This Preliminary Official Statement is deemed final for purposes of SEC Rule 15c2-12. Certain information contained herein is subject to completion and amendment or other change without notice. The securities may not be sold nor may an offer to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful, prior to registration or qualification under the securities laws of any such jurisdiction. PRELIMINARY OFFICIAL STATEMENT Underlying Bond Rating: Standard & Poor's Corp. BBB (stable outlook) BOOK-ENTRY ONLY (See Rating herein) In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, interest on the Bonds is excluded from gross income for federal income tax purposes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific item of tax preference under 57 of the Internal Revenue Code of 1986, as amended (the Code ) for purposes of Federal individual or corporate alternative minimum taxes. The Bonds and interest income therefrom, are free from taxation for purposes of personal income, corporate net income and personal property taxes within the Commonwealth of Pennsylvania. For further information concerning federal and state tax matters relating to the Bonds, see Tax Matters herein. $56,555,000* CLAIRTON MUNICIPAL AUTHORITY (Allegheny County, Pennsylvania) $8,220,000* Sewer Revenue Bonds, Series A of 2012 $48,335,000* Sewer Revenue Bonds, Series B of 2012 Dated Date: (Date of Delivery) August 9, 2012 Interest Payable: June 1 and December 1 Due: December 1 (of the years as shown on the inside cover) First Interest Payment Date: December 1, 2012 The Sewer Revenue Bonds, Series A of 2012 (the Series A Bonds"), of the Clairton Municipal Authority (the Authority ), will be issued in the aggregate principal amount of $8,220,000*. The Series A Bonds will mature on December 1, 2015 through and including December 1, 2022 and December 1, 2026, 2031, 2036 and 2042 and will pay interest semi-annually, from their Dated Date, on June 1 and December 1 of each year, commencing on December 1, 2012 at the rates shown on the inside cover. The Sewer Revenue Bonds, Series B of 2012 (the Series B Bonds"), of the Clairton Municipal Authority (the Authority ), will be issued in the aggregate principal amount of $48,335,000*. The Series B Bonds will mature on December 1, 2013 through and including December 1, 2022 and December 1, 2027, 2032, 2037 and 2042 and will pay interest semi-annually, from their Dated Date, on June 1 and December 1 of each year, commencing on December 1, 2012 at the rates shown on the inside cover. The Series A Bonds and Series B Bonds will be herein collectively referred to as (the Bonds ). When issued, the Bonds will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company ( DTC ), New York, New York. So long as Cede & Co. is the registered owner, reference herein to the registered owner of Bonds shall mean Cede & Co., and not the Beneficial Owners (as defined herein). DTC will act as securities depository of the Bonds, and purchases of beneficial ownership interests in the Bonds will be made in book-entry form only, in denominations of $5,000 or integral multiples thereof. Beneficial Owners will not receive certificates representing their interest in the Bonds. See Book-Entry Only System herein. Principal of, and premium, if any, on the Bonds will be paid by Wells Fargo Bank, N.A., Pittsburgh, Pennsylvania as Trustee (the Trustee ). So long as Cede & Co. is the registered owner, the Trustee will pay principal of, and interest on the Bonds to DTC, which will remit such principal and interest to its Participants (as defined herein), which will in turn remit such principal and interest to the Beneficial Owners of the Bonds, as more fully described herein. See Book-Entry Only System herein. The Bonds are subject to optional and mandatory sinking fund redemption, as more fully set forth herein. SECURITY: The Bonds are revenue obligations of the Authority, issued under and secured pursuant to the provisions provided in the Trust Indenture dated August 15, 1976 between the Authority and the Trustee, (the Indenture ). The Series A Bonds are secured by the receipts and revenues derived from the City of Clairton Wastewater Collection System (the City System ) which serves the City of Clairton (see Appendix A for economic and demographic information for the City of Clairton). The Series B Bonds are secured by receipts and revenues derived from the operation of the Authority s Wastewater Treatment Plant (see Appendix A for economic and demographic information on the participating municipalities. See SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE, as more fully described herein and payable solely from the Receipts and Revenues of the Sewer System as identified in the Indenture. The Clairton Municipal Authority has covenanted to impose sewer rates and charges to provide revenues sufficient to pay the cost of operating the Sewer System and to pay debt service on the Bonds. THE BONDS ARE REVENUE OBLIGATIONS OF THE AUTHORITY AND NEITHER THE CREDIT NOR THE TAXING POWER OF AUTHORITY, ANY POLITICAL SUBDIVISION SERVED BY THE AUTHORITY, THE COUNTY OF ALLEGHENY, THE COMMONWEALTH OF PENNSYLVANIA, OR ANY AGENCY OR POLITICAL SUBDIVISION THEREOF, OTHER THAN THE AUTHORITY IS PLEDGED TO PAY THE PRINCIPAL OF AND INTEREST ON THE BONDS. THE AUTHORITY HAS NO TAXING POWER. AUTHORIZATION FOR ISSUANCE: The Bonds are being issued in accordance with the Pennsylvania Municipality Authorities Act of (53 Pa. C.S.A. 5601 et seq) (the Act ), and pursuant to the Indenture and a Resolution duly adopted by the Authority on June 28, 2012 (the Resolution ). MATURITY SCHEDULE (See Schedule herein) The Bonds are offered, subject to prior sale, withdrawal or modification, when, as and if issued by the Authority and received by the Underwriter and subject to the approving legal opinion Dinsmore & Shohl, LLP, Pittsburgh, Pennsylvania, Bond Counsel. Said opinion will be furnished upon delivery of the Bonds. Certain legal matters will be passed upon for the Dodaro Matta & Cambest, PC, Pittsburgh, Pennsylvania, Solicitor for the Authority. The Bonds are expected to be delivered on or about August 9, 2012. The date of this Preliminary Official Statement is July 5, 2012. *Subject to change.
