$28,230,000 THE CITY OF SUGAR HILL DOWNTOWN DEVELOPMENT AUTHORITY (GEORGIA) Revenue Bonds (EpiCenter Project),

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1 TWO SEPARATE ISSUES (Book-Entry Only) RATING Standard & Poor s: AA+ See MISCELLANEOUS - Rating herein. In the opinion of Bond Counsel, under existing law, (a) interest on the Series 2016A Bonds is excluded from gross income for federal income tax purposes, (b) interest on the Series 2016A Bonds is not an enumerated item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and (c) interest on the Series 2016A Bonds is exempt from State of Georgia income taxation, subject to the conditions and limitations described herein. The opinion contains greater detail, and is subject to exceptions, as noted in LEGAL MATTERS - Opinion of Bond Counsel herein. Interest on the Series 2016B Bonds is included in gross income for federal income tax purposes and therefore is not exempt from federal income taxation. Interest on the Series 2016B Bonds is, however, exempt from State of Georgia income taxation. See LEGAL MATTERS Certain Tax Consequences of Owning Series 2016B Bonds herein. $28,230,000 THE CITY OF SUGAR HILL DOWNTOWN DEVELOPMENT AUTHORITY (GEORGIA) Revenue Bonds (EpiCenter Project) Dated: Date of Issuance New Issue New Issue $24,375,000 Revenue Bonds (EpiCenter Project), Series 2016A $3,855,000 Revenue Bonds (EpiCenter Project), Federally Taxable Series 2016B Due: December 1, as shown on the inside front cover hereof The Revenue Bonds (EpiCenter Project), Series 2016A (the Series 2016A Bonds ) and the Revenue Bonds (EpiCenter Project), Federally Taxable Series 2016B (the Series 2016B Bonds ) are being issued by The City of Sugar Hill Downtown Development Authority (the Issuer ) for the purpose of financing the costs of acquiring, constructing, and installing mixed use facilities (the Facilities ), to be known as the EpiCenter, consisting of (1) a performing arts center, a gymnasium, a walking track, and classrooms and community rooms (the Public Component ); (2) restaurant, retail, and office space (the Commercial Component ); and (3) a parking garage (the Parking Component ), to be located in the downtown area of the City of Sugar Hill, Georgia. The Issuer will rent the Commercial Component and a portion of the Parking Component to commercial tenants. The Issuer will rent the Public Component and a portion of the Parking Component to the City of Sugar Hill, Georgia (the City ) pursuant to a Lease Agreement, dated as of February 1, 2016 (the Lease Agreement ). See PLAN OF FINANCING herein. Interest on the Series 2016A Bonds and the Series 2016B Bonds (collectively the Series 2016 Bonds ) is payable semiannually on June 1 and December 1 of each year, commencing on June 1, All Series 2016 Bonds bear interest from their date of issuance. See INTRODUCTION - Description of the Series 2016 Bonds herein. The Series 2016 Bonds will be issued as fully registered bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ), to which payments of principal, premium, if any, and interest will be made. Purchasers will acquire beneficial interests in the Series 2016 Bonds in book-entry form only. DTC will remit such payments to its participants who will be responsible for remittance to beneficial owners. See INTRODUCTION - Description of the Series 2016 Bonds herein. The Series 2016A Bonds are subject to optional and mandatory sinking fund redemption prior to maturity as described herein. The Series 2016B Bonds are subject to optional redemption prior to maturity as described herein. See THE SERIES 2016 BONDS - Redemption herein. The Series 2016 Bonds are special limited obligations of the Issuer payable solely from and secured by a pledge of and lien on rent payments to be made by the City to the Issuer pursuant to the Lease Agreement and rent payments to be made by commercial tenants of the Facilities. Under the terms of the Lease Agreement, the City will agree to make rent payments to the Issuer in amounts sufficient, after taking into account rent payments received by the Issuer from commercial tenants of the Facilities, to enable the Issuer to pay the principal of, premium, if any, and interest on the Series 2016 Bonds when due. The City s obligation to make the rent payments required by the Lease Agreement is absolute and unconditional and will not expire so long as any of the Series 2016 Bonds remain outstanding and unpaid. The City will agree in the Lease Agreement to levy an annual ad valorem tax on all taxable property located within the corporate limits of the City, at such rates without limitation, as may be necessary to produce in each year revenues that are sufficient to fulfill the City s obligations under the Lease Agreement. See SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS herein. The maturities, principal amounts, interest rates, prices or yields, and CUSIP numbers of the Series 2016 Bonds are set forth on the inside front cover of this Official Statement. Kidwell & Company (the Municipal Advisor ), located in Newnan, Georgia, provides municipal advisory services for the City and is serving as municipal advisor with respect to the Series 2016 Bonds. This cover page contains certain information for quick reference only. It is not a summary of this Official Statement. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision. The Series 2016 Bonds are offered when, as, and if issued by the Issuer and accepted by the Underwriter, subject to prior sale and to withdrawal or modification of the offer without notice, and are subject to the approving opinion of Dentons US LLP, Atlanta, Georgia, Bond Counsel. Certain legal matters will be passed on for the Issuer and the City by their general counsel, Thompson, Sweeny, Kinsinger & Pereira, P.C., Lawrenceville, Georgia, and for the City by its disclosure counsel, Dentons US LLP, Atlanta, Georgia. The Series 2016 Bonds are expected to be available for delivery in book-entry form only through the facilities of DTC in New York, New York on or about February 19, Dated: February 11, 2016

2 MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, PRICES OR YIELDS, AND CUSIPS Maturity Principal Amount $24,375,000 Revenue Bonds (EpiCenter Project), Series 2016A $20,205,000 Serial Bonds Interest Rate Yield CUSIP 1 Maturity Principal Amount Interest Rate Yield CUSIP 2021 $ 560, % 1.12% RAA $1,665, % 2.05% RAH ,325, RAB ,730, RAJ ,365, RAC ,770, RAK ,420, RAD ,845, RAL ,480, RAE ,915, RAM ,535, RAF ,995, RAN ,600, RAG8 $4,170, % Term Bonds due December 1, 2035, to Yield 3.085%, CUSIP 86485RAP8 1 Priced to December 1, 2020 optional redemption date. Maturity $3,855,000 Revenue Bonds (EpiCenter Project), Federally Taxable Series 2016B Principal Amount Interest Rate Price or Yield CUSIP 2018 $ 600, % 1.30% 86485RAQ ,250, RAR ,270, RAS , RAT0 CUSIP data herein is provided by Standard & Poor s, CUSIP Services Bureau, a division of the McGraw-Hill Companies, Inc. The Issuer is not responsible for the selection of CUSIP numbers, nor is any representation made as to their correctness on the Series 2016 Bonds or as indicated above.

3 THE CITY OF SUGAR HILL DOWNTOWN DEVELOPMENT AUTHORITY Members Taylor Anderson, Chairman Dawn P. Gober, Vice Chairman Brandon S. Hembree Allen Jorgensen Mark Orcutt Nick Thompson Nancy Wren CITY OF SUGAR HILL, GEORGIA ELECTED OFFICIALS Mayor Steve Edwards Councilmembers Brandon Hembree, Mayor Pro Tempore Marc Cohen Susie Gajewski Curtis Northrup Mike Sullivan APPOINTED OFFICIALS Paul D. Radford, City Manager Jane Whittington, City Clerk V. Lee Thompson, Jr., City Attorney SPECIAL SERVICES Auditors Walker, Pierce & Tuck, Certified Public Accountants, P.C. Gainesville, Georgia Bond Counsel and Disclosure Counsel Dentons US LLP Atlanta, Georgia Municipal Advisor Kidwell & Company Newnan, Georgia

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5 TABLE OF CONTENTS INTRODUCTION... 1 The Issuer... 1 The City... 1 Purpose of the Series 2016 Bonds... 2 Security and Sources of Payment for the Series 2016 Bonds... 2 Description of the Series 2016 Bonds... 2 Tax Consequences... 3 Bond Registrar, Paying Agent, Custodian, and Depository... 3 Professionals Involved in the Offering... 3 Legal Authority... 3 Offering and Delivery of the Series 2016 Bonds... 3 Continuing Disclosure... 3 Other Information... 4 PLAN OF FINANCING... 6 Estimated Sources and Applications of Funds... 6 The Series 2016 Project... 6 THE SERIES 2016 BONDS... 8 Description... 8 Redemption... 8 Book-Entry Only System... 9 Legal Authority Investments Principal and Interest Requirements SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS Lease Agreement Resolution Limited Obligations Enforceability of Remedies THE ISSUER THE CITY Introduction City Administration and Officials City Services City Facilities Demographic Information Economic Information Employees, Employee Relations, and Labor Organizations City Amenities CITY DEBT STRUCTURE Summary of City Debt by Category Proposed Debt Overlapping Debt Debt Ratios Limitations on City Debt Page (i)

6 Page CITY AD VALOREM TAXATION Introduction Property Subject to Taxation Assessed Value Annual Tax Levy Property Tax Collections Historical Property Tax Data Ten Largest Taxpayers CITY FINANCIAL INFORMATION Accounting System and Policies Five Year General Fund History Management Comments Concerning Material Trends in Revenues and Expenditures Budgetary Process General Fund Budgets Capital Improvements Sources of Tax Revenues Employee Benefits Insurance Coverage and Governmental Immunity LEGAL MATTERS Pending Litigation Opinion of Bond Counsel Original Issue Discount and Premium on Series 2016A Bonds Collateral Federal Tax Consequences of Owning Series 2016A Bonds Changes in Federal and State Tax Law Certain Tax Consequences of Owning Series 2016B Bonds State of Georgia Tax Reform Legislation Validation Proceedings Closing Certificates MISCELLANEOUS Rating Underwriting Municipal Advisor Independent Auditors Additional Information RESPONSIBILITY FOR OFFICIAL STATEMENT APPENDIX A: FINANCIAL STATEMENTS OF THE CITY... A-1 APPENDIX B: DEFINITIONS AND SUMMARIES OF PRINCIPAL DOCUMENTS... B-1 Definitions... B-1 The Resolution... B-5 The Lease Agreement... B-9 The Continuing Disclosure Certificate... B-13 APPENDIX C: FORM OF LEGAL OPINION... C-1 (ii)

7 OFFICIAL STATEMENT of THE CITY OF SUGAR HILL DOWNTOWN DEVELOPMENT AUTHORITY (GEORGIA) relating to its $28,230,000 REVENUE BONDS (EPICENTER PROJECT) New Issue New Issue $24,375,000 $3,855,000 Revenue Bonds (EpiCenter Project), Revenue Bonds (EpiCenter Project), Series 2016A Federally Taxable Series 2016B INTRODUCTION The purpose of this Official Statement, which includes the cover page and the Appendices hereto, is to furnish certain information in connection with the sale by The City of Sugar Hill Downtown Development Authority of its Revenue Bonds (EpiCenter Project), consisting of $24,375,000 in aggregate principal amount of its Revenue Bonds (EpiCenter Project), Series 2016A (the Series 2016A Bonds ), and $3,855,000 in aggregate principal amount of its Revenue Bonds (EpiCenter Project), Federally Taxable Series 2016B (the Series 2016B Bonds ). The Series 2016A Bonds and the Series 2016B Bonds are referred to collectively as the Series 2016 Bonds in this Official Statement and will be differentiated, where necessary, by reference to the Series 2016A Bonds and the Series 2016B Bonds. Definitions of certain terms used in this Official Statement and not otherwise defined herein are set forth in Appendix B to this Official Statement under the heading DEFINITIONS. This Introduction is not a summary of this Official Statement and is intended only for quick reference. It is only a brief description of and guide to, and is qualified in its entirety by reference to, more complete and detailed information contained in the entire Official Statement, including the cover page and the Appendices hereto, and the documents summarized or described herein. Potential investors should fully review the entire Official Statement. The offering of the Series 2016 Bonds to potential investors is made only by means of the entire Official Statement, including the Appendices hereto. No person is authorized to detach this Introduction from the Official Statement or to otherwise use it without the entire Official Statement, including the Appendices hereto. The Issuer The City of Sugar Hill Downtown Development Authority (the Issuer ), the issuer of the Series 2016 Bonds, is a public body corporate and politic created and existing under the laws of the State of Georgia. For more complete information, see THE ISSUER herein. The City The City of Sugar Hill, Georgia (the City ) is a municipal corporation of the State of Georgia created by an Act of the General Assembly of the State of Georgia on March 24, The City is located in Gwinnett County in the north central portion of the State of Georgia approximately 39 miles northeast of Atlanta, Georgia. For more complete information, see THE CITY herein.

8 Purpose of the Series 2016 Bonds The Issuer is issuing the Series 2016 Bonds for the purpose of providing funds to finance the costs of acquiring, constructing, and installing mixed use facilities (the Facilities ), to be known as the EpiCenter, consisting of (1) a performing arts center, a gymnasium, a walking track, and classrooms and community rooms (the Public Component ); (2) restaurant, retail, and office space (the Commercial Component ); and (3) a parking garage (the Parking Component ), to be constructed in the downtown area of the City, and to finance the costs of issuing the Series 2016 Bonds. The Issuer will rent the Commercial Component and a portion of the Parking Component to commercial tenants. The Issuer will rent the Public Component and a portion of the Parking Component to the City pursuant to the hereinafter described Lease Agreement. For more complete information, see PLAN OF FINANCING herein. Security and Sources of Payment for the Series 2016 Bonds The Series 2016 Bonds are special limited obligations of the Issuer payable solely from and secured by a pledge of and lien on rent payments to be made by the City to the Issuer pursuant to a Lease Agreement (the Lease Agreement ), to be dated as of February 1, 2016, to be entered into between the Issuer and the City, and rent payments to be made by commercial tenants of the Facilities. Under the terms of the Lease Agreement, the City will agree to make rent payments to the Issuer in amounts sufficient, after taking into account rent payments received by the Issuer from commercial tenants of the Facilities, to enable the Issuer to pay the principal of, premium, if any, and interest on the Series 2016 Bonds when due. The City s obligation to make the rent payments required by the Lease Agreement is absolute and unconditional and will not expire so long as any of the Series 2016 Bonds remain outstanding and unpaid. The City will agree in the Lease Agreement to levy an annual ad valorem tax on all taxable property located within the corporate limits of the City, at such rates without limitation, as may be necessary to produce in each year revenues that are sufficient to fulfill the City s obligations under the Lease Agreement. To secure its obligations under the Series 2016 Bonds, the Issuer adopted a Master Bond Resolution on November 17, 2015, as supplemented and amended by a Supplemental Series 2016 Bond Resolution adopted by the Issuer on February 11, 2016 (collectively the Resolution ). For more complete and detailed information, see SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS herein. Description of the Series 2016 Bonds Redemption. The Series 2016A Bonds maturing on or after December 1, 2021 are redeemable at the option of the Issuer, upon the request of the City, not earlier than December 1, 2020, at the prices and on the terms described in this Official Statement. The Series 2016A Bonds maturing on December 1, 2035 are subject to mandatory sinking fund redemption in part prior to maturity on the dates and in the amounts described in this Official Statement. The Series 2016B Bonds are redeemable at the option of the Issuer, upon the request of the City, at any time, at the prices and on the terms described in this Official Statement. For more complete information, see THE SERIES 2016 BONDS - Redemption herein. Denominations. The Series 2016 Bonds are issuable in the denominations of $5,000 or any integral multiple thereof. Book-Entry Bonds. Each of the Series 2016 Bonds will be issued as fully registered bonds in the denomination of one bond per aggregate principal amount of the stated maturity thereof, and, when issued, will be registered in the name of Cede & Co., as nominee for The Depository Trust Company ( DTC ), New York, New York, an automated depository for securities and clearing house for securities transactions, which will act as securities depository for the Series 2016 Bonds. Purchasers will not receive certificates representing their ownership interest in the Series 2016 Bonds purchased. Purchases of beneficial interests in the Series 2016 Bonds will be made in book-entry only form (without certificates), in authorized denominations, and, under certain circumstances as more fully described in this Official Statement, such beneficial interests are exchangeable for one or more fully registered bonds of like principal amount and maturity in authorized denominations. For more complete information, see THE SERIES 2016 BONDS - Book-Entry Only System herein. Payments. So long as DTC or its nominee, Cede & Co., is the registered owner of the Series 2016 Bonds, payments of the principal of, premium, if any, and interest on the Series 2016 Bonds will be made directly to Cede & Co., which will remit such payments to the DTC participants, which will in turn remit such payments to the beneficial owners of the Series 2016 Bonds. For a more complete description of the Series 2016 Bonds, see THE SERIES 2016 BONDS herein. -2-

9 Tax Consequences In the opinion of Bond Counsel, under existing law, (a) interest on the Series 2016A Bonds is excluded from gross income for federal income tax purposes, (b) interest on the Series 2016A Bonds is not an enumerated item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and (c) interest on the Series 2016A Bonds is exempt from State of Georgia income taxation, subject to the conditions and limitations described herein. Interest on the Series 2016B Bonds is included in gross income for federal income tax purposes and therefore is not exempt from federal income taxation. Interest on the Series 2016B Bonds is, however, exempt from State of Georgia income taxation. See Appendix C hereto for the form of the opinion Bond Counsel proposes to deliver in connection with the issuance of the Series 2016 Bonds. For a more complete discussion of such opinion and certain other tax consequences of owning the Series 2016 Bonds, including certain exceptions to the exclusion of the interest on the Series 2016A Bonds from gross income, see LEGAL MATTERS - Opinion of Bond Counsel, - Original Issue Discount and Premium on Series 2016A Bonds, - Collateral Federal Tax Consequences of Owning Series 2016A Bonds, and - Certain Tax Consequences of Owning Series 2016B Bonds herein. Bond Registrar, Paying Agent, Custodian, and Depository U.S. Bank National Association, Nashville, Tennessee, will act as bond registrar and as paying agent for the Series 2016 Bonds. Quantum National Bank, Sugar Hill, Georgia, will act as custodian of the Sinking Fund created under the Resolution and as depository of the Project Fund created under the Resolution. Professionals Involved in the Offering Certain legal matters pertaining to the Issuer and its authorization and issuance of the Series 2016 Bonds are subject to the approving opinion of Dentons US LLP, Atlanta, Georgia, Bond Counsel. Copies of such opinion will be available at the time of delivery of the Series 2016 Bonds, and a copy of the proposed form of such opinion is attached hereto as Appendix C. Certain legal matters will be passed on for the Issuer and the City by their general counsel, Thompson, Sweeny, Kinsinger & Pereira, P.C., Lawrenceville, Georgia, and for the City by its disclosure counsel, Dentons US LLP, Atlanta, Georgia. Kidwell & Company, Newnan, Georgia, has been employed as municipal advisor to the City in connection with the issuance of the Series 2016 Bonds. The basic financial statements of the City as of December 31, 2014 and for the year then ended, attached hereto as Appendix A, have been audited by Walker, Pierce & Tuck, Certified Public Accountants, P.C., Gainesville, Georgia, independent certified public accountants, to the extent and for the period indicated in their report thereon which appears in Appendix A hereto. See MISCELLANEOUS - Independent Auditors herein. Legal Authority The Series 2016 Bonds are being issued in accordance with the Constitution of the State of Georgia and pursuant to the authority granted by the statutes of the State of Georgia. For more complete information, see THE SERIES 2016 BONDS - Legal Authority herein. Offering and Delivery of the Series 2016 Bonds The Series 2016 Bonds are offered when, as, and if issued by the Issuer and accepted by the Underwriter, subject to prior sale and to withdrawal or modification of the offer without notice. The Series 2016 Bonds are expected to be available for delivery in book-entry form only through the facilities of DTC in New York, New York on or about February 19, Continuing Disclosure The Issuer has determined that no financial or operating data concerning the Issuer is material to any decision to purchase, hold, or sell the Series 2016 Bonds, and the Issuer will not provide any such information. The City has undertaken all responsibilities for any continuing disclosure to beneficial owners of the Series 2016 Bonds as described below, and the Issuer will have no liability to the beneficial owners of the Series 2016 Bonds or any other person with respect to such disclosures. The City has covenanted in the Lease Agreement and a Continuing Disclosure Certificate (the Disclosure Certificate ) for the benefit of the beneficial owners of the Series 2016 Bonds to provide certain financial information and operating data relating to the City (the Annual Report ) by not later than 270 days after the end of each fiscal year of the City, commencing with fiscal year 2015, and to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by the City with the Municipal Securities Rulemaking Board -3-

