=- CITY OF PAPILLION, NEBRASKA WATER REVENUE BONDS SERIES 2014

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1 PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER 2, S -g NEW ISSUE - BOOK-ENTRY-ONLY NON-RATED o BANK QUALIFIED Si S ^ o In the opinion ofgilmore & Bell, P.C., Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal ^ S ^ x "1 ~K$ Revenue Code of1986, as amended (the "Code "), (1) the interest on the Series 2014 Bonds (including any original issue discount properly allocable to 3 K ;<> an owner thereof) is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, (2) the interest on the Series 2014 Bonds is exempt from income taxation by the S _g State of Nebraska and (3) the Series 2014 Bonds are "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code. See «5? "TAXMATTERS" in this Official Statement. $2,405,000* C =- CITY OF PAPILLION, NEBRASKA I 1 WATER REVENUE BONDS SERIES 2014 ; Dated: Date of Delivery Due: October 1, as shown below 73 8 The Water Revenue Bonds, Series 2014 (the "Series 2014 Bonds") are issuable as fiilly registered bonds and, when initially issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, 3 5 New York ("DTC"), which will act as securities depository for the Series 2014 Bonds. Purchases of the Series ^1 Bonds will be made in book-entry only form, in the principal amount of $5,000 or any integral multiple thereof, through l o g brokers and dealers who are, or who act through, DTC participants. Beneficial owners of the Series 2014 Bonds will not ^ '«receive physical delivery of bond certificates so long as DTC or a successor securities depository acts as the securities s % ^ depository with respect to the Series 2014 Bonds. Interest is payable semiannually on April 1 and October 1 of each year 3 1 commencing April 1,2015. So long as DTC or its nominee is the registered owner of the Series 2014 Bonds, payments of the principal or redemption price of and interest on the Series 2014 Bonds will be made directly to DTC. Disbursement kj -g 6 of such payments to DTC participants is the responsibility of DTC and disbursement of such payments to the beneficial S owners is the responsibility of DTC participants. See "THE SERIES 2014 BONDS -Global Book-Entry Bonds." Union I S < 5 S * -S to T R ^ B 50 <3 5 o a to s; -ts 5 g o w.h Bank and Trust Company, Lincoln, Nebraska, will act as Paying Agent and Registrar for the Series 2014 Bonds. For terms relating to payments made to DTC or its nominee or in the event that the use of book-entry form is discontinued, see "THE SERIES 2014 BONDS."! -2 The Series 2014 Bonds are subject to optional redemption prior to maturity at any time on or after the fifth anniversary of the 3^-5" date of delivery thereof, as described herein. o O'f,! c; B g J & MATURITY SCHEDULE* t ^ October 1 Principal Interest October 1 Principal Interest Maturity Maturitv Amount Rate Price Maturitv Amount Rate Price S.a 2015 $ 100, $ 110,000.8 i , ,000 C , , "5; * 5 Si) c-i , ,000 «.g , , , , , , ,000 1 ^ -Js $740,000 % Term Bonds, due October 1,2034-Price %? 8 The proceeds of the Series 2014 Bonds shall be used for the purpose of providing for the financing of the costs of, ^ constructing additions to and improving, extending and equipping the waterworks plant and water system of the City of g Papillion, Nebraska (the "City"). A portion of the net proceeds of the Series 2014 Bonds will be deposited into a sub- ~ jb * account of the Debt Service Reserve Account for the Series 2014 Bonds and will be used to pay costs of issuance for the V- '= Series 2014 Bonds. * * S ^ -a s The Series 2014 Bonds are payable solely from the revenues and earnings derived and to be derived from the 1 ' ownership and operation of the City's Water System and the other funds pledged in the Ordinance (as described herein). - a S3 S This cover page contains certain information for quick reference only. It is not a summaiy of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. ^ t j? "3 -c <. S The Series 2014 Bonds are offered in book-entiy form, when, as and if issued and received by the Underwriter and <5* jd subject to the approval of legality by Gilmore & Bell, P.C., Omaha, Nebraska, Bond Counsel, and certain other conditions. c> 5 2 It is expected that the Series 2014 Bonds will be available for delivery through The Depository Trust Company, in New ; js York, New York, on or about September 30,2014. s * $ -i, H I AMERITAS INVESTMENT CORP. ft, -s a E? s R- * Preliminary, subject to change.

2 No dealer, broker, salesman or other person has been authorized by the City of Papillion or the Underwriter to give any information or to make, any representations with respect to the Series 2014 Bonds other than the information and representations contained in this Official Statement, and, if given or made, such other information or representations must 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 an offer to buy nor shall there be any sale of the Series 2014 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been furnished by the City and 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 City or its waterworks plant and water system since the date hereof. IN CONNECTION WITH THE OFFERING OF THE SERIES 2014 BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2014 BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS Pase No. INTRODUCTION 1 SECURITY FOR THE SERIES 2014 BONDS 2 THE SERIES 2014 BONDS 4 SOURCES AND APPLICATION OF FUNDS 9 THE PROJECT 9 THE WATER SYSTEM., 9 HISTORICAL STATEMENT OF REVENUES AND EXPENSES 11 DEBT SERVICE 12 FINANCIAL STATEMENT 13 THE CITY 14 TAX BASE DATA 19 ENVIRONMENTAL MATTERS 21 SUMMARY OF CERTAIN PROVISIONS OF THE ORDINANCE 21 BONDHOLDERS' RISKS 24 NEBRASKA DEVELOPMENTS RELATED TO BUDGETS AND TAXATION 25 TAX MATTERS 25 LITIGATION 27 UNDERWRITING 28 CONTINUING DISCLOSURE UNDERTAKING 28 FINANCIAL STATEMENTS 29 APPROVAL OF LEGAL PROCEEDINGS 29 MISCELLANEOUS 29 FINANCIAL REPORT Appendix A FORM OF CONTINUING DISCLOSURE UNDERTAKING Appendix B WATER RATES Appendix C SUCH SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS ANY DOCUMENT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATIONS OF THE TERMS OF THE OFFERING. THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFICIAL STATEMENT. -i-

3 OFFICIAL STATEMENT RELATING TO $2,405,000* CITY OF PAPILLION, NEBRASKA WATER REVENUE BONDS SERIES 2014 INTRODUCTION The purpose of this Official Statement, which includes the cover page and appendices, is to set forth information concerning the City of Papillion, Nebraska ("Papillion" or the "City"), the City's waterworks plant and water system (the "Water System") and the City's $2,405,000* of Water Revenue Bonds, Series 2014 (the "Series 2014 Bonds") offered hereby. The Series 2014 Bonds have been authorized by Ordinance No passed and approved by the Mayor and Council of the City on August 19, 2014 (the "Ordinance"). The City has issued and outstanding its Water Revenue Bonds, Series 2013, date of original issue - June 11, 2013, in the original principal amount of $7,325,000, of which are $7,325,000 are currently outstanding (the "Series 2013 Bonds") authorized by Ordinance No of the City (the "Series 2013 Bonds Ordinance"), Water Revenue Bonds, Series 2011, date of original issue - June 15, 2011, in the original principal amount of $3,950,000, of which are $3,640,000 are currently outstanding (the "Series 2011 Bonds") authorized by Ordinance No of the City (the "Series 2011 Bonds Ordinance") and Water Revenue Refunding Bonds, Series 201 IB, date of original issue - September 7, 2011, in the original principal amount of $3,840,000, of which $3,240,000 are currently outstanding (the "Series 201 IB Bonds") authorized by Ordinance No of the City (the "Series 201 IB Bonds Ordinance"). The Series 2011 Bonds, the Series 201 IB Bonds and the Series 2013 Bonds are sometimes hereinafter referred to collectively as the "Outstanding Bonds", and the Series 2011 Bonds Ordinance, the Series 201 IB Bonds Ordinance and the Series 2013 Bonds Ordinance are sometimes hereinafter referred to collectively as the "Outstanding Bonds' Ordinance". The Outstanding Bonds' Ordinance permits the issuance of "Additional Bonds" of equal lien and standing with the Outstanding Bonds, provided that certain revenue requirements have been met (similar in requirements to those summarized under the heading "SECURITY FOR THE SERIES 2014 BONDS Additional Bonds"). Sources of Certain Information There follow in this Official Statement brief descriptions of the Series 2014 Bonds and the City. All descriptions of documents herein are only summaries and are qualified in their entirety by reference to each such document. During the offering period, copies of such documents may be obtained from the City or from Ameritas Investment Corp. Information in this Official Statement concerning the City has been furnished by the City. Forward-Looking Statements This Official Statement contains statements which should be considered "forward-looking statements," meaning they refer to possible future events or conditions. Such statements are generally identifiable by the words such as "plan," "expect," "estimate," "budget" or similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The City does not expect or intend to issue any updates or revisions to those forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur or change. * Preliminary, subject to change.

4 Purpose and Authority The proceeds of the Series 2014 Bonds shall be used for the purpose of providing for the financing of the costs of constructing additions to and improving, extending and equipping the waterworks plant and water system of the City of Papillion, Nebraska. A portion of the net proceeds of the Series 2014 Bonds may be applied to provide a deposit into a sub-account of the Debt Service Reserve Account for the Series 2014 Bonds and to pay costs of issuance for the Series 2014 Bonds. The Series 2014 Bonds are being issued pursuant to the Constitution and laws of the State of Nebraska, specifically Sections through , R.R.S. Neb The Series 2014 Bonds are not general obligations of the City and are payable solely from the revenues of the City's Water System. Outstanding Bonds The Outstanding Bonds are the only presently-outstanding obligations evidenced by revenue bonds of the City for which the revenues of the Water System have been pledged. Upon issuance of the Series 2014 Bonds, the Series 2014 Bonds and the Outstanding Bonds will be equally and ratably secured by a pledge of the revenues of the City's Water System. The Outstanding Bonds are described as follows: Issue Series 2011 Bonds Series 201 IB Bonds Series 2013 Bonds Date of Issue June 15,2011 September 7,2011 June 11,2013 Principal Amount Outstanding $3,640,000 3,240,000 7,325,000 Final Maturity December 15, 2031 December 15, 2023 December 15, 2031 SECURITY FOR THE SERIES 2014 BONDS The principal of and interest on the Series 2014 Bonds, the Outstanding Bonds and any Additional Bonds of equal priority issued as authorized by the Outstanding Bonds' Ordinance and the Ordinance will be payable solely from and secured by a pledge of and lien on the revenues of the City's Water System. The entire gross revenues and income derived from the operation of the Water System (including any and all additions and improvements thereto hereafter acquired) shall be set aside as collected and deposited in the Papillion Water System Fund in which the City shall maintain the following accounts: (1) Bond Payment Account; (2) Operation and Maintenance Account; (3) Debt Service Reserve Account (including the reserve sub-account for the Outstanding Bonds as provided for in the Outstanding Bonds' Ordinance and the reserve sub-account for the Series 2014 Bonds as provided for in the Ordinance); and (4) Surplus Account. The Series 2014 Bonds and the Outstanding Bonds will be the only outstanding obligations of the City of Papillion secured by a first pledge of the revenues of the City's Water System. The Outstanding Bonds will be the only obligations of the City to be secured by the funds in the respective sub-accounts for the Outstanding Bonds as established under the terms of the Outstanding Bonds' Ordinance and the Series 2014 Bonds will be the only obligations secured by the funds in the sub-account for the Series 2014 Bonds of the Debt Service Reserve Account as established under the terms of the Ordinance. Debt Service Reserve Account The Outstanding Bonds' Ordinance and the Ordinance establish a Debt Service Reserve Account with separate sub-accounts for each issue of bonds. The sub-account for the Series 2014 Bonds will be funded by the City from proceeds of the Series 2014 Bonds in the amount of $168,600*. The sub-accounts in the Debt Service Reserve Account for the Outstanding Bonds have been set at $292,155, $354,925 and * Preliminary, subject to change. 2

5 694,192.08, respectively. The amount for any sub-account for any Additional Bonds will be in the discretion of the Mayor and Council of the City at the time of issuance of such Additional Bonds (which may be $-0-). Amounts in a sub-account in the Debt Service Reserve Account may only be used to provide for payment on the specific issue for which it is established. See "SUMMARY OF CERTAIN PROVISIONS OF THE ORDINANCE" for further information. Rate Covenant In the Ordinance the City agrees to establish and collect rates and charges sufficient at all times (1) to pay principal of and interest on the Series 2014 Bonds, the Outstanding Bonds and any Additional Bonds; (2) to pay all necessary costs of operation and maintenance for the Water System; (3) to provide funds sufficient to make required credits to the various accounts and funds created under the Ordinance and the Outstanding Bonds' Ordinance; (4) to maintain Net Revenues, as defined, in each fiscal year adopted by the City for the Water System in an amount not less than 1.15 times the debt service due in such year on the Series 2014 Bonds, the Outstanding Bonds and any Additional Bonds. Net Revenues for purposes of the Ordinance are defined as the gross revenues of the Water System, including investment income, but not including income from the sale of any property belonging to the Water System, less the ordinary expenses of operating and maintaining the Water System payable from the Operation and Maintenance Account. For such purpose, operation and maintenance expenses do not include depreciation, amortization, or interest on any bonds or other indebtedness. Additional Bonds Additional Bonds having equal status with the Series 2014 Bonds and the Outstanding Bonds may be issued upon compliance with certain terms set forth in the Ordinance and the Outstanding Bonds' Ordinance. Such Additional Bonds may be issued to provide funds for any purpose related to the Water System or to refund any of the Series 2014 Bonds, any of the Outstanding Bonds or any Additional Bonds. Additional Bonds, except for refunding purposes, may be issued upon compliance with the following conditions: 1. The Additional Bonds must be issued pursuant to an ordinance which provides for an increase in the monthly credits to the Bond Payment Account sufficient to pay principal and interest on the Series 2014 Bonds, the Outstanding Bonds and all Additional Bonds to be outstanding and for any required credits to a sub-account in the Debt Service Reserve Account. 2. The City shall comply with one or the other of the following two conditions: a. The Net Revenues, as defined in the Ordinance, of the Water System for the audited fiscal year next preceding the issuance of Additional Bonds shall have been at least equal to 1.25 times the average annual debt service of the Series 2014 Bonds, the Outstanding Bonds and any Additional Bonds, all as then outstanding, and of the proposed Additional Bonds; or b. The City shall have received a projection made by consulting engineers or certified public accountants projecting that the Net Revenues, as defined in the Ordinance, in each of the three full fiscal years after the issuance of the proposed Additional Bonds will be at least equal to 1.25 times the average annual debt service of the Series 2014 Bonds, the Outstanding Bonds and any Additional Bonds, all as then outstanding, and of the proposed Additional Bonds. Such Net Revenues may be adjusted to reflect changes in rates, changes of amounts payable under existing contracts for services, additional general income from sales to customers, projected revisions in expenses and such other factors affecting the projections of revenues and expenses as the consulting engineer or accountant deems reasonable and proper. Additional Bonds may be issued for refunding purposes without compliance with the Net Revenues tests described above, but if any Series 2014 Bonds, Outstanding Bonds or Additional Bonds are to remain outstanding after such issuance, the principal payments may not be increased in any fiscal year in which such 3

6 remaining bonds will remain outstanding. Additional Bonds may also be issued for refunding purposes and Series 2014 Bonds, Outstanding Bonds or Additional Bonds may remain outstanding after their issuance provided that the Net Revenues of the Water System for the fiscal year next preceding the issuance of such Additional Bonds shall have been at least equal to 1.25 times the average annual debt service requirements of the Series 2014 Bonds, the Outstanding Bonds and all Additional Bonds (including the refunding bonds being issued) which are to be outstanding after such issuance. If the proceeds of such refunding bonds are not to be applied immediately to the satisfaction of the bonds which are to be refunded, then such refunding bonds must provide by their terms that they shall be junior in lien to all Series 2014 Bonds, Outstanding Bonds and any Additional Bonds outstanding at the time of issuance of such refunding bonds until the time of application of their proceeds to the satisfaction of the bonds which are to be refunded. Net Revenues for all purposes of the Ordinance shall be shown by an audit for the fiscal year in question as conducted by an independent certified public accountant or firm of such accountants, provided, however, for purposes of determining compliance with requirements for issuing Additional Bonds, in the event that as of the time of authorization or issuance of Additional Bonds, the financial statements for the most recently completed fiscal year have not yet been completed and reported on by the City's certified public accountant, compliance may be shown using the audited financial statements for the most recently completed fiscal year for which audited financial statements are available and unaudited financial statements (certified by the City Treasurer) for the most recently completed fiscal year so long as compliance is shown for both such fiscal years. Not General Obligations The Series 2014 Bonds are not a debt of the State of Nebraska or of the City within the meaning of any constitutional or statutory limitation upon the creation of general obligation indebtedness. The City is liable for the payment of the Series 2014 Bonds only from the revenues of the Water System and not from any tax monies or other resources. The enforcement of the rights of the holders of the Series 2014 Bonds under the Ordinance could be affected in the event of a petition for adjustment of debts of the City under the United States Bankruptcy Code. THE SERIES 2014 BONDS The Series 2014 Bonds will be issued in the aggregate principal amount of $2,405,000*, will be dated the date of delivery, bear interest (computed on the basis of a year of 360 days consisting of twelve thirty-day months) at specified rates, payable semiannually on April 1 and October 1 of each year, commencing April 1, 2015 (collectively, the "Interest Payment Dates"), and mature on the dates, all as set forth on the cover page of this Official Statement. The Series 2014 Bonds are issuable only in fully registered form in the denomination of $5,000 or any integral multiple thereof. Initially, the Series 2014 Bonds will be issued using the services of The Depository Trust Company ("DTC") and will be registered in the name of Cede & Co. and will be made available to beneficial owners in book-entry only form, as described below. General The principal of and interest on the Series 2014 Bonds due at maturity or upon redemption prior to maturity are payable at the principal corporate office of Union Bank and Trust Company, Lincoln, Nebraska (the "Registrar") or of any successor paying agent and registrar appointed by the City, as provided in the Ordinance, upon presentation and surrender thereof. Interest on the Series 2014 Bonds due prior to maturity or earlier date of redemption will be paid to the registered owners thereof at the close of business on the 15th day immediately preceding each Interest Payment Date (the "Record Date") and will be paid by check or draft drawn on the Registrar and mailed on each Interest Payment Date to the registered owners thereof at the addresses shown on the registration books maintained by the Registrar notwithstanding the cancellation of any such Series 2014 Bond upon any exchange or transfer thereof subsequent to the Record Date and prior to such Interest Payment Date. The principal of and interest on the Series 2014 Bonds will be paid in lawful money of the United States of America. The foregoing procedures and methods for payment will apply in the event that provisions for global book-entry bonds as described below cease to be 4

7 in effect and will apply to the holding and transfer of Series 2014 Bonds by DTC subject to certain modifications provided for in a Letter of Representations between the City, the Registrar and DTC. Global Book-Entry Bonds The Series 2014 Bonds will be available to the ultimate purchasers in global book-entry form only, in the principal amount of $5,000 or integral multiples thereof. Purchasers of the Series 2014 Bonds will not receive certificates representing their interests in the Series 2014 Bonds purchased, except as described below. The following description of the procedures and record-keeping with respect to beneficial ownership interests in the Series 2014 Bonds, payment of interest and other payments on the Series 2014 Bonds to Participants (as hereinafter defined) or Beneficial Owners (as hereinafter defined) of the Series 2014 Bonds, confirmation and transfer of beneficial ownership interests in the Series 2014 Bonds and other related transactions by and between DTC, Participants and Beneficial Owners of the Series 2014 Bonds, is based solely on information furnished by DTC to the City for inclusion in this Official Statement. Accordingly, the City and the Registrar do not make any representations concerning these matters, and the Beneficial Owners of the Series 2014 Bonds should not rely on the following information with respect to such matters, but should instead confirm the same with the Participants from whom they purchased the Series 2014 Bonds. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Series 2014 Bonds. The Series 2014 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2014 Bond certificate will be issued for each separate maturity of the Series 2014 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participant's 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 and at. Purchases of the Series 2014 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2014 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2014 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant 5

8 through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2014 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2014 Bonds, except in the event that use of the book-entry system for the Series 2014 Bonds is discontinued. To facilitate subsequent transfers, all Series 2014 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC; The deposit of 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 Series 2014 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2014 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2014 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2014 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the documents relating to the Series 2014 Bonds. For example, Beneficial Owners of Series 2014 Bonds may wish to ascertain that the nominee holding the Series 2014 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Series 2014 Bonds within a maturity 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 Series 2014 Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City (or the Registrar) 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 Series 2014 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, principal, and interest payments on the Series 2014 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Registrar, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, principal, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Registrar (from funds provided by the City), disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Series 2014 Bonds at any time by giving reasonable notice to the City or the Registrar. Under such circumstances, in the event that a successor depository is not obtained, certificates for the Series 2014 Bonds are required to be printed and delivered. 6

9 The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, certificates for the Series 2014 Bonds will be printed and delivered to DTC. The information under this subcaption concerning DTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. The City and the Registrar will not have any responsibility or obligation to Participants, to Indirect Participants or to any Beneficial Owner with respect to (i) the accuracy of any records maintained by DTC, any Direct Participant or any Indirect Participant; (ii) the payment by DTC or any Direct Participant or Indirect Participant of any amount with respect to the principal or redemption price of or interest on the Series 2014 Bonds; (iii) any notice which is permitted or required to be given to bondholders under the Ordinance; (iv) the selection by DTC or any Direct or Indirect Participant of any person to receive payment in the event of a partial redemption of the Series 2014 Bonds; or (v) any consent given or other action taken by DTC as Bondholder. The information included under this subcaption, other than in this paragraph, the preceding paragraph hereof and the first two full paragraphs under this subcaption, has been provided by DTC. No representation is made by the City or the Registrar as to the accuracy or adequacy of such information provided by DTC or as to the absence of material adverse changes in such information subsequent to the date hereof. The Beneficial Owners of the Series 2014 Bonds will rely on DTC Participants or Indirect Participants for timely payments and other notices and for otherwise making available to the Beneficial Owners the rights of a bondholder. No assurances can be given, in the event of the bankruptcy or insolvency of DTC or the Direct Participant or Indirect Participant through which a Beneficial Owner holds beneficial interest in the Series 2014 Bonds, that payment will be made by DTC, the Direct Participant or the Indirect Participant on a timely basis. Notice to Bondholders Notice of any proposed modification or amendment of the Ordinance by means of a supplemental ordinance that is to be effective with the consent of the registered owners of the Series 2014 Bonds as well as all notices of redemption will be mailed to DTC, as the registered owner of the Series 2014 Bonds then outstanding. No assurance can be given by the City or the Registrar that DTC will distribute to the Participants, or that the Participants will distribute to the Beneficial Owners, (i) payment of debt service on the Series 2014 Bonds paid to DTC, or its nominee, as the registered owner, or (ii) any redemption or other notices, or that DTC or the Participants will serve and act on a timely basis or in the manner described in this Official Statement. Optional Redemption The Series 2014 Bonds are subject to redemption at the option of the City prior to maturity at any time on or after the fifth anniversary of the date of delivery thereof, in whole or in part, at the principal amount thereof plus accrued interest to the date fixed for redemption. The City may select Series 2014 Bonds to be redeemed in its sole discretion, including particular maturities as it deems appropriate. 7

10 Mandatory Redemption* The Bonds maturing as term bonds on October 1, 2034 are required to be redeemed, in part, prior to their stated maturity on October 1, 2030, and on October 1 of each year thereafter. The redemptions shall be in the years and for the amounts set forth below: Year of Redemption (final maturity) Amount Required to be Redeemed $135, , , , ,000 Such mandatory redemption shall be at a price equal to 100% of the principal amount redeemed, plus interest accrued to the date fixed for redemption. The Registrar shall select the Bonds which are subject to mandatory redemption, using any random method of selection deemed appropriate by it.] Redemption- Series 2014 Bonds Held by PTC If the Series 2014 Bonds are being held by DTC under the book-entry system and less than all of such Series 2014 Bonds within a maturity are being redeemed, DTC's current practice is to determine by lot the amount of the interest of each Participant in such maturity to be called for redemption, and each Participant is to then select by lot the ownership interest in such maturity to be redeemed. See "THE SERIES 2014 BONDS - Global Book-Entry Bonds" herein. Notice of Redemption: Effect of Redemption Notice of call for redemption, identifying the Series 2014 Bonds or portions thereof to be redeemed shall be given by the Registrar by mail or by other means acceptable to DTC, sent to the registered owners of the Series 2014 Bonds to be redeemed (initially, Cede & Co.) at their registered addresses as shown on the registration books maintained by the Registrar, first class, postage prepaid, not less than thirty (30) days prior to the date fixed for redemption. Failure to give notice to any registered owner or any defect in the notice shall not affect the validity of the proceedings calling the Series 2014 Bonds or the redemption of any Series 2014 Bonds for which proper notice has been given. The City shall have the right to direct further notice of redemption for any Series 2014 Bond for which defective notice has been given. Transfer of Series 2014 Bonds The Series 2014 Bonds are transferable upon presentation for cancellation to the Registrar at its principal corporate trust office in Lincoln, Nebraska. To be transferred, any Series 2014 Bonds must be accompanied by a written instrument of transfer in form satisfactory to the Registrar and must be accompanied by such signature guaranties and other evidence as the Registrar may require. Upon surrender of any Series 2014 Bond in proper form, the Registrar will deliver at the Registrar's office or send by registered mail to the transferee owner or owners at such transferee owner's or owners' risk and expense, a new Series 2014 Bond or Series 2014 Bonds of the same maturity, interest rate and aggregate principal amount registered in the name of the transferee owner or owners. To the extent of the denominations permitted by the Ordinance, one Series 2014 Bond may be transferred for several Series 2014 Bonds of a like maturity, interest rate and aggregate principal amount and several Series 2014 Bonds may be transferred for one or several Series 2014 Bonds, respectively, of the same maturity, interest rate and aggregate principal amount. Transfer of interests by Beneficial Owners, so long as there is a securities depository serving will be governed by the procedures described under "THE SERIES 2014 BONDS - Global Book-Entry Bonds" herein. * Preliminary, subject to change. 8

11 Sources of Funds: Principal Amount of Bonds Total SOURCES AND APPLICATION OF FUNDS Avvlieation of Funds: Deposit to Project Construction Fund Deposit to Debt Service Reserve Account (sub-account for Series 2014 Bonds) Issuance Costs (including Underwriter's Discount) Total THE PROJECT Net Proceeds of the Series 2014 Bonds will be used to finance water system improvements to include an additional 5 million gallon ground level storage reservoir, a new booster pump station, improvements to the existing Southwest Booster Pump Station along with additional transmission lines and improvements to service the west high service area pressure zones. THE WATER SYSTEM The City's water system serves both City residents and residents in certain outlying sanitary and improvement districts. Water for the City's system is provided by wells located within the City and by a well field located upon the Platte River. The City completed a 10 mgd water treatment plant and expansion in mid-2008 along with an additional transmission main extension from the plant to the ground water reservoir for service redundancy. The wells have an average static water level of 16 feet. The system has a combined pumping capacity of 14,400 gallons per minute including the in-town peak demand/emergency wells. The water system facilities have total storage capacity of 6 million gallons. The average daily water demand is 3.5 million gallons and historic peak daily demand of 11.2 million gallons. The system has a maximum capacity of 20 million gallons per day. Customers and Consumption The following table sets forth the number of customers, gallons billed and pumped, the peak demand. All services are metered. No single customer of the water system utilizes more than 5% of the water. Total Customers/Gallons Billed/Gallons Pumped/Peak Demand FY 2013 FY 2012 FY 2011 FY 2010 FY 2009 Average Monthly Customers 10,418 10,118 9,906 9,637 9,383 Average Gallons Billed (000)* 112, , ,366 90,799 90,128 Average Gallons Pumped (000)* 115, , , ,014 97,287 Peak Demand (per day)(000)* 10,709 10,783 10,799 8,800 7,148 Variation between gallons pumped and gallons billed includes line loss due to leakage and water main breaks, water for maintenance, line flushing and well pre-lube lines. Source: The City 9