$56,555,000* CLAIRTON MUNICIPAL AUTHORITY (Allegheny County, Pennsylvania) $8,220,000* Sewer Revenue Bonds, Series A of 2012 Dated: (Dated of Delivery) August 9, 2012 Due: December 1 (as shown below) Year * Amount * Coupon Yield Price 2015 $ 165,000 2016 170,000 2017 175,000 2018 180,000 2019 185,000 2020 190,000 2021 195,000 2022 200,000 2026 ** 900,000 2031 ** 1,365,000 2036 ** 1,740,000 2042 ** 2,755,000 *Subject to change. **Term Bonds. (Plus Accrued Interest) i
$56,555,000* CLAIRTON MUNICIPAL AUTHORITY (Allegheny County, Pennsylvania) $48,335,000* Sewer Revenue Bonds, Series A of 2012 Dated: (Dated of Delivery) August 9, 2012 Due: December 1 (as shown below) Year * Amount * Coupon Yield Price 2013 $ 825,000 2014 840,000 2015 855,000 2016 890,000 2017 925,000 2018 965,000 2019 1,000,000 2020 1,040,000 2021 1,085,000 2022 1,130,000 2027 ** 6,470,000 2032 ** 8,265,000 2037 ** 10,550,000 2042 ** 13,495,000 *Subject to change. **Term Bonds. (Plus Accrued Interest) ii
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET 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. No dealer, broker, salesman or other person has been authorized by the Clairton Municipal Authority (the "Authority"), or the Underwriter to give any information or to make any representations, other than those contained within this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any state in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth has been obtained from the Authority and other sources that are believed to be reliable, but the Underwriter does not guarantee the accuracy or completeness of the information nor is the information to be construed as a representation by the Underwriter and, except for the information supplied by the Authority, it is not to be construed as a representation or warranty by the Authority. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority since the date hereof. TABLE OF CONTENTS Page Introduction 1 The Authority 1 Purpose of the Issue 1 Sources and Uses of Proceeds 2 The Construction Program 2 The Bonds 3 Security for the Bonds 7 Defaults and Remedies 8 Summary of Certain Provisions of the Indenture 8 Authority Finances, Financial Statements and Consent of Independent Certified Public Accountants 12 Rating 13 Not Arbitrage Bonds 13 No Litigation Certificate 13 Legal Matters 13 Tax Exemption and Other Tax Matters 14 Continuing Disclosure Undertaking 16 Miscellaneous 17 Appendix A - Economic and Demographic Information The Authority Appendix B - Financial Statements and Notes Appendix C - Report of the Consulting Engineer Appendix D - Form of Opinion of Bond Counsel The Table of Contents does not list all of the subjects in this Official Statement and in all instances reference should be made to the complete Official Statement to determine the subjects set forth herein. iii
CLAIRTON MUNICIPAL AUTHORITY Allegheny County, Pennsylvania 1 North State Street Clairton, Pennsylvania 15025 MEMBERS OF THE AUTHORITY Thomas Ward Dominic Curinga Perry Ohm James Cerqua Raymond Glover Chairman Vice Chairman Treasurer Secretary Asst. Secretary / Treasurer OTHERS ASSOCIATED WITH THE AUTHORITY Patrick J. Canavan Brian Secrest Francis A. Geleko KLH Engineers, Inc. Maher Duessel Superintendent Asst. Superintendent Finance Director Consulting Engineers Auditors SOLICITOR Dodaro Matta & Cambest, PC Pittsburgh, Pennsylvania TRUSTEE Wells Fargo Bank, N.A. Pittsburgh, Pennsylvania BOND COUNSEL Dinsmore & Shohl, LLP Pittsburgh, Pennsylvania UNDERWRITER Piper Jaffray & Co. Pittsburgh, Pennsylvania iv
CLAIRTON MUNICIPAL AUTHORITY Allegheny County, Pennsylvania SUMMARY STATEMENT This Summary Statement is qualified in its entirety and subject in all respects to more complete information contained in this Official Statement. No person is authorized to detach this Summary Statement or otherwise use it without the entire Official Statement. Issuer Bonds Redemption Provisions Clairton Municipal Authority, Allegheny County, Pennsylvania. $56,555,000* Sewer Revenue Bonds, Series A of 2012 (the Series A Bonds ), and Sewer Revenue Bonds, Series B of 2012 (the Series B Bonds ). The Series A Bonds and Series B Bonds will be herein collectively referred to as (the Bonds or the Sewer Revenue Bonds ). The Series A Bonds maturing on and after December 1, 2026 are subject to redemption in whole or in part, at the option of the Authority on December 1, 2022 or any date thereafter at 100% of the principal amount thereof plus interest accrued to the date of redemption. The Series A Bonds are subject to mandatory sinking fund redemption as set forth herein. The Series B Bonds maturing on and after December 1, 2023 are subject to redemption in whole or in part, at the option of the Authority on December 1, 2022 or any date thereafter at 100% of the principal amount thereof plus interest accrued to the date of redemption. The Series B Bonds are subject to mandatory sinking fund redemption as set forth herein. See THE BONDS Mandatory Sinking Fund Redemption. Form Application of Proceeds Book-Entry Only Bonds. The proceeds of the Series A Bonds will be used to provide funds: (1) to pay a portion of the costs of the acquisition of the City System (hereinafter defined) and the completion of certain capital improvements thereto, (2) to pay capitalized interest on the Project Bonds during completion of improvements to collection system, (3) to fund a debt service reserve fund for the Project Bonds; and (4) to pay the costs of issuance and insuring the Project Bonds. The proceeds of the Series B Bonds will be used to provide funds: (1) to refinance existing short-term indebtedness incurred in connection with the renovation of the Authority s Administration Building, (2) to pay the costs of the Expansion Project and various and sundry capital improvements necessary for the maintenance, operation and expansion of the Authority Wastewater Treatment Facilities (hereinafter defined), (3) to pay capitalized interest on the Project Bonds during construction of the Expansion Facilities, (4) to fund a debt service reserve fund for the Project Bonds; and (5) to pay the costs of issuance and insuring the Project Bonds. Security Rating Continuing Disclosure