$50,000,000 CITY OF SCOTTSDALE, ARIZONA GENERAL OBLIGATION BONDS, PROJECT OF 2004, SERIES 2012 (PRESERVE ACQUISITION)

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1 OFFICIAL STATEMENT DATED JANUARY 18, 2012 NEW ISSUE Book-Entry-Only RATINGS: See RATINGS herein Fitch: Moody s: S&P: AAA Aaa AAA In the opinion of Gust Rosenfeld P.L.C., Phoenix, Arizona, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, and assuming continuing compliance with certain restrictions, conditions and requirements by the City as mentioned under "TAX EXEMPTION" herein, interest income on the Bonds is excluded from gross income for federal income tax purposes and is exempt from Arizona income taxes. Interest income on the Bonds is not an item of preference to be included in computing alternative minimum tax of individuals or corporations; however, such interest income must be taken into account for federal income tax purposes as an adjustment to alternative minimum taxable income for certain corporations, which income is subject to federal alternative minimum tax. See "TAX EXEMPTION", BOND PREMIUM and ORIGINAL ISSUE DISCOUNT herein. $50,000,000 CITY OF SCOTTSDALE, ARIZONA GENERAL OBLIGATION BONDS, PROJECT OF 2004, SERIES 2012 (PRESERVE ACQUISITION) Dated: Date of Delivery Due: July 1 as shown on the inside front cover The $50,000,000 General Obligation Bonds, Project of 2004, Series 2012 (Preserve Acquisition), (the Bonds ) will be issued by the City of Scottsdale, Arizona (the City ). Use of Proceeds: The Bonds are being issued to provide funds for the purposes of (i) acquiring and improving land for the McDowell Sonoran Preserve (the Preserve ) and (ii) paying costs relating to the issuances of the Bonds. See THE BONDS Authorization and Purpose herein. Interest Payments: Interest on the Bonds is payable semiannually on each July 1 and January 1, beginning July 1, Redemption: The Bonds are subject to optional redemption prior to maturity as more fully described herein. Form and Denominations: The Bonds, when issued, will be registered in the name of Cede & Co., as nominee for The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Bonds. Purchases of beneficial ownership interests in the Bonds will be made in book-entry-only form in denominations of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their beneficial interests in the Bonds. See APPENDIX C Book-Entry-Only System. As long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, the principal of, premium, if any, and interest on the Bonds will be paid by Wells Fargo Bank N.A., acting as Registrar and paying agent for the Bonds (the Registrar and Paying Agent ). Disbursement of such payments to DTC Participants (as that term is defined herein) is the responsibility of DTC, and disbursement of such payments to the beneficial owners of the Bonds is the responsibility of the Direct Participants and Indirect Participants (as those terms are defined herein), as more fully described herein. Security and Sources of Payment: The Bonds are direct and general obligations of the City and are payable as to both principal and interest from ad valorem taxes to be levied annually, without limit as to rate or amount, against all of the taxable property located within the boundaries of the City. SEE MATURITY SCHEDULE ON INSIDE FRONT COVER Legal Matters: The City will furnish the winning bidder with the approving legal opinion of Gust Rosenfeld, P.L.C., Phoenix, Arizona, Bond Counsel. The Bonds are offered when, as and if issued, subject to the approving legal opinion of Gust Rosenfeld, P.L.C., Phoenix, Arizona, Bond Counsel to the City, as to validity and tax exemption. It is anticipated that the Bonds will be available for delivery in book-entry-only form through the facilities of DTC on or about February 2, This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors are advised to read this entire Official Statement to obtain information essential to making an informed investment decision.

2 $50,000,000 CITY OF SCOTTSDALE, ARIZONA GENERAL OBLIGATION BONDS, PROJECT OF 2004, SERIES 2012 (PRESERVE ACQUISITION) MATURITY SCHEDULE Maturity Date Principal Interest CUSIP No. (July 1) Amount Rate Yield (a) 2018 $ 1,400, % % 4G ,500, H ,500, J ,000, * 4K ,000, * 4L ,000, * 4M ,000, * 4N ,000, * 4P ,000, Q ,000, R ,000, S ,600, T4 * (a) Copyright 2011, American Bankers Association. CUSIP data is provided by Standard & Poor s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. CUSIP numbers are provided for information only. The District takes no responsibility for the accuracy of such numbers. * Priced to the July 1, 2022 redemption date.

3 CITY OF SCOTTSDALE, ARIZONA Incorporated June 25, 1951 CITY COUNCIL Mayor W.J. Jim Lane, Mayor Linda Milhaven, Vice Mayor Lisa M. Borowsky Suzanne Klapp Robert Littlefield Ron McCullagh Dennis Robbins David E. Richert City Manager David N. Smith City Treasurer Lee Guillory Bond & Finance Manager Carolyn Jagger City Clerk Bruce Washburn City Attorney BOND COUNSEL Gust Rosenfeld, P.L.C. Phoenix, Arizona FINANCIAL ADVISOR Piper Jaffray & Co. Phoenix, Arizona BOND REGISTRAR/PAYING AGENT Wells Fargo Bank, N.A. Phoenix, Arizona

4 REGARDING THIS OFFICIAL STATEMENT This Official Statement, including the inside front cover page and the Appendices hereto (this Official Statement ), does not constitute an offering of any security other than the original offering of the City of Scottsdale, Arizona, (the City ), General Obligation Bonds, Project of 2004, Series 2012 (Preserve Acquisition) (the Bonds ). No person has been authorized by the City, or Piper Jaffray & Co., as the financial advisor to the City (the Financial Advisor ), to give any information or to make any representations other than as contained in this Official Statement, and if given or made, such other information or representation not so authorized should not be relied upon as having been given or authorized by the City or the Financial Advisor. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, and there will not be any sale of the Bonds by any person in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. The information set forth herein has been obtained from the City, the Maricopa County Assessor (the County Assessor ), the City s Finance and Accounting Division and other sources that are considered to be reliable and customarily relied upon in the preparation of similar official statements, but such information is not guaranteed as to accuracy or completeness. 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 will, under any circumstances, give rise to any implication there will be no change in the affairs of the City after the date hereof. The Bonds will not be registered pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon the exemptions provided pursuant thereto by Sections 3(a)(2) and 3(a)(12), respectively, pertaining to the issuance and sale of municipal securities, nor will the Bonds be qualified pursuant to the Securities Act of Arizona in reliance upon various exemptions contained in such act. Neither the Securities and Exchange Commission nor any other Federal, state or other governmental entity or agency will have, at the request of the City, passed upon the accuracy or adequacy of this Official Statement or approved the Bonds for sale. All forecasts, projections, assumptions, opinions or estimates contained herein are forward looking statements which must be read with an abundance of caution and which may not be realized or may not occur in the future. The City will undertake to provide continuing disclosure as described in this Official Statement under CONTINUING DISCLOSURE CERTIFICATE and in APPENDIX F FORM OF CONTINUING DISCLOSURE CERTIFICATE, to assist the original purchaser(s) of the Bonds in complying with their obligations pursuant to Rule 15c2-12 promulgated pursuant to the Securities Exchange Act of 1934, as amended.

5 TABLE OF CONTENTS INTRODUCTION... 1 THE BONDS... 1 Authorization and Purpose... 1 Terms of the Bonds Generally... 2 Registration, Transfer and Exchange... 2 Redemption Provisions... 3 Notice of Redemption... 3 Security for and Sources of Payment of the Bonds... 4 ANNUAL DEBT SERVICE REQUIREMENTS... 4 LITIGATION... 5 LEGAL MATTERS... 5 LIMITATION ON ISSUE PRICE... 5 RATINGS... 5 CERTIFICATION CONCERNING OFFICIAL STATEMENT... 6 CONTINUING DISCLOSURE CERTIFICATE... 6 TAX EXEMPTION... 6 BOND PREMIUM... 8 ORIGINAL ISSUE DISCOUNT... 8 FINANCIAL ADVISOR... 9 RELATIONSHIP BETWEEN PARTIES... 9 CITY FINANCIAL STATEMENTS... 9 CONCLUDING STATEMENT... 9 Page APPENDIX A: APPENDIX B: APPENDIX C: APPENDIX D: APPENDIX E: APPENDIX F: APPENDIX G: CITY OF SCOTTSDALE, ARIZONA GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION CITY OF SCOTTSDALE, ARIZONA FINANCIAL DATA BOOK-ENTRY-ONLY SYSTEM CITY OF SCOTTSDALE, ARIZONA EXCERPTS OF THE AUDITED ANNUAL FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2011 FORM OF APPROVING LEGAL OPINION OF BOND COUNSEL FORM OF CONTINUING DISCLOSURE CERTIFICATE NOTICE INVITING BIDS FOR THE PURCHASE OF BONDS i

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7 $50,000,000 CITY OF SCOTTSDALE, ARIZONA GENERAL OBLIGATION BONDS, PROJECT OF 2004, SERIES 2012 (PRESERVE ACQUISITION) INTRODUCTION This Official Statement, including the front cover page and the Appendices ( Official Statement ) has been prepared on behalf of the City of Scottsdale, Arizona (the City ), in connection with the initial issuance and sale by the City of $50,000,000 General Obligation Bonds, Project of 2004, Series 2012 (Preserve Acquisition), (the Bonds ), dated the date of initial delivery, as identified on the front cover page hereof. Certain information concerning the authorization, purpose, terms, conditions of sale and sources of payment of and security for the Bonds is stated in this Official Statement. All financial and other information presented in this Official Statement has been provided by the City from its records, except for information expressly attributed to other sources. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as is shown herein, will necessarily continue or be repeated in the future. All forecasts, projections, assumptions, opinions or estimates are forward looking statements which must be read with an abundance of caution and which may not be realized or may not occur in the future. Reference to provisions of Arizona law, whether codified in the Arizona Revised Statutes, uncodified or of the Arizona Constitution, are references to those provisions in their current form. Those provisions may be amended, repealed or supplemented. As used in this Official Statement, debt service means principal of and interest on the obligations referred to; County means Maricopa County, Arizona; and State or Arizona means the State of Arizona. Authorization and Purpose THE BONDS The Bonds will be issued by the City pursuant to the Constitution and laws of the State, including particularly Title 35, Chapter 3, Article 3 of the Arizona Revised Statutes and in accordance with the provisions of Resolution No adopted by the Mayor and Council of the City on December 6, 2011 (the Resolution ). The Bonds were authorized by the qualified electors of the City voting at a special bond elections held on May 18, 2004 (the 2004 Election ). After the issuance and sale of the Bonds, the City will have $387,475,000 principal amount of remaining authorized, but unissued, general obligation (Preserve Acquisition) bonds authorized by the 2004 Bond Election. The City also has $6,400,000 principal amount of remaining authorized, but unissued, general obligation bonds authorized by the qualified electors of the City voting at a special bond elections held on September 12, 2000 for a public safety helicopter. The Bonds are being issued to provide funds for the purposes of (i) acquiring and improving land for the McDowell Sonoran Preserve (the Preserve ) and (ii) paying the costs relating to the issuance of the Bonds. 1

8 Terms of the Bonds Generally The Bonds will be dated the date of initial delivery. The Bonds will mature on the dates and in the principal amounts and will bear interest at the rates set forth on the inside front cover page of this Official Statement. Interest on the Bonds is payable commencing on July 1, 2012, and on each January 1 and July 1 thereafter (each an Interest Payment Date ) until maturity or prior redemption. The Bonds, 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, which will act as securities depository for the Bonds. Purchases of beneficial interests in the Bonds will be made in book-entry-only form in the amount of $5,000 of principal due on a specific maturity date or integral multiples thereof. Purchasers of beneficial interests in the Bonds will not receive certificates representing their beneficial interests in the Bonds. So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, payments of the principal of and interest on the Bonds will be paid by the paying agent, initially Wells Fargo Bank, N.A. (the Paying Agent ) directly to DTC. Disbursement of payments to Direct Participants (as defined herein) is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners (as defined herein) is the responsibility of Direct Participants and Indirect Participants (as defined herein), as more fully described herein. See APPENDIX C BOOK-ENTRY-ONLY SYSTEM. SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE REGISTERED OWNER OF THE BONDS, REFERENCES IN THIS OFFICIAL STATEMENT TO THE OWNERS OR REGISTERED OWNERS OF THE BONDS (OTHER THAN UNDER THE CAPTIONS TAX EXEMPTION, AMORTIZABLE PREMIUM AND ORIGINAL ISSUE DISCOUNT) WILL MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. If the book-entry-only system ( Book-Entry-Only System ) is discontinued, interest on the Bonds will be payable by check of the Paying Agent mailed on or prior to the Interest Payment Date to the registered owners of such Bonds at the addresses of such owners appearing on the books of the bond registrar, initially Wells Fargo Bank, N.A. (the Registrar ) on the fifteenth (15 th ) day of the month preceding each Interest Payment Date or, if such day is not a business day, on the next succeeding business day (the Record Date ). Principal of the Bonds will be paid when due upon surrender of such Bonds at the designated corporate trust office of the Paying Agent. The City may change the Registrar or the Paying Agent at any time without notice. Payment of interest on the Bonds and, if adequate terms for surrender are made, principal on the Bonds may be made by wire transfer upon twenty (20) days prior written request to the Registrar and Paying Agent specifying the wire address in the United States of America by any registered owner of an aggregate principal amount of at least $1,000,000 of Bonds. Registration, Transfer and Exchange Pursuant to the terms of the Resolution, the Registrar will establish and maintain a register of the Bonds, the registered owners of the Bonds and transfers of the Bonds at the designated corporate trust office of the Registrar (the Bond Register ) for the registration and transfer of the Bonds. Upon surrender for transfer of any Bond at the designated corporate trust office of the Registrar, duly endorsed by, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Registrar and duly executed by the registered owner or the attorney-in-fact of the registered owner duly authorized in writing, the Registrar will authenticate, date and deliver in the name of the transferee or transferees, a new fully-registered Bond or Bonds of the same maturity date for a like aggregate principal amount of authorized denominations. Any Bond or Bonds may be exchanged at the designated corporate trust office of the Registrar for a Bond or Bonds of the same principal amount, maturity and rate of interest as the surrendered bonds. 2