12 Water Rates Included herein as Appendix C is Ordinance No of the City which sets out the water rates in effect as of April 30, 2012, and includes planned and approved rate increases through Major Customers/Gal. Consumption Total Gallons Total Gallons Total Gallons Customer Name Consumed Consumed Consumed FY 2013 FY 2012 FY 2011 Papillion-LaVista Schools 26,336,300 30,212,710 21,268,010 Alegent Health 8,137,390 10,209,380 14,591,570 Meridian Club Apts 11,917,600 14,462,300 15,096,300 Sarpy County 10,242,830 11,360,420 10,603,760 Midland Heights Apts 7,145,800 8,183,500 7,982,300 Cole Mt Papillion NE LLC 5,593,100 13,614,600 9,977,790 Tara Heights Apts 6,340,100 5,912,400 5,644,000 Stahl Rentals 3,863,100 4,517,500 4,405,700 Shadow Lake Towne Center LLC 6,432,120 6,613,010 7,166,720 Tara Hills Villas 5,848,800 5,590,000 4,858,000 Papillion Manor 6,479,800 6,312,400 4,098,900 Huntington Park Care Center 4,041,500 4,407,730 4,972,170 (Remainder of page intentionally left blank) 10

13 HISTORICAL STATEMENT OF REVENUES AND EXPENSES The following table sets forth the statement of revenues and expenses and net income available for debt service for the Water System and has been taken from the City's audited financial statements for the fiscal years ended September 30, 2010, 2011, 2012 and An extract from the financial statement of the City dated September 30, 2013, is included herein as Appendix A. Complete financial statements and financial statements for prior years are available upon request from the City Clerk, and complete financial statements for the year ended September 30, 2013 are available on EMMA (as hereinafter defined). Individual Statement of Revenues and Expenses Enterprise Fund - Water Audited - Fiscal Year Ended September 30, Operating Revenues $4,524,829 $4,505,926 $3,338,613 $ 2,876,288 Operating Expenses Payroll expense 1,675,803 1,583,004 1,677,181 1,597,098 Contractual services 145, , , ,162 Utilities 463, , , ,571 Materials and supplies 634, , , ,034 Depreciation and amortization 1,136,692 1,200,751 1,271,429 1,178,569 Repairs and maintenance 133, , , ,183 Other Total operating expenses Net Operating Income (Loss) 283, ,053 (722,987) (976,263) Nonoperating Revenues (Expenses) Proceeds from annexations ,308 27,762 Capital facility fees 929, ,137 64, ,010 Development fees 944, Interest income 3,272 4,366 5,091 13,257 (Loss) on disposal of asset (16,733) Interest expense (360,002) (338,555) (385,231) (472,774) Bond issue costs ( ) - _ - Total nonoperating revenues (expenses) ( ) Net Income (Loss) (before transfers) 1,674, ,001 (953,086) (696,741) Net Operating Transfers _ Net Income (Loss) SI $ $ ( ) K ( ) Historical Debt Service Coverage: Net Income (Loss) $1,674,961 $ 604,001 $ (953,086) $ (643,546) Add back: Interest expense 360, , , ,774 Depreciation and Amortization Net Available for Debt Service $3,171,655 $2,143,307 $ 703,574 $1,007,797 Estimated Max Annual Debt Service - Outstanding Bonds and Series 2014 Bonds '* 1,200,000 1,200,000 1,200,000 1,200,000 (1 ) Debt Service Coverage Ratio (FY 2013)* 2.64x (, ) 1.79x (1 ) O) 0.59x 0.84x (1 ) Excludes final maturities of the Outstanding Bonds and the Series 2014 Bonds, to which debt service reserve funds are expected to be applied. * Preliminary, subject to change. 11

14 DEBT SERVICE The following table shows the debt service on the Outstanding Bonds and the Series 2014 Bonds. Fiscal Year Ending Sept. 30 Outstanding Bonds 2014 $ 856, ,084, ,092, ,027, , ,028, ,025, ,024, ,023, , ,370, , ,014, ,014, ,016, ,011, ,013, ,013, Total $ Series 2014 Bond s Total Debt Principal* Interest Total Service $100, , , , , , , , , , , , , , , , , , , fr *Preliminary, subject to change Total General Obligation Debt Service The following table shows the debt service due on the City's outstanding general obligation bonded indebtedness. Fiscal Year Total Fiscal Year Total Ending Sept. 30 Debt Service Endine Sept. 30 Debt Service 2014 $4,436, $2,431, ,010, ,704, ,836, ,702, ,861, ,275, ,649, ,283, ,889, , ,888, , ,906, , ,712, , ,742, ,

15 FINANCIAL STATEMENT Taxable Valuation (2013) General Obligation Debt Highway Allocation Fund Pledge Bonds, Series 2008 Highway Allocation Fund Pledge Bonds, Series 2009 Highway Allocation Fund Pledge Rfdg Bonds, Series 201 IB Highway Allocation Fund Pledge Bonds, Series 2013 (1 ) Lease Purchase Debt Municipal Facilities Corporation Series 2014 (Public Works and Park Maintenance Facilities) Series 2012 (Public Works Facility) Series 2009 (Refunding - Eagle Hills Golf Course) Series 2005 (Refunding - Eagle Hills Golf Course) Direct Debt Ratio of Direct Debt to Taxable Valuation Direct, Overlapping and Underlying G.O. Debt Ratio of Direct, Overlapping and Underlying Debt to Taxable Valuation Revenue Debt: Water Revenue Refunding Bonds, Series 201 IB Water Revenue Bonds, Series 2011 Water Revenue Bonds, Series 2013 Water Revenue Bonds, Series 2014 (this issue) Sarpy County Population (2013 est.) Papillion Population (2013 est.) $1,346,353,256 25,615,000 1,565,000 3,760,000 1,460, ,000 $6,000,000 2,000,000 2,060,000 1,425,000 $44,530, % $84,491, % $ 3,240,000 3,640,000 7,325,000 2,405,000* 169,331 21,921 Overlapping Debt: Sarpy County Taxable Valuation (2013) General Obligation Debt (11.6% applicable to City) $11,599,879,360 35,345,000 4,100,020 Sarpy County School District 0027 Taxable Valuation (2013) (3) General Obligation Debt (31.6% applicable to City) $4,254,922, ,485,000 35,861,260 (! ) (2 ) (3 ) See Appendix A, Notes to Financial Statements, Note D, for a description of certain other non-bonded debt. Includes $17,310,000 Lease Rental Bonds issued by the Sarpy County Leasing Corporation for the Omaha Storm Chasers Stadium Project and $8,070,000 Recovery Zone Facility Certificates of Participation for the same project. $59,600,000 of general obligation bonds were approved at the general election held November 6,2012. The first series of bonds in the amount of $9,900,000 was issued on March 6,2013, the second series of bonds in the amount of $35,630,000 was issued on February 13,2014 and it is expected that the remainder of bonds authorized pursuant to said election will be issued in the years The issuers listed above represent the principal obligors for overlapping debt. The Papio-Missouri River Natural Resources District, Educational Service Unit No. 3 and Metropolitan Community College have or may have debt obligations outstanding. Such obligations are supported by multi-county taxing bases with large taxable valuations which result in relatively small allocations of overlapping debt to the City and are not included in the tables shown above. * Preliminary, subject to change. 13

16 Future Borrowing Plans/Annexations In addition, through the Municipal Facilities Corporation, in early 2015 the City expects to issue approximately $3,500,000 (in addition to the 2014 Municipal Facilities Corporation Bonds) for construction of Public Works facilities. The City expects to review the viability of annexation of surrounding sanitary and improvement districts as well as general capital improvements to City infrastructure that may require the issuance of future debt. However, no accurate estimate of these financings can be made at this time. Debt Limitations Under Nebraska law, there is no general limitation on general obligation or revenue indebtedness. Authority to Lew Property Taxes The City's authority to levy and collect property taxes is limited to not more than 45 per $100 of taxable valuation plus an additional 50 per $100 to provide financing for the City's share of revenue required under interlocal agreements. See "NEBRASKA DEVELOPMENTS RELATED TO BUDGETS AND TAXATION". The City's 2013/14 general fund tax levy for municipal purposes as described above is $ on each $100 of taxable value (bond fund is $ and capital improvement fund is $ ) on all the taxable property within the City. Such levy limitations do not apply to the City's levy for bonded indebtedness approved according to law and secured by a levy on property. City Budget Limitations The Nebraska Legislature has enacted revised budget limitations applicable to certain prior, the current and following budget years. See "NEBRASKA DEVELOPMENTS RELATED TO BUDGETS AND TAXATION". THE CITY The City of Papillion, incorporated in 1883, is the county seat of Sarpy County and is located approximately ten miles south of the City of Omaha, approximately 45 miles east of Lincoln, Nebraska and approximately 186 miles north of Kansas City, Missouri. The City is principally a residential community for persons working in the Omaha Metropolitan area including STRATCOM, located in Sarpy County south of Bellevue, Nebraska. The City's economy is dependent upon the diverse general economy of the metropolitan area and in part upon the agricultural economy of Sarpy County. Population Papillion is estimated to be the 11th largest city in Nebraska and covers an area of approximately 6.65 square miles, all within Sarpy County. Historical population statistics for the City are as follows: Year est. City of Papillion 5,606 6,399 10,372 16,363 18,894 21,921 Sarov County 63,696 86, , , , ,331 Source: U.S. Bureau of the Census, Dept. of Economic Development 14

17 Government Papillion is a municipal corporation and a city of the first class, organized under the Mayor-Council plan of government and governed by a Mayor and an eight-member City Council. The City provides general municipal governmental services, including sewer and water service, sanitation service, street construction and maintenance, library facilities, parks and recreational facilities and police and fire protection. The City's budget is governed by the Nebraska Budget Act. The City has in the course of recent years maintained capital improvements needed in each year to serve the sustained growth and economic development of the community. As the City is presently organized, the Mayor has supervisory control of the officers and affairs of the City. In addition to the professional staff, advisory boards and committees are used for advice and operations support. Day-to-day operations are supervised by the City Administrator. City officials are as follows: David Black Bob Stubbe Steve Engberg... James Glover... Troy Florance... Gene Jaworski... Lu Ann Kluch... Tom Mumgaard Jason Gaines DanHoins Nancy Hypse Elizabeth Butler Marty Leming... Jeff Thompson.. Karla Rupiper... Mayor Council Member Council Member Council Member Council Member Council Member Council Member Council Member Council Member City Administrator Finance Director/Treas. City Clerk Director of Public Works City Engineer City Attorney City Employees The City has 181 full-time employees and approximately 24 part-time and 225 seasonal employees not including the Mayor, Council and City Attorney. The City's employees are represented by three unions covering civilian employees and police officers and firefighters. The number of City employees has remained relatively stable over the past five years. Pension Fund The City provides retirement benefits for its police officers and firefighters through defined contribution plans. The City provides retirement benefits to other employees through a deferred compensation plan. For full information on retirement benefits, see Note G and Note H to the City's Financial Statements, as included in Appendix A. Education Educational needs of the community are provided by the Papillion-LaVista Public Schools, providing public education for kindergarten through grade twelve and covering approximately 18,000 acres. The District is a Class III public school district, created by the State of Nebraska. The District operates two senior high schools, two junior high schools, fourteen elementary schools and one alternative school. One private K-8 Catholic school is located in Papillion. Current K-12 total enrollment of the District is 15

18 approximately 10,753 students. The District employs approximately 1,573 persons and is accredited by the Nebraska Department of Education. The District's secondary schools are accredited by the North Central Association of Colleges and Schools. Also serving the community are colleges and universities in the surrounding area including Bellevue University, Metropolitan Community College, University of Nebraska at Omaha, University of Nebraska Medical Center, College of Saint Mary, Grace University and Creighton University. Health Care Health care needs of the community are provided by Alegent Creighton Health Midlands Hospital, located south of Highway 370 and 84th Street in Papillion. Midlands Hospital is licensed for 131 beds and is part of the Alegent Creighton Health System, one of the nation's top 20 folly integrated health care systems. A medical office complex is located adjacent to the hospital. Opened in May of 2010, the Bellevue Medical Center located to the east of the City on Highway 370 is a full-service hospital that houses 266,000 square feet of comprehensive patient services which includes 55 private inpatient suites and 47 outpatient beds. A new 60,000 square foot medical office building connected to the main hospital houses family medicine and specialty physicians. Additional health facilities located in the Omaha metropolitan area include Alegent Creighton Health Bergan Mercy Medical Center, Alegent Creighton Health Immanuel Medical Center, Alegent Creighton Health Lakeside Hospital, Boys Town National Research Hospital, Children's Hospital, Douglas County Community Mental Health Center, Alegent Creighton Health, the Nebraska Medical Center, the Nebraska Orthopaedic Hospital and Nebraska Methodist Hospital. Recreational The City has a variety of fully equipped neighborhood and city parks, athletic fields and complexes and the Papio Bay Water Park. Two 18-hole golf courses and clubhouses and a par-three, 18-hole golf course are located within the community. Walnut Creek is a 500-acre lake with features that include camping, hiking and biking trails, horseback riding trails, an archery range and fishing. Financial Institutions Banking services in the City are provided by American National Bank (Branch of Omaha), Charter West National Bank (Branch of West Point), First National Bank of Omaha (Branch of Omaha), Pinnacle Bank (Branch of Lincoln), SAC Federal Credit Union (Branch of Bellevue), Great Western Bank (Branch of Watertown, South Dakota), Wells Fargo Bank, National Association (Branch of Sioux Falls, South Dakota), U.S. Bank N.A. (Branch of Cincinnati, Ohio), and Omaha Police Federal Credit Union (Branch of Omaha). 16

19 Housing and Construction The records of the City's Building Inspector indicate the value of permits issued within the City limits and its zoning jurisdiction as follows: Calendar Year Value of Permits 2013 $260,056, ,847, ,697, ,987, ,890, ,900, ,244, ,775, ,248, ,648,456 Note: Value of permits in 2013 includes Fidelity Data Center, 2012 includes SAC Federal Credit Union, 2010 includes Werner Park and 2009 includes the Midlands Data Center. There were no major permits in New residential development surrounding the City occurs primarily in sanitary and improvement districts which are independently responsible for indebtedness incurred for street, sewer, water and other local improvements, unless and until annexed. Valuation attributable to the permits shown above may not become part of the City's taxable valuation for several years. Housing Statistics City of Sarpy State of Panillion Countv Nebraska Housing units, ,240 64,537* 807,034* Homeownership rate, % 70.8% 67.6% Median value of owner-occupied housing units, $167,000 $161,500 $126,700 Median household income, $73,988 $69,269 $51,381 *As of 2013 Source: U.S. Department of Commerce/U.S. Census Bureau Utilities The City owns and operates its own water and sanitary sewer systems. Electric service within the City is provided by Omaha Public Power District. Sanitary sewage treatment is provided by the City of Omaha. Solid waste disposal is provided by independent contractors currently using a County-owned landfill as the primary disposal site. Such landfill is scheduled to close in the near future and other arrangements will need to be made. Natural gas is supplied by Black Hills Energy. 17

20 Employment ("Sarpy County') Nebraska National Total Labor Number Unemployment Unemployment Unemployment Year Force Employed Rate (%) Rate (%"> Rate (%) ,482 81, % 3.9% 1A% ,178 80, ,282 78, ,658 76, ,144 75, Source: Nebraska Department of Labor, Bureau of Labor Statistics Data Retail Sales Papillion Sarpy County Year Net Taxable Sales Net Taxable Sales 2013 $561,342,161 $1,440,611, ,081,900 1,316,902, ,372,357 1,118,043, ,899,977 1,073,751, ,478,428 1,020,721,260 Source: Nebraska Department of Revenue Principal Area Employers - Sarpy County Employer Type of Business No. of Employees STRATCOM (Offutt AFB Base) Military 9,049 PayPal Inc. Financial Services 3,000 Papillion-LaVista Public Schools Public Education 1,492 Werner Enterprises Trucking Service 1,425 Bellevue Public Schools Public Education 1,422 Ameritrade Financial 1,050 InfoGroup Compilation Center Service 931 Ehrling Bergquest Clinic Health 679 Bellevue University Education 608 Sarpy County Government 560 Northrop Grumman Mo Services 550 Alegent Health-Midlands Healthcare 501 Source: Sarpy County Department of Labor Planning & Development 18

21 TAX BASE DATA Values for Tax Levy Purposes Sarpy County Year School District $4,009,753, ,067,974, ,113,352, ,196,246, ,254,922,255 Source: Nebraska Auditor of Public Accounts Tax Lew History ($ per $100") City of Pavillion $1,302,772,969 1,340,423,861 1,352,359,049 1,353,972,678 1,346,353,256 County of Sarpy $10,977,324,419 11,076,469,531 11,197,886,358 11,451,696,861 11,599,879,360 Metro Papio Fiscal School Comm Nat Res Year City Countv District College Dist As Soc. ESU3 Total 2009/ (1 ) / (Z ) / / (3 ) / (3 ) (1 Includes Learning Community General Fund Levy of.9500, Special Building Levy of.0100 and capital projects of (2 Includes Learning Community General Fund Levy of.9500, Elementary Learning Center of.0100 and Capital Projects of (3 Includes Learning Community General Fund Levy of.9500 and Elementary Learning Center levy of Source: Nebraska Department of Revenue Tax Collection History The fiscal year of the City begins October 1 and ends September 30. Taxes are levied in September based upon a valuation as of the preceding January 1. First installments of real estate taxes are due the following April 1, second installment due August 1; personal property taxes are due April 1 and August 1. Delinquent taxes bear 14% interest. Property taxes collected on the City levy for the five most recently completed years are as follows: Fiscal Year Taxes Levied $5,308,846 5,277,611 5,430,137 6,118,924 6,118,914 Taxes Received as of September 30* $5,222,431 5,179,076 5,338,489 6,038,581 6,050,975 Actual Receipts as a % of Taxes Levie d* 98.37% *Does not include receipts from previous years, interest and penalties. 19

22 Largest Taxpayers Listed below are the largest taxpayers in the City of Papillion Valuation %of Taxpayer Twe of Business (Real Estate Only) Total Shadow Lake Towne Center Shopping Mall $99,049, % Spirit MT Papillion NE LLC Shopping Mall 21,860, Papillion Building LLC Data Provider 14,610, Wal Mart Real Estate Bus Trst Retail Store 14,301, Papillion Apartments LP Apartments 11,610, Tara Hills Villas Inc Apartments and Shopping Mall 11,520, Dayton Hudson Corp Retail Store 10,240, Hy-Vee Inc. Retail and Convenience Store 9,510, Midland Heights Apartments LLC Apartments 7,990, SGD Huntington LLC Apartments 6,800, Source: Sarpy County Assessor's Office Sales Tax Collections from the City's Local Sales and Use Tax of 1.5% are as follows: Highway Allocation Fund Fiscal Year Amount Collected 2008/09 $6,019, /10 6,291, /11 6,456, /12 6,953, /13 7,440,990 Revenues received by the City of Papillion from the State of Nebraska Highway Allocation Fund are as follows: Fiscal Year Revenues 2008/09 $1,220, /10 1,167, /11 1,298, /12 1,428, /13 1,478,558 20

23 ENVIRONMENTAL MATTERS The City of Papillion and its water and sewer utilities are subject to extensive and evolving environmental laws and regulations enacted in response to growing public concern over environmental issues. The regulations are administered and enforced by the United States Environmental Protection Agency ("EPA"), the Nebraska Department of Environmental Quality ("NDEQ") and the Nebraska Department of Health and Human Services, Division of Public Health ("NDHHS"). Apart from its utilities, the City has used and expects to continue using landfill disposal provided through other parties. The federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") impacts solid waste disposal facilities. Strict joint and several liability is imposed on all past and present owners and operators of properties where hazardous substances have been released or where there is a threat of release. Liability also extends to generators and transporters who selected or arranged for disposal of materials at a contaminated site. More than 20 per cent of the sites listed on the CERCLA ("Superfund") National Priority List ("NPL") are past or current solid waste landfills. The cost of CERCLA investigations, studies, cleanups and oversight can be very substantial. The City is not aware of any claims arising from past or current disposal of solid waste. It licenses solid waste haulers who use NDEQ permitted landfills for waste disposal, primarily the Sarpy County Landfill. The Sarpy County Landfill is scheduled to close within the next two years. They have built a transfer station for waste disposal operations. Under the Nebraska Petroleum Release Remedial Action Act, owners of underground petroleum storage tanks and underground piping for storage tanks which have leaked are responsible for remediation. The City has experienced a leaking underground storage tank at its Public Works facility and is continuing to comply with NDEQ requirements for periodic monitoring and observations at this site. The City has obtained authorization to abandon the monitoring wells at that facility. SUMMARY OF CERTAIN PROVISIONS OF THE ORDINANCE The Outstanding Bonds' Ordinance provides that "Additional Bonds" must be issued pursuant to an ordinance which provides for an increase in the deposits to the Bond Payment Account sufficient to pay principal and interest on the Outstanding Bonds and all Additional Bonds to be outstanding and for any required deposits to the Debt Service Reserve Account. The Ordinance has been passed and approved to comply with these requirements of the Outstanding Bonds' Ordinance. Certain provisions of the Ordinance are summarized elsewhere. Summaries of the provisions of the Ordinance as contained in this Official Statement are to be considered as summaries only and are subject to reference to the Ordinance itself. Copies of the Ordinance are available through the office of the City Clerk of Papillion and from Ameritas Investment Corp., at its office at 440 Regency Parkway Drive, Suite 222, Omaha, NE In addition to the provisions summarized elsewhere, the Ordinance provides for the following: Application of Revenues The Ordinance provides for the establishing and maintaining of a separate special fund of the City known as the "Papillion Water System Fund." All revenues of the Water System are to be credited to this fund. The revenues in such fund are to be credited monthly to the following accounts: (1) Bond Payment Account; (2) Operation and Maintenance Account; (3) Debt Service Reserve Account (including the reserve sub-account with respect to the Outstanding Bonds as provided for in the Outstanding Bonds' Ordinance and the reserve sub-account for the Series 2014 Bonds as provided for in the Ordinance); and (4) Surplus Account. Bond Payment Account - The City has agreed to make monthly credits to the Bond Payment Account in amounts sufficient to cover the payments of principal and interest on the Series 2014 Bonds, the 21

24 Outstanding Bonds and any Additional Bonds as the same fall due. The City Treasurer is authorized and directed to withdraw monies credited to the Bond Payment Account, or if the monies in such Account are insufficient, then from the sub-accounts within the Debt Service Reserve Account (but only for the series of bonds for which each respective sub-account has been established) and next from the Surplus Account, an amount sufficient to pay, when due, the principal of and interest on the Series 2014 Bonds, the Outstanding Bonds or any Additional Bonds and to transfer such amounts due to the respective paying agents or direct payees for the Series 2014 Bonds and the Outstanding Bonds and any Additional Bonds, at least five (5) business days before each principal and interest payment date. In the event that Additional Bonds equal in lien to the Series 2014 Bonds and the Outstanding Bonds are issued, the ordinance authorizing such Additional Bonds must provide for appropriate additional credits to the Bond Payment Account. Operation and Maintenance Account - The Ordinance requires monthly credits to the Operation and Maintenance Account in amounts sufficient to cover the necessary expenses of operating and maintaining the Water System. Debt Service Reserve Account - The City has agreed that $168,600* from proceeds of the Series 2014 Bonds or other funds of the City shall be credited to a separate sub-account in the Debt Service Reserve Account as the required balance in such account for the Series 2014 Bonds. Monies in the Debt Service Reserve Account, but only from the designated sub-account for a specific issue, are to be applied to prevent any default in payments due on the Series 2014 Bonds, the Outstanding Bonds and any Additional Bonds, as the case may be, in the event that there are not sufficient monies available for such purpose in the Bond Payment Account established by the Outstanding Bonds' Ordinance and the Ordinance. In the event of a withdrawal from the Debt Service Reserve Account, there shall be credited to the Debt Service Reserve Account in the month following such withdrawal all monies in the Papillion Water System Fund remaining after making the payments required to be made in such month to the Bond Payment Account and the Operation and Maintenance Account and each month thereafter all such remaining monies shall be credited to the appropriate sub-account in the Debt Service Reserve Account until such sub-account has been restored to the required balance. Upon the issuance of any Additional Bonds, the amount required to be accumulated and maintained in the Debt Service Reserve Account, in a separate sub-account for such Additional Bonds, shall be that amount determined by the Mayor and Council to be appropriate or required (which may be $-0-) in connection with any such issue of Additional Bonds. Additional amounts may be provided for by deposit or by monthly credits from revenues payable over a period of not more than five years. Each sub-account in the Debt Service Reserve Account shall be held solely for the specific issue for which it is established. In the event of withdrawal from any such sub-account which results in the amount in such sub-account being deficient to meet the required balance, available amounts for restoring subaccount balances shall be credited to each deficient sub-account on a pro rata basis in accordance with the respective outstanding principal amounts for those issues for which the respective sub-accounts are then deficient. When the Series 2014 Bonds, the Outstanding Bonds or any issue of Additional Bonds for which a sub-account has been established is no longer outstanding, the particular sub-account for such issue shall no longer be required to be maintained. The maximum amount required to be maintained in the Debt Service Reserve Account shall not exceed the maximum amount permitted to be invested without yield restriction under the regulations of the United States Treasuiy Department relating to Sections 103(b) and 148 of the Internal Revenue Code of 1986, as amended. Surplus Account - After making all necessaiy monthly credits to the Bond Payment Account, the Operation and Maintenance Account and the Debt Service Reserve Account, all remaining monies in the Papillion Water System Fund are to be credited to the Surplus Account. Monies in the Surplus Account may be applied to make up any deficiencies in any of the preceding accounts, to redeem the Series 2014 Bonds, the Outstanding Bonds or Additional Bonds prior to maturity, to pay any junior lien indebtedness (including the Outstanding Notes) incurred with respect to the Water System or to provide for any other * Preliminary, subject to change. 22

25 lawful purpose of the City (including payments in lieu of taxes or interfund transfers) determined by the Mayor and Council. Rate Covenant In the Ordinance the City agrees to establish and collect rates and charges sufficient at all times (1) to pay principal of and interest on the Series 2014 Bonds, the Outstanding Bonds and any Additional Bonds; (2) to pay all necessary costs of operation and maintenance for the Water System; (3) to provide funds sufficient to make required credits to the various funds and accounts maintained under the Outstanding Bonds' Ordinance and the Ordinance; (4) to maintain Net Revenues, as defined, in each fiscal year in an amount not less than 1.15 times the total amount of principal and interest falling due during such fiscal year on the Series 2014 Bonds, the Outstanding Bonds and any Additional Bonds. Net Revenues for purposes of the Outstanding Bonds' Ordinance and the Ordinance are defined as the gross revenues of the Water System, including investment income, but not including income from the sale of any property belonging to the Water System, less the ordinary expenses of operating and maintaining the Water System. For such purpose, operation and maintenance expenses do not include depreciation, amortization, or interest on any bonds or other indebtedness. Additional Indebtedness The terms of the Outstanding Bonds' Ordinance and the Ordinance with respect to Additional Bonds are summarized in previous parts of this Official Statement. So long as any of the Series 2014 Bonds, the Outstanding Bonds and any Additional Bonds are outstanding, the City will not issue any bonds or notes payable from the revenues of the Water System except in accordance with the provisions of the Outstanding Bonds' Ordinance and the Ordinance, provided, however, the City reserves the right to issue bonds or notes which are junior in lien to the Series 2014 Bonds, the Outstanding Bonds and any such Additional Bonds with the principal and interest of such bonds or notes to be payable from monies credited to the Surplus Account. Additional Covenants of the City The Ordinance provides for the following additional agreements on the part of the City: 1) to maintain the Water System in a reasonable and efficient manner; 2) not to grant any franchise or right to any person, firm or corporation to own or operate a utility system or systems in competition with the Water System; 3) to maintain insurance on the properties constituting the Water System (other than such portions of the Water System as are not normally insured) against risks customarily carried by similar utilities in an amount which would enable the City to repair, restore or replace the property damaged; 4) to keep proper books, records and accounts and to provide for an annual audit by a firm of certified public accountants; 5) to provide for appropriate fidelity bonds on persons handling the revenues of the Water System. Defeasance The Ordinance provides that the lien of the Series 2014 Bonds may be discharged by deposit with the Registrar or with a national or state bank having trust powers of monies or "Deposit Securities," as defined, payable at such times and bearing interest sufficient in amount to fully provide for the payment of such bonds. The term "Deposit Securities" is defined to include obligations of the United States, direct or guaranteed. Amendments The Ordinance may be amended with the written consent of the holders of two-thirds in principal amount of the Series 2014 Bonds then outstanding, provided that neither the principal and interest to be paid upon any bond nor the maturity date of any bond may be changed without the consent of all bondholders 23

