FINAL OFFICIAL STATEMENT DATED AUGUST 19, 2014

Transcription

1 New Issue Investment Rating: Moody s Investors Service Aa2 FINAL OFFICIAL STATEMENT DATED AUGUST 19, 2014 Subject to the City s compliance with certain covenants, under present law, in the opinion of Bond Counsel, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax imposed on individuals and corporations; however, with respect to corporations, such interest is included in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Interest on the Bonds is not exempt from present Iowa income taxes. The City intends to designate the Bonds as qualified tax-exempt obligations. See TAX MATTERS herein. CITY OF MASON CITY Cerro Gordo County, Iowa Dated Date of Delivery Bank Qualified Book-Entry Due Serially June 1, The (the Bonds ), are being issued by the City of Mason City, Cerro Gordo County, Iowa (the City ). Interest on the Bonds is payable semiannually on June 1 and December 1 of each year, commencing June 1, The Bonds will be issued using a book-entry system. The Depository Trust Company ( DTC ), New York, New York, will act as securities depository for the Bonds. The ownership of one fully registered Bond for each series and maturity will be registered in the name of Cede & Co., as nominee for DTC and no physical delivery of Bonds will be made to purchasers. The Bonds will mature on June 1 as described herein. See BOND ISSUE SUMMARY herein. AMOUNTS, MATURITIES, INTEREST RATES AND YIELDS Principal Due Interest CUSIP(1) Principal Due Interest CUSIP(1) Amount June 1 Rate Yield NUMBER Amount June 1 Rate Yield NUMBER $365, % 0.250% C73 $760, % 1.300% D49 520, % 0.500% C81 770, % 1.500% D56 705, % 0.700% C99 790, % 1.750% D64 710, % 0.970% D23 600, % 1.900% D72 715, % 1.150% D31 400, % 2.050% D80 Note: (1) CUSIP numbers appearing in this Official Statement have been provided by the CUSIP Service Bureau, which is managed on behalf of the American Bankers Association by Standard & Poor's, a division of the McGraw-Hill Companies, Inc. The City is not responsible for the selection of CUSIP numbers and makes no representation as to their correctness on the Bonds or as set forth on the cover of this Final Official Statement. OPTIONAL REDEMPTION The Bonds due June 1, , inclusive, are not subject to optional redemption prior to maturity. The Bonds due June 1, , inclusive, are subject to optional redemption prior to maturity in whole or in part on any date on or after June 1, 2020 at a price of par and accrued interest. If less than all the Bonds are called, they shall be redeemed in any order of maturity as determined by the City and within any maturity by lot. See OPTIONAL REDEMPTION herein. PURPOSE, LEGALITY AND SECURITY The Bond proceeds will be used to: (i) pay costs of equipping the police and fire departments; (ii) acquire peace office communication equipment and other emergency services communication equipment and systems; (iii) improve airport owned by the City; (iv) improve real estate for city cemetery, construct, reconstruct or repair cemetery facilities; (v) acquire, construct, improve and install street lighting fixtures, connections and facilities; (vi) construct, reconstruct and repair sidewalks and pedestrian underpasses and overpasses, and acquire real estate for such purposes, including Blue Zone Trail projects; (vii) improve, extend and equip the City water utility; (viii) pay costs of improvements to City Facilities, including City Hall, Police and Fire Departments and Cemetery Facilities; and (ix) pay the costs of issuance of the Bonds. See THE PROJECT herein. In the opinion of Bond Counsel, Ahlers & Cooney, P.C., Des Moines, Iowa, the Bonds will constitute valid and legally binding obligations of the City payable both as to principal and interest from ad valorem taxes levied against all taxable property therein without limitation as to rate or amount, all except as limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws relating to the enforcement of creditors rights generally and except that enforcement by equitable and similar remedies, such as mandamus, is subject to the exercise of judicial discretion. The City intends to designate the Bonds as qualified tax-exempt obligations under Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. See TAX MATTERS herein. The Bonds are offered when, as and if issued and received by the Underwriter, subject to the approving legal opinion of Ahlers & Cooney, P.C., Des Moines, Iowa, Bond Counsel, and certain other conditions. It is expected that the Bonds will be made available for delivery on or about September 17, Established 1954 Speer Financial, Inc. INDEPENDENT PUBLIC FINANCE CONSULTANTS ONE NORTH LASALLE STREET, SUITE 4100 CHICAGO, ILLINOIS Telephone: (312) ; Facsimile: (312) COMMERCIAL STREET, SUITE 608 WATERLOO, IOWA Telephone: (319) ; Facsimile: (319)

2 No dealer, broker, salesman or other person has been authorized by the City to give any information or to make any representations with respect to the Bonds other than as contained in the Official Statement or the Final Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. Certain information contained in the Official Statement and the Final Official Statement may have been obtained from sources other than records of the City and, while believed to be reliable, is not guaranteed as to completeness. THE INFORMATION AND EXPRESSIONS OF OPINION IN THE OFFICIAL STATEMENT AND THE FINAL OFFICIAL STATEMENT ARE SUBJECT TO CHANGE, AND NEITHER THE DELIVERY OF THE OFFICIAL STATEMENT OR THE FINAL OFFICIAL STATEMENT NOR ANY SALE MADE UNDER EITHER SUCH DOCUMENT SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CITY SINCE THE RESPECTIVE DATES THEREOF. References herein to laws, rules, regulations, ordinances, resolutions, agreements, reports and other documents do not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein. Where full texts have not been included as appendices to the Official Statement or the Final Official Statement they will be furnished on request. This Official Statement does not constitute an offer to sell, or solicitation of an offer to buy, any securities to any person in any jurisdiction where such offer or solicitation of such offer would be unlawful.

