$6,560,000* CITY OF PALOS HILLS Cook County, Illinois Debt Certificates, Series 2019

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1 New Issue Investment Rating: Date of Sale: Thursday, April 4, 2019 S&P Global Ratings Between 9:45 and 10:00 A.M., C.D.T. (Rating Requested) (Closed Speer Auction) Official Statement Subject to compliance by the City with certain covenants, in the opinion of Ice Miller LLP, Chicago, Illinois, Bond Counsel ( Bond Counsel ), under present law, interest on the Certificates is not includible in the gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations. Interest on the Certificates is not exempt from present State of Illinois income taxes. The City has designated the Certificates as qualified tax-exempt obligations under Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. See TAX EXEMPTION and QUALIFIED TAX-EXEMPT OBLIGATIONS herein for a more complete discussion. $6,560,000* CITY OF PALOS HILLS Cook County, Illinois Debt Certificates, Series 2019 Dated Date of Delivery Book-Entry Bank Qualified Due Serially December 15, The $6,560,000* Debt Certificates, Series 2019 (the Certificates ) are being issued by the City of Palos Hills, Cook County, Illinois (the City ). Interest is payable semiannually on June 15 and December 15 of each year, commencing December 15, Interest is calculated based on a 360-day year of twelve 30-day months. The Certificates will be issued using a book-entry system. The Depository Trust Company, New York, New York ( DTC ), will act as securities depository for the Certificates. The ownership of one fully registered Certificate for each maturity will be registered in the name of Cede & Co., as nominee for DTC and no physical delivery of Certificates will be made to purchasers. The Certificates will mature on December 15 in the following years and amounts. AMOUNTS*, MATURITIES, INTEREST RATES, YIELDS OR PRICES AND CUSIP NUMBERS Principal Due Interest Price or CUSIP Principal Due Interest Price or CUSIP Amount* Dec. 15 Rate Yield Number(1) Amount* Dec. 15 Rate Yield Number(1) $295, % % $320, % % 245, % % 330, % % 250, % % 340, % % 255, % % 355, % % 265, % % 370, % % 270, % % 385, % % 280, % % 400, % % 290, % % 415, % % 295, % % 435, % % 310, % % 455, % % Any consecutive maturities may be aggregated into term certificates at the option of the bidder, in which case the mandatory redemption provisions shall be on the same schedule as above. OPTIONAL REDEMPTION Certificates due December 15, , inclusive, are not subject to optional redemption. Certificates due December 15, , inclusive, are callable in whole or in part on any date on or after December 15, 2027, at a price of par plus accrued interest. If less than all the Certificates are called, they shall be redeemed in such principal amounts and from such maturities as determined by the City and within any maturity by lot. See DESCRIPTION OF THE CERTIFICATES- Optional Redemption herein. PURPOSE, LEGALITY AND SECURITY Certificate proceeds will be used to finance the costs of certain capital improvements in the City, including the construction of a new public works building, and to pay the costs of issuance of the Certificates. See THE PROJECT herein. In the opinion of Bond Counsel, the Certificates are payable from any funds of the City legally available for such purpose, except that the rights of the owners of the Certificates and the enforceability of the Certificates may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors rights and by equitable principles, whether considered at law or in equity, including the exercise of judicial discretion. There is no statutory authority for the levy of a separate tax in addition to other City taxes or the levy of a special tax unlimited as to rate or amount to pay the principal and interest due on the Certificates. See DESCRIPTION OF THE CERTIFICATES herein. Section 17(b) of the Local Government Debt Reform Act of the State of Illinois, as amended, authorizes the City to purchase either real or personal property through agreements that provide that the consideration for the purchase may be paid through installments made at stated intervals for a period of no more than 20 years. The Certificates evidence indebtedness of the City incurred under an Installment Purchase Agreement between the City and the seller named therein. In the Installment Purchase Agreement, the City represents and warrants that the obligation to make payments due on the Certificates is a direct general obligation of the City payable from the corporate funds of the City and such other sources of payment as are otherwise lawfully available and that the City will appropriate funds annually and in a timely manner so as to provide for the making of all payments thereon when due. THERE IS NO STATUTORY AUTHORITY FOR THE LEVY OF A SEPARATE TAX IN ADDITION TO OTHER TAXES OF THE CITY OR THE LEVY OF A SPECIAL TAX UNLIMITED AS TO RATE OR AMOUNT TO PAY ANY OF THE AMOUNTS DUE ON THE CERTIFICATES. The Certificates are qualified tax-exempt obligations under Section 265(b)(3) of the Code. See QUALIFIED TAX-EXEMPT OBLIGATIONS herein. This Official Statement is dated March 21, 2019, and has been prepared under the authority of the City. An electronic copy of this Official Statement is available from the web site under Debt Auction Center/Competitive Official Statement Sales Calendar. Additional copies may be obtained from Mr. Kenneth J. Nolan, Treasurer, City of Palos Hills, South Roberts Road, Palos Hills, Illinois 60465, or from the Municipal Advisor to the City: *Subject to change. (1) CUSIP data herein is provided by the CUSIP Global Services, managed on behalf of the American Bankers Association by S&P Capital IQ, a part of McGraw Hill Companies Financial. No representations are made as to the correctness of the CUSIP numbers. These CUSIP numbers may also be subject to change after the issuance of the Certificates..

2 For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document, as the same may be supplemented or corrected by the City from time to time (collectively, the Official Statement ), may be treated as an Official Statement with respect to the Certificates described herein that is deemed near final as of the date hereof (or the date of any such supplement or correction) by the City. The Official Statement, when further supplemented by an addendum or addenda specifying the maturity dates, principal amounts and interest rates of the Certificates, together with any other information required by law or deemed appropriate by the City, shall constitute a Final Official Statement of the City with respect to the Certificates, as that term is defined in Rule 15c2-12. Any such addendum or addenda shall, on and after the date thereof, be fully incorporated herein and made a part hereof by reference. Alternatively, such final terms of the Certificates and other information may be included in a separate document entitled Final Official Statement rather than through supplementing the Official Statement by an addendum or addenda. No dealer, broker, salesman or other person has been authorized by the City to give any information or to make any representations with respect to the Certificates other than as contained in the Official Statement or the Final Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. Certain information contained in the Official Statement and the Final Official Statement may have been obtained from sources other than records of the City and, while believed to be reliable, is not guaranteed as to completeness. THE INFORMATION AND EXPRESSIONS OF OPINION IN THE OFFICIAL STATEMENT AND THE FINAL OFFICIAL STATEMENT ARE SUBJECT TO CHANGE, AND NEITHER THE DELIVERY OF THE OFFICIAL STATEMENT OR THE FINAL OFFICIAL STATEMENT NOR ANY SALE MADE UNDER EITHER SUCH DOCUMENT SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CITY SINCE THE RESPECTIVE DATES THEREOF. References herein to laws, rules, regulations, ordinances, resolutions, agreements, reports and other documents do not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein. Where full texts have not been included as appendices to the Official Statement or the Final Official Statement, they will be furnished on request. This Official Statement does not constitute an offer to sell, or solicitation of an offer to buy, any securities to any person in any jurisdiction where such offer or solicitation of such offer would be unlawful. (i)

3 TABLE OF CONTENTS Page CERTIFICATE ISSUE SUMMARY... 1 CITY OF PALOS HILLS... 2 DESCRIPTION OF THE CERTIFICATES... 2 Authorization and Security... 2 RISK FACTORS... 5 Local Economy... 5 Finances of the State of Illinois... 5 State Actions... 5 Effect of a Decline in Equalized Assessed Valuations... 6 Bankruptcy... 6 Secondary Market for the Certificates... 6 Continuing Disclosure... 6 Suitability of Investment... 6 Future Changes in Laws... 7 Factors Relating to Tax Exemption... 7 Cybersecurity... 7 THE CITY... 8 City Government and Services... 8 Transportation... 8 Community Life... 9 Education... 9 SOCIOECONOMIC INFORMATION... 9 Employment... 9 Building Permits Housing Income Retail Activity THE PROJECT DEFAULT RECORD SHORT-TERM BORROWING DEBT INFORMATION PROPERTY ASSESSMENT AND TAX INFORMATION REAL PROPERTY ASSESSMENT, TAX LEVY AND COLLECTION PROCEDURES Summary of Property Assessment, Tax Levy and Collection Procedures Real Property Assessment Equalization Exemptions Tax Levy Property Tax Extension Limitation Law Extensions Collections Truth in Taxation Law No Consent or Updated Information Requested of the Auditor EMPLOYEE RETIREMENT AND OTHER POSTEMPLOYMENT BENEFITS OBLIGATIONS Background Regarding Pension Plans Illinois Municipal Retirement Fund Police Pension Plan Other Post-Employment Benefits REGISTRATION, TRANSFER AND EXCHANGE TAX EXEMPTION Amortizable Bond Premium Original Issue Discount QUALIFIED TAX EXEMPT OBLIGATIONS LITIGATION OFFICIAL STATEMENT AUTHORIZATION INVESTMENT RATING UNDERWRITING MUNICIPAL ADVISOR CERTIFICATION APPENDIX A - FISCAL YEAR 2018 AUDITED FINANCIAL STATEMENTS APPENDIX B - DESCRIBING BOOK-ENTRY-ONLY ISSUANCE APPENDIX C - PROPOSED FORM OF OPINION OF BOND COUNSEL APPENDIX D - EXCERPTS OF FISCAL YEAR 2018 AUDITED FINANCIAL STATEMENTS RELATING TO THE CITY S PENSION PLANS APPENDIX E - CONTINUING DISCLOSURE UNDERTAKING OFFICIAL BID FORM OFFICIAL NOTICE OF SALE EXHIBIT A - Example Issue Price Certificate (ii)

4 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 CERTIFICATE ISSUE SUMMARY This Certificate Issue Summary is expressly qualified by the entire Official Statement, including the Official Notice of Sale and the Official Bid Form, which is provided for the convenience of potential investors and which should be reviewed in its entirety by potential investors. Issuer: City of Palos Hills, Cook County, Illinois. Issue: $6,560,000* Debt Certificates, Series Dated Date: Date of delivery, expected to be on or about April 23, Interest Due: Each June 15 and December 15, commencing December 15, Principal Due: Optional Redemption: Authorization: Security: Serially each December 15, commencing December 15, 2019 through 2038, as detailed on the front page of this Official Statement. Certificates maturing on or after December 15, 2028, are callable at the option of the City on any date on or after December 15, 2027, at a price of par plus accrued interest. See DESCRIPTION OF THE CERTIFICATES- Optional Redemption herein. The Illinois Municipal Code, as supplemented and amended, and in particular as supplemented by the Local Government Debt Reform Act of the State of Illinois, as amended (the Debt Reform Act ), and an ordinance passed by the Mayor and City Council of the City. The Certificates are payable from any funds of the City legally available for such purpose, except that the rights of the owners of the Certificates and the enforceability of the Certificates may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors rights and by equitable principles, whether considered at law or in equity, including the exercise of judicial discretion. There is no statutory authority for the levy of a separate tax in addition to other City taxes or the levy of a special tax unlimited as to rate or amount to pay the principal and interest due on the Certificates. See DESCRIPTION OF THE CERTIFICATES herein. Section 17(b) of the Debt Reform Act authorizes the City to purchase either real or personal property through agreements that provide that the consideration for the purchase may be paid through installments made at stated intervals for a period of no more than 20 years. The Certificates evidence indebtedness of the City incurred under an Installment Purchase Agreement between the City and the seller named therein. In the Installment Purchase Agreement, the City represents and warrants that the obligation to make payments due on the Certificates is a direct general obligation of the City payable from the corporate funds of the City and such other sources of payment as are otherwise lawfully available and that the City will appropriate funds annually and in a timely manner so as to provide for the making of all payments thereon when due. THERE IS NO STATUTORY AUTHORITY FOR THE LEVY OF A SEPARATE TAX IN ADDITION TO OTHER TAXES OF THE CITY OR THE LEVY OF A SPECIAL TAX UNLIMITED AS TO RATE OR AMOUNT TO PAY ANY OF THE AMOUNTS DUE ON THE CERTIFICATES. Rating: Purpose: Tax Exemption: Bank Qualification: Registrar/Paying Agent: An investment rating for the Certificates has been requested from S&P Global Ratings, New York, New York. The Certificates are being issued to finance the costs of certain capital improvements in the City, including the construction of a new public works building, and to pay the costs of issuance of the Certificates. See THE PROJECT herein. Ice Miller LLP, Chicago, Illinois, will provide an opinion as to the federal tax exemption of the interest on the Certificates as discussed under TAX EXEMPTION in this Official Statement. Interest on the Certificates is not exempt from present State of Illinois income taxes. The Certificates are qualified tax-exempt obligations under Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. See QUALIFIED TAX-EXEMPT OBLIGATIONS herein. Amalgamated Bank of Chicago, Chicago, Illinois. Delivery: The Certificates are expected to be delivered on or about April 23, Book-Entry Form: Denomination: Municipal Advisor: *Subject to change. The Certificates will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository of the Certificates. See APPENDIX B herein. $5,000 or integral multiples thereof. Speer Financial, Inc., Chicago, Illinois. 1

5 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 CITY OF PALOS HILLS COOK COUNTY, ILLINOIS Gerald R. Bennett Mayor Council Members Mark Brachman Joseph Marrotta AJ Pasek Martin Kleefisch Ricky Moore Mike Price Michael Lebarre Dawn Nowak Pauline Stratton Officials Rudy A. Mulderink City Clerk Kenneth J. Nolan Treasurer George Pappas, Esq. City Attorney DESCRIPTION OF THE CERTIFICATES Authorization and Security The Certificates, in the aggregate principal amount of $6,560,000*, are issued under and pursuant to an ordinance (the Certificate Ordinance ), to be adopted by the City Council of the City of Palos Hills (the City ) on April 4, 2019 and an Installment Purchase Agreement (the Installment Purchase Agreement ) between the City and the City Treasurer, not individually but as nominee seller. The Certificates evidence the indebtedness of the City under the Installment Purchase Agreement. The Local Government Debt Reform Act of the State of Illinois, as amended, authorizes the City and the City Treasurer, as nominee seller, to enter into the Installment Purchase Agreement. From time to time, as the City enters into contracts for the purpose of acquiring portions of the hereinafter defined Project (the Project Contracts ), the City Council will order the executed Project Contracts filed with the City Treasurer. The City Treasurer will identify any Project Contracts to the Installment Purchase Agreement, which will permit the proceeds of the Certificates to be used to pay amounts under any of such Project Contracts. *Subject to change. 2

