 Bonds, the Mayor is hereby authorized and directed to execute and deliver, the City Clerk and City Manager is hereby authorized to attest under seal and countersign, the Escrow Deposit Agreement. The Bank of New York Mellon Trust Company, N.A. is hereby appointed Escrow Agent pursuant to the Escrow Deposit Agreement. Upon execution and delivery of the Escrow Deposit Agreement, at least thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption, the Issuer hereby directs The Bank of New York Mellon Trust Company, N.A., as successor to J.P. Morgan Trust Company, N.A., or its successor, as paying agent and registrar for the Refunded Bonds, to mail a notice of optional redemption in accordance with the requirements of Section 2.05 of Resolution No adopted by the Issuer on December 19, 2005, and a notice of defeasance upon the issuance of the Series 2016 Bonds. On the date of issuance of the Series 2016 Bonds, the Issuer may transfer funds which secured the Refunded Bonds and are legally available therefor to the Escrow Agent to be held on behalf of the Issuer and to be used pursuant to the terms of the Escrow Deposit Agreement. The Issuer hereby also authorizes the Finance Director to engage such professionals as in their discretion are competent to provide a verification report with respect to the Refunded Bonds. The Issuer is hereby authorized to purchase the securities to be described in the Escrow Deposit Agreement, if any, and the Mayor, City Manager and Finance Director, both individually and collectively, may execute all documents in connection therewith. ARTICLE VII COMPETITIVE SALE; DESIGNATIONS AND APPROVALS Section 7.1. Summary Notice of Sale and Official Notice of Sale; Delegated Award. (1) The Issuer hereby approves the forms of each of the Summary Notice of Sale and the Official Notice of Sale attached hereto as Exhibit A, each made a part hereof as if set forth herein in their entirety, subject to such modifications, amendments, changes and filling of blanks therein as shall be approved by the Finance Director. The Issuer hereby authorizes the newspaper publication of the Summary Notice of Sale pursuant to the requirements of law, and the distribution of the Official Notice of Sale based on the advice of the Financial Advisor. (2) In addition to other items described herein, the Issuer hereby delegates to the Finance Director of the Issuer the authority to determine the interest rates, the prices and yields and the delivery date for the Series 2016 Bonds, and all other details of the Series 2016 Bonds, City of Alachua Page 41 City of Alachua Page 42

164 Legislation Legislation C-22 and to take such further action as shall be required for carrying out the purposes of the Bond Resolution all with respect to the Series 2016 Bonds. (3) Subject to full satisfaction of the conditions set forth in this subparagraph (3) of this Section 7.1, the Issuer hereby authorizes a delegated award of the Series 2016 Bonds to the successful bidder in accordance with the terms of the Official Notice of Sale and the bid of the successful bidder, with such changes, amendments, modifications, omissions and additions thereto as shall be approved by the Finance Director in accordance with the provisions of the Official Notice of Sale. The bid of the successful bidder to purchase the Series 2016 Bonds shall not be accepted by the Issuer until such time as the Issuer is in receipt of a properly delivered bid to purchase such Series 2016 Bonds by the successful bidder, as adjusted as permitted in the applicable Official Notice of Sale, said offer to provide for, among other things: (i) the issuance of not exceeding $18,000,000 aggregate principal amount, (ii) a true interest cost rate of not more than 4.5%, (iii) a final maturity not being later than October 1, 2046, (iv) net present value debt service savings attributable to the refunding of the Refunded Bonds not less than 3.0% of the principal amount of the Refunded Bonds, and (v) a completed truth-in-bonding statement in compliance with Section , Florida Statutes. The award of the Series 2016 Bonds to the lowest bidder and establishment of the final pricing terms and conditions shall be evidenced by the delivery of a Certificate of Finance Director ("Certificate of Award") to the City Clerk, the form of which is attached hereto as Exhibit E. (4) Notwithstanding the foregoing, if the conditions set forth in items (i), (ii), (iii), and (v) of subparagraph (3) of Section 7.1 hereof are satisfied, the issuance of the Series 2016 Bonds and the delegated award of the Series 2016 Bonds to the successful bidder is hereby authorized for the purposes of financing the Project and paying certain expenses related to the issuance of the Series 2016 Bonds. Section 7.2. Paying Agent and Registrar. The Bank of New York Mellon Trust Company, N.A., is hereby appointed Paying Agent and Registrar for the Series 2016 Bonds. Subject to satisfaction of the parameters in Section 7.1 hereof relating to the Series 2016 Bonds, the Mayor is hereby authorized and directed to execute and deliver, the City Manager and City Clerk is hereby authorized to countersign and attest under seal, a registrar and paying agent agreement on behalf of the Issuer, and any other agreement which may be necessary to effect the appointment contemplated by this Section 7.2 and by the Bond Resolution. Section 7.3. Approval of Preliminary Official Statement. The Issuer hereby approves the form and content of the draft Preliminary Official Statement attached hereto as Exhibit B, and authorizes the Mayor, the City Manager and the Finance Director to make or approve such changes, modifications and revisions to the draft Preliminary Official Statement as he or she may deem necessary or desirable; hereby authorizes the Mayor, the City Manager or the Finance Director to deem "final" the Preliminary Official Statement, as so amended and approved by him or her, for purposes of the Rule; and approves the use of the Preliminary Official Statement in the marketing of the Series 2016 Bonds. The Mayor and the City Manager are hereby authorized to execute, on behalf of the Issuer, the final Official Statement relating to the Series 2016 Bonds with such changes from the Preliminary Official Statement as, in their sole discretion, may approve, such execution to be conclusive evidence of such approval, and such final Official Statement is hereby authorized to be used and distributed in connection with the marketing and sale of the Series 2016 Bonds. Section 7.4. Approval of Form of Disclosure Dissemination Agent Agreement. The Issuer hereby covenants and agrees that, in order to assist the original purchasers in complying with the continuing disclosure requirements of the Rule with respect to the Series 2016 Bonds, it will comply with and carry out all of the provisions of the Disclosure Dissemination Agent Agreement to be executed by the Issuer prior to the time the Issuer delivers the Series 2016 Bonds to the original purchasers, as it may be amended from time to time in accordance with the terms thereof. The form of the Disclosure Dissemination Agent Agreement attached hereto as Exhibit C is hereby approved, subject to such changes, insertions and omissions and such filling of blanks therein as may be approved and made in such Disclosure Dissemination Agent Agreement by the Mayor, the City Manager and the Finance Director, in a manner consistent with the provisions of this Supplemental Resolution, such execution to be conclusive evidence of such approval. Subject to satisfaction of the parameters in Section 7.1. hereof relating to the Series 2016 Bonds, the Mayor is hereby authorized and directed to execute and deliver, the City Manager and City Clerk is hereby authorized to countersign and attest under seal, the Disclosure Dissemination Agent Agreement on behalf of the Issuer. Notwithstanding any other provision of the Bond Resolution, failure of the Issuer to comply with such Disclosure Dissemination Agent Agreement shall not be considered an event of default thereunder or hereunder. However, the Disclosure Dissemination Agent Agreement shall be enforceable by the Holders in the event that the Issuer fails to cure a breach thereunder within a reasonable time after written notice from a Holder to the Issuer that a breach exists. Any rights of the Holders to enforce the provisions of the covenant shall be on behalf of all Holders and shall be limited to a right to obtain specific performance of the Issuer's obligations thereunder. Section 7.5. Optional Financial Guaranty Insurance. The Issuer is hereby authorized to insure all, some or none of the Series 2016 Bonds, whichever is in the best financial interests of the Issuer, based on the discretion of the bidder, with a policy of financial guaranty insurance, and further authorizes the Finance Director to take any actions and do all things necessary in order to accept such policy in connection with the issuance of the Series 2016 Bonds. ARTICLE VIII AUTHORIZATIONS CONCERNING BONDS Section 8.1. General Authorizations. The members of the City Commission of the Issuer, the City Manager, the Finance Director, the City Attorney, the City Clerk and the Issuer's officers, City of Alachua Page 43 City of Alachua Page 44

