THE SERIES 2012 BONDS

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1 NEW ISSUE S&P Rating: BBB Book Entry Only BANK QUALIFIED In the opinion of Gilmore & Bell, P.C., Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended, the interest on the Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes, except as described in this Official Statement, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. The interest on the Bonds is exempt from Missouri income taxation by the State of Missouri. The Bonds are qualified tax-exempt obligations within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. See TAX MATTERS in this Official Statement. $2,830,000 THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF GRAIN VALLEY, MISSOURI TAX INCREMENT REVENUE BONDS (GRAIN VALLEY MARKETPLACE REDEVELOPMENT PROJECT #2) SERIES 2012 Dated: Date of Delivery Due: September 1, as shown below The Series 2012 Bonds are issuable only as fully-registered Bonds and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Series 2012 Bonds. Purchases of the Series 2012 Bonds will be made in book entry form, in the denomination of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their interests in Series 2012 Bonds purchased. So long as Cede & Co. is the registered owner of the Series 2012 Bonds, as nominee of DTC, references herein to the Bondowners or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (herein defined) of the Series 2012 Bonds. Principal of and semiannual interest on the Series 2012 Bonds will be paid from moneys available therefor under the Indenture (herein defined) by UMB Bank, N.A., Kansas City, Missouri, as Trustee (the Trustee ). So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to such Bondowner. DTC is expected, in turn, to remit such principal and interest to the DTC Participants (herein defined) for subsequent disbursement to the Beneficial Owners. Interest on the Series 2012 Bonds will be payable semiannually on each March 1 and September 1, beginning March 1, The Series 2012 Bonds are being issued by The Industrial Development Authority of the City of Grain Valley, Missouri (the Authority ), pursuant to a Trust Indenture dated as of October 1, 2012 by and between the Authority and the Trustee (the Indenture ). The Series 2012 Bonds are special, limited obligations of the Authority, payable solely from the proceeds of the Bonds and the Revenues (as described herein). The Authority, the City of Grain Valley, Missouri (the City ) and the Grain Valley Marketplace Community Improvement District (the District ) have entered into a Financing Agreement dated as of October 1, 2012 (the Financing Agreement ) pursuant to which the City and the District have agreed to make certain payments to the Trustee for application to the payment of the Bonds (as described herein). THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, THE DISTRICT, THE CITY, THE STATE OF MISSOURI (THE STATE ) OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL, STATUTORY OR CHARTER PROVISION OR LIMITATION. THE ISSUANCE OF THE BONDS SHALL NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE THE AUTHORITY, THE DISTRICT, THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO TAXING POWER. IN ISSUING THE BONDS, THE AUTHORITY HAS RELIED ONLY UPON FINANCIAL INFORMATION SUPPLIED BY THE CITY, THE DISTRICT AND THE DEVELOPER AND HAS PERFORMED NO DUE DILIGENCE OF ITS OWN AS TO THE ADEQUACY OF THE REVENUES OR ANY OTHER MONEY PLEDGED UNDER THE INDENTURE TO PAY THE SERIES 2012 BONDS. The Series 2012 Bonds involve a high degree of risk, and prospective purchasers should read the caption herein captioned BONDOWNERS RISKS. The Series 2012 Bonds may not be suitable investments for all persons. Prospective purchasers should carefully evaluate the risks and merits of an investment in the Series 2012 Bonds, should confer with their own legal and financial advisors and should be able to bear the risk of loss of their investment in the Series 2012 Bonds before considering a purchase of the Series 2012 Bonds. The Series 2012 Bonds are subject to redemption prior to maturity in certain circumstances, as described herein. See THE SERIES 2012 BONDS Redemption Provisions herein. The Series 2012 Bonds are offered when, as and if issued by the Authority, subject to the approval of legality by Gilmore & Bell, P.C., Kansas City, Missouri, Bond Counsel. Certain legal matters related to this Official Statement will be passed upon by Gilmore & Bell, P.C., Kansas City, Missouri. Certain legal matters will be passed upon for the Authority by John F. Barry, Esq., and for the District and the Developer by Husch Blackwell, LLP, Kansas City, Missouri. It is expected that the Series 2012 Bonds will be available for delivery on or about October 24, The date of this Official Statement is October 15, 2012.

2 $2,830,000 THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF GRAIN VALLEY, MISSOURI TAX INCREMENT REVENUE BONDS (GRAIN VALLEY MARKETPLACE REDEVELOPMENT PROJECT #2) SERIES 2012 MATURITY SCHEDULE Serial Bonds Maturity Principal Interest September 1 Amount Rate Price Yield 2014 $115, % % 1.100% , , , $490, % Term Bonds due September 1, 2022, priced at %; Yield of 3.700% $370, % Term Bonds due September 1, 2025, priced at %; Yield of 4.075% $1,610, % Term Bonds due September 1, 2033, priced at %; Yield of 4.550%

3 No dealer, broker, salesman or other person has been authorized by the Authority, the City or the District to give any information or to make any representations with respect to the Series 2012 Bonds offered hereby 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 any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Series 2012 Bonds offered hereby by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been furnished by the Authority, the City, the District and other sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Authority. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the District since the date hereof. The Series 2012 Bonds have not been registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or under any state securities or blue sky laws. The Series 2012 Bonds are offered pursuant to an exemption from registration with the Securities and Exchange Commission. In making an investment decision, investors must rely on their own examination of the terms of this offering, including the merits and risks involved. These securities have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary may be a criminal offense. CAUTIONARY STATEMENTS REGARDING FORWARD- LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, anticipate, projected, budget or other similar words. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE FUTURE RISKS AND UNCERTAINTIES INCLUDE THOSE DISCUSSED IN THE BONDOWNERS RISKS SECTION OF THIS OFFICIAL STATEMENT. NEITHER THE AUTHORITY NOR ANY OTHER PARTY PLANS TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN THEIR EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES UPON WHICH SUCH STATEMENTS ARE BASED OCCUR. i

4 TABLE OF CONTENTS Page INTRODUCTION... 1 Purpose of the Official Statement... 1 The Authority... 1 The City... 1 The District... 1 Grain Valley Marketplace... 2 The Series 2012 Bonds... 2 Security for the Bonds... 2 Revenue Projections... 4 Bondowners Risks... 4 Definitions and Summary of Documents... 4 Continuing Disclosure... 5 PLAN OF FINANCE... 5 The Traffic Study... 5 The Redevelopment Plan... 6 The Neighborhood Improvement District... 8 The Community Improvement District... 9 Developer Contributions... 9 Estimated Sources and Uses of Funds The Projects THE SERIES 2012 BONDS Authorization; Description of the Series 2012 Bonds Registration, Transfer and Exchange of Bonds Redemption Provisions Payment and Discharge Provisions Defeasance Provisions Book Entry Only System SOURCES OF PAYMENT AND SECURITY FOR THE BONDS Limited Obligations; Sources of Payment Revenues City Annual Appropriation Obligation Indenture Funds and Accounts Debt Service Coverage Additional Bonds BONDOWNERS RISKS Nature of the Obligations City Payments Tax Increment Financing Litigation Risk of Non-Appropriation Reliance on the Developer, Other Property Owners, Tenants and Subsequent Property Owners Financial Feasibility of the Shopping Center No Mortgage of the Projects or the Shopping Center Risk of Failure to Maintain Levels of Assessed Valuations Changes in State and Local Tax Laws Reduction in State and Local Tax Rates Limitations on Remedies Page Factors Affecting Economic Activity Tax Revenues and District Sales Taxes Revenue Study Changes in Market Conditions Bond Reserve Fund Determination of Taxability Risk of Audit Loss of Premium Upon Early Redemption Secondary Market Defeasance Risks Additional Bonds TAX INCREMENT FINANCING IN MISSOURI Overview The TIF Act Assessments and Collections of Ad Valorem Taxes 32 Tax Delinquencies Economic Activity Tax Revenues GRAIN VALLEY MARKETPLACE Overview Ownership of Shopping Center Environmental Assessment The Architect and the Contractor Competition OCCUPANTS THE DISTRICT General District Sales Taxes Cooperative Agreement THE AUTHORITY Organization and Powers Membership Indebtedness of the Authority ABSENCE OF LITIGATION LEGAL MATTERS TAX MATTERS UNDERWRITING FINANCIAL ADVISOR RATINGS PROJECTIONS MISCELLANEOUS Appendix A The City Appendix B Audited Financials of the City Appendix C Revenue Study Appendix D Definitions and Summary of the Indenture and Financing Agreement; Continuing Disclosure Appendix E Form of Opinion of Bond Counsel Appendix F City TIF Fund Reserve Policy ii

5 OFFICIAL STATEMENT $2,830,000 THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF GRAIN VALLEY, MISSOURI TAX INCREMENT REVENUE BONDS (GRAIN VALLEY MARKETPLACE REDEVELOPMENT PROJECT #2) SERIES 2012 INTRODUCTION This introduction is only a brief description and summary of certain information contained in this Official Statement and is qualified in its entirety by reference to the more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. Purpose of the Official Statement The purpose of this Official Statement is to furnish information relating to (1) The Industrial Development Authority of the City of Grain Valley, Missouri (the Authority or the Issuer ), (2) the Grain Valley Marketplace Community Improvement District (the District ), (3) the City of Grain Valley, Missouri (the City ), (4) the Authority s Tax Increment Revenue Bonds (Grain Valley Marketplace Redevelopment Project #2) Series 2012 (the Series 2012 Bonds and, together with any Additional Bonds, the Bonds ) and (5) the construction of a retail development, known as Grain Valley Marketplace ( Marketplace or the Shopping Center ), to be developed by SG Property Management, LLC (the Developer ), and anchored by an 8-screen movie theater to be operated by B&B Theatres Operating Company, Inc. For the definition of certain capitalized terms used herein and not otherwise defined, see Appendix D Definitions and Summary of the Indenture and Financing Agreement; Continuing Disclosure hereto. The Authority The issuer of the Bonds is The Industrial Development Authority of the City of Grain Valley, Missouri, a public corporation of the State of Missouri. See the caption THE AUTHORITY herein. The City The City of Grain Valley, Missouri, is a fourth-class city and a political subdivision of the State of Missouri, located in Jackson County, Missouri. See Appendices A and B for additional information with respect to the City. The District The District is a community improvement district and a political subdivision of the State of Missouri, formed pursuant to the Missouri Community Improvement District Act, Sections through of the Revised Statutes of Missouri, as amended (the CID Act ). The District encompasses all of the Shopping Center. See the caption THE DISTRICT herein.

6 Grain Valley Marketplace Pursuant to the Real Property Tax Increment Allocation Redevelopment Act, Sections to , inclusive, of the Revised Statutes of Missouri, as amended (the TIF Act ), the City designated a redevelopment area (the Redevelopment Area ) on September 27, The Redevelopment Area is approximately 32 acres and located at the northeast portion of the intersection of Interstate 70 and Missouri Route BB (Buckner-Tarsney Road). The Redevelopment Area was studied and determined by the City to be a blighted area within the meaning of the TIF Act. On January 13, 2011, the City entered into a tax increment financing contract with the Developer authorizing the Developer to redevelop the Redevelopment Area. The Shopping Center is planned to consist of the construction of approximately 106,180 square feet of retail space, including a 24,000 square foot movie theater. See the caption OCCUPANTS below. It is anticipated that the construction of the Shopping Center will be completed by March The Series 2012 Bonds The Series 2012 Bonds are being issued pursuant to the Industrial Development Corporations Act, Chapter 349 of the Revised Statutes of Missouri, as amended, and the Trust Indenture dated as of October 1, 2012 (the Indenture ) between the Authority and UMB Bank, N.A., Kansas City, Missouri (the Trustee ) for the purpose of (1) financing certain costs related to the development of Marketplace (the Projects ) (see PLAN OF FINANCE herein), (2) funding a debt service reserve for the Series 2012 Bonds, (3) fund capitalized interest for the Series 2012 Bonds, and (4) paying the costs of issuance of the Bonds. A description of the Series 2012 Bonds is contained in this Official Statement under the caption THE SERIES 2012 BONDS. All references to the Series 2012 Bonds are qualified in their entirety by the definitive form thereof and the provisions with respect thereto included in the Indenture. The Series 2012 Bonds are subject to redemption prior to maturity as described herein. See the caption THE SERIES 2012 BONDS Redemption Provisions herein. Security for the Bonds The Bonds and the interest thereon are special, limited obligations of the Authority, payable solely from Bond proceeds and Revenues, as provided in the Indenture. The Authority, the City and the District have entered into a Financing Agreement dated as of October 1, 2012, pursuant to which the District has pledged to transfer, or direct the transfer, to the Trustee for application to the payment of the Bonds the District Sales Taxes, subject to annual appropriation by the District. Pursuant to the Financing Agreement, the City has agreed to pay to the Trustee the Payments in Lieu of Taxes and, subject to annual appropriation by the City, the Economic Activity Tax Revenues and the City Payments. See the caption SOURCES OF PAYMENT AND SECURITY FOR THE BONDS herein. Revenues means the amounts pledged under the Indenture to the payment of principal of, premium, if any, and interest on the Bonds, consisting of the following: (i) Payment in Lieu of Taxes payable by the City to the Trustee pursuant to the Financing Agreement, subject to annual appropriation by the City, Economic Activity Tax Revenues paid by the City to the Trustee pursuant to the Financing Agreement, the District Sales Taxes appropriated and paid by or on behalf of the District to the Trustee as provided the Financing Agreement, and the City Payments appropriated and paid by the City to the Trustee as provided in the Financing Agreement, and (ii) moneys held in the Funds and Accounts, together with investment earnings thereon, other than amounts held in the Rebate Fund. Revenues do not include (i) any amount paid under protest until the protest is withdrawn or resolved against the taxpayer and (ii) any sum received by the City or the District which is the subject of a suit or other claim communicated to the City or the District which suit or claim challenges the collection of such sum. Economic Activity Tax Revenues means 50% of the total additional revenue from taxes imposed by the City or other taxing districts (as that term is defined in Section of the TIF Act) which are generated by economic activities within the Redevelopment Area over the amount of such taxes generated by economic activities within the -2-

7 Redevelopment Area in the calendar year ending December 31, 2009, but excluding therefrom any taxes imposed on sales or charges for sleeping rooms paid by transient guests of hotels and motels, taxes levied pursuant to Section , RSMo., licenses, fees or special assessments other than payments in lieu of taxes and penalties and interest thereon, personal property taxes, taxes levied for the purpose of public transportation pursuant to Section , RSMo, and the sales tax imposed by Jackson County, Missouri to fund improvements to the Stadium Sports Complex. Payments in Lieu of Taxes means those payments in lieu of taxes (as defined in Sections (10) and of the TIF Act), if any, attributable to the increase in the current equalized assessed valuation of all taxable lots, blocks, tracts and parcels of real property in the Redevelopment Area over and above the certified total initial equalized assessed valuation of the real property in the Redevelopment Area, as provided for by Section of the TIF Act (excluding 50% of the Payments in Lieu of Taxes related to any real property taxes imposed by the Central Jackson County Fire Protection District). District Sales Taxes means the receipts by or on behalf of the District from the sales taxes imposed on retail sales within the boundaries of the District, and not required to be deposited into the Special Allocation Fund. City Payments means the payments by the City, if any, appropriated on an annual basis from legally available funds required to be paid in accordance with the Financing Agreement to pay Debt Service Requirements for the Bonds. Because the TIF Act provides that 23 years is the maximum amount of time for the retirement of obligations incurred to finance redevelopment project costs, the obligation of the City to transfer Economic Activity Tax Revenues and Payments in Lieu of Taxes to the Trustee for the repayment of the Series 2012 Bonds terminates on September 26, 2033 whether or not the principal amount thereof or interest thereon has been paid in full. Thereafter, the revenues available for repayment of the Series 2012 Bonds, subject to appropriation, will be the District Sales Taxes and the City Payments. In no event shall District Sales Taxes or Economic Activity Tax Revenues derived from the sales tax imposed by the District be used (1) to pay Debt Service Requirements and District operating costs in an amount in excess of 9.5% of the Debt Service Requirements (net after application of the proceeds of the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes (e.g., moneys for capitalized interest or the reserve funds, or earnings on the proceeds of such Bonds)) of the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes, or (2) to restore any deficiency in the Bond Reserve Fund for the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes, without an Opinion of Bond Counsel that such payments will not cause any Bonds then Outstanding and exempt from taxation for federal income tax purposes to become subject to federal income taxes then in effect. For purposes of this section, the District Sales Taxes allocable to pay the Debt Service Requirements for the Series 2012 Bonds shall not exceed 20% of the Debt Service Requirements for the Series 2012 Bonds, or such other percentage as provided in writing by the City to the Trustee permitted by law based on amounts paid from the Project Fund and eligible for payment from the District Sales Taxes. In no event shall City Payments related to the Series 2012 Bonds be made from revenues of the City derived from its park sales tax or its transportation sales tax imposed on businesses outside the boundaries of the Redevelopment Area. The Series 2012 Bonds will be secured by an annual appropriation covenant pursuant to which the City agrees to budget and appropriate sufficient legally available funds to pay all City Payments. If the City continues to appropriate such moneys, the City s obligations to make City Payments will be payable from all legally available funds for that Fiscal Year, plus any legally available unencumbered balances from previous years. The taxing power of the City is not pledged to the payment of the City Payments. There can be no assurances that the City will appropriate such City Payments in any year and the Financing Agreement does not -3-

8 obligate the City to do so. See SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 2012 BONDS City Annual Appropriation Obligation herein. A bond reserve fund will be funded in the amount of $257, from Bond proceeds as additional security for the Series 2012 Bonds. THE BONDS ARE NOT SECURED BY A MORTGAGE ON ANY PROPERTY. However, the TIF Act provides that the Payments in Lieu of Taxes that are due and owing shall constitute a lien against the real estate in the Redevelopment Area from which they are derived. Upon a default in the payment of any Payments in Lieu of Taxes, the lien for such unpaid Payments in Lieu of Taxes may be enforced as provided by law. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, THE DISTRICT, THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL, STATUTORY OR CHARTER PROVISION OR LIMITATION. THE ISSUANCE OF THE BONDS SHALL NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE THE AUTHORITY, THE DISTRICT, THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO TAXING POWER. Revenue Projections A study entitled Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2), dated as of June 29, 2012 (the Projections ) has been prepared by Real Estate Research Consultants, Inc., Orlando, Florida. A copy of the Projections is attached hereto as Appendix C. See the caption PROJECTIONS herein. The Issuer, the City, the District, the Developer, the Financial Advisor and the Underwriter make no representation or warranty (express or implied) as to the accuracy or completeness of any financial, technical or statistical data or any estimates, projections, assumptions or expressions of opinion set forth in the Projections. Pursuant to the State law, taxpayers who promptly pay their sales taxes are entitled to retain 2% of the amount of taxes owed. Because it can not be determined whether the taxpayers in the Redevelopment Area will promptly pay their sales taxes, the Projections assume that all taxpayers will promptly pay their sales taxes and will retain 2% of the amount of the taxes owed. Bondowners Risks The Series 2012 Bonds involve a high degree of risk, and prospective purchasers should read the caption herein captioned BONDOWNERS RISKS. The Series 2012 Bonds may not be suitable investments for all persons, and prospective purchasers should carefully evaluate the risks and merits of an investment in the Series 2012 Bonds, should confer with their own legal and financial advisors and should be able to bear the risk of loss of their investment in the Series 2012 Bonds before considering a purchase of the Series 2012 Bonds. Definitions and Summary of Documents Definitions of certain words and terms used in this Official Statement and a summary of certain provisions of the Indenture, the Financing Agreement and the Continuing Disclosure Agreement are included in this Official Statement in Appendix D hereto. Such definitions and summaries do not purport to be comprehensive or definitive. All references herein to the Indenture are qualified in their entirety by reference to the definitive form of such document, a copy of which may be obtained from Piper Jaffray & Co., One Hallbrook Place, Overbrook Road, Suite 310, Leawood, Kansas

9 Continuing Disclosure The City will covenant in a Continuing Disclosure Agreement to provide certain financial information relating to the City by not later than 180 days after the end of each fiscal year of the City, commencing with the fiscal year ending December 31, 2012, and to provide notices of the occurrence of certain enumerated events, if deemed by the City to be material. The District will covenant in the Continuing Disclosure Agreement to provide certain financial information relating to the District, semi annually, not later than 60 days after each March 1 and September 1, until the Shopping Center has been completed, and thereafter, annually, not later than 180 days after the end of each fiscal year of the City. The Developer will covenant in the Continuing Disclosure Agreement to provide certain financial information relating to the Shopping Center, semi annually, not later than 60 days after each March 1 and September 1, until the Shopping Center has been completed, and thereafter, annually, not later than 180 days after the end of each fiscal year of the City. See Continuing Disclosure in Appendix D hereto. The Traffic Study PLAN OF FINANCE The City, the Missouri Department of Transportation (MoDOT) and TranSystems conducted a traffic study of the area around the intersection of I-70 and Buckner-Tarsney Road in the City. The study outlined vehicular flows and safety enhancements and determined the best locations of new ramps, lanes and drives to improve traffic flow at the intersection. The interchange improvements, which are estimated to cost approximately $14,000,000, will include modifications to the existing interchange, construction of new north and south outer roads and realignment of U.S. 40 Highway where it intersects Buckner-Tarsney Road. The City has received grants in the amount of approximately $6,900,000 from the Missouri Department of Transportation (MoDOT) to finance part of the interchange improvements. The remaining costs of the improvements will be funded with the proceeds of general obligation bonds issued by the City and the proceeds of approximately $1,500,000 of neighborhood improvement district bonds issued by the City payable from special assessments to be imposed against real property owned by the Developer or any other property owners in the Redevelopment Area. In May 2012, the estimated sources and uses for financing the interchange improvements were as illustrated in the following table. Sources Amount MoDOT Cost Share Agreement $ 6,880,000 City General Obligation Bonds, Series ,500,000 City General Obligation Bonds, Series ,230,000 City Utility Cash 220,000 Neighborhood Improvement District Temporary Notes, Series ,500,000 Total Sources $15,330,000-5-

10 Uses Design Engineering $ 1,500,000 Right of Way Acquisition 850,000 Utility Relocation 410,000 Construction Inspection 700,000 Construction 10,300,000 Undesignated Uses* 1,570,000 Total Uses $15,330,000 In January of 2012, the City deposited with MoDOT $5 million of bond proceeds from the City s General Obligation Bonds, Series 2011 (the Series 2011 Bonds ) toward its required contribution for the interchange improvement project. Should the final project cost be as currently projected, the City will not need all of the Series 2011 Bond proceeds for the project. In this case, the City will utilize remaining proceeds to: expand the scope of the interchange project; construct eligible road infrastructure projects; and/or defease outstanding Series 2011 Bonds. Construction of the interchange improvements began in July 2012 and is expected to conclude in November Completion of the north outer road, which will serve the Shopping Center, is expected to conclude in November 2012 in time for opening of the movie theater within the Shopping Center. All of the debt obligations referenced as funding sources have been issued by the City to finance the costs of the interchange improvements. The City has placed on deposit with MoDOT its share of the interchange improvement costs. Should the costs of the interchange improvements exceed estimates, the City has $1,570,000 in additional general obligation bond proceeds it can utilize to fund its share of the overage. The City will pay the debt service on the General Obligation Bonds, Series 2008 and General Obligation Bonds, Series 2011 from property taxes as authorized by referendums held on July 21, 2005 and April 3, The Redevelopment Plan In September 2010, the City approved the redevelopment plan which includes approximately 84 acres of land encompassing the four quadrants of the I-70/Buckner-Tarsney Interchange in the City. The goals of the redevelopment plan are to: Leverage approximately $6.9 million in Missouri Department of Transportation ( MoDOT ) grants to improve the City s primary Interstate 70 interchange at Buckner-Tarsney Road; Eliminate blighted conditions within the Redevelopment Area; and Strengthen and diversify the City s tax base. Each interchange quadrant represents a distinct redevelopment project. Of the four redevelopment projects, only Redevelopment Project 2 related to the Marketplace project has been activated. It is in support of this Redevelopment Project that the Series 2012 Bonds will be issued. In January 2011, the City and the Developer entered into the Redevelopment Agreement related to the construction of the Shopping Center in the City. The Redevelopment Agreement contemplates that the City will provide various incentives to help finance construction of the Shopping Center. The Redevelopment -6-

11 Agreement provides that the City will use tax increment financing, a neighborhood improvement district and a community improvement district to help finance costs of improvements for the Shopping Center. The Redevelopment Plan for the Shopping Center was approved by the City on September 27, A petition creating a Neighborhood Improvement District was filed by owners of the property within the boundaries of the Shopping Center and approved by the City on September 27, On September 27, 2010, the Grain Valley Marketplace Community Improvement District was formed with boundaries that include all of the Shopping Center and certain other properties. The special assessments from the Neighborhood Improvement District will not be available to make payments of debt service on the Bonds. Pursuant to the Redevelopment Plan and Redevelopment Agreement, the Shopping Center will be financed as follows. Source Amount Tax Increment Financing Bonds $5,675,000 Neighborhood Improvement District Bonds $2,847,473 Post-TIF Community Improvement District Revenues $1,015,146 Private Developer $7,370,407 Private Third-Party Developers $9,000,000 Total $25,908,026 The terms by which the Bonds will be issued are established in the Redevelopment Agreement. Under these terms, the City agrees to secure the Bonds with its annual appropriation pledge so that the Bonds may be issued in advance of Shopping Center construction. Additionally, the Redevelopment Agreement provides that no more than three series of Bonds will be issued without the City s consent. The Series 2012 Bonds will constitute a combination of all the Site Development Bonds, and a portion of the Developer Bonds (as defined below) based on the projected revenues from the operation of the movie theater. The Bonds have been structured with principal amortization beginning September 2014 and interest capitalized through March 2014 in anticipation that construction of the Shopping Center will be complete in March It is anticipated that Additional Bonds will be issued in order to reimburse the Developer and the City for a total of $5,675,000 of Reimbursable Project Costs (excluding financing costs) as contemplated in the Redevelopment Plan and the Redevelopment Agreement. Based on the Projections, it is projected that $3,750,000 of additional Developer Bonds will be issued in 2013 through tax-exempt and taxable bonds in the par amounts of $2,685,000 and $1,065,000, respectively. Also, it is projected that the balance of Developer Bonds and all of the Final Bonds will be issued in 2014 in the par amount of $1,715,000 through tax-exempt and taxable bonds in the par amounts of $1,145,000 and $570,000, respectively. It is anticipated that the debt service for Additional Bonds will be structured around the then projected revenues to be generated by operating and committed businesses within the Shopping Center. This plan is based on estimates from the Projections and are subject to revision. Site Development Bonds: tax increment revenue bonds providing the first $1,575,000 of net bond proceeds (the Site Development Bonds ) will reimburse the Developer for $1,500,000 of eligible site development costs and reimburse the City for $75,000 of eligible pre-development costs. There is no -7-

