REFUNDING ISSUE (BOOK-ENTRY ONLY) Dated: Date of Delivery OFFICIAL STATEMENT DATED APRIL 25, 2013 $21,880,000 CITY OF EAST ORANGE IN THE COUNTY OF ESSEX, NEW JERSEY RATING: See RATINGS herein In the opinion of Wilentz, Goldman & Spitzer, P.A., Woodbridge, New Jersey ( Bond Counsel ), under existing statutes, regulations, rulings and court decisions, and assuming continuing compliance with certain covenants described herein, interest on the Series 2013A Bonds (i) is not includable in gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the Code ), and (ii) will not be treated as a preference item under Section 57 of the Code for purposes of calculating the Federal alternative minimum tax; however, such interest will be included in the adjusted current earnings of a corporation for purposes of the Federal alternative minimum tax imposed on corporations. Bond Counsel is further of the opinion that, under existing laws of the State of New Jersey, interest on the Bonds and any gain on the sale thereof are not includable in gross income under the New Jersey Gross Income Tax Act, as amended. See TAX EXEMPTION herein. $15,785,000 CAPITAL IMPROVEMENT REFUNDING BONDS, SERIES 2013A And $6,095,000 PENSION REFUNDING BONDS (TAXABLE), SERIES 2013B (Qualified Pursuant to the Provisions of the Municipal Qualified Bond Act, P.L. 1976, c.38, as amended) Due: as shown on inside cover hereof The $15,785,000 Capital Improvement Refunding Bonds, Series 2013A (the Series 2013A Bonds ) and $6,095,000 Pension Refunding Bonds (Taxable), Series 2013B (the Series 2013B Bonds and together with the Series 2013A Bonds, the Bonds ) are general obligations of the City of East Orange, in the County of Essex, New Jersey (the City ) and are secured by the full faith and credit of the City for the payment of the principal thereof and interest thereon. The Bonds, unless paid from other sources, are payable from ad valorem taxes levied upon all the taxable property within the City for the payment of the principal thereof and the interest thereon without limitation as to rate or amount. The Bonds are also entitled to the benefits of the Municipal Qualified Bond Act, P.L. 1976 c. 38, as amended. See THE MUNICIPAL QUALIFIED BOND ACT herein. The Series 2013A Bonds are being issued by the City to provide funds which will be used to refund, on an advanced basis, the City s outstanding and callable Capital Improvement Bonds, Series 2006B, dated November 1, 2006, which are maturing on and after November 1, 2016, in the aggregate principal amount of $15,850,000 (the Series 2006 Refunded Bonds ) at a redemption price of 100% of the principal amount thereof (the Redemption Price ). The proceeds of the Series 2013A Bonds will be used to pay: (i) the Redemption Price of the Series 2006 Refunded Bonds on November 1, 2015 (the Series 2006 Redemption Date ); (ii) interest on the Series 2006 Refunded Bonds to the Series 2006 Redemption Date; and (iii) the costs of issuance of the Series 2013A Bonds. The Series 2013B Bonds are being issued by the City to provide funds which will be used to refund, on a current basis, the City s outstanding and callable General Obligation Refunding Bonds (Federally Taxable Pension Refunding), Series 2003, dated April 1, 2003, which are maturing on and after April 1, 2014, in the aggregate principal amount of $5,880,000 (the Series 2003 Refunded Bonds ) at the Redemption Price. The proceeds of the Series 2013B Bonds will be used to pay: (i) the Redemption Price of the Series 2003 Refunded Bonds on June 17, 2013 (the Series 2003 Redemption Date ); (ii) interest on the Series 2003 Refunded Bonds to the Series 2003 Redemption Date; and (iii) the costs of issuance of the Series 2013B Bonds. The Bonds will be issued in the form of one certificate for each Series of Bonds for each year of maturity of the Bonds in the aggregate principal amount of such maturity and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York, which will act as securities depository for the Bonds. The Bonds will be on deposit with DTC. DTC will be responsible for maintaining a book-entry system for recording the interests of its participants or transfers of the interests among its participants. The participants will be responsible for maintaining records regarding the beneficial ownership interests in the Bonds on behalf of the individual purchasers. Individual purchases may be made in any integral multiple of $1,000 with a minimum purchase of $5,000 required. See THE BONDS - Book-Entry Only System herein. So long as DTC or its nominee, Cede & Co., is the registered owner of the Bonds, payments of principal of and interest on the Bonds will be made directly by The Bank of New York Mellon, as Paying Agent, to DTC or its nominee, Cede & Co., which will remit such payments to DTC Participants, which will in turn remit such payments to the owners of beneficial interest in the Bonds. Principal of the Bonds is payable in each of the years and in the amounts as set forth on the inside cover hereof. Interest on the Series 2013A Bonds is payable on June 1 and December 1, commencing December 1, 2013 in each year until maturity. Interest on the Series 2013B Bonds is payable on April 1 and October 1, commencing October 1, 2013 in each year until maturity. The Bonds are not subject to optional redemption prior to their respective stated maturities. See THE BONDS - Optional Redemption herein. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by ASSURED GUARANTY MUNICIPAL CORP. The Bonds are not a debt or obligation, legal, moral or otherwise, of the State of New Jersey, or any county, municipality or political subdivision thereof other than the City. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement, including Appendices hereto, to obtain information essential to their making of an informed decision. The Bonds are offered when, as and if issued and subject to prior sale, withdrawal or modification of the offer without notice and to the approval of legality thereof by the law firm of Wilentz, Goldman & Spitzer, P.A., Woodbridge, New Jersey, Bond Counsel to the City, and certain other conditions described herein. Certain legal matters will be passed upon for the City by its Corporation Counsel, Jason Holt, Esq., East Orange, New Jersey, and for the Underwriter by its counsel, GluckWalrath LLP, Trenton, New Jersey. It is expected that the Bonds will be available for delivery through the facilities of DTC, New York, New York, on or about May 16, 2013.
$15,785,000 CAPITAL IMPROVEMENT REFUNDING BONDS, SERIES 2013A (Qualified Pursuant to the Provisions of the Municipal Qualified Bond Act, P.L. 1976, c.38, as amended) MATURITY SCHEDULE INTEREST RATES AND YIELDS Year (June 1) Amount Rate Yield Year (June 1) Amount Rate Yield 2016 $1,360,000 3.000% 1.27% 2020 $1,495,000 4.000% 2.04% 2017 1,420,000 3.000 1.41 2021 2,740,000 4.000 2.25 2018 1,505,000 4.000 1.64 2022 2,890,000 4.000 2.43 2019 1,410,000 4.000 1.83 2023 2,965,000 4.000 2.65 $6,095,000 PENSION REFUNDING BONDS (TAXABLE), SERIES 2013B (Qualified Pursuant to the Provisions of the Municipal Qualified Bond Act, P.L. 1976, c.38, as amended) MATURITY SCHEDULE INTEREST RATES AND YIELDS OR PRICES Year (April 1) Amount Rate Price Year (April 1) Amount Rate Price 2014 $535,000 1.027% 100.00% 2018 $ 780,000 2.217% 100.00% 2015 590,000 1.227 100.00 2019 855,000 2.530 100.00 2016 650,000 1.585 100.00 2020 945,000 2.730 100.00 2017 710,000 2.067 100.00 2021 1,030,000 3.112 100.00
CITY OF EAST ORANGE IN THE COUNTY OF ESSEX, NEW JERSEY MAYOR Robert L. Bowser COUNCIL MEMBERS Jamal S. Barnes Virginia M. Cross Sharon Fields Theodore R. Green Alicia Holman William C. Holt Lonnie Hughes Jacquelyn E. Johnson Andrea D. McPhatter Quilla E. Talmadge CITY ADMINISTRATOR Jillian C. Barrick CHIEF FINANCIAL OFFICER Victoria Y. Walker CITY CLERK Cynthia Brown CORPORATION COUNSEL Jason Holt, Esq. CITY AUDITOR Lerch, Vinci & Higgins, LLP Fair Lawn, New Jersey BOND COUNSEL Wilentz, Goldman & Spitzer, P.A. Woodbridge, New Jersey
No broker, dealer, salesperson or other person has been authorized by the City or the Underwriter to give any information or to make any representations with respect to the Bonds other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Underwriter. The information contained herein has been obtained from the City, DTC and other sources which are believed to be reliable; however, such information is not guaranteed as to accuracy or completeness, and is not to be construed as a representation or warranty of the City or the Underwriter. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in any of the information herein since the date hereof, or the date as of which such information is given, if earlier. References in this Official Statement to laws, rules, regulations, ordinances, resolutions, agreements, reports and documents do not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein, and copies of which may be inspected at the offices of the City during normal business hours. The order and placement of materials in this Official Statement, including the Appendices, are not deemed to be a determination of relevance, materiality or importance, and this Official Statement, including the Appendices, must be considered in its entirety. In order to facilitate the distribution of the Bonds, the Underwriter may engage in transactions intended to stabilize the price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The prices at which the Bonds are offered to the public by the Underwriter and the yields resulting there from may vary from the initial public offering prices or yields shown on the inside front cover page hereof. In addition, the Underwriter may allow concessions or discounts from such initial public offering prices or yields to dealers and others. 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 Bonds in any jurisdiction in which it is unlawful for any person to make such an offer, solicitation or sale. The Underwriter has reviewed the information in this Official Statement in accordance with and as part of its responsibilities to investors under the Federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guaranty the accuracy or completeness of such information. Assured Guaranty Municipal Corp. ( AGM ) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading BOND INSURANCE and APPENDIX E - Specimen Municipal Bond Insurance Policy.
