FINAL OFFICIAL STATEMENT DATED APRIL 6, 2016

Transcription

1 FINAL OFFICIAL STATEMENT DATED APRIL 6, 2016 NEW ISSUES Rating: Moody s Investors Service - Aa2 (See RATINGS herein) In the opinion of Quarles & Brady LLP, Bond Counsel, assuming continued compliance with the requirements of the Internal Revenue Code of 1986, as amended, under existing law, interest on the Series 2016A Notes is excludable from gross income and is not an item of tax preference for federal income tax purposes. The Series 2016A Notes are designated as "qualified tax-exempt obligations." See "LEGAL MATTERS - Tax Exemption on the Series 2016A Notes" herein for a more detailed discussion of some of the federal income tax consequences of owning the Series 2016A Notes. In the opinion of Quarles & Brady LLP, Bond Counsel, interest on the Series 2016B Notes is included in gross income for federal income tax purposes. See LEGAL MATTERS - Taxability of Interest on the Series 2016B Notes herein. The interest on the Series 2016A Notes and the Series 2016B Notes is not exempt from present State of Wisconsin income or franchise taxes. CITY OF SHEBOYGAN Sheboygan County, Wisconsin $3,400,000 General Obligation Promissory Notes, Series 2016A $7,525,000 Taxable General Obligation Promissory Notes, Series 2016B The Series 2016A Notes and the Series 2016B Notes (collectively referred to as the Securities ) will be dated April 20, 2016, will be in the denomination of $5,000 each or any multiple thereof. The 2016A Notes will mature serially on October 1, 2017 through Interest shall be payable commencing on October 1, 2016 and semiannually thereafter on April 1 and October 1 of each year. The Series 2016B Notes will mature serially on October 1, 2017 through Interest shall be payable commencing on April 1, 2017 and semiannually thereafter on October 1 and April 1 of each year. Interest on the Securities is calculated based on 360-day year of twelve 30-day months. $3,400,000 G.O. Promissory Notes, Series 2016A Dated April 20, 2016; 1 st Interest Payment October 1, 2016 October 1 Amount Rate Yield Base CUSIP 82102R (1) October 1 Amount Rate Yield Base CUSIP 82102R (1) 2017 $475, % 0.75 BN $350, % 1.30 BT , BP , BU , BQ , BV , BR , BW , BS3 $7,525,000 Taxable G.O. Promissory Notes, Series 2016B Dated April 20, 2016; 1 st Interest Payment April 1, 2017 October 1 Amount Rate Yield Base CUSIP 82102R (1) October 1 Amount Rate Yield Base CUSIP 82102R (1) 2017 $ 765, % 0.85 BX $1,035, % 1.80 CC ,145, BY , CD ,120, BZ , CE ,095, CA , CF ,075, CB9 The Securities are issued pursuant to Chapter 67 of the Wisconsin Statutes, the Series 2016A Note Resolution and the Series 2016B Note Resolution. The Securities will be general obligations of the City of Sheboygan, Wisconsin (the City ) for which its full faith and credit and unlimited taxing powers are pledged which taxes may, under current law, be levied without limitation as to rate or amount. Proceeds for the Series 2016A Notes will be used for public purposes, including paying the cost of various construction, improvement and acquisition projects set forth in the City's 2016 Capital Improvement Plans, including the acquisition of motor vehicles, rolling stock, fire department equipment, sirens and controls, bridge and street improvements, city hall construction, assessment revaluation, and TID No. 16 projects costs ( Series 2016A Project ). Proceeds of the Series 2016B Notes will be used for public purposes, including payment of development incentives ( Series 2016B Project), and refunding the 2017 through 2022 maturities of the Taxable General Obligation Refunding Bonds, Series 2006D, dated July 1, The Securities maturing on October 1, 2024 and 2025 shall be subject to redemption prior to maturity, at the option of the City, on October 1, 2023 or on any date thereafter, in whole or in part, from maturities selected by the City and within each maturity by lot at par, plus accrued interest to the date of redemption. The Securities are issued as fully registered bonds and will be registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York, ( DTC ), to which principal and interest payments on the Securities will be made. Individual purchases will be made in book-entry form only in denominations of $5,000 principal amount or any integral multiple thereof. Purchasers of the Securities will not receive physical delivery of bond certificates. (See BOOK-ENTRY-ONLY SYSTEM herein.) The City will act as bond registrar and paying agent for the Securities. This Official Statement has been revised to reflect the results of the actual interest rates bid on the Securities at a public sale on April 6, 2016 (in accordance with the respective Official Notice of Sale). The Securities will be delivered subject to the unqualified approval of legality by Quarles & Brady LLP, Bond Counsel on or about April 20, BOSC, Inc., a subsidiary of BOK Financial Corp. Underwriter for the Series 2016A Notes Wisconsin Public Finance Professionals, LLC, Municipal Advisor Robert W. Baird & Co., Inc. Underwriter for the Series 2016B Notes (1) CUSIP data provided by the CUSIP Service Bureau, managed on behalf of the American Bankers Association by Standard & Poor s, a division of the McGraw- Hill Companies, Inc. No representations are made as to the correctness of the CUSIP numbers.

2 City of Sheboygan, Wisconsin City Hall 828 Center Avenue Sheboygan, WI (920) Common Council Name Aldermanic District Term of Office Todd Wolf, Chair Committee First April, 2016 of the Whole John Belanger, Vice President First April, 2016 Roman Draughon Second April, 2016 Vacant Second April, 2016 Rosemarie Trester Third April, 2017 Michael Damrow Third April, 2016 Job Hou-seye Fourth April, 2017 Mary Lynne Donohue Fourth April, 2016 William Thiel Fifth April, 2017 Julie Kath Fifth April, 2016 Mark Hermann Sixth April, 2017 Bryan Bitters Sixth April, 2016 Don Hammond, President Seventh April, 2017 Susan Lessard Seventh April, 2016 Joseph Heidemann Eighth April, 2017 Jim Bohren Eighth April, 2016 Michael Vandersteen James Amodeo Susan Richards Nancy Wasmer Nancy Buss Charles Adams Administration Mayor Chief Administrative Officer City Clerk City Treasurer/Comptroller Finance Director City Attorney As a result of the April 5, 2016 elections, District 2 will be represented by Tammy Rabe and District 5 will be represented by Scott Lewandowski. All other Alderpersons were re-elected to a two-year term. Alderman Don Hammond resigned his position April 6, 2016 to be effective April 18, The Council s reorganizational meeting will occur on April 19, 2016 whereby officers will be elected. James Amodeo, Chief Administrative Officer, retired from this position, which will be filled by Darrell Hofland. Paying Agent City of Sheboygan Contact Finance Director Professional Services Independent Auditors Bond Counsel Schenck SC Quarles & Brady LLP 2200 Riverside Drive 411 East Wisconsin Avenue Green Bay, WI Milwaukee, WI Municipal Advisor Wisconsin Public Finance Professionals, LLC 1020 N. Broadway Milwaukee, WI

3 For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document, as the same may be supplemented or amended by the City of Sheboygan, Sheboygan County, Wisconsin (the City ), from time to time (collectively, the Official Statement ), may be treated as an Official Statement with respect to the Securities described herein that is deemed final by the City as of the date hereof (or of any such supplement or amendment). No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations concerning the Securities other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as statements of the City or the Underwriter. 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 Securities by any person, in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. Unless otherwise indicated, the City is the source of the information contained in this Official Statement. Certain information contained herein has been obtained from sources other than records of the City, and is believed to be reliable, but is not guaranteed as to accuracy or completeness. The information and opinions expressed herein are subject to change without notice, and 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 City since the date of this Official Statement. Wisconsin Public Finance Professionals, LLC, Milwaukee, Wisconsin, is serving as municipal advisor (the Municipal Advisor ) to the City in connection with the issuance of the Securities. In preparing this Official Statement, the Municipal Advisor has relied upon the City and other sources having access to relevant data to provide accurate information for this Official Statement. To the best of the Municipal Advisor s knowledge, the information contained in this Official Statement is true and accurate. However, the Municipal Advisor has not been engaged, nor has it undertaken, to independently verify the accuracy of such information. Any statements made in this Official Statement, including the Exhibits, involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of such estimates will be realized. This Official Statement contains certain forward-looking statements and information that are based on the City s beliefs as well as assumptions made by and information currently available to the City. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. This Official Statement should be considered in its entirety. No one factor should be considered more or less important than any other by reason of its position in this Official Statement. Where statutes, ordinances, reports or other documents are referred to in this Official Statement, reference should be made to those documents for more complete information regarding their subject matter. The Securities will not be registered under the Securities Act of 1933, as amended, in reliance upon exemptions contained in the Act, or the securities laws of any state of the United States, and will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state, municipal or other governmental entity shall have passed upon the accuracy or adequacy of this Official Statement. IN CONNECTION WITH THE OFFERING OF THE SECURITIES, THE UNDERWRITER MAY OR MAY NOT OVER ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT NOTICE. THE PRICES AND OTHER TERMS RESPECTING THE OFFERING AND SALE OF THE SECURITIES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER AFTER THE SECURITIES ARE RELEASED FOR SALE AND THE SECURITIES MAY BE OFFERED AND SOLD AT PRICES OTHER THAN THE INITIAL OFFERING PRICES, INCLUDING SALES TO DEALERS WHO MAY SELL THE SECURITIES INTO INVESTMENT ACCOUNTS. 3

4 TABLE OF CONTENTS Page NEW ISSUES 1 SUMMARY FOR THE SERIES 2016A NOTES 6 SUMMARY FOR THE SERIES 2016B NOTES 7 INTRODUCTION 8 THE SECURITIES 8 Authority and Purpose 8 Security for the Securities 8 Maturities, Interest Rates and Form of Bond 9 Redemption Provisions 9 Notice of Redemption 9 Paying Agent 9 THE PROJECT AND THE REFUNDING 10 Source and Application of Funds Series 2016A Notes 11 Source and Application of Funds Series 2016B Notes 11 CONSTITUTIONAL AND STATUTORY CONSIDERATIONS AND LIMITATIONS CONCERNING THE CITY S POWER TO INCUR INDEBTEDNESS 12 THE RESOLUTIONS 13 Series 2016A Note Resolution 13 Series 2016B Note Resolution 13 Tax Levy Limits 14 Continuing Disclosure for the Securities 15 BOOK ENTRY-ONLY SYSTEM 16 THE CITY 18 Location and Organization 18 Common Council 18 Administration 18 Principal Services and Facilities 19 Employees and Labor Relations 19 Pension and Retirement Plan 20 Other Post-Employment Benefits 21 DEMOGRAPHIC AND ECONOMIC DATA 23 Recent Developments in 2015 and Population 25 Median Age 25 Median Home Value 25 Median Household Income 25 Per Return Adjusted Gross Income 25 Per Capita Income 25 Unemployment Rates 25 Building Permits 25 Largest Employers 26 Largest Taxpayers 27 Property Valuations and Tax Levies 28 Tax Rates 28 4

5 INDEBTEDNESS 29 Categories of Debt and Amount Outstanding 29 General Obligation Debt Service Schedule After Refunding 31 Capital Leases 37 Amount Due to Sheboygan County, WI 37 Mortgage Note 37 Revenue Debt Service Schedule Sewer Utility Purposes 38 Revenue Debt Service Schedule Water Utility Purposes 39 Debt Trends for the Last Five Years 41 Debt Limit 41 Future Financing 41 Borrowing for Operational Purposes 41 History of Debt Administration 41 Investment Policy 42 Direct and Overlapping Debt 42 Statistical Summary 42 FINANCIAL INFORMATION 43 Budgeting Process 43 Budget Summary Adopted 44 Governmental Fund Summary 45 General Fund Summary 46 Summary of Property Assessment, Tax Levy and Tax Collection Procedures 47 History of Tax Collections 47 UNDERWRITING 48 The Series 2016A Notes 48 Original Issue Discount for the Series 2016A Notes 48 Bond Premium for the Series 2016A Notes 49 The Series 2016B Notes 50 Original Issue Discount for the Series 2016B Notes 50 Bond Premium for the Series 2016B Notes 51 LEGAL MATTERS 51 Tax Exemption for the Series 2016A Notes 51 Qualified Tax-Exempt Obligations 52 Taxability of Interest on the Series 2016B Notes 52 Approval of Legality of Securities 52 Absence of Material Litigation 52 MUNICIPAL BANKRUPTCY 52 RATINGS 53 EXHIBITS 53 MISCELLANEOUS 54 MUNICIPAL ADVISOR 54 ACCURACY AND COMPLETENESS OF OFFICIAL STATEMENT 54 EXHIBIT I. Audited Financial Statement for the City of Sheboygan for the Year End December 31, 2014 EXHIBIT II. Form of Legal Opinions for the Securities EXHIBIT III. Continuing Disclosure Certificates for the Securities Page 5

6 SUMMARY FOR THE SERIES 2016A NOTES This is not a summary of this Official Statement. The information on this page is qualified by more complete and detailed information contained in the entire Official Statement, including the cover page and exhibits hereto, and the documents summarized or described herein. A review of the entire Official Statement and all such documents should be made by potential investors. Issuer City of Sheboygan, Sheboygan County, Wisconsin Issue Dated Date Sale Date and Award $3,400,000 General Obligation Promissory Notes, Series 2016A (the Series 2016A Notes ) April 20, 2016 (Date of Delivery) Wednesday, April 6, 2016; sale at 10:00 A.M. C.T. awarded at a Common Council meeting on April 6, 2016 commencing at 6:00 P.M. C.T. Principal Due October 1, 2017 through 2025 Interest Payment Due Redemption Provision Authority Purpose Security Commencing October 1, 2016 and on each April 1 and October 1 thereafter. Interest on the Series 2016A Notes will be computed on the basis of a 30-day month and 360-day year. Series 2016A Notes maturing on October 1, 2024 and 2025 shall be subject to redemption prior to maturity, at the option of the City, on October 1, 2023 or on any date thereafter, in whole or in part, from maturities selected by the City and within each maturity by lot at par, plus accrued interest to the date of redemption, upon 30-day notice as set forth in THE SECURITIES Redemption Provisions herein. The Series 2016A Notes are issued pursuant to Chapter 67, Wisconsin Statutes and the Series 2016A Note Resolution awarding the sale of the Series 2016A Notes, adopted by the Common Council on April 6, Proceeds for the Series 2016A Notes will be used for public purposes, including paying the cost of various construction, improvement and acquisition projects set forth in the City's 2016 Capital Improvement Plans, including the acquisition of motor vehicles, rolling stock, fire department equipment, sirens and controls, bridge and street improvements, city hall construction, assessment revaluation, and TID No. 16 projects costs ( Series 2016A Project ). The full faith, credit and resources of the City are pledged to the payment of the principal of and the interest on the Series 2016A Notes as the same become due and, for said purposes, there are levied on all taxable property in the City, direct, annual, irrepealable taxes in each year and in such amounts which will be sufficient to meet such principal and interest payments when due. Under current law, such taxes may be levied without limitation as to rate or amount. The City has heretofore levied a direct annual irrepealable ad valorem debt service tax in anticipation of the sale of the Series 2016A Notes, in an amount sufficient to pay the interest on the Series 2016A Notes coming due on October 1, Tax Exemption Bank Qualification Bond Rating In the opinion of Quarles & Brady LLP, Milwaukee, Wisconsin, Bond Counsel, interest on the Series 2016A Notes is excludable from gross income for federal income tax purposes. (See LEGAL MATTERS - Tax Exemption on the Series 2016A Notes herein.) Interest on the Series 2016A Notes is not exempt from present State of Wisconsin income or franchise taxes. The Series 2016A Notes shall be designated as qualified tax-exempt obligations. The City has received a rating of Aa2 on the Series 2016A Notes from Moody s Investors Service, Inc. (See RATINGS herein). Bond Years 18, years Average Life years Record Date Paying Agent The 15 th day of calendar month next preceding an interest payment date. City of Sheboygan, Wisconsin 6

7 SUMMARY FOR THE SERIES 2016B NOTES This is not a summary of this Official Statement. The information on this page is qualified by more complete and detailed information contained in the entire Official Statement, including the cover page and exhibits hereto, and the documents summarized or described herein. A review of the entire Official Statement and all such documents should be made by potential investors. Issuer City of Sheboygan, Sheboygan County, Wisconsin Issue Dated Date Sale Date and Award $7,525,000 Taxable General Obligation Promissory Notes, Series 2016B (the Series 2016B Notes ) April 20, 2016 (Date of Delivery) Wednesday, April 6, 2016; sale at 11:00 A.M. C.T. awarded at a Common Council meeting on April 6, 2016 commencing at 6:00 P.M. C.T. Principal Due October 1, 2017 through 2025 Interest Payment Due Redemption Provision Authority Purpose Security Tax Status of Interest Bond Rating Commencing April 1, 2017 and on each October 1 and April 1 thereafter. Interest on the Series 2016B Notes will be computed on the basis of a 30-day month and 360-day year. Series 2016B Notes maturing on October 1, 2024 and 2025 shall be subject to redemption prior to maturity, at the option of the City, on October 1, 2023 or on any date thereafter, in whole or in part, from maturities selected by the City and within each maturity by lot at par, plus accrued interest to the date of redemption, upon 30-day notice as set forth in THE SECURITIES Redemption Provisions herein. The Series 2016B Notes are issued pursuant to Chapter 67, Wisconsin Statutes and the Series 2016B Note Resolution awarding the sale of the Series 2016B Notes, adopted by the Common Council on April 6, Proceeds of the Series 2016B Notes will be used for public purposes, including payment of development incentives ( Series 2016B Project ) and refunding the 2017 through 2022 maturities of the Taxable General Obligation Refunding Bonds, Series 2006D, dated July 1, The full faith, credit and resources of the City are pledged to the payment of the principal of and the interest on the Series 2016B Notes as the same become due and, for said purposes, there are levied on all taxable property in the City, direct, annual, irrepealable taxes in each year and in such amounts which will be sufficient to meet such principal and interest payments when due. Under current law, such taxes may be levied without limitation as to rate or amount. Interest on the Series 2016B Notes is included in gross income for federal income tax purposes. (See LEGAL MATTERS Taxability of Interest on the Series 2016B Notes herein.) The interest on the Series 2016B Notes is not exempt from present State of Wisconsin income or franchise taxes. The City has received a rating of Aa2 on the Series 2016B Notes from Moody s Investors Service, Inc. (See RATINGS herein). Bond Years 36, years Average Life years Record Date Paying Agent The 15 th day of calendar month next preceding an interest payment date. City of Sheboygan, Wisconsin 7

8 INTRODUCTION The purpose of this Official Statement, which includes the cover page, reverse thereof and Exhibits, is to provide certain information relating to the City of Sheboygan, Sheboygan County, Wisconsin (the City ) in connection with the issuance of $3,400,000 General Obligation Promissory Notes, Series 2016A and $7,525,000 Taxable General Obligation Promissory Notes, Series 2016B (collectively referred to as the Securities ). The Securities are issued pursuant to the Constitution and laws of the State of Wisconsin, the Series 2016A Note Resolution and the Series 2016B Note Resolution (the Resolutions ) adopted by the City s Common Council (the Common Council ) and other proceedings and determinations related thereto. Unless otherwise indicated, the information contained in this Official Statement is based upon material provided by the City and available at the date of publication of the Official Statement. Certain information has been obtained from sources other than records of the City and is believed to be reliable, but is not guaranteed as to accuracy or completeness. Persons considering a purchase of the Securities should consider the Official Statement in its entirety. No one factor should be considered more or less important than any other by reason of its position in this Official Statement. All references to material included in this Official Statement not purporting to be quoted in full are only summaries of certain provisions thereof and do not purport to summarize or describe all the provisions thereof. Reference is made to such instruments, document and other materials for the complete provisions thereof, copies of which will be furnished upon request. The Resolutions may be obtained, upon request, from the Municipal Advisor. City information, including prior years financial statements, is available, upon request, from the City s Finance Director. Authority and Purpose THE SECURITIES The Securities are issued pursuant to the provisions of Chapter 67 of the Wisconsin Statutes, the Series 2016A Note Resolution, and the Series 2016B Note Resolution (the Resolutions ). The Resolutions Awarding the Sale of $3,400,000 General Obligation Promissory Notes, Series 2016A and $7,525,000 Taxable General Obligation Promissory Notes, Series 2016B were adopted by the Common Council on April 6, Proceeds for the Series 2016A Notes will be used for public purposes, including paying the cost of various construction, improvement and acquisition projects set forth in the City's 2016 Capital Improvement Plans, including the acquisition of motor vehicles, rolling stock, fire department equipment, sirens and controls, bridge and street improvements, city hall construction, assessment revaluation, and TID No. 16 projects costs ( Series 2016A Project ). Proceeds of the Series 2016B Notes will be used for public purposes, including payment of development incentives ( Series 2016B Project ) and refunding the 2017 through 2022 maturities of the Taxable General Obligation Refunding Bonds, Series 2006D, dated July 1, Security for the Securities The Series 2016A Notes will be general obligations of the City. The full faith, credit and taxing powers are pledged to the payment of the principal and interest on the Series 2016A Notes as the same becomes due. Under current law, taxes may be levied without limitation as to rate or amount on all taxable property in the City. The tax will be levied under the Series 2016A Note Resolution for collection in each of the years 2016 through 2025 (or monies to pay such debt service will otherwise be appropriated). The City has heretofore levied a direct annual irrepealable ad valorem debt service tax in anticipation of the sale of the Series 2016A Notes, in an amount sufficient to pay the interest on the Series 2016A Notes coming due on October 1,