9 The Registrar will transfer any Bond during the period beginning at the close of business on a Record Date, to and including the day preceding the next interest payment date, but the interest payment on such interest payment date will be payable to and mailed to the registered owner of such Bond on the Record Date. Notwithstanding the foregoing, the Registrar will not be required to transfer any Bond after notice of redemption with respect to such Bond has been mailed, or within fifteen (15) days next preceding the mailing of any notice of redemption with respect to any Bond. The Registrar will charge the owners of the Bonds being transferred or exchanged for any fees, taxes and costs in connection with such transfers or exchanges. Redemption Provisions Optional Redemption. The Bonds are subject to redemption prior to maturity, at the option of the City, on or after July 1, 2022, in whole or in part at any time, by the payment of a redemption price equal to the principal amount of each Bond called for redemption plus accrued interest to the date fixed for redemption, but without premium. The Bonds may be redeemed in part only in $5,000 increments. The City will, at least sixty (60) days prior to any redemption date, unless a shorter time period shall be accepted by the Registrar, notify the Registrar of such redemption date and of the maturities of the Bonds and the principal amount of the Bonds of any such maturity to be redeemed on such date. For the purposes of any redemption of less than all of the Bonds of a single maturity, the particular Bonds or portions of Bonds to be redeemed, DTC will determine the lot to be redeemed. If the Book-Entry-Only System is discontinued, for the purposes of any redemption of less than all of the Bonds of a single maturity, the particular Bonds or portions of Bonds to be redeemed will be selected by lot not less than forty-five (45) days prior to the redemption date by the Registrar by such selection methods as the Registrar deems fair and appropriate. Notice of Redemption So long as the Book-Entry-Only System is in effect, notice of any redemption will be given by the Registrar on behalf of the City to DTC by the method required by DTC. If the Book-Entry-Only System is discontinued, notice of redemption will be given by mailing a notice of redemption, by first class mail not less than thirty (30) days nor more than sixty (60) days prior to such redemption date, to the registered owner of each Bond to be redeemed at the address shown on the Bond Register. Notice of redemption may be sent to any securities depository by mail, facsimile transmission, wire transmission or any other means of transmission of the notice generally accepted by the respective depository. Neither the failure of DTC nor any registered owner of Bonds to receive a notice of redemption nor any defect therein will affect the validity of the proceedings for the redemption of Bonds as to which proper notice of redemption was given. The Registrar will also provide notice of redemption to the Municipal Securities Rulemaking Board (the MSRB ) currently through the MSRB s Electronic Municipal Market Access system ( EMMA ) by the method required by the MSRB. Notice of redemption having been given in the manner described above, the Bonds or portions thereof called for redemption will become due and payable on the redemption date and if an amount of money sufficient to redeem all the Bonds or portions thereof called for redemption is held by the Paying Agent, then the Bonds or portions thereof called for redemption will cease to bear interest from and after such redemption date. The person in whose name any Bond is registered will be deemed and regarded as the absolute owner thereof for all purposes, and payment of the principal of and premium, if any, and interest, on any Bond will be made only to or upon the order of the registered owner thereof or the legal representative of the registered owner. All such payments will be valid and effectual to satisfy and discharge the liability of the City upon such Bond to the extent of the sum or sums so paid. 3

10 Security for and Sources of Payment of the Bonds Debt service on the Bonds is payable from ad valorem property taxes. The Bonds are direct and general obligations of the City, and the Mayor and City Council are obligated to levy annually an ad valorem tax for payment of the principal of and interest on the Bonds upon all of the taxable property within the City without limitation as to rate or amount. The City intends, however, to pay debt service on the Preserve Bonds from the two-tenths (0.20) of one percent (1.00%) City transaction privilege (sales) tax approved by the voters in 1995 and dedicated to financing land acquisitions for the Preserve (the 1995 Preserve Tax ) and by the fifteen hundredths percent (0.15%) of gross proceeds of sales or gross income from business in the City transaction privilege (sales) tax approved by the voters in 2004 and dedicated to financing land acquisitions for the Preserve (the 2004 Preserve Tax, and together with the 1995 Preserve Tax, the Preserve Excise Taxes ). ANNUAL DEBT SERVICE REQUIREMENTS (a) The following schedule illustrates the annual debt service requirements on the outstanding general obligation bonds of the City and the annual debt service requirements on the Bonds. Less: GO Debt Service Fiscal Requirements Net General Year Outstanding Annual to be Paid by Obligation Ending Debt Service Requirements Plus: The Bonds the Preserve Debt Service (June 30) Principal Interest Principal Interest (b) Excise Taxes (c) Requirements 2012 $28,315,000 $25,047,258 $662,740 $17,017,660 $37,007, ,085,000 23,874,958 1,601,250 18,859,470 36,701, ,815,000 22,568,839 1,601,250 21,191,658 36,793, ,920,000 21,044,189 1,601,250 18,979,133 35,586, ,100,000 19,626,489 1,601,250 21,296,308 34,031, ,810,000 18,085,514 1,601,250 20,593,583 34,903, ,485,000 16,510,401 $1,400,000 1,601,250 22,021,545 34,975, ,080,000 14,949,919 1,573,250 21,642,038 32,961, ,490,000 13,317,581 1,500,000 1,573,250 21,839,050 31,041, ,020,000 11,799,106 1,500,000 1,528,250 22,310,575 29,536, ,300,000 10,134,831 1,468,250 23,096,050 24,807, ,240,000 8,581,138 1,468,250 23,350,856 24,938, ,910,000 6,895,538 1,468,250 25,293,100 24,980, ,650,000 5,150,613 1,468,250 36,105,613 14,163, ,230,000 3,153,769 18,000,000 1,468,250 22,369,019 14,483, ,210,000 2,510,119 4,000, ,250 7,732,619 14,825, ,020,000 1,819,606 4,000, ,250 7,579,856 14,978, ,665,000 1,065,706 4,000, ,250 7,456,956 4,872, ,060, ,825 4,000, ,250 7,333,075 4,992, ,360, ,100 3,000, ,250 6,208, ,460, ,750 3,000, ,250 6,109, ,560, ,500 3,000, ,250 6,001, ,955, ,500 2,600,000 84,500 5,781,000 0 TOTALS $572,740,000 $228,198,246 $50,000,000 $25,808,490 $390,168,261 $486,578,475 (a) Prepared by Piper Jaffray & Co., financial advisor to the City (the Financial Advisor ). (b) The first interest payment on the Bonds is due July 1, (c) The City is paying and intends to continue to pay amounts representing general obligation debt service on: a portion of the City s General Obligation Bonds, Projects of 2004, Series 2011, General Obligation Refunding Bonds, Series 2011, General Obligation Bonds, Projects of 2000 and 2004, 4

11 Series 2008; a portion of the City s General Obligation Bonds, Projects of 2000 and 2004, Series 2005; a portion of the City s General Obligation Bonds, Projects of 1999 and 2000, Series 2004; a portion of the City s General Obligation Refunding Bonds, Series 2002; and the Bonds (collectively, the Preserve Excise Tax Supported GO Bonds ) from collections of the Preserve Excise Taxes. In the event that these revenues from the Preserve Excise Taxes prove insufficient to pay amounts due for debt service on these Preserve Excise Tax Supported GO Bonds, or if the City decides not to pay such amounts from revenues of the Preserve Excise Taxes, amounts due for debt service on the Preserve Excise Tax Supported GO Bonds will then be paid from ad valorem taxes. LITIGATION At the time of delivery of the Bonds, the City Treasurer will certify, among other things, that there is no action, suit or proceeding, inquiry or investigation at law or in equity, or before or by any judicial, quasijudicial or administrative forum pending or overtly threatened against the City that questions its right to levy and collect taxes to pay the principal of and interest on the Bonds, or questions the proceedings and authority pursuant to which the levy is made or questions the City s right to issue and deliver securities, including the Bonds, or to restrain or enjoin the issuance, offer, sale or delivery of the Bonds or in any way affecting or contesting the authority for or the validity of the Resolution, the Bonds or the proceeds from the issuance thereof or the application of the proceeds of the Bonds in the manner contemplated in the Resolution, or in any way contesting the existence or powers of the City or if resolved adversely to the City or its interests, individually or in the aggregate, would have (a) a material adverse effect upon the financial condition, assets, properties or operations of the City, (b) a material adverse effect on the transactions contemplated by this Official Statement, (c) an adverse effect on the validity or enforceability of the Resolution or (d) impair the City s ability to comply with the requirements set forth in the Resolution. LEGAL MATTERS Legal matters incident to the issuance of the Bonds and with regard to the tax-exempt status of the interest thereon are subject to the approving legal opinion of Gust Rosenfeld, P.L.C., Phoenix, Arizona, Bond Counsel to the City ( Bond Counsel ). Copies of such opinion will be delivered to the purchaser of the Bonds at the time of the delivery of the Bonds. The form of the opinion is included as APPENDIX E FORM OF APPROVING LEGAL OPINION OF BOND COUNSEL hereto. Fees of Bond Counsel will be paid from Bond proceeds. While Bond Counsel has reviewed and participated in the preparation of portions of this Official Statement, Bond Counsel has not been engaged to confirm or verify, and will express no opinion concerning, the accuracy or the adequacy of this Official Statement or the information herein. LIMITATION ON ISSUE PRICE The Bonds may not be reoffered to produce a net premium associated with the Bonds in excess of 5.00% of the par value of the Bonds. If the Bonds are so reoffered they are invalid. Net premium is defined to be equal to the difference between the par amount of the Bonds and the issue price of the Bonds as determined pursuant to United States Treasury Regulations. The City will issue the Bonds subject to the requirement that the Bonds are not reoffered to produce a net premium associated with the Bonds in excess of 5.00% of the par value of the Bonds. RATINGS Fitch Ratings ( Fitch ), Moody s Investors Service ( Moody s ) and Standard & Poor s Ratings Services ( S&P ) have assigned the ratings of AAA, Aaa and AAA, respectively, on the Bonds. Such ratings reflect only the respective views of Fitch, Moody s and S&P. An explanation of the significance of the rating given by Fitch may be obtained at One State Street Plaza, New York, New York An explanation of the significance of the rating given by Moody s may be obtained at 7 World Trade Center at 250 Greenwich Street, New York, New York An explanation of the significance of the rating given by S&P may be obtained at 55 Water Street, New York, New York The City furnished to the rating agencies certain information and materials, some of which may not have been included in this Official 5

