STERNE, AGEE & LEACH, INC.

Transcription

1 NEW ISSUE - BOOK ENTRY ONLY INSURED RATING: AAA (negative outlook) UNDERLYING RATING: S&P: A (See RATINGS herein) In the opinion of Bond Counsel, under existing law, interest on the Series 2009-B Bonds (i) will be excludable from gross income for federal income tax purposes if the City complies with all requirements of the Internal Revenue Code that must be satisfied subsequent to the issuance of the Series 2009-B Bonds in order that interest thereon be and remain excludable from gross income, and (ii) will not be an item of tax preference for purposes of the federal alternative minimum tax on individuals and corporations; however, in the opinion of Bond Counsel, under existing law, interest on the Series 2009-A Bonds will not be excludable from gross income for federal income tax purposes. Bond Counsel is also of the opinion that, under existing law, interest on the Series 2009-A and the Series 2009-B Bonds will be exempt from State of Alabama income taxation. See TAX EXEMPTION herein for further information and certain other federal tax consequences arising with respect to the Series 2009 Bonds. CITY OF SELMA, ALABAMA $12,000,000 General Obligation Build America Bonds (Federal Taxable Direct Payment), Series 2009-A $1,290,000 General Obligation Refunding Bonds (Tax-Exempt), Series 2009-B Dated: December 1, 2009 Due: Series 2009-A Bonds: February 1, as shown on the inside cover Series 2009-B Bonds: February 1, as shown on the inside cover The Series 2009-A Bonds and the Series 2009-B Bonds constitute separate series and are together referred to in this Official Statement as the Series 2009 Bonds. The Series 2009 Bonds are issuable as fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York, to which principal and interest payments on the Series 2009 Bonds will be made so long as Cede & Co. is the registered owner of the Series 2009 Bonds. Individual purchases of the Series 2009 Bonds will be made in Book-Entry Only form, and individual purchasers ( Beneficial Owners ) of the Series 2009 Bonds will not receive physical delivery of bond certificates. Interest will be payable on the Series 2009 Bonds each February 1 and August 1, beginning February 1, Payment of debt service on Series 2009 Bonds not in Book-Entry Only form shall be made by check or draft or, at the request of the holder of the Series 2009 Bonds in an aggregate principal amount of not less than $100,000 accompanied by adequate written instructions, by wire transfer, provided that payment of principal of Series 2009 Bonds shall be made only upon surrender of such Bonds at the office of the Paying Agent, Regions Bank, Birmingham, Alabama. So long as DTC or its nominee is the registered owner of the Series 2009 Bonds, disbursement of such payments to DTC is the responsibility of the Paying Agent, disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owner is the responsibility of DTC Participants or Indirect Participants as more fully described herein. The Series 2009 Bonds will constitute general obligations of the City for the payment of which its full faith and credit are irrevocably pledged. Payment of principal of and interest on the Series 2009 Bonds when due will be guaranteed under a financial guaranty insurance policy to be issued concurrently with the delivery of the Series 2009 Bonds by Assured Guaranty Corp. The Series 2009 Bonds will be subject to redemption prior to their respective maturities as described herein. FOR MATURITIES, AMOUNTS, RATES, PRICES AND CUSIPS, SEE INSIDE COVER. The Series 2009 Bonds are offered when, as and if issued, subject to approval of validity by Bond Counsel, Maynard, Cooper & Gale, P.C., Birmingham, Alabama. Certain legal matters will be passed on by Disclosure Counsel, Maynard, Cooper & Gale, P.C., Birmingham, Alabama. It is expected that the Series 2009 Bonds in definitive form will be available for delivery through the facilities of The Depository Trust Company in New York, New York on or about December 30, This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. STERNE, AGEE & LEACH, INC. The date of this Official Statement is December 17, 2009.

2 GENERAL OBLIGATION BUILD AMERICA BONDS (FEDERAL TAXABLE DIRECT PAYMENT), SERIES 2009-A MATURITIES, AMOUNTS, RATES, PRICES & CUSIPS Maturity Principal Amount Interest Rate Yield CUSIP Maturity Principal Amount Interest Rate Yield CUSIP 2010 $950, % 1.250% PV $775, % 4.550% QC , PW , QD , PX , QE , PY , QF , PZ , QG , QA , QH , QB , QJ3 (accrued interest to be added) GENERAL OBLIGATION REFUNDING BONDS (TAX-EXEMPT), SERIES 2009-B MATURITIES, AMOUNTS, RATES, PRICES & CUSIPS Maturity Principal Amount Interest Rate Price or Yield CUSIP 2010 $260, % 1.000% QK , QL , QM , QN , QP9 (accrued interest to be added)

3 CITY OF SELMA, ALABAMA MAYOR George P. Evans CITY COUNCIL Dr. Geraldine Allen, President Dr. Cecil Williamson Susan M. Keith Dr. Monica Newton Angela Benjamin Samual Randolph Bennie L. Tucker Bennie Ruth Crenshaw Corey D. Bowie CITY CLERK Ivy Harrison TREASURER Cynthia Mitchell COUNSEL FOR THE CITY Jimmy L. Nunn BOND COUNSEL Maynard, Cooper & Gale, P.C. Birmingham, Alabama AUDITORS Wilson Price Barranco Blankenship & Billingsley, P.C. Montgomery, Alabama UNDERWRITER Sterne, Agee & Leach, Inc. Birmingham, Alabama

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5 TABLE OF CONTENTS INTRODUCTION... 1 GLOSSARY OF TERMS USED IN OFFICIAL STATEMENT... 2 DESCRIPTION OF THE SERIES 2009 BONDS... 2 General Provisions... 2 Method and Place of Payment... 3 Redemption of Series 2009-A Bonds Prior to Maturity... 3 Redemption of Series 2009-B Bonds Prior to Maturity... 4 Other Matters Related to Redemption Prior to Maturity... 4 Registration and Exchange... 4 Book-Entry Only System... 4 Authority for Issuance... 6 ELECTION OF SERIES 2009-A BONDS AS BUILD AMERICA BONDS... 7 General Description... 7 Interest Subsidy Payment... 7 Series 2009-A Bonds As Build America Bonds... 7 SECURITY AND SOURCE OF PAYMENT... 8 General... 8 Provisions for Payment... 8 Remedies... 8 The United States Bankruptcy Code... 9 THE FINANCIAL GUARANTY INSURANCE POLICY... 9 The Insurance Policy... 9 The Insurer... 9 THE PLAN OF FINANCING Series 2009-A Bonds Series 2009-B Bonds Contemporaneous Issuance of Series 2009 Warrants SOURCES AND USES OF FUNDS Series 2009-A Bonds Series 2009-B Bonds THE CITY General Governance and Administration Services, Departments and Agencies Employee Relations Personnel and Retirement System Post-Employment Benefits FINANCIAL SYSTEM General Budgetary System Accounting System Governmental Funds Proprietary Funds Page

6 Description of Major Sources of General Fund Revenues RESULTS OF OPERATIONS DEBT MANAGEMENT General Outstanding Indebtedness Constitutional Debt Limit Direct and Overlapping Debt Debt Ratio DEBT SERVICE REQUIREMENTS ON GENERAL OBLIGATION DEBT AD VALOREM TAXATION General Classification of Taxable Property Assessment Ratio Adjustment Rate Adjustments Ceiling on Ad Valorem Taxes Ad Valorem Tax Rates Assessed Valuation of Taxable Property Largest Ad Valorem Taxpayers LITIGATION RISK FACTORS ECONOMIC AND DEMOGRAPHIC INFORMATION General Population Employment Major Employers Income Levels Education Health Care Services Utilities Transportation LEGAL MATTERS TAX MATTERS RELATING TO SERIES 2009-A BONDS General Election of Series 2009-A Bonds as Build America Bonds TAX MATTERS RELATING TO SERIES 2009-b BONDS General Original Issue Discount Premium BANK QUALIFICATION UNDERWRITING CONTINUING DISCLOSURE General... 34

7 RATINGS INDEPENDENT AUDITORS MISCELLANEOUS ADDITIONAL INFORMATION Appendix A - Audited Financial Statements of the City for the fiscal years ended September 30, 2007 and September 30, 2008 Appendix B - Proposed Opinions of Bond Counsel

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9 OFFICIAL STATEMENT Regarding CITY OF SELMA, ALABAMA $12,000,000 General Obligation Build America Bonds (Federal Taxable Direct Payment), Series 2009-A $1,290,000 General Obligation Refunding Bonds (Tax-Exempt), Series 2009-B INTRODUCTION This Official Statement is furnished in connection with the issuance of the Series 2009-A Bonds referred to above (the Series 2009-A Bonds ) and the Series 2009-B Bonds referred to above (the Series 2009-B Bonds") by the City of Selma, Alabama (the City ). The City is a municipal corporation organized under the laws of the State of Alabama. The Series 2009 Bonds will be issued pursuant to two separate ordinances (the Bond Ordinances ) adopted on the date of this Official Statement by the governing body of the City. The Series 2009 Bonds will constitute general obligations of the City for the payment of which its full faith and credit are irrevocably pledged. The Series 2009-A Bonds are being issued for the purpose of (i) paying the costs of acquiring and constructing various municipal improvements and capital equipment authorized in a public referendum held on October 27, 2009 and (ii) paying the costs of issuing the Series 2009-A Bonds. See THE PLAN OF FINANCING. The Series 2009-B Bonds are being issued for the purpose of (i) refunding the City s $4,500,000 General Obligation Bonds dated December 1, 1999, which are currently outstanding in the aggregate principal amount of $1,275,000 * and (ii) paying the costs of issuing the Series 2009-B Bonds. See THE PLAN OF FINANCING. The Series 2009 Bonds are subject to optional and mandatory redemption at the times and under the circumstances set forth herein. See DESCRIPTION OF THE SERIES 2009 BONDS - Redemption Prior to Maturity. The Series 2009 Bonds are being offered in the denomination of $5,000 or any multiple thereof and may be transferred and exchanged subject to certain terms and conditions set forth herein. See DESCRIPTION OF THE SERIES 2009 BONDS. Payment of the principal of and interest on the Series 2009 Bonds when due will be guaranteed by a financial guaranty insurance policy to be issued by Assured Guaranty Corp. (the Bond Insurer ) simultaneously with the issuance of the Series 2009 Bonds. See THE BOND INSURANCE POLICY. The City has covenanted to undertake certain continuing disclosure pursuant to Rule 15c2-12 of the Securities and Exchange Commission. See CONTINUING DISCLOSURE. This Official Statement speaks only as of its date, and the information contained herein is subject to change. For further information during the initial offering period with respect to the Series 2009 Bonds, contact Ivy Harrison, City Clerk, City of Selma, Alabama 222 Broad Street (Telephone Number: (334) ) or David Hooks, Sterne, Agee & Leach, Inc., 800 Shades Creek Parkway, Birmingham, Alabama (Telephone Number: (205) ). 1

10 GLOSSARY OF TERMS USED IN OFFICIAL STATEMENT Certain capitalized terms used frequently in this Official Statement are defined in this section of the Official Statement. Bond Insurance Policy means the financial guaranty insurance policy issued by the Bond Insurer guaranteeing payment when due of the principal of and interest on the Series 2009 Bonds. Bond Insurer means Assured Guaranty Corp., or any successor or assign. City means the City of Selma, Alabama, a municipal corporation under the laws of the State of Alabama. Federal Securities means direct obligations of, or obligations the payment of which is guaranteed by, the United States of America. Internal Revenue Code means whichever of the following shall be applicable in the context: the Internal Revenue Code of 1986, as amended, the Internal Revenue Code of 1954, as amended, and the transition rules of related legislation. Paying Agent means Regions Bank, Birmingham, Alabama, which is the paying agent and registrar for the Series 2009 Bonds. Refunded Bonds means the City s $4,500,000 General Obligation Bonds, dated December 1, 1999, which are outstanding in the aggregate principal amount of $1,275,000. Series 2009 Bonds means the Series 2009-A Bonds and the Series 2009-B Bonds, collectively. Series 2009-A Bond Ordinance means the ordinance adopted by the governing body of the City on the date of this Official Statement authorizing the issuance of the Series 2009-A Bonds. Series 2009-B Bond Ordinance means the ordinance adopted by the governing body of the City on the date of this Official Statement authorizing the issuance of the Series 2009-B Bonds. Series 2009-A Bonds means the City s $12,000,000 General Obligation Build America (Federal Taxable Direct Payment) Bonds, Series 2009-A, dated December 1, 2009, which are being offered by this Official Statement. Series 2009-B Bonds means the City s $1,290,000 General Obligation Refunding Bonds (Federal Tax- Exempt) Bonds, Series 2009-B, dated December 1, 2009, which are being offered by this Official Statement. Series 2009 Warrants means the City s $4,495,000 General Obligation Refunding Warrants, Series 2009, which are being offered contemporaneously with the issuance of the Series 2009 Bonds. General Provisions DESCRIPTION OF THE SERIES 2009 BONDS The Series 2009 Bonds will be fully registered bonds in the denomination of $5,000 or any multiple thereof, will be dated December 1, 2009, and will be numbered separately from 1 upward. The Series 2009 Bonds will mature annually on February 1 in the amounts and years set forth on the inside cover page hereof. The Series 2009 Bonds will bear interest at the applicable per annum rates set forth on the inside cover page hereof. All Series 2009 Bonds with the same maturity will bear interest at the same rate. Interest shall be computed on the basis of a 360-day year with 12 months of 30 days each. Interest on the Series 2009 Bonds will be payable on each February 1 and August 1, beginning February 1,