9 The Series 2016B Notes will be general obligations of the City. The full faith, credit and taxing powers are pledged to the payment of the principal and interest on the Series 2016B Notes as the same becomes due. Under current law, taxes may be levied without limitation as to rate or amount on all taxable property in the City. The tax will be levied under the Series 2016B Note Resolution for collection in each of the years 2017 through 2025 (or monies to pay such debt service will otherwise be appropriated). Maturities, Interest Rates and Form of Bond The Series 2016A Notes are dated April 20, 2016 and will bear interest from that date and will mature serially on October 1, 2017 through October 1, 2025 in the amounts and at the rates as set forth on the cover page of this Official Statement. Interest on the Series 2016A Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months, and shall be payable on April 1 and October 1 of each year commencing October 1, Interest shall be paid to the registered owners of the Series 2016A Notes appearing of record in the bond register at the close of business on the 15 th day of the month next preceding the interest payment date ( Record Date ). The Series 2016B Notes are dated April 20, 2016 and will bear interest from that date and will mature serially on October 1, 2017 through October 1, 2025 in the amounts and at the rates as set forth on the cover page of this Official Statement. Interest on the Series 2016B Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months, and shall be payable on April 1 and October 1 of each year commencing April 1, Interest shall be paid to the registered owners of the Series 2016B Notes appearing of record in the bond register at the close of business on the 15 th day of the month next preceding the interest payment date ( Record Date ). The Securities are issuable as fully registered bonds and when issued will be registered to Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). Ownership interests in the Securities will be in denominations of $5,000 or integral multiples thereof and will be in book-entry-only form as described herein under BOOK-ENTRY-ONLY SYSTEM. As long as the Securities are held under the book-entry-only system, beneficial ownership interest in the Securities may be acquired in book-entry form only and all payments of principal of, premium, if any, and interest on the Securities shall be made through the facilities of DTC and its Participants. If the book-entry system is terminated, principal of, premium, if any, and interest on the Securities shall be payable as provided in the respective Resolution awarding the sale of the Securities. Redemption Provisions The Securities maturing on October 1, 2024 and 2025 shall be subject to redemption prior to maturity, at the option of the City, on October 1, 2023 or on any date thereafter, in whole or in part, from maturities selected by the City and within each maturity by lot at par, plus accrued interest to the date of redemption. If less than all of the Securities of a maturity are to be redeemed, selection of the Securities to be so redeemed shall be by lot conducted by DTC in accordance with its rules and practices. (See BOOK-ENTRY-ONLY SYSTEM herein.) Notice of Redemption In the event the City exercises its option to redeem the Securities prior to maturity, as long as the Securities are in book-entry-only form, official notice of the redemption will be given by mailing a notice by registered or certified mail, overnight express delivery, facsimile or by electronic transmission or in any other manner required by DTC, to DTC not less than thirty (30) nor more than sixty (60) days prior to the redemption date. If less than all the Securities are to be called for redemption, the Securities to be redeemed will be selected by lot. Such notice will include but not be limited to the following: the designation, date and maturities of the Securities called for redemption, CUSIP numbers; and the date of redemption. Any failure of DTC to advise any DTC Participant or of any DTC Participant or Indirect Participant to notify the Beneficial Owner of any such notice and its content or effect will not affect the validity or sufficiency of the proceedings relating to the redemption of the Securities called for redemption. Paying Agent The City of Sheboygan will act as Paying Agent for the Securities. The City Finance Director is the contact person for paying agent matters. 9

10 THE PROJECT AND THE REFUNDING The Series 2016A Notes Proceeds for the Series 2016A Notes will be used for public purposes, including, paying the cost of various construction, improvement and acquisition projects set forth in the City's 2016 Capital Improvement Plans, including the acquisition of motor vehicles, rolling stock, fire department equipment, sirens and controls, bridge and street improvements, city hall construction, assessment revaluation, and TID No. 16 projects costs. The Series 2016B Notes Proceeds of the Series 2016B Notes will be used for public purposes, including payment of development incentives for TID No. 16 and to current refund the following: Taxable G.O. Refunding Bonds, Series 2006D, dated July 1, 2006 October 1 Principal Refunded CUSIP Maturities Outstanding Bonds* L $700,000 $700, M $700,000 $700, N $700,000 $700, P $700,000 $700, Q $700,000 $700, R $700,000 $700,000 *Redemption Date October 1, 2016; Redemption Price at Par. Tax Incremental District No. 16 Tax Incremental District No. 16 ( TID 16 ), located in the City s downtown, was created as of January 1, 2016 as a mixed-use district to promote development growth and redevelopment activity. A portion of the proceeds of the Series 2016A Notes will be used for the development of the arts/culture greenspace including paved walkways, grassy areas, lighting, and restroom facilities for utilization as arts venues. A portion of the proceeds of the Series 2016B Notes will be used for developer incentives for two projects described as follows: 1. The City reached an agreement with Oakbrook Corporation for the development of a new $10.2 million mixed-use project, which includes 80 market rate apartments with heated underground parking and 4,000 square feet of ground floor retail space. The building s design will be integrated with the Arts and Culture plaza, which will continue to be owned and maintained by the City. The project is anticipated to break ground in May The City reached an agreement with Eighth-New Jersey LLC for the development of a $15 million luxury apartment complex, which includes 91 market rate apartment units with amenities and underground parking. Construction is scheduled to begin in June with initial occupancy completion anticipated in Spring 2017 and final completion by September These projects are included in the Project Plan for TID 16 approved in September

11 Source and Application of Funds for the Series 2016A Notes Source of Funds Series 2016A Note Proceeds $3,400,000 Reoffering Premium 66,133 City Funds on Hand 27,300 Total Source of Funds $3,493,433 Application of Funds 2016 CIP Project Costs $3,000,000 TID No. 16 Project Costs 400,000 Cost of Issuance, Including Underwriter s Discount 35,041 Bid Premium Available for Debt Service Fund 58,392 Total Application of Funds $3,493,433 Source and Application of Funds for the Series 2016B Notes Source of Funds Series 2016B Note Proceeds $7,525,000 Reoffering Premium 1,645 Total Source of Funds $7,526,645 Application of Funds Refund 2006D Bonds Principal on October 1, 2016 $4,200,000 TID No. 16 Development Incentives 3,250,000 Cost of Issuance, Including Underwriter s Discount 69,207 Deposit to Debt Service 7,438 Total Application of Funds $7,526,645 11

12 CONSTITUTIONAL AND STATUTORY CONSIDERATIONS AND LIMITATIONS CONCERNING THE CITY'S POWER TO INCUR INDEBTEDNESS The Constitution and laws of the State limit the power of the City (and other municipalities of the State) to issue obligations and to contract indebtedness. Such constitutional and legislative limitations include the following, in summary form and as generally applicable to the City. Purpose The City may not borrow money or issue notes or bonds therefor for any purpose except those specified by statute, which include among others the purposes for which the Securities are being issued. General Obligation Bonds The principal amount of every sum borrowed by the City and secured by an issue of bonds may be payable at one time in a single payment or at several times in two or more installments; however, no installment may be made payable later than the termination of twenty years immediately following the date of the bonds. The Common Council is required to levy a direct, annual, irrepealable tax sufficient in amount to pay the interest on such bonds as it falls due and also to pay and discharge the principal thereof at maturity. Bonds issued by the City to refinance or refund outstanding notes or bonds issued by the City may be payable no later than twenty years following the original date of such notes or bonds. Refunding Bonds In addition to being authorized to issue bonds, the City is authorized to borrow money using bonds for refunding existing debt. To evidence such indebtedness, the City must issue to the lender its refunding bonds (with interest) payable within a period not exceeding twenty years following the initial date of the debt to be refunded. Such refunding bonds constitute a general obligation of the City. Refunding bonds are not subject to referendum. Promissory Notes In addition to being authorized to issue bonds, the City is authorized to borrow money using promissory notes for any public purpose. To evidence such indebtedness, the City must issue its promissory notes (with interest) payable within a period not exceeding ten years following the date of said notes. Such notes constitute a general obligation of the City. Notes may be issued to refinance or refund outstanding notes or bonds. However, such notes must be payable not later than twenty years following the original date of such notes. Bond or Note Anticipation Notes In anticipation of issuing general obligation bonds or notes, the City is authorized to borrow money using bond or note anticipation notes. The bond or note anticipation notes shall in no event be general obligations of the City and do not constitute an indebtedness of the City, or a charge against its general credit or taxing power. The bond or note anticipation notes are payable only from (a) proceeds of the bond or note anticipation notes set aside for payment of interest on the bond or note anticipation notes as they become due and (b) proceeds to be derived from the issuance and sale of general obligation bonds or notes, which proceeds are pledged for the payment of the principal of and interest on the bond or note anticipation notes. The maximum term of any bond or note anticipation notes (including any refunding) is five years. Debt Limit The City has the power to contract indebtedness for purposes specified by statute so long as the principal amount thereof does not exceed five percent of the equalized value of taxable property within the City. For information with respect to the City's percentage of legal debt incurred, the section titled "INDEBTEDNESS - Debt Limit" included in this Official Statement. 12

13 THE RESOLUTIONS The following is a summary of certain provisions of the Resolutions pursuant to the procedures prescribed by Wisconsin Statutes. Reference is made to the Resolutions for a complete recital of their terms. Series 2016A Note Resolution On April 6, 2016, the Common Council adopted a Resolution Awarding the Sale of $3,400,000 General Obligation Promissory Notes, Series 2016A (the Series 2016A Note Resolution ), pursuant to Chapter 67 of the Wisconsin Statutes, accepting the bid of the Underwriter for the purchase of the Series 2016A Notes in accordance with the bid specifications, setting forth the details and form of the Series 2016A Notes, and setting out certain covenants with respect thereto. The Series 2016A Notes will be used for public purposes, including, paying the cost of various construction, improvement and acquisition projects set forth in the City's 2016 Capital Improvement Plans, including the acquisition of motor vehicles, rolling stock, fire department equipment, sirens and controls, bridge and street improvements, city hall construction, assessment revaluation, and TID No. 16 projects costs ( Series 2016A Project ). The Series 2016A Note Resolution pledges the full faith, credit and resources of the City to payments of the principal of and interest on the Series 2016A Notes until paid. Pursuant to the Series 2016A Note Resolution, the amount of direct, annual irrepealable taxes levied for collection in the years 2016 through 2025, which will be sufficient to meet principal and interest payments on the Series 2016A Notes when due, will be specified (or monies to pay such debt will otherwise be appropriated). The Series 2016A Note Resolution establishes, separate and distinct from all other funds of the City, a debt service fund with respect to payments of principal of and interest on the Series 2016A Notes. Series 2016B Note Resolution On April 6, 2016, the Common Council adopted a Resolution Awarding the Sale of $7,525,000 Taxable General Obligation Promissory Notes, Series 2016B (the Series 2016B Note Resolution ), pursuant to Chapter 67 of the Wisconsin Statutes, accepting the bid of the Underwriter for the purchase of the Series 2016B Notes in accordance with the bid specifications, setting forth the details and form of the Series 2016B Notes, and setting out certain covenants with respect thereto. The Series 2016B Notes will be used for public purposes, including payment of development incentives ( Series 2016B Project ) and refunding the 2017 through 2022 maturities of the Taxable General Obligation Refunding Bonds, Series 2006D, dated July 1, The Series 2016B Note Resolution pledges the full faith, credit and resources of the City to payments of the principal of and interest on the Series 2016B Notes until paid. Pursuant to the Series 2016B Note Resolution, the amount of direct, annual irrepealable taxes levied for collection in the years 2017 through 2025, which will be sufficient to meet principal and interest payments on the Series 2016B Notes when due, will be specified (or monies to pay such debt will otherwise be appropriated). The Series 2016B Note Resolution establishes, separate and distinct from all other funds of the City, a debt service fund with respect to payments of principal of and interest on the Series 2016B Notes. 13

14 Tax Levy Limits Section of the Wisconsin Statutes, imposes a limit on property tax levies by cities, villages, towns and counties. No city, village, town or county is permitted to increase its tax levy by a percentage that exceeds its valuation factor (which is defined as a percentage equal to the greater of either the percentage change in the political subdivision's January 1 equalized value due to new construction less improvements removed between the previous year and the current or zero percent). The base amount in any year to which the levy limit applies is the actual levy for the immediately preceding year. This levy limitation is an overall limit, applying to levies for operations as well as for other purposes. A political subdivision that did not levy its full allowable levy in the prior year can carry forward the difference between the allowable levy and the actual levy, up to a maximum of 1.5% of the prior year's actual levy. The use of the carry forward levy adjustment needs to be approved by a majority vote of the political subdivision's governing body (except in the case of towns) if the amount of carry forward levy adjustment is less than or equal to 0.5% and by a super majority vote of the political subdivision's governing body (three-quarters vote if the governing body is comprised of five or more members, two-thirds vote if the governing body is comprised of fewer than five members) (except in the case of towns) if the amount of the carry forward levy adjustment is greater than 0.5% up to the maximum increase of 1.5%. For towns, the use of the carry forward levy adjustment needs to be approved by a majority vote of the annual town meeting or special town meeting after the town board has adopted a resolution in favor of the adjustment by a majority vote if the amount of carry forward levy adjustment is less than or equal to 0.5% or by two-thirds vote or more if the amount of carry forward levy adjustment is greater than 0.5% up to the maximum of 1.5%. Beginning with levies imposed in 2015, if a political subdivision does not make an adjustment in its levy as described in the above paragraph in the current year, the political subdivision may increase its levy by the aggregate amount of the differences between the political subdivision s valuation factor in the previous year and the actual percent increase in a political subdivision s levy attributable to the political subdivision s valuation factor in the previous year, for the five years before the current year, less any amount of such aggregate amount already claimed as an adjustment in any of the previous five years. The calculation of the aggregate amount available for such adjustment may not include any year before 2014, and the maximum adjustment allowed may not exceed 5%. The use of the adjustment described in this paragraph requires approval by a two-thirds vote of the political subdivision s governing body, and the adjustment may only be used if the political subdivision s level of outstanding general obligation debt in the current year is less than or equal to the political subdivision s level of outstanding general obligation debt in the previous year. Special provisions are made with respect to property taxes levied to pay general obligation debt service. Those are described below. In addition, the statute provides for certain other exclusions from and adjustments to the tax levy limit. Among the items excluded from the limit are amounts levied for any revenue shortfall for debt service on a revenue bond issued under Section Among the adjustments permitted is an adjustment applicable when a tax increment district terminates, which allows an amount equal to the prior year's allowable levy multiplied by 50% of the political subdivision's percentage growth due to the district's termination. With respect to general obligation debt service, the following provisions are made: (a) If a political subdivision's levy for the payment of general obligation debt service, including debt service on debt issued or reissued to fund or refund outstanding obligations of the political subdivision and interest on outstanding obligations of the political subdivision, on debt originally issued before July 1, 2005, is less in the current year than in the previous year, the political subdivision is required to reduce its levy limit in the current year by the amount of the difference between the previous year's levy and the current year's levy. 14

15 (b) For obligations authorized before July 1, 2005, if the amount of debt service in the preceding year is less than the amount of debt service needed in the current year, the levy limit is increased by the difference between the two amounts. This adjustment is based on scheduled debt service rather than the amount actually levied for debt service (after taking into account offsetting revenues such as sales tax revenues, special assessments, utility revenues, tax increment revenues or surplus funds). Therefore, the levy limit could negatively impact political subdivisions that experience a reduction in offsetting revenues. (c) The levy limits do not apply to property taxes levied to pay debt service on general obligation debt authorized on or after July 1, The Securities were authorized after July 1, 2005 and, therefore, the levy limits do not apply to taxes levied to pay debt service on the Securities. Continuing Disclosure for the Securities In order to assist the Underwriters in complying with SEC Rule 15c2-12 promulgated by the Securities and Exchange Commission, pursuant to the Securities Exchange Act of 1934 (the "Rule"), the City shall covenant pursuant to the Resolutions adopted by the Common Council to enter into undertakings (the "Undertakings") for the benefit of holders including beneficial holders of the Securities to provide certain financial information and operating data relating to the City annually to the Municipal Securities Rulemaking Board (the MSRB ) and to provide notices of the occurrence of certain events enumerated in the Rule electronically or in the manner otherwise prescribed by the MSRB to the MSRB. The details and terms of the Undertakings, as well as the information to be contained in the annual report or the notices of material events, are set forth in the Continuing Disclosure Certificates to be executed and delivered by the City at the time the Securities are delivered. Such Certificates will be in substantially the form attached hereto as Exhibit III. In the previous five years, the City has not filed material event notices of various insured rating changes affecting certain of the City s notes and bonds due to widespread industry knowledge of bond insurance rating changes. To the best of the City s knowledge, the City did not receive any notification from the rating agencies of these rating changes in order to file a material event notice. Except to the extent the preceding is deemed to be material, in the previous five years, the City has not failed to comply in all material respects with any previous continuing disclosure undertakings under the Rule. A failure by the City to comply with the Undertaking will not constitute an event of default on the Securities (although holders will have the right to obtain specific performance of the obligations under the Undertaking). Nevertheless, such a failure must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Securities in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Securities and their market price. The City is required to file its continuing disclosure information using the Electronic Municipal Market Access ("EMMA") system. Investors will be able to access continuing disclosure information filed with the MSRB at 15

16 BOOK-ENTRY-ONLY SYSTEM The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the securities (the Securities ). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC s records. The ownership interest of each actual purchaser of each Security ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates rep resenting their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 16

17 Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. The City will have no responsibility or obligation to any Securities Depository, any Participants in the book-entry system or the Beneficial Owners with respect to (i) the accuracy of any records maintained by the Securities Depository or any Participant; (ii) the payment by the Securities Depository or by any Participant of any amount due to any Beneficial Owner in respect of the principal amount or redemption price of, or interest on, any Securities; (iii) the delivery of any notice by the Securities Depository or any Participant; (iv) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Securities; or (v) any other action taken by the Securities Depository or any Participant. 17

18 THE CITY Location and Organization The City is located in Sheboygan County, approximately 52 miles north of Milwaukee and 60 miles south of Green Bay. The City rests on the Lake Michigan shores about halfway along the State s eastern seaboard on Interstate 43. Incorporated in 1853, the City encompasses square miles, with a 2015 final estimated population of 48,806 (per Wisconsin Department of Administration). The City provides the full range of municipal services, including police and fire protection, parks and culture activities, public works operations, parking and transit utilities, water and sewer utilities, community development and general administrative services. The City presently operates under the mayor/aldermanic form of government, the legislative branch of which is composed of a Common Council consisting of sixteen members elected for two-year, alternating terms. The President of the Council is elected to that position by the Council members. Michael Vandersteen, Mayor Term: April 2013 April 2017 Common Council Name Aldermanic District Term of Office Todd Wolf, Chair Committee First April, 2016 of the Whole John Belanger, Vice President First April, 2016 Roman Draughon Second April, 2016 Vacant Second April, 2016 Rosemarie Trester Third April, 2017 Michael Damrow Third April, 2016 Job Hou-seye Fourth April, 2017 Mary Lynne Donohue Fourth April, 2016 William Thiel Fifth April, 2017 Julie Kath Fifth April, 2016 Mark Hermann Sixth April, 2017 Bryan Bitters Sixth April, 2016 Don Hammond, President Seventh April, 2017 Susan Lessard Seventh April, 2016 Joseph Heidemann Eighth April, 2017 Jim Bohren Eighth April, 2016 Administration Michael Vandersteen James Amodeo Susan Richards Nancy Wasmer Nancy Buss Charles Adams Mayor Chief Administrative Officer City Clerk City Treasurer/Comptroller Finance Director City Attorney As a result of the April 5, 2016 elections, District 2 will be represented by Tammy Rabe and District 5 will be represented by Scott Lewandowski. All other Alderpersons were re-elected to a two-year term. Alderman Don Hammond resigned his position April 6, 2016 to be effective April 18, The Council s reorganizational meeting will occur on April 19, 2016 whereby officers will be elected. James Amodeo, Chief Administrative Officer, retired from this position, which will be filled by Darrell Hofland. Source: City of Sheboygan, WI 18

19 Principal Services and Facilities The City employs the following full-time individuals in order to provide the City with the services and facilities of their respective departments. Department Full-Time Part-Time Total Police Fire Street and Sanitation City Parks Administrative Library Parking and Transit Wastewater Water TOTAL Employees and Labor Relations The following unions and associations represent the respective number of City employees: Union/Association Contract Term Number of Members Sheboygan Professional Police Officers Association Sheboygan Professional Police Officers Supervisory Association International Association of Firefighters Local 483 December 31, December 31, December 31, *Amalgamated Transit Union #998 December 31, * 23 members are full-time transit employees. All other City employees are not represented by a bargaining unit. The City considers its relationship with the employee Associations to be very good. Source: City of Sheboygan 19

20 All eligible City personnel are covered by the Municipal Employment Relations Act ("MERA") of the Wisconsin Statutes. Pursuant to that law, employees have rights to organize and, after significant changes were made to the law in 2011, very limited rights to collectively bargain with municipal employers. MERA was amended by 2011 Wisconsin Act 10 (the "Act") and by 2011 Wisconsin Act 32. As a result of the 2011 amendments to MERA, the City is prohibited from bargaining collectively with municipal employees, other than public safety or transit employees, with respect to any factor or condition of employment except total base wages. Even then, the City is limited to increasing total base wages beyond any increase in the consumer price index since 180 days before the expiration of the previous collective bargaining agreement (unless the City were to seek approval for a higher increase through a referendum). Ultimately, the City could unilaterally implement the wages for a collective bargaining unit. Under the changes to MERA, impasse resolution procedures were removed from the law for municipal employees of the type employed by the City, including binding interest arbitration. Strikes by any municipal employee or labor organization are expressly prohibited. As a practical matter, it is anticipated that strikes will be rare. Furthermore, if strikes do occur, they may be enjoined by the courts. Impasse resolution for public safety employees is subject to final and binding arbitration procedures, which do not include a right to strike. Additionally, because the only legal subject of bargaining is the base wage rates, all bargaining over items such as just cause, benefits, and terms of conditions of employment are prohibited and cannot be included in a collective bargaining agreement. The Wisconsin Supreme Court and the U.S. Court of Appeals have upheld the validity of the Act s amendments to MERA. Source: Sheboygan City Attorney Pension and Retirement Plan The following information has been excerpted from the City s Audited Financial Statements for Year End December 31, All eligible City employees participate in the Wisconsin Retirement System (WRS), a cost-sharing, multiple-employer, defined benefit, public employee retirement system. All employees initially employed by a participating WRS employer prior to July 1, 2011 and expected to work at least 600 hours a year (440 hours for teachers and school district educational support employees) and expected to be employed for at least one year from employee s date of hire, are eligible to participate in the WRS. All employees initially employed by a participating WRS employer on or after July 1, 2011, and expected to work at least 1,200 hours a year (880 hours for teachers and school district educational support employees) and expected to be employees for at least one year from employee s date of hire are eligible to participate in the WRS. Employees hired to work nine or ten months per year, (e.g. teachers contracts), but expected to return year after year on considered to have met the one-year requirement. Effective the first day of the first pay period on or after June 29, 2011, the employee required contribution was changed to one-half of the actuarially determined contribution rate for employees in the General category, including Teachers, and Executives and Elected Officials. Required contributions for protective employees are the same rate as general employees. Employers are required to contribute the remainder of the actuarially determined contribution rate. The Employer may not pay the employee required contribution unless provided for by an existing collective bargaining agreement. Contribution rates for 2014 are as follows Employee Employer General (including Teachers) 7.00% 7.00% Executives & Elected Officials 7.75% 7.75% Protective with Social Security 7.00% 10.10% Protective without Social Security 7.00% 13.70% 20