12 Statement. Generally, rating agencies base their ratings on such information and materials and on their own investigation, studies and assumptions. There is no assurance that the ratings will continue for any given period of time or that the respective ratings will not be revised downward or withdrawn entirely by Fitch, Moody s or S&P, if in their respective judgments circumstances so warrant. Any downward revision or withdrawal of a rating may have an adverse effect on the market price of the Bonds. The City expects to furnish the rating agencies with information and materials that they may request. The City, however, assumes no obligation to furnish requested information and materials, and may issue debt for which a rating is not requested. Failure to furnish requested information and materials, or the issuance of debt for which a rating is not requested, may result in the suspension or withdrawal of a rating on the Bonds. CERTIFICATION CONCERNING OFFICIAL STATEMENT The closing documents will include a certificate confirming, that, to the best knowledge, information and belief of the City Treasurer of the City, the description and statements contained in this Official Statement were at the time of the sale, and at the time of closing, true, correct and complete in all material respects and did not and do not contain an untrue statement of a material fact or omit a material fact required to be stated therein in order to make the statements, in light of the circumstances under which they were made, not misleading. In the event this Official Statement is supplemented or amended, the foregoing confirmation will also encompass such supplements or amendments. CONTINUING DISCLOSURE CERTIFICATE The City will covenant for the benefit of the owners of the Bonds to provide certain financial information and operating data relating to the City by not later than January 31 in each year commencing January 31, 2013 (the Annual Reports ), and to provide notices of the occurrence of certain enumerated events as set forth in APPENDIX F (the Notices ). The Annual Reports and the Notices and any other documentation or information required to be filed by such covenants will be filed by the City with the Municipal Securities Rulemaking Board (the MSRB ) through the MSRB s EMMA system, all as described in APPENDIX F: FORM OF CONTINUING DISCLOSURE CERTIFICATE. The specific nature of the information to be contained in the Annual Report and the Notices is set forth in APPENDIX F. These covenants will be made in order to assist the original purchaser of the Bonds in complying with the Securities and Exchange Commission Rule 15c2-12 (the Rule ). The form of the undertaking which describes the content of the Annual Reports and the Notices and method of their dissemination is included as APPENDIX F hereto. A failure by the City to comply with these covenants must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Also pursuant to Arizona law, the ability of the City to comply with such covenants is subject to annual appropriation of funds sufficient to provide for the costs of compliance with such covenants. Should the City not comply with such covenants due to a failure to appropriate for such purpose, the City has covenanted to provide notice of such failure in the same way it does the Notices. Absence of continued disclosure, due to non-appropriation in or otherwise, may adversely affect the transferability and liquidity of the Bonds and their market price. The City has complied in all material respects with all of its previous continuing disclosure undertakings executed pursuant to the Rule. TAX EXEMPTION In the opinion of Bond Counsel, under existing laws, regulations, rulings and judicial decisions, and assuming compliance with certain restrictions, conditions and requirements by the City as described below, interest income on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of Arizona income taxes. The opinion of Bond Counsel will be dated as of the date of delivery of the Bonds. The form of such opinion is included as APPENDIX E attached hereto. 6

13 The Internal Revenue Code of 1986, as amended (the Code ), imposes various restrictions, conditions and requirements relating to the continued exclusion of interest income on the Bonds, from gross income for federal income tax purposes, including a requirement that the City rebate to the federal government certain of its investment earnings with respect to the Bonds. The City has covenanted to comply with the provisions of the Code relating to such matters. Failure to comply with such restrictions, conditions and requirements could result in the interest income on the Bonds being included in gross income for federal income tax purposes, under certain circumstances, from the date of issuance. The opinion of Bond Counsel assumes continuing compliance with such covenants. The Code also imposes an alternative minimum tax ( AMT ) upon certain corporations and individuals. A taxpayer s alternative minimum taxable income ( AMTI ) is its taxable income with certain adjustments. Interest income on the Bonds is not an item of tax preference to be included in the AMTI of individuals or corporations. Notwithstanding the preceding sentence, one of the adjustment items used in computing the AMTI of a corporation (with certain exceptions) is an amount equal to 75% of the excess (if any) of the corporation s adjusted current earnings over the corporation s AMTI for the taxable year (determined without regard to such adjustment for excess book income and the alternative tax net operating loss deduction). A corporation s adjusted current earnings includes all tax-exempt interest, including the interest on the Bonds. Although Bond Counsel will render an opinion that, as of the delivery of the Bonds, interest income on the Bonds is excluded from gross income for federal income tax purposes, the accrual or receipt of interest on the Bonds may otherwise affect a Beneficial Owner s federal tax liability. Certain taxpayers may experience other tax consequences. Taxpayers who become Beneficial Owners of the Bonds, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain subchapter S corporations, individuals who receive Social Security or Railroad Retirement benefits and taxpayers who have or are deemed to have incurred indebtedness to purchase or carry tax-exempt obligations, should consult their tax consultants as to the applicability of such tax consequences to the respective Beneficial Owner. The nature and extent of these other tax consequences will depend upon the Beneficial Owner s particular tax status and the Beneficial Owner s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. The Bonds will not be private activity bonds within the meaning of Section 141 of the Code. Under existing federal tax law, if the Bonds are determined to be invalid for failure to comply with a substantive or procedural requirement of local law, the Bonds will be deemed not to be an obligation of the City and interest on the Bonds will not be excludable from gross income for federal income tax purposes. The Bonds do not provide for an adjustment in interest rate or yield in the event of taxability, and an event of taxability does not cause an acceleration of the principal of the Bonds. Legislation affecting tax-exempt obligations is regularly considered by the United States Congress and may also be considered by the State legislature. Court proceedings may also be filed, the outcome of which could modify the tax treatment of obligations such as the Bonds. There can be no assurance that legislation enacted or proposed, or actions by a court, after the date of issuance of the Bonds will not have an adverse effect on the tax status of interest on the Bonds or the market value or marketability of the Bonds. These adverse effects could result, for example, from changes to federal or state income tax rates, changes in the structure of federal or state income taxes (including replacement with another type of tax), or repeal (or reduction in the benefit) of the exclusion of interest on the Bonds from gross income for federal or state income tax purposes for all or certain taxpayers. For example, on September 13, 2011, legislation proposed by President Obama called the American Jobs Act of 2011 was introduced into the Senate that could if enacted, among other things, result in additional federal income tax for tax years beginning after 2012 on taxpayers that own tax-exempt obligations, including the Bonds, if they have incomes above certain thresholds. 7

14 BOND PREMIUM The initial public offering price of the Bonds maturing on July1, 2018, July 1, 2020, July 1, 2021 and on July 1, 2026 through and including July 1, 2030 (collectively, the Premium Bonds ) is greater than the amount payable on such Bonds at maturity. An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that a substantial amount of the Premium Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes premium to the initial Beneficial Owner of such Premium Bonds. The basis for federal income tax purposes of a Premium Bond in the hands of such initial Beneficial Owner must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by an initial Beneficial Owner is determined by using such Beneficial Owner's yield to maturity. Beneficial Owners of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable bond premium with respect to the Premium Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning Premium Bonds. ORIGINAL ISSUE DISCOUNT The initial public offering price of the Bonds maturing on July 1, 2031 through and including July 1, 2034 (collectively, the Discount Bonds ), is less than the respective amounts payable at maturity. As a result, the Discount Bonds will be considered to be issued with original issue discount. The difference between the initial public offering price (the Issue Price ) of the Discount Bonds, and the amount payable at maturity or the payment date, as applicable, of the Discount Bonds will be treated as original issue discount. With respect to a Beneficial Owner who purchases a Discount Bond in the initial public offering at the Issue Price and who holds the Discount Bond to maturity or the payment date, as applicable, the full amount of original issue discount will constitute interest which is not includible in the gross income of the Beneficial Owner of the Discount Bond for federal income tax purposes and Arizona income tax purposes and that Beneficial Owner will not, under present federal income tax law and present Arizona income tax law, realize a taxable capital gain upon payment of the Discount Bond at maturity. The original issue discount on each of the Discount Bonds is treated for federal income tax purposes and Arizona income tax purposes as accreting daily over the term of such Discount Bond on the basis of a constant interest rate compounded at the end of each six-month period (or shorter period from the date of original issue) ending on January 1 and July 1 (with straight-line interpolation between compounding dates). The amount of original issue discount accreting each period will be added to the Beneficial Owner's tax basis for the Discount Bond. The adjusted tax basis will be used to determine taxable gain or loss upon disposition of the Discount Bond. An initial Beneficial Owner of a Discount Bond who disposes of the Discount Bond prior to maturity should consult his or her tax advisor as to the amount of the original issue discount accreted over the period held and the amount of taxable gain or loss upon the sale or disposition of the Discount Bond prior to maturity. The Code contains certain provisions relating to the accretion of original issue discount in the case of subsequent Beneficial Owners of the Discount Bonds. Beneficial Owners who do not purchase the Discount Bonds in the initial offering at the issue price should consult their own tax advisors with respect to the tax consequences of the ownership of Discount Bonds. A portion of the original issue discount that accretes in each year to a Beneficial Owner of a Discount Bond may result in certain collateral federal income tax consequences as described in TAX EXEMPTION herein. Beneficial Owners of Discount Bonds in states other than Arizona should consult their own tax advisors with respect to the state and local taxes. 8

15 FINANCIAL ADVISOR The Financial Advisor has been engaged by the City for the purpose of advising the City as to certain debt service structuring matters specific to the Bonds and on certain matters relative to the City s overall debt financing program. The Financial Advisor has assisted in the assembly and preparation of this Official Statement at the direction and on behalf of the City. No person is entitled to rely on the Financial Advisor s participation as an assumption of responsibility for, or an expression of opinion of any kind with regard to, the accuracy or completeness of the information contained herein. RELATIONSHIP BETWEEN PARTIES Bond Counsel has acted as bond counsel or represented the Financial Advisor in other financing transactions underwritten by the Financial Advisor and may do so in the future. CITY FINANCIAL STATEMENTS The financial statements of the City as of June 30, 2011, and for the fiscal year then ended, excerpts of which are included as APPENDIX D of this Official Statement, have been audited by LarsonAllen, LLP as stated in its report included in this APPENDIX D. The City neither requested nor obtained the consent of LarsonAllen, LLP to include their report and LarsonAllen, LLP has performed no procedures subsequent to rendering their opinion on the financial statements. These are the most recent audited financial statements of the City and may not represent the City s current financial position. CONCLUDING STATEMENT To the extent that any statements made in this Official Statement involve matters of opinion or estimates, whether or not expressly stated to be such, such opinions or estimates are made as such and not as representations of fact or certainty, and no representation is made that any of these statements have been or will be realized. Information in this Official Statement has been provided by the City from official and other sources and is believed by the City to be accurate and reliable. Information other than that obtained from official records of the City has not been independently confirmed or verified by the City, and its accuracy is not guaranteed. It is anticipated that CUSIP numbers will be placed on the Bonds, but neither the failure to print such numbers on any Bond nor any error with respect thereto will constitute cause for failure or refusal by the purchaser thereof to accept delivery of and pay for the Bonds in accordance with the terms of the sale. No CUSIP number will be deemed to be part of any Bond or of the contract evidenced thereby. Neither this Official Statement nor any statement that may have been or that may be made orally or in writing is to be construed as a part of a contract with the original purchasers or subsequent owners of the Bonds. All of the summaries of the opinions, contracts, agreements, financial and statistical data, and other related documents described in this Official Statement are made subject to the provisions of such documents. These summaries do not purport to be complete statements of such provisions and reference is made to such documents, copies of which are publicly available for inspection during normal business hours at the offices of the Financial Advisor in Phoenix, Arizona. This Official Statement has been prepared by the City and executed for and on behalf of the City by its officer indicated below. CITY OF SCOTTSDALE, ARIZONA By: /s/ David N. Smith City Treasurer 9

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17 CITY OF SCOTTSDALE, ARIZONA GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION APPENDIX A The City, the sixth largest in the State, is centrally located in Maricopa County, Arizona (the County ) and encompasses an area of approximately 185 square miles. The City is located in the northeastern portion of the Valley of the Sun and comprises part of the greater City of Phoenix, Arizona ( Phoenix ) metropolitan area, which is the economic, political and population center of the State. The City shares common boundaries with the incorporated communities of Phoenix, the City of Tempe ( Tempe ), Arizona, the Town of Paradise Valley, Arizona, ( Paradise Valley ), the Town of Fountain Hills, Arizona and the Town of Carefree, Arizona. The City was founded in the 1800s when retired Army Chaplain Major Winfield Scott homesteaded what is now the center of the City. The City was incorporated June 25, 1951 and the City Charter, pursuant to which it still operates, was adopted November 16, The City has grown from the 1985 special census population of 108,447 to 217,385, as registered in the 2010 Census. The following table illustrates the City s growth expressed by population statistics along with the population statistics for the County and the State. POPULATION STATISTICS City of Maricopa State of Population Scottsdale County Arizona 2010 Census 217,385 3,817,117 6,392, Census 202,705 3,072,149 5,130, Special Census 168,176 2,551,765 4,228, Census 1985 Special Census 130, ,447 2,122,101 1,837,956 3,665,339 3,187,000 Source: The Arizona Department of Economic Security, Research Administration Population and Statistical Unit and U.S. Census Bureau Municipal Government Organization The City operates pursuant to a Council/Manager form of government as provided by its Charter. The Mayor and six City Councilmembers are elected at large on a non-partisan ballot for four-year terms. The Council determines the duties and compensation of City officials and employees, and enacts ordinances and resolutions relating to City services, tax levies, appropriating and borrowing money, licensing and regulating businesses and trades and other municipal purposes. The City Council appoints the City Manager and City Treasurer. The City Manager is responsible for executing Council policies and administering City operations. The City Treasurer is responsible for the financial management of the City. The City government is responsible for furnishing basic municipal services. Primary services delivered by the City s approximately 2,500 fulltime and part-time, permanent employees include police, City courts, fire protection, parks and recreation, library, sanitation, water, sewer, building safety, public works and general administration. For fiscal year , the operating budget is $465.0 million and the total adopted budget, which includes the operating budget, grants and capital outlay expenditures, is $1.2 billion. A-1

