$25,000,000 Limited Obligation Bonds (City of Asheville, North Carolina) Series 2017

Transcription

1 New Issue/Book-Entry-Only $25,000,000 Limited Obligation Bonds (City of Asheville, North Carolina) Series 2017 Ratings: Moody s: Aa1 S&P: AA+ (See RATINGS herein) Dated: Date of Delivery Due: October 1, as shown on inside cover This Official Statement has been prepared by the City of Asheville, North Carolina (the City ) to provide information on the Limited Obligation Bonds (City of Asheville, North Carolina), Series 2017 (the 2017 Bonds ). Selected information is presented on this cover page for convenience of the user. To make an informed decision regarding the purchase of the 2017 Bonds, prospective investors should read this Official Statement in its entirety. Unless indicated, capitalized terms used on this cover page have the meanings given in this Official Statement. Security: The payment of principal or prepayment price and interest with respect to the 2017 Bonds shall be limited to funds appropriated for that purpose by the City Council for the City in its discretion. As security for the 2017 Bonds, the City has executed and delivered a deed of trust, as amended, granting, among other things, a lien of record on the Premises (as described herein), subject to permitted encumbrances. The obligation to make payment with respect to the 2017 Bonds is not a general obligation of the City, and the taxing power of the City is not pledged directly or indirectly to secure any monies due to the owners of the 2017 Bonds. Tax Treatment: In the opinion of Parker Poe Adams & Bernstein LLP, Bond Counsel, under existing law, the portion of the Installment Payments designated and paid as interest with respect to the 2017 Bonds is (1) assuming compliance by the City and the Corporation with certain requirements of the Internal Revenue Code of 1986, as amended (the Code ), (a) excludable from gross income for federal income tax purposes, and (b) not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and (2) exempt from State of North Carolina income taxation. See TAX TREATMENT herein. Redemption: The 2017 Bonds are subject to optional prepayment prior to their maturities as described herein. Purpose: The proceeds of the 2017 Bonds will be used by the City to (1) refund a portion of the 2012 Bonds (as defined herein) (2) prepay a portion of the 2016 Bond (as defined herein) and (2) pay related financing costs. Interest Payment Date: April 1 and October 1, commencing April 1, Record Date: With respect to any Interest Payment Date, the close of business on the 15 th day of the month preceding such Interest Payment Date. Denomination: $5,000 and any integral multiple thereof. The 2017 Bonds initially will be issued as fully registered bonds and when delivered will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company. See Appendix E hereto. Delivery Date: November 9, Trustee Branch Banking and Trust Company, Wilson, North Carolina. Bond Counsel: Parker Poe Adams & Bernstein LLP, Charlotte, North Carolina. City Attorney: Robin Currin, Esq., Asheville, North Carolina. Corporation s Counsel: McGuire, Wood & Bissette, P.A., Asheville, North Carolina. Underwriter s Counsel: Womble Carlyle Sandridge & Rice, LLP, Raleigh, North Carolina. Financial Advisor: DEC Associates, Inc., Charlotte, North Carolina. October 13, 2017 BofA Merrill Lynch

2 Due October 1 Principal Amount MATURITY SCHEDULE $25,000,000 Bonds Interest Rate Yield CUSIP * 2018 $ 685, % 0.96% AW , AX , AY , AZ ,820, BA ,810, BB ,810, BC ,825, BD ,825, BE ,835, BF , BH ,280, C BG ,825, C BJ ,805, C BK ,795, C BL , C BM , BN , BP , BQ , BR , BS7 C Yield to October 1, 2027 call date at 100%. * Copyright, American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor s Financial Services LLC on behalf of The American Bankers Association. This data is not intended to create a database and does not service in any way as a substitute for CUSIP Global Services. CUSIP numbers are provided for convenience of reference only for the purchasers of the 2017 Bonds. Neither the City, the Corporation nor the Underwriter assume any responsibility for the selection or accuracy of such numbers.

3 In connection with this offering, the Underwriter may overallot or effect transactions that stabilize or maintain the market price of the 2017 Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. No dealer, broker, salesman or other person has been authorized to give any information or to make any representation other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon. This Official Statement does not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of the 2017 Bonds by any person in any jurisdiction in which it is not lawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the Corporation, the City and other sources that are deemed to be reliable. The electronic distribution of this Official Statement does not constitute an offer to sell or the solicitation of an offer to buy the 2017 Bonds described herein to the residents of any particular state and is not specifically directed to the residents of any particular state. The 2017 Bonds shall not be offered or sold in any state unless and until they are either registered pursuant to the laws of such state, or qualified pursuant to an appropriate exemption from registration in such state. The information set forth herein has been obtained from sources which are believed to be reliable and is in form deemed final by the City for the purpose of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (except for certain information permitted to be omitted under Rule 15c2-12(b)(1)). Neither the 2017 Bonds nor the Indenture (as defined herein) have been registered with the Securities and Exchange Commission by reason of the provisions of Section 3(a)(2) of the Securities Act of 1933, as amended. The registration or qualification of the 2017 Bonds and the Indenture in accordance with applicable provisions of securities laws of the states in which the 2017 Bonds and the Indenture have been registered or qualified, and the exemption from registration or qualification in other states, shall not be regarded as a recommendation thereof. In making an investment decision, investors must rely on their own examination of the terms of the offering, including the merits and risks involved. These securities have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense. All quotations from and summaries and explanations of laws and documents herein do not purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions. Any statements made in this Official Statement involving estimates or matters of opinion, whether or not expressly so stated, are intended merely as estimates or opinions and not as representations of fact. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the 2017 Bonds shall under any circumstances create any implication that there has been no change in the affairs of the City 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.

