GWINNETT COUNTY WATER AND SEWERAGE AUTHORITY (GEORGIA)

Transcription

1 NEW ISSUE BOOK-ENTRY ONLY Ratings: Moody s: Aaa S&P: AAA Fitch: AAA (See MISCELLANEOUS Ratings herein) In the opinion of Bond Counsel, under existing statutes, rulings and other court decisions and under applicable regulations, interest on the Series 2011 Bonds is excludable from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. See TAX TREATMENT OF SERIES 2011 BONDS Federal Tax Exemption herein. In the opinion of Bond Counsel, under existing law, interest on the Series 2011 Bonds is exempt from all present State of Georgia income taxation. See TAX TREATMENT OF SERIES 2011 BONDS State Tax Exemption herein. GWINNETT COUNTY WATER AND SEWERAGE AUTHORITY (GEORGIA) $163,615,000 Revenue Refunding Bonds Series 2011 Dated: Date of Delivery Due: August 1, as shown on inside cover The Gwinnett County Water and Sewerage Authority (the Authority ) will issue its Revenue Refunding Bonds, Series 2011 (the Series 2011 Bonds ) in registered form in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York. The Series 2011 Bonds will be initially available for purchase in book-entry form only, in denominations of $5,000 or any integral multiple thereof. Interest on the Series 2011 Bonds is payable semiannually on February 1 and August 1, beginning August 1, Payments of principal of, premium, if any, and interest on the Series 2011 Bonds will be made by The Bank of New York Mellon Trust Company, N.A., as paying agent, directly to Cede & Co., as nominee for DTC, as registered owner of the Series 2011 Bonds, to be subsequently disbursed to DTC Participants and thereafter to the beneficial owners of the Series 2011 Bonds, all as further described herein. The Series 2011 Bonds are subject to redemption prior to their respective maturities as described herein. The Series 2011 Bonds are limited, special obligations of the Authority payable from certain lease payments to be received by the Authority pursuant to an Amended and Restated Lease Contract, dated as of November 1, 1985 (the Original Lease ), as amended and supplemented, including by a 2011 Supplemental Lease, dated as of July 1, 2011 (the Original Lease, as amended and supplemented, the Lease ), each between Gwinnett County, Georgia (the County ) and the Authority and other moneys pledged under a Trust Indenture, dated as of October 1, 2004 (the Original Indenture ), as supplemented, including by the Fifth Supplemental Trust Indenture, dated as of July 1, 2011 (the Original Indenture, as supplemented, the Indenture ), each between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee. The Lease obligates the County to make certain payments to the Authority, including payments sufficient to enable the Authority to pay the principal of and interest on all indebtedness secured by the hereinafter defined Net Revenues (including certain outstanding revenue bonds of the Authority and the Series 2011 Bonds). The County s obligations under the Lease are absolute and unconditional and are secured by a pledge of the gross revenues derived from the operation of the County s water and sewerage system (the System ), less reasonable costs of operating, maintaining and repairing the System (the Net Revenues ) and by a pledge of the County s full faith and credit and taxing power, but the pledge of the Net Revenues under the Lease with respect to the Authority s Existing Indenture Bonds (hereinafter defined) and the Series 2011 Bonds is expressly junior and subordinate to the pledge of Net Revenues with respect to the Authority s first lien revenue bonds currently outstanding in the aggregate principal amount of $33,140,000 (excluding the hereinafter defined Series 2003B Bonds that are being refunded). (See SECURITY FOR THE SERIES 2011 BONDS. ) The Series 2011 Bonds are being issued on a parity as to the lien on the lease payments with the Authority s Refunding Revenue Bonds, Series 2005 in the aggregate outstanding principal amount of $257,380,000, the Authority s Refunding Revenue Bonds, Series 2006 in the aggregate outstanding principal amount of $119,255,000, the Authority s Revenue Bonds, Series 2008 in the aggregate outstanding principal amount of $190,000,000, the Authority s Revenue Bonds, Series 2009A in the aggregate outstanding principal amount of $227,475,000 and the Authority s Taxable Revenue Bonds (Recovery Zone Economic Development Bonds), Series 2009B in the aggregate outstanding principal amount of $23,955,000 (collectively, the Existing Indenture Bonds ). The proceeds of the sale of the Series 2011 Bonds will be used to (i) refund all or a portion of the Authority s Revenue Bonds, Series 2003B (the Series 2003B Bonds ) and (ii) pay costs of issuing the Series 2011 Bonds. (See PLAN OF FINANCE Estimated Sources and Uses of Funds and Refunding Plan ). The Series 2011 Bonds do not constitute a debt or pledge of the faith and credit of the State of Georgia or any political subdivision thereof, including the County, except to the extent provided in the Lease. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. The Series 2011 Bonds are offered when, as and if issued by the Authority and accepted by the Underwriters, subject to prior sale, to the withdrawal or modification of the offer without notice, subject to validation by the Superior Court of Gwinnett County, Georgia, and subject to approval of legality by King & Spalding LLP, Atlanta, Georgia, Bond Counsel. Certain legal matters will be passed upon for the Authority and the County by their disclosure counsel, King & Spalding LLP, for the Authority by its counsel, Webb, Tanner, Powell, Mertz & Wilson, LLP, Lawrenceville, Georgia, for the County by Van Stephens, Acting County Attorney and for the Underwriters by their counsel, Sutherland Asbill & Brennan LLP. The Series 2011 Bonds are expected to be delivered through The Depository Trust Company in New York, New York on or about July 1, J.P. Morgan Dated: June 28, 2011 Morgan Keegan

2 MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, AND PRICES OR YIELDS $163,615,000 Gwinnett County Water and Sewerage Authority Revenue Refunding Bonds, Series 2011 Maturity (August 1) Principal Amount Interest Rate Yield CUSIP 2014 $2,390, % 0.74% HX ,000, JG ,115, JR ,045, HY , JH ,090, JS , HZ ,760, JJ ,290, JA ,675, JK ,455, JL , JB ,770, JM ,725, JN ,115, JC ,295, JP ,110, JQ ,870, JD ,660, JE ,490, JF9

3 GWINNETT COUNTY, GEORGIA BOA OF COMMISSIONERS OF GWINNETT COUNTY Charlotte J. Nash, Chairman Shirley Lasseter, Commissioner Lynnette Howard, Commissioner Mike Beaudreau, Commissioner John Heard, Commissioner GWINNETT COUNTY WATER AND SEWERAGE AUTHORITY Michael L. Sullivan, Chairman Rich Edinger, Secretary Laurie McClain, Member Howard Eggert, Member Daniel Wagner, Member COUNTY ADMINISTRATOR Glenn P. Stephens DEPUTY COUNTY ADMINISTRATOR/CHIEF FINANCIAL OFFICER Aaron J. Bovos COUNTY CLERK Diane Kemp DEPUTY COUNTY CLERK Marie Dickey DIRECTOR OF FINANCIAL SERVICES Maria B. Woods DEPARTMENT OF WATER RESOURCES DIRECTOR Lynn Smarr, Acting Director The following serve as advisors, auditors and counsel to the County and the Authority in connection with the Series 2011 Bonds: LEGAL COUNSEL TO THE AUTHORITY Webb, Tanner, Powell, Mertz & Wilson, LLP Lawrenceville, Georgia FINANCIAL ADVISOR Public Financial Management Atlanta, Georgia ACTING COUNTY ATTORNEY Van Stephens Lawrenceville, Georgia BOND AND DISCLOSURE COUNSEL King & Spalding LLP Atlanta, Georgia AUDITORS Mauldin & Jenkins, LLC Atlanta, Georgia

4 No dealer, broker, salesman or other person has been authorized to give any information or to make any representations, other than those contained in this Official Statement in connection with the offering contained herein, and if given or made, such other information or representations must not be relied upon. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2011 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information contained in this Official Statement has been obtained from representatives of the Authority and the County, public documents, records and other sources considered to be reliable. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. The delivery of this Official Statement at any time does not imply that any information herein is correct as of any time subsequent to its date. Any statements in this Official Statement involving estimates, assumptions and matters of opinion, whether or not so expressly stated, are intended as such and not representations of fact. The Preliminary Official Statement has been deemed final by the County and the Authority within the meaning of Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Act of 1934, as amended. The CUSIP numbers are included in this Official Statement for the convenience of the holders and potential holders of the Series 2011 Bonds. No assurance can be given that the CUSIP numbers for a particular maturity of Series 2011 Bonds will remain the same after the date of issuance and delivery of the Series 2011 Bonds. None of the Authority, the County, the Bond Registrar or the Underwriters assume any responsibility for the accuracy of such numbers. THE SERIES 2011 BONDS ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE NOT LISTED ON ANY STOCK OR OTHER SECURITIES EXCHANGE, AND NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY FEDERAL, STATE, MUNICIPAL OR OTHER GOVERNMENTAL AGENCY HAS OR WILL PASS UPON THE ACCURACY, COMPLETENESS OR ADEQUACY OF THIS OFFICIAL STATEMENT. THE INDENTURE HAS NOT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACT. The Series 2011 Bonds have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this Official Statement. Any representation to the contrary is a criminal offense. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2011 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or holders of any of the Series 2011 Bonds. All quotations from and summaries and explanations of provisions of laws and documents herein do not purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions. All estimates and assumptions contained herein are believed to be reasonable, but no representation is made that such estimates or assumptions are correct or will be realized. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the parties referred to above since the date hereof. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sales of the Series 2011 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.

5 Cautionary Statements Regarding Forward-Looking Statements in This Official Statement Certain statements included or incorporated by reference in this Official Statement constitute forwardlooking statements. Such statements are generally identifiable by the terminology used such as expects, forecasts, projects, intends, anticipates, estimates, or similar words. Such forward-looking statements include, among others, the information contained in the table entitled Gwinnett County Water and Sewerage System Projected Net Revenues and Debt Service Coverage and in the tables found in the section GWINNETT COUNTY - Pensions and Employee Benefits in this Official Statement. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWA-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWA-LOOKING STATEMENTS. THE AUTHORITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWA-LOOKING STATEMENTS IF OR WHEN CHANGES TO ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED, OCCUR.

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7 TABLE OF CONTENTS INTRODUCTION... 1 The Authority and the County... 1 The Lease... 1 The Prior Bonds... 2 Purpose of the Series 2011 Bonds... 2 Description of the Bonds... 2 Tax Exemption... 3 Professionals Involved in the Offering... 3 Authority for Issuance... 3 Offering and Delivery of the Series 2011 Bonds... 4 Continuing Disclosure... 4 General... 4 PLAN OF FINANCE... 5 Estimated Sources and Uses of Funds... 5 Refunding Plan... 5 ESTIMATED COMBINED DEBT SERVICE SCHEDULE... 6 THE SERIES 2011 BONDS... 6 Terms, Registration and Transfer... 6 Redemption Prior to Maturity... 7 Redemption Procedures and Redemption Notice... 8 Book-Entry System of Registration... 8 SECURITY FOR THE SERIES 2011 BONDS General Revenue Fund and Lease Payments Additional Bonds THE AUTHORITY General Management THE SYSTEM General The Water System The Sewerage System Summary of Operating Results Financial Operations of Water and Sewerage System Gwinnett County Capital Improvement Plan GWINNETT COUNTY General General Fund History Financial Operations of County General Fund Accounting Policies and Budgetary Process Budget Pensions and Employee Benefits Summary of County Direct and Overlapping Debt By Category Debt Ratios Limitations on County Debt Property Tax Levies and Collections Property Reappraisal Property Tax Rates Page

8 Ten Largest Taxpayers TAX TREATMENT OF SERIES 2011 BONDS Federal Tax Matters State Tax Matters LEGAL MATTERS Pending Litigation Validation Approval of Legal Proceedings MISCELLANEOUS Ratings Underwriting Continuing Disclosure Information in the Appendices CERTIFICATION APPENDIX A Basic Financial Statements of Gwinnett County for the Year Ended December 31, 2010 APPENDIX B Gwinnett County Economic and General Information APPENDIX C Form of Bond Counsel Opinion APPENDIX D Summary of Principal Documents APPENDIX E Form of Continuing Disclosure Agreement ii

9 GWINNETT COUNTY WATER AND SEWERAGE AUTHORITY (GEORGIA) $163,615,000 Revenue Refunding Bonds Series 2011 INTRODUCTION This Official Statement provides certain information concerning the $163,615,000 in aggregate principal amount of Revenue Refunding Bonds, Series 2011 (the Series 2011 Bonds ) to be issued by the Gwinnett County Water and Sewerage Authority (the Authority ). This introduction is not a summary of this Official Statement and is intended only for quick reference. It is only a brief description of and guide to, and is qualified in its entirety by reference to, more complete and detailed information contained in the entire Official Statement, including the cover page and the Appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement and of the documents summarized or described herein, if necessary. The offering of the Series 2011 Bonds to potential investors is made only by means of the entire Official Statement, including the Appendices hereto. No person is authorized to detach this Introduction from the Official Statement or to otherwise use it without the entire Official Statement including the Appendices hereto. The Authority and the County The Authority was established in 1970 for the primary purpose of financing, constructing and operating water treatment and transmission facilities designed to serve the rapidly growing requirements of Gwinnett County, Georgia (the County ). (See THE AUTHORITY. ) The County is a political subdivision of the State of Georgia. (See GWINNETT COUNTY. ) The Lease The Authority and the County have previously entered into a Lease Contract, dated as of November 1, 1985 (the 1985 Lease ), as amended and supplemented from time to time, including the 2011 Supplemental Lease Contract, dated as of July 1, 2011 (the 2011 Supplemental Lease ), for a period not to exceed 50 years, pursuant to which the Authority leased to the County all of its water and sewerage facilities (including those facilities acquired from the County). The 1985 Lease, as amended and supplemented, is hereinafter referred to as the Lease. The facilities so leased, together with all water and sewerage facilities thereafter and hereafter acquired by the Authority and all other facilities used by the County in furnishing water and sewerage services, but excluding facilities decommissioned or sold in the ordinary course of business, are hereinafter referred to as the System. The County manages and operates the System under the terms of the Lease. (See 1985 Lease and Supplemental Lease Contracts in APPENDIX D.) The County is obligated under the Lease to make certain payments to the Authority, including payments sufficient to enable the Authority to pay the principal of and interest on all Obligations (as hereinafter defined) issued by the Authority (including the Series 2011 Bonds and the Existing Indenture Bonds hereinafter defined). The obligations of the County under the Lease are absolute and unconditional and are secured by (i) a pledge of the gross revenues of the System derived from the operation of the System, less the reasonable and necessary cost of operating, maintaining and repairing the System (the Net Revenues ) and (ii) by a pledge of the County s full faith and credit and taxing power. [Remainder of page intentionally left blank.] 1

10 The Prior Bonds Prior to 2004, the Authority issued various series of water and sewerage revenue bonds to finance or refinance improvements to and expansions of the System. Such bonds, which were issued under a Bond Resolution dated as of September 1, 1985 (the 1985 Resolution ), have a first lien on the payments received by the Authority under the Lease and are referred to in this Official Statement as the First Lien Bonds. Pursuant to the Indenture (hereinafter defined), the Authority has abrogated its right to issue additional First Lien Bonds and has closed the lien of the 1985 Resolution. The Series 2011 Bonds are being issued on a parity as to the lien on the lease payments with the Authority s Refunding Revenue Bonds, Series 2005 in the aggregate outstanding principal amount of $257,380,000 (the Series 2005 Bonds ), the Authority s Refunding Revenue Bonds, Series 2006 in the aggregate outstanding principal amount of $119,255,000 (the Series 2006 Bonds ), the Authority s Revenue Bonds, Series 2008 in the aggregate outstanding principal amount of $190,000,000 (the Series 2008 Bonds ), the Authority s Revenue Bonds, Series 2009, in the aggregate outstanding principal amount of $227,475,000 (the Series 2009A Bonds ), and the Authority s Taxable Revenue Bonds (Recovery Zone Economic Development Bonds), Series 2009B, in the aggregate outstanding principal amount of $23,955,000 (the Series 2009B Bonds ). The Series 2005 Bonds, Series 2006 Bonds, Series 2008 Bonds, Series 2009A Bonds and Series 2009B Bonds are referred to herein as the Outstanding Second Lien Bonds and together with the Series 2011 Bonds are collectively referred to herein as the Second Lien Bonds. The pledge of the Net Revenues of the System with respect to the Second Lien Bonds under the Lease is expressly junior and subordinate to the pledge of Net Revenues with respect to the First Lien Bonds. The First Lien Bonds and the Outstanding Second Lien Bonds are collectively referred to herein as the Prior Bonds. The Series 2011 Bonds, the Prior Bonds and any Additional Bonds (as hereinafter defined) issued by the Authority on a parity with the Second Lien Bonds are collectively referred to herein as the Bonds. Pursuant to the Indenture, the Authority has pledged its rights under the Lease (subject to the rights of the holders of First Lien Bonds) and the Subordinate Lease Payments due thereunder as security for the Series 2011 Bonds and obligations issued by the Authority on a parity with the Outstanding Second Lien Bonds (including the Series 2011 Bonds). (See 1985 Lease, Supplemental Lease Contracts and Trust Indenture in APPENDIX D.) Pursuant to the Indenture, the Authority has abrogated its right to issue any additional revenue bonds on a parity with the First Lien Bonds. After giving effect to the bond issuance contemplated herein, the First Lien Bonds outstanding (other than the hereinafter defined Series 2003B Bonds, all or a portion of which are being refunded by the Series 2011 Bonds) as of June 1, 2011 (capital appreciation bonds are valued at their accreted amounts as of August 1, 2010) in the aggregate principal amount of $33,140,000, the Outstanding Second Lien Bonds in the outstanding aggregate principal amount of $818,065,000 and the Series 2011 Bonds will be the only outstanding indebtedness of the Authority. (See ESTIMATED COMBINED DEBT SERVICE SCHEDULE. ) Purpose of the Series 2011 Bonds The proceeds from the sale of the Series 2011 Bonds will be used by the Authority for the purpose of (i) refunding all or a portion of its $200,000,000 in original aggregate principal amount Revenue Bonds, Series 2003B (the Series 2003B Bonds ), which are currently outstanding in the principal amount of $200,000,000, and (ii) paying the costs of issuance related to the Series 2011 Bonds. (See PLAN OF FINANCE Refunding Plan. ) Description of the Bonds Redemption Prior to Maturity. The Series 2011 Bonds are subject to optional redemption prior to their maturity. (See THE SERIES 2011 BONDS Optional Redemption. ) Denominations. The Series 2011 Bonds are issuable in denominations of $5,000 and integral multiples thereof. 2

11 Registration, Transfers and Exchanges. The Series 2011 Bonds will be issued in fully registered form. When in book-entry form, the purchasers of the Series 2011 Bonds (the Beneficial Owners ) will not receive certificates representing their ownership interest in the Series 2011 Bonds. Instead, such Series 2011 Bonds will be held by a securities depository, initially The Depository Trust Company ( DTC ), New York, New York and registered in the name of DTC or its nominee, Cede & Co. Any transfer or exchange of the ownership interest in Series 2011 Bonds held in book-entry form will be made through computerized book-entry changes on the books of DTC through DTC s Direct and Indirect Participants in the manner described herein under THE SERIES 2011 BONDS Book-Entry System of Registration. Payments. Interest on the Series 2011 Bonds is payable on February 1 and August 1 of each year (each such date, an Interest Payment Date ), commencing August 1, Payment of the principal of and interest on the Series 2011 Bonds will be made by the Paying Agent directly to Cede & Co., as nominee of DTC, and will subsequently be disbursed to Participants hereinafter defined) and thereafter to Beneficial Owners of the Series 2011 Bonds. See THE SERIES 2011 BONDS Terms, Registration and Transfer. Tax Exemption In the opinion of Bond Counsel, under existing laws, regulations and judicial decisions, and assuming continued compliance by the Authority and the County with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal individual and corporate alternative minimum tax; however, such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. In addition, in the opinion of Bond Counsel, interest on the Bonds is exempt from present State of Georgia income taxation. See APPENDIX C hereto for the form of the opinion Bond Counsel proposes to deliver in connection with the issuance of the Bonds. For more complete discussion of such opinion and certain other tax consequences of owning the Bonds, including certain exceptions to the exclusion of the interest on the Bonds from gross income, see TAX TREATMENT OF SERIES 2011 BONDS. Professionals Involved in the Offering Certain legal matters pertaining to the Authority and its authorization and issuance of the Series 2011 Bonds are subject to the approving opinion of King & Spalding LLP, Atlanta, Georgia, Bond Counsel. Copies of such opinion will be available at the time of delivery of the Series 2011 Bonds, and a copy of the proposed form of such opinion is attached hereto as APPENDIX C. Certain legal matters will be passed on for the Authority by its counsel, Webb, Tanner, Powell, Mertz & Wilson, LLP, Lawrenceville, Georgia, and for the County by its counsel, Van Stephens, Acting County Attorney. Certain matters will be passed on by King & Spalding LLP, Atlanta, Georgia, as Disclosure Counsel. The financial statements of the County attached hereto as APPENDIX A have been audited by Mauldin & Jenkins, Certified Public Accountants, LLC, Atlanta, Georgia, to the extent and for the period indicated in their report thereon which appears in APPENDIX A hereto. Authority for Issuance The Series 2011 Bonds are issued under the authority of Article IX, Section III, Paragraph I of the Constitution of Georgia, the Revenue Bond Law (O.C.G.A through ), as amended, and pursuant to resolutions of the Authority authorizing the issuance of the Series 2011 Bonds, adopted on September 20, 2010 and May 23, 2011, as supplemented by a resolution adopted by the Authority on June 28, 2011 (the Bond Resolution ), and a Trust Indenture, dated as October 1, 2004 (the Original Indenture ), as supplemented, including by a Fifth Supplemental Indenture, dated as of July 1, 2011 (the Fifth Supplemental Indenture and the Original Indenture, as so supplemented, the Indenture ), between the Authority and The Bank of New York Mellon Trust Company, N.A. as Trustee (the Trustee ). Pursuant to resolutions adopted October 5, 2010 and May 24, 2011, as supplemented by a resolution adopted on June 28, 2011, the County consented to the issuance of the Series 2011 Bonds, authorized the execution of the 2011 Supplemental Lease and ratified and reaffirmed all of the terms, covenants and provisions of the Lease. 3

