CITY OF ELDORA, IOWA

Transcription

1 AMENDED OFFICIAL STATEMENT DATED DECEMBER 17, 2012 In the opinion of Dorsey & Whitney LLP, Bond Counsel, according to present laws, rulings and decisions and assuming compliance with certain covenants, the interest on the Bonds will be excluded from gross income for federal income tax purposes. Interest on the Bonds will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations under the Internal Revenue Code of 1986; provided, however, such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes). The Issuer will designate the Bonds as qualified tax exempt obligations. See Tax Exemption and Related Considerations and Bank Qualification heein. REFUNDING ISSUE DTC BOOK ENTRY NOT RATED CITY OF ELDORA, IOWA $5,660,000 SEWER REVENUE REFUNDING BONDS, SERIES 2012 DATED: Date of Delivery (expected on or about December 20, 2012) DUE: June 1, The Sewer Revenue Refunding Bonds, Series 2012 described above (the "Bonds" or Series 2012 Bonds ) are issued as fully registered Bonds in the denomination of $5,000 or any integral multiple thereof and, when issued, will be registered in the name of Cede & Co., as Bondholder and nominee of the Depository Trust Company, New York, NY ("DTC"). DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form. Purchasers of the Bonds will not receive certificates representing their interest in the Bonds purchased. So long as DTC or its nominee, Cede & Co., is the Bondholder, the principal of, premium, if any, and interest on the Bonds will be paid by Bankers Trust Company, Des Moines, Iowa as Registrar and Paying Agent (the "Registrar"), or its successor, to DTC, or its nominee, Cede & Co. Disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants as more fully described herein. Neither the Issuer nor the Registrar will have any responsibility or obligation to such DTC Participants, indirect participants or the persons for whom they act as nominee with respect to the Bonds. Interest on the Bonds is payable on June 1 and December 1 in each year, beginning June 1, The Bonds will mature on June 1 in the years and amounts and bear interest at the rates shown below: Year (June 1) Amount Interest Rate Price SERIAL BONDS Year (June 1) Amount Interest Rate 2013 $250, % $400, % , % , % , % , % , % , % , % , % , % , % , % , % , % The City reserves the right to prepay part or all of the Bonds maturing in each of the years 2021 to 2027, inclusive, prior to and in any order of maturity on June 1, 2020, or on any date thereafter upon terms of par and accrued interest. The Bonds are being issued by the City of Eldora, Iowa (the City or Issuer ) in the aggregate principal amount of $5,660,000, to evidence the City s obligation under a certain loan agreement (the Loan Agreement ) for the purpose of paying the cost, to that extent, of current refunding, on December 20, 2012, the remaining portions of the City s Sewer Revenue Bonds, Series 2000A, Series 2000B, Series 2000D and Series 2005, all of which are SRF loans (State Revolving Fund), originally issued to fund improvements to the City s Municipal Sanitary Sewer System (the Utility. The Bonds are issued pursuant to and in strict compliance with the provisions of Chapters 384 and 76 of the Code of Iowa, and all other laws amendatory thereof and supplemental thereto, and in conformity with a resolution of the City Council authorizing and approving the Loan Agreement and providing for the issuance and securing the payment of the Bonds (the Resolution ). The Bonds are not general obligations of the City or the Utility but together with any additional obligations as may be hereafter issued and outstanding from time to time ranking on a parity therewith under the conditions set forth in the Resolution, are payable solely and only out of the future Net Revenues of the Utility, a sufficient portion of which has been ordered set aside and pledged for that purpose. The Bonds are not payable in any manner by taxation, and under no circumstances shall the City be in any manner liable by reason of the failure of the said Net Revenues to be sufficient for the payment of the Bonds and the interest hereon. Further security for the Bonds is provided by a Reserve Fund in the amount of $472,330 funded from cash on hand. The Bonds are offered when, as and if issued and received by the Underwriter, subject to the approval of their legality by opinion of Dorsey & Whitney LLP, Des Moines, Iowa, whose opinion will be furnished at closing. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about December 20, This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Price

