Public Financial Management, Inc. Financial Advisor to the Borough

Transcription

1 This Preliminary Official Statement and the information contained herein are subject to completion, amendment or other change without notice. The Bonds may not be sold nor may offers to buy be accepted prior to the time the Preliminary Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the applicable securities laws of any such jurisdiction. PRELIMINARY OFFICIAL STATEMENT DATED JUNE 30, 2008 NEW ISSUE BOOK-ENTRY ONLY RATING: S&P: AAA Assured Guaranty In the opinion of Bond Counsel, under existing statutes, regulations and judicial decisions, interest on the Bonds is excluded from gross income for purposes of federal income taxation and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although in the case of corporations (as defined for federal income tax purposes) such interest is taken into account in determining adjusted current earnings for purposes of such alternative minimum tax. This opinion of Bond Counsel is subject to continuing compliance by the Borough with its covenants in the Ordinance and other documents to comply with requirements of the Internal Revenue Code of 1986, as amended, and applicable regulations thereunder. Bond Counsel is also of the opinion that under the laws of the Commonwealth of Pennsylvania (the Commonwealth ) as presently enacted and construed, the Bonds are exempt from personal property taxes in the Commonwealth and the interest on the Bonds is exempt from the Commonwealth s Personal Income Tax and the Commonwealth s Corporate Net Income Tax. The Bonds are qualified tax-exempt obligations, for purposes and effect contemplated by Section 265 of the Internal Revenue Code of 1986, as amended (relating to expenses and interest relating to tax-exempt income of certain financial institutions). For further information concerning federal and state tax matters relating to the Bonds see Tax Exemption and Other Tax Matters herein. $10,000,000* Borough of Huntingdon (Huntingdon County, Pennsylvania) General Obligation Bonds, Series of 2008 Bonds Dated: August 1, 2008 Principal Due: August 15, as shown on inside cover Interest Due: February 15 and August 15 First Interest Payment: February 15, 2009 The General Obligation Bonds, Series of 2008 (the Bonds ) in the aggregate principal amount of $10,000,000* will be issued in registered form in denominations of $5,000 and integral multiples thereof. The Bonds will be registered in the name of Cede & Co., as the registered owner and nominee of The Depository Trust Company ("DTC"), New York, New York. Beneficial ownership of the Bonds may be acquired only under the electronic book-entry system maintained by DTC through its brokers and dealers who are, or act through, DTC Participants. The purchasers of the Bonds will not receive physical delivery of the Bonds. For so long as any purchaser is the beneficial owner of a Bond, that purchaser must maintain an account with a broker or a dealer who is, or acts through, a DTC Participant to receive payment of principal of and interest on the Bonds. See "BOOK-ENTRY ONLY SYSTEM" herein. If, under the circumstances described herein, Bonds are ever issued in certificated form, the Bonds will be subject to registration of transfer, exchange and payment as described herein. The Bonds are general obligations of the Borough of Huntingdon, located in Huntingdon County, Pennsylvania (the "Borough"), payable from its tax and other general revenues. The Borough has covenanted that it will provide in its budget in each year, and will appropriate from its general revenues in each such year, the amount of the debt service on the Bonds for such year and will duly and punctually pay or cause to be paid from the sinking fund established under the Ordinance or any other of its revenues or funds the principal of every Bond and the interest thereon on the dates, at the place and in the manner stated in the Bonds, and for such budgeting, appropriation and payment the Borough irrevocably has pledged its full faith, credit and taxing power, which taxing power presently includes the power to levy ad valorem taxes on all taxable real property within the Borough presently unlimited as to rate or amount for the payment of debt service on the Bonds. Sewer rates and charges payable by users of the public sanitary sewer system owned and operated by the Borough, though not specifically pledged, is intended to be the source of funds to pay the principal of and interest on the Bonds (see The Sewer System infra). Interest on each of the Bonds is payable initially on February 15, 2009, and thereafter semiannually on February 15 and August 15 of each year until the maturity date of such Bond or, if such Bond is subject to redemption prior to maturity, until the date fixed for redemption thereof, if payment of the redemption price has been duly made or provided for. The Borough has appointed (the Paying Agent ), as paying agent and sinking fund depositary for the Bonds. So long as Cede & Co., as nominee for DTC, is the registered owner of the Bonds, payments of the principal of, redemption premium, if any, and interest on the Bonds, when due for payment, will be made directly to DTC by the Paying Agent, and DTC will in turn remit such payments to DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds. If the use of the Book-Entry Only System for the Bonds is ever discontinued, the principal on each certificated Bond will be payable, when due, upon surrender of such Bond to the Paying Agent at its designated corporate trust office located in, Pennsylvania (or any successor paying agent at its designated office(s)) and interest on such Bond will be payable by check and mailed to the person(s) in whose name(s) such Bond is registered as of the Record Date with respect to the particular interest payment date (See THE BONDS, infra). The Bonds are subject to redemption prior to maturity as described herein. Proceeds of the Bonds will be used to construct improvements to the public sanitary sewer treatment plant owned and operated by the Borough and to pay the costs of issuing the Bonds, including upgrades to comply with the Chesapeake Bay cleanup initiative. The Bonds are an authorized investment for fiduciaries in the Commonwealth pursuant to the Pennsylvania Probate, Estate and Fiduciaries Code, Act of June 30, 1972, No. 164, P.L. 508, as amended and supplemented. The scheduled payment of principal of and interest on the Obligations when due will be guaranteed under a financial guaranty insurance policy to be issued concurrently with the delivery of the Obligations by Assured Guaranty Corp. MATURITY DATE, PRINCIPAL AMOUNT, INTEREST RATE, AND INITIAL OFFERING PRICES {As shown on inside cover} The Bonds are offered when, as and if issued, subject to withdrawal or modification of the offer without notice, and subject to the approving legal opinion of Rhoads & Sinon LLP, of Harrisburg, Pennsylvania, Bond Counsel to the Borough, to be furnished upon delivery of the Bonds. Certain other legal matters will be passed upon by Lawrence L. Newton, Esquire of Huntingdon, Pennsylvania, Solicitor to the Borough. Public Financial Management, Inc., of Harrisburg, Pennsylvania, serves as the Financial Advisor to the Borough in connection with the issuance of the Bonds. It is expected that the Bonds will be available for delivery to DTC or its agent, on or about August, Dated: *Estimated, subject to change. Public Financial Management, Inc. Financial Advisor to the Borough

2 $10,000,000* Borough of Huntingdon (Huntingdon County, Pennsylvania) General Obligation Bonds, Series of 2008 Bonds Dated: August 1, 2008 Principal Due: August 15, as shown below Interest Due: February 15 and August 15 First Interest Payment: February 15, 2009 Maturity Date Principal Interest Initial Offering August 15 Amount Rate Prices (A portion of the Bonds may be structured as Term Bonds. See "Invitation to Bid".) *Estimated, subject to change.

3 BOROUGH OF HUNTINGDON (Huntingdon County, Pennsylvania) BOROUGH COUNCIL, OFFICERS, AND MEMBERS Glenn A. Stampfle... Council President Richard D. Myers... Council Vice-President Jeffrey M. Speck... Member G. Scott Shaffer... Member John R. Shuck... Member John T. Gradwell... Member Donald M. Rudy... Member OTHER BOROUGH OFFICIALS Foster G. Ulrich, Jr.... Mayor Kenneth F. Myers... Borough Manager Karen A. Foust... Secretary BOROUGH MANAGER/BOROUGH SECRETARY KENNETH E. MYERS BOROUGH SOLICITOR LAWRENCE L. NEWTON, ESQUIRE Huntington, Pennsylvania BOND COUNSEL RHOADS & SINON LLP Harrisburg, Pennsylvania FINANCIAL ADVISOR PUBLIC FINANCIAL MANAGEMENT, INC. Harrisburg, Pennsylvania PAYING AGENT, Pennsylvania BOROUGH ADDRESS 530 Washington Street P.O. Box 592 Huntingdon, Pennsylvania 16652

4 No dealer, broker, salesman, or other person has been authorized by the Borough to give information or to make any representations, other than those contained in this Preliminary Official Statement, and if given or made, such other information or representations must not be relied upon. This Preliminary Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. The information set forth herein has been obtained from the Borough and from other sources which are believed to be reliable but the Borough does not guarantee the accuracy or completeness of information from sources other than the Borough. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Preliminary Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in any of the information set forth herein since the date hereof. INTRODUCTION... 1 AUTHORITY FOR ISSUANCE... 1 PURPOSE OF THE ISSUE... 1 Sources and Uses of Bond Proceeds... 1 THE BONDS... 2 Description... 2 Payment of Principal and Interest... 2 Transfer, Exchange and Registration of Bonds... 2 SECURITY FOR THE BONDS... 3 General Obligation Pledge... 3 Sinking Fund... 3 Sewer System Revenues Intended to Pay Bond Debt Service... 3 Bonds Constitute Self-Liquidating Debt from Sewer Revenues... 3 Authority Sewer Rate Covenant... 4 Debt Act Remedies... 4 REDEMPTION OF BONDS... 4 Mandatory Redemption... 4 Optional Redemption... 4 Notice of Redemption... 4 Manner of Redemption... 5 BOND INSURANCE... 5 The Insurance Policy... 5 The Insurer... 6 BOOK-ENTRY ONLY SYSTEM... 7 TABLE OF CONTENTS Page Page LABOR RELATIONS Borough Employees Pension Program THE SEWER SYSTEM MUNICIPAL BANKRUPTCY LAW DEFAULTS AND REMEDIES TAX EXEMPTION AND OTHER TAX MATTERS Federal Income Tax Matters Pennsylvania Tax Matters Federal Income Tax Interest Expense Deductions for Financial Institutions CONTINUING DISCLOSURE UNDERTAKING LITIGATION NEGOTIABILITY OF BONDS RATING UNDERWRITING LEGAL OPINION FINANCIAL ADVISOR MISCELLANEOUS THE BOROUGH... 9 BOROUGH FINANCES... 9 Introduction... 9 Summary of Fund Revenues, Expenditures and Changes in Fund Balance... 9 General DEBT AND DEBT LIMITS Debt Statement Types of Indebtedness under the Debt Act Borrowing Capacity Future Financing APPENDIX A - DEMOGRAPHIC AND ECONOMIC INFORMATION RELATING TO THE BOROUGH OF HUNTINGDON Population... A-1 Employment... A-2 Commercial Activity... A-4 Financial Institutions... A-4 Educational Institutions... A-4 Transportation Facilities... A-5 Utilities... A-5 APPENDIX B - FORM OF BOND COUNSEL OPINION APPENDIX C SPECIMEN OF MUNICIPAL BOND INSURANCE POLICY i