26 affected by such change. The Ordinance permits amendments necessary to cure any ambiguity or formal defect without bondholder consent. Remedies The holder of any Series 2014 Bond may enforce or compel performance of any and all acts and duties required by the Ordinance and the City has agreed that any court of competent jurisdiction may, upon application of such holder, appoint a receiver to take charge of the Water System and operate it and apply the revenues to the payment of principal and interest on the Series 2014 Bonds and any Additional Bonds in accordance with the terms of the Ordinance and the Outstanding Bonds' Ordinance. The rights and remedies of the registered owners of the Series 2014 Bonds are subject to the limitations on enforceability provided for in the United States Bankruptcy Code, to other laws relating to insolvency proceedings and creditors' rights and to judicial discretion as exercised in appropriate cases. BONDHOLDERS' RISKS Among the factors affecting an investment in the Series 2014 Bonds, the following items, among others, should be considered by potential investors: 1. The Series 2014 Bonds Not d. Rate The Series 2014 Bonds have not been rated or reviewed by any rating agency and it is not expected that any rating will be applied for. The absence of a rating may limit the market for reselling the Series 2014 Bonds because certain institutional and other investors limit their purchases to securities which have received a rating. 2. Limitation of Rights Upon Insolvenc y. The United States Bankruptcy Code enables debtors, including cities, which are insolvent to obtain relief through petition and plan which may result in the modification or delay of payments to creditors, including bondholders. In the event of any insolvency upon the part of the City, the holders of the Series 2014 Bonds would be treated as creditors of the City secured by the revenues of the Water System. The extent to which holders of Series 2014 Bonds are to be treated as a separate class or otherwise given priority over other claimants is a matter that would be subject to future determinations of Nebraska state and federal courts interpreting and applying both state law and the United States Bankruptcy Code. Procedures under the Bankruptcy Code or other insolvency laws could result in delays in payment and modifications of payment rights. The State of Nebraska has authorized its political subdivisions to seek relief under the United States Bankruptcy Code by statute. 3. Nebraska Developments Related to Budgets and Taxatio n. The Nebraska Legislature has taken actions designed to reduce the reliance of local governmental units on property taxation. For a discussion of such changes, see "NEBRASKA DEVELOPMENTS RELATED TO BUDGETS AND TAXATION." 4. Failure to Meet Rate Covenan t. The City is obligated by the Outstanding Bonds' Ordinance to establish rates necessary for the City to meet certain ratios with respect to its water system revenues and debt service requirements. See "SECURITY FOR THE SERIES 2014 BONDS Rate Covenant" included elsewhere in this Official Statement. In 2011, the City did not satisfy such debt service coverage ratio as required by the Outstanding Bonds' Ordinance. The City is actively performing a rate analysis to promote compliance with its debt service coverage ratios. In 2012, the City exceeded its debt service coverage requirements and anticipates meeting its debt service coverage requirements for Various factors, including weather, seasonality and use, could in the future cause the City to produce water system revenues below expectations and the City may not be able to raise rates in sufficient time to meet its debt service coverage requirements under the Ordinance. 5. Future Legislatio n. President Obama has released legislative and budget proposals that would, among other things, subject interest on tax-exempt bonds (including the Series 2014 Bonds and other taxexempt obligations of the City) to a federal income tax for taxpayers with incomes above certain thresholds. Additional proposals affecting tax-exempt interest may be considered from time to time which 24

27 could limit the availability of or eliminate federally tax-exempt interest on tax-exempt bonds. Neither house of Congress has passed any such proposal, and it is not possible to predict whether President Obama's, or another proposal with similar effects, will be enacted into law. If enacted into law, such a proposal could adversely affect the ability of the City to finance and/or refinance projects on favorable taxexempt terms. Prospective purchasers of the Series 2014 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. 6. Secondary Marke t. There can be no guarantee that there will be a secondary market for the Series 2014 Bonds or, if a secondary market exists, that the Series 2014 Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price. NEBRASKA DEVELOPMENTS RELATED TO BUDGETS AND TAXATION The Nebraska Legislature has enacted legislation intended to reduce the level of property taxation and political subdivision expenditures in the State. The Legislature has enacted legislation to provide for budget limitations and legislation requiring reductions in the rate of taxation for general property taxes. Budget limitations relating to cities, villages, counties and other political subdivisions (Sections to , R.R.S. Neb. 2012, as amended, and related sections, the "Budget Limitations") limit the growth in amounts which may be budgeted with respect to certain restricted funds. Restricted funds include sales taxes, property taxes and certain other revenue sources. The limitation imposed does not apply to tax revenues pledged to retire bonded indebtedness. The Budget Limitations currently provide for a base limitation of 2.5% upon increases. Such base limitation is subject to review by the Nebraska Legislature from year to year. The base limitation may be exceeded by an additional 1% upon an affirmative vote of at least 75% of the governing body. These limitations are to be enforced through the office of the Auditor of Public Accounts of the State of Nebraska and state aid may be withheld from governmental units which fail to comply. The Budget Limitations do not apply to (i) restricted funds pledged to retire bonded indebtedness or (ii) to the revenues of proprietary funds unless such revenues are transferred to fund a service for a function not directly related to the charges and activity for which the charges are imposed. Tax levy limitations (Section , R.R.S. Neb. 2009, as amended, and related sections, the "Levy Limitations") provide for overall limitations on the tax levies of political subdivisions, including cities. The Levy Limitations provide for an express exclusion from the limitations for property tax levies for bonded indebtedness. The Series 2014 Bonds are not payable from any tax revenues of the City. Taxes to pay principal and interest on the City's general obligation bonds are thus not subject either to the Budget Limitations or the Levy Limitations. Under the Levy Limitations, the rates for levying property taxes have been reduced for each type of governmental unit in the State of Nebraska. The rate for cities is set at 45 per $100 of taxable valuation with an additional 50 available for payments under interlocal cooperation agreements. The future methods for providing for financing cities, schools and other local units may be altered depending upon future actions to be taken by the Nebraska Legislature, further decisions of the Nebraska Supreme Court and federal courts and future initiative petitions proposed by voters. TAX MATTERS The following is a summary of the material federal and State of Nebraska income tax consequences of holding and disposing of the Series 2014 Bonds. This summary is based upon laws, regulations, rulings 25

28 and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of owners subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Series 2014 Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State of Nebraska, does not discuss the consequences to an owner under any state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Series 2014 Bonds in the secondary market. Prospective investors are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Series 2014 Bonds. Opinion of Bond Counsel In the opinion of Gilmore & Bell, P.C., Bond Counsel, under the law existing as of the issue date of the Series 2014 Bonds: Federal and Nebraska Tax Exemption. The interest on the Series 2014 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes and is exempt from income taxation by the State of Nebraska. Alternative Minimum Tax. Interest on the Series 2014 Bonds is not an item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Bank Qualification. The Series 2014 Bonds are "qualified tax-exempt obligations" for purposes of Section 265(b) of the Code. Bond counsel's opinions are provided as of the date of the original issue of the Series 2014 Bonds, subject to the condition that the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2014 Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2014 Bonds in gross income for federal and the State of Nebraska income tax purposes retroactive to the date of issuance of the Series 2014 Bonds. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Series 2014 Bonds but has reviewed the discussion under the heading "TAX MATTERS." Other Tax Consequences [Original Issue Discount. For federal income tax purposes, original issue discount ("OID") is the excess of the stated redemption price at maturity of a Series 2014 Bond over its issue price. The issue price of a Series 2014 Bond is the first price at which a substantial amount of the Series 2014 Bonds of that maturity have been sold (ignoring sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers). Under Section 1288 of the Code, OID on taxexempt bonds accrues on a compound basis. The amount of OID that accrues to an owner of a Series 2014 Bond during any accrual period generally equals (1) the issue price of that Series 2014 Bond, plus the amount of OID accrued in all prior accrual periods, multiplied by (2) the yield to maturity on that Series 2014 Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), minus (3) any interest payable on that Series 2014 Bond during that accrual period. The amount of OID accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excludable from gross income for federal 26

29 income tax purposes, and will increase the owner's tax basis in that Series 2014 Bond. Prospective investors should consult their own tax advisors concerning the calculation and accrual of OID.] [Original Issue Premium. If a Series 2014 Bond is issued at a price that exceeds the stated redemption price at maturity of the Series 2014 Bond, the excess of the purchase price over the stated redemption price at maturity constitutes "premium" on that Series 2014 Bond. Under Section 171 of the Code, the purchaser of that Series 2014 Bond must amortize the premium over the term of the Series 2014 Bond using constant yield principles, based on the purchaser's yield to maturity. As premium is amortized, the owner's basis in the Series 2014 Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner. This will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of the Series 2014 Bond prior to its maturity. Even though the owner's basis is reduced, no federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium.] Sale, Exchange or Retirement of Series 2014 Bonds. Upon the sale, exchange or retirement (including redemption) of a Series 2014 Bond, an owner of the Series 2014 Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Series 2014 Bond (other than in respect of accrued and unpaid interest) and such owner's adjusted tax basis in the Series 2014 Bond. To the extent a Series 2014 Bond is held as a capital asset, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Series 2014 Bond has been held for more than 12 months at the time of sale, exchange or retirement. Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on the Series 2014 Bonds, and to the proceeds paid on the sale of the Series 2014 Bonds, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner's federal income tax liability. Collateral Federal Income Tax Consequences. Prospective purchasers of the Series 2014 Bonds should be aware that ownership of the Series 2014 Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with "excess net passive income," foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Series 2014 Bonds. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Series 2014 Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Series 2014 Bonds, including the possible application of state, local, foreign and other tax laws. LITIGATION No litigation is pending or, to the knowledge of the City, threatened in any court to restrain or enjoin the issuance or delivery of any of the Series 2014 Bonds or attacking in a material way the City's ability to collect the revenues pledged to pay the Series 2014 Bonds, or in any way contesting or affecting the validity of the Series 2014 Bonds or the Ordinance, or contesting the powers or authority of the City to issue the Series 2014 Bonds or adopt the Ordinance. 27

30 UNDERWRITING Ameritas Investment Corp., as Underwriter, has agreed, subject to certain conditions, to purchase the Series 2014 Bonds at the price of $ which takes into consideration underwriter's discount of $_, plus accrued interest, if any, to date of delivery thereof. The Underwriter intends to offer the Series 2014 Bonds to the public initially at the offering prices or yields as set forth on the cover page of this Official Statement, which may subsequently change without any requirement of prior notice. The Underwriter will be obligated to purchase all such Series 2014 Bonds if any such Series 2014 Bonds are purchased. The Series 2014 Bonds may be offered and sold to certain dealers at prices lower than the public offering prices, and the public offering prices may be changed, from time to time, by the Underwriter. While the Underwriter expects, insofar as possible, to maintain a secondary market for the Series 2014 Bonds, no assurance can be given concerning the future maintenance of such a market by the Underwriter or others, and prospective purchasers of the Series 2014 Bonds should therefore be prepared to hold their Series 2014 Bonds to their maturity. Undertaking CONTINUING DISCLOSURE UNDERTAKING The City has covenanted for the benefit of the Beneficial Owners of the Series 2014 Bonds to provide certain financial information and operating data relating to the City by not later than May 1 of each year (the "Annual Report"), commencing May 1, 2015, and to provide notices of the occurrence of certain material events, using the Electronic Municipal Market Access System ("EMMA") established by the Municipal Securities Rulemaking Board (the "MSRB"). The Annual Report, together with notices of material events, will be filed by the City with the MSRB using EMMA. The proposed form of the Continuing Disclosure Undertaking to be made by the City in the Ordinance in connection with the issuance of the Series 2014 Bonds is attached to this Official Statement as "APPENDIX B - FORM OF CONTINUING DISCLOSURE UNDERTAKING." These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) under the Securities Exchange Act of 1934, as amended (the "Rule"). A failure by the City to comply with the Continuing Disclosure Undertaking will not constitute a default under the Ordinance, although Beneficial Owners are to have an available remedy to require performance. Any such failure must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Series 2014 Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Series 2014 Bonds and their market price. Compliance with Existing Continuing Disclosure Undertakings The City believes it has complied during the past five years with its prior undertakings under the Rule, except as follows: 1. The City failed to file operating data required to be provided pursuant to prior undertakings under the Rule for the fiscal year ended September 30, 2009, and did not separately incorporate certain filing information by reference to the audited financial statements or official statements of the City for fiscal years ended September 30,2010,2011, 2012 and 2013 and failed to file notices of such deficiencies. While the City believes this information was disseminated or available through other sources, the City has incorporated such operating data by reference, to the extent available, on EMMA. 2. During the past five years the City did not make timely filings of event notices on EMMA relating to rating changes for the following bond issues: General Obligation Refunding Bonds, Series 2002; 28

31 General Obligation Refunding Bonds, Series 2004; Highway Allocation Fund Pledge Bonds, Series 2007B; and Highway Allocation Fund Pledge Bonds, Series 2009; and failed to file notices of such deficiencies. While the City believes this information was disseminated or available through other sources, the City has filed notice of such events for the currently outstanding Highway Allocation Fund Pledge Bonds, Series 2009, on EMMA. FINANCIAL STATEMENTS The City's Financial Statements were audited by HSMC ORIZON LLC, CPAs, Omaha, Nebraska, for the fiscal year ended September 30, Such financial statement is included as Appendix A hereto and the financial statement is available at the office of the City Clerk, 122 East 3rd Street, Papillion, Nebraska or from Ameritas Investment Corp., 440 Regency Parkway Drive, Suite 222, Omaha, NE HSMC ORIZON LLC has not been asked to provide its consent to the inclusion of the financial statements, or HSMC ORIZON LLC's audit report thereon, in this Official Statement. APPROVAL OF LEGAL PROCEEDINGS Legal matters incident to the authorization and issuance of the Series 2014 Bonds are subject to the unqualified approving opinion of Gilmore & Bell, P.C., Bond Counsel. MISCELLANEOUS The information contained in this Official Statement has been compiled or prepared from information obtained from the City and other sources deemed to be reliable and, while not guaranteed as to completeness or accuracy, is believed to be correct as of this date. Any statements involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. CITY OF PAPILLION, NEBRASKA 29

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33 APPENDIX A COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF PAPILLION, NEBRASKA FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2013 A-1

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35 CITY OF PAPILLION, NEBRASKA COMPREHENSIVE ANNUAL FINANCIAL REPORT for the fiscal year ended September 30,2013 Prepared by: The Finance Department

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37 CITY OF PAPILLION, NEBRASKA TABLE OF CONTENTS September 30,2013 Page(s) INTRODUCTORY SECTION Letter of Transmittal 1-4 Certificate of Achievement for Excellence in Financial Reporting 5-6 Organization Chart 7 Listing of Officials 8 FINANCIAL SECTION Independent Auditors' Report 9-11 Management's Discussion and Analysis BASIS FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS Statement of Net Position 23 Statement of Activities 24 FUND FINANCIAL STATEMENTS Governmental Funds Financial Statements Balance Sheet 25 Reconciliation of the Balance Sheet to the Statement of Net Position 26 Statement of Revenues, Expenditures and Changes in Fund Balances 27 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities 28 Proprietary Funds Financial Statements Statement of Net Position 29 Statement of Revenues, Expenditures and Changes in Net Position 30 Statement of Cash Flows 31 Fiduciary Funds Financial Statements Statement of Net Position 32 Statement of Changes in Net Position 33 Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues and Expenditures - Budget and Actual - Budgetary Basis - General Fund 56 Schedule of Revenues and Expenditures - Budget and Actual - Budgetary Basis - All Special Revenue Funds 57 Note to Required Supplementary Information - Budgetary Comparison Schedules 58

38 CITY OF PAPILLION, NEBRASKA TABLE OF CONTENTS September 30,2013 Page(s) OTHER SUPPLEMENTARY INFORMATION Schedule of Revenues and Expenditures - Budget and Actual - Budgetary Basis - Capital Improvement Fund 59 Debt Service Fund 60 Schedules of General Fund Cash Expenditures - Budget and Actual - Budgetary Basis General and Administrative 61 Building Permits and Inspections 62 Planning 63 Library 64 Parks Department. 65 Police Department 66 Fire Department 67 Street Department 68 Recreation Department 69 Senior Center 70 Information Systems Department 71 Amphitheater 72 Schedules of Bond Principal and Interest Requirements by Fiscal Year of Maturity Governmental Funds 73 Proprietary Funds 74 Fiduciary Fund Combining Schedules Schedule of Net Position 75 Schedule of Changes in Net Position 76

39 CITY OF PAPILLION, NEBRASKA TABLE OF CONTENTS September 30,2013 STATISTICAL SECTION Table# Net Position by Components... 1 Changes in Net Position 2 Fund Balances of Governmental Funds 3 Changes in Fund Balances of Governmental Funds 4 Total City Taxable Sales 5 Sales Tax Rates 6 Net Taxable Sales by Business Classification 7 Assessed and Estimated Actual Value of Taxable Property 8 Property Tax Rates-Direct and Overlapping Governments 9 Principal Property Taxpayers 10 Property Tax Levies and Collections 11 Ratios of Outstanding Dept by Type 12 Ratios of General Bonded Dept Outstanding 13 Direct and Overlapping Governmental Activities Debt 14 Pledged Revenue Coverage 15 Demographic and Economic Statistics 16 Principal Employers Full-Time Equivalent City Governmental Employees by Function Operating Indicators by Function 19 Capital Asset Statistics by Function INTERNAL CONTROL AND COMPLIANCE AUDIT SECTION Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards

40 INTRODUCTORY SECTION

41 C I T Y O F PA ;!-l ij:jgn David P. Black, Mayor Mfliicy HfjJse, Finance idireapr 122 East Third Street Papillion, Nebraska Phone Fax nhjpse@pitpillron.org March 11,2014 Honorable Mayor, City Council, Ahii Citizenk f Papillion City of Papillion, Nebraska The comprehensive annual financial report of the City of Papillion, Nebraska (the "City" or "City of Papillion") for the fiscal year ended September 30,2013 is hereby submitted, State law requires cities to issue within six months of fiscal year end a set of audited financial statements. This report fulfills this requirement for the fiscal year ended September 30,2013. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the management. In developing and evaluating the City's accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss, theft, or misuse, and to ensure the reliability of financial records for preparing financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") and maintaining accountability of assets. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. As a recipient of federal, state and local financial assistance, the City is also responsible for ensuring that an adequate internal control structure is n i place to ensure the document compliance with applicable laws and regulations reflated to these programs. The federal government, under the revised QMB Circular A-133, requires local governments that expend $500,000 or more in federal funds in any fiscal year to have a financial and compliance audit performed. The City was not required to have a Single Audit for the year ended September 30,2013. To the best of management's knowledge and belief, the enclosed data are accurate in all material respects and reported in a manner designed to present fairly the financial position and financial activities of the City. All disclosures necessary to enable the reader to gain an understanding of the government's financial activities as specified by all currently effective statements of the Governmental Accounting Standards Board have been included. The City'sfinancial statements have been audited by HSMC Orizon LLC, a firm of licensed certified public accountants. The goal of the independent audit is to provide reasonable assurance that the financial statements of the City for the fiscal year ended September 30,2013, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified ("clean") opinion that the City's financial statements for the fiscal year ended September 30,2013 are fairly presented n i conformity with generally accepted accounting principles ("GAAP"). The independent auditor's report is presented as the first component of the financial section of this report. Generally accepted accounting principles require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis ("MD&A"). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City's MD&A can be found in the Financial Section immediately following the independent auditors' report. -1-

42 CITY PROFILE The City of Papillion, incorporated on May 9,1883, is the county seat of Sarpy County and is located approximately ten miles south of the City of Omaha. It occupies a land area of approximately 6.65 square miles with opportunities to grow in all directions except to the north. The City has legal control over the development (planning, zoning and building permit issuance) within approximately 2 miles of city limits in the directions where growth exists. Papillion is empowered by state statute to extend its corporate limits by annexation, which it has done from time to time. The City of Papillion utilizes the mayor and council form of government. The Council is elected on a nonpartisan basis. Council members serve four year staggered terms with four council members elected every two years. The Mayor serves a four-year term. The City is divided into four wards and each ward is represented by two council members with staggered terms. The City of Papillion provides a full range of services, including public safety (police and fire); the construction and maintenance of highways, streets, and other infrastructure; planning and zoning; a public library; two 18-hole golf courses; an aquatic facility; parks and recreation; water and sewer utilities. Many of these services are also used by those within the extra territorial jurisdiction ('ETJ"), including but not limited to the fact the City provides water and sewer utilities to those in sanitary and improvement districts within the City's ETJ. The Council is required to adopt a final budget by no later than September 20 of the prior fiscal year. This annual budget serves as the foundation for the City's financial planning and control. The budget is prepared by fund, and department. The budget includes all funds of the City except fiduciary funds (Pension Trust Funds). Department directors may transfer resources within a department as they see fit. Transfers between departments or additional appropriations need special approval from the City Council. LOCAL ECONOMY The City continues its transformation from the residential suburb to a major retail and commercial area within the metropolitan area. This transformation is helping to diversify the tax base of the City and at the same time increase the sales tax revenue for the City. Shadow Lake Towne Center, located in Papillion, is one of the largest retail shopping areas in the Omaha metro area. The City was selected as the site location for a large national company data center, Fidelity. A building permit has been issued and construction of the data center is ongoing. Construction is expected to finish this fiscal year. Additional retail and commercial development is occurring elsewhere in Papillion. Two national retailers are constructing stores in Settlers Creek at nd 72 and Cornhusker, one mile north of Shadow Lake Towne Center. Midlands Place, located at Highway 370 and 84 th Street, half mile east of Shadow Lake Towne Center, is complete with the necessary infrastructure and building permits have been issued for six buildings to be built within this development which includes a national hotel. Demand for retail and commercial development continues as evidenced by recent platting activity. th A new mixed use district at 114 Street and Highway 370 which will create 263,500 square feet of commercial/retail/office is proceeding through the platting and zoning process. Additionally, three development applications are pending for projects within Schewe Farms, the location of Werner Park, at 126 Street and Highway 370. These projects will create 391,000 square feet of commercial/retail/office development, approximately 400 multi-family units, and 43 single-family residential lots. During the last five years there has been continual construction of single family homes within the City's zoning jurisdiction. Recently, two large residential developments completed the zoning and platting process. Together these developments platted an additional 410 single-family residential lots, an elementary school lot, and 11 mixed use lots on approximately 264 areas. Currently, five large residential developments are proceeding through the zoning and platting process. Together these developments will plat an additional 600 single-family residential lots, 615 multi-family units, a middle school lot, and two mixed use lots on approximately 377 acres. -2-

43 The federal government has a significant economic presence thanks to STRATCOM (Offutt AFB) located approximately 7 miles to the east. The City continues to receive national recognition. Papillion has been recognized several times by national rankings and publications over the course of the last decade. In January 2013, Bloomberg BusinessWeek released its 2013 list of best communities in which to raise kids. For the state of Nebraska, Papillion was at the top of the list. In August 2013, Money Magazine ranked the City #8 on its list of America's Best Small Towns to live in. This is the fifth consecutive award from Money Magazine. During 2012 Papillion was named the Best Small Town in America by Liviability.com, a service that focuses on ranking the best places to live and visit. In 2011, Bloomberg BusinessWeek named Papillion the Best Affordable Suburb in Nebraska, as well as the #2 Best Affordable Suburb in the United States. These national recognitions have helped promote the City at a national level sparking additional business and residential interest in the City and surrounding area. In the fall of 2012, Moody's rated the City of Papillion's general obligation bonds at Aa2. This positive rating helped provide the City with low interest rates on refunding of various purpose bonds. Moody's also gave an A1 rating to the City of Papillion Water System's Revenue Bonds Series LONG-TERM FINANCIAL PLANNING On September 7,2010, the City Council approved a General Fund Cash Reserve Policy (the "Policy"). The purpose of the Policy is to ensure that the General Fund Cash Reserve balance will be accumulated and maintained to protect the stability of tax rates, fiscal solvency and creditworthiness of the City. The Policy establishes a minimum limit of 28% of general fund expenditures and a maximum of 40%. Based on the fiscal 2013 budget and the unrestricted cash balance in the General Fund at September 30,2013, the City was at 41%, slightly above the policy maximum. On January 7,2014, the City Council approved a budget amendment which requires $960,000 of reserves for the payment required under a partial annexation after which the cash reserve would be 36%. The Policy requires an annual review during the budget process. The City has recently adopted a Capital Improvement Plan Policy (the "Plan") to establish a proactive approach to assessing existing and future capital needs. The Plan will cover a period of five years and be updated annually in conjunction with the budget process. The Plan will establish priorities and funding of capital project requirements which the City of Papillion should make to assure its continued economic viability and to protect public health and safety. MAJOR INITIATIVES The City of Papillion wastewater is sent to the City of Omaha for treatment. The federal government issued a mandate to control combined sewer overflows, which will result in increased costs to the City of Papillion. This is going to have a major impact on the sewer fund and Papillion's utility customers. The City has already implemented a change in user fees due to this program. The approved resolution contains annual rate changes for the next three years based on a rate study which included the increased charges from the City of Omaha. The City is required by state statute to approve a one and six year road plan annually by March 1. th The next major improvement scheduled is the Washington Street (84 Street) reconstruction from Cedardale Road to Capehart Road. Federal funding of 80% is anticipated for this project, along with cost sharing from Sarpy County and Sanitary and Improvement District 264. The improvement is necessary in part due to the commercial and residential development occurring in this southern section of the City, as well as increasing the safety and traffic flow of the area. -3-

44 Based on a City Council retreat, they established the five following goals including strategies and objectives for the next three years in order to accomplish the goals. 1. Preserve Mid-Town Papillion 2. Expand/Improve Recreational Facilities 3. Maintain a Strong Financial Position 4. Improve and Maintain the Road System to Foster Efficient Movement of Traffic 5. Protect the Small-Town Feel and Sense of Community The City will begin construction of a new public works facility in This facility will be an investment in the City's future both as it relates to the City being able to service the community and remove the public works maintenance facility from "Mid-Town Papillion". In December 2013, the City purchased acres of land adjacent to other City property, which will become the site for the new public works facility. The City was able to purchase approximately 2.91 acres adjacent to currently owned recreational facilities of the City for future expansion AWARDS AND ACKNOWLEDGEMENTS The Government Finance Officers Association ("GFOA") awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Papillion for its comprehensive annual finance report ("CAFR") for the fiscal year ended September 30,2012. This was the second consecutive year that the City has achieved this prestigious award. In order to be awarded a Certificate of Achievement, the government had to publish an easily readable and efficiently organized CAFR that satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR will meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for a certificate. The preparation of this report on a timely basis could not be accomplished without the efficient and dedicated services of the entire staff of the Finance Department. I would like to express my appreciation to all members of the department who assisted and contributed to its preparation. I would also like to thank the Mayor and members of the City Council for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, Nancy Hypse, CPA Finance Director -4-

45 The Government Finance Officers Association ("GFOA") awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Papillion for its comprehensive annual financial report ("CAFR") for the fiscal year ended September 30,2012. In order to be awarded a Certificate of Achievement, the government had to publish an easily readable and efficiently organized CAFR that satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR will meet the Certificate of Achievement Programs' requirements and we are submitting it to the GFOA to determine its eligibility for a certificate. -5-

46 < & Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of PapUlion Nebraska For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30,2012 Executive Director/CEO -6-

47 City of Papillion, NebraskaOrganizationChart Citizens City of Papiilioi Mayor David P Biack City Council 8 Members Executive Assistant Nicole Brown Library Board (Mayoral Appointments) Asst City Administrator Christina Mvcrs ChitT of Police Leonard Honioose Fire Chief Bill Bowes Library Director Robin Clark Finance Director Nancy Hypse Recreation Director Lori Hanson. Public Works Director Marty Lemin." Planninq; Directot Mark Stursrna 3 In man Resources Carrie Svendscn Golf Maintenance Director Tom James um Chief Building I I Engineering Official B B Services Todd Aemi B B Jeff Thompson i Mm, - ir X. p,. I B Community Parks Director.. SBS Relations lonv bowan _. Darren Caisson M - -7-

48 City of Papillion, Nebraska List of Elected and Appointed Officials September 30,2013 Elected Officials Mayor Council Members - Ward I Council Members-Ward II Council Members-Ward III Council Members - Ward IV David P. Black Gene Jaworski James Glover Steve Engberg Jason Gaines Troy Florance Lu Ann Kluch Bob Stubbe Tom Mumgaard Appointed Officials City Administrator Assistant City Administrator City Attorney City Clerk Recreation Director Public Works Director Fire Chief Police Chief Finance Director Planning Director Manager of Engineering Services Director of Golf Maintenance City Physician Dan Hoins Christine Myers Karla Rupiper Eliza Butler Lori Hansen Marty Leming Bill Bowes Len Houloose Nancy Hypse Mark Stursma Jeff Thompson Tom James Dr. Jeff Strohmyer -8-