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5 TABLE OF CONTENTS Page INTRODUCTION... 1 The City... 1 Purpose... 1 Security... 2 The 2017 Bonds... 3 Book-Entry Only... 3 Tax Status... 3 Professionals... 3 Continuing Disclosure... 3 THE 2017 BONDS... 3 Authorization... 3 General... 4 Prepayment Provisions... 4 THE PLAN OF FINANCE... 5 ESTIMATED SOURCES AND USES OF FUNDS... 7 SECURITY AND SOURCES OF PAYMENT OF 2017 BONDS... 7 Installment Payments and Additional Payments... 7 Budget and Appropriation... 8 Deed of Trust... 8 Indenture... 9 Consent of Initial Purchaser, Underwriter or Remarketing Agent Enforceability Additional Bonds AVAILABLE SOURCES FOR PAYMENT General General Fund Revenues ANNUAL INSTALLMENT PAYMENT REQUIREMENTS CERTAIN RISKS OF 2017 BOND OWNERS Limited Obligation of the City Risk of Nonappropriation Environmental Risks Value of Collateral Uninsured or Underinsured Casualty Outstanding General Obligation Debt of the City Other Indebtedness Bankruptcy THE CORPORATION THE CITY LEGAL MATTERS Litigation Contingent Liabilities Opinions of Counsel Relationships TAX TREATMENT General Original Issue Discount Original Issue Premium CONTINUING DISCLOSURE OBLIGATION UNDERWRITING FINANCIAL ADVISOR i

6 RATINGS VERIFICATION OF MATHEMATICAL COMPUTATIONS MISCELLANEOUS APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E The City Financial Information Concerning the City Summary of Principal Legal Documents Form of Opinion of Bond Counsel Book-Entry Only System ii

7 OFFICIAL STATEMENT $25,000,000 Limited Obligation Bonds (City of Asheville, North Carolina) Series 2017 INTRODUCTION The purpose of this Official Statement, which includes the Appendices hereto, is to provide certain information in connection with the execution, sale and delivery of the Limited Obligation Bonds (City of Asheville, North Carolina), Series 2017, in the aggregate principal amount of $25,000,000 (the 2017 Bonds ), which evidence proportionate undivided interests in rights to receive certain Revenues (as defined herein) pursuant to the Installment Financing Contract, dated as of June 1, 2012 (the 2012 Contract ), as amended by Amendment Number One to the Installment Financing Contract, dated as of June 1, 2016 (the First Contract Amendment ), and as further amended by Amendment Number Two to the Installment Financing Contract, dated as of November 1, 2017 (the Second Contract Amendment and, together with the 2012 Contract and the First Contract Amendment, the Contract ), each between the Asheville Public Financing Corporation (the Corporation ) and the City of Asheville, North Carolina (the City ). The 2017 Bonds will be executed and delivered pursuant to the Indenture of Trust dated as of June 1, 2012 (the 2012 Indenture ), as amended by Supplemental Indenture, Number 1, dated as of June 1, 2016 (the First Supplement ), and as further amended by Supplemental Indenture, Number 2, dated as of November 1, 2017 (the Second Supplement and, together with the 2012 Indenture and the First Supplement, the Indenture ), each between the Corporation and Branch Banking and Trust Company, as trustee (the Trustee ). The Corporation has heretofore executed and delivered pursuant to the Indenture (a) Limited Obligation Bonds (City of Asheville, North Carolina), Series 2012, of which $21,590,000 remain outstanding (the 2012 Bonds ), and (b) Limited Obligation Bond, Series 2016 (the 2016 Bond ). The 2016 Bond is a draw-down instrument pursuant to which the City may draw up to $45,000,000. As of October 1, 2017, the City has drawn $32,986, of the 2016 Bond. See THE PLAN OF FINANCE herein. This introduction provides only certain limited information with respect to the contents of this Official Statement and is expressly qualified by the Official Statement as a whole. Prospective investors should review the full Official Statement and each of the documents summarized or described herein. This Official Statement speaks only as of its date, and the information contained herein is subject to change. Capitalized terms used in this Official Statement, unless otherwise defined herein, have the meanings set out in Appendix C hereto. The City See Appendix A hereto for certain information regarding the City. The City s most recent audited financial statements are contained in Appendix B hereto. Purpose The 2017 Bonds are being executed and delivered to provide funds, together with other available funds of the City, to (1) refinance the City s obligations with respect to a portion of the 2012 Bonds, (2) prepay a portion of the 2016 Bond, and (3) finance related financing costs. See the captions THE PLAN OF FINANCE and ESTIMATED SOURCES AND USES OF FUNDS herein.