6 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 THE OBLIGATION OF THE CITY TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST UNDER THE INSTALLMENT PURCHASE AGREEMENT IS A GENERAL OBLIGATION OF THE CITY PAYABLE FROM ANY FUNDS LEGALLY AVAILABLE AND ANNUALLY APPROPRIATED THEREFOR. NO STATUTORY AUTHORITY EXISTS, HOWEVER, FOR THE LEVY OF A SEPARATE TAX IN ADDITION TO OTHER CITY TAXES OR THE LEVY OF A SPECIAL TAX UNLIMITED AS TO RATE OR AMOUNT TO PAY DEBT SERVICE INSTALLMENT PURCHASE PAYMENTS DUE UNDER THE INSTALLMENT PURCHASE AGREEMENT. PAYMENTS DUE ON THE INSTALLMENT PURCHASE AGREEMENT ARE NOT SECURED BY ANY INTEREST IN THE PROJECT THAT IS THE SUBJECT OF THE INSTALLMENT PURCHASE AGREEMENT. The City expects to pay debt service on the Certificates from the receipts from a City-wide capital improvement fee placed on the water bills of the City s residents. The fee was effective January 8, 2008 and does not expire. Such receipts are expected to be realized by the City in annual amounts equal to approximately 1.25 times debt service on the Certificates. Optional Redemption The Certificates due on December 15, , are subject to redemption upon prepayment by the City of respective debt service installment purchase payments as a whole, or in part in integral multiples of $5,000, in such maturities as selected by the City (less than all the Certificates of a single maturity to be selected by the hereinafter described Registrar in such manner as it shall deem fair and appropriate), on any date on or after December 15, 2027, at the redemption price of par plus accrued interest to the redemption date. The Registrar will give notice of redemption, identifying the Certificates (or portions thereof) to be redeemed, by mailing a copy of the redemption notice by first class mail not less than thirty (30) days nor more than sixty (60) days prior to the date fixed for redemption to the registered owner of each Certificate (or portion thereof) to be redeemed at the address shown on the registration books maintained by the Registrar. Unless moneys sufficient to pay the redemption price of the Certificates to be redeemed are received by the Registrar prior to the giving of such notice of redemption, such notice may, at the option of the City, state that said redemption will be conditional upon the receipt of such moneys by the Registrar on or prior to the date fixed for redemption. If such moneys are not received, such notice will be of no force and effect, the City will not redeem such Certificates, and the Registrar will give notice, in the same manner in which the notice of redemption has been given, that such moneys were not so received and that such Certificates will not be redeemed. Otherwise, prior to any redemption date, the City will deposit with the Registrar an amount of money sufficient to pay the redemption price of all the Certificates or portions of Certificates which are to be redeemed on the date. Subject to the provisions for a conditional redemption described above, notice of redemption having been given as described above and in the Certificate Ordinance, the Certificates or portions of Certificates so to be redeemed will, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the City shall default in the payment of the redemption price) such Certificates or portions of Certificates shall cease to bear interest. Upon surrender of such Certificates for redemption in accordance with said notice, such Certificates will be paid by the Registrar at the redemption price. 3

7 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Transfers and Exchanges of Certificates; Lost or Mutilated Certificates See also APPENDIX B, BOOK-ENTRY SYSTEM for information on the registration, transfer and exchange of book-entry certificates. The Certificates will be initially issued as book-entry certificates. (a) The holder of any Certificate may transfer such Certificate only upon the surrender thereof for cancellation at the principal office (the Principal Office ) of Amalgamated Bank of Chicago, Chicago, Illinois, as Registrar (the Registrar ), except as provided in (e) hereof. Thereupon the Registrar shall execute in the name of the transferee a new Certificate or Certificates of the same maturity in aggregate principal amount equal to the original principal amount of the Certificates so surrendered, and the component thereon representing interest at the same rate or rates as represented by the component on the Certificates so surrendered, and the Registrar shall authenticate and deliver such new Certificate or Certificates to such transferee. (b) The holder of any Certificate may at any time surrender such Certificates at the Principal Office of the Registrar in exchange for an equal aggregate principal amount of Certificates, and the component thereon representing interest at the same rate or rates as represented by the component on the Certificates so surrendered, in the form of registered Certificates in any authorized denominations. (c) All Certificates presented or surrendered for transfer shall be accompanied by a written instrument or instruments of assignment or transfer, in form satisfactory to the Registrar, duly executed by the holder or by its attorney duly authorized in writing. The Registrar shall not be required to make a transfer or an exchange of any Certificate for the period from the 1 st day of the month next preceding any interest payment date (the Record Date ) to such Certificate payment date. (d) No notarial seal shall be necessary for the transfer or exchange of any Certificate, and the holder of any Certificate shall be entitled to any and all rights and privileges granted under the Certificate Ordinance to a holder of a Certificate. (e) In case any Certificate shall become mutilated or be destroyed, lost or stolen, the Registrar, upon the written request of the holder thereof, shall execute and deliver a new Certificate in exchange and substitution for the mutilated Certificate, or in lieu of and in substitution for the Certificate so destroyed, lost or stolen. The applicant for a substitute Certificate shall furnish to the Registrar such security or indemnity as may be required by it to save it harmless from all risks, and the applicant shall also furnish to the Registrar evidence to its satisfaction of the mutilation, destruction, loss or theft of the applicant s Certificate and of the ownership thereof. In case any Certificate which has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Registrar may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Certificate), if the applicant for such payment shall furnish to the Registrar such security or indemnity as it may require to save it harmless, and shall evidence to the satisfaction of the Registrar the mutilation, destruction, loss or theft of such Certificate and the ownership thereof. If any institutional Certificate holder or its nominee is the owner of any mutilated, destroyed, lost or stolen Certificate, then the affidavit of its President, Vice President, Assistant President or Treasurer in form reasonably satisfactory to the Registrar setting forth the fact of destruction, loss or theft and such institutional Certificate holder s ownership of the Certificate at the time of such mutilation, destruction, loss or theft shall be accepted as satisfactory evidence thereof and no indemnity shall be required as a condition to execution and delivery of a new Certificate other than the written agreement of such institutional Certificate holder in form reasonably satisfactory to the Registrar, to indemnify the Registrar, and as otherwise may be by law required. 4

8 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 RISK FACTORS The purchase of the Certificates involves certain investment risks. Accordingly, each prospective purchaser of the Certificates should make an independent evaluation of the entirety of the information presented in this Final Official Statement and its appendices and exhibits in order to make an informed investment decision. Certain of the investment risks are described below. The following statements, however, should not be considered a complete description of all risks to be considered in the decision to purchaser the Certificates, nor should the order of the presentation of such risks be construed to reflect the relative importance of the various risks. There can be no assurance that other risk factors are not material or will not become material in the future. Local Economy The financial health of the City is in part dependent on the strength of the regional and State of Illinois (the State ) economy. Many factors affect the economy, including rates of employment and economic growth and the level of residential and commercial development. It is not possible to predict to what extent any changes in economic conditions, demographic characteristics, population or commercial and industrial activity will occur and what impact such changes would have on the finances of the City. Finances of the State of Illinois The State has experienced adverse fiscal conditions resulting in significant shortfalls between the State s general fund revenues and spending demands. The State failed to enact a full budget for the State fiscal years ending June 30, 2016, and June 30, 2017, which had a significant, negative impact on the State s finances, although certain spending occurred through statutory transfers, statutory continuing appropriations, court orders and consent decrees, including spending for elementary and secondary education. In addition, the underfunding of the State s pension systems and a bill backlog of billions of dollars contributed to the State s poor financial health. On July 6, 2017, the General Assembly of the State (the General Assembly ) enacted a budget (the Fiscal Year 2018 Budget ) for the State fiscal year ending June 30, 2018 (the State Fiscal Year 2018 ), overriding the Governor s veto. On May 31, 2018, the General Assembly passed a budget (the Fiscal Year 2019 Budget ) for the State for the fiscal year ending June 30, 2019 (the State Fiscal Year 2019 ), and on June 4, 2018, the Governor approved the same. Nonetheless, legislators have not yet addressed a substantial backlog of unpaid bills or significant pension liabilities. There may continue to be delays in payments of bills and the State s backlog of unpaid bills may continue to grow. State Actions Many elements of local government finance, including the issuance of debt and the levy of property taxes, are controlled by State government. Past and future actions of the State may affect the overall financial condition of the City, the taxable value of property within the City, and the ability of the City to levy property taxes. For example, Illinois legislators have introduced proposals to modify the Property Tax Extension Limitation Law of the State (the Limitation Law ), including freezing property taxes (the Property Tax Freeze Proposal ). If the Property Tax Freeze Proposal or similar legislation were to become law, such reform may freeze the City s local property tax revenue. The City cannot predict whether, or in what form, any such change may be enacted into law, nor can the City predict the effect of any such change on the City s finances. 5

9 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Effect of a Decline in Equalized Assessed Valuations The amount of property taxes extended for the City is determined by applying the various operating tax rates and the bond and interest tax rate levied by the City to the City s Equalized Assessed Valuation ( EAV ). The City s EAV could decrease for a number of reasons including, but not limited to, a decline in property values or large taxpayers moving out of the City. Declining EAVs and increasing tax rates (certain of which may reach their rate ceilings) could reduce the amount of taxes the City is able to receive. Bankruptcy The rights and remedies of the Certificate holders may be limited by and are subject to the provisions of federal bankruptcy laws, to other laws or equitable principles that may affect the enforcement of creditors rights, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against local governments. The various opinions of counsel to be delivered with respect to the Certificates will be similarly qualified. Secondary Market for the Certificates No assurance can be given that a secondary market will develop for the purchase and sale of the Certificates or, if a secondary market exists, that such Certificates can be sold for any particular price. The underwriters of the Certificates are not obligated to engage in secondary market trading or to repurchase any of the Certificates at the request of the owners thereof. Prices of the Certificates as traded in the secondary market are subject to adjustment upward and downward in response to changes in the credit markets and other prevailing circumstances. No guarantee exists as to the future market value of the Certificates. Such market value could be substantially different from the original purchase price. Continuing Disclosure A failure by the City to comply with the Undertaking for continuing disclosure (see CONTINUING DISCLOSURE herein) will not constitute an event of default on the Certificates. Any such failure must be reported in accordance with Rule 15c2-12 (the Rule ) adopted by the Securities and Exchange Commission (the Commission ) under the Securities Exchange Act of 1934, as amended (the Exchange Act ), and may adversely affect the transferability and liquidity of the Certificates and their market price. Suitability of Investment The interest rates borne by the Certificates are intended to compensate the investor for assuming the risk of investing in the Certificates. Furthermore, the tax-exempt feature of the Certificates is currently more valuable to high tax bracket investors than to investors that are in low tax brackets. As such, the value of the interest compensation to any particular investor will vary with individual tax rates and circumstances. Each prospective investor should carefully examine the Final Official Statement for the Certificates and its own financial condition to make a judgment as to its ability to bear the economic risk of such an investment, and whether or not the Certificates are an appropriate investment for such investor. 6

10 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Future Changes in Laws Various State and federal laws, regulations and constitutional provisions apply to the City and to the Certificates. The City can give no assurance that there will not be a change in, interpretation of, or addition to such applicable laws, provisions and regulations which would have a material effect, either directly or indirectly, on the City, or the taxing authority of the City. For example, many elements of local government finance, including the issuance of debt and the levy of property taxes, are controlled by state government. Future actions of the State may affect the overall financial conditions of the City, the taxable value of property within the City, and the ability of the City to levy property taxes or collect revenues for its ongoing operations. Factors Relating to Tax Exemption As discussed under TAX EXEMPTION herein, interest on the Certificates could become includible in gross income for purposes of federal income taxation, retroactive to the date the Certificates were issued, as a result of future acts or omissions of the City in violation of its covenants in the Certificate Ordinance. Should such an event of taxability occur, the Certificates are not subject to any special redemption. There are or may be pending in the Congress of the United States legislative proposals relating to the federal tax treatment of interest on the Certificates, including some that carry retroactive effective dates, that, if enacted, could affect the market value of the Certificates. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to Certificates issued prior to enactment. Prospective purchasers of the Certificates should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation. Finally, reduction or elimination of the tax-exempt status of obligations such as the Certificates could have an adverse effect on the City s ability to access the capital markets to finance future capital or operational needs by reducing market demand for such obligations or materially increasing borrowing costs of the City. The tax-exempt bond office of the Internal Revenue Service (the Service ) is conducting audits of tax-exempt bonds, both compliance checks and full audits, with increasing frequency to determine whether, in the view of the Service, interest on such tax-exempt obligations is includible in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether the Service will commence any such audit. If an audit is commenced, under current procedures the Service may treat the City as a taxpayer and the Certificate holders may have no right to participate in such proceeding. The commencement of an audit with respect to any tax-exempt obligations of the City could adversely affect the market value and liquidity of the Certificates, regardless of the ultimate outcome. Cybersecurity Computer networks and data transmission and collection are vital to the efficient operation of the City. Despite the implementation of network security measures by the City, its information technology and infrastructure may be vulnerable to deliberate attacks by hackers, malware, ransomware or computer virus, or may otherwise be breached due to employee error, malfeasance or other disruptions. Any such breach could compromise networks and the information stored thereon could be disrupted, accessed, publicly disclosed, lost or stolen. Although the City does not believe that its information technology systems are at a materially greater risk of cybersecurity attacks than other similarly situated governmental entities, any such disruption, access, disclosure or other loss of information could have an adverse effect on the City s operations and financial health. Further, as cybersecurity threats continue to evolve, the City may be required to expend significant additional resources to continue to modify and strengthen security measures, investigate and remediate any vulnerabilities, or invest in new technology designed to mitigate security risks. 7

