Loading...
GOB Refunding BondsLegal Opinion Gilmore & Bell, P.e. Kansas City, Missouri TRANSCRIPT OF PROCEEDINGS AUTHORIZING THE ISSUANCE OF $3,785,000 CITY OF SALINA, KANSAS GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 15, 2012 CITY OF SALINA, KANSAS GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 15, 2012 CLOSING LIST Copies of the transcript of proceedings for the above referenced issue (the "Bonds"), will be prepared and distributed as follows: 1. City of Salina, Kansas (the "Is,suer") 2. Attorney General of the State of Kansas 3. UMB Bank, N.A., Kansas City, Missouri (the "Original Purchaser") 4. George K. Baum & Company, Kansas City, Missouri (the "Financial Advisor") 5. UMB National Bank of America, Wichita, Kansas (the "Escrow Agent") 6. Gilmore & Bell, P.C., Kansas City, Missouri ("Bond Counsel") Document Number PROCEEDINGS AUTHORIZING THE REFUNDED BONDS 1. Ordinance No. 03-10147 and Resolution No. 03-5949 authorizing the Series 2003-A Bonds 2. Ordinance No. 04-10205 and Resolution No. 04-6089 authorizing the Series 2004-B Bonds 3. Ordinance No. 05-10282 and Resolution No. 05-6199 authorizing the Series 2005-A Bonds PROCEEDINGS AUTHORIZING THE SALE AND ISSUANCE OF THE BONDS 4. Excerpt of Minutes of the governing body meeting evidencing adoption of Resolution No. 12-6910 5. Resolution No. 12-6910 authorizing the offering for sale ofthe Bonds 6. Notice of Bond Sale, Preliminary Official Statement and Certificate Deeming Preliminary Official Statement Final 7. Official Statement 8. Excerpt of Minutes evidencing first reading of Ordinance No. 12-10644 9. Excerpt of Minutes of the governing body meeting evidencing opening of the bids, acceptance of the best bid of the Original Purchaser, passage of Ordinance No. 12-10644 and adoption of Resolution No. 12-6918. 10. Ordinance No. 12-10644 authorizing the issuance of the Bonds 11. Affidavit of publication of Ordinance No. 12-10644 12. Resolution No. 12-6918 prescribing the form and details ofthe Bonds 13. Escrow Trust Agreement Schedule 1 -Verification Report Schedule 2 -Redemption of Refunded Bonds Schedule 3 -Estimated Costs of Issuance Exhibit A -Call for Redemption and Notice of Call for Redemption Exhibit B -Notice of Defeasance Exhibit C -Event Notice Pursuant to SEC Rule 15C2-12(B)(C) 14. Subscriptions/Confirmations for the purchase of United States Government Obligations for Escrow Fund CLOSING DOCUMENTS 15. Transcript Certificate Exhibit A -Schedule of Outstanding General Obligation Indebtedness 16. Uniform Facsimile of Signature Certificate 17. Specimen Bond 18. Agreement Between Issuer and Agent 19. DTC Blanket Letter of Representations 20. Rating Letter -Moody's 21. Closing Certificate Exhibit A -Continuing Disclosure Instructions 22. Federal Tax Certificate with attachments as follows: Exhibit A -Internal Revenue Service Form 8038-G and evidence of filing Exhibit B -Receipt for Purchase Price Exhibit C -Receipt and Representation Exhibit D -Description of Financed Improvements, Final Allocation Schedule -Attachment to Final Allocation Exhibit E -Sample Annual Compliance Checklist Exhibit F -Allocation of Bonds -Multipurpose Issue Schedule 1 -Debt Service Schedule and Proof of Yield 11 iii 23. Certificate of Financial Advisor 24. Escrow Agent’s Closing Certificate LEGAL OPINIONS 25. Approving legal opinion of Gilmore & Bell, P.C. 26. Defeasance Opinion of Gilmore & Bell, P.C. 27. Approval letter of Attorney General MISCELLANEOUS DOCUMENTS 28. Closing Letter 29. Letter from State Treasurer Confirming Registration Number * * * * * GILMORE & BELL, P.c. Document No. KI06411.02\Ord3 ORDINANCE NO. 03-10147 AN ORDINANCE AUTHORIZING THE ISSUANCE AND DELIVERY OF $4,350,000 PRINCIPAL AMOUNT OF GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2003-A, OF THE CITY OF SALINA, KANSAS, FOR THE PURPOSE OF PAYING THE COST OR A PORTION OF THE COST OF CERTAIN IMPROVEMENTS; PROVIDING FOR THE LEVY AND COLLECTION OF AN ANNUAL TAX AND SPECIAL ASSESSMENTS FOR THE PURPOSE OF PAYING THE PRINCIPAL OF AND INTEREST ON THE BONDS AS THEY BECOME DUE; MAKING CERTAIN COVENANTS WITH RESPECT THERETO. WHEREAS, the City of Salina, Kansas (the "City") is a City of the first class, created, organized and existing under the laws of the State; and WHEREAS, pursuant to K.S.A. 10-101 et seq., K.S.A. 12-6a01 et seq., K.S.A. 12-685 et seq. and K.S.A. 12-1736 el seq., Charter Ordinance No. 29 of the City and Article 12, Section 5 of the Constitution of the State of Kansas, all as amended and supplemented, and all other applicable provisions of the laws of the stale of Kansas, the governing body of the City has caused the following improvements to be undertaken in the City (such improvements to be referred to as the "Improvements"): a. Marymount Road (12-6a01) b. Marymount Road (12-685) c. Magnolia Hills Water d. Fifth and Stimmel Sewer e. North Ohio Utility Ext. (12-6aO 1) f. Law Enforcement Center g. South Ninth Street Phase III WHEREAS, all legal requirements pertaining to the Improvements have been complied with, and the governing body of the City now finds and determines that the total cost of the Improvements is at least $4,350,000, to be paid by the issuance of general obligation bonds; and WHEREAS, the governing body of the City is authorized by law to issue general obligation bonds of the City to pay the costs of the Improvements; and WHEREAS, the governing body of the City hereby finds and determines it is necessary for the City to authorize the issuance and delivery of its general obligation bonds in the principal amount of $4,350,000 to pay the costs of the Improvements; NOW, THEREFORE, BE IT ORDAINED BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS, AS FOLLOWS: Section 1. Definitions of Words and Terms. "Act" means the Constitution and all applicable statutes of the State including but not limited to K.S.A. 10-101 et seq., K.S.A. 12-6a01 et seq., K.S.A. 12-685 et seq. and K.S.A. 12-1736 et seq., Charter Ordinance No. 29 of the City and Article 12, Section 5 of the Constitution of the State of Kansas, all as amended and supplemented. "Authorized Cost" means the amount of expenditure for an Improvement which has been authorized to be paid by the City by a resolution or ordinance of the City, less (1) the amount of any notes or bonds of the CIty which are currently outstanding and available to pay the Authorized Cost, and (2) any Authorized Cost which have been previously paid by the City or by any eligibJe source of funds unless such amounts are entitled to be reImbursed under State and federal law. "Bond and Interest Fund" means the Bond and Interest Fund of the City for its general obligation bonds. "Bonds" means the General Obligation Internal Improvement Bonds, Series 2003-A authorized by this Ordinance in the aggregate principal amount 0[$4,350,000 and dated July 15,2003. "City" means the City of Salina, Kansas. "CIty Clerk" means the appointed and acting City Clerk or, in the City Clerk's absence, the appointed and/or elected Deputy or Acting City Clerk of the City. "Code" means the Internal Revenue Code of 1986, as amended, and the applicable regulations proposed or promulgated thereunder of the United States Department of the Treasury. "Improvements" means the improvements referred to in the preamble to this Ordinance. "Mayor" means the elected and acting Mayor of the CIty or, in the Mayor's absence, the appointed and/or elected Vice or Acting Mayor of the City. "Ordinance" means this Ordinance authorizing the issuance of the Bonds. "State" means the state of Kansas. "Treasurer" means the appointed and acting Treasurer of the City or, in the Treasurer's absence, the appointed and/or elected Deputy or Acting Treasurer of the City. Section 2. Allthorization of and SeclIrity for the Bonds. These Bonds shall be issued for the purpose of providing funds to pay the Authorized Costs of the Improvements. The Bonds shal1 be general obligations of the City payable as to both principal and interest in part from special assessments levied upon the property benefited by the construction of certain portIOns of the Improvements and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The balance of the principal and interest on the Bonds shall be payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The full faith, credit and resources of the City are -7.- hereby irrevocably pledged for the prompt payment of the principal of and interest on the Bonds as the same become due. Sect jon 3. Terms, Details and Condjtjons of the Bonds. The Bonds shall be dated and bear interest, shall mature and be payable at such times, shall be in such forms, shall be subject to redemption and payment prior to the maturity thereof, and shall be issued and delivered in the manner prescribed and subject to the provisions, covenants and agreements set forth in a resolution hereinafter adopted by the governing body of the City. Section 4. I evy and Collection of Annual Tax and Special Assessments. The governing body of the City shall annually make provision for the payment of principal of, premium, if any, and interest on the Bonds as the same become due, taking into account any scheduled mandatory redemptions, by levying and collecting the necessary taxes and/or assessments upon all of the taxable tangible property within the City in the manner provided by law. The taxes and/or assessments referred to above shall be spread upon the tax rolls and shall be levied and collected at the same tIme and in the same manner as the general ad valorem taxes of the City are levied and collected, and the proceeds derived from the taxes andlor assessments shall be deposited in the Bond and interest Fund. If at any time the taxes andlor assessments are not co1Jected in time to pay the principal of or interest on the Bonds when due, the Treasurer is hereby authorized and directed to pay the principal or interest out of the general funds of the City and to reimburse the general funds for money so expended when the taxes andlor assessments are collected. SectIon 5. Tax Covenants. The City covenants and agrees that it will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion of the interest on the Bonds from gross income for federal income tax purposes. The City covenants and agrees that it will use the proceeds of the Bonds as soon as practicable and with all reasonable dispatch for the purpose for which the Bonds are issued as previously set forth, and that it will not directly or indirectly use or penn it the use of any proceeds of the Bonds or any other funds of the City, or take or omit to take any action that would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148(a) of the Code. To that end, the City will comply with all requirements of Section 148 of the Code to the extent applicable to the Bonds. The City covenants and agrees that it will not use any portion of the proceeds of the Bonds, including any investment income earned on sllch proceeds, directly or indirectly, in a manner that would cause any Bond to be a "private activity bond" within the meaning of Section 141 (a) of the Code. Section 6. Fllrther Authority. The Mayor, City Clerk and other City officials are authorized and directed to execute such documents and take such actions as they may deem necessary or advisable in order to carry out the purposes of this Ordinance. Section 7. Governing I aw The Ordinance and the Bonds shall be governed by and construed in accordance with the applicable laws of the State. SectioD 8. Effectjye Datf. This Ordinance shall take effect and be in full force from and after its passage by the governing body of the City and publication in the official City newspaper. -1- PASSED by the governing body of the City on July 7,2003. (SEAL) ~ City Clerk GILMORE & BELL, P.e. Document No. Kl 06411.02\Res2 REGISTERED BONDS BOOK-ENTRY ONLY SERIES 2003-A RESOLUTION NO. 03-5949 OF CITY OF SALINA, KANSAS ADOPTED JULY 7,2003 $4,350,000 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2003-A Secti on 101. Section 201. Section 202. Section 203. Section 204. Section 205. Section 206. Section 207. Section 208. Section 209. Section 210. SectIOn 211. Section 212. Section 301. Section 302. Section 303. Section 304. Section 401. RESOLUTION TABLE OF CONTENTS Title ..................................................................................................................... 1 Recitals................................................................................................................ 1 ARTICLE I DEFINITIONS Definitions of Words and Terms ....................................................................... .. ARTICLE II DETAaSOFTHEBONDS Authorization of the Bonds ............................................................................... .. Description of the Bonds ....................................................................... _ ............ . Designation of Paying Agent and Bond Registrar ............................................ .. Method and Place of Payment of the Bonds ..................................................... .. Method of Execution and Authentication of the Bonds ..................................... . Registration, Transfer and Exchange of Bonds .................................................. . Surrender and Cancellation of Bonds ............................................................... .. Mutilated, Lost, Stolen or Destroyed Bonds ..................................................... .. Temporary Bonds ............................................................................................... . Delivery of the Bonds ....................................................................................... .. Book-Entry Bonds; Securities Depository ......................................................... . Payments Due on Saturdays, Sundays and Holidays ......................................... .. ARTICLE III REDEMPTION OF THE BONDS Optional Redemption ......................................................................................... . Selection of Bonds to be Redeemed .................................................................. . Notice of Redemption ....................................................................................... .. Effect of Call for Redemption ........................................................................... .. ARTICLEN ESTABLISHMENT OF FUNDS AND ACCOUNTS Creation of Funds and Accounts ........................................................................ . -}- 1 4 4 5 5 5 5 6 6 7 7 7 8 8 9 9 10 10 Section 402. Section 501. Section 502. Section 503. Section 504. Section 601. Section 602. Section 603. Section 70l. Section 702. Section 703. Section 801. Section 802. Section 803. Section 901. Section 902. Administration of Funds and Accounts ............................................................. .. ARTICLE V APPLICATION OF BOND PROCEEDS Disposition of Bond Proceeds ........................................................................... .. Withdrawals from the Improvement Fund ........................................................ .. Surplus in the Improvement Fund ..................................................................... .. Substitution of Improvements .............................................................................. .. ARTICLE VI PAYMENT OF THE BONDS Application of Moneys in the Principal and Interest Account. .......................... . Transfer of Funds to Paying Agent ................................................................... .. Surplus in Principal and Interest Account .......................................................... . ARTICLE VII DEPOSITS AND INVESTMENT OF FUNDS Deposits ............................................................................................................. . Investments ........................................................................................................ . Deposits into and Application of Moneys in the Rebate Fund ........................... .. ARTICLE VIII DEFAULT AND REMEDIES Remedies ............................................................................................................ . Limitation on Rights of Bondowners ................................................................. . Remedies Cumulative " ..................................................................................... .. ARTICLE IX AMENDMENTS Amendments ...................................................................................................... . Written Evidence of Amendments .................................................................... .. -11- 10 10 11 11 11 11 11 11 12 12 12 13 13 13 14 14 ARTICLE X DEFEASANCE Section 1001. Defeasance ....... ......... ....................... ... ........................ ...... ...... ............................ 14 ARTICLE XI CONTINUING DISCLOSURE REQUIREMENTS Section 1101. Disclosure Requirements ....... .......... .... ... ....... ........ ........... ...... .... ........................ 15 Section 1201. Section 1202. Section 1203. Section 1204. Section 1205. Section 1206. Section 1207. ARTICLE XII MISCELLANEOUS PROVISIONS Preliminary Official Statement and Official Statement ..................................... . Rebate Covenants ............................................................................................... . Tax Covenants .................................................................................................... . Severability ........................................................................................................ . Further Authority ............................................................................................... . Governing Law ...... '" ......................................................................................... . Effective Date .................................................................................................... . 15 16 16 16 16 16 17 Adoption...... ........... ..... ............... .... ..... ... ............ .......... ................... .......... ......... 18 Signatures and Seal. ..... ........ ................... ....... .......... ............... .... ........................ 18 Exhibit A -Bond Form Exhibit B -Continuing Disclosure Instructions -lll- RESOLUTION NO. 03-5949 A RESOLUTION PRESCRIBING THE FORM AND DETAILS OF AND AUTHORIZING THE DELIVERY OF $4,350,000 PRINCIPAL AMOUNT OF GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2003-A, OF THE CITY OF SALINA, KANSAS, PREVIOUSLY AUTHORIZED BY ORDINANCE NO. 03-10147 OF THE CITY; AND MAKING CERTAIN COVENANTS WITH RESPECT THERETO. WHEREAS, the City has adopted the Ordinance authorizing the issuance of the Bonds; and WHEREAS, the Ordinance authorized the governing body of the City to adopt a resolution prescribing certain details and conditions and to make certain covenants with respect to the issuance of the Bonds; NOW, THEREFORE, BE IT RESOLVED BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS, AS FOLLOWS: ARTICLE I DEFINITIONS Section 101. Definitions of Words and Terms. "Act" means the Constitution and statutes of the State of Kansas including, but not limited to, K.S.A. 10-101 et seq., K.S.A. 12-6aOl et seq., K.S.A. 12-685 et seq. and K.S.A. 12-1736 et seq., Charter Ordinance No. 29 of the City and Article 12, Section 5 of the Constitution of the State of Kansas, all as amended and supplemented. "Arbitrage Instructions" means the Arbitrage Instructions (dated as of the date of issuance of the Bonds) relating to certain matters within the scope of Section 148 of the Code, as the same may be amended or supplemented in accordance with its terms. "Authorized Costs" means the amount of expenditure for an Improvement which has been duly authorized to be paid by the City by a resolution or ordinance of the City, less (1) the amount of any notes or bonds of the City which are currently outstanding and available to pay such Authorized Costs, and (2) any Authorized Costs which have been previously paid by the City or by any eligible source of funds unless such amounts are entitled to be reimbursed under State and federal law. "Authorized Investments" means investments authorized by K.S.A. 10-131, as amended from time to time, or as otherwise permitted under the laws of the State. "Bond and Interest Fund" means the Bond and Interest Fund of the City for its general obligation bonds. "Bond Counsel" means the firm of Gilmore & Bell, P.C., or any other attorney or firm of attorneys whose expertise in matters relating to the issuance of obligations by states and their political subdivisions is nationally recognized and acceptable to the City. "Bondowner" shall have the same meaning as the tenn Owner. "Bond Registrar" means the Treasurer of the State, Topeka, Kansas, and its successors and assigns. "Bonds" means the City's General Obligation Internal Improvement Bonds, Series 2003-A Bonds in the aggregate princlpaI amount of $4,350,000 and dated July 15,2003. "Business Day" means a day other than a Saturday, Sunday or any day designated as a holiday by the Congress of the United States or by the Legislature of the State and on which the Paying Agent is scheduled in the nonnal course of its operations to be open to the public for conduct of its operations. "Cede & Co." means Cede & Co., as nominee name of The Depository Trust Company, New York, New York. "City" means the City of Salina, Kansas. "City Clerk" means the duly appointed and acting City Clerk of the City or, in the City Clerk's absence, the duly appointed and/or elected Deputy or Acting CitY Clerk of the CIty. "Code" means the Internal Revenue Code of 1986, as amended, and the applicable regulatIOns proposed or promulgated thereunder of the United States Department of the Treasury. "Continuing Disclosure Instructions" means the Continuing Disclosure Instructions dated May 6, 1996 and attached as an exhibit to Resolution No. 96-5007 of the City (pertaining to General Obligation Internal Improvement Bonds, Series 1996-A of the City), as from time to time amended and attached hereto as Exhibit B. "Costs of Issuance" shaH mean all costs of issuing the Bonds, including all publication, pnnting, signing and mailing expenses but not limited to, registration fees, al1 fees and expenses of legal counsel, and any expenses incurred in connection with receivmg ratings on the Bonds, any financial advisory fees and all other related expenses. "Improvement Fund" means the Improvement Fund for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2003-A, created herein and any Substitute Improvements. "Improvements" means the improvements referred to in the preamble to the Ordinance. "Interest Payment Dates" means April 1 and October 1 of each year, commencing April 1, 2004, and ending on the maturity date of the Bonds, or such other time as the Bonds are paid or provision is made for the payment thereof. "Mayor" means the duly elected and acting Mayor of the City or, in the Mayor's absence, the duly appointed and/or elected Mayor or acting Mayor ofthe City. "Ordinance" means Ordinance No. 03-10147 of the City authorizing the issuance of the Bonds. "Original Purchaser" means Stone & Youngberg, San Francisco, California. -2- "Outstanding" means as of a particular date, all Bonds heretofore issued, authenticated and delivered under the provisions of this Resolution, except: (a) Bonds cancelled by the Paying Agent or delivered to the Paying Agent for cancellation pursuant to this Resolution; (b) Bonds for the payment or redemption of which monies or investments have been deposited in accordance with this Resolution; and (c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered pursuant to this Resolution. "Owner" or "Registered Owner" when used with respect to any Bond means the person in whose name such Bond is registered on the registration books of the City as maintained by the Bond Registrar. "PartiCIpants" means those financial institutions for whom the Securities Depository effects book- entry transfers and pledges of securIties deposited with the Securities Depository, as such listing of Participants exists at the time of such reference. "Paying Agent" means the Treasurer of the State, Topeka, Kansas, and any successors and assigns. "Principal and Interest Account" means the Principal and Interest Account for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2003-A, created in the City's Bond and Interest Fund. "Principal Payment Dates" means October 1 of the years as set forth in Section 202 of this Resolution, or until such time as the aggregate prinCIpal amount of the Bonds has been paid or provision is made for the payment of the Bonds. "Purchase Price" means 100% of the principal amount of the Bonds plus accrued interest to the date of delivery and plus any premIUm to be paid by the Original Purchaser. "Rebate Fund" means the Rebate Fund for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2003-A, created herein. "Record Dates" means the fifteenth day of each month preceding the Interest Payment Dates of each year the Bonds are Outstanding. "Replacement Bonds" means Bonds issued to the beneficial owners of the Bonds in accordance with Section 21 J(b) hereof. "Representation Letter" means the Representation Letter, if any is required, from the City and the Paying Agent to the Securities Depository with respect to the Bonds. "Resolution" means this resolution relating to the Bonds. -3- "Securities Depository" means, initially, The Depository Trust Company, New York, New York, and Its successors and assigns. "State" means the state of Kansas. "Substitute Improvements" means the substitute or additional improvements of the City as authorized by Section 504 of this Resolution. "Treasurer" means the duly appointed and acting Treasurer of the City or, in the Treasurer's absence, the duly appointed Deputy or acting Treasurer of the City. ARTICLE 11 DETAILS OF THE BONDS Section 201. Authorization of the Bonds. The Bonds have been issued pursuant to the Ordinance for the purpose of providing funds to pay the Authorized Costs of the Improvements. Section 202. Description of the Bonds. The Bonds shall consist of fully registered bonds in the denomination of $5,000 or any integral multiple thereof, shall be dated July 15, 2003, shall be numbered in such manner as the Bond Registrar shall determine, shall be in substantially the form set forth in Exhibit A to this Resolution, may be in typewritten form and shall be dated July 15, 2003. All of the Bonds shall become due on the Principal Payment Dates and shall bear interest from the date thereof as follows: MATURITY PRINCIPAL INTEREST OCTOBER 1 AMOUNT RATE 2004 $325,000 2.750% 2005 325,000 2.125% 2006 325,000 2.250% 2007 325,000 2.250% 2008 325,000 2.500% 2009 320,000 2.750% 2010 320,000 3.000% 2011 320,000 3.250% 2012 320,000 3.250% 2013 320,000 3.375% 2014 225,000 3.400% 2015 225,000 3.550% 2016 225,000 3.700% 2017 225,000 3.7500/0 2018 225,000 3.850% Interest on the Bonds at the rates stated above (computed on the basis of a 360-day year of twelve 30-day months) from the date thereof or from the most recent Interest Payment Date to which interest has been paid or duly provided for, shall be payable on the Interest Payment Dates to the Owners whose -4~ names appear on the books maintained by the Bond Registrar at the close of business on the Record Dates. Section 203. Designation of Paying Agent and Bond Registrar. The Treasurer of the State, Topeka, Kansas, is hereby designated as the Paying Agent and Bond Registrar for the Bonds. The Mayor and City Clerk of the City are hereby authorized and empowered to execute on behalf of the City an agreement wIth the Bond Registrar and Paying Agent for the Bonds. Section 204. Method and Place of Payment of the Bonds. The principal of, premium, if any, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment, is legal tender for the payment of debts due the United States of America. The principal of and any premium on the Bonds shall be paid to the Registered Owner of each Bond upon presentatIOn of the Bond at the maturity or redemption date to the Paying Agent for cancellation. The interest payable on each Bond on any Interest Payment Date shall be paid to the Registered Owner of such Bond as shown on the Bond Register at the close of business on the Record Date for such interest (a) by check or draft mailed by the Paying Agent to such Registered Owner at the address shown on the Bond Register or (b) in the case of an interest payment to any Registered Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Registered Owner upon written notIce given to the Paying Agent by such Registered Owner not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank (which shall be in the continental United States), address, ABA routing number and account number to which such RegIstered Owner wishes to have such transfer directed. The Paying Agent shall keep In its offices a record of payment of principal of, premium, if any, and interest on all Bonds. Section 205. Method of Execution and Authentication of the Bonds. The Bonds shall be executed for and on behalf of the City by the manual or facsimile signature of the Mayor, attested by the manual or facsimile signature of the City Clerk and the seal of the City shall be affixed thereto or imprinted on the Bonds. The Bonds shall be registered in the office of the City Clerk, and evidenced by the manual or facsimile signature of the City Clerk WIth the seal of the City affixed to or imprinted on the Bonds. The Bonds shall also be registered in the office of the State Treasurer, evidenced by the manual or facsimile signature of the State Treasurer with the seal of the State Treasurer affixed to or imprinted on the Bonds. In the event that any of the officers shall cease to hold such offices before the Bonds are issued and delivered, the Bonds may be issued and transferred to other Owners as though the officers had not ceased to hold office, and such signatures appearing on the Bonds shall be valid and sufficient for all purposes as if they had remained in office until such issuance or transfer. The Bonds shall not be valid obligations under the provisions of this Resolution until the Certificate of Authentication appearing on each bond is executed by the Bond Registrar or a duly authorized representative of the Bond Registrar. It is not necessary that the same representative of the Bond Registrar execute the certificate of authentication on all of the Bonds. Section 206. Registration, Transfer and Exchange of Bonds. As long as the Bonds remain Outstanding, the City shall cause the Bond Registrar to keep the books for the registration and transfer of the Bonds. -5- Upon presentation of the necessary documents the Bond Registrar shall transfer or exchange any Bond(s) for new Bond(s) in an authorized denomination of the same maturity and for the same aggregate principal amount as the Bond(s) which was presented for transfer or exchange. All Bonds presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature satisfactory to the Bond Registrar, duly executed by the Registered Owner thereof or by the Registered Owner's duly authorized agent. In addition, all Bonds presented for transfer or exchange shall be surrendered to the Bond Registrar for cancellatIon. Prior to delivery of the new Bond(s) to the transferee, the Bond Registrar shall register the same in the registration books kept by the Bond Registrar for such purpose and shall authenticate each Bond. The City shall pay the fees of the Bond Registrar for registration and transfer of the Bonds and the cost of printing a reasonable supply of registered bond blanks. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Bond Registrar, are the responsibility of the Owners. The City and the Bond Registrar shaH not be required to issue, register, transfer or exchange any Bonds during a period beginning on the day following the Record Date preceding any lnterest Payment Date and ending at the close of business on the Interest Payment Date or any Bonds which have been called for redemption in accordance with Article III of thls Resolution. New Bonds delivered upon any transfer or exchange shall be valid obligations of the City, evidencing the same debt as the Bonds surrendered, shall be secured by the Resolution and shall be entitled to all of the security and benefits hereof to the same extent as the Bonds surrendered. The City, Bond Registrar and Paying Agent may deem and treat the person in whose name any Bond is registered as the absolute Owner thereof, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of, redemption premium, if any, and interest on such Bond and for all other purposes, and neither the City, Bond Registrar and Paying Agent shall be affected by any notice to the contrary. Section 207. Surrender and Cancellation of Bonds. Whenever any Outstanding Bonds are delivered to the Bond Registrar for cancellation such Bond shall be canceled by the Bond Registrar upon payment of the principal amount of the Bond and interest thereon or replacement pursuant to the Resolution, and the canceled Bond shall be returned to the City. Section 208. Mutilated. Lost, Stolen or Destroyed Bonds. In the event Bond is mutilated, lost, stolen or destroyed, the City may execute and the Bond Registrar may authenticate a new Bond of the same date, maturity, denommation and interest rate, as the mutilated, lost, stolen or destroyed Bond; provided, that in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the City or the Bond Registrar, and, in the case of any lost, stolen or destroyed Bond there shall be first furnished to the Bond Registrar and the City evidence of such loss, theft or destruction satisfactory to them, together with an indenmity satisfactory to the City and the Bond Registrar. In the event any such Bond shall have matured, instead of issuing a duplicate Bond, the City and Bond Registrar may pay the same without surrender thereof. The City and Bond Registrar may charge to the Registered Owner of such Bond their reasonable fees and expenses in connection with replacing any Bond or Bonds mutilated, stolen, lost or destroyed. -6- Section 209. Temporary Bonds. Until definitive Bonds are prepared, the City may execute, in the same manner as is provided in the Resolution and upon the request of the City, the Bond Registrar shall authenticate and deliver, in lieu of definitive Bonds but subject to the same provisions, limitations and conditions as the definitlVe Bonds, one or more temporary Bonds substantially of the tenor of the definitive Bonds in lieu of which such temporary Bond or Bonds are issued, in denominations authorized herein, authorized by the City and with such omissions, insertions and variations as may be appropriate to temporary Bonds. The City at its own expense shall prepare and execute and, upon the surrender of such temporary Bonds for exchange and upon the cancellation of such surrendered temporary Bonds, the Bond Registrar shall authenticate and, without charge to the Owner thereof, deliver in exchange therefor definitive Bonds of the same aggregate principal amount and maturity as the temporary Bonds surrendered. If the City shan authorize the issuance of temporary Bonds in more than one denomination, the Registered Owner of any temporary Bond or Bonds may, at such Registered Owner's option, surrender the same to the Bond Registrar in exchange for another temporary Bond or Bonds of like aggregate principal amount and maturity of any other authorized denomination or denominations, and thereupon the City shall execute and the Bond Registrar shall authentIcate and, upon payment of any applicable taxes, fees and charges, shall deliver a temporary Bond or Bonds of like aggregate principal amount and maturity in such other authorized denomination or denominations as shall be requested by such Owner. All temporary Bonds surrendered in exchange either for another temporary Bond or Bonds or for a definitive Bond or Bonds shall be canceled by the Bond Registrar. Section 210. Delivery of the Bonds. The Mayor and City Clerk are hereby authorized and directed to cause the Bonds to be registered in the offices of the City Clerk and the State Treasurer as provided by law, and, when duly executed and registered, to cause the Bonds to be delivered to the Original Purchaser, upon receipt by the City of the Purchase Price. Section 211. Book-Entry Bonds; Securities Depository. (a) The Bonds shall initially be registered to Cede & Co., the nominee for the Securities Depository, and no beneficial owner will receive certificates representing theIr respective interests in the Bonds, except in the event the Bond Registrar issues Replacement Bonds as provided in subsection (b) hereof. It is anticipated that during the term of the Bonds, the Securities Depository will make book-entry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Bonds to the Participants until and unless the Bond Registrar authenticates and delivers Replacement Bonds to the beneficial owners as described in subsection (b). (b) (1) If the City determines (A) that the Securities Depository is unable to properly discharge its responsibilities, or (B) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities Exchange Act of 1934, as amended, or (C) that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the beneficial owners of the Bonds, or (2) if the Bond Registrar receives written notice from Participants having interests in not less than 50% ofthe Bonds Outstanding, as shown on the records ofthe Securities Depository (and certified to such effect by the Securities Depository), that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the beneficial owners of the Bonds, then the Bond Registrar shall notIfy the Owners of such determination or -7- such notice and of the availability of certificates to Owners requesting the same, and the Bond Registrar shall register in the name of and authenticate and deliver Replacement Bonds to the beneficial owners or their nominees in principal amounts representing the interest of each, making such adjustments as it may find necessary or appropriate as to accrued interest and previous calls for redemption; provided, that in the case ofa determination under (l)(A) or (l)(B) of this subsection (b), the City, with the consent of the Bond Registrar, may select a successor securities depository in accordance with Section 211 (c) hereof to effect book-entry transfers. In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Bond. Upon the issuance of Replacement Bonds, all references herein to obligations imposed upon or to be performed by the Securities Depository shaH be deemed to be imposed upon and performed by the Bond Registrar, to the extent applicable with respect to such Replacement Bonds. If the Securities Depository resigns and the City, the Bond Registrar or Owners are unable to locate a qualified successor of the Securities Depository in accordance with Section 211(c) hereof, then the Bond Registrar shall authenticate and cause delivery of Replacement Bonds to Owners, as provided herein. The Bond Registrar may rely on information from the Securities Depository and its Participants as to the names of the beneficial owners of the Bonds. The cost of printing, registration, authentication and delivery of Replacement Bonds shaH be paid for by the City. (c) In the event the Securities DepOSItory resigns, is unable to properly discharge its responsibilities, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities Exchange Act of 1934, as amended, the City may appoint a successor Securities Depository provided the Bond Registrar receives written evidence satisfactory to the Bond Registrar with respect to the ability of the successor Securities Depository to discharge its responsibilities, Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulatIOn that operates a securities depository upon reasonable and customary terms. The Bond Registrar upon 11s receipt of a Bond or Bonds for cancellation shall cause the delivery of Bonds to the successor SecurIties Depository in appropriate denominations and form as provided herein. (d) The execution and delivery of any required Representation Letter to the Securities Depository by an authorized officer of the City is hereby authorized. Section 212. Payments Due on Saturdays, Sundays and Holidays. In any case where the Principal Payment Date, the Interest Payment Date or the redemption date is not a Business Day, then payment of principal, interest or redemption price need not be made on such date(s) but may be made on the next succeeding Business Day with the same force and effect as if made on such date(s), and no interest shall accrue for the period after such date(s). ARTICLE III REDEMPTION OF THE BONDS Section 301. Optional Redemption. At the option of the City, Bonds maturing on October 1, 2014, and thereafter may be called for redemption and payment prior to maturity on October 1, 2013 and thereafter, in whole or m part at any time, in such principal amounts for such maturities as shall be determined by the City at the redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the date ofredemption. -8- ,Section 302, Selection of Bonds to be Redeemed. The Bonds shall be redeemed only in the principal amount of $5,000 or any integral multiple thereof When less than all of the Bonds are to be redeemed and paid prior to maturity, Bonds of less than a full maturity to be selected in such manner as the Bond Registrar acting on behalf of the City shall determine. In the case of a partial redemption of Bonds when Bonds of denominations greater than $5,000 are then Outstanding, then for all purposes in connection with such redemption each $5,000 of face value shall be treated as though it were a separate Bond of the denomination of $5,000. If it is detennined that one or more, but not all, of the $5,000 units of face value represented by any Bond is selected for redemption, then upon notice of intention to redeem such $5,000 unit or units, the Owner or the Owner's duly authorized agent shall forthwith present and surrender such Bond to the Bond Registrar: (i) for payment of the redemption price (including the redemption, if any, and interest to the date fixed for redemption) of the $5,000 unit or units of face value called for redemptlOn; and (ii) for exchange, without charge to the Owner thereof, for a new Bond(s) of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Owner of any Bond of a denomination greater than $5,000 shall fail to present such Bond as aforesaid, such Bond shall, nevertheless, become due and payable on the redemption date to the extent of the amount called for redemption. Section 303. Notice of Redemption. In the event the City desires to call the Bonds for redemption prior to maturity, written notice of such intent shall be provided in accordance with K.S.A. 10-129, as amended. Unless waived by any Owner of Bonds to be redeemed, if the City shall can any Bonds for redemption and payment prior to the maturity thereof, the City or the Bond Registrar and Paying Agent on behalf of the City shall give written notice of its intention to call and pay said Bonds on a speclfied date, the same bemg described by maturity, said notice to be mailed by United States first class mail addressed to the Owners of said Bonds, such notice to be mailed not Jess than 30 days prior to the date fixed for redemption. The City and Bond Registrar shall also give such additional notice as may be required by State law in effect as of the date of such notice. All official notices of redemption shall be dated and shall state (I) the redemption date, (2) the redemption price, (3) Ifless than alI Outstanding Bonds are to be redeemed, the identification (and, in the case of partIal redemption, the respective principal amounts) of the Bonds to be redeemed, (4) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (5) the place where such Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the principal office of the Paying Agent. Pnor to any redemption date, the City shall deposit with the Paying Agent an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. Upon surrender of such Bonds for redemption in accordance with said notIce, such Bonds shall be paid by the Paying Agent at the redemption price. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. Upon surrender for any partial redemption of any Bond, there shall be prepared for the Registered Owner a new Bond or Bonds of the same maturity in the amount of the unpaid principal. All Bonds which have been redeemed shall be cancelled and destroyed by the Paying Agent and shall not be reissued. For so long as the Securities Depository is effecting book-entry transfers of the Bonds, the Bond Reg,istrar shall provide the notices specified in this Section to the Securities Depository. It is expected that the Securities Depository shall, in tum, notify its Participants and that the Participants, in tum, will notify or cause to be notified the beneficial owners. Any failure on the part of the Securities Depository -9- or a Participant, or failure on the part of a nominee of a beneficial owner of a Bond (having been mailed notice from the Bond Registrar, the Securities Depository, a Participant or otherwise) to notify the beneficial owner of the Bond so affected, shall not affect the validity of the redemption of such Bond. Section 304. Effect of Call for Redemption. Whenever any Bond is called for redemption and payment as provided in this Article, all interest on such Bond shall cease from and after the date for which such call is made, provided funds are available for its payment at the price specified above. ARTICLEN ESTABLISHMENT OF FUNDS AND ACCOUNTS Section 401. Creation of Funds and Accounts. Simultaneously with the issuance of the Bonds, there shall be created within the Treasury of the City the following funds and accounts: (a) Improvement Fund for Salina, Kansas, General Obltgation Internal Improvement Bonds, Series 2003-A; and (b) Principal and Interest Account for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2003-A; and (c) Rebate Fund for Salina, Kansas, General ObligatIOn Internal Improvement Bonds, Series 2003-A. Section 402. Admmistratlon of Funds and Accounts. The funds and accounts established herein shall be administered in accordance with the provisions of the Resolution so long as the Bonds are outstanding. ARTICLE V APPLICATION OF BOND PROCEEDS Section 501. Disposition of Bond Proceeds. The proceeds of the Bonds, upon issuance and delivery thereof, shall be deposited as follows: (a) In the Principal and Interest Account, a sum equal to the accrued interest and any premium paid on the Bonds. (b) The balance of the proceeds of the Bonds shall be deposlted into the Improvement Fund. If (a) any portion of the Bond proceeds will be used to pay principal of any temporary notes previously issued by the City to finance the Improvements or other City improvements (the "Refunded Notes"), and (b) any proceeds of such Refunded Notes (including sale proceeds and investment earnings on such proceeds) remain unspent, then there may be transferred to the Improvement Fund all such unspent proceeds. -10- Section 502. Withdrawals from the Improvement Fund. The Treasurer shall make withdrawals from the Improvement Fund solely for the purpose of paying the Authorized Costs of the Improvements, including the retirement of the principal of and any interest on previously issued temporary financing therefor and paying the Costs ofIssuance for the Bonds. Section 503. Surplus in the Improvement Fund. All moneys remaining in the Improvement Fund after the completion of the Improvements, shall be transferred immediately to the Principal and Interest Account and applied to the next installment of principal and/or interest due on the Bonds. Section 504. Substitution of Improvements. If the City is prevented, hindered or delayed from proceeding with the acquisition or construction of the improvements as referred to in Section 101 of this Resolution or if the City has moneys remaining in the Improvement Fund after the completion of such improvements, the Clty may elect to substitute or add other improvements pursuant to this Section (the "Substitute Improvement") provided the following conditions are met: (1) the Substitute Improvement and the issuance of general obligation bonds to pay the cost of the Substitute Improvement has been duly authonzed by the govemmg body of the City in accordance with the laws of the State, (2) a resolution or ordinance authorizing the use of the proceeds of the Bonds to pay the Authorized Costs of the Substitute Improvement has been duly adopted by the governing body of the City, (3) the Attorney General of the State has approved the amendment to the transcript of proceedings for the Bonds to include the Substitute Improvements and (4) the City has received an opinion of Bond Counsel to the effect that the use of the proceeds of the Bonds to pay the Authorized Cost of the Substitute Improvement will not adversely affect the tax-exempt status of the Bonds under State or federal law and the Substitute Improvement has been duly authorized pursuant to this Section and the laws of the State. ARTICLE VI PAYMENT OF THE BONDS Section 601. Application of Moneys in the Principal and Interest Account. All amounts paid and credited to the Principal and Interest Account shall be expended and used by the City for the sole purpose of paying the principal of, premium, if any, and interest on the Bonds as and when the same become due and paying the usual and customary fees and expenses of the Paying Agent. Section 602. Transfer of Funds to Paying Agent. The Treasurer is hereby authorized and directed to withdraw from the Principal and Interest Account and forward to the Paying Agent sums sufficient to pay both principal of and premium, if any, and interest on the Bonds as and when the same become due, and also to pay the charges made by the Paying Agent for acting in such capacity in the payment of principal and interest on the Bonds, and said charges shall be forwarded to the Paying Agent over and above the amount of the principal of, premium, if any, and interest on the Bonds. If, through the lapse of time, or otherwise, the Owners of Bonds shall no longer be entitled to enforce payment of their obligations, it shall be the duty of the Paying Agent forthwith to return said funds to the City. AU moneys deposited with the Paying Agent shall be deemed to be deposited in accordance with and subject to all of the provisions contained in the Resolution. Section 603. Surplus in Principal and Interest Account. Any moneys or investments remaming in the Principal and Interest Account after the retirement of the indebtedness for which the Bonds were issued shall be transferred and paid into the Bond and Interest Fund of the City. -11- ARTICLE VII DEPOSITS AND INVESTMENT OF FUNDS Section 701. Deposits. Cash moneys in each of the funds and accounts created by this Resolution shall be deposited in a bank or banks or federal or state chartered savings and loan association(s), as pennitted by Kansas law, and all such deposits shall be adequately secured by the bank or banks or savings and loan associations holdmg such deposits in accordance with State law. Section 702. Investments. Moneys held in the funds and accounts herein created by this Resolution in conjunction with the issuance of the Bonds may be invested by the City in Authorized Investments, or 'in other investments allowed by State law in the amounts and maturing at such times as shall reasonably provide for moneys to be availab1e when required in said accounts or funds; provided, however, that no such investment shall be made for a period extendmg longer than to the date when the moneys invested may be needed for the purpose for which the fund or account was created. All interest on any Authorized Investment held in any fund or account shall (except amounts required to be deposited into the Rebate Fund in accordance with the Arbitrage Instructions) accrue to and become a part of such fund or account. In determining the amount held in any fund or account under the provisions of the Resolution, Authorized Investments shall be valued at their principal par value or at their then market value, whichever is lower. SectIOn 703. Deposits into and Application of Moneys in the Rebate Fund. (a) There shall be deposited in the Rebate Fund such amounts as are required to be deposlted therein pursuant to the Arbitrage Instructions. Subject to the payment provisions provided in subsection (b) be10w, all money in the Rebate Fund shall be held in trust, to the extent required to pay arbitrage rebate to the United States, and neither the City nor the Owner of any Bond shall have any rights in or claim to such money. All amounts in the Rebate Fund shall be governed by this Section and by the Arbitrage Instructions (which are incorporated herein by reference). (b) Pursuant to the Arbitrage Instructions, the City shall pay rebate installments and the final rebate payments to the United States. Any moneys remaining in the Rebate Fund after redemption and payment of all of the Bonds and payment and satisfaction of any rebate amounts, or provision made therefor, shall be withdrawn and released to the City. (c) Notwithstanding any other provision of the Resolution, including in particular this Article, the obligation to pay arbitrage rebate to the United States and to comply with all other requirements of this Section, the preceding Section and the Arbitrage Instructions shall survive the defeasance or payment in full of the Bonds. -12- ARTICLE VIII DEFAULT AND REMEDIES Section 801. Remedies. The provisions of the Resolution, including the covenants and agreements herein contained, shall constitute a contract between the City and the Owners of the Bonds. The Owner or Owners of any of the Bonds at the time Outstanding shall have the right for the equal benefit and protection of all Owners of Bonds similarly situated: (a) by mandamus or other suit, action or proceedings at law or in equity to enforce the rights of such Owner or Owners against the City and its offic,ers, agents and employees, and to require and compel duties and obligations required by the provisions of the Resolution or by the Constitution and laws of the State; (b) by suit, action or other proceedings in equity or at law to require the City, its officers, agents and employees to account as if they were the trustees of an express trust; and (c) by suit, action or other proceedmgs in equity or at law to enjoin any acts or things which may be unlawful or in violation of the rights of the Owners of the Bonds. Section 802. Limitation on Rights of Bondowners. The covenants and agreements of the City contained herein and in the Bonds shall be for the equal benefit, protection, and security of the Owners of any or all of the Bonds, all of which Bonds shaH be of equal rank and without preference or priority of one Bond over any other Bond in the application of the funds herein pledged to the payment of the principal of and the interest on the Bonds, or otherwise, except as to rate of interest, date of maturIty and right of prior redemption as provided In the Resolutlon. No one or more. Bondowners secured hereby shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security granted and provided for herein, or to enforce any right hereunder, except in the manner herein provided, and all proceedings at law or in equity shall be instituted, had and maintained for the equal benefit of all Owners of such Outstanding Bonds. Section 803. Remedies Cumulative. No remedy conferred herein upon the Bondowners is intended to be exclusive of any other remedy, but each such remedy shall be cumulative and in addition to every other remedy and may be exercised without exhausting and without regard to any other remedy conferred herein. No waiver of any default or breach of duty or contract by the Owner of any Bond shan extend to or affect any subsequent default or breach of duty or contract or shall impair any rights or remedies thereon. No delay or omission of any Bondowner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therem. Every substantive nght and every remedy conferred upon the Owners of the Bonds by the Resolution may be enforced and exercised from time to time and as often as may be deemed expedient. In case any suit, action or proceedings taken by any Bondowner on account of any default or to enforce any nght or exercise any remedy shall have been discontinued or abandoned for any reason, or shall have been determined adversely to such Bondowner, then, and in every such case, the City and the Owners of the Bonds shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies, powers and duties of the Bondowners shall continue as if no such suit, action or other proceedmgs had been brought or taken. -13- ARTICLE IX AMENDMENTS Section 901. Amendments. Except as set forth herein, the provisions of the Bonds and the provisions of the Resolution may be modified or amended at any time by the City with the written consent of the Owners of not less than seventy-five per cent (75%) in aggregate principal amount of the Bonds herein authorized at the time Outstanding; provided, however, that no such modification or amendment shan permit or be construed as permitting: (a) the extension of the maturity of the principal of any of the Bonds, or the extension of the maturity of any interest on any of the Bonds, or (b) a reduction in the principal amount of any of the Bonds or the rate of interest thereon, or (c) a reduction in the aggregate princIpal amount of the Bonds; the consent of 100% of the Owners of whIch is required for any such amendment or modification. The City may from time to time, without the consent of or notice to any of the Owners, provide for amendment to the Bonds or the Resolution, for anyone or more of the following purposes: (a) To cure any ambiguity or formal defect or omission in the Resolution or to make any other change not prejudicial to the Owners; (b) To grant to or confer upon the Owners any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Owners; (c) To more precisely identify the Improvements. (d) To conform the Resolution to the Code or future applicable federal law concerning tax-exempt obligations. The Continuing Disclosure Instructions are exempt from the provisions of this Section and are subject to amendment and modification only as provided therein. Section 902. Written Evidence of Amendments. Every amendment or modification of a provision of the Bonds or of the Resolution to which the written consent of the Owners is given as above provided shall be expressed in a resolution of the City amending or supplementing the provisions of the Resolution and shall be deemed to be a part of the Resolution. It shall not be necessary to note on any of the Outstanding Bonds any reference to such amendment or modification, if any. A certified copy of every such amendatory or supplemental resolution, if any, and a certified copy of the Resolution shall always be kept on file in the Office of the City Clerk and shall be made available for inspection by the Owners of any Bond or prospective purchaser or Owners of any Bond authorized by the Resolution, and upon payment of the reasonable cost of preparing the same, a certified copy of any such amendatory or supplemental resolution or of the Resolution will be sent by the City Clerk to any such Owner or prospective Owner. ARTICLE X DEFEASANCE Section 100 I. Defeasance. When all or any part of the Bonds and interest thereon shall have been paid and discharged, then the requirements contained herein and the pledge of revenues made hereunder and -14- all other rights granted hereby shall cease and determine. Bonds shall be deemed to have been paid and discharged within the meaning of the Resolution if there shall have been deposited with the Paying Agent or a bank located in the State and having full trust powers, at or prior to the matqrity or redemption date of the Bonds, in trust for and irrevocably appropriated thereto, moneys and/or direct obligations of, or obligations the principal of and interest on which are guaranteed by, the United States of America, or other investments allowed by State law which, together with the interest to be earned on such investments, will be sufficient for the payment of the principal of the Bonds, the redemption premium thereon, if any there be, and interest accrued to the date of maturity or redemption, as the case may be, or if default in such payment shall have accrued on such date, then to the date of the tender of such payments, provided always that if any such Bonds shall be redeemed prior to the maturity thereof, the City shall have elected to redeem such Bonds and either notice of such redemption shall have been given or the City shaH have given irrevocable instructions, or shall have provided for an escrow agent to give irrevocable instructions to the Bond Registrar to give such notice of redemption in compliance with this Resolution. Any moneys which at any time shall be deposited with the Paying Agent or said bank in the State by or on behalf of the City, for the purpose of paying and discharging any of the Bonds shan be and are hereby assigned, transferred and set over to the Paying Agent or such bank in the State in trust for the respective Owners of the Bonds, and such moneys shall be and are hereby irrevocably appropriated to the payment and discharge thereof. All moneys deposited with the Paying Agent or saId bank in the State shall be deemed to be deposited in accordance with and subject to all of the provisions contained in the Resolution. ARTICLE XI CONTINUING DISCLOSURE REQUIREMENTS Section 1101. Disclosure Requirements. The City hereby elects that the Continuing Disclosure Instructions shall apply to the Bonds. The City hereby covenants with the Original Purchaser and the Beneficial Owners (as defined in the Continuing Disclosure InstructIOns) to provide and disseminate such information as is required by Rule 15c2-12 (as defined m the Continuing Disclosure Instructions) and as further set forth in the Contmuing Disclosure Instructions. Such covenant shaH be for the benefit of and enforceable by the Original Purchaser and such Beneficial Owners. In the event the City fails to comply in a timely manner with its covenants contained in the preceding sentences, the Original Purchaser and/or any such Beneficial Owner may make demand for such compliance by written notice to the City. In the event the City does not remedy such noncompliance within 10 days of receipt of such written notice, the Original Purchaser or any such Beneficial Owner may in its discretion, without notice or demand, proceed to enforce compliance by a suit or suits in equity for the specific performance of such covenant or agreement contained in the preceding section or for the enforcement of any other appropriate legal or equitable remedy as the Original Purchaser andlor any such Beneficial Owner shall deem effectual to protect and enforce any of the duties of the City under such preceding section, but such noncompliance shall not constitute a default or event of default under this Resolution. ARTICLE XII MISCELLANEOUS PROVISIONS Section 1201. Preliminary Official Statement and Official Statement. The City hereby approves the form and content of the Preliminary Official Statement prepared in the initial offering and sale of the Bonds. The Prel1minary Official Statement is "deemed final" by the City except for the omission of -15- certain information as provided in Securities and Exchange Commission Rule 15c2-12. The City hereby approves the form and content of any addenda, supplement, or amendment thereto utilized to prepare a final Official Statement. The Official Statement is "deemed final" by the City in accordance with the provisions of Securities and Exchange Commission Rule 15c2-12. The use of such Official Statement in the reoffering of the Bonds by the Original Purchaser is hereby approved and authorized. The proper officials of the City are hereby authorized to execute and deliver a certificate pertaining to such Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Bonds. Section 1202. Rebate Covenants. The CIty agrees to pay from time to time all amounts required to be rebated to the United States pursuant to Section 148(f) of the Code and any applicable Treasury Regulations. This covenant shall survive payment in full or defeasance of the Bonds from time to time. Section 1203. Tax Covenants. The City hereby designates $320,000 of the Bonds as "qualified tax-exempt obligatIOns" as defined in Section 265(b)(3) of the Code; $4,030,000 of the Bonds are deemed designated under Section 265(b)(3)(D)(ii) of the Code. In addition, the City hereby represents that: (1) the aggregate face amount of all tax-exempt obligations (other than (a) private activity bonds whIch are-not "qualified 501(c)(3) bonds" or (b) any obligation issued to currently refund another obligation, to the extent the amount of the refunding obligation does not exceed the outstanding amount of the refunded obligation) which will be issued by the City (and all subordmate entities thereof) during calendar year 2003 is not reasonably expected to exceed $10,000,000; and (2) the City (including all subordinate entities thereof) will not issue an aggregate principaJ amount of obligations designated by the City to be "qualified tax-exempt obligations" during the calendar year 10 which the Bonds are issued, inc1uding the Bonds, in excess of $10,000,000, without first obtaining an opinion of bond counsel that the designation of the Bonds as "qualified tax-exempt obligations" will not be adversely affected. Section 1204. Severability. In case anyone or more of the provisions of the Resolution or of the Bonds issued hereunder shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of the Resolution, or of the Bonds appertainmg thereto, but the Resolution and the Bonds shall be construed and enforced as if such illegal or invalid provision had not been contained herem. In case any covenant, stipulation, obligation or agreement contained in the Bonds or in the Resolution shall for any reason be held to be in violation of law, then such covenant, stipulation, obligation or agreement shall be deemed to be the covenant, stipulation, obligation or agreement of the City to the full extent permitted by law. Section 1205. Further Authority. The Mayor, City Clerk and other officials of the City are authorized and directed to execute any and all documents and take such actions as they may deem necessary or advisable in order to carry out and perform the purposes of the Resolution to make alterations, changes or additions in the foregoing agreements, statements, i,nstruments and other documents herein approved, authorized and confirmed which they may approve and the execution or taking of such action shall be conclusive evidence of such necessity or advisability. Section 1206. Governing Law. The Resolution and the Bonds shall be governed exclusively by and construed in accordance with the applicable laws of the State. -16- Section 1207. Effective Date. This Resolution shall take effect and be in full force from and after its adoption by the governing body of the City. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -17- ADOPTED by the governing body of the City on July 7,2003. (SEAL) ATTEST: ~M/k City Clerk .:.18- EXHffiITA (Form of Bond) EXCEPT AS OTHERWISE PROVIDED IN THE RESOLUTION (DESCRIBED HEREIN), THIS GLOBAL BOND MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES DEPOSITORY (DESCRIBED HEREIN) OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY. REGISTERED NUMBER UNITED STATES OF AMERICA STATE OF KANSAS COUNTY OF SALINE CITY OF SALINA GENERAL OBLIGATION INTERNAL IMPROVEMENT BOND SERIES 2003-A Interest Rate: _% Maturity Date: REGISTERED OWNER: PRINClPALAMOUNT: Dated CUSIP: Date: July 15, 2003 REGISTERED $_--- KNOW ALL PERSONS BY THESE PRESENTS: That the City of Salina, m the County of Saline, State of Kansas (the "City"), for value received, hereby acknowledges itself to be indebted and promises to pay to the registered owner identified above, or registered assigns, as of the Record Dates as hereinafter provided on the Maturity Date identified above, the Principal Amount identified above, and in like manner to pay interest on such Principal Amount from the Dated Date shown above or from the most recent interest payment date to which interest has been paid or duly provided for at the rate of mterest per annum set forth above (computed on the basis ofa 360-day year of twelve 30-day months), semiannually on April 1 and October I of each year, commencing April I, 2004 (the "lnterest Payment Dates"), until the Principal Amount is paid, unless this Bond shall have been previously called for redemption and payment as hereinafter set forth. The principal of, premium, if any, and interest on this Bond shall be payable by the Treasurer of the state of Kansas, Topeka, Kansas (the "Paying Agent" and "Bond Registrar"). The principal of and any premium on this Bond shall be payable to the registered owner hereof upon presentation of this Bond at the maturity or redemption date to the Paying Agent for payment and cancellation. The interest payable on this Bond on any interest payment date shall be paid to the person in whose name this Bond is registered on the Bond Register at the close of business on the fifteenth day of the month preceding the interest payment date (the "Record Date") for such interest (a) by check or draft mailed by the Paying Agent to such Registered Owner at the address shown on the Bond Register or at such other address as is furnished to the Paying Agent in writing by such Registered Owner or (b) in the case of an interest payment to any Registered Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Registered Owner upon written notice given to the Paying Agent by such A-1 Registered Owner not less than 15 days prior to the Record Date for such interest, contammg the electronic transfer instructions including the bank (which shall be in the continental United States), address, ABA routing number and account number to which such Registered Owner wishes to have such transfer directed. The principal, premium, if any, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of debts due the United States of America. The Bonds constitute general obligations of the City payable as to both principal and interest in part from special assessments levied upon the property benefited by the construction of certain portions of the improvements being financed and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The balance of the principal and interest on the Bonds shall be payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The full faith, credit and resources of the City are irrevocably pledged for the payment of the principal of and interest on this Bond and the issue of which it is a part as the same respectively become due. This Bond is one of an authorized series of Bonds of the City designated "General Obligation Internal Improvement Bonds, Series 2003-A," in an aggregate principal amount of $4,350,000 (the "Bonds") issued for the purposes set forth in the Ordinance of the City authorizing the issuance of the Bonds and the Resolution of the City prescribing the form and details of the Bonds (jointly, the "Resolution"). The Bonds are issued by the authority of and m full compliance with the provisions, restrictions and limitations of the Constitution and laws of the state of Kansas, including, without limitation, K.S.A. 10-101 et seq., K.S.A. 12-6aOl et seq., K.S.A. 12-685 et seq. and K.S.A. 12-1736 et seq., Charter Ordinance No. 29 of the City and Article 12, Section 5 of the Constitution of the State of Kansas, all as amended. At the option of the City, Bonds maturing on October 1,2014, and thereafter may be called for redemption and payment prior to maturity on October 1, 2013 and thereafter, in whole or in part at any time, in such principal amounts for such maturities as shall be determined by the City at the redemption price of 1 00% (expressed as a percentage of the principal amount), plus accrued interest thereon to the date of redemption. Unless waived by any owner of the Bonds to be redeemed, if the City elects to call any Bonds for redemption and payment prior to maturity, the City or the Bond Registrar and Paying Agent on behalf of the City shall give written notice of its intention to call and pay such Bonds on a specified date, the same being described by maturity, such notice to be mailed by United States first class mail addressed to the Owners of the Bonds not less than 30 days prior to the date fixed for redemption. All Bonds so called for redemption and payment shall cease to bear interest from the date for which such call is made, provided funds are available for the payment of such Bonds at the price specified above. The Bonds are being issued by means of a book-entry system with no physical distribution of bond certificates to be made except as provided in the Resolution. One Bond certificate with respect to each date on which the Bonds are stated to mature, registered in the nominee name of the Securities Depository, is being issued and required to be deposited with the Securities Depository and immobilized in its custody. The book-entry system will evidence positions held in the Bonds by the Securities Depository's participants, beneficial ownership of the Bonds in authorized denominations being evidenced in the records of such participants. Transfers of ownership shall be effected on the records of the Securities Depository and its participants pursuant to rules and procedures established by the Securities Depository and its participants. The City, the Bond Registrar and the Paying Agent will recognize the Securities Depository nominee, while the registered owner of this Bond, as the owner of A-2 this Bond for all purposes, including (i) payments of principal of, and redemption premium, if any, and interest on, this Bond, (ii) notices and (iii) voting. Transfers of principal, interest and any redemption premium payments to participants of the Securities Depository, and transfers of principal, interest and any redemption premium payments to beneficial owners of the Bonds by participants of the Securities Depository will be the responsibility of such participants and other nominees of such beneficial owners. The City, the Bond Registrar and the Paying Agent will not be responsible or liable for such transfers of payments or for maintaining, supervising or reviewing the records maintained by the Securities Depository, the Securities Depository nominee, its participants or persons acting through such participants. While the Securities Depository nominee is the owner of this Bond, notwithstanding the provision hereinabove contained, payments of principal of and interest on this Bond shaH be made in accordance with existing arrangements among the City, the Bond Registrar and the Securities Depository. EXCEPT AS OTHERWISE PROVIDED IN THE RESOLUTION, THIS GLOBAL BOND MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES DEPOSITORY OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY. The Bonds are issued in fully registered foml in the denomination of $5,000 or any integral multiple thereof. This Bond may be exchanged at the office of the Bond Registrar for a like aggregate principal amount of Bonds of the same maturity of other authorized denominations upon the tenns provided in the Resolution. The City and the Bond Registrar may deem and treat the registered owner hereof as the absolute owner hereof for purposes of receiving payment of or on account of principal hereof and interest due hereon and for all other purposes and neither the City nor the Bond Registrar shall be affected by any notice to the contrary. This Bond is transferable by the registered owner hereof in person or by the registered owner's agent duly authorized in writing, at the office of the Bond Registrar, but only in the manner, subject to the limitations and upon payment of the charges provided in the Resolution and upon surrender and cancellation of this Bond. The City shall pay all costs incurred in connection with the issuance, payment and initial registration of the Bonds and the cost of a reasonable supply of bond blanks. The City and the Bond Registrar shall not he required to issue, register, transfer or exchange any Bonds during a period beginning on the day following the Record Date preceding any Interest Payment Date and ending at the close of business on the Interest Payment Date or Bonds which have been called for redemption in accordance with Article III of the Resolution. IT IS HEREBY DECLARED AND CERTIFIED that all acts, conditions, and things required to bc done and to exist precedent to and in the issuance of this Bond have been properly done and perfom1ed and do exist in due and regular fonn and manner as required by the Constitution and laws of the state of Kansas, and that the total indebtedness of the City, including this series of bonds, does not exceed any constitutional or statutory limitation. This Bond shall not be valid or become obligatory for any purpose until the Certificate of Authentication and Registration hereon shall have been lawfully executed by the Bond Registrar. IN WITNESS WHEREOF, the City has caused this Bond to be executed by the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of its City Clerk, and its corporate seal to be affixed hereto or imprinted hereon, and this Bond to be dated the Dated Date shown above. A-3 CITY OF SALINA, KANSAS (Facsimile Seal) (facsimile) Mayor ATTEST: By (facsimile) City Clerk CERTIFICATE OF AUTHENTICATION AND REGISTRATION This Bond is one of a series of General Obligation Internal Improvement Bonds, Series 2003-A, of the City of Salina, Kansas, described in the within-mentioned Resolution. Registration Date: _____ _ Registration Number: 0322-085-071503-965 A-4 Office of the State Treasurer, Topeka, Kansas as Bond Registrar and Paying Agent By: ------------------- BOND ASSIGNMENT FOR VALUE RECEIVED, the undersigned do(es) hereby sell, assign and transfer to (Name and Address) (Social Security or Taxpayer Identification No.) the Bond to which this assignment is affixed in the outstanding principal amount of $ _____ _ standing in the name of the undersigned on the books of the Bond Registrar. The undersigned do(es) hereby irrevocably constitute and appoint as agent to transfer said Bond on the books of said Bond Registrar with full power of substitution in the premises. Dated Name Social Security or Taxpayer Identification No. Signature (Sign here exactly as name(s) appear on the face of Certificate) Signature guarantee: By [Name of Eligible Guarantor Institution as defined by SEC Rule 17ad-IS (12CFR 240.17 Ad-IS) or any similar rule which the Bond Registrar deems applicable] A-S CERTIFICATE OF CITY CLERK STATE OF KANSAS ) ) SS. COUNTY OF SALINE ) I, the undersigned, City Clerk of Salina, Kansas, hereby certify that the within Bond has been duly registered in my office according to law as of July 15,2003. WITNESS my hand and official seal. (Facsimile Seal) (facsimile) City Clerk CERTIFICATE OF STATE TREASURER OFFICE OF THE TREASURER, STATE OF KANSAS I, LYNN JENKINS, Treasurer of the State of Kansas, do hereby certify that a transcript of the proceedings leading up to the issuance of this Bond has been filed in my office, and that this Bond was registered in my office according to law on _____ _ WITNESS my hand and official seal. (Facsimile Seal) Treasurer of the State of Kansas A-6 STATEMEl'JT OF INSURANCE Financial Security Assurance Inc. ("Financial Security"), New York, New York, has delivered its municipal bond insurance policy with respect to the scheduled payments due of principal of and interest on this Bond to the Treasurer of the State of Kansas, Topeka, Kansas, or its successor, as paying agent for the Bonds (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Financial Security or the Paying Agent. A-7 LEGAL OPINION I, the undersigned, City Clerk of the City of Salina, Kansas, hereby certity that the following is a true and correct copy of the approving legal opinion of Gilmore & Bell, a Professional Corporation, Attorneys at Law, Kansas City, Missouri, on the within Bond and the series of which it is a part, except that it omits the date of such opinion; that the opinion was manually executed and was dated and issued as of the date of delivery of and payment for the Bonds and is on file in my office. By ________ ~(f~a~cs~im~il~eL) ________ _ City Clerk (PRINTED LEGAL OPINION) A-8 EXHIBITB CONTINUING DISCLOSURE INSTRUCTIONS SECTION I. Purpose of the Continuing Disclosure Instructions. These Continuing Disclosure Instructions (the "Instl1.1ctions") are being executed and delivered by the City for the benefit of the beneficial owners of any series of the Bonds and in order to assist the Participating Underwriters in complying with Rule 15c2-12 (defined below). These Instructions are to govern the continuing disclosure obligations of the City with respect to the City's General Obligation Internal Improvement Bonds, Scries 1996-A dated as of June 1, 1996 (the "1996 Bonds") and any additional series of Bonds that the City hereafter elects to make subject to these Instl1.1ctions. SECTION 2. Definitions. UnJess otherwise defined in these Instructions, the following capitalized tern1S shall have the following meanings for purposes of these Instructions: "Beneficial owner" means any registered owner of the Bonds and any other person who, directly or indirectly, has investment power with respect to any of the Bonds. "Bond Counsel" means the firm of Gilmore & Bell, P.c., or any other attorney or firm of attorneys with a nationally recognized standing in the field of municipal bond financing selected by the City. "Bonds" means the 1996 Bonds and any additional series of bonds, notes or other municIpal obligations of the City that the City elects at the time of issuance to have subject to these Instructions for the purpose of constituting the undeltaking of the City to provide continuing disclosure pursuant to Rule 15c2- 12. "City" means the CIty of Salina, Kansas. "MSRB" means the Municipal Securities Rulemaking Board. "NRMSrn." means any information repository recognized by the Securities and Exchange Commission as a nationally recognized municipal securities information repositOlY under Rule 15c2-12. "Participating Underwriter" means any of the original underwriters of the 1996 Bonds and any future series of Bonds required to comply with Rule 15c2-12 in connection with the offering of any series of Bonds. "Rule l5c2-12" means Rule 15c2-12 adopted by the Securities and Exchange Commission under thc Securities Exchange Act of 1934, as the same may be amended from time to time. "SID" means any public or private information depository, if any, designated by the State of Kansas and the Securities and Exchange Commission as such for purposes of Rule 15c2-12. SECTION 3. Provision of Annual Reports. (a) Within 180 days after the close of each fiscal year, the City shall furnish to each NRMSIR and to the SID, if any, (i) a copy of the financial statements of the City prepared in accordance with generally accepted accounting principles and audited by its independent auditors (or if not available as of B-1 such date, the unaudited financial statements of the City and as soon thereafter as available such audited financial statements of the City), and (ii) the operating data of the City, updated for the fiscal year then ended, in substantially the scope and form contained in the Official Statement dated May 6, 1996, with respect to the 1996 Bonds in the tables under the following headings: I. Debt Summary 2. Tax Levies 3. Assessed Valuation 4. Estimated Actual Valuation 5. Tax Collections 6. Largest Taxpayers (b) Any or all of the financial information or operating data required by this Section 3 may be incorporated by reference from other documents, including official statements of debt issues with respect to the City that have been filed with each NRMSIR or the Securities and Exchange Commission, and in the case of a final official statement, that is available from the MSRB. The City shall clearly identify in each annual report filed under this Sectio!l.J each document incorporated by reference and the source from which it is available. SECTION 4. Reporting of Matelial Events. (a) The City shall disseminate to the SID, if any, and to each NRMSIR or to the MSRB, promptly upon the occurrence thereof notice of any of the following events with respect to each series of the Bonds, If material: (i) Any principal or interest payment delinquencies; (ii) Any non-payment related defaults; (iii) Any unscheduled draws on debt service reserves reflecting financial difficultIes; (iv) Any unscheduled draws on credit enhancements reflecting financial difficulties; (v) Any substitution of credit or liquidity providers, or their failure to perform; (vi) Any adverse tax opinions or events affecting the tax-exempt status of any series of the Bonds; (vii) Any modifications to rights of security holders; (viii) Any caBs (other than mandatory sinking fund redemptions or redemptions at maturity); (ix) Any de[casances; (x) Any release, substitution or sale of property securing repayment of any series of the Bonds; and (xi) Any rating changes. B-2· (b) The City shall also provide to the SID, if any, and to each NRMSIR or to the MSRB, as promptly as practicable notice of any failure of the City to provide the NRMSIRs and the SID, if any, the annual financial information or operating data required by Section 3 on or before the date specified. SECTION 5. Termination of Reporting Obligation. The City's obligations under these Instructions shall tenninate with respect to each series of Bonds upon the defeasance, prior redemption or payment in full of all of such series of Bonds. SECTION 6. Amendment; Waiver. (a) The provisions of these Instructions may be amended only by a written instrument executed by the Mayor of the City if the City receives an opinion from Bond Counsel to the effect that these Instructions, as so amended, are in compliance with Rule 15c2-12 and all current amendments thereto and interpretations thereof that are applicable to these Instructions. (b) If an amendment is made to these Instructions, the City shall describe in the next annual financial repOlt submitted to the NRMSIRs pursuant to Section 3 the substance of the amendment, the reasons for such amendment and the impact of such amendment on the type of operating data or financial information required to be provided under these Instructions. SECTION 7. Additional1nformation. Nothing in these Instructions shall be deemed to prevent the City from disseminatmg any other infom1ation, or including any other information in any report or notice made hereunder, in additIOn to that which is required by these Instructions. If the City chooses to include any information in any repOlt or notice made hereunder in addition to that which is specifically required by these Instructions, the City shall have no obligation hereunder to update such information or include it in any future report or notice. SECTION 8. NoncomplIance. The provisions of these Instructions shall be subject to speCific enforcement or action in mandamus in a court of eqUlty by any beneficial owner of any series of the Bonds. A breach of the provisions of this Section shall not constitute a default or event of default under the resolution adopted by the City authorizing any series of the Bonds. SECTION 9. Beneficiaries. These Instructions are for the benefit of the City, the Participating Underwriters and the beneficial owners of any series of the Bonds, and shall create no rights in any other person. SECTION 10. Applicability to Future Series of Bonds. These Instructions shall apply to any future series of Bonds of the City that the City elects to have subject to these Instructions at the time of issuance thereof. These Instructions shall constitute the undettaking of the Ctty with respect to any such future series of Bonds for the purpose of any Participating Underwriters determining compliance with Rule 15c2-12. Nothing contained herein shall obligate the City to adopt these Instructions with respect to any future bonds or municipal obligations issued by the City. Dated: May 6, 1996. CITY OF SALINA, KANSAS B-3 GILMORE & BELL, P.C. Document No. KI06875.04\BondOrdl ORDINANCE NO. 04-10205 AN ORDINANCE AUTHORIZING THE ISSUANCE AND DELIVERY OF $4,053,000 PRINCIPAL AMOUNT OF GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2004-B, OF THE CITY OF SALINA, KANSAS, FOR THE PURPOSE OF PAYlNG THE COST OR A PORTION OF THE COST OF CERTAIN IMPROVEMENTS; PROVIDING FOR THE LEVY AND COLLECTION OF AN ANNUAL TAX AND SPECIAL ASSESSMENTS FOR THE PURPOSE OF PAYING THE PRINCIPAL OF AND INTEREST ON THE BONDS AS THEY BECOME DUE; MAKING CERTAIN COVENANTS WITH RESPECT THERETO. WHEREAS, the City of Salina, Kansas (the "City") is a City of the first class, created, organized and existing under the laws of the State; and WHEREAS, pursuant to K.S.A. 10-101 et seq., K.S.A. 12-6aOl et seq., K.S.A. 12-685 et seq. and K.s.A. 12-2101 et seq., all as amended and supplemented, and all other applicable provisions of the laws of the state of Kansas, the governing body of the City has caused the following improvements to be undertaken in the City (such improvements to be referred to as the "Improvements"): a. Schilling/Centennial Road b. Water Well Road Interchange c. Solid Waste Facility Improvements d. Liberty Addition WHEREAS, all legal requirements pertaining to the Improvements have been complied with, and the governing body of the City now finds and determines that the total cost of the Improvements is at least $4,053,000, to be paid by the issuance of general obligation bonds; and WHEREAS, the governing body of the City is authorized by law to issue general obligation bonds of the City to pay the costs of the Improvements; and WHEREAS, the governing body of the City hereby finds and determines it is necessary for the City to authorize the issuance and delivery of its general obligation bonds in the principal amount of $4,053,000 to pay the costs of the Improvements; NOW, THEREFORE, BE IT ORDAINED BY THE GOVERNING BODY OF THE CITY OF SALlNA, KANSAS, AS FOLLOWS: Section 1. Definitions of Words and Terms. "Act" means the Constitution and all applicable statutes of the State including but not limited to K.s.A. 10-101 et seq., K.S.A. 12-6aOl et seq., K.S.A. 12-685 et seq. and K.S.A. 12-2101 et seq., all as amended and supplemented. "Authorized Cost" means the amount of expenditure for an Improvement which has been authorized to be paid by the City by a resolution or ordinance of the City, less (1) the amount of any notes or bonds of the City which are currently outstanding and available to pay the Authorized Cost, and (2) any Authorized Cost which have been previously paid by the City or by any eligible source of funds unless such amounts are entitled to be reimbursed under State and federal law. "Bond and Interest Fund" means the Bond and Interest Fund of the City for its general obligation bonds. "Bonds" means the General Obligation Internal Improvement Bonds, Series 2004-B authorized by this Ordinance in the aggregate principal amount of $4,053,000 and dated July 15,2004. "City" means the City of Salina, Kansas. "City Clerk" means the appointed and acting City Clerk or, in the City Clerk's absence, the appointed andlor elected Deputy or Acting City Clerk of the City. "Code" means the Internal Revenue Code of 1986, as amended, and the applicable regulations proposed or promulgated thereunder of the United States Department of the Treasury. "Improvements" means the improvements referred to in the preamble to this Ordinance. "Mayor" means the elected and acting Mayor of the City or, in the Mayor's absence, the appointed andlor elected Vice or Acting Mayor of the City. "Ordinance" means this Ordinance authorizing the issuance of the Bonds. "State" means the state of Kansas. "Treasurer" means the appointed and acting Treasurer of the City or, in the Treasurer's absence, the appointed and/or elected Deputy or Acting Treasurer bfthe City. Section 2. Authorization of and Security for the Bonds. These Bonds shall be issued for the purpose of providing funds to pay the Authorized Costs of the Improvements. The Bonds shall be general obligations of the City payable as to both principal and interest in part from special assessments levied upon the property benefited by the construction of certain improvements and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The balance of the principal and interest on the Bonds shall be payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The full faith, credit and resources of the City are hereby irrevocably pledged for the prompt payment of the principal of and interest on the Bonds as the same become due. Section 3. Terms, Details and Conditions of the Bonds. The Bonds shall be dated and bear interest, shall mature and be payable at such times, shall be in such forms, shall be subject to redemption and payment prior to the maturity thereof, and shaH be issued and delivered in the manner prescribed and subject to the provisions, covenants and agreements set forth in a resolution hereinafter adopted by the governing body of the City. -2- Section 4. LeVY and Collection of Annual Tax and Special Assessments. The governing body of the City shall annually make provision for the payment of principal of, premium, if any, and interest on the Bonds as the same become due, taking into account any scheduled mandatory redemptions, by levying and collecting the necessary taxes andlor assessments upon all ofthe taxable tangible property within the City in the manner provided by law. The taxes and/or assessments referred to above shall be spread upon the tax rolls and shall be levied and collected at the same time and in the same manner as the general ad valorem taxes of the City are levied and collected, and the proceeds derived from the taxes andlor assessments shall be deposited in the Bond and Interest Fund. If at any time the taxes and/or assessments are not collected in time to pay the principal of or interest on the Bonds when due, the Treasurer is hereby authorized and directed to pay the principal or interest out of the general funds of the City and to reimburse the general funds for money so expended when the taxes andlor assessments are collected. Section 5. Tax Covenants. The City covenants and agrees that it will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion of the interest on the Bonds from gross income for federal income tax purposes. The City covenants and agrees that it will use the proceeds of the Bonds as soon as practicable and with all reasonable dispatch for the purpose for which the Bonds are issued as previously set forth, and that it will not directly or indirectly use or pennit the use of any proceeds of the Bonds or any other funds of the City, or take or omit to take any action that would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148(a) of the Code. To that end, the City will comply with all requirements of Section 148 of the Code to the extent applicable to the Bonds. The City covenants and agrees that it will not use any portion of the proceeds of the Bonds, including any investment income earned on such proceeds, directly or indirectly, in a manner that would cause any Bond to be a "private activity bond" within the meaning of Section 141(a) of the Code. Section 6. Further Authority. The Mayor, City Clerk and other City officials are authorized and directed to execute such documents and take such actions as they may deem necessary or advisable in order to carry out the purposes of this Ordinance. Section 7. Governing Law. The Ordinance and the Bonds shall be governed by and construed in accordance with the applicable laws of the State. Section 8. Effective Date. This Ordinance shall take effect and be in full force from and after its passage by the governing body of the City and publication in the official City newspaper. -3- PASSED by the governing body of the City on July 12,2004. (SEAL) i1&JL~ \tlce-Mayor ArrEST: ::H O~ D~Clerk -4- GILMORE & BELL, P.C. Document No. KI06875.04\2004-BBondRes2 RESOLUTION NO. 04-6089 01' CITY OF SALINA, KANSAS ADOPTED JULy t2, 2004 $4,053,000 REGISTERED BONDS BOOK-ENTRY ONLY SERIES 2004-B GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2004-B Section 101. Section 201 , Section 202. Section 203. Section 204. Section 205. Section 206. Section 207. Section 208. Section 209. Section 210. Section 21l. Section 212. Section 30r. Section 302. Section 303. Section 304. Section40L REsoumON TABLE OF CONTENTS Title..................................................................................................................... 1 Recitals .................. :............................................................................................. 1 ARTICLE I DEFINITIONS Defmitions of Words and Tenns ....................................................................... .. ARTICLE II DETNLSOFTHEBONDS Authorization of the Bonds ............................................................................... .. Description of the Bonds ................................................................................... . Designation of Paying Age!)t and Bond Registrar ............................................. . Method and Place of Payment of the Bonds ..................................................... .. Method of Execution and Authentication of the Bonds .................................... .. Registration, Transfer and Exchange of Bonds ................................................. .. Surrender and Cancellation of Bonds ................................................................ . Mutilated, Lost, Stolen or Destroyed Bonds ....................... : .............................. . Temporary Bonds ............................................................................................... . Delivery of the Bonds ................................... .-.................................................... . Book-Entry Bonds; Securities Depository ......................................................... . Payments Due on Saturdays, Sundays and Holidays ......................................... .. ARTICLE III REDE~TIONOFTHEBONDS Redemption ....................................................................................................... .. Selection of Bonds to be Redeemed .................................................................. . Notice ofRedernption ........................................................................................ . Effect of Call for Redemption ........................................................................... .. ARTtCLEIV ESTABLISHMENT OF FUNDS AND ACCOUNTS Creation of Funds and Accounts ........................................................................ . -1- 1 4 4 5 5 5 6 6 .6 7 7 7 8 9 9 9 10 10 Section 402. Section 501. Section 502. Section 503. Section 504. Section 601. Section 602. Section 603. Section 701. Section 702. Section 703. Section 801. Section 802. Section 803. Section 90l. Section 902. Administration of Funds and Accounts .............................................................. . ARTICLE V APPLICATION OF BOND PROCEEDS Disposition of Bond Proceeds ............................................................................ . Withdrawals from the Improvement Fund ........................................................ .. Surplus in the Improvement Fund ..................................................................... .. Substitution ofhnprovements ............................................................................... . ARTICLE VI PAYMENT OF THE BONDS Application of Moneys in the Principal and Interest Account.. ........................ .. Transfer of Funds to Paying Agent .................................................................... . Surplus in Principal and ~terest AccounL ........................................................ . ARTICLE VII DEPOSITS AND INVESTMENT OF FUNDS Deposits ........................................................... , ................ ', ............................... .. Investments , ...................................................................................................... .. Deposits into and Application of Moneys in the Rebate Fund ............................ . ARTICLE VIII DEFAULT AND REMEDIES Remedies ................................................................................ ; ........................... . Limitation on Rights of Bond owners ................................................................ .. Remedies Cumulative ........................................................................................ . ARTICLE IX. AMENDMENTS Amendments ............................. , ........................................................................ . Written Evidence of Amendments .................................................................... .. -1I~ 10 10 11 11 11 11 11 12 12 12 12 13 13 13 14 14 ARTICLE X DEFEASANCE Section 1001. Defeasance :......... ...... ..... ................. ........ .............. ..... ........................ ......... ........ 15 ARTICLE XI CONTINUING DISCLOSURE REQUIREMENTS Section 110 1. Disclosure Requirements. ............ ......... ............... .......... ..... .......................... ...... 15 Section 1201. Section 1202. Section 1203. Section 1204. Section 1205 .. Section 1206. Section 1207. ARTICLE XII MISCELLANEOUS PROVISIONS Preliminary Official Statement and Official Statement ..................................... . Rebate Covenants ........................ -........ : ........................................................... ' ... . Tax Covenants .................................................................................................... . Severability ............................... , ........................................................................ . Further Authority ...................................................... : ........................................ . Governing Law .................................................................................................. . Effective Date .................................................................................................... . 16 16 16 . 16 16 17 17 Adoption... ........... ............. ........... ......... ........... .............. ..................... ............ .... 18 Signatures an!! Seal ...................... ,............................ .... ..... .......... ....................... 18 Exhibit A -Bond Form Exhibit B -Continuing Disclosure Instructions -lll- RESOLUTION NO. 04-6089 A RESOLUTION PRESCRIBING THE FORM AND DETAILS OF AND AUTHORIZING THE DELNERY OF $4,053,000 PRINClPAL AMOUNT OF GENERAL OBLIGATION INTERNAL lMPROVEMENT BONDS, SERIES 2004-B, ,OF THE CITY OF SALINA, KANSAS, PREVIOUSLY AUTHORIZED BY ORDINANCE NO. 04-10205 OF TIlE CITY; AND MAKING CERTAIN COVENANTS WITH RESPECT THERETO. WHEREAS, the City has adopted the Ordinance authorizing the issuance of the Bonds; and WHEREAS, "the Ordinance authorized the governing body of the City to adopt a resolution prescribing certain details and conditions and to make certain covenants with respect to the issuance of the Bonds; NOW, ~REFORE, BE IT RESOLVED BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS, AS FOLLOWS: ARTICLE I DEFINITIONS Section 101. Definitions of Words and Tenns. "Act" means the ConStitution and statutes of the State of Kansas including, but not limited to, K.S.A. 10-101 et seq., K.SA. 12-6aOl et seq., KS.A. 12-685 et seq. and K.8.A. 12-2101 et seq., all as amended and supplemented. "Arbitrage Instructions" means the Arbitrage Instructions (dated as of the date of issuance of the Bonds) relating to certain matters within the scope of Section 148 of the Code, as the same may be amended or supplemented in accordance with its tenns. "Authorized Costs" means the amount of expenditure for an Improvement which has been duly authorized to be paid by the City by a resolution'or ordinance of the City, less (1) the amount of any notes or bonds of the City which are currently outstanding and available to pay such Authorized Costs, and (2) any Authorized Costs which have been previously paid by the City or by any eiigible source of funds unless such amounts are entitled to be reimbursed under" State and federal law. "Authorized Investments" means investments authorized by K.S.A. 10-131, asamended from time to time, or as otherwise permitted under the laws of the State. " "Bond and Interest Fund" means the Bond and Interest Fund of the City for its general obligation bonds. "Bond Counsel" means the finn of Gilmore & Bell, P.C., or any other attorney or firm of attorneys whose expertise in matters relating to the issuance of obligations by states and their political subdivisions is nationally recognized and acceptable to the City. IfBondowner" shall have the same meaning as the term Ovmer. "Bond Registrar" means the Treasurer of the State, Topeka, Kansas, and its successors and aSSigns. "Bonds" means the City's General Obligation Internal Improvement Bonds, Series 2004-B Bonds in the aggregate principal amount of $4,053,000 and dated July 15,2004. "Business Day" means a day other than a Saturday, Sunday or any daY,designated as a holiday by the Congress of the United States or by the Legislature of the State and on which the Paying Agent is scheduled in the normal course ofits operations to be open to the public for conduct of its operations. "Cede & Co." means Cede & Co., as nominee name of The Depository Trust, Company, New York, New York. "City" means the City of Salina, Kansas. "City Clerk" means the duly appointed and acting City Clerk of the City or, in the City Clerk's absence. the duly appointed and/or elected Deputy or Acting City Clerk of the City. "Code" means the Internal Revenue Code of 1986, as amended, and the applicable regulations proposed or promulgated thereunder of the United States Department of the Treasury. "Continuing Disclosure Instructions'l means the Continuing Disclosure Instructions dated May 6, 1996 and attached as an exhibit to Resolution No. 96-5007 of the City (pertaining to General Obligation Internal Improvement Bonds, Series 1996-A of the City), as from time to time amended and attached hereto as Exhibit B. "Costs of Issuance" shall mean all costs of issuing the Bonds, including an publication, printing. signing and mailing expenses but not limited to, registration fees, all fees and expenses of legal counsel, and any expenses incurred in cOJUlection with receiving ratings on the Bonds, any financial advisory fees and all other related expenses. "Improvement Fund" means the Improvement Fund for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2004-B, created herein and any Substitute Improvements. "Improvements" means the improvements referred to in the preamble to the Ordinance. "Interest Payment Dates" means April 1 and October 1 of each year, commencing April 1,2005, and ending on the maturity date of the Bonds, or such other time as the Bonds are paid or provision is made for the payment thereof. "Mayor" means the duly elected and acting Mayor of the City or, in the Mayor's absence, the duly appointed and/or elected Mayor or acting Mayor of the City. "Ordinance" means Ordinance No. 04-10205 of the City authorizing the issuance of the Bonds. "Original Purchaser" means Wachovia Securities, Dallas, Texas. -2- "Outstanding" means as of a particular date, all Bonds heretofore issued, authenticated and delivered under the provisions of this Resolution, except: (a) Bonds cancelled by the Paying Agent or delivered to the Paying Agent for cancellation pursuant to this Resolution; (b) Bonds for the payment or redemption of which monies or investments have been deposited in accordance with this Resolution; and (c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered pursuant to this Resolution. "Owner" or "Registered Owner" when used with respect to any Bond means the person in whose name such Bond is registered on the registration books of the City as maintained by the Bond Registrar. "Participants" means those fmancial institutions for whom the Securities Depository effects book- entry transfers and pledges of securities deposited with the Securities Depository, as such listing of Participants exists at the time of such reference: C "Paying Agent" means the Treasurer of the State, Topeka, Kansas, and any successors and aSSIgns. "Principal and Interest Account" means the Principal and Interest Account for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2004-B, created in the City's Bond and Interest Fund. ' "Prjncipal Payment Dates" means October I of the years as set forth in Section 202 of this Resolution, or until such time as the aggregate principal amount of the Bonds has been paid or provision is made for the payment of the Bonds. "Purchase Price" means 1 00% of the principal amount of the Bonds plus accrued interest to the date of delivery and plus any premium to be paid by the Original Purchaser. "Rebate Fund" means the Rebate Fund for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2004-B, created herein. "Record Dates" means the fifteenth day of each month preceding the Interest Payment Dates of each year the Bonds are Outstanding. "Replacement Bonds" means Bonds issued to the beneficial owners of the Bonds in accordance with Section 211 (b) hereof. "Representation Letter" means the Representation Letter, if any is required, from the City and the Paying Agent to the'Securities Depository with respect to the Bonds. "Resolution" means this resolution relating to the Bonds. -3- "Securities Depository" means, initially, The Depository Trust Company, New York, New York, and its successors and assigns. "State" means the state of Kansas. "Substitute Improvements" means the substitute or additional improvements of the City as authorized by Section 504 of this Resolution. "Treasurer" means the duly appointed and acting Treasurer of the City or, in the Treasurer's absence, the duly appointed Deputy or acting Treasurer of the City. ARTICLE II DETAaSOFTHEBONDS Section 201. Authorization of the Bonds. The Bonds have been issued pursuant to-the Ordinance for the purpose of providing funds to pay the Authorized Costs of the Improvements. - Section 202. Description of the Bonds. The Bonds shall consist offully registered bonds in the denomination of $5,000 or any integral mUltiple thereof, except one bond maturing in 2005 will be in the denomination of $8,000 or any integral multiple of $5,000 in excess thereof, shan be dated July 15,2004, shaH be numbered in such manner as the Bond Registrar shall determine, shall be in substantially the form set forth in Exhibit A to this Resolution, may be in typewritten form and shall-be dated July 15, 2004. An of the Bonds shall become due on the Principal Payment Dates and shall bear interest from the date thereof as follows: MATURITY PRINCIPAL INTEREST OCTOBER 1 AMOUNT RATE 2005 $383,000 3.000% 2006 380,000 3.125% 2007 380,000 3.200% 2008 380,000 3.200010 2009 380,000 3.125% 2010 380,000 3.125% 2011 380,000 3.300% 2012 380,000 3.400% 2013 380,000 3.500% 2014 380,000 3.650% 2015 50,000 3.750% 2016 50,000 3.875% 2017 50,00Q 4.000% 2018 50,000 4.000% 2019 50,000 4.000% -4- Interest on the Bonds at the rates stated above (computed on the basis of a 360-day year of twelve 30-day months) from the date thereof or from the most recent Interest Payment Date to which interest has been paid or duly provided for. shall be payable on the Interest Payment Dates to the Owners whose names appear on the books maintained by the Bond Registrar at the close of business on the Record Dates. Section 203. Designation of Paying Agent and Bond Registrar. The Treasurer of the State, Topeka, Kansas, is hereby designated as the Paying Agent and Bond Registrar for the Bonds. The Mayor and City Clerk of the City are hereby authorized and empowered to execute on behalf of the City an agreement with the Bond Registrar and Paying Agent for the Bonds. Section 204. Method and Place of Payment of the Bonds. The principal of, premium, if any, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment, is legal tender for the payment of debts due" ~he United States of America. The principal of and any premium on the Bonds shall be paid to the Registered Owner of each Bond upon presentation of the Bond at the maturity or redemption date to the Paying Agent for cancellation. The interest payable on each Bond on any Interest Payment Date shall be paid to the Registered Owner of such Bond as shown on the Bond Register at the close of business on the Record Date for such interest (a) by check or draft mailed by the Paying Agent to such Registered Owner at the address shown on the Bond Register or (b) in the case of an interest payment to any Registered Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Registered Owner upon written notice given to the Paying Agent by such Registered Owner not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank (which shall be in the continental United States), address, ABA routing number and account niunber to which such Registered Owner wishes to have such transfer directed. The Paying Agent shall keep in its offices a record of payment of principal of, premium, if any, and interest on an Bonds. Section 205. Method of Execution and Authentication of the Bonds. The Bonds shall be executed for and on behalf of the City by the manual or facsimile signature of the Mayor, attested by the manual or facsimile signature of the City Clerk and the seal of the City shall be affixed thereto or imprinted on the Bonds. The Bonds shall be registered in the office of the City Clerk, and evidenced by . the manual or facsimile signature of the City Clerk with the seal of the City affixed to or imprinted on the Bonds. The Bonds shall also be registered in the office of the State Treasurer, evidenced by the manual or facsimile signature of the State Treasurer with the seal of the State Treasurer affixed to or imprinted on the Bonds. In the event that any of the officers shall cease to ho\d such offices before the Bonds are issued and delivered, the Bonds may be issued and transferred to other Owners as though the officers had not ceased to hold office, and such signatures appearing on the Bonds shan be valid and sufficient for all purposes as if they had remained in office until such issuance or transfer. ." The Bonds shall not be valid obligations under the provisions of this Resolution until the Certificate of Authentication appearing on each bond is executed by the Bond Registrar or a duly authorized representative of the Bond Registrar. It is not necessary that the same representative of the Bond Registrar execute the certificatt;: of authentication on all of the Bonds. -5- Section 206. Registration, Transfer and Exchange of Bonds. As long as the Bonds remain Outstanding, the City shall cause the Bond Registrar to keep the books for the registration and transfer of the Bonds. Upon presentation of the necessary documents the Bond Registrar shall transfer or exchange any Bond(s) for new Bond(s) in an authorized denomination of the same maturity and for the same aggregate principal amount as the Bond(s) which was presented for transfer or exchange. All Bonds presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature , satisfactory to the Bond Registrar, duly executed by the Registered Owner thereof or by the Registered Owner's duly authorized agent. fu addition, all Bonds presented for transfer or exchange shall be surrendered to the Bon~ Registrar for cancellation. Prior to delivery of the new Bond(s) to the transferee, the Bond Registrar shall register the same in the registration books kept by the Bond Registrar for, such purpose and shall authenticate each-Bond. _The City shall pay the fees of the Bond Registrar for registration and transfer of the Bonds and the cost of printing a reasonable supply of ~egistered bond bJanks. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Bond Registrar. are the responsibility oflhe Owners. The City and the Bond Registrar shan not be required to issue, register, transfer or exchange any Bonds during a period beginning on the day following the Record Date preceding any 'Interest Payment Date and ending at the close of business on the Interest Payment Date or any Bonds which have been called for redemption in accordance with Article ill of this Resolution. New Bonds delivered upon any transfer or exchange shall be valid obligations of the City, evidencing the same debt as the Bonds surrendered, shall be secured by the Resolution and shaII be entitled to all of the security and benefits hereof to the same extent as the Bonds s~rrendered'- The City, Bond Registrar and Paying Agent may deem and treat the person in whose name any Bond is registered as the absolute Owner thereof, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of, redemption premium, if any, and interest on such Bond and for all other purposes, and neither the City, Bond Registrar and Paying Agent shall be affected by any notice to the contrary. Section 207. Surrender and Cancellation of Bonds. Whenever any Outstanding Bonds are delivered to the Bond Registrar for cancellation such Bond shall be canceled by the Bond Registrar upon payment of the principal amount of the Bond and interest thereon or replacement pursuant to the Resolution, and the canceled Bond shall be returned to the City. Section 208. Mutilated, Lost. Stolen or Destroyed Bonds. In the event Bond is mutilated, lost, stolen or destroyed, the City may execute arid the Bond Registrar may authenticate a new Bond of the same date, maturity, denomination and interest rate, as the mutilated, lost, stolen or destroyed Bond; provided, that in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the City or the Bond Registrar, and, in the case of any lost, stolen or destroyed Bond there shall be first furnished to the Bond Registrar and the City evidence of such loss, theft or destruction satisfactory to them, together with an indemnity satisfactory to the City and the Bond Registrar. In the event any such Bond shall have matured, instead of issuing a duplicate Bond, the City and Bond Registrar may pay the same without surrender thereof. The City and Bond Registrar may charge to the Registered Owner of such Bond their reasonable fees and expenses in connection with replacing any Bond or Bonds mutilated, stolen, lost or destroyed. Section 209. Temporary Bonds. Until definitive Bonds are prepared, the City may execute, in the same manner as is provided in the Resolution and upon the request of the City, the Bond Registrar shall authenticate and deliver, in lieu -of definitive Bonds but subject to the same provisions, limitations and conditions as the definitive Bonds, one or more temporary Bonds substantially of the tenor of the -definitive Bonds in lieu of which such temporary Bond or Bonds are issued, in denominations authorized herein, authorized by the City and with such omissions, insertions and variations as may be appropriate to temporary Bonds. The City at its own expense shall prepare and execute and, upon the surrender of such temporary Bonds for exchange and upon the cancellation of such surrendered temporary Bonds, the Bond Registrar shall authenticate and, without charge to the Owner thereof, deliver in exchange therefor defmitive Bonds of the same aggregate principal amount and maturity as the temporary Bonds surrendered. If the City shall authorize the issuance of temporary Bonds in more than one denomination, the Registered Owner of any temporary Bond or Bonds may, at such Registered Owner's option, surrender the same to the Bond Registrar in exchange for another temporary Bond or Bonds of like aggregate principal amount and maturity of any other authorized denomination or denominations, and thereupon the City shall execute and the Bond Registrar shall authenticate and, upon payment of any applicable taxes, fees and chatges, shaH deliver a temporary Bond or Bonds of like aggregate principal amount and maturity in such other authorized denomination or denominations as shall be requested by such Owner. All temporary Bonds surrendered in exchange either for another temporary Bond or Bonds or for a definitive Bond or Bonds shall be canceled by the Bond Registrar. Section 210. Delivery of the Bonds. The Mayor and City Clerk are hereby authorized and directed to cause the Bonds to be registered in the offices of the City Clerk and the State Treasurer as provided by law, and, when duly executed and registered, to cause the Bonds to be delivered to the Original Purchaser, upon receipt by the City of the Purchase Price. Section 211. Book-Entrv Bonds; Securities Depository. (a) The Bonds shall initially be registered to Cede & Co., 'the nominee for the Securities Depository, and no beneficial owner will receive certificates representing their respective interests in the Bonds, except in the event the Bond Registrar issues Replacement Bonds as provided in subsection (b) hereof. It is anticipated that during the tenn of the Bonds, the Securities Depository will make book-entry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Bonds to the Participants until and unless the Bond Registrar authenticates and delivers Replacement Bonds to the beneficial owners as descn'bed in subsection (b). (b) (1) If the City determines (A) that the Securities Depository is unable to properly discharge its responsibilities, or (B) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities Exchange Act of 1934, as amended, or (C) that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the beneficial owners of the Bonds, or (2) if the Bond Registrar receives -written notice from Participants having interests in not less -7- than 50% of the Bonds Outstanding, as shown on the records of the Securities Depository (and certified to . such effect by the Securities Depository), that the continuation of a book--entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the beneficial owners of the Bonds, then the Bond Registrar shall notifY the Owners of such detennination or such notice and of the availability of certificates to Owners requesting the same, and the Bond Registrar shall register in the name of and authenticate and deliver Replacement Bonds to the beneficial owners or their nominees in principal amounts representing the interest of each, making such adjustments as it may find necessary or appropriate as to accrued interest and previous calls for redemption; provided, that in the case ofa detennination under (l)(A) or (l)(B) of this subsection (b), the City. with the consent of the Bond Registrar, may select a successor securities depository in accordance with Section 211(c) hereof to effect book-entry transfers. m such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Bond. Upon the issuance of Replacement Bonds, all references herein to obligations imposed upon or to be performed by the Securities Depository shall be deemed to be imposed upon and performed by the Bond Registrar, to the extent applicable with respect to such Replacement Bonds. If the Securities Depository resigns and the City, the Bond Registrar or Owners are unable to locate a qualified successor of the Securities Depository in accordance with Section 21 I(c) hereof, then the Bond Registrar shall authenticate and cause delivery of Replacement Bonds to Owners, as provided ·herein. The Bond Registrar may rely on information from the Securities Depository and its ParticipatJts as to the names of the beneficial owners of the Bonds. The cost of printing. registration, authentication and delivery of Replacement Bonds shall be paid for by the City. (c) In the event the Securities Depository resigns, is unable to properly discharge its responsibilities, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities Exchange Act of 1934, as amended, the City may appoint a successor Securities Depository provided the Bond Registrar receives written evidence satisfactory to the Bond Registrar with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shan be a securities depository which is a registered clearing agency under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation that operates a securities depository upon reasonable and customary terms. The Bond Registrar upon its receipt of a Bond or Bonds for cancellation shall cause the delivery of Bonds to the successQr Securities Depository in appropriate denominations and fonn as provided herein. (d) The execution and delivery of any required Representation Letter to the Securities Depository by an authorized officer of the City is hereby authorized. Section 212. Payments Due on Saturdays, Sundays and Holidays. In any case where the PrinCipal Payment Date, the mterest Payment Date or the redemption date is not a Business Day, then payment of principal, interest or redemption price need not be made on such date( s) but may be made on the next succeeding Business Day with the same force and effect as if made on such date(s), and no interest shall accrue for the period after such date(s). -8- ARTICLEID REDEMPTION OF THE BONDS Section 301. Redemption. (a) Optional Redemption. At the option of the City, Bonds maturing on October 1,2013, and thereafter may be called for redemption and payment prior to maturity on October 1,2012 and thereafter, in whole or in part at any time, in such principal amounts for such maturities as shall be determined by the City at the redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the date of redemption. Section 302. Selection of Bonds to be Redeemed. The Bonds shall be redeemed only in the principal amount of $5,000 or any integral mUltiple thereof. When less than all of the Bonds are to be redeemed and paid prior to maturity, Bonds of less than a fuU maturity to be selected in such manner as the Bond Registrar acting on behalf of the City shall determine. In the case of a partial redemption of Bonds when Bonds of denominations greater than $5,000 are then Outstanding, then for all purposes in connection with such redemption each $5,000 of face value shan be treated as though it were a separate Bond of the denomination of $5,000. If it is detennined that one or more, but not all, of the $5,000 units of face value'represented by any Bond is selected for redemption, then upon notice of intention to redeem ,such $5,000 unit or units, the Owner or the Owner's duly authorized agent shall forthwith present and surrender such Bond to the Bond Registrar: (i) for payment of the redemption price (including the redemption. if any, and interest to the date fixed for , redemption) of the $5,000 unit or units of face value caned for redemption; and (ii) for exchange, without charge to the Owner thereof. for a new Bond(s) of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Owner of any Bond of a denomination greater than $5,000 shall fail to present such Bond as aforesaid, such Bond shall, nevertheless, become due and payable on the redempti<?n date to the extent of the amount called for redemption. Section 303. Notice of Redemption. In the event the City desires to call the Bonds for optional redemption prior to maturity, written notice of such intent shall be provided in accordance with K.S.A. 10-129, as amended. Unless waived by any Owner of Bonds to be redeemed, if the City shall call any Bonds for redemption and' payment prior to the maturity thereof, the City or the Bond Registrar and Paying Agent on behalf of the City shan give written notice of its intention to call and pay said Bonds on a specified date. the same being described by maturity, said notice to be mailed by United States frrst class mail addressed to the Owners of said Bonds, 'such notice to be mailed not less than 30' days prior to the date fixed for redemption. The City and Bond Registrar shall also give such additional notice as may be required by State law in effect as of the date of such notice. All official notices of redemption shall be dated. and shall state (1) the redemption date, (2) the redemption price, (3) if less than all Outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed, (4) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (5) the place where such Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the principal office of the Paying Agent. -9- On or prior to any redemption date, the City shall deposit with the Paying Agent an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Paying Agent at the redemption price. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. Upon surrender for any partial redemption of any Bond, there shall be prepared for the Registered Owner a new Bond or Bonds of the same maturity in the amount of the unpaid principal. All Bonds which have been redeemed shan be cancelled and destroyed by the Paying Agent and shall not be reissued. For,so long as the Secwities Depository is effecting book-entry transfers of the Bonds, 'the Bond Registrar shall provide the notices specified in this Section to the Securities Depository. It is expected that the Securities Depository shall, in turn,-notify its Participants and that the Participants, in turn, will notify or cause to be notified the beneficial owners. Any failure on the part of the Securities Depository or a Participant, or failure on the part of a nominee of a beneficial owner of a Bond (having been mailed notice from the Bond Registrar, the Securities Depository, a Participant or otherwise) to notify the beneficial owner of the Bond so affected, shall liot affect the validity of the redemption of such Bond. Section 304. Effect of Call for Redemption. Whenever any Bond is called for redemption and payment as provided in this Article, all interest on such Bond shall cease from and after the date for which such call is made, provided funds are available for its payment at the price specified above. ARTICLE IV ESTABLISHMENT OF FUNDS AND ACCOUNTS Section 40 I. Creation of Funds and Accounts. Simultaneously with the issuance of the Bonds, there shall be created within the Treasury of the City the following funds and accounts: (a) -Improvement Fund for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2004-B~ and (b) Principal and Interest Account for Salina, 'Kansas, General Obligation Internal Improvement Bonds, Series 2004-B; and (c) Rebate Fund for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2004-B. Section 402. Administration of Funds and Accounts. The funds and accounts established herein shall be administered in accordance with the provisions of the Resolution so long as the Bonds are outstanding. ARTICLE V APPLICATION OF BOND PROCEEDS Section 501. Disposition of Bond Proceeds. The proceeds of the Bonds, upon issuance and ~elivery thereof, shall be deposited as follows: -10- (a) In the Principal and Interest Account, a sum equal to the accrued interest and any premium paid on the Bonds. (b) The balance of the proceeds of the Bonds shall be deposited into the hnprovement Fund. If (a) any portion of the Bond proceeds will be used to pay principal of any temporary notes previously issued by the City to finance the Improvements or other City improvements (the "Refunded Notes"), and (b) any proceeds of such ,Refunded Notes (including sale proceeds and investment earnings on such proceeds) remain unspent, then there may be transferred to 'the Improvement Fund all such unspent 'proceeds. Section 502. Withdrawals from the Improvement Fund. The Treasurer shall make withdrawals from the Improvement Fund solely for the purpose of paying the Authorized Costs of the Improvements, including the retirement of the principal of and any interest on previously issued temporary financing therefor and paying the Costs of Issuance for the Bonds. Section 503. Surplus in the Improvement Fund. All moneys remaining in the Improvement Fund after the completion of the Improvements, shall be transferred immediately to the Principal and Interest Account and applied to the next instaIJment of principal and/or interest due on the Bonds. Section 504. Substitution of Improvements. If the City is prevented, hindered or delayed from . proceeding with the acquisition or construction of the improvements as referred to in Section 101 of this Resolution or if the City has moneys remaining in the Improvement Fund after the completion of such improvements, the City may elect to substitute or add other improvements pursuant to this Section (the "Substitute Improvement") provided the following conditions are met: (1) the Substitute Improvement and the issuance of general obligation bonds to pay the cost of the Substitute Improvement has been duly authorized by the governing body of the City in accordance with the laws of the State, (2) a resolution or ordinance authorizing the use of the proceeds of the Bonds to pay the Authorized Costs of the Substitute , Improvement has been duly adopted by the governing body of the City, (3) the Attorney General of the State has approved the amendment to the transcript 'Of proceedings for the Bonds to include the Substitute Improvements and (4) the City has received ~ opinion of Bond Counsel to the effect that the use of the proceeds of the Bonds to pay the Authorized Cost of the Substitute Improvement will not adversely affect the tax-exempt status of the Bonds under State or federal law and the Substitute Improvement has been du1y authorized pursuant to this Section and the laws of the State. ARTICLE VI PAYMENT OF THE BONDS Section 601. Application of Moneys in the Principal and Interest Account. All amounts paid and credited to the Principal and Interest Account shall be expended and used by the City for the sole purpose of paying the principal of, premium, if any. and interest on the Bonds as and when the same become due and paying the usual and customary fees and expenses of the Paying Agent. Section 602. Transfer of Funds to Paying Agent. The Treasurer is hereby authorized and directed to withdraw from the Principal and Interest Account and forward to the Paying Agent sums sufficient to -11- pay both principal of and premium, if any, and interest on the Bonds as and when the same become due, and also to pay the charges made by the Paying Agent for acting in such capacity in the payment of principal and interest on the Bonds, and said charges shall be forwarded to the Paying Agent over and above the amount of the principal of, premium, if any, and interest on the Bonds. If, through the lapse of time, or otherwise, the Owners of Bonds shall no longer be entitled to enforce payment of their obligations, it shall be the duty of the Paying Agent forthwith to return said funds to the City. AU moneys deposited with the Paying Agent shall be deemed to be deposited in accordance with and subject to all of the provisions contained in the Resolution. Section 603. Surplus in Principal and Interest Account. Any moneys or investments remaining in the Principal and Interest Account after the retirement of the indebtedness for which the Bonds were issued shall be transferred and paid into the Bond and Interest Fund of the City. ARTICLE VII DEPOSITS AND INVESTMENT OF FUNDS Section 701. Deposits. Cash moneys in each of the funds and accounts created by this Resolution shall be deposited in a bank or banks or federal or state chartered savings and loan association(s), as pennitted by Kansas law, and all such deposits shall be adequately secured by the bank or banks or savings and loan associations holding such deposits in accordance with S.tate law. Section 702. Investments. Moneys held in the funds and accounts herein created by this Resolution in conjunction with the issuance of the Bonds may be invested by the City in Authorized hIvestments, or in other investments allowed by State law in the' amounts and maturing at such times as shall reasonably provide for moneys to be available when required in said accounts or funds; provided, however, that no such investment shall be made for a period extending longer than to the date when the moneys invested may be needed for the purpose for which the fund or account was created. All interest on any Authorized Investment held in any fund or account shall (except amounts required to be deposited into the Rebate Fund in accordance with the Arbitrage Instructions) accrue to and become a part of such fund or account. In determining the amount held in any fund or account under the provisions of the Resolution, Authorized Investments shall be valued at their principal par value or at their then market value, whichever is lower. . Section 703. Deposits into and Application of Moneys in the Rebate Fund. (a) There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Arbitrage Instructions. Subject to the payment provisions provided in subsection (b) below, all money in the Rebate Fund shall be held in trust, to the extent required to pay arbitrage rebate to the United States, and neither the City nor the Owner of any Bond shall have any rights in or claim to such money. All amoWlts in the Rebate Fund shall be governed by this Section and by the Arbitrage Instructions (which are incorporated herein by reference). (b) Pursuant to the Arbitrage Instructions, the City shall pay rebate installments and the :final rebate payments to the United States. Any moneys remaining in the Rebate Fund after redemption and payment of all of the Bonds and payment and satisfaction of any rebate amounts, or provision made therefor, shaH be withdrawn and released to the City. -12- (c) Notwithstanding any other provision of the Resolution, including in particular this Article, the obligation to pay arbitrage rebate to the United States and to comply with all other requirements of this Section, the preceding Section and the Arbitrage Instructions shall survtve the defeasance or payment in full of the :Sonds. ARTICLEVm DEFAULT AND REMEDIES Section 801. Remedies. The provisions of the Resolution, including the covenants and agreeInents herein contained, shall constitute a contract between the City and the Owners of the Bonds. The Owner or Owners of any of the Bonds at the time Outstanding shall have the right for the equal benefit and protection of all Owners of Bonds similarly situated: (a) by mandamus or other suit, action or proceedings at law or in equity to enforce the rights of such Owner or Owners against the City and its officers, agents and employees, and to require and compel duties and obligations required by the provisions of the Resolution or by the Constitution and laws of the State; (b) by suit, action or other proceedings in equity or at law to require the City, its officers, agents and employees to account as if they were the trustees of an express trust; arid (c) by suit, action or other proceedings in equity or at law to enjoin any acts or things which may be unlawful or in violation of the rights of the Owners of the Bonds. Section 802. Limitation on Rights of Bondowners. The covenants and agreements _ of the City contained herein and in the Bonds shall be for ~he eq~l benefit, protection, and security of the Owners of any or all of the Bonds, aU of which Bonds shall be of equal rank and without preference or priority of one Bond over any other Bond in the application of the funds herein pledged to the payment of the principal of and the interest on the Bonds, or otherwise, except as to rate of interest, date of maturity and right of prior redemption as provided in the Resolution. No one or more Bondo'WTlers secured hereby shall have any right in any manner whatever by his or their action to an-ect, disturb or prejudice the security granted and provided for herein, or to enforce any right hereunder, except in the-manner herein provided, and all proceedings at law or in equity shall be instituted, had and maintained for the equal benefit of all Owners of such Outstanding Bonds. Section 803. Remedies Cumulative. No remedy conferred herein upon the Bondowners is intended to be exclusive of any other remedy, but each such remedy shall be cumulative and in addition to every other remedy and may be exercised without exhausting and without regard to any other remedy conferred herein. No waiver of any default or breach of duty or contract by the Owner of any Bond shall extend to or affect any subsequent default or breach of duty or contract or shall impair any rights or remedies thereon. No delay or omission of any Bond~wner to exercise any right or power accruing upon any default shall impair any such right or power or !!hall be construed to be a waiver of any such default or acquiescence therein. Every substantive right and every remedy conferred upon the Owners of the Bonds by the Resolution may be enforced and exercised from time to time and as often as may be deemed expedient. In case any suit, action or proceedings taken by any Bondowner on account of any default or to enforce any right or exercise any remedy shall have been discontinued or abandoned for any reason, or shall have been determined adversely to such Bondowner, then, and in every such case, the City and the -13- Owners of the Bonds shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies, powers and duties of the Bondowners shan continue as if no such suit, action or other proceedings had been brought or taken. ARTICLE IX -AMENDMENTS Section 901. Amendments. Except as set forth herem, the provisions of the Bonds and the provisions of the Resolution may be modified or amended at any time by the City with the written consent of the Owners of not less than seventy-five per cent (75%) in aggregate principal amount of the Bonds herein authorized at the time Outstanding; provided, however, that no such modification or amendment shaH permit or be construed as permitting: (a) the extension of the maturity of the principal of any of the Bonds, or the extension of the maturity of any interest on any of the Bonds, or (b) a reduction in the principal amount of any of the Bonds or the rate of interest thereon, or (c) a reduction in the aggregate principal amount of the Bonds; the consent of "1 00% of the Owners of which is required for any such amendment or modification. The City may from time to time, without the consent of or notice to any of the Owners, provide for amendment to the Bonds or the Resolution, for anyone or more of the following purposes: (a) To cure any ambiguity or formal-defect or omission in the Resolution or to make any other change not prejudicial to the Owners; (b) To grant to or confer upon the Owners any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Owners; (c) To more precisely identify the Improvements. (d) To -conform the Resolution to the Code or future applicable federal law concerning tax-exempt obligations. The Continuing Disclosure Instructions are exempt from the provisions of this Section and are subject to amendment and modification only as provided therein. Section 902. Written Evidence of Amendments. Every amendment or modification of a provision of the Bonds or of the Resolution to which the written consent of the Owners is given as above provided shall be expressed in a resolution of the City amending or supplementing the provisions of the Resolution and shall be deemed to be a part of the Resolution. It shall not be necessary to note on any of the Outstanding Bonds any reference to such amendment or modification, if any. A certified copy of every such amendatory or supplemental resolution, if any, and a certified copy of the Resolution shall always be kept on file in the Office of the City Clerk and shall be made available for inspection by the Owners of any Bond or prospective purchaser or Owners of any Bond authorized by the Resolution, and upon payment of the reasonable cost of preparing the same, a certified copy of any such amendatory or supplemental resolution or of the Resolution will be sent by the City Clerk to any such Owner or prospective Owner. -14- ARTICLE X DEFEASANCE Section 1001. Defeasance. When all or any part of the Bonds and interest thereon shall have been paid and discharged, then the reqUirements contained herein and the pledge of revenues made hereunder and all other rights granted hereby shall cease and determine. Bonds shall be deemed to have been paid and discharied within the meaning of the Resolution if there shall have been deposited with the Paying Agent or a bank located in the State and having full trust powers, at or prior to the maturity or redemption date of the Bonds, in trust for and irrevocably appropriated thereto, moneys and/or direct obligations of, or obligations the principal of and interest on which are gUaranteed by, the United States of America, or other investments allowed by State law which, together with the interest to be earned on such inves1ments, will be sufficient for the payment of the principal of the Bonds, the redemption premium thereon, if any there be, and interest accrued to the date of maturity or redemption, as the case may be, or if default in such payment shall have accrued on such date, then to the date of the tender of such payments, provided always that if any such -Bonds shall be redeemed prit>r to the maturity thereof, the City shall have elected to redeem such Bonds and either notice of such redemption shall have been given or the City shall have given irrevocable instructions, or shall have provided for an escrow agent to give irrevocable instructions to the Bond Registrar to give such notice of redemption in compliance with this Resolution. Any moneys which at any time shall be deposited with the Paying Agent or said bank in the State by or on behalf of the City, for the purpose of . paying and discharging any of the Bonds shan be and are hereby assigned, transferred and set over to the Paying Agent or such bank in the State in trust for the respective Owners of the Bonds, and such moneys shall be and are hereby irrevocably appropriated to the payment and discharge thereof. All moneys deposited with the Paying Agent or said bank in the State shall be deemed to be deposited in accordance with and subject to all of the provisions contained in the Resolution. ARTICLE XI CONTINUING DISCLOSURE REQUIREMENTS Section llOI. Disclosure Requirements. The City hereby elects that the Continuing Disclosure Instructions shall apply to the Bonds. The City hereby covenants with the Original Purchaser and the Beneficial Owners (as defined in the Continuing Disclosure Instructions) to provide and disseminate such infonnation as is required by Rule 15c2-12 (as'defined in the Continuing Disclosure Instructions) and as further set forth in the Continuing Disclosure Instructions. Such covenant shall be for the benefit of and enforceable by the Original Purchaser and such Beneficial Owners. In the event the City fails to comply in a timely manner with its covenants contained in the preceding sentences, the Original Purchaser and/or any such Beneficial Owner may make demand for such compliance by written notice to the City. In the event the City does not remedy such noncompliance within 10 days of receipt of such written notice, the Original Purchaser or any such Beneficial Owner may in its discretion, without notice or demand, proceed to enforce compliance by a suit or suits in equity for the specific perfonnance of such covenant or agreement contained in the preceding section or for the enforcement of any other appropriate legal ,or equitable remedy as the Original Purchaser and/or any such Beneficial Owner shall deem effectual to protect and enforce any of the duties of the City under such preceding section, but such noncompliance shall not constitute a default or event of default under this Resolution. -15- ARTICLE XII MISCELLANEOUS PROVISIONS Section 1201. Preliminary Official Statement and Official Statement. The City hereby approves the form and content of the Preliminary Official Statement prepared in the initial offering and sale of the Bonds. The Preliminary Official Statement is "deemed final" by the City except for the omission of certain information as provided in Securities and Exchange Commission Rule 15c2-12. The City hereby approves the fonn and content of any addenda, supplement, or amendment thereto utilized to prepare a _ final Official Statement. The Official Statement is "deemed fmal" by the City in accordance with the provisions of Securities and Exchange Commission Rule 15c2-12. The use of such Official Statement in the reoffering of the Bonds by the Original Purchaser is hereby' approved and authorized. The proper officials of the City are hereby authorized to execute and deliver a certificate pertaining to such Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Bonds. Section 1102. Rebate Covenants. The City agrees to pay from time to time all amounts required to be rebated to the United States pursuant to Section 148(f) of the Code and any applicable Treasury Regulations. This covenant shall survive payment in full or defeasance of the Bonds from time to time. Section 1203. Tax Covenants. The City hereby designates $353,000 of the Bonds as "qualified tax-exempt obligations" as defined in Section 265(b)(3) of the Code; $3,700,000 of the Bonds are deemed designated under Section 265(b)(3)(D)(ii) of the Code. In addition, the City hereby represents that: (1) the aggregate face amount of all tax-exempt obligations (other than (a) private activity bonds which are p.ot "qualified 501(c)(3) bonds" or (b) any obligation issued to currently refund another obligation, to the extent the amount of the refunding obligation does not exceed the . outstanding amount of the refunded obligation) which will be issued by the City (and all subordinate entities thereof) during calendar year 2004 is not reasonably expected to exceed $10,000,000; and (2) the City (including all subordinate entities thereof) will not issue an aggregate principal amount of obligations designated by the City to be "qualified tax-exempt obligations" . during the calendar year in which' the Bonds are issued, including the Bonds, in excess of $10,000,000, without first obtaining an opinion of bond counsel that the designation of the Bonds as "qualified tax-exempt obligations" will not be adversely affected. Section 1204. Severability, In case anyone or more of the provisions ofthe Resolution or of the Bonds issued hereunder shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of the Resolution, or of the Bonds appertaining thereto, but the Resolution and the Bonds shall be construed and enforced as if such illegal or invalid provision had not been contained herein. In case any covenant, stipulation, obligation or agreement contained in the BondS or in the Resolution shall for any reason be held to be in violation of law, then such covenant, stipulation, obligation or agreement shall be deemed to be the covenant, stipulation, obligation or agreement of the City to the full extent permitted by law. Section 1205. Further Authority. The Mayor, City Clerk and other officials of the City are authorized and directed to execute any and all docwnents and take such actions as they may deem necessary or advisable in order to carry out and perform the purposes of the Resolution to make alterations, changes or additions in the foregoing agreements, statements, instruments and other -16- documents herein approved, authorized and confIrmed which they may approve and the execution or taking of such action shall be conclusive evidence of such necessity or advisability. Section 1206. Governing Law. The Resolution and the Bonds shall be governed exclusively by and construed in accordance with the applicable laws of the State. Section 1207. Effective Date. This Resolution shall take effect and be in full force from and after its adoption by the governing body of the City. -17- ADOPTED by the governing body of the City on July 12,2004. (SEAL) ATfEST: ~ -18- EXHIBIT A (Form of Bond) EXCEPT AS OTHERWISE PROVIDED IN tHE RESOLUTION (DESCRIBED HEREIN), THIS GLOBAL BOND MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES DEPOSITORY (DESCRIBED HEREIN) OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY. REGISTERED NUMBER UNITED STATES OFAMEUCA STATE OF KANSAS COUNTY OF SALINE CITY OF SALINA GENERAL OBLIGATION INTERNAL IMPROVEMENT BOND , SERIES 2004-B 'Interest Rate: _% Maturity Date: REGISTERED OWNER: PRINCIPAL AMOUNT: Dated CUSIP: Date: July 15,2004 REGISTERED $_--- KNOW ALL PERSONS BY THESE PRESENTS: That the City of Salina, in the County of Saline, State of Kansas (the "City"), for value received, hereby acknowledges itself to be indebted and pr<;)mises to pay to the registered owner identified above, or registered assigns, as of the Record Dates as hereinafter provided on the Maturity D~te identified above, the Principal Amount identified above, and in like manner to pay interest on such Principal Amount from the Dated Date shown above or from the most recent interest payment date to which mterest has been paid or duly provided for at the rate of interest per annum set forth above (computed on the basis ofa 360-day year of twelve 30-day months), semiannually on April 1 and October 1 of each year, commencing April 1,2005 (the ·'Interest Payment Dates"), until the Principal Amount is paid, unless this Bond shall have been previously called for redemption and payment as hereinafter set forth. The principal of, premium, if any, and interest on this Bond shall be payable by the Treasurer of the state of Kansas, Topeka, Kansas (the "Paying Agent" and "Bond Registrar"). The principal of and any premium on this Bond shall be payable to the registered owner hereof upon presentation of this Bond at the maturity or redemption date to the Paying Agent for payment and cancellation. The interest payable on this Bond on any interest payment date shall be paid to the person in whose name this Bond is registered on the Bond Register at the close of business on the fifteenth day of the month preceding the interest payment date (the "Record Date") for such interest (a) by check or draft mailed by the Paying Agent to such Registered Owner at the address shown on the Bond Register or at such other address as is furnished to the Paying Agent in writing by such Registered Owner or (b) in the case of an interest payment to any Registered Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Registered Owner upon written notice given to the Paying Agent by such A-I Registered Owner not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank (which shall be in the continental United States) address, ABA routing number and account number to which such Registered Owner wishes to have such transfer directed. The principal, premium, if any. and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of debts due the United States of America. The Bonds constitute general obligations of the City payable as to both principal and _ interest in part from special assessments levied upon the property benefited by the construction of certain portions of the improvements being financed and. if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, rea] and personal. within the territorial limits of the City. The balance of the principal and interest on the Bonds shall be payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property) real and personal, within the territorial limits of the City. The full faith, credit and resources of the City are irrevocably pledged for the payment of the principal of and interest on this Bond and the issue of which it is a part as the same respectively become due. This Bond is one of an authorized series of Bonds of the City designated "General Obligation Internal hnprovement Bonds, Series 2004-B," in an aggregate principal amount of $4.053,000 (the "Bonds") issued for the purposes set forth in the Ordinance of the City authorizing the issuance of the Bonds and the Resolution of the City prescribing the form and details of the Bonds Gointly, the "Resolution"). The Bonds are issued by the authority of and in full compliance with the provisions, restrictions and limitations of the Constitution and laws of the state of Kansas. including, without limitation, K.S.A. 10-101 et seq,., K.S.A. 12-6aOl et seq., K.s.A. 12-.685 et seq. and K.S.A. 12-2101 et seq., all as amended. At the option of the City, Bonds maturing on October 1.2013, and thereafter may be called for redemption and payment prior to maturity on October 1,2012 and thereafter, in whole or in part at any time, in such principal amounts for such maturities as shall be determined by the City at the redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the date of redemption. Unless waived by any owner of the Bonds to be redeemed, if the City elects to call any Bonds for redemption and payment prior to maturity, the City or the Bond Registrar and Paying Agent on behalf.of the City shall give written notice of its intention to caJl and pay such Bonds on a specified date, the same being described by maturity, such notice to be mailed by United States first class mail addressed to the Owners of the Bonds not less than 30 days prior to the date fixed for redemption. All Bonds so called for redemption and payment shall cease to bear interest from the date for which such call is made, provided funds are available for the payment of such Bonds at the price specified above. The Bonds are being issued by means of a book-entry system with no physical distribution of bond certificates to be made except as provided in the Resolution. One Bond certificate with respect to each date on which the Bonds are stated to mature, registered in the nominee name of the Securities Depository, is being issued and required to be deposited with the Securities Depository and immobilized in its custody. The book-entry system will evidence positiof!S held in the Bonds by the Securities Depository's participants, beneficial ownership of the Bonds in authorized denominations being evidenced in the records of such participants. Transfers of ownership shall be effected on the records of the Securities Depository and its participants pursuant to rules and procedures established by the Securities Depository and its participants. The City, the Bond Registrar and the Paying Agent will recognize the Securities Depository nominee, while the registered owner of this Bond, as the owner of this Bond for all purposes, including (i) payments of principal of, and redemption premium, if any, and A-2 interest on, this Bond, (ii) notices and (iii) voting. Transfers of principal, interest and any redemption premium payments to participants of the Securities Depository, and transfers of principal, interest and any redemption premium payments to beneficial owners of the Bonds by participants of the Securities Depository will be the responsibility of such participants and other nominees of such beneficial owners. The City, the Bond Registrar and the Paying Agent will not be responsible or liable for such transfers of payments or for maintaining, supervising or reviewing the records maintained by the Securities Depository, the Securities Depository nonrinee, its participants or persons acting through such participants. While the Securities Depository nominee is the owner of this Bond, notwithstanding the provision hereinabove contained, payments of principal of and interest on this Bond shall be made in . accordance with existing arrangement~ among the City, the Bond Registrar and the Securities Depository. EXCEPT AS OTHERWISE PROVIDED IN TIlE RESOLUTION, TIUS GLOBAL BOND MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES DEPOSITORY OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY. The Bonds are issued in fully registered fonn in the denomination of $5,000 or any integral multiple thereof except one Bond maturing in 2005 will be in the denomination of $8.000 or any integral multiple of $5,000 in excess thereof. This Bond may be exchanged at the office of the Bond Registrar for a like aggregate principal amount of Bonds of the same maturity of other authorized denominations upon the tenus provided in the Resolution. The City and the Bond Regjstrar may deem and treat the registered owner hereof as the absolute owner hereof for purposes of receiving payment of or on account of principal hereof and interest due hereon and for all other purposes and neither the City nor the Bond Registrar shall be affected by any notice to the contrary. This Bond is transferable by the registered owner hereof in person or by the registered owner's agent duly authorized in writing, at the office of the :Bond Registrar, but only in the manner, subject.to the limitations and upon payment of the charges provided in the Resolution and upon surrender and cancellation of this Bond. The City shall pay all costs incurred in connecti~n with the issuance, payment and initial registration of the Bonds and the cost of a reasonable supply of bond blanks. The City and the Bond Registrar shall not be required to issue, register, transfer or exchange any Bonds during a period beginning on the day following the Record Date preceding any Interest Payment Date and ending at the close of business on the Interest Payment Date or Bonds which have been called for redemption in accordance with Article ill of the Resolution. IT IS HEREBY DECLARED AND CERTJFIED that all acts, conditions, and things required to be done and to exist precedent to and in the issuance of this Bond have been properly done and perfonned and do exist in due and regular form and manner as required by the Constitution and laws of the state of Kansas, and that the total indebtedness of the City, including this series of bonds, does not exceed any constitutional or statutory limitation. This Bond shall not be valid or become obligatory for any purpose until the Certificate' of Authentication and Registration hereon shall have been lawfully executed by the Bond Registrar. A-3 IN WITNESS WHEREOF. the City has caused this Bond to be executed by the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of its City Clerk, and its corporate seal to be affixed hereto or imprinted hereon, and this Bond to be dated the Dated Date shown above. CITY OF SALINA, KANSAS (Facsimile Seal) (facsimile) Mayor ATTEST: By (facsimile) City Clerk CERTIFICATE OF AUmENTICATION AND REGISTRATION This Bond is one of a series of General Obligation Internal Improvement Bonds, Series 2004-B, of the City of Salina, Kansas, described in the within-mentioned Resolution. Registration Date: ____ _ Registration Number: 0322-085-071504-383 A-4 Office ofthe State Treasurer, Topeka, Kansas as Bond Registrar and Paying Agent By: ----------------------- BOND ASSIGNMENT FOR VALUE RECENED, the undersigned do(es) hereby sell, assign and transfer to (Name and Address) (Social Security or Taxpayer Identification No.) the Bond to which this assignment is affixed in the outstanding principal amount of $ , standing in the name of the undersigned on the books of the Bond Registrar. The undersigned do(es) hereby irrevocably constitute and appoint as agent to transfer said Bond on the books of said Bond Registrar with full power of substitution in the premises. Dated Name Social Security or Taxpayer Identification No. Signature (Sign here exactly as name(s) appear on the face of Certificate) Signature ,guarantee: By ______________________________ _ [Name of Eligible Guarantor Institution as defined by SEC Rule 17ad-15 (12CFR 240.17 Ad-IS) or any similar rule which the Note Registrar deems applicable] A-5 CERTIFICATE OF CITY CLERK STATE OF KANSAS ) ) SS. COUNTY OF SALINE ) I, the undersigned, City Clerk of Salina, Kansas, hereby certify that the within Bond has been duly registered in my office according to law as of July 15, 2004. WITNESS my hand and official seal. (Facsimile Seal) (facsimile) City Clerk CERTIFICATE OF STATE TREASURER OFFICE OF THE TREASURER, STATE OF KANSAS I, LYNN JENKINS, Treasurer of the State of Kansas, do hereby certify that a transcript of the proceedings leading up to the issuance of this Bond has been filed in my office, and that this Bond was registered in my office according to law on _____ _ WITNESS my hand and official seal. (Facsimile Seal) Treasurer of the State of Kansas A-6 STATEMENT OF INSURANCE [TO BE PROVIDED BY BOND INSURER, IF ANY] LEGAL OPINION I, the undersigned, City Clerk of the City of Salina, Kansas, hereby certify that the following is a true aria correct copy of the approving legal opinion of Gilmore & Bell, a Professional Corporation, Attorneys at Law, Kansas City, Missouri, on the within Bond and the series of which it is a part, except that it omits the date of such opinion; that the opinion was manually executed and was dated and issued as of the date of delivery of and payment for the Bonds and is on file in my office. By ________ ~(~fu~c~s~im~l~·leu)~ ______ _ City Clerk (PRINTED LEGAL OPINION) A-7 EXHIBITB CONfINUING DISCLOSURE INSTRUCfIONS SECTION 1. Pmpose of the Continuing Disclosure Instructions. These Continuing Disclosure Jnstru.ctions (the "Instructions") are being executed and delivered by the City for the benefit of the beneficial owners of any series of the Bonds and in order to assist the Participating Underwriters in complying with Rule 15c2-12 (defined below). These Instructions are to govern the continujng disclosure obligations of the City with respect to the City's General Obligation Internal hnprovement Bonds, Series 1996-A dated as of June I, 1996 (the "1996 Bonds") and any additional series of Bonds that the City hereafter elects to make subject to these Instructions. SECTION 2. Definitions. Unless otherwise defined in these Instructions, the following capitalized terms shall have the following meanings for purposes of these Instructions: "Beneficial owner" means any registered owner of the Bonds and any other person who, directly or indirectly, has investment power with reSpect to any of the Bonds. "Bond Counsel" means the finn of Gilmore & Bell, P.C., or any other attorney or finn of attorneys with a nationally recognized standing in the field of rntmicipal bond financing selected by the City. "Bonds" means the 1996 Bonds and any additional series of bonds, notes or other municipal obligations of the City that the City elects at the time of issuance to have subject to these Instructions for the purpose of constituting the Wldertaking of the City to provide continuing disclosure pursuant to Rule 15c2- 12. . "City" means the City of Salina, Kansas. "MSRB" means the Municipal Securities Rulemaking Board." "NRMSIR." means any information repository recognized by the Securities and Exchange Commission as a nationally recognized municipal securities infonnation repository under Rule 15c2-12. "Participating Underwriter" means any of the original underwriters of the 1996 Bonds and any future series of Bonds required to comply with Rule 15c2-12 in connection with the offering of any series of Bonds. "Rule 15c2-12" means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "SID" means any public or private infonnation depository, if any, designated by the State of Kansas· and the Securities and Exchange Commission as such for purposes of Rule 15c2-12. SECTION 3. Provision of Annual Reports. (a) Within 180 days after the close of each fiscal year, the City shall furnish to each NRMSIR and to the SID, if any, (i) a copy of the financial statements of the City prepared in accordance with generally accepted accounting principles and audited by its independent auditors "(or if not available as of B-1 such date, the unaudited financial statements of the City and as soon thereafter as available such audited financial statements of the City), and (ii) the operating data of the City, updated for the fiscal year then ended, in substantially the scope and fonn contained in the Official Statement dated May 6, 1996, with respect to the 1996 Bonds in the tables under the folloWing headings: 1. Debt Sunnnary 2. . Tax Levies 3. Assessed Valuation 4. Estimated Actual Valuation 5. Tax Collections 6. Largest Taxpayers (b) Any or all of the financial infonnation or operating data required by this Section 3 may be incorporated by reference from other documents, including official statements of debt issues with respect to the City that have been filed with each NRMSIR or the Securities and Exchange Commission, and in the case of a final official statement, that is available from the MSRB. The City shall clearly identify in each annual report filed under this Section 3 each document incorporated by reference and the source from which it is available. SECTION 4. Reporting of Material Events. (a) The City shall disseminate to the SID, if any, and to each NRMSIR or to the MSRB, promptly upon the occurrence thereof notice of any of the following events with respect to each series of the Bonds, if material: (i) Any principal or interest payment delinquencies; (ii) Any-non-payment related defaults; (iii) Any unscheduled draws on debt service reserves reflecting financial difficulties; (iv) Any unscheduled draws on credit enhancements reflecting financial difficulties; (v) . Any substitution of credit or liquidity providers, or their failure to perform; (vi) Any adverse tax opinions or events affecting the tax-exempt status of any series of the Bonds; (vii) Any modifications to rights of ~ecurity holders; (viii) Any calls (other than mandatory sinking fimd redemptions or redemptions at maturity); (ix) Any defeasances; (x) Any release, substitution or sale of property securing repayment of any series of the Bonds; and (xi) Any rating changes. B-2 (b) The City shall also provide to the SID, if any, and to each NRMSIR or to the MSRB, as promptly as practicable notice of any failure of the City to provide the NRMSIRs and the SID, if any, the annual financial information or operating data required by Section 3 on or before the date specified. SECTION 5. Termination of Reporting Obligation. The City's obligations under these Instructions shall terminate with respect to each series of Bonds upon the defeasance, prior redemption or payment in full of all of such series of Bonds. SECTION 6. Amendment; Waiver. (a) The provisions of these Instructions may be amended only by a written instrument executed by the Mayor of the City if the City receives an opinion from Bond Counsel to the effect that these Instructions, as so amended, are in compliance with Rule 15c2-12 and all current amendments thereto and interpretations thereof that are applicable to these Instructions. (b) If an amendment is made to these Instructions, the City shall describe in the next annual financial report submitted to the NRMSIRs pursuant to Section 3 the substance of the amendment, the reasons for such amendment and the impact of such amendment on the type of operating data or financial information required to be provided under these Instructions. SECTION 7. Additional Infonnation. Nothing in these Instructions shall be deemed to prevent the City from disseminating any other information, or including any other infonnation in any report or notice made hereunder, in addition to that which is required by these Instructions. If the City chooses to include ahy information in any report or notice made hereunder in addition to that which is specifically _ required by these Instructions, the City shall have no obligation hereunder to update such infonnation or include it in any future report or notice. SECTION 8. Noncompliance. The provisions of these Instructions shall be subject to specific enforcement or action in mandamus in a court of equity by any beneficial owner of any series of the Bonds. A breach of the provisions of this Section shall not constitute a default or event of default under the resolution adopted by the City authorizing any series of the Bonds. - SECTION 9. Beneficiaries. These lnstructions are for the benefit of the City, the Participating Underwriters and the beneficial owners of any series of the Bonds, and shall create no rights in any other person. SECTION 10. Applicability to Future Series of Bonds. These" Instructions shall apply to any future series of Bonds of the City that the City elects to have subject to these Instructions at the time of issuance thereof. Th~ Instructions shall constitute the undertaking of the City with respect to any such future series / of Bonds for the purpose of any Particip~ng Underwriters detennining compliance with Rule 15c2-12. Nothing contained herein shall obligate the City to adopt these Instructions with respect to any future bonds or municipal obligations issued by the City. Dated: May 6, 1996. CITY OF SALINA, KANSAS B-3 ORDINANCE NO. 05-10282 AN ORDINANCE AUTHORIZING THE ISSUANCE AND DELIVERY OF $4,210,000 PRINCIPAL AMOUNT OF GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 200S-A, OF THE CITY OF SALINA, KANSAS, FOR THE PURPOSE OF PAYING THE COST OR A PORTION OF THE COST OF CERTAIN IMPROVEMENTS; PROVIDING FOR THE LEVY AND COLLECTION OF AN ANNUAL TAX AND SPECIAL ASSESSMENTS FOR THE PURPOSE OF PAYING THE PRINCIPAL OF AND INTEREST ON THE BONDS AS THEY BECOME DUE; MAKING CERTAIN COVENANTS WITH RESPECT THERETO. WHEREAS, the City of Salina, Kansas (the "City") is a City of the first class, created, organized and eXIsting under the laws of the State; and WHEREAS, pursuant to K.S.A. 10-101 et seq., K.S.A. 12-6aOl et seq., K.S.A. 12-685 et seq. and K.S.A. 12-1736 et seq., and Charter Ordinance No. 33 of the City and Article 12, Section 5 of the Constitution of the State of Kansas, all as amended and supplemented, and all other applicable provisions of the laws of the state of Kansas, the governing body of the City has caused the following improvements to be undertaken in the City (such improvements to be referred to as the "Improvements"): a. Cedar Ridge Addition b. Cedar Ridge Drive c. Ohio/Shilling Water Line d. Yost Addition e. River Meadows f. Bicentennial Center HV AC g. North Ninth Street Bridge h. Lakewood Bridge i. Bill Burke Soccer Complex J. RiverRun Subdivision WHEREAS, all legal requirements pertaining to the Improvements have been complied with, and the governing body of the City now finds and determines that the total cost of the Improvements is at least $4,210,000, to be paid by the issuance of general obligation bonds; and WHEREAS, the governing body of the City is authorized by law to issue general obligation bonds of the City to pay the costs of the Improvements; and WHEREAS, the governing body of the City hereby finds and determines it is necessary for the City to authorize the issuance and delivery of its general obligation bonds in the principal amount of $4,210,000 to pay the costs of the Improvements; NOW, THEREFORE, BE IT ORDAINED BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS, AS FOLLOWS: Section 1. Definitions of Words and Tenns. "Act" means the Constitution and all applicable statutes of the State including but not limited to K.S.A. 10-101 et seq., K.S.A. 12-6aOI et seq., K.S.A. 12-685 et seq. and K.S.A. 12-1736 et seq., and Charter Ordinance No. 33 of the City and Article 12, Section 5 of the Constitution of the State of Kansas, all as amended and supplemented. "Authorized Cost" means the amount of expenditure for an Improvement which has been authorized to be paid by the City by a resolution or ordinance of the City, less (1) the amount of any notes or bonds of the City which are currently outstanding and available to pay the Authorized Cost, and (2) any Authorized Cost which have been previously paid by the City or by any eligible source of funds unless such amounts are entitled to be reimbursed under State and federal law. "Bond and Interest Fund" means the Bond and Interest Fund of the City for its general obligation . bonds. "Bonds" means the General Obligation Internal Improvement Bonds, Series 2005-A authorized by this Ordinance in the aggregate principal amount of $4,210,000 and dated July 15,2005. "City" means the City of Salina, Kansas. "City Clerk" means the appointed and acting City Clerk or, in the City Clerk's absence, the appointed and/or elected Deputy or Acting City Clerk of the City. "Code" means the Internal Revenue Code of 1986, as amended, and the applicable regulations proposed or promulgated thereunder of the United States Department of the Treasury. "Improvements" means the improvements referred to in the preamble to this Ordinance. "Mayor" means the elected and acting Mayor of the City or, in the Mayor's absence, the appointed and/or elected Vice or Acting Mayor of the City. "Ordinance" means this Ordinance authorizing the issuance of the Bonds. "State" means the state of Kansas. "Treasurer" means the appointed and acting Treasurer of the City or, in the Treasurer's absence, the appointed and/or elected Deputy or Acting Treasurer of the City. Section 2. Authorization of and Security for the Bonds. These Bonds shall be issued for the purpose of providing funds to pay the Authorized Costs of the Improvements. The Bonds shall be general obligations of the City payable as to both principal and interest in part from special assessments levied upon the property benefited by the construction of certain improvements and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The balance of the principal and interest on the Bonds shall be payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The full faith, credit and resources of the City are hereby -2- irrevocably pledged for the prompt payment of the principal of and interest on the Bonds as the same become due. Section 3. Tenns, Details and Conditions of the Bonds. The Bonds shall be dated and bear interest, shall mature and be payable at such times, shall be in such forms, shall be subject to redemption and payment prior to the maturity thereof, and shall be issued and delivered in the manner prescribed and subject to the provisions, covenants and agreements set forth in a resolution hereinafter adopted by the governing body of the City. Section 4. Levy and Collection of Annual Tax and Special Assessments. The governing body of the City shall annually make provision for the payment of principal of, premium, if any, and interest on the Bonds as the same become due, taking into account any scheduled mandatory redemptions, by levying and collecting the necessary taxes andlor assessments upon all of the taxable tangible property within the City in the manner provided by law. The taxes andlor assessments referred to above shall be spread upon the tax rolls and shall be levied and collected at the same time and in the same manner as the general ad valorem taxes of the City are levied and collected, and the proceeds derived from the taxes andior assessments shall be deposited in the Bond and Interest Fund. If at any time the taxes andior assessments are not collected in time to pay the principal of or interest on the Bonds when due, the Treasurer is hereby authorized and directed to pay the principal or interest out of the general funds of the City and to reimburse the general funds for money so expended when the taxes andlor assessments are collected. Section 5. Tax Covenants. The City covenants and agrees that it will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion of the interest on the Bonds from gross income for federal income tax purposes. The City covenants and agrees that it will use the proceeds of the Bonds as soon as practicable and with all reasonable dispatch for the purpose for which the Bonds are issued as previously set forth, and that it will not directly or indirectly use or pennit the use of any proceeds of the Bonds or any other funds of the City, or take or omit to take any action that would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148(a) of the Code. To that end, the City will comply with all requirements of Section 148 of the Code to the extent applicable to the Bonds. The City covenants and agrees that it will not use any portion of the proceeds of the -Bonds, including any investment income earned on such proceeds, directly or indirectly, in a manner that would cause any Bond to be a "private activity bond" within the meaning of Section 141(a) of the Code. Section 6. Further Authority. The Mayor, City Clerk and other City officials are authorized and directed to execute such documents and take such actions as they may deem necessary or advisable in order to carry out the purposes of this Ordinance. Section 7. Governing Law. The Ordinance and the Bonds shall be governed by and construed in accordance with the applicable laws of the State. Section 8. Effective Date. This Ordinance shall take effect and be in full force from and after its passage by the governing body of the City and publication in the official City newspaper. -3- PASSED by the governing body of the City On July 11, 2005. (SEAL) Mayor City of Salina -Bond Ordinance Series 2005-A S-1 " , GILMORE & BELL, P.e. Document No. K107422\2005-ABondRes RESOLUTION NO. 05-6199 OF CITY OF SALINA, KANSAS ADOPTED JULY 11,2005 $4,210,000 BANK QUALIFIED REGISTERED BONDS BOOK-ENTRY ONLY SERIES 200S-A GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2005-A Section 101. Section 201. Section 202. Section 203. Section 204. Section 205. Section 206. Section 207. Section 208. Section 209. Section 210. Section 211. Section 212. Section 301. Section 302. Section 303. Section 304. Section 401. RESOLUTION TABLE OF CONTENTS Title ................................................................................................................... . Recitals .............................................................................................................. . ARTICLEl DEFINITIONS Definitions of Words and Terms ........................................................................ . ARTICLE II DETAILS OF THE BONDS Authorization of the Bonds ...................................................................... '" ...... . Description of the Bonds ................................................................................... . Designation of Paying Agent and Bond Registrar. ............................................ . Method and Place of Payment of the Bonds ....... '" .................................... '" .... . Method of Execution and Authentication of the Bonds .................................... . Registration, Transfer and Exchange of Bonds ................................................. . Surrender and Cancellation of Bonds ................................................................ . Mutilated, Lost, Stolen or Destroyed Bonds .............. : ...................................... . Temporary Bonds .............................................................................................. . Delivery of the Bonds ....................................................................................... . Book-Entry Bonds; Securities Depository ........................................................ . Payments Due on Saturdays, Sundays and Holidays .......................................... . ARTICLE III REDEMPTION OF THE BONDS Redemption ....................................................................................................... . Selection of Bonds to be Redeemed ................................................................. .. Notice of Redemption ....................................................................................... . Effect of Call for Redemption ........................................................................... . ARTICLE IV ESTABLISHMENT OF FUNDS AND ACCOUNTS Creation of Funds and Accounts ....................................................................... . -}- 4 4 5 5 5 6 6 6 7 7 7 8 9 9 9 10 10 Section 402. Section 501. Section 502. Section 503. Section 504. Section 601. Section 602. Section 603. Section 701. Section 702. Section 703. Section 801. Section 802. Section 803. Section 901. Section 902. Administration of Funds and Accounts ............................................................. . ARTICLE V APPLICATION OF BOND PROCEEDS Disposition of Bond Proceeds ........................................................................... . Withdrawals from the Improvement Fund ........................................................ . Surplus in the Improvement Fund ..................................................................... . Substitution of Improvements ................................................................................ . ARTICLE VI PAYMENT OF THE BONDS Application of Moneys in the Principal and Interest Account .......................... . Transfer of Funds to Paying Agent. ................................................................... . Surplus in Principal and Interest Account.. ....................................................... . ARTICLE VII DEPOSITS AND INVESTMENT OF FUNDS Deposits ............................................................................................................. . Investments ....................................................................................................... . Deposits into and Application of Moneys in the Rebate Fund ............................ . ARTICLE VIII DEFAULT AND REMEDIES Remedies .......................................................................................................... .. Limitation on Rights of Bondowners ............................................................... .. Remedies Cumulative ...................................................................................... .. ARTICLE IX AMENDMENTS Amendments ..................................................................................................... . Written Evidence of Amendments .................................................................... .. -ii- 10 10 11 11 II 11 11 12 12 12 12 13 13 13 14 14 ARTICLE X DEFEASANCE Section 1001. Defeasance............................................................................................. ............ 15 ARTICLE XI CONTINUING DISCLOSURE REQUIREMENTS Section 110 1. Disclosure Requirements...................................................................... ......... ..... 15 Section 120 l. Section 1202. Section 1203. Section 1204. Section 1205. Section 1206. ARTICLE XII MISCELLANEOUS PROVISIONS Preliminary Official Statement and Offic~al Statement... .................................. . Tax Covenants ........................................................................................... : ....... . Severability ....................................................................................................... . Further Authority .......................... '" .................................................................. . Governing Law .................................................................................................. . Effective Date .................................................................................................... . 16 16 16 16 17 17 Adoption. ......................................... ........................................ .... ....................... 18 Signatures and Seal... ... ..... ...... .... .... .............. ...... ..... ....... ........ .... ........ ............... 18 Exhibit A· Bond Form Exhibit B -Continuing Disclosure Instructions -111- RESOLUTION NO. 05-6199 A RESOLUTION PRESCRIBING THE FORM AND DETAILS OF AND AUTHORIZING THE DELIVERY OF $4,210,000 PRINCIPAL AMOUNT OF GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2005-A, OF THE CITY OF SALINA, KANSAS, PREVIOUSLY AUTHORIZED BY ORDINANCE NO. 05-10282 OF THE CITY; AND MAKING CERTAIN COVENANTS WITH RESPECT THERETO. WHEREAS, the City has adopted the Ordinance authorizing the issuance of the Bonds; and WHEREAS, the Ordinance authorized the governing body of the City to adopt a resolution prescribing certain details and conditions and to make certain covenants with respect to the issuance of the Bonds; NOW, THEREFORE, BE IT RESOLVED BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS, AS FOLLOWS: ARTICLE I DEFINITIONS Section 101. Definitions of Words and Terms. "Act" means the Constitution and statutes of the State of Kansas including, but not limited to, K.S.A. 10-101 et seq., K$.A. 12-6aOl et seq., K.S.A. 12-685 et seq., K.S.A. 12-1736 et seq., and Charter Ordinance No. 33 of the City and Article 12, Section 5 of the Constitution of the State of Kansas, all as amended and supplemented. "Arbitrage Instructions" means the Arbitrage Instructions (dated as of the date of issuance of the Bonds) relating to certain matters within the scope of Section 148 of the Code, as the same may be amended or supplemented in accordance with its terms. "Authorized Costs" means the amount of expenditure for an Improvement which has been duly authorized to be paid by the City by a resolution or ordinance of the City, less (1) the amount of any notes or bonds of the City which are currently outstanding and available to pay such Authorized Costs, and (2) any Authorized Costs which have been previously paid by the City or by any eligible source of funds unless such amounts are entitled to be reimbursed under State and federal law. "Authorized Investments" means investments authorized by K.S.A. 10-131, as amended from time. to time, or as otherwise pennitted under the laws of the State. "Bond and Interest Fund" means the Bond and Interest Fund of the City for its general obligation bonds. "Bond Counsel" means' the firm of Gilmore & Bell, P.C., or any other attorney or firm of attorneys whose expertise in matters relating to the issuance of obligations by states and their political subdivisions is nationally recognized and acceptable to the City. "Bondowner" shall have the same meaning as the term Owner. "Bond Registrar" means the Treasurer of the State, Topeka, Kansas, and its successors and assigns. "Bonds" means the City's General Obligation Internal Improvement Bonds, Series 2005-A Bonds in the aggregate principal amount of $4,21 0,000 and dated July 15, 2005. "Business Day" means a day other than a Saturday, Sunday or any day designated as a holiday by the Congress of the United States or by the Legislature of the State and on which the Paying Agent is scheduled in the normal course of its operations to be open to the public for conduct of its operations. "Cede & Co." means Cede & Co., as nominee name of The Depository Trust Company, New York, New York. "City" means the City of Salina, Kansas. "City Clerk" means the duly appointed and acting City Clerk of the City or, in the City Clerk's absence, the duly appointed and/or elected Deputy or Acting City Clerk of the City. "Code" means the Internal Revenue Code of 1986, as amended, and the applicable regulations proposed or promulgated thereunder of the United States Department of the Treasury. "Continuing Disclosure Instructions" means the Continuing Disclosure Instructions dated May 6, 1996 and attached as an exhibit to Resolution No. 96-5007 of the City (pertaining to General Obligation Internal Improvement Bonds, Series 1996-A of the City), as from time to time amended and attached hereto as Exhibit B. "Costs of Issuance" shall mean all costs of issuing the Bonds, including all publication, printing, signing and mailing expenses but not limited to, registration fees, all fees and expenses of legal counsel, and any expenses incurred in connection with receiving ratings on the Bonds, any financial advisory fees and all other related expenses. "Improvement Fund" means the Improvement Fund for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2005-A, created herein and any Substitute Improvements. "Improvements" means the improvements referred to in the preamble to the Ordinance. "Interest Payment Dates" means April 1 and October 1 of each year, commencing April 1, 2006, and ending on the maturity date of the Bonds, or such other time as the Bonds are paid or provision is made for the payment thereof. "Mayor" means the duly elected and acting Mayor of the City or, in the Mayor's absence, the duly appointed and/or elected Mayor or acting Mayor of the City. "Ordinance" means Ordinance No. 05-10282 of the City authorizing the issuance of the Bonds. "Original Purchaser" means Country Club Bank, n.a., Prairie Village, Kansas. -2- "Outstanding" means as of a particular date, all Bonds heretofore issued, authenticated and delivered under the provisions of this Resolution, except: (a) Bonds cancelled by the Paying Agent or delivered to the Paying Agent for cancellation pursuant to this Resolution; (b) Bonds for the payment or redemption of which monies or investments have been deposited in accordance with this Resolution; and (c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered pursuant to this Resolution. "Owner" or "Registered Owner" when used with respect to any Bond means the person in whose name such Bond is registered on the registration books of the City as maintained by the Bond Registrar. "Participants" means those financial institutions for whom the Securities Depository effects book- entry transfers and pledges of securities deposited with the Securities Depository, as such listing of Participants exists at the time of such reference. "Paying Agent" means the Treasurer of the State, Topeka, Kansas, and any successors and assigns. "Principal and Interest Account" means the Principal and Interest Account for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 200S-A, created in the City's Bond and Interest Fund. "Principal Payment Dates" means October I of the years as set forth in Section 202 of this Resolution, or until such time as the aggregate principal amount of the Bonds has been paid or provision is made for the payment of the Bonds. "Purchase Price" means 100% of the principal amount of the Bonds plus accrued interest to the date of delivery and plus any premium to be paid by the Original Purchaser. "Rebate Fund" means the Rebate Fund for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 200S-A, created herein. "Record Dates" means the fifteenth day of each month preceding the Interest Payment Dates of each year the Bonds are Outstanding. "Replacement Bonds" means Bonds issued to the beneficial owners of the Bonds in accordance with Section 211(b) hereof. "Representation Letter" means the Representation Letter, if any is required, from the City and the Paying Agent to the Securities Depository with respect to the Bonds. "Resolution" means this resolution relating to the Bonds. -3- "Securities Depository" means, initially, The Depository Trust Company, New York, New York, and its successors and assigns. "State" means the state of Kansas. "Substitute Improvements" means the substitute or additional improvements of the City as authorized by Section 504 of this Resolution. "Treasurer" means the duly appointed and acting Treasurer of the City or, in the Treasurer's absence, the duly appointed Deputy or acting Treasurer of the City. ARTICLE II DETAILS OF THE BONDS Section 201. Authorization of the Bonds. The Bonds have been issued pursuant to the Ordinance for the purpose of providing funds to pay the Authorized Costs of the Improvements. Section 202. Description of the Bonds. The Bonds shall consist of fully registered bonds in the denomination of $5,000 or any integral mUltiple thereof, shall be dated July 15,2005, shall be numbered in such manner as the Bond Registrar shall detennine, shall be in substantially the fonn set forth in Exhibit A to this Resolution, may be in typewritten fonn and shall be dated July 15, '2005. All of the Bonds shall become due on the Principal Payment Dates and shall bear interest from the date thereof as follows: MATURITY PRINCIPAL INTEREST OCTOBER 1 AMOUNT RATE 2006 $335,000 4.25% 2007 $335,000 4.15% 2008 $335,000 4.00% 2009 $335,000 2.95% 2010 $335,000 3.05% 2011 $335,000 3.15% 2012 $335,000 3.25% 2013 $330,000 3.35% 2014 $330,000 3.45% 2015 $330,000 3.55% 2016 $175,000 3.65% 2017 $175,000 3.75% 2018 $175,000 3.85% 2019 $175,000 3.95% 2020 $175,000 4.00% -4- Interest on the Bonds at the rates stated above (computed on the basis of a 360-day year of twelve 30-day months) from the date thereof or from the most recent Interest Payment Date to which interest has been paid or duly provided for, shall be payable on the Interest Payment Dates to the Owners whose names appear on the books maintained by the Bond Registrar at the close of business on the Record Dates. Section 203. Designation of Paying Agent and Bond Registrar. The Treasurer of the State, Topeka, Kansas, is hereby designated as the Paying Agent and Bond Registrar for the Bonds. The Mayor and City Clerk of the City are hereby authorized and empowered to execute on behalf of the City an agreement with the Bond Registrar and Paying Agent for the Bonds. Section 204. Method and Place of Payment of the Bonds. The principal of, premium, if any, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment, is legal tender for the payment of debts due the United States of America. The principal of and any premium on the Bonds shall be paid to the Registered Owner of each Bond upon presentation of the Bond at the maturity or redemption date to the Paying Agent for cancellation. The interest payable on each Bond on any Interest Payment Date shall be paid to the Registered Owner of such Bond as shown on the Bond Register at the close of business on the Record Date for such interest (a) by check or draft mailed by the Paying Agent to such Registered Owner at the address shown on the Bond Register or (b) in the case of an interest payment to any Registered Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Registered Owner upon written notice given to the Paying Agent by such Registered Owner not less than 15 days prior to the Record Date for such interest, containing the electronic transfer mstructions includmg the bank (which shall be in the continental United States), address, ABA routing number and account number to which such Registered Owner wishes to have such transfer directed. The Paying Agent shall keep in its offices a record of payment of principal of, premium, if any, and interest on all Bonds. Section 205. Method of Execution and Authentication of the Bonds. The Bonds shan be executed for and on behalf of the City by th~ manual or facsimile signature of the Mayor, attested by the manual or facsimile signature of. the City Clerk and the seal of the City shall be affixed thereto or imprinted on the Bonds., The Bonds shall be registered in the office of the City Clerk, and evidenced by the manual or facsimile signature of the City Clerk with the seal of the City affixed to or imprinted on the Bonds. The Bonds shall also be registered in the office of the State Treasurer, evidenced by the manual or facsimile signature of the State Treasurer with the seal of the State Treasurer affixed to or imprinted on the Bonds. In the event that any of the officers shall cease to hold such offices before the Bonds are issued and delivered, the Bonds may be issued and transferred to other Owners as though the officers had not ceased to hold office, and such signatures appearing on the Bonds shall be valid and sufficient for all purposes as if they had remained in office until such issuance or transfer. The Bonds shall not be valid obligations under the provisions of this Resolution until the Certificate of Authentication appearing on each bond is executed by the Bond Registrar or a duly authorized representative of the Bond Registrar. It is not necessary that the same representative of the Bond Registrar execute the certificate of authentication on all of the Bonds. -5- Section 206. Registration, Transfer and Exchange of Bonds. As long as the Bonds remain Outstanding, the City shall cause the Bond Registrar to keep the books for the registration and transfer of the Bonds. Upon presentation of the necessary documents the Bond Registrar shall transfer or exchange any Bond(s) for new Bond(s) in an authorized denomination of the same maturity and for the same aggregate principal amount as the Bond(s) which was presented for transfer or exchange. All Bonds presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature satisfactory to the Bond Registrar, duly executed by the Registered Owner thereof or by the Registered Owner's duly authorized agent. In addition, all Bonds presented for transfer or exchange shall be surrendered to the Bond Registrar for cancellation. Prior to delivery of the new Bond(s) to the transferee, the Bond Registrar shall register the same in the registration books kept by the Bond Registrar for such purpose and shall authenticate each Bond. The City shall pay the fees of the Bond Registrar for registration and transfer of the Bonds and the cost of printing a reasonable supply of registered bond blanks. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Bond Registrar, are the responsibility of the Owners. The City and the Bond Registrar shall not be required to issue, register, transfer or exchange any Bonds during a period beginning on the day following the Record Date preceding any Interest Payment Date and ending at the close of business on the Interest Payment Date or any Bonds which have been called for redemption in accordance with Article III of this Resolution. New Bonds delivered upon any transfer or exchange shall be valid obligations of the City, evidencing the same debt as the Bonds surrendered, shall be secured by the Resolution and shall be entitled to all of the security and benefits hereof to the same extent as the Bonds surrendered. The City, Bond Registrar and Paying Agent may deem and treat the person in whose name any Bond is registered as the absolute Owner thereof, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of, redemption premium, if any, and interest on such Bond and for all other purposes, and neither the City, Bond Registrar and Paying Agent shall be affected by any notice to the contrary. Section 207. Surrender and Cancellation of Bonds. Whenever any Outstanding Bonds are delivered to the Bond Registrar for cancellation such Bond shall be canceled by the Bond Registrar upon payment of the principal amount of the Bond and interest thereon or replacement pursuant to the Resolution, and the canceled Bond shall be returned to the City. Section 208. Mutilated, Lost, Stolen or Destroyed Bonds. In the event Bond is mutilated, lost, stolen or destroyed, the City may execute and the Bond Registrar may authenticate a new Bond of the same date, maturity, denomination and interest rate, as the mutilated, lost, stolen or destroyed Bond; provided, that in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the City or the Bond Registrar, and, in the case of any lost, stolen or destroyed Bond there shall be first furnished to the Bond Registrar and the City evidence of such loss, theft or destruction satisfactory to them, together with an inderrmity satisfactory to the City and the Bond Registrar. In the event any such -6- Bond shall have matured, instead of issuing a duplicate Bond, the City and Bond Registrar may pay the same without surrender thereof. The City and Bond Registrar may charge to the Registered Owner of such Bond their reasonable fees and expenses in connection with replacing any Bond or Bonds mutilated, stolen, lost or destroyed. Section 209. Temporary Bonds. Until definitive Bonds are prepared, the City may execute, in the same manner as is provided in the Resolution and upon the request of the City, the Bond Registrar shall authenticate and deliver, in lieu of definitive Bonds but subject to the same provisions, limitations and conditions as the definitive Bonds, one or more temporary Bonds substantially of the tenor of the definitive Bonds in lieu of which such temporary Bond or Bonds are issued, in denominations authorized herein, authorized by the City and with such omissions, insertions and variations as may be appropriate to temporary Bonds. The City at its own expense shall prepare and execute and, upon the surrender of such temporary Bonds for exchange and upon the cancellation of such surrendered temporary Bonds, the Bond Registrar shall authenticate and, without charge to the Owner thereof, deliver in exchange therefor defmitive Bonds of the same aggregate principal amount and maturity as the temporary Bonds surrendered. If the City shall authorize the issuance of temporary Bonds in more than one denomination, the Registered Owner of any temporary Bond or Bonds may, at such Registered Owner's option, surrender the same to the Bond Registrar in exchange for another temporary Bond or Bonds of like aggregate principal amount and maturity of any other authorized denomination or denominations, and thereupon the City shall execute and the Bond Registrar shall authenticate and, upon payment of any applicable taxes, fees and charges, shall deliver a temporary Bond or Bonds of like aggregate principal amount and maturity in such other authorized denomination or denominations as shall be requested by such Owner. All temporary Bonds surrendered in exchange either for another temporary Bond or Bonds or for a definitive Bond or Bonds shall be canceled by the Bond Registrar. Section 210. Delivery of the Bonds. The Mayor and City Clerk are hereby authorized and directed to cause the Bonds to be registered in the offices of the City Clerk and the State Treasurer as provided by law, and, when duly executed and registered, to cause the Bonds to be delivered to the Original Purchaser, upon receipt by the City of the Purchase Price. Section 211. Book-Entry Bonds; Securities Depository. (a) The Bonds shall initially be registered to Cede & Co., the nominee for the Securities Depository, and no beneficial owner will receive certificates representing their respective interests in the Bonds, except in the event the Bond Registrar issues Replacement Bonds as provided in subsection (b) hereof. It is anticipated that during the tenn of the Bonds, the Securities Depository will make book-entry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Bonds to the Participants until and unless the Bond Registrar authenticates and delivers Replacement Bonds to the beneficial owners as described in subsection (b). (b) (1) If the City determines (A) that the SecuritIes Depository is unable to properly discharge its responsibilities, or (B) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities Exchange Act of 1934, as amended, or (C) that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the beneficial owners of the Bonds, or (2) if the Bond Registrar receives written notice from Participants having interests in not less -7- than 50% of the Bonds Outstanding, as shown on the records of the Securities Depository (and certified to such effect by the Securities Depository), that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the beneficial owners of the Bonds, then the Bond Registrar shall notify the Owners of such determination or such notice and of the availability of certificates to Owners requesting the same, and the Bond Registrar shall register in the name of and authenticate and deliver Replacement Bonds to the beneficial owners or their nominees in principal amounts representing the interest of each, making such adjustments as it may find necessary or appropriate as to accrued interest and previous calls for redemption; provided, that in the case of a determination under (l)(A) or (l)(B) of this subsection (b), the City, with the consent of the Bond Registrar, may select a successor securities depository in accordance with Section 21 ICc) hereof to effect book-entry transfers. In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Bond. Upon the issuance of Replacement Bonds, all references herein to obligations imposed upon or to be perfonned by the Securities Depository shall be deemed to be imposed upon and performed by the Bond Registrar, to the extent applicable with respect to such Replacement Bonds. If the Securities Depository resigns and the City, the Bond Registrar or Owners are unable to locate a qualified successor of the Securities Depository in accordance with Section 211(c) hereof, then the Bond Registrar shall authenticate and cause delivery of Replacement Bonds to Owners, as provided herein. The Bond Registrar may rely on infonnation from the Securities Depository and its Participants as to the names of the beneficial owners of the Bonds. The cost of printing, registration, authentication and delivery of Replacement Bonds shall be paid for by the City. (c) In the event the Securities Depository resigns, is unable to properly discharge its responsibilities, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities Exchange Act of 1934, as amended, the City may appoint a successor Securities Depository provided the Bond Registrar receives written evidence satisfactory to the Bond Registrar with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation that operates a securities depository upon reasonable and customary tenns. The Bond Registrar upon its receipt of a Bond or Bonds for cancellation shall cause the delivery of Bonds to the successor Securities Depository in appropriate denominations and fonn as provided herein. (d) The execution and delivery of any required Representation Letter to the Securities Depository by an authorized officer of the City is hereby authorized. Section 212. Payments Due on Saturdays, Sundays and Holidays. In any case where the Principal Payment Date, the Interest Payment Date or the redemption date is not a Business Day, then payment of principal, interest or redemption price need not be made on such date(s) but may be made on the next succeeding Business Day with the same force and effect as if made on such date(s), and no interest shall accrue for the period after such date(s). -8- ARTICLE III REDEMPTION OF THE BONDS Section 301. Redemption. (a) Optional Redemption. At the option of the City, Bonds maturing on October 1, 2014, and thereafter may be called for redemption and payment prior to maturity on October 1, 2013 and thereafter, in whole or in part at any time, in such principal amounts for such maturities as shall be determined by the City at the redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the date of redemption. Section 302. Selection of Bonds to be Redeemed. The Bonds shall be redeemed only in the principal amount of $5,000 or any integral multiple thereof. When less than all of the Bonds are to be redeemed and paid prior to maturity, Bonds of less than a full maturity to be selected in such manner as the Bond Registrar acting on behalf of the City shall determine. In the case of a partial redemption of Bonds when Bonds of denominations greater than $5,000 are then Outstanding, then for all purposes in connection with such redemption each $5,000 of face value shall be treated as though it were a separate Bond of the denomination of $5,000. If it is determined that one or more, but not all, of the $5,000 units of face value represented by any Bond is selected for redemption, then upon notice of intention to redeem such $5,000 unit or units, the Owner or the Owner's duly authorized agent shall forthwith present and surrender such Bond to the Bond Registrar: (i) for payment of the redemption price (including the redemption, if any, and interest to the date fixed for redemption) of the $5,000 unit or units of face value called for redemption; and (ii) for exchange, without charge to the Owner thereof, for a new Bond(s) of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Owner of any Bond of a denomination greater than $5,000 shall fail to present such Bond as aforesaid, such Bond shall, nevertheless, become due and payable on the redemption date to the extent of the amount called for redemption. Section 303. Notice of Redemption. In the event the City desires to call the Bonds for optional redemption prior to maturity, written notice of such intent shall be provided in accordance with K.S.A. 10-129, as amended. Unless waived by any Owner of Bonds to be redeemed, if the City shall call any Bonds for redemption and payment prior to the maturity thereof, the City or the Bond Registrar and Paying Agent on behalf of the City shall give written notice of its intention to call and pay said Bonds on a specified date, the same being described by maturity, said notice to be mailed by United States first class mail addressed to the Owners of said Bonds, such notice to be mailed not less than 30 days prior to the date fixed for redemption. The City and Bond Registrar shall also give such additional notice as may be required by State law in effect as of the date of such notice. All official notices of redemption shall be dated and shall state (1) the redemption date, (2) the redemption price, (3) if less than all Outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed, (4) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (5) the place where such Bonds are to be surrendered for payment ofthe redemption price, which place of payment shall be the principal office of the Paying Agent. -9- On or prior to any redemption date, the City shall deposit with the Paying Agent an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Paying Agent at the redemption price. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. Upon surrender for any partial redemption of any Bond, there shall be prepared for the Registered Owner a new Bond or Bonds of the same maturity in the amount of the unpaid principal. All Bonds which have been redeemed shall be cancelled and destroyed by the Paying Agent and shall not be reissued. For so long as the Securities Depository is effecting book-entry transfers of the Bonds, the Bond Registrar shall provide the notices specified in this Section to the Securities Depository. It is expected that the Securities Depository shall, in tum, notify its Participants and that the Participants, in tum, will notify or cause to be notified the beneficial owners. Any failure on the part of the Securities Depository or a Participant, or failure on the part of a nominee of a beneficial owner of a Bond (having been mailed notice from the Bond Registrar, the Securities Depository, a Participant or otherwise) to notify the beneficial owner of the Bond so affected, shall not affect the validity of the redemption of such Bond. Section 304. Effect of Call for Redemption. Whenever any Bond is called for redemption and payment as provided in this Article, all interest on such Bond shall cease from and after the date for which such call is made, provided funds are available for its payment at the price specified above. ARTICLE IV ESTABLISHMENT OF FUNDS AND ACCOUNTS Section 401. Creation of Funds and Accounts. Simultaneously with the issuance of the Bonds, there shall be created within the Treasury of the City the following funds and accounts: (a) Improvement Fund for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 200S-A; and (b) Principal and Interest Account for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 200S-A; and (c) Rebate Fund for Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2005-A Section 402. Administration of Funds and Accounts. The funds and accounts established herein shall be administered in accordance with the provisions of the Resolution so long as the Bonds are outstanding. ARTICLE V APPLICATION OF BOND PROCEEDS Section 501. Disposition of Bond Proceeds. The proceeds of the Bonds, upon issuance and delivery thereof, shall be deposited as follows: -10- (a) In the Principal and Interest Account, a sum equal to the accrued interest and any premium paid on the Bonds. (b) The balance of the proceeds of the Bonds shall be deposited into the Improvement Fund. If (a) any portion of the Bond proceeds will be used to pay principal of any temporary notes previously issued by the City to finance the Improvements or other City improvements (the "Refunded Notes"), and (b) any proceeds of such Refunded Notes (including sale proceeds and investment earnings on such proceeds) remain unspent, then there may be transferred to the Improvement Fund all such unspent proceeds. Section 502. Withdrawals from the Improvement Fund. The Treasurer shall make withdrawals from the Improvement Fund solely for the purpose of paying the Authorized Costs of the Improvements, including the retirement of the principal of and any interest on previously issued temporary financing therefor and paying the Costs ofIssuance for the Bonds. Section 503. Surplus in the Improvement Fund. All moneys remaining in the Improvement Fund after the completion of the Improvements, shall be transferred immediately to the Principal and Interest Account and applied to the next installment of principal andlor interest due on the Bonds. Section 504. Substitution of Improvements. If the City is prevented, hindered or delayed from proceeding with the acquisition or construction of the improvements as referred to in Section 101 of this Resolution or if the City has moneys remaining in the Improvement Fund after the completion of such improvements, the City may elect to substitute or add other improvements pursuant to this Section (the "Substitute Improvement") provided the following conditions are met: (1) the Substitute Improvement and the issuance of general obligation bonds to pay the cost of the Substitute hnprovement has been duly authorized by the governing body of the City in accordance with the laws of the State, (2) a resolution or ordinance authorizing the use of the proceeds of the Bonds to pay the Authorized Costs of the Substitute Improvement has been duly adopted by the governing body of the City, (3) the Attorney General of the State has approved the amendment to the transcript of proceedings for the Bonds to include the Substitute Improvements and (4) the City has received an opinion of Bond Counsel to the effect that the use of the proceeds of the Bonds to pay the Authorized Cost of the Substitute Improvement will not adversely affect the tax-exempt status of the Bonds under State or federal law and the Substitute hnprovement has been duly authorized pursuant to this Section and the laws of the State. ARTICLE VI PAYMENT OF THE BONDS Section 601. Application of Moneys in the Principal and Interest Account. All amounts paid and credited to the Principal and Interest Account shall be expended and used by the City for the sole purpose of paying the principal of, premium, if any, and interest on the Bonds as and when the same become due and paying the usual and customary fees and expenses of the Paying Agent. Section 602. Transfer of Funds to Paying Agent. The Treasurer is hereby authorized and directed to withdraw from the Principal and Interest Account and forward to the Paying Agent sums sufficient to -11- pay both principal of and premium, if any, and interest on the Bonds as and when the same become due, and also to pay the charges made by the Paying Agent for acting in such capacity in the payment of principal and interest on the Bonds, and said charges shall be forwarded to the Paying Agent over and above the amount of the principal of, premium, if any, and interest on the Bonds. If, through the lapse of time, or otherwise, the Owners of Bonds shall no longer be entitled to enforce payment of their obligations, it shall be the duty of the Paying Agent forthwith to return said funds to the City. All moneys deposited with the Paying Agent shall be deemed to be deposited in accordance with and subject to all of the provisions contained in the Resolution. Section 603. Surplus in Principal and Interest Account. Any moneys or investments remaining in the Principal and Interest Account after the retirement of the indebtedness for which the Bonds were issued shall be transferred and paid into the Bond and Interest Fund of the City. ARTICLE VII DEPOSITS AND INVESTMENT OF FUNDS Section 701. Deposits. Cash moneys in each of the funds and accounts created by this Resolution shaH be deposited in a bank or banks or federal or state chartered savings and loan association(s), as permitted by Kansas law, and all such deposits shall be adequately secured by the bank or banks or savings and loan associations holding such deposits in accordance with State law. Section 702. Investments. Moneys held in the funds and accounts herein created by this Resolution in conjunction with the issuance of the Bonds may be invested by the City in Authorized Investments, or in other investments allowed by State law in the amounts and maturing at such times as shall reasonably provide for moneys to be available when required in said accounts or funds; provided, however, that no such investment shall be made for a period extending longer than to the date when the moneys invested may be needed for the purpose for which the fund or account was created. All interest on any Authorized Investment held in any fund or account shall (except amounts required to be deposited into the Rebate Fund in accordance with the Arbitrage Instructions) accrue to and become a part of such fund or account. In detennining the amount held in any fund or account under the provisions of the Resolution, Authorized Investments shall be valued at their principal par value or at their then market value, whichever is lower. Section 703. Deposits into and Application of Moneys in the Rebate Fund. (a) There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Arbitrage Instructions. Subject to the payment provisions provided in subsection (b) below, all money in the Rebate Fund shall be held in trust, to the extent required to pay arbitrage rebate to the United States, and neither the City nor the Owner of any Bond shall have any rights in or claim to such money. All amounts in the Rebate Fund shall be governed by this Section and by the Arbitrage Instructions (which are incorporated herein by reference). (b) Pursuant to the Arbitrage Instructions, the City shall pay rebate installments and the final rebate payments to the United States. Any moneys remaining in the Rebate Fund after redemption and payment of all of the Bonds and payment and satisfaction of any rebate amounts, or provision made therefor, shall be withdrawn and released to the City. -12- (c) Notwithstanding any other provision of the Resolution, including in particular this Article, the obligation to pay arbitrage rebate to the United States and to comply with all other requirements of this Section, the preceding Section and the Arbitrage Instructions shall survive the defeasance or payment in full of the Bonds. ARTICLEVTII DEFAULT AND REMEDIES Section 801. Remedies. The provisions of the Resolution, including the covenants and agreements herein contained, shall constitute a contract between the City and the Owners of the Bonds. The Owner or Owners of any of the Bonds at the time Outstanding shall have the right for the equal benefLt and protection of all Owners of Bonds similarly situated: (a) by mandamus or other suit, action or proceedings at law or in equity to enforce the rights of such Owner or Owners against the City and its officers, agents and employees, and to require and compel duties and obligations required by the provisions of the Resolution or by the Constitution and laws of the State; (b) by suit, action or other proceedings in equity or at law to require the City, its officers, agents and employees to account as if they were the trustees of an express trust; and (c) by suit, action or other proceedings in equity or at law to enjoin any acts or things which may be unlawful or in violation ofthe rights of the Owners of the Bonds. Section 802. Limitation on Rights of Bondowners. The covenants and agreements of the City contained herein and in the Bonds shall be for the equal benefit, protection, and security of the Owners of any or all of the Bonds, all of which Bonds shall be of equal rank and without preference or priority of one Bond over any other Bond in the application of the funds herein pledged to the payment of the principal of and the interest on the Bonds, or otherwise, except as to rate of interest, date of maturity and right of prior redemption as provided in the Resolution. No one or more Bondowners secured hereby shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security granted and provided for herein, or to enforce any right hereunder, except in the manner herein provided, and all proceedings at law or in equity shall be instituted, had and maintained for the equal benefit of all Owners of such Outstanding Bonds. Section 803. Remedies Cumulative. No remedy conferred herein upon the Bondowners is intended to be exclusive of any other remedy, but each such remedy shall be cumulative and in addition to every other remedy and may be exercised without exhausting and without regard to any other remedy conferred herein. No waiver of any default or breach of duty or contract by the Owner of any Bond shall extend to or affect any subsequent default or breach of duty or contract or shall impair any rights or remedies thereon. No delay or omission of any Bondowner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein. Every substantive right and every remedy conferred upon the Owners of the Bonds by the Resolution may be enforced and exercised from time to time and as often as may be deemed expedient. In case any suit, action or proceedings taken by any Bondowner on account of any default or to enforce any right or exercise any remedy shall have been discontinued or abandoned for any reason, or shall have been detennined adversely to such Bondowner, then, and in every such case, the City and the -13- Owners of the Bonds shall be restored to their fonner positions and rights hereunder, respectively, and all rights, remedies, powers and duties of the Bondowners shall continue as if no such suit, action or other proceedings had been brought or taken. ARTICLE IX AMENDMENTS Section 901. Amendments. Except as set forth herein, the provisions of the Bonds and the provisions of the Resolution may be modified or amended at any time by the City with the written consent of the Owners of not less than seventy-five per cent (75%) in aggregate principal amount of the Bonds herein authorized at the time Outstandmg; provided, however, that no such modification or amendment shall permit or be construed as pennitting: (a) the extension of the maturity of the principal of any of the Bonds, or the extension of the maturity of any interest on any of the Bonds, or (b) a reduction in the principal amount of any of the Bonds or the rate of interest thereon, or ( c) a reduction in the aggregate principal amount of the Bonds; the consent of 100% of the Owners of which is required for any such amendment or modification. The City may from time to time, without the consent of or notice to any of the Owners, provide for amendment to the Bonds or the Resolution, for anyone or more of the following purposes: (a) To cure any ambiguity or fonnal defect or omission in the Resolution or to make any other change not prejudicial to the Owners; (b) To grant to or confer upon the Owners any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Owners; (c) To more precisely identify the Improvements. (d) To conform the Resolution to the Code or future applicable federal law concerning tax-exempt obligations. The Continuing Disclosure Instructions are exempt from the provisions of this Section and are subject to amendment an,d modification only as provided therein. Section 902. Written Evidence of Amendments. Every amendment or modification of a provision of the Bonds or of the Resolution to which the written consent of the Owners is given as above . provided shall be expressed in a resolution of the City amending or supplementing the provisions of the Resolution and shall be deemed to be a part of the Resolution. It shall not be necessary to note on any of the Outstanding Bonds any reference to such amendment or modification, if any. A certified copy of every such amendatory or supplemental resolution, if any, and a certified copy of the Resolution shall always be kept on file in the Office of the City Clerk and shall be made available for inspection by the Owners of any Bond or prospective purchaser or Owners of any Bond authorized by the Resolution, and upon payment of the reasonable cost of preparing the same, a certified copy of any such amendatory or supplemental resolution or of the Resolution will be sent by the City Clerk to any such Owner or .prospective Owner. -14- ARTICLE X DEFEASANCE Section 100 I. Defeasance. When all or any part of the Bonds and interest thereon shall have been paid and discharged, then the requirements contained herein and the pledge of revenues made hereunder and all other rights granted hereby shall cease and determine. Bonds shall be deemed to have been paid and discharged within the meaning of the Resolution if there shall have been deposited with the Paying Agent or a bank: located in the State and having full trust powers, at or prior to the maturity or redemption date of the Bonds, in trust for and irrevocably appropriated thereto, moneys and/or direct obligations of, or obligations the principal of and interest on which are guaranteed by, the United States of America, or other investments allowed by State law which, together with the interest to be earned on such investments, will be sufficient for the payment of the principal of the Bonds, the redemption premium thereon, if any there be, and interest accrued to the date of maturity or redemption, as the case may be, or if default in such payment shall have accrued on such date, then to the date of the tender of such payments, provided always that if any such Bonds shall be redeemed prior to the maturity thereof, the City shall have elected to redeem such Bonds and either notice of such redemption shall have been given or the City shall have given irrevocable instructions, or shall have provided for an escrow agent to give irrevocable instructions to the Bond Registrar to give such notice of redemption in compliance with this Resolution. Any moneys which at any time shall be deposited with the Paying Agent or said bank in the State by or on behalf of the City, for the purpose of paying and discharging any of the Bonds shall be and are hereby assigned, transferred and set over to the Paying Agent or such bank in the State in trust for the respective Owners of the Bonds, and such moneys shall be and are hereby irrevocably appropriated to the payment and discharge thereof. All moneys deposited with the Paying Agent or said bank in the State shall be deemed to be deposited in accordance with and subject to all of the provisions contained in the Resolution. ARTICLE XI CONTINUING DISCLOSURE REQUIREMENTS Section 1l01. Disclosure Requirements. The City hereby elects that the Continuing Disclosure Instructions shall apply to the Bonds. The City hereby covenants with the Original Purchaser and the Beneficial Owners (as defmed in the Continuing Disclosure Instructions) to provide and disseminate such information as is required by Rule 15c2-12 (as defined in the Continuing Disclosure Instructions) and as further set forth in the Continuing Disclosure Instructions. Such covenant shall be for the benefit of and enforceable by the Original Purchaser and such Beneficial Owners. In the event the City fails to comply in a timely manner with its covenants contained in the preceding sentences, the Original Purchaser and/or any such Beneficial Owner may make demand for such compliance by written notice to the City. In the event the City does not remedy such noncompliance within 1 o days of receipt of such written notice, the Original Purchaser or any such Beneficial Owner may in its discretion, without notice or demand, proceed to enforce compliance by a suit or suits in equity for the specific performance of such covenant or agreement contained in the preceding section or for the enforcement of any other appropriate legal or equitable remedy as the Original Purchaser and/or any such Beneficial Owner shall deem effectual to protect and enforce any of the duties of the City under such preceding section, but such noncompliance shall not constitute a default or event of default under this Resolution. -15- ARTICLE XII MISCELLANEOUS PROVISIONS Section 1201. Preliminary Official Statement and Official Statement. The City hereby approves the form and content of the Preliminary Official Statement prepared in the initial offering and sale of the Bonds. The Preliminary Official Statement is "deemed final" by the City except for the omission of certain information as provided in Securities and Exchange Commission Rule 15c2-12. The City hereby approves the form and content of any addenda, supplement, or amendment thereto utilized to prepare a final Official Statement. The Official Statement is "deemed final" by the City in accordance with the provisions of Securities and Exchange Commission Rule 15c2-12. The use of such Official Statement in the reoffering of the Bonds by the Original Purchaser is hereby approved and authorized. The proper officials of the City are hereby authorized to execute and deliver a certificate pertaining to such Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Bonds. Section 1202. Tax Covenants. (a) The City covenants and agrees that (I) it will comply with all applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"), including Sections 1 03 and 141 through 150, necessary to maintain the exclusion from gross income for federal income tax purposes of the interest on the Notes and (2) it will not take ~ny action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion from gross income of the interest on the Notes. The City will, in addition, adopt such other ordinances or resolutions and take such other actions as may be necessary to comply with the Code and with all other applicable future laws, regulations, published rulings and judicial decisions, in order to ensure that the interest on the Notes will remain excluded from federal gross income, to the extent any such actions can be taken by the City. (b) The City covenants and agrees that (I) it will comply with all requirements of Section 148 of the Code to the extent applicable to the Notes, (2) it will use the proceeds of the Notes as soon as practicable and with all reasonable dispatch for the purposes for which the Notes are issued and (3) it will not invest or directly or indirectly use or permit the use of any proceeds of the Notes or any other funds of the City in any manner, or take or omit to take any action, that would cause the Notes to be "arbitrage bonds" within the meaning of Section I 48(a) of the Code. ( c) The City covenants and agrees that it will payor provide for the payment from time to time of all amounts required to be rebated to the United States pursuant to Section 148(f) of the Code and any Treasury Regulations applicable to the Notes from time to time. This covenant shall survive payment in full or defeasance of the Notes. The City specifically covenants to comply with the Arbitrage Instructions attached as Exhibit A to the Federal Tax Certificate. Notwithstanding anything to the contrary contained herein, the Arbitrage Instructions may be amended or replaced if, in the opinion of counsel nationally recognized on the subject of municipal notes, such amendment or replacement will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Notes. (d) The foregoing covenants shall remain in full force and effect notwithstanding the defeasance of the Notes pursuant to Section 17 of this Resolution until the final maturity date of all Notes Outstanding. -16- Section 1203. Severability. In case anyone or more of the provisions of the Resolution or of the Bonds issued hereunder shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of the Resolution, or of the Bonds appertaining thereto, but the Resolution and the Bonds shall be construed and enforced as if such il1egal or invalid provision had not been contained herein. In case any covenant, stipulation, obligation or agreement contained in the Bonds or in the Resolution shall for any reason be held to be in violation of law, then such covenant, stipulation, obligation or agreement shall be deemed to be the covenant, stipulation, obligation or agreement of the City to the full extent permitted by law. Section 1204. Further Authority. The Mayor, City Clerk and other' officials of the City are authorized and directed to execute any and all documents and take such actions as they may deem necessary or advisable in order to carry out and perform the purposes of the Resolution to make alterations, changes or additions in the foregoing agreements, statements, instruments and other documents herein approved, authorized and confirmed which they may approve and the execution or taking of such action shall be conclusive evidence of such necessity or advisability. Section 1205. Governing Law. The Resolution and the Bonds shall be governed exclusively by and construed in accordance with the applicable laws of the State. Section 1206. Effective Date. This Resolution shall take effect and be in full force from and after its adoption by the governing body of the City. -17- ADOPTED by the governing body of the City on July 11,2005. (SEAL) Mayor ~ City Clerk ~ • Bond Resolution S-1 EXHIBIT A (Fonn of Bond) EXCEPT AS OTHERWISE PROVIDED IN THE RESOLUTION (DESCRIBED HEREIN), THIS GLOBAL BOND MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES DEPOSITORY (DESCRIBED HEREIN) OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY. REGISTERED NUMBER UNITED STATES OF AMERICA STATE OF KANSAS COUNTY OF SALINE CITY OF SALINA GENERAL OBLIGATION INTERNAL IMPROVEMENT BOND SERIES 2005-A Interest Rate: _% Maturity Date: REGISTERED OWNER: PRINCIPAL AMOUNT: Dated CUSlP: Date: July 15,2005 REGISTERED $_--- KNOW ALL PERSONS BY THESE PRESENTS: That the City of Salina, in the County of Saline, State of Kansas (the "City"), for value received, hereby acknowledges itself to be indebted and promises to pay to the registered owner identified above, or registered assigns, as of the Record Dates as hereinafter provided on the Maturity Date identified above, the Principal Amount identified above, and in like manner to pay interest on such Principal Amount from the Dated Date shown above or from the most recent interest payment date to which interest has been paid or duly provided for at the rate of interest per annum set forth above (computed on the basis of a 360-day year oftwelve 30-day months), semiannually on April 1 and October 1 of each year, commencing April 1, 2006 (the "Interest Payment Dates"), until the Principal Amount is paid, unless this Bond shall have been previously called for redemption and payment as hereinafter set forth. The principal of, premium, if any, and interest on this Bond shall be payable by the Treasurer of the state of Kansas, Topeka, Kansas (the "Paying Agent" and "Bond Registrar"). The principal of and any premium on this Bond shall be payable to the registered owner hereof upon presentation of this Bond at the maturity or redemption date to the Paying Agent for payment and cancellation. The interest payable on this Bond on any interest payment date shall be paid to the person in whose name this Bond is registered on the Bond Register at the close of business on the fifteenth day of the month preceding the interest payment date (the "Record Date")' for such interest (a) by check or draft mailed by the Paying Agent to such Registered Owner at the address shown on the Bond Register or at such other address as is furnished to the Paying Agent in writing by such Registered Owner or (b) in the case of an interest payment to any Registered Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Registered Owner upon written notice given to the Paying Agent ~y such A-I Registered Owner not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank (which shall be in the continental United States), address, ABA routing number and account number to which such Registered Owner wishes to have such transfer directed. The principal, premium, if any, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of debts due the United States of America. The Bonds constitute general obligations of the City payable as to both principal and interest in part from special assessments levied upon the property benefited by the construction of certain portions of the improvements being financed and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The balance of the principal and interest on the Bonds shall be payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The full faith, credit and resources of the City are irrevocably pledged for the payment of the principal of and interest on this Bond and the issue of which it is a part as the same respectively become due. This Bond is one of an authorized series of Bonds of the City designated "General Obligation Internal hnprovement Bonds, Series 2005-A," in an aggregate principal amount of $4,210,000 (the "Bonds") issued for the purposes set forth in the Ordinance of the City authorizing the issuance of the Bonds and the Resolution of the City prescribing the fonn and details of the Bonds (jointly, the "Resolution"). The Bonds are issued by the authority of and in full compliance with the provisions, restrictions and limitations of the Constitution and laws of the state of Kansas, including, without limitation, K.S.A. 10-101 et seq., K.S.A. 12-6a01 et seq., KS.A. 12-685 et seq., KS.A. 12-1736 et seq., and Charter Ordinance No. 33 of the City and Article 12, Section 5 of the Constitution of the State of Kansas, all as amended and supplemented. At the option of the City, Bonds maturing on October 1, 2014, and thereafter may be called for redemption and payment prior to maturity on October 1, 2013 and thereafter, in whole or in part at any time, in such principal amounts for such maturities as shall be determined by the City at the redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the date of redemption. Unless waived by any owner of the Bonds to be redeemed, if the City elects to call any Bonds for redemption and payment prior to maturity, the City or the Bond Registrar and Paying Agent on behalf of the City shall give written notice of its intention to call and pay such Bonds on a specified date, the same being described by maturity, such notice to be mailed by United States first class mail addressed to the Owners of the Bonds not less than 30 days prior to the date fixed for redemption. All Bonds so called for redemption and payment shall cease to bear interest from the date for which such call is made,· provided funds are available for the payment of such Bonds at the price specified above. The Bonds are being issued by means of a book-entry system with no physical distribution of bond certificates to be made except as provided in the Resolution. One Bond certificate with respect to each date on which the Bonds are stated to mature, registered in the nominee name of the Securities Depository, is being issued and required to be deposited with the Securities Depository and immobilized in its custody. The book-entry system will evidence positions held in the Bonds by the Securities Depository's participants, beneficial ownership of the Bonds in authorized denominations being evidenced in the records of such participants. Transfers of ownership shall be effected on the records of the Securities Depository and its participants pursuant to rules and procedures established by the Securities Depository and its participants. The City, the Bond Registrar and the Paying Agent will recognize the Securities Depository nominee, while the registered owner of this Bond, as the owner of A-2 this Bond for all purposes, including (i) payments of principal of, and redemption premium, if any, and interest on, this Bond, (ii) notices and (iii) voting. Transfers of principal, interest and any redemption premium payments to participants of the Securities Depository, and transfers of principal, interest and any redemption premium payments to beneficial owners of the Bonds by participants of the Securities Depository will be the responsibility of such participants and other nominees of such beneficial owners. The City, the Bond Registrar and the Paying Agent will not be responsible or liable for such transfers of payments or for maintaining, supervising or reviewing the records maintained by the Securities Depository, the Securities Depository nominee, its participants or persons acting through such participants. While the Securities Depository nominee is the owner of this Bond, notwithstanding the provision hereinabove contained, payments of principal of and interest on this Bond shall be made in accordance with existing arrangements among the City, the Bond Registrar and the Securities Depository. EXCEPT AS OTHERWISE PROVIDED IN THE RESOLUTION, THIS GLOBAL BOND MAY BE TRANSFERRED, IN WHOLE BlIT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES DEPOSITORY OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY. The Bonds are issued in fully registered form in the denomination of $5,000 or any integral multiple thereof. This Bond may be exchanged at the office of the Bond Registrar for a like aggregate principal amount of Bonds of the same maturity of other authorized denominations upon the terms provided in the Resolution. The City and the Bond Registrar may deem and treat the registered owner hereof as the absolute owner hereof for purposes of receiving payment of or on account of principal hereof and interest due hereon and for all other purposes and neither the City nor the Bond Registrar shall be affected by any notice to the contrary. This Bond is transferable by the registered owner hereof in person or by the registered owner's agent duly authorized in writing, at the office of the Bond Registrar, but only in the manner, subject to the limitations and upon payment of the charges provided in the Resolution and upon surrender and cancellation of this Bond. The City shall pay all costs incurred in connection with the issuance, payment and initial registration of the Bonds and the cost of a reasonable supply of bond blanks. The City and the Bond Registrar shall not be required to issue, register, transfer or exchange any Bonds during a period beginning on the day following the Record Date preceding any Interest Payment Date and ending at the close of business on the Interest Payment Date or Bonds which have been called for redemption in accordance with Article III of the Resolution. IT IS HEREBY DECLARED AND CERTIFIED that all acts, conditions, and things required to be done and to exist precedent to and in the issuance of this Bond have been properly done and performed and do exist in due and regular form and manner as required by the Constitution and laws of the state of Kansas, and that the total indebtedness of the City, including this series of bonds, does not exceed any constitutional or statutory limitation. This Bond shall not be valid or become obligatory for any purpose until the Certificate of Authentication and Registration hereon shall have been lawfully executed by the Bond Registrar. A-3 IN WITNESS WHEREOF, the City has caused. this Bond to be executed by the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of its City Clerk, and its corporate seal to be affixed hereto or imprinted hereon, and this Bond to be dated the Dated Date shown above. CITY OF SALINA, KANSAS (Facsimile Seal) (facsimile) Mayor ArrEST: By (facsimile) City Clerk CERTIFICATE OF AUTHENTICATION AND REGISTRATION This Bond is one of a series of General Obligation Internal Improvement Bonds, Series 2005-A, of the City of Salina, Kansas, described in the within-mentioned Resolution. Registration Date: _____ _ Registration Number: 0322-085-071505-777 A-4 Office of the State Treasurer, Topeka, Kansas as Bond Registrar and Paying Agent By: ---------------- BOND ASSIGNMENT FOR VALUE RECENED, the undersigned do(es) hereby sell, assign and transfer to (Name and Address) (Social Security or Taxpayer Identification No.) the Bond to which this assignment is affixed in the outstanding principal amount of $ _____ ---' standing in the name of the undersigned on the books of the Bond Registrar. The undersigned do(es) hereby irrevocably constitute and appoint as agent to transfer said Bond on the books of said Bond Registrar with full power of substitution in the premises. Dated Name Social Security or Taxpayer Identification No. Signature (Sign here exactly as name(s) appear on the face of Certificate) Signature guarantee: By ______________________________ __ [Name of Eligible Guarantor Institution as defined by SEC Rule 17ad-lS (l2CFR 240.17 Ad-IS) or any similar rule which the Note Registrar deems applicable] A-5 CERTIFICATE OF CITY CLERK STATE OF KANSAS ) ) SS. COUNTY OF SALINE ) I, the undersigned, City Clerk of Salina, Kansas, hereby certify that the within Bond has been duly registered in my office according to law as of July 15, 2005. WITNESS my hand and official seal. (Facsimile Seal) (facsimile) City Clerk CERTIFICATE OF STATE TREASURER OFFICE OF THE TREASURER, STATE OF KANSAS I, LYNN JENKINS, Treasurer of the State of Kansas, do hereby certify that a transcript of the proceedings leading up to the issuance of this Bond has been filed in my office, and that this Bond was registered in my office according to law on _____ _ WITNESS my hand and official seal. (Facsimile Seal) Treasurer of the State of Kansas A-6 STATEMENT OF INSURANCE [TO BE PROVIDED BY BOND JNSURER, IF ANY) LEGAL OPINION I, the undersigned, City Clerk of the City of Salina, Kansas, hereby certify that the following is a true and correct copy of the approving legal opinion of Gilmore & Bell, a Professional Corporation, Attorneys at Law, Kansas City, Missouri, on the within Bond and the series of which it is a part, except that it omits the date of such opinion; that the opinion was manually executed and was dated and issued as of the date of delivery of and payment for the Bonds and is on file in my office. By ________ ~(~fa~c~si~nn~·~le~) ________ __ City Clerk (PRINTED LEGAL OPINION) A-7 EXHIBITB CONTlNUING DISCLOSURE INSTRUCTIONS SECTION 1. Purpose of the Continuing Disclosure Instructions. These Continuing Disclosure Instructions (the "Instructions") are being executed and delivered by the City for the benefit of the beneficial owners of any series of the Bonds and in order to assist the Participating Underwriters in complying with Rule 15c2-12 (defined below). These Instructions are to govern the continuing disclosure obligations of the City with respect to the City's General Obligation Internal Improvement Bonds, Series 1996-A dated as of June 1, 1996 (the" 1996 Bonds") and any additional series of Bonds that the City hereafter elects to make subject to these Instructions. SECTION 2. Definitions. Unless otherwise defined in these Instructions, the following capitalized terms shall have the following meanings for purposes ofthese Instructions: "Beneficial owner" means any registered owner of the Bonds and any other person who, directly or indirectly, has investment power with respect to any of the Bonds. "Bond Counsel" means the firm of Gilmore & Bell, P.C., or any other attorney or firm of attorneys with a nationally recognized standing in the field of municipal bond financing selected by the City. "Bonds" means the 1996 Bonds and any additional series of bonds, notes or other municipal obligations of the City that the City elects at the time of issuance to have subject to these Instructions for the purpose of constituting the undertaking of the City to provide continuing disclosure pursuant to Rule 15c2- 12. "City" means the City of Salina, Kansas. "MSRB" means the Municipal Securities Rulemaking Board. "NRMSIR" means any information repository recognized by the Securities and Exchange Commission as a nationally recognized municipal securities information repositorx under Rule 15c2-12. "Participating Underwriter" means any of the original underwriters of the 1996 Bonds and any future series of Bonds required to comply with Rule 15c2-12 in connection with the offering of any series of Bonds. "Rule 15c2-12" means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "SID" means any public or private information depository, if any, designated by the State of Kansas and the Securities and Exchange Commission as such for purposes of Rule 15c2-12. SECTION 3. Provision of Annual Reports. (a) Within 180 days after the close of each fiscal year, the City shall furnish to each NRMSIR and to the SID, if any, (i) a copy of the financial statements of the City prepared in accordance with generally accepted accounting principles and audited by its independent auditors (or if not available as of B-1 such date, the unaudited fmancial statements of the City and as soon thereafter as available such audited fmandal statements of the City), and (ii) the operating data of the City, updated for the fiscal year then ended, in substantially the scope and fonn contained in the Official Statement dated May 6, 1996, with respect to the 1996 Bonds in the tables under the following headings: 1. Debt Summary 2. Tax Levies 3. Assessed Valuation 4. Estimated Actual Valuation 5. Tax Collections 6. Largest Taxpayers (b) Any or all of the financial infonnation or operating data required by this Section 3 may be incorporated by reference from other documents, including official statements of debt issues with respect to the City that have been filed with each NRMSIR or the Securities and Exchange Commission, and in the case of a fmal official statement, that is available from the MSRB. The City shall clearly identify in each annual report filed under this Section 3 each document incorporated by reference and the source from which it is available. SECTION 4. Reporting of Material Events. (a) The City shall disseminate to the SID, if any, and to each NRMSIR or to the MSRB, promptly upon the occurrence thereof notice of any of the following events with respect to each series of the Bonds, if material: (i) Any principal or interest payment delinquencies; (ii) Any non-payment related defaults; (iii) Any unscheduled draws on debt service reserves reflecting financial difficulties; (iv) Any unscheduled draws on credit enhancements reflecting financial difficulties; (v) Any substitution of credit or liquidity providers, or their failure to perfonn; (vi) Any adverse tax opinions or events affecting the tax-exempt status of any series of the Bonds; (vii) Any modifications to rights of security holders; (viii) Any calls (other than mandatory sinking fund redemptions or redemptions at maturity); (ix) Any defeasances; (x) Any release, substitution or sale of property securing repayment of any series of the Bonds; and (xi) Any rating changes. B-2 (b) The City shall also provide to the SID, if any, and to each NRMSIR or to the MSRB, as promptly as practicable notice of any failure of the City to provide the NRMSIRs and the SID, if any, the annual financial information or operating data required by Section 3 on or before the date specified. SECTION 5. Termination of Reporting Obligation. The City's obligations under these Instructions shall terminate with respect to each series of Bonds upon the defeasance, prior redemption or payment in full of all of such series of Bonds. SECTION 6. Amendment; Waiver. (a) The provisions of these Instructions may be amended only by a written instrument executed by the Mayor of the City if the City receives an opinion from Bond Counsel to the effect that these Instructions, as so amended, are in compliance with Rule lSc2-12 and all current amendments thereto and interpretations thereof that are applicable to these Instructions. (b) If an amendment is made to these Instructions, the City shall describe in the next annual fmancial report submitted to the NRMSIRs pursuant to Section 3 the substance of the amendment, the reasons for such amendment and the impact of such amendment on the type of operating data or financial information required to be provided under these Instructions. SECTION 7. Additional Information. Nothing in these Instructions shall be deemed to prevent the City from disseminating any other information, or including any other information in any report or notice made hereunder, in addition to that which is required by these Instructions. If the City chooses to include any information in any report or notice made hereunder in addition to that which is specifically required by these Instructions, the City shall have no obligation hereunder to update such information or include it in any future report or notice. SECTION 8. Noncompliance. The provisions of these Instructions shall be subject to specific enforcement or action in mandamus in a court of equity by any beneficial owner of any series of the Bonds. A breach of the provisions of this Section shall not constitute a default or event of default under the resolution adopted by the City authorizing any series of the Bonds. SECTION 9. Beneficiaries. These Instructions are for the benefit of the City, the Participating Underwriters and the beneficial owners of any series of the Bonds, and shall create no rights in any other person. SECTION 10. Applicability to Future Series of Bonds. These Instructions shall apply to any future series of Bonds of the City that the City elects to have subject to these Instructions at the time of issuance thereof. These Instructions shall constitute the undertaking of the City with respect to any such future series of Bonds for the purpose of any Participating Underwriters determining compliance with Rule ISc2-12. Nothing contained herein shall obligate the City to adopt these Instructions with respect to any future bonds or municipal obligations issued by the City. Dated: May 6, 1996. CITY OF SALINA, KANSAS B-3 12-0130 12-0131 12-0132 12-0133 12-0135 CITY OF SALINA, KANSAS REGULAR MEETING OF THE BOARD OF COMMISSIONERS June 11, 2012 4:00p.m. The City Commission convened at 3:00 p.m. in a Study Session on Budgetary Goals. The Regular Meeting of the Board of Commissioners was called to order at 4:00 p.m. in Room 107, City-County Building. A roll call was taken followed by the Pledge of Allegiance and a moment of silence. There were present: Mayor Norman M. Jennings, Presiding Officer; Commissioner Samantha P. Angell; Commissioner Kaye J. Crawford; Commissioner Aaron Householter; Commissioner Barb Shirley ADMINISTRATION (8.3) General Obligation Bonds and Temporary Notes (8.3a) Resolution No. 12-6909 formalizing and adopting a Tax and Securities Compliance Procedure. (8.3b) (8.3c) (8.3d) Resolution No. 12-6910 authorizing the offering for public sale of general obligation temporary notes and bonds. First reading Ordinance No. 12-10642 authorizing the issuance and delivery of general obligation bonds, Series 2012-A. First reading Ordinance No. 12-10644 authorizing the issuance and delivery of general obligation bonds, Series 2012-B. Moved by Commissioner Angell, seconded by Commissioner Crawford, to adopt Resolution No. 12- 6909. Aye: (5). Nay: (0). Motion carried. Moved by Commissioner Angell, seconded by Commissioner Shirley, to adopt Resolution No. 12-6910. Aye: (5).' Nay: (0). Motion carried. Moved by Commissioner Angell, seconded by Commissioner Crawford, to pass Ordinance No. 12- 10642 on first reading. Aye: (5). Nay: (0). Motion carried. Moved by Commissioner Angell, seconded by Commissioner Shirley, to pass Ordinance No. 12-10644 on first reading. Aye: (5). Nay: (0). Motion carried. ADJOURNMENT Moved by Commissioner Householter, seconded by Commissioner Shirley, that the regular meeting of the Board of City Commissioners be adjourned. Aye: (5). Nay: (0). Motion carried. The meeting adjourned at 5:50 p.m. [SEAL] ATTEST: (W Lf,ewAVW\;E4ey Lieu Ann Elsey, CMC, City Clerk (51 Norl'1UVVV lvI. T~ Norman M. Jennings, Mayor I hereby certify that the foregoing is a true correct excerpt of the action taken by the Governing Body at its regular meeting on June 11, 2012 regarding Resolution Numbers 12-6909 and 12-6910 and first reading of Ordinance Numbern 12-10642 ""d 12-10644. ~ Lieu Ann Elsey, City Clerk Page 1 RESOLUTION NO. 12-6910 'RESOLUTION AUTHORIZING THE OFFERING FOR SALE OF GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 20 12-A, GENERAL OBLIGATION REFUNDING BONDS, SERIES 20l2-B, AND GENERAL OBLIGATION TEMPORARY NOTES, SERIES 2012-1 OF THE CITY OF SALINA, KANSAS. WHEREAS, the City of Salina, Kansas (the "Issuer"), has heretofore authorized certain internal improvements described as follows (collectively, the ''Note Improvements"): Project Description East Magnolia Road Improvements Stone Lake Addition Magnolia Hills Subdivision, Phase IV Total: Ord.IRes. No. Res. 11-6812 Res. 12-6904 Res. 12-6902 Authority K.S.A. 12-685 et seq. K.S.A. 12-6aOI et seq. K.S.A. 12-6aOI etseq. Amount $ 4,500,000.00 1,460,979.00 287,483.69 .$ 6,248,462.69 WHEREAS, the governing body of the Issuer is authorized by law to issue general obligation bonds to pay the costs of the Note Improvements; and WHEREAS, it is necessary for the Issuer to provide cash funds (from time to time) to meet its obligations incurred in constructing the Note Improvements prior to the completion thereof and the issuance of the Issuer's general obligation bonds, and it is desirable and in the interest of the Issuer that such funds be raised by the issuance of temporary notes of the Issuer; and WHEREAS, none of such temporary notes heretofore authorized have been issued and the Issuer proposes to issue its temporary notes to pay a portion of the costs of the Note Improvements; and WHEREAS, the Issuer proposes to issue its temporary notes to pay a portion of the costs ofthe Note Improvements; and WHEREAS, the Issuer has heretofore authorized certain internal improvements described as follows (the "Bond Improvements," and together with the Note Improvements, the "Improvements"): Project Description Magnolia Commons OrdJRes. No. Ord. 12-10633 Authority K.S.A. 12-6aO I et seq. Amount $ 3,031,529.78 WHEREAS, the Issuer desires to issue its general obligation bonds in order to permanently finance the costs of such Bond Improvements and to retire the following temporary notes of the Issuer, which were issued to temporarily finance a portion of the costs of the Bond Improvements (the "Refunded Notes"): ; and Series 2011-1 Dated Date July 15,2011 Maturity Date August 1,2012 Original Amount $3,400,000 WHEREAS, the Issuer proposes to issue its general obligation bonds to pay a portion of the costs of the Bond Improvements and to retire the Refunded Notes; and WHEREAS, the Issuer has heretofore issued and has outstanding general obligation bonds; and WHEREAS, due to the current interest rate environment, the Issuer has the opportunity to issue its general obligation refunding bonds in order to achieve an interest cost savings on all or a portion of the debt represented by such general obligation bonds described as follows (collectively the "Refunded Bonds"): Dated Maturity Original Outstanding Redemption Redemption Series Date Date Amount Amount A.!!!m!!!! Date 20OJ-A July 15,2003 2014 $4,350,000 $1,765,000 $1,125,000 October I, 2013 2004-B July 15, 2004 2013 4,053,000 1,390,000 1,010,000 October 1,2012 2005-A July 15, 2005 2014 4,210,000 2,200,000 1,535,000 October 1,2013 ;and WHEREAS, the Issuer has selected the firm of George K. Baum & Company, Kansas City, Missouri ("Financial Advisor"), as financial advisor for one or more series of general obligation bonds of the Issuer to be issued in order to provide funds to permanently finance the Bond Improvements, to retire the Refunded Notes and to refund the Refunded Bonds, and a series of general obligation temporary notes of the Issuer to be issued in order to provide funds to temporarily finance the Note Improvements; and WHEREAS, the Issuer desires to authorize the Financial Advisor to proceed with the offering for sale of said general obligation bonds and notes and related activities; and WHEREAS, one of the duties and responsibilities of the Issuer is to prepare and distribute a preliminary official statement relating to said general obligation bonds and notes; and WHEREAS, the Issuer desires to authorize the Financial Advisor and Bond Counsel, in conjunction with the Clerk, to proceed with the preparation and distribution of a preliminary official statement and Notice of Sale and to authorize the distribution thereof and all other preliminary action necessary to sell said general obligation bonds and notes. BE IT RESOLVED BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS, AS FOLLOWS: Section 1. The Issuer is hereby authorized to offer for sale the Issuer's General Obligation Internal Improvement Bonds, Series 2012-A (the "Series 2012-A Bonds"), General Obligation Refunding Bonds, Series 2012-B (the "Series 2012-B Bonds") and the General Obligation Temporary Notes, Series 201 1 -I (the "Notes," and together with the Series 2012-A Bonds and the Series 20l2-B Bonds, the "Obligations") described in the Notice of Sale, which is hereby approved in substantially the form presented to the governing body this date. . Section 2. The Mayor and Clerk in conjunction with the Financial Advisor and Bond Counsel are hereby authorized to cause to be prepared a Preliminary Official Statement, and such officials and other representatives of the Issuer are hereby authorized to use such document in connection with the sale of the Obligations. Section 3. The Clerk, in conjunction with the Financial Advisor and Gilmore & Bell, P.C., Kansas City, Missouri ("Bond Counsel"), is hereby authorized and directed to give notice of sale of the Series 2012- A Bonds by publishing a summary of the Notice of Sale not less than 6 days before the date of the bond sale in a newspaper of general circulation in Saline County, Kansas, and the Kansas Register and by distributing copies of the Notice of Sale and Preliminary Official Statement to prospective purchasers of the Obligations. Proposals for the purchase of the Obligations shall be submitted upon the terms and conditions set forth in said Notice of Sale, and shall be delivered to the governing body at its meeting to be held on such date, at which meeting the governing body shall review such bids and shall award the sale of any or all of the Obligations or reject any or all of the proposals. Section 4. For the purpose of enabling the purchaser(s) of the Obligations (the "Purchasers") to comply with the requirements of Rule 15c2-12 of the Securities and Exchange Commission (the "Rule"), the Mayor and Clerk or other appropriate officers of the Issuer are hereby authorized: (a) to approve the form of said Preliminary Official Statement and to execute the "Certificate Deeming Preliminary Official Statement Final" in substantially the form attached hereto as Exhibit A as approval of the Preliminary Official Statement, such official's signature thereon being conclusive evidence of such official's and the Issuer's approval thereof; (b) covenant to provide continuous secondary market disclosure by annually transmitting certain financial information and operating-data and other information necessary to comply with the Rule to the Municipal Securities Rulemaking Board; and (c) take such other actions or execute such other documents as such officers in their reasonable judgment deem necessary to enable the Purchasers to comply with the requirement ofthe Rule. Section 5. The Issuer agrees to provide to the Purchasers within seven business days of the date of the sale of the Obligations or within sufficient time to accompany any confirmation that requests payment from any customer of the Purchasers, whichever is earlier, sufficient copies of the final Official Statement to enable the Purchasers to comply with the requirements of the Rule and with the requirements of Rule G-32 of the Municipal Securities Rulemaking Board. Section 6. The Mayor, Clerk and the other officers and representatives of the Issuer, the Financial Advisor and Bond Counsel are hereby authorized and directed to take such other action as may be necessary to carry out the sale of the Obligations. Such officials are also directed and authorized to make provision for payment and/or redemption of the Notes from proceeds of the Series 2012-A Bonds and other available funds. Section 7. The Financial Advisor is hereby authorized to submit a bid or participate in a syndicate submitting a bid for the purchase of the Obligations. Section 8. The officers and representatives of the Issuer are hereby authorized and directed to take such action as may be necessary, after consultation with the Financial Advisor and Bond Counsel, to subscribe for the United States Treasury Securities to be purchased and deposited in the escrow for the Refunded Bonds and to provide for notice of redemption of the Refunded Bonds. Section 9. This Resolution shall be in full force and effect from and after its adoption. ADOPTED by the governing body on June 1 \,2012. (SEAL) ATTEST: (Signature Page to Sale Resolution) To: [Purchaser Name] [Purchaser City, State] [Purchaser Name] [Purchaser City, State] [Purchaser Name 1 [Purchaser City, State] EXHIBITA CERTIFICATE REGARDING PRELIMINARY OFFICIAL STATEMENT June 11,2012 Re: Approximately $, __ -,-_ General Obligation Intemallmprovement Bonds, Series 2012- A, $ General Obligation Refunding Bonds, Series 2012-B and $ General Obligation Temporary Notes, Series 2012-1 The undersigneds are the duly acting Mayor and Clerk of the City of Salina, Kansas (the "Issuer''), and are authorized to deliver this Certificate to the addressees (the "Purchasers") on behalf of the Issuer. The Issuer has heretofore caused to be delivered to the Purchasers copies of the Preliminary Official Statement (the "Preliminary Official Statement") relating to the above-referenced bonds and notes (the "Obligations") . . For the purpose of enabling the Purchasers to comply with the requirements of Rule ISc2-12(b)(J) of the Securities and Exchange Commission (the "Rule"), the Issuer hereby deems the information regarding the Issuer contained in the Preliminary Official Statement to be final as of its date, except for the omission of such information as is permitted by the Rule, such as offering prices, interest rates, selling compensation, aggregate principal amount, principal per maturity, delivery dates, ratings, identity of the underwriters and other terms of the Obligations depending on such matters. CITY OF SALINA, KANSAS By: __________________ __ Title: Mayor By: __ ~---------------­ Title: Clerk NOTICE OF SALE CITY OF SALINA, KANSAS $1,485,000* GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 $2,365,000 * GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A $3,760,000* GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B (GENERAL OBLIGATION BONDS PAYABLE FROM UNLIMITED AD VALOREM TAXES) Bids. Written and electronic (as explained below) bids for the purchase of the above-referenced notes (the "Notes") and bonds (the "Bonds," and collectively with the Notes, the "Obligations") of the City of Salina, Kansas (the "Issuer") herein described will be received on behalf of the undersigned Clerk of the Issuer at the address hereinafter set forth in the case of written bids, and via PARITY@ in the case of electronic bids, on JULY 9, 2012 (the "Sale Date") until the following times (the "SubmIttal Hour"): SERIES Series 2012-A Bonds Series 20 12-B Bonds Series 2012-1 Notes SUBMITTAL HOUR (Central Davlight Time) 1:00 p.m. 1:00 p.m. 2:00 p.m. All bids will be publicly evaluated at said time and place and the award of the Obligations to the successful bidder(s) (the "Successful Bidders") will be acted upon by the governing body at its meeting to be held at 4:00 p.m. on the Sale Date. No oral or auction bids will be considered. Capitalized terms not otherwise defined herein shall have the meanings set forth in the hereinafter referenced Preliminary Official Statement relating to the Obligations. THE NOTES Terms of the Notes. The Notes will consist of fully registered notes in the denomination of $5,000 or any integral multiple thereof (the "Authorized Denomination"). The Notes will be dated July 15,2012 (the "Dated Date"), and will become due on August 1,2013. The Notes will bear interest from the Dated Date at rates to be detennined when the Notes are sold as hereinafter provided, which interest will be payable at maturity. Place of Payment. The principal of and interest on the Notes will be payable in lawful money of the United States of America by check or draft of the Treasurer of the State of Kansas, Topeka, Kansas • Preliminary; subject to change as provided in "Adjustment ofIssue Size." herein. (the "Paying Agent" and "Note Registrar"). The principal of each Note and the interest thereon will be payable at maturity to the owners thereof whose names are on the registration books (the "Note Register") of the Note Registrar (the "Registered Owner") upon presentation and surrender at the principal office of the Paying Agent. Note Registration. The Notes will be registered pursuant to a plan of registration approved by the Issuer and the Attorney General of the State of Kansas. The Issuer will pay for the fees of the Note Registrar for registration and transfer of the Notes and will also pay for printing a reasonable supply of registered note blanks. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Note Registrar, will be the responsibility of the Registered Owners. Book-Entry-Only System. The Notes shall be initially registered in the name of Cede & Co., as the nominee of DTC and no beneficial owner will receive certificates representing their interests in the Notes. During the term of the Notes, so long as the book-entry-only system is continued, the Issuer will make payments of principal of, premium, if any, and interest on the Notes to DTC or its nominee as the Registered Owner of the Notes, DTC will make book-entry-only transfers among its participants and receive and transmit payment of principal of, premium, if any, and interest on the Notes to is participants who shall be responsible for transmitting payments to beneficial owners of the Notes in accordance with agreements between such participants and the beneficial owners. The Issuer will not be responsible for maintaining, supervising or reviewing the records maintained by DTC, its participants or persons acting through such participants. In the event that: (a) DTC determines not to continue to act as securities depository for the Notes, or (b) the Issuer determines that continuation of the book-entry-only fonn of evidence and transfer of ownership of the Notes would adversely affect the interests of the beneficial owners of the Notes, the Issuer will discontinue the book-entry-only fonn of registration with DTC. If the Issuer fails to identify another qualified securities depository to replace DTC, the Issuer will cause to be authenticated and delivered to the beneficial owners replacement Notes in the forn1 of fully registered certificates. Reference is made to the Preliminary Official Statement for further information regarding the book-entry-only system of registration of the Notes and DTC. Redemption of Notes Prior to Maturity. The Notes are not subject to redemption prior to maturity. Authority, Purpose and Security. The Notes are being issued pursuant to K.S.A. 10-123 and K.S.A. 12-685 et seq., as amended, and a resolution adopted by the governing body of the Issuer (the "Note Resolution") for the purpose of paying a portion of the cost of certain street improvements (the "Improvements"). The Notes shall be general obligations of the Issuer payable as to both principal and interest from the proceeds of general obligation bonds of the Issuer, and if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, withlll the terrItorial limits of the Issuer. The full faith, credit and resources of the Issuer are irrevocably pledged for the prompt payment of the principal and interest on the Notes as the same become due. THE BONDS Terms of the Bonds. The Bonds will consist of fully registered bonds in the denomination of $5,000 or any integral multiple thereof (the "Authorized Denomination"). The Series 2012-A Bonds will be dated July 15,2012 (the "Dated Date"), and will become due in principal installments on October I in the years as follows: 2 Year Principal Amount Year Principal Amount 2013 $130,000 2021 $160,000 2014 140,000 2022 160,000 2015 145,000 2023 165,000 2016 150,000 2024 170,000 2017 150,000 2025 175,000 2018 155,000 2026 175,000 2019 155,000 2027 180,000 2020 155,000 The Series 2012-B Bonds will be dated the Dated Date, and will become due in principal installments on October 1 in the years as follows: Year Principa! Amount Principa! Year Amount 2013 $370,000 2017 $485,000 2014 935,000 2018 470,000 2015 625,000 2019 235,000 2016 460,000 2020 180,000 The Bonds will bear interest from the Dated Date at rates to be determined when the Bonds are sold as hereinafter provided, which interest will be payable semiannually on April] and October] in each year, beginning on April 1,2013 (the "Interest Payment Dates"). Place of Payment. The principal of and interest on the Bonds will be payable in lawful money of the United States of America by check or draft of the Treasurer of the State of Kansas, Topeka, Kansas (the "Paying Agent" and "Bond Registrar"). The principal of each Bond will be payable at maturity or earlier redemption to the owner thereof whose name is on the registration books (the "Bond Register") of the Bond Registrar (the "Registered Owner") upon presentation and surrender at the principal office of the Paying Agent. Interest on each Bond will be payable to the Registered Owner of such Bond as of the fifteenth day (whether or not a business day) of the calendar month next preceding each Interest Payment Date (the "Record Date") (a) mailed by the Paying Agent to the address of such Registered Owner as shown on the Bond Register or at such other address as is furnished to the Paying Agent in writing by such Registered Owner; or (b) in the case of an interest payment to Cede & Co. or any Owner of $500,000 or more in aggregate principal amount of Bonds, by wire transfer to such Registered Owner upon written notice given to the Paying Agent by such Registered Owner, not less than 15 days prior to the Record Date for such interest, containing the wire transfer address to which such Registered Owner wishes to have such wire directed. Bond Registration. The Bonds will be registered pursuant to a plan of registration approved by the Issuer and the Attorney General of the State of Kansas (the "State"). The Issuer will pay for the fees of the Bond Registrar for registration and transfer of the Bonds and will also pay for printing a reasonable supply of registered bond blanks. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Bond Registrar, will be the responsibility of the Owners. Book-Entry-Only System. The Bonds will initially be issued exclusively in "book entry" fonn and shall be initially registered in the name of Cede & Co., as the nominee of DTC and no beneficia] owner will receive certificates representing their interests in the Bonds. During the tenn of the Bonds, so • Preliminary; subject to change as provided in "Adjustment ofIssue Size," herein. 3 long as the book-entry-only system is continued, the Issuer will make payments of principal of, premium, if any, and interest on the Bonds to DTC or its nominee as the Registered Owner of the Bonds, DTC will make book-entry-only transfers among its participants and receive and transmit payment of principal of, premium, if any, and interest on the Bonds to its participants who shall be responsible for transmitting payments to beneficial owners of the Bonds in accordance with agreements between such participants and the beneficial owners. The Issuer will not be responsible for maintaining, supervising or reviewing the records maintained by DTC. its participants or persons acting through such participants. In the event that: (a) DTC determines not to continue to act as securities depository for the Bonds, or (b) the Issuer detem1ines that continuation of the book-entry-only form of evidence and transfer of ownership of the Bonds would adversely affect the interests of the beneficial owners of the Bonds, the Issuer will discontinue the book-entry-only form of registration with DTC. If the Issuer fails to identify another qualified securities depository to replace DTC, the Issuer will cause to be authenticated and delivered to the beneficial owners replacement Bonds in the form of fully registered certificates. Reference is made to the Official Statement for further information regarding the book-entry-only system of registration of the Bonds and DTC. Redemption of Bonds Prior to Maturity. General. Whenever the Issuer is to select Bonds for the purpose of redemption, it will, in the case of Bonds in denominations greater than the minimum Authorized Denomination, if less than all of the Bonds then outstanding are to be called for redemption, treat each minimum Authorized Denomination of face value of each such fully registered Bond as though it were a separate Bond in the minimum Authorized Denomination. Optional Redemption. At the option of the Issuer, Bonds maturing on October I in the years 2020, and thereafter, will be subject to redemption and payment prior to maturity on' October 1,2019, and thereafter, as a whole or in part (selection of maturities and the amount of Bonds of each maturity to be redeemed to be determined by the Issuer in such equitable manner as it may detennine) at any time, at the redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest to the date of redemption. Mandatory Redemption. A bidder may elect to have all or a portion of the Series 20 12-A Bonds or the Series 2012-B Bonds scheduled to mature in consecutive years issued as tenn bonds (the "Tenn Bonds") scheduled to mature in the latest of said consecutive years and subject to mandatory redemption requirements consistent with the schedules of serial maturities set forth above, subject to the following conditions: (a) not less than all Series 2012-A Bonds or Series 2012-B Bonds of the same serial maturity shall be convelied to TeTI11 Bonds with mandatory redemption requirements; and (b) a bidder shall make such an election by completing the applicable paragraph on the Official Bid Form or completing the applicable information on PARITYfR'. Notice and Effect of Call for Redemption. Unless waived by any owner of Bonds to be redeemed, if the Issuer shall call any Bonds for redemption and payment prior to the maturity thereof, the Issuer shall give written notice of its intention to call and pay said Bonds to the Bond Registrar and the Successful Bidder. In addition, the Issuer shall cause the Bond Registrar to give written notice of redemption to the registered owners of said Bonds. Each of said written notices shall be deposited in United States first class mail not less than 30 days prior to the date fixed for redemption. All notices of redemption shall state the date of redemption, the redemption price, the Bonds to be redeemed, the place of surrender of Bonds so called for redemption and a statement of the effect of the redemption. The Issuer shall also give such additional notice as may be required by Kansas law or regulation of the Securities and Exchange Commission in effect as of the date of such notice. If any Bond be called for 4 redemption and payment as aforesaid, all interest on such Bond shall cease from and after the date for which such call is made, provided funds are available for its payment at the price hereinbefore specified. Authority, Purpose and Security. The Series 2012-A Bonds. The Series 2012-A Bonds are being issued pursuant to K.S.A. 12- 6aO I et seq., as amended, and an ordinance and a resolution adopted by the governing body of the Issuer (collectively the "Series 2012-A Bond Resolution") for the purpose of paying a portion of the cost of certain street, water and sewer improvements (the "Improvements"). The Series 2012-A Bonds shall be general obligations of the Issuer payable as to both principal and mterest in part from special assessments levied upon the property benefited by the construction of said Improvements, and if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The full faith, credit and resources of the Issuer are irrevocably pledged for the prompt payment of the principal and interest on the Bonds as the same become due. The Series 2012-B Bonds. The Bonds are being issued pursuant to K.S.A. 10-427, as amended, and an ordinance and a resolution adopted by the governing body of the Issuer (collectively the "Series 2012-B Bond Resolution") for the purpose of refunding certain outstanding bonds of the Issuer. The Series 20 12-B Bonds shall be general obligations of the Issuer payable as to both principal and interest in part from special assessments levied upon the property benefited by the construction of said Improvements, and if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The full faith, credit and resources of the Issuer are irrevocably pledged for the prompt payment of the principal and interest on the Bonds as the same become due. THE NOTES AND THE BONDS Adjustment of Issue Size. The Issuer reserves the right to increase or decrease the total principal amount of the Obligations, and the principal amount of any maturity, depending on the purchase price and interest rates bid and the offering prices specified by the Successful Bidder(s). Such adjustments may be made by the Issuer in order to properly size the Obligations based on the required funding needs as well as purchase price and interest rates bid. The Successful Bidder may not withdraw its bid or change the interest rates bid as a result of any changes made to the principal amount of the Obligations or principal of any maturity as described herein, provided however that the total principaJ amount of each series of Obligations will not be changed by more than 15% within consent of the Successful Bidder(s). If there is an increase or decrease in the final aggregate principal amount of the Obligations or the schedule of principal payments as described above, the Issuer will notify the Successful Bidder by means of telephone or facsimile transmission, subsequently confinned in writing, no later than 4:00 p.m., central time, on the SaJe Date. The net production as a percentage of the principal amount of the Obligations generated from the bids(s) of the Successful Bidder(s) will not be decreased as a result of any change in the total principal amount of the Obligations. Submission of Bids. Written bids must be made on forn1s which may be procured from the Clerk or the Financial Advisor and shall be addressed to the undersigned, and marked "Proposal for General Obligation Temporary Notes, Series 2012-1," "Proposal for General Obligation Internal Improvement Bonds, Series 2012-A," or "Proposal for General Obligation Internal Improvement Bonds, Series 2012- B," as applicable. Written bids submitted by facsimile should not be preceded by a cover sheet and should be sent only once to (785)309-5738. Confinnation of receipt of facsimile bids may be made by contacting the Financial Advisor at the number listed below. Electronic bids via PARITY"o must be submitted in accordance with its Rules of Participation, as well as the provisions of this Notice of Sale. If 5 provisions of this Notice of Sale conflict with those of PARITY<!<', this Notice of Sale shall control. Bids must be received prior to the Submittal Hour on the Sale Date accompanied by the Deposit (as hereinafter defined), which may be submitted separately, provided such Deposit is received by the Issuer prior to the Submittal Hour on the Sale Date. The Issuer shall not be responsible for any failure, misdirection or error in the means of transmission selected by any bidder. PARITY®. Information about the electronic bidding services of PARITY@ may be obtained from i-Deal LLC at 1359 Broadway, 2nd Floor, New York, New York 10018, Phone No. (212) 849-5023. Conditions of Bids. Bids shall be submitted separately for each series of Obligations. Proposals will be received on the Obligations bearing such rate or rates of interest as may be specified by the bidders, subject to the following conditions: For each series of Bonds: The same interest rate shall apply to all Bonds of the same maturity year. Each interest rate specified shall be a multiple of 1/8 or 1120 of 1 %. No interest rate may exceed a rate equal to the daily yield for 10-year treasury bonds published by The Bond Buyer in New York, New York, on the Monday next preceding the day of which the Bonds are sold, plus 6%. The difference between the highest rate specified and the lowest rate specified for the Bonds cannot exceed 3.0%. No bid of less than the principal amount of the Bonds and accrued interest thereon to the date of delivery will be considered and no supplemental interest payments will be considered. Each bid shall specify the total interest cost (expressed in dollars) during the term of the Obligations on the basis of such bid, the premium, if any, offered by the bidder, the net interest cost (expressed in dollars) on the basis of such bid, and an estimate of the TIC (as hereinafter defined) on the basis of such bid. F or the Notes: The same interest rate shall apply to all Notes. Each interest rate specified shall be a multiple of 11100 of 1 %. No interest rate may exceed a rate equal to the daily yield for 10-year treasury bonds published by The Bond Buyer in New York, New York, on the Monday next preceding the day of which the Notes are sold, plus 6%. No bid of less than 99.25% of the principal amount of the Notes and accrued interest thereon to the date of delivery will be considered and no supplemental interest payments will be considered. Each bid for the Notes must specify the total interest cost to the Issuer during the tenn of the applicable series of Notes on the basis of such bid, the discount or premium, if any, offered by the bidder, and the net interest cost to the Issuer on the basis of such bid. Each bid for the Notes must also specify the average annual net interest rate to the Issuer on the basis of such bid. For all Obligations: Each bidder shall certify to the Issuer the correctness of the infonnation contained on the Official Bid Fonn; the Issuer will be entitled to rely on such certification. Each bidder agrees that, if it is awarded any series of the Obligations, it will provide the certification as to initial offering prices described under the caption "Certification as to Offering Price" in this Notice. Good Faith Deposit. Each bid shall be accompamed by a good faith deposit (the "Deposit") as follows: For the Notes: A good faith deposit will not be required for the Notes. For the Bonds: Each bid for a series of the Bonds shall be accompanied by a Deposit payable to the order of the Issuer to secure the Issuer from any loss resulting from the failure of the bidder to comply with the terms of its bid. The amount of the Deposit for each series of the Bonds shall be as follows: $47,300.00 for the Series 2012-A Bonds and $75,200.00 for the Series 2012-B Bonds. The Deposit, which must be received by the Issuer prior to the Submittal Hour, may be submitted in any of the following forms: 6 (a) Certified or cashier's check drawn on a bank located in the United States of America; (b) financial surety bond as hereinafter described (the "Surety Bond"); or (c) wire transfer in Federal Reserve funds, immediately available for use by the Issuer (wire transfer information may be obtained from the Financial Advisor at the addresses set forth below). Contemporaneously with the submission of a wire transfer Deposit, such bidder shall send an email to the Issuer and the Financial Advisor at the email address set forth below, including the following infonnation: (a) notification that a wire transfer has been made; (b) the amount of the wire transfer; and (c) return wire transfer instructions in the event such bid is unsuccessful. All Surety Bonds must be from an insurance or surety company rated at least "AA-" by Standard and Poor's Ratings Services, a division of The McGraw Hill Companies, Inc., or "Aa3" by Moody's Investors Service and licensed to issue such a surety bond in the State. The Surety Bond must identify each bidder whose deposit is guaranteed by such Surety Bond. Good Faith checks submItted by unsuccessful bidders will be returned; wire transfer Deposits submitted by unsuccessful bidders will not be accepted or shall be returned in the same manner received on the next business day following the Sale Date. The Issuer reserves the right to withhold reasonable charges for any fees or expenses incurred in returning a wire transfer Deposit. If the sale of the Obligations is awarded to a bidder utilizing a Surety Bond, the Successful Bidder is required to submit to the Issuer a cashier's or certified check or wire transfer of immediately available federal funds to such financial institution requested by the Issuer, not later than 2:00 p.m., Central Time on the next business day following the Sale Date. If such funds are not received by such time, the Surety Bond may be drawn on by the Issuer to satisfy the Deposit requirement. No interest on the Deposit will be paid by the Issuer. If a bid is accepted, the Deposit, or the proceeds thereof, will be held by the Issuer until the Successful Bidder has complied with all of the tenns and conditions of this Notice at which time the amount of said Deposit shall be returned to the Successful Bidder or deducted from the purchase price at the option of the Issuer. If a bid is accepted but the Issuer fails to deliver the Obligations to the Successful Bidder in accordance with the terms and conditions of this Notice, said Deposit, or the proceeds thereof, will be returned to the Successful Bidder. If a bid is accepted but the bidder defaults in the perfonnance of any of the tenns and conditions of this Notice, the proceeds of such Deposit will be retained by the Issuer as and for liquidated damages. Basis of Award. For each series of Bonds: The award of the Bonds will be made on the basis of the lowest true interest cost ("TIC"), which will be detennined as follows: the TIC is the discount rate (expressed as a per annum percentage rate) which, when used in computing the present value of all payments of principal and interest to be paid on the Bonds, from the payment dates to the Dated Date, produces an amount equal to the price bid, including any adjustments for premium, if any. Present value will be computed on the basis of semiannual compounding and a 360-day year of twelve 30-day months. Bidders are requested to supply an estimate of the TIC for the Bonds on the Official Bid Fonn, computed as specified herein on the basis of their respective bids, which shall be considered as infonnative only and not binding on either the bidder or the Issuer. If there is any discrepancy between the true interest cost specified and the bid price and interest rates specified, the specified bid price and interest rates shall govern and the TIC specified in the bid shall be adjusted accordingly. If two or more proper bids providing for identical amounts for the lowest TIC are received, the governing body of the Issuer will determine which bid, if any, will be accepted, and its detennination is final. 7 For the Notes: The award of the Notes will be made on the basis of the lowest net interest cost (expressed in dollars), which will be detennined by subtracting the amount of the premium bid, if any, from or adding the amount of the discount bid, if any, to the total interest cost to the Issuer. If there is any discrepancy between the net interest cost specified and the interest rate and premium/discount specified, the interest rate and premium/discount specified shall govern and the net interest cost specified in the bid shall be adjusted accordingly. If two or more proper bids providing for identical amounts for the lowest net interest cost are received, the governing body of the Issuer will detennine which bid, if any, will be accepted, and its detennination is final. For all Obligations: The Issuer reserves the right to reject any and/or all bids and to waive any irregularities in a submitted bid. Any bid received after the Submittal Hour on the Sale Date will be returned to the bidder. Any disputes arising hereunder shall be governed by the laws of Kansas, and any party submitting a bid agrees to be subject to jurisdiction and venue of the federal and state courts within Kansas with regard to such dispute. The Issuer's acceptance, including electronic acceptance through PARITY®, of the Successful Bidder's proposal for the purchase of the Obligations in accordance with this Notice of Sale shaD constitute a contract between the Issuer and the Successful Bidder for the purposes of Rule 15c2-12 of the Securities and Exchange Commission (the "Rule") and Rule G-32 of the Municipal Securities Rulemaking Board ("Rule G-32") and a bond purchase agreement for purposes of the laws of the State. Bond Ratings. The Issuer has applied to Moody's Investors Service for a rating on the Obligations herein offered for sale. Optional Bond Insurance. The Issuer has not applied for any policy of mumcipal bond insurance with respect to the Obligations. If the Obligations qualify for municipal bond insurance, and any bidder desires to purchase such policy, such indication and the name of the desired insurer must be set forth on the bidder's Official Bid Fonn. The Issuer specifically reserves the right to reject any bid specifying municipal bond insurance, even though such bid may result in the lowest bid to the Issuer. All costs associated with the issuance of such policy and associated ratings and expenses (other than any independent rating requested by the Issuer) shall be paid by the Successful Bidder. Failure of the municipal bond insurer to issue the policy after the award of the Obligations shall not constitute cause for failure or refusal by the Successful Bidder to accept delivery of the Obligations. CUSIP Numbers. CUSIP identification numbers will be assigned and pnnted on the Obligations, but neither the failure to print such number on any Obligation nor any error with respect thereto shall constitute cause for failure or refusal by the purchaser thereof to accept delivery of and pay for the Obligations in accordance with the tenns of this Notice. All expenses in relation to the assignment and printing of CUSIP numbers on the Obligations will be paid by the Issuer. Delivery and Payment. The Issuer will pay for preparation of the Obligations and will deliver the Obligations properly prepared, executed and registered without cost on or about JULY 26, 2012 (the "Closing Date"), to DTC for the account of the Successful Bidder. The Successful Bidder will be furnished with a certified transcript of the proceedings evidencing the authorization and issuance of the Obligations and the usuaJ closing documents, including a certificate that there is no litigation pending or threatened at the time of delivery of the Obligations affecting their validity and a certificate regarding the completeness and accuracy of the Official Statement. Payment for the Obligations shall be made in federal reserve funds, immediately availabJe for use by the Issuer. The Issuer will deliver one Obligation of each maturity registered in the nominee name of DTC. 8 Reoffering Prices. To provide the Issuer with infonnation necessary for compliance with Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), the Successful Bidder will be required to complete, execute and deliver to the Issuer prior to the delivery of the Obligations, a written certification (the "Issue Price Certificate") containing the following: (a) the initial offering price and interest rate for each maturity of the Obligations; (b) that all of the Obligations were offered to the public in a bona fide public offering at the initial offering prices on the Sale Date; and (c) on the Sale Date the Successful Bidder reasonably expected that at least 10% of each maturity of the Obligations would be sold to the "public" at prices not higher than the initial offering prices. For purposes of the preceding sentence "public" means persons other than bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers. However, such Issue Price Certificate may indicate that the Successful Bidder has purchased the Obligations for its own account in a capacity other than as an underwriter or wholesaler, and currently has no intent to reoffer the Obligations for sale to the public. Subsequent to the Submittal HOU1~ such initial offering prices to the public shall be provided to the Issuer or the Financial Advisor not more than 20 minutes after requested by the Issuer or the Financiai Adv;S01: At the request of the Issuer, the Successful Bidder will provide infonnation explaining the factual basis for the Successful Bidder's Issue Price Certificate. This agreement by the Successful Bidder to provide such infonnation will continue to apply after the Closing Time if: (a) the Issuer requests the infonnation in connection with an audit or inquiry by the Internal Revenue Service (the "IRS") or the Securities and Exchange Commission (the "SEC") or (b) the infonnation is required to be retained by the Issuer pursuant to future regulation or similar guidance from the IRS, the SEC or other federal or state regulatory authOlity. Preliminary Official Statement and Official Statement. The Issuer has prepared a Preliminary Official Statement dated June II, 2012, "deemed final" by the Issuer except for the omission of certain infonnation as provided in the Rule, copies of which may be obtained from the Clerk or from the Financial Advisor. Upon the sale of the Obligations, the Issuer will adopt the final Official Statement and will furnish the Successful Bidder, without cost, within seven business days of the acceptance of the Successful Bidder's proposal, with a sufficient number of copies thereof, which may be in electronic fonnat, in order for the Successful Bidder to comply with the requirements of the Rule and Rule G-32. Additional copies may be ordered by the Successful Bidder at its expense. Continuing Disclosure. In the Note Resolution and the Bond Resolutions. the Issuer has covenanted to proVIde annually certain financial infonnation and operating data and other infonnation necessary to comply with the Rule, and to transmit the same to the Municipal Securities Rulemaking Board. This covenant is for the benefit of and is enforceable by any Registered Owner of the Obligations. For further infonnation, reference is made to the caption "CONTINUING DISCLOSURE" in the Preliminary Official Statement. 9 Assessed Valuation and Indebtedness. The total assessed valuation of the taxable tangible property within the Issuer for the year 2011 is as follows: Equalized Assessed Valuation of Taxable Tangible Property ............................................................ . $402,354,576 Tangible Valuation of Motor Vehicles ................................................. . 47,406,062 Equalized Assessed Tangible Valuation for Computation of Bonded Debt Limitations ................................. $449,760,638 The total general obligation indebtedness of the Issuer as of the Closing Date, including the Obligations being sold, is $64,865,000. Legal Opinion. The Obligations will be sold subject to the approving legal opinion of Gilmore & Bell, P.C., Kansas City, Missouri, Bond Counsel, which opinion will be furnished and paid for by the Issuer, will be printed on the Obligations, if the Obligations are printed, and will be delivered to the Successful Bidder when the Obligations are delivered. Said opinion will also include the opinion of Bond Counsel relating to the interest on the Obligations being excluded from gross income for federal income tax purposes and exempt from income taxation by the State. Reference is made to the Preliminary Official Statement for further discussion of federal and Kansas income tax matters relating to the interest on the ObligatIOns. Additional Information. Additional infonnation regarding the Obligations may be obtained from the undersigned, or from the Financial Advisor, at the addresses set forth below: DATED: June 11, 2012. CITY OF SALINA, KANSAS By Lieu Ann Elsey, Clerk Written and Facsimile Bid and Good Faith Deposit DelivelJ' Address: 300 West Ash Salina, Kansas 67402 Attn: Rod Franz, Finance Director Phone No.: (785)309-5735 Fax No.: (785)309-5738 Email: rod. franz@salina.org Financial Advisor: George K. Baum & Company 480 I Main Street, Suite 500 Kansas City, Missouri 64112 Attn: David Arteberry Phone No.: (816)474-1100 Email: arteberry@gkbaum.com 10 TO: OFFICIAL BID FORM PROPOSAL FOR THE PURCHASE OF CITY OF SALINA, KANSAS GENERAL OBLIGATION TEMPORARY NOTES Lieu Ann Elsey, Clerk City of Salina, Kansas July 9, 2012 For $1,485,000' principal amount of General Obligation Temporary Notes, Series 2012-1, of the City of Salma, Kansas, to be dated July 15, 2012, as described in your Notice of Sale dated June 11, 2012, said Notes to bear interest as follows: Maturity August 1 2013 Principal Amount' $1,485,000 Interest Rate ---_% the undersigned will pay the purchase price for the Notes set forth below, plus accrued interest to the date of delivery. Principal Amount ..................................................................................................................................... $1,485,000.00 Less Discount (not to exceed 0.75%) ................................................................................. -_________ _ Plus Premium (if any) ......................................................................................................... _________ _ Total Purchase Price ....................................................................................................... $ _________ _ Total mterest cost to maturity at the rate(s) specified ..................................................... $ _________ _ Net interest cost ............................................................................................................... $ _________ -:- Average annual net mterest rate ........................................................................................................... ______ % This proposal is subject to all terms and conditions contained m saJd Notice of Note Sale, and if the undersigned IS the Successful BIdder, the undersigned wlll comply with all of the provIsIons contamed 111 saJd NotIce. The acceptance of tl1lS proposal by the Issuer shall constitute a contract between the Issuer and the Successful Bldder for purposes of complymg with Rule 15c2-12 of the Secunties and Exchange CommIssion. Submitted by; _____________ _ (LIST ACCOUNT MEMBERS ON REVERSE) By: Telephone No. ACCEPTANCE Pursuant to actlOn duly taken by the Goveming Body of the CJty of Sahna, Kansas, the above proposal IS hereby accepted on .July 9, 2012. Attest: Clerk Mayor NOTE No additions or aiteratJOns m the above proposal forn1 shall bc made, and any erasures may cause rejectJOn of any bId. Scaled blds may be filed WIth the Clerk. LIeu Ann Elsey. 300 West Ash. Salma. Kansas 67402. faCSImile bids may be filed WIth the Clerk, Fax No. (785)309- 5738 or electronic blds may be submItted via PARlnt'. at or pnor to 2:00 p.m .. Central Tlme, on July 9, 2012. Any bid received after such tlme will not be accepted or shall be returned to the bldder. Preliminary; subject to change as provided in Notice of Sale. TO: Lieu Ann Elsey, Clerk City of Salina. Kansas OFFICIAL BID FORM PROPOSAL FOR THE PURCHASE OF CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS July 9, 2012 For $2,365,000' prmcipal amount of General Obligation IntemalImprovement Bonds, Series 2012-A, of the City of Salina, Kansas, to be dated July 15, 2012, as described in the Notice of Sale dated June 11,2012. said Bonds to bear mterest as follows: Stated Annual Stated Annua! Maturity Principa! Rate of Maturity Principa} Rate of October 1 Amount Interest October 1 Amount Interest 2013 $130.000 % 2021 $160,000 % 2014 140.000 % 2022 160.000 % 2015 145.000 % 2023 165,000 % 2016 150,000 % 2024 170.000 % 2017 150,000 % 2025 175,000 % 2018 155.000 % 2026 175,000 % 2019 155.000 % 2027 180,000 % 2020 155,000 % the undersigned will pay the purchase pnce for the Bonds set forth below, plus accrued interest to the date of delivery. o o Principal Amount ......................................................................................................................................................... $2.365,000.00 Plus PremJUm (if any) ............................................................................................................................. _________ _ Total Purchase Pnce .......................................................................................................................... $ _________ _ Total interest cost to maturity at the rates specified ............................................................................ $ _________ _ Net interest cost (adjusted for Premium) ............................................................................................. $ _________ _ True lnterest Cost .................................................................................................................................................. _____ (% The Bidder elects to purchase Municipal Bond Insurance from. [AssuredJ [AGMJ [ _______ --'J. Circle one or complete blank. The Bidder elects to have the tollowmg Term Bonds' Maturity Date October I. October I. Years Amount" ______ w _____ _ $_---- __ ..,--_ to __ -,-_ $ _____ _ *subJect to mandatory redemption reqUIrements m the amounts and at the times shown above ThiS proposal IS subJect to all terms and conditions contained in said NotIce of Sale. and If the underSIgned IS the Successful Bidder, the underSIgned will comply wIth all of the provIsions contaIned In SaId NotIce. A cashIer's or certified check. a wire transfer or a qualIfied financial surety bond In the amount of $47.300.00 payable to the order of the Issuer. accompanies this proposal as an eVIdence of good faith. The acceptance of thiS proposal by the Issuer shall constitute a contract between the Issuer and the Successful Bidder for purposes of complymg with Rule 15c2-12 of the Securities and Exchange CommISSion 1 and a bond purchase agreement for purposes of the laws of the State of Kansas. Submitted by: _______________ _ (LIST ACCOUNT MEMBERS ON REVERSE) By: _____________ _ Telephone No. ACCEPTANCE Pursuant to actIOn duly taken by the GovernIng Body of the Clty of SalIna, Kansas. the above proposal IS hereby accepted on July 9, 2012. Attest" Clerk Mayor NOTE: No additions or alteratIOns In the above proposal fonn shall be made, and any erasures may cause rejection of any bid. Sealed bids may be filed wIth the Clerk, LIeu Ann Elsey, 300 West Ash, Sa1ma. Kansas 67402, faCSimile bids may be filed with the Clerk, Fax No. (785)309- 5738 or electronic bids may be submItted VIa PARfT~. at or pnor to 1 :00 p.m., Central TIme, on July 9.2012. Any bid received after such time will not be accepted or shall be returned to the bidder. * Preliminary; subject to change as provided in Notice of Sale. TO: LIeu Ann Elsey, Clerk City of SalIna, Kansas OFFICIAL BID FORM PROPOSAL FOR THE PURCHASE OF CITY OF SALINA, KANSAS GENERAL OBLIGATION REFUNDING BONDS July 9. 2012 For $3,760.000' prinCIpal amount of General OblIgatIOn Refunding Bonds, Series 2012-B, of the CIty of Salina, Kansas, to be dated July 15,2012, as described m the NotIce of Bond Sale dated June II, 2012, said Bonds to bear mterest as follows: Stated Annual Stated Annual Maturity Principa! Rate of Maturity Principa! Rate of October 1 Amount Interest October 1 Amount Interest 2013 $370,000 % 2017 $485,000 % 2014 935,000 % 2018 470,000 % 2015 625,000 % 2019 235,000 % 2016 460,000 % 2020 180.000 % the underSIgned WIll pay the purchase price for the Bonds set forth below, plus accrued mterest to the date of delivery. Prmcipal Amount ......................................................................................................................................................... $3,760,000.00 Plus Premium (if any) ............................................................................................................................. _________ _ Total Purchase PrIce ........................................................................................................................... $ _________ _ Total interest cost to maturity at the rates specIfied ........................................................................... $ _________ _ Net mterest cost (adjusted for PremIUm) ............................................................................................ $ _________ _ True Interest Cost ........................................................................................................ .. ................................... _----_% o The BIdder elects to purchase MUnICIpal Bond Insurance from: [Assured] [AGM] [ _______ .-11. Circle one or complete blank. o The BIdder elects to have the followmg Tenn Bonds: Maturity Dat£' October I, October 1. Years Amount* _______ to_______ S __________ _ __ ---, ___ to ____ ...,--_ $ __________ _ *subject to mandatory redemption reqUIrements m the amounts and at the tImes shown above. ThIS proposal IS subject to all tem1S and condItIons contamed m saId NotIce of Bond Sale, and if the underSIgned IS the Successful BIdder, the underSIgned will comply wIth all of the provIsIons contamed m said NotIce. A cashIer's or certified check, a wIre transfer or a qualified finanCIal surety bond In the amount of $75,200.00 payable to the order of the Issuer, accompames thIS proposal as an eVIdence of good faith. The acceptance of this proposal by the Issuer shall constitute a contract between the Issuer and the Successful Bidder for purposes of complymg with Rule 15c2-12 of the SecurItIes and Exchange CommIssIon and a bond purchase agreement for purposes of the laws of the State of Kansas. Submitted by: _______________ __ (LIST ACCOUNT MEMBERS ON REVERSE) By: Telephone No ACCEPTANCE Pursuant to actIon duly taken by the Governmg Body of the City of Saima. Kansas. thc above proposal IS hereby accepted on July 9. 2012. Attest: Clerk Mayor NOTE: No addJtlOns or alteratIons m the above proposal fonn shall be made, and any erasures may cause rejectIon of any bId. Sealed bIds may be filed with the Clerk, Lieu Ann Elsey. 300 West Ash. Salina. Kansas 67402. faCSImile bids may be filed with the Clerk, Fax No. (785)309- 5738 or electronic bids may be submItted vIa PARITY"'. at or pnor to I :00 p.m., Central TIme. on July 9, 2012. Any bid received after such time wIll not be accepted or shall be returned to the bIdder. * Preliminary; subject to change as provided in Notice of Sale. PRELIMINARY OFFICIAL STATEMENT DA TED JUNE 20, 2011 In the opinion of Gilmore & Bell, P.e.. Kansas City, Missouri, Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986. as amended (the "Code "j, the interest 011 the Notes and Bonds [(including any original issue discount proper(v allocable to an owner thereof)] is (aj excluded from gross income for federal income tax pU/poses and (b) not an item of tax pr(';ference for pU/poses of the federal alternative minimum tax imposed on individuals and COlporations, but is taken into account in determining adjusted cun'ent earnings for the purpose of computing the alternative minimum tax imposed on certain cOlporations. The interest on the Notes and Bonds is exemptfrom income taxation by-the State of Kansas. The Notes and Bonds are "qual~fied tax-exempt obligations" within the meaning o.fCode Section 265 (b)(3). See TAX MATTERS -"Opinion of Bond Counsel" herein. New Issues Book-Entry Only Bank Qualified Moody's Ratings: CITY OF SALINA, KANSAS $1,485,000 (subject to change) GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 Bonds-"Applied For" Notes-"Applied For" $2,365,000 $3,760,000 (subject to change) GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A (subject to change) GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B Dated: JUly 15,2012 Due: As Shown Herem The Series 2012-1 Notes (the "Notes") will be issued as fully registered notes in the denomination of $5,000 or any integral multiple thereof. The Notes shall be initially registered in the name of Cede & Co., as nommee of The Depository Trust Company ("DTC"), New York, New York, to which payment of principal and interest will be made. Individual purchases of Notes will be made in book-entry fonn. Purchasers will not receive certificates representing theIr interest in the Notes purchased. Interest on the Bonds will be payable at maturity. Principal and interest on the Notes will be payable by check, draft, or wire transfer from the Treasurer of the State of Kansas (the "Note Paying Agent"). The Notes are not subject to redemption prior to maturity. The Series 2012-A Bonds (the "Senes 2012-A Bonds") and the Series 2012-B Bonds (the "Series 2012-B Bonds" and, collectively with the Series 2012-A Bonds, the "Bonds") will be Issued as fully registered bonds 111 the denominatIon of $5,000 or any integral multiple thereof. The Bonds shall be initially registered in the name of Cede & Co., as nominee of DTC to which payment of principal and interest will be made. Individual purchases of Bonds will be made in book- entry only form. Purchasers will not receive certificates representing their mterest in the Bonds purchased. Principal on the Bonds will be payable on each October 1 in the years shown herein. Interest on the Bonds will be payable semiannually on April 1 and October 1 of each year until maturity, commencing on April 1. 2013. The principal of and interest on the Bonds will be payable by check. draft, or wire transfer from the Treasurer of the State of Kansas (the "Bond Paying Agent"). The Bonds are subJect to redemption at the option of the City as fmiher described herein. MATURITY SCHEDULES (see inside fi'ont cover) The full faith, credit, and resources of the City are Irrevocably pledged for the prompt payment of the principal and interest on the Notes and Bonds as the same becomes due. See THE NOTES -"Security" and THE BONDS -"Security" herein. The Notes and Bonds are offered when, as and if issued by the City and received by the Underwriters subJect to the approval of Bond Counsel. It is expected that the Notes and Bonds will be available for delivery through the facihties ofDTC on or about July 26, 2012. BIDS FOR THE PURCHASE OF THE NOTES AND BONDS WILL BE RECEIVED PURSUANT TO THE NOTICE OF SALE: The Series 2012-A Bonds: On or before 1:00 p.m., Central Daylight Time The Series 2012-B Bonds: On or before 1:00 p.m., Central Daylight Time The Notes: On or before 2:00 p.m., Central Daylight Time On Monday, July 9, 2012 TillS COVER PAGE CONTAINS INFORMATIOk FOR QUlC'K REFERENCE ONLY IT IS NOT A SUMMARY OF THE ISSUE INVESTORS MUST READ THE ENTIRE OFFICIAL STA TEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION MATURITYSCHEDULES $1,485,000 (subject to change) GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 · Maturitv 08-01-13 Amount $1,485,000 The Notes are not subject to redemption prior to maturity. $2,365,000 (subject to change) Base CUSIP(l) 794743 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A Maturitv 10-01-13 10-01-14 10-01-15 10-01-16 10-01-17 10-01-18 10-01-19 10-01-20* 10-01-21 * 10-01-22* 10-01-23 * 10-01-24* 10-01-25* 10-01-26* 10-01-27* Amount $130,000 140,000 145.000 150,000 150,000 155,000 155,000 155,000 160.000 160,000 165,000 170,000 175.000 175,000 180,000 $3,760,000 (subject to change) Base CUSIP(I) 794743 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B Maturity 10-01-13 10-01-14 10-01-15 10-01-16 10-01-17 10-01-18 10-01-19 10-01-20* Amount $370.000 935,000 625,000 460,000 485,000 470,000 235,000 180,000 Base CUSIP(1) 794743 *The Bonds maturing on or after October 1, 2020, will be subject to redemption prior to maturity at the option of the City on October 1, 2019, and thereafter, in whole or in part on any date, in principal amounts of $5,000 or any integral multiple thereof, at a price equal to 100% of the principal amount of Bonds to be redeemed plus accrued interest to the date fixed for redemption. [The Term Bonds are also subject to mandatory redemption.] See THE BONDS -"Redemption Provisions" herein. iI)CUSIP numbers have been assigned to thIs Issue by Standard & Poor's CUSIP Service Bureau. a divisIOn of the McGraw-HIli Compames. InG.. and are included solei)! (or the COIlVel11enCe of the Owners of the Notes and Bonds Neither the CII) nor the Underwruers shall be responsIble for the selection or correctness of the CUSIP numbers set forth above CITY OF SALINA, KANSAS 300 West Ash City/County Building -Room 206 P. O. Box 736 Salina, Kansas 67402-0736 CITY COMMISSION Norman Jennings, Mayor Barb Shirley, Vice Mayor Samantha Angell, Commissioner Kaye Crawford, CommIssioner Aaron Householter, Commissioner CITY STAFF Jason Gage. City Manager Mike Schrage. Deputy City Manager Rodney Franz, Director of Finance and Administration Lieu Ann Elsey, City Clerk CITY ATTORNEY Greg Bengtson Clark, Mize & Linville. Chartered Salina, Kansas BOND COUNSEL Gilmore & Bell, P.C. Kansas City, Missouri FINANCIAL ADVISOR George K. Baum & Company Kansas City, Missouri No person has been authOlized by the City or the Underwriters to give any infonnation or to make any representations with respect to the Bonds to be issued, other than those contained in this Official Statement, and if given or made, such other infonnation or representations not so authorized must not be relied upon as having been given or authorized by the City or the Underwriters. This Official Statement is not to be used in connection with an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicItation. All financial and other information presented herein, except for information expressly attributed to other sources, has been provided by the City from its records and is intended to show recent historic information. Such information is not guaranteed as to accuracy or completeness. All descriptions of laws and documents contained herein are only summaries and are qualified in their entirety by reference to such laws and documents. Information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale of the Bonds shall, under any cucumstances, create any implication that the infonnation contained herein has remained unchanged since the respective dates as of which such information is given. TABLE OF CONTENTS Page INTRODUCTORY STATEMENT ............................................ :....................................................... I THE NOTES.............................................. ........................................................................................ 2 THE BONDS.............................................. ........................................................................................ 5 THE DEPOSITORY TRUST COMPANY ........................................................................................ 9 THE FINANCING PLAN .............................................. .................................................................... 11 SOURCES AND USES OF FUNDS ................................. ................................................................. 12 RISK FACTORS AND INVESTMENT CONSIDERATIONS......................................................... 13 LEGAL MATTERS ........................................................................................................................... 14 TAX MATTERS ................................................................................................................................ 15 RATINGS........................................................................................................................................... 16 FINANCIAL ADVISOR ....................................................... ............................................................. 16 UNDERWRITING .... .......................... ....................... ..... ................................................................... 17 ABSENCE OF MATERIAL LITIGATION ...................................................................................... 17 CONTINUING DISCLOSURE ...................................................................................................... ... 17 CERTIFICATION OF OFFICIAL STATEMENT ............................................................................ 18 APPENDIX A" INFORMATION CONCERNING THE CITY FINANCIAL OVERVIEW OF THE CITY .................................................................................. A-I GENERAL INFORMATION CONCERNING THE CITY ......................................................... A-2 ECONOMIC INFORMATION CONCERNING THE CITy....................................................... A-6 DEBT SUMMARY OF THE CITY... ............ ...... ......................................................................... A-8 FINANCIAL INFORMATION CONCERNING THE CITY ...................................................... A-II APPENDIX B: CONTINUING DISCLOSURE INSTRUCTIONS APPENDIX C: AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDING DECEMBER 31, 2011 General CITY OF SALINA, KANSAS $1,485,000 (subject to change) GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 $2,365,000 (subject to change) GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A $3,760,000 (subject to change) GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B INTRODUCTORY STATEMENT The purpose of this OfficIal Statement is to present certain infonnation concerning the City of Salina, Kansas (the "City"), and the issuance of its $1,485,000 (subject to change) General Obligation Temporary Notes, Series 2012-1 (the "Notes"), its $2,365,000 (subject to change) General Obligation Internal Improvement Bonds, Series 2012-A (the "Series 2012-A Bonds"), and its $3,760.000 (subject to change) General Obligation Refunding Bonds, Series 2012-B (the "Series 2012-B Bonds" and collectively with the Series 2012-A Bonds. the "Bonds"), all dated July 15,2012. The Notes and the Bonds are being Issued to provide funds to finance certain water. sewer. and street improvements within the City and to refund portions of three outstanding bond issues of the City. See THE FINANCING PLAN herein. The full faith, credit, and resources of the City are irrevocably pledged for the prompt payment of the principal and interest on the Notes and Bonds as the same becomes due. See THE NOTES -"Security" and THE BONDS -"Security" herein. The Appendices are an integral part of this Official Statement and should be read in their entirety. All financial and other information presented herein has been compiled by the City's financial adVIsor, George K. Baum & Company, Kansas City. Missouri (the "Financial Advisor"). Such infonnation ha'i been provided by the City and other sources deemed to be reliable. The presentation of information herein is intended to show recent historic information and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. Gilmore & Bell, P.C, Kansas City, Missouri, Bond Counsel, has not assisted in the preparatIon of thIS Official Statement, except for the sectIOns titled INTRODUCTORY STATEMENT, THE NOTES, THE BONDS, LEGAL MATTERS, TAX MATTERS, CONTINUING DISCLOSURE, and APPENDIX B and, accordingly. expresses no opinion as to the accuracy or sufficiency of any other information contained herein. Definitions Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the resolution of the governing body of the City authorizmg the Notes (the "Note Resolution") and in the resolutions and ordinances of the governing body of the City authorizing the Bonds (the "Bond Ordinances"), as applicable. Copies of the Note Resolution and the Bond Ordinances are available upon request to the City, the Financial Advisor, or Bond Counsel. Additional Information Additional information regarding the City, the Notes, or the Bonds may be obtained from George K. Baum & Company, 4801 Main Street, Kansas City, Missouri 64112, telephone 8l6-474-11 00. THE NOTES Description The Notes shall consist of fully registered book-entry-only Notes in the denomination of $5,000 or any mtegral multiples thereof (the "Authorized Denomination") and shall be numbered m such manner as the Note Registrar shall detennine. All ofthe Notes shall be dated July 15, 2012, shall become due in the amounts on the Stated Maturities, with option of prior redemption and payment plior to their Stated Maturities, and shall bear interest at the rates per annum set forth on the mside cover page of this Official Statement. The Notes shall bear interest (computed on the basis of twelve 30-day months) from the later of the Dated Date or the most recent Interest Payment Date to which interest has been paid on the Interest Payment Dates in the manner hereinafter set forth. Redemption Provisions The Notes are not subject to redemption and payment prior to maturity. Authoritv The Notes are issued pursuant to and in full compliance with the Constitution and statutes of the State of Kansas, including without limItation K.S.A. 10-101 et seq. (including particularly K.S.A. 10-123) and K.S.A. 12- 685 el seq., all as amended, and a resolution adopted by the CIty on , 2012, authorizing the issuance of the Notes (the "Note Resolution"). Securitv The Notes shall be general obligatIOns of the City, payable as to both principal and interest from the proceeds of general obligation bonds of the issuer. and if not so paid, from ad valorem taxes which may be levied WIthout lImitatIon as to rate or amount upon all the taxable tangible property. real and personaL within the telTitorial limits of the City. The full faith, credlt and resources of the City are hereby ilTevocably pledged for the prompt payment of the pnncipal of and interest on the Notes as the same become due. Designation of Note Paving Agent and Note Registrar The City will at all times mamtain a paymg agent and note registrar meetll1g the qualifications set forth in the Note Resolution. The City reserves the right to appoint a successor paying agent or note registrar. No resignation or removal of the paying agent or note registrar shall become effective until a successor has been appointed and has accepted the duties of paying agent or note registrar. Every paying agent or note registrar appointed by the City shall at all tImes meet the requirements of Kansas law. The Treasurer of the State of Kansas. Topeka, Kansas (the "Note RegIstrar" and "Note Paying Agent") has been designated by the City as payll1g agent for the payment of principal of and mterest on the Notes and note registrar with respect to the regIstration. transfer and exchange of Notes. Registration, Transfer and Exchange of Notes As long as any of the Notes remall1 Outstanding, each Note when Issued shall be registered in the name of the Owner thereof on the Note Register. Notes may be transferred and exchanged only on the Note Register as hereinafter provided. Upon surrender of any Note at the principal office of the Note Registrar, the Note Registrar shall transfer or exchange such Note for a new Note or Notes in any authorized denomination of the same Stated Maturity and in the same aggregate principal amount as the Note that was presented for transfer or exchange. Notes presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature satisfactory to the Note Registrar, duly executed by the Owner thereof or by the Owner's duly authorized agent. 2 In all cases in which the privilege of transferring or exchanging Notes is exercised, the Note Registrar shall authenticate and deliver Notes in accordance with the provisions of the Note Resolution. The City shall pay the fees and expenses of the Note Registrar for the registration, transfer and exchange of Notes. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Note Registrar, are the responsibility of the Owners of the Notes. In the event any Owner fails to provide a correct taxpayer identification number to the Note Paying Agent, the Note Paying Agent may make a charge against such Owner sufficient to pay any governmental charge required to be paid as a result of such failure. The City and the Note Registrar shall not be required (a) to register the transfer or exchange of any Note that has been called for redemption after notice of such redemption has been mailed by the Note Paying Agent and during the period of 15 days next preceding the date of mailing of such notice of redemption; or (b) to register the transfer or exchange of any Note during a period beginning at the opening of business on the day after receiving written notice from the City of its intent to pay Defaulted Interest and ending at the close of business on the date fixed for the payment of Defaulted Interest. Mutilated, Lost, Stolen or Destroyed Notes If (a) any mutilated Note is surrendered to the Note Registrar or the Note Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (b) there is delivered to the City and the Note Registrar such security or indemnity as may be required by each of them, then, in the absence of notice to the City or the Note Registrar that such Note has been acquired by a bona fide purchaser, the City shall execute and, upon the City'S request, the Note Registrar shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of the same Stated Maturity and of like tenor and plincipal amount. If any such mutilated, destroyed. lost or stolen Note has become or IS about to become due and payable. the City, in Its dIscretion, may pay such Note lI1stead of issuing a new Note. Upon the issuance of any new Note, the City may require the payment by the Owner of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Note Paying Agent) connected therewith. Nonpresentment of Notes If any Note is not presented for payment when the principal thereof becomes due at Maturity, if funds sufficient to pay such Note have been made available to the Note Paying Agent all liability of the City to the Owner thereof for the payment of such Note shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Note Paying Agent to hold such funds, without liability for interest thereon, for the benefit of the Owner of such Note. who shall thereafter be restricted exclusively to such funds for any claIm of whatever nature on his part under this Note Resolution or on, or with respect to, said Note. If any Note IS not presented for payment within four (4) years following the date when such Note becomes due at Maturity, the Note Paying Agent shall repay to the City the funds theretofore held by it for payment of such Note, and such Note shalL subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the City, and the Owner thereof shall be entitled to look only to the City for payment, and then only to the extent of the amount so repaid to it by the Note Paying Agent, and the City shall not be liable for any Interest thereon and shall not be regarded as a trustee of such money. Method and Place of Payment of the Notes The principal of, or Redemption Price, and interest on the Notes shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of pubhc and private debts. The principal or Redemption Price of each Note and the interest thereon shall be paid at Maturity to the Person in whose name such Note is registered on the Note RegIster at the Maturity thereof, upon presentation and surrender of such Note at the principal office of the Note Paying Agent. The interest payable on each Note on any Interest Payment Date shall be paid to the Owner of such Note as shown on the Note RegIster at the close of business on the Record Date for such interest (a) by check or draft mailed by 3 the Note Paying Agent to the address of such Owner shown on the Note Register or at such other address as is furnished to the Note Paying Agent in writing by such Owner; or (b) in the case of an interest payment to Cede & Co. or any Owner of $500,000 or more in aggregate principal amount of Notes, by electronic transfer to such Owner upon written notice given to the Note Registrar by such Owner, not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank, ABA routing number and account number to which such Owner wishes to have such transfer directed. Notwithstanding the foregoing, any Defaulted Interest WIth respect to any Note shall cease to be payable to the Owner of such Note on the relevant Record Date and shall be payable to the Owner in whose name such Note is registered at the close of business on the Special Record Date for the payment of such Defaulted Interest, which Special Record Date shall be fixed as hereinafter specified. The City shall notify the Note Paying Agent in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment (which date shall be at least 30 days after receipt of such notice by the Note Paying Agent) and shall deposit with the Note Paying Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest. Following receipt of such funds the Note Paying Agent shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment. The Note Paying Agent shall notify the City of such SpeCIal Record Date and shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed. by first class mail, postage prepaid, to each Owner of a Note entitled to such notice not less than 10 days prior to such Special Record Date. SO LONG AS CEDE & CO. REMAINS THE REGISTERED OWNER OF THE NOTES, THE NOTE PAYING AGENT SHALL TRANSMIT PAYMENTS TO THE SECURITIES DEPOSITORY, WHICH SHALL REMIT SUCH PAYMENTS IN ACCORDANCE WITH ITS NORMAL PROCEDURES. See "THE NOTES -Book-Entry Notes: Secuntles Depository." PaYments Due on Saturdays, Sundays and Holidays In any case where a Note Payment Date is not a Business Day. then payment of principaL Redemption Pnce or interest need not be made on such Note Payment Date but may be made on the next succeeding Business Day with the same force and effect as if made on such Note Payment Date, and no mterest shall accrue for the penod after such Note Payment Date. Book-Entry Notes: Securities Depository The Notes shall initially be registered to Cede & Co., the nominee for the SecuritIes Depository, and no Beneficial Owner will receive certificates representing their respective mterests m the Notes, except in the event the Note Registrar issues Replacement Notes. It is anticipated that dunng the term of the Notes. the Securities Depository will make book-entry transfers among its PartIcipants and recelYe and transmit payment of principal of, premium, if any, and interest on, the Notes to the Participants until and unless the Note Registrar authenticates and delivers Replacement Notes to the Beneficial Owners (L<; described in the followmg paragraphs. The City may decide, subject to the reqUJrements of the Operational Arrangements of DTC (or a successor Securities Depository), and the following provisions of this section to discontinue use of the system of book-entry transfers through DTC (or a successor Securities Depository): (a) If the Cny determines (l) that the Securities Depository is unable to properly discharge its responsibilities, or (2) that the Securities Depository IS no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, or (3) that the continuation of a book-entry system to the exclusion of any Notes being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Notes; or (b) if the Note Registrar receives written notice from Participants having interest in not less than 50% of the Notes Outstanding, as shown on the records of the Securities Depository (and certified to such effect by the Securities DepOSItory), that the continuation of a book-entry system to the exclusion of any Notes being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Notes, then the Note Registrar shall notify the Owners of such detennination or 4 such notice and of the availability of certificates to owners requesting the same, and the Note Registrar shall register in the name of and authenticate and deliver Replacement Notes to the Beneficial Owners or their nominees in principal amounts representing the interest of each, making such adjustments as it may find necessary or appropriate as to accrued interest and previous calls for redemption; provided, that in the case of a determination under (a)(l) or (a)(2) of this paragraph, the City, with the consent of the Note Registrar, may select a successor securities depository in accordance with the following paragraph to effect book-entry transfers. In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Note. Upon the issuance of Replacement Notes, all references herein to obligations imposed upon or to be performed by the Securities Depository shall be deemed to be imposed upon and performed by the Note Registrar, to the extent applicable with respect to such Replacement Notes. If the Securities Depository resigns and the City, the Note Registrar or Owners are unable to locate a qualified successor of the Securities Depository, then the Note Registrar shall authenticate and cause delivery of Replacement Notes to Owners, as provided herein. The Note Registrar may rely on information from the Securities Depository and its Participants as to the names of the Beneficial Owners of the Notes. The cost of printing, registration, authentication, and delivery of Replacement Notes shall be paid for by the City. In the event the Securities DeposItory resigns, is unable to properly discharge its responsibilitIes, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, the City may appoint a successor Securities Depository provided the Note Registrar receives wntten evidence satisfactory to the Note Registrar with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities and Exchange Act of 1934, as amended, or other applicable statute or regulation that operates a securities depository upon reasonable and customary terms. The Note Registrar upon its receipt of a Note or Notes for cancellation shall cause the delivery of the Notes to the successor SeCUritIes DeposItory 111 appropriate denominations and form as provided 111 the Note Resolution. THE BONDS Description The Bonds shall consist of fully registered book-entry-only bonds in the denomination of $5,000 or any integral multiples thereof (the "Authorized Denomination") and shall be numbered in such manner as the Bond Registrar shall determine. All of the Bonds will be dated July 15,2012, shall become due in the amounts, on the Stated Maturities, and subject to redemption and payment prior to their Stated Maturities, and shall bear interest at the rates per annum set forth on the inside cover page of this Official Statement. The Bonds shall bear interest (computed on the basis of twelve 30-day months) from the later of the Dated Date or the most recent Interest Payment Date to which interest has been paid on the Interest Payment Dates in the manner heremafter set forth. Redemption Provisions OptJOnal Redemption. At the optIon of the City, Bonds or portIOns thereof maturing on October 1, 2020 and thereafter may be called for redemption and payment prior to their Stated Maturity on October 1, 2019, and thereafter as a whole or in part (selection of maturities and the amount of Bonds of each maturity to be redeemed to 'be detenmned by the City in such equitable manner as it may determine) at any time, at the Redemption Price of 100% (expressed as a percentage of the pJincipal amount), plus accrued interest thereon to the Redemption Date. Mandatory Redemption-Series 2012 Bonds. The Series 2012-_ Bonds maturing (the "Term Bond") shall be subject to mandatory redemption and payment prior to their stated maturity pursuant to the mandatory redemption reqUIrements hereinafter set forth, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date. The City shall redeem 011 October 1 in each year the following principal amounts of such Term Bond: 5 *Final maturity of Term Bond] Principal Amount Selection of Bonds to be Redeemed. Bonds shall be redeemed only in an Authorized Denomination. When less than all of the Bonds are to be redeemed and paid prior to their Stated Maturity, such Bonds shall be redeemed in such manner as the City shall determine, Bonds of less than a full Stated Matunty shall be selected by the Bond Registrar in minimum Authorized Denomination in such equitable manner as the Bond Registrar may determine. In the case of a partial redemption of Bonds by lot when Bonds of denominations greater than a minimum Authorized Denomination are then Outstanding, then for aJl purposes in connection with such redemption each minimum Authorized Denomination of face value shall be treated as though it were a separate Bond of a minimum Authorized Denomination. If it is determined that one or more, but not all, of the minimum Authorized Denomination value represented by any Bond is selected for redemption, then upon notice of intention to redeem such minimum Authorized Denomination, the Owner or the Owner's duly authorized agent shall forthwith present and surrender such Bond to the Bond Registrar: (1) for payment of the Redemption Price and interest to the Redemption Date of such mmImum Authorized Denomination value called for redemption, and (2) for exchange. without charge to the Owner thereof, for a new Bond or Bonds of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Owner of any such Bond fails to present such Bond to the Bond Paying Agent for payment and exchange as aforesaid. such Bond shall, nevertheless, become due and payable on the redemption date to the extent of the minimum Authorized Denommation value called for redemption (and to that extent only). Notice and Effect of Call for Redemption. Unless waived by any Owner of Bonds to be redeemed, if the City shall call any Bonds for redemptIon and payment prior to the Stated Maturity thereof, the City shall give written notice of Its intention to call and pay said Bonds to the State Treasurer and the Purchaser. In addition, the City shall cause the Bond Registrar to give written notice of redemption to the Owners of said Bonds. Each of said written notices shall be deposited in the United States first class mail not less than 30 days pnor to the RedemptIOn Date. All official notIces of redemption shall be dated and shall contam the follow111g information: (a) the Redemption Date; (b) the Redemption Pnce: (c) if less than all Outstandmg Bonds are to be redeemed. the identification (and. in the case of partial redemption of any Bonds, the respective principal amounts) of the Bonds to be redeemed; (d) a statement that on the Redemption Date the Redemption Price will become due and payable upon each such Bond or portion thereof called for redemption and that interest thereon shall cease to accrue from and after the Redemption Date; and (e) the place where such Bonds are to be surrendered for payment of the Redemption Price. which shall be the principal office of the Bond Paying Agent. The failure of any Owner to receive notice given as heretofore provided or an immaterial defect therein shall not invalidate any redemption. Prior to any Redemption Date. the City shall deposit with the Bond PaY111g Agent an amount of money sufficient to pay the RedemptIOn Price of all the Bonds or portIons of Bonds that are to be redeemed on such Redemption Date. Official notice of redemption having been given as aforesaJd, the Bonds or portions of Bonds to be redeemed shall become due and payable on the Redemption Date. at the RedemptIon Pnce therein specified. and from and after the Redemption Date (unless the City defaults in the payment of the Redemption Price) such Bonds or portIon of Bonds shall cease to bear interest. For so long as the Securities Depository is effecting book-entry transfers of the Bonds. the Bond Registrar shall provide the notices specified to the SecUlities Depository. It is expected that the Securities Depository shall. in turn, notify its Participants and that the Participants, in turn, will notify or cause to be notified the Beneficial Owners. Any failure on the paJi of the Securities DepOSItory or a PartiCIpant. or failure on the part of a nominee of a Beneficlal Owner of a Bond (having been mailed notIce from the Bond Registrar. the Securities Depository, a Participant or otherwise) to notify the Beneficial Owner of the Bond so affected, shall not affect the validity of the redemption of such Bond. In addition to the foregoing notice, the City shall provide such notices of redemption as are required by the Disclosure Instructions. The Bond Paying Agent is also directed to comply with any mandatory or voluntary standards then in effect for processing redemptions of municipal securitIes established by the State or the Securities and Exchange Commission. Failure to comply WIth such standards shall not affect or Il1validate the redemption of any 6 Bond. Authoritv The Series 20l2-A Bonds are issued pursuant to and in full compliance with the Constitution and statutes of the State of Kansas, including without limitation K.S.A. 10-101 et seq. and K.S.A. 12-6aOl et seq., all as amended, and an ordinance and resolution adopted by the City on , 2012, authorizing the issuance of the Series 20l2-A Bonds (jointly referred to herein as the "Series 2012-A Bond Ordinance"). The Series 20l2-B Bonds are issued pursuant to and in full compliance with the Constitution and statutes of the State of Kansas, including without limitation K.S.A. 10-101 et seq. and K.S.A. 10-427 et seq .. all as amended, and an ordinance and resolution adopted by the City on , 2012, authorizing the issuance of the Series 2012-B Bonds (jointly referred to herein as the "Series 20l2-B Bond Ordinance"). Security The Bonds shall be general obligations of the City, payable as to both principal and interest in part from special assessments levied upon the property benefited by the constructIon of certain public Improvements, and if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The balance of the principal and interest on the Bonds is payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real or personal, within the territorial limits of the City. The full faith, credit and resources of the City are hereby irrevocably pledged for the prompt payment of the principal of and interest on the Bonds as the same become due. Designation of Bond Paving Agent and Bond Registrar The CIty will at all times maintain a paying agent and bond registrar meeting the qualifications set forth in the Bond Resolutions. The CIty reserves the right to appoint a successor paying agent or bond registrar. No resignation or removal of the paying agent or bond registrar shall become effective until a successor has been appointed and has accepted the duties of paying agent or bond registrar. Every paying agent or bond registrar appointed by the City shall at all times meet the requirements of Kansas law. The Treasurer of the State of Kansas, Topeka, Kansas (the "Bond Registrar" and "Bond Paying Agent") has been designated by the City as paying agent for the payment of principal of and mterest on the Bonds and bond registrar with respect to the registration, transfer and exchange of Bonds. Registration, Transfer and Exchange of Bonds As long as any of the Bonds remain Outstanding, each Bond when issued shall be registered in the name of the Owner thereof on the Bond Register. Bonds may be transfeITed and exchanged only on the Bond Register as hereinafter provided. Upon surrender of any Bond at the principal office of the Bond Registrar, the Bond Registrar shall transfer or exchange such Bond for a new Bond or Bonds many authonzed denommation of the same Stated Maturity and in the same aggregate principal amount as the Bond that was presented for transfer or exchange. Bonds presented for transfer or exchange shall be accompanied by a \vritten instrument or 1I1struments of transfer or authorization for exchange, in a form and wIth guarantee of signature satisfactory to the Bond Registrar. duly executed by the Owner thereof or by the Owner's duly authorized agent. In all cases in which the privilege of transferring or exchanging Bonds is exercised, the Bond Registrar shall authenticate and deliver Bonds in accordance with the provisions of the Bond ResolutIon. The City shall pay the fees and expenses of the Bond Registrar for the registration, transfer and exchange of Bonds. Any additional costs or fees that might be incuITed in the secondary market, other than fees of the Bond Registrar, are the responsibility of the Owners of the Bonds. In the event any Owner fails to provide a COlTect taxpayer identification number to the Bond Paying Agent, the Bond Paying Agent may make a charge against such Owner sufficient to pay any govemmental charge required to be paid as a result of such failure. 