ADDENDUM TO PRELIMINARY OFFICIAL STATEMENT DATED JUNE 19, 2014

ADDENDUM TO PRELIMINARY OFFICIAL STATEMENT DATED JUNE 19, 2014 CITY OF PROVIDENCE, RHODE ISLAND Relating to $17,465,000* GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014A (Tax-Exempt) $6,285,000* GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014B (Federally Taxable) The Preliminary Official Statement dated June 19, 2014 is hereby amended as follows: Page A-20 of the Preliminary Official Statement is amended by deleting the third sentence in the first paragraph under the heading "Retirement System City Employees Pension Plan" and replacing it with the following: According to the July 1, 2013 actuarial study, which is the most recent available, the market value of the total assets of the pension fund amounted to $393.1 million. Included in this amount is approximately $57.3 million in discounted future City contributions for the fiscal year ending June 30, 2014. The actuary has recommended that future valuations exclude discounted contributions from reported assets. The actuary's report can be viewed at: https://data.providenceri.gov/retirement/2013-retirement-system-actuarial-valuation/wcaqc2p9. The unfunded accrued liability as of July 1, 2013 was $831.5 million. Dated: June 25, 2014 *Preliminary, Subject to Change

This Preliminary Official Statement and the information contained herein are subject to completion and amendment. These 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 a 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 jurisdiction. A definitive Official Statement with respect to these securities will be made available concurrently to their sale. PRELIMINARY OFFICIAL STATEMENT DATED JUNE 19, 2014 NEW ISSUE Rating: Moody s Baa1 S&P BBB In the opinion of Moses Afonso Ryan Ltd., Bond Counsel, based upon an analysis of existing law and assuming, among other matters, compliance with certain covenants, interest on the $17,465,000* General Obligation Refunding Bonds, Series 2014A (Tax-Exempt) (the Series A Bonds ) is excludable from gross income for federal income tax purposes under the Internal Revenue Code of 1986 and is not an item of tax preference for the purpose of calculating the alternative minimum tax imposed on individuals and corporations. Interest on the Bonds will, however, be included in the calculation of adjusted current earnings for the purpose of computing the alternative minimum tax imposed on corporations. Interest on the $6,285,000* General Obligation Refunding Bonds, Series 2014B (Federally Taxable) (the Series B Bonds and together with the Series A Bonds collectively the Bonds ) is wholly includable in gross income for federal income tax purposes. Under existing law, income from the Bonds is exempt from taxation by the State of Rhode Island (the State ) or any instrumentality of the State, although the income therefrom may be included in the measure of Rhode Island estate taxes and certain Rhode Island corporate and business taxes. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on the Bonds. See TAX STATUS and APPENDIX C herein. Dated: Date of Delivery OFFICIAL STATEMENT of the CITY OF PROVIDENCE, RHODE ISLAND Relating to $17,465,000* GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014A (Tax-Exempt) $6,285,000* GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014B (Federally Taxable) Due: As shown on the inside front cover The Bonds are issuable only as fully registered Bonds without coupons, and, when issued, will be registered in the name of Cede & Co., as Bondowner and nominee for The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their interest in Bonds purchased. So long as Cede & Co. is the Bondowner, as nominee of DTC, references herein to the Bondowners or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (as defined herein) of the Bonds. So long as DTC, or its nominee Cede & Co., is the Bondholder, principal and semiannual interest payments will be made directly to such Bondholder. Principal of and interest on the Bonds will be payable to DTC by The Bank of New York Mellon Trust Company, N.A. as Paying Agent. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursements of such payments to Beneficial Owners is the responsibility of the DTC Participants and the Indirect Participants, as more fully described herein. (See THE BONDS Book-Entry Only System" herein.) Interest is computed on the basis of a 360-day year consisting of twelve 30-day months. The Bonds will be dated the date of delivery. Interest on the Bonds will be payable on July 15, 2014 and semiannually thereafter on January 15 and July 15 of each year at the rates as shown in the maturity schedule on the inside cover. Principal of the Bonds will be payable on July 15 as shown in the maturity schedule on the inside cover. The Bonds are not subject to optional redemption prior to maturity. The Bonds are not "qualified tax-exempt obligations" pursuant to Section 265(b)(3) of the Code. The Bonds are offered for delivery when, as, and if issued, subject to the final approving opinion of Moses Afonso Ryan Ltd., Bond Counsel, of Providence, Rhode Island, and to certain other conditions referred to herein. Certain legal matters in connection with the Bonds will be passed upon by Harrington & Vitale Ltd as Counsel to the Underwriter. FirstSouthwest will be serving as financial advisor for the City on this transaction. It is expected that the Bonds in definitive form, will be available for delivery to DTC in New York, New York, or to its custodial agent, on or about July 8, 2014. Janney Montgomery Scott Official Statement Dated June, 2014 * Preliminary, subject to change. Raymond James CastleOak Securities, L.P.

MATURITIES, AMOUNTS, INTEREST RATES, PRICES OR YIELDS AND CUSIPS $17,465,000* GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014A (Tax-Exempt) Maturity Principal Interest Price or July 15, Amount* Rate Yield CUSIP No. ** 2014 2015 2016 2017 2018 2019 $6,285,000* GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014B (Federally Taxable) Maturity Principal Interest Price or July 15, Amount* Rate Yield CUSIP No. ** 2014 2015 2016 2017 2018 2019 *Preliminary, subject to change **The CUSIP Numbers have been assigned by an independent company not affiliated with the City, the Underwriters, or the Financial Advisor and are included solely for the convenience of the holders of the Bonds. Neither the Financial Advisor, the Underwriters, nor the City is responsible for the selection or uses of the CUSIP numbers, and no representation is made as to their correctness on the Bonds or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity.

This Official Statement is made available to prospective purchasers of the Bonds for review prior to purchase and is in a form deemed final by the City as of its date (except for permitted omissions) for purposes of paragraph (b)(1) of Securities and Exchange Commission Rule 15c-2-12 (the Rule ), but is subject to revision, amendment, and completion (as so revised, amended or completed such document will be referred to as the Final Official Statement ). No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations, other than information and representations contained herein, in connection with the offering of the Bonds, and if given or made, such information or representations must not be relied upon. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy any of the Bonds in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. The information set forth herein has been furnished by the City and other sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or holders of any of the Bonds. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as opinion and not as representations of fact. 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 City since the date hereof. All quotations from and summaries and explanations of provisions of laws and documents described herein do not purport to be complete and reference is made to said laws and documents for full and complete statements of their provisions. Upon issuance, the Bonds will not be registered under the Securities Act of 1933, as amended, in reliance upon exemptions contained in such Act. The Bonds will not be listed on any stock or other securities exchange. Any registration or qualification of the Bonds in accordance with applicable provisions of securities laws of the states in which the Bonds may be registered or qualified and the exemption from registration or qualification in other states cannot be regarded as a recommendation thereof. Neither the Securities and Exchange Commission nor any other federal, state or other governmental entity or agency, except for the City, will have passed upon the accuracy of the Official Statement or, except for the City, approved the Bonds for sale. Any representation to the contrary may be a criminal offense. The information relating to The Depository Trust Company ("DTC") and the book-entry only system contained in this Official Statement has been furnished by DTC (see "THE BONDS--Book-Entry Only System" herein). No representation is made by the City as to the adequacy or accuracy of such information. The City has not made any independent investigation of DTC or the book-entry only system. The Underwriters intend to offer the Bonds to the public initially at the offering prices or yields shown on the inside front cover page hereof, which prices or yields may change subsequently without any requirement or prior notice. The Underwriters may offer and sell the Bonds to certain dealers (including dealers depositing such Bonds into investment trusts) at prices lower than the public offering prices shown on the inside front cover page hereof. The Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. 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 parties referred to above or that the other information or opinions are correct as of any time subsequent to the date hereof. The financial advisor to the City has provided the following sentence for inclusion in this Official Statement: The financial advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the financial advisor does not guarantee the accuracy or completeness of such information. The cover page hereof, the inside cover page, this page and the appendices attached hereto are part of this Official Statement.

TABLE OF CONTENTS Page THE BONDS 1 Description of the Bonds.. 1 Record Date 1 Authorization and Purpose of the Bonds 1 Plan of Refunding 2 Book-Entry Only System 2 Sources and Uses of Funds. 4 Security for the Bonds 4 THE CITY OF PROVIDENCE. 6 BONDOWNERS RISK. 6 TAX STATUS. 7 CONTINUING DISCLOSURE.. 12 LITIGATION.. 12 CERTAIN LEGAL MATTERS.. 13 FINANCIAL ADVISOR. 13 RATINGS 13 UNDERWRITING.. 13 MISCELLANEOUS 13 APPENDIX A - Information relating to the City of Providence, Rhode Island... A 1 APPENDIX B - Audited Financial Statements for the Fiscal Year Ended June 30, 2013... B 1 APPENDIX C - Proposed Form of Legal Opinion for the Bonds... C 1 Page APPENDIX D - Proposed Form of Continuing Disclosure Certificate... D 1

OFFICIAL STATEMENT of the CITY OF PROVIDENCE, RHODE ISLAND Relating to $17,465,000* GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014A (Tax-Exempt) $6,285,000* GENERAL OBLIGATION REFUNDING BONDS, SERIES 2014B (Federally Taxable) This Official Statement provides certain information concerning the City of Providence, Rhode Island (the "City" or Providence ) in connection with the issuance by the City of its $17,465,000 * General Obligation Refunding Bonds, Series 2014A (Tax-Exempt) (the "Series A Bonds") and $6,285,000* General Obligation Refunding Bonds, Series 2014B (Federally Taxable) (the Series B Bonds and together with the Series A Bonds, collectively the Bonds ) Description of the Bonds THE BONDS The Bonds will be issued only as fully registered Bonds in the denomination of $5,000 or any integral multiple thereof. The Bonds will be dated the date of delivery and will bear interest at the rates shown on the inside front cover page hereof. Interest on the Bonds will be payable on July 15, 2014 and semi-annually thereafter on January 15 and July 15 of each year at the rates shown in the maturity schedule on the inside front cover page hereof. Principal of the Bonds will be payable on July 15, 2014 and annually thereafter as set forth on the inside front cover page hereof. The Bonds are issuable only as fully registered Bonds without coupons, and, when issued, will be registered in the name of Cede & Co., as Bondowner and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denomination of $5,000 or any multiple thereof. Purchasers will not receive certificates representing their interest in Bonds purchased. So long as Cede & Co. is the Bondowner, as nominee of DTC, references herein to the Bondowners or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (as defined herein) of the Bonds. See "THE BONDS- Book-Entry Only System" below. Principal of and interest are payable to DTC by The Bank of New York Mellon Trust Company, N. A., as Paying Agent to DTC. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to such Bondowner. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and the Indirect Participants, as more fully described herein. Interest on the Bonds is computed on the basis of a 30-day month and a 360-day year. For every transfer and exchange of the Bonds, whether in certificated form or otherwise, the Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Adequate indemnification may be required to replace any lost, stolen or destroyed Bonds, whether in certificated form or otherwise. Record Date The Record Date for each payment of interest on the Bonds is the close of business on the fifteenth day preceding the interest payment date or, if such day is not a regular business day of the Paying Agent, the next preceding day which is a regular business day of the Paying Agent. Authorization and Purpose of the Bonds The Bonds are authorized pursuant to Section 45-12-5.2 of the Rhode Island General Laws and a resolution duly passed by the City Council on June 5, 2014 and the proceeds will be applied to refund, on a current basis, * Preliminary. Subject to change. 1

$1,295,000 of the outstanding principal balance of the City s General Obligation Bonds, Series 2000 (Tax-Exempt) dated August 1, 2000 (the Series 2000 Bonds ) and $16,705,000of the outstanding principal balance of the City s General Obligation Refunding Bonds, Series 2004A (Tax-Exempt) dated September 16, 2004 (the Series 2004A Bonds ) and $6,065,000Series 2004B (Federally Taxable) dated September 16, 2004 (the Series 2004B Bonds and collectively, the Series 2004 Bonds ). Plan of Refunding A portion of the Bonds will be applied to refund the Series 2000 Bonds maturing in 2014 and 2015 and the Series 2004 Bonds maturing in 2014 through 2019 * (the Refunded Bonds ). The Series 2000 and 2004 Bonds are subject to optional redemption and will be so redeemed on July 15, 2014 at the redemption price of 100% of the principal amount thereof. The City, upon delivery of the Bonds, will enter into a refunding escrow agreement (the Refunding Agreement ) with The Bank of New York Mellon Trust Company, N.A. as escrow agent (the Refunding Escrow Agent ) for the Refunded Bonds. The Refunding Agreement will provide for the deposit of the net proceeds of the Bonds with the Refunding Escrow Agent in a separate account (the Refunding Escrow Account ) to be paid to the Paying Agent of the Refunded Bonds solely for the payment of the principal of and redemption premium, if any, and interest on the Refunded Bonds. The proceeds from the Bonds are calculated to be sufficient to pay principal, interest and redemption premium, if any, on the Refunded Bonds. Book-Entry Only System The information under this heading has been furnished by DTC, New York, New York. Neither the City nor the Underwriters make any representations 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. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Bond will be issued for each maturity of the Bonds, 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 and www.dtc.org. 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 * Preliminary. Subject to change. 2

behalf of Beneficial Owners. Beneficial Owners will not receive certificates 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 DTC 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. Beneficial Owners of Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City or the Paying Agent as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments and redemption proceeds 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 the 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 City or Paying Agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City, 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 securities depository with respect to the Bonds at any time by giving reasonable notice to the City and Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, certificated Bonds are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, certificated Bonds will be printed and delivered to DTC. 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 CITY, THE UNDERWRITERS AND THE PAYING AGENT WILL HAVE NO RESPONSIBILITY OR OBLIGATION TO SUCH DTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEE WITH RESPECT TO THE PAYMENTS TO OR THE 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 BOND OWNERS OR REGISTERED OWNERS OF THE BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. Neither the City, the Underwriters, nor the Paying Agent shall have any responsibility or obligation with respect to: (i) the accuracy of the records of DTC or any Participant with respect to any beneficial ownership interest of 3

the Bonds; (ii) the delivery to any Participant, Beneficial Owner of the Bonds or other person, other than DTC, of any notice with respect to the Bonds; (iii) the payment to any Participant, Beneficial Owner of the Bonds or other person, other than DTC of any amount with respect to the principal of, premium, if any, or interest on, the Bonds; (iv) any consent given by DTC as registered owner; or (v) the selection by DTC or any Participant of any Beneficial Owners to receive payment if the Bonds are redeemed in part. Sources and Uses of Funds The proceeds of the Bonds are to be applied at follows: SOURCES OF FUNDS: Principal of Bonds.. $ Net Reoffering Premium/Discount $ TOTAL SOURCES OF FUNDS $ USES OF FUNDS: Deposit to Refunding Escrow Account $ Costs of Issuance. $ Underwriters Discount... $ TOTAL USES OF FUNDS $ Security for the Bonds The Bonds will be valid general obligations of the City and all taxable property in the City will be subject to taxation without limitation as to rate or amount to pay the Bonds or the interest thereon (See APPENDIX C Proposed Form of Legal Opinion for the Bonds). The Rhode Island General Laws provide that the City shall annually appropriate a sum sufficient to pay the principal and interest coming due within the year on all its general obligation bonds and notes to the extent that monies therefor are not otherwise provided, and that if such sum is not appropriated, it shall nevertheless be added to the annual tax levy. In order to provide such amount, all taxable property in the City is subject to ad valorem taxation by the City without limitation as to rate or amount. Claims for Payment Due Rhode Island General Laws Section 45-15-5 permits any person who shall have any claim for money due from any town to present a demand for such claim to the City Council and, if satisfaction of such claim is not made within forty (40) days, to commence an action against the town treasurer for recovery of the claim. If a judgment is obtained for such debt due and if the treasurer of the town does not have sufficient monies to pay the judgment, Rhode Island General Laws Section 45-15-6 authorizes the city treasurer to apply to any justice of the peace for an order requiring the town to hold a special meeting of the City Council "for the speedy ordering and making a tax" to be collected for such purpose. If the City Council shall fail to assess voluntarily a tax sufficient to satisfy judgment on a town debt, Rhode Island General Laws Section 45-15-7 authorizes the Superior Court to order the assessors of the city "to assess upon the ratable property thereof, and the collector to collect, a tax sufficient for the payment of the judgment, with all incidental costs and charges, and the expense of assessing and collecting the tax." Enforcement of a claim for payment of principal of or interest on a bond or note issued by the City is subject to the applicable provisions of the federal bankruptcy laws and of statutes, if any, hereafter enacted by the federal government or the State of Rhode Island extending the time for payment of such obligations or imposing other constitutionally valid constraints upon such enforcement. Statutory Lien In July of 2011, the General Assembly enacted amendments to Section 45-12-1 of the Rhode Island General Laws to provide for a statutory lien on ad valorem taxes and general fund revenues for the benefit of general obligation debt of cities and towns such that the statutory lien has a priority in a bankruptcy. The amendments provide, in part, as follows: 4

The faith and credit, ad valorem taxes and general fund revenues of each city and town are pledged for the payment of principal of, premium and interest on all general obligation bonds and notes of the city or town, whether or not the pledge is stated in the bonds and notes or in the proceedings authorizing their issue and the pledge constitutes a first lien on such ad valorem taxes and general fund revenues. In addition, annual appropriations for payment of financing leases and obligations securing bonds, notes or certificates ( other financing obligations ), have a first lien on ad valorem taxes and general fund revenues commencing on the date of each annual appropriation. Amounts appropriated or added to the tax levy to pay principal of, premium and interest on general obligation bonds or notes and payments of other financing obligations are applied to the payment of such obligations. Any municipal employee or official who intentionally violates such provisions of Section 45-12-1 is personally liable to the city or town for any amounts not expended in accordance with such appropriations. The superior court has jurisdiction to adjudicate claims brought by any city or town and to order such relief as the court may find appropriate to prevent further violations under such provisions of Section 45-12-1. Any municipal employee or official who violates such provisions of Section 45-12-1 is subject to removal. Section 45-12-1 further provides in part, that: notwithstanding any provision of any other law, including the uniform commercial code, Title 6A of the Rhode Island General Laws: (1) the pledge of ad valorem taxes and general fund revenues to the payment of the principal, premium and interest on general obligation bonds and notes and payment of other financing obligations is valid and binding, and deemed continuously perfected from the time the bonds or notes or other financing obligations are issued; (2) no filing need be made under the uniform commercial code or otherwise to perfect the first lien on ad valorem taxes and general fund revenues; (3) the pledge of ad valorem taxes or general fund revenues is subject to the lien of the pledge without delivery or segregation, and the first lien on ad valorem taxes and general fund revenues is valid and binding against all parties having claims of contract or tort or otherwise against the city or town, whether or not the parties have notice thereof; and (4) the pledge shall be a statutory lien effective by operation of law and shall apply to all general obligation bonds and notes and financing obligations of cities, towns and districts and shall not require a security agreement to be effective. The July 2011 amendments, described above, provide that ad valorem taxes and general fund revenues may be applied as required by the pledge without further appropriation except for other financing obligations which are subject to annual appropriation. State Aid Intercept Rhode Island General Laws 45-12-32 creates a mechanism to enhance the creditworthiness of cities and towns in financial stress by providing for a state aid intercept mechanism to pay general obligation bonds and notes. Under the statute, the finance director is required to notify the mayor and the city council if it appears to the finance director that the city is likely to be unable to pay in whole or in part the principal or interest, or both, on any of its bonds, notes or certificates of indebtedness when due. If the mayor or city council, whether or not so notified, finds upon investigation that the payment cannot or is not likely to be made when due, he, she, or they is required to certify the inability or likely inability to the Director of Revenue of the State. The City has never made such a certification. Upon receipt of the certificate, the Director of Revenue shall immediately investigate the circumstances and, if the Director finds that the city is, or in the Director s opinion will be, unable to make the payment when due, the Director shall forthwith certify the inability, the amount of the due or overdue payment and the name of the paying agent for the bonds, notes or certificates of indebtedness to the General Treasurer of the State. Notwithstanding any provision of general or special law or any rules or regulations with respect to the timing of payment of state aid payments, not later than three (3) days after receipt of the certification from the Director of Revenue or one business day prior to the date on which the principal or interest, or both, becomes due, whichever is later, the General Treasurer of the State is required to pay to the paying agent the amount of the due or overdue payment certified to him/her to the extent of the sums otherwise then payable and the sums estimated to become payable during the remainder of the fiscal year, from the treasury, to the city. The amounts so paid to the paying agent are held in trust and exempt from being levied upon, taken, sequestered or applied for any purpose other than paying principal or interest, or both, on bonds, notes or certificates of indebtedness of the city. For purposes of the statute, the sums otherwise payable from the treasury to a city shall be the funds made available to cities: (i) as state aid pursuant to chapter 45-13 of the Rhode Island General laws, but specifically excluding reimbursements to cities and towns for the cost of state mandates pursuant to 45-13-9 of the Rhode Island General Laws; (ii) as school housing aid pursuant to 16-7-35 16-7-47 of the Rhode Island General Laws, but subject to any pledge to bonds issued to finance school projects by the Rhode Island Health and Educational Building Corporation, 5

and specifically excluding school operations aid provided for in 16-7-15 16-7-34.3 of the Rhode Island General Laws; (iii) in replacement of motor vehicle and trailer excise taxes pursuant to chapter 44-34.1 of the Rhode Island General Laws; (iv) from the public service corporation tax pursuant to chapter 44-13 of the Rhode Island General Laws; (v) from the local meal and beverage tax pursuant to 44-18-18.1 and the hotel tax pursuant to 44-18-36.1 of the Rhode Island General laws; and (vi) pursuant to all acts supplementing such chapters. THE CITY OF PROVIDENCE For a discussion of certain matters regarding the City, see APPENDIX A Information Relating to the City of Providence, Rhode Island and APPENDIX B Audited Financial Statements for the Fiscal Year Ended June 30, 2013. BONDOWNERS RISKS Purchase of the Bonds involves a degree of risk. Potential investors should be thoroughly familiar with this entire Official Statement (including the appendices hereto) in order to make a judgment as to whether the Bonds are an appropriate investment, to identify risk factors and to make an informed investment decision. The discussion herein of risks that could affect payments to be made by the City with respect to the Bonds is not intended to be comprehensive or definitive, but rather is to summarize certain matters which could affect the ability of the City to make such payments. Risks Related to City Operations The ability of the City to meet its payment obligations under the Bonds will depend upon the continued availability to the City of revenues from a variety of sources sufficient to meet obligations such as the City s operating expenses, debt service on the Bonds and other debt of the City and extraordinary costs or expenses which may occur from time to time. Revenues and expenses of the City will be affected by future events and conditions which will include the City s ability to control expenses, the City s ability to maintain or increase property tax rates and other sources of revenue, and the City s access to other sources of funds. No assurances can be given that these or other sources of revenues will be adequate to meet the expenses of the City. Future revenues and expenses of the City will be subject to conditions which may differ from current conditions to an extent that cannot be determined at this time. Descriptions of the City s current finances and operations as well as certain projected financial and operating results of the City are contained in APPENDIX A CERTAIN INFORMATION CONCERNING THE CITY Financial Matters in this Official Statement. Unfunded Pension and OPEB Liabilities The City is facing an unfunded pension liability and unfunded other post employment benefits ( OPEB ) liability. (see APPENDIX A - RETIREMENT SYSTEM City Employees Pension Plan and Other Post Employment Benefits ). General Economic Factors The City has been subject to the effects of the recession which has affected Rhode Island and the United States over the past several years. Related economic factors have adversely affected the City s revenues, including lower consumer and business spending, high unemployment, depressed home sales and other challenges. In addition, the income levels of the City s residents have been adversely affected by the recession. Marketability No assurance can be given that a secondary market for the Bonds will develop following the completion of the offering of the Bonds. Consequently, prospective bond purchasers should be prepared to hold their Bonds to maturity or prior redemption. No assurance can be given that the initial offering price for the Bonds will continue for any period of time following issuance of the Bonds. The Underwriter is not obligated to make a secondary market in the Bonds. 6

Legal Matters and Future Changes in Laws Various state and federal laws, regulations and constitutional provisions apply to the obligations created by the Bonds. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, regulations and provisions. Any such change, interpretation or addition could have a material adverse effect, either directly or indirectly, on the City or the taxing authority of the City, which could materially adversely affect the City s ability to repay the Bonds. Tax-Exempt Status of the Series A Bonds The exclusion from federal gross income of interest on the Series A Bonds is based on the continued compliance of the City with certain covenants relating generally to restriction on use of the Project financed with proceeds from the Series A Bonds, arbitrage limitations and rebate of certain excess investment earnings to the Federal government. Failure to comply with such covenants could cause interest on the Series A Bonds to become subject to Federal income taxation retroactive to the date of issuance of the Series A Bonds. See TAX STATUS in this Official Statement. Potential Effects of Bankruptcy and Receivership While Section 45-12-1 of the Rhode Island General Laws provides that the pledge of ad valorem taxes and general fund revenues to the payment of the principal, premium and interest on general obligation bonds is valid and binding, and deemed continuously perfected from the time the bonds are issued, in a bankruptcy or receivership proceeding, a debtor could file a plan for the adjustment of its debts which modifies the rights of creditors generally or the rights of any class of creditors, secured or unsecured (including the registered owners of the Bonds). While the City is not a debtor in any bankruptcy or receivership, any plan, if confirmed by a court, binds all creditors who had notice or knowledge of the plan and discharges all claims against the debtor provided for in the plan. No plan may be confirmed unless, among other conditions, the plan is in the best interest of creditors, is feasible and has been accepted by each class of claims impaired thereunder. Even if a plan is not so accepted, it may be confirmed if a court finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly. Limitations on Enforcement of Remedies The remedies available to the Trustee or the Registered Owners of the Bonds upon an event of default under the bond documents are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, the remedies provided in the bond documents may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by the valid exercise of the sovereign powers of the State, and the constitutional powers of the United States of America, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Forward-Looking Statements This Official Statement, including the Appendices, contains certain statements relating to future results that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. When used in this Official Statement, the words estimate, intend, expect and similar expressions identify forward-looking statements. Any forward-looking statement is subject to uncertainty and risks that could cause actual results to differ, possibly materially, from those contemplated in such forward-looking statements. Inevitably, some assumptions used to develop forward-looking statements will not be realized or unanticipated events and circumstances may occur. Therefore, investors should be aware that there are likely to be differences between forward-looking statements and actual results; those differences could be material. Series A Bonds Tax-Exempt Bonds TAX STATUS In the opinion of Moses Afonso Ryan Ltd., Bond Counsel to the City ( Bond Counsel ), based upon an analysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Series A Bonds is excludable from gross income for federal income tax purposes 7

under Section 103 of the Internal Revenue Code of 1986 (the Code ). Bond Counsel is of the further opinion that interest on the Series A Bonds is not an item of tax preference for the purpose of calculating the alternative minimum tax imposed on individuals and corporations. Interest on the Series A Bonds will, however, be included in the calculation of adjusted current earnings for the purpose of computing the alternative minimum tax imposed on corporations. Bond Counsel expresses no opinion regarding any other federal tax consequences arising with respect to the ownership or disposition of, or the accrual or receipt of interest on, the Series A Bonds. The Code imposes various requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series A Bonds. Failure to comply with these requirements may result in interest on the Series A Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series A Bonds. The City has covenanted to comply with such requirements to ensure that interest on the Series A Bonds will not be includible in federal gross income. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel is also of the opinion that, under existing law, interest on the Series A Bonds is free from taxation by the State or any political subdivision or other instrumentality of the State. Bond Counsel has not opined as to other Rhode Island tax consequences arising with respect to the Series A Bonds. Prospective Bondholders should be aware, however, that the Series A Bonds may be included in the measure of Rhode Island estate taxes, and the Series A Bonds and the interest thereon may be included in the measure of certain Rhode Island corporate and business taxes. Bond Counsel has not opined as to the taxability of the Series A Bonds or the income therefrom under the laws of any state other than Rhode Island. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX C hereto. Except as described herein, Bond Counsel will express no opinion regarding the federal income tax consequences resulting from the acquisition of, ownership of, receipt or accrual of interest on, or disposition of the Series A Bonds. Prospective purchasers of the Series A Bonds should be aware that the ownership of the Series A Bonds may result in other collateral federal tax consequences, including (without limitation) (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase or carry Series A Bonds or, in the case of a financial institution, that portion of the owner s interest expenses allocable to interest on the Series A Bonds, (ii) the reduction of the loss reserve deduction for property and casualty insurance companies by fifteen percent (15%) of certain items, including interest on the Series A Bonds, (iii) the inclusion of interest on the Series A Bonds in the earnings of certain foreign corporations doing business in the United States for purposes of a branch profits tax, (iv) the inclusion of interest on the Series A Bonds in passive income subject to federal income taxation of certain Subchapter S corporations with Subchapter C earnings and profits at the close of the taxable year, (v) the inclusion in modified adjusted gross income of interest on the Series A Bonds by recipients of certain Social Security and Railroad Retirement benefits, and (vi) the inclusion of interest on the Series A Bonds in the modified adjusted gross income of certain persons disposing of property financed with federally subsidized indebtedness (mortgage credit certificates and single family mortgage loans). Original Issue Discount Certain of the Series A Bonds (the Discount Bonds ) may be offered and sold to the public at an original issue discount (the OID ). The OID is the excess of the stated redemption price at maturity (the face amount) over the issue price of such Series A Bonds. The issue price of a Discount Bond is the initial offering price to the public (other than to bond houses, brokers or similar persons acting in the capacity of underwriters or wholesalers) at which a substantial amount of the Discount Bonds of the same maturity are sold pursuant to that offering. For federal income tax purposes, OID accrues to the holder of a Discount Bond over the period to maturity at a constant yield as described in Income Tax Regulation Section 1.1272-1(b). With respect to an initial purchaser of a Discount Bond at its issue price, the portion of OID that accrues during the period the purchaser owns the Discount Bond (i) is interest excludable from the purchaser s gross income for federal income tax purposes to the same extent and subject to the same considerations discussed above as other interest on the Series A Bonds, and (ii) is added to the purchaser s tax basis for purposes of determining gain or loss on the maturity redemption, prior sale or other disposition of that Discount Bond. Holders of Discount Bonds should consult their own tax advisors as to the determination for federal income tax purposes of the amount of OID properly accruable each year with respect to the Discount Bond and as to other federal consequences and any state or local tax aspects of owning Discount Bonds. 8

Bond Premium Under the Code, a purchaser (other than a purchaser who holds such Bond as inventory, stock in trade or for sale to customers in the ordinary course of business) who acquires a Bond (a Premium Bond ) for a price in excess of (i) in the case of a Discount Bond, its initial offering price plus accrued OID to the date of purchase (as described in the preceding paragraph) or (ii) in the case of any other non-callable Bond, its stated redemption value at maturity, has acquired the Bond with bond premium. In the case of Bonds that are callable at the Applicable Call Date (defined below) at a price less than the holder s acquisition price, the bond premium is the excess of the holder s acquisition price over the redemption price on the Applicable Call Date. The Applicable Call Date is the first date on which the Bond may be redeemed for a redemption price less than the holder s acquisition price. Bond premium is amortized over the remaining term of the Premium Bond for federal income tax purposes. In the case of callable Premium Bonds acquired at a price in excess of par, the bond premium will be amortizable to the Applicable Call Date. For purposes of calculating amortizable bond premium only, a Premium Bond not redeemed on the Applicable Call Date shall be treated as if sold and reacquired on such date at the optional redemption price. The purchaser of the Premium Bond is required to decrease his adjusted basis in the Premium Bond by the amount of amortizable bond premium attributable to each taxable year during the amortization period. The amount of amortizable bond premium attributable to each taxable year is determined actuarially at a constant interest rate. The amortizable bond premium attributable to a taxable year is not deductible for federal income tax purposes. Purchasers of Premium Bonds should consult their own tax advisors with respect to the precise determination for federal income tax purposes of the treatment of bond premium upon sale, redemption or other disposition of Premium Bonds and with respect to the state and local consequences of owning and disposing of Premium Bonds. Other Tax Considerations Prospective Bondholders should be aware that from time to time legislation is or may be proposed which, if enacted into law, could result in interest on the Series A Bonds being subject directly or indirectly to federal income taxation, or otherwise prevent Bondholders from realizing the full benefit provided under current federal tax law of the exclusion of interest on the Series A Bonds from gross income. To date, no such legislation has been enacted into law. However, it is not possible to predict whether any such legislation will be enacted into law. Further, no assurance can be given that any pending or future legislation, including amendments to the Code, if enacted into law, or any proposed legislation, including amendments to the Code, or any future judicial, regulatory or administrative interpretation or development with respect to existing law, will not adversely affect the market value and marketability of, or the tax status of interest on, the Series A Bonds. Prospective Bondholders are urged to consult their own tax advisors with respect to any such legislation, interpretation or development. Although Bond Counsel is of the opinion that interest on the Series A Bonds is excludable from gross income for federal income tax purposes and is exempt from Rhode Island income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Series A Bonds may otherwise affect a Bondholder s federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondholder or the Bondholder s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences, and holders of the Series A Bonds should consult with their own tax advisors with respect to such consequences. Series B Bonds Federally Taxable Bonds In the opinion of Bond Counsel, under existing law, interest on the Series B Bonds is included in gross income for federal income tax purposes. Bond Counsel expresses no opinion regarding any other federal tax law consequences related to the ownership or disposition of, or accrual or receipt of interest on, the Series B Bonds. Bond Counsel is also of the opinion that, under existing law, interest on the Series B Bonds is free from taxation by the State or any political subdivision or other instrumentality of the State. Bond Counsel has not opined as to other Rhode Island tax consequences arising with respect to the Series B Bonds. Prospective Bondholders should be aware, however, that the Series B Bonds may be included in the measure of Rhode Island estate taxes, and the Series B Bonds and the interest thereon may be included in the measure of certain Rhode Island corporate and business taxes. Bond Counsel has not opined as to the taxability of the Series B Bonds or the income therefrom under the laws of any state other than Rhode Island. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX B hereto. 9

The following discussion summarizes certain U.S. federal tax considerations generally applicable to Beneficial Owners of the Series B Bonds that acquire their Series B Bonds in the initial offering. The discussion below is based upon laws, regulations, rulings, and decisions in effect and available on the date hereof, all of which are subject to change, possibly with retroactive effect. Prospective investors should note that no rulings have been or are expected to be sought from the IRS with respect to any of the U.S. federal income tax consequences discussed below, and no assurance can be given that the IRS will not take contrary positions. Further, the following discussion does not address all U.S. federal income tax consequences applicable to any given investor, nor does it address the U.S. federal income tax considerations applicable to investors who may be subject to special taxing rules (regardless of whether or not such persons constitute U.S. Holders), such as certain U.S. expatriates, banks, real estate investment trusts, regulated investment companies, insurance companies, tax-exempt organizations, dealers or traders in securities or currencies, partnerships, S corporations, estates and trusts, investors who hold their Series B Bonds as part of a hedge, straddle or an integrated or conversion transaction, or investors whose functional currency is not the U.S. dollar. Furthermore, the following discussion does not address (i) alternative minimum tax consequences or (ii) the indirect effects on persons who hold equity interests in a Beneficial Owner of Series B Bonds. In addition, this summary generally is limited to investors who become Beneficial Owners of Series B Bonds pursuant to the initial offering for the issue price that is applicable to such Series B Bonds (i.e., the price at which a substantial amount of such Series B Bonds is first sold to the public) and who will hold their Series B Bonds as capital assets within the meaning of the Code. As used herein, U.S. Holder means a Beneficial Owner of a Series B Bond who for U.S. federal income tax purposes is an individual citizen or resident of the United States, a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any State thereof (including the District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust with respect to which a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that has made a valid election under Treasury Regulations to be treated as a domestic trust). As used herein, Non-U.S. Holder generally means a Beneficial Owner of a Series B Bond (other than a partnership) who is not a U.S. Holder. If an entity classified as a partnership for U.S. federal income tax purposes is a Beneficial Owner of Series B Bonds, the tax treatment of a partner in such partnership generally will depend upon the status of the partner and upon the activities of the partnership. Partners in such partnerships should consult their own tax advisors regarding the tax consequences of an investment in the Series B Bonds (including their status as U.S. Holders or Non-U.S. Holders). U.S. Holders Interest. Stated interest on the Series B Bonds generally will be taxable to a U.S. Holder as ordinary interest income at the time such amounts are accrued or received, in accordance with the U.S. Holder s method of accounting for U.S. federal income tax purposes. Original issue discount will arise for U.S. federal income tax purposes in respect of any Series B Bond if its stated redemption price at maturity exceeds its issue price by more than a de minimis amount (as determined for tax purposes). For any Series B Bonds issued with original issue discount, the excess of the stated redemption price at maturity of that Series B Bond over its issue price will constitute original issue discount for U.S. federal income tax purposes. The stated redemption price at maturity of a Series B Bond is the sum of all scheduled amounts payable on such Series B Bond other than qualified stated interest. U.S. Holders of Series B Bonds generally will be required to include any original issue discount in income for U.S. federal income tax purposes as it accrues, in accordance with a constant yield method based on a compounding of interest (which may be before the receipt of cash payments attributable to such income). Under this method, U.S. Holders of Series B Bonds issued with original issue discount generally will be required to include in income increasingly greater amounts of original issue discount in successive accrual periods. Premium generally will arise for U.S. federal income tax purposes in respect of any Series B Bond to the extent its issue price exceeds its stated principal amount. A U.S. Holder of a Series B Bond issued at a premium may make an election, applicable to all debt securities purchased at a premium by such U.S. Holder, to amortize such premium, using a constant yield method over the term of such Series B Bond. Disposition of the Series B Bonds. Unless a nonrecognition provision of the Code applies, the sale, exchange, redemption, retirement (including pursuant to an offer by the State), reissuance or other disposition of a Series B Bond will be a taxable event for U.S. federal income tax purposes. In such event, a U.S. Holder of a Series B 10

Bond generally will recognize gain or loss equal to the difference between (i) the amount of cash plus the fair market value of property received (except to the extent attributable to accrued but unpaid interest on the Series B Bond which will be taxed in the manner described above under Interest ) and (ii) the U.S. Holder s adjusted tax basis in the Series B Bond (generally, the purchase price paid by the U.S. Holder for the Series B Bond, increased by the amount of any original issue discount previously included in income by such U.S. Holder with respect to such Series B Bond and decreased by any payments previously made on such Series B Bond, other than payments of qualified stated interest, or decreased by any amortized premium). Any such gain or loss generally will be capital gain or loss. Defeasance or material modification of the terms of any Series B Bond may result in a deemed reissuance thereof, in which event a Beneficial Owner of the defeased Series B Bonds generally will recognize taxable gain or loss equal to the difference between the amount realized from the sale, exchange or retirement (less any accrued qualified stated interest which will be taxable as such) and the Beneficial Owner s adjusted tax basis in the Series B Bond. In the case of a non-corporate U.S. Holder of the Series B Bonds, the maximum marginal U.S. federal income tax rate applicable to any such gain may be lower than the maximum marginal U.S. federal income tax rate applicable to ordinary income if such U.S. Holder s holding period for the Series B Bonds exceeds one year. The deductibility of capital losses is subject to limitations. Medicare Tax on Unearned Income. The Health Care and Education Reconciliation Act of 2010 (P.L. 111-152) requires certain U.S. Holders that are individuals, estates or trusts to pay an additional 3.8% tax on, among other things, interest and gains from the sale or other disposition of the Series B Bonds for taxable years beginning after December 31, 2012. U.S. Holders that are individuals, estates or trusts should consult their tax advisors regarding the effect, if any, of this legislation on their ownership and disposition of the Series B Bonds. Non-U.S. Holders The following discussion applies only to non-u.s. Holders. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to non-u.s. Holders in light of their particular circumstances. For example, special rules may apply to a non-u.s. Holder that is a controlled foreign corporation or a passive foreign investment company, and, accordingly, non-u.s. Holders should consult their own tax advisors to determine the United States federal, state, local and other tax consequences of holding the Series B Bonds that may be relevant to them. Interest. Subject to the discussion below under the heading Information Reporting and Backup Withholding, payments of principal of, and interest on, any Series B Bond to a Non-U.S. Holder, other than a bank which acquires such Series B Bond in consideration of an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business, generally will not be subject to any U.S. withholding tax provided that the Beneficial Owner of the Series B Bond provides a certification completed in compliance with applicable statutory and regulatory requirements, which requirements are discussed below under the heading Information Reporting and Backup Withholding, or an exemption is otherwise established. Disposition of the Series B Bonds. Subject to the discussion below under the heading Information Reporting and Backup Withholding, any gain realized by a Non-U.S. Holder upon the sale, exchange, redemption, retirement (including pursuant to an offer by the State), reissuance or other disposition of a Series B Bond generally will not be subject to U.S. federal income tax, unless (i) such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United States; or (ii) in the case of any gain realized by an individual Non-U.S. Holder, such holder is present in the United States for 183 days or more in the taxable year of such sale, exchange, redemption, retirement (including pursuant to an offer by the State), reissuance or other disposition and certain other conditions are met. U.S. Federal Estate Tax. A Series B Bond that is held by an individual who at the time of death is not a citizen or resident of the United States will not be subject to U.S. federal estate tax as a result of such individual s death, provided that at the time of such individual s death, payments of interest with respect to such Series B Bond would not have been effectively connected with the conduct by such individual of a trade or business within the United States. 11