165 Legislation Legislation attorneys and other agents and employees of the Issuer, are each designated as agents of the Issuer in connection with the issuance and delivery of the Series 2016 Bonds and are authorized and empowered, collectively or individually, to take all action and steps and to execute all instruments, documents and contracts on behalf of the Issuer that are necessary or desirable in connection with the execution and delivery of the Series 2016 Bonds, and which are specifically authorized or are not inconsistent with the terms and provisions of the Bond Resolution or any action relating to the Series 2016 Bonds heretofore taken by the Issuer. Such officers and those so designated are hereby charged with the responsibility for the issuance of the Series 2016 Bonds. [EXHIBITS INTENTIONALLY OMITTED] EXHIBIT A FORM OF SUMMARY NOTICE OF SALE AND OFFICIAL NOTICE OF SALE ARTICLE IX SEVERABILITY; EFFECTIVE DATE C-23 Section 9.1. Severability. If any one or more of the covenants, agreements or provisions of this Supplemental Resolution should be held contrary to any express provision of law or contrary to the policy of express law, though not expressly prohibited, or against public policy, or shall for any reason whatsoever be held invalid, then such covenants, agreements or provisions shall be null and void and shall be deemed separate from the remaining covenants, agreements or provisions of this Supplemental Resolution or of the Series 2016 Bonds issued hereunder. DULY ADOPTED in regular session, this 14 th day of March, CITY COMMISSION OF THE CITY OF ALACHUA, FLORIDA Gib Coerper, Mayor SEAL ATTEST: Traci L. Gresham, City Manager/Clerk City of Alachua Page 45 City of Alachua Page 46

166 Legislation Legislation EXHIBIT B FORM OF PRELIMINARY OFFICIAL STATEMENT EXHIBIT C FORM OF DISCLOSURE DISSEMINATION AGENT AGREEMENT C-24 City of Alachua Page 47 City of Alachua Page 48

167 Legislation Legislation EXHIBIT D FORM OF ESCROW DEPOSIT AGREEMENT EXHIBIT E FORM OF CERTIFICATE OF FINANCE DIRECTOR C-25 City of Alachua Page 49 City of Alachua Page 50

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169 APPENDIX D Form of Disclosure Dissemination Agent Agreement

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171 DISCLOSURE DISSEMINATION AGENT AGREEMENT This Disclosure Dissemination Agent Agreement (the "Disclosure Agreement"), dated as of April 11, 2016, is executed and delivered by the City of Alachua, Florida (the "Issuer") and Digital Assurance Certification, L.L.C., as exclusive Disclosure Dissemination Agent (the "Disclosure Dissemination Agent" or "DAC") for the benefit of the Holders (hereinafter defined) of the Bonds (hereinafter defined) and in order to provide certain continuing disclosure with respect to the Bonds in accordance with Rule 15c2-12 of the United States Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time (the "Rule"). The services provided under this Disclosure Agreement solely relate to the execution of instructions received from the Issuer through use of the DAC system and do not constitute "advice" within the meaning of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act"). DAC will not provide any advice or recommendation to the Issuer or anyone on the Issuer s behalf regarding the "issuance of municipal securities" or any "municipal financial product" as defined in the Act and nothing in this Disclosure Agreement shall be interpreted to the contrary. SECTION 1. DEFINITIONS. Capitalized terms not otherwise defined in this Disclosure Agreement shall have the meaning assigned to such terms in the Rule or, to the extent not in conflict with the Rule, in the Official Statement (hereinafter defined). The capitalized terms shall have the following meanings: "Annual Filing Date" means the date, set in Sections 2(a) and 2(f), by which the Annual Report is to be filed with the Repositories. "Annual Financial Information" means annual financial information as such term is used in paragraph (b)(5)(i) of the Rule and specified in Section 3(a) of this Disclosure Agreement. "Annual Report" means an Annual Report described in and consistent with Section 3 of this Disclosure Agreement. "Audited Financial Statements" means the financial statements (if any) of the Issuer for the prior fiscal year, certified by an independent auditor as prepared in accordance with generally accepted accounting principles or otherwise, as such term is used in paragraph (b)(5)(i) of the Rule and specified in Section 3(b) of this Disclosure Agreement. "Bonds" means the bonds as listed on the attached Exhibit A, with the 9-digit CUSIP numbers relating thereto. "Certification" means a written certification of compliance signed by the Disclosure Representative stating that the Annual Report, Audited Financial Statements, the Failure to File Event notices, Voluntary Report or Notice Event notice delivered to the Disclosure Dissemination Agent is the Annual Report, Audited Financial Statements, the Failure to File Event notices, Voluntary Report or Notice Event notice required to be submitted to the Repositories under this Disclosure Agreement. A Certification shall accompany each such document submitted to the Disclosure Dissemination Agent by the Issuer and include the full name of the Bonds and the 9-digit CUSIP numbers for all Bonds to which the document applies. D-1

172 "Disclosure Dissemination Agent" means Digital Assurance Certification, L.L.C., acting in its capacity as Disclosure Dissemination Agent hereunder, or any successor Disclosure Dissemination Agent designated in writing by the Issuer pursuant to Section 9 hereof. "Disclosure Representative" means the Director of Financial Services of the Issuer or his or her designee, or such other person as the Issuer shall designate in writing to the Disclosure Dissemination Agent from time to time as the person responsible for providing Information to the Disclosure Dissemination Agent. "EMMA" means the MSRB's Electronic Municipal Market Access System authorized by the SEC in accordance with the Rule. Further information regarding EMMA can be retrieved by visiting the website "Failure to File Event" means the Issuer s failure to file an Annual Report on or before the Annual Filing Date. "Fiscal Year" means the Issuer's fiscal year, an annual period commencing on October 1 and ending on the immediately succeeding September 30, or such other period as may be prescribed by law. "Force Majeure Event" means: (i) acts of God, war, or terrorist action; (ii) failure or shut-down of the Electronic Municipal Market Access system maintained by the MSRB; or (iii) to the extent beyond the Disclosure Dissemination Agent s reasonable control, interruptions in telecommunications or utilities services, failure, malfunction or error of any telecommunications, computer or other electrical, mechanical or technological application, service or system, computer virus, interruptions in Internet service or telephone service (including due to a virus, electrical delivery problem or similar occurrence) that affect Internet users generally, or in the local area in which the Disclosure Dissemination Agent or the MSRB is located, or acts of any government, regulatory or any other competent authority the effect of which is to prohibit the Disclosure Dissemination Agent from performance of its obligations under this Disclosure Agreement. "Holder" means any person (a) having the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries) or (b) treated as the owner of any Bonds for federal income tax purposes. "Information" means the Annual Financial Information, the Audited Financial Statements (if any), the Notice Event notices, the Failure to File Event notices, and the Voluntary Reports. "MSRB" means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of "Notice Event" means an event listed in Section 4(a) of this Disclosure Agreement. "Official Statement" means that Official Statement prepared by the Issuer in connection with the Bonds, as listed on Exhibit A. "Repository" means the MSRB, through EMMA. D-2