21 The payroll for City employees covered by the WRS for the year ended December 31, 2014 was $26,387,532; the employer s total payroll was $27,321,713. The total required contribution for the year ended December 31, 2014 was $4,124,328, which consisted of $2,396,783, or 9.1% of covered payroll from the employer and $1,727,545, or 6.5% of covered payroll from employees. Total contributions for the years ending December 31, 2013 and 2012 were $4,145,739 and $3,630,922, respectively, equal to the required contributions for each year. Employees who retire at or after age 65 (62 for elected officials and 54 for protective occupation employees with less than 25 years of service, 53 for protective occupation employees with more than 25 years of service) are entitled to receive a retirement benefit. Employees may retire at age 55 (50 for protective occupation employees) and receive actuarially reduced benefits. The factors influencing the benefit are: (1) final average earnings, (2) years of creditable service, and (3) a formula factor. A final average earnings is the average of the employee s three highest year s earnings. Employees terminating covered employment and submitting application before becoming eligible for a retirement benefit may withdraw their contributions and, by doing so, forfeit all rights to any subsequent benefit. For employees beginning participation on or after January 1, 1990 and no longer actively employed on or after April 24, 1998, creditable service in each of five years is required for eligibility for a retirement annuity. Participants employed prior to 1990 and on or after April 24, 1998 and prior to July 1, 2011 are immediately vested. Participants who initially became WRS eligible on or after July 1, 2011 must have five years of creditable service to be vested. The WRS also provides death and disability benefits for employees. Eligibility and the amount of all benefits is determined under Chapter 40 of Wisconsin Statutes. The WRS issues an annual financial report which may be obtained by writing to the Department of Employee Trust Funds, P.O. Box 7931, Madison, WI Source: City of Sheboygan Audited Financial Statements for Year End December 31, 2014 Note D Other Information 1. Retirement Commitments Other Post-Employment Benefits The following information has been excerpted from the City s Audited Financial Statements for Year End December 31, Plan Description - The City provides health care related benefits for employees who retire prior to the age of 65. Benefit terms including eligibility and vesting requirement vary by employee classification. There were 442 active and 56 retired employees in the plan as of the most recent actuary valuation date. Annual OPEB Cost and Net OPEB Obligation - The City s annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution (ARC), and the amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the City s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City s net OPEB obligation. Component 21 Amount Annual required contribution $ 503,634 Interest on net OPEB 32,320 Adjustment to annual required contribution (59,454) Annual OPEB cost (expense) 476,500 Contributions made (67,853) Change in net OPEB obligation 408,647 OPEB obligation - beginning of year 807,996 OPEB obligation - end of year $1,216,643

22 The annual required contribution for the current year was determined as part of the January 1, 2014 actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 4.0% discount rate, and (b) projected salary increases at 3%, and (c) 3% inflation rate. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with a long-term perspective of the calculations. The unfunded actuarial accrued liability is being amortized as a level dollar amount of projected payroll. Trend Information - The City s annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net OPEB obligation for 2014 is as follows: Fiscal Year Ended Annual OPEB Cost Percentage Of Annual OPEB Cost Contributed Net OPEB Obligations 12/31/2014 $476,500 14% $1,216,643 12/31/2013 $396, % $807,996 12/31/2012 $332, % $913,701 Funded Status and Funding Progress - As of January 1, 2014, the most recent actuarial valuation date, the City s unfunded actuarial accrued liability (UAAL) was $4,879,620. The annual payroll for active employees covered by the plan for the 2014 fiscal year was $26,387,532 for a ratio of the UAAL to covered payroll of 18.5%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future, such as assumptions about future terminations, mortality, and healthcare cost trends. Actuarially determined amounts are subject to continual revision as actuarial results are compared with past experience and new estimates are made about the future. Actuarial Methods and Assumptions - Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of shortterm volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2014 actuarial valuation, the unit credit method was used. The actuarial assumptions included a rate of 4% to discount expected liabilities to the valuation date. The initial healthcare trend rate was 7.5%, reduced by decrements to an ultimate rate of 5% after 15 years. The UAAL is being amortized as a level dollar amount on an open basis. Source: City of Sheboygan Audited Financial Statements for Year End December 31, 2014 Note D Other Information 2. Other Post-Employment Benefits 22

23 Recent Developments in 2015 and 2016 Industrial: DEMOGRAPHIC AND ECONOMIC DATA In 2014, Alliant Energy began construction on a $114 million Air Quality Control System to remove CO2 from coal fired emissions at the Alliant Edgewater Power Plant. This project is required to meet new air emissions levels as required by the Clean Air Act. This project is slated to be completed in late Torginol, a manufacturer of decorative resinous flooring media, including: decorative vinyl ColorFlakes, quartz ColorGranules completed a 2500 sf addition valued at $813,000. A. Chappa Holding Co. purchased a vacant 61,000 sf manufacturing facility for Gardner Denver Thomas to operate light manufacturing and repair activities of their vacuum pumps for the medical industry. The facility is employing 30 new positions. Saco Polymers, a polyethylene water pipe and wire and cable company, is constructing a new two-story corporate office building with a footprint of 10,994 square feet valued at $5.1M. Construction began in the Fall of 2015 on a 150,000 sf manufacturing facility for Old Wisconsin Sausage, for $10M in building and approximately $10M in new personal property The facility will be situated adjacent to I-43 and provide great visibility for the local manufacturer. Approximately new employees will be hired to add to the existing workforce. Commercial: ACUITY Insurance continues to construct a 640 car parking structure and two additions to their galleria and 240,000 sf of office space to their campus. This project has been ongoing since 2014 and is slated to be completed in 2017 at a value of $75M. In 2016, ACUITY announced hiring another 150 new employees to bring their total employee count in Sheboygan to over 1,000 employees. Pier 17 opened for business in an vacant existing building on Sheboygan s riverfront. This restaurant is a great addition to the Sheboygan s riverfront district and employees about 25 FTE positions. Kwik Trip Convenience Stores completed a 700 sf addition to one of its existing gas stations with a value of $445,000. In October 2015, plans were approved for Parker Johns to build a new shanty on Sheboygan s Riverfront. This project will employ approximately 30 people and bring about $500,000 in value to the waterfront. In December, the Common Council approved an offer to purchase from the John Michael Kohler Arts Center to acquire 39 acres of the former Schuchurdt Property to allow the Arts Center to build a state of the art visual storage 60,000+ sf facility to house their vernacular artist environments. The project has a value of $20M and will be constructed over the next three years. St. Nicholas Hospital is completing $15M renovation of the ICU and Surgery Center. This project will generate approximately $80,000 in building permit fees. Residential: Seven single family homes were constructed in 2015 at a value of $1,263,000 and one two-family home at a value of $130,

24 In October of 2015, the City executed a developer s agreement with Oakbrook Corporation to build 81 market rate apartments and 4,054 sf of retail space in Sheboygan s downtown on the former Boston Store property. This project is valued at $10.2M. Construction is set to begin in May In November 2015, construction began on an 80-unit market rate housing development off Union Avenue on the City s southwest side. This project is valued at $5.1M In January 2016, the City executed a developers agreement with LCM Funds to building 91 luxury market rate apartments on South 8 th Street. The project has a value of $15.1M and will include penthouse apartments with rooftop decks. Construction is set to begin in June In May of 2016, work is planned to begin on another 80-unit apartment development on the City s western side. This project is estimated to be valued at $5.2M. The City is in final negotiations with a developer to build 80 townhome market rate apartments in the City s South Pier District. This project is slated to begin in August 2016 and will be valued at $10.3M. Provided low-income tax credits are received from the State, the Gorman Company will begin the conversion of a vacant elementary school into 42 units of Section 42 housing with an estimated value of $7M. Other Information: In 2015, Sheboygan along with Two Rivers, Manitowoc, and Port Washington was approved by NOAA to be designated as a National Marine Sanctuary for Great Lakes Shipwrecks. This designation will provide increased economic development options for the local economy as well as approximately $500M more in visitor spending to Sheboygan County. Ten percent of the State of Wisconsin family owned large manufacturing (500+ employees) businesses are located in Sheboygan County. Currently, the County has 2,800 open positions with salaries above $35,000/year posted and 900 people on unemployment. In January, the City had 3.4% unemployment. In order to fill these positions, people will need to be recruited from outside the County. Most employers in the City of Sheboygan are recruiting employees. Source: City of Sheboygan Department of Planning and Development 2015 Employment by Industry Sheboygan County Average Employment Manufacturing 20,572 Trade, Transportation, Utilities 9,932 Education & Health Services 10,565 Leisure & Hospitality 5,539 Professional & Business Services 4,299 Financial Activities 2,621 Construction 2,147 Public Administration 1,504 Other Services 1,438 Natural Resources & Mining 691 Information 306 Not Assigned 0 Total All Industries 59,614 Source: WI DWD, Bureau of Workforce Training, 2 nd Quarter

25 Following are respective historical demographic information for population, housing, income, unemployment rates and building permits. Population Census 2010 City of Sheboygan 48,806 48,897 48,965 49,110 49,288 Sheboygan County 115, , , , ,507 State of Wisconsin 5,753,324 5,732,981 5,717,110 5,703,525 5,686,986 Source: Wisconsin Department of Administration / U.S. Census Bureau Median Age ( ) Median Home Value ( ) Median Household Income ( ) City of Sheboygan 36.4 $111,800 $43,107 Sheboygan County 40.7 $150,800 $53,029 State of Wisconsin 38.8 $165,900 $52,738 Source: U.S. Census Bureau, American Community Survey 5-year Estimates Per Return Adjusted Gross Income City of Sheboygan $41,330 $40,520 $42,240 $39,700 $37,990 Sheboygan County $50,690 $50,220 $50,630 $47,820 $46,388 State of Wisconsin $52,050 $50,670 $49,900 $47,640 $46,958 Source: Wisconsin Department of Revenue Per Capita Income Sheboygan County $46,328 $44,344 $45,504 $43,056 $39,598 State of Wisconsin $44,186 $42,737 $42,463 $40,837 $38,815 Source: U.S. Department of Commerce Unemployment Rates December Annual Average Percentage City of Sheboygan Sheboygan County State of Wisconsin Source: State of Wisconsin Workforce Development Building Permits 2015 $144,044, ,280,101 (Includes Acuity and Alliant projects) ,543, ,866, ,189,901 Source: City of Sheboygan 25

26 Largest Employers Below is a listing of major employers within the City. Employer Aurora Medical Group / Aurora Health Care Nemak (formerly J.L. French Corporation) Nature of Business or Product Manufactured Sheboygan Memorial Medical Center and Sheboygan Clinic Aluminum die castings; complete machining, assembly and testing Number of Employees 1,434 1,160 Sheboygan Area School District Education 1,156 Full-Time 132 Part-Time Acuity Mutual Insurance Co. Insurance 893 Full-Time 5 Part-Time Rockline Industries, Inc. Manufacturer of coffee filters, baking cups, and baby wipes 843 Sheboygan County County employees 687 Full-Time 97 Part-Time Fresh Brands Distributing, Inc. (Piggly Wiggly Midwest) Wholesale/retail grocers 614 City of Sheboygan Government 488 American Orthodontics Manufacturer of orthodontic appliances 442 Full-Time 9 Part-Time St. Nicholas Hospital Hospital /surgery facilities 400 Nemschoff Inc. Manufacturer of office furniture 400 The Vollrath Company Manufacturer of stainless steel and plastic utensils, sinks and hospital utensils 400 Source: Phone Survey February

27 Largest Taxpayers Following are the ten largest taxpayers in the City. Name Nature of Business or Product Manufactured 2015 Assessed Valuation* Net Taxes Due Acuity Mutual Insurance Co. Insurance $48,536,250 $1,192,296 Aurora Medical Group / Aurora Health Care Nemak (formerly J.L. French Corporation) Sheboygan Memorial Medical Center and Sheboygan Clinic Aluminum die castings; complete machining, assembly and testing 21,270, ,095 19,652, ,938 American Orthodontics Manufacturer of orthodontic appliances 19,527, ,404 Plastics Engineering Co. Manufacturer of phenolic epoxy, alkyd and melamine synthetic resins and thermoset molding compounds 15,522, ,767 Country Village Apartments Real estate 13,953, ,115 Wal-Mart Department and grocery store 14,637, ,307 St. Nicholas Hospital Hospital/surgery facilities 12,378, ,990 The Vollrath Company Manufacturer of stainless steel and plastic utensils, sinks and hospital utensils 11,759, ,300 Meijer Stores LP Department and grocery store 10,695, ,593 *Net of exempt property. The total assessed value of the 10 largest taxpayers ($187,934,870) represents 7.84% of the total 2015 assessed valuation of the City ($2,398,045,640). Source: City of Sheboygan 27

28 Property Valuations and Tax Levies Section Wisconsin Statutes dictates that beginning in 1986, assessed valuations must be established within 10% of the full value, at least once during the four year period consisting of the current year and the three preceding years. City of Sheboygan - Equalized Valuations REAL ESTATE: Residential $1,527,680,100 $1,571,766,100 $1,540,923,400 $1,603,578,400 $1,704,019,500 Commercial 632,705, ,021, ,859, ,391, ,222,300 Manufacturing 148,963, ,942, ,106, ,318, ,156,200 Agricultural 40,400 39,800 40,700 42,200 43,400 Undeveloped 2,400 2,400 2,400 2,400 2,400 TOTAL REAL ESTATE $2,309,391,900 $2,373,772,400 $2,338,932,200 $2,376,332,800 $2,499,443,800 TOTAL PERSONAL PROPERTY $ 98,140,100 $ 101,322,600 $ 108,862,000 $ 100,083,000 $ 86,820,500 TOTAL EQUALIZED VALUATION (TID IN) $2,407,532,000 $2,475,095,000 $2,447,794,200 $2,476,415,800 $2,586,264,300 TOTAL EQUALIZED VALUATION (TID OUT) $2,297,297,000 $2,346,144,700 $2,341,698,700 $2,374,778,900 $2,428,968,400 TOTAL ASSESSED VALUATION $2,398,045,640 $2,397,778,840 $2,701,398,750 $2,691,192,720 $2,680,023,340 Ratio of Assessed to Equalized Value 99.56% 96.91% % % % CITY PURPOSE TAX LEVY $22,771,458 $22,868,524 $22,659,219 $22,299,458 $22,556,101 ALL PURPOSE TAX LEVY $67,140,389 $68,842,198 $69,010,921 $68,446,873 $70,529,817 Tax Rates Assessed Tax Rate Ratio of Tax Rate Less: State Per $1,000 Assessed to Per $1,000 Year of Levy City Schools* VTAE District County State & School Tax Credit Assessed Valuation Equalized Valuation Equalized Valuation 2015 $9.50 $11.95 $0.80 $5.65 $0.17 $(2.10) $ % $ (1.85) (1.67) (1.69) (1.69) * Sheboygan Area School District 28

29 Categories of Debt and Amount Outstanding INDEBTEDNESS Date of Issue Type of Debt Original Amount Interest Rates Due Serially To Principal Outstanding As of April 20, 2016 City Purposes 09/01/2007 G.O. Corp. Bonds, Series 2007B $8,000, /01/2026 $7,300,000 06/23/2010 G.O. Promissory Notes, Series 2010A 2,045, /01/ ,000 06/23/2010 G.O. Taxable Bonds, Series 2010B 5,790, /01/2027 4,215,000 09/29/2011 G.O. Promissory Notes, Series 2011A 670, /01/ ,000 05/10/2012 G.O. Promissory Notes, Series 2012A 4,745, /01/2022 2,910,000 08/04/2015 G.O. Promissory Notes 4,310, /01/2024 4,310,000 04/20/2016 G.O. Promissory Notes, Series 2016A 3,000, /01/2025 3,000,000 Total City Purposes G.O. Debt Outstanding 22,755,000 Convention Center Purposes 08/04/2015 G.O. Taxable Bonds 2,375, /01/2018 2,375,000 Total Convention Center Purposes G.O. Debt Outstanding 2,375,000 TID No. 6 Purposes 12/23/2002 Land Recycling Loan 1,982, /01/ ,903 04/14/2004 Land Recycling Loan 756, /01/ ,579 07/01/2006 G.O. Bonds, Series 2006C 4,290, /01/2022 2,675,000 07/01/2006 G.O. Taxable Bonds, Series 2006D 8,575, /01/2022 4,900,000 * 04/20/2016 G.O. Taxable Prom. Notes, Series 2016B 4,240, /01/2022 4,240,000 Total TID No. 6 Purposes G.O. Debt Outstanding 12,694,482 * Less: 2006D Bonds Being Refunded With a Portion of the Series 2016B Notes (4,200,000) Net TID No. 6 Purposes G.O. Debt Outstanding After Refunding 8,494,482 TID No. 10 Purposes 06/23/2010 G.O. Taxable Bonds, Series 2010B 280, /01/ ,000 29

30 Date of Issue Type of Debt Original Amount Interest Rates Due Serially To Principal Outstanding As of April 20, 2016 TID No. 11 Purposes 11/09/2010 G.O. Bonds, Series 2010C 1,100, /01/ ,000 TID No. 12 Purposes 06/23/2010 G.O. Taxable Bonds, Series 2010B 1,120, /01/ ,000 TID No. 16 Purposes 04/20/2016 G.O. Promissory Notes, Series 2016A 400, /01/ ,000 04/20/2016 G.O. Taxable Prom. Notes, Series 2016B 3,285, /01/2025 3,285,000 Total TID No. 16 Purposes G.O. Debt Outstanding 3,685,000 Environmental District No. 1 Purposes 06/23/2010 G.O. Taxable Bonds, Series 2010B 1,135, /01/ ,000 Total All G.O. Debt Outstanding After Refunding $38,494,482 30

31 General Obligation Debt Service Schedules After Refunding City Purposes Year Due $220,000 State Trust Fund Loan 07/05/06 Principal (03/15) Interest $8,000,000 G.O. Corp. Bonds Series B - 9/01/07 Principal (10/01) Interest $2,045,000 (BAB) G.O. Prom. Notes Series 2010A - 06/23/10 Principal (04/01) Interest ($5,790,000 City Portion) $8,325,000 Taxable G.O. Bonds Series 2010B - 06/23/10 Principal (04/01) Interest $670,000 G.O. Prom. Notes Series 2011A - 09/29/11 Principal (10/01) Interest 2016 $25,773 $1,034 $275,000 $353,188 $205,000 $37,448 $290,000 $197,630 $135,000 $2, , , ,000 30, , , , , ,000 22, , , , , ,000 14, , , , , ,000 4, , , , , , , , , , , , , , , , , ,000 81, ,000 78, ,000 60, ,000 39, ,000 37, ,000 12,863 $25,773 $1,034 $7,300,000 $2,404,003 $1,090,000 $110,090 $4,505,000 $1,424,691 $135,000 $2,363 Year Due $4,745,000 G.O. Prom. Notes Series 2012A - 05/10/12 Principal (04/01) Interest $4,310,000 G.O. Prom. Notes - 08/04/15 Principal (10/01) Interest New Issue ($3,000,000 City Portion) $3,400,000 G.O. Prom. Notes, Series 2016A - 04/20/16 Principal (10/01) Interest 2016 $450,000 $62,212 $1,150,000 $100,341 $21, ,000 54, ,000 63,625 $475,000 47, ,000 44, ,000 47, ,000 42, ,000 35, ,000 41, ,000 39, ,000 25, ,000 35, ,000 36, ,000 15, ,000 28, ,000 31, ,000 5, ,000 21, ,000 25, ,000 14, ,000 19, ,000 7, ,000 12, ,000 6,188 $3,360,000 $243,819 $4,310,000 $361,241 $3,000,000 $282,000 31

32 General Obligation Debt Service Schedules After Refunding (Continued) City Purposes (Continued) Year Due Total Principal Total City Purposes Total Total Interest Debt Service 2016 $ 2,530,773 $ 775,403 $ 3,306, ,530, ,779 3,254, ,110, ,588 2,772, ,280, ,655 2,877, ,410, ,305 2,931, ,285, ,181 2,726, ,335, ,357 2,699, ,945, ,984 2,234, ,930, ,741 2,147, ,615, ,744 1,759, ,265,000 76,641 1,341, ,000 12, ,863 $23,725,773 $4,829,241 $28,555,014 Convention Center Purposes Year Due $2,375,000 Taxable G.O. Bonds - 08/04/15 Principal (11/01) Interest Total Convention Center Purposes 2016 $780,000 $31,973 $ 811, ,000 17, , ,000 10, ,000 $2,375,000 $59,923 $2,434,923 32

33 General Obligation Debt Service Schedules After Refunding (Continued) TID No. 6 Purposes Year Due $1,982,324 Land Recycling Loan - 12//23/02* Principal (05/01) $756,625 Land Recycling Loan 04/14/04* Principal (05/01) ($4,290,000 TID No. 6 Portion) $5,155,000 G.O. Ref. Bonds, Series 2006C - 07/01/06 Principal (10/01) Interest $8,575,000 G.O. Ref. Bonds, Series 2006D - 07/01/06 Principal (10/01) Interest 2016 $80,129 $39,823 $350,000 $107,600 $700,000 $284, ,129 39, ,000 93, Maturities ,129 39, ,000 79,600 Being Refunded With ,129 39, ,000 64,600 A Portion of Series ,129 39, ,000 48, B Note Proceeds ,129 39, ,000 32, ,129 39, ,000 16, ,822 $560,903 $318,579 $2,675,000 $443,000 $700,000 $284,550 Year Due New Issue ($4,240,000 TID No. 6 Portion) $7,525,000 Tax G.O. Promissory Notes, Series 2016B - 04/20/16 Principal (10/01) Interest Total Principal Total TID No. 6 Purposes Total Interest Total Debt Service 2016 $1,169,952 $ 392,150 $1,562, $765,000 $79,051 1,234, ,651 1,407, ,000 46,972 1,249, ,572 1,376, ,000 39,423 1,244, ,023 1,348, ,000 31,085 1,219,952 79,685 1,299, ,000 21,635 1,189,951 54,235 1,244, ,000 11,250 1,144,951 27,650 1,172, ,822 39,822 $4,240,000 $229,416 $8,494,482 $956,966 $9,451,448 * Loans issued through the State of Wisconsin at 0% interest. TID No. 6 Tax Increment for 2016 is $993,