18 Administrative Staff David E. Richert, City Manager David E. Richert was appointed City Manager by the City Council in May Mr. Richert had been serving as Acting City Manager since November Prior to that Mr. Richert was the City s executive director of Planning, Neighborhood and Transportation Services since joining the City in Before joining the City, he was a planner for Phoenix starting in 1972, becoming deputy planning director in 1985 and served as planning director from 1992 to From 2005 through spring 2008, he was senior executive assistant to the Phoenix city manager. Mr. Richert has a Master's degree in public administration from Arizona State University and a Bachelor's degree in landscape architecture from the University of Wisconsin at Madison. He is a graduate of the Senior Executive in State and Local Government Leadership Development Program at the John F. Kennedy School of Government at Harvard University. David N. Smith, City Treasurer David N. Smith joined the City in September 2009 as Interim City Treasurer and was appointed City Treasurer in June Prior to joining the City, he was the Chief Financial Officer of the National Passenger Rail Service (AMTRAK) and, previously, the Chief Financial Officer of the Tennessee Valley Authority (TVA). Mr. Smith earned an undergraduate degree in Business Administration and Accounting from Northwestern University and a Masters Degree in Finance from Northwestern University. He is a member of the American Institute and the Illinois Society of Certified Public Accountants and a member of the Financial Executive Institute. Lee Guillory, Bond & Finance Manager Lee Guillory started with the City in 2004 as Finance Manager. Prior to working for the City, she was employed at Arizona Public Service as a Finance Manager in treasury management and long-range planning. Ms. Guillory received a Bachelor of Science degree in Finance and a post-baccalaureate certificate in Accounting from Arizona State University and a Masters degree in Business Administration from Western International University. Economy The economy of the City is based on high technology-oriented manufacturing, corporate/regional headquarters, biomedical services, tourism, and commerce. Employment reports of the Arizona Department of Economic Security indicate that, on average, 188,488 City citizens were employed in the labor force during Employment and Employers The City has a diverse and rapidly growing employment base. According to SitesUSA, the City is a net importer of labor with a jobs/labor force ratio of 1.31:1 (as of 2009). Between 2000 and 2009 the number of jobs located in the City increased by approximately 48%, the population grew by approximately 14%, and the labor force grew by approximately 39%. Major sectors of the City s employment base include corporate/regional headquarters, high-tech manufacturing, biomedical services, financial services, research and development, tourism and retailing. Manufacturing is an important segment of the City s economy. City ordinances restrict heavy manufacturing and encourage clean industry. Manufacturing activity is concentrated in the Airpark. The Airpark is a fully planned facility designed to meet the needs of an employer with air transportation requirements. The Airpark features direct access to the Scottsdale Municipal Airport via taxiways that are incorporated into the Airpark design. The Airpark consists of approximately 2,900 acres and is home to both light industry and commercial offices. Nearly 2,800 businesses are located at the Airpark, employing A-2

19 over 40,000 people. This area is one of the three largest employment concentrations in the Phoenix metropolitan area. Since 2007, the pace of corporate relocations to the City has fluctuated. The following table shows the number of new companies and new jobs that have moved to the City over the last five fiscal years. Fiscal Year Number of New Businesses Number of New Jobs , , ,275 Source: City of Scottsdale, Arizona, Department of Economic Vitality. [Remainder of page intentionally left blank.] A-3

20 Following is a list of the City s largest employers. MAJOR EMPLOYERS (a) City of Scottsdale, Arizona Approximate Number of Employer Product/Service Employees Scottsdale Healthcare Corporation Healthcare 6,700 Mayo Clinic - Scottsdale (b) Healthcare 4,900 General Dynamics (c) Defense - Commercial/Industrial 3,600 Scottsdale Unified School District Education 3,126 City of Scottsdale, Arizona Government 2,500 Caremark Prescription benefit administrator 2,048 Go Daddy Web Hosting Services 1,915 The Vanguard Group Investment Management 1,899 Troon Golf LLC Golf course manager 1,539 Scottsdale Insurance Company Insurance 1,400 Fairmont Resort Resort 1,000 International Cruise & Excursions Travel Company 800 Dial Corporation Research and development 700 Desert Mountain Properties Golf course/community center 650 United Blood Services Blood services 647 Coventry Healthcare Heathcare 631 The Boulders Resort Resort 620 United States Postal Service Mail delivery services 595 Hyatt Regency at Gainey Ranch Resort 583 Nordstrom Department store 500 Yelp Online Review Site 500 JDA Software Group Software 451 Wal-mart Department store 450 Scottsdale Medical Imaging Healtchare 380 Taser Electronic Control Devices 355 (a) Data may not reflect recent layoffs or company restructuring. Neither the Financial Advisor or their respective agents or consultants have examined the information set forth in the table above for accuracy or completeness, nor do they assume responsibility for the same. (b) Includes all Mayo Clinic employees in Metro Phoenix. (c) Includes all employees that report to Scottsdale site. Source: City of Scottsdale, Arizona, Department of Economic Vitality. A-4

21 The City s diverse economic base is illustrated in the table below which outlines the employment structure NONFARM EMPLOYMENT STRUCTURE Phoenix Metropolitan Area (a) % of Total Employment (b) Mining and Construction 4.88 % 85,000 Information ,800 Manufacturing ,000 Trade, Transportation and Public Utilities ,800 Financial, Professional & Busniess Services ,400 Government ,800 Other Services ,700 Total % 1,742,500 (a) Data as of December (b) Total may not add due to rounding. Source: Arizona Department of Economic Security, Research Administration. The following table illustrates comparative unemployment averages for the United States of America, the State, the County, Phoenix and the City. AREA UNEMPLOYMENT AVERAGES Year United States State of Arizona Maricopa County City of Phoenix City of Scottsdale % 8.7% 8.2% 9.6% 6.2% Source: Arizona Department of Economic Security, Bureau of Information and Research Analysis, Labor Force Statistic Unit. A-5

22 Construction The following tables illustrate the value of building permits for residential and non-residential construction and new housing starts for the City. VALUE OF BUILDING PERMITS City of Scottsdale, Arizona (000 s omitted) Commercial Calendar and Year Residential Industrial Other Total 2011 (a) $64,833 $37,860 $8,948 $111, ,541 64,466 9, , ,952 55,252 20, , , ,881 16, , , ,985 44,316 1,131,204 (a) Data through 2 nd quarter of Source: Arizona State University, Polytechnic Campus. Note that the Polytechnic Campus obtains its data from County and municipal divisions that issue such permits. Construction is valued on the basis of estimated cost, not on market price or value of construction at the time the permit is issued. The year in which the permit is issued should not be construed as the year of construction. NEW HOUSING PERMITS City of Scottsdale, Arizona Calendar Year Total New Housing Starts 2011 (a) ,080 (a) Data through 2 nd quarter of Source: Arizona State University, Polytechnic Campus. Note that the Polytechnic Campus obtains its data from County and municipal divisions that issue such permits. The date on which the permit is issued is not to be construed as the date of construction. A-6

23 Tourism Tourism is an important contributor to the City s economy. Since 1995, a total of 8,695 hotel rooms have been added in the City and its surrounding market area, bringing the total room inventory to 15,345. The revenue per available room for the City and Paradise Valley market area was $ in 2009, reflecting the strength of the tourism industry the City. This figure is a slight decrease from the record high figure of $ in Numerous public and private golf courses and tennis courts and several country clubs also complement the area making it an attractive location for conventions. There are also many large annual events that attract visitors to the City each year, such as the Waste Management Phoenix Open, the Barrett-Jackson Auto Auction, San Francisco Giants spring training, the Arizona Diamondbacks and Colorado Rockies spring training and the Scottsdale All-Arabian Horse Show. Additionally, the City benefits from national events that occur in the greater Phoenix Metropolitan area such as the Fiesta Bowl, and the Insight Bowl. More than 4,000 retail shops, boutiques and galleries are located throughout the City and a selection of over 700 restaurants is available. These services, facilities, and events, together with the mild winter, have made the City a premier vacation area for tourists and winter visitors. The following table outlines the City s Bed Tax ( Transient Occupancy Tax ) collections for the last five fiscal years. BED TAX COLLECTIONS City of Scottsdale, Arizona (000 s omitted) Fiscal Year Amount Percent Change ( 1) (1) $13, % ,113 (6.12) ,577 (21.25) ,621 (1.05) , (1) The Transient Occupancy Tax was increased from 3.00% to 5.00% effective July 1, Source: City of Scottsdale, Arizona, Comprehensive Annual Financial Reports. Retail Retail trade has a significant impact on the City s economy. The Promenade, located at Frank Lloyd Wright Boulevard and Scottsdale Road, contains 750,000 square feet of primarily big box tenants, including the Great Indoors and Lowe s Hardware. Additionally, The Shops at Gainey Village in Gainey Ranch contains 135,000 square feet of upscale boutique retail and dining. The anchor of the City s retail sector continues to be Scottsdale Fashion Square Mall, which offers two million square feet of shopping, including major department store tenants Nordstrom, Neiman Marcus, Macy s, Barneys New York and the largest Dillard s in the nation. Other significant retail areas include the downtown area with over 200 shops and galleries consisting of 870,000 square feet and The Borgata and Hilton Village shopping centers, both featuring numerous boutique shops and restaurants. The Scottsdale Waterfront, a developed retail project situated alongside 1,800 linear feet of the Arizona Canal, has converted an aging shopping center in the heart of the City s downtown into a waterfront development. The result is a refined yet inviting community of shops, restaurants, cafes, offices, residential units and major retailers that attracts visitors from all over the State. A-7

24 TRANSACTION PRIVILEGE AND USE TAXES BY CATEGORY The City s Transaction Privilege and Use Tax is levied on persons conducting business activities within the City. The amount of tax due is calculated by applying the tax rate against the gross proceeds of sales or gross income derived from the following business activities: Advertising Amusements Construction Contracting Feed at Wholesale Hotel/Motel Jet Fuel Sales Job Printing Manufactured Buildings Mining Publishing Rental, Leasing and licensing for use of Real Property Rental, Leasing and licensing for use of Tangible Personal Property Restaurants and Bars Telecommunications Services Timber and Other Extractions Transporting for Hire Utility Services Wastewater Removal Services TRANSACTION PRIVILEGE AND USE TAX RECEIPTS City of Scottsdale, Arizona (000 s omitted) Transaction Privilege and Use Tax Receipts consists of Retail Sales (shown on the bottom of the page and consisting of automotive, food store, major department store, miscellaneous retail store and restaurant tax categories) and non-retail sales (construction, hotel/motel, rentals, utilities and other taxable activity categories). Fiscal Year Amount Percentage Change $130, % ,443 (9.28) ,380 (18.13) ,245 (4.89) , Source: City of Scottsdale, Arizona, Comprehensive Annual Financial Reports. RETAIL SALES TAX RECEIPTS City of Scottsdale, Arizona (000 s omitted) Retail sales consist of the automotive, food store, major department store, miscellaneous retail store and restaurant tax categories and are included in the Transaction Privilege and Use Tax Receipts shown above. The following chart illustrates retail sales tax receipts by the City for the previous five years. Fiscal Year Amount Percentage Change ( $72, % ( ,935 (0.81) ,509 (18.96) ,010 (6.82) , Source: City of Scottsdale, Arizona, Comprehensive Annual Financial Reports. A-8

25 Educational Facilities Several institutions of higher learning are available to City residents. Scottsdale Community College, part of the Maricopa County Community College System, located on the eastern border of the City, is a twoyear college which offers a wide variety of academic, occupational, developmental, and special interest programs. Located just south of the City, in Tempe, is Arizona State University, one of the major universities in the Southwest. Arizona State University offers its approximately 67,000 students, a choice of 12 colleges and has approximately 3,000 full-time faculty members. Arizona State University recently began to offer a Scottsdale MBA Program at the Airpark. The University of Phoenix also offers graduate and undergraduate programs within the City. The City is served by 25 public elementary and middle schools and 5 public high schools. Transportation The City has access to a number of transportation facilities including Interstates 10 and 17; United States Highways 60, 70, 80 and 89; State Highways 101, 202, 87 and 93; the main lines of the Southern Pacific Railroad, the Atchison, Topeka and Santa Fe Railroad; and a number of transcontinental interstate and intrastate truck lines. The Pima Freeway, representing a portion of State Highway 101, provides freeway connection within the City to Interstates 10 and 17 and State Highway 202. The City is served by two airports. Scottsdale Municipal Airport, owned and operated by the City, is located approximately nine miles north of the central business district. This airport provides both general aviation and regional commercial air service and offers an 8,250-foot paved lighted runway with two parallel taxiways and industrial park access. International, national, regional and local air service is also available at Phoenix Sky Harbor International Airport, the world s fifth busiest airport in operations and ninth busiest in passenger enplanements and deplanements, located approximately eight miles from the City. A-9