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6 PRELIMINARY OFFICIAL STATEMENT $10,000,000* Borough of Huntingdon (Huntingdon County, Pennsylvania) General Obligation Bonds, Series of 2008 INTRODUCTION This Preliminary Official Statement, including the cover and inside cover page and the Appendices hereto, is furnished in connection with the offering of $10,000,000* aggregate principal amount of the General Obligation Bonds, Series of 2008, dated as of August 1, 2008 (the "Bonds") of the Borough of Huntingdon, located in Huntingdon County, Pennsylvania (the Borough ). The Bonds are being issued pursuant to, and are secured by an ordinance of the Borough enacted on July 8, 2008 (the Ordinance ), and pursuant to the Local Government Unit Debt Act of the Commonwealth of Pennsylvania, 53 Pa. C. S. Chs (the Debt Act ). ( Paying Agent ), will act as the paying agent and sinking fund depositary for the Bonds. The Bonds are general obligations of the Borough, and the full faith, credit and taxing power of the Borough are pledged for the payment of the principal of and interest on the Bonds when due. The Bonds are payable from the Borough s tax and other general revenues, including ad valorem taxes on all taxable real property in the Borough, which taxing power is presently without limitation as to rate or amount for the payment of debt approved under the Debt Act. The Borough intends to pay the Bonds from revenues, though not specifically pledged, collected by the Borough from customers of the sanitary sewer system owned and operated by the Borough. Neither the delivery of this Preliminary Official Statement nor any sale of the Bonds made hereunder shall, under any circumstances, create any implication that thereafter there have been no changes in the affairs of the Borough since the date of this Preliminary Official Statement or the earliest date as of which certain information contained herein is given. AUTHORITY FOR ISSUANCE The Bonds will be executed and delivered in accordance with the Debt Act, and pursuant to an ordinance (the Ordinance ) duly enacted by the Borough Council on July, As a condition to issuance, proceedings with respect to the issuance of the Bonds will have been approved by the Department of Community and Economic Development of the Commonwealth of Pennsylvania pursuant to the Debt Act. PURPOSE OF THE ISSUE Proceeds of the Bonds will be used to construct improvements to the public sanitary sewer treatment plant (the Sewer System ) owned and operated by the Borough and to pay the costs of issuing the Bonds, including upgrades to comply with the Chesapeake Bay cleanup initiative (see The Sewer Project below). Sources and Uses of Bond Proceeds The following is a summary of the sources and uses of the proceeds from the issuance of the Bonds. Sources of Funds Bond Proceeds $ Accrued Interest Total Sources of Funds $ Uses of Funds Deposit to the Construction Fund $ Costs of Issuance (1) Total Uses of Funds $ (1) Includes legal, financial advisor, printing, rating, bond insurance, total bond discount, CUSIP, paying agent and miscellaneous costs *Estimated, subject to change. 1

7 THE BONDS Description The Bonds will be issued in fully registered form in denominations of $5,000 and integral multiples thereof, will be in the aggregate principal amount of $10,000,000*, will be dated as of August 1, 2008, and will bear interest at the rates and mature in the amounts and on the dates set forth on the inside cover of this Preliminary Official Statement. Interest on the Bonds will be payable initially on February 15, 2009, and thereafter, semiannually on February 15 and August 15 of each year until the maturity date of such Bond or, if such Bond is subject to redemption prior to maturity, until the date fixed for redemption thereof, if payment of the redemption price has been duly made or provided for. When issued, the Bonds will be registered in the name of Cede & Co., as nominee for the Depository Trust Company ( DTC ), New York, New York. Purchasers of the Bonds (the Beneficial Owners ) will not receive any physical delivery of bond certificates, and beneficial ownership of the Bonds will be evidenced only by book entries. See BOOK ENTRY ONLY SYSTEM herein. Payment of Principal and Interest So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, payments of principal of, redemption premium, if any, and interest on the Bonds, when due, are to be made to DTC and all such payments shall be valid and effective to satisfy fully and to discharge the obligations of the Borough with respect to, and to the extent of, principal, redemption premium, if any, and interest so paid. If the use of the Book-Entry Only System for the Bonds is discontinued for any reason, bond certificates will be issued to the Beneficial Owners of the Bonds and payment of principal and interest on the Bonds shall be made as described in the following paragraphs: The principal of certificated Bonds, when due upon maturity or upon any earlier redemption, will be paid to the registered owners of the Bonds, or registered assigns, upon surrender of such Bonds to (the Paying Agent ), acting as paying agent and sinking fund depositary for the Bonds, at its designated corporate trust office in, Pennsylvania (or to any successor paying agent at its designated office(s)). Interest on the Bonds will be payable to the registered owner of a Bond from the interest payment date next preceding the date of registration and authentication of the Bond, unless: (a) such Bond is registered and authenticated as of an interest payment date, in which event such Bond shall bear interest from said interest payment date, or (b) such Bond is registered and authenticated after a Record Date (hereinafter defined) and before the next succeeding interest payment date, in which event such Bond shall bear interest from such interest payment date, or (c) such Bond is registered and authenticated on or prior to the Record Date preceding February 15, 2009, in which event such Bond shall bear interest from August 1, 2008, or (d) as shown by the records of the Paying Agent, interest on such Bond shall be in default, in which event such Bond shall bear interest from the date to which interest was last paid on such Bond. Interest on a certificated Bond will be payable by check drawn on the Paying Agent, which shall be mailed to the registered owner whose name and address shall appear, at the close of business on the fifteenth (15 th ) day (whether or not a day on which the Paying Agent is open for business) next preceding each interest payment date (the Record Date ), on the registration books maintained by the Paying Agent, irrespective of any transfer or exchange of the Bond subsequent to such Record Date and prior to such interest payment date, unless the Borough shall be in default in payment of interest due on such interest payment date. In the event of any such default, such defaulted interest shall be payable to the person in whose name the Bond is registered at the close of business on a special record date for the payment of such defaulted interest established by notice mailed by the Paying Agent to the registered owners of such Bonds not less than fifteen (15) days preceding such special record date. Such notice shall be mailed to the persons in whose names such Bonds are registered at the close of business on the fifth (5 th ) day preceding the date of mailing. If the date for payment of the principal of or interest on any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the Commonwealth are authorized or required by law or executive order to close, then the date for payment of such principal or interest shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are authorized or required to close, and payment on such date shall have the same force and effect as if made on the nominal date established for such payment. Transfer, Exchange and Registration of Bonds Subject to the provisions described below under Book-Entry Only System, Bonds are transferable or exchangeable by the registered owners thereof upon surrender of Bonds to the Paying Agent, accompanied by a written instrument or instruments in form, with instructions, and with guaranty of signature satisfactory to the Paying Agent, duly executed by the registered owner of such Bond or his attorney-in-fact or legal representative. The Paying Agent shall enter any transfer of ownership of Bonds in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new fully registered bond or bonds of authorized denominations of the same series, maturity and interest rate for the aggregate principal amount which the registered owner is entitled to receive. The Borough and the Paying Agent may deem and treat the registered owner of any Bond as the absolute owner thereof (whether or not a Bond shall be overdue) for the purpose of receiving payment of or on account of principal and interest and for all other purposes, and the Borough and the Paying Agent shall not be affected by any notice to the contrary. *Estimated, subject to change. 2

8 The Borough and the Paying Agent shall not be required (a) to register the transfer of or exchange any Bonds then considered for redemption during a period beginning at the close of business on the fifteenth (15 th ) day next preceding any date of selection of Bonds to be redeemed and ending at the close of business on the day on which the applicable notice of redemption is mailed or (b) to register the transfer of or exchange any portion of any Bond selected for redemption until after the redemption date. Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same series, maturity, and interest rate. General Obligation Pledge SECURITY FOR THE BONDS The Bonds will be general obligations of the Borough, payable from its tax and other general revenues of the Borough. The Borough has covenanted in the Ordinance, that it shall do the following: (1) include the amount of debt service for the Bonds for each fiscal year in which such sums are payable in its budget for that year, (2) appropriate those amounts from its general revenues for the payment of such debt service, and (3) duly and punctually pay or cause to be paid from its Sinking Fund, as hereinafter defined, or any other of its revenues or funds, the principal of and interest on each of the Bonds at the dates and places and in the manner stated in the Bonds, according to the true intent and meaning thereof. For such budgeting, appropriation and payment in respect to the Bonds, the Borough under the Ordinance, has pledged its full faith, credit and taxing power. Under the provisions of the Pennsylvania Borough Code, as presently enacted and construed, the Borough has the power to levy an annual ad valorem tax on all taxable real property within the Borough, presently without limitation as to rate or amount for the purpose of paying debt service when due on the Bonds. Sinking Fund A sinking fund for the payment of debt service on the Bonds, designated Sinking Fund, General Obligation Bonds, Series of 2008 (the Sinking Fund ), has been created under the Ordinance and is maintained by the Paying Agent, as sinking fund depository. The Borough shall deposit in the Sinking Fund a sufficient sum not later than the date when interest and/or principal is to become due on the Bonds so that on each payment date the Sinking Fund will contain an amount which, together with any other funds available therein, is sufficient to pay, in full, interest and/or principal then due on the Bonds. The Sinking Fund shall be held by the Paying Agent, as sinking fund depository, and invested by the Paying Agent in such securities or shall be deposited in such funds or accounts as are authorized by the Act, upon direction of the Borough. Such deposits and securities shall be in the name of the Borough, but subject to withdrawal or collection only by the Paying Agent, as sinking fund depository, and such deposits and securities, together with the interest thereon, shall be a part of the Sinking Fund. The Paying Agent, as sinking fund depository, is authorized without further order from the Borough to pay from the Sinking Fund the principal of and interest on the Bonds, as and when due and payable. Sewer System Revenues Intended to Pay Bond Debt Service Although the Borough has not specifically pledged its Sewer System revenues (the Sewer Revenues ) for the payment of the debt service on the Bonds, it is expected that the Borough will utilize such revenues to certify the Bonds as self-liquidating debt from such revenues under the Debt Act. As a result, the debt represented by the Bonds will not reduce the remaining borrowing capacity of the Borough under the Debt Act. The Sewer System is owned by the Borough and leased to the Huntingdon Area Water and Sewer Authority created by the Borough (the Authority ). The Authority sets the sewer rates in accordance with a budget prepared by the Borough. The Borough operates the Sewer System under a Management Agreement with the Authority. The Sewer System serves the residents of the Borough, and also provides bulk sewage treatment services to neighboring Oneida, Smithfield and Walker Townships. The Borough maintains a segregated Sewer System revenue account for the purposes of depositing sewer revenues and paying sewer system operating expenses as well as debt service on general obligation debt and other debt attributable to the Sewer System. The sewer revenues are not specifically pledged for the payment of the Bonds. The Sewer Revenues are pledged to secure the PennVest Loans (see Other Sewer System Debt below), but are not pledged to secure the 2004A Bonds. Bonds Constitute Self-Liquidating Debt from Sewer Revenues The Borough plans to file necessary documentation with the Pennsylvania Department of Community and Economic Development, including a Report and Certification of a qualified registered engineer, and projections of utility revenues and expenses, in order to establish that $10,000,000 aggregate principal amount of the Bonds constitute self-liquidating debt from existing and project Sewer System revenues. Selfliquidating debt is subtracted from the gross nonelectoral debt of the Borough to arrive at net nonelectoral debt subject to borrowing limitations under the Debt Act. 3