12 Offering and Delivery of the Series 2011 Bonds The Series 2011 Bonds are offered when, as, and if issued by the Authority and accepted by the original purchaser thereof, subject to prior sale, to the withdrawal or modification of the offer without notice and subject to the approving opinion of King & Spalding LLP, Bond Counsel. The Series 2011 Bonds in definitive form are expected to be delivered through The Depository Trust Company, New York, New York, on or about July 1, Continuing Disclosure The County and the Authority have covenanted for the benefit of the owners of the Bonds in a Continuing Disclosure Agreement (the Disclosure Agreement ) to comply with certain covenants in order to assist the original purchaser in complying with Securities and Exchange Commission Rule 15c2-12 (the Rule ). See MISCELLANEOUS Continuing Disclosure herein. General This Official Statement speaks only as of its date, and the information contained herein is subject to change. This Official Statement and the Appendices hereto contain brief descriptions of, among other matters, the Authority, the System, the County, the Series 2011 Bonds, the Lease, the Indenture and the security and sources of payment for the Series 2011 Bonds. Such descriptions and information do not purport to be comprehensive or definitive. The summaries of various constitutional provisions, statutes, the Lease, the Indenture and other documents are intended as summaries only and are qualified in their entirety by reference to such provisions, statutes, and documents; additionally, references herein to the Series 2011 Bonds are qualified in their entirety to the form thereof included in the Indenture. Copies of the Lease, the Indenture and other documents and information are available upon request, and upon payment to the Authority of a charge for copying, mailing and handling, from Susan Paul, Gwinnett County Finance Department, 75 Langley Drive, Lawrenceville, Georgia 30046, telephone: During the period of the offering of the Series 2011 Bonds, copies of such documents are available upon request and upon payment of a charge for copying, mailing, and handling from Public Financial Management, 600 Peachtree Street, NE, Atlanta, Georgia 30308, Phone: [Remainder of page intentionally left blank] 4

13 PLAN OF FINANCE Estimated Sources and Uses of Funds The proceeds of the sale of the Series 2011 Bonds will be used to (i) refund all or a portion of the Series 2003B Bonds currently outstanding in the aggregate principal amount of $200,000,000 and (ii) pay costs of issuing the Series 2011 Bonds. The sources and application of funds in connection with the issuance of the Series 2011 Bonds are estimated below: Sources of Funds: Principal Amount of the Series 2011 Bonds $163,615,000 Net Original Issue Premium 26,101,787 Total Sources of Funds: $189,716,787 Uses of Funds: Deposit to Escrow Fund for Series 2003B Bonds $188,873,037 Costs of Issuance (1) 405,020 Underwriter s Discount 438,729 Total Uses of Funds $189,716,787 (1) Refunding Plan Includes legal, ratings, advisory, printing services, validation costs and miscellaneous transaction costs. The Series 2003B Bonds were issued pursuant to the 1985 Resolution, as supplemented on April 21, 2003 and May 19, 2003 (collectively, the Bond Resolution ). The Series 2003B Bonds were issued to (i) finance certain extensions, additions and improvements to the System and (ii) pay costs of issuance related thereto. The Series 2003B Bonds are currently outstanding in an amount equal to $200,000,000. A portion of the proceeds from the sale of the Series 2011 Bonds will be used to advance refund the Series 2003B Bonds maturing on August 1, 2014 through August 1, 2025 in an amount equal to $170,360,000. Such proceeds of the sale of the Series 2011 Bonds will be irrevocably deposited with The Bank of New York Mellon Trust Company, N.A., as escrow agent (the Escrow Agent ), pursuant to an Escrow Deposit Agreement, dated as of July 1, 2011 (the Escrow Deposit Agreement ), between the Authority and the Escrow Agent, and will be applied by the Escrow Agent to the open market purchase of certain direct non-callable obligations of the United States of America (the Escrow Obligations ). The Escrow Obligations will bear interest at such rate or rates and will be scheduled to mature at such times and in such amounts so that sufficient moneys will be available to pay when due the principal of and premium and interest on the outstanding Series 2003B Bonds until their earliest date of optional redemption, August 1, Upon such deposit, the Series 2003B Bonds will be considered defeased for all purposes under the Bond Resolution, and the Authority s liability with respect thereto will be limited to the Escrow Obligations and cash deposited in the escrow fund. The Arbitrage Group, Inc. will verify the mathematical accuracy of certain computations with respect to the sufficiency for such purpose of the Escrow Obligations and cash on deposit in the escrow fund. [Remainder of page intentionally left blank] 5

14 ESTIMATED COMBINED DEBT SERVICE SCHEDULE The following schedule presents the annual debt service requirements on the Prior Bonds and the Series 2011 Bonds on a calendar year basis. Year Ending December 31 Debt Service on Outstanding First Lien Bonds (1) Debt Service on Outstanding Second Lien Bonds Principal Amount Interest Payable Annual Total Combined Total 2011 $11,699,294 $51,670,303 - $ 655,492 $ 655,492 $64,025, ,943,588 68,679,205-7,865,900 7,865,900 89,488, ,857,338 78,592,524-7,865,900 7,865,900 97,315, ,648,899 $10,505,000 7,865,900 18,370,900 97,019, ,323,224 10,935,000 7,432,350 18,367,350 96,690, ,441,661 11,410,000 6,954,950 18,364,950 96,806, ,332,074 11,965,000 6,403,950 18,368,950 96,701, ,225,974 12,455,000 5,911,500 18,366,500 96,592, ,754,361 13,080,000 5,288,750 18,368,750 78,123, ,753,249 13,725,000 4,640,950 18,365,950 78,119, ,756,836 14,410,000 3,954,700 18,364,700 78,121, ,754,905 15,110,000 3,256,500 18,366,500 78,121, ,762,543 15,870,000 2,501,000 18,371,000 78,133, ,755,230 16,660,000 1,707,500 18,367,500 78,122, ,758,655 17,490, ,500 18,364,500 78,123, ,221, ,221, ,216, ,216, ,513, ,513, ,042, ,042,548 Totals $35,500,219 $1,140,203,357 $163,615,000 $73,179,842 $236,794,842 $1,412,498,417 (1) Excludes the portion of the Series 2003B Bonds being refunded by the Series 2011 Bonds. Terms, Registration and Transfer THE SERIES 2011 BONDS The Series 2011 Bonds will be dated their date of delivery and will bear interest from their date at the rates per annum set forth on the inside cover page hereof, payable semiannually on February 1 and August 1 of each year beginning August 1, The Series 2011 Bonds will mature annually on August 1, in the years and in the principal amounts set forth on the inside cover page of this Official Statement, subject to redemption in whole or in part as described herein. The Series 2011 Bonds will be issued in book-entry form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ). (See Book-Entry Only below.) The Series 2011 Bonds will be issued initially as one registered bond for each interest rate and maturity, registered to Cede & Co. Beneficial interests in such Series 2011 Bonds will be available to be purchased in denominations of $5,000 or any integral multiple thereof. The principal of and premium, if any, and interest on the Series 2011 Bonds will be payable in lawful money of the United States of America. Except as may otherwise be provided in the Indenture, the principal and redemption premium (if any) of all Series 2011 Bonds shall be payable only at the Principal Office of the Paying Agent, and the payment of the interest on all Series 2011 Bonds shall be made by the Paying Agent on each 6

15 February 1 and August 1 (an Interest Payment Date ) to the person appearing on the Bond Register of the Authority as the registered owner thereof on the fifteenth day of the calendar month next preceding each February 1 and August 1 (a Record Date ), by check or draft mailed or otherwise delivered to such registered owner at his address as it appears on such Bond Register. Payment of the principal of and redemption premium (if any) on all Series 2011 Bonds shall be made upon the presentation and surrender of such Series 2011 Bonds as the same shall become due and payable. The person in whose name any Series 2011 Bond is registered at the close of business on any Record Date with respect to any Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date notwithstanding the cancellation of such Series 2011 Bond upon any registration of transfer or exchange thereof subsequent to the Record Date and prior to such Interest Payment Date. So long as the Series 2011 Bonds are in book entry form, principal of and premium, if any, and interest on the Series 2011 Bonds will be paid to Cede & Co., DTC s partnership nominee, as the registered owner of the Series 2011 Bonds. (See Book-Entry Only below.) Subject to the provisions of the Indenture relating to the registration of transfer of ownership of Series 2011 Bonds held in the Book-Entry System, Series 2011 Bonds may be registered as transferred on the books of registration kept by the Registrar by the holder in person or by his duly authorized attorney or legal representative, upon surrender thereof, together with a written instrument of transfer executed by the holder or his duly authorized attorney or legal representative. Upon surrender for registration of transfer of any Series 2011 Bond with all partial redemptions endorsed thereon at the principal office of the Registrar, the Authority will execute and the Authenticating Agent will authenticate and deliver in the name of the transferee or transferees a new Series 2011 Bond or Bonds of the same maturity, interest rate, aggregate principal amount and tenor and in denominations of $5,000 or any integral multiple thereof and numbered consecutively in order of issuance according to the records of the Registrar. Such registrations of transfer or exchanges of Series 2011 Bonds shall be without charge to the holders of such Series 2011 Bonds, but any taxes, other governmental charges or related fees required to be paid with respect to the same shall be paid by the holder of the Series 2011 Bond requesting such registration of transfer or exchange as a condition precedent to the exercise of such privilege. In the event any Series 2011 Bond is mutilated, lost, stolen or destroyed, the Authority will cause to be executed, and the Authenticating Agent will authenticate and deliver, a new Series 2011 Bond of like tenor, date, maturity, interest rate and denomination and bearing the same number as that mutilated, lost, stolen, or destroyed; provided that, in the case of any mutilated Series 2011 Bond, such mutilated Series 2011 Bond shall first be surrendered to the Trustee, and in the case of any lost, stolen or destroyed Series 2011 Bond, there shall be furnished to the Trustee evidence of such loss, theft or destruction satisfactory to the Trustee and the Authority, together with indemnities satisfactory to them. Upon the issuance of any Series 2011 Bond pursuant to the provisions of this paragraph, the Authority and the Trustee may require the payment by the Bondholder requesting such replacement of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. The preceding two paragraphs are subject to the book-entry provisions applicable to the Series 2011 Bonds described below under the caption Book-Entry Only. Redemption Prior to Maturity Optional Redemption. The Series 2011 Bonds of each series maturing on and after August 1, 2022 may be redeemed at the direction of the Authority in whole or in part at any time on or after August 1, 2021, from any moneys which may be available for such purpose and deposited with the Trustee on or before the date fixed for redemption. The optional redemption of Series 2011 Bonds shall be made by the payment of the principal amount of the Series 2011 Bonds to be redeemed and accrued interest thereon to date of redemption, with no redemption premium applicable thereto. If the Series 2011 Bonds are called for optional redemption in part, then any Series 2011 Bonds so called for redemption shall be called in such maturities as may be specified by the Authority and if less than a full maturity by lot or in such other manner as may be designated by the Bond Registrar. 7

16 Redemption Procedures and Redemption Notice In the event of a redemption, subject to the terms of the Indenture, the Registrar will give notice, in the name of the Authority, of the redemption of Series 2011 Bonds, which notice shall (i) specify the Series 2011 Bonds to be redeemed, the redemption date or dates, the redemption price and the place where amounts due upon such redemption will be payable (which shall be the Principal Office of the Paying Agent), and any conditions to such redemption and, if less than all of the Series 2011 Bonds are to be redeemed, the numbers of the Series 2011 Bonds and the portions of such Series 2011 Bonds (in units of $5,000 or any integral multiple thereof only) so to be redeemed, and (ii) state that, on the redemption date or dates, assuming that the conditions to such redemption are satisfied, the Series 2011 Bonds to be redeemed shall cease to bear interest, such Series 2011 Bonds shall cease to be entitled to the benefits or security of the Indenture and the registered owners of such Series 2011 Bonds shall have no rights in respect of such Series 2011 Bonds or portions thereof so called for redemption except to receive payment of the redemption price therefore and the accrued interest thereon to the redemption date from the moneys deposited with the Trustee or the Paying Agent. Such notice may set forth any additional information relating to such redemption. Book-Entry System of Registration DTC will act as securities depository for the Series 2011 Bonds. The Series 2011 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each maturity of the Series 2011 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized bookentry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s 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 and Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2011 Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2011 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Series 2011 Bonds is discontinued. 8

17 To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2011 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 the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Series 2011 Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Trustee 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Series 2011 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Authority, or the Paying Agent or Bond Registrar, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Paying Agent or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority 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 providing its services as depository with respect to the Series 2011 Bonds at any time by giving reasonable notice to the Authority or Paying Agent or Bond Registrar. Under such circumstances, in the event that a successor depository is not obtained, Bonds are required to be printed and delivered. The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Authority believes to be reliable, but neither the Authority nor the Underwriters take any responsibility for the accuracy thereof. SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE SOLE REGISTERED OWNER OF THE SERIES 2011 BONDS, THE AUTHORITY AND THE PAYING AGENT WILL TREAT CEDE & CO. AS THE ONLY OWNER OF THE SERIES 2011 BONDS FOR ALL PURPOSES UNDER THE INDENTURE, INCLUDING RECEIPT OF ALL DISTRIBUTIONS ON THE SERIES 2011 BONDS, RECEIPT OF NOTICES, VOTING AND REQUESTING OR DIRECTING THE AUTHORITY OR THE PAYING AGENT TO TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS UNDER THE INDENTURE. NEITHER THE AUTHORITY NOR THE PAYING AGENT SHALL HAVE ANY RESPONSIBILITY OR OBLIGATION TO THE PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (A) THE ACCURACY OF ANY RECOS MAINTAINED BY DTC OR ANY PARTICIPANT WITH RESPECT TO ANY BENEFICIAL OWNERSHIP INTEREST IN ANY BONDS; (B) THE PAYMENT BY ANY PARTICIPANT OF ANY AMOUNT 9

18 DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE DISTRIBUTIONS ON THE SERIES 2011 BONDS; (C) THE DELIVERY OR TIMELINESS OF DELIVERY BY ANY PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO OWNERS OF THE SERIES 2011 BONDS INCLUDING, WITHOUT LIMITATION, ANY NOTICE OF PREPAYMENT; OR (D) OTHER ACTION TAKEN BY DTC OR CEDE & CO., AS REGISTERED OWNER. Beneficial Owners of the Series 2011 Bonds may experience some delay in their receipt of distributions of principal and interest on the Series 2011 Bonds since such distributions will be forwarded by the Paying Agent to DTC and DTC will credit such distributions to the accounts of Direct Participants which will thereafter credit them to the accounts of Beneficial Owners either directly or indirectly through Indirect Participants. Issuance of the Series 2011 Bonds in book-entry form may reduce the liquidity of the Series 2011 Bonds in the secondary trading market since investors may be unwilling to purchase Bonds for which they cannot obtain physical certificates. In addition, since transactions in the Series 2011 Bonds can be effected only through DTC, Direct Participants, Indirect Participants, and certain banks, the ability of a Beneficial Owner to pledge Bonds to persons or entities that do not participate in the DTC system, or otherwise to take action in respect of such Bonds, may be limited due to lack of a physical certificate. Beneficial Owners will not be recognized by the Paying Agent as registered owners for purposes of the Bond Resolution, and Beneficial Owners will be permitted to exercise the rights of registered owners only indirectly through DTC and the Direct or Indirect Participants. General SECURITY FOR THE SERIES 2011 BONDS The Series 2011 Bonds are limited, special obligations of the Authority. The Authority and the County have entered into the Lease, under which the Authority has leased that part of the System comprising the Leased Facilities to the County for a term extending through the date on which all of the Series 2011 Bonds and any Additional Bonds have been paid in full, but in no event later than October 1, 2060, and in consideration thereof the County has obligated itself to make the Subordinate Lease Payments to the Authority in amounts sufficient to enable the Authority to pay the principal of and interest on the Outstanding Second Lien Bonds, the Series 2011 Bonds and any Additional Bonds or Obligations issued by the Authority on a parity therewith as the same become due and payable either at maturity or by proceedings for mandatory redemption. The Leased Facilities consist of the System as it existed in 1985 plus all additions thereafter financed with the proceeds of bonds issued by the Authority and with other moneys, less any facilities decommissioned or sold in the ordinary course of business. Such Subordinate Lease Payments are to be paid by the County directly to the Sinking Fund No. 2 Custodian and deposited into the Sinking Fund No. 2. The revenues of the Authority representing the Subordinate Lease Payments from the County as provided in the Supplemental Lease have been pledged under the Indenture to the payment of the principal of and interest on the Outstanding Second Lien Bonds, the Series 2011 Bonds and any Additional Bonds or Obligations of the Authority on a parity therewith. Bonds. No debt service reserve or similar fund or account will be established with respect to the Series 2011 Revenue Fund and Lease Payments All revenue derived from ownership and operation of the System or from properties in connection therewith shall be collected by the County and deposited promptly into the Revenue Fund created pursuant to the Lease. (See 1985 LEASE Revenues and Funds Revenue Fund in APPENDIX D.) The County shall first pay from the Revenue Fund the reasonable and necessary costs of operating, maintaining and repairing the System, including salaries, wages, employee benefits, the payment of any contractual obligations incurred pertaining to the operation of the System, cost of materials and supplies, rentals (excluding Lease Payments) of leased property, real and personal, insurance premiums, audit fees, any incidental expenses of the Authority and such other charges as may properly be made for the purpose of operating, maintaining and repairing the System in accordance with sound business practice, but before making provision for depreciation, interest expense and amortization. The Net Revenues remaining in the Revenue Fund after the payment of such operating expenses, as provided in the Lease, 10

19 are next pledged to the payment of the Lease Payments under the 1985 Lease in respect of the First Lien Bonds. The Net Revenues remaining in the Revenue Fund after the payment of such Lease Payments in respect of the First Lien Bonds are pledged to the payment of the Subordinate Lease Payments. Such pledge of Net Revenues to the payment of Subordinate Lease Payments is expressly junior and subordinate to the pledge of Net Revenues to the payment of the Lease Payments under the 1985 Lease. After there have been paid from the Revenue Fund the sums required or permitted to be paid as set forth above with respect to operating, maintaining and repairing the System, on or before the last day of each month, the County shall (i) first, make the Basic Lease Payment in respect of First Lien Bonds, (ii) second, make the Supplemental Lease Payment in respect of First Lien Bonds, and (iii) subsequent thereto, make the Subordinate Lease Payments in respect of the Second Lien Bonds and any Additional Bonds to or on behalf of the Authority. The Basic Lease Payments and the Supplemental Lease Payments are payable directly to the Sinking Fund Custodian for deposit into the Debt Service Account and the Reserve Account, respectively. The Subordinate Lease Payments are payable directly to the Sinking Fund No. 2 Custodian for deposit into the Sinking Fund No. 2. The Lease requires the County to revise and adjust as often as it shall appear necessary the schedule of rates, fees and charges for water and sewerage services and facilities to produce funds sufficient to operate and maintain the System on a sound businesslike basis and to make the Lease Payments and the Subordinate Lease Payments as the same become due and payable. Pursuant to the Lease the County has covenanted that such rates, fees and charges, in addition to the foregoing requirements, shall be maintained at such level so as to produce Net Revenues equal to at least 1.2 times the Debt Service Requirement in the then current Sinking Fund Year and, taking into account amounts on deposit therein, to create and maintain by the end of such Sinking Fund Year a balance in the Renewal and Extension Fund of not less than $3,000,000 (except as described under 1985 LEASE Revenues and Funds Renewal and Extension Fund in APPENDIX D). For the purposes of this covenant, with respect to Second Lien Bonds issued as Variable Rate Obligations, the Debt Service Requirement for such Obligations shall be calculated at a rate equal to the lesser of: (i) the average annual interest rate on such Variable Rate Bonds for the 12 consecutive months preceding the date of calculation or, if such Variable Rate Bonds shall not have been outstanding for such period, the average annual interest rate on such Variable Rate Bonds for the period during which such Variable Rate Bonds shall have been outstanding, or if such Variable Rate Bonds have not yet been issued, the initial interest rate established for such Variable Rate Bonds and (ii) the average of the SIFMA Index for the 12 consecutive months preceding the date of calculation. Currently, there are no Variable Rate Bonds outstanding under the Indenture. With respect to Second Lien Bonds issued as Obligations subject to a Hedge Agreement, the following provisions shall apply for any period during which such Hedge Agreement is in effect: (a) with respect to Second Lien Bonds bearing interest at a Variable Rate which are subject to a Hedge Agreement providing for floating payments to be made to the Authority by the Qualified Hedge Provider in exchange for fixed payments to be made to the Qualified Hedge Provider by the Authority, such Second Lien Bonds shall be deemed to bear interest at the fixed rate used to calculate the fixed payments to be made by the Authority under such Hedge Agreement, provided that (i) the floating rate used to calculate the payments due from the Qualified Hedge Provider under such Hedge Agreement shall be either (A) equal to the actual Variable Rate from time to time applicable to the Second Lien Bonds or (B) based on the SIFMA Index or another objective interest rate index which the Authority has determined is reasonably expected to be comparable to (but not necessarily the same as) the Variable Rate in effect with respect to such Second Lien Bonds from time to time, and (ii) the floating amounts payable by the Qualified Hedge Provider are to be paid on or prior to each Interest Payment Date for such Second Lien Bonds; (b) with respect to Second Lien Bonds bearing interest at a fixed rate which are subject to a Hedge Agreement providing for fixed payments to be made to the Authority by the Qualified Hedge Provider in exchange for floating payments to be made to the Qualified Hedge Provider by the Authority, and provided the fixed amounts payable by the Qualified Hedge Provider are to be paid on or prior to each Interest Payment Date for such Second Lien Bonds, such Second Lien Bonds shall be deemed to bear interest at a Variable Rate and the provisions of the Indenture described in the preceding paragraph shall apply to the calculation of such interest for purposes of calculating the Debt Service Requirement for such Second Lien Bonds; however, clause (ii) of the preceding paragraph shall not apply to such calculation unless the floating amounts payable by the Authority under the Hedge Agreement are based on the SIFMA Index; and (c) with respect to any Second Lien Bonds subject to a Hedge Agreement for which the interest calculation is not otherwise provided for under clause (a) or (b) above, interest on such Second Lien Bonds shall be 11