3 TABLE OF CONTENTS BOND ISSUE SUMMARY... 1 THE CITY... 2 City Organization and Services... 2 Medical... 3 Transportation... 3 Recreation... 3 Education... 3 Sales & Major Employers... 3 SOCIOECONOMIC INFORMATION... 4 Population... 4 Employment... 4 Building Permits... 6 Housing... 6 Income... 7 Agriculture... 7 Local Option Sales Tax... 8 Retail Sales... 9 THE PROJECT... 9 DEBT INFORMATION... 9 PROPERTY TAX INFORMATION Property Tax Assessment Property Tax Collection Levy Limits Utility Property Tax Replacement Tax Increment Financing Legislation FINANCIAL INFORMATION Budgeting Investment Policy Financial Reports No Consent or Updated Information Requested of the Auditor Summary Financial Information EMPLOYEE RETIREMENT AND OTHER POST EMPLOYMENT BENEFIT OBLIGATIONS Pensions Other Post-Employment Benefits (OPEB) REGISTRATION, TRANSFER AND EXCHANGE TAX MATTERS Tax Exemption Qualified Tax-Exempt Obligations Tax Accounting Treatment of Discount and Premium on Certain Bonds Related Tax Matters Opinion CONTINUING DISCLOSURE OPTIONAL REDEMPTION LITIGATION LEGAL MATTERS FINAL OFFICIAL STATEMENT AUTHORIZATION INVESTMENT RATING UNDERWRITING FINANCIAL ADVISOR CERTIFICATION APPENDIX A: Excerpts From the Audited Financial Statements for the Fiscal Year Ended June 30, 2013 APPENDIX B: Describing Book-Entry Only Issuance APPENDIX C: Draft Form of Legal Opinion APPENDIX D: Draft Continuing Disclosure Certificate i

4 BOND ISSUE SUMMARY This Bond Issue Summary is expressly qualified by the entire Final Official Statement Issuer: City of Mason City, Cerro Gordo County, Iowa. Issue:. Dated Date: Date of delivery (expected to be on or about September 17, 2014). Interest Due: Each June 1 and December 1, commencing June 1, Principal Due: Optional Redemption: Authorization: Security: Investment Rating: Purpose: Tax Matters: Registrar/Paying Agent: Book-Entry Form: Bank Qualified: Serially each June 1, commencing June 1, 2015 through 2024, as detailed on the front page of this Official Statement. The Bonds maturing on or after June 1, 2021, are callable at the option of the City on any date on or after June 1, 2020, at a price of par plus accrued interest. See OPTIONAL REDEMPTION herein. The Bonds are being issued pursuant to authority established in the Code of Iowa, Chapter 384 and all laws amendatory thereof and supplementary thereto, and in conformity with resolutions of the City Council duly passed and approved. The Bonds are valid and legally binding general obligations of the City payable both as to principal and interest from ad valorem taxes levied against all taxable property therein without limitation as to rate or amount, all except as limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws relating to the enforcement of creditors rights generally and except that enforcement by equitable and similar remedies, such as mandamus, is subject to the exercise of judicial discretion. An investment rating for the Bonds has been requested from Moody s Investors Service, New York, New York. See INVESTMENT RATING herein. The Bond proceeds will be used to: (i) pay costs of equipping the police and fire departments; (ii) acquire peace office communication equipment and other emergency services communication equipment and systems; (iii) improve airport owned by the City; (iv) improve real estate for city cemetery, construct, reconstruct or repair cemetery facilities; (v) acquire, construct, improve and install street lighting fixtures, connections and facilities; (vi) construct, reconstruct and repair sidewalks and pedestrian underpasses and overpasses, and acquire real estate for such purposes, including Blue Zone Trail projects; (vii) improve, extend and equip the City water utility; (viii) pay costs of improvements to City Facilities, including City Hall, Police and Fire Departments, and Cemetery Facilities; and (ix) pay the costs of issuance of the Bonds. See THE PROJECT herein. Ahlers & Cooney, P.C., Des Moines, Iowa, will provide an opinion as to the tax exemption of the Bonds as discussed under TAX MATTERS in this Final Official Statement. Interest on the Bonds is not exempt from present State of Iowa income taxes. See APPENDIX C for a draft form of legal opinion for the Bonds. Bankers Trust Company, of Des Moines, Iowa. The Bonds will be registered in the name of Cede & Co. as nominee for The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository of the Bonds. See APPENDIX B herein. The City intends to designate the Bonds as qualified tax-exempt obligations under Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. See TAX MATTERS herein. Delivery Date: The Bonds are expected to be delivered on or about September 17, Denomination: Financial Advisor: $5,000 or integral multiples thereof. Speer Financial, Inc., Waterloo, Iowa and Chicago, Illinois. 1