49 i FINANCIAL SECTION

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51 a H SMC ORIZON L L C CPAs, BUSINESS & TECHNOLOGY CONSUITANTS FRANCES STREET OMAHA, NEBRASKA H SMC ORIZON KANSAS CITY OMAHA / PHONE / FAX w vyvy.. hsmcorizon.com March 11,2014 INDEPEN0INT AUDITOR'S REPORT Honorable Mayor and Members of the City Council City of Papillion, Nebraska We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of City of Papillion, Nebraska ("City of Papillion") as of and for the year ended September 30,2013, and the related notes to the financial statements, which collectively comprise City of Papillion's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the. United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States* Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. -9-

52 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, and each major fund of the City of Papillion, as of September 30,2013, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America ("GAAP") Emphasis of Matter - Change in Accounting Principle As described in Note N to the financial statements, in 2013, the City adopted new accounting guidance, GASB Statement No. 61, The Financial Reporting Entity: Omnibus-An Amendment of GASB Statements No. 14 and No. 34, No 62, Codification of Accounting And Financial Reporting Guidance Contained in Pre-November 30,1989 FASB and AlCPA Pronouncements, No. 63 Reporting Deferred Outflows, Deferred Inflows and Net Position and No. 65, Items Previously Reported as Assets and Liabilities. Our opinion is not modified with respect to these matters. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis (pages 12-22) and budgetary comparison information (pages 56-58) be presented to supplement the basic financial statements. Such information although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with evidence sufficient to express an opinion or provide assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise City of Papillion's basic financial statements. The other supplementary information: (pages 59-76) is presented for purposes of additional analysis and is not a required part of the basic financial statements. We have applied certain limited procedures to the other supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise City of Papillion's basic financial statements. The introductory section (pages 1-8) and statistical section (pages 77-98) are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly we do not express an opinion or provide any assurance on them. -10-

53 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have issued our report dated March 11,2014 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Papillion's internal control over financial reporting and compliance. HSMC ORIZON LLC i I -11-

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55 CITY OF PAPILLION, NEBRASKA MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30,2013 (UNAUDITED) This section of the City of Papillion, Nebraska's (the "City" or "City of Papillion") annual financial report presents our discussion and analysis of the City's financial performance during the fiscal year that ended on September 30, Please consider this discussion in conjunction with the additional information provided in the Letter of Transmittal and the conditions reflected in the City's financial statements. Financial Highlights 0 B a B At the end of the current fiscal year, unassigned fund balance for the general fund was increased to $7,288,282. The City of Papillion continued to experience growth in retail development. The two major retail developments, Market Pointe and Shadow Lake Towne Center, continue to experience construction and had retailers opening throughout the year. These developments, along with continued residential growth, have kept local and national retailers interested in development both within the City and the City's zoning jurisdiction. The City's total debt increased by $3,202,778 during the current fiscal year, as a result of more new debt incurred compared to principal payments being made. The City made all scheduled payments. The City issued $7,950,000 General Obligation Refunding Bonds which were used to refund a portion of Various Purpose Bonds, Series 2007D originally issued to pay off warrants issued by Sanitary Improvement District No. 267 prior to annexation. The City issued $7,325,000 of Water System Revenue Bonds which were used to refund Water System Revenue Notes, Series The City's certified valuation for fiscal year 2012 was $1,352,359,049 compared to $1,353,972,678 for fiscal year This equates to a 1% increase in overall valuation. The certified growth for 2013 was $10,919,245 which reflects growth in new construction. The valuation for 2014 certified by the County Assessor in August 2013 was $1,346,353,256. The certified growth for 2014 was $11,251,129 which reflects growth in new construction during the year. Overview of the Financial Statements The City's financial statements are prepared in accordance with accounting principles established by the Governmental Accounting Standards Board ("GASB"). This discussion is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. The two kinds of statements in the basic financial statements present different views of the City: -12-

56 B 0 The first two statements are government-wide financial statements that provide both long-term and short-term information about the City's overall financial status. The remaining statements are fund financial statements that focus on individual parts of the City government, reporting the City's operations in more detail than the governmentwide statements. The governmental fund statements indicate how general governmental services like public safety were financed in the short-term as well as what remains for future spending. Proprietary fund statements offer short and long-term financial information about the activities the government operates like businesses, such as the golf courses, water system, and sewer system. Fiduciary fund statements provide Information about the financial relationships - like the retirement plan for the City's employees - in which the City acts solely as a trustee or agent for the benefit of others, to whom the resources in question belong. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the information in the financial statements. Figure A-1 shows how the required parts of the annual report are arranged and relate to one another. Figure A-1 Required Components of City of Papillion's Annual Financial Report Management's Basic Required Discussion Financial Supplementary And Statements Information Analysis Government- Fund Notes wide Financial To the Financial Statements Financial Statements Statements Summary * Detail -13-

57 Figure A-2 summarizes the major features of the City's financial statements, including the portion Of the City government they cover and the types of information they contain. The remainder of this overview section of the Management's Discussion and Analysis explains the structure and contents of each of the statements. Figure A-2 Major Features of the City of Papillion's Government-wide and Fund Financial Statements Fund Statements Government-wide Statements Governmental Funds Proprietary Funds Fiduciary Funds Scope Entire City government (except fiduciary funds) and the City's component units. The activities of the City which are not proprietary or fiduciary, such as police, fire, and parks. Activities the City operates similar to private businesses such as the water system, sewer system and golf courses. Instances in which the City is the trustee or agent for someone else's resources, such as the retirement plan for City employees. Required Financial Statements Statement of Net Position; Statement of Activities. Balance Sheet; Statement of Revenues, Expenditures and Changes in Fund Balances. Statement of Net Position; Statement of Revenues, Expenses, and Changes in Net Position; Statement of Cash Flows. Statement of Fiduciary Net Position; Statement of Changes in Fiduciary Net Position. Accounting Basis and Measurement Focus Accrual accounting and economic resources focus. Modified accrual accounting and current financial resources focus. Accrual accounting and economic resources focus. Accrual accounting and economic resources focus. Type of Asset/ Liability Information All assets and liabilities, both financial and capital, and short-term and long-term. Only assets expected to be used and liabilities that come due during the year or soon thereafter, no capital assets included. Al assets and liabilities both financial and capital, and short-term and long-term. All assets and liabilities, both shortterm and long-term, the City's funds do not currently contain capital assets, althoush they can. Type of inflow/ outflow information All revenues and expenses during year, regardless of when cash is received or paid. Revenues for which cash is received during or soon after the end of the year, expenditures when goods or services have been received and payment is due. Al revenues and expenses during the year, regardless of when cash is received or paid. Al additions and deductions during year, regardless of when cash is received or paid. -14-

58 Government-wide Statements The government-wide statements report information about the City as a whole using accounting methods similar to those used by private-sector companies. The statement of net assets includes all of the government's assets and liabilities. All of the current year's revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the City's net position and how it has changed. Net position - the difference between the City's assets and liabilities - is one way to measure the City's financial health, or position. Q D Over time, increases or decreases in the City's net position are an indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the City you need to consider additional non-financial factors such as changes in the City's property tax base and the condition of the City's capital assets. B Over the last year, the City's net position increased by $6,362,329 and the City's property tax base decreased by $7,619,422 during the fiscal year. The government-wide financial statements of the City are divided into two categories: 0 0 Governmental activities - Most of the City's basic services are included here, such as the police, streets, fire, library, planning, building inspection, parks, recreation departments and general administration. Property and sales taxes, charges for services, and state and federal grants finance most of these activities. Business-type activities - The City charges fees to customers to help it cover the costs of certain services it provides. The City's golf courses, water system and sewer system are included here. Fund Financial Statements The fund financial statements provide more detailed information about the City's funds - not the City as a whole. Funds are accounting devices that the City uses to keep track of specific sources of funding and spending for particular purposes. 0 B Some funds are required by State law and bond covenants. The City Council establishes other funds to control and manage money for particular purposes. The City has three kinds of funds: 8 Governmental Funds - Most of the City's basic services are included in governmental funds, which focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detailed short-term view that helps you determine whether or not there are more or fewer financial resources that can be spent in the near future to finance the City's programs. Because this information does not encompass the additional long-term focus of the governmentwide statements, we provide additional information on the subsequent page that explains the relationship (or differences) between them. -15-

59 D 0 Proprietary Funds - Services for which the City charges customers a fee are generally reported in proprietary funds. Proprietary funds, like the government-wide statements, provide both long and short-term financial information. In fact, the City's enterprise funds (one type of proprietary fund) are the same as its business-type activities, but provide more detail and additional information, such as cash flows. Fiduciary Funds - The City is the trustee, or fiduciary, for its employees' pension plans. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All of the City's fiduciary activities are reported in a separate statement of fiduciary net position and a statement of changes in fiduciary net position. We exclude these activities from the City's government-wide financial statements because the City cannot use these assets to finance its operations. Financial Analysis of the City as a Whole Net Position. As noted earlier, net position over time may serve as a useful indicator of a government's financial position. In the case of the City of Papillion, assets exceed liabilities by $69,546,374 at the close of the most recent fiscal year. The largest portion of the City of Papillion's net position (63%) reflects its investment in capital assets (e.g. land, infra-structure, buildings, machinery, and equipment) less any related debt to acquire those assets that is still outstanding. The City of Papillion uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Papillion's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Unrestricted net assets may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Papillion is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. Government Activities Business-tvoe Activities Total Current and other assets $ 18,508,639 $ 19,666,214 $ 11,423,789 $ 8,718,636 $ 29,932,428 $ 28,384,850 Capital assets Total assets Long-term liabilities 34,867,382 38,296,654 18,449, ,876 53,317,228 57,094,530 Other liabilities Total liabilities Deferred Inflows of resources Net position: Invested in capital assets, net of related debt 25,985,250 21,292,272 18,171,507 18,505,646 44,156,757 39,797,918 Restricted 6,778,968 10,883,178 4,643, ,034 11,422,224 11,699,212 Unrestricted Total net position S S 39.41? 1B2 S ,993 $ 69,54(5, Changes in Net Position Governmental Activities: Governmental activities increased the City of Papillion's net position by $3,463,513. The key elements of this increase relates to the collection of property taxes and city sales tax exceeding the activities losses, along with a large number of commercial building permits being issued this year For the most part, inflation and demand for expanded services were the cause of increases within the departments expenses. The City's sales tax revenue grew at 8% over the prior year which was greater than anticipated at budget time and therefore not used to fund current expenditures. -16-

60 Business-typo Activities: Business-type activities increased the City of Papillion's net position by $2,925,816. One of the key elements of this change is contributions from developers for the construction of water distributions systems and the sewer collection system servicing their developments. The City also has scheduled rate increases in both the Water Fund and the Sewer Fund to help revenues increase at a rate similar to the expected increases in operating expenditures. One of the expected increases in operation expenditures of the Sewer Fund was the increase in the cost with the City of Omaha as a result of the federal mandate to control combined sewer overflows. The City has continued to improve its business model at the golf courses to ensure operating income is available to off-set debt payments including principal. Government Activities Revenues: Program revenues: Charges for services $ 4,401,463 $ 2,849,943 Operating grants and contributions 4,580,447 4,532,204 Capital grants and contributions 1,079, ,349 General revenues: Property taxes 6,761,603 6,754,498 Special assessments 169, ,513 City sales tax 7,600,986 7,019,662 Other taxes 984, ,031 Interest income 12,914 26,742 Other 807,576 Capital facility fees Total revenues Expenses: General government 873,970 1,069,045 Building permits and 467, ,496 Planning 314, ,281 Library 933, ,663 Park department 1,297,993 1,193,064 Police department 5,129,763 4,957,666 Fire department 5,178,756 4,999,167 Street department 4,831,396 4,548,781 Recreation department 617, ,469 Senior center 153, ,992 Water park 489, ,623 Information services 300, ,745 Amphitheatre 314, ,527 Community betterment 125,131 89,156 Financing Fees 125,925 Interest expense 998,284 1,332,098 Water Sewer Golf courses Business park Total expenses Increase (decrease) in net position before other items 3,439,361 1,821,745 Loss on disposal of assets <2.848) Changes in net position 3,436,513 1,821,745 Net position, October 1 38,338,079 37,590,437 Change in accounting principle ( Net position, September 30 $ $ Business-tope Activities Total $10,499,949 $10,221,009 $14,901,412 $ 13,070,952 4,580,447 4,532,204 1,265,966 2,345, ,349 6,761,603 6,754, , ,513 7,600,986 7,019, , ,031 8,479 10,905 21,393 37, , , ,872 1,009, ,970 1,069, , , , , , ,663 1,297,993 1,193,064 5,129,763 4,957,666 5,178,755 4,999,167 4,831,396 4,548, , , , , , , , , , , ,131 89, , ,284 1,332,098 4,727,489 4,399,428 4,648,256 4,399,428 2,896,990 2,802,164 2,896,990 2,802,064 2,376,998 2,297,841 2,386,014 2, ,925,816 1,376,140 6,365,177 3,197,885 (2.848) 2,925,816 1,376,140 6,362,329 3,197,885 24,845,966 23,659,853 63,184,045 61,250,290 s o O) f S ft2 894 fl4sfififi SB31H

61 Financial Analysis of the City's Funds As noted earlier, the City of Papillion uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the City of Papillion's governmental funds is to provide information on neamerm inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Papillion's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As the City completed the yeari its governmental funds reported a combined fund balance of $14,402,659. Of that fund balance, $7,288,282 constitutes unassigned fund balance. The general fund is the main operating fund of the City of Papillion. At the end of the current fiscal year, unassigned fund balance of the general fund was $7,288,282. As a measure of the general fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 43% of total 201? general fund expenditures, while total fund balance represents 44% of that same amount. The debt service fund provides for the servicing of al bonded debt issued for governmental activities. At the end of the current fiscal year, the restricted fund balance was $3,647,425 which represents 85% of the scheduled principal and interest payments of currently issued governmental debt. The capital project fund accounts for the large governmental projects. This current fiscal year, 82% of the expenditures were spent on infrastructure; The fund balance of $2,795,356 is assigned to other capital projects. The keno lottery fund is restricted for community betterment as defined by Nebraska State Statutes. At the end of the current fiscal year, the restricted fund balance was $336,187 up from $117,991 one year ago. These funds wil be used in the future for community betterment as allowed by statute. The water park fund accounts for the activity of Papio Bay Aquatic Center. At the end of the current fiscal year, the assigned fund balance was $95,897 which represents 24% of the total 2013 water park expenditures. General Fund Budgetary Highlights 2010? Expenditures Revenues B Urtassighed Balance* Total Balance -18-

62 2013 GENERAL FUND EXPENDITURES Amphitheater Recreation ->», Senior cent!?*" 1% Street 10% Administrative.5% " Planning n.2% Building y 3% 2013 GENERAL FUND REVENUES All other sources Rural Fire District 15% 1% Properly Tax 19% Permits & Fees 19% City Sales Tax 34% Funding from the Federal Grants State i% 6% Occupational Taxes m -19-

63 Over the course of the year, the City Council revised the City budget twice, The changes were all the result of unforeseen circumstances: The First Amendment Included: 8 B 8 Various Grants approved during the year to allow for the related expenditures Various donations received during the year to allow for the expenditures of these donations as intended. Re-allocation of property and liability insurance to more appropriately reflect actual costs between various City departments. Refunding of bonds to reduce future interest payments. a A payment to Sanitary and Improvement District 278 as per the partial annexation agreement. The Second Amendment included: 8 Additional special event fees and expenditures as a result of increased participation of various programs run by the recreation department. Proprietary Funds 8,000,000 6,000,000 4,000,000 2,000,000 Expenses Compared to Revenues Water Sewer Golf Business Park Expenses Revenues The City of Papillion's proprietary funds provide the same type of information found in the government-wide financial statements, but in more-detail. The total of the proprietary funds unrestricted net position at the end of the year was $4,957,

64 Capital Asset and Debt Administration Capital Assets. The City of Papiilion's capital assets for its governmental and business-type activities as of September 30, 2013 equals to $100,588,773 (net of accumulated depreciation). This investment in capital assets includes land, buildings and system improvements, machinery and equipment, park facilities, intangibles, roads, highways, and bridges. The total increase in the City of Papiilion's capital assets for the current fiscal year was $1,259,142. This is a 1.3% increase over the year resulting from new asset purchases being greater than the depreciation of assets. The City acquired land during the current fiscal year which will be the site of a future public works facility. There were water distribution and sewer collection systems which were extended during the fiscal year to service new development, which were in part funded by the developers. There were no major road projects or buildings constructed during the fiscal year. See Note C for additional information. Governmental Business-type Activities Activities Total Land $ 4,260,063 $ 6,187,031 $ 10,447,094 Intangible 369, ,305 Construction-in-Progress 3,390, ,679 3,520,412 Land Improvements 4,736,516 4,736,516 Buildings and Equipment 19,329,878 6,154,345 25,484,223 Infrastructure 73,937,089 73,937,089 Distribution and collection systems 45,749,741 45,749,741 Total 105,654,279 58,590, ,244,380 Less accumulated depreciation (41,777,496) (21,878,111) (63,655,607) $ 63,876,783 $36,711,990 $ 100,588,773 Long-term Debt. At the end of the current fiscal year, the City of Papillion had total bonded debt outstanding of $54,890,000 all backed by the full faith and credit of the government and/or secured by specific revenue sources of the Water and Golf Funds. The City made all scheduled payments. See Note D for additional information. Economic Factors and Next Year's Budgets and Rates The following factors were considered in preparing the City of Papiilion's budget for the 2014 fiscal year. B D D While establishing next year's budget the City was focused on the long-term future of the City rather than a one year outlook. Based on the budgetary planning done for the 2013 year, the City was able to prepare the fiscal 2014 budget without an increase to the levy. The City anticipated a decrease in commercial building permits, since 2012 had unusually high collection of commercial building permits. There was a national retailer looking at building a large retail store within the City's zoning jurisdiction, for which the City has taken action to annex this commercial area. Along with the anticipated continued build out of the two large commercial areas. -21-

65 Requests for Information This financial report is designed to provide a general overview of the City of Papillion's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or request for additional financial information should be addressed to the Finance Director/Treasurer, 122 East Third Street, Papillion, Nebraska

66 CITY OF PAPILLION, NEBRASKA STATEMENT OF NET POSITION SEPTEMBER 30, ASSETS Primary M M I R I J Government W V V M I I i l V l l t Business- Governmental type Activities Activities Total Cash and cash equivalents $ 8,114,873 $ 3,660,067 $ 11,774,940 Investments 4,817, ,263 5,774,289 Receivables 4,549,476 2,082,686 6,632,162 Inventory 80,517 80,517 Cash 1,027,264 2,303,691 3,330,955 Investments 2,339,565 2,339,565 Land 4,260,063 6,187, ,094 Construction-in-progress 3,390, ,679 3,520,412 Depreciable capital assets (net of accumulated depreciation) 56,225,987 30,025,975 86,251,962 Intangible asset 369, Total assets 82,385,422 48,135, ,521,201 LIABILITIES Accounts payable 606, ,102 1,224,258 Accrued payroll and withholding 245, ,904 Accrued interest payable 288, , ,063 Other accrued liabilities 134,724 19, ,699 Noncurrent Liabilities: Due within one year: Note payable 244,000 17, ,127 Bonds payable 3,420, ,000 4,090,000 Leases payable 92,945 91, ,977 Accrued compensated absences 710, , ,079 Due in more than one year: Note payable Bonds payable 978,000 33,060,214 74,076 17,688,248 1,052,076 50,748,462 Leases payable ,374 Outtatl sewer liability 460, ,037 Accrued compensated absences , ,279 Total liabilities 40, ,259,773 60,869,335 DEFERRED INFLOWS OF RESOURCES: Unearned revenue - gift certificates ,492 Total deferred inflows of resources ,492 NET POSITION Invested in capital assets (net of related debt) 25,985,250 18, ,156,757 Restricted for Capital projects 2,795,356 4,643,256 7,438,612 Debt service ,647,425 Community betterment ,187 Unrestricted ,957, Total net position $ $ $ ,374 See notes to basic financial statements. -23-

67 CITY OF PAPILLION, NEBRASKA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2013 Program Revenue s Wet (Expense) Revenue ami Changes In Net Assets Operating Capital Primary Governmen t Charges for Grants and Grants and Governmental Bustness4ype Fimefions/Piograms Ex oen sea Services Contributions Contributions Activities Activities Total Primary government Governmental activities: General government S $ S ( ) $ (708,421) BuikSng permits and inspections ,278, Planning ,520 (286,379) ( ) L&rary 933,305 48,266 $ (877,792) ( ) Parks department (1, ) ( ) Pofice department ( ) ( ) Ftm department 5,178, ( ) ( ) Street department 4.831, S 1.079,081 ( ) (2, ) Recreation department 617, (332,369) ( ) Senior center 153, ( ) ( ) Water parte 489, (116,858) ( ) Information services ( ) ( ) Amphitheatre ,250 (208,933) ( ) Community betterment 125, Financing fees 125,925 (125,925) ( ) Interest expense ( * ( ) Tots! governmental activities f ) ( ) Business-type activities: Water 4, , ,789 $ ,129 Sewer ,161 Goff courses ,148 Business park 5l rs33 (51.533) (51.533) Total business-type activities Total primary government S S S S f ) ( ) General revenues: Taxes: Property 6, Special assessments ,685 City sates ,986 Other tarns ,977 interest income Loss on disposal of assets (2.848) (2.848) Outfen release Capital Facitty Fees Total general revenues and transfers CHANGE IN NET POSITION 3, , NET POSfTION. beginning of year, as previously reported , , Change in accounting principle ( ) ( ) ( ) NET POSITION, beginning of year, as restated NET POSfTION. end of year S S $ See notes to basic financial statements. -24-

68 CITY OF PAPILLION, NEBRASKA BALANCE SHEET - GOVERNMENTAL FUNDS SEPTEMBER ASSETS AND OTHER DEBITS Total Debt Capital Special Revenue Governmental General Service Prelects Keno Lottery Water Park Funds ASSETS: Cash and cash equivalents $ 4, $ 2, $ 647,451 $ 359,279 $ 105,348 $ 8,114,873 Restricted and designated assets 197, , ,284 Total cash and cash equivalents 4,812,051 2,387,793 1,477, , ,348 9,142,137 Investments 3,197,341 1,093, ,355 4,817,026 Receivables: Accounts 992,128 60, ,510 25,842 1,998,387 Property taxes 70,510 39,323 1, ,244 Special assessments 1,635,817 1,635,817 Interest on special assessments 91,177 91,177 Total assets and other debits $ $ $ $ 385,221 $ $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES LIABILITIES: Accounts payable $ 425,088 $ 128,329 $ 48,368 $ 4,371 $ 606,156 Accrued payroll and withholding 244, ,904 Other accrued liabilities 134, ,724 Accrued uncompensated absences 706, Total liabilities 1,510, ,329 49,034 8, DEFERRED INFLOWS OF RESOURCES: Unavailable revenue - property taxes 32,798 $ 33,361 1,157 67,317 Unavailable revenue - special assessments Unavailable revenue - gift certificates 494 1,827, , Total deferred inflows of resources 33,293 1,860, ,688,146 FUND BALANCES: Restricted for Debt service 3,647,425 3,647,425 Community betterment 336, ,187 Fire protection 51,874 51,874 Committed for Park Improvements 119, ,303 Assigned to: Capital projects 2,795,358 2,795,356 Water park 95,897 95,897 Subsequent year's budget 68,335 68,335 Unassigned 7,288,282 7,288,282 Total fund balances ,897 14, Total liabilities, deferred inflows of resources and fund balance $ $ $ $ S $ See notes to basic financial statements. -25-

69 CITY OF PAPILLION, NEBRASKA RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL FUNDS SEPTEMBER 30, 2013 Total fund balances - governmental funds $ 14,402,659 Amounts reported for governmental activities in the statement of net assets are different because: Infrastructure, property and equipment used in governmental activities are not financial resources and, therefore, are not reported in the funds. 63,876,783 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. (38,674,113) Other long-term receivables are not available to pay for current period expenditures and, therefore, are deferred in the funds 712,851 Accrued interest expense from the balance sheet that requires current financial resources for governmental activities. (288,252) Unamortized bond discounts are reported in governmental activities, but are not reported in the funds as they do not provide economic resources. 58,067 Unamortized bond premium that requires current financial resources for governmental activities. (8,281) Unavailable revenues represent funds not available in the current period and, therefore, are not recognized as revenue in the governmental funds. 1,694,878 Total net position - governmental activities $ 41, See notes to basic financial statements. -26-

70 CITY OF PAPILLION, NEBRASKA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BAUNCES - GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER Total Debt Capital Special Revenue Governmental General Service Prelects Keno Lottery Water Part Funds REVENUES: Taxes * property $ $ S J 6,770,779 Taxes *city sates 6.336, ,235 7,466,202 Special assessments 565, ,244 Occupational (ax natural gas Occupational tax telephone Occupational tax - other 15,725 15,725 CATV uitdin9 permits 2, Licenses, permits and fees $ Rural fire district 2,906,564 2, H^hway allocation funds ,652 1, Street and highway Interest $ Miscellaneous Federal grants , ,355 Etderty bus subsidy 32, Keno proceeds Total revenues EXPENDITURES: Current General end administrative ,128 Building permits and inspections Planning ,543 Library ,248 Parts department 1.293, ,488,614 Police department 4, ,991,987 Fire department ,271,393 Street department 1,746,729 3, , Recreation department 610, ,321 Senior center 139, ,350 Information systems department 273, ,494 Amphitheatre 286, Community betterment 125, Papio bay 393, ,126 Debt service: Bond principal retirement ,000 Interest on bonds 1,072,485 1, Fees Total expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES ( ) ( ) { ( ) OTHER FINANCING SOURCES (USES): issuance of refunding bonds Refunding bond} redeemed Transfers In Transfers out Total other financing sources (uses) NET CHANGES IN FUND BALANCE FUND BALANCES, beginning of year FUND BALANCES, end of year 7,950,000 (7, ) 650,000 20,132 7, ( ) ( ) ,051,018 (336,016) (1,918,943) (880) (986,427) S S S S S $ See notes to basic financial statements. -27-

71 CITY OF PAPILLION, NEBRASKA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30,201 Net change in fund balances - governmental funds $ (986,427) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the costs of those assets are allocated over their estimated useful lives and reported as depreciation expense. In the current period, these amounts are: Capital outlays Less: Depreciation expense The issuance of long-term debt provides current financial resources to governmental funds, white the repayment of principal of long-term debt consumes current financial resources of governmental funds. These transactions, however, have no effect on net position. Bonds and other financing contracts issued Principal payments on bonds and other financing contracts Effects of premiums, discounts and similar items Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. The net change in accrued interest expense that does not require current financial resources. Long-term accrual of compensated absences is not reported in the governmental fund as it does not consume current financial resources. The net change in deferred revenues that does not provide current financial resources. The net proceeds from a capital lease provides current financial resources in the funds. The payment of notes payable consumes current financial resources of governmental funds. Loss on disposal of fixed asset $ 4,927,153 (3,438,394) 1.488,759 (7,950,000) 11,140,000 26,386 3,216, ,784 84,653 (75,740) (413,735) (189,319) 180,000 (2.848) Change in net position of governmental activities $ 3.436,513 See notes to basic financial statements. -28-