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27 APPENDIX B CITY OF SCOTTSDALE, ARIZONA FINANCIAL DATA (a) Current Bonded Indebtedness City of Scottsdale, Arizona 2011/12 Estimated Net Full Cash Valuation $ 45,335,478,712 (b) 2011/12 Net Primary Assessed Valuation $ 5,669,965, /12 Net Secondary Assessed Valuation 5,691,989,913 Net General Obligation Bonded Debt Outstanding $ 355,520,000 (c) Net Water and Sewer Bonded Debt Outstanding 350,535,000 (d) Net Municipal Property Corporation Bonded Debt Outstanding 123,925,000 (e)(f)(g) Net Scottsdale Preserve Authority Bonded Debt to be Outstanding 327,140,000 (h) Total Improvement District Bonded Debt Outstanding 1,500,000 Total Certificates of Participation Debt Outstanding 20,000,000 (a) (b) (c) (d) (e) (f) All figures of bonded indebtedness in this Appendix exclude principal amounts of bonds and certificates of participation that have been refunded with the proceeds of refunding obligations, but not yet paid. Debt service on such refunded bonds and certificates of participation is provided for by obligations issued by or guaranteed by the United States of America, which are held in irrevocable trusts for the benefit of the holders of such refunded bonds and certificates of participation. Estimated net full cash value is the total estimated market value of the property less unsecured personal property and less estimated exempt property within the City, as projected by the Arizona Department of Revenue, Division of Property and Special Taxes. Excludes the Preserve Excise Tax Supported GO Bonds. Includes $308,525,000 in aggregate principal amount of the City of Scottsdale Municipal Property Corporation ( MPC ) Excise Tax Revenue Bonds, Series 2004, 2005-E, 2006, 2008-A and 2010 (collectively, the Water and Sewer Revenue Supported MPC Bonds ). The City is paying and intends to continue to pay amounts representing debt service on the Water and Sewer Revenue Supported MPC Bonds from revenues of the Water and Sewer Fund. In the event that these revenues prove insufficient to pay the contemplated portions of amounts due for debt service on the Water and Sewer Revenue Supported MPC Bonds, or if the City decides not to pay such amounts from revenues of the Water and Sewer Fund, amounts due for debt service on the Water and Sewer Revenue Supported MPC Bonds will then be paid from Excise Taxes. See also footnote (a) on the table entitled MPC BONDED INDEBTEDNESS MPC Bonded Debt Outstanding City of Scottsdale, Arizona herein. The MPC issued $1,266, Capital Appreciation Excise Tax Revenue Bonds, Series 2005-B (the 2005-B Excise Tax Revenue Bonds ) and $13,209, Convertible Capital Appreciation Excise Tax Revenue Bonds, Series 2005-C (the 2005-C Excise Tax Revenue Bonds ) as capital appreciation bonds. For Generally Accepted Accounting Principles ( GAAP ) financial statement reporting purposes, the accretion of capital appreciation bonds is added to the principal balance outstanding. The accreted value of the 2005-B Excise Tax Revenue Bonds as of July 1, 2011 was $823, The accreted value of the 2005-C Excise Tax Revenue Bonds as of July 1, 2011 was $17,241, See also the table entitled MPC BONDED INDEBTEDNESS MPC Bonded Debt Outstanding City of Scottsdale, Arizona herein. Excludes $308,525,000 in aggregate principal of the Water and Sewer Revenue Supported MPC Bonds. See the table entitled MPC BONDED INDEBTEDNESS MPC Bonded Debt Outstanding City of Scottsdale, Arizona herein. B-1

28 (g) (h) Excludes $23,534, in aggregate principal of the Series 2005 A MPC Excise Tax Revenue Bonds, 2005 B MPC Excise Tax Revenue Bonds and 2005 C MPC Excise Tax Revenue Bonds (collectively, the Authority Payment Supported MPC Bonds ). The City intends to pay amounts representing debt service on the Authority Payment Supported MPC Bonds from payments provided by the Arizona Sports and Tourism Authority (the Authority ). Pursuant to an Intergovernmental Agreement dated March 25, 2005, between the City and the Authority, the Authority has agreed to fund project costs in aggregate payments totaling $34,002, (the Authority Payments ). The schedule of the payments to be made by the Authority are based on estimates of future Authority revenues which may not be realized. In the event that these revenues prove insufficient to pay the contemplated portions of amounts due for debt service on the Authority Payment Supported MPC Bonds, or if the City decides not to pay such amounts from payments from the Authority, amounts due for debt service on the Authority Payment Supported MPC Bonds will then be paid from Excise Taxes. See the table entitled MPC BONDED INDEBTEDNESS MPC Bonded Debt Outstanding City of Scottsdale, Arizona herein. Includes Preserve Excise Tax Supported GO Bonds. See footnotes (b) and (c) of GENERAL OBLIGATION BONDED INDEBTEDNESS Net Direct General Obligation Bonded Debt Outstanding City of Scottsdale, Arizona herein for further discussion regarding the calculation of general obligation debt. See the table entitled SCOTTSDALE PRESERVE AUTHORITY BONDED INDEBTEDNESS SPA Bonded Debt Outstanding and to Be Outstanding City of Scottsdale, Arizona herein. [Remainder of page intentionally left blank.] B-2

29 GENERAL OBLIGATION BONDED INDEBTEDNESS Net Direct General Obligation Bonded Debt Outstanding City of Scottsdale, Arizona Original Original Principal Principal Issue Principal Maturity Balance Series Purpose Amount Dates Outstanding 1997 Refunding $ 19,900, /14 $ 3,795, Refunding 72,000, /19 32,330, Refunding 16,265, /13 2,710, Various Purpose and Preservation 113,400, /25 100,200,000 Land Acquisition, Projects of 1999 and Refunding 74,630, /24 74,630, Projects of 2000 and ,000, /24 125,550, Projects of 2000 and ,000, /30,34 118,675, Projects of ,800, /30 49,850, Projects of ,525, /34 22,525, Refunding 43,115, /24 42,475,000 Total Direct General Obligation Bonded Debt Outstanding $ 572,740,000 Plus: The Bonds 50,000,000 Less: Preserve Excise Tax Supported GO Bonds (267,220,000) (a) Net Direct General Obligation Bonded Outstanding $ 355,520,000 (a) The City is paying and intends to continue to pay amounts representing general obligation debt service on the Preserve Excise Tax Supported GO Bonds, including the Bonds, from Preserve Excise Tax collections. In the event that these revenues from the Preserve Excise Taxes prove insufficient to pay amounts due for debt service on these general obligation bonds, or if the City decides not to pay such amounts from revenues of the Preserve Excise Taxes, amounts due for debt service on Preserve Excise Tax Supported GO Bonds will then be paid from ad valorem taxes. B-3

30 Direct General Obligation Bonded Debt, Legal Limitation and Unused Borrowing Capacity City of Scottsdale, Arizona The Arizona Constitution provides that the general obligation bonded indebtedness for a city for general municipal purposes may not exceed six percent (6%) of the secondary assessed valuation of the taxable property in that city. In addition to the six percent (6%) limitation for general municipal purpose bonds, cities may issue general obligation bonds in an amount up to an additional twenty percent (20%) of the secondary assessed valuation for supplying such city with water, artificial light or sewers, and for the acquisition and development of land for open space preserves, parks, playgrounds and recreational facilities, public safety, law enforcement, fire and emergency services facilities and streets and transportation facilities. General Municipal Purpose Bonds Water, Light, Sewer, Open Space, Public Safety, Transportation, Law Enforcement, Fire and Emergency Services and Park Bonds Total 6% General Obligation $ 341,519,394 Total 20% General Obligation $ 1,138,397,982 Bonding Capacity Bonding Capacity Less: 6% General Obligation Less: 20% General Obligation Bonds Outstanding (74,250,000) (a) Bonds Outstanding (548,490,000) (a)(b) Unused 6% General Obligation Unused 20% General Obligation Bonding Capacity $ 267,269,394 (a) Bonding Capacity $ 589,907,982 (a)(b) (a) Voters in November 2006 approved an amendment to the State Constitution allowing debt issued for streets, transportation facilities and public safety purposes, to be included in the 20% debt limit rather than the 6% debt limit. The outstanding indebtedness reflects $50,000,000 principal amount of bonds issued for such purposes since 2006 and the principal amount of the Bonds in the 20% debt category. (b) Includes the Bonds. [Remainder of page intentionally left blank.] B-4

31 Net Direct and Overlapping General Obligation Bonded Debt City of Scottsdale, Arizona Fiscal Year Net General Proportion Allocable to City Obligation of Scottsdale (a) Bonded Approximate Net Debt Debt (b) Percent Amount State of Arizona None % None Maricopa County None None Maricopa County Community College District $ 671,250, $ 97,084,566 Maricopa County Library District None None Maricopa County Fire District None None Maricopa County Flood Control District None None Central Arizona Water Conservation District None None Tempe Elementary School District No ,200, Balsz Elementary School District No. 31 4,185, ,590 Scottsdale Unified School District No ,050, ,968,338 Paradise Valley Unified School District No ,465, ,395,146 Cave Creek Unified School District No ,900, ,079,250 Fountain Hills Unified School District No ,745, ,099 Phoenix Union High School District No ,430, ,116 Tempe Union High School District No ,560, East Valley Institute of Technology District No. 401 None None Western Maricopa Education Center District None None Scottsdale Mountain Community Facilities District 2,640, ,640,000 McDowell Mountain Ranch Community Facilities District 12,430, ,430,000 DC Ranch Community Facilities District 15,660, ,660,000 Via Linda Road Community Facilities District 2,320, ,320,000 Scottsdale Waterfont Community Facilities District 3,695, ,695,000 City of Scottsdale 355,520,000 (c) ,520,000 Total Net Direct and Overlapping General Obligation Bonded Debt $ 757,215,617 (a) Proportion applicable to the City is computed on the ratio of secondary assessed valuation for the overlapping jurisdiction within the City to the total secondary assessed valuation of the overlapping jurisdiction. Does not include the obligation of the Central Arizona Water Conservation District ( CAWCD ) to the United States of America, Department of the Interior, for repayment of certain capital costs for construction of the Central Arizona Project ( CAP ), a major reclamation project that has been substantially completed by the Department of the Interior. The obligation is evidenced by a master contract between CAWCD and the Department of the Interior. In April of 2003, the United States and CAWCD agreed to settle litigation over the amount of the construction cost repayment obligation, the amount of the respective obligations for payment of the operation, maintenance and replacement costs and the application of certain revenues and credits against such obligations and costs. Under the agreement, CAWCD s obligation for substantially all of the CAP features that have been constructed so far will be set at $1.646 billion, which amount assumes (but does not mandate) that the United States will acquire a total of 667,724 acre feet of CAP water for federal purposes. The United States will complete unfinished CAP construction work related to the water supply system and regulatory storage stages of CAP at no additional cost to CAWCD. Of the $1.646 billion repayment obligation, 73% will B-5

32 be interest bearing and the remaining 27% will be non-interest bearing. These percentages will be fixed for the entire 50-year repayment period, which commenced October l, Effectiveness of the agreement is subject to a number of conditions including settlement of certain Indian community water claims and other water claims and will require certain State of Arizona legislation. Federal enabling legislation was passed in If the conditions are not met by May 9, 2012, and the parties do not amend the agreement, the agreement will terminate and litigation will resume. If it appears prior to May 9, 2012, that the conditions will not be met by the deadline, the parties can amend the agreement or either party may petition the U.S. District Court to terminate the agreement and resume litigation. It is not possible to predict whether the agreement will become finally effective, be amended, or terminate, or whether litigation will resume. If litigation resumes, it is not possible to predict the outcome of such litigation. CAWCD is a water conservation district having boundaries coterminous with the exterior boundaries of Maricopa, Pima and Pinal Counties. It was formed for the express purpose of paying administrative costs and expenses of the CAP and to assist in the repayment to the United States of the CAP capital costs. Repayment will be made from a combination of power revenues, subcontract revenues (i.e., agreements with municipal, industrial and agricultural water users for delivery of CAP water) and a tax levy against all taxable property within CAWCD s boundaries. At the date of this Official Statement, the tax levy is limited to fourteen cents per $100 of secondary assessed valuation, of which ten cents is being currently levied. (See Arizona Revised Statutes, Sections and ) There can be no assurance that such levy limit will not be increased or removed at any time during the life of the contract. (b) Includes total general obligation bonds outstanding, less estimated funds irrevocably pledged for the redemption of general obligations. Does not include presently authorized but unissued general obligation bonds of such jurisdictions listed herein, which may be issued in the future: General Obligation Bonds Overlapping Jurisdiction Authorized but Unissued Maricopa County Community College District $151,093,000 Tempe Elementary School District No. 3 37,560,000 Balsz Elementary School District No ,000,000 Scottsdale Unified School district No. 48 None Paradise Valley Unified School District No ,000,000 Cave Creek Unified School District No. 93 None Fountain Hills Unified School District No. 98 None Phoenix Union High School District No ,000,000 Tempe Union High School District No. 213 None East Valley Institute of Technology District No. 410 None Scottsdale Mountain Community Facilities District 1,550,000 McDowell Mountain Ranch Community Facilities District 1,140,000 DC Ranch Community Facilities District None Via Linda Road Community Facilities District 275,000 Scottsdale Waterfront Community Facilities District 5,195,000 City of Scottsdale, Arizona 6,400,000 (1) (1) Excludes $387,475,000 of authorized but unissued general obligation bonds that if issued, would be supported from collections of Preserve Excise Taxes. (c) Excludes Preserve Excise Tax Supported GO Bonds. See footnote (a) on the table entitled GENERAL OBLIGATION BONDED INDEBTEDNESS Net Direct General Obligation Bonded Debt Outstanding. Source: County Department of Finance and individual entities. B-6