9 Authority Sewer Rate Covenant Under the terms of the Lease, between the Borough and the Authority (the Lease ) the Authority has covenanted to impose sufficient sewer rates to pay the operating costs of the Sewer System as well as all debt service of the Borough and the Authority attributable to the Sewer System, including the Bonds. The Borough serves as sewer rates collection agent for the Authority under the terms of the Management Agreement. Debt Act Remedies In the event of failure of the Borough to pay or cause to be paid the interest on or principal of the Bonds, the holders of the Bonds shall be entitled to certain remedies provided by the Debt Act. Among the remedies, if the failure to pay shall continue for 30 days, holders of the Bonds shall have the right to recover the amount due by bringing a civil action in the Court of Common Pleas in the county in which the Borough is located. The Debt Act provides that any judgment shall have an appropriate priority upon the moneys next coming into the treasury of the Borough. The Debt Act also provides that upon a default of at least 30 days, holders of at least 25 percent of the Bonds may appoint the Paying Agent or other trustee to represent them. The Debt Act provides certain other remedies in the event of default, and further qualifies the remedies hereinbefore described. Mandatory Redemption REDEMPTION OF BONDS Bidders may elect to structure the issue to include term bonds, which term bonds, if selected by the bidder, will be subject to mandatory redemption prior to maturity, in the years and amounts as shown in the Invitation to Bid, upon payment of the principal amount of Bonds to be redeemed, together with accrued interest to the date fixed for redemption, or upon maturity, as applicable. Bonds to be redeemed shall be selected by lot by the Paying Agent. In lieu of such Mandatory Redemption, the Paying Agent, on behalf of the Borough, may purchase from money in the Sinking Fund, at a price not to exceed the principal amount plus accrued interest, or the Borough may tender to the Paying Agent, all or part of the Bonds subject to being drawn for redemption in any such year. Optional Redemption The Bonds stated to mature on or after August 15, 2014 shall be subject to redemption prior to maturity, at the option of the Borough, as a whole, on August 15, 2013, or on any date thereafter, or from time to time, in part (and if in part, in any order of maturities as selected by the Borough and within a maturity by lot) on August 15, 2013, or on any date thereafter, in either case upon payment of a redemption price of 100% of the principal amount of such Bonds, together with accrued interest to the redemption date. Notice of Redemption So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, the Borough and the Paying Agent shall send redemption notices only to Cede & Co. See BOOK-ENTRY ONLY SYSTEM herein for further information regarding conveyance of notices to Beneficial Owners. Notice of any redemption of certificated Bonds shall be given by depositing a copy of the redemption notice in first class mail not less than thirty (30) days prior to the date fixed for redemption addressed to each of the registered owners of Bonds to be redeemed, in whole or in part, at the addresses shown on the registration books; provided, however, that failure to give such notice by mailing, or any defect therein or in the mailing thereof, shall not affect the validity of any proceeding for redemption of other Bonds so called for redemption as to which proper notice has been given. If at the time of mailing of a notice of redemption the Borough shall not have deposited with the Paying Agent, as sinking fund depositary, money sufficient to redeem all Bonds called for redemption, the notice of redemption shall state that it is conditional, i.e., that it is subject to the deposit of sufficient redemption money with the Paying Agent not later than the opening of business on the redemption date, and such notice shall be of no effect unless such money is so deposited. If the Bonds to be called for redemption shall have been refunded, money sufficient to redeem such Bonds shall be deemed to be on deposit with the Paying Agent for the purposes of this paragraph, and the notice of redemption need not state that I is conditional, if the redemption money has been deposited irrevocably with another bank or bank and trust company which shall have been give irrevocable instructions to transfer the same to the Paying Agent not later than the opening of business on the redemption date. On the date designated for redemption, notice having been provided as aforesaid, and money for payment of the principal and accrued interest being held by the Paying Agent, interest on the Bonds or portions thereof so called for redemption shall cease to accrue and such Bonds or portions thereof shall cease to be entitled to any benefit or security under the Ordinance, and registered owners of such Bonds or portions thereof so called for redemption shall have no rights with respect to such Bonds, except to receive payment of the principal of and accrued interest on such Bonds to the date fixed for redemption. 4

10 Manner of Redemption So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, however, payment of the redemption price shall be made to Cede & Co. in accordance with the existing arrangements by and among the Borough, the Paying Agent and DTC and, if less than all of the Bonds of any particular maturity are to be redeemed, the amount of the interest of each DTC Participant, Indirect Participant and Beneficial Owner on such Bonds to be redeemed shall be determined by the governing arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. See Book-Entry Only System herein for further information regarding redemption of Bonds registered in the name of Cede & Co. If a Bond is of a denomination larger than $5,000, a portion of such Bond may be redeemed. For the purposes of redemption, a Bond shall be treated as representing the number of Bonds which is obtained by dividing the principal amount thereof by $5,000, each $5,000 portion of such Bond being subject to redemption. In the case of partial redemption of a Bond, payment of the redemption price shall be made only upon surrender of such Bond in exchange for Bonds of the same series, maturity and interest rate and in authorized denominations in the aggregate principal amount equal to the unredeemed portion of the principal amount thereof. If the redemption date for any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the Commonwealth are authorized or required by law or executive order to close, then the date for payment of the principal, premium, if any, and interest upon such redemption shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are authorized or required to close, and payment on such date shall have the same force and effect as if made on the nominal date of redemption. BOND INSURANCE The following information is not complete and reference is made to Appendix C for a specimen of the financial guaranty insurance policy (the Policy ) of Assured Guaranty Corp. ( Assured Guaranty or the Insurer ). The Insurance Policy Assured Guaranty has made a commitment to issue the Policy relating to the Bonds, effective as of the date of issuance of such Bonds. Under the terms of the Policy, Assured Guaranty will unconditionally and irrevocably guarantee to pay that portion of principal of and interest on the Bonds that becomes Due for Payment but shall be unpaid by reason of Nonpayment (the Insured Payments ). Insured Payments shall not include any additional amounts owing by the Issuer solely as a result of the failure by the Trustee or the Paying Agent to pay such amount when due and payable, including without limitation any such additional amounts as may be attributable to penalties or to interest accruing at a default rate, to amounts payable in respect of indemnification, or to any other additional amounts payable by the Trustee or the Paying Agent by reason of such failure. The Policy is non-cancelable for any reason, including without limitation the non-payment of premium. Due for Payment means, when referring to the principal of the Bonds, the stated maturity date thereof, or the date on which such Bonds 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 a call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless Assured Guaranty in its sole discretion elects to make any principal payment, in whole or in part, on such earlier date) and, when referring to interest on such Bonds, means the stated dates for payment of interest. Nonpayment means the failure of the Issuer to have provided sufficient funds to the Trustee or the Paying Agent for payment in full of all principal and interest Due for Payment on the Bonds. It is further understood that the term Nonpayment in respect of a Bond also includes any amount previously distributed to the Holder (as such term is defined in the Policy) of such Bond in respect of any Insured Payment by or on behalf of the Issuer, which amount has been recovered from such Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction that such payment constitutes an avoidable preference with respect to such Holder. Nonpayment does not include nonpayment of principal or interest caused by the failure of the Trustee or the Paying Agent to pay such amount when due and payable. Assured Guaranty will pay each portion of an Insured Payment that is Due for Payment and unpaid by reason of Nonpayment, on the later to occur of (i) the date such principal or interest becomes Due for Payment, or (ii) the business day next following the day on which Assured Guaranty shall have received a completed notice of Nonpayment therefor in accordance with the terms of the Policy. Assured Guaranty shall be fully subrogated to the rights of the Holders of the Bonds to receive payments in respect of the Insured Payments to the extent of any payment by Assured Guaranty under the Policy. law. The Policy is not covered by any insurance or guaranty fund established under New York, California, Connecticut or Florida insurance 5

