NEW ISSUE - Book-Entry Only Ratings: (See RATINGS herein)

Transcription

1 NEW ISSUE - Book-Entry Only Ratings: (See RATINGS herein) In the opinion of Bond Counsel, assuming continuing compliance with certain tax covenants, under existing statutes, regulations, rulings and court decisions, interest on the Series 2017 Bonds (as hereinafter defined) is excludable from gross income for federal income tax purposes. Further, interest on the Series 2017 Bonds is not an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations; however, such interest will be taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. See TAX MATTERS herein for a description of the federal alternative minimum tax on corporations and certain other federal tax consequences of ownership of the Series 2017 Bonds. Bond Counsel is further of the opinion that the Series 2017 Bonds and the income thereon are not subject to taxation under the laws of the State of Florida, except as to estate taxes and taxes under Chapter 220, Florida Statutes, on interest, income or profits on debt obligations owned by corporations as defined in said Chapter 220. See TAX MATTERS herein. $82,350,000 EAST CENTRAL REGIONAL WASTEWATER TREATMENT FACILITIES OPERATION BOARD WASTEWATER TREATMENT FACILITIES REVENUE REFUNDING BONDS, SERIES 2017 (PALM BEACH COUNTY, FLORIDA) Dated: Date of Delivery Due: October 1, as shown on inside cover page The East Central Regional Wastewater Treatment Facilities Operation Board Wastewater Treatment Facilities Revenue Refunding Bonds, Series 2017 (the Series 2017 Bonds ) are being issued by the East Central Regional Wastewater Treatment Facilities Operation Board (the ECR or ECR Board ), under the authority of the Act (as defined herein) and Resolution No , adopted by the ECR Board on September 12, 2012, as amended by Resolution No adopted by the ECR Board on April 10, 2013 (collectively, the Master Resolution ) and Resolution No , adopted by the ECR Board on November 30, 2017 (the Series Resolution ). The Master Resolution and the Series Resolution are herein referred to as the Resolution. The entities comprising the ECR Board are the City of West Palm Beach, Florida, Palm Beach County, Florida, the Town of Palm Beach, Florida, the City of Riviera Beach, Florida and the City of Lake Worth, Florida. The Series 2017 Bonds will be issued as fully registered bonds, without coupons, in denominations of $5,000 or any integral multiple thereof and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York, which will act as securities depository for the Series 2017 Bonds. Purchasers will not receive certificates representing their ownership interests in the Series 2017 Bonds purchased. See THE SERIES 2017 BONDS Book-Entry Only System herein. Interest on the Series 2017 Bonds will accrue from their date of delivery and will be payable on April 1, 2018 and semiannually on each October 1 and April 1 thereafter, until maturity or earlier redemption. While the Series 2017 Bonds are registered through the DTC Book-Entry Only System, principal of and interest on the Series 2017 Bonds will be payable by the Bond Registrar to DTC. TD Bank, N.A. will serve as the initial paying agent (the Paying Agent ) and bond registrar (the Bond Registrar ) for the Series 2017 Bonds. The Series 2017 Bonds are subject to optional and mandatory sinking fund redemption prior to maturity as described herein. See THE SERIES 2017 BONDS Redemption Provisions herein. The proceeds of the Series 2017 Bonds will be used, together with certain other available moneys of the ECR, to (i) advance refund certain of the ECR s outstanding Series 2014 Bonds (as defined herein); and (ii) pay certain costs of issuing the Series 2017 Bonds. The Series 2017 Bonds are payable solely from and secured by a pledge of and lien on the Net Revenues (as herein defined) of the ECR on a parity with certain other Bonds heretofore or from time to time issued and Outstanding under the Resolution. See SECURITY AND SOURCES OF PAYMENT herein. THE SERIES 2017 BONDS SHALL NOT BE AND SHALL NOT BE DEEMED TO CONSTITUTE A DEBT, LIABILITY OR OBLIGATION OF THE ECR, THE CITY OF WEST PALM BEACH, FLORIDA, THE TOWN OF PALM BEACH, FLORIDA, THE CITY OF RIVIERA BEACH, FLORIDA, THE CITY OF LAKE WORTH, FLORIDA, PALM BEACH COUNTY, FLORIDA, THE STATE OF FLORIDA OR ANY OTHER POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL, STATUTORY OR CHARTER PROVISION OR LIMITATION, OR A PLEDGE OF THE FAITH AND CREDIT OF THE ECR, THE CITY OF WEST PALM BEACH, FLORIDA, THE TOWN OF PALM BEACH, FLORIDA, THE CITY OF RIVIERA BEACH, FLORIDA, THE CITY OF LAKE WORTH, FLORIDA, PALM BEACH COUNTY, FLORIDA, THE STATE OF FLORIDA OR ANY OTHER POLITICAL SUBDIVISION THEREOF, BUT SHALL BE PAYABLE SOLELY FROM THE NET REVENUES OF THE ECR, AS PROVIDED IN THE RESOLUTION ON PARITY WITH THE PRIOR BONDS (AS DEFINED HEREIN). THE SERIES 2017 BONDS AND THE OBLIGATIONS EVIDENCED THEREBY SHALL NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE THE ECR, THE CITY OF WEST PALM BEACH, FLORIDA, THE TOWN OF PALM BEACH, FLORIDA, THE CITY OF RIVIERA BEACH, FLORIDA, THE CITY OF LAKE WORTH, FLORIDA, PALM BEACH COUNTY, FLORIDA, THE STATE OF FLORIDA OR ANY OTHER POLITICAL SUBDIVISION THEREOF TO LEVY OR PLEDGE ANY TAXES WHATEVER THEREFOR AND SHALL NOT CONSTITUTE A LIEN UPON ANY PROPERTY OWNED BY THE ECR, THE CITY OF WEST PALM BEACH, FLORIDA, THE TOWN OF PALM BEACH, FLORIDA, THE CITY OF RIVIERA BEACH, FLORIDA, THE CITY OF LAKE WORTH, FLORIDA OR PALM BEACH COUNTY, FLORIDA, BUT SHALL CONSTITUTE A LIEN ONLY ON THE NET REVENUES OF THE ECR, ALL IN THE MANNER PROVIDED IN THE RESOLUTION. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read this entire Official Statement to obtain information essential to the making of an informed investment decision. The Series 2017 Bonds are offered when, as and if issued and received by the Underwriter named below, subject to the receipt of the approving legal opinion of Greenberg Traurig, P.A., West Palm Beach, Florida, Bond Counsel. Certain legal matters will be passed upon for the ECR by Greenberg Traurig, P.A., West Palm Beach, Florida, as Issuer Counsel for the ECR. Greenberg Traurig, P.A., West Palm Beach, Florida is also serving as Disclosure Counsel to the ECR. Greenspoon Marder, P.A., West Palm Beach, Florida, is acting as counsel to the Underwriter. PFM Financial Advisors LLC, Coral Gables, Florida, is serving as Financial Advisors to the ECR. It is expected that settlement on the Series 2017 Bonds will occur through the facilities of DTC in New York, New York on or about December 21, CITIGROUP December 8, 2017

2 Due (October 1) MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, PRICES, YIELDS AND INITIAL CUSIP NUMBERS Principal Amount $49,015,000 Series 2017 Serial Bonds Interest Rate Price Yield Initial CUSIP Number* 2025 $2,525, % % 27149T AS ,650, % % 27149T AT ,780, % % 27149T AU ,925, % (c) 2.130% (c) 27149T AV ,070, % (c) 2.190% (c) 27149T AW ,220, % (c) 2.250% (c) 27149T AX ,380, % (c) 2.300% (c) 27149T AY ,550, % (c) 2.650% (c) 27149T AZ ,690, % (c) 2.700% (c) 27149T BA ,840, % (c) 2.470% (c) 27149T BB ,035, % (c) 2.520% (c) 27149T BC ,235, % (c) 2.550% (c) 27149T BD ,445, % (c) 2.590% (c) 27149T BE ,670, % (c) 2.600% (c) 27149T BF7 $33,335, % Term Bond maturing October 1, 2044 Price (c) Yield 2.68% (c) Initial CUSIP Number 27149T BG5* * Copyright 2017, American Bankers Association. CUSIP is a registered trademark of the American Bankers Association. The CUSIP data herein are provided by Standard & Poor s, CUSIP Service Bureau, a division of the McGraw-Hill Companies, Inc. The CUSIP numbers are not intended to create a database and do not serve in any way as a substitute for CUSIP Service. CUSIP numbers have been assigned by an independent company not affiliated with the ECR and are provided solely for convenience and reference. The CUSIP numbers for the Series 2017 Bonds of a specific maturity are subject to change after the issuance of the Series 2017 Bonds. Neither the ECR nor the Underwriter takes any responsibility for the accuracy of such CUSIP numbers. (c) Price and yield calculated to first optional redemption date of October 1, 2027.

3 EAST CENTRAL REGIONAL WASTEWATER TREATMENT FACILITIES OPERATIONS BOARD BOARD CHAIRMAN Brian Shields, P.E. Member for City of Lake Worth BOARD MEMBERS Jim Stiles Member for Palm Beach County Eric Brown, P.E. Member for Town of Palm Beach Poonam Kalkat, PhD. Member for City of West Palm Beach William Horton Member for City of Riviera Beach EXECUTIVE MANAGER Clifford Sanders INDEPENDENT AUDITORS Grau & Company West Palm Beach, Florida BOND COUNSEL Greenberg Traurig, P.A. West Palm Beach, Florida DISCLOSURE COUNSEL Greenberg Traurig, P.A. West Palm Beach, Florida ISSUERS COUNSEL Greenberg Traurig, P.A. West Palm Beach, Florida FINANCIAL ADVISOR PFM Financial Advisors LLC Coral Gables, Florida

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5 No dealer, broker, salesman or other person has been authorized by the ECR or the Underwriter to make any representations, other than those contained in this Official Statement, in connection with the offering contained herein, and if given or made, such other information or representations must not be relied upon as having been authorized by either of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Series 2017 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information contained in this Official Statement has been obtained from public documents, records and other sources considered to be reliable and, while not guaranteed as to completeness or accuracy, are believed to be correct. Any statement in this Official Statement involving estimates, assumptions and opinions, whether or not so expressly stated, are intended as such and are not to be construed as representations of fact, and the Underwriter and the ECR expressly make no representation that such estimates, assumptions and opinions will be realized or fulfilled. Any information, estimates, assumptions and matters of opinion contained in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement, nor any sale hereunder, shall, under any circumstances, create any implication that there has been no change in the affairs of the ECR since the date hereof. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The order and placement of materials in this Official Statement, including the Appendices, are not to be deemed a determination of relevance, materiality or importance, and this Official Statement, including the Appendices, must be considered in its entirety. The captions and headings in this Official Statement are for convenience only and in no way define, limit or describe the scope or intent, or affect the meaning or construction, of any provisions or sections in this Official Statement. The offering of the Series 2017 Bonds is made only by means of this entire Official Statement. THE SERIES 2017 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, NOR HAS THE RESOLUTION BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE EXEMPTION OF THE SERIES 2017 BONDS FROM REGISTRATION OR QUALIFICATION IN CERTAIN STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ECR AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL, STATE OR GOVERNMENTAL ENTITY OR AGENCY WILL HAVE PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT OR APPROVED OR RECOMMENDED THE SERIES 2017 BONDS FOR SALE. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2017 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET, AND SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE SERIES 2017 BONDS TO CERTAIN DEALERS AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES

6 STATED ON THE INSIDE COVER PAGE OF THIS OFFICIAL STATEMENT, AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. THIS OFFICIAL STATEMENT SHALL NOT CONSTITUTE A CONTRACT BETWEEN THE ECR OR THE UNDERWRITER AND ANY ONE OR MORE HOLDERS OF THE SERIES 2017 BONDS. THIS OFFICIAL STATEMENT IS BEING PROVIDED TO PROSPECTIVE PURCHASERS EITHER IN BOUND PRINTED FORM ( ORIGINAL BOUND FORMAT ) OR IN ELECTRONIC FORMAT ON THE WEBSITE: THIS OFFICIAL STATEMENT MAY BE RELIED UPON ONLY IF IT IS IN ITS ORIGINAL BOUND FORMAT OR IF IT IS PRINTED IN FULL DIRECTLY FROM SUCH WEBSITE. CERTAIN STATEMENTS INCLUDED OR INCORPORATED BY REFERENCE IN THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES, CONSTITUTE FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS GENERALLY ARE IDENTIFIABLE BY THE TERMINOLOGY USED, SUCH AS PLAN, EXPECT, ESTIMATE, PROJECT, FORECAST, BUDGET OR OTHER SIMILAR WORDS. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE ECR DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD- LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.

7 TABLE OF CONTENTS Page INTRODUCTION... 1 ESTIMATED SOURCES AND USES OF FUNDS... 3 REFUNDING PLAN... 4 THE SERIES 2017 BONDS... 4 General... 4 Redemption Provisions... 5 Optional Redemption... 5 Mandatory Sinking Fund Redemption... 5 Mailing of Notice of Redemption... 5 Effect of Redemption... 6 Book-Entry Only System... 6 SECURITY AND SOURCES OF PAYMENT... 9 General... 9 Limited Obligation... 9 Rate and Entity Contributions Covenant... 9 Flow of Funds Additional Bonds Other Indebtedness THE 2014 PROJECT Project Description THE ECR BOARD General Government ECR Board Indebtedness THE SYSTEM General System Operations by WPB Wastewater Treatment Facilities Description Septage Receiving Facility Sludge and Effluent Disposal Reclaimed Water Production Facility Advanced Wastewater Treatment Facility SWA Agreement for Biosolids Disposal Regulatory Compliance Physical Condition, Treatment Performance and Regulatory Compliance of the ECR Facilities Capital Improvement Program Rates, Fees and Charges Wastewater Flow Charges and Septage Rates HISTORICAL OPERATING RESULTS General i

8 Summary of Historical Operating Results DEBT SERVICE SCHEDULE LITIGATION FUTURE FINANCINGS LEGAL MATTERS ENFORCEABILITY OF REMEDIES TAX MATTERS Original Issue Premium Changes in Federal and State Tax Law Information Reporting and Backup Withholding CONTINUING DISCLOSURE GASB STATEMENT NO FINANCIAL STATEMENTS RATINGS MISCELLANEOUS FINANCIAL ADVISOR VERIFICATION OF MATHEMATICAL COMPUTATIONS UNDERWRITING CONTINGENT FEES DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS AUTHORIZATION CONCERNING OFFICIAL STATEMENT APPENDIX A - Supplemental Information Concerning the Entities APPENDIX B - Financial Report of the ECR for the Fiscal Year Ended September 30, 2016 APPENDIX C - Summary of Certain Provisions of the Master Resolution APPENDIX D - Proposed Form of Opinion of Bond Counsel APPENDIX E - Interlocal Agreement ii

9 OFFICIAL STATEMENT relating to $82,350,000 EAST CENTRAL REGIONAL WASTEWATER TREATMENT FACILITIES OPERATIONS BOARD WASTEWATER TREATMENT FACILITIES REVENUE REFUNDING BONDS, SERIES 2017 INTRODUCTION The purpose of this Official Statement, including the cover page and all appendices, is to set forth certain information relating to the East Central Regional Wastewater Treatment Facilities Operations Board (the ECR or ECR Board ), its Wastewater Treatment Facilities (the ECR Facilities ) comprising the herein defined System and the issuance by the ECR of $82,350,000 in the aggregate principal amount of Wastewater Treatment Facilities Revenue Refunding Bonds, Series 2017 (the Series 2017 Bonds ). The Series 2017 Bonds are being issued pursuant to and under the authority of the Constitution of the State of Florida (the State ), Chapter 125, Florida Statutes, as amended and supplemented, Part I of Chapter 163, Florida Statutes, as amended and supplemented, Chapter 159, Florida Statutes, as amended and supplemented, the respective charters of each of the Entities (as defined below), as amended and supplemented, and other applicable provisions of law (the Act ), and the Interlocal Agreement Establishing Duties and Responsibilities Among the Entities for the Operation of the East Central Regional Wastewater Treatment Facilities (the Interlocal Agreement ) (See APPENDIX E Interlocal Agreement ), and Resolution No , adopted by the ECR Board on September 12, 2012, as amended by Resolution No adopted by the ECR Board on April 10, 2013 (collectively, the Master Resolution ) and Resolution No , adopted by the ECR Board on November 30, 2017 (the Series Resolution and, together with the Master Resolution, the Resolution ). See APPENDIX C Summary of Certain Provisions of the Resolution. The Series 2017 Bonds, together with the Outstanding Prior Bonds under the Master Resolution, as described below, and any other bonds or indebtedness that may be issued under the provisions of the Master Resolution on a parity with the Series 2017 Bonds and the Prior Bonds are referred to collectively in this Official Statement as the Bonds. See SECURITY AND SOURCES OF PAYMENT Additional Bonds and Other Indebtedness herein. The Series 2017 Bonds are being issued for the purpose of providing moneys which will be used, together with certain other available moneys of the ECR, to (i) advance refund a portion of the ECR s Wastewater Treatment Facilities Revenue Bonds, Series 2014 (Biosolids Project) (the Series 2014 Bonds ) that were issued to finance the construction of improvements to the ECR s biosolids treatment processes and the quality of biosolids, reduce the volume of biosolids generated, reduce energy consumption, and generate renewable digester gases to in part be reused to generate energy for the biosolids digestion process (the 2014 Project ), and (ii) pay certain costs of issuing the Series 2017 Bonds. See 2014 Project and REFUNDING PLAN, herein. The Series 2017 Bonds will be issued in book-entry only form and purchasers of the Series 2017 Bonds will not receive certificates representing their interest in the Series 2017 Bonds purchased. The Series 2017 Bonds will contain such other terms and provisions, including provisions regarding redemption, as described in THE SERIES 2017 BONDS herein. The Series 2017 Bonds are limited obligations of the ECR, payable solely from and secured by the Net Revenues (as herein defined) of the ECR, on a parity with the ECR s Bonds. The Series 2017