10 (the MSRB ) in an electronic format as prescribed by the MSRB (which, as of the date hereof, is the Electronic Municipal Market Access ( EMMA ) system of the MSRB). The notices of certain events will be filed by the City with the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA). The specific nature of the information to be contained in the Annual Report or the notices of certain events is summarized in Appendix B hereto under the caption THE CONTINUING DISCLOSURE CERTIFICATE. These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the Rule ). The Disclosure Certificate represents the first time the City has been required to undertake to provide continuing disclosure since the effective date of the relevant provisions of the Rule. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change without notice. This Official Statement contains forecasts, projections, and estimates that are based on current expectations but are not intended as representations of fact or guarantees of results. If and when included in this Official Statement, the words expects, forecasts, projects, intends, anticipates, estimates, and analogous expressions are intended to identify forward-looking statements as defined in the Securities Act of 1933, as amended, and any such statements inherently are subject to a variety of risks and uncertainties, which could cause actual results to differ materially from those contemplated in such forward-looking statements. These forward-looking statements speak only as of the date of this Official Statement. The Issuer and the City each disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based. This Official Statement and the Appendices hereto contain brief descriptions of, among other matters, the Issuer, the City, the Series 2016 Bonds, the Lease Agreement, the Resolution, the Disclosure Certificate, and the security and sources of payment for the Series 2016 Bonds. Such descriptions and information do not purport to be comprehensive or definitive. The summaries of various constitutional provisions and statutes, the Lease Agreement, the Resolution, the Disclosure Certificate, and other documents are intended as summaries only and are qualified in their entirety by reference to such laws and documents, and references herein to the Series 2016 Bonds are qualified in their entirety to the form thereof included in the Resolution. Copies of the Lease Agreement, the Resolution, the Disclosure Certificate, and other documents and information are available, upon request and upon payment to the City of a charge for copying, mailing, and handling, from Paul D. Radford, City Manager, 5039 West Broad Street, Sugar Hill, Georgia 30518, telephone (770) During the period of the offering of the Series 2016 Bonds copies of such documents are available, upon request and upon payment to the Underwriter of a charge for copying, mailing, and handling, from Raymond James & Associates, Inc., Two Buckhead Plaza, Suite 702, 3050 Peachtree Road, N.W., Atlanta, Georgia 30305, telephone (404) The Series 2016 Bonds have not been registered under the Securities Act of 1933, and the Resolution has not been qualified under the Trust Indenture Act of 1939, in reliance on exemptions contained in such Acts. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2016 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation, or sale. No dealer, broker, salesman, or other person has been authorized by the Issuer, the City, or the Underwriter to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations should not be relied upon as having been authorized by the Issuer, the City, or the Underwriter. Except where otherwise indicated, all information contained in this Official Statement has been provided by the City. The information set forth herein has been obtained by the City from sources that are believed to be reliable. The Issuer has not provided information regarding the City and does not certify as to the accuracy or sufficiency of the disclosure practices of or content of the information provided by the City, and is not responsible for the information provided by the City. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities law as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information contained herein is subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create an implication that there has been no change in the affairs of the Issuer, the City, or the other matters described herein since the date hereof or the earlier dates set forth herein as of which certain information contained herein is given. In connection with this offering, the Underwriter may over-allot or effect transactions that stabilize or maintain the market prices of the Series 2016 Bonds at a level above that might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. -4-

11 Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Series 2016 Bonds or reviewed or passed upon the adequacy or accuracy of this Official Statement. Any representation to the contrary may be a criminal offense. The order and placement of information in this Official Statement, including the appendices, are not an indication of relevance, materiality, or relative importance, and this Official Statement, including the appendices, must be read in its entirety. The captions and headings in this Official Statement are for convenience only and in no way define, limit, or describe the scope or intent, or affect the meaning or construction, of any provision or section in this Official Statement. THIS OFFICIAL STATEMENT IS BEING PROVIDED TO PROSPECTIVE PURCHASERS EITHER IN BOUND PRINTED FORM ( ORIGINAL BOUND FORMAT ) OR IN ELECTRONIC FORMAT ON THE FOLLOWING WEBSITE: THIS OFFICIAL STATEMENT MAY BE RELIED UPON ONLY IF IT IS IN ITS ORIGINAL BOUND FORMAT OR IS PRINTED IN ITS ENTIRETY DIRECTLY FROM SUCH WEBSITE. [Remainder of Page Intentionally Left Blank] -5-

12 PLAN OF FINANCING Estimated Sources and Applications of Funds The sources and applications of funds in connection with the issuance of the Series 2016 Bonds are estimated below. Estimated Sources of Funds: Proceeds of Series 2016A Bonds 1 $25,762,440 Proceeds of Series 2016B Bonds 2 3,844,663 Sales Tax Collections 7,000,000 Estimated Interest Earnings 3 258,093 Total Sources of Funds $36,865,196 Estimated Applications of Funds: Cost of Series 2016 Project 4 $34,627,474 Capitalized Interest 5 1,661,576 Costs of Issuance 6 401,120 Underwriting Discount 7 175,026 Total Applications of Funds $36,865,196 1 After adding net premium of $1,387, After subtracting original issue discount of $10, Based on estimated earnings on the unexpended construction funds at an average investment rate of 0.76% over a period of 24 months. 4 See PLAN OF FINANCING - The Series 2016 Project herein. 5 Represents interest on a portion of the Series 2016 Bonds that will finance the costs of the Series 2016 Project for approximately 24 months. 6 Includes legal and accounting fees, initial Bond Registrar s and Paying Agent s fees, printing costs, validation court costs, and other costs of issuance % of the principal amount of the Series 2016 Bonds. See MISCELLANEOUS - Underwriting herein. The Series 2016 Project In February 2014, the City engaged a consultant team consisting of Bleakly Advisory Group, Inc., Lord Aeck Sargent, and Precision Planning, Inc. to prepare a Void Analysis Report identifying opportunities for residential and commercial development in the downtown area of the City and including an updated master plan vision to help the City achieve long term goals for developing the downtown area. The consultant team delivered the final report, entitled the Sugar Hill Downtown Market Overview and Master Plan Review, to the City in August The report acknowledges recent improvements to the downtown area, including a new city hall, amphitheater, town green, and other key land acquisitions by the City, and analyzes the then current housing and retail markets, including supply and demand conditions, and market potential based on statistical demand methodology. The report provides a downtown framework plan including conceptual development, mobility, open space, and infrastructure recommendations. As a centerpiece for the downtown area, the plan recommends development of the EpiCenter (the EpiCenter ), a community mixed-use project to be built on West Broad Street, the downtown area s main thoroughfare, in order to create a main street character and to consist of a combination of commercial, community, and recreational uses. In furtherance of the recommendations set forth in the downtown framework plan set forth in the consultants report, the Issuer plans to use the proceeds of the Series 2016 Bonds, after the payment of the costs of issuing the Series 2016 Bonds, together with other funding sources, to finance the costs of acquiring, constructing, and installing the EpiCenter (the Series 2016 Project ). The EpiCenter will be located on an approximately 2.16 acre site that the City purchased as two separate parcels in 2009 and 2014 for an aggregate purchase price of $1,190,000. The site is adjacent to and the EpiCenter will overlook the City s amphitheater and amenity pond, which are located behind the city hall. The EpiCenter will include approximately 148,408 square feet of mixed-use facilities consisting of the following components: -6-

13 (1) The Public Component, which will include an approximately 320-seat performing arts center, a gymnasium, with volleyball, basketball, and pickleball courts, a walking trail, and classrooms and community rooms, all totaling approximately 57,881 square feet. (2) The Commercial Component, which will include approximately 42,915 square feet of restaurant, retail, and office space. (3) The Parking Component, which will be an approximately 100-space parking garage totaling approximately 47,612 square feet, to be constructed under the Public Component and the Commercial Component. The Issuer will rent the Commercial Component and a portion of the Parking Component to commercial tenants. The Issuer will rent the Public Component and a portion of the Parking Component to the City pursuant to the Lease Agreement. The City has developed a plan to finance the Series 2016 Project that relies on a combination of (i) proceeds of the Series 2016 Bonds, (ii) investment earnings, and (iii) proceeds received by the City from a one percent (1%) special purpose sales and use tax approved by the voters of Gwinnett County to finance various capital outlay projects of Gwinnett County and the municipalities in Gwinnett County, including the City. The City expects that these sources of funds will be sufficient to provide funding for the Series 2016 Project. The expected categories of expenditures of funds related to the Series 2016 Project are set forth below: Uses of Funds: Construction Costs $31,822,913 Fixtures, Furnishings, and Equipment 150,000 Architectural and Other Professional Fees 2,396,468 Additional Construction Contingency 258,093 Total $34,627,474 Precision Planning, Inc. (the Architect ), Lawrenceville, Georgia, is serving as the design architect for the Series 2016 Project under an architectural contract with the City. The Architect is registered in Georgia. Under the architectural contract, the Architect agreed to design the Series 2016 Project to conform to program requirements established by the Issuer and the City, to prepare construction documents consisting of plans and specifications setting forth in detail the requirements for the construction of the Series 2016 Project, to assist in awarding and preparing construction contracts, and to provide construction administration services, including observation and monitoring of construction progress to ensure conformity with the plans and specifications and review of applications for payment to determine whether they comply with the construction contract. There is no relationship of any kind, by blood, marriage, or business, between any director, officer, stockholder, or employee of the Architect and the Issuer or the City. The City, on behalf of the Issuer, has solicited proposals for a construction manager for the construction of the Series 2016 Project utilizing a construction manager at risk project delivery method, and the City plans to select the construction manager by February 29, The City plans to require the construction manager to agree to construct the Series 2016 Project for a firm fixed price based on final plans and specifications developed by the Architect. The City plans to require the construction manager to secure its obligations for construction and timely completion by labor and material payment and performance bonds. The City expects to commence construction of the Series 2016 Project in June 2016 and expects to complete construction in December The timely completion of the construction of the Series 2016 Project is dependent upon, among other factors, promptly obtaining approvals and permits from various governmental agencies and the absence of delays due to strikes, shortages of labor and materials, and adverse weather conditions. The cost of constructing the Series 2016 Project may be affected by factors beyond the control of the Issuer or the City, including strikes, energy, labor, and material shortages, subcontractor defaults, adverse weather conditions, and other unforeseen contingencies. There can be no assurance that the City will complete the construction of the Series 2016 Project in accordance with its present construction schedule and construction budget. The City is obligated under the Lease Agreement, in the event the proceeds of the Series 2016 Bonds are not sufficient to pay the costs of completing the Series 2016 Project, to complete the Series 2016 Project and to pay such cost overruns. For a discussion of restrictions that apply to the use and investment of the proceeds of the Series 2016 Bonds, see THE RESOLUTION - Funds Created by the Resolution and Flow of Funds - Project Fund and - Investments in Appendix B hereto. -7-

14 THE SERIES 2016 BONDS Description The Series 2016A Bonds are being issued in the aggregate principal amount of $24,375,000, and the Series 2016B Bonds are being issued in the aggregate principal amount of $3,855,000. The Series 2016 Bonds, as initially issued, will be dated as of as of their date of issuance and delivery, and will bear interest at the rates per annum set forth on the inside front cover page of this Official Statement, computed on the basis of a 360-day year consisting of twelve 30-day months, payable on June 1, 2016 and semiannually thereafter on December 1 and June 1 of each year (each an Interest Payment Date ) and will mature on the dates and in the amounts set forth on the inside front cover page of this Official Statement, unless earlier called for redemption. Each Series 2016 Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof unless such date of authentication is an Interest Payment Date, in which event such Series 2016 Bond will bear interest from such Interest Payment Date, or unless such date of authentication is prior to the first Interest Payment Date, in which event such Series 2016 Bond will bear interest from its dated date; provided, however, that if at the time of authentication of any Series 2016 Bond, interest is in default on such Series 2016 Bond, such Series 2016 Bond will bear interest from the Interest Payment Date to which interest has been paid or if no interest has theretofore been paid on such Series 2016 Bond, from its dated date. The Series 2016 Bonds are issuable only as fully registered bonds, without coupons, in the denomination of $5,000 or any integral multiple thereof. Purchases of beneficial ownership interests in the Series 2016 Bonds will be made in book-entry form, and purchasers will not receive certificates representing interests in the Series 2016 Bonds so purchased. If the book-entry system is discontinued, Series 2016 Bonds will be delivered as described in the Resolution, and beneficial owners will become the registered owners of the Series 2016 Bonds. See THE SERIES 2016 BONDS - Book-Entry Only System herein. Redemption Optional Redemption of Series 2016A Bonds The Series 2016A Bonds maturing on and after December 1, 2021, are subject to optional redemption prior to maturity by the Issuer upon the written direction of the City pursuant to the Lease Agreement, in whole or in part on any business day (and if in part in an authorized denomination), in either case on or after December 1, 2020, at the redemption price equal to 100% of the principal amount thereof plus accrued interest thereon to such redemption date and without premium, all in the manner provided in the Resolution. Mandatory Redemption of Series 2016A Bonds The Series 2016A Bonds maturing on December 1, 2035 are subject to mandatory sinking fund redemption prior to maturity by application of payments from the Sinking Fund, in accordance with the Bond Resolution, at a redemption price equal to the principal amount of the Series 2016A Bonds set forth below plus the interest due thereon on the redemption date, on the dates set forth below: Optional Redemption of Series 2016B Bonds Series 2016A Bonds Maturing December 1, 2035 December 1 of the Year Principal Amount 2034 $2,055,000 (Leaving $2,115,000 to mature December 1, 2035) The Series 2016B Bonds are subject to optional redemption prior to maturity by the Issuer upon the written direction of the City pursuant to the Lease Agreement, in whole or in part on any business day (and if in part in an authorized denomination), at the redemption price equal to 100% of the principal amount thereof plus accrued interest thereon to such redemption date and without premium, all in the manner provided in the Resolution. -8-

15 Selection of Series 2016 Bonds to be Redeemed If less than all of the Series 2016 Bonds of like maturity shall be called for redemption, the particular Series 2016 Bonds, or portions of Series 2016 Bonds, to be redeemed shall be selected by lot by the Issuer (at the direction of the City) or in such other manner as the Issuer (at the direction of the City) may deem proper. The portion of any Series 2016 Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof and, in selecting portions of such Series 2016 Bonds for redemption, the Issuer shall treat each such Series 2016 Bond as representing that number of Series 2016 Bonds that is obtained by dividing the principal amount of such Series 2016 Bond to be redeemed in part by $5,000. Redemption Notices Unless waived by any owner of Series 2016 Bonds to be redeemed, official notice of any redemption of Series 2016 Bonds will be given by the Bond Registrar on behalf of the Issuer by mailing a copy of an official redemption notice by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to the registered owner of the Series 2016 Bond or Series 2016 Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such registered owner to the Bond Registrar. Notice having been given in the manner and under the conditions described above, and monies for payment of the redemption price being held by the Paying Agent as provided in the Resolution, the Series 2016 Bonds or portions of Series 2016 Bonds so called for redemption will, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Series 2016 Bonds on such date, and interest on the Series 2016 Bonds or portions of Series 2016 Bonds so called for redemption will cease to accrue, such Series 2016 Bonds or portions of Series 2016 Bonds will cease to be entitled to any lien, benefit, or security under the Resolution, and the owners of such Series 2016 Bonds or portions of Series 2016 Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. Book-Entry Only System The Depository Trust Company ( DTC ), New York, New York, or its successor, will act as securities depository for the Series 2016 Bonds. The Series 2016 Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Series 2016 Bond will be issued for each maturity of each series of the Series 2016 Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. So long as DTC or its nominee is the registered owner of the Series 2016 Bonds, payments of the principal and redemption premium of and interest due on the Series 2016 Bonds will be payable directly to DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 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 bookentry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Series 2016 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2016 Bonds on DTC s records. The ownership interest of each actual purchaser of each Series 2016 Bond (a Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2016 Bonds are to be accomplished by entries made -9-

16 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 Series 2016 Bonds, except in the event that use of the book-entry system for the Series 2016 Bonds is discontinued. To facilitate subsequent transfers, all Series 2016 Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2016 Bonds 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 Series 2016 Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 2016 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices will be sent to DTC. If less than all of the Series 2016 Bonds within a maturity are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2016 Bonds unless authorized by a Direct Participant in accordance with DTC s MMI procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Series 2016 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, premium, and interest payments on the Series 2016 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Issuer or the Paying Agent, on the payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer 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. A Beneficial Owner will give notice to elect to have its Series 2016 Bonds purchased or tendered, through its Participant, to the Paying Agent, and will effect delivery of such Series 2016 Bonds by causing the Direct Participant to transfer the Participant s interest in the Series 2016 Bonds, on DTC s records, to the Paying Agent. The requirement for physical delivery of Series 2016 Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Series 2016 Bonds are transferred by Direct Participants on DTC s records and followed by a book-entry credit of tendered Series 2016 Bonds to the Paying Agent s DTC account. DTC may discontinue providing its services as securities depository with respect to the Series 2016 Bonds at any time by giving reasonable notice to the Issuer and the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2016 Bonds are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2016 Bonds will be printed and delivered to DTC. The information concerning DTC and DTC s book-entry system set forth above has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE SOLE BONDHOLDER, THE ISSUER SHALL TREAT CEDE & CO. AS THE ONLY BONDHOLDER FOR ALL PURPOSES, INCLUDING RECEIPT OF ALL PRINCIPAL AND PREMIUM OF AND INTEREST ON THE SERIES 2016 BONDS, RECEIPT OF NOTICES, VOTING, AND REQUESTING OR DIRECTING THE ISSUER TO TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS. THE ISSUER HAS NO RESPONSIBILITY OR OBLIGATION TO THE DIRECT OR INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (A) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT OR INDIRECT -10-