8 Security The 2017 Bonds and the 2012 Bonds and any additional Bonds outstanding under the Indenture (the Additional Bonds and together with the 2017 Bonds and the 2012 Bonds, the Bonds ) evidence proportionate undivided interests in the right to receive certain Revenues under the Contract. The 2017 Bonds are payable solely from the Installment Payments and certain other moneys as provided in the Indenture. As security for its obligations under the Original Contract, the City has executed and delivered to a deed of trust trustee (the Deed of Trust Trustee ), for the benefit of the Corporation or its assignee, a Deed of Trust, Security Agreement and Fixture Filing dated as of June 1, 2012 (the 2012 Deed of Trust ), granting a lien of record on certain City facilities and the real property on which those facilities are located, and any additions, modifications, attachments, replacements and parts thereof, as more particularly described in the 2012 Deed of Trust (the Initial Premises ), subject to Permitted Encumbrances. In connection with the First Contract Amendment, the City executed and delivered a Notice of Extension and Amendment to Deed of Trust, dated as of June 1, 2016 (the Deed of Trust Amendment and, together with the 2012 Deed of Trust, the Deed of Trust ), granting a lien on certain additional City facilities and the real property on which those facilities are located, and any additions, modifications, attachments, replacements and parts thereof, as more particularly described in the Deed of Trust Amendment (the Additional Premises and, together with the Initial Premises, the Premises ), subject to certain Permitted Encumbrances. Not all of the projects refinanced with proceeds of the 2017 Bonds are part of the Premises. The property subject to the lien of the Deed of Trust consists of the sites on which City Hall (officially known as the City Building ), the Municipal Building and the City s Public Works Facility are located and any improvements thereon as further described in the Deed of Trust. See the caption SECURITY AND SOURCES OF PAYMENT OF 2017 BONDS Deed of Trust herein. In addition, the 2017 Bonds are secured by such moneys as may be on deposit under the Indenture. Pursuant to the Indenture, the Corporation has assigned to the Trustee for the benefit of the Owners of the Bonds (1) all rights, title and interest of the Corporation in the Contract (except for certain reserved rights), including its right to receive the Installment Payments, (2) all rights, title and interest of the Corporation in the Deed of Trust and the Premises and (3) all money and securities from time to time held by the Trustee under the Indenture in any fund or account (except the Rebate Fund). Pursuant to the Contract, the Installment Payments are payable by the City directly to the Trustee. Additional Bonds which have equal rights in the security available to the Owners of the 2017 Bonds and 2012 Bonds may be executed and delivered in accordance with the provisions of the Indenture. See the captions SECURITY AND SOURCES OF PAYMENT OF 2017 BONDS Additional Bonds herein and SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The Indenture Additional Bonds in Appendix C hereto. Under certain conditions, the Deed of Trust Trustee may release portions of the Premises from the lien of the Deed of Trust. See the caption SECURITY AND SOURCES OF PAYMENT OF 2017 BONDS Deed of Trust herein and SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The Deed of Trust in Appendix C hereto. If a default occurs under the Contract, the Trustee may attempt to dispose of the Premises and apply the proceeds received as a result of any such disposition to the payment of the amounts due to the Owners of the Bonds. No assurance can be given that any such proceeds will be sufficient to pay the principal and interest with respect to the 2017 Bonds. In addition, no deficiency judgment can be obtained against the City if the proceeds from any such disposition (together with other funds that may be held by the Trustee under the Indenture) are insufficient to pay the 2017 Bonds in full. Neither the 2017 Bonds nor the City s obligation to make payments under the Contract constitute a pledge of the City s 2

9 faith and credit within the meaning of any constitutional provision. See the caption SECURITY AND SOURCES OF PAYMENT OF 2017 BONDS herein. The 2017 Bonds The 2017 Bonds will be dated their date of initial execution and delivery. Interest is payable on April 1 and October 1 of each year, beginning April 1, 2018, at the rates set forth on the inside cover page of this Official Statement. Principal is payable on October 1 in the years and in the amounts set forth on the inside cover page of this Official Statement. Book-Entry Only The 2017 Bonds will be delivered in book-entry form only, without physical delivery of bonds. Payments to beneficial owners of the 2017 Bonds will be made by the Trustee through The Depository Trust Company ( DTC ) and its participants. See BOOK-ENTRY ONLY SYSTEM in Appendix E hereto. Tax Status In the opinion of Parker Poe Adams & Bernstein LLP, Bond Counsel, under existing law, the portion of the Installment Payments designated and paid as interest with respect to the 2017 Bonds is (1) assuming compliance by the City and the Corporation with certain requirements of the Internal Revenue Code of 1986, as amended (the Code ), (a) excludable from gross income for federal income tax purposes, and (b) not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and (2) exempt from State of North Carolina income taxation. See TAX TREATMENT herein. Professionals Merrill Lynch, Pierce, Fenner & Smith Incorporated (the Underwriter ) is serving as underwriter for the 2017 Bonds. Branch Banking and Trust Company is serving as Trustee and Escrow Agent (hereinafter defined). Parker Poe Adams & Bernstein LLP is serving as Bond Counsel to the City. McGuire, Wood & Bissette, P.A. is serving as counsel to the Corporation and will pass on certain legal matters relating to the Corporation. Robin Currin, Esq., City Attorney, is serving as counsel to the City and will pass on certain legal matters relating to the City. Womble Carlyle Sandridge & Rice, LLP is serving as counsel to the Underwriter. DEC Associates, Inc. is serving as financial advisor to the City. Continuing Disclosure The City will undertake in the Second Contract Amendment to provide continuing disclosure of certain annual financial information and operating data and material events regarding the Contract and the 2017 Bonds. See the caption CONTINUING DISCLOSURE OBLIGATION herein. Authorization THE 2017 BONDS The 2017 Bonds will be executed and delivered pursuant to the Indenture. The 2017 Bonds evidence proportionate undivided interests in the right to receive certain Revenues pursuant to the Contract. The 2017 Bonds are payable solely from the Installment Payments and certain other moneys as provided in the Indenture. 3