12 requirement in the Redevelopment Agreement that businesses be committed or under construction prior to issuance of the Site Development Bonds, although the movie theater is currently under construction. Developer Bonds: tax increment revenue bonds providing the next $3,500,000 of net bond proceeds (the Developer Bonds ) will reimburse the Developer, in part, for eligible costs associated with construction of the movie theater and the three retail buildings to be owned, leased and operated by the Developer. The amount of Developer Bonds issued is to be determined based upon the revenues from operating and committed businesses as forecasted by a third-party revenue forecast consultant at a debt service coverage ratio of 1.25 of the debt service related to any Bonds issued as Developer Bonds (including the portion of the Series 2012 Bonds issued as Developer Bonds). Committed businesses are defined in the Redevelopment Agreement as: (i) tenants of the Developer s buildings which have executed a lease with a covenant to open by a date certain within 180 days of signing the lease; (ii) pad site purchasers which have executed a land sale contract which includes a covenant to open by a date certain within 180 days of signing the contract; or (iii) pad site purchasers which have received a building permit from the City. Developer Bonds in any amount up to the maximum of $3,500,000 may be issued in conjunction with the Site Development Bonds or the Final Bonds. Final Bonds: tax increment revenue bonds providing the last $600,000 of net bond proceeds (the Final Bonds ) will reimburse the Developer for the balance of its eligible site development costs. For issuance of the Final Bonds, a third-party revenue forecast must indicate that revenues from operating and committed businesses will be sufficient to support all Site Development Bonds, Developer Bonds, and Final Bonds debt service at a debt service coverage ratio of The Neighborhood Improvement District On September 27, 2010, the City established the Grain Valley Marketplace Neighborhood Improvement District (the NID ). The NID was formed after a petition by owners of more than 2/3 by area of all real property located in the NID was filed with the City as required by the Neighborhood Improvement District Act. To provide interim finance of the NID improvements, the City issued its $3,015,000 Limited General Obligation Neighborhood Improvement District Temporary Notes, Series 2012, dated May 31, 2012 (the Notes ). The Notes are expected to be retired from the proceeds of bonds issued by the City for that purpose or by assessments levied for a period of 20 years on the properties in the NID benefited by the project once the improvements have been completed. The NID was formed to provide improvements that will consist of: (1) the installation of storm sewer, sanitary sewer and water service for the NID and the necessary site preparation for such improvements, including cut and fill site grading, mass grading mobilization, demolition, clearing and disposal, erosion control, top soil replacement and fine grading; (2) the construction of road infrastructure improvements to the intersection of Interstate I-70 and Buckner Tarsney Road, the construction of a new outer road through the NID, improvements to the I-70/Buckner-Tarsney Road exit ramp/interchange, and improvements to Buckner- Tarsney Road; (3) the construction and installation of public streets and sidewalks within the NID; and (4) the costs incurred in connection with the improvements described above, including, but not limited to, costs incurred for the preparation of preliminary reports, the preparation of plans and specifications, the preparation and publication of notices of hearings, resolutions, ordinances and other proceedings, fees and expenses of attorneys and other consultants, interest accrued on borrowed money during the period of construction, underwriting costs and other costs incurred in connection with the issuance of bonds or notes, establishment of reasonably required reserve funds for bonds or notes, the cost of land, materials, labor and other lawful expenses incurred in planning, acquiring and doing any improvement, reasonable construction contingencies, and work done or services performed by the City in the administration and supervision of the improvements. The NID encompasses approximately 28 acres of land that is under development by the Developer for the Shopping Center. -8-

13 Proceeds of the Notes in the amount of $1,500,000 will be utilized to finance the improvements to the I-70/Buckner-Tarsney Interchange and the remainder will be utilized to finance public improvements related to the Shopping Center. The Neighborhood Improvement District Act provides that the cost of any improvement to be assessed against the real property in a neighborhood improvement district shall be apportioned against such property in accordance with the benefits accruing thereto by reasons of such improvement. The cost may be assessed equally per front foot or per square foot against property within the district or by any other reasonable assessment plan determined by the governing body of the city or county which results in imposing substantially equal burdens or share of the cost upon property similarly benefited. All property owners, including owners that are exempt from property taxation, are obligated to pay special assessments. The method of assessment of real property within the NID is as follows: in proportion to the square footage of each parcel (excluding property owned in fee interest by a tax exempt entity). In the event that a final plat for any portion of the property within the NID is approved after the date that the final costs of the Project are assessed, then the assessment shall be recalculated and reassessed proportionally to each of the parcels resulting from the division of the original parcel, based on the assessed valuation of each resulting parcel, as required by the Neighborhood Improvement District Act. The Special Assessments for the NID project are expected to equal approximately $9,890 per acre annually. The total expected cost per acre including interest payments is expected to equal approximately $197,790. The Community Improvement District For information regarding the District, see the section titled THE DISTRICT. The District has imposed a sales tax at the maximum rate of one percent for a period of 30 years to pay for certain public improvements included as part of the Shopping Center. The District has entered into a Cooperative Agreement with the City and the Developer (the Cooperative Agreement ) to transfer sales tax receipts toward payment of Bond debt service. After retirement of the Bonds, the District will reimburse the Developer for remaining eligible costs on a pay-as-you-go basis. Developer Contributions The Developer is the owner of the property on which the Shopping Center will be constructed. It is anticipated that the Developer will be co-owner of the movie theater which will be operated by B&B Theatres Operating Company, LLC. The Developer also intends to own, lease and operate three retail buildings totaling approximately 57,220 square feet. Five pad sites are expected to be sold by the Developer to third-party developers. See OCCUPANTS for status of businesses committed to the Shopping Center. -9-

14 Estimated Sources and Uses of Funds Following is a summary of the anticipated sources and uses of funds in connection with the issuance of the Series 2012 Bonds: Sources of Funds: Principal Amount of the Series 2012 Bonds... $2,830, Less Net Original Issue Discount... 46, Uses of Funds: The Projects Total sources of funds... $2,783, Deposit to the Project Fund... $2,120, Deposit to the Costs of Issuance Fund , Deposit to the Capitalized Interest Fund , Deposit to Bond Reserve Fund , Underwriter s Discount... 56, Total uses of funds... $2,783, The proceeds of the Series 2012 Bonds will finance the clearing, grading and environmental remediation work to prepare the site for construction of the Shopping Center. In addition, the Bond proceeds will finance construction of the public and private utilities, public parking lots, the movie theater, and professional services, developer fees and permitting fees. THE SERIES 2012 BONDS The following is a summary of certain terms and provisions of the Series 2012 Bonds. Reference is hereby made to the Series 2012 Bonds and the provisions with respect thereto in the Indenture for the detailed terms and provisions thereof. Authorization; Description of the Series 2012 Bonds The Series 2012 Bonds are being issued pursuant to and in full compliance with the Constitution and statutes of the State of Missouri, including particularly the Industrial Development Corporations Act, Chapter 349 of the Revised Statutes of Missouri, as amended (the Act ) and the Missouri Community Improvement District Act, Sections to , inclusive, of the Revised Statutes of Missouri, as amended (the CID Act ). The Series 2012 Bonds will be issuable as fully-registered bonds. Purchases of the Series 2012 Bonds will be made in book entry form only (as described below) in denominations of $5,000 or any integral multiple in excess thereof. Purchasers of the Series 2012 Bonds will not receive certificates representing their interests in the Series 2012 Bonds purchased. The Series 2012 Bonds will be dated as of the date of initial issuance and delivery thereof, and will mature on the dates and in the principal amounts set forth on the inside cover page of this Official Statement. The Series 2012 Bonds will bear interest at the rates per annum set forth on the inside cover page hereof, which interest will be payable semiannually on March 1 and September 1 in each year, beginning on March 1,

15 Registration, Transfer and Exchange of Bonds Any Bond may be transferred only upon the Bond Register upon surrender thereof to the Trustee duly endorsed for transfer or accompanied by an assignment duly executed by the Owner or his attorney or legal representative in such form as shall be satisfactory to the Trustee. Upon any such transfer, the Authority shall execute and the Trustee shall authenticate and deliver in exchange for such Bond a new fully-registered Bond or Bonds of the same series and maturity, registered in the name of the transferee, of any Authorized Denomination. Any Bond, upon surrender thereof at the payment office of the Trustee, together with an assignment duly executed by the Owner or his attorney or legal representative in such form as shall be satisfactory to the Trustee, may, at the option of the Owner thereof, be exchanged for Bonds of the same series and maturity, of any Authorized Denomination. The Authority or the Trustee may make a charge against each Owner requesting a transfer or exchange of Bonds for every such transfer or exchange of Bonds sufficient to reimburse it for any tax or other governmental charge required to be paid with respect to such transfer or exchange, the cost of printing, if any, each new Bond issued upon any transfer or exchange and the reasonable expenses of the Authority and the Trustee in connection therewith, and such charge shall be paid before any such new Bond shall be delivered. The Authority or the Trustee may levy a charge against an Owner sufficient to reimburse it for any governmental charge required to be paid in the event the Owner fails to provide a correct taxpayer identification number to the Trustee. Such charge may be deducted from amounts otherwise due to such Owner under the Indenture or under the Bonds. Redemption Provisions Optional Redemption. The Series 2012 Bonds are subject to redemption and payment prior to maturity by the Authority, upon the direction of the City, on and after September 1, 2019, in whole or in part on any date in Authorized Denominations, at a redemption price of 100% of the principal amount thereof, plus accrued interest to the redemption date, without premium. Mandatory Redemption. The Series 2012 Bonds maturing on September 1, 2022, September 1, 2025 and September 1, 2033, are subject to mandatory sinking fund redemption and payment prior to stated maturity on September 1 in each year, at 100% of the principal amount thereof, plus accrued interest to the redemption date, without premium, in accordance with the mandatory sinking fund schedule determined as set forth below: Term Bonds Maturing on September 1, 2022 Year Principal Amount Final Maturity 2018 $90, , , , ,

16 Term Bonds Maturing on September 1, 2025 Year Principal Amount 2023 $120, , ,000 Term Bonds Maturing on September 1, 2033 Year Principal Amount Final Maturity 2026 $140, , , , , , , ,000 The Trustee shall make timely selection of such Series 2012 Bonds or portions thereof to be so redeemed in Authorized Denominations of principal amount in such equitable manner as the Trustee may determine and shall give notice thereof without further instructions from the Issuer, the City or the District. At the option of the City, to be exercised on or before the 45 th day next preceding each mandatory redemption date, the City may: (1) deliver Series 2012 Bonds to the Trustee for cancellation in the aggregate principal amount desired; or (2) furnish to the Trustee moneys, together with appropriate instructions, for the purpose of purchasing any Series 2012 Bonds from any owner thereof in the open market at a price not in excess of 100% of the principal amount thereof, whereupon the Trustee shall use its best efforts to expend such funds for such purposes; or (3) elect to receive a credit in respect to the mandatory redemption obligation under this subsection for any Series 2012 Bonds which prior to such date have been redeemed (other than through the operation of the requirements of this subsection) and cancelled by the Trustee and not theretofore applied as a credit against any redemption obligation under this subsection. Each Series 2012 Bond so delivered or previously purchased or redeemed shall be credited at 100% of the principal amount thereof on the obligation to redeem Series 2012 Bonds on the next mandatory redemption date applicable to Series 2012 Bonds that is at least 45 days after receipt by the Trustee of such instructions from the City, and any excess of such amount shall be credited on future mandatory redemption obligations for Series 2012 Bonds in chronological order or such other order as the City may designate, and the principal amount of Series 2012 Bonds to be redeemed on such future mandatory redemption dates by operation of the requirements of this subsection shall be reduced accordingly. If the City intends to exercise any option granted by the provisions of clauses (1), (2) or (3) of this subsection, the City will, on or before the 45 th day next preceding the applicable mandatory redemption date, furnish the Trustee a certificate indicating to what extent the provisions of said clauses (1), (2) and (3) are to be complied with in respect to such mandatory redemption payment and any Series 2012 Bonds to be cancelled or credited for the mandatory redemption obligation. Selection of Bonds to be Redeemed. Bonds shall be redeemed only in Authorized Denominations. When less than all of the Outstanding Bonds are to be optionally redeemed, such Bonds shall be redeemed from stated maturities selected by the City, and Bonds of less than a full Stated Maturity shall be selected by the Trustee in $5,000 units of principal amount by lot or in such other equitable manner as the Trustee may determine. -12-

17 In the case of a partial redemption of Bonds when Bonds of denominations greater than the minimum Authorized Denomination are then Outstanding, then for all purposes in connection with such redemption each unit of $5,000 in excess of the minimum Authorized Denomination shall be treated as though it was a separate Bond of $5,000. If one or more, but not all, of the $5,000 units of principal amount in excess of the minimum Authorized Denomination represented by any Bond are selected for redemption, then upon notice of intention to redeem such unit or units, the Owner of such Bond or such Owner s attorney or legal representative shall forthwith present and surrender such Bond to the Trustee (i) for payment of the redemption price (including the redemption premium, if any, and interest to the date fixed for redemption) of the unit or units of principal amount called for redemption, and (ii) for exchange, without charge to the Owner thereof, for a new Bond or Bonds of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Owner of any such Bond of a denomination greater than the minimum Authorized Denomination shall fail to present such Bond to the Trustee for payment and exchange as aforesaid, said Bond shall, nevertheless, become due and payable on the redemption date to the extent of the unit or units of principal amount called for redemption and shall cease to accrue interest on such amount. Notice and Effect of Call for Redemption. Unless waived by any Owner of Bonds to be redeemed, official notice of the redemption of any Bond shall be given by the Trustee on behalf of the Authority by mailing a copy of an official redemption notice by first class mail, postage prepaid, at least 30 days prior to the date fixed for redemption to the Owner of the Bond or Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such Owner to the Trustee; provided, however, that failure to give such notice by mailing as aforesaid to any Owner or any defect therein as to any particular Bond shall not affect the validity of any proceedings for the redemption of any Bonds. Any provision in the Indenture to the contrary notwithstanding, the notice of optional redemption pursuant to the Indenture shall state that it is conditioned upon receipt by the Trustee of sufficient moneys to redeem the Bonds, and such notice and optional redemption shall be of no effect if by no later than the scheduled redemption date, sufficient moneys to redeem the Bonds are not on deposit with and available to the Trustee. On or prior to the date fixed for redemption, moneys available solely for such redemption in accordance with the requirements of the Indenture shall be deposited with the Trustee to pay the principal of the Bonds called for redemption, accrued interest thereon to the redemption date, if any, and the redemption premium, if any, thereon. Upon the happening of the above conditions, and notice having been given as provided in the Indenture, as applicable, the Bonds or the portions of the principal amount of Bonds thus called for redemption shall cease to bear interest on the specified redemption date, provided moneys sufficient for the payment of the redemption price of the Bonds called for redemption are on deposit at the place of payment at the time fixed for such redemption, and shall no longer be entitled to the protection, benefit or security of the Indenture and shall not be deemed to be Outstanding under the provisions of the Indenture. Payment and Discharge Provisions If the Authority shall pay the principal of, redemption premium, if any, and interest on all of the Bonds Outstanding in accordance with their terms, or shall provide for such payment as provided in the Indenture, and if the Authority shall also pay or cause to be paid all other sums payable under the Indenture by the Authority, then and in that case the Indenture and the estate and rights granted under the Indenture shall cease, terminate and become null and void, and thereupon the Trustee shall, upon written request of the Authority, and an Opinion of Counsel, each stating that in the opinion of the signers all conditions precedent to the satisfaction and discharge of the Indenture have been complied with, forthwith execute proper instruments acknowledging satisfaction of and discharging the Indenture and the lien thereof; provided that, with respect to Bonds for which payment has been provided at the time but which has not in fact been paid, the liability of the Authority in respect of such Bonds shall continue provided that the Owners thereof shall thereafter be entitled to payment only out of the moneys or Government Securities deposited with the Trustee as provided in the -13-

18 Indenture. The satisfaction and discharge of the Indenture shall be without prejudice to the rights of the Trustee to charge and be reimbursed by the Developer for any expenditures that it may thereafter incur in connection therewith. Notwithstanding the release and discharge of the lien of the Indenture as described above, those provisions of the Indenture relating to the maturity of the Bonds, interest payments and dates thereof, exchange and transfer of Bonds, replacement of mutilated, destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds, nonpresentment of Bonds, the holding of moneys in trust, redemption of Bonds and the duties of the Trustee, the Bond Registrar and the Paying Agent in connection with all of the foregoing and the rights of the Trustee under the Indenture, remain in effect and shall be binding upon the Trustee and the Bondowners. Defeasance Provisions If the Authority shall pay or provide for the payment of any Outstanding Bond in any one or more of the following ways: (1) by paying or causing to be paid the principal of (including redemption premium, if any) and interest on such Bonds, as and when the same become due and payable; (2) by depositing with the Trustee, in trust and irrevocably setting aside exclusively for such payment, at or before maturity, moneys in an amount sufficient to pay or redeem (when redeemable) Bonds (including the payment of redemption premium, if any, and interest payable on such Bonds to the maturity or redemption date thereof), provided that such moneys, if invested, shall be invested in Government Securities which are not subject to redemption and payment prior to maturity except at the option of the holder thereof ( Non-Callable Government Securities ) in an amount and with maturities, without consideration of any income or increment to accrue thereon, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such Bonds at or before their respective maturity dates, to pay the interest thereon as it comes due; (3) by delivering to the Trustee, for cancellation by it, such Bonds; or (4) if the Bonds are to be refunded and defeased more than 90 days prior to the redemption date, by depositing with the Trustee, in trust, Non-Callable Government Securities in such amounts as are certified to the Trustee by a written report of an independent certified public accountant to be fully sufficient, together with other moneys deposited therein and together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, to pay or redeem (when redeemable) and discharge the indebtedness on such Bonds at or before their respective maturity dates, to pay the interest thereon as it comes due; then such Bond or Bonds shall be deemed to be paid within the meaning of the Indenture and shall cease to be entitled to any lien, benefit or security under the Indenture, except for the purposes of any such payment from such moneys or Government Securities and except for the purposes of registration, transfer and exchange of such Bonds. If all the Bonds are not to be redeemed within 30 days, the Trustee shall mail, as soon as practicable, in the manner prescribed by the Indenture, a notice to the Owners of such Bonds that the deposit required by paragraphs (2) or (4) above has been made with the Trustee and that said Bonds are deemed to have been paid in accordance with the Indenture stating the maturity or redemption date upon which moneys are to be available for the payment of the principal of or redemption price, if applicable, on said Bonds as specified in paragraphs (2) or (4) above. Notwithstanding any provisions of the Indenture which may be contrary, all moneys or Non-Callable Government Securities set aside and held in trust pursuant to the provisions of defeasance provisions of the Indenture for the payment of Bonds (including redemption premium thereon, if any, and interest) shall be -14-

19 applied to and used solely for the payment of the particular Bonds (including redemption premium thereon, if any, and interest) with respect to which such moneys and Non-Callable Government Securities have been so set aside in trust. Book Entry Only System General When the Series 2012 Bonds are issued, ownership interests will be available to purchasers only through a book-entry only system (the Book-Entry Only System ) maintained by The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Series 2012 Bonds. Initially, the Series 2012 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC S partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate for each maturity of the Series 2012 Bonds will be issued, in the aggregate principal amount of such maturity, and will be deposited with DTC or the Trustee as its FAST agent. The following discussion will not apply to any Series 2012 Bonds issued in certificate form due to the discontinuance of the DTC Book-Entry Only System, as described below. DTC and its Participants DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. 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 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 (the Indirect Participants and, together with the Direct Participants, the 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 Purchase of Ownership Interests Purchases of the Series 2012 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2012 Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond (the Beneficial Owner ) is, in turn, to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2012 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf -15-

20 of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Series 2012 Bonds, except in the event that use of the book-entry system for the Series 2012 Bonds is discontinued. So long as Cede & Co., as nominee of DTC, is the registered owner of any of the Series 2012 Bonds, the Beneficial Owners of such Bonds will not receive or have the right to receive physical delivery of the Series 2012 Bonds, and references herein to the registered owners of such Bonds shall mean Cede & Co. and shall not mean the Beneficial Owners of such Bonds. Transfers To facilitate subsequent transfers, all 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 the Series 2012 Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2012 Bonds. DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Notices 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 2012 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. Voting Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2012 Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority 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 2012 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of Principal and Interest So long as any Bond is registered in the name of DTC s nominee, all payments of principal of, premium, if any, and interest on such Bond will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Authority or the Trustee, on the payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC nor its nominee, the Trustee or the Authority, subject to any statutory and regulatory requirements as may be in effect from time to time. Payment of principal of, premium, if any, and interest on the Series 2012 Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, -16-

21 disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. Discontinuation of Book-Entry Only System DTC may discontinue providing its services as depository with respect to the Series 2012 Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, bond certificates are required to be printed and delivered as described in the Indenture. The use of the system of book-entry transfers through DTC (or a successor securities depository) may be discontinued as described in the Indenture. In that event, bond certificates will be printed and delivered as described in the Indenture. None of the Underwriter, the Trustee nor the Authority will have any responsibility or obligations to any Direct Participants or Indirect Participants or the persons for whom they act with respect to (i) the accuracy of any records maintained by DTC or any such Direct Participant or Indirect Participant; (ii) the payment by any Participant of any amount due to any Beneficial Owner in respect of the principal of, premium, if any, or interest on the Series 2012 Bonds; (iii) the delivery by any such Direct Participant or Indirect Participant of any notice to any Beneficial Owner that is required or permitted under the terms of the Indenture to be given to owners of the Series 2012 Bonds; (iv) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Series 2012 Bonds; or (v) any consent given or other action taken by DTC as Bondholder. The information above concerning DTC and DTC s book-entry system has been obtained from sources that the Authority believes to be reliable, but is not guaranteed as to accuracy or completeness by and is not to be construed as a representation by the Authority, the District, the Trustee or the Underwriter. The Authority, the District, the Trustee and the Underwriter make no assurances that DTC, Direct Participants, Indirect Participants or other nominees of the Beneficial Owners will act in accordance with the procedures described above or in a timely manner. SOURCES OF PAYMENT AND SECURITY FOR THE BONDS Limited Obligations; Sources of Payment The Bonds and the interest thereon are special, limited obligations of the Authority, payable solely from Bond proceeds and the Revenues, as provided in the Indenture. Subject to the limitations contained in the Indenture, the Authority will pledge and assign moneys in the Revenue Fund, the Debt Service Fund and the Bond Reserve Fund to the Bondowners as security for the payment of the Bonds and the interest thereon. Pursuant to the Financing Agreement, the City has pledged to transfer to the Trustee for application to the payment of the Bonds the Payments in Lieu of Taxes and, subject to annual appropriation, the Economic Activity Tax Revenues and the City Payments, and the District has pledged to transfer, or to cause the transfer, to the Trustee for application to the payment of the Bonds, subject to annual appropriation, the District Sales Taxes. Because the TIF Act provides that 23 years is the maximum amount of time for the retirement of obligations incurred to finance redevelopment project costs, the obligation of the City to transfer Economic Activity Tax Revenues and Payments in Lieu of Taxes to the Trustee for the repayment of the Series 2012 Bonds terminates on September 26, 2033, whether or not the principal amount thereof or interest thereon has been paid in full. Thereafter, the revenues available for repayment of the Series 2012 Bonds, subject to appropriation, will be the District Sales Taxes and the City Payments. -17-

22 In no event shall District Sales Taxes or Economic Activity Tax Revenues derived from the sales tax imposed by the District be used (1) to pay Debt Service Requirements and District operating costs in an amount in excess of 9.5% of the Debt Service Requirements (net after application of the proceeds of the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes (e.g., moneys for capitalized interest or the reserve funds, or earnings on the proceeds of such Bonds)) of the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes, or (2) to restore any deficiency in the Bond Reserve Fund for the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes, without an Opinion of Bond Counsel that such payments will not cause any Bonds then Outstanding and exempt from taxation for federal income tax purposes to become subject to federal income taxes then in effect. For purposes of this section, the District Sales Taxes allocable to pay the Debt Service Requirements for the Series 2012 Bonds shall not exceed 20% of the Debt Service Requirements for the Series 2012 Bonds, or such other percentage as provided in writing by the City to the Trustee permitted by law based on amounts paid from the Project Fund and eligible for payment from the District Sales Taxes. In no event shall City Payments related to the Series 2012 Bonds be made from revenues of the City derived from its park sales tax or its transportation sales tax imposed on businesses outside the boundaries of the Redevelopment Area. The Bonds are not secured by a mortgage on any property. However, the TIF Act provides that the Payments in Lieu of Taxes that are due and owing shall constitute a lien against the real estate in the Redevelopment Area from which they are derived. Upon a default in the payment of any Payments in Lieu of Taxes, the lien for such unpaid Payments in Lieu of Taxes may be enforced as provided by law. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, THE DISTRICT, THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL, STATUTORY OR CHARTER PROVISION OR LIMITATION. THE ISSUANCE OF THE BONDS SHALL NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE THE AUTHORITY, THE DISTRICT, THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO TAXING POWER. Revenues Revenues means the amounts pledged under the Indenture to the payment of principal of, premium, if any, and interest on the Bonds, consisting of the following: (i) Payment in Lieu of Taxes payable by the City to the Trustee pursuant to the Financing Agreement; subject to annual appropriation by the City, Economic Activity Tax Revenues paid by the City to the Trustee pursuant to the Financing Agreement; subject to annual appropriation by the District, the District Sales Taxes paid by or on behalf of the District to the Trustee as provided the Financing Agreement; and subject to annual appropriation by the City, the City Payments paid by the City to the Trustee as provided in the Financing Agreement, and (ii) moneys held in the Funds and Accounts, together with investment earnings thereon, other than amounts held in the Rebate Fund. Revenues do not include (i) any amount paid under protest until the protest is withdrawn or resolved against the taxpayer and (ii) any sum received by the City or the District which is the subject of a suit or other claim communicated to the City or the District which suit or claim challenges the collection of such sum. Economic Activity Tax Revenues means 50% of the total additional revenue from taxes imposed by the City or other taxing districts (as that term is defined in Section of the TIF Act) which are generated by economic activities within the Redevelopment Area over the amount of such taxes generated by economic activities within the Redevelopment Area in the calendar year ending December 31, 2009, but excluding -18-

23 therefrom any taxes imposed on sales or charges for sleeping rooms paid by transient guests of hotels and motels, taxes levied pursuant to Section , RSMo., licenses, fees or special assessments other than payments in lieu of taxes and penalties and interest thereon, personal property taxes, taxes levied for the purpose of public transportation pursuant to Section , RSMo, and the sales tax imposed by Jackson County, Missouri to fund improvements to the Stadium Sports Complex. Payments in Lieu of Taxes means those payments in lieu of taxes (as defined in Sections (10) and of the TIF Act), if any, attributable to the increase in the current equalized assessed valuation of all taxable lots, blocks, tracts and parcels of real property in the Redevelopment Area over and above the certified total initial equalized assessed valuation of the real property in the Redevelopment Area, as provided for by Section of the TIF Act (excluding 50% of the Payments in Lieu of Taxes related to the real property taxes imposed by the Central Jackson County Fire Protection District). District Sales Taxes means the receipts by or on behalf of the District from the sales taxes imposed on retail sales within the boundaries of the District, and not required to be deposited into the Special Allocation Fund. City Payments means the payments by the City, if any, appropriated from legally available funds on an annual basis and required to be paid in accordance with the Financing Agreement to provide funds to pay Debt Service Requirements for the Bonds. City Annual Appropriation Obligation The City s obligations under the Financing Agreement to make payments of the Economic Activity Tax Revenues and the City Payments on the Series 2012 Bonds are payable solely from legally available funds of the City, including any unencumbered balances of legally available funds from previous years. Such moneys must be appropriated each year by the Board of Aldermen. The Financing Agreement contains the following provisions with respect to the City s annual appropriation obligation: Annual Appropriation. The City intends, on or before the last day of each Fiscal Year, to budget and appropriate moneys sufficient to pay (1) the Economic Activity Tax Revenues, (2) any additional amounts necessary for all payments of principal of and interest on the Bonds for the next succeeding Fiscal Year as the City Payments, and (3) any additional amounts owing by the City pursuant to the Financing Agreement, from legally available moneys of the City for that Fiscal Year. The City has agreed that the officer of the City at any time charged with the responsibility of formulating budget proposals is directed to include in the budget proposal submitted to the City s Board of Aldermen for each Fiscal Year a request for an appropriation of the Economic Activity Tax Revenues, the City Payments and any other amounts owing by the City during such Fiscal Year for deposit in the Revenue Fund under the Indenture or as otherwise provided in the Financing Agreement. The City shall deliver written notice to the Trustee no later than 15 days after the commencement of its Fiscal Year stating whether or not the Board of Aldermen has appropriated funds sufficient for such purposes during such Fiscal Year. If the Board of Aldermen shall have made the appropriation necessary to make such payments, the failure of the City to deliver the foregoing notice on or before the 15th day after the commencement of its Fiscal Year shall not constitute an event of default and, on failure to receive such notice 15 days after the commencement of the City s Fiscal Year, the Trustee shall make independent inquiry of the fact of whether or not such appropriation has been made. If the Trustee shall have notified the City and the Original Purchaser on the 35 th day prior to any Payment Date that the Trustee has not received sufficient Revenues, together with other available funds under the Indenture (other than the Bond Reserve Fund), to pay the Debt Service Requirements for the Bonds Outstanding and that the City will be required to make the City Payments, and the original appropriation of moneys to pay the City Payments is not sufficient to pay all the Debt Service Requirements for the Bonds Outstanding, then the City has agreed that the officer of the City charged with the responsibility of formulating budget proposals is directed to prepare an amendment to the budget submitted to the City s Board of Aldermen and to request for an appropriation of the additional amounts necessary for the City Payments during such Fiscal Year for deposit in the Revenue Fund under the Indenture. The City shall deliver written notice to the Trustee no later than 10 days prior to the Interest Payment Date or Principal Payment Date stating whether or not the Board of Aldermen has appropriated funds sufficient for City Payments to pay the Debt Service Requirements of the Bonds Outstanding. -19-