34 General Obligation Debt Service Schedules After Refunding (Continued) TID No. 10 Purposes TID No. 11 Purposes Year Due ($280,000 TID No. 10 Portion) $8,325,000 Taxable G.O. Bonds Series 2010B - 06/23/10 Principal Total TID No. 10 (04/01) Interest Purposes ($1,100,000 TID No. 11 Portion) $2,530,000 G.O. Ref. Bonds Series 2010C - 11/09/10 Principal (10/01) Interest Total TID No. 11 Purposes 2016 $ 35,000 $ 3,445 $ 38,445 $130,000 $11,380 $141, ,000 2,220 42, ,000 9, , , , ,000 6, , ,000 3, ,480 $115,000 $6,425 $121,425 $545,000 $30,700 $575,700 TID No. 10 Tax Increment for 2016 is $272,388. TID No. 11 Tax Increment for 2016 is $494,882. TID No. 12 Purposes Environmental District No. 1 Purposes Year Due ($1,120,000 TID No. 12 Portion) $8,325,000 Taxable G.O. Bonds Series 2010B - 06/23/10 Principal Total TID No. 12 (04/01) Interest Purposes ($1,135,000 Env. Dist.1 Portion) $8,325,000 Taxable G.O. Bonds Series 2010B - 06/23/10 Principal (04/01) Interest Total Env. District No. 1 Purposes 2016 $155,000 $11,170 $166,170 $145,000 $13,680 $158, ,000 6, , ,000 8, , ,000 1,710 91, ,000 3, ,040 $400,000 $19,013 $419,013 $460,000 $25,513 $485,513 TID No. 12 Tax Increment for 2016 is $135,

35 General Obligation Debt Service Schedules After Refunding (Continued) TID No. 16 Purposes Year Due New Issue ($400,000 TID No. 16 Portion) $3,400,000 G.O. Promissory Notes, Series 2016A - 04/20/16 Principal (10/01) Interest New Issue ($3,285,000 TID No. 16 Portion) $7,525,000 Taxable G.O. Promissory Notes, Series 2016B - 04/20/16 Principal (10/01) Interest Total TID No. 16 Purposes 2016 $3,022 $ 3, ,757 $ 79,883 86, $45,000 6,758 $ 390,000 55, , ,000 6, ,000 51, , ,000 5, ,000 46, , ,000 4, ,000 41, , ,000 3, ,000 35, , ,000 2, ,000 27, , ,000 1, ,000 19, , , ,000 10, ,028 $400,000 $42,165 $3,285,000 $366,951 $4,094,116 35

36 General Obligation Debt Service Schedules After Refunding (Continued) Total General Obligation Debt Outstanding Year Due Total Principal Total Interest Total Debt Service 2016 $ 4,945,725 $1,242,223 $ 6,187, ,034,951 1,028,336 6,063, ,029, ,295 5,903, ,114, ,763 4,877, ,074, ,428 4,728, ,929, ,520 4,471, ,939, ,836 4,370, ,454, ,430 2,775, ,410, ,790 2,648, ,110, ,772 2,265, ,265,000 76,641 1,341, ,000 12, ,863 $39,800,255 $6,336,897 $46,137,152 36

37 Capital Leases The City has entered into multiple capital lease agreements to finance the acquisition of machinery and equipment. Annual principal and interest maturities are as follows: Year Due Principal Interest Total 2016 $196,239 $ 44,476 $240, ,977 37, , ,960 30, , ,196 23, , ,696 16, , ,709 8, , ,385 3, ,456 $1,328,162 $163,822 $1,491,984 Amount Due to Sheboygan County, Wisconsin Sheboygan County, Wisconsin, provided funding to assist in the development and construction of the infrastructure of the Marina Boatworks facility. To the extent the City does not recover its initial taxpayer funding contribution through tax incremental revenues, the City will share any surplus cash with Sheboygan County in proportion to the initial taxpayer funding contributions excluding tax incremental revenue effects until the $1,000,000 has been returned. Mortgage Note Mortgage notes currently outstanding in the amount of $225,000 consist of a note with the Sheboygan Development Corporation. A repayment schedule does not exist as of March 1,

38 Revenue Debt Service Schedule Sewer Utility The following sewer revenue bond issues are not general obligations of the City and are totally supported by the revenues of the Sewer Utility. Year Due $3,250,000 Clean Water Fund Loan - 11/26/96* Principal (05/01) Interest $2,848,194 Clean Water Fund Loan - 05/26/10* Principal (05/01) Interest $7,725,722 Clean Water Fund Loan - 10/23/13* Principal (05/01) Interest Total Sewer Utility Debt Total Principal Total Interest Total Debt Service 2016 $ 225,319 $3,599 $127,364 $52,887 $ 331,194 $ 192,466 $ 683,877 $ 248,952 $ 932, ,420 49, , , , , , ,551 46, , , , , , ,756 43, , , , , , ,038 40, , , , , , ,399 36, , , , , , ,840 33, , , , , , ,364 29, , , , , , ,973 25, , , , , , ,668 22, , , , , , ,453 18, ,155 93, , , , ,328 14, ,421 81, ,749 96, , ,294 10, ,982 70, ,276 80, , ,358 6, ,846 58, ,204 64, , ,519 2, ,022 45, ,541 47, , ,518 33, ,518 33, , ,341 20, ,341 20, , ,501 6, ,501 6, ,254 $225,319 $3,599 $2,267,325 $432,159 **$7,497,636 $1,908,087 $9,990,280 $2,343,845 $12,334,125 * This debt was issued under the State of Wisconsin Clean Water Fund Program. ** Figure represents loan amount disbursed as of December 31,

39 Revenue Debt Service Schedule (Continued) Water Utility Year Due $3,152,000 Safe Drinking Water Loan 03/10/04* Principal (05/01) 2.75% $4,900,000 Water Utility Revenue Bonds 09/01/05 Principal (05/01) Interest $4,000,000 Water Utility Revenue Bonds 04/15/07 Principal (05/01) Interest $3,000,000 Water Utility Revenue Bonds 05/01/13 Principal (05/01) Interest 2016 $173,373 $39,638 $225,000 $47,919 $200,000 $121,394 $125,000 $76, ,141 34, Maturities 200, , ,000 74, ,040 29,839 Being Refunded With 200, , ,000 71, Revenue ,073 24, ,000 Bond Proceeds 96, ,000 69, ,245 19, ,000 87, ,000 66, ,560 14, ,000 77, ,000 63, ,020 8, ,000 68, ,000 60, ,630 2, ,000 57, ,000 57, ,000 46, ,000 52, ,000 33, ,000 48, ,000 20, ,000 43, ,000 6, ,000 38, ,000 33, ,000 28, ,000 22, ,000 16, ,000 10, ,000 3,500 $1,528,082 $174,070 $225,000 $47,919 $2,925,000 $833,553 $2,800,000 $838,238 * This debt was issued under the State of Wisconsin Safe Drinking Water Fund Program. 39

40 Water Utility Revenue Debt Service Schedule (Continued) Year Due $3,122,030 Safe Drinking Water Loan 05/13/15* Principal (05/01) 1.65% $2,115,000 Water Utility Revenue Ref. Bonds 04/20/ Total Water Utility Debt Principal (05/01) Interest Total Principal Total Interest Total Debt Service 2016 $ 80,857 $ 27,735 $ 18,370 $ 804,230 $ 331,831 $1,136, ,191 29,298 $ 240,000 33, , ,948 1,110, ,548 27, ,000 31, , ,662 1,102, ,926 26, ,000 27, , ,821 1,107, ,327 25, ,000 23, , ,228 1,091, ,752 23, ,000 19, , ,785 1,085, ,200 22, ,000 14, , ,570 1,077, ,672 20, ,000 9, , ,699 1,084, ,168 19, ,000 5, , , , ,689 17, ,000 1, , , , ,234 16, ,234 80, , ,806 14, ,806 60, , ,403 12, ,403 46, , ,027 11, ,027 39, , ,677 9, ,677 32, , ,355 7, ,355 24, , ,060 6, ,060 16, , ,794 4, ,794 7, , ,556 2, ,556 2, , , , ,257 **$1,897,589 $327,201 $2,115,000 $186,727 $11,490,671 $2,407,708 $13,898,379 * This debt was issued under the State of Wisconsin Safe Drinking Water Fund Program. ** Figure represents loan amount disbursed as of February 24,

41 Debt Trends for the Last Five Years Year of Levy Debt as of December 31 Assessed Valuation Debt as a Percentage of Assessed Valuation Equalized Valuation (TID Out) Debt as a Percentage of Equalized Valuation City Population Direct Debt Per Capita 2015 $33,075,255 $2,398,045, % $2,297,297, % 48,806 $ ,965,437 2,397,778, ,346,144, , ,094,063 2,701,398, ,341,698, , ,507,184 2,691,192, ,374,778, , ,241,852 2,680,023, ,428,968, , Debt Limit The City has the power to incur indebtedness for City purposes specified by statute in an aggregate amount, not to exceed five percent of the equalized value of taxable property in the City, as last determined by the State of Wisconsin Department of Revenue. See CONSTITUTIONAL AND STATUTORY CONSIDERATIONS AND LIMITATIONS CONCERNING THE CITY S POWER TO INCUR INDEBTEDNESS Debt Limit herein. The table below reflects direct bonded indebtedness as of the closing of the Securities and is a comparison of the outstanding indebtedness of the City as a percentage of the applicable debt limit. Equalized Valuation (2015) as certified by Wisconsin Department of Revenue $2,407,532,000 Legal Debt Percentage Allowed 5.00% Legal Debt Limit $120,376,600 General Obligation Debt Outstanding as of April 20, 2016, Including the Series 2016A Notes and Series 2016B Notes $42,694,482 Less: 2006D Bonds Being Refunded With Series 2016B Notes (4,200,000) Less: Remaining 2016 Principal Payments (3,639,952) Net General Obligation Debt Outstanding After Refunding $34,854,530 Unused Margin of Indebtedness $85,522,070 Percent of Legal Debt Incurred 28.96% Percent of Legal Debt Available 71.04% Future Financing The City may issue general obligation debt in Summer 2016 to current refund existing debt for savings. The City anticipates issuing general obligation debt in 2017 to finance a portion of the Capital Improvement Plan. The Water Utility is reviewing the possible construction of a new elevated tank, which would be financed with approximately $2.3 Million of water utility revenue bonds in Borrowing for Operational Purposes The City has never had to borrow money for operating purposes except from internal funds. History of Debt Administration The City has never issued any obligations to avoid default; nor has the City ever defaulted in the payment of any of its obligations. 41

42 Investment Policy The following has been excerpted from the City s Audited Financial Statements for Year End December 31, The Investment Policy of the City requires that funds be invested in accordance with Wisconsin State Statutes and the City investment policies. By Wisconsin Statute, the City can invest in any security which matures or which may be tendered for purchase at the option of the holder within not more than seven years of the date on which it is acquired, if that security is rated the highest or second highest rating category assigned by a nationally recognized rating agency. The City's investment policy shall limit the investments to the following investment instruments and shall diversify the portfolio by instruments, financial institutions and maturities: U.S. Treasury Obligations; U.S. Government Agency Securities and Instrumentalities of Government Sponsored Operations; Repurchase Agreements with Commercial Banks; Certificates of Deposit in Commercial Banks; and State Investment Pool. Source: City of Sheboygan Audited Financial Statements for Year End December 31, 2014 Note C Detailed Notes on All Funds - 1. Cash and Investments. Direct and Overlapping Debt Gross General Obligation Debt Governmental Unit as of 12/31/ Debt Service/ Trust Funds 2016 New Issues Approximate Percentage Applicable Net Debt Applicable To City City of Sheboygan $33,075,255 $4,945,725 4,200,000* $3,400,000 7,525, $34,854,530 Sheboygan Area School District 35,713,000 3,125, ,654,726 Kohler School District 6,500, , ,178,433 Lakeshore Technical College (1) 28,745,000 3,985, ,164,632 Sheboygan County 38,635,000 5,890,000 3,265, ,870,341 Total Direct and Overlapping Debt $71,722,662 * Represents existing debt being refunded with a portion of the Series 2016B Note proceeds. (1) Lakeshore Technical College anticipates issuing approximately $1,500,000 Spring of Source: Respective municipalities. Statistical Summary 2015 Equalized Valuation $2,407,532,000 City Population (2015 estimate) 48, Full Value Per Capita $49,329 Direct Debt Including the Series 2016A Notes and 2016B Notes as of April 20, 2016 $34,854,530 Direct Debt Per Capita $714 Direct Debt as a Percentage of Equalized Value 1.45% Direct and Overlapping Debt $71,722,662 Direct and Overlapping Debt Per Capita $1,470 Direct and Overlapping Debt as a Percentage of Equalized Value 2.98% 42

43 FINANCIAL INFORMATION Wisconsin Statutes and the Wisconsin Administrative Code require cities, with a population greater than 25,000, to publish, at the close of each fiscal (calendar) year, a complete set of financial statements presented in conformity with generally accepted accounting principles ( GAAP ) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. The City retained the services of Schenck SC, Certified Public Accountants, to perform the audit of the City s basic financial statements for years ended December 31, 2010 through Information included in this Official Statement under the heading General Fund Summary and Governmental Fund Summary has been excerpted from the City s respective Audited Financial Statements. The City s Audited Financial Statement for Year End December 31, 2014 is available on the City s Budgeting Process During October, City management submits to the Common Council a proposed operating budget for the calendar year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them. After submission to the governing body, public hearings are held to obtain taxpayer comments. Following the public hearings, the proposed budget, including authorized additions and deletions, is legally enacted by Common Council action. Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the general, special revenue and debt service funds. Budget is defined as the originally approved budget plus or minus approved amendments. Individual amendments throughout the year were not material in relation to the original budget. Budget appropriations not expended during the year are closed to fund balance unless authorized by the governing body to be forwarded into the succeeding year s budget. During the year, formal budgetary integration is employed as a management control device for the general fund, special revenue funds and debt service funds. Management control for the capital projects funds is achieved through project authorizations included in debt issue resolutions Expenditures may not exceed appropriations provided in detailed budget accounts maintained for each department of the City. Amendments to the budget during the year require initial approval by management and are subsequently authorized by the Common Council. The City s finance committee or the City s director of finance can approve transfers within departments while transfers between departments and changes in the overall budget require approval by two-thirds of the Common Council. Source: City of Sheboygan, WI 43

44 Budget Summary REVENUES 2016 Adopted 2015 Adopted Percent Percent General Fund Of Total General Fund Of Total Taxes (other than property) $ 1,446, % $ 1,243, % Licenses & Permits 705, , Intergovernmental Revenue 14,306, ,174, Charges for Services 1,436, ,202, Fines & Forfeits 293, , Interest on Investments 190, , Miscellaneous Revenue 125, , Other Financing Sources 1,749, ,730, Total Revenue for General Fund 20,252, ,708, Tax Levy for General Fund 14,960, ,972, TOTAL REVENUE $35,212, % $35,681, % EXPENDITURES General Government $ 4,536, % $ 4,608, % Public Protection/Safety 20,468, ,841, Public Works 7,253, ,153, Health / Human Services 241, , Culture / Recreation 2,439, ,544, Conservation / Development 254, , Debt Expenses 15, , Interfund Transfers 3, , TOTAL EXPENDITURES $35,212, % $35,681, % Budget information is available on the City of Sheboygan s The City s unaudited financial statements for year end December 31, 2015 are currently not available. The City anticipates total general fund revenues for year end 2015 to be in excess of budgeted revenues; and, total general fund expenditures for year end 2015 to be under budget. Source: City of Sheboygan Finance Director 44

45 Governmental Fund Summary Statement of Revenues, Expenditures and Changes in Fund Balances For Year Ended December Revenues: Taxes $25,979,122 $25,373,427 $26,433,662 $26,969,653 $27,788,931 Special Assessments 483, , , , ,612 Intergovernmental 16,229,810 17,731,503 20,726,417 18,927,296 18,272,517 Licenses & Permits 1,660,357 1,317,384 1,453,238 1,408,946 1,286,772 Fines and Forfeits 1,616,499 1,568,882 1,357,149 1,208,976 1,710,250 Public Charges for Services 3,563,671 3,789,661 4,128,604 2,282,986 2,536,148 Intergovernmental Charges for Services 221, , , , ,733 Miscellaneous 2,531,868 2,371,918 2,109,361 2,099,211 2,444,809 Total and Investment Earnings 1,476, Unrealized Loss on Fair Value of Investments 0 (1,179,021) TOTAL REVENUES 53,762,604 51,514,460 56,733,456 53,325,710 54,497,772 Expenditures: Current: General Government 4,753,677 4,431,964 4,456,399 4,747,553 5,159,248 Public Safety 21,367,246 20,553,971 19,776,946 20,392,386 20,575,797 Public Works 7,814,736 7,953,580 7,399,144 8,111,058 8,130,896 Health and Human Services 302, , , , ,006 Culture and Recreation 5,805,461 5,863,342 5,760,169 5,924,214 6,262,894 Conservation and Development 2,867,851 3,011,655 2,422,061 3,854,765 3,149,784 Debt Service - Principal 5,251,521 5,531,141 6,593,010 6,250,130 5,867,860 - Interest & Fiscal Charges 1,696,911 1,898,993 2,668,736 2,479,650 2,988,749 Capital Outlay 4,648,350 5,555,217 5,979,749 5,542,987 1,364,721 TOTAL EXPENDITURES 54,507,835 55,140,167 55,331,673 57,673,692 53,893,955 Excess of Revenues Over (Under) Expenditures (745,231) (3,625,707) 1,401,783 (4,347,982) 603,817 Other Financing Sources (Uses): Long-Term Debt Issued 0 0 4,745, ,000 12,900,000 Premium on Long-Term Debt Issues , Refunding Debt Principal Payments (1,440,000) Capital Leases 470, ,736 Sale of Capital Asset 227,609 28,656 44, ,900 29,374 Payment to Current Noteholder (9,325,000) Transfers In 6,791,285 4,760,545 5,235,118 3,462,970 4,290,426 Transfers Out (5,360,641) (3,368,858) (3,924,738) (2,127,934) (3,124,814) Total Other Financing Sources (Uses) 2,128,799 1,420,343 6,192,278 2,219,936 3,785,722 Net Change in Fund Balances 1,383,568 (2,205,364) 7,594,061 (2,128,046) 4,389,539 FUND BALANCES JANUARY 1 36,234,608 36,439,972 28,845,911 30,555,789 26,166,250 Prior Period Adjustment ,168 0 FUND BALANCES JANUARY 1, RESTATED ,973,957 0 FUND BALANCES DECEMBER 31 $35,618,176 $34,234,608 $36,439,972 $28,845,911 $30,555,789 Source: Information shown for years ended December 31, 2010 through 2014 is excerpted from the respective City Audited Financial Statements. 45

46 General Fund Summary Statement of Revenues, Expenditures and Changes in Fund Balances For Year Ended December Revenues: Taxes $16,172,763 $15,864,156 $15,580,001 $15,385,793 $14,813,663 Intergovernmental 14,047,489 14,376,308 14,360,884 15,234,416 15,300,104 Licenses & Permits 1,039, , , , ,928 Fines and Forfeits 372, , , , ,555 Public Charges for Services 1,449,057 1,473,001 1,908, , ,969 Intergovernmental Charges for Services 221, , , , ,733 Miscellaneous 241, , , , ,037 Unrealized Loss on Fair Value of Investments 1,476,448 (1,179,021) TOTAL REVENUES 35,020,791 32,307,656 33,788,213 32,824,562 33,017,989 Expenditures: Current: General Government 4,036,423 3,743,372 3,860,349 4,180,712 4,132,768 Public Safety 20,820,701 19,998,821 19,281,378 19,859,515 19,733,043 Public Works 6,809,341 7,128,693 6,564,893 7,323,546 7,321,721 Health and Human Services 301, , , , ,618 Culture and Recreation 2,515,122 2,368,530 2,341,054 2,381,412 2,527,118 Conservation and Development 905, , , , ,763 Debt Service - Interest & Fiscal Charges Capital Outlay 470, TOTAL EXPENDITURES 35,859,473 33,814,401 32,560,703 34,399,760 34,454,871 Excess of Revenues Over (Under) Expenditures (838,682) (1,506,745) 1,227,510 (1,575,198) (1,436,882) Other Financing Sources (Uses): Capital Leases 470, ,736 Sale of Capital Asset 32,729 13,208 9, ,900 0 Transfers In 2,914,735 2,970,238 2,742,533 2,427,097 1,475,196 Transfers Out (73,402) (86,817) (42,194) (6,399) (248,065) Total Other Financing Sources (Uses) 3,344,608 2,896,629 2,709,854 2,635,598 1,682,867 Net Change in Fund Balances 2,505,926 1,389,884 3,937,364 1,060, ,985 Fund Balances January 1 18,498,773 17,108,889 13,171,525 11,692,957 11,446,972 Prior Period Adjustment ,168 0 Fund Balances January 1, Restated ,111,125 0 Fund Balances December 31 $21,004,699 $18,498,773 $17,108,889 $13,171,525 $11,692,957 Source: Information shown for years ended December 31, 2010 through 2014 is excerpted from the respective City Audited Financial Statements. 46