5 CITY OF MASON CITY Cerro Gordo County, Iowa Eric Bookmeyer Mayor City Council Travis Hickey Alex Kuhn John Lee Jean Marinos Janet Solberg Scott Tornquist Officials Brent Trout City Administrator Kevin Jacobson Director of Finance THE CITY Mason City, Cerro Gordo County, Iowa (the City ) is the county seat for Cerro Gordo and is located approximately 130 miles north of Des Moines and nine miles east of popular Clear Lake with excellent recreational facilities. The City was recognized nationally as a superior community in which to live. A book entitled, The Rating Guide to Life in America s Small Cities, authored by G. Scott Thomas, a former reporter for National Public Radio, ranked 219 metropolitan areas with populations between 15,000 and 50,000. The City ranked 10 th nationally and was found to be superior in health care, retail outlets, amusement places, proximity to surrounding urban areas and education. City Organization and Services The City has a Mayor-Council form of government. The Mayor is elected to a four-year term and six council members are elected to staggered four-year terms. Policy is established by the Mayor and the City Council. The City Administrator and Director of Finance are appointed by the City Council. The day-to-day operations of the City are the responsibility of the City Administrator. Approximately 280 people are employed by the City on a full-time basis. The City considers its employee relations to be good. The City s Police are represented by the Police Bargaining Unit which the bargaining contract expires on June 30, 2015; the Fire Fighters by Local No. 678 of the International Association of Fire Fighters which the bargaining contract expires on June 30, 2014, and the Public Works Employees by the AFCSME which the bargaining contract expires on June 30, The City employs 47 full-time police officers and is served by 45 full-time firefighters and paramedics. The fire insurance classification is ISO 3. The City s water system provides water to City residents from the Jordan aquifer. The City collects residential trash, while commercial businesses contract privately for trash removal. Electric power and natural gas are provided to City residents by Alliant Energy. Telecommunication services are provided locally by Qwest Communications. Cable services are provided by MediaCom and internet services by Mediacom and Netconx. 2

6 Medical St. Joseph s Mercy Hospital and North Iowa Medical Center consolidated in 1993 to form the North Iowa Mercy Health Center. The Health Center serves to make the City a medical center for north central Iowa. The Health Center s east campus (formerly St. Joseph s Mercy Hospital) employs approximately 1,500 employees and is licensed for 303 acute care beds. The Health Center is currently completing a $44 million building program which includes the construction of a new cancer center and a new medical office building for hospital doctors. The Health Center s west campus (formerly the North Iowa Medical Center) employs approximately 340 employees and is licensed the 75 acute care beds. The Medical Center also owns and operates a 44-unit elderly housing project and a Women s Clinic and Family Practice Center. Transportation Transportation needs are served by three railroads, the rail lines serving the City are the Union Pacific Railroad and the I&M Rail Link. Iowa Traction Railroad provides reciprocal switching agreements and through rates for all roads. The City operates a municipal airport serviced by regularly scheduled commuter airline flights. Intra-city bus service is provided by the Mason City Transit and inter-city transportation is provided by both the Jefferson Bus Lines and the Scenic Hawkeye States, Inc. bus service. Fifteen common carriers provide trucking service from nine terminals in the City. The City is served by primary roads Hwy 18 and 65, as well as U.S. Interstate Highway No. 35 (located six miles west of the City). The City is also served by the Avenue of the Saints providing excellent connections to major metropolitan areas in the Midwest. Recreation The City operates many parks and recreation areas within the City limits. The facilities available at these areas include tennis, golf, swimming, boating, picnicking, fishing and baseball. The Winnebago River flows through the City and popular Clear Lake is only nine miles west. Both private and public golf courses are available. Pilot Knob State Park and McIntosh Woods are both within twenty miles of the City. The City s cultural activities are enhanced by a community playhouse and scheduled lecture series. Circulation at the City s Globe Gazette newspaper reaches the surrounding nine-county area. Education Educational needs for City residents are provided primarily by the Mason City Community School District which operates six elementary schools, two middle schools, a senior high school, and an alternative school (grades 9-12). Total enrollment of the Mason City Community School District is approximately 4,700 students. In addition, another 635 students attend three parochial elementary-middle schools and one parochial senior high school. Total teaching staff of the public and private education systems is approximately 400. Continuing educational opportunities within the community are provided by Area II, North Iowa Area Community College (enrollment 2,456, teaching staff 80), Buena Vista College of Storm Lake, Hamilton Business College, LaJames College of Hairstyling and Capri Cosmetology College. Continuing education centers within commuting distance include Wartburg College, Waverly, Iowa, and Waldorf College, Forest City, Iowa. Sales & Major Employers The City serves as the principal trading center for north-central Iowa, with a trade population of 240,000 people. The area also supports an industrial base of companies such as Armour & Co. (Division of Con Agra Inc.); Curries Manufacturing Co., Inc.; FRC; Holnam Inc.; IMI Cornelius; LeHigh Portland Cement Company. Other major employers include Principal Financial Group Inc, North Iowa Mercy Health Center, North Iowa Community College and Mason City Community School District. For more information see SOCIOECONOMIC INFORMATION Employment and Retail Sales. 3