173 "Voluntary Report" means the information provided to the Disclosure Dissemination Agent by the Issuer pursuant to Section 7. SECTION 2. PROVISION OF ANNUAL REPORTS. (a) The Issuer shall provide, annually, an electronic copy of the Annual Report and Certification to the Disclosure Dissemination Agent not later than 30 days prior to the Annual Filing Date. Promptly upon receipt of an electronic copy of the Annual Report and the Certification, the Disclosure Dissemination Agent shall provide an Annual Report to the MSRB, through EMMA, not later than April 30 of each fiscal year of the Issuer, commencing April 30, Such date and each anniversary thereof is the Annual Filing Date. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 3 of this Disclosure Agreement. (b) If on the fifteenth (15th) day prior to the Annual Filing Date, the Disclosure Dissemination Agent has not received a copy of the Annual Report and Certification, the Disclosure Dissemination Agent shall contact the Disclosure Representative by telephone and in writing (which may be by ) to remind the Issuer of its undertaking to provide the Annual Report pursuant to Section 2(a). Upon such reminder, the Disclosure Representative shall either (i) provide the Disclosure Dissemination Agent with an electronic copy of the Annual Report and the Certification no later than two (2) business days prior to the Annual Filing Date, or (ii) instruct the Disclosure Dissemination Agent in writing that the Issuer will not be able to file all or a portion of the Annual Report within the time required under this Disclosure Agreement, state the date by which the Annual Report for such year will be provided and instruct the Disclosure Dissemination Agent that a Failure to File Event has occurred and to immediately send a notice to the MSRB, through EMMA, in substantially the form attached as Exhibit B. (c) If the Disclosure Dissemination Agent has not received an Annual Report and Certification by 12:00 noon on the first business day following the Annual Filing Date for the Annual Report, a Failure to File Event shall have occurred and the Issuer irrevocably directs the Disclosure Dissemination Agent to immediately send a notice to the MSRB, through EMMA, in substantially the form attached as Exhibit B. (d) If Audited Financial Statements of the Issuer are prepared but not available prior to the Annual Filing Date, the Issuer shall provide unaudited financial statements for such Fiscal Year on or before the Annual Filing Date and, when the Audited Financial Statements are available, the Issuer shall provide an electronic copy to the Disclosure Dissemination Agent, accompanied by a Certification for filing with the MSRB, through EMMA. (e) The Disclosure Dissemination Agent shall: (i) determine the name and address of each Repository each year prior to the Annual Filing Date; (ii) upon receipt, promptly file each Annual Report received under Section 2(a) with the MSRB, through EMMA; (iii) upon receipt, promptly file the unaudited annual financial statements, if any, and each Audited Financial Statement received under Section 2(d) with the MSRB, through EMMA; D-3

174 (iv) upon receipt, promptly file the text of each disclosure to be made with the MSRB, through EMMA, together with a completed copy of the Material Event Notice Cover Sheet in the form attached as Exhibit C, describing one or more of the events described in 4(c) hereof and any voluntary reports pursuant to Section 7 hereof by checking the appropriate box indicated in such Material Event Notice Cover Sheet. The Disclosure Dissemination Agent shall make its best efforts to provide any such filing within ten business days of the occurrence of any such event. (v) provide the Issuer evidence of the filings of each of the above when made, which shall be by means of the DAC system, for so long as DAC is the Disclosure Dissemination Agent under this Disclosure Agreement. (f) The Issuer may adjust the Annual Filing Date upon change of its fiscal year by providing written notice of such change and the new Annual Filing Date to the Disclosure Dissemination Agent and the Repositories, provided that the period between the existing Annual Filing Date and new Annual Filing Date shall not exceed one year. The Issuer's current fiscal year commences on October 1 and ends on the immediately succeeding September 30. SECTION 3. CONTENT OF ANNUAL REPORTS. (a) Each Annual Report shall contain the following Annual Financial Information with respect to the Issuer: Updates of historical operating data in table set forth in the Official Statement entitled "Historical Non-Ad Valorem Revenues." (b) Audited Financial Statements prepared in accordance with Generally Accepted Accounting Principles, as modified by applicable State of Florida requirements and the governmental accounting standards promulgated by the Government Accounting Standards Board as described in the Official Statement will be included in the Annual Report. If audited financial statements are not available, then, unaudited financial statements will be included in the Annual Report. Audited Financial Statements (if any) will be provided pursuant to Section 2(d). Any or all of the items listed above may be included by specific reference from other documents, including official statements of debt issues with respect to which the Issuer is an "obligated person" (as defined by the Rule), which have been previously filed with the MSRB or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer will clearly identify each such document so incorporated by reference. SECTION 4. REPORTING OF NOTICE EVENTS. (a) The occurrence of any of the following events, if material, with respect to the Bonds constitutes a Notice Event. Any event under clauses (i), (iii), (iv), (v), (vi), (ix), (x), (xii), (xiii) or (xvi) below will always be deemed to be material. (i) (ii) (iii) (iv) difficulties; Principal and interest payment delinquencies; Non-payment related defaults; Unscheduled draws on debt service reserves reflecting financial difficulties; Unscheduled draws on credit enhancements relating to the Bonds reflecting financial D-4

175 (v) Substitution of credit or liquidity providers, or their failure to perform; (vi) 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; (vii) (viii) (ix) (x) (xi) (xii) Modifications to rights of Bondholders; Bond calls (excluding mandatory sinking fund redemption); Tender offers with respect to the Bonds; Defeasances; Release, substitution, or sale of property securing repayment of the Bonds; Rating changes on the Bonds; and (xiii) Bankruptcy, insolvency, receivership or similar event of the Issuer (this event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Issuer in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Issuer, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Issuer); (xiv) 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 an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; (xv) (xvi) Appointment of a successor or additional trustee or the change of name of a trustee; and Failure to provide annual financial information as required. The Issuer shall notify the Disclosure Dissemination Agent in writing upon the occurrence of a Notice Event in such manner so that the Disclosure Dissemination Agent may make its filing in accordance with Section 2(e)(iv) on a timely basis not in excess of 10 business days after such Notice Event. Such notice shall instruct the Disclosure Dissemination Agent to report the occurrence pursuant to subsection (c). Such notice shall be accompanied with the text of the disclosure that the Issuer desires to make, the written authorization of the Issuer for the Disclosure Dissemination Agent to disseminate such information, and the date the Issuer desires for the Disclosure Dissemination Agent to disseminate the information. (b) The Disclosure Dissemination Agent is under no obligation to notify the Issuer or the Disclosure Representative of an event that may constitute a Notice Event. In the event the Disclosure D-5