Undertaking *Subject to change. The principal of, premium, if any, and the interest on the Bonds, together with any Additional Bonds to be issued under the Indenture and as said term is defined in the Indenture shall be payable, equally and ratably, from the Receipts and Revenues of the Authority derived from the operation of its Sewer System (as hereinafter defined), and from other receipts, revenues and moneys of the Authority available for such purposes, to the extent and in the manner provided in the Indenture. The Series A Bonds are secured by the receipts and revenues derived from the City of Clairton Wastewater Collection System (the City System ) which serves the City of Clairton (see Appendix A for economic and demographic information for the City of Clairton). The Series B Bonds are secured by receipts and revenues derived from the operation of the Authority s Wastewater Treatment Plant (see Appendix A for economic and demographic information on the participating municipalities. The Authority is authorized to issue the Bonds under the Municipality Authorities Act (53 Pa. C.S.A. 5601 ET sew) (the Act ). (See SECURITY FOR THE BONDS herein). The Bonds are expected to receive an underlying rating of BBB (stable) (based on the Authority s financial condition) from S&P (See Rating herein.) The Authority has agreed to provide, or cause to be provided, in a timely manner, certain information in accordance with the requirements of Rule 15c2-12 as promulgated under the Securities Exchange Act of 1934, as amended and interpreted (the Rule). (See Continuing Disclosure Undertaking herein.) v
$56,555,000* CLAIRTON MUNICIPAL AUTHORITY (Allegheny County, Pennsylvania) Sewer Revenue Bonds, Series A of 2012 Sewer Revenue Bonds, Series B of 2012 INTRODUCTION This Official Statement of the Clairton Municipal Authority (the Authority ) provides certain information concerning the Authority, in connection with the issuance of $56,555,000* aggregate principal amount of its, Sewer Revenue Bonds, Series A of 2012 (the Series A Bonds ) and Sewer Revenue Bonds, Series B of 2012 (the Series B Bonds ). The Series A Bonds and Series B Bonds will be herein collectively referred to as (the Bonds or the Sewer Revenue Bonds ). The Bonds are being issued by the Authority pursuant to the Constitution and laws of the Commonwealth of Pennsylvania, including the Municipality Authorities Act (53 Pa. C.S.A. 5601 et seq.) (the Act ) and the Resolution adopted by the Authority on June 28, 2012 and are each secured, separately, by portions of the Receipts and Revenues (as defined in the Indenture) Authority s sanitary sewer system pursuant to the Trust Indenture dated as of, 2012 (the Indenture ). The Bonds are revenue obligations of the Authority, and the principal of, redemption premium, if any, and the interest on the Bonds are payable solely from the portions Receipts and Revenues of the Authority derived from the operation of its Sewer System, as said terms are defined and described in the Indenture, and also from other moneys as may be made available for such purpose to the extent and in the manner provided in the Indenture. The Series A Bonds are secured by the receipts and revenues derived from the City of Clairton Wastewater Collection System (the City System ) which serves the City of Clairton (see Appendix A for economic and demographic information for the City of Clairton). The Series B Bonds are secured by receipts and revenues derived from the operation of the Authority s Wastewater Treatment Plant (see Appendix A for economic and demographic information on the participating municipalities. Neither the delivery of this Official Statement nor any sale of the Bonds made hereunder shall, under any circumstances, create an implication that no changes have occurred in the affairs of the Authority, or areas served by the Authority, since the date of this Official Statement or the earlier date as of which certain information contained herein is given. Introduction THE AUTHORITY The Authority is a body corporate and politic Created in 1950 under the Municipality Authorities Act of 1945, as amended, and pursuant to an ordinance of the Council of the City of Clairton, Allegheny County, Pennsylvania. On June 19, 2006, a Resolution was passed to extend the life of the Authority to June 19, 2056. The Authority is empowered to exercise any and all powers conferred by the Act, as amended, necessary to the acquisition, ownership, improvement, maintenance and operation of its Sewage collection system (the City System ) and its sewage treatment and sanitary disposal system (the Wastewater Treatment Facilities and, together with the City System, the Sewer System ). The Authority is governed by a board of five members appointed by the City for terms of five years. PURPOSE OF THE ISSUE The proceeds of the Series A Bonds will be used to provide funds: (1) to pay a portion of the costs of the acquisition of the City System and the completion of certain capital improvements thereto, (2) to pay capitalized interest on the Series A Bonds during construction of the Capital Improvements to the City System, (3) to fund a debt service reserve fund for the Series A Bonds; and (4) to pay the costs of issuance and insuring the Series A Bonds. 1