7 SOCIOECONOMIC INFORMATION Population The following demographic information is for the City. Additional comparisons are made with Cerro Gordo County (the County ) and the State of Iowa (the State ). Population Comparison(1) City Percent The Percent State of Percent Year Population Change County Change Iowa Change ,642 N/A 49,894 N/A 2,757,537 N/A ,379 (0.86%) 49,223 (1.34%) 2,825, % ,144 (0.77%) 48,458 (1.55%) 2,913, % ,040 (3.66%) 46,733 (3.56%) 2,776,785 (4.70%) , % 46,447 (0.62%) 2,926, % ,079 (3.75%) 44,151 (4.94%) 3,046, % Note: (1) Source: U.S. Bureau of the Census. Employment Following is a list of certain major employers located in the City. Major City Employers(1) Approximate Name Business or Product Employment North Iowa Mercy Health Center... Healthcare... 2,582 Mason City Community School District... Education Curries Manufacturing Co. Inc.... Steel Doors and Frames Graham Mfg. Corp.... Millwork Armour-Eckrich Meats, LLC... Meat Packing Mondelez International, Inc.... Food Preparation Globe Gazette/Mason City Shopper... Newspaper Cargill Kitchen Solutions, Inc.... Poultry Processing Woodharbor Doors & Cabinetry, Inc.... Millwork Lehigh Cement Co... Cement FRC Component Products, Inc.... Aircraft Parts North Iowa Vocational Center... Wood Pallets Note: (1) Source: Mason City Chamber of Commerce, Iowa Manufacturers 2014 Directory and a selected telephone survey. 4

8 The following tables show employment by industry and by occupation for the City, the County and the State as reported by the American Community Survey 5-Year Estimates from the U.S. Bureau of the Census. Employment By Industry(1) The City The County The State Classification Number Percent Number Percent Number Percent Agriculture, forestry, fishing and hunting, and mining % % 62, % Construction % 1, % 95, % Manufacturing... 2, % 3, % 229, % Wholesale trade % 1, % 46, % Retail trade... 2, % 3, % 181, % Transportation and warehousing, and utilities % 1, % 73, % Information % % 30, % Finance, insurance, real estate and rental and leasing % 1, % 119, % Professional, scientific, management, administrative, and Waste management services % 1, % 106, % Education, health and social services... 3, % 5, % 372, % Arts, entertainment, recreation, accommodation and food services... 1, % 2, % 118, % Other services % 1, % 68, % Public administration % % 51, % Total... 14, % 23, % 1,557, % Note: (1) Source: U. S. Bureau of the Census. American Community Survey 5-Year Estimates from Employment By Occupation(1) The City The County The State Classification Number Percent Number Percent Number Percent Management, professional, and related occupations... 4, % 6, % 524, % Service occupations... 2, % 4, % 258, % Sales and office occupations... 3, % 5, % 374, % Natural Resources, construction, and maintenance occupations % 1, % 148, % Production, transportation, and material moving occupations... 3, % 4, % 250, % Total... 14, % 23, % 1,557, % Note: (1) Source: U. S. Bureau of the Census. American Community Survey 5-Year Estimates from States. The following shows the annual average unemployment rates for the City, the County, the State and the United Annual Average Unemployment Rates(1) Calendar The State of United Year County Iowa States % 4.3% 5.1% % 3.7% 4.6% % 3.8% 4.6% % 4.4% 5.8% % 6.0% 9.3% % 6.7% 9.6% % 5.9% 8.9% % 5.2% 8.1% % 4.6% 7.4% % 4.4% 6.6% Notes: (1) Source: Iowa Workforce Development. (2) Through April

9 Micropolitan Area of Cerro Gordo and Worth Counties Non-Agricultural Wage and Salary Employment By Place of Work(1) Total Non-Farm Year Employment , , , , , , (2)... 25,980 Notes: (1) Source: Iowa Workforce Development. Place of Work concept counts an individual in the area where he or she works regardless of where that person lives. (2) As of April Building Permits Building permits have averaged approximately $21,924,322 annually over the last five fiscal years in the City, excluding the value of land. City Building Permits(1) (Excludes the Value of Land) Calendar Single-Family Multi-Family Commercial/Industrial Year Permits Value Permits Value Permits Value Total Value $ 9,988,014 4 $1,586, $ 4,041,813 $15,616, ,261, ,113,864 19,375, ,137, ,339, ,751,137 19,227, ,725, ,504,619 23,229, ,577, , ,687,916 4,657, ,893, , ,164,798 4,353, ,479, , ,519,591 11,291, ,177, , ,053,891 26,213, ,578, ,581, ,398,594 18,558, ,732, ,051, ,419,903 49,203,650 Note: (1) Source: the City. Housing According to the American Community Survey 5-Year Estimates from the U.S. Bureau of the Census, the median value of the City s owner-occupied homes was $96,200. This compares to $107,800 for the County and $123,000 for the State. The following table represents the five year average market value of specified owneroccupied units for the City, the County and the State at the time of the American Community Survey. 6