2 No broker, dealer, salesman, or other person has been authorized by the Issuer or the Underwriter to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations may not be relied upon as having been authorized by any of the foregoing. 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 Bonds, by any person in any jurisdiction in which it is unlawful for such person to make such a solicitation or sale. The information set forth herein has been obtained from the Issuer and other sources which are believed to be reliable but such information is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Underwriter. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer since the date hereof. Reference herein to laws, rules, regulations, resolutions, agreements, reports and other documents do not purport to be comprehensive or definitive. All references to such documents are qualified to their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein. Where full texts have not been included as appendices to the Official Statement they will be furnished on request. TABLE OF CONTENTS Page No. Directory of Officials... 1 Introduction, Description, Authority and Purpose Security and Source of Payment, Optional Redemption Underwriting, Book Entry Only System Rating, Litigation, Future Financing, Debt Payment History... 6 Bondholders Risks, Legal Matters... 7 Tax Exemption, Bank Qualification, Continuing Disclosure... 8 The Utility General Information, Sewer User Rates, and Charges, Largest Customers Historical Number of Customers Served, Sales History and Total Sewer Charges Fund Balances (Sewer) Historical cash flow and Debt Coverage Sewer Revenue Debt and Debt Requirements The Issuer General Information, Population Trend, Major Employers Financial Services, Taxable Retail Sales Trend Building Permit Trend, Unemployment Statistics, Receipts/Disbursements Valuation by Property Classification, Valuation Trend Larger Taxpayers, Property Valuations & Tax Collection Procedures, Legislation Property Tax Matters Tax Rate Per $1,000, Breakdown of City Tax Levy, Tax collection Trend General Obligation Debt, Debt Limit Calculation Financial Summary Certification APPENDIX A Independent Auditor s Report APPENDIX B Preliminary Legal Opinion APPENDIX C Form of Continuing Disclosure

3 CITY OF ELDORA, IOWA CITY HALL 1442 Washington Street Eldora, Iowa Telephone CITY OFFICIALS James Brown, Mayor... Term Expires January 1, 2016 Myron Kosanke, Council Member... Term Expires January 1, 2016 Steve Pence, Council Member... Term Expires January 1, 2016 Trista Nelson, Council Member... Term Expires January 1, 2014 Peter Harrison, Council Member... Term Expires January 1, 2014 Melody Hoy, Council Member... Term Expires January 1, 2014 Patrick Ian Rigg... City Administrator/Clerk Lawrence Cutler... City Attorney BOND COUNSEL DORSEY & WHITNEY LLP 801 Grand, Suite 4100 Des Moines, Iowa / UNDERWRITER RUAN SECURITIES A division of D.A. Davidson & Co. 515 East Locust, Suite 200 Des Moines, Iowa (515)