10 Bonds shall not be and shall not be deemed to constitute a debt, liability or obligation of the ECR, the City of West Palm Beach, Florida ( WPB ), the Town of Palm Beach, Florida ( Town ), the City of Riviera Beach, Florida ( Riviera Beach ), the City of Lake Worth, Florida ( Lake Worth ), Palm Beach County, Florida (the County and, together with Lake Worth, Riviera Beach, the Town and WPB, the Entities and individually, an Entity ), the State or any other political subdivision thereof within the meaning of any constitutional, statutory or charter provision or limitation, or a pledge of the faith and credit of the ECR, the Entities, the State or any other political subdivision thereof, but shall be payable solely from the Net Revenues of the ECR, as provided in the Resolution and as described herein. Neither the ECR nor the Entities are directly, indirectly, or contingently obligated to levy or pledge any form of taxation whatever for the payment of the Series 2017 Bonds, nor do the Series 2017 Bonds constitute a charge, lien, or encumbrance, upon any property of the ECR or the Entities. See SECURITY AND SOURCES OF PAYMENT herein. In addition to the Series 2014 Bonds issued under the Master Resolution, the ECR has previously issued and has Outstanding under the provisions of the Master Resolution the following Bonds: (i) Fourteen Million Dollars ($14,000,000) in principal amount of Wastewater Facilities Revenue Bonds, Series 2012, of which Eight Million Six Hundred Fifty-Five Thousand Dollars ($8,655,000) in principal amount are currently Outstanding; (ii) Eleven Million Dollars ($11,000,000) in principal amount of Wastewater Facilities Revenue Bonds, Series 2013, of which Seven Million Twenty-Five Thousand Dollars ($7,025,000) in principal amount are currently Outstanding; and (iii) Eleven Million One Hundred Thirty Dollars ($11,130,000) in principal amount of Wastewater Facilities Revenue Bonds, Series 2016, of which Nine Million Seven Hundred Thirty Thousand Dollars ($9,730,000) in principal amount are currently Outstanding (collectively, the Prior Bonds ). No debt service reserve fund has been established with respect to the Prior Bonds or the Series 2017 Bonds. All or a portion of the Series 2014 Bonds will be advance refunded (such Series 2014 Bonds to be advance refunded herein called the Refunded Bonds ), with a portion of net proceeds of the Series 2017 Bonds and other legally available money of the ECR. See REFUNDING PLAN, herein. This introduction is intended to serve as a brief description of the Official Statement and is expressly qualified by reference to the Official Statement as a whole. A full review should be made of the entire Official Statement, including its appendices, as well as the documents and reports summarized or described herein. The description of the Series 2017 Bonds, the documents authorizing and securing the same, and the information from various reports contained herein are not comprehensive or definitive. All references herein to such documents and reports are qualified by the entire, actual content of such documents and reports. Copies of such documents and reports may be obtained from WPB, as agent for the ECR. Capitalized terms used but not defined in this Official Statement shall have the meaning ascribed to such terms in the Resolution. See APPENDIX C Summary of Certain Provisions of the Resolution. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 2

11 ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of funds from the proceeds of the Series 2017 Bonds and other legally available moneys of the ECR: Sources of Funds Par Amount of Series 2017 Bonds $ 82,350, Plus/Original Issue Premium 16,880, Other Available Moneys (1) 1,083, Total Estimated Sources of Funds $100,314, Uses of Funds Deposit to Refunded Bonds Escrow Fund (2) $99,452, Costs of Issuance (3) 622, Underwriter s Discount 239, Total Estimated Uses of Funds $100,314, (1) Moneys made available from the Debt Service Fund as a result of the defeasance of the Refunded Bonds. (2) See REFUNDING PLAN herein. (3) Includes fees of Bond Counsel, Disclosure Counsel, Issuers Counsel, the Financial Advisor, rating agencies and miscellaneous costs of issuance. 3

12 REFUNDING PLAN The Series 2017 Bonds are being issued, together with other available moneys, to advance refund a portion of the outstanding Series 2014 Bonds, herein referred to as the Refunded Bonds. The Series 2014 Bonds were issued for the purpose of financing the 2014 Project. The Outstanding principal amount of the Series 2014 Bonds is $86,590,000 of which $83,140,000 will be refunded. To effect the defeasance and refunding of the Refunded Bonds, the ECR will enter into an escrow deposit agreement (the Escrow Agreement ) with TD Bank, N.A., as escrow agent (the Escrow Agent ). Pursuant to the terms of the Escrow Agreement, the ECR will deposit with the Escrow Agent and the Escrow Agent will irrevocably deposit to a special trust fund created under the Escrow Agreement (the Refunded Bonds Escrow Fund ) a portion of the proceeds of the Series 2017 Bonds and other available moneys of the ECR, which Series 2017 Bond proceeds and other available moneys will be invested in United States Treasury obligations, other than a beginning cash balance. Such securities and moneys deposited in the Refunded Bonds Escrow Fund are expected to be sufficient to pay the principal of and interest on the Refunded Bonds through and including October 1, Upon execution and delivery of the Escrow Agreement, the direction to give certain notices as required under the Master Resolution and Series Resolution relating to the Refunded Bonds and the deposit of such proceeds and other available moneys into the Refunded Bonds Escrow Fund, all as provided in the Escrow Agreement, in reliance on the verification report of Robert Thomas CPA, LLC described under VERIFICATION OF MATHEMATICAL COMPUTATIONS herein, the Refunded Bonds will no longer be deemed Outstanding under the Master Resolution and Series Resolution under which the Refunded Bonds were issued and the Owners of the Refunded Bonds shall be restricted exclusively to the securities and moneys so deposited in the Refunded Bonds Escrow Fund for any claim of whatsoever nature with respect to the Refunded Bonds. See VERIFICATION OF MATHEMATICAL COMPUTATIONS herein. General THE SERIES 2017 BONDS The Series 2017 Bonds will be dated the date of their delivery, will be issued in denominations of Five Thousand Dollars ($5,000) or any integral multiple thereof and will bear interest at the rates and mature on the dates and in the amounts set forth on the inside cover page of this Official Statement. Interest on the Series 2017 Bonds is payable on April 1, 2018 and semiannually thereafter on each October 1 and April 1 until maturity or earlier redemption. Such interest shall be calculated on the basis of a three hundred sixty (360) day year consisting of twelve (12) thirty (30) day months. The ECR has appointed TD Bank, N.A. as the bond registrar (the Bond Registrar ) and paying agent (the Paying Agent ) for the Series 2017 Bonds. In any case where the maturity date of, or the date for the payment of the principal of or interest on the Series 2017 Bonds is not a Business Day, then payment of such interest or principal need not be paid by the Bond Registrar on such date but may be paid on the next succeeding Business Day on which the Bond Registrar is open for business with the same force and effect as if paid on the Interest Payment Date or the date of maturity and no interest shall accrue for the period after the date of maturity. The Series 2017 Bonds will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company ( DTC ), New York, New York. Purchases of beneficial interests in the Series 2017 Bonds will be made in book-entry only form, without certificates. Unless a securities depository other than DTC is selected by the ECR, so long as the Series 2017 Bonds shall be in book-entry only form, the principal of and interest on the Series 2017 Bonds will be payable to Cede & Co. (or such other nominee selected by DTC), as registered owner thereof, and will be distributed by DTC 4

13 and the DTC Participants to the Beneficial Owners (as such terms are hereinafter defined). See THE SERIES 2017 BONDS Book-Entry Only System herein. Redemption Provisions Optional Redemption The Series 2017 Bonds maturing on or before October 1, 2027 are not subject to redemption prior to maturity. The Series 2017 Bonds maturing on or after October 1, 2028 are subject to redemption prior to maturity, at the option of the ECR, on or after October 1, 2027, in whole or in part at any time, in any order of maturity selected by the ECR and by lot within a maturity, at a redemption price equal to one hundred percent (100%) of the principal amount of the Series 2017 Bonds to be redeemed, together with accrued interest to the date fixed for redemption. Mandatory Sinking Fund Redemption The Series 2017 Bonds maturing on October 1, 2044 are subject to mandatory sinking fund redemption in part prior to maturity by lot through the application of mandatory sinking fund installments, at a redemption price equal to one hundred percent (100%) of the principal amount thereof, in the following principal amounts and on October 1 in the years specified: *Final maturity. Mailing of Notice of Redemption Year Mandatory Sinking Fund Installments 2039 $4,900, ,145, ,400, ,675, ,955, * 6,260,000 Notice of redemption of the Series 2017 Bonds shall be mailed, postage prepaid, by the Bond Registrar not less than thirty (30) days before the date fixed for redemption to the registered owners of the Series 2017 Bonds or portions of the Series 2017 Bonds which are to be redeemed, at their addresses as they appear on the registration books of the ECR kept by the Bond Registrar fifteen (15) days prior to the date such notice is mailed. Such notice of redemption shall set forth (i) the date fixed for redemption, (ii) the redemption price to be paid, (iii) that such Series 2017 Bonds will be redeemed at the designated corporate trust office of the Paying Agent, and the name, address and telephone number of a contact person, (iv) if less than all of the Series 2017 Bonds shall be called for redemption, the distinctive numbers and letters, if any, of such Series 2017 Bonds to be redeemed, and (v) in the case of Series 2017 Bonds to be redeemed in part only, the portion of the principal amount thereof to be redeemed. In case any Series 2017 Bond is to be redeemed in part only, and the Series 2017 Bonds are not registered pursuant to the Book Entry System, the notice of redemption that relates to such Series 2017 Bond shall state also that on or after the redemption date, upon surrender of such Series 2017 Bond, a new Series 2017 Bond or Series 2017 Bonds of the same maturity, bearing interest at the same rate and in aggregate principal amount, equal to 5

14 the unredeemed portion of such Series 2017 Bond, will be issued. Failure of the registered owner of any Series 2017 Bonds which are to be redeemed to receive any such notice shall not affect the validity of the proceedings for the redemption of Series 2017 Bonds for which proper notice has been given. Interest shall cease to accrue on any of the Series 2017 Bonds duly called for prior redemption if payment of the redemption price has been duly made or provided for. Notwithstanding any provision in the Resolution to the contrary, the ECR may, in connection with any optional redemption, provide in such notice of redemption that the optional redemption is conditional on the availability of funds on or prior to the optional redemption date. The Bond Registrar also shall mail (by certified mail, return receipt requested) a copy of such notice for receipt not less than the second Business Day prior to the date the notice of redemption is mailed to the registered Holders of the Series 2017 Bonds to the following: The Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530, Fax (516) (or the most current address) or such other securities depository designated by the ECR; provided, however, that such mailing shall not be a condition precedent to such redemption and failure to mail any such notice shall not affect the validity of any proceedings for the redemption of the Series 2017 Bonds. The Bond Registrar shall also provide notice, at the same time notice of redemption is given to the Bondholders, to EMMA in an EMMA Complaint format. Effect of Redemption On the date designated for redemption, notice having been given in the manner and under the conditions described above, the Series 2017 Bonds or portions of Series 2017 Bonds so called for redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Series 2017 Bonds or portions of Series 2017 Bonds on such date. On the date so designated for redemption, moneys for payment of the redemption price being held in separate accounts by the Paying Agent in trust for the registered owners of the Series 2017 Bonds or portions thereof to be redeemed, interest on the Series 2017 Bonds or portions of Series 2017 Bonds so called for redemption shall cease to accrue, such Series 2017 Bonds and portions of Series 2017 Bonds shall cease to be entitled to any lien, benefit or security under the Resolution and shall be deemed paid thereunder, and the registered owners of such Series 2017 Bonds or portions of Series 2017 Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Book-Entry Only System The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the ECR believes to be reliable, but the ECR and the Underwriters take no responsibility for the accuracy of such information. DTC will act as securities depository for the Series 2017 Bonds. The Series 2017 Bonds will be issued as fully-registered securities registered in the name of Cede & Co., as DTC s partnership nominee, or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2017 Bond certificate will be issued for each maturity of the Series 2017 Bonds, in the aggregate principal amount to be issued for each maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money 6

15 market instruments (from over one hundred (100) countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized bookentry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has 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 Series 2017 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2017 Bonds on DTC s records. The ownership interest of each actual purchaser of each Series 2017 Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2017 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2017 Bonds, except in the event that use of the book-entry system for the Series 2017 Bonds is discontinued. To facilitate subsequent transfers, all Series 2017 Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Series 2017 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee does not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2017 Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 2017 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2017 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2017 Bonds, such as redemptions, tenders, * defaults, and proposed amendments to the Series 2017 Bond documents. For example, Beneficial Owners of Series 2017 Bonds may wish to ascertain that the nominee holding the Series 2017 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Bond Registrar and request that copies of notices be provided directly to them. * Not applicable to the Series 2017 Bonds. 7

16 Redemption notices shall be sent to DTC. If less than all of the Series 2017 Bonds are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such Series 2017 Bonds to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2017 Bonds unless authorized by a Direct Participant in accordance with DTC s MMI procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the ECR as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Series 2017 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, * and interest payments on the Series 2017 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the ECR or the Paying 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 nor its nominee, the Bond Registrar, or the ECR, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the ECR and/or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Series 2017 Bonds at any time by giving reasonable notice to the ECR or the Bond Registrar. Under such circumstances, in the event that a successor depository is not obtained, Series 2017 Bond certificates are required to be printed and delivered. The ECR may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2017 Bond certificates will be printed and delivered to DTC. SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE SOLE REGISTERED OWNER OF THE SERIES 2017 BONDS, THE ECR AND THE BOND REGISTRAR SHALL TREAT CEDE & CO. AS THE ONLY OWNER OF THE SERIES 2017 BONDS FOR ALL PURPOSES UNDER THE RESOLUTION, INCLUDING RECEIPT OF ALL PRINCIPAL OF AND INTEREST ON THE SERIES 2017 BONDS, RECEIPT OF NOTICES, VOTING AND REQUESTING OR DIRECTING THE ECR AND THE BOND REGISTRAR TO TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS UNDER THE RESOLUTION. THE ECR AND THE BOND REGISTRAR HAVE NO RESPONSIBILITY OR OBLIGATION TO THE DTC PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (A) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT; (B) THE PAYMENT BY ANY DTC PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OF AND INTEREST ON THE SERIES 2017 BONDS; (C) THE DELIVERY OR TIMELINESS OF DELIVERY BY ANY DTC PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE GIVEN TO BONDHOLDERS; OR (D) OTHER ACTION TAKEN BY DTC OR CEDE & CO., AS THE REGISTERED OWNER OF THE SERIES 2017 BONDS. 8

17 SECURITY AND SOURCES OF PAYMENT General Limited Obligation The Series 2017 Bonds are limited obligations of the ECR payable solely from and secured by a pledge of all Net Revenues of the System, on a parity with all Bonds at any time Outstanding under the Resolution including the Prior Bonds. The Series 2017 Bonds shall not be deemed to constitute a debt of the ECR or of the Entities or a pledge of the faith and credit of the ECR or of the Entities, but shall be payable solely from the funds provided therefor from the Net Revenues. Neither the ECR nor the Entities are directly, indirectly or contingently obligated to levy or pledge any form of taxation whatever for the payment of the Series 2017 Bonds, nor do the Series 2017 Bonds constitute a charge, lien or encumbrance upon any property of the ECR or of the Entities. Rate and Entity Contributions Covenant The ECR has covenanted in the Resolution that it will fix, establish and maintain such Wastewater Flow Charges, such fees, other charges and Entity contribution for the services and Facilities of the System and receipt of contributions from the Entities, and revise the same from time to time whenever necessary, as will always provide in each Fiscal Year Net Revenues, which shall be adequate to pay at least one hundred ten percent (110%) of the Annual Debt Service Requirement for the Bonds issued under the Resolution; and provided further, that such Net Revenues shall be sufficient to make all of the payments required by the terms of the Resolution; provided however, that the Wastewater Flow Charges, such fees, other charges and Entity contributions shall not be so reduced as to be insufficient for the operation and maintenance of the System. Annual Debt Service Requirement means, at any time, the amount required to be deposited from Revenues during the then current Fiscal Year into the Debt Service Fund, as provided in the Resolution; provided, however, that such required deposit shall be reduced by any earnings or investment income in the then current Fiscal Year on moneys and investments on deposit in any fund or account created and established by the ECR or the Agent, on behalf of the ECR Board, for application under the Resolution and transferred to the Debt Service Fund, as provided in the Resolution. Excluded Funds means the AWT Renewal and Replacement Fund, the RW Renewal and Replacement Fund and such other funds or accounts the ECR or WPB, on behalf of the ECR, may create from time to time pursuant to a Participatory Agreement with such Entity as provided in the Interlocal Agreement which are to be used solely to fund renewal and replacement costs for the specific facilities of the ECR Facilities constructed and operated for a particular Entity or Entities. Only the beneficiary Entity or Entities of such facilities shall be responsible for the funding of the related Excluded Fund. Gross Revenues or Revenues means the sum of all Wastewater Flow Charges, Septage Charges, penalties, insurance or Federal Emergency Management Agency claims payments, Wastewater Flow Charges Credits, and any other income and contributions received by the ECR from the operation of the System or from any agency thereof in control of the management and operation of the System, and all parts thereof; and shall also include the earnings and investment income derived from the investment of moneys on deposit in the various funds and accounts created and established by the ECR or the Agent, on behalf of the ECR, for application under the Resolution, which by the terms and provisions of the Resolution are required to be deposited in the Debt Service Fund created and established by the ECR or WPB, on behalf of the ECR, for application under the Resolution; and shall also include any transfers from the Construction Fund, and amounts received from the Entities for deposit into the Renewal and 9

18 Replacement Fund; provided, however, that Revenues shall not include any contributions paid by an Entity with respect to the financing and renewal and replacement of a capital asset or part thereof, which such Entity has financed the Costs thereof other than by the issuance of Bonds and the ECR has entered into a Participatory Agreement with such Entity under the terms of the Interlocal Agreement, proceeds from insurance for System asset replacement, or the disposition of property to the extent otherwise provided pursuant to the terms of the Resolution, non-operating grants from other units of government, interest earned on such grants and unrealized gains or losses from investments. Net Revenues means, for any monthly particular period, the Gross Revenues remaining after deducting the payment of monthly Operating Expenses. Operating Expenses means the expenses of operation, maintenance and ordinary repairs of the System and its Facilities and shall include, without limiting the generality of the foregoing, insurance premiums, if any, administrative general expenses of the ECR and WPB, as Agent for the ECR relating to the System, engineering expenses, legal and financial advisory expenses, required payments to fund pension, retirement, health and hospitalization benefits, taxes or franchise fees and such other reasonable expenses as shall be incurred in accordance with generally accepted accounting principles and properly allocable to the System. Operating Expenses shall not include extraordinary repairs, any allowance for depreciation, any extraordinary items arising from the early extinguishment of debt, interest, amortization, any costs and expenses for new construction, or any expenses or repairs funded or reimbursed from the Renewal and Replacement Fund, including any Excluded Funds therein, or from the Operating/Catastrophic Reserve Fund or funded or reimbursed from a grant from a unit of government other than the ECR, or any amounts classified as an expense for financial reporting purposes under generally accepted accounting principles that are funded from the proceeds of Bonds or other indebtedness. System means all of the property, real, personal and mixed, which constitute a part of ECR Facilities the ECR has determined to be a part of the System which System collects, treats and disposes of sanitary sewage generated by Entities and septage generated by third parties, and processes, stores, disposes of and distributes biosolids byproducts and advanced wastewater treatment and reclaimed water; together with extensions, additions, modifications and alterations thereto. Pursuant to the terms and provisions of the Resolution, the System shall also include, if determined by subsequent proceedings of the ECR to be in the best interest of the Bondholders after the Consultant certifies in writing to the ECR that the combining of such additional utility system or public works enterprise shall not have an adverse effect upon the existing System and is reasonably related to the type, management and operation of the System. All Facilities shall be considered a part of the System unless the ECR affirmatively elects to not make such capital asset a part of the System. Flow of Funds The following Funds and Accounts are established by the ECR pursuant to the Resolution: the Operating Fund, the Debt Service Fund, Debt Service Reserve Fund, the Operating/Catastrophic Reserve Fund, and the Renewal and Replacement Fund. (A) Revenues shall be first used, to the full extent necessary, to pay Operating Expenses that are due and payable during each calendar month. (B) Net Revenues shall next be used, to the full extent necessary, for deposit into the Debt Service Fund, on the fifteenth (15th) day of each month, beginning, with respect to interest on the Bonds, within the fifteenth (15th) day of the first full calendar month following the date on which any or all of the Bonds are delivered to the purchaser thereof and beginning with respect to principal or Accreted 10