7 The City and the Bond Registrar shall not be required (a) to register the transfer or exchange of any Bond that has been called for redemption after notice of such redemption·has been mailed by the Bond Paying Agent and during the period of 15 days next preceding the date of mailing of such notice of redemption; or (b) to register the transfer or exchange of any Bond during a period beginning at the opening of business on the day after receiving written notice from the City of its intent to pay Defaulted Interest and ending at the close of business on the date fixed for the payment of Defaulted Interest. Method and Place of Payment of the Bonds The principal of, or Redemption Price, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts. The principal or Redemption Price of each Bond shall be paid at Maturity to the Person in whose name such Bond is registered on the Bond Register at the Maturity thereof, upon presentation and surrender of such Bond at the principal office of the Bond Paying Agent. The interest payable on each Bond on any Interest Payment Date shall be paid to the Owner of such Bond as shown on the Bond Register at the close of business on the Record Date for such mterest (a) by check or draft mailed by the Bond Paying Agent to the address of such Owner shown on the Bond Register or at such other address as is furnished to the Bond Paying Agent in writing by such Owner; or (b) in the case of an interest payment to Cede & Co. or any Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Owner upon written notice given to the Bond Registrar by such Owner, not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank, ABA routmg number and account number to which such Owner wishes to have such transfer directed. Notwithstanding the foregoing, any Defaulted Interest with respect to any Bond shall cease to be payable to the Owner of such Bond on the relevant Record Date and shall be payable to the Owner in whose name such Bond IS regIstered at the close of business on the Special Record Date for the payment of such Defaulted Interest, whIch Special Record Date shall be fixed as hereinafter specified. The City shall notify the Bond Paying Agent in writing of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment (which date shall be at least 30 days after receipt of such notIce by the Bond Paying Agent) and shall deposit with the Bond Paying Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest. Following receipt of such funds the Bond Paying Agent shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment. The Bond Paying Agent shall notify the City of such Special Record Date and shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to bemailed.byfirstclassmail.postageprepald.to each Owner of a Bond entitled to such notice not less than 10 days prior to such Special Record Date. SO LONG AS CEDE & CO., REMAINS THE REGISTERED OWNER OF THE BONDS, THE BOND PAYING AGENT SHALL TRANSMIT PAYMENTS TO THE SECURITIES DEPOSITORY, WHICH SHALL REMIT SUCH PAYMENTS IN ACCORDANCE WITH ITS NORMAL PROCEDURES. PaYments Due on Saturdays, Sundays and Holidavs In any case where a Bond Payment Date IS not a Busmess Day, then payment of principal, Redemption Price or interest need not be made on such Bond Payment Date but may be made on the next succeedmg Busmess Day with the same force and effect as if made on such Bond Payment Date, and no interest shall accrue for the period after such Bond Payment Date. Book-Entrv Bonds: Securities Depository The Bonds shall initially be registered to Cede & Co., the nominee for the Securities Depository, and no Beneficial Ownei will receive certificates representing their respective interests in the Bonds, except in the event the Bond Registrar issues Replacement Bonds. It is anticipated that during the term of the Bonds, the Securities Depository will make book-entry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Bonds to the Participants until and unless the Bond Registrar authenticates and delivers Replacement Bonds to the Beneficial Owners as described in the following paragraphs. 8 The City may decide, subject to the requirements ofthe OperatIOnal Arrangements ofDTC (or a successor Securities Depository), and the following provisions of this section to discontinue use of the system of book-entry transfers through DTC (or a successor Securities Depository): (a) If the City determines (1) that the Securities Depository is unable to properly discharge its responsibilities, or (2) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, or (3) that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners ofthe Bonds; or (b) if the Bond Registrar receives written notice from Participants having interest in not less than 50% of the Bonds Outstanding, as shown on the records of the Securities Depository (and certified to such effect by the Securities Depository), that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Bonds, then the Bond Registrar shall notify the Owners of such detennination or such notice and of the availability of certificates to owners requesting the same, and the Bond Registrar shall register in the name of and authenticate and deliver Replacement Bonds to the Beneficial Owners or their nominees in principal amounts representmg the interest of each, making such adjustments as it may find necessary or appropnate as to accrued interest and previous calls for redemption; provided, that m the case of a detennination under (a)(1) or (a)(2) of this sectIOn, the City, with the consent of the Bond Registrar, may select a successor securities depository as hereinafter provided to effect book-entry transfers. In such event, all references to the Securities Depository herein shall relate to the period oftime when the Securities Depository has possession of at least one Bond. Upon the issuance of Replacement Bonds. all references herein to obligations imposed upon or to be perfonned by the Securities Depository shall be deemed to be imposed upon and performed by the Bond Registrar, to the extent applicable with respect to such Replacement Bonds. If the Securities Depository resigns and the City, the Bond Registrar or Owners are unable to locate a qualified successor of the Securities Depository, then the Bond Registrar shall authenticate and cause delivery of Replacement Bonds to Owners, as provided herein. The Bond Registrar may rely on information from the Secuntles Depository and its Participants as to the names of the Beneficial Owners of the Bonds. The cost of printing, registration, authentication, and delivery of Replacement Bonds shall be paid for by the CIty. In the event the Securities Depository resigns, is unable to properly discharge Its responsibilitIes, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, the City may appoint a successor Securities Depository provided the Bond Registrar receives written evidence satisfactory to the Bond Registrar with respect to the ability of the successor SecuritIes Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securitIes depository which is a registered clearing agency under the Securities and Exchange Act of 1934, as amended, OT other applIcable statute or regulation that operates a securities depository upon reasonable and customary terms. The Bond Registrar upon its receipt of a Bond or Bonds for cancellation shall cause the delivery of the Bonds to the successor Securities Depository in appropriate denominations and form as provided m the Bond Resolution. THE DEPOSITORY TRUST COMPANY The Depository Trust Company ("DTC"), New York, NY. will act as securities depository for the Notes and Bonds (collectively, the "Securities"). The Securities will be issued as fully registered secunties registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative ofDTC. One fully-registered Security certificate will be issued for each maturity of such series of the Securities, in the aggregate principal amount of such matunty, and will be deposited with DTC. DTC, the world's largest 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 Unifonn Commercial Code; and a "clearing agency" registered pursuant to the provisions of Section 17 A 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, 9 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 U.S. and non-U.S. securities brokers and dealers, banks, trust companies, cleanng corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing CorporatIOn, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its PartIcipants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is m 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 penodic statements oftheir holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownershIp interests in the Securities, except m the event that use of the book-entry system for the Secunties is discontinued. To facilitate subsequent transfers. all Securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC The deposIt of SecurItIes with DTC and their registration in the name of Cede & Co. or such other DTC nommee do not effect any change in beneficial ownership_ DTC has no knowledge of the actual BeneficIal Owners of the Securities; DTC's records reflect only the Identity of the Direct Participants to whose accounts such SecuritIes are credited. whIch mayor may not be the Beneficial Owners. The Direct and Indirect Paltlcipants will remain responsible for keep1l1g account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by DIrect Participants to IndIrect Participants, and by Direct Participants and IndIrect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC If less than all of the Bonds within an issue are being redeemed, DTC's practice is to detenmne by lot the amount of the interest of each Direct Parllcipant in such Issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct PartIcIpant in accordance WIth DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.' s consentmg or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distlibutions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC DTC's practice IS to credit Direct Participants' accounts upon DTCs receipt of funds and corresponding detail information from the Issuer, the Note Paying Agent, or the Bond Paying Agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not ofDTC, the Note Paying Agent, the Bond Paying Agent, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from tIme to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer, the Note Paying Agent or the Bond Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of 10 DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to the Note Paying Agent and the Bond Paying Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's mterest in the Securities, on DTC's records, to the Note Paying Agent and the Bond Paying Agent. The requirement for physical delivery of the Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTes records and followed by a book-entry credit of tendered Securities to the Note Paying Agent's or Bond Paying Agent's DTC account. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the Issuer, the Note Paying Agent or the Bond Paymg Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delIvered. The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. THE FINANCING PLAN The Note Projects Proceeds from the sale of the Notes will be used to provide construction period financing for lmprovements to a main trafficway in the City and to pay the costs associated with the issuance of the Notes. The Series 2012-A Bond Projects Proceeds from the sale of the Series 2012-A Bonds will be used to provide long term financing for certain utility and street improvements within a new commercial development within the City and to pay the costs associated with the issuance of the Senes 2012-A Bonds. A portlon of the cost of these improvements was originally financed by the issuance of the City's Series 2011-1 General ObligatJOn Temporary Notes, which will be retired with proceeds from the sale of the Series 2012-A Bonds and other available funds. The Series 2012-B Refunding Plan Proceeds from the sale of the Series 2012-B Bonds and other available funds will be used to refund the callable portions of three outstanding bond issues of the City: the General Obligation Internal Improvement Bonds. Series 2003-A; the General Obligation Internal Improvement Bonds, Series 2004-B: and the General Obligation Internal Improvement Bonds, Series 2005-A (collectively, the "Refunded Bonds"): and to pay the costs associated with the sale of the Series 2012-B Bonds. The repayment of the callable Series 2004-B Bonds is a current refunding. The repayment of the callable Series 2003-A and Series 2005-A Bonds is an advance refunding. According to the terms of the Refunding Plan, proceeds from the sale of the Series 2012-B Bonds and other available funds will be deposited into an irrevocable escrow account (the "Escrow Trust Account") which will provide funds to pay the interest due on the Refunded Bonds up to and including payments due on the Refunded Bonds' earliest optional redemption date and to redeem the principal of the Refunded Bonds on such date. All Refunded Bonds will be redeemed at their first optional redemption date. All Refunded Bonds will be called at a price equal to 100% of the par value thereof, without premium. The Refunding Plan is being undertaken in order to achieve interest cost savings. II The following details the Refunded Bonds: Principal Maturity Dates Refunded Amount Amount to be Redemption Bonds Outstanding to be Refunded Refunded Date 2003-A $1,765,000 $1,125,000 1 0-01-14 thru 1 0-OJ-1 8 10-OJ-13 2004-B 1.390,000 1,010.000 10-01-13 thru 1 0-01-19 10-01-12 2005-A 2,200,000 1,535,000 10-01-14 thru 10-01-20 10-01-13 Escrow Trust Agreement An Escrow Trust Account will be established for the Refunded Bonds pursuant to the tenns of an Escrow T rust Agreement dated as of July 15, 2012, by and between the City and UMB National Bank of America, Wichita. Kansas (the "Escrow Trustee"). Proceeds from the Series 2012-B Bonds will be deposited in the Escrow Trust Account and used to acqUire direct, non-callable obligations of the United States of America (the "Escrowed Securities"). The Escrowed Securities will mature at such times and in such amounts as necessary, when combined with cash balances in the Escrow Trust Account, to pay the principal of and interest on the Refunded Bonds as described in the preceding section. Mathematical Verification The mathematical accuracy of (a) the computations made by George K. Baum & Company on the adequacy of the matunng pnncipal and interest earned on the Escrowed Securities to be purchased with the proceeds from the proceeds of the Series 2012-B Bonds. together with uninvested funds to be held by the Escrow Trustee, 111 accordance with the Escrow Trust Agreement, to prOVIde for the payment of the interest on the Refunded Bonds up to and includmg theIr earlIest optional redemptIOn date, and to redeem the Refunded Bonds on such dates: and (b) the YIeld computations made by George K. Baum & Company supporting the conclusion by Bond Counsel that the Series 20 12-B Bonds are not "arbItrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, WIll be verified by Robert Thomas CPA, LLC, Shawnee MISSIon, Kansas. SOURCES AND USES OF FUNDS Funds to be used in the Financing Plan will be provided and applied approxImately as follows. exclusive of accrued interest Sources of Funds: Note and Bond Proceeds Other Available Funds Total Sources of Funds Uses of Funds: DeposIt to Improvement Fund Deposit to Escrow Fund Costs of Issuance Total Application of Funds Series 2012-1 Notes 12 Series 2012-A Bonds Series 2012-B Bonds RISK FACTORS AND INVESTMENT CONSIDERATIONS A PROSPECTIVE PURCHASER OF THE NOTES AND BONDS (COLLECTIVELY, THE "SECURITIES',) DESCRIBED HEREIN SHOULD BE AWARE THAT THERE ARE CERTAIN RISKS ASSOCIATED WITH THE SECURITIES WHICH MUST BE RECOGNIZED. THE FOLLOWING STATEMENTS REGARDING CERTAIN RISKS ASSOCIATED WITH THE OFFERING SHOULD NOT BE CONSIDERED AS A COMPLETE DESCRIPTION OF ALL RISKS TO BE CONSIDERED IN THE DECISION TO PURCHASE THE SECURITIES. PROSPECTIVE PURCHASERS OF THE SECURITIES SHOULD ANALYZE CAREFULLY THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT AND ADDITIONAL INFORMATION IN THE FORM OF THE COMPLETE DOCUMENTS SUMMARIZED HEREIN, COPIES OF WHICH ARE AVAILABLE AND MAY BE OBTAINED FROM THE CITY OR THE UNDERWRITER. Legal Matters Various state and federal laws, regulations and constitutional provisions apply to the obligations created by the SecUlities. There is no assurance that there will not be any change in, interpretation of or addition to such applicable laws, provisions and regulations whIch would have a matenal effect, eIther dlfectly or indirectly, on the City or the taxing authonty ofthe City. Limitations on Remedies Available to Owners of Securities The enforceability of the nghts and remedies of the owners of Securities, and the obligations incurred by the City in issuing the Securities, are subject to the followmg: the federal Bankruptcy Code and applicable bankruptcy, insolvency, reorgal1lZatioll, moratorium, or similar laws relatmg to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may lImit the specific enforcement under state law of celtain remedies; the exercise by the United States of America of the powers delegated to it by the United States Constitution; and the reasonable and necessary exerCIse, m certain unusual SItuatIOns. of the police power inherent in the State of Kansas and its governmental subdivisions in the interest of servmg a legitimate and significant public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government. if initiated, could subject the owners of the Securities to judiCIal discretion and interpretation of their nghts in bankruptcy and otherwise. and consequently may involve risks of delay. limitation or modification oftheir rights. Taxation of Interest on the Securities An opinion of Bond Counsel WIll be obtained to the effect that interest earned on the SecuritIes is excludable from gross income for federal II1come tax purposes under current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and applicable rulmgs and regulatIOns under the Code; however. an applicatIon for a rulmg has not been made and an opimon of counsel is not binding upon the Internal Revenue ServIce. There can be no a%urance that the present provisions of the Code. or the rules and regulations thereunder. will not be adversely amended or modified, tbereby rendering tbe interest earned on the Securitie~ includable 111 gross income for federal income tax purposes. The City has covenanted in the Bond and Note Resolutions and in other documents and certIficates to be delivered in connection with the issuance of the Securities to comply with the provisions of tbe Code. including those which require the City to take or omit to take certain actions after the issuance of the Securities. Because the existence and continuation of the excludability of the interest on the Securities depends upon events occurring after the date of issuance of the Secuntles, the opinion of Bond Counsel described under TAX MATTERS assumes the comphance by the City with the provisions of the Code described above and the regulations relating thereto. No opinion is expressed by Bond Counsel WIth respect to the excludability of the interest on the Securities in the event of noncompliance WIth such provisions. The failure of the City to comply with the provisions described above may cause the interest on the Securities to become includable in gross income as of the date of issuance. 13 No Additional Interest or Mandatorv Redemption upon Event of Taxabilitv The Bond and Note ResolutlOns do not provide for the payment of additional interest or penalty on the SecuritIes or the mandatory redemptlOn thereof if the interest thereon becomes includable in gross income for federal income tax purposes. Likewise. the Bond and Note ResolutlOns do not provide for the payment of any additional interest or penalty on the Securities if the interest thereon becomes includable in gross income for Kansas income tax purposes. Suitability of Investment The tax exempt feature of the Securities is more valuable to high tax bracket investors than to investors who are in low tax brackets, and so the value of the interest compensation to any particular investor will vary with individual tax rates. Each prospective investor should carefully examine thiS Official Statement, including the Appendices hereto, and ItS own financial condition to make a judgment as to Its ability to bear the economic risk of such an investment. and whether or not the Securities are an appropriate investment. Market for the Securities Ratings. The Securities have been assigned the financial ratings set f01ih in the sectIon hereof titled RATINGS. There is no assurance that a particular rating will remain in effect for any given penod of time or that it will not be revised, either downward or upward, or withdrawn entirely. if in the judgment of the agency originally establishing such rating, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse affect on the market price ofthe Secunties. Secondary Market. There is no assurance that a secondary market will develop for the purchase and sale of the Securities. Prices of seCUrIties traded in the secondary market. though, are subject to adjustment upward and downward In response to changes in the credIt markets. From time to tIme it may be necessary to suspend mdefinitely secondary market trading in the Securities as a result of financial conditIOn or market position of broker- dealers, prevailmg market conditions, lack of adequate current financial information about the City, or a material adverse change in the finanCial condition of the City. whether or not the Securities are in default as to prinCipal and Interest payments, and other factors WhICh may give rise to uncertainty concerning prudent secondary market practices. Recent Legislative Proposal On September 12. 2011. the President released a legislative proposal that would. among other things. subject interest on tax-exempt secunties (mcluding the SeCUl1tIes) to a federal mcome tax for taxpayers with mcomes above certam thresholds for tax years beginning after 2012. The proposal has not yet passed either of the two Houses of Congress and It IS not possible to predict whether this proposal will be enacted into law. If enacted imo law. such a proposal could affect the value or marketability of tax-exempt securities (including the Securities). Prospective purchasers of the Securities should consult their own tax advisers regarding the impact of any change in law on the Securities LEGAL MATTERS All matters incident to the authorizatIOn and issuance of the Securities by the CIty are subject to the approval of Gilmore & Bell, P.c., Kansas City, Missouri, Bond Counsel, whose approving opinion accompanies the Notes and Bonds. The factual and financial information appearing herein has been supplied or reviewed by certain officials of the City and its certIfied public accountants, as referred to herein. Bond Counsel has participated in the preparation of the matters appearing in the sections of this Official Statement captioned INTRODUCTORY STATEMENT, THE NOTES, THE BONDS, LEGAL MATTERS, TAX MATTERS, CONTINUING DISCLOSURE, and APPENDIX B. 14 TAX MATTERS General The following is a summary of the material federal and state income tax consequences of holding and disposing of the Notes and the Bonds (collectively refen-ed to herein as the "Securities"). This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of holders subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Securities as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State of Kansas, does not discuss the consequences to an owner under state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Securities 111 the secondary market at a premium or a discount. Prospective lllvestors are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Securities. Opinion of Bond Counsel In the opinion of Bond Counsel, under the law existing as ofthe issue date of the SeCUrIties: Federal Tax Exemption: The interest on the Securities [(including any original issue discount properly allocable to an owner thereof)] is excluded from gross income for federal income tax purposes. Alternative Minimum Tax. Interest on the Securities is not an item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporatIOns, but is taken into account in determining adjusted current earnings for the purpose of computll1g the alternatlve minimum tax imposed on celiain corporatlons. Bank Qualification. The Securities are "qualified tax-exempt obligations" for purposes of Code *265(b) ). and in the case of certain financial institutions (within the meaning of Code § 265(b )(5), a deduction is allowed for 80% of that portion of such financial institutions' interest expense allocable to interest on the Securities. Kansas Tax Exemption. The interest on the Securities is exempt from income taxation by the State. No Other Opinions. Bond Counsel's opinions are provided as of the date of the original issue of the Securities. subject to the condition that the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Securities in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply wlth all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Securities in gross income for federal income tax purposes retroactive to the date of issuance of the Securities. Bond Counsel is expressmg no opinion regarding other federal. state or local tax consequences arislllg with respect to the Securities. Other Tax Consequences Origillallssue Discount. For Federal income tax purposes, original issue discount ("OlD") is the excess of the stated redemption price at maturity of a Security over its issue price. The issue price of a Security is the first price at which a substantial amount of the Securities of that maturity have been sold (ignoring sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers). Under Code § 1288, OlD on tax-exempt bonds accrues on a compound basis. The amount of OID that accrues to an owner of a Security during any accrual period generally equals: (a) the issue price of that Security, pI us the amount of OID accrued in all pllor accrual periods; multiplied by (b) the yield to maturity on that Security (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period); minus (c) any interest payable on that Security during that accrual period. The amount of OlD accrued in a particular accrual period will be considered to be received ratably on each day of the accrual 15 period, will be excludable from gross income for Federal income tax purposes, and will increase the owner's tax basis in that Security. Prospective investors should consult their own tax advisors concerning the calculation and accrual of om.] [ Original Issue Premium. If a Secunty is issued at a price that exceeds the stated redemption price at maturity of the Security, the excess of the purchase pnce over the stated redemption price at maturity constitutes "premium" on that Security. Under Code * 171, the purchaser of that Security must amortize the premium over the term of the Security using constant yield principles, based on the purchaser's yield to maturity. As premium is amortized, the owner's basis in the Security and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner. This will result in an increase in the gain (or decrease in the loss) to be recognized for Federal income tax purposes on sale or disposition of the Security prior to its maturity. Even though the owner's basis is reduced, no Federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium.] Sale, Exchange or Retirement of Securities. Upon the sale, exchange or retirement (including redemption) of a Security, an owner of the Security generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retIrement of the Security (other than m respect of accrued and unpaid interest) and such owner's adjusted tax basis m the Security. To the extent the ~ecuritles are held as a capItal asset, such gam or loss will be capItal gain or loss and will be long-term capital gain or loss if the Secunty has been held for more than 12 months at the time of sale, exchange or retirement. Reporting Requirements. In generaL mfonnation reporting requirements will apply to certam payments of principaL interest and premIUm paid on Securities, and to the proceeds paid on the sale of Securities, other than certain exempt recipients (such as corporatIons and foreign entitles). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identificatIon number or certIfication of foreign or other exempt status or fails to report m full dividend and Interest income. The amount of any backup withholdmg from a payment to an owner will be allowed as a credIt against the owner's federal mcome tax liabil1ty. Collateral Federal Income Tax Consequences. Prospective purchasers of the Securities should be aware that ownership of the Securities may result In collateral federal income tax consequences to certain taxpayers, including. without limltatlOn. financial institutions. property and casualty insurance companies, indIvidual recipients of Social Security or Railroad Retirement benefits, certain S corporations with "excess net passive income," foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred celiain expenses allocable to the Securities. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Securities should consult theIr tax advisors as to the applicability of these tax consequences and other federal income tax consequence" of the purchase, ownership and dIsposition of the Securities, including the possible application of state. local. foreign and other tax laws. RATINGS The City has applJed to Moody's Investors Service for ratings on the Notes and Bonds. Any explanation of the SIgnificance of such ratings may be obtall1ed only from smd rating agency. There is no assurance that the ratings will remain for any given period of time or that they may not be lowered or withdrawn entirely by the rating service if. in their jUdgment. circumstances so warrant. Any such downward change 111 or withdrawal of the ratings may have an adverse effect on the market price of the Notes and Bonds. The City'S other outstanding general obligation notes and bonds have been rated "MIG 1" and "Aa2", respectively, by Moody's. FINANCIAL ADVISOR George K. BauIn & Company, Kansas City, Missouri, has acted as Financial Advisor to the City in connection with the sale ofthe Securities. The Financial Advisor has assisted the City in the preparation of this Official Statement and in other matters relating to the issuance of the Securities. The fees of the Financial Advisor are contingent upon the issuance of the Securities. 16 UNDERWRITING The Notes were purchased at public sale on 2012, by _______ _ (the "Notes Successful Bidder") at a price equal to , plus accrued mterest to the date of closing. The Series 2012-A Bonds were purchased at public sale on ___ ,2012, by (the "Selies 2012-A Bonds Successful Bidder") at a price equal to , plus accrued interest to the date of closing. The Series 2012-B Bonds were purchased at public sale on ___ , 2012, by (the "Series 2012-B Bonds Successful Bidder") at a price equal to , plus accrued interest to the date of closing. The Notes Successful Bidder, the Senes 2012-A Bonds Successful Bidder, and the Series 2012-B Bonds Successful Bidder are collectively referred to herein as (the "Successful Bidders"). ABSENCE OF MATERIAL LITIGATION The Transcript of Proceedings will contain a certificate of non-litigation dated as of the closing date and executed by the City to the effect that there is no controversy. suit, or proceeding of any kind pending OL to the knowledge of the CIty, threatened wherein or whereby any question IS raIsed, or may be raIsed, questioning, disputing, or affecting in any way the legal organizatIon of the City or its boundaries Of the legality of any official act shown to have been done regarding the Issuance of the Notes and Bonds or the constItutionality or validity ofthe obligation represented by the Bonds or the means provided for the payment of the Notes and Bonds. CONTINUING DISCLOSURE The Secunties and Exchange CommIssion (the "SEC") has promulgated amendments to Rule 15c2-12 (the "Rule"), requiring continuous secondary market dIsclosure. In the Note Resolution and the Bond Resolutions, the City has covenanted to provide annually certam financial information and operating data and other informatIon necessary to comply WIth the Rule, and to transmit the same or cause the same to be transmitted to certain repositories and the Municipal SecuritIes Rulemaking Board, as applicable. This covenant is for the benefit of and IS enforceable by the owners of the Notes and Bonds. See APPENDIX B for further details concerning continuing disclosure reqUlrements. On June 28th. 2012 the City filed with the MUlllcipal Securities Rulemaking Board's Electronic MuniCIpal Market Access system ("EMMA") the annual financial informatlOn and operating data required pursuant to its eXIsting contmuing disclosure undertakmgs and complied in a timely manner with its obligations for the fiscal year ending December 31. 2011. During the prior five years the City dId not always file the annual financial informatlOn and operatmg data within 180 days of the end of its fiscal year as required. Past failures to file the annual finanCIal information was primarily the result of not having audited financial statements completed within 180 days of the end of the fiscal year. The required operating data was made available to the public through the City's filing of certain official statements with the MSRB in April 2011 and 2010. July 2009 and 2008 and June 2007. The City has put mto place procedures to ensure continued complIance with all undertakings with respect to the CIty'S note and bond issues including acceleration of the deadline for the completion of its annual audited financial statements and the formal adoption of a post Issuance compliance policy. 17 CERTIFICATION OF THIS OFFICIAL STATEMENT The preparation and distribution of this Official Statement has been authorized by the City. This Official Statement is hereby duly approved by the governing body of the City as of the date on the cover page hereof. CITY OF SALINA, KANSAS By Is/ ___________ _ DIrector of Fmance and Admmistration ATTEST: Is/ ____________ _ CIty Clerk 18 APPENDIX A FINANCIAL OVERVIEW OF THE CITY 2011 Estimated Actual Valuation (1) 2011 Assessed Valuation Outstanding General Obligation Bonds (2) Population-2010 U.S. Census Bureau Estimate General Obligation Debt Per Capita Ratio of General Obligation Debt to Estimated Actual Valuation Ratio of General Obligation Debt to EstImated Assessed Valuation Outstanding Temporary Notes (3) Outstanding Lease Purchase Obligations Outstanding Revenue Bonds Overlapping General Obligation Debt (4) Direct and Overlappmg General Obhgation Debt (5) Direct and Overlappmg Debt Per Capita Ratio of Direct and Overlapping Debt to Estimated Actual Valuation Ratio of DIrect and Overlapping Debt to EstImated Assessed Valuation $ 2,891,461,447 $ 449,760,638 $ 63,380,000 $ $ $ $ $ $ $ 47,707 1,329 2.19% 14.09% 1,485.000 0.00 16,120,000 66.357,521 131.222,521 2,751 4.54% 29.18% (1) For a further descliption of how Estimated Actual Valuation is calculated and additional historical figures see the section titled FINANCIAL INFORMATION ~ "Estimated Actual Valuation". (2) Includes the Bonds. Does not include bonds to be refunded with proceeds from the Series 2012-B Bonds. (3) Includes the Notes. Does not include notes to be retired with proceeds from the Series 2012-A Bonds. (4) For a more detailed explanation of the overlapping debt of the other jurisdIctions, see DEBT SUMMARY - "Overlapping Debt". (5) Includes outstanding general obligation bonds and temporary notes of the City and overlapping jurisdIctions. A-I GENERAL INFORMATION CONCERNING THE CITY Location and Size The City of Salina is located in north central Kansas, near the geographic center of the contiguous United States. It is the seventh largest city in Kansas, with a 2010 U.S. Census Bureau estimate of 47,707. The City is the county seat for Saline County which had an estimated 2010 U.S. Census Bureau population of55,606. Situated at the intersection of Interstate Highways 70 and 135, the City of Salina serves as the industrial, medical, retail, trade and service hub for north central Kansas. Kansas City, Kansas, and Wichita, Kansas, are 175 and 95 miles away, respectIvely, via the direct access of these two major highways. The City encompasses a total area of approximately 23 square miles. Government The Town of Salina was organized in 1858 under the Town and Village Act in the State of Kansas. The City has had a Commission-City Manager form of government since 1921. The Commission comprises five members elected at-large. Each year the Commission chooses one member to act as Mayor. The City Manager is appointed by the Governing Body and acts as its primary agent in accordance with state statute. Other cIty officers and employees are appointed by the City Manager. The Governing Body is responsible for the policy determination, and the City Manager is responsible for the administration of the mUnicIpal government. Salina became a City of the first class on July 9, 1920. There are no organized city employee unions. The present elected officials of the City, along with the expiration of their current terms of office, are as follows: Name Norman Jenmngs Barb Shirley Samantha Angell Kaye Crawford Aaron Householter Retirement Svstems Title Mayor Vice Mayor Commissioner Commissioner Commissioner Term Expires 2013 2015 2013 2013 2015 The City participates in the Kansas Public Employees RetIrement System (KPERS) established in 1962, as an instrumentality of the State, pursuant to K.S.A. 74-4901 et seq., to prOVIde retirement and related benefits to public employees in Kansas. KPERS is governed by a board of trustees consIsting of nine members, including four members appointed by the Governor subject to confirmation by the State Senate, one appointed by the President of the Senate, one appomted by the Speaker of the House of RepresentatIves, two elected by members and retirants of the retirement system, which must be members of such system, and the State Treasurer. Members of the board of trustees serve four-year terms and elect a chairperson annually. The board of trustees appoints an ExecutIve Director to serve as the managing officer of KPERS and employs a staff of approximately 95 peopie. As of June 30. 2010, KPERS serves about 277,000 members and 1,500 participating employers, including the State. school districts. counties, cities. public libraries. hospitals and other governmental units. KPERS administers the following three statewide, defined benefit retirement plans for public employees: (a) Kansas Public Employees Retirement System; (b) Kansas Police and Firemen's Retirement System; and (c) Kansas Retirement System for Judges. These three plans are separate and distinct with different membership groups, actuarIal assumptIOns, experience, contribution rates and benefit options. The Kansas Public Employees Retirement System is the largest of the three plans, accounting for more than 95% of the members. The Kansas Public Employees Retirement System is further divided into two separate groups, as follows: A-2 (a) State/School Group -includes members employed by the State, school districts, community colleges, vocational-teclmical schools and educational cooperatives. The State of Kansas makes all employer contributions for this group, 85% of which comes from the State General Fund. State legislation enacted in 2003 made certain pre-1962 Board employees (which are part of a small group of pre-1962 Board and University of Kansas Hospital Authority employees known as the "TIAA Group"), special members of the State/School Group. (b) Local Group -all participating cities, counties, library boards, water districts and political subdivisions are included in this group. Local employers contribute at a different rate than the State/School Group rate. State legislation enacted in 2003 made certain pre-1962 employees of the University of Kansas Hospital Authority (which are a part of a small group of pre-l 962 Board and University of Kansas Hospital Authority employees known as the "TIAA Group"), special members of the Local Group. KPERS is a qualified, governmental, § 401(a) defined benefit pension plan, and has received IRS determination letters attesting to the plan'S qualified status dated October 14, 1999 and March 5, 2001. KPERS is also a "contributory" defined benefit plan, meaning that employees make contributions to the plan. This contrasts it from noncontributory pension plans (more common in the private sector), which are funded solely by employer contributions. The City'S employees annually contribute: (a) 4% of their gross salary to the plan if such employees are KPERS Tier I members (covered employment prior to July 1,2009), or (b) 6% of their gross salary to the plan if such employees are KPERS Tier 2 members (covered employment on or after July 1, 2009). The City's contribution varies from year to year based upon the annual actuarial valuation and appraisal made by KPERS, subject to legislative caps on percentage increases. The City'S contribution is 8.54% of the employee's gross salary for calendar year 2012. The City has established membership in the Kansas Police and Fire Retirement System ("KPFRS") for its polIce and fire personnel. KPFRS is a diVIsion of and IS administered by KPERS. Annual contributions are adjusted annually based on actuarial studies, subject to legislatIve caps on percentage increases. Employees contribute 7% of gross compensation and the City contributes 19.81 % of employees' gross compensation for calendar year 2012. In 2012, a number of changes to KPERS were approved, including: (a) Effective January L 2015, the creation of a new KPERS Tier 3 category (covered employment on or after January I, 2015) based on a cash balance plan. Each Tier 3 participant shall have a retirement annuity account to which such participant shall contribute 6% of their gross salary to the plan. The employer or State contribution varies based on longevity of participant service: (1) 3% for less than 5 years; (2) 4% for at least 5 years but less than 12 years; (3) 5% for at least 12 years but less than 24 years; and (4) 6% for 24 or more years. Such account shall receive an interest credit of 5.25% per annum, and under certain circumstances. shall receive additIOnal interest credits. Subject to certain exceptions, a Tier 3 partIcipant. upon retirement. shall receive a sll1gle life annuity benefit. (b) Increasmg the statutory maximum employer contributJOn annual increase from 0.6% per year (status quo) to 0.9% per year in 2014, 1.0% Il1 2015, 1.1 % m 2016 and 1.2% per year by 2017. (c) Effective January 1,2014, providing additIOnal contributIon flexibJlity for Tier 1 participants with corresponding benefit adjustments. (d) Effective January 1,2014, eliminate COLA adjustments for Tier 2 participants with corresponding benefit adjustments. (e) Provide additIOnal flexibility for alternative investments for the plan (f) Provide for a single actually-determined employer contribution rate covering all three KPERS Tiers, calculated for each KPERS group. (g) Provide new State funding sources to assist in reducmg UAAL. The 2012 changes did not address the Kansas Police and Firemen's Retirement System or the Kansas Retirement System for Judges. A-3 Population The City of Salina has a population that is approaching metropolitan area status. This is defined by the U.S. Census Bureau as cities with 50,000 inhabitants or more. According to the U. S. Census Bureau, the City's citizens had a median age of 36.4 years in 2010. The foliowing table and graph show the population for the CIty for selected years as provided by the U.S. Census Bureau. Police and Fire Protection Year 2010 2009 2008 2007 2006 U.S. Census Bureau Population 47,707 46,180 45,998 46,025 45,898 The City of Salina provides police and fire protection services to residents of the City and surrounding areas. Firefighting services are provided from four stations located throughout the CIty with 92 full-time firefighters. The fire department operates 36 vehicles and provides emergency medical services. The police department employs approximately 81 full-time police officers and operates 37 polIce vehicles, including patrol vehicles, motorcycles. and Cushmans. Education The City of Salina has a very complete and diverse educational system from the primary level up to ItS higher educational institutIOns. Ul11fied School District No. 305 provides public education through Jts eight elementary, two middle, and two senior high schools. The Distnct also operates altemative education. vocational- technical, and speclal education schools. Current enrollment is over 7,000. Additionally, there are a number of parochial institutions that operate two grade schools, two junior high schools, and one senior high school. A military school is located in the City and operates both a grade school and high school. The City is home to five regional or private upper-level specialty schools. The Kansas Highway Patrol has.a training academy located in Salina. One public library with over 230.000 volumes, two college libranes, a medical library, and a law library are located with111 the City. Kansas State Universitv at Salina The University offers a vanety of two-and four-year aVJation and technology degree programs. Areas of emphasls mclude civil, electrical and mechanical engmeering technologies. aeronautical studies. and avionics. The campus is located entirely within the boundaries of the Salina Airport Industrial Center. Approxlmately 716 students are currently enrolled in the school. Kansas Weslevan Universitv Kansas Wesleyan University was founded in 1886 and is located within the City. Currently. Kansas Wesleyan maintains an enrollment of approximately 800 students, the majority from Kansas and surrounding states. The school, based on a liberal arts foundation, offers more than 27 major programs, including graduate studies. Evening degree completion programs for adults are also available. Kansas Wesleyan is a member of the Associated Colleges of Central Kansas, a consortium of six academic institutions within 70 miles of the University through which students may enroll in courses and utilize resources. A-4 Transportation In addition to 1-70 and 1-135, US-81 and US-40 also intersect Salina. Several freight companies provide motor freight service in Salina with direct and connecting schedules to all cities in the United States. Bus service is available at regular intervals during each day in all directions. Union Pacific gives the City rail service in four directions out of the City and provides daily package-car service in and out of Salina. There are approximately 8 daily freights stopping in the City. Existing terminals have adequate capacity to handle present and greatly increased future capacity. Approximately 30 miles of storage tracks are available. The City is served by the Salina Municipal Airport and scheduled air service is provided by SeaPort Airlines, offering weekday and weekend flights to Kansas City and Denver. Utilities and Infrastructure Westar Energy supplies electricity and Kansas Gas Service provides natural gas to the City. The City owns its own water and sewage system. Additionally, the City IS responsible for street maintenance and pollce and fire protectJOn for the Alrport. SBC provides telephone service. Two cellular phone companies prOVIde service to the City. Health Facilities The City is served by Salina RegJOnal Health Center ("SRHC'''), a 330-bed regJOnal facility divided between two Salina campuses. SRHC IS an acute care facility for the diagnosis and treatment of all types of dIseases and conditions, and includes a cancer treatment center and two medIcal office buildmgs. The institution is also a 50% partner in a separate surgical hospital adjacent to the Asbury campus of SRHC. Several other facilities providing mental health services. counseling, and alcohol and drug dependency treatment programs are located in the CIty. Financial Institutions Ten banks operatmg a total of 23 different facilitIes are located in the City FIve banks are headquartered in the City and reported combined deposits in excess of $2.35 billion as of December 3 L 2011 A savings bank has a branch office in the City. Other Information Public recreation facilJtles available to CIty residents include 27 parks, a public golf course, baseball/softball fields, an aquatic park, an art center, a community theater, a museum, tennis courts, and ice and roller skating facilities. Two private clubs provide additional recreational opportunities for reSIdents of the CIty. The Bicentennial Center, a 7,500-seat facility, with over 40,000 square feet of exhibit space, nicknamed "Mid-America's Meeting Place", provides a venue for the region's numerous concerts, exhibitions, conventions, and other events are also held in the Center. There are several radio stations in the City. Five standard television stations from Wichita serve the Salina area. Additionally, Cox Communications provides cable television and broadband internet service to subscribing customers. A-5 ECONOMIC INFORMATION CONCERNING THE CITY Economic Characteristics The City of Salina benefits from its location at the junction of Interstate Highways 70 and 135. This convenient location has drawn numerous national and regional companies to open manufacturing or distribution centers in or adjacent to the City. Such companies include Schwan's Global Supply Chain, Inc., Salina Vortex, GeoProbe, Bergkamp, Kasa Industrial Controls, Premier Pneumatics, Great Plains Manufacturing, PKM Steel, Crestwood Cabinets, McShares, Inc., Pepsi Cola, ElDorado Bus, Exide Battery, Advance Auto Parts Distribution Center, and Philips Lighting. Currently. manufacturing, retail trade, and service industries rank as the three primary employers in the City. No single industry is dominant. The government sector and wholesale trade industnes make up the second tier of Salina employers. The City serves as a 24-county regional trade center for north central Kansas. Many individuals and businesses within a 70-mile radius travel to the City to purchase consumer goods and servIces. This designation as a regional trade center is supported by the fact that the City had the third highest "trade pull factor" of all Kansas counties in 2011 according to Kansas State UniverSIty. City trade pull factor is computed by dividing the per capita sales tax of a city by the statewide per capita saies tax. SalIne County is located in the center of one of the most productIve agricultural areas in the United States. In 2007-2008, 750 farms were located on 430,000 acres. Farm crops were valued at over $38 million harvested on 210.910 acres. Cattle and milk produced was valued at over $19 million. Salina is a city centered more on industry than agriculture. Currently, there are approxllnately 100 manufactunng and processing companies located 111 the City. The City, Saline County, the Chamber of Commerce, and the Salma Airport Authority have developed several economIc JJ1centlves which can be offered as mducements to opening I11dustrial facihtles. These include property tax abatement for basic industry, the waiving of building peJ111it and inspection fees, refunding of sales tax paid on machinery and equipment, and providing trainmg for employees through the Salina Area Technical College and the Kansas State University at Salina. Additionally. a "build-to-sllIt-tenant'" agreement IS. available on sItes in the Airport Industlial Center that can provide 100% financing for land and building costs. Several major commercial projects are currently under construction in Salina. Menards home improvement store recently opened and consists of a 26,420 square-foot warehouse with 162.340 square-foot of floor space. Fed Ex, currently located in the City, is building a new dIstribution center. Salina Commumty Theater, Great Plains Manufacturing, Salina Area Technical College, and Brown Mackie are all doing major remodeling andlor expansions. The community has J .200 acres of industrial sItes available In North Salina, the South Industrial District, and the AIrport Industnal Center. Sites range in size from I-to 240 acres, and are available for aVJatJOn. manufacturing, and distribution and warehouse businesses. The Salina Airport Authoritv The Salina Airport Authonty is a body corporate and politic. The Authority was created by the City of Salina in April 1965 pursuant to the authority granted by the City by the surplus property and public airport authority act of the State of Kansas. The Authority was created for the purpose of accepting as surplus property portions of the former Schilling Air Force Base, which was closed by the United States Department of Defense JI1 June 1965. By quitclaim deed the Authority received over 2,900 acres of land and numerous buildings for the purpose of operating and developing the Salina Municipal Airport and the Salina AlTport Industrial Center. The Authority is managed and controlled by a five-member Board of Directors appointed by the Salina City Commission. The Salina Municipal Airport is the only commercial service airport serving Salina/Saline County and the 24-county area, which comprises North Central Kansas. The AirpOJi also services the corporate, business, private A-o aviation and flight training needs of industry, business and mdividuals 111 the area. The Airport is also used by Kansas State University at Salina (KSUS). The campus ofKSUS is located adjacent to the Airport. The University offers degrees in professional flight training, airframe and power plant maintenance, and avionics technology. Scheduled air service is provided by SeaPort Airlines. The airline offers weekday and weekend flights to the Kansas City International hub. During 2011. the Airport enplaned 2,705 passengers and also accommodates a wide variety of aircraft including business jets, military, flight training and general aviation aircraft. During 2011, the Salina Air Traffic Control Tower logged over 69.207 aircraft operations serving the needs of over 7,000 business jets, the professional flight training department of University at Salina, general aviatlon and military aircraft. The two fixed base operators on the field at Salina specialIzing in aviation fuel delivered over 2.39 million gallons of fuel to the wide variety of aircraft utilizing the AirpOli durmg 2011. As of December 31, 2010, over 70 businesses and organizations at the Salma MUlllcipal Airport and Airport Industrial Center employed over 3,700 employees with a combmed payroll in excess of $130.4 million. One of the primary functions of the Authority is to facilitate the continued growth of jobs and payroll at the Airport and Airport Industnal Center. The Authority works in partnership with the City of Salina, Saline County, and the Salina Area Chamber of Commerce, and the Kansas Department of Commerce for the retention of existing business and industry and the recruitment of new business and industry. Major Emplovers Industrial development during the past ten years has established a broad. mdustnal base m and around the City. A list of the major employen is as follows. All figures represent total full-tllne employment excludmg seasonal and part-time employees. Name Schwan's Food Management Salina Regional Health Center Unified School District No. 305 Exide Technologies Great Plains Manufacturing Philips Llghting Company City of Salina ElDorado National Advance Auto Palis Kasa Industrial Controls Source: Salina Chamber of Commerce Product/Business Frozen Pizza Health Care School System Battery Manufacturer Agricultural & Landscapmg Equipment Fluorescent Lamps CJty Government Busses/Recreational Vehlcles Distribution Center Metal and Electrical Controls Fabricator Estimated Emplovment 1,850 1.082 935 800 650 600 493 255 200 200 The following table shows the per caplta personal mcome for residents of Sahne County and the State during the years indicated: Year 2009 2008 2007 2006 2005 Source: Kansas Statistical Abstract. 2010 Saline County $38,752 39,173 37,201 36,133 32,672 A-7 State of Kansas $39,173 40,022 37,775 35,772 33,145 Labor Force According to the Kansas Department of Labor, the following table shows the labor force figures for the City of Salina and the State of Kansas. Year 2012 (May) 2011 2010 2009 2008 Year 2012 (May) 2011 2010 2009 2008 Current Indebtedness City of Salina Total Labor Force EmQloved UnemQloyed 26,007 24.439 1,568 26.263 24,555 1,708 26,156 24,434 1,722 26,783 25,193 1,590 26,469 25,422 1,047 State o.f Kansas Totai Labor Force EmQloved Unem(!loved 1,491,061 1,404.111 86,950 1.505,043 1,404,339 100,704 1,504.883 1.397,208 107,675 1.507.644 1,399.356 108,288 1,480,875 1,415,467 65,408 DEBT SUMMARY OF THE CITY Unemployment Rate 6.0% 6.5 6.6 5.9 4.0 Unemployment Rate 5.8% 6.7 7.2 7.2 4.4 The following is an overview of the City's outstanding indebtedness by classIfication as of the dated date ofthe Bonds. Figures do not include bonds for which payment has been provided through the creation of designated escrow accounts. General Obligation Bonds: Date Amount Final Amount Issued Series PurQose of Issue Maturitv Outstanding 07-15-02 2002-B Internal Improvements $ 1,980,000 10-01-1 ~ $ 165,000 07-15-03 2003-A Internal Improvements 4,350.000 10-01-13 640,000 * 05-01-04 2004-A Refunding 5.585,000 08-01-15 1.170.000 07-15-04 2004-B Internal Improvements 4,053,000 1 0-01-1~ 380.000 * 07-15-05 2005-A Internal Improvements 4.210,000 10-01-13 665,000 " 03-15-06 2006-A Internal Improvements 2.200,000 10-0 i -26 1,650,000 07-15-06 2006-B Internal Improvements 885,000 10-01-21 535,000 06-15-07 2007-A Intel11al Improvements 6,545.000 10-01-27 5,085.000 07-15-08 2008-A Internal Improvements 3,720,000 10-01-23 3,000,000 12-15-08 2008-B Internal Improvements 3.525,000 07-01-28 3,295,000 07-15-09 2009-A Internal Improvements 23,695.000 10-01-29 20,645,000 05-01-10 201O-A Refunding & Improvement 6,875,000 10-01-25 6,100,000 10-15-1 ° 2010-B Refunding 7,860,000 10-01-23 7.360,000 07-15-11 20ll-A Internal Improvements 6,565,000 10-01-31 6,565,000 07 -15-12 2012'l\ Interna1 Ilnprovelnents 2.365,000 10-01-27 2.365,000 07-15-12 2012-B Refunding 3,760,000 10-01-20 3,760.000 $63,380.000 *Does not include bonds to be refunded with proceeds from the sale of the Series 2012-B Bonds. A-8 A portion of the City's outstanding general obligation bonds are payable from special assessments levied upon properties benefited by certain internal improvement projects, local option sales tax and transfers from enterprise funds of the City. If such payments are not provided in a timely manner, the principal of and interest on the bonds must then be paid from the City's ability to levy unlimited ad valorem taxes. See FINANCIAL INFORMATION -"Special Assessments" for a further description of special assessment financ1l1g. Temporary Notes: Temporary notes represent general obligation indebtedness payable ultimately from the City's ability to levy unlimited taxes upon all taxable tangible property within its territorial limits. The City customanly redeems temporary notes with proceeds from the sale of long-term general obligation bonds or other availabJe funds. Final Original Date Maturity Note Amount Project Series Issued Date Amount Outstanding Street Water. and Sewer 2011-1 07-1S-11 08-01-12 $3,400,000 $ 0* Street, Vlater, and Sewer 2012-1 07-1S-12 08-01-13 1,48S.000 1.48S.000 $1,48S,000 *Amount outstanding ($3.400,000) to be redeemed with proceeds from the sale of the Series 2012-A Bonds and available cash from the City. Revenue Bonds: Revenue bonds are payable solely from the net revenues derived by the City from the operation of Its combined water and sewage system. Revenue bonds do not represent a general obligation indebtedness of the City for whIch the City's taxing ability has been pledged. Date Issued 04-1S-1 ] Overlapping Debt Purpose Improvements Amount oflssue $16,120.000 Final Maturitv 10-01-31 Amount Outstanding $16.120.000 According to the Saline County Clerk's office, the following table shows the overlapping general obligation indebtedness of the City. The percent of an overlapP1l1gjurisdiction's debt that is apphcable to the City is calculated by dividing the assessed valuatIon of that portion of the jurisdictIOn'S boundanes which overlap those of the City by the total assessed valuation of such jurisdIction. All debt outstand1l1g is as of June 30,2012. Jurisdiction Salma Airpon Authonty U.S.D. No. 30S Saline County Amount Outstanding $26,170.000 43,200,000 o A-9 Estimated Share of the Citv Amount $26.170,000 40,187.S21 o $66,357.521 Percentage 100.00'% 93.03 Annual Debt Pavments The following is a list of annual debt service requirements for the City's currently outstanding general obligation bonded indebtedness. All amounts are rounded to the nearest whole dollar. Outstanding Bonds Series 2012-A Bonds Series 2012-B Bonds Year Princi~al Interest PrinciI;!al Interest PrinciQal Interest :D!!!!! 2012 $ 6,050,000 $ 1,054,651 $ 0 $ 0 2013 5,825,000 1,891,894 130,000 370,000 2014 4,945,000 1,681,254 145,000 935,000 2015 4,475,000 1,522,566 145,000 625,000 2016 4,470,000 1,373,116 150,000 460,000 2017 4,220,000 1,222,306 150,000 485,000 2018 4,300,000 1,052,269 155,000 470,000 2019 4.415,000 871,936 155,000 235,000 2020 2,645,000 727,721 155,000 180,000 2021 2,580,000 636,776 160,000 0 2022 2,615,000 543,266 165,000 0 2023 2,380,000 445,304 165,000 0 2024 2,070,000 352,060 170,000 0 2025 1,720,000 268,366 175,000 ° 2026 1,380,000 196,190 175,000 0 2027 1.080,000 136,841 180,000 ° 2028 950,000 89,603 0 ° 2029 625,000 47,878 ° ° 2030 250,000 2].675 ° ° 2031 260,000 11.050 0 0 $57,255,000 $ I 4,146,722 $2,365,000 $3.760,000 Historical Debt Information The following table shows histoncal balances of outstanding general obligatIOn bonds for the CIty during the most recent five-year period. Bonds Debt to Debt to U.S. Debt Outstanding Assessed Estimated Actual Census Per Year December 31 Valuation Valuation Po(!ulation Capita 2011 $61,045.000 13.57% 2.11%, 47.707 1.279.58 2010 60.280,000 13.44 2.09 47,707 1,263.55 2009 52,900,000 11.81 1.83 46,180 1,145.52 2008 31,645.000 7.01 1.09 45,998 687.96 2007 27,650,000 624 0.98 46.025 600.76 Future Indebtedness The CJty annually prepares and adopts a five-year capital improvements plan. This plan identifies and pnontizes potential capItal improvement projects within the City and includes the respective funding sources. Based on the City's last capital Improvements plan, the total cost of projects the City anticipates undertaking between now and 2014 is approximately $91.1 milJior., of which approximately $6.9 million is anticipated being financed through general obligation bonds. Borrowing requirements described above do not include future subdivision improvement projects financed with general obligation special assessment temporary bonds. The City typically undertakes such projects after receiving and reviewing a valid petition from property owners. See FINANCIAL INFORMATION -"Special Assessments". A-10 The City has been involved with ongoing discussions concerning contamination in certain areas within the boundaries of the Salina Airport Industrial Center. This contamination was caused by activities occurring prior to 1964, when the site served as the Shilling Air Force Base. The CIty, the Salina Airport Authority, and other local governmental entities are pursuing federal funds to clean up the affected areas. In the event funding cannot be secured in a timely fashion or in sufficient amounts, it may be necessary for the City to issue debt to relocate certain water wells. The exact timing and amount, if any, of such borrowing cannot be detennined at this tIme. If City borrowing is necessary for this project, it is anticipated that utilIty revenue bonds will be the first type of debt considered. Debt Payment Record The City has always met principal and interest payments on all outstanding bonds and temporary notes when due and payable. Legal Debt Limits Cities within Kansas are pennitted to issue bonds m an aggregate amount not to exceed 30% of the total assessed valuatioTl of the city. Bonds issued for the purpose of improving, acquiring, enlarging, or extending mumcipal utilities, including storm and samtary sewer systems; bonds issued to pay the cost of improvements to intersections and streets in front of city or school district property: bonds for bridges as authorized by a vote of the electors of a city: bonds issued to refund outstanding bonds; and bonds payable from revenue sources other than the general taxing authority of the city are not included in total aggregate debt for purposes of computing a city's debt limitation. FINANCIAL INFORMATION CONCERNING THE CITY Financial Statement Summan The followmg is a summary of the combined revenues. expenditures, and fund balances for the City's General Fund for the most recent available years as shown in the Oty's ComprehensIve Annual FmancJaI Reports. ThIS summary has not been prepared or reviewed by the City's audItor. Audited Audited Audited Audited Revenues: 2008 2009 2010 2011 Property Taxes $ 2.546,938 $ 9,909.912 $ 8,764,040 $ 8,671,423 Sales Tax 11,985.856 11,668.987 11.117,078 11,767,400 Other Taxes 4.685.1 05 4.789.524 4,965,601 5,083,919 Intergovernmental 911.305 1.227.486 1.008,482 813,185 Charges for ServIces 5.793.253 5,375.308 7.193,831 7,822,307 Investment Revenue 244.769 0 0 28,972 Miscellaneous 496.742 356.249 352.308 501.260 Total Revenues $26,663.968 $33.327,466 $33.401.340 $34.688,466 Expenditures: General Government $ 3,336,261 $ 3,007,751 $ 3.549,487 $ 3.461,488 Public Safety 14,070.189 17,883.362 18,228.881 18.1 17,827 Public Works 5,239,844 6,345.981 6,245,355 6.132,020 Public Health and Samtatlon 1,109,794 1,176,096 1,176,743 1,176,082 Culture and RecreatIon 2,297,431 2,294,894 2.599,921 2,734,957 Planning and Development 2,087.685 2,381,797 2,428,900 2,319,300 Capital Outlay 630.178 887.449 560.129 555,048 Total Expenditures $28,771,382 $33,977,330 $34,789,416 $34,496,722 Revenues Over (Under) Expenditures $(2,1 07,414) $ (649,864) $(1,388,076) $ 191,744 Other Sources (Uses) 806.306 (292.278) (82.124} (129.111) Net Change in Fund Balance $(1.301,108) $ (942,142) $(1,470,200) $ (62,633) Fund Balance January 1 $ 7,330,631 $ 6,029,523 $ 5,087,381 $ 3,617,181 Restatement of prior year balance 156,424 Fund Balance December 31 $ 6,029,523 $ 5,087,381 $ 3,617,181 $ 3,836,238 A-II Assessed Valuation According to the Saline County Clerk's Office, the following table gives the November 1 assessed valuation of the City, unless otherwise noted, in the years indicated. State Total Real Personal Assessed Motor Assessed Year Estate Pronertv (I} Utilities Vehicle Valuation 2011 $367,750,803 $19,918,188 $14,685,585 $47.406,062 $449,760.638 2010 364,544,771 21,488,933 14,214,579 48,184,331 448,432,614 2009 358,979,211 24,760,806 13,730,609 50,330,252 447,800,878 2008 356,678,712 28.373,980 14,929,456 51.35].656 451.333,804 2007 342,045,389 34,507,464 16,175,634 50,548,706 443,277,193 2006 321,695,326 39.691.690 16,530,171 50,551,299 428,468,486 2005 296,537,399 38,662.356 17,624,030 49,367,870 402,191,655 (1) Beginning in 2007, certain types of personal property were removed from the tax rolls. See footnote (3) to the table in FINANCIAL INFORMA nON -"Property Assessment Rates". Estimated Actual Valuation Based on assessment percentages provided by Kansas Statutes, real estate equalization ratios provided by the Kansas Department of Revenue (see FINANCIAL INFORMA nON -"Property Assessment Rates"). and estimated actual valuation figures provided by the Salme County Appraiser's Office, the followmg table provlde~ November 1 estimated actual valuatIOns for the City. unless otherwlse noted, in the years indicated. Year 2011 2010 2009 2008 2007 2006 2005 Special Assessments Residential Real Estate Equalization Ratio 12.04% (pre1.) 