24 Payments to Constitute Current Expenses of the City. The City acknowledges that the Economic Activity Tax Revenues and the City Payments shall constitute currently budgeted expenditures of the City, and shall not in any way be construed or interpreted as creating a liability or a general obligation or debt of the City in contravention of any applicable constitutional or statutory limitation or requirements concerning the creation of indebtedness by the City, nor shall anything contained in this Financing Agreement constitute a pledge of the general credit, tax revenues, funds or moneys of the City. The City s obligations to pay Economic Activity Tax Revenues and City Payments under the Financing Agreement shall be from year to year only, and shall not constitute a mandatory payment obligation of the City in any ensuing Fiscal Year beyond the then current Fiscal Year. Neither the Financing Agreement nor the issuance of the Bonds shall directly or indirectly obligate the City to levy or pledge any form of taxation or make any appropriation or make any payments beyond those appropriated for the City s then current Fiscal Year in contravention of any applicable constitutional or statutory limitation or requirements concerning the creation of indebtedness by the City, but in each Fiscal Year Economic Activity Tax Revenues and City Payments shall be payable solely from the amounts budgeted or appropriated therefor by the City for such year; provided, however, that nothing in the Financing Agreement shall be construed to limit the rights of the owners of the Bonds or the Trustee to receive any amounts which may be realized from the Trust Estate pursuant to the Indenture. Indenture Funds and Accounts The Trustee shall deposit into the Revenue Fund all Revenues and any other amounts received by the Trustee on the tenth day of each month (or the next Business Day thereafter if the tenth day is not a Business Day) that are subject to the lien and pledge of this Indenture, to the extent not required to be deposited in other Funds and Accounts in accordance with the terms of the Indenture or to the extent otherwise restricted in use of payments pursuant to the Indenture. The Trustee shall deposit (1) all District Sales Taxes and all Economic Activity Tax Revenues derived from the sales tax imposed by the District received from or on behalf of the District in accordance with the Financing Agreement to the Sales Tax Account of the Revenue Fund; (2) all Payments in Lieu of Taxes received from or on behalf of the City in accordance with the Financing Agreement to the Pilots Account of the Revenue Fund, (3) all Economic Activity Tax Revenues (other than the revenues derived from the sales tax imposed by the District) received from or on behalf of the City in accordance with the Financing Agreement to the EATS Account of the Revenue Fund and (4) all other amounts required to be deposited in the Revenue Fund pursuant to the terms of this Indenture into the Revenue Account of the Revenue Fund. The Trustee shall notify the City, the District, the Issuer, the Developer and the Original Purchaser if the Trustee has not received such payments on or before the 12th calendar day of each month (or the next Business Day thereafter if the 12th day is not a Business Day). The Trustee will deposit into the Debt Service Fund the City Payments, if and only to the extent required for amounts on deposit in the Debt Service Fund on the 10 th day prior to each Payment Date to be sufficient to provide for the Debt Service Requirements for the Bonds. The Trustee shall notify the City and the Original Purchaser on the 35 th day prior to each Payment Date if the Trustee has not received sufficient Revenues, together with other available funds under this Indenture (other than the Bond Reserve Fund), to pay the Debt Service Requirements for the Bonds Outstanding and that the City will be required to make the City Payments. In no event shall City Payments related to the Series 2012 Bonds be made from revenues of the City derived from its park sales tax or its transportation sales tax imposed on businesses outside the boundaries of the Redevelopment Area. The Trustee shall apply moneys from the Revenue Fund, after accounting for the application of moneys from the Capitalized Interest Fund, first, from the Revenue Account of the Revenue Fund, second, from the Sales Tax Account of the Revenue Fund, third, from the Pilots Account of the Revenue Fund, and fourth, from the EATS Account of the Revenue Fund, at least 40 days prior to each Interest Payment Date and Principal Payment Date on the Bonds (or at any time in the event of rebate payable to the United States of America), for application in the order of priority and for the purposes as follows: -20-

25 (1) to the Rebate Fund when necessary, an amount sufficient to pay rebate, if any, to the United States of America, owed under Section 148 of the Code, in accordance with the Tax Compliance Agreement and to the Rebate Analyst, an amount equal to all fees, charges, advances and expenses of the Rebate Analyst due and payable; (2) to the Trustee, an amount equal to all fees, charges, advances and expenses of the Trustee due and payable pursuant to this Indenture (not to exceed $4,250 per Fiscal Year); (3) to the Issuer, an amount equal to all fees, charges and expenses of the Issuer due and payable pursuant to this Indenture; and (4) to the Interest Account of the Debt Service Fund, an amount sufficient to pay the interest becoming due and payable on the Bonds on the next two Interest Payment Dates; (5) to the Principal Account of the Debt Service Fund, an amount sufficient to pay the principal of the Bonds on the next Principal Payment Date (at maturity or upon scheduled mandatory redemption); (6) to the Bond Reserve Fund, such amount as may be required to restore any deficiency in the Bond Reserve Fund if the amount on deposit in the Bond Reserve Fund is less than the Bond Reserve Requirement; (7) at the option of the City, (A) for payment to the Developer for Reimbursable Project Costs that have not been paid by the City to the Developer in accordance with the Redevelopment Agreement, (B) for transfer to the Redemption Account of the Debt Service Fund, beginning subsequent to the certification by the City to the Trustee that all of the Projects have been completed and reimbursements to the Developer has been made as provided in the Redevelopment Agreement, amounts sufficient to redeem Bonds in Authorized Denominations which shall be applied to the payment of the principal of and accrued interest on all Bonds which are subject to redemption on the next succeeding Payment Date, or (C) to the District Operating Account from moneys remaining in the Sales Tax Account in an amount not to exceed $10,000 per calendar year upon receipt of an Opinion of Bond Counsel that such payments will not cause any Bonds then Outstanding and exempt from taxation for federal income tax purposes to become subject to federal income taxes then in effect. In no event shall District Sales Taxes or Economic Activity Tax Revenues derived from the sales tax imposed by the District be used (1) to pay Debt Service Requirements and District operating costs in an amount in excess of 9.5% of the Debt Service Requirements (net after application of the proceeds of the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes (e.g., moneys for capitalized interest or the reserve funds, or earnings on the proceeds of such Bonds)) of the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes, or (2) to restore any deficiency in the Bond Reserve Fund for the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes, without an Opinion of Bond Counsel that such payments will not cause any Bonds then Outstanding and exempt from taxation for federal income tax purposes to become subject to federal income taxes then in effect. For purposes of this section, the District Sales Taxes allocable to pay the Debt Service Requirements for the Series 2012 Bonds shall not exceed 20% of the Debt Service Requirements for the Series 2012 Bonds, or such other percentage as provided in writing by the City to the Trustee permitted by law based on amounts paid from the Project Fund and eligible for payment from the District Sales Taxes. -21-

26 Debt Service Fund. The Trustee will deposit into the Interest Account the amounts required by the Indenture. Moneys on deposit in the Interest Account shall be applied solely to pay the interest on the Bonds as the same becomes due and payable. On each date fixed for redemption of the Bonds and on each scheduled Interest Payment Date on the Bonds, the Trustee shall remit to the respective Bondowners of such Bonds an amount from the Interest Account sufficient to pay the interest on the Bonds becoming due and payable on such date. The Trustee will deposit into the Principal Account the amounts required by the Indenture. Moneys on deposit in the Principal Account shall be applied solely to pay the principal of the Bonds as the same becomes due and payable at maturity. On each Principal Payment Date of the Bonds, the Trustee shall set aside and hold in trust an amount from the Principal Account sufficient to pay the principal of the Bonds becoming due and payable on such date. The Trustee will deposit into the Redemption Account the amounts required by the Indenture. Moneys on deposit in the Redemption Account shall be applied solely to pay the principal and premium, if any, on the Bonds as the same become due and payable by redemption. On each date fixed for such redemption, the Trustee shall set aside and hold in trust an amount from the Redemption Account sufficient to pay the principal of and premium, if any, on the Bonds becoming due and payable on such date. Bond Reserve Fund. Moneys in the Bond Reserve Fund shall be disbursed and expended by the Trustee without further authorization solely for the payment of the principal of, redemption premium, if any, and interest on the Bonds if and to the extent moneys otherwise available for such purpose in the Debt Service Fund are insufficient to pay the same as they become due and payable. The Trustee may disburse and expend moneys from the Bond Reserve Fund for such purposes whether or not the amount in the Bond Reserve Fund at that time equals the Bond Reserve Requirement. On January 15 and July 15 of each year (or if such date is not a Business Day, the immediately preceding Business Day), commencing January 15, 2013, the Trustee shall determine the value of all cash and Investment Securities held in the Bond Reserve Fund and shall give immediate written notice to the District and the City if such amount is less than the Bond Reserve Requirement. All such Investment Securities shall be valued as specified pursuant to the Indenture. If the value so determined exceeds the Bond Reserve Requirement, the Trustee shall promptly transfer the excess without further authorization to the Revenue Account of the Revenue Fund. Moneys in the Bond Reserve Fund shall be used to pay and retire the last Outstanding Bonds unless such Bonds and all interest thereon be otherwise paid. Notwithstanding any other provision of the Indenture, moneys in the Bond Reserve Fund shall be applied to pay the last Outstanding Bonds prior to any application of moneys on deposit in the Revenue Fund or the Debt Service Fund for such purpose. Capitalized Interest Fund. The Trustee shall apply moneys from the Capitalized Interest Fund at least 45 days prior to each Interest Payment Date on the Bonds, to the Interest Account of the Debt Service Fund, in an amount sufficient to pay the interest becoming due and payable on the Bonds on such date. Project Fund. Moneys in the Project Account of the Project Fund shall be used for the sole purpose of paying the costs of the Projects. Costs of Issuance Fund. Moneys in the Costs of Issuance Fund shall be used to pay the Costs of Issuance. Moneys remaining in the Cost of Issuance Fund on the 180th day after the Bond Issuance Date shall be transferred without further authorization into the Project Account except as otherwise provided in the Indenture. -22-

27 Debt Service Coverage The following table shows projected debt service coverage of the Series 2012 Bonds based on the net debt service (calculated after applying proceeds of the Series 2012 Bonds as capitalized interest and earnings on the Bond Reserve Fund moneys at an assumed interest rate of 0.25%) using the projected Revenues included in Appendix C assuming that the only business operating at the Shopping Center is the movie theater, and adjusting the revenues to match each bond year ending September 1. It is expected that the development of the Shopping Center would be completed by March 2014 and that additional Revenues would be available to pay debt service on the Bonds. If that would not happen as shown below, the projected Revenues would be less than 100% of the debt service on the Series 2012 Bonds and that the City would have to make City Payments on an annual basis as shown below. The net debt service for 2013 is $0 because the only debt service payable is interest and will be paid from Capitalized Interest Funds available from the proceeds of the Series 2012 Bonds. Net Debt Projected Projected Projected City Year Service Revenues Coverage Appropriation 2013 $0.00 $15, N/A N/A , , $129, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , The City has developed and adopted a TIF Special Allocation Fund Reserve Policy related to the development of the Shopping Center to establish a plan of how the City plans to provide funds for any City Payments that would be required. A copy of the policy is included as Appendix F hereto. Additional Bonds Prior to issuance of the Final Bonds for the benefit of the Developer, Additional Bonds may be issued on a parity with the Series 2012 Bonds or Additional Bonds issued on a parity with the Series 2012 Bonds only upon delivery to the Trustee of a certificate of a planning consultant acceptable to the City and the Original Purchaser demonstrating that the Projected Debt Service Coverage Ratio (calculated using the projected Revenues for Developer Committed Businesses, Third Party Committed Businesses and Developer s Land Sale Contracts and the average annual Debt Service Requirements for such Additional Bonds and any other Bonds or portions thereof issued as Developer Bonds) for each Fiscal Year of the City succeeding the proposed date of issuance of such Additional Bonds will not be less than

28 Additional Bonds may also be issued on a parity with the Series 2012 Bonds or Additional Bonds issued on a parity with the Series 2012 Bonds only upon delivery to the Trustee of either (i) a certificate of the City demonstrating that the Historical Pro Forma Debt Service Coverage Ratio for all Bonds for the most recent full twelve months was not less than 1.25; or (ii) a certificate of a planning consultant acceptable to the City and the Original Purchaser demonstrating that the Projected Debt Service Coverage Ratio for all Bonds for each Fiscal Year of the City succeeding the proposed date of issuance of such Additional Bonds will not be less than Except as described above, the Authority will not otherwise issue any obligations on a parity with the Series 2012 Bonds, but the Authority may issue other obligations specifically subordinate and junior to the Series 2012 Bonds so that if at any time the Authority shall be in default in paying either principal of or interest on the Series 2012 Bonds or any Additional Bonds issued on a parity with the Series 2012 Bonds, the Authority shall make no payments of either principal of or interest on said junior Bonds until such default or defaults be cured. In no event shall Additional Bonds be issued in a principal amount of less than $2,000,000, without the consent of the City provided in its sole discretion. BONDOWNERS RISKS An investment in the Series 2012 Bonds is subject to a number of significant risk factors. The following is a discussion of certain risks that could affect payments to be made with respect to the Series 2012 Bonds. Such discussion is not, and is not intended to be, exhaustive and should be read in conjunction with all other parts of this Official Statement and should not be considered as a complete description of all risks that could affect such payments. Prospective purchasers of the Series 2012 Bonds should analyze carefully the information contained in this Official Statement, including the Appendices hereto, and additional information in the form of the complete documents summarized herein, copies of which are available as described herein. Nature of the Obligations The Bonds are limited obligations of the Authority and are payable solely from Bond proceeds, Revenues and all moneys and securities from time to time held by the Trustee under the terms of the Indenture (except payments required to be made to meet the requirements of Section 148(f) of the Code) and any and all other property (real, personal or mixed) of every kind and nature from time to time hereafter, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security under the Indenture by the District or by anyone in its behalf or with its written consent, to the Trustee, as provided in the Indenture. See SOURCES OF PAYMENT AND SECURITY FOR THE BONDS Indenture Funds and Accounts herein. Because the TIF Act provides that 23 years is the maximum amount of time for the retirement of obligations incurred to finance redevelopment project costs, the obligation of the City to transfer Economic Activity Tax Revenues and Payments in Lieu of Taxes to the Trustee for the repayment of the Series 2012 Bonds terminates on September 26, 2033, whether or not the principal amount thereof or interest thereon has been paid in full. Thereafter, the revenues available for repayment of the Series 2012 Bonds, subject to appropriation, will be the District Sales Taxes and the City Payments. In no event shall District Sales Taxes or Economic Activity Tax Revenues derived from the sales tax imposed by the District be used (1) to pay Debt Service Requirements and District operating costs in an amount in excess of 9.5% of the Debt Service Requirements (net after application of the proceeds of the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes (e.g., moneys for capitalized interest or the reserve funds, or earnings on the -24-

29 proceeds of such Bonds)) of the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes, or (2) to restore any deficiency in the Bond Reserve Fund for the Series 2012 Bonds or any Additional Bonds then Outstanding and exempt from taxation for federal income tax purposes, without an Opinion of Bond Counsel that such payments will not cause any Bonds then Outstanding and exempt from taxation for federal income tax purposes to become subject to federal income taxes then in effect. For purposes of this section, the District Sales Taxes allocable to pay the Debt Service Requirements for the Series 2012 Bonds shall not exceed 20% of the Debt Service Requirements for the Series 2012 Bonds, or such other percentage as provided in writing by the City to the Trustee permitted by law based on amounts paid from the Project Fund and eligible for payment from the District Sales Taxes. City Payments At the time of issuance of the Series 2012 Bonds, no businesses will be open to generate any sales taxes and there is limited construction of improvements within the Redevelopment Area to generate any other Revenues. The only business currently under construction is the movie theater. Casey s Marketing Company, an affiliate of Casey s General Stores, Inc., has signed a contract to construct a convenience store on one of the pad sites (subject to a number of contingencies), but no other businesses have signed leases or sales contracts to construct and operate a business within the Redevelopment Area. Assuming the movie theater opens for business on time, the Revenues generated will not be sufficient to provide for the payment of debt service on the Series 2012 Bonds. If businesses generating sufficient additional Revenues to pay the debt service on the Series 2012 Bonds and any Additional Bonds issued do not open prior to depletion of the capitalized interest and initiation of principal payments on September 1, 2014, the Bondowners would be dependent upon the City to make the City Payments in an amount sufficient to pay debt service on the Bonds. If the City fails to pay City Payments there will be insufficient funds to provide for the payment of the debt service on the Bonds. See SOURCES OF PAYMENT AND SECURITY FOR THE BONDS-Debt Service Coverage herein for a discussion of the projected Revenues compared to net debt service for the Series 2012 Bonds assuming the movie theater is the only business operating in the Shopping Center. Tax Increment Financing Litigation The Missouri Supreme Court upheld the constitutionality of the TIF Act (prior to certain amendments thereto) in See TAX INCREMENT FINANCING IN MISSOURI The TIF Act herein. Nevertheless, litigation regarding the constitutionality and application of the TIF Act is currently pending in various Missouri circuit courts. Circuit courts in Missouri are trial courts and decisions in those courts are not binding on other Missouri courts. Circuit court decisions, whether favorable or unfavorable with respect to the constitutionality and application of the TIF Act, may be appealed to a Missouri Court of Appeals and, ultimately, the Missouri Supreme Court. If the plaintiffs are successful in one or more of the currently pending cases, the court s decision may interpret the requirements of the TIF Act in a manner adverse to the establishment of tax increment financing in the Redevelopment Area. It is not possible to predict whether an adverse holding in any current or future litigation would prompt a challenge to the adoption of tax increment financing in the Redevelopment Area or how that decision would be applied by a court with respect to the Redevelopment Area. If current or future litigation challenging all or any part of the TIF Act were to be applied to the adoption of tax increment financing in the Redevelopment Area, the Revenues may not be available to pay principal of and interest on the Series 2012 Bonds and the enforceability of the Indenture and the Financing Agreement could be adversely affected. The City cannot predict or guarantee the outcome of any currently pending or future litigation challenging the constitutionality or the application of the TIF Act or the application by a court of a potential holding in any case to other tax increment projects. -25-

30 Risk of Non-Appropriation The application of the District Sales Taxes, the Economic Activity Tax Revenues and the City Payments is subject to annual appropriation by the District and the City. The District and the City have covenanted that the officer at any time charged with the responsibility of formulating budget proposals is directed to include in the budget proposal submitted to the governing body for each Fiscal Year that the Bonds are Outstanding a request for an appropriation of the taxes collected during such Fiscal Year for application as provided in the Indenture. Any funds appropriated as the result of such a request shall be transferred to the Trustee at the times and in the manner provided in the Indenture. There can be no assurance that such appropriation will be made by the governing bodies, and the governing bodies are not legally obligated to do so. Reliance on the Developer, Other Property Owners, Tenants and Subsequent Property Owners The development of the Shopping Center was undertaken by the Developer and those parties contracting with the Developer. The Developer is under no obligation to continue to own the Shopping Center for the term of the Bonds. It is anticipated that the Shopping Center will be managed by the Developer. Bondowners will be dependent on current and future managers of the Shopping Center to maintain occupancy with retail businesses that would generate sales tax revenues. It is contemplated that some of the leases will require the tenants to continuously operate a business at the leased premises but some leases may not contain this requirement. Thus, a tenant may cease operations but continue to pay rent to the property owner. Under such circumstances, no Economic Activity Tax Revenues or District Sales Taxes, as applicable, would be generated by such tenant. The Developer has the complete and exclusive control over the leasing or sales of property that it owns within the Redevelopment Area including the fixing of rentals and the selection or rejection of users. The Redevelopment Agreement does require the City s approval prior to the sale or lease for redevelopment of certain types of businesses. The Developer shall not, without City approval, sell or lease for development more than one pad site or more than 10% of the finished first floor retail strip space in the Redevelopment Area to non-sales tax generating businesses such as office uses or fitness centers. A non-sales tax generating business is defined in the Redevelopment Agreement as any business projected to generate less than $50 per square foot of retail sales. See the caption OCCUPANTS herein. Financial Feasibility of the Shopping Center The financial feasibility of the Shopping Center depends in large part upon the ability of the Developer to complete the Shopping Center and to maintain substantial occupancy throughout the term of the Bonds. The only business currently under construction is the movie theater. Casey s Marketing Company, an affiliate of Casey s General Stores, Inc., has signed a contract to construct a convenience store on one of the pad sites (subject to a number of contingencies). There is no assurance that any businesses will open in the Redevelopment Area. If the Developer fails to complete construction of the Shopping Center and to maintain substantial occupancy in the Shopping Center, there may be insufficient Revenues to pay the Bonds. The Developer only has financing for the site development and the movie theater currently under construction. Additional financing will need to be obtained to complete development of the Shopping Center. If the Developer is not able to obtain additional financing, the Shopping Center would not be completed, limiting the amount of Revenues that would be generated to pay debt service on the Bonds. Bondowners would be dependent on the City appropriating City Payments in amount sufficient to pay debt service on the Bonds. -26-

31 The Projections include assumptions relating to the future occupancy of the Shopping Center and certain other significant assumptions. Some assumed events and circumstances inevitably will not materialize and unanticipated events and circumstances will occur subsequent to the date thereof. The preparer of the Projections did not assume that Casey s would be operating a retail business in the Shopping Center, but rather assumed typical ranges of sales for convenience stores. Therefore, the actual results achieved during the forecast period may vary from the forecast and the variations may be material. No assurance can be given that environmental conditions do not now or will not in the future exist at the Shopping Center which could become the subject of enforcement actions by governmental agencies. Additionally, there can be no assurance that future environmental conditions, if any, would not adversely impact the willingness of the public to frequent the Shopping Center. The amount of sales taxes generated at the Shopping Center is dependent upon taxable sales at the Shopping Center. See the caption OCCUPANTS herein. No Mortgage of the Projects or the Shopping Center Payment of the principal of and interest on the Bonds is not secured by any deed of trust or mortgage on the Projects or any portion thereof, the Shopping Center or any other property within the Redevelopment Area. The Bonds are payable solely from Bond proceeds, Revenues and all moneys and securities from time to time held by the Trustee under the terms of the Indenture (except payments required to be made to meet the requirements of Section 148(f) of the Code) and any and all other property (real, personal or mixed) of every kind and nature from time to time hereafter, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security under the Indenture by the District or by anyone in its behalf or with its written consent, to the Trustee, as provided in the Indenture. Risk of Failure to Maintain Levels of Assessed Valuations or to Pay Payments in Lieu of Taxes There can be no assurance that the assessed value of the Shopping Center will be maintained throughout the term of the Series 2012 Bonds. Construction has started to prepare the Redevelopment Area for construction of buildings to be used by businesses. The only business currently under construction is the movie theater. If at any time during the term of the Series 2012 Bonds the only construction completed is the preparation of the Redevelopment Area for construction of businesses, or if the only business opened is the movie theater, the actual assessed value will be substantially less than the Projections, and the amount of the Payments in Lieu of Taxes will not be sufficient to meet the obligations to the Owners. Even if the County Assessor s determination of the assessed value of the Shopping Center equals or exceeds the amounts in the Projections, the owners of the Shopping Center have the right to appeal such determination. Additionally, pursuant to certain leases, certain tenants may also be granted the right to appeal such determination should the Developer or successor owners decline to do so. If any such appeal is not resolved prior to the time when real estate taxes and Payments in Lieu of Taxes are due, the taxpayer may pay the taxes and Payments in Lieu of Taxes under protest. In such event, the Payments in Lieu of Taxes being protested will not be available for deposit into the Special Allocation Fund until the appeal has been concluded. If the appeal is resolved in favor of the taxpayer, the assessed value of the Shopping Center will be reduced, in which event the Payments in Lieu of Taxes may be less than forecasted. See the caption TAX INCREMENT FINANCING IN MISSOURI Assessments and Collections of Ad Valorem Taxes herein. When tax increment financing is adopted for a redevelopment area, the assessed value of real property in the redevelopment area is frozen for tax purposes at the then current base level prior to the construction of improvements. The owners of the property continue to pay property taxes at the base level. As the property is improved, the assessed value of real property in the redevelopment area should increase above the base level. By applying the tax rate of all taxing districts having taxing power within the redevelopment area to the increase in assessed valuation of the improved property over the base level, a tax increment is produced. The tax -27-

32 increments, referred to as payments in lieu of taxes or PILOTS, are paid by the owners of property in the same manner as regular property taxes. The payments in lieu of taxes are transferred by the collecting agency to the treasurer of the city or county and deposited in a special allocation fund. All or a portion of the moneys in the fund are used to pay directly for redevelopment project costs or to retire bonds or other obligations issued to pay such costs. The failure of a property owner in the Redevelopment Area to pay the Payments in Lieu of Taxes would result in a reduced amount of Revenues to pay the Bonds. An affiliate of the Developer, Larino Properties, LLC, was delinquent in the payment of real property taxes for the 2011 tax year in Greene County, Missouri. The Developer claimed that the nonpayment was related to a dispute with Greene County, Missouri for the county s failure to make certain payments to the affiliate with respect to a tax increment financing project in Greene County, Missouri. Total real property taxes delinquent and payable by the Developer were $31, The Developer has recently paid the delinquent taxes, including penalties and interest. Changes in State and Local Tax Laws Any change in the current system of collection and distribution of real property taxes, Payments in Lieu of Taxes, Economic Activity Tax Revenues or District Sales Taxes in the County or the City, including without limitation the reduction or elimination of any such tax, judicial action concerning any such tax or voter initiative, referendum or action with respect to any such tax, could adversely affect the availability of Revenues to pay the principal of and interest on the Bonds. There can be no assurances, however, that the current system of collection and distribution of the real property taxes, Payments in Lieu of Taxes, Economic Activity Tax Revenues or District Sales Taxes in the County or the City will not be changed by any competent authority having jurisdiction to do so, including without limitation the State, the County, the City, school districts, the courts or the voters, and the Indenture and the Financing Agreement does not limit the ability of the City to make any such changes with respect to taxes and levies. In addition, if the assessed valuation in the City rises to the extent that a rollback in tax rates is required, and if the increase in assessed valuation within the Redevelopment Area is not as extensive as the increase within the City generally, the rollback in tax rates may result in a reduction in Payments in Lieu of Taxes. See TAX INCREMENT FINANCING IN MISSOURI Assessments and Collections of Ad Valorem Taxes Reassessment and Tax Rate Rollback herein. The assessments and revenue estimates used in the Projections are based on the current status of the national and local business economy and assume a future performance of the real estate market similar to the historical performance of such market in the Grain Valley, Missouri area. However, changes in such market conditions, as well as changes in general economic conditions, could adversely affect the amount of Revenues collected. Reduction in State and Local Tax Rates Any taxing district in the Redevelopment Area could lower its tax rate, which would have the effect of reducing the Payments in Lieu of Taxes or Economic Activity Tax Revenues derived from the Redevelopment Area. Such a reduction in rates could be as a result of a desire of the governing body of the taxing district to lower tax rates, the retirement of general obligation bonds of the Taxing District, taxpayer initiative, or in response to state or local litigation or legislation affecting the broader taxing structure within the taxing district, such as litigation or legislation affecting the primary reliance on ad valorem property taxes to fund elementary and secondary education in the State. Limitations on Remedies The remedies available to the Bondowners upon a default under the Indenture are in many respects dependent upon judicial action, which is often subject to discretion and delay under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code (the Federal -28-