Information Reporting and Backup Withholding U.S. Holders and non-u.s. Holders Interest on, and proceeds received from the sale of, a Series B Bond generally will be reported to U.S. Holders, other than certain exempt recipients, such as corporations, on IRS Form 1099. In addition, a backup withholding tax may apply to payments with respect to the Series B Bonds if the U.S. Holder fails to furnish the payor with a correct taxpayer identification number or other required certification or fails to report interest or dividends required to be shown on the U.S. Holder s federal income tax returns. In general, a non-u.s. Holder will not be subject to backup withholding with respect to interest payments on the Series B Bonds if such non-u.s. Holder has certified to the payor under penalties of perjury (i) the name and address of such non-u.s. Holder and (ii) that such non-u.s. Holder is not a United States person, or, in the case of an individual, that such non-u.s. Holder is neither a citizen nor a resident of the United States, and the payor does not know or have reason to know that such certifications are false. However, information reporting on IRS Form 1042-S may still apply to interest payments on the Series B Bonds made to non-u.s. Holders not subject to backup withholding. In addition, a non-u.s. Holder will not be subject to backup withholding with respect to the proceeds of the sale of a Series B Bond made within the United States or conducted through certain U.S. financial intermediaries if the payor receives the certifications described above and the payor does not know or have reason to know that such certifications are false, or if the non-u.s. Holder otherwise establishes an exemption. Non-U.S. Holders should consult their own tax advisors regarding the application of information reporting and backup withholding in their particular circumstances, the availability of exemptions and the procedure for obtaining such exemptions, if available. Backup withholding is not an additional tax, and amounts withheld as backup withholding are allowed as a refund or credit against a holder s federal income tax liability, provided that the required information as to withholding is furnished to the IRS. The foregoing summary is included herein for general information only and does not discuss all aspects of U.S. federal income taxation that may be relevant to a particular Beneficial Owner of Series B Bonds in light of the Beneficial Owner s particular circumstances and income tax situation. Prospective investors are urged to consult their own tax advisors as to any tax consequences to them from the purchase, ownership and disposition of Series B Bonds, including the application and effect of state, local, foreign and other tax laws. Circular 230 Disclaimer The preceding tax matters discussion related to the Series B Bonds is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed under federal tax law in connection with the Series B Bonds. Such discussion was written to support the promotion or marketing of the Series B Bonds. Each purchaser of the Series B Bonds should seek advice based on such purchaser s particular circumstances from an independent tax advisor. CONTINUING DISCLOSURE In order to assist the Underwriters in complying with Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission (the "Rule"), the City will covenant (a) for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the City by not later than 9 months after the end of each fiscal year commencing with the fiscal year ending June 30, 2014 (the "Annual Report"), to provide notices of the occurrence of certain enumerated events, if material, and to provide notice of failure to provide the Annual Report. The covenants will be contained in a Continuing Disclosure Certificate, the proposed form of which is provided in APPENDIX D. Except as noted below, in the last five years, the City has complied in all material respects with all continuing disclosure agreements made by it in accordance with the Rule. In connection with the issuance of the City of Providence $13,000,000 General Obligation Taxable Bonds 2001 Series B, the City is required to provide certain financial information and operating data relating to the City by not later than 210 days after the end of each fiscal year. Due to an administrative oversight, the FY09 Annual Report was filed on January 29, 2010 and the FY10 Annual Report was filed on January 31, 2011. The Annual Reports were due January 26, 2010 and January 26, 2011, respectively. The City has implemented procedures to ensure timely filing in the future. 12

LITIGATION There is not now pending or, to the knowledge of the City, threatened, any litigation (a) restraining or enjoining the issuance or delivery of the Bonds, (b) questioning or affecting the validity of the Bonds or the proceedings and authority under which they are to be issued, (c) contesting the powers of the City to issue or sell the Bonds, or (d) contesting the corporate existence or boundaries of the City. For additional information on pending litigation, see APPENDIX A Information Relating to the City of Providence, Rhode Island under the heading LITIGATION AND OTHER MATTERS. CERTAIN LEGAL MATTERS All legal matters incidental to the authorization, issuance, sale and delivery of the Bonds are subject to the approval of Moses Afonso Ryan Ltd., Providence, Rhode Island, Bond Counsel, whose approving opinion substantially in the form appended hereto as APPENDIX C will be delivered with the issuance of the Bonds. Certain legal matters will be passed upon for the Underwriter by its counsel, Harrington & Vitale Ltd, Providence, Rhode Island. FINANCIAL ADVISOR The City has retained FirstSouthwest (the Financial Advisor ) to serve as its financial advisor in connection with the issuance of the Bonds. The Financial Advisor has not independently verified any of the information contained in this Official Statement and makes no guarantee as to its completeness or accuracy. The Financial Advisor s fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds, and receipt by the City of payment therefor. The City may engage the Financial Advisor to perform other services, including without limitation, providing certain investment services with regard to the investment of Bond proceeds. RATINGS Moody s Investors Service, Inc. ( Moody s ) and Standard & Poor s ( S&P ) have assigned the Series 2014A and 2014B Bonds ratings of Baa1 and BBB respectively. Such ratings reflect only the views of Moody s and S&P, and any desired explanation of the significance of such rating should be obtained from Moody s and S&P. Generally, a rating agency bases its ratings on the information and materials furnished it and on investigations, studies, and assumptions by the rating agency. There is no assurance that a particular rating will apply for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing the rating, circumstances so warrant. The Underwriters have undertaken no responsibility either to bring to the attention of the holders of the Bonds any proposed revision or withdrawal of the ratings of the Bonds or to oppose any such proposed revision or withdrawal. Any downward revision or withdrawal of such ratings could have an adverse effect on the market price of the Bonds. Such ratings should not be taken as a recommendation to buy or hold the Bonds. UNDERWRITING The Bonds are being purchased for reoffering by Raymond James & Associates, Inc., as representative of the Underwriters, at an aggregate purchase price of par plus a net premium of $ less underwriters discount of $. The Underwriters may offer and sell the Bonds to certain dealers and others at prices other than the initial offering price. The offering price may be changed from time to time by the Underwriters. MISCELLANEOUS All quotations from and summaries and explanations of laws herein do not purport to be complete, and reference is made to said laws for full and complete statements of their provisions. 13

This Official Statement is submitted only in connection with the sale of the Bonds by the City and may not be reproduced or used in whole or in part for any other purpose. CITY OF PROVIDENCE, RHODE ISLAND By: James J. Lombardi III, Treasurer Dated:, 2014 By: Lawrence J. Mancini, Finance Director 14

APPENDIX A INFORMATION RELATING TO THE CITY OF PROVIDENCE, RHODE ISLAND

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APPENDIX A INFORMATION RELATED TO THE CITY OF PROVIDENCE General The City of Providence, Rhode Island (the City or Providence ) is the capital of the State of Rhode Island (the State ) and is located at the head of Narragansett Bay on the Providence River. It is the major population, industrial, and commercial center of the State. As the capital, Providence is the center of State government. Providence occupies a total land area of 18.1 square miles and an additional 1.9 square miles of water. Situated on the Boston-Washington Interstate 95 corridor, with proximity to multi-billion dollar markets and multi-million population centers, residents and businesses have ready access to all major forms of transportation, including AMTRAK, Providence & Worcester Railroad, TF Green International Airport, the Port of Providence, and Interstates 95 and 195. Multi-modal transportation has most recently been expanded with the opening of Interlink, increasing commuter rail service connections with the Massachusetts Bay Transit Authority. The City is ranked first in population among the thirty-nine cities and towns in Rhode Island. The United States Census Bureau reported that the population in 2010 was 178,042, an increase of 2.5% over the population in 2000 of 173,618. According to the School Department, as of June 30, 2013, there were 23,746 students attending Providence public schools. There are a number of private and parochial schools, as well as public and private institutions of higher learning, in Providence, including Brown University, Providence College, the Rhode Island School of Design, Johnson & Wales University, the New England Institute of Technology, Rhode Island College, and the University of Rhode Island Providence Center. Several industrial parks, built as part of major urban renewal projects in recent years, are located in Providence. The Port of Providence has, with its neighbor, City of East Providence, over 10 miles of commercial waterfront with 25 wharves and docks for medium and deep draft vessels. The channel has been deepened to 40 feet to accommodate larger vessels. Rail service and transit sheds are accessible to ships docking in the Port. The cargo entering and leaving the Port of Providence includes principally gasoline, fuel and diesel oil, cement and lumber. Government The City operates under a Home Rule Charter adopted in November, 1980, providing for a Mayor-Council form of government with a fifteen-member City Council. The Charter became fully effective on January 3, 1983. The Mayor is elected by the voters of the City for a four-year term of office. The Mayor supervises preparation of the annual City budget which is presented to the City Council for its approval. The Mayor is authorized to approve or veto any ordinance passed by the City Council. The Mayor also appoints all department heads and most of the members of the agencies, boards, and commissions which directly affect City operations. The Mayor also serves ex-officio on many of these bodies. Mayor Angel Taveras took the oath of office as the 37 th Mayor of the City of Providence, on January 3, 2011. Mayor Taveras announced that he will focus his administration on job creation and economic development, city services, public safety, public education, and on transparency and fiscal responsibility. Mayor Taveras is a graduate of Harvard University, and a graduate of Georgetown University School of Law. Prior to becoming Mayor, he practiced law at Brown Rudnick Berlack Israels LLP and Taveras Law. He is also a former judge in the Providence Housing Court. The fifteen members of the City Council are elected for a term of four years concurrent with that of the Mayor. One member is elected from each of the City's fifteen wards. The Council passes ordinances within the scope of powers defined in the Charter and its major responsibility is passage of the City budget. The City Council may amend or alter the budget before passage, subject to the requirement of Rhode Island law that the budget be balanced when adopted. The Mayor also has lineitem veto powers. Under the City Charter, the City has a Finance Department headed by a Finance Director who is appointed by the Mayor with the approval of the City Council. The Finance Director has charge of the administration of the financial affairs of the City, with specific responsibility for assessing, collecting and authorizing the disbursement of all City money, for preparing and administering the annual City Budget, and for accounting of all financial transactions. The following divisions are located within the finance department: assessment, collections and accounting. The City's Finance Director is Lawrence J. Mancini. Mr. Mancini is also the Acting Director of Administration for the City. Mr. Mancini was appointed Director of Finance effective October 7, 2013. Mr. Mancini has enjoyed a 27-year

career with the City of Providence, holding various and significant finance, fiscal and accounting positions. He has also held positions as the City s Acting Finance Director and as the Accounting Administrator and Director of Administration in the Department of Planning and Development as well as Deputy Tax Collector. He was most recently the Deputy Finance Director and Budget Officer. In his capacity as Deputy Director, he had the primary responsibility for the City s municipal budget, as well as developing executive-level budget strategies and solutions to complex budgetary issues. Additionally, Mr. Mancini oversaw daily cash-management and the development and execution of monthly cash-flow, financial, and operational monitoring and reporting. He also oversaw the City s annual audit. Mr. Mancini participates in all major policy undertakings and decisions within the Finance Department and enjoys a solid and highly-esteemed reputation amongst government leaders, colleagues and elected officials. Prior to joining the City of Providence in 1987, Mr. Mancini held Principal and Senior Accountant positions with 2 well-established local Certified Public Accountant firms in Rhode Island, with significant and diversified accounting and tax related duties. He holds a Bachelor of Science in Business Administration, with a major concentration in accounting, from Bryant University. The City Treasurer is elected by the City Council, with duties relating to reviewing the decisions of the Controller as to the sufficiency of funds before approving payment of any bill, payroll or other claim, demand or charge against the City; having custody of all public funds belonging to or under the control of the City, or any office, department or agency of city government; and issuing notes and bonds of the City. The Treasurer does not set policy or make decisions about the day to day operations of the City or its fiscal policy. The position of Treasurer is a part time position in the City. The City Treasurer is James J. Lombardi III. Mr. Lombardi is both an attorney and certified public accountant. He has been employed by the City since 1999. From 1999 to 2011, he served as the Internal Auditor for the City and in 2011 was appointed Treasurer. Mr. Lombardi was appointed by and reports to the City Council. Prior to his employment with the City, Mr. Lombardi worked as a field agent for the Internal Revenue Service. He also has his own law practice. He holds a Bachelors degree from Rhode Island College, and a Juris Doctor Degree from Southern New England School of Law. MUNICIPAL SERVICES The City provides municipal services including police, fire, sanitation, parks and recreation through various City departments. Although elementary and secondary education expenditures are the responsibility of the City, the public school system is administered by a separately appointed School Board. Certain other services are provided by related entities such as the Providence Water Supply Board, the Providence Housing Authority, the Providence Public Buildings Authority, and the Providence Redevelopment Agency. The State and its agencies, and not the City, are responsible for providing service programs such as Medicaid, aid to families with dependent children, general public assistance, public health, public transportation, corrections, and sewage treatment. City School System The School Department of the City is administered by a School Board or School Committee (the "School Board") of nine members. Each member is appointed by the Mayor, with approval of the City Council, and serves for a term of from one to three years. Within the limits of the total amount appropriated by the City Council for the purposes of the School Department, the School Board has the authority and responsibility for the provision of all public school services, for the establishment of the classification and compensation of personnel, and for the expenditure of all school funds. The School Board initiates a school budget; provides for the operation and maintenance of the schools; passes on appointments and promotion of teachers and other School Department personnel; and determines matters of curriculum and special education and services. The School Board appoints the Superintendent of Schools who acts as its chief administrative agent. There are 22 elementary schools, one annex serving second through fifth grade students, six middle schools, eight high schools, two charter schools, and one center servicing students with significant disabilities. School Board policy reserves 80% of seats for neighborhood students, but parental choice and programmatic needs require transportation for students who live longer distances from school. School enrollment was 23,603 students as of the school year ending June 2014. The Providence school system is fiscally dependent on the City. The budget is prepared by the Superintendent and presented to the School Board. Annually, at the time and in the manner provided by law for all City departments, the School Board submits to the Finance Director of the City an itemized budget, including an itemized estimate of the anticipated revenues and the proposed expenditures necessary to meet the financial needs of the School Department, together with such other supporting information as the Finance Director may direct. The Finance Director, under the supervision of the Mayor, A-2

may revise the estimates as submitted by the School Board, and the Mayor presents his recommended budget for the operation of the School Department to the City Council in the same manner as required by law for other City departments. The City Council acts on the School Department budget in the same manner and to the same extent it acts on the budgets of the other City departments. The Department of Finance of the City is responsible for insuring that no expenditures are made or obligations created by the School Board in excess of the amount appropriated, as may be amended by the City Council. Enrollment figures for the past five years and projected enrollments for the next five fiscal years are shown in the chart displayed below: Actual Projected State School Aid 2009 10... 23,710 2014 15... 23,548 2010 11... 23,500 2015 16... 23,676 2011 12... 23,520 2016 17... 23,872 2012 13... 23,548 2013 14... 23,603 2017 18... 23,384 2018 19... 23,454 Pursuant to Rhode Island General Laws Sections 16-7-15 to 16-7-34 et seq., as amended, the State provides school operations assistance aid to each municipality and school district in the State, subject to annual appropriation by the General Assembly. The General Assembly substantially changed the funding formula for school operations beginning in fiscal year 2012. Under the existing program the City s School Department received $197,844,345 in fiscal year 2013. The City expects to receive $206,088,489 in fiscal year 2014 and $213,857,625 in fiscal year 2015. The City expects State School Aid levels to continue to increase under the new formula. For projects approved by the voters after June 30, 2003, the cost of interest on any bond will be reimbursed as an eligible project cost only if the bonds for these projects are issued through the Rhode Island Health and Educational Building Corporation (RIHEBC). School construction aid attributable to projects financed through RIHEBC bonds is paid by the State directly to the trustee for such RIHEBC bonds and is not directly available to the City for other purposes. Furthermore, if the City defaults in making any payment due to the RIHEBC trustee in support of any RIHEBC bond, any State aid in respect of other school housing projects may be redirected by the State to the trustee for the RIHEBC bond. The legislation authorizing State School Construction Aid is subject to future change and all State aid is subject to annual appropriation by the Rhode Island General Assembly. For the fiscal year ended June 30, 2013, the City received $29,026,384 in school construction aid and expects to receive $24,849,401 in fiscal year 2014 and $23,420,340 in fiscal year 2015. Pursuant to Rhode Island General Laws Section 16-7-41(d), any net interest savings resulting from the issuance of refunding bonds issued by any local community in support of school housing projects for the community shall be allocated between the community and the State, by applying the applicable school housing aid ratio at the time of issuance of the refunding bonds, calculated pursuant to section 16-7-39, that would otherwise apply in connection with school housing projects of the community; provided however, that for any refundings that occur between July 1, 2013 and December 31, 2015, the community shall receive eighty percent (80%) of the total savings and the State shall receive twenty percent (20%). In connection with any refunding bond issue, school housing project costs shall include the cost of interest payments on such refunding bonds, if the cost of interest payments was included as a school housing cost for the bonds being refunded. In addition, school housing projects costs in connection with any such refunding bond issue shall include bond issuance costs incurred in connection with the issuance. The benefits of this law are available only if the net present value savings resulting from the refunding is at least three percent (3%) of the refunded bond issue. The Providence Public Buildings Authority has lease revenue bonds for school projects financed through RIHEBC subject to the pledge of school housing aid. School Department Finances Set forth below is a summary of the School Department revenues and expenditures for the fiscal years ended June 30, 2011 through 2013 and budgeted figures for fiscal years 2014 and 2015. A-3

Actual 2011 Actual 2012 Actual 2013 Budgeted 2014 Budgeted 2015 City Appropriated $124,896,611 $124,896,611 $124,896,612 $124,896,611 $124,896,611 Medicaid Reimbursements 3,744,900 4,104,188 4,234,280 4,450,000 4,450,000 State Grants 176,490,621 177,121,395 197,844,346 206,088,489 213,857,625 Departmental Revenues 2,308,882 1,495,895 1,395,743 1,985,000 1,985,000 Total Revenue $307,441,014 $307,618,089 $328,370,981 $337,420,100 $345,189,236 Total Expenditures $307,441,014 $307,618,089 $328,370,981 $337,420,100 $345,189,236 The School Fund is set up as a separate fund accountable for appropriations disbursed to it from the General Fund of the City and revenue receipts specifically pertaining to school activities. Under this system of accounting, any excess of revenues over expenditures reverts to the General Fund; therefore, the School Fund has no un-appropriated fund balance. Other Municipal Services Providence Water Supply Board and Water System Providence Water Supply Board ("Providence Water"), supplies water to the cities of Providence and Cranston and the Towns of Johnston and North Providence on a retail basis. In addition, water is sold on a wholesale basis to the Cities of East Providence and Warwick, the Towns of Lincoln, Smithfield and Johnston and the Village of Greenville, and, through the Kent County Water Authority, part of the City of Warwick and the Towns of West Warwick, East Greenwich, North Kingstown, Coventry, and Scituate. In addition, the towns of Barrington, Bristol and Warren are presently on the system and serviced through the Bristol County Water Authority. In total, approximately 60% of the State of Rhode Island s population is served by Providence Water. Providence Water obtains its water supply from the Scituate Reservoir and five tributary reservoirs. The entire watershed covers 93 square miles and Providence Water owns 26.8 square miles of land outright. Providence Water, therefore, controls approximately 28% of the land in the watershed, land that is primarily adjacent to the major water bodies. The system has an output capacity of 144 million gallons per day ( MGD ). Providence Water is regulated by the Public Utility Commission. Set forth below is a summary statement of revenues and expenditures of Providence Water for the fiscal years 2011- through 2013 and budgeted figures for fiscal years 2014 and 2015. Actual Actual Actual Budget Budget 2011 2012 2013 2014 2015 Operating Revenues $ 64,017,000 $ 61,727,000 $ 61,070,000 $ 69,660,094 $ 69,962,287 Operating Expenses 46,054,000 49,595,000 50,305,000 46,653,286 46,399,563 Operating Income 17,963,000 12,132,000 10,765,000 23,006,808 23,562,724 Non-Operating Revenues (1) 544,000 494,000 2,397,000 494,070 235,889 Non-Operating Expenses 1,429,000 1,486,000 1,629,000 1,650,000 1,471,652 Excess (Deficiency) of Income $ 17,078,000 $ 11,140,000 $ 11,533,000 $ 21,850,878 $ 22,326,961 Over Expenses (1) Restricted Revenues The table below sets out a five year summary of outstanding Enterprise Fund water debt and lease appropriation obligations for fiscal years 2009-2013 (000's omitted). A-4

2009 2010 2011 2012 2013 Safe Drinking Water - CWFA 2001 $ 1,789 $ 1,678 $ 1,563 $ 1,444 $ 1,320 Safe Drinking Water - CWFA 2002 - - - - - Safe Drinking Water - CWFA 2005 5,108 4,314 3,500 2,663 1,802 Safe Drinking Water - CWFA 2008 35,000 35,000 33,702 32,376 31,014 Safe Drinking Water - CWFA 2010-13,250 13,249 12,124 10,990 Clean Water - CWFA 2012 - - - 3,000 2,999 Clean Water - CWFA 2013 - - - - 4,200 Safe Drinking Water - CWFA 2013 - - - - 25,000 Providence Public Buildings Authority 1996 Lease Revenue Bond 1,675 1,057 996 882 761 RI Water Resources Board Corporate Lease Revenue Bond 990 - - - - Total $ 44,562 $ 55,299 $ 53,010 $ 52,489 $ 78,086 The City has $10,800,000 of authorized but unissued authority to issue water system revenue bonds. Public Safety The City's Public Safety Division is comprised of three departments: Police, Fire and Communications. The actual expenditures for fiscal years 2009-2013 and the budgeted figures for fiscal years 2014 and 2015 of each are set forth below: Fiscal Year Police Department Fire Department Communications Division 2009 $72,579,476 $68,320,798 $8,578,781 2010 68,160,000 65,475,000 8,819,881 2011 67,790,628 69,958,505 8,713,526 2012 61,565,525 63,076,750 8,891,879 2013 2014 2015 62,001,902 65,470,568 68,610,211 Source: City Finance Department. 67,419,778 67,775,182 70,177,001 8,641,820 8,759,395 8,590,942 Police Department The Police Department is authorized to have 448 police officers and 96 civilian employees in the fiscal year 2014 adopted budget and 448 police officers and 104 civilian employees in the fiscal year 2015 budget. Fire Department The Fire Department is authorized to have a force of 484 sworn personnel and 23 civilian employees in the fiscal year 2014 adopted budget and 486 sworn personnel and 23 civilian employees in the fiscal year 2015 adopted budget. There are 14 fire stations, 23 companies, 6 rescue units, a carpenter shop, an automotive division, a fire prevention division and a training division. Communications Division The Communications Division has 69 personnel in the fiscal year 2014 adopted budget and 67 in the 2015 adopted budget. Its role is to manage, control, maintain, operate, and service all communications systems for all City departments, except the School Department. Public Works The City's Public Works Department has the primary responsibility of maintaining all City streets, bridges, and sewer laterals, and conducting snow removal. Waste collection and processing is performed by outside contractors. There are 101 employees funded in the Public Works Department in the fiscal year 2014 adopted budget and 100 employees funded in A-5

the fiscal year 2015 budget. As of April 1, 2014, 95 positions are filled. The Public Works operating budget for fiscal year 2013 was $19,306,386 as compared to $18,163,000 in fiscal year 2012. The Department s budget for fiscal year 2014 is $18,964,730 and for fiscal year 2015 is $19,138,367. Recreation and Public Parks The Department of Parks and Recreation encompasses 100 neighborhood parks, 12 downtown parks, and Roger Williams Park totaling approximately 1,350 acres of land. The largest park, the 435 acre Roger Williams Park, features a zoo, a museum of natural history, a botanical center, indoor and outdoor entertainment venues, 10 miles of roads, and over 100 acres of ponds. The department s administrative and maintenance buildings are also located in Roger Williams Park. The neighborhood park system includes 47 ball fields, 61 playgrounds, 6 outdoor swimming pools, 10 water spray parks, and 9 recreation centers. Special facilities in the Providence park system include a downtown outdoor skating rink, a municipal golf course, and two municipal cemeteries. The Recreation Division, the Museum of Natural History, and the Zoo are the primary providers of public programs more than 200 per year in the department. In addition, the City s Arts Culture & Tourism Department works with parks to provide over 60 summer cultural performances in neighborhood parks. The Forestry Division of the department is responsible for the care and maintenance of the City s 26,000 street trees and the department s parks trees. In addition, this division plants approximately 500-600 new trees per year. There are 155 full time employees currently funded in the Parks and Recreation department. Depending on the season of the year, another 75-245 seasonal part-time employees are also hired to provide recreation support and to bolster peak season outdoor park maintenance services. The Parks and Recreation adopted budget for fiscal year 2014 is $14,010,687, an increase of almost 4% from the fiscal year 2013 budget of $13,498,205. The adopted budget for fiscal year 2015 is $13,847,788. Libraries The Providence Public Library offers many educational services to the citizens of Providence and the State. In addition, the Providence Community Library, a 501(c)(3) not-for-profit organization, manages the City s nine neighborhood libraries. Department of Planning and Development The Department of Planning and Development (the Department ) provides valuable services to many different constituencies in a variety of ways. One of the primary goals of the Department is to apply the expertise and experience of its professional staff to revitalize the City s neighborhoods and rejuvenate local commercial districts. The goal of the Department is to assist in the creation of new jobs by identifying and encouraging development initiatives, thereby stimulating the local economy and increasing the City s tax base. The Department administers a variety of federally funded programs that enhance efforts to improve the quality of life for its residents in the areas of housing, public infrastructure, public services, public facilities, and economic development. In fiscal year 2013, these entitlement programs totaled more than $7.5 million in funding targeted to providing opportunities for low and moderate income citizens on an individual and area basis, eliminating slums, blight, and providing for urgent community needs. The Department provides staff services to the Providence Redevelopment Agency ( PRA ), City Plan Commission ( CPC ), Historic District Commission ( HDC ), the Capital Center Commission ( CCE ), the Providence Public Buildings Authority ( PBA ), the Providence Economic Development Partnership ( PEDP ) and the Downcity Design Review Committee ( DRC ). In an effort to streamline the operation of the City s various affordable housing programs and expedite the service delivery to the housing non-profit organizations, the City consolidated its entire housing program under a newly created Housing Trust. The Housing Trust is administered by the PRA. The Housing Trust has assets of $2.2 million in cash, and $6 million in mortgages. These funds are used to address lead paint problems, to make housing repairs, to assist first time home buyers, to fund other programs to improve the quality of the City s housing stock, and provide residents with access to affordable housing. A-6

Other Related Entities Port of Providence Prior to September 28, 1994, the Port of Providence (the Port ) was a department of the City controlled by a Port Commission and a Port Director who operated and maintained the Port with 19 full-time employees. On September 28, 1994, the City entered into various agreements with ProvPort, a non-profit corporation established to purchase and manage the Port of Providence and the PRA, which financed ProvPort s acquisition of the Port facilities. The Port area has 25 wharves and docks and 6 berths, accommodating medium and deep draft vessels and more than 10 miles of commercial waterfront almost evenly divided between the cities of Providence and East Providence. Additional dock facilities are supplied by 2 private wharves, 23 private docks and a marina for pleasure craft. The facility is adjacent to Fields Point and adequately served by highway and rail connections. The wharf is a contiguous seawall consisting of 3,473 feet, and the facility includes a 750-ton container crane capability. In May 2003, ProvPort refinanced $17 million of outstanding certificates of participation and issued an additional $2.8 million of certificates of participation for dredging the Port s berths. The new issue that replaced the original debt will be paid off on the same date as was originally scheduled. Also, as part of the transaction, the City was repaid all moneys due from replenishing the debt service reserve account and providing additional security at the Port following September 11, 2001. Total debt service of the 2003 issue, including the additional $2.8 million for capital improvements and funds to repay the City, increased less than $40,000 over the life of the financing. In May of 2006, the PRA issued $6,857,571.15 in Certificates of Participation. This was based on a Tax Exemption Agreement with ProvPort for the period of September 24, 2004 through September 23, 2014, which provides for ProvPort to make in-lieu tax payments to the City based on a percentage of gross revenues. The bonds were issued to pay the City the present value of the in-lieu payments under the agreement. In October of 2010, the City received a $10.5 TIGER II grant from the US Department of Transportation to acquire two cargo cranes and barges to expand the capacity of the port. Providence Redevelopment Agency The Providence Redevelopment Agency ( PRA ) is an agency of the City and consists of five members appointed by the Mayor and two members of the City Council elected by the City Council. The PRA undertakes various redevelopment projects which are funded by the City. See Economic Development herein. The PRA had $86,382,071 of bonds, leases, certificates of participation, and notes outstanding as of June 30, 2013. The PRA s bonds, leases, certificates of participation, and notes are secured by, among other things, payments made by the City pursuant to various leases. The bonds, leases, certificates of participation, and notes are not obligations of the City. The obligation of the City to pay lease rentals is subject to annual appropriation (see also CITY INDEBTEDNESS Leases with Providence Redevelopment Agency ). Providence Public Buildings Authority In the 1987 session of the Rhode Island General Assembly, municipalities, including the City, were authorized to establish Public Buildings Authorities to finance certain capital projects. The Providence Public Buildings Authority ( PBA ) is a body corporate and politic, created pursuant to the Rhode Island Municipal Public Buildings Authorities Law, Chapter 50 of Title 45 of the General Laws of Rhode Island, as amended. Upon request of the Mayor and approval of the City Council, the PBA is generally authorized to acquire, construct, improve, equip, maintain, furnish, install, and operate public facilities and public equipment. The PBA had $361,214,254 in bonds outstanding as of June 30, 2013. In November 2013 the PBA refunded certain outstanding bonds for school purposes through the Rhode Island Health and Educational Building Corporation leaving $353,219,254 of PBA debt outstanding as of November 19, 2013, the date of delivery of the refunding bonds. The PBA s bonds are secured by, among other things, payments made by the City pursuant to various leases. The obligation of the City to pay lease rentals is subject to annual appropriation. The PBA's staff is supplemented by that of the Department of Planning and Development (see also CITY INDEBTEDNESS ). Population ECONOMIC CHARACTERISTICS The City is ranked first in population among the thirty-nine cities and towns in Rhode Island. The City experienced an increase of 4,424 inhabitants or 2.5% during the period from 2000 to 2010, from 173,618 to 178,042. The City is the A-7

economic center for the State. Set forth below is a listing of the number of inhabitants in the City for various years from 1970 to 2010. Source: U.S. Bureau of the Census Year Population 1970... 179,116 1980... 156,804 1990... 160,728 2000... 173,618 2010... 178,042 Unemployment The most recent labor market information summary prepared by the Rhode Island Department of Labor and Training indicates that seasonally unadjusted unemployment rates for the years 2009 through 2013, and monthly 2014 to date are as shown in the following tables: Annualized 2009 2010 2011 2012 2013 Providence 13.0 % 13.6 % 13.6 % 12.4 % 11.4 % Rhode Island 10.9 11.7 11.2 10.4 9.5 United States 9.3 9.6 8.9 8.1 7.4 Source: RI Department of Labor & Training Not Seasonally Adjusted 2014 Monthly Jan Feb Mar Apr City of Providence 11.7 % 10.7 % 10.7 % 9.5 % Rhode Island 10.1 9.4 9.1 7.8 United States 7.0 7.0 6.8 5.9 Source: RI Department of Labor & Training Not Seasonally Adjusted Employment As the economic center of Rhode Island, Providence is a focus for professional, commercial, and industrial enterprise conducted within the State. In 2011, according to the Department of Labor and Training, business in Providence provided 26.6% of all Rhode Island jobs. Providence provides the direct source of employment and income for an area that extends well beyond the City borders and the Providence metropolitan area. In the past two decades, the economic base of the City has shifted in a fashion consistent with national trends. Dramatic growth in the service industries especially in health, educational and business services and gradual suburbanization of manufacturing firms has caused the service sector to surpass manufacturing as a source of employment which historically had been the mainstay of the Providence economy. Private sector employment in Providence averaged 92,368 in 2012, the highest among all municipalities in the state of Rhode Island. Type of Employment The following is a listing of the various types of industry in the City compiled by the Rhode Island Department of Labor and Training in June 2013. A-8

Source: Rhode Island Department of Labor and Training, June 2013. Total # of Avg. Wage Units Empmnt. % of Covered Emp. Agriculture, Forestry, Fishing & Hunting * 1 * N/A % Mining * 1 * N/A Utilities $ 49,187,975 6 573 0.62 Construction 118,458,708 266 1,790 1.94 Manufacturing 169,196,665 254 4,240 4.59 Wholesale Trade 170,884,927 209 2,685 2.91 Retail Trade 153,653,164 622 6,777 7.34 Transportation & Warehousing 25,008,307 75 627 0.68 Information 229,624,847 152 3,153 3.41 Finance & Insurance 481,593,176 314 4,781 5.18 Real Estate & Rental & Leasing 62,318,627 189 1,408 1.52 Professional & Technical Services 461,888,796 903 6,303 6.82 Management of Companies and Enterprises 244,221,192 42 1,787 1.93 Administrative & Waste Services 203,862,900 304 7,251 7.85 Educational Services 579,327,570 112 11,302 12.24 Health Care & Social Assistance 1,345,759,315 609 25,405 27.50 Arts, Entertainment, & Recreation 22,442,068 56 916 0.99 Accommodations & Food Services 169,813,561 544 8,902 9.64 Other Service Except Public Admin 139,623,260 778 4,468 4.84 Unclassified Establishments * 4 * N/A TOTAL $ 4,626,865,058 5,441 92,368 100.00 % * Data not shown due to the possibility of identifying a specific employer. Economic Development In April 2013, Mayor Angel Taveras announced a 20-point economic development action plan, Putting Providence Back to Work. Just as actions were necessary to put the City on the path to long-term financial sustainability, actions are now being taken to lay the groundwork for a sustained recovery. The plan builds on Providence s competitive advantages: a knowledge economy anchored by best-in-class hospitals and universities, vibrant arts and cultural centers, a strong maritime industry, thriving small businesses in local neighborhood economies and a young workforce. The City is also making long-term investments in basic municipal operations: strong schools, safe neighborhoods, reliable public infrastructure and the timely provision of City services: 1. Freeze Commercial Tax Rates. In its FY2014 budget, the Taveras administration successfully worked with the City Council to freeze Providence s commercial tax rate. 2. Fix the Permitting Process. The City has established a new departmental subgroup focused solely on small permit application review so that simple, small-dollar projects proceed more quickly. Providence will also soon allow for online permit application submissions. 3. Remove Barriers to Redevelopment. The Providence Redevelopment Agency is aggressively pursuing a range of economic development tools to spur the continued development of key real estate parcels in the City. 4. Develop Surface Lots Citywide. The Taveras administration is seeking passage of a new Citywide tax stabilization ordinance designed to incentivize new development on Providence s surface parking lots. A-9

5. Reinvent Kennedy Plaza. In partnership with a range of stakeholders, Providence is undertaking a fundamental infrastructure reformation of its downtown hub, Kennedy Plaza. The project is designed to make the downtown more attractive for visitors, businesses and residents alike. 6. Invest in Storefront Improvement. The Taveras administration is working to begin a program of reimbursing eligible, main-street small businesses for storefront capital improvements. 7. Provide Targeted Back Office Supports. Providence plans to begin providing operational support and technical assistance to small businesses and/or eligible start-ups. 8. Reform the City s Zoning Ordinance. Providence is currently undertaking a comprehensive update of the City s existing zoning ordinance to support goals for smart growth, sustainable, cultural, equitable and transit-oriented development. 9. Invest in Historic Preservation. Providence will work with the General Assembly, the Office of the Governor and local advocates to win reinstatement of this critical tax credit. 10. Market Available Real Estate. Providence plans to create and maintain a public database of properties available for development. Beyond being available online, Providence s available real estate will be aggressively marketed to site selection consultants nationwide. 11. Raise Participation in State Incentive Programs. Using a range of outreach strategies, the City plans to execute an outreach campaign to increase the rate of participation. 12. Review Statewide Regulatory Policy. The City proposes a full review of Rhode Island labor, tax and regulatory policy, in cooperation with both business organizations and labor representatives, with the goal of aligning Rhode Island standards with national norms. 13. Raise Student Achievement. Providence is implementing two new, award winning programs Providence Talks and Providence Reads to help ensure Providence children enter kindergarten ready to learn and reach grade level reading proficiency by third grade. 14. Expand Apprenticeship Programs. Providence plans to expand its portfolio of apprenticeship programs, looking first to Providence s working waterfront and creative economy. 15. Support Nursing & Health Sciences. Providence will work to bring a nursing school to the City. 16. Expand Adult Education. Workforce Solutions of Providence/Cranston will seek new partnerships between Rhode Island s institutions of public higher education and local community organizations. 17. Make Streetcars a Reality. Providence is aggressively pursuing a sustainable funding strategy to bring this transportation option to fruition. 18. Rehabilitate Foreclosed Properties. Providence will partner with Community Development Corporations to direct the rehabilitation of abandoned and vacant residential properties. 19. Market Providence. In the summer of 2013 Providence conducted a regional marketing and advertising campaign encouraging visitors to Come to Providence. 20. Improve the Visitor Experience. Providence plans to erect new visitor information kiosks, which will double as a centralized ticketing hub for all arts related events and activities in Providence. Additionally, the City Council, working collaboratively with the City Administration, has given tentative and pending approval to several new Tax Stabilization Agreements that include a new model of tax-payment predictability during the tax stabilization period. These tax stabilizations are expected to provide over $300,000,000 in additional investment in the City and are expected to create hundreds of construction and permanent employment opportunities. A-10

Demographics The population of the City increased modestly between 2000 and 2010 from l73,618 to 178,042. As of 2010, the demographic profile of the City consisted of Caucasians representing approximately 49.8% of the population, African Americans representing approximately 16.0%, Hispanics representing approximately 38.1%, Asians representing 6.4% and Native Americans representing roughly 1.4%. Housing Units The total number of housing units in the City as of April 1, 2010 was 71,530. This represented an increase of 5.3% from the 67,915 housing units in 2000. Of the 71,530 housing units in 2010, 62,718 (or 87.7%) were occupied and 34.9% of these units were owner-occupied. Building Permits The following table lists the number and value of building permits issued by the City's building inspector since fiscal year 2002: Fiscal Year 2012-13 Structural Div. Electrical Div. Mechanical Div. Plumbing Div. Total Number Number Number Number Value of Value of Value of Value of (Mills.) Permits (Mills.) Permits (Mills.) Permits (Mills.) Permits $150.24 2,847 $33.28 1,207 $24.31 705 $7.65 7,536 Number of Permits 2,777 A-11 Value (Mills.) $215.48 2011-12 3,116 102.72 2,770 29.22 1,147 21.79 709 5.72 7,742 159.45 2010-11 3,062 82.66 2,754 38.00 1,320 13.60 832 7.90 7,952 142.2 2009-10 4,351 86.89 2,994 26.74 1,748 27.41 1,121 5.19 10,214 146.2 2008-09 2,570 148.57 2,656 44.12 1,488 33.07 828 8.43 7,542 234.2 2007-08 2,712 109.43 2,555 52.96 1,317 41.92 777 13.31 7.361 217.6 2006-07 3,210 193.3 2,460 63.5 664 11.4 1,686 37.8 8,020 306.0 2005-06 3,274 148.3 2,551 41.4 1,627 45.5 798 16.2 8,250 251.4 2004-05 3,169 97.7 2,521 31.2 1,342 33.3 727 10.5 7,759 173.4 2003-04 2,889 218.6 2,478 41.1 1,272 41.6 779 14.1 7,418 315.4 2002-03 2,273 115.3 2,067 26.1 996 18.8 578 5.8 5,914 166.0 2001-02 2,148 96.7 1,847 20.1 714 18.0 456 5.5 5,165 140.3 Source: Providence Building Inspector. General PROPERTY TAXES Under Rhode Island law, municipalities, including the City, are restricted from levying general taxes except ad valorem taxes upon real and tangible personal property and excise taxes on registered motor vehicles and trailers. Under Rhode Island law, valuations of real and personal property are assessed as of December 31 and the levy thereon may be paid in full or quarterly without penalty, at the taxpayer's option. In Providence, the fiscal year begins July 1 with taxes based upon the prior December 31 assessment payable in full before July 24 or quarterly in July, October, January, and April. No discount is allowed by the City for advance payment of taxes. The City has yearly tax sales for delinquent real property taxes. Delinquent automobile excise taxes are collected in cooperation with the Rhode Island Registry of Motor Vehicles (the Registry ). By state law, if automobile excise taxes are not current by November 1 of each year, information is supplied to the Registry and automobiles may not be registered until taxes are paid in full. Other delinquent personal property taxes are collected through various procedures. The City assesses an interest charge of 12% per annum on delinquent accounts. For the City, the four classes of property taxes are (1) residential, (2) commercial/business, (3) tangible, and (4) motor vehicle. Class one of property has two tax rates in budget year 2014. There is an owner-occupied rate of $19.25 and a non-owner occupied rate of $33.75 ($ per thousand).the class two 2014 budget base commercial rate is $36.75 ($ per thousand), with the owner-occupied rate on the residential portion (if applicable). The class three tangible personal property rate for budget year 2014 is $55.80 ($ per thousand) and the class four motor vehicles rate is $60.00 ($ per thousand) with a $1,000 exemption. Tax classification legislation, authorized by the Rhode Island General Assembly and the City of Providence through its Levy Ordinance No. 262 of Chapter 2013-17, adopted June 13, 2013, authorized the City to provide for increases in various present exemptions and for an exemption of $25,922 for persons receiving Social Security Retirement Benefits. The tax classification legislation further authorized the City to provide for the limitation of property taxes on owner occupied

residential real estate containing not more than three dwelling units for owners whose household income is not greater than $25,000 to 105.5% of the amount of the property taxes levied for 2013 upon the assessed valuation as of December 31, 2012 and in subsequent years at the amount of the property tax for the next immediate year increased by the then current percentage increase in the tax rate for real estate plus any property tax attributable to additions to the property subsequent to the date of assessment of valuations for the next prior year. City Ordinance No. 409 of Chapter 2013-366, adopted September 19, 2013, has been enacted implementing the increases in various exemptions; any person 65 years of age prior to December 31, or any person 62 years of age prior to December 31 receiving Social Security Retirement Benefits, is eligible for the Elderly exemption of $26,545. Motor Vehicle Excise Tax Phase Out The General Assembly passed legislation during the 1998 legislative session that eliminated municipal authority to levy an excise tax on motor vehicles and trailers after fiscal year 2007. This Legislative directive required all cities and towns to exempt the first $4,500 in value (based on NADA valuation) on all motor vehicles subject to taxation and contemplated a full phase out over a period of time. This authority to levy excise taxes was subsequently restored as part of the State 2010 Supplemental Budget. The exemption for fiscal year 2010 was $6,000. The State fiscal year 2010 Supplemental Budget reduced a portion of the fourth quarter motor vehicle tax reimbursement to cities and towns. The loss to the City was $2,733,156 for the fiscal year 2010. In addition, the fiscal year 2011 State budget reduced the exemption from $6,000 to $500 starting in fiscal year 2011 and thereafter. Cities and towns may provide an additional exemption of any amount above $500. However, any additional exemption above $500 that is provided by cities and towns shall not be subject to reimbursement by the State. Reimbursement to cities and towns will be ratably reduced to the annual appropriation, which, in fiscal year 2011 is $10,000,000 for all cities and towns combined. The City received $2,200,000 in State reimbursement in fiscal year 2011, compared to approximately $20.8 million in fiscal year 2010. In fiscal 2011, the City elected to keep the $6,000 exemption; however, the City lowered the exemption to $1,000 for fiscal year 2012. The City received $1,715,886 in State reimbursement in fiscal year 2012 and $1,773,136 in fiscal year 2013. $1,715,886 is budgeted for fiscal year 2014 and $1,737,588 is budgeted for fiscal year 2015. Tax Limitations Rhode Island General Laws Section 44-5-2 limits the amount by which a city or town may increase its tax levy to 4.0% unless it qualifies for certain exemptions relating to loss of non-property tax revenue, emergencies, payment of debt service and substantial increase in the tax base necessitating significant expenditures. Any levy pursuant to this section in excess of the percentage increase as specified in subsection (a) or (b) of Section 44-5-2 must be approved by an affirmative vote of at least four fifths (4/5) of the full membership of the governing body of the city or town and, in the case of a city or town with a financial town meeting, the majority of electors present and voting at the financial town meeting. Section 44-5-2 makes it clear that nothing contained in that Section constrains the payment of obligations as described by Section 45-12-1 of the Rhode Island General Laws, which provides that the outstanding notes, bonds and contracts of cities and towns shall be paid and be fulfilled and that the power and obligation of each city and town to pay its general obligation bonds and notes shall be unlimited and each city and town shall levy ad valorem taxes upon all taxable property within the city or town for the payment of such bonds and notes and interest thereon, without limitation as to rate or amount, except as otherwise provided by or pursuant to law. Assessed Valuations The following table sets forth the assessed valuation of real and personal property in the City as of December 31, for the calendar years 2008 2012, which equate to the 2009 through 2013 tax rolls. A-12