10 The City entered into the Original Contract and the First Contract Amendment and will enter into the Second Contract Amendment under the provisions of Section 160A-20 of the General Statutes of North Carolina, as amended. The City Council of the City authorized the City s execution and delivery of the Second Contract Amendment in a resolution adopted on September 26, In addition, the City s entering into the Second Contract Amendment received the required approval of the North Carolina Local Government Commission (the LGC ) on October 3, The LGC is a division of the State Treasurer s office charged with general oversight of local government finance in the State of North Carolina (the State ). Its approval is required for substantially all bond issues and other local government financing arrangements in the State. Before approving an installment financing, the LGC must determine, among other things, that (1) the proposed financing is necessary and expedient, (2) the financing, under the circumstances, is preferable to a general obligation or revenue bond issue for the same purpose, and (3) the sums to fall due under the proposed financing are not excessive for the local government. General The 2017 Bonds will be dated their date of initial execution and delivery. Interest with respect to the 2017 Bonds is payable on each April 1 and October 1 (the Interest Payment Dates ), beginning April 1, 2018, at the rates set forth on the inside cover page of this Official Statement (calculated on the basis of a 360-day year consisting of twelve 30-day months). Principal with respect to the 2017 Bonds is payable on October 1 in the years and amounts set forth on the inside cover page of this Official Statement. Payments will be effected through DTC. See BOOK-ENTRY ONLY SYSTEM in Appendix E hereto. So long as DTC or its nominee is the registered owner of the 2017 Bonds, transfers and exchanges of beneficial ownership interests in the 2017 Bonds will be available only through DTC Participants and DTC Indirect Participants. See BOOK-ENTRY ONLY SYSTEM in Appendix E hereto. The Indenture describes the provisions for transfer and exchange applicable if a book-entry system is no longer in effect. These provisions generally provide that the transfer of the 2017 Bonds is registrable by the Owners thereof, and the 2017 Bonds may be exchanged for an equal aggregate, unredeemed principal amount of 2017 Bonds of denominations of $5,000 or any integral multiple thereof and of the same maturity and interest rate, only upon presentation and surrender of the 2017 Bonds to the Trustee at the designated corporate trust office of the Trustee duly endorsed for transfer or accompanied by an assignment duly executed. The Trustee may require the person requesting any transfer or exchange to reimburse it for any tax or other governmental charge required to be paid with respect to such registration or exchange. Prepayment Provisions Optional Prepayment. The 2017 Bonds maturing on or before October 1, 2027 are not subject to optional prepayment before maturity. The 2017 Bonds maturing on or after October 1, 2028 are subject to optional prepayment in whole or in part on any date on or after October 1, 2027, at the option of the City, at the prepayment price equal to 100% of the principal amount of such 2017 Bonds to be prepaid, together with accrued interest to the date fixed for prepayment. General Prepayment Provisions of 2017 Bonds. If called for prepayment in part, the 2017 Bonds to be prepaid shall be prepaid in such order as the City shall select and within the same maturity as selected by DTC pursuant to its rules and procedures or, if the book-entry system with respect to the 2017 Bonds is discontinued, by lot within a maturity in such manner as the Trustee in its discretion may determine. 4

11 Notice of prepayment identifying the 2017 Bonds or portions thereof to be prepaid shall be given by the Trustee in writing not less than 30 days nor more than 60 days before the date fixed for prepayment (1) by registered or certified mail or otherwise in accordance with DTC s then-existing rules and procedures, to DTC or its nominee or to the then-existing securities depositories, or (2) if DTC or its nominee or another securities depository is no longer the Owner of the 2017 Bonds, by first class mail, postage prepaid to the then-registered Owners of the 2017 Bonds to be prepaid at their addresses appearing on the registration books maintained by the Trustee, (3) to the LGC by first class mail, postage prepaid or such other method acceptable to the LGC, and (4) to the Municipal Securities Rulemaking Board (the MSRB ) through the Electronic Municipal Market Access (EMMA) system in electronic format as prescribed by the MSRB. If at the time of mailing of notice of prepayment, there shall not have been deposited with the Trustee money sufficient to prepay all the 2017 Bonds or portions thereof called for prepayment, which money is or will be available for prepayment of 2017 Bonds, such notice will state that it is conditional on the deposit of the prepayment money with the Trustee not later than the opening of business on the prepayment date, and such notice shall be of no effect unless such money is so deposited. On or before the date fixed for prepayment, funds shall be deposited with the Trustee to pay, and the Trustee is hereby authorized and directed to apply such funds to the payment of, the 2017 Bonds or portions thereof called, together with accrued interest with respect thereto to the prepayment date, and any required premium. On the giving of notice and the deposit of such funds for prepayment pursuant to this Indenture, interest with respect to the 2017 Bonds or portions thereof thus called shall no longer accrue after the date fixed for prepayment. The 2017 Bonds or portions thereof called for prepayment shall be due and payable on the prepayment date at the prepayment price, together with accrued interest with respect thereto to the prepayment date and any applicable prepayment premium. If any required notice of prepayment has been given and money sufficient to pay the prepayment price, together with accrued interest with respect thereto to the prepayment date and any required prepayment premium, has been deposited with the Trustee, the 2017 Bonds or portions thereof so called for prepayment shall cease to be entitled to any benefit or security under this Indenture and the Owners of such 2017 Bonds shall have no rights with respect to such 2017 Bonds or portions thereof so called for prepayment except to receive payment of the prepayment price and accrued interest to the prepayment date from such funds held by the Trustee. Anything in the Indenture to the contrary notwithstanding, if an Event of Default has occurred and is continuing under the Indenture, there will be no prepayment of less than all of the 2017 Bonds Outstanding under the Indenture. THE PLAN OF FINANCE The 2017 Bonds are being executed and delivered to provide funds, together with other available funds, to (1) refinance the City s obligations with respect to all of the 2012 Bonds maturing on or after April 1, 2023 (collectively, the Bonds to be Refunded ) and prepay a portion of the 2016 Bond and (2) finance the costs of the initial execution and delivery of the 2017 Bonds. A portion of the proceeds of the 2017 Bonds will be used to refund the Bonds to be Refunded and prepay the City s obligations with respect thereto. To accomplish the refunding of the Bonds to be Refunded, a portion of the proceeds of the 2017 Bonds will be deposited with Branch Banking and Trust Company, as escrow agent (the Escrow Agent ), in trust pursuant to the terms and conditions of an Escrow Agreement, to be dated as of November 1, 2017 (the Escrow Agreement ), between the City and 5