The proceeds of the Series B Bonds will be used to provide funds: (1) to refinance existing short-term indebtedness incurred in connection with the renovation of the Authority s Administration Building, (2) to pay the costs of the expansion of the Wastewater Treatment Facilities and various and sundry capital improvements necessary for the maintenance, operation and expansion of the Wastewater Treatment Facilities, (3) to pay capitalized interest on the Series B Bonds during construction of the Expansion Facilities, (4) to fund a debt service reserve fund for the Series B Bonds; and (5) to pay the costs of issuance and insuring the Series B Bonds. Sources and Uses of Funds USE OF PROCEEDS It is estimated that monies will be provided, and applied, substantially in accordance with the following table: Sources: Series A Series B Total Principal Amount of Bonds Less: Net Original Issue Discount Total Sources Uses: Deposit to Capital Projects Funds Refunding Escrow Deposit Deposit to the Capitalized Interest Funds Deposit to the Debt Service Reserve Fund Municipal Bond Insurance Premium Costs of Issuance (1) Miscellaneous (Additional Proceeds) Total Uses (1) Includes bond discount, legal fees, rating fees, document and bond printing, trustee fees, CUSIP numbers, registration fees, advertising and miscellaneous. THE CONSTRUCTOIN FUND The Authority is undertaking certain capital projects which include, but are not restricted to the following: Series A Bonds The Authority will be; paying a portion of the cost of the acquisition of the City System and the completion of certain capital improvements thereto; which includes the acquisition of certain equipment. Series B Bonds The Authority will be expanding its Wastewater Treatment Facilities in order to comply with Commonwealth of Pennsylvania, Department of Environmental Protection requirements. 2
THE BONDS Description The Series A Bonds are designated the Sewer Revenue Bonds, Series A of 2012, (the Series A Bonds ). The Series A Bonds will be issued in fully registered form, without coupons, in $5,000 denominations or integral multiples thereof. The Series A Bonds will bear interest from August 9, 2012 payable semi-annually commencing December 1, 2012, and on each June 1 and December 1 thereafter until maturity or earlier redemption of such Series A Bonds. The Series B Bonds are designated the Sewer Revenue Bonds, Series B of 2012, (the Series B Bonds ). The Series B Bonds will be issued in fully registered form, without coupons, in $5,000 denominations or integral multiples thereof. The Series B Bonds will bear interest from August 9, 2012 payable semi-annually commencing December 1, 2012, and on each June 1 and December 1 thereafter until maturity or earlier redemption of such Series B Bonds. Payment of Principal and Interest The person in whose name any Bond is registered (the Registered Owner ) at the close of business on any Record Date (as defined below) with respect to any Interest Payment Date will be entitled to receive the interest payable on such Interest Payment Date notwithstanding the cancellation of such Bond upon any transfer or exchange thereof subsequent to such Record Date and prior to such Interest Payment Date. The term Record Date with respect to any Interest Payment Date means the fifteenth (15 th ) day of the calendar month immediately preceding such Interest Payment Date. The Bonds may be transferred or exchanged only on the bond register (the Bond Register ) of the Authority maintained at the designated corporate trust office of the Trustee. No transfer or exchange of any Bond will be valid unless made at such office and registered on the Bond Register. Every Bond presented or surrendered for registration of transfer or exchange must be duly endorsed, or be accompanied by a written instrument of transfer in form and with guaranty of signature satisfactory to the Trustee, duly executed by the Registered Owner thereof or his duly authorized agent or legal representative. No service charge shall be made for any transfer or exchange of any Bonds, but the Authority may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds. Authority shall not be required to register the transfer or exchange of any Bond called for redemption. Principal of and premium, if any, are payable in legal tender at the designated corporate trust office of the Trustee, provided that interest will be paid by check mailed to the Registered Owner on the appropriate Record Date. The Sewer Revenue Bonds are limited obligations of the Authority; the principal of, redemption premium, if any, and the interest on the Sewer Revenue Bonds are payable from the Receipts and Revenues of the Authority derived from its Sewer System, respectively, as said phrase is defined in the applicable Indenture, together with certain other monies and funds available for such purpose, to the extent and in the manner provided in the applicable Indenture. The Bonds are being issued pursuant to the laws of the Commonwealth of Pennsylvania, particularly the Act. There is no specific statutory or constitutional limitation upon the amount of bonds which may be issued by Pennsylvania Municipality Authorities governed by the Act. The Bonds are specifically authorized by the Indenture. As a condition to authentication of the Bonds by the Trustee, the Authority is required to deliver to the Trustee a certified copy of the applicable Indenture and various certificates and opinions are specified by the Indenture. Book-Entry-Only System The information in this section concerning DTC (as hereinafter defined), and DTC's book-entry system was obtained from material provided by DTC. Neither the Authority nor the Underwriter takes any responsibility for the accuracy thereof. 3
Certificates representing ownership of the Bonds will not be issued to the purchasers of the Bonds. Rather, The Depository Trust Company, New York, New York ( DTC ), will act as securities depository under a book-entry system for the Bonds. Unless such system is discontinued, the provisions described under this caption, Book-Entry-Only System (including provisions regarding payments to and transfers by the owners of beneficial interests in the Bonds) will be applicable to the Bonds. If such system is discontinued, the provisions described under Discontinuation of Book-Entry-Only System below will be applicable. DTC will act as securities depository for the Bonds. The ownership of one fully registered Bond for each maturity set forth on the inside cover page hereof, in the aggregate principal amount of such maturity, will be 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. DTC, the world s largest depository, is a limited-purpose trust company organized under New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 85 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 thereby eliminating the need for physical movement of securities certificates. Direct DTC Participants ( Direct Participants ) include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. Access to the DTC system is also available to others such as both U.S. and