2009 2010 (1) 2011 2012 2013 (1) Real Estate $ 13,657,654,266 $ 10,358,911,515 $ 10,346,045,471 $ 10,261,120,056 $ 9,290,516,321 Motor Vehicles 610,996,821 616,721,739 644,247,338 685,618,303 701,908,771 Tangible Property 830,243,146 926,252,489 850,313,705 881,796,625 969,783,461 Total Assessed Valuation $15,098,894,233 $11,901,885,743 $11,840,606,514 $11,828,534,984 $10,962,208,553 Less Exemptions (4,784,301,115) (2,858,134,041) (2,960,340,848) (2,468,167,777) (574,879,647) Net Taxable Real & Tangible Personal Property $ 10,314,593,118 $ 9,043,751,702 $ 8,880,265,666 $ 9,360,367,207 $ 10,387,328,906 Average Ratio of Assessment 99.16% 99.16% 99.16% 99.16% 98.00% Estimated Full Valuation $ 12,279,277,521 $ 10,523,332,211 $ 10,333,099,448 $ 10,231,682,760 $ 10,742,964,381 Source: City Assessor. (1) Revaluation Analysis of Assessed Value The following table sets forth the percentage by type of assessed valuation of all taxable real and personal property in the City as reflected in the Tax Rolls for the most recent fiscal year: % of Total Assessed Valuation Class City State Residential 47.97% 73.86% Commerical/Industrial 38.07% 17.21% Tangible 7.69% 3.50% Motor Vehicles 6.27% 5.43% 100.00% 100.00% Revaluation Source: RI Department of Administration The City completed its last triennial revaluation of all real property in the City as of December 31, 2012 for the July 1, 2013 tax bill. The 2012 revaluation was a statistical revaluation rather than a full revaluation. The previous revaluation was conducted on values as of December 31, 2009 and was a full revaluation. The 2012 revaluation realized a 7.3% overall decrease in value between the fiscal year 2012 and fiscal year 2013 certified tax rolls. This equaled an $866,326,431 decrease from $11,828,534,984 to $10,962,208,553 in assessed valuations. Furthermore, personal exemptions decreased 76.7% during the same time period. The significant decrease in exemption value was due to removing the homestead exemption and replacing it with owner-occupied and non-owner-occupied tax rates. This equaled a $1,893,288,130 overall decrease from $2,468,167,777 to $574,879,647. Although the overall decrease in values equaled approximately 7.3%, residential property types in general were more affected by the outcome of the revaluation than commercial properties. Additionally, neighborhoods on the East Side experienced the least depreciation in property values as compared to South and West-end neighborhoods. Because foreclosures and short sales were included as valid market sales, the prices associated with these sales negatively impacted property values, especially in highly concentrated areas of foreclosures and short sales such as the South and West-end neighborhoods. City's Largest Taxpayers Set forth below is a list of the largest taxpayers in the City based upon real and personal property (tangible) assessed valuations as of December 31, 2012. These twenty properties represent 11.94% of the total tax levy. A-13

Rank Company Real Estate Assessments Real Estate Tax Tangible Assessments Tangible Tax Total Taxes % Total Levy 1 Narragansett Electric Co.* $60,921,200 $2,238,854 $148,376,870 $8,279,429 $10,518,283 3.09 % 2 Motiva Enterprises, LLC 26,925,300 989,505 55,990,280 3,124,258 4,113,763 1.21 3 OMNI Rhode Island 72,362,700 2,659,329 8,383,500 467,799 3,127,128 0.92 4 ONA Providence Office I, LLC 60,863,400 2,236,729 10,357,850 577,968 2,814,697 0.83 5 One Financial Holdings, LLC 57,723,100 2,121,324 10,820,800 603,801 2,725,125 0.80 6 One Citizens Plaza Holdings, LLC 40,694,800 1,495,534 2,707,040 151,053 1,646,587 0.48 7 Textron Realty Corp 41,539,000 1,526,558 1,323,330 73,842 1,600,400 0.47 8 Brown University 42,072,200 1,546,153 0 0 1,546,153 0.45 9 Regency Plaza I, LLC 38,162,300 1,402,464 44,070 2,459 1,404,923 0.41 10 Avalon Properties 31,984,300 1,175,423 442,330 24,682 1,200,105 0.35 11 HFP Hotel Owner II, LLC 28,797,300 1,058,300 2,232,560 124,577 1,182,877 0.35 12 CJUF III MJH Providence, LLC 26,665,600 979,960 2,921,220 163,004 1,142,964 0.34 13 10 Memorial Boulevard Owner* 54,767,800 1,100,000 0 0 1,100,000 0.32 14 High Rock Westminster Street 29,686,200 1,090,968 0 0 1,090,968 0.32 15 15 Park Row West Holdings, LLC 17,382,700 638,814 6,245,940 348,523 987,337 0.29 16 PRI I LP 19,590,700 719,958 4,702,770 262,415 982,373 0.29 17 The Providence Journal Company 19,063,400 700,580 4,330,690 241,653 942,233 0.28 18 One Financial Plaza 18,638,900 684,980 1,453,160 81,086 766,066 0.22 19 700 Smith Street Providence 17,088,100 627,988 0 0 627,988 0.18 20 Capital Properties 16,018,400 588,676 243,420 13,583 602,259 0.18 *indicates a tax stabilization agreement Tax Levy and Collection Records Following is a chart detailing the tax levy and collection records for the City for fiscal years 2004-2013: Fiscal Year Ending June 30 Tax Year Levy Net Additions & Abatements Net Levy Collected End of Fiscal Year Percent of Net Levy at End of Fiscal Yr Collected as of 6/30/13 Percent of Net Levy as of 6/30/13 2013 12 $ 332,768,119 $ (8,553,751) $ 324,214,368 $ 310,510,342 95.77 % $ 310,510,342 95.77 % 2012 11 324,460,407 (10,524,858) 313,935,549 299,707,126 97.02 308,531,485 98.28 2011 10 307,014,942 (19,286,412) 287,728,530 277,131,464 97.71 284,423,565 98.85 2010 09 294,186,862 (6,035,233) 288,151,629 276,463,184 96.55 285,158,037 98.96 2009 08 287,281,144 (5,391,599) 281,889,545 269,559,441 95.73 280,603,020 99.54 2008 07 275,853,725 (6,937,200) 268,916,525 255,874,916 94.90 268,656,308 99.90 2007 06 261,951,088 (4,670,393) 257,280,695 246,952,069 95.98 256,804,759 99.82 2006 05 259,979,819 (4,446,564) 255,533,255 243,165,192 95.31 253,159,894 99.07 2005 04 256,688,743 (5,585,851) 251,102,892 240,140,679 96.56 248,804,049 99.08 2004 03 248,030,527 (8,250,542) 239,779,985 231,862,834 96.38 238,513,535 99.47 Source: City Tax Collector General CITY FINANCES Under the City Charter, the City has a Finance Department headed by a Finance Director who is appointed by the Mayor with the approval of the City Council. The Finance Director has charge of the administration of the financial affairs of the City, with specific responsibility for assessing, collecting and authorizing the disbursement of all City money, for preparing and administering the annual City Budget, and for accounting of all financial transactions. The following divisions are located within the finance department: assessment, collections and accounting divisions. The City Treasurer is elected by the City Council, with duties relating to accounting for receipts and disbursements and issuing notes and bonds of the City. A-14

Basis of Accounting The modified accrual basis of accounting is followed by the governmental funds. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, i.e., both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures, other than interest on long-term debt, are recorded when the liability is incurred. The City recognizes property tax revenues in accordance with generally accepted accounting principles. Only those property tax payments due as of the end of the fiscal year and received within 60 days thereafter are recognized as revenue. All unpaid property taxes as of the end of the fiscal year are recorded as receivables. Those not collected within 60 days are recorded as deferred revenue if the eventual collection appears likely or are rescinded by an allowance for doubtful accounts if the eventual collection appears unlikely. The following table shows the changes in fund balance in the General Fund for fiscal years 2009 through 2013 (in millions). 2009 2010 2011 (1) 2012 (1) 2013 (1) Undesignated fund balance, beginning... $22.3 $17.4 $3.5 $3.7 $(11.4) Increase... (4.9) (13.9) 0.2 (15.1) 1.6 Relocation of Designated Fund Balance... Total $17.4 $3.5 $3.7 $(11.4) $(9.8) Source: audited financial statements. (1) Unassigned balance, due to implementation of new GASB rules. Reporting Requirements of Municipalities and School Districts Pursuant to Rhode Island General Law 45-12-22.1, the Rhode Island General Assembly imposes financial reporting requirements for municipalities in order to ensure that municipalities and school districts monitor their financial operations on an ongoing basis and to prevent potential budget deficits (the "Financial Reporting Act"). The requirements are as follows: Reporting The chief financial officer of the municipality must submit monthly reports to the municipality's chief executive officer, each member of the city or town council, and school district committee certifying the status of the municipal budget, including the school department budget or regional school budget. The chief financial officer of the municipality must also submit quarterly reports to the State Office of Municipal Affairs certifying the status of the municipal budget. The chief financial officer of the school department or school district shall certify the status of the school district's budget and shall assist in the preparation of these reports. If any reports project a year-end deficit, the chief financial officer of the municipality must submit a corrective action plan, providing for the avoidance of a year-end deficit, to the State Division of Municipal Finance and Auditor General on or before the last day of the month succeeding the close of the fiscal quarter. If, at the end of the fiscal year, the chief financial officer determines that it is likely that the city or town's general fund or combined general fund and unrestricted school special revenue fund will incur a deficit, the municipality must immediately develop a plan to eliminate the accumulated year-end deficit by annual appropriation over no more than five (5) years. This plan must be submitted to the State Auditor General for approval. Restrictions and Requirements No municipality can sell long-term bonds in order to fund a year-end deficit without prior approval by the Rhode Island Auditor General and the Director of the Rhode Island Department of Revenue. No municipality can incur expenditures or obligate the municipality to expend unbudgeted amounts in excess of $100,000 without first notifying the city or town council of the proposed expenditure and identifying the source of funding. Any such expenditure must be included in the chief financial officer's monthly report. A-15

Remedies No school committee or school department can incur accumulated unbudgeted expenditures in excess of $100,000 without notifying the chief financial officer of the municipality of the proposed expenditure and identifying the source of funding. Any such expenditure must be included in the chief financial officer's monthly report. School committees, boards or regional school districts that are independent government entities within a municipality must cooperate in providing to the chief financial officer all information needed to formulate his or her reports and the deficit elimination plan. If a municipality does not comply with the requirements of the Financial Reporting Act, the State Auditor General or State Office of Municipal Affairs, through the Director of Administration, may elect any or all of the following remedies: - Petition the Superior Court for mandatory injunctive relief seeking compliance with the provisions of the Financial Reporting Act; - In the event a municipality fails to provide a year-end deficit elimination plan, implement a financial review commission pursuant to Rhode Island General Laws Section 45-9-3; or - Withhold State Aid. If a school committee or board fails to cooperate with the municipality or provide all information requested by the chief financial officer needed to formulate a plan: -The Auditor General or the Director of Revenue may petition the Superior Court to order the school committee or board to cooperate; and -The Director of Revenue may also direct the Rhode Island Controller and General Treasurer to withhold state aid from a school committee until the school committee or board cooperates in the formulation of the plan. The City has not been advised by the Auditor General or State s Director of Revenue (the Director of Revenue ) that it is not in compliance with the Financial Reporting Act. State Oversight Rhode Island General Law 45-9-1 et seq. entitled An Act Relating to Cities and Towns Providing Financial Stability the (the Financial Stability Act ) was enacted to provide a predictable and stable mechanism for the State to work with cities and towns undergoing financial distress that threatens the fiscal well-being, public safety and welfare of such cities and towns, or welfare of other cities and towns or the state, in order to preserve the safety and welfare of citizens of the State and their property and the access of the State and its municipalities to the capital markets. The Financial Stability Act prohibits municipalities from filing for judicial receivership and clarifies that the Superior Court has no jurisdiction to hear such matters. The Financial Stability Act gives the State, acting primarily through the Department of Revenue, the power to exercise varying levels of support and control depending circumstances. It creates three levels of State oversight and control: Level 1--Fiscal Overseer; Level II-- Budget Commission; and, Level III -- Receiver. The Director of Revenue, in consultation with the Auditor General, may skip fiscal overseer and budget commission by appointing a receiver in a fiscal emergency. Fiscal Overseer (Level 1) A fiscal overseer may be appointed by: (1) request of the municipality, which request is approved by the State s Division of Municipal Finance and the Auditor General; (2) the State Director of Revenue, if: (i) the Director of Revenue, in consultation with the Auditor General, finds that any two or more of the following events have occurred; or (ii) the Director of Revenue finds, in his or her sole discretion, that any two of the following events have occurred which are of such a A-16

magnitude that they threaten the fiscal wellbeing of the city or town, or diminish the city's or town's ability to provide for the public safety or welfare of its citizens: Projects a deficit in the municipal budget in the current fiscal year and again in the upcoming fiscal year; Has not filed its audits with the auditor general by the deadlines required by law for two (2) successive fiscal years (not including extensions authorized by the auditor general); Has been downgraded by one of the nationally recognized statistical rating organizations; Is otherwise unable to obtain access to credit markets on reasonable terms; and Does not promptly respond to requests made by the Director of Revenue, or the auditor general, or the chairpersons of the house or senate finance committees for financial information. The Director of Revenue may also appoint a fiscal overseer for failure to comply with the financial reporting and action plan requirements relating to budget deficits. A fiscal overseer acts in an advisory capacity to municipal officials, approves budgets and reports to State officials. Budget Commission (Level II) A budget commission may be established by request of a municipality or without such a request, if the fiscal overseer reports to the Director of Revenue that the city or town is unable to present a balanced municipal budget, faces a fiscal crisis that poses an imminent danger to the safety of the citizens of the city or town or their property, will not achieve fiscal stability without the assistance of a budget commission, recommends that the tax levy should not be approved, or otherwise determines that a budget commission should be established. A budget commission is composed of five (5) members: three (3) designees of the Director of Revenue, the elected chief executive officer of the city, and the president of the city or town council (or in cities or towns in which the elected chief executive officer is the president of the city or town council, then the appointed city or town manager). A budget commission has significant powers over financial matters, including but not limited to the power to: Receiver (Level III) Amend, formulate and execute annual and supplemental municipal budgets and capital budgets; Reorganize, consolidate or abolish municipal departments, commissions, authorities, boards, offices or functions; Issue bonds, notes or certificates of indebtedness to fund a deficit of the city or town, to fund cash flow and to finance capital projects. The Director of Revenue may appoint a receiver if the budget commission recommends appointment of a receiver after concluding that its powers are insufficient to restore fiscal stability to the city or town. A receiver may exercise any function or power of any municipal officer, employee, board or commission and has the power to file on behalf of a city or town for bankruptcy in federal bankruptcy court. City Budget The City is not under State statutory oversight. Pursuant to State law, the Mayor must submit the City s annual operating budget to the City Council no later than sixty days prior to June 30th for the City Council s review and approval. The Mayor presented the Fiscal Year 2015 Recommended Operating Budget to the City Council on May 1, 2014, and the budget was adopted on June 10, 2014 by the City Council. The Fiscal Year 2015 Operating Budget of $678.4 million represents an increase of 2% over the Fiscal Year 2014 Operating Budget. The property tax levy is increased by 1%. The City has been budgeted for $278,640,829 in State aid in the State budget. The following table shows adopted budgets from fiscal year 2013 through 2015. A-17

General Fund Budget for Fiscal Years 2013-2015 Rvenues and Transfers Budget 2013 Budget 2014 Budget 2015 Tax Revenue: Property Taxes $ 316,911 $ 326,058 $ 330,358 Interest on overdue taxes 5,500 5,500 5,000 Total Tax Revenues $ 322,411 $ 331,558 $ 335,358 Payment in lieu of taxes 23,461 22,846 26,227 Tax stabilzation plans 5,222 5,222 5,222 State Revenue 42,442 45,256 43,044 Fines 8,068 7,300 6,400 Rents 20 20 - Investment interest 25 25 - Miscellaneous 200 200 2,500 Executive, Legislative, and judicial - - - Finance 1,206 650 683 Public Safety 2,283 2,742 2,942 Building inspection department 3,754 4,641 4,328 Public works 2,777 3,009 3,388 Public Lands and Parks/Recreation - - 236 Other Departments 19,434 18,903 17,086 Public properties 128 128 128 Transfers: from Finance Department - - - from revolving funds - - - from parking tickets - - - from rescue runs 3,600 4,455 4,400 from water supply - - - from police/fire detail fund 1,200 1,700 1,700 from expendable trust - - - from North Burial Ground 600 600 350 from medical trust - - - from capital proceeds fund - - 4,000 from other financing - - - from PRA - - - from $40mm Road Bond Fund - 250 125 from School Department 1,000 - - from RI zoological Society - - - capital lease proceeds - - - bond proceeds from PPBA - - - Parking scuritization - - - Total Revenue and Transfers 437,831 449,505 458,117 Expenditures and Transfers Budget 2013 Budget 2014 Budget 2015 Executive, legislative and judicaial 11,830 12,169 11,467 Finance 87,639 89,790 90,064 Public Safety 123,819 132,469 137,206 Building inspection deparment 3,398 3,841 3,908 Public works 18,333 17,790 18,063 Recreation 677 703 736 Public lands and parks 11,558 11,786 11,509 Other departments 11,221 6,333 8,553 Grants 4,354 4,322 5,025 Public properties 5,730 6,022 6,174 Purchasing - - Transfers: to School Department 124,897 124,897 124,897 to Finance Department - - - to Council Contingency - - - to Retiree Benefits 22,502 21,093 21,605 to Active Medical 15,173 18,290 18,910 to Annual Pension Reform Savings (3,300) - - to Misc. not Classified - - Total Expenditures and Transfers 437,831 449,505 458,117 Over Revenues and Transfers - - - A-18

The following table shows budget to actual results for fiscal years 2012 and 2013. Schedule of Revenues and Expenditures Budget and Actual - General Fund (in thousands) Fiscal Year ended June 30, Revenues and Transfers Budget 2012 Actual 2012 Budget 2013 Actual 2013 Tax revenues: Property taxes $311,393 $308,214 $316,911 $319,047 Interest on overdue taxes 5,500 6,141 5,500 5,011 Total tax revenues $316,893 $314,355 $322,411 $324,058 Payment in lieu of taxes $23,110 $23,455 $23,461 $25,645 Tax stabilization plans 5,222 5,222 5,222 5,222 State revenue 35,842 37,195 42,442 37,759 Fines 9,000 6,341 8,068 5,698 Rents 20 14 20 0 Investment interest 25 100 25 84 Miscellaneous 200 226 200 1401 Executive, legislative, and judicial 204 232 0 239 Finance 802 758 1,206 1,140 Public safety 4,367 3,904 2,283 7,279 Building inspection department 4,609 4,185 3,754 4,558 Public works 336 10,309 2,777 3,301 Public Lands and Parks/Recreation - 247 0 244 Other departments 24,148 23,848 19,434 24,496 Public properties - 144 128 264 Transfers: From Finance Department - - - - from revolving funds - - - - from parking tickets - - - - From rescue runs 3,600 3,485 3,600 2,918 from water supply - - - - from police/fire detail fund 1200 2,112 1,200 2,047 from expendable trust - 4,741 - - from North Burial Ground 600 400 600 350 from medical trust - 1,110 0 1,955 from capital proceeds fund - - - - from other financing - - - 577 from PRA - - - - from School Department - 487 1,000 2,033 from RI Zoological Society - - - - capital lease proceeds - - - - bond proceeds from PPBA - - - - parking securitization - 1,000 - - Total Revenues and Transfers $430,178 $443,870 $437,831 $451,268 Expenditures and Transfers Budget 2012 Actual 2012 Budget 2013 Actual 2013 Executive, legislative and judicial $11,370 $12,716 $11,830 $10,402 Finance 90,167 90,775 87,639 87,564 Public safety 135,473 135,973 123,819 140,612 Building inspection department 4,025 3,901 3,398 3,931 Public works 18,163 26,134 18,333 18,868 Recreation 677 671 677 736 Public lands and parks 13,231 13,599 11,558 12,662 Other departments 11,126 10,185 11,221 9,704 Grants 4,536 4,321 4,354 4,253 Public properties 6,251 6,280 5,730 6,578 Purchasing - - - - Transfers: to School Department $124,897 $124,897 $124,897 $124,897 to Finance Department - - - - to Council Contingency - - - - to Retiree Benefits 10,265 28,494 22,502 29,196 to Active Medical - 964 15,173 - to Annual Pension Reform Savings - - (3,300) - to Misc. not Classified Total Expenditures and Transfers $430,178 $458,910 $437,831 $449,403 Over Revenues and Transfers ($15,040) $1,865 Prepared by FirstSouthwest based upon Audited Financial Statements and information from the City Finance Department A-19

Retirement System City Employees Pension Plan The City has a contributory pension plan (the ERS ) covering substantially all City and certain School Department employees. As of July 1, 2013, there were 2,998 active members and 3,094 beneficiaries in the municipal plan. According to the July 1, 2013 actuarial study, which is the most recent available, the market value of the total assets of the pension fund amounted to $393.1 million and the unfunded accrued liability at July 1, 2013 was $831.5 million. Employees who are sworn members of the Fire Department hired on or after July 1, 2011 contribute 9% of their base pay and longevity. All other employees contribute 8% of compensation. To reduce the unfunded accrued liability in the ERS, the City on April 30, 2012 adopted an ordinance suspending certain cost-of-living adjustments and capping the amount of pension benefits. The pension cutbacks became subject to mediation in a lawsuit brought in the State Superior Court by an association of retired City police and firefighters to challenge a different City ordinance affecting retirees. The mediating parties, including unions representing the City s active firefighters and police have reached a settlement (described below). The Superior Court determined on January 25, 2013 that the proposed settlement was reached through arm s-length negotiations and is fair and reasonable. The City s landmark pension reform agreement with police, firefighters, and retirees was completed on April 12, 2013 in Rhode Island Superior Court. The negotiated municipal pension settlement may be the first of its kind in the country. Judge Sarah Taft-Carter, who has called Providence s pension agreement a laudable example for other cities and towns, entered consent judgments finalizing reforms. The retirees who accepted the proposed settlement and active firefighters and police who retire under the terms of the collective bargaining agreements that are amended to reflect the terms of the proposed settlement will be subject to the following terms: COLA SUSPENSION: All COLAs suspended for 10 years. (Families of City employees killed in the line of duty will continue to receive annual COLA.) ELIMINATION OF HIGH END COLAs: All 5 and 6 percent compounded COLAs are permanently eliminated. PENSIONS CAPPED: In fiscal year 2023, COLAs will be reinstated only for retirees with pensions less than 150 percent the state median income OR less than the salary of an incumbent employee of the same rank as the retiree at the time of retirement (police and fire retirees only), whichever is lower. FUTURE COLAs LIMITED: Retirees whose COLAs are reinstated in fiscal year 2023 will receive annual raises of 3 percent compounded or what is provided for in their contract, whichever is less. ONE-TIME STIPEND IN FY2017: In fiscal year 2017 (Year 5 of the agreement), retirees collecting pensions of less than $100,000 will receive a stipend of $1,500. This one-time payment will not change their future pension calculations. CONTINGENT STIPEND IN FY2020: In fiscal year 2020 (Year 8 of the agreement), retirees collecting pensions of less than $100,000 may receive a separate one-time stipend of up to $1,500 if the City achieves savings through the creation of a self-insured dental plan. The potential payment would not change future pension calculations. SUSTAINABLE REFORMS TO PENSION CALCULATIONS: Future pensions will be calculated based on the four highest compensated years of service. The current system calculates pensions based on the highest three years. CONTINUED PENSION CONTRIBUTIONS: Employees will be required to contribute to the pension system for as long as they earn credit toward a pension. ACCIDENTAL DISABILITY: Accidental disability pension calculations will be based on 66 2/3 percent of the employee s final salary. A-20

City employees who are not active firefighters or police and retirees who were not firefighters or police are not covered by the tentative agreement described above; however, negotiations are under way to achieve similar results and to have them confirmed through the entry of a consent decree. Over the past six years, the City has made the following required contributions: City Employee Plan (in thousands) Fiscal Year Annual Required Contribution Actual Contribution Percent Contributed Unfunded Liability* Funded Ratio 2013 $ 58,145 $ 58,145 100.00 % Not Available 2012 58,929 48,454 90.17 $ 758,613 33.60 2011 56,380 56,333 99.92 903,311 31.84 % 2010 51,299 49,123 97.00 828,484 34.06 2009 48,509 48,410 99.00 804,801 33.49 2008 54,120 54,120 100.00 715,719 38.57 Other Post Employment Benefits Based on the City s settlement with retirees and current employees described above, the following summarizes the changes to police, fire, and retiree association healthcare benefits: MEDICARE SETTLEMENT: Retirees 65 and older will move onto Medicare. PART B SUPPLEMENT AND MEDICARE PENALTY: The City will provide funding to cover Medicare s Part B supplement and penalties, as had previously been committed. PART D PRESCRIPTION DRUG COVERAGE: The City will also provide funding to cover Medicare Part D prescription drug coverage. UNDER 65 HEALTH COVERAGE UNCHANGED: Health care for retirees under the age of 65 will not be changed. Pursuant to requirements of the Governmental Accounting Standards Board ( GASB ) and specifically, GASB 45, the City is required to disclose in its financial statements certain obligations with respect to so-called Other Post Employment Benefits ( OPEBs ). The required contribution is based on pay-as-you-go financing requirements. For fiscal year 2013, the City contributed approximately $36,175,000. Below is a summary of the unfunded liability during the past five years: School Teachers Retirement Plan Other Post Employment Benefits (in thousands) Actuarial Fiscal Year Value of Assests Unfunded Liability* Funded Ratio 2013 $ - $ 1,190,552 0.10 % 2012-1,149,115 0.10 2011 1,040 1,211,575 0.09 2010 1,040 1,497,451 0.07 2009 1,035 592,868 0.17 The City provides retirement benefits to its public school teachers through its participation in the Employees Retirement System of Rhode Island ( ERSRI or the Teachers Retirement System ), a statutory, mandatory, statewide, cost-sharing multi-employer defined benefit plan, which first covered State teachers on July 1, 1949. ERSRI is administered A-21

as a unified statewide system by the State Retirement Board. The assets are held in the custody of the State Treasurer as an undivided single fund. The actuarial costs of the retirement benefits are partially funded by employee contributions of 9.50% of the actuarial costs of the retirement benefits effective July 1, 2003. The actuary determines the net employer actuarial costs annually and as provided by the State Retirement Board to the Department of Administration. Contributions are reported as a percent of payroll, payable in part by the State and in part by the City. The split between State and the City is specified in State statute. For fiscal year 2012-2013, the State paid 40 percent and the City paid 60 percent. Significant actuarial assumptions included (a) a net investment return of 7.50 percent compounded annually, (b) projected salary increases at an annual service related component plus a 3 percent inflation component plus 1.5 percent additional general increase compounded annually, (c) 3 percent per year cost-of-living adjustments, (d) mortality rates based on the 1994 Uninsured Pensioner Mortality Table and (e) a retirement age of 60 or completion of service requirements, if later. Over the past six years, the City has made the following required contributions: ERSRI (Teachers) ($ in millions) Annual Fiscal Year Required Contribution Actual Contribution Percent Contributed 2013 $16.2 $16.2 100 % 2012 17.9 17.9 100 2011 15.1 15.1 100 2010 17.9 17.9 100 2009 18.2 18.2 100 2008 20.1 20.1 100 The actuarial valuation prepared by Gabriel, Roeder, Smith & Company uses the Entry Age Normal (EAN) actuarial cost method. Valuations under this method assume a valuation date of June 30 th of each plan year. This is the date as of which both the actuarial present value of future benefits and the actuarial value of assets are determined. The valuation assumes an annual salary increase on a scale of age/service. In addition, other actuarial assumptions are made for post-retirement increases and other contingencies as set forth in the published annual reports of the State Retirement Board. The ERSRI s website contains additional information (www.ersri.org). The following are comparative highlights for fiscal years 2009 through 2013 for the Teachers Retirement System as a whole: 6/30/2013 6/30/2012 6/30/2011 6/30/2010 6/30/2009 Active Participants 13,193 13,212 13,381 13,530 13,689 Pensioners & Beneficiaries 10,776 10,622 10,347 10,213 9,749 Inactive Participants 2,947 2,808 2,689 2,521 2,466 Market Value of Assets $ 3,601,811,359 $ 3,499,847,941 $ 3,626,646,745 $ 3,196,511,775 $ 2,962,026,384 Employer Contributions $ 179,244,463 $ 207,800,343 $ 183,762,262 $ 178,122,248 $ 193,923,476 Member & Other Misc. Contributions 36,899,338 91,086,659 94,342,939 94,117,458 89,226,214 Total Contributions $ 216,143,801 $ 298,887,002 $ 278,105,201 $ 272,239,706 $ 283,149,690 Miscellaneous Income $ - $ - $ - $ - $ - Investment Income 370,887,631 50,871,632 606,935,285 402,693,600 (765,400,473) Total Income Available for Benefit Payments $ 587,031,432 $ 349,758,634 $ 885,040,486 $ 674,933,306 $ (482,250,783) Benefit Payment $ (480,608,602) $ (471,318,776) $ (455,121,047) $ (440,029,866) $ (413,096,770) Transfer and other Adjustments $ 228,578 $ (5,238,662) $ 215,531 $ (418,049) $ - Excess of Income Over Expenses $ 106,651,408 $ (126,798,804) $ 430,134,970 $ 234,485,391 $ (895,347,553) Funded Ratio 58.1% 58.8% 59.7% 48.4% 58.1% Compiled from Employees' Retirement System of Rhode Island - Actuarial Valuation Report as of June 30, 2013 Actuarial costs and liabilities, as shown in the summary presentation, are determined in the aggregate for the ERSRI. Accordingly, employer contributions are first determined in the aggregate for all participating employers in this multi-employer system and are then expressed as a percentage of the aggregate participating payroll. For fiscal year 2013, the A-22

City applied 60 percent of this factor to its participating payroll (the remaining 40 percent of the employer cost is contributed by the State as well as the full cost of deferred contributions being contributed by the State). With respect to the ERSRI, Gabriel, Roeder, Smith & Company, independent actuaries advising the State Retirement Board have calculated the pension plan to be fully funded by 2029. According to the statutory funding schedule, the combined contributions required each year by the City and the State will remain relatively level as a percent of payroll as the ERSRI moves toward funding the full actuarial liability. Ultimately, however, because the actuarial funding results in the accumulation of reserves that are invested, the required appropriation will be significantly less than would be required if the ERSRI were on a pay-as-you-go basis. Defined Contribution Plan for MERS and ERSRI Participants The Rhode Island Retirement Act of 2011 changed the defined benefit plan to a hybrid plan which includes a defined contribution plan. The State selected TIAA-CREF to administer the plan. All employees in MERS and ERSRI are required to participate. MERS and ERSRI employees contribute 5% of their annual salary into the defined contribution plan, with an additional 2% contribution for those employees that do not participate in Social Security, and the City must contribute 1% of salary. Participants have a selection of investment options chosen by the State and provided by TIAA- CREF. Challenges to Pension Reform Under the Employees Retirement System of Rhode Island A number of unions representing state employees and teachers filed a lawsuit in State Court in May 2010 challenging pension reforms made by the Rhode Island General Assembly in 2009 and 2010. The defendant State officials filed a Motion for Summary Judgment on the claims set forth in the Amended Complaint which was heard on July 18, 2011. On September 13, 2011, the Superior Court issued its decision in which it ruled that pension plan participants have a contractual right based on an implied-in-fact contract theory, but consistent with a stipulation of the parties, the Court did not decide whether that contract had been impaired or whether any such impairment was legally justified. The defendant State officials have publicly stated that they believe the Superior Court's ruling was legally wrong. On October 3, 2011, defendants filed a Petition for Issuance of a Writ of Certiorari and Supporting Memorandum of Law with the Rhode Island Supreme Court. On November 22, 2011, the Supreme Court denied the petition for Writ of Certiorari. On January 2, 2013, the Court ordered the parties to participate in mediation. In addition, in June 2012, certain unions, active employees, retired state employees and associations of retired state and municipal employees who maintain they are current beneficiaries of Employees Retirement System of Rhode Island commenced five separate lawsuits in State court challenging the Retirement Security Act. The Retirement Security Act took effect July 1, 2012 and made significant changes to the State retirement system administered by the Employees Retirement System of Rhode Island. The five cases are: Rhode Island Public Employees' Retirement Coalition v. Chafee, C.A. No. 12-3166; Bristol/Warren Regional School Employees, Local 581, AFSCME, Council 94 v. Chafee, C.A. No. 12-3167; Rhode Island Council 94, AFSCME, AFL-CIO, et al v. Chafee, C.A. No. 12-3168; City of Cranston Police Officers, International Brotherhood of Police Officers, Local 301, AFL, CIO v. Chafee, C.A. No. 12-3169 and Woonsocket Fire Fighters, IAFF Local 732, AFL-CIO v. Chafee, C.A. No. 12-3579. In each of the five cases, the plaintiffs alleged that Retirement Security Act violates the Contract Clause, the Takings Clause and the Due Process Clause of the Rhode Island Constitution. In addition, in the Rhode Island Public Employees' Retirement Coalition v. Chafee, C.A. No. 12-3166 case, the plaintiffs also allege counts for promissory estoppel and breach of contract. The State has indicated that it intends to vigorously contest the lawsuits. On August 17, 2012, the defendants filed a motion to dismiss the Rhode Island Public Employees' Retirement Coalition v. Chafee, C.A. No. 12-3166 case on the ground that Rhode Island's pension legislation does not create a contract with ERSRI participants and that general contract principles, such as implied contracts, cannot be used to determine whether a state statute creates a contract. In the remaining four cases, the defendants filed motions for more definite statements in which they argued that it is not clear from the plaintiffs' pleadings what purported contract or contract(s) plaintiffs allege have been impaired. The defendants also moved in the alternative and asked the Court to dismiss the remaining four cases if the Court concluded that the plaintiffs' purported contracts derive from Rhode Island's pension legislation. A hearing on defendants' motions was held in December 2012. The parties anticipated receiving a decision on those motions during the first quarter of 2013. On January 2, 2013, the Court ordered the parties to participate in mediation. On February 14, 2014, the parties (with the exception of City of Cranston, Police Officers, International Brotherhood of Police Officers Local 301 and Cranston Fire Fighters, IAFF Local 1363) executed a Settlement Agreement in each of those cases. Pursuant to the terms of the parties agreement, a series of votes took place for the unions to proceed A-23

with the proposed settlement. In addition, the settlement was conditioned on enactment of the legislation by the Rhode Island General Assembly. As a result of the voting and pursuant to terms of the proposed settlement, the settlement process has ended. Under the terms of the proposed settlement, if any one of the six groups voting voted to reject the proposal, the settlement process would terminate and the litigation would continue. Although more than seventy percent of the members eligible to vote did not reject the settlement, the smallest group, representing less than two percent of all eligible members, voted to reject the settlement. The court was apprised of the vote. The mediation has ended without a settlement agreement. Presently, a trial date has not been set. On April 2, 2014, fifty retired state workers and public school teachers filed an additional lawsuit objecting to the class action settlement, and seeking equitable relief, including but not limited to restoration of cost of living adjustments. Stated broadly, the plantiffs claims are substantively similar to those raised in the underlying litigation, Rhode Island Public Employees Retirement Coalition v. Chafee. The State intends to vigorously contest the lawsuit. An adverse judgment to the State rendered in the litigation could significantly increase the City s Annual Required Contribution ( ARC ). If there were to be a significant increase in the ARC, the City may be required to (i) raise additional revenue, (ii) reduce City services, (iii) modify benefits provided by the Teachers' Plan, (iv) implement a combination of the foregoing, or (v) take any other measures as necessary. Government Accounting Standards Board Statements 67 and 68 On June 25, 2012, the Government Accounting Standards Board ( GASB ) voted to approve two new standards applicable to the accounting and financial reporting of public employee pensions by state and local governments. Statement No. 67, Financial Reporting for Pension Plans ("GASB 67"), revises existing guidance for the financial reports of most pension plans. Statement No. 68, Accounting and Financial Reporting for Pensions ("GASB 68"), revises and establishes new financial reporting requirements for most governments that provide their employees with pension benefits. GASB 67 and 68 replace the requirements of GASB 25 and GASB 27. For the City of Providence, the first annual financial report under the new standards will be for the fiscal year ending June 30, 2014. Calculations and the format of disclosures under GASB 67 and 68 will be different than under GASB 25 and 27. Copies of Statements 67 and 68, and a plain language summary, are currently available from GASB. Authorization and Sale of Bonds and Notes General Obligation Bonds CITY INDEBTEDNESS Bonds of the City are generally authorized pursuant to special legislation which requires referendum approval and a majority vote of the City Council subject to the Mayor's veto. Such legislation normally provides that the indebtedness is not subject to the general three percent (3%) debt limit. (See ''Debt Limit'' below). City bonds may also be authorized within the general debt limit, by an ordinance passed by a majority vote of the City Council, subject to the Mayor's veto; any such authorization must also receive referendum approval. The City Council may authorize by resolution the issuance of notes in anticipation of the issuance of bonds so authorized within the general debt limit. In addition, the City Council may similarly authorize refunding bonds by resolution, but no referendum is required. When serial bonds have been authorized under special legislation, the officers authorized by the legislation to issue the bonds may issue bond anticipation notes. Revenue anticipation notes and grant anticipation notes are authorized by a majority vote of the City Council. In compliance with the City's Home Rule Charter, which became effective on January 3, 1983, bonds must be issued within three years following certification of their approval by the voters of Providence, unless the City Council, by ordinance, grants an extension, not to exceed two years, for a maximum total period of five years. Claims for Payment Due Rhode Island General Laws Section 45-15-5 permits any person who shall have any claim for money due from any city to present a demand for such claim to the city council and, if satisfaction of such claim is not made within forty (40) days, to commence an action against the city treasurer for recovery of the claim. If a judgment is obtained for such debt due A-24