11 Method and Place of Payment Payment of interest due on each interest payment date will be made by check or draft mailed on such interest payment date to the persons who were registered holders of the Series 2009 Bonds on the regular record date for such interest payment date, which will be the 15th day of the month preceding such interest payment date. Payment of the principal of (and premium, if any, on) the Series 2009 Bonds and payment of accrued interest due upon redemption on any date other than an interest payment date will be made only upon surrender of the Series 2009 Bonds at the principal office of the Paying Agent, Regions Bank, Birmingham, Alabama. The holder of Series 2009 Bonds in an aggregate principal amount of $100,000 or more may, upon the terms and conditions of the Bond Ordinance, request payment of debt service by wire transfer to an account of such holder maintained at a bank in the continental United States or by any other method providing for payment in sameday funds that is acceptable to the Paying Agent. Redemption of Series 2009-A Bonds Prior to Maturity Optional Redemption. Series 2009-A Bonds maturing on February 1, 2020 or thereafter, or any smaller principal amount of such Series 2009-A Bonds that is a multiple of the smallest authorized denomination, may be redeemed at the option of the City on February 1, 2019 or any date thereafter at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest to the redemption date. Extraordinary Optional Redemption. The Series 2009-A Bonds will be subject to extraordinary optional redemption as a whole or in part at any time, in any order of maturities, at the option of the City, upon the occurrence of an Extraordinary Event (as defined below), at a redemption price equal to the greater of: (1) 100% of the principal amount of the Series 2009-A Bonds to be redeemed; or (2) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of such Series 2009-A Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which such Series 2009-A Bonds are to be redeemed, discounted to the date on which such Series 2009-A Bonds are to be redeemed on a semi-annual basis, assuming a 360-day year of twelve 30-day months, at the Treasury Rate (as defined above), plus 100 basis points; plus, in each case, accrued interest on such Series 2009-A Bonds to be redeemed to the redemption date. The redemption price of the Series 2009-A Bonds is to be determined by the Paying Agent, but the Paying Agent shall have the right to retain, at the expense of the City, an independent accounting firm, investment banking firm or financial advisor (which accounting firm, investment banking firm or financial advisor shall be subject to the reasonable approval of the City) to calculate such redemption price. The Paying Agent and the City may conclusively rely on such accounting firm, investment banking firm or financial advisor s determination of such redemption price and shall bear no liability for such reliance. Treasury Rate means, with respect to any redemption date for a particular Series 2009-A Warrant, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical release H.15 (519) that has become publicly available at least two business days prior to the redemption date (excluding inflation indexed securities) (or, if such Statistical Release is no longer published, any publicly available source of similar market data) most nearly equal to the period from the redemption date to the maturity date of the Series 2009-A Warrant to be redeemed; provided, that if the period from the redemption date to such maturity date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used. An Extraordinary Event will have occurred if the City determines that a material adverse change has occurred to Section 54AA of the Internal Revenue Code (see ELECTION OF SERIES 2009-A BONDS AS BUILD AMERICA BONDS ) or there is any guidance published by the Internal Revenue Service or the United States Department of the Treasury with respect to Section 54AA of the Internal Revenue Code or any other determination by the Internal Revenue Service or the United States Department of the Treasury, which determination is not the result of any act or omission by the City to satisfy the requirements to qualify to receive Interest Subsidy Payments (as defined below under DESIGNATION OF SERIES 2009-A BONDS AS BUILD AMERICA BONDS ), pursuant to which the Interest Subsidy Payments are reduced or eliminated. 3

12 Redemption of Series 2009-B Bonds Prior to Maturity Optional Redemption. Series 2009-B Bonds maturing on February 1, 2020 or thereafter, or any smaller principal amount of such Series 2009-B Bonds that is a multiple of the smallest authorized denomination, may be redeemed at the option of the City on February 1, 2019 or any date thereafter at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest to the redemption date. Other Matters Related to Redemption Prior to Maturity If less than all Series 2009 Bonds Outstanding are to be redeemed, the particular Series 2009 Bonds to be redeemed may be specified by the City by written notice to the Paying Agent, or, in the absence of timely receipt by the Paying Agent of such notice, shall be selected by the Paying Agent by lot or by such other method as the Paying Agent shall deem fair and appropriate; provided, however, that (i) the principal amount of Series 2009 Bonds of each maturity to be redeemed must be a multiple of the smallest authorized denomination of Series 2009 Bonds, and (ii) if less than all Series 2009 Bonds with the same stated maturity are to be redeemed, the Series 2009 Bonds of such maturity to be redeemed shall be selected by lot by the Paying Agent. Any redemption will be made upon at least 30 days notice by registered or certified mail to the holders of Series 2009 Bonds to be redeemed. If a trust is established for payment of less than all Series 2009 Bonds of a particular maturity, the Series 2009 Bonds of such maturity to be paid from the trust shall be selected by the Paying Agent within 7 days after such trust is established and shall be identified by a separate CUSIP number or other designation satisfactory to the Paying Agent. The Paying Agent shall notify holders whose Series 2009 Bonds (or portions thereof) have been selected for payment from such trust and shall direct such holders to surrender their Series 2009 Bonds to the Paying Agent in exchange for Series 2009 Bonds with the appropriate designation. Upon any partial redemption of a Series 2009 Bond, such Series 2009 Bond shall be surrendered to the Paying Agent in exchange for one or more new Series 2009 Bonds in authorized form for the unredeemed portion of principal. Any Series 2009 Bond (or portion thereof) which is to be redeemed must be surrendered to the Paying Agent for payment of the redemption price. Series 2009 Bonds (or portions thereof) duly called for redemption will cease to bear interest after the redemption date, unless the City defaults in payment of the redemption price. Registration and Exchange The Series 2009 Bonds are transferable only on the bond register maintained at the principal office of the Paying Agent. Upon surrender of a Series 2009 Bond to be transferred, properly endorsed, a new Series 2009 Bond will be issued to the designated transferee. The Series 2009 Bonds will be issued in denominations of $5,000 or any multiple thereof and, subject to the provisions of the Bond Ordinance, may be exchanged for a like aggregate principal amount of Series 2009 Bonds, of any authorized denominations and of the same maturity, as requested by the holder surrendering the same. No service charge shall be made for any transfer or exchange, but the City may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Book-Entry Only System The information contained in this section concerning The Depository Trust Company and its book-entry only system has been obtained from materials furnished by The Depository Trust Company to the City. The City and the Underwriter do not make any representation or warranty as to the accuracy or completeness of such information. The Depository Trust Company ( DTC ), New York, New York, will act as securities depository for the Series 2009 Bonds. The Series 2009 Bonds will be issued as fully-registered securities registered in the name of 4

13 Cede & Co., DTC s partnership nominee or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2009 Bond certificate will be issued for each maturity of the Series 2009 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also are subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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 Standard & Poor s highest rating: AAA. 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 Purchases of beneficial ownership interests in the Series 2009 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2009 Bonds on DTC s records. The ownership interest of each beneficial owner of a Series 2009 Bond (a Beneficial Owner ) is in turn to be recorded on the Direct Participants and Indirect Participants records. Beneficial Owners will not receive written communication 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 Participant or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of beneficial ownership interests in the Series 2009 Bonds are to be accomplished by entries made on the books of Direct Participants and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their beneficial ownership interests in the Series 2009 Bonds, except in the event that use of the book-entry system for the Series 2009 Bonds is discontinued. To facilitate subsequent transfers, all Series 2009 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 Series 2009 Bonds with DTC and their registration in the name of Cede & Co. or such other name as may be requested by an authorized representative of DTC do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2009 Bonds. DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 2009 Bonds are credited, which may or may not be the Beneficial Owners. The Direct Participants 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. Redemption notices shall be sent to DTC. If less than all of the Series 2009 Bonds 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 2009 Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual 5

14 procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Series 2009 Bonds are credited on the record date identified in a listing attached to the Omnibus Proxy. Principal, premium and interest payments on the Series 2009 Bonds will be made to Cede & Co., or such nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts, upon receipt of funds and corresponding detail information, in accordance with their respective holdings shown on DTC s records. Payments by Direct Participants and Indirect 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 Direct Participants and Indirect Participants and not of DTC, the Paying Agent or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal, premium (if any) and interest to Cede & Co. (or any other DTC nominee) is the responsibility of the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC and disbursement of such payments to the Beneficial Owners shall be the responsibility of the Direct Participants and Indirect Participants. The City and the Paying Agent cannot and do not give any assurances that DTC, the Direct Participants or the Indirect Participants will distribute to the Beneficial Owners of the Series 2009 Bonds (i) payments of principal of or interest and premium, if any, on the Series 2009 Bonds, (ii) certificates representing an ownership interest or other confirmation of beneficial ownership interests in Series 2009 Bonds, or (iii) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Series 2009 Bonds, or that they will do so on a timely basis or that DTC, Direct Participants or Indirect Participants will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with Direct Participants are on file with DTC. Neither the City nor the Paying Agent will have any responsibility or obligation to any Direct Participant, Indirect Participant or any Beneficial Owner or any other person with respect to: (1) the Series 2009 Bonds; (2) the accuracy of any records maintained by DTC or any Direct Participant or Indirect Participant; (3) the payment by DTC or any Direct Participant or Indirect Participant of any amount due to any Beneficial Owner in respect of the principal or redemption price of or interest on the Series 2009 Bonds; (4) the delivery by DTC or any Direct Participant or Indirect Participant of any notice to any Beneficial Owner which is required or permitted under the terms of the Indenture to be given to bondholders; (5) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Series 2009 Bonds; or (6) any consent given or other action taken by DTC as bondholder. DTC may discontinue providing its services as a depository with respect to the Series 2009 Bonds at any time by giving reasonable notice to the City and the Paying Agent. Under such circumstances, in the event that a successor depositor is not obtained, certificates for the Series 2009 Bonds are required to be printed and delivered. In addition, the City may discontinue the book-entry only system for the Series 2009 Bonds at any time by giving reasonable notice to DTC. Authority for Issuance Series 2009-A Bonds. Section , et seq., of the Code of Alabama 1975 authorizes any municipality in the State of Alabama to issue and sell bonds for the purposes specified in Section , provided that such bonds are first approved at an election duly held within the City. Such bonds shall be issued in the amount and for the purposes and payable at the times and in the respective amounts specified in the notice of said election. Series 2009-B Bonds. Section of the Code of Alabama 1975 authorizes any municipality in the State of Alabama to issue, without an election, bonds for the purpose of refunding a like or greater face amount of the principal of any matured or unmatured bonds of such city then outstanding and any unpaid interest then accrued on such bonds. 6