non-u.s., brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the Indirect Participants ). The DTC rules applicable to its Participants are on file with the Securities and Exchange School District. More information about DTC can be found at www.dtcc.com. Purchasers of the Bonds under the DTC system must be made by or through Direct Participants, which receive a credit balance for the Bonds in the records of DTC. The ownership interest of each actual purchaser of each Bond (the Beneficial Owner ) will be recorded through the records of the DTC Participants. Beneficial Owners will not receive written confirmation from DTC of their purchase, but are expected to receive a written confirmation providing details of the transaction, as well as periodic statements of their holdings, from the DTC Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership in the Bonds will be accomplished by book entries made by DTC and by the DTC Participants who act on behalf of the Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. Interest on and principal of the Bonds will be paid by the Trustee to DTC, or its nominee, and then paid by DTC to the Direct Participants and thereafter paid by the Direct Participants to the Indirect Participants or to the Beneficial Owners when due. NEITHER THE AUTHORITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO THE DTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR THE DIRECT PARTICIPANTS, THE INDIRECT PARTICIPANTS, OR THE BENEFICIAL OWNERS. PRINCIPAL AND INTEREST PAYMENTS ON THE BONDS WILL BE MADE TO DTC OR ITS NOMINEE, CEDE & CO., AS THE REGISTERED OWNER OF THE BONDS. UPON RECEIPT OF MONEYS, DTC S CURRENT PRACTICE IS TO CREDIT IMMEDIATELY THE ACCOUNTS OF DIRECT PARTICIPANTS IN ACCORDANCE WITH THEIR RESPECTIVE HOLDINGS SHOWN ON THE RECORDS OF DTC. PAYMENTS BY DIRECT PARTICIPANTS AND INDIRECT PARTICIPANTS TO BENEFICIAL OWNERS WILL BE GOVERNED BY STANDING INSTRUCTIONS AND CUSTOMARY PRACTICES, AS IS NOW THE CASE WITH MUNICIPAL SECURITIES HELD FOR THE ACCOUNTS OF CUSTOMERS OR REGISTERED IN STREET NAME AND WILL BE THE RESPONSIBILITY OF SUCH DTC PARTICIPANTS AND NOT OF DTC, THE TRUSTEE OR THE AUTHORITY, SUBJECT TO ANY STATUTORY AND REGULATORY REQUIREMENTS AS MAY BE IN EFFECT FROM TIME TO TIME. 4
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 or Registered Owners shall mean Cede & Co. and shall not mean the Beneficial Owners of the Bonds. Under the Indenture, payments made by the Trustee to DTC or its nominee shall satisfy the Authority s obligations under the Resolution to the extent of such payments. For every transfer and exchange of the Bonds, the Trustee may charge DTC and DTC may charge the DTC Participants and the DTC Participants may charge the Beneficial Owners a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Discontinuance of Book-Entry-Only System DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving notice to the Trustee and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, Bond certificates are required to be printed and delivered as described below and in the Resolution. A Beneficial Owner, upon registration of certificates held in the Beneficial Owner s name, will become the Bondholder. The Authority may determine to discontinue the system of book-entry transfer through DTC (or a successor securities depository). In such event, Bond certificates will be printed and delivered as described below and in the Indenture. Unless otherwise noted, the information contained in this section has been extracted from a report from DTC entitled Book Entry-Only Municipals. No representation is made by the Authority or the Underwriter as to the completeness or the accuracy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. In the event that the Book-Entry-Only System is discontinued and the Beneficial Owners become registered owners of the Bonds, the following provisions applicable to registered owners would apply: (i) Bonds may be exchanged for an equal aggregate principal amount of Bonds in other authorized denominations, upon surrender thereof at the designated corporate trust office of the Trustee; (ii) the transfer of any Bonds may be registered on the books maintained by the Trustee for such purpose only upon the surrender thereof to the Trustee together with a duly executed assignment in form satisfactory to the Authority and the Trustee; and (iii) for every exchange or registration of transfer of Bonds, the Trustee may impose a charge sufficient to reimburse it for any tax, fee or governmental charge required to be paid with respect to such exchange or registration of transfer of the Bonds. The Authority and the Trustee shall not be required: (a) to issue or transfer or exchange any Bond during a period beginning at the close of business on the Record Date next preceding any Interest Payment Date and ending at the close of business on the Interest Payment Date; or (b) to issue or transfer or exchange any Bond then considered for redemption during the period beginning at the close of business on the fifteenth (15th) day next preceding any date of selection of such Bonds to be redeemed and ending at the close of business on the day on which the notice of redemption is mailed; or (c) to transfer or exchange any portion of any Bond selected for redemption until after the redemption date. Delivery of Certificates; Registered Owners Bond certificates in fully registered form will be delivered to, and registered in the name of DTC or its nominee, Cede & Co., and in the event that the book-entry-only system for the Bonds is discontinued, the DTC Participants or such other persons as such DTC Participants may specify (which may be the DTC Participants or Beneficial Owners), in authorized denominations of $5,000 or integral multiples thereof. The ownership of the Bonds so delivered (and any Bonds thereafter delivered upon a transfer or exchange described below) shall be registered in registration books to be kept by the Trustee as Registrar and the Authority and the Trustee shall be entitled to treat the registered owners of such Bonds, as their names appear in such registration books as of the appropriate dates, as the owners thereof for all purposes described herein and in the Indenture. 5