19 Value on the Bonds, on the twelfth (12th) month prior to the first maturity of such Bond or mandatory sinking fund installment of Term Bonds, such sums as shall be sufficient to pay one-sixth (1/6th) of the interest becoming due on the Bonds on the next semiannual Interest Payment Date and one-twelfth (1/12) of the principal amount or Accreted Value of the Bonds which will mature and become due on the next annual maturity date or, in the case of Term Bonds, subject to mandatory sinking fund installments; provided, however, that such monthly deposits for interest shall not be required to be made into the Debt Service Fund to the extent that money is on deposit therein or moneys are transferred thereto from any Capitalized Interest Line Item in the Construction Fund for such purpose; and provided further, that in the event the ECR Board has issued pari passu additional Variable Rate Bonds pursuant to the provisions of the Resolution, Net Revenues shall be deposited at such other or additional times and amounts as necessary to pay the interest and principal becoming due on the Bonds on the next Interest Payment Date, all in the manner provided in the supplemental resolution authorizing such pari passu additional Variable Rate Bonds. (C) To the extent not funded from Bond proceeds or covered by Reserve Fund Credit Facility Substitutes and such funding described below is permitted by each Rating Agency then rating the Bonds, Net Revenues shall next be used on a pro rata basis, to the full extent necessary, for deposits into each of the Debt Service Reserve Funds that have been created and established for one or more Series of Bonds in the Sinking Fund, on the fifteenth (15th) day of each month in each year, beginning with the fifteenth (15th) day of the first full calendar month following the date on which any or all of the Bonds issued under the Resolution are delivered to the purchaser thereof, such sums as shall be sufficient to pay an amount equal to one-twelfth of twenty percent (1/12th of 20%) of the Debt Service Reserve Requirement applicable for each applicable Series of Bonds; provided, however, that no payments shall be required to be made into the applicable Debt Service Reserve Fund whenever and as long as the amount deposited therein shall be equal to the Debt Service Reserve Requirement for such one or more Series of Bonds to which each such Debt Service Reserve Fund relates; provided further, however, that if Net Revenues are insufficient to make the required deposits into the applicable Debt Service Fund, such Net Revenues, which are available, will be deposited therein on a pro rata basis. No Debt Service Reserve Fund has been created by the ECR for the Prior Bonds or the Series 2017 Bonds. (D) Net Revenues shall next be used, first, for the repayment of any obligations owed to the provider(s) of a Reserve Fund Credit Facility Substitute (pro rata, if necessary), and second, for the payment of any subordinated indebtedness hereafter issued by the ECR in connection with the System in accordance with the proceedings authorizing such subordinated indebtedness. (E) On the fifteenth (15 th ) day of the first month succeeding the month all or a part of the Bonds are delivered to the purchaser thereof and on the fifteenth (15 th ) day of each month thereafter until the amounts on deposit in the Renewal and Replacement Fund equal the Renewal and Replacement Requirement, Revenues shall next be used for deposit in the manner provided in the Interlocal Agreement into the Renewal and Replacement Fund in an amount equal to the Annual Renewal and Replacement Requirement. Amounts on deposit in the Renewal and Replacement Fund may be used to (1) make additions, extensions and improvements to the System, and (2) pay the costs of replacement or renewal of capital assets of the System or extraordinary repairs thereto. Notwithstanding the monthly funding provided above, in the event moneys are withdrawn from the Renewal and Replacement Fund, such that the balance therein is below the Renewal and Replacement Requirement, the ECR will cause the Entities to fund the Renewal and Replacement Fund to be at least equal to the Renewal and Replacement Requirement. (F) Net Revenues shall next be used, to the extent budgeted by the ECR, for deposit to the Operating/Catastrophic Reserve Fund. Amounts in the Operating/Catastrophic Reserve Fund may be used (1) for working capital and operating liquidity requirements, (2) for preliminary funding of 11

20 reimbursable insurance or FEMA claims costs and insurance deductible amounts, (3) for catastrophic event and other emergency costs, (4) for additions, extensions and improvements to the System, (5) to pay the costs of replacement or renewal of capital assets of the System or extraordinary repairs thereto, (6) to purchase or redeem Bonds prior to maturity, or (7) for any lawful ECR purpose including but not limited to making additional deposits into the Renewal and Replacement Fund, prepaying any Bonds or subordinated indebtedness or, after the close of the Fiscal Year, crediting all or a portion of such balance remaining at the end of the Fiscal Year against the Entities Wastewater Flow Charges for the next Fiscal Year on a pro-rata basis; provided, however, that none of such Net Revenues shall ever be used for the purposes provided in this paragraph (F) unless all payments required in paragraphs (A) to (E) above, including any deficiencies for prior payments, have been made in full to the date of such use; provided further, however, that the moneys in the Operating/Catastrophic Reserve Fund shall be used for payment into the Debt Service Reserve Fund (pro rata, if necessary) whenever the moneys in the Operating Fund are insufficient therefor. Pursuant to the Resolution, the ECR created and established the Construction Fund. The balance of the proceeds derived from the sale of the Series 2017 Bonds and any other Bonds issued pursuant to the Resolution shall be deposited in the Construction Fund, together with other moneys lawfully available therefor, if any. There is created and established in the Construction Fund a separate line item to be known as the Cost of Issuance Line Item with such other appropriate Series designation into which shall be deposited and appropriated an amount sufficient to pay the costs of issuance of each Series of the Bonds, including, but not limited to, payment for the Credit Facility, if any, and the initial payment of the premium or fee for the Reserve Fund Credit Facility Substitute, if any. The balance remaining in the Construction Fund is to be applied for financing the 2017 Project. Any surplus funds in the Construction Fund derived from the proceeds of the Series 2017 Bonds shall be deposited: First to the Debt Service Fund in the amounts determined by subsequent proceedings of the ECR; and Second, the balance, if any, to a special account created in the Operating/Catastrophic Reserve Fund and used for any proper purpose of the ECR. Additional Bonds Pari passu additional Bonds of the ECR may be issued under and secured by the Resolution payable pari passu with the Prior Bonds and the Series 2017 Bonds, out of the Net Revenues of the ECR shall be issued, only subject to the conditions described below, from time to time: (A) The ECR must be current in all deposits into the various funds and accounts and all payments required to have been theretofore deposited or made by it under the provisions of the Resolution, and any supplemental resolution hereafter adopted for the issuance of pari passu additional Bonds and has complied with the covenants and provisions of the Resolution, and any supplemental resolutions hereafter adopted for the issuance of pari passu additional Bonds. (B) The amount of the Net Revenues as received during any twelve (12) consecutive months of the twenty-four (24) months immediately preceding the issuance of said pari passu additional Bonds, as certified by the Finance Director of WPB and as may be adjusted, as described below, will be equal to one hundred ten per centum (110%) of the Maximum Annual Debt Service Requirement; on (1) the Bonds originally issued pursuant to the Resolution then outstanding, (2) any pari passu additional Bonds theretofore issued and then outstanding, and (3) the pari passu additional Bonds then proposed to be issued; provided that for the purpose of determining the Maximum Annual Debt Service Requirement pursuant to the provisions described under this heading, the interest rate on Variable Rate Bonds then Outstanding shall be the greater of (i) the average daily interest rate on such Variable Rate Bonds during the preceding Fiscal Year, or (ii) the actual rate of interest applicable to such Variable Rate Bonds on the date of issuance of such Variable Rate Bonds; and provided further, that if pari passu additional Variable 12

21 Rate Bonds are to be issued, the interest rate thereon shall be calculated in accordance with the 30-year Revenue Bond Index as published by The Bond Buyer as of the last week of the month preceding the date of issuance of such Variable Rate Bonds, or if that index is no longer published, the interest rate as of the last week of such month as published in an index that is deemed to be substantially equivalent to said Revenue Bond Index. (C) In the event any pari passu additional Bonds are issued for the purpose of refunding any Bonds then Outstanding, the condition of (B) above shall not apply, provided that the issuance of such pari passu additional Bonds shall result in a reduction or shall not increase the Annual Debt Service Requirement over the life of the Bonds so refunded. For the purposes of paragraph (B) under this heading, the test period of twelve (12) consecutive months of the twenty-four (24) months immediately preceding the issuance of said pari passu additional Bonds shall only be used if the adjustments set forth below are not utilized. If such adjustments are used, the test period shall be the twelve (12) consecutive months of the eighteen (18) months immediately preceding the issuance of the proposed pari passu additional Bonds. The adjustment of Net Revenues which are permitted in connection with the above-described pari passu additional Bonds test shall be certified to the ECR by the Consultant and shall be computed as follows: (D) If the ECR, prior to the issuance of the proposed pari passu additional Bonds, shall have increased the Wastewater Flow Charges or such other charges for the services or use of the Facilities of the System, the Net Revenues for the twelve (12) consecutive months of the eighteen (18) months immediately preceding the issuance of the pari passu additional Bonds shall be adjusted to include the Net Revenues which would have been derived from said System in such twelve (12) consecutive months as if such increased Wastewater Flow Charges and such other fees and charges for the services of the System had been in effect during all of such twelve (12) consecutive months. (E) If the ECR shall have acquired or has contracted to acquire any privately or publicly owned existing wastewater system or any other utility that the ECR will consolidate with the System, the cost of which shall be paid from all or part of the proceeds of the issuance of the proposed pari passu additional Bonds, then the Net Revenues derived from the System during the twelve (12) consecutive months of the eighteen (18) months immediately preceding the issuance of said pari passu additional Bonds, shall be increased by adding to the Net Revenues for such twelve (12) consecutive months seventy-five percent (75%) of the projected Net Revenues which would have been derived from the aforementioned existing systems as if such system had been operated by the ECR as a part of the System during such twelve (12) consecutive months. (F) If the ECR shall have entered into a contract, which contract shall be for a duration of not less than the final maturity of the pari passu additional Bonds authorized for the purposes of such financing from the date of the issuance of the proposed pari passu additional Bonds, with any public body whereby the ECR shall have agreed to furnish services consistent with the services performed by the System, then the Net Revenues of the System during the twelve (12) consecutive months of the eighteen (18) months immediately preceding the issuance of the pari passu additional Bonds shall be increased by the least amount which the entity receiving such services shall guarantee to pay in any one (1) year for the furnishing of the services by the ECR, after deducting from such payment the estimated proportion of operating expenses and repair, renewal and replacement costs attributable in such year to such services. (G) If there is an estimated increase in Revenues to be received by the ECR, as a result of additions, extensions or improvements to the System during the period of three (3) years from delivery of 13

22 the pari passu additional Bonds and the ECR has taken official action toward the increase in Revenues, then the Net Revenues derived from the System during the twelve (12) consecutive months of the eighteen (18) months immediately preceding the issuance of said pari passu additional Bonds shall be increased by seventy-five percent (75%) of the average annual additional Net Revenues calculated for such three year period. The term pari passu additional Bonds, as used above, shall be deemed to mean additional obligations evidenced by Bonds or other form of indebtedness permitted under the Act issued under the provisions and within the limitations set forth under this heading payable from the Net Revenues of the System pari passu with bonds originally authorized and issued pursuant to the Resolution. Such Bonds shall be deemed to have been issued pursuant to the Resolution, the same as the Bonds originally authorized and issued pursuant to the Resolution, and all of the covenants and other provisions of the Resolution (except as to any Debt Service Reserve Fund established for any one or more series of Bonds and as to details of such bonds evidencing such pari passu additional obligations inconsistent therewith) shall be for the equal benefit, protection and security of the holders of any bonds originally authorized and issued pursuant to the Resolution and the Holders of any bonds evidencing pari passu additional obligations subsequently issued within the limitations of and in compliance set forth in this paragraph. All of such Bonds, regardless of the time or times of their issuance shall rank equally with respect to their lien on the Net Revenues and their sources and security for payment therefrom without preference of any Bonds over any other. Other Indebtedness Under the provisions of the Resolution, the ECR may incur other forms of indebtedness related to the System, subordinate to the Prior Bonds, the Series 2017 Bonds and any pari passu additional Bonds. Project Description THE 2014 PROJECT The ECR Board commissioned the ECRWRF Engineering Report for Biosolids Treatment and Management (hereafter referred to as the Biosolids Engineering Report ) from Hazen and Sawyer, P.C., its consulting engineers. The Biosolids Engineering Report recommended that the ECR implement a two phase biosolids treatment and management program ( Phase 1 and Phase 2 ). The Phase 1 improvements included construction of biosolids improvements required to meet a total annual average treatment capacity of fifty-seven and five tenths (57.5) million gallons per day (MGD). Based on the System s current flow rate of approximately forty-three (43) MGD, the Phase 1 improvements will provide sufficient biosolids treatment capacity for a twenty (20) year planning period through the Year Phase 2 improvements for the planning period after the Year 2035 included additional biosolids improvements to provide sufficient biosolids treatment capacity for the currently permitted ECRWRF annual average flow capacity of seventy (70) MGD. The contract for the Phase I improvements was awarded to Poole & Kent, Inc., in the original amount of Ninety-Two Million Six Hundred Two Thousand Dollars ($92,602,000). There has been approximately Three Million Seven Hundred Forty Nine Thousand Four Hundred Three Dollars ($3,749,403) in additional costs due to change orders to date. The Phase I Improvements are currently approximately eighty-seven percent (87%) complete, and the current contract amount, after change orders, is Ninety-Six Million Three Hundred Fifty-One Thousand Four Hundred Three Dollars ($96,351,403). The estimated cost to complete the Phase 1 Project, including projected change orders, is Twelve Million Four Hundred Ninety-Five Thousand Six Hundred Forty-Seven Dollars ($12,495,647). The amount remaining in the Construction Fund for the Phase I Improvements is Twenty Million Five 14

23 Hundred Ninety Thousand Dollars ($20,590,000), of which Twenty Million Two Hundred Ninety Thousand Dollars ($20,290,000) has been encumbered for the 2014 Project. It is anticipated that any funds remaining in the Construction Fund at the close of the Phase I Project would be deposited first in the debt service reserve fund and second to the debt service fund. It is anticipated that the Phase II improvements would be commenced in the Year The preliminary Opinion of Probable Construction Cost of the Phase II improvements, consistent with the AACE definition of a Class 5 Cost Estimate is Sixteen Million Thirty Thousand Dollars ($16,030,000). Source: Utilities Department City of West Palm Beach. The following chart provides a summary of Phase I major milestones for Phase I. Summary of Phase I Major Milestone Dates Milestone Project Construction Commencement August, 2015 Project Substantial Completion November, 2018 Project Final Completion December, 2018 Date THE ECR BOARD General The ECR was created as a separate governmental entity pursuant to Part I of Chapter 163, Florida Statutes (the Interlocal Act ), through an Interlocal Agreement (the Interlocal Agreement ) dated September 9, 1992, titled, Interlocal Agreement Establishing Duties and Responsibilities Among the Entities for the Operation of the East Central Regional Wastewater Treatment Facilities (the ECR Facilities ), entered into among the Town, WPB, the County, Riviera Beach and Lake Worth (each an Entity and collectively the Entities ). See APPENDIX E - Interlocal Agreement, herein. Pursuant to the Interlocal Agreement, the ECR Board owns and operates the System that treats and disposes of all wastewater collected by each of the Entities within their respective jurisdictions and from sub-regional bulk wastewater customers and transmitted to the ECR Facilities for treatment and disposal. 1 Each of the Entities is responsible for the ownership, permitting, operation, maintenance, repair and replacement of its own wastewater collection and transmission systems, and for transmission of wastewater to the ECR Facilities. Government Under the Act, Florida counties and cities may join together to create a governmental entity separate and apart from the counties and cities to exercise a governmental function in a joint manner that 1 The County transmits all of its wastewater flows from the northern portion of its Palm Beach County Water Utilities Department ( PBCWUD ) service territory to the System, but owns a separate thirty-five (35) MGD wastewater treatment plant, known as the Southern Region Water Reclamation Facility, for the wastewater flows from the southern portion of the PBCWUD service territory, and a three (3) MGD wastewater treatment plant, known as the Central Region Water Reclamation Facility, for the wastewater flows from the central portion of the PBCWUD service territory. PBCWUD has the capability of temporarily diverting a portion of its wastewater flows for the System to its Southern Region Wastewater Reclamation Facility, and from its Southern Region Wastewater Reclamation Facility to the ECR Facilities. Pursuant to the Reclaimed Water Agreement, described in THE SYSTEM Reclaimed Water Production Facility, The County agreed at a minimum to deliver an average daily wastewater flow of twelve and five tenths (12.5) MGD to the System. Source: Palm Beach County Water Utilities Department. 15

24 each of the individual local governmental entities could exercise individually. Under the Interlocal Act, the individual local governmental entities may enter into an Interlocal Agreement to establish the separate legal entity, with the Interlocal Agreement setting forth the terms of governance of the separate legal entity and the powers and duties of such separate legal entity. Under the Interlocal Act, a separate legal entity created by Interlocal Agreement may provide utility services, establish the fees and charges for such utility services, and issue bonds to fund the capital needs of the entity. The Interlocal Agreement entered into by the Entities provides for the establishment of the ECR Board which is the legislative governing body of the ECR Board. The ECR Board comprises five (5) members, with each of the Entities appointing one member to the ECR Board. Each member of the ECR Board serves for a term that extends until the member resigns or is replaced by the Entity that appointed the member. Each Entity may replace its appointed member to the ECR Board at any time without cause. The ECR Board members elect a Chairman, Vice Chairman and Secretary annually. Voting by the members of the ECR Board depends on the nature of the vote to be taken. For administrative and parliamentary matters, each member of the ECR Board has one (1) un-weighted vote. For matters involving the expenditure of capital, each member of the ECR Board has a weighted vote based upon the relative Entity share of the capacity in the ECR Facilities, provided at least three ECR Board members must vote in the affirmative on any weighted voting matter. The current members of the ECR Board, their weighted voting percentages, and each Entity s share of the permitted capacity in the ECR Facilities are set forth below: Chairman Vice Chairman Member Member Member Brian Shields, P.E. Appointed by the City of Lake Worth Poonam Kalkat, PhD Appointed by West Palm Beach William Horton Appointed by the City of Riviera Beach Eric Brown, P.E. Appointed by the Town of Palm Beach Jim Stiles Appointed by Palm Beach County % of the weighted vote % of the weighted vote % of the weighted vote % of the weighted vote % of the weighted vote 11.5 MGD 20.5 MGD 8 MGD 6 MGD 24 MGD Brian Shields, P.E., is the Water and Sewer Utility Director for the City of Lake Worth. Poonam Kalkat, PhD., is Utility Director for WPB. Eric Brown, P.E., is the Assistant Town Engineer for the Town of Palm Beach. William Horton is the Utility Director for the City of Riviera Beach Utility District. Jim Stiles is the Utility Director for Palm Beach County Water Utilities Department. Michelle Ballantine, an employee of WPB, currently serves as Secretary of the ECR Board. The ECR Board has plenary power to decide all matters related to the System. The ECR Board does not have any employees. Pursuant to the terms of the Interlocal Agreement, the administration and operation of the ECR Facilities are the responsibility of WPB, subject to the direction of the ECR Board. WPB s Utility Department provides the day-to-day operation of the ECR Facilities. WPB employs an Executive Manager for the ECR Facilities, subject to approval by the ECR Board. WPB s Public Utility Fiscal Services Division provides financial services for the ECR Board, including, billing, collections, accounts payables and financial reporting. WPB s Procurement Department provides for the procurement of goods and services for the ECR Facilities. WPB also provides other ancillary services for the ECR Board. From time to time, the Entities consider whether to transition operations of the ECR Facilities from WPB to a contract operator. Such transition would require an amendment to the Interlocal 16