TABLE OF CONTENTS Page INTRODUCTION... 1 THE BONDS... 1 AUTHORIZATION AND PURPOSE OF THE BONDS... 4 ESCROW DEPOSIT AGREEMENT... 5 ESTIMATED SOURCES AND USES OF FUNDS... 5 SECURITY AND SOURCE OF PAYMENT... 5 BOND INSURANCE... 6 BOND INSURANCE RISK FACTORS... 8 NO DEFAULT... 8 THE MUNICIPAL QUALIFIED BOND ACT... 9 CERTAIN STATUTORY PROVISIONS FOR THE PROTECTION OF GENERAL OBLIGATION DEBT... 11 FINANCIAL INFORMATION OF THE CITY... 13 MUNICIPAL BUDGET... 13 TAX INFORMATION ON THE CITY... 16 DEBT INFORMATION ON THE CITY... 17 UPSALA COLLEGE DEBT GUARANTY... 17 TAX EXEMPTION... 19 BANK QUALIFIED BONDS... 20 LITIGATION... 20 APPROVAL OF LEGAL PROCEEDINGS... 20 MUNICIPAL BANKRUPTCY... 20 SECONDARY MARKET DISCLOSURE... 22 LEGALITY FOR INVESTMENT... 23 UNDERWRITING... 23 VERIFICATION OF MATHEMATICAL COMPUTATIONS... 24 RATINGS... 24 FINANCIAL STATEMENTS... 24 PREPARATION OF OFFICIAL STATEMENT... 24 ADDITIONAL INFORMATION... 25 MISCELLANEOUS... 25 APPENDIX A Certain General Information Concerning the City of East Orange, in the County of Essex, State of New Jersey... A-1 APPENDIX B Independent Auditor s Report and Financial Statements... B-1 APPENDIX C Form of Bond Counsel Opinion... C-1 APPENDIX D Form of Continuing Disclosure Certificate... D-1 APPENDIX E Specimen Municipal Bond Insurance Policy... E-1
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OFFICIAL STATEMENT of $21,880,000 CITY OF EAST ORANGE IN THE COUNTY OF ESSEX, NEW JERSEY $15,785,000 CAPITAL IMPROVEMENT REFUNDING BONDS, SERIES 2013A And $6,095,000 PENSION REFUNDING BONDS (TAXABLE), SERIES 2013B (Qualified Pursuant to the Provisions of the Municipal Qualified Bond Act, P.L. 1976, c.38, as amended) INTRODUCTION The purpose of this Official Statement is to provide certain information regarding the financial and economic condition of the City of East Orange (the "City"), in the County of Essex (the "County"), State of New Jersey (the "State") in connection with the sale and issuance of its $15,785,000 Capital Improvement Refunding Bonds, Series 2013A (the Series 2013A Bonds ) and $6,095,000 Pension Refunding Bonds (Taxable), Series 2013B (the Series 2013B Bonds and together with the Series 2013A Bonds, the Bonds ). This Official Statement (the "Official Statement"), which includes the front and inside cover page and the Appendices attached hereto, has been authorized by the City Council of the City and executed by and on behalf of the City by the Chief Financial Officer and City Administrator to be distributed in connection with the sale of the Bonds. This Official Statement contains specific information relating to the Bonds including their general description, certain matters affecting the financing, certain legal matters, historical financial information and other information pertinent to the sale, issuance and delivery of the Bonds. This Official Statement should be read in its entirety. All financial and other information presented herein has been provided by the City from its records, except for information expressly attributed to other sources. The presentation of information is intended to show recent historical information and, but only to the extent specifically provided herein, certain projections of the immediate future, and is not necessarily indicative of future or continuing trends in the financial position or other affairs of the City. This Official Statement is deemed final, as of its date, within the meaning of Rule 15c2-12 promulgated by the Securities and Exchange Commission ( Rule 15c2-12 ). General Description of the Bonds THE BONDS The Bonds shall be dated the date of delivery and will mature in the years and in the principal amounts as shown on the inside cover page hereof. The Series 2013A Bonds shall bear interest from the date of delivery and shall be payable on June 1 and December 1 (the "Series 2013A Interest Payment Dates") in each year until maturity commencing December 1, 2013, at the rates shown on the inside cover page hereof. The Series 2013B Bonds shall bear interest from the date of delivery and shall be payable on April 1 and October 1 (the "Series 2013B Interest Payment Dates" and together with the Series 2013A Interest Payment Dates, the Interest Payment Dates ) in each year until maturity commencing October 1, 2013, at the rates shown on the inside cover page hereof. The Bonds are issuable as fully registered book-entry only bonds in the form of one certificate for each series of Bonds for each year of maturity of the Bonds in the aggregate principal amount of such maturity. The Bonds may be purchased in book-entry only form in the amount of any integral multiple of $1,000 with a - 1 -