15 General Description ELECTION OF SERIES 2009-A BONDS AS BUILD AMERICA BONDS In February, 2009, as part of the American Recovery and Reinvestment Act of 2009 ( ARRA ), the United States Congress added Section 54AA to the Internal Revenue Code of 1986, as amended (the Internal Revenue Code ), which permits certain governmental issuers to obtain certain tax advantages when issuing taxable obligations that meet requirements of the Internal Revenue Code and related Treasury regulations. Such bonds are referred to as Build America Bonds. A Build America Bond qualifies under Section 54AA for a direct payment subsidy equal to 35% of the amount of interest payable on such bonds if certain requirements are met. Interest on Build America Bonds is not excludable from gross income of the holders thereof for federal income tax purposes under the Internal Revenue Code, and holders of Build America Bonds will not receive any tax credits as the result of ownership of such Build America Bonds of the City, since the City will elect to receive the Interest Subsidy Payment (as defined herein) when the Series 2009-A Bonds are issued. Interest Subsidy Payment Under Section 54AA(g) of the Internal Revenue Code, an issuer of a Build America Bond may apply to receive payments (the Interest Subsidy Payment ) directly from the Secretary of the United States Treasury (the Secretary ). The amount of an Interest Subsidy Payment is equal to 35% of the corresponding interest payable on the Series 2009-A Bonds on any interest payment date. To receive an Interest Subsidy Payment under existing procedures, the City will have to file a tax return (now designated as Form 8038-CP) between 45 and 90 days prior to the corresponding interest payment date. The City expects to receive the Interest Subsidy Payment contemporaneously with the interest payment dates on the Series 2009-A Bonds. Depending on the timing of the filing and other factors, the Interest Subsidy Payment may be received before or after the corresponding interest payment date. Series 2009-A Bonds As Build America Bonds The City expects to designate all of the Series 2009-A Bonds as Build America Bonds. As a result, interest on the Series 2009-A Bonds is not excludable from gross income of the holders thereof for federal income tax purposes under the Internal Revenue Code, and holders of the Series 2009-A Bonds will not be entitled to any tax credits as the result of either ownership of the Series 2009-A Bonds or receipt of any interest payments on the Series 2009-A Bonds. Beneficial owners of the Series 2009-A Bonds should consult their tax advisors with respect to the inclusion of interest on the Series 2009-A Bonds in gross income for federal income tax purposes. In light of the City s designation of all Series 2009-A Bonds as Build America Bonds, the City intends to apply for Interest Subsidy Payments from the Secretary as provided in Section 54AA of the Internal Revenue Code. The City has covenanted in the Series 2009-A Bond Ordinance to deposit all Interest Subsidy Payments received by the City, if any, into the Revenue Fund established with the Paying Agent. On or before each interest payment date, the Paying Agent is required to transfer such Interest Subsidy Payments to the Debt Service Fund, and the City is permitted to net Interest Subsidy Payments received against the amount otherwise required to be deposited into the Debt Service Fund. The City, however, will not pledge the Interest Subsidy Payments to holders of the Series A Bonds. No assurances can be provided that the City will receive the Interest Subsidy Payments. The amount of any Interest Subsidy Payments is subject to legislative changes by the United States Congress. For the Series 2009-A Bonds to be and remain Build America Bonds, the City must comply with certain covenants and the City must establish certain facts and expectations with respect to the Series 2009-A Bonds, the use and investment of proceeds thereof, and the use of property financed thereby. There are currently no procedures for requesting an Interest Subsidy Payment after the 45 th day prior to an interest payment date; therefore, if the City fails to file the necessary tax return in a timely fashion, it is possible that the City will never receive such Interest Subsidy Payments. If Interest Subsidy Payments are received by the Paying Agent after an interest payment date, the City will be required to pay the entire amount of interest due on such interest payment date and is entitled to be reimbursed out of such Interest Subsidy Payments. The City has entered into a Filing Agent Agreement with the Paying Agent which provides for the Paying Agent to undertake the responsibility of filing the required tax returns in a timely fashion. 7

16 The Interest Subsidy Payments are subject to offset against certain amounts that may, for unrelated reasons, be owed by the City to an agency of the United States of America. Any failure by the City to qualify for Interest Subsidy Payments or any offset of such payments, will not alter the City s obligation to pay the principal of and interest on the Series 2009-A Bonds. General SECURITY AND SOURCE OF PAYMENT The Series 2009 Bonds will be general obligations of the City, for the payment of which the full faith and credit of the City will be irrevocably pledged. Revenues available to the City for payment of debt service on the Series 2009 Bonds include ad valorem taxes, sales and business license taxes and other general fund revenues including, without limitation, the Bond Tax described below. None of such legally available revenues are, however, specially pledged for payment of debt service on the Series 2009 Bonds. Information describing certain taxes and other revenues of the City is set forth in the Official Statement under the caption FINANCIAL SYSTEM - Description of Major Sources of General Fund Revenues. The City is currently levying a 7.4-mill ad valorem tax (the Bond Tax ) that is authorized by Amendment 8 to the Constitution of Alabama of 1901 (the Constitution ). The proceeds of the Bond Tax may, under existing law, be used only for the payment of the debt service on bonds of the City. Collections from the Bond Tax for the fiscal years ending September 30, 2006 through September 30, 2009, were as follows: Fiscal Year Bond Tax Revenues 2006 $1,097, ,003, ,161, ,084,132 After the issuance of the Series 2009 Bonds, the City will have no other outstanding bonds payable out of the Bond Tax. As of December 8, 2009, there was on deposit in the Bond Tax Fund the approximate sum of $4,643,585. Provisions for Payment The Bonds shall, prior to the maturity or redemption date thereof, be deemed to have been paid, and the pledge of the City s full faith and credit shall be terminated, if there shall have been deposited with the Paying Agent cash and/or Federal Securities which (assuming due and punctual payment of the principal of and interest on such Federal Securities) will provide money sufficient to pay when due the debt service due and to become due on such Bonds on and prior to the redemption date or maturity date thereof, as the case may be. At such time as the Bonds shall be deemed paid as aforesaid, they shall no longer be secured by or entitled to the benefits of the Bond Ordinances, except for the purpose of any payment from such cash and/or Federal Securities deposited with the Paying Agent and the purpose of transfer and exchange as provided in the Bond Ordinances. Remedies The Paying Agent is, under existing law, subject to mandamus in the event that there is money available for payment of debt service on the Bonds and such money is not applied as and to the extent provided in the Bond Ordinances. Rights of the holders of the Bonds and the enforceability thereof may also be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and the exercise of judicial discretion in appropriate cases, including the law-imposed requirement that the City may first use its taxes and other revenues to pay the expenses of providing necessary governmental services before paying debt service on the Bonds. 8

17 The United States Bankruptcy Code The United States Bankruptcy Code permits political subdivisions and public agencies or instrumentalities that are insolvent or unable to meet their debts to file petitions for relief in the Federal bankruptcy courts if authorized by State law. While the matter is not entirely free from doubt, prospective purchasers of the Bonds should assume that existing Alabama statutes presently authorize the City and other political subdivisions in Alabama to file such petitions for relief. Bankruptcy proceedings by the City could have adverse effects on holders of the Bonds, including (i) delay in the enforcement of their remedies, (ii) subordination of their claims to the claims of those supplying goods and services to the City after the initiation of bankruptcy proceedings and to the administrative expenses of bankruptcy proceedings, and (iii) imposition without their consent of a reorganization plan reducing or delaying payment on the Bonds. Such a reorganization plan, when confirmed by the bankruptcy court, binds all creditors who had timely notice or actual knowledge of the petition or plan and discharges all claims against the petitioning political subdivision provided for in the plan. No plan may, however, be confirmed by the court unless, among other conditions, either the plan has been accepted in writing by 2/3 in amount and more than 50% in number of the allowed claims of each class which is impaired by the plan, or the court finds that the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims that is impaired under, and has not accepted, the plan. THE FINANCIAL GUARANTY INSURANCE POLICY The following information has been supplied by the Insurer for inclusion in this Official Statement. No representation is made by the City as to the accuracy or completeness of the information. The Insurance Policy Concurrently with the issuance of the Series 2009 Bonds, Assured Guaranty Corp. ( AGC or the Insurer ) will issue its financial guaranty insurance policy (the Policy ) for the Series 2009 Bonds. The Policy guarantees the scheduled payment of principal of and interest on the Series 2009 Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. The Insurer AGC is a Maryland-domiciled insurance company regulated by the Maryland Insurance Administration and licensed to conduct financial guaranty insurance business in all fifty states of the United States, the District of Columbia and Puerto Rico. AGC commenced operations in AGC is a wholly owned, indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, structured finance and mortgage markets. Neither AGL nor any of its shareholders is obligated to pay any debts of AGC or any claims under any insurance policy issued by AGC. AGC s financial strength is rated AAA (negative outlook) by Standard & Poor s, a division of The McGraw-Hill Companies, Inc. ( S&P ), Aa3 (negative outlook) by Moody s Investors Service, Inc. ( Moody s ) and AA- (negative outlook) by Fitch, Inc. ( Fitch ). Each rating of AGC should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of any security guaranteed by AGC. AGC does not guaranty the market price of the securities it guarantees, nor does it guaranty that the ratings on such securities will not be revised or withdrawn. 9

18 Recent Developments In a press release dated December 18, 2009, Moody s announced that it had confirmed its Aa3 insurance financial strength rating of AGC, with a negative outlook. Reference is made to the press release, a copy of which is available at for the complete text of Moody s comments. In a press release dated October 12, 2009, Fitch announced that it had downgraded the insurer financial strength rating of AGC to AA- (negative outlook) from AA (ratings watch negative). Reference is made to the press release, a copy of which is available at for the complete text of Fitch s comments. On July 1, 2009, S&P published a Research Update in which it affirmed its AAA counterparty credit and financial strength ratings on AGC. At the same time, S&P revised its outlook on AGC to negative from stable. Reference is made to the Research Update, a copy of which is available at for the complete text of S&P s comments. There can be no assurance as to any further ratings action that Moody s, Fitch or S&P may take with respect to AGC. For more information regarding AGC s financial strength ratings and the risks relating thereto, see AGL s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which was filed by AGL with the Securities and Exchange Commission ( SEC ) on February 26, 2009, AGL s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, which was filed by AGL with the SEC on May 11, 2009, and AGL s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, which was filed by AGL with the SEC on August 10, 2009, and AGL s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009, which was filed by AGL with the SEC on November 16, Capitalization of Assured Guaranty Corp. As of September 30, 2009, AGC had total admitted assets of $2,096,784,037 (unaudited), total liabilities of $1,917,777,236 (unaudited), total surplus of $179,006,801 (unaudited) and total statutory capital (surplus plus contingency reserves) of $951,037,548 (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. Incorporation of Certain Documents by Reference The portions of the following documents relating to AGC are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof: the Annual Report on Form 10-K of AGL for the fiscal year ended December 31, 2008 (which was filed by AGL with the SEC on February 26, 2009); the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009 (which was filed by AGL with the SEC on May 11, 2009); the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 (which was filed by AGL with the SEC on August 10, 2009); the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 (which was filed by AGL with the SEC on November 16, 2009); the filed portion of the Current Report on Form 8-K of AGL dated December 11, 2009; and the Current Reports on Form 8-K filed by AGL with the SEC relating to the periods following the fiscal year ended December 31, All consolidated financial statements of AGC and all other information relating to AGC included in documents filed by AGL with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the date of this Official Statement and prior to the termination of the offering of 10

19 the Bonds shall be deemed to be incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such consolidated financial statements. Any statement contained in a document incorporated herein by reference or contained herein under the heading THE FINANCIAL GUARANTY INSURANCE POLICY -The Insurer shall be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any subsequently filed document which is incorporated by reference herein also modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. Copies of the consolidated financial statements of AGC incorporated by reference herein and of the statutory financial statements filed by AGC with the Maryland Insurance Administration are available upon request by contacting AGC at 31 West 52 nd Street, New York, New York or by calling AGC at (212) In addition, the information regarding AGC that is incorporated by reference in this Official Statement that has been filed by AGL with the SEC is available to the public over the Internet at the SEC s web site at and at AGL s web site at from the SEC s Public Reference Room at 450 Fifth Street, N.W., Room 1024, Washington, D.C , and at the office of the New York Stock Exchange at 20 Broad Street, New York, New York AGC makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGC has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGC supplied by AGC and presented under the heading THE FINANCIAL GUARANTY INSURANCE POLICY. Series 2009-A Bonds THE PLAN OF FINANCING On October 27, 2009, at a referendum duly called and held within the City, the City was authorized to issue its general obligation bonds in an aggregate principal amount not exceeding $12,000,000 for the following municipal purposes (the Improvements ): Purpose Amount Public Safety Facilities and Equipment $2,065,000 Recreation Facilities 1,510,000 Firefighting Facilities 970,000 Public Works Facilities 2,770,000 Public Building Improvements 610,000 Park Facilities 660,000 Information Technology Equipment 1,570,000 Business Application Software 495,000 Library Facilities 285,000 General Capital Equipment 555,000 Neighborhood Equipment and Improvements 410,000 Landfill Facilities Improvement 100,000 The proceeds of the Series 2009-A Bonds will be used to pay the costs of acquiring and constructing the Improvements and the costs of issuing the Series 2009-A Bonds. The costs of issuance will be deducted from the amounts allocated to the foregoing purposes on a pro rata basis. Series 2009-B Bonds The City has heretofore issued the Refunded Bonds, which are outstanding in the aggregate principal amount of $1,275,000. The Refunded Bonds, maturing in 2011 and thereafter will be refunded with the proceeds of 11