25 Agreement with the unanimous consent of the Entities and a contract operations agreement that would not affect the status of any outstanding ECR tax-exempt debt. The ECR Board establishes annual operating and capital budgets for the ECR Facilities and commissions an annual independent audit of its finances and operations. WPB invoices the ECR Board for the administration and operations services it provides to the ECR Board, subject to the ECR Board s annual budget appropriations. Based on the annual budgets, the ECR Board establishes on an annual basis the Wastewater Flow Charges to be paid by the Entities and monthly flow charge amounts for the Fiscal Year. Wastewater Flow Charges for October, November and December are invoiced and due in October of the new Fiscal Year. The Interlocal Agreement provides for WPB to invoice each Entity monthly in advance for its Wastewater Flow Charges. The annual Wastewater Flow Charges are based on the total amount of the annual operating budget divided by the estimated flows for the budget year of each Entity. Pursuant to the Section , Florida Statute and the Interlocal Agreement, the ECR Board s establishment of annual Wastewater Flow Charges is not subject to Florida Public Service Commission jurisdiction or regulation by any other governmental body, including the Entities. In addition to Wastewater Flow Charges, each Entity is responsible to pay an annual Renewal and Replacement Fund contribution equal to a minimum of one percent (1%) of the replacement value of the ECR Facilities until such Entity s contributions held in the Renewal and Replacement Fund equals ten percent (10%) of such replacement value. No further Renewal and Replacement Fund contribution is required until the Entity s Renewal and Replacement Fund balance falls below five percent (5%) of the replacement value of the ECR Facilities, at which time the annual one percent (1%) contributions recommence. Renewal and Replacement Fund contributions are payable in advance in full at the start of the Fiscal Year. The monies in the Renewal and Replacement Fund are utilized by the ECR Board to make additions, extensions and improvements to the System, and to pay the costs of replacement or renewal of capital assets of the System or extraordinary repairs thereto. The ECR Board can increase the required annual renewal and replacement funding requirements and adjust the funding formula as needed. The ECR Board may require non-annual payments by the Entities in anticipation of projects which will require additional funding. The ECR Board is required to establish Wastewater Flow Charges and other charges to ensure that the ECR Facilities are self-sustaining. The ECR Board is not authorized to create or distribute a profit or surplus to any Entity Member, provided the ECR Board may establish reserves or add to existing reserves at its discretion. The ECR Board has the following additional powers pursuant to the Interlocal Agreement and the Act, which may be authorized in its own name to: 1. Make and enter into contracts; 2. Retain consultants; 3. Acquire, construct, manage, maintain, or operate buildings, works, or improvements; 4. Acquire, hold, or dispose of property; 5. Incur debts, liabilities, or obligations which do not constitute the debts, liabilities, or obligations of any of the Entities; and 6. Exercise all powers in connection with the authorization, issuance, and sale of bonds. 17

26 The initial term of the Interlocal Agreement was for thirty (30) years ending September 8, The Interlocal Agreement provides for a thirty year renewal term with the consent of the Entities. The Entities have renewed the Interlocal Agreement for an additional thirty year term commencing September 9, 2022 and ending September 8, The ECR and the Interlocal Agreement cannot be terminated or amended without the unanimous consent of the Entities. Pursuant to Section 5 of the Interlocal Agreement, debt service, debt related costs and debt coverage requirements are recovered as an un-differentiated component part of the operating and maintenance costs recovered within the Wastewater Flow Charges invoiced to the Entities. ECR Wastewater Flow Charges, including ECR debt service, are a wastewater treatment and disposal operating expense of the utility system of each Entity. Therefore, each Entity is obligated to pay the Wastewater Flow Charges to the ECR before payment of debt service on any senior debt of such Entity. Section 5(D) of the Interlocal Agreement provides for WPB to monitor the annual budget revenues and expenditures and if the annual budget will not be sufficient to properly fund the ECR, the ECR is required to amend the budget and increase the Wastewater Flow Charges to the Entities, which can be implemented at any monthly ECR Board meeting. Pursuant to Section 5(D), in the event an Entity is delinquent in payment of Wastewater Flow Charges, the ECR Board may increase the Wastewater Flow Charges to the other Entities to cover any shortfall in revenues. Delinquent Wastewater Flow Charges accrue interest at twelve percent (12%) per annum until paid. After the annual audit is received by the ECR, the ECR reconciles invoiced Wastewater Flow Charges to actual wastewater flows and charges any Entity whose actual flows exceeded the invoiced flows, and provides a credit against future Wastewater Flow Charges to any Entity whose actual flows were less than the invoiced flows. Section 13 of the Interlocal Agreement authorizes the ECR Board to establish reserves and fulfill all requirements imposed by any bond financing. Section 14 of the Interlocal Agreement provides that the ECR can be terminated only with the unanimous consent of the Entities. Any Entity may withdraw from participation in the Interlocal Agreement, but any such withdrawing Entity remains responsible to meet its accrued and continuing obligations to the ECR Board. An Entity may transfer its interest to another Entity or Entities upon agreement of the transferring Entities. Section 15 of the Interlocal Agreement provides that the ECR Facilities may not be disposed of without the consent of all of the Entities. Subject to the foregoing, the ECR is permitted under the Resolution to sell, lease or otherwise dispose of the System as a whole or a portion of the System either as Property in Use, as described in the Resolution, or Property Not in Use, as described in the Resolution. Under the Resolution, the System can only be sold, leased or otherwise disposed of as a whole or substantially as a whole if all Bonds issued under the Resolution are retired. Under the Interlocal Agreement, WPB is potentially liable for regulatory violations, including compliance costs or penalties assessed for violations, that arise out of or are solely related to material errors or omissions by WPB personnel, or the failure of WPB to proceed in a timely manner with a requirement imposed by any regulatory agency in any consent order or operating permit. Fines or costs relating to regulatory violations caused by the actions of the ECR Board are shared by all of the Entities. Failure of the ECR Board to follow an action recommended by WPB to comply with a consent order, regulatory agency or operating permit entitles WPB to indemnification by the other Entities for all costs and penalties incurred. A complete copy of the Interlocal Agreement is attached hereto as APPENDIX E. For supplemental information concerning the Entities, see APPENDIX A Supplemental Information Concerning the Entities. 18

27 ECR Board Indebtedness Prior Bonds. The ECR Board has issued Bonds to evidence the obligation under three (3) bank loans under the Master Resolution, the Series 2011 Bank Loan, the Series 2012 Bank Loan, and the Series 2016 Bank Loan (collectively, the Bank Loans ), to JP Morgan, or affiliates, to refund two (2) State Revolving Fund loans, to fund a generator renewal project, and to fund certain preliminary costs of the 2014 Project, and to fund costs of the other 2016 construction projects (collectively, the Prior Bonds ). The aggregate principal amount borrowed under the Bank Loans totaled Thirty-Six Million One Hundred and Thirty Thousand Dollars ($36,130,000), of which Twenty-Five Million Four Hundred Ten Thousand Dollars ($25,410,000) remained outstanding as of October 1, The ECR Board also issued the Series 2014 Bonds in the aggregate principal amount of Eighty Six Million Five Hundred and Ninety Thousand Dollars ($86,590,000), all of which remains Outstanding. A portion of the Series 2014 Bonds will be advanced refunding with a portion of the proceeds of the Series 2017 Bonds and other legally available funds of the ECR. See REFUNDING PLAN herein. The ECR Board is obligated to repay the Prior Bonds from Net Revenue. The Prior Bonds are on parity with the Series 2017 Bonds. No Debt Service Reserve Fund has been established with respect to such Prior Bonds or with respect to the Series 2017 Bonds. For more detailed information concerning the Prior Bonds, see APPENDIX B Financial Statements of the ECR for the Fiscal Year Ended September 30, The decision to issue the ECR Bonds, to enter into future indebtedness, and the amount, structure and timing of such indebtedness, are decisions that will be made by the ECR Board, and are not subject to the oversight or consent of the Entities. Under the Interlocal Agreement, the determination to issue debt requires approval by Entity Members holding more than fifty percent (50%) of treatment capacity, and, in addition, by no less than three (3) of the Entities must vote in favor of the decision. None of the Entities have the power, independently, to place limits on the amount or structure of the indebtedness the ECR Board decides to incur. However, any decision made by the ECR Board to incur indebtedness obligates each Entity to pay its proportionate share of such indebtedness, included within the Wastewater Flow Charges as an operating expense. As a result, payment of flow charges by an Entity to the ECR, including debt service payments required to be made by the ECR on the Prior Bonds and the Series 2017 Bonds, are made prior to the Entity s payment of debt service on the Entity s utility system debt. General System Operations by WPB THE SYSTEM The operations of the ECR Facilities are managed by WPB s Public Utilities Department (the Utilities Department ). WPB designates an ECR Executive Manager to oversee the operations of the ECR Facilities comprising the System. The ECR Executive Manager reports to the WPB City Administrator s office. The Utilities Department is operated under the direction of the WPB Utilities Director. The Utilities Director is directly responsible to the WPB Assistant City Administrator. Clifford Sanders is the current ECR Executive Manager. He has worked at the ECR Facilities since He has a Class A Florida Wastewater Treatment License. The ECR has direct general liability and property insurance policies. Also, the ECR funded a Catastrophic Reserve Fund which has a balance of $5,000,000 and can be used to pre-fund covered 19

28 insurance policy claims costs as well as for extraordinary R&R from a catastrophic event or emergency not covered by insurance. Wastewater Treatment Facilities Description The ECR is located within the corporate boundaries of WPB. The original facilities were constructed in the early 1970s by WPB as a major regional facility serving coastal and inland communities from the Town of Manalapan to the south to the City of Riviera Beach to the north, including areas of eastern unincorporated Palm Beach County. The facilities were expanded from fortyfour (44) MGD to fifty-five (55) MGD in 1990 and converted from an extended aeration secondary treatment process utilizing mechanical surface aerators to a conventional activated sludge process utilizing a fine bubble diffused air system. Additional significant capital improvements were completed in 1995 that provided firm capacity to treat projected influent flows and pollutant loadings for a fifty-five (55) MGD rating, expressed on an annual average daily flow ( AADF ) basis. The improvements also provided firm peak flow effluent disposal capabilities, while improving the existing facilities operations and maintenance and promoting cost efficiencies for the disposal of sludge. Expressed on an AADF basis, the facility was expanded to sixty-two (62) MGD in 2006, to sixty-four (64) MGD shortly thereafter in 2006, and to seventy (70) MGD in The WPB Utility Department staff serving the ECR Facilities consists of two (2) employees certified as Class-A operators, two (2) certified as Class-B operators, six (6) certified as Class-C operators and three (3) operator trainees. The System currently serves an estimated population in excess of four hundred thousand (400,000). The System operates pursuant to Florida Department of Environmental Protection ( FDEP ) Operating Permit Number FL issued a five (5) year permit effective on May 5, 2017 and expires on May 4, 2021 ( Operation Permit ). The Operation Permit is issued to West Palm Beach as operator of the System on behalf of the ECR Board. The System is in good standing with the FDEP and has no reason to believe that the Operation Permit will not be renewed in the ordinary course. Under the Interlocal Agreement, West Palm Beach is charged with compliance with and timely renewal of the Operation Permit. The System process train consists of large solids removal, grit removal, activated sludge biological treatment, clarification and effluent disinfection prior to transport to the disposal wells. The System has a reclaimed water treatment facility which treats up to twenty-five (25) MGD which is delivered to the County for sale and disposal as reclaimed water. Unused reclaimed water is disposed of in the ECR disposal wells. See THE SYSTEM Sludge and Effluent Disposal herein. The System has an emergency generation facility that can operate the entire facility upon loss of electric service. The following chart shows the average monthly influent flows to the System from July 2009 to September The average monthly plant flow ranged from a maximum of forty-nine and forty-four hundredths (49.44) MGD in July 2009 to a maximum of thirty-seven and seventy-seven hundredths (37.77) MGD in February 2017, with an average influent flow over this period of forty-one and forty-five hundredths (41.45) MGD. Spikes in flows shown on the table correspond to significant rainfall events. 20

29 Source: Utilities Department City of West Palm Beach. The following table shows a comparison of the contractual capacity, pursuant to the Interlocal Agreement, and the AADF during Fiscal Year 2017 for each of the five (5) Entities. Fiscal Year 2017 Wastewater Flows for ECRWRF (MGD) West Palm Beach Town of Palm Beach Palm Beach County Lake Worth Riviera Beach Total Allocated Capacity Wastewater Flow (AADF) Percent Utilized 60.94% 37.10% 72.64% 45.32% 56.42% 57.48% Source: Utilities Department, City of West Palm Beach, Florida. Septage Receiving Facility The ECR operates a septage receiving facility at the ECR Facilities to receive septage from licensed septage vendors. The septage is transferred from the septage receiving facility to the headworks of the ECR Facilities for treatment and disposal. The ECR has entered into an agreement with the Solid Waste Authority of Palm Beach County, Florida ( SWA ) to continuously operate the septage receiving facility during the term of the Interlocal Agreement. The ECR Board establishes rate and charges for the septage receiving service, which are not subject to review by any other governmental authority. The average daily septage flows received at the septage receiving facility are one hundred two thousand two hundred ninety-nine (102,299) gallons per day. Source: Utilities Department, City of West Palm Beach, Florida. 21

30 Sludge and Effluent Disposal By-products of the wastewater treatment process consist of effluent (liquids) and sludge (solids). Prior to ultimate disposal of each, the two by-products must comply with the United States Environmental Protection Agency (USEPA) and Florida Department of Environmental Protection (FDEP) criteria. Processing the waste activated sludge by-products consists of aerobic digestion, dewatering and transport to the SWA for ultimate disposal. The ECR wastewater effluent disposal facilities consist of seven (7) Class-1 deep injection wells for the disposal of secondary treated domestic wastewater effluent into the boulder zone at a depth of between 2,937 feet and 3,282 feet below surface level. Seven (7) dual-zone monitoring wells for groundwater monitoring are also permitted and installed. The permitted average daily capacity for the combined seven (7) deep injection well system is seventy (70) MGD, and the peak daily flow capacity for the combined seven (7) deep injection well system is one hundred twenty-six and three tenths (126.3) MGD. The ECR operates the injection wells pursuant to FDEP Operating Permit Number UO, a five (5) year permit expiring August 15, The ECR is currently undertaking mechanical integrity testing of the wells for purposes of renewing the FDEP Operation Permit for another five (5) years, which renewal permit the ECR anticipates receiving. The capacity of each injection well is as shown in the table below. Well No. Injection Well Permitted Capacities Maximum Permitted Capacity (MGD) IW-1R 15.0 IW W IW IW IW IW Source: Utilities Department, City of West Palm Beach, Florida. Reclaimed Water Production Facility The County, under an Interlocal Agreement with the ECR Board and WPB, dated May 20, 2008 (the Reclaimed Water Agreement ), constructed a high level disinfection reclaimed water production facility at the ECR Facilities, and transferred title to the ECR. The purpose of the reclaimed water production facility was for the County to meet industrial cooling water demand at the Florida Power & Light Company ( FPL ) West County Energy Center. The County has an agreement with FPL, pursuant to which FPL has the right to purchase from the County twenty-two (22) MGD (average daily flow) and twenty-seven (27) MGD (peak daily flow) of reclaimed water from the ECR Facilities pursuant to the Reclaimed Water Agreement. The reclaimed water production facility diverts secondary treated effluent from the injection well piping system to a filtration, high level disinfection, storage and pumping facility operated by the ECR. Such diversion has significantly reduced the amount of effluent required to be disposed of by the ECR s injection well system, provided any reclaimed water not used by the County is disposed of in the injection well system. Pursuant to the Reclaimed Water Agreement, the County is responsible for payment of the direct and indirect operating and capital expenses incurred by the ECR for the reclaimed water production facility, and is obligated to deliver at a minimum an average daily wastewater flow of twelve and five tenths (12.5) MGD to the ECR Facilities. 22

31 Advanced Wastewater Treatment Facility WPB, under an Interlocal Agreement with the ECR Board dated, January 8, 2001, constructed a ten (10) MGD advanced wastewater treatment facility at the ECR Facilities, and transferred title to the ECR. The purpose of the advanced wastewater treatment facility was to provide reclaimed water to recharge WPB s water supply wellfield. Operation of the advanced wastewater treatment facility was suspended indefinitely in 2014 at the request of WPB as it was no longer needed for water supply recharge, which suspension of operation is anticipated to continue. Pursuant to the Interlocal Agreement, WPB is responsible for payment of the direct and indirect operating (minimal during operation suspension) and capital expenses incurred by the ECR for the advanced wastewater treatment facility. SWA Agreement for Biosolids Disposal The ECR has an Amended Interlocal Government Agreement for Biosolids Processing and Recycling with SWA, with an effective date of July 2, 2014 (the SWA Agreement ). The SWA Agreement provides the ECR a thirty five and eighty-three one hundredths percent (35.83%) ownership share in the capacity of the SWA s Biosolids Pelletizer Facility, and provides that the SWA will process and dispose of all of the biosolids anticipated to be generated by the ECR Facilities during the term of the SWA Agreement. Other participants with ownership of capacity in the Biosolids Pelletizer Facility are the SWA (twelve and thirty-seven hundredths percent (12.37%)), Loxahatchee River Environmental Control District (eight and ninety-six hundredths percent (8.96%)), Palm Beach County (seventeen and eighty-two hundredths percent (17.82%)), South Central Regional Wastewater Treatment and Disposal Board (fourteen and seventy-five hundredths percent (14.75%)) and the City of Boca Raton (ten and twenty-seven hundredths percent (10.27%)). The term of the SWA Agreement extends until August 9, 2029, at which time the participants in the Biosolids Pelletizer Facility may determine to continue its operation. The ECR is obligated to pay its pro rata share of the capital and operating expenses of the Biosolid Pelletizer Facility. Regulatory Compliance The FDEP and the USEPA promulgate rules that regulate and govern the operation of the ECR Facilities. Regulations deal primarily with the quality of the effluent discharged from the ECR Facilities, the disposal of sludge generated by the ECR Facilities, the discharge of pollutants into the groundwater and the nature of waste material discharged into the collection facilities of the ECR Facilities. Associated with these regulations are monitoring and reporting requirements. The ECR entered into a consent order with FDEP on April 18, 2017, regarding operation of the aeration blowers at the ECR which led to temporary effluent limitations exceedances. The ECR has complied with the requirements of the Consent Order. The ECR Facilities is currently in compliance with its FDEP permits and USEPA rules and regulations. The ECR intends to continue to perform renewals, replacements and recommended capital improvements to the ECR Facilities so that the facilities can reasonably be expected to meet the capacity requirements of the ECR Facilities and remain in compliance with all regulatory requirements. Physical Condition, Treatment Performance and Regulatory Compliance of the ECR Facilities The ECR endeavors to operate and maintain the ECR Facilities in good to excellent condition under general municipal utility standards prevalent in government owned and operated utilities in southeast Florida and regulatory standards. 23