17 PARTICIPANT; (B) THE PAYMENT BY ANY DIRECT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AND PREMIUM OF AND INTEREST ON THE SERIES 2016 BONDS; (C) THE DELIVERY OR TIMELINESS OF DELIVERY BY ANY DIRECT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE GIVEN TO BONDHOLDERS; OR (D) OTHER ACTION TAKEN BY DTC OR CEDE & CO. AS BONDHOLDER. Beneficial Owners of the Series 2016 Bonds may experience some delay in their receipt of distributions of principal and interest on the Series 2016 Bonds since such distributions will be forwarded by the Paying Agent to DTC and DTC will credit such distributions to the accounts of Direct Participants, which will thereafter credit them to the accounts of Beneficial Owners either directly or indirectly through Indirect Participants. Issuance of the Series 2016 Bonds in book-entry form may reduce the liquidity of the Series 2016 Bonds in the secondary trading market since investors may be unwilling to purchase Series 2016 Bonds for which they cannot obtain physical certificates. In addition, since transactions in the Series 2016 Bonds can be effected only through DTC, Direct Participants, Indirect Participants, and certain banks, the ability of a Beneficial Owner to pledge Series 2016 Bonds to persons or entities that do not participate in the DTC system, or otherwise to take action in respect of such Series 2016 Bonds, may be limited due to lack of a physical certificate. Beneficial Owners will not be recognized by the Paying Agent as registered owners for purposes of the Resolution, and Beneficial Owners will be permitted to exercise the rights of registered owners only indirectly through DTC and the Direct or Indirect Participants. Legal Authority The Series 2016 Bonds are being issued and secured pursuant to the authority granted by (i) the Constitution of the State of Georgia, and (ii) Chapter 42 of Title 36 of the Official Code of Georgia Annotated, entitled the Downtown Development Authorities Law, as amended (the Downtown Development Authorities Law ). The Series 2016 Bonds are being issued under the provisions of the Resolution. The Issuer is authorized pursuant to the Downtown Development Authorities Law: (1) to issue revenue bonds and use the proceeds thereof for the purpose of paying all or any part of the cost of any project, which includes the acquisition, construction, installation, modification, renovation, or rehabilitation of land, interests in land, buildings, structures, facilities, or other improvements located or to be located within the downtown development area designated by the City Council of the City, and the acquisition, installation, modification, renovation, rehabilitation, or furnishing of fixtures, machinery, equipment, furniture, or other property of any nature whatsoever used on, in, or in connection with any such land, interest in land, building, structure, facility, or other improvement, all for the essential public purpose of the development of trade, commerce, industry, and employment opportunities in the Issuer s authorized area of operation, which project may be for any industrial, commercial, business, office, parking, public, or other use, provided that a majority of the members of the Issuer determines, by a duly adopted resolution, that the project and such use thereof would further the public purpose of the Downtown Development Authorities Law; (2) to construct, erect, assemble, purchase, acquire, own, improve, install, and sell projects; (3) to make and execute contracts, agreements, and other instruments necessary or convenient to exercise the powers of the Issuer or to further the public purpose for which the Issuer is created, including, but not limited to, contracts with respect to the use of projects; (4) to contract for any period, not exceeding 50 years, with any municipal corporation of the State of Georgia for the use by such municipal corporation of any facilities or services of the Issuer, provided that such contracts shall deal with such activities and transactions as the Issuer and any such municipal corporation are authorized by law to undertake; and (5) as security for repayment of its revenue bonds, to pledge, convey, assign, hypothecate, or otherwise encumber any property of the Issuer and to execute any security agreement, assignment, or other agreement or instrument as may be necessary or desirable, in the judgment of the Issuer, to secure any such revenue bonds. Article IX, Section III, Paragraph I of the Constitution of the State of Georgia of 1983 authorizes any municipality of the State of Georgia (1) to contract for any period not exceeding fifty years with any public corporation or public authority for joint services, for the provision of services, or for the joint or separate use of facilities or equipment, if such contract deals with activities, services, or facilities that the contracting parties are authorized by law to undertake or provide, and (2) in connection with any such contract to convey any existing facilities or equipment to any public corporation or public authority. -11-

18 Section of the Official Code of Georgia Annotated authorizes the City to acquire, construct, lease, own, operate, and improve parking areas, parking buildings, buildings for educational purposes, and buildings used or useful for public amusement purposes, together with facilities or buildings used for any combination of the above. The execution, delivery, and performance of the Contract by the City was authorized and approved pursuant to an ordinance adopted by the City Council of the City on November 12, Investments For a description of how the proceeds of the Series 2016 Bonds are to be invested pending their use, the provisions governing those investments, the conditions that must be satisfied before the proceeds of the Series 2016 Bonds may be applied to their intended use, and other provisions governing the investment of the proceeds of the Series 2016 Bonds and the amounts held to pay debt service on the Series 2016 Bonds, see THE RESOLUTION - Funds Created by the Resolution and Flow of Funds and - Investments in Appendix B hereto. Principal and Interest Requirements Following are the principal and interest payment requirements with respect to the Series 2016 Bonds, for the calendar years shown below. For purposes of calculating the principal payable in any year, the relevant maturity or mandatory redemption amount is used. A description of the debt service requirements of the City is set forth under CITY DEBT STRUCTURE - Debt Service Requirements herein. Series 2016A Bonds Series 2016B Bonds Total Total Combined Year Ending Debt Service Debt Service Debt Service December 31 Principal Interest Requirements Principal Interest Requirements Requirements 2016 $ --- $ 680, $ 680, $ --- $ 49, $ 49, $ 729, , , , , , , , ,000 63, , ,531, , , ,250,000 55, ,305, ,174, , , ,270,000 36, ,306, ,175, , , ,428, ,000 14, , ,178, ,325, , ,176, ,176, ,365, , ,177, ,177, ,420, , ,177, ,177, ,480, , ,180, ,180, ,535, , ,176, ,176, ,600, , ,180, ,180, ,665, , ,181, ,181, ,730, , ,179, ,179, ,770, , ,176, ,176, ,845, , ,180, ,180, ,915, , ,176, ,176, ,995, , ,179, ,179, ,055, , ,180, ,180, ,115,000 63, ,178, ,178, Total $24,375,000 $11,708, $36,083, $3,855,000 $283, $4,138, $40,221,

19 SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016 BONDS Lease Agreement Pursuant to the Lease Agreement, the City will agree to pay to the Issuer rent payments in such amounts and at such times as will be sufficient, after taking into account rent payments received by the Issuer from commercial tenants of the Facilities, to enable the Issuer to pay the principal of, premium, if any, and interest on the Series 2016 Bonds, as and when the same become due and payable. In addition, the City has agreed that, in the event the paying agent for the Series 2016 Bonds has notice that any payment of principal of, premium, if any, or interest on a Series 2016 Bond that has been made to a registered owner of such Series 2016 Bond by or on behalf of the Issuer has been deemed a preferential transfer and theretofore recovered from such registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court of competent jurisdiction, the City will pay as rent to the Issuer an amount equal to such recovery if sufficient funds are not otherwise available to reimburse such a registered owner. See THE LEASE AGREEMENT - Bond Rent and Other Amounts Payable by the City in Appendix B hereto. The obligation of the City to make the rent payments required by the Lease Agreement is a general obligation of the City, to which its full faith and credit and unlimited taxing power are pledged. The City has agreed in the Lease Agreement to levy, to the extent necessary, an annual ad valorem tax on all taxable property located within the corporate limits of the City, as now existent and as the same may hereafter be extended, at such rate or rates, without limitation as to rate or amount, as may be necessary to produce in each year revenues that will be sufficient to fulfill the City s obligations under the Lease Agreement, from which revenues the City agreed to appropriate sums sufficient to pay in full when due all of the City s obligations under the Lease Agreement. The City has also agreed in the Lease Agreement that in order to make funds available for such purpose in each fiscal year, it will, in its general revenue, appropriation, and budgetary measures through which its tax funds or revenues and the allocation thereof are controlled or provided for, include sums sufficient to satisfy any such payments that may be required to be made under the Lease Agreement, whether or not any other sums are included in such measure, until all payments so required to be made under the Lease Agreement shall have been made in full. The City s obligation to make the payments required under the Lease Agreement is absolute and unconditional and will not expire so long as any of the Series 2016 Bonds remain outstanding and unpaid. See THE LEASE AGREEMENT - Obligations of City Absolute and Unconditional in Appendix B hereto. The obligations of the City under the Lease Agreement have been determined by the Superior Court of Gwinnett County, Georgia to be legal, valid, binding, and enforceable obligations of the City. See LEGAL MATTERS - Validation Proceedings herein. Resolution To secure its obligations under the Series 2016 Bonds, the Issuer has adopted the Resolution, pursuant to which the Issuer has collaterally assigned and pledged for the benefit of the owners of the Series 2016 Bonds all Pledged Revenues. Pledged Revenues consist of (1) all of the Issuer s right, title, interest, and remedies in and to the Lease Agreement, including all payments to be received thereunder (except for the Unassigned Rights), and (2) all revenues to be received by the Issuer constituting rents paid by commercial tenants of the Facilities. The Resolution provides that the lien of this pledge is valid and binding against the Issuer and against all parties having claims of any kind against the Issuer, whether such claims arise in contract, tort, or otherwise and irrespective of whether such parties have notice of the lien created by the Resolution. The Issuer has covenanted in the Resolution not to create or permit to be created any lien, security interest, or charge upon the Pledged Revenues or the Lease Agreement, other than the pledge and assignment created by the Resolution. See THE RESOLUTION - Liens in Appendix B hereto. The Issuer has not granted any lien on or security interest in the Facilities or any other assets of the Issuer or the revenues therefrom (other than the Pledged Revenues) to secure the Series 2016 Bonds. The Resolution permits the issuance of additional parity bonds, which, if issued, would be equally and ratably secured on a parity basis with the Series 2016 Bonds. See THE RESOLUTION - Additional Bonds in Appendix B hereto. -13-

20 The Issuer may issue other bonds for the purpose of financing unrelated projects, which are not and will not be secured by the Resolution or the Lease Agreement. Such bonds, except any parity bonds issued under the Resolution, will be secured by instruments separate and apart from the Resolution and the Lease Agreement. Limited Obligations The Series 2016 Bonds are special limited obligations of the Issuer payable solely from rent payments to be made by the City to the Issuer pursuant to the Lease Agreement and rent payments to be made by commercial tenants of the Facilities. The Series 2016 Bonds are not payable from and are not secured by a charge, lien, or encumbrance upon any funds or assets of the Issuer other than the Pledged Revenues and the funds created and held under the Resolution. The Series 2016 Bonds, however, do not constitute direct obligations of the City and are not directly secured by the general faith and credit or the taxing power of the City, the State of Georgia, or any other political subdivision thereof, and the Series 2016 Bonds will not be or be deemed to constitute a debt of the State of Georgia, the Issuer, or the City or any other political subdivision of the State of Georgia within the meaning of any pertinent constitutional or statutory limitation on indebtedness. The Issuer has no taxing power and has no legal right to receive appropriations from the State of Georgia or the City, except under the Lease Agreement. No owner of any Series 2016 Bonds shall, by virtue of being such an owner and without regard to any rights such owner may have under other instruments and agreements, including the Lease Agreement, ever have the right to compel the exercise of the taxing power of the State of Georgia or any political subdivision thereof, including the City, to pay the Series 2016 Bonds or the interest thereon, or to enforce the payment thereof against any property of the Issuer (other than property assigned and pledged under the Resolution), the State of Georgia, or any political subdivision thereof, including the City. Enforceability of Remedies The realization of value from the pledge of the Pledged Revenues and the taxing power of the City under the Lease Agreement upon any default will depend upon the exercise of various remedies specified by the Resolution and the Lease Agreement. These and other remedies may require judicial actions, which are often subject to discretion and delay and which may be difficult to pursue. The enforceability of rights and remedies with respect to the Series 2016 Bonds may be limited by state and federal laws, rulings, and decisions affecting remedies and by bankruptcy, reorganization, insolvency, or other laws affecting creditors rights or remedies heretofore or hereafter enacted. A court may decide not to order the specific performance of the covenants contained in the Resolution or the Lease Agreement. Section of the Official Code of Georgia Annotated provides that no authority or county created under the Constitution or laws of the State of Georgia shall be authorized to file a petition for relief from payment of its debts as they mature or a petition for composition of its debts under any federal statute providing for such relief or composition or otherwise to take advantage of any federal statute providing for the adjustment of debts of political subdivisions and public agencies and instrumentalities. Section of the Official Code of Georgia Annotated also provides that no chief executive, board of commissioners, or other governmental officer, governing body, or organization shall be empowered to cause or authorize the filing by or on behalf of any authority or county created under the Constitution or laws of the State of Georgia of any petition for relief from payment of its debts as they mature or a petition for composition of its debts under any federal statute providing for such relief or composition or otherwise to take advantage of any federal statute providing for the adjustment of debts of political subdivisions and public agencies and instrumentalities. Section of the Official Code of Georgia Annotated does not constitute a statutory covenant with the owners of any Series 2016 Bonds and may be amended or repealed at any time without the consent of any owners of the Series 2016 Bonds. -14-

21 THE ISSUER The City of Sugar Hill Downtown Development Authority is a public body corporate and politic created and existing under the laws of the State of Georgia, particularly the Downtown Development Authorities Law, and was activated by a resolution adopted by the City Council of the City on January 13, THE ISSUER HAS NO TAXING POWER AND HAS NO LEGAL RIGHT TO RECEIVE APPROPRIATIONS OR OTHER PAYMENTS FROM THE CITY OR ANY OTHER GOVERNMENTAL BODY, EXCEPT FOR THE PAYMENTS THE CITY HAS CONTRACTED TO MAKE UNDER THE CONTRACT. The Issuer has authorized the use of this Official Statement but has not participated in the preparation of this Official Statement and, except for the information under the captions THE ISSUER and LEGAL MATTERS - Pending Litigation pertaining to the Issuer, has not provided or made any investigation with respect to any of the information contained in this Official Statement, and does not assume any responsibility for the accuracy or completeness of the information contained herein. The affairs of the Issuer are conducted by a Board of Directors consisting of seven members. The City Council of the City appoints the members of the Board of Directors of the Issuer for staggered terms of office of four years. The Downtown Development Authorities Law requires all directors of the Issuer to be (1) taxpayers residing in City, (2) owners or operators of businesses located within the downtown development area designated by the City Council of the City and who are taxpayers residing in Gwinnett County, or (3) persons having a combination of the qualifications specified in (1) and (2); provided, however, that one of such directors may be a member of the City Council of the City. Information concerning the current members of the Issuer is set forth below. Name and Office Held Expiration of Term Principal Occupation Taylor Anderson, Chairman January 31, 2019 Civil Engineer Dawn P. Gober, Vice Chairman January 31, 2017 Realtor Brandon S. Hembree Allen Jorgensen January 31, 2019 January 31, 2017 Government Relations Business Owner Mark Orcutt January 31, 2017 Technology Nick Thompson Nancy Wren January 31, 2017 January 31, 2017 Realtor Restaurant Owner Introduction THE CITY The City is a municipal corporation created and existing under the laws of the State of Georgia and has as its formal name the City of Sugar Hill, Georgia. The City was originally chartered as the Town of Sugar Hill on March 24, 1939 and was renamed in The City is located in the north central portion of the State of Georgia approximately 39 miles northeast of Atlanta, Georgia. The City is located in Gwinnett County, which is the second largest Georgia county by population. The City presently has a land area of approximately 9.2 square miles. The City is part of the Atlanta Standard Metropolitan Statistical Area, as designated by the Bureau of the Census of the U.S. Department of Commerce. The City s elevation averages 1,148 feet above sea level, and the City s terrain is rolling. City Administration and Officials The affairs of the City are conducted by a City Council consisting of a Mayor and five councilmembers. Under the City s Charter, all powers of government of the City are vested in the City Council. The Mayor and the other councilmembers serve four-year terms of office. No person is eligible to serve as Mayor or as a councilmember unless such person (1) was a resident of the City for one year prior to the date of election, (2) continues to reside therein during such person s term of office, (3) is registered and qualified to vote in municipal elections of the City. Under the City s Charter, all councilmember positions are designated by posts numbered 1 through 5. The Mayor and the councilmembers who hold posts 1 and 2 are elected in the same year, and the councilmembers who hold posts 3, 4, and 5 are elected in the same year. The Mayor and all other councilmembers are elected at large. -15-

22 The Mayor is a member of the City Council, presides at all meetings of the City Council, and votes on matters before the City Council only in the case of a tie vote. At the first meeting of the City Council by majority vote in each odd-numbered year, the City Council chooses from its members a mayor pro tempore to act as mayor in the absence, sickness, or disqualification of the Mayor. Information concerning the current Mayor and the other councilmembers is set forth below: Number of Principal Name and Office Held Expiration of Term Years in Office Occupation Steve Edwards, Mayor December 31, Waste and Recycling Brandon Hembree, Mayor Pro Tempore December 31, Government Relations Marc Cohen Susie Gajewski December 31, 2019 December 31, Marketing Software Sales Curtis Northrup December 31, Retired/Volunteer Mike Sullivan December 31, Software Engineer Under the City s Charter, the City Council may appoint a City Manager who is not a member of the City Council for an indefinite term. The duties of the City Manager are established by ordinance of the City Council, and, in so doing, the City Council may specifically delegate to the City Manager any of the administrative or budgetary duties of the Mayor. Paul D. Radford has served as City Manager of the City since November 2013 and is responsible for the day-today operations of the City. Prior to joining the City, Mr. Radford served for 12 years as the Deputy Executive Director of the Georgia Municipal Association and for 22 years with the Georgia Department of Community Affairs, including serving as Deputy Commissioner. Mr. Radford received a Bachelor of Arts degree from Roanoke College in Salem, Virginia in 1974 and a Masters of Urban Affairs degree from Virginia Tech in City Services The City directly provides a number of municipal services to its residents as well as a number of others by contract or by franchise. The City directly provides planning, zoning, community development, building inspection, code enforcement, municipal court, road maintenance, drainage maintenance, recreation, and other public works functions, the costs of which are funded by General Fund revenues with certain capital projects funded by special local option sales tax revenues. Public safety (including fire protection, police protection, and E911) services and water and sewer services are provided by Gwinnett County as a cooperative service delivery function. Police protection services are supplemented with community patrol by contract through an outside vendor, the cost of which is funded by General Fund revenues. The City provides stormwater management to residents of the City, the cost of which is primarily financed by stormwater fees charged to property owners in the City. City Facilities The City maintains approximately 73 miles of streets and 1,175 street lights. The City owns and maintains the City Lawn and Amphitheater, which is located behind City Hall. The City s Town Green comprises 1.37 acres and is located directly across from City Hall. The Town Green features a large gazebo with bench seating, walking paths, swings, a small clock tower, a veterans memorial, and electronic chimes and hosts local events, festivals, a farmer s market, and other outdoor gatherings. The Amphitheater features a concert-sized stage with seating for up to 1,600 people and serves as a venue for ticketed and free outdoor concerts and other community events. The City also operates a 4,400 square foot community center in the downtown area with flexible meeting space, a large commercial kitchen, and recreation staff offices. The City completed and opened its new, 32,000 square foot City Hall in January Following the opening of this new building, the City repurposed the old, 8,000 square foot City Hall as a business incubator branded as The Suite Spot and operated by the Issuer. Offices and renovated first floor space are leased on an annual basis to business startups looking to move from home occupation to full scale commercial operations. On the main level, the majority of the space has been recrafted as co-working space and available by membership for a monthly fee. The City owns and operates an 18-hole golf course, built in 1992 with Bermuda 419 fairways and dwarf Bermuda greens. A full service pro-shop, bar/grill, and driving range are provided at the course. The golf course is setup and funded through an enterprise fund separate from the parks and recreation (General Fund) functions. Adjacent to the golf course the City also owns 90 acres of vacant property bordered by National Park Service property with access to Highway 20. Across Highway 20, the City recently purchased 71 acres from the Trust for -16-