11 The Insurer Assured Guaranty Corp. ( Assured Guaranty ) is a Maryland-domiciled insurance company regulated by the Maryland Insurance Administration and licensed to conduct financial guaranty insurance business in all fifty states of the United States, the District of Columbia and Puerto Rico. Assured Guaranty commenced operations in Assured Guaranty is a wholly owned, indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, structured finance and mortgage markets. Neither AGL nor any of its shareholders is obligated to pay any debts of Assured Guaranty or any claims under any insurance policy issued by Assured Guaranty. Assured Guaranty is subject to insurance laws and regulations in Maryland and in New York (and in other jurisdictions in which it is licensed) that, among other things, (i) limit Assured Guaranty s business to financial guaranty insurance and related lines, (ii) prescribe minimum solvency requirements, including capital and surplus requirements, (iii) limit classes and concentrations of investments, (iv) regulate the amount of both the aggregate and individual risks that may be insured, (v) limit the payment of dividends by Assured Guaranty, (vi) require the maintenance of contingency reserves, and (vii) govern changes in control and transactions among affiliates. Certain state laws to which Assured Guaranty is subject also require the approval of policy rates and forms. Assured Guaranty s financial strength is rated AAA by Standard & Poor s, a division of The McGraw-Hill Companies, Inc. ( S&P ), AAA by Fitch, Inc. ( Fitch ) and Aaa by Moody s Investors Service, Inc. ( Moody s ). Each rating of Assured Guaranty should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of any security guaranteed by Assured Guaranty. Assured Guaranty does not guaranty the market price of the securities it guarantees, nor does it guaranty that the ratings on such securities will not be revised or withdrawn. Capitalization of Assured Guaranty Corp. As of March 31, 2008, Assured Guaranty had total admitted assets of $1,518,398,730 (unaudited), total liabilities of $1,138,285,708 (unaudited), total surplus of $380,113,022 (unaudited) and total statutory capital (surplus plus contingency reserves) of $1,001,533,924 (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of December 31, 2007, Assured Guaranty had total admitted assets of $1,361,538,502 (audited), total liabilities of $961,967,238 (audited), total surplus of $399,571,264 (audited) and total statutory capital (surplus plus contingency reserves) of $982,045,695 (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. The Maryland Insurance Administration recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company, for determining its solvency under the Maryland Insurance Code, and for determining whether its financial condition warrants the payment of a dividend to its stockholders. No consideration is given by the Maryland Insurance Administration to financial statements prepared in accordance with accounting principles generally accepted in the United States ( GAAP ) in making such determinations. Incorporation of Certain Documents by Reference The portions of the following documents relating to Assured Guaranty are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof: The Annual Report on Form 10-K of AGL for the fiscal year ended December 31, 2007 (which was filed by AGL with the Securities and Exchange Commission (the SEC ) on February 29, 2008); The Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008 (which was filed by AGL with the SEC on May 9, 2008); and The Current Reports on Form 8-K filed by AGL with the SEC, as they relate to Assured Guaranty. All consolidated financial statements of Assured Guaranty and all other information relating to Assured Guaranty included in documents filed by AGL with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the date of this Official Statement and prior to the termination of the offering of the Bonds shall be deemed to be incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such consolidated financial statements. Any statement contained in a document incorporated herein by reference or contained herein under the heading Bond Insurance-The Insurer shall be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any subsequently filed document which is incorporated by reference herein also modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. 6

12 Copies of the consolidated financial statements of Assured Guaranty incorporated by reference herein and of the statutory financial statements filed by Assured Guaranty with the Maryland Insurance Administration are available upon request by contacting Assured Guaranty at 1325 Avenue of the Americas, New York, New York or by calling Assured Guaranty at (212) In addition, the information regarding Assured Guaranty that is incorporated by reference in this Official Statement that has been filed by AGL with the SEC is available to the public over the Internet at the SEC s web site at and at AGL s web site at from the SEC s Public Reference Room at 450 Fifth Street, N.W., Room 1024, Washington, D.C , and at the office of the New York Stock Exchange at 20 Broad Street, New York, New York Assured Guaranty makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, Assured Guaranty 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 Assured Guaranty supplied by Assured Guaranty and presented under the heading Bond Insurance. BOOK-ENTRY ONLY SYSTEM The information in this section has been obtained from materials provided by DTC for such purpose. The Borough (herein referred to as the Issuer ) and the Underwriter does not guaranty the accuracy of completeness of such information and such information is not to be construed as representation of the Borough or the Underwriter. DTC will act as securities depository for the Bonds. The ownership of one fully registered Bond for each maturity, each in the aggregate principal amount of such maturity, will be registered in the name of Cede & Co., as nominee for DTC. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDHOLDERS, BONDOWNERS OR REGISTERED OWNERS OF THE BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. DTC, the world s largest depository, is a limited-purpose trust company organized under the laws of the State of 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 1934, as amended. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 85 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, in turn, is owned by a number of Direct Participants of DTC and Members of National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange, LLC and the National Association of Securities Dealers, Inc. 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 (the Indirect Participants"). DTC has Standard & Poor s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at So long as the Bonds are maintained in book-entry form with DTC, the following procedures will be applicable with respect to the Bonds Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of the Bonds (the Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of the Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Bonds except in the event that use of the book-entry system for the Bonds is discontinued under the circumstances described below under Discontinuance of Book-Entry Only System. To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be 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 the Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults and proposed amendments to the security documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit 7

13 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 Paying Agent and request that copies of the notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds (or all Bonds of a particular maturity) are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue (or maturity) to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails on Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). So long as the Bonds are held by DTC under a book-entry system, payments of the principal of and interest on the Bonds and, if applicable, any premium payable upon redemption thereof, 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 Issuer or the Paying Agent on the payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participants and not of DTC, the Paying Agent or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of the principal of and interest on Bonds and, if applicable, any premium payable upon redemption thereof to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or 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 its services as a securities depository for the Bonds at any time by giving reasonable notice to the Issuer or the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. So long as a nominee of DTC is the registered owner of the Bonds, references herein to the Bondholders or the holders or owners of the Bonds shall mean DTC and shall not mean the Beneficial Owners of the Bonds. The Borough and the Paying Agent will recognize DTC or its nominee as the holder of all of the Bonds for all purposes, including the payment of the principal or Redemption Price of and interest on the Bonds, as well as the giving of notices and any consent or direction required or permitted to be given to or on behalf of the Bondholders under the Ordinance. Neither the Borough nor the Paying Agent will have any responsibility or obligation to Participants or Beneficial Owners with respect to payments or notices to Participants or Beneficial Owners. Discontinuation of Book-Entry Only System. DTC may determine to discontinue providing its service with respect to the Bonds at any time by giving notice to the Borough and the Paying Agent and discharging its responsibilities with respect thereto under applicable law. In addition, the Borough may discontinue the book-entry only system for the Bonds at any time if it provides thirty (30) days' notice of such discontinuation to the Paying Agent and DTC that continuation of the book-entry only system is not in the best interests of the Borough. Upon the giving of such notice, the book-entry only system for the Bonds will be discontinued unless a successor securities depository is appointed by the Borough. THE BOROUGH AND THE PAYING AGENT CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, THE DTC PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE BONDS (I) PAYMENTS OF PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS, (II) CERTIFICATES REPRESENTING AN OWNERSHIP INTEREST OR OTHER CONFIRMATION OF BENEFICIAL OWNERSHIP INTERESTS IN BONDS, OR (III) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE, AS THE REGISTERED OWNER OF THE BONDS, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR THAT DTC, DTC PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS PRELIMINARY OFFICIAL STATEMENT. THE CURRENT "RULES" APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE CURRENT "PROCEDURES" OF DTC TO BE FOLLOWED IN DEALING WITH DTC PARTICIPANTS ARE ON FILE WITH DTC. NEITHER THE BOROUGH NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, INDIRECT PARTICIPANT OR BENEFICIAL OWNER OR ANY OTHER PERSON WITH RESPECT TO: (1) THE BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS; (4) THE DELIVERY BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE ORDINANCE TO BE GIVEN TO BONDHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (6) ANY OTHER ACTION TAKEN BY DTC AS BONDHOLDER. 8

14 THE BOROUGH The Borough is the County seat of Huntingdon County and is located on the Juniata River in central Pennsylvania. The Borough is bounded by Smithfield Township on the southwest, Porter Township on the northwest, Oneida Township on the northeast and Henderson Township on the southeast. The area of the Borough is approximately 3.5 square miles. The Borough is governed by seven council members, each of whom is elected at large to a four-year term. The current Borough Manager is assisted by a Borough Secretary, an Engineer, and a Police Chief. Introduction BOROUGH FINANCES The Borough s governmental and fiduciary fund types utilize the cash basis of accounting. Under this method, certain revenue and related assets are recognized when received rather than when earned and certain expenditures are recognized when paid rather than when the obligation is incurred. The Borough s financial statements are audited by CPA Associates, of Huntingdon, Pennsylvania, Certified Public Accountants. Summary of Fund Revenues, Expenditures and Changes in Fund Balance The tables appearing on the following pages represent a summary of all of the Borough s General Fund receipts and expenditures for the period 2003 through 2006, estimated 2007 and the General Fund 2008 preliminary budget. TABLE 1 BOROUGH OF HUNTINGDON GENERAL FUND BALANCE SHEET (Years ending December 31) ASSETS Cash... $965,388 $882,166 $898,434 Investments Receivables from other funds... 5, Total Assets... $971,207 $882,166 $898,434 LIABILITIES Payroll Taxes Payable... $10,093 $16,273 $18,849 Due to Other Funds ,195 0 Total Liabilities... $10,093 $21,468 $18,849 FUND EQUITY AND OTHER CREDITS Unreserved, reported in: General Fund... $961,114 $860,698 $879,585 Special Revenue Funds Total Fund Equity and Other Credits... $961,114 $860,698 $879,585 TOTAL LIABILITIES, FUND EQUITY AND OTHER CREDITS... $971,207 $882,166 $898,434 Source: Borough Audit Reports. 9