176 Dissemination Agent so notifies the Disclosure Representative, the Disclosure Representative will immediately instruct the Disclosure Dissemination Agent that (i) a Notice Event has not occurred and no filing is to be made or (ii) a Notice Event has occurred and the Disclosure Dissemination Agent is to report the occurrence pursuant to subsection (c), together with the text of the disclosure that the Issuer desires to make, the written authorization of the Issuer for the Disclosure Dissemination Agent to disseminate such information, and the date the Issuer desires for the Disclosure Dissemination Agent to disseminate the information. (c) If the Disclosure Dissemination Agent has been instructed by the Issuer as prescribed in subsection (a) or (b)(ii) of this Section 4 to report the occurrence of a Notice Event, the Disclosure Dissemination Agent shall file a notice of such occurrence with MSRB in accordance with Section 2(e)(iv) hereof. This notice will be filed with a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C. SECTION 5. CUSIP NUMBERS. Whenever providing information to the Disclosure Dissemination Agent, including but not limited to Annual Reports, documents incorporated by reference to the Annual Reports, Audited Financial Statements, unaudited annual financial statements, notices of Notice Events, Failure to File Event notices, and Voluntary Reports filed pursuant to Section 7(a), the Issuer shall indicate the full name of the Bonds and the 9-digit CUSIP numbers for the Bonds as to which the provided information relates. SECTION 6. ADDITIONAL DISCLOSURE OBLIGATIONS. The Issuer acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the Issuer, and that the failure of the Disclosure Dissemination Agent to so advise the Issuer shall not constitute a breach by the Disclosure Dissemination Agent of any of its duties and responsibilities under this Disclosure Agreement. The Issuer acknowledges and understands that the duties of the Disclosure Dissemination Agent relate exclusively to execution of the mechanical tasks of disseminating information as described in this Disclosure Agreement. Any Information received by the Disclosure Dissemination Agent before 6:00 p.m. Eastern time on any business day that it is required to file with the MSRB pursuant to the terms of this Disclosure Agreement and that is accompanied by all other information required by the terms of this Disclosure Agreement will be filed by the Disclosure Dissemination Agent with the MSRB no later than 11:59 p.m. Eastern time on the same business day; provided, however, the Disclosure Dissemination Agent shall have no liability for any delay in filing with the MSRB if such delay is caused by a Force Majeure Event provided that the Disclosure Dissemination Agent uses reasonable efforts to make any such filing as soon as possible. SECTION 7. VOLUNTARY REPORTS. (a) The Issuer may instruct the Disclosure Dissemination Agent to file information with the Repositories, from time to time pursuant to a Certification of the Disclosure Representative accompanying such information (a "Voluntary Report"); provided, however, the Issuer is not obligated to do so. (b) Nothing in this Disclosure Agreement shall be deemed to prevent or require the Issuer from disseminating any other information through the Disclosure Dissemination Agent using the means of dissemination set forth in this Disclosure Agreement or including any other information in any Annual Report, Annual Financial Statement, Voluntary Report or Notice Event notice, in addition to that required D-6

177 by this Disclosure Agreement. If the Issuer chooses to include any information in any Annual Report, Annual Financial Statement, Voluntary Report or Notice Event notice in addition to that which is specifically required by this Disclosure Agreement, the Issuer shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report, Annual Financial Statement, Voluntary Report or Notice Event notice. SECTION 8. TERMINATION OF REPORTING OBLIGATION. The obligations of the Issuer and the Disclosure Dissemination Agent under this Disclosure Agreement shall terminate with respect to the Bonds (a) upon the legal defeasance, prior redemption or payment in full of all of the Bonds, (b) when the Issuer is no longer an obligated person with respect to the Bonds, (c) upon the termination of the continuing disclosure requirements of the Rule by legislative, judicial or administrative action, or (d) upon delivery by the Disclosure Representative to the Disclosure Dissemination Agent of an opinion of nationally recognized bond counsel to the effect that continuing disclosure is no longer required. SECTION 9. DISCLOSURE DISSEMINATION AGENT. The Issuer has appointed Digital Assurance Certification, L.L.C. as exclusive Disclosure Dissemination Agent under this Disclosure Agreement. The Issuer may, upon thirty days written notice to the Disclosure Dissemination Agent, replace or appoint a successor Disclosure Dissemination Agent. Upon termination of DAC's services as Disclosure Dissemination Agent, whether by notice of the Issuer or DAC, the Issuer agrees to appoint a successor Disclosure Dissemination Agent or, alternately, agrees to assume all responsibilities of Disclosure Dissemination Agent under this Disclosure Agreement for the benefit of the Holders of the Bonds. Notwithstanding any replacement or appointment of a successor, the Issuer shall remain liable until payment in full for any and all sums owed and payable to the Disclosure Dissemination Agent accrued prior to such replacement. The Disclosure Dissemination Agent may resign at any time by providing thirty days' prior written notice to the Issuer and shall reimburse to the Issuer any unearned fees previously paid by the Issuer. SECTION 10. SUBMISSION OF INFORMATION TO THE MSRB. The information required to be disclosed pursuant to this Disclosure Agreement shall be submitted to the MSRB, through EMMA. Subject to future changes in submission rules and regulations, such submissions shall be provided to the MSRB, through EMMA, in portable document format ("PDF") files configured to permit documents to be saved, viewed, printed and retransmitted by electronic means. Such PDF files shall be word-searchable (allowing the user to search for specific terms used within the document through a search or find function available in a software package). Subject to future changes in submission rules and regulations, at the time that such information is submitted through EMMA, the Issuer, or any dissemination agent engaged by the Issuer pursuant to Section 9 hereof, shall also provide to the MSRB information necessary to accurately identify: (A) the category of information being provided; (B) the period covered by the Audited Financial Statements and any additional financial information and operating data being provided; (C) the issues or specific securities to which such submission is related or otherwise material (including CUSIP number, issuer name, state, issue description/securities name, dated date, maturity date, and/or coupon rate); D-7

178 (D) (E) (F) the name of any Obligated Person other than the Issuer; the name and date of the document being submitted; and contact information for the submitter. SECTION 11. REMEDIES IN EVENT OF DEFAULT. In the event of a failure of the Issuer or the Disclosure Dissemination Agent to comply with any provision of this Disclosure Agreement, the Holders' rights to enforce the provisions of this Agreement shall, to the extent allowed by applicable law, be limited solely to a right, by action in mandamus or for specific performance, to compel performance of the parties' obligation under this Disclosure Agreement. Any failure by a party to perform in accordance with this Disclosure Agreement shall not constitute a default on the Bonds or under any other document relating to the Bonds, and all rights and remedies shall be limited to those expressly stated herein. SECTION 12. DUTIES, IMMUNITIES AND LIABILITIES OF DISCLOSURE DISSEMINATION AGENT. (a) The Disclosure Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement. The Disclosure Dissemination Agent s obligation to deliver the information at the times and with the contents described herein shall be limited to the extent the Issuer has provided such information to the Disclosure Dissemination Agent as required by this Disclosure Agreement. The Disclosure Dissemination Agent shall have no duty with respect to the content of any disclosures or notice made pursuant to the terms hereof. The Disclosure Dissemination Agent shall have no duty or obligation to review or verify any Information or any other information, disclosures or notices provided to it by the Issuer and shall not be deemed to be acting in any fiduciary capacity for the Issuer, the Holders of the Bonds or any other party. The Disclosure Dissemination Agent shall have no responsibility for the Issuer s failure to report to the Disclosure Dissemination Agent a Notice Event or a duty to determine the materiality thereof. The Disclosure Dissemination Agent shall have no duty to determine, or liability for failing to determine, whether the Issuer has complied with this Disclosure Agreement. The Disclosure Dissemination Agent may conclusively rely upon certifications of the Issuer at all times. (b) The Disclosure Dissemination Agent may, from time to time, after providing written notice thereof to the Issuer, consult with legal counsel (either in-house or external) of its own choosing in the event of any disagreement or controversy, or question or doubt as to the construction of any of the provisions hereof or its respective duties hereunder, and the Disclosure Dissemination Agent shall not incur any liability and shall be fully protected in acting in good faith upon the advice of such legal counsel. The reasonable fees and expenses of such counsel shall be payable by the Issuer. SECTION 13. AMENDMENT; WAIVER. Notwithstanding any other provision of this Disclosure Agreement, the Issuer and the Disclosure Dissemination Agent may amend this Disclosure Agreement and any provision of this Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws acceptable to both the Issuer and the Disclosure Dissemination Agent to the effect that such amendment or waiver does not materially impair the interests of Holders of the Bonds; provided neither the Issuer or the Disclosure Dissemination Agent shall be obligated to agree to any amendment modifying their respective duties or obligations without their consent thereto. D-8