4 OFFICIAL STATEMENT CITY OF ELDORA, IOWA $5,660,000 SEWER REVENUE REFUNDING BONDS, SERIES 2012 INTRODUCTION This Official Statement, including the cover page and any and all appendices, is provided to set forth certain information with respect to the issuance of $5,660,000 Sewer Revenue Refunding Bonds, Series 2012 (the Bonds or Series 2012 Bonds ) of the City of Eldora, Hardin County, State of Iowa (the Issuer or City ). None of the references to or summaries of the laws of the State of Iowa or any documents referred to in this Official Statement purport to be complete, and all such references are qualified in their entirety by reference to the complete provisions thereof. DESCRIPTION OF BONDS The Bonds are dated the date of delivery (expected on or about December 20, 2012) and will be issued as fully registered Bonds in the denomination of $5,000 or any integral multiple thereof and, when issued, will be registered in the name of Cede & Co., as Bondholder and nominee of the Depository Trust Company, New York, NY ("DTC"). DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form. Purchasers of the Bonds will not receive certificates representing their interest in the Bonds purchased. So long as DTC or its nominee, Cede & Co., is the Bondholder, the principal and interest on the Bonds will be paid by Bankers Trust Company, Des Moines, Iowa as Registrar and Paying Agent (the "Registrar"), or its successor, to DTC or its nominee, Cede & Co. Disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants as more fully described herein. The Bonds will bear interest from their date at such rates and mature on the dates and in the amounts set forth on the cover page hereof, said interest being payable June 1, 2013 and semiannually thereafter on the first day of June and December in each year until maturity or earlier redemption. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Payments of principal and interest shall be made to the registered holder thereof or to their designated Agent as the same appear on the books of the Registrar on the 15 th day of the month preceding the payment date. AUTHORITY AND PURPOSE The Bonds are being issued by the City in the aggregate principal amount of $5,660,000, to evidence the City s obligation under a certain loan agreement (the Loan Agreement ) for the purpose of paying the cost, to that extent, of current refunding on December 20, 2012, the remaining portions of the City s Sewer Revenue Bonds, Series 2000A, 2000B, 2000D and Series 2005, all of which are SRF loans (State Revolving Fund), originally issued to fund improvements to the City s Municipal Sanitary Sewer System (the Utility ). The Bonds are issued pursuant to and in strict compliance with the provisions of Chapters 384 and 76 of the Code of Iowa, and all other laws amendatory thereof and supplemental thereto, and in conformity with a resolution of the City Council authorizing and approving the Loan Agreement and providing for the issuance and securing the payment of the Bonds (the Resolution ). Details of the bonds to be refunded are set forth below. Name of Issue to be Refunded Call Date Call Price Maturities to be Refunded Principal Amount Coupon Series 2000A Bonds December 20, June 1, 2013 $10, % December 20, June 1, , % Current December 20, June 1, , % Refunding December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % Total $104,

5 Name of Issue to be Refunded Call Date Call Price Maturities to be Refunded Principal Amount Coupon Series 2000B Bonds December 20, June 1, 2013 $47, % December 20, June 1, , % Current December 20, June 1, , % Refunding December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % Total $491,000 Name of Issue to be Refunded Call Date Call Price Maturities to be Refunded Principal Amount Coupon Series 2000D Bonds December 20, June 1, 2013 $8, % December 20, June 1, , % Current December 20, June 1, , % Refunding December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % Total $85,000 Name of Issue to be Refunded Call Date Call Price Maturities to be Refunded Principal Amount Coupon Series 2005 Bonds December 20, June 1, 2013 $ 258, % December 20, June 1, , % Current December 20, June 1, , % Refunding December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % December 20, June 1, , % Total $4,394,