47 Summary of Property Assessment, Tax Levy and Tax Collection Procedures Wisconsin cities, villages and towns are charged with the responsibility of assessing taxable property, collecting taxes, and making distribution to the state, county, school districts and other taxing jurisdictions. Property of manufacturing establishments and utilities is assessed by the State Department of Revenue. All assessments are made as of January 1. Taxes on real estate and personal property are levied in December of each year by each municipality within the County for each taxing jurisdiction in amounts that, when collected in the ensuing year, are sufficient to cover operating expenses, debt service and other expenditures of the said taxing jurisdictions. The following accelerated tax collection procedures are now in effect in the State of Wisconsin for taxes levied in 1989 and beyond. In all taxation districts, except those which have adopted a local option payment plan, real property taxes must either be paid in full by January 31 to the taxation district treasurer, or paid in two equal installments with 50% paid by January 31 and the balance due by July 31. Amounts paid after January 31 are paid to the County Treasurer. On or before February 20, all tax rolls are turned over to the County Treasurer who then continues to collect all delinquent and postponed taxes. Personal property taxes, special assessments, special charges and special taxes must be paid in full by January 31. Any taxation district may authorize the payment of real property taxes in three or more installments. The first installment must be paid by January 31 and at least 50% of the real property taxes must be paid by April 30. All real property taxes must be paid by July 31. The taxation district treasurer shall retain the tax roll and make collections through July 31. The tax roll is then transferred to the County Treasurer who continues to collect delinquent taxes. On or before January 15 and February 20, (and in taxation districts whereby payment is made in three or more installments, on February 15 and on the 15th day of each month following a month in which an installment payment is due), the taxation district treasurer settles with other taxing jurisdictions for all collections through the preceding month. On August 20, the County Treasurer must settle in full with the underlying taxing jurisdictions for all real estate and special taxes (except special assessments). Any county board may authorize its county treasurer to also settle in full with the underlying taxing districts for all special assessments and special charges. The County may then recover any tax delinquencies by enforcing the lien on the property and retain any penalties or interest on the delinquencies for which it has settled. Sheboygan County does not settle in full with the City for special charges or special assessments, which are reimbursed as collected. The City receives 100% of their real estate taxes. Collection of delinquent personal property taxes is the duty of the taxation district treasurer. However, if they remain uncollected after one year, each taxing jurisdiction is billed their proportionate amount. History of Tax Collections Levy/Collection Year Levy for City Of Sheboygan Purposes Only (Including TIF) Collected as of January 31, 2016 Percent Collected 2015/16 $22,771,458 $21,659, % 2014/15 22,868,524 22,840, /14 22,659,219 22,648, /13 22,299,458 22,290, /12 22,556,101 22,552,

48 UNDERWRITING The Series 2016A Notes The Series 2016A Notes were offered at a public sale on April 6, 2016 at 10:00 A.M. (Central Time). Action on bids received was taken at a Common Council meeting on April 6, 2016, commencing at 6:00 P.M. (Central Time), whereby the Series 2016A Notes were awarded to the Underwriter, BOSC, Inc., a subsidiary of BOK Financial Corporation ( BOSC ). BOSC and BOKF, National Association ( BOKF N.A. ) are both wholly-owned subsidiaries of BOK Financial Corporation ( BOKF ), a bank holding company organized under laws of the State of Oklahoma. Thus, BOSC and BOKF N.A. are affiliated, but BOSC is not a bank. Affiliates of BOSC may provide banking services or engage in other transactions with the City. BOKF and BOKF N.A. are not responsible for the obligations of BOSC. The Series 2016A Notes are purchased by the Underwriter at a price of $3,458, The Underwriter s compensation in connection with this issue results from the sale of the Series 2016A Notes at the prices or rates set forth on the cover page of this Official Statement is estimated to be 0.228% of the par amount of the Series 2016A Notes, less expenses of issuance. Original Issue Discount for the Series 2016A Notes To the extent that the initial public offering price of certain of the Series 2016A Notes is less than the principal amount payable at maturity, such Series 2016A Notes ("Discounted Bonds") will be considered to be issued with original issue discount. The original issue discount is the excess of the stated redemption price at maturity of a Discounted Bond over the initial offering price to the public, excluding underwriters or other intermediaries, at which price a substantial amount of such Discounted Bonds were sold (issue price). With respect to a taxpayer who purchases a Discounted Bond in the initial public offering at the issue price and who holds such Discounted Bond to maturity, the full amount of original issue discount will constitute interest that is not includible in the gross income of the owner of such Discounted Bond for federal income tax purposes and such owner will not, subject to the caveats and provisions herein described, realize taxable capital gain upon payment of such Discounted Bond upon maturity. Original issue discount is treated as compounding semiannually, at a rate determined by reference to the yield to maturity of each individual Discounted Bond, on days that are determined by reference to the maturity date of such Discounted Bond. The amount treated as original issue discount on a Discounted Bond for a particular semiannual accrual period is generally equal to (a) the product of (i) the yield to maturity for such Discounted Bond (determined by compounding at the close of each accrual period) and (ii) the amount that would have been the tax basis of such Discounted Bond at the beginning of the particular accrual period if held by the original purchaser; and less (b) the amount of any interest payable for such Discounted Bond during the accrual period. The tax basis is determined by adding to the initial public offering price on such Discounted Bond the sum of the amounts that have been treated as original issue discount for such purposes during all prior periods. If a Discounted Bond is sold or exchanged between semiannual compounding dates, original issue discount that would have been accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period. For federal income tax purposes, the amount of original issue discount that is treated as having accrued with respect to such Discounted Bond is added to the cost basis of the owner in determining gain or loss upon disposition of a Discounted Bond (including its sale, exchange, redemption, or payment at maturity). Amounts received upon disposition of a Discounted Bond that are attributable to accrued original issue discount will be treated as tax-exempt interest, rather than as taxable gain. 48

49 The accrual or receipt of original issue discount on the Discounted Bonds may result in certain collateral federal income tax consequences for the owners of such Discounted Bonds. The extent of these collateral tax consequences will depend upon the owner's particular tax status and other items of income or deduction. In the case of corporate owners of Discounted Bonds, a portion of the original issue discount that is accrued in each year will be included in adjusted current earnings for purposes of calculating the corporation's alternative minimum tax liability. Corporate owners of any Discounted Bonds should be aware that such accrual of original issue discount may result in an alternative minimum tax liability although the owners of such Discounted Bonds will not receive a corresponding cash payment until a later year. The Code contains additional provisions relating to the accrual of original issue discount. Owners who purchase Discounted Bonds at a price other than the issue price or who purchase such Discounted Bonds in the secondary market should consult their own tax advisors with respect to the tax consequences of owning the Discounted Bonds. Under the applicable provisions governing the determination of state and local taxes, accrued interest on the Discounted Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment until a later year. Owners of Discounted Bonds should consult their own tax advisors with respect to the state and local tax consequences of owning the Discounted Bonds. Bond Premium for the Series 2016A Notes To the extent that the initial offering price of certain of the Series 2016A Notes is more than the principal amount payable at maturity, such Series 2016A Notes ("Premium Bonds") will be considered to have bond premium. Any Premium Bond purchased in the initial offering at the issue price will have "amortizable bond premium" within the meaning of Section 171 of the Code. The amortizable bond premium of each Premium Bond is calculated on a daily basis from the issue date of such Premium Bond until its stated maturity date (or call date, if any) on the basis of a constant interest rate compounded at each accrual period (with straight line interpolation between the compounding dates). An owner of a Premium Bond that has amortizable bond premium is not allowed any deduction for the amortizable bond premium; rather the amortizable bond premium attributable to a taxable year is applied against (and operates to reduce) the amount of tax-exempt interest payments on the Premium Bonds. During each taxable year, such an owner must reduce his or her tax basis in such Premium Bond by the amount of the amortizable bond premium that is allocable to the portion of such taxable year during which the holder held such Premium Bond. The adjusted tax basis in a Premium Bond will be used to determine taxable gain or loss upon a disposition (including the sale, exchange, redemption, or payment at maturity) of such Premium Bond. Owners of Premium Bonds who did not purchase such Premium Bonds in the initial offering at the issue price should consult their own tax advisors with respect to the tax consequences of owning such Premium Bonds. Owners of Premium Bonds should consult their own tax advisors with respect to the state and local tax consequences of owning the Premium Bonds. 49

50 The Series 2016B Notes The Series 2016B Notes were offered at a public sale on April 6, 2016 at 11:00 A.M. (Central Time). Action on bids received was taken at a Common Council meeting on April 6, 2016, commencing at 6:00 P.M. (Central Time), whereby the Series 2016B Notes were awarded to the Underwriter, Robert W. Baird & Co., Inc. The Series 2016B Notes are purchased by the Underwriter at a price of $7,494, The Underwriter s compensation in connection with this issue results from the sale of the Series 2016B Notes at the prices or rates set forth on the cover page of this Official Statement is estimated to be 0.421% of the par amount of the Series 2016B Notes, less expenses of issuance. Original Issue Discount for the Series 2016B Notes To the extent that the initial public offering price of certain of the Series 2016B Notes is less than the stated principal amount payable at maturity, such Series 2016B Notes will be considered to be issued with original issue discount unless the amount of original issue discount is "de minimis." The amount of original issue discount with respect to a Series 2016B Note will be "de minimis" if the amount of discount is less than one-fourth of 1% of the principal amount payable at maturity multiplied by the number of complete years from the issue date until the maturity date. If the amount of discount with respect to a Series 2016B Note is considered "de minimis," then the amount of original issue discount with respect to the Series 2016B Notes will be zero. In that case, owners of those Series 2016B Notes will not be required to include any amount of original issue discount in income until the principal amount is repaid, at which time the owner will recognize capital gain (assuming the Series 2016B Notes is held as a capital asset) equal to the excess of the amount received at maturity over the issue price. If the amount of discount with respect to a Series 2016B Note is more than "de minimis," then the Series 2016B Note will contain original issue discount and owners of the Series 2016B Notes will be required to include original issue discount in income. The Internal Revenue Code of 1986, as amended (the "Code") contains a number of very complex provisions requiring holders of debt instruments with original issue discount to include such original issue discount in income as it accrues ratably over the life of the debt instrument. In the case of a Series 2016B Note with original issue discount, the owner may be required to include the original issue discount in income before the owner receives the associated cash payment, regardless of the owner's regular method of accounting for tax purposes. Any such original issue discount that is included in income is treated in the same manner as interest. Any original issue discount that is included in income by an owner with respect to a Series 2016B Note will increase the holder's tax basis in the Series 2016B Note. The Code contains certain provisions relating to the accrual of original issue discount (including de minimis original issue discount) in the case of subsequent purchasers of obligations such as the Series 2016B Notes. Owners who do not purchase Series 2016B Notes in the initial public offering should consult their own tax advisors with respect to the tax consequences of the acquisition and ownership of Series 2016B Notes. Owners who purchase Series 2016B Notes in the initial public offering but at a price different than the initial offering price at which a substantial amount of that maturity of the Series 2016B Notes was sold to the public should consult their own tax advisors with respect to the tax consequences of the acquisition and ownership of the Series 2016B Notes. Owners of Series 2016B Notes should consult their own tax advisors with respect to the state and local tax consequences of owning the Series 2016B Notes. 50

51 Bond Premium for the Series 2016B Notes To the extent that the initial offering price of certain of the Series 2016B Notes ("Premium Bonds") is more than the principal amount payable at maturity, the Premium Bonds will be considered to have "bond premium" equal to the difference between the issue price and the stated redemption price at maturity. Any Premium Bond purchased in the initial offering at the issue price will have "amortizable bond premium" within the meaning of Section 171 of the Code. Owners of Premium Bonds, the interest on which is subject to tax, may make an election to amortize the bond premium and to offset the taxable interest income with the amortizable bond premium for the year. Any amortizable bond premium that reduces the amount of interest income also reduces the owner's adjusted tax basis in the Series 2016B Note by a corresponding amount. The adjusted tax basis in a Premium Bond will be used to determine taxable gain or loss upon a disposition (for example, upon a sale, exchange, redemption, or payment at maturity) of such Premium Bond. If the election is made, it is effective for all Series 2016B Notes acquired during that year and all future years unless the taxpayer receives permission from the IRS to revoke the election. Owners of Premium Bonds should consult with their tax advisors regarding the calculation and treatment of bond premium for federal income tax purposes, as well as the manner of making the election. Owners of the Premium Bonds who do not purchase such Premium Bonds in the initial offering at the issue price should consult with their tax advisors regarding the tax consequences of owning the Premium Bonds. Owners of Premium Bonds should consult with their tax advisors regarding the state and local tax consequences of owning such Premium Bonds. Tax Exemption on the Series 2016A Notes LEGAL MATTERS Quarles & Brady LLP, Milwaukee, Wisconsin, Bond Counsel, will deliver a legal opinion with respect to the federal income tax exemption applicable to the interest on the Series 2016A Notes under existing law substantially in the following form: "The interest on the Series 2016A Notes is excludable for federal income tax purposes from the gross income of the owners of Series 2016A Notes. The interest on the Series 2016A Notes is not an item of tax preference for purposes of the federal alternative minimum tax imposed by Section 55 of the Internal Revenue Code of 1986, as amended (the "Code") on corporations (as that term is defined for federal income tax purposes) and individuals. However, for purposes of computing the alternative minimum tax imposed on corporations, the interest on the Series 2016A Notes is included in adjusted current earnings. The Code contains requirements that must be satisfied subsequent to the issuance of the Series 2016A Notes in order for interest on the Series 2016A Notes to be or continue to be excludable from gross income for federal income tax purposes. Failure to comply with certain of those requirements could cause the interest on the Series 2016A Notes to be included in gross income retroactively to the date of issuance of the Series 2016A Notes. The Issuer has agreed to comply with all of those requirements. The opinion set forth in the first sentence of this paragraph is subject to the condition that the Issuer comply with those requirements. We express no opinion regarding other federal tax consequences arising with respect to the Series 2016A Notes." The interest on the Series 2016A Notes is not exempt from present Wisconsin income or franchise taxes. 51

52 Prospective purchasers of the Series 2016A Notes should be aware that ownership of Series 2016A Notes may result in collateral federal income tax consequences to certain taxpayers. Bond Counsel will not express any opinion as to such collateral tax consequences. Prospective purchasers of the Series 2016A Notes should consult their tax advisors as to collateral federal income tax consequences. From time to time legislation is proposed, and there are or may be legislative proposals pending in the Congress of the United States that, if enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value of the Series 2016A Notes. It cannot be predicted whether, or in what form, any proposal that could alter one or more of the federal tax matters referred to above or adversely affect the market value of the Series 2016A Notes may be enacted. Prospective purchasers of the Series 2016A Notes should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation. Qualified Tax-Exempt Obligations The Series 2016A Notes are designated "qualified tax-exempt obligations" for purposes of Section 265 of the Internal Revenue Code of 1986, as amended, relating to the ability of financial institutions to deduct from income for federal income tax purposes, interest expense that is allocable to carrying and acquiring tax-exempt obligations. Taxability of Interest on the Series 2016B Notes The Series 2016B Notes are being issued as taxable bonds. Interest on the Series 2016B Notes is included in gross income for present Federal income tax purposes. Interest on the Series 2016B Notes is not exempt from present Wisconsin income or franchise taxes. Approval of Legality of the Securities Legal matters incident to the authorization, issuance and sale of the Securities, are subject to the approval of Quarles & Brady LLP, Milwaukee, Wisconsin, Bond Counsel. Copies of such opinions will be available at the time of delivery of the Securities. Absence of Material Litigation There is no controversy or litigation of any nature now pending or, threatened to restrain or enjoin the issuance, sale, execution or delivery of the Securities or the levy and collection of taxes to pay the same; or questioning the proceedings or authority pursuant to which the Securities are issued and taxes levied; or questioning or relating to the validity of the Securities, or contesting the corporate existence of the City or the titles of its present officers to their respective offices. The absence of such litigation will be confirmed at the time of the delivery of the Securities to the purchasers by a certificate of the City Clerk. MUNICIPAL BANKRUPTCY Municipalities are prohibited from filing for bankruptcy under Chapter 11 (reorganization) or Chapter 7 (liquidation) of the U.S. Bankruptcy Code (11 U.S.C ) (the "Bankruptcy Code"). Instead, the Bankruptcy Code permits municipalities to file a petition under Chapter 9 of the Bankruptcy Code, but only if certain requirements are met. These requirements include that the municipality must be specifically authorized under State law to file for relief under Chapter 9. For these purposes, "State law" may include, without limitation, statutes of general applicability enacted by the State legislature, special legislation applicable to a particular municipality, and/or executive orders issued by an appropriate officer of the State's executive branch. 52

53 As of the date hereof, Wisconsin law contains no express authority for municipalities to file for bankruptcy relief under Chapter 9 of the Bankruptcy Code. Nevertheless, there can be no assurance (a) that State law will not change in the future, while the Securities are outstanding, in a way that would allow the City to file for bankruptcy relief under Chapter 9 of the Bankruptcy Code; or (b) even absent such a change in State law, that an executive order or other executive action could not effectively authorize the City to file for relief under Chapter 9. If, in the future, the City were to file a bankruptcy case under Chapter 9, the relevant bankruptcy court would need to consider whether the City could properly do so, which would involve questions regarding State law authority as well as other questions such as whether the City is a municipality for bankruptcy purposes. If the relevant bankruptcy court concluded that the City could properly file a bankruptcy case, and that determination was not reversed, vacated, or otherwise substantially altered on appeal, then the rights of holders of the Securities could be modified in bankruptcy proceedings. Such modifications could be adverse to holders of the Securities, and there could ultimately be no assurance that holders of the Securities would be paid in full or in part on the Securities. Further, under such circumstances, there could be no assurance that the Securities would not be treated as general, unsecured debt by a bankruptcy court, meaning that claims of holders of the Securities could be viewed as having no priority (a) over claims of other creditors of the City; (b) to any particular assets of the City, or (c) to revenues otherwise designated for payment to holders of the Securities. Moreover, if the City were determined not to be a municipality for the purposes of the Bankruptcy Code, no representations can be made regarding whether it would still be eligible for voluntary or involuntary relief under Chapters of the Bankruptcy Code other than Chapter 9 or under similar federal or state law or equitable proceeding regarding insolvency or providing for protection from creditors. In any such case, there can be no assurance that the consequences described above for the holders of the Securities would not occur. RATINGS Moody s Investors Service has assigned a Aa2 rating on the Securities (Outlook- NOO), and maintains the Aa2 rating to previously issued general obligation debt. City s General Obligation Bonds, Series 2006C, Series 2006D, and Series 2007B are rated AA- by Standard & Poor s. The City has not applied for a rating from Standard & Poor s for the Securities. The rating reflects only the views of Moody s and Standard & Poor s and any explanation of the significance of such rating may only be obtained from Moody s and Standard & Poor s. There is no assurance that the rating will be maintained for any given period of time or will not be revised, either upward or downward, or withdrawn entirely, by Moody s and Standard & Poor s, if, in their judgment, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Securities. EXHIBITS Exhibit I. Exhibit II. Exhibit III. City of Sheboygan, Wisconsin Financial Statements and Auditor s Report for the Year End December 31, Form of Legal Opinions for the Securities Continuing Disclosure Certificates for the Securities 53

54 MISCELLANEOUS This Official Statement includes the cover page, reverse thereof, Summary Statements and Exhibits hereto. Bond Counsel has furnished the material under the heading LEGAL MATTERS Tax Exemption on the Series 2016A Notes, LEGAL MATTERS - Qualified Tax-Exempt Obligations, and "LEGAL MATTERS Taxability of Interest on the Series 2016B Notes, but has not participated in the preparation of this Official Statement and will not pass on its accuracy, completeness or specifications. Bond Counsel has not examined or attempted to examine or verify any of the financial or statistical statements or data contained in this Official Statement, and will express no opinion with respect thereto. All references to material not purporting to be quoted in full are only summaries of certain provisions thereof and do not purport to summarize or describe all the provisions thereof. Reference is hereby made to such instruments, documents and other materials for the complete provisions thereof, copies of which will be furnished upon request to the City. The City has authorized the distribution of this Official Statement. MUNICIPAL ADVISOR Wisconsin Public Finance Professionals, LLC, Milwaukee, Wisconsin, ( WPFP ) has been retained as Municipal Advisor to the City in connection with the issuance of the Securities. The Municipal Advisor has relied upon the City, and other sources, having access to relevant data to provide accurate information for this Official Statement. To the best of the WPFP s knowledge, the information contained in this Official Statement is true and accurate. WPFP s compensation is payable entirely by the City. WPFP is registered with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board as a Municipal Advisor. ACCURACY AND COMPLETENESS OF OFFICIAL STATEMENT This Official Statement has been approved for distribution to prospective purchasers and the Underwriters of the Securities by the City. All of the statements and data presented herein have been obtained from reliable sources and are believed to be correct but are not guaranteed by the City. The City Clerk or other appropriate official will provide to the original purchasers of the Securities at the time of delivery of the Securities, a certificate confirming to the purchasers that, to the best of their knowledge and belief, the Preliminary Official Statement and Final Official Statement, with respect to the Securities, at the time of the sale and delivery of the Securities, was true and correct in all material respects and did not at any time contain an untrue statement of a material fact or omit to state a material fact required to be stated, where necessary to make the statements, in light of the circumstances under which they were made, not misleading. 54

55 EXHIBIT I. City of Sheboygan, Wisconsin Financial Statements and Auditor s Report for the Year End December 31, 2014

56 CITY OF SHEBOYGAN, WISCONSIN ANNUAL FINANCIAL REPORT DECEMBER 31, 2014

57 CITY OF SHEBOYGAN, WISCONSIN December 31, 2014 Table of Contents Page No. INDEPENDENT AUDITORS' REPORT BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Position Statement of Activities Fund Financial Statements Balance Sheet - Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Position - Agency Funds Notes to Basic Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress Schedule of Employer Contributions SUPPLEMENTARY INFORMATION Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Combining Statement of Net Position - Nonmajor Enterprise Funds Combining Statement of Revenues, Expenses and Changes in Net Position Nonmajor Enterprise Funds Combining Statement of Cash Flows - Nonmajor Enterprise Funds Combining Statement of Net Position - Internal Service Funds