20 the Series 2009-B Bonds and will be called for redemption on February 1, Interest accruing on the Refunded Bonds between the date the Series 2009-B Bonds are issued and February 1, 2010, will be paid out of the City s own funds. Contemporaneous Issuance of Series 2009 Warrants Contemporaneously with the issuance of the Series 2009-A Bonds and the Series 2009-B Bonds, the City will issue its General Obligation Refunding Warrants, Series 2009 (the Series 2009 Warrants ) in the principal amount of $4,485,000. The proceeds of the Series 2009 Warrants will be used to (i) refund the City s General Obligation Warrants, Series 1996, which are currently outstanding in the aggregate principal amount of $1,955,000, (ii) refunding the City s General Obligation Warrants, Series 2003, which are currently outstanding in the aggregate principal amount of $2,380,000, and (iii) paying the costs of issuing the Series 2009 Warrants. See DEBT MANAGEMENT and DEBT SERVICE REQUIREMENTS ON GENERAL OBLIGATION DEBT. Series 2009-A Bonds SOURCES AND USES OF FUNDS The expected sources and uses of funds for the plan of financing for the Series 2009-A Bonds are as follows (rounded to the nearest whole dollar): Sources of Funds Principal amount of Series 2009-A Bonds (1)... $12,000,000 (Less: original issue discount)... 44,491 Total... $11,955,509 Uses of Funds Costs of the Improvements... $11,690,192 Expenses of issuance (including underwriters discount, bond insurance premium, legal, accounting and other issuance expenses) ,317 Total... $11,955,509 (1) Accrued interest received by the City upon the sale of the Series 2009 Bonds will be deposited in the Debt Service Fund established under the Series 2009-A Bond Ordinance and applied to the payment of interest on the Series 2009 Bonds due February 1,

21 Series 2009-B Bonds The expected sources and uses of funds for the plan of financing for the Series 2009-B Bonds are as follows (rounded to the nearest whole dollar): Sources of Funds Principal amount of Series 2009 Bonds (1)... $1,290,000 Plus original issue premium... 45,762 Total... $1,335,762 Uses of Funds Refunding the Refunded Bonds... $1,308,256 Expenses of issuance (including underwriters discount, bond insurance premium, legal, accounting and other issuance expenses)... 27,506 Total... $1,335,762 (1) Accrued interest received by the City upon the sale of the Series 2009 Bonds will be deposited in the Debt Service Fund established under the Series 2009-B Bond Ordinance and applied to the payment of interest on the Series 2009 Bonds due February 1, General THE CITY The City is a municipal corporation organized under the laws of the State of Alabama. The City, which is the county seat of Dallas County, is located approximately 52 miles west of Montgomery, 97 miles southwest of Birmingham and 162 miles north of Mobile. See ECONOMIC AND DEMOGRAPHIC INFORMATION. Governance and Administration The City has the Mayor-Council form of government, and the City Council constitutes the governing body of the City subject to certain powers vested in the Mayor. The Mayor and the City Council members are elected for four-year terms, which end October, Eight of the members of the City Council are elected on a single member ward basis, one from each of the City s eight wards; the ninth member is elected at-large and serves as President of the City Council. The Mayor is the chief administrative office of the City and is responsible for the daily management of the City and the supervision of its employees. The Mayor and the City Council are together responsible for adopting all legislative ordinances and setting the policies of the City, including the appropriation of money. 13

22 Executive, Legislative and Administrative Officials Executive Name Office Expiration of Term George P. Evans Mayor November 2012 Legislative Name Office Expiration of Term Dr. Geraldine Allen City Councilmember, President November 2012 Dr. Cecil Williamson City Councilmember November 2012 Susan M. Keith City Councilmember November 2012 Dr. Monica Newton City Councilmember November 2012 Angela Benjamin City Councilmember November 2012 Samuel Randolph City Councilmember November 2012 Bennie L. Tucker City Councilmember November 2012 Bennie Ruth Crenshaw City Councilmember November 2012 Corey D. Bowie City Councilmember November 2012 Administrative Name Office Expiration of Term Ivy Harrison City Clerk November 2012 Cynthia Mitchell Treasurer November 2012 Services, Departments and Agencies The City s current-year budget authorizes the employment of 286 full-time and 49 part-time employees in its various departments or agencies, which include the following: Police Department. 1 department head, 59 full-time sworn police officers, 0 part-time sworn police officers. Fire Department. 2 fire chiefs, 3 battalions, 6 full-time fire-medics. Municipal Court. 2 judges, 1 city prosecutor, 3 magistrates and 1 court clerk. Sanitation Department. 1 supervisor, 24 laborers. Street Maintenance. 1 supervisor, 16 employees. Utility Equipment and Service. 2 mechanics. season. Parks and Recreation. 3 supervisors, 13 full-time employees, 33 part-time employees for the summer Beautification. 1 supervisor, 13 full-time employees. 1 part-time employee. The City Council appoints the managers of the various departments in the City and these managers are responsible for the routine operation of their respective departments. The City provides police protection, fire protection, public works, including garbage and refuse collecting, certain recreational services and cemetery. 14

23 The water and sanitary sewer systems in the City are owned and operated by The Water Works and Sewer Board of the City of Selma, which Board is governed by a Board of Directors consisting of five members elected by the governing body of the City for staggered six-year terms. In addition to the Water Works and Sewer Board, there are other municipal boards such as The Industrial Development Board of the City of Selma, The Medical Clinic Board of the City of Selma, The Public Building Authority of the City of Selma, the Selma Housing Authority and the Craig Field Airport Authority. The City s public school system is operated and supervised by the Board of Education of the City of Selma. The Board of Education recently became an elected five-member board, with four members representing districts within the City and one member elected at-large throughout the City. The following table lists the governmental services provided by the City, other levels of government or independently appointed or elected agencies. Governmental Services Provided by the City and Others City County State Independent Police protection... Principal Shared Shared Fire protection... Exclusive Street maintenance and repair... Principal Shared Solid waste disposal... Exclusive Water service... Exclusive Sanitary sewer service... Principal Shared Storm water sewers... Exclusive Courts... Shared Principal Road construction... Shared Principal Education... Exclusive Health... Shared Principal Recreation... Exclusive Social welfare... Shared Principal Aviation... Exclusive Employee Relations The City considers relations with its employees to be satisfactory. No employees of the City are represented by labor unions or similar employee organizations. The City does not bargain collectively with any labor union or employee organization. Personnel and Retirement System The City employed approximately 272 full-time personnel in its several departments as of November 1, The benefits and compensation for all employees of the City s several departments are established by the City Council and are paid from the City s general fund. No employees of the City are represented by labor unions or similar employee organizations, and the City does not bargain collectively with any labor unions or employee organizations. The employees of the City participate in a retirement system established by the Legislature of Alabama and known as the Employees Retirement System of Alabama (the Retirement System ). Contributions to the Retirement System are made by both the employees and the City. The respective amounts of such contributions are established by the Legislature of Alabama. Under current law, each employee (other than public safety employees) contributes an amount equal to five percent (5%) of his regular compensation to the Retirement System, while the 15

24 contribution of the City is in an amount equal to times the employee s contribution. Public safety employees contribute six percent (6%) of their regular compensation to the Retirement System and the City contributes an amount equal to times each public safety employee s contribution. At this time, the City has no unfunded liability with respect to the Retirement System. Post-Employment Benefits The City offers health insurance through its group policy for retired employees. Employees who are eligible for retirement benefits are eligible for post-employment health insurance. The City pays 50% of the total cost of health insurance for the retired employees (not including dependents) until the employee reaches sixty-five years of age. When the employee reaches age sixty-five and becomes eligible for Medicare, the City pays one-half of the cost of the employee s supplemental health insurance coverage offered through its group policy. This benefit is available for the life of the employee; it is not available to beneficiaries of the employee. The City accounts for the benefit on the (pay-as-you-go) cash basis. Participants are currently eligible. The total expense to the City for the year ended September 30, 2008 was $63,662. General FINANCIAL SYSTEM The City maintains a financial reporting system which provides timely and accurate reports of receipts and expenditures. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding (i) the safeguarding of assets against loss from unauthorized use or disposition, and (ii) the reliability of financial records for preparing financial statements and maintaining accountability for assets. Activities of the City are monitored internally on a monthly basis and are audited annually, as required by law, by independent certified public accountants. The report of such accountants with respect to certain of the City s financial statements for the fiscal year ended September 30, 2008 is included as Appendix A to this Official Statement. Budgetary System The City follows the following procedures in establishing a budget: 1. Beginning on June 1 of each year, each department head is provided with budget worksheets to be used for that departments budget request. 2. After all departmental budget requests are complete, each department returns the worksheets to the Finance Director and summary budget worksheets are prepared combining the requests of all departments. The total requests are adjusted in relation to projected income and projected revenues are based on historical trends. 3. All budget requests are required to be in final form by September 15 so that public hearings may be conducted. 4. Following the hearings, the final budget is official adopted at the last meeting of the City Council that held in September. Accounting System The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of selfbalancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, for accounting and reporting purposes, into two broad categories, Governmental Funds and Proprietary Funds. Each of these categories is divided into separate fund types as follows: 16

25 Governmental Funds General Fund. The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. Municipal Fund. The Municipal Aid Fund accounts for proceeds from a State gasoline tax. The use of this funding is restricted to expenditures related to construction, improvement and maintenance of highways, bridges and streets. Other Funds Account. The Other Funds Account accounts for special revenue items, largely federal and state grant receipts. AmeriCorp Digital Divide. The AmeriCorp Digital Divide Fund accounts for the grant revenue and expenditures related to the AmeriCorp federal grant program. Proprietary Funds Enterprise Funds. Enterprise funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises when the intent is that the costs of providing goods or services to the general public be financed or recovered primarily through user charges or (b) where the governing body has described that periodic determination of revenues earned, expenses incurred and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. The Inert Landfill Fund, the City s only Enterprise Fund, accounts for the operations, maintenance and development of the City-owned landfill. The notes to the financial statements included in Appendix A include a summary of other significant accounting policies of the City. See Note A. Description of Major Sources of General Fund Revenues The City s major sources of revenues for its General Fund are as follows: Gross Receipts Tax. The City levies a gross receipt tax (the Gross Receipts Tax ) at a rate of four per cent (4%) of gross sales conducted within its corporate limits and two per cent (2%) of sales outside the corporate limits of the City and within its police jurisdiction within Dallas County. The Gross Receipts Tax, which is similar to the sales tax levied by the State of Alabama, is a special privilege or license tax levied on those engaging in the businesses of selling certain items of tangible personal property at retail or conducting places of amusement. The Gross Receipts Tax is the City s largest source of revenue. The proceeds of the Gross Receipts Tax (other than amounts that are paid to the City Board of Education) are and will be available, after the payment of the necessary and legitimate operating expenses of the City, for the payment of all general obligation indebtedness of the City now outstanding or hereafter issued or incurred. The Gross Receipts Tax is collected by the vendor from the consumer and paid to the State Department of Revenue. The State Department of Revenue then remits collections of such tax, net of certain collection charges, to the City. Pursuant to the resolutions and ordinances adopted by the City Council, five per cent (5%) of the proceeds of the Gross Receipts Tax historically have been remitted to the Board of Education, after the City has deducted a 7% administrative fee and has retained an amount sufficient to pay annual debt service on City indebtedness incurred for school purposes. Although the City is not required under applicable state law to continue sharing any proceeds of the Gross Receipts Tax with the City Board of Education, the City has no plans to change its historical practice. General License Taxes. The City levies, in accordance with a schedule of varying rates, license taxes on persons, corporations and others engaged in businesses, occupations and professions in the City. Wholesale Gasoline Distributor s License Tax. The City levies a four cents (4 ) per gallon license or privilege tax on persons and firms engaging in the wholesale distribution or sale, within the City limits and the 17