11 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 THE CITY The City, incorporated in 1958, is located approximately 20 miles southwest of the Chicago Loop (the Loop ) in Cook County (the County ). It is a non-home rule municipality. In recognition of their activities, the State has awarded the City its Home Town Award for numerous years. According to the 2010 Census, the City had a population of 17,484, which compares with 17,665 in City Government and Services The City has adopted the Mayor-Alderman form of government. The Mayor, Clerk, Treasurer and the 10 Aldermen of the City Council are elected for four-year terms. The City employs 72 full-time and 90 part-time employees. Such totals include 30 full-time police employees. The City s Police Department employees are represented by the Metropolitan Alliance of Police bargaining unit and the City s Public Works Department employees are represented by the Service Employees International Union bargaining unit. Collective bargaining contracts with such bargaining units expire on April 30, The City considers its employee relations to be good. The City s Police Department includes 30 sworn officers. The City has initiated several major programs and services for the health, safety, and welfare of its citizens. A Community Crime Prevention Program continues to be maintained by the Police Department that alerts the community by increasing their awareness along with the cooperation of the Police Department to prevent local crime. The Police Department is a participant of the Drug Enforcement administration that returns thousands of dollars in additional revenue to the City. The City continues to modernize the Police Department. The City has established two canine units and a motorcycle unit. The City continues to be in programs such as Block Home and Officer Friendly. In addition, the City has received grant monies to finance public improvements in the City. Through such funds, the City has recently obtained $126,000 for street improvement. The North Palos Fire Protection District (the District ) is a separate government body with three trustees and a Fire Chief. It maintains two stations that serve the community in firefighting and advanced life support (paramedic/ambulance). In its over 50 years of service to the community, the District has grown by expanding programs and services. The District protects all of Palos Hills, a portion of Hickory Hills, and a large area of the Forest Preserve district; totaling an 11.5 square mile area. The District is a member of Division 21 of M.A.B.A.S. (mutual aid box alarm system). Transportation The City is easily accessed by different modes of transportation. The City is situated just three miles from Interstate 294 (I-294), which takes commuters into the City of Chicago via Interstate 90 (I-90), which is about a 45 minute drive to the Loop. O Hare Airport is approximately an hour away from the City, while Midway Airport is approximately a 20-minute drive. Metra s Norfolk Southern Line from nearby Palos Park reaches the Loop in about an hour. Bus service is also available to City residents. 8

12 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Community Life Palos Community Hospital is an approximately 413-bed facility located in nearby Palos Heights. The City s popular Palos Hills Municipal Golf Course is a public 2,838-yard championship course and is recognized as one of the top 10, nine-hole courses in the Chicagoland area. The City s Resource and Recreation Department maintains six playlots and a community center which houses a gym, preschool rooms and a citizens pavilion. The Recreation Department offers year-round activities, including arts and crafts, dance classes for children, exercise programs for senior citizens and ice skating in the winter months. The Green Hills Public Library District serves area residents. The Library holds more than 100,000 volumes and subscribes to more than 200 periodicals. Reading programs for children, book discussion groups for adults and meeting rooms make the Library a center of community activity. Education Local elementary School Districts 117 and 118 provide education for the City s children. High school students attend Amos Alonzo Stagg High School ( Stagg ) in School District 230. In addition to the City, Stagg serves the communities of Bridgeview, Hickory Hills, Orland Park, Palos Heights, Palos Park, Willow Springs and Worth. Higher education is provided locally by Moraine Valley Community College (the College ). Located on a 294-acre campus in the City, the College is approximately 25 miles southwest of the Loop and serves 26 communities in the County. The College has an approximate enrollment of 34,000 credit and noncredit students annually. The College s Fine and Performing Arts Center offers a 600-seat theater, art gallery and meeting rooms. SOCIOECONOMIC INFORMATION Employment Following are lists of large employers located in the City and in the surrounding area. Major City Employers(1) Approximate Name Product/Service Employment Moraine Valley Community College... Community College... 1,800 Executive Mailing Service, Inc.... Direct Mail Service Illinois Brick Co.... Divisional Headquarters and Brick and Masonry Materials Distribution National Acid-Proofing, Inc.... Acid-Proof Tank, Brick Floor and Trench Installation Rama Trucking Enterprise... Trucking Landmark Engineering Corp.... Land Surveying Services Kats & Sons, Inc.... Concrete A to Z Construction Co.... Construction Cranes & Equipment Specialist... Building Equipment Masters Millwork Co.... Wood and Millwork Note: (1) Source: 2018 Illinois Manufacturers Directory, 2018 Illinois Services Directory and a selective telephone survey. 9

13 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Major Area Employers(1) Approximate Location Name Product/Service Employment Oak Lawn... Advocate Christ Medical Center... Medical Center... 5,500 Palos Heights... Palos Community Hospital... Hospital... 2,343 Alsip... Anixter, Inc... Electronic Cable and Wire Burr Ridge... CNH Industrial America... Agricultural Equipment Alsip... American Heritage Protective Services... Security Guard Services Bedford Park... Belt Railway Co.... Commercial Railway Bedford Park... Calmark Group... Marketing Services Alsip... Griffith Foods, Inc.... Food Seasonings Orland Park... Horton Group, Inc.... Insurance Chicago Ridge... Richlee Vans, Inc.... School Buses Note: (1) Source: 2018 Illinois Manufacturers Directory, 2018 Illinois Services Directory and a selective telephone survey. The following tables show employment by industry and by occupation for the City, the County and the State as reported by the U.S. Census Bureau American Community Survey 5-year estimated values. Employment By Industry(1) The City The County The State Classification Number Percent Number Percent Number Percent Agriculture, Forestry, Fishing and Hunting, and Mining % 4, % 65, % Construction % 117, % 323, % Manufacturing % 250, % 762, % Wholesale Trade % 72, % 190, % Retail Trade... 1, % 248, % 669, % Transportation and Warehousing, and Utilities % 172, % 378, % Information % 55, % 120, % Finance and Insurance, and Real Estate and Rental and Leasing % 203, % 451, % Professional, Scientific, and Management, and Administrative and Waste Management Services... 1, % 362, % 722, % Educational Services and Health Care and Social Assistance... 1, % 571, % 1,416, % Arts, Entertainment and Recreation and Accommodation and Food Services % 250, % 561, % Other Services, Except Public Administration % 124, % 292, % Public Administration % 88, % 226, % Total... 8, % 2,521, % 6,181, % Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2013 to Employment By Occupation(1) The City The County The State Classification Number Percent Number Percent Number Percent Management, Business, Science and Arts... 3, % 991, % 2,321, % Service... 1, % 452, % 1,067, % Sales and Office... 2, % 595, % 1,481, % Natural Resources, Construction, and Maintenance % 150, % 446, % Production, Transportation, and Material Moving... 1, % 331, % 864, % Total... 8, % 2,521, % 6,181, % Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2013 to

14 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Annual Average Unemployment Rates(1) Calendar The Year City The County The State % 10.9% 10.4% % 10.4% 9.7% % 9.6% 9.0% % 9.6% 9.0% % 7.5% 7.1% % 6.2% 6.0% % 6.1% 5.8% % 5.2% 5.0% 2018(2)... N/A 3.8% 4.1% Notes: (1) Source: Illinois Department of Employment Security. (2) Preliminary rates for the month of November Building Permits Building permit values have averaged approximately $4,489,300 annually for the most recent five years in the City, excluding the value of land. City Building Permits(1) (Excludes the Value of Land) Fiscal Year Single-Family Multi-Family and Commercial Total Value $ 612, , , , ,871, ,255, , ,405,000 Note: (1) Source: the City. Housing The U.S. Census Bureau 5-year estimated values reported that the median value of the City s owner-occupied homes was $187,900. This compares to $227,400 for the County and $179,700 for the State. The following table represents the five-year average market value of specified owner-occupied units for the City, the County and the State at the time of the American Community Survey. Home Values(1) The City The County The State Value Number Percent Number Percent Number Percent Under $50, % 47, % 231, % $50,000 to $99, % 103, % 501, % $100,000 to $149, , % 149, % 516, % $150,000 to $199, % 178, % 514, % $200,000 to $299, , % 258, % 653, % $300,000 to $499, % 232, % 505, % $500,000 to $999, % 111, % 209, % $1,000,000 or more % 30, % 51, % Total... 5, % 1,112, % 3,185, % Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2013 to

15 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Mortgage Status(1) The City The County The State Value Number Percent Number Percent Number Percent Housing Units with a Mortgage... 3, % 735, % 2,052, % Housing Units without a Mortgage... 2, % 377, % 1,132, % Total... 5, % 1,112, % 3,185, % Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2013 to Income Per Capita Personal Income for the Highest Income Counties in the State(1) Rank 2013 to Lake County... $42, DuPage County... 42, Monroe County... 37, McHenry County... 36, Woodford County... 34, Will County... 33, Cook County... 33, Putnam County... 33, Piatt County... 33, Kane County... 33, Kendall County... 33, Sangamon County... 33,277 Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-Year estimates 2013 to The following shows the median family income for counties in the Chicago metropolitan area. Ranking of Median Family Income(1) Family County Income Rank DuPage County... $103,731 1 Lake County ,965 2 Kendall County... 97,105 3 McHenry County... 94,995 4 Will County... 93,727 5 Kane County... 87,818 7 Cook County... 73, Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-Year estimates 2013 to

16 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 The U.S. Census Bureau 5-year estimated values reported that the City had a median family income of $72,689. This compares to $73,012 for the County and $76,533 for the State. The following table represents the distribution of family incomes for the City, the County and the State at the time of the American Community Survey. Family Income(1) The City The County The State Income Number Percent Number Percent Number Percent Under $10, % 58, % 126, % $10,000 to $14, % 34, % 75, % $15,000 to $24, % 88, % 197, % $25,000 to $34, % 96, % 227, % $35,000 to $49, % 135, % 354, % $50,000 to $74, , % 192, % 550, % $75,000 to $99, % 154, % 452, % $100,000 to $149, % 201, % 584, % $150,000 to $199, % 99, % 266, % $200,000 or more % 122, % 287, % Total... 4, % 1,182, % 3,122, % Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2013 to The U.S. Census Bureau 5-year estimated values reported that the City had a median household income of $57,956. This compares to $59,426 for the County and $61,229 for the State. The following table represents the distribution of household incomes for the City, the County and the State at the time of the American Community Survey. Household Income(1) The City The County The State Income Number Percent Number Percent Number Percent Under $10, % 159, % 331, % $10,000 to $14, % 89, % 204, % $15,000 to $24, % 189, % 446, % $25,000 to $34, % 173, % 425, % $35,000 to $49, % 232, % 593, % $50,000 to $74, , % 321, % 836, % $75,000 to $99, % 234, % 613, % $100,000 to $149, , % 278, % 724, % $150,000 to $199, % 126, % 311, % $200,000 or more % 150, % 330, % Total... 6, % 1,956, % 4,818, % Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2013 to

17 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Retail Activity Following is a summary of the City s sales tax receipts as collected and disbursed by the State. Retailers Occupation, Service Occupation and Use Tax(1) State Fiscal Year State Sales Tax Annual Percent Ending June 30 Distributions(2) Change + (-) $732,336 N/A , % , % ,645 (4.58%) , % , % Growth from 2013 to % Notes: (1) Source: Illinois Department of Revenue. (2) Tax distributions are based on records of the Illinois Department of Revenue relating to the 1% municipal portion of the Retailers Occupation, Service Occupation and Use Tax, collected on behalf of the City, less a State administration fee. The municipal 1% includes tax receipts from the sale of food and drugs which are not taxed by the State. THE PROJECT The proceeds of the Certificates are expected to finance the costs of certain capital improvements in the City, including the construction of a new public works building, and to pay the costs of issuance of the Certificates. The public works building will be approximately 40,000 square feet and will be located at 7860 W. 108 th Street. The total cost of the public works building is expected to be financed by $6,400,000 from net Certificate proceeds and $700,000 from other funds on hand of the City. DEFAULT RECORD The City has no record of default and has met its debt repayment obligations promptly. SHORT-TERM BORROWING The City has not issued tax anticipation warrants or revenue anticipation notes during the last five years to meet its short-term current year cash flow requirements. The remainder of this page was left blank intentionally. 14

18 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 DEBT INFORMATION After issuance of the Certificates, the City will have outstanding $7,175,000* principal amount of general obligation certificated debt. In addition, the City has outstanding $70,177 principal amount of equipment purchase installment contract obligations as of April 30, The City does not expect to issue any other bonded or certificated indebtedness in General Obligation Bonded Debt(1) (Principal Only) Calendar Series 2003A The Total Debt Cumulative Principal Retired(2) Year Debt Certificates Certificates(2) Certificate Debt(2) Amount Percent $145,000 $ 295,000 $ 440,000 $ 440, % , , , , % , , ,000 1,240, % , , ,000 1,660, % , ,000 1,925, % , ,000 2,195, % , ,000 2,475, % , ,000 2,765, % , ,000 3,060, % , ,000 3,370, % , ,000 3,690, % , ,000 4,020, % , ,000 4,360, % , ,000 4,715, % , ,000 5,085, % , ,000 5,470, % , ,000 5,870, % , ,000 6,285, % , ,000 6,720, % , ,000 7,175, % Total... $615,000 $6,560,000 $7,175,000 Notes: (1) Source: the City. (2) Subject to change. Detailed Overlapping Bonded Debt(1) (As of February 5, 2019) Outstanding Applicable to the City Debt(2) Percent(3) Amount Schools: School District Number $ 19,820, % $ 7,434,907 School District Number ,170, % 443,159 School District Number ,585, % 103 High School District Number ,255, % 608,585 Community College District Number ,070, % 2,910,030 Total Schools... $11,396,784 Others: Cook County... $2,950,121, % $ 7,243,638 Cook County Forest Preserve District ,360, % 349,546 Metropolitan Water Reclamation District... 2,348,253, % 5,877,728 Green Hills Public Library District... 2,060, % 1,105,839 Hickory Hills Park District , % 460 Worth Park District , % 548 Total Others... $14,577,760 Total Schools and Other Overlapping Bonded Debt... $25,974,544 Notes: (1) Source: Cook County Clerk. (2) Includes alternate revenue source bonded debt. (3) Overlapping debt percentages based on 2017 EAV, the most current available. 15