58 Schenc~ CPAs AND SO MUCH MORE. INDEPENDENT AUDITORS' REPORT To Mayor Michael Vandersteen and the Common Council City of Sheboygan Sheboygan, Wisconsin Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Sheboygan, Wisconsin ("the City") as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Water Utility Enterprise fund, which is both a major fund and 55 percent, 56 percent, and 50 percent, respectively, of the assets, net position, and revenues of the City's business-type activities. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Water Utility Enterprise fund, is based solely on the report of the other auditors. We did not audit the financial statements of the Housing Authority of the City of Sheboygan. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Housing Authority of the City of Sheboygan, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. The financial statements of the Harbor Centre Business Improvement District, a discretely presented component unit of the City, were not audited in accordance with Government Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 1 Appleton. Fond du Lac Green Bay Manitowoc Milwaukee Oshkosh Sheboygan Wausau schencksc.com Schenck 1<

59 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City as of December 31, 2014, and the respective changes in financial position and, where applicable, cash flows thereof and the budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the schedule of funding progress and the schedule of employer contributions on pages 51 and 52 be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Management has omitted the management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinions on the basic financial statements are not affected by this missing information. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The financial information listed in the table of contents as supplementary information and the schedule of expenditures of federal awards and schedule of state financial assistance, as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the State Single Audit Guidelines issued by the Wisconsin Department of Administration, are presented for purposes of additional analysis and are not a required part of the basic financial statements. 2

60 The supplementary information and schedules of expenditures of federal awards and state financial assistance are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information, the schedules of expenditures of federal awards and the schedule of state financial assistance are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 17, 2015, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Certified Public Accountants Sheboygan, Wisconsin June 17,

61 BASIC FINANCIAL STATEMENTS

62 (This page left blank intentionally)

63 CITY OF SHEBOYGAN, WISCONSIN Statement of Net Position December 31, 2014 Primarv Government Governmental Business-type Activities Activities Totals Comoonent Units Housing Harbor Centre Authority of the Business City of Improvement Sheboygan District ASSETS Cash and investments Receivables Taxes Accounts Special assessments Loans Other Internal balances Due from other governments Inventories and prepaid items Deposit with CVMIC Restricted assets Cash and investments Capital assets, nondepreciable Land Construction in progress Capital assets, depreciable Buildings and improvements Improvements other than buildings Machinery and equipment Infrastructure Less: Accumulated depreciation TOTAL ASSETS LIABILITIES Accounts payable Accrued and other current liabilities Accrued interest payable Due to other governments Unearned revenues Long-term Obligations Due within one year Due in more than one year TOTAL LIABILITIES DEFERRED INFLOWS OF RESOURCES Property taxes NET POSITION Net investment in capital assets Restricted for Debt service Tax incremental financing districts Capital improvements Community development Cemetery perpetual care Library trust Business Improvement district Housing assistance Unrestricted TOTAL NET POSITION $ 51,288,935 $ 15,448,075 $ 66,737,010 24,829, ,592 25,408,097 1,142,261 1,811,780 2,954, , ,568 1,113,220 9,180,291 9,180, ,351 16, , ,122 (445,122) 430, ,393 1,091, , , ,540 2,205,665 2,205,665 1,009,775 1,009,775 16,361, ,683 17,249, ,807 8,254,717 8,614,524 32,814,756 20,190,107 53,004,863 13,805,709 26,660,073 40,465,782 24,192,166 31,377,718 55,569, ,005,969 60,967, ,973,582 { } { } { ,393} , , , ,006, ,463 1,627,940 6,036, ,994 6,979, , , ,658 1,477, ,478,415 48,144 36,353 84,497 5,152,133 1,921,974 7,074, , z737, , ,108 65,499,602 46,101, ,601,411 1,254, ,742 1,608,906 2,510,858 2,510, , ,231 8,968,770 8,968, , ,305 1,072,171 1,072,171 37,210, i 118,098,461 i 63,329,875 i 181,428,336 The notes to the basic financial statements are an integral part of this statement. 4 $ 4,065,880 $ 21,580 8,255 18,882 16,571 33, , ,942 15,250 8,484,038 9, ,643 1,500 {7, } {21984} 6, ,879 12,900 95,912 1,670 1, ,616,362 7,807 54,135 3, ,462 i 6,650,971 i 34,269

64 CITY OF SHEBOYGAN, WISCONSIN Statement of Activities For the Year Ended December 31, 2014 Proaram Revenues Operating Capital Grants Charges for Grants and and Functions/Programs Expenses Services Contributions Contributions Primary Government Governmental Activities General government $ 4,144,176 $ 1,552,871 $ 25,797 $ Public safety 22,111,836 2,681, ,263 Public works 10,790,187 1,927,977 2,951, ,940 Health and human services 304, ,999 Culture and recreation 6,543, , ,308 Conservation and development 4,884,854 35, ,994 Interest on debt 1 633,489 Total Governmental Activities 50,412, ,937, ,940 Business-type Activities Sewerage system 6,890,509 7,050,895 98,321 Water utility 5,716,087 8,161,634 Transit commission 4,438, ,534 2,837,410 Parking facility 370, ,313 Boat facility ,705 Total Business-type Activities 17,496,484 16,479,081 2,837,410 98,321 Total Primary Government $ i ,013 i 7,775,236 i 1,088,261 Component Units Housing Authority of the City of Sheboygan $ 2,162,303 $ 890,914 $ 767,918 $ Harbor Centre Business Improvement District 159, $ 2, i 1,059,090 i i General revenues Taxes General property taxes Tax increments Other taxes Federal and state grants and other contributions not restricted to specific functions Interest and investment earnings Miscellaneous Gain on sale of capital assets Transfers Total general revenues and transfers Change in net position Net position - January 1 Net position - December 31 The notes to the basic financial statements are an integral part of this statement. 5

65 Net (Expense) Revenue and Chances in Net Position Primary Government Component Units Housing Harbor Centre Authority of the Business Governmental Business-type City of Improvement Activities Activities Totals Sheboygan District $ (2,565,508) $ $ (2,565,508) $ $ (19,155,356) (19,155,356) (4,920,806) (4,920,806) (193,210) (193,210) (4,968,808) (4,968,808) (3,879,585) (3,879,585) {1,633,489} {1,633,489} (37,316,762) (37,316,762) 258, ,707 2,445,547 2,445,547 (770,247) (770,247) (9,457) (9,457) {6,222} (6,222} 1,918,328 1,918,328 (37,316,762) 1,918,328 {35,398,434} (503,471) 9147 {503,471} ,165, ,547 21,677,093 2,978,357 2,978,357 1,835,219 1,835,219 11,965,361 11,965,361 1,787, ,229 1,897,271 4, ,502 1, , ,199 14,469 14, ,305,644 (1,305,644} 41,182,671 ( } 40,515, , ,865,909 1,250,661 5,116,570 (373,175) 9, , ,079, ,311,766 7,024,146 25,029 m 118,098,461 m 63,329,875 m 181,428,336 m 6,650,971 i 34,269 6

66 CITY OF SHEBOYGAN, WISCONSIN Balance Sheet Governmental Funds December 31, 2014 ASSETS Cash and investments Receivables Taxes Accounts Special assessments Loans Other Due from other funds Advance to other funds Due from other governments Inventories and prepaid items TOTAL ASSETS LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities Accounts payable Accrued and other current liabilities Due to other funds Due to other governments Unearned revenues Advance from other funds Total Liabilities Deferred Inflows of Resources Property taxes Special assessments Loans receivable Accounts receivable Total Deferred Inflows of Resources Fund Balances Nonspendable Inventories and prepaid items Long-term accounts and interfund receivables Cemetery perpetual care Library trust Restricted Debt service Tax incremental financing districts Capital improvements Community development Library trust Committed Development Information technology Public works projects Assigned Subsequent year expenditures Unassigned Total Fund Balances TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCE (Continued) Debt Service Debt Service General GO Debt TIF Districts $ 20,438,241 $ 3,486,452 $ 4,215,237 16,064,806 2,886,889 3,572, ,109 87,265 10,000 47,247 8,990 10,779 1,220,097 2,811,581 1,218, ,461 9, ,026 i 39,597,929 i 9,650,373 i 7,798,031 $ 443,927 $ $ 2,100,132 2,000,000 95,713 1,174 1,800 1,619,445 2,547,033 2,000,000 1,715,158 15,972,916 2,886,889 3,572,015 73, , ,167 3,572, ,026 1,409,815 3,268, , ,927 77,076 1,254,164 2,510, , , ,206 2, i 39,597,92!i! i 9,650,373 i 7,798,031 Other Governmental Funds Total Governmental Funds $ 10,850,621 $ 38,990,551 2,305,795 24,829, ,098 1,078, , ,652 9,170,291 9,180,291 16,091 83,107 4,031, ,173 1,860, , , ,178 i 24,133,4~2 i 81,179,78~ $ 466,392 $ 910, ,249 4,356,381 2,848,316 2,944,029 1,476,547 1,477,721 46,344 48, i753 1,954,198 5,428,601 11,690,792 2,305,741 24,737, , ,562 7,917,458 7,917, , , ,178 4,677, , , , ,000 1,254,164 2,510, , ,231 2,391,316 2,391, , , , ,927 77,076 5,543,581 5,543, ,682 ( } ,580,413 35,618,176 i 24,133,452 i 81,179,7~5 7

67 CITY OF SHEBOYGAN, WISCONSIN Balance Sheet (Continued) Governmental Funds December 31, 2014 Reconciliation to the Statement of Net Position Total Fund Balances as shown on previous page $ 35,618, 176 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the funds. Other long-term assets are not available to pay current period expenditures and therefore are deferred in the funds. Special assessments Accounts receivable Loans receivable Advance from other funds Internal service funds reported in the statement of net position as governmental activities (see page 14) Some liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Bonds and notes payable Bond premium Bond discount Capital leases payable Unfunded post employment benefits Compensated absences Accrued interest on long-term obligations Net Position of Governmental Activities as Reported on the Statement of Net Position (see page4) 98,382, , ,958 7,917, ,278 16,470,532 $ (36, 190,437) (68,083) 73,425 (853,566) (1,216,643) (2,858,431) (392, 734) (41,506,469) $118, The notes to the basic financial statements are an integral part of this statement. 8

68 CITY OF SHEBOYGAN, WISCONSIN Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds For the Year Ended December 31, 2014 Revenues Taxes Special assessments Intergovernmental Licenses and permits Fines and forfeits Public charges for services Intergovernmental charges for services Miscellaneous Interest and investment earnings Total Revenues General $ 16, 172, ,047,489 1,039, ,764 1,449, , ,051 1,476,448 35,020,791 Debt Service GO Debt Debt Service TIF Districts $ 2,886,889 $ 3,261,326 40, ,196 39,001 3,486,085 3,340,924 Other Governmental Funds $ 3,658, ,427 2,141, ,540 1,243,735 2,114,614 1,652,620 11,914,804 Total Governmental Funds $ 25,979, ,427 16,229,810 1,660,357 1,616,499 3,563, ,402 2,531,868 1,476,448 53,762,604 Expenditures Current General government Public safety Public works Health and human services Culture and recreation Conservation and development Debt service Principal Interest and fiscal charges Capital outlay Total Expenditures 4,036,423 20,820,701 6,809, ,953 2,515, , ,546 35,859, ,915 3,300,687 1,869,951 1,061, ,049 4,362,716 3,156, , ,545 1,005, ,290,339 1,301,549 80,883 9,133 4,177,804 11,128,731 4,753,677 21,367,246 7,814, ,082 5,805,461 2,867,851 5,251,521 1,696,911 4,648,350 54,507,835 Excess of Revenues Over (Under) Expenditures (838,682) (876,631) 184, ,073 (745,231) Other Financing Sources (Uses) Capital leases Sale of capital assets Transfers in Transfers out Total Other Financing Sources (Uses) 470,546 32,729 2,914,735 {73,402} 3,344,608 1,137,756 1,058,138 {2, 199,080} (1,061,324} 1,058, ,880 1,680,656 {3,088, 159} (1,212,623) 470, ,609 6,791,285 {5,360,641} 2,128,799 Net Change in Fund Balances 2,505,926 (1,937,955) 1,242,147 (426,550) 1,383,568 Fund Balances - January 1 18,498,773 6,460,161 1,268,711 8,006,963 34,234,608 Fund Balances - December 31 i i $ i i (Continued) 9

69 CITY OF SHEBOYGAN. WISCONSIN Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds (Continued) For the Year Ended December 31, 2014 Reconciliation to the Statement of Activities Net Change in Fund Balances as shown on previous page Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital ouuays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital assets reported as capital outlay in governmental fund statements Depreciation expense reported in the statement of activities Amount by which capital outlay is less than depreciation in current period In governmental funds the entire proceeds, if any, from the disposal of capital assets is reported as an other financing source. In the statement of activities only the gain (or loss) on the disposal is reported. Proceeds from the disposition of capital assets as reported on the governmental funds operating statement Gain (loss) on disposition reported on the statement of activities Cost of assets disposed of Certain employee benefits are reported in the governmental funds when amounts are paid. The statement of activities reports the value of benefits earned during the year. This year the accrual of these benefits increased by: Special assessments are recorded as revenues when collected in the governmental funds; however, in the government-wide financial statements, special assessments are recognized as revenue when levied Special assessments levied Special assessment collections Accounts receivable deferred and collected after the period of availability Water utility's portion of unfunded pension liability payoff established in 2009 Loans issued by the City are recorded as an expenditure in the governmental funds when paid and loan repayments are recognized as a revenue when received. The issuance of loans or the receipt of repayments does not have an effect on net position. Loans issued Loan repayments received Some capital assets acquired during the year were financed with debt. In addition, debt was issued to refinance existing debt obligations. The amount of the debt is reported in the governmental funds as a source of financing. In the statement of net position; however, debt constitutes a long-term liability. Debt issued in the current year is: Repayment of principal on long-term debt is reported in the governmental funds as an expenditure, but is reported as a reduction in long-term debt in the statement of net position and does not affect the statement of activities. The amount of long-term debt principal payments in the current year is: Interest payments on outstanding debt are reported in the governmental funds as an expenditure when paid, in the statement of activities interest is reported as it accrues. Bond premiums and discounts are reported in the governmental funds as revenues and expenditures. In the statement of activities these costs are capitalized and amortized over life of the bonds. Bond premium Bond discount Internal service funds are used by the City to charge the costs of motor vehicle, data processing, health, workers compensation and general liability to individual funds. Change in Net Position of Governmental Activities as Reported in the Statement of Activities (see pages 5-6) The notes to the basic financial statements are an integral part of this statement. $ 2,667,508 (3,869,415) $ (227,609) (87.405) $ 1,072,168 (565,655) $ 12,000 (1z160,384) $ 1,383,568 (1,201,907) (315,014) (501,970) 506,513 (2,429) (12,062) (1, 148,384) (470,546) 5,251,521 61,174 9,391 (6,843) 312,897 $

70 CITY OF SHEBOYGAN, WISCONSIN Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual General Fund For the Year Ended December 31, 2014 Variance Final Budget - Bud eted Amounts Actual Positive Ori inal Final Amounts N ative Revenues Taxes $ 16,167,716 $ 16,167,716 $ 16,172,763 $ 5,047 Intergovernmental 13,919,612 13,938,093 14,047, ,396 Licenses and permits 676, ,895 1,039, ,922 Fines and forfeits 313, , ,764 37,441 Public charges for services 1,173,500 1,177,070 1,449, ,987 Intergovernmental charges for services 216, , ,402 4,566 Miscellaneous 134, , ,051 80,784 Interest and investment earnings 250, ,000 1,476, ,448 Total Revenues 32,852,309 32,922,200 35,020,791 2,098,591 Expenditures General Government Council 117, , ,398 5,721 Mayor 406, , , City clerk 376, , ,636 36,468 Elections 121, ,247 77,541 43,706 Finance 1,241,057 1,223, , ,704 Assessor 437, , ,506 4,462 Personnel 251, , ,652 41,125 City attorney 442, , ,393 (565) City insurance 276, , , ,537 City buildings 852, , ,236 87,714 Board of review 2,150 2,150 1, Total General Government 4,527,269 4,629,979 4,036, ,556 Public Safety Police 12,419,356 12,547,183 12,326, ,143 Fire 7,715,356 7,895,216 7,887,339 7,877 Building inspection 619, , ,992 38,030 Emergency operations 1,400 1, Civil defense 12,460 12,460 5,405 7,055 Total Public Safety 20,768,181 21,095,281 20,820, ,580 Public Works Department of public works 258, , ,101 10,806 Engineering 515, , ,633 11,048 Streets department 4,065,898 4,114,276 3,777, ,701 Sanitation department 2,356,027 2,356,027 2,264,238 91,789 Incinerator 19,000 19,000 14,794 4,206 Total Public Works 7,215,513 7,263,891 6,809, ,550 Health and Human Services Cemetery 326, , ,953 24,395 (Continued) 11

71 CITY OF SHEBOYGAN, WISCONSIN Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Continued) General Fund For the Year Ended December 31, 2014 Budaeted Amounts Actual Oriainal I Final Amounts Culture and Recreation Park department 2,247,631 2,479,006 2,339,191 Senior citizen center 180, , ,931 Total Culture and Recreation 2,428,015 2,661,190 2,515,122 Conservation and Development City development 247,070 1, 195, ,387 Capital Outlay Fire 470,546 Total Expenditures 35,512,396 37,171,853 35,859,473 Excess of Revenues Over (Under) Expenditures (2,660,087) (4,249,653) (838,682) Other Financing Sources (Uses) Capital leases 470,546 Sale of capital assets 32,729 Transfers in 2,667,147 2,676,818 2,914,735 Transfers out {7,060} (7,060} (73,402} Total Other Financing Sources (Uses) 2,660,087 2,669,758 3,344,608 Net Change in Fund Balance (1,579,895) 2,505,926 Variance Final Budget - Positive (Neaative) 139,815 6, , ,777 (470,546) 1,312,380 3,410, ,546 32, ,917 (66,342} 674,850 4,085,821 Fund Balance - January 1 18,498,773 18,498,773 18,498,773 Fund Balance - December 31 $ $ $ 21, $ The notes to the basic financial statements are an integral part of this statement. 12

72 CITY OF SHEBOYGAN, WISCONSIN Statement of Net Position Proprietary Funds December 31, 2014 Enterprise Funds Sewerage System Water Utility ASSETS Cash and investments $ 6,488,699 $ 5,389,624 Receivables Taxes 52,908 Accounts 766,909 1,035,873 Special assessments ,259 Other 10,601 Due from other governments 303,989 Inventories and prepaid items 329,220 Restricted assets Cash and investments 1,009,775 Advance to other funds Deposit with CVMIC Capital assets, nondepreciable Land 2, ,671 Construction in progress 7,527, ,824 Capital assets, depreciable Buildings and improvements 12,371,095 7,066,598 Improvements other than buildings 23,905,496 Machinery and equipment 14,372,249 10,580,515 Infrastructure 23,880,484 37,087,129 Less: Accumulated depreciation (57, } (16, } TOTAL ASSETS 32,021,365 47,892,748 LIABILITIES Accounts payable 363, ,884 Accrued and other current liabilities 91, ,387 Accrued interest payable 46,691 67,233 Due to other funds 1,087,649 Due to other governments Unearned revenues 9,790 Advance from other funds 241,278 Long-term obligations Due within one year 1,208, ,733 Due in more than one year 9,822,697 9,626,802 TOTAL LIABILITIES 11,542,709 12,582,966 DEFERRED INFLOWS OF RESOURCES Property taxes NET POSITION Net investment in capital assets 13,670,930 29,543,430 Restricted for Debt service 354,742 Unrestricted 6,807,726 5,411,610 TOTAL NET POSITION i 20,478,656 i 35,309,782 Adjustment to reflect consolidation of internal service fund activities related to enterprise funds Net Position, as reported in the Statement of Net Position in the government-wide financial statements The notes to the basic financial statements are an integral part of this statement. 13

73 Transit Commission Nonmajor Enterprise Funds Totals Governmental Activities - Internal Service Funds $ 2,113,707 $ 1,456, ,547 14,137 1,100 7,898 84,929 3,453 2, ,404 19, ,753 35, , ,173 14, ,007 1,882,570 6,143, ,780 {5,796,246} {2,000,262} 4,998,937 2,795,148 $ 15,448, ,592 1,811, ,568 16, , ,084 1,009, , ,683 8,254,717 20,190,107 26,660,073 31,377,718 60,967,613 {81,457,586} 87,708,198 $ 12,298,384 64,054 23,244 49,278 2,205,665 13,692,059 {9,536, 762} 18,795,922 90,625 9, ,511 5, , ,136 42, , , ,924 1,087, , ,278 1,921,974 19,449,499 24,415,828 96,158 1,680,180 1,776, , ,547 1,992, ,587 2,246,392 1,858,544 i 4,239,254 i 2,753,131 46,101, ,742 16,324,272 62,780, ,052 i 63, ,155,297 12,864,287 17,019,584 (549,052} $

74 CITY OF SHEBOYGAN, WISCONSIN Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended December 31, 2014 Enterprise Funds Sewerage System Water Utility Operating Revenues Charges for services $ 6,987,541 $ 8,038,409 Other 63, ,225 Total Operating Revenues 7,050,895 8,161,634 Operating Expenses Personal services 2,004,440 1,917,985 Contractual services 2,222,519 1,579,607 Supplies and materials 796, ,891 Insurance 28,537 99,005 Other 544, ,422 Depreciation 1,099,429 1,166,232 Total Operating Expenses 6,695,759 5,333,142 Operating Income (loss) 355,136 2,828,492 Nonoperating Revenues (Expenses) Property taxes Intergovernmental Investment income 76,641 9,192 Miscellaneous revenues (expenses) Interest expense (192,190) (382,945) Amortization of premium 822 Sale of capital assets 14,469 Total Nonoperating Revenues (Expenses) (101,080) (372,931) Income (loss) Before Contributions and Transfers 254,056 2,455,561 Capital contributions 98,321 Transfers in Transfers out (247,921) (1,064, 728) Change in Net Position 104,456 1,390,833 Net Position - January 1 20,374,200 33,918,949 Net Position - December 31 $ ,656 $ 35, Change in net position, as reported above Adjustment to reflect consolidation of internal service fund activities related to enterprise funds Change in Net Position, as reported in the Statement of Activities in the government-wide financial statements The notes to the basic financial statements are an integral part of this statement. 15