72 CITY OF PAPILLION, NEBRASKA STATEMENT OF NET POSITION - PROPRIETARY FUNDS SEPTEMBER 30,201 ASSETS Water Sewer Golf Business Park Totals CURRENT ASSETS: Cash and cash equivalents $ 2,358,491 $ 309,266 $ 916,449 $ 75,861 $ 3,660,067 investments 461, , ,263 Receivables: Accounts 736, ,041 94,022 1,126,007 Other 947,994 8, ,679 Inventory 80,517 80,517 Total current assets 4,504, ,856 1,090,988 75,861 6, NON-CURRENT ASSETS: Restricted: Cash and cash equivalents 292,160 1,844, , ,691 Investments 1,051,623 1,287,942 2,339,565 Capital assets, net of accumulated deprecation 24,628,460 4,485,410 5,754,535 1,474,280 36,342,685 Intangible asset Total non-current assets 26,341,548 7,617, ,474,280 41,355,246 Total assets $ $ 8.728,226 $ 7,013,036 $ 1,550,141 $ 48,135,779 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 335,300 $ 183,545 $ 99,257 $ 618,102 Deposits payable 19,975 19,975 Accrued Interest payable 128,771 44, ,811 Accrued compensated absences short-term 114,564 66,982 39, ,880 Capital lease obligation ,032 Note payable due within one year 17,127 17,127 Bonds due within one year 420, , Total current liabilities 1.035, , ,663 1, NONCURRENT LIABILITIES: Accrued compensated absences - long-term 114,917 67,324 45, Outfall sewer liability 460, ,037 Note payable due in more than one year 74,076 74,076 Bonds due In more than one year ,248 17,688,248 Total noncurrent liabilities 14,393, ,361 3,528,492 18,449,846 Total liabilities , ,155 20,259,773 DEFERRED INFLOWS OF RESOURCES: Unavailable revenue - gift certificates 104, Total deferred inflows of resources 104, NET POSITION: Invested in capital assets net of related debt 10,281,562 4,485,410 1,930,255 $ 1,474,280 18,171,507 Restricted for debt service 1,343,783 3,131, , ,256 Unrestricted , Total net position ,856, ,771,782 Total liabilities, deferred inflows of resources and net position $ $ $ $ $ See notes to basic financial statements. -29-

73 CITY OF PAPILLION, NEBRASKA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN POSITION - PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER Water Sewer.Golf Business Park im OPERATING REVENUES: Charges for services Merchandise sales Concession sales $ 4.524,829 $ 3,480,717 $ 1.666, , Total operating revenues , $ 9.672, , OPERATING EXPENSES: Payroll expense 1,675, , ,524,688 Cost of merchandise sold 160, ,222 Cost of concessions sold 223, ,989 Contractual services 145,435 1,567, ,563 1,870,007 Utilities 463,697 17,696 75, ,955 Materials and supplies 634,277 75, , ,551 Depreciation and amortization 1,136, , $ 51,513 1,751,164 Repairs and maintenance 133,774 40,138 80, ,998 Other Total operating expenses OPERATING INCOME (LOSS) (51.533) NON-OPERATING REVENUES (EXPENSES): Capital facility fees Development fees Outfalls released Donation Interest income Bond issue costs Interest expense 929, , , ,B72 929,560 1,253, ,872 12,743 12,743 3,272 (126,351) 4, ,479 (126,351) Total non-operating revenues (expenses) ( ) ( ) ( ) ( ) CHANGE IN NET POSITION 1,674,961 1,171, ,557 (51,507) 2,925,816 NET POSITION - beginning of year, as previously reported 13,879,479 6,776,533 2,778,333 1,601,648 25,035,993 Change in accounting principle ( ) (52.233) ( ) NET POSITION, beginning of year, as restated ,776, NET POSITION, end of year $ $ $ 2, $ S See notes to basic financial statements. -30-

74 CITY OF PAPILLION, NEBRASKA STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2013 Water Sewer polf Business Park Total CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 4,551,725 S 3,016,698 $ 2,493,504 $ 10,061,927 Cash paid to vendors and others (1.376,839) (1,853,998) (962,248) * (20) (4,193,105) Cash paid to employees ( ) ( ) (923,218) ( ) Net cash flows from operating activities (20) CASH FLOWS FROM INVESTING ACTIVITIES: Sale (purchase) of investments (1,052,714) (5,540) (1.058,254) Interest income Net cash flows from invesling activities ( ) (768) (1,049,775) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Capital facility fees 460, ,815 Development fees 944, ,306 1,528,095 Bond issue costs (128,351) (126,351) Purchase of capital assets (1,109,102) (308,490) (106,169) ( ) Payments on capital lease obligation (86,662) (86.662) Donation for capital asset 12,743 Payment on note payable (16,604) (16,604) Proceeds from bond issuance 7,325,000 Principal paid on debt (6, ) (200,000) (7, ) Interest end other charges paid on debt ( ) ( ) ( ) Net cash flows from capital and related financing activities ,816 ( ) (35.484) NET CHANGE IN CASH AND CASH EQUIVALENTS 712, ,020 67, ,324,292 CASH AND CASH EQUIVALENTS, beginning of year ,016, CASH AND CASH EQUIVALENTS, end of year $ $ 2,153,284 $ 1,083,962 t $ CASH AND CASH EQUIVALENTS TO STATEMENT OF NET ASSETS - PROPRIETARY FUNDS: Consists of: Unrestricted cash and cash equivalents $ 2,358,491 $ 309,266 $ 916,449 $ 75,861 $ 3,660,067 Restricted cash and cash equivalents $ $ 2, $ $ $ RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS FROM OPERATING ACTIVITIES: Operating income (loss) Adjustments to reconcile net operating Income (loss) to net cash flows from operating activities: Depredation and amortization Changes In assets and liabilities: Accounts receivable and other receivables Inventoiy Accounts payable and accrued liabilities Sewer outfall liability 283,693 t 583,727 $ 277,195 $ (51,533) i 1.093, ,692 26,696 64, ,569 (37,050) (107,305) ( ) 305,390 (30,598) (1.965) 58,036 51,513 1,751,164 (40,752) (1,965) 35,011 ( ) Net cashflows from operating activities $ $ $_ $ (20) $ 2.409,551 See notes to basic financial statements. -31-

75 CITY OF PAPILLION, NEBRASKA STATEMENT OF NET POSITION - FIDUCIARY FUNDS SEPTEMBER 30, Combined Pension Trust Funds ASSETS: Investments, mutual funds $ ,635 NET POSITION: Held in trust for pension benefits and other purposes $ ,635 See notes to basic financial statements. -32-

76 CITY OF PAPILLION, NEBRASKA STATEMENT OF CHANGES IN NET POSITION - FIDUCIARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30,201 Combined Pension Trust Funds ADDITIONS: Contributions: Employer Plan members Rollovers Total contributions Investment earnings Total additions DEDUCTIONS: Loss on investments Distributions Plan expenses Total deductions CHANGE IN OBLIGATIONS NET POSITION, beginning of year NET POSITION, end of year 476,487 1,452, ,029 2,131, , ,583 48, ,683 19,303 1,012,294 4,061,289 17,579,346 $ 21,640,635 See notes to basic financial statements. -33-

77 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30,2013 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Papillion (the "City") is a governmental entity established under the laws of the State of Nebraska. The financial statements of the City have been prepared in conformity with accounting principles generally accepted in the United States of America as applicable to governmental units. The City's reporting entity applies all relevant Governmental Accounting Standards Board ("GASB") pronouncements. Reporting Entity - The City is governed by an elected mayor and an eight-member council. As required by accounting principles generally accepted in the United States of America, the basic financial statements present the government and its blended component unit, the City of Papillion Municipal Facilities Corporation, an entity for which the government is considered to be financially accountable. The blended component unit, although a legally separate entity, is, in substance, part of the government's operations and thus data from this unit is combined with data of the primary government. The City and the blended component unit both have a September 30 year-end. Blended Component Unit - The City created the City of Papillion Municipal Facilities Corporation ("MFC"), a not-for-profit corporation under the laws of the State of Nebraska. The purpose of the corporation is to acquire by construction, purchase or otherwise, real or personal property, including improvements and additions thereto, suitable for use by the City in any of its municipal activities, proprietary or governmental, and lease or sell the same to the City. Separate financial statements are not available for the activities of the City of Papillion Municipal Facilities Corporation. Government-wide and Fund Financial Statements - The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all non-fiduciary activities of the primary government. Governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for services for support. The statement of activities demonstrates the degree to which direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges for services, fines and forfeitures, and licenses and fees, and 2) grants and contributions that are restricted to meeting operational or capital requirements of a particular function or segment. Taxes and other items, which are not specifically identifiable with a particular function or segment, are reported as general revenues at the bottom of the statement. The general revenues support net costs of the functions or segments not covered by program revenues. -34-

78 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds even though the latter are excluded from the government-wide financial statements. Major, individual funds are reported in separate columns in the fund financial statements. A fund is considered major if it is the primary operating fund of the City, meets specific mathematical criteria set forth by GASB or is identified as a major fund by the City's management. In addition to the City's funds meeting the required criteria, the City's management has designated all remaining funds to be presented as major funds for financial reporting purposes. Measurement Focus, Basis of Accounting and Financial Statement Presentation Government-wide Financial Statements - The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned, and expenses are recorded when a liability is incurred, regardless of the timing of the cash flows. Property tax revenues are recognized in the year in which they are levied while grants are recognized when grantor eligibility requirements are met. Governmental Fund Types - Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of the governmental funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both "measurable and available"). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers sales and use taxes available when in the hands of the State of Nebraska, the intermediary collecting government. These taxes are normally collected by the City within 30 days of year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt which is recognized when due. The City reports the following major governmental funds: General Fund - is the City's primary operating fund and is used to account for all financial resources, except those required to be accounted for in another fund. Debt Service Fund - accounts for the accumulation of resources and the payment of principal and interest on general long-term debt. Capital Project Fund - accounts for the financial resources to be used for the acquisition or construction of major capital facilities and projects (other than those financed by General or Proprietary funds) using proceeds from the sale of General Obligation Bonds or other financing means. Keno Lottery Fund - accounts for the revenues and expenses related to the Keno operations of the City. The revenue source is the City's share of the hold, the amount bet net of winning payouts. Water Park Fund - accounts for the operations of the City's aquatic center. The revenue source is user fees. The two major sources of fees come from admission into the water park and concessions revenues. -35-

79 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Proprietary Fund Types - Proprietary funds are reported using the economic resources measurement focus and the accrual basis of accounting. They also distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water and sewer utilities and the golf enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include cost of sales and services, administrative expense and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The City reports the following major proprietary funds: Water Fund - accounts for the operations and capital needs to provide treated water to customers within the City and adjoining areas. Sewer Fund - accounts for the operations and capital needs to service customers within the City and adjoining areas, providing sewer collection and treatment. Golf Course Fund - accounts for the operation of the City's golf courses. Business Park Fund - accounts for the acquisition and subsequent sale of business park sites. Fiduciary Fund Types - Fiduciary funds are used to report assets held in agency, a custodial capacity for others and therefore are not available to support City programs. Since these funds are custodial in nature, they do not involve the measurement of results of operations and are not incorporated into the government-wide financial statements. Fiduciary funds are reported using the economic resources measurement focus and the accrual basis of accounting. The City's fiduciary fund pension trust fund includes: Retirement Plan - accounts for the activity of the police officers and firefighters retirement plans. Deferred Compensation Plan - accounts for the activity associated with the City's deferred compensation plan. Cash and Cash Equivalents - For purposes of the statement of cash flows, cash equivalents are short-term, highly liquid investments that are both readily convertible to known amounts of cash, and so near their maturity (generally original maturity of three months or less) that they present insignificant risk of changes in value because of interest rate changes. ReceivablesIn the governmental fund financial statements, property taxes are recorded as a receivable when levied. Based on past experience, the uncollectible portion has been negligible and no allowance for uncollectible taxes has been recorded. Property taxes levied for the tax year are recorded as revenue when levied and collected within 30 days after September 30, Prior-year levies were recorded using these same principles, and remaining receivables are re-evaluated annually. -36-

80 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED In the government-wide financial statements, property taxes receivable and related revenue include all amounts due the City regardless of when cash is received. Historically, substantially all property taxes have been collected. At September 30, 2013, the current portion of property taxes receivable was $43,928. The current portion of special assessments receivable was $383,625 and the noncurrent portion was $1,252,192. Management does not believe an allowance is necessary as all past due amounts were classified as noncurrent and liens have been placed on the properties. Inventories - Inventories are valued at the lower of cost or market. The costs of inventories are recorded as expenditures when used. Inventory held by the golf fund consists primarily of merchandise and concessions. Capital Assets - Capital Assets which include equipment, buildings, and infrastructure assets (such as roads, sidewalks, traffic signals, land improvements and similar items) are depreciated and reported in the applicable governmental or business-type activities columns in the government-wide financial statements. No capital assets or depreciation are shown in the governmental fund financial statements. Capital assets have an estimated useful life greater than one year and are valued at historical cost or estimated historical cost if actual historical cost is not available. The City's capitalization threshold is $2,500. The estimated useful life for City assets is determined on a variety of methods including engineering estimates, industry standards and replacement cycles. Additions subsequent to that date are stated at cost. Donated capital assets are valued at their estimated fair value on the date donated. Costs of normal maintenance and repairs that do not add to the value of an asset or materially extend the asset lives are not capitalized. Improvements are capitalized and depreciated over the remaining useful lives of the related asset, as applicable. Interest is capitalized on proprietary fund capital project assets acquired with tax-exempt debt during construction. Interest on general government capital projects is not capitalized. Capital assets are depreciated using the straight-line method over the following useful lives: Land and building improvements Equipment Infrastructure Distribution and collection systems years 3-10 years years 30 years Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This represents a consumption of net position that applies to future periods and will not be recognized as an outflow of resources (as either an expense or expenditure) until that period. The City currently does not have any items that qualify for reporting in this category. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This represents an acquisition of net position that applies to a future period and will not be recognized as an inflow of resources (revenue) until that period. The City has two items that qualify for reporting in this category: (1) Unavailable revenue received after the availability period. This includes property taxes plus other local taxes and fees received after 30 days. They are reported as deferred inflows on the governmental funds balance sheet and will be recognized as revenue next year; and (2) Unavailable revenue relating to gift certificates. -37-

81 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30,2013 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Long-term Debt, Deferred Debt Expense and Bond Discounts/Premiums - In government-wide and proprietary financial statements, outstanding debt is reported as a liability. Bond discounts or premiums and the difference between the reacquisition price and the net carrying value of refunded debt are capitalized and amortized over the terms of the respective bonds using the method that approximates the effective interest method. The governmental fund financial statements recognize the proceeds of debt and premiums as other financing sources of the current period and payment of principal and issuance costs are reported as expenditures. Accrued Compensated Absences - Accumulated vacation leave related to the City's governmental funds are recorded as expenditure and a fund liability as these amounts are generally used within one year. Accumulated sick pay benefits related to the City's governmental funds are not due and payable in the current period and therefore are not reported in the governmental funds. As the paid vacation and sick leave accrue to employees paid out of proprietary funds, an expense and liability is recorded in those funds. Net Position Flow Assumption Government-wide Statements Net position is classified and displayed in three components: a. Net invested in capital assets - Consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds; mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets b. Restricted net position - Consists of net position with constraints placed on their use either by (1) external groups such as creditors, grantors, contributors or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. c. Unrestricted net position - All other net position that do not meet the definition of "restricted" or "net invested in capital assets." Sometimes the City will fund outlays for a particular purpose from both restricted and unrestricted resources, in order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City's policy to use restricted resources first, then unrestricted resources as they are needed. -38-

82 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Fund Balance Flow Assumption Fund balances are divided into five classifications based primarily on the extent to which the City is bound to observe constraints imposed upon the use of the resources in the governmental funds. The classifications are as follows: Non-spendable - Amounts that cannot be spent either because they are not in a spendable form or because they are legally or contractually required to be maintained intact. Restricted - Amounts that can be spent only for specific purposes because of the City Charter, City Code, state or federal laws or externally imposed conditions by grantors or creditors. Committed - Amounts that can be used only for specific purposes determined by a formal action by the City Council through an ordinance or resolution. Assigned - Amounts that are designated by the Mayor for a specific purpose, but are not spendable until a budget ordinance is passed by the City Council. Unassigned - All amounts not included in other spendable classifications. Sometimes the City will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned and unassigned fund balance). In order to calculate the amounts to report for each category of fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the City's policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. -39-

83 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Budgets and Budgetary Accounting - The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The appropriate budget is prepared by fund, function and department. The City Administrator submits to the City Council a proposed operating budget for the fiscal year commencing October Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted through passage of an ordinance for all governmental and enterprise funds. 4. The City Administrator is authorized to transfer budgeted amounts within a department of any fund; however, any revisions that alter the total expenditures of any fund must be approved by the City Council. The legal level of budgetary control is by fund type. 5. The City's legally adopted budget is based on requirements of the State of Nebraska. The adopted budget uses the cash basis of accounting whereby revenues are budgeted as they are expected to be received rather than when susceptible to accrual, and expenditures are budgeted as they are expected to be disbursed rather than as incurred. 6. Appropriations lapse at the end of the year. The City Council approved certain amendments to the legally adopted budget for fiscal year Property Taxes - Real estate and personal property taxes are levied and due on December 31 of each year and may be paid in two equal installments. The first and second half becomes delinquent on the following April 1 and August 1, respectively. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. -40-

84 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30,201 B. DEPOSITS AND INVESTMENTS Statutes authorize the City to invest in time deposits at banks selected as depositories of City funds, direct debt securities of the United States Government, certain government agency bonds, and state-sponsored pooled investment funds. Cash is stated at cost, which approximates fair value. The City's cash deposits, including certificates of deposit, are with institutions insured by the Federal Deposit Insurance Corporation ("FDIC") and other collateral. At September 30,2013, the bank balance of the City's deposits of $12,058,622 was fully-insured or collateralized. The City's cash and cash equivalents include units of participation in the short-term investment pool of the Nebraska Public Agency Investment Trust ("NPAIT"). NPAIT is a special purpose government established under Nebraska statute. The investment pool or trust is not registered and is not rated for credit risk. The City limits its interest rate risk by investing only in the shortterm pool, which consists primarily of government agency or government securitized investments with maturities of less than one year. The City's Cash with Sarpy County Treasurer is covered by collateral held by the County. At September 30, 2013, the City's cash and cash equivalents and investments reported on the government-wide financial statements include: Cash and cash equivalents: Bank accounts $ 5,357,003 Cash on hand 6,340 Cash with Sarpy County Treasurer 58,724 NPAIT accounts Total cash and cash equivalents $ Investments: Certificates of deposit $ 7,062,231 Investment with NPAIT Total investments S The fiduciary funds investments managed by trustee and investments designated for deferred compensation plan consist primarily of open-end mutual funds and guaranteed investment contracts and thus are not categorized above. The City attempts to mitigate the following types of deposit and investment risks through compliance with the State Statutes referred to above but has not adopted a policy to manage these risks. The three types of deposit and investment risks are the following: Custodial Credit Risk - for deposits and investments, custodial credit risk is the risk that in the event of the failure of a bank or other counterparty, the City will not be able to recover the value of its deposits or investments or collateral securities in the possession of a thirdparty. Credit Risk - for deposits and investments, credit risk is the risk that a bank or other counterparty defaults on its principal and/or interest payments owed to the City. Interest Rate Risk - for deposits and investments, interest rate risk is the risk that the value of deposits and investments will decrease as a result of a rise in interest rates. -41-

85 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 C. CAPITAL ASSETS A summary of changes in capital assets for the year ended September 30,2013 is as follows: Beginning Ending Balance Additions Deletions Balance Governmental Activities Not being depreciated: Land $ 3,568,400 $ 691,663 $ 4,260,063 Construction-in-progress S ( ) Total not being depreciated ( ) Other capital assets: Land improvements 3,686,323 1,052,813 (2,620) 4,736,516 Buildings and improvements 11,377, ,645 11,859,615 Equipment 7,156, ,928 (406,876) 7,470,263 Infrastructure Total other capital assets ( ) Accumulated depreciation: Land improvements (1,304,064) (151,714) 913 (1,454,865) Buildings and improvements (4,861,513) (358,760) (5,220,273) Equipment (4,902,507) (567,479) 405,735 (5,064,251) Infrastructure ( ) ( ) ( ) Total accumulated depreciation ( ^ ( ) ( ) Net other capital assets ( ) (2.848) Capital assets, net S S 19?5 17H S (439 2B4) S Business-tyoe Activities Not being depreciated: Land $ 6,187,031 $ 6,187,031 Intangible asset 369, ,305 Construction-in-progress S ( ) Total not being depreciated ( ) Other capital assets: Buildings and equipment 6,132, ,689 ( ) 6,154,345 Distribution and collection systems (4.128) Total other capital assets ( ) Accumulated depreciation: Buildings and equipment (5,122,373) (386,410) 103,114 (5,405,669) Distribution and collection systems ( ) ( ) 4128 ( ) Total accumulated depreciation ( i ( ) ( ) Net other capital assets Capital assets, net $ 36.93B.756 S 5fi54fifi (792,232) $ 3(

86 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, C. CAPITAL ASSETS, CONTINUED Depreciation was charged to functions as follows: Governmental Activities: General government $ 30,252 Planning Library 84,636 Parks department 230,218 Police department 259,829 Fire department 105,020 Street department 2,540,369 Recreation department 9,102 Senior center 13,834 Water park 95,497 Information systems 40,801 Amphitheatre $ Business-type Activities: Water $ 1,136,692 Sewer 257,569 Golf courses 304,753 Business park $ Intangible Asset - The City entered into an agreement in 2008 for the development and operational rights of a well field to supply the City's municipal water distribution and treatment system. The value of these rights has been determined to be $369,305 at September 30, 2013 with no impairment. -43-

87 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30,2013 D. LONG-TERM OBLIGATIONS General obligation bonds are secured by the full faith and credit and taxing authority of the City. General obligation bonds are recorded in the government-wide statement of net position as liabilities related to governmental activities and will be retired by future property tax levies and resources accumulated in the debt service fund. Bonds recorded in the proprietary funds will be retired by revenue generated in these funds. Restricted assets of $649,591 and $167,513 are present in the Water Fund and Golf Fund, respectively, related to the future debt servicing requirements of the bonds payable of such funds. Changes in long-term obligations were as follows: Governmental activities: General obligation bonds payable Capital lease Obligation under MFO agreement Unamortized bond discount Unamortized bond premium Accrued compensated absences Beginning Balance $39,720,000 1,402,000 (35,711) 12, Additions $ 7,950, ,319 1,002,000 (25,820) Reductions $11,140,000 1,182,000 (3,464) 4, Ending Balance $ 36,530, ,319 1,222,000 (58,067) 8, Due within One Year $ 3,420,000 92, , : Net governmental activities $ $ $ $ $ Business-type activities: Bonds payable Capital lease Note payable Unamortized bond discount Sewer outfall liability Accrued compensated absences Net business-type activities $11,650, , ,807 (2,389) 887, $ 7,325, , $ 615,000 86,660 16,604 (637) 1,235, $ 18,360,000 91,032 91,203 (1,752) 460, $ $ $ $ $670,000 91,032 17, S

88 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 D. LONG-TERM OBLIGATIONS, CONTINUED Bonds Payable Specific changes in the individual governmental bond issues were as follows: DescriDtion Governmental Activities: Interest Rate Maturity Date Beginning Balance Additions Paid Ending Balance Highway Allocation, Series % 11/1/2013 $ 275,000 $ 135,000 $ 140,000 Public Safety Bonds, Series % 11/15/ , , ,000 Various Purpose Bonds, Series 2007D % 12/15/ ,510,000 8,380,000 2,130,000 Limited Obligation Highway Allocation, Series % 8/1/2023 1,840, ,000 1,705,000 Highway Allocation, Series % 5/1/2024 4,095, ,000 3,915,000 Flood Control Bonds, Series % 5/1/2024 1,410, ,000 1,310,000 Refunding Bonds, Series % 8/15/2021 5,550,000 1,225,000 4,325,000 Refunding Bonds, Series 2010B % 12/15/2030 7,385,000 90,000 7,295,000 Refunding Bonds, Series % 12/15/2027 4,300, ,000 3,850,000 Highway Allocation Refunding Bonds, Series % 12/15/2027 1,645,000 95,000 1,550,000 Refunding Bonds, Series % 12/15/2027 $ 7,950,000 7,950,000 Public Works Facility Bonds Series % 12/1/ TOTAL S S S S

89 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 D. LONG-TERM OBLIGATIONS, CONTINUED Specific changes in the individual business-type bond issues were as follows: Interest Maturity Beginning Description Rate Date Balance Additions Business-type Activitie s: Paid Ending Balance Golf Refunding Bonds, 6/7/2005 Golf Refunding Bonds, 12/15/2009 Water System Revenue Bonds, 6/15/ % 12/15/2018 $1,675, % 12/15/2023 2,260, % 12/15/2031 3,950,000 $ 1,675,000 $ 200,000 2,060, ,000 3,795,000 Water System Revenue Bonds Refunding 9/7/ % 6/15/2024 3,765,000 Water System Revenue Bonds 6/11/ % 12/15/ ,000 3,505,000 $ TOTAL $ S 7 32S.000 $ $ The future maturities of outstanding bond principal and interest are as follows: Governmental Business-tvoe Principal Interest Principal Interest 2014 $ 3,420,000 $ 893,401 $ 670,000 $ 582, ,055, , , , ,940, , , , ,135, , , , ,995, , , , ,775,000 2,237,170 5,315,000 1,993, ,955, ,180 4,640,000 1,101, $ S $ $

90 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 D. LONG-TERM OBLIGATIONS, CONTINUED On December 1, 2012, the City issued General Obligation Refunding Bonds, Series 2012 in the amount of $7,950,000 to refund General Obligation Various Purpose Bonds, Series 2007D originally issued by the City to pay off warrants originally issued by Sanitary Improvement District No The bonds have an interest rate of 0.30% % and annual maturity dates of December 15,2013 through December 15,2027. The Series 2012 Bonds are subject to optional redemption prior to maturity on and after the fifth anniversary of the date of issue. As a result of the refunding, the City decreased its total debt service over the next fifteen years by approximately $2,058,184, net of underwriting and transaction costs, and obtained an economic gain (difference between present values of the debt service payments on the old and new debt) of approximately $1,801,154. On June 11, 2013, the City issued Water System Revenue Bonds, Series 2013 in the amount of $7,325,000 to refund City of Papillion, Water System Revenue Bond Anticipation Notes Series The Bonds have an interest rate of % and annual maturity dates of December 15, 2014 through December 15, These bonds are subject to optional redemption prior to maturity on and after the fifth anniversary of the date of issue. Capital Leases In the governmental funds, the City entered into a capital lease agreement for the purchase of dump truck equipment. The lease requires annual payments of principal and interest through March 1, At September 30, 2013, the gross amount of assets recorded under capital leases is $378,744. In the proprietary funds, the City entered into two capital lease agreements; one for golf carts and one for golf maintenance equipment. The golf cart lease requires monthly payments of principal and interest during the six seasonal months through September 1, The golf maintenance equipment requires an annual payment in September through September 1, At September 30, 2013, the gross amount of assets recorded in the golf fund related to these leases is $422,471. The following are schedules by year of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of September 30,2013: Governmental Activities: Year ending September 30,: $ Total minimum lease payments 199,861 Less: Amount representing interest Present value of minimum lease payments $

91 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, D. LONG-TERM OBLIGATIONS, CONTINUED Business-type Activities: Year ending September 30,: 2014 $ 95,062 Less: Amount representing interest Present value of minimum lease payments $ Obligation Under MFO Agreement On September 15, 2008, the Papillion Rural Fire Protection District issued $5,000,000 of General Obligation Bonds, Series 2008 with interest rates of 2.3% to 4.0%. The proceeds of this bond issue were used to construct and equip a second fire station under an interlocal agreement with the City. Under the Mutual Finance Organization ("MFO") agreement the fire station and equipment are owned 60% by the Papillion Rural Fire Protection District and 40% by the City. The allocation was based on a valuation ratio of the two entities at the time of the agreement. The City has recorded its proportional share of the assets and debt ("Obligation under MFO agreement') under this agreement. On February 14, 2013, the Papillion Rural Fire Protection District issued $2,505,000 of General Obligation Refunding Bonds, Series 2013 with interest rates of 0.35% to 0.90%. As of September 30, 2013, the City's obligation under this agreement was $1,222,000. See Note L for additional information. The future maturities of outstanding obligation principal and interest are as follows: Principal Governmental Interest 2014 $ 242,000 $ 9, ,000 6, ,000 5, ,000 4, $1,222,000 $ Notes Payable Specific change in the individual proprietary note payable is as follows: Interest Maturity Beginning Ending Description Rate Date Balance Paid Balance Business-type Activities: Note payable 3.15% 7/1/2018 $ S S