19 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Statement of Bonded Indebtedness(1) Ratio To Per Capita Amount Equalized Estimated (2010 Census Applicable Assessed Actual Pop. 17,484) City EAV of Taxable Property, $ 370,311, % 33.33% $21, Estimated Actual Value, $1,110,934, % % $63, Total Direct Bonded Debt(2)... $ 7,175, % 0.65% $ Overlapping Bonded Debt(3): Schools... $ 11,396, % 1.03% $ Others... 14,577, % 1.31% Total Overlapping Bonded Debt... $ 25,974, % 2.34% $ 1, Total Direct and Overlapping Bonded Debt... $ 33,149, % 2.98% $ 1, Notes: (1) Source: Cook County Clerk. (2) Subject to change. Excludes $70,177 principal amount of installment contract certificates. (3) As of February 5, 2019 for Overlapping Bonded Debt. Legal Debt Margin(1) (As of April 4, 2019) 2017 City Equalized Assessed Valuation... $370,311,623 Statutory Debt Limitation (8.625% of EAV)... 31,939,377 General Obligation Debt: Installment Contract Certificates... $ 70,177 Series 2003A Debt Certificates ,000 The Certificates(2)... 6,560,000 Total Certificated Debt(2).... $7,245,177 Total Applicable Debt(2)... $ 7,245,177 Legal Debt Margin(2)... $ 24,694,200 Notes: (1) Source: the City. As of the date of issuance of the Certificates. (2) Subject to change. PROPERTY ASSESSMENT AND TAX INFORMATION For the 2017 levy year, the City's EAV was comprised of 83% residential, 1% industrial, 16% commercial, and less than 1% farm and railroad property valuations. Equalized Assessed Valuation(1) Levy Years Property Class Residential... $268,126,543 $258,651,443 $252,386,865 $262,929,201 $306,433,647 Farm , , ,884 Commercial... 45,789,017 51,476,106 50,549,707 51,799,626 58,791,628 Industrial... 14,227,256 4,894,282 4,792,277 5,034,181 4,867,464 Total... $328,142,816 $315,074,716 $307,728,849 $319,819,285 $370,311,623 Percent Change... (7.51%)(2) (3.98%) (2.33%) 3.93% 15.79% Notes: (1) Source: Cook County Clerk. (2) Percentage change based on 2012 EAV of $354,805,

20 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Representative Tax Rates(1) (Per $100 EAV) Levy Years The City: Corporate... $ $ $ $ $ Garbage Library Police Pension I.M.R.F Street & Bridge Public Benefit Police Protection Social Security Auditing Liability Insurance Crossing Guards Total City Rates(2)... $ $ $ $ $ Cook County... $ $ $ $ $ Cook County Forest Preserve District Consolidated Elections Metropolitan Water Reclamation District South Cook County Mosquito Abatement District Palos Township Road and Bridge Palos Township General Assistance Palos Township North Palos Fire Protection District Green Hills Public Library District School District Number Consolidated High School District Number Moraine Valley Community College District Number Total Tax Rates(3)... $ $ $ $ $ Notes: (1) Source: Cook County Clerk and the City. (2) Statutory tax rate limits for the City are as follows: Corporate ($0.2664); Garbage ($0.2000); Library ($0.2000); Street & Bridge ($0.0600); Public Benefit ($0.0500); Police Protection ($0.0750) and Crossing Guards ($0.0200). (3) Representative tax rates for other government units are from Palos Township tax code 30031, which represents 67% of the City's 2017 EAV. Tax Extensions and Collections(1) Fiscal Year Total Tax Levy Total Collections to Date Ending April 30 For Fiscal Year Amount Percent $2,088, $2,049, % ,124, ,022, % ,146, ,082, % ,172, ,081, % ,262, ,187, % Note: (1) Source: the City. 17

21 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Principal Taxpayers(1) Taxpayer Name Business/Service 2017 EAV(2) Palos Hills Extended... Retail and Commercial Properties... $ 5,778,732 Green Oaks Investments... Special Rental Properties... 5,549,344 R & D Management... Industrial properties... 3,136,691 City of Palos Hills... Parcels of Vacant Land... 2,693,326 Individual... Shopping Center... 2,196,928 Robak Inc.... Special Commercial Structure... 1,630,661 Palos Hills Realty LLC... Retail and Commercial Properties... 1,613,602 Individual... Real Estate... 1,609, Southwest Hwy LLC... Commercial Property... 1,503, West 103 LLC... Commercial Property... 1,351,880 Total... $27,064,794 Ten largest as a percent of the City's 2017 EAV ($370,311,623) % Notes: (1) Source: Cook County Clerk. (2) Every effort has been made to seek out and report the largest taxpayers. However, many of the taxpayers listed contain multiple parcels and it is possible that some parcels and their valuations have been overlooked. The 2017 EAV is the most current available. REAL PROPERTY ASSESSMENT, TAX LEVY AND COLLECTION PROCEDURES Summary of Property Assessment, Tax Levy and Collection Procedures A separate tax to pay the principal of and certain interest on the Certificates will not be levied on all taxable real property within the City. The information under this caption describes the current procedures for real property assessments, tax levies and collections in the County. There can be no assurance that the procedures described herein will not change. Real Property Assessment The County Assessor (the Assessor ) is responsible for the assessment of all taxable real property within the County, including that in the City, except for certain railroad property and pollution control facilities, which are assessed directly by the Illinois Department of Revenue (the Department of Revenue ). For triennial reassessment purposes, the County is divided into three districts: west and south suburbs (the South Tri ), north and northwest suburbs (the North Tri ), and the City of Chicago (the City Tri ). The City is located in the South Tri and was reassessed for the 2017 tax levy year. Real property in the County is separated into classes for assessment purposes. After the County Assessor establishes the fair market value of a parcel of property, that value is multiplied by the appropriate classification percentage to arrive at the assessed valuation (the Assessed Valuation ) for the parcel. Prior to the 2009 tax levy year, the classification percentages ranged from 16% for certain residential, commercial and industrial property to 36% and 38%, respectively, for other industrial and commercial property. On September 17, 2008, the Cook County Board of Commissioners approved changes to the property classification ordinance. The changes reduced the percentages used to calculate the assessed value of real property in the County for real estate tax purposes. These reductions take effect in the 2009 tax levy year. Such new classification percentages range from 10% for certain residential, commercial and industrial property to 25% for other industrial and commercial property. 18

22 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Property is classified for assessment into six basic categories, each of which is assessed (beginning with the 2009 tax levy year) at various percentages of fair market value as follows: Class 1) unimproved real estate - 10%; Class 2) residential - 10%; Class 3) rental-residential - 16%, in tax year 2009, 13% in assessment year 2010, and 10% in assessment year 2011 and subsequent years; Class 4) not-for-profit - 25%; Class 5a) commercial - 25%; Class 5b) industrial - 25%. There are also eight additional categories. Upon expiration of such classification, property so classified will revert to one of the basic six assessment classifications described above. Newly constructed industrial properties or substantially rehabilitated sections of existing industrial properties within the County may qualify for a Class 6b assessment level, which assessment level is 10% for the first 10 years and for any subsequent 10-year renewal periods. However, if the incentive is not renewed, the 6b assessment level is 15% in year 11 and 20% in year 12, hereafter reverting to Class 5b. Real estate, which is to be used for industrial or commercial purposes where such real estate has undergone environmental testing and remediation, may be eligible for a Class C assessment level. The Class C assessment level for industrial properties is 10% for the first 10 years, 15% in year 11 and 20% in year 12, thereafter reverting to Class 5b. Class C commercial properties are assessed at 10% for the first 10 years, 15% in year 11 and 20% in year 12, thereafter reverting to Class 5a. Commercial properties that are newly constructed or substantially rehabilitated and are within an area determined to be an area in need of commercial development may be classified as Class 7a or 7b property, and will then be assessed at a level of 10% for the first 10 years, 15% in year 11 and 20% in year 12, thereafter reverting to Class 5a. Newly constructed or rehabilitated commercial buildings and acquisition of abandoned property and rehabilitation of buildings thereon including the land upon which the buildings are situated and the land related to the rehabilitation may be classified as Class 7c, and will be assessed at a level of 10% for first 3 years and any 3 year renewal; if not renewed, 15% in year 4, 20% in year 5, thereafter reverting to Class 5a. Certain commercial and industrial properties located in zones determined to be in need of substantial revitalization or in an enterprise community could be eligible for Class 8 assessments. The Class 8 assessment level for industrial properties is 10% for the first 10 years and for any subsequent 10-year renewal periods. If the incentive is not renewed, the Class 8 assessment level for industrial properties is 15% in year 11 and 20% in year 12, thereafter reverting to Class 5b. The Class 8 assessment level for commercial properties is 10% for the first 10 years, 15% in year 11 and 20% in year 12, thereafter reverting to Class 5a. Substantially rehabilitated or new construction multifamily residential properties within certain target areas, empowerment or enterprise zones may be eligible for Class 9 categorization. The Class 9 assessment level is 10% for an initial 10-year period, renewable upon application for additional 10-year periods. When the Class 9 assessment level expires, the assessment level reverts to the applicable classification. Rental-residential (Class 3) properties subject to a Section 8 contract that has been renewed under the Mark Up To Market option may qualify for a Class S assessment level The Class S assessment level is 10% for the term of the Section 8 contract renewal under the Mark Up To Market option, and for any additional terms of renewal of the Section 8 contract under the Mark Up To Market option. When the Class S assessment level expires, the assessment level reverts to Class 3. Substantially rehabilitated properties which are designated as Class 3, Class 4, Class 5a or Class 5b and which qualify as Landmark or Contributing buildings may qualify for a Class L assessment level. The Class L assessment level for Class 3, 4 or 5b properties is 10% for the first 10 years and for any subsequent 10-year renewal periods. If the incentive is not renewed, the Class L assessment level is 15% in year 11 and 20% in year 12, thereafter reverting to Class 3, 4 or 5b. Class L commercial properties are assessed at 10% for the first 10 years, 15% in year 11 and 20% in year 12, thereafter reverting to Class 5a. The Assessor has established procedures enabling taxpayers to contest their proposed Assessed Valuations. Once the Assessor certifies its final Assessed Valuations, a taxpayer can seek review of its assessment by appealing to the Cook County Board of Review, which consists of three commissioners elected by the voters of the County. The Board of Review has the power to adjust the Assessed Valuations set by the Assessor. 19

23 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Owners of both residential property having six or fewer units and owners of real estate other than residential property with six or fewer units are able to appeal decisions of the Board of Review to the Illinois Property Tax Appeal Board (the PTAB ), a statewide administrative body. The PTAB has the power to determine the Assessed Valuation of real property based on equity and the weight of the evidence. Taxpayers may appeal the decision of PTAB to either the Circuit Court of Cook County or the Illinois Appellate Court under the Illinois Administrative Review Law. As an alternative to seeking review of Assessed Valuations by PTAB, taxpayers who have first exhausted their remedies before the Board of Review may file an objection in the Circuit Court of Cook County similar to the previous judicial review procedure but with a different standard of proof than that previously required. In addition, in cases where the Assessor agrees that an assessment error has been made after tax bills have been issued, the Assessor can correct any factual error, and thus reduce the amount of taxes due, by issuing a Certificate of Error. Certificates of Error are not issued in cases where the only issue is the opinion of the valuation of the property. Equalization After the County Assessor has established the Assessed Valuation for each parcel for a given year, and following any revisions by the Board of Review or PTAB, the Illinois Department of Revenue is required by statute to review the Assessed Valuations. The Illinois Department of Revenue establishes an equalization factor (the Equalization Factor ), commonly called the multiplier, for each county to make all valuations uniform among the 102 counties in the State. Under State law, the aggregate of the assessments within each county is to be equalized at 33-1/3% of the estimated fair cash value of real property located within the county prior to any applicable exemptions. One multiplier is applied to all property in Cook County, regardless of its assessment category, except for some farmland property which is not subject to equalization. Once the Equalization Factor is established, the Assessed Valuation, as revised by the Board of Review or PTAB, is multiplied by the Equalization Factor to determine the equalized assessed valuation (the EAV ) of that parcel. The EAV for each parcel is the final property valuation used for determination of tax liability. The aggregate EAV for all parcels in any taxing body s jurisdiction, plus the valuation of property assessed directly by the State, constitutes the total real estate tax base for the taxing body and is the figure used to calculate tax rates (the Assessment Base ). The following table sets forth the Equalization Factor for Cook County for the last 10 tax levy years. TAX LEVY YEAR EQUALIZATION FACTOR

24 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Exemptions The Illinois Property Tax Code, as amended (the Property Tax Code ), exempts certain property from taxation. Certain property is exempt from taxation on the basis of ownership and/or use, including, but not limited to, public parks, not-for-profit schools, public schools, churches, not-for-profit hospitals and public hospitals. In addition, the Property Tax Code provides a variety of homestead exemptions, which are discussed below. An annual General Homestead Exemption provides that the EAV of certain property owned and used for residential purposes ( Residential Property ) may be reduced by the amount of any increase over the 1977 EAV, up to a maximum reduction of $10,000 for tax year 2017 and thereafter. The Long-Time Occupant Homestead Exemption limits the increase in EAV of a taxpayer s homestead property to 10% per year if such taxpayer has owned the property for at least 10 years as of January 1 of the assessment year (or 5 years if purchased with certain government assistance) and has a household income of $100,000 or less ( Qualified Homestead Property ). If the taxpayer s annual income is $75,000 or less, the EAV of the Qualified Homestead Property may increase by no more than 7% per year. There is no exemption limit for Qualified Homestead Properties. The Homestead Improvement Exemption applies to Residential Property that has been improved and to properties that have been rebuilt in the two years following a catastrophic event, as defined in the Property Tax Code. The exemption is limited to $75,000 for up to four years, to the extent the assessed value is attributable solely to such improvements or rebuilding. The Senior Citizens Homestead Exemption annually reduces the EAV on residences owned and occupied by senior citizens. Beginning with tax year 2017, the maximum exemption is $8,000. The Senior Citizens Assessment Freeze Homestead Exemption freezes property tax assessments for homeowners who are 65 and older and receive a household income not in excess of the maximum income limitation. The maximum income limitation is $55,000 for assessment year 2008 through assessment year Beginning in assessment year 2018, the maximum income limitation is $65,000. This exemption grants to qualifying senior citizens an exemption equal to the difference between (a) the current EAV of the residence and (b) the EAV of a senior citizen s residence for the year prior to the year in which he or she first qualifies and applies for the exemption, plus the EAV of improvements since such year. Beginning January 1, 2015 purchasers of certain single family homes and residences of one to six units located in certain targeted areas (as defined in the applicable section of the Property Tax Code) can apply for the Community Stabilization Assessment Freeze Pilot Program. To be eligible the purchaser must meet certain requirements for rehabilitating the property, including expenditures of at least $5 per square foot, adjusted by the Consumer Price Index ( CPI ). Upon meeting the requirements, the assessed value of the improvements is reduced by (a) 90% in the first seven years, (b) 65% in the eighth year and (c) 35% in the ninth year. The benefit ceases in the tenth year. The program will be phased out by June 30,