20 calculated as otherwise provided for in the definition of Debt Service Requirement as if such Hedge Agreement were not in effect. (See Additional Bonds below.) The obligations of the County to make the Subordinate Lease Payments when due are absolute and unconditional and the County has pledged its full faith and credit to such payment. The County has covenanted that, in order to make any Subordinate Lease Payments from its general funds to the extent required, it will exercise its power of taxation to the extent necessary to pay such amounts and it will make available and use for such payments all taxes levied and collected for that purpose together with funds received from any other source. The County has further covenanted that in order to make funds available for such purpose, it will, in its general revenue, appropriation, and budgetary measures include sums sufficient to satisfy any such Subordinate Lease Payments that may be required to be made from the general funds until all payments so required to be made shall have been made in full. The obligation of the County to make any payments that may be required to be made from its general funds shall constitute a pledge of the full faith and credit of the County to provide the funds required to fulfill any such obligation. The Series 2011 Bonds shall not be deemed to constitute a debt of the State of Georgia or the County, nor a pledge of the faith and credit of the State of Georgia or the County (except to the extent provided in the Lease), nor shall the State of Georgia or the County be subject to any pecuniary liability thereon. The Series 2011 Bonds shall not be payable from, nor shall a charge be made upon any funds other than the revenues pledged to the payment thereof, and are payable solely from the special fund provided therefor from the revenues of the Authority derived under the Lease. No owner of any Series 2011 Bond shall ever have the right to enforce payment thereof against any property of the Authority, nor shall any Series 2011 Bond constitute a charge, lien or encumbrance, legal or equitable, upon any property of the Authority (other than revenues of the Authority derived under the Lease). The issuance of the Series 2011 Bonds shall not directly, indirectly or contingently obligate the State of Georgia or the County to levy or to pledge any form of taxation whatever therefor or to make any appropriation for its payment. The County, however, is obligated to levy a tax under the circumstances set forth in, and to the extent required by, the Lease sufficient to make the Subordinate Lease Payments when due thereunder. Additional Bonds In addition to the Series 2011 Bonds and the Prior Bonds, the Authority may issue, under certain terms and conditions as provided in the Indenture and the Supplemental Lease, Additional Bonds or Obligations, and if issued such Additional Bonds or Obligations will rank on a parity as to lien on the revenues of the Authority derived from the Lease with the lien securing the payment of the Second Lien Bonds, provided that, among other requirements, a firm of independent certified public accountants shall have certified: (i) that based on Net Revenues for a period of 12 full consecutive calendar months out of the 18 consecutive calendar months preceding the month of the adoption of proceedings for the issuance of such Additional Bonds, the Debt Service Coverage Ratio (excluding for calculation of the Debt Service Requirement any Bonds or First Lien Obligations which are to be refunded and defeased by such proposed Additional Bonds) for each full Sinking Fund Year subsequent to issuance of the proposed Additional Bonds, shall not be less than 1.10; or (ii) if a new schedule of rates and charges for the services, facilities and commodities furnished by the System shall have been adopted and shall be in effect, that had this new rate schedule been in effect during the period described above the Debt Service Coverage Ratio (excluding for calculation of the Debt Service Requirement any Bonds or First Lien Obligations which are to be refunded and defeased by such proposed Additional Bonds) for each full Sinking Fund Year subsequent to issuance of the proposed Additional Bonds, would be not less than The County is also authorized, under certain terms and conditions as provided in the Lease, to issue revenue bonds ranking as to lien on the Net Revenues of the System on a parity with or subordinate to the lien on such Net Revenues created to secure the payment of the Subordinate Lease Payments required to be made to comply with the terms of the Lease. Pursuant to the Indenture, the Authority has abrogated its right to issue any additional revenue bonds under the 1985 Resolution and has closed the lien thereunder. (See TRUST INDENTURE Abrogation of Lien on 1985 Resolution in APPENDIX D.) [Remainder of page intentionally left blank.] 12

21 THE AUTHORITY General The Authority was created as a body politic and corporate pursuant to the Gwinnett County Water and Sewerage Authority Act, Georgia Laws 1970, p et seq., as amended (the Act ). The Act provides that the Authority shall have, among other things, the powers as summarized below: 1. To acquire, construct, own, repair, extend, improve, equip, operate, maintain and manage water treatment and distribution facilities for the sale of water to users and consumers within and without the territorial boundaries of the County; to acquire, construct, own, repair, extend, improve, equip, operate, maintain and manage sewerage treatment and gathering facilities; 2. To make contracts and leases with respect to the furnishing of services and facilities by the Authority to municipal corporations, counties and political subdivisions, as well as firms and corporations, for a term not exceeding 50 years; 3. To accept loans and/or grants of money or materials or property of any kind from the United States of America or any agency or instrumentality thereof, upon such terms and conditions as the United States of America or such agency or instrumentality may require; 4. To accept loans and/or grants of money or materials or property of any kind from the State of Georgia or any agency or instrumentality or political subdivision thereof, upon such terms and conditions as the State of Georgia or such agency or instrumentality or political subdivision may require; 5. To borrow money for any of its corporate purposes and to issue negotiable revenue bonds payable from funds pledged for that purpose and to provide for the payment of the same and for the rights of the holders thereof; 6. To exercise the power of eminent domain; and 7. To issue bonds for the purpose of funding or refunding any bonds previously issued under the Act. Under the Act, the Authority has no power to levy or to pledge any form of taxation by the County nor shall any revenue bonds issued by the Authority be deemed to constitute a debt of the County. [Remainder of page intentionally left blank.] 13

22 Management The Act provides the Authority shall consist of five members, all of whom shall be residents of the County and each of whom shall serve for a term of one year from the date of appointment and until their successors shall have been selected and appointed. Members are appointed by the Board of Commissioners of the County. No more than two members of the Board of Commissioners, or one member and the Chairman of the Board of Commissioners, may serve on the Authority. The current members of the Authority are: Name Term Expires Years Served Occupation General Michael L. Sullivan, Chairman December 31, Attorney Rich Edinger, Secretary December 31, Engineer Laurie McClain, Member December 31, Certified Public Accountant Howard Eggert, Member December 31, Engineer Daniel Wagner, Member December 31, Businessman THE SYSTEM The County began providing water to its customers in 1955 and sewerage services in In 1977, the responsibility for obtaining and transmitting potable water to County distribution mains was transferred from the County to the Authority. The County continued to provide water purchased from the Authority to retail and wholesale customers through County transmission mains until the County and Authority systems were consolidated in In 1985, the Authority s facilities and the County s facilities were consolidated into one water and sewerage system (referred to in this Official Statement as the System ), which is owned by the Authority and operated as a single utility enterprise by the County pursuant to the Lease. The administrative offices of the System are located in the Department of Water Resources Central Facility in Lawrenceville, Georgia. The County s Department of Water Resources operates and manages the System. The following is a description of the System. Except as otherwise noted, the following information has been provided by the Department of Water Resources of the County. The Department of Water Resources has a director and 3 deputy directors who supervise the overall management and coordination of the System. Eight divisions, each led by a division director, perform the functions of administration, water distribution and sewerage collection, engineering and construction, water production, water reclamation, planning/permitting, and stormwater. As of December 31, 2010, there were 577 authorized positions in the Department of Water Resources, of which 518 are water and sewerage system positions and 59 are stormwater utility positions. [Remainder of page intentionally left blank] 14

23 HALL SHOAL CREEK INTAKE BAVARIAN WOODS PUMP LANIER INTAKE DAM KS BUFO W REST HAVEN W RN AT DBU ER LANIER FILTER PLANT FER OR SHA S SHOAL CREEK FILTER PLANT FORSYTH RY SAWNEE SHAD ST AVE TS BER BURN RO AVE N MA E ST IN ST BUFO WO OD MIL E W CH UR DR TER MONT DR N ST G K CL FE NE STO VIS DA FF NORTH OR A NO ST 5-90 CO OP ER IDG CO LE DR E DR ROSE BUD LA KE LU CE 5-93 RN E HIG HP OIN 5-6 T 5-61 LOGANVILLE SPR ING DAL 5-62 SPRINGDALE E PAT RO 6-56 CE SS RK 6-61 EV ER SO E 5-63 OL 5-30 N ND DR SKYLA ATT HEW VD OZ IA BL A PLA HO AC FORT MT DOW MEA H SMIT TOM UR 6-53 E PA MT N L CEN NCIA FINA RCH CHU ST RE LC HIL SER ROS SH BR OLD S ING HU CIR SON SIMP ND IE FR SPR ST LD ER BO CK NEW HOPE TU K SS EE NEW HOPE RO CR RC G S NO NIN BOGGS OW K DR EE NA CK K IN RO E ER LUKE EDWAS RT OV ST EE CR CR N BE G LIA MA Y GR OD NIN MIL ON WO OW D DR KE OO LL CR MI MC N OR EH KNOLLWOOD PUMP LANIER MOUNTAIN TANK & PUMP 6-52 RK NS ACE SO OZ Y 5-27 PA MA ER W D LO GA NV ILL E EE TT EK RM PA PK EL LS ON WY NS F PK JOH OA N PIN AP SHOA RL P CRE HA 6-81 CH LETT GA SO SNELLVILLE NOB HILL TANK WALTON COURT PUMP CAMPBELL SU AY WI BRAM Y CAM L TUCKER FIV UM ING E W K OA LL HI OL GR 5-41 MOUNTAIN VIEW PUMP ICK EW NE PK N RR RS GRAYSON AR LS PH OA ER E DR SH DL S TR WA F LSID IAN AN RK FR INS SU OA IA N CA D RB LE RL LL KI JOH 5-42 OO E FO HA VIL GA DR GW PE E 5-88 DO R CE SU IN US LE RS A EN RU HO D DA SE WR LD ER GIN DR OL CE HO LA NO AV G ER HO CH MIL W BB HIL NE WE AR BE TU OLD NORCROSS DO N RIV IND CA GRAYSON TANK GRAYSO & PUMP DR LA PE CH R ER CU HO HILL UR OAKLAND TE PLACE RIV AR DA HI COLLINS E CH Y OS JOH ON N PKW GL AF N DR MS ES ROCKBRIDGE TANK & PUMP NS IS LOU MOON MOON S N TO ON OK BRO LILBURN BROOKS SIM HARBINS RE LO DE RN LIA ER EL PKW Y AP BU WIL GAN CH ST S PA - LIL AV REA LE IN ALD RT CHURCH AIL RON MA TR PIRKLE GR ND AR D N T DR GE SUG AN IA ET S VY CO BETHESDA IND S RN AL MARTINS CHAPEL PUMP Y CE KL S ME PKW EN OA T JA KE D CRES DICKEN MC ER LAN ER HILL CK INN GW INS IDE WR S LA LAWRENCEVILLE 7-3 E BETHESDA SCHOOL TU ON ID ERS RB US HA OAK CR BR RIV E CK US DR RO WY FO BU CR E S PKWY ROCKBRIDG SS SS TT GRAVES BRI TT CRO NOR BU ANE SHOAL OLD SINGLETON F PK OA SS BU H DR RL ER GA AT NGTON WY SU TW 7-34 LAKE HURRIC DACULA Y EE HERRI PK UG GE DR ST RO OW NO EW VI LL RC LL DO ER HE N NO K HO MC KO OAKBROOK PKWY OR SW TC L OO GOSHEN SPRINGS TANK & PUMP NT MI MIL L D ES BR EF VD KL CE S BLV EL JON AP CLUB DR AC R BL NORCROSS TANK & PUMP HIL LD PEACHTREE/DEKALB PUMP SH D S CH NORCROSS L ND ER ER PO NT AM WIL RO 7-77 NO REY WI ON EL PKW SS DACULA PUMP RC NT RO VE RC STE D NO E BL BRECKINRIDGE BLVD NO LIT SA OL D EA TEL OL PL FO D NG B BRI DGE PON LA COM RC AF SA HOL NS KI VD LS PU LO AT SEV TR E SHOA AR US ICAN SUG IND Y E PKW EE DA L RE OAF TR MC NIE VD ARL CH SUG HURR AN Y KE HT Y PK LA PEA AC F PK N F EY PE OA 7-50 SH OA EL D BL SS RL E RL RK KE S OL IAL RU L NC LES GA BE LA MEDLOCK BRIDGE TANK & PUMP N EY RE KEL HT DR S BER AC GE ING S K BRID LD ER EL LOC SPA RN MED PE CO GE E TEN E S BRID BUSH GA SU N OW IN TA DEAN UN D FO N BR R CI LOR BUN IDG W JONE OL 7-53 TAY S SCA SU S BR AD H NE TE DGE E JO HE BARROW ITE WH GE DULUTH BERKELEY LAKE YL TA RID ET BRI OR T HILL PLEASAN RN ERS BU ROG DULUTH PUMP AUBURN S E IA HTRE OR PEAC NG RI OLD M SP L RA SUNNY HILL ROAD PUMP NE 3-1 S Y MT ING MI K SPR ROC CH AN Y RR FE IS BR MORGAN ROAD PUMP VD L PKW OF BL N MIL LL GIA GI NN ITO MA OR MIL GE Mc EK Y CRE CAN S ING HA SUWANEE SPR UT SPO WALLACE ROAD PUMP BRASELTON OR SON MILL DUN AN L THOMP ER FULTON 211 OW WA KI LG FL N PRICE ITON MILL S BOG L CH PRICE ROAD PUMP HAMIL LL M ICE IL IS MI E DA PR M SA N NE W CK TO WA PU LI MI SU ON PS OM T N 1-3 ET HA TH SUGAR HILL GA E JACKSON BOGAN ROAD TANK & PUMP L ST S LE RIDGE AI S HIL M W N N BO ST W PA RK PL AC BETHA NY CHUR 6-58 E BL VD 6-59 ON E DR NO 6-38 ZOAR DR A NN LE RO CK 6-21 BR ID GE K LIV 6-12 ER E RO SE BU D LEE NT LL VI SEY 6-23 CE MIN WALTON S N DESHONG D VILLE ROSEBU CH ANNISTOWN CENTER 5-32 UR CH 6-16 RA DEKALB 5-33 LENORA LE ST CH CEN TER VIL LE HW Y ROCKDALE NEWTON Legend Booster Pump 2 Inch Water Main 4 Inch Water Main Tank & Pump 6 Inch Water Main Tank 8 Inch Water Main Filter Plant 10 Inch Water Main Intake 12 Inch Water Main Inactive Pumps Interstate 16 Inch Water Main 20 Inch Water Main Major Road State Route 24 Inch Water Main Lakes 36 Inch Water Main City 48 Inch Water Main 72 Inch Water Main 78 Inch Water Main City Water Service 30 Inch Water Main GWINNETT COUNTY EXISTING WATER CURRENT AS OF OCTOBER Gwinnett County Department of Water Resources Operations & Infrastructure Support Division Data Management Section Miles This map is a graphical representation of data obtained from aerial photography, recorded deeds, engineering drawings and other public records and data. Gwinnett County does not warrant the accuracy or currency of the data it has provided and does not guarantee the suitability of the data for any purpose, expressed or implied. ALL DATA IS PROVIDED AS IS, WITH ALL FAULTS, WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY OF FITNESS FOR A PARTICULAR PURPOSE. This map is the proprietary product of Gwinnett County and in no event will Gwinnett County be liable for damages, including any loss of profits, lost savings, or other incidental or consequential damages arising out of the use of or the inability to use this map.

24 The Water System The County obtains all of its water supply needs from facilities located at Lake Sidney Lanier ( Lake Lanier ), a 38,000-acre lake located just north of the County. Withdrawal from Lake Lanier is regulated through permits issued by the U.S. Army Corps of Engineers (the Corps of Engineers ) and the Georgia Department of Natural Resources Environmental Protection Division ( EPD ). The water facilities of the System (the Water System ) consist primarily of the treatment facilities at Lake Lanier, transmission mains, distribution mains, booster stations, storage, and administration and operations facilities. The Lanier Filter Plant and the majority of the Water System s facilities and pipes were constructed after The Shoal Creek Filter Plant was completed in 2004 and has operated continuously since that time, with production split more or less evenly between the two facilities. A brief description of primary Water System facilities is provided below. Water Production Facilities. The Lake Lanier facilities include two raw water intakes with pump stations, four raw water force mains, a surge tank, a raw water distribution structure, a raw water reservoir, two water filtration plants, and two finished water pump stations and a residuals handling facility. The Lanier Raw Water Pump Station, dating from 1976, is located on the shore of Lake Lanier and has access to deep water in the main body of the lake. This intake consists of three 72 inch diameter fiberglass pipes of varying lengths, arranged to withdraw water from approximately 10, 24, and 45 feet below normal surface elevation of the lake (1,071 feet above mean sea level ( msl )). The Shoal Creek Intake and Pump Station utilizes a 14 foot diameter tunnel below the lake bottom to withdraw water from an elevation of 1,025 msl. The Lanier Raw Water Pump Station has six 35 to 45 million gallons per day ( mgd ) pumps, allowing for a peak pumping capacity of 200 mgd and a firm capacity of 150 mgd. Two raw water force mains, 48 and 72 inches in diameter, follow a parallel route 2.9 miles to the Lanier Filter Plant. These mains are protected by a steel hydro-pneumatic surge tank, which prevents water column separation in the event of a power failure or emergency pump shutdown. A major upgrade to the Lanier Raw Water Pump Station was completed in January The work included new pumps and motors, hydraulic system, electrical switchgear, motor starters and controls, and HVAC systems. The Shoal Creek Raw Water Pump Station has four 35 mgd pumps dedicated to the Shoal Creek Filter Plant and four 50 mgd pumps dedicated to the Lanier Filter Plant. This greatly improves reliability of the Water System by having back-up pumping capability for both water production facilities. Two 72 inch diameter raw water mains carry water to the Shoal Creek and Lanier Filter Plants. This station went into operation in September Construction of the Raw Water Distribution Structure was finished in This structure is the junction box for all raw water lines from both raw water pump stations. This structure allows distribution of water from either raw water pump station to either or both water treatment plants. There are also accommodations for pipelines to and from a proposed future raw water reservoir. This allows additional flexibility to maintain operations in the event of outages at either raw water pump station. The Lanier Filter Plant is located on a 94 acre site north of the City of Buford. The plant has a treatment capacity of 150 mgd. Facility components consist of a 37 million gallon raw water storage reservoir; ozone disinfection facilities; pretreatment facilities (rapid mix and flocculation); filtration; clearwells; a high service pump station; chemical storage, handling, and feed systems; and residuals handling facilities. High service pumping to the water distribution system is accomplished with seven variable speed pumps, four at 50 mgd and three at 25 mgd, allowing a nominal firm capacity of 200 mgd. The plant is operated through the use of an upgraded integrated Supervisory Control and Data Acquisition ( SCADA ) computer system, which controls both the treatment facility and tanks/pump stations within the distribution system. In 1998, the Lanier Filter Plant was presented with the Grand Award of Excellence by the Consulting Engineers of Georgia. Additional improvements and enhancements to the Lanier Filter Plant were completed in The clearwell storage was increased by 20 million gallon ( MG ). This increased finished water storage, allowing multi-day averaging to reduce maximum day demand peaking factor from 1.67 to 1.5, which extended the sufficiency of the Lanier Filter Plant capacity by two years. Also, a $20 million upgrade of the residuals handling facility was completed in August This improvement removed the previous liquid sludge contribution to the sanitary sewer system and replaced it with a dewatering system capable of producing a reusable residuals product. Work was completed in 2008 to provide an enhanced Backwash Equalization Process to improve operation of the residuals facility. The addition of two backwash equalization tanks, a filtrate equalization tank and recycle pump station enables the plant to recycle the filer backwash water. This new process allows the plant to save and recycle two mgd and thereby reduce the amount of raw water withdrawn from the lake. The Georgia Engineering Alliance selected this project for its 2009 Engineering Excellence Award. 16