92 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 D. LONG-TERM OBLIGATIONS, CONTINUED The future maturities of outstanding note payable principal and interest are as follows: Principal Business-type Interest 2014 $ 17,127 $ 2, ,667 2, ,223 1, ,797 1, S $ Bond Anticipation Notes Specific change in the anticipation notes are as follows: Interest Maturity Beginning Ending Description Rate Date Balance Paid Balance Business-type Activities: Series 2010 Water System Revenue Notes 1.65% 6/15/2013 $6,500,000 $6,500,000 $ TOTAL $6,500,000 $ f5.fi $ On June 15,2010, the City issued $6,500,000 of Water System Revenue Bond Anticipation Notes, Series 2010 with a rate of 1.65%, which interest is paid semi-annually and principal will be due on June 15,2013. At September 30,2013 these notes were paid in full with the issuance of revenue bonds. These notes were issued for the purpose of refinancing Series 2008 Water System Revenue Anticipation Notes and Series 2008B Water System Revenue Bond Anticipation Notes which were originally issued for various water improvements. Operating Leases The City has three non-cancelable operating leases in the proprietary funds, one for golf carts, expiring on October 1,2014, one for golf carts, expiring on November 15, 2014 and one for GPS systems for golf carts, expiring on May 30,2015. Lease payments for these operating leases for the year ended September 30,2013 were $46,419 based on the terms of the lease agreement. Future minimum lease payments for all leases are as follows: Year ending September 30.: Amount $46,419 11,

93 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 E. INTERFUND TRANSACTIONS Transfers between funds during the year were as follows: Transfer s: Purpose Funds Received Bv Funds Paid Bv Amount For the purchase of land and building adjacent to the recreation building Capital Projects General Fund $ 650,000 To provide funding for the operations of the Water Park Water Park General Fund 20,132 F. OUTFALL SEWER PROJECTS The City has entered into various separate agreements with Sanitary and Improvement Districts ("SID's") to construct outfall sewer lines. A separate restricted account is to be maintained for the accounting of monies contributed by the SID's to the City for this purpose. The City, according to these agreements, is to apply 50% -100% of the sewer connection fees toward reimbursement of the SID's for their contributions to the construction cost, plus construction cost interest. A liability of $460,037 has been recorded for those connection fees collected to date, less amounts paid back to SID's. Restricted assets are present in the Sewer Fund related to the future payments to SID's. G. RETIREMENT PLAN The City provides retirement benefits through defined contribution plans for police officers and firefighters. In a defined contribution plan, benefits depend solely on amounts contributed to the plan, plus investment earnings. Police officers participate in the plan from the date of employment. At September 30,2013, there were 42 plan members. State legislation requires that both the employee and the City contribute an amount equal to 6% of the employee's earnings each month. The City's contributions for each employee (and interest allocated to the employee's account) are vested 40% after the first four years of participation by an officer and vesting increases 10% each year thereafter until fully-vested. Employee contributions are fully-vested immediately. City contributions and interest forfeited by employees who leave employment before becoming fully-vested are used to reduce the City's current period contribution requirement. The plan is administrated by First National Bank of Omaha. The City's retirement plan contributions for police officers were calculated using the earnings amount for police officers of approximately $2,937,900. Contribution expense is $176,274 or 6% of covered payroll, for the year ended September 30,2013. Effective October 1,2013 the contribution rate will be 6.5% for all earnings paid after that date as provided for in Nebraska State Statutes. The plans' investments of $5,328,982 consist of mutual funds and are reported at fair value. Such mutual funds are traded on national exchanges and are valued at available, quoted market prices by the City's investment advisor -50-

94 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 G. RETIREMENT PLAN, CONTINUED Firefighters participate in the plan from the date of employment. At September 30, 2013, there were 41 plan members. State legislation requires that the employee contribute an amount equal to 6.5% and the City contribute an amount equal to 13% of the employee's earnings each month. The City's contributions for each employee (and interest allocated to the employee's account) are vested 40% after the first four years of participation by a firefighter and vesting increases 20% each year thereafter until fully-vested. Employee contributions are fully-vested immediately. City contributions and interest forfeited by employees who leave employment before becoming fully-vested are allocated to the Unallocated Employer account to meet plan liabilities. Excess forfeitures are used to pay expenses of administration and then to reduce the City's current period contribution requirement. The City is the administrator for the plan. The City's retirement plan contributions for firefighters were calculated using the earnings amount for firefighters of approximately $2,309,300. Contribution expense is $300,213 or 13% of covered payroll, for the year ended September 30,2013. The plan's investments of $3,858,207 consist of mutual funds and are reported at fair value. Such mutual funds are traded on national exchanges and are valued at available, quoted market prices by the City's investment advisor. There are no separate financial statements prepared for the above retirement plans. H. DEFERRED COMPENSATION PLAN The City offers all its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all full-time City employees who perform services for the City for which compensation is paid, permits them to defer a portion of their salary until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) held in trust for the exclusive benefits of the participants and their beneficiaries. The City is the administrator for the plan. The City is liable to pay benefits under this plan only to the extent of amounts that are available under the investment product as elected in the participation agreement by the participant, and the City shall not be responsible for the investment or performance results of such investment product. -51-

95 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30,2013 I. COMMITMENTS AND CONTINGENCIES The City is involved in lawsuits arising in the ordinary course of business, including claims for property damage and personal injury. In the opinion of the City management, based on the advice of the City attorney with respect to litigation, these matters are not expected to have a materially adverse effect on the City's financial position at September 30,2013. The City receives funds under various federal grant programs to be expended in accordance with the provisions of the grants. Compliance with grant provisions is subject to audit by various governmental agencies which may impose sanctions in the event of noncompliance. The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees and natural disasters. These risks are transferred to independent insurance carriers. City management believes adequate coverage exists for potential exposures as of September 30, The City did not pay any settlement amounts, which exceeded its insurance coverage for the years ending September 30,2012,2011 and The City has one open construction contract at September 30,2013. Remaining commitments on this contract is approximately $300,113 at September 30, K. LOTTERY The City instituted a keno-type lottery in 1993 for which the City received an average of approximately 6.5% of the gross handle in The lottery generated revenues of $343,194 for the City during the year ended September 30, These revenues are restricted for community betterment purposes by state law and, accordingly, are reported in a separate special revenue fund. -52-

96 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 L. INTERLOCAL AGREEMENTS An interlocal agreement to establish a county-wide communication center became operational in The system provides emergency response dispatching to the sheriff's department, three police departments and five fire/rescue departments from a centralized location at the Sarpy County Courthouse. Funding is provided by a county bond issue, payments from municipalities and E-911 telephone fees. This system is the only county-wide emergency communication system in the State of Nebraska. The City paid $168,278 to support this system during the year ended September 30,2013. An interlocal agreement to establish a Mutual Finance Organization ("MFC) between the City and the Papillion Rural Fire Protection District to provide fire and rescue services started October 1, Under the agreement the City created a Fire Department to provide fire suppression, fire and life safety codes enforcement, advanced life support, emergency medical service and EMS billing/collection services for both the City and Rural District. The City spent $5,237,538 to provide these services during the year ended September 30,2013. The City received $3,049,488 from the Papillion Rural Fire Protection District, and $489,390 from EMS billings to help support this function. The City is a party to an interlocal agreement providing general insurance and worker compensation insurance to various Nebraska cities. During the year, the City paid $741,933 to the League Association of Risk Management for insurance. The City has an interlocal agreement with Sarpy County to utilize the resources of the County's Information Service Department. During the year, the City paid the County $67,443 for this service. The City has an interlocal agreement with Sarpy County to better provide the public information regarding real estate, sewers, water and infrastructure through the use of a Geographic Information System. During the year, the City paid the County $14,414 for this service. The City also has a contract through October 31, 2013 for animal control with Sarpy County at a current rate of $4,349 per month. The rate for November 2013 through October 2014 will be $4,746 per month. The City has an interlocal agreement with the Papillion La Vista School District to provide a committed law enforcement presence at the schools. The City has an interlocal agreement with Metro Area Transit for bus services in the Papillion area. During the year, the City paid $5,532 to Metro Area transit for their services. The City is a party to an interlocal agreement providing K-9 officer and dog response whenever needed within the Omaha metropolitan area. The City is a party to an interlocal agreement through which the City receives funding for an officer participating in the Other Metro Drug Task Force. During the year, the City received $28,905 which was passed through the City of Omaha. -53-

97 CITY OF PAP1LLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 L. INTERLOCAL AGREEMENTS, CONTINUED The City has an interlocal agreement with Douglas County CIS to provide services to the Papillion Police Department. During the year, the City paid $2,613 to Douglas County CIS for these services. The City has an interlocal agreement with the City of Omaha for the treatment of wastewater. During the year, the City paid $1,596,051 to the City of Omaha for this service. The City has an interlocal agreement with Omaha Public Power District for street lighting. During the year, the City paid $487,293 to the Omaha Public Power District for this service. M. SUBSEQUENT EVENTS On December 20, 2013, the City issued General Obligation Refunding Bonds, Series 2013 in the amount of $1,360,000 to pay the costs of certain improvements within the Street and Paving District No of the City. The Bonds have an interest rate of 0.35% % and annual maturity dates of August 1, 2014 through August 1,2033. The Series 2013 Bonds are subject to optional redemption prior to maturity on and after the fifth anniversary of the date of issue. On December 20, 2013, the City issued Highway Allocation Fund Pledge Bonds, Series 2013 in the amount of $715,000 to pay the costs on construction of certain streets of the City. The Bonds have an interest rate of 0.35% % and annual maturity dates of August 1, 2014 through August 1, The Series 2013 Bonds are subject to optional redemption prior to maturity on and after the fifth anniversary of the date of issue. On October 10, 2013, a District Court judge approved the partial annexation which the City Council had approved by ordinance on April 16, 2013 whereby the City annexes the commercial portion of Sanitary and Improvement District No. 272, also known as Settlers Creek. Under the agreement the City is to pay the Sanitary and Improvement District No. 272 $1,600,000 for the City's pro-rata share of the outstanding debt in exchange for the infrastructure which becomes the City's assets. On October 1, 2013, the City entered into an interlocal cooperation agreement with the City of LaVista and the Papillion Rural Fire Protection District to create the Papillion Fire Protection Mutual Finance Organization which serves to allow the City of LaVista to join the City of Papillion and the Papillion Rural Fire Protection District as a participant in creating a single fire department and emergency medical service for the entire geographic area encompassed within the respective boundaries of the City of LaVista and the City of Papillion. The agreement will run from October 1, 2013 to September 30, 2033 with the option of successive, additional ten year options for extensions. N. CHANGE IN ACCOUNTING PRINCIPLE During the year ended September 30, 2013, the City implemented several Governmental Accounting Standards Board (GASB) statements. Below is detailed information of those standards that had a direct impact on the City's current financial statements. -54-

98 CITY OF PAPILLION, NEBRASKA NOTES TO FINANCIAL STATEMENTS, CONTINUED SEPTEMBER 30, 2013 N. CHANGE IN ACCOUNTING PRINCIPLE, CONTINUED Statement No. 61, The Financial Reporting Entity: Omnibus - An Amendment of GASB Statements No. 14 and No. 34, amends Statements No. 14 and No. 34 and modifies certain requirements for inclusion of component units in the financial reporting entity to ensure that the reporting entity includes only organization for which the elected officials are financially accountable or that are determined by the government to be misleading to exclude. Statement No. 61 also clarifies the criteria for blending component units and presenting business-type component units. This new guidance did not impact the City's current reporting of component units. Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. GASB Statement No. 62 improves financial reporting by contributing to the GASB's efforts to codify all sources of generally accepted accounting principles for state and local governments so that they derive from a single source. This requirement will bring the authoritative accounting and financial reporting literature together in one place. Therefore, the option to use subsequent FASB guidance has been removed. Statement No. 63, Reporting Deferred Outflows, Deferred Inflows and Net Position. GASB Statement No. 63 provides financial reporting guidance for deferred outflows of resources and deferred inflows of resources that were introduced and defined by Concepts Statement No. 4, Elements of Financial Statements. Previous financial reporting standards did not include guidance for reporting those financial statement elements, which are distinct from assets and liabilities. In addition, the previous Statement of Net Assets was renamed to a Statement of Financial Position. The City early implemented Statement No. 65, Items Previously Reported as Assets and Liabilities, which has an effective date of June 30, GASB Statement No. 65 establishes accounting and financial reporting standards that reclassifies, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. The result of implementation was a direct adjustment to net position, in the amount of $1,074,103 in governmental activities and $190,027 in businesstype activities to eliminate bond issue costs. -55-

99 REQUIRED SUPPLEMENTARY INFORMATION

100 CITY OF PAPILLION, NEBRASKA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL BUDGETARY BASIS - GENERAL FUND (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER Original Final Budaet Budaet Actual Variance REVENUES: Taxes - property $ 3,575,081 $ 3,575,081 $ 3,588,889 $ 13,808 Taxes - city sates 5,806,760 5,831,470 6,296, ,583 Occupational tax - telephone 415, , ,789 72,789 Occupational tax - natural gas 240, , ,234 (14,766) Occupational tax - other 17,058 17,058 15,725 (1.333) Building permits 2, ,183,750 2,239, Licenses, permits and fees 1,029,899 1,100,679 1,206, ,801 Rural fire district 3,009,129 3,027,322 3,049,488 22,166 Federal grants 1,000 78,859 79, Highway allocation funds 879, ,556 1,108, ,362 Street and highway 44,800 44,800 37,800 (7,000) Interest 42,000 42,000 8,489 (33,511) Miscellaneous 245, , ,860 (138,390) CATV 269, , ,679 (11,321) Elderly bus subsidy 30,000 41,490 21,713 (19.777) Total revenues 17,788, ,851, EXPENDITURES: General and administrative 883, , ,372 58,411 Building permits and inspections 458, , ,148 6,445 Planning 374, , ,579 53,393 Library 864, , ,858 30,123 Parks department 1,298,984 1,328,297 1,254,267 74,030 Police department 5,267,259 5,338,340 4,971, ,088 Fire department 5, ,373,593 5,237, ,055 Street department 1,841,598 1,870,473 1,741, ,704 Recreation department 596, , ,099 32,330 Senior center 153, , ,936 21,724 Information systems department 420, , , ,780 Amphitheatre 265, Total expenditures 17,772,810 18, OTHER FINANCING SOURCES (USES): Operating transfers out ( ) (750,616) ( ) Total other financing sources (uses) ( ) ( ) ( ) EXCESS (DEFICIT) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND OTHER FINANCING USES $ (655,066) $ ( ) $ $

101 CITY OF PAPILLION, NEBRASKA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL BUDGETARY BASIS - ALL SPECIAL REVENUE FUNDS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER Keno Lottery Fund Original Final Budqet Budaet Actual Variance REVENUES: Keno proceeds $ 330,000 $ 330,000 $ 330,603 $ 603 Interest income (167) Total revenues 330, EXPENDITURES: Community betterment 218, , ,700 Keno tax 105, , ,707 Miscellaneous 1,600 1,600 22,364 3,293 (20,764) Total expenditures 325, , , OTHER FINANCING SOURCES (USES): Operating transfer out (5,000) (5.000) Total other financing sources (uses) (5,000) (5,000) 5,000 EXCESS (DEFICIT) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND OTHER FINANCING USES Water Park Fund REVENUES: Charges for services Interest Income Total revenues EXPENDITURES: Payroll Contracted services Utilities Material and supplies Repair and maintenance Capital outlay Other Total expenditures OTHER FINANCING SOURCES (USES): Operating transfer in Total other financing sources (uses) EXCESS (DEFICIT) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND OTHER FINANCING USES $ $ $ ,509 $ 409,509 $ 372,135 $ (37,374) (35) 409, , ,200 (37.409) 241, , , ,166 16,194 12,280 3,914 21,000 21,000 24,977 (3,977) 72,250 82,250 68,235 14,015 51,500 51,500 34,781 16,719 12,000 2,000 2, ,500 6,389 3, , ,890 20,616 20, (484) 20,616 20,616 20,132 (484) J3) $_ J ) -57-

102 CITY OF PAPILLION, NEBRASKA NOTE TO REQUIRED SUPPLEMENTAL INFORMATION - BUDGETARY COMPARISON SCHEDULES SEPTEMBER 30,2013 A. BUDGETARY ACCOUNTING The City prepares its budgets on the cash basis of accounting. Accordingly, revenues are recognized when cash is received by the City and expenditures are recognized when cash is disbursed. This basis is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Under this method of accounting, all unexpended appropriations lapse at the end of the budget year. Amounts presented on the cash basis of accounting differ from those presented in accordance with GAAP due to the treatment of afforded accruals. A reconciliation for the year ended September 30, 2013, which discloses the nature and amount of the adjustments necessary to convert the actual GAAP data to the budgetary basis, is presented below: General Fund Keno Lottery Fund Water Park Fund Excess (deficit) of revenues and other financing sources over (under) expenditures and other financing uses (budgetary basis) $1,204,084 $ 206,665 $ (3) Adjustments: To adjust revenues for receivables and deferred revenue (37,766) To adjust expenditures for payables and accrued expenses ( ) Net changes in fund balance (GAAP basis) $ ( (7911 $ $(

103 l OTHER SUPPLEMENTARY INFORMATION

104 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES AND EXPENDITURES BUDGET AND ACTUAL BUDGETARY BASIS CAPITAL PROJECTS FUND (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 3201 Capital Projects Fund Original Final Budnet Budqet Actual Variance REVENUES: Taxes-property $ 139,481 $ 139,481 S 139,398 $ (83) Taxes - city sates 736, , ,936 Highway allocation funds 300, ,639 69,639 Federal grants 8,824,079 8,824, ,518 (8,537,561) Other intergovernmental 1,348,654 1,348,654 41,777 (1, ) Interest income Total revenues 11,348,860 11,324,150 1,551,043 (9, ) EXPENDITURES: General and administrative 660, , ,000 Park department 353, , ,536 15,878 Street department 21,495,757 21, ,152,639 17, Recreation 650, , , Total expenditures , ,039, OTHER FINANCING SOURCES (USES): Proceeds from bonds 8,000,000 8, (8,000,000) Operating transfer in 650, , (80.000) Total other financing sources 8,650, ( ) EXCESS (DEFICIT) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND OTHER FINANCING USES $ (3,159,927) $ (2,897,527) $ (2.838,795) $

105 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES AND EXPENDITURES BUDGET AND ACTUAL BUDGETARY BASIS DEBT SERVICE FUND (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER Debt Service Fund Original Budget Final Budnet Actual Variance REVENUES: Taxes - property Taxes-city sales Interest Total revenues $ 3,589,876 $ 3,610,976 $ 3,628,733 $ 17, , , , (4.227) EXPENDITURES: Bond principal retirement Interest on bonds Fees Total expenditures 3,449,580 3,449,580 1,122, , , ,191 3, ,072, ,580 (69,487) OTHER FINANCING SOURCES (USES): Operating transfer out Proceeds from the issuance of bonds Early extinguishment of debt Total other financing sources (uses) (1,800,000) 9,750,000 (7.900,680) ,950,000 ( ) ,800,000 (1,800,000) EXCESS (DEFICIT) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND OTHER FINANCING USES $ ( ) $ ( ) $ ( ) $

106 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS - GENERAL AND ADMINISTRATIVE FOR THE YEAR ENDED SEPTEMBER 30, 2013 (UNAUDITED) PERSONNEL SERVICES: Salaries Social security Deferred compensation Retirement plan Employee insurance Mayor and council salaries Total personnel services OPERATING EXPENDITURES: Maintenance Schools, conferences and dues Insurance and surety bonds Legal publications Election expense Telephone Electricity and natural gas Refuse collection Audit Metro area transit Fuel, Legal Office supplies Capital expenditures Books and periodicals Municipality league Youth council City promotion Codification Miscellaneous Consultant fees Engineering Total operating expenditures Original Final Budaet Budaet Actual Variance $ 439,524 $ 439,524 $ 434,922 $ 4,602 39,397 39,397 37,519 1,878 32,809 32,809 31,769 1,040 6,566 6,666 6, ,471 72,892 71,151 1, , ,200 6,200 6, ,000 18,000 19,497 (1,497) 8,449 4,828 9,797 (4,969) 4,000 4,000 2,453 1,547 1,500 1,500 2,517 (1.017) 4,000 4,000 2, ,300 21,300 11,231 10,069 1,000 1, ,000 18,000 15,302 2,698 7,000 7,000 7,137 (137) 1,000 1, ,000 20,000 14,428 5,572 16,600 23,550 14,518 9,032 4,414 39,564 20,199 19,365 3,000 3,000 3,578 (578) 12,500 12,500 13,303 (803) 2,000 2,000 1, ,000 40,000 44,103 (4,103) 2,500 2,500 1, ,000 5,000 7,846 (2,846) 30,000 25,000 16,960 8, , Total $ $ 913,783 $ $

107 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS - BUILDING PERMITS AND INSPECTIONS FOR THE YEAR ENDED SEPTEMBER 30, 2013 (UNAUDITED ) Original Final Budget Budaet Actual Variance PERSONNEL SERVICES: Salaries $ 280,419 $ 289,708 $ 291,841 $ (2.133) Social security 23,154 23,865 22,097 1,768 Deferred compensation 22,254 22,254 20,676 1,578 Retirement plan 2,914 2,914 2, Employee insurance 65,879 76,198 75, Uniform allowance , Total personnel services , , OPERATING EXPENDITURES: Maintenance 1,200 1,200 1, School, conferences and dues 8,000 8,000 3,901 4,099 Insurance 20,802 7,283 6, Legal publications Telephone 5,000 5,000 5,070 (70) Fuel 6,500 6,500 6, Office supplies 5,500 5,500 4,145 1,355 Equipment 2,790 (2,790) Books and periodicals 2, , Miscellaneous and parts/supplies 9,000 9,000 9,681 (681) Consulting fees 1,221 1,221 1,221 Code enforcement clean-up ,000 2, Total operating expenditures ,904 45, Total $ $ 465,593 $ 459,148 $

108 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS - PLANNING FOR THE YEAR ENDED SEPTEMBER 30,2013 (UNAUDITED) Original Final Budget Budaet Actual Variance PERSONNEL SERVICES: Salaries $ 194,428 $ 194,428 $ 194,418 $ 10 Social security 16,064 16,064 14,429 1,635 Deferred compensation 15,554 15,554 15, Retirement plan 2,393 2,393 2, Employee insurance 36,287 36,435 35, Uniform allowance Total personnel services 265, ,578 OPERATING EXPENDITURES: School, conferences and dues 9,200 9,200 9,868 (668) Insurance 4,711 3,563 3, Legal publications 3,300 3,300 1,484 1,816 Telephone 1,150 1, Office supplies 6,250 6,250 2,257 3,993 Books and periodicals 1,250 1, Miscellaneous and parts/supplies ,750 5,576 (826) GIS with Sarpy County 18,000 18,000 14,414 3,586 Consulting fees 36,166 35, ,364 Engineering fees 5,000 5, ,745 HOA Grant expenditures 10,000 10,000 4, Capital outlay Total operating expenditures 109, , Total $ 374,803 $ 372,972 $ 319,579 $ 53,

109 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS - LIBRARY FOR THE YEAR ENDED SEPTEMBER 30, 2013 (UNAUDITED) Original Final Budaet Budaet Actual Variance PERSONNEL SERVICES: Salaries $ 441,300 $ 442,300 $ 424,648 $ 17,652 Social security 35,554 35,554 33,415 2,139 Deferred compensation 23,462 23,462 22,274 1,188 Retirement plan 6,282 6,282 6, Employee insurance 57,283 58,370 57, Total personnel services , OPERATING EXPENDITURES; Maintenance 31,500 31,500 38,497 (6,997) Custodial 20,000 20,000 24,795 (4,795) Schools, conferences and dues 6,200 6,200 10,231 (4,031) Insurance 13,862 12,775 10,307 2,468 Legal publications Advertising 2,000 2,000 3,350 (1,350) Telephone 5,500 5, Electricity and natural gas 51,000 51,000 35,900 15,100 Internet connection 3,600 3,600 3, Refuse collection (73) Computer operations 16,000 16,000 19,687 (3.687) Supplies 24,500 24,500 22,685 1,815 Database system 10,000 10,000 9, Printing Books 75,000 75,000 71,677 3,323 Periodicals 6,300 6,300 5, Audio visual 20,000 20,000 19, Grant fund expenditure 3,000 5,648 2,334 3,314 Miscellaneous ,333 (1.833) Consulting 10, , Total operating expenditures 300, , , Total $ 864,333 $ 867,981 $ 837,858 $ 30,

110 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS - PARKS DEPARTMENT Original Final Budaet Budaet Actual Variance PERSONNEL SERVICES: Salaries $ 579,060 $ 579,060 $ 571,399 $ 7,661 Social security 46,959 46,959 44,297 2,662 Deferred compensation 34,781 34,781 31,249 3,532 Retirement plan 10,127 10,127 9, Employee insurance 131, , ,771 11,241 Uniform allowance 3, ,535 (1,035) Total personnel services , ,603 OPERATING EXPENDITURES: Maintenance 67,469 83,382 82, Schools, conferences and dues 5,425 5,425 3,383 2,042 Insurance 53,397 35,651 35, Telephone 5,700 5,700 3,142 2,558 Electricity and natural gas 66,600 66,600 76,037 (9,437) Refuse collection 7,600 7,600 7,831 (231) Fuel 29,500 29,500 28, Cleaning supplies 3,500 3,500 1,331 2,169 Equipment 51,210 36,206 15,004 Recreational supplies Irrigation supplies 1,800 1,800 2,478 (678) Tools 1,200 1,200 1,577 (377) Gravel, sand and rock Seed and fertilizer 19,200 19,200 17,696 1,504 Landscaping 33,450 43,625 39,316 4,309 Chemicals 17,000 17,000 9,892 7,108 Paint and field marking 11,200 11,200 9,914 1,286 Electrical and plumbing 2,500 2,500 4,421 (1,921) Papillion days 1,900 1,900 2,908 (1,008) Winter Wounderland 8,000 11,015 16,646 (5,631) Miscellaneous 12,050 12,050 13,658 (1,608) Signs 2,000 2,000 2,275 (275) Capital expenditures ,159 Total operating expenditures 493, , Total $ 1,298,984 $ $ $

111 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS POLICE DEPARTMENT FOR THE YEAR ENDED SEPTEMBER 30,2013 (UNAUDITED ) PERSONNEL SERVICES: Salaries Social security Retirement plan Employee insurance Uniform purchases Tuition assistance Total personnel services OPERATING EXPENDITURES: Maintenance Schools, conferences and dues Insurance Telephone Electricity Refuse collection Fuel Communications Office supplies and postage Supplies and equipment Prevention programs Photography Books and periodicals K9 operations Additional K9 Civil service testing Human officer Ammunition/qualified Douglas County crime lab Miscellaneous Accreditation Federal forfeiture Capital outlay Total operating expenditures Total Original Final Budaet Budaet Actual Variance $ 3,181,720 $ 3,242,386 $ 3,115,425 $ 126, , , ,344 14, , ,395 26, , , ,433 11,216 24,500 25,500 21,745 3, , , , , ,509 75,600 83,365 69,669 13,696 23,500 23,500 13,474 10, ,751 82,622 75,753 7,069 10,000 10,000 8,023 1,977 36,000 36,000 31,154 4, ,000 85,000 77,986 7,014 80,000 80,000 84,139 (4,139) 14,500 14,500 12,443 2,057 35,000 35,000 25,462 9,538 23,311 24,961 13,082 11,879 2,000 2,000 2,000 2,000 2, ,137 5,000 5,000 1,672 3,328 9,540 9,540 9,540 5,000 5,000 5,617 (617) 53,000 53,000 52, ,000 16,000 13,935 2,065 4,500 4,500 2,789 1,711 9,000 9,000 5,645 3,355 7,000 7,000 7,591 (591) 1,318 1,318 1, , , , , ,579 $ $ 5, $ 4,971,252 $

112 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS - FIRE DEPARTMENT FOR THE YEAR ENDED SEPTEMBER 30,2013 (UNAUDITED) PERSONNEL SERVICES: Salaries Social security Retirement plan Employee insurance Uniform allowance Tuition assistance Total personnel services OPERATING EXPENDITURES: Maintenance MFO donations expenditures Schools, conferences and dues Insurance Telephone Electricity and natural gas Refuse collection Fuel Communications Office supplies and postage Supplies and equipment Prevention programs Books and periodicals Civil service testing Miscellaneous Legal Capital expenditures Payment to rural fire district LOSAP Software Total operating expenditures Total Original Final Budaet Budaet Actual Variance $ 2,848,976 $ 2,848,976 $ 2,789,347 $ 59,629 47,266 47,266 44,356 2, , , ,487 16, , , ,763 20,302 28,525 28,525 10,553 17,972 7,260 (7.260) 3, ,145,739 4,035, ,225 63,225 80,072 (16,847) 33,000 33,000 1,285 31,715 28,280 28,280 27, ,204 40,251 40, ,710 6,710 6,959 (249) 38,610 38,610 28,440 10,170 2,350 2,350 2, ,500 46,500 38,552 7,948 80,000 80,000 84,139 (4,139) 11,845 11,845 12,227 (382) 107, ,505 76,994 30,511 11,675 29,868 28,162 1,706 1,035 1,035 1,357 (322) 19,655 19,655 59,622 (39,967) 988 (988) 2,500 2,500 2,500 23,000 23,000 19,534 3, , , , ,000 36,000 36,000 6, <197) 1,423,614 1,227,854 1, $ $ $ $