33 Direct and Overlapping General Obligation Bonded Debt Ratios City of Scottsdale, Arizona Per Capita As a Percentage of Bonded Debt Total Population Secondary Estimated Estimated Assessed Net 217,385 (a) Valuation Cash Value Net Direct General Obligation Bonded Debt Outstanding ($355,520,000) (b) $1, % 0.78% Total Direct and Overlapping General Obligation Bonded Debt Outstanding ($757,215,617) (b) $3, % 1.67% (a) Population as of 2010 Census. (b) Excludes Preserve Excise Tax Supported GO Bonds. See footnote (a) on the table entitled GENERAL OBLIGATION BONDED INDEBTEDNESS Net Direct General Obligation Bonded Debt Outstanding. WATER AND SEWER REVENUE BONDED INDEBTEDNESS Water and Sewer Revenue Bonded Debt Outstanding City of Scottsdale, Arizona Original Original Principal Principal Issue Principal Maturity Balance Series Purpose Amount Dates Outstanding 2004 Refunding $18,880, /16 $8,945, Refunding 35,290, /23 33,065,000 Total Water and Sewer Revenue Bonded Debt Outstanding $42,010,000 Plus: Water and Sewer Revenue Supported MPC Bonds (a) 308,525,000 Net Water and Sewer Revenue Bonded Debt Outstanding $350,535,000 (a) Includes $308,525,000 in aggregate principal amount of the Water and Sewer Revenue Supported MPC Bonds. The City is paying and intends to continue to pay amounts representing debt service on the Water and Sewer Revenue Supported MPC Bonds from revenues of the Water and Sewer Fund. In the event that these revenues prove insufficient to pay the contemplated portions of amounts due for debt service on the Water and Sewer Revenue Supported MPC Bonds, or if the City decides not to pay such amounts from revenues of the Water and Sewer Fund, amounts due for debt service on the Water and Sewer Revenue Supported MPC Bonds will then be paid from the City s excise taxes. B-7

34 CERTIFICATES OF PARTICIPATION INDEBTEDNESS Certificates of Participation Debt Outstanding City of Scottsdale, Arizona Original Original Principal Principal Issue Principal Maturity Balance Series Purpose Amount Dates Outstanding 2010 Acquisition and improvements on Emergency Communication Equipment $ 20,000, /20 $ 20,000,000 Total Certificates of Participation Debt Outstanding $ 20,000,000 MPC BONDED INDEBTEDNESS The MPC is a nonprofit corporation formed to assist the City in financing the acquisition and construction of certain municipal facilities and structures on behalf of the City. As such, the MPC has entered into certain agreements with the City, pursuant to which the City has agreed to make lease or installment payments to the MPC in amounts sufficient to pay principal of and interest on bonds issued by the MPC to finance various capital facilities. The City may make such payments from Excise Taxes, which in fiscal year were $168,549,000 and in fiscal year were $170,638,000. All of the agreements between the MPC and the City specifically provide that no ad valorem taxes of the City can be used to make the payments required pursuant thereto unless budgeted for that purpose in a particular fiscal year. [Remainder of page intentionally left blank.] B-8

35 MPC Bonded Debt Outstanding City of Scottsdale, Arizona Original Original Principal Principal Issue Principal Maturity Balance Series Purpose Amount Dates Outstanding 2004 Various Purpose (a) $75,000, /24 $10,260, A ASU/City/Center for New 40,760, /34 7,915,000 Technology & Innovation 2005A,B&C Scottsdale Stadium and Indian 19,945, /21 23,534,614 School Park Improvements (b) (c) 2005D&E TPC/ WestWorld Land Acq. and 134,860, /35 33,405,000 W&S Improvement Project (a) 2006A&B TPC Improvements Project and 42,500, /27 41,085,000 Westworld Land Acquisition 2006 REF Refunding Bonds (a) 165,960, /34 165,960, A W&S Improvement Project (a) 105,875, /32 98,825, W&S Improvement Project (a) 75,000, /30,33,36 75,000,000 Total MPC Bonded Debt Outstanding $455,984,614 Less: Water and Sewer Revenue Supported MPC Bonds (a) (308,525,000) Less: Authority Payment Supported MPC Bonds (c) (23,534,614) Net MPC Bonded Debt Outstanding $123,925,000 (a) The City is paying and intends to continue to pay amounts representing debt service on the Water and Sewer Revenue Supported MPC Bonds from the Water and Sewer Fund. In the event that these revenues prove insufficient to pay the contemplated portions of amounts due for debt service on Water and Sewer Revenue Supported MPC Bonds, or if the City decides not to pay such amounts from revenues of the Water and Sewer Fund, amounts due for debt service on the Water and Sewer Revenue Supported MPC Bonds will then be paid from Excise Taxes. (b) For these capital appreciation bonds the original principal amount shown is the final maturity value and includes the initial issuance value of $19,945, See also footnote (e) under the table entitled Current Bonded Indebtedness City of Scottsdale, Arizona herein. (c) The City intends to pay amounts representing debt service on the Authority Payment Supported MPC Bonds from payments provided by the Authority. Pursuant to an Intergovernmental Agreement dated March 25, 2005, between the City and the Authority, the Authority has agreed to fund project costs in aggregate payments totaling $34,002, The schedule of the payments to be made by the Authority are based on estimates of future Authority revenues which may not be realized. In the event that these revenues prove insufficient to pay the contemplated portions of amounts due for debt service on the Authority Payment Supported MPC Bonds, or if the City decides not to pay such amounts from payments from the Authority, amounts due for debt service on the Authority Payment Supported MPC Bonds will then be paid from Excise Taxes. B-9

36 SCOTTSDALE PRESERVE AUTHORITY BONDED INDEBTEDNESS The Scottsdale Preserve Authority (the SPA ) is a nonprofit corporation formed pursuant to the Arizona Nonprofit Corporation Act Title 10, Chapter 24 for the purpose of acquiring land, on behalf of the City, for the Preserve. As such, the SPA has entered into certain agreements with the City pursuant to which the City has agreed to make payments to the SPA in amounts sufficient to pay principal of and interest on bonds issued by the SPA for such purpose and to pay other related costs. The City makes and intends to continue to make such payments from collections of the the Preserve Excise Taxes. The City s agreements with the SPA specifically provide that no ad valorem property taxes of the City can be used to make the payments unless budgeted for that purpose in a particular fiscal year. SPA Bonded Debt Outstanding and to be Outstanding City of Scottsdale, Arizona Original Original Principal Principal Issue Principal Maturity Balance Series Purpose Amount Dates Outstanding 2004 Refunding $ 22,925, /16 $ 15,050, Refunding 32,855, /24 32,855, Refunding 12,015, /22 12,015,000 Total SPA Bonded Debt Outstanding $ 59,920,000 Plus: Preserve Excise Tax Supported GO Bonds (a) 267,220,000 Net SPA Bonded Debt Outstanding and to be Outstanding $ 327,140,000 (a) Represents the Preserve Excise Tax Supported GO Bonds. See footnote (a) on the table entitled GENERAL OBLIGATION BONDED INDEBTEDNESS Net Direct General Obligation Bonded Debt Outstanding. Includes the Bonds. IMPROVEMENT DISTRICT BONDED INDEBTEDNESS Public improvements that benefit local areas within the City may be financed through the creation of improvement districts. The cost of the improvements is assessed against the properties benefited, and the assessment becomes a lien upon the property. Bonds payable from installments paid by the property owners may also be issued. If the installments are not paid by the property owner when due, an auction sale of the property is conducted. If there is no other purchaser for a property offered for sale, the City is required by law to be the purchaser, and, after expiration of the time provided by law for the prior owner to redeem the property, the City may sell the property to reimburse itself for any amount paid for the property. The table on the following page lists the bonds outstanding with respect to improvement districts within the City. B-10

37 Improvement District Bonded Debt Outstanding City of Scottsdale, Arizona Original Original Principal Principal Issue Principal Maturity Balance Series Purpose Amount Dates Outstanding 2001 Bell Road II ID No. I-0101 $7,500, /13 $1,500,000 Total Improvement District Bonded Debt Outstanding $1,500,000 Source: City of Scottsdale, Arizona, Finance and Accounting Division. Short-Term Indebtedness OTHER INDEBTEDNESS The City has no short-term indebtedness other than that normally occurring such as accounts payable, accrued payroll and other related expenses and has current revenues available for the payment thereof. Other Contracts and Leases The City has entered into various long-term contracts, pursuant to which $14,582,242 was outstanding as of June 30, These contracts represent the acquisition of items such as City buildings, water system facilities, undergrounding of power lines and economic development contracts. These agreements are subject to annual appropriation from the City s general, enterprise, and special assessment debt service funds. The City also has various sales tax agreements in which the City s payments are contingent upon the sales taxes generated on the sites. Pension and Other Post-Employment Benefits All full-time employees of the City, except public safety personnel, participate in the Arizona State Retirement System (the ASRS ), a multiple-employer cost sharing pension plan. All public safety personnel participate in the Public Safety Personnel Retirement System (the PSPRS ), which is an agent multiple-employer pension plan. The Mayor and Council participate in the Elected Officials Retirement Plan (the EORP ), a multiple-employer cost sharing pension plan. All three pension plans are administered by the State. For Fiscal Year 2010/11 the City s contribution rate to the ASRS was 9.60%, to the PSPRS was 18.96% for police and 10.05% for fire, and to the EORP was 29.79%. The board of the ASRS has adopted the contribution rates for fiscal year 2012 and For the year ended June 30, 2012, active plan members were required by statute to contribute at the actuarially determined rate of % of the members annual covered payroll. The City was required by statute to contribute at the actuarially determined rate of % of the members annual covered payroll. For fiscal year 2012 (starting July 1, 2012) the rate will increase to 10.48% for the City and increase to 11.81% for employees, with additional increases currently scheduled through fiscal year For fiscal year 2012, the City s contribution rate to the PSPRS is 20.5% for police and 10.4% for fire, and to the EORP is 32.99%. Recently enacted State legislation also made changes to how the ASRS operates, which includes, effective July 1, 2011, requiring employers to pay an alternative contribution rate for retired ASRS employees that return to work, changing the age at which an employee can retire without penalty based upon years of service, limiting permanent increases in retirement benefits and establishing a Defined Contribution and Retirement Study Committee (as defined in the legislation) that will review the feasibility and cost to changing the current defined benefit plan to a defined contribution plan. B-11

38 The contribution split to ASRS effective July 1, 2011 (explained above) is being challenged by the Arizona Education Association, the American Federation of State, County and Municipal Employees, and the American Federation of Teachers. These groups filed a lawsuit on July 14, 2011 on behalf of seven plaintiffs alleging that the shift in contribution levels cannot be applied to employees who are already participating in the System under a theory that it violates the Arizona Constitution and contract law. It is not possible to know the outcome of such litigation or the impact such litigation may have on the City. The ASRS has reported increases in its unfunded liabilities. The most recent annual reports for the ASRS may be accessed at: The effect of the increase in the ASRS unfunded liabilities on the City, or on the City s and its employees future annual contributions to the ASRS, are projected to increase to 11.50% for the defined benefit pension plan by The PSPRS has reported increases in its unfunded liabilities. The most recent annual reports for the PSPRS may be accessed at: The effect of the increase in the PSPRS s unfunded liabilities on the City, or on the City s and its employees future annual contributions to the PSPRS, is projected to increase approximately 1.79%, in the aggregate, on the total payroll in Fiscal Year 2011/12. The EORP has reported increases in its unfunded liabilities. The most recent annual reports for the EORP may be accessed at: The effect of the increase in the EORP s unfunded liabilities on the City, or on the City s and its employees future annual contributions to the EORP, are forecasted to increase over the next several years. See Note G of the City s audited financial statements for fiscal year ended June 30, 2011 presented in APPENDIX D for more information concerning the City s obligations to the ASRS, PSPRS and EORP. Beginning with the Fiscal Year that commenced on July 1, 2007, the City was required to implement the requirements of GASB 45, Accounting by Employers for Other Postemployment Benefits, which required the City to report the actuarially accrued cost of its other post employment benefits liabilities other than pensions, such as health insurance for current and future retirees ( OPEB ). GASB 45 requires that such benefits be recognized as current costs over the working lifetime of employees, and, to the extent such costs are not prefunded, GASB 45 requires the reporting of such costs as a financial statement liability. Under GASB 45, the City is required to commission an actuarial valuation of its OPEB costs every two years. City contributions to OPEB costs that are less than an actuarially determined annual required contribution will result in a net OPEB cost, which under GASB 45 will be required to be recorded as a liability in the City s financial statements. Upon retirement, employees may choose to remain on the City s medical plan through the age of 65 but the retiree is responsible for paying health care premiums which, in turn, are established to equal 100% of estimated program costs for the retiree group. The implied subsidy for the retiree health care (program costs in excess of program premiums) is the City s post employment benefit obligation and as of June 30, 2011 was $423,000. In addition, for the majority of future retirees, if the retiree has 300 or more hours of accumulated unused medical leave, the value of the sick leave will be placed in a Retirement Health Savings (RHS) Account and may be used to pay for health care premiums or other medically necessitated costs. Prior to the Retirement Health Savings Account program a retiree who had 300 or more hours of accumulated medical leave would have the value of the sick leave placed in a Medical Leave Conversion account to be used to pay for City of Scottsdale health care premiums only. The actual liability for retirees, as of June 30, 2011 for the Medical Leave Conversion program was $752,322. The actuarial accrued liability to establish future Retirement Health Savings accounts for active employees, as of June 30, 2011 was $14,826,981. See Note H and I of the City s audited financial statements for the fiscal year ended June 30, 2011 presented in APPENDIX D for more information concerning the City s medical leave conversion program and the postemployment healthcare benefits. For a description of the City s pension and other post-employment benefit obligations see Notes G, H and I in APPENDIX D CITY OF SCOTTSDALE, ARIZONA EXCERPTS OF THE AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Notes to the Financial Statements Section V Other Information. B-12