179 SECTION 14. BENEFICIARIES. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Disclosure Dissemination Agent and the Holders from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 15. GOVERNING LAW. This Disclosure Agreement shall be governed by the laws of the State of Florida (other than with respect to conflicts of laws). SECTION 16. COUNTERPARTS. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. [Remainder of page intentionally left blank] D-9

180 The Disclosure Dissemination Agent and the Issuer have caused this Continuing Disclosure Agreement to be executed, on the date first written above, by their respective officers duly authorized. DIGITAL ASSURANCE CERTIFICATION, L.L.C., as Disclosure Dissemination Agent By: Name Title: CITY OF ALACHUA, FLORIDA, as Issuer By: Name: Gib Coerper (SEAL) Title: Mayor ATTESTED AND COUNTERSIGNED By: Name: Traci Gresham Title: City Manager and City Clerk D-10

181 EXHIBIT A NAME AND CUSIP NUMBERS OF BONDS Name of Issuer: Obligated Person: Name of Bond Issue: City of Alachua, Florida City of Alachua, Florida City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 Date of Issuance: April 11, 2016 Date of Official Statement: March 29, 2016 CUSIP NUMBERS* * The Issuer is not responsible for the use of the CUSIP Numbers referenced herein nor is any representation made by the Issuer as to their correctness. The CUSIP Numbers provided herein are included solely for the convenience of the readers of this Official Statement. D-11

182 EXHIBIT B NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Issuer: Obligated Person: Name of Bond Issue: City of Alachua, Florida City of Alachua, Florida City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 Date of Issuance: April 11, 2016 NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above-named Bonds as required by the Disclosure Agreement, dated as of April 11, 2016, between the Issuer and Digital Assurance Certification, L.L.C., as Disclosure Dissemination Agent. The Issuer has notified the Disclosure Dissemination Agent that it anticipates that the Annual Report will be filed by. Dated: DIGITAL ASSURANCE CERTIFICATION, L.L.C., as Disclosure Dissemination Agent, on behalf of the Issuer cc: Issuer Obligated Person D-12

183 EXHIBIT C MATERIAL EVENT NOTICE COVER SHEET This cover sheet and material event notice should be sent to the Municipal Securities Rulemaking Board, through the Electronic Municipal Market Access System, and the State Information Depository, if applicable, pursuant to Securities and Exchange Commission Rule 15c2-12(b)(5)(i)(C) and (D). Issuer's and/or Other Obligated Person's Name: City of Alachua, Florida Issuer's Six-Digit CUSIP Number: or Nine-Digit CUSIP Number(s) of the bonds to which this material event notice relates: Number of pages of attached material event notice: Description of Material Events Notice (Check One): 1. Principal and interest payment delinquencies 2. Non-Payment related defaults 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 or events affecting the tax-exempt status of the security 7. Modifications to rights of securities holders 8. Bond calls 9. Defeasances 10. Release, substitution, or sale of property securing repayment of the securities 11. Rating changes 12. Failure to provide annual financial information as required 13. Other material event notice (specify) I hereby represent that I am authorized by the issuer or its agent to distribute this information publicly: Signature: Name: Title: Employer: Digital Assurance Certification, L.L.C. Address: City, State, Zip Code: Voice Telephone Number: Please print the material event notice attached to this cover sheet in 10-point type or larger, The cover sheet and notice may be submitted electronically to the MSRB through its Electronic Municipal Market Access System, which can be accessed by visiting the website " Contact the MSRB at (703) with questions regarding this form or the dissemination of this notice. D-13

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185 APPENDIX E Proposed Form of Opinion of Bond Counsel

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187 APPENDIX E PROPOSED FORM OF OPINION OF BOND COUNSEL Upon delivery of the Series 2016 Bonds in definitive form, Bryant Miller Olive P.A., Bond Counsel, proposes to render its final approving opinion in substantially the following form: [Date of Issuance] City Commission of the City of Alachua, Florida Alachua, Florida Re: $16,545,000 City of Alachua, Florida Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016 (the "Series 2016 Bonds") Ladies and Gentlemen: We have acted as Bond Counsel to the City of Alachua, Florida (the "Issuer") in connection with the issuance by the Issuer of the above-referenced Series 2016 Bonds pursuant to and under the authority of the Constitution and laws of the State of Florida, including, particularly, Chapter 166, Part II, Florida Statutes, the Charter of the Issuer, and other applicable provisions of law, Resolution No , adopted by the City Commission of the Issuer (the "Commission") on March 14, 2016, as supplemented by Resolution No , adopted by the Commission on March 14, 2016 (collectively, the "Resolution"). In such capacity, we have examined such law and certified proceedings, certifications and other documents as we have deemed necessary to render this opinion. Any capitalized undefined terms used herein shall have the meaning set forth in the Resolution. As to questions of fact material to our opinion, we have relied upon representations of the Issuer contained in the Resolution and in the certified proceedings and other certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation. We have not undertaken an independent audit, examination, investigation or inspection of such matters and have relied solely on the facts, estimates and circumstances described in such proceedings and certifications. We have assumed the genuineness of signatures on all documents and instruments, the authenticity of documents submitted as originals and the conformity to originals of documents submitted as copies. In rendering this opinion, we have examined and relied upon the opinion of even date herewith of Marian B. Rush, Esq., the Issuer's city attorney on a contract basis, with respect to various matters concerning the Issuer, including as to the due creation and valid existence of the E-1

188 City Commission of the City of Alachua, Florida [Date of Issuance] Page 2 of 3 Issuer, the due adoption of the Resolution and the due execution and delivery of the Series 2016 Bonds. The Series 2016 Bonds are payable from the Pledged Funds, which consist primarily of Non-Ad Valorem Revenues budgeted and appropriated by the Issuer in accordance with the Resolution and deposited into the Debt Service Fund and, until applied in accordance with the provisions of the Resolution, all moneys, including the investments thereof, in the funds and accounts established under the Resolution, with the exception of the Rebate Fund, in the manner and to the extent provided in the Resolution. Pursuant to the terms, conditions and limitations contained in the Resolution, the Issuer has reserved the right to incur additional debt secured by all or a portion of the Non-Ad Valorem Revenues in the future. The Series 2016 Bonds do not constitute a general obligation or indebtedness of the Issuer within the meaning of any constitutional, statutory or other limitation of indebtedness and the holders thereof shall never have the right to compel the exercise of any ad valorem taxing power of the Issuer or taxation in any form or any real or personal property for the payment of the principal of or interest on the Series 2016 Bonds. The opinions set forth below are expressly limited to, and we opine only with respect to, the laws of the State of Florida and the federal income tax laws of the United States of America. Based on our examination, we are of the opinion, that, under existing law: 1. The Resolution constitutes a valid and binding obligation of the Issuer enforceable against the Issuer in accordance with its terms. 2. The Series 2016 Bonds are valid and binding limited obligations of the Issuer enforceable in accordance with their terms, payable solely from the Pledged Funds in the manner and to the extent provided in the Resolution. 3. The Resolution creates a valid lien upon the Pledged Funds for the security of the Series 2016 Bonds, all in the manner and to the extent provided in the Resolution. 4. Interest on the Series 2016 Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. However, interest on the Series 2016 Bonds will be taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax on corporations. The opinions set forth in the preceding two sentences are subject to the condition that the Issuer complies with all requirements of the Internal Revenue Code of 1986, as amended, (the "Code") that must be satisfied subsequent to the issuance of the Series 2016 Bonds in order that the interest thereon be, E-2