25 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 The Natural Disaster Homestead Exemption (the Natural Disaster Exemption ) applies to homestead properties containing a residential structure that has been rebuilt following a natural disaster occurring in taxable year 2012 or any taxable year thereafter. A natural disaster is an occurrence of widespread or severe damage or loss of property resulting from any catastrophic cause including but not limited to fire, flood, earthquake, wind, or storm. The Natural Disaster Exemption is equal to the EAV of the residence in the first taxable year for which the taxpayer applies for the exemption minus the base amount. To be eligible for the Natural Disaster Exemption, the residential structure must be rebuilt within two years after the date of the natural disaster, and the square footage of the rebuilt residential structure may not be more than 110% of the square footage of the original residential structure as it existed immediately prior to the natural disaster. The Natural Disaster Exemption remains at a constant amount until the taxable year in which the property is sold or transferred. Three exemptions are available to veterans of the United States armed forces. The Veterans with Disabilities Exemption for Specially-Adapted Housing exempts up to $100,000 of the Assessed Valuation of property owned and used exclusively by veterans with a disability, their spouses or unmarried surviving spouses. Qualification for this exemption requires the veteran s disability to be of such a nature that the federal government has authorized payment for purchase of specially adapted housing under the U.S. Code as certified to annually by the Illinois Department of Veterans Affairs or for housing or adaptations donated by a charitable organization to such disabled veteran. The Standard Homestead Exemption for Veterans with Disabilities provides an annual homestead exemption to veterans with a service-connected disability based on the percentage of such disability. If the veteran has a (a) serviceconnected disability of 30% or more but less than 50%, the annual exemption is $2,500, (b) service-connected disability of 50% or more but less than 70%, the annual exemption is $5,000, and (c) service-connected disability of 70% or more, the property is exempt from taxation. The Returning Veterans Homestead Exemption is available for property owned and occupied as the principal residence of a veteran in the assessment year, and the year following the assessment year, in which the veteran returns from an armed conflict while on active duty in the United States armed forces. This provision grants a one-time, twoyear homestead exemption of $5,000. Finally, the Homestead Exemption for Persons with Disabilities provides an annual homestead exemption in the amount of $2,000 for property that is owned and occupied by certain disabled persons who meet State-mandated guidelines. Tax Levy As part of the annual budgetary process of governmental units (the Units ) with power to levy taxes in the County, proceedings are adopted by the designated body for each Unit each year in which it determines to levy real estate taxes. The administration and collection of real estate taxes is statutorily assigned to the County Clerk and the County Treasurer. After the Units file their annual tax levies, the County Clerk computes the annual tax rate for each Unit. The Cook County Clerk uses the prior year s EAV to compute the taxing district s maximum allowable levy. The maximum levy that can be raised for a Unit is the maximum tax rate for that Unit multiplied by the prior year, EAV for all property currently in the district. The prior year s EAV includes the prior year s EAV plus the EAV of any new property, the current year value of any annexed property, and any recovered tax increment value, minus any disconnected property for the current year under the Limitation Law. The tax rate for a Unit is computed by dividing the lesser of the maximum allowable levy or the actual levy by the current year s EAV. 22

26 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Property Tax Extension Limitation Law The Limitation Law is applied after the prior year EAV limitation. The Limitation Law limits the annual growth in the amount of property taxes to be extended for certain Illinois non-home rule units, including the City. The effect of the Limitation Law is to limit the amount of property taxes that can be extended for a taxing body. In addition, general obligation bonds, notes and installment contracts payable from ad valorem taxes, unlimited as to rate and amount, cannot be issued by the affected taxing bodies unless they are approved by referendum, are alternate bonds or are for certain refunding purposes. The use of prior year EAVs to limit the allowable tax levy may reduce tax rates for funds that are at or near their maximum rates in districts with rising EAVs. These reduced rates and all other rates for those funds subject to the Limitation Law are added together, which results in the aggregate preliminary rate. The aggregate preliminary rate is then compared to the limiting rate. If the limiting rate is more than the aggregate preliminary rate, there is no further reduction in rates due to the Limitation Law. If the limiting rate is less than the aggregate preliminary rate, the aggregate preliminary rate is further reduced to the limiting rate. In all cases, taxes are extended using current year EAV under Section of the Property Tax Code. The City has the authority to levy taxes for many different purposes. See the table entitled Representative Tax Rates under PROPERTY ASSESSMENT AND TAX INFORMATION herein. The ceiling at any particular time on the rate at which these taxes may be extended for the City is either (i) unlimited (as provided by statute), (ii) initially set by statute but permitted to be increased by referendum, (iii) capped by statute, or (iv) limited to the rate approved by referendum. Public Act , effective June 30, 2006, provides that the only ceiling on a particular tax rate is the ceiling set by statute above, at which the rate is not permitted to be further increased by referendum or otherwise. Therefore, taxing districts (such as the City) will have increased flexibility to levy taxes for the purposes for which they most need the money. The total aggregate tax rate for the various purposes subject to the Limitation Law, however, will not be allowed to exceed the City s limiting rate computed in accordance with the provisions of the Limitation Law. In general, the annual growth permitted under the Limitation Law is the lesser of 5% or the percentage increase in the Consumer Price Index during the calendar year preceding the levy year. Taxes can also be increased due to new construction, referendum approval of tax rate increases, mergers and consolidations. Local governments, including the City, can issue limited tax bonds in lieu of general obligation bonds that have otherwise been authorized by applicable law. See DESCRIPTION OF THE CERTIFICATES herein. Illinois legislators have introduced several proposals to modify the Limitation Law, including freezing property taxes and extending tax caps to all taxing bodies in the State. In particular, the House passed Senate Bill 851 ( Senate Bill 851 ) on November 8, Senate Bill 851 provides that for levy years 2017 and 2018, for taxing districts (including home rule units) with a majority of EAV in Cook and the collar counties (Lake, McHenry, Kane, DuPage and Will Counties), other than qualified school districts, the extension limitation under the Limitation Law will be 0% or the rate of increase approved by voters. In addition, Senate Bill 851 allows county boards for counties other than Cook and the collar counties, to submit to their voters at the general primary or general election in 2018, the question of whether to subject all taxing districts (including home rule units) with a majority of EAV in their county, other than qualified school districts, to the provisions of the Limitation Law and an extension limitation under the Limitation Law of 0% or the rate of increase approved by voters for levy years 2018 and Senate Bill 851 is subject to a vote of concurrence by the Senate and approval from the Governor prior to being enacted into law. If Senate Bill 851 or similar legislation were to become law, such reform may have a material impact on the finances of the City. The City cannot predict whether, or in what form, any change to the Limitation Law, including Senate Bill 851, may be enacted into law, nor can the City predict the effect of any such change on the City s finances. 23

27 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Extensions The County Clerk then computes the total tax rate applicable to each parcel of real property by aggregating the tax rates of all of the Units having jurisdiction over the particular parcel. The County Clerk extends the tax by entering the tax (determined by multiplying the total tax rate by the EAV of that parcel for the current assessment year) in the books prepared for the County Collector (the Warrant Books ) along with the tax rates, the Assessed Valuation and the EAV. The Warrant Books are the County Collector s authority for the collection of taxes and are used by the County Collector as the basis for issuing tax bills to all property owners. Collections Property taxes are collected by the County Collector, who is also the County Treasurer, who remits to each Unit its share of the collections. Taxes levied in one year become payable during the following year in two installments, the first due on March 1 and the second on the later of August 1 or 30 days after the mailing of the tax bills. A payment due is deemed to be paid on time if the payment is postmarked on the due date. The first installment is equal to one-half of the prior year s tax bill; beginning in collection year 2010, this estimated amount was raised to 55% of the prior year s tax bill. However, if a Certificate of Error is approved by a court or certified on or before November 30 of the preceding year and before the estimated tax bills are prepared, then the first installment is instead equal to one-half of the corrected prior year s tax bill. The second installment is for the balance of the current year s tax bill, and is based on the then current tax year levy, assessed value and Equalization Factor, and reflects any changes from the prior year in those factors. The following table sets forth the second installment penalty date for the last 10 tax levy years in Cook County; the first installment penalty date has been March 1 for all such years. SECOND INSTALLMENT TAX LEVY YEAR PENALTY DATE 2008 December 1, December 13, November 1, August 1, August 1, August 1, August 3, August 1, August 1, August 1, 2018 It is possible that the changes to the assessment appeals process described above will cause delays similar to those experienced in past years in preparation and mailing of the second installment in future years. The County may provide for tax bills to be payable in four installments instead of two. However, the County has not required payment of tax bills in four installments. During the periods of peak collections, tax receipts are forwarded to each Unit on a weekly basis. Upon receipt of taxes from the County Collector, the City promptly credits the taxes received to the funds for which they were levied. 24

28 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 At the end of each collection year, the County Collector presents the Warrant Books to the Circuit Court and applies for a judgment for all unpaid taxes. The court orders resulting from the application for judgment provides for an Annual Tax Sale (the Annual Tax Sale ) of unpaid taxes shown on that year s Warrant Books. A public sale is held, at which time successful tax buyers pay the unpaid taxes plus penalties. In each such public sale, the collector can use any automated means. Unpaid taxes accrue penalties at the rate of 1.5% per month from their due date until the date of sale. Taxpayers can redeem their property by paying the amount paid at the sale, plus a maximum of 12% for each six-month period after the sale. If no redemption is made within the applicable redemption period (ranging from six months to two and one-half years depending on the type and occupancy of the property) and the tax buyer files a petition in the Circuit Court notifying the necessary parties in accordance with the applicable law, the tax buyer receives a deed to the property. In addition, there are miscellaneous statutory provisions for foreclosure of tax liens. If there is no sale of the tax lien on a parcel of property at the Annual Tax Sale, the taxes are forfeited and the property becomes eligible to be purchased at any time thereafter at an amount equal to all delinquent taxes and interest accrued to the date of purchase. Redemption periods and procedures are the same as applicable to the Annual Tax Sale. The Scavenger Sale (the Scavenger Sale ), like the Annual Tax Sale, is a sale of unpaid taxes. The Scavenger Sale is held every two years on all property on which two or more years taxes are delinquent. The sale price of the unpaid taxes is the amount bid at such sale, which may be less than the amount of delinquent taxes. Redemption periods vary from six months to two and a half years depending upon the type and occupancy of the property. Illinois legislators have introduced proposals to modify the Limitation Law, including the Property Tax Freeze Proposal. If the Property Tax Freeze Proposal or similar legislation were to become law, such reform may have a material impact on the finances of the City and the ability of the City to issue non-referendum bonds. The City cannot predict whether, or in what form, any change to the Limitation Law, including the Property Tax Freeze Proposal, may be enacted into law, nor can the City predict the effect of any such change on the City s finances. Truth in Taxation Law Legislation known as the Truth in Taxation Law (the Truth in Taxation Law ) limits the aggregate amount of certain taxes which can be levied by, and extended for, a taxing district to 105% of the amount of taxes extended in the preceding year unless specified notice, hearing and certification requirements are met by the taxing body. The express purpose of the Truth in Taxation Law is to require published disclosure of, and hearing upon, an intention to adopt a levy in excess of the specified levels. Because the debt service on the Certificates is not paid from the levy of taxes, the provisions of the Truth in Taxation Law do not apply. The remainder of this page was left blank intentionally. 25

29 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 FINANCIAL INFORMATION Financial Reports The City s financial statements are audited annually by certified public accountants. The City s financial statements are completed on a modified accrual basis of accounting consistent with generally accepted accounting principles applicable to governmental entities. See APPENDIX A for more detail. The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its comprehensive annual financial report for the fiscal year ended April 30, In order to be awarded a Certificate of Achievement, the government published a comprehensive annual financial report. This report satisfied both generally accepted accounting principles and applicable legal requirements. No Consent or Updated Information Requested of the Auditor The tables contained in this FINANCIAL INFORMATION section (the Excerpted Financial Information ) are from the audited financial statements of the City, including the audited financial statements for the fiscal year ended April 30, 2018 (the 2018 Audit ), which was approved by formal action of the City Council and attached to this Official Statement as APPENDIX A. The City has not requested the Auditor to update information contained in the Excerpted Financial Information or the 2018 Audit; nor has the City requested that the Auditor consent to the use of the Excerpted Financial Information or the 2018 Audit in this Official Statement. Other than as expressly set forth in this Official Statement, the financial information contained in the Excerpted Financial Information and 2018 Audit has not been updated since the date of the 2018 Audit. The inclusion of the Excerpted Financial Information and 2018 Audit in this Official Statement in and of itself is not intended to demonstrate the fiscal condition of the City since the date of the 2018 Audit. Questions or inquiries relating to financial information of the City since the date of the 2018 Audit should be directed to the City. Summary Financial Information The City expects to pay debt service on the Certificates from the receipts from a City-wide capital improvement fee placed on the water bills of the City s residents, which became effective January 8, 2008 and does not expire. Such receipts are expected to be realized by the City in annual amounts equal to approximately 1.25 times debt service on the Certificates. The City is operating under a balanced budget for its fiscal year ending April 30, 2019, and the General Fund revenues and expenditures are generally within budgeted amounts for such fiscal year. The following tables are summaries and do not purport to be the complete audits, copies of which are available upon request. See APPENDIX A for excerpts of the City s 2018 fiscal year audit. 26