25 The Shoal Creek Filter Plant went into operation in September The Shoal Creek facility duplicates the processes employed at the Lanier facility, with the exception of the residuals handling process: all filter backwash water is pumped to the Lanier facility for dewatering. The Shoal Creek Filter Plant sits on an 88 acre site approximately three miles west of the Lanier Filter Plant. With its capacity of 75 mgd, the total Water System capacity is 225 mgd. Having the second facility improves redundancy and reliability of the overall Water System. The 1986 Amendments to the Safe Drinking Water Act ( SDWA ) expanded requirements for testing and monitoring for lead and copper content of drinking water (the Lead and Copper Rule ), along with other new water quality parameters. The County conducted a corrosion control optimization study that examined options available to minimize corrosion. The County has conducted full-scale system evaluations of corrosion inhibitors to select products best suited for this specific water chemistry. The Environmental Protection Division approved the County s long-term corrosion control plan in 1995 and again in Successful use of blended phosphate corrosion inhibitors has optimized the County s corrosion control program. This has reduced the Lead/Copper sampling frequency to one event every three years. The most recent sampling and testing was completed in The test results were in full compliance. The 1996 Reauthorization of the Safe Drinking Water Act required that water systems begin publication and distribution of annual Consumer Confidence Reports ( CCRs ) in The County s CCR, called Gwinnett Water Words, is mailed to customers between April and June of each year with the water bills, and it is available on the Gwinnett County web site. CCRs detail all regulated contaminants, and certain unregulated contaminants, detected in drinking water. These include specific language dealing with particular contaminants (including lead) which may be found in drinking water and/or bottled waters. There has been a positive response from consumers regarding this report. Vulnerability Assessment. The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (PL ) required community water systems serving more than 100,000 persons to conduct Vulnerability Assessments and prepare specific Emergency Response Plans. The Vulnerability Assessment was completed by the March 2003 deadline and the Emergency Response Plan was finished by September 2003, as required. Specific security improvements such as closed circuit television cameras, card readers and automatic door locks, and fence enhancements were installed in Additional security upgrades are included in future CIP plans. Continuity of Operations. The County s Department of Water Resources has completed National Incident Management System ( NIMS ) training and certification for Incident Response Teams to deal with a wide variety of potential emergency events, ranging from terrorist attacks to natural disasters to pandemic flu. The Department has developed staffing plans based on accepted Continuity of Operations ( COOP ) guidelines to address absences due to any outbreaks that may occur. The plan contains strategies for vaccinations, reduced staffing levels, shelter in place contingencies, limited public access, and contamination management. Pathogen Inactivation. As part of the Long-Term 2 Enhanced Surface Water Treatment Rule, USEPA is collecting data on pathogen occurrence in drinking water facilities, which will impact future water quality standards. The Shoal Creek Filter Plant was designed to meet these potential regulatory requirements for pathogen inactivation with Ozone. Design began in 2006 for an Ultraviolet Disinfection System for the Lanier Filter Plant, to provide equality of treatment at both facilities and give an additional barrier of protection against these contaminants. The construction of this system is in the long-range capital plan. Transmission Mains. The transmission system includes approximately 180 miles of transmission mains. The major transmission main looping the County was completed in Approximately 89 miles of 36 and 48 inch pipe loop around the County, making it possible to reliably serve the entire area with water even in the event of a major transmission main break. Major branches form the grid to provide water service to all populated areas within the County, and also lead to wholesale customers neighboring the County. Because of continuing growth and increasing water demands, a third 48 inch transmission main was installed along the western portion of the County to reinforce the transmission main loop. This ductile iron transmission main is 21 miles long and connects to a 30 inch transmission main in Norcross. Connections between this main and the original transmission system provide greater flexibility and reliability of the water distribution system. Additionally, a 78-inch transmission main that runs 48,000 feet from the Lanier Filter Plant was completed in 2000 and intersects the 48 loop near Lawrenceville. The Shoal Creek Filter Plant construction included a new transmission main to connect the plant to the existing Lanier Filter Plant. The construction of a 60-inch transmission line from the Shoal Creek Plant to the existing 48-inch 17

26 transmission main located on Peachtree Industrial Boulevard at Little Mill Road was completed and went into service in July This greatly reinforces the County loop system and adds reliability. Distribution Mains. The distribution main system consists of approximately 3,411 miles of pipes of various sizes that draw water from the transmission main system for distribution to customers. Over 50% of the distribution system has been installed in the last 25 years. Booster Stations. The Water System includes several booster pump stations that raise water pressure in local areas to acceptable levels. They are used to provide service to customers in hilltop areas above the system delivery gradient or where limitations in transmission and storage capacity make delivery pressures too low. Currently, the water distribution system has 13 booster stations. A major re-pump station, jointly owned by the County and the City of Norcross, provides service for the heavily populated Norcross area. Major rehabilitation of this station, including new pumps and motors, was completed in Subsequent operation and maintenance of this facility is being handled by the County. While booster stations raise water pressure above the standard system gradient, topography dictates that other areas (considerably below the system delivery gradient) are relieved of excess pressure. This is accomplished by the creation of special zones that are isolated under normal circumstances by pressure-reducing valves. To optimize service delivery, the County has established four separate pressure zones, based on topography: South, Central, North and Upper North. The Upper North Pressure Zone consists of the highest elevations in the County and is served by the Bogan Road Pump Station. The existing Bogan Road Pump Station was upsized in 2003 and again in 2008 to better serve this growing area. The North Pressure Zone is served by three high service pumps at the Lanier Filter Plant. During 2006, these pumps were replaced with three 25-mgd pumps with an increased delivery gradient to better serve this area. The Northside (now named the Rock Quarry Road) Pump Station, with a 10 mg tank and a 20 mgd pump station, was completed in summer of The Central Pressure Zone consists of customers located at average elevations. Water is delivered to the central area from four high service pumps at the Lanier Filter Plant through the County s transmission mains. Since replacement of the 48-inch concrete water main, the Duluth Pump Station has basically become redundant, because water is now pumped from the Lanier High Service Pump Station. The Central Service Area Tank Facility and Pump Station, now called the Grayson Pump Station, was completed in November 2001 and incorporated 20 MG of storage and a 40 mgd pump station. Construction concluded in 2007 for a new pump station at the Rockbridge Road tank site. The new pump station included a 5 mg tank and four 3.3 mgd pumps. This replaced the 1970s vintage pump station, which served this area for over 30 years. The South Pressure Zone is a region with elevations lower than the rest of the County; water is delivered to the south area from the central area along a series of pressure-reducing valves. Storage Facilities. Water system storage is either ground storage, in elevated tanks, or in standpipes located at key sites throughout the distribution system. The standpipes on I-85 and at the no longer used Duluth pump station were demolished in The Medlock Bridge elevated tank was no longer used and was also demolished in The finished water clearwells at the Lanier and Shoal Creek Filter Plants provide storage of 63 MG (43 at Lanier and 20 at Shoal Creek). Five and 10 MG ground storage tanks are located near the cities of Norcross, Buford, Grayson, Snellville, and Lilburn. The County and the City of Norcross equally share storage capacity in the Norcross tank. Completion of the new 10 MG tank in Buford and the new clearwell at the Shoal Creek Filter Plant boosts total finished water storage to MG. [Remainder of page intentionally left blank] 18

27 The following table illustrates the growth in the Water System in the last five years: Water System Growth County Population (July 1 Census Estimates) 746, , , , ,321 County Population Connected (Estimated) (1) 738, , , , ,268 Water Meters in Service 230, , , , ,356 Plant s Capacity as permitted by State of Georgia (maximum day; mgd) Average Daily Production (mgd) Maximum Daily System Production (million gallons) Raw Water Storage (million gallons) Treated Water Storage (million gallons) (Tanks and Useable Clearwell volumes) Miles of Water Main in Service 3,300 3,346 3,399 3,408 3,411 Fire Hydrants in Service 38,916 40,038 40,614 40,805 40,877 New Water Meters Installed 7,290 4,705 1, Miles of New Water Main Installed Customers per Mile of Water Main Fire Hydrants Installed 1,351 1, Fire Insurance Rating (2) (1) (2) Does not include population served by wholesale suppliers outside of the County. Public Protection Classification (PPC TM ) from Insurance Services Organization. ISO assigns a PPC from 1 to 10 to the communities it rates. Class 1 represents exemplary fire protection and Class 10 indicates that the area s fire suppression program does not meet ISO s minimum criteria. Customers of the Water System. As of December 31, 2010, the Water System had 227,356 retail customers. The Water System provides treated water to both retail and wholesale customers within and around the County. The Water System provides water at retail rates directly to customers residing in unincorporated areas of the County, as well as to many customers within incorporated areas. As municipalities within the County annex contiguous areas, water and sewer service remains with the County and the residents of the contiguous areas continue to purchase water at retail rates. The County provides direct retail service to the residents of Berkeley Lake, Dacula, Duluth, Grayson, Lilburn, Snellville and Sugar Hill. The Water System also provides direct retail service to some of the residents of the cities of Buford, Lawrenceville, Loganville, Norcross and Suwanee. It serves some of the residents of Buford, Lawrenceville, Norcross and Suwanee on a wholesale basis. The City of Lawrenceville supplements its water system with wells. The City of Buford has its own intake in Lake Lanier and its own water treatment plant. The Water System also sells water on a wholesale basis to the City of Auburn in Barrow County, the Town of Braselton in Barrow County, the City of Loganville in both Gwinnett and Walton Counties, and the Walton County Water and Sewer Authority. The County purchased the City of Duluth water system in December 1991, the City of Grayson water system in May 1993, the City of Sugar Hill water and sewer system in December 1995, and the City of Dacula water system in May [Remainder of page intentionally left blank] 19

28 The following table shows the average daily consumption, in mgd, of water billed by the Water System during the years 2006 through 2010: Gwinnett County Consumption Year Retail Wholesale Out of County Consumption (1) Total Average Daily Consumption (1) Out-of-County consumption is all at wholesale rates. Non-revenue water that is due to Water System losses, fire flows, meter underreporting, and other causes, including potential data errors, was approximately 17 percent between 2002 and By the end of 2005 non-revenue water was on a downward trend and at the end of 2008, was tracking at around 11 percent, which was below the industry standard of 12 percent. From January to July 2009, the percentage increased to an average of just below 12 percent. From August to December 2009, the rate of average increased to 13 percent. For 2010, non-revenue water decreased and is currently approximately 11 percent. Water resources has established a task force to work toward decreasing the monthly percentage of non-revenue water by focusing on all areas of possible water loss and finding methods to track and account for water not currently metered. These efforts include (a) tracking water use through hydrants by County departments, contractors and for County projects and (b) testing and replacing large water meters. The following tables show the 10 largest retail and wholesale customers of the Water System during the 12 months ended December 31, Total water usage during the 12 months ending December 31, 2010 was 25,213,313.9/thousands of gallons, generating $92,093, in usage revenues (excluding late fees). No single retail customer accounted for more than 1.39 percent of total Water System usage revenues in 2010, and the 10 largest retail customers together accounted for 4.62 percent of such revenues. No single wholesale customer accounted for more than 3.24 percent of total Water System usage revenues in 2010, and the seven wholesale customers together accounted for 4.57 percent of such revenues. In addition to regular water revenues, the Water System generated $13,096, in conservation tier revenue from water customers who exceeded consumption of 8,000 gallons in any given month. Largest Retail Water Customers 2010 Customer Thousands of Gallons Per Year mgd Total Revenues Received Gwinnett County Government 267, $1,280, Gwinnett County Board of Education 255, ,090, Publix 138, , Phillips State Prison 57, , OFS Brightwave 52, , Quality Technology Services 50, , Suniva Inc 43, , Management Assoc 41, , MTS Sweetwater 38, , Pine Crest Gardens 36, , TOTAL 981, $4,250,

29 Wholesale Water Customers 2010 Customer Thousands of Gallons Per Year mgd Total Revenues Received City of Lawrenceville 708, $2,986, City of Norcross 287, ,038, Town of Braselton 18, , City of Buford 10, , City of Loganville 10, , City of Suwanee 2, , Walton County Water , TOTAL 1,038, $4,206, Current Water Rates. Presented below are the major rate categories currently in effect. The Gwinnett County Board of Commissioners adopted the following rates and rate increases at their regular meeting on March 3, Water rates are fixed by the County and are subject to change as the County deems advisable. Rates set by the County are not subject to approval by any outside agency. Retail Monthly Meter Charges Meter Size (inches) Base Water Fee (effective 7/1/2009) Note: Base Rates are effective until modified by the Board of Commissioners. Volume Charge ¾ $ ½ Except for the seasonal residential water surcharge and seasonal irrigation water charge, all accounts are charged the following volume charge for water that passes through the water meter: Current 2011 Effective 1/1/2012 Effective 1/1/2013 Effective 1/1/2014 Effective 1/1/2015 Effective 1/1/2016 (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) Tier 1: $4.38 Tier 2: $6.57 Tier 3: $8.76 Tier 1: $4.53 Tier 2: $6.80 Tier 3: $9.06 Tier 1: $4.69 Tier 2: $7.04 Tier 3: $9.38 Tier 1: $4.85 Tier 2: $7.28 Tier 3: $9.70 Tier 1: $5.02 Tier 2: $7.53 Tier 3: $10.04 Tier 1: $5.02 Tier 2: $7.53 Tier 3: $10.04 Note: Effective January 1, 2010, water charges are based on a 3-tier system to promote conservation. Tier 1 rates are applied to consumption equaling less than 8,000 gallons. Tier 2 rates are applied to consumption equaling 8,000-12,000 gallons. Tier 3 rates are applied to consumption equaling more than 12,000 gallons. 21

30 Effective June 1, 2009, all irrigation and builder accounts are billed at 2.0 times the tier-one volumetric rate and for all water passing through the water meter per billing period as follows: Current 2011 Effective 1/1/2012 Effective 1/1/2013 Effective 1/1/2014 Effective 1/1/2015 Effective 1/1/2016 (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) $8.76/1,000 gallons $9.06/1,000 gallons $9.38/1,000 gallons $9.70/1,000 gallons $10.04/1,000 gallons $10.04/1,000 gallons Fire Protection Effective September 1, 2009, the fee for fire protection taps is $2.00 per inch of the fire service pipe diameter. Also effective September 1, 2009, water which passes through the fire protection meter for purposes other than fire suppression is billed for water and sewer; the water volumetric rate applicable to non-fire-related water usage shall be 3.0 times the tier-one rate. Each private line is equipped with an approved detector meter at the customer s expense. Connection Charge Charges for connecting new services to the Water System (effective since January 1, 2011) are: Water Meter Size (inch)(1) Current 2011 ¾ $ ½ 1, , , , , , , ,211 Note: Connection Charges are effective until modified by the Department Director. Water System Development Charges Water Meter Size (inch)(1) Current 2011 ¾ $ 1, ,610 1 ½ 8, , , , , ,671 Note: System Development Charges are effective until modified by the Board of Commissioners. Raw Water Supply. As described below in more detail, the Water System holds a permit from Georgia EPD allowing it to withdraw raw water from Lake Lanier, which serves as the source of raw water for the County. In addition to obtaining a withdrawal permit from Georgia EPD, the County has obtained an easement from the U.S. Army Corps of Engineers (the Corps ) to withdraw water from Lake Lanier. On July 2, 1973, the County entered into the Contract between the United States of America and Gwinnett County, Georgia for Withdrawal of Water from Lake Sidney Lanier, and has since entered 22

31 into several extensions and modifications to that agreement. The 1973 contract granted the County the right to withdraw raw water from Lake Lanier for municipal and industrial uses at the initial rate of 40 mgd. The 1973 contract permitted the County to construct and operate facilities to withdraw water and requires the County to maintain certain records. The 1973 contract originally provided that either party could terminate it upon providing three years notice. Unless otherwise terminated, the 1973 contract would continue for 30 years or until the federal government completed its study of area water storage, discharge and withdrawal needs. The Corps and the County amended the 1973 contract on April 29, 1974 to grant the County a right upon termination of the contract to utilize storage space in Lake Lanier containing at least 38,100 acre feet sufficient to yield approximately 40 mgd of water under the Water Supply Act of Additional amendments increasing withdrawal amount rights occurred in the years 1983, 1985, and In June 1989, the 1973 contract was extended for six months, until January 1, The 1973 contract expired in 1990 (see Interstate Water Disputes Among Georgia, Alabama and Florida below); however, the County has continued to withdraw water from Lake Lanier, which provides all of the County s raw water, with the consent of the Corps. From 1990 to 2000, the county paid $9.74 per million gallons of water withdrawn. In April 2000, the Corps of Engineers increased this amount to $18.80 per million gallons. In December 2000, customers of the Southeastern Power Administration, which receive the benefits of hydropower production from Corps of Engineers projects in the Alabama-Coosa- Tallapoosa ( ACT ) and Apalachicola-Chattahoochee-Flint ( ACF ) basins, filed a lawsuit seeking an increase in the price charged to municipalities drawing domestic water supplies from Lake Lanier. The County, with the Atlanta Regional Commission and others, joined in the mediation of this lawsuit. The settlement of this litigation, signed by the United States, the State of Georgia, and hydropower customers as well as the municipal water purveyors, restores the contractual relationship between the County and the Corps of Engineers pending National Environmental Policy Act procedures. The new contracts would have reserved unto the County a portion of the conservation pool of Lake Lanier sufficient to yield an annual average supply of up to 152 mgd even during a severe drought. The annual cost of raw water would increase from approximately $700,000 per year on an escalating and interminable schedule to approximately $1,780,000 per year on a 30-year amortization schedule, after which payments for that volume of water cease. These increased payments would be retroactive to 2003, the date the settlement agreement was approved by the D.C. District Court. The interim water storage contract appended to the mediation agreement and which is convertible to a permanent storage contract had a 10 year term with an automatic 10-year renewal provision. This conversion to a permanent storage contract was contingent upon clarification of the legal authority granted to the Corps of Engineers by Congress to enter into permanent contracts. This settlement agreement was appealed by Florida and Alabama to the Washington D.C. Circuit Court of Appeals. A three judge panel of the D.C. Circuit Court determined on February 5, 2008 that the hydropower compensation settlement agreement exceeded the Corps of Engineers authority, thus overturning the decision by the D.C. District Court. As a consequence, the County was not obligated for the accumulated contingent liability of the difference in (a) payments for actual raw water amounts used at $18.80 per million gallons, and (b) the $1,780,000 annual payment for storage since However, the County anticipates that if an agreement is reached with the Corps of Engineers, the Corps of Engineers may seek compensation in some amount for the use of the storage in Lake Lanier to offset the use of the water to generate power. The Water System is required to have a permit from EPD to withdraw water from Lake Lanier. In 1997, the County received a revised withdrawal permit for 150 mgd during a maximum day. This rate of withdrawal coincided with the capacity of the expanded plant on which construction was completed in December The withdrawal permit was amended in 1999 to change the 150 mgd limit from maximum day to average day for any month. This permit modification allowed the County to proceed with the new Shoal Creek Filter Plant construction to increase the water production capacity from 150 mgd to 225 mgd. Major construction of this plant was finished in The current withdrawal permit is sufficient to meet nearterm demand projections. For example, the maximum monthly withdrawal rate was 99 mgd, 103 mgd, 90 mgd. 98 mgd, 112 mgd, 118 mgd, 110 mgd, 81 mgd and 87 mgd for the years respectively. On June 28, 1990, the State of Alabama filed a lawsuit in the United States District Court for the Northern District of Alabama against the Corps of Engineers, State of Alabama v. the United States Army Corps of Engineers, et al. In the lawsuit the State of Alabama alleges that among other things, the Corps of Engineers violated the National Environmental Policy Act in connection with the proposed reallocation of a portion of Lake Lanier s conservation storage to municipal and industrial water supply. The State of Florida joined the lawsuit, and on September 19, 1990, at the request of the State of Alabama and the Corps of Engineers, the District Court entered an order staying the proceedings so that the negotiations among the States may occur and a comprehensive study of the water resources of the Alabama-Coosa-Tallapoosa and the Apalachicola- Chattahoochee-Flint River basins could be performed. This study is known as the ACT/ACF Basins Comprehensive Water Resources Study. The Corps of Engineers, along with the States of Georgia, Alabama and Florida, performed the study. The three states approved Basin Compacts in early These Compacts were ratified by the U.S. Congress and signed by the 23