189 City Commission of the City of Alachua, Florida [Date of Issuance] Page 3 of 3 and continue to be, excludable from gross income for federal income tax purposes. The Issuer has covenanted in the Resolution to comply with all such requirements. Failure to comply with certain of such requirements may cause interest on the Series 2016 Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2016 Bonds. It is to be understood that the rights of the owners of the Series 2016 Bonds and the enforceability thereof may be subject to the exercise of judicial discretion in accordance with general principles of equity, to the valid exercise of the sovereign police powers of the State of Florida and of the constitutional powers of the United States of America and to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted. For purposes of this opinion, we have not been engaged or undertaken to review and, therefore, express no opinion herein regarding the accuracy, completeness or adequacy of the Official Statement or any other offering material relating to the Series 2016 Bonds. This opinion should not be construed as offering material, an offering circular, prospectus or official statement and is not intended in any way to be a disclosure statement used in connection with the sale or delivery of the Series 2016 Bonds. Furthermore, we are not passing on the accuracy or sufficiency of any CUSIP numbers appearing on the Series 2016 Bonds. In addition, we have not been engaged to and, therefore, express no opinion as to compliance by the Issuer or the underwriter or underwriters with any federal or state statute, regulation or ruling with respect to the sale and distribution of the Series 2016 Bonds or regarding the perfection or priority of the lien on the Pledged Funds created by the Resolution. Further, we express no opinion regarding federal income or state tax consequences arising with respect to the Series 2016 Bonds other than as expressly set forth herein. Our opinions expressed herein are predicated upon present law, facts and circumstances, and we assume no affirmative obligation to update the opinions expressed herein if such laws, facts or circumstances change after the date hereof. Respectfully submitted, BRYANT MILLER OLIVE P.A. E-3

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191 APPENDIX F FRS Pension Plan and HIS Program Information

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193 The information relating to the Florida Retirement System ("FRS") contained herein has been obtained from the FRS Pension Plan and Other State Administered Systems Comprehensive Annual Financial Reports available at and the Florida Comprehensive Annual Financial Reports available at No representation is made by the City as to the accuracy or adequacy of such information or that there has not been any material adverse change in such information subsequent to the date of such information. Florida Retirement System Plan Membership. FRS membership is compulsory for all employees filling a regularly established position in a state agency, county agency, state university, state community college, or district school board. Participation by cities, municipalities, special districts, charter schools, and metropolitan planning organizations, although optional, is generally irrevocable after election to participate is made. Members hired into certain positions may be eligible to withdraw from the FRS altogether or elect to participate in the non-integrated optional retirement programs in lieu of the FRS except faculty of a medical college in a state university who must participate in the State University System Optional Retirement Program. There are five general classes of membership, as follows: Regular Class - Members of the FRS who do not qualify for membership in the other classes. Senior Management Service Class (SMSC) - Members in senior management level positions in state and local governments as well as assistant state attorneys, assistant statewide prosecutors, assistant public defenders, assistant attorneys general, deputy court administrators, and assistant capital collateral representatives. Members of the Elected Officers' Class may elect to withdraw from the FRS Pension Plan or participate in the SMSC in lieu of the Elected Officers' Class. Special Risk Class - Members who are employed as law enforcement officers, firefighters, firefighter trainers, fire prevention officers, state fixed-wing pilots for aerial firefighting surveillance, correctional officers, emergency medical technicians, paramedics, communitybased correctional probation officers, youth custody officers (from July 1, 2001 through June 30, 2014), certain health-care related positions within state forensic or correctional facilities, or specified forensic employees of a medical examiner's office or a law enforcement agency, and meet the criteria to qualify for this class. Special Risk Administrative Support Class - Former Special Risk Class members who are transferred or reassigned to nonspecial risk law enforcement, firefighting, emergency medical care, or correctional administrative support positions within an FRS Pension Plan special risk-employing agency. Elected Officers' Class (EOC) - Members who are elected state and county officers and the elected officers of cities and special districts that choose to place their elected officials in this class. Beginning July 1, 2001, through June 30, 2011, the FRS Pension Plan provided for vesting of benefits after six years of creditable service for members initially enrolled during this period. Members F-1

194 not actively working in a position covered by the FRS Pension Plan on July 1, 2001, must return to covered employment for up to one work year to be eligible to vest with less service than was required under the law in effect before July 1, Members initially enrolled on or after July 1, 2001, through June 30, 2011, vest after six years of service. Members initially enrolled on or after July 1, 2011, vest after eight years of creditable service. Members are eligible for normal retirement when they have met the requirements listed below. Early retirement may be taken any time after vesting within 20 years of normal retirement age; however, there is a 5% benefit reduction for each year prior to the normal retirement age. Regular Class, Senior Management Service Class, and Elected Officers' Class Members For members initially enrolled in the FRS Pension Plan before July 1, 2011, six or more years of creditable service and age 62, or the age after completing six years of creditable service if after age 62. Thirty years of creditable service regardless of age before age 62. For members initially enrolled in the FRS Pension Plan on or after July 1, 2011, eight or more years of creditable service and age 65, or the age after completing eight years of creditable service if after age 65. Thirty-three years of creditable service regardless of age before age 65. Special Risk Class and Special Risk Administrative Support Class Members For members initially enrolled in the FRS Pension Plan before July 1, 2011, six or more years of Special Risk Class service and age 55, or the age after completing six years of Special Risk Class service if after age 55. Twenty-five years of special risk service regardless of age before age 55. A total of 25 years of service including special risk service and up to four years of active duty wartime service and age 52. Without six years of Special Risk Class service, members of the Special Risk Administrative Support Class must meet the requirements of the Regular Class. For members initially enrolled in the FRS Pension Plan on or after July 1, 2011, eight or more years of Special Risk Class service and age 60, or the age after completing eight years of Special Risk Class service if after age 60. Thirty years of special risk service regardless of age before age 60. Without eight years of Special Risk Class service, members of the Special Risk Administrative Support Class must meet the requirements of the Regular Class. Benefits. Benefits under the FRS Pension Plan are computed on the basis of age, average final compensation, creditable years of service, and accrual value by membership class. Members are also eligible for in-line-of-duty or regular disability and survivors' benefits. Pension benefits of retirees and annuitants are increased each July 1 by a cost-of-living adjustment. If the member is initially enrolled in the FRS Pension Plan before July 1, 2011, and all service credit was accrued before July 1, 2011, the annual cost-of-living adjustment is 3% per year. If the member is initially enrolled before July 1, 2011, and has service credit on or after July 1, 2011, there is an individually calculated cost-of-living adjustment. The annual cost-of-living adjustment is a proportion of 3% determined by dividing the sum of the pre-july 2011 service credit by the total service credit at retirement multiplied by 3%. FRS Pension Plan members initially enrolled on or after July 1, 2011, will not have a cost-of-living adjustment after retirement. The Deferred Retirement Option Program (DROP) became effective July 1, 1998, subject to provisions of Section (13), Florida Statutes. FRS Pension Plan members who reach normal retirement are eligible to defer receipt of monthly benefit payments while continuing employment with an FRS employer. An employee may participate in the DROP for a maximum of 60 months. Authorized instructional personnel may participate in the DROP for up to 36 additional months beyond their initial 60-month participation period. Monthly retirement benefits remain in the FRS Trust Fund during DROP F-2