30 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Statement of Net Position Governmental Activities Audited as of April ASSETS: Cash and Cash Equivalents... $ 3,971,875 $ 4,062,114 $ 4,111,610 $ 4,214,478 $ 5,163,220 Receivables: Property Taxes... 1,004,729 1,028,467 1,037,369 1,067,855 1,061,383 Other , , , , ,984 Due from Other Governmental Units , , , , ,325 Due from Fiduciary Funds , Internal Balances... 1,458,316 1,900,745 2,236,092 2,000,785 1,725,371 Prepaid Expenses... 36,007 36,907 37,087 37,649 38,150 Capital Assets Not Being Depreciated... 5,404,581 5,404,581 5,404,581 5,404,581 5,404,581 Capital Assets, Net of Accumulated Depreciation... 4,216,003 4,309,347 4,017,195 3,728,123 3,436,016 Total Assets... $17,233,140 $17,948,727 $17,978,327 $17,527,193 $17,692,030 DEFERRED OUTFLOWS OF RESOURCES: Deferred Outflows of Resources Related to Pensions... $ 0 $ 0 $ 6,479,932 $ 6,040,925 $ 5,297,334 LIABILITIES: Accounts Payable... $ 176,038 $ 248,261 $ 164,718 $ 154,473 $ 284,842 Accrued Payroll and Compensated Absences ,603 69,773 85, , ,771 Accrued Interest... 51,661 51,316 33,096 32,700 12,916 Deposits Payable , , , , ,340 Due to Fiduciary Funds... 77,420 17,782 17,782 17,782 0 Noncurrent Liabilities: Due within one year , ,607 1,018,392 1,049, ,000 Due in more than one year... 7,510,793 7,403,585 19,351,600 19,055,491 17,625,798 Total Liabilities... $ 8,940,438 $ 8,944,176 $20,844,742 $20,524,113 $19,133,667 DEFERRED INFLOWS OF RESOURCES: Deferred Revenue, Property Taxes... $ 994,673 $ 1,021,502 $ 1,020,137 $ 1,044,417 $ 1,043,769 Intergovernmental Revenue , Deferred Inflows of Resources Related to Pensions , , ,582 1,447,923 Total Deferred Inflows of Resources... $ 994,673 $ 1,034,287 $ 1,155,082 $ 1,420,999 $ 2,491,692 NET POSITION: Net Investment in Capital Assets... $ 8,393,736 $ 8,259,943 $ 8,175,266 $ 8,133,683 $ 8,100,130 Restricted for: Street Maintenance , , , ,640 1,082,808 Police Protection... 60, , , , ,358 Unrestricted (Deficit)... (1,905,756) (1,375,729) (6,833,843)(1) (7,666,204)(1) (8,124,291)(1) Total Net Position... $ 7,298,029 $ 7,970,264 $ 2,458,435 $ 1,623,006 $ 1,364,005 Note: (1) Includes implementation of GASB 68. The remainder of this page was left blank intentionally. 27

31 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Statement of Activities Governmental Activities Audited for the Fiscal Year Ending April Functions/Programs: Governmental Activities: General Government... $(1,055,986) $(1,048,591) $(1,413,214) $(1,145,109) $(1,225,121) Parks... (411,247) (397,922) (338,890) (350,965) (355,260) Public Safety... (4,615,227) (4,843,315) (5,216,401) (5,912,009) (5,467,626) Public Works... (1,007,447) (899,488) (555,933) (503,483) (614,117) Interest on Long-Term Debt... (200,291) (169,551) (6,497) (125,383) (69,756) Total Governmental Activities... $(7,290,198) $(7,358,867) $(7,530,935) $(8,036,949) $(7,731,880) General Revenues: Taxes: Property... $ 2,066,244 $ 2,065,403 $ 2,077,927 $ 2,124,377 $ 2,170,247 Utility... 1,217,167 1,124,236 1,029,936 1,046,362 1,023,765 Intergovernmental - Unrestricted... 3,492,103 3,768, State Income... (1) (1) 1,854,478 1,739,259 1,751,420 State Sales... (1) (1) 755, , ,485 Personal Property Replacement... (1) (1) 20,985 23,310 19,504 Local Use... (1) (1) 403, , ,890 Interest Income... 2,613 3,636 5,987 6,915 9,716 Miscellaneous Income , ,890 1,075, ,958 1,151,703 Transfers ,922 81,578 81,934 82,136 82,149 Total General Revenues... $ 7,917,941 $ 8,031,102 $ 7,305,770 $ 7,201,520 $ 7,472,879 Change in Net Position... $ 627,743 $ 672,235 $ (225,165) $ (835,429) $ (259,001) Net Position, Beginning... 6,670,286 7,298,029 2,683,600(2) 2,458,435 1,623,006 Net Position, Ending... $ 7,298,029 $ 7,970,264 $ 2,458,435 $ 1,623,006 $ 1,364,005 Notes: (1) Included under Intergovernmental - Unrestricted. (2) Restated due to implementation of GASB 68. The remainder of this page was left blank intentionally. 28

32 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 General Fund Balance Sheet Audited as of April ASSETS: Cash and Cash Equivalents... $1,533,714 $1,277,804 $1,245,231 $1,120,025 $1,726,386 Property Taxes Receivable... 1,004,729 1,028,467 1,037,369 1,067,855 1,061,383 Other Receivables , , , , ,557 Due from Other Governmental Units , , , , ,299 Due from Other Funds... 21,575 17, ,607 60,293 45,373 Advances to Other Funds... 1,858,487 1,967,958 2,040,116 2,112,191 2,206,432 Prepaid Items... 36,007 36,907 37,087 37,649 38,150 Total Assets... $5,454,834 $5,416,402 $5,569,464 $5,357,643 $5,798,580 LIABILITIES AND FUND BALANCE: Liabilities: Accounts Payable... $ 159,080 $ 199,244 $ 151,839 $ 148,837 $ 202,775 Accrued Payroll ,603 69,773 85, , ,771 Deposits Payable , , , , ,340 Due to Other Funds , , , , ,612 Total Liabilities... $1,033,191 $ 661,644 $ 627,229 $ 716,818 $1,238,498 DEFERRED INFLOWS OF RESOURCES: Deferred Revenue - Property Taxes... $ 994,673 $1,021,502 $1,020,137 $1,044,417 $1,043,769 Deferred Revenue - Intergovernmental , , ,337 0 Total Deferred Inflows of Resources... $1,258,934 $1,334,913 $1,020,137 $1,278,754 $1,043,769 Fund Balances: Nonspendable... $1,894,494 $2,004,865 $2,077,203 $2,149,840 $2,244,582 Unassigned... 1,268,215 1,414,980 1,844,895 1,212,231 1,271,731 Total Fund Balances... $3,162,709 $3,419,845 $3,922,098 $3,362,071 $3,516,313 Total Liabilities, Deferred Inflows of Resources and Fund Balances... $5,454,834 $5,416,402 $5,569,464 $5,357,643 $5,798,580 The remainder of this page was left blank intentionally. 29

33 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 General Fund Revenues and Expenditures Audited for the Fiscal Year Ending April REVENUES: Property Taxes... $2,066,244 $2,065,403 $2,077,927 $2,124,377 $2,170,247 Utility Taxes... 1,217,167 1,124,236 1,029,936 1,046,362 1,023,765 Licenses, Permits and Fees , , , , ,674 Intergovernmental... 2,859,415 2,947,408 3,348,120 2,744,435 3,269,636 Intragovernmental , , , , ,000 Fines and Forfeitures , , , ,221 1,033,215 Interest Income ,078 2,789 4,678 Miscellaneous Income... 14,267 66, ,641 66,453 18,031 Total Revenues... $7,911,179 $8,172,948 $8,618,278 $7,874,245 $8,746,246 EXPENDITURES: Current: General Government... $1,785,907 $1,711,118 $1,784,386 $1,794,250 $1,823,207 Parks , , , , ,288 Public Safety... 4,810,009 4,994,688 4,966,921 5,254,502 5,317,846 Public Works , , , , ,175 Debt Service: Principal Retirement , , , , ,457 Interest and Fees... 60,851 48,642 62,694 52,130 41,091 Capital Outlay:... 40, General Government... (1) 28,890 67,584 28,760 18,273 Public Safety... (1) 357,586 64,622 49,662 16,159 Public Works... (1) 5,645 6,062 13,044 28,960 Total Expenditures... $8,141,047 $8,351,262 $8,236,880 $8,526,893 $8,685,456 Excess (Deficit) of Revenues Over (Under) Expenditures $ (229,868) $ (178,314) $ 381,398 $ (652,648) $ 60,790 Other Financing Sources: Transfers in (Including Installment Contracts)... $ 223,540 $ 435,450 $ 120,855 $ 92,621 $ 93,452 Total Other Financing Sources... $ 223,540 $ 435,450 $ 120,855 $ 92,621 $ 93,452 Net Change in Fund Balance... $ (6,328) $ 257,136 $ 502,253 $ (560,027) $ 154,242 Fund Balance at Beginning of Year... 3,169,037 3,162,709 3,419,845 3,922,098 3,362,071 Fund Balance at End of Year... $3,162,709 $3,419,845 $3,922,098 $3,362,071 $3,516,313 Note: (1) Included Under Capital Outlay. EMPLOYEE RETIREMENT AND OTHER POSTEMPLOYMENT BENEFITS OBLIGATIONS The City participates in two defined benefit pension plans: (i) the Illinois Municipal Retirement Fund (the IMRF Plan ), and the (ii) the Police Pension Plan (the Police Pension Plan and, together with the IMRF Plan, the Pension Plans ). The Pension Plans provide defined benefit pension benefits to the City s employees, retirees and beneficiaries covered thereby. The IMRF Plan is an agent multiple-employer public employee retirement system, and the Police Pension Plan is a single-employer pension plan. The City makes certain contributions to the Pension Plans on behalf of its employees, as further described in this section. The operations of the Pension Plans, including the contributions to be made to the Pension Plans, the benefits provided by the Pension Plans, and the actuarial assumptions and methods employed in generating the liabilities and contributions of the Pension Plans, are governed by the Pension Code. This section first describes certain concepts related to pensions generally, then describes the applicable provisions of the Pension Plans. These concepts are more completely described in the 2018 Audit, as hereinafter defined, as well as the supplementary schedules thereto, attached hereto as APPENDICES A and D. 30

34 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 The Pension Code allows the State Comptroller to divert State payments intended for the City to the Police Pension Plan to satisfy contribution shortfalls by the City (the Recapture Provisions ). If the City fails to contribute to the Police Pension Plan as required by the pension code of the State, the City will be subject to a reallocation of payments of State funds to the City if: (i) the City fails to make the required payment for 90 days past the due date, (ii) the subject retirement fund gives notice of the failure to the City, and (iii) such retirement fund certifies to the State Comptroller that such payment has not been made. Upon the occurrence of these events, the State Comptroller will withhold payments of State funds from the City in an amount not in excess of the delinquent payment amount in the following proportions: (i) in fiscal year 2017, two-thirds of the total amount of any payments of State funds to the City and (ii) in fiscal year 2018 and in each fiscal year thereafter, 100% of the amount of any payments of State funds to the City. Should the Recapture Provisions be enforced as a result of the City s failure to contribute all of its required contribution, a reduction in payments of State funds may have an adverse impact on the City s finances. Recently, the State Comptroller began enforcing the Recapture Provisions for the benefit of an Illinois municipality s police and firefighter pension funds following the municipality s failure to contribute its required annual contributions to each fund. The municipality has challenged the State Comptroller s authority to enforce the Recapture Provisions. On April 26, 2018, the Illinois Supreme Court vacated an appellate ruling which had overturned the circuit court s denial of an injunction of the enforcement of the Recapture Provisions. Such dispute is ongoing, and the City cannot determine at this time whether the Illinois courts will enforce the Recapture Provisions. In addition, there are proposals pending in the Illinois General Assembly which would limit the State Comptroller s intercept power, starting in fiscal year 2019, to one-fourth of the total amount of State funds for any municipality. The City cannot determinate at this time whether any such proposal will become law in the future. For fiscal year 2018, the City contributed approximately 60.7% of the actuarially determined contribution to the Police Pension Plan. If the City does not contribute 100% of its statutory actuarial minimum required contributions to both pension plans in a year, the State Comptroller may withhold State payments otherwise due to the City. Background Regarding Pension Plans The Actuarial Valuation The disclosures in the 2018 Audit related to the Pension Plans are based in part on the actuarial valuations of the Pension Plans. In the actuarial valuations, the actuary for each of the Pension Plans measures the financial position of a Pension Plan, determines the amount to be contributed to a Pension Plan pursuant to statutory requirements, and produces information mandated by the financial reporting standards issued by the Governmental Accounting Standards Board ( GASB ), as described below. In producing an actuarial valuation, the actuary for a Pension Plan uses demographic data (including employee age, salary and service credits), economic assumptions (including estimated future salary and interest rates), and decrement assumptions (including employee turnover, mortality and retirement rates) and employs various actuarial methods to generate the information required to be included in such valuation. 31