113 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS - STREET DEPARTMENT FOR THE YEAR ENDED SEPTEMBER 30,2013 (UNAUDITED ) Original Final PERSONNEL SERVICES: Budget Budget Actual Variance Salaries $ 473,298 $ 473,298 $ 455,570 $ 17,728 Social security 38,871 38,871 35,499 3,372 Deferred compensation 34,824 34,824 32,548 2,276 Retirement plan 10,049 10,049 9, Employee insurance 113, , ,435 5,764 Uniform allowance 8,700 8, Total personnel sen/ices 679, , OPERATING EXPENDITURES: Maintenance 107, ,375 80,368 56,007 Schools, conferences and dues 6,225 6,225 2,980 3,245 Insurance 87,917 54,652 41,909 12,743 Telephone Electricity and natural gas 44,810 44,810 40,734 4,076 Refuse collection 18,000 18,000 11,127 6,873 Fuel 75,900 75,900 77,400 (1,500) Tools 3,000 3,000 2, Legal publications Office supplies 3,000 3,000 1,683 1,317 Shop parts 5,000 5,000 5,887 (887) Asphalt, gravel and cement 80,000 80,000 74,118 5,882 Seed, fertilizer, chemicals and sod 21,000 21,000 23,089 (2,089) Plumbing and electrical 15,000 15,000 13,331 1,669 Salt 65,000 65,000 53,274 11,726 Miscellaneous supplies and parts 15,000 15,000 21,146 (6,146) Signs 20,000 20,000 25,515 (5,515) Street lighting 487, , , Street lining 23,000 23,000 16,490 6,510 Miscellaneous 6,200 6,200 5, Capital outlay Total operating expenditures Total $ $ $ 1,741,769 $

114 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS - RECREATION DEPARTMENT FOR THE YEAR ENDED SEPTEMBER 30,2013 (UNAUDITED ) Original Final Budget Budaet Actual Variance 'ERSONNEL SERVICES: Salaries $ 250,965 $ $ 244,027 $ 6,938 Social security 20,363 20,363 19,133 1,230 Deferred compensation 15,261 15,261 14,229 1,032 Retirement plan 4,662 4,662 4, Employee insurance 42,349 42,349 37,298 5,051 Uniforms 2, (245) Total personnel services ,064 DPERATING EXPENDITURES: Maintenance ,000 15,625 8,375 Schools, conferences and dues 4,750 4,750 5,596 (846) Insurance 10,716 10,716 9,417 1,299 Telephone 6,100 6,100 6, Electricity and natural gas 6,750 6,750 5,660 1,090 Printing 8,500 8,500 5,719 2,781 Seasonal programs 94,750 94,750 93, Special events 71,000 86,813 87,730 (917) Community arts contracts 4,000 4,000 1,350 2,650 Fuel 3,000 3,000 4,068 (1,068) Office supplies 13,000 23,000 18,757 4,243 Postage 7,000 7, ,218 Books and periodicals Miscellaneous 3,750 3,750 8,098 (4,348) Consulting 3, ,779 Total operating expenditures ,266 Total $ $ $ $

115 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS - SENIOR CENTER FOR THE YEAR ENDED SEPTEMBER 30,2013 (UNAUDITED) Original Budget PERSONNEL SERVICES: Salaries $ 92, 8io Social security Deferred compensation 1680 Retirement plan *426 Employee insurance 4,635 Uniforms I]OQO Total personnel services OPERATING EXPENDITURES: Maintenance 10,800 Insurance g-fss Telephone 2,700 Electricity and natural gas 4,525 Refuse collection 700 Fuel 12,000 Office supplies 5,500 Miscellaneous 500 Total operating expenditures 45,881 Tota! $ Final Budaet Actual Variance $ 92,810 $ 82,910 $ 9,900 7,228 6, ,680 1, ,574 3,989 1, ,800 5,402 5,398 8,217 5,141 3,076 2,700 2, ,525 4, ,000 13,419 (1.419) 5,500 3,562 1, (1.210) 44, $ $ $ 21,724 i

116 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS - INFORMATION SYSTEMS DEPARTMENT FOR THE YEAR ENDED SEPTEMBER 30,2013 (UNAUDITED ) OPERATING EXPENDITURES: Consulting fees Contracted services Software and license agreements Small office equipment Internet connection Computer maintenance Capital outlay Original $ 93,734 $ 16, , , ,633 Final Budget Actual Variance 93,734 $ 56,942 $ 35,780 10,516 16,033 20, , , ,052 73,151 54,218 86,853 13,839 Total $ 420,776 $ 420,776 $ 289,996 $ 36,792 25,264 (4,940) (17,765) (518) 18,

117 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF GENERAL FUND CASH EXPENDITURES BUDGET AND ACTUAL - BUDGETARY BASIS AMPHITHEATRE FOR THE YEAR ENDED SEPTEMBER 30,2013 (UNAUDITED) Original Final Budget Budoat Actual Variance PERSONNEL SERVICES: Salaries $ 82,531 $ 82,531 $ 90,148 $ (7.617) Social security 6,862 6,862 7,175 (313) Deferred compensation 4,272 4,272 4,306 (34) Retirement plan 1,047 1,047 1, Employee insurance ,117 3,497 1,620 Uniforms ,500 1, Total personnel services 101, (5.986) OPERATING EXPENDITURES: Maintenance Insurance Telephone Electricity Refuse collection Community events Concessions School and travel Advertising Licenses and fees Office supplies and postage Small equipment Miscellaneous Total operating expenditures 8,000 8,000 3,601 4,399 8,166 8,116 4,769 3,347 2,000 2,000 2,102 (102) 6,000 6,000 5, ,500 1,500 1, , ,012 93,534 26,478 26,000 26,000 31,066 (5,066) 1,000 1,000 1,000 25,000 25,000 21,165 3,835 2,500 2,500 1, ,550 5,550 1,975 3,575 1,500 10,700 10, , , , Total $ S $ $

118 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION _ SCHEDULE OF BOND PRINCIPAL AND INTEREST REQUIREMENTS BY FISCAL YEAR OF MATURITY GOVERNMENTAL FUNDS SEPTEMBER Highway Refunding Series Refunding Allocation Refunding 201? 2012 MFC Bonds $ $ 480,000 S 90,000 $ 415,000 Interest 125,140 $ 49,117 57,865 34, , Bonds 60, ,000 95, ,000 Interest , , Bonds 65, ,000 Interest 124, ,880 32, , Bonds , ,000 Interest 124,290 48,668 45,270 31, , Bonds , ,000 95, Interest ,693 37,164 30, Bonds 650, , , Interest 116, ,755 28, Bonds 655, , Interest 109,955 44, , , Bonds 665, , , , ,000 Interest 102,196 43, , , Bonds 675, , Interest , Bonds 695, , ,000 Interest 82,519 39,010 15,189 19,637 99, Bonds 705, , , Interest 70, ,305 16, Bonds 730, ,000 60, , ,000 Interest 56,795 33,860 6,825 13,510 64, Bonds 745, ,000 60, , ,000 Interest , ,021 44, Bonds 765, , ,000 Interest 25, ,230 31, Bonds 790, , , ,000 Interest 8,887 24, ,125 25, Bonds 130, ,000 Interest , Bonds ,000 Interest 16,155 11, Bonds 135, ,000 Interest 11,847 3, Bonds 140,000 Interest 7, Bonds 145,000 Interest Total Bonds 7, , , , , Total Interest Total Payments S S S $ S Refunding Flood Control Highway Limited Htahwav $ $ S 140, ,833 83, , , , , ,268 77, , , , ,078 71, , , , , ,978 64, ,000 26,020 34, , , , , , , ,293 40, , , , ,770 69, , , , ,025 21, , ,693 37,420 11, , , , , ,915, ,705, $ $ S $

119 CITY OF PAPILLION, NEBRASKA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF BOND PRINCIPAL AND INTEREST REQUIREMENTS BY FISCAL YEAR OF MATURITY PROPRIETARY FUNDS SEPTEMBER 30,2013 Water Water System Water System Revenue System Golf Golf Revenue Refunding Revenue r Refunding Refunding Fiscal Bonds Bonds Bonds Bonds Bonds Year 06/11/13 09/07/11 06/15/11 12/03/09 06/07/0S ZSM 2014 Bonds $ 265,000 $ 155,000 $ 250,000 $ Interest $ 217,007 86, ,936 $ , , Bonds 235, , , , Interest 214,094 84, ,192 82,598 53, Bonds , , , Interest 212,845 80, ,905 82,598 42, , Bonds 185, , , , Interest 209,350 76, ,105 82,598 31, , Bonds 130, , , , Interest 204,625 71, ,646 82,598 19, , Bonds 195, , , , ,000 1,155,000 Interest 199,750 65, , , , Bonds 200, , , ,000 1,005,000 Interest 193,825 57, ,449 68, , Bonds 210, , , ,000 1,035,000 Interest 187,675 49, ,900 55, , Bonds 210, , , ,000 1, Interest 181,375 39, ,960 40, , Bonds 155, , , ,000 1,045,000 Interest 175,900 29,495 95,527 24, Bonds 220, , , ,000 1,500,000 Interest 170,275 12,070 88,405 8, , Bonds 470, , ,000 Interest 161,100 80, Bonds 580, , ,000 Interest 147,395 72, Bonds 600, , ,000 Interest 131,015 63, , Bonds 620, , ,000 Interest 113,165 53, , Bonds 635, , ,000 Interest 94,023 42, , Bonds 655, , ,000 Interest 72,881 31, , Bonds 680, , ,000 Interest 49,852 18,949 68, Bonds 1,105, ,000 Interest ,455 Total Bonds 7, ,505,000 3,795,000 2,060,000 1,675,000 18, Total Interest 2.955, , Total Payments $ $ $ 5,431,193 $ $ $ 24,512,

120 CITY OF PAPILLION, NEBRASKA COMBINING SCHEDULE OF NET POSITION EMPLOYEE RETIREMENT FUNDS - FIDUCIARY FUNDS SEPTEMBER 30,201 Combined Deferred Police Fire Pension Trust Plan Plan Plan Funds ASSETS: Investments, mutual funds $ 12,453,446 $ $ $ ,635 NET POSITION: Held in trust for pension benefits and other purposes $ ,446 $ $ $

121 CITY OF PAPILLION, NEBRASKA COMBINING SCHEDULE OF CHANGES IN NET POSITION - EMPLOYEE RETIREMENT FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 201 Deferred Plan Police Plan Fire Plan Combined Pension Trust Funds ADDITIONS: Contributions: Employer Plan members Rollovers $ 1,126, ,029 $ 176,274 $ 176, , ,106 $ 476,487 1,452, Total contributions 1,328, , ,319 2, Investment earnings 1.607, , , Total additions 2, , ,034 5, DEDUCTIONS: Loss on investments Distributions Plan expenses 46, ,515 1, , ,114 48, , Total deductions 265, , ,494 1, CHANGE IN OBLIGATIONS 2,670, , ,540 4,061,289 NET POSITION, beginning of year 9.783,396 4,641, , NET POSITION, end of year $ $ $ $ ,

122 i STATISTICAL SECTION

123 CITY OF PAPILLION, NEBRASKA STATISTICAL SECTION (Unaudited) This part of the City of Papillion's comprehensive annual financial report presents detailed information as a context for understanding the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. Contents Tables Financial Trends These tables contain trend information that may assist the reader in assessing how the City's financial performance and well-being has changed over time. 1-4 Revenue Capacity These tables contain information that may assist the reader in assessing the City's most significant local revenue sources, sales tax and property tax Debt Capacity These tables present information that may assist the reader in analyzing the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future Demographic and Economic Information These tables offer demographic and economic indicators to assist the reader in understanding the environment within which the government's financial activities take place Operating Information These tables contain service and infrastructure indicators that can assist the reader in understanding how the information in the City's financial statements relates to the services the City provides and the activities it performs Source: Unless otherwise noted the information in these tables is derived from the annual financial report for the relevant year.

124 CITY OF PAPILLION, NEBRASKA NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (sccrua! basis of accounting) Fiscal Year Governmental Activities investment fn capital assets (net of related debt} Restricted Unrestricted S 25.8S , $ 20,732,642 10,705, S , $ , $ , $ 21,205,114 4,776, $ 21,341,756 1, S , Total Governmental Activities Net Position , Business-Typo Activities Investment in capital assets (net of related debt) Restricted Un rest ricted $ 18, , $ ,034 S ,335 1,045,153 $ , , , S 20,681, ,100 ( ) 20, , ,495,111 2, S 13,339,978 $ 3.073, ,534 Total Business-Type Activities Net Position , Primary Government investment in capita] assets (net of related debt) Re stricted Unrestricted , ,797, S1.04S $ , S S $ ,566 $ 41,217,613 $ S $ ,516,450 6, Total Primary Government Activities Net Position $ $ $ S S $ $ S S $ Note: As of 10/01/2004, Keno Lottery and Water Park were recl as sified from non-major opriet ary funds to special revenue funds In the governmental funds section -77-

125 Expenses Governmental ties activi General government BuiMng permits end inspections Planning LftMTBfy Parks department Police department Fire department Street department Recreation department Senior center Water park Information services Amphitheatre Community-betterment Financing fees Interest expense Total governmental activities expenses Business-type activities Water Sewer Golf course Business park Total business-type activities expenses Totaf primary go ve rnme nt en»enses CITY OF PAPILLION, NEBRASKA CHANGE IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) TABU 2 Fiscal Year $ S 1,069,045 $ S 1.022,958 $ 984,939 $ $ $ 522,970 S 509,635 $ 1,704, , , , , , , , , , , , , , ,024 1, , , , , , , , ,291 2,839, , ,999,167 4,727,101 4,595,961 3,633, , , ,722 1, ,781 4, , ,795,823 4, , , , , , , , , , ,590 90,298 96,560 79, , , , , , , , ,289 42,156 72, , , , , , , , , , , , , , ,740 2, , ,896,990 2, ,536, , ,632, ,479, , , ,347,436 2, , ,673, , , S S S S $ S S $ S Program Revenues Governmen tal activities General government $ 165,549 S 94,732 S 14,800 $ $ $ $ 362,819 $ 359,082 Building permits and inspections 2, , , ,562 1,387,568 1,423,190 Planning , Library Parks department , Fire department 606, , , Street department Recreation department 281, , ,958 Water park 372, , Senior center 4,667 5, , Amphitheatre , Community betterment , , , , , ,357 Operating Grants and Contributions General government 153, , , , Library , , Parks department , , , , , ,217 PoTce department , ,679 1,857, , ,082,500 Fire department Street department 1,564,300 1,513,620 1, , , , ,234 Recreation department 4,183 Senior center 32,625 Amphitheatre ,250 17,250 35, , ,139 16, $ , , , , ,507 $ 292, , , , , ,388 26,

126 (Continued) Capital Grants and Contributions General government Parks department Street department ity Commun betterme nt Total governmental activities program revenues , , , Hseal Year ,025 69, ,984 1, , , , , Business-type activities Charges for Services Water Sewer Gotf course Business park Operating Grants and Contributions Water Capital Grants and Contributions Water Sewer Golf course Total business-type activities program revenues Tola! primary government program revenues General Revenues and Other Changes In Net Position Governments! activities Taxes Property Special assessments City sales Other taxes Interest income Net proceeds (loss) from annexations Miscellaneous Transfers Total governmental activities general revenues and other changes Business-type of activities Interest Net proceeds (loss) from annexations Miscellaneous Loss on asset disposal Land sales Transfers Total business-type activities general revenues and other changes Total primary governmental generaf revenues and other changes Change in Net Position Governmental activities Business-type activities Total primary government change in net position 4, , , $ S $ $ 6, (2.848) s 6.754, , $ 5.603, , ( ) s $ $ $ $ ( ) $ $ $ ,288 2, ,478,839 2, ,777,529 2, ,521,131 1,882,205 1,798, ,630, , ,018 2,429,508 2,155,264 2, , , , ,529 2, , $ S $ $ S ,123 S $ 5,859,710 $ 5,794,492 $ 5.582,320 $ 5.357,080 S 4.815,525 $ $ 4.910, , , , ,884 2,986, , , , (545,832) ( ) , , ( ) (4.656) (137) ( ) , ,579 53, , ,220 81,897 42, ,413 1,122,094 1,828, (46) , ,656 (32.633) (80.836) (26.173) J 15,107,233 s S $ s $ $ s (482,225) $ $ $ 1, $ 2, $ 2,467, f ) ( ) ,811 s (27.014) $ (22.522) s $ $ $ S

127 CITY OF PAPILLION, NEBRASKA TABLE 3 Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year General Fund Restricted for fire protection Committed for park improvements Assigned to subsequent years' budget Unassorted Unreserved Total General Fund $ 51, ,303 68,335 7,288,282 $ 49, , ,598,805 49,214 82,824 95,717 5,236,718 4,820,685 $ 7, $ 6,476,778 $ 5.464,473 $ 4.820,685 $ $ 4,712,421 $ $ 4, $ $ 4,739,458 $ $ $ $ $ $ 6.318,096 All Other Governmental Funds Restricted for debt service Restricted for community betterment Assigned to capital projects Assigned to water park Reserved Reserved for capital projects Reserved for debt service Reserved for community betterment Unreserved, reported in: Special revenue funds Total All Other Governmental Funds $ 3,647, ,187 2,795,356 S 3,983, ,991 4,714,299 96,577 $ 4,362, ,472 3,933,109 53, ,807 3,812, ,037 $ 650,697 3,298, ,679 (5,024,250) $ 110,916 2,410, ,454 2,485, ,773 $ 314,087 1,253, $ 658,452 $ 1,074,785 1,680,315 1, ,094, ,014 53,174 39, ,244 (2.434) (2,723) (17,882) $ S $ S $ S ( ) $ $ $ $ Note 1: The City adopted GASB Statement No. 54 for the year ended 9/30/2011. This resulted in different components of the fund balance as defined by the new standard. Note 2: As of 10/01/2004, Keno Lottery and Water Park were re-classified from non-major proprietary funds to special revenue funds in the governmental funds section. -80-

128 CITY OF PAPILUON, NEBRASKA TABLE 4 Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year REVENUES: General Federal grafts $ $ $ S 1,910,845 $ $ $ $ $ $ Taxes property 6,779,779 6, ,096, , , , ,032,144 4,910,404 Taxes-city tales , ,459,962 6,357,380 5, ,120, , ,380 2,751,886 Special assessments 565, , , , Occupational tax - natural gas , , , , Occupational tax-telephone , , , , Occupations) tax other 15,725 18, , ,795 9,770 11,025 3,932 Occupational tax - cabte television , , , Building permits 2, , , , , ,423,190 1, ,795 Licenses, permits and fees 1,344,698 1, , , , , , Rural fire district 2, , ,234, ,147 1, ,228, , , State aid , , , , , ,431 Highway allocation funds 1,125,473 1,067,049 1,053,584 1,041, , , ,378 1,066,706 1,039,038 Street and highway 37, , ,734 26,734 Interest 12, ,483 71, , , , , , ,284 Schram Road Contributions 17, , , ,049 Miscellaneous 317, , , , , , ,867 52,334 Elderly bus subsidy , , MFO grant Capital projects 369, , , , , ,349 Keno proceeds 343, , , , , , , , ,957 Water park , , Total revenues , , , , EXPENDITURES: Current: General and administrative , , ,320 8u3ding permits and inspections , , , , , , , ,716 Planning 317, , , , , , , , ,178 Library , , , , , , , , Parks department 1,293, , , , ,071, , , ,417 Po&ea department 4.991,987 4,734, ,325 4,399*900 4,035,468 4, ,605,105 3,210,519 2,777,759 2,541,816 Fire department 5.271, , ,569, , ,065 1, Street department 1,746, , ,353 1,599,873 1,483,826 1,377,428 1,190,931 1,071, Recreation department 610, , , , , , , , ,968 Senior center 139, , , , , ,786 89,202 74, ,112 Information systems department 273, , , , ,769 87, , Amphitheatre , , , ,247 20,819 Community betterment , , , , , , Papio bay 393, , , , , , , ,015 (Continued) <81-

129 Oobtservica: Bond principal retirement Warrants paid (merest on bonds Interest on warrants Capita] lease principal and interest Bond/BAN issue costs Bond discount Fiscal Year S ,130, , ,729, ,336 61, ,529 13,117 Fees , , , ,810 Capital Outlay 4.831,062 1, , ,991, ,171 7, , , ,155 2,544,179 Total expenditures 26.S05.93f 23,558,215 23,521, ,313 37, ,135, ,095, EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (1, ) ( ) (1,521,905) 82,540 (2.019,775) (17,176,563) (6,936,528) ( ) (1,718,650) (1,388,316) 3,055, , ,784 2, ,033 2, ,051 2,385, ,462 OTHER FINANCING SOURCES (USES): Proceods from capital teases Land sates 800,076 Payments to refunding bond escrow agent (7, ) (6,675,000) Proceeds from bond issuance ,000 (2,745,000) 7, ,901 (7, ) ,155,000 8, Bond issuance cost Operating transfers out Operating transfers in ( ) (28.000) (1.742,079) 1, ( ) 777,091 (814,218) ( ) ( ) ) (3,017,012) 2.832,557 ( ) 1.900,674 (418,808) 444,981 Total other financing sources (usee) , ,675 ( ) , (184,455) ,916 SPECIAL ITEMS: Net assets assumed from annexation NET CHANGES IN FUND BALANCES $ ( ) $ 1.326,146 $ $ 491,127 S $ ( ) $ $ ( ) S (1.637,815) $ ( ) DeM Service as a percentage of Noncapital Expenditures 20% 20% 20% 23% 22% 20% 16% 26% 2d% 27% (9.023,473) 9.001,

130 CITY OF PAPILLION, NEBRASKA TOTAL CITY TAXABLE SALES LAST TEN FISCAL YEARS TABLE 5 Fiscal Year Ended Total City Taxable Total Direct September 30, Sales Tax Rate 2013 $ 546,818, % ,489, % ,665, % ,522, % ,035, % ,482, % ,395, % ,168, % ,904, % ,580, % Source: Nebraska Department of Revenue -83-

131 CITY OF PAPILLION, NEBRASKA TABLE 6 SALES TAX RATES DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS Fiscal Year Direct City of Papillion Overlapping (1) State of Nebraska Total Tax Rate % % % % % % % % % % 5.50% 7.00% 5.50% 7.00% 5.50% 7.00% 5.50% 7.00% 5.50% 7.00% 5.50% 7.00% 5.50% 7.00% 5.50% 7.00% 5.50% 7.00% 5.50% 7.00% Note: (1) Overlapping rates are those of other governments that apply to consumers within the City of Papillion. -84-

132 CITY OF PAPILLION, NEBRASKA NET TAXABLE SALES BY BUSINESS CLASSIFICATION CURRENT YEAR AND TEN YEARS AGO TABLE 7 Business Classification Net Taxable Sales Percentage of Total Net Taxable Rank Sales Net Taxable Sales Rank Percentage of Total Net Taxable Sales Retail Trade Accommodations & Food Services Wholesale Trade Other Total $ 615,921, ,457,184 98,332, ,191,600 $ 1.316,902, % 16.59% 7.47% 29.17% % $ 358,605,280 95,168,738 50,943, ,690,286 $ 652,407, % 14.59% 7.81% 22.64% % City of Papillion Total City of Papillion Percertage of Total $ 506,081, % 101,593, % Note: Source: Amounts shown are Sarpy County net taxable sales, which includes refunds and does not include motor vehicle net sales. The numbers are on a calendar year basis. Amounts are not available at the City level Data is not yet available from the Nebraska Department of Revenue Nebraska Department of Revenue -85-

133 CITY OF PAPILLION, NEBRASKA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS TABLE 8 FISCAL YEAR TOTAL ENDED PERSONAL TOTAL ASSESSED DIRECT TAX SEPTEMBER 30, REAL PROPERTY PROPERTY VALUE RATE 2013 $ 1,309,469,322 $ 44,503,356 $ 1,353,972, ,310,800,323 41,558,726 1,352,359, ,289,251,012 51,172,849 1,340,423, ,250, ,286,667 1,302,772, ,259,514,547 50,861,947 1,310,376, ,138,816,270 31,621,569 1,170,437, ,831,122 20,437,932 1,017,269, ,059,234 21,196, ,256, ,796,694 22,159, ,955, ,971,532 26,661, ,633, Note: Property is assessed at actual value; therefore, the assessed values are equal to actual value. Source: Sarpy County Assessor's Office -86-

134 Fiscal Year Tax Year City of Papillion General Fund Debt Service CIP Total City of Papillion Overlapping Rales (2) Sarpy County Papillion School Papillion Spec Sch Schl Dist 27 Bond 1 Schl Dist 27 Bond 2 Schl Dist 27 Bond 3 Schl Dist 27 Bond 4 Learning Comm-General Learning Comm-Bldg Learning Comm-Capital Projects Elem Leam Com Pa pit Natural Resrce Papil NRD Bond Metro Community Coll Agricultural Society Communication Bond Ed Service Unit 3 Total Overlapping Rates Total Property Taxes City of Papillion, Nebraska Property Tax Rates-Direct and Overlapping Governments (1) Last Ten Fiscal Years TABLE S (1) TAX RATES ARE PER $100 OF ASSESSED VALUATION. AND EFFECTIVE ON SEPTEMBER 1 OF EACH YEAR. (2) OVERLAPPING RATES ARE THOSE OF LOCAL AND COUNTY GOVERNMENTS THAT APPLY TO PROPERTY OWNERS WITHIN THE CITY OF PAPILLION. NEBRASKA. -87-

135 CITY OF PAPILLION, NEBRASKA PRINCIPAL PROPERTY TAXPAYERS CURRENTYEAR TABLE % OF TOTAL TAXABLE CITY ASSESSED TAXABLE TAXPAYERS TYPE OF BUSINESS VALUE RANK VALUE Shadow Lake Towne Center Shopping Mall $ , % Spirit MT Papillion NE LLC Shopping Mall 21,860, % Papillion Building LLC Data Provider 14,610, % Wal-Mart Real Estate Business Trust Retail Store 14,301, % Papillion Apartments LP Apartments 11,610, % Tare Hills Villas Inc Apartments & Shopping Mall 11,520, % Dayton Hudson Corp Retail Store 10,240, % Hy-Vee Inc Retail Store & Convenience Store 9,510, % Midland Heights Apartments LLC Apartments 7,990, % SGD Huntington LLC Apartments 6,800, % $ % Note: Source: Historical information not available. Sarpy County Assessor's Office -88-

136 CITY OF PAPILLION, NEBRASKA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS TABLE 11 Fiscal Year Ended Sep )te: Collected within the Fiscal Year of the Levy Collections Total Collections to Date Taxes Subsequent Total Percentage in Subsequent Percentage Levied Adjustments Adjusted Levy Amount of Levy Years Amount of Levy $ 6,118,914 $ (6,439) $6,112,475 $ 6,050, % $ 6,050, % 6,118,924 (27,838) 6,091,086 6,038, % $ 48,193 6,086, % 5,430,137 (45,107) 5,385,030 5,338, % 33,462 5,371, % 5,277,611 (3,807) 5,273,804 5,179, % 92,325 5,271, % 5,308,846 3,770 5,312,616 5,222, % 90,096 5,312, % 4,741,900 11,189 4,753,089 4,674, % 78,229 4,753, % 4,166,947 38,565 4,205,512 4,135, % 69,806 4,205, % 4,150,622 13,418 4,164,040 4,088, % 75,336 4,164, % 4,369,769 7,918 4,377,687 4,311, % 66,298 4,377, % 4,258,701 4,663 4,263,364 4,201, % 61,320 4,263, % The fiscal year of the City begins October 1 and ends September 30. Taxes are levied in December. First installments of real estate taxes are delinquent the following April 1, second installments delinquent August 1. Delinquent taxes bear 14 percent interest. The figures above do not include motor vehicle in lieu of ad valorem taxes. Tax receipts are not reported from the County separate from interest collected, therefore taxes collected may be greater than original levy. Such differences, including any adjustments made by the County Assessor subsequent to the date the original levy was set, are reported in the "Subsequent Adustments" column above. -89-