12 the Escrow Agent. Funds on deposit with the Escrow Agent will be used to purchase direct obligations of the United States of America, obligations the principal of and interest on which are guaranteed by the United States of America or obligations of any agency or instrumentality of the United States of America, in each case for the payment of which the full faith and credit of the United States of America are pledged (or evidences of ownership of proportionate interests in future interest and principal payments on such obligations) (the Federal Securities ) maturing at times and in amounts sufficient to provide funds, together with other funds on deposit with the Escrow Agent and remaining uninvested, to pay the prepayment price of and interest with respect to the Bonds to be Refunded. The Bonds to be Refunded will be irrevocably called for prepayment on April 1, 2022, at a prepayment price equal to 100% of the principal amount of such Bonds to be Refunded, plus accrued interest to the prepayment date. Upon depositing such funds with the Escrow Agent pursuant to the Escrow Agreement, the Bonds to be Refunded will be secured solely by the funds held by the Escrow Agent. The 2016 Bond was issued to provide funds to pay the costs of various projects in the City for affordable housing, public safety, transportation, economic development, parks and recreation and repair and renovation to City facilities. Simultaneously with the issuance of the 2017 Bonds, the City plans to issue its Special Obligation Bonds, Series 2017 (the Special Obligation Bonds ). A portion of the proceeds of the 2017 Bonds and a portion of the proceeds of the Special Obligation Bonds will be used to prepay in whole the outstanding principal amount of the 2016 Bond on the date of issuance of the 2017 Bonds and the Special Obligation Bonds. The Special Obligation Bonds will not be issued pursuant to the Indenture and will not be secured by the Deed of Trust. The projects financed with the proceeds of the 2016 Bond and refinanced with the proceeds of the 2017 Bonds and the Special Obligation Bonds are the first part of a multi-year capital improvement plan undertaken by the City. For more information regarding such capital improvement plan and the funding sources for such plan, see Debt Information Debt Outlook in Appendix A. 6

13 ESTIMATED SOURCES AND USES OF FUNDS The City estimates the sources and uses of funds in connection with the plan of finance to be as follows: Sources: Par Amount of the 2017 Bonds $25,000,000 City Contribution 54,576 Net Original Issue Premium 3,028,352 Uses: Total $28,082,928 Refunding of Bonds to be Refunded $12,986,273 Prepayment of 2016 Bond 1 14,768,584 Costs of Issuance 2 328,071 Total $28,082,928 1 Approximately $18,218,214 of the proceeds of the Special Obligation Bonds will be combined with this amount to prepay the 2016 Bond. 2 Includes underwriter s discount, legal fees, rating agency fees, financial advisor fees, fees and expenses of the Trustee and the Escrow Agent and miscellaneous fees and expenses. SECURITY AND SOURCES OF PAYMENT OF 2017 BONDS The 2017 Bonds are secured by such moneys as may be on deposit under the Indenture with the exception of any moneys held in the Rebate Fund. The 2017 Bonds, the 2012 Bonds and any Additional Bonds evidence proportionate undivided interests in the rights to receive certain Revenues pursuant to the Contract. The 2017 Bonds will be proportionately and ratably secured with the 2012 Bonds and any Additional Bonds executed and delivered pursuant to the Indenture. Revenues are defined in the Contract to mean (1) all Net Proceeds not applied to the replacement of the Premises, (2) all Installment Payments and (3) all investment income on all funds and accounts created under the Indenture (other than the Rebate Fund). Notwithstanding the foregoing, the Owner of each 2017 Bond is not entitled to receive more than the amount of principal and interest represented by such 2017 Bond. Installment Payments and Additional Payments Under the Contract, the City is required to make the Installment Payments directly to the Trustee in amounts sufficient to provide for the payment of the principal (whether at maturity, by prepayment or otherwise) and interest with respect to the 2017 Bonds, the 2012 Bonds and any Additional Bonds hereafter executed and delivered under the Indenture as the same become due and payable. The City is also obligated under the Contract to pay as Additional Payments to such persons as are entitled thereto, the reasonable and customary expenses and fees of the Trustee and the Corporation, any expenses of the Corporation in defending an action or proceeding in connection with the Contract or the Indenture and any taxes or any other expenses, including, but not limited to, licenses, permits, state 7