23 Public Land that will become part of the City s Sugar Loop Greenway. A large home on top of the ridge of the property, along with some 30 acres, have been set aside for the City to develop for commercial purposes. The City owns and operates two parks containing approximately 119 acres. These parks include two softball fields with sports lighting, two age twelve and under little league fields with sports lighting, three age eight and under tee-ball fields with sports lighting, two tennis courts with sports lighting, two beach volleyball courts with sports lighting, five multi-purpose fields (including three synthetic turf fields and two natural grass fields), one large playground under a solar-powered shelter pavilion, two small children s play areas, one amphitheater, two concession stands, two picnic pavilions, a jogging trail, 1.7 miles of paved lighted walking trails and benches, viewing grandstands, and a community garden and activity barn. In 2012, the City purchased approximately 1.9 acres of land, which was the site of a self-service car wash, in order to preserve such land for future development. The City currently operates the car wash and plans to continue to do so until such time that the City develops or sells the land for another use. The City owns and operates a retail natural gas distribution system that serves a service area that includes the corporate limits of the City and certain designated areas outside the City s corporate limits, including portions of Gwinnett County. The City s gas system serves an approximately 11 square mile area containing an estimated population in excess of 22,205 and has approximately 10,574 customers accounts. The City purchases all of its natural gas from the Municipal Gas Authority of Georgia ( MGAG ), of which the City is a member. MGAG is a public corporation and instrumentality of the State of Georgia created to supply natural gas to local government natural gas distribution systems. The City, together with 86 other municipal gas utilities, has entered into gas supply contracts with MGAG pursuant to which the City purchases natural gas for resale to its gas customers. See CITY DEBT STRUCTURE - Summary of City Debt By Category herein for information regarding the City s gas supply contract with MGAG. The major assets of the City s gas system consist of two delivery points, 14 regulator stations, 15.9 miles of high pressure pipeline, and approximately 173 miles of distribution pipeline. Demographic Information The City is located in central Gwinnett County. Set forth below is selected demographic data for the City and Gwinnett County. City Gwinnett County Median Household Per Capita Median Household Median Year Population 1 Income 3 Population 1 Income 2 Income 3 Age ,821 $67, ,922 $35,374 $60, ,138 66, ,956 34,029 60, ,674 71, ,221 33,596 61, ,091 72, ,981 33,466 63, ,522 70, ,374 31,795 63, ,399 n/a 588,488 32,305 60, ,812 n/a 352,910 20,971 43, Sources: 1 U.S. Department of Commerce, Bureau of the Census. All population figures for years other than 1990, 2000, and 2010 are estimates by the U.S. Department of Commerce, Bureau of the Census. 2 U.S. Department of Commerce, Bureau of Economic Analysis. 3 United States Census Bureau, 2014 American Community Survey 1-Year Estimates. -17-

24 Economic Information The following information is provided to give prospective investors an overview of the general economic conditions in the City and Gwinnett County. These statistics have not been adjusted to reflect economic trends. Business Licenses Issued by the City Year Number of Licenses Summary of City Building Permits Residential Commercial/Industrial/Other Single Family Multi-Family Year Permits Value Permits Value Units Value $ 4,798, $30,065, $1,825, , ,942, ,441, ,126, ,830, ,054, ,557, ,686, ,209, Set forth below are the percentages of land use for various purposes within the City, computed based upon the assessed values of the various categories for ad valorem property tax purposes. Category of Land Use Year Residential Commercial Industrial Other % 21.75% 0.76% 1.10% Includes agricultural, preferential conservation use, utility, and miscellaneous. Source: State of Georgia Department of Revenue, Property Tax Division. -18-

25 Following is a table showing the percentage of the 2013 payroll distribution in Gwinnett County for each major sector of the local economy. Percentage of 2013 Payroll Distribution in Gwinnett County by Sector Percentage of 2013 Industry Payroll Distribution Forestry, Fishing, Hunting, and Agriculture Support Mining n/a n/a Utilities 0.22% Construction Manufacturing Wholesale Trade Retail Trade Transportation and Warehousing Information 8.63 Finance and Insurance Real Estate and Rental and Leasing Professional, Scientific, and Technical Services Management of Companies and Enterprises Administrative, Support, Waste Management, 5.74 and Remediation Services 7.49 Educational Services Health Care and Social Assistance Arts, Entertainment, and Recreation 0.47 Accommodation and Food Services Other Services Unclassified Establishments 0.10 Total % Source: U.S. County Business Patterns, U.S. Department of Commerce, Bureau of the Census. Set forth below are the ten largest private employers located in the City as of November 1, 2015, their products/services, and their approximate number of employees. There can be no assurance that any employer listed below will continue to be located in the City or will continue employment at the level stated. No independent investigation has been made of, and no representation can be made as to, the stability or financial condition of the companies listed below. Employer Product/Service Employees Publix Super Market Grocery Store 140 Kroger Grocery Store 105 MTI Baths Bathroom Manufacturing 101 Derby Pub Restaurant and Bar 100 A. L. Grading Grading Contractor 75 Adreka Advertising 70 Mac Group Photo Equipment 70 Logicsone, LLC Computer System Design 70 Applebees Restaurant 70 McDonalds Restaurant 60 The largest public employer, other than the City, located in the City as of November 1, 2015 is the Gwinnett County School District, which employs approximately 775 full-time employees at its seven public schools located in the City. -19-

26 Set forth below are labor statistics for the City for the past five years, with comparative data for Gwinnett County and the State of Georgia Employment 8,883 9,192 9,482 9,718 9,876 Unemployment Total Labor Force 892 9, , , , ,485 City Unemployment Rate 9.1% 8.2% 7.4% 6.8% 5.8% Gwinnett County Unemployment Rate State Unemployment Rate 9.2% 10.5% 8.7% 10.2% 7.8% 9.2% 6.9% 8.2% 6.1% 7.2% Source: State of Georgia Department of Labor. According to the State of Georgia Department of Labor, the preliminary October 2015 unemployment rate of the City was 4.9%, compared to 5.0% for Gwinnett County and 5.7% for the State of Georgia. Total Deposits in City Financial Institutions as of June 30 (in thousands) Year Total Deposits 2015 $130, , , , ,382 Source: State of Georgia Department of Banking and Finance. According to the State of Georgia Department of Banking and Finance, the City had three financial institutions with a total of three branch offices as of June 30, Employees, Employee Relations, and Labor Organizations The City employed 83 persons in all departments of government as of October 1, 2015, 67 full-time and 16 part-time and temporary. No employees of the City are represented by labor organizations or are covered by collective bargaining agreements, and the City is not aware of any union organizing efforts at the present time. The City Manager believes that employee relations are good. City Amenities The City is located in northern Gwinnett County, close to the southernmost shoreline of Lake Lanier, a 38,000- acre federal reservoir used primarily for water supply and recreation. Private entities and other governmental entities provide services and facilities to residents of the City in addition to those provided by the City. Gwinnett County provides water and sanitary sewer service throughout the City although some households and businesses in older areas of the City remain on septic systems. Electric service is provided by Georgia Power Company and Sawnee EMC. There are four privately operated landfills and a private recycling facility in Gwinnett County. Telephone, broadband, cable television, and satellite television service is available to residents of the City from private service providers including AT&T and Charter Communications. The City receives all radio and television stations transmitting from the Atlanta area. The City is served by one weekly publication, The Buford Weekly, and one daily local newspaper, the Gwinnett Daily Post, as well as Atlanta s primary newspaper, The Atlanta Journal Constitution. Several nearby hospitals and medical centers are available to residents of the City. Gwinnett Medical Center, a full-service hospital located in Gwinnett County, is a 553-bed, not-for-profit health care network that provides a wide array of high-quality healthcare services and facilities. The Lawrenceville campus of Gwinnett Medical Center is located approximately 14 miles southeast of the City and includes the Strickland Heart Center, which performs -20-

27 open heart surgery. In addition, Gwinnett Medical Center operates a community hospital in Duluth, Georgia, approximately 12 miles south of the City, which provides acute and emergency care services. Northside Hospital-Forsyth, located in Cumming, Georgia, located approximately 10 miles northwest of the City, also serve residents of the City. Kaiser Permanente also operates a full-service medical facility in the City. The City is well connected to the region via multiple roadways that extend through the City. Highways serving the City include U.S. Interstates 985 and 85, State Highway 400, and State Route 20, which passes through the City. The Metropolitan Atlanta Rapid Transit Authority ( MARTA ) provides bus and heavy rail transportation in neighboring DeKalb and Fulton Counties. The Gwinnett County Bus System is designed to provide linkages with the MARTA system. Private air service is available at the Gwinnett County Airport-Briscoe Field, which is located approximately 13 miles southwest of the City, and DeKalb-Peachtree Airport, which is located approximately 28 miles south of the City. Commercial air service is available at Hartsfield-Jackson Atlanta International Airport, which is located approximately 48 miles southwest of the City. The Gwinnett County Library System serves the City with branches in the nearby cities of Suwanee and Buford. In addition to City-owned parks, a new 60-acre Gwinnett County owned and operated park is under construction less than a half mile from the City s 53-acre EE Robinson Park. Public education in the City is provided by the Gwinnett County School District, which is the largest public school system in Georgia. The Gwinnett County School District operates one high school, two middle schools, and four elementary schools located within the City limits, as well as additional schools in the surrounding area that serve City residents. Georgia Gwinnett College, a four-year, bachelor-degree granting institution of the University System of Georgia, is located in Gwinnett County approximately 12 miles southeast of the City and serves approximately 11,000 students. Gwinnett Technical College, a vocational school of the Technical College System of Georgia, is located approximately 13 miles south of the City and serves approximately 18,000 students. North Georgia College and State University has satellite campuses in the nearby cities of Cumming and Gainesville. Many additional colleges, universities, and vocational schools serving the Atlanta area are located within a fifty-mile radius of the City. [Remainder of Page Intentionally Left Blank] -21-

28 CITY DEBT STRUCTURE Summary of City Debt by Category Set forth below is information concerning debt of the City as of January 1, The information set forth below should be read in conjunction with the City s financial statements included as Appendix A hereto. Amount Outstanding Amount To Be Outstanding Amount Authorized (less Sinking Fund Upon Issuance of Category of Debt But Unissued Installments Paid) Series 2016 Bonds Intergovernmental Contracts 1 The Issuer (securing the Series 2016 Bonds) $-0- $-0- $28,230,000 1 General obligations of the City to which its full faith and credit and taxing power are pledged. Each of these obligations is represented by one or more intergovernmental contracts with the named public entity pledged to the payment of one or more series of revenue bonds issued by such public entity. These obligations do not constitute debt of the City for purposes of the constitutional debt limit described in CITY DEBT STRUCTURE - Limitations on City Debt herein and do not count against the City s debt limitation. The City has entered into a take-or-pay gas supply contract, as supplemented and amended, with MGAG (the Gas Supply Contract ) pursuant to which the City is obligated to take from MGAG, and MGAG is obligated to provide, all natural gas required by the City for resale to its natural gas customers. MGAG establishes rates and charges to its members, including the City, so as to produce revenues sufficient to cover its costs, including debt service on MGAG s debt, but it may not operate any of its projects for profit unless such profits inure to the benefit of the public. Payments by the City to MGAG under the Gas Supply Contract are required to be made by the City whether or not MGAG s facilities or any part thereof are operating or operable or the output therefrom is interrupted, interfered with, curtailed, or terminated in whole or in part. In addition, the City may be obligated to purchase additional natural gas, subject to contractual limitations, in the event other MGAG members default. Although the City intends to pay, and has in the past paid, all amounts that the City is required to pay to MGAG under the Gas Supply Contract from the revenues of the City s gas system, the obligation to pay MGAG under the Gas Supply Contract is a general obligation of the City to which its full faith and credit and taxing power are pledged. The City s payment obligations under the Gas Supply Contract extend through the year The City purchased natural gas totaling approximately $5.4 million from MGAG during fiscal year MGAG has issued debt for the purpose of financing long-term supplies of natural gas. The City is obligated for its pro rata share of this debt as a portion of its gas purchase costs under the Gas Supply Contract until such debt is retired. As of June 30, 2015, MGAG s bonds were outstanding in the aggregate principal amount of $357,255,000, with the City s pro rata share being approximately 2%. Reference is made to Note 17 in the notes to the basic financial statements of the City included as Appendix A for a discussion of the commitments and contingent liabilities of the City, including the Gas Supply Contract. There has never been a default in payment of the principal of or interest on any general obligation bonds issued by the City. Proposed Debt The City has no present plans to incur additional debt in the next five years. -22-

29 Overlapping Debt In addition to the City s debt obligations, property owners in the City are responsible for any debt obligations of other taxing entities in the proportion to which the jurisdiction of the City overlaps such entities. Set forth below is the estimated overlapping general obligation debt and estimated overlapping property tax supported or guaranteed revenue debt of the City as of December 1, Although the City has attempted to obtain accurate information as to the outstanding overlapping debt, it does not warrant its completeness or accuracy, as there is no central reporting entity that has this information available, and the amounts are based on information supplied by others. Amount of Amount of Percent of Outstanding Name of Authorized But Outstanding Debt Debt Chargeable to Overlapping Entity Unissued Debt (Less Sinking Fund) Property in the City 1 Gwinnett County General Obligation Bonds $-0- $ 15,665, % Intergovernmental Contracts 2 Gwinnett County Water and Sewerage Authority (securing its Revenue Bonds and Certificates of Participation) ,225, Development Authority of Gwinnett County (securing its Revenue Bonds) -0-84,545, Notes 3, ,872, Gwinnett County School District -0-1,076,420, Total $-0- $1,969,727,000 1 The percentage of each overlapping entity s outstanding debt chargeable to property in the City is calculated by dividing the gross assessed valuation of property in the City by the gross assessed valuation of property in the overlapping entity. 2 General obligations (represented by separate contracts with the named public entities, which are pledged to the payment of revenue bonds or certificates of participation issued by such public entities) of Gwinnett County to which its full faith and credit and taxing power are pledged. These obligations do not constitute debt of Gwinnett County for purposes of the constitutional debt limit and do not count against Gwinnett County s debt limitation. 3 As of December 31, General obligations of Gwinnett County payable to the Georgia Environmental Facilities Authority. Although Gwinnett County may pay these obligations from revenues of the water and sewerage system of the Gwinnett County Water and Sewerage Authority, these obligations constitute general obligations of Gwinnett County to which its full faith and credit and taxing power are pledged. Debt Ratios Set forth below is the property tax supported debt per capita of the City as of the end of each of the City s past five fiscal years. Fiscal Year Ended December 31 Direct Tax Supported Debt Overlapping Tax Supported Debt Overall Tax Supported Debt 2014 $-0- $2, $2, , , , , , , , ,

30 Set forth below is the property tax supported debt of the City expressed as a percentage of total assessed value of taxable property within the City as of the end of each of the City s past five fiscal years. Fiscal Year Direct Tax Overlapping Tax Overall Tax Ended December 31 Supported Debt Supported Debt Supported Debt % 7.61% 7.61% Set forth below is the property tax supported debt of the City expressed as a percentage of total estimated market value of taxable property within the City as of the end of each of the City s past five fiscal years. Fiscal Year Direct Tax Overlapping Tax Overall Tax Ended December 31 Supported Debt Supported Debt Supported Debt Limitations on City Debt % % % The Constitution of the State of Georgia provides that the City may not incur long-term obligations payable out of general property taxes without the approval of a majority of the qualified voters of the City voting at an election called to approve the obligations. In addition, under the Constitution of the State of Georgia, the City may not incur long-term obligations payable out of general property taxes in excess of 10 percent of the assessed value of all taxable property within the City. Neither the Lease Agreement nor the Series 2016 Bonds are considered debt of the City for purposes of the foregoing constitutional limitations. Therefore, no vote was required to be held with respect to the Lease Agreement or the Series 2016 Bonds, and neither the Lease Agreement nor the Series 2016 Bonds count against the City s debt limitations. Short-term obligations (those payable within the same calendar year in which they are incurred), lease and installment purchase obligations subject to annual appropriation, and intergovernmental obligations (such as the Lease Agreement and the other intergovernmental contract described under the heading CITY DEBT STRUCTURE - Summary of City Debt by Category herein) are not subject to the legal limitations described above. Georgia law provides, however, that no lease or installment purchase contract subject to annual appropriation (excluding intergovernmental contracts such as the Lease Agreement and the other intergovernmental contract described under the heading CITY DEBT STRUCTURE - Summary of City Debt by Category herein) may be delivered if the principal portion of such contract, when added to the amount of debt subject to the debt limitation described above, exceeds 10 percent of the assessed value of all taxable property within the City. Georgia law also provides that no lease or installment purchase contract subject to annual appropriation (excluding intergovernmental contracts such as the Lease Agreement and the other intergovernmental contract described under the heading CITY DEBT STRUCTURE - Summary of City Debt by Category herein) with respect to real property may be developed and executed or renewed, refinanced, or restructured if the lesser of either of the following is exceeded: (1) the average annual payments on the aggregate of all such outstanding contracts exceed 7.5 percent of the governmental fund revenues of the City for the calendar year preceding the delivery of such contract plus any available special county one percent sales and use tax proceeds collected; or (2) the outstanding principal balance on the aggregate of all such outstanding contracts exceeds $25 million. -24-

31 As computed in the table below, based upon the 2015 assessed value of taxable property within the City, the City could incur (upon necessary voter approval) approximately $66,795,710 of long-term obligations payable out of general property taxes (or general obligation bonds). Computation of Legal Debt Margin Assessed Value of Taxable Property as of December 31, 2015 $667,957,095 Debt Limit (10% of Assessed Value) Amount of Debt Applicable to Debt Limit $66,795, Legal Debt Margin $66,795,710 Introduction CITY AD VALOREM TAXATION An important source of revenue to fund the operations of the City is ad valorem property taxes. Ad valorem property taxes accounted for an annual average of approximately 40% of City General Fund revenues for the years ended December 31, 2010 to 2014, were budgeted to account for approximately 38% of General Fund revenues for the year ended December 31, 2015 and are budgeted to account for approximately 36% of General Fund revenues for the year ending December 31, Ad valorem property taxes are levied annually in mills (one tenth of one percent) upon each dollar of assessed property value. Property Subject to Taxation Ad valorem property taxes are levied, based upon value, against real and personal property within the City. There are, however, certain classes of property that are exempt from taxation, including public property, religious property, charitable property, property of nonprofit hospitals, nonprofit homes for the aged, and nonprofit homes for the mentally handicapped, college and certain educational property, public library property, certain farm products, certain air and water pollution control property, and personal effects. In addition, the City allows exemptions from ad valorem taxation for (1) homesteads, or owner-occupied residences, of all persons, in the amount of $2,000 of the assessed value of that homestead (this exemption, however, is inapplicable to land in excess of one acre included in the homestead); (2) homesteads, or owner-occupied residences, of persons who are 65 years of age or older, in the amount of $2,000 of the assessed value of that homestead (this exemption, however, is inapplicable to land in excess of one acre included in the homestead); (3) homesteads, or owner-occupied residences, of disabled veterans and certain un-remarried surviving spouses of disabled veterans or of members of the armed forces of the United States killed in the line of duty, in the amount not to exceed the greater of $32,500 or an amount determined under federal law (currently $70,465) of the assessed value of that homestead; and (4) homesteads, or owner-occupied residences, of un-remarried surviving spouses of peace officers or firefighters who were killed in the line of duty, for the full value of that homestead. In its 2012 legislative session, the Georgia General Assembly enacted House Bill 386 (the Tax Reform Act ). Georgia Governor Nathan Deal signed the Tax Reform Act into law on April 19, The Tax Reform Act provides a number of changes to Georgia s tax laws that impact local governments in Georgia, including the elimination of the ad valorem tax on motor vehicles and the replacement of such ad valorem tax with onetime state and local title fees whenever any motor vehicle changes ownership on or after March 1, For more information, see LEGAL MATTERS - State of Georgia Tax Reform Legislation herein. Assessed Value Assessed valuation, which represents the value upon which ad valorem property taxes are levied, is calculated as a percentage of fair market value. Georgia law requires all municipalities to use the fair market value finally determined for county ad valorem tax purposes in determining the fair market value of property within their respective tax jurisdictions for purposes of municipal ad valorem property taxation. Georgia law requires Gwinnett County to furnish without charge to the City Council of the City the final determinations of the fair market value of property within the City as soon as such information is available. -25-