11.89 11.67 11.66 11.68 11.22 11.16 Estimated Actual Value $2,891.461,447 2.888,659,004 2,893,359,541 2,914,775,730 2.833.709.391 2,719.391.025 2,529,377.135 The Oty has pursued a policy of utilizmg speclal benefit districts to assign the cost of certam internal improvement projects to the property that dlrectly benefits from the constructlon. Kansas statutes allow for the creation of special benefit districts to pay for the cost of a vanety of improvements including street construction, storm water drains. samtary sewer system llTIprovements, street lighting. water system improvements, recreatIOnal facilities, flood control projects, bridges, and parking facilities. The CJty has typically utilized special benefit districts to pay for the costs associated with constructing streets. sidewalks. curbs, gutter~. and lighting m new residential developments wlthm the City. When a developer requests the use of Special Assessments to finance public improvements, the City requires that they pay 20% of the estimated cost of the project in cash, or file a letter of credit equivalent to 35% of the estlmated cost of the project. The letter of credit is released when Certificates of Occupancy have been lssued for 35% of the lots in the development. Special benefit dlstricts have also been created to pay for the cost of improvements to streets and sldewalks in the CJty's downtown area. A-12 The creation of special benefit districts, the determination of property benefited, and the method of allocating the cost of the improvement is at the discretion of the City. Property owners have the ability to suggest improvements through a petition process and to comment on the final amount of their assessment. The City mayor may not be included as part of the special benefit district. All property owners have the option to pay their portion of the improvement cost with a one-time payment during a 30-day assessment prepayment period or pay in annual installments with interest over a certain number of years. Upon completion of the special benefit district improvement projects and a 30-day prepayment period, the City issues general obligation bonds to provide for pennanent project financing. The payment of the principal of and interest on such bonds is paid from the special assessments levied annually on the benefited property. Special assessments are paid at the same time and in the same manner as ad valorem property taxes. If at any time the special assessments received from the property owners are insufficient to provide for the payment of the principal of and interest on the bonds, the City is obligated to provide for the balance of such payments through its ability to levy unlimited ad valorem property taxes. Largest Taxpavers Accordmg to the Saline County Clerk's Office, the following table lists the largest taxpayers in the City, their November 2011 assessed valuations, and the percentage each taxpayer comprised of the total assessed valuation ofthe City. Company Schwan's Sales (Tony's Pizza) Coyote Garnson Salma LLC' Salma Regional Health Center Westar Energy Kansas Gas Service Gateway Adams Inc. (Midstate Plaza) Wal-Mart Stores (Includes Sam's) Southwestern Bell Telephone Great Plains Manufacturing S&B Motels Building Permits Issued Type of Business Frozen Pizza Regional Shopping Center Hospital and Medical Offices Utility Utility Shopping Center DIscount Retail Utility Agncultural Equipment Hotel 0/0 of Assessed Total Valuation Valuation $ 8,189,411 1.82% 6254.037 1.39% 6,234,437 1.39% 4.294,726 0.95% 3,762,052 0.84% 3,566,208 0.79%, 3,465,983 0.77% 2,655,148 0.59% 2,074,617 0.46% 2.064.471 0.46% $42,561,090 9.46% Buildmg permIts Issued by the CIty cun'entl} maintain steady levels. This table reflects both private developments as well as the expanslOn to the educational facilities in the community. The five-year history of the total value of permits Issued IS: Year 2012 (thru May) 2011 2010 2009 2008 A-J3 Value $19,937,316 J 9,752,335 52,358,547 12,192,481 18,276,022 Tax Collections Tax statements are mailed November 1 each year and may be paid in full or one-half on or before December 20 with the remaining one-half due on or before May 10 of the following year. Taxes that are unpaid on the due dates are penalized at a statutorily prescribed rate until paid or until the property is sold for taxes. Real estate bearing unpaid taxes is advertised for sale in July of each year and is sold by the County for taxes and all legal charges on the first Tuesday in September. Properties that are sold and not redeemed within two years after the tax sale are' subject to foreclosure sale, except homestead properties which are subject to foreclosure sale after three years. Personal property taxes are assessed, due and may be paid in the same manner as real estate taxes. Motor vehicle property taxes are based on valuations provided by the Kansas Department of Revenue and the county average tax rate for the county in which the vehicle is registered. Motor vehicle taxes are payable to the county treasurer at the time of the vehicle's annual registration. Vehicle registration dates are assigned by the State in a manner such as to equal registration over a twelve-month period. Motor vehicle taxes are distributed by the county to the state, city and other taxmg jUflsdictions based on their proportionate tax levies. Delinquent personal and motor vehicle taxes are penalized at the same rate as delinquent real property taxes. The following is a summary of tax collections for the years shown. Current Current and Delinquent Levy Tax Taxes Tax Collections Tax Collections Year Rate Levied Amount 0/0 Amount 0/0 2011 * 26.272 ' $10,582,043 $9.614,366 90.0% $ 9,629.140 91.00% 2010 26.022 10,425.260 9,823,578 94.2 10,118.285 97.06% 2009 25.855 10.289.701 9.831289 95.5 10.126,228 98.41%, 2008 25.886 10,369,087 9,825.122 94.8 10.119,876 97.60%, 2007 23.959 9,432.248 8,941.650 94.8 9.209.900 97.64% 2006 23.789 9.029,080 8.648,305 95.8 8,907,754 98.66% 2005 23.999 8.478.392 8.223.308 97.0 8.470.007 99.90% *Collections as of May 10,2012 Tax Levies The City may levy taxes in accordance With the requirements of its adopted budget. The County Clerk determll1es property tax levies based upon the assessed valuations provided by the Appraiser and spreads the levies on the tax rolls, The following table gives the total tax levies for all taxing Jurisd1ctions per $1,000.00 assessed valuation of the City for the last five years. 2007 2008 2009 2010 2011 Levy Levy Levy Levy Levy for for for for for 2008 2009 2010 2011 2012 Jurisdiction Budget Budget Budget Budget Budget City of Salina 23.959 25.886 25.855 26.022 26.272 Salina Library 5.242 5.419 5.413 5.372 5.292 State Education & Other 1.500 1.500 1.500 1.500 1.500 Unified School District No. 305 54.990 58.547 58.495 58.913 58.820 Airport Authority 2.877 2.877 4.315 4.055 4.007 Central Kansas Extension District 1.156 1.175 1.173 1.204 1.179 Saline County 27 .435 29.347 31.303 31.432 32.576 Total 117.159 124.751 128.054 128.498 129.646 A-14 Sales Tax Sales tax collections are the responsibility of the Kansas Department of Revenue. The Department of Revenue distributes the local option countywide and cItywide sales taxes on a monthly basis. Countywide sales taxes are distributed between the levying county and the cities located within the county based on population and relative tax levies. Citywide local option sales taxes are distributed solely to the levying city. Statewide sales taxes are retained entirely by the state. The total sales tax for goods and services in the City is 8.20%, which consists of 6.3% imposed by the State. 1 % countywide local option sales tax, and .90% citywide local option sales tax. In 1982 the voters of Saline County, in accordance with Kansas statutes, approved a 1 % countywide local option sales tax. In 1992 voters of the City approved a local option .50% citywide sales tax for purposes of helping fund general operations expenditures of the City. In November 1998, voters within the City approved an additional .25% restricted local option sales tax to be collected through June 1, 2004 and distributed to Umfied School District No. 305 to fund educational technology. The voters renewed the .25% local option sales tax and are now using those collections for various city capital improvements. In November 2008, voters in the City of SalIna approved a .40% citywide retailers dedicated sales tax to pay the costs of various City capital Improvements mcluding constructing, operatmg and maintaining a $12.5 million aquatic park. The .40% sales tax replaced the 2004 .25% sales tax on April 1. 2009 and terminates ten years after its commencement. The City of Salina deposits sales tax receipts from its 1992 tax into Its General Fund. Sales tax receipts are used for fundmg general operatmg expendItures of the City and capital Improvement projects. The following table lists the local-optIOn sales tax receipts of the City of Salina 111 the years indicated. 2004 2008 1992 City's Portion of .25% Citywide .40% Citywide .50% Citywide 1 % Countywide Local Option Local Option Local Option Local Option Year Sales Tax Recei);!ts Sales Tax Recei);!ts Sales Tax Recei);!ts Sales Tax Recei);!ts 2008 $2.588.731 $ 0 $5,177,462 $6,808,395 2009 3,379,938 (1) 4,987,415 6,703,839 2010 3,861,809 4,818.398 6,339,236 2011 4.080,342 5.076,751 6.690,649 2012 (thru May) 1,779.603 2,215,817 2,932,739 (l) The 2008.40'% sales tax became effectJve Apnl 1,2009, at whIch tnne the 2004 sales tax stopped. This figure is the combmed total receIpts of the 2004 sales tax and the 2008 sales tax for 2009. Source: City Clerk Budgeting Procedures Applicable Kansas statutes require that budgets be legally adopted for all funds (including debt service and enterprise funds) unless exempted by a speCIfic statute. All budgets are prepared utilizing the modified accrual basis further modified by the encumbrance method of accounting. For example. commitments such as purchase orders and contracts. in addition to disbursements and accounts payable. are recorded as expenditures. The statutes provide that the budget for the succeeding calendar year must be prepared on or before August 1 and published on or before August 5 of each year. A public bearing is required to be held on or before August 15, with the final budget being adopted on or before August 25 of each year. Original appropriations may be modified by supplemental appropriations and transfers among budget categories. The City Commission must approve all significant changes. A-15 Kansas law prohibits cities and other governmental units from creating indebtedness unless there is money on hand in the proper fund and unencumbered by previous commitments with which to pay the indebtedness. The execution of a contract, or the issuing of a purchase order, automatically encumbers the money in the fund for the payment of the amount represented by the commitment. It makes no difference that-the amount may not have to be paid until more moneys are in the fund or until the following year. An exception to this cash basis law is the issuance of debt, in the form of bonds, notes, or warrants, pursuant to statutory authority, referendum or by the State Board of Tax Appeals. In the event debt is issued, funds need not be on hand for future payments. Appraisal and Assessment Procedures The determination of appraised and assessed valuation and the collection of property taxes for all political subdivisions in the State of Kansas are the responsibility of the vanous counties. The Saline County appraiser annually determines the appraised valuation of property located in the City. The appraiser's determination is based on a number of criteria established by Kansas's statute. All property. with the exception of agricultural land. is appraised based on estimated fair market value. Agricultural property is appraised based on productivity value. Kansas statutes require that each parcel of real propel1y be reviewed and inspected by the county appraiser once every four years for taxation purposes. Once appraised valuations have been determmed, they are multiplied by the applicable statutory assessment rates to arrive at the assessed valuations. The total assessed valuation is then used to establish property tax rates. Property Assessment Rates In order to determine the assessed valuation of a parcel of property for taxation purposes. the county appraiser multiplies the appraised value of the parcel by the applicable assessment rate. Current property assessment rates were established in 1986, effectIve in 1989, and slightly modified in 1992. The most significant 1992 modifications involved lowenng the assessment rate on commerCIal and industrial real property from 30°/c, to 25%, and on residential property from 12% to 11.5%. The following table shows the current assessment rates for the different classes of taxable tangible property within the State of Kansas. Real Property: Residential Commercial and Industrial- Real Property Agricultural Land (l) Agricultural Improvements Vacant Lots Not-for-Profit (2) All Other Personal Property: (3) Mobile Homes Mineral Leaseholds (large) Mineral Leaseholds (small) Commercial & Industrial Machinery & Equipment All Other UtilIties: Railroads All Other Public Utilities Motor Vehicles: Property Exempt: 11.5% 25.0 30.0 25.0 12.0 12.0 30.0 11.5'% 30.0 25.0 25.0 30.0 federally mandated rate 33.0% 20.0% Property used for the following purposes, or portions thereof, are exempt from taxation provided certain statutory requirements are met: reli gJO us, educationaL literary, scientific, benevolent, alumni associations, veterans' organizations, or charitable purposes, includmg parsonages and community service organizations proVIding humanitarian services. A-16 (1) Agricultural land is valued based on the productivity value of the property and not estimated market valuation. (2) A bill passed by the Kansas LegIslature in 1994 clarified this class of property to include all property owned and operated by not-for-profit organizations not subject to federal income taxation pursuant to paragraphs (2), (3), (4), (7), (8), or (10) of Subsection C of Section 501 of the federal internal revenue code. This biil specifically established that private, not-for-profit country clubs would be assessed at 12% for all land that does not accommodate buildings or improvements. (3) The 2006 Kansas Legislature exempted from all property or ad valorem propeliy taxes levied under the laws of the State, all commercial. industriaL telecommunications, and railroad machinelY and equipment acquired by qualified purchase or lease after June 30, 2006 or transported into the State after June 30, 2006 for the purpose of expanding an existmg busmess or creation of a new business. Equalization Ratios Annually, the Property Valuation Division of the Kansas Department of Revenue conducts a study to compare the assessed valuation of real property to estImated market value based on property sale prices. The study derives an equalization ratio which. when divided into assessed valuation, prOVIdes a means to approximate actual market value. According to the 2011 Prelimmary Kansas AppraIsal/Sales Ratio Study, the equalization ratio for residential real property in Salme County was 12.04%, and commercial and industrial property was 28.75%. REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY A-17 APPENDIX B Form of Continuing Disclosure Instructions FORM OF CONTINUING DISCLOSURE INSTRUCTIONS $1,485,000 CITY OF SALINA, KANSAS GENEPJ~L OBLIGATION TEMPORARY NOTES SERIES 2012-1 DATED JULY 15, 2012 THESE CONTINUING DISCLOSURE INSTRUCTIONS (the "Disclosure Instructions") are executed and delivered by the Issuer in connection with the issuance of the above-described notes (the "Notes") which are being issued simultaneously herewith pursuant to the Note Resolution, in which the Issuer covenants to enter into this undertaking to provide notice of certain material events with respect to the Notes in order to assist the Participating Underwriter in complying with the provisions of the SEC Rule. The Issuer is the only "obligated person" with responsibility for continuing disclosure with respect to the Notes. Section 1. Definitions. In addition to the definitions set fonh in the Note Resolution. which apply to any capitalized tenn used in these Disclosure Instructions, unless otherwise defined herein, the following capitalized ternlS shall have the following meanings: "Beneficial Owner" means any registered owner of any Notes and any 'Person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Notes (including persons holding Notes through nommees, depositories or other intennediaries). or (b) is treated as the owner of any Notes for federal income tax purposes. "Designated Agent" means Gilmore & Bell, P.e. or one or more other entities deSIgnated in writing by the Issuer to serve as a designated agent of the Issuer for purposes of these Disclosure Instructions. "Dissemination Agent" means any entity desif:,'11ated in wnting by the Issuer to serve as dissemination agent pursuant to these Disclosure Instructions and which has filed with the Issuer a written acceptance of such designation substantially in the fonD attached hereto as Exhibit A. "EMMA" means the Electronic Municipal Market Access system for municipal securitIes disclosures established and maintained by the MSRB, which can be accessed at wwv, .emmiUl1srb on:. "Fiscal Year" means the one year period ending December 31, or such other date or dates as may be adopted by the Issuer for Its general accounting purposes "Issuer" means the City of Salina. Kansas. and any successors or assigns. "Material Events" means any of the events listed in Section 2(a) hereof. "MSRB" means the Municipal Securities Rulemakmg Board. "Note Resolution" means the resolution of the governing body of the Issuer authorizing the issuance of the Notes. "Official Statement" means the Issuer's Official Statement for the Notes. B-1 "Participating Underwriter" means any of the original underwriters of the Notes required to comply with the SEC Rule in connection with offering of the Notes. "Repository" means the MSRB via EMMA. "SEC" means the Securities and Exchange Commission of the United States. "SEC Rule" means Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 2. Reporting of Material Events. (a) Pursuant to the provisions of this Section, the Issuer shall give, or cause the Dissemination Agent, if any, to give, to the Repository within 10 Business Days after the occurrence of any of the following events with respect to the Notes, notice of the following events: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions ; the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Note, or other material events affecting the tax-exempt status of the Notes; (7) modifications to rights of Owners, if material; (8) bond calls, ifmaterial, and tender offers; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Notes, if material; ( 11 ) rating changes; (12) bankruptcy, insol veney, receivership or similar event of the Issuer; (13) the consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of busmess. the entry into a definitive agreement to undertake such an action or the tennmation of a definitive agreement relating to any such actions, other than pursuant to its tenns, if material; and (14) appollltment of a successor or additional Paying Agent or the change of name of the Paying Agent, if material. (b) Notwithstanding the foregoing, notice of Material Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Notes pursuant to the Note Resolution. Section 3. Dissemination Agent. (a) General. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligatIOns under these Disclosure Instructions, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. (b) Material Event Notices. B-2 (1) The Dissemination Agent shall, promptly after obtaining actual knowledge of the occurrence of any event that it believes may constitute a Material Event, contact the chief financial officer of the Issuer or his or her designee, or such other person as the Issuer shall designate in \-"riting to the Dissemination Agent from time to time, infonn such person of the event, and request that the Issuer promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to Section 4(c)(3). (2) The Issuer will promptly respond in writing to any such request. Whenever the Issuer obtains knowledge of the occurrence of a Material Event, because of a notice from the Dissemination Agent pursuant to this subsection (c) or otherwise, the Issuer shall promptly detennine if such event constitutes a Material Event and shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to Section 4(c)(3). If the Issuer has detennined that knowledge of an event is listed in (2), (7), (10) or (13) of the definition of a Material Event, is not material, the Issuer shall notify the Dissemination Agent in writing not to report the occurrence pursuant to Section 4(c)(3). (3) If the Dissemination Agent has been given written instmctiol1s by the Issuer to report the occurrence of a Material Event, the Dissemination Agent shall file a notice of such . occurrence with the Repository within 10 Business Days after the occurrence, with copies to the Issuer. Notwithstanding the foregoing, notice of Material Events described in Sections 3(a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Notes pursuant to the Note Resolution. (c) Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in these Disclosure Instmctions, and the Issuer agrees to indemnify and save the Dissemination Agent, Its officers, directors, employees and agents. hannless against any loss, expense and liabilitIes which it may incur arising out of or in the exercise or perfonnance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Notes. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Issuer pursuant to these Disclosure Instmctions. (d) Other Designated Agents. The Issuer may, from time to time, appoint or designate a Designated Agent to submit Material Event notices, and other notices or reports pursuant to these Disclosure Instructions. The Issuer hereby appoints the Dissemination Agent and the Designated Agent(s) solely for the purpose of submitting Issuer-approved Material Event notices, and other notices or reports pursuant to these Disclosure Instructions. The Issuer may revoke this designation at any time upon written notice to the Designated Agent. Section 4. Termination of Reporting Obligation. The Issuer's obligations under these Disclosure Instructions shall tenninate upon the legal defeasance, prior redemption or payment 1ll full of all of the Notes. If the Issuer's obligations hereunder are assumed in full by some other entity as pennitted in the Note Resolution, such person shall be responsible for compliance with under these Disclosure Instructions in the same manner as if it were the Issuer, and the Issuer shall have no fmiher responsibility hereunder. If such tennination or substitution occurs prior to the final maturity of the Notes, the Issuer shall give notice of such tennination or substitution in the same manner as for a Material Event under Section 2(b). B-3 Section 5. Amendment; Waiver. Notwithstanding any other provision of these Disclosure Instructions, the Issuer and the Dissemination Agent, if any, may amend of these Disclosure Instructions (and the Dissemination Agent shall not umeasonably refuse to execute any amendment so requested by the Issuer) and any provision of these Disclosure Instructions may be waived, provided that: (a) Bond Counselor other counsel experienced in federal securities law matters provides the Issuer and the Dissemination Agent, if any, with its opinion that the undertaking of the Issuer contained herein, as so amended or after giving effect to such waiver, is in compliance with the SEC Rule and all current amendments thereto and interpretations thereof that are applicable to these Disclosure Instructions; (b) if the amendment or waiver relates to Sections 2(a), it may only be made in connection with a change in circumstances that arises from a change in law or legal requirements, or change in the identity, nature or status of an obligated person with respect to the Notes, or the type of business conducted; and (c) the amendment or waiver is either 0) approved by the Owners of the Notes in the same manner as provided in the Note Resolution with consent of the Owners, or (2) does not in the opinion of Bond Counsel materially impair the interests of the Owners or Beneficial Owners of the Notes. In the event of any amendment or waiver of a provision of these Disclosure Instructions, the Issuer shall be given in the same manner as for a Material Event. Section 6. Additional Information. Nothing in these Disclosure Instructions shall be deemed to prevent the Issuer from disseminatll1g any other infonnation, using the means of dissemination set forth in these Disclosure Instructions or any other means of communication, or including any other infonnation in any notice of occurrence of a Material Event, in addition to that which is required by these Disclosure Instructions. If the Issuer chooses to include any information in any notice of occurrence of a Material Event, in addition to that which is specifical1y required by these Disclosure Instructions, the Issuer shall have no obligation under these Disclosure Instructions to update such infonnation or include It in any future notice of occurrence of a Material Event. Section 7. Noncompliance. In the event of a failure of the Issuer or the Dissemination Agent, if any, to comply with any provision of these Disclosure InstructJOns, the Participating Underwriter or any Beneficial Owner of the Notes may take such actions as may be necessary and appropriate, including seeking mandamus or specific perfonnance by court order, to cause the Issuer or the Dissemination Agent, if any. as the case may be, to comply with its obligations under these Disclosure Instructions. Noncompliance with the provisions of these Disclosure Instructions shaH not be deemed an Event of Default under the Note Resolution, and the sole remedy under these Disclosure Instructions in the event of any failure of the Issuer or the DIssemination Agent. if any, to comply with these Disclosure instructions shall be an actIOn to compel perfonnance. Section 8. Notices. Any notlces or communications to or among any of the parties referenced 111 these Disclosure Instructlons may be given as follows: (a) To the Issuer at: 300 West Ash Salina. Kansas 67402 Fax: (785)309-5738 Attention: Clerk (b) To the Participating Underwriter at the address set forth in the Note Resolution or such other address as is furnished in writing to the other parties referenced herein. B-4 (c) To the Dissemination Agent at the address set forth on Exhibit A attached hereto. Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. Section 9. Electronic Transactions. Actions taken hereunder and the arrangement described herein may be conducted and related documents may be stored by electronic means. Section 10. Beneficiaries. These Disclosure Instructions shall inure solely to the benefit of the Issuer, the Dissemination Agent, if any, the Participating Underwriter and Beneficial Owners from time to time of the Notes, and shall create no rights in any other person or entity. Section 11. Severability. If any provision in these Disclosure Instructions, the Note Resolution or the Notes relating hereto, shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 12. Governing Law. These Disclosure Instructions shall be governed by and construed in accordance with the laws of the State of Kansas. Dated: July 26, 2012. CITY OF SALINA, KANSAS EXHIBIT A ACCEPTANCE OF DISSEMINATION AGENT Name of Issuer: Name of Note Issue: Dissemination Agent: City of Salina, Kansas $1,485,000 General Obligation Temporary Notes, Series 2012-1, dated as ofJuly 15,2012 Notice Address of Dissemination Agent: ____________ , having been duly appointed by the City of Salina, Kansas to act in the capacity of Dissemination Agent pursuant to the Continuing Disclosure Instructions to which this acceptance IS attached, accepts such duties and responsibilitIes set forth therein. Dated: B-5 FORM OF CONTINUING DISCLOSURE INSTRUCTIONS CITY OF SALINA, KANSAS $[2,365,000] GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A $[3,760,000] GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 15, 2012 THESE CONTINUING DISCLOSURE INSTRUCTIONS (the "Disclosure Instructions") are executed and delivered by the Issuer in connection with the issuance of the above-described bonds (the "Bonds") which are bemg issued simultaneously herewith as of July 26, 2012, pursuant to the Bond Resolution, in which the Issuer covenants to enter into this undertaking to provide certain financial and other infonnation with respect to the Bonds in order to assist the Participating Underwriter in complying with the provisions of the SEC Rule. The Issuer is the only "obligated person" with responsibility for continuing disclosure with respect to the Bonds. Section 1. Definitions. In addition to the definitions set forth in the Bond Resolution, whlch apply to any capitalized tem1 used in these Disclosure Instructions, unless otherwise defined herein. the following capitalized tem1S shall have the following meanings: "Annual Report" means any Annual Report filed by the Issuer pursuant to, and as described in, Section 2 of these Disclosure Instructions. "Beneficial Owner" means any registered owner of any Bonds and any person which (a) has the power, directly or indirectly. to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intennediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. "Bond Resolution" means collectively, the ordinances and the resolutions of the goveming body of the Issuer authorizing the issuance of the Bonds. "CAFR" means the Issuer"s ComprehenSIVe Annual Financial Report. "Designated Agent" means Gilmore & Bell, P.c. or one or more other entities designated in writing by the Issuer to serve as a designated agent of the Issuer for purposes of these Disclosure Instructions. "Dissemination Agent" means any entlty designated in wntmg by the Issuer to serve as dissemination agent pursuant to these Disclosure Instructions and which has filed with the Issuer a written acceptance of such designation substantially in the fonn attached hereto as Exhibit B. B-6 "EMMA" means the Electronic Municipal Market Access system for municipal secuntles disclosures established and maintained by the MSRB, which can be accessed at www.eml11a.msrb.org. "Financial Information" means the financial infonnation of the Issuer described III Section 2(a)(J) hereof. "Fiscal Year" means the one year period ending December 31, or such other date or dates as may be adopted by the Issuer for its general accounting purposes. "GAAP" means generally accepted accounting principles, as applied to governmental units, as in effect at the time of the preparation of the Financial Infonnation. "Issuer" means the City of Salina, Kansas, and any successors or assigns. "Material Events" means any of the events listed in Section 3(a) hereof. "MSRB" means the Municipal Securities Rulemaking Board. "Official Statement" means the Issuer's Official Statement for the Bonds. "Operating Data" means the operating data of the Issuer described in Section 2(a)(2) hereof. "Participating Underwriter" means any of the original underwriters of the Bonds required to comply with the SEC Rule in connection with offering ofthe Bonds. "Repository" means the MSRB via EMMA. "SEC" means the Securities and Exchange Commission of the United States. "SEC Rule" means Rule J 5c2-12(b )(5) adopted by the SEC under the Securities Exchange Act of J 934, as the same may be amended from time to time. Section 2. Provision of Annual Reports. (a) The Issuer shall, or shall cause the DIssemination Agent to, not later than 180 days after the end of the Issuer's Fiscal Year. commencmg with the Fiscal Year ended in 2012. file with the RepOSItory the Issuer's CAFR. which will contain the Financial lnfonnation and Operating Data (collectIvely, the "Annual Report"), as follows: (1 ) Financial Information. The financial statements of the Issuer for such prior FIscal Year, accompanied by an audit repoI1 resulting from an audit conducted by an Independent Accountant in confonnity with generally accepted auditing standards. Such financial statements will be prepared on a modified accrual baSIS of accounting other than GAAP for all governmental funds, expendable trust and agency funds. The accrual basis of accounting is used for proprietary and nonexpendable trust funds. A more detailed explanation of the accounting basis is contained in Appendix A to the Official Statement. If such audit report is not available by the time the Annual RepoI1 is required to be filed pursuant to this Section, the Annual Report shaH contain unaudited financial statements and the audit report and accompanying financial statements shall be filed in the same manner as the Annual Report promptly after they become available. The method of preparation and basis of accounting of the Financial Infonnation may not be changed to a basis less comprehensive than contained in the Official Statement, unless the Issuer provides notice of B-7 such change in the same manner as for a Material Event under Section 3(b) hereof. (2) Operating Data. Updates as of the end of the Fiscal Year of substantially all of the infonnation and data contained in the following sections of Appendix A to the Official Statement: (i) Debt Summary (ii) Tax Levies (iii) Assessed Valuation (iv) Estimated Actual Valuation (v) Tax Collections (vi) Largest Taxpayers. together with any material adverse changes III the other portions of the section entitled "FINANCIAL INFORMATION." Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues with respect to which the Issuer is an "obligated person" (as defined by the SEC Rule), which have been filed with the Repository, the MSRB or the SEC. If the document included by reference is a final official statement, it must be available from the MSRB via EMMA. The Issuer shall clearly identify each such other document so included by reference. In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other infonnation as provided in this Section; provided that the audit report and accompanying financial statements may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Issuer's Fiscal Year changes, it shall give notice of such change in the same manner as for a Material Event under Section 3(b). (b) If no Dissemination Agent has been appointed, the Issuer shall file the Annual Report as specified by Section 2(a) hereof: or if the Annual Report is not filed within the tnne period specified in Section 2(a) hereof, the Issuer shall send a notice to each Repository in substantially the fonn attached as Exhibit A within 10 Business Days after the date the Annual Report is required to be filed as set forth herein. Section 3. Reporting of Material Events. (a) Pursuant to the provisions of this Section, the Issuer shall give, or cause the Dissemination Agent, if any, to give, to the Repository wIthin 10 Business Days after the occurrence of any of the followlllg events with respect to the Bonds, notice of the following events: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting finanCIal difficulties; (5) substitution of credit or liquidity providers, or their failure to perfonn; (6) adverse tax opinions; the issuance by the Internal Revenue Service of proposed or final detenninations of taxability, Notices of Proposed Issue (IRS Fonn 5701-TEB) or other material notices or detenninations with respect to the tax status of the Bond, or other material events affecting the tax-exempt status of the Bonds; (7) modifications to rights of Owners, if material; (8) bond calls, ifmaterial, and tender offers; B-8 (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the Issuer; (13) the consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional Paying Agent or the change of name of the Paying Agent, if material. (b) Notwithstanding the foregoing, notice of Material Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Bonds pursuant to the Bond Resolution. Section 4. Dissemination Agent. (a) General. The Issuer may, from time to hme, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under these Disclosure Instructions, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. (b) Annual Reports. If a Dissemination Agent is appointed, not later than 15 Business Days pnor to the date specified 111 Section 2(a) for providing the Annual Report to the Repository, the Issuer shall provide the Annual Report to the Dissemination Agent or the Repository. The Dissemination Agent shall file a report with the Issuer certifying that the Annual Report has been filed pursuant to these Disclosure Instructions, statmg the date it was filed, or that the Issuer has certified to the Dissemination Agent that the Issuer has filed the Annual Report with the Repository. If the Dissemination Agent has not received an Annual Report or has not received a written notIce from the Issuer that it has filed an Annual Report with the Repository, by the date required in Section 2(a), the Dissemination Agent shall send a notice to the Repository in substantially the fonn attached as Exhibit A. (c) Material Event Notices. (1) The Dissemination Agent shall, promptly after obtaining actual knowledge of the occurrence of any event that it believes may constitute a Material Event, contact the chief financial officer of the Issuer or his or her designee, or such other person as the Issuer shall designate in writing to the Dissemination Agent from time to time, inform such person of the event, and request that the Issuer promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to Section 4(c)(3). (2) Whenever the Issuer obtains knowledge of the occurrence of an event, because of a notice ft.·om the Dissemination Agent pursuant to Section 4(c)(J) or otherwise, the Issuer shall promptly detennine if such event constitutes a Material Event and shall promptly notify the Dissemination Agent of such detennination. If appropriate, such writing shall instruct the DIssemination Agent to report the occurrence pursuant to Section 4(c)(3). (3) If the Dissemination Agent has been given written instructions by the Issuer to report the occurrence of a Material Event pursuant to Section 4(c)(2), the Dissemination Agent shall promptly file a notice of such Material Event with the Repository and provide a copy thereof to the Issuer. Notwithstanding the foregoing, notice of Material Events described in Sections B-9 3(a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Bonds pursuant to the Bond Resolution. (d) Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in these Disclosure Instructions, and the Issuer agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or perfonnance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim ofliability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Issuer pursuant to these Disclosure Instructions. (e) Other Designated Agents. The Issuer may, from time to time, appoint or designate a Designated Agent to submit Annual Reports, Material Event notices, and other notices or reports pursuant to these Disclosure Instructions. The Issuer hereby appoints the Dissemination ,~.gent and the Designated Agent(s) solely for the purpose of submitting Issuer-approved Annual Reports, Material Event notices, and other notices or reports pursuant to these Disclosure Instructions. The Issuer may revoke this designation at any time upon written notice to the Designated Agent. Section 5. Termination of Reporting Obligation. The Issuer's obligations under these Disclosure Instructions shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If the Issuer's obligations hereunder are assumed in full by some other entity as pennitted in the Bond Resolution, such person shall be responsible for compliance with under these Disclosure Instructions in the same manner as if it were the Issuer. and the Issuer shall have no further responsibility hereunder. If such termination or substitutIOn occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such tennination or substitution in the same manner as for a Material Event under Section 3(b). Section 6. Amendment; Waiver. Notwithstanding any other provision of these Disclosure Instructions, the Issuer and the Dissemination Agent, if any, may amend of these Disclosure Instructions (and the Dissemination Agent shall not unreasonably refuse to execute any amendment so requested by the Issuer) and any provision of these Disclosure Instructions may be waived, provided that: (a) Bond Counselor other counsel experienced in federal securities law matters provides the Issuer and the Dissemination Agent, if any, with its opinion that the undertaking of the Issuer contained herein, as so amended or after giving effect to such waiver, is in compliance with the SEC Rule and all current amendments thereto and interpretations thereof that are applicable to these Disclosure Instructions; (b) if the amendment or waiver relates to Sections 2(a) or 3(<<), it may only be made in connection with a change in circumstances that arises from a change in law or legal requirements, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; and (c) the amendment or waiver is either (1) approved by the Owners of the Bonds in the same manner as provided in the Bond Resolution with consent of the Owners, or (2) does not in the opinion of Bond Counsel materially impair the interests of the Owners or Beneficial Owners of the Bonds. if there is an amendment or waiver of a provision of these Disclosure instructions, the Issuer shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of Financial Information or Operating Data being presented by the Issuer. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements: (a) notice of such change shall be given in the same manner as for a B-I0 Material Event under Section 3(b), and (b) the Annual Report for the year in which the change is made should present a comparison (in narrative fonn and also, if feasible, in quantitative fonn) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 7. Additional Information. Nothing in these Disclosure Instructions shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in these Disclosure Instructions or any other means of communication, or including any other infonnation in any Annual Report or notice of occurrence of a Material Event, in addition to that which is required by these Disclosure Instructions. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is specifically required by these Disclosure Instructions, the Issuer shall have no obligation under these Disclosure Instructions to update such infonnation or include it in any future Annual Report or notice of occurrence of a Material Event. Section 8. Noncompliance. In the event of a failure of the Issuer or the Dissemination Agent, if any, to comply with any provision of these Disclosure Instructions, the Participating Underwriter or any Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific perfonnance by court order. to cause the Issuer or the Dissemination Agent, if any, as the case may be, to comply with its obligations under these Disclosure Instructions. Noncompliance with the provisions of these Disclosure Instructions shall not be deemed an Event of Default under the Bond Resolution, and the sole remedy under these Disclosure Instructions in the event of any failure of the Issuer or the Dissemination Agent if any. to comply with these Disclosure Instructions shall be an action to compel perfonnance. Section 9. Notices. Any notices or communications to or among any of the parties referenced in these Disclosure InstructIOns may be given as follows: (a) To the Issuer at: 300 West Ash Salina, Kansas 67402 Fax: (785)309-573S Attention: Clerk (b) To the Participating Underwnter(s) at the address set forth in the Bond ResolutIOns or such other address as is furnished in writmg to the other parties referenced herein. (c) To the Dissemination Agent at the address set forth on Exhibit B attached hereto. Any person may, by written notice to the other persons listed above, designate a different address or teJephone number(s) to which subsequent notices or communications should be sent. Section 10. Electronic Transactions. Actions taken hereunder and the arrangement described herein may be conducted and related documents may be stored by electrol1lc means. Section 11. Beneficiaries. These Disclosure Instructions shall inure solely to the benefit of the Issuer, the Dissemination Agent, if any, the Participating Underwriter and BenefiCIal Owners from time to time of the Bonds, and shall create no rights in any other person or entity. B-11 Section 12. Severability. If any provlslOn in these Disclosure Instructions, the Bond Resolution or the Bonds relating hereto, shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 13. Governing Law. These Disclosure Instructions shall be governed by and construed in accordance with the laws of the State of Kansas. CITY OF SALINA, KANSAS EXHIBIT A NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Name of Bond Issue: Name of Obligated Person: Date of Issuance: City of Salina, Kansas $[2,365,000J General Obligation Internal Improvement Bonds, Series 20l2-A and $[3,760,000] General Obligation Refunding Bonds, Series 20I2-B, dated as ofJuly 15,2012 City of Salina, Kansas July 26, 2012 NOTICE IS GIVEN that the City of Salina, Kansas (the "Issuer") has not provided an Annual Report with respect to the above-named Bonds as required by the Continu111g Disclosure Instructions dated as of July 26, 2012. The Issuer anticipates that the Annual Report will be filed by _____ _ Dated: ________ _ CITY OF SALINA, KANSAS EXHIBITB ACCEPT ANCE OF DISSEMINATION AGENT Name of Issuer: Name of Bond Issue: Dissemination Agent: City of Salina, Kansas $[2,365,000] General Obligation Internal Improvement Bonds, Senes 2012-A and $[3,760,000] General Obligation Refunding Bonds, Series 20l2-B, dated as of July 15,2012 Notice Address of Dissemination Agent: ____________ , having been duly appointed by the City of Salina, Kansas to act in the capacity of Dissemination Agent pursuant to the Continuing Disclosure Instructions to which this acceptance is attached, accepts such duties and responsibilities set forth therein. B-12 APPENDIX C Financial Statements Smce 1992. the CIty's comprehensive annual financial reports have receIved the CertIficate of Achievement for Excellence in Financial Reportmg award by the Government Finance Officers AssoClatJon. TIle CertIficate of AchIevement wa~ developed to encourage governmental units to prepare and publish an eaSIly readable and understandable financial report coverIng all funds and financial transactIons of the government dunng the fiscal year The following appendIx contains audited financial statements for the CIty of Salina's primary governmental functions for fiscal year ending December 31. 2011. At the time this report was completed the audited financial statements of two component UllJts~loint ventures of the City. the Salina AIrport Authority and Salina/Saline County Health Department, were not available and as a result have not been incorporated into the enclosed audit. The audIted financial statements for the Salina Airport Authority have subsequently been completed and can be found on the MUl1Jcipal Secunty Rulemaking Board's EMMA webSIte. The audIted financIal statement for the Health Department have been delayed due to recent structural damage to the Health Department's admmistratlve offices. Upon completion of the Health DepaJ1ments audIt, the CIty will update as audIt and release Its ComprehensIve Annual Fll1ancial Report. Mayor and City Commissioners City of Salina, Kansas INDEPENDENT AUDITOR'S REPORT ON THE BASIC FINANCIAL STATEMENTS AAIZE.~" HOUSER (XOMPANYP.A. 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 Salina, Kansas, as of and for the year ended December 31, 2011, which collectively comprise the baSIC financial statements of the City's primary government as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these basic 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 "Kansas Municipal Audit Guide." Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's Internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test baSIS, evidence supporting the amounts and disclosures In the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall baSIC financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. The financial statements referred to previously include only the primary government of the City of Salina, Kansas, which consist of all funds, organizations, institutions, agencies, departments, and offices that comprise the City's legal entity. The financial statements do not include financial data for the City's legally separate component units, which accounting principles generally accepted in the United States of America require to be reported with the financial data of the City's primary government. As a result, the primary government financial statements do not purport to, and do not, present fairly the financial position of the reporting entity of the City of Salina, Kansas, as of December 31, 2011, the changes In its financial position, or, where applicable, its cash flows for the year then ended In conformity with accounting principles generally accepted in the United States of America In accordance with accounting principles generally accepted in the United States of America, the City of Salina, Kansas has issued separate reporting entity financial statements for which we have issued our report dated June 22. 2012. 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 Salina, Kansas, as of December 31, 2011, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund, Flood & Drainage Improvement Fund, TOUrism and Convention Fund, Special Gas Fund. Bicentennial Center Fund and the Sales Tax Capital Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. w«w mizebouser com == mhco@mizehouser.com 534 S Kansas Ave, Suite 700 • Topeka, KS 66603-3465 .785.233.0536 P • 785.233.1078 f 534 S Kansas Ave, Suite 400 • Topeka, KS 66603-3454 11785.234.5573 P Ii 785.234.1037 f 7101 College Blvd, Suite 900 • Overland Park, KS 66210-1984 .913.451.1882 P • 913.451.2211 f 120 E Ninth. Lawrence, KS 66044-2682 • 785.842.8844 P • 785.842.9049 f 900 Massachusetts, Suite 301. Lawrence, KS 66044-2868 • 785.749.5050 P • 785.749.5061 f Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 3 through 13 and the schedules of funding progress On page 52 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Govemmental 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. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's financial statements as a whole. The introductory section, combining and individual nonmajor fund financial statements and schedules, and statistical tables as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and Individual nonmajor fund financial statements and 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 account 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 as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of me r;;;~e~nt(a:;i not expcess an opinion oc pcovide any assurnnee on them June 22, 2012 2 CITY OF SALINA, KANSAS Year Ended December 31, 2011 (Unaudited) Management Discussion and Analysis This section of the report contains an overview and analysis of the City of Salina's financial statements for the fiscal year ended December 31, 2011. The information contained here, as well as the information contained in the letter of transmittal, are intended to provide the reader of the financial statements with a well rounded picture of the City's financial condition. Financial Highlights • Net Assets increased by $5,912,298. Governmental Net Assets declined by $463,769, while Business Type Net Assets increased by $6,376,067. (After prior year adjustments) • Liabilities also increased substantially due to the issuance of$16,120,OOO in Revenue Bonds. • Sales taxes grew modestly (4.1 %), a reversal of the previous two years of decline. • In Business Type Activities, the Water and Sewer fund saw asset growth, despite increases in operating expenditures, due to good revenue production. • The multi-year decline in fund balance for the General Fund was halted, with a slight recovery. • Tax delinquency rates have declined to a relatively normal level of 2.7%. • Personal property taxes continued to decline as a result of the exemption of business equipment from the tax rolls. • Investment revenues continue to be very minimal, but levels have stabilized. • The unemployment rate declined from 6.4% to 6.3%. The Basic Financial Statements The basic financial statements of the City include the government-wide financial statements and the fund financial statements. The notes to the financial statements follow the basic financial statements, and are essential for the reader's understanding of the financial statements. Other supplementary Information, including the combining schedules for non-major funds and the budgetary comparison reports, are at the end of this report to provide additional information for the reader. Government-wide Financial Statements The government-wide financial statements present the results of the City's operations using the accrual basis of accounting, the same basis as is used by private sector businesses. These statements focus on the long-term financial picture of the City as a whole The Statement of Net Assets reports all of the City's assets and liabilities Net assets, the difference between assets and liabilities, are an important measure of the City's overall financial health. Net assets represent the total accumulated and unused resources available to the City for the purpose of providing services. Over time, the increases and decreases in net assets can be monitored to determine if the City's financial positron is improving or deteriorating. The Statement of Activities shows how the net assets have changed during the fiscal year. One unique feature of this statement is how it shows the revenues and expenses related to specific programs and how much of those programs were supported by the general taxes of the City. Since this statement is prepared on the accrual basis of accounting, all revenues and expenses are included, regardless of when cash is actually received. Both statements show the operations of the City broken down between governmental and business type activities. Governmental activities are the operations of the City generally supported by taxes, such as Public Safety (Police, Fire, and EMS), Public Works, Public Health, and Culture & Recreation. Business-type Activities are operations of the City that are intended to recover a significant portion of their costs through user fees and charges. These include Water and Sewer, Refuse collection, the Golf Course, and operation of the City Solid Waste Facility. 3 Fund Financial Statements CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) The City uses three types of funds to manage its resources: governmental funds, proprietary funds, and fiduciary funds. A fund is a fiscal entity with a set of self-balancing accounts recording financial resources together with all related liabilities and residual equities and balances, and the changes therein. These accounting entities are separated for the purpose of carrying on specific activities or attaining certain objectives in accordance with regulations, restrictions, or limitations. Governmental fund financial statements are prepared on a modified accrual basis. Under this basis, revenues are recognized when they become measurable and available, and expenditures are recognized when the related fund liability is incurred with the exception of long term debt and similar items which are recorded when due. The focus is on the short-term financial picture of the operations of the individual fund, rather than long-term citywide view provided by the government-wide statements. Major Governmental Funds are presented in individual columns, while Non-major Governmental Funds are aggregated into an "Other Governmental Funds" column. A combining statement for the Non-major funds is presented as supplementary information in the back of the report. The information presented in these statements can be compared to the governmental activities information in the government-wide statements. The reconciliation at the end of the fund financial statements details the relationship between the two types of finanCial statements. Proprietary funds fall into two categories: enterprise funds and internal service funds. All proprietary funds are prepared on the accrual basis of accounting, and are used to account for business-type activities. Enterprise fund statements present the same information that is in the government-wide statements for business-type activities, but In greater detail. The City of Salina currently operates four enterprise funds: Sanitation, Solid Waste Disposal, Golf Course, and Water and Sewer Internal Service funds are used to account for the cost of operations shared by various departments of the City. The city operates five Internal service funds. Three of these are for self-insurance activity: Risk Management, Workers' Compensation Reserve, and Health Insurance. The remaining two account for our Information Systems activity and for the Central Garage operation. A combining statement for these internal service funds can be found in the supplementary information following the notes to the financial statements. Fiduciary funds are used by the City to account for resources held by the City for a third party. Agency funds are a special class of Fiduciary Fund in which liabilities always equal assets, and thus there are no net assets. The City of Salina operates nine Agency funds. Schedules for these funds may be viewed in the supplementary section of this report. Permanent Funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used. Permanent funds operated by the City include the Cemetery and Mausoleum Endowments and the Tri-centennial Commission fund. Notes to the Financial Statements The notes to the financial statements are an integral part of the baSIC financial statements since they contain valuable additional information necessary for gaining a complete understanding of the City's financial statements. Other Information In addition to the basic financial statements and the notes described above, this report also presents the general fund and major special revenue fund's budgetary statements as required supplementary information directly following the notes to the baSIC financial statements. The combining statements for the non-major funds are shown after the required supplementary information. Finally, the statistical section Includes selected statistical data about the City's operations and economy. The City as a Whole This section will identify, discuss, and analyze significant differences and trends that will enhance the reader's understanding of the City's financial position. 4 Tax Base and Economy CITY OF SALINA, KANSAS Year Ended December 31, 2011 (Unaudited) The City of Salina relies on three major groups of revenues to support it's operations. Each of these revenue streams has a different revenue base. In declining order of magnitude, they are charges for service, sales taxes, and property taxes. Sales taxes and property taxes apply primarily to Governmental Activities, while charges for services apply to both Governmental (36%) and Business-type (64%) activities. Charges for Services account for about 46% ($37,249,107) of the City's revenue stream. Charges for Service depend on both the rate that is set for the activity, as well as the volume of services provided. The following table illustrates service volume and rate adjustments for some of the more significant services for the year ending December 31, 2011. Description 2010 Volume 2011 Volume Change Rate Comments Golf Course: Rounds. 18 Hole 30.420 26,782 (3.638) No fee increase Rounds, Par3 3,707 3,368 (339) No fee increase Annual Golf Members 33 18 ( 15) No fee increase River Festival Gate Count 64,835 72,664 7,829 $2.00 per button increase Development Services Inspections Performed 6,391 5,473 (918) Permits Issued 3,031 2,678 (353) Finance/Adm inistration EMS Runs Billed 3.473 4,003 530 Five percent increase Licenses Issued 1,296 1,358 62 Water Billings Issued 238,635 239,448 813 Water Metered (In Billion Gallons) 1.97 NA Parks and Recreation Kenwood Cove Attendance 119,000 111,063 (7,937) No fee increase Youth Teams 164 178 14 Adult Teams 300 308 8 Special Pops Programs 109 114 5 Trips/Tours offered 31 54 23 Youth Tournament Teams 424 388 (36) Adult Tournament Teams 140 164 24 Public Works Sanitation Customers 14,520 14,604 84 3% fee increase Landfill Tonnage 94,907 96,178 1,271 No fee increase Street Cut and Excavation Permits 181 201 20 Concrete Permits 155 143 (12) Water and Wastewater $2.00 per month per Water Treated (Billion Gallons) 2.30 2.30 typical user $2.00 per month per Wastewater Treated (Billion Gallons) 1.50 1.45 (0.05) typical user **In general, if not specified in the table, rates were adjusted an average of about 2% for most services. 