26 City s police jurisdiction, of gasoline or certain other fuels for use in internal combustion engines. Such tax is levied without regard for the use for which gasoline is sold. The four cents rate is applicable to sales or deliveries by a seller or distributor in the corporate limits of the City and to fuel shipped, transported, or delivered by such seller or distributor at or from its storage point or place of business within the corporate limits to any port or place within the City s corporate limits or police jurisdiction. However, fuel sold or delivered outside the City s corporate limits, but within the City s police jurisdiction, from a storage point or place of business outside the City s corporate limits is subject to a two cents (2 ) per gallon rate. Ad Valorem Taxes. Property or ad valorem taxes are levied under various provisions of the constitution and statutes of Alabama and may be used only for the purpose or purposes for which they are levied. The City levies a 7.8-mill tax for general municipal purposes, proceeds of which are deposited in the General Fund. Under present law, the rates at which local ad valorem taxes are levied may be increased only after approval by the legislature and a majority vote of the qualified electors of the affected jurisdiction. See AD VALOREM TAXATION. Under applicable judicial precedents, neither the Gross Receipts Tax nor any business license tax may be levied at rates that are confiscatory or unreasonable, nor may the rate of any such taxes in the police jurisdiction of a municipality be fixed at a rate that will yield an amount in excess of the cost of furnishing police and fire protection and other essential services to the activity or person being taxed. For a table setting forth the gross revenues for the City s General Fund, see RESULTS OF OPERATIONS - Major Sources of General Fund Revenues. RESULTS OF OPERATIONS This section of the Official Statement presents certain historical financial information concerning the City. The information in this section will be updated annually and such annual report will be filed with appropriate information repositories in accordance with the requirements of Rule 15c2-12 of the Securities and Exchange Commission. See CONTINUING DISCLOSURE. Comparative Statement of General Fund Revenues and Expenditures. The table on the following page sets forth revenues, expenditures and changes in fund balance for the City s General Fund for the three fiscal years ended September 30, 2006 through This information was extracted from the audited financial statements of the City for fiscal years ending September 30, 2006 and September 30, The information for fiscal year ending September 30, 2009 is unaudited. The audited financial statements for fiscal years 2007 and 2008 are included in Appendix A to this Official Statement. Audited financial statements for prior fiscal years may be obtained from the financial consultant upon request. 18

27 Comparative Statement of General Fund Revenues and Expenditures and Changes in Fund Balance Fiscal Year (Ended 9/ (unaudited) REVENUES Taxes $13,763,403 $13,401,273 $13,095,429 $12,786,899 Licenses, Permits & Fees 2,452,743 2,601,450 2,596,991 2,706,703 Intergovernmental 291, , , ,735 Charges for services 832, ,932 Other Revenues 1,661,163 1,376, , ,510 Interest on Investments 128, ,755 64,030 7,945 Total Revenues 18,296,766 17,938,562 17,616,625 16,967,724 EXPENDITURES Current operations: General government 5,009,739 5,474,304 5,747,815 4,914,392 Public safety 7,483,092 7,618,202 7,435,343 6,933,332 Public service 2,596,361 2,638,726 2,606,911 2,211,570 Other 1,533,567 1,703,128 1,526,041 1,556,457 Total current 17,316,110 15,615,751 Capital outlay 548,577 0 Debt Service: Principal retirement 275, , , ,317 Interest charges 100,110 96,214 97,702 0 Total Expenditures 16,998,735 17,932,306 18,339,473 16,162,069 Excess (deficiency) of revenues over (under) expenditures 1,298,031 6, , ,655 OTHER FINANCING SOURCES (USES) Transfers In 9, ,435 Transfers Out -733, , ,538 0 Proceeds from capital leases 23, , ,277 0 Total Other Financing Sources (Uses) -700,709 53, ,261 66,435 Net change in fund balances 597,322 59,543-1,239, ,090 FUND BALANCES BEGINNING (AS ORIGINALLY REPORTED) 4,577,054 5,132,467 5,270,189 4,031,080 Prior period adjustments -41,909 78, FUND BALANCES BEGINNING (AS RESTATED) 4,535,145 5,210,646 5,270,189 4,031,080 FUND BALANCES ENDING $5,132,467 $5,270,189 $4,031,080 $4,903,170 19

28 DEBT MANAGEMENT General The principal forms of indebtedness that the City is authorized to incur include general obligation bonds, general obligation bonds, general obligation bond anticipation notes, revenue anticipation notes, gasoline tax anticipation bonds, and various revenue anticipation bonds and warrants relating to enterprises. In addition, the City has the power to enter into certain leases which constitute a charge upon the general credit of the City and to guarantee obligations of certain public corporations affiliated with the City. In general, the issuance of general obligation bonds requires voter approval. The following types of obligations may be issued or incurred without voter approval: (1) general obligation bonds; (2) general obligation refunding bonds; (3) certain revenue anticipation bonds, warrants and notes; (4) general and special obligation bonds financing street, sidewalk and sewer improvements supported, in whole or in part, by assessments; and (5) capitalized lease obligations that are funded on a year-to-year basis. The City has never defaulted in the payment of debt service on its bonds, warrants or other funded indebtedness, nor has the City ever refunded any funded indebtedness for the purpose of preventing or avoiding such a default. Outstanding Indebtedness Long-Term Indebtedness. Following the issuance of the Series 2009 Bonds and the Series 2009 Warrants (see, PLAN OF FINANCING ), the City will have the following long-term indebtedness outstanding: Description of Indebtedness Source of Payment Principal Balance (1) General Obligation Build America Bonds (Federal Taxable Direct Payment), Series 2009-A General Obligation $12,000,000 General Obligation Refunding Bonds (Tax-Exempt), Series 2009-B General Obligation 1,290,000 General Obligation Warrants, Series 2009 (2) General Obligation 4,495,000 General Obligation Warrants, Series 2005 (3) General Obligation 1,060,000 Miscellaneous capital lease obligations General Obligation 936,146 Jail Lease (4) General Obligation 2,000,000 TOTAL $21,781,146 1) (2) (3) (4) As of September 30, $2,020,000 is exempt from the constitutional debt limit. Exempt from the constitutional debt limit. The City has agreed to lease space in the County jail on a year-to-year basis at the rate of $200,000 per year ending September 30, Short-Term Indebtedness. Other than portions of long-term indebtedness due in the current fiscal year, the City has no short-term indebtedness outstanding. 20

29 Constitutional Debt Limit The City s present constitutional debt limit is an amount equal to 20% of the assessed value of the taxable property located within its corporate limits; however, under existing law, the following are not chargeable against the City s constitutional debt limit: (1) obligations issued for the purpose of acquiring, providing or constructing schools, water works or sewers; (2) obligations incurred for street or sidewalk improvements where the costs thereof, in whole or in part, are to be assessed against the property abutting such improvements; (3) tax anticipation notes not exceeding one-fourth of general revenues; (4) revenue securities payable solely from the revenues of water, sewer, gas or electric systems; and (5) capitalized lease obligations that are funded on a year-to-year basis. The following statement reflects the City s legal debt margin after the issuance of the Series 2009 Bonds: City of Selma, Alabama Statement of Legal Debt Margin Assessed value of taxable property (as of September 30, 2009) $151,819,480 Total Debt Limit (20% of assessed value) $30,363,896 Total indebtedness: Series 2009-A Bonds offered by this Official Statement $12,000,000 Series 2009-B Bonds offered by this Official Statement 1,290,000 Series 2009 Warrants offered contemporaneously 4,495,000 Other general obligation indebtedness (1) 1,060,000 Less: Exempt indebtedness (2) (3,080,000) Total indebtedness chargeable against debt limit 15,765,000 Legal debt margin $14,598,896 limit. (1) (2) Excludes capital lease obligations and jail lease obligation, which are not chargeable against the City s constitutional debt Includes City debt incurred for school purposes. 21

30 Direct and Overlapping Debt The following table reflects the direct debt of the City that will be outstanding after the issuance of the Series 2009 Bonds and the overlapping debt of Dallas County and governmental entities subordinate to the County and the City. Debt of the State of Alabama and the Dallas County Board of Education is not included in overlapping debt. For purposes of this table, direct and overlapping debt includes only general obligation debt or debt payable from taxes levied by the County, the City or a governmental entity subordinate to the County or the City. Pro Forma Direct and Overlapping Indebtedness September 30, 2009 Principal Balance Percent of Debt Allocable To City (1) City s Allocable Share of Debt Direct Debt General obligation bonds, warrants and other obligations (2) $21,781, % $21,781,146 Overlapping Debt (3) Dallas County 2,755, % 1,513,674 Total Direct and Overlapping Debt $24,536,146 $23,294,820 (1) The percent of this debt allocable to the City was calculated on the basis of the ratio of assessed value of taxable property within the City s corporate limits to assessed value of taxable property within Dallas County as of the end of the fiscal year ended September 30, (2) After giving effect to the issuance of the Series 2009 Bonds and the Series 2009 Warrants. (3) Includes all general obligation debt and other County debt payable from county-wide ad valorem taxes. Debt Ratio The following table sets forth certain debt ratios applicable to the City: City of Selma, Alabama Debt Ratios Prior to issuance of Series 2009 Bonds Population (estimated) (1) 18,847 Assessed Value of Taxable Property (2) $151,819,480 General Obligation Debt (3) $21,781,146 General Obligation Debt Per Capita $1,155 Ratio of General Obligation Debt to Assessed Value 14.35% Direct and Overlapping Debt $23,294,820 Ratio of Direct and Overlapping Debt Per Capita $1,236 Ratio of Direct and Overlapping Debt to Assessed Value 15.34% (1) (2) (3) Based on United State Census Bureau Source: Dallas County Revenue Commission. After giving effect to the issuance of the Series 2009 Bonds and the Series 2009 Warrants. 22

31 DEBT SERVICE REQUIREMENTS ON GENERAL OBLIGATION DEBT The following table contains the debt service requirements on all general obligation debt of the City immediately after issuance of the Series 2009 Bonds and the Series 2009 Warrants: 2009-A Bonds 2009-B Bonds 2009 Refunding Warrants Other Outstanding GO Debt Total Fiscal Year Prin Interest Subsidy Total DS Prin Interest Total DS Prin Interest Total DS Prin Interest Total DS Prin Total DS 09/30/10 $950,000 $319,104 $(111,686) $1,157,418 $260,000 $26,450 $286,450 $- $107,992 $107,992 $70,000 $42,825 $112,825 $1,280,000 $1,664,684 09/30/11 $830,000 $462,401 $(161,840) $1,130,561 $245,000 $33,113 $278,113 $275,000 $157,175 $432,175 $75,000 $40,103 $115,103 $1,425,000 $1,955,951 09/30/12 $845,000 $441,864 $(154,652) $1,132,211 $255,000 $24,363 $279,363 $285,000 $147,375 $432,375 $75,000 $37,178 $112,178 $1,460,000 $1,956,126 09/30/13 $880,000 $417,256 $(146,040) $1,151,217 $260,000 $15,350 $275,350 $295,000 $137,225 $432,225 $80,000 $34,075 $114,075 $1,515,000 $1,972,867 09/30/14 $910,000 $388,700 $(136,045) $1,162,655 $270,000 $5,400 $275,400 $310,000 $125,863 $435,863 $80,000 $30,795 $110,795 $1,570,000 $1,984,713 09/30/15 $720,000 $358,044 $(125,315) $952,728 $- $320,000 $114,063 $434,063 $85,000 $27,413 $112,413 $1,125,000 $1,499,203 09/30/16 $755,000 $326,700 $(114,345) $967,355 $- $330,000 $102,688 $432,688 $90,000 $23,825 $113,825 $1,175,000 $1,513,868 09/30/17 $775,000 $293,219 $(102,627) $965,592 $- $345,000 $90,875 $435,875 $95,000 $19,938 $114,938 $1,215,000 $1,516,405 09/30/18 $805,000 $257,166 $(90,008) $972,158 $- $355,000 $78,625 $433,625 $95,000 $15,853 $110,853 $1,255,000 $1,516,635 09/30/19 $840,000 $218,075 $(76,326) $981,749 $- $370,000 $65,938 $435,938 $100,000 $11,635 $111,635 $1,310,000 $1,529,321 09/30/20 $870,000 $174,980 $(61,243) $983,737 $- $380,000 $52,813 $432,813 $105,000 $7,150 $112,150 $1,355,000 $1,528,700 09/30/21 $905,000 $128,378 $(44,932) $988,445 $- $395,000 $39,003 $434,003 $110,000 $2,420 $112,420 $1,410,000 $1,534,869 09/30/22 $930,000 $79,285 $(27,750) $981,535 $- $410,000 $24,156 $434,156 $- $1,340,000 $1,415,692 09/30/23 $985,000 $27,088 $(9,481) $1,002,607 $- $425,000 $8,234 $433,234 $- $1,410,000 $1,435,841 $12,000,000 $3,892,259 $(1,362,291) $14,529,968 $1,290,000 $104,675 $1,394,675 $4,495,000 $1,252,023 $5,747,023 $1,060,000 $293,208 $1,353,208 $18,845,000 $ 23,024,874 (1) Preliminary; subject to change. (2) Excludes capital lease obligations; for purposes of this table the principal amount of indebtedness to be retired in a fiscal year pursuant to mandatory redemption provisions is shown as maturing in that fiscal year. 23