32 President of the United States in December The three states and the federal government were in the process of developing a management system for water resources in the ACT/ACF basins and a formula for the allocation of ACT/ACF water and storage, as mandated by the Compacts. However, the ACF compact, and interstate water allocation discussions between Georgia, Alabama, and Florida on the ACF basis, ended on September 1, Several ACF cases were consolidated in March 2007 by order of the Judicial Panel of Multidistrict Litigation. The multidistrict litigation combined the following cases with the 1990 litigation on the ACF referenced above: Georgia s 2001 lawsuit against the Corps of Engineers challenging the Corps denial of a request to reallocate storage in Lake Lanier and execute contracts for long-term water supply; Georgia s 2006 litigation against the Corps of Engineers challenging the Corps interim operating plan for the ACF system and Florida s 2006 filing against the U.S. Fish and Wildlife Service challenging the biological opinion for the interim operating plan. The County is an intervenor in the cases filed in Georgia, along with the State of Georgia and other metro-atlanta water supply providers. Phase 1 of the ACF Basin Litigation involves interpretation of statutes that govern the Corps authority to operate Buford Dam and Lake Lanier, including The River and Harbor Act of 1946 (the 1946 RHA ); the Water Supply Act of 1958 (the WSA ); and specific legislation in 1956 to provide up to 10 mgd to the County. The 1946 RHA is the statute that authorized the construction of Buford Dam and Lake Lanier. The State of Georgia and certain other parties, including the County, maintain that the 1946 RHA authorizes the Corps to modify its operations over time to meet evolving water supply needs. The County contends that the amendment of the 1946 RHA in 1956 authorizes withdrawals directly from the lake by the County, and further implicitly authorizes the Army to allow lake withdrawals as a result of impact to its previous river withdrawals upon completion of the dam. The County moved its intake into the new reservoir from a location below the dam at the Corps urging to mitigate impacts resulting from construction of the dam. Further, the County contends that the WSA authorizes the Corps to reallocate storage for water supply to meet current and future water supply demands. Other parties, including the States of Alabama and Florida, argue that the 1946 RHA merely allows the Corps to make available for water supply whatever water results incidentally from releases that are made to maximize the hydropower benefit from Lake Lanier. Construction of the Buford Dam/Lake Lanier project commenced in 1950 and took approximately six years. In 1958, the U.S. Congress enacted the WSA. The WSA allows the Corps to include storage in any reservoir project nationwide for municipal water supply, subject to certain restrictions. During the 1970 s federal, state, and local governments conducted a joint study that concluded that the most favorable source of future water supply for metropolitan Atlanta was Lake Lanier. In the 1970 s, the Corps began to enter into shortterm contracts with certain Georgia municipalities to provide them with water supply from the Buford Dam/Lake Lanier project pending a permanent reallocation of storage in Lake Lanier to water supply. In 1989, the Corps issued a draft proposal to reallocate storage in Lake Lanier to water supply, and in 1990, Alabama sued the Corps to block that proposal. Georgia and Florida intervened in that litigation, which was stayed for more than a decade to allow negotiations to proceed and which has now been consolidated into the ACF Basin Litigation. On July, 17, 2009, Judge Paul Magnuson reached a decision in Phase 1 of the ACF Basin Litigation (the Phase 1 Order ). In the Phase 1 Order, Judge Magnuson held, among other things, that: (1) water supply is not an authorized purpose of the Buford Dam/Lake Lanier project under any of the statutory authorities; and (2) the Corps operations to meet current (and therefore also future) water supply demands are not authorized. The Phase 1 Order allowed the Corps to continue operating Lake Lanier to meet water supply needs as of July, 2009, until July 17, 2012, to allow time for federal legislation authorizing such operations, or for some alternative form of settlement among the parties. In September 2009, the State of Georgia, other parties aligned with it, and independently the County, and the Corps, appealed the Phase 1 Order. The County s appeal of the July 17, 2009 Order of the district court was independent of the State of Georgia and other water supply providers due to its specific arguments. The appeals are docketed as In Re: MDL-1824 Tri-State Water Rights Litigation, United States Court of Appeals for the Eleventh Circuit Case Nos G, G and G. On June 28, 2011, the Eleventh Circuit reversed the district court s Phase 1 Order and vacated its findings relative to the availability of water supply for metropolitan Atlanta from the reservoir. Specifically, the Court found that water supply was an authorized purpose of the reservoir under the 1946 RHA, and further that the Corps had additional authority to allocate water storage for water supply under both the WSA and the 1956 Act for direct lake withdrawals. The Court set aside the Corps prior position as to the upper bound of its authority to allocate storage for water supply and remanded the case to the Corps for a determination of the full extent of that authority using all of the statutory provisions, setting a deadline of one year for the Corps to complete its analysis. At this juncture it is unclear whether Florida, Alabama or other parties may seek further review of the ruling in the circuit court or in the United States Supreme Court. 24

33 In addition to pursuing this appeal together with the County and other affected parties, the Governor of Georgia has been working to resolve this issue by taking the following steps: Participating in negotiations with Alabama and Florida, and discussions with Tennessee; Seeking Congressional authorization; and Contingency planning for alternate water sources. In Phase 2 of the ACF Basin Litigation, the State of Florida and other parties aligned with it (the Florida Parties ) claimed that the Corps reservoir operating plan for the federal reservoirs in the ACF Basin would place certain endangered and threatened species in jeopardy and result in adverse modification of the critical habitats of those species in violation of the ESA. An analysis by the United States Fish and Wildlife Service (the FWS ) found that the Corps operating plan would not violate the ESA. On July 21, 2010, Judge Magnuson entered summary judgment in favor of the Corps and the FWS and against the Florida Parties as to all claims in Phase 2 of the ACF Basin Litigation (the Phase 2 Order ). The Florida Parties appealed the Phase 2 Order on September 20, 2010 and subsequently moved to stay those appeals pending further consultation between the Corps and FWS regarding the Fat Threeridge Mussel. At present, the Florida Parties opening briefs in the Phase 2 appeals are due in October, The Phase 2 appeals are docketed as State of Florida v. U.S. Army Corps of Engineers, United States Court of Appeals for the Eleventh Circuit Case Nos & Other Raw Water Supply Concerns. An additional issue facing the Water System is long term supply if the sustainable yield of the Chattahoochee basin is reached. The County may have to consider alternative means of meeting the projected future demand. The costs of implementing alternative means to meet this demand cannot be determined at this time. However, the County maintains that return flows of high quality reclaimed water into Lake Lanier should be accounted for in the County s allocation of storage for withdrawals. The Sewerage System The sewage treatment facilities of the System (the Sewerage System ) comprise five Water Reclamation Facilities ( WRFs ) that are wholly owned by the Authority and contractual treatment capacity in one other WRF. The minor treatment facilities at Beaver Ruin and Jacks Creek were taken out of service in 2009 and 2010, respectively. Total permitted treatment capacity currently available to Gwinnett County is mgd. Sewerage System Data Number of Sewer Customers 138, , , , ,637 Miles of Sewer 2,480 2,595 2,640 2,663 2,670 Treatment Capacity (mgd) ADMMF (1) Flow Received/Treated (mgd) AADF (2) Flow Received/Treated (mgd) (1) (2) ADMMF is the average daily flow in the maximum month. This is the typical permit basis. AADF is the average annual daily flow. [Remainder of page intentionally left blank] 25

34 HALL LANIER DAM RY AVE BURN SHAD N GA BUFO HIDDEN MEADOWS S BOG DR TER BL FORT MONT N ST MT DR VIS FF RN E HIG NORTH MT G 5-69 K SHADOWBROOKE LOGANVILLE ING DAL 5-62 SPRINGDALE E HAMPTON RIDGE 5-29 SO N PAT ROSELAKE # E 5-63 OL BIG HAYNES CREEK # E LENORA LENORA SPRINGS BRUSHY FORK CH 5-32 UR NN A DR CH LE 5-1 WALTON IVY FORK RO CK 6-21 BR LAKEPORT ID GE CE MIN K LIV NT ER LL VI E RO SE BU D SEY 124 ILL CENTERVILLE NV RA GA SOUTHFORK NO COUNTRY CLUB OF GWINNETT #2 D ZOAR VILLE ROSEBU D LO 5-34 COUNTRY CLUB OF GWINNETT #1 CH ND DR ER LE AC NO S N DESHONG LANDINGS AT BAY CREEK SKYLA VD T BL ABINGTON LAKEVIEW DRIVE MANOR OIN CE SHANNON ROAD HP ATT SS PLA SHANNON HEIGHTS HEW RO RK CH NE STO DA DOW MEA H SMIT TOM CE E PA AN RCH CHU ST RE LC HU SIMP BOGGS CIR SON HIL S ING SER SPR ROS LD OLD BO NEW HOPE ER NEW HOPE CK K EE ND CR IE G FR NIN ST OW TU DR SS K LUKE EDWAS RO EE N RC CR LIA S NO G NIN K OW EE DR CR D LL MI BE NS KE MA OO EE CR FR MIL CAMBRIDGE DOWNS OZORA ROAD LU EV ANNISTOWN CASTLEWOOD MHP A 5-95 CENTER 6-25 ER OR OP OZ BAY CREEK CO HICKORY STATION 5-27 D EH 5-58 DR NO BUSINESS CREEK WRF 6-30 TROTTERS RIDGE A IA OL ER OR Y NY CHUR OZ SPR BETHA BUD KE 6-37 DR MC W ROSE LA E PK EL DR OD ACE LE ON N ST 5-38 HIGHWAY 78/ LANIER MOUNTAIN AP ST JACK'S CREEK 6-44 ST SO LS STONE HAVEN PARK HAVEN PIN EASTGATE BUSINESS PARK 5-26 JACK'S CREEK WRF 6-45 AY OA BOLD SPRINGS VD CH GR UR ING CO E BL 5-89 SH PARADISE NORTH E EW IDG AC WINDSOR CREEK IAN MIDDLETON SNELLVILLE WI IND WO PE RK HO BR PL RS 5-57 CARRINGTON 5-24 SH CK RK NA RO E PA INS N IN OV W AR 6-55 ROSS ROAD 6-56 W RIVERCLIFF PLACE 6-57 NE HERRING RIDGE M&M KILLIAN HILL 6-62 PARKER WOODS #2 N ER GRAYSON SO E DR WELLINGTON WALK WOODBERRY PH PA RB SO RT Y GR 6-60 HA ER MA ON 6-77 WALMART LSID 5-88 NEWTONS GROVE AY CHANDLER AN WOODS DL E NORTHFORKE PLANTATION PRESIDENTIAL COMMONS 5-9 BROOKS FARM THE COLUMNS KILLIANS POND APTS PARKER WOODS #1 EAST PARK PLACE US ASHWOOD GROVE EMBASSY WALK 6-73 EVERGREEN CROSSING EVERGREEN LAKES HO HIL 5-56 TANGLEWOOD LS TT D BROOKWOOD PLANTATION PARKVIEW SHOA PA 5-42 OO BROOKWOOD HIGH CAMPBELL ON WY NS F PK JOH OA K RM MOUNTAIN PARK LETT RL OA EK 6-86 MOUNTAIN PARK PARK BRAM GA P CRE HA S TR SU LD CAM L RK RS Y W NO OL E FO DA E PK AR RR FIV 6-93 UM LA CE NE F R CA 5-10 BROOKWOOD CORNERS KILLIAN WOODS 6-83 ICK 6-81 MOUNTIAN PARK AQUATIC CENTER WA OA TE GW A SU RL OS LL HI N DOMINION WALK FOXFIRE CEDAR CREEK 6-99 GARNER CREEK SE LE GA GL N DO RIVER GR GIN PHARR ELEMENTARY 6-69 GROVE PLACE HO VIL SU OAKLAND IA DR TOM SMITH ROAD CU CE DR LL KI ER YELLOW RIVER YELLOW WRF 6-84 LE PE EN N RIV DR HO WR WY IN R ROUND ROAD PHILLIPS DOGWOOD FARMS CH GREAT RIVER MCCONNELL ROAD RU JOH VE ON INDIAN SHOALS LANDING BB R NS WE S AVINGTON GLEN OK PLACE BROOKS CROSSING IS DA HI LA PK D JOH BRO MOON HUNTERS RIDGE AKA HIRAM DAVIS GRAYSON HIGHWAY HARBINS CAMPBELL ROAD EWING CHAPEL CHANDLER RIDGE DEKALB LOU DO BROOKSBROOKS ROAD CHESTNUT LAKE MIL ROYAL WOODS (DEKALB) AF AN ER DR LO KL AV G TUCKER HILL CH AR OA SIM N TO ON FARMER COURT MOON 5-22 CA MEADOW GROVE TU OLD NORCROSS KENVILLA DRIVE THORNCREST AR HARBINS LANDING ENSORBROOK FARM LESTER ROAD EL ARNOLD ROAD #2 DULUTH HIGHWAY 5-51 PATTERSON AP CH S LAWRENCEVILLE 5-18 Y MARTIN CHAPEL ESTATES IN RI RT BENTLEY ESTATES MA DACULA CE EZZA ROAD 5-45 PKW SUG GAN LEESHIRE (DEKALB) COLLINS UR ND REA N JACOBS FARM INDIAN TRIAL E CH KLA ER LILBURN RE OA ST BE JACKSON CREEK WRF JACKSON CREEK BY-PASS EN ALCOVY VY CO RESERVE AL ALCOVY SPRINGS OLD ROCKHOUSE ROAD LAWRENCEVILLE FLAT CREEK 5-76 ALD LE ND WY RON F PK OA S WR LA RN RN KE RL S BEAVER RUIN BY-PASS S MC ER GA ME BU MS ES SU - LIL LIA AV INS SEV AIL WIL PIRKLE GR WY JA OLD ATHENS PKW Y S CHURCH TR T DR BEAVER RUIN N ET GE IDE DACULA ALCOVY IA INN RB ID ANE SHOAL 7-3 E BETHESDA IND GW BR ERS ON T ON HA US CK RIV E CRUSE ROAD BEAVER RUIN WRF CRES TT BRI TT CR RO LAKE IVANHOE DICKEN BU E US HURRIC ROCKBRIDG CR GRAVES MARATHON PK ER HILL CK S PKWY 5-48 FREEMAN LAKE SS CRO AF TU SINGLETON NOR OLD OAKBROOK PKWY H DR SS DR COLLINS HILL FO BUSINESSBU PARK DE WY SHORE LAKE RO PK BU ER CSX DACULA CITY LAKE FREEMAN'S WALK LS 7-12 DULUTH HIGHWAY PA OW UG AT BETHESDA SCHOOL SS LL NO TW ST RO K HO DO R BL MC GE EE NGTON LL RC OO HERRI HE N NO BR MITCHELL GOODWICK WAY KO DR TC L NORTH FORK PEACHTREE CREEK D EW VI MI MIL OR SW PINNACLE BUSINESS PARK L 7-35 CLUB DR NORTH WOODLAND EF SHEFFIELD FOREST ER VD ES KL ROAD EL MITCHELL NT S BL EL JON AP CE LD S CH ER AC VD ER AM WIL MITCHELL EVERGLADES TRAIL SH ND NT NORCROSS RC PO WI L NO ATLANTIC BLVD VD E SHOA RC 7-77 HIL REY E BL BRECKINRIDGE BLVD NO NT LIT SA D ICAN EA SS TEL OL PL RO VE RC STE FO D NG PON LA D NO PU LO OL AR SA HURR NS SUG HEBRON CHURCH DACULA HIGH COLLINS HILL HEIGHTS LEGACY RIVER BLUE RIDGE FAIRMONT ON THE PARK Y KI B BRI DGE DA GARNER COM F PK HOL MC L OA AT Y PKW TR OAF US ARL IND SUG EE RL 7-25 HUNTER'S CREEK 7-50 SH Y W TR CH NIE E PK KE E VD RE LA HT EY PEA AC EL E PE RK LAK D BL L NC F BE EY S OL REGENCY PARK RU EL FE OA N KEL CROOKED CREEK WRF S BER THE DEERINGS GE RE IAL GA SS SU WOODBRIDGE N BAILEY ROAD BERKELEY LAKE K BRID HT DR CROOKED CREEK WRF AC LOC ING S MED LD ER SPA RN BELHAVEN/ TURNBURY OAKS TEN GE PE CO BUN ID E BUSH R GE CI TWELVE OAKS SAGAMORE 7-52 HILLS RIDGE ROAD/ HIGHWAY OW DACULA ROAD DEAN N BR NORTH CHATTAHOOCHEE S BRID RL S BR W JONE CHATTAHOOCHEE STATION LOR H LES GA NE TAY FOUNTAIN GLEN 7-53 MILLERBROOK 7-23 OL IA S SCA SU E JO PEACHTREE STATION # WOLF CREEK/ CHATTAHOOCHEE AD MEADOW FOREST BERKELEY LAKE 7-55 PROSPECT IN TA UN ROAD D FO 7-54 BAILEY FARMS 7-65 HE 324 APALACHEE FARMS ITE BARROW 2-4 MAGRUDER PLANTATION GE 7-88 WH RID 7-64 LAWRENCEVILLESUWANEE ESTATES NORTHBROOK # OR DULUTH RIVERFIELD HUNTCREST NESBITT CROSSING DULUTH VILLAGE T HILL TA OR M TE DGE PLEASAN YL NORTHBROOK #2 YORKSHIRE ESTATES BRADFO MANOR MAGNOLIA WALK AUBURN WILDFLOWER PARK AUBURN ROAD HOG MOUNTAIN ET BRI MT E HTRE S PEAC RN ERS NG RI OLD SUWANEE CREEK SP BU ROG MINERAL SPRINGS AEN RIDGE 85 DAY'S INN JIM MOORE ROAD L Y RA RR NE FE 2-4 HOG MOUNTAIN ROAD S IS HOG MOUNTAIN ROAD ING MI NN HO FINA K SPR Y GI MULBERRY MULBERRY RIVER PLANTATION ROC Mc HOLMAN ROAD DRIVE STANCIL SUWANEE UR CH VD IS N L CEN NCIA GIA FULTON TRILOGY PARK OR IVY CREEK GE L PKW OF LL N MIL KENNEDY FARMS/ LANSDOWNE MA ITO HAMILTON MILL AT DUNCAN CREEK MIL F. WAYNE HILL WRC DUNCAN CREEK ELEMENTARY EK CH HA CRE AN CAN BR DOC HUGHES THE RIVER CLUB ABERRONE CASCADE FALLS FLOWERY BRANCH COMMUNITY S Y L E DUN SPOUT UT SPR ING SPO SPRINGS CL MIL OR BRASELTON ER KI LG L WA IL DUNCAN LAKES SEDGEFIELD M N OD 20 SON MILL OW ROSEMOORE LEVEL CREEK WO AN ROCK QUARRY IVY MILL PLANTATION 1-1 ON FL NORTH LAKEFIELD GWINNETT HIGH N PRICE HAMIL ITON MILL LL MI M 985 THOMP N E DA ICE PARKVIEW EAST PARKVIEW NORTH SA TO NE PR HAMILTON'S CROSSING LI MI SHERWOOD PS SAIS CHURCH OM 3-6 OLD THOMPSON MILL GLEN JONES MIDDLE SCHOOL PINE CREST OLD SUWANEE ROAD OLD T FRIENDSHIP ET CK PLACE PU N 1-3 HA WA W TH SANDY BRANCH FARMS RIDGE L ST SU S HIL JACKSON ST PEACHTREE MHP SUGAR HILL ST IN PINE STREET NORTH NORTH AVENUE BOER STREET GWINNETT # TH WHITEHEAD ROAD MA ST OLD CUMMING ROAD THE OAKS E ST N E MAPLECLIFF NORTH AVENUE # S LE 20 AI M W SUGARHILL PLANTATION THE SPRINGS TS BER PROVIDENCE CROSSING AVE RO PRINCETON OAKS REST HAVEN FER SAWNEE W RN AT ER DBU LITTLE MILL ESTATES LITTLE MILL W OR SHA N BO BUFO RICHLAND CREEK FORSYTH KS AMBERCREST S ISLAND POINTE LEE RUTLEDGE ESTATES WEST PLACE CEN TER VIL LE HW Y BRIDLE POINT ASHLYN COVE NORRIS LAKE MINK LIVSEY MANOR ELLINGTON SPRINGS HIGHTOWER RIDGE ROCKDALE NEWTON Legend Flow Management Interstate Pump Station Regional Flow Major Road State Route Treatment Plant City Limits Pressure Main Sewer Collector Sewer Interceptor Reuse Sewer Main City Service Area (H.B. 489) Lakes Streams GWINNETT COUNTY EXISTING SEWER CURRENT AS OF OCTOBER 2010 Sewer Tunnel 26 Gwinnett County Department of Water Resources Operations & Infrastructure Support Division Data Management Section Miles This map is a graphical representation of data obtained from aerial photography, recorded deeds, engineering drawings and other public records and data. Gwinnett County does not warrant the accuracy or currency of the data it has provided and does not guarantee the suitability of the data for any purpose, expressed or implied. ALL DATA IS PROVIDED AS IS, WITH ALL FAULTS, WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY OF FITNESS FOR A PARTICULAR PURPOSE. This map is the proprietary product of Gwinnett County and in no event will Gwinnett County be liable for damages, including any loss of profits, lost savings, or other incidental or consequential damages arising out of the use of or the inability to use this map.