minimum purchase of $5,000 required, through book-entries made on the books and records of The Depository Trust Company, New York, New York ("DTC") and its participants. So long as DTC or its nominee, Cede & Co., or any successor or assign, is the registered owner for the Bonds, payments of the principal of and interest on the Bonds will be made by the City directly to Cede & Co. or any successor or assign, as nominee for DTC. Interest on the Bonds is calculated on the basis of twelve (12) thirty (30) day months in a three hundred sixty (360) day year and will be credited to the participants of DTC as listed on the records of DTC as of the close of business on 15th day prior to the Interest Payment Dates (the "Record Dates" for the payment of interest on the Bonds) for the Series 2013A Bonds and Series 2013B Bonds, respectively. See THE BONDS - Book-Entry Only System herein. Book-Entry Only System The description which follows of the procedures and recordkeeping with respect to beneficial ownership interest in the Bonds, payment of principal and interest and other payments on the Bonds to Direct and Indirect Participants (defined below) or Beneficial Owners (defined below), confirmation and transfer of beneficial ownership interests in the Bonds and other related transactions by and between DTC, Direct Participants and Beneficial Owners, is based on certain information furnished by DTC to the City. Accordingly, the City does not make any representations as to the completeness or accuracy of such information. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered bonds registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds of each Series, each in the aggregate principal amount of such maturity, and will be deposited with 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 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct 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 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive - 2 -
bonds representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 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. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy (the Omnibus Proxy ) to the Board as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds and principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the City or Paying Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the 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. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to City or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. THE PAYING AGENT WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO SUCH DTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO OR PROVIDING OF NOTICE FOR THE DTC PARTICIPANTS, OR THE INDIRECT PARTICIPANTS, OR BENEFICIAL OWNERS. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDHOLDERS OR REGISTERED OWNERS OF THE BONDS - 3 -
(OTHER THAN UNDER THE CAPTION "TAX EXEMPTION") SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. Discontinuation of Book-Entry Only System If the City, in its sole discretion, determines that DTC is not capable of discharging its duties, or if DTC discontinues providing its services with respect to the Bonds at any time, the City will attempt to locate another qualified Securities Depository. If the City fails to find such Securities Depository, or if the City determines, in its sole discretion, that it is in the best interest of the City or that the interest of the Beneficial Owners might be adversely affected if the book-entry only system of transfer is continued (the City undertakes no obligation to make an investigation to determine the occurrence of any events that would permit it to make such determination) the City shall notify DTC of the termination of the book-entry only system. Optional Redemption The Bonds are not subject to optional redemption prior to their stated maturities. AUTHORIZATION AND PURPOSE OF THE BONDS The Bonds are authorized by and are issued pursuant to: (i) the provisions of the Local Bond Law, N.J.S.A. 40A:2-1 et seq., as amended and supplemented (the Local Bond Law ), specifically, pursuant to N.J.S.A. 40A:2-51.3, and the Municipal Qualified Bond Act, N.J.S.A. 40A:3-1 et seq., as amended and supplemented (the Act ), (ii) refunding bond ordinances (the Refunding Bond Ordinances ) duly adopted by the City Council of the City on March 11, 2013, and approved and published as required by law, and (iii) a resolution duly adopted by the City Council of the City on March 11, 2013. The Refunding Bond Ordinances have been published in full after final adoption along with the statement that the twenty (20) day period of limitation, within which a suit, action or proceeding questioning the validity of the Refunding Bond Ordinances could be commenced, began to run from the date of the first publication of such statement. The Local Bond Law provides that, after issuance, all obligations shall be conclusively presumed to be fully authorized and issued by all laws of the State, and all persons shall be estopped from questioning their sale, execution or delivery by the City. The Bonds will be issued in accordance with N.J.A.C. 5:30-2.5, and, therefore, no approval is