195 participation and accrue interest. As of June 30, 2015, the FRS Trust Fund projected $3,119,220,735 in accumulated benefits and interest for 34,829 current and prior participants in the DROP. Administration. The Department of Management Services, Division of Retirement administers the FRS Pension Plan. The State Board of Administration (the "SBA") invests the assets of the FRS Pension Plan held in the FRS Trust Fund. Costs of administering the FRS Pension Plan are funded from earnings on investments of the FRS Trust Fund. Reporting of the FRS Pension Plan is on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when the obligation is incurred. Contributions. All participating employers must comply with statutory contribution requirements. Section (3), Florida Statutes, requires an annual actuarial valuation of the FRS Pension Plan, which is provided to the Legislature as guidance for funding decisions. Employer and employee contribution rates are established in Section , Florida Statutes. Employer contribution rates under the uniform rate structure (a blending of both the FRS Pension Plan and Investment Plan rates) are recommended by the actuary but set by the Legislature. Statutes require that any unfunded actuarial liability ("UAL") be amortized within 30 plan years. Pursuant to Section (3)(f), Florida Statutes, any surplus amounts available to offset total retirement system costs are to be amortized over a 10-year rolling period on a level-dollar basis. The balance of legally required reserves for all defined benefit pension plans at June 30, 2015, was $148,454,681,903. These funds were reserved to provide for total current and future benefits, refunds, and administration of the FRS Pension Plan. Effective July 1, 2011, both employees and employers required to make contributions to establish service credit for work performed in a regularly established position. Effective July 1, 2002, the Florida Legislature established a uniform contribution rate system for the FRS, covering both the FRS Pension Plan and the FRS Investment Plan. The uniform rates for State Fiscal Year are as follows: Membership Class Employee Contribution Rate Employer Contribution Rate (1) Total Contribution Rate Regular 3.00% 6.07% 9.07% Special Risk Special Risk Administrative Support Elected Officers Judges Elected Officers Legislators/Attorneys/Cabinet Elected Officers - County Senior Management Service Deferred Retirement Option Program N/A (1) These rates include the normal cost and unfunded actuarial liability contributions but do not include the 1.26% contribution for the HIS and the fee of 0.04% for administration of the FRS Investment Plan and provision of educational tools for both plans. Source: Florida Retirement System Pension Plan and Other State Administered Systems Comprehensive Annual Financial Report for Fiscal Year Ended June 30, F-3

196 Pension Amounts for the FRS Pension Plan. Schedule of Changes in Net Pension Liability and Related Ratios (1) (in thousands) Total Pension Liability June 30, 2014 June 30, 2015 Service cost $2,256,738 $2,114,047 Interest on total pension liability 11,489,921 11,721,563 Effect of plan changes 0 0 Effect of economic/demographic (gains) or losses (448,818) 1,620,863 Effect of assumption changes or inputs 1,256,045 0 Benefit payments (8,714,251) (10,201,501) Net change in total pension liability 5,839,635 5,254,972 Total pension liability, beginning 150,276, ,115,763 Total pension liability, ending (a) $156,115,763 $161,370,735 Fiduciary Net Position Employer contributions $2,190,424 $2,438,085 Member contributions 682, ,304 Investment income net of investment expenses 22,812,286 5,523,287 Benefit payments (8,714,250) (10,201,500) Administrative expenses (18,352) (18,074) Net change in plan fiduciary net position 16,952,615 (1,559,898) Fiduciary net position, beginning 133,061, ,014,292 Fiduciary net position, ending (b) $150,014,292 $148,454,394 Net pension liability, ending = (a) (b) $6,101,471 $12,916,341 Fiduciary net position as a % of total pension liability 96.09% 92.00% Covered payroll (2) $24,723,565 $32,726,034 Net pension liability as a % of covered payroll 24.68% 39.47% (1) This schedule will fill in to a ten-year schedule as results for new fiscal years are calculated. (2) For June 30, 2014, covered payroll shown includes defined benefit plan actives and members in DROP, but excludes the payroll for FRS Invest Plan members and payroll on which only UAL rates are charged. For June 30, 2015, and later, covered payroll shown includes the payroll for FRS Investment Plan members and payroll on which only UAL rates are charged. Source: Florida Retirement System Pension Plan and Other State Administered Systems Comprehensive Annual Financial Report for Fiscal Year Ended June 30, F-4

197 Actuarial Methods and Assumptions for the FRS Pension Plan. The total pension liability was determined by an actuarial valuation as of the valuation date of July 1, 2015, calculated based on the discount rate and actuarial assumptions below: June 30, 2014 June 30, 2015 Discount rate 7.65% 7.65% Long-term expected rate of return, net of investment expense 7.65% 7.65% Bond Buyer General Obligation 20-Bond Municipal Bond Index N/A N/A Source: Florida Retirement System Pension Plan and Other State Administered Systems Comprehensive Annual Financial Report for Fiscal Year Ended June 30, The plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees in the determining the projected depletion date. Therefore, the discount rate for calculating the total pension liability is equal to the long-term expected rate of return. The actuarial assumptions used to determine the total pension liability as of June 30, 2015, were based on the results of an actuarial experience study for the period July 1, June 30, Valuation Date July 1, 2015 Measurement Date June 30, 2015 Asset Valuation Method Fair Market Value Inflation 2.60% Salary increase including inflation 3.25% Mortality Generational RP-2000 with Projection Scale BB Actuarial cost method Individual Entry Age Normal Source: Florida Retirement System Pension Plan and Other State Administered Systems Comprehensive Annual Financial Report for Fiscal Year Ended June 30, Sensitivity Analysis for the FRS Pension Plan. The following presents the net pension liability of the FRS, calculated using the discount rate of 7.65%, as well as what the FRS's net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.65%) or one percentage point higher (8.65%) than the current rate. 1% Decrease 6.65% Current Discount Rate 7.65% 1% Increase 8.65% Total pension liability $181,923,555,126 $161,370,735,088 $144,267,412,898 Fiduciary net position 148,454,393, ,454,393, ,454,393,902 Net pension liability $33,469,161,224 $12,916,341,186 $4,186,981,004) Source: Florida Retirement System Pension Plan and Other State Administered Systems Comprehensive Annual Financial Report for Fiscal Year Ended June 30, F-5

198 Retiree Health Insurance Subsidy The Retiree Health Insurance Subsidy ("HIS") Program is a cost-sharing multiple-employer defined benefit pension plan established under Section , Florida Statutes. The benefit is a monthly payment to assist retirees of state-administered retirement systems in paying their health insurance costs and is administered by the Division of Retirement within the Department of Management Services. For the fiscal year ended June 30, 2015, eligible retirees and beneficiaries received a monthly HIS payment equal to the number of years of creditable service completed at the time of retirement multiplied by $5. The payments are at least $30 but not more than $150 per month, pursuant to Section , Florida Statutes. To be eligible to receive a HIS benefit, a retiree under a state-administered retirement system must provide proof of health insurance coverage, which can include Medicare. The HIS Program is funded by required contributions from FRS participating employers as set by the Legislature. Employer contributions are a percentage of gross compensation for all active FRS members. For the fiscal year ended June 30, 2015, the contribution rate was 1.26% of payroll pursuant to Section , F.S. The state contributed 100% of its statutorily required contributions for the current and preceding two years. HIS contributions are deposited in a separate trust fund from which HIS payments are authorized. HIS benefits are not guaranteed and are subject to annual legislative appropriation. In the event the legislative appropriation or available funds fail to provide full subsidy benefits to all participants, the legislature may reduce or cancel HIS payments. [Remainder of page intentionally left blank] F-6