Denominations The Bonds will be issued in denominations of $5,000 principal amount or any integral multiple thereof within a maturity. Redemption Series A Bonds Optional Redemption. The Series A Bonds stated to mature on and after December 1, 2026 are subject to redemption prior to maturity at the option of the Authority, in whole or in part on any date beginning December 1, 2022 upon not less than 30 days notice, to be given in the manner required by the Resolution, at 100% of principal. Mandatory Sinking Fund Redemption. The Series A Bonds maturing on December 1, 2026, 2031, 2036 and 2042 are subject to mandatory redemption by lot, at a redemption price of 100% of the principal amount thereof plus interest accrued to the date set for redemption, on December 1 in the years and in the principal amounts as follows: Redemption Date Principal Amount to be Redeemed *Stated Maturity Series B Bonds Optional Redemption. The Series B Bonds stated to mature on and after December 1, 2023 are subject to redemption prior to maturity at the option of the Authority, in whole or in part on any date beginning December 1, 2022 upon not less than 30 days notice, to be given in the manner required by the Resolution, at 100% of principal Mandatory Sinking Fund Redemption. The Series B Bonds maturing on December 1, 2031, 2036 and 2042 are subject to mandatory redemption by lot, at a redemption price of 100% of the principal amount thereof plus interest accrued to the date set for redemption, on December 1 in the years and in the principal amounts as follows: Redemption Date Principal Amount to be Redeemed *Stated Maturity 6
Manner of Redemption If less than all Bonds of any one maturity are to be redeemed at any particular time, such Bonds so to be called for redemption shall be chosen by lot, within such maturity, by the Trustee. If a Bond is of a denomination (principal amount or maturity value) larger than $5,000, a portion of such Bond may be redeemed. For the purposes of redemption, a Bond shall be treated as representing that number of Bonds which is obtained by dividing the denomination thereof by $5,000, each $5,000 portion of such Bond being subject to redemption. In the case of partial redemption of a Bond, payment of the redemption price shall be made only upon surrender of such Bond in exchange for Bonds of authorized denominations, of like form, in an aggregate amount equal to the unredeemed portion. Notice of Redemption Any redemption under the preceding provisions shall be made upon notice of redemption mailed not less than thirty (30) days nor more than sixty (60) days prior to the date fixed for redemption, postage prepaid, to all registered owners of the Bonds to be redeemed at their last addresses shown on the Registration Books maintained by the Trustee; provided, however, failure to mail such notice or any defect in the notice so mailed or in the mailing thereof with respect to any one Bond shall not affect the validity of the proceedings for redemption of any other Bonds. The notice of redemption for the Bonds may be a conditional notice of redemption. If the Authority shall have duly mailed notice of redemption and shall have provided funds for the payment of the principal of the Bonds so called for redemption and interest thereon, interest on such Bonds shall cease to accrue after said redemption date. SECURITY FOR THE BONDS The Bonds will be issued under and secured separately, in accordance with the terms of the Indenture. The Indenture provides for the issuance of the sewer revenue bonds in addition to the Bonds ( Additional Bonds ) under the limitations set forth therein, and defines the duties and responsibilities of the parties with respect to the expenditures of the proceeds of the Bonds, the maintenance and operation of the Sewer System, the conservation and application of all funds, the security for moneys on deposit, the provisions relating to reserves, the provisions relating to the redemption of the Bonds, and the provisions for the payment of the principal or premium, if any, and the interest on the Bonds and any additional bonds. The Series A Bonds are revenue obligations of the Authority, and the principal of, redemption premium, if any, and the interest on the Bonds are payable solely from that portion of the Receipts and Revenues of the Authority derived from the operation of its City System, as said terms are defined in the Indenture, and also from other moneys as may be made available for such purpose to the extent and in the manner provided in the Indenture. The Authority and the City have determined that it is in their best interests that the Authority either own or operate the City wastewater collection systems or otherwise become responsible for ownership and or compliance with the City s NPDES Permits. To that end, the Authority and the City have entered into the Acquisition Agreement. It is recognized the acquisition will not be finally consummated until such time as the total consideration for the acquisition has been paid in accordance with the Acquisition Agreement. However, the effective date of the acquisition shall be March 1, 2012, for any and all purpose once the acquisition has been completed in accordance with the provisions of the Acquisition Agreement. The system shall be separately maintained by the Authority with separate staff, professionals and revenues and expenses associated only with the collection system. Whereas, Jefferson Hills, South Park and PCSA understand and acknowledge this acquisition. The debt service fund will be paid solely from the receipts and revenues derived from the customers of the City Wastewater Treatment system. The Series B Bonds are revenue obligations of the Authority, and the principal of, redemption premium, if any, and the interest on the Bonds are payable solely from that portion of the Receipts and Revenues of the Authority derived the operation of its Wastewater Treatment Facilities, as said terms are defined in the Indenture, and also from other moneys as may be made available for such purpose to the extent and in the manner provided in the Indenture. 7