required by the Local Finance Board, Division of Local Government Services, Department of Community Affairs, State of New Jersey (the Local Finance Board ). However, the details of the sale, issuance and delivery of the Bonds will be delivered to the Local Finance Board within ten (10) days of the delivery of the Bonds. The Series 2013A Bonds are being issued by the City to provide funds which will be used to refund, on an advanced basis, the City s outstanding and callable Capital Improvement Bonds, Series 2006B, dated November 1, 2006, which are maturing on and after November 1, 2016, in the aggregate principal amount of $15,850,000 (the Series 2006 Refunded Bonds ) at a redemption price of 100% of the principal amount thereof (the Redemption Price ). The proceeds of the Series 2013A Bonds will be used to pay: (i) the Redemption Price of the Series 2006 Refunded Bonds on November 1, 2015 (the Series 2006 Redemption Date ); (ii) interest on the Series 2006 Refunded Bonds to the Series 2006 Redemption Date; and (iii) the costs of issuance of the Series 2013A Bonds. The Series 2013B Bonds are being issued by the City to provide funds which will be used to refund, on a current basis, the City s outstanding and callable General Obligation Refunding Bonds (Federally Taxable Pension Refunding), Series 2003, dated April 1, 2003, which are maturing on and after April 1, 2014, in the aggregate principal amount of $5,880,000 (the Series 2003 Refunded Bonds ) at the Redemption Price. The proceeds of the Series 2013B Bonds will be used to pay: (i) the Redemption Price of the Series 2003 Refunded Bonds on June 17, 2013 (the Series 2003 Redemption Date ); (ii) interest on the Series 2003 Refunded Bonds to the Series 2003 Redemption Date; and (iii) the costs of issuance of the Series 2013B Bonds. - 4 -
ESCROW DEPOSIT AGREEMENT A portion of the proceeds of the Series 2013A Bonds will be used to purchase United States Treasury Securities and/or direct-obligations of the United States of America (State and Local Government Series) (the Escrow Securities ). The Escrow Securities will be deposited into an escrow account that will be created pursuant to an Escrow Deposit Agreement. The Escrow Deposit Agreement will be executed by and between the City and The Bank of New York Mellon, Woodland Park, New Jersey, as escrow agent (the Escrow Agent ), and will be dated as of the date of closing on the Bonds. All moneys and Escrow Securities deposited into the escrow account created pursuant to the Escrow Deposit Agreement for payment of the Series 2006 Refunded Bonds are pledged solely and irrevocably for the benefit of the holders of the Series 2006 Refunded Bonds. The Escrow Securities will bear interest at such rates and will mature at such times and in such amounts so that, when paid in accordance with their terms, will be sufficient to make full and timely payments of the Redemption Price of and interest on the Series 2006 Refunded Bonds through, and inclusive of, the date fixed for redemption. See VERIFICATION OF MATHEMATICAL COMPUTATIONS herein. ESTIMATED SOURCES AND USES OF FUNDS The proceeds from the sale of the Bonds are expected to be applied as follows: Sources Series 2013A Bonds Series 2013B Bonds Total Par Amount of Bonds $15,785,000.00 $6,095,000.00 $21,880,000.00 Original Issue Premium 1,763,046.95 0.00 1,763,046.95 Total Sources $17,548,046.95 $6,095,000.00 $23,643,046.95 Uses Deposit to Escrow Fund $17,393,166.45 $5,948,102.60 $23,341,269.05 Costs of Issuance * 154,880.50 146,897.40 301,777.90 Total Uses $17,548,046.95 $6,095,000.00 $23,643,046.95 SECURITY AND SOURCE OF PAYMENT The Bonds are valid and legally binding general obligations of the City, and the City has pledged its full faith and credit for the payment of the principal of and interest on the Bonds. The Bonds are direct obligations of the City and, unless paid from other sources, the City is required by law to levy ad valorem taxes upon all the taxable property within the City for the payment of the principal of and interest on the Bonds without limitation as to rate or amount. The Bonds are also entitled to the benefits of the Municipal Qualified Bond Act, P.L. 1976, c.38, as amended. See THE MUNICIPAL QUALIFIED BOND ACT herein. The City is required by law to include the total amount of principal of and interest on all of its general obligation indebtedness, such as the Bonds, for the current year in each annual budget unless provision has been made for payment of its general obligation indebtedness from other sources. The enforceability of rights or remedies with respect to the Bonds may be limited by bankruptcy, insolvency or other similar laws affecting creditors' rights or remedies heretofore or hereafter enacted. See "MUNICIPAL BANKRUPTCY" herein. * Includes, as applicable, Underwriter's discount, legal, accounting, printing, verification of mathematical computations and fiduciary fees, the bond insurance premium and other expenses incurred in connection with the issuance of the Bonds. - 5 -