15 TABLE 2 BOROUGH OF HUNTINGDON SUMMARY OF BOROUGH GENERAL FUND REVENUES AND EXPENDITURES* (Years Ending December 31) Preliminary Actual Estimated Budget OPERATING RECEIPTS (1) 2008 (2) Taxes... $1,230,355 $1,258,044 $1,380,242 $1,380,242 $1,414,391 $1,347,460 Licenses and Permits... 36,396 16,290 64,033 64,033 76,869 78,284 Fines and Forfeits... 98,998 83,714 79,793 79,793 59,014 69,000 Interest... 42,769 25,056 39,687 39,687 4,895 7,000 Rents & Royalties ,000 32,575 32,575 7,585 6,600 Intergovernmental , , , , , ,850 Charges for Services , , , , , ,176 Miscellaneous... 11,555 13,419 15,734 15,734 9,480 80,983 TOTAL RECEIPTS... $1,984,516 $2,426,607 $2,301,152 $2,301,152 $2,358,885 $2,243,354 OPERATING DISBURSEMENTS General Government... $260,071 $266,282 $337,336 $337,336 $363,197 $445,983 Public Safety ,664 1,020,736 1,095,427 1,095, ,717 1,084,609 Health and Human Services ,114 1,600 1,600 1, ,600 Public Works: Sanitation... 11,203 85,274 92,384 92,384 84,608 88,000 Public Works: Highways & Streets , , , , ,248 32,250 Public Works: Other Culture & Recreation... 12, ,122 38,508 38,508 32,354 41,400 Community Development... 1,500 1,500 1,650 1, Debt Service Expense Other , , , , , ,131 TOTAL DISBURSEMENTS... $1,968,875 $2,527,023 $2,287,505 $2,287,505 $2,312,378 $2,243,354 EXCESS (DEFICIT) OF OPERATING RECEIPTS OVER DISBURSEMENTS... $15,641 ($100,416) $13,647 $13,647 $46,507 $0 OTHER FINANCING SOURCE (USES) Operating Transfers out... $4,455 $0 $0 $0 Operating Transfers in Proceeds of G.O. Debt 0 585, Debt Service Principal 0 (564,922) 0 0 Bond Discount 0 (5,564) 0 0 Proceeds of Sale of Assets ,240 Unrealized Gain (Loss) on Investments Excess (deficiency) of revenues over Net Other Financing Sources (Uses)... $4,455 $14,514 $0 $5,240 Expenditures and other financing uses... $20,096 ($112,657) ($100,416) $18,887 Fund Balance, January 1,... $1,053,675 $1,073,771 $961,114 $860,698 Fund Balance, December 31,... $1,073,771 $961,114 $860,698 $879,585 (1) Estimated, subject to change and approval of final audit. (2) Preliminary budget, subject to change and adoption of final budget. *Totals may not add due to rounding. Source: Borough Audit Reports and Preliminary Budget. 10

16 SUMMARY OF FINANCIAL DATA General Borough Council adopts an annual budget (which includes various funds including the Sewer Fund), and also levies local taxes prior to the beginning of the fiscal year on January 1. Under provisions of 53 P.S of the Statute of the Commonwealth of Pennsylvania, the Borough may levy the following taxes: Annual tax on all taxable real estate, not to exceed 30 mills for general borough purposes (plus an additional 5 mills with court approval). The Council of any borough may levy different rates of taxation on all real estate classified as buildings as land. The following additional taxes may be levied: Purpose General Purposes... Fire Services... Firehouse, fire training school and center, lock-up and/or municipal building... Recreation... Ambulance and Rescue Service... Debt Service... Pension and retirement... Shade Trees... Utilities... Street Lighting... Library purposes... Levy 30.0 mills 3.0 mills 2.0 mills Unlimited 0.50 mills Unlimited ½ mill 1/10 mill 8 mills 8 mills 3 mills Under the Act of December 31, 1966, P.L. 1257, effective January 1, 1966, the Pennsylvania Local Tax Enabling Act, additional taxes may be levied by Boroughs (subject to division with other political subdivisions authorized to levy similar taxes on the same person, subject, business, transaction or privilege), subject to the following limitations: Tax Levy Per Capita... $10.00 Wages, salaries, commissions and other earned income of individuals % Transfer of title of real property % Flat rate occupation and occupational privilege tax (maximum rate)... $52.00 Admissions (except Motion Picture Theaters) % Occupation (if a millage or percentage of the assessed valuation of occupation is used as base)... No limit Source: Borough officials. 11

17 TABLE 3 BOROUGH OF HUNTINGDON COMPARATIVE REAL PROPERTY TAX RATES* (Mills on Assessed Value) Huntingdon Area School District Borough of Huntingdon Huntingdon County Source: Borough officials. TABLE 4 BOROUGH OF HUNTINGDON REAL PROPERTY ASSESSMENT DATA* Year Market Value Assessed Value Ratio $129,869,900 $29,605, % ,062,700 29,838, % ,093,700 30,148, % ,944,000 30,340, % ,022,200 30,401, % Compound Average Annual Percentage Change % n/a Source: Pennsylvania State Tax Equalization Board. TABLE 5 BOROUGH OF HUNTINGDON REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY Market Assessed Market Assessed Value Value Value Value Huntingdon Borough... $ 144,944,000 $ 30,340,060 $ 163,022,200 $ 30,401,920 Huntingdon Area School District ,175, ,326, ,272, ,823,320 Huntingdon County... 1,246,745, ,866,671 1,388,421, ,962,935 Source: Pennsylvania State Tax Equalization Board. 12

18 TABLE 6 BOROUGH OF HUNTINGDON ASSESSMENT BY LAND USE Residential... $20,489,141 $20,689,041 $20,924,681 $20,920,461 $21,135,001 Lots , , , , ,684 Industrial... 1,092,860 1,092,860 1,092,860 1,092,860 1,092,860 Commercial... 7,396,455 7,379,495 7,450,975 7,643,335 7,483,175 Agriculture... 93, , , , ,000 Land... 98,320 95,480 92,880 90,080 91,200 Totals... $29,605,040 $29,838,800 $30,148,960 $30,340,060 $30,401,920 Source: Pennsylvania State Tax Equalization Board. TABLE 7 BOROUGH OF HUNTINGDON REAL PROPERTY TAX COLLECTION DATA Current Year Collections Total Total Total Current As Percent Collections Collections Year Tax Levy Collections of Total Tax Levy Amount as Percent 2003 $805,648 $739, % $825, % , , % 825, % , , % 813, % , , % 838, % , , % 869, % Source: Borough officials. The ten largest real property taxpayers, together with 2007/2008 assessed values, are shown in Table 8. The aggregate assessed value of these ten taxpayers totals approximately 14.8 percent of total assessed value. TABLE 8 BOROUGH OF HUNTINGDON TEN LARGEST REAL PROPERTY TAXPAYERS 2007/2008 Assessed Owner Value Agy & Co. $ 810,960 Presbyterian homes 879,160 Swigart Associates/Mutual Benefits 547,480 DeForrest II Limited Partnership 452,200 Blair House 356,720 Juniata College 350,120 Huntingdon Hospitality 333,400 Huntingdon Nursing Center 314,680 Rodney Wellar/Individual J.C. Blair 166,440 Total $4,497,920 Source: Borough officials. 13

19 DEBT AND DEBT LIMITS Debt Statement Table 9 shows the debt of the Borough as of June 23, 2008, including the issuance of the Bonds. TABLE 9 BOROUGH OF HUNTINGDON DEBT STATEMENT* (As of June 23, 2008) Gross NONELECTORAL DEBT Outstanding General Obligation Bonds, Series of 2008 (Sewer)... $10,000,000 Guaranteed Sewer Revenue Note, Series of 2005 (PENNVEST)(Sewer) ,000 General Obligation Bonds, Series A of 2004 (Sewer)... 3,020,000 General Obligation Bonds, Series of 2004 (Water)... 3,900,000 Guaranteed Sewer Revenue Note, Series of 1995 (PENNVEST)(Sewer) ,129 General Obligation Note, Series of 1992 (PENNVEST)(Water)... 1,436,324 Subtotal... $19,553,453 Less: Self-Liquidating/Subsidized Debt... (19,553,453) TOTAL NET NONELECTORAL DEBT... $0 LEASE RENTAL DEBT TOTAL LEASE RENTAL DEBT... $0 TOTAL PRINCIPAL OF NET DIRECT DEBT... $0 OVERLAPPING DEBT Huntingdon Area School District (1)... $13,478,809 Huntingdon County, General Obligation (2) ,308 TOTAL OVERLAPPING DEBT... $14,110,117 TOTAL NET DIRECT AND OVERLAPPING DEBT... $14,110,117 DEBT RATIOS Per Capita... $2, Percent 2007 Assessed Value % Percent 2007 Market Value % *Includes the estimated Bonds offered through this Preliminary Official Statement. (1) Pro rata 26.20% share of $51,450,000 principal amount outstanding. (2) Pro rata 11.74% share of $5,376,699 principal amount outstanding. 14

20 Types of Indebtedness under the Debt Act The Debt Act establishes three forms of debt for a local government unit: (i) electoral debt (debt incurred with the approval of the electors for which there is no limitation on the amount that may be so incurred), (ii) nonelectoral debt (debt of a local government unit not being electoral or lease rental debt for which the limitation on all such net debt which may be incurred is 250% of the borrowing base for the Borough), and (iii) lease rental debt (the principal amount of municipal authority debt or debt of another local government unit to be repaid by the local government unit pursuant to a lease, subsidy contract guarantee or other form of agreement where such debt is or may be payable out of the tax revenues and other general revenues; the limitation on all such net debt which may be incurred, including any net nonelectoral debt incurred, is 350% of the borrowing base for the Borough). Any debt which is approved by the Pennsylvania Department of Community and Economic Development as subsidized or self-liquidating may be deducted or excluded from the determination of any such debt incurred in determining the net debt of the local government unit to which such limitations are applicable. Certain other deductions are allowed in determining net debt. Borrowing Capacity The Debt Act establishes debt limits for local government units. The basis for determining nonelectoral borrowing capacity is related to adjusted revenues received over the most recent three fiscal years. The following is a calculation of the current borrowing base, which is the arithmetic average of the Total Revenues of the Borough after adjustments by the exclusion of certain subsidies, reimbursements, pledged revenues (including water and sewer), and non-recurring items: Total Revenues for 2005 $2,266,840 Total Revenues for ,152,593 Total Revenues for 2007(estimated) 1,931,872 Total $6,351,305 Annual Arithmetic Average (Borrowing Base) $2,117,102 The following is a calculation of the Borough s current net debt limitations. Net Nonelectoral Debt Limit: Borrowing Base... $5,292,754 Multiplier... 0 Net Nonelectoral Debt Limit... $5,292,754 Combined Net Nonelectoral Debt and Net Lease Rental Debt Limit: Borrowing Base... $7,409,855 Multiplier... 0 Combined Net Nonelectoral Debt and Net Lease Rental Debt Limit... $7,409,855 15