35 Treatment of Wastewater. The County s total owned and contracted wastewater treatment capacity is currently mgd. All of the Sewerage System s Water Reclamation Facilities ( WRFs ) provide advanced treatment under some of the most stringent environmental requirements in the State of Georgia. A Water Resources Laboratory providing chemical and microbiological analyses ensures the WRFs provide consistent reporting and monitoring to the regulators. Additional laboratory services include monitoring and enforcement of industrial pretreatment requirements and ambient water quality monitoring of the streams and rivers within the County as needed. Separate process control laboratories are also maintained at each WRF to monitor plant performance and provide data for process control decisions. Water Reclamation Facilities. The Sewerage System s major treatment facilities are the F. Wayne Hill Water Resources Center ( FWHWRC ), the Yellow River WRF, the Crooked Creek WRF, and the Jackson Creek WRF. The Sewerage System has purchased treatment capacity in DeKalb County s Pole Bridge Water Pollution Control Facility ( WPCF ). The following table shows the permitted capacity in mgd of each treatment facility and the approximate usage for each during Sewerage System Capacity and Usage in 2010 Wastewater Treatment Facility Permit ADMMF AADF F. Wayne Hill WRC Crooked Creek WRF Yellow River WRF 13.5 (2) Pole Bridge WPCF (1) Jackson Creek WRF 3.0 (3) Total System (4) (1) (2) (3) (4) Plant capacity at Pole Bridge is used through an agreement with DeKalb County. Yellow River WRF currently being expanded, permit capacity will be 22 MGD when complete in This includes the permit capacity from Beaver Ruin WRF (4.5 MGD) and Jacks Creek WRF (1 MGD) which are previously decommissioned facilities. Jackson Creek WRF will be decommissioned in 2011 when Yellow River WRF upgrades are complete, permit capacity of 3 MGD will transfer to Yellow River and will be included in the 22 MGD permit for Yellow River WRF. This total is the Average Daily Flow for the System s Maximum Month and is not the sum of the ADMMF s for the individual locations which may occur in different months. The County reports the number of National Pollutant Discharge Elimination System ( NPDES ) permit violations experienced by the County s WRFs were zero, zero, one, zero, two, zero, zero, ten and four for the years 2002 through 2010, respectively. Nine of the violations in 2009 were related to flows when flooding in the County was declared a national disaster by FEMA. Additionally, the County WRFs have won a total of 102 awards from the National Association of Clean Water Agencies and the Georgia Association of Water Professionals in the years 2001 through 2007, including Platinum Awards for five WRFs for five consecutive years with no permit violations. In 2001 and 2002, Jackson Creek WRF and in 2006 and 2008 the F. Wayne Hill Water Resources Center were selected as Plant of the Year in their size categories by the Georgia Association of Water Professionals. In 2008 the F. Wayne Hill Water Resources Center received the National Clean Water Act Recognition Award, and the Regional IV National Clean Water Act Recognition Award from EPA. As part of a 50-Year Water and Wastewater Master Plan, FWHWRC started operation in early In late 2005 construction was completed on an additional 40 mgd of treatment capacity at the FWHWRC. The additional capacity brought the total water reclamation capacity of the FWHWRC to 60 mgd. The facility is part of a comprehensive plan to protect and conserve the County s limited water supply. The FWHWRC meets the strictest overall treatment requirements in the Southeast, producing high quality reclaimed water that is clean enough to discharge to a drinking water supply source. The FWHWRC is permitted to discharge up to 40 mgd into Lake Lanier and 20 mgd to the Chattahoochee River. The FWHWRC has begun discharging to Lake Lanier after the pipeline to the Lake was completed in May At this time, the permit for FWHWRC was increased from 29 to 60 mgd. In early 2007 construction began at the Yellow River WRF in order to consolidate wastewater flows from several smaller aging wastewater treatment facilities in the Yellow River basin and treat that flow at one facility capable of producing an effluent that meets current EPD standards. The County chose to consolidate operations in the Yellow River basin to the single Yellow River site rather than upgrade and rehabilitate each of the smaller individual sites as a way to reduce the overall 27

36 cost to our ratepayers and stakeholders. The result of consolidating operations into a single site will result in reduced capital costs for construction as well as long term reduced operating costs. This saving is achieved through an economics of scale that is achieved by building and operating a single large facility. When the construction at the Yellow River WRF is completed, the permitted capacity will increased from 13.5 to 22.0 mgd. The Crooked Creek WRF Improvement project started in 2009 to provide sufficient and reliable treatment capacity. Tasks to be completed include: a new influent pump station with in-line grinders; a new Headworks with band screens and vortex grit removal; a new ultraviolet disinfection building; improvements to hydraulics of the oxidation basins; new solids thickening/storage tanks; and a new solids handling building. The project is scheduled for completion in Collection System. The County has approximately 2,670 miles of sewers ranging in size from eight inches to 72 inches in diameter, and approximately 226 active pump stations and nine under construction. These gravity sewers and pump stations collect and transmit the wastewater flow from the water customers who are served by the Sewerage System to the WRFs. Sewer service is provided in the central, western and north central portions of the County. The Lower Apalachee and Lower Alcovy basins are only minimally served by sewers presently. The current Water and Wastewater Master Plan Update outlines future areas to be served by the Sewerage System and projects a timeline for this service. The County experienced several sanitary sewer overflows, mainly due to root intrusion and grease accumulation in the Sewerage System. The reportable overflows from were 43, 33, 32 and 35, respectively. The County has a program to address these issues. The County recently completed the East Side Wastewater Conveyance System, designed to convey flows from numerous sub-basins on the southeastern side of the County nearly eighteen miles to the FWHWRC. Flows that originate in the southernmost sub-basins of that system are collected at the Lower Big Haynes Pump Station (15 MGD Phase I) and pumped through a 36-inch force main to the Brooks Road Booster Pump Station. At that point, flows from the Brooks Road Pump Station are added, and all flow is then pumped northward to the Alcovy Booster Pump Station. At that point, flows from the Alcovy Pump Station are added, and all flow is then pumped directly to the FWH WRC. Interbasin connection by pumped flows allows management to direct flow to the treatment facility that is best able to handle the flows. In basins where treatment facilities are located downgradient of other treatment facilities, the upgradient facilities have diversion gravity lines that allow flows to be diverted for downstream treatment when needed. All pump stations have remote telemetry capability, which reports power outages, high water level alarms and other problems to a central control center that is continuously manned. Critical pump stations that could overflow into waters with the potential for human contact have backup telemetry as well. The telemetry system is monitored by a computer that periodically queries the current status of the stations and verifies the ability of the pump stations to call in alarms. All pump stations are visited and checked by maintenance personnel on the scheduled preventive maintenance frequency recommended by the manufacturer. Alarms are investigated and needed repairs are promptly accomplished. Rightof-ways and easements are maintained for access to all Sewerage System gravity lines and pump stations. Large pump stations have dual electrical feed or standby generators for emergency use. The County owns portable generators that can be transported to small pump stations in power outage situations. A state-approved pretreatment program is in place. This program protects the treatment facilities from discharges to the sewers of materials that could upset or harm the biological treatment processes at the treatment plants. In addition, this program protects the Sewerage System from discharges of materials that could damage the gravity lines and/or the pump stations. Reserve Capacity. In the late 1970s and early 1980s the County entered into reserve capacity agreements with certain large landholders as a means of generating capital to construct WRFs. The facilities were constructed as promised by the County, and the reserve capacity made available for the holders of these liens on future capacity. The reserve capacity was specific to parcels of land, and as this land was subdivided and sold, so too were the sewerage rights associated with it. The County administrative staff carefully monitors the assignments of these rights. Meanwhile, the Sewerage System derives over $7, per year in revenues from these unexercised options. The following table shows the approximate remaining open commitments of these agreements as of December 31,

37 Reserve Capacity Status Report December 31, 2010 Assignee mgd Source: Gwinnett County Department of Water Resources. Kraft Corporation Williams Brothers Concrete Kuniansky Max Sams, Mr. Kenneth Waffle House Rick Case Burkett Oil Company, Incorporated K C Coatings, Incorporated Autozone Wachovia Bank TOTAL Customers of the Sewerage System. As of December 31, 2010, the Sewerage System had 147,637 retail customers. The City of Norcross uses the Sewerage System facilities on a wholesale basis. Norcross made capital contributions to the Sewerage System to aid in construction and in order to assure itself of adequate future treatment capacity. Norcross maintains its own sewer lines within its corporate limits. A similar contract with DeKalb County allows DeKalb to share proportionately in the operational cost of the Jackson Creek WRF up to the 1.12 mgd capacity reserved for DeKalb. Residents of Lilburn, Snellville, Berkeley Lake, Grayson, Duluth, Dacula, Suwanee and Sugar Hill who are connected to the Sewerage System receive their service directly from the County. A portion of the residents of Buford is served by Buford s wastewater treatment system, while others are served by the County. The following table shows the 10 largest retail users of the Sewerage System during Total sewer usage during 2010 was 15,826, thousands of gallons, generating $89,064, in usage revenues (excluding late fees). No single retail user accounted for more than 1.25 percent of total Sewerage System revenues in 2010, and the ten largest users together accounted for 4.56 percent of such revenues. In addition to retail customers, the County also provided service to two municipal customers on a wholesale basis: DeKalb County and the City of Norcross. DeKalb County produced 0.38 mgd of wastewater in 2010 and was billed $333, The City of Norcross produced 0.76 mgd of wastewater in 2010 and was billed $2,550, (1). These two wholesale customers accounted for 3.24 percent of the total Sewerage System revenues. (1) Of the total amount billed to Norcross, $2,140, was billed for their share of the 2009 Capital Projects. This bill is still outstanding as of the CAFR publishing date. Total outstanding of their share of the 2008 and 2009 Capital Projects is $4,152, Largest Retail Sewerage Users 2010 Customer Thousands of Gallons Per Year mgd Total Revenues Received Gwinnett County Board of Education 206, $1,113, Gwinnett County Government 156, , Publix 95, , Phillips State Prison 57, , Suniva 43, , Management Assoc 41, , MTS Sweetwater 38, , Tree Summit/Pinecrest Gardens 36, , Cottonwood Bristol PT 36, , Magnolia Pointe Apartments 34, , TOTAL 747, $4,065,

38 Current Sewerage Rates. The schedule presented below shows sanitary sewer rates. The Board of Commissioners adopted these rates and rate increases at their meeting on March 3, The rates are subject to change by the County as it deems advisable. Rates set by the County are not subject to the approval of any outside agency. Volume Sewer Charge The following volumetric sewer charge applies to all water consumed. Current 2011 Effective 1/1/2012 Effective 1/1/2013 Effective 1/1/2014 Effective 1/1/2015 Effective 1/1/2016 (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) (per 1000 gal.) $5.89 $6.47 $7.11 $7.82 $8.60 $8.60 In addition to the water base charge, all retail sewer accounts pay a base fee of $5.00 per billing period, effective July 1, 2009, with the exception of multi-family housing on a master meter. The base charge is separate from the volume charge for either water or sewer usage. Where one meter serves more than one unit, the monthly meter charge is $10.00 per unit per billing period, effective July 1, Base rates are effective until modified by the Board of Commissioners. Industrial Surcharge: As computed for specific conditions of discharge. Sewerage System Development Charge Water Meter Size (inch)(1) (1) Current 2011 ¾ $ 4, ,270 1 ½ 31, , , , , ,751 (1) System development charges for meters larger than 8 inches will be determined by the Department of Water Resources to reflect anticipated average daily wastewater flows; insufficient data are available to develop equivalent flow factor for these large meters. Note: System Development Charges are effective until modified by the Board of Commissioners. Summary of Operating Results Information in the following table has been derived from the County s financial statements. Amounts for the year ended December 31, 2010, were derived from the audited financial statements attached hereto as APPENDIX A. Amounts for the years ended December 31, 2009, 2008, 2007 and 2006 were derived from audited financial statements not included herein. Although taken from audited financial statements, no representation is made that the information is comparable from year to year, or that the information as shown taken by itself presents fairly the financial condition of the County for the fiscal years shown. The table presents only selected items and should be read in conjunction with financial statements published for the relevant periods. [Remainder of page intentionally left blank] 30

39 GWINNETT COUNTY WATER AND SEWERAGE SYSTEM SUMMARY OF OPERATING RESULTS (In Thousands of Dollars) Years ended December 31, Operating Revenues: Residential and commercial service $ 178,179 $191,790 $183,110 $201,134 $232,764 Wholesale service 4,446 9,135 5,789 6,895 7,091 Public fire protection charges to other funds Connection charges 2,489 1, Intergovernmental ,617 Miscellaneous 7,319 3,490 4,327 4,679 6,348 Total operating revenues 192, , , , ,931 Operating Expenses: Water production 14,290 14,082 15,806 16,652 15,161 Distribution and collections 24,389 25,990 26,036 25,398 26,868 Engineering 7,504 6,430 6,100 5,881 4,587 Reclamation 26,189 26,988 27,963 26,372 27,928 Depreciation and amortization 64,304 63,123 69,126 65,449 68,424 General and administrative 12,941 21,323 22,358 22,717 28,916 Total operating expenses 149, , , , ,884 Net Operating Revenues (Expenses) 43,207 48,514 26,897 51,015 82,047 Nonoperating Revenues (Expenses): Interest income 10,189 5,455 2, Change in fair value of investments 1, (64) -- Interest expense (24,800) (33,986) (33,269) (31,281) (36,407) Loss on Disposal of Capital Assets (1,060) (6,500) (4,159) (6,041) (1,804) Income (loss) before transfers and contributions 29,462 14,186 (8,477) 13,820 44,238 Capital contributions 93,105 89,210 59,128 16,702 10,745 Transfers in Transfers out (88) (10) (90) Increase in net assets 122, ,267 50,651 30,522 54,967 Net assets, January 1 1,892,733 2,015,530 2,119,797 2,170,448 2,200,970 Net assets, December 31 $2,015,530 $2,119,797 $2,170,448 $2,200,970 $2,255,937 Source: Gwinnett County Comprehensive Annual Financial Report - Year Ended December 31, [Remainder of page intentionally left blank] 31

40 Financial Operations of Water and Sewerage System The System s financial picture follows the general growth that the System has experienced. For example, operating revenues have increased by 32 percent from 2006 to During the same period, fixed assets of the System grew by 21 percent. The large increase in fixed assets is indicative of the commitment by the Authority and the County to build the infrastructure required to serve the County s future water and wastewater needs. The cash balance in the available funds for capital expenditures and Debt Service as of December 31, 2010, was approximately $196.1 million and this amount has been encumbered to pay contractual obligations in the amount of $67.6 million over multiple years. The debt service coverage ratio of the System has increased from 1.70 in 2005 to 1.81 in Debt service coverage in 2010 calculated upon net operating revenue of $150.9 million and debt service expense of $83.5 million. Availability of funds from operations has allowed the Authority to pay for new projects with cash over the last several years. The County and the Authority anticipate that no additional Bonds will be issued for capital projects during the period from 2011 through See --Gwinnett County Capital Improvement Program below. On July 19, 2005, the County adopted water and sewer rate increases that revised the rates previously scheduled for 2006 and 2007 and added annual scheduled rate increases from 2008 through On March 3, 2009, the County adopted water and sewer rates that added annual scheduled rate increases from 2012 through 2015, increased the water base fee, created a sewer base fee, and adjusted some additional, minor fees. The Gwinnett County Department of Financial Services has prepared a financial forecast of the System s Net Revenues and debt service coverage for the period during the life of the Series 2011 Bonds based upon assumptions and estimates concerning future events and circumstances which the County believes to be reasonable. THE FINANCIAL FORECAST IS BASED SOLELY UPON ASSUMPTIONS MADE BY THE GWINNETT COUNTY DEPARTMENT OF FINANCIAL SERVICES, INCLUDING, WITHOUT LIMITATION, ASSUMPTIONS AS TO RATES FOR WATER AND SEWER SERVICE, STABILITY AND GROWTH OF THE CUSTOMER BASE, AND OPERATING EXPENSES. THERE IS NO ASSURANCE THAT ACTUAL EVENTS WILL CORRESPOND WITH SUCH ASSUMPTIONS, THAT UNCONTROLLABLE FACTORS WILL NOT AFFECT SUCH ASSUMPTIONS, OR THAT THE FORECASTED RESULTS WILL BE ACHIEVED. THUS, THE ACTUAL RESULTS ACHIEVED MAY VARY MATERIALLY FROM THOSE FORECAST, AND SUCH VARIATIONS COULD HAVE A MATERIAL AND ADVERSE EFFECT UPON THE SYSTEM S NET REVENUES AVAILABLE FOR DEBT SERVICE. NEITHER THE COUNTY S NOR THE AUTHORITY S INDEPENDENT AUDITORS HAVE EXAMINED, COMPILED OR OTHERWISE APPLIED PROCEDURES TO THE FINANCIAL FORECAST PRESENTED HEREIN AND, ACCOINGLY, DO NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE ON IT. [Remainder of page intentionally left blank] 32

41 Gwinnett County Water and Sewerage System Projected Net Revenues and Debt Service Coverage (In Thousands of Dollars) Year Projected Net Revenues (1) Existing Debt Services as of 12/31/2010 Less: Refunded 2003B Bonds Debt Service (2) Adjusted Existing Debt Service as of 12/31/2010 Plus Debt Service on Series 2011 Bonds Total Estimated Debt Service Coverage Proposed Future GEFA and Other Debt Service (3) Total Debt Service for Current CIP Estimated Coverage 2011 $154,323 $89,526 $8,092 $81,434 $655 $82, $3,868 $85, ,888 89,715 8,092 81,623 7,866 $89, ,670 93, ,924 97,542 8,092 89,450 7,866 $97, , , ,317 97,601 18,952 78,649 18,371 $97, , , ,594 97,274 18,951 78,323 18,367 $96, , , ,435 97,393 18,951 78,442 18,365 $96, , , ,572 97,282 18,950 78,332 18,369 $96, , , ,405 97,178 18,952 78,226 18,367 $96, , , ,202 78,705 18,951 59,754 18,369 $78, ,586 81, ,871 78,704 18,951 59,753 18,366 $78, ,586 81, ,546 78,706 18,949 59,757 18,365 $78, ,586 81, ,568 78,705 18,951 59,755 18,367 $78, ,586 81, ,951 78,715 18,953 59,763 18,371 $78, ,586 81, ,709 78,705 18,950 59,755 18,368 $78, ,586 81, ,857 78,708 18,949 59,759 18,365 $78, ,586 81, ,411 36,221 36,221 $36, ,586 39, ,388 36,217 36,217 $36, ,586 39, ,803 37,513 37,513 $37, ,461 40, ,675 21,043 21,043 $21, ,547 22, (1) (2) (3) Projected Net Revenues prepared by the Gwinnett County Department of Finance. Rate increases approved for are included in the forecast. Series 2003B maturities for 2011, 2012, and 2013 and associated interest remain outstanding GEFA loans are subordinate to the Bonds but do represent a general obligation of the County 33

42 Gwinnett County Capital Improvement Plan The County has a Capital Improvement Plan ( CIP ) for the years that provides for approximately $664 million of improvements to the System. The CIP includes improvements in the following categories: Improvement Classification Funding (in millions of dollars) Water Production $ 21,298 Water Distribution 62,665 Wastewater Collection 104,077 Wastewater Reclamation 160,533 System Support 315,891 Total $664,464 The revenue sources for the total funds required to the support the CIP through the year 2015 are as follows: Sources of Funds Funding (in millions of dollars) Renewal and Extension Fund $ 552,269 Funds Available from Operations 109,895 GEFA Loan/Stimulus Proceeds (1) 2,300 Total Funding: $664,464 (1) Anticipated proceeds of a loan from the Georgia Environmental Facilities Authority ( GEFA ). GEFA loans are subordinate to the Series 2011 Bonds but do represent a general obligation of the County. [Remainder of page intentionally left blank] 34

43 GWINNETT COUNTY General The County, located 25 miles northeast of downtown Atlanta, was founded December 15, 1818 and was named for Button Gwinnett, one of three signers of the Declaration of Independence from Georgia. The County encompasses a land area of 437 square miles and ranks second largest in the State of Georgia. The county seat is Lawrenceville, the largest of 15 municipalities in the County. More than 80 percent of the total population of the County resides in the unincorporated areas. Additional economic and general information with respect to the County is included herein as APPENDIX B Gwinnett County Economic and General Information. Government. The administrative body of the County is the elected five-member Board of Commissioners. The Board of Commissioners is headed by a full-time Chairman, who is elected on a county-wide basis for a fouryear term. The other four commissioners also serve four-year terms, but are elected by their respective districts. The day-to-day operations of the County are administered by the County Administrator who is appointed by the Board of Commissioners. The Board of Commissioners is as follows: Name Occupation Term Expires Charlotte J. Nash, Chairman Governmental Consulting 12/31/12 Shirley Lasseter Public Service 12/31/12 Lynette Howard Public Service 12/31/14 Mike Beaudreau Account Manager 12/31/12 John Heard Architect 12/31/14 Services Provided by the County. The County provides fire protection, police protection, emergency medical services, judicial services, recreational facilities, water supply and distribution and sewerage collection and treatment. The public school system for all of the County, except for the City of Buford, is operated by the County s Board of Education, an independent political subdivision. The City of Buford maintains its own independent school system. The County government has 4,823 authorized positions as of January 1, The employees are not unionized. The County believes that employee relations are generally good. Under O.C.G.A. Section , et. seq. (referred to as the Service Delivery Act ), Georgia law provides a flexible framework within which local governments in each county can develop a service delivery system that is both efficient and responsive to the needs of the citizens in their county. The Service Delivery Act provides mechanisms, including litigation, for local governments to utilize to resolve disputes over local government service delivery, funding equity and land use. Pursuant to the Service Delivery Act, the County is currently involved in litigation with certain municipalities located within the County. Gwinnett County, Georgia v. City of Auburn, et. al, relates specifically to determining what local government services the County will provide and what local government services each of the fifteen municipalities will provide, and how those services will be funded. An evidentiary hearing was held in August 2010 relating to disputed items and as of June 1, 2011, a ruling by the Superior Court judge is currently pending. [Remainder of page intentionally left blank] 35