and if the treasurer of the city does not have sufficient monies to pay the judgment, Rhode Island General Laws Section 45-15-6 authorizes the city treasurer to apply to any justice of the peace for an order requiring the city to hold a special meeting of the city council "for the speedy ordering and making a tax" to be collected for such purpose. If the city council shall fail to assess voluntarily a tax sufficient to satisfy judgment on a city debt, Rhode Island General Laws Section 45-15-7 authorizes the Superior Court to order the assessors of the city "to assess upon the ratable property thereof, and the collector to collect, a tax sufficient for the payment of the judgment, with all incidental costs and charges, and the expense of assessing and collecting the tax." Enforcement of a claim for payment of principal of or interest on a bond or note issued by the City is subject to the applicable provisions of the federal bankruptcy laws and of statutes, if any, hereafter enacted by the federal government or the State of Rhode Island extending the time for payment of such obligations or imposing other constitutionally valid constraints upon such enforcement. Statutory Lien In July of 2011, the General Assembly enacted amendments to Section 45-12-1 of the Rhode Island General Laws to provide for a statutory lien on ad valorem taxes and general fund revenues for the benefit of general obligation debt of cities and for giving priority to general obligation debt in a bankruptcy. The validity and priority of the lien granted by Section 45-12-1 have not been adjudicated in any chapter 9 bankruptcy proceeding. The amendments provide, in part, as follows: The faith and credit, ad valorem taxes and general fund revenues of each city and town are pledged for the payment of principal of, premium and interest on all general obligation bonds and notes of the city or town, whether or not the pledge is stated in the bonds and notes or in the proceedings authorizing their issue and the pledge constitutes a first lien on such ad valorem taxes and general fund revenues. In addition, annual appropriations for payment of financing leases and obligations securing bonds, notes or certificates ( other financing obligations ), have a first lien on ad valorem taxes and general fund revenues commencing on the date of each annual appropriation. Amounts appropriated or added to the tax levy to pay principal of, premium and interest on general obligation bonds or notes and payments of other financing obligations are applied to the payment of such obligations. Any municipal employee or official who intentionally violates such provisions of Section 45-12-1 is personally liable to the city or town for any amounts not expended in accordance with such appropriations. The superior court has jurisdiction to adjudicate claims brought by any city or town and to order such relief as the court may find appropriate to prevent further violations under such provisions of Section 45-12-1. Any municipal employee or official who violates such provisions of Section 45-12-1 is subject to removal. Section 45-12-1 further provides in part, that: notwithstanding any provision of any other law, including the uniform commercial code, Title 6A of the Rhode Island General Laws: (1) the pledge of ad valorem taxes and general fund revenues to the payment of the principal, premium and interest on general obligation bonds and notes and payment of other financing obligations is valid and binding, and deemed continuously perfected from the time the bonds or notes or other financing obligations are issued; (2) no filing need be made under the uniform commercial code or otherwise to perfect the first lien on ad valorem taxes and general fund revenues; (3) the pledge of ad valorem taxes or general fund revenues is subject to the lien of the pledge without delivery or segregation, and the first lien on ad valorem taxes and general fund revenues is valid and binding against all parties having claims of contract or tort or otherwise against the city or town, whether or not the parties have notice thereof; and (4) the pledge shall be a statutory lien effective by operation of law and shall apply to all general obligation bonds and notes and financing obligations of cities, towns and districts and shall not require a security agreement to be effective. The July 2011 amendments, described above, provide that ad valorem taxes and general fund revenues may be applied as required by the pledge without further appropriation except for other financing obligations which are subject to annual appropriation. State Aid Intercept Rhode Island General Laws 45-12-32 creates a mechanism to enhance the creditworthiness of cities and towns in financial stress by providing for a state aid intercept mechanism to pay general obligation bonds and notes. Under the statute, the finance director is required to notify the mayor and the city council if it appears to the finance director that the city is likely to be unable to pay in whole or in part the principal or interest, or both, on any of its bonds, notes or certificates of indebtedness when due. If the mayor or city council, whether or not so notified, finds upon investigation that the payment cannot or is not likely to be made when due, he, she, or they is required to certify the inability or likely inability to the Director of Revenue of the State. The City has never made such a certification. Upon receipt of the certificate, the Director A-25

of Revenue shall immediately investigate the circumstances and, if the Director finds that the city is, or in the Director s opinion will be, unable to make the payment when due, the Director shall forthwith certify the inability, the amount of the due or overdue payment and the name of the paying agent for the bonds, notes or certificates of indebtedness to the General Treasurer of the State. Notwithstanding any provision of general or special law or any rules or regulations with respect to the timing of payment of state aid payments, not later than three (3) days after receipt of the certification from the Director of Revenue or one business day prior to the date on which the principal or interest, or both, becomes due, whichever is later, the General Treasurer of the State is required to pay to the paying agent the amount of the due or overdue payment certified to him/her to the extent of the sums otherwise then payable and the sums estimated to become payable during the remainder of the fiscal year, from the treasury, to the city. The amounts so paid to the paying agent are held in trust and exempt from being levied upon, taken, sequestered or applied for any purpose other than paying principal or interest, or both, on bonds, notes or certificates of indebtedness of the city. For purposes of the statute, the sums otherwise payable from the treasury to a city and town shall be the funds made available to cities and towns: (i) as state aid pursuant to chapter 45-13 of the Rhode Island General laws, but specifically excluding reimbursements to cities and towns for the cost of state mandates pursuant to 45-13-9 of the Rhode Island General Laws; (ii) as school housing aid pursuant to 16-7-35 16-7-47 of the Rhode Island General Laws, but subject to any pledge to bonds issued to finance school projects by the Rhode Island Health and Educational Building Corporation, and specifically excluding school operations aid provided for in 16-7-15 16-7-34.3 of the Rhode Island General Laws; (iii) in replacement of motor vehicle and trailer excise taxes pursuant to chapter 44-34.1 of the Rhode Island General Laws; (iv) from the public service corporation tax pursuant to chapter 44-13 of the Rhode Island General Laws; (v) from the local meal and beverage tax pursuant to 44-18-18.1 and the hotel tax pursuant to 44-18-36.1 of the Rhode Island General laws; and (vi) pursuant to all acts supplementing such chapters. Enforceability of City Obligations Enforcement of a claim for payment of principal of or interest on a bond or note issued by the City is subject to the applicable provisions of the federal bankruptcy laws and of statutes, if any, hereafter enacted by the federal government or the State of Rhode Island extending the time for payment of such obligations or imposing other constitutionally valid constraints upon such enforcement. Judicial enforcement of statutes such as Rhode Island General Laws Sections 45-15-5 45-15-7 described above under the heading Claims for Payments Due, the statutory lien provided for in section 45-12-1 and state aid intercepts such as that provided for in Section 45-12-32 are within the discretion of a court. The status of these rights and remedies of owners of bonds and notes in a proceeding to restructure city or town debt under Chapter 9 of the Federal Bankruptcy Code, or pursuant to other subsequently enacted laws relating to creditors rights has not been adjudicated. General Obligation Tax Anticipation Notes Tax anticipation notes may be issued by the City pursuant to Section 45-12-4 of the Rhode Island General Laws, the City's Charter and resolutions of the City Council. Under Rhode Island law the City may borrow in each fiscal year in anticipation of the receipt of the proceeds of the property tax due in each fiscal year an amount which shall not exceed the total levy of the then current fiscal year or, if no tax shall then have been made, shall not exceed the tax levy of the next preceding fiscal year. Tax anticipation notes must be payable not later than one year from their date, but notes issued for less than one year may be renewed, provided such renewal notes are payable within one year from the date of the original notes. The City Charter limits such borrowing to not more than 80% of the revenue receipts (other than water revenues) as estimated in the annual appropriation ordinance remaining uncollected at the time of issue of the notes. By ordinance the City has lowered the limit to 70% of such estimated receipts. The City Charter provides further that all receipts and revenues of the General Fund, up to the amount of the borrowing (other than any funds or payments received as grants from the federal government or any funds or payments received from the State for the support of the public schools), beginning on the first day subsequent to the issuance of such notes, shall be reserved for the specific purpose of retiring said notes, or the remainder thereof, and such revenues or receipts shall not be available for expenditure for any purpose other than for the payment of principal and interest on bonds and other notes, until such borrowing in anticipation of taxes shall have been repaid. A-26

Under Section 45-12-4.1 of the Rhode Island General Laws, the Finance Director or Treasurer, with the approval of the Mayor, may issue notes of the City in order to pay any outstanding tax anticipation notes or other obligations of the City which in the judgment of the Finance Director or Treasurer cannot be paid when due from property tax revenues as a result of a court order or decision which directly or indirectly delays the collection of taxes by the City or which provides for the refunding of taxes previously collected, or for any other reason. Notes issued under this section shall be payable within such period of time, not exceeding one (1) year, as shall be necessary, in the judgment of the Finance Director or Treasurer, for the City to receive sufficient property tax revenue to pay them. Debt Limit The City has not borrowed in anticipation of taxes since the fiscal year ending June 30, 1987. Except as explained below, under Rhode Island law, the City may not, without special statutory authorization, or ministerial approval by the Auditor General of the State (described below), incur any debt which would increase its aggregate indebtedness not otherwise excepted by law to an amount greater than 3% of the taxable property of the City. Deducted from the computation of aggregate indebtedness is the amount of any borrowing in anticipation of taxes authorized by law and the amount of any sinking funds maintained by the City. In computing the value of taxable property, motor vehicles and trailers are valued at full value without regard to assessed value reductions provided for in other sections of the general laws. In July 2007, the Rhode Island State Legislature enacted legislation providing for ministerial approval by the State s Auditor General of debt outside of the 3% debt limit for communities with an A rating of better, if the community satisfies certain requirements. According to Note 7 of the City s fiscal year 2013 audited financial statements, as of June 30, 2013, the outstanding debt of the City subject to the 3% debt limit is $41.2 million and the current 3% debt limit of the City is $321.5 million based on a net assessed valuation as of December 31, 2012, of approximately $10.7 billion, leaving a remaining borrowing capacity of approximately $280.3 million. The State General Assembly (the General Assembly ) may by special act permit the City to incur indebtedness outside the 3% debt limit. Bonds issued either within the 3% debt limit or by ministerial approval or by special legislation adopted by the General Assembly authorizing the City to incur debt are subject to referendum by the electors of the City. On June 30, 2012, the total outstanding debt of the City issued outside the 3% debt limit was $65.9 million, excluding water bonds and sewer bonds that are deemed self supporting. In addition to debt authorized within the 3% debt limit pursuant to Rhode Island General Law Section 45-12-2, ministerial approved debt and debt authorized by special act of the General Assembly, Rhode Island General Laws Section 45-12-11 authorizes the State Director of Administration, upon petition by a municipality, to authorize such municipality to incur indebtedness in excess of the 3% debt limit whenever the Director shall determine that the sums appropriated by the municipality or its funds available are insufficient to pay the necessary expenses of the municipality. The City has not requested the State Director of Administration to authorize indebtedness of the City under Section 45-12-11. Projected Financing - Capital Improvements Program Beginning in 1950, the City established a Capital Improvement Program and capital budget as part of its general program of financial planning. Responsibility for the Program rests with the City Planning Commission in cooperation with the City Finance Director, who jointly are required to submit a one year capital budget and a five year plan to the City Council each year for the fiscal period beginning the following first day of July. A proposed financing plan is included with the budget as submitted. This program is annually examined. As a result, each year some proposals are abandoned, others are added, the work of the past year is reviewed, and the program is projected one more year into the future. In this Program, City departments cooperate in presenting their proposals for construction projects and detailed plans for development of the City during the next six years. These are reviewed by the City Planning Commission and Finance Department to be sure that they do not conflict with one another or with general and long-term plans for the City's development. The City Charter requires that the Mayor submit to the City Council a five-year Capital Budget. The City Council may accept, reject or modify the projects described or the proposed methods of financing those projects. The City Planning Commission is responsible for the development of the five-year Capital Budget. However, the only projects funded are those identified in the current year's budget submission. The City budget reflects actual capital expenditures and their means of financing. A-27

Special Obligation Tax Increment Bonds Pursuant to the State's Tax Increment Financing Statute, Title 45, Chapter 33.2 of the Rhode Island General Laws, as amended, the City Council adopted the Manchester Street Power Plant Tax Increment Project Plan (the Project Plan ). Under the Project Plan, the Tax Increment Area is the site of a $600 million capital project which rebuilt the Narragansett Electric Company Manchester Street power plant including off-site improvements associated with the repowering of the facility. A major component of the Repowering Project was the addition of a seven mile 115,000 volt underground transmission line to connect the station into the transmission grid seven miles to the west in Johnston, Rhode Island. Additionally, electric relay and projection systems were installed and modified at substations in Providence, Woonsocket, and Warwick, Rhode Island. The installation of the transmission line and construction of and improvements to the substations enhance the reliability of electric supply to the City. The project was operational as of December, 1995. In an agreement with the Rhode Island Public Utilities Commission and under a state statute to allow full recovery of stranded costs, the New England Electric System (the corporate parent of the Narragansett Electric Company) divested all fossil-fuel generating facilities in 1998. The facilities sold included the Manchester Street Power Plant, which was sold to U.S. Generating and is currently owned by Dominion Energy Manchester Street, Inc. On November 23, 2005, the City issued $28,675,000 of Special Obligation Tax Increments Bonds, Series E, Series F, and Series G, to refund the following bonds: Special Obligation Tax Increment Bonds Series A, issued February 15, 1995; Special Obligation Tax Increment Bonds Series B and Series C, issued March 8, 1995; and Special Obligation Tax Increment Bonds, Series D, issued April 1, 1996. The issuance of the Series A, Series B and Series C Bonds provided proceeds to finance the housing programs of the Providence Plan Housing Program, a comprehensive plan to foster the ownership and improvement of owner-occupied homes in the City. The proceeds of the Series D Bonds were used to finance the Community Facilities Project, which included the demolition, construction, renovation, rehabilitation, and/or improvements to and necessary furnishing of various community facilities in the City. The refunding resulted in present value saving to the City of over $4 million dollars. The Series F Bonds were paid in full on June 1, 2009. The Series G Bonds were paid in full on June 1, 2010. As of June 30, 2013 Series E Bonds in the principal amount of $9,450,000 remain outstanding. The following table outlines the debt service coverage of the Special Obligation Tax Increment Bonds. The required coverage amount set forth in the Indenture authorizing the Special Obligation Tax Increment Bonds is 1.25% of total debt service. City of Providence, Rhode Island Special Obligation Tax Increment Bonds Debt Service Coverage General Obligation Debt Allocation Net Tax Increment Payments Total Debt Service Fiscal Year Tax Payment Coverage (1) 2012 $5,222,222 ($208,889) $5,013,333 $3,740,016 1.34 x 2013 5,222,222 (208,889) 5,013,333 3,744,179 1.34 2014 5,222,222 (208,889) 5,013,333 3,737,509 1.34 2015 5,222,222 (208,889) 5,013,333 3,743,969 1.34 2016 5,222,222 (208,889) 5,013,333 2,857,625 1.75 Total $26,111,110 ($1,044,444) $25,066,666 $17,823,298 (1) Coverage is based on Net Tax Increment Payments divided by Total Debt Service. As provided in the Act, the Project Plan and the Indenture, the City uses the excess of each year's Net Tax Increment Payment over the amount actually applied to debt service on the Series E Bonds and any other special obligation debt issued under the Indenture in such fiscal year to make a deposit into the City's general fund. A-28

Authorized but Unissued General Obligation Debt On November 6, 2012 voters authorized the issuance of $40,000,000 of bonds for improvements to City roads. The City issued $39,345,000 of these Bonds on March 14, 2013 leaving an authorized but unissued amount of $655,000. Outstanding Debt Set forth below is a schedule of outstanding principal of general obligation debt of the City for the fiscal years 2009 to 2013 (period ending June 30 th ). 2009 2010 2011 2012 2013 General Obligations Public Improvements $14,965,000 $13,345,000 $11,655,000 $9,890,000 $59,615,000 General Obligation Refunding Issues 77,825,000 71,440,000 66,300,000 61,475,000 56,515,000 Judgment 3,945,000 3,475,000 2,980,000 2,450,000 1,890,000 Schools 0 0 0 0 0 Total Bond(s) Excluding Water and $96,735,000 $88,260,000 $80,935,000 $73,815,000 $118,020,000 Sewer Debt Water Debt; Self Supporting (1)(2) 0 0 0 0 0 Total Bonds Issued And $96,735,000 $88,260,000 $80,935,000 $73,815,000 $118,020,000 Outstanding (3) (1) Certain Providence Water Supply Board (PWSB) long-term debt is actually general obligation debt of the City; however, because it is the intent of the City to have the PWSB meet the debt service requirements of this debt, such amounts are recorded in the PWSB enterprise fund. (2) The City issued Safe Drinking Water Revenue Bonds in the amounts of: $12,000,000 dated December 1, 1994; $5,000,000 dated October 27, 1999; $5,000,000 dated April 26, 2001; $2,000,000 dated December 27, 2002; $8,101,000 dated March 23, 2005; $13,750,000 dated November 19, 2009; and $25,000,000 dated May 14, 2013 through the Rhode Island Clean Water Finance Agency. The City also issued Clean Water Revenue Bonds in the amounts of $3,000,000 dated June 28, 2012 and $4,200,000 dated June 6, 2013. These Bonds are special obligations of the City and are not a general obligation of the City. See MUNICIPAL SERVICES Other Municipal Services Providence Water Supply Board and Water System. (3) Does not include 2005 E Tax Increment Financing Bonds. Lease Revenue Bonds Leases with the Providence Public Buildings Authority The Providence Public Buildings Authority (the Authority ) was created pursuant to Title 45 Chapter 50 of the Rhode Island General Laws, as amended (the Act ). It was empowered to begin the transaction of business by a resolution of the Providence City Council duly passed on August 13, 1987, and by resolution of the Rhode Island Public Finance Management Board, created under Section 42-10.1-1 of the General Laws of Rhode Island, on February 12, 1988. Under the Authority of Chapter 50 of the Act, the Authority constitutes a body corporate and politic and an instrumentality and agency of the City, having a distinct legal existence from the City. The purposes for which the Authority may act are to acquire, construct, maintain, renovate, repair and operate public facilities and public equipment (borrowing money for such purposes through issuance of the Authority's bonds and notes) for lease to the City for the conduct of the executive, legislative and judicial functions of government and its various branches, departments and agencies. Such leases to the City require the City to pay rent to the Authority in an amount necessary to cover the payment of bonds or notes issued by the Authority, but the lease payments are subject to annual appropriation by the City Council. The Authority has no power to levy taxes. The various types of projects which the Authority is authorized to finance include (but are not limited to) judicial, administrative, educational, residential, civic facilities, rehabilitative, medical, police, fire and public safety, recreation, transportation, public water supply system and such other projects as the Authority shall be requested to initiate to provide effective governmental, health, safety and welfare services in the City. The Act limits the borrowing of the Authority to an amount equal to fifteen percent (15%) of the City's most recently adopted budget for any one issue and to an aggregate outstanding amount equal to fifty percent (50%) of the City's most recently adopted budget provided, however, that there shall not be included in the calculation of this limitation fifty percent (50%) of the outstanding principal amount of any bonds issued for which the Authority or the City receives school housing aid pursuant to Sections 16-7-44 and 16-7-41 of the Rhode Island General Laws. The Authority had $361,214,254 in bonds outstanding as of June 30, 2013. In November 2013 the Authority refunded certain outstanding bonds for school purposes through the Rhode Island Health and Educational Building Corporation ( RIHEBC ). The Authority issues bonds for school purposes through RIHEBC in order to receive State School Housing Aid. As of November 19, 2013, the date of delivery of the refunding bonds, $353,219,254 of Authority debt was outstanding. A-29

On April 4, 2014 the Internal Revenue Service notified RIHEBC that it had opened a routine audit of RIHEBC s $94,090,536.40 Providence Public Buildings Authority Revenue Bonds (School Projects) 2007 Series A and 2007 Series B. Counsel has been engaged to respond to the audit notice. The Authority is required by the Act to report annually to the Mayor and City Council as to its activities for the preceding fiscal year, including audited financial statements. The Authority has $8,943,000 of Build America Bonds, $28,796,000 of Qualified School Construction Bonds, and $8,591,000 of Qualified Zone Academy Bonds outstanding as of June 30, 2013. According to the Tax Exempt Bonds Office within the Internal Revenue Service, interest subsidy payments made to issuers on such bonds on or after October 1, 2013 through and including September 30, 2014 will be reduced by 7.2%. This is projected to decrease the total subsidy by $176,865 during this time period, of which up to 80% may be eligible for State School Housing Aid. Leases with Providence Redevelopment Agency The Providence Redevelopment Agency (the Agency ) was formed on December 20, 1946 pursuant to Chapters 31, 32 and 33 of Title 45 of the Rhode Island General Laws (the Act ) by a duly enacted resolution of the City Council of the City. Under the Act, the Agency constitutes a body corporate and politic, exercising public and essential government functions, and having a distinct legal existence from the City. The Agency was created to eliminate and prevent blighted and substandard areas and replace such areas through redevelopment of well-planned, integrated, stable, safe, and healthful neighborhoods. The Agency has the authority to acquire, develop as a building site, administer, sell and lease property, has the power of eminent domain, and the power to issue bonds, notes and other evidence of indebtedness. The Agency does not have the power to levy taxes. The Agency and the City are parties to several leases which require the City to pay rent to the Agency for the use of Agency projects in an amount necessary to cover payments of bonds, notes, or lease certificates of participation of the Agency but the rental payments are subject to annual appropriation by the City Council. The Agency had $86,382,071 in bonds, notes and lease certificates of participation outstanding as of June 30, 2013. City Master Lease Program and Leases The City uses a master lease program to finance routine capital equipment and had approximately $13,154,268.69 million outstanding as of June 30, 2013. During fiscal year 2010, the City entered into sale-leaseback transactions involving certain street lights within the City. The transactions resulted in the City receiving $14.5 million in payments and committing to a future stream of lease payments. Actual Bonded Debt Service Maturities The following table sets forth a schedule of debt service for the outstanding General Obligation and Lease Revenue Bonds of the City as of June 30, 2013: A-30

General Obligation Bonds Public Buildings Authority (1) Redevelopment Agency Total Debt Fiscal Year Principal Interest Principal Interest Principal Interest Service 2014 $ 9,645,000 $ 4,933,475 $ 26,843,129 $ 17,469,031 $ 5,740,250 $ 3,660,096 $ 68,290,981 2015 9,805,000 4,816,229 27,725,788 16,321,720 5,963,250 3,423,710 68,055,696 2016 10,240,000 4,421,136 28,252,001 15,126,509 6,256,833 3,152,034 67,448,514 2017 9,995,000 4,022,528 29,522,664 13,833,686 6,519,833 2,857,501 66,751,211 2018 10,475,000 3,579,164 29,023,323 12,543,479 6,779,833 2,576,768 64,977,567 2019 8,470,000 3,125,828 28,892,683 11,225,171 6,082,833 2,266,361 60,062,877 2020 8,915,000 2,694,158 26,602,167 9,990,618 4,700,833 2,009,871 54,912,647 2021 4,855,000 2,357,009 24,449,167 8,848,408 4,905,833 1,779,792 47,195,208 2022 5,095,000 2,113,209 22,594,167 7,773,321 4,630,000 1,550,800 43,756,496 2023 5,350,000 1,853,132 22,814,167 6,761,352 4,855,000 1,324,600 42,958,251 2024 5,600,000 1,607,592 23,784,167 5,755,656 4,595,393 1,585,082 42,927,889 2025 5,855,000 1,349,548 20,199,167 4,806,003 4,131,823 2,050,152 38,391,693 2026 6,165,000 1,038,950 19,539,167 3,914,494 4,262,205 1,918,570 36,838,386 2027 2,200,000 711,656 16,959,167 3,009,344 4,404,478 1,776,047 29,060,692 2028 2,310,000 601,656 12,794,167 2,277,744 4,558,567 1,622,708 24,164,842 2029 2,425,000 486,156 1,219,167 1,755,600 4,569,436 1,466,464 11,921,823 2030 2,510,000 398,250 - - 518,167 1,316,833 4,743,250 2031 2,605,000 304,125 - - 489,633 1,345,367 4,744,125 2032 2,700,000 206,438 - - 462,585 1,372,415 4,741,438 2033 2,805,000 105,188 - - 436,950 1,398,050 4,745,188 2034 - - - - 412,655 1,422,345 1,835,000 2035 - - - - 389,644 1,445,356 1,835,000 2036 - - - - 367,826 1,467,174 1,835,000 2037 - - - - 348,210 1,486,790 1,835,000 Total $ 118,020,000 $ 40,725,425 $ 361,214,254 $ 141,412,135 $ 86,382,071 $ 46,274,888 $ 794,028,773 (1) Interest shown net of Build America Bond subsidy. Debt Ratios and Net General Obligation Debt per Capita Set forth below is a chart detailing the debt ratios and net General Obligation Debt per Capita for the City for the fiscal years 2008-2013: Net Estimated Fiscal Year Assessed % of Full Net Bonded Net Debt to Full Net Bonded Ended 6/30 Population (1) Valuation Assessment (2) Valuation Debt (3) Per Capita Value Debt Service Revenues 2008 (4) 173,618 $ 10,647,099,376 84.00 % $ 12,675,118,304 $ 105,075,000 $ 605 0.82 % $ 12,933,250 4.72 % 2009 173,618 10,229,955,803 85.94 11,903,602,284 96,735,000 557 0.81 12,930,826 4.73 2010 173,618 10,314,593,118 99.16 12,279,277,521 88,260,000 508 0.72 12,688,553 4.73 2011 (4) 178,042 9,043,751,702 99.16 10,523,332,211 80,935,000 455 0.77 11,119,209 3.82 2012 178,042 8,880,265,666 99.16 10,333,099,448 73,815,000 415 0.71 9,538,506 3.18 2013 178,042 9,360,367,207 99.16 10,231,682,760 118,020,000 663 1.15 12,914,283 Not Available Source: City of Providence (1) U.S. Census (2) Percent of assessment estimated by Tax Assessor using tax equalization studies of the Rhode Island Department of Administration Office of Local Government Assistance and data from real estate sales. (3) Excluding water debt deemed self-supporting (4) Revaluation/update EMPLOYEE RELATIONS Municipal employees have the right, pursuant to the Rhode Island General Laws, to organize, to designate bargaining representatives and to negotiate with the City on matters pertaining to wages, hours and all conditions of employment. Additionally, municipal employees have all the rights granted to private employees by the State Labor Relations Act, except the right to strike. Should the representatives of bargaining units and the City be unable to reach agreement after collective bargaining, State law provides for the submission of unresolved issues to arbitration. The decision of appointed arbitrators, concerning uniformed public safety employees, is binding on the parties with respect to all issues, including those which involve the expenditure of money. Further, the arbitrators, in such cases, must consider the ability of the community to pay as a factor in making their decisions. However, with regard to non-uniformed municipal employees and teachers, decisions of arbitrators are binding on the parties with respect to all issues except those involving the expenditure of money. A-31 Ratio of Net Debt % of Debt Service to Tax

The City has sought changes in all municipal contracts as they have expired. Concessions in healthcare, flexibility in scheduling employees and wages were, and continue to be, topics for negotiations. Over the past year, the City has successfully negotiated contracts with the police, fire, teachers and Local 1033 bargaining units. Municipal Employees (Non-School) School Department The Rhode Island Laborers District Council on the behalf of the Public Service Employees, Local 1033 entered into an amended contract for the fiscal year 2012 year that was set to expire on June 30, 2012 and a new 3-year contract that expires June 30, 2015. The Providence Firefighters Local 799, International Association of Firefighters entered into two contracts covering fiscal years 2011-2013 and fiscal years 2013-2016. The contract with the police union was successfully renegotiated through FY2016. The Providence Teacher s Union AFT Local 958 The contract expires on August, 31, 2014 and is currently in negotiations. The Association of Providence Public Schools Staff and Administrators Union Local 5 AFSA The agreement expires on June 30, 2015. Rhode Island Laborers' District Council on behalf of the Public Service Employees, Local 1033 (which covers business educational specialists and technical staff, teacher assistants, and public school Safety Services Officers) The contract expires on June 30, 2015. Rhode Island Council 94, Affiliate of America Federation of State, County and Municipal Employees (A.F.S.C.M.E.), Local 1339 (which covers clerical employees) The contract expires on August 31, 2015. LITIGATION AND OTHER MATTERS The City is a defendant in many cases involving claims for personal injury, property damage, tax appeals, claims for contract violations, claims for violations of civil rights, and other claims. The City is a party in many other matters not included here, as they are less significant in terms of financial exposure or otherwise. As for matters involving property owners seeking relief from assessment, there are significant number of cases in which there is currently insufficient data to estimate the City s potential exposure. In the cases where there was enough data, the cases have been evaluated and, where appropriate, added to this list. It should also be noted that in virtually all tax appeal cases, taxpayer relief comes in the form of future tax credits for the taxpayer - forgone future City revenue - as opposed to a payment by the City. However, there is no litigation pending against the City which, in the opinion of the City Solicitor, either individually or in the aggregate, would result in judgments that would have a materially adverse effect on the City's financial position, or its ability to meet its debt service obligations. Nevertheless, the following cases should be noted: 15 Park Row v. Tax Assessor - This is an appeal for relief from tax assessment for a commercial property. The potential exposure exceeds $2.2 million for tax years 2009-2012. The matter currently is in settlement discussions. 50 Agnes Street v. City and Building Board of Appeals This is an appeal of the City s issuance of a building permit to an abutting property. Plaintiff brought suit in State Court alleging the City violated its due process rights. The amount of damages sought is not yet known. 101 Plain LLC v. Tax Assessor This action constitutes an appeal for relief from tax assessment for 10 commercial properties. The potential exposure exceeds $300,000 for each tax year 2010, 2011, 2012, and 2013. The matter currently is in settlement discussions. Typically, relief in this type of case comes in the form of future tax credits for the taxpayer. 380 Westminster Street LLC v. Tax Assessor This action constitutes an appeal for relief from tax assessment for a piece of commercial property. The potential exposure averages an excess of $398,000 for each tax year: 2008, 2009, 2010 and 2011. The matter is currently in discovery. Typically, relief in this type of case comes in the form of future tax credits for the taxpayer. AER Realty, LLC v. City and Providence Redevelopment Agency This is an action wherein the plaintiff claims inverse condemnation and diminishment of value of property owned at One Fields Point. The plaintiff is seeking $1.5 million. The City is in the process of filing a dispositive motion. A-32

Andrews v. City of Providence (Medicare) This case concerns retired police and fire employees who opted out of a settlement. The settlement ended litigation that was a certified class action challenging an ordinance requiring Medicare eligible retired employees of the City to enroll in Medicare as a condition of receiving or continuing to receive health benefits. The individuals who have opted out of the retiree class have brought a separate action. Atlantic-Eddy Realty v. Tax Assessor This action constitutes an appeal for relief from tax assessment for three (3) properties. The potential exposure could exceed $300,000. Typically, relief in this type of case comes in the form of future tax credits for the taxpayer. Estate of Jameson Bazelais and Oidin Bazelais v. City This lawsuit involves the death by drowning of one minor child and the injury of another at a City swimming pool. The City is vigorously defending the suit, but if proven, damages against the City could exceed $1.5 million. The matter is currently in discovery. Brown University v. Tax Assessor This action constitutes an appeal for relief from tax assessment for 11 commercial properties. The potential exposure exceeds $2 million for each tax year 2010 and 2011. The matter is currently in settlement discussions. Typically, relief in this type of case comes in the form of future tax credits for the taxpayer. Ceprano v. City wrongful termination and libel suit commenced by the City s former Tax Collector. Summary judgment recently entered for the defendants as to most, but not all, of the counts of Plaintiff s complaint. If proven, damages against the City could exceed $350,000. Doughty v. City of Providence recently commenced civil suit in which the Providence Firefighters Union alleges violations of the Fair Labor Standards Act concerning the calculation of overtime payments. If proven, damages could exceed $3,000,000. Estate of Juana Contreras v. City wrongful death action alleging gross negligence on the part of the city and two emergency medical technicians. Damages against the City could exceed $750,000 if proven. Trial is scheduled to commence on June 23, 2014. Extell Providence, LLC v. Tax Assessor This action constitutes an appeal for relief from tax assessment for 1 commercial property. The potential exposure exceeds $255,000.00 for tax year 2010. The matter is currently in settlement discussions. Epoch SL III, Inc., Epoch SL I, Inc. v. Tax Assessor This action constitutes an appeal for relief from tax assessment for 3 commercial properties. The potential exposure exceeds $260,000.00 for tax year 2010. The matter is currently in discovery. Typically, relief in this type of case comes in the form of future tax credits for the taxpayer. Epoch SL III, Inc., Epoch SL I, Inc. v. Tax Assessor This action constitutes an appeal for relief from tax assessment for 3 commercial properties. The potential exposure exceeds $255,000.00 for tax year 2011. The matter is currently in discovery. Typically, relief in this type of case comes in the form of future tax credits for the taxpayer. Farrell v. Retirement Board - This is a state court action in which the former fire chief plaintiff is contesting both the Retirement Board s denial of an accidental disability retirement and the City s calculation of his pension allowance. The Court granted summary judgment for the City on the first issue, and, as for his pension allowance, the court found questions of fact and left it for trial. If plaintiff were to win all issues on appeal, he would win in the range of tens of thousands of dollars for pension allowance and the city could potentially have to pay more in health care costs as he would be entitled to heath care for life without the cost cap which his current plan provides. Franchina v. City This is a sexual harassment and discrimination action filed against the city by a female firefighter. It is pending in Federal District Court. Damages against the City could exceed $250,000 if proven. The matter is in discovery, and trial likely will commence in the fall of 2014. J&W Associates v. Tax Assessor This is an action challenging 11 property tax valuations. The potential exposure exceeds $2 million for tax years 2010-2012. The matter is currently in settlement discussions. Typically, relief in this type of case comes in the form of future tax credits for the taxpayer. Machado v. City wrongful death suit resulting from alleged police chase. A verdict against the city could be in excess of $500,000. One expert still needs to be deposed. Trial is expected to commence in late 2014. A-33

Manzotti v. City recently commenced civil suit in which the Fraternity Order of Police President, on behalf of all other officers, alleges violations of the Fair Labor Standards Act concerning the calculation of overtime payments. If proven, damages could exceed $2 million. McAllister Towing v. Tax Assessor - This action constitutes an appeal for relief from tax assessment for tangible property (primarily a tugboat). The potential exposure could exceed $357,643.16. Mendonca v. City - action for alleged police brutality on October 20, 2009. Although the extent of the personal injury to the claimant is not yet clear, available information suggests that if liability is found, damages against the City could be in excess of $250,000. The matter was filed in the Rhode Island Superior Court, but the City removed it to the United States District Court for the District of Rhode Island. Trial likely will commence in late 2014. Mentor v. Providence School Department - action for breach of contract, violation of civil rights and defamation arising from Mentor s failure to receive a continuation of its contract to provide adult education services for 2002 academic year. The Court granted the City s motion to dismiss the civil rights claim. The City is actively undertaking further efforts to obtain dismissal of the remaining claims. If the Plaintiff prevails on the contract claim alone, damages could exceed $850,000. Park Row Properties, Ltd. v. City - This case is pending in Providence Superior Court and involves maintenance and repairs to the Amtrak station plaza and parking garage. If the City were to be found liable, damages could exceed $11 million. PRI I, LP v. Tax Assessor - These are two actions for appeals for relief from tax assessment for 1 commercial property. The potential exposure exceeds $700,000 for tax year 2010 and $600,000 for tax year 2011. The matter is scheduled for trial in the summer of 2014. Providence Biltmore the city and the Biltmore Hotel entered into a tax stabilization agreement, which provided a reduced amount of property taxation upon completion of certain renovations. The city has been underpaid over the 2012 and 2013 tax years when the Biltmore was erroneously given the benefit of the reduced taxation ahead of schedule. The city estimates that Biltmore currently owes an additional $1.34 million in taxes. Quattrucci v. City of Providence (Cost of Living Adjustment) This case concerns retired police and fire employees who opted out of a settlement. The settlement ended litigation that was a certified class action challenging an ordinance that suspended a cost of living adjustment benefit. The individuals who have opted-out of the retiree class have brought a separate action to challenge the suspension of the COLA benefit. Retirement Board v. Frank E. Corrente - The Superior Court confirmed the action by Retirement Board to award a reduced pension pursuant to the City s honorable service ordinance. The Mayor has retained separate counsel and has intervened in the action, challenging the propriety of any award under the circumstances and the Board has also appealed the decision of the Mayor to intervene in this matter. The Rhode Island Supreme Court has decided to have both appeals briefed concurrently - with full briefing rather than for a show cause hearing. SEI/Aaron s v. Tax Assessor This action constitutes an appeal for relief from tax assessment and illegal tax for tangible taxes. The potential exposure could exceed $2 million. Typically, relief in this type of case comes in the form of future tax credits for the taxpayer. School Housing Aid Litigation action challenging the state s attempt to recoup an alleged overpayment in aid to the City which, if the City is found liable, could result in an approximately $6 million judgment against the City. Terzian, Boghos v City of Providence and Laborers International of North America Local Union 1033 - Boghos Terzian was suspended for off-duty criminal conduct and later terminated for unauthorized absences from his position as a utility maintenance worker at Water Supply Board. He had been unable to report to work and perform his job duties due to his incarceration at the ACI from his criminal conduct. Terzian has claimed wrongful suspension and failure to subsequently provide adequate due process hearing procedures which led to his termination. Terzian sued Local Union 1033 alleging failure to adequately represent him resulting in his suspension and termination. Terzian is seeking compensation for lost income, expenses, costs and reinstatement. Lost income totals $204,000. Yangambi v. City (School Board) claims of employment discrimination and retaliation for an alleged failure to promote a school department teacher to an administrator position. This matter went to trial in March 2014. A jury returned a verdict for the City on nine of ten claims. The jury found for the plaintiff on one claim of discrimination and assessed A-34

damages at $190,710.35. With prejudgment interest, the damages exceed $300,000. A notice of appeal to the Rhode Island Supreme Court will be filed in June 2014. Young v. City of Providence civil suit for damages relating to a rape allegedly committed by a City police officer. If the City were to be found liable, damages could exceed $750,000. Discovery has begun but not yet concluded. A-35

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APPENDIX B AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2013

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CITY OF PROVIDENCE, RHODE ISLAND COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended June 30, 2013 City of Providence Finance Department 25 Dorrance Street, Providence, RI 02903

CITY OF PROVIDENCE RHODE ISLAND YEAR ENDED JUNE 30, 2013 TABLE OF CONTENTS Page(s) INTRODUCTORY SECTION: Letter of Transmittal................... Organization Chart.... List of City Officials.... GFOA Certificate of Achievement....... i-vii viii ix X FINANCIAL SECTION: Report of Independent Auditors................................. Basic Financial Statements and Required Supplementary Information: Management's Discussion and Analysis.... Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position................................................ Statement of Activities.............................. Fund Financial Statements: Governmental Funds: Balance Sheet....................................... Statement of Revenues, Expenditures, and Changes in Fund Balances.... Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds (B-2) to the Statement of Activities (A-2)..... Proprietary Funds: Statement of Net Position..................... Statement of Revenues, Expenses and Changes in Net Position..... Statement of Cash Flows................... Fiduciary Funds: Statement of Fiduciary Net Position.......... Statement of Changes in Fiduciary Net Position.......... Notes to Financial Statements....................... Required Supplementary Information: Budgetary Comparison Schedule for the General Fund...... Budgetary Comparison Schedule for the School General Fund.... Notes to Required Supplementary Information.......... Schedule of Funding Progress.... Other Supplementary Information: Non-major Governmental Funds: Combining Balance Sheet............................... Combining Statement of Revenues, Expenditures, and Changes in Fund Balances..... A-1 A-2 B-1 B-2 B-3 C-1 C-2 C-3 D-1 D-2 E-1 E-2 E-3 E-4 F-1 F-2 1-2 3-11 12 13 14 15 16 17 18 19-20 21 22 23-55 56-60 61 62 63 64 65 (CONTINUED)

CITY DE PROVIDENCE RHODE ISLAND YEAR ENDED JUNE 30, 2013 TABLE OF CONTENTS School Grant Funds: Combining Balance Sheet... Combining Statement of Revenues, Expenses and Changes in Fund Balances... G-1 G-2 Page(s) 66 67 Agency Funds: Statement of Changes in Assets and Liabilities.... Capital assets schedules: Capital Assets Used in the Operation of Governmental Funds.......... 1-1 J-1 68 69 STATISTICAL SECTION: Net Position by Component.......... Changes in Net Position.... Fund Balances, Governmental Funds........................ Changes in Fund Balances, Governmental Funds..................... Tax Revenue by Source.......... Assessed Values and Estimated Actual Values of Taxable Property............... Principal Property Taxpayers...................... Property Tax Levies and Collections........................ Ratios of General Bonded Debt Outstanding.... Direct Governmental Activities Debt.... Legal Debt Margin Information.................... Pledged Revenue Coverage..................... Demographic and Economic Statistics.... Principal Employers............... Full-Time Equivalent Employees by Function.......... Operating Indicators by Function............ Capital Assets Statistical by Function.................. Schedule 1 70 2 71-72 3 73 4 74 5 75 6 76 7 77 8 78 9 79 10 80 11-12 81-82 13 83 14 84 15 85 16 86 17 87 18 88 (CONCLUDED)

CITY OF PROVIDENCE Angel Taveras, Mayor Introductory Section Letter of Transmittal Organizational Chart List of City Officials GFOA Certificate of Achievement

CITY OF PROVIDENCE Angel Taveras, Mayor December 31, 2013 City Council Providence, Rhode Island Honorable Members, Rhode Island state law requires that all general purpose, local governments publish a complete set of audited financial statements within six months of the close of each fiscal year. This report fulfills that requirement for the fiscal year (FY) that ended June 30,2013. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute assurance that the financial statements are free of any material misstatements. Accountants and advisers from Braver PC have issued an unqualified ("clean") opinion on the City of Providence, Rhode Island's financial statements for the year ended June 30, 2013. A copy of their independent auditor's report is located at the front of the financial section of this report. Management's discussion and analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview and analysis ofthe basic financial statements. The MD&A is intended to compliment this letter of transmittal and should be read in conjunction with it. Profile of the Government The capital city of Providence was founded in 163 6 and incorporated in 183 I. It occupies a total land area of 18.1 square miles and an additional 1.9 square miles of water; is located at the head ofnarragansett Bay on the Providence River, and is the major population, financial, educational, governmental, and industrial center of Rhode Island. Situated on the Boston-Washington Interstate 95 corridor, with proximity to multi-billion dollar markets and multi-million population centers, residents and businesses have ready access to all major forms of transportation, including AMTRAK, Providence & Worcester Railroad, TF Green International Airport, the Port of Providence and Interstates 95 and 195. Multi-modal transportation has most recently been expanded with the opening of Interlink, increasing commuter rail service connections with the Massachusetts Bay Transit Authority. Providence has the largest population of Rhode Island's cities and towns with 178,036 residents (20 I 0 Census), up 2.5 percent from 173,618 in 2000 (2000 Census.) The demographic profile for the City is as follows: Caucasians 49.8 percent; Hispanics 38.1 percent; African Americans 16.0 percent; Asians 6.4 percent; and Native Americans 1.4 percent.