32 AD VALOREM TAXATION General The levy and collection of ad valorem taxes in Alabama are subject to the Alabama Constitution, which, among other things, fixes the percentage of market value at which property can be assessed for taxation, limits the tax rates that can be levied against property and places a ceiling on the aggregate ad valorem taxes that can be levied by all taxing authorities on any property in any tax year. The amount of an ad valorem tax in Alabama is computed by multiplying the applicable tax rate by the assessed value of the taxable property. The assessed value of taxable property is a specified percentage (the assessment ratio ) of its fair and reasonable market value or, in certain circumstances, its current use value. Ad valorem tax rates are stated in terms of mills per dollar of assessed value. Each mill represents a tax equal to one-tenth of one percent of the assessed value of such property. Classification of Taxable Property Amendment No. 373 to the Alabama Constitution divides all taxable property into the following four classes valued for taxation according to the assessment ratios shown below: Class I All property owned by utilities 30% Class II All property not otherwise 20% classified Class III Class IV All agricultural, forest and single-family, owner-occupied residential property and historic buildings and sites 10% Private passenger automobiles and pickup trucks owned and operated by an individual for personal or private use 15% Amendment No. 373 permits the owner of Class III property to elect to have such property appraised at its current use value rather than its fair and reasonable market value. Current use value has been defined statutorily as the value of such property based on the use being made of it on October 1 of the preceding year, without taking into consideration the prospective value such property might have if it were put to some other possible use. Assessment Ratio Adjustment The Alabama Legislature has no power to adjust assessment ratios pertaining to local (as distinguished from state) taxes but does have the power to approve or disapprove an adjustment proposed by a local taxing authority. The governing body of any county, municipality or other local taxing authority may increase or decrease the assessment ratio with respect to any class of property subject to the following conditions: (i) the governing body of such county, municipality or other taxing authority must hold a public hearing on the proposed adjustment before authorizing the adjustment, (ii) the Legislature must adopt an act approving the adjustment and (iii) a majority of the electors of such county, municipality or other taxing authority must approve the adjustment in a special election. In addition, the Legislature has placed the following restrictions on the adjustment of assessment ratios: (1) If the total assessed value of all property of a single class located within a taxing authority s jurisdiction exceeds 50% of the total assessed value of all taxable property located within the jurisdiction of such authority, then the assessment ratio with respect to that class of property may be decreased by no more than 5% from the ratio otherwise prescribed for such class; (2) If the total assessed value of all properties of a single class located within the jurisdiction of a local taxing authority is less than 20% of the total assessed value of all taxable property located within such jurisdiction, 24

33 then the assessment ratio with respect to that class of property may be increased by no more than 5% from the ratio otherwise prescribed for such class; and (3) If the total assessed value of all property of a single class located within the jurisdiction of a local taxing authority exceeds 75% of the total assessed value of all taxable property located within such jurisdiction, then (i) the assessment ratio with respect to that class of property may be decreased by no more than 5% from the ratio otherwise prescribed for such class and (ii) the prospective assessment ratio for all other classes of property may be increased by no more than 5% from the ratio otherwise prescribed for such classes. The governing body of the City has not sought to adjust the assessment ratio applicable to any class of taxable property nor does the City have any present plan for any such adjustment. Rate Adjustments Amendment No. 373 authorizes any county, municipality or other local taxing authority to decrease any ad valorem tax rate at any time, provided that such decrease does not jeopardize the payment of any bonded indebtedness secured by such tax. Amendment No. 373 also permits a county, municipality or other local taxing authority to increase the rate at which any ad valorem tax is levied, but only if (i) the governing body of such county, municipality or other taxing authority holds a public hearing on the proposed increase before authorizing the increase, (ii) the Legislature adopts an act approving the increase and (iii) a majority of the electors of such county, municipality or other taxing authority subsequently approves the increase in a special election. Ceiling on Ad Valorem Taxes Amendment No. 373 also limits the total amount of state, county, municipal and other ad valorem taxes that may be imposed on any class of property in any one tax year. This limitation is expressed in terms of a specified percentage of the fair and reasonable market value of such property. The applicable percentages to the four classes of property are as follows: Class I - 2% Class II - 1 1/2% Class III - 1% Class IV - 1 1/4% If the total amount of tax otherwise payable with respect to a class of property would exceed the maximum tax limit, the millage rate of each separate tax to which such property is subject must be reduced in the same proportion that the millage levied by or for the benefit of each taxing authority bears to the total millage levied by or for the benefit of all applicable taxing authorities. This provision becomes operative as to the several classes of property only if the total tax rate exceeds the following: Class I - Class II - Class III - Class IV /3 mills 75 mills 100 mills 83 1/3 mills 25

34 Ad Valorem Tax Rates Ad valorem taxes on property in the jurisdiction of the City are currently levied at the following rates: Taxing Authority Mills State of Alabama 6.5 Dallas County: 30.5 City of Selma: General 7.8 School 11.8 Bond debt service 7.4 Total 64.0 Assessed Valuation of Taxable Property The following table contains assessed value of taxable property (including motor vehicles) in the City for the fiscal year ended September 30 as follows: Fiscal Year Assessed Value of Taxable Property 2009 $151,819, ,002, ,000, ,648,760 Source: Dallas County Tax Assessor Dallas County License Commissioner (motor vehicles) Largest Ad Valorem Taxpayers Listed below are the ten largest ad valorem taxpayers in Dallas County and the total amount of ad valorem taxes paid by each during the tax year ended September 30, 2009 (the most recent year for which definitive information is available). The amounts shown under the heading Total Ad Valorem Taxes Paid represent the collections during the tax year ended September 30, 2009 from the total state, county, municipal and school district levies (64-mills) on property in the County s jurisdiction. 26

35 Name of Taxpayer Business Assessed Value of Taxable Property* Total Ad Valorem Taxes Paid Percent of Total Alabama Power Co. Utilities 5,746,600 $155, % Bush Hog, LLC Farm equipment 4,729, , PRHC-Alabama Healthcare 4,256, , BellSouth Telecommunications 3,436,400 92, Honda Lock-America, 3,079,060 Inc. Lock and key sets 83, Vaughan Regional 2,101,380 Medical Center Healthcare 56, Henry Brick Co., Inc. Bricks 1,980,600 53, Wal-Mart Retail 1,596,940 43, Bush Hog, LLC Farm equipment 1,478,880 39, Alagasco Utilities 1,474,740 38, *Assessed Value of Taxable Property includes only those taxpayer properties located inside the jurisdiction of the County, but outside any municipalities Sources: Dallas County Tax Assessor and Tax Collector. LITIGATION There is no litigation pending or, to the knowledge of the City, threatened questioning the validity of the Series 2009 Bonds, the proceedings under which they are to be issued, the security for the Series 2009 Bonds provided by the Bond Ordinance, the consummation of the transactions contemplated by the Bond Ordinance, the organization of the City, or the election or qualification of the City s officers. Recent court decisions have substantially eroded the immunity from tort liability formerly enjoyed by local governmental units in Alabama; however, Chapter 93 of Title 11 of the Code of Alabama 1975 now prescribes certain limits on the liability of local governmental units for bodily injury or death and for damage or loss of property. The limits are presently $100,000 in the case of bodily injury or death of one person in any single occurrence, $300,000 in the aggregate where more than two persons have claims or judgments on account of bodily injury or death arising out of any single occurrence, and $100,000 for damage or loss of property arising out of any single occurrence. The Alabama Supreme Court has held that the limitations prescribed by Chapter 93 are constitutional. The City is a defendant in several suits and has been notified of various claims against it arising from matters relating to normal operations of a municipality. The City believes that any liability resulting from these suits and claims will be covered by the City s liability insurance, which has a deductible amount of $5,000 per occurrence, or by other funds of the City which will be available to discharge such liability without impairing its ability to perform any of its other obligations. Local governmental units throughout the country increasingly have been subjected to lawsuits - many of which claim damages in large amounts - for alleged denials of civil rights under the provisions of Section 1983 of Title 42 of the United States Code. While the question is not free from doubt, it should be assumed that existing Alabama statutory limitations on liability for personal injury would not serve to limit liability under Section RISK FACTORS An investment in the Series 2009 Bonds involves certain risks which should be carefully considered by investors. The sufficiency of revenues to pay debt service on the Series 2009 Bonds may be affected by events and conditions relating to, among other things, population and employment trends and economic conditions in the City, the nature and extent of which are not presently determinable. 27

36 Holders of the Series 2009 Bonds should be aware that their rights and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and the exercise of judicial discretion in appropriate cases, including the law-imposed requirement that the City may first use its taxes and other revenues to pay the expenses of providing necessary governmental services before paying debt service on the Series 2009 Bonds. General ECONOMIC AND DEMOGRAPHIC INFORMATION The City is located in Dallas County. Dallas County covers approximately 993 square miles in the westcentral portion of Alabama. Incorporated since 1820, the City is located approximately 52 miles west of Montgomery, 97 miles southwest of Birmingham, and 162 miles north of Mobile. Population The following table sets forth population statistics for the State of Alabama, Dallas County and the City of Selma for the years indicated State of Alabama 4,040,587 4,447,100 4,626,595 4,661,900 Dallas County 48,130 46,365 42,991 42,867 City of Selma 23,755 20,512 18,911 18,847 Source: United States Census Bureau 28

37 Employment The following table sets forth estimated nonagricultural wage and salary employment statistics for Dallas County as of the 4 th Quarter, 2008: Dallas County Employment by Industry Number Employed % Manufacturing 3, Health Care and Social Assistance 2, Retail Trade 1, Education Services 1, Public Administration 1, Accommodation and Food Services Other Services (except Public Admin.) Construction Admin. Support, Waste Mgmt, Remediation Finance and Insurance Wholesale Trade Professional Scientific & Technical Svc Transportation and Warehousing Utilities Real Estate and Rental and Leasing Agriculture, Forestry, Fishing & Hunting Information Arts, Entertainment and Recreation Mining Total wage and salary employees 14, % Source: Alabama Department of Industrial Relations. The following table sets forth labor force estimates and employment rates for Dallas County on the dates indicated: September * Civilian Labor Force 16,116 15,744 15,798 15,474 15,289 15,477 Employment 14,669 14,586 14,665 14,331 13,746 12,209 Unemployment 1,447 1,158 1,133 1,143 1,543 3,268 Rate Source: U.S. Department of Labor, Bureau of Labor Statistics. *Preliminary 29