33 Bankruptcy Code ). The various legal opinions to be delivered concurrently with delivery of the Bonds will be qualified as to enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally, now or hereafter in effect; to usual equity principles which shall limit the specific enforcement under laws of the State of Missouri as to certain remedies; to the exercise by the United States of America of the powers delegated to it by the United States Constitution; and to the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State of Missouri and its governmental bodies, in the interest of serving an important public purpose. Factors Affecting Economic Activity Tax Revenues and District Sales Taxes Economic Activity Tax Revenues and District Sales Taxes are contingent and may be adversely affected by a variety of factors, including without limitation economic conditions within the Redevelopment Area and the surrounding trade area and competition from other retail businesses, rental rates and occupancy rates in private developments in the Redevelopment Area, suitability of the Shopping Center and the retailers within the Redevelopment Area for the local market, local unemployment, availability of transportation, neighborhood changes, crime levels in the area, vandalism and rising operating costs, interruption or termination of operation of the Shopping Center and the retailers within the Redevelopment Area as a result of fire, natural disaster, strikes or similar events, among many other factors. As a result of all of the above factors, it is difficult to predict with certainty the expected amount of Economic Activity Tax Revenues and District Sales Taxes which will be available for appropriation to the repayment of the Bonds. The retail sales industry is highly competitive. Existing retail businesses outside of the Redevelopment Area and the future development of retail businesses outside of the Redevelopment Area, which are competitive with retail businesses in the Redevelopment Area may exist or may be developed after the date of this Official Statement. In addition to the foregoing, the partial or complete destruction of the Shopping Center or the retailers within the Redevelopment Area, as a result of fire, natural disaster or similar casualty event or the temporary or permanent closing of one or more of such retail establishments due to strikes or failure of the business would adversely affect the Economic Activity Tax Revenues and District Sales Taxes and thereby adversely affect the revenues available to pay the Bonds and the interest thereon. Any insurance maintained by the owner of or the tenants in such areas for such casualty or business interruption is not likely to include coverage for sales taxes that otherwise would be generated by the establishment. Products that are eligible for the federal Food Stamp program and pharmaceutical products that are purchased cannot, by law, be subject to state or local sales taxes. To the extent that products are sold to shoppers who purchase goods with Food Stamps or purchase pharmaceutical items, the expected amount of Economic Activity Tax Revenues and District Sales Taxes which will be available for appropriation for payment of the principal of and interest on the Bonds would be reduced. Revenue Study The forecasted annual Revenues shown in the Projections are based on certain assumptions concerning facts and events over which the City, the District, the Developer and Real Estate Research Consultants, Inc. (the preparer of the Projections) will have no control. Certain assumptions in the Projections were provided by the Developer and from information supplied, without verification, by interested tenants of the Shopping Center. The only business under construction is the movie theater. Casey s Marketing Company, an affiliate of Casey s General Stores, Inc., has signed a contract to construct a convenience store on one of the pad sites (subject to a number of contingencies). There is no assurance that any businesses will open in the Redevelopment Area. The preparer of the Projections did not assume that Casey s would be operating a retail business in the Shopping Center, but rather assumed typical ranges of sales for convenience stores. The preparer of the Projections has prepared revenue studies for other tax increment financings in which projected revenues were significantly higher than the revenues which were actually realized. No -29-

34 representation or warranty is or can be made about the amount or timing of any future income, taxes, increased assessment or revenues, or that actual results will approach the Projections. The Authority, the City, the District, the Developer, the Financial Advisor and the Underwriter make no representation or warranty (express or implied) as to the accuracy or completeness of any financial, technical or statistical data or any estimates, projections, assumptions or expressions of opinion set forth in the Projections. Changes in Market Conditions The assessments and revenue estimates used in the Projections are based on the current status of the national and local business economy and assume a future performance of the real estate market similar to the historical performance of such market in the metropolitan Kansas City area. However, changes in the market conditions in the City, as well as changes in general economic conditions, could adversely affect the amount of development in the Redevelopment Area and the District Sales Taxes, the Payments in Lieu of Taxes, the Economic Activity Tax Revenues and other tax revenues available for the repayment of the Bonds. Bond Reserve Fund At the time of issuance of the Series 2012 Bonds, the Bond Reserve Fund will be funded with proceeds of the Series 2012 Bonds in the amount of $257, (the Bond Reserve Requirement ). See SOURCES OF PAYMENT AND SECURITY FOR THE BONDS Indenture Funds and Accounts herein. There can be no assurance that the amounts on deposit in the Bond Reserve Fund will be available if needed for payment of the Bonds in the full amount of the Bond Reserve Requirement because (1) of fluctuations in the market value of the securities deposited therein and/or (2) if funds are transferred to the Debt Service Fund, sufficient revenues may not be available in the Revenue Fund to replenish the Bond Reserve Fund to the Bond Reserve Requirement. Determination of Taxability The Series 2012 Bonds are not subject to redemption, nor is the interest rate on the Series 2012 Bonds subject to adjustment, in the event of a determination by the Internal Revenue Service or a court of competent jurisdiction that the interest paid or to be paid on any Series 2012 Bond is or was includible in the gross income of the Owner of a Series 2012 Bond for federal income tax purposes. Such determination may, however, result in a breach of the tax covenants of the Authority set forth in the Indenture which may constitute an event of default under the Indenture. Likewise, the Indenture does not require the redemption of the Series 2012 Bonds or the payment of any additional interest or penalty on the Series 2012 Bonds if the interest thereon loses its exemption from income taxes imposed by the State of Missouri. It may be that Owners would continue to hold their Series 2012 Bonds, receiving principal and interest as and when due, but would be required to include such interest payments in gross income for federal and state income tax purposes. Risk of Audit The Internal Revenue Service (the Service ) has established an ongoing program to audit tax-exempt obligations to determine whether interest on such obligations should be included in gross income for federal income tax purposes. No assurance can be given that the Service will not commence an audit of the Bonds. Owners of the Bonds are advised that, if an audit of the Bonds were commenced, in accordance with its current published procedures, the Service is likely to treat the Authority as the taxpayer, and the Owners of the Bonds may not have a right to participate in such audit. Public awareness of any audit could adversely affect the market value and liquidity of the Bonds during the pendency of the audit, regardless of the ultimate outcome of the audit. -30-

35 Loss of Premium Upon Early Redemption Purchasers of Series 2012 Bonds at a price in excess of their principal amount should consider the fact that the Series 2012 Bonds are subject to redemption at a redemption price equal to their principal amount plus accrued interest under certain circumstances. See THE SERIES 2012 BONDS Redemption Provisions. Secondary Market There is no assurance that a secondary market will develop for the purchase and sale of the Series 2012 Bonds. Prices of municipal securities in the secondary market are subject to adjustment upward and downward in response to changes in the credit markets and changes in operating performance of the entities operating the facilities subject to the municipal securities. Municipal securities are generally viewed as long-term investments, subject to material unforeseen changes in the investor's circumstances, and may require commitment of the investor's funds for an indefinite period of time, perhaps until maturity. Defeasance Risks When any or all of the Bonds or the interest payments thereon have been paid and discharged, then the requirements contained in the Indenture and the pledge of revenues made thereunder and all other rights granted thereby shall terminate with respect to the Bonds so paid and discharged. Bonds shall be deemed to be paid within the meaning of the Indenture when payment of the principal on such Bonds, plus premium, if any, plus interest thereon to the due date thereof (whether such due date is by reason of maturity or upon redemption as provided in the Indenture, or otherwise), either (1) has been made or caused to be made in accordance with the terms of the Indenture, or (2) provision therefore has been made by depositing with the Trustee, in trust and irrevocably setting aside exclusively for such payment, (i) moneys sufficient to make such payment or (ii) non-callable Government Securities maturing as to principal and interest in such amount and at such times as will ensure the availability of sufficient moneys to make such payment and the Trustee shall have received an opinion of Bond Counsel (which opinion may be based upon a ruling or rulings of the Internal Revenue Service) to the effect that such deposit of interest on any Bonds will not result in the interest on any Bonds then Outstanding and exempt from taxation for federal income tax purposes becoming subject to federal income taxes then in effect and that all conditions precedent to the satisfaction of the Indenture have been met. Any money and non-callable Government Securities that at any time shall be deposited with the Trustee by or on behalf of the City, for the purpose of paying and discharging any of the Bonds or the interest payments thereon, shall be assigned, transferred and set over to the Trustee in trust for the respective Owners of the Bonds, and such moneys shall be irrevocably appropriated to the payment and discharge thereof. Noncallable Government Securities include, in addition to cash and obligations pre-refunded with cash, bonds, notes, certificates of indebtedness, treasury bills and other securities constituting direct obligations of, or obligations the principal of and interest on which are fully and unconditionally guaranteed as to full and timely payment by, the United States of America. Historically, such United States obligations have been rated in the highest rating category by the rating agencies. There is no legal requirement in the Indenture that Government Securities consisting of such United States obligations be or remain rated in the highest rating category by any rating agency. Prices of municipal securities in the secondary market are subject to adjustment upward and downward in response to changes in the credit markets and that could include any rating of the Bonds defeased with Government Securities to the extent the Government Securities have a change or downgrade in rating. Additional Bonds The Authority may issue Additional Bonds upon satisfaction of certain conditions provided in the Indenture. Prior to issuance of the Final Bonds for the benefit of the Developer, Additional Bonds may be issued on a parity with the Series 2012 Bonds or Additional Bonds issued on a parity with the Series 2012 Bonds only upon delivery to the Trustee of a certificate of a planning consultant acceptable to the City and the Original Purchaser demonstrating that the Projected Debt Service Coverage Ratio (calculated using the projected Revenues for Developer Committed Businesses, Third Party Committed Businesses and Developer s -31-

36 Land Sale Contracts and the average annual Debt Service Requirements for such Additional Bonds and any other Bonds issued as Developer Bonds) for each Fiscal Year of the City succeeding the proposed date of issuance of such Additional Bonds will not be less than Any such Additional Bonds issued would be expected to provide additional Revenues (excluding City Payments) from new businesses that had committed to open that could be used to help pay debt service on the Series 2012 Bonds because of the coverage amounts, but would likely still be less than the amount sufficient to pay debt service on the Series 2012 Bonds and such Additional Bonds. Bondowners would be dependent upon the City making its City Payments to provide sufficient funds to pay the Series 2012 Bonds. Overview TAX INCREMENT FINANCING IN MISSOURI Tax increment financing is a procedure whereby cities and counties encourage the redevelopment of designated areas. The theory of tax increment financing is that, by encouraging redevelopment projects, the value of real property in a redevelopment area should increase. When tax increment financing is adopted for a redevelopment area, the assessed value of real property in the redevelopment area is frozen for tax purposes at the then current base level prior to the construction of improvements. The owners of the property continue to pay property taxes at the base level. As the property is improved, the assessed value of real property in the redevelopment area should increase above the base level. By applying the tax rate of all taxing districts having taxing power within the redevelopment area to the increase in assessed valuation of the improved property over the base level, a tax increment is produced. The tax increments, referred to as payments in lieu of taxes or PILOTS, are paid by the owners of property in the same manner as regular property taxes. The payments in lieu of taxes are transferred by the collecting agency to the treasurer of the city or county and deposited in a special allocation fund. All or a portion of the moneys in the fund are used to pay directly for redevelopment project costs or to retire bonds or other obligations issued to pay such costs. The TIF Act The TIF Act was enacted in 1982 and was subsequently amended numerous times. The constitutional validity of the TIF Act (prior to the amendments) was upheld by the Missouri Supreme Court in Tax Increment Financing Commission of Kansas City, Missouri v. J.E. Dunn Construction Co., Inc., 781 S.W.2d 70 (Mo. 1989) (en banc). The TIF Act authorizes cities and counties to provide long term financing for redevelopment projects in blighted and conservation areas (as defined in the TIF Act) through the issuance of bonds and other obligations. Prior to the amendments to the TIF Act, such obligations were payable solely from PILOTS within the redevelopment area. Now, such obligations are also payable from 50% of the increase in certain other tax revenues generated by economic activities within the redevelopment area (including sales, utilities and earnings taxes but excluding personal property taxes, taxes for hotel or motel rooms, licenses, fees and special assessments). Such other taxes are referred to herein as Economic Activity Tax Revenues. The validity of certain portions of the TIF Act relating to the capture of Economic Activity Tax Revenues was upheld by the Missouri Supreme Court in County of Jefferson v. QuikTrip Corporation, 912 S.W.2d 487 (Mo. 1995) (en banc). Although payments in lieu of taxes may be irrevocably pledged to the repayment of bonds, Economic Activity Tax Revenues are subject to annual appropriation by the governing body of the city or county, and there is no obligation on the part of the governing body to appropriate Economic Activity Tax Revenues in any year. See the captions BONDOWNERS RISKS Risk of Non-Appropriation, BONDOWNERS RISKS Factors Affecting Economic Activity Tax Revenues and BONDOWNERS RISKS Tax Increment Financing Litigation herein. Assessments and Collections of Ad Valorem Taxes The City and the Redevelopment Area are located within Jackson County, Missouri (the County ). On or before September 1 in each year, each political subdivision located within the County which imposes ad -32-

37 valorem taxes (the Taxing Districts ) estimates the amount of taxes that will be required during the next succeeding fiscal year to pay interest falling due on general obligation bonds issued and the principal of bonds maturing in such year and the costs of operation and maintenance plus such amounts as shall be required to cover emergencies and anticipated tax delinquencies. The Taxing Districts certify the amount of such taxes which shall be levied, assessed and collected on all taxable tangible property in the County to the County Assessor by September 1. All taxes levied must be based upon the assessed valuation of land and other taxable tangible property in the County as shall be determined by the records of the County Assessor and must be collected and remitted to the Taxing Districts. All the laws, rights and remedies provided by the laws of the State for the collection of State, county, city, school and other ad valorem taxes are applicable to the collection of taxes authorized to be collected in the Redevelopment Area. The Missouri Constitution requires uniformity in taxation of real property by directing such property to be subclassed as agricultural, residential or commercial and permitting different assessment ratios for each subclass. Residential property is currently assessed at 19% of true value in money, commercial property is assessed at 32% of true value in money, and agricultural property is assessed at 12% of true value in money. The phrase true value in money has been held to mean fair market value except with respect to agricultural property. Real property within the County is assessed by the County Assessor. The County Assessor is responsible for preparing the tax roll each year and for submitting the tax roll to the Board of Equalization. The Board of Equalization has the authority to question and determine the proper values of real property and then adjust and equalize individual properties appearing on the tax rolls. The County Collector collects taxes for all Taxing Districts within the County limits. The County Collector deducts a commission for its services. After such collections and deductions of commission, taxes are distributed according to the Taxing District s pro rata share. Taxes are levied on all taxable property based on the equalized assessed value thereof determined as of January 1 in each year. Under Missouri law, each property must be reassessed every two years (in odd numbered years). The County Collector prepares the tax bills and mails them to each taxpayer in September. Payment is due by December 31, after which they become delinquent and accrue a penalty of one percent per month. In the event of an increase in the assessed value of a property, notice of such increase must be given to the owner of the affected property, which notice is generally given in April. Valuation of Real Property. The County Assessor must determine the assessed value of a property based upon the State law requirement that property be valued at its true value in money. For agricultural land, true value is based on its productive capability. As to residential and commercial property, true value in money is the fair market value of the property on the valuation date. The fair market value is arrived at by using the three universally recognized approaches to value: cost approach, the sales comparison approach and the income approach. The cost approach is typically applied when a property is newly constructed and is based on the principle of substitution. This principle states that no informed buyer will pay more for a property than the cost to reproduce or replace the property. Value is determined under the cost approach by adding the estimated land value to the replacement or reproduction cost of improvements reduced by estimated depreciation. Courts have held, however, that construction cost alone is not a proper basis for determining true value in money and that all factors which affect the use and utility of the property must be considered. The sales comparison approach determines value based upon recent sales prices of comparable properties. Comparable sales are adjusted for differences in properties by comparing such items as sales price per square foot and net operating income capitalization rates. -33-

38 The income approach estimates market value by discounting to present value a stream of estimated net operating income. First, the property s gross potential income is estimated based on gross rents being generated at the property. A vacancy allowance is then deducted to arrive at effective gross income. Next, allowable operating expenses are deducted to arrive at an estimate of the property s net operating income. Finally, the net operating income is divided by an appropriate capitalization rate to arrive at the estimated present value of the income stream. Appeal of Assessment. State statutes set up various mechanisms for a property owner to appeal the assessment of a tax on its property. Typically, there are four issues that can be raised in property tax appeals: overvaluation, uniformity, misclassification and exemption. Overvaluation appeals are the most common appeals presented by taxpayers. An overvaluation appeal requires the taxpayer to prove that the true value in money of the property is less than that determined by the assessor. Uniformity appeals are based on the assertion that other property in the same class and county as the subject property is assessed at a lower percentage of value than the subject property. A misclassification appeal is based on an assertion that assessing authorities have improperly subclassed a property. Exemption appeals are based on claims that the property in question is exempt from taxation. Overvaluation appeals, for the most part, must be made administratively, first, to the Board of Equalization and then to the State Tax Commission within prescribed time periods following notice of an increase in assessment. Appeals to the Board of Equalization must be filed with the County Assessor on or before the third Monday in June of each year. Appeals to the State Tax Commission must be filed by the later of August 15 and 30 days after the date of the final decision of the Board of Equalization. Where valuation is not an issue, appeals must be taken directly to the State circuit court rather than the State Tax Commission. If an appeal is pending on December 31, the due date for the payment of taxes, State statute provides a procedure for the payment of taxes under protest. If taxes are paid but not under protest, the taxpayer cannot recover the amount paid unless those taxes have been mistakenly or erroneously paid. Application for a refund of mistakenly or erroneously paid taxes must be made within one year after the tax in dispute was paid. Typically, only that portion of the taxes being disputed is identified as being paid under protest, unless a claim of exemption is being asserted. The portion of the tax paid under protest is required to be held in an interest bearing account. Unless an appeal before the Board of Equalization or State Tax Commission is pending, suit must be brought by the taxpayer to resolve the dispute within 90 days, or the escrowed funds will be released to the Collector of Revenue and distributed to the Taxing Districts. Reassessment and Tax Rate Rollback. A general reassessment of all property in the State is required to be conducted every two years. When, as a result of such reassessment, the assessed valuation within a Taxing District increases by more than an allowable percentage pursuant to the Hancock Amendment (as hereinafter described), the Taxing District is required to roll back the rate of tax within the Taxing District so as to produce substantially the same amount of tax revenue as was produced in the previous year increased by an amount called a preceding valuation factor. A preceding valuation factor is a percentage increase or decrease based on the average annual percentage changes in total assessed valuation of the County over the previous three or five years, whichever is greater, adjusted to eliminate the effect of boundary changes, changes from State to County assessed property, general reassessment and State ordered changes. The Hancock Amendment. A Constitutional amendment limiting taxation and government spending was approved by Missouri voters on September 4, 1980, and went into effect with the fiscal year. The amendment (Article X, Section 22(a) of the State Constitution and popularly known as the Hancock Amendment) limits the rate of increase and the total amount of taxes that shall be imposed in any fiscal year, and provides that the limit shall not be exceeded without voter approval. Provisions are included in the Hancock Amendment for rolling back tax rates to produce an amount of revenues equal to that of the previous year if the definition of the tax base is changed or if property is reassessed. The tax levy on the assessed valuation of new construction is exempt from this limitation in the initial year of new construction. -34-

39 Tax Delinquencies All real estate upon which taxes or payments in lieu of taxes remain unpaid on the first day of January, annually, are delinquent, and the County Collector is empowered to enforce the lien of the taxing jurisdictions thereon. Whenever the County Collector is unable to collect any taxes on the tax roll, having diligently endeavored and used all lawful means to do so, the County Collector is required to compile lists of delinquent tax bills collectible by such office. All lands and lots on which taxes are delinquent and unpaid are subject to suit to collect delinquent tax bills or suit for foreclosure of the tax liens. Upon receiving a judgment, the Sheriff must advertise the sale of the land, fixing the date of sale within 30 days after the first publication of the notice. Delinquent taxes, with penalty, interest and costs, may be paid to the County Collector at any time before the property is sold therefor. No action for recovery of delinquent taxes shall be valid unless initial proceedings therefore are commenced within five years after delinquency of such taxes. Economic Activity Tax Revenues The Economic Activity Tax Revenues that will be used for the payment of the Bonds, subject to annual appropriation, are 50% of the total additional revenue from taxes imposed by the City or other Taxing Districts which are generated by economic activities within the Redevelopment Area over the amount of such taxes generated by economic activities within the Redevelopment Area in calendar year 2009, but excluding any taxes imposed on sales or charges for sleeping rooms paid by transient guests of hotels and motels, taxes levied pursuant to Section , RSMo., licenses, fees or special assessments, other than payments in lieu of taxes, and personal property taxes and taxes levied for the purpose of public transportation pursuant to Section , RSMo. Retail businesses are required to collect the sales tax from purchasers at the time of sale, and pay said amounts to the Department of Revenue of the State with the filing of returns, except for the sales tax on motor vehicles, trailers, boats and outboard motors, which is due at the time application is made for title and registration. The sales volume of a retail business determines the frequency of payments made to the Department of Revenue of the State. In most cases, the retail businesses in the City make monthly payments to the Department of Revenue of the State, which are due on the tenth day of each calendar month for sales taxes collected in the preceding calendar month. Retail businesses located in the City submit applications to the City for a merchants license and an occupancy permit, and before such license and permit are awarded verification of a tax identification number from the State is made by the City. In the event of a failure by a retail business to remit sales taxes, interest and penalties, the unpaid amount may become a lien in the nature of a judgment lien against the delinquent taxpayer. In the event of overpayment by any retail business as a result of error or duplication, provision is made under State law for refunds. Pursuant to State law, taxpayers who promptly pay their sales taxes are entitled to retain 2% of the amount of taxes owed. Within 30 days of receipt of sales taxes by the Department of Revenue of the State, the Director of the Department of Revenue remits to the State Treasurer for deposit in a special trust fund for the benefit of each political subdivision entitled to a sales tax distribution the amount of such sales tax receipts less 1% of such amount which constitutes a fee paid to the State for collecting and distributing the tax. The State Treasurer then distributes moneys on deposit in the special trust fund on behalf of each such political subdivision to such political subdivision on a monthly basis. Overview GRAIN VALLEY MARKETPLACE Pursuant to the Real Property Tax Increment Allocation Redevelopment Act, Sections to , inclusive, of the Revised Statutes of Missouri, as amended (the TIF Act ), the City designated a -35-

40 redevelopment area (the Redevelopment Area ) on September 27, 2010 for the Shopping Center. The Redevelopment Area is approximately 32 acres and located at the northeast portion of the intersection of Interstate 70 and Missouri Route BB (Buckner-Tarsney Road). The Redevelopment Area was studied and determined by the City to be a blighted area within the meaning of the TIF Act. On January 13, 2011, the City entered into a tax increment financing contract with the Developer authorizing the Developer to redevelop the Redevelopment Area. The Shopping Center is planned to consist of the construction of approximately 106,180 square feet of retail space. See the caption OCCUPANTS below for current information about the status of development of the Shopping Center. It is anticipated that the construction of the Shopping Center will be completed by March The project site is about 23 miles east of downtown Kansas City, at the intersection of I-70 and Buckner Tarsney Road, in the City. The interchange at I-70 and Buckner Tarsney Road in Grain Valley is undergoing significant improvements. See PLAN OF FINANCE herein. These pending improvements helped open up the four corners of the interchange to redevelopment. This area, the Grain Valley Marketplace, is expected to be built in four phases around the improved interchange. The Developer has purchased approximately 17 acres on the northeast corner of the interchange for the purpose of constructing the Shopping Center. Current plans include a movie theater, restaurants and a variety of retail operators. See Appendix C Revenue Study for more details of the possible retail operators. To date, site preparation work and construction for the movie theater is the only work commenced on the Shopping Center. Casey s Marketing Company, an affiliate of Casey s General Stores, Inc., has signed a contract to construct a convenience store on one of the pad sites (subject to a number of contingencies). No other outparcels have been sold to third parties and no leases have been signed for any space at the Shopping Center other than for the movie theater. The site work is approximately 90% complete and includes all site preparation work, construction of a detention basin, public and private utilities (sewer, water and electric), and environmental remediation (tank removal). See OCCUPANTS herein. The total number of parking spaces for the Shopping Center is approximately 836. Construction lending has been provided by Blue Ridge Bank and Trust Co. The loan is evidenced by promissory notes and secured by a number of collateral documents, including a deed of trust, assignment of rents, security agreement and fixture filing, all of which is for the sole and exclusive benefit of Blue Ridge Bank and Trust Co. and provide financing for construction currently pending for site development and for construction of the movie theater. Additional financing will need to be obtained for construction of any further development of the Shopping Center. Ownership of Shopping Center The Developer is the owner of the land upon which the Shopping Center will be built. The Developer is a Missouri limited liability company. The Managing Members of the Developer are Paul Larino and Cathy Larino, husband and wife. The Developer will also manage and operate the Shopping Center. The Developer or its members or affiliates are currently engaged in three commercial redevelopment projects in Missouri. In one of the commercial developments the Developer still holds six of 15 developable lots after five years from commencing the project. The second commercial development is anchored by a 162,000 square foot home improvement store and 13 of the 15 pad sites are still available after three years from commencing the project. Developer anticipates full development within the next five years. The third commercial development, which is nearly completed with site improvements, is to be anchored by a 162,000 square foot home improvement store. Expectations are that 11 remaining pad sites will be sold over an additional three year period. The Shopping Center is the first redevelopment project of the Developer in the Kansas City metropolitan area. -36-

41 Environmental Assessment No assurance can be given that environmental conditions do not now or will not in the future exist at the Shopping Center which could become the subject of enforcement actions by governmental agencies. Additionally, there can be no assurance that future environmental conditions, if any, would not adversely impact the willingness of the Developer to continue construction of the Shopping Center, or the willingness of property owners within the Redevelopment Area to continue operation of their businesses. A portion of the property in the Redevelopment Area has been assessed and determined to have detectable concentrations of benzene, toluene, ethylbenzene and total xylenes and measurable concentrations of hazardous substance/petroleum products in the soil and groundwater as a result of the operation of a truck stop/fueling station until Remediation of the hazards was performed and the Missouri Department of Natural Resources determined that no further actions were required, but contingent on the property being used solely for nonresidential purposes (unless further investigation or evaluation is completed) and that none of the groundwater from the site be used for domestic purposes (unless further investigation or evaluation is completed). The Architect and the Contractor J. Price Architecture, Inc. and Bates & Associates, Inc. (the Architects ), serves as architects for the portion of the construction of the Shopping Center undertaken by the Developer. Similar retail projects that have involved Price Architecture, Inc. include: Ozark/Nixa 12 (Ozark, Missouri); Wildwood, 10-screen theatre (Wildwood, Missouri), and Hannibal Cinema (Hannibal, Missouri). Similar retail projects that have involved Bates & Associates, Inc. include PriceCutter grocery stores; Deerfield Convenience Store; and Lakewood Retail Center. Shafer, Kline & Warren, Inc. serves as the civil engineer for the site preparation and development for the Shopping Center. Similar retail projects that have involved the engineer include: Independence Commons (Independence, Missouri); Briarcliff Village (Kansas City, Missouri); and Deer Creek Marketplace (Overland Park, Kansas). Emery Sapp & Sons, Inc. has been selected as contractor for the site work and certain public and private improvements. Crossland Construction Company, Inc. has been selected as contractor for construction of the movie theatre. Similar retail projects that have involved Emery Sapp & Sons, Inc. include Wilson Creek Marketplace (Battlefield, Missouri) and Grindstone Plaza (Columbia, Missouri). Similar retail projects that have involved Crossland Construction Company, Inc. include the Warren Theatre (Moore, Oklahoma) and the Bentonville Performing Arts Theatre (Bentonville, Arkansas). Competition The concept for the proposed project is somewhat unique, as it combines some elements of what might normally be located within a grocery anchored neighborhood center with a movie theater that will draw from a much larger area. The movie theater competition will come from a more distant area, but restaurants will compete with both local establishments in the City as well as other operators near or around the site. There are five movie theaters within a 10 to 12 mile radius of the Site that would compete with the theater at the Shopping Center including the Blue Springs 8, AMC Independence Commons 20, Dickinson Eastglen 16, Pharaoh Cinema 4 and Noland Fashion Square 6. Dickinson Theatres Inc., a 92-year old movie theater chain based in Overland Park, Kansas, has recently filed for bankruptcy reorganization as a result of the soft economy and intense competition in the movie theater industry. Dickinson has 210 screens in 18 theater complexes in seven states, including theaters in Blue Springs, Missouri and Lee s Summit, Missouri near the Marketplace development. -37-