32 Capital Improvement Program The ECR has identified certain capital improvements, extensions and additions to the System during the next five (5) Fiscal Years. Many of the improvements contained in the ECR s five (5) year capital improvement program are primarily designed to repair, upgrade and enhance existing facilities of the System to enable such facilities to function satisfactorily, reliably and efficiently. The costs of some of those improvements are currently expected to be funded from existing cash balances in certain funds and accounts of the System and from Revenues expected to be generated by the System during the next five (5) Fiscal Years. The five (5) Year ECR capital improvement program is set forth below. Summary of Capital Funding Requirements Forecast Period Estimated Appropriations Fiscal Years Percent of Total 2014 Project $12,495, % 2016 Project $10,824, % Other Capital Expenditures $45,141, % Total $68,461, % The ECR evaluates the System capital improvement program annually. As the capital improvement program is updated, any required or recommended additions, upgrades or renovations to the ECR Facilities and the need to issue Additional Bonds to finance all or a portion of the costs thereof will be determined in consultation with the consulting engineers, and/or financial adviser for the ECR. The ECR anticipates issuing additional debt for such purpose sometime in the next two (2) years. The ECR intends to continue to perform renewals, replacements and recommended capital improvements to the System so that the ECR Facilities can reasonably be expected to meet the capacity requirements of the System and remain in compliance with all regulatory requirements. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 24

33 Rates, Fees and Charges Wastewater Flow Charges and Septage Rates The following is a summary of the Wastewater Flow Charges for Fiscal Year 2016: East Central Regional Wastewater Treatment Facility Operating Fund Flow Charges For The Fiscal Year 2016 (in thousands of dollars) East Central Regional Wastewater Treatment Facility Actual Wastewater Flow Charges FY FY 2016 Town of Palm Beach Palm Beach County Fiscal Year West Palm Beach Lake Worth Riviera Beach Total 2016 $ 6,140,557 $ 1,130,024 $ 4,284,777 $ 6,794,019 $ 2,368,158 $ 20,717, $ 5,667,611 $ 941,196 $ 3,977,119 $ 5,896,120 $ 2,278,154 $ 18,760, $ 3,939,258 $ 755,093 $ 2,838,467 $ 4,891,619 $ 1,701,201 $ 14,125, $ 3,534,062 $ 577,866 $ 2,002,132 $ 4,641,483 $ 1,507,529 $ 12,263, $ 3,770,684 $ 624,669 $ 2,207,528 $ 4,658,773 $ 1,494,874 $ 12,756,527 East Central Regional Wastewater Treatment Facility Actual Flow FY FY 2016 Town of Palm Beach Palm Beach County Fiscal Year West Palm Beach Lake Worth Riviera Beach Total , , , , , , , , , , , , , , , , , , , , , , , , , East Central Regional Wastewater Treatment Facility % of Total Actual Flow FY FY 2016 Town of Palm Beach Palm Beach County Fiscal Year West Palm Beach Lake Worth Riviera Beach Total % 5.45% 20.68% 32.79% 11.43% % % 5.02% 21.20% 31.43% 12.14% % % 5.35% 20.09% 34.63% 12.04% % % 4.71% 16.33% 37.85% 12.29% % % 4.90% 17.31% 36.52% 11.72% % Source: Utilities Department, City of West Palm Beach, Florida. 25

34 The Septage Rates for Fiscal Year 2017 are $65.67 per 1,000 gallons Monday-Friday, and $98.51 on weekends and holidays. The Septage Rates for Fiscal Year 2018 are $67.64 per 1,000 gallons Monday-Friday, and $ on weekends and holidays. Source: Utilities Department, City of West Palm Beach, Florida. General HISTORICAL OPERATING RESULTS The historical operating results presented below for the ECR Facilities were prepared based on financial information compiled and provided by the ECR and information included in the Comprehensive Annual Financial Reports of the Entities for the Fiscal Years indicated. In general, the historical operating results have been prepared in a manner consistent with the requirements of the Resolution relative to the determination of Net Revenues of the ECR Facilities. Therefore, the amounts shown reflect certain differences in the presentation of the financial results when compared to the Annual Financial Reports of the ECR and the Entities. Specifically, the major differences are that the historical results of operations reflected in the tables below do not include: (i) depreciation and amortization expenses as part of Current Expenses; (ii) as part of Current Expenses, any other transfers and capital accounts, the payment of which are not considered Current Expenses under the Resolution; and (iii) in interest income, any earnings derived from: (a) capacity charges, (b) Construction Fund balances, (c) any other balances held in any fund or account which are restricted to such fund or account, or (d) fair market value adjustments required by the Government Accounting Standards Board Statement No. 31. Summary of Historical Operating Results The historical operating results for the ECR Facilities for the Fiscal Years ended September 30, 2011 through 2016 are summarized below. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 26

35 East Central Regional Wastewater Treatment Facilities Operations Board Historical Revenues, Expenses and Debt Service Coverage Fiscal Year Ended September 30, Description Gross Revenues: Operating Revenues Wastewater Flow Charges Palm Beach County $5,100,940 $5,604,673 $5,994,149 $7,348,635 $8,155,401 City of West Palm Beach 4,560,427 3,585,464 3,923,882 5,091,062 5,561,305 City of Lake Worth 1,581,175 1,505,119 2,255,654 3,493,067 3,854,188 Riviera Beach Utility District 1,072,652 1,140,586 1,351,900 2,000,818 2,130,176 Town of Palm Beach 441, , , ,617 1,016,465 Total Wastewater Flow Charges $12,756,527 $12,263,071 $14,125,638 $18,760,199 $20,717,535 Other Operating Revenue 1,754,358 1,941,735 2,081,181 2,119,419 2,320,371 Transfer (to) / from Rate Stabilization Fund Transfer from Operating / Catastrophic Reserve Fund Total Operating Revenues $14,510,885 $14,204,806 $16,206,819 $20,879,618 $23,037,906 Other Revenues: Interest Income $150,772 $108,573 $121,464 $216,686 $314,455 Other Revenues Other Payments from Entities: Palm Beach County $1,980,162 $1,776,538 $1,916,314 $1,612,361 $4,118,472 City of West Palm Beach 1,603,839 1,880,113 2,328,361 1,532,152 1,424,852 City of Lake Worth 1,355,151 1,157,684 1,242, , ,309 Riviera Beach Utility District 781, , , , ,041 Town of Palm Beach 549, , , , ,189 Total Other Payments from Entities $6,269,661 $5,890,473 $6,683,295 $4,881,122 $7,775,863 Total Other Revenues and Other Payments from Entities: $6,420,434 $5,999,046 $6,804,759 $5,097,808 $8,090,318 Total Gross Revenues $20,931,319 $20,203,851 $23,011,577 $25,977,426 $31,128,224 Operating Expenses: Contractual Services: Administration $4,044,312 $4,292,752 $4,168,813 $4,000,467 $4,174,301 Waste Disposal 2,371,065 1,994,030 2,046,653 2,974,266 2,640,404 Other 956, , ,638 1,149,113 2,505,838 Repairs and Maintenance 1,488,544 1,751,812 1,708,348 1,388,080 1,888,154 Materials and Supplies 1,579,543 1,544,221 1,659,932 1,379,265 1,052,676 Utilities 3,042,288 2,791,480 2,936,431 2,914,219 2,796,576 General and Administrative 363, , , , ,907 Total Operating Expenses $13,844,920 $13,689,362 $13,944,032 $14,239,780 $15,506,856 Net Revenues $7,086,399 $6,514,489 $9,067,545 $11,737,646 $15,621,368 Annual Debt Service Requirement Series 2012 Bonds $12,821 $259,000 $1,049,000 $1,554,385 $1,830,150 Series 2013 Bonds 0 95, ,200 1,251,800 1,251,544 Series 2014 Bonds ,830,004 4,505,888 Series 2016 Bonds ,411 Total Annual Debt Service Requirement $12,821 $354,627 $2,010,200 $6,636,189 $7,614,993 Debt Service Coverage - Net Revenues: Debt Service Coverage - Calculated 55272% 1837% 451% 177% 205% Debt Service Coverage - Required 110% 110% 110% 110% 110% Subordinate Debt Requirement: State Revolving Fund Loan - CS $1,266,670 $0 $0 $0 $0 State Revolving Fund Loan - CS , Total Subordinate Debt Requirement $1,303,765 $0 $0 $0 $0 27

36 East Central Regional Wastewater Treatment Facilities Operations Board Historical Revenues, Expenses and Debt Service Coverage Fiscal Year Ended September 30, Description Subordinate Debt Service Coverage (SRF): Net Revenues $7,086,399 $6,514,489 $9,067,545 $11,737,646 $15,621,368 Less: Outstanding Bonds Debt Service (12,821) (354,627) (2,010,200) (6,636,189) (7,614,993) Less: Allowance for Outstanding Bonds Coverage at 10% (1,282) (35,463) (201,020) (663,619) (761,499) Net Revenues Available for Subordinate Debt Requirement $7,072,296 $6,124,399 $6,856,325 $4,437,838 $7,244,876 Test 1 - Net Revenues Excluding Reserved Revenue Account Net Revenues Available for Subordinate Debt Requirement $7,072,296 $6,124,399 $6,856,325 $4,437,838 $7,244,876 Total Subordinate Debt Requirement 1,303, Debt Service Coverage - Calculated 542% N/A N/A N/A N/A Debt Service Coverage - Required 115% N/A N/A N/A N/A Required Annual Transfers and Deposits: Transfer to Renewal and Replacement Fund (471) $3,242,100 $3,895,924 $4,586,057 $3,542,730 $4,865,350 Transfers to Operating/Catastrophic Reserve Fund Total Required Transfers and Deposits $3,242,100 $3,895,924 $4,586,057 $3,542,730 $4,865,350 Available Funds for Other System Use After Required Transfers $2,527,713 $2,263,939 $2,471,288 $1,558,727 $3,141,025 Additional Annual Transfers and Deposits: Transfer to Renewal and Replacement Fund (471) $564,062 $708,906 $1,264,594 $1,338,392 $2,910,513 Transfers to Operating/Catastrophic Reserve Fund 1,062,436 1,285, , Total Additional Transfers and Deposits $1,626,498 $1,994,550 $2,097,238 $1,338,392 $2,910,513 Available Funds for Other System Use After Transfers $901,215 $269,389 $374,050 $220,335 $230,512 DEBT SERVICE SCHEDULE Set forth below are the debt service requirements of the Series 2017 Bonds and the Prior Bonds and the total combined debt service of all Bonds Outstanding immediately following issuance of the Series 2017 Bonds Bonds (Remaining after 2017 Refunding) Existing Parity Debt Service Series 2017 (Refunding Bonds) Aggregate Debt Service Period Ending 2012 Bank Loan 2013 Bank Loan 2016 Bank Loan 10/01/2018 $1,830,118 $1,249,880 $172,500 $1,584,139 $4,836,637 $3,146,189 $7,982,825 10/01/2019 1,829,223 1,253, ,500 1,578,476 4,833,670 4,045,100 8,878,770 10/01/2020 1,827,773 1,251, ,500 1,582,598 4,834,454 4,045,100 8,879,554 10/01/2021 1,825,768 1,249, ,500 1,586,362 4,833,942 4,045,100 8,879,042 10/01/2022 1,828,208 1,251, ,500 1,579,769 4,832,133 4,045,100 8,877,233 10/01/2023-1,248,520 1,247,500 2,337,962 4,833,982 4,045,100 8,879,082 10/01/ ,493,750-2,493,750 4,045,100 6,538,850 10/01/ ,570,100 6,570,100 10/01/ ,568,850 6,568,850 10/01/ ,566,350 6,566,350 10/01/ ,572,350 6,572,350 10/01/ ,571,100 6,571,100 10/01/ ,567,600 6,567,600 28

37 2014 Bonds (Remaining after 2017 Refunding) Existing Parity Debt Service Series 2017 (Refunding Bonds) Aggregate Debt Service Period Ending 2012 Bank Loan 2013 Bank Loan 2016 Bank Loan 10/01/ $6,566,600 $6,566,600 10/01/ ,567,600 6,567,600 10/01/ ,565,600 6,565,600 10/01/ ,568,000 6,568,000 10/01/ ,571,000 6,571,000 10/01/ ,569,250 6,569,250 10/01/ ,567,500 6,567,500 10/01/ ,570,250 6,570,250 10/01/ ,566,750 6,566,750 10/01/ ,566,750 6,566,750 10/01/ ,564,500 6,564,500 10/01/ ,569,500 6,569,500 10/01/ ,565,750 6,565,750 10/01/ ,573,000 6,573,000 LITIGATION There is no litigation pending that seeks to restrain or enjoin the issuance or delivery of the Series 2017 Bonds or contesting the proceedings or authority under which they are to be issued or the creation, organization or existence of the ECR or, if determined adversely to the ECR, would have a material adverse impact on the ability of the System to generate sufficient Revenues to pay debt service on the Series 2017 Bonds. The ECR experiences routine litigation and claims incidental to the conduct of its affairs. In the opinion of Issuer Counsel of the ECR, there are no lawsuits presently pending or, to the best of its knowledge, threatened, the adverse outcome of which would impair the ECR s ability to perform its obligations to the owners of the Series 2017 Bonds. FUTURE FINANCINGS The ECR anticipates issuing additional parity debt sometime during the next two (2) years to pay for capital improvements to the System. LEGAL MATTERS Certain legal matters incident to the issuance of the Series 2017 Bonds and with regard to the taxexempt status of the interest on the Series 2017 Bonds (see TAX MATTERS herein) are subject to the legal opinion of Greenberg Traurig, P.A., Bond Counsel to the ECR. The signed legal opinion of Bond Counsel, substantially in the form attached hereto as APPENDIX D, dated and premised on law in effect as of the date of issuance of the Series 2017 Bonds, will be delivered on the date of issuance of the Series 2017 Bonds. The actual legal opinion to be delivered may vary from the form attached hereto to reflect facts and law on the date of delivery. The opinion will speak only as of its date, and subsequent distribution of it by recirculation of this Official Statement or otherwise shall create no implication that Bond Counsel has reviewed or expresses any opinion concerning any of the matters referenced in the opinion subsequent to its date of issuance. 29

38 Greenberg Traurig, P.A. is also serving as disclosure counsel to the ECR. Certain legal matters will be passed on for the ECR by Greenberg Traurig, P.A., as Issuer Counsel for the ECR. Greenspoon Marder, P.A. is acting as counsel to the Underwriter. The legal opinions and other letters of counsel to be delivered concurrently with the delivery of the Series 2017 Bonds express the professional judgment of the attorneys rendering the opinions or advice regarding the legal issues and other matters expressly addressed therein. By rendering a legal opinion or advice, the giver of such opinion or advice does not become an insurer or guarantor of the result indicated by that opinion, or the transaction on which the opinion or advice is rendered, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. ENFORCEABILITY OF REMEDIES The remedies available to the owners of the Series 2017 Bonds upon the occurrence of a default under the Resolution are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, the remedies specified by the Resolution and the Series 2017 Bonds may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Series 2017 Bonds (including Bond Counsel s approving opinion) will be qualified, as to the enforceability of the various legal instruments, by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors enacted before or after such delivery and to general principles of equity (whether sought in a court of law or equity). TAX MATTERS The Internal Revenue Code of 1986, as amended (the Code ), includes requirements which the Issuer must continue to meet after the issuance of the Series 2017 Bonds in order that the interest on the Series 2017 Bonds be and remain excludable from gross income for federal income tax purposes. The ECR s failure to meet these requirements may cause the interest on the Series 2017 Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2017 Bonds. The Issuer has covenanted in the Master Resolution to take the actions required by the Code in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Series 2017 Bonds. In the opinion of Bond Counsel, assuming the accuracy of certain representations and certifications of the ECR and continuing compliance by the ECR with the tax covenants referred to above, under existing statutes, regulations, rulings and court decisions, the interest on the Series 2017 Bonds is excludable from gross income for federal income tax purposes. Interest on the Series 2017 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Series 2017 Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Bond Counsel is further of the opinion that the Series 2017 Bonds and the income thereon are not subject to taxation under the laws of the State, except as to estate taxes and taxes under Chapter 220, Florida Statutes, on interest, income or profits on debt obligations owned by corporations as defined. Bond Counsel will express no opinion as to any other tax consequences regarding the Series 2017 Bonds. Prospective purchasers of the Series 2017 Bonds should consult their own tax advisors as to the status of interest on the Series 2017 Bonds under the tax laws of any state other than Florida. 30

39 Except as described above, Bond Counsel will express no opinion regarding the federal income tax consequences resulting from the receipt or accrual of the interest on the Series 2017 Bonds, or the ownership or disposition of the Series 2017 Bonds. Prospective purchasers of Series 2017 Bonds should be aware that the ownership of Series 2017 Bonds may result in other collateral federal tax consequences, including (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase or carry the Series 2017 Bonds, (ii) the reduction of the loss reserve deduction for property and casualty insurance companies by 15 percent of certain items, including the interest on the Series 2017 Bonds, (iii) the inclusion of the interest on the Series 2017 Bonds in the earnings of certain foreign corporations doing business in the United States for purposes of a branch profits tax, (iv) the inclusion of the interest on the Series 2017 Bonds in the passive income subject to federal income taxation of certain Subchapter S corporations with Subchapter C earnings and profits at the close of the taxable year and (v) the inclusion of interest on the Series 2017 Bonds in the determination of the taxability of certain Social Security and Railroad Retirement benefits to certain recipients of such benefits. The nature and extent of the other tax consequences described above will depend on the particular tax status and situation of each owner of the Series 2017 Bonds. Prospective purchasers of the Series 2017 Bonds should consult their own tax advisors as to the impact of these other tax consequences. Bond Counsel s opinions are based on existing law, which is subject to change. Such opinions are further based on factual representations made to Bond Counsel as of the date thereof. Bond Counsel assumes no duty to update or supplement its opinions to reflect any facts or circumstances that may thereafter come to Bond Counsel s attention, or to reflect any changes in law that may thereafter occur or become effective. Moreover, Bond Counsel s opinions are not a guarantee of a particular result, and are not binding on the Internal Revenue Service or the courts; rather, such opinions represent Bond Counsel s professional judgment based on its review of existing law, and in reliance on the representations and covenants that it deems relevant to such opinion. Original Issue Premium Certain of the Series 2017 Bonds ( Premium Bonds ) may be offered and sold to the public at a price in excess of their stated redemption price (the principal amount) at maturity (or earlier for certain Premium Bonds callable prior to maturity). That excess constitutes bond premium. For federal income tax purposes, bond premium is amortized over the period to maturity of a Premium Bond, based on the yield to maturity of that Premium Bond (or, in the case of a Premium Bond callable prior to its stated maturity, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on that Premium Bond), compounded semiannually (or over a shorter permitted compounding interval selected by the owner). No portion of that bond premium is deductible by the owner of a Premium Bond. For purposes of determining the owner s gain or loss on the sale, redemption (including redemption at maturity) or other disposition of a Premium Bond, the owner s tax basis in the Premium Bond is reduced by the amount of bond premium that accrues during the period of ownership. As a result, an owner may realize taxable gain for federal income tax purposes from the sale or other disposition of a Premium Bond for an amount equal to or less than the amount paid by the owner for that Premium Bond. Owners of Premium Bonds should consult their own tax advisers as to the determination for federal income tax purposes of the amount of bond premium properly accruable in any period with respect to the Premium Bonds and as to other federal tax consequences, and the treatment of bond premium for purposes of state and local taxes on, or based on, income. 31