6 SECURITY AND SOURCE OF PAYMENT This section sets forth a summary of the security provisions for the Bonds. A detailed statement of security provisions is contained in the Resolution authorizing the issuance of the Bonds, which is available upon request. Source of Payment: The Bonds are not general obligations of the City or the Utility, but together with any additional obligations as may be hereafter issued and outstanding from time to time ranking on a parity therewith under the conditions set forth in the Resolution ( Parity Obligations ), are payable solely and only out of the future Net Revenues of the Utility, a sufficient portion of which has been ordered set aside and pledged for that purpose. Unpaid Sewer Charges: As provided by Section , Subsection 3, Code of Iowa, unpaid sewer charges constitute a lien upon the premises served by the Utility upon certification by the City to the County Treasurer that the rates or charges are past due. The lien has equal precedence with ordinary taxes, may be certified to the County Treasurer and collected in the same manner as taxes, and is not divested by a judicial sale. Rate Covenant: So long as the Bonds or any Parity Obligations are outstanding, the Issuer covenants to maintain the Municipal Sanitary Sewer System in good condition, and the Utility shall continue to be operated in an efficient manner and at a reasonable cost as a revenue producing undertaking. The Utility shall establish, impose, adjust and provide for the collection of rates to be charged to customers of the Utility, including the City, to produce gross revenues (the Gross Revenues ) at least sufficient to pay the expenses of operation and maintenance of the Utility, which shall include salaries, wages, cost of maintenance and operation, materials, supplies, insurance, and all other items normally included under recognized accounting practices (but does not include allowances for depreciation in the valuation of physical property) (which such expenses are referred to in the Resolution as the Operating Expenses ) and to leave a balance of net revenues (referred to in the Resolution as Net Revenues ) equal to at least 110 percent of the amount of annual payments of principal of and interest on all of the Bonds and any Parity Obligations outstanding from time to time, as the same become due, and to maintain a reasonable reserve for the payment of such principal and interest, as provided in the Resolution. Reserve Fund: The Issuer covenants to maintain a Reserve Fund to provide a reserve for the payment of principal of and interest on the Bonds, and any Parity Obligations. The Issuer covenants to maintain $472,330 in the Reserve Fund (the Required Reserve Fund Balance ) which reflects the lesser of: (i) the maximum amount of principal and interest becoming due on the Bonds and any outstanding Parity Obligations, (ii) 125% of the average amount of principal of and interest becoming due on the outstanding Bonds and Parity Obligations, or (iii) 10% of the stated principal amount of the Bonds and Parity Obligations stated principal amount shall not include any portion of an issue refunded or advance refunded by a subsequent issue. At the time of the delivery of the Bonds, the City agrees to deposit the sum of $472,330 from cash on hand to fund the Required Reserve Fund Balance, which is equal to 10% of the stated principal amount of the Series 2012 Bonds. All money on deposit in the Reserve Fund shall be used and is hereby pledged to the payment of the principal of and interest on the Bonds and any Parity Obligations outstanding from time to time whenever for any reason the funds on deposit in the Sinking Fund (as defined in the Resolution) are insufficient to pay such principal and interest when due. Whenever the sum on deposit in the Reserve Fund has been reduced to less than the Required Reserve Fund Balance by the expenditure of all or a portion of such funds in order to prevent or remedy a deficiency in the Sinking Fund, the Issuer covenants to deposit into the Reserve Fund the remaining Net Revenues, after first making the required deposits into the Sinking Fund, until the sum on deposit in the Reserve Fund has been restored to the Required Reserve Fund Balance. Additional Bonds Test: The City reserves the right and privilege to issue additional revenue bonds, from time to time, payable from the same source and ranking on a parity with the outstanding Bonds, in order to pay the cost of improvements and extensions to the Utility, but before any such bonds ranking on a parity are issued, there shall have first been procured and filed with the City Clerk, a statement of an independent certified public accountant or consulting engineer, not a regular employee of the City, reciting the opinion based upon necessary investigations that the Net Revenues of the Utility for the last preceding fiscal year prior to the issuance of such parity obligations were equal to at least 120% of the maximum amount that will become due in any fiscal year for both principal of and interest on the Bonds, any Outstanding Parity Obligations then outstanding and the parity bonds then proposed to be issued. OPTIONAL REDEMPTION The City reserves the right to prepay part or all of the Bonds maturing in each of the years 2021 through 2027 inclusive, prior to and in any order of maturity on June 1, 2020, or on any date thereafter upon terms of par plus accrued interest to date of call. The Bonds may be called in whole or from time to time in part in one or more units of $5,000. Notice of such redemption shall be mailed by ordinary mail or electronic means to the registered owners thereof at the addresses shown on the City s registration books not less than 30 nor more than 60 days prior to such redemption date. All of such Bonds as to which the City reserves and exercises the right of redemption and as to which notice as aforesaid shall have been given and for the redemption of which funds are duly provided, shall cease to bear interest on the redemption date

7 UNDERWRITING The Underwriter has agreed to purchase the Bonds from the Issuer at the price of $5,575,100 plus accrued interest. The Underwriter intends to offer the Bonds to the public initially at the offering prices or bond yields as set forth on the cover page of this Official Statement, which may subsequently change without any requirement of public notice. The Underwriter may offer and sell the Bonds to certain dealers at prices lower than the public offering prices. BOOK ENTRY ONLY SYSTEM The information contained in the following paragraphs of this subsection Book-Entry Only System has been extracted from a schedule prepared by Depository Trust Company ( DTC ) entitled SAMPLE OFFERING DOCUMENT LANGUAGE DESCRIBING BOOK-ENTRY ONLY ISSUANCE. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds (the Securities ). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each maturity of the Securities, in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC s records. The ownership interest of each actual purchaser of each Security ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates rep resenting their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them