42 Retail competition for the Shopping Center will be from both local businesses and other shopping centers near the Site. Concentrations of existing retail within the City are Old Towne Marketplace and Sni-A- Bar Plaza. Other retail and restaurant options are scattered around the City. Other retail options outside the City include retail operators around or near the Interstate 70 interchange in Oak Grove, Missouri, Adam s Farm development in Blue Springs, Missouri, retail operators around or near the Interstate 70/Missouri Highway 7 interchange in Blue Springs, Missouri, retail operators around or near the Interstate 70/Woods Chapel Road interchange in Blue Springs, Missouri, retail operators around or near the Interstate 70/Interstate 470 interchange in Independence, Missouri, retail operators around or near the Interstate 470/Douglas Street interchange in Lee s Summit, Missouri, and retail operators around or near the Interstate 470/U.S. Highway 50 interchange in Lee s Summit, Missouri. See REVENUE STUDY in Appendix C for a more complete description of the competition of the Shopping Center. Below are two maps that show the location of the competition to the Shopping Center. The first map shows locations of competing movie theaters. The second map shows concentrations of competing retail and restaurant businesses. -38-

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44 OCCUPANTS The only business under construction at the Shopping Center is an approximately 24,000 square foot movie theater to be located on approximately 1.5 acres in the Redevelopment Area. The theater is expected to be owned by an entity owned by the Developer and B&B Movie Theaters, LLC and operated by B&B Theatres Operating Company, LLC (an affiliate of B&B Movie Theaters, LLC). The movie theater is expected to be open for business in November See REVENUE STUDY in Appendix C for details regarding the movie theater and the experience of the operator of the movie theater. The only other development activity at the Shopping Center relate to a contract with a convenience store operator. Casey s Marketing Company, an affiliate of Casey s General Stores, Inc., has signed a contract to construct a convenience store on one of the pad sites (subject to a number of contingencies). There is no assurance that any businesses will open in the Redevelopment Area. General THE DISTRICT The District is a community improvement district and a political subdivision of the State of Missouri, formed pursuant to Sections to of the Revised Statues of Missouri (the CID Act ). The District has an area of approximately 85 acres. The District was formed upon the filing of a Petition for the Establishment of a Community Improvement District. The District is governed by a five member Board of Directors. Members of the Board of Directors serve a term of four years. At the end of each term, new directors are elected at large in accordance with Section -40-

45 of the CID Act. Each director serves without compensation. The current directors and officers of the District are as follows: District Sales Taxes Name Paul Larino Larry Reeves Tina Evans Cathy Larino Alexa Barton Office Chairman Vice Chairman Secretary Treasurer District Manager Term as Director Expires September 26, 2014 September 26, 2012 September 26, 2012 September 26, 2014 September 26, 2012 A majority of the qualified voters within the District voting on the proposition approved the imposition of a sales tax within the District in the amount of one percent (1%) on all transactions which are taxable pursuant to the CID Act. By resolution adopted by the Board of Directors of the District and notification to the Missouri Department of Revenue, the District has imposed the sales tax within the District, effective April 1, The sales tax is authorized to remain in effect for a period of thirty years or until such time as the District is terminated if such time is less than thirty years. The retail establishments located in the District collect the District Sales Taxes and forward the District Sales Taxes to the Missouri Department of Revenue for further remittance, less such Department s 1% collection fee, to the District. Under State law, taxpayers who promptly pay their sales taxes are entitled to retain 2% of the amount of taxes owed. Cooperative Agreement The District has entered into a Cooperative Agreement with the City and the Developer (the Cooperative Agreement ). Pursuant to the Cooperative Agreement, the District agrees to direct the Missouri Department of Revenue to collect the District Sales Taxes and to distribute the revenues, after deducting the not to exceed 1% of the total amount collected, to the City for deposit by the City into a special account created for such purpose. Pursuant to the Cooperative Agreement, on a monthly basis, the City shall, after deducting 1.5% of the amount received by the City to provide for its service in administering the District Sales Taxes, distribute such revenues received in the preceding month in the following order of priority: (a) for so long as tax increment financing is in effect within the Redevelopment Area, one half of the District Sales Taxes will be captured as Economic Activity Taxes and deposited into the Special Allocation Fund; (b) the City shall transfer the remaining monies to the Trustee for distribution in accordance with the Indenture. Pursuant to the CID Act, no community improvement district may repeal or amend its sales tax unless such repeal or amendment will not impair the district s ability to repay any liabilities which it has incurred, money which it has borrowed or revenue bonds, notes or other obligations which it has issued. -41-

46 THE AUTHORITY Organization and Powers The Authority is a public corporation, duly organized and existing under the laws of the State of Missouri, including particularly the Industrial Development Corporations Act. The Authority is authorized under the Industrial Development Corporations Act, among other things, to (i) finance all or any part of the costs of certain projects (as defined in the Industrial Development Corporations Act); (ii) issue its revenue bonds to finance and refinance such projects and refund prior bond issues; and (iii) pledge the income and revenues to be received with respect to such projects sufficient for the payment of such bonds and the interest thereon. The Authority may issue its bonds, notes or other obligations for any of its corporate purposes. Neither the directors of the Authority nor any person executing the Bonds will be personally liable on the Bonds by reason of the issuance thereof. The Bonds and the interest thereon shall be special, limited obligations of the Authority payable solely from the Revenues held by the Trustee as provided in the Indenture, and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the Owners of the Bonds, as provided in the Indenture. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, THE DISTRICT, THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL, STATUTORY OR CHARTER PROVISION OR LIMITATION. THE ISSUANCE OF THE BONDS SHALL NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE THE AUTHORITY, THE DISTRICT, THE CITY, THE COUNTY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO TAXING POWER. Membership The Authority has a Board of Directors in which all of the powers of the Authority are vested, which consists of seven directors, all of which are duly qualified electors of and taxpayers in the City of Grain Valley, Missouri. The address of the Authority is 711 Main Street, Grain Valley, Missouri. The current members and officers of the Board of Directors of the Authority are as follows: Name Jeffrey L. Coleman Michael Switzer Penny Kruse Paul Wootten Kim Roam Title President and Director Vice President and Director Secretary and Director Treasurer and Director Director Indebtedness of the Authority The Authority is authorized to issue and may issue other series of bonds and notes secured by instruments separate and apart from the Indenture. The owners of such bonds and notes will have no claim on the assets, funds or revenues of the Authority securing the Bonds. The holders of the Bonds will have no claim on the assets, funds or revenues of the Authority securing such other bonds and notes. With respect to additional indebtedness of the Authority, the Authority intends to enter into separate agreements for the purpose of providing financing for eligible projects. Issues which may be sold by the -42-

47 Authority in the future will be created under separate and distinct indentures or resolutions and secured by instruments, properties and revenues separate from those securing the Bonds. EXCEPT FOR INFORMATION CONCERNING THE AUTHORITY IN THIS CAPTION NONE OF THE INFORMATION IN THIS OFFICIAL STATEMENT HAS BEEN SUPPLIED OR VERIFIED BY THE AUTHORITY, AND THE AUTHORITY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. ABSENCE OF LITIGATION There is no controversy, suit or other proceeding of any kind pending or, to the City s knowledge, threatened wherein or whereby any question is raised or may be raised, questioning, disputing or affecting in any way the legal organization of the City or its boundaries, or the right or title of any of its officers to their respective offices, the Redevelopment Plan, or the legality of any official act shown to have been done in connection with the issuance of the Series 2012 Bonds, or the constitutionality or validity of the Series 2012 Bonds, or any of the proceedings had in relation to the authorization, issuance or sale thereof. The Missouri Supreme Court upheld the constitutionality of the TIF Act (prior to certain amendments thereto) in See TAX INCREMENT FINANCING IN MISSOURI The TIF Act herein. Nevertheless, litigation regarding the constitutionality and application of the TIF Act is currently pending in various Missouri circuit courts. Circuit courts in Missouri are trial courts and decisions in those courts are not binding on other Missouri courts. Circuit court decisions, whether favorable or unfavorable with respect to the constitutionality and application of the TIF Act, may be appealed to a Missouri Court of Appeals and, ultimately, the Missouri Supreme Court. If the plaintiffs are successful in one or more of the currently pending cases, the court s decision may interpret the requirements of the TIF Act in a manner adverse to the establishment of tax increment financing in the Redevelopment Area. It is not possible to predict whether an adverse holding in any current or future litigation would prompt a challenge to the adoption of tax increment financing in the Redevelopment Area or how that decision would be applied by a court with respect to the Redevelopment Area. If current or future litigation challenging all or any part of the TIF Act were to be applied to the adoption of tax increment financing in the Redevelopment Area, the Revenues may not be available to pay principal of and interest on the Bonds and the enforceability of the Indenture could be adversely affected. The City cannot predict or guarantee the outcome of any currently pending or future litigation challenging the constitutionality or the application of the TIF Act or the application by a court of a potential holding in any case to other tax increment projects. LEGAL MATTERS Legal matters incident to the authorization, issuance and sale of the Series 2012 Bonds are subject to the approving legal opinion of Gilmore & Bell, P.C., Kansas City, Missouri, Bond Counsel, whose approving opinion will be delivered with the Series 2012 Bonds. The expected form of such opinion is attached as Appendix E hereto. Certain legal matters related to this Official Statement will be passed upon by Gilmore & Bell, P.C., Kansas City, Missouri. Certain legal matters will be passed upon for the Authority by John F. Barry, Esq., and for the District and the Developer by Husch Blackwell, LLP, Kansas City, Missouri. TAX MATTERS The following is a summary of the material federal and State of Missouri income tax consequences of holding and disposing of the Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of owners subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who -43-

48 do not hold the Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State of Missouri, does not discuss the consequences to an owner under any state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Bonds in the secondary market. Prospective investors are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Bonds. Opinion of Bond Counsel In the opinion of Gilmore & Bell, P.C., Bond Counsel, under the law existing as of the issue date of the Series 2012 Bonds: Federal and Missouri Tax Exemption. The interest on the Series 2012 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes and is exempt from income taxation by the State of Missouri. Alternative Minimum Tax. Interest on the Series 2012 Bonds is not an item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Bank Qualification. The Series 2012 Bonds have been designated as qualified tax-exempt obligations for purposes of Section 265(b) of the Code. Missouri Tax Exemption. The interest on the Series 2012 Bonds is exempt from income taxation by the State of Missouri. Bond Counsel s opinions are provided as of the date of the original issue of the Series 2012 Bonds, subject to the condition that the Authority, the City and the District comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2012 Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The Authority, the City and the District have covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2012 Bonds in gross income for federal and State of Missouri income tax purposes retroactive to the date of issuance of the Series 2012 Bonds. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Series 2012 Bonds but has reviewed the discussion under the section herein captioned TAX MATTERS. No Other Opinions. Bond Counsel expresses no opinion regarding other federal, state or local tax consequences arising with respect to the Series 2012 Bonds. Other Tax Consequences Original Issue Premium. If a Series 2012 Bond is issued at a price that exceeds the stated redemption price at maturity of the Series 2012 Bond, the excess of the purchase price over the stated redemption price at maturity constitutes premium on that Series 2012 Bond. Under Section 171 of the Code, the purchaser of that Series 2012 Bond must amortize the premium over the term of the Series 2012 Bond using constant yield principles, based on the purchaser s yield to maturity. As premium is amortized, the owner s basis in the Series 2012 Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner. This will result in an increase in the gain (or decrease in -44-

49 the loss) to be recognized for federal income tax purposes on the sale or disposition of the Series 2012 Bond prior to its maturity. Even though the owner s basis is reduced, no federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium. Original Issue Discount. The original issue discount is the excess of the stated redemption price at maturity of such Series 2012 Bond over its initial offering price to the public (excluding underwriters and intermediaries) at which price a substantial amount of the Series 2012 Bonds were sold. Under Section 1288 of the Code, original issue discount on tax-exempt bonds accrues on a compound basis. The amount of original issue discount that accrues to an owner during any accrual period generally equals (i) the issue price of such Series 2012 Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity on such Series 2012 Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), minus (iii) any interest payable on such Series 2012 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 2012 Bond. Owners of any Series 2012 Bonds purchased at an original issue discount should consult with their tax advisors regarding the determination and treatment of original issue discount for federal income tax purposes and the state and local tax consequences of owning such Series 2012 Bonds. Sale, Exchange or Retirement of Bonds. Upon the sale, exchange or retirement (including redemption) of a Series 2012 Bond, an owner of the Series 2012 Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Series 2012 Bond (other than in respect of accrued and unpaid interest) and such owner s adjusted tax basis in the Series 2012 Bond. To the extent a Series 2012 Bond is held as a capital asset, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Series 2012 Bond has been held for more than 12 months at the time of sale, exchange or retirement. Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on the Series 2012 Bonds, and to the proceeds paid on the sale of the Series 2012 Bonds, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner s federal income tax liability. Collateral Federal Income Tax Consequences. Prospective purchasers of the Series 2012 Bonds should be aware that ownership of the Series 2012 Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with excess net passive income, foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Series 2012 Bonds. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Series 2012 Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Series 2012 Bonds, including the possible application of state, local, foreign and other tax laws. -45-

50 UNDERWRITING Piper Jaffray & Co. (the Underwriter ) has agreed, subject to certain conditions, to purchase the Series 2012 Bonds from the Authority at a price equal to $2,727, (representing the par amount of the Series 2012 Bonds less an underwriter s discount of $56, and less a net original issue discount of $46,332.35). The Underwriter is purchasing the Series 2012 Bonds from the Authority for resale in the normal course of the Underwriter s business activities. The Underwriter may sell certain of the Series 2012 Bonds at a price greater than such purchase price, as shown on the inside cover page hereof. The Underwriter reserves the right to offer any of the Series 2012 Bonds to one or more purchasers on such terms and conditions and at such price or prices as the Underwriter, in its discretion, shall determine. The Underwriter and Pershing LLC, a subsidiary of The Bank of New York Mellon Corporation, have entered into an agreement (the Distribution Agreement ) which enables Pershing LLC to distribute certain new issue municipal securities underwritten by or allocated to the Underwriter, including the Series 2012 Bonds. Under the Distribution Agreement, the Underwriter will share with Pershing LLC a portion of the fee or commission paid to the Underwriter. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction. The Underwriter has not, however, independently verified the factual and financial information contained in this Official Statement and, accordingly, expresses no view as to the sufficiency or accuracy thereof. FINANCIAL ADVISOR The City has retained Springsted Incorporated, Public Sector Advisors, of St. Paul, Minnesota and Kansas City, Missouri, as financial advisor (the Financial Advisor ) in connection with the issuance of the Bonds. In reviewing and commenting on the Official Statement, the Financial Advisor has relied upon governmental officials, and other sources, that have access to relevant data to provide accurate information for the Official Statement, and the Financial Advisor has not been engaged, nor has it undertaken, to independently verify the accuracy of such information. The Financial Advisor is not a public accounting firm and has not been engaged by the City to compile, review, examine or audit any information in the Official Statement in accordance with accounting standards. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities and therefore will not participate in the underwriting of the Bonds. RATINGS Standard & Poor s Ratings Services has assigned the Series 2012 Bonds a rating of BBB, which reflects its evaluation of the investment quality of the Series 2012 Bonds. Such rating reflects only the view of such rating agency, and an explanation of the significance of such rating may be obtained therefrom. There is no assurance that the rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, by said rating agency if, in its judgment, circumstances warrant. Any such downward revisions or withdrawal of the rating may have an adverse effect on the market price of the Series 2012 Bonds. The City, the District and the Developer have furnished the rating agency with certain information and materials that have not been included in this Official Statement. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies and assumptions made by the rating agencies. There is no assurance that a particular rating will be maintained for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the rating agency originally establishing such rating, circumstances so warrant. The Underwriter has not undertaken any responsibility to bring to the attention of the holders of the Series 2012 Bonds any proposed revision or withdrawal of the ratings of the Series

51 Bonds or to oppose any such proposed revision or withdrawal. Any such revision or withdrawal of the ratings could have an adverse effect on the market price and marketability of the Series 2012 Bonds. PROJECTIONS Real Estate Research Consultants, Inc., has prepared the Projections which are attached hereto as Appendix C. Certain financial and statistical data included in this Official Statement have been excerpted from the Projections. The City, the Authority, the District, the Developer, the Financial Advisor and the Underwriter make no representation or warranty (express or implied) as to the accuracy or completeness of any financial, technical or statistical data or any estimates, projections, assumptions or expressions of opinion set forth in the Projections. No party assumes any responsibility to update such information after the delivery of the Series 2012 Bonds. Appendix C must be read in its entirety to understand the assumptions upon which the forecasts are based and the qualifications which have been made. There is no assurance that the forecasts will be achieved. Actual future events will vary from the forecasts, and such variances may be material. MISCELLANEOUS Information set forth in this Official Statement has been furnished or reviewed by certain officials of the City, the District, the Developer and other sources, as referred to herein, which are believed to be reliable. Any statements made in this Official Statement involving matters of opinion, estimates or projections, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates or projections will be realized. The descriptions contained in this Official Statement of the Series 2012 Bonds do not purport to be complete and are qualified in their entirety by reference thereto. The form of this Official Statement, and its distribution and use, has been approved by the City. Neither the City nor any of its officials or employees, in either their official or personal capacities, has made any warranties, representations or guarantees regarding the financial condition of the City or the City s ability to make payments required of it; and further, neither the City nor its officials or employees assumes any duties, responsibilities or obligations in relation to the issuance of the Series 2012 Bonds other than those either expressly or by fair implication imposed on the City. CITY OF GRAIN VALLEY, MISSOURI By:/s/ Michael Todd. Mayor -47-

52 APPENDIX A CITY OF GRAIN VALLEY, MISSOURI TABLE OF CONTENTS THE CITY General... A-2 Municipal Services and Utilities... A-2 Transportation and Communication Facilities... A-2 Educational Institutions and Facilities... A-3 Recreational and Religious Facilities... A-3 Economy... A-3 ECONOMIC INFORMATION CONCERNING THE CITY Commerce and Industry... A-3 General and Demographic Information... A-4 Population Distribution by Age... A-4 Employment Figures... A-4 Income Statistics... A-4 Housing Structures... A-5 Building Construction... A-5 DEBT STRUCTURE OF THE CITY Current Indebtedness of the City... A-5 Debt Summary... A-6 Overlapping Indebtedness... A-6 Other Obligations... A-6 Legal Debt Capacity... A-7 Defaults on City Indebtedness... A-7 FINANCIAL INFORMATION CONCERNING THE CITY Accounting, Budgeting and Auditing Procedures... A-7 Sources of Revenue... A-8 Tax Increment Financing... A-8 Property Valuations... A-8 Property Tax Levies and Collections... A-9 Tax Rates... A-10 Page A-1

53 THE CITY General The City is a fourth-class city and political subdivision, duly created and existing under the laws of the State of Missouri. The City was incorporated in 1945 and encompasses an area of approximately six square miles. The City is located in Jackson County, Missouri approximately 24 miles east of downtown Kansas City, Missouri with a population according to the 2010 Census of 12,854, a growth of two and a half times more than the 2000 Census of 5,160. Additional information regarding the City may be obtained from Alexa Barton, City Administrator, City of Grain Valley, 711 Main Street, Grain Valley, Missouri or the underwriter at Piper Jaffray & Co., Overbrook Road, Suite 310, Leawood, KS The current members of the Board of Aldermen and officers of the City are: Name Office Term Expires Michael Todd Mayor April 2014 Dale Arnold Alderman April 2014 Bob Headley Alderman / Mayor Pro Tem April 2014 Mike Scully Alderman April 2013 Scott Shafer Alderman April 2013 Nancy Totton Alderman April 2013 Yolanda West Alderman April 2014 Jaime Rehmsmeyer Alexa Barton Cathy Bowden City Clerk City Administrator Finance Director The City is governed by a Mayor, a six-person Board of Aldermen and a City Administrator. The Mayor is elected every two years and three Aldermen are elected each year for staggered terms of two years with no restrictions on reelection. The City Administrator is appointed by the Mayor with the approval of a majority vote of the Board of Aldermen. The appointment is for an indefinite term. The City Administrator is the budget officer of the City and works directly with the City Clerk, Budget Committee and Mayor in preparing the budget for each year. The City Administrator has continuing responsibility throughout the year in proper implementation and administration of the City budget. Tax rates are established by the Board of Aldermen to support the budget adopted. As required by state law, the aggregate City's budget may not include any expenditures in excess of anticipated revenues plus any unencumbered balances. The City's fiscal year ends on December 31. Municipal Services and Utilities Utility Service in the City is provided by a mix of public and private facilities. Electric service is provided by Kansas City Power & Light, natural gas is supplied by Missouri Gas Energy and telephone service to the area is provided by AT&T/SBC, all of which are corporations regulated by the Missouri Public Service Commission. The City owns and operates its own water distribution system and sanitation collection system. The City provides its own police protection and has a parks and recreation department. Fire protection is provided by the Central Jackson County Fire Protection District, a separate political subdivision. The East Kansas City Airport is privately owned and located in the City Transportation and Communication Facilities The City is considered to be a part of the greater Kansas City metropolitan area. Because of its location on Interstate 70 and Highway 40, which passes through the City, there is easy access to other highways and roads connecting the metro area together. The Illinois Central and Gulf Railroad also passes through the City. The airport runway has 7,000 feet to allow for larger aircraft use, including jet aircraft. The City's proximity to Kansas City provides extensive choices in television, cable and internet accessibility. A-2

54 Educational Institutions and Facilities The Grain Valley R-V School District (the "District") currently holds an "accredited" rating from the State Department of Elementary and Secondary Education, which is the highest rating attainable. The District encompasses four elementary schools, a middle school and a senior high school with a total enrollment of over 3,500 students. With the City being located within 20 miles of downtown Kansas City, Missouri, many colleges and universities are available for continued educational opportunities. Recreational and Religious Facilities The City maintains 5 public parks and 4 public tennis courts. Monkey Mountain Park is adjacent to the City and has 855 scenic acres for picnicking, permit camping, hiking and horseback riding. Lake Jacomo is one of Jackson County's largest parks with 4,434 acres including a 970 acre lake for boating, skiing, personal water craft and fishing. Missouri Town 1855 is a historic village located in Jacomo Park and is just 10 minutes west of Grain Valley. Recent improvements to its parks system have included athletic fields, an aquatic center, a community center, and the Grain Valley Pavilion; a one of a kind facility in the Kansas City area. Economy The City has churches representing most denominations. In 2000 the population of the City was 5,160 compared to the 2010 Census of 12,854, a growth of over 250 percent in ten years. This City is a fast growing community that was once largely farm land and is quickly changing into a bedroom community. Commerce and Industry ECONOMIC INFORMATION CONCERNING THE CITY The City is included in the Kansas City metropolitan area providing an easy commute for residents to jobs throughout the metropolitan area. Listed below are ten of the major employers located in the metropolitan Kansas City area and the number employed by each: Employer Product/Service Number of Employees 1. HCA-Midwest Division Health Care 8, Sprint Nextel Communications 7, St. Luke's Health System Health Care 6, Cerner Corporation IT Solutions-Health Care 6, Children's Mercy Hospitals & Clinics Health Care 5, DST Systems Inc. Information Processing/Software 5, Truman Medical Centers Health Care 4, Hallmark Cards Inc. Greeting Cards 3, Black & Veatch Engineering/Consulting 3, UPS Package Delivery 3,500 Source: Kansas City Business Journal, April A-3

55 General and Demographic Information The following table sets forth certain population information City of Grain Valley 1,327 1,898 5,160 12,854 Jackson County 629, , , ,158 State of Missouri 4,916,766 5,117,073 5,595,211 5,988,927 Population Distribution by Age (2010 Census) City of Jackson Age Grain Valley County State of Missouri Under 5 1,296 47, , years 2,287 90, , years , , years 5, ,558 1,937, years 1,392 98, , years , , years and older , ,294 Total 12, ,158 5,988,927 Median Age Source: 2010 Census, U.S. Census Bureau. Employment The following table sets forth unemployment figures for the last five years for the County and the State of Missouri * Jackson County Total Labor Force 335, , , , ,806 Unemployed 23,086 34,449 35,761 32,466 27,628 Unemployment Rate 6.9% 10.2% 10.8% 9.6% 8.3% State of Missouri Total Labor Force 3,046,891 3,036,622 2,993,198 3,046,302 3,012,020 Unemployed 185, , , , ,603 Unemployment Rate 6.1% 9.3% 9.4% 8.6% 7.6% Source: Missouri Economic Research & Information Center, Local Area Unemployment Statistics (LAUS). *Average of January through May, Income Statistics The following table sets forth income figures from Census 2010: Per Capita Median Family City $24,931 $71,922 Jackson County 25,213 58,831 State of Missouri 24,724 57,661 Source: 2010 Census, U.S. Census Bureau. A-4

56 Housing Structures The following table sets forth statistics on housing structures by type in the City from Census Number of Units Percentage of Units Single Family 3, % Mobile Home 0 0 Multi-Family The median value of owner occupied housing units in the area of the City and related areas according to Census 2010 were as follows: Median Value City $155,200 Jackson County 129,900 State of Missouri 137,700 Source: 2010 Census, U.S. Census Bureau. Building Construction The following table indicates the number of building permits and total estimated valuation of these permits issued within the City over a five-year period. These numbers reflect permits issued for new construction *2012 Residential Permits Commercial Permits TOTALS: Number of Permits Estimated Cost $12,397,535 $3,419,600 $3,818,327 $4,388,345 $798,600 Source: City. *Through April 30, Current Indebtedness of the City DEBT STRUCTURE OF THE CITY The following table sets forth as of July 1, 2012, all of the outstanding general obligation indebtedness of the City. Amount Name of Issue Issue Date Principal Amount Outstanding General Obligation Bonds 6/05/2002 * 3,500,000 $325,000 GO Refunding & Improvement 7/21/2005 9,620,000 7,795,000 General Obligation Bonds 7/15/2008 6,940,000 4,985,000 General Obligation Bonds 11/29/2011 5,234,676 5,234,676 Limited GO Temp Notes 5/31/2012 3,015,000 3,015,000 Total $21,354,676 * A portion of the Series 2002 Bonds were refunded with the Series 2005 Bonds. A-5