38 The following table sets forth comparative unemployment rates for the Dallas County, the State of Alabama and the United States for the dates indicated: September * Dallas County 9.0% 7.4% 7.2% 7.4% 10.1% 21.1% State of Alabama United States Source: U.S. Department of Labor, Bureau of Labor Statistics. *Preliminary Major Employers The major governmental and nongovernmental employers in Dallas County, Alabama, their principal activity and the number of employees of each are as follows: Number of Name Employees Principal International Paper Company, Riverdale Mill 810 Paper / Pulp Vaughan Regional Medical Center 600 Healthcare Dallas County Public Schools 590 Education Selma Public Schools 509 Education Bush Hog, LLC 432 Rotary Cutters American Apparel, Inc. 415 Military Uniforms Wal-Mart Super Center 400 Retail Plantation Patterns Furniture Company 348 Cushion & Umbrellas HL-A Company, Inc. 279 Automotive Lock Sets City of Selma 272 Government Hanil E-Hwa Interior Systems Alabama, LLC 258 Automotive Interior Trim Cahaba Center for Mental Health- 232 Mental Health Mental Retardation Services Dallas County 230 Government Wallace Community College Selma 220 Education Warren Manor Nursing Home 201 Healthcare R. L. Zeigler, Co., Inc. 200 Meat Packing Miller & Company 185 Hardwood Lumber, Molding & Oak Flooring Crown Health Care Laundry Services, Inc. 165 Commercial Laundry Global Security Glazing 122 Security Glass, Park Place Nursing & Rehab Center, LLC 120 Healthcare Source: Economic Development Partnership of Alabama 30

39 Income Levels For the year 2009, the U.S. Department of Housing and Urban Development estimates the following with respect to median family income levels in the jurisdictions indicated: Median Family Income Dallas County $38,000 State of Alabama 53,200 United States 64,000 Source: University of Alabama Center for Business and Economic Research Education The Dallas County School System is comprised of 14 schools providing education for approximately 4,500 students. The City of Selma School System is comprised of 12 schools with approximately 4,000 students. There are four private or parochial schools in Dallas County with a combined enrollment of approximately 1,300 students. In addition, the Dallas County Area Vocational School and Wallace Community College offer a full range of vocational and technical programs. Health Care Services The City is the site of one hospital, Vaughan Regional Medical Center. Services provided there include family medicine, general surgery, obstetrics and internal medicine. A 175-bed facility, this hospital employs 75 physicians and surgeons serving 22 medical specialties. Utilities Electricity is supplied to the residents of the City by Alabama Power Company. Natural gas service is supplied by Alabama Gas Corporation. Transportation Dallas County is served by U.S. Highway 80, a modern four-lane corridor, which connects Selma with I-65 and I-85 to the east and with I-20/I-59 to the west. The CSX Railroad serves the County with its Nashville-to- Birmingham line. Craig Field, an airport owned jointly by the City of Selma and the County, has a lighted 10,000-foot runway and a hanger to accommodate corporate jets and private planes. Montgomery is within an hour s drive and is served by major airlines offering regional flights with national and international connections. LEGAL MATTERS The legality and validity of the Series 2009 Bonds will be approved by Bond Counsel, Maynard, Cooper & Gale, P.C., Birmingham, Alabama. Bond Counsel has been employed primarily for the purpose of preparing certain legal documents and supporting certificates, reviewing the transcript of proceedings by which the Series 2009 Bonds have been authorized to be issued, and rendering an opinion in conventional form as to the validity and legality of the Series 2009 Bonds and the exemption of interest thereon from Federal and State of Alabama income taxes. It is anticipated that Bond Counsel will render an opinion substantially in the form attached hereto as Appendix B. Certain legal matters will be passed upon for the City by its counsel, Jimmy L. Nunn. The various legal opinions to be delivered concurrently with the delivery of the Series 2009 Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of 31

40 professional judgment, of the transaction opined upon, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. General TAX MATTERS RELATING TO SERIES 2009-A BONDS Interest on the Series 2009-A Bonds is not excludable from gross income of the holders thereof for federal income tax purposes under the Internal Revenue Code. However, Bond Counsel is of the opinion that, under existing law, interest on the Series 2009-A Bonds will be exempt from State of Alabama income taxation. Election of Series 2009-A Bonds as Build America Bonds The City expects to elect to have all Series 2009-A Bonds treated as Build America Bonds, as described more particularly under ELECTION OF SERIES 2009-A BONDS AS BUILD AMERICA BONDS. General TAX MATTERS RELATING TO SERIES 2009-B BONDS In the opinion of Bond Counsel, under existing law, interest on the Series 2009-B-B Bonds will be excludable from gross income for federal income tax purposes if the City complies with all requirements of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code ), that must be satisfied subsequent to the issuance of the Series 2009-B Bonds in order that interest thereon be and remain excludable from gross income. Failure to comply with certain of such requirements could cause the interest on the Series 2009-B Bonds to be included in gross income, retroactive to the date of issuance of the Series 2009-B Bonds. The City has covenanted to comply with all such requirements. Bond Counsel is also of the opinion that, under existing law, interest on the Series 2009-B Bonds will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on such corporations. Bond Counsel is also of the opinion that the Series 2009-B Bonds are qualified tax-exempt obligations within the meaning of Section 265(b)(3) of the Internal Revenue Code, and, in the case of financial institutions (as defined in Section 265(b)(5) of the Internal Revenue Code), a deduction is allowed for 80% of that portion of such financial institution s interest expense allocable to interest on the Series 2009-B Bonds. Bond Counsel will express no opinion regarding federal tax consequences arising with regard to the Series 2009-B Bonds other than the opinions expressed in the three preceding paragraphs. The form of Bond Counsel s opinion is expected to be substantially as set forth in Appendix C to this Official Statement. Prospective purchasers of the Series 2009-B Bonds should be aware that ownership of the Series 2009-B 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 a branch profits tax and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Series 2009-B Bonds. Bond Counsel will not express any opinion as to such collateral tax consequences. Prospective purchasers of the Series 2009-B Bonds should consult their tax advisors as to collateral federal income tax consequences. Bond Counsel is also of the opinion that, under existing law, interest on the Series 2009-B Bonds will be exempt from State of Alabama income taxation. 32

41 Original Issue Discount In the opinion of Bond Counsel, under existing law, the original issue discount in the selling price of a Series 2009 Bond, to the extent properly allocable to each owner of such Series 2009 Bond, is excludable from gross income for federal income tax purposes with respect to such owner. The original issue discount is the excess of the stated redemption price at maturity of such Series 2009 Bond over the initial offering price to the public, excluding underwriters and other intermediaries, at which price a substantial amount of the Series 2009 Bonds of such maturity were sold. Under Section 1288 of the Internal Revenue Code of 1986, as amended, original issue discount on taxexempt bonds accrues on a compound basis. The amount of original issue discount that accrues to an owner of a Series 2009 Bond during any accrual period generally equals (i) the issue price of such Series 2009 Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity of such Series 2009 Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest payable on such Series 2009 Bond during such accrual period. The amount of original issue discount so 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 income tax purposes, and will increase the owner s tax basis in such Series 2009 Bond. Any gain realized by an owner from a sale, exchange, payment or redemption of a Series 2009 Bond will be treated as gain from the sale or exchange of such Series 2009 Bond. Premium An amount equal to the excess of the purchase price of a Series 2009 Bond over its stated redemption price at maturity constitutes premium on such Series 2009 Bond. A purchaser of a Series 2009 Bond must amortize any premium over such Series 2009 Bond s term using constant yield principles, based on the purchaser s yield to maturity. As premium is amortized, the purchaser s basis in such Series 2009 Bond is reduced by a corresponding amount, resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Series 2009 Bond prior to its maturity. Even though the purchaser s basis is reduced, no federal income tax deduction is allowed. Purchasers of any Series 2009 Bonds at a premium, whether at the time of initial issuance or subsequent thereto, should consult with their own tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to state and local tax consequences of owning such Series 2009 Bonds. BANK QUALIFICATION The Series 2009-B Bonds have been designated by the City as qualified tax-exempt obligations for purposes of paragraph (3) of subsection (b) of Section 265 of the Code. UNDERWRITING The Series 2009-A Bonds are being purchased from the City by Sterne, Agee & Leach, Inc.(the Underwriter ). The Underwriter has agreed to purchase the Series 2009-A Bonds for an aggregate purchase price of $11,995, (which represents the face amount of the Series 2009-A Bonds less underwriter s discount of $72, and original issue discount of $44,490.70) plus accrued interest. The initial public offering price set forth on the cover page may be changed by the Underwriter, and the Underwriter may offer and sell the Series A Bonds to certain dealers (including dealers depositing the Series 2009-A Bonds into investment trusts) and others at prices lower than the offering price set forth on the cover page. The Underwriter will purchase all the Series 2009-A Bonds if any are purchased. The Series 2009-B Bonds are being purchased from the City by Sterne, Agee & Leach, Inc.(the Underwriter ). The Underwriter has agreed to purchase the Series 2009-B Bonds for an aggregate purchase price of $1,328, (which represents the face amount of the Series 2009-B Bonds less underwriter s discount of $7, and plus original issue premium of $45,762.40) plus accrued interest. The initial public offering price set 33

42 forth on the cover page may be changed by the Underwriter, and the Underwriter may offer and sell the Series B Bonds to certain dealers (including dealers depositing the Series 2009-B Bonds into investment trusts) and others at prices lower than the offering price set forth on the cover page. The Underwriter will purchase all the Series 2009-B Bonds if any are purchased. General CONTINUING DISCLOSURE The City has covenanted for the benefit of the holders of the Series 2009 Bonds to provide the Municipal Securities Rulemaking Board s Electronic Municipal Market Access System ( EMMA ) with (i) certain financial information and operating data relating to the City on an annual basis (the Annual Financial Information ) within 180 days after the end of its fiscal year and (ii) notices ( Material Event Notices ) of the occurrence of the following events, if it deems them to be material: 1. A delinquency in payment of principal of or interest on the Series 2009 Bonds. 2. Non-payment related defaults under the proceedings of the City authorizing the Series 2009 Bonds, whether or not such defaults constitute an event of default thereunder. 3. Unscheduled draws on any debt service reserve fund reflecting financial difficulties of the City. 4. Unscheduled draws on any credit enhancement or liquidity facility with respect to the Series 2009 Bonds reflecting financial difficulties of the City. 5. Substitution of a credit enhancer for the one originally described in the Official Statement (if any), or the failure of any credit enhancer respecting the Series 2009 Bonds to perform its obligations under the agreement between the City and such credit enhancer. 6. The existence of any adverse tax opinion with respect to the Series 2009 Bonds or events affecting the tax-exempt status of interest on the Series 2009 Bonds. 7. Any modification of the rights of the registered owners of the Series 2009 Bonds. 8. Redemption of any of the Series 2009 Bonds prior to the stated maturity or mandatory redemption date thereof. 9. Defeasance of the lien of any of the Series 2009 Bonds or the occurrence of circumstances which, pursuant to such authorizing proceedings, would cause the Series 2009 Bonds, or any of them, to be no longer regarded as outstanding thereunder. Bonds. 10. The release, substitution or sale of the property securing repayment of the Series Any changes in published ratings affecting the Series 2009 Bonds. In addition, the City has covenanted to provide in a timely manner to EMMA notice of the City s failure to provide the Annual Financial Information on or before the date specified herein. The Annual Financial Information will include financial information and operating data relating to the City of the type found in the section of this Official Statement called RESULTS OF OPERATIONS. In addition, the City will provide to EMMA audited financial statements prepared in accordance with accounting principles described in the audited financial statements included in this Official Statement as an appendix. 34