The City has a Mayor-Council form of government. A Home Rule Charter was adopted in 1980 and became fully effective on January 3, 1983. The responsibilities of City government include providing a range of services that include: general government, community development, administrative services, public safety, sanitation, public works, planning and development, workforce development, recreation, parks and public education. The City adopts an Annual Budget for the General Fund, which includes the School Department. The legal level of control is by Department. Providence is Recovering Upon taking office in January 20 I I, Mayor Angel Taveras signed an Executive Order creating an independent Municipal Finances Review Panel to conduct a full review of the City' s finances. On March 3, 2011, the Panel delivered a report that identified a $110 million structural deficit in FY2012. Mayor Taveras took swift and decisive action to address this "Category 5 Fiscal Hurricane." He called on every stakeholder in the city to share in the sacrifices necessary to pull Providence back from the brink. He cut his own pay by I 0 percent and reduced the Mayor's Office budget by 10 percent. The Mayor renegotiated union contracts with City workers, firefighters, police officers and teachers, saving approximately 10 percent of the value of those contracts in FY20 12 and more than $100 million over the next several years. Mayor Taveras secured contributions from Brown University and the six other major, tax-exempt universities, colleges and hospitals in Providence, totaling nearly $48 million in additional revenue over II years. In FY20 13, the City reached a landmark agreement with retirees and current employees to reform the City pension and retiree health care system. The agreement saved Providence approximately $18.5 million in FY20 13 and reduces the City' s unfunded pension liability by approximately $170 million. Details of the agreements: Pension PENSIONS CAPPED: In FY2023, COLAs will be reinstated only for retirees with pensions less than 150 percent the state median income OR less than the salary of an incumbent employee of the same rank as the retiree at the time of retirement (police and fire retirees only), whichever is lower. COLA SUSPENSION: All COLAs suspended for 10 years. (Families of city employees killed in the line of duty will continue to receive annual COLA.) After 10 years, COLAs will only be reinstated for retirees who are under the pension cap, and COLAs will end when the cap is reached. ELIMINATION OF HIGH-END COLAS: All 5 and 6 percent compounded COLAs are permanently eliminated. FUTURE COLAS LIMITED: Retirees whose COLAs are reinstated in FY2023 will receive annual raises of 3 percent compounded or what is called for in their contract, whichever is less. ONE-TIME STIPEND IN FY2017: In FY20 17 (Year 5 of the agreement), retirees collecting pensions of less than $100,000 will receive a stipend of $1,500. This one-time payment will not change their future pension calculations. CONTINGENT STIPEND IN FY2020: In FY2020 (Year 8 of the agreement), retirees collecting pensions of less than $100,000 may receive a separate one-time stipend of up to $1,500 if the city achieves savings through the creation of a self-insured dental plan. The potential payment would not change future pension calculations. ii

SUSTAINABLE REFORMS TO PENSION CALCULATIONS: Future pensions will be calculated based on the four highest years of service. The current system calculates pensions based on the highest three years. CONTINUED PENSION CONTRIBUTIONS: Employees will be required to contribute to the pension system for as long as they earn credit toward a pension. ACCIDENTAL DISABILITY: Accidental disability pension calculations will be based on 66 2/3 of the employee's final salary. Healthcare (pertains only to police, fire and retiree association) MEDICARE SETTLEMENT: Retirees 65 and older will move onto Medicare. PART B SUPPLEMENT AND MEDICARE PENALTY: The City will provide funding to cover Medicare's Part B supplement and any penalties retirees will be required to pay. PART D PRESCRIPTION DRUG COVERAGE: The City will also provide funding to cover Medicare Part 0 prescription drug coverage. UNDER 65 HEALTH COVERAGE UNCHANGED: Health care for retirees under the age of 65 will not be changed. These reforms saved the City $4 million ofthe $18.5 million noted above in FY2013 and are projected to save the City more than $40 million over the next I 0 years. Through collaborative efforts and shared sacrifice, the Taveras administration, with the partnership of the Providence City Council and stakeholders across the City, has all but eliminated the City's $110 million structural deficit and ended FY20 13 with a $1.57 million surplus in the general fund. Creating Jobs and Growing Providence's Economy Just as bold actions were necessary to weather Providence's "Category 5 Fiscal Hurricane" and put the city on the path to long-term financial sustainability, equally bold actions are now being taken to lay the groundwork for a sustained recovery. In April 2013, Mayor Angel Taveras announced a 20-point economic development action plan, Putting Providence Back to Work. The plan builds on Providence's competitive advantages: a knowledge economy anchored by best-in-class hospitals and universities, vibrant arts and cultural centers, a strong maritime industry, thriving small businesses in local neighborhood economies and a young workforce. The City is also making long-term investments in basic municipal operations: strong schools, safe neighborhoods, reliable public infrastructure and the timely provision of city services. 1. Freeze Commercial Tax Rates. In its FY2014 budget, the Taveras administration successfully worked with the City Council to freeze Providence's commercial tax rate. 2. Fix the Permitting Process. The City of Providence has established a new departmental subgroup focused solely on small permit application review so that simple, small-dollar projects proceed more quickly. Providence will also soon allow for online permit application submissions. 3. Remove Barriers to Redevelopment. The Providence Redevelopment Agency is aggressively pursuing a range of economic development tools to spur the continued development of key real estate parcels in the city. iii

4. Develop Surface Lots Citywide. The Taveras administration is preparing a new citywide tax stabilization ordinance designed to incentivize new development on Providence' s surface parking lots. 5. Reinvent Kennedy Plaza. In partnership with a range of stakeholders, Providence is undertaking a fundamental infrastructure reformation of its downtown hub, Kennedy Plaza. The project is designed to make the downtown more attractive for visitors, businesses and residents alike. 6. Invest in Storefront Improvement. The Taveras administration is working to begin a program of reimbursing eligible, main-street small businesses for storefront capital improvements. 7. Provide Targeted Back Office Supports. Providence will begin providing operational support and technical assistance to small businesses and/or eligible start-ups. 8. Reform the City's Zoning Ordinance. Providence is currently undertaking a comprehensive update of the City's existing zoning ordinance to support goals for smart growth, sustainable, cultural, equitable and transit-oriented development. 9. Invest in Historic Preservation. Providence worked with the General Assembly, the Office of the Governor and local advocates to win reinstatement ofthis critical tax credit. 10. Market Available Real Estate. Providence will create and maintain a public database of properties available for development. Beyond being available online, Providence's available real estate will be aggressively marketed to site selection consultants nationwide. 11. Raise Participation in State Incentive Programs. Using a range of outreach strategies, the City will execute an outreach campaign to increase the rate of participation. 12. Review Statewide Regulatory Policy. The City proposes a full review of Rhode Island labor, tax and regulatory policy, in cooperation with both business organizations and labor representatives, with the goal of aligning Rhode Island standards with national norms. 13. Raise Student Achievement. Providence is implementing two new, award winning programs Providence Talks and Providence Reads - to help ensure Providence children enter kindergarten ready to learn and reach grade level reading proficiency by third grade. 14. Expand Apprenticeship Programs. Providence will expand its portfolio of apprenticeship programs, looking first to Providence's working waterfront and creative economy. 15. Support Nursing & Health Sciences. Providence will work to bring a nursing school to the City. 16. Expand Adult Education. Workforce Solutions of Providence/Cranston will seek new partnerships between Rhode Island' s institutions of public higher education and local community organizations. 17. Make Streetcars a Reality. Providence is aggressively pursuing a sustainable funding strategy to bring this transportation option to fruition. 18. Rehabilitate Foreclosed Properties. Providence will partner with Community Development Corporations to direct the rehabilitation of abandoned and vacant residential properties. 19. Market Providence. In the summer of 20 13 Providence conducted a regional marketing and advertising campaign encouraging visitors to "Come to Providence." iv

20. Improve the Visitor Experience. Providence will erect new visitor information kiosks, which will double as a centralized ticketing hub for all a1ts related events and activities in Providence. Infrastructure Improvements The City is working to improve infrastructure in ways that will impact all residents and businesses for years to come. Providence Road Improvement Project: In spring 2013, the City kicked off the Providence Road Improvement Project, its efforts to rebuild and repair approximately 65 miles of roads, or one out of every six roads, in Providence. The road improvement work is funded by a $40 million bond that was overwhelmingly approved by city voters in November 2012. Improving Public Education Plans to grow the City's economy can never be divorced from efforts to improve our schools. The City is working to provide every child in Providence with a first-class education. Providence Reads - In fall20 12, the City launched Providence Reads- an initiative in partnership with more than a dozen businesses and organizations to increase grade-level reading, promote school readiness, improve school attendance and support summer learning in Providence. Providence Talks - In March 2013, the City became the $5 million Grand Prize Winner of Bloomberg Philanthropies' Mayors Challenge for its innovative proposal to set low-income children on a path toward lifelong achievement by increasing the number of words they hear in their earliest years. Children and Youth Cabinet - The City is working closely with the Providence Children and Youth Cabinet (CYC), a diverse team of more than I 00 community leaders helping to guide the future of education in Providence. In October 2012, the CYC released its 'Educate Providence: Action for Change' report, which provides baseline data and II indicators to measure the City's progress in educating children from cradle to career. Awards- Providence's efforts to improve public education were recognized and honored. o In July 2012, Providence was named an All-America City by the National Civic League for its ambitious plan to ensure that more children are reading at grade level by the end of third grade. o o In July 2012, the Casey Foundation chose Providence as the first site for Evidence2Success because of the City's and the State's commitment to investing in children and youth, and for their collaborative efforts to improve outcomes of children in low-income neighborhoods. In October 2012, the Mayor's Children and Youth Cabinet was among the national winners of the Together for Tomorrow School Improvement Grant. Providence received the national recognition for its efforts to turn around low-performing schools and raise student achievement in every public school. v

o In October 2012, Cities of Service announced that it awarded Providence a $25,000 grant supported by Bloomberg Philanthropies to implement Leyendo, a service-based initiative to boost reading levels for Providence students who are not reading on grade level and speak a language other than Engli sh at home. Healthy Communities In August 2012, Mayor Taveras signed an executive order establishing the Healthy Communities Office. The office is charged with improving the health and well ness of Providence residents by improving nutrition and increasing access to healthy foods, promoting physical activity and recreation, and preventing substance abuse among young people, among other efforts. The Healthy Communities Office, along with other City departments, has worked to make Providence a healthier community for all. Cyclovia: In 2012, the City held its first Cyclovia on Broad Street. The street was closed to traffic for exclusive use of pedestrians, runners, skaters and bicyclists. Cyclovia is an international phenomenon that reportedly began in Bogota, Colombia and has spread to cities across the globe, including New York City, Chicago, Seattle, San Francisco, Los Angeles, Miami, and Cambridge, Mass. In spring 2013, Mayor Taveras announced that the City will host an expanded schedule of three Cyclovia events over the summer. Tobacco Prevention: In early 2012, Mayor Taveras and the Providence City Council passed two ordinances banning the sale of tobacco products and store discounts aimed at children. The tobacco industry sued to prevent the laws from taking effect. In December 2012, the City won an important victory in its fight to protect children from the harmful effects of tobacco, when Rhode Island U.S. District Cou1t Chief Judge Mary Lisi ruled against Big Tobacco's attempt to block City officials from enforcing the new anti-tobacco laws. Sustainability The City of Providence is taking vital steps to improve the quality of life for City residents and to ensure that Providence is a sustainable and livable place for residents and visitors. Big Green Can Recycling: In October 2012, the City launched a new recycling initiative, making it easier for residents to recycle in Providence. Every Providence household received a new, 65-gallon gray trash barrel and began using the large, 95-gallon ' Big Green Can' for recycling. The larger recycling barrel, coupled with the statewide transition to single-stream recycling, aims to increase recycling rates by making it easier for all residents to recycle. Lots of Hope: In 2012, the City of Providence, in partnership with the Southside Community Land Trust and the Rhode Island Foundation, launched Lots of Hope, a new initiative to convert city-owned vacant lots into productive urban farms. Earth Day City-wide Clean Up: ln April 2013, Mayor Taveras and the City of Providence hosted the first annual city-wide celebration of Earth Day, drawing I,800 volunteers who cleaned parks, planted trees and worked on neighborhood beautification efforts. vi

Debt Administration Outstanding governmental ~nd business-type activity bonds at June 30,2013 totaled $623,051,000. (Note 7 of this report presents more detailed information about the City's debt position.) The City has the following bond ratings: Moody's Investor Services Standard and Poors Fitch Baal BBB BBB Long-Term Financial Planning As part of the annual budget process, the Finance and Planning Departments present a five-year Capital Improvement Plan. This plan identifies costs and financing methods for those capital projects the City expects to fund over the next five years. The 20 12-20 16 fiscal year Capital Improvement Plan projects needs through FY20 16. The plan provides for the needs of the general government and addresses issues such as infrastructure, major equipment replacement, school facilities, public safety, recreation and public lands and parks. Acknowledgments The preparation of this report could not have been accomplished without the dedication and hard work of the Finance, Planning & Development, Policy and Communications professionals who work for the City of Providence. I would like to express my appreciation and gratitude to all of the staff members who assisted and contributed to its preparation. I also appreciate the assistance and dedication of the audit team of Braver PC. Finally, I would like to thank Mayor Angel Taveras and the Providence City Council for their steady and responsible stewardship of all aspects of City government. ~ ~~~ Lawrence J. ~~~ini Finance Director vii

,~,, City of Providence Organizational Chart Mayor City Council Water Supply Board Treasury City Archives Parks Com iss ion City Council Office Finance Police Fire Information Technology Emergency Management Telecommunications Public Property/ Purchasing Board of Canvassers Parks & Recreation Economic Development Redevelopment Agency Inspections & Standards Art, Culture & Tourism viii

City Officials As of June 30, 2013 Ward I -Seth Yurdin Ward 2- Samuel D. Zurier Ward 3- Kevin Jackson Ward 4- Nicholas A. Narducci Ward 5 - Michael A. Solomon Mayor Angel Taveras City Council Ward 6- Michael J. Correia Ward 7- John J. Igliozzi Ward 8 - Wilbur W. Jennings, Jr. Ward 9- Carmen Castillo Ward I 0 - Luis A. Aponte Department Directors Ward 1 1 - Davian Sanchez Ward 12- Terrence Hassett Ward 13 -Brian Principe Ward 14 - David A. Salvatore Ward 15 - Sabina Matos Chief Engineer/GM of Water Supply Chief of Fire Department Chief of Police Department Chief of Staff City Clerk City Controller City Solicitor City Treasurer Director of Administration Director of Arts, Culture, and Tourism Director of Emergency Management Director of Finance Director oflnformation Technology Director of Inspections and Standards Director of Operations Director of Personnel Director of Planning and Development Director of Public Works Director of Telecommunications Internal Auditor Recorder of Deeds Registrar of Vital Statistics Superintendent of Parks and Recreation Superintendent of Schools Tax Assessor Tax Collector Traffic Engineer Boyce Spinelli Michael Dillon, Acting Col. Hugh Clements, Jr. Michael D'Amico, Acting Anna Stetson Michael D ' Antuono Jeffrey Padwa, Esq. James Lombardi, III Michael D'Amico Lynne McCormack Col. Peter Gaynor (ret) Michael Pearis James Silveria Jeff Lykins Alan Sepe Sybil Bailey Ruben Flores-Marzan William Bombard, Acting William Trinque Matthew M. Clarkin, Jr. John Murphy Serena Conley Robert McMahon Dr. Susan Lusi David L. Quinn John Murphy William Bombard ix

Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Providence Rhode Island For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30,2012 Executive Director/CEO X

I CITY OF PROVIDENCE I FINANCIAL SECTION REPORT OF INDEPENDENT AUDITORS MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION

& Braver" I Accountants & Advi sors REPORT OF INDEPENDENT AUDITORS To the Honorable Mayor and Members of the City Council Providence, Rhode Island Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Providence, Rhode Island, as of and for the year ended June 30, 2013, and the related notes to the financial statements which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financ ial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Providence, Rhode Island, as of June 30, 2013, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Needham Taunton 155 South Main Street, Suite 100, Providence. Rl 02903 T401.421.27 10 F401.274.5230 www.thebravergroup.com Providence

Other Matters Required Supplementary Informa tion Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, budgetary comparison information, and Schedules of Funding Progress on Pages 3-ll, Pages 56-62 and Page 63, respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Providence, Rhode Island's basic financial statements. The introductory section and the accompanying financial information listed as supplemental schedules in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining fund financial statements and capital assets schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America, In our opinion, the information is fairly stated in all material respects in relation to the financial statements taken as a whole. The introductory section and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 31,2013, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Providence, Rhode Island's internal control over financial reporting and compliance. Providence, Rhode Island December 31, 20 13 2

CITY OF PROVIDENCE, RHODE ISLAND MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2013 This Management's Discussion and Analysis of the City of Providence, Rhode Island's Basic Financial Statements provides a narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2013. Financial Highlights- Primary Government Government- Wide Highlights Net Position- The liabilities of the City's governmental activities exceeded its assets for the fiscal year ending June 30, 2013 by $146.3 million (presented as "total net position"). Of this amount, a negative of $263.7 million was reported as " unrestricted.' The net investment in capital assets was $117.4 million. The assets of the City's business-type activities exceed its liabilities by $258.7 million. Of this amount, $217.2 million represents the City's net investment in capital assets. Change in Net Position- The City's total net position decreased by $5.3 million in fiscal year 2013. Net position of governmental activities decreased by $7.8 million, while net position of business-type activities increased by $13.1 million. Fund Highlights Governmental Funds - Fund Balances - As of June 30, 2013, the City's governmental funds reported a combined ending fund balance of$91.4 million, a $38.9 million increase from the prior year. Ofthe total fund balance reported, a negative $9.8 million represents "unassigned fund balance". Long-Term Obligations The City's total long-term obligations related to its government activities had a net increase of $42.8 million during the current fiscal year. The total long-term obligations of the City's proprietary activities increased $.02 million during the current fiscal year. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Providence's basic financial statements. The City's basic financials statements include three components: I) government- wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains additional supplementary information (budget schedules) and other supplementary information (combining financial statements). These components are described in this next section of this analysis. Basic Financial Statements The basic financial statements include two types of statements that present different views of the City's financial information. These statements are the Government-Wide and the Fund Financial statements. These financial statements are accompanied by Notes to the financial Statements, which provide detailed information about financial statement items. 3

Government-Wide Financial Statements CITY OF PROVIDENCE, RHODE ISLAND MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2013 The government-wide financial statements provide a broad view of the city's operations in a manner similar to a business operating in the private sector. The statements provide short-term and long-term information about the City' s financial position, which assists in assessing the City's economic condition at the end of the fiscal year. These are prepared using the flow of economic resources measurement focus and the accrual basis of accounting. This basically means they follow methods that are similar to those used by most businesses. They take into account all revenues and expenses connected with the fiscal year even if cash involved has not been received or paid. The government-wide financial statements include two statements: The Statement of Net Positon presents all of the government's assets and liabilities, with the difference between the two reported as " net position." Over time, increases or decreases in the City's net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents information showing how the government's net position changed during the fiscal year. All changes in net position are reported, as soon as, the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expense are reported in this statement for some items that will not result in cash flows until future fiscal periods (such as, uncollected taxes and earned, but unused vacation leave). This statement also presents a comparison between direct expenses and program revenues for each function of the City. Both of the above financial statements have separate sections for two different types of the City's programs or activities. These activities are defined below: Governmental Activities - The activities in this section are supported mostly by tax revenues and intergovernmental revenues (federal and state grants). Most services normally associated with City government fall into this category, including the executive, legislative and judicial, financial administration, human resources, public safety, building inspections, public works, recreation, parks, schools, public property, planning, other general government, judgment and claims, retirement costs, debt service, and other employee benefits. Business-Type Activities - These functions normally are intended to recover all or a significant portion of their costs through user fees and charges to external users of goods and services. The City's business-type activities include the operations of the Water Supply Board and The Providence Public Building Authority. The City does not have any discretely presented component units. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Like other local Governments, the City uses fund accounting to ensure and demonstrate compliance with finance-regulated legal requirements. The fund financial statements focus on individual parts of the City government, reporting the City's operations in more detail than the government-wide statements. All of the funds of the City can be divided into three categories. It is important to note that these fund categories use different accounting approaches and should be interpreted differently. The three categories of funds are described below: 4

CITY OF PROVIDENCE, RHODE ISLAND MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2013 1. Governmental Fund Financial Statements - Most of the basic services provided by the City are financed through governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, the governmental fund financial statements focus on near-term inflows and outflows of spendable recourses. They also focus on the balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluation the government's near-term financing requirements. This approach is known as using the flow of current financial resources measurement focus and the modified accrual basis of accounting. These statements provide a detailed, short-term view of the City's finances that assists in determining whether there will be adequate financial resources available to meet the current needs of the City. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-side financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and the governmental activities. These reconciliations are presented on the page immediately following each governmental fund financial statement. The City has four governmental funds considered to be major funds for financial statement presentation. That is, each major fund is presented in a separate column in the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balances. The City's four major governmental funds are comprised of the following: (I) the General Fund, (2) the School Fund, (3) the School Grant Fund, and ( 4) the Capital Projects Fund. All nonmajor governmental funds are presented in single column. The basic governmental fund financial statements can be found immediately following the government-wide statements. 2. Proprietary Fund Financial Statements - These funds are used to show activities that operate more like those of commercial enterprises. Because these funds charge fees for services provided to outside customer, including local governments, which are known as enterprise funds. Proprietary funds provide that same type of information as the government-wide financial statement, only in more detail. Like the government-wide financial statements, proprietary fund financial statements use the accrual basis of accounting. There is no reconciliation needed between the government-wide financial statements for business-type activities and proprietary fund financial statements. The City has two major enterprise funds: The Water Supply Board and the Providence Public Buildings Authority. Financial statements for the Providence Public Buildings Authority may be obtained from the City of Providence Finance Department. The Internal Service Fund is maintained to account for the self-insured health claims and potential legal claims of the City. The basic proprietary fund financial statements can be found immediately following the governmental fund financial statements. 5

CITY OF PROVIDENCE, RHODE ISLAND MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2013 3. Fiduciary Fund Financial Statements - These funds are used to account for resources held for the benefit of parties outside the City government. Fiduciary funds are not reflected in the governmentwide financial statements because the resources of these funds are not available to support the City's own programs. The accounting used for fiduciary funds is similar to that used for proprietary funds. They use the accrual basis of accounting. The City' s fiduciary funds are the Employee Retirement Fund, various Private-Purpose Trust Funds, and Agency Funds. The fiduciary financial statements can be found immediately following the proprietary fund financial statements. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and the fund basis financial statements. The notes to the financial statements can be found immediately following the fiduciary fund financial statements. Required Supplementary Information The basic financial statements are followed by a section of required supplementary information. This section includes budgetary comparison schedules for the general and school funds - the only governmental funds for which legal budgets are adopted annually. In fiscal year 2013, there were no significant modifications to the budgets originally adopted for each fund. Other Supplementary Information Combining Financial Statements and Schedules Combining financial statements are presented for nonmajor governmental funds and combining schedules are presented by individual grant within the school department. These are presented following the required supplementary information. The total columns of these combining financial statements and schedules are presented in the applicable fund financial statement. 6

Government-Wide Financial Analysis Net Postion CITY OF PROVIDENCE, RHODE ISLAND MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2013 As earlier noted, net position may serve as a useful indicator of the government' s financial position over time. The City' s combined net position (government and business-type activities) totaled $112.4 million at the end of2013, compared to $107.1 million at the end last year. The largest portion of the City' s net position, $334.7 million, reflect its investment in capital assets, like land, buildings, equipment, and infrastructure (roads, bridges, and other immovable assets) less any outstanding related debt used to acquire that asset. The City uses these capital assets to provide services to citizens; consequentially, these assets are not available for future spending. Although the City's investments in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets can not be used to liquidate these liabilities. June 30,2013 June 30, 2012 Governmental Business-type Activitites Activities Total Governmental Business-type Activitites Activities Total Current and other assets Capital assets Total Assets $ 275,678 $ 685,985 961,663 64,006 $ 295,297 359,303 339,684 981,282 1,320,966 $ 233,151 684,133 917,284 $ 74,183 $ 266,247 340,430 307,334 950,380 1,257,714 Current liabilities Long-term liabilities Total liabilities 220,182 887,794 1,107,976 22,256 78,322 100,578 242,438 966,116 1,208,554 205,922 849,873 1,055,795 20,151 51,462 71,613 226,073 901,335 I, 127,408 Net Assets: Investment in capital asse1 net of related debt Restricted Unrestricted Total Net assets $ 117,449 (263,762) (146,313) $ 217,210 35,112 6,403 258,725 $ 334,659 35,112 (257,359) 112,412 $ 122,997 (261,508) (138,511) $ 213,758 20,943 10,749 245,450 $ 336,755 20,943 (250,759) 106,939 Restricted net position of $35.1 million primarily represent water restricted funds that are subject to external restrictions on how they may be used. Internally imposed designations of resources are not presented as restricted net position. Changes in Net Position The City's net postion decreased by $7.8 million and increased by $13.1 million for governmental activities and business-type activities, respectively. General fund revenues increased due to the success of increased tax collections and higher than budgeted departmental while expenditures for healthcare and pension costs came in higher than the budgeted amounts. Business-type activities increased due to large commitment to the replacement of infrastructure included in water rates in FY2013. Approximately 47.5% ofthe City's total governmental revenues were generated from taxes and payments in lieu of taxes. 34% resulted from grants and contributions, including Federal Aid. Charges for various goods and services provided 13.3% of total revenues, while other revenues and investment and rental income accounted for 5.2% of total revenues, respectively. The City's expenses cover a range of services. The largest expenses were for school, public safety, retirement costs, and employee benefits. Revenues from business-type activities in 2013 exceeded 7

CITY OF PROVIDENCE, RHODE ISLAND MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2013 expense by $12.8 million. The Business-type activities reported an increase in revenue of I%, while expense increased 2% over the prior year. Revenues: June 30,2013 June 30, 2012 Business- Business- Governmental type Governmental type Activities Activities Total Activities Activities Total Program revenues: Charges for service $ 98,334 $ 96,214 $ 194,548 $ 92,095 $ 97,270 $ 189,365 Operating grants and contributions 261,254 261,254 241,623 241,623 Capital grants and contributions 852 852 827 827 General revenues: Property taxes 351,605 351,605 344,052 344,052 Grants not restricted for a speci fie purpose 19,296 19,296 21,472 21,472 Miscellaneous 18,047 243 18,290 16,846 16,846 Unrestricted investment earnings 84 2, 100 2,184 100 200 300 Total revenues 748,620 99,409 848,029 716,188 98,297 814,485 Expenses: Executive, legislative and judicial 32,662 32,662 51,677 51,677 Finance 58,429 58,429 57,819 57,819 Public safety 165,773 165,773 I 57,676 157,676 Builiding inspection 4,264 4,264 4,126 4, 126 Public works 21,889 21,889 25,754 25,754 Recreation 1,903 1,903 1,644 1,644 Public lands and parks 20,415 20,415 19,437 19,437 Education 395,994 14,422 410,416 379,768 13,908 393,676 Community development 24,297 24,297 18,687 18,687 Interest on long-term debt 30,796 30,796 32,365 32,365 Economic development 19,396 19,396 19,992 19,992 Water 52,553 52,553 50,461 50,461 Total expenses 756,422 86,371 842,793 748,953 84,361 833,3 14 Change in net assets (7,802) 13,038 5,236 (32,765) 13,936 ( 18,829) Net assets- beginning (138,511) 245,687 107, 176 (I 05,746) 231,75 I 126,005 Net assets- ending $ ( 146,313) $ 258,725 $ 112,412 $ (138,511) $ 245,687 $ 107, 176 Business-Type Activities The business-type activities increased the City's net position by $13.1 million. This resulted primarily from a $11 million increase in net position of the Water Supply Board, an increase of net position of$! million by the Providence Public Building Authority, and $1 million by the school lunch program. Financial Analysis of the City's Individual Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. 8

CITY OF PROVIDENCE, RHODE ISLAND MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2013 Governmental Funds The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City' s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. The general fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the general fund was a negative $9.8 million, an increase of 1.6 million from 11.4 million the prior year. The increase in fund balance is due to increased tax collections and higher than budgeted departmental revenues. As a measure of the general funds' liquidity, it may be useful to compare both unassigned fund balance and total fund balance. School Grants-Fund Balance - The school grant funds account for federal and state grants received and expended by the school system. The fiscal year 2013 school grants fund balance is reported at $1.99 million, a $.2 million decrease from fiscal year 2012. The inclusion of all state aid in fiscal 2013 was included in the School's general fund and excluded from the school grants fund. School Fund - The school fund ended the year with a $0 fund balance in accordance with City charter regulations. The expenditures were $337.9 million as compared to $320.4 million in the prior year. The inclusion of all state aid in fiscal 2013 was included in the School's general fund and excluded in the school grants fund. Capital Projects Fund-Fund Balance - The capital projects fund accounts for resources to be used for the acquisition or construction of capital assets for housing and community improvement activities in the City, other than those financed by proprietary funds. The fiscal year 2013 capital projects fund balance is $39.6 million. The $38.63 million increase from fiscal year 2012 is attributable most notably to the $40 Million Road Bond Paving Initiative. Proprietary Funds The City' s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. As discussed in the business-type activities above, the City's proprietary net position increased by $13 million as a result of operations in the individual enterprise funds. This resulted primarily from a $11 million increase in net position of the Water Supply Board, an increase of net position of $1 million by the Providence Public Building Authority, and $1 million by the school lunch program. General Fund Budgetary Highlights The general fund incurred an uncombined surplus in FY 2013 of $1.9 million. This will increase the cumulative uncombined general fund balance to a negative $17.9 million. The new GASB 54 requirement for combining funds shows a cumulative general fund balance as a negative $9.8 million. Total general fund revenues and transfers for the fiscal year were $449.8 million and total general fund expenditures and transfers for the fiscal year were $447.9 million. Further details of favorable and unfavorable variances of revenue and expense items can be found in the Required Supplementary Information on pages 56 to 60 of the Comprehensive Annual Financial Report. 9

CITY OF PROVIDENCE, RHODE ISLAND MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2013 Capital Asset and Debt Administration Capital Assets (Note 5 to the Basic Financial Statements) June 30, 2013 Governmental Business-type Governmental Activitites Activities Total Activitites June 30, 2012 Business-type Activities Total Land $ 46,768 $ 24,529 $ 71,297 $ 46,865 Land Improvements 18,682 18,682 Building and Improvements 144,398 146,869 291,267 132,470 Machinery and Equipment 16,704 3,033 19,737 15,519 Infrastructure 102,817 102,817 106, 159 Leased Assets 347,703 10,041 357,744 350,852 Construction in Progress 27,595 75,049 102,644 32,268 $ 685,985 $ 278,203 $ 964, 188 $ 684, 133 $ 21,917 $ 68,782 18,682 18,682 148,545 281,015 3,082 18,601 106, 159 10,225 361,077 63,796 96,064 $ 266,247 $ 950,380 The City's investment in capital assets for its governmental activities as of June 30, 2013 amounts to $1,072.6 million, net of accumulated depreciation of $386.6 million, leaving a net book value of $686 million. This investment in capital assets included land, buildings, improvements, equipment, infrastructure and construction in progress. Infrastructure assets are items that are normally immovable and of value only to the City, such as roads, bridges, streets and sidewalks, drainage systems, lighting systems, and similar items. 10

CITY OF PROVIDENCE, RHODE ISLAND MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2013 Debt Administration June 30, 2013 June 30, 2012 Governmental Business-type Governmental Business-type Activitites Activities Total Activitites Activities Total General Obligation Bonds $ 105,66 1 $ 105,66 1 $ 73,815 $ 73,815 Revenue Bonds 65,934 78,087 144,021 68,860 52,489 121,349 Tax Increment Obligations 9,450 9,450 12,585 12,585 Capital Notes Payable 35, 127 35, 127 39,554 39,554 Notes Payable 2,777 2,777 2,776 2,776 PPBA Debt 363,919 363,919 388,487 388,487 $ 218,949 $ 442,006 $ 660,955 $ 197,590 $ 440,976 $ 638,566 The authority of the City to incur debt is governed by federal and state laws, which restrict the amounts and purposes for which a municipality can incur debt. General obligation bonds are backed by the full faith and credit of the City, including the City's power to levy additional taxes to ensure repayment of the debt. Accordingly, all general obligation debt currently outstanding was approved by a vote of the City Council. The City's total outstanding notes and bonds increased by $22.4 million during the current fiscal year. The 2004 State legislative session authorized the City to issue variable rate debt and to participate in interest rate swaps. The City is developing policies that will set guidelines and procedures and define permitted instruments. It will set participant requirements and limitations on exposure, as well as ongoing management and reporting requirements. The City of Providence maintains the following ratings from Wall Street's credit agencies for general obligation debt: an Baal rating from Moody's Investors Service, and a BBB rating from Standard and Poor and an BBB rating from Fitch. The City of Providence continues to perform long-term strategic planning in a pro-active attempt to control costs: examples of these costs are health insurance, pension costs, education, salaries and benefits and debt service. The City has negotiated with all of its unions to increase employee contributions for health insurance. Additional information on the City's long-term debt obligations can be found in Notes 7 and 8 to the Financial Statements. Requests for Information This financial report is designed to provide a general overview of the City of Providence's finances for all of the City of Providence's citizens, taxpayers, customers, and investors and creditors. This financial report seeks to demonstrate the City's accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional information should be addressed to: City of Providence, Finance Department, Providence City Hall, Providence, RI 02903. 11

I CITY OF PROVIDENCE I BASIC FINANCIAL STATEMENTS

CITY OF PROVIDENCE A-1 Statement of Net Position June 30, 2013 (in thousands) Governmental Activities Business-Type Activities Totals* ASSETS: Current Assets: Cash and cash equivalents $ 106,031 $ 32,088 $ 138,119 Restricted cash and cash equivalents 26,628 26,628 Investments 27,039 8,698 35,737 Restricted investments 6,261 6,261 Taxes receivable (net of allowance) 24,259 24,259 Intergovernmental receivable 46,831 874 47,705 Loan receivable (net of allowance) 28,041 28,041 Restricted receivables 18 18 Other receivable 13,295 13,295 Charges for service receivable (net of allowance) 13,098 13,098 Internal balances 25,048 (25,048) Other assets 2,482 1,389 3,871 Total current assets 273,026 64,006 337,032 Noncurrent assets Deferred charges 2,652 2,652 Capital assets, nondepreciable 74,363 102,326 176,689 Capital assets, depreciable, net 611,622 192,971 804,593 Total noncurrent assets 688,637 295,297 983,934 TOTAL ASSETS 961,663 359,303 1,320,966 LIABILITIES: Current Liabilities: Warrants and accounts payable 30,055 6,995 37,050 Payable to retirement plan 39,603 39,603 Due to other governments 165 165 Line of credit 3,000 3,000 Accrued liabilities 43,466 43,466 Other 5,051 5,051 Unearned revenue 15,145 1,997 17,142 Amounts payable with current restricted assets 1,395 1,395 Long term debt due within one year 91,748 3,818 95,566 Total current liabilities 220,182 22,256 242,438 Noncurrent liabilities: Due in more than one year 887,794 78,322 966,116 Total noncurrent liabilities 887,794 78,322 966,116 TOTAL LIABILITIES 1,107,976 100,578 1,208,554 Net Position Net investment in capital assets 117,449 217,210 334,659 Restricted for Water Quality Protection 31,512 31,512 Restricted for debt service 3,600 3,600 Unrestricted (263,762) 6,403 (257,359) TOTAL NET POSITION $ (146,313) $ 258,725 $ 112,412 *After internal receivables and payables have been eliminated SEE NOTES TO THE BASIC FINANCIAL STATEMENTS 12

CITY OF PROVIDENCE, RHODE ISLAND A-2 Statement of Activities For the Year Ended June 30, 201 3 (in thousands) Program Revenues Net (Expense) Revenue and Changes in Net Position Charges for Services Operating Grants Capita l Grants Governmental Business-type and and Total Activities Activities Contributions Contributions Functions/Progra ms Expenses Primary government: Governmental activities: Executive, legislative, and judicial $ 36,944 $ 222 $ (36,722) $ $ (36,722) Finance 58,462 68,955 10,493 10,493 Public Safety 170,854 11,776 $ 183 (158,895) (158,895) Building inspection 4,264 4,503 239 239 Public Works 15,752 229 (15,523) (15,523) Recreation 1,876 211 442 (1,223) (1,223) Public land and parks 21,941 264 (21,677) (21,677) Education 395,215 12,174 247,624 (135,417) (135,417) Community development 24,297 13,005 (11,292) (11,292) Interest on long-term debt 26,817 (26,817) (26,817) Total governmental activities 756,422 98,334 261,254 (396,834) (396,834) Business-type activities: PPBA 19,396 20,020 624 624 Water Supply Board 52,553 61,070 $ 2,100 10,617 10,617 Non-major School lunch program 14,422 15,124 702 702 Total business-type activities 86,371 96,214 2,100 11,943 11,943 Total primary government $ 842,793 $ 194,548 $ 261,254 $ 2,100 (396,834) 11,943 (384,891) General revenues Taxes: Property taxes 325,960 325,960 Payments in lieu of taxes 25,645 25,645 Transfers In (out) (243) 243 Grants and contributions not restricted to specific programs 19,296 19,296 Investment income 84 852 936 Loss on disposal of assets Miscellaneous 18,290 18,290 Total general revenues 389,032 1,095 390,127 Change in net position (7,802) 13,038 5,236 Net position-beginning (138,511) 245,687 107,176 Net position-ending $ (146,313) $ 258,725 $ 112,412 SEE NOTES TO THE BASIC FINANCIAL STATEMENTS 13

CITY OF PROVIDENCE, RHODE ISLAND B-1 Balance Sheet- Governmental Funds June 30, 2013 (in thousands) ASSETS: Cash and cash equivalents Investments Receivables, net: Taxes Loans Intergovernmental Other Due from other funds Other assets TOTAL ASSETS Major Funds School Grants General Fund School Fund Fund $ 17,010 $ 23,155 $ 8,197 $ 24,259 30,533 1,270 13,881 8,559 544 101 44,753 24,918 699 $ 125,114 $ 49,887 $ 22,878 $ Capital Projects Other Non-major Gove rn menta l Fu nds 40,543 $ 11,130 27,039 28,041 1,147 34 200 20,077 214 40,743 $ 87,682 $ $ Total Governmental Funds 100,035 27,039 24,259 28,041 46,831 9,238 90,647 214 326,304 LIABILITIES AND FUND BALANCES: LIABILITIES: Warrants and accounts payable Accrued liabilities Other payables Unearned revenues Due to other funds Due to other governments TO TAL LIABILITIES $ 3,211 $ 19,618 $ 3,167 $ 4,721 22,463 519 50,531 26,640 36 2,342 49,749 7,770 14,786 89 76 134,941 49,887 20,890 1,177 $ 2,016 212 8,777 16,983 1,177 27,988 $ 29,189 27,915 50,531 37,795 89,288 165 234,883 FUND BALANCES: Nonspendable Restricted Committed Unassigned TOTAL FUND BALANCES 1,988 (9,827) (9,827) 1,988 19,932 39,566 29,512 10,268 (18) 39,566 59,694 19,932 71,066 10,268 (9,845) 91,421 TO TAL LIABILITIES AND FUND BALANCES $ 125,114 $ 49,887 $ 22,878 $ 40,743 $ 87,682 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore, are not reported in the funds. Net pension obligations and other post employment benefits Deferred charges Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds Deferred revenues (net of an allowance for uncollectibles) are recorded in the funds, but are not deferred under the measurement focus employed in the Statement of Net Assets Internal service funds 685,985 (321,102) 2,652 (628,934) 23,665 Net position of governmental activities (A-1) $ (146,313) SEE NOTES TO THE BASIC FINANCIAL STATEMENTS 14

CITY OF PROVIDENCE, RHODE ISLAND B-2 Statement of Revenues, Expenditures and Changes in Fund Balances-Governmental Funds For the Year Ended June 30, 2013 (in thousands) Major Funds major Total School Grants Capital Governmental Governmental General Fund School Fund Fund Projects Funds Funds REVENUES: Taxes $ 324,058 $ $ $ $ $ 324,058 Departmental revenue 83,942 400 8,341 92,683 Federal and state grants and reimbursements 37,759 202,079 45,545 657 20,155 306,195 Investment and rental income 555 2,742 3,297 Fines and forfeitures 6,030 6,030 Other 1,426 11,601 173 1,8 76 15,076 TOTAL REVENUES 453,770 214,080 45,718 657 33,114 747,339 EXPENDITURES: Current: Executive, legislative, and judicial 10,640 1,009 11,649 Finance 50,719 24 50,743 Public safety 146,497 6,995 153,492 Building inspection 3,931 3,931 Public works 18,963 18,963 Recreation 736 1,014 1,750 Public lands and parks 19,726 732 20,458 Other departments 7,877 7,877 Grants 4,231 4,231 Education 337,939 44,679 382,618 Community development 20,066 20,066 Noncurrent: Capital outlays 3,038 1,600 4,638 Debt Service: Principal 41,680 2,663 44,343 Interest and other costs 24,693 463 14 25,170 TOTAL EXPENDITURES 329,693 337,939 44,679 3,501 34,117 749,929 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 124,077 (123,859) 1,039 (2,844) (1,003) (2,590) OTHER FINANCING SOURCES (USES) Transfers in 2,414 125,892 994 407 129,707 Transfers out (124,919) (2,033) (2,232) (766) (129,950) Bond proceeds 39,345 39,345 Bond premium 2,125 2,125 Loan proceeds 250 250 TOTAL OTHER FINANCING SOURCES (USES) (122,505) 123,859 (1,238) 41,470 (109) 41,477 NET CHANGE IN FUND BALANCES 1,572 (199) 38,626 (1,112) 38,887 FUND BALANCES AT BEGINNING OF YEAR, (11,399) 2,187 940 60,806 52,534 FUND BALANCE AT END OF YEAR $ (9,827) $ 1,988 $ 39,566 $ 59,694 91,421 SEE NOTES TO THE BASIC FINANCIAL STATEMENTS 15

CITY OF PROVIDENCE, RHODE ISLAND B-3 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds For the Year Ended June 30, 2013 (in thousands) Net Change in Fund Balances - Total Governmental Fund (B-2) $ 38,887 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. In the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Governmental funds do not present revenues that are not available to pay current obligations. In contrast, such revenues are reported in the Statement of Activities when earned. (4,825) 1,523 Internal service funds are used by management to charge the costs of certain activities, such as fleet maintenance and information technology, to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities. The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds. Change in net position of Governmental Activities in the Statement of Activities (A-2) 1,547 (44,934) $ (7,802) SEE NOTES TO THE BASIC FINANCIAL STATEMENTS 16