57 Debt Summary (as of 7/1/2012) 2011 Assessed Valuation: $158,579, Estimated Actual Valuation: $728,105,716 Population (Census 2010) 12,854 Total Outstanding General Obligation Debt $21,354,676 Overlapping Debt: (1) $27,836,900 Direct and Overlapping General Obligation Debt: $49,191,576 Ratio of General Obligation Debt to Assessed Valuation: 13.47% Ratio of General Obligation Debt to Estimated Actual Valuation: 2.93% Per Capita General Obligation Debt: $1, Ratio of Direct and Overlapping Debt to Assessed Valuation: 31.02% Ratio of Direct and Overlapping Debt to Estimated Actual Valuation: 6.76% Per Capita Direct and Overlapping Debt: $3, (1) Includes general obligation debt of political subdivisions with boundaries overlapping the City. See "Debt Structure of the City - Overlapping Indebtedness." Overlapping Indebtedness The following table sets forth the approximate overlapping indebtedness (including general obligation bonds) of political subdivisions with boundaries overlapping the City as of July 1, 2012, and the percent attributable (on the basis of current assessed valuation) to the City. The table was compiled from information furnished by the State Auditor's office, and the City has not independently verified the accuracy or completeness of such information. Furthermore, political subdivisions may have ongoing programs requiring the issuance of substantial additional bonds or capital leases, the amounts of which cannot be determined at this time. Outstanding Percent Amount General Obligation Applicable Applicable Taxing Jurisdiction Indebtedness to City to City Grain Valley R-V School District $39,200, % $25,754,400 Central Jackson Co Fire Protection District 11,900, ,082,500 $27,836,900 Other Obligations The City issues revenue bonds where the City pledges income derived from the acquired or constructed assets to pay debt service and enters into capital leases. Revenue bonds and capital leases outstanding at July 1, 2012 are as follows: Amount Purpose Interest Rates Outstanding Combined Waterworks and Sewerage System Refunding and Improvement Revenue Bonds Series % to 5.125% $4,350,000 Combined Waterworks and Sewerage System Refunding Revenue Bonds, Series % to 4.800% 1,495,000 The City expects to make the rental payments on the following certificates from the proceeds of its capital improvement sales tax. Refunding Certificates of Participation, Series 2006 (Community Center Project) 4.500% to 5.000% $1,830,000 A-6

58 Legal Debt Capacity Article VI, Sections 26(b) and (c) of the Constitution of the State of Missouri limit the net outstanding amount of authorized general obligation indebtedness for a city to 10 percent of the assessed valuation of the city by a two-thirds (four-sevenths at certain elections) vote of the qualified voters. Article VI, Section 26(d) provides that a city may, by a two-thirds (four-sevenths at certain elections) vote of the qualified voters, incur indebtedness in an amount not to exceed an additional 10 percent for the purpose of acquiring rights-of-way, construction, extending and improving streets and avenues, and sanitary or storm sewer systems, provided the total general obligation indebtedness of a city does not exceed 20 percent of the assessed valuation. Article VI, Section 26(e) provides that a city may, by a two-thirds (four-sevenths at certain elections) vote of the qualified voters, incur indebtedness in an amount not exceeding an additional 10 percent for the purpose of purchasing or constructing waterworks, electric or other light plants to be owned exclusively by the city, provided that the total general obligation indebtedness of a city does not exceed 20 percent of the assessed valuation. The legal debt capacity of the City is $31,715,993, less the current outstanding indebtedness of the City of $21,899,017*, leaving a legal debt margin of the City at $9,816,976. * Includes the Limited General Obligation Temporary Notes, Series 2012 calculated at 125% of the amount specified in the petition. Defaults on City Indebtedness The City has never defaulted on the payment of any of its debt obligations. FINANCIAL INFORMATION CONCERNING THE CITY Accounting, Budgeting and Auditing Procedures The City currently produces financial statements that are in conformity with accounting principles generally accepted in the United States of America. 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 self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses as appropriate. An annual budget is prepared under the direction of the City Administrator and submitted to the Board of Aldermen for consideration prior to the fiscal year commencing on January 1. The operating budget includes proposed expenditures and revenue sources. Public hearings are conducted to obtain taxpayer comments. The budget is legally enacted through the adoption of an ordinance. The primary basis of budgetary control is at the departmental level. The City Administrator is authorized to transfer budgeted amounts between programs within any department; however, any revisions that alter the total expenditures of any department must be approved by the Board of Aldermen. Formal budgetary integration is employed as a management control device during the year for all funds. Budgets for all funds are adopted on a basis consistent with accounting principles generally accepted in the United States of America. The financial records of the City are audited annually by a firm of independent certified public accountants in accordance with generally accepted governmental auditing standards. The annual audit for the fiscal year ending December 31, 2011 was performed by Troutt, Beeman & Co., P.C., Harrisonville, Missouri. Copies of the audit reports for the past 5 years are on file in the City Administrator's Office and are available for review. A-7

59 Sources of Revenue The City finances its general operations through the following taxes and other miscellaneous sources as indicated below for the last fiscal year for which audited financial statements are available: Source Amount Percent Taxes $5,873, % Intergovernmental 560,529 7 Charges for Services 327,185 4 Fees & Fines 304,809 4 Investment Earnings 127,102 2 Other Revenue 267,371 4 $7,460, % Tax Increment Financing The City has created two tax increment financing districts within the City, to reimburse redevelopment project costs to assist in the developments. These costs are payable solely from moneys on deposit in a "special allocation fund." The moneys deposited into the special allocation fund may consist of (a) certain payments in lieu of taxes, attributable to the increase in assessed valuation of the real property within the districts as a result of development, and (b) fifty percent of the total additional revenue from taxes (including the sales taxes of the City but excluding certain other taxes) of local taxing districts which are generated by economic activities within the districts over the amount of such taxes generated by economic activities within the year in the calendar year in which the districts were created. As a result, the payments in lieu of taxes attributable to the increase in assessed valuation of the real property within the districts and up to fifty percent (50%) of the additional revenues generated by the sales taxes within such districts over the amount so generated in the year in which such districts were created may not be available to the City but instead might be deposited into the special allocation fund and used to pay redevelopment project costs related to the development. The City does not expect that the amount of such payments in lieu of taxes or sales taxes paid into special allocation funds from these projects will materially affect its ability to pay the Bonds. Property Valuations Assessment Procedure: All taxable real and personal property within the City is assessed annually by the County Assessor. Missouri law requires that real property be assessed at the following percentages of true value: Residential real property... 19% Agricultural and horticultural real property... 12% Utility, industrial, commercial, railroad and all other real property... 32% A general reassessment of real property occurred statewide in In order to maintain equalized assessed valuations following this reassessment, the Missouri General Assembly adopted a maintenance law in Beginning January 1, 1987, and every odd-numbered year thereafter, each County Assessor must adjust the assessed valuation of all real property located within his or her county in accordance with a two-year assessment and equalization maintenance plan approved by the State Tax Commission. The assessment ratio for personal property is generally 33-1/3% of true value. However, subclasses of tangible personal property are assessed at the following assessment percentages: grain and other agricultural crops in an unmanufactured condition, 1/2%; livestock, 12%; farm machinery, 12%; historic motor vehicles, 5%; and poultry, 12%. A-8

60 The County Assessor is responsible for preparing the tax roll each year and for submitting the tax roll to the Board of Equalization. The County Board of Equalization has the authority to adjust and equalize the values of individual properties appearing on the tax rolls. Current Assessed Valuation: The following table shows the total assessed valuation, including state assessed, by category, of all taxable tangible property situated in the City according to the 2011 assessment (the last completed assessment): Assessed Assessment Estimated Actual Valuation Rate Valuation Real Estate: Residential $110,186,002 19% $579,926,326 Commercial 21,249, ,403,581 Agricultural 64, ,367 Sub-Total 131,499, ,863,274 Personal Property 27,080, /3%* 81,242,442 Total $158,579,966 $728,105,716 * Assumes all personal property is assessed at 33 1/3%; because certain subclasses of tangible personal property are assessed at less than 33 1/3%, the estimated actual valuation for personal property would likely be greater than that shown above. See "Assessment Procedure" discussed above. History of Property Valuation: The total assessed valuation of all taxable tangible property situated in the City, including state assessed railroad and utility property, according to the assessments of January 1 in each of the following years, has been as follows: Assessed Percent Year Valuation Change Property Tax Levies and Collections Tax Collection Procedure: 2011 $158,579,966 (3.58)% ,464, ,917,848 (3.45) ,662, ,260,396 N/A Property taxes are levied and collected by the City. The City is required by law to prepare an annual budget, which includes an estimate of the amount of revenues to be received from all sources for the budget year, including an estimate of the amount of money required to be raised from property taxes and the tax levy rates required to produce such amounts. The budget must also include proposed expenditures and must state the amount required for the payment of interest, amortization and redemption charges on the City's debt for the ensuing budget year. Such estimates are based on the assessed valuation figures provided by the County Clerk. The City must fix its ad valorem property tax rates and certify them to the County Clerk not later than September first for entry in the tax books. The County Clerk receives the county tax books from the County Assessor, which set forth the assessments of real and personal property. The County Clerk enters the tax rates certified to him by the local taxing bodies in the tax books and assesses such rates against all taxable property in the City as shown in such books. The County Clerk forwards the tax books by October 31 to the County Collector, who is charged with levying and collecting taxes as shown therein. The County Collector extends the taxes on the tax rolls and issues the tax statements in early December. Taxes are due by December 31 and become delinquent if not paid to the County Collector by that time. All tracts of land and city lots on which delinquent taxes are due are charged with A-9

61 a penalty of eighteen percent of each year's delinquency. All lands and lots on which taxes are delinquent and unpaid are subject to sale at public auction in August of each year. The County Collector is required to make disbursements of collected taxes to the City each month. Because of the tax collection procedure described above, the City receives the bulk of its moneys from local property taxes in the months of December, January and February. Tax Rates Debt Service Levy. The current debt service levy of the City is $ per $100 of assessed valuation. Once indebtedness has been approved by the constitutionally required percentage of the voters voting therefore and bonds are issued, the City is required under Article VI, Section 26(f) of the Missouri Constitution to levy an annual tax on all taxable tangible property therein sufficient to pay the interest and principal of the indebtedness as they fall due and to retire the same within 20 years from the date of issue. The Board of Aldermen may set the tax rate for debt service, without limitation as to rate or amount, at the level required to make such payments. Operating Levy. The current general fund levy of the City is $ per $100 of assessed valuation. As a result of provisions in the Missouri Constitution (the Hancock Amendments ), the general fund levy cannot exceed the "tax rate ceiling" for the current year without voter approval. The tax rate ceiling, determined annually, is the rate of levy which, when charged against the newly assessed valuation of the City for the current year, excluding new construction and improvements, will produce an amount of tax revenues equal to tax revenues for the previous year increased by 5% or the Consumer Price Index, whichever is lower. Without the required percentage of voter approval, the tax rate ceiling cannot at any time exceed the greater of the tax rate in effect in 1980 or the most recent voter-approved tax rate. The tax levy for debt service on the City's general obligation bonds is exempt from the calculations of and limitations upon the tax rate ceiling. Under Article X, Section 11(c) of the Missouri Constitution, any increase in the City's general fund levy above $1.00 must be approved by two-thirds of the voters voting on the proposition. The current tax rate ceiling for the general fund is $ per $100 of assessed valuation. In 2008, through the enactment of Senate Bill 711 ( SB 711 ), the Missouri General Assembly approved further limitations on the amount of property taxes that can be imposed by a local governmental unit. Prior to the enactment of SB 711, a rollback required by the Hancock Amendments would not necessarily result in a reduction of a city s actual operating tax levy if its current tax levy was less than its current tax levy ceiling, due to the city s voluntary rollback from the maximum authorized tax levy. Under SB 711, in reassessment years (odd-numbered years), the Hancock rollback is applied to a city s actual operating tax levy, regardless of whether that levy is at the city s tax levy ceiling. This further reduction is sometimes referred to as an SB 711 rollback. In non-reassessment years (even-numbered years), the operating levy may be increased to the city s tax levy ceiling (as adjusted by the Hancock rollback), only after a public hearing and adoption of a resolution or policy statement justifying the action. years: The following table shows the City's tax levies (per $100 of assessed valuation) for each of the last five Fiscal Year Ended General Parks Public Debt Total December 31 Fund Fund Health Service Levy 2011 $ $ $ $ $ A-10

62 Tax Collection Record: The following table sets forth tax collection information for the City for the last five fiscal years. Year Current and Delinquent Ended Total Taxes Taxes Collected. December 31 Levy Levied Amount % 2011 $ $2,736,721 $2,820, % ,682,023 2,752, ,645,230 2,598, ,790,220 2,861, ,653,739 2,975, Major Property Taxpayers: The following table sets forth the ten largest real property taxpayers in the City based upon the 2011 assessed valuation. Local Assessed Percentage of Total Local Name of Taxpayer Valuation Assessed Valuation 1. KCPL-GMOC $1,828, % 2. Eagle Ridge Homes LLC 1,474, Sallee Ward Investment Inc. 1,291, Bristol Park Management LLC 1,213, Bannister Realty Company Inc. 1,178, Owner Operator Independent Drivers Assn 1,051, Fineout Enterprises Inc. 865, Southern Union Co 619, GE Trans System Global Signaling LLC 609, Penneys Concrete Inc. 547, Source: Jackson County Assessor's Office. Retail Sales Tax: The following table shows the retail sales tax collections for the City for the last five fiscal years: ½% Capital ½% Trans- Year 1% General Improvement ½% Park portation Total 2011 $676,415 $281,855 $283,070 $281,854 $1,523, , , , ,887 1,321, , , , ,069 1,292, , ,075 46, ,075 1,196, , , ,818 1,333,499 Source: City. The increased collections in sales tax revenues during 2010 and 2011 have been the result of a general overall increase in economic activity in the City. A-11

63 APPENDIX B AUDITED FINANCIALS OF THE CITY B 1

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150 618 E. South Street Suite 600 Orlando, Florida ESTIMATES OF FUTURE SALES AND PROPERTY TAX REVENUES GRAIN VALLEY MARKETPLACE REDEVELOPMENT AREA (PROJECT 2) CITY OF GRAIN VALLEY, MISSOURI FINAL REPORT JUNE 2012 STRATEGISTS ECONOMISTS PLANNERS ADVISORS

151 June 29, 2012 Alexa Barton City Administrator City of Grain Valley, Missouri 711 Main Street Grain Valley, MO Dear Alexa: Real Estate Research Consultants, Inc. (RERC) has completed its analysis of the planned development activities associated with Project 2 of the Grain Valley Marketplace Tax Redevelopment Area. The attached report entitled Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) summarizes our findings. The study has been completed in accordance with our proposal to the City of Grain Valley, Missouri (the City) dated March 13, The report is based on estimates, assumptions and other information related to the above. Such estimates, assumptions or other information were developed from prior RERC research, knowledge of the area, the retail and entertainment industry and discussions with you and other involved parties, during which we were provided certain information. The sources of information and basis of estimates and assumptions are stated in the report. Since our documentation is based on estimates and assumptions which are inherently subject to uncertainty and variation depending upon evolving events, we do not represent the data as results which would actually be achieved. Our services did not include legal and regulatory counseling, comments on matters associated with zoning or other state and local government regulations, permits and licenses. Further, no effort was made to determine the possible effects on any specific projects as they may be influenced by present or future federal, state or local legislation, including any bond restrictions, changes in tax structure or tax law, environmental or ecological matters, or interpretations thereof. Any conclusions and/or any prospective financial information that is included in our documentation were based on estimates and assumptions from previous studies, information developed from supplemental research, knowledge of the industry and other sources, including certain information that you and your project participants have provided. These sources of information and bases of significant estimates and assumptions are stated in our documentation. Some assumptions inevitably will not materialize and unanticipated events and circumstances may occur. Therefore, actual results achieved will vary from any estimates, and the variations may be material. The terms of this engagement are such that we have no obligation to revise the document to reflect events or conditions which occur subsequent to the date of the documentation. 618 E. SOUTH STREET SUITE 600 ORLANDO, FLORIDA P F

152 Our documentation is intended for your information, general planning and for disclosure within the official statement prepared for this project. This document may be quoted in that official statement in its entirety. Excerpts or references to the document must acknowledge that these passages from the document are out of context and the entire report must be reviewed. Neither our documentation nor its contents, nor any reference to our firm may be included or quoted in any other real estate offering or registration statement, loan or other agreement or document without our express prior permission. Permission will be granted upon meeting certain conditions. Please contact us if you have any questions about this report. David R. Darsey Senior Principal Todd DeLong, AICP Senior Associate REAL ESTATE RESEARCH CONSULTANTS, INC.

153 TABLE OF CONTENTS 1.0 EXECUTIVE SUMMARY Introduction and Overview Objectives and Scope of Research or Investigation Financial Summary GRAIN VALLEY MARKETPLACE LOCATION, PROJECT OVERVIEW AND PROFILE OF MAJOR USERS SG Property Management, LLC B&B Movie Theaters Implications GENERAL ECONOMIC CONDITIONS Employment and Labor Force Growth and Distribution of Population Residential Construction Area Income Implications INDUSTRY CONTEXT AFFECTING THE ANALYSIS Trends in the National Restaurant Industry Trends in the Theater Industry and Their Impacts on Assumptions METROPOLITAN MISSOURI RETAIL CONDITIONS Regional Retail Sales Structure of the Local Retail Marketplace SALES TAX PROJECTIONS Description of Basic Scenarios Major Assumptions Sales Tax Projections Sales Tax Projections PROPERTY TAX AND PROPERTY TAX PROJECTIONS Ad Valorem Taxes in the State of Missouri Methodology for Estimating Property Tax Revenue Property Tax Levies and Appreciation TIF Projections Summary of Sales and Property Tax Projections APPENDIX REAL ESTATE RESEARCH CONSULTANTS, INC.

154 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) 1.0 EXECUTIVE SUMMARY Real Estate Research Consultants (RERC) was retained by the City of Grain Valley, Missouri (the City) to prepare estimates of potential tax revenue available to support the development of a new retail and restaurant center. This project, the Grain Valley Marketplace, is expected to be built in four phases around an improved interchange at Interstate 70 and Buckner Tarsney Road. The first phase is actually described in the City s Tax Increment Financing Plan as Project 2. Project 2 will total approximately 100,000 to 110,000 square feet (SF) on about 17 acres of land at the northeast corner of the I-70 and Buckner Tarsney Road interchange. Current plans include a movie theater, restaurants and a variety of retail operators. The project developer is SG Property Management, LLC based in Nixa, Missouri. These facilities are being implemented under redevelopment powers authorized by Missouri state law. This report only addresses the tax revenue generated by Project 2. This report describes the developer s concept, the general context in which the project is being implemented, and our work effort to validate the concept. The report also provides RERC s projections of annual tax receipts and the processes involved in that work. It is understood that this analysis will be used to support the marketing and sale of bonds. Property tax and sales tax together are supporting tax increment bonds, referred to in this analysis as TIF bonds. Each reader is encouraged to read this analysis in its entirety to understand the assumptions and potential limitations of the analysis. 1.1 Introduction and Overview The project site is about 23 miles east of downtown Kansas City, at the intersection of I- 70 and Buckner Tarsney Road. The following map illustrates the site s location in proximity to the greater region. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 1

155 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Kansas City, General Location of the Grain Valley Site Source: Google Maps 2012 The interchange at I-70 and Buckner Tarsney Road in Grain Valley will be undergoing significant improvements very soon. These improvements are the result of a traffic study produced by the City, Missouri Department of Transportation (MoDOT) and TranSystems. The study outlined vehicular flows and safety enhancements and determined the best locations of ramps, lanes and drives. The following steps were proposed: Relocate US 40 and Main Street / Buckner Tarsney intersection approximately 400 feet south of the current location. Improve the existing interchange with 4 lanes added behind the columns of the existing bridge (total 8 lanes) and additional turn lanes to the I-70 off-ramps to reduce backups. Relocate the north outer roads approximately 600 feet north of the current location to increase separation from the traffic signal at the I-70 northern ramps. Extending the acceleration/deceleration lanes on I-70 to allow for better merging on and off I-70. Promote alternative forms of transportation, such as pedestrian access and cycling. The overall Interchange Project will actually be two separate phases. Phase 1 is the reconstruction and widening of the I-70 interchange, Main Street, and US 40 Highway. Phase 2 is the relocation and reconstruction of the North Outer Belt Roads. Both projects are scheduled to begin in July 2012, with months for construction REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 2

156 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) completion. The latest information from MoDOT indicated the project could be completed by the end of October These pending improvements helped open up the four corners of the interchange to redevelopment. The entire area has been incorporated into a Tax Increment Financing (TIF) redevelopment area. This area, the Grain Valley Marketplace, is expected to be built in four phases around the improved interchange. The first phase is actually described in the City s Tax Increment Financing Plan as Project 2. SG Property Management LLC (the developer) has purchased approximately 17 acres on the northeast corner of the interchange for this proposed project. Project 2 will total approximately 100,000 to 110,000 square feet (SF) on about 17 acres of land on the northeast corner of the interchange. Current plans include a movie theater, restaurants and a variety of retail operators. There is also an existing 40-room America s Best Value Inn located within the TIF redevelopment area. At this point in time we are not aware of any plans to significantly improve or redevelop the hotel property. A site plan and preliminary development program as of this writing (excluding the existing hotel) is summarized on the following pages. However, the hotel has been included in the property tax and sales tax projections discussed in a later section of this report. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 3

157 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Grain Valley Marketplace Site Plan REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 4

158 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Proposed Development Program, Grain Valley Marketplace Project 2 Building Land Land Proposed Lot # User Area (SF) Area (Acres) Area (SF) Opening Date 1 Restaurant-Full Service 8, ,988 Sep-13 2 Retail 16, ,170 Mar-13 3 Retail In-Line Shops 19, ,660 Mar-13 4 Movie Theater 24, ,336 Nov-12 5 Retail In-Line Shops 21, ,408 Mar-14 6 Restaurant-Fast Food 4, ,365 Mar-14 7 Restaurant-Fast Food 3, ,600 May-13 8 Convenience Store/Gas Station 4, ,412 Dec-12 9 Restaurant-Fast Food 3, ,492 Mar Vacant NA ,261 NA Tract A Parking NA ,397 NA Total 106, ,088 Source: SG Property Management, LLC; Real Estate Research Consultants, Inc. The 8 screen movie theater will be operated by B&B Theaters, who has offices in Liberty, Salisbury, and Fulton, Missouri. The theater will be co-owned by the developer and B&B Theaters. The sales and operating agreement have not been finalized as of this writing but we understand the documents will soon be executed. At this time, the movie theater is the only operator that is close to a binding commitment to the project. A national fast food restaurant operator and a regional gas station convenience operator have signed non-binding letters of intent with the developer. The developer intends to include other national restaurant franchises within the project. However, no restaurants or retail operators have committed at this time. As the Grain Valley Marketplace is implemented, major project elements will be funded and financed in part through redevelopment powers relying upon local retail sales tax and property tax revenues. The following table illustrates the various sales tax rates applied in the analysis. These tax rates yield revenue flowing entirely to the designated special district for its use. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 5

159 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Current Sales Tax Rates Applicable to the Grain Valley Marketplace Sales Tax Rates Applied Through April 2018 After April 2018 County General 0.500% 0.500% CJCFPD 0.500% 0.500% Zoo 0.125% 0.125% COMBAT % 0.000% County Total 1.375% 1.125% City General 1.000% 1.000% Capital Improvements 0.500% 0.500% Park & Recreation 0.500% 0.500% Transportation 0.500% 0.500% City Total 2.500% 2.500% CID 1.000% 1.000% Total Rate Subject to EATS 4.875% 4.625% Captured within TIF 50% 50% Total Rate Applied for EATS % % Applicable Rates Not Subject to EATS CID Rate NOT Captured by EATS % 0.500% 1 COMBAT sales tax sunsets April CID rate not captured by EATS after 2033 = 1.0% Source: City of Grain Valley Cities, counties, school districts, and other similar entities all have the power to levy property taxes. In the case of the proposed project area, there are seven relevant levies to support TIF bonds. The tax rates applied in this analysis are shown in the following table. Applicable Property Tax Levies by Jurisdiction Jurisdiction Levy City of Grain Valley $ Jackson County Jackson County Handicap Jackson County Mental Health School District (Grain Valley R-5) Central Jackson County Fire Mid-Continent Library Total $ Only 50% of the CJCFPD levy is captured within TIF Source: Jackson County Property Assessor REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 6

160 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) The analysis presented is based on an expected construction completion for the newly proposed elements as represented by the development team. Should the construction schedule be lengthened into the future or should openings of specific venues be delayed, such changes could potentially impact the analysis and affect estimated sales and property tax revenues, especially those prospective estimates for particular years. 1.2 Objectives and Scope of Research or Investigation The objective of the analysis is to evaluate the future course of proposed development if fully implemented as represented to us by the development team or the respective operators. The impact is measured specifically in terms of projected retail sales, sales taxes and property taxes from their operation and development to support a proposed TIF bond issue as allowed by Missouri law. In the conduct of this analysis, it has been our role only to define assumptions about the origin, nature and distribution of tax collections as they relate to this program consistent with Missouri law. We did not assist in preparing the site plan. The content and emphasis of the various concepts as they have been represented to us as of June 2012 are incorporated within our analysis, but it should not be construed that we have done market studies for the project or for individual users within the project. This information has been adapted to the various scenarios described elsewhere in this report. To the degree that we believe certain assumptions made by project representatives or others have a material affect on the projected taxes, these are indicated specifically. The key operating parameters associated with the project were identified through site visits and through interviews with owners or operators. RERC did interview agents or representatives of the movie theater to confirm data available to us. The proposed retail and restaurant operators were discussed with the developer. However, since no sales or lease agreements have been reached at this time, we utilized general or secondary operating data available for the target industry to estimate future operations. This information was supplemented by data from selected SEC filings, industry studies or analyses, resources specific to the retail and restaurant industry, and other retail or specialized data available to RERC and proposed in the Grain Valley Marketplace. Potentially competing areas and properties were profiled to evaluate their potential impacts. Future sales performance and tax receipts are based upon results of like operators where available, and/or industry standards for like concepts, adjusted for the specifics of this location. The principal secondary resources referenced here include the Urban Land Institute s Dollars and Cents of Shopping Centers: 2008, the Census of Retail Trade prepared by the U.S. Department of Commerce, County Business Patterns REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 7

161 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) prepared by the U.S. Department of Commerce and selected forms prepared by specific industry operators and filed with the SEC. The nature of the analysis is such that the expected sales and property tax collections shown over the short term are substantially more reliable than those prepared for periods occurring at points in the future. There may be uncertainties associated with the specific manner in which operators yet to open might be implemented or managed that could influence the outcome to a material degree. We have attempted to accommodate for these and other uncertainties by casting the expected collections in terms of low, moderate and high scenarios. We believe this range of possibilities represents the parameters in which decision-making should occur. We believe a single estimate is misleading and suggests a level of accuracy that really cannot be achieved in these kinds of studies. 1.3 Financial Summary The low, moderate and high scenarios considered together provide the planning and development team with financial benchmarks. Though not identified as such, the three alternatives might be viewed as sensitivity analyses that reflect both highly favorable and average outcomes. These scenarios reflect varying levels of sales performance and appreciation of property values in Grain Valley Marketplace. The differences among the scenarios are predicated on the overall ability to implement the concepts as described, maintain the integrity of the environment as it is described, achieve expectation regarding interactions between elements within and/or nearby the project area, and maintain specific tenants. Low Scenario. The low scenario generally assumes the minimally acceptable performance that any of the typical retailers are reasonably expected to sustain and remain viable. While there will be modest rates of growth over time stemming from the new operators yet to open, it is necessarily assumed that all components do not achieve the level of performance represented by their owners, agents, or developers so the extended impacts are generally lower than in other scenarios. The low scenario anticipates lower yields on the general retail components because of some dependence on local population concentrations that are not yet established. With regards to potential sales tax revenues generated, this scenario assumes 90% occupancy at stabilization, but also a lower absorption of leasable retail and restaurant space in the two years of occupancy. Please note that for all scenarios, it was assumed the movie theater would open in November 2012 and remain at 100% occupancy for the entire projection period. The 90% occupancy stabilization assumption was applied to the other proposed operators, which are unknown at this time. This scenario also assumes approximately 25% of the project s total square footage will be comprised of non sales tax producing tenants. Appraised values in this scenario are not anticipated to increase over the life of the projection period. Moderate Scenario. The moderate scenario generally assumes directly higher taxable transactions within the redevelopment area s potential retailers and restaurants. The REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 8