43 The Annual Financial Information and Mutual Event Notices are required to be filed with the MSRB in the form and content required by the MSRB, including EMMA, which is operated by the MSRB. EMMA may be reached at The City shall never be subject to money damages for its failure to comply with its obligations to provide the required information. The only remedy available to the holders of the Series 2009 Bonds for breach by the City of its obligations to provide the required information shall be the remedy of specific performance or mandamus against appropriate officials of the City. The failure by the City to provide the required information shall not be an event of default with respect to the Series 2009 Bonds under the Bond Ordinance. A failure by the City to comply with its obligations to provide the required information must be reported as described above and must be considered by any broker, dealer, or municipal securities dealer before recommending the purchase or sale of the Series 2009 Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Series 2009 Bonds and their market price. No person other than the City shall have any liability or responsibility for compliance by the City with its obligations to provide information. The Paying Agent has not undertaken any responsibility with respect to any required reports, notices or disclosures. The City retains the right to modify its obligations described above as long as such modification is done in a manner consistent with Rule 15c2-12 of the Securities and Exchange Commission. RATINGS Standard & Poor s Ratings Services, a division of The McGraw Hill Companies, Inc. ( S&P ), has assigned the ratings to the Series 2009 Bonds as indicated on the cover page based upon the understanding that upon delivery of the Series 2009 Bonds, a financial guaranty insurance policy guaranteeing the payment when due of the principal of and interest on the Series 2009 Bonds will be issued by the Bond Insurer. The first part of S&P s rating on the Series 2009 Bonds reflects S&P s current assessment of the creditworthiness of the Insurer and is ability to pay claims on its policies of insurance. S&P has assigned an underlying rating to the Series 2009 Bonds (as shown in parentheses on the cover page), which reflects S&P s current assessment of the creditworthiness of the City with respect to obligations secured by the full faith and credit of the City. Any further explanation of the significance of such ratings may be obtained only from S&P. The City furnished to S&P the information contained in this Official Statement and certain other information respecting the City and the Series 2009 Bonds. Generally, rating agencies base their underlying ratings on such materials and information, as well as on their on investigations, studies and assumptions. The above ratings are not a recommendation to buy, sell or hold the Series 2009 Bonds, and any such ratings may be subject to revision or withdrawal at any time by S&P. Any downward revision or withdrawal of any or all of such rating may have an adverse effect on the market price of the affected Series 2009 Bonds. Neither the City nor the Underwriter has undertaken any responsibility either to bring to the attention of the holder of any the Series 2009 Bond any proposed revision, suspension or withdrawal of a rating or to oppose any such revision, suspension or withdrawal. INDEPENDENT AUDITORS The financial statements of the City included in Appendix A to this Official Statement have been audited by Wilson Price Barranco Blankenship & Billingsley, P.C., Montgomery, Alabama, independent certified public accountants, as stated in their report appearing herein as Appendix A to this Official Statement. 35

44 MISCELLANEOUS This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or holders of any of the Series 2009 Bonds. All quotations from and summaries and explanations of provisions of laws and documents herein do not purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions. The order and placement of material in this Official Statement, including its appendices, are not to be deemed a determination of relevance, materiality or importance, and all material in this Official Statement, including its appendices, must be considered in its entirety. The information in this Official Statement has been obtained from sources which are considered dependable and which are customarily relied upon in the preparation of similar official statements, but such information is not guaranteed as to accuracy or completeness. All estimates and assumptions contained herein are believed to be reliable, but no representation is made that such estimates or assumptions are correct or will be realized. No person, including any broker, dealer or salesman, has been authorized to give any information or to make any representation other than those 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 the City. The Series 2009 Bonds will not be registered under the Securities Act of 1933, as amended, or any state securities laws and will not be listed on any stock or other securities exchange, and neither the Securities and Exchange Commission nor any federal, state, municipal or other governmental agency will pass upon the accuracy, completeness or adequacy of this Official Statement. Any information or expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create an implication that there has been no change as to the affairs of the City since the date hereof. 36

45 ADDITIONAL INFORMATION For further information during the initial offering period with respect to the Series 2009 Bonds, contact Ivy Harrison, City Clerk, City of Selma, Alabama, City Hall, 222 Broad Street, Selma, Alabama 36703, telephone number (334) or David Hooks, Sterne, Agee & Leach, Inc., 800 Shades Creek Parkway, Birmingham, Alabama, telephone number (205) This Official Statement has been approved by the governing body of the City. CITY OF SELMA, ALABAMA By: s/george P. Evans Mayor

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47 APPENDIX A Audited Financial Statements of the City of Selma, Alabama for the fiscal years ended September 30, 2007 and September 30, 2008

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139 APPENDIX B Proposed Opinions of Bond Counsel

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141 (Form of Opinion of Bond Counsel) [Closing Date] Holders of the Series 2009-A Warrants referred to below Re: $12,000,000 General Obligation Build America Bonds (Federal Taxable Direct Payment), Series 2009-A, issued by the City of Selma We have acted as bond counsel in connection with the issuance of the above-referenced bonds (the Series 2009-A Bonds ) by the City of Selma, a municipal corporation organized under the laws of the State of Alabama (the City ). In such capacity, we have examined such law and such certified proceedings and other documents as we have deemed necessary to render this opinion. We have examined the following: the proceedings for adoption of a certain ordinance by the governing body of the City on December 15, 2009 approving the issuance of the Series 2009-A Bonds (the Series 2009-A Bond Ordinance ); and such other certificates, proceedings, proofs and documents considered by us to be pertinent. As to various questions of fact material to our opinion, we have relied upon the certified proceedings and other certificates of public officials and others furnished to us without undertaking to verify the same by independent investigation. Capitalized terms not otherwise defined herein shall have the meanings assigned to such term in the Series 2009-A Bond Ordinance. Based on the foregoing, we are of the opinion that, under existing law: 1. The Series 2009-A Bonds constitute valid and binding obligations of the City. The indebtedness evidenced by the Series 2009-A Bonds is a general obligation of the City for the payment of which the City has validly and irrevocably pledged its full faith and credit. 2. Interest on the Series 2009-A Bonds is exempt from State of Alabama income taxation. We express no opinion regarding federal tax consequences arising with regard to the Series 2009-A Bonds. The rights of the holders of the Series 2009-A Bonds and the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and the exercise of judicial discretion in appropriate cases. We express no opinion herein as to the accuracy, adequacy or completeness of the Official Statement relating to the Series 2009-A Bonds. This opinion is given as of the date hereof and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Faithfully yours, B-1

142 (Form of Opinion of Bond Counsel) [Closing Date] Holders of the Series 2009-B Bonds referred to below Re: $1,275,000 General Obligation Refunding Bonds (Tax-Exempt), Series 2009-B dated December 1, 2009, issued by the City of Selma, Alabama We have acted as bond counsel in connection with the issuance of the above-referenced bonds (the "Series 2009-B Bonds") by the City of Selma, Alabama, a municipal corporation organized under the laws of the State of Alabama (the "City"). We have examined the following: the proceedings for adoption of a certain ordinance by the governing body of the City on December 15, 2009 approving the Series 2009-B Bonds (the "Series 2009-B-Bond Ordinance"); and other certificates, proceedings, proofs and documents considered by us to be pertinent. As to various questions of fact material to our opinion, we have relied upon representations made in certificates executed by public officials and by officers of the City without undertaking to verify the same by independent investigation. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in then Series 2009-B Bond Ordinance. that: Based on the foregoing and upon such investigation as we have deemed necessary, we are of the opinion 1. The Series 2009-B Bonds constitute valid and binding obligations of the City. The indebtedness evidenced by the Series 2009-B Bonds is a general obligation of the City for the payment of which the City has validly and irrevocably pledged its full faith and credit. 2. Interest on the Series 2009-B Bonds (including any original issue discount properly allocable to an owner thereof) is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on certain corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings. The opinion set forth in the preceding sentence is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Series 2009-B Bonds in order that interest thereon be, or continue to be, excluded 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 interest on the Series 2009-B Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2009-B Bonds. 3. The Series 2009-B Bonds are "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Internal Revenue Code and, in the case of a financial institution (as defined in Section 265(b)(5) of the Internal Revenue Code), a deduction is allowed for 80% of that portion of such financial institution's interest expense allocable to interest on the Series 2009-B Bonds. 4. Interest on the Series 2009-B Bonds is exempt from State of Alabama income taxation. B-2

143 We express no opinion regarding federal tax consequences arising with regard to the Series 2009-B Bonds, other than the opinions expressed in paragraphs 2 and 3 above. The rights of the holders of the Series 2009-B Bonds and the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights and the exercise of judicial discretion in appropriate cases. We express no opinion herein as to the accuracy, adequacy or completeness of the Official Statement relating to the Series 2009-B Bonds. This opinion is given as of the date hereof and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Faithfully yours, MAYNARD, COOPER & GALE, P.C. By: B-3

144 Financial Guaranty Insurance Policy Issuer: Policy No.: Obligations: Premium: Effective Date: Assured Guaranty Corp., a Maryland corporation ( AGC ), in consideration of the payment of the Premium and on the terms and subject to the conditions of this Policy (which includes each endorsement hereto), hereby unconditionally and irrevocably agrees to pay to the trustee (the Trustee ) or the paying agent (the Paying Agent ) for the Obligations (as set forth in the documentation providing for the issuance of and securing the Obligations) for the benefit of the Holders, that portion of the Insured Payments which shall become Due for Payment but shall be unpaid by reason of Nonpayment. AGC will make such Insured Payments to the Trustee or the Paying Agent on the later to occur of (i) the date applicable principal or interest becomes Due for Payment, or (ii) the Business Day next following the day on which AGC shall have Received a completed Notice of Nonpayment. If a Notice of Nonpayment by AGC is incomplete or does not in any instance conform to the terms and conditions of this Policy, it shall be deemed not Received, and AGC shall promptly give notice to the Trustee or the Paying Agent. Upon receipt of such notice, the Trustee or the Paying Agent may submit an amended Notice of Nonpayment. The Trustee or the Paying Agent will disburse the Insured Payments to the Holders only upon receipt by the Trustee or the Paying Agent, in form reasonably satisfactory to it of (i) evidence of the Holder's right to receive such payments, and (ii) evidence, including without limitation any appropriate instruments of assignment, that all of the Holder's rights to payment of such principal or interest Due for Payment shall thereupon vest in AGC. Upon and to the extent of such disbursement, AGC shall become the Holder of the Obligations, any appurtenant coupon thereto and right to receipt of payment of principal thereof or interest thereon, and shall be fully subrogated to all of the Holder's right, title and interest thereunder, including without limitation the right to receive payments in respect of the Obligations. Payment by AGC to the Trustee or the Paying Agent for the benefit of the Holders shall discharge the obligation of AGC under this Policy to the extent of such payment. This Policy is non-cancelable by AGC for any reason. The Premium on this Policy is not refundable for any reason. This Policy does not insure against loss of any prepayment premium or other acceleration payment which at any time may become due in respect of any Obligation, other than at the sole option of AGC, nor against any risk other than Nonpayment. Except to the extent expressly modified by any endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. Avoided Payment means any amount previously distributed to a Holder in respect of any Insured Payment by or on behalf of the Issuer, which amount has been recovered from such Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction that such payment constitutes an avoidable preference with respect to such Holder. Business Day means any day other than (i) a Saturday or Sunday, (ii) any day on which the offices of the Trustee, the Paying Agent or AGC are closed, or (iii) any day on which banking institutions are authorized or required by law, executive order or governmental decree to be closed in the City of New York or in the State of Maryland. Due for Payment means (i) when referring to the principal of an Obligation, the stated maturity date thereof, or the date on which such Obligation shall have been duly called for mandatory sinking fund redemption, and does not refer to any earlier date on which payment is due by reason of a call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless AGC in its sole discretion elects to make any principal payment, in whole or in part, on such earlier date) and (ii) when referring to interest on an Obligation, the stated date for payment of such interest. Holder means, in respect of any Obligation, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Obligation to payment of principal or interest thereunder, except that Holder shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Obligations. Insured Payments means that portion of the principal of and interest on the Obligations that shall become Due for Payment but shall be unpaid by reason of Nonpayment. Insured Payments shall not include any additional amounts owing by the Issuer solely as a result of the failure by the Trustee or the Paying Agent to pay such amount when due and payable, including without limitation any such additional amounts as may be attributable to penalties or to interest accruing at a default rate, to amounts payable in respect of indemnification, or to any other additional amounts payable by the Trustee or the Paying Agent by reason of such failure. Nonpayment means, in respect of an Obligation, the failure of the Issuer to have provided sufficient funds to the Trustee or the Paying Agent for payment in full of all principal and interest Due for Payment on such Obligation. It is further understood that the term "Nonpayment" in respect of an Obligation includes any Avoided Payment. Receipt or Received means actual receipt or notice of or, if notice is given by overnight or other delivery service, or by certified or registered United States mail, by a delivery receipt signed by a person authorized to accept delivery on behalf of the person to whom the notice was given. Notices to AGC may be mailed by registered mail or personally delivered or telecopied to it at 31 West 52 nd Street, New York, New York 10019, Telephone Number: (212) , Facsimile Number: (212) , Attention: Risk Management Department Public Finance Surveillance, with a copy to the General Counsel at the same address and at generalcounsel@assuredguaranty.com or at the following Facsimile Number: (212) , or to such other address as shall be specified by AGC to the Trustee or the Paying Agent in writing. A Notice of Nonpayment will be deemed to be Received by AGC on a given Business Day if it is Received prior to 12:00 noon (New York City Page 1 of 2 Form NY-FG (05/07)