The Bonds are not a debt or obligation, legal, moral or otherwise, of the State, or any County, municipality or any political subdivision thereof, other than the City. BOND INSURANCE POLICY BOND INSURANCE Concurrently with the issuance of the Bonds, Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. ASSURED GUARANTY MUNICIPAL CORP. AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of the shareholders of AGL or AGM is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM. AGM s financial strength is rated AA- (stable outlook) by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ) and A2 (stable outlook) by Moody s Investors Service, Inc. ( Moody s ). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. Current Financial Strength Ratings On January 17, 2013, Moody s issued a press release stating that it had downgraded AGM s insurance financial strength rating to A2 (stable outlook) from Aa3. AGM can give no assurance as to any further ratings action that Moody s may take. Reference is made to the press release, a copy of which is available at www.moodys.com, for the complete text of Moody s comments. On November 30, 2011, S&P published a Research Update in which it downgraded AGM s financial strength rating from AA+ to AA-. At the same time, S&P removed the financial strength rating from - 6 -
CreditWatch negative and changed the outlook to stable. AGM can give no assurance as to any further ratings action that S&P may take. Reference is made to the Research Update, a copy of which is available at www.standardandpoors.com, for the complete text of S&P s comments. For more information regarding AGM s financial strength ratings and the risks relating thereto, see AGL s Annual Report on Form 10-K for the fiscal year ended December 31, 2012. Capitalization of AGM At December 31, 2012, AGM s consolidated policyholders surplus and contingency reserves were approximately $3,324,781,247 and its total net unearned premium reserve was approximately $2,090,197,521, in each case, in accordance with statutory accounting principles. Incorporation of Certain Documents by Reference Portions of the following document filed by AGL with the Securities and Exchange Commission (the SEC ) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: (i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (filed by AGL with the SEC on March 1, 2013). All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC s website at http://www.sec.gov, at AGL s website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52 nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) 826-0100). Any information regarding AGM included herein under the caption BOND INSURANCE Assured Guaranty Municipal Corp. or included in a document incorporated by reference herein (collectively, the AGM Information ) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Matters AGM or one of its affiliates may purchase a portion of the Bonds or any uninsured bonds offered under this Official Statement and such purchases may constitute a significant proportion of the bonds offered. AGM or such affiliate may hold such Bonds or uninsured bonds for investment or may sell or otherwise dispose of such Bonds or uninsured bonds at any time or from time to time. AGM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading BOND INSURANCE. - 7 -
BOND INSURANCE RISK FACTORS In the event of default of the payment of principal or interest with respect to the Bonds when all or some becomes due, any owner of the Bonds shall have a claim under the Policy for such payments. However, in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments are to be made in such amounts and at such times as such payments would have been due had there not been any such acceleration. The Policy does not insure the payment of redemption premiums, if any. The payment of principal and interest in connection with mandatory or optional prepayment, if any, of the Bonds by the City which is recovered by the City from the bond owner as avoidable preference under applicable bankruptcy law is covered by the Policy; however, such payments will be made by AGM at such time and in such amounts as would have been due absent such prepayment by the City unless AGM chooses to pay such amounts at an earlier date. AGM may direct and must consent to any remedies and AGM s consent may be required in connection with amendments to any applicable bond documents. In the event AGM is unable to make payment of principal and interest as such payments become due under the Policy, the Bonds are payable solely from moneys of the City, and unless paid from other sources, are payable from ad valorem taxes levied upon all the taxable real property within the City, without limitation as to rate or amount. In the event AGM becomes obligated to make payments with respect to the Bonds, no assurance is