32 Georgia law requires taxable tangible property to be assessed, with certain exceptions, at 40 percent of its fair market value and to be taxed on a levy made by each respective tax jurisdiction according to 40 percent of the property s fair market value. Georgia law requires certain agricultural real property to be assessed for ad valorem property tax purposes at 75 percent of the value of which other real property is assessed, requires certain historical property to be valued at a lower fair market value for ad valorem property tax purposes, and requires certain agricultural, timber, and environmentally sensitive real property and certain single-family real property located in transitional developing areas to be valued at their current uses (as opposed to fair market value). The chief appraiser of Gwinnett County is required to submit a certified list of assessments for all taxable property, except motor vehicles and property owned by public utilities, within Gwinnett County to the Gwinnett County Board of Tax Assessors. The Tax Commissioner of Gwinnett County is required to present the tax returns of Gwinnett County to the Gwinnett County Board of Tax Assessors by April 11 of each year. The Gwinnett County Board of Tax Assessors is required to complete its revision and assessment of returns by June 1 of each year and to forward a copy of the completed digest to the State of Georgia Revenue Commissioner for examination and approval. The State of Georgia Revenue Commissioner has the authority to examine the digest for the purpose of determining if the valuations of property are reasonably uniform and equalized between and within counties. Assessments may also be subject to review at various stages by the Gwinnett County Board of Equalization and the state courts. The State of Georgia Motor Vehicle Tax Unit assesses the value of motor vehicles by make, model, and year by county and provides this information to each county tax office. Gwinnett County provides the City with its motor vehicle assessed values and bills and collects these taxes on behalf of the City. The State of Georgia Property Tax Unit assesses the value of the property of public utilities and divides the assessment into two parts, assessed value of property and assessed value of franchise, and provides these amounts to the Tax Commissioner of Gwinnett County, which bills these taxes to the utilities on behalf of the City. Annual Tax Levy The City determines a rate of levy for each fiscal year by computing a rate which, when levied upon the assessed value of taxable property within its corporate limits, will produce the necessary amount of property tax revenues. The City then levies its ad valorem property taxes. Property Tax Collections Gwinnett County bills and collects the property taxes of the City on behalf of the City. Real and personal property taxes, except motor vehicle taxes, are levied on July 1 of each year on the assessed value listed as of January 1. Gwinnett County charges the City a nominal collection fee. Taxes levied by the City are normally billed during mid-august of each year and are normally payable on or before October 15. Motor vehicle taxes are levied, due, and collected on a staggered basis throughout the entire calendar year; however, only motor vehicles titled prior to March 1, 2013 are subject to ad valorem tax. For more information, see LEGAL MATTERS - State of Georgia Tax Reform Legislation herein. Interest of 12% per annum accrues on taxes paid after the due date, and an additional 10% penalty is added to taxes unpaid 90 days after the due date. All taxes levied on real and personal property, together with interest thereon and penalties for late payment, constitute a perpetual lien on and against the property taxed arising after January 1 in the year in which taxed. The lien becomes enforceable 90 days after the due date of the taxes. Georgia law provides that taxes must be paid before any other debt, lien, or claim of any kind, except for certain claims against the estate of a decedent and except that the title and operation of a security deed is superior to the taxes assessed against the owner of property when the tax represents an assessment upon property of the owner other than the property specifically subject to the title and operation of the security deed. Collection of delinquent real property taxes is enforceable by tax sale of such realty. Delinquent personal property taxes are similarly enforceable by seizure and sale of the taxpayer s personal property. There can be no assurance, however, that the value of property sold, in the event of a tax sale, will be sufficient to produce the amount required to pay in full the delinquent taxes, including any interest or penalties thereon. At any time after the last day for the payment of taxes has arrived, the tax collector may notify the taxpayer in writing of the fact that the taxes have not been paid and that, unless paid, an execution will be issued. At any time after 30 days from giving the notice described in the preceding sentence, an execution for nonpayment of taxes will be issued to the Sheriff of Gwinnett County, or the Tax Commissioner, as ex-officio Sheriff of Gwinnett County. The Sheriff of Gwinnett County, or the Tax Commissioner, as ex-officio Sheriff of Gwinnett County, may then publish a notice of the sale in a local newspaper weekly for four weeks and give the taxpayer ten days written notice by registered or certified mail or statutory overnight delivery. A public sale of the property may then be made by the Sheriff of Gwinnett County, or the Tax Commissioner, as ex-officio Sheriff of Gwinnett County, at the Gwinnett County Courthouse on the first Tuesday of the month after the required notices are given. -26-

33 Historical Property Tax Data Set forth below is information concerning the assessed (40% of fair market value) and estimated actual value of taxable property within the City for calendar years 2010 through Assessed Values General Maintenance Maintenance Estimated Calendar Real & Personal Public Motor Mobile Gross Bond Obligation Bond & Operation & Operation Actual Year Property Utilities Vehicles 1 Homes Tax Digest Exemptions Tax Digest 2 Exemptions Tax Digest 3 Value 2010 $585,798,132 $4,157,040 $37,222,900 $2,207,460 $629,385,532 $3,681,640 $625,703,892 $13,475,640 $615,909,892 $1,573,463, ,451,920 4,166,760 36,942,890 1,606, ,168,110 4,136, ,031,540 14,022, ,145,540 1,535,420, ,241,250 4,246,280 39,475,430 1,558, ,521,780 4,260, ,261,630 14,204, ,317,630 1,451,304, ,776,050 4,803,480 43,877,510 1,514, ,971,860 4,452, ,519,460 14,436, ,535,660 1,417,429, ,971,740 4,971,800 39,075,230 1,466, ,485,070 5,938, ,546,205 16,246, ,238,605 1,591,212, ,934,990 4,839,880 27,927,180 1,450, ,152,470 5,195, ,957,095 15,767, ,385,095 1,682,881,175 1 As of March 1, 2013, only motor vehicles titled prior to March 1, 2013 are subject to ad valorem tax. Motor vehicles titled after that date are subject instead to a one-time state and local title fee. In part as a result of this change in law, the assessed value of motor vehicles subject to ad valorem tax decreased by approximately $15.95 million from 2013 to 2015, and the City expects the assessed value of motor vehicles to continue to decrease in future years as motor vehicles subject to ad valorem tax come out of service. For more information, see COUNTY AD VALOREM TAXATION - Property Subject to Taxation and LEGAL MATTERS - State of Georgia Tax Reform Legislation herein. 2 Total assessed value, after deducting exemptions, for purposes of levying tax for City s general obligation bonds. 3 Total assessed value, after deducting exemptions, for purposes of levying tax for City maintenance and operation, including payments under the Lease Agreement. Sources: State of Georgia Department of Revenue, Property Tax Division; Gwinnett County Tax Assessor. [Remainder of Page Intentionally Left Blank] -27-

34 Set forth below is information concerning the rate of levy of property taxes per $1,000 of assessed value, or millage rates, of the City and all overlapping governments for calendar years 2010 through Fire Police City Gwinnett and Special Calendar Maintenance Debt Gwinnett County EMS Service Recreation State of Year and Operation Service Total County School District District District District Georgia Total Source: State of Georgia Department of Revenue, Property Tax Division; Gwinnett County Tax Commissioner. Set forth below is information (stated in thousands) concerning property tax levies and collections (excluding motor vehicles and mobile homes) of the City for the past five fiscal years of the City. Percentage of Collection Percentage Delinquent Tax Collections of Current of Total Tax Taxes Fiscal Current Prior Year s Levy Collections Outstanding Year Tax Levy Year s Levy Years Total to Tax Levy to Tax Levy as of Year End 2010 $2,195,689 $1,984,454 $219,495 $2,203, % % $308, ,105,495 1,952, ,677 2,169, , ,961,366 1,850, ,497 2,079, , ,900,958 1,841,152 91,423 1,932, , ,152,514 2,106,674 61,148 2,167, ,780 Source: Gwinnett County Tax Commissioner. Set forth below is the estimated value of total tax title liens (or fi fas) owned by the City as of the end of its past five fiscal years. The amounts set forth below are cumulative amounts from all preceding years. Estimated Value as of December $308,745 $254,916 $131,321 $86,563 $88,780 Source: Gwinnett County Tax Commissioner. Delinquent property taxes of the City are written off when the statute of limitations for their collection (7 years) expires or if no property is found to levy upon, if earlier. The delinquent taxes written off are usually for personal property, which are more difficult to collect than taxes on real property. -28-

35 Ten Largest Taxpayers Set forth below are the ten largest taxpayers of the City for calendar year A determination of the largest taxpayers within the City can be made only by manually reviewing individual tax records. Therefore, it is possible that owners of several small parcels may have an aggregate assessment in excess of those set forth in the table below. Furthermore, the taxpayers shown in the table below may own additional parcels within the City. No independent investigation has been made of, and consequently no representation can be made as to, the financial condition of any of the taxpayers listed below or that such taxpayers will continue to maintain their status as major taxpayers in the City. Taxpayer Nature of Business Taxes Levied Assessed Valuation Percent of Net Tax Digest 1 Tralee Affordable Bulldog, LLC GA Hwy 20 Associates, LLC Apartment Rental Shopping Center $18,544 15,656 $ 4,880,000 4,120, % 0.63 Selig Enterprises, Inc. Shopping Center 10,488 2,760, Halpern Properties, LLC ARHC BHSUGGA01, LLC Shopping Center Retirement Home 9,728 9,082 2,560,000 2,390, Peachtree Mobile Home Park Mobile Home Rentals 7,741 2,037, Pinnacle-Peachtree Commons A & B Atlanta, LLC Shopping Center Warehouse 6,232 5,644 1,640,000 1,485, Your Extra Attic Suwanee Storage Unit Facility 5,374 1,414, Extra Space Properties Thirty Storage Unit Facility 4,380 1,152, Total $92,869 $24,439, % 1 Represents percentage of assessed valuation as compared to the total value of the City s maintenance and operations tax digest for calendar year 2015 ($657,385,095). Source: Gwinnett County Tax Commissioner. Accounting System and Policies CITY FINANCIAL INFORMATION The accounting practices and policies of the City conform to generally accepted accounting principles as applied to governments. The City s accounting system is organized and operated on a fund basis. The City s funds are segregated for the purpose of accounting for the operation of specific activities or attaining certain objectives. The City s primary fund is the General Fund, which contains all City revenues except those that are specifically allocated by law for other purposes. The City may appropriate money from the General Fund for all ordinary City expenses. The Issuer and the Housing Authority of the City of Sugar Hill, Georgia are accounted for as discretely presented component units of the City. The City also maintains several other funds to account for specific activities or to attain certain objectives. The funds of the City are grouped into two broad categories: (1) Governmental Funds - This category includes the General Fund and the Special Revenue Funds. The General Fund is the principal operating fund of the City and is used to account for all activities of the City not otherwise accounted for in a specified fund. The City has three Special Revenue Funds that account for specific revenues that are legally restricted to expenditures for particular purposes. (2) Proprietary Funds - This category consists of four Enterprise Funds, which are the Gas Fund, the Golf Fund, the Stormwater Utility Fund, and the Car Wash Fund. The Enterprise Funds account for City operations that are designed to be self-supporting. Note 1 of the basic financial statements of the City included as Appendix A to this Official Statement contains a detailed discussion of the City s significant accounting policies. Five Year General Fund History Set forth below is an historical, comparative summary of selected balance sheet data for the City s General Fund for the past five fiscal years. Information in the following table has been extracted from audited financial statements -29-

36 of the City for the years ended December 31, 2010 to Although taken from audited financial statements, no representation is made that the information is comparable from year to year, or that the information as shown taken by itself presents fairly the financial condition of the City for the fiscal years shown. For more complete information, reference is made to the audited financial statements, copies of which are available from the City upon request. General Fund Balance Sheet Years Ended December 31 (Audited) Assets Cash and Cash Equivalents $14,264,811 $12,567,635 $ 8,041,841 $10,876,727 $12,748,580 Restricted Cash , , ,033 Intergovernmental Receivable ,117 48,366 Receivables (Net) 277, , , , ,027 Prepaid Expenditures 20,874 13, ,866 21,030 Due from other Funds ,182, , Total Assets 14,563,059 12,814,770 10,201,991 12,158,840 13,753,036 Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources $14,563,059 $12,814,770 $10,201,991 $12,158,840 $13,753,036 Liabilities Accounts Payable $ 188,985 $ 2,167 $ 746,333 $ 93,110 $ 260,196 Retainage Payable 52, , , Accrued Expenses 58,119 63,413 13, ,369 39,110 Due to Other Funds ,096 Bonds Held - Erosion/Escrow 36,420 99, , , ,033 Deferred Revenue 248, , Total Liabilities 585, ,935 1,518, , ,435 Deferred Inflows of Resources ,655 68,060 76,264 Total Liabilities and Deferred Inflows of Resources 585, ,935 1,616, , ,699 Fund Balances Nonspendable: Prepaid Expenditures ,866 21,030 Restricted for: Stormwater Activities ,096 Unassigned 13,977,940 12,258,835 8,585,489 11,461,108 12,776,211 Total Fund Balances 13,977,940 12,258,835 8,585,489 11,491,974 13,020,337 Total Liabilities, Deferred Inflows of Resources, and Fund Balance $14,563,059 $12,814,770 $10,201,991 $12,158,840 $13,753,

37 Set forth below is an historical, comparative summary of the revenues, expenditures, and changes in fund balance of the City s General Fund for the past five fiscal years. Information in the following table has been extracted from audited financial statements of the City for the years ended December 31, 2010 to Although taken from audited financial statements, no representation is made that the information is comparable from year to year, or that the information as shown taken by itself presents fairly the financial condition of the City for the fiscal years shown. For more complete information, reference is made to the audited financial statements, copies of which are available from the City upon request. General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance Years Ended December 31 (Audited) Revenues Taxes and Fees $ 4,002,604 $ 4,326,115 $ 4,377,328 $ 4,752,508 $ 5,094,149 Intergovernmental , , , ,303 Licenses and Permits 184, , , , ,707 Fines and Forfeitures 10,298 22,303 34,519 14,122 44,770 Charges for Services 559, , , , ,135 Interest 106,096 30,736 18,175 14,783 12,714 Miscellaneous Revenues 27,037 15, ,522 31,100 14,817 Total Revenues 4,890,649 5,150,154 5,820,932 6,221,364 6,548,595 Expenditures Current General Government 1,994,126 2,818,399 5,862,093 1,555,426 3,640,460 Judicial ,283 2,911 4,335 Public Safety 122, , , , ,994 Public Works 1,347,584 4,130,931 2,765,131 1,571,864 1,308,785 Health and Welfare 9,048 5,315 4,928 4,722 11,701 Recreation and Culture 3,473, , , , ,973 Housing and Development 522, , , , ,213 Debt Service 120, , Total Expenditures 7,589,251 8,472,780 10,095,429 4,674,588 6,483,461 Excess of Revenues Over (Under) Expenditures (2,698,602) (3,322,626) (4,274,497) 1,546,776 65,134 Other Financing Sources (Uses) Operating Transfers In 1 2,152,243 2,058, ,354 1,682,415 1,649,669 Operating Transfers Out 2 (362,069) (455,188) (1,155,738) (322,706) (278,242) Total Other Financing Sources (Uses) 1,790,174 1,603,521 (262,384) 1,359,709 1,371,427 Net Change in Fund Balance (908,428) (1,719,105) (4,536,881) 2,906,485 1,436,561 Fund Balance, Beginning of Year 14,886,368 13,977,940 12,283, ,585,489 11,491,974 Prior Period Adjustment , ,802 Fund Balance, End of Year $13,977,940 $12,258,835 3 $ 8,585,489 $11,491,974 $13,020,337 1 The City transferred moneys during fiscal years 2010 through 2014 from certain of its Enterprise Funds to its General Fund for the purpose of financing the operations of the City and to reimburse the General Fund for expenditures accounted for in the General Fund that are allocable to such funds. The amounts of these transfers were as follows: $1,952,345 (gas) and $199,898 (stormwater); $1,628,681 (gas), $167,210 (stormwater), and $262,818 (unclassified); $418,544 (gas), $227,643 (stormwater), and $247,167 (car wash); $1,421,378 (gas), $226,805 (stormwater), and $34,232 (car wash); and $1,612,190 (gas) and 37,479 (car wash). 2 The City transferred moneys during fiscal years 2010 through 2014 from the General Fund primarily to its Golf Fund to support operations of the City s golf course. 3 Ending fund balance was restated in 2012 to properly account for municipal court operations in the General Fund. -31-

38 Management Comments Concerning Material Trends in Revenues and Expenditures The City s General Fund balance decreased from approximately $14.0 million as of the end of fiscal year 2010, to approximately $12.3 million as of the end of fiscal year 2011, and to approximately $8.6 million as of the end of fiscal year The decrease in fund balance during these fiscal years was primarily due to planned major capital improvements, specifically the City s new 32,000 square foot City Hall that opened in January 2013, the new City Lawn and Amphitheater located behind City Hall, and a regional stormwater amenity pond serving 18 acres of property in the City s downtown area. In each of these years, General Fund expenditures exceeded revenues, and the City utilized interfund transfers from certain of its Enterprise Funds (primarily the Gas Fund) to its General Fund for the purpose of financing the operations of the City and to reimburse the General Fund for expenses accounted for in the General Fund that are allocable to such funds. From fiscal year 2012 to fiscal year 2014, following completion of the City s major capital improvement projects, General Fund revenues increased approximately 12.5%, and General Fund expenditures decreased approximately 35.8%. As a result, General Fund revenues exceeded expenditures in each of those fiscal years, the annual transfer amounts into the General Fund were approximately $1.7 million for each of those fiscal years, and the City s General Fund balance increased to approximately $11.5 million as of the end of fiscal year 2013 and to $13.0 million as of the end of fiscal year The City currently estimates that its General Fund balance as of December 31, 2015 will be approximately $6.5 million, representing a decrease of approximately 50.0% from the General Fund balance as of December 31, This decrease is primarily the result of acquiring key real estate properties in accordance with the City s master plan for redevelopment of its downtown area and greenspace parcels to enhance the City s western gateway and the planned Sugar Loop Greenway. In total, the City invested approximately $9.4 million in real estate acquisitions in 2015, which it paid for from General Fund reserves. The City is presently pursuing strategic resales of portions of its downtown properties to private developers for future residential and commercial development. Despite the reduction in its General Fund balance in 2015 due property acquisitions, the City expects its cash balance to be in excess of $11 million as of December 31, No assurance can be given, however, that the actual General Fund balance or the City s cash balance will equal or exceed the amounts presently estimated. Although the City has not formally adopted a resolution or an ordinance regarding interfund transfers to or from the General Fund, the City has regularly utilized interfund transfers primarily from its Gas Fund to its General Fund for the purpose of financing the operations of the City and to reimburse the General Fund for expenses accounted for in the General Fund that are allocable to such funds. For fiscal years 2010 through 2014, the annual transfer amounts into the General Fund averaged approximately $1.4 million per year. For specific amounts of these transfers during fiscal years 2010 through 2014, see CITY FINANCIAL INFORMATION - Five Year General Fund History herein. In 2015, the City Council approved an increase in the monthly service fee charged to customers of its gas system from $13 per customer to $17 per customer, to be phased-in over a three year period. Effective January 1, 2016, the monthly service fee has been increased by $2.00, another $1.00 increase will go into effect on January 1, 2017, and the final $1.00 increase will go into effect on January 1, This is the first adjustment to gas rates in 15 years. The City has estimated that, based on the current number of customers, the increase in the service fee will generate approximately $1.0 million in additional revenue for the City s gas system during the three-year phase-in period and approximately $507,000 per year after that. The City presently plans to apply the revenue generated by the increased fee to rent payments due under the Lease Agreement. No assurance can be given, however, that the actual increase in revenues, if any, will equal or exceed the amount presently estimated or that such increase will not be offset by additional operating expenses or that the City will determine not to apply these revenues to rent payments due under the Lease Agreement. -32-