40 Changes in Federal and State Tax Law From time to time, there are legislative proposals suggested, debated, introduced or pending in Congress that, if enacted into law, could alter or amend one or more of the federal tax matters described above including, without limitation, the excludability from gross income of interest on the Series 2017 Bonds, adversely affect the market price or marketability of the Series 2017 Bonds, or otherwise prevent the holders from realizing the full current benefit of the status of the interest thereon. Currently, legislation designed to bring about comprehensive reform of the United States Tax Code is being considered in Congress. The House of Representatives and Senate have passed separate and distinct comprehensive tax bills. Each bill includes provisions that would directly and indirectly adversely affect the ability of issuers to issue tax-exempt bonds and could indirectly adversely affect the market price or marketability of the Series 2017 Bonds. Both bills contain provisions that would eliminate the ability of issuers to issue advance refunding bonds after December 31, Both bills also contain provisions that would significantly lower the corporate tax rate and potentially reduce the marginal tax rate for many personal income taxpayers. Neither bill as proposed affects the excludability from gross income of interest on the Series 2017 Bonds if they are issued, as expected, prior to January 1, The bills are expected to go to conference and for formal discussions to reconcile differences between the bills to commence during the first full week of December However, it cannot be predicted whether or in what form this proposed legislation or any other such proposal may be enacted, or whether, if enacted, any such proposal would affect the Series 2017 Bonds. If enacted into law, such legislative proposals could affect the market price or marketability of the Series 2017 Bonds. Prospective purchasers of the Series 2017 Bonds should consult their tax advisors as to the impact of any proposed or pending legislation. Information Reporting and Backup Withholding Interest paid on tax-exempt bonds such as the Series 2017 Bonds is subject to information reporting to the Internal Revenue Service in a manner similar to interest paid on taxable obligations. This reporting requirement does not affect the excludability of interest on the Series 2017 Bonds from gross income for federal income tax purposes. However, in conjunction with that information reporting requirement, the Code subjects certain non-corporate owners of Series 2017 Bonds, under certain circumstances, to backup withholding at the rates set forth in the Code, with respect to payments on the Series 2017 Bonds and proceeds from the sale of Series 2017 Bonds. Any amount so withheld would be refunded or allowed as a credit against the federal income tax of such owner of Series 2017 Bonds. This withholding generally applies if the owner of Series 2017 Bonds (i) fails to furnish the payor such owner s social security number or other taxpayer identification number ( TIN ), (ii) furnished the payor an incorrect TIN, (iii) fails to properly report interest, dividends, or other reportable payments as defined in the Code, or (iv) under certain circumstances, fails to provide the payor or such owner s securities broker with a certified statement, signed under penalty of perjury, that the TIN provided is correct and that such owner is not subject to backup withholding. Prospective purchasers of the Series 2017 Bonds may also wish to consult with their tax advisors with respect to the need to furnish certain taxpayer information in order to avoid backup withholding. CONTINUING DISCLOSURE (a) Disclosure of Annual Information. The ECR has agreed, in accordance with the provisions of Rule 15c2-12 in effect from time to time and applicable to the Series 2017 Bonds (the Rule ), promulgated by the Securities and Exchange Commission (the Commission ) pursuant to the Securities Exchange Act of 1934, to provide, either directly or indirectly through a designated agent, to the Municipal Securities Rulemaking Board ( MSRB ) through the Electronic Municipal Market Access ( EMMA ) system, and to the appropriate State of Florida information depository ( SID ), if any, 32

41 operated or designated by the State, respectively, in accordance with the Rule, (i) on or before March 31 following the end of each Fiscal Year of the ECR Board commencing with the Fiscal Year ending September 30, 2017, annual financial information and operating data concerning the System, of the type included in this Official Statement, including operating revenues, debt service coverage by Net Revenues, rates and charges of the System, a summary of the current capital improvements plan and information concerning permitted capacities and actual usage of capacity of the System and financial statements (audited, or, if not available during such time period, unaudited) and, (ii) if not submitted as part of such financial information and operating data described above, then, when available, audited financial statements for the ECR Board prepared in accordance with generally accepted accounting principles applicable to governmental entities from time to time by the Governmental Accounting Standards Board. (The information required to be disclosed in this paragraph shall be hereinafter referred to as the Annual Report. ) (b) Disclosure of Listed Events. The ECR agrees to provide either directly or indirectly through a designated agent, in a timely manner, to (i) MSRB using the EMMA system on EMMA Compliant Format (as defined below) and (ii) the SID, if any, notice of the occurrence of any of the following events in a timely manner not in excess of ten (10) business days after the occurrence of such event if applicable to the Series 2017 Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Series 2017 Bonds, or other material events affecting the tax status of the Series 2017 Bonds; (7) modifications to rights of holders of the Series 2017 Bonds, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution or sale of any property securing repayment of the Series 2017 Bonds, if material (the Series 2017 Bonds are secured solely by the Net Revenues); (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the ECR (which is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the ECR in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the ECR, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but 33

42 subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the ECR); (13) the consummation of a merger, consolidation, or acquisition involving the ECR or the sale of all or substantially all of the assets of the ECR, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional trustee or the change of name of the trustee, if material. (c) Termination. The ECR reserves the right to terminate its obligation to provide the Annual Report and notices of listed events, as set forth above, if and when ECR no longer remains an obligated person with respect to the Series 2017 Bonds (within the meaning of the Rule). If the ECR believes such condition exists, the ECR will provide notice of such termination to the MSRB, the ECR Board and the SID, if any. (d) Undertaking for Benefit of Holders and Beneficial Owners. The ECR agrees that its undertaking pursuant to the Rule set forth in the Resolution is intended to be for the benefit of the holders and beneficial owners of the Series 2017 Bonds and shall be enforceable by any holder or beneficial owner; provided that the right to enforce the provisions of this undertaking shall be limited to a right to obtain specific enforcement of the ECR s obligations described herein and any failure by the ECR to comply with the provisions of this undertaking shall not be an event of default with respect to the Series 2017 Bonds under the Resolution. (e) Voluntary Disclosure Shall Not Bind The ECR. Any voluntary inclusion by the ECR of information in its Annual Report of supplemental information that is not required by the Rule shall not expand the obligations of the ECR under the Rule and the ECR shall have no obligation to update such supplemental information or include it in any subsequent report. (f) Third Parties. The covenants described herein are solely for the benefit of the holders and beneficial owners of the Series 2017 Bonds and shall not create any rights in any other parties. (g) Amendment; Waiver. Notwithstanding any other provision of the Resolution, the ECR may amend the provisions of the Resolution described under this caption Continuing Disclosure and any such provision may be waived, provided that the following conditions are satisfied: (1) If the amendment or waiver relates to the provisions of paragraphs (a), (b), or (c) above, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the ECR or the type of business conducted by the ECR; (2) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Series 2017 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (3) The amendment or waiver does not materially impair the interests of holders and beneficial owners as determined either by nationally recognized bond counsel, or by an approving 34

43 vote of the holders of at least a majority in aggregate principal amount of the then outstanding Series 2017 Bonds pursuant to the terms of the Resolution. In the event of any such amendment or waiver of a provision described above, the ECR shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of annual financial information or operating data being presented by the ECR. In addition, if the amendment or waiver relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as set forth in subsection (b) and (ii) the Annual Report for the year in which the change is made must present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The ECR has agreed to comply with all requirements imposed by the MSRB with respect to EMMA including the filing of the Annual Report and material event notices in a word searchable format that can be viewed on-line and can be printed and downloaded ( EMMA Compliant Format ). If the State of Florida creates a SID which is applicable to the ECR Board, the ECR will make the required filings with such SID. The term Beneficial Owner used in paragraph (c) above shall mean any person which (i) has the power, directly or indirectly, to rate or consent with respect to, or to dispose of ownership of any Bonds (including persons holding Bonds through nominees, depositories or the intermediaries) or (ii) is treated as the owner of any Bonds for federal income tax purposes. The ECR Board has not entered into any undertakings under the Rule with respect to the Prior Bonds represented by the Bank Loans. The ECR previously entered into a continuing disclosure undertaking (the Prior Undertaking ) in connection with the Series 2014 Bonds. In the Prior Undertaking, the ECR agreed to provide certain annual financial information and operating data concerning the System to the MSRB through EMMA on or before March 31 of each year for the fiscal year ending on the preceding September 30. ECR filed its annual financial information and operating data between 99 and 251 days later than March 31 for its fiscal years ended September 30, 2014, 2015 and 2016, respectively, and filed its unaudited financial statements 48 days later than March 31 for its fiscal year ended September 30, WPB on behalf of the ECR has committed to full compliance with its continuing disclosure undertakings going forward. WPB has appointed DAC to serve as the dissemination agent for the Series 2017 Bonds and the outstanding 2014 Bonds. GASB STATEMENT NO. 45 The Government Accounting Standards Board ( GASB ), which establishes financial reporting and accounting requirements for governmental entities, issued its Statement No. 45 in June 2004 ( GASB 45 ). GASB 45 details new financial reporting guidelines that require state and local governmental entities to report their unfunded actuarial accrued liabilities for health care and other non-pension postemployment benefits (collectively referred to as OPEB ) as well as their annual OPEB costs. Historically, governmental entities generally accounted for OPEB on a pay-as-you-go basis, reporting only the cost of OPEB due in the current fiscal year. As a result of GASB 45, governmental entities are required to utilize an actuarial method of accounting that takes into account unfunded liabilities related to 35

44 OPEB. In order to receive a clean opinion in its annual audit, governmental entities have to comply with the requirements of GASB 45. Since the ECR has no employees and no OPEB, GASB 45 does not apply to the ECR. FINANCIAL STATEMENTS The Financial Report of the ECR for the Fiscal Year ended September 30, 2016 and the report of Grau & Associates, independent certified public accountants, in connection therewith, dated July 12, 2017, are included in APPENDIX B as part of the public records of the ECR. The consent of Grau & Associates was not requested for the reproduction of its audit report in this Official Statement. The auditor has performed no services in connection with the preparation of this Official Statement and is not associated with the offering of the Series 2017 Bonds. RATINGS S&P Global Ratings, a division of Standard & Poor s Financial Services LLC ( S&P ), has assigned to the Series 2017 Bonds a rating of AA+ with a stable outlook and Fitch Ratings, Inc. ( Fitch ) has assigned to the Series 2017 Bonds a rating of AA+ with a stable outlook. Such ratings reflect only the view of such organizations and any desired explanation of the significance of such ratings may be obtained from the rating agency furnishing the same, at the following addresses: Standard & Poor s Corporation, 38th Floor, New York, New York 10041; Fitch Ratings, Inc., One State Street Plaza, New York, New York Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that the ratings provided by S&P, and Fitch, respectively, will continue for any given period of time or that they will not be revised downward or withdrawn entirely by such rating agencies if, in their judgment, circumstances so warrant. Any downward revision or withdrawal of any such ratings may have an adverse effect on the market price of the Series 2017 Bonds. A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. MISCELLANEOUS All information included in this Official Statement has been provided by the ECR, except where attributed to other sources. The summaries of and references to all documents, statutes, reports, and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such reference or summary is qualified in its entirety by reference to each such document, statute, report or other instrument. This Official Statement is not intended to be construed as a contract or agreement between the ECR and the purchasers or holders of any of the Series 2017 Bonds. The information contained in this Official Statement is presented for the guidance of prospective purchasers of the Series 2017 Bonds described therein. The information in this Official Statement has been compiled from officials and other sources and, while not guaranteed by the ECR, is believed to be correct. To the extent that any statements made in this Official Statement and the appendices attached hereto involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. FINANCIAL ADVISOR The ECR has retained PFM Financial Advisors LLC, Coral Gables, Florida as financial advisor with respect to the authorization and issuance of the Series 2017 Bonds. The Financial Advisor is not obligated to undertake and have not undertaken to make an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in this Official 36

45 Statement. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. VERIFICATION OF MATHEMATICAL COMPUTATIONS The accuracy of (i) the mathematical computations of the adequacy of the securities and moneys held by the Escrow Agent under the Escrow Agreement to pay principal of and interest on the Refunded Bonds from April 1, 2018 through and including October 1, 2024, being the redemption date, and (ii) the yield on the Series 2017 Bonds will be verified by Robert Thomas CPA, LLC. UNDERWRITING Citigroup Global Markets Inc., (the Underwriter ) has agreed to purchase the Series 2017 Bonds at a price of $98,991, (which represents the $82,350, principal amount of the Series 2017 Bonds, plus original issue premium of $16,880,820.40, minus an Underwriter s discount of $239,606.66). The Underwriter will purchase all of the Series 2017 Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions contained in a Bond Purchase Agreement relating to the Series 2017 Bonds and to the approval of certain legal matters by Bond Counsel. The Series 2017 Bonds are offered for sale to the public at the prices and yields set forth on the inside cover page of this Official Statement. The Series 2017 Bonds may be offered and sold to certain dealers at prices lower than or yields higher than such offering prices and yields. After the initial public offering, such public offering prices and yields may be changed, from time to time, by the Underwriters. CONTINGENT FEES The ECR has retained Bond Counsel, the Disclosure Counsel and the Financial Advisor with respect to the authorization, sale, execution and delivery of the Series 2017 Bonds. Payment of the fees of such professionals and an underwriting discount to the Underwriter (including the fees of Underwriter s Counsel) are each contingent upon the issuance of the Series 2017 Bonds. The Underwriter and its affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The Underwriter and its affiliates have, from time to time, performed, and may in the future perform, various investment banking services for the ECR Board for which they received or will receive customary fees and expenses. In the ordinary course of their various business activities, the Underwriter and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the ECR Board. DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS Section , Florida Statutes, and Rule 3E , Florida Administrative Code, requires the ECR to disclose each and every default as to payment of principal and interest after December 31, 1975 with respect to obligations issued or guaranteed by the ECR. Rule 3E further provides, however, that if the ECR in good faith believes that such disclosure would not be considered material by reasonable 37

46 investors, such disclosure may be omitted. The ECR is not in default, and since December 31, 1975, has not been in default in the payment of principal or interest with respect to any obligations issued or guaranteed by the ECR. AUTHORIZATION CONCERNING OFFICIAL STATEMENT This Official Statement has been authorized by the ECR Board. Concurrently with the delivery of the Series 2017 Bonds, the undersigned will furnish its certificate to the effect that to the best of his knowledge nothing has come to his attention which would lead him to believe that the information provided by the ECR in this Official Statement as of its date and as of the date of the delivery of the Series 2017 Bonds contains an untrue statement of a material fact or omits to state a material fact which should be included therein for the purpose for which this Official Statement is intended to be used, or which is necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. The execution and delivery of this Official Statement by the ECR Board Chairman has been duly authorized by the ECR Board. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 38

47 This Official Statement has been duly executed and delivered by the Chairman of the ECR Board. EAST CENTRAL REGIONAL WASTEWATER TREATMENT FACILITIES OPERATIONS BOARD /s/ Brian Shields Brian Shields, P.E. Chairman, ECR Board 39

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49 APPENDIX A SUPPLEMENTAL INFORMATION CONCERNING THE ENTITIES Supplemental information concerning the Entities can be reviewed on the following websites: Palm Beach County: Town of Palm Beach: City of Riviera Beach: City of Lake Worth: City of West Palm Beach: A-1

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51 APPENDIX B FINANCIAL REPORT OF THE ECR FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2016

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53 EAST CENTRAL REGIONAL WASTEWATER TREATMENT FACILITIES OPERATION BOARD FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2016

54 EAST CENTRAL REGIONAL WASTEWATER TREATMENT FACILITIES OPERATION BOARD FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2016 TOGETHER WITH REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT 1 MANAGEMENT'S DISCUSSION AND ANALYSIS 3 FINANCIAL STATEMENTS Statement of Net Position 6 Statement of Revenues, Expenses and Changes in Net Position 7 Statement of Cash Flows 8 Notes to the Financial Statements 9 REQUIRED REPORTS Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 25 Report to Management 27

55 2700 North Military Trail Suite 350 Boca Raton, Florida (561) (800) Fax (561) INDEPENDENT AUDITOR S REPORT To the Board of Operations East Central Regional Wastewater Treatment Facilities West Palm Beach, Florida Report on the Financial Statements We have audited the accompanying basic financial statements of East Central Regional Wastewater Treatment Facilities, West Palm Beach, Florida ( ECR ) as of and for the fiscal year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the ECR s basic financial statements as listed in the table of contents. The prior year comparative information has been derived from ECR s 2015 financial statements and, in our report dated November 1, 2016, we expressed an unmodified opinion on the financial statements. 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. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

56 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of ECR as of September 30, 2016, and the respective changes in financial position and cash flows thereof for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated July 12, 2017 on our consideration of the ECR s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the ECR s internal control over financial reporting and compliance. July 12,