44 General Fund History Set forth below is a historical comparative summary of the revenues, expenditures and changes in fund balance of the County s General Fund for the past five fiscal years. Information in the following table has been extracted from audited financial statements of the County for the fiscal years ending on December 31. Amounts for the year ended December 31, 2010 were extracted from the audited financial statements attached hereto as APPENDIX A. Amounts for the years ended December 31, were extracted from audited financial statements not included herein. Although taken from audited financial statements, no representation is made that the information is comparable from year to year, or that the information as shown taken by itself presents fairly the financial condition of the County for the fiscal years shown. For more complete information, reference is made to the basic financial statements of the County attached hereto as APPENDIX A. Gwinnett County, Georgia, General Fund Summary of Revenues, Expenditures and Changes in Fund Balance (In Thousands of Dollars) Years Ended December 31, Revenues $396,042 $421,212 $413,401 $425,254 $488,582 (2) Expenditures 356, , , , ,968 Revenues in Excess of Expenditures 39,985 22,485 (1,388) 10,349 57,614 Other Financing Sources (Uses): Transfers In 2,250 1, Transfers Out (1) (27,020) (20,231) (36,700) (6,175) (28,585) Revenues and Other Financing Sources in Excess of (less than) Expenditures and Other Financing Uses 15,215 3,712 (38,072) 4,174 29,783 Fund Balance January 1 133, , , , ,170 Fund Balance December 31 $148,356 $152,068 $113,996 $118,170 $147,953 (1) Transfers Out generally represent transfers either to (i) the Capital Projects Fund for capital projects, (ii) the Vehicle Fund for replacement of motor vehicles, (iii) the Grant Matching Fund for the County s share of grant fund matched projects. In 2010, there was a $10 million transfer to the County s Debt Service Fund, which was used to retire outstanding general obligation bonds. Additionally, the governmental activities transferred capital assets with a net book value of $145,000 to the Water and Sewerage Fund. (2) Includes collections from additional 2009 property tax billing. Source: Gwinnett County Comprehensive Annual Financial Report - Years Ended December 31, 2010, 2009, 2008, 2007, [Remainder of page intentionally left blank] 36

45 Financial Operations of County General Fund The County s General Fund is the principal fund used to finance most of the services provided by County government. Major exceptions include recreation services which is funded through a special tax district, and water and sewerage services, which are funded primarily through user charges. Additionally, certain major capital improvements have been funded separately from the General Fund through the imposition of a voter-approved special purpose local option sales and use tax ( SPLOST ). The rapid growth of the County s population and the resulting demand for increased and improved services are reflected in the history of General Fund expenditures. Total expenditures, including transfers, for the General Fund, have grown from $383,077,000 in 2006 to $459,553,000 in Growth in revenues offset the overall increase in expenditures during the last five years, as revenues, including transfers, increased from $398,292,000 in 2006 to $489,336,000 in As previously introduced, the County is also able to fund a number of capital improvements through the imposition of a SPLOST. On November 2, 2008, the voters approved a five-year extension of the SPLOST. The proceeds of the SPLOST will be directed for (a) capital improvements to roads, public safety, parks and recreation, courthouse and libraries and (b) city directed capital improvement projects. It is estimated that the five-year SPLOST, which began in April 2009, will generate approximately $731 million for County and city capital improvements. Funding the development of infrastructure needed to meet the increased demands of its residents has been the County s greatest financial challenge of the past decade. In addition to the projects funded by the SPLOST, the County issued $61,740,000 in General Obligation Refunding Bonds for the purpose of refunding certain outstanding debt of the County. In 2003, the County issued $75 million in general obligation bonds to fund an expansion of the Detention Center. In 2007, the Development Authority of Gwinnett County (the Development Authority ) issued $12 million in principal amount of revenue bonds, which are payable from contract payments made by the County, to finance the acquisition and construction of a parking deck at the Gwinnett Center. In April 2008, the Development Authority issued $33 million principal amount of revenue bonds, which are payable from lease payments made by the County to finance the construction of a minor league baseball stadium. In 2010, the Development Authority issued $52,660,000 in principal amount of revenue refunding bonds to refinance prior bonds issued in 2001 to finance an expansion to the Gwinnett County Civic and Cultural Center. Less than 0.2% of the $1.46 billion Capital Improvement Program is funded by debt. Over the last several years, the County has faced pressures on its operating budget from three primary sources: (1) increased service demands from a growing population, (2) operating costs for newly completed capital facilities, and (3) unfunded mandates from the State and Federal governments. For approximately 20 years the County has been able to withstand these pressures without increasing tax rates or depleting its general fund balance through careful fiscal management. In fact, the millage rate has remained the same or been reduced every year since However, in 2009, the millage rate was increased by 21%. This increase represented the first of its kind in 20 years. After this increase, the millage rate is 11.4% lower than the 1991 rate. In 2010, the County maintained the same millage rate as Accounting Policies and Budgetary Process Budgetary Controls. In addition to internal accounting controls, the County maintains budgetary controls. The Department of Financial Services is responsible for the compilation of an annual budget for all County funds. Chapter 1, Part 4, Section 102 of the Gwinnett County Code (as amended by House Bill 1815) (the State Code ) provides that the Chairman of the Board of Commissioners will submit or cause to be submitted to the Board, not later than December 1, a proposed budget for each fund of the County for the ensuing calendar year. The Board then reviews and, after meeting legal requirements for advertisement of the budget and for public hearings, adopts the annual budget at the first regularly scheduled Commission meeting of the year. The budget may be amended at any time during the year upon formal action of the Board of Commissioners. Exceptions to this are the Grant Fund and public authorities. The Grant Fund is budgeted on a program basis, rather than an annual basis, and public authorities are not budgeted. 37

46 The legal level of budgetary control is at the fund/department level as specified in the State Code. However, County policy and the adopted annual budget resolution require the following controls: Budgetary appropriations may not exceed anticipated funding sources, in order that each fund has a balanced budget. Actual expenditures of each fund for the year may not exceed the budget for that fund, or amendments thereto, and may not exceed actual funding sources. 1. The Director of Financial Services, without Board action, has authority to: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) allocate funds to appropriate Department from insurance proceeds and/or from the Casualty and Liability Insurance Reserve for the replacement or repair of damaged equipment items; allocate funds from the established Judicial Reserve to appropriate departments within the Judicial System as required: allocate funds from the established Medical Reserve to various funds/departments when required to cover medical expenses; allocate funds from the established Indigent Defense Reserve to appropriate departments for required indigent defense expenses; allocate funds from the established Court Reporter Reserve to appropriate departments for required expenses; allocate funds from the established Court Interpreter Reserve to appropriate departments for required expenses; allocated funds from the established Inmate Housing Reserve to appropriate departments for required expenses; allocate funds from the established Fuel/Parts Reserve as required; authorize preparation and submission of applications for grant funding; however, acceptance of all grant awards is subject to the approval of the Board of Commissioners; adjust revenue and appropriation budget between capital projects as necessary to incorporate grant awards previously approved by the Board of Commissioners; approve transfers of appropriations within capital projects and allocate funds previously approved, or, as appropriate, transfer appropriations among fiscal years for projects as necessary to allow completion of each project and cover existing obligations/expenses in accordance with the intent and actions of the Board of Commissioners; however, in no case shall appropriations exceed actual available funding sources; and adjust revenue and appropriation budgets to incorporate collected revenue at the capital fund contingency project and project specific levels. 2. The Deputy County Administrator/Chief Financial Officer to: (a) transfer funds from Departments under his/her direct authority so long as the total budget for the Administrative Departments is not increased; 38

47 (b) (c) (d) transfer funds from established reserves for leave balances at retirement, salary adjustments and reclassifications to Departments and Organizational Units as necessary to provide funding for compensation actions, reductions in force and retirement incentives; transfer funds resulting from salary savings or transfer balances resulting from under expenditures in operating accounts into Non-Departmental reserves to fund accrued liabilities; transfer appropriations within a capital fund from an Information Technology contingency/reserve to establish new projects/initiatives for amounts up to $100, The County Administrator: (a) (b) (c) (d) transfer funds from department budgets to Contribution to Capital Projects for amounts up to $25,000; transfer funds within a capital fund from fund or program contingencies and/or savings in existing projects to establish new projects for amounts up to $100,000; allocate funds from the established Operational Efficiency Reserve as required; allocate funding among projects by Board of Commissioners. Financial Reports. The accounting policies of the County conform to generally accepted accounting principles as applicable to governmental units. The following is a summary of the more significant policies: The Governmental Fund Types (the General Fund, Special Revenue Funds, Capital Projects Funds and Debt Service Fund) are maintained and the financial statements are prepared on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are generally recognized when they are susceptible to accrual, i.e., when they become measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government generally considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Major revenue sources which are susceptible to accrual are Property Tax, Sales Tax, Insurance Premium Tax and Intergovernmental Revenue. Expenditures are generally recognized when the related fund liabilities are incurred. The accounts of the Proprietary Fund Types are maintained, and the financial statements are prepared, on the accrual basis of accounting. The accounts of the Agency Funds are maintained, and the financial statements are prepared, on the accrual basis of accounting. The County has established a Risk Management Program for workers compensation, general liability, and employee medical costs. This program incorporates both County retention of routine claims and the purchase of excess liability insurance coverage. See Note 10, Notes to Financial Statements in APPENDIX A. The County offers its employees a deferred compensation plan, all contributions to which are voluntary employee contributions, and all full-time eligible employees participate in either a defined contribution or defined benefit pension plan. See Notes 11 and 12, Notes to Financial Statements in APPENDIX A. The County also provides certain post-retirement health care benefits to certain employees pursuant to another post employment benefit plan (the OPEB Plan ). See Note 13, Notes to Financial Statements in APPENDIX A. [Remainder of page intentionally left blank] 39

48 Budget Set forth below is a summary of the County s 2011 Budget for its General Fund adopted on January 4, Pensions and Employee Benefits General Budget Gwinnett County, Georgia Revenues: Taxes $332,841,761 Licenses and Permits 7,989,111 Intergovernmental Revenue 2,771,928 Charges for Services 48,324,843 Fines and Forfeitures 14,299,214 Investment Income 188,694 Contributions and Donations 19,400 Miscellaneous Revenue 4,062,057 Other Finance Source 90,437 Total Revenues 410,587,445 Use of Fund Balance 37,995,263 TOTAL REVENUES - GENERAL FUND $448,582,708 Expenditures: Personal Services $ 284,531,966 Operations 96,992,431 Contributions to Other Funds 9,439,098 Contributions. to Subsidized Agencies 19,420,160 Cont. to Cap/Capital Outlay 20,564,053 Payments to Other Agencies 6,010,000 Reserve/Contingencies 11,625,000 TOTAL EXPENDITURES $448,582,708 Article III, Section X, Paragraph V of the Constitution of the State of Georgia gives the Georgia General Assembly the duty of enacting legislation to define funding standards which will assure the actuarial soundness of any retirement or pension system supported wholly or partially from public funds. The Public Retirement Systems Standards Law of the State of Georgia (O.C.G.A et seq.) sets forth minimum funding standards for such retirement or pension systems. The Public Retirement Systems Investment Law (O.C.G.A et seq.) governs investments for such retirement or pension systems. All of the County s investment including pension investments comply with all state laws as well as the County s Investment Policy. Georgia law (O.C.G.A ) requires that a local retirement system (meaning any retirement or pension system covering employees of a county, municipality or similar public body) hire a qualified actuary every two years to conduct an actuarial investigation of its retirement systems; however, it has been the practice of the County to engage an actuary every year for such an investigation. The County s current actuary is Cavanaugh Macdonald Consulting, LLC ( Cavanaugh ). See Discussion of 2011 Actuarial Report - Defined Benefit Plan and Discussion of 2011 Actuarial Report - Other Post-Employment Benefits below for a discussion of Cavanaugh s most recent actuarial reports. The County s actuarial reports are released approximately six months after the valuation date (currently, the end of each fiscal year). The purpose of an actuarial valuation is to calculate the actuarial accrued liability in a pension plan, which estimates on the basis of demographic and economic assumptions the present value of benefits a pension plan will pay to its retired members and active members upon 40

49 retirement. The County s actuarial valuation is performed in accordance with State of Georgia standards and the parameters set forth in the Governmental Accounting Standards Board (GASB) Statement 25 and Statement 27. Defined Benefit Plan. The County previously participated in the agent-multiple employer Association County Commissioners of Georgia Defined Benefit Plan and the Association County Commissioner Defined Benefit Plan Master Trust Agreement sponsored by the Association of County Commissioners of Georgia (the ACCG Plan ). The County established the Gwinnett County Defined Benefit Plan, effective January 1, 2007 (the Defined Benefit Plan ), as a single employer, locally governed plan for the benefit of its employees and other eligible individuals. Assets held in the ACCG Plan for the benefit of County employees were transferred to the Defined Benefit Plan in The Retirement Plans Management Committee (the Retirement Committee ), composed of seven members who serve without compensation by the Defined Benefit Plan, is the trustee of the Defined Benefit Plan. BNY Mellon Bank is the custodian for the Defined Benefit Plan while Great-West Retirement Services is the third party administrator. Benefit provisions and contribution requirements are established and may be amended by the Retirement Committee, subject to approval by the Board of Commissioners. Full-time employees with an employment or reemployment commencement date on or before December 31, 2006, who did not elect to participate in the Defined Contribution Plan (as defined below) are eligible to participate in the Defined Benefit Plan. Employees hired or rehired after January 1, 2007, County commissioners and other elected or appointed officials with an employment or reemployment date after August 1, 2000 and employees who elected to participate in the Defined Contribution Plan are excluded from participation in the Defined Benefit Plan. The Defined Benefit Plan is closed to new entrants. Normal retirement age under the Defined Benefit Plan is 65. Employees having an employment or reemployment date prior to November 1, 2004, become fully vested after three years of service. Employees having an employment or reemployment date after November 1, 2004, become fully vested after five years of service. Normal retirement benefits are based on a participant s average monthly compensation for the highest 60 consecutive months of credited service out of the employee s last 120 months of credited service prior to termination of employment. A participant who, prior to satisfying the requirements for a normal, early, or reduced retirement pension shall be entitled to receive a disability pension if the participant has completed 10 years of full-time service and is determined to be totally disabled by the Social Security Administration prior to the participant s termination of employment. Joint and survivor retirement benefits to a participant s designated beneficiary are provided by the Defined Benefit Plan, as well as 10 years certain benefit option. A post retirement death benefit of up to $15,000 (payable in a lump sum) is provided for each participant receiving an early, reduced, normal or late retirement pension. INFORMATION INCLUDED IN THIS SECTION RELIES ON INFORMATION PROVIDED BY THE RETIREMENT COMMITTEE AND THE INDEPENDENT ACCOUNTANTS AND ACTUARIES ENGAGED BY THE COUNTY RELATING TO THE DEFINED BENEFIT PLAN. ACTUARIAL ASSESSMENTS ARE FORWA-LOOKING INFORMATION THAT REFLECT THE JUDGMENT OF THE FIDCUCIARIES OF THE DEFINED BENEFIT PLAN. ACTUARIAL ASSESSMENTS ARE BASED UPON A VARIETY OF ASSUMPTIONS, ONE OR MORE OF WHICH MAY PROVE TO BE INACCURATE OR BE CHANGED IN THE FUTURE AND WILL CHANGE WITH THE FUTURE EXPERIENCE OF THE DEFINED BENEFIT PLAN. 41

50 Actuarial Methods and Assumptions - Defined Benefit Plan 2011 Actuarial Report The following are the principal actuarial assumptions used by Cavanaugh in preparing the valuation as of January 1, 2011: Valuation date January 1, 2011 Actuarial cost method Projected Unit Credit Amortization method Level Percent of Pay Amortization period Closed Remaining amortization period 16 years Asset valuation method Five-year smoothed market value Actuarial assumptions: Investment rate of return (includes inflation) 8.00% Projected salary increases (includes inflation) 4.50% % Price inflation 3.00% Wage inflation 4.00% Cost-of-living adjustments 1.00% Payroll decrease 5.00% Decrement assumptions were revised in conjunction with a three-year Experience Study performed for the period beginning January 1, 2006 and ending January 1, The recommendations presented in the three-year Experience Study were adopted by the Retirement Committee and first utilized in the January 1, 2010 valuation. Discussion of 2011 Actuarial Report - Defined Benefit Plan Pursuant to the Public Retirement Systems Standards Law, the County is required to contribute an actuarially determined amount annually to the Defined Benefit Plan s trust. The required contribution amount is determined using actuarial methods and assumptions as set forth in controlling State statutes, as described above under General. Effective January 1, 2010, the required contribution rate for County contributions, as a percentage of pensionable earnings was set at percent. Employees were required to contribute at an average rate of 5.5 percent of pensionable earnings. The chart below shows County costs and contributions for the year ended December 31, 2010, for the current Defined Benefit Plan and the prior six years. Schedule of Employer Cost and Contributions (in thousands of dollars) Fiscal Year Annual Pension Cost Actual County Contribution Percentage of APC Contributed Net Pension Asset End of Year 2010 $31,816 $60, % $109, ,360 37, , ,715 28, , ,037 32, , ,604 36, , ,940 30, , ,676 25, ,279 42

51 The County s annual pension cost and net pension asset for the year ended December 31, 2010 were as follows: Annual required contribution $27,505,949 Interest from net pension asset (6,389,617) Adjustment of net pension asset 10,699,595 Annual pension cost 31,815,927 Actual contributions to plan 60,946,966 Increase (Decrease) in net pension asset 29,131,039 Net pension asset as of January 1, ,870,209 Net pension asset as of December 31, 2010 $109,001,248 For the fiscal year ended December 31, 2010, the County exceeded its required contribution to the Defined Benefit Plan. When possible, the County makes additional contributions above annual required contributions. All contributions are planned as part of the County s annual budget process. The County does not currently anticipate having to raise property taxes to meet its annual required contributions to the Defined Benefit Plan. The following schedule of funding progress presents the funded status and the funding progress of the Defined Benefit Plan: Actuarial Valuation Date Actuarial Valuation of Assets Historical Funding Progress (Actuarial Value) (1) Actuarial Accrued Liability (AAL) Unfunded Actuarial Accrued Liability (UAAL) Funded Ratio Covered Payroll UAAL as a Percentage of Covered Payroll 1/1/11 $594,981,000 $809,082,724 $214,101, % $128,215, % 1/1/10 533,811, ,822, ,011, ,626, /1/09 504,918, ,298, ,380, ,391, /1/08 481,198, ,599, ,401, ,233, /1/07 423,952, ,758, ,806, ,174, /31/05 374,603, ,037,404 93,433, ,132, /31/04 296,962, ,159,702 38,197, ,726, (1) All figures prior to January 1, 2007 were reported by the Association County Commissioners of Georgia. [Remainder of page intentionally left blank] 43

52 Valuation Date Market Valuation of Assets Historical Funding Progress (Market Value) (1) Actuarial Accrued Liability (AAL) Unfunded Actuarial Accrued Liability (UAAL) Funded Ratio Covered Payroll UAAL as a Percentage of Covered Payroll 1/1/11 $595,440,000 (2) $809,082,724 $213,642, % $128,215, % 1/1/10 492,726,000 (2) 760,822, ,096, ,626, /1/09 389,468,000 (2) 678,298, ,830, ,391, /1/08 482,867,000 (2) 607,599, ,732, ,233, /1/07 434,018,401 (3) 547,758, ,740, ,174, /31/05 366,301,333 (4) 468,037, ,736, ,132, /31/04 322,398,547 (4) 335,159,702 12,761, ,726, (1) All figures prior to January 1, 2007 were reported by Association County Commissioners of Georgia. (2) Source: Gwinnett County Comprehensive Annual Financial Report for each respective year. (3) Source: Cavanaugh McDonald Actuarial Report. (4) Source: Association County Commissioners of Georgia. See Note 12, Notes to Financial Statements in APPENDIX A. Defined Contribution Plan. The Gwinnett County Defined Contribution Pension Plan (the Defined Contribution Plan ) is a defined contribution pension plan established by the County on August 1, 2000 to provide retirement benefits for appointed and elected officials. Effective January 1, 2007, all new eligible employees were required to participate in this plan, and the Defined Benefit Plan was closed to new entrants. The Defined Contribution Plan is administered by Great- West Retirement Services. Plan provisions and contribution requirements are established by and may be amended by the Board of Commissioners within the scope of all applicable laws. As of December 31, 2010, there were 2,213 active participants in the Defined Contribution Plan. Participants are required to make a one-time, irrevocable election of either 2.5, 5.0 or 7.5 percent contribution of their pensionable earnings. The County is required to contribute 11.5 percent of pensionable earnings for employees hired prior to January 1, 2007 or 7 percent of pensionable earnings for employees hired after such date. For the year ended December 31, 2010, the amount contributed by employees was $3,785,472. The amount contributed by the County was $8,373,387. The Defined Contribution Plan contains the Retiree Medical Savings Plan (401h), which is also administered by Great-West Retirement Services. All contributions to this plan are made by the County at 1.5 percent of pensionable earnings. This plan is only available to employees hired prior to January 1, Upon retirement, employees may receive disbursements from this account for eligible medical expenses. Persons leaving County employment prior to retirement forfeit all rights or claims against the medical savings plan and those funds are returned to the program for payment of expenses or redistribution in accordance with applicable IRS regulations. See Note 12, Notes to Financial Statements in APPENDIX A. Other Post-Employment Benefits. The Gwinnett County Retirement System Health Insurance Plan (the OPEB Plan ) is a single-employer defined benefit post-retirement health care plan, or other post-employment benefit (OPEB) plan. The County was awarded a 2008 Government Finance Officers Association Award for Excellence in Government Finance for its OPEB Plan. 44