39 Budgetary Process Georgia law requires each municipality to operate under an annual balanced budget adopted by ordinance or resolution. A budget ordinance or resolution is balanced when the sum of estimated net revenues and appropriated fund balances is equal to appropriations. The City adopts annual appropriated budgets for all of its funds. The City uses the modified accrual basis of accounting in its adopted General Fund budget, which is consistent with the basis of accounting used in the City s General Fund financial statements. In September of each year, information is transmitted to the various departments to enable them to prepare their operating budget requests for the next fiscal year. During September and October, the budgetary requests are returned and are reviewed by the City Manager. The City Manager then prepares a line item operating budget and submits it to the City Council by December 1. The operating budget includes proposed expenditures and the means for financing them. Public hearings are then conducted in the City in order to obtain taxpayer comments on the proposed budget. The budget is legally adopted no later than December 31 through passage of a resolution by the City Council. Budget amendments must be authorized by the City Council through a budget revision. Budgetary control is maintained at the department appropriation level. Departments, with the approval of the City Manager, are authorized, with certain exceptions, to transfer amounts within departmental budgets. Expenditures that would increase total departmental appropriations require the approval of the City Council. The City also prepares monthly financial statements comparing budgeted and actual amounts. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of moneys are recorded in order to reserve that portion of the applicable appropriation, is not utilized by the City. Thus, appropriations outstanding at year-end lapse under generally accepted accounting principles because they do not constitute expenditures or liabilities. [Remainder of Page Intentionally Left Blank] -33-

40 General Fund Budgets Set forth below is a summary of the City s adopted budget, as amended, for its General Fund for the year ended December 31, 2015 and for the year ending December 31, These budgets are based upon certain assumptions and estimates of the City regarding future events, transactions, and circumstances. Realization of the results projected in these budgets will depend upon implementation by management of the City of policies and procedures consistent with the assumptions. There can be no assurance that actual events will correspond with such assumptions, that uncontrollable factors will not affect such assumptions, or that the projected results will be achieved. Accordingly, the actual results achieved could materially vary from those projected in the budgets set forth below. General Fund Budgets Year Ended Year Ending December 31, December 31, 2016 Revenues Taxes and Fees $ 4,564,500 $ 4,950,100 Intergovernmental 133, Licenses and Permits Fines and Forfeitures 332,600 13, ,850 6,050 Charges for Services 669, ,300 Interest Miscellaneous Revenues 10,000 15,000 12,000 15,500 Total Revenues 5,737,800 6,167,490 Expenditures Current General Government 4,316,774 2,940,115 Public Safety Public Works 150,000 1,574, ,000 1,514,757 Recreation and Culture 838, ,950 Housing and Development 1,592,100 1,932,668 Total Expenditures 8,472,074 7,411,490 Excess of Revenues Over (Under) Expenditures (2,734,274) (1,244,000) Other Financing Sources (Uses) Transfers In 2,734,274 1,244,000 Net Change in Fund Balance $ -0- $ -0-1 The City currently estimates that its actual General Fund balance as of December 31, 2015 will be approximately $6.5 million, representing a decrease of approximately 50.0% from the General Fund balance as of December 31, For more information, see CITY FINANCIAL INFORMATION - Management Comments Concerning Material Trends in Revenues and Expenditures herein. -34-

41 The City has not conformed to its General Fund budgets in a few instances for the fiscal years ended December 31, 2010 to Set forth below is a summary of unfavorable variances between budgeted and actual amounts for the General Fund for the fiscal years ended December 31, 2010 to General Fund Unfavorable Variances Years Ended December Revenues Intergovernmental Fines and Forfeitures $ (29,999) --- $ $(1,769,212) --- $ (666,888) (11,878) $ Interest Income (143,904) (34,264) Net Cumulative Variance of Net Change in Fund Balances $8,817,337 $10,949,740 $(4,545,405) $2,854,497 $1,436,561 The City has amended its budget three times during the current fiscal year. The City expects to conform to its adopted budget, as amended, for its General Fund for fiscal year Capital Improvements The City has in effect a five year capital improvements plan, which allows the City to plan, on a long-term basis, for future capital needs. Each year the plan is updated. The following table summarizes historical capital outlays for the City s general fixed assets (excluding fixed assets accounted for in the Enterprise Funds) for the City s past five fiscal years. Years Ended December 31 Department Land $ --- $ --- $ --- $ 10,000 $2,100,106 Buildings and Improvements Machinery and Equipment 8,447 50, , , , , ,524 Vehicles 45,037 25,000 17,192 26,888 7,400 Infrastructure Recreational Upgrades 582,375 3,323, ,099 1,112,753 1,480, ,220, , , ,104 Construction in Progress 1,083,196 4,406,264 10,563, , ,592 Total Cost $5,093,125 $6,366,816 $12,103,491 $2,322,941 $3,563,489 Set forth below is a summary of the City s five year capital improvements plan. Type of Capital Expenditure Years Ending December Total Transportation $ 2,482,080 $ 3,640,474 $ 7,808,000 $4,434,000 $ 4,250,000 $22,614,554 Downtown Facilities 22,950,000 16,100, ,150,000 48,200,00 Recreation Facilities 905,000 1,330,000 1,500,000 2,100, ,000 6,335,000 Property Acquisition , , , ,000 3,520,000 Total Costs $26,337,080 $21,950,474 $10,188,000 $7,414,000 $14,780,000 $80,669,554 Type of Funding Source General Fund $ 3,320,156 $ 5,918,433 $ 3,605,000 $3,105,000 $ 4,530,000 $20,478,589 Sales Tax 5,633,718 5,371,360 3,423,000 2,574,000 10,090,000 27,092,078 Grants 183, ,207 3,160,000 1,735, ,000 5,471,413 Series 2016 Bonds 17,200,000 10,427, ,627,474 Total Sources $26,337,080 $21,950,474 $10,188,000 $7,414,000 $14,780,000 $80,669,

42 Sources of Tax Revenues Set forth below are the City s governmental tax revenues by source for each of its past five fiscal years. Fiscal Year Property Tax Motor Vehicle Title Fees 1 Franchise Fees Tax Revenues By Source Alcoholic Beverage Tax Business and Occupation Tax Sales Tax 2 Other Taxes 2010 $2,309,397 $ --- $719,410 $ 63,987 $255,645 $2,246,454 $ 654,165 $6,249, ,258, , , ,434 2,477, ,576 6,803, ,199, , , ,158 2,425, ,334 6,802, ,055, , , , ,028 2,353,214 1,023,297 7,105, ,234, , , , ,401 2,700,336 1,060,916 7,794,485 1 As of March 1, 2013, motor vehicles titled after that date are no longer subject to ad valorem tax property taxation, but are subject instead to a one-time state and local title fee. Amount shown represents proceeds of motor vehicle title fees received by the City. For more information, see COUNTY AD VALOREM TAXATION - Property Subject to Taxation and LEGAL MATTERS - State of Georgia Tax Reform Legislation herein. 2 Represents proceeds received by the City from a one percent (1%) special purpose sales and use tax approved by the voters of Gwinnett County to finance various capital outlay projects of Gwinnett County and the municipalities in Gwinnett County, including the City. On November 4, 2008, the voters of Gwinnett County approved the imposition of the sales and use tax from April 1, 2009 through March 31, Pursuant to an intergovernmental agreement among Gwinnett County and the municipalities in Gwinnett County, including the City, the City was allocated % of the total amount of the taxes collected. On November 3, 2013, the voters of Gwinnett County approved the imposition of the tax from April 1, 2014 through March 31, Pursuant to an intergovernmental agreement among Gwinnett County and the municipalities in Gwinnett County, including the City, the City was allocated % of the total amount of the taxes collected. Total Employee Benefits The City maintains a single employer, defined-contribution plan created in accordance with Internal Revenue Code Section 401(a) for all full-time employees of the City. In a defined-contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. The City has no liability under this plan except for contributions established and made each year. All full-time employees, excluding elected officials, are eligible to participate in the plan upon completion of one month of service. Participants in the plan are not required to contribute to the plan. Under the plan, the City s contribution can be amended by a majority vote of the City Council. For fiscal year 2014, the City s contribution requirement was equal to 3% of eligible employees salaries as a base contribution. The City s contributions allocated to each employee s account become fully vested after four years of continuous service. As of December 31, 2014, there were 52 participants in the plan. For the year ended December 31, 2014, the City contributed $83,948 to the plan. The City also offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457(b) as secondary retirement plan for all full-time employees of the City. The plan is available to all City employees and permits them to defer income taxation of a portion of their salary to future years. The plan is funded through payroll deductions with a maximum contribution being 15% of the employee s annual salary with a ceiling dollar amount for 2014 of $16,500 per year (or $24,000 per year for employees over 50 years of age) and $18,000 per year (or $24,000 per year for employees over 50 years of age) for Participation in the plan is optional, but the City matches 50% of the employee s contribution up to 7.5% of the employee s annual salary. Although the City s contributions to the plan become vested immediately, the deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. In accordance with Internal Revenue Code Section 457, plan assets are held in trust for the exclusive benefit of plan participants. For the year ended December 31, 2014, participants in the plan contributed $100,436 and the City contributed $36,897. The City s pension and deferred compensation plans are administered by the Nationwide Retirement Solutions. The City has no fiduciary relationship with the plans. Accordingly, the plan assets are not reported in the City s financial statements. Reference is made to Note 15 in the notes to the basic financial statements of the City included as Appendix A for further discussion of the City s pension and deferred compensation plans. -36-

43 City employees are entitled to personal leave in different amounts, depending upon the period of time the employee has been employed by the City. There is a 240 hour limit on the amount of personal leave that employees may accumulate. The hourly value of any earned and unused leave over 240 hours at the end of each fiscal year is either paid to the employee or deposited into that employee s 401(a) retirement account, as directed by the employee. In addition, the City pays employees accrued personal leave not in excess of 30 days upon termination of employment of no more than thirty (30) days. The City reflects a liability for accumulated personal leave in its financial statements. As of December 31, 2014, accrued personal leave pay in the City s governmental funds totaled $126,670. Insurance Coverage and Governmental Immunity The General Assembly of the State of Georgia has declared, in Section of the Official Code of Georgia Annotated, that it is the public policy of the State of Georgia that there is no waiver of the sovereign immunity of municipal corporations and that municipal corporations shall be immune from liability for damages. This policy is applicable to actions based upon tort but is not applicable to actions based upon contract. The City, however, may be unable to rely upon the defense of sovereign immunity and may be subject to liability in the event of suits alleging causes of action founded upon various federal laws, such as suits filed pursuant to 42 U.S.C alleging the deprivation of federal constitutional or statutory rights of an individual and suits alleging anti-competitive practices and violations of the federal antitrust laws by the City in the exercise of its delegated powers. Section of the Official Code of Georgia Annotated also provides that a municipal corporation shall not waive its immunity by the purchase of liability insurance, except for vehicular liability insurance or unless the insurance policy covers an occurrence for which the defense of sovereign immunity is available, but the waiver is limited to the extent of the limits of the insurance policy. Section of the Official Code of Georgia Annotated also provides that municipal corporations are not liable for failure to perform or for errors in performing their legislative or judicial powers, but are liable for neglect to perform or improper or unskillful performance of their ministerial duties. The City carries liability insurance for the types of claims and in amounts that are customary for similar entities for those categories of claims that are not subject to the defense of sovereign immunity. The City also carries property and casualty damage insurance on buildings and other physical assets through the Georgia Interlocal Risk Management Agency jointly administered by the Georgia Municipal Association and the Association County Commissioners of Georgia. Present insurance coverage is summarized below: Type Amount in Force Property (Building and Contents) $22,933,268 Crime: Blanket Employee Dishonesty 500,000 Forgery or Alteration 500,000 Computer Crime 500,000 Theft of Money and Securities 500,000 Limits of Liability Type Each Occurrence Aggregate General Liability $2,000,000 None Law Enforcement Liability Employee Benefits Liability 2,000,000 2,000,000 None $10,000,000 Public Officials Errors and Omissions 1,000,000 5,000,000 Automobile Liability Workers Compensation 1,000,000 Statutory None Statutory Reference is made to Note 6 of the City s financial statements included as Appendix A for a discussion of the City s risk management program. The City requires payment and performance surety bonds and builders risk insurance of all contractors and subcontractors involved in its public works projects. The City requires the surety bonds to be issued by surety firms listed on the U.S. Treasury-approved list and the builders risk insurance to be in the amount of the contract sums. -37-

44 LEGAL MATTERS Pending Litigation The City, like other similar bodies, is subject to a variety of suits and proceedings arising in the ordinary conduct of its affairs. The City, after reviewing the current status of all pending and threatened litigation with its counsel, Thompson, Sweeny, Kinsinger & Pereira, P.C., believes that, while the outcome of litigation cannot be predicted, the final settlement of all lawsuits that have been filed and of any actions or claims pending or threatened against the City or its officials in such capacity are adequately covered by insurance or will not have a material adverse effect upon the financial position or results of operations of the City. There is no litigation now pending or, to the knowledge of the Issuer or the City, threatened against the Issuer or the City that restrains or enjoins the issuance or delivery of the Series 2016 Bonds, the provision of the security for the payment of the Series 2016 Bonds, or the use of the proceeds of the Series 2016 Bonds or that questions or contests the validity of the Series 2016 Bonds or the proceedings and authority under which they are to be issued. Neither the creation, organization, or existence of the Issuer or the City, nor the title of the present members or other officials of the Issuer or the City to their respective offices, is being contested or questioned. There is no litigation pending or, to the knowledge of the Issuer, threatened that in any manner questions the right of the Issuer to adopt the Resolution, to enter into the Lease Agreement, or to secure the Series 2016 Bonds in the manner provided in the Resolution. No litigation and no proceedings are pending against the City or its officials, or to their knowledge are threatened against them, that would affect the sale of the Series 2016 Bonds, the security therefor, or the ability of the City to enter into and perform its obligations under the Lease Agreement. Opinion of Bond Counsel Legal matters incident to the authorization, validity, and issuance of the Series 2016 Bonds are subject to the unqualified approving opinion of Dentons US LLP, Atlanta, Georgia, Bond Counsel, whose opinion will be available at the time of delivery of the Series 2016 Bonds. It is anticipated that the approving opinion will be in substantially the form attached to this Official Statement as Appendix C. The Internal Revenue Code of 1986, as amended (the Code ), contains a number of requirements and restrictions which apply to the Series 2016A Bonds. These include restrictions on investments, requirements for periodic payment of arbitrage profits to the United States, requirements regarding the use of Series 2016A Bond proceeds, and other restrictions and requirements. Failure to comply with certain of such requirements and restrictions may cause interest on the Series 2016A Bonds to become subject to federal income taxation, retroactive, in some cases, to the date of issuance of the Series 2016A Bonds. In the opinion of Bond Counsel, under existing law, interest on the Series 2016A Bonds (including any original issue discount properly allocable to an owner thereof) is excluded from gross income for federal income tax purposes (including the tax imposed by Chapter 2A of Subtitle A of the Code). Moreover, in the opinion of Bond Counsel, interest on the Series 2016A Bonds is not an enumerated item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings. For purposes of Chapter 2A of Subtitle A of the Code, interest on the Series 2016A Bonds, by virtue of being excluded from gross income under Chapter 1 of Subtitle A of the Code, is excluded from the modified adjusted gross income of individuals, from the adjusted gross income of estates and trusts, and from the net investment income of taxpayers that are subject to the 3.8% tax, which was enacted into law as part of the Patient Protection and Affordable Care Act and imposed pursuant to Section 1411 of the Code (the Affordable Care Tax ). The foregoing opinions are subject to the condition that the Issuer and the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2016A Bonds in order that the interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. Failure to comply with certain of such requirements may cause the inclusion of the interest on the Series 2016A Bonds in gross income for federal income tax purposes (including the tax imposed by Chapter 2A of Subtitle A of the Code) to be retroactive to the date of issuance of the Series 2016A Bonds. In concluding that interest on the Series 2016A Bonds is excluded from gross income for federal income tax purposes (including the tax imposed by Chapter 2A of Subtitle A of the Code), Bond Counsel will rely, as to questions of fact material to its opinion, upon certified proceedings and other certifications of public officials furnished to Bond Counsel, without undertaking to verify any of them by independent investigation. If certain of these items are incorrect, interest on the Series 2016A Bonds may become included in gross income for federal income tax purposes retroactive, in some cases, to the date of issuance of the Series 2016A Bonds. -38-

45 Pursuant to Section 1411 of the Code (which is contained in Chapter 2A of Subtitle A of the Code), for taxable years beginning after December 31, 2012, a 3.8% tax is imposed on individuals on the lesser of (1) net investment income and (2) any excess of the modified adjusted gross income over the applicable threshold amount. For individuals filing joint federal tax returns or as surviving spouses, the applicable threshold is $250,000; for married individuals filing separate returns, the applicable threshold is $125,000; and for other individuals, the applicable threshold is $200,000. This 3.8% tax is also imposed on estates and trusts on the lesser of (1) their undistributed net investment incomes and (2) any excess of their adjusted gross incomes over the dollar amount at which the highest tax bracket in Section 1(e) of the Code begins for the taxable year. Subject to the exceptions, conditions, and limitations set forth in the opinion of Bond Counsel, interest on the Series 2016A Bonds is excluded from modified adjusted gross income, adjusted gross income, and net investment income for purposes of the Affordable Care Tax. Gain, however, if any, from the sale or other disposition of Series 2016A Bonds will be taken into account in such calculations. Bond Counsel expresses no opinion regarding any other federal tax consequences arising with respect to the Series 2016A Bonds. In the further opinion of Bond Counsel, the interest on the Series 2016A Bonds is exempt from State of Georgia income taxation. Bond Counsel has not opined as to whether interest on the Series 2016A Bonds is subject to state or local income taxation in jurisdictions other than Georgia; interest on the Series 2016A Bonds may or may not be subject to state or local income taxation in jurisdictions other than Georgia under applicable state or local laws. Each purchaser of the Series 2016A Bonds should consult its own tax advisor regarding the tax-exempt status of the interest on the Series 2016A Bonds in a particular state or local jurisdiction other than Georgia. Original Issue Discount and Premium on Series 2016A Bonds In the opinion of Bond Counsel, under existing law, the original issue discount in the selling price of each Series 2016A Bond maturing December 1, 2029, December 1, 2033, and December 1, 2035 (collectively the Discount Series 2016A Bonds ), to the extent properly allocable to each owner of such Discount Series 2016A Bond, is excluded from gross income for federal income tax purposes with respect to such owner. The original issue discount is the excess of the stated redemption price at maturity of such Discount Series 2016A Bond over the initial offering price to the public, excluding underwriters and other intermediaries, at which price a substantial amount of such Discount Series 2016A Bonds were sold. Under Section 1288 of the Code, original issue discount on tax-exempt obligations accrues on a constant yield to maturity basis. The amount of original issue discount that accrues to an owner of a Discount Series 2016A Bond who acquires such Discount Series 2016A Bond in this offering during any accrual period generally equals (i) the issue price of such Discount Series 2016A Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity of such Discount Series 2016A Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest payable on such Discount Series 2016A Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excluded from gross income for federal income tax purposes, and will increase the owner s tax basis in such Discount Series 2016A Bond for the purpose of determining gain or loss upon a subsequent sale, exchange, payment, or redemption. Any gain realized by an owner from a sale, exchange, payment, or redemption of a Discount Series 2016A Bond would be treated as gain from the sale or exchange of such Discount Series 2016A Bond. Owners of Discount Series 2016A Bonds should consult their own tax advisors with respect to the state and local tax consequences of owning Discount Series 2016A Bonds. Under the tax laws of certain state and local jurisdictions, the amount of interest considered to have accrued to an owner of a Discount Series 2016A Bond may also be deemed to be received in the year of such accrual, even though there will not be a corresponding cash payment, rather than upon the disposition, redemption, or maturity of such Discount Series 2016A Bond for purposes of determining such owner s income tax liability under such state or local tax laws. The Series 2016A Bonds maturing December 1, 2021 through December 1, 2028, inclusive, and December 1, 2030 through December 1, 2032, inclusive (collectively the Premium Bonds ), are being sold at prices in excess of the principal amount thereof. Under the Code, the excess of an owner s cost basis of a bond over the principal amount of such bond (other than a bond held as inventory, stock in trade, or for sale to customers in the ordinary course of business) is generally characterized as bond premium. For federal income tax purposes, bond premium is amortized over the term of the related bond. An owner will therefore be required to decrease its basis in the Premium Bonds by the amount of amortizable bond premium attributable to each taxable year it holds Premium Bonds. The amount of amortizable bond premium attributable to each taxable year is determined on an actuarial -39-