75 Transit Commission Nonmajor Enterprise Funds Totals Governmental Activities - Internal Service Funds $ 759,217 $ 430,196 71,317 5, , ,018 $ 16,215, ,718 16,479,081 $ 11,527,385 88,799 11,616,184 3,034, , , , ,619 28, ,736 1,615 1,744 31, ,669 38,956 4,531, ,497 (3, 700, 719) (21,479) 7,123,495 4,226,196 1,760, , ,552 2,792,286 17,017,651 (538,570) 1,441,253 1,011, ,927 7,428, , ,009 11,239, , ,547 2,837,410 10,738 13,658 (1,900) 2, ,357,918 16,468 (342,801) (5,011) 7,005 (342,801) 1,994 4,582,055 2,751, ,547 2,837, , (575,012) ,469 2,900,375 2,361,805 98,321 7,005 (1,312,649) 1,154,482 61,626,341 77,850 79, , , ,218 (298,218) 409,076 16,610,508 $ $ $ ,823 Ii ,584 $ 1,154,482 $ 409,076 96,179 (96,179) Ii 1,250,661 Ii 312,897 16

76 17

77 Transit Commission Nonmajor Enterprise Funds Totals Governmental Activities - Internal Service Funds $ 816,158 $ (1,448,151) { } { } 511,547 2,837,410 (1,900) (77,337) 123 (77,214} 502,532 $ 16,587,322 (289,239) (9, 136, 701) { } { } ,547 2,837,410 (1,900) 7,005 (1,265,973) (2,986) (15,047) {5.JOO} 4.D (4,448) (7, 148,550) 14,469 4,903,189 (1,541,277) (594,050) 79, (4,448) (41188, 102} $ 11,589,539 (9,262,205) (1,456,636) (125,000) {125,000} (1,804,217) 182,520 ( ) (401,282) 55,138 (1,284,475) (798,149) i ,113,707 i ,045 i ,850 $ ,298,384 $ 2,113,707 $ i 2,113,707 i 1,456,045 $ 15,448, ,456,045 i ]6,~~Z. ~Q $ ill 12,298,384 32,298,~M $ (3,700,719) $ (21,479) $ (538,570) $ 376, ,669 38,956 2,792, ,390 2,810 2, ,009 i 9,311 (23,687) (3,400) (21,351) (15,415) (414,271) (3, ) i 55,695 41,497 (16,483) (3,560) (35,074) (1,343,924) (4,769) 66,831 (2,239) (416,510) ].909 i z33 os1 (26,645) (6,513) 7,429 (258,374) i 8Z

78 CITY OF SHEBOYGAN, WISCONSIN Statement of Fiduciary Net Position Agency Funds December 31, 2014 ASSETS Cash and investments Receivables Taxes Special assessments TOTAL ASSETS LIABILITIES Liabilities Accounts payable Due to other governments Total Liabilities Property Tax Collection $ 27,177,236 16,433,405 $ $ 17,555 43,593,086 $ ,641 Business Improvement District Totals $ 16,476 $ 27,193, ,836 16,552,241 10,217 10,217 $ 145,529 $ $ $ 17, ,529 43,738,615 $ 145,529 $ 43,756,170 The notes to the basic financial statements are an integral part of this statement. 19

79 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of Sheboygan, Wisconsin ("the City") have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standardsetting body for establishing governmental accounting and financial reporting principles. The significant accounting principles and policies utilized by the City are described below: 1. Financial Reporting Entity The City of Sheboygan, Wisconsin is a municipal corporation governed by an elected mayor and sixteenmember council. Included in the City's operations (the primary government) is the City's water utility managed by the Board of Waterworks Commissioners appointed by the Common Council. As required by GAAP, the basic financial statements present the City (the primary government) and any component units. A legal separate organization should be reported as a component unit if the elected officials of the primary government are financially accountable to the organization. The primary government is financial accountable if it appoints a majority of the organization's governing body and (1) it is able to impose its will on that organization or (2) there is a potential for the organization to provide specific financial benefits to or burdens on the primary government. The primary government may be financially accountable if an organization is fiscally dependent on the primary government. A legally separate, tax exempt organization should be reported as a component unit of a primary government if all of the following criteria are met: a. the economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units or its constituents; b. the primary government is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization; c. the economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to the primary government. The component units discussed below are included in the City's reporting entity because of the significance of their operational and/or financial relationship with the City. 2. Individual Component Unit Disclosures Discretely Presented Component Units The component unit columns in the government-wide financial statements represent the financial data of the Housing Authority of the City of Sheboygan ("Housing Authority") and the Harbor Centre Business Improvement District ("the Districr). They are reported in separate columns to emphasize that they are legally separate from the City. The governing bodies of both organizations are appointed by the City's Common Council. Wisconsin Statutes also provide for circumstances where the City can impose their will on both organizations and also create a potential burden on the City. The financial information presented is for the fiscal year ended March 31, 2014 for the Housing Authority and December 31, 2014 for the District. Complete financial statements for the Housing Authority can be obtained from their office at 611 North Water Street, P.O. Box 1052, Sheboygan, WI Complete financial statements for the District can be obtained from their office at 621 S. 8th Street, Sheboygan, WI

80 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 3. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the City and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Governmental funds include general, special revenue, debt service, capital projects and permanent funds. Proprietary funds include enterprise and internal service funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. The City reports the following major governmental funds: GENERAL FUND This is the City's main operating fund. It accounts for all financial resources of the general government, except those accounted for in another fund. DEBT SERVICE GENERAL OBLIGATION DEBT FUND This fund accounts for the resources accumulated and payments made for principal and interest on longterm general obligation debt of governmental funds, except debt issued to finance project plan expenditures of the City's tax incremental financing districts. DEBT SERVICE TAX INCREMENT AL FINANCING DISTRICTS FUND This fund accounts for the resources accumulated and payments made for principal and interest on longterm general obligation debt issued to finance project plan expenditures of the City's tax incremental financing districts. 21

81 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The City reports the following major enterprise funds: SEWERAGE SYSTEM This fund is used to account for the operations of the City's sanitary sewer system. WATER UTILITY This fund is used to account for the operations of the City's water treatment and distribution system. TRANSIT COMMISSION This fund is used to account for the operations of the City's transit system. Special revenue funds are used to account for the proceeds of specific revenue sources that are legally restricted for specific purposes. Non-major special revenue funds consist of the following: Community Development Block Grant Revolving Loan Funds Lead Based Abatement Program Mead Library Cable TV Tourism Promotion Harbor Center Marina Police Meg Unit Special Assessment Redevelopment Authority E.H. May Environmental Park Municipal Court Ambulance Storm Water Capital project funds are used to account for financial resources to be used for the acquisition of equipment or construction of major capital facilities. The Capital Projects Tax Levy and Capital Projects Bonded funds are reported as non-major capital project funds. Permanent funds are used to report resources that are legally restricted to the extent that only earning, and not principal, may be used for purposes that support the reporting government's programs. The City's cemetery perpetual care and library trust are reported as non-major permanent funds. Enterprise funds are used to report any activity for which a fee is charged to external users for goods and services, and must be used for activities which meet certain debt or cost recovery criteria. Non-major enterprise funds consist of the following: Parking Facility Boat Facility Additionally, the government reports the following fund types: Internal service funds account for services provided to other departments or agencies of the City, or to other governments, on a cost reimbursement basis. The City reports the following internal service funds: Motor Vehicle Data Processing Health Self Insurance Workers Compensation Self Insurance General Liability Self Insurance The City accounts for assets held for individuals by various departments and funds held for other governmental agencies in an agency fund. The Property Tax Collection and Business Improvement District are accounted for as agency funds. 22

82 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 4. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund (other than agency funds) financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Agency funds follow the a:ccrual basis of accounting, and do not have a measurement focus. Governmental fund financial statements are reported using the cu"ent financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Revenues susceptible to accrual include intergovernmental grants, intergovernmental charges for services, public charges for services and interest. Other revenues such as licenses and permits, other fines and forfeits and miscellaneous revenues are recognized when received in cash or when measurable and available. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the City's water and sewer functions and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, and fees and fines, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to customers for services. Operating expenses for enterprise funds include the cost of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources, as they are needed. 23

83 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5. Assets. Liabilities. Deferred Outflows/Inflows of Resources. and Net Position or Fund Balance a. Cash and Investments Cash and investments are combined in the financial statements. Cash deposits consist of demand and time deposits with financial institutions and are carried at cost. Investments are stated at fair value. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. For purposes of the statement of cash flows, all cash deposits and highly liquid investments (including restricted assets) with an original maturity of three months or less from the date of acquisition are considered to be cash equivalents. b. Receivables Accounts receivable have been shown net of an allowance for uncollectible accounts. Delinquent real estate taxes are assumed by Sheboygan County as of July 31; therefore, no allowance is considered necessary. Delinquent personal property taxes remain the collection responsibility of the City; accordingly, an allowance for uncollectible accounts has been established. The City is able to recover a portion of these delinquent personally property taxes from other taxing jurisdictions. The City has received federal and state grants for economic development and housing rehabilitation loan programs to area businesses and homeowners. A loan receivable and deferred inflow is recorded when loan funds are disbursed. Loans made to eligible businesses and homeowners are recorded as expenditures while loan repayments are recognized as revenue in the City's fund financial statements. In the government-wide financial statements, loan repayments and disbursements are not recognized as revenue or expenditures but recorded as loans receivable. c. lnterfund Receivables and Payables During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as "due from other funds" and "due to other funds" in the fund financial statements. Noncurrent portions of the interfund receivables/payables are considered "Advance to other funds" and "Advance from other funds" in the fund financial statements. Advances to other funds are offset by a nonspendable fund balance since they do not constitute expendable available financial resources and therefore are not available for appropriation. The amount reported on the statement of net position for internal balances represents the residual balance outstanding between the governmental and business-type activities. d. Inventories Inventories are recorded at cost, which approximates market, using the first-in, first-out method. Inventories consist of expendable supplies held for consumption. The cost is recorded as an expenditure at the time individual inventory items are consumed rather than when purchased. Inventories of governmental funds in the fund financial statements are offset by nonspendable fund balance to indicate that they do not represent spendable available financial resources. e. Prepaid Items Payments made to vendors that will benefit periods beyond the end of the current fiscal year are recorded as prepaid items. Prepaid items of governmental funds in the fund financial statements are offset by nonspendable fund balance to indicate that they do not represent spendable available financial resources. 24

84 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) f. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of $500 (non-infrastructure) or $5,000 (infrastructure) or higher and an estimated useful life in excess of one (1) year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Capital assets of the City are depreciated using the straight-line method over the following estimated useful lives: Governmental I Business-type Activities Activities Years Assets Buildings and improvements Machinery and equipment Infrastructure g. Compensated Absences Under terms of employment, employees are granted sick leave and vacation time in varying amounts. Only benefits considered to be vested are disclosed in these statements. All vested vacation and sick leave pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Payments for vacation and sick leave will be made at rates in effect when the benefits are used. Accumulated vacation and sick leave liabilities are determined on the basis of current salary rates and include salary related payments. h. Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City currently does not have any items that qualify for reporting in this category. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The City has one type of item that qualifies for reporting in this category, property taxes. This amount will be recognized as an inflow of resources in the subsequent year for which it was levied. The City also has additional type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from three sources, special assessments, loans receivable, and accounts receivable. These amounts are deferred and recognized as an inflow of resources in the period the amounts become available. 25

85 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) i. Long-term Obligations In the government-wide financial statements, and proprietary funds in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed as incurred. In the fund financial statements, governmental funds recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. j. Claims and Judgments Claims and judgments are recorded as liabilities if all the conditions of Governmental Accounting Standards Board pronouncements are met. Claims and judgments expected to be liquidated with expendable available financial resources are recorded during the year as expenditures in the governmental funds. If they are not expected to be liquidated with expendable available financial resources, no liability is recognized in the governmental fund financial statements. Claims and judgments in the government-wide financial statements and proprietary funds are recorded as expenses when the related liabilities are incurred. There were no significant claims or judgments at the end of the year. k. Fund Equity GOVERNMENTAL FUND FINANCIAL STATEMENTS Fund balance of governmental funds is reported in various categories based on the nature of any limitations requiring the use of resources for specific purposes. The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: Nonspendable fund balance -Amounts that are not in spendable form (such as inventory, prepaid items, or long-term receivables) or are legally or contractually required to remain intact. Restricted fund balance - Amounts that are constrained for specific purposes by external parties (such as granter or bondholders), through constitutional provisions, or by enabling legislation. Committed fund balance - Amounts that are constrained for specific purposes by action of the Common Council. These constraints can only be removed or changed by the Common Council using the same action that was used to create them. Assigned fund balance - Amounts that are constrained for specific purposes by action of City management. The Common Council has not authorized an employee to assign fund balance. Residual amounts in any governmental fund, other than the General Fund, are also reported as assigned. Unassigned fund balance - Amounts that are available for any purpose. Positive unassigned amounts are only reported in the General Fund. 26

86 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The City has not adopted a fund balance spend-down policy regarding the order in which fund balance will be utilized. When a policy does not specify the spend-down policy, GASB Statement No. 54 indicates that restricted funds would be spent first, followed by committed funds, and then assigned funds. Unassigned funds would be spent last. GOVERNMENT-WIDE AND PROPRIETARY FUND STATEMENTS Equity is classified as net position and displayed in three components: Net investment in capital assets - Amount of capital assets, net of accumulated depreciation, and capital related deferred outflows of resources less outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets and any capital related deferred inflows of resources. Restricted net position - Amount of net position that is subject to restrictions that are imposed by 1) external groups, such as creditors, granters, contributors or laws or regulations of other governments or 2) law through constitutional provisions or enabling legislation. Unrestricted net position - Net position that is neither classified as restricted nor as net investment in capital assets. 6. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. NOTE B - STEWARDSHIP AND COMPLIANCE 1. Budgets and Budgetarv Accounting The City follows these procedures in establishing the budgetary data reflected in the basic financial statements: a. During October, City management submits to the Common Council a proposed operating budget for the calendar year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them. After submission to the governing body, public hearings are held to obtain taxpayer comments. Following the public hearings, the proposed budget, including authorized additions and deletions, is legally enacted by Common Council action. b. Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the general, special revenue and debt service funds. Budget is defined as the originally approved budget plus or minus approved amendments. Individual amendments throughout the year were not material in relation to the original budget. Budget appropriations not expended during the year are closed to fund balance unless authorized by the governing body to be forwarded into the succeeding year's budget. c. During the year, formal budgetary integration is employed as a management control device for the general fund, special revenue funds and debt service funds. Management control for the capital projects funds is achieved through project authorizations included in debt issue resolutions. 27

87 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE B STEWARDSHIP AND COMPLIANCE (Continued) d. Expenditures may not exceed appropriations provided in detailed budget accounts maintained for each department of the City. Amendments to the budget during the year require initial approval by management and are subsequently authorized by the Common Council. The City's finance committee or the City's director of finance can approve transfers within departments while transfers between departments and changes in the overall budget require approval by two-thirds of the Common Council. The City did not have any material violation of legal or contractual provisions for the fiscal year ended December 31, Deficit Fund Eguitv The following fund had deficit fund balance as of December 31, 2014: I Fund Nonmajor Special Revenue Fund Harbor Center Marina Deficit Fund Balance $ 3,009,191 The City anticipates funding the above deficit from future revenues of the fund. NOTE C DETAILED NOTES ON ALL FUNDS 1. Cash and Investments The City maintains various cash and investment accounts, including pooled funds that are available for use by all funds. Each fund's portion of these accounts is displayed in the financial statements as "Cash and investments." Invested cash consists of deposits and investments that are restricted by Wisconsin Statutes to the following: Time deposits; repurchase agreements; securities issued by federal, state and local governmental entities; statutorily authorized commercial paper and corporate securities; and the Wisconsin local government investment pool. In addition, investment of most trust funds including cemetery perpetual care funds is regulated by Chapter 881 of the Wisconsin Statutes. Investment of library trust funds is regulated by Chapter 112. These sections give broad authority to use such funds to acquire various kinds of investments, including common stock. 28

88 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C-DETAILED NOTES ON ALL FUNDS (Continued) The carrying amount of the City's cash and investments totaled $94,940,497 on December 31, 2014 as summarized below: Petty cash funds Deposits with financial institutions Investments Cash held by brokerage firm Certificates of deposit Federal agency securities Money market mutual funds Repurchase agreements Municipal bonds Mutual funds Wisconsin local government investment pool $ $ 5,311 8,556,239 24,020 5,190,511 38,873,806 12,973, ,908 1,573,069 22,489, e4'.940'.4az Reconciliation to the basic financial statements: Government-Wide Statement of Net Position Cash and investments Restricted cash and investments Fiduciary Funds Statement of Net Position Agency funds $ 66,737,010 1,009,775 27,193,712 $ Deposits and investments of the City are subject to various risks. Presented below is a discussion of the specific risks and the City's policy related to the risk. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty {e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. Wisconsin statutes require repurchase agreements to be fully collateralized by bonds or securities issued or guaranteed by the federal government or its instrumentalities. The City does not have an additional custodial credit risk policy. Deposits with financial institutions within the State of Wisconsin are insured by the Federal Deposit Insurance Corporation {FDIC) in the amount of $250,000 for the combined amount of all time and savings deposits and $250,000 for interest-bearing and noninterest-bearing demand deposits per official custodian per insured depository institution. Deposits with financial institutions located outside the State of Wisconsin are insured by the FDIC in the amount of $250,000 for the combined amount of all deposit accounts per official custodian per depository institution. Also, the State of Wisconsin has a State Guarantee Fund which provides a maximum of $400,000 per public depository above the amount provided by an agency of the U.S. Government. However, due to the relatively small size of the State Guarantee Fund in relation to the Fund's total coverage, total recovery of insured losses may not be available. As of December 31, 2014, $1,615,512 of the City's deposits with financial institutions were in excess of federal and state depository insurance limits and uncollateralized. On December 31, 2014, the City held repurchase agreement investments of $436,908 of which the underlying securities are held by the investment's counterparty, not in the name of the City. 29

89 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C - DETAILED NOTES ON ALL FUNDS (Continued) Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Wisconsin statutes limit investments in securities to the top two ratings assigned by nationally recognized statistical rating organizations. Presented below is the actual rating as of yearend for each investment type. Investment Type Cash held by brokerage firm Certificates of deposit Federal National MTG Assn Federal Home Loan MTG Corp Federal Home Loan Bank Federal Farm Credit Bank Money market mutual funds Municipal bonds Mutual funds Wisconsin local government investment pool Totals Amount $ 24,020 5,190,511 28,464,572 4,050,079 5,450, ,158 12,973,204 1,573,069 22,489,244 4,818,185 $ 85, Exempt From Disclosure $ $ AAA 28,464,572 4,050,079 5,450, ,158 $ $ 38,873,806 Not AA A Rated $ $ $ 24,020 5,190,511 12,973, , , ,212 22,489,244 4,818,185 $ 757,507 $ 229,350 $ 46,081,376 Concentration of Credit Risk The investment policy of the City states that the funds of the City will be invested in accordance with Wisconsin State Statutes. The City's investment policy shall limit the investments to the following investment instruments and shall diversify the portfolio by instruments, financial institutions and maturities: I instruments U.S. Treasury Obligations (bills, notes and bonds) U.S. Government Agency Securities and Instruments of Government Sponsored Operations Certificates of Deposit in Commercial Banks State Investment Pool I Maximum% I of Portfolio 100% 75% 50% 100% Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represent 5% or more of total City investments are as follows: Issuer Federal National MTG Assn Federal Home loan MTG Corp Federal Home loan Bank Investment T e Federal Agency Securities $ Federal Agency Securities Federal Agency Securities Reported Amount 28,464,572 4,050,079 5,450,997 Percent of Total 42% 8% 11% 30

90 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C DETAILED NOTES ON ALL FUNDS (Continued) Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the City's investments to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity: Investment Tvoe Cash held by brokerage firm Certificate of deposit Federal National MTG Assn Federal Home Loan MTG Corp Federal Home Loan Bank Federal Farm Credit Bank Money market mutual funds Municipal bonds Mutual funds Repurchase agreement Wisconsin local government investment pool $ Remainini:i Maturity (in Months 12 Months 13 to to 60 Amount or Less I Months I Months 24,020 $ 24,020 $ $ 5,190,511 28,464,572 4,050,079 5,450, ,158 12,973,204 1,573,069 22,489, , ,270 12,973,204 22,489, ,908 1,099, ,126 91, ,344 98,722 41,340 2,619,893 24,254,346 3,958,820 4,535, , ,352 More Than 60 Months $ 1,320,928 3,910, , ,377 4,818,185 4,818,185 Totals $ 86, $ 40, $ $ 36,750,563 $ Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations The City's investments include the following investments that are highly sensitive to interest rate fluctuations (to a greater degree than already indicated In the information provided above): Hi hi Sensitive Investments Federal National MTG Assn Federal Home Loan MTG Corp Federal Home Loan Bank Federal Farm Credit Bank Fair Value at Year End $ 28,464,572 4,050,079 5,450, ,158 $ 38,873,806 31

91 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C DETAILED NOTES ON ALL FUNDS (Continued) Investment in Wisconsin Local Government Investment Pool The City has investments in the Wisconsin local government investment pool of $4,818,185 at year-end. The Wisconsin local government investment pool (LGIP) is part of the State Investment Fund (SIF), and is managed by the State of Wisconsin Investment Board. The SIF is not registered with the Securities and Exchange Commission, but operates under the statutory authority of Wisconsin Chapter 25. The SIF reports the fair value of its underlying assets annually. Participants in the LGIP have the right to withdraw their funds in total on one day's notice. At December 31, 2014, the fair value of the City's share of the LGIP's assets were substantially equal to the carrying value. 2. Property Taxes Property taxes consist of taxes on real estate and personal property. They are levied during December of the prior year and become an enforceable lien on property the following January 1. Property taxes are payable in various options depending on the type and amount. Personal property taxes are payable on or before January 31 in full. Real estate taxes are payable in full by January 31 or in two equal installments on or before January 31 and July 31. Real estate taxes not paid by January 31 are purchased by the Sheboygan County as part of the February tax settlement. The City and all other entities receive payment in full during the August tax settlement. Delinquent personal property taxes remain the collection responsibility of the City. The City bills and collects its own property taxes and also levies and collects taxes for the Sheboygan Area School District, Kohler School District, Sheboygan County, Lakeshore Technical College and the State of Wisconsin. Collections and remittances of taxes for other entities are accounted for in the property tax agency fund. 3. Restricted Assets The following represents the balances of the restricted assets: Enterprise Fund Water Utility Special Redemption Funds Interest and principal account Reserve account Total Restricted Assets $ 416, ,957 $