199 Pension Amounts for the HIS. Schedule of Changes in Net Pension Liability and Related Ratios (1) (in thousands) Total Pension Liability June 30, 2014 June 30, 2015 Service cost $190,371 $217,519 Interest on total pension liability 409, ,441 Effect of plan changes 0 0 Effect of economic/demographic (gains) or losses 0 0 Effect of assumption changes or inputs 386, ,698 Benefit payments (407,276) (425,086) Net change in total pension liability 579, ,572 Total pension liability, beginning 8,864,244 9,443,629 Total pension liability, ending (a) $9,443,629 $10,249,201 Fiduciary Net Position Employer contributions $342,566 $382,454 Member contributions 0 0 Investment income net of investment expenses Benefit payments (407,275) (425,085) Administrative expenses (54) (188) Net change in plan fiduciary net position (64,544) (42,611) Fiduciary net position, beginning 157,929 93,385 Fiduciary net position, ending (b) 93,385 50,774 Net pension liability, ending = (a) (b) $9,350,244 10,198,427 Fiduciary net position as a % of total pension liability 0.99% 0.50% Covered payroll 29,676,340 30,340,449 Net pension liability as a % of covered payroll 31.51% 33.61% (1) This schedule will fill in to a ten-year schedule as results for new fiscal years are calculated. Source: Florida Retirement System Pension Plan and Other State Administered Systems Comprehensive Annual Financial Report for Fiscal Year Ended June 30, Actuarial Methods and Assumptions for the HIS. The total pension liability was determined by an actuarial valuation as of the valuation date, calculated based on the discount rate and actuarial assumptions below, and then was projected to the measurement date. Any significant changes during this period have been reflected as prescribed by GASB 67. The same demographic and economic assumptions that were used in the Florida Retirement System Actuarial Valuation as of July 1, 2014 ("funding valuation") were used for the HIS program, unless otherwise noted. In a given membership class and tier, the same assumptions for both FRS Investment Plan members and for FRS Pension Plan members were used. F-7

200 June 30, 2014 June 30, 2015 Discount rate 4.29% 3.80% Long-term expected rate of return, net of investment expense N/A N/A Bond Buyer General Obligation 20-Bond Municipal Bond Index 4.29% 3.80% Source: Florida Retirement System Pension Plan and Other State Administered Systems Comprehensive Annual Financial Report for Fiscal Year Ended June 30, In general, the discount rate for calculating the total pension liability under GASB 67 is equal to the single rate equivalent to discounting at the long-term expected rate of return for benefit payments prior to the projected depletion date. Because the HIS benefit is essentially funded on a pay-as-you-go basis, the depletion date is considered to be immediate, and the single equivalent discount rate is equal to the municipal bond rate selected by the plan sponsor. In September 2014, the Actuarial Assumptions Conference adopted the Bond Buyer General Obligation 20-Bond Municipal Bond Index as the applicable municipal bond index. The discount rate used in the 2014 valuation was updated from 4.29% to 3.80%, reflecting the change in the Bond Buyer General Obligation 20- Bond Municipal Bond Index as of June 30, The actuarial assumptions used to determine the total pension liability as of June 30, 2015, were based on the results of an actuarial experience study for the period July 1, June 30, Valuation Date July 1, 2014 Measurement Date June 30, 2015 Asset Valuation Method Fair Market Value Discount rate (municipal bond rate) 3.80% Inflation 2.60% Salary increase including inflation 3.25% Mortality Generational RP-2000 with Projection Scale BB Actuarial cost method Individual Entry Age Source: Florida Retirement System Pension Plan and Other State Administered Systems Comprehensive Annual Financial Report for Fiscal Year Ended June 30, Sensitivity Analysis for the HIS. The following presents the net pension liability of the HIS, calculated using the discount rate of 3.80%, as well as what the HIS's net pension liability would be if it were calculated using a discount rate that is one percentage point lower (2.80%) or one percentage point higher (4.80%) than the current rate. 1% Decrease 2.80% Current Discount Rate 3.80% 1% Increase 4.80% Total pension liability $11,671,407,115 $10,249,201,290 $9,063,295,120 Fiduciary net position 50,774,315 50,774,315 50,774,315 Net pension liability $11,620,632,800 $10,198,426,975 $9,012,520,805 Source: Florida Retirement System Pension Plan and Other State Administered Systems Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2015 F-8

201 APPENDIX G 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. G-1

204 BAM may appoint a fiscal agent (the Insurer s Fiscal Agent ) for purposes of this Policy by giving written notice to the Trustee, the Paying Agent, the Member and the Issuer specifying the name and notice address of the Insurer s Fiscal Agent. From and after the date of receipt of such notice by the Trustee, the Paying Agent, the Member or the Issuer (a) copies of all notices required to be delivered to BAM pursuant to this Policy shall be simultaneously delivered to the Insurer s Fiscal Agent and to BAM and shall not be deemed received until received by both and (b) all payments required to be made by BAM under this Policy may be made directly by BAM or by the Insurer s Fiscal Agent on behalf of BAM. The Insurer s Fiscal Agent is the agent of BAM only, and the Insurer s Fiscal Agent shall in no event be liable to the Trustee, Paying Agent or any Owner for any act of the Insurer s Fiscal Agent or any failure of BAM to deposit or cause to be deposited sufficient funds to make payments due under this Policy. To the fullest extent permitted by applicable law, BAM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to BAM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy may not be canceled or revoked. This Policy sets forth in full the undertaking of BAM and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. THIS POLICY IS ISSUED WITHOUT CONTINGENT MUTUAL LIABILITY FOR ASSESSMENT. In witness whereof, BUILD AMERICA MUTUAL ASSURANCE COMPANY has caused this Policy to be executed on its behalf by its Authorized Officer. BUILD AMERICA MUTUAL ASSURANCE COMPANY By: Authorized Officer G-2

205 Notices (Unless Otherwise Specified by BAM) Address: 1 World Financial Center, 27th floor 200 Liberty Street New York, New York Telecopy: (attention: Claims) G-3

206 FLORIDA ENDORSEMENT TO MUNICIPAL BOND INSURANCE POLICY NO. Code. This Policy is not covered by the Florida Insurance Guaranty Association created under Part II of Chapter 631 of the Florida Insurance Nothing herein shall be construed to waive, alter, reduce or amend coverage in any other section of the Policy. If found contrary to the Policy language, the terms of this Endorsement supersede the Policy language IN WITNESS WHEREOF, BUILDAMERICA MUTUAL ASSURANCE COMPANY has caused this policy to be executed on its behalf by its Authorized Officer. BUILD AMERICA MUTUAL ASSURANCE COMPANY By Authorized Officer G-4

207

208 CITY OF ALACHUA, FLORIDA Capital Improvement Revenue and Revenue Refunding Bonds, Series 2016