CITY OF PROVIDENCE, RHODE ISLAND C-1 Statement of Net Position-Proprietary Funds June 30, 2013 (in thousands) Water Supply Board Business-Type Activities-Enterprise Funds Non-major PPBA School lunch Totals Program Governmental Activities Internal Service Fund ASSETS: Current assets: Cash and cash equivalents $ 4,883 $ 25,269 $ 1,936 $ 32,088 $ 5,996 Restricted cash 26,628 26,628 Investments 8,698 8,698 Restricted investments 6,261 6,261 Receivables, net 12,936 162 13,098 4,057 Restricted receivables 18 18 Receivables- other governments 874 874 Rentals receivable 486,863 486,863 Due from other funds 409 409 30,183 Inventories 645 645 Other assets 744 744 2,268 Total current assets 52,115 520,830 3,381 576,326 42,504 Noncurrent assets : Deferred gain on refunding 621 621 Capital assets: Land 21,918 21,918 Buildings and improvements 74,388 74,388 Improvements other than buildings 270,994 270,994 Machinery and equipment 30,450 30,450 Construction in progress 80,408 80,408 478,158 478,158 Less accumulated depreciation 182,861 182,861 Net capital assets 295,297 295,297 Total noncurrent assets 295,297 621 295,918 Total assets 347,412 521,451 3,381 872,244 42,504 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 4,104 1,732 1,159 6,995 866 Claims payable 10,642 Unearned revenue 1,997 1,997 1,015 Due to other funds 1,793 177 1,970 29,981 Line of credit 3,000 3,000 Other 13,400 13,400 Amounts payable from restricted assets 1,395 1,395 Current portion of long-term debt and capital leases, net 3,818 25,663 29,481 Total current liabilities 16,107 40,795 1,336 58,238 42,504 Noncurrent liabilities: Revenue bonds, net 74,269 476,959 551,228 Net OPES obligation 4,053 4,053 Total noncurrent liabilities 78,322 476,959 555,281 TOTAL LIABILITIES 94,429 517,754 1,336 613,519 42,504 NET POSITION Net investment in capital assets 217,210 217,210 Restricted for Water Quality Protection 31,512 31,512 Restricted for debt service 3,600 3,600 Unrestricted 4,261 97 2,045 6,403 TOTAL NET POSITION $ 252,983 $ 3,697 $ 2,045 $ 258,725 $ SEE NOTES TO THE BASIC FINANCIAL STATEMENTS 17

CITY OF PROVIDENCE, RHODE ISLAND C-2 Statement of Revenue, Expenses and Changes in Net Position-Proprietary Funds For the Year Ended June 30, 2013 (in thousands) Governmental Activities Water Supply School Lunch Internal Service Board PPBA Program Totals Fund OPERATING REVENUES: Charges for sales and services $ 61,070 $ $ 51 4 $ 61,584 $ 97,119 Lease receipts 18,500 18,500 Other 1,520 14,610 16,130 2,323 Total operating revenues 61,070 20,020 15,124 96,214 99,442 OPERATING EXPENSES: Co st of sales and services 27,901 866 14,422 43,189 Health claims 99,443 Administration 10,759 77 10,836 Depreciation 12,264 12,264 Total operating expenses 50,924 943 14,422 66,289 99,443 OPERATING INCOME (LOSS) 10,146 19,077 702 29,925 (1) NON-OPERATING REVENUES (EXPENSES) : Investment income 297 555 852 Interest expense (1,629) (18,453) (20,082) Total non-operating expenses (1,332) (17,898) (19,230) NET INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 8,814 1,179 702 10,695 Capital grants and contributions 2,100 2,100 Transfers in 243 243 Transfers out 2,100 243 2,343 Change in net position 10,914 1 '179 945 13,038 NET POSITION, BEGINNING 242,069 2,518 1,100 245,687 NET POSITION, ENDING $ 252,983 $ 3,697 $ 2,045 $ 258,725 $ SEE NOTES TO THE BASIC FINANCIAL STATEMENTS 18

CITY OF PROVIDENCE Statement of Cash Flows-Proprietary Funds For the Year Ended June 30, 2013 (in thousands) Water Supply Board Business-Type Activities-Enterprise Funds Non-major PPBA School lunch Totals Program C-3 Governmental Activities Internal Service Fund CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers and other $ 62,070 $ 43,194 $ 397 $ 105,661 $ 99,233 Cash received from intergovernmental sources 1,520 15,075 16,595 Cash paid to vendors (24,499) (280) (14,905) (39,684) (100,734) Cash paid to employees (13,520) (476) (13,996) Net cash provided by (used for) operating activities 24,051 44,434 91 68,576 (1,501) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers (602) 243 (359) Due from (to) other funds 1,251 (260) 991 2,407 Net cash provided by (used for) noncapital financing activities 1,251 (602) (17) 632 2,407 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets (41,314) (6,083) (47,397) Interest paid on debt (1,629) (18,556) (20,185) Proceeds from line of credit 3,000 3,000 Repayment of long-term debt and capital leases (3,602) (24,568) (28,170) Proceeds from long-term debt 29,200 29,200 State housing aid receipts State housing aid transfer Capital grants 2,100 2,100 Net cash provided by (used for) capital and related financing activities (12,245) (49,207) (61,452) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment securities (2,137) (2,137) Sale of investment securities Investment income 297 555 852 Net cash provided by (used for) investing activities (1,840) 555 (1,285) Net increase (decrease) in cash and cash equivalents 11,217 (4,820) 74 6,471 907 Cash and Cash Equivalents Beginning 19,944 30,089 1,862 51,895 5,089 Ending $ 31,161 $ 25,269 $ 1,936 $ 58,366 $ 5,996 SEE NOTES TO THE BASIC FINANCIAL STATEMENTS 19 (CONTINUED)

CITY OF PROVIDENCE. RHODE ISLAND C-3 Statement of Cash Flows-Proprietary Funds For the Year Ended June 30, 2013 (in thousands) Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities Operating income (loss) Adjustments to reconcile operating income to net cash provided by (used in) operating activities: Depreciation Change in allowance for doubtful accounts Transfer Changes is assets and liabilities: Receivables Inventories Other assets Due from other funds Accounts payable and accrued expenses Due to other funds Unearned revenue Net cash provided by (used in) operating activities Water Supply Board $ 10,146 12,264 (1,321) 2,586 (8) (265) 631 Business-Type Activities-Enterprise Funds 18 $ 24,051 $ $ PPBA 19,077 602 24,695 60 44,434 Non-major School lunch Program $ 702 349 (960) $ 91 Totals $ 29,925 12,264 (1,321) 602 27,630 (8) (265) (269) 18 $ 68,576 Governmental Activities Internal Service Fund $ (1) (209) (1,291) $ (1,501) SEE NOTES TO THE BASIC FINANCIAL STATEMENTS 20 (CONCLUDED)

CITY OF PROVIDENCE, RHODE ISLAND D-1 Statement of Fiduciary Net Position-Fiduciary Funds June 30, 2013 (in thousands) Retirement Purpose Trust Plan Funds Agency Fund ASSETS Investments, at fair value: U.S Government securities $ 14,582 Corporate and foreign bonds 37,222 Corporate equity securities 195,537 Mutual funds $ 1,400 Total investments 247,341 1,400 Cash and cash equivalents 3,449 3 $ 1,979 Receivables: Loans receivable 26,158 Other 59,111 58 Total receivables 85,269 58 Total assets 336,059 1,403 2,037 LIABILITIES Accounts payable 241 Due to student groups 100 Other payables 33 1,937 Total liabilities 274 $ 2,037 NET ASSETS Held in Trust for Pension Benefits and other purposes $ 335,785 $ 1,403 SEE NOTES TO THE BASIC FINANCIAL STATEMENTS 21

CITY OF PROVIDENCE, RHODE ISLAND D-2 Statement of Changes in Fiduciary Net Position-Fiduciary Funds For the Year Ended June 30, 2013 (in thousands) t:mployee Retirement Plan Private Purpose Trust Fund Funds ADDITIONS: Contributions: Employer $ 58,145 Employees 10,940 Donations $ 17 Total contributions 69,085 17 Investment Earnings Net appreciation (depreciation) in the fair value of investments 31,707 197 Interest 1,975 Dividends 3,469 Total investment earnings 37,151 197 Total additions 106,236 214 DEDUCTIONS: Benefits 95,402 24 Administrative expenses 1,588 Total deductions 96,990 24 Change in net assets 9,246 190 Net position - beginning 326,539 1,213 Net position - ending $ 335,785 $ 1,403 SEE NOTES TO THE BASIC FINANCIAL STATEMENTS 22

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 1. SIGNIFICANT ACCOUNTING POliCIES Reporting Entity The City of Providence, Rhode Island (the "City") was incorporated in 1832. The City covers 18.5 square miles located in southeastern New England, at the head of the Narragansett Bay on the Atlantic sea coast. The City is approximately 45 miles from Boston and approximately 3 1/2 hours from New York by automobile or rail. The City operates under a Mayor-Council form of government. A Home Rule Charter was adopted in November 1980 and became fully effective on January 3, 1983. The Mayor is elected by the voters of the City to a four-year term. City Council members are also elected to four-year terms, which coincide with the term of the Mayor. Most department heads and other City officials are appointed by the Mayor. The City complies with generally accepted accounting principles (GAAP), including all relevant Governmental Accounting Standards Board (GASB) pronouncements. The accounting and reporting framework and the more significant accounting policies are discussed in subsequent subsections of this Note. In evaluating how to define the government for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in GASB Statement No. 61. Under GASB Statement No. 61, a legally separate entity is required to be included as a component unit if it is fiscally dependent upon the primary government and there is a financial benefit or burden relationship present. The primary government is financially accountable if it appoints the voting majority of the organization's governing board and (I) it is able to impose its will on that organization or (2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. A potential component unit has a financial benefit or burden relationship with the primary government if, for example, any one of the following conditions exists: a. The primary government is legally entitled to or can otherwise access the organization's resources. b. The primary government is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide financial support to, the organization. c. The primary government is obligated in some manner for the debt of the organization. The criteria has been considered and the blended component units discussed below are included in the City's reporting entity because of the significance of its operational or financial relationships with the City. Individual Component Unit Disclosure The component unit provides services entirely or almost entirely to the City or otherwise exclusively or almost exclusively benefits the City, even though they do not provide services directly to it. The component unit has been reported as if it was part of the primary government through a method of inclusion known as blending. A description of the component unit, criteria for inclusion and its relationship with the City is as follows: Providence Public Buildings Authority The Providence Public Buildings Authority ("PPBA") was created by an act of the Rhode Island General Assembly and was empowered by resolution of the Providence City Council on August 13, 1987, and by resolution of the Public Finance Board, created under Section 42-10.11 of the General Laws of Rhode Island, on February 12, 1988. Membership is comprised of 5 members appointed by the Mayor and approved by the City Council. The PPBA is presented as a blended enterprise fund. 23 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) I. SIGNIFICANT ACCOUNTING POLICIES (Continued) Individual Component Unit Disclosure (Continued) Providence Public Buildings Authority (Continued) The purpose of the PPBA is to acquire, construct, maintain, renovate, repair and operate public facilities and public equipment through the use of public financing for lease to the City. These activities allow the PPBA to provide for the conduct of the executive, legislative and judicial functions of the government. The PPBA is obligated to pay the principal and interest on any financing solely from the rents, revenues and receipts derived under the lease agreements with the City or from receipts on the disposition of the assets being financed. The PPBA's administrative expenses are paid on an annual basis by the lessee in the form of additional rent. Complete financial statements of the PPBA can be obtained through the City of Providence Finance Department, City Hall, Providence, Rhode Island 02903. The Providence Redevelopment Agency The Providence Redevelopment Agency ("PRA") was formed on December 20, 1946 pursuant to R.I.G.L. 45-31 (the Act) by a duly enacted resolution of the City Council of the City. Under the Act, the PRA constitutes a body corporate and politic, exercising public and essential government functions, and having a distinct legal existence from the City. As such, the PRA has the authority to acquire, develop as a building site, administer, sell and lease property, has the power of eminent domain, and the power to issue bonds, notes and other evidence of indebtedness. The PRA does not have the power to levy taxes. The PRA was created to eliminate and prevent blighted and substandard areas and replace such areas through redevelopment of well-planned, integrated stable, safe and healthful neighborhoods. The Powers of the PRA are vested in eight members, including the Mayor of the City ex officio, five members appointed by the Mayor of the City and two members who are also members of the City Council, appointed by the City Council. All appointed members of the PRA must be resident electors of the City. The PRA is presented as a blended special revenue fund. Recently Issued Accounting Standards The City has implemented the following governmental accounting standards during fiscal year ended June 30, 2013: GASB Statement No. 60 - Accounting and Financial Reporting for Service Concession Arrangements. GASB Statement No. 61 - The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34. GASB Statement No. 62 -Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. GASB Statement No. 63 - Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. The City will adopt the following new accounting pronouncements in future years: GASB Statement No. 65 - Items Previously Reported as Assets and Liabilities, effective for the Corporation's fiscal year ending June 30, 2014. GASB Statement No. 66 -Technical Corrections - an amendment of GASB Statements No. lo and No. 62, effective for the Corporation's fiscal year ending June 30, 2014. 24 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) Recently Issued Accounting Standards (Continued) GASB Statement No. 67 - Financial Reporting of Pension Plans - and amendment of GASB Statement No. 25, effective for the Corporation's fiscal year ending June 30,2014. GASB Statement No. 68 - Accounting and Financial Reporting for Pensions - an amendment of GASB Statement No. 27, effective for the Corporation's fiscal year ending June 30,2015. GASB Statement No. 69 - Government Combinations and Disposals of Government Operations, effective for the fiscal year ending June 30, 2015. GASB Statement No. 70 - Accounting and Financial Reporting for Nonexchange Financial Guarantees, effective for the fiscal year ending June 30, 2014. GASB Statement No. 71 - Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB Statement No. 68, effective for the fiscal year ending June 30,2015. The impact of these pronouncements on the City's financial statements has not been determined. Government-Wide Fund Financial Statements The Statement of Net position and Statement of Activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. For the most part, the effect of interfund activity has been removed from these statements. The statements distinguish between governmental and businesstype activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate fund financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and proprietary funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements, proprietary and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Agency funds are not involved in the measurement of results of operations; therefore, measurement focus is not applicable to them. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year when levied for. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. 25 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Governmental fund financial statements are reported using the "current financial resources" measurement focus and the modified accrual basis of accounting. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are generally recorded when a liability is incurred as under accrual accounting, however, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due (matured). Property taxes when levied for, intergovernmental revenue when eligibility requirements are met, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual (measurable) and so have been recognized as revenues of the current fiscal period, if available. All other revenue items, primarily permits and fees, are considered to be measurable only when cash is received by the City. All proprietary funds utilize an "economic resources" measurement focus. The accounting objectives of this measurement focus are the determination of net income, financial position and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise funds and the government's internal service funds are charges to customers for sales and services. Operating expenses for proprietary funds, including both enterprise funds and internal service funds, include the cost of operations, maintenance, sales and service, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Revenues from charges for services of the Providence Water Supply Board are recognized on the accrual basis, net of estimated uncollectibles. Depending upon consumption, metered water sale customers are billed monthly, quarterly or annually for water usage. Large commercial customers and other local water suppliers are billed more frequently. Fund financial statements of the reporting entity are organized into funds each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts which constitute its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity, revenues, and expenditures/expenses. Funds are organized into three major categories: governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria: a) Total assets and deferred outflow of resources, liabilities and deferred inflow of resources, revenues, or expenditures/expenses of that individual, governmental or enterprise fund are at least lo percent of the corresponding total for all funds of that category or type, and b) Total assets and deferred outflow of resources, liabilities and deferred inflow of resources, revenues, or expenditures/expenses of the individual, governmental fund or enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds combined. The City reports the following major governmental funds: - The General Fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. - The School Fund accounts for operations of the Providence school system. Revenue is derived primarily from State and Federal Aid and transfers from the City. 26 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) -The School Grants Fund accounts for federal, state, and private grants received and expended by the school system -The Capital Projects Fund accounts for resources to be used for the acquisition or construction of capital assets for the housing and community improvement activities in the City. The City reports the following major proprietary funds: -The Water Supply Board accounts for the activities of the Providence Water Supply Board. -The Providence Public Buildings Authority accounts for the activities related to acquisition, construction and leasing of capital assets to the City. Additionally, the City reports the following fund types: -The Pension Trust Fund accounts for the activities of the City of Providence Employees Retirement System, which accumulates resources for pension benefit payments to qualified employees. - The Private-Purpose Trust Fund is used to account for resources legally held in trust for the benefit of individuals, organizations or other governments. - The Agency Fund accounts for assets held by the City in a purely custodial capacity. Since agency funds are custodial in nature (i.e. assets equal liabilities), they do not involve the measurement of results of operations. - The Internal Service Fund is used by management to charge the costs of self-insurance and legal claims to individual funds. Interfund Receivables and Payables Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as " internal balances." Pension Plan Accounting Employee Retirement Plan The Employee Retirement Plan (Pension Trust Fund) is reported on the accrual basis of accounting. Employee contributions are recognized in the period in which the contributions are due. Employer contributions to the plan are recognized when due and the City has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan. Administrative costs are financed through investment earnings. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Investments that do not have an established market are reported at estimated fair value, based on value of underlying assets. The net pension obligation, the cumulative difference between annual pension cost and the City's contributions to the plan since 1986, is calculated on an actuarial basis consistent with the requirements of Government Accounting Standards Board Statement No. 27. Expenditures are recognized when they are paid or are expected to be paid with current available resources. The net pension obligation is recorded as a non-current liability in the government-wide financial statements. Funding Policy The City makes contributions at the discretion of management. 27 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses and expenditures during the reporting period. Actual results could differ from those estimates. Property taxes The City's property tax is levied each year on July I based on the assessed property value, as of the prior December 31, for all real property, tangible property, equipment and motor vehicles located in the City. Assessed values of real property were established by the City Assessor's office at 100% of appraised market value based on 2003 State mandated statistical updated valuations less Homestead exemptions for up to five residential units. Assessed values of tangible property and equipment and motor vehicles are determined annually at 100% of market value, with a State mandated, 10-year phase-out on tangible inventory property and a $6,000 exemption on motor vehicle assessments. Payments on the gross levy are due in equal quarterly installments in July, October, January, and April. Property taxes attach as an enforceable lien on property when levied. Cash equivalents For purposes of the cash flow statement, the City considers certificates of deposits and highly liquid short-term investment funds with original maturities of three months or less, when purchased, to be cash equivalents, including amounts reported as restricted. Investments Investments and pooled fixed income investments are stated at fair value, based on quoted market prices. Inventories and prepaid assets Proprietary fund inventory is stated at the lower of weighted average cost or market using the first-in, first-out method. Inventory consists primarily of materials and supplies. Inventory is not maintained in governmental funds, but is recorded as an expenditure at the time of purchase. Inventory on hand at year-end is not material. Any material payments to vendors that reflect costs applicable to future accounting periods are recorded as prepaid items in both government-wide and fund financial statements. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and in the proprietary fund financial statements. Capital assets are defined by the government as all computer equipment and assets with an initial, individual cost of more than a range of $5,000 to $100,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Improvements are capitalized and depreciated over the remaining useful lives of the related capital asset, as applicable. 28 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) I. SIGNIFICANT ACCOUNTING POLICIES (Continued) Capital Assets (Continued) Capital assets of the governmental activities are depreciated using the straight-line method over the following estimated useful lives: i\ssets )Tear Buildings.......... 45 Building improvements... 20 Public domain infrastructure.................... 45 System infrastructure... 30 Vehicles... 6 Office equipment... 7 Computer equipment... 5 Machinery and equipment... 15 Capital assets are reported as expenditures and no depreciation expense is reported in the governmental fund financial statements. Property, plant and equipment of the business-type activities and proprietary funds are depreciated using the straightline method over the following estimated useful lives: Water Supply Board Buildings, source of supply, structures, and improvements......... oo............ Improvements other than buildings........... 00 Machinery and equipment............. 5-75 years 3-75 years 3-50 years Interest is capitalized on proprietary fund assets acquired with tax-exempt debt. The amount of interest capitalized is calculated by offsetting interest expense incurred from the date of the borrowing until completion of the project with interest earned on invested proceeds from project specific debt issued over the same period. Self-Insurance The City is self-insured in most areas of risk, subject to certain third-party "stop Joss" coinsurance. Self-insured risks include general liability, property and casualty, workers' compensation, unemployment and employee health and life insurance claims. Claims incurred but not paid, including those which have not been reported, are accrued as longterm obligations in the government-wide and internal service fund financial statements. Obligations are paid out of the General Fund and the Internal Service Funds. Allowance for Collection Losses The allowance for possible loan losses is maintained at a level believed adequate by management to absorb potential losses for outstanding loans. Management's determination of the adequacy of the allowance is based on an evaluation of the portfolio, past loan loss experience and current economic conditions. i\ll trade and property tax receivables for governmental and proprietary funds are reported net of an allowance for uncollectibles, totaling $59,530 and $1,465, respectively. The majority of amounts relates to property taxes and water usage. i\mounts determined to be uncollectible are based on the type and age of the related receivable and the ability of the debtor to pay. 29 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) I. SIGNIFICANT ACCOUNTING POLICIES (Continued) Compensated Absences Under the terms of various contracts and policies, employees are granted vacation and sick leave based on length of service. The City's policy is to recognize the cost of vacation and sick leave in governmental funds when paid (matured). The liability for vacation and sick leave is recognized when earned in the government-wide and proprietary fund financial statements. For governmental activities the general fund is used to satisfy this liability as it becomes due, while each enterprise fund accounts for all its settlement of business-type liabilities for compensated absences. Long-term Obligations In the government-wide and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable statement of net position. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond proceeds, premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Payments of bond principal are recognized as expenditures as it comes due. Fund Equity and Net position In the government-wide and proprietary fund financial statements, net position is classified m the following categories: Net investment in capital assets - This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce this category. Restricted Net position -This category represents the net position of the City, which are restricted by outside parties or enabling legislation. Unrestricted Net position or Deficits - This category represents the net position of the City, which do not meet the definition of "restricted" or "invested in capital assets, net of related debt". Deficits require future funding. Governmental fund equity is classified as fund balance. Fund balance is classified into one of the following five categories: nonspendable, restricted, committed, assigned, or unassigned. These categories are defined below. (a) Nonspendable Fund Balance - includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. "Not in spendable form" includes items that are not expected to be converted to cash. (b) Restricted Fund Balance - includes amounts that are restricted to specific purposes. Fund balance is reported as restricted when constraints placed in the use of resources are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. 30 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 1. SIGNIFICANT ACCOUNTING POUCIES (Continued) Fund Equity and Net position (Continued) Unrestricted Net position or Deficits (Continued) (c) Committed Fund Balance - includes amounts that can be used only for the specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision-making authority. Those committed amounts cannot be used for any other purpose unless the government removes or changes the specified use by taking the same type of action it employed to previously commit those amounts usually through city ordinance. The City Council is the highest level of decision-making authority for the City of Providence and utilizes City Ordinances to vote on the City's budget and resolutions proposed by the various committees. (d) Assigned Fund Balance- includes amounts that are constrained by the government's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (a) the governing body itself or (b) a body (a budget or finance committee) or official to which the governing body has delegated the authority to assign amounts to be used for specific purposes. The City of Providence does not currently have a spending policy regarding the order in which restricted, committed, assigned, and unassigned fund balances are spent when more than one amount is available for the expenditures incurred. Accordingly, by default, the City is following the policy prescribed by GASB Statement No. 54 which specifies that fund balance is reduced frrst by committed, then by assigned, then by unassigned when expenditures are incurred for purposes for which any unrestricted fund balance could be used. (e) Unassigned Fund Balance - is the residual classification for the General Fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund. 2. RECONCiliATION OF GOVERNMENTAL ACTIVITIES AND GOVERNMENTAL FUND FINANCIAL STATEMENTS The governmental fund balance sheet includes a reconciliation between fund balances - total governmental funds and net position- governmental activities as reported in the government-wide statement of net position. One element of that reconciliation explains that "long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. " The details of this $628,934 difference are as follows: Bonds and notes payable Add: premiums and discounts Leases payable Capital notes payable Accrued interest payable Compensated absences Workers' compensation Unspent PPBA bond proceeds Claims and judgments Net adjustment to reduce fund balance- total governmental funds to arrive at net assets -governmental ac ti vi ties $ $ (547,74 1) 722 (13, 154) (2 1,973) (4,623) (33,634) (3,875) 23,487 (28, 143) (628,934) The governmental fund statement of revenues, expenditures, and changes in fund balances includes reconciliation between net changes in fund balances - total governmental funds and changes in net position of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that "Governmental funds report capital outlays as expenditures; however, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." The details of this $4,825 difference is as follows: 31 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 2. RECONCILIATION OF GOVERNMENTAL ACTIVITIES AND GOVERNMENTAL FUND FINANCIAL STATEMENTS (Continued) Capital outlay - governmental funds $ 16,559 Depreciation expense Net adjustment to decrease net changes in fund balance - total governmental funds to arrive at changes in net position of governmental activities $ (21,384) (4,825) Another element of that reconciliation states that "the issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities." The details of this $1,547 difference are as follows: Long-Term Liabilities issued or incurred: Bond and note proceeds Bond premium Bond issuance cots Principal repayments: General obligation bonds Capital leases Capital notes Notes payable Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities $ $ (39,595) (2, 125) 463 38, 128 3,342 1,085 249 1,547 Another element of that reconciliation states that "Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds." The details of this $44,934 difference are as follows: Compensated absences Accrued interest Deferred charges Amortization of bond premium Claims and judgments Net pens ion obligation Other post employment benefits Net adjustment to decrease net changes in fund balance- total governmental funds to arrive at changes in net position of governmental activities $ $ (3,042) 244 (378) (437) (2,322) (2,406) (36,593) (44,934) 32 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 3. CASH, CASH EQUIVALENTS AND INVESTMENTS (continued) Deposits The City's custodial credit risk policy is in accordance with RI General Laws, Chapter 35-10.1, depository institutions holding deposits of the State, its agencies or governmental subdivisions of the State, shall at a minimum, insure or pledge eligible collateral equal to 100% of time deposits with maturities greater than sixty days. Any of these institutions which do not meet minimum capital standards prescribed by federal regulators will insure or pledge eligible collateral equal to 100% of deposits, regardless of maturities. Investments The City policy for pension investments is under the oversight of the Board of Investment Commissioners. The Board contracts with an investment advisory firm and approves any new investment vehicles presented by the consultant. The Board follows all applicable state statutes and Section 17-189 of the City Ordinance, which states, ''The Board of Investment Commissioners is authorized and empowered to execute the disposition and investment of the funds which are within its control in any securities and investments as would be acquired by prudent persons of discretion and intelligence in these matters, who are seeking a reasonable income and the preservation of their capital." Interest Rate Risk The City does not have a formal investment policy for its pension funds that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The City's policy is to limit its exposure to fair value losses arising from changes in interest rates by structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity, and investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools. Concentrations The City's policy is to maintain a diversified portfolio to minimize the risk of loss resulting from over concentration of assets in a specific issuer. Custodial Credit Risk Deposits This is the risk that, in the event of failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. As of June 30, 2013 $46,361 of the city's bank balance of $196,324 was uninsured and uncollateralized. (Amounts do not include PPBA, as such amounts cannot be separated.) Investments This is the risk that in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The City does not have a custodial credit risk policy. 33 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 3. CASH, CASH EQUIVALENTS AND INVESTMENTS (Continued) Cash and Cash Equivalents Deposits with financial institutions PPBA deposits with financial institutions Water Supply Board deposits with financial institutions School Lunch Program deposits with financial institutions Total cash and cash equivalents Investments Non-major Governmental Funds Mutual Funds Municipal Bonds Private Purpose Trust Funds Mutual Funds $ 111,462 25,269 31,511 1,936 170,178 27,039 27,039 1,400 PPBA Investments Guaranteed Investment Contracts Water Supply Board Equity Mutual Funds Pension Trust Funds U.S. Government Securities Corporate and Foreign Bonds Common and Preferred Stocks Total investments Total cash, cash equivalents and investments 8,698 8,698 6,261 14,582 37,222 195,537 247,341 290,739 $ 460 917 *These investments are uninsured and unregistered, with securities held by the counterparty, or by its trust department or agent, in the City's name. Cash, cash equivalents, and investments are classified in the accompanying financial statement as follows: 34 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 3. CASH, CASH EQUIVALENTS AND INVESTMENTS (Continued) Cash and Cash Equivalents Statement of Net Assets Cash and cash equivalents Restricted cash and cash equivalents Fiduciary Funds Cash and cash equivalents Total cash and cash equivalents $ $ 138,11 9 26,628 164,747 5,431 5,431 170, 178 Investments Statement of Net Assets Investments Restricted investments Fiduciary Funds Investments Restricted investments Total investments $ $ 35,737 6,261 41,998 248,741 248,741 290,739 Interest Rate Risk This is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. Information about the exposure of the entity's debt type investments to this risk using the segmented time distribution model is as follows: Investment Maturities (in Years) Fair Less Than 1-5 6-10 Over Type of Investment Value I Year Years Years 10 Years U.S. Government Securities $ 14,582 $ $ 14,160 $ 422 Corporate and Foreign Bonds 37,222 1,763 14, 101 12,088 $ 9,270 PPBA-Guaranteed Investment 8,698 3,257 5,441 TOTAL $ 60,502 $ 1,763 $ 28,261 $ 15,767 $ 14,711 35 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 3. CASH, CASH EQUIVALENTS AND INVESTMENTS (Continued) Credit Risk Generally, credit risk is the risk that an issuer of a debt type investment will not fulfill its obligation to the holder of the investment. This is measured by assignment of a rating of a nationally recognized rating organization. U.S. government securities or obligations explicitly guaranteed by the U.S. government are not considered to have credit risk exposure. Presented below is the minimum rating as required for each debt type investment: PPBA- Corporate Guaranteed Average and Foreign Municipal Investment Rating Bonds Bonds Contracts AAA $ 1,670 $ AA+ 6,530 AA 812 AA 1,691 $ 3,258 A+ 1,158 A 2,451 A- 4,942 5,440 BBB+ 2,909 BBB 3,078 BBB 2,486 BB+ 570 BB 216 BB 519 B+ B 91 B CCC Unrated 8,099 $ 37,222 $ $ 8,698 36 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 4. INTERFUND RECEIVABLES, PAY ABLES AND TRANSFERS As of June 30, 2013, inter-fund receivables and payables that resulted from various inter-fund transactions were as follows (in thousands): Due from Due to Other Funds Other Funds General Fund $ 44,753 $ 49,749 School Fund 24,918 7,770 School Grants 699 14,786 Capital Projects 200 Non-Major Governmental Funds 20,077 16,983 Water Supply Board 1,793 School Lunch Program 409 177 Internal Service Fund 30,183 29,981 Total $ 121,239 $ 121,239 Amounts owed among funds result principally from timing of payments to the City's general fund of $44 million, payments to the City's health insurance and legal claims fund of $30.1 million, and amounts owed to the school fund for current year expenditures of $24.9 million. All of these amounts were paid subsequent to year-end. All other amounts owed are expected to be paid within one year. Interfund transfers during the year ended June 30, 2013 were as follows (in thousands): Transfers from Transfers to Other Funds Other Funds General Fund $ 2,414 $ 124,919 School Fund 125,892 2,033 School Grants 994 2,232 School lunch 243 Non-Major Governmental Funds 407 766 Total $ 129,950 $ 129,950 The most significant transfer in fiscal year 2013 was the appropriated operating subsidy from the City's general fund to the school fund. 37 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 5. CAPITAL ASSETS Capital asset activity for the year ended June 30, 2013 was as follows: (in thousands): Beginning Decreases/ Balance Increases Transfers Governmental activities: Capital assets, not being depreciated: Land $ 46,865 $ $ 97 Construction in progress-city 8,888 1,808 5,205 Construction in progress-ppba 23,380 4,869 6,145 Total capital assets, not being depreciated 79,133 6,677 11,447 Capital assets, being depreciated: Buildings 190,006 11,314 11, 183 Improvements other than buildings 23,594 9,463 Machinery and equipment 82,921 6,891 14,401 Infrastructure 278,758 128 Building- leases-ppba 414,659 6,145 Total capital assets being depreciated 989,938 33,941 25,584 Less accumulated depreciation for: Buildings 70,739 2,106 5,455 Improvements other than buildings 10,391 1,015 Machinery and equipment 67,402 5,433 14,194 Infrastructure 172,599 3,470 Building - leases 63,807 9,360 Total accumulated depreciation 384,938 21,384 19,649 Total capital assets, being depreciated, net 605,000 12,557 5,935 Governmental activities capital assets, net $ 684,133 $ 19,234 $ 17,382 Ending Balance $ 46,768 5,491 22,104 74,363 190,137 33,057 75,411 278,886 420,804 998,295 67,390 11,406 58,641 176,069 73,167 386,673 611,622 $ 685,985 Beginning Decreases/ Balance Increases Transfers Business-type activities: Capital assets, not being depreciated: Land $ 21,917 $ $ Construction in progress-city 63,796 39,478 41,548 Other land improvements 18,682 Total capital assets, not being depreciated 104,395 39,479 41,548 Capital assets, being depreciated: Buildings and improvements 69,296 5,092 Improvements other than buildings 234,158 36,836 Machinery and equipment 28,995 1,455 Total capital assets being depreciated 332,449 43,383 Less accumulated depreciation for: Buildings 39,812 6,363 Improvements other than buildings 102,243 5,019 Machinery and equipment 24,921 882 Leased assets 3,621 Total accumulated depreciation 170,597 12,264 Total capital assets, being depreciated, net 161,852 31,119 Business-type activities capital assets, net $ 266,247 $ 70,598 $ 41,548 Ending Balance $ 21,918 61,726 18,682 102,326 74,388 270,994 30,450 375,832 46,175 107,262 25,803 3,621 182,861 192,971 $ 295,297 Reclassification Certain accounts from 2012 have been reclassified to conform with the 2013 presentation. 38 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 5. CAPITAL ASSETS (Continued) The leased assets reported in the table above represent assets, principally buildings and related improvements, leased by the City from the Providence Public Building Authority. For the government-wide statements, the capital assets and related PPBA debt is presented principally in the governmental activities column and the related transactions are eliminated. Depreciation expense was charged to functions/programs of the primary government as follows: Executive, legislative and judicial $ 6 Finance 121 Public safety 1,818 Public works 3,608 Recreation 5 Public lands and parks 1,558 Other departments 11,209 Education 3,059 Building Leases Total depreciation expense $ 21,384 6. UNEARNED REVENUE Governmental funds report unearned revenue in connection with receivables for revenues that are not available to liquidate liabilities of the current period. Governmental funds and governmental activities report unearned revenue in connection with resources that have been received, but not yet earned. At year-end, the various components of unearned revenue reported in governmental funds and governmental activities were as follows: General Fund: Taxes amd accrued interest on delinquent property taxes Advance collections Charges for services School Fund: School Grants: Grant drawdowns prior to meeting all eligibility requirements Nonmajor Funds Unearned revenue Unearned Revenue $ 20,759 2,975 2,906 36 2,342 8,777 $ 37,795 39 (Continued)

7. LONG-TERM OBLIGATIONS CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) Long-term liability activity for the year ended June 30, 2013 was as follows: Beginning Ending Due Within Balance Increases Decreases Balance One Year Governmental activities Bonds payable: General obligation bonds $ 73,815 $ 39,345 $ 7,499 $ 105,66 1 $ 7,444 Revenue bonds 68,860 2,926 65,934 3,021 Special obligation tax increment 12,585 3,135 9,450 5,110 Total bonds payable 155,260 39,345 13,560 181,045 15,575 Notes payable 2,776 250 249 2,777 303 Capital leases 16,496 3,342 13,154 3,491 Capital notes 23,058 1,085 21,973 1,130 Total bonds and notes payable 197,590 39,595 18,236 218,949 20,499 Deferred items from refunding (3,284) (2,562) (722) (437) Other Long-Term Liabilities: Claims and judgments 41,261 1,399 42,660 42,660 Compensated absences 30,592 27,016 23,974 33,634 3,363 Net pension obligation 149,478 2,406 151,884 Other post employment liability 132,625 36,593 169,2 18 Total other long-term liabilities 353,956 67,414 23,974 397,396 46,023 Governmental activity long-term liabilities before PPBA reclassification 548,262 107,009 39,648 615,623 66,085 PPBADebt 388,487 24,568 363,919 25,663 Government activity long-term liabilities $ 936,749 $ 107,009 $ 64,216 $ 979,542 $ 91,748 Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the above totals for governmental activities. 40 (Continued)