14 and local income, sales and use or ownership taxes or property taxes which the City or the Corporation is expressly required to pay as a result of the Contract (together with interest that may accrue thereon in the event that the City fails to pay the same). Budget and Appropriation Pursuant to the Contract, the City shall (1) cause its budget officer (as statutorily defined) to include the Installment Payments and the reasonably estimated Additional Payments coming due in each Fiscal Year in the corresponding annual budget request, (2) require that the deletion of such funds from the City s final budget or any amended budget be made only pursuant to an express resolution of the City Council which explains the reason for such action and (3) deliver notice to the Trustee, S&P, Moody s and the LGC within five days after the adoption by the City Council of the resolution described in clause (2) above. Nothing contained in the Contract, however, obligates the City to appropriate funds contained in the proposed budget for the payment of the Installment Payments or the reasonably estimated Additional Payments coming due under the Contract. In connection with the Installment Payments and the Additional Payments, the appropriation of funds therefor is within the sole discretion of the City Council. Deed of Trust In connection with the execution and delivery of the 2012 Contract, the City executed and delivered the Original Deed of Trust granting a lien of record on the site on which the City Building is located subject to Permitted Encumbrances. In connection with the execution and delivery of the First Contract Amendment, the City executed and delivered the Deed of Trust Amendment granting a lien of record on the site of the Additional Premises, subject to Permitted Encumbrances. The Premises consist of the sites on which the City Building, the Municipal Building and the City s Public Works Administration Building are located and any improvements thereon. The City Building sits on a.668-acre parcel located at 70 Court Plaza in an area generally known as City-County Plaza. The parcel subject to the Deed of Trust is adjacent to the site of the County Courthouse and the Buncombe County Detention Center. An agreement between the City and the County provides for the City to manage City-County Plaza. The City Building is a 10-story building of approximately 110,081 square feet. It has been designated by ordinance as a local historic property. The ordinance identifies significant features of the structure which may not be demolished, materially altered, remodeled or removed without a certificate of appropriateness issued by the Historic Resources Commission of Asheville and Buncombe County. The Municipal Building sits on a 0.82 acre parcel of land located at 100 Court Plaza. The Municipal Building is a four-story building of approximately 95,000 square feet. The Public Works Administration Building sits on a 2.73 acre parcel of land located at 161 South Charlotte Street. The Public Works Administration Building is a two-story building of approximately 27,383 square feet. The Premises have not been recently appraised and no representation is made regarding the current fair value of the Premises. The Deed of Trust authorizes future obligations evidenced by Additional Bonds executed and delivered under the Indenture to be secured by the Deed of Trust, provided that the total amount of present and future obligations secured thereby at any one time does not exceed $80,000,000 and such future obligations are incurred not later than 30 years from the date of the Deed of Trust. 8

15 Title Insurance. The Deed of Trust has been recorded by the City in the office of the Register of Deeds of Buncombe County, North Carolina, and the liens created thereby are insured by a title insurance policy in the amount of $43,000,000. No representation is made regarding the value of the Premises. Generally, a claim against a title insurance policy may only be made in the amount which is the lesser of the actual value of the real property and the amount of the title insurance policy. Release of Premises. So long as there is no event of default under the Deed of Trust, the Trustee must release the Premises or any part thereof from the lien and security interest of the Deed of Trust when and if the following requirements have been fulfilled: Indenture (1) in connection with any release of the Premises, or any part thereof, there is filed with the Corporation a certified copy of the resolution of the City Council stating the purpose for which the City desires such release, giving an adequate legal description of the part of the Premises to be released, requesting such release and providing for payment by the City of all expenses in connection with such release; (2) in connection with the release of any part of the Premises constituting less than the entire Premises, either (a) the value of the Premises remaining after the proposed release (as such value is evidenced by or derived from (i) an appraisal of the remaining Premises prepared by a certified MAI-approved appraiser, (ii) the insured replacement value of the Premises or (iii) the assessed tax valuation of the remaining Premises) is not less than 50% of the aggregate principal component of the Installment Payments then Outstanding under the Indenture or (b) the City (i) provides for the substitution of other real property therefor and the value of the Premises (as such value is evidenced by or derived from (A) an appraisal of the remaining Premises prepared by a certified MAI-approved appraiser, (B) the insured replacement value of the remaining Premises or (C) the assessed tax valuation of the remaining Premises) remaining after the proposed substitution is not less than the value of the Premises (as determined above) immediately before the proposed substitution, (ii) delivers to the Trustee and the Corporation an opinion of Special Counsel to the effect that the substitution (A) is permitted by law and under the Deed of Trust and (B) will not adversely affect the tax treatment of the Bonds, and (iii) records a modification to the Deed of Trust reflecting such substitution of the Premises. Any appraisal ordered pursuant to the Deed of Trust may be prepared by an employee of the City, so long as such employee is a certified MAI-approved appraiser; (3) in connection with the release of any part of the Premises constituting less than the entire Premises, such release will not prohibit the City s ingress, egress and regress to and from the remainder of the Premises not being released, or materially interfere with the use of the remainder of the Premises not being released; and (4) in connection with the release of the entire Premises, there is paid to the Corporation an amount sufficient to provide for the payment in full all of the Bonds then Outstanding under the Indenture. Pursuant to the Indenture, the Corporation has assigned to the Trustee for the benefit of the Owners of the 2017 Bonds and the 2012 Bonds and any Additional Bonds executed and delivered under the Indenture (1) all rights, title and interest of the Corporation in the Contract (except for certain indemnification rights, certain notice rights and the right to Additional Payments payable to the Corporation), including its rights to receive the Installment Payments thereunder, (2) all rights, title and 9