8 Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. RATING The Issuer has not requested a rating for this issue. LITIGATION There is no litigation now pending or, to the knowledge of officials of the Issuer, threatened which questions the validity of the Bonds or of any proceedings of the Issuer taken with respect to the issuance or sale thereof. Separate from these Bonds or the Utility there is litigation underway in the State Appellate court to overturn a dismissal of a lawsuit in favor of the City at the District court level. This lawsuit was over the City s right to refinance a revenue bond on a building it is renting to the School District. The City believes that any adverse decision under this litigation will have no effect on the Utility or the City s ability to pay the Bonds. FUTURE FINANCING The City refinanced a bond for lower interest rates and an additional $395,000 for road projects in November of 2012 and does not anticipate any further refinancing other than refinancing a USDA Revenue Bond in the amount of $340,000 once the City is clear of all litigation brought against it, see Litigation above. The City s Capital Improvement Planning does not anticipate any new money borrowing until Fiscal Year DEBT PAYMENT HISTORY The Issuer is not aware of any instance in which they have defaulted on the payment of principal and interest debt payments

9 BONDHOLDERS RISKS An investment in the Bonds is subject to certain risks. No person should purchase the Bonds unless such person understands the risks described below and is willing to bear those risks. There may be other risks not listed below which may adversely affect the value of the Bonds. Nature of Obligation - The Bonds and other Parity Obligations are special obligations of the City payable solely from the Net Revenues of the Utility. The Bonds are not payable by, and have no recourse to, the power of taxation. The Bondholders have no lien on or security interest in any of the physical assets of the City, including the Utility. Future revenues and expenses of the City with respect to the Utility are subject to conditions which may change in the future to an extent that cannot be determined at this time. Future events may occur that upset the assumptions upon which projections of revenues and expenses are based, or those assumptions may fail to materialize. Because no assurance can be made that actual events will correspond to such assumptions, no assurances can be made that Net Revenues will be realized in amounts sufficient to pay the debt service on the Bonds. Revenues and Expenses - Several factors not within the control of the City could affect the City s ability to generate sufficient Net Revenues to pay the debt service on the Bonds and other Parity Obligations. These factors include, but are not limited to, inflation and adverse economic conditions, increases in operation and maintenance costs and in the cost of purchasing or processing sanitary sewer (wastewater), unexpected repairs, replacements or improvements to the Utility, decreases in the demand for wastewater services from the Utility, slower growth than projected for the number of users, and the ability of the City to supply the services demanded and to maintain necessary rates for those services. The City may not require potential users to connect to the System or prevent current users from obtaining alternative wastewater supplies. Any one of the above factors, among others, individually or combined may cause the City to be unable to generate sufficient Net Revenues to pay debt service on the Bonds. Secondary Market Not Established - There is no established secondary market for the Bonds, and there is no assurance that a secondary market will develop for the purchase and sale of the Bonds. Prices of municipal bonds traded in the secondary market, if any, are subject to adjustment upward and downward in response to changes in the credit markets and changes in the operating performance of the entities operating the facilities subject to bonded indebtedness. From time to time it may be necessary to suspend indefinitely secondary market trading in selected issues of municipal bonds as a result of the financial condition or market position, prevailing market conditions, lack of adequate current financial information about the entity operating the subject facilities, or a material adverse change in the operations of that entity, whether or not the subject Bonds are in default as to principal and interest payments, and other factors which, may give rise to uncertainty concerning prudent secondary market practices. Additional Debt of the Utility - As described above, upon the satisfaction of certain conditions set forth in the Resolution, the City may issue Parity Obligations for the purpose of financing improvements or modifications to the System, which Waterworks Parity Obligations would be equally and ratably secured with the Bonds and any existing or future Parity Obligations, by the net revenues of the System. Municipal bonds are generally viewed as long-term investments, subject to material unforeseen changes in the investor s circumstances, and may require commitment of the investor s funds for an indefinite period of time, perhaps until maturity. LEGAL MATTERS Legal matters incident to the authorization, issuance and sale of the Bonds and with regard to the tax-exempt status of the interest thereon (see TAX EXEMPTION AND RELATED CONSIDERATIONS and BANK QUALIFICATION herein) are subject to the approving legal opinion of Dorsey & Whitney LLP, Des Moines, Iowa, Bond Counsel, a form of which is attached hereto as APPENDIX B. Signed copies of the opinion, dated and premised on law in effect as of the date of original delivery of the Bonds, will be delivered to the Underwriter at the time of such original delivery. The Bonds are offered subject to prior sale and to the approval of legality of the Bonds by Bond Counsel. The legal opinion to be delivered will express the professional judgment of Bond Counsel, and by rendering a legal opinion, Bond Counsel does not become an insurer or guarantor of the result indicated by that expression of professional judgment or of the transaction or the future performance of the parties to the transaction. Bond Counsel has not been engaged, nor has it undertaken, to prepare or to independently verify the accuracy of the Official Statement, including but not limited to financial or statistical information of the Issuer and risks associated with the purchase of the Bonds, except Bond Counsel has reviewed the information and statements contained in the Official Statement under INTRODUCTION, TAX EXEMPTION AND RELATED CONSIDERATIONS, and BANK QUALIFICATION insofar as such statements contained under such captions purport to summarize certain provisions of the Internal Revenue Code of 1986, the Bonds, and any opinions rendered by Bond Counsel, and Bond Counsel has prepared the documents contained in Appendix B and Appendix C