21 Future Financing The Borough does anticipate issuing additional long term debt within the next five years. Borough Employees LABOR RELATIONS The Borough presently employs 45 full-time employees and 25 part-time employees. Twelve of these employees are uniformed; the remaining employees are non-uniformed. Non-uniformed employees are represented by the American Federation of State, County, and Municipal Employees. The collectively bargained contract that non-uniformed employees work provides for a 3% salary increase annually. The police are currently working under a contract, which expires on December 31, The Borough employees have never gone on strike. Pension Program The Borough provides separate pension plans for its uniformed (police) and nonuniformed employees. Each pension plan is discussed separately below: Police Pension Fund The Borough s Police Pension plan is provided by means of a joinder agreement between the Borough of Huntingdon and the Pennsylvania State Association of Boroughs defined benefit pension plan administered by the consulting firm of Mockenhaupt, Mockenhaupt, Cowden & Parks, Inc. Under this arrangement, the Borough is participating in a cost-sharing multiple-employer Public Employee Retirement System. The Pennsylvania State Association of Boroughs acts as a common investment and administrative agent for member Borough throughout the Commonwealth of Pennsylvania. The Borough s contributions to the plan in 2006 were $73,835. Non-uniformed Pension Fund: The Borough is a member of the Pennsylvania Municipal Retirement System defined benefit pension plan covering all full-time non-uniformed employees employed by the Borough. Participants are required to contribute 4.5% of their annual salary. Employer contributions vary in accordance with the actuarial determination based on age, sec, service and classification of the individual. The Borough s contributions to the plan in 2005 were $103,211. {THIS SECTION INTENTIONALLY LEFT BLANK} 16

22 THE SEWER SYSTEM The Borough of Huntingdon owns and operates a wastewater treatment facility. The Borough s facility serves the Borough and the existing sewer service areas in the Townships of Oneida, Smithfield and Walker, all of Huntingdon County, Pennsylvania. Two State Correctional Institutions are also served. The Borough has been notified that it must reduce its contribution of nitrogen and phosphorus nutrients and phosphorus nutrients that flow into the Chesapeake Bay from its wastewater treatment facilities. Huntingdon s wastewater treatment facilities were first constructed in 1964 and upgraded in These facilities cannot meet the Chesapeake Bay requirements. Huntingdon has decided to upgrade their facilities, but in doing so, will look down the road as much as possible. Believing that even more strict treatment requirements lie in the future, they have selected processes that go beyond merely meeting the intent of the Bay requirements, but also eliminate the use of chemicals such as lime and chlorine, cut sludge production and yield a Class A bio-solids product. To control costs, the existing structures at the plant will be reused. Major pieces of equipment will be pre-purchased. A large scale pilot plant has been operated on site to confirm and set design parameters. The project is under design. The approximate schedule is: Procure Equipment Summer 2008 Submit Permit Applications Winter 2009 Award Contracts for Construction Project Summer 2009 Complete Project and Start-up Winter 2011 The Borough pursued the possibility of purchasing nitrogen credits from a farm bank but found the 25 year cost to be more expensive than upgrading their facilities to remove nitrogen and phosphorus. Sewer Rate Structure The service area for the Sewer System extends north and east to the Borough lines into portions of Onedia Township, north and west into all of Smithfield Township, southwest through Walker Township to the Village of McConnelstown, and south along Pine Ridge to the water gap near the confluence of Standing Stone Creek and the Juniata River. The treatment facilities serve the Borough of Huntingdon, the Villages of Smithfield and Juniata College, and treats bulk wastewater from the three townships, which own their own sewage collection systems. There are also several significant industrial accounts. Major sewer system customers and approximate wastewater flows based upon 2007 records are tabulated as follows: Customer Wastewater Flow, gpd SCI Huntingdon 570,000 SCI Smithfield 310,000 AGY 95,000 Juniata College 70,000 J.C. Blair Hospital 30,000 Owens Corning Fiberglas 13,000 Walker Township 147,000 Oneida Township 16,000 17

23 Bulk Sewer Treatment Agreements The Borough currently has used commitments to provide bulk sewage treatment service to the following entities: Sewer Fees Sewer System User Agreement Date SCI Huntingdon September 3, 1999 SCI Smithfield September 3, 1999 Smithfield Township October 2, 1956 Oneida Township August 2, 1989 Walker Township October 10, 1989 Owens Corning December 4, 1998 AGY December 4, 1998 Source: Borough Officials. Minimum Charges per Month Sewer rates are based on the size of the water meter serving the property. The water meters are read by the Borough in providing public water services. The following sewer users shall be subject to the following minimum monthly charge: As of 9/1/2007 Minimum Effective 7/1/2008 Minimum Meter Size Charge Per Month Charge Per Month 5/8 $ $ ¾ , , , , , {THIS SPACE INTENTIONALLY LEFT BLANK} 18

24 Summary of Sewer Fund Receipts and Disbursements Shown below is a summary of receipts and disbursements of the Sewer System as prepared by Borough Officials from year-end audit s: YEAR ENDING DECEMBER 31 Unaudited Budgeted OPERATING RECEIPTS Charges for Services $1,414,124 $1,597,314 $1,429,558 $1,498,532 $1,466,450 Fines & Forfeits 300 1, Intergovernmental 0 5, Donations TOTAL OPERATING REVENUES 1,414,424 1,604,285 1,429,558 1,498,532 1,466,450 OPERATING EXPENDITURES General Operating Expenditures 980, ,276 1,011,439 1,032,577 1,171,475 Depreciation Expense 299, , , ,874 0 Amortization Expense 0 8,426 8,426 8,426 0 TOTAL OPERATING EXPENSES 1,279,888 1,285,942 1,343,410 1,370,877 1,171,475 EXCESS (DEFICIT) OF OPERATING RECEIPTS OVER EXPENSES 134, ,343 86, , ,975 NONOPERATING RECEIPTS (EXPENSES) Interest Income 13,724 13,966 25,946 18,328 20,000 Interest Expense (239,973) (120,897) (126,253) (120,804) (112,735) Gain (Loss) on Sale of Assets (1,850) 0 (342,214) Refunds of Prior Year Revenues (26,408) 0 0 NET NONOPERATING RECEIPTS (DISBURSEMENTS) (226,249) (106,931) (128,565) (102,476) (434,949) CHANGE IN NET ASSSETS (91,713) 211,412 (42,417) 25,179 (139,974) FUND NET ASSETS - Beginning (as restated) 1,237,812 1,184,789 1,396,201 1,353,784 1,378,963 FUND NET ASSETS - Ending 1,146,099 1,396,201 1,353,784 1,378,963 1,238,989 Source: Borough Officials. MUNICIPAL BANKRUPTCY LAW Enforcement of holder of the Bonds' rights may be limited by and be subject to the provisions of bankruptcy, insolvency and distressed municipality laws, as now or hereafter enacted, or to other laws or equitable principles which may affect enforcement of creditors' rights. The rights and remedies of holders of the Bonds are subject to the provisions of Chapter 9 of the Federal Bankruptcy Code. In general, that chapter permits, under prescribed circumstances (but only after an authorization by the applicable state legislature or by a governmental officer or organization empowered by state law to give such authorization), a political subdivision of a state to file a petition for relief in a bankruptcy court of the United States if it is insolvent or unable to meet its debts as they mature and desires to effect a plan to adjust its debt. Such plan may, on being approved by a certain percentage of creditors and the court, include provisions modifying or altering the rights of creditors. The United States Bankruptcy Court for the Western District of Pennsylvania has twice ruled that Pennsylvania law does not authorize a municipal authority incorporated under the Municipality Authorities Act of 1945 to be a Chapter 9 debtor. See In re: Carroll Township Authority, 199 Bank Rptr. 61 (W.D. Pa 1990); and In re: North and South Shenango Joint Municipal Authority, 80 Bank. Rptr. 57 (W.D. Pa 1982). The Pennsylvania Distressed Municipalities Act, Act No , authorizes a municipality, such as the Borough, to file a municipal debt readjustment action pursuant to the Federal Bankruptcy Code only if one of the following conditions is present: (1) such action has been recommended by a state coordinator following a determination by the Department of Community and Economic Development that the municipality is financially distressed, within the meaning of such Act; (2) there is imminent jeopardy of an action by a creditor, a claimant or a supplier of goods and services that is likely to substantially interrupt or restrict the ability of the municipality to provide health or safety services; (3) one or more creditors of the municipality has rejected the proposed or adopted plan for relieving the municipality s financial distress and efforts to negotiate a resolution with such creditor(s) has been unsuccessful; (4) a condition affecting the municipality s financial distress is potentially solvable only through utilization of a remedy under the Federal Municipal Debt Readjustment Act; or (5) a majority of the governing body of the municipality has failed to adopt a plan for relieving the financial distress or to carry out the recommendations of the state coordinator. 19