39 PROPERTY TAXES Tax Years The Arizona tax year has been defined as the calendar year notwithstanding the fact that tax procedures, as explained below, begin prior to January 1 of the calendar year and continue through May of the succeeding calendar year. The tax lien attaches to the real property as of January 1 of the tax year in question. Ad Valorem Taxes The State has two different valuation bases for levying ad valorem property taxes. They are limited property and full cash values. Property valuations are established on most property by the individual county assessors, with the Arizona Department of Revenue determining the valuations of centrally assessed properties such as gas, water and electric utilities, pipelines, mines, local and long distance telephone companies and airline flight property. All property within the State, whether real or personal property is subject to property taxation unless specifically exempted by law. Full cash value is statutorily defined to mean that value determined as prescribed by statute or if no statutory method is prescribed it is synonymous with market value. Market value means that estimate of value that is derived annually by use of standard appraisal methods and techniques, which generally include the market approach, the cost approach and the income approach. As a general matter, the various county assessors use a cost approach for commercial/industrial property and a sales data approach for residential property. Arizona law allows taxpayers to appeal the county assessor s valuations by providing evidence of a lower value, which may be based upon another valuation approach. County assessors, upon meeting certain conditions, may value residential, agricultural and vacant land at the same full cash valuation for up to three years. The County Assessor currently values existing properties on a two-year cycle. Arizona law provides for a property valuation freeze for certain residential property owners 65 years of age and older. Owners of residential property may obtain such freezes against valuation increases (the Property Valuation Protection Option ) if the owner s total income from all sources does not exceed 400% (500% for two or more owners of the same property) of the Social Security Income Benefit Rate. The Property Valuation Protection Option must be renewed every three years. If the property is sold to a person who does not qualify, the valuation reverts to its current full cash value. Any freeze on increases in full cash value will translate to the secondary assessed value of the affected property hereinafter described. Additionally, all property, both real and personal, is assigned a classification to determine its assessed valuation for tax purposes. Each legal classification is defined by property use and has an assessment ratio (a percentage factor), which is multiplied by the limited or full cash values of the property to obtain the primary or secondary assessed valuations, respectively. B-13

40 The assessment ratios utilized over the five-year period for each class are set forth below: PROPERTY TAX ASSESSMENT RATIOS Property Classification (a) Mining, Utility, Commercial and Industrial (b)(c) 23% 22% 21% 20% 20% Agriculture and Vacant Land (b)(c) Owner-Occupied Residential Leased or Rented Residential Railroad, Private Car Company and Airline Flight Property (d) (a) Several additional classes of property exist, but seldom amount to a significant portion of an entity s total valuation. (b) The first $68,079 of full cash value for commercial, industrial and agricultural personal property is not subject to taxation for tax year This exemption is indexed annually for inflation. Any portion of the full cash value in excess of those amounts will be assessed at the applicable rate. (c) Pursuant to recently enacted legislation, the assessment ratio for commercial and industrial property will be reduced to 19.5% for tax year 2013 and further reduced one-half of one percent for each year to 18% for 2016 and thereafter. The assessment ratio for agricultural and vacant property will be reduced to 15% for tax year 2016 and thereafter. From time to time, there are legislative proposals in the State, including proposals to reduce the assessment ratio for certain property, which, if enacted, could alter or amend the matters referred to above or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would adversely affect the market value of the obligations (including the Bonds). (d) The percentage is calculated annually based on the ratio of (i) the total assessed valuation of all mining, utility, commercial, industrial and military reuse zone properties, agricultural personal property and certain leasehold personal property to (ii) the total full cash value of such properties. Source: State and County Abstract of the Assessment Roll, Arizona Department of Revenue. B-14

41 Primary Taxes Taxes levied against the assessed limited property value (after application of the assessment ratio) are referred to as primary taxes, which are used for the maintenance and operation of counties, cities/towns, school districts, community college districts and the State. The State currently does not levy an ad valorem tax. With the exception of personal property (other than mobile homes) and utility, mining and producing oil, gas and geothermal property with limited values equal to full cash values, limited property value cannot exceed the full cash value and is derived statutorily using one of the following two procedures: (1) The limited property value for parcels in existence in the prior year that did not undergo modification through construction, destruction, split or change in use, is established at the previous year s limited property value increased by the greater of either 10% of last year s limited property value or 25% of the difference between last year s limited property value and the current year s full cash value. (2) The limited property value for property that was omitted from the tax roll in the prior year, that underwent a change in use or modification through construction, destruction or demolition or that has been split, subdivided or consolidated, is established at a level or percentage of the limited property value to full cash value of existing properties of the same use or legal classification. The aggregate of the primary taxes levied by a county, city, town and community college district is constitutionally limited to a maximum increase of two percent (2%) over the prior year s levy limit plus any taxes on property not subject to tax in the preceding year (e.g., new construction and property brought into the jurisdiction because of annexation). In November 2006, the maximum allowable primary property tax levy limit was rebased to the amount of actual 2005 primary property taxes levied (plus amounts levied against property not subject to taxation in prior years). The two percent (2%) limitation does not apply to primary taxes levied on behalf of school districts. The limited and full cash values of personal property (other than mobile homes) and for utility, mining and producing oil, gas and geothermal property are the same. Primary taxes on residential property are only constitutionally limited to one percent (1%) of the full cash value of such property. Since 1997, municipalities have been required to publish truth in taxation notices in local newspapers to announce any proposed increases in primary property tax rates in a county, city, town or community college district. Secondary Taxes Taxes levied against the assessed full cash value (after application of the assessment ratio) are referred to as secondary taxes, which are used for debt retirement (i.e., debt service on bonds), voter-approved budget overrides and the maintenance and operation of special service districts such as sanitary, fire and road improvement districts. Except for the Property Valuation Protection Option described above, there is no limitation on the annual increase in full cash value of any property. Annual levies for voter-approved bond indebtedness and special district assessments are unlimited. Determination of Full Cash Value The first step in the tax process is the determination of the full cash value of each parcel of real property within the State. Most property is valued by the various county assessors, including the County Assessor, with the Arizona Department of Revenue valuing the centrally assessed properties such as gas, water and electrical utilities, pipelines, mines, local and long distance telephone companies and airline flight property. Full cash value is statutorily defined to mean that value determined as prescribed by statute or if no statutory method is prescribed, it is synonymous with market value. Market value means that estimated value derived annually by use of standard appraisal methods and techniques, which generally includes the market approach, the cost approach and the income approach. As a general matter, the County Assessor uses a cost approach for commercial/industrial property and a sales data approach for residential property. Arizona law allows taxpayers to B-15

42 appeal the County Assessor s valuations by providing evidence of a lower value, which may be based upon another approach. Delinquent Tax Procedures The property taxes due to the City are billed, along with State and other taxes, in September of the calendar tax year and are due and payable in two installments on October 1 and March 1 and become delinquent on November 1 and May 1. Delinquent taxes are subject to an interest penalty of 16% per annum prorated monthly as of the first day of the month. (However, delinquent interest is waived if a taxpayer, delinquent as to the November 1 payment, pays the entire year s tax bill by December 31.) After the close of the tax collection period, the County Treasurer prepares a delinquent property tax list and the property so listed is subject to a tax lien sale in February of the succeeding year. In the event there is no purchaser for the tax lien at the sale, the tax lien is assigned to the State, and the property is reoffered for sale from time to time until such time as it is sold, subject to redemption, for an amount sufficient to cover all delinquent taxes. Three years after the sale of the tax lien, the tax lien certificate holder may bring an action in a court of competent jurisdiction to foreclose the right of redemption and, if the delinquent taxes plus accrued interest are not paid by the owner of record or any entity having a right to redeem, a judgment is entered ordering the treasurer of the county to deliver a Treasurer s Deed to the certificate holder as prescribed by law. It should be noted that in the event of a taxpayer filing for relief pursuant to the United States Bankruptcy Code (the Bankruptcy Code ), the law is currently unsettled as to whether a lien can be attached against the taxpayer s property for property taxes levied during the pending bankruptcy. Such taxes might constitute an unsecured and possibly non-interest bearing administrative expense payable only to the extent that the secured creditors of a taxpayer are oversecured, and then possibly only on the prorated basis with other allowed administrative claims. It cannot be determined, therefore, what adverse impact bankruptcy might have on the ability to collect ad valorem taxes on property of a taxpayer within the City. Proceeds to pay such taxes come only from the taxpayer or from a sale of the tax lien on delinquent property. It cannot be determined what impact any deterioration of the financial conditions of any taxpayer, whether or not protection under the Bankruptcy Code is sought, may have on payment of or the secondary market for the Bonds. Neither the City, the Financial Advisor, the purchaser nor their respective attorneys, agents or consultants have undertaken any independent investigation of the operations and financial condition of any taxpayer, nor have they assumed responsibility for the same. In the event the County is expressly enjoined or prohibited by law from collecting taxes due from any taxpayer, such as may result from the bankruptcy of a taxpayer, any resulting deficiency could be collected in subsequent tax years by adjusting the City s tax rate charged to non-bankrupt taxpayers during such subsequent tax years. B-16

43 Real and Secured Property Taxes Levied and Collected (a) City of Scottsdale, Arizona Collected to June 30 of Cumulative Collection Fiscal City City Initial Fiscal Year Through January 4, 2012 Year Tax Rate Tax Levy Amount % of Levy Amount % of Levy $ $62,032,935 (b) (b) $33,954, % ,298,989 $62,143, % 62,963, ,432,449 55,578, ,860, ,093,446 55,876, ,649, ,023,609 49,408, ,681, (a) Taxes are certified and collected by the County Treasurer. Taxes in support of debt service are levied by the County Board of Supervisors as required by State law. Delinquent taxes are subject to an interest and penalty charge of 16% per annum, which is prorated at a monthly rate of 1.33%. Interest and penalty collections for delinquent taxes are not included in the collection figures above, but are deposited in the County General Fund. (b) In the process of collections. Source: County Treasurer s Office. Primary and Secondary Property Tax History City of Scottsdale, Arizona (Tax Rates per $100 Assessed Valuation) Fiscal Primary Secondary Total Year Tax Rate Tax Rate Tax Rate $ $ $ Source: Property Tax Rates and Assessed Values, Arizona Tax Research Foundation and the County Department of Finance. B-17

44 Direct and Overlapping Assessed Valuations and Tax Rates Per $100 Assessed Valuation Fiscal Year Total Tax Secondary Primary Rates Per $100 Assessed Assessed Assessed Valuation Valuation Valuation State of Arizona $ 61,700,292,915 $ 60,900,480,130 $ (a) Maricopa County 38,760,296,714 38,492,098, Maricopa County Community College District 38,760,296,714 38,492,098, Maricopa County Library District 38,760,296,714 N/A Maricopa County Fire District (Assistance Tax) 38,760,296,714 N/A Maricopa County Flood Control District 35,056,838,356 N/A Maricopa County Special Healthcare District 38,760,296,714 N/A Central Arizona Water Conservation District 38,760,296,714 N/A Tempe Elementary School District No. 3 1,582,122,127 1,565,297, Balsz Elementary School District No ,111, ,429, Scottsdale Unified School District No. 48 4,960,210,513 4,938,451, Paradise Valley Unified School District No. 69 3,294,525,696 3,278,500, Cave Creek Unified School District No. 93 1,819,191,822 1,808,202, Fountain Hills Unified School District No ,376, ,440, Phoenix Union High School District No ,325,305,098 5,246,309, Tempe Union High School District No ,634,859,003 3,611,247, East Valley Institute of Technology District No ,294,956,554 (b) N/A Western Maricopa Education Center District 13,686,180,419 N/A Scottsdale Mountain Community Facilities District 33,625,022 N/A McDowell Mountain Ranch Community Facilities District 165,075,971 N/A DC Ranch Community Facilities District 265,671,614 N/A Via Linda Road Community Facilities District 17,036,593 N/A Scottsdale Waterfront Commercial Community Facilities District 8,585,915 N/A City of Scottsdale 5,691,989,913 5,669,965, (a) (b) Source: Includes the State Equalization Assistance Property Tax. The State Equalization Property Tax in fiscal years has been set at $ and is adjusted annually pursuant to Arizona Revised Statutes, Section Includes secondary assessed valuation for the East Valley Institute of Technology District No. 401 within Pinal County, Arizona. Property Tax Rates and Assessed Values, Arizona Tax Research Foundation and the County Department of Finance. B-18