10 TAX EXEMPTION AND RELATED CONSIDERATIONS The opinion of Bond Counsel will state that under present laws and rulings, interest on the Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations under the Internal Revenue Code of 1986 (the Code ); provided, however, that such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes). The opinions set forth in the preceding sentence will be subject to the condition that the Issuer comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. In the resolution authorizing the issuance of Bonds, the Issuer will covenant to comply with all such requirements. There may be certain other federal tax consequences to the ownership of the Bonds by certain taxpayers, including without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security and Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations. Bond Counsel will express no opinion with respect to other federal tax consequences to owners of the Bonds. Prospective purchasers of the Bonds should consult with their tax advisors as to such matters. From time to time, there are Presidential proposals, proposals of various federal committees, and legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to herein or adversely affect the marketability or market value of the Bonds or otherwise prevent holders of the Bonds from realizing the full benefit of the tax exemption of interest on the Bonds. Further, such proposals may impact the marketability or market value of the Bonds simply by being proposed. No prediction is made whether such provisions will be enacted as proposed or concerning other future legislation affecting the tax treatment of interest on the Bonds. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value, marketability or tax status of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds would be impacted thereby. BANK QUALIFICATION In the resolution authorizing the issuance of the Bonds, the Issuer will designate the Bonds as qualified tax exempt obligations within the meaning of Section 265(b)(3) of the Code relating to the ability of financial institutions to deduct from income for federal income tax purposes a portion of the interest expense that is allocable to tax-exempt obligations. CONTINUING DISCLOSURE The Securities and Exchange Commission (the SEC ) has promulgated certain amendments to Rule 15c2-12 under the Securities Exchange Act of 1934 (17 C.F.R c2-12) (the Rule ) that make it unlawful for an underwriter to participate in the primary offering of municipal securities in a principal amount of $1,000,000 or more unless, before submitting a bid or entering into a purchase contract for such securities, it has reasonably determined that the issuer or an obligated person has undertaken in writing for the benefit of the holders of such securities to provide certain disclosure information to prescribed information repositories on a continuing basis so long as such securities are outstanding. On the date of issuance and delivery of the Bonds, the City will execute and deliver a Continuing Disclosure Certificate pursuant to which the City will undertake to comply with the Rule. The City will covenant and agree to comply with and carry out the provisions of the Continuing Disclosure Certificate. All of the officers of the City will be authorized and directed to take any and all actions as may be necessary to comply with the Rule and the Continuing Disclosure Certificate which is attached as Appendix C to this Official Statement