The Authority operates a wastewater treatment and disposal facility consisting of sewage works, combined sewer overflow structures, and all other appurtenances necessary for the treatment and disposal of wastewater and other acceptable waste. In order to comply with Commonwealth of Pennsylvania, Department of Environmental Protection (hereinafter DEP ) requirements (the DEP Requirements ), the Authority plans to undertake the expansion of the Authority Wastewater Treatment Facilities as well as other various capital projects necessary for the Operation and Maintenance of said Authority Wastewater Treatment Facilities. In order to proceed with the Expansion Project, the Authority has entered into an Agreement to replace the Prior Agreements and to establish the rights and obligations of the parties, defined service areas, reservation of capacity, and allocation of costs. The Authority s Consulting Engineer has prepared certain studies and reports, Final Basis of Design Reports, detailing the size, layout and cost of the Wastewater Treatment Facilities required to be constructed to accommodate flow from the Authority Customers. The debt service and Operation and Maintenance costs associated with plant expansion will be paid by the Authority s customers (Clairton, Jefferson Hills, PCSA and South Park) based on their percent of reserved capacity, as defined in Article II of the Wastewater Treatment Agreement. DEFAULTS AND REMEDIES As provided in the Indenture, upon happening and during continuance of any Event of Default, as defined therein, then and in every case the Trustee shall declare, by notice in writing delivered to the Authority, the principal of all Bonds and additional bonds then outstanding if not then due and payable and the interest accrued thereon to be due and payable immediately; and upon such declaration the same shall become and shall be due and payable immediately. The above provision, however, is subject to the condition that if, after the principal of the Bonds shall have been so declared to be due and payable, all arrears of interest, if any, upon the Bonds and interest on overdue installments of interest at the rate of interest specified therein, and the principal of all Bonds which have matured other than by reason of such declaration, shall have been paid by the Authority, and the Authority shall also have performed all other things in respect to which it may have been in default hereunder, and shall have paid the reasonable charges of the Trustee and its counsel and of the bondholders, including reasonable attorneys fees paid or incurred, then, and in every such case, the holders of not less than a majority in aggregate principal amount of the bonds then outstanding, by written notice to the Authority and to the Trustee, may waive such default and its consequences and such waiver shall be binding upon the Trustee and upon all bondholders; but not such waiver shall extend to or affect any subsequent default or impair any rights or remedy consequent thereon. SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE The Bonds are being issued as Sewer Revenue Bonds, under and subject to the provisions of the Trust Indenture dated as of, 2012 (collectively, the Indenture ), between the Authority and Wells Fargo Bank, N.A., Pittsburgh, Pennsylvania, as Trustee, (the Trustee ), to which reference is made for complete details of the terms of the Bonds. The following statements are a summary of certain provisions of the Indenture. This Summary does not purport to be complete and reference is hereby made to the Indenture for a full and complete statement of such provisions. Security for the Bonds Under the Indenture, all Receipts and Revenues (as defined therein) have been pledged to the Trustee. Certain portions of the Receipts and Revenues secure, separately, the Series A Bonds and Series B Bonds. The Indenture constitutes an irrevocable lien upon such Receipts and Revenues for the benefit of the holders of the Series A Bonds and Series B Bonds, as their respective interests appear, and any additional bonds or other parity obligations authorized to be issued thereunder (collectively referred to hereinafter as the Bonds ). Covenants of the Authority The Authority has covenanted in the Indenture that it will adopt, fix, charge, maintain and collect rates, rents and other charges for use of the Sewer System and for services rendered by the Authority in connection therewith. The Authority also covenants to keep such rates and charges in full force and effect continuously during the time any Bonds remain outstanding under the Indenture. 8
The Authority covenants that such sewer rates and other charges imposed, shall be established so that the estimated amounts to be received therefrom in each fiscal year of the Authority, together with revenues otherwise estimated to become available in such fiscal year under provisions of the Indenture for the purposes, will be sufficient: A. to pay the current expenses of the Authority; B. to pay 110% of the current fiscal year s debt service requirements (the Current Annual Debt Service Requirements ); C. to make transfers to the Debt Service Reserve Fund when required; and Funds to be established by the Authority Under the Indenture, the Authority has established a Revenue Fund to be held by one or more Authorized Depositaries, and a Construction Fund, a Debt Service Fund, Debt Service Reserve Fund and Surplus Fund all to be held by the Trustee. Revenue Fund All Receipts and Revenues are initially deposited to the Authority s Revenue Fund, established with an authorized depositary, from which the Authority may pay its current expenses. The Receipts and Revenues will be segregated into two accounts based upon the sources from which they are derived, the City System Account and the Wastewater Treatment Facilities Account. Debt Service Reserve Fund Simultaneously with the issuance of the Bonds, an amount equal to the lesser of: (i) maximum annual debt service requirement of the Bonds; and (ii) 10% of the principal amount of the Bonds, (iii) or 125% Average Annual Debt will be deposited to the Debt Service Reserve Fund. The Debt Service Reserve Fund will be segregated into two accounts based upon the sources from which funds are