10 Specified Owner-Occupied Units(1) The City The County The State Value Number Percent Number Percent Number Percent Under $50, , % 1, % 104, % $ 50,000 to $ 99, , % 5, % 232, % $100,000 to $149, , % 2, % 210, % $150,000 to $199, % 1, % 147, % $200,000 to $299, , % 1, % 124, % $300,000 to $499, % % 51, % $500,000 to $999, % % 13, % $1,000,000 or more % % 4, % Total... 8, % 14, % 888, % The City The County The State Mortgage Status Number Percent Number Percent Number Percent Housing Units with a Mortgage... 5, % 8, % 556, % Housing Units without a Mortgage... 3, % 5, % 332, % Total... 8, % 14, % 888, % Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates Income According to the American Community Survey 5-Year Estimates from the U.S. Bureau of the Census, the City had a median family income of $57,118. This compares to $61,354 for the County and $64,772 for the State. The following table represents the distribution of family incomes for the City, the County and the State at the time of the American Community Survey. Family Income(1) The City The County The State Income Number Percent Number Percent Number Percent Under $10, % % 26, % $ 10,000 to $ 14, % % 20, % $ 15,000 to $ 24, % % 55, % $ 25,000 to $ 34, % 1, % 70, % $ 35,000 to $ 49, , % 1, % 114, % $ 50,000 to $ 74, , % 2, % 182, % $ 75,000 to $ 99, , % 1, % 136, % $100,000 to $149, % 1, % 125, % $150,000 to $199, % % 35, % $200,000 or more % % 28, % Total... 8, % 14, % 795, % Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates Agriculture Shown below is information on the agricultural values of Cerro Gordo County and certain data comparing the County with statewide averages: Average Value Per Acre(1)(3): The County... $4,811 $5,704 $7,499 $9,611 $10,020 State of Iowa... 4,371 5,064 6,708 8,296 8,716 Notes: (1) Source: Cooperative Extension Service - Iowa State University. 7

11 Local Option Sales Tax The City approved a 1% local option sales and service tax ( Local Option Tax ) in 1992 and renewed that Local Option Tax in 1997, 2002 and The Local Option Tax approved on November 6, 2012 will run from July 1, 2013, through June 30, Actual monies received from such tax are used for property tax relief, street improvement and community improvements. The State of Iowa Department of Revenue and Finance (the Department ) administers collection and disbursement of all local option sales and services taxes in conjunction with administration of the State-wide sales, services and use tax presently assessed at 6%. The Department is required by statute to remit at least 95% of the estimated tax receipts to a county board of supervisors (for taxes imposed in unincorporated areas) and to each incorporated city on a monthly basis. Once a year the Department reconciles its estimated payments and makes an adjustment payment or debit at the November 10 payment date. Remittance of collections within a county are based upon the following statutory formula for county-wide collections: 75 percent: Based on a pro rata share of population (the most recent certified federal census) of those incorporated or unincorporated areas in a county which have approved a Local Option Tax. 25 percent: Based on a pro rata share of total property tax dollars levied during the three year period beginning July 1, 1982, through June 30, 1985, for those incorporated or unincorporated areas of a county which have approved a Local Option Tax. Local Option Taxes are based on the same sales currently taxed by the state-wide 6% sales and services tax, with the present statutory exceptions of use taxes, lottery tickets, motor fuel and special fuels, certain farm machinery, industrial equipment, and the sale of automobiles, room rental already subject to a hotel/motel tax, or natural gas or electricity already subject to a city or county franchise fee or user fee. The following table shows the trend of City s local option sales tax receipts. Local Option Tax Receipts(1)(2) Local Fiscal Year Option Tax Percent Ending June 30 Receipts Change $3,277,682 N/A ,995, % ,145, % ,442, % ,106,150 (7.58%) ,998,655 (2.62%) ,347, % ,578, % ,458,688 (2.62%) ,293,644(3) (3.70%) Notes: (1) Source: Iowa Department of Revenue. (2) Includes a makeup payment in November attributable to the previous fiscal year. (3) Collections received or expected to be received, based upon an estimate from the Iowa Department of Revenue. This estimate does not including any allowance for the reconciliation payment. 8

12 Retail Sales The Department of Revenue of the State of Iowa provides retail sales figures based on sales tax reports for years ending June 30. The Department of Revenue figures provide recent data to confirm trends in retail sales activity in the City. Retail Taxable Sales(1) Year Annual Percent Ending June 30 th (2) Taxable Sales Change + (-) $474,823, %(3) ,968, % ,297, % ,736, % ,145, % ,998, % ,924,593 (4.35%) ,049, % ,759, % ,619,935 (0.38%) Growth from 2003 to % Notes: (1) Source: the Iowa Department of Revenue. (2) Fiscal years numbers reflect a fiscal year ending March 31 st. (3) Based on a 2002 taxable sales of $463,588,972. THE PROJECT The Bond proceeds will be used to: (i) pay costs of equipping the police and fire departments; (ii) acquire peace office communication equipment and other emergency services communication equipment and systems; (iii) improve airport owned by the City; (iv) improve real estate for city cemetery, construct, reconstruct or repair cemetery facilities; (v) acquire, construct, improve and install street lighting fixtures, connections and facilities; (vi) construct, reconstruct and repair sidewalks and pedestrian underpasses and overpasses, and acquire real estate for such purposes, including Blue Zone Trail projects; (vii) improve, extend and equip the City water utility; (viii) pay costs of improvements to City Facilities, including City Hall, Police and Fire Departments, and Cemetery Facilities; and (ix) pay the costs of issuance of the Bonds. DEBT INFORMATION After issuance of the Bonds, the City will have outstanding approximately $32,165,000 principal amount of general obligation debt. The City has a general obligation legal debt limit equal to 5% of Actual Valuation. For the January 1, 2013 Actual Valuation of $1,646,871,318 (including tax increment valuation and excluding military exemption valuation) applied to fiscal year 2014/15, the total limit is $82,343,566. Including the Bonds, the principal amount of bonded indebtedness applicable to this limit is $32,165,000. Applying such bonded and non-bonded indebtedness to the legal debt limitation, the City will have a remaining legal debt margin of $50,178,566. The City does not intend to issue any new general obligation debt in Nothing in the Bond Resolution prohibits or limits the ability of the City to use legally available moneys other than the proceeds of the general ad valorem property taxes levied to pay all or any portion of the principal of or interest on the Bonds. If and to the extent such other legally available moneys are used to pay the principal of or interest on the Bonds, the City may, but shall not be required to, (a) reduce the amount of taxes levied for such purpose; or (b) use proceeds of taxes levied to reimburse the fund or account from which such other legally available moneys to pay the principal of or interest on the Bonds. 9