46 basis at a constant interest rate compounded on each interest payment date. The amortizable bond premium attributable to a taxable year is not deductible for federal income tax purposes. Purchasers of Premium Bonds should consult their own tax advisors with respect to the precise determination for federal income tax purposes of the treatment of bond premium upon sale, redemption, or other disposition of Premium Bonds. Collateral Federal Tax Consequences of Owning Series 2016A Bonds Ownership of the Series 2016A Bonds may result in collateral federal tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, certain recipients of Social Security or railroad retirement benefits, foreign corporations operating branches in the United States, certain Subchapter S corporations, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Series 2016A Bonds. The following is a general description of certain of these consequences: 1. Interest on the Series 2016A Bonds is included in the adjusted current earnings of corporations, and such corporations may therefore be required to include as an adjustment in their calculation of alternative minimum taxable income 75% of the excess of adjusted current earnings over alternative minimum taxable income (determined without regard to this adjustment and prior to reduction for certain net operating losses). 2. No deduction is allowable for interest on indebtedness incurred or continued to purchase or carry the Series 2016A Bonds or, in the case of a financial institution, that portion of the owner s interest expense allocated to interest on the Series 2016A Bonds; however, certain de minimis exceptions may be applicable for owners of Series 2016A Bonds other than financial institutions. 3. Property and casualty insurance companies are required to reduce the amount of their deductible underwriting losses by 15% of their amount of tax-exempt interest, including interest on the Series 2016A Bonds. If the amount of this reduction exceeds the amount otherwise deductible as losses incurred, such excess may be includable in income. 4. Certain recipients of Social Security benefits and railroad retirement benefits will be required to include a portion of such benefits within gross income by reason of receipt or accrual of interest on the Series 2016A Bonds. 5. A branch-level tax is imposed on certain earnings and profits of foreign corporations operating branches in the United States, and interest on the Series 2016A Bonds may be included in the determination of such domestic branches taxable base on which this tax is imposed. 6. Passive investment income, including interest on the Series 2016A Bonds, may be subject to federal income taxation for any Subchapter S corporation that has Subchapter C earnings and profits at the close of the taxable year, if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income. 7. Payments of interest on the Series 2016A Bonds are subject to reporting to the Internal Revenue Service (the IRS ) and to payees on Form 1099-INT (or successor form), and the Paying Agent (or its agent) may be required to withhold federal tax (referred to as backup withholding ) from any such payment on a Series 2016A Bond, which is imposed at the rate of 28% of the gross amount of any such payment, if (i) the owner fails to furnish the Paying Agent (or its agent) his or her taxpayer identification number ( TIN ), the accuracy of which has been certified under the penalty of perjury, (ii) the Paying Agent (or its agent) has been notified by the IRS that the owner of the Series 2016A Bond has supplied an incorrect TIN, (iii) the IRS has notified the Paying Agent (or its agent) that the owner of the Series 2016A Bond has failed properly to report certain income to the IRS, or (iv) when required to do so, the owner of the Series 2016A Bond fails to certify under the penalty of perjury that he or she is not subject to backup withholding. The foregoing is not intended as a detailed or comprehensive description of all possible consequences of purchasing or holding the Series 2016A Bonds. Persons considering the purchase of the Series 2016A Bonds should consult with their tax advisor as to the consequences of buying or holding the Series 2016A Bonds in their particular circumstances. Changes in Federal and State Tax Law From time to time, legislative proposals may be made to change federal or state law that, if enacted, would eliminate the exclusion of interest on tax-exempt bonds from gross income for federal income tax purposes or any state law exemption or that would otherwise diminish the advantages of ownership of tax-exempt bonds for one or more categories of taxpayers for federal or state law purposes. Any such proposal could, in certain circumstances, even become effective with respect to tax-exempt bonds issued or purchased prior to enactment or announcement of -40-

47 the proposal. Recent federal tax proposals have included a surtax on a measure of income that included interest on tax-exempt bonds and a proposal that diminished the tax value of the tax exemption for higher-income taxpayers whose income as so measured would be subject to federal income tax at higher marginal rates. Among these proposals is one that was included in the Obama Administration s Fiscal Year 2016 Revenue Proposals. This Obama proposal would, in effect, have limited the tax value of specified deductions and exclusions, including interest on federally tax-exempt bonds, to 28% of such items. These items would be added as modifications to a taxpayer s adjusted gross income. If the marginal federal income tax rate(s) on this measure of income exceeded 28% for an affected taxpayer, an additional tax would be imposed on the amount of such items at a rate (or rates) equal to the excess of the taxpayer's abovementioned margin rate(s) over 28%. This proposal would have been effective for taxable years beginning after 2015, including with respect to tax-exempt bonds issued before that date. A proposal of this nature, if enacted, would adversely affect the ownership of federally tax-exempt bonds, including the ownership of federally tax-exempt bonds issued or purchased prior to enactment or announcement of the proposal. In addition, from time to time, administrative actions, including regulations, rulings, and other administrative authorities, may be announced or proposed and litigation may be commenced or threatened that, if they become a legal authority, could eliminate or diminish the advantages of ownership of tax-exempt bonds for one or more categories of taxpayers for federal or state law purposes. The mere existence or announcement of any such legislative proposal or commencement or threatening of any such administrative action or litigation could impair the marketability or market value of the Series 2016A Bonds, at least temporarily, whether or not it is ultimately enacted into law or becomes a legal authority. The opinion expressed by Bond Counsel is based upon the U.S. Constitution and the Constitution of the State of Georgia, implemented by statutes enacted thereunder, and as interpreted by judicial, regulatory, and other administrative authorities existing as of the date of issuance and delivery of the Series 2016A Bonds. Bond Counsel expresses no opinion as of any date subsequent thereto or with respect to any proposed or pending legislation or proposed, pending, or threatened administrative actions or litigation. Potential purchasers of the Series 2016A Bonds should consult their tax advisors regarding any pending or proposed legislation, administrative action, or litigation of the type referred to or characterized above as part of their investment decision and thereafter, as appropriate. Certain Tax Consequences of Owning Series 2016B Bonds The following constitutes a discussion of certain of the federal and State of Georgia income tax consequences of the purchase, ownership, and disposition of the Series 2016B Bonds. This summary is presented for informational purposes only and is intended to be a discussion primarily of the federal and State of Georgia income tax consequences to individual owners who are citizens or residents of the United States. It is not practicable to comment on all aspects of the federal, state, and local tax laws which may affect an individual owner s purchase of the Series 2016B Bonds. Therefore, state (other than State of Georgia), local, and foreign tax consequences are not discussed, nor are the tax consequences to owners other than individuals. Such tax consequences will vary with each purchaser, depending upon its individual situation. The following summary should not be considered as legal or tax advice to prospective purchasers of the Series 2016B Bonds. Taxability The interest on the Series 2016B Bonds is included in gross income of the United States resident owners thereof for federal income tax purposes and therefore is not exempt from federal income taxation. The interest on the Series 2016B Bonds is, however, exempt from State of Georgia income taxation. Original Issue Discount on Series 2016B Bonds The Series 2016B Bonds are being sold at a discount. The amount of discount equals the excess of the stated redemption price at maturity of each maturity of the Series 2016B Bonds over the selling price of that maturity of the Series 2016B Bonds, which is the initial offering price to the public, excluding underwriters and other intermediaries, at which price a substantial amount of such maturity was sold for money. Because the amount of such discount is treated for federal income tax purposes as de minimis under Section 1273 of the Code, as a general rule such discount will not be realized or accrued over the term of the Series 2016B Bonds, and the tax bases of the owners of such bonds will therefore not be increased. Under current law, any gain realized by an owner from a sale, exchange, payment, or redemption of a Series 2016B Bond would be treated as gain from the sale or exchange of such Series 2016B Bond. Owners of Series 2016B Bonds should consult their own tax advisors with respect to the state and local tax consequences of owning Series 2016B Bonds. -41-

48 Backup Withholding and Reporting Requirements Interest payments with respect to the Series 2016B Bonds will be reported to the owners and the Internal Revenue Service (the IRS ). Such amounts will normally not be subject to withholding of federal income tax. However, the Issuer or its agent may be required to withhold federal income tax at a rate of 28% from payments to certain owners ( backup withholding ) in accordance with Section 3406 of the Internal Revenue Code. This tax may be withheld from certain payments if (i) an owner fails to furnish the Issuer or its agent with his or her tax identification number ( TIN ) certified under penalties of perjury, (ii) the Issuer or its agent is notified by the IRS that the TIN furnished by an owner is incorrect, (iii) the IRS notifies the Issuer or its agent that an owner has failed to report properly certain income to the IRS, or (iv) when required to do so, an owner fails to certify under penalty of perjury that he or she is not subject to backup withholding. Circular 230 Prospective investors are urged to consult their own tax advisors before determining whether to purchase Series 2016B Bonds. The tax discussion herein under LEGAL MATTERS - Certain Tax Consequences of Owning Series 2016B Bonds was not intended or written to be used, and cannot be used, for purposes of avoiding taxpayer penalties. This discussion was written to support the promotion or marketing of the Series 2016B Bonds. Other Tax Consequences to Investors There may be other federal, state, local, or foreign tax considerations applicable to the circumstances of a particular investor. Prospective investors are urged to consult their own tax advisors before determining whether to purchase Series 2016B Bonds. Purchasers of Series 2016B Bonds who are nonresident alien individuals, corporations that are not incorporated in the United States or under the laws of the United States or of any state of the United States, or other non-united States persons should consult their own tax advisors with respect to the possible applicability of United States withholding and other taxes on income realized in respect to the Series 2016B Bonds. State of Georgia Tax Reform Legislation During its 2012 legislative session, the Georgia General Assembly enacted legislation known as House Bill 386 (the Tax Reform Act ). Georgia Governor Nathan Deal signed HB 386 into law on April 19, The Tax Reform Act provides a number of changes to Georgia s tax laws that impact local governments in Georgia, including the City. These changes include the following: Elimination of the sales tax and the ad valorem tax on motor vehicles and the replacement of such taxes with onetime state and local title fees whenever any motor vehicle changes ownership on or after March 1, These title fees will equal 6.5% of the fair market value of the motor vehicle (less any trade-in value) for vehicles titled from March 1, 2013 through December 31, 2013, 6.75% of the fair market value of the motor vehicle (less any trade-in value) for vehicles titled in 2014, and 7% of the fair market value of the motor vehicle (less any trade-in value) for vehicles titled in 2015 and thereafter. The revenues from these fees will be allocated among state and local governments by formula. Elimination of the state and local sales tax (except for any local sales tax for educational purposes) on the sales, use, storage or consumption of energy used in manufacturing, subject to a four year phase in of 25% per year beginning on January 1, 2013 until it reached the full exemption on January 1, 2016; however, the Tax Reform Act permits each county to adopt an ordinance to levy and collect an excise tax upon the sale or use of energy used in manufacturing to make up for the sales tax revenues lost as a result of the imposition of the sales tax exemption described above. Expansion of the definition of dealer required to collect local and state sales tax on internet transactions to include out-of-state vendors with affiliate relationships with Georgia vendors if gross sales in Georgia during the preceding 12 months exceeded $50,000. Comprehensive revision of the income tax credit for the qualified donation of conservation real property, including the reduction of the cap of the conservation easement tax credit to $500,000. The Tax Reform Act also prohibits counties, cities, and consolidated governments from holding a conservation easement unless the encumbered property is located at least partly within the boundaries of such local government. Reinstitution of sales tax holidays for the purchase of school supplies (2 days in August 2012 and August 2013) and energy-efficient or water efficient products (3 days in October 2012 and October 2013). The Georgia General Assembly eliminated similar sales tax holidays for 2010 and 2011 as a result of the economic downturn. -42-

49 The City is currently uncertain as to the impact that the Tax Reform Act will have on its revenues in future years as the various provisions of the Tax Reform Act become effective. In a letter dated March 19, 2012 addressed to the Georgia House Ways and Means Committee one day prior to the vote by the Georgia House of Representatives on the Tax Reform Act, the Department of Audits and Accounts of the State of Georgia cited a report from the Georgia State University Fiscal Research Center that estimated that the Tax Reform Act would result in a revenue decline for Georgia local governments of approximately $200 million in the aggregate during fiscal years 2013 through No assurance can be given that the Tax Reform Act on Georgia local governments, including the City, will not have an adverse impact on their revenues in future years. Validation Proceedings The State of Georgia instituted proceedings in the Superior Court of Gwinnett County, Georgia to validate the Series 2016 Bonds and the security therefor. The State of Georgia was the plaintiff in the proceeding, and the Issuer and the City were the defendants. A final judgment confirming and validating the Series 2016 Bonds and the security therefor was entered on December 23, Under Georgia law, the judgment of validation will be forever conclusive with respect to the validity of the Series 2016 Bonds and the security therefor against the Issuer and the City. The judgment entered by the Superior Court of Gwinnett County held, among other things, that the Issuer and the City are authorized to enter into the Lease Agreement, that the Lease Agreement, when executed and delivered, will constitute a valid, binding, and enforceable obligation of the Issuer and the City, and that the City is authorized to make all payments required by the Lease Agreement and to levy and collect taxes, without limitation, for the purpose of making all payments required under the Lease Agreement. Closing Certificates At closing of the sale of the Series 2016 Bonds by the Underwriter, the Issuer and the City will each deliver to the Underwriter a certificate that no litigation is pending or threatened against it that would have a material effect on the issuance or validity of the Series 2016 Bonds or performance under the Lease Agreement or the Resolution or, in the case of the City, on the financial condition of the City. In addition, the City will deliver to the Underwriter a certificate that the information contained in this Official Statement does not contain any misstatement of a material fact and does not omit to state any material fact necessary to make the statements herein contained, in light of the circumstances under which they were made, not misleading. Rating MISCELLANEOUS Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc., has assigned a rating of AA+ (stable outlook) to the Series 2016 Bonds. The rating reflects only the view of the rating agency, and any desired explanation of the significance of the rating should be obtained from the rating agency at the following address: Standard & Poor s Ratings Services, 55 Water Street, New York, New York Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies, and assumptions of its own. There is no assurance that such rating will remain unchanged for any given period of time or that it will not be revised downward or withdrawn entirely by the rating agency, if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the liquidity and market price of the Series 2016 Bonds. Underwriting The Series 2016A Bonds will be purchased for re-offering at negotiated sale by Raymond James & Associates, Inc. (the Underwriter ) from the Issuer at an aggregate purchase price of percent of the principal amount of the Series 2016A Bonds. The Series 2016B Bonds will be purchased for re-offering at negotiated sale by the Underwriter from the Issuer at an aggregate purchase price of percent of the principal amount of the Series 2016B Bonds. The Underwriter will enter into a Bond Purchase Agreement that provides that the Underwriter will purchase all of the Series 2016 Bonds, if any are purchased. The obligation of the Underwriter to accept delivery of the Series 2016 Bonds will be subject to various conditions contained in the Bond Purchase Agreement. The Underwriter intends to offer the Series 2016 Bonds to the public initially at the offering prices set forth on the cover page of this Official Statement, which offering prices may subsequently be changed from time to time by the Underwriter without any requirement of prior notice. The offering prices set forth on the cover page of this Official Statement average $6.20 per $1,000 face amount of the Series 2016 Bonds in excess of the purchase price to be paid to the Issuer by the Underwriter. The Underwriter will receive no fee (other than the anticipated profits described in the preceding sentence) from the Issuer for underwriting the Series 2016 Bonds. The Underwriter has -43-

50 reserved the right to permit other securities dealers who are members of the National Association of Securities Dealers, Inc. to assist in selling the Series 2016 Bonds. The Underwriter may offer and sell the Series 2016 Bonds to certain dealers (including dealers depositing Series 2016 Bonds into investment trusts) at prices lower than the public offering prices set forth on the cover page of this Official Statement or otherwise allow concessions to such dealers who may re-allow concessions to other dealers. Any discounts or commissions that may be received by such dealers in connection with the sale of the Series 2016 Bonds will be deducted from the Underwriter s underwriting profits. Municipal Advisor The City has employed Kidwell & Company, Newnan, Georgia, as its municipal advisor in connection with the issuance of the Series 2016 Bonds. Independent Auditors The basic financial statements of the City as of December 31, 2014, and for the year then ended, attached hereto as Appendix A, have been audited by Walker, Pierce & Tuck, Certified Public Accountants, P.C., Gainesville, Georgia, independent certified public accountants, to the extent and for the period indicated in its report thereon, which appears in Appendix A. Such financial statements have been included herein in reliance upon the report of Walker, Pierce & Tuck, Certified Public Accountants, P.C. Additional Information Use of the words shall, must, or will in this Official Statement in summaries of documents or laws to describe future events or continuing obligations is not intended as a representation that such event will occur or obligation will be fulfilled but only that the document or law contemplates or requires such event to occur or obligation to be fulfilled. Any statements made in this Official Statement involving estimates or matters of opinion, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates or matters of opinion will be realized. Neither this Official Statement nor any statement that may have been made orally or in writing is to be construed as a contract with the owners of the Series 2016 Bonds. RESPONSIBILITY FOR OFFICIAL STATEMENT The execution and delivery of this Official Statement, and its distribution and use by the Underwriter, have been duly authorized and approved by the Issuer and the City. The contents of this Official Statement are the responsibility of the City, except that the Issuer is responsible for the statements contained under the caption THE ISSUER and the information with respect to the Issuer appearing under the caption LEGAL MATTERS - Pending Litigation herein, and, with the exception of the foregoing information for which the Issuer is responsible, the Issuer makes no representation as to the accuracy or completeness of any information contained herein. THE CITY OF SUGAR HILL DOWNTOWN DEVELOPMENT AUTHORITY By: /s/ Taylor Anderson Chairman CITY OF SUGAR HILL, GEORGIA By: /s/ Steve Edwards Mayor -44-

51 APPENDIX A FINANCIAL STATEMENTS OF THE CITY The basic financial statements of the City as of December 31, 2014, and for the year then ended, included as this Appendix A, have been audited by Walker, Pierce & Tuck, Certified Public Accountants, P.C., Gainesville, Georgia, independent certified public accountants, to the extent and for the period indicated in its report thereon, which appears in this Appendix A. Such financial statements have been included herein in reliance upon the report of Walker, Pierce & Tuck, Certified Public Accountants, P.C. [Remainder of Page Intentionally Left Blank]

52 [THIS PAGE INTENTIONALLY LEFT BLANK]

53 CITY OF SUGAR HILL, GEORGIA FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014 WALKER, PIERCE & TUCK, CPA'S, PC

54 [THIS PAGE INTENTIONALLY LEFT BLANK]

55 To the City Council Sugar Hill, Georgia Report on the Financial Statemcnts INDEPENDENT AUDITOR'S REPORT \Ve have audited the accompanying financial statements orthe governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Sugar H ill Georgia~ as of' and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. IVlanagcmcnt's Rcsponsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these tinancial statements in accordance vvith accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internnl control relevant to the preparntion and nlir presentation of flnancial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements bnsed on our audit. \Ye conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standard.,), issued by the Comptroller General or the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financinl statements are free from material misstatement. All audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statcments. The procedul'es selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design nudit procedures that arc appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evalunting the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management as well as evaluating the overall presentation of the financial statements. \Ve believe that the audit evidcnce we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above prescnt nlirly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the dist,,;retely presented component units, each major fund, and the aggregate remaining fund information of the City of' Sugar Hill, Georgia, as of December 3 I, 2014, and the respective chnngesin financial position and, where applicable, cash nows thereof for the year then ended in accordance with accounting principles gcnerally accepted in the United States of America.