7. LONG-TERM OBUGATIONS (Continued) CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) Beginning Ending Due Within Balance Increases Decreases Balance One Year Business-type activities: Bonds payable: Revenue bonds - water $ 52,489 $ 29,200 $ 3,602 $ 78,087 $ 3,818 PPBA- CITY 388,487 24,568 363,919 25,663 Total bonds 440,976 29,200 28,170 442,006 29,481 PPBA- net bond premium 1,906 118 1,788 118 PPBA- PAP Loans* 136,9 15 136,9 15 Other post employment liability 2,575 1,478 4,053 Business-type activity long-term liabilities $ 582,372 $ 30,678 $ 28,288 584,762 29,599 Less PPBA Eliminations (502,622) (25,781) Business-type activity long-term liabilities $ 82,140 $ 3,818 * - Amount represents internal loans between the City and the PPBA and is therefore eliminated on the entitywide statements. The $138,703 difference between business type PPBA eliminations and governmental PPBA eliminations consists of $ 136,9 15 of PAP loans between the City and PPBA and $1,788 of net bond premium. The Water Supply Board long-term debt is general obligation debt of the City. However, because it is the intent of the City to have the Board meet the debt service requirements of this debt, such amounts are recorded in the enterprise funds of the City. Similarly, debt of the PPBA that will be met by the Water Supply Board has been recorded as the Water Supply Board's debt. 41 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 7. LONG-TERM OBUGATIONS (Continued) Debt service requirements for bonds and notes payable at June 30, 2013 were as follows: Governmental Activities PPBA Total Government Entity-Wide Principal Interest Total Principal Interest Total Principal Interest Total 2014 $ 15,575 $ 8,015 $ 23,590 $ 25,663 $ 17,486 $ 43,149 $ 41,238 $ 25,501 $ 66,739 2015 15,968 7,613 23,581 26,493 16,336 42,829 42,461 23,949 66,410 2016 15,822 6,898 22,720 27,017 15,142 42,159 42,839 22,040 64,879 2017 12,950 6,195 19,145 28,287 13,850 42,137 41,237 20,045 61,282 2018 13,510 5,604 19,114 27,786 12,561 40,347 41,296 18,165 59,461 2019-2023 49,955 19,797 69,752 119,548 44,663 164,211 169,503 64,460 233,963 2024-2028 40,200 8,967 49,167 87,180 19,765 106,945 127,380 28,732 156,112 2029-2033 17,065 1,683 18,748 21,945 1,756 23,701 39,010 3,439 42,449 2034-2038 2039-2043 $ 181,045 $ 64,772 $ 245,817 $ 363,919 $ 141,559 $ 505,478 $ 544,964 $ 206,331 $ 751,295 Business-T~12e Activities ARRA. Principal Principal Forgiveness Interest Total 2014 $ 29,481 $ (284) $ 19, 125 $ 48,322 2015 30,588 (307) 18,262 48,543 2016 31,314 (372) 17, 109 48,051 2017 31,845 (186) 15,307 46,966 2018 29,026 (78) 13,248 42, 196 2019-2023 138,240 (996) 53,059 190,303 2024-2028 107,580 (1,138) 25,685 132, 127 2029-2033 40,339 (1,182) 4,557 43,714 2034-2038 3 593 (229) 322 3.686 442,006 (4,772) 166,674 603,908 Less amount representing 363,919 141,559 505,478 the PPBA $ 78,087 $ (4,772) $ 25,115 $ 98,430 42 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 7. LONG-TERM OBUGATIONS (Continued) Bonds Payable Total interest expense paid on general long-term liabilities for the year ended June 30, 2013 was approximately $27,000. Date of Amount Interest Maturity Balance Issue Issued Rate Date June 30, 2012 Additions December 2001- Taxable 12/1/2007 $ 13,000 3.00-6.84% l/15/2026 $ 9,890 Judgement Bond 8/1/2000 $ 6,825 4.75-5.375% 8/15/2015 2,450 Refunding Bonds 2001 12/1/2001 $ 21,620 3.0-5.5% 1/15/2013 1,890 Revenue Refunding Bonds 2005 Series A 3/1/2005 $ 67,315 3.0-5.0% 4/1/2029 53,425 GO Refunding Bonds 2004 Series A 9/16/2004 $ 34,395 2.5-5.5% 7/15/2019 21,330 GO Refunding Bonds 2004 Series B 9/16/2004 $ 12,135 2.37-5.41% 7115/2019 7,710 Special Obligation Bonds Series E 6/1/2006 $ 24,465 4-5% 6/1/2016 12,585 Refunding Bonds 2010 Series A 12/21/2010 $ 30,545 4.625-5% 6/30/2026 30,545 PRA Taxable Lease Revenue Bonds 20 I 0 Series I 8/27/2010 $ 12,600 4.15% 10/15/2018 11,136 PRA Taxable Lease Revenue Bond 2010 Series I 6/30/2011 $ 3,145 4.90% 6/30/2021 3,095 PRA Taxable Lease Revenue Bond 20 I 0 Series 2 6/30/2010 $ 1,605 3.30% 6/30/2015 1,204 GO Road Bond 2013 Series A 1/15/2013 $ 39,345 5.00% 1/15/2033 $ 39,345 Total governmental activities bonds payable $ 155,260 $ 39,345 Balance Retirements June 30, 2013 $ 455 $ 9,435 560 1,890 1,890 2,475 50,950 2,265 19,065 805 6,905 3,135 9,450 30,545 1,524 9,612 50 3,045 401 803 $ 39,345 $ 13,560 $ 181,045 43 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 7. LONG-TERM OBUGATIONS (Continued) Bonds Payable (continued) Revenue Bonds 1995 Series B 1996 Series B 1998 Series A 1999 Series A 200 I Series A 2003 Series A 2003 Series B 2006 Series A 2007 Series A 2007 Series B 2007 Series C 2009 Series A 2009 Series B 2009 Series A QSCB 20 I 0 Series I 20 II Series A 2010 Series A QSCB 20 I 0 Series B QSCB Total business-type activities bonds payable Date of Amount Interest Maturity Balance Issue Issued Rate Date June 30,2012 $ 52,489 6/l/1995 $ 7,500 4.70-7.10% 12/1/2014 1,780 12/l/1996 $ 21,225 5.375-6.50% 12/l/2017 7,590 5/l/1998 $ 28,270 3.85-5.10% 12/l/2018 12,095 7/l/!999 $ 39,750 4.10-5.5% 12/112019 20,750 12/1/2001 $ 9,995 3.25-5.125% 12/l/2021 6,305 3/112003 $ 31,000 2.5-5.0% 12/l/2023 21,140 6/l/2003 $ 31,000 3.0-5.0% 12/112023 21,245 9/1/2006 $ 60,000 4.0-5.0% 5/l/2027 50,785 1117/2007 $ 75,000 3.75-5.5% 5/15/2028 67,110 1117/2007 $ 16,470 3.75-5.5% 5/15/2021 11,335 12/20/2007 $ 75,000 3.5-5.0% 5/15/2028 66,805 6/30/2009 $ 12,000 6.25% 6/30/2021 9,981 6/30/2009 $ 1,000 5.01 % 6/30/2014 481 12/30/2009 $ 22,320 1.92% 6/15/2025 19,360 11115/2010 $ 19,500 4.25% 12/112018 16,260 4/28/20 11 $ 35,000 3.0-5.875% 6/15/2026 33,520 1217/2010 $ 12,280 2.51 % 5/15/2029 12,280 1217/2010 $ 9,665 2.51 % 5/15/2029 9,665 $ 440,976 Balance Additions Retirements June 30, 2013 $ 29,200 $ 3,602 $ 78,087 560 1,220 1,355 6,235 1,475 10,620 2,145 18,605 500 5,805 1,395 19,745 1,425 19,820 2,355 48,430 2,865 64,245 1,080 10,255 2,930 63,875 824 9,157 208 273 1,480 17,880 2,216 14,044 1,755 31,765 12,280 9,665 $ 29,200 $ 28, 170 $ 442,006 44 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 7. LONG-TERM OBUGATIONS (Continued) Capital Notes Date of Issue Amount Issued Interest Rate Maturity Date Balance June 30, 2012 Additions Retirement Balance June 30,2012 4/112003 $ 511/2006 $ 23,655 1.70-4.25% 6,857 5.34-5.56% 2013 2036 $ 16,200 6.858 $ 1,085 $ 15,115 6,858 $ 23,058 $ $ 1,085 $ 21,973 45 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 7. LONG-TERM OBLIGATIONS (Continued) Notes Payable At June 30, 2013, the City had notes outstanding relating to planning and development activities. These notes included $2,766 of Section I 08 loans payable through 2032 with interest rates ranging from.2% to 7.18%; $175 was paid in 2013. PPBA Eliminations The Providence Public Building Authority (PPBA) issues long-term bonds for the acquisition and construction of capital assets. Upon acquisition or completion, these capital assets are leased to the City. Because the PPBA is included as a blended component unit in the accompanying statements, the capital assets and related debt are reported as part of the governmental activities and business-type activities columns in the government-wide statements as presented below. The respective amounts in the PPBA statements have been eliminated in the business-type activities column in order to properly reflect the debt and assets. The annual requirements to amortize the debt payable at June 30, 2013 are as follows: Cit Princi~al Interest 2014 $ 25,663 $ 17,486 2015 26,493 16,336 2016 27,017 15,142 20 17 28,287 13,850 20 18 27,786 12,561 20 19-2023 119,548 44,663 2024-2028 87,180 19,765 2029-2032 21,945 1,756 $ 363,9 19 141,559 The City and the Water Supply Board entered into lease agreements with the PPBA relating to various capital projects. In connection with these lease agreements, the PPBA issued revenue bonds that will be repaid by the Water Board with the $0.01 per hundred gallons Water Quality Protection Charge. The City repays the PPBA as lease payments from general revenues. The PPBA debt to be repaid by the proprietary funds has been shown as debt in those funds' financial statements. PPBA debt to be repaid by the City is presented as debt of the governmental activities in the governmentwide statement of net position. Debt Limit Except as explained below, under Rhode Island law, the City may not, without special statutory authorization, incur any debt which would increase its aggregate indebtedness not otherwise excepted by law to an amount greater than 3% of the taxable property of the City. Deducted from the computation of aggregate indebtedness is the amount of any borrowing in anticipation of taxes authorized by law and the amount of any borrowing in anticipation of taxes authorized by law and the amount of any sinking funds maintained by the City. The current outstanding debt of the City subject to the 3% debt limit is $41.2 million and the current 3% debt limit of the City is $321.5 million based on taxable property as of December 31, 2012, of approximately $10.7 billion, leaving a remaining borrowing capacity of approximately $280.3 million. The State of Rhode Island General Assembly (General Assembly) may, by special act permit the City to incur indebtedness outside the 3% debt limit. Bonds issued either within the 3% debt limit or by special legislation adopted by the General Assembly authorizing the City to incur debt are subject to referendum by the electors of the City. On June 30, 2013, the total outstanding debt of the City issued outside the 3% debt limit was $65.9 million, excluding water bonds and sewer bonds that are deemed self-supporting. 46 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 7. LONG-TERM OBLIGATIONS (Continued) Debt Limit (Continued) In addition to debt authorized within the 3% debt limit and debt authorized by special act of the General Assembly, Rhode Island General Laws Section 45-12- 11 authorizes the State Director of Administration, upon petition by a municipality, to authorize such municipality to incur indebtedness in excess of the 3% debt limit whenever the Director shall determine that the sums appropriated by the municipality or its funds available are insufficient to pay the necessary expenses of the municipality. The City has not requested the State Director of Administration to authorize indebtedness of the City under Section 45-12-11. Bond Anticipation Notes The City had no bond anticipation transactions for the fiscal year ended June 30, 2013. 8. LEASE COMMITMENT Property and equipment carried at approximately $98,000 with approximately $97,000 in accumulated depreciation, in the governmental activities is being acquired under capital lease arrangements. The City is obligated under various capital and operating leases to make the following aggregate annual lease payments (in thousands): Lease expenditures approximated $2,030 for fiscal year ended June 30, 2013. Operating Capital 20 14 $ 2,030 $ 3,899 20 15 2,030 3, 135 20 16 2,030 2,369 20 17 2,030 4,870 $ 8, 120 14,273 Less: Interest 1, 11 9 Present Value of minimum payme nts $ 13, 154 Sale-Leaseback During fiscal year 20 I 0, the City entered into a sale-leaseback transaction involving certain streetlights within the City. The transaction resulted in the City receiving $14.5 million in payments and committing to a future stream of lease payments. 9. RESTRICTED ASSETS AND RELATED LIABILITIES The State of Rhode Island enacted the Public Drinking Water Protection Act of 1987 (the Act) that empowers suppliers of public drinking water to levy a surcharge (the Water Quality Protection Surcharge) of $0.01 per hundred gallons of water for all customers. The Act was amended numerous times and effective July I, 2002, the surcharge increased to $0.0292 per hundred gallons of water for all customers. In addition to the increase, the Water Supply Board will retain 36.1 % of the surcharge in its Water Quality Protection fund, remit 57% to the State Water Resources Board and retain 6.9% for general operations. 47 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 9. RESTRICTED ASSETS AND RELATED LIABILITIES (Continued) The restricted assets are pooled with the cash and cash equivalents and investments of other funds maintained by the City. The earnings from pooled cash and cash equivalents and investments are allocated in proportion to each funds ' balance. 10. FUND EQUITY The following non-major fund had a deficit as of June 30, 2013: Governmental: Skating Rink... $ 55 This deficit is expected to be eliminated through transfers from the City's general fund and from other revenue sources. As stated in Note l, Fund Balance may be classified as one of five categories: Nonspendable, Restricted, Committed, Assigned, or Unassigned. Committed Fund Balance represents that amount of fund balance which can only be used for specific purposes pursuant to constraints imposed by formal action of the District's highest level of decision-making authority. The City's Council is considered to be the highest level of decision making authority. In accordance with the City Charter, the Council votes on the annual budget and on any resolutions proposed by the Committees. The passage of the Council's annual budget and proposed resolutions may result in the commitment of fund balance. The City of Providence does not currently have a spending policy regarding the order in which restricted, committed, assigned, and unassigned fund balances are spent when more than one amount is available for the expenditures incurred. Accordingly, by default, the City is following the policy prescribed by GASB Statement No. 54 which specifies that fund balance is reduced first by committed, then by assigned, then by unassigned when expenditures are incurred for purposes for which any unrestricted fund balance could be used. In all situations, the City considers restricted fund balance to be used first when available and when expenditures are incurred that meet the requirements of the restricted fund balance. At June 30, 2013 Non-Spendable Fund Balance consisted of the following: Loans receivable Trust agreements $ 19,644 288 19,932 At June 30, 2013 Restricted Fund Balance consisted of the following: Public lands and parks Law enforcement and fire prevention Education Federal programs Trust agreements Various future capital projects Total Restricted Fund Balance 821 1,389 1,988 12,688 14,614 39,566 71,066 At June 30, 2013 Committed Fund Balance consisted of the following: Committed for various capital projects Committed for public lands and parks Total Committed Fund Balance $ 9,290 978 10,268 The Water Supply Board has restricted net position of $18 million at June 30, 2013. This represents the excess of restricted assets over liabilities payable from restricted assets unexpended water quality protection revenue. 48 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 11. EMPLOYEE RETIREMENT SYSTEM The City contributes to two defined benefit pension plans - the Employees' Retirement System of the City of Providence (ERS), a single employer plan; and the Employees' Retirement System of the State of Rhode Island (the System), a costsharing multiple employer plan. The ERS is presented in the accompanying financial statements as a pension trust fund. A separate financial statement is not issued. The System is not included in the basic financial statements. (a) Employees' Retirement System of the City of Providence (ERS) Plan Description and Contribution Information Membership of the ERS plan consisted of the following at June 30, 2012, the date of the latest actuarial valuation: Retirees and beneficiaries receiving benefits........ Active plan members................... Vested................................. Non-vested.... 3,098 1,805 ~ 6.231 Additional information as of the latest actuarial valuation follows: Valuation Date Actuarial cost method Amortization cost method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Inflation rate Projected salary increases June 30, 2012 Individual entry age method Approximate level percent of payroll-open 28 years 5-year smoothed market value 8.25 % 3% 2012-2013-0% Thereafter- 3.5% Cost of living adjustments No COLA for next lo years, 3% thereafter (previously 3%-6%) Plan Description ERS is a single-employer defined benefit pension plan that covers most management employees of the City, except school teachers. The Plan provides retirement, disability and death benefits to plan members and their beneficiaries. Cost-of-living adjustments (COLA) are provided to retirees and beneficiaries at varying percentages ranging from 0% to 6%. Benefits are paid at varying amounts not to exceed 100% of final compensation for Class A (city) employees or 75% of final compensation for Class B (police and fire). Final compensation is the average of the highest three years of base compensation including longevity pay earned by a member during his total service as an employee. ERS is governed by an Employee Retirement Board provided by the Providence Home Rule Charter. The ERS consists of elected officials, management and employee representation and provides for establishing rules and regulations and is responsible for the administration and operation of the city employee retirement system. Contributions Class A members and police officers are required to contribute 8% of their salary to the Plan. Class B members, other than police officers, are required to contribute 9.5% of their salary to the Plan. The Mayor and City Council contribute to the Plan at a rate of $350 per year. Additionally, the City shall contribute from time to time amounts sufficient with the contributions of elected officials to provide the special pensions granted to them. The City's contributions to the ERS for the years ended June 30, 2013, 2012 and 2011 were $58,145,$48,454, and $56,333, respectively. 49 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 11. EMPLOYEE RETIREMENT SYSTEM (Continued) (a) Employees' Retirement System of the City of Providence (ERS) (Continued) Funded Status of Plan The required supplementary information, which follows the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing overtime relative to the actuarial accrued liability for benefits. Listed below are the details of the funding progress of the ERS with a valuation date of June 30, 2012, which is the most recent report available. Actuarial value of assets Actuarial accrued liability Unfunded (excess) actuarial accrued liability Funded ratio Annual covered payroll UALL (excess) as a percentage of payroll $ 383,881 $ I, 142,494 $ 758,613 33.60% $ 131,946 666.78% Annual Pension Cost and Net Pension Obligation (NPO) The City's annual pension cost and net pension obligation to ERS for the current and two preceding years were as follows: FY 2013 FY2012 FY 2011 Annual required contribution 58,145 58,929 56,380 Interest on NPO 12,332 II,229 11,200 Amortization of NPO {9,926) (8,341) (7,899) Annual pension cost 60,551 61,817 59,681 Contributions made (58,145) (48,454) (56,333) Increase in net pension obligation 2,406 13,363 3,348 Net pension ob ligation, beginning of year 149,478 136,115 132,767 Net pension obligation, end of year 151,884 149,478 136,115 Percentage of annual pension cost contributed 96.03% 78.38% 94.39% (b) Employees Retirement System of the State of Rhode Island Employees' Retirement System (ERS)- Defined Benefit Plan Effective July 1, 2012, the State administered retirement system which covers local teachers and certain municipal employees was modified to include both defined benefit and defined contribution plan components. Plan Description All full-time teachers, principals, school nurses and certain other school officials (including the superintendent) in the City's school system must participate in ERS, a cost-sharing multiple-employer defined benefit plan administered by the Employees' Retirement System of Rhode Island (the "System"). The plan provides retirement, death and disability benefits (as well as annual cost of living allowances if certain conditions have been met) as outlined in Chapters 36-10 and 16-16 of the Rhode Island General Laws (RIGL). The benefits may be amended by the Rhode Island General Assembly. 50 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 11. EMPLOYEE RETIREMENT SYSTEM (Continued) (b) Employees Retirement System of the State of Rhode Island (Continued) Funding Policy The funding policy is outlined in RIGL sections 16-16-22 and 36-10-2 (which can be amended by the Rhode Island General Assembly). Active plan members must contribute 3.75% of his/her compensation. The City and the State are collectively required to contribute at an actuarially determined rate expressed as a percentage of total compensation paid to the active membership. The employer contribution is split and paid 40% by the State and 60% by the City with the exception of teachers who work in federally funded programs where 100% is paid by the City and reimbursed by the federal government. For fiscal 2013, the total employer rate was 19.29% (7.88% State share and 11.41 % local share). The State share of the employer contribution rate includes the total cost of prior contribution deferrals which was.28% for fiscal 2013. The City contributed approximately $16.2 million, $17.9 million, and $15.1 million during the fiscal years 2013, 2012 and 2011, respectively, equal to 100% of the actuarially required contributions for those respective years. For financial reporting purposes, the State's share of contributions are reflected as on behalf-payments and are included as both revenue and expenditures in the accompanying financial statements. The on-behalf contributions for the defined benefit plan for the fiscal year ended June 30,2013 amounted to approximately $ll.l million. The System issues an annual financial report that includes financial statements and required supplementary information for all of the plans it administers. The reports can be obtained at www.ersri.org Teachers Defined Contribution Pension Plan Plan Description Employees participating in the defined benefit plan(s), as described above, also participate in a defined contribution plan of the Employees' Retirement System as authorized by General Law Chapter 36-10.3. The defined contribution plan is established under IRS section 40 l(a) and is administered by TIAA-CREF and the Employees' Retirement System of Rhode Island (the System). Employees may choose among various investment options available to plan participants. Employee contributions are immediately vested while employer contributions are vested after three years of contributory service. Contributions required under the plan by both the employee and employer are established by the General Laws, which are subject to amendment by the General Assembly. Amounts in the defined contribution plan are available to participants in accordance with the Internal Revenue Service guidelines for such plans. Plan Funding Policy The funding policy is outlined in RIGL chapter 36-1.3 (which can be amended by the Rhode Island General Assembly). Active plan members must contribute 5% of his or her compensation and the City is required to contribute l %. The plan members and the City contributed approximately $7.2 million and $940, respectively, during the fiscal year ended June 30,2013. The System issues an annual financial report that includes financial statements and required supplementary information for all of the plans it administers. The reports can be obtained at www.ersri.org 51 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 11. EMPLOYEE RETIREMENT SYSTEM (Continued) (b) Employees Retirement System of the State of Rhode Island (Continued) Although the City is required to contribute 3% towards the plan for certified teachers, the City receives reimbursement from the State of Rhode Island for 0.4% of I% of the required contributions. For financial reporting purposes, the State' s share of the contribution is reflected as on-behalf payments and is included as both revenue and expenditures in the accompanying financial statements. The on-behalf contributions for the defined contribution plan for the fiscal year ended June 30, 2013 amounted to approximately $500. (c) Other City Pension Costs The City is required to make contributions to the National Pension Plan of the Laborers' International Union ofnorth America, a multi-employer plan. The pension cost charged to the general fund for these purposes amounted to $3.7 million for the year ended June 30, 2013. 12. POSTEMPLOYMENT BENEFITS Plan Description The City' s Post-Employment Medical Benefit Plan is a single-employer defined benefit postretirement health insurance program administered by the City. The City provides for a portion of the lifetime health care benefits to substantially all retired employees and their spouses. Health care benefits were paid to approximately 3,665 retired participants and spouses during the fiscal year ended June 30, 2013 and are paid substantially on a pay as you go basis. Health care benefits are provided through the City's self-insured health insurance program covering both active and retired employees. The financial activity of these programs is reported as an internal service fund. The Plan does not issue a separate financial report. These benefits are provided for and amended under various provisions of Rhode Island General Law, City Ordinances and the terms of collective bargaining agreements. Funding Policy The contribution requirements of plan members and the City are established and may be amended through provisions of Rhode Island General Law, City Ordinances and through collective bargaining. The required contribution is based on pay as you go financing requirements. For fiscal year 2013 the City contributed approximately $36,175 to the health insurance program on behalf of retirees. Plan members contributed approximately $3,211 or 8.2% of the total contributed. The plan can cover I 00% of the costs of the benefit, however, retirees and their spouses are potentially required to fund a portion of the Plan costs depending upon the class an employee has been assigned and their date of hire. Current employee co-share for the retiree health insurance benefit requires a co-share of.0 I of fmal average salary with a maximum limit of $400. Annual OPEB Cost and Net OPEB Obligation The City's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the provisions of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City's net OPEB obligation (amounts in thousands): 52 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 12. POSTEMPLOYMENT BENEFITS (Continued) Annual OPEB Cost and Net OPEB Obligation (Continued) Annual contribution Interest on net OPEB obligation Adjustment to annual required contributions Annual OBEB cost (expense) Contributions made Increase in net OPEB obligation Net OPEB obligation - beginning of year Net OPEB obligation - end of year $ 73,860 5,408 (5,022) 74,246 36,175 38,071 135,200 $ 173,27 1 The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2013 and the two preceding years were as follows (dollar amounts in thousands): Fiscal Percentage of Net Year A1mual Annual OPEB OPEB Ended OPEB Cost Cost Contributed ObliBation 6/30/2013 $ 74,246 48.72% $ 173,271 6/30/2012 $ 70,635 47.91% $ 135,200 6/30/2011 $ 64,437 46.57% $ 98,408 Funding Status and Schedule of Funding Progress The unfunded actuarial accrued liability was determined using the level dollar thirty year open amortization basis. Actuarial UAALas a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability AAL Funded Covered of Covered Valuation Assets (AAL) (UAAL) Ratio Payroll Payroll Date (a) (b) (b)-(a) (a)/(b) (c) [(b)-(a)]/(c) 7/1/2012 $ $ 1,190,552 $ 1,190,552 0.10% $ 260,546 456.95% 7/1/2011 $ $ 1,149,115 $ 1,149,115 0.10% $ 266,731 430.81% 7/1/2010 $ 1,040 $ 1,212,615 $ 1,2 11,575 0.09% $ 267,593 452.77% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of the benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. 53 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30, 2013 (in thousands) 12. POSTEMPLOYMENT BENEFITS (Continued) Actuarial Methods and Assumptions (continued) In the July 1, 2012 actuarial valuation, the projected unit credit method was used. The actuarial assumptions included a 4.0% rate of return (net of administrative expenses), which is a blended rate of the expected long-term investment returns on plan assets and on the employer's own investments calculated based on the funded level of the plan at the valuation date, and an annual healthcare cost trend rate of 9% initially, reduced by decrements to an ultimate rate of 5% after five years. Both rates included a 3.5% inflation assumption (formerly 4.5 %). The actuarial value of the assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The UAAL is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at July I, 20 12, was 30 years. 13. CONTINGENCIES The City is involved in numerous lawsuits, claims and grievances arising in the normal course of business, including claims for property damage, personal injury and personnel practices, disputes over property condemnation proceedings and suits contesting the legality of certain taxes. In the opinion of City officials, the ultimate disposition of these matters will not have a material adverse effect on the City's basic financial statements. Included in the government-wide financial statements is a provision for claims that are deemed probable. The City participates in a number of federally-assisted grant programs. These programs are subject to financial and compliance audits by the grantors or their representatives. In the opinion of City officials, liabilities resulting from such disallowed expenditures, if any, will not be material to the accompanying basic financial statements. The City is committed under contracts for outstanding projects approximating $4.1 million as of June 30, 2013. 14. RELATED PARTY TRANSACTIONS The City leases certain properties from the PPBA. The estimated future minimum lease payments required under these agreements coincide with the principal and interest payments on bonds issued by the PPBA. The leases terminate between 2014 and 2028. The City, in turn, subleases a portion of this property to the School Department. At the expiration of the leases, the City, at its option, can purchase the properties for a nominal amount (see Notes 5 and 7). 15. RISK MANAGEMENT The City is self-insured in most areas of risk; due to "stop loss" insurance, the city is responsible for a maximum of $1,000 per claimant per year for health care claims. Self-insured risks include general liability, property and casualty, workers' compensation, unemployment and employee health and life insurance claims. The City does, however, purchase commercial insurance for all buildings leased from the PPBA. The City's Counsel defends the City in any lawsuits that arise from the normal course of operations. At no time during the past three years have insurance settlements exceeded coverage. The City's health insurance program provides coverage to the City's employees and retirees through Healthmate and Blue Cross- Blue Shield of Rhode Island (BCBS). In 1997, the City first went to a self-insured program with BCBS and United Health Care. BCBS and United Health Care act as third-party agents for the City in the payment of the various claim plans used by the City. Costs incurred for the operation of BCBS and United Health Care plans are accounted for in an internal service fund. Costs to the City are paid by all funds based on "working rates" established by a third party medical consultant. The City is required to record liabilities for self-insured claims if it is probable that a loss has been incurred and the amount can be reasonable estimated. The City has established a liability based on historical trends of previous years, where available, and attorney's estimates of pending matters and lawsuits in which the City is involved. 54 (Continued)

CITY OF PROVIDENCE, RHODE ISLAND Notes to Financial Statements June 30,2013 (in thousands) 15. RISK MANAGEMENT (Continued) Changes in the risk management liability for the fiscal years ended June 30, 2013 and June 30, 2012 are below. Legal claims and incurred but not reported claims for health benefits are recorded in the City's internal service fund. Accrued workers ' compensation claims are recorded on the entity-wide statements. This schedule presents the activity for all selfinsured risks. Beginning of year............. Incurred claims.................... Less: payments of claims attributable to events of both the current and prior fiscal years: Health, legal and workers' compensation.... Total 2013 $41,261 99,443 98,044 $42.660 2012 $38,035 104,362 101,136 $41.261 Legal claims............ Health- IBNR........ Workers' compensation................. Total.................. $33, 154 5,631 3,875 $42.660 $32,642 4,972 3,647 $41.261 55 (Concluded)

I CITY OF PROVIDENCE REQUIRED SUPPLEMENTARY INFORMATION

CITY OF PROVIDENCE, RHODE ISLAND E-1 Required Supplementary Information General Fund Revenues and Expenditures-Budgetary Basis Budget and Actual For the Year Ended June 30, 2013 (in thousands) Budgeted Amounts Revenues and Transfers Original Final Actual Variance With Final Budget Positive/ (Negative) Tax revenues : Property taxes $ 316,911 $ 316,911 $ 319,047 Interest on overdue taxes 5,500 5,500 5,011 322,411 322,411 324,058 Payments in lieu of taxes 23,465 23,465 25,645 Tax stabilization plans 5,222 5,222 5,222 State revenue 37,592 37,592 37,759 Fines 8,068 8,068 5,698 Rents 20 20 Investment interest 25 25 84 Miscellaneous 200 200 1,401 74,592 74,592 75,809 Executive, legislative, and judicial: Mayor's Office 15 Law Department 1 City clerk 15 15 20 Probate court 161 161 136 Housing court 23 23 67 199 199 239 Finance: City collector 725 725 686 City controller 79 City assessor 481 481 375 Personnel 1,206 1,206 1 '140 Public safety: Commissioner of public safety 60 60 59 Police department 641 641 2,896 Fire department 761 761 1,247 Communications 637 637 741 Traffic engineering 2,501 2,501 2,336 4,600 4,600 7,279 Building inspection department: Building inspection administration 3,653 3,653 4,503 Zoning board of review 80 80 48 Building board of review 4 4 7 Structures and zoning 18 18 3,755 3,755 4,558 $ 2,136 (489) 1,647 2,180 167 (2,370) (20) 59 1,201 1,217 15 1 5 (25) 44 40 (39) 79 (106) (66) ( 1) 2,255 486 104 (165) 2,679 850 (32) 3 (18) 803 56 (CONTINUED

CITY OF PROVIDENCE, RHODE ISLAND E-1 Required Supplementary Information General Fund Revenues and Expenditures-Budgetary Basis Budget and Actual, Continued For the Year Ended June 30, 2013 (in thousands) Revenues and Transfers Budgeted Amounts Original Final Actual Variance With Final Budget Positive/ (Negative) Public works: Environmental control Highway Sewer construction and maintenance Administration 37 233 7 277 37 233 7 277 9 3,280 11 1 3,301 (28) 3,047 4 1 3,024 Public lands and parks North Burial Ground 244 244 Other departments: Recorder of deeds Vital statistics Bureau of licenses Emergency Management WSB reimbursement WSB medical reimbursement JTPNplanning reimbursement Room tax Meals and beverage tax Tax stabilization Blue Cross reimbursement Planning and urban development Arts, Culture, Film & Tourism Providence Place Mall Voluntary payments in lieu of taxes D P reimburse school department Human Service 2,266 332 1,535 182 839 375 50 1,350 4,100 750 2,072 95 300 8,795 1,010 212 24,263 2,266 332 1,535 182 839 375 50 1,350 4,100 750 2,072 95 300 8,795 1,010 212 24,263 2,595 319 1,509 158 1 '193 1,522 4,556 79 68 1,832 98 300 9,255 1,010 2 24,496 329 (13) (26) (24) 354 (375) (50) 172 456 79 (682) (240) 3 460 (21 0) 233 Public Properties 128 128 264 136 Transfers: Transfer from rescue runs Transfer from police/fire detail fund Transfer from medical trust Transfer from School Department Transfers from North Burial Ground Transfer from Other funds 3,600 1,200 1,000 600 6,400 3,600 1,200 1,000 600 6,400 2,918 2,047 1,955 2,033 350 577 9,880 (682) 847 1,955 1,033 (250) 577 3,480 Total $ 437,831 $ 437,831 $ 451,268 $ 13,437 57 (CONTINUED)

CITY OF PROVIDENCE, RHODE ISLAND E-1 Required Supplementary Information General Fund Revenues and Expenditures-Budgetary Basis Budget and Actual, Continued For the Year Ended June 30, 2013 (in thousands) Budgeted Amounts Expenditures and Transfers Original Final Actual Executive, legislative and judicial: Mayor's office $ 2,367 $ 2,367 $ 2,475 City Council 1 '117 1 '117 961 City sergeant 65 65 67 City clerk 761 761 594 Law department 3,403 3,403 3,261 Municipal court 2,335 2,335 2,125 Probate court 392 392 398 Housing court 382 382 398 Contingencies-Mayor 99 99 123 10,921 10,921 10,402 Finance: Finance director 524 524 580 City controller 1 '133 1 '133 1 '185 Employees retirement office 342 342 355 Data processing 2,635 2,635 2,558 City collector 1,914 1,914 2,297 City assessor 2,070 2,070 1,886 Board of tax assessment review 17 17 14 Treasury department 466 466 439 Personnel 1,349 1,349 1,473 Heat, light and power 6,000 6,000 7,381 Debt service 67,019 67,019 66,373 Employee Death Benefit 200 200 157 Workers compensation 1,792 1,792 2,533 Unemployment compensation 215 215 264 Reserve for anticipated tax abatements 600 600 59 Elected officials pension contribution 125 125 F.I.C.A. 10 86,401-86,401-87,564 vanance VVItn Final Budget Positive/ (Negative) $ (1 08) 156 (2) 167 142 210 (6) (16) (24) 519 (56) (52) (13) 77 (383) 184 3 27 (124) (1,381) 646 43 (741) (49) 541 125 (1 0) - (1,163) Public safety: Commissioner of public safety 1,474 1,474 1,408 Police department 60,319 60,319 62,002 Fire department 63,444 63,444 67,420 Communications department 8,099 8,099 8,642 Traffic Engineering 1 '198 1 '198 1 '140 134,534 134,534 140,612 66 (1,683) (3,976) (543) 58 (6,078) 58 (CONTINUED~

59 CONTINUED

CITY OF PROVIDENCE, RHODE ISLAND E-1 Required Supplementary Information General Fund Revenues and Expenditures-Budgetary Basis Budget and Actual, Continued For the Year Ended June 30, 2013 (in thousands) Budgeted Amounts Expenditures and Transfers Original Final Actual vanance VVItn Final Budget Positive/ (Negative) Other departments, Continued: Emergency Management Planning and urban development Administration to City Council Internal auditor Archives Human relations commission Department of human services Office of Arts, Culture, Film & Tourism Office of parking administration Providence Housing Authority League of Cities Ceremonies P.E.RA 496 4,895 811 318 243 69 467 585 360 45 12 9 79 10,777 496 460 4,895 4,412 811 712 318 277 243 215 69 81 467 153 585 694 360 345 45 8 12 9 4 79 63 10,777 9,704 36 483 99 41 28 (12) 314 (109) 15 37 12 5 16 1,073 Grants: Providence Public Library Capital Center Providence Plan Commission Community centers Crossroads PAS.A Institute of Non-Violence Procap Grants (Transfer to Mary Sharpe) Grant Expenditure 3,345 28 88 378 109 250 73 60 22 4,353 3,345 3,345 28 88 378 109 250 73 192 60 22 22 694 4,353 4,253 28 88 378 109 250 (119) 60 (694) 100 Public properties 6,039 6,039 6,578 {539) Transfers: Transfers to School Department Transfer to Active Medical Transfer to Retiree Benefits Deficit Reduction Annual Pension Reform Savings 124,897 22,502 5,668 (3,300) 124,897 124,897 22,502 29,196 5,668 (3,300) (6,694) 5,668 (3,300) 149,767 149,767 154,093 (4,326) Total $ 437,831 $ 437,831 $ 449,403 $ {11,572) 60 {CONCLUDED)

CITY OF PROVIDENCE, RHODE ISLAND E-2 Revenues: Federal and state revenue Other revenue Transfers from other funds Master lease proceeds Total revenues Expenditures: Education Transfer to other funds Total expenses Required Supplementary Information Schedule of Revenues and Expenditures-Budget and Actual School Fund For the Year Ended June 30, 2013 (in thousands) Budgeted Amounts Original Final Actual $ 197,844 $ 197,844 $ 202,079 6,335 6,335 400 124,897 124,897 125,892 329,076 329,076 328,371 329,076 329,076 326,338 2,033 329,076 329,076 328,371 Variance With Final Budget Positive (Negative} $ 4,235 (5,935) 995 (705) 2,738 (2,033) 705 Excess revenue over expenditures $ $ $ $ 61

CITY OF PROVIDENCE NOTES TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2013 E-3 Schedules of Revenues and Expenditures - Budget and Actual - General and School Funds The City employs the following procedures in establishing the General Fund budgetary data reflected in the accompanying required supplementary information: At least sixty days prior to July 1, the Mayor submits proposed operating budget for the upcoming fiscal year to the City Council. The operating budget inclu es proposed expenditures and the means of financing appropriations over expected revenues. The final budget is legally enacted through passage o an ordinance. The Mayor is authorized to make minor transfers of b dgeted amounts between departments. Significant budget revisions or transfers must be approved by the City Council. The General and School funds are the only governmental fun s that have legally adopted annual budgets. The "actual amounts" presented in the accompanying schedules are prese ted on a budgetary basis. The budget for the School Fund is prepared annually and app ved by the Providence School Board. The amount of the annual transfer from the General Fund is ultimately deter ined through the adoption of the General Fund budget. This appropriation does not lapse at year-end. The difference between the amounts shown in the accompany ng schedules and those shown in the basic financial statements relate solely to reclassifications made between rev nues and expenditures as presented below (in thousands): General Fund School Fund Total budgetary revenues and transfers per schedule $ 451,268 $ 328,371 Reclassification of: On-behalf payments paid directly by the State of Rhode Island Teachers' Retirement System 11,601 Revenues from other departments recorded net for GAAP ( 1,827) Grants and revenue recorded net for budgetary purposes 356 Revenue from various other special revenue funds combi ed with General Fund per GASB 54 requirements 6,387 Total revenues and transfers per financial statements $ 456,184 $ 339,972 Total budgetary expenditures and transfers per schedule $ 449,403 $ 328,371 Reclassification of: On-behalf payments paid directly by the State of Rhode Island Teachers' Retirement System 11,601 Expenditures to other departments recorded net for G ( l,827) Grants and expenditures recorded net for budgetary purpo es 356 Expenses and transfers of various other special reveune fu ds combined with General Fund per GASB 54 requireme ts 6,680 Refunding of bonds and related expenses Total expenditures and transfers per financial statements $ 454,612 $ 339,972 62

CITY OF PROVIDENCE REQUIRED SUPPLEMENTARY INFORMATION- FUNDING PROGRESS JUNE 30, 2013 E-4 The information presented in the required supplementary schedules was determined as part of the actuarial valuation at the date indicated. Additional information as of the latest valuation follows: Pension SCHEDULE OF FUNDING PROGRESS (Dollar Amounts in Thousands) UAALas a Actuarial Actuarial Unfunded Percentage Actuarial Value of Accrued AAL Funded Covered of Covered Valuation Assets Liability (AAL) (VAAL) Ratio Payroll Payroll Date June 30 (a) (b) (b-a) (alb) (c) ((b-a)/c) 2003 $ 334,929 $ 899,336 $ 564,407 37.24% $ 115,015 490.72% 2004 $ 372,128 $ 1,025,345 $ 653,217 36.29% $ 115,548 565.32% 2005 $ 376,690 $ 993,029 $ 616,339 37.93 % $ 118,600 519.68 % 2006 $ 393,768 $ 1,052,805 $ 659,036 37.40% $ 126,458 521.15% 2007 $ 426,055 $ 1,079,017 $ 652,962 39.49% $ 132,719 491.99% 2008 $ 449,464 $ 1, 165,183 $ 715,719 38.57% $ 133,008 538.10% 2009 $ 405,217 $ 1,210,018 $ 804,801 33.49% $ 135,516 593.88% 2010 $ 427,891 $ 1,256,375 $ 828,484 34.06% $ 137,355 603.17% 2011 $ 421,963 $ 1,325,274 $ 903,311 31.84% $ 135,474 666.78 % 2012 $ 383,881 $ 1, 142,494 $ 758,613 33.60% $ 131,946 666.78 % SCHEDULE OF CONTRffiUTIONS FROM THE CITY Year Annual Ended Required Percentage June 30 Contribution Contributed Other Post Employment Benefits 2004 $ 46,321 85.99% 2005 $ 49,329 92. 15% 2006 $ 51,454 96.22% 2007 $ 50,584 100.20% 2008 $ 54,200 100.00% 2009 $ 48,509 99.80% 2010 $ 51,299 97.66% 2011 $ 56,380 100.00% 2012 $ 58,924 82.23% 2013 $ 58,145 100.00% Actuarial UAALas a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability AAL Funded Covered of Covered Valuation Assets (AAL) (UAAL) Ratio Payroll Payroll Date (a) (b) (b)-(a) (a)/(b) (c) [(b)-(a)]/(c) 7/l/2012 $ $ 1,190,552 $ 1,190,552 0.10% $ 260,546 456.95% 7/l/2011 $ $ 1, 149,115 $ 1,149,115 0.10% $ 266,731 430.81 % 7/1/2010 $ 1,040 $ 1,212,615 $ 1,211,575 0.09% $ 267,593 452.77% 7/1/2009 $ 1,040 $ 1,498,491 $ 1,497,451 0.07% $ 268,871 556.94% 63

I CITY OF PROVIDENCE I OTHER SUPPLEMENTARY INFORMATION

I CITY OF PROVIDENCE I NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Special revenue funds are used to account for specific revenues that are legally restricted to expenditures for particular purposes. Neighborhood Housing Fund - is used for Administrative and Program Expenses primarily related to Housing Repair Loan Programs and Downpayment/Ciosing Assistance Programs. Also income related to Tax Stabilization Agreements. Federal Funds Fund - is used to account for Administrative and Program Expenses and Program Income primarily related to the following federally funded programs: Community Development Block Grant, Emergency Shelter Grant and Housing Opportunities for Persons with Aids. PEDC Fund - is used to account for Administrative and Program Expenses and Program Income primarily related to loans and grants for business start-ups, expansion, and operating costs (Industrial, Commercial and Operating Accounts). PRA Fund - Is used to account for Administrative and Program Expenses and Program Income primarily related to the sale, rent and upkeep of Providence Redevelopment Agency controlled land and buildings. Expenses related to implementation of redevelopment projects. Other P&D - is used to account for Good Faith Deposits - Deposits to secure vacant lots of the PRA until closing. There is also the Lead Fund which is primarily for expenses and income related to federally funded programs that supply loans to homeowners for remediation work, income from federal grants and City Bond dollars. Other Special Revenue Funds- is used to account for various smaller special revenue funds used by the City. Skating Rink- is used to account for the operations of the Skating Rink. WOO - is used to account for proceeds received from the federal government for workforce development services. Capital Proceeds Fund - is used to account for various smaller operations. It primarily consists of a Trust Fund that has spending stipulations for various City operations, and proceeds received or public safety and seizure.

I CITY OF PROVIDENCE I NONMAJOR GOVERNMENTAL FUNDS PERMANENT TRUST FUNDS Other Nonmajor governmental funds are used to account for permanent trust funds.