162 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) moderate scenario assumes that the operators within the project perform at rates near that of the average achieved by types of operators likely to occupy the proposed project. Some obviously will perform above or below these rates but in the main they reflect the characteristics of established national chains. Excluding the movie theater, for which a 100% occupancy was applied starting on its proposed November 2012 opening, this scenario assumes a higher absorption of retail and restaurant space in the first two years of tenant occupancy than the low scenario with a stabilized occupancy rate of 90%. In addition, non sales tax revenue producing tenants make up approximately 15% of the total square footage. While the low scenario anticipates no increase in property values over time, the moderate scenario assumes a modest increase in property values in 2013 and The pattern of property value appreciation reflects a rebound in values, which is expected to occur in recession recovery periods. These rates then stabilize at a 4.0% growth rate every other year. High Scenario. The high scenario generally assumes every unit within the project performs at rates that equal or exceed the most comparable properties operating nationally. The high scenario is the most synergistic of the three and incorporates higher than average industry sales for each of the tenant types. This scenario anticipates 100% of the tenants will generate sales tax revenues, and also assumes higher absorption rates than applied in the other two scenarios. Property values in the high scenario reflect the most favorable conditions related to the long term appreciation. The scenario also expects a greater post recession recovery than the moderate scenario, and then stabilizing with an appreciation rate of 8.0% every other year. All applicable property and sales taxes are supporting tax increment bonds, referred to in this analysis as TIF bonds. The TIF redevelopment area ordinance for Grain Valley Marketplace was adopted on September 27, 2010 and will sunset 23 years later in September The analysis of sales and property tax revenues assumes an effective levy against incremental retail sales and taxable property values, respectively. The base value established for taxable retail sales is $536, These sales were generated in 2009 by a former convenience store/gas station that has since been destroyed. Because sales taxes applied to hotel room sales cannot be captured by the EATS, room sales associated with the existing America s Best Value Inn were not included in the base figure. However, the Community Improvement District (CID) sales tax can be applied to taxable hotel room sales within the project area and have been accounted for in our projections. The base year established for the property tax TIF was 2010, when taxable values totaled $657,422. This figure includes the existing America s Best Value Inn hotel. According to the City, actual sales tax distributions made by the state based on the total retail sales collected lag by approximately 60 days behind the period in which they are actually generated. Over the entire study period, this lag in actual receipts available to REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 9

163 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) the City is immaterial to the total collections generated but it does impact short term distributions, especially in the year a retailer begins operating. Our projections reflect the estimated 60 day lag. The various assumptions incorporated into the analysis yield a range of total projected sales tax and property tax revenues, running from a low of approximately $10,685,000 to a high of approximately $24,999,000. The following table summarizes the revenue available to support TIF bonds for the total projection period. The years in the table corresponds with a 12-month calendar year ending December 31. The results shown in the following table do reflect reductions or fees such as the sales tax reduction of 3% (2% reduction for early payment and a 1% payment to the State) and the 1% administrative fee applied to all property tax revenues. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 10

164 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Projected Sales and Property Tax Revenues Selected Years and Total Study Period (12 Months Ending December Month End) Total LOW SCENARIO Taxable Sales Subject to EATS 2 $0 $3,520,000 $12,205,000 $13,138,000 $14,155,000 $11,227,000 $262,922,000 Base Taxable Sales Subject to EATS $542,315 $542,315 $542,315 $542,315 $542,315 $542,315 Incremental Sales Subject to EATS $0 $2,977,685 $11,662,685 $12,595,685 $13,612,685 $10,684,685 $251,533,381 Total EATS Revenues 3 City $0 $36,000 $142,000 $152,000 $165,000 $130,000 $3,053,000 County $0 $19,000 $71,000 $69,000 $75,000 $58,000 $1,437,000 CID $0 $15,000 $56,000 $61,000 $66,000 $51,000 $1,218,000 Subtotal EATS Revenues $0 $70,000 $269,000 $282,000 $306,000 $239,000 $5,708,000 Taxable Property Values $486,000 $484,000 $2,879,000 $2,879,000 $2,879,000 $2,879,000 $56,165,000 Project Area Base Taxable Value $657,422 $657,422 $657,422 $657,422 $657,422 $657,422 Incremental Taxable Value $0 $0 $2,221,000 $2,221,000 $2,221,000 $2,221,000 $42,036,000 Subtotal Property Tax Revenues (PILOTS) 3 $0 $0 $195,000 $195,000 $195,000 $195,000 $3,691,000 Taxable Sales Subject to CID 2 $71,000 $3,650,000 $12,335,000 $13,268,000 $14,285,000 $11,324,000 $265,690,000 Subtotal CID Revenues 3 $0 $17,000 $60,000 $64,000 $69,000 $55,000 $1,286,000 Total EATS, CID & PILOTS Revenues 3 $0 $87,000 $524,000 $541,000 $570,000 $489,000 $10,685,000 MODERATE SCENARIO Taxable Sales Subject to EATS 2 $0 $5,778,000 $19,422,000 $21,444,000 $23,675,000 $19,098,000 $429,814,000 Base Taxable Sales Subject to EATS $542,315 $542,315 $542,315 $542,315 $542,315 $542,315 Incremental Sales Subject to EATS $0 $5,235,685 $18,879,685 $20,901,685 $23,132,685 $18,555,685 $418,425,381 Total EATS Revenues 3 City $0 $63,000 $229,000 $253,000 $280,000 $225,000 $5,074,000 County $0 $35,000 $114,000 $114,000 $126,000 $101,000 $2,382,000 CID $0 $25,000 $91,000 $102,000 $113,000 $90,000 $2,027,000 Subtotal EATS Revenues $0 $123,000 $434,000 $469,000 $519,000 $416,000 $9,483,000 Taxable Property Values $486,000 $484,000 $3,137,000 $3,393,000 $3,817,000 $4,128,000 $68,236,000 Project Area Base Taxable Value $657,422 $657,422 $657,422 $657,422 $657,422 $657,422 Incremental Taxable Value $0 $0 $2,480,000 $2,736,000 $3,159,000 $3,471,000 $54,118,000 Subtotal Property Tax Revenues (PILOTS) 3 $0 $0 $218,000 $241,000 $278,000 $305,000 $4,761,000 Taxable Sales Subject to CID 2 $71,000 $5,908,000 $19,552,000 $21,574,000 $23,805,000 $19,195,000 $432,582,000 Subtotal CID Revenues 3 $0 $29,000 $95,000 $105,000 $115,000 $93,000 $2,098,000 Total EATS, CID & PILOTS Revenues 3 $0 $152,000 $747,000 $815,000 $912,000 $814,000 $16,342,000 HIGH SCENARIO Taxable Sales Subject to EATS 2 $0 $8,625,000 $29,670,000 $34,448,000 $39,934,000 $33,214,000 $696,533,000 Base Taxable Sales Subject to EATS $542,315 $542,315 $542,315 $542,315 $542,315 $542,315 Incremental Sales Subject to EATS $0 $8,082,685 $29,127,685 $33,905,685 $39,391,685 $32,671,685 $685,144,381 Total EATS Revenues 3 City $0 $98,000 $353,000 $411,000 $477,000 $396,000 $8,307,000 County $0 $54,000 $177,000 $185,000 $215,000 $178,000 $3,891,000 CID $0 $39,000 $142,000 $165,000 $191,000 $158,000 $3,324,000 Subtotal EATS Revenues $0 $191,000 $672,000 $761,000 $883,000 $732,000 $15,522,000 Taxable Property Values $486,000 $484,000 $3,409,000 $3,976,000 $5,009,000 $5,843,000 $83,281,000 Project Area Base Taxable Value $657,422 $657,422 $657,422 $657,422 $657,422 $657,422 Incremental Taxable Value $0 $0 $2,752,000 $3,319,000 $4,352,000 $5,185,000 $69,161,000 Subtotal Property Tax Revenues (PILOTS) 3 $0 $0 $243,000 $292,000 $383,000 $456,000 $6,086,000 Taxable Sales Subject to CID 2 $71,000 $8,755,000 $29,800,000 $34,578,000 $40,064,000 $33,311,000 $699,301,000 Subtotal CID Revenues 3 $0 $43,000 $145,000 $168,000 $194,000 $162,000 $3,391,000 Total EATS, CID & PILOTS Revenues 3 $0 $234,000 $1,060,000 $1,221,000 $1,460,000 $1,350,000 $24,999,000 Note: Totals may not add due to rounding includes only revenues collected through September. 2 Taxable sales shown reflect the 60 day lag, not the date of sale. Taxable property values are based on the prior year s assessment. 3 Sales tax revenues reduced by 3% (2% for early payment; 1% payment to state); Property tax revenues reduced by 1% The following figures graphically illustrate these revenue streams over the life of the various bond issues. TIF bond revenues presented in the graph include both sales and REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 11

165 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) property tax collections. Please note that 2033 is a partial year, which explains the drop in revenue in the final year of the analysis. $1,800,000 Annual Estimates of TIF Revenues, $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $ Low Moderate High Note: 2033 includes only revenues collected through September. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 12

166 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) 2.0 GRAIN VALLEY MARKETPLACE LOCATION, PROJECT OVERVIEW AND PROFILE OF MAJOR USERS The project site is about 23 miles east of downtown Kansas City, at the intersection of I- 70 and Buckner Tarsney Road. The following map illustrates the site s location in proximity to the greater region. Kansas City, General Location of the Grain Valley Marketplace Source: Google Maps 2012 The existing highway network and road improvements serving the proposed project provide both superior access and visibility. I-70 is a major east-west connector within the Kansas City metro area. I-470 provides access to the southern portions of the metro area and is located about 10 miles west of the site. I-435 is a loop road circling the Kansas City metro area with the nearest access point from Grain Valley about 16 miles west of the site. This road network provides convenient and relatively unrestricted connection with virtually any point in the region. The interchange at I-70 and Buckner Tarsney Road in Grain Valley will be undergoing significant improvements very soon. These improvements are the result of a traffic study produced by the City, Missouri Department of Transportation (MoDOT) and TranSystems. The study outlined vehicular flows and safety enhancements and determined the best locations of ramps, lanes and drives. The following steps were proposed: REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 13

167 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Relocate US 40 and Main Street / Buckner Tarsney intersection approximately 400 feet south of the current location. Improve the existing interchange with 4 lanes added behind the columns of the existing bridge (total 8 lanes) and additional turn lanes to the I-70 off-ramps to reduce backups. Relocate the north outer roads approximately 600 feet north of the current location to increase separation from the traffic signal at the I-70 northern ramps. Extending the acceleration/deceleration lanes on I-70 to allow for better merging on and off I-70. Promote alternative forms of transportation, such as pedestrian access and cycling. The overall Interchange Project will actually be two separate phases. Phase 1 is the reconstruction and widening of the I-70 interchange, Main Street, and US 40 Highway. Phase 2 is the relocation and reconstruction of the North Outer Belt Roads. Both projects are scheduled to begin in July 2012, with months for construction completion. The latest information from MoDOT indicated the project could be completed by the end of October These pending improvements helped open up the four corners of the interchange to redevelopment. The entire area has been incorporated into a Tax Increment Financing redevelopment area. This area, the Grain Valley Marketplace, is expected to be built in four phases around the improved interchange. The first phase is actually described in the City s Tax Increment Financing Plan as Project 2. SG Property Management, LLC (the developer) has purchased approximately 17 acres on the northeast corner of the interchange for this proposed project. A map showing the location of the project within the area is shown below. Source: Jackson County Property Appraiser REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 14

168 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) The area around the site north of I-70 includes an America s Best Value Inn just to the east along with the Mathews Elementary School and residential uses. To the north is the Breezeway Industrial Park that encompasses office/warehouse users. To the west of the site across Buckner Tarsney Road are the McShop gas station/truck stop and a commuter parking lot. South of I-70 and west of Buckner Tarsney Road is vacant land until the area south of Route 40, where there is a Sonic restaurant. To the east of Buckner Tarsney Road is a gas station with a Subway sandwich shop, a bank building, and the Grain Valley City Hall and Community Center. Project 2 will total approximately 100,000 to 110,000 square feet (SF) on about 17 acres of land on the northeast corner of the interchange. Current plans include a movie theater, restaurants and a variety of retail operators. There is also an existing 40 room America s Best Value Inn located within the TIF redevelopment area. At this point in time we are not aware of any plans to significantly improve or redevelop the hotel property. A site plan and preliminary development program as of this writing (excluding the existing hotel) is summarized below. However, the hotel has been included in the property tax and sales tax projections discussed in a later section of this report. Grain Valley Marketplace Site Plan REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 15

169 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Proposed Development Program, Grain Valley Marketplace Project 2 Building Land Land Proposed Lot # User Area (SF) Area (Acres) Area (SF) Opening Date 1 Restaurant-Full Service 8, ,988 Sep-13 2 Retail 16, ,170 Mar-13 3 Retail In-Line Shops 19, ,660 Mar-13 4 Movie Theater 24, ,336 Nov-12 5 Retail In-Line Shops 21, ,408 Mar-14 6 Restaurant-Fast Food 4, ,365 Mar-14 7 Restaurant-Fast Food 3, ,600 May-13 8 Convenience Store/Gas Station 4, ,412 Dec-12 9 Restaurant-Fast Food 3, ,492 Mar Vacant NA ,261 NA Tract A Parking NA ,397 NA Total 106, ,088 Source: SG Property Management, LLC; Real Estate Research Consultants, Inc. The 8 screen movie theater will be operated by B&B Theaters, who has offices in Liberty, Salisbury, and Fulton, Missouri. The theater will be co-owned by the developer and B&B Theaters. The sales and operating agreement have not been finalized as of this writing but we understand the documents will soon be executed. At this time, the movie theater is the only operator that is close to a binding commitment to the project. A national fast food restaurant operator and a regional gas station convenience operator have signed non-binding letters of intent with the developer. The developer intends to include other national restaurant franchises within the project. However, no restaurants or retail operators have committed at this time. 2.1 SG Property Management, LLC Developer Paul Larino of SG Property Management, LLC is based out of Nixa, MO. He has acted as the developer of three previous projects similar to the new development proposed for Grain Valley. Chestnut Crossing in Springfield, MO is a 36 acre development that is home to Price Cutter, Ace Hardware, Liberty Bank, Arby s, and KFC. Larino plans to place restaurants in most of the remaining lots. The Hickory Hills development is also in Springfield. Hickory Hills totals 46 acres and will be anchored by a large regional retail tenant, as well as several restaurants and retail stores. Larino is also the developer of Wilson Creek Marketplace in Battlefield, MO. This 32 acre site will also be an anchored by a large regional retail tenant. The Hickory Hills and Wilson Creek projects are still in the planning and development phase and have not been completed. 2.2 B&B Movie Theaters The history of B&B Theaters stretches back to 1924 when Elmer Bills, Sr., bought the Lyric Theatre in Salisbury, MO, and founded Bills Theatres. In 1936, Mr. Bills hired 10- year-old Sterling Bagby as a concession clerk. Sterling grew up, fought in World War II and came home to marry his Higbee, MO, ticket seller, Pauline. Together, they started REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 16

170 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) the Bagby Traveling Picture Show and roamed rural Missouri with their films, projection equipment, seats and snack bar. The Traveling Picture Show screened movies in barns, schools and parks. Eventually, Sterling and Pauline's company evolved into a Kansas circuit of drive-in theaters and indoor theaters. Meanwhile, Mr. Bills son, Elmer Bills, Jr. and his wife Amy joined his parents Elmer and continued the expansion of Bills Theatres, Inc. On January 1, 1980, the Bills and Bagby families cemented decades of friendship by formally joining their two theater companies into B&B Theatres. Today, these families run one of the Midwest's fastest-growing theater circuits. B&B Theatres was recognized in 1999 by the National Association of Theatre Owners as one of the oldest familyowned circuits in the Midwest. The company now consists of over 900 employees. B&B operates theaters in towns of all sizes, and has even opened multiplex theaters in many of the same places that once were home to their old-time single-screen and twin theaters. B&B Theaters operates a total of 29 theaters, with 16 in Missouri, 6 in Kansas, 5 in Oklahoma, 1 in Texas and 1 in Florida. B&B s newest complexes offer the latest in sound and comfort, including DOLBY 7.1 Surround Sound and digital sound in all auditoriums, stadium seating, wide screens, high-back rocker chairs with cup holders and digital projectors with 3D capabilities. The theater in Grain Valley will have all of these amenities, as well as leather seats. RERC had extensive conversations with B&B Theater management so as to fully understand their proposed concept for Grain Valley. Management gave us access to their projected operating revenues and expenses for the Grain Valley theater as well as historic financial statements for an existing theater in their chain that they believe is most comparable to the likely operating environment in Grain Valley. That information was shared in confidence so we cannot include it in this report. However, it was used as a factor in our analysis as we developed our operating scenarios that are discussed later in this document. 2.3 Implications The proposed project at Grain Valley Marketplace will continue the eastward growth of retail and restaurants from the Kansas City metro area. The improved interchange and other road widening and realignments near the site will enhance access to the area. Visibility of the site and proposed users from I-70 should be excellent. The proposed movie theater should provide a major draw of consumers to the site. B&B Theaters has a long history of theater operation and brings proven theater management expertise to the project. Consumers drawn to the site to attend movies should also help support adjacent restaurant and retail operations. Drive-by traffic on I-70 should also provide potential patrons for the proposed restaurants on-site. The planned restaurants within the project are proposed to be high-volume national chain restaurants that, if implemented as represented by the developer, should be able to effectively compete for business within the market. More detailed information on the local area retail, restaurant and movie theater environment is included in a later section of this report. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 17

171 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) RERC has worked extensively in the Kansas City market in the past and as a result of that work we have extraordinary access to operating sales data for many retail projects in the area. This information provided valuable input into the sales projections at the Grain Valley Marketplace that are discussed in detail later in this document. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 18

172 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) 3.0 GENERAL ECONOMIC CONDITIONS According to the National Bureau of Economic Research (NBER), the most recent recession officially began in December 2007 with the formal close announced as June The decline in economic health benchmarked by NBER lasted 18 months and exceeds the 16 month contractions suffered first from 1973 to 1975 and then again from 1981 to The 18 month downturn constitutes the longest recessionary period since the Great Depression. Although the data generally shows that the worst is over, economic growth has been very slow to recover, and there are threats. Nationally, non-farm employment has been on the rise since July Preliminary data shows an increase of 2,689,000 employees from July 2011 to May The nation s unemployment rate decreased to 9.6% as the average for 2011 from 10.7% in 2010, but recent job gains have been modest. Perhaps because of only modest employment gains, consumer confidence, an important predictor of spending potential, has shown recent downward movement. The Conference Board (CB) reported that its index had dropped to 64.9 in May 2012, down from 68.7 in April. However, the index is over 10 points higher than the same months of Also, the CB forecasts Real Consumer Spending to stay above 2011 levels for the duration of 2012 and The CB s Index of leading economic indicators (LEI) for the U.S. declined 0.1% in April, following a 0.3% gain in March, and a 0.7% rise in February. Starting in October 2011, there had been about half a year of steady increases in this measure prompting CB economist Ataman Ozyildirim to observe, The LEI s sixmonth growth rate fell slightly, but remains in expansionary territory and well above its growth at the end of At the same time, CB s coincident index (CEI), a measure of current economic activity, has been slowly improving in recent months. The results from the CB largely mirror information from the U.S. Bureau of Economic Analysis (BEA). BEA, in its May 31, 2012 release, reported that gross domestic product (GDP) increased 1.9% in the first quarter of 2012 after increasing 3.0% in the fourth quarter of The increase tracks higher consumer spending, improved exports and investments made for private inventory and residential activity. National privately owned housing completions showed a drastic decline from 2005 to Total housing completions for both single and multiple units was at 2,155,300 in 2005 and declined to 583,000 in January 2011 saw the lowest number of residential building permits, which offer some perspective of near term future activity, in over 50 years. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 19

173 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) 3.1 Employment and Labor Force Total employment in Jackson County, MO was negatively affected by the recession, but now has continued to grow since 2010, nearly reaching pre-recession employment numbers. The unemployment rate for the area was at 7.6% (preliminary) in April 2012, down from the 2011 average annual rate of 9.6% and much lower than the 2010 average of 10.7%. However, Jackson County has typically had unemployment rates around one percentage point higher than that of the national annual average, as noted in the table on the following page. The current unemployment rates for Jackson County, Kansas City MO-KS MSA, and the State of Missouri are all lower than the United States rate for April Comparison of Unemployment Rates in Selected Areas, April 2012 Unemployment Location Rate Jackson County 7.6% Kansas City, MO-KS MSA 6.6% Missouri 7.3% United States 8.1% Source: U.S. Bureau of Labor Statistics, and Missouri Dept. of Labor April 2012 The following table tracks the region s change in employment going back 12 years. Generally, the State of Missouri and the Kansas City, MO-KS metropolitan statistical area have had unemployment patterns similar to those of the U.S. However, the Kansas City, MO-KS MSA and State of Missouri were able to maintain levels of employment at or above those of the country during the recessionary period. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 20

174 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Selected Labor Force Data, Jackson County and Other Areas, April 2012 Jackson County Kansas City, MO- KS MSA State of Missouri United States Year Emp. Unemployment Rate (%) , , , , , , , , , , , , Apr 2012 (P) 309, Source: Missouri Department of Labor in conjunction with U.S. Department of Labor; U.S. Bureau of Labor Statistics; Annual Not Seasonally Adjusted Labor Force, Employment and Unemployment data; RERC (P) April 2012 Preliminary Not Seasonally Adjusted As demonstrated by the data, Jackson County is showing signs of nominal improvement in the unemployment rate which peaked at 10.7% in 2010 and has recovered to a rate better than that of the U.S. for April Comparison of Unemployment Rates, 2000 April Percent Apr 2012 (P) Jackson Co. Kansas City, MO-KS MSA State of Missouri U.S. Source: U.S. Bureau of Labor Statistics; Missouri Department of Labor; RERC REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 21

175 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) 3.2 Growth and Distribution of Population The Kansas City, MO-KS MSA consists of a 15 county region. Nine counties, including Jackson, are in Missouri and six are located in Kansas. Jackson County is the region s most populated. It has about 33% of the population distribution within the metropolitan region with approximately 674,158 (2011 Census estimate) people today. The three next biggest counties in the Missouri portion of the Kansas City, MO-KS MSA are Clay, Cass, and Platte in that order. There are a little over 2,000,000 persons living in the Kansas City, MO-KS MSA with 57.9% residing in the Missouri portion of the region. The following table illustrates the population change and distribution for the counties within the Missouri portion of the Kansas City, MO-KS MSA. Population Change and Distribution for MSA Counties in Missouri, Census Change 2011* Population Estimate Distribution Missouri Bates 16,653 17, % 17, % Caldwell 8,969 9, % 9, % Cass 82,092 99, % 99, % Clay 184, , % 221, % Clinton 18,975 20, % 20, % Jackson 654, , % 674, % Lafayette 32,962 33, % 33, % Platte 73,777 89, % 89, % Ray 23,354 23, % 23, % Sub-total MO MSA 1,095,668 1,191, % 1,188, % Missouri State 5,596,678 5,995, % 6,010,688 Total Kansas City, MO-KS MSA 1,842,798 2,035, % 2,052,676 Source: U.S. Bureau of the Census. Bureau of Economic Analysis. RERC * U.S. Census Bureau Population Estimates The Census figures show a 3.1% population increase for Jackson County from 2000 to The Mid-America Regional Council (MARC) has projected population growth at 10 year intervals through 2040 for the nine-county planning region that show gains. The forecasts reflect a slow but upward trend in population as shown in the following table. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 22

176 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Population Change, Projections and Distribution - Selected MSA Counties, Missouri Census Forecast Average Annual Growth Rate Cass 82,092 99, , , , % 21.10% 14.00% 12.00% Clay 184, , , , , % 7.50% 9.60% 43.90% Jackson 654, , , , , % 6.70% 6.30% 5.90% Platte 73,781 89, , , , % 16.00% 10.70% 36.70% Sub-total 994,759 1,086,488 1,183,702 1,279,937 1,499, % 8.90% 8.10% 17.10% % of Total MSA 48.90% 53.40% Sources: Mid-America Regional Council, Missouri (MARC); RERC All counties listed in the table above are expected to have growth projected into Jackson County is predicted to have the least amount of population growth amongst the four largest counties out of the nine in the Missouri portion of the MSA. However, Jackson will remain the most populated, with population in Clay, the next largest county, still less than half of the population of Jackson County. 3.3 Residential Construction Residential construction activity steeply declined in Missouri and within the Kansas City, MO-KS MSA, starting in 2006 and has gotten worse through the most recent data from 2011, mirroring other areas across the U.S. Statewide the number of permits issued has fallen to levels not seen in more than a decade. The following table shows the total number of permits issued annually for the 11-year period from 2000 to 2011 in Jackson County, Kansas City, MO-KS MSA and State of Missouri. Though residential permits issued within Jackson County have declined from a spike of 6,068 in 2005, the 2011 permits issued are greater in number than those in 2010, unlike the rest of the state. Residential permits in Jackson County declined to 670 in 2010, but showed a 58% growth in This general pattern in permits was seen throughout the nation as the housing market collapsed and the economy struggled. Annual Permits in Jackson County, Kansas City MSA, and State of Missouri, Jackson Co, MO Single-Family 3,086 3,376 4,028 4,280 4,564 4,484 2,771 1, Multi-Family 1,261 1,822 1,502 1,290 1,426 1,584 2, , Total Units 4,347 5,198 5,530 5,570 5,990 6,068 5,743 2,809 2, ,060 Kansas City, MO-KS MSA Single-Family 9,404 9,868 10,899 11,944 12,541 12,161 8,751 6,049 2,610 1,858 2,155 2,363 Multi-Family 3,650 5,248 3,096 3,045 2,517 3,100 4,491 2,099 2,690 1, Total Units 13,054 15,116 13,995 14,989 15,058 15,261 13,242 8,148 5,300 3,406 2,714 3,287 Missouri Single-Family 17,966 18,792 21,234 23,636 26,269 25,984 19,980 15,024 7,782 6,553 6,902 6,061 Multi-Family 6,392 5,947 7,582 6,694 6,522 7,165 9,246 6,624 5,496 3,504 2,798 3,183 Total Units 24,358 24,739 28,816 30,330 32,791 33,149 29,226 21,648 13,278 10,057 9,700 9,244 Sources: FHUD SOCDS Building Permits Database (U.S. Bureau of the Census); RERC REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 23

177 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Since Missouri, Kansas City, MO-KS MSA, and Jackson County seem to have followed national trends through the recessionary period, current U.S. forecasting may be a good indicator of where the market is going. In April of 2012, RealtyTrac reported that the first quarter of 2012 showed the lowest foreclosure activity since quarter four of This is a potential indicator the housing market may have hit bottom and is now poised for positive growth. The permits for 2011 have already shown growth in Jackson County and the Kansas City MSA. 3.4 Area Income Jackson County s average household income ranks below that of the Kansas City, MO- KS MSA. All geographic areas reflect the same pattern in their average annual household incomes; making large gains from 2000 to 2010, dropping slightly in the current year of 2012, and showing predicted growth for Historical, Current and Projected Average Household Incomes, Selected Years * Jackson County $50,544 $60,459 $58,121 $59,370 Kansas City, MO-KS, MSA $58,313 $69,266 $69,097 $70,972 Sources: CLARITAS. RERC. *Data from U.S. Census Bureau- American Fact Finder. The following table showing per capita income from 2000 to 2010 reflects the most recent income data from the BEA. The 31.1% change between 2000 and 2010 for Jackson County ranks above the average change for the MSA of 28.5%. Jackson County overall shows steady positive growth, with only a small decline during the economic recession, from which incomes already appear to be recovering. Per Capita Income, % Change Area Name Jackson County $30,168 $34,738 $38,217 $40,306 $38,873 $39, % Kansas City, MO-KS MSA $32,344 $36,558 $40,762 $43,165 $41,061 $41, % Sources: U.S. BEA, REIS 3.5 Implications Although there is evidence that population changes may be favorable to Jackson County, surrounding counties are predicted to see growth at higher rates. A jump in residential permits was seen in Jackson County in 2011 which may be a sign that the area s housing market is stabilizing after the recession. Job growth in Jackson County has been getting stronger over the past three years, and 2012 is seeing unemployment rates below the national rate. The June 8, 2012 report from the Tenth District (Tenth District) Federal Reserve reports that financial stress increased in May, but still remained below its long run average. The Conference Board (CB) index, a predictor of spending potential, has been maintaining rates for 2011 and 2012 about ten points higher than those seen in Household REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 24