53 The Gwinnett County OPEB Trust is an irrevocable trust established pursuant to Section 115 of the Internal Revenue Code for the purpose of pre-funding other post-employment benefits provided under the County s welfare benefits plans in accordance with GASB Statement 43 and GASB Statement 45. The trust was established effective January 1, 2007 by the Board of Commissioners to pre-fund medical and prescription drug benefits for retirees and other former employees (and their eligible dependants) who are eligible for such benefits under existing County policy. The Retirement Committee is the trustee of the OPEB Plan and BNY Mellon is the custodian. Benefit provisions and contribution requirements are established and may be amended by the County Administrator. Under the OPEB Plan, eligible retirees and other former employees are offered health and prescription drug coverage. In 2009, retirees paid approximately 25 percent of actuarially calculated and self-supporting monthly rates. The County contributed the remainder of the rates, but it caps its contribution at specific monthly limits. Participants pay 100 percent of the cost of vision and dental coverage. Actuarial Methods and Assumptions - Other Post-Employment Benefits 2011 Actuarial Report The following are the principal actuarial assumptions used by Cavanaugh in preparing the valuation as of January 1, 2011: Valuation January 1, 2011 Actuarial cost method Projected unit credit Amortization method Level percent of pay, open Remaining amortization period 30 years Asset valuation method Market Value of Assets Actuarial assumptions: Investment Rate of Return (1) 7.00% Medical cost trend rate (1) Pre-Medicare rate 10.50% Post-Medicare rate 9.00% Ultimate trend rate 5.00% Year of Ultimate trend rate 2018 (1) Includes inflation at 3.00% The assumed investment rate of return reflects the intention that the County will make contributions at least equal to the ARC each year. If contributions equal to the ARC are not made each year in the future, the discount rate will have to be lowered. INFORMATION INCLUDED IN THIS SECTION RELIES ON INFORMATION PROVIDED BY THE RETIREMENT COMMITTEE AND THE INDEPENDENT ACCOUNTANTS AND ACTUARIES ENGAGED BY THE COUNTY RELATING TO THE OPEB PLAN. ACTUARIAL ASSESSMENTS ARE FORWA- LOOKING INFORMATION THAT REFLECT THE JUDGMENT OF THE FIDCUCIARIES OF THE OPEB PLAN. ACTUARIAL ASSESSMENTS ARE BASED UPON A VARIETY OF ASSUMPTIONS, ONE OR MORE OF WHICH MAY PROVE TO BE INACCURATE OR BE CHANGED IN THE FUTURE AND WILL CHANGE WITH THE FUTURE EXPERIENCE OF THE OPEB PLAN. Discussion of 2011 Actuarial Report - Other Post-Employment Benefits In 2010, the County contributed an actuarially determined amount to the OPEB Plan s trust. The annual required contribution amount is determined using actuarial methods and assumptions approved by the Retirement Committee. It is intended to satisfy the minimum contribution requirements as set forth in GASB Statement 45. [Remainder of page intentionally left blank] 45

54 Schedule of Employer Cost and Contributions (in thousands of dollars) Fiscal Year Annual OPEB Cost Actual County Contribution Percentage of AOPEB Contributed Net OPEB Asset End of Year *To be determined $15,956 TBD* TBD* TBD* ,098 $26, % $19, ,245 16, , ,235 14, , ,305 21, ,409 The County s annual OPEB cost and net OPEB asset for the year ended December 31, 2010 were as follows: Annual required contribution $15,219,288 Interest from net OPEB asset (561,694) Adjustment of net OPEB asset 440,395 Annual OPEB cost 15,097,989 Actual contributions to plan 26,840,151 Increase in net OPEB asset 11,742,162 Net OPEB asset as of December 31, ,024,194 Net OPEB asset as of December 31, 2010 $19,766,356 For the fiscal year ended December 31, 2010, the County exceeded its required contribution to the OPEB Plan. When possible, the County makes additional contributions above annual required contributions. All contributions are planned as part of the County s annual budget process. The County does not currently anticipate having to raise property taxes to meet its annual required contributions to the OPEB Plan. [Remainder of page intentionally left blank] 46

55 Actuarial Valuation Date As of the most recent valuation date, January 1, 2011, the funded status of the OPEB Plan was as follows: Actuarial Value of Assets Historical Funding Progress (Actuarial Value) (1) Actuarial Accrued Liability (AAL) Unfunded Actuarial Accrued Liability (UAAL) Funded Ratio Covered Payroll UAAL as a Percentage of Covered Payroll 1/1/11 $51,362,002 $194,311,443 $142,949, % $219,527, % 1/1/10 28,135, ,041, ,906, ,204, /1/09 17,788, ,921, ,133, ,464, /1/08 16,646, ,202, ,555, ,050, /1/07 [0] 163,210, ,210,867 [0] 190,896, /1/06 [0] 328,159, ,159,422 [0] 200,000, (1) No Market Value table is shown as the Actuarial Value uses the market value of assets. See Actuarial Methods and Assumptions - Other Post- Employment Benefits 2011 Actuarial Report above. Note: The County s OPEB Plan trust fund was not established until See Note 13, Notes to Financial Statements in APPENDIX A. Litigation Plan. There is currently no material litigation relating to either the County s Defined Benefit Plan or the OPEB [Remainder of page intentionally left blank] 47

56 Summary of County Direct and Overlapping Debt By Category Set forth below is information concerning direct debt of the County, as of December 31, 2010 and the estimated overlapping property tax supported debt of certain governmental entities that is attributable to property owners in the County based upon the proportion to which the jurisdiction of the County overlaps such entities. Although the County has attempted to obtain accurate information as to the outstanding overlapping debt, it does not warrant its completeness or accuracy, as there is no central reporting entity which has this information available, and the amounts are based on information supplied by others. There has never been a default in payment of the principal of or interest on any general obligation bonds issued by the County. (in thousands) Direct Debt: General Obligation Debt $ 63,465 Intergovernmental Contracts (1): : Gwinnett County Water and Sewerage Authority 1,021,565 Development Authority of Gwinnett County 96,420 Notes Payable to Georgia Environmental Facilities Authority (1) 56,548 Total Direct Debt $1,237,998 Overlapping General Obligation Debt Gwinnett County School District (2) $922,125 Municipalities within Gwinnett County 20,550 Total Overlapping General Obligation Debt $942,675 Total Direct, Tax Supported and Overlapping General Obligation Debt: $2,180,673 (1) (2) Contractual obligations to which the County s full faith and credit are pledged. County-wide excluding the City of Buford. Source: Gwinnett County Board of Education Comprehensive Annual Financial Report for Year Ended June 30, Debt Ratios The following table sets forth certain debt ratios as of December 31, Direct General Obligation Debt (1) Direct Tax Supported Debt (2) Overlapping Tax Supported Debt (3) Overall Tax Supported Debt (4) Per Capita Debt (5) $78.81 $1, $1, $2, Percentage of Net Maintenance and Operations Tax Digest (6).24% 4.65% 3.54% 8.18% Percentage of Fair Market Value (7).10% 1.86% 1.41% 3.27% Per Capita Debt as Percentage of Per Capita Income (8) 0.24% 4.75% 3.61% 8.36% (1) (2) (3) (4) (5) (6) (7) (8) Based upon direct general obligation debt of $63,465,000. Based upon total direct tax supported debt of $1,237,998,000. Based upon overlapping debt chargeable to the County of $942,675,000. Based upon overall debt chargeable to the County of $2,180,673,000. Based upon estimated 2010 population figure of 805,321. Based upon 2010 Net Tax Digest for Maintenance and Operations of $26,647,359,957. Based upon 2010 estimated actual value of $66,618,399,893. Based upon 2009 per capita income figure in Gwinnett County of $32,

57 Limitations on County Debt The Constitution of the State of Georgia provides that the County may not incur long-term obligations payable out of general property taxes without the approval of a majority of the qualified voters of the County voting at an election called to approve the obligations. In addition, under the Constitution of the State of Georgia, the County may not incur long-term obligations payable out of general property taxes in excess of ten percent of the assessed value of all taxable property within the County. The school district may also incur general obligation debt up to the ten percent limitation. Short-term obligations (those payable within the same calendar year in which they are incurred), lease and installment purchase obligations subject to annual appropriation and intergovernmental obligations are not subject to the legal limitations described above. In addition, refunded obligations cease to count against the County s debt limitations. As computed in the table below, based upon the 2010 assessed value, the County could incur (upon necessary voter approval) approximately $2,635,251,000 in long-term obligations payable out of general property taxes (or general obligation bonds). Computation of Legal Debt Margin (in thousands) 2010 Net Tax Digest for General Obligation Bond Purposes $26,647,360 Debt Limit (10% of Tax Digest) $2,664,736 Amount of Debt Applicable to Debt Limit, Net of Amounts Set Aside for Repayment of General Obligation Debt $29,485 Estimated Legal Debt Margin $2,635,251 Source: Gwinnett County Comprehensive Annual Financial Report - Year Ended December 31, [Remainder of page intentionally left blank] 49

58 Assessed and Estimated Value of Taxable Property Real Property Personal Property Fiscal Year Ended Dec. 31, Residential Property Commerical Property Other Real Property Motor Vehicle Other (1) Gross Digest Less: Tax Exemptions Total Taxable Assessed Value Total Direct Tax Rate Total Actual Taxable Value Assessed Value as a Percentage of Actual Value 2007 $19,110,676,313 $7,620,660,544 $711,286,124 $2,100,293,790 $3,553,418,546 $33,096,335,317 $5,521,193,379 $27,575,141, $68,937,854,845 40% ,154,776,093 8,232,413, ,878,956 2,203,612,510 3,685,145,915 35,000,827,047 5,647,694,750 29,353,132, ,382,830,743 40% ,601,892,754 8,007,858, ,273,050 2,244,806,130 3,704,242,078 34,286,072,335 5,285,098,686 29,000,973, ,502,434,123 40% ,636,924,358 7,328,942, ,159,776 1,947,193,360 3,363,021,476 31,013,241,228 4,365,881,271 26,647,359, ,618,399,893 40% ,128,412,742 4,081,466,691 24,046,946,051 40% (1) Includes mobile homes. Source: 2007 through 2010 from Gwinnett County Comprehensive Annual Financial Report - Year Ended December 31, figures are a projection provided by Gwinnett County Economic Analysis Division and the Gwinnett County Tax Assessor. [Remainder of page intentionally left blank] 50

59 Property Tax Levies and Collections The following table shows the property tax levies and collections of the County for the years Year Total Tax Levy (1) Current Tax Collections Percent of Levy Collected Delinquent Tax Collections Total Tax Collections Total collections as Percent of Current Levy 2006 $776,843,211 $712,381, % $47,788,257 $760,169, % ,910, ,880, ,246, ,127, ,462, ,605, ,187, ,792, ,213, ,546, (2) 109,272, ,819, ,713, ,612, ,612, (1) Reflects original digest net of all digest corrects to date. (2) Percentage does not include the portion on the levy billed in March Notes: Includes 2010 Utilities (not due until 03/15/11) Includes all rolls, tax only No Street Light Assessments, Speed Humps or Storm Water The 2009 Levies include $60.1 million of additional taxes billed in March Source: Gwinnett County Comprehensive Annual Financial Report - Year Ended December 31, Property Reappraisal The Board of Assessors has a policy of performing an annual review of tax values for all properties on either a neighborhood or property use basis. The review consists of a comparison of tax values to sales prices within the neighborhood or use group. The results of the review produces an indicator of whether the tax values are at an acceptable level in each of the groups. If the indicator of a group is unacceptable, then all of the properties within that group will receive current market appraisals. The Commissioner of the State Department of Revenue is charged with the examination of the tax digest (roll) of all Georgia counties on an annual basis. The tri-annual comprehensive review of the County s 2008 tax digest resulted in a finding of no deficiencies. The 2011 tax digest will be reviewed in June [Remainder of page intentionally left blank] 51

60 Property Tax Rates The following table shows the property tax rates in mills for the County, School and State for the period JURISDICTION COUNTY Maintenance & Operations Unincorporated Incorporated Debt Service Fire Protection Recreation TOTAL County Unincorporated TOTAL County Municipalities SCHOOL Maint. & Operations Debt Service TOTAL SCHOOL STATE TOTAL Unincorporated TOTAL Municipalities Source: Gwinnett County Comprehensive Annual Financial Report - Year Ended December 31, [Remainder of page intentionally left blank] 52

61 Ten Largest Taxpayers The ten largest taxpayers in the County as of December 31, 2010, and the assessed value of the taxable property of such taxpayers are listed in the table below. Taxpayer Nature of Business Taxes Levied Assessed Valuation AT&T Communications Utility/Media $5,393, $162,337,738 Publix Super Markets Inc. Retail 4,354, ,728,936 Georgia Power Co. Utility 3,733, ,775,800 Wal-Mart Retail 3,428, ,790,860 Mall of Georgia LLC Real Estate 2,927, ,975,871 Scientific Atlanta LLC Manufacturing 2,588, ,061,385 Jackson Electric Membership Corporation Utility 2,352, ,886,840 CRLP Holdings Real Estate 1,591, ,989,720 Fourth Quarter Properties, LLC Real Estate 1,413, ,880,000 Atlanta Gas Light Utility 1,404, ,205,200 $29,187, $907,632,350 Source: Gwinnett County Comprehensive Annual Financial Report - Year Ended December 31, 2010 and Gwinnett County Tax Commissioner. [Remainder of page intentionally left blank] 53

62 TAX TREATMENT OF SERIES 2011 BONDS Legal matters incident to the authorization, validity, and issuance of the Series 2011 Bonds are subject to the unqualified approving opinion of King & Spalding LLP, Bond Counsel. The form of the opinion of Bond Counsel is attached to this Official Statement as APPENDIX C. Copies of such opinion will be available at the time of the initial delivery of the Series 2011 Bonds. Federal Tax Matters In the opinion of King & Spalding LLP, Atlanta, Georgia, Bond Counsel, under existing statutes, rulings and court decisions and under applicable regulations, interest on the Series 2011 Bonds is not included in gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on certain corporations. Except as provided below with respect to original issue discount, no opinion will be expressed with respect to any other federal tax consequences of the receipt or accrual of interest on the Series 2011 Bonds. In rendering its opinion that the interest on the Series 2011 Bonds is not included in gross income for federal income tax purposes, Bond Counsel will rely on (a) representations of the Authority and the County and (b) certified proceedings and other certifications of public officials and others furnished to Bond Counsel, without undertaking to verify the same by independent investigation. The inaccuracy of any such representations may cause interest on the Series 2011 Bonds to become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2011 Bonds. Ownership of the Series 2011 Bonds may result in other collateral federal income tax consequences to certain taxpayers, including without limitation, corporations subject to the environmental tax, banks, thrift institutions and other financial institutions, foreign corporations which conduct a trade or business in the United States, property and casualty insurance corporations, S corporations, individual recipients of social security or railroad retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Series 2011 Bonds. Purchasers of the Series 2011 Bonds should consult their tax advisors as to the applicability of any such collateral consequences. Original Issue Premium. The Series 2011 Bonds are being sold at initial offering prices in excess of the principal amount thereof. An amount equal to the excess of the purchase price of a Series 2011 Bond over its stated redemption price at maturity constitutes premium on such Series 2011 Bond. A purchaser of a Series 2011 Bond must amortize any premium over such Series 2011 Bond s term using constant yield principles, based on the purchaser s yield to maturity. As premium is amortized, the purchaser s basis in such Series 2011 Bond is reduced by a corresponding amount, resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Series 2011 Bond prior to its maturity. Even though the purchaser s basis is reduced, no federal income tax deduction is allowed. Purchasers of any Series 2011 Bonds at a premium, whether at the time of initial issuance or subsequent thereto, should consult with their own tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to state and local tax consequences of owning such Series 2011 Bonds. State Tax Matters In the opinion of Bond Counsel, under existing statutes, rulings and court decisions and under applicable regulations, interest on the Series 2011 Bonds is exempt from all present State of Georgia income taxation. Interest on the Series 2011 Bonds may or may not be subject to state or local income taxation in jurisdictions other than Georgia under applicable state or local laws. Purchasers of the Series 2011 Bonds should consult their tax advisors as to the taxable status of the Series 2011 Bonds in a particular state or local jurisdiction other than Georgia. 54

63 LEGAL MATTERS Pending Litigation Other than validation proceedings with respect to the Series 2011 Bonds and as described below, there is not now pending any litigation restraining or enjoining, or seeking to restrain or enjoin, the issuance or delivery of the Series 2011 Bonds or questioning or affecting the validity of the Series 2011 Bonds or the proceedings and authority under which they are issued. Neither the creation, organization, or existence of the Authority or the County, nor the title of the present members and officers thereof to their respective offices, is being contested. There is no litigation pending which in any manner questions the power of the Authority to issue the Series 2011 Bonds and to secure the Series 2011 Bonds in accordance with the provisions of the Indenture by the pledge of the revenues derived by the Authority from the Subordinate Lease Payments to be made under the Lease, nor is there now pending any litigation which in any manner questions the power of the Authority or the County to enter into the Lease or the validity or enforceability of the Lease. For a discussion of certain litigation affecting the Water System, see THE SYSTEM -- The Water System -- Raw Water Supply herein. Validation As required by the Act, the Authority caused proceedings to be instituted in the Superior Court of Gwinnett County, Georgia to validate the Series 2011 Bonds. A final judgment confirming and validating the Series 2011 Bonds and the security therefor, was entered on November 17, Under the law of the State of Georgia, the judgment of validation is final and conclusive with respect to the Series 2011 Bonds and the security therefor. Approval of Legal Proceedings All legal matters incident to authorization and issuance of the Series 2011 Bonds by the Authority are subject to the approval of King & Spalding LLP, Bond Counsel, Atlanta, Georgia, whose approving opinions will be available at the time of the issuance and delivery of the Series 2011 Bonds. It is anticipated that the approving opinions will be in substantially the forms attached hereto as APPENDIX C. Certain legal matters will be passed upon for the Authority and the County by King & Spalding LLP, Atlanta, Georgia, their Disclosure Counsel, for the Authority by Webb, Tanner, Powell, Mertz & Wilson, LLP, Lawrenceville, Georgia and for the County by Van Stephens, Lawrenceville, Georgia, Acting County Attorney. Ratings MISCELLANEOUS The Series 2011 Bonds have been assigned a rating of Aaa by Moody s Investors Service, a rating of AAA by Standard & Poor s, a division of the McGraw-Hill Companies, Inc. and a rating of AAA by Fitch Ratings. Such ratings reflect only the respective views of such organizations and an explanation of the significance of such ratings may be obtained only from the rating agency furnishing the same. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by either or all of such rating agencies if, in the judgment of either or all, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Series 2011 Bonds. Underwriting J.P. Morgan Securities LLC and Morgan Keegan & Company, Inc. (collectively, the Underwriters ) have agreed to purchase all of the Series 2011 Bonds at a purchase price of par pursuant to a Bond Purchase Agreement among the County, the Authority and J.P. Morgan Securities LLC, as representative of the Underwriters. The aggregate underwriting compensation for all of the Series 2011 Bonds is $438,729, which will be paid from the proceeds of the sale of the Series 2011 Bonds. The Bond Purchase Agreement provides that the Underwriters will 55

64 be obligated to purchase all of the Series 2011 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions to be satisfied by the Authority and the County. The Bond Purchase Agreement contains the agreement of the County and the Authority to indemnify the Underwriters against certain liabilities to the extent permitted by law. The Underwriters may offer and sell the Series 2011 Bonds to certain dealers and others at prices lower than the offering prices stated on the cover page. The offering prices may be changed from time to time by the Underwriters. J.P. Morgan Securities LLC ( JPMS ), one of the Underwriters of the Series 2011 Bonds, has entered into negotiated dealer agreements (each, a "Dealer Agreement") with each of UBS Financial Services Inc. ( UBSFS ) and Charles Schwab & Co., Inc. ("CS&Co.") for the retail distribution of certain securities offerings, including the Series 2011 Bonds, at the original issue prices. Pursuant to each Dealer Agreement, each of UBSFS and CS&Co. will purchase Series 2011 Bonds from JPMS at the original issue price less a negotiated portion of the selling concession applicable to any Series 2011 Bonds that such firm sells. Continuing Disclosure The County and the Authority have covenanted for the benefit of Bondholders to provide certain financial information and operating data relating to the County and the Authority by not later than July 1, in each year commencing July 1, 2012 (the Annual Report ), and to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by the County and the Authority with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access system. The notices of enumerated events will be filed by the County and the Authority with the MSRB and with any similar repositories established by the State, if any. A summary of the information to be contained in the Annual Report or the notices of material events is provided under the caption APPENDIX E Form of Continuing Disclosure Agreement. These covenants have been made in order to assist the Underwriters in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). The County and the Authority have complied in all material respects during the past five years with their existing continuing disclosure undertakings. Information in the Appendices The basic financial statements and required supplementary information of Gwinnett County for the year ended December 31, 2010, attached hereto as APPENDIX A have been audited by Mauldin & Jenkins, Certified Public Accountants, LLC for the period indicated in their report included in APPENDIX A. Certain information with respect the County is included herein as APPENDIX B. The form of legal opinion attached hereto as APPENDIX C has been prepared by King & Spalding LLP, Bond Counsel, Atlanta, Georgia, and is substantially in the form to be given in connection with delivery of the Series 2011 Bonds. Certain information with respect to the Lease and the Indenture is included herein as APPENDIX D. Certain information concerning continuing disclosure is included herein as APPENDIX E. [Remainder of page intentionally left blank] 56

65 CERTIFICATION This Official Statement has been duly executed and delivered by the Authority and the County as of the date shown on the cover page hereof. GWINNETT COUNTY WATER AND SEWERAGE AUTHORITY By: /s/ Michael L. Sullivan Chairman GWINNETT COUNTY By: /s/ Charlotte J. Nash Chairman of the Board of Commissioners 57

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67 APPENDIX A BASIC FINANCIAL STATEMENTS OF GWINNETT COUNTY FOR THE YEAR ENDED DECEMBER 31, 2010

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69 Comprehensive Annual Financial Report gwinnettcounty, georgia Year Ended December 31, 2010