CITY OF PROVIDENCE, RHODE ISLAND F-1 Combining Balance Sheet Non major Governmental Funds June 30,2013 (in thousands) r Non major Neighborhood Other Special Capital Governmental Housing Federal Funds PEDC PRA Other P & D Revenue Fund Skating Rink WOO Proceeds Fund Funds Totals ASSETS Cash and cash equivalents $ 1,857 $ 561 $ 1,280 $ 2,104 $ 671 $ 3,267 $ 48 $ 233 $ 1,109 $ 11,130 Investments 9,100 150 $ 3,258 14,531 27,039 Receivables. net: Loans 5,707 8,243 14,091 28,041 Intergovernmental 82 679 386 1,147 Other 34 34 Due from other funds 344 3,164 1,941 322 252 410 13,542 102 20,077 Other assets 214 21 4 Total assets $ 7,908 $ 12,050 $ 17,312 $ 11,740 $ 923 $ 4,540 $ 48 $ 619 $ 16,800 $ 15,742 $ 87,682 LIABILITIES AND FUND BALANCES LIABILITIES Warrants and accounts payable $ 25 $ 306 $ 264 $ 628 $ 133 $ 464 $ 117 $ 44 $ 35 $ 2,016 Accrued liabilities 54 4 154 212 Unearned revenue 134 8,276 30 156 173 8 8,777 Due to other funds 485 3,42 1 2,344 1,103 361 728 $ 103 175 7,466 797 16,983 Total liabilities 698 12,003 2,638 1,731 494 1,352 103 619 7,510 840 27,988 FUND BALANCES (DEFICITS) Nonspendable 5,573 10 14,061 288 19,932 Restricted 1,637 613 10,009 429 2.210 14,614 29,512 Committed 978 9,290 10,268 Unassigned 37 (55) (18) Total fund balances (deficits) 7,210 47 14,674 10,009 429 3,188 (55) 9,290 14,902 59,694 Total liabilities and fund balances (deficits) $ 7,908 $ 12,050 $ 17,312 $ 11,740 $ 923 $ 4,540 $ 48 $ 619 $ 16,800 $ 15,742 $ 87,682 64

CITY OF PROVIDENCE, RHODE ISLAND F-2 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds June 30, 2013 (in thousands) Other Other Capital Non major Neighborhood Federal Other Special Revenue Skating Proceeds Governmental Housing Funds PEDC PRA P&D Fund Rink woo Fund Funds Totals Revenues Departmental 7,074 828 439 8,341 Intergovernmental 250 10,188 65 2,502 4,034 2,962 154 20,155 Investment and rental income 2 264 1 366 2,109 2,742 Other 13 97 29 92 87 489 1 038 31 1 876 Total Revenues 265 10,285 358 7,167 2 589 5 717 439 2 962 1 038 2 294 33,114 Expenditures Current: Executive, legislative, and judicial 453 556 1,009 Finance 24 24 Public safety 3,730 3,265 6,995 Recreation 539 475 1,014 Public lands and parks 673 59 732 Community development 1,078 9,979 761 5,911 2,337 20,066 Debt service Principal 12 195 2,456 2,663 Interest and other costs 10 14 Capital outlay 1,600 1,600 Total expenditures 1,078 9,995 966 9,967 2 337 5 395 475 3 265 24 615 34,117 Excess (deficiency} of revenue (813) 290 (608) (2.800) 252 322 (36) (303) 1,014 1,679 (1,003) over expenditures Other Financing Sources (Uses) Transfers 10 242 165 407 Transfers out (251) (515) (766) Loan proceeds 250 250 Total other financing sources (uses) 250 350 109 Net change in fund balance (deficit) (813) 290 (358) (2,800) 252 313 (36) (303) 1,014 1.329 (1,112) Fund Balance (deficit), beginning of year 8,023 (243) 15,032 12,809 177 2,875 (19) 303 8,276 13,573 60,806 t-una t:ialance (aet c tj, ena ot year 7 210 47 14 674 10 009 429 3 188 55 9 290 14 902 59 694 65

CITY OF PROVIDENCE. RHODE ISLAND G-1 COMBINING BALANCE SHEET BY GRANT ACCOUNT JUNE 30, 2013 (in thousands) ASSETS Cash and in vestments $ Receivables, net: Other governments Other Due from other funds Total assets $ Federal Direct Federal State Grants From Grants Grants Grants Other Sources 2,553 $ 243 $ 2,639 $ 1,449 13,663 99 119 5 96 50 170 1 16,271 $ 243 $ 2,908 $ 1,665 Indirect Sports Costs Com~ l e x Totals $ 1,313 $ 8,197 13,881 101 309 169 699 $ 1,622 $ 169 $ 22,878 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ Accrued liabilities Unearned revenue Due to other funds Due to other governments Total liabilities 1,853 $ 18 $ 1,279 512 7 18 1,980 344 13,543 243 3 76 16,002 243 1,998 1,633 $ 17 $ 3,167 519 2,342 $ 997 14,786 76 997 17 20,890 FUND BALANCES (DEFICITS) Restricted : Total fund balances (deficits) Total liabilities and fund balance (deficits) $ 269 910 32 269 910 32 16,271 $ 243 $ 2,908 $ 1,665 625 152 1,988 625 152 1,988 $ 1,622 $ 169 $ 22,878 66

CITY OF PROVIDENCE. RHODE ISLAND G-2 COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BY GRANT FUND JUNE 30, 2013 (in thousands) Federal Direct Federal State Grants From Indirect Grants Grants Grants Other Sources Costs REVENUES: Federal and state governments $ 45,429 $ 116 Miscellaneous 8 $ 81 Total revenues 45,429 $ 124 81 $ EXPENDITURES: Personnel services 17,262 95 0 Employee benefits 7,145 7 0 Other supplies Equipment 2,194 29 Miscellaneous services 13,355 4 45 Other services 1,418 5 Pupil transportation 274 18 Repairs 30 Office supplies 2,696 2 Education supplies 6 Textbooks 55 Total expenditures 44,435 124 81 OTHER FINANCING SOURCES (USES) Transfer to other funds (994) (243) (995) Transfer from other funds 994 Total other financing sources (uses) (994) (243) (1) Net change in fund balances (deficit) (243) (1) Fund balance, beginning of year 269 243 910 32 626 Fund balance (deficit), end of year $ 269 $ $ 910 $ 32 $ 625 Sports ComE lex Totals $ 45,545 $ 84 173 84 45,718 17,357 7,152 2,223 13,404 39 1,462 292 30 2,698 6 55 39 44,679 (2,232) 994 (1,238) 45 (199) 107 2,187 $ 152 $ 1,988 67

I CITY OF PROVIDENCE AGENCY FUNDS I Agency funds are used to account for assets held by the government as an agent for others.

CITY OF PROVIDENCE, RHODE ISLAND 1-1 Statement of Changes in Assets and Liabilities For the Year Ended June 30, 2013 (in thousands) Balance June 30, 2012 Additions Deletions AGENCY FUND Assets Cash and cash equivalents $ 6,019 $ 1,569 $ 5,609 Other receivables 42 16 Total Assets $ 6,061 $ 1,585 $ 5,609 Liabilities Other payables $ 1,218 $ 719 Due to student groups 4,843 $ 1,283 $ 6,026 Total Liabilities $ 6,061 $ 2,002 $ 6,026 Balance June 30, 2013 $ 1,979 58 $ 2,037 $ 1,937 100 $ 2,037 68

I CITY OF PROVIDENCE I CAPITAL ASSETS

City of Providence J-1 Capital Assets Used in the Operation of Governmental Funds For the Year Ended June 30, 2013 (in thousands) Governmental funds capital assets, net of related accumulated depreciation Land Improvements other than buildings Buildings and improvements Buildings - leases Infrastructure Machinery and equipment Constuction in progress - City Construction in progress - PPBA $ $ 46,768 21,651 122,747 347,703 102,817 16,704 5,491 22,104 685,985 Investments in governmental funds capital assets: Assets put into service as of June 30, 2013 $ 685,985 69

I CITY OF PROVIDENCE I STATISTICAL SECTION This part of the City of Providence, Rhode Island's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financial health. Contents: Financial Trends These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax. Debt Capacity These schedules present information to help the reader assess the affordability of the government's current levels of outstanding debt and the government's ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within the government's financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government provides and the activities it performs.

CITY OF PROVIDENCE, RHODE ISLAND Schedule 1 Net Position By Component Last Ten Fiscal Years* (accrual basis of accounting) (in thousands) Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Governmental activities: Invested in capital assets, net of related debt $ 52,962 $ 34,042 $ 22,435 $ 51,350 $ 80,301 $ 102,250 $ 122,820 $ 127,340 $ 122,997 $ 117,449 Unrestricted ( 18,473) (4,820) 11,285 765 (29,054) (63,215) (143,890) (233,086) (261,508) (263,762) Total governmental activities net position $ 34,489 $ 29,222 $ 33,720 $ 52,115 $ 51,247 $ 39,035 $ (21,070) $ (105,746) $ (138,5 11) $ (146,313) Business-type activities: Invested in capital assets, net of related debt $ 137,962 $ 147,543 $ 157,507 $ 165,284 $ 143,479 $ 159,670 $ 179,800 $ 201,281 $ 213,758 $ 217,210 Restricted 16,411 16,193 17,5 15 19,470 54,745 44,280 31,037 18,809 20,943 35,1 12 Unrestricted 3,967 (888) 7,43 1 8,178 8,465 6,622 3,503 11,661 10,986 6,403 Total business-type activities net position $ 158,340 $ 162,848 $ 182,453 $ 192,932 $ 206,689 $ 210,572 $ 214,340 $ 231,751 $ 245,687 $ 258,725 Primary government: Invested in capital assets, net of related debt $ 190,924 $ 181,585 $ 179,942 $ 216,634 $ 223,780 $ 261,920 $ 302,620 $ 328,621 $ 336,755 $ 334,659 Restricted 16,411 16,193 17,515 19,470 54,745 44,280 31,037 18,809 20,943 35,112 Unrestricted (14,506) (5,708) 18,7 16 8,943 (20,589) (56,593) (140,387) (221,425) (250,522) (257,359) Total primary government net position $ 192,829 $ 192,070 $ 216,173 $ 245,047 $ 257,936 $ 249,607 $ 193,270 $ 126,005 $ 107,176 $ 112,412 70

CITY OF PROVIDENCE, RHODE ISLAND Schedule 2 Changes In Net Position Last Ten Fisca l Years* (accrual basis of accounting) (in thousands) 2004 2005 2006 2007 2008 2009 20 10 2011 2012 2013 Expenses: Governmental activities: Executive, legislative, and judicial Finance Public safety Building inspection Public works Recreation Public land and parks Education Community development Interest on long-term debt Total governmental activities expenses $ 11,240 96,286 87,558 2,537 24,119 2,751 16,654 351,656 20,632 14,531 627,964 $ 15,514 38,517 152,354 4,578 28,223 3,34 1 22,484 36 1,220 16,758 26, 134 669,123 $ 15,552 32,655 170,273 5,455 30,275 3,933 23,992 373,591 21,175 21,863 698,764 $ 22,76 1 106,740 110,246 2,495 21,992 2,939 17,535 380,730 23,432 18,639 707,509 $ 19,352 119,373 111,183 2,717 18,384 3,089 17,249 387,624 20,81 1 17,056 716,838 $ 32,624 111,908 106,243 2,946 17,079 2,771 5,523 377,736 26,110 27,360 710,300 $ 42,202 59,345 182,787 4,806 23,030 3,285 2 1,069 38 1,096 3 1,1 50 27,389 776,159 $ 40,382 58,740 178,374 4,636 28,45 1 1,593 24,572 388,612 21,467 26,699 773,526 $ 51,677 57,819 157,676 4,126 25,754 1,644 19,437 379,768 18,687 32,365 748,953 $ 32,662 58,429 165,773 4,264 21,889 1,903 20,415 395,994 24,297 30,796 756,422 Business-type activities: PPBA Water Supply Board Civic Center Non-major School lunch program Total business-type activities expenses 11,496 39,184 7,743 58,423 9,929 42,421 9,106 61,456 9,314 43,66 1 2,24 1 55,216 11,790 46, 105 57,895 14,900 47,610 62,510 17,222 50,38 1 12,044 79,647 17,696 52,303 12,194 82,193 18,949 47,483 12,836 79,268 19,992 50,461 13,908 84,361 19,396 52,553 14,422 86,371 Total primary government expenses 686,387 730,579 753,980 765,404 779,348 789,947 858,352 852,794 833,314 842,793 Program revenue: Governmental activities: Charges for services: Executive, legislative, and judicial Finance Public safety Building inspection Public works Recreation Public land and parks Education Community development Operating grants and contributions: Executive, legislative, and judicial Finance Public safety Public works Recreation Public land and parks Education Community development Capital grants and contributions: Finance Education Total governmental activities program revenue: 238 19,273 16,078 4,38 1 208 94 1,133 1,942 410 1 1,733 3,474 504 32 242,5 17 22,198 13,609 327,825 224 22,2 16 19,412 4,660 258 91 1,271 1,931 2,054 136 269 1,696 3,044 570 248,927 17,361 13,11 5 337,235 234 24,526 16,336 4,8 17 244 90 1,216 2,802 125 142 683 3,039 3,171 599 252,043 25,502 15,199 350,768 788 34,717 14,83 1 6,379 2,259 418 4,004 1,526 7,233 I 61 2,702 703 4,679 248,239 15,472 15,039 359,051 265 18,779 20,8 67 4,993 202 361 410 1,621 8,397 4,924 743 4,714 248,949 13,758 13,908 342,891 241 16,928 22,222 4,240 213 416 438 8,309 8,982 7,348 329 177 235,234 I 1,943 15,872 332,892 222 42,926 19,515 3,599 2 19 231 31 I I 1,691 375 3,084 349 238,267 14,645 335,434 203 51,412 16,252 3,405 132 226 581 I 1,704 88 2,200 296 243,134 15,856 345,489 232 63,264 11,384 4,112 193 206 136 12,558 10 3,183 261 225,661 12,518 333,718 222 68,955 11,776 4,503 229 211 264 12,174 183 442 247,624 13,005 359,588 71

CITY OF PROVIDENCE, RHODE ISLAND Schedule 2 Changes In Net Position, Continued Last Ten Fiscal Years (accrual basi.1 of accmmtmg) (m thousands) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 PrOb'Tam revenue : Business-type activities: Charges for services: PPBA 7,110 8, 197 7,825 10,988 15,712 9,835 16,362 18,548 20,996 20,020 Water Supply Board 49, 168 48,807 52,432 52,749 56,032 59,575 54,976 64,017 61,726 61,070 Civic Center 5,306 5,581 1,824 15,124 Non-major School lunch program 12,040 12,446 12,986 14,548 Capital grants and contributions: 1,197 1,464 Water Supply Board 1,309 1,613 898 775 773 510 200 2,100 Total business-type activities program revenues 62,781 64,049 63,390 65,350 72,642 82,225 84,557 96,06 1 97,470 98,314 Total primary government program revenues 390,606 401,284 414, 158 424,401 415,533 415,117 419,991 441,550 431, 188 457,902 Net (expense) revenue: Governmental activities (300, 139) (331,888) (347,996) (348,458) (373,947) (377,408) (440,725) (428,037) (415,235) (396,834) Business-type activities 4,358 2,593 8,174 7,455 10, 132 2,578 2,364 16,793 13,109 11,943 Total primary government net expense (295,78 1) (329,295) (339,822) (341,003) (363,8 15) (374,830) (438,36 1) (41 1,244) (402,126) (384,891) General revenues and other changes in net asset s: Governmental activities: Property taxes 257, 116 258,213 260,629 257,776 272,366 284,775 289,837 286,998 320,591 325,960 Payments in lieu of taxes 17,078 17,656 26,879 20,124 19,575 19,680 19, 103 23,115 23,461 25,645 Grants and contributions not restricted to specific prob'fajns 42,869 45,781 49,546 51,967 42,787 38,048 40,070 25,619 21,473 19,296 Investment income 4, 191 4,465 8,033 19,779 19,905 1,230 252 153 100 84 Gain (loss) on disposal (31) 3,563 409 Miscellaneous (3,430) 782 696 17,207 18,037 21,525 31,358 17,473 16,846 18,290 Transfers (600) (245) (243) Sale of building and land 3, 148 Total governmental activities 317,224 326,621 352,494 366,853 373,079 365,258 380,620 353,358 382,471 389,032 Business-type activities: Investment earnings 1,68 1 1,670 2,227 3,024 3,625 1,243 1,404 618 827 852 Transfers 600 245 243 Special items: Sale of building and land 9,204 Total business-type activities 2,28 1 1,915 II,431 3,024 3,625 1,243 1,404 618 827 1,095 Total primary government 319,505 328,536 363,925 369,877 376,704 366,501 382,024 353,976 383,298 390,127 Changes in net assets: Governmental activities 17,085 (5,267) 4,498 18,395 (868) (12, 150) (60, 105) (74,679) (32,764) (7,802) Business-type activities 6,639 4,508 19,605 10,479 13,757 3,821 3,768 17,411 13,936 13,038 Total primary government 23,724 $ (759) 24,103 28,874 $ 12,889 $ (8,329) $ (56,337) $ (57,268) $ (18,828) 5,236 72

CITY OF PROVIDENCE, RHODE ISLAND Schedule 3 Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) General Fund: Designated for future uses Unreserved/ Unassigned Total General Fund 2004 2005 $ 2,290 $ 401 12,532 16,706 $ 14,822 $ 17,107 $ $ 2006 2007 2008 433 $ 550 $ 19,251 21,614 22,361 19,684 $ 22,164 $ 22,361 Fiscal Year 2009 2010 2011 2012 $ $ 1,378 $ $ 17,361 2,080 3,725 (11,399) $ 17,361 $ 3,458 $ 3,725 $ ( II,399) 2013 $ (9,827) $ (9,827) All Other Governrnemal Funds: Nonspendable Restricted Committed Unassigned Reserved Unreserved: Designated for future uses Special Revenue Undesignated: Capital Projects Special Revenue Permanent Trust Total all other government funds $ 10,264 $ 11,758 11,035 11,146 26,942 24,930 26,833 57,228 20,673 $ 95,747 $ 105,062 $ $ 10,885 $ 10,157 $ 11,729 11,146 16,026 18,045 23,541 14,513 7,394 95,918 76,976 57,678 18,223 14,932 141,490 $ 135,895 $ 109,778 $ 14,183 $ 15,882 16,754 9,311 9,807 7,081 42,400 20,041 11,821 12,794 $ 16,428 $ 19,8 18 36,253 35,103 12, 194 9,275 3,686 (262) $ 94,965 $ 65,109 $ 68,561 $ 63,934 $ 19,932 71,066 10,268 ( 18) $ 101,248 Note: 2011 and 2012 includes combining of former special revenue funds considered to be part of general fund as they are unassigned 73

CITY OF PROVIDENCE, RHODE ISLAND Schedule 4 Changes In Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual /J(IJis of accounting) (in thousands) Revenues: Taxes Departmental revenue Federal and state grants and rcimbun;emcuts Investment and rental income Fines and forfeitures State Fiscal Stabilization Fwuis Other Total revenues 2004 262.873 31.352 326.5 16 17.047 5.23 1 4.075 647.094 2005 270.302 32.9 11 329.141 15.628 5.597 3.772 657.35 1 2006 285.966 33.877 345.627 21.305 5.486 4.267 6%.528 2007 28 1.422 67.352 338.863 19.779 4.307 17.207 728.930 2008 273.956 64.136 334.533 21.201 7.241 15.628 716.695 Fiscal Year 2009 283.631 73.545 298.742 16,254 7.464 10.209 15.491 705.336 2010 290.358 65.786 302.272 19.742 7.663 13.246 11.867 710.934 2011 290.704 73.025 305.8 14 4.829 8.143 4,406 12.7% 699.717 2012 314.355 95.336 285. 120 1.454 7.341 1.437 15.492 720.535 2013 324.058 92.683 306. 195 3.297 6.030 15.076 747.339 Expenditures: CWTent: Execut ive. legislative. and judicial Finance Public safety Building inspection Public works Recreation Public lands and parks Education Comnumitydevelopmeot Other departments Grants Noocurrcnt: Capital out lays Debt service principnl payments Debt service interest and other payments Total expendilures 11.285 98.836 95.137 2.610 13.426 2.766 15.411 338.485 20. 185 10.979 10.489 22.649 642.258 11.074 119.565 95. 110 2.52 1 12.866 2.470 14.446 345.255 18.942 5.709 11.915 19.061 658.934 12.995 124.814 108.146 2.600 13.919 2.939 16.211 366.9 10 21. 145 6.279 10.000 14.128 700.086 9.852 106.674 103.111 2.462 13.423 2.909 23.718 377.793 19.101 5.742 4.33 1 19.627 32.267 18.978 739.988 10.264 112.142 109, 197 2.686 14.33 1 2.992 14.884 385.72 1 16.663 5.394 4. 148 14.520 35.05 1 14.622 742.615 11.100 103.361 103.795 2.838 15.65{) 2.656 14.582 380.577 22.024 5.947 4.086 7.903 36.929 20.591 732.039 14.239 43.447 166.254 4.39 1 19.064 2.902 19.138 383.636 26.621 9.262 4.529 2.856 46.653 26.201 769.1 93 12.695 39.526 165.909 4.308 21.806 1.470 21.716 378.572 17.282 9.767 4. 185 10.782 4 1. 158 28.706 757.882 15.364 49.661 151.655 3.901 26. 179 1.532 2 1.034 10.185 4.297 362.649 14.390 2.587 43.066 32.427 738.927 11.649 50.743 153.492 3,931 18.%3 1.750 20.458 7.877 4.231 382.618 20.066 4.638 42.844 26.669 749.929 Excess of rtvenues (under) exvenditures 4.836 (1.583) (3.558) (11.058) (25.920} (26.703) (58.259) (58. 165) (18.392) (2.590) Other fmancing sources (uses): Capital leases issued Capital notes issued Bond proceeds Payment to refunding bonds escrow agent Premium on bood issued Loan proceeds Proceeds from sale of real estate Transfers in Transfers out Proceeds on refunding bonds issued Total other financing sources (uses) 4.535 11 8. 126 (118.726) 3.935 7.435 (111.980) 3.013 11 2.305 ( 112.550) 11 4.960 13.183 9.145 9.08 1 (28.244) 778 6.440 138.153 (138.270) 28.675 25.758 7.547 (29.514) 139.458 (139.458) 29.910 7.943 156.231 (156.23 1) 6.952 145.201 (145.201) 6.952 14.500 165.765 ( 165.765) 14.500 87.584 (29.425) 139.461 ( 139.461) 58.159 2.366 133.903 (133.903) 2.366.39.345 2.125 250 129.707 (129.950) 4 1.477 Specialltt!ntS Proceeds from sale 16.805 Net changt!s in fund balance 8.771 11.600 39.005 (3. 11 5) (25.920) s (19.751) s (43.759) s (6) s ( 16.026) s 38.887 Debt service as a percentage of noucapital expenditures 5.2% 4.7 <;1-3.5% 7. 1% 6.8% 7.9% 9.5% 9.4% 10.3% 9.3% 74

CITY OF PROVIDENCE, RHODE ISLAND Schedule 5 Tax Revenues by Source, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (unaudited) (in thousands) Fiscal Year Tangible Excise Real Estate Taxes Taxes Total 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 193,896 31' 121 18,254 203,258 28,378 17,131 209,251 28,154 17,768 211,732 28,440 15,685 226,176 26,087 16,564 231,186 30,080 16,963 234,687 34,262 15,559 234,519 34,032 16,221 239,855 35,437 24,280 248,593 35,185 25,939 243,271 248,767 255,173 255,857 268,827 278,229 284,508 284,772 299,572 309,717 Change 2004-2013 28.2% 13.1 % 42.1% 27.3% Source: City records. 75

CITY OF PROVIDENCE, RHODE ISLAND Schedule 6 Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years {in thousand\) (unaudited) Tangible Total Taxable Fiscal Real Personal Motor Assessed Percent Year Property Property Vehicle Exemptions Value Growth Estimated Assessed Actual Value as a Total Direct Taxable Percentage of Tax Rate Value Actual Value 2004 6, I 54,269 672,482 243,658 (1,082,370) 5,988,039 0.16% 2005 9,484,121 638,720 222,344 (3,055, I 79) 7,290,006 21.74% 2006 9,496,709 636,126 241,06 1 (3, I 39,525) 7,234,37 I -0.76% 2007 9,651,377 657,840 599,020 (3,593,637) 7,314,600 Ill% 2008 13,721,337 63 1,0 15 638,107 (4,78 I,679) 10,208,780 39.57% 2009 13,664,004 746,260 658,076 (4,838,398) 10,229,942 0.2 1% 20 10 13,657,654 830,243 6 I 0,997 (4,838,398) 10,260,496 0.30% 2011 10,358,912 926,252 616,722 (2,858, I 34) 9,043,752-11.86% 20 12 10,346,045 850,3 14 644,247 (2,960,325) 8,880,28 I -1.81% 20 13 9,290,516 969,783 701,908 (243,985) 10,7 18,222 20.70% Source: City Records 41.39 7,044,752 8500% 34.75 8,570,428 8506% 35.36 8,8 18,102 82.04% 35.17 8,5 I I,287 85.94% 26.62 10,295,260 99.16% 25.53 10,316,601 99.16% 28.87 10,347,4 14 99.16% 35.37 9,120,363 99.16% 36.28 8,955,507 99.16% 34.14 10,809,018 99.16% Tot. RIE Tangible Excise Weighted Average Rate Calculation 10,346,045 850,3 14 644,247 Tot. Assesment 11,840,606 Tot. Res. RIE Comm. RIE Tangible Excise %of Assesment Tax Rate 6,869,23 1 58% 3 1.89 2,42 I,284 20% 36.75 969,783 8% 55.80 701,908 6% 60.00 0.93 Tot. Direct Rate 18.50 7.52 4.57 3.56 34. 14 76

CITY OF PROVIDENCE, RHODE ISLAND Schedule 7 Principal Property Taxpayers Current Year and Ten Years Ago (unaudited) 2013 2004 Percentage Percentage of Total of Total City City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Narragansett Electric Co. $60,92 1,200 0.66% $ 38,665,811 2 0.63 % Motiva Enterprises, LLC 26,925,300 2 0.29% 8,793,794 13 0.14% OMNI Rhode Island 72,362,700 3 0.78% 0.00% ONA Providence Office I, LLC 60,863,400 4 0.66% 48,473,800 0.79% One Financial Holdings, LLC 57,723,100 5 0.62% 37,827,200 4 0.61% One Citizens Plaza Holdings, LLC 40,694,800 6 0.44% 32,940,000 5 0.54% Textron Realty Corp. 41,539,000 7 0.45% 30,000,000 6 0.49% Brown University 42,072,200 8 0.45% 19,134,598 10 0.31% Regency Plaza I, LLC 38,162,300 9 0.41% 0.00% A val on Properties 3 1,984,300 10 0.34% 24,392,793 9 0.40% HFP Hotel Owner II, LLC 28,797,300 II 0.31% 8,182,895 15 0.13% CJUF III MJH Providence, LLC. 26,665,600 12 0.29% 25,891,001 8 0.42% lo Memorial Boulevard Owner 54,767,800 13 0.59% 0.00% High Rock Westminster Street 29,686,200 14 0.32% 38,182,601 3 0.62% 15 Park Row West Holdings, LLC 17,382,700 15 0.19% 8,773,828 14 0. 14% PRI ILP 19,590,700 16 0.21% 12,393,400 12 0.20% The Providence Journal Company 19,063,400 17 0.21% 27,845,272 7 0.45% One Financial Plaza 18,638,900 18 0.20% 0.00% 700 Smith Street Providence 17,088, 100 19 0.18% 0.00% Capital Properties, Inc. 16,018,400 20 0.17% 17,858,272 II 0.29% Source: City Records Total $ 720,947,400 7.76% $ 379,355,265 6. 16% 77

CITY OF PROVIDENCE, RHODE ISLAND Schedule 8 Property Tax Levies And Collections Last Ten Fiscal Years (unaudited) Fiscal Year Ended June 30: Collected Within the Fiscal Year of the Lev;r Taxes Levied for the Percentage Tax Year Amount of Levy Collections in Subsequent Years Total Collections to Date Amount Percentage of Levy 2004 2005 2006 2007 2008 2009 20 10 2011 20 12 2013 248,030,527 23 I,862,834 93.48% 256,688,743 240, 140,679 93.55% 259,979,819 243, 165, 192 93.53% 26 1,95 1,088 246,952,069 94.27% 275,853,725 255,874,9 16 92.76% 287,281, 144 269,559,44 1 93.83% 294, 186,862 276,463,184 93.98% 307,014,942 277,13 1,464 90.27% 324,460,407 299,707, 126 92.37% 332,768, 119 3 10,5 10,342 93.3 1% 6,650,70 1 8,663,370 9,994,702 9,852,690 12,78 1,392 11,043,579 8,694,853 7,292, 101 8,824,359 238,513,535 96.16% 248,804,049 96.93% 253, 159,894 97.38% 256,804,759 98.04% 268,656,308 97.39% 280,603,020 97.68% 285, 158,037 96.93% 284,423,565 92.64% 308,53 1,485 95.09% 310,5 10,342 93.3 1% Source: City Tax Collector Records 78

CITY OF PROVIDENCE, RHODE ISLAN D Schedule 9 Ratios of Net General Bonded Debt Outstanding by Type Last Ten Fiscal Years (unaudited) (in thousands) Governmental Activities General Special Capital Fiscal Obligation Revenue Obligation Tax PPBA Notes and Year Bonds Bonds Increment Debt Leases Business-Type Activities Notes Net Bond Deferred I terns Line of Revenue Payable Premium from Financing Credit Bonds Net General Total Percentage of Net Debt Obligation Bonds Capital Primary Personal Per to Estimated Leases Government Income Capita Actual Value 2004 131,875 64,085 29,250 192,768 47,959 2005 127,250 67,315 27,675 182,930 50,987 2006 119,215 66,500 28,285 173,474 59,994 2007 112,845 64,525 26,260 222,415 58,453 2008 105,075 62,445 23,755 361,011 49,300 2009 96,735 60,295 21,150 358,750 47,628 2010 88.260 58,080 18,435 360,663 52,286 2011 80,935 73,140 15,575 411,617 45,433 2012 73.815 68,860 12,585 388,487 39,554 2013 105.661 65,934 9.450 363,9 19 35,127 5,966 789 22,135 4,974 (8,099) 1,104 22,437 4,215 (3,477) 385 18,070 3,434 (4,610) 300 11,879 2,546 (5,184) 45,043 2,336 (4,666) 43,573 798 (4,184) 55,299 585 (3,792) 53,010 2.776 1,906 (3,284) 52,489 2,777 1,788 (722) 78,087 6,105 500,932 760 1.87% 5,009 481,582 719 1.48% 3.865 470,526 674 1.35% 2,950 498,451 638 1.33% 2,000 645,991 1731 0.86% 990 626,791 542 0.80% 633,821 495 0.73% 676,503 4826 0.67% 637,188 ** 0.61 % 662,021 0.88% Note: Details regarding the City's outstanding debt may be found in the notes to the basic financial statements. Amounts were mcluded m general obltgauon bonds. ** Information not available. 79

CITY OF PROVIDENCE, RHODE ISLAND Schedule 10 Direct Governmental Activities Debt For the Year Ended June 30, 20 13 (unaudited) (in thousands) Governmental Unit Debt Outstanding General obligation debt: General obligation bonds Revenue bonds Special obligation tax increment Notes payable Capital leases Capital notes PPBA debt-city PPBA net bond premium Deferred items from refunding Total direct debt $ $ 105,661 65,934 9,450 2,777 13,154 21,973 363,919 1,788 (722) 583,934 Note: The City of Providence is not subject to the debt of overlapping governments. 80

CITY OF PROVIDENCE, RHODE ISLAND Schedule 11 Legal Debt Margin Information For the Year Ended June 30,2013 (unaudited) (in thousands) Legal Debt Margin Calculation for Fiscal Year 2013 Taxable Property $ Debt limit (3% of taxable property) Debt applicable to limit: General obligaton bonds Less: debt not subject to 3% limit Total net debt applicable to limit Legal debt margin $ 10,718,236 321,547 107, 185 65,950 41,235 280,312 81

CITY OF PROVIDENCE, RHODE ISLAND Schedule 12 Legal Debt Margin Information Last Ten Fiscal Years and Current Year Computation (unaudited) (in thousands) 2004 2005 2006 2007 2008 2009 2010 20ll 20 12 2013 Debt limit $ 218,700 $ 206,500 $ 210,700 $ 219,400 $ 294,163 $ 306,899 $ 309,438 $ 266,408 $ 273,279 $ 321,547 Total net debt applicable to limit 31,600 27,500 23,400 19,400 16,247 13,078 9,914 6,750 4,340 41,235 Legal debt margin 187,100 179,000 187,300 200,000 277,916 293,821 299,524 259,658 268,939 280,312 Total net debt applicable to the limit as a percentage of debt limit 17% IS % 12% 10% 6% 4% 3% 3% 2% 15 % Debt outstanding issued outside the 3% debt limit* $ 102,500 $ 99,800 $ 95,700 $ 93,400 $ 88,828 $ 83,657 $ 78,346 $ 74,185 $ 69,475 $ 65,950 * The State of Rhode Island General Assembly has, by Special Act, permitted the City to incur indebtedness outside the 3% debt limit. This amount excludes water and sewer bonds that are deemed self-supporting. 82

CITY OF PROVIDENCE, RHODE ISLAND Schedule 13 Pledged-Revenue Coverage Last Ten Fiscal Years (unaudited) (in thousands) Water Supply Board Redevelopment Revenue Bonds Utility Less Nel Fiscal Service Operating Year Charges Expenses Available Debt Service Revenue Principal Interest Coverage Fiscal Year Deb! Service Collections Principal Interest Covera~e 2004 49,168 37,614 II,554 464 229 16.70 2004 6,624 1,360 3,662 1.32 2005 48,807 40,871 7,936 516 207 11.00 2005 6,858 2006 52,432 42,446 9,986 509 183 14.43 2006 2007 52,749 45,181 7,568 537 158 10.89 2007 2008 56,032 46,410 9,622 561 131 13.90 2008 2009 59,575 48,796 10,779 590 102 15.58 2009 2010 54,976 50,845 4,131 618 71 6.00 2010 2011 64,017 46,054 17,963 61 24 211.33 2011 20 12 61,726 49,2 12 12,514 115 41 80.22 2012 2013 61,070 50,305 10,765 na na na 2013 Civic Center Bonds Providence Public Building Authority Revenue Net Fiscal Operating Year Charges Expenses Available Deb! Service Revenues Principal Interest Coverage Fiscal Year Deb! Service Collections Principal lnleresl Coverage 2004 5,492 7,659 (2,167) 225 68 (7.4) 2004 7,110 7,322 6,943 0.50 2005 4,885 8,949 2006 1,824 2,241 2007 2008 2009 2010 2011 2012 2013 (4,064) 235 151 (10.4) (417) 2005 2006 2007 2008 2009 2010 2011 2012 2013 8,197 9,838 9,189 0.43 7,825 10,5 16 8,713 0.41 10,988 11,058 9,829 0.53 15,7 12 27,874 13,124 0.38 9,835 15,261 16,675 0.31 16,362 20,407 16,7 15 0.44 18,548 25,491 17,429 0.43 20,966 23,130 19,607 0.49 20,020 24,568 18,368 0.47 Bond was fully refunded in 2005. No! available. Note: The Civic Center Authority was sold on December 5, 2005. 83

CITY OF PROVIDENCE, RHODE ISLAND Schedule 14 Demographic and Economic Statistics Last Ten Fiscal Years (unaudited) Fiscal Year Ended June 30 Population*** Personal Income Per Capita Income**** Median Age*** School Enrollment** Unemployment(*) Rate 2004 173,618 2005 176,862 2006 176,862 2007 176,862 2008 178,400 2009 178,400 2010 178,400 2011 178,400 2012 178,042 2013 178,042 (l) (I) (l) (l) (I) (I) (I) (I) (I) (I) 30,837 21,978 (I) (I) 26,867 26,867 26,867 26,867 20,735 19,489 28.1 30.4 30.4 30.4 28.1 28.1 28.2 28.2 28.5 28.5 26,741 25,615 25, 190 24,494 24,494 23,710 23,710 23,500 23,520 23,872 6.1% 6.3% 6.9% 6.1% 10.5% 13.1 % 11.7% 10.9% 12.9% 11.1 % ( I ) Unavailable * Source: Rhode Island Department of Labor and Training ** Rl Department of Education *** Source: U.S. Bureau of the Census **** Source U.S. Bureau of Economic Analysis 84

CITY OF PROVIDENCE, RHODE ISLAND Schedule 15 Principal Employers 20 13 and 2004 (unaudited) 2013 2004 Employer Employees Rank Percentage of Total City Employment Employees Rank Percentage of Total City Employment Brown University Rhode Island Hospital Life Span (Mgmt. Svcs. including Miriam Mgmt Svcs.) Women & Infants Hospital Roger Williams Medical Center The Miriam Hospital Belo Corp/Providence Journal Mars 2000 Providence College AAA Southern New England Johnson & Wales University Butler Hospital H. Carr & Sons Inc. National Grid Employment 2000 Yerizon Wireless Gilbane Building Co. Wal-mart Stores Jewel Case Corp. Nordstrom Inc. 4,600 I 4,200 2 1,990 3 1,800 4 1,470 5 1,263 6 870 7 850 8 799 9 700 10 700 II 699 12 500 13 450 14 400 15 400 16 400 17 350 18 300 19 300 20 4.30% 3.93% 1.86% 1.68% 1.38% 1.18% 0.81% 0.80% 0.75% 0.66% 0.66% 0.65% 0.47% 0.42% 0.37% 0.37% 0.37% 0.33% 0.28% 0.28% 3,251 6,063 2,800 1,340 2,161 964 1,200 800 1,304 2 4 6 5 II 8 16 10 2.78% 5.19% 2.40% 1.15% 1.85% 0.82% 1.03% 0.68% 1.12% Sources: Rhode Island Economic Development Corp. 85

CITY OF PROVIDENCE, RHODE ISLAND Schedule 16 Full-Time Equivalent Employees By Functional Program Last Ten Fiscal Years (unaudited) Functions/Program Executive, Legislative, Judicial and Finance: City Council City Council Administration Internal Auditor City Sergeant City Clerk Personnel Finance Computer Services Legal Courts Retirement Board Tax Assessment City Treasurer City Collector City Assessor Recreation and Public Land and Parks: Neighborhood Parks & Recreation Svs Recreation Zoo Forestry Parks Greenhouse Public Property Public Safety: Police Department Commissioner's Office Firefighters' Department Communication Emergency Mgmt./Homeland Security Public Works Administration Engineering Environmental Control Highway and Bridge Maintenance Sewer Maintenance Miscellaneous Garage Traffic Engineering Building Inspection Miscellaneous: Recorded Deeds Planning & Develoment Arts, Culture & Tourism Human Relations Human Services PERA Board of Canvassers Board of Licenses Vital Statistics City Archivist School Department Total 2013 15 II 2 I 9 14 23 13 25 23 4 5 5 15 18 56 31 15 51 6 31 529 9 438 69 5 8 8 8 50 9 3 7 9 42 6 44 4 I 7 I 8 II II 3 3 224 4 887 Full-Time Equivalent Employees as of June 30 2012 2011 2010 2009 2008 15 II 2 I 9 14 18 13 26 24 5 5 6 15 15 60 31 15 49 10 32 562 9 433 73 6 8 8 II 52 10 3 9 8 55 7 50 4 I 3 2 8 13 5 3 3 226 4 945 15 II 2 I II 12 24 5 25 24 5 5 7 15 16 61 31 15 51 II 30 594 9 450 76 6 12 50 12 I 9 13 60 7 54 5 2 3 8 12 5 3 3,236 5 023 15 II 4 II 12 24 5 24 24 5 5 6 15 15 44 21 31 14 48 II 30 594 8 467 76 6 8 8 12 50 12 I 9 13 60 7 46 5 3 4 3 8 II 5 3 3, 157 4 952 15 I II 13 22 7 23 23 5 5 6 13 15 44 21 31 14 48 II 31 589 8 489 76 8 7 13 50 12 120 9 13 49 3,284 5 086 15 II 13 22 7 23 23 5 5 14 17 44 20 31 14 48 II 31 581 8 487 76 7 7 12 50 10 117 9 13 49 3,300 5 086 2007 15 10 12 30 0 22 23 5 5 5 18 16 44 20 31 14 49 II 33 592 7 487 78 10 7 12 50 10 45 9 12 13 3,345 5 041 2006 15 I 9 12 23 7 22 23 5 5 5 16 18 47 20 37 14 45 II 24 592 7 484 78 10 7 12 48 9 45 8 12 12 3,333 5 016 2005 15 I 9 12 30 0 22 23 5 5 5 18 16 52 20 37 16 39 14 25 563 7 485 78 10 8 12 48 10 44 9 II 13 3,342 5 004 2004 15 10 10 33 0 22 24 5 5 20 20 62 22 36 17 39 14 29 584 7 508 84 10 7 12 56 9 47 9 II 14 3 473 5 220 Source: City Records. 86

CITY OF PROVIDENCE, RHODE ISLAND Schedule 17 Operating Indicators By Function/Program Last Ten Fiscal Years (unaudited) (in thousands) Function/Program 2013 2012 2011 2010 2009 Fiscal ear 2008 2007 2006 2005 2004 Police: Calls for service 114 118 125 139 145 138 149 190 190 190 Fire: Total fire calls 41 44 Total rescue calls 10 II 14 31 31 27 13 14 13 13 13 27 26 25 25 25 Building safety: Total building permits 8 8 Total value all permits 215,485 162,913 8 10 8 198,251 146,236 234,191 7 3,210 8,250 7,759 7,418 217,629 TBD 251,400 172,700 315,400 Public service: Residential garbage collected (ton) 71 73 74 77 79 81 TBD 69 69 69 Source: City Records * Reported as total fire and rescue 87

CITY OF PROVIDENCE, RHODE ISLAND Schedule 18 Capital Asset Statistics By Function/Program Last Ten Fiscal Years (unaudited) Function/Prmrram 20 13 20 12 20 11 20 10 2009 2008 2007 2006 2005 2004 Public Safety: Fire, Fire Stations Fire trucks 15 15 15 15 15 23 23 23 23 23 15 23 15 15 15 15 23 28 28 28 Public Works: Bridges Streets (Miles) Manholes Catch Basins Drain Inlets 27 27 27 27 27 370 370 370 370 370 20 20 20 20 20 12 12 12 12 12 4 4 4 4 4 27 370 20 12 4 27 53 53 53 370 417 417 417 20 20 20 20 12 12 12 12 4 Parks & Recreation: Acreage Parks Golf Course Baseball/Softball Diamonds Greenhouse Soccer/Football Fields Water Parks Museum Swimming pools Recreation Centers 1,300 1,300 1,300 1,300 1,300 124 124 124 124 124 2 2 2 2 2 40 40 40 40 40 6 6 6 6 6 II II II II II 9 9 9 9 9 I I I I I 6 6 6 6 6 10 10 10 10 10 1,300 124 2 40 6 II 9 I 6 10 1,300 124 141 141 141 2 1 40 6 II I I I 9 3 3 3 I I I I 6 6 6 6 10 12 12 12 Zoo Community Centers Water: Lakes 10 10 10 10 10 10 10 10 10 10 Wastewater: Sanitary Sewer Lines (miles) 300 300 300 300 300 300 300 415 415 415 Source: City Records 88

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APPENDIX C PROPOSED FORM OF LEGAL OPINION FOR THE BONDS

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Date of Delivery APPENDIX C City of Providence, Rhode Island 25 Dorrance Street Providence, Rhode Island 02903 Re: $17,465,000* City of Providence, Rhode Island General Obligation Refunding Bonds, Series 2014A (Tax Exempt) and $6,285,000* City of Providence, Rhode Island General Obligation Refunding Bonds, Series 2014B(Federally Taxable) Dear Sir or Madam: We have examined the law, a certified copy of proceedings and other papers relating to the issuance of the $17,465,000* City of Providence, Rhode Island General Obligation Refunding Bonds, Series 2014A (the "2014A Bonds") and $6,285,000* City of Providence, Rhode Island General Obligation Taxable Refunding Bonds, Series 2014B dated the date of delivery (the "2014B Bonds" and collectively with the 2014A Bonds, the "Bonds") both dated the date of delivery. Based on our examination, we are of the opinion, as of the date hereof and under existing law, as follows: 1. The Bonds are valid general obligations of the City of Providence, Rhode Island (the City ), enforceable in accordance with their terms in accordance with law, and all taxable property in the City is subject to taxation without limitation as to rate or amount to pay the Bonds and the interest thereon. 2. Interest on the 2014A Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for the purpose of calculating the alternative minimum tax imposed on individuals and corporations. Interest on the 2014A Bonds will, however, be included in the calculation of adjusted current earnings for the purpose of computing the alternative minimum tax imposed on corporations. Interest on the 2014B Bonds is wholly includable in gross income for federal income tax purposes. *Preliminary, subject to change C-1