178 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) incomes appear to still be negatively affected by the recession, but are predicted to rise in the near future. Whatever inferences RERC might make regarding the depth and strength of post recessionary activity in Jackson County, the new Grain Valley development is likely to be somewhat enhanced through renewed interest in residential development and greater local population growth. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 25

179 Estimates of Future Sales and Property Tax Revenues Grain Valley TIF Redevelopment Area (Phase 1) 4.0 INDUSTRY CONTEXT AFFECTING THE ANALYSIS The concerns about the nation s housing markets have overshadowed those of the retail industry which has also been suffering and warrants more attention in the current analysis. For years, select categories of retailing have experienced slowing rates of growth. The recession offers an opportunity to trace the performance of retail in the course of prior recessions. Until March of 2011, Mitsubishi Bank had followed discrete categories of same store retail sales. That work going back to 1980, has enabled us to trace the impact of recessionary pressures immediately prior to, during, and following a particular recession. While there are cautions about paralleling past events, the length of the most recent recession (18 months) evokes the aforementioned 16 month recession in 1981 to 1982 for which retail data are available. As the following table suggests, same store sales remained strong in this specific case. Nationwide Same Store Sales, and Recessions Percentage change in sales from same date previous year Recessionary period peak (start) Jul % Recessionary period trough (end) Nov % December, year recession ends Dec % 11 months past trough Oct % Recessionary period peak (start) Dec % Recessionary period trough (end) Jun % December, year recession ends Dec % 11 months past trough May % Sources: Mitsubishi Bank; RERC Although the impacts of other recent recessions (1990 and 2001) varied from those above, the overall performance remained positive during and following these declines. The recession was different in that performance during the decline was actually negative, not just a lower positive number than pre-recession years. Since the recession marks the most substantial and radical of the last three recessions, it follows that the economy has been very slow to recover. The usual spike in spending upon the end of the recession was not seen in 2010 as some economists may have expected. Except during the last four years ( ), Mitsubishi Bank s reporting history included the sales of Wal-Mart which, in the very earliest years, were probably not much of a factor in gauging the retail industry s performance. In the middle of 2008, Mitsubishi Bank modified its data to reflect sales activity without Wal-Mart, adjusting its report to a 1992 base year. Both the longer and shorter periods of same store sales are provided in the following table. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 26

180 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Annual Trends in Same Store Sales Percentage Increase/Decrease From Previous Year, Year Includes Wal-Mart Excludes Wal-Mart Economic Cycle % N/A Recession: January, July, % N/A Recession: July, November, % N/A Recession: July, November, % N/A % N/A % N/A % N/A % N/A % N/A % N/A % N/A Recession: July, March, % N/A Recession: July, March, % 4.6% % 3.3% % 3.6% % 2.2% % 2.6% % 4.2% % 4.7% % 6.2% % 3.7% % 1.2% Recession: March, November, % 1.7% % 2.4% % 4.2% % 4.3% % 4.9% % 2.8% Recession: December, June, N/A -0.8% Recession: December, June, N/A -1.8% Recession: December, June, N/A 2.9% Sources: Mitsubishi Bank; RERC Mitsubishi indicates that a drop in same store sales which began in late 2007 continued until there were more than 24 months of decline seen in year over year sales. Data from the International Council of Shopping Centers (ICSC), though not directly comparable to that prepared by Mitsubishi Bank, does provide some history of sales activity through Then according to ICSC, same store sales showed an altered course. Starting in December 2009, as shown in the following table, same store sales have continued to remain positive through all of 2010, 2011, and the first part of REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 27

181 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Same Store Sales Percentage Increase/Decrease from Previous Year, Month by Month, January May 2012 Month Jan 0.2% -4.8% 3.0% 4.7% 2.7% Feb 1.2% -4.3% 3.7% 4.2% 4.1% Mar -2.3% -5.1% 9.0% 2.0% 4.1% Apr 3.3% -2.7% 0.8% 8.5% 0.6% May 1.4% -4.6% 2.6% 5.4% 4.0% Jun 1.9% -5.1% 3.0% 6.9% Jul 1.3% -5.0% 2.8% 4.6% Aug -0.1% -2.0% 3.0% 4.8% Sep -1.0% 0.6% 2.6% 5.5% Oct -4.2% 2.1% 1.6% 3.7% Nov -7.7% -0.2% 5.4% 2.8% Dec -4.6% 3.6% 3.1% 3.5% Annual -1.1% -1.9% 3.3% 4.7% Sources: International Council of Shopping Centers, ICSC Chain Store Sales Trends; RERC Looking ahead, the length of the positive trends suggests stabilization over the term of the analysis, either imposed through the market itself or by the orderly management of individual retailers. As the industry has sought to develop new retailing approaches, total per capita sales have generally increased above the rate of inflation according to the table below. Not surprisingly, 2009 year-end retail sales figures show that per capita sales have declined. Despite the recession not officially ending until June 2009, annual growth was already seen the following year. Further growth in 2011 is a good indicator that retail activity is stabilizing and may continue on the upward trend once again. Overall, total estimated per capita retail sales have historically shown steady growth during the last ten years. Estimated Retail and Restaurant Sales Per Capita All Major Categories, United States, Total Per Capita Sales Total Per Capita Sales Retail Sales Per Capita % Restaurant Sales Per Capita Year (Ex. Food Estab. & Autos) Change (Food Establishments) % Change CPI 2000 $7,741 $1, % 2001 $7, % $1, % 2.8% 2002 $8, % $1, % 1.6% 2003 $8, % $1, % 2.3% 2004 $8, % $1, % 2.7% 2005 $9, % $1, % 3.4% 2006 $9, % $1, % 3.2% 2007 $10, % $1, % 2.8% 2008 $10, % $1, % 3.8% 2009 $9, % $1, % 0.0% 2010 $10, % $1, % 1.6% 2011 $10, % $1, % 3.2% Sources: U.S. Census Bureau, Estimated Annual Retail and Food Services Sales by Kind of Business 1992 through 2011; Monthly Retail Trade Survey Historical Data; Estimates of Monthly Retail and Food Services Sales by Kind of Business REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 28

182 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) The table below indicates monthly sales for the same categories of activity from January through March Estimates of Sales January through March 2012 Retail* Eating and Drinking Estab. Jan $257,783,000,000 $39,875,000,000 Feb (p) $264,269,000,000 $41,231,000,000 Mar (a) $292,055,000,000 $45,643,000,000 *Excludes motor vehicle and eating and drinking sales Sources: U.S. Census Bureau; RERC Retail continues to demonstrate its vulnerability with certain categories particularly sensitive to economic disturbances. However, the table above shows sales estimates for the first three months of 2012 and seems to offer some basis to conclude that the worst stress may have passed and the nation may be in recovery mode. Over the last several years, annualized changes in retail sales appear to have been largely a function of both inflation and new store openings. Although not all stores could survive the recent downturn, there is evidence that the industry has continued to expand even if only modestly following the recession. Indeed, sales figures are modestly ahead of inflation even as many retailers have closed stores. What remains speculative is the rate of future growth and the speed at which spending begins to mount as the economy recovers. Based on the data available so far, it seems sales are increasing between 2-7% annually based on the type of sales being measured. A long history of retail activity suggests sharply upward spending but the lower growth rates experienced in more recent years throughout the retail industry may indicate a structural condition attendant to caution and a greater emphasis on thrift. On the restaurant front, the patterns of business activity are similar to those experienced by the nation s leading retail chains. That is, a handful of giant operators set the tone for the balance of the food service industry. As presented in the following table, there were four food services corporations represented in Fortune 500 s ranking of America s largest corporations, each with revenue changes of at least 5% from The positive change in revenue may be a good indicator that other food service restaurants also had growth in 2011 and may continue that growth in the future Fortune 500 Ranking of America's Largest Corporations Rank in Food Services Category Rank in All Industries Corporation Name Revenue (Millions) Revenue % Change from 2010 to McDonald's $27, Yum Brands $12, Starbucks $11, Darden Restaurants $7, Source: money.cnn.com from Fortune 500 published May 21, 2012 Yum Brands : KFC, Taco Bell, and Pizza Hut Darden Restaurants: Red Lobster, Olive Garden, Longhorn, Capital Grille, Bahama Breeze, Eddie V's, and Seasons 52 REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 29

183 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) As with the major retailers, a single name stands well above the rest in terms of universal name recognition, scale, and production. McDonald s revenues are over twice those of Yum Brands, which includes three recognizable chain names: KFC, Taco Bell, and Pizza Hut. Although there are some full service casual restaurants, the list of giants is dominated by fast food outlets such as Taco Bell and Chick-fil-A which provide a narrow range of menu options and virtually no alcohol. More detail on various segments of the retail and restaurant industries pertinent to the analysis follow on the next few pages. 4.1 Trends in the National Restaurant Industry Restaurants have become an important and essential ingredient of the American lifestyle. According to the National Restaurant Association, the restaurant industry s share of the U.S. food dollar has grown from 25.0% in 1955 to 48.0% in 2012, up only 1.0% since It is highly likely that the slowdown in growth was due to an effort by the general population to be more conservative during the recession. As these changes occur, new concepts and formats attempt to respond. The National Restaurant Association has forecasted in its February 2012 trends report that 2012 could reach a record high for restaurant industry sales. The following table provides a historical trend analysis, on a national level, estimating the annual revenue for the restaurant industry. These figures are compiled annually by the U.S. Census Bureau in an effort to benchmark sales. Annual revenue growth in every year profiled in the following table exceeds the annual growth of the CPI, except for 2008 to 2009 which were recessionary years. In 2010 and 2011 the growth percentage is once again beyond that of inflation. Restaurant Industry, Retail Trends, Year Revenue Avg. Annual % Change CPI 1995 $233,012,000, % 1996 $242,245,000, % 3.0% 1997 $257,364,000, % 2.3% 1998 $271,194,000, % 1.6% 1999 $283,900,000, % 2.2% 2000 $304,261,000, % 3.4% 2001 $316,638,000, % 2.8% 2002 $330,525,000, % 1.6% 2003 $349,726,000, % 2.3% 2004 $373,557,000, % 2.7% 2005 $396,463,000, % 3.4% 2006 $422,786,000, % 3.2% 2007 $444,551,000, % 2.8% 2008 $456,102,000, % 3.8% 2009 $451,070,000, % -0.4% 2010 $466,001,000, % 1.6% 2011 $493,501,000, % 3.2% Source: U.S. Census Bureau. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 30

184 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) There is a high degree of competition in the food and beverage industry which historically has seen low profit margins. The industry is dependent on discretionary spending, and many participants in the industry have pursued growth through acquisition in lieu of building new units. This provides a larger revenue base over which to spread costs and leverage to keep supplier costs down. Restaurants and Institutions publishes an annual list of the 400 largest grossing restaurant (2009) chains in the world. The 100 largest chains oriented primarily but not exclusively to the fast food segment account for about 88.0% of aggregate top 400 sales, a percentage that has been relatively constant for several years. The recession may have caused some stars to fade but the mix is still likely to favor these largest chains. The remaining restaurants compete heavily for the balance of sales but some are sufficiently large to be recognized as investment grade operations. Implications. Retail continues to demonstrate some vulnerability with certain categories particularly sensitive to economic disturbances. Though recent indicators for same store sales suggest signs of improvement generally throughout 2010, 2011, and 2012 thus far, in some cases the measures benchmark against much weaker performance in prior recessionary periods. The magnitude of the recent recession indicates a need to consider very carefully how smaller retail centers will respond, certainly in the short run. RERC expects that there may be a need for service based businesses to fill some of the retail vacancies until the retail sales industry shows more signs of strength. For 2010 and 2011, the restaurant and retail industries are both showing gains above that of normal inflation, demonstrating some stability after the sharp decline in sales in Giant national restaurant chains are known to set the tone for the balance of the food service industry, and have been showing positive revenue gains since Any nationally recognized restaurant or retailer has the strength and experience to potentially perform well in the project. 4.2 Trends in the Theater Industry and Their Impacts on Assumptions Despite a recession that has led to drops in nearly every category of consumer spending, box-office revenue at the nation s many movie theaters has continued to grow in the United States and Canada. Industry analysts expect ticket prices to continue rising as theater owners invest in new technologies. Rising ticket prices have been shown to contribute to improved box office totals. The U.S. Census Bureau reports increasingly higher revenues reflecting all activity in theaters. The interest in movies as a form of recreational spending, compared with travel, eating out, sporting events and shopping, stems from the relatively modest price of a ticket, given its content and the duration of the experience. The market research firm CinemaScore reports, "Even at $10, or $15 for IMAX or 3-D, going to the movies is still a cheaper night out than almost anything else." In the most recent data from the National Association of Theater Owners, theater admissions peaked in 2002 and saw modest rises in attendance in 2006 and Other than 2006 and 2009, turnstile counts have steadily fallen from REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 31

185 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Although analysts observe that theater attendance remains strong among a core audience, they had generally conceded that the combination of home theater systems, digital imaging, illegally obtained movie copies, and enhanced delivery of DVD releases or premium movie sites had permanently eroded the advantages of conventional theater. People may have rediscovered the singular experience of going to a theater where technologies such as 3-D projection have been broadened, creating a movie environment which is not yet widely replicated in the home. The advances of technology have been coupled with the unusually large number of major hits which have been mostly superhero themed in the past year. That has led analysts to query viewers about the quality they attach to individual films. These respondents suggest the quality has not improved overall but they do attend more frequently. These phenomena lead to further speculation about the momentum necessary to sustain the meteoric rise in attendance. If the jump in attendance ultimately stems from content value relative to alternative forms of spending, future patterns and gains become more uncertain. The industry has been aided somewhat by changes in operations and management. Site and screen consolidations, significant investment in new multi-theater complexes, and increased debt levels have resulted in some markets with fewer screens per 1,000 people. A limited number of facilities are still being developed to serve existing markets having an inadequate number of screens, to replace smaller theaters that may no longer be competitive and to replace aging or obsolete facilities that may be small and lack state of the art seating, audio and video. The table below shows the latest available theater industry revenue trends from the U.S. Census Bureau. Theater Industry Revenue Trends, Year Revenue Avg. Annual % Change CPI 1998 $8,030,000, % 1999 $8,845,000, % 2.2% 2000 $9,596,000, % 3.4% 2001 $10,039,000, % 2.8% 2002 $10,730,000, % 1.6% 2003 $11,048,000, % 2.3% 2004 $11,069,000, % 2.7% 2005 $11,585,000, % 3.4% 2006 $12,210,000, % 3.2% 2007 $12,609,000, % 2.8% 2008 $12,687,000, % 3.8% 2009 $13,198,000, % -0.4% 2010 $13,363,000, % 1.6% Source: U.S. Census Bureau, RERC The theater is an integral part of the core program at Grain Valley which has helped elevate that portion of the project to a regional destination. In conjunction with other trends, it seems less vulnerable to the industry s conditions which have generated mixed longer term performance. Cinemas have shown they are an important part of the REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 32

186 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) approach to developing a total retail and entertainment environment and the present analysis assumes this property will continue to fill that role. In 2009, there were 5,561 theaters with approximately 38,605 indoor screens in the United States. This was down from 7,031 theaters in 1999, but higher than the 5,403 theaters in These numbers are reported from the most recent data available from the National Association of Theater Owners. Implications. Even if gate receipts are up, the theater industry remains a difficult one with some questions about the underlying causes of increasing and decreasing attendance. Still, there appear to be clear differences among companies, their product, and their operating performance. B&B Theaters, the operator of the Grain Valley facility, has seasoned principals with proven track records managing and marketing theaters. B&B s newest complexes offer the latest in sound and comfort, including DOLBY 7.1 Surround Sound and digital sound in all auditoriums, stadium seating, wide screens, high-back rocker chairs with cup holders and digital projectors with 3D capabilities. The theater in Grain Valley will have all of these amenities, as well as leather seats. The proposed movie theater should provide a major draw of consumers to the site. The theater industry continues to benefit from natural barriers to entry such as capital, market need, and film distribution practices. Because the industry has become more thoughtful in locating and developing theaters, new competitors will be moderately discouraged. Ultimately, the overall industry s challenge will be to maintain and enhance the experience of movie-going in order to effectively compete with home and other entertainment dollars. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 33

187 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) 5.0 METROPOLITAN MISSOURI RETAIL CONDITIONS Sections 3.0 and 4.0 discussed the national economic environment and national retail trends. This section focuses on that information in the context of the local and regional areas providing market support to the retail and restaurant functions that will be available in the Grain Valley TIF development project. 5.1 Regional Retail Sales Retail data more specific to the Kansas City regional area is difficult to acquire for a number of reasons, principal among them the bifurcation of the geographic area itself between two different states with varied methods of collection and reporting. Comprised of 15 counties, the metro area has varied jurisdictions and tax rates, but they work together to form a composite of retail activity and retail spending which is occurring in the region. Recognizing inherent limitations in the data and focusing on discrete categories of sales activity, we have summarized selected data from the Missouri Department of Revenue to show trends and performance benchmarks from 2006 to For Missouri, data is available only for total taxable sales activity so interpretation is more restricted. Missouri. As noted, only data for taxable sales is readily available for analysis. Here, we focused on taxable sales activity in Jackson, Clay and Platte Counties, as the largest jurisdictions comprising the Missouri portion of the defined metropolitan area. Kansas City, Missouri is generally located in Jackson County. This County represents about one-third of the region s population. A comparison of average monthly sales activity, from 2008 to 2009, for all business sectors indicates taxable sales declining by 6.1%, 8.1% and 6.3%, respectively for Jackson, Clay and Platte Counties. After some recovery in 2010 and 2011, the Missouri Department of Revenue anticipates further decline in However, so far for January-March of 2012, the Missouri Department of Revenue reports that the total taxable sales for Jackson County have increased by 5.4% over the same months of Also, national studies show that sales are on the rise for 2012, so Jackson County may follow the national trend and outperform its regional projections. The following table shows total taxable sales which include all business sectors required by law to collect sales tax. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 34

188 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Total Taxable Sales in Selected Missouri Counties, Total Taxable Sales Jackson $9,078,194,070 $9,225,905,659 $9,151,109,311 $8,588,380,682 $8,719,295,990 $8,991,856,344 Clay $3,063,341,210 $3,097,798,779 $3,089,280,502 $2,839,003,200 $2,880,741,548 $2,962,718,932 Platte $1,574,637,695 $1,651,329,423 $1,790,449,792 $1,678,393,959 $1,675,842,338 $1,750,119,161 Average Monthly Sales Jackson $756,516,172 $768,825,472 $762,592,443 $715,698,390 $726,607,999 $749,321,362 Clay $255,278,434 $258,149,898 $257,440,042 $236,583,600 $240,061,796 $246,893,244 Platte $131,219,808 $137,610,785 $149,204,149 $139,866,163 $139,653,528 $145,843,263 Sources: Missouri Department of Revenue; RERC. Implications. Although retail activity is challenged at virtually every level, it has shown some stability in selected segments in the areas described. What is particularly noteworthy is that in Jackson County, where the retail inventory is dependent upon regional support to bolster sales, the retail volume in 2011 is ahead of the average monthly retail volume in Nearby Clay and Platte counties showed similar increases in retail volume in 2011, indicating there may be strength in the region. Food service as an industry also showed increases in for the time period studied. 5.2 Structure of the Local Retail Marketplace From 2010 to 2011, the Kansas City, MO-KS MSA saw the metropolitan retail inventory decline from 67,153,909 to 62,318,371 square feet, resulting in a 7.20% loss of square feet of retail in the regional area. During the same time period, East Jackson County experienced a 4.79% increase in retail inventory. East Jackson and Wyandotte Counties were the only areas that showed growth over 1% in retail inventory for The retail inventory of space within centers comprised of more than 50,000 SF totaled approximately 62,000,000 SF and was about 90.0% occupied. The concentration and distribution of that inventory are shown in the following table. Retail Inventory and Occupancy, Kansas City Metropolitan Area Submarket 2010 SF 2011 SF % Change 2010 Vacancy Rate 2011 Vacancy Rate Northwest Kansas City 4,342,901 3,817, % 8.40% 8.80% Northeast Kansas City 7,684,685 7,684, % 10.30% 11.30% Central Kansas City 5,812,230 2,398, % 7.70% 5.10% South Kansas City 5,269,720 4,430, % 18.30% 17.60% Southeast Trade Area 5,085,666 5,090, % 8.80% 10.50% East Jackson County 10,136,847 10,622, % 11.90% 10.40% North Johnson County 11,952,851 11,684, % 11.90% 11.10% South Johnson County 13,158,633 12,392, % 12.10% 10.00% Wyandotte County 3,710,376 4,197, % 19.70% 15.40% Total Metro Area 67,153,909 62,318, % 12.90% 10.30% Source: LANE4 Kansas City Retail Report, 2012 REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 35

189 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Comprising nearly 40% of the total retail space located within shopping centers greater than 50,000 SF, Johnson County, Kansas by far has the largest concentration of retail within the metro area. Combined, Northwest Kansas City, Northeast Kansas City, Southeast Trade Area, and East Jackson County make up approximately 43.0% of the inventory. As noted, 2011 overall occupancy across the marketplace averages about 88-90%. Occupancy in East Jackson County was about 88.0% in East Jackson County saw an increase of 1.7% in occupancy rate and an 8.0% increase in lease rate from 2010 to The concept for the proposed project at Grain Valley is somewhat unique, as it combines some elements of what might normally be located within a grocery anchored neighborhood center with a movie theater that will draw from a much larger area. The location adjacent to I-70 could also draw drive-by customers that might be attracted to easy access restaurants off the highway. In our opinion, competition will vary depending on the type of operator within the complex. The movie theater s competition will come from a more distant area, including theaters within a 10 to 12 mile radius. Restaurants will compete with both local Grain Valley establishments as well as other operators off of I-70 but in a much tighter range, such as 3 to 5 miles from the site. Due to the relatively small amount of land within the boundaries of the site, it is unlikely that any big box retailer could be attracted to the proposed project. This would leave smaller operators such as hardware stores, dollar stores, drug stores and small in-line shops and local eateries. These types of operators would mainly draw from the local Grain Valley community. Due to this variation in probable competition, the discussion below focuses on different competitive areas and the existing major operators within those markets. Movie Theaters The following movie theaters are within a 10 to 12 mile radius of the site: Blue Springs 8 (Blue Springs), opened AMC Independence Commons 20 (Independence), opened Dickinson Eastglen 16 (Lee s Summit), opened Pharaoh Cinema 4 (Independence), opened Noland Fashion Square 6 (Independence), opened The following map shows the location of these theaters in relation to Grain Valley. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 36

190 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) Source: Google Maps 2012 The Blue Springs 8 screen theater is the closet existing operator to the subject site. The property does show first run movies but is in poor physical condition. A vacant chiropractor s office and a small Pizza Hut delivery storefront are a part of the building. The AMC Independence Commons 20 screen theater is located in a significant concentration of retail establishments that is clustered around the Independence Mall just to the north of I-70 and east of I-470/SR 291. The facility appeared to be in good physical condition and does show first run movies but there have been discussions within the community of criminal activity occurring in the vicinity of the complex. The Pharaoh Cinema 4 screen theater is located in downtown Independence. This was an older theater located in a downtown setting that was recently renovated. The building was in good shape and the theater does show first run movies. The Noland Fashion Square 6 screen theater is located in an older retail mall that has significant vacancies. The theater and surrounding retail is in poor condition. The complex shows second run movies. The Dickinson Eastglen 16 screen theater in Lee s Summit is a stand-alone building located in an area with a significant amount of nearby retail activity. The facility appeared to be in good condition and does show first run movies. We believe the Dickinson Eastglen and AMC Independence Commons theaters will offer the most competition for the proposed theater in Grain Valley. The Pharaoh Cinema in REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 37

191 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) downtown Independence is the most distant from Grain Valley and the Blue Springs and Noland Fashion Square theaters are in poor physical condition. In addition, the Noland Fashion Square theater does not show first run movies. As noted earlier, RERC has had discussions with B&B Theater management concerning their proposed Grain Valley operation and the competition in the area. We understand that the Grain Valley theater will offer a higher level of amenities than what is currently available in this area of the County. B&B management have conducted their own market studies and through that research believe the Grain Valley theater will compete very effectively in this market. Judging from what was observed during our fieldwork, we agree with this assessment. Grain Valley Retail Market Currently there are limited retail and restaurant options within the Grain Valley area. An earlier section of this report noted the operators around the I-70 and Buckner Tarsney Road area, which are mainly limited to gas stations/convenience stores and fast food restaurants. The largest concentration of existing retail within the City is in Old Towne Marketplace, which is located south of the interchange at the intersection of Buckner Tarsney Road and SW Eagles Parkway. That center was built in 2003 and contains about 87,000 SF of space. Major tenants include: Dollar General Patricia s Grocery El Maguey Mexican Restaurant Sear s Hometown Store Premium Oil and Lube (outparcel) Red Cross Pharmacy and State Farm Insurance (outparcel) Others including a pizza restaurant, Chinese restaurant, Subway sandwich shop, Edward Jones financial advisors and a CPA There were some vacancies within the center but they appear to be limited. The Old Towne Marketplace is also located within a TIF redevelopment area in Grain Valley. There appears to be excess land available for expansion adjacent to the center. A Casey s gas station/convenience store is located on the east side of Buckner Tarsney Road across from Old Towne. Further west of this area on SW Eagles Parkway is the Sni-A-Bar Plaza, a smaller 35,000 SF retail center built in Tenants include a coffee shop, chiropractor, fitness center, real estate broker, liquor store, hair/nail salon, dentist, family practice physician, the Grain Valley Chamber of Commerce and a CPA. There did appear to be a significant amount of vacant space, perhaps as high as 25+%. The few remaining retail and restaurant options are scattered around the City and are not located in concentrated retail centers. REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 38

192 Estimates of Future Sales and Property Tax Revenues Grain Valley Marketplace Redevelopment Area (Project 2) I-70 Interchanges and Lee s Summit Other retail options outside of Grain Valley that are most accessible to local residents are concentrated around other I-70 interchanges. The following map shows the areas that have retail concentrations around nearby I-70 interchanges or I-470 interchanges in the Lee s Summit area. Source: Google Maps 2012 The town of Oak Grove is about four miles east of Grain Valley. The retail operators around or near the I-70 interchange include: Gas stations, including the Oak Grove 70 (includes a Wendy s, Blimpies, Dairy Queen and Petro Lube) and Travel America truck stops, Casey s and QT gas stations. Restaurant and fast food chains such as McDonald s, Subway, Waffle House, Hardee s, TJ s Family Restaurant. Walgreen s Hotel Banks Patricia s Food Store Small 22,000 SF retail center including hair/nail salon, insurance agent, health clinic, CPA, dentist, fitness center, pt shop, Chinese restaurant, diner, cash advance/loans. The largest concentration nearest to Grain Valley is at Adam s Dairy Parkway, about three miles west of the City. That area is home to big box destination shopping options that include: REAL ESTATE RESEARCH CONSULTANTS, INC. PAGE 39