13 The City s obligation to pay the principal of and interest on the Bonds is secured by a covenant to levy taxes within the City, including any such debt issued or incurred after the issuance of the Bonds. The Bond Resolution does not restrict the City s ability to issue or incur additional general obligation debt, although issuance of additional general obligation debt is subject to the same constitutional and statutory limitations that apply to the issuance of the Bonds, including, but not limited to, constitutional limitations on the dollar amount of general obligation debt. The tables below set out the City s outstanding general obligation debt upon issuance of the Bonds. The Bond Resolution provides that after the Bonds have been issued, the Bond Resolution shall be and remain a contract between the City and the registered owners of the Bonds, and shall be and remain irrepealable until all amounts due with respect to the Bonds shall be fully paid, satisfied and discharged and all other obligations of the City with respect to the Bonds have been satisfied in the manner provided in the Bond Resolution. General Obligation Debt Summary(1) (Principal Only) General Obligation Bonds and Notes: Series $ 695,000 Series 2006A ,000 Series ,255,000 Series ,485,000 Series 2008B... 1,695,000 Series ,050,000 Series ,060,000 Series 2010B... 3,150,000 Series 2011A ,000 Series 2011B... 1,275,000 Series 2012A... 1,945,000 Taxable Series 2012B ,000 Series ,000 The Series 2014 Bonds... 6,335,000 Total General Obligation Debt... $32,165,000 Note: (1) Source: The City. 10

14 General Obligation Bonded Debt(1) (Principal Only) Outstanding Bonds Fiscal Taxable Year Ending Series Series Series Series Series Series Series Series Series Series Series Series June A B B 2011A(2) 2011B 2012A 2012B 2015 $340,000 $315,000 $ 285,000 $ 345,000 $ 315,000 $ 560,000 $ 270,000 $ 420,000 $175,000 $ 725,000 $ 230,000 $175, , , , , , , , ,000 70, , , , , , , , , , ,000 75, , , , , , , , , ,000 55, , , , , , , , , ,000 55, , , , , ,000 60, , , , , ,000 60, , , , , , , , , , , , , Total $695,000 $990,000 $2,255,000 $1,485,000 $1,695,000 $8,050,000 $2,060,000 $3,150,000 $615,000 $1,275,000 $1,945,000 $720,000 Outstanding Bonds Plus Fiscal Total General (Less:) Year Ending Series Total The Obligation Expected Revenues for Cumulative Retirement(2) June Outstanding Bonds Outstanding Property Tax Abatements Amount(2) Percent 2015 $175,000 $ 4,330,000 $ 365,000 $ 4,695,000 $ (355,000) $ 4,340, % ,000 3,780, ,000 4,300,000 (335,000) 8,305, % ,000 3,415, ,000 4,120,000 (515,000) 11,910, % ,000 3,140, ,000 3,850,000 (520,000) 15,240, % ,720, ,000 3,435,000 (525,000) 18,150, % ,975, ,000 2,735,000 (565,000) 20,320, % ,745, ,000 2,515,000 (575,000) 22,260, % , ,000 1,750,000 (585,000) 23,425, % , ,000 1,270,000 (600,000) 24,095, % , , ,000 (405,000) 24,550, % , , ,030, % , , ,530, % , , ,055, % , , ,605, % , , ,185, % Total $895,000 $25,830,000 $6,335,000 $32,165,000 $(4,980,000) Notes: (1) Source: The City. Mandatory redemption amounts are shown for term bonds. 11