11 SANITARY SEWER UTILITY SYSTEM The system has approximately 1,450 municipal connections served by a 1,967,000 gallon per day wastewater sewage treatment facility. Average daily demand is approximately 487,000 gallons per day while peak demand reaches 1,400,000 gallons per day. There is a three cell-lagoon system for the wastewater. The system meets or exceeds all NPDES permit requirements and given its relatively new construction, no major upgrades are anticipated for either regulatory compliance or ability to provide service. SEWER USER RATES AND CHARGES The rates listed below are the current rates passed and approved on December 3, BASIC RATES. The rates for comprehensive sewer service charges are as follows: 1. Group I: The total monthly billing for Group I sewer charges shall be $5.00 for a sewer treatment charge then increased to $8.00 July 1 st 2016 and then $10.00 July 1 st 2021, plus an amount determined based upon water meter readings according to the following rate schedule: A. 0-1,000 gallons $15.64 B. > 1,000 gallons $9.61 per 1,000 gallons Sewer charges shall be due and payable monthly with the water bill. If any billing is delinquent for nonpayment by the fifteenth day of the month of billing or when due, an additional penalty of five dollars ($5.00) or ten percent (10%) of the net sewer bill, whichever is greater, shall be added to such delinquent bill. 2. Group II: The total monthly billing for Group II sewer charges shall be $5.00 for a sewer treatment charge then increased to $8.00 July 1 st 2016 and then $10.00 July 1 st 2021, plus an amount determined based upon water meter readings according to the following rate schedule: A. 0-1,000 gallons $15.64 B. > 1,000 gallons $9.61 per 1,000 gallons Sewer charges shall be due and payable monthly with the water bill. If any billing is delinquent for nonpayment by the fifteenth day of the month of billing or when due, an additional penalty of five dollars ($5.00) or ten percent (10%) of the net sewer bill, whichever is greater, shall be added to such delinquent bill. 3. Group III: The total monthly billing for Group III sewer service charges shall be an amount determined based upon water meter readings as outlined for Group II in Subsection 2 and based upon monthly average values obtained in-situ measurements and samples according to the following schedule: A. Flow in 1,000s gpd multiplied by ($13.10) B. BOD in lbs. multiplied by ($9.03) C. SS in lbs. multiplied by ($5.47) D. TKN in lbs. multiplied by ($22.10) 4. The following are annual rate increases beginning on July 1 st of each year to satisfy loan payments, capital improvements, maintenance and operational costs. 07/01/ % 07/01/ % 07/01/ % 07/01/ % 07/01/ % 07/01/ % Each Year After 5.0% 5. The Council may by Resolution lower the sewer rate increases from 5.0% to no less than 2.0% after Fiscal year for reasons of low inflation in operations costs, increased usage that disperses overhead, or any other reason the Council sees fit. The minimum increase of 2% is for capital improvement resources or depreciation costs for the sewer system. 6. Group IV: When the Director of Utilities determines, based on applicable standards, that special conditions surround the use of City water to the extent that the application of the basic charges provided herein would be inequitable or unfair to either the City or contributor, a special rate may be established by resolution of the Council. Such rates may include, among others, the following cases: A. Where the nature of the use of City water is such that the resulting sewage or industrial waste has characteristics making it more difficult to process than ordinary domestic waste. B. Where a major proportion of the City water consumed is not polluted and is not discharged into or does not reach the sanitary sewer