given that such event will not adversely affect the market price of the Bonds or the marketability (liquidity) for the Bonds. The long-term ratings on the Bonds are dependent in part on the financial strength of AGM and its claims-paying ability. AGM s financial strength and claims-paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of AGM and of the ratings on the Bonds insured by AGM will not be subject to downgrade and such event could adversely affect the market price of the Bonds or the marketability (liquidity) for the Bonds. See description of "RATINGS" herein. The obligations of AGM are general obligations of AGM and in an event of default by AGM, the remedies available may be limited by applicable bankruptcy law or other similar laws related to insolvency. Neither the City nor the Underwriter has made independent investigation into the claims paying ability of AGM and no assurance or representation regarding the financial strength or projected financial strength of AGM is given. Thus, when making an investment decision, potential investors should carefully consider the ability of the City to pay principal and interest on the Bonds and the claims paying ability of AGM, particularly over the life of the investment. See BOND INSURANCE herein for further information provided by AGM and the Policy, which includes further instructions for obtaining current financial information concerning AGM. NO DEFAULT The City has never defaulted in the payment of principal of, redemption premium, if any, and interest on any bonds or notes or other obligations of the City, nor are any payments of principal of or interest on the City's indebtedness past due. THE MUNICIPAL QUALIFIED BOND ACT The Bonds are entitled to the benefits of the Act. Pursuant to the Act, a portion of certain State aid allocated to the City, in amounts sufficient to pay the debt service on the Bonds, is to be withheld by the State Treasurer and forwarded to the Paying Agent for the Bonds on or before the principal and interest payment dates. The funds are to be deposited in an account established by the Paying Agent (as hereinafter defined) for the purpose of paying the debt service on the Bonds. - 8 -
Pursuant to the provisions of the Act, the City shall certify to the State Treasurer the name and address of the paying agent, maturity schedule, interest rates and dates of payment of debt service on qualified bonds within ten (10) days after the issuance thereof. After receipt of such certificate, the State Treasurer shall, in accordance with the Act, withhold, with respect to such qualified bonds, from the amount of business personal property tax replacement revenues, gross receipts tax revenues, municipal purpose tax assistance fund distributions, State urban aid and State revenue sharing and any other funds appropriated as State Aid (hereinafter, collectively, the municipal qualified revenues ) and not otherwise dedicated to specific municipal programs payable to the City in amounts which will be sufficient to pay the debt service on such qualified bonds as the same shall mature and become due. The Act further provides that the State Treasurer shall, on or before each interest payment date, forward such withheld amounts to the Paying Agent for such qualified bonds for deposit to the account established with such Paying Agent for the sole purpose of paying the debt service on such qualified bonds. The Act provides that from the time withheld by the State Treasurer all such municipal qualified revenues so withheld and paid or to be paid to and held by the paying agent shall be exempt from being levied upon, taken, sequestered or applied towards paying the debts of the City other than for payment of debt service on such qualified bonds. The Act further provides that such municipal qualified revenues from the time so withheld by the State Treasurer and paid or to be paid to the paying agent shall be deemed to be held in trust for the sole purpose of paying the debt service on such qualified bonds. The Act does not relieve the City of its obligation to include in its annual budget amounts necessary to pay, in each year, the principal and interest maturing and coming due on qualified bonds issued by the City; provided, however, that such amounts may, to the extent they are not needed to pay debt service on qualified bonds, be applied to the payment of operating expenses of the City for the then current year and if municipal qualified revenues are not appropriated, such budgeted amounts shall by used to pay the debt service maturing and becoming due in such year on such qualified bonds of the City. The State has covenanted in the Act with the purchasers, holders and owners, from time to time, of qualified bonds that it will not repeal, revoke, rescind, modify or amend the provisions of such Act providing for the withholding of the State aid and payment of such municipal qualified revenues to the paying