92 CITY OF SHEBOYGAN. WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C- DETAILED NOTES ON ALL FUNDS (Continued) 4. Capital Assets Capital asset activity for the year ended December 31, 2014 was as follows: Beginning Ending Balance Increases Decreases Balance Governmental activities: Capital assets, not being depreciated: Land $ 15,186,188 $ 1,387,403 $ 211,928 $ 16,361,663 Construction in progress 359, ,807 Total capital assets, not being depreciated 15,186,188 1,747, ,928 16,721,470 Capital assets, being depreciated: Buildings and improvements 32,419, ,867 32,814,756 Improvements other than buildings 13,805,709 13,805,709 Machinery and equipment 23,041,191 2,179,590 1,028,615 24,192,166 Infrastructure 116,958,997 46, ,005,969 Subtotals 186,225,786 2,621,429 1,028, ,818,600 Less accumulated depreciation for: Buildings and improvements 14,299, ,193 14,976,869 Improvements other than buildings 10,357, ,914 10,861,244 Machinery and equipment 18,506,902 1,235, ,529 18,817,157 Infrastructure 55,116,004 2,230,533 57,346,537 Subtotals 98,279,912 4,647, , ,001,807 Total capital assets, being depreciated, net 87,945,874 (2,025,995) 103,086 85,816,793 Governmental activities capital assets, net $ 103,132,062 $ (278,785) $ 315, ,538,263 Less: General obligation debt 34,965,437 Less: Mortgage notes 225,000 Less: Capital lease 853,566 Less: Sheboygan County 1,000,000 Less: Bond premium 68,083 Add: Bond discount (73,425) Net investment in capital assets

93 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C - DETAILED NOTES ON ALL FUNDS (Continued) Beginning Ending Balance Increases Decreases Balance Business-type activities: Capital assets, not being depreciated: Land $ 887,683 $ $ $ 887,683 Construction in progress 4,494,330 3,842,761 82,374 8,254,717 Total capital assets, not being depreciated 5,382,013 3,842,761 82,374 9,142,400 Capital assets, being depreciated: Buildings and improvements 19,643, ,079 20,190,107 Improvements other than buildings 26,660,073 26,660,073 Machinery and equipment 31,016, , ,128 31,377,718 Infrastructure 59,304,116 1,776, ,983 60,967,613 Subtotals 136,624,040 2,784, , , 195,511 Less accumulated depreciation for: Buildings and improvements 12,999, ,861 13,238 13,551,433 Improvements other than buildings 19,648, ,324 19,985,628 Machinery and equipment 22,852,604 1,004,388 86,677 23,770,315 Infrastructure 23,237,303 1,026, ,196 24,150,210 Subtotals 78,738,021 2,932, ,111 81,457,586 Total capital assets, being depreciated, net 57,886,019 (148,094) 57,737,925 Business-type activities capital assets, net $ 63,268,032 $ 3,694,667 $ 82,374 66,880,325 Less: Revenue bonds 20,515,036 Less: Alliant Energy notes 249,760 Less: Bond premium 13,720 Net investment in capital assets ~

94 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C - DETAILED NOTES ON ALL FUNDS (Continued) Depreciation expense was charged to functions of the City as follows: Governmental activities General government Public safety Public works Health and human services Culture and recreation Conservation and development Internal service funds allocated to other activities Total depreciation expense - governmental activities Business-type activities Sewerage system Water utility Depreciation expense Depreciation expense allocated to clearing accounts Transit commission Parking facility Boat facility Total depreciation expense - business-type activities $ 85, ,317 2,240, , , ,009 $ 4, $ 1,099,429 1,166, , ,669 17,477 21,479 li lnterfund Receivables 1 Payables. and Transfers lnterfund receivables and payables between individual funds of the City, as reported in the fund financial statements, as of December 31, 2014 are detailed below: Receivable Fund General fund Debt service fund - GO debt Subtotal - Fund Financial Statements Payable Fund Special revenue fund - Community development block grant Debt service fund - TIF districts Enterprise fund - Water utility Special revenue fund - Harbor Center Marina Amount $ 36,735 $ 95,713 1,087,649 Amount not Due Within One Year 2,811,581 2,811,581 4,031,678 2,811,581 Less: Fund eliminations Total Internal Balances - Government-wide Statement of Net Position ~2.944,029} ~2.811,581} $ 1,087,649 $ 35

95 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C DETAILED NOTES ON ALL FUNDS (Continued) The principal purpose of these interfunds is to account for the time lag between the dates that 1) interfund goods and services are provided or reimbursable expenditures occur, 2) transactions are recorded in the accounting system, and 3) payments between funds are made. For the statement of net position, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. The following is a schedule of interfund advances: General fund Receivable Fund Pavable Fund Debt service fund - TIF districts Amount not Due Within Amount One Year $1,218,089 $1,218,089 Debt service fund - GO debt Debt service fund - TIF districts Enterprise fund - Water utility 215, , , ,278 Capital projects fund -Tax levy Debt service fund - TIF districts 186,173 Enterprise fund - Boat facility Subtotal - Fund Financial Statements Less: Fund eliminations Less: Enterprise portion of advance Special revenue fund - Harbor Center Marina 1,860, 723 1,67 4, , ,753 2, 195,476 2,009,303 (1,619,445) (1,433,272) (669,506) (669,506) Total Internal Balances - Government-wide Statement of Net Position $ (93,475) $ (93,475) The principal purpose of these interfund advances was financing debt service maturities of the City's tax incremental financing districts and capital acquisitions. For the statement of net position, interfund advance balances which are owed within the governmental activities or business-type activities are netted and eliminated. A reconciliation to the statement of net position follows: Due from other funds lnterfund advances Internal service fund allocation to business-type activities Total Internal Balances - Government-wide Statement of Net Position $1,087,649 (93,475) (549,052) $ 445,122 36

96 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C-DETAILED NOTES ON ALL FUNDS (Continued) lnterfund transfers for the year ended December 31, 2014 were as follows: General fund Fund Transferred To Fund Transferred From Enterprise fund - Water utility Enterprise fund - Sewerage system Permanent fund - Cemetery perpetual care Special revenue fund - Cable TV Special revenue fund-tourism promotion Special revenue fund - Municipal court Special revenue fund - Ambulance Capital projects -Tax levy Internal service fund - Motor vehicle fund Amount $ 1,064, , ,000 41, , ,010 9, ,000 Special revenue fund - Community Development Block Grant Lead based abatement program 219,896 Special revenue fund - Mead library Special revenue fund - Meg unit Debt service fund - GO debt Debt service fund - TIF districts Capital projects fund - Tax levy Capital projects fund - Bonded Enterprise fund - Parking facility General fund General fund Special revenue fund - Tourism promotion Special revenue fund - Special assessment Capital projects fund - Bonded Debt service fund - GO debt General fund Special revenue fund - Special assessment Capital projects fund - Tax levy Debt service fund - GO debt General fund Capital projects - Tax levy 25,992 15, , ,203 15,246 1,030,164 27,974 60, , ,285 3, ,005 Internal service fund - Workers comp self insurance Subtotal - Fund Financial Statements Government fund transfers in Less: Fund eliminations Total Transfers - Government-wide Statement of Activities Internal service fund - Health self insurance m 6,971,508 $ 6,964,503 { } m 1,305,644 37

97 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C DETAILED NOTES ON ALL FUNDS (Continued) Transfers are used to: (1) move unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations; (2) move revenues from the fund that is required to collect them to the fund that is required or allowed to expend them; and (3) move receipts restricted to or allowed for debt service from the funds collecting the receipts to the debt service funds as debt service payments become due. 6. Long-term Obligations The following is a summary of changes in long-term obligations of the City for the year ended December 31, 2014: Governmental activities: General Obligation Debt Bonds Notes Total General Obligation Debt Bond premium Bond discount Mortgage notes Capital lease Sheboygan County Unfunded post employment benefits Compensated absences Govemmental activities Long-tenn obligations Business-type activities: Revenue bonds Unamortized bond premium Alliant Energy notes Business-type activities Long-tenn obligations Outstanding 1/1/14 $ 28,345,000 $ 11,749,063 40,094,063 77,474 (80,268) 225, ,915 1,000, ,996 2,765,108 Issued 470, ,500 98,434 Retired $ 2,565,000 2,563,626 5,128,626 9,391 (6,843) 122,895 67,853 5, 111 Outstanding Due Within 12/31/14 One Year $ 25,780,000 $ 9,185,437 34,965,437 68,083 (73,425) 225, ,566 1,000,000 1,216,643 2,858,431 2,540,000 2,420,182 4,960,182 9,391 (6,843) 189,403 $ 45,395,288 $ 1,045,480 $ 5,327,033 $ 41,113,735 $ 5, $ 17,498,222 $ 4,903,189 $ 1,293,418 $ 21,107,993 $ 1,672,214 14, , , , , ,760 $ 18,010,383 $ 4,903,189 $ 1,542,099 $ 21,371,473 $ 1,921,974 Total interest paid during the year on long-term debt totaled $2,237,283. For governmental activities, the other long-term liabilities are generally funded by the general fund. 38

98 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C - DETAILED NOTES ON ALL FUNDS (Continued) General Obligation Debt General obligation debt is backed by the full faith and credit of the City. The City finances general obligation debt of its governmental funds with general property taxes or tax increments. The City finances debt of proprietary funds with user fees of the respective fund and, if sufficient user fees are not available, from future general property taxes. General obligation debt currently outstanding on December 31, 2014 is detailed as follows: Balance Date of Interest Final Issue Outstanding Issue Rate Maturity Amount 12/31/14 General Obligation Debt General Obligation Bonds Refunding Bonds 07/01/ % 10/01/22 $ 5,155,000 $ 2,975,000 Refunding Bonds 07/01/ % 10/01/22 8,575,000 5,600,000 Refunding Bonds 07/01/ % 11/01/18 7,150,000 3,040,000 General Obligation Bonds 09/01/ % 10/01/26 8,000,000 7,400,000 Taxable Refunding Bonds 06/23/ % 04/01/27 8,325,000 6,085,000 Refunding Bonds 11/09/ % 10/01/19 2,530, ,000 Total General Obligation Bonds 25,780,000 General Obligation Notes Land Recycling Loan 12/23/02 0% 05/01/22 $ 2,700, ,032 Land Recycling Loan 04/14/04 0% 05/01/23 756, ,401 State Trust Fund Notes 11/21/ % 03/15/15 500,000 65,446 Promissory Notes 04/15/ % 10/01/15 3,000, ,000 Promissory Notes 04/15/ % 10/01/15 1,400, ,000 State Trust Fund Notes 07/05/ % 03/15/16 220,000 50,558 Promissory Notes 04/15/ % 10/01/16 3,000, ,000 Promissory Notes 05/15/ % 10/01/17 3,000,000 1,375,000 Promissory Notes (Build America Bonds) 06/23/ % 04/01/20 2,045,000 1,290,000 Promissory Notes 09/29/ % 10/01/16 670, ,000 Promissory Notes 05/10/ % 04/01/22 4,745,000 3,810,000 Total General Obligation Notes 9,185,437 Total $

99 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C DETAILED NOTES ON ALL FUNDS (Continued) Build America Bond The general obligation debt issued on June 23, 201 O qualifies as Build America Bonds, as described in Section 54AA of the Internal Revenue Code. The interest on the debt is taxable as set forth in the regulations. The City is eligible to receive a 35% subsidy of the annual interest payment from the Federal government. In order to receive this subsidy it is necessary for the City to file a claim form annually. Annual principal and interest maturities of the outstanding general obligation debt of $34,965,437 on December 31, 2014 are detailed below: Year Ended Governmental Activities December 31 Princi al Interest Total 2015 $ 4,960,182 $ 1,434,241 $ 6,394, ,525,726 1,251,025 5,776, ,194,952 1,078,108 5,273, ,954, ,453 4,864, ,069, ,959 3,814, ,264,675 1,948,452 13,213, ,995, ,060 3,223,060 i i 71594,298 i 42, Legal Margin for New Debt The City's legal margin for creation of additional general obligation debt on December 31, 2014 was $95,822,377 as follows: Equalized valuation of the City Statutory limitation percentage General obligation debt limitation, per Section of the Wisconsin Statutes Total outstanding general obligation debt applicable to debt limitation Less: Amounts available for financing general obligation debt Debt service funds Net outstanding general obligation debt applicable to debt limitation Legal Margin for New Debt $ 34,965,437 7,033,064 $ 2,475,095,000 (x) 5% 123, 754, ,932,373 $ 95, Mortgage Notes Mortgage notes currently outstanding consist of a note with the Sheboygan Development Corporation. A repayment schedule does not exist as of December 31,

100 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C - DETAILED NOTES ON ALL FUNDS (Continued) Capital Leases The City has entered into multiple capital lease agreements to finance the acquisition of machinery and equipment. Annual principal and interest maturities are as follows: Year Ended December Governmental Activities Princi al Interest $ 189,403 $ 29,296 $ 109,506 24, ,675 20, ,996 16, ,492 11, ,189 7,070 73,305 2, 192 $ $ $ Total 218, , , , , ,259 75, Amount due to Shebovaan County. Wisconsin Sheboygan County, Wisconsin, provided funding to assist in the development and construction of the infrastructure of the Marina Boatworks facility. To the extent the City does not recover its initial taxpayer funding contribution through tax incremental revenues, the City will share any surplus cash with Sheboygan County in proportion to the initial taxpayer funding contributions excluding tax incremental revenue effects until the $1,000,000 has been returned. Revenue Bonds Revenue bond debt service requirements are financed by income derived from the acquired or constructed assets of the enterprise funds. Enterprise fund revenue bonds currently outstanding on December 31, 2014 are detailed as follows: Balance Date of Interest Final Issue Outstanding Issue Rate Maturity Amount 12/31/14 Sewerage System Clean Water Fund Loan 11/30/ % 05/01/15 $ 4,375,561 $ 300,250 Clean Water Fund Loan 11/25/ % 05/01/16 3,250, ,662 Clean Water Fund Loan 05/26/ % 05/01/30 2,747,622 2,391,706 Clean Water Fund Loan 10/23/ % 05/01/33 7,645,560 7,645,560 Total Sewerage System 10,781,178 Water Utility Revenue Bonds 03/10/ % 05/15/23 3,152,000 1,696,815 Refunding Revenue Bonds 09/01/ % 06/01/25 4,900,000 2,585,000 Revenue Bonds 04/01/ % 05/01/27 4,000,000 3,125,000 Revenue Bonds 04/03/ % 05/01/33 3,000,000 2,920,000 Total Water Utility 10,326,815 Total Revenue Bonds ~

101 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C-DETAILED NOTES ON ALL FUNDS (Continued) Annual principal and interest maturities of the above outstanding enterprise fund debt of $21,107,993 on December 31, 2014 are shown below: Year Ended Business-t e Activities December 31 Princi al Interest Total 2015 $ 1,672,214 $ 621,635 $ 2,293, ,399, ,796 1,973, ,190, ,908 1,724, ,212, ,347 1,709, ,254, ,450 1,714, ,552,613 1,689,806 8,242, ,956, ,543 5,684, ,868, ,897 3,026,536 i i i Utility Revenues Pledged The City has pledged future water and sewer customer revenues, net of specified operating expenses, to repay the water and sewer system revenue bonds. Proceeds from the bonds provided financing for the construction or acquisition of capital assets used with the systems. The bonds are payable solely from water and sewer customer net revenues and are payable through The total principal and interest remaining to be paid on the bonds is $26,370,375. Principal and interest paid for the current year and net customer revenues for the water utility were $1,090,356 and $4,003,916, respectively. Principal and interest paid for the current year and net customer revenues for the sewer utility were $845,579 and $1,431,644, respectively. Alliant Energy Notes Debt service requirements of the Alliant Energy Notes are financed by the City's sewerage system. Alliant Energy Notes currently outstanding on December 31, 2014 are detailed as follows: Sewerage System Alliant Energy Note Date of Issue 12/2010 Interest Rate 2.00% Balance Final Issue Outstanding Maturitv Amount 12/31/14 12/2015 $1,200,000 $ 249,760 Annual principal and interest maturities of the above outstanding Alliant Energy Notes of $249, 760 on December 31, 2014 are shown below: Year Ended December $ Business-t e Activities Princi al Interest Total 249]60 $ $ Other Debt Information There are a number of limitations and restrictions contained in the various bond and note obligations. The City believes it is substantially in compliance with all material limitations and restrictions. 42

102 CITY OF SHEBOYGAN. WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE C DETAILED NOTES ON ALL FUNDS (Continued) Conduit Debt Obligations From time to time, the City has issued Industrial Revenue Bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2014, there were 6 series of Industrial Revenue Bonds outstanding, with an aggregate principal amount payable of $18, 165,000. NOTE D OTHER INFORMATION 1. Retirement Commitments All eligible City employees participate in the Wisconsin Retirement System (WRS), a cost-sharing, multiple-employer, defined benefit, public employee retirement system. All employees initially employed by a participating WRS employer prior to July 1, 2011, expected to work at least 600 hours a year (440 hours for teachers and school district educational support employees) and expected to be employed for at least one year from employee's date of hire, are eligible to participate in the WRS. All employees initially employed by a participating WRS employer on or after July 1, 2011, and expected to work at least 1200 hours a year (880 hours for teachers and school district educational support employees) and expected to be employed for at least one year from employee's date of hire are eligible to participate in the WRS. Employees hired to work nine or ten months per year, (e.g. teachers contracts), but expected to return year after year are considered to have met the one-year requirement. Effective the first day of the first pay period on or after June 29, 2011, the employee required contribution was changed to one-half of the actuarially determined contribution rate for employees in the General category, including Teachers, and Executives and Elected Officials. Required contributions for protective employees are the same rate as general employees. Employers are required to contribute the remainder of the actuarially determined contribution rate. The employer may not pay the employee required contribution unless provided for by an existing collective bargaining agreement. Contribution rates for 2014 are as follows: General (including Teachers) Executives & Elected Officials Protective with Social Security Protective without Social Security Employee 7.00% 7.75% 7.00% 7.00% Employer 7.00% 7.75% 10.10% 13.70% The payroll for City employees covered by the WRS for the year ended December 31, 2014 was $26,387,532; the employer's total payroll was $27,321,713. The total required contribution for the year ended December31, 2014 was $4,124,328, which consisted of $2,396,783 or 9.1% of covered payroll from the employer, and $1,727,545, or 6.5% of covered payroll from employees. Total contributions for the years ended December 31, 2013 and 2012 were $4,145,739 and $3630,922, respectively, equal to the required contributions for each year. 43

103 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE D OTHER INFORMATION (Continued) Employees who retire at or after age 65 (62 for elected officials and 54 for protective occupation employees with less than 25 years of service, 53 for protective occupation employees with more than 25 years of service) are entitled to receive a retirement benefit. Employees may retire at age 55 {50 for protective occupation employees) and receive actuarially reduced benefits. The factors influencing the benefit are: (1) final average earnings, (2) years of creditable service, and (3) a formula factor. A final average earnings is the average of the employee's three highest year's earnings. Employees terminating covered employment and submitting application before becoming eligible for a retirement benefit may withdraw their contributions and, by doing so, forfeit all rights to any subsequent benefit. For employees beginning participation on or after January 1, 1990, and no longer actively employed on or after April 24, 1998, creditable service in each of five years is required for eligibility for a retirement annuity. Participants employed prior to 1990 and on or after April 24, 1998 and prior to July 1, 2011 are immediately vested. Participants who initially became WRS eligible on or after July 1, 2011 must have five years of creditable service to be vested. The WRS also provides death and disability benefits for employees. Eligibility and the amount of all benefits are determined under Chapter 40 of Wisconsin Statutes. The WRS issues an annual financial report that may be obtained by writing to the Department of Employee Trust Funds, P.O. Box 7931, Madison, WI Other Post-employment Benefits Plan Description - The City provides health care related benefits for employees who retire prior to the age of 65. Benefit terms including eligibility and vesting requirements vary by employee classification. There were 442 active and 56 retired employees in the plan as of the most recent actuary valuation date. Annual OPEB Cost and Net OPEB Obligation - The City's annual other post-employment benefit (OPES) cost (expense) is calculated based on the annual required contribution (ARC), and the amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City's net OPEB obligation. Component Annual required contribution Interest on net OPEB Adjustment to annual required contribution Annual OPEB cost (expense) Contributions made Change in net OPEB obligation OPEB obligation - beginning of year OPEB obligation - end of year I Amount $ 503,634 32,320 (59,454) 476,500 (67,853) 408, ,996 $ 1, I 44

104 CITY OF SHEBOYGAN, WISCONSIN Notes to Basic Financial Statements December 31, 2014 NOTE D - OTHER INFORMATION (Continued) The annual required contribution for the current year was determined as part of the January 1, 2014 actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 4.0% discount rate, (b) projected salary increases at 3%, and (c) 3% inflation rate. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with a longterm perspective of the calculations. The unfunded actuarial accrued liability is being amortized as an open level dollar amount of projected payroll. Trend Information - The City's annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net OPEB obligation for 2014 is as follows: Fiscal Year Ended Annual OPEB Cost Percentage of Annual OPES Cost Contributed NetOPEB Obligation 12131/ / /2012 $ 476, , ,520 14% 127% 190% $ 1,216, , ,701 Funded Status and Funding Progress - As of January 1, 2014, the most recent actuarial valuation date, the City's unfunded actuarial accrued liability (UAAL) was $4,879,620. The annual payroll for active employees covered by the plan for the 2014 fiscal year was $26,387,532 for a ratio of the UAAL to covered payroll of 18.5%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future, such as assumptions about future terminations, mortality, and healthcare cost trends. Actuarially determined amounts are subject to continual revision as actuarial results are compared with past experience and new estimates are made about the future. Actuarial Methods and Assumptions - Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2014 actuarial valuation, the entry age normal method was used. The actuarial assumptions included a rate of 4% to discount expected liabilities to the valuation date. The initial healthcare trend rate was 7.5%, reduced by decrements to an ultimate rate of 5.0% after fifteen years. The UAAL is being amortized as a level dollar amount on an open basis. 45