57 MANAGEMENT S DISCUSSION AND ANALYSIS Management s Discussion and Analysis provides a narrative overview and serves as an introduction to the financial statements of the East Central Regional Wastewater Treatment Facilities Operation Board ("ECR"). The information presented should be considered in conjunction with the ECR's financial statements that follow. FINANCIAL HIGHLIGHTS The following points highlight changes in ECR financial position and activity for the fiscal year ended September 30, 2016 as compared to the prior fiscal year: Total assets increased by $27 million due to significant spending on the biosolids construction project and to proceeds from an $11 million bond issue Total liabilities increased by $16 million due primarily to the new bond issue Net position increased by $11.6 million as a result of the Entities renewal and replacement contributions of $8 million combined with $2 million of income Operating revenue, comprised of flow charges to the Entities, increased by $2 million to cover the additional cost of hiring a centrifuge company to perform water/biosolids separation. The equipment previously used for this purpose had to be discontinued due to its age. OVERVIEW OF FINANCIAL STATEMENTS The financial statements report information about the ECR using accounting methods similar to those used by private sector enterprises. The financial statements consist of a Statement of Net Position; a Statement of Revenues, Expenses, and Changes in Net Position; a Statement of Cash Flows; and Notes to the Financial Statements. The Statement of Net Position presents financial information on all of the ECR s assets, liabilities, and deferred inflows/outflows of resources. Over time, increases or decreases in net position may serve as a useful indicator of the financial health of the ECR. The Statement of Revenues, Expenses, and Changes in Net Position presents the results of activity over the course of the fiscal year and summarizes the costs associated with operating the facility and how those costs were funded. This statement also provides an explanation of the change in net position from the previous fiscal year end to the current fiscal year end. The Statement of Cash Flows lists the sources and uses of cash in the areas of operating, investing, and financing activities and the overall change in cash over the course of the fiscal year. The Notes to the Financial Statements contain required disclosures and additional information providing the reader with a greater understanding of the numerical financial statements. 3

58 CONDENSED DATA FROM THE FINANCIAL STATEMENTS Statement of Net Position Capital assets $ 148,199,374 $ 101,055,086 Other assets 119,317, ,392,029 Total assets 267,516, ,447,115 Long-term liabilities 135,768, ,778,123 Other liabilities 13,668,493 10,184,318 Total liabilities 149,437, ,962,441 Net investment in capital assets 79,316,152 74,970,600 Restricted net position 34,255,336 27,047,934 Unrestricted net position 4,507,781 4,466,140 $ 118,079,269 $ 106,484,674 Statement of Revenues, Expenses, and Changes in Net Position Revenue $ 23,037,906 $ 20,885,792 Operating expense 19,617,323 18,139,249 Operating income 3,420,583 2,746,543 Non-operating revenue (expense) 7,574 (866,416) Contributions 8,166,438 5,260,321 Change in net position 11,594,595 7,140,448 Ending net position $ 118,079,269 $ 106,484,674 FINANCIAL ANALYSIS Note that none of the restrictions on the ECR s resources (restricted net position) in any way limits the availability of resources for the future. Significant changes occurring in fiscal year 2016 relative to fiscal year 2015 are presented below. Assets Issuance of the Series 2016 revenue bonds caused assets to increase by $11 million. Capital assets, net of accumulated depreciation, increased by $47 million due to progress on the biosolids and other capital construction projects. This increase was offset by cash payments made to construction contractors. Additional details related to capital assets can be found in the Notes to the Financial Statements which appears later in this report. 4

59 Liabilities Issuance of the Series 2016 revenue bonds caused liabilities to increase by $11 million. Contracts and Retainage payables increased by a combined $7 million due to major construction projects. Additional details related to long-term debt can be found in the Notes to the Financial Statements which appears later in this report. Revenue Flow charges incurred by the Entities increased by $2 million to cover the additional cost of centrifuge services, as mentioned previously. Expense The additional cost of centrifuge services increased expenses by approximately $1.5 million. ECONOMIC FACTORS AND NEXT YEAR S EVENTS Expenses will rise in fiscal year 2017 to cover interest costs related to the Series 2016 bond issue. Revenues from the Entities are expected to rise by the same amount to offset that expense. In general, ECR activity is expected to continue increasing at a moderate pace as populations in its service area grow. CONTACT INFORMATION This financial report was prepared by the City of West Palm Beach. Related questions or requests for additional financial information should be directed to the City of West Palm Beach Finance Department, 401 Clematis Street, West Palm Beach, Florida

60 EAST CENTRAL REGIONAL WASTEWATER TREATMENT FACILITIES OPERATION BOARD STATEMENT OF NET POSITION SEPTEMBER 30, 2016 with comparative totals for 2015 ASSETS Current - unrestricted: Cash and cash equivalents $ 2,095,425 $ 2,163,786 Investments 2,975,354 2,868,274 Interest receivable 12,420 11,851 Total unrestricted current assets 5,083,199 5,043,911 Current - restricted: Cash and cash equivalents 54,347,390 13,016,827 Investments 57,070,184 17,254,864 Accounts receivable 179, ,941 Interest receivable 188,896 77,239 Due from County 341, ,575 Prepaid expenses 885, ,200 Inventories 1,221, ,118 Total restricted current assets 114,234,065 32,317,764 Total current assets 119,317,264 37,361,675 Noncurrent: Cash and cash equivalents - 75,502,462 Investments - 26,527,892 Capital assets, net 148,199, ,055,086 Total noncurrent assets 148,199, ,085,440 Total assets $ 267,516,638 $ 240,447,115 LIABILITIES Current liabilities payable from restricted assets: Payables: Accounts $ 1,715,260 $ 1,521,799 Interest 2,479, ,093 Contracts 4,485,987 1,682,880 Bonds, current portion 2,685,000 2,365,000 Unearned revenue 1,591,573 1,274,189 Due to ECR entities 710,991 3,118,357 Total current liabilities 13,668,493 10,184,318 Noncurrent: Retainage payable from restricted assets 4,551, ,259 Customer deposits 52,140 64,140 Bonds payable, noncurrent portion 131,165, ,465,724 Total noncurrent liabilities 135,768, ,778,123 Total liabilities $ 149,437,369 $ 133,962,441 NET POSITION Net investment in capital assets $ 79,316,152 $ 74,970,600 Restricted: Renewal and Replacement (AWT, REUSE, Plant) 31,568,288 24,668,610 Debt service 2,687,048 2,379,324 Unrestricted 4,507,781 4,466,140 Total net position $ 118,079,269 $ 106,484,674 See accompanying notes to the financial statements 6

61 EAST CENTRAL REGIONAL WASTEWATER TREATMENT FACILITIES OPERATION BOARD Operating revenue: Entities' flow charges $ 20,717,535 $ 18,760,199 Other revenue 2,320,371 2,125,593 Total operating revenue 23,037,906 20,885,792 Operating expense: STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION Contractual services: Administration 4,174,301 4,000,467 Waste disposal 2,640,404 2,974,266 Other 2,505,838 1,149,113 Repairs and maintenance 1,888,154 1,388,080 Materials and supplies 1,052,676 1,379,265 Utilities 2,796,576 2,914,219 General and administrative 448, ,370 Depreciation 4,110,467 3,899,469 Total operating expense 19,617,323 18,139,249 Operating income 3,420,583 2,746,543 Non-operating revenue (expense): FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2016 with comparative totals for 2015 Interest revenue and other non-operating income 797, ,351 Interest expense (698,904) (334,582) Bond issuance costs (91,150) (786,170) Gain (loss) on asset disposal - (10,015) Total non-operating revenue (expense) 7,574 (866,416) Income before capital contributions 3,428,157 1,880,127 Capital contributions 8,166,438 5,260,321 Change in net position 11,594,595 7,140,448 Net position, beginning 106,484,674 99,344,226 Net position, ending $ 118,079,269 $ 106,484,674 See accompanying notes to the financial statements 7

62 EAST CENTRAL REGIONAL WASTEWATER TREATMENT FACILITIES OPERATION BOARD Cash flows from operating activities: Cash received from customers $ 20,578,875 $ 23,080,272 Cash payments to suppliers (15,808,569) (15,837,798) Net cash provided by (used for) operating activities 4,770,306 7,242,474 Cash flows from capital and related financing activities: Capital contributions 8,166,438 5,260,321 Bond issuance proceeds 11,130, ,943,557 Bond issuance costs (91,150) (786,170) Principal payments (3,110,690) (1,540,000) Interest payments (1,927,694) (4,285,697) Capital purchases (40,468,364) (5,092,420) Net cash provided by (used for) capital and related financing activities (26,301,460) 96,499,591 Cash flows from investing activities: Purchase of investment securities (13,394,508) (46,651,030) Interest received 685, ,402 Net cash provided by (used for) investing activities (12,709,106) (46,360,628) Increase (decrease) in cash and cash equivalents (34,240,260) 57,381,437 Cash and cash equivalents, beginning of year 90,683,075 33,301,638 Cash and cash equivalents, end of year 56,442,815 90,683,075 Cash and cash equivalents: Current assets unrestricted 2,095,425 2,163,786 Current assets restricted 54,347,390 13,016,827 Noncurrent assets - 75,502,462 Total cash and cash equivalents 56,442,815 90,683,075 Reconciliation of operating income to net cash provided by (used for) operating activities: Operating income 3,420,583 2,746,543 Adjustments to reconcile operating income to net cash provided by (used for) operating activities: Depreciation 4,110,467 3,899,469 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (21,443) 345,417 Due from ECR entities (39,665) (301,574) Inventories and prepaid expenses (597,654) (916,092) Increase (decrease) in: STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2016 with comparative totals for 2015 Accounts payable and accrued expenses 193,461 (681,926) Due to ECR Entities (2,407,366) 1,779,965 Unearned revenue and customer deposits 111, ,672 Net cash provided by (used for) operating activities $ 4,770,306 $ 7,242,474 See accompanying notes to the financial statements 8

63 EAST CENTRAL REGIONAL WASTEWATER TREATMENT FACILITIES OPERATION BOARD NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2016 NOTE 1. DESCRIPTION OF ENTITY The East Central Regional Wastewater Treatment Facilities Operation Board ("ECR") was established on September 9, 1992 by interlocal agreement (the Agreement ) pursuant to Part I of Chapter 163, Florida Statutes. The ECR is a separate legal entity created to provide wastewater treatment and disposal services to five local government units: the city of West Palm Beach (the "City"), the town of Palm Beach, the cities of Lake Worth and Riviera Beach, and Palm Beach County (the five units collectively, the "Entities"). The ECR began operating on October 1, 1992 and is governed by a five-member board comprised of one member from each Entity (the "Board"). In addition to providing services to the Entities, the ECR operates a Septage Receiving Facility where private haulers can deposit wastewater into the treatment system. The Agreement establishes the duties and responsibilities among the Entities for the operation of the ECR. The Agreement specifies an initial period of thirty years with an option to renew for an additional thirty years upon the mutual consent of the Entities, which option to renew has been exercised by the Entities. The Agreement can be terminated only with the unanimous consent of the Entities. An Entity may withdraw from participation in the Agreement. However, a withdrawing Entity will forfeit its interest in the ECR and will remain responsible for its obligations under the Agreement. Upon the sale or disposal of the ECR, any proceeds will be prorated among the Entities based on the reserve capacity allocation in effect as of the date of the sale or disposal. The City is the designated administrator of the ECR and as such is obligated to operate the facilities efficiently and economically for the benefit of the Entities. To that end, the City retains legal title to ECR property. The City provides all personnel resources required for operation and administration of the ECR. All employee benefits, risk management and other costs are the responsibility of the City. In exchange for such services, the ECR pays the City an administrative fee. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Reporting Entity The financial statements were prepared in accordance with Governmental Accounting Standards Board (GASB) Statements. Under the provisions of those statements, the financial reporting entity consists of the primary government, organizations for which the ECR is considered to be financially accountable, and other organizations for which the nature and significance of their relationship with the ECR are such that, if excluded, the financial statements of the ECR would be considered incomplete or misleading. The ECR has no such related organizations. Therefore, the financial statements include only the operations of the ECR. 9

64 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) b. Basis of Accounting and Presentation The ECR is reported as a single enterprise fund, which is the type of fund used to account for services provided to the public and financed through charges to the users of such services. As such it employs an economic resources measurement focus. The goal of the ECR's financial statements is similar to that of private business enterprises, which is to assess the change in its total economic resources over a period of time. This goal is accomplished through the use of the accrual basis of accounting under which revenues are recorded when earned and expenses are recorded when the associated liabilities are incurred, regardless of the timing of cash receipts and disbursements. c. Cash and Cash Equivalents and Investments All highly liquid investments with maturities of three months or less when purchased are considered cash equivalents in the statements of net position and cash flows. The ECR s cash and cash equivalents are interest-bearing. Investments in the City's investment pool are reported at fair values as determined by various third party pricing sources. d. Inventories Chemical inventories consist of fuel, polymer, and chlorine and are stated at cost on a first-in, first-out basis. Spare parts inventories are stated at cost on an average cost basis. e. Restricted Assets Restricted assets represent resources to fund the renewal and replacement of ECR facilities and include those employed for operating activities in accordance with the Agreement. Resources related to funding construction projects and debt service are also classified as restricted assets. When both restricted and unrestricted resources are available for use, it is the ECR s policy to use restricted resources first for qualifying expenses and then unrestricted resources as needed. f. Capital Assets Property, plant and equipment are stated at cost, net of accumulated depreciation. The ECR capitalizes all acquisitions of tangible and intangible property expected to be held for more than one year and which have a minimum cost of $25,000 for buildings and infrastructure or a minimum cost of $10,000 for all other assets. Expenditures for maintenance, repairs, and minor improvements are charged to expense as incurred. Interest on amounts borrowed to finance the construction of capital assets is capitalized during construction. Depreciation is computed on the straight-line method over the estimated useful lives of the assets. The useful lives are based on the City s historical experience with various asset types. The typical ranges for these lives include Plant assets at 15 to 40 years and Equipment assets at 3 to 20 years. g. Entity Payables and Receivables During the fiscal year, the Entities are billed flow charges equal to budgeted operating expenses allocated by estimated flows. Flow charges billed to the respective Entities are adjusted at year end based on actual flows. Year end adjustments are reported as Due from Entities for those Entities that were under-billed during the year and Due to Entities for those Entities that were over-billed during the year. 10

65 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) h. Unearned Revenue Unearned revenue is recorded for funds received prior to year end where the associated services will be rendered after year end. i. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position may report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense) until that future period. In addition to liabilities, the statement of financial position may report a separate section for deferred inflows of resources. This separate financial statement element 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 future period. j. Net Position Capital assets, net of accumulated depreciation and related long term debt, are classified as net investment in capital assets. Other resources that are held separately due to contractual requirements are classified as restricted. All remaining net position is classified as unrestricted. k. Revenues and Expenses Operating revenues consist primarily of flow charges paid by the Entities. Other revenue includes charges paid by private haulers for the use of the septage receiving facility. Operating expenses are those necessary to operate the wastewater treatment plant. These consist of expenses charged directly to the ECR as well as those paid by the City on behalf of the ECR and reimbursed through the administration fee. Non-operating revenues and expenses are those related to financing and investing activities, capital contributions paid by the Entities, and other ancillary activities. l. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates. m. Budgets The ECR adopts annual budgets for operating, capital, debt service and reserve funds. No appropriation lapses until its purpose has been accomplished or abandoned. The Agreement requires the City to submit a proposed budget to the Board no later than 150 days prior to year-end. The Board is required to approve a final budget by July 1 or amend the deadline. 11

66 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) n. Pronouncements Issued and Adopted GASB Statement No. 72, Fair Value Measurement and Application. This Statement addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement provides guidance for determining a fair value measurement for financial reporting purposes and applying fair value to certain investments and disclosure related to all fair value measurements. This statement has not materially impacted the ECR s financial statements. GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. This Statement establishes requirements for defined benefit pensions that are not within the scope of Statement 68 as well as for the assets accumulated for purposes of providing those pensions. In addition, it establishes requirements for defined contribution pensions that are not within the scope of Statement 68. It also amends certain provisions of Statements 67 and 68 for pension plans and pensions that are within their respective scopes. This statement has not materially impacted the ECR s financial statements. GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The objective of this Statement is to identify in the context of the current governmental financial reporting environment the hierarchy of generally accepted accounting principles (GAAP). The GAAP hierarchy consists of the sources of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and non-authoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. This Statement supersedes Statement No. 55, the Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. This statement has not materially impacted the ECR s financial statements. GASB Statement No. 79, Certain External Investment Pools and Pool Participants. This Statement addresses accounting and financial reporting for certain external investment pools and pool participants. Specifically, it establishes criteria for an external investment pool to qualify for making the election to measure all of its investments at amortized cost for financial reporting purposes. An external investment pool qualifies for that reporting if it meets all of the applicable criteria established in this Statement. This statement has not materially impacted the ECR s financial statements. Other GASB statements in the numerical range from 72 thru 79 (i.e., 74, 75, 77 and 78) and beyond that range will be adopted as required in future years. 12

67 NOTE 3. CASH, CASH EQUIVALENTS, AND INVESTMENTS Governmental Accounting Standards Board ( GASB ) Statement 40, Deposit and Investment Risk Disclosures, addresses common deposit and investment risks related to credit risk, custodial credit risk, concentration of credit risk, interest rate risk, and foreign currency risk. As an element of interest rate risk, GASB Statement 40 requires certain disclosures for investments whose values are highly sensitive to changes in interest rates. The ECR participates in the City's pooled cash system to maximize earnings. The City s pooled cash is held in an investment account directed by an outside investment manager in compliance with the City s adopted investment policy. The City s investment activities are monitored for compliance on a quarterly basis by the City s Investment Committee. The ECR s cash and investments were structured as follows at September 30, 2016: Credit Risk Amortized cost Fair Value % of Weighted Total Cash Investment Vehicle Rating Portfolio Durations Portfolio Equivalents Investments Money Market Funds AAA 48.45% $ 34,130,965 $ 34,130,965 $ - US Treasuries AA % ,528,157 26,528,157 Federal Instrumentalities AA % ,436,790 21,436,790 Municipal Bonds AA+ 3.95% ,596,185 4,596,185 Corporate Notes AA 5.42% ,308,321 6,308,321 Commercial Paper AA 1.01% ,176,085 1,176, % $ 94,176,503 $ 34,130,965 $ 60,045,538 Cash Deposits $ 22,311,850 $ 116,488,353 Reconciliation to the Statement of Net Position: Current, unrestricted, cash $ 2,095,425 $ - Current, unrestricted, investments 2,975,354 Current, restricted, cash 54,347,390 Current, restricted, investments 57,070,184 Total cash and investments $ 56,442,815 $ 60,045,538 The ECR holds investments that are measured at fair value on a recurring basis. Because investing is not a core part of the ECR s mission, the ECR has determined that the disclosures related to these investments only need to be disaggregated by major type. 13

68 NOTE 3. CASH, CASH EQUIVALENTS, AND INVESTMENTS (Continued) Accordingly, on September 30, 2016, the ECR measured its investment portfolio according to the categories and pricing levels shown in the following table. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs and Level 3 inputs are significant unobservable inputs. Quoted Prices in Active Markets For Significant Other Observable Inputs Significant Unobservable Inputs Investment Type Fair Value Level 1 Level 2 Level 3 Total Municipal Obligation $ - $ 4,596,185 $ 4,596,185 Agency Bonds $ 21,436, $ - $ 21,436,790 US Treasuries $ 26,528, $ - $ 26,528,157 Corporate Notes $ 6,308,321 $ 6,308,321 Commercial Paper $ 1,176,085 $ 1,176,085 $ 47,964,947 $ 12,080,591 $ - $ 60,045,538 Money Market Funds 34,130,965 Cash Deposits (including Petty Cash) 22,311,850 $ 116,488,353 Custodial Credit Risk: Custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investment or collateral security that are in the possession of an outside party. The City s investment portfolios are held by SunTrust Bank, JP Morgan Bank, and TD Bank in the name of the City of West Palm Beach, thereby reducing exposure to custodial credit risk. In accordance with Florida Statute 280, all City deposits to which the ECR is a party are insured and/or collateralized and all depositories are qualified public depositories under the statute. Interest Rate Risk: The City s Investment Policy sets limits for investment maturities to match known cash needs and anticipated cash flow requirements. Investments of current operating funds shall have maturities of no longer than twenty-four (24) months. Investments of bond reserves, construction funds, and other nonoperating funds shall have a term appropriate to the need for funds and in accordance with debt covenants, not to exceed a maturity of five (5) years with an average duration of the portfolio as a whole not to exceed three (3) years. The maturities of the underlying securities of a repurchase agreement will follow the requirements of the Master Repurchase Agreement. Effective Duration: The durations of all of the ECR s investments are within the ranges specified by the City s investment policy. 14