16 interest of the Corporation in the Deed of Trust and the Premises and (3) all money and securities from time to time held by the Trustee under the Indenture in any fund or account (except the Rebate Fund). Consent of Initial Purchaser, Underwriter or Remarketing Agent Any person that holds any Bond as an Owner, including an initial purchaser, underwriter or remarketing agent that holds such Bond with an intent to sell or distribute such Bond in the future, shall be deemed to be the Owner of such Bond for the purpose of giving any consent required under the Indenture, including any consent to an amendment or supplemental indenture that adversely affects the interests of other Owners. Neither the City nor any initial purchaser, underwriter or remarketing agent providing its consent to an amendment or supplemental indenture shall be required to provide any prior notice or other documentation regarding such amendment or supplemental indenture to any Owner of any Bond. Enforceability NEITHER THE CONTRACT NOR THE 2017 BONDS CONSTITUTE A PLEDGE OF THE FAITH AND CREDIT OF THE CITY WITHIN THE MEANING OF ANY CONSTITUTIONAL DEBT LIMITATION. NO DEFICIENCY JUDGMENT MAY BE RENDERED AGAINST THE CITY IN ANY ACTION FOR BREACH OF ANY CONTRACTUAL OBLIGATION UNDER THE CONTRACT, AND THE TAXING POWER OF THE CITY IS NOT PLEDGED DIRECTLY OR INDIRECTLY TO SECURE ANY MONEYS DUE THE OWNERS OF THE 2017 BONDS PURSUANT TO THE CONTRACT. The remedies afforded to the Trustee and the Owners of the 2017 Bonds upon a default by the City under the Contract are limited to those specified in the Contract and the Indenture, including exercising the rights of the beneficiary under the Deed of Trust and the rights of the Trustee in the funds held under the Indenture. The 2017 Bonds will not constitute a debt or general obligation of the Corporation and will not give the Owners of the 2017 Bonds any recourse to the assets of the Corporation, but will be payable solely from amounts payable by the City under the Contract, from amounts realized on the foreclosure on the Premises pursuant to the Deed of Trust and from funds held in certain funds and accounts under the Indenture for such purpose. The enforceability of the Indenture, the Contract and the Deed of Trust is subject to bankruptcy, insolvency, fraudulent conveyance and other related laws affecting the enforcement of creditors rights generally and, to the extent that certain remedies under such instruments require, or may require, enforcement by a court, to such principles of equity as the court having jurisdiction may impose. See SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The Contract Remedies on Default in Appendix C for a more complete description of the rights and powers of the Trustee upon the occurrence of an event of default under the Contract. Additional Bonds Under the conditions described in the Indenture and so long as no Event of Default has occurred and is continuing under the Indenture, the Corporation may execute and deliver Additional Bonds under the Indenture without the consent of the Owners of the 2017 Bonds, the 2012 Bonds or any Additional Bonds then Outstanding under the Indenture to provide funds to pay (1) the cost of expanding the 2012 Projects (as defined in the Indenture) or acquiring, constructing, renovating and equipping other facilities 10

17 or acquiring equipment and other capital assets for use by the City for public purposes; (2) the cost of refunding of all or any portion of the Bonds or any other installment financing obligations of the City; and (3) the Costs of Issuance relating to the execution, delivery and sale of the Additional Bonds. The 2017 Bonds are payable on a parity with the 2012 Bonds not being refunded with the proceeds of the 2017 Bonds and any Additional Bonds hereafter executed and delivered pursuant to the Indenture. The Installment Payments and any Installment Payments with respect to Additional Bonds issued under the Indenture will be deposited as received by the Trustee in the Bond Fund held by the Trustee. Moneys in the Bond Fund will be withdrawn and used to pay the principal and interest with respect to the 2017 Bonds, the 2012 Bonds and any Additional Bonds executed and delivered under the Indenture as the same become due and payable. If on any date the moneys on deposit in the Bond Fund are insufficient to pay all of the principal and interest with respect to the 2017 Bonds, the 2012 Bonds or any Additional Bonds executed and delivered under the Indenture which are due and payable on such date, such moneys will be used to pay such principal and interest with respect to the 2017 Bonds, the 2012 Bonds and any such Additional Bonds entitled to receive principal or interest on such date in the manner provided in the Indenture. See SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The Indenture Application of Money in Appendix C. General AVAILABLE SOURCES FOR PAYMENT The City may pay its Installment Payments from any source of funds available to it in each year and appropriated therefor during the term of the Contract. General Fund Revenues The City s unaudited general fund estimated revenues for the Fiscal Year ended June 30, 2017 were $113,182,000. The City s general fund revenues for the Fiscal Year ending June 30, 2018 are currently budgeted at $120,705,145. General fund revenues are derived from various sources including property taxes, which generate 51.7% of the general fund revenue, sales taxes, intergovernmental revenues, licenses, permit and charges for services. For the Fiscal Years ended June 30, 2017 and ending June 30, 2018, the City imposed a property tax of $0.475 and $ per $100 of assessed value, respectively. A rate of $0.01 per $100 of assessed value in the Fiscal Year ended June 30, 2017, generated approximately $1,180,450 and in the Fiscal Year ending June 30, 2018, is expected to generate approximately $1,446,654. The General Statutes of North Carolina permit cities to impose property taxes of up to $1.50 per $100 of assessed value for certain purposes without the requirement of a voter referendum. See Appendix B hereto for a description of the uses of the City s general fund revenues for the Fiscal Year ended June 30,