12 C. Where privately produced water supplies are discharged directly or indirectly into the sanitary sewer. Such rates shall be on an equal basis as nearly as may be with the rates which would apply to an equal quantity and character of waste originating through the use of City water. It shall be the duty of every person responsible for the production of such private water supply to report forthwith to the Director of Utilities and further, to cooperate with the Director of Utilities in the determination of the quantity and character of the waste originating from each such respective private water supply. The Director of Utilities shall designate in each such special rate case any necessary means of measurement of such private water supply and resulting sewage flow, which meter or other means of measurement shall be installed by and at the expense of the contributor upon written order of the Director of Utilities. PREVIOUS RATES User Group: Wastewater service charge rates as herein established shall be according to User Group: Group I Group II Group III Residential users commercial users and small industrial users without permits Industrial users, permit required Basic Rates: The rates for comprehensive sewer service charges are as follows: Group I and Group II: The total monthly billing shall be $5.00 for a sewer treatment charge, plus an amount determined based upon water meter readings according to the following rate schedule: A. 0 1,000 gallons $9.12 B. Over 1,000 gallons $5.61 per 1,000 gallons Delinquent charges for nonpayment by the fifteenth of the month will result in an additional penalty of $5.00 or 10% of the net sewer bill, whichever is greater. Group III: The total monthly billing for this group sewer service charges shall be an amount determined based upon water meter readings as outlined for Group II and based upon monthly average values obtained in-situ measurements and samples according to the following schedule: A. Flow in 1,000s gpd multiplied by $ 2.58 B. BOD in lbs. multiplied by $ 3.30 C. SS in lbs. multiplied by $ 2.58 D. TKN in lbs. multiplied by $12.10 LARGEST SEWER CUSTOMERS Customer Consumption Gallons Charges % of Total Gallons (1) % of Total Revenue (2) Iowa State Training School 269,098 $2, %.47% Hardin County Jail 148,200 1, %.27% Scotts Car Wash 143,000 1, %.26% Valley View 140,500 1, %.25% Eldora Nursing 112,000 1, %.21% ENP School District 80, %.15% Quality Products 71, %.13% 963,798 $9, % 1.74% (1) 66,430,000 total gallons sold during Fiscal Year 2011/12 (2) $529,168 total charges during Fiscal Year 2011/

13 HISTORICAL NUMBER OF CUSTOMERS SERVED (SEWER) Residential 1,220 1,229 1,219 1,240 1,255 1,250 Commercial Total 1,340 1,346 1,339 1,358 1,371 1,370 SALES HISTORY AND TOTAL SEWER CHARGES Fiscal Year Water Sales (gallons) Sewer Charges 2012/13 1 st qtr. 18,900,000 $163, /12 66,430,000 $529, /11 65,800,000 $535, /10 68,400,000 $521, /09 70,100,000 $504,756 FUND BALANCES (SEWER) as of 9/30/2012 FY 11/12 Ending Balance $410,806 Revenues FY 12/13 1 st Quarter 295,830 Expenses FY 12/13 1 st Quarter (143,482) Balance as of 10/01/2012 $563,154 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

14 CASHFLOW AND DEBT COVERAGE The table below presents the Municipal Sewer System s audited operating revenues and expenditures for the three-year period FY through FY Unaudited financial performance for FY is also shown, as well as current year FY budgeted revenues and expenses. Additionally projections for the phased in rate increases adopted Nov. 5, 2012 are shown through FY The projections were prepared by the City and based on historical number of customers served, volume of usage, and historical operating performance. The City s auditor, Cornwell, Frideres, Maher & Associates, P.L.C., reviewed the projections and has confirmed that the projections are reasonable and appropriate based on the rate increase adopted. The projected FY Municipal Sewer System net revenues available for debt of $631,999 is expected to produce a debt service coverage ratio of approximately 1.32 times the projected maximum annual debt service on the Bonds of $477,393. The FY through FY financial performance cannot be guaranteed but is based on historical financial performance, historical water gallons sold, historical numbers of customers and other current Sewer System information. ELDORA SEWER ENTERPRISE FUND OPERATING STATEMENT Audited Financial Statements Unaudited Projections based on Rate Ordinance adopted Dec. 3, 2012* FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 OPERATING REVENUES Sewer Charges for Service 592, , , , , , , , ,899 Other Revenue , Total Operating Revenues 592, , , , , , , , ,749 OPERATING EXPENDITURES Business Type Activities 306, , , , , , , , ,605 Total Operating Expenditures 306, , , , , , , , ,605 Net Operating Income 286, , , , , , , , ,144 Non-Operating Items Interest on Investments 13,332 7,821 6,685 2,880 6,330 10,759 11,144 11,697 12,355 Miscellaneous 7,409 5,610 5,254 19,819 17,779 16,500 16,500 16,500 16,500 Gain or (Loss) on Sale of Equipment Total Non -O perating Items 20,741 13,431 11,939 22,699 24,109 27,259 27,644 28,197 28,855 Revenue Available for Debt Service 307, , , , , , , , ,999 Projected Debt Service , , , , ,273 Coverage 148% 154% 150% 133% 132% * - See "Sewer User Rates and Charges"