56 Other Matters Required Supplementary Information Management has omitted Management's Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. However, accounting principles generally accepted in the United States of America require that the budgetary comparison information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the infonnation and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Sugar Hill, Georgia's basic financial statements. The Combin ing Non-major Fund Financial Statements and the Schedule of Expenditures of Special Purpose Local Option Sales Tax, as required by O.C.G.A as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining Non-major Fund Financial Statements and the Schedule of Expenditures of Special Purpose Local Option Sales Tax are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such infonnation has been SUbjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining Non-major Fund Financial Statements and the Schedule of Expenditures of Special Purpose Local Option Sales Tax are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Goverllmellt Aliditillg Stalldards In accordance with Government Auditing Standards, we have also issued our report dated November 12,2015, on our consideration of the City of Sugar Hill, Georgia's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Sugar Hill, Georgia's internal control over financial reporting and compliance. Walker, PieYC(VCr Tuc1v, CPA'~ P.C. Walker, Pierce and Tuck, CPA's, P.C. Gainesville, Georgia November 12,

57 City of Sugar Hill, Georgia Statement of Net Position December 3 I, 2014 Primary Government Governmental Business-Type Housing Activities Activities Total Authority Assets Current Assets Cash and cash equivalents $ 14,437,464 $ 10,451 $14,447,915 $200,387 Restricted cash 134, , ,321 Receivables (net) 801, ,176 1,784,203 Intergovernmental receivable 581, ,322 Interfund balances (223,096) 223,096 Prepaid expenses 21,030 21,030 Supplies I inventory JOI~ Total Current Assets 15~751~ ) 72706z z387 Deferred Outflows of Resources Component Units Down Town Dev. Authorit~ $ 51,889 3,329 55z218 Non-current Assets Capital assets Nondepreciable 7,069,307 4,893,321 11,962,628 Depreciable, net ~471 Total Non-current Assets Total Assets ~9441] Liabilities Current Liabilities Accounts payable 260, ,631 1,012,827 Accrued expenses 39,) JO 24,128 63,238 Lease payable 22,825 22,825 Unearned revenue 1,480 ),480 Landfill closure/postclosure cost Total Current Liabilities ) Long-term Liabilities Amounts held in trust )34, , ,840 Compensated absences ] 13,229 51, ,359 Landfill c1osure/postclosure cost ~ Total Long-term Liabilities 12842~ ,937 2~528,050 Deferred Inflows of Resources Total Liabilities 2,286,405 1,487,001 3,773, , ,200 Net Position Net Investment in Capital Assets 60,592,637 9,621,967 70,214,604 Restricted for: Capital projects 2,221,840 2,221,840 Storm water activities 223, ,096 Unrestricted J 1 z Total Net Position $ ]2 $ 10 ] ) 210] $ ] 3 $ $ S40]8 The accompanying notes are an integral part of these financial statements. 3

58 City of Su~ar Hill, Georgia Statement of Activities For the Year Ended December 31, 2014 Primary government: Governmental activities General government Judicial Public safety Public works Health and welfare Recreation and culture Housing and development Total governmental activities Business-type activities Gas Golf Stormwater utility Car wash Total business-type activities Total primary government Component units: City of Sugar Hill Housing Authority Downtown Development Authority Total component units Net (Expenses) Revenues and Program Revenues Changes in Net Position Operating Capital Primary Government Charges for Grants and Grants and Governmental Business-Type Expenses Services Contributions Contributions Activities Activities Total $ 3, $ $ $ 513,280 $ (1,846,452) $ $ (1,846,452) 4, ,179 5, ,994 ( ) (128,994) 2.231, , ,474 (1,474,585) (l,474,585) 30,781 (30,781 ) (30,781) 1,354, ,382 1,722, , , ! } ( } 7,519,673 l,l16a~5_ J9, (3,410,031) ( ) 6,480,242 7,967,799 1,487,557 1,487,557 1,112, ,763 (430,607) (430,607) 374, , , , : :499 1: : $ 'J $104]695.4 $ $ lfla ) $ $ ( ) 15,807 15, : S 64]Q $ Z22Q2 $ 23 Q41 $ General revenues: Taxes: Property taxes, levied for general purposes 2,795,975 2,795,975 Franchise tax 871, ,268 Sales taxes 166, ,633 Business Tax 1,300,128 1,300,128 Alcoholic Beverage Tax 39,535 39,535 Interest and investment earnings ,714 Miscellaneous 26,479 3,300 29,779 Transfers ( } Total general revenues and transfers {1.368: 127} Change in net position 3,174,128 (75,728) 3,098,400 Net Position Beginning of Year : ,313 Ending net position $ $ ~$ :t Housing Authority Component Units $ $ $ $ Downtown Dev. Authority (479) $ (479) $ , j $ The accompanying notes are an integral part of these financial statements. 4

59 City of Sugar Hill, Gcor~ia Balance Sheet Governmental Funds December 31, 2014 Assets Cash and cash equivalents Restricted cash Intergovernmental receivable Receivables (net) Prepaid expenditures SPLOST SPLOST General Fund 2005 Fund 2009 Fund $ 12,748,580 $ 454,316 $ 166, ,033 48, ,027 21:030 SPLOST 2014 Fund $ 1,068, ,956 Total Governmental Funds $ 14,437, , ,322 80),027 21:030 Total Assets 13,753, , ,429 1,601,095 15,974,876 Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources $ 13 Z $ 454 J 16 $ 166,422 $ $ 1~ 2Z4 8Z6 Liabilities Accounts payable Accrued expenses Due to other funds Bonds held $ 260,196 $ $ 39, , :033 $ $ 260,196 39, , :033 Total Liabilities 656, ,435 Deferred Inflows of Resources :264 Total Liabilities and Deferred Inflows of Resources 732, ,699 Fund Balances Nonspendable: Prepaid expenditures Restricted for: Capital projects Storm water activities Unassigned Total Fund Balances 21, , , , : ,601,095 1:601 :095 21,030 2,221, , : :177 Total Liabilities, Deferred Inflows of Resources and Fund Balance $ 13,1~J.QJ6 $ 454,316 $ 16(2,429 ~ 1 60),09~ $ 15 9Z4,876 The accompanvim~ notes are an integral part of these financial statements. 5

60 City of Sugar Hill, Georgia Reconciliation of the Governmental Funds Balance Sheet to the Statement ornet Position December 3 I, 2014 Total Governmental Fund Balances $ 15,242,177 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Governmental capital assets Less: Accumulated depreciation Total capital assets Some liabilities are not due and payable in the current period and therefore are not reported in the funds. Those liabilities consist of: Accrued personal leave not reported in governmental funds Landfill Closure/Postclosure costs $ 82, I 07,390 (21.514,753) 60,592,637 (113,229) (1,739,837) Some of the City's revenues will be collected after year-end, but are not available soon enough to pay for the current period's expenditures and therefore are deferred in the funds. Net Position of Governmental Activities 76,264 $74,058,012 The accompanying notes are an integral part of these financial statements. 6

61 City of Sugar Hill, Georgia Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended December 31, 2014 SPLOST SPLOST SPLOST General Revenues Fund Fund Fund Fund Taxes $ 5,094,149 $ $ $ Intergovernmental 228, ,013 2,143,323 Licenses and permits 553,707 Fines and forfeitures 44,770 Charges for services 600,135 Interest 12, ,478 Miscellaneous Total Revenue 6,548, ,593 2,144,801 Expenditures Current: General government 3,640,460 Judicial 4,335 Public safety 128,994 Public works 1,308,785 93,807 Health and wei fare 11,701 Recreation and culture 787,973 Housing and development 601,213 Capital Outlay 1:716: Total Expenditures 6A83A :706 Excess (Deficiency) of Revenues Ovel' 65, (1,252,620) 1,601,095 (Under) Expenditures Other Financing Sources (Uses) Transfers in 1,649,669 Transfers out ( ) Total Other Financing Sources (Uses) Net Change in Fund Balances 1,436, (1,252,620) 1,601,095 Fund Balances Beginning of Year 11,491, ,635 1,510,851 Prior Period Adjustment ( } Fund Balances End of Year $ $ 4543]6 $ ] $ ] Total Governmental Funds $ 5,094,149 2,928, ,707 44, ,135 15, ,251,670 3,640,460 4, ,994 1,402,592 11, , , ,290 1,649,669 ( } ,785,717 13,456,460 $ The accompanying notes are an integral part of these financial statements. 7

62 City of Sugar Hill, Georgia Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended December 31,2014 Net Changes in Fund Balanccs-Total Governmcntal Funds Amounts reported as governmental activities in the Statement of Activities are different from the amounts reported in the Statement of Revenues, Expenditures, and Changes in Fund Balance because: Capital outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities the cost of those assets is allocated over their useful lives and reported as depreciation expense. This is the amount by which capital outlay exceeded depreciation. Expenditures for capital outlays Less: Current year depreciation 3,500,989 (2,316,018) 1,184,97) Under the modified accrual basis of accounting used in the Governmental Funds, expenditures are not recognized for transactions that are not normally paid with expendable available financial resources. In the Statement of Activities, however, which is presented on the accrual basis, expenses and liabilities are reported regardless of when financial resources are available. Landfill Closure / Postclosure Costs Compensated Absences are reported in the Statement of Activities, but do not require the use of current financial resources and therefore are not reported in the governmental funds. Compensated absence liability at December 31, 2013 Compensated absence liability at December 31,2014 Revenues from donated assets in the Statement of Activities that do not provide current financial resources are not reported as revenues in the governmental funds. Because some revenues will not be collected for several months after the City's fiscal year end, they are not considered "available" revenues and are deferred in the governmental funds. Deferred revenue at December 31, 2013 Deferred revenue at December 3), 2014 Change in Net Position of Governmentnl Activities 100,979 (J 13,229) (68,060) 76, ,986 (12,250) 62,500 8,204 $ 3 ] The accompanying notes are an integral part of these financial statements. 8

63 City of Sugar Hill, Georgia Statement of Net Position Proprietary Funds December 31, 2014 Gas Golf Assets Current Assets: Cash and cash equivalents $ Fund 800 $ Fund 9,651 Restricted cash and cash equivalents 636,288 Accounts receivable (nct) 939,698 Supplies / inventory 89,760 12,139 Due from other funds Total Current Assets 1.666:546 21:790 $ Nonmajor Funds 43, : Total $ 10, , , , :096 1:954:910 Noncurrent Assets: Capital assets Non-depreciable 10,900 4,247,948 Depreciable, net :707 1: Total Noncurrent Assets :687: , ,893, : :792 Total Assets 4: ,708: I L599,702 Liabilities Current Liabilities: Accounts payable 729,826 22,570 Accrued expenses 6,517 16,349 Unearned revenue 1,480 Capital lease payable 22:825 Total Current Liabilities 737:823 61: , ,631 24,128 1,480 22: :064 Long-term Liabilities: Compensated absences 24,794 23,572 Customer deposits Total Long-term Liabilities 659:601 23:572 2,764 2,764 51, : ,937 Total Liabilities 1.397:424 85:316 4,261 L487,001 Net Position Net investment in capital assets 3,177,607 5,664,377 Unrestricted 269:122 ( } Total Net Position $ $ , ,313 $ ] 04? 226 9,621, :734 $10]1210) The accompanying notes are an integra) part of these financial statements. 9

64 City of Sugar Hill, Georgia Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended December 3 1, 2014 Gas Golf Nonmajor Fund Fund Funds Operating Revenue Sales $7,763,895 $ $ 77,499 Tap-on fees 67,800 Green and cart fees 501,098 Rentals 32,712 Concessions and merchandise 146,597 User fees and charges 568,505 Penalties and interest 134,751 4,933 Miscellaneous income I z 356 Total Operating Revenue 7,971, , ,937 Operating Expenses Personal services: Personnel services 510, ,070 97,848 Employment Taxes 40,636 30,698 7,642 Benefits Total Personal Services 795, , ,909 Purchased / contracted services: Professional and technical 107,688 42,033 16,324 Purchased property services 17,607 60,834 3,053 Rentals 1, Other purchased services : Total Purchased / contracted services 200, , ,206 Supplies 243, ,628 41,285 Purchases for resale 5,089,366 87,575 Depreciation 150, ,487 37,088 Total Operating Expenses Operating Income (Loss) ( } Nonoperating Revenues (Expenses) Interest expense (22149} Total Nonoperating Revenues and (Expenses) (22149} Transfer in 278,242 Transfer out (L612J90) (37A79) Change in Net Position (121,333) (152,365) 197,970 Net Position Beginning of Year 3,568,062 5,776, ,326 Net Position End of Year $ $ $] Total $ 7,841,394 67, ,098 32, , , ,684 6 z 009 9,303, ,305 78, ,497, ,045 81,494 1, , ,360 5,176, ,425 82OO5 z (22149} (22149} 278,242 (J,649,669) (75,728) 10,188,429 $ ] I The accompanying notes are an integral part of these financial statements. 10

65 City of Sugar Hill, Georgia Statement of Cash Flows Proprietary Funds For The Year Ended December 31, 2014 Gas Golf Fund Fund Cash flows from operating activities: Receipts from customers $ $ 681,763 Payments to suppliers ( ) (357,977) Payments to employees ( ~ (547,273) Net cash provided (used) by operating activities (223,487) Cash flows from noncapital financing activities: Transfer from other funds Transfer to other funds ( ~ Net cash provided (used) by noncapital linancing activities ( ) Cash flows from capital and related financing activities: Acquisition of capital assets (23.000) (8.086) Debt payments, principal and interest {46.154) Net cash provided (used) by capital and related financing activities (23.000) (54.240) Nonmajor Funds $ (226,048) ( ) (37.479) (37,479) Total $9.308,438 (6,323,529) (1.490,690) ,242 ( 1,649,669) (1,371,427) (31,086) ~46, 154) (77,240) Net increase (decrease) in cash and cash equivalents 45, Cash and cash equivalents, December ,136 Cash and cash equivalents, December $ 637,088 $ 9651 $ 45, ,187 $ 646,739 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $ 1, $ ( ) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation 150, Changes in assets and liabilities: (Increase) decrease in accounts receivable (Increase) decrease in supplies/inventory ( ) (1,722) Increase (decrease) in due from other funds Increase (decrease) in accounts payable ( ) Increase (decrease) in accrued expenses 2,286 2,232 Increase (decrease) in compensated absences 1,489 (993) Increase (decrease) in deferred revenue (364) Increase (decrease) in customer deposits Net cash provided (used) by operating activities $ I $ {2ZJ ~8ZJ $ (13,096) (223,096) (557) 449 1,242 $ n~12 $ 1, , (18,533) (223,096) (186,865) 4, (364) 45,400 $ The accompanying notes are an integral part of these financial statements, 11

66 City of Sugar Hill, Georgia Notes to Financial Statements December 3 l, 2014 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of City of Sugar Hill, Georgia, have been prepared in confonnity with Generally Accepted Accounting Principles (GAAP) as applied to government units. The City's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements and Accounting Principles Board (APB) opinions, unless those pronouncements conflict with or contradict GASB pronouncements, in which case GASB prevails. The more significant of the government's accounting policies are described below. I-A The Reporting Entity The City of Sugar Hi1l, Georgia is a municipal corporation governed by a five member City Council, a Mayor and a full time City Manager. As required by generally accepted accounting principles, the accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable. The blended component unit, although a legally separate entity is, in substance, part of the City's operations and so data from this unit is combined with data of the primary government. The discretely presented component unit is reported in a separate column in the government-wide financial statements (see note below for description) to emphasize that it is legally separate from the government. Each blended and discretely presented component unit has a December 31 st year-end. The primary government is financialjy accountable if it appoints a voting majority of the organization's governing body and (J) it is able to impose its will on that organization or (2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. The primary government may be financially accountable if an organization is fiscally dependent on the primary government regardless of whether the organization has (1) a separately elected governing board, (2) a governing board appointed by a higher level of government, or (3) a jointly appointed board. Discretely presented component units The Sugar Hill Housing Authority (Housing Authority) is governed by a separate board appointed by the Mayor and Council and is a separate legal, public body created and existing under instrumentality of the City of Sugar Hill, Georgia for the purpose of providing safe and sanitary dwelling accommodations to persons of low income. The Housing Authority'S financial statements are reflected on the City's financial statements under the Discretely Presented Component Unit caption. The Housing Authority does not issue separate financial statements. The Downtown Development Authority (Development Authority) was created for the purpose of revitalization and redevelopment of the central business district of the City of Sugar Hill and to develop and promote for the public good and general welfare trade, commerce, industry, and employment opportunities. The Development Authority is governed by a separate board appointed by the Mayor and Council and is a separate legal, public body created and existing under instrumentality of the City of Sugar Hill, Georgia. The Development Authority utilizes City employees to conduct daily operations including finance activities. The Development Authority leases property from the city for $10 annually and is responsible for maintaining the property and entering into subleases for the rental and occupancy of the building which are approved by the City. The Development Authority does not issue separate financial statements Payments between the city and component units Resource flows (except those that affect the statement of net positionlbalance sheet only) between a primary government and its discretely presented component units are reported as external transactions-that is, as revenues and expenses. Resource flows between the primary government and blended component units are classified as interfund transactions in the financial statements. During 2014, there were no blended component units. All funds, organizations, institutions, agencies, departments, and offices that are not legally separate are, for financial reporting purposes, part of a primary government. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule include charges between the City's business-type / proprietary funds and governmental funds. 12