18 ANNUAL INSTALLMENT PAYMENT REQUIREMENTS The following schedule sets forth for each fiscal year of the City ending June 30 the amount of principal and interest required to be paid under the Contract with respect to the 2012 Bonds and the 2017 Bonds. Totals may not foot due to rounding Bonds Fiscal Year Ending June 30, 2012 Bonds 1, 2 Principal Interest Total $3,431,400 - $409,759 $3,841, ,037,300 $685,000 1,025,125 3,747, ,964, , ,300 3,643, ,895, , ,050 3,540, ,543, , ,800 3,154, ,820, ,275 2,692, ,810, ,625 2,600, ,810, ,125 2,510, ,825, ,250 2,434, ,825, ,000 2,343, ,835, ,500 2,261, ,830, ,438 2,172, ,825, ,750 2,092, ,805, ,175 2,009, ,795, ,175 1,945, , , , ,000 92, , ,000 72, , ,000 51, , ,000 31, , ,000 10, ,625 Total 3 $10,872,100 $25,000,000 $9,568,221 $45,440,321 1 Includes principal and interest. 2 Excludes debt service on the Bonds to be Refunded and the 2016 Bond. 3 Totals may not foot due to rounding. Limited Obligation of the City CERTAIN RISKS OF 2017 BOND OWNERS If the payments to be made by the City are insufficient to pay the principal and interest with respect to the 2017 Bonds, the 2012 Bonds and any Additional Bonds, as the same become due or, if any other event of default occurs under the Contract, the Trustee may accelerate the 2017 Bonds and all unpaid principal amounts due by the City under the Contract and foreclose on the City s interest in the Premises under the Deed of Trust. The Premises includes only the sites on which the City Building, the Municipal Building and the Public Works facility are located and any improvements thereon. 12

19 No deficiency judgment may be rendered against the City in any action for any breach of the Contract. The taxing power of the City is not and may not be pledged directly or indirectly or contingently to secure any moneys due under the Contract. The remedies afforded to the Trustee and the Owners of the 2017 Bonds, the 2012 Bonds and any Additional Bonds upon a default by the City under the Contract are limited to those of a secured party under the laws of the State, including foreclosing on the City s interest in the Premises covered by the Deed of Trust. There can be no assurance that the moneys available in the funds and accounts held by the Trustee and the proceeds of any such foreclosure will be sufficient to provide for the payment of the principal and interest with respect to the 2017 Bonds, the 2012 Bonds and any Additional Bonds outstanding under the Indenture. Risk of Nonappropriation The appropriation of moneys to make payments due on the 2017 Bonds is within the sole discretion of the City Council. If the City Council fails to appropriate such moneys, the only sources of payment for the 2017 Bonds will be the moneys, if any, available in the respective funds and accounts held by the Trustee under the Indenture and the proceeds of any attempted foreclosure on the City s interest in the Premises under the Deed of Trust. Environmental Risks The City has not obtained a Phase I environmental assessment for the Premises. The City acquired the land on which the City Building is located from Buncombe County in Prior to its acquisition by Buncombe County, the property was occupied by a boarding house known as the Knickerbocker Inn. The City obtained the land for the Municipal Building in 1808, with the building completed in The Public Works Facility building was completed in The City is not aware of any recognized environmental concerns with respect to the Premises and the parcels have not been used for industrial or manufacturing purposes while owned by the City. Environmental contamination of the Premises and undiscovered or future environmental contamination could have a material adverse effect on the value of the Premises; however, the City is required under the Deed of Trust to undertake whatever environmental remediation may be required by law. Value of Collateral No special appraisal of the Premises has been obtained and the amount of proceeds received through foreclosure of the City s interest in the Premises will be affected by a number of factors, including (1) the costs and expenses in enforcing the lien and security, (2) the condition of the Premises, (3) the occurrence of any damage, destruction, loss or theft of the Premises which is not repaired or replaced and for which there are not received or appropriated moneys from insurance policies or any risk management program, (4) problems relating to the paucity of alternative uses of the facilities arising from their design, zoning restrictions, use restrictions, easements and encumbrances on the Premises and (5) environmental problems and risks with respect to the Premises. No representation is made as to the value of the City s interest in the Premises in foreclosure. 13