137 CITY OF PARILLION, NEBRASKA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS TABLE 12 GOVERNMENTAL ACTIVITIES GENERAL BOND FISCAL OBLIGATION CAPITAL ANTICIPATION YEAR BONDS LEASES NOTES 2013 $ 36,480,214 $ 189, ,696, ,704, ,822, S 4,565, ,757, ,565, ,492,874 64,171 12,505, ,767 7,940, , , NOTES PAYABLE i 1,222,000 1, ,000 1, BUSINESS-TYPE ACTIVITIES BOND TOTAL PERCENTAGE REVENUE NOTES CAPITAL ANTICIPATION PRIMARY DEBT PER OF PERSONAL BONDS PAYABLE LEASES NOTES GOVERNMENT CAPITA (1) INCOME (1) $ 18, $ 91,203 $ 91,032 $56,433,768 11,647, , ,692 $ 6,500,000 59,531, , , ,199 6,500,000 62,470,524 3, ,816, , ,221 10,325,000 65,125,419 3, ,645, , ,000 64,992,067 2, , ,325, , , ,050,767 1, ,000 30,585,771 1, ,243 32,157,044 1, ,921 35,711, Note: Detail regarding the City's outstanding debt can be found in the notes to the tinancial statements. (1) See Table 16. Demographic and Economic Statistics, for income and popluation data. Population estimates and personal income for 2013 are not available. -90-

138 CITY OF PAPILLION, NEBRASKA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS TABLE 13 RATIO OF NET DEBT TO GENERAL BOND GENERAL BONDED VALUATION FISCAL OBLIGATION ANTICIPATION BONDED DEBT PER OF TAXABLE YEAR BONDS NOTES DEBT CAPITA (1) REAL PROPERTY (2) 2013 $ 36,480,214 $ 36,480, % ,696,600 39,696,600 1, % ,704,272 41,704,272 2, % ,822,140 $ 4,565,000 43,387,140 2, % ,757,168 4,565,000 44,322,168 1, % ,492,874 12,505,000 45,997,874 1, % ,265,767 7,940,000 33,205,767 1, % ,015,771 2,140,000 19,155, % ,923,801 19,923, % ,711,200 22,711,200 1, % Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Population data can be found in Table 16, Demographic and Economic Statistics. Population is not available yet for (2) Property value information can be found in Table 18, Assessed Value and Actual Value of Taxable Property -91-

139 CITY OF PAPILLION, NEBRASKA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF SEPTEMBER 30, 2013 TABLE 14 Governmental Units Direct: City Overlapping: School District #27 Sarpy County Total Direct And Estimated Overlapping Percentage Debt To The Debt Outstanding Applicable City $ 36,480, % $ 36,480,214 82,015, % 25,951,394 10,150, % 1,178,071 92,165,000 27,129,465 $ 128, $ ,679 Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Papillion. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. The percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of the governmental unit's taxable revenue base that is within the City of Papillion's boundaries and dividing by the unit's total taxable revenue base. Sources: Assessed value data used to estimate applicable percentages provided by the County assessor's office. Debt outstanding data provided by each governmental entity. -92-

140 TABLE 15 CITY OF PAPILLION, NEBRASKA PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS Direct Net Gross Operating Available Debt Service Requirements Revenue Expenses Revenue Principal Interest Total Coverage Water Svstem Utilitv Service Charaes 2013 $ 6,412,666 $ 3,104,444 $3,308,222 $ 420,000 $ 327,485 $ 747, ,003,429 2,860,122 2,143,307 75, , , ,408,437 2,790, , , , , ,617,555 2,673, , , , , ,907,702 2,748, , , , , ,763,397 2,517, , , , , ,314,033 2,406, , , , , ,214,495 2,054,541 3,159, , , , ,857,212 1,945,583 3,911, , , , ,549,609 1,700, , , , Golf Facilitv and Course Fees 2013 $ 2,494,812 $ 1,911,818 $ 582,994 $ 200,000 $ 151,390 $ 351, ,646,095 1,809, , , , , ,282,992 1,620, , , , , ,389,281 1,775, , , , , ,434,719 1,900, , , , , ,182,680 1,784, , , , , ,259,574 1,682, , , , , ,216,334 1,511, , , , , ,543, , , , , , ,508, , , , , , Business Park Grants and Land Sale Revenue 2006 $ 598 $ 1,232 $ (634) $ 245,011 $ 5,767 $ 250,778 (0.00) ,764 1, , ,910 6, , ,387 4, , ,379 15, , Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Direct Operating Expenses do not include interest, depreciation and amortization expenses. -93-

141 CITY OF PAPILLION, NEBRASKA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS TABLE 16 Personal Per Capita Public Fiscal Income (2) Personal School Unemployment Year Population (1) (000's) Income (2) Enrollment (3) Rate (4) , % 2012 $ 20,785 $ 7,351,131 $ 44,323 10, % ,056 6,941,162 42,689 9, % ,894 6,467,590 40,498 9, % ,280 6,251,192 40,034 9, % ,707 6,102,301 39,946 9, % ,825 5,607,442 37,833 8, % ,899 5,232,278 36,318 8, % ,113 4,801,473 34,238 8, % ,182 4,454,831 32,675 8, % Sources: (1) U.S. Census Bureau numbers are not available (2) U.S. Department of Commerce Bureau of Economic Analysis, Personal Income and Per Capital Income are based on Omaha-Council Bluffs NE-IA, Sarpy County NE numbers are not available. (3) Papillion-LaVista Public Schools (4) Nebraska Dept. of Labor, Labor Market Information, Local Area Unemployment Statistics (LAUS) for Sarpy County Median age 2010 census was 36.8 years old. Education statistics per the 2010 census indicates that 96.6% of the population 25 years and older has a high school degree or greater with 35.4% of the same population holding a Bachelor's degree or greater. -94-

142 CITY OF PAPILLION, NEBRASKA PRINCIPAL EMPLOYERS CURRENT YEAR AND 10 YEARS AGO TABLE PERCENTAGE OF TOTAL PERCENTAGE COUNTY OF TOTAL LABOR FORCE COUNTY LABOR EMPLOYER EMPLOYEES RANK (10) EMPLOYEES RANK FORCE (10) STRATCOM (Offutt AFB Base) 9, % 10, % PayPal Inc. 3, % Papiliion-LaVist Public Schools 1, % % Werner Enterprises 1, % 1, % Bellevue Public Schools 1, % 1, % Ameritrade 1, % % InfoGroup Compilation Center % 0.00% InfoUSA % Eliding Berquest Clinic % % Bellevue University % Sarpy County % % Northrop Grumman Info % Alegent Health - Midlands % ADT Corporation % Custom Edge % 21, % 17, % Note: Information is not available at the City level, therefore county level information has been provided. Number of employees is for those employeed in Sarpy County only. Employer may have additional locations outside of Sarpy County not included in count. Source: Sarpy County Department of Labor Planning and Development -95-

143 CITY OF PAPILLION, NEBRASKA TABLE 18 FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS Function General Government Administration Financial Administration Community Relations Planning & Zoning Engineering Police Fire Building and Safety Streets and Highways Culture and Recreation, Parks Recreation Library Golf Water System Sewer System Source: City of PapiJion Finance -96*

144 CITY OF PAPIUUON, NEBRASKA OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS TABLE FUNCTION Engineering Miles of Street Reconstruction Public Safely Police Arrests ,093 1,215 1,109 1,101 1,040 1, Parking/Ordinance Citations Traffic Citations ,125 2,240 2,413 2,233 1,771 1,718 1,720 1,622 Fire Number of Cals Answered ,798 1,748 1,749 1,702 1,626 1,491 1,343 1,240 Number of Faeries Building and Safety Number of Commercial Building Perm! Number of Residential Building Permit) Culture and Recreation Library Total Circulation 245, , , , , , , , , ,644 Golf Rounds of Golf 77,445 86,604 73,138 76,815 81,242 73,816 70,537 78,138 (1) (1) Water Number of Consumers 10,518 10,255 10,009 9,747 9,480 9,267 8,747 8,334 7,965 7,488 Water Inspections Locates 5,383 4,526 3,876 5,707 4,300 3,600 2,500 3,100 3,000 2,220 Sewer Sewer Inspections N/A N/A (1) Not available; clubhouse management was outsourced. Sources: Various City Departments -97-

145 CITY OF PAPILLION, NEBRASKA CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS TABLE FUNCTION General Government City Hall Public Safety Police Stations Fire Stations Streets Streets (Lane Miles) Culture and Recreation Parks Acreage Parks # Swimming Pools (Public) Campgrounds Tennis Courts Amphitheaters Golf Courses (Public) Library Senior Centers Water Water mains (miles) Water treatment plants Sewer Sanitary sewer (miles) Sources: Various City Departments -98-

146 INTERNAL CONTROL AND COMPLIANCE AUDIT SECTION

147 i HSMC ORIZON LLC CPAJ, BUSINFSS & TECHNOLOGY CONSULTANTS FRANCES STREET ~ OMAHA, NEBRASKA HSMC ORIZON KANSAS CITY OMAHA / PHONE / FAX Wviw. hsmcor izo n. com March 11,2014 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor and Members Of the City Council City of Papillion, Nebraska We have audited in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, and each fund of the City of Papillion, Nebraska (the "City"), as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the City's basic fihartetalistatements, and have issued our report thereon dated March 11,2014. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting ("internal control") to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable. possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. -99-

148 Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. MSMtLtpMpn-tML HSMC ORIZON LLC -100-

149 APPENDIX B FORM OF CONTINUING DISCLOSURE UNDERTAKING This CONTINUING DISCLOSURE UNDERTAKING dated as of, 2014 (this "Continuing Disclosure Undertaking"), is executed and delivered by the City of Papillion, Nebraska (the "Issuer"). RECITALS A. This Continuing Disclosure Undertaking is executed and delivered by the Issuer in connection with the issuance by the Issuer of $ Water Revenue Bonds, Series 2014 (the "Bonds"), pursuant to an Ordinance adopted by the governing body of the Issuer on, 2014 (the "Ordinance"). B. The Issuer is entering into this Continuing Disclosure Undertaking for the benefit of the Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. The Issuer is the only "obligated person" with responsibility for continuing disclosure pursuant to the Rule and hereunder. Pursuant to the requirements of the Rule, the Issuer covenants and agrees as follows: Section 1. Definitions. In addition to the definitions set forth in the Ordinance, which apply to any capitalized term used in this Continuing Disclosure Undertaking unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" means any Annual Report provided by the Issuer pursuant to, and as described in, Section 2 of this Continuing Disclosure Undertaking. "Beneficial Owner" means any registered owner of any Bonds and any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. "EMMA" means the Electronic Municipal Market Access system for municipal securities disclosures established and maintained by the MSRB, which can be accessed at. "Material Events" means any of the events listed in Section 3 of this Continuing Disclosure Undertaking. "MSRB" means the Municipal Securities Rulemaking Board, or any successor repository designated as such by the Securities and Exchange Commission in accordance with the Rule. "Participating Underwriter" means any of the original underwriter(s) of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Rule" means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Section 2. Provision of Annual Reports. The Issuer shall not later than May 1 of each year, commencing May 1,2015, file with the MSRB, through EMMA, the following financial information and operating data (the "Annual Report"): (a) The annual financial statements of the Issuer for the prior fiscal year, prepared in accordance with accounting principles generally accepted in the United States for governmental units as prescribed by the Governmental Accounting Standards B-1

150 Board, which financial statements shall have been audited as shall be then required or permitted by the laws of the State of Nebraska. (b) Updated financial information and operating data of the type contained in the final Official Statement as described in Exhibit A, in substantially the same format contained in the final Official Statement. Such financial information and operating data may be included as Supplementary Information to the City's audited financials. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues with respect to which the Issuer is an "obligated person" (as defined by the Rule), which have been provided to the MSRB and are available through EMMA. If the document included by reference is a final official statement, it must be available from the MSRB on EMMA. The Issuer shall clearly identify each such other document so included by reference. In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in this Section. If the Issuer's fiscal year changes, it shall give notice of such change in the same manner as for a Material Event under Section 3. Section 3. Reporting of Material Events. Not later than 10 business days after the occurrence of any of the following events, the Issuer shall give, or cause to be given to the MSRB, through EMMA, notice of the occurrence of any of the following events with respect to the Bonds ("Material Events"): (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of bondholders, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the Issuer; B-2

151 (13) the consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; or (14) appointment of a successor or additional trustee or the change of name of the trustee, if material. If the Issuer has not submitted the Annual Report to the MSRB by the date required in Section 2, the Issuer shall send a notice to the MSRB of the failure of the Issuer to file on a timely basis the Annual Report, which notice shall be given by the Issuer in accordance with this Section 3. All documents provided to the MSRB pursuant to this Continuing Disclosure Undertaking shall be accompanied by identifying information as prescribed by the MSRB. Section 4. Termination of Reporting Obligation. The Issuer's obligations under this Continuing Disclosure Undertaking shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If the Issuer's obligations under this Continuing Disclosure Undertaking are assumed in full by some other entity, such person shall be responsible for compliance with this Continuing Disclosure Undertaking in the same manner as if it were the Issuer, and the Issuer shall have no further responsibility hereunder. If such assumption occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such assumption in the same manner as for a Material Event under Section 3. Section 5. Dissemination Agents. The Issuer may, from time to time, engage a Dissemination Agent to assist it in carrying out its obligations under this Continuing Disclosure Undertaking, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. Any such Dissemination Agent shall not be responsible in any manner for the content of any notice or report (including without limitation the Annual Report) prepared by the Issuer pursuant to this Continuing Disclosure Undertaking. Section 6. Amendment; Waiver. Notwithstanding any other provision of this Continuing Disclosure Undertaking, the Issuer may amend this Continuing Disclosure Undertaking and any provision of this Continuing Disclosure Undertaking may be waived, provided that Bond Counsel or other counsel experienced in federal securities law matters provides the Issuer with its written opinion that the undertaking of the Issuer contained herein, as so amended or after giving effect to such waiver, is in compliance with the Rule and all current amendments thereto and interpretations thereof that are applicable to this Continuing Disclosure Undertaking. In the event of any amendment or waiver of a provision of this Continuing Disclosure Undertaking, the Issuer shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Issuer. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, notice of such change shall be given in the same manner as for a Material Event under Section 3. Section 7. Additional Information. Nothing in this Continuing Disclosure Undertaking shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Continuing Disclosure Undertaking or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is required by this Continuing Disclosure Undertaking. If the Issuer includes any information in any Annual Report or notice of occurrence of a Material Event in addition to the information specifically required by this Continuing Disclosure Undertaking, the Issuer shall have no obligation under this Continuing Disclosure Undertaking to update such information or include it in any future Annual Report or notice of occurrence of a Material Event. B-3

152 Section 8. Default. If the Issuer fails to comply with any provision of this Continuing Disclosure Undertaking, any Participating Underwriter or any Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Issuer to comply with its obligations under this Continuing Disclosure Undertaking. A default under this Continuing Disclosure Undertaking shall not be deemed an event of default under the Ordinance or the Bonds, and the sole remedy under this Continuing Disclosure Undertaking in the event of any failure of the Issuer to comply with this Continuing Disclosure Undertaking shall be an action to compel performance. Section 9. Beneficiaries. This Continuing Disclosure Undertaking shall inure solely to the benefit of the Issuer, the Participating Underwriter, and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 10. Severability. If any provision in this Continuing Disclosure Undertaking, the Ordinance or the Bonds shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Continuing Disclosure Undertaking shall not in any way be affected or impaired thereby. Section 11. Electronic Transactions. The arrangement described herein may be conducted and related documents may be stored by electronic means. Copies, telecopies, facsimiles, electronic files and other reproductions of original documents shall be deemed to be authentic and valid counterparts of such original documents for all purposes, including the filing of any claim, action or suit in the appropriate court of law. Section 12. Governing Law. This Continuing Disclosure Undertaking shall be governed by and construed in accordance with the laws of the State of Nebraska. B-4

153 EXHIBIT A TO FORM OF CONTINUING DISCLOSURE UNDERTAKING FINANCIAL INFORMATION AND OPERATING DATA TO BE INCLUDED IN ANNUAL REPORT Bonds: The information contained in the following sections of the final Official Statement relating to the HISTORICAL STATEMENT OF REVENUES AND EXPENSES Historical Debt Service Coverage. B-5

154 TfflS PAGE LEFT BLANK INTENTIONALLY

155 APPENDIX C ORDINANCE NO WATER RATES C-1

156 ORDINANCE NO AN ORDINANCE TO AMEND CHAPTER 195, SECTION , INVOLVING WATER RATES, TO MODIFY THE WATER RATE TARIFF STRUCTURES FOR WATER SERVICE WITHIN AND BEYOND THE CORPORATE LIMITS BY REQUIRING MINIMUM WATER RATES BASED UPON USE OR CONSUMPTION OF LESS THAN 3,000 GALLONS PER MONTH AS DETERMINED BY METER SIZE, TO PROVIDE A SCHEDULE OF MINIMUM WATER RATE TARIFF INCREASES THROUGH OCTOBER 31, 2014, TO ADD A SCHEDULE OF COMMODITY FEES FOR USE OR CONSUMPTION GREATER THAN 3,000 GALLONS AND LESS THAN 10,000 GALLONS PER MONTH THROUGH OCTOBER 31, 2014, TO ADD A SCHEDULE OF SURCHARGE FEES FOR USE OR CONSUMPTION GREATER THAN 10,000 GALLONS PER MONTH THROUGH OCTOBER 31, 2014, TO REPEAL CHAPTER 195, SECTION IN ITS ENTIRETY, AND TO PROVIDE FOR AN EFFECTIVE DATE THEREOF. BE IT ORDAINED by the Mayor and the City Council of the City of Papillion as follows: Section 1: Chapter 195, Section , of the Municipal Code be amended to read as follows: Section Service within the corporate limits. A. Minimum rates. The following is established as a tariff of minimum water rates for all water customers within the corporate limits of the City of Papillion. Customers shall be liable for the minimum rate determined by meter size unless and until the consumer shall, by written order, direct the Director of Public Works to shut off the water at the stop box, in which case the customer shall not be liable thereafter for water rental until the water is turned on again. The rates shall be effective for the billing dates shown below: (1) One (1) inch meter and smaller- Effective April 30,2012, there shall be a minimum billing of $6.98 for all customers located within the corporate limits of the City of Papillion which use or consume less than 3,000 gallons per month a. Effective October 31,2012, the minimum billing shall be $7.43. b. Effective October 31,2013, the minimum billing shall be $9.23. c. Effective October 31,2014, the minimum billing shall be $

157 (2) One and one-half (1 Vz) inch meter - Effective April 30, 2012, there shall be a minimum billing of $11.63 for all customers located within the corporate limits of the City of Papillion which use or consume less than 3,000 gallons per month. a. Effective October 31,2012, the minimum billing shall be $ b. Effective October 31,2013, the minimum billing shall be $ c. Effective October 31,2014, the minimum billing shall be $ (3) Two (2) inch meter - Effective April 30,2012, there shall be a minimum billing of $18.60 for all customers located within the corporate limits of the City of Papillion which use or consume less than 3,000 gallons per month. a. Effective October 31, 2012, the minimum billing shall be $ b. Effective October 3,2013, the minimum billing shall be $ c. Effective October 3,2014, the minimum billing shall be $ (4) Three (3) inch meter - Effective April 30,2012, there shall be a minimum billing of $34.88 for all customers located within the corporate limits of the City of Papillion which use or consume less than 3,000 gallons per month. a. Effective October 31,2012, the minimum billing shall be $ b. Effective October 31,2013, the minimum billing shall be $ c. Effective October 31,2014, the minimum billing shall be $ (5) Four (41 inch meter - Effective April 30,2012, there shall be a minimum billing of $69.75 for all customers located within the corporate limits of the City of Papillion which use or consume less than 3,000 gallons per month. a. Effective October 31,2012, the minimum billing shall be $ b. Effective October 31,2013, the minimum billing shall be $ c. Effective October 31,2014, the minimum billing shall be $ (6) Six (Q) inch meter and larger- Effective April 30,2012, there shall be a minimum billing of $ for all customers located within the corporate limits of the City of Papillion which use or consume less than 3,000 gallons per month. 2

158 a. Effective October 31,2012, the minimum billing shall be $ b. Effective October 31,2013, the minimum billing shall be $ c. Effective October 31,2014, the minimum billing shall be $ B. Commodity Charges The following is established as a tariff of commodity fees to customers within the corporate limits for water purchased from the City of Papillion, which rates shall be effective for the billing dates shown below: (1) From April 30, 2012, there shall be a charge of $1.60 per 1,000 gallons for water used or consumed greater than 3,000 gallons and less than 10,000 gallons per month. (2) From October 31,2012, there shall be a charge of $1.67 per 1,000 gallons for water used or consumed greater than 3,000 gallons and less than 10,000 gallons per month. (3) From October 31, 2013, there shall be a charge of $1.70 per 1,000 gallons for water used or consumed greater than 3,000 gallons and less than 10,000 gallons per month. (4) From October 31,2014, there shall be a charge of $1.71 per 1,000 gallons for water used or consumed greater than 3,000 gallons and less than 10,000 gallons per month. C. Surcharge The following is established as a tariff of surcharge fees to customers within the corporate limits for water purchased from the City of Papillion, which rates shall be effective for the billing dates shown below: (1) Surcharge applied to the monthly water usage greater than 10,000 gallons and less than 20,000 gallons per month: a. From April 30, 2012, there shall be a charge of $1.93 per 1,000 gallons for the monthly water usage greater than 10,000 gallons and less than 20,000 gallons per month. b. From October 31,2012, there shall be a charge of $2.01 per 1,000 gallons for the monthly water usage greater than 10,000 gallons and less than 20,000 gallons per month. 3

159 c. From October 31,2013, there shall be a charge of $2.06 per 1,000 gallons for the monthly water usage greater than 10,000 gallons and less than 20,000 gallons per month. d. From October 31,2014, there shall be a charge of $2.07 per 1,000 gallons for the monthly water usage greater than 10,000 gallons and less than 20,000 gallons per month. (2) Surcharge applied to the monthly water usage greater than 20,000 gallons per month: a. From April 30, 2012, there shall be a charge of $2.20 per 1,000 gallons for the monthly water usage greater than 20,000 gallons per month. b. From October 31,2012, there shall be a charge of $2.30 per 1,000 gallons for the monthly water usage greater than 20,000 gallons per month.! I c. From October 31,2013, there shall be a charge of $2.35 per 1,000 gallons for the monthly water usage greater than 20,000 gallons per month. d. From October 31,2014, there shall be a charge of $2.36 per 1,000 gallons for the monthly water usage greater than 20,000 gallons per month. Section 2: That Section be amended to read as follows: Section Service beyond the corporate limits. The City may contract to sell water to users beyond the corporate limits of the City, but service shall not be instituted or continued except to the extent that the facilities of the City for supplying water service are in excess of the requirements for serving the inhabitants of the City. I A. Minimum rates. The following is established as a tariff of minimum water rates for all water customers beyond the corporate limits of the City of Papillion. Customers shall be liable for the minimum rate determined by meter size unless and until the consumer shall, by written order, direct the director of public works to shut off the water at the stop box, in which case the customer shall not be liable thereafter for water rental until the water is turned on again. The rates shall be effective for the billing dates shown below: 4

160 (1) One (1) inch meter and smaller- Effective April 30, 2012, there shall be a minimum billing of $13.96 for all customers located beyond the corporate limits of the City of Papillion which use or consume less than 3,000 gallons per month. a. Effective October 31,2012, the minimum billing shall be $ b. Effective October 31,2013, the minimum billing shall be $ c. Effective October 31,2014, the minimum billing shall be $ (2) One and one-half (1 Vis inch meter - Effective April 30,2012, there shall be a minimum billing of $23.26 for all customers located beyond the corporate limits of the City of Papillion which use or consume less than 3,000 gallons per month. a. Effective October 31,2012, the minimum billing shall be $ b. Effective October 31, 2013, the minimum billing shall be $ c. Effective October 31,2014, the minimum billing shall be $ (3) Two (2) inch meter - Effective April 30,2012, there shall be a minimum billing of $37.20 for all customers located beyond the corporate limits of the City of Papillion which use or consume less than 3,000 gallons per month. a. Effective October 31,2012, the minimum billing shall be $ b. Effective October 3,2013, the minimum billing shall be $ c. Effective October 3,2014, the minimum billing shall be $ (4) Three (3) inch meter - Effective April 30,2012, there shall be a minimum billing of $69.76 for all customers located beyond the corporate limits of the City of Papillion which use or consume less than 3,000 gallons per month. a. Effective October 31,2012, the minimum billing shall be $ b. Effective October 31,2013, the minimum billing shall be $ c. Effective October 31,2014, the minimum billing shall be $ (5) Four (4) inch meter - Effective April 30,2012, there shall be a minimum billing of $ for all customers located beyond the corporate limits of 5

161 the City of Papillion which use or consume less than 3,000 gallons per month. a. Effective October 31, 2012, the minimum billing shall be $ b. Effective October 31, 2013, the minimum billing shall be $ c. Effective October 31, 2014, the minimum billing shall be $ (6) Six (6^ inch meter and large r- Effective April 30, 2012, there shall be a minimum billing of $ for all customers located beyond the corporate limits of the City of Papillion which use or consume less than 3,000 gallons per month. a. Effective October 31, 2012, the minimum billing shall be $ b. Effective October 31, 2013, the minimum billing shall be $ c. Effective October 31, 2014, the minimum billing shall be $ B. Commodity Charges The following is established as a tariff of commodity fees to customers beyond the corporate limits for water purchased from the City of Papillion, which rates shall be effective for the billing dates shown below: (1) From April 30, 2012, there shall be a charge of $3.20 per 1,000 gallons for water used or consumed greater than 3,000 gallons and less than 10,000 gallons per month. (2) From October 31,2012, there shall be a charge of $3.34 per 1,000 gallons for water used or consumed greater than 3,000 gallons and less than 10,000 gallons per month. (3) From October 31,2013, there shall be a charge of $3.40 per 1,000 gallons for water used or consumed greater than 3,000 gallons and less than 10,000 gallons per month. (4) From October 31,2014, there shall be a charge of $3.42 per 1,000 gallons for water used or consumed greater than 3,000 gallons and less than 10,000 gallons per month. 6

162 C. Surcharge The following is established as a tariff of surcharge fees to customers beyond the corporate limits for water purchased from the City of Papillion, which rates shall be effective for the billing dates shown below: (1) Surcharge applied to the monthly water usage greater than 10,000 gallons and less than 20,000 gallons per month: e. From April 30,2012, there shall be a charge of $3.86 per 1,000 gallons for the monthly water usage greater than 10,000 gallons and less than 20,000 gallons per month. f. From October 31,2012, there shall be a charge of $4.02 per 1,000 gallons for the monthly water usage greater than 10,000 gallons and less than 20,000 gallons per month. g. From October 31,2013, there shall be a charge of $4.12 per 1,000 gallons for the monthly water usage greater than 10,000 gallons and less than 20,000 gallons per month. h. From October 31,2014, there shall be a charge of $4.14 per 1,000 gallons for the monthly water usage greater than 10,000 gallons and less than 20,000 gallons per month. (2) Surcharge applied to the monthly water usage greater than 20,000 gallons per month: e. From April 30,2012, there shall be a charge of $4.40 per 1,000 gallons for the monthly water usage greater than 20,000 gallons per month. f. From October 31,2012, there shall be a charge of $4.60 per 1,000 gallons for the monthly water usage greater than 20,000 gallons per month. g. From October 31,2013, there shall be a charge of $4.70 per 1,000 gallons for the monthly water usage greater than 20,000 gallons per month. h. From October 31,2014, there shall be a charge of $4.72 per 1,000 gallons for the monthly water usage greater than 20,000 gallons per month. Section 3: That Section is repealed in its entirety. 7

163 Section 4: That Chapter 195, Section , Section and Section of the Papillion City Code, as previously approved in Ordinance No on July 1,2008, and all ordinances in conflict herewith, are hereby repealed. Section 5: Effective Date. This ordinance shall be in full force and effect fifteen (15) days after its passage. The city clerk is directed to effectuate the publishing of this Ordinance for at least one (1) week in a newspaper in general circulation within the City of Papillion, which publication must take place within fifteen (15) days of the passage of the ordinance by the city council. PASSED AND APPROVED the 7$day of CITY OF PAPILLION, Attest: Da^id P. Black, MAYOR utler, CnTCLERK First Reading: January 17, 2012 Second Reading: March 6, 2012 Third Reading: March 20,2012 WT'X ( SEAL } 8