45 Total Tax Rates Per $100 Assessed Valuation Fiscal Year Inside the City and Inside: Tax Rate Tempe Elementary School District No. 3, Tempe Union High School District No. 213 and East Valley Institute of Technology District No. 401 $ Balsz Elementary School District No. 31 and Phoenix Union High School District No. 213 $ Scottsdale Unified School District No. 48 $ Paradise Valley Unified School District No. 69 $ Cave Creek Unified School District No. 93 $ Fountain Hills Unified School District No. 98 $ Scottsdale Mountain Community Facilities District, Scottsdale Unified School District No. 48 and East Valley Institute of Technology District No. 401 $ McDowell Mountain Ranch Community Facilities District, Scottsdale Unified School District No. 48 and East Valley Institute of Technology District No. 401 $ DC Ranch Community Facilities District, Scottsdale Unified School District No. 48 and East Valley Institute of Technology District No. 401 $ Via Linda Road Community Facilities District, Scottsdale Unified School District No. 48 and East Valley Institute of Technology District No. 401 $ Scottsdale Waterfront Community Facilities District, Scottsdale Unified School District No. 48 and East Valley Institute of Technology District No. 401 $ Source: Property Tax Rates and Assessed Values, Arizona Tax Research Foundation and the County Department of Finance. Secondary Assessed Valuation By Property Classification City of Scottsdale, Arizona A breakdown of the secondary assessed valuation by property classification for the previous five years for the City is shown below: Class Mines, utilities, telecommunications, commercial and industrial $ 1,790,377,866 $ 2,494,019,890 $ 2,634,592,789 $ 2,340,214,855 $ 2,048,366,317 Agricultural vacant 379,580, ,427, ,522, ,335, ,703,238 Residential (not for profit) 3,137,266,429 3,790,462,737 4,465,023,581 4,734,121,082 4,145,147,274 Residential (rental), day care, residential care 384,391, ,264, ,141, ,083, ,154,253 Noncommercial historic, foreign trade zones, enterprise zones, military reuse zones, environmental technology, manufacturing, railroads, prossessory 373, , ,512 1,662,496 1,452,143 $ 5,691,989,913 $ 7,375,408,402 $ 8,411,536,879 $ 8,272,416,830 $ 7,243,823,225 Source: Property Tax Rates and Assessed Values, Arizona Tax Research Foundation and the County Department of Finance. B-19

46 Secondary Assessed Valuation of Major Taxpayers (a) City of Scottsdale, Arizona Fiscal Year Net Secondary Percent of Taxpayer Description Assessed Value Total Arizona Public Service Company Gas & Electricity Utility $60,208, % Scottsdale Fashion Square LLC Mall 49,818, SHR Scottsdale LLC Branding Company 21,788, Qwest Corporation Telecommunications 18,583, Gerneral Dynamics Decision Systems Inc. Manufacture Durable/Nondurable Goods 15,391, WJ Small Grandchildern's Trust Realty Development 14,949, SDQ Fee LLC Office Building 14,426, Portales Corporate Center LLC/ Et al. Office Building 14,017, Gainey Drive Associates Office Building 13,594, Pacific Promenade LLC Hotel 12,887, Dial Corporation Personal care and household cleaning products 12,600, Scottsdale Fiesta Retail Center LLC Open Mall 12,502, JEMB Scottsdale LLC Realty Development 12,002, Southwest Gas Corporation Gas Utility 10,602, Scottsdale Fashion Square Partnership Mall 10,534, Drug QRS Inc. Drug Company 9,898, Win Mortgage LLC Mortgage 9,128, DC Ranch LLC Vacant Residential Urban Subdivided 9,098, RCC North LLC Mortgage 8,833, Dtr14 LLC Office Building 8,793, Swiftsure Realty Corporation Real Estate 8,772, Herberger Enterprises Inc. Apartments 8,663, Levine Investments LP Realty Development 8,583, Lincoln National Life Insurance Company 8,299, Walton PR Hotel III LLC Hotel 8,182, Total $382,160, % Total City Net Secondary Assessed Valuation $5,691,989,913 (a) Based upon data obtained from the tax rolls of the County Assessor. None of the City, Bond Counsel, or the Financial Advisor has made an independent determination of the financial position of any of the major taxpayers. Source: County Department of Finance. SPECIAL NOTE: The assessed valuation of property owned by the Salt River Project Agricultural Improvement and Power District ("SRP") is not included in the assessed valuation of the City in the prior table or in any other valuation information set forth in this Official Statement. Because of SRP's quasi-governmental nature, property owned by SRP is exempt from property taxation. However, SRP may elect each year to make voluntary contributions in lieu of property taxes with respect to certain of its electrical facilities (the "SRP Electric Plant"). If SRP elects to make the in lieu contribution for the year, the full cash value of the SRP Electric Plant and the in lieu contribution amount is determined in the same manner as the full cash value and property taxes owed is determined for similar non-governmental public utility property, with certain special deductions. B-20

47 If SRP elected not to make such contributions, the City would be required to contribute funds from other sources or levy an increased tax rate on all other taxable property to provide sufficient amounts to pay debt service on the Bonds. If after electing to make the in lieu contribution, SRP then failed to make the in lieu contribution when due, the Treasurer of the County and the City have no recourse against the property of SRP and there may be a delay in the tax collection to pay debt service on the Bonds in full. Since 1964, when the in lieu contribution was originally authorized in State statute, SRP has never failed to make that election and contribution. The fiscal year in lieu assessed valuation of SRP within the City is $19,783,931 which represents approximately 0.28% of the combined secondary assessed value in the City. SRP s estimated contribution in lieu of secondary tax payments was approximately $177,580 for fiscal year Source: Salt River Project. Comparative Secondary Assessed Valuation Histories Scottsdale Fiscal City of Unified School Maricopa State of Year Scottsdale District No. 48 County Arizona $ 5,691,989,913 $ 4,960,210,513 $ 38,760,296,714 $ 61,700,292, ,375,408,402 6,319,354,438 49,662,543,618 75,664,423, ,411,536,879 7,216,137,012 58,105,204,146 86,525,272, ,272,416,830 7,156,544,125 58,303,635,287 86,090,579, ,243,823,225 6,183,080,117 49,534,573,826 71,852,630,420 Source: Property Tax Rates and Assessed Values, Arizona Tax Research Foundation and the County Department of Finance. Estimated Net Full Cash Value (a) City of Scottsdale, Arizona Fiscal Year Estimated Net Full Cash Value $ 45,335,478, ,012,345, ,144,083, ,318,567, ,030,549,435 (a) Estimated net full cash value is the total estimated market value of the taxable property less estimated exempt property within the City as determined by the Arizona Department of Revenue, Division of Property and Special Taxes. Source: Property Tax Rates and Assessed Values, Arizona Tax Research Foundation and the County Department of Finance. B-21

48 OTHER REVENUES Transaction Privilege and Use Tax Receipts City of Scottsdale, Arizona (000 s omitted) Public Transient Fiscal Preserve Safety Occupancy Year General Transportation (a) Excise Tax Tax Tax (b) Total $80,119 $15,042 $27,199 $7,765 $13,126 $143, ,878 14,608 26,416 7,541 7, , ,829 16,141 29,121 8,289 7, , ,673 19,823 35,604 10,145 9, , ,225 20,910 37,281 10,578 9, ,717 (a) Includes Transaction Privilege Tax collections only. (b) Prior to FY , 20% of the Transient Occupancy Tax was used by the City for general purposes and 80% of the Transient Occupancy Tax was restricted to hospitality development, including destination and event promotion, visitor related capital projects and visitor research. In FY , the Transient Occupancy Tax was increased from 3% to 5% with 50% of the tax being designated to be used by the City for destination marketing and 50% to be used for tourism-related event support, tourism research, tourism-related capital project and other eligible uses. Source: City of Scottsdale, Arizona, Comprehensive Annual Financial Reports. Franchise Fees The City has franchise agreements with various utilities within its borders. The following table is a comparative history of franchise fee revenues. Franchise Fees City of Scottsdale, Arizona (000 s omitted) Fiscal Year Franchise Fees $11, , , , ,639 Source: City of Scottsdale, Arizona, Comprehensive Annual Financial Reports. B-22

49 State Revenue Sharing State Income Tax Cities throughout Arizona share, in relation to their population as determined by the latest census, fifteen percent (15%) of State personal and corporate income taxes collected two years prior. The table below is a comparative history of State revenue sharing proceeds received by the City. State Revenue Sharing Receipts City of Scottsdale, Arizona (000 s omitted) Fiscal Year Amount $22, , , , ,653 Source: City of Scottsdale, Arizona, Comprehensive Annual Financial Reports. State-Shared Revenues - State Sales Tax The following table is a comparative history of State-shared sales taxes received by the City. State-Shared Sales Tax Receipts City of Scottsdale, Arizona (000 s omitted) Fiscal Year Amount $17, , , , ,312 Source: City of Scottsdale, Arizona, Comprehensive Annual Financial Reports. B-23

50 Building Permits The following table shows a history of building permit revenue over the past five fiscal years. Building Permit Revenues City of Scottsdale, Arizona (000 s omitted) Fiscal Year Amount $ 6, , , , ,057 Source: City of Scottsdale, Arizona, Comprehensive Annual Financial Reports. B-24

51 APPENDIX C BOOK-ENTRY-ONLY SYSTEM The description set forth below of the procedures and record-keeping with respect to beneficial ownership interests in the Bonds, payment of principal of, premium, if any, and interest on, the Bonds to Direct Participants, Indirect Participants and Beneficial Owners (each as hereinafter defined), and other information concerning DTC and the book-entry-only system of registration and transfer of beneficial ownership interests in the Bonds is based solely on information furnished by DTC to the City for inclusion in this Official Statement. Neither the City, the Registrar, nor the Financial Advisor make any representations as to the accuracy or completeness thereof. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities 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 will be issued for each maturity thereof, each in the aggregate principal amount of such maturity and the Bonds will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct Participants and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct Participant or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of the Direct Participants and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Bonds, except in the event that use of the book-entry-only system for the Bonds is discontinued. To facilitate subsequent transfers, all the 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 Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 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 Participants and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. C-1

52 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 Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, premium, if any, and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts, upon DTC s receipt of funds and corresponding detail information from the City on the payment date in accordance with their respective holdings shown on DTC s records. Payments by Direct Participants and Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Direct Participant or Indirect Participant and not of DTC, the City or the Registrar, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Registrar, 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 Participants and Indirect Participants. A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its Direct Participant or Indirect Participant, to the Registrar, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Direct Participant s or Indirect Participant s interest in the Bonds, on DTC s records, to the Registrar. The requirement for physical delivery of the Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC s records and followed by a book-entry credit of tendered Bonds to the Registrar s DTC account. DTC may discontinue providing its services with respect to the Bonds at any time by giving reasonable notice to the Registrar and/or to the City. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds will be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC. The information in this section concerning DTC and DTC s book-entry-only system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. NEITHER THE CITY, THE REGISTRAR, NOR THE FINANCIAL ADVISOR HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DIRECT PARTICIPANT, INDIRECT PARTICIPANT OR TO ANY BENEFICIAL OWNER WITH RESPECT TO: (I) THE BONDS, (II) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT; (III) THE TIMELY OR ULTIMATE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR OF INTEREST ON THE BONDS; (IV) THE TRANSMITTAL BY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDHOLDERS; (V) ANY CONSENT GIVEN BY DTC OR OTHER ACTION TAKEN BY DTC AS REGISTERED OWNER; OR (VI) THE SELECTION BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS. C-2

53 APPENDIX D CITY OF SCOTTSDALE, ARIZONA EXCERPTS OF THE AUDITED ANNUAL FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2011 The financial statements of the City as of June 30, 2011, and for the fiscal year then ended, excerpts of which are included as APPENDIX D of this Official Statement, have been audited by LarsonAllen, LLP as stated in its report included in this APPENDIX D. The City neither requested nor obtained the consent of LarsonAllen, LLP to include their report and LarsonAllen, LLP has performed no procedures subsequent to rendering their opinion on the financial statements. These are the most recent audited financial statements of the City and may not represent the City s current financial position. D-1

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