15 Statement of General Obligation Bonded Indebtedness(1)(2) City Actual Value, January 1, $1,646,871,318 City Taxable Value, January 1, $1,083,282,458 Per Capita Applicable Ratio to City Ratio to City (2010 Pop. Total Percent Amount Actual Value Taxable Value 28,079) Direct Debt... $32,165, % $32,165, % 2.97% $1, (Less): Expected Revenues for Property Tax Abatements (3)... $ (4,980,000) % $ (4,980,000) (0.30%) (0.46%) (177.36) Net Direct Debt:... $27,185,000 $27,185, % 2.51% $ Overlapping Debt: Mason City Community School District... $ % $ % 0.00% $ 0.00 North Iowa Area Community College , % 109, % 0.01% 3.90 Cerro Gordo County... 9,745, % 4,350, % 0.40% Total Direct and Overlapping Debt... $31,644, % 2.92% $1, Per Capita Actual Value... $58, Per Capita Taxable Value... $38, Notes: (1) Source: The City, the County, Mason City School District and North Iowa Area Community College. (2) As of June 11, 2014 for overlapping debt and the date of issuance of the Bonds for direct debt. (3) General Obligation debt paid with sources other than property tax revenues; including water and local options sales tax revenues. PROPERTY TAX INFORMATION Property Tax Assessment In compliance with Section of the Code of Iowa, as amended, the State Director of Revenue annually directs all county auditors to apply prescribed statutory percentages to the assessments of certain categories of real property. The final values, called Actual Valuation, are then adjusted by the County Auditor. Taxable Valuation subject to tax levy is then determined by the application of State determined rollback percentages, principally to residential property. Beginning in 1978, the State required a reduction in Actual Valuation to reduce the impact of inflation on its residents. The resulting value is defined as the Taxable Valuation. Such rollback percentages may be changed in future years. Certain historical rollback percentages for residential valuation are as follows: Residential Rollback Percentages for Taxable Valuation(1) Fiscal Year Percentage 2005/ % 2006/ % 2007/ % 2008/ % 2009/ % 2010/ % 2011/ % 2012/ % 2013/ % 2014/ % Note: (1) Source: the Iowa Department of Revenue. Property is assessed on a calendar year basis. The assessments finalized as of January 1 of each year are applied to the following tax year. For example, the assessments finalized on January 1, 2013, are used to calculate tax liability for the tax year starting July 1, 2014 through June 30,

16 Property Tax Collection Each county is required by State law to collect all tax levies within its jurisdiction and remit, before the fifteenth of each month, the amount collected through the last day of the preceding month to underlying units of government, including the City. Property tax payments are made at the office of each county treasurer in full or one-half by September 30 and March 31, pursuant to the Code of Iowa, Sections and Where the first half of any property tax has not been paid by October 1, such installment becomes delinquent. If the second installment is not paid, it becomes delinquent on April 1. Delinquent taxes and special assessments are subject to a penalty at the rate of one and one-half percent per month, to a maximum of eighteen percent per annum. If taxes are not paid when due, the property may be offered at the regular tax sale on the third Tuesday of June following the delinquency date. Purchasers at the tax sale must pay an amount equal to the taxes, special assessments, interest and penalties due on the property, and funds so received are applied to the payment of taxes. A property owner may redeem from the regular tax sale, but failing redemption within two years, the tax sale purchaser is entitled to a deed which in general conveys the title free and clear of all liens except future installments of taxes. Actual (100%) Valuations for the City(1)(2) Fiscal Year: 2010/ / / / /15 Property Class Levy Year January 1: Residential... $1,075,013,895 $1,081,226,712 $1,084,061,563 $1,084,275,873 $1,086,215,535 Agricultural... 9,339,910 8,959,341 11,302,889 11,126,040 15,956,994 Commercial ,376, ,863, ,823, ,251, ,922,274 Industrial ,290, ,824, ,339,274 99,562, ,825,839 Railroad... 4,730,683 4,958,003 5,867,763 6,668,650 6,893,260 Utilities without Gas and Electric (3)... 6,287,129 6,576,242 6,761,118 6,560,531 6,018,709 Gas and Electric Utilities (3)... 39,183,481 44,040,789 46,274,059 48,045,152 51,062,791 Other (4)... 1,200,700 1,423,914 1,682,791 1,809,517 2,448,416 Less: Military Exemption... (3,911,435) (3,811,751) (3,700,296) (3,596,584) (3,472,500) Total.... $1,601,511,243 $1,611,061,627 $1,627,412,926 $1,629,703,150 $1,646,871,318 Percent Change +(-) %(5) 0.60% 1.01% 0.14% 1.05% Notes: (1) Source: Iowa Department of Management. (2) Includes tax increment finance (TIF) valuations used in the following amounts: January 1: TIF Valuation... $43,683,734 $44,862,773 $45,824,253 $48,343,651 49,264,997 (3) See PROPERTY TAX INFORMATION - Utility Property Tax Replacement herein. (4) Any City Annexation Taxation Exempt Valuation and any City Ag Valuation in TIF Increments. (5) Based on 2008 Actual Valuation of $ $1,595,926,742. For the January 1, 2013 levy year, the City s Taxable Valuation was comprised of approximately 55% residential, 33% commercial, 9% industrial, 2% utilities, and 1% railroads, agricultural, other and less military exemption. Taxable ( Rollback ) Valuations for the City(1)(2) Fiscal Year: 2010/ / / / /15 Property Class Levy Year January 1: Residential... $ 504,282,489 $ 524,718,281 $ 550,180,588 $ 572,677,345 $ 590,903,092 Agricultural... 5,784,721 5,742,108 5,789,319 5,943,200 5,539,476 Commercial ,376, ,863, ,823, ,251, ,976,678 Industrial ,290, ,554, ,339,274 99,562,061 97,684,579 Railroad... 4,730,683 4,958,003 5,867,763 6,668,650 6,548,596 Utilities without Gas and Electric (3)... 6,287,129 6,576,242 6,761,118 6,560,531 6,018,709 Gas and Electric Utilities (3)... 19,052,535 19,183,859 19,770,745 19,230,367 20,083,828 Less: Military Exemption... (3,911,435) (3,811,751) (3,700,296) (3,596,584) (3,472,500) Total... $1,005,893,002 $1,024,785,119 $1,059,832,276 $1,082,297,480 $1,083,282,458 Percent Change +(-) %(4) 1.88% 3.42% 2.12% 0.09% Notes: (1) Source: Iowa Department of Management. (2) Includes tax increment finance (TIF) valuations used in the following amounts: January 1: TIF Valuation... $43,683,734 $44,862,773 $45,824,253 $48,343,651 $49,265,000 (3) See PROPERTY TAX INFORMATION - Utility Property Tax Replacement herein. (4) Based on 2007 Taxable Valuation of $997,474,