agents for qualified bonds so as to create any lien or charge on or pledge, assignment, diversion, withholding payment or other use of or deduction from such aid which is prior in time or superior in right to the payment provided in such Act. The State does not pledge or guarantee that any of the amounts payable to the paying agents will, in fact, be made or continued. Each such annual amount of State aid is subject to appropriation by the State Legislature. Moreover, the State is not required to continue to make payments of municipal qualified revenues or any other funds appropriated as State aid nor is the State limited or prohibited from repealing or amending any law heretofore or hereinafter enacted for the payment or apportionment of such amounts or the manner, time, or amount thereof. For calendar year 2013, municipal qualified revenue appropriated and available to the City was $22,117,676, while municipal qualified debt service was approximately $9,486,452. Conditions of Qualification In granting approvals for qualification of prior issues of bonds by the City, the Local Finance Board can impose certain requirements on City fiscal operations including: (i) authorizations for capital projects for City purposes must be reviewed and have the approval of the Local Finance Board (See Historical Analysis of Municipal Qualified Revenues herein), (ii) filing with the Local Finance Board of realized revenue and expenditure reports for the Current Fund and (iii) filing with the Local Finance Board all amendments to its capital improvement budget. The City Council adopted a resolution acknowledging the foregoing requirements. - 9 -
Historical Analysis of Municipal Qualified Revenues Year Qualified Debt Service Qualified Revenues CY2012 $9,495,036 $22,117,676 FY2011 9,735,112 22,117,676 FY2010 9,269,501 25,784,041 FY2009 8,931,833 25,784,041 FY2008 8,901,185 26,634,033 FY2007 7,817,024 26,634,033 FY2006 8,333,391 26,634,033 FY2005 9,101,222 26,634,033 FY2004 9,634,197 26,394,246 FY2003 7,721,543 26,363,875 FY2002 8,009,661 26,363,875 FY2001 5,342,489 24,588,078 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] - 10 -
Analysis of Municipal Qualified Revenues Available for Proposed Qualified Bonds State Aid State Existing New After New Fiscal Total State Qualified Remaining Less: Qualified Qualified Year Aid Debt State Aid Refunded Debt Debt Ending Available (1) Service Available Bonds Service Service 2013 $22,117,676 $9,436,264 $12,681,412 $ (491,864) $ 377,383 $ 12,566,931 2014 22,117,676 9,433,291 12,684,385 (1,407,854) 1,270,341 12,546,872 2015 22,117,676 9,442,436 12,675,240 (1,454,038) 1,318,974 12,540,176 2016 22,117,676 9,445,202 12,672,474 (2,860,595) 2,709,803 12,521,682 2017 22,117,676 9,431,783 12,685,893 (2,926,576) 2,775,614 12,534,931 2018 22,117,676 9,438,624 12,679,052 (3,013,686) 2,863,230 12,528,596 2019 22,117,676 7,604,414 14,513,262 (2,915,626) 2,765,468 14,363,104 2020 22,117,676 7,611,908 14,505,768 (3,004,771) 2,858,653 14,359,650 2021 22,117,676 7,803,525 14,314,151 (4,228,283) 4,075,027 14,160,895 2022 22,117,676 7,725,768 14,391,908 (3,139,050) 3,066,400 14,319,258 2023 22,117,676 7,658,728 14,458,948 (3,096,225) 3,024,300 14,387,023 2024 22,117,676 4,527,678 17,589,998 17,589,998 2025 22,117,676 4,579,453 17,538,223 17,538,223 2026 22,117,676 3,097,903 19,019,773 19,019,773 2027 22,117,676 2,953,728 19,163,948 19,163,948 2028 22,117,676 2,527,728 19,589,948 19,589,948 2029 22,117,676 547,503 21,570,173 21,570,173 2030 22,117,676 376,602 21,741,074 21,741,074 $398,118,168 $113,642,538 $284,475,630 $(28,538,569) $27,105,193 $283,042,254 (1) Subject to cost of living increases. CERTAIN STATUTORY PROVISIONS FOR THE PROTECTION OF GENERAL OBLIGATION DEBT Local Bond Law (N.J.S.A. 40A:2-1 et seq.) The Local Bond Law governs the issuance of bonds and notes to finance certain municipal capital expenditures. Among its provisions are requirements that bonds must mature within the statutory period of usefulness of the projects bonded and that bonds be retired in serial installments. A five percent (5%) cash down payment is generally required to be appropriated for the financing of expenditures for municipal purposes for which bonds are authorized. The Local Fiscal Affairs Law (N.J.S.A. 40A:5-1 et seq.) This law regulates the non-budgetary financial activities of local governments. An annual, independent audit of the local unit's accounts for the previous year must be performed by a licensed Registered Municipal Accountant. The audit, conforming to the Division of Local Government Services "Requirements of Audit," includes recommendations for improvement of the local unit's financial procedures and must be filed with the Director within six (6) months after the close of the fiscal year. A synopsis of the audit report, together with all recommendations made, must be published in a local newspaper within thirty (30) days of its completion. - 11 -