35 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 GASB Standards Prior to the fiscal year ended December 31, 2015, the applicable GASB financial reporting standards with respect to the Pension Plans were GASB Statement No. 25 and GASB Statement No. 27 (together, the Prior GASB Standards ). The Prior GASB Standards required the disclosure of an Annually Required Contribution (which was such pronouncement s method for calculating the annual amounts needed to fully fund a pension plan) and the calculation of pension funding statistics such as the unfunded actuarial accrued liability ( UAAL ), which was the shortfall of the assets held by the pension plan when compared against the liabilities of such pension plan, as actuarially determined (the Actuarial Accrued Liability ), and the Funded Ratio, which was the ratio, expressed as a percentage, derived from dividing the assets of the pension plan by the Actuarial Accrued Liability. In addition, the Prior GASB Standards allowed pension plans to prepare financial reports pursuant to various approved actuarial methods and to use an assumed investment rate of return determined by the pension plan for financial reporting purposes. Beginning with the fiscal year ended December 31, 2015, the applicable GASB financial reporting standards with respect to the Pension Plans became GASB Statement No. 67 and GASB Statement No. 68 (together, the New GASB Standards ). Unlike the Prior GASB Standards, the New GASB Standards do not establish approaches to funding pension plans, and, therefore, do not require computation of the Annually Required Contribution or a similar contribution number. Instead, the New GASB Standards provide standards solely for financial reporting and accounting related to pension plans. The New GASB Standards require calculation and disclosure of a Net Pension Liability or Net Pension Asset, which is the difference between the actuarial present value of projected benefit payments that is attributed to past periods of employee service calculated pursuant to the methods and assumptions set forth in the New GASB Standards (referred to in such statements as the Total Pension Liability ) and the fair market value of the pension plan s assets (referred to as the Fiduciary Net Position ). This concept is similar to the UAAL, which was calculated under the Prior GASB Standards, but most likely will differ from the UAAL on any calculation date because the Fiduciary Net Position is calculated at fair market value and because of the differences in the manner of calculating the Total Pension Liability as compared to the Actuarial Accrued Liability under the Prior GASB Standards. Furthermore, the New GASB Standards employ a rate, referred to in such statements as the Discount Rate, which is used to discount projected benefit payments to their actuarial present values. The Discount Rate is a blended rate comprised of: (1) a long-term expected rate of return on a pension plan s investments (to the extent that such assets are projected to be sufficient to pay benefits), and (2) a tax-exempt municipal bond rate meeting certain specifications set forth in the New GASB Standards. Therefore, in certain cases in which the assets of a pension plan are not expected to be sufficient to pay the projected benefits of such pension plan, the Discount Rate calculated pursuant to the New GASB Standards may differ from the assumed investment rate of return used in reporting pursuant to the Prior GASB Standards. Finally, the New GASB Standards require that the Net Pension Liability be disclosed in the notes to the financial statements of the pension system and that a proportionate share of the Net Pension Liability be recognized on the balance sheet of the employer. In addition, the New GASB Standards require an expense to be recognized on the income statement of the City. 32

36 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Pension Plans Remain Governed by the Pension Code As described above, each of the Prior GASB Standards and the New GASB Standards establish requirements for financial reporting purposes. However, the Pension Plans are ultimately governed by the provisions of the Pension Code in all respects, including, but not limited to, the amounts to be contributed by the City to the Pension Plans in each year. Illinois Municipal Retirement Fund The City participates in the IMRF Plan, which is a defined-benefit, agent multiple-employer pension plan administered by the IMRF that acts as a common investment and administrative agent for units of local government and school districts in Illinois. All employees (other than those covered by the Police Pension Plan hired in positions that meet or exceed the prescribed annual hourly standard) must be enrolled in IMRF as participating members. The IMRF Plan is established and administered under statutes adopted by the General Assembly. The Pension Code sets the benefit provisions of the IMRF Plan, which can only be amended by the General Assembly. Each employer participating in the IMRF Plan, including the City, has an employer reserve account with the IMRF Plan separate and distinct from all other participating employers (the IMRF Account ) along with a unique employer contribution rate determined by the IMRF Board of Trustees (the IMRF Board ), as described below. The employees of a participating employer receive benefits solely from such employer s IMRF Account. Participating employers are not responsible for funding the deficits of other participating employers. The IMRF issues a publicly available financial report that includes financial statements and required supplementary information which may be viewed at the IMRF s website. See the 2018 Audit for additional information on the IMRF Plan s actuarial methods and assumptions. Contributions Both employers and employees contribute to the IMRF Plan. At present, employees contribute 4.50% of their salary to the IMRF Plan, as established by statute. Employers are required to make all additional contributions necessary to fund the benefits provided by the IMRF Plan to its employees. The annual rate at which an employer must contribute to the IMRF Plan is established by the IMRF Board. The City s contribution rates of covered payroll for calendar years 2017 and 2018 were 10.97% and 11.03%, respectively. For the fiscal year ended April 30, 2018, the City contributed $321,358 to the IMRF Plan. The remainder of this page was left blank intentionally. 33

37 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Measures of Financial Position The following table presents the measures of the IMRF Account s financial position as of December 31, 2015, December 31, 2016 and December 31, 2017, which are presented pursuant to the New GASB Standards. Such measures were calculated pursuant to the current Discount Rate of 7.50%. CALENDAR YEAR ENDED DECEMBER 31 TOTAL PENSION LIABILITY FIDUCIARY NET POSITION NET PENSION LIABILITY/(ASSET) FIDUCIARY NET POSITION AS A % OF TOTAL PENSION LIABILITY 2015 $15,188,531 $13,272,791 $1,915, % ,083,619 14,146,669 1,936, % ,152,233 16,196, , % Source: Audited financial statements for the City for fiscal years ended April 30, 2016, April 30, 2017 and April 30, See the 2018 Audit, and the related required supplementary information disclosures, for a description of the IMRF Plan, the IMRF Account, the City s funding policy, information on the assumptions and methods used by the Actuary, and the financial reporting information required by the New GASB Standards. Police Pension Plan The City provides retirement, death and disability benefits to its sworn police personnel and retirees and their beneficiaries through the Police Pension Plan. The Police Pension Plan is a single-employer defined benefit contribution plan. The benefits provided by the Police Pension Plan and the amount of employer and employee contributions to the Police Pension Plan are governed by the Pension Code and may only be amended by the General Assembly. As of April 30, 2018, the Police Pension Plan had a membership of 58. Contributions As stated above, both the City and its participating employees make contributions to the Police Pension Plan. At present, employees contribute 9.91% of their salary to the Police Pension Plan. The City is required to make all additional contributions necessary to fund the benefits provided by the Police Pension Plan to its members. The Pension Code requires that the City contribute annually the amount necessary to fund the normal cost of the Police Pension Plan for such year plus an amount sufficient to bring the total assets of the Police Pension Plan up to 90% of the total actuarial liabilities of the Police Pension Plan by the end of fiscal year 2040, as determined by an actuary (the Funding Requirement ). The Pension Code provides a levy of a separate tax annually by the City to generate the funds necessary to make this contribution. As the Funding Requirement represents an amortization of the unfunded portion of the actuarial liabilities of the Police Pension Plan over a closed period of time, the City s required contributions to the Police Pension Plan are expected to increase, possibly by a significant margin, during the period of fiscal years leading up to For fiscal year ended December 31, 2017, the City s contribution was 40.3% of covered payroll. 34

38 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Measures of Financial Position The following table provides statistical information produced pursuant to the New GASB Standards with respect to the Police Pension Plan for each of the last three fiscal years. The Total Pension Liability as of April 30, 2018, was calculated pursuant to the current Discount Rate of 6.75%. CALENDAR YEAR ENDED APRIL 30 TOTAL PENSION LIABILITY FIDUCIARY NET POSITION NET PENSION LIABILITY (ASSET) FIDUCIARY NET POSITION AS A % OF TOTAL PENSION LIABILITY 2016 $31,491,541 $16,055,746 $15,435, % ,424,174 17,414,635 16,009, % ,387,364 18,669,233 15,718, % Source: Audited financial statements for the City for fiscal years ended April 30, 2016, April 30, 2017 and April 30, See the 2018 Audit, and the related required supplementary information disclosures, for a description of the Police Pension Plan, the City s funding policy, information on the assumptions and methods used by the actuary for the Police Pension Plan, and the financial reporting information required by the New GASB Standards. Other Post-Employment Benefits In addition to providing the pension benefits described above, the City provides post-employment healthcare benefits ( OPEB ) for eligible retired employees through a single employer defined benefit plan (the OPEB Plan ). The benefits, benefit levels, employee contributions and employer contributions are governed by the City Council and can be amended by the City through its personnel manual and union contracts. As of December 31, 2017, the OPEB Plan had a membership of 10. For additional information regarding the OPEB Plan, see the 2018 Audit. The City does not currently fund the cost of benefits due under the OPEB Plan in advance of the payment of such expenses. Active employees do not contribute to the OPEB Plan until retirement. The City provides post-employment health care benefits to its retirees. To be eligible for benefits, an employee must qualify for retirement under one of the City s retirement plans. Elected officials are eligible for benefits if they qualify for retirement through the IMRF. All health care benefits are provided through the City s health insurance plan. The benefit levels are the same as those afforded to active employees. All retirees contribute 100% of the actuarially determined premium to the plan. For additional information on the City s post-employment benefits other than pensions, see the 2018 Audit. REGISTRATION, TRANSFER AND EXCHANGE See also APPENDIX B for information on registration, transfer and exchange of book-entry certificates. The Certificates will be initially issued as book-entry certificates. The City shall cause books (the Certificate Register ) for the registration and for the transfer of the Certificates to be kept at the principal office maintained for the purpose by the Registrar in Chicago, Illinois. The City will authorize to be prepared, and the Registrar shall keep custody of, multiple certificate blanks executed by the City for use in the transfer and exchange of Certificates. 35

39 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Any Certificate may be transferred or exchanged, but only in the manner, subject to the limitations, and upon payment of the charges as set forth in the Certificate Ordinance. Upon surrender for transfer or exchange of any Certificate at the principal office maintained for the purpose by 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 such owner s attorney duly authorized in writing, the City shall execute and the Registrar shall authenticate, date and deliver in the name of the registered owner, transferee or transferees (as the case may be) a new fully registered Certificate or Certificates of the same maturity and interest rate of authorized denominations, for a like aggregate principal amount. The execution by the City of any fully registered Certificate shall constitute full and due authorization of such Certificate, and the Registrar shall thereby be authorized to authenticate, date and deliver such Certificate, provided, however, the principal amount of outstanding Certificates of each maturity authenticated by the Registrar shall not exceed the authorized principal amount of Certificates for such maturity less Certificates previously paid. The Registrar shall not be required to transfer or exchange any Certificate following the close of business on the first day of the month in which an interest payment date occurs on such Certificate (known as the record date), nor to transfer or exchange any Certificate after notice calling such Certificate for redemption has been mailed, nor during a period of fifteen days next preceding mailing of a notice of redemption of any Certificates. The person in whose name any Certificate shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of the principal of or interest on any Certificates shall be made only to or upon the order of the registered owner thereof or such owner s legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Certificate to the extent of the sum or sums so paid. No service charge shall be made for any transfer or exchange of Certificates, but the City or the Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates except in the case of the issuance of a Certificate or Certificates for the unredeemed portion of a certificate surrendered for redemption. TAX EXEMPTION In the opinion of Bond Counsel, under existing federal statutes, decisions, regulations, and rulings, interest on the Certificates is excludable from gross income for purposes of federal income taxation pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the Code ), and is not an item of tax preference for purposes of the federal alternative minimum tax. This opinion relates only to the exclusion from gross income of interest on the Certificates for federal income tax purposes under Section 103 of the Code and is conditioned on continuing compliance by the City with the Tax Covenants (as hereinafter defined). Failure to comply with the Tax Covenants could cause interest on the Certificates to lose the exclusion from gross income for federal income tax purposes retroactive to the date of issue. Interest on the Certificates is not exempt from present State income taxes. See APPENDIX C hereto for the form of the approving opinion of Bond Counsel. 36

40 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 The Code imposes certain requirements which must be met subsequent to the issuance of the Certificates as a condition to the exclusion from gross income of interest on the Certificates for federal income tax purposes. The City will covenant not to take any action, nor fail to take any action within its power and control, with respect to the Certificates that would result in the loss of the exclusion from gross income for federal income tax purposes of interest on the Certificates pursuant to Section 103 of the Code (collectively, the Tax Covenants ). The Certificate Ordinance and certain certificates and agreements to be delivered on the date of delivery of the Certificates establish procedures under which compliance with the requirements of the Code can be met. It is not an event of default under the Certificate Ordinance if interest on the Certificates is not excludable from gross income for federal income tax purposes or otherwise pursuant to any provision of the Code which is not in effect on the issue date of the Certificates. Although Bond Counsel will render an opinion on the federal tax matters described above, the accrual or receipt of interest on the Certificates may otherwise affect a Certificate holder s federal income tax liability. The nature and extent of these other tax consequences will depend upon the Certificate holder s particular tax status and the Certificate holder s other items of income or deduction. Taxpayers who may be affected by such other tax consequences include, without limitation, financial institutions, certain insurance companies, S corporations, certain foreign corporations, individual recipients of Social Security or railroad retirement benefits, and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry the Certificates. Bond Counsel expresses no opinion regarding any other such tax consequences. Prospective purchasers of the Certificates should consult their own tax advisors with regard to the other tax consequences of owning the Certificates. Amortizable Bond Premium The initial offering prices of the Certificates maturing on (collectively, the Premium Certificates ) are greater than the principal amount payable at maturity or call date. As a result, the Premium Certificates will be considered to be issued with amortizable bond premium (the Bond Premium ). An owner who acquires a Premium Certificate in the initial offering will be required to adjust the owner s basis in the Premium Certificate downward as a result of the amortization of the Bond Premium, pursuant to Section 1016(a)(5) of the Code. Such adjusted tax basis will be used to determine taxable gain or loss upon the disposition of the Premium Certificates (including sale, redemption, or payment at maturity or call). The amount of amortizable Bond Premium will be computed on the basis of the owner s yield to maturity, with compounding at the end of each accrual period. Rules for determining (i) the amount of amortizable Bond Premium and (ii) the amount amortizable in a particular year are set forth in Section 171(b) of the Code. No income tax deduction for the amount of amortizable Bond Premium will be allowed pursuant to Section 171(a)(2) of the Code, but amortization of Bond Premium may be taken into account as a reduction in the amount of tax-exempt income for purposes of determining other tax consequences of owning the Premium Certificates. Owners of the Premium Certificates should consult their tax advisors with respect to the precise determination for federal income tax purposes of the treatment of Bond Premium upon the sale or other disposition of Premium Certificates and with respect to the State and local tax consequences of owning and disposing of Premium Certificates. Special rules governing the treatment of Bond Premium, which are applicable to dealers in tax exempt securities are found at Section 75 of the Code. Dealers in tax-exempt securities are urged to consult their own tax advisors concerning treatment of Bond Premium. 37