17 The following shows the trend in the City s tax extensions and collections. Tax Extensions and Collections(1)(2) Levy Fiscal Amount Amount Percent Year Year Levied Collected(2) Collected $ 8,380,157 $ 8,369, % ,414,330 9,410, % ,065,910 11,065, % ,549,474 10,551, % ,901,194 11,527, % ,269,045 12,103, % ,949,529 12,947, % ,368,985 13,106, % ,822,521 12,991, % ,543,634 13,249,201(3) 97.82% Notes: (1) Source: The County. (2) Does not include levies and collections for the City s tax increment finance districts. (3) As of May 31, Principal Taxpayers(1) January 1, 2013 Taxable Taxpayer Name Business/Service Valuation(2) Interstate Power & Light Co, a.k.a. Alliant Energy... Utility... $19,365,201 Golden Grain Energy LLC... Ethanol Processing... 17,981,622 LeHigh Portland Cement Co.... Cement Processing... 15,372,868 Mills Properties, Inc.... Real Estate... 11,694,389 Wal Mart Real Estate Business Trust... Retail... 11,019,649 AADG, Inc..... Manufacturing... 10,942,594 Principal Mutual Life Insurance Co... Retail... 8,420,649 Mason City Shopping Center, LP... Retail... 8,075,827 Sunny Fresh Foods, Inc.... Egg Products... 7,861,498 Armour Eckrich Meats LLC... Meat Processing... 7,851,760 Total... $118,586,057 Ten Largest Taxpayers as Percent of City s 2013 Taxable Valuation ($1,083,282,458) % Notes: (1) Source: The County. (2) Every effort has been made to seek out and report the largest taxpayers. However, many of the taxpayers listed contain multiple parcels and it is possible that some parcels and their valuations have been overlooked. Levy Limits Normal municipal operations and maintenance costs are generally funded through the corporate property tax levy. Iowa State Code does not allow the municipal general fund to be taxed above $8.10 per thousand dollars of taxable value in any one year. In addition to the General Fund, there are several other tax funds that the City can create and use for specific purposes. The property tax rates for the City from levy year 2008 through levy year 2012 are shown below: 14

18 Property Tax Rates: Levy Years (1)(2) (Per $1,000 Actual Valuation) Fiscal Year: 2009/ / / / /14 Levy Year: The City: General Fund... $ $ $ $ $ Debt Service Pension and Benefits Others Total City Rate... $ $ $ $ $ Others: Cerro Gordo County... $ $ $ $ $ Mason City Community School District North Iowa Community College Other Total Rate Paid... $ $ $ $ $ Notes: (1) Source: The County. (2) Does not include the tax rate for agriculture. Utility Property Tax Replacement Beginning in 1999, the State replaced its previous property tax assessment procedure in valuing the property of entities involved primarily in the production, delivery, service and sale of electricity and natural gas with a replacement tax formula based upon the delivery of energy by these entities. Electric and natural gas utilities now pay replacement taxes to the State in lieu of property taxes. All replacement taxes are allocated among local taxing districts by the State Department of Revenue and Finance and the Department of Management. This allocation is made in accordance with a general allocation formula developed by the Department of Management on the basis of general property tax equivalents. Properties of these utilities are exempt from the levy of property tax by political subdivisions. Utility property will continue to be valued by a special method as provided in the statute and taxed at the rate of three cents per one thousand dollars for the general fund of the State. The utility replacement tax statute states that the utility replacement tax collected by the State and allocated among local taxing districts (including the City) shall be treated as property tax when received and shall be disposed of by the county treasurer as taxes on real estate. However, utility property is not subject to the levy of property tax by political subdivisions, only the utility replacement tax and statewide property tax. It is possible that the general obligation debt capacity of the City could be adjudicated to be proportionately reduced in future years if utility property were determined to be other than taxable property for purposes of computing the City s debt limit under Article XI of the Constitution of the State of Iowa. There can be no assurance that future legislation will not (i) operate to reduce the amount of debt the City can issue or (ii) adversely affect the City s ability to levy taxes in the future for the payment of the principal of and interest on its outstanding debt obligations, including the Bonds. Approximately 2% of the City s tax base currently is utility property. Notwithstanding the foregoing, the City has the obligation to levy taxes against all the taxable property in the City sufficient to pay principal of and interest on the Bonds. Tax Increment Financing The Code of Iowa currently authorizes the use of two types of tax increment financing by local taxing districts in the State of Iowa. The first type allows local governments to establish TIF districts to be established for the purposes of financing capital improvements constructed within the defined area which contribute to the urban redevelopment and economic development of the immediate area. The City currently has four active TIF districts of this first type in place. The Airport TIF District was formed in 1994; the Westgate TIF District was formed in 1988 and expanded in 1998, 2002 and 2009; the Wildwood Drive TIF District was established in 2011 along with the Hospital TIF District in that same year. The total certified taxable valuation for this type of TIF district was $49,264,997 for levy year