69 NOTE 3. CASH, CASH EQUIVALENTS, AND INVESTMENTS (Continued) Concentration of Credit Risk: The investments of the ECR include the following holdings that each exceed 5% of total investments: Investment Vehicle Fair Value US Treasury Notes $ 26,528,157 Federal National Mortgage Association 3,016,862 Federal Farm Credit Banks Funding Corp 2,301,038 Federal Home Loan Banks 2,251,641 Federal Home loan Mortgage Corp 7,001,680 Federal Farm Credit Bank $ 3,500,420 44,599,798 Balances Held, by Entity: Cash, cash equivalents, and investment balances held by the ECR on an individual Entity basis include the following: West Palm Town of Palm Beach Lake Riviera Palm Purpose of Funds Beach County Worth Beach Beach Total Renewal and Replacement $ 8,689,360 $ 9,105,059 $ 4,680,653 $ 3,345,961 $ 2,871,325 $ 28,692,359 Reuse Renewal and Replacement - 1,189, ,189,841 Reclaimed Water Production Facility (AWT) 1,608, ,608,866 $ 10,298,226 $ 10,294,901 $ 4,680,653 $ 3,345,961 $ 2,871,325 $ 31,491,066 NOTE 4. RESTRICTED CASH, CASH EQUIVALENTS, AND INVESTMENTS Amounts included in restricted cash, cash equivalents, and investments were as follows: Purpose of Funds Renewal and Replacement $ 28,692,359 $ 22,222,046 Reclaimed Water Production Facility (AWT) 1,608,866 1,421,294 Reuse Renewal and Replacement 1,189, ,162 Operating 500,583 3,069,910 Debt Service 5,155,651 2,591,279 Construction 74,270, ,030,355 Total restricted cash, cash equivalents, and investments $ 111,417,574 $ 132,302,046 15

70 NOTE 4. RESTRICTED CASH, CASH EQUIVALENTS, AND INVESTMENTS (Continued) Renewal and Replacement Each Entity is required to make a minimum annual contribution for renewal and replacement equal to 1% of the Entity s share of the facility's replacement value, as estimated by the Board, or such other percentage as the board determines annually. Each Entity's share is its proportion of total reserve capacity multiplied by the replacement value. Once an Entity s renewal and replacement cash balance reaches 10% of its share of the replacement value, the Entity is not required to make annual payments until its cash balance falls below 5% of its share of that value. The renewal and replacement cash balance for any Entity may not fall below 1% of its share of the replacement value. As of September 30, 2016, all Entities met the renewal and replacement annual contribution and cash balance requirements. The reserve capacity percentages and minimum required renewal and replacement contributions by Entity are shown below. West Palm Town of Palm Beach Lake Riviera Palm Beach County Worth Beach Beach Total Reserve capacity percentages % % % % % % FY16 budgeted minimum required contribution, 2.0% $ 1,424,852 $ 1,668,119 $ 799,309 $ 556,041 $ 417,029 $ 4,865,350 FY16 excess contribution - 2,450, ,160 2,910,513 FY16 total contribution $ 1,424,852 $ 4,118,472 $ 799,309 $ 556,041 $ 877,189 $ 7,775,863 Other Restricted Funds Amounts held for the reclaimed water facilities are classified as restricted cash and cash equivalents since their use is subject to external constraints imposed by interlocal agreements. Amounts held for debt service also are classified as restricted cash and cash equivalents since these funds are held in accordance with debt agreements. Amounts held for construction are classified as restricted cash and cash equivalents as a result of bond covenants. 16

71 NOTE 5. SOLID WASTE AUTHORITY BIOSOLIDS PROCESSING CAPACITY On May 7, 2013, the ECR entered into an Interlocal Agreement with the Solid Waste Authority (SWA) of Palm Beach County for the purchase of biosolids processing and recycling capacity in the SWA s biosolids processing facility. Under the terms of the agreement, the ECR acquired ownership capacity in the SWA s biosolids processing facility equal to a maximum of 68,005 wet tons of acceptable deliveries annually, or 35.83% of the total biosolids processing facility capacity. The ECR will own this share of the SWA s biosolids processing facility s capacity for the life of the biosolids processing facility. The agreement details the ECR s commitment to supply biosolids and the SWA s commitment to accept and process biosolids and extends until August 9, 2029 unless terminated sooner or extended in accordance with the terms therein. The ECR s capacity purchase price of $10,429,488 has been recorded as an intangible capital asset and is being amortized over the life of the agreement. As of September 30, 2016, accumulated amortization totaled $2,085,898. NOTE 6. CAPITAL ASSETS The following schedule summarizes capital asset activity for the current fiscal year. Balance at Balance at September 30, September 30, 2015 Additions Subtractions 2016 Capital assets not being depreciated: Land $ 1,205,455 $ - $ - $ 1,205,455 Construction in progress 8,009,537 51,358,663 (1,720,233) 57,647,967 Total capital assets not being depreciated 9,214,992 51,358,663 (1,720,233) 58,853,422 Capital assets being depreciated: Plant 170,044,027 1,601,788 (3,450) 171,642,365 Intangible asset 10,429, ,429,488 Furniture and equipment 1,613,019 14,535 (66,147) 1,561,407 Total capital assets being depreciated 182,086,534 1,616,323 (69,597) 183,633,260 Less accumulated depreciation/amortization Plant 87,572,022 3,323,072-90,895,094 Intangible asset 1,390, ,299-2,085,897 Furniture and equipment 1,283,819 88,645 (66,147) 1,306,317 Total capital assets being depreciated 90,246,440 4,107,016 (66,147) 94,287,308 Total capital assets being depreciated, net 91,840,094 (2,490,693) (3,450) 89,345,952 Capital assets, net 101,055,086 48,867,970 (1,723,683) 148,199,374 Capitalized interest reconciliation: Coupon interesst expense $ 4,930,973 Amortizaation of bond premium (745,690) Gross interest expense 4,185,283 Less capitalized interest (3,486,379) Net interest expense $ 698,904 17

72 NOTE 7. DUE TO/FROM ECR ENTITIES Amounts Due to (from) ECR Entities for overpayment (underpayment) of operating charges at September 30, 2016 and 2015 were as follows: West Palm Beach $ (309,412) $ 125,715 Town of Palm Beach 118, ,160 Lake Worth (23,471) (156,070) Palm Beach County 567,266 2,450,352 Riviera Beach (5,375) 238,200 Subtotal, amounts due from current year 347,076 3,118,357 West Palm Beach 125,715 - Riviera Beach 238,200 - Subtotal, amounts due from prior year (1) 363,915 - Total $ 710,991 $ 3,118,357 (1) These amounts are normally applied to the entities' accounts in the following fiscal year. The 2015 amounts were finalized too late for application in 2016 and will be applied in NOTE 8. BONDS PAYABLE On September 13, 2012, the ECR entered into an agreement with JP Morgan for private placement of $14,000,000 of ECR bonds. A portion of the proceeds were used to pay off the outstanding balances on the SRF loans. The JP Morgan bonds are due on October 1, 2022 and bear a fixed interest rate of 1.85%. Principal is to be paid serially commencing October 1, 2014 and running through October 1, Interest is to be paid semiannually on each April 1 and October 1. On April 18, 2013, the ECR entered into an agreement with JP Morgan for private placement of $11,000,000 of ECR bonds. The proceeds were used to purchase processing capacity in the Solid Waste Authority s Biosolids Processing Facility. The bonds are due on October 1, 2023 and bear a fixed interest rate of 1.92%. Principal is to be paid serially commencing October 1, 2014 and running through October 1, Interest is to be paid semiannually on each April 1 and October 1. On November 25, 2014, the ECR issued $86,590,000 of revenue bonds. The proceeds are being used to construct a biosolids processing facility at the existing ECR plant. The bonds are due on October 1, 2044 and bear coupon interest rates from 5% to 5.25%. Principal is to be paid serially commencing October 1, 2023 and running through October 1, Interest is to be paid semiannually on each April 1 and October 1. 18

73 NOTE 8. BONDS PAYABLE (Continued) On July 29, 2016, the ECR issued $11,130,000 of revenue bonds. The proceeds are being used to finance the Headworks facility and safety improvements. The bonds are due on October 1, 2023 and bear a fixed interest rate of 1.43%. Principal is to be paid serially commencing October 1, 2017 and running through October 1, Interest is to be paid semiannually on each April 1 and October 1. Debt service payments for the four bond issues will be as follows: Fiscal Year Principal Interest Total ,685,000 4,984,359 7,669, ,130,000 4,975,670 9,105, ,230,000 4,903,541 9,133, ,300,000 4,829,950 9,129, ,375,000 4,755,085 9,130, ,450,000 22,451,397 40,901, ,480,000 19,303,938 33,783, ,485,000 15,183,956 33,668, ,520,000 10,621,863 29,141, ,160,000 5,613,300 34,773, ,815,000 97,623, ,438,058 All ECR revenues net of operating expenses are pledged as security for these bonds. The bond resolutions require that the ECR set aside equal monthly amounts in preparation for the next semiannual debt service payments. These principal and interest amounts are included in the calculation of flow charges that are billed monthly to the Entities. 19

74 NOTE 8. BONDS PAYABLE (Continued) Changes in long-term debt for the years ended September 30, 2016 and 2015 are summarized as follows: Combined bonds payable - beginning balance $ 125,830,724 $ 25,000,000 Add new principal 11,130,000 86,590,000 Less principal reduction (2,365,000) (1,540,000) Add new premium - 16,353,557 Less premium amortization (745,690) (572,833) Combined bonds payable - ending balance 133,850, ,830,724 Less current portion (2,685,000) (2,365,000) Noncurrent portion 131,165, ,465,724 Combined bonds payable - ending balance 133,850, ,830,724 Less unamortized premium (15,035,034) (15,780,724) Principal portion payable 118,815, ,050,000 NOTE 9. RISK MANAGEMENT Pursuant to the Agreement, the City holds title to all ECR property in trust for ECR and manages the facilities on its behalf. The City as managing agent for ECR retains all of the risks of operation of ECR and risks related to its property. City employees operate the plant and the permit for its operation is in the City s name. Accordingly, workers compensation insurance is covered by a self-insurance fund established by the City and other liability exposures are covered by insurance policies purchased in the City s name. ECR facilities are insured under an insurance policy purchased in the City s name as agent for the ECR. No significant reductions in insurance coverage have occurred from that in effect during the prior year. Settlements of property damage claims have not exceeded insurance coverage during any of the past three fiscal years. 20

75 NOTE 10. RELATED PARTY TRANSACTIONS City of West Palm Beach During the fiscal year ended September 30, 2016, the ECR paid the following amounts to the City: $ 4,174,302 for administrative fees 450,000 for laboratory and property maintenance services 332,919 for water service Reclaimed Water Production Facility During fiscal year 2001, the Board approved an agreement between the ECR and the City concerning the construction, operation and maintenance of a reclaimed water production facility (AWT). Since the AWT is constructed on ECR land, it is considered ECR property with 100% of its capacity and beneficial interest allocated to the City. The AWT is intended to treat ECR effluent to provide reusable water for the benefit of the City. For the fiscal year ended September 30, 2016, total operating expenses for the AWT were $37,826. This amount was charged to the City in its entirety. In May 2014, the ECR Board approved discontinuing the operations of the AWT. Beginning with fiscal year 2015, the AWT s expenses were determined on an itemized basis and were no longer determined as a proportion of the ECR s overall expense structure. The City continues to reimburse the ECR for ongoing insurance and renewal and replacement costs. The discontinued operations of AWT could potentially result in an impairment of the asset value in future years which would result in a potentially significant non-monetary loss for the ECR. As of the report date, there is no estimate available for the erosion or loss of value related to the discontinued operations or additional funding required if the plant were to be retrofitted or repaired and therefore no changes have been made to the financial statements. Furthermore, any impairment in the asset value in future years will not adversely affect the ECR operations. Palm Beach County Onsite Reclaimed Water Facility In fiscal year 2008, the ECR Board entered into an Interlocal Agreement with the City of West Palm Beach and Palm Beach County related to the construction, operation, and maintenance of an Onsite Reclaimed Water Facility (REUSE). Palm Beach County constructed reclaimed water production, metering, transmission, and storage facilities on ECR property. Palm Beach County provides for the payment of capital, operations, maintenance, and renewal and replacement costs for the Onsite Reclaimed Water Facility. The facility commenced operations on January 1, In order to permit Palm Beach County to design, bid, finance, permit, and construct the Onsite Reclaimed Water Facility, the City of West Palm Beach has delegated certain of its administrative obligations. Following the completion of construction and in accordance with the 1992 Interlocal Agreement, the Onsite Reclaimed Water Facilities will be owned by ECR and operated by the City of West Palm Beach. Pursuant to allocation of secondary treated effluent by the Entities, the ECR will provide Palm Beach County with a sufficient amount of secondary treated effluent to produce up to 22 million gallons per day. Any reclaimed water use credits granted by the South Florida Water Management District or any other entity shall be allocated amongst the Entities proportionately based on the respective amount of secondary treated effluent provided. 21

76 NOTE 10. RELATED PARTY TRANSACTIONS (Continued) For the fiscal year ended September 30, 2016, total operating expenses for the REUSE facility were $2,044,134. This amount was charged to Palm Beach County in its entirety. The following list presents the most significant of these expenses: $ 626,145 for administrative services 616,616 for electricity 212,696 for repairs and maintenance Palm Beach County maintains a cash balance with the ECR of $180,000 to cover REUSE expenses. This amount has been reported as unearned revenue on the Statement of Net Position. NOTE 11. PLANT CAPACITY In November 2011, ECR met the permitting requirements of the Florida Department of Environmental Protection for rating of the plant capacity at 70 MGD. However, demand for treatment capacity from the Entities does not currently require 70 MGD. NOTE 12. COMMITMENTS AND CONTINGENCIES Significant Commitments Significant commitments outstanding at September 30, 2016 included the following: $ 51,739,476 with Poole & Kent, the prime contractor for the biosolids expansion project $ 4,488,362 with Hazen and Sawyer, the prime engineering firm for the biosolids expansion project Litigation The ECR may, from time to time, be engaged in routine litigation incidental to the conduct of its business. This routine litigation is not expected to have a material effect on the ECR. 22

77 NOTE 12. COMMITMENTS AND CONTINGENCIES (Continued) The following non-routine matter could possibly have a material effect on the ECR. On January 17, 2015, an employee of the City died while performing services at the ECR plant on behalf of the City as operator of the ECR. A complaint has been filed in the Circuit Court of the Fifteenth Judicial Circuit, in and for Palm Beach County, Florida, against the City of West Palm Beach, the City of Lake Worth, the Town of Palm Beach, the City of Riviera Beach, and Palm Beach County for damages. The complainant is seeking damages in excess of $4 million from the defendants collectively. The ECR has not been named a party to the litigation. The defendants are actively defending against the allegations of the complaint. A contingency exists that the complainant could later decide to name the ECR as a party to the complaint as the death occurred at the ECR facility. Until such event were to occur, no estimate can be made as to any contingent liability for the ECR. NOTE 13. CONCENTRATION RISK RELATED TO OPERATIONS The ECR s activity is dependent on the continued involvement of the Entities, the loss of which could have a material adverse effect on ECR operations. NOTE 14. GREEN BONDS DISCLOSURES On November 25, 2014, the ECR issued revenue bonds in the par amount of $86,590,000. The bonds were issued in accordance with a document known as Green Bond Principles, The following disclosures are provided to comply with those principles. All proceeds from the 2014 bonds were placed in a separate investment account. The funds have been withdrawn as needed for the sole purpose of paying for costs incurred on the biosolids construction project. Withdrawn funds are deposited into the ECR/City s pooled cash account from which construction invoices are then paid. The balance of the biosolids project (pooled) cash account is maintained separately in the ECR s accounting records. The following table presents various biosolids project balances: September 30, 2016 September 30, 2015 November 25, 2014 (2014 Green Bonds Issued) September 30, and 2013 bonds investment account balance $ 502,478 $ 702,246 n/a $ 2,418, green bonds investment account balance 58,281, ,129, ,021,840 - Biosolids project pooled cash account balance 4,353, ,519 n/a 711,752 Amount spent during fiscal year $ 38,879,971 $ 3,135,243 n/a n/a 23

78 NOTE 15. SUBSEQUENT EVENTS On April 19, 2017 the Florida Department of Environmental Protection issued consent order for violations occurring at the East Central Regional Water Reclamation Facility. These violations included: 1. Exceeding effluent permit limits for Total Suspended Solids in 21 instances from September 1, 2015 through September 30, Exceeding effluent permit limits for Fecal Coliform in 10 instances from October 2015 through September Exceeding effluent permit limits for Carbonaceous Biochemical Oxygen Demand in 9 instances from January 2016 through September The facility reported 18 unauthorized onsite wastewater discharges from January 29, 2016 through November 3, The facility failed to maintain equipment resulting in both exceedances and spills. The consent order identifies the following corrective actions: 1. Development and implementation of a contractor spill prevention and control plan. 2. Provide evidence that two back up blower motors have been purchased and placed in the plant inventory. 3. Provide evidence that all wastewater operators have undergone sampling training. 4. Provide a written report each calendar quarter containing information on the status and progress of projects being completed under the order. 5. Within two years from April 19, 2017 submit to the Department a detailed Operation and Maintenance Performance Report. On June 9, 2017, the ECR submitted an in-kind project proposal for the delivery of reclaimed water in lieu of the $45,350 civil penalty outlined in the consent order. As of June 16, 2017, corrective actions numbered 1 thru 3 above have been completed and submitted to the Florida Department of Environmental Protection. Based on current capital investment and maintenance plans, all technical issues are expected to be resolved timely and further negative impact is not expected from this enforcement action. 24

79 2700 North Military Trail Suite 350 Boca Raton, Florida (561) (800) Fax (561) INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Operations East Central Regional Wastewater Treatment Facilities West Palm Beach, Florida We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of East Central Regional Wastewater Treatment Facilities, West Palm Beach, Florida ( ECR ) as of and for the fiscal year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the ECR s basic financial statements, and have issued our opinion thereon dated July 12, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the ECR s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the ECR s internal control. Accordingly, we do not express an opinion on the effectiveness of the ECR s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the ECR s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. 25