25 DEFAULTS AND REMEDIES In the event of failure of the Borough to pay or cause to be paid the interest on or principal of the Bonds, as the same becomes due and payable, the holders of the Bonds shall be entitled to certain remedies provided by the Debt Act. Among the remedies, if the failure to pay shall continue for 30 days, holders of the Bonds shall have the right to recover the amount due by bringing an action in assumpsit in the Court of Common Pleas of Huntingdon County. The Debt Act provides that any judgment shall have an appropriate priority upon the funds next coming into the treasury of the Borough. The Debt Act also provides that upon a default of at least 30 days, holders of at least 25 percent of the Bonds may appoint a trustee to represent them. The Debt Act provides certain other remedies in the event of default, and further qualifies the remedies hereinbefore described. Federal Income Tax Matters TAX EXEMPTION AND OTHER TAX MATTERS On the date of delivery of the Bonds, Rhoads & Sinon LLP, Harrisburg, Pennsylvania, as Bond Counsel will issue an opinion to the effect that under existing statutes, regulations and judicial decisions, interest on the Bonds is excluded from gross income for purposes of federal income taxation and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, but that in the case of corporations (as defined for federal income tax purposes) such interest is taken into account in determining adjusted current earnings for purposes of such alternative minimum tax. This opinion of Bond Counsel will assume the accuracy of certifications made by the Borough and will be subject to the condition that the Borough will comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excluded from gross income for federal income tax purposes. The Borough has covenanted to comply with all such requirements, which include, among others, restrictions upon the yield at which proceeds of the Bonds and other money held for the payment of the Bonds and deemed to be proceeds thereof may be invested and the requirement to calculate and rebate any arbitrage that may be generated with respect to investments allocable to the Bonds. Failure to comply with such requirements could cause the interest on the Bonds to be included in gross income retroactive to the date of issuance of the Bonds. Certain maturities of the Bonds may be sold to the public in the initial offering at a price less than the stated redemption price of such Bonds at maturity (that is, at less than par of the stated principal amount), the difference being original issue discount. Generally, original issue discount accruing on a tax-exempt obligation is treated as interest excludable from gross income for federal income tax purposes. In addition, original issue discount that has accrued on a tax-exempt obligation is treated as an adjustment to the issue price of the obligation for the purpose of determining taxable gain upon sale or other disposition of such obligation prior to maturity. The Internal Revenue Code of 1986, as amended, provides specific rules for the accrual of original issue discount on tax-exempt obligations for federal income tax purposes. Prospective purchasers of Bonds being sold with original issue discount should consult their tax advisors for further information. Ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, certain subchapter S corporations with substantial passive income and Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Bonds. Bond Counsel will express no opinion as to such collateral tax consequences, and prospective purchasers of the Bonds should consult their tax advisors. No representation is made or can be made by the Borough or any other party associated with the issuance of the Bonds as to whether or not any legislation now or hereafter introduced and enacted will be applied retroactively so as to subject interest on the Bonds to inclusion in gross income for Federal income tax purposes or so as to otherwise affect the marketability or market value of the Bonds. Enactment of any legislation that subjects the interest on the Bonds to inclusion in gross income for federal income tax purposes or otherwise imposes taxation on the Bonds or the interest paid thereon may have an adverse effect on the market value or marketability of the Bonds. Pennsylvania Tax Matters On the date of delivery of the Bonds, Bond Counsel will issue an opinion to the effect that under the laws of the Commonwealth as presently enacted and construed, the Bonds are exempt from personal property taxes within the Commonwealth and the interest on the Bonds is exempt from the Commonwealth s Personal Income Tax and the Commonwealth s Corporate Net Income Tax. Profits, gains or income derived from the sale, exchange or other disposition of the Bonds are subject to state and local taxation within the Commonwealth, in accordance with Pennsylvania Act No Certain maturities of the Bonds may be sold to the public in the initial offering at a price less than their stated redemption price at maturity (that is, at an original issue discount ). For Pennsylvania Personal Income Tax purposes, original issue discount on publicly offered obligations is treated under current regulations of the Pennsylvania Department of Revenue as interest and, for purposes of determining taxable gain upon sale or other distribution of an obligation the interest on which is exempt from income taxation by the Commonwealth, as an adjustment to basis. For Pennsylvania Corporate Net Income Tax purposes, original issue discount is to be accorded similar treatment, according to a Private Letter Ruling issued by the Office of the Chief Counsel of the Pennsylvania Department of Revenue dated December 2,

26 Prospective purchasers of Bonds issued with original issue discount should consult their tax advisors for further information and advice concerning the reporting of profits, gains or other income related to a sale, exchange or other disposition of such Bonds for Pennsylvania tax purposes. Federal Income Tax Interest Expense Deductions for Financial Institutions Under the Internal Revenue Code of 1986, as amended (the Code ), financial institutions are disallowed 100 percent of their interest expense deductions that are allocable, by a formula, to tax-exempt obligations acquired after August 7, An exception, which reduces the amount of the disallowance, is provided for certain tax-exempt obligations that are designated or deemed designated by the issuer as qualified tax-exempt obligations under Section 265 of the Code. Each of the Bonds has been designated, or is deemed designated, as a qualified tax-exempt obligation for purposes and effect contemplated by Section 265 of the Code (relating to expenses and interest relating to tax-exempt income of certain financial institutions). Financial institutions intending to purchase Bonds should consult with their professional tax advisors to determine the effect of the interest expense disallowance on their federal income tax liability. CONTINUING DISCLOSURE UNDERTAKING In accordance with the requirements of Rule 15c2-12 (the Rule ) promulgated by the Securities and Exchange Commission, the Borough (being an obligated person with respect to $10,000,000 or more of outstanding securities, including the Bonds, within the meaning of the Rule) will agree in a written agreement or contract for the benefit of the holders of the Bonds: (i) to file annually, with each nationally recognized municipal securities information repository ( NRMSIR ) and with the state information depository, if any, for the Commonwealth of Pennsylvania ( SID ) (there is no SID as of the date of this Official Statement), not later than 180 days following the end of each fiscal year of the Borough, beginning with the fiscal year ending December 31, 2008, the following financial information and operating data with respect to the Borough: the financial statements for the most recent fiscal year, prepared in accordance with generally accepted accounting principles for local government units and audited in accordance with generally accepted auditing standards a copy of the general fund and the sewer system budget for the current fiscal year (ii) in a timely manner, to file with each NRMSIR, or with the Municipal Securities Rulemaking Board ( MSRB ), and with the SID, if any, notice of any failure to timely perform as described in (i) above and also notice of the occurrence of any of the following events with respect to the Bonds, if material: (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 Bonds; (7) modifications to rights of holders of the Bonds; (8) bond calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds; and (11) rating changes. The Borough may from time to time choose to provide notice of the occurrence of certain other events, in addition to those listed above, but the Borough does not commit to provide any such notice of the occurrence of any events except those specifically listed above. The Borough reserves the right to terminate its obligation to provide annual financial information and notices of material events, as set forth above, if and when the Borough no longer remains an obligated person with respect to the Bonds within the meaning of the Rule. The Borough acknowledges that its undertaking pursuant to the Rule described under this heading is intended to be for the benefit of the holders of the Bonds and shall be enforceable by the holders of such Bonds; provided that the Bondholders right to enforce the provisions of this undertaking shall be limited to a right to obtain specific enforcement of the Borough s obligations hereunder and any failure by the Borough to comply with the provisions of this undertaking shall not be an event of default with respect to the Bonds. The Borough has complied with all prior written undertakings under the Rule to provide timely ongoing disclosure of annual financial information and notice of material events affecting its securities during the past five (5) years. LITIGATION Upon delivery of the Bonds, the Borough shall furnish or cause to be furnished, a certificate, to the effect that, among other things, there is no litigation pending in any court to restrain or enjoin the issuance or delivery of the Bonds, or the proceedings of the Borough taken in connection therewith, or the application of any money provided for their payment, or contesting the powers of the Borough with respect to the foregoing or the issuance of the Bonds. NEGOTIABILITY OF BONDS Under the Act, the Bonds have all the qualities and incidents of securities under Article 8 of the Uniform Commercial Code and are negotiable instruments. 21

27 RATING Standard & Poor s Ratings Group has assigned an underlying rating of A and its municipal bond rating of AAA to this issue of Bonds, and has done so with the understanding that upon delivery of the Bonds, the Municipal Bonds Insurance Policy will be issued by Assured Guaranty. Any explanation of the significance of such rating may only be obtained from the rating agency furnishing the rating. The rating reflects only the view of such rating agency and the Borough makes no representation as to the appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by the rating agency, if, in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. UNDERWRITING The Underwriter has agreed to purchase the Bonds from the Borough, subject to certain conditions precedent, and will purchase all of the Bonds if any of such Bonds are purchased. The Bonds will be purchased at a total discount of $ (consisting of a net original issue discount of $ and underwriters discount of $ ) from the par amount of the Bonds. LEGAL OPINION The Bonds are offered subject to the receipt of the approving legal opinion of Rhoads & Sinon LLP, Harrisburg, Pennsylvania, Bond Counsel to the Borough. Other legal matters pertaining to the Borough and the Authority will be passed upon to Lawrence L. Newton, Esquire of Huntingdon, Pennsylvania, Solicitor to the Borough and to the Authority. FINANCIAL ADVISOR The Borough has retained Public Financial Management, Inc., Harrisburg, Pennsylvania, as financial advisor (the Financial Advisor ) in connection with the preparation, authorization, and issuance of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in the Preliminary Official Statement. Public Financial Management, Inc. is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities. MISCELLANEOUS This Preliminary Official Statement has been prepared under the direction of the Borough by Public Financial Management, Inc., Harrisburg, Pennsylvania, in its capacity as Financial Advisor to the Borough. The information set forth in this Preliminary Official Statement has been obtained from the Borough and from other sources believed to be reliable. Insofar as any statement herein includes matters of opinion or estimates about future conditions, it is not intended as representation of fact, and there is no guarantee that it is, or will be, realized. Summaries or descriptions of provisions of the Bonds, the Ordinance, and all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof. Reference is hereby made to the complete documents, copies of which will be furnished by the Borough or the Financial Advisor upon request. The information assembled in this Preliminary Official Statement is not to be construed as a contract with holders of the Bonds. The Borough has authorized the distribution of this Preliminary Official Statement. BOROUGH OF HUNTINGDON Huntingdon County, Pennsylvania By: /s/ Glenn A. Stampfle President, Borough Council 22

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29 APPENDIX A Demographic and Economic Information Relating to the Borough of Huntingdon

30 Population Table A-1 shows recent population trends for the Borough, the County, and the Commonwealth. Table A-2 shows 2000 estimates of the age composition and average number of persons per household in Huntingdon County and for the Commonwealth. Average household size for the County was slightly lower than the statewide average. TABLE A-1 RECENT POPULATION TRENDS* Compound Average Annual Percentage Change Area Huntingdon Borough... 6,843 6, % Huntingdon County... 44,164 45, % Pennsylvania... 11,881,643 12,281, % Source: U.S. Bureau of the Census and Pennsylvania State Data Center. TABLE A-2 AGE COMPOSITION Persons Per Years Years Household Huntingdon County % 17.4% 2.44% Pennsylvania Source: Pennsylvania State Data Center. A-1