41 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Original Issue Discount The initial offering prices of the Certificates maturing on (collectively, the Discount Certificates ) are less than the principal amounts payable at maturity or call date. As a result, the Discount Certificates will be considered to be issued with original issue discount. The difference between the initial public offering price of each maturity of the Discount Certificates (or portions thereof) as set forth on the inside cover page of this Official Statement (assuming it is the first price at which a substantial amount of that maturity, or a portion thereof, is sold) (the Issue Price for such maturity ), and the amount payable at maturity of the Discount Certificates will be treated as original issue discount. A taxpayer who purchases a Discount Certificate in the initial public offering at the Issue Price for such maturity, or a portion thereof, and who holds such Discount Certificate to maturity may treat the full amount of original issue discount as interest which is excludable from the gross income of the owner of that Discount Certificate for federal income tax purposes and will not, under present federal income tax law, realize taxable capital gain upon payment of the Discount Certificate at maturity. The original issue discount on each of the Discount Certificates is treated as accruing daily over the term of such Discount Certificates on the basis of the yield to maturity determined on the basis of compounding semiannually (or shorter period from the date of the original issue). Section 1288 of the Code provides, with respect to tax-exempt obligations such as the Discount Certificates, that the amount of original issue discount accruing each period will be added to the owner s tax basis for the Discount Certificates. Such adjusted tax basis will be used to determine taxable gain or loss upon disposition of the Discount Certificates (including sale, redemption, or payment at maturity). Owners of the Discount Certificates who dispose of Discount Certificates prior to maturity should consult their tax advisors as to the amount of original discount accrued over the period held and the amount of taxable gain or loss upon the sale or other disposition of such Discount Certificates prior to maturity. As described under the caption TAX EXEMPTION above, the original issue discount that accrues in each year to an owner of a Discount Certificate may result in certain collateral federal income tax consequences. Owners of any Discount Certificates should be aware that the accrual of original issue discount in each year may result in a tax liability from these collateral tax consequences even though the owners of such Discount Certificates will not receive a corresponding cash payment until a later year. Owners who purchase Discount Certificates in the initial public offering but at a price different from the Issue Price for such maturity should consult their own tax advisers with respect to the tax consequences of the ownership of the Discount Certificates. The Code contains certain provisions relating to the accrual of original issue discount in the case of subsequent purchasers of bonds such as the Discount Certificates. Owners who do not purchase Discount Certificates in the initial public offering should consult their own tax advisers with regard to the other tax consequences of owning the Discount Certificates. Owners of Discount Certificates should consult their own tax advisers with respect to the State and local tax consequences of owning Discount Certificates. It is possible under the applicable provisions governing the determination of State and local income taxes that accrued interest on the Discount Certificates may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment until a later year. 38

42 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 QUALIFIED TAX EXEMPT OBLIGATIONS Subject to the City s compliance with certain covenants, in the opinion of Bond Counsel, the Certificates are qualified tax-exempt obligations under the small issuer exception provided under Section 265(b)(3) of the Code, which affords banks and certain other financial institutions more favorable treatment of their deduction for interest expense than would otherwise be allowed under Section 265(b)(2) of the Code. LEGAL OPINIONS AND ENFORCEABILITY OF REMEDIES The various legal opinions to be delivered concurrently with the delivery of the Certificates express the professional judgment of the attorneys rendering the opinion as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to such transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. The remedies available to the Certificate holder upon a default under the Certificate Ordinance are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code (the federal bankruptcy code), the remedies provided in the Certificate Ordinance may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Certificates will be qualified as to the enforceability of the various legal instruments by limitations imposed by the valid exercise of the constitutional powers of the City, the State and the United States of America and bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law.) These exceptions would encompass any exercise of federal, State or local police powers (including the police powers of the City), in a manner consistent with the public health and welfare. Enforceability of the Certificate Ordinance in a situation where such enforcement may adversely affect public health and welfare may be subject to these police powers. LIMITED CONTINUING DISCLOSURE Because at the time of the delivery of the Certificates the City will be an obligated person (as such term is defined in Rule 15c2-12 (the Rule )) with respect to less than $10,000,000 in aggregate amount of outstanding municipal securities, including the Certificates, the City is exempt from the provisions of the Rule requiring the delivery of annual financial information to the MSRB pursuant to the Rule. However, pursuant to the Rule, the City will enter into a Continuing Disclosure Undertaking (the Undertaking ) for the benefit of the beneficial owners of the Certificates to send certain financial information annually and to provide notice of certain events to the Municipal Securities Rulemaking Board (the MSRB ) pursuant to the Rule. No person, other than the City, has undertaken, or is otherwise expected, to provide continuing disclosure with respect to the Certificates. The information to be provided on an annual basis, the events which will be noticed on an occurrence basis and a summary of other terms of the Undertaking, including termination, amendment and remedies, are set forth in APPENDIX E - FORM OF CONTINUING DISCLOSURE UNDERTAKING. 39

43 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 A failure by the City to comply with the Undertaking will not constitute a default under the Certificate Ordinance and beneficial owners of the Certificates are limited to the remedies described in the Undertaking. The City must report any failure to comply with the Undertaking in accordance with the Rule. Any broker, dealer or municipal securities dealer must consider such report before recommending the purchase or sale of the Certificates in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Certificates and their market price. On December 20, 2013, Standard & Poor s Ratings Services ( S&P) raised the City s long-term and underlying rating (SPUR) to A+ from A on the City s general obligation debt certificates based on the application of its recently released local general obligation criteria. The City did not file a notice of upgrade on the MSRB s EMMA website. The City filed a failure to file notice of this upgrade on March 20, On December 20, 2018, S&P lowered its long-term rating to A+ from AA- on the City s existing debt certificates and the notice of such downgrade was filed on January 9, 2019, four business days late. The City s Debt Certificates, Series 2004 (the 2004 Certificates ), were insured by AMBAC Assurance Corporation ( AMBAC ). The 2004 Certificates are no longer outstanding. While the 2004 Certificates were outstanding, the City did not disclose any AMBAC rating changes. LITIGATION There is no litigation of any nature now pending or threatened restraining or enjoining the issuance, sale, execution or delivery of the Certificates, or in any way contesting or affecting the validity of the Certificates or any proceedings of the City taken with respect to the issuance or sale thereof. There is no litigation now pending, or to the knowledge of the City, threatened against the City that is expected to materially impact the financial condition of the City. OFFICIAL STATEMENT AUTHORIZATION This Official Statement has been authorized for distribution to prospective purchasers of the Certificates. All statements, information, and statistics herein are believed to be correct but are not guaranteed by the consultants or by the City, and all expressions of opinion, whether or not so stated, are intended only as such. INVESTMENT RATING The City has supplied certain information and material concerning the Certificates and the City to S&P Global Ratings, New York, New York ( S&P ), including certain information and materials which may not have been included in this Official Statement, as part of its application for an investment rating on the Certificates. A rating reflects only the views of the rating agency assigning such rating and an explanation of the significance of such rating may be obtained from such rating agency. Generally, such rating service bases its rating on such information and material, and also on such investigations, studies and assumptions that it may undertake independently. There is no assurance that such rating will continue for any given period of time or that it may not be lowered or withdrawn entirely by such rating service if, in its judgment, circumstances so warrant. Any such downward change in or withdrawal of such rating may have an adverse effect on the secondary market price of the Certificates. An explanation of the significance of the investment rating may be obtained from the rating agency: S&P Global Ratings, 55 Water Street, New York, New York 10041, telephone The City will provide appropriate periodic credit information to the rating service to maintain a rating on the Certificates. 40

44 City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 UNDERWRITING The Certificates were offered for sale by the City at a public, competitive sale on April 4, The best bid submitted at the sale was submitted by (the Underwriter ). The City awarded the contract for sale of the Certificates to the Underwriter at a price of $ (reflecting the par amount of $, plus a reoffering premium of $, and less an Underwriter s discount of $ ). The Underwriter has represented to the City that the Certificates have been subsequently re-offered to the public initially at the yields or prices set forth in the Final Official Statement. MUNICIPAL ADVISOR The City has engaged Speer Financial, Inc. as municipal advisor (the Municipal Advisor ) in connection with the issuance and sale of the Certificates. The Municipal Advisor is a Registered Municipal Advisor in accordance with the rules of the MSRB. The Municipal Advisor will not participate in the underwriting of the Certificates. The financial information included in this Official Statement has been compiled by the Municipal Advisor. Such information does not purport to be a review, audit or certified forecast of future events and may not conform with accounting principles applicable to compilations of financial information. The Municipal Advisor is not a firm of certified public accountants and does not serve in that capacity or provide accounting services in connection with the Certificates. The Municipal Advisor is not obligated to undertake any independent verification of or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement, nor is the Municipal Advisor obligated by the City s continuing disclosure undertaking. CERTIFICATION We have examined this Official Statement dated March 21, 2019, for the $6,560,000* Debt Certificates, Series 2019, believe it to be true and correct and will provide to the purchaser of the Certificates at the time of delivery a certificate confirming to the Underwriter that to the best of our knowledge and belief information in this Official Statement was at the time of acceptance of the bid for the Certificates and, including any addenda thereto, was at the time of delivery of the Certificates true and correct in all material respects and does not include any untrue statement of a material fact, nor does it omit the statement of any material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. /s/ GERALD R. BENNETT /s/ KENNETH J. NOLAN Mayor Treasurer CITY OF PALOS HILLS CITY OF PALOS HILLS Cook County, Illinois Cook County, Illinois *Subject to change. 41

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136 APPENDIX B DESCRIBING BOOK-ENTRY-ONLY ISSUANCE The Depository Trust Company, New York, New York ( DTC ), will act as securities depository for the Certificates (the Securities ). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. 1. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 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 an S&P Global Ratings 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 2. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC s records. The ownership interest of each actual purchaser of each Security ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 3. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. B-1

137 4. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Registrar and request that copies of notices be provided directly to them. 5. Redemption notices shall be sent to DTC. If less than all of the Securities 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. 6. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 7. Redemption proceeds, distributions, and dividend payments on the Securities 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 or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments 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 Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 8. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to any Tender/Remarketing Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant s interest in the Securities, on DTC s records, to any Tender/Remarketing Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC s records and followed by a book-entry credit of tendered Securities to any Tender/Remarketing Agent s DTC account. 9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the City or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 10. 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, Security certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. B-2

138 APPENDIX C PROPOSED FORM OF OPINION OF BOND COUNSEL, 2019 City of Palos Hills, Cook County, Illinois Palos Hills, Illinois, Re: City of Palos Hills, Cook County, Illinois Debt Certificates, Series 2019 Total Issue: $ Original Date:, 2019 Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by City of Palos Hills, Cook County, Illinois (the City ) of $ of its Debt Certificates, Series 2019, dated, 2019 (the Certificates ) evidencing the indebtedness of the City pursuant to the Installment Contract dated, 2019 (the Contract ) by and between the City and the City Treasurer. We have examined the law and the certified transcript of proceedings of the City relative to the authorization, issuance and sale of the Certificates, the execution and delivery of the Contract and such other papers as we deem necessary to render this opinion. We have relied upon the certified transcript of proceedings and other certificates of public officials, including the City s tax covenants and representations (the Tax Covenants ), and we have not undertaken to verify any facts by independent investigation. Based upon our examination, we are of the opinion, as of the date hereof, as follows: City. 1. The Certificates and the Contract are valid and binding general obligations of the 2. The principal of and interest due on the Contract and on the Certificates is payable from any funds of the City legally available and annually appropriated for such purpose. There is no statutory authority for the levy of a separate tax in addition to other City taxes or the levy of a special tax unlimited as to rate or amount to pay the installments of principal of and interest due on the Contract and on the Certificates. 3. Under federal statutes, decisions, regulations and rulings existing on this date, the interest on the Certificates is excludable from gross income for purposes of federal income taxation pursuant to Section 103 of the Internal Revenue Code of 1986, as in effect on the date hereof (the Code ), and is not a specific preference in computing the federal alternative minimum tax for individuals and corporations. This opinion is conditioned on the City s continuing compliance with the Tax Covenants. Failure to comply with the Tax Covenants C-1

139 , 2019 Page 2 could cause interest on the Certificates to lose the exclusion from gross income for purposes of federal income taxation retroactive to the date of issuance of the Certificates. The Certificates have been designated as qualified tax exempt obligations for purposes of Section 265(b)(3) of the Code, as amended to this date, relating to the exception from the 100% disallowance for the deduction for interest expense allocable to interest on tax exempt obligations acquired by financial institutions. The designation is conditioned upon continuing compliance with the Tax Covenants. We express no opinion as to (a) the ability or the likelihood of the City to make such payments when due or (b) the validity or feasibility of any future financings that the City may undertake in order to provide funds to make such payments. We have not been engaged nor have we undertaken to review the accuracy, completeness or sufficiency of any offering material relating to the Certificates, and we express no opinion thereon. The opinions set forth herein express the professional judgment of the attorneys participating in the transactions as to the legal issues addressed herein. By rendering such opinions, the undersigned does not become an insurer or guarantor of that expression of professional judgment or of the transaction opined upon. Nor does the rendering of that opinion guarantee the outcome of any legal dispute that may arise out of the transaction. It is to be understood that the rights of the owners of the Certificates and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights heretofore or hereafter enacted and that their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. It is to be understood that the rights of the owners of the Certificates and the enforceability thereof may be subject to the valid exercise of the constitutional powers of the City, the State of Illinois and the United States of America. Very truly yours, C-2

140 APPENDIX D CITY OF PALOS HILLS COOK COUNTY, ILLINOIS EXCERPTS OF FISCAL YEAR 2018 AUDITED FINANCIAL STATEMENTS RELATING TO THE CITY S PENSION PLANS

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