derived, the Series 2012A Account and the Series 2012B Account. The Series 2012 A Account will secure the Series A Bonds and the Series 2012 B Account will secure the Series B Bonds. The Trustee will be authorized to withdraw money on deposit in the Debt Service Reserve Fund to repair any deficiencies in the Debt Service Fund in order to meet current debt service requirement of the Bonds; such amount may be satisfied by the deposit of cash, a surety bond, or similar instrument, acceptable to the insurer. In the event of such a withdrawal or other deficiency of funds in the Debt Service Reserve Fund, the Authority will repair the same within two years, by means of equal installments or more expeditiously. Debt Service Fund After the Authority shall have paid its current expenses, the Authority shall withdraw from the Revenue Fund and deposit with the Trustee for credit to the Debt Service Fund on the first day of each month,, 2012, an amount equal to one-twelfth of and for the purpose of paying, the interest due on the Series 2012A Bonds on, 2012. Thereafter, on the first day of each month, beginning, 200, the Authority shall deposit to the Debt Service Fund an amount equal to one-sixth of, and for the purpose of paying, the interest due on the Series 2012A Bonds on the next interest payment date therefor and an amount equal to one-twelfth of, and for the purpose of paying, the principal amount of the Series 2012A Bonds maturing by their terms, or subject to mandatory sinking fund redemption or purchase pursuant to the Indenture on the next succeeding _(month/day). After the Authority shall have paid its current expenses, the Authority shall withdraw from the Revenue Fund and deposit with the Trustee for credit to the Debt Service Fund on the first day of each month,, 2012, an amount equal to one-twelfth of and for the purpose of paying, the interest due on the Series 2012B Bonds on, 2012. Thereafter, on the first day of each month, beginning, 200, the Authority shall deposit to the Debt Service Fund an amount equal to one-sixth of, and for the purpose of paying, the interest due on the Series 2012B Bonds on the next interest payment date therefor and an amount equal to one-twelfth of, and for the purpose of paying, the principal amount of the Series 2012B Bonds maturing by their terms, or subject to mandatory sinking fund redemption or purchase pursuant to the Indenture on the next succeeding _(month/day). 9
Surplus Fund On of each year, all moneys in the Revenue Fund in excess of [one-fourth of the estimated annual current expenses of the Authority], which estimate shall be based upon the budget of current expenses of the Authority for the ensuing Fiscal Year, shall be withdrawn by the Authority from the Revenue Fund and deposited in the Surplus Fund. The Trustee shall from time to time, upon requisitions signed by the Treasurer or Assistant Treasurer of the Authority, withdraw from the Surplus Fund and pay to the Authority the amounts requested in any such requisitions, which amounts shall be credited to a special fund established with an authorized depositary and shall be used for the purposes, herein specified. The moneys held by the Trustee in the Surplus Fund may be used by the Authority: (a) to pay the cost of any Capital Additions, or extraordinary repairs and maintenance; (b) to prepay, redeem or purchase Bonds, provided that no Bonds may be purchased at a price in excess of the then effective optional prepayment or redemption price, with respect to the Bonds to be purchased or if such Bonds are not then subject to optional redemption, at a price not in excess of 105% of the principal amount of the Bonds to be purchased, plus accrued interest to the purchase date; (c) to supplement funds for projects (including projects consisting in whole or in part of the refunding of Bonds) financed by the issuance of Additional Bonds; (d) to make up any deficiency in the Debt Service Fund or Debt Service Reserve Fund; or (e) to pay any debts, liabilities or obligations of the authority incurred in connection with the ownership or operation of the Sewage System for which there is insufficient money in another Fund or which are not properly payable from any other fund under the Indenture (including, among other things, surveys, plans, specifications, studies and reports with respect to the Sewage System or the operation thereof or the feasibility or desirability of acquiring or constructing Capital Additions). In connection with the application of moneys in the Surplus Fund to (i) the purposes described in clauses (a) or (c) above, the Authority shall furnish the Trustee a requisition substantially in the form described in Section 5.01(a) and (b) hereof, with such changes as may be necessary to reflect the purpose for which and the Fund from which such amount is to be withdrawn; (ii) the purpose described in clause (b) above, the Authority shall furnish to the Trustee an Officers Certificate containing specific instructions as to redemption or purchase, and in the case of any purchase, the purchase price, the names of the sellers, the Bonds to be purchased and the expenses involved in the purchase; (iii) the purpose described in clause (e) above, the Authority shall furnish to the Trustee an Officers Certificate requesting such payment and an Opinion of Counsel to the effect that the obligation to be paid is a proper obligation of the Authority which the Authority is legally required to pay and may be paid from moneys in the Surplus Fund; and (iv) the purpose described in clause (d) above, the Trustee may make such transfers as it deems necessary without any direction from the Authority. In addition, the Trustee shall, without any direction from the Authority, transfer moneys from the Surplus Fund to the Debt Service Fund or to any sinking, purchase or analogous fund to the extent that the moneys in the Debt Service Fund, the Debt Service Reserve Fund or any sinking, purchase or analogous fund may on any Interest Payment Date be insufficient to make the payment for which the Debt Service Fund, the Debt Service Reserve Fund or any sinking, purchase or analogous fund was established as the same shall become due. 10