31 Employment Overall employment data are not compiled for the Borough, but such data are compiled for the Huntingdon County Micropolitan Statistical Area (the MSA )(an area which includes the Borough). Table A-3 shows the distribution of employment for the MSA for May TABLE A-3 DISTRIBUTION OF EMPLOYMENT* (Huntingdon County) Industry Employment April March February April Net Change From: ESTABLISHMENT DATA March 2008 April 2007 Total Nonfarm... 14,100 13,700 13,700 13, Total Private... 10,800 10,400 10,400 10, Goods-Producing... 3,100 3,000 3,000 3, Construction, Natural Resources, Mining Manufacturing... 2,300 2,300 2,300 2, Service-Providing... 11,000 10,700 10,700 10, Trade, Transportation, and Utilities... 2,100 2,100 2,100 2, Trade... 1,800 1,800 1,800 1, Educational and Health Services... 2,900 2,900 2,900 2, Leisure and Hospitality... 1, , Government... 3,300 3,300 3,300 3, State Government... 1,500 1,500 1,500 1, Local Government... 1,700 1,700 1,700 1, Data benchmarked to March 2007 ***Data changes of 100 may be due to rounding*** *Non-Agricultural Wage and Salary Employment; establishment data. Source: Pennsylvania State Employment Service. The largest employers located within or near the Borough include: Approximate Name Product or Service Employment Advanced Glassfiber Yarns Fiberglass Products 398 Huntingdon Area School District Education 402 J.C. Blair Memorial hospital Health Care Provider 368 Juniata College Education 403 Mutual Benefit Insurance Insurance 204 Huntingdon County Commissioners Governmental Agency 125 Source: Borough officials. A-2

32 Table A-4 shows recent trends in labor force, employment and unemployment for the County and the Commonwealth. TABLE A-4 RECENT TRENDS IN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT* Compound Average Annual % (1) Rate Huntingdon County Civilian Labor Force (000) % Employment (000) % Unemployment (000) % Unemployment Rate % 6.0% 5.2% 5.1% 5.5% Pennsylvania Civilian Labor Force (000)... 6, , , , , % Employment (000)... 5, , , , , % Unemployment (000) % Unemployment Rate % 5.0% 4.7% 5.3% 4.7% *Residence Data. (1) As of April Source: Pennsylvania State Employment Service. Income The data in Table A-5 shows trends in per capita income for the County and the Commonwealth over the period. Per capita income for the County was higher than the average per capita income for the Commonwealth. TABLE A-5 RECENT TRENDS IN PER CAPITA INCOME* Percentage Change Huntingdon County... $10,471 $15, % Pennsylvania... 14,068 20, % *Income is defined by the Bureau of the Census as the sum of wage and salary income, non-farm self-employment income, net self-employment income, Social Security and Railroad retirement income, public assistance income, interest, dividends, pensions, etc. before deductions for personal income taxes, Social Security, etc. School District income is the populationweighted average for political subdivisions. Source: 2000 Census, Pennsylvania State Data Center. A-3

33 Commercial Activity Table A-6 shows trends for retail sales in the County and the Commonwealth. TABLE A-6 TOTAL RETAIL SALES (Millions of Dollars) Huntingdon County... $ $ $ Pennsylvania , , ,558.0 Source: Sales and Marketing Management Magazine Financial Institutions As of June 30, 2006, Huntingdon County contained 21 branch offices of various commercial banks with total deposits of $442,335,000, 3 savings banks with deposits of $40,865,000 and 1 credit unions with deposits of $9,707,000. Educational Institutions Huntingdon Borough is home to Juniata College, a four-year co-education, independent, liberal arts college that is highly regarded for academic excellence. Juniata has an annual enrollment of 1,200, with 92 percent living on campus. The college offers traditional bachelor of science and Bachelor of Arts programs, but it also allows students to create their own program of emphasis, combining multiple academic programs. Juniata s natural science program is particularly well respected, and its placement rate into medical, dental and veterinary schools averages 90 percent. Class sizes are small, with an average student-to-teacher ratio of 13:1. Although many faculty members are engaged in research, their first commitment is to teaching. DuBois Business College opened a local campus in They offer courses in various clerical and technology fields including; word processing, medical secretary, and clerk stenographer. The main campus of Penn State houses nearly 38,000 students who attend graduate and undergraduate classes at University Park. PSU is both a research and teaching institution with course offerings in 11 colleges and schools. Other colleges and institutions within commuting distance are Shippensburg University in Cumberland County; Penn State s Altoona Campus, Blair County; Mount Aloysius College, Cambria County; and Saint Francis College, Cambria County. Occasionally colleges located outside the county will offer satellite courses here. The Borough is located in the Huntingdon Area School District. The School District has approximately 2,589 students enrolled in five elementary schools, one middle school and one high school. A-4

34 Medical Facilities The County s largest health care facility is J.C. Blair Memorial Hospital. This is a 104 bed hospital with a modern hightech surgical wing and a obstetrics/gynecology unit. The emergency room is staffed by physicians and nurses around the clock. The active medical staff at the hospital includes approximately 60 local physicians and nurses around the clock. The County has five regional medical centers that provide primary care for many local residents: Transportation Facilities Juniata Valley Medical Center, Alexandria Mount Union Area Medical Center, Mount Union Southern Huntingdon County Medical Center, Orbisonia Broad Top Medical Center, Broad Top City Through Creek Medical Center, Cassville The Borough is serviced by State Routes 22 and 25. The Pennsylvania Turnpike U.S. Rt. 76 is 45 miles south of the Borough. Freight and passenger railroad service is provided by Consolidated Rail Corporation. Utilities Public sewer and water facilities are supplied to all Borough residents. Sewage is treated A-5

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36 APPENDIX B Form of Bond Counsel Opinion

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38 APPENDIX C Specimen of Municipal Bond Insurance Policy

39 Assured Guaranty Corp Avenue of the Americas New York, NY t Financial Guaranty Insurance Policy Issuer: Policy No.: Obligations: Premium: Effective Date: Assured Guaranty Corp., a Maryland corporation ( Assured Guaranty ), in consideration of the payment of the Premium and on the terms and subject to the conditions of this Policy (which includes each endorsement hereto), hereby unconditionally and irrevocably agrees to pay to the trustee (the Trustee ) or the paying agent (the Paying Agent ) for the Obligations (as set forth in the documentation providing for the issuance of and securing the Obligations) for the benefit of the Holders, that portion of the Insured Payments which shall become Due for Payment but shall be unpaid by reason of Nonpayment. Assured Guaranty will make such Insured Payments to the Trustee or the Paying Agent on the later to occur of (i) the date applicable principal or interest becomes Due for Payment, or (ii) the Business Day next following the day on which Assured Guaranty shall have Received a completed Notice of Nonpayment. If a Notice of Nonpayment by Assured Guaranty is incomplete or does not in any instance conform to the terms and conditions of this Policy, it shall be deemed not Received, and Assured Guaranty shall promptly give notice to the Trustee or the Paying Agent. Upon receipt of such notice, the Trustee or the Paying Agent may submit an amended Notice of Nonpayment. The Trustee or the Paying Agent will disburse the Insured Payments to the Holders only upon receipt by the Trustee or the Paying Agent, in form reasonably satisfactory to it of (i) evidence of the Holder's right to receive such payments, and (ii) evidence, including without limitation any appropriate instruments of assignment, that all of the Holder's rights to payment of such principal or interest Due for Payment shall thereupon vest in Assured Guaranty. Upon and to the extent of such disbursement, Assured Guaranty shall become the Holder of the Obligations, any appurtenant coupon thereto and right to receipt of payment of principal thereof or interest thereon, and shall be fully subrogated to all of the Holder's right, title and interest thereunder, including without limitation the right to receive payments in respect of the Obligations. Payment by Assured Guaranty to the Trustee or the Paying Agent for the benefit of the Holders shall discharge the obligation of Assured Guaranty under this Policy to the extent of such payment. This Policy is non-cancelable by Assured Guaranty for any reason. The Premium on this Policy is not refundable for any reason. This Policy does not insure against loss of any prepayment premium or other acceleration payment which at any time may become due in respect of any Obligation, other than at the sole option of Assured Guaranty, nor against any risk other than Nonpayment. Except to the extent expressly modified by any endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. Avoided Payment means any amount previously distributed to a Holder in respect of any Insured Payment by or on behalf of the Issuer, which amount has been recovered from such Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction that such payment constitutes an avoidable preference with respect to such Holder. Business Day means any day other than (i) a Saturday or Sunday, (ii) any day on which the offices of the Trustee, the Paying Agent or Assured Guaranty are closed, or (iii) any day on which banking institutions are authorized or required by law, executive order or governmental decree to be closed in the City of New York or in the State of Maryland. Due for Payment means (i) when referring to the principal of an Obligation, the stated maturity date thereof, or the date on which such Obligation 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 a call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless Assured Guaranty in its sole discretion elects to make any principal payment, in whole or in part, on such earlier date) and (ii) when referring to interest on an Obligation, the stated date for payment of such interest. Holder means, in respect of any Obligation, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Obligation to payment of principal or interest thereunder, except that Holder shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Obligations. Insured Payments means that portion of the principal of and interest on the Obligations that shall become Due for Payment but shall be unpaid by reason of Nonpayment. Insured Payments shall not include any additional amounts owing by the Issuer solely as a result of the failure by the Trustee or the Paying Agent to pay such amount when due and payable, including without limitation any such additional amounts as may be attributable to penalties or to interest accruing at a default rate, to amounts payable in respect of indemnification, or to any other additional amounts payable by the Trustee or the Paying Agent by reason of such failure. Nonpayment means, in respect of an Obligation, the failure of the Issuer to have provided sufficient funds to the Trustee or the Paying Agent for payment in full of all principal and interest Due for Payment on such Obligation. It is further understood that the term "Nonpayment" in respect of an Obligation includes any Avoided Payment. Receipt or Received means actual receipt or notice of or, if notice is given by overnight or other delivery service, or by certified or registered United States mail, by a delivery receipt signed by a person authorized to accept delivery on behalf of the person to whom the notice was given. Notices to Assured Guaranty may be mailed by registered mail or personally delivered or telecopied to it at 1325 Avenue of the Americas, New York, New York 10019, Telephone Number: (212) , Facsimile Number: (212) , Attention: Risk Management Department Public Finance Surveillance, with a copy to the General Counsel, or to such other address as shall be specified by Assured Guaranty to the Trustee or the Paying Agent in writing. A Notice of Nonpayment will be deemed to be Received by Assured Guaranty on a given Business Day if it is Received prior to 12:00 noon (New York City time) on such Business Day; otherwise it will be deemed Received on the Page 1 of 2 Form FG001 (05/07)