5 CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) Sales taxes are the next largest component of the revenue mix, providing 20% ($15,847,742) of the total revenues. This is a slightly smaller portion than 2010 (21 %). The City receives a .90% City-wide sales tax, and also a portion of the County-wide 1% sales tax. Forty-four percent, (a rate of .4%) of the City-wide sales tax is required to be used for special purposes. The remaining .5%, along with the City portion of the Countywide tax is available for general purposes. Total revenue from the sales tax in 2011 was $ 15,847,742, up from $ 15,224,888 in 2010. This 4.1% increase follows a 4.7% decline (after adjustment for a change in rate) for 2010. A number of factors affect the sales tax. First are the regional and local economic conditions and relationships. These are most directly reflected in the proceeds of the City-wide tax, which grew by 5.8%. The City was unfavorably affected by the formula used to distribute the County-wide sales tax among participating jurisdictions (only Cities and the County participate, School and other special districts do not). The formula is based, in part, on the property tax efforts of each jurisdiction. Because the portion of the overlapping levy attributable to the City of Salina was increased for 2011, the City's allocated portion of the County-wide sales tax was decreased from 63.3% in 2010 61.85% in 2011. Total Countywide taxes received in 2011 were approximately $6,755,629. The change in formula thus resulted in a shift of about $158,000 from the City of Salina to Saiine County in 2011. On November 4, 2008, Salina voters approved an increase of the special purpose .25% tax to a .40% tax. The extended tax is to sunset March 31, 2018. The tax was also modestly re-purposed, for Capital and Economic Development purposes only. Property Taxes are the third major component of the revenue mix, accounting for 16% ($11,711,254) of total revenues. Property taxes consist of two components: Real estate and personal property taxes which are determined by the mill levy set by the city and the assessed value of the property; and motor vehicle taxes, which are established by a countywide average tax rate, and the assessed value of the vehicle. Real estate assessed value increased by 2.4%. The total City mill levy was increased slightly, by .2%, while the overlapping levy increased by .3% Tax delinquency decreased from 5.6% to 2.7%. Personal property value continued to slide, presumably as a result of removing business equipment from the tax base. Personal property value has now dropped to $19.9 million from it's peak of $39.7 million in 2007. At the 2011 tax rate, this exemption is equivalent to $514,546 in lost revenue for 2011 Motor Vehicle value decreased by 5.8%. Motor vehicle taxes are distributed based on a formula using prior year's tax effort (similar to the Countywide Sales Tax Distribution). The following table summarizes the comparative property assessed values and tax levy rates: Comparative Property Values and Tax Levy Rates Fiscal (Budget) Year Real Estate and Personal Property Assessed Valuation City Mill Levy ($ per $1,000) Operating (General Fund) Debt Service Total City Rate Total Overlapping Levy Percent of Total Taxes Collected Ratio of Total Taxes (including delinquent collections) to taxes Motor Vehicle Valuation 2010 2011 Change $ 397,470,626 $ 402,354,576 $ 4,883,950 20.082 19.236 [0.846J 5.773 6.786 1.013 25.855 26.022 0.167 124.707 128.498 3.791 94.4% 97.3% 2.9% 97.1% 99.9% 2.8% $ 50,330,252 $ 47,406,072 $ [2,924,180] The unemployment rate in Saline County declined very slightly from 6.4% in 2010 to 6.3% in 2011, reflecting general economic conditions. This is stili slightly below the statewide and significantly below the national unemployment rate. The total labor force increased to 26,656, a change of 1.5%. In 2011, the top ten property taxpayers accounted for 11.22% of total assessed value. This is slightly more concentrated than ten years ago (at 11.18%) 6 Statement of Net Assets CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) Net assets may, over time, provide an indicator of a government's financial position. In the case of the City of Salina, assets exceeded liabilities by $187,641,000 at December 31,2011. This represents an increase in net assets of $6,519,000 over 2010. A comparative condensed Statement of Net Assets at December 31, 2010 and 2011: Cash and Investments Other Current Assets Noncurrent (Capital) Asset Total Assets Current Liabilities Noncurrent Liabilities Total liabilities Net Assets Invested in capital assets, Governmental Activities 2010 2011 $ 13,935 $ 17,475 $ 12,309 $ 12,670 $166,122 $164,515 $192.366 $194.660 $ 21,918 $ 21,687 $ 52,650 $ 55,639 $ 74,568 $ 77,326 net of related debt $113,001 $ 109,289 Restricted for Permanent Funds $ 417 $ 427 Restricted for Debt ServiCE $ 572 $ 1.285 Unrestncted $ 3,808 $ 6,333 Total Net Assets $117,798 $117,334 Percent of Total Assets Cash and Investments as a percentage of current liabilities 65% 64% 63% 81% Business-Type Activities 2010 2011 2010 $17,530 $28,047 $ 31,465 $ 2,025 $ 2,344 $ 14,334 $58,273 $67,639 $224,395 $ 77,828 $ 98,030 $270,194 $ 3,352 $ 2,944 $ 25,270 $10,538 $24,772 $ 63,188 $13,890 $27,716 $ 88,458 $48,079 $ 44,227 $161,080 $ $ $ 417 $ 1,553 $ 1,553 $ 2,125 $14,306 $24,534 $ 18,114 $ 63,938 $ 70,314 $181,736 35% 37% 100% 523% 953% 125% Total Prima~ Government % of % of 2011 Total 2011 Total Change 12% $ 45,522 16% $ 14,057 5% $ 15,014 5% $ 680 83% $ 232,154 79% $ 7,759 ~ $292,690 ~ $ 22,496 29% $ 24,631 23% $ (639) 71% $ 80,411 77% $ 17,223 ~ $105,042 ~ $ 16,584 89% $153,516 82% $ (7,564) 0% $ 427 0% $ 10 1% $ 2,838 2% $ 713 10% $ 30,867 16% $ 12,753 ~ $187,648 ~ $ 5,912 100% 185% The largest segment of the City's net assets (82%) reflects its investment in capital assets (land, buildings, streets and drainage facilities, utility plant, vehicles, equipment, etc.), less any debt used to acquire those assets that is still outstanding. These assets are used to provide services to citizens. As a result, resources required to retire related debt can not come from liquidation of the asset. Such resources generally must be provided from other sources, such as future taxes or user charges. A small portion of net assets (2%) is restricted for debt service. The remainder (unrestricted) of net assets (16%) may be used to meet the City's obligations to citizens and creditors. This is comparable to previous years. In 2011, the amount invested In capital assets net of related debt decreased by $7,564,000. Unrestricted net assets increased by $12,573,000. These represent diverse changes throughout the financial statement: Increases in cash in both Governmental and Business type activities, a decrease in Capital assets in Governmental Activities and an increase in Capital Assets in BUSiness type activities. Total liabilities remained much the same in Governmental Activities, but increased significantly in Business Type Activities, attributable to the issuance of Revenue Bonds to finance the Advanced Meter Infrastructure project. During the year ended December 31, 2011, there were several significant events that changed the balance of net assets. Governmental Activities. 2011 saw an increase in cash and investments in Governmental funds. This is due to controlled expenditures for both capital and operating requirements as well as improved revenues from the Sales Tax. 7 CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) Business-type Activities: The Water and Wastewater fund has a dominant influence on the Business Type Activities net assets. The increase in net assets is due to good revenue production and controlled expenses. Statement of Activities A condensed statement of activities is shown below. Condensed Comparitive Statement of Activities, 2010 and 2011 (In $OOO's) Govemmental Busmess-T:t~e Total Pnma!1 Government 2010 2011 2010 2011 2010 % 2011 % 2010 -2011 Program Revenues. Change Charges for Services $ 12.306 $ 13.470 $ 22,419 $23,779 $ 34.725 48% $ 37,249 47% $ 2,524 Operating Grants and Contributions $ 3,415 $ 2,907 $ 202 $ 3,415 5% $ 3,109 4% $ (306) Capital Grants and Contributions $ 3,804 $ 0% $ 3,804 5% $ 3.804 General Revenues. Property Taxes $ 11,179 $ 11,712 $ 11,179 16% $ 11,712 15% $ 533 Sales Taxes $ 15.225 $ 15,848 $ 15.225 21% $ 15,848 20% $ 623 Other Taxes $ 6.298 $ 6,389 $ 6,298 9% $ 6,389 8% $ 91 Investment Revenue $ 81 $ 77 $ 67 $ 83 $ 148 0% $ 160 0% $ 12 Other Miscellaneous $ 565 $ 872 ~ LBQ $ 906 1% $ 1.202 2% $ 296 Total Revenues $ 49.069 $ 51.275 ~ $28.198 $ 71.896 100% $ 79.473 100% $ 7.577 Expenses: $ General Government $ 10,845 $ 13,615 S; 10,845 15% $ 13,615 18% $ 2,770 Public Safety $ 18,592 $ 18.579 $ 18.592 25% $ 18,579 25% $ (13) PubliC Works S; 9.782 $ 9,858 $ 9,782 13% $ 9,858 13% $ 76 PubliC Health and Sanitation $ 1,365 $ 1.368 $ 1 365 2% $ 1,368 2% $ 3 Culture and Recreation $ 6.572 $ 6,693 $ 6.572 9% $ 6.693 9% $ 121 Planning and Developrnent $ 3,715 $ 3.450 $ 3.715 5% $ 3.450 5% $ (265) Solid Waste Disposal $ 2.925 $ 2,945 $ 2.925 4% $ 2.945 4°' /0 $ 20 Water and Sewer $ 14.050 $13,597 $ 14,050 19% $ 13,597 18% $ (453) Sanitation $ 2261 $ 2,261 $ 2261 3% $ 2.261 3% $ Golf Course $ 817 $ 825 $ 817 1% $ 825 1% $ 8 Interest on Long Term Debt $ 2,257 $ 1,650 $ 2.257 3% $ 1.650 2% $ (607) Total Expenses $ 53,128 $ 55.213 $ 20,053 $19.628 $ 73,181 100% $ 74.841 100% $ 1,660 Increase In net assets before transfers $ (4,059) $ (3,938) $ 2.774 $ 8,570 $ (1,285) $ 4,632 $ 5,917 Transfers and other extraordinary items $ 92 $ 2,362 ~) $(2,163) $ $ 199 $ 199 Increase In Net Assets $ (3.967) $ (1,576) $ 2.682 $ 6.407 $ (1.285) $ 4,831 $ 6 116 Net Assets. January 1 $119,854 $117,798 $ 61.270 $63.938 $181124 $181.736 $ 612 Prior Period Adjustment $ 1.911 $ 1.112 L.J2i) L.fl1.) $ 1.897 $ 1.081 $ (816) Net Assets. January 1. restated $121,765 $ 118,910 $ 61.256 $63,907 $ 183.021 $182.817 $ (204) Net Assets December 31 $117.798 $ 117.334 $ 63,938 $70.314 $181,736 $187.648 $ 5.912 Governmental Activities. Total expenses for Governmental Activities for the year ending December 31, 2011 were $55,213,000 compared to $53,128,000 in 2010. Governmental activities represent 74% of the City's total expenses. The largest element of Governmental Activity expense was Public Safety, accounting for 34% of the total. Charges for service attributable to Governmental Activities totaled $13,470,000 and operating grants for those purposes were $2,907,000. The balance was funded by general revenues. Sales taxes accounted for $15,848,000 of the general revenues, with property taxes providing $11,712,000. Net assets decreased by $1,576,000 as a result of Governmental Activities. Business Type Activities. Total expenses for Business-type Activities for the year were $19,628,000, or 26% of the City's total expense. The majority of this expense ($13,597.000) is attributable to Water and Sewer operations, with the other activities (Solid Waste Disposal, Sanitation, and Golf Course) costing a combined total of $6,031,000. These activities are primarily supported by user charges, with only $413,000 coming from general revenues, representing largely the interest earned on fund balances held by the City. Net assets increased by $6,407,000 as a result of Business-type Activity operations. 8 Fund Financial Analysis Governmental Funds Fund Balances: CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) The table below shows the Governmental Fund balances for major funds for the years ended December 31,2010 and December 31,2011. Governmental Fund Balances, 2010 and 2011 Fund 2010 2011 Change General $ 3,617,181 $ 3.836,238 $ 219.057 Flood and Drainage $ 188,526 $ 907 $ (187,619) Tounsm and Convention $ 367,197 $ 340,473 $ (26,724) Special Gas $ 1,484,641 $ 1,417,743 $ (66,898) Bicentennial Center $ 46,048 $ 142,881 $ 96,833 Sales Tax Capital $ 2,154,367 $ 1,397,571 $ (756,796) Debt Service $ 571,873 $ 1,285,130 $ 713,257 Capital Projects $ (2,610,001 ) $ 390,852 $ 3,000,853 Other Governmental Funds $ 2,981,652 $ 2,792,546 $ (189,106) Total $ 8,801,484 $ 11,604,341 $ 2,802,857 Total Governmental Fund balances increased by $2,802,857. The reasons for these changes are varied. The most significant change is in the Capital Projects Fund, and IS largely the result of Project financing activities General Fund balances stabilized and grew slightly in 2011. The Flood and Drainage Fund was scheduled for depletion in 2011. The Special Sales Tax Capital Outlay Fund shows a significant reduction in fund balance due to an aggressive capital improvements program, most notably the reconstruction of Marymount Road. Revenues and Expenditures: The following table shows a comparison of revenues and expenditures (including other sources and uses) for major funds for the years ending December 31,2010 and 2011 Consolidated Statement of Revenues and Expenditures for Major Funds, 2010 and 2011 Modified Accrual BaSIS Fund 2010 2011 Change Revenues (Including Other FinanCing Sources) General $ 34,303,574 $ 35.557,304 $ 1,253,730 Flood and Drainage Improvement $ 1,312 $ 18.473 $ 17,161 Tourism and Convention $ 1.332,671 $ 1.306.102 $ (26,569) SpeCial Gas $ 1,569.648 $ 1,546,045 $ (23,603) Blcentenmal Center $ 1,702.066 $ 1,656,762 $ (45,304) Sales Tax Capital 3; 3.815.966 $ 3.777.286 $ (38,680) Debt Service $ 7,943.865 $ 6.844,521 $ (1.099,344) Capital Projects $ 5.552.906 $ 9,896,198 $ 4,343,292 Other Governmental Funds' $ 2.954.257 $ 2.800.508 $ (153.749) Total Revenues 3; 59.176.265 $ 63.403,199 $ 4.226,934 Less Other Sources $ 12,157.284 $ 14,581,655 S, 2.424,371 Revenues. net of other sources $ 47.018981 $ 48.821.544 $ 1.802.563 Expenditures (Including Other FinanCing Uses) General $ 35,773,774 $ 35.494,671 $ (279,103) Flood and Drainage Improvement $ 3,223 $ 206.092 $ 202,869 Tourism and Convention $ 1.228.789 $ 1,332.826 $ 104.037 Special Gas $ 2,138,057 $ 1,612,943 $ (525,114) Bicentennial Center $ 1.768,246 $ 1,559,929 $ (208,317) Sales Tax Capital $ 3,289.009 $ 4,534.082 $ 1,245,073 Debt Service $ 8.107,283 $ 6.131,264 $ (1,976,019) Capital Projects $ 15,936.269 $ 6,895,345 $ (9,040,924) Other Governmental Funds' $ 2.829,609 $ 2.989,614 $ 160.005 Total Expenditures $ 71,074,259 $ 60,756,766 $ (10,317,493) Less Other Uses $ 4.983.834 $ 5,692,077 $ 708,243 Expenditures, net 01 other uses $ 66.090.425 $ 55.064,689 $ (11,025.736) 9 CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) Total revenues and other sources increased by $4,226,934 from 2010 to 2011. The largest component of this change was in the Capital Projects accounts, and is related to Construction activities. Other changes include an increased General supplement for the Bi-Centennial Center and changes in temporary note activity. Expenditures generally declined, with the notable exception of the Sales Tax Capital Fund, which was committed to the Marymount Road reconstruction, along with some smaller projects. Proprietary Funds The City of Salina operates four Enterprise Funds as well as five Internal Service Funds. A summarized comparative Statement of Net Assets follows for each Enterprise Fund: Comparative Summary Statement of Net Assets; 2010 -2011 (in $OOO's) Solid Waste Disposal Water and Sewer 2010 2011 Change 2010 2011 Change Current Assets $ 3,887 $ 3,611 $ (276) $ 14,755 $ 25,988 $ 11,233 Capital Assets $ 4,211 $ 3,495 $ (716) $ 53,075 $ 63,184 $ 10,109 Total Assets $ 8,098 $ 7,106 $ (992) $ 67,830 $ 89,172 $ 21,342 Current liabilities $ 1,010 $ 528 $ (482) $ 2,091 $ 2,363 $ 272 Noncurrent Liabilities $ 3,192 $ 2,868 $ (324) $ 7,161 $ 21,640 $ 14,479 Total Liabilities $ 4,202 $ 3,396 $ (806) $ 9,252 $ 24,003 $ 14,751 Assets Invested In Capital, net of related debt $ 2,294 $ 2,276 $ (18) $ 45,567 $ 40,991 $ (4,576) Restricted Net Assets $ $ $ $ 1,553 $ 1,553 $ Unrestricted Net Assets $ 1,602 $ 1,434 $ (168) $ 11,458 $ 22,625 $ 11.167 Total Net Assets $ 3,896 $ 3,710 $ (186) $ 58,578 $ 65,169 $ 6.591 Current Assets as a percentage of current liabilities 385% 684% 706% 1100% Sanitation Golf Course 2010 2011 Change 2010 2011 Change Current Assets $ 846 $ 761 $ (85) $ 66 $ 32 $ (34) Capital Assets $ 639 $ 646 $ 7 $ 348 $ 314 $ P4) Total Assets $ 1,485 $ 1,407 $ (78) $ 414 $ 346 $ (68) Current Liabilities $ 203 $ 29 $ (174) $ 48 $ 24 $ (24) Noncurrent Liabilities $ 123 $ 156 $ 33 $ 61 $ 109 $ 48 Total liabilities $ 326 $ 185 $ (141 ) $ 109 $ 133 $ 24 Assets Invested in Capital, net of related debt $ 639 $ 646 $ 7 $ 348 $ 314 $ (34) Restricted Net Assets $ $ $ $ $ $ Unrestricted Net Assets $ 520 $ 576 $ 56 $ (43) $ (101 ) $ (58) Total Net Assets $ 1,159 $ 1,222 $ 63 $ 305 $ 213 $ ~92) Current Assets as a percentage of current liabilities 417% 2624% 138% 133% 10 CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) The Golf Course Fund shows declines in total net assets, due primarily to a reduction in current assets, however, capital assets also decline. Unrestricted net assets in this fund reflect a $101,000 deficit balance, up from $43,000 a year ago. The Solid Waste fund shows decreases in assets as well as liabilities, the result of constructing an additional cell. The Water and Sewer fund shows a significant increase In long term liabilities as a result of a Revenue Bond Issue. Both Current and Capital assets increase significantly within this fund. Revenues, Expenses, and Changes in Net Assets The Water and Wastewater Funds, showed healthy results from operations, with net assets increasing significantly due to a good revenue flow (attributable to both adequate rates and favorable weather conditions) and controlled expenses. The Golf Course showed a very significant loss on the year, requiring increased transfers from the General Fund to maintain cash liquidity. The Sanitation Fund is stable. Net assets declined slightly in the Solid Waste fund. Comparative Summary of Revenues, Expenses and Changes in Net Assets, 2010 and 2011 (In $OOO's) Solid Waste Disposal Water and Sewer 2010 2011 Change 2010 2011 Change Operating Revenues $ 2,878 $ 2,929 $ 51 $ 16,789 $ 18,361 $ 1,572 Operating Expenses $ 2,852 $ 2,829 $ (23) $ 13,571 $ 12,964 $ (607) Operating Income $ 26 $ 100 $ 74 $ 3,218 $ 5,397 $ 2,179 Non-operating revenues (expenses) $ (55) $ (107) $ (52) $ (433) $ (561 ) $ (128) Income (Loss) before Transfers $ (29) $ (7) $ 22 $ 2,785 $ 4,836 $ 2,051 Transfers In (out) $ (139) $ (180) $ (41 ) $ 77 $ (2,030) $ (2,107) C~pital Contributions $ $ $ $ $ 3,804 $ 3,804 Change in Net Assets $ (168) $ (187) $ (19) $ 2,862 $ 6,610 $ 3,748 Net Assets, January 1 $ 4,121 $ 3,896 $ (225) $ 55,668 $ 58,578 $ 2,910 Restatement $ (57) $ 1 $ 58 $ 48 $ (19) $ (67) Net Assets, January 1, restated $ 4,064 $ 3,897 $ (167) $ 55,716 $ 58,559 $ 2,843 Net Assets. December 31 $ 3,896 $ 3.710 $ (186) $ 58,578 $ 65,169 $ 6,591 Sanitation Golf Cou'rse 2010 . 2011 Change 2010 2011 Change Operating Revenues $ 2,311 $ 2,335 $ 24 $ 783 $ 687 $ (96) Operating Expenses $ 2.276 $ 2.292 $ 16 $ 817 $ 825 $ 8 Operating Income $ 35 $ 43 $ 8 $ (34) $ (138) $ (104) Non-operating revenues (expenses) $ 18 $ 32 $ 14 $ $ $ Income (Loss) before Transfers $ 53 $ 75 $ 22 $ (34) $ (138) $ (104) Transfers in (out) $ (50) $ $ 50 $ 20 $ 47 $ 27 Capital Contributions $ $ $ $ $ $ Change in Net Assets $ 3 $ 75 $ 72 $ (14) $ (91) $ (77) Net Assets, January 1 $ 1,166 $ 1,159 $ (7) $ 314 $ 305 $ (9) Restatement $ (10) $ (12) $ (2) $ 5 $ (1 ) $ (6) Net Assets, January 1, restated $ 1,156 $ 1,147 $ (9) $ 319 $ 304 $ (15) Net Assets, December 31 $ 1,159 $ 1,222 $ 63 $ 305 $ 213 $ (92) II Budgetary Highlights CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) The objective of budgetary controls is to ensure compliance with legal provIsions embodied in the annual appropriated budget approved by the City Commission. The legal level of budgetary control is maintained at the Fund level, in accordance with State Statutes. Management control is maintained at the departmental level. Within the departments, considerable discretion is permitted. The City uses an encumbrance accounting system, in which estimated purchase orders are recorded prior to the release of purchase orders to vendors. Open purchase orders are reported as reservations of budgetary basis fund balances at December 31, 2011. Formal budgetary amendments are limited to' those circumstances in which the need is perceived to alter the total fund budget. Re- allocation among departments or line items are not typically recorded as budgetary amendments. However, in addition to formal amendments, departments within the City are allowed to transfer budget between line items within a department. Budgets may also be transferred from department to department within each fund. As a result of these transfers, the original budget and the final budgets may not be the same for departments within a fund. There were a number of funds in which the budgets were amended, including the Flood and Drainage Improvement Fund, Sales Tax Capital Fund, Risk Management Fund, Central Garage Fund and the Water and Sewer Fund. The City experienced a number of significant variances from budgeted items in the General Fund, however, the total fund was within budgeted expenses. Motor vehicle taxes fell short of budget due to a delayed distribution from the County. Public Safety charges for service were significantly short of budget. This includes Court Revenues and EMS fees due from Saline County. Sales taxes exceeded budgetary levels slightly. Several expenditure items were also significantly over or under budget. Several Departments exceeded budgeted expenditures. In general, retirement system contributions exceeded budget Capital Assets and Debt Administration Capital Assets The total amount invested in Capital Assets for the City at December 31, 2011 was $232,153,260 net of accumulated depreciation. The following table illustrates the Capital Asset balance by various classes of assets at December 31, 2010 and 2011 : Capital Asset Balances Net of Depreciation, 12/31/2010 and 12/31/2011 (In OOO's) Governmental Activity BUSiness-type Activity Total 2010 2011 2010 2011 2010 2011 Equipment, Furniture and Fixtures $ 1,314 $ 1,288 $ 1,982 $ 1,729 $ 3,296 $ 3,017 Vehicles $ 2,445 $ 2,996 $ 903 $ 812 $ 3,348 $ 3,808 Buildings and Improvements $ 23,625 $ 22,591 $ 12,345 $ 11,904 $ 35,970 $ 34,495 Land $ 22,477 $ 22,477 $ 1.541 $ 1,541 $ 24,018 $ 24,018 Infrastructure $ 83,712 $ 82,609 $ 39,985 $ 40,591 $ 123,697 $ 123,200 Construction in Progress $ 32,549 $ 32,554 $ 1,517 $ 11,062 $ 34,066 $ 43,616 Total $ 166,122 $ 164,515 $ 58,273 $ 67,639 $ 224,395 $ 232,154 * Net of Accumulated Depreciation 12 CITY OF SAUNA, KANSAS Year Ended December 31,2011 (Unaudited) Changes to capital assets may be summarized as follows: Changes to Capital Assets, 2011 (in OOO's) Governmental Business-Type Activity Activity Additions $ 547 $ 10,633 Retirements $ (3,110) $ (1,236) Adjustments $ 956 $ (31 ) Net Additions $ (1,607) $ 9,366 Total $ 11,180 $ (4,346) $ 925 $ 7,759 Depreciation Expense Applied $ 4,730 $ 2,653 .;,.$==~7=,=,3;;.,;8",;",3 Additional information on the City's capital assets can be found in Note 4,D. of the notes to the basic financial statements. Debt Management The City's general policy for General Obligation Bonds is to issue them for no more than 10 years for the City at Large portion, with some exceptions permitted for extraordinary projects. On special assessment bonds, the maturity may extend to 15 years. The outstanding General Obligation Bonds for Governmental activities at December 31,2011 totaled $55,225.670. In addition, there were temporary notes outstanding in the amount of $3.400,000. Business-type activities had $16,193,925 in Revenue Bonds outstanding, as well as $7,217.907 in General Obligation Bonds. Revenues generated by user fees are pledged to retire all of the Bonds issued by BUSiness-type activities. The City engaged in several debt transactions during 2011. On August 1 st, the City issued $6,565,000 in internal improvement bonds. The bulk of the proceeds ($3,765Jl36) were used to finance an Industrial fire protection system located at the Salina Airport Industrial Center. The balance of the proceeds were used to finance several residential subdivisions. Also on August 1 S\ the City issued $3,400,000 in temporary notes to finance public facilities to serve a commercial subdivision development. These note will be refinanced into a long term bond issue in August, 2012. Additional Information on the City's debt can be found in Note 4, E. of the notes to the baSIC financial statements. Requests for Information This financial report is intended to give the reader a general overview of the City's finances. Questions about information in this report or requests for additional information should be directed to the Director of Finance, Room 206,300 West Ash Street, Salina, Kansas, 67401. 13 BASIC FINANCIAL STATEMENTS ASSETS Current assets: Cash and investments CITY OF SALINA, KANSAS STATEMENT OF NET ASSETS December 31,2011 Receivables (net of allowance for uncollectibles) Accounts Taxes Interest Inventory Deferred charges Total current assets Noncurrent assets: Capital assets, nondepreciable Construction in progress Land Capital assets, depreciable Less: Accumulated depreciation Total noncurrent assets Total assets liabilities: Current liabilities: Accounts payable Retainage payable Accrued liabilities Matured bond principal and Interest Accrued interest payable DepOSits payable Unearned revenue Current portion of compensated absences Current portion of temporary notes payable Current portion of revenue bonds payable Current portion of general obligation bonds payable Total current liabilities Noncurrent-liabilities' Accrued liabilities Compensated absences Net OPEB obligation Revenue bonds payable General obligation bonds payable Landfill post-closure care liabilities Total noncurrent liabilities Total liabilities Net Assets Invested in capital assets, net of related debt Restricted for' Permanent funds: Expendable Debt service Unrestncted Total net assets Total Total Governmental Business-type Activities Activities $ 17,475,299 $ 28,047,281 1,122,221 1,396,659 10,848,090 35,877 16 205,410 571,702 458,315 375,179 30,145,212 30,390,837 32,554,357 11,062,055 22,477,191 1,541,002 196,166,753 101,308,419 86,683,788 46.272,729 164,514,513 67,638,747 $ 194,659,725 $ 98,029,584 $ 788,731 $ 294,449 468,309 608,219 563,720 5,145 512.680 211,291 163,904 10,315,524 581,694 122,301 3.400,000 343,696 5.051,038 1,200,048 21,686.841 2,943.908 149,245 2,507,440 527,190 2,807,425 334,458 15.850,229 50,174,632 6,017,859 2,042,254 55,638,742 24,771.990 $ 77,325,583 $ 27,715,898 $ 109,288,843 $ 44,226,915 426,741 1,285,130 1,553,016 6,333,428 24,533,755 $117,334,142 $ 70,313,686 The notes to the baSIC financial statements are an integral part of thiS statement. 14 Total Primary Government $ 45,522,580 2,518,880 10,848,090 35,893 777,112 833,494 60,536,049 43,616,412 24,018,193 297,4 75,172 132,956,517 232,153,260 $ 292,689,309 $ 1,083,180 1,076,528 563,720 5,145 723.971 163.904 10,315,524 703,995 3.400,000 343.696 6,251,086 24,630.749 149.245 3,034,630 3,141,883 15,850.229 56.192491 2,042,254 80410,732 $ 105,041,481 $ 153,515,758 426,741 2,838,146 30,867,183 $ 187,647,828 Governmental activities: General government Public safety Public works Public health and sanitation Culture and recreation Planning and development Interest on long-term debt Total governmental activities Business-type activities: Solid Waste Disposal Water and Sewer Sanitation Golf Course Total bUSiness-type activities Total primary government CITY OF SALINA, KANSAS STATEMENT OF ACTIVITIES For the Year Ended December 31,2011 Net [Expenses] Revenue and Program Revenues Changes in Net Assets Operatrng Capital Total Total Total Charges for Grants and Grants and Governmental Business-type Primary EXl2enses Services Contributions Contributions Activities Activities Government $ 13,614,508 $ 6,106,067 $ 359,148 $ $ [7,149,293] $ $ [7,149,293] 18,579,041 3,766,156 631,417 [14,181,468] [14,181,468] 9,858,199 261 707 1,368,577 [8,227,915] [8,227,915] 1,367,825 42,729 153,566 [1,171,530] [1 ,171,530] 6,693,341 3,140,025 177,048 [3,376,268] [3,376,268] 3,450,078 153,675 217,643 [3,078.760] [3,078,760] 1.650,426 [1,650,426] [1 ,650,426] 55,213,418 13470,359 2.907,399 [38,835,660] [38,835,660] 2,944,765 2,904,371 [40,394] [40,394] 13.596,918 17.904,056 201,700 3,803,565 8,312,403 8,312,403 2,261,462 2,334,119 72,657 72,657 825,057 636,202 [188,855] [188,855] 19,628,202 23.778.748 201,700 3.803,565 8,155,811 8,155,811 $ 74.841.620 $ 37 249107 $ 3,109.099 $ 3,803,565 [38.835.660] 8.155,811 [30,679.849] General Revenues: Property taxes leVied for General purposes 7,782.768 7,782,768 Debt service 2,778,845 2,778,845 Motor vehicle tax General purposes 1,149,641 1,149,641 Sales tax General purposes 11,767,400 11,767,400 Selective purposes 4,080,342 4,080,342 Other taxes General purposes 6,389,878 6,389,878 Investment revenues 77.095 83.399 160,494 Miscellaneous 871.904 330.351 1,202.255 Transfers net 2,361,593 [2,162.772] 198,821 Subtotal general revenues 37.259,466 [1,749.022] 35,510,444 Change In net assets [1,576,194] 6,406.789 4,830,595 Net assets -beginning 117,797,911 63.937619 181,735,530 Prior period adjustment 1,112,425 [30,722) 1,081,703 Net assets -beginning, restated 118,910,336 63,906,897 182,817,233 Net assets -ending $117,334,142 $ 70.313.686 $ 187,647,828 The notes to the basic finanCial statements are an Integral part of thiS statement 15 CITY OF SALINA, KANSAS BALANCE SHEET GOVERNMENTAL FUNDS December 31,2011 Flood & Tourism Drainage and Special General Improvement Convention Gas ASSETS Cash and investments $ 3,153,960 $ 907 $ 2,202 $ 1,195,840 Receivables (net) Accounts 677,815 338,271 Taxes 8,094,093 312,648 Interest 35,877 Inventory 89,716 Due from other funds 9,375 Cash with fiscal agent Total assets $ 12,060,836 $ 907 $ 340,473 $ 1,508,488 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable $ 301,319 $ -$ -$ 46,356 Retainage payable 44,389 Deferred revenue 7,923.279 Due to other funds Matured principal and interest Temporary notes payable Total liabilities 8,224,598 90.745 Fund balance Nonspendable 89,716 Restricted 340,473 1,094,720 Committed Assigned 292,816 907 323,023 Unassigned 3.453.706 Total fund baiances 3.836,238 907 340,473 1,417,743 Total liabilities and fund balance $ 12.060,836 $ 907 $ 340.473 $ 1,508,488 Bicentennial Center $ 117,993 54,966 $ 172,959 $ 30,078 30.078 142,881 142,881 $ 172.959 Other Total Sales Tax Debt Capital Governmental Governmental Capital Service Projects Funds Funds $ 1,397,571 $ 1,236,026 $ 4,503,053 $ 2,773,395 $ 14,380,947 51,169 1,122,221 2,441,349 10,848,090 35,877 89,716 9,375 5,145 5,145 $ 1,397,571 $ 3,682,520 $ 4,503,053 $ 2,824,564 $ 26,491,371 $ -$ -$ 288,281 $ 22,643 $ 688,677 423,920 468,309 2,392,245 10,315,524 9,375 9,375 5,145 5,145 3.400,000 3,400,000 2,397,390 4.112,201 32,018 14,887,030 89,716 1,285,130 891,254 3,611,577 610,134 [2,477,564] 1,851,292 126,743 787,437 2,868,416 50,000 4,322,599 3,453,706 1,397.571 1,285,130 390,852 2,792,546 11,604,341 $ 1,397,571 $ 3,682,520 $ 4,503,053 $ 2,824.564 $ 26,491.371 The notes to the basic financial statements are an integral part of this statement. 16 CITY OF SALINA, KANSAS RECONCILIATION OF THE TOTAL GOVERNMENTAL FUND BALANCE TO NET ASSETS OF GOVERNMENTAL ACTIVITIES December 31, 2011 Total Governmental Fund Balances Amounts reported for governmental activities in the statement of net assets are different because Bond issuance costs are shown as current year expenditures in the funds. Bond issuance costs Capital assets used In governmental activities are not financial resources and therefore are not reported in the funds The cost of capital assets is Accumulated depreciation IS An internal service fund is used by the City's management to charge the costs of the worker's compensation program. The assets and liabilities of the internal service fund are included with governmental activities. The following liabilities, Including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. These liabilities at year end consist of' Compensated absences Net OPEB obligation Bonds payable Accrued interest on the bonds Net Assets of Governmental Activities 250,331,663 85,844,940 2,996.810 2,807,425 55.225,670 512,680 The notes to the basic financial statements are an integral part of this statement. 17 $ 11,604,341 458,315 164,486,723 2,327,348 [61,542,585J $ 117,334,142 CITY OF SALINA, KANSAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS For the Year Ended December 31,2011 Flood & Tourism Drainage and Special General ImQrovement Convention Gas REVENUES: Taxes Real estate taxes $ 7,564,508 $ -$ -$ Delinquent taxes 212,244 6,016 Motor vehicle taxes 894,671 General sales taxes 11,767,400 Selective sales taxes Other taxes 5,083,919 1,305,959 Intergovernmental 813,185 1,362,327 Special assessments Licenses and permits Charges for services 7,822,307 Investment revenue 28,972 143 3,718 Reimbursements Miscellaneous 501,260 11,550 Total revenues 34,688,466 17,566 1,306,102 1,366,045 EXPENDITURES: Current General government 3,461,488 Public safety 18,117,827 Public works 6,132,020 9,784 427,429 Public health and sanitation 1,176.082 Culture and recreation 2,734,957 Planning and development 2,319.300 736,386 Miscellaneous Capital outlay 555,048 196,308 1,183,678 Debt service Principal retirement Interest and other charges Total expenditures 34496.722 206.092 736,386 1,611,107 Excess [defiCiency) of revenue and other sources over [under] expenditures and other [uses] 191.744 [188.526J 569,716 [245,062] OTHER FINANCING SOURCES [USES) Issuance of bonds Bond premium Transfers In 868,838 907 180,000 Transfers [out) [997,949J [596,440J [1,836J Total other financing sources [uses] [129,111J 907 [596,440] 178,164 Net change in fund balance 62,633 [187,619J [26,724) [66,898) Fund balance -Beginning of year 3,617,181 188,526 367,197 1,484,641 Restatement of prior year fund balance 156,424 FUND BALANCE -Beginning of year. as restated 3,773,605 188,526 367.197 1,484,641 Fund balance -End of year $ 3,836,238 $ 907 $ 340,473 $ 1,417,743 Other Total Bicentennial Sales Tax Debt Capital Governmental Governmental Center Capital Service Projects Funds Funds $ -$ -$ 2,723,262 $ -$ $ 10,287,770 55,583 273,843 254,970 1,149,641 11,767,400 3,763,045 317,297 4,080,342 6,389,878 725,637 2,901,149 1,535,487 1,535,487 6,250 6,250 783,028 1,125,022 9,730,357 193 5,683 13,686 9,634 6,620 68,649 32,000 32,000 692 12,983 72,293 598,778 783,913 3,768,728 4.595,971 41,634 2,253.119 48,821,544 3,461,488 18,117,827 6,569,233 153,730 1,329,812 1,548,901 1,616,170 5,900,028 288,275 3,343,961 35 35 11,028 1,032,526 6,338,741 529,401 9,846,730 4,276,195 135,000 4,411,195 1,771,581 151,055 161,744 2,084,380 1,559.929 1.032,526 6.047.776 6489.796 2,884,355 55,064,689 [776,016J 2.736.202 [1,451,805J [6,448,162J [631,236J [6,243,145) 6,565,000 6,565,000 22.985 22,985 872.849 8,558 2,225.565 3.289,564 547,389 7,993,670 [3,501,556) [83.488J [405,549) [105,259J [5,692,077J 872.849 [3.492.998) 2.165,062 9449.015 442.130 8.889,578 96.833 [756,796] 713,257 3,000,853 [189,106] 2,646,433 46.048 2,154,367 571,873 [2,610,001] 2,981,652 8,801,484 156,424 46,048 2,154,367 571,873 [2,610,001J 2,981,652 8,957,908 $ 142,881 $ 1,397,571 $ 1,285,130 $ 390,852 $ 2,792,546 $ 11,604,341 The notes to the basic financial statements are an integral part of this statement. 18 CITY OF SALINA, KANSAS RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE WITH THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES For the Year Ended December 31,2011 Total Net Change In Fund Balances -Governmental Funds Amounts reported for governmental activities in the statement of activities are different because Capital outlays to purchase or build assets are reported in governmental funds as expenditures. However, for governmental activities those costs are shown in the statement of net assets and allocated over their estimated useful lives as annual depreciation expenses in the statement of activities. This is the amount by which capital outlays exceeds depreciation in the period. Gain on sale of assets Proceeds from sale of assets Capital outlays Depreciation expense Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recorded as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. This IS the amount by which interest decreased. An internal service fund is used by the city's management to charge the costs of certain activities to the individual funds. The revenues and expenses of certain internal service fund is reported with governmental activities. Some expenses reported in the statement of activities, such as compensated absences and other post employment benefits, do not require the use of current financial resources and therefore are not reported as expenditures In governmental funds. Bond and temporary note proceeds are other financing sources in the governmental funds, but they increase long-term liabilities in the statement of net assets and do not affect the statement of activities. 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. Repayment of bond principal and bond issuance costs is an expenditure in the governmental funds, but it reduces long-term liabilities in the statement of net assets and does not affect the statement of activities. Changes In Net Assets of Governmental Activities [77,143] [10,070] 2,254,765 [4,725,361] The notes to the basic financial statements are an integral part of this statement. 19 $ 2,646,433 [2,557,809] 314,150 584,822 [523,988] [6,570,801J . 4,530,999 $ [1,576, 194J CITY OF SALINA KANSAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31 , 2011 Business-Type Activities. Emer~nse Funds Solid Waste Water and ASSETS Disposal Sewer Sanitation Golf Course Current assets Cash and Investments $ 3,379.526 $ 24,042,117 $ 621.683 $ 3,955 Receivables (net of allowance for uncollectlbles) Accounts 231,123 1,026,364 139,172 Interest 16 Inventory and prepaid supplies 544,052 27,650 Deferred charges 375,179 Total current assets 3,610,665 25.987,712 760855 31.605 Capital assets Nondepreciable capital assets Construction In progress 1'i ,062,055 Land 682,000 844.002 15,000 Depreciable' capital assets Capital assets 8,278,501 90,480,372 1,557,447 992,099 Less accumulated depreCiation 5,465,856 39.202.619 911,117 693,137 Total capital assets 3,494,645 63,183.810 646,330 313,962 Total assets $ 7,105.310 $89171.522 $1,407.185 $ 345,567 Liabilities Current liabilities Accounts payable $ 22.192 ;;; 262,444 ;;; 6.859 $ 2954 Retalnage payable 608,219 Interest payable 8,514 202,777 Meter depOSits payable 163,904 Current portion of compensated absences payable 11.215 68.382 22.203 20501 Current portion of accrued claims payable Current portion of general obligation bonds payable 486.302 713,746 Current portion of revenue bonds payable 343696 Total current liabilities 528223 2,363168 29,062 23,455 Noncurrent liabilities. Compensated absences payable 48,340 294,765 95,709 88,376 Accrued claims payable Net OPEB Obligation 43,944 209.872 59830 20.812 Payable from restncted assets General obligation bonds payable 732.806 5.285053 Revenue bonds payable 15,850,229 Landfill post-closure care liabilities 2,042.254 Total noncurrent liabilities 2.867.344 21,639,919 155,53S 109,188 Total liablllIles S 3.395 567 S, 24 003.087 5', 184,60~, $ 132,643 Net Assets Invested In capital assets, net of related debt $ 2,275,537 $ 40,991,086 $ 646,330 $ 313,962 Restricted Restricted for bond retirement 1,553,016 Unrestricted 1,434,206 22,624,333 576254 [101,038} Total net assets 5) 3,709,743 $ 65,168,435 $1.222,584 $ 212,924 The notes to the baSIC financial statements are an Integral part of thiS statement 20 Total Internal Enterorise Service Funds Funds $ 28,047,281 $ 3,089.207 1,396,659 16 571,702 115,694 375,179 30.390,837 3,204.901 11,062.055 1,541.002 101,308419 866.638 46,272729 838.848 67.638.747 27,790 $ 98.029.584 $ 3.232 691 $ 294449 5) 100.054 608,219 211.291 163.904 122301 17.384 563.720 1,200.048 343,696 2,943,908 681,158 527.190 74.940 149245 334,458 6.017.859 15850.229 2,042,254 24,771,990 224, ~ 8::: $27.715.898 $ 905.343 $ 44.226,915 $ 27,790 ~ ,553,016 24,533,755 2.299,558 $ 70,313,686 $ 2,327348 CITY OF SALINA, KANSAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS For the Year Ended December 31, 2011 Business-Type Activities: Enterense Funds Total Solid Waste Water and Enterpnse Diseosal Sewer Sanitation Golf Course Funds Operating revenues Charges for services $ 2,904,371 $ 17,904,056 $ 2,334,119 $ 636,202 $ 23,778,748 Federal grants 201,700 Miscellaneous 24,491 255,256 424 50.180 Total operating revenues 2,928.862 18,361,012 2,334.543 686.382 Operating expenses General govemment Public works 2.088,843 11,205,114 2,170,663 Recreation 791,488 Depreciation 740,047 1.758,777 120,799 33,569 Total operating expenses 2,828,890 12,963.891 2,291,462 825,057 Operating Income [loss] 99,972 5.397.121 43.081 [138,675] Nonoperating revenues [expenses] Investment revenue 9,072 72,452 1,839 36 Debt service [115,875] [632,390] Galn/[Ioss] on disposal of fixed assets 2,550 30.000 Accretion of bond premium 7,864 Amortization of bond issuance costs [11,051) Total nonoperating revenues [expenses] [106,803) [560,575) 31,839 36 Income [loss] before transfers [6,831) 4,836,546 74,920 [138,639) Transfers from [to] other funds Transfers In 47,228 Transfers [out] [180,000J [2,030,000) Total transfers [180,000) [2.030,000J 47,228 Capital contributions 3,803.565 Change In net assets [186.831J 6.610,111 74,920 [91411J Net assets January 1 3.895,812 58.578.036 1,159.149 304,622 Restatement 762 [19,712) [11.485) [287) Net assets, January 1. restated 3.896.574 58.558,324 1 147.664 304.335 Net assets, December 31 $ 3.709,743 $ 65,168,435 $ 1,222.584 $ 212.924 The notes to the basic financial statements are an integral part of this statement 21 201,700 330,351 24,310,799 15.464,620 791,488 2.653,192 18,909,300 5.401,499 83.399 [748,265] 32,550 7,864 [11.051) [635.503) 4.765.996 47.228 [2,210,000) [2.162.772) 3.803.565 6406789 63.937.619 [30,722) 63.906,897 $ 70,313.686 Intemal Service Funds $ 9,881,156 251,196 10,132,352 9,611,278 4,698 9,615,976 516,376 8,446 1,129 9,575 525.951 60.000 60,000 585.951 1.737.815 3,582 1,741,397 $ 2,327,348 CITY OF SALINA. KANSAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended Decem ber 31. 2011 Business-Type Activities' Entererrse Funds Solid Waste Water and Dlseosal Sewer Sanitation Golf Course Cash flows from operating actlvlltes Cash received from customers and users $2.948.382 $17.850.055 $ 2.332.281 $ 636.201 Cash paid to suppliers of goods or services [1.722.492J [7.552.182J [1.616.344] [391.100J Cash paid to employees [454.426J [2.945.574J [696.074J [386.401J Other operating receipts 24491 456.956 424 50.180 Net cash provided by [used InJ operating activities 795.955 7.809.255 20,287 (91,120) Cash flows from capital and related financing activities Purchase and construclton of capital assets [23.446J [11.886.827J [139.452J Capital contributions 3,803.565 Debt Issuance costs Incurred [315.426J Proceeds from sale of capital assets 2,550 30,000 Prrncipal payments -general obligation bonds [697.396J [691.410J Prrnclpal payments -revenue bonds [1.580.000J Proceeds from Issuance of revenue bonds 16,193.925 Interest paid (136,908) (496.760) Net cash provided by [used InJ capital and related finanCing activities [857.750J 5,029.617 [109.452J Cash flows from Investing activities Interest received 9,072 72.453 1.839 37 Cash flows from noncapltal finanCing activities Transfers In 47.228 Transfers [outJ [180,000) 12,030.000) Net cash provided by [used rnJ noncapltal ftnanclng activities (180.000J [2.030.000) 47,228 Net Increase [decreaseJ In cash and cash eqUivalents [232.723J 10,881.325 [87. 326J [43.855J Cash and cash eqUivalents, January 1 3.612,249 13,160.792 709.009 47,810 Cash and cash eqUivalents. December 31 $ 3.379.526 $ 24.042.117 621.683 $ 3.955 The notes to the baSIC financial statements are an Integral part of thiS statement 22 Total Internal Enterprrse Service Funds Funds $ 23.766.919 $ 9.786.038 [11.282.118J [8.955.819] [4.482.475J [631.488J 532.051 251.196 8.534.377 449.927 [12.049,725J 3,803.565 [315.426J 32,550 1,129 [1.388.806] [1,580,000J 16,193.925 (633.668) 4.062.415 1,129 83.401 8.445 47.228 60,000 [2,210.000) [2162.772) 60,000 10.517.421 519.501 17.529.860 2.569,706 $ 28.047.281 $ 3.089,207 CITY OF SALINA, KANSAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS (Continued) For the Year Ended December 31, 2011 Business-Type Acllvitles: Enterprise Funds Total Internal ReconCiliation of operating [loss] income to net cash provided by [used In] operating activities Solid Waste Water and Enterprise Disposal Sewer Sanitallon Golf Course Funds Service ~ Opera ling Income [loss] $ 99,972 $ 5,397,121 $ 43,081 $ [138,675) $ 5,401,499 $ 516,376 Adjustments to reconcile operating Income [loss] to net cash provided by [used In] operating actIVIties Depreciation expense [Increase) decrease In accounts receivable [Increase) decrease in Inventory Increase [decrease] In accounts payable Increase [decrease) in retalnage payable Increase [decrease] In accrued compensated absences Increase [decrease] in claims payable Increase [decrease) in landfill postclosure liabilities Increase [decrease) In net OBEB obligation Increase [decrease] In meter deposits payable Net cash provided by [used In] operating activities $ 740,047 44,011 [218,286] [12,979] [342] 133,066 10,466 795,955 $ 1,758,777 120,799 33,569 [79,017] [1,838] 31,950 [9.113] 35,620 [120,339] [1,394] 591,610 [1,806) [35,666] 19,536 49,984 14,250 4,957 25,016 7,809,255 $ 20,287 $ [91.120) The notes to the baSIC finanCial statements are an Integral part of this statement. 23 2,653,192 4,698 [36,844] 22,837 6,646 [304,399] 14,032 578.631 [18,278) 3,294 [95,119] 133,066 79,657 25,016 $ 8,534,377 $ 449,927 ASSETS CITY OF SALINA, KANSAS STATEMENT OF ASSETS AND LIABILITIES AGENCY FUNDS December 31, 2011 Cash and investments Total assets LIABILITIES AND FUND BALANCES Liabilities Accounts payable Total liabilities The notes to the basic financial statements are an integral part of this statement. 24 $ 313,300 $ 313,300 $ 313,300 $ 313,300 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Salina, Kansas (the City) is a municipal corporation governed by a mayor and a five-member commission. These financial statements present only the primary government of the City. Its component units, entities for which the government is considered to be financially accountable, are not presented within these fmancial statements. Component Units That Are Not Presented City of Salina Airport Authority -The Salina Airport Authority was created for the purpose of accepting as surplus property portions of the former Schilling A.F.B that was closed by the United States Department of Defense in June 1965. One of the primary functions of the Airport Authority IS to faCilitate the continued growth of jobs and payroll at the Airport Industrial Center. The Airport Authority is managed and controlled by a five-member Board of Directors appointed by the Salina City Commission. Any director may be removed by a majority vote of the Salina City Commission. The Airport Authority's basic mill levy (up to 3 mills) requires the approval of the City Commission. The Commission must also approve the issuance of general obligation debt by the Airport Authority. The Airport Authority has a December 31 fiscal year end. Housing Authority of the City of Salina -The purpose of the Housing Authority of the City of Salina (Housing Authority) IS to administer Public Housing Programs authorized by the United States Housing Act of 1937 . The Mayor of the City of Salina appoints the governing board. The City Commission may remove commissioners of the Housing Authority. The City must issue revenue bonds for the Housing Authority. The financial liability of the Housing Authority is essentially supported by the operating and debt service subsidies received under contract from the Federal government. The Housing Authority has a June 30 fiscal year end. Information in the accompanying financial statements covers the fiscal year ended June 30, 2011. Complete financial statements for each of the individual component units may be obtained at the entity's administrative offices. Salina Airport Authority 3237 Arnold Ave. Salina, KS JOint Ventures That Are Not Presented Housing Authority of the City of Salina 469 S. 5th Salina, KS The City of Salina also participates with Saline County In two joint ventures, for which financial information is not presented. The Saiina-Saline County Board of Health was organized by the City and County to promote public health. The City and County organized the Salina County-City Building Authority to acquire, operate and maintain facilities for the administrative offices of both governments. The primary governments each have an ongoing financial responsibility for the joint ventures. Separate financial statements are available from the governing boards of each joint venture. Complete financial statements for each of the joint ventures may be obtained at the entity's administrative offices. Salina-Saline County Board of Health 125 West Elm Street Salina, KS 25 Salina County-City Building Authority 300 West Ash Street Salina, KS CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Government-wide and fund financial statements The statement of net assets and the statement of activities report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Exceptions to this general rule are charges between the City's governmental and business-type activities. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are specifically associated with a service, program or department and therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program and grants and contributions that are restricted to meeting the operational requirements of a particular program. Taxes and other items, which are not classified as program revenues, are presented as general revenues of the city. Separate 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 funds are reported as separate columns in the fund financial statements. Nonmajor funds are aggregated and presented in a Single column in the fund financial statements. C. Measurement Focus, Basis of Accounting and Basis of Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund. 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 for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported uSing the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. 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 generally are recorded when a liability is Incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to certain compensated absences and claims and judgments are recognized when the obligations are expected to be liquidated with expendable available financial resources. 26 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting and Basis of Presentation (Continued) Property taxes and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met. The City applies all applicable Governmental Accounting Standards Board (GASB) pronouncements as well as the following pronouncements issued on or before November 30. 1989, unless those pronouncements conflict with or contradict GASB pronouncements: FASB Statements and Interpretations, APB Opinions, and ARBs. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total assets. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing goods and services in connection with a proprietary fund's ongoing operations. The principal operating revenues of the City's proprietary funds are charges to customers for sales and services. Operating expenses for enterprrse funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenues and expenses The internal service funds account for risk management, worker's compensation, health insurance, central garage and information services that are provided to other departments or agencies of the government, or to other governments. on a cost-reimbursement basis. Agency funds are custodial in nature and do not measure results of operations or have a measurement focus. Agency funds do however use the accrual basis of accounting. Agency funds are used to account for assets held as an agent for Individuals, other governmental units, private organizations and/or other funds. The City reports the following major governmental funds: General fund -To account for resources traditionally associated with government, which are not required legally, or by sound financial management to be accounted for in another fund Flood and drainage Improvement fund -To account for property tax revenues to be used for capital improvements to the flood control and stormwater drainage systems. Tourism and convention fund -To account for transiem guest tax revenues, which are specifically restricted to promotion and tourrsm activities. Special gas fund -To account for the City's share of motor fuel tax revenues, which are legally restricted to the maintenance, or Improvement of streets within the City. Bicentennial Center fund -To account for the activities of the City's convention center. Sales tax capital fund -To account for 87.5% of the 1/4 cent sales tax designated for capital, debt, and human services purposes Debt service fund -To account for the accumulation of resources and payment of general obligation bond principal and Interest from governmental resources and special assessment bond principal and interest from special assessment levies when the City IS obligated in some manner for the payment. 27 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting and Basis of Presentation (Continued) Capital projects fund -To account for the acquisition and construction of major capital facilities other than those financed by proprietary funds and trust funds. The City reports the following major proprietary funds: Sanitation fund -To account for the operations of the City's refuse collection service. Solid waste disposal fund -To account for the activities of the City's landfill. Go!f course fund -To account for the operations of the municipal golf course. Water and sewer fund -To account for the activities of the City's water and sewer operations. D. Assets, Liabilities, Fund Balance, and Net Assets 1. Pooled cash and investments The City maintains a cash and Investment pool that IS available for use by all funds managed by the city. Each fund type's portion of this pool is displayed In the financial statements as "Cash and Investments." The city's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. investments in the Kansas Municipal Pool are carried at fair value. Cash balances from all funds are invested to the extent available in certificates of deposit and other authorized investments. Investments with maturity dates greater than three months are stated separately. Earnings from these investments, unless specifically designated, are allocated monthly to the investing fund based on the percentage of funds invested to total investments. All investments are carried at fair value. 2. Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the year are referred to as either "interfund receivables/payables" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds" Accounts Receivable. The City records revenues when services are provided All receivables are shown net of an allowance for doubtful accounts. Property taxes receivable. Collection of current year property tax by the County Treasurer is not completed, apportioned or distributed to the various subdivisions until the succeeding year, such procedure being in conformity with governing state statutes. Consequently, current year property taxes receivable are not available as a resource that can be used to finance the current year operations of the City and, therefore, are not susceptible to accrual. Accruals of uncollected current year property taxes are offset by deferred revenue and are identical to the adopted budget for 2012. it is not practicable to apportion delinquent taxes held by the County Treasurer at the end of the accounting period, and further, the amounts thereof are not material in relationship to the financial statements taken as a whole. 28 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities and Equity (Continued) 2. Receivables and Payables (Continued) The determination of assessed valuations and the collection of property taxes for all political subdivisions in the State of Kansas are the responsibility of the vanous counties. The County Appraiser annually determines assessed valuations on January 1 and the County Clerk spreads the annual assessment on the tax rolls. The County Treasurer is the tax collection agent for all taxing entities within the County. In accordance with state statutes, property taxes levied during the current year are a revenue source to be used to finance the budget of the ensuing year. Property taxes are leVied and liens against property are placed on November 1 of the year prior to the fiscal year for which they are budgeted. Payments are due November 1, becoming delinquent, with penalty, December 21. Payments of 50% are accepted through December 20, with the second 50% then being due on or before May 10 of the following year. This procedure eliminates the need to issue tax anticipation notes since funds will be on hand prior to the beginning of each fiscal year. The City Treasurer draws down all available funds from the County Treasurer's office in two-month intervals. Taxes remaining due and unpaid at February 15 and July 1 are subject to collection procedures prescribed in state statutes. 3. Inventones and Prepaid Items Inventories are valued at cost using the first-in/first-out (FIFO) method The costs of governmental fund-type inventories are recorded as expenditures when consumed Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. 4. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets, are reported in the applicable governmental or bUSiness-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 and an estimated useful life In excess of two years. Such assets are recorded at histoncal cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Capital assets used In governmental fund types of the City are recorded at cost or estimated historical cost if purchased or constructed Donated capital assets are recorded at their estimated fair value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend assets lives are not capitalized. Major outlays for capital assets and Improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type is included in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. Property, piant and equipment of the primary government, are depreciated using the straight-line method over the following estimated useful lives: Assets Buildings Other equipment Vehicles Infrastructure 29 Years 50 5 -15 6 -10 30 -50 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 ~,Jote 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, Fund Balance, and Net Assets (Continued) 5. Compensated Absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. All employees of the City, except temporary and part time employees, may accumulate sick leave at a rate of 8 or 11 hours per month depending on their work duty schedule. There is no limit on the amount of sick leave that can be accumulated. Employees with more than five years of service with the City are paid for one-third of their accumulated sick leave at their current wage scale upon termination of employment in good standing. In 2001, a limited buy back policy was instituted. All regular employees are entitled to paid vacation time. Such leave is granted each year of employment. Employees must use 50% of leave accrued each calendar year and an employee's maximum accrued vacation leave balance cannot exceed 250 hours (or 350 hours for employees working 24 hour shifts). Employees are paid for all accumulated vacation leave at their current wage scale upon termination of employment. Vested or accumulated vacation leave that is expected to be liquidated with expendable available financial resources is reported as an expenditure and a fund liability in the government fund financial statements that will pay it. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Vested or accumulated vacation leave of the business-type funds and government wide financial statements are recorded as an expense and liability of those funds as the benefits accrue to employees. A liability is recorded for accumulated rights to receive sick pay benefits that are payable upon termination of employment. The General Fund, Bicentennial Center Fund, Central Garage Fund, Information Systems Fund, Sanitation Fund. Solid Waste Fund, Golf Course Fund, and Water and Sewer Fund have been used in prior years to liquidate the liability for compensated absences. 6. Temporary Notes Upon authorization for the issuance of general obligation bonds for certain improvements, Kansas law permits the temporary financing of such improvements by the issuance of temporary notes. Temporary notes issued may not exceed the aggregate amount of bonds authorized, are interest bearing and have a maturity date not later than four years from the date of issuance of such temporary notes. Temporary notes outstanding are retired from the proceeds of the sale of general obligation bonds. 7. Long-term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs. are deferred and amortized over the life of the bonds using the effective 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 premiums and discounts, as well as 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. 30 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, Fund Balance, and Net Assets (Continued) 8. Fund Balances In the fund financial statements, governmental funds report fund balance in the following classifications: nonspendable, restricted, committed, assigned and unassigned. Nonspendable fund balance includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Restricted fund balance indicates that constraints have been placed on the use of resources either by being externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional prOVisions or enabling legislation. Committed fund balances include amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the city commission. Assigned fund balances include amounts that are constrained by the City management's intent to be used for specific purposes, but are neither restricted nor committed. Unassigned fund balance 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. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available restricted amounts are considered to be spent first. When an expenditure is incurred for purposes for which committed, assigned, or unassigned fund balance is available, the following is the order in which resources will be expended: committed, assigned and unassigned. The following is the detail for fund balance classifications in the finanCial statements: Malor Governmental Funds Flood & Tourism Other Total Dramage and SpeCial Bicentennial Sales Tax Debt Capital Governmental Governmental General Improvement Convention Gas Center Capital Service Prolects Funds Funds Fund Balances Nonspendable for Inventory $ 89.716 $ $ $ 89716 Restricted for Public works 1.094.720 1.094720 Public health and sanitation Culture and recreatIon 45236 45.236 Planning and development 340473 298,015 638488 Debt payments 1,285,130 547,999 1,833129 Committed for Public safety [7,866J [7866J Culture and recreation 142,881 524,907 667 788 Planmng and development 6102 6,102 Cemetery 421,037 421,037 Capital Improvements 610134 [2477,564) 907112 [960,318) AssIgned for General government 18450 18450 Pubhcworks 36755 907 323,023 360,685 Planning and development 11,376 11,376 Capital Improvements 226,235 787437 2,868.416 50,000 3,932,088 UnaSSigned 3453706 ---------3453,706 Total Fund Balances $ 3,836,238 $ 907 $ 340.473 $ 1,417.743 ~ ~ $ 1,285,130 ~ $ 2,792,546 $ 11 604,341 31 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, Fund Balance, and Net Assets (Continued) 9. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 10. Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net assets are reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Note 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Information Kansas statutes require that an annual operating budget be legally adopted for the general fund, special revenue funds (unless specifically exempted by statute), debt service fund, and enterprise funds. The statutes provide for the following sequence and timetable in the adoption of the legal annual operating budget: 1. Preparation of the budget for the succeeding year on or before August 1. 2. Publication in local newspaper of the proposed budget and notice of public hearing on the budget on or before August 5. 3. Public hearing on or before August 15, but at least ten days after publication of notice of hearing. 4. Adoption of the final budget on or before August 25. The statutes allow the governing body to increase the originally adopted budget for previously unbudgeted increases in revenue other than ad valorem property taxes. To do this, a notice of public hearing to amend the budget must be published In the local newspaper. At least ten days after publication the hearing may be held and the governing body may amend the budget at that time. The 2011 budget was amended for the Flood & Drainage Improvement Fund, Sales Tax Capital Fund, Water and Sewer Fund, Risk Management Fund and Central Garage Fund 32 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued) A. Budgetary Information (Continued) The statutes permit management to transfer budgeted amounts between line items within an individual fund. However, such statutes prohibit expenditures in excess of the total amount of the adopted budget of expenditures of individual funds. Budget comparison statements are presented for each fund showing actual receipts and expenditures compared to legally budgeted receipts and expenditures. All legal annual operating budgets are prepared using the statutory basIs of accounting, in which, revenues are recognized when cash is received, and expenditures include disbursements, accounts payable, and encumbrances. Encumbrances are commitments by the municipality for future payments and are supported by a document evidencing the commitment, such as a purchase order or contract. All unencumbered appropriations (legal budget expenditure authority) lapse at year end. A legal operating budget is not required for capital projects funds, non-major debt service funds, trust funds, and the following special revenue funds: Bicentennial Center Event, HUD Community Development, Community Development Revolving, Heritage Commission, CDBG-ED, HOME V, Special Law Enforcement, Police Grants, DARE Donations, War Memorial Maintenance and Federal Care Grant. A legal operating budget is not required for the following Enterprise funds: Solid Waste Construction, Water and Sewer Principal and Interest, Water and Sewer Bond Reserve, Water and Sewer Construction and Reserve funds. A legal operating budget is also not required for the Internal Service funds. Actual to budget comparisons for these funds that present budgets to the Commissioners are shown strictly for informational purposes. Spending in funds, which are not subject to the legal annual operating budget reqUirements are controlled by federal regulations, other statutes, or by the use of internal spending limits established by the governing body. B. Statutory Violations Actual exceeded budgeted expenditures at December 31, 2011 in the Flood & Drainage Improvement Fund and Sales Tax Economic Development Fund, which violates KSA 79-2935. C. legal Debt Margin The City is subject to the municipal finance law of the state of Kansas which limits the bonded debt (exclusive of revenue bonds and special assessment bonds) the city may have outstanding to 30 percent of the assessed value of all tangible taxable property within the city, as certified to the county clerk on the proceeding August 25. At December 31, 2011, the statutory limit for the City was $133.379.948, providing a debt margin of 75,990,305. 33 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 3. RESTATEMENT OF EQUITY The implementation of GASB 54 required the reclassification of the governmental fund balances. The following is the reclassification of fund balance as of December 31, 2010. Fund Balance Classification As of December 31. 2010 Unreserved Reserved Total Governmental Fund' General Fund $ 3,517,895 $ 99,286 $ 3,617,181 Flood & Drainage Improvement Fund 187,350 1,176 188,526 Tourism and Convention Fund 367,197 367,197 Special Gas Fund 986,224 498,417 1.484,641 Bicentennial Center Fund 46,048 46,048 Sales Tax Capital Fund 1,572,216 582,151 2,154,367 Debt Service Fund 571,873 571,873 Capital Projects Fund [6,654,370J 4,044,369 [2,610,001J Other Governmental Funds 2,365,603 616,049 2.981.652 Total Governmental Funds $ 2,388,163 $ 6,413,321 $ 8,801.484 Fund Balance Classification As of December 31. 2010 Reclassified NonsQendable Restricted Committed Assigned Unassigned Total Governmental Fund General Fund $ 87.238 $ $ -$ 99,286 $ 3,430,657 $ 3.617,181 Flood & Drainage Improvement Fund 187,350 1,176 188,526 Tourism and Convention Fund 367,197 367,197 Special Gas Fund 986.224 498.417 1,484,641 Bicentennial Center Fund 46,048 46,048 Sales Tax Capital Fund 1,572,216 582151 2,154,367 Debt Service Fund 571.873 571,873 Capital Projects Fund [6,654.370J 4.044.369 [2,610,001J Other Governmental Funds 944,240 2,031,076 6,336 2,981.652 Total Governmental Funds $ 87.238 $ 2,869,534 $ [2.817,680J $ 5.231.735 $ 3,430,657 $ 8,801,484 Following the close of the previous fiscal year, it was discovered that several capital assets were misclassified or recorded incorrectly. Additionally, it was discovered that accounts receivable had not been properly recorded. Accordingly, the beginning net assets balances were restated, the effects of which are as follows: Net Assets/Fund Balance, December 31, 2010 Capital Asset Adjustment Accounts Receivable Adjustment Net Assets/Fund Balance, December 31,2010, Restated Solid Waste Water and Golf Central Governmental General Disposal Sewer Sanitation Course Garage Activities Fund Fund Fund Fund Fund Fund $ 117,797,911 $ 3,617,181 $ 3,895,812 $ 58,578,036 $ 1,159,149 $ 304,622 $ 205,887 956.001 762 [19.712J [11485] [287J 3,582 156,424 156.424 $ 118,910,336 $ 3,773,605 $ 3,896,574 $ 58.558.324 $ 1,147.664 $ 304,335 $ 209,469 34 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 4. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments The City's cash is considered to be active funds by management and is invested according to KSA 9-1401. The statute requires that banks eligible to hold active funds have a main or branch bank in the county in which the City is located or in a county adjacent to the City and the banks provide an acceptable rate for active funds. Various City investments are considered to be idle funds by management and are invested according to KSA 12-1675. The statute requires that the City invest its idle funds in only temporary notes of the City, bank certificates of deposit, repurchase agreements, and if eligible banks do not offer an acceptable rate for the funds: U.S. Treasury bills or notes or the Municipal Investment Pool (KMIP). Maturities of the above investments may not exceed two years by statute. Some of the City's investments are of bond proceeds invested pursuant to KSA 10-131. This statute allows additional investment authority beyond that of KSA 12-1675. Investments of bond proceeds may follow KSA 12-1675 or include other investments such as the KMIP, direct obligations of the U.S. government or any agency thereof, investment agreements with a financial institution the obligations of which at the time of investment are rated in either of the three highest rating categories by Moody's investors service or Standard and Poor's corporation, and various other investments as specified in KSA 10-131 . Ai December 31,2011, the City has the following investments: Investment Type Kansas Municipal Investment Pool U.S. Government Securities Total fair value Fair Value $ 305,158 S&P AAAf/S 1 + 22,063,739 N/A $ 22,368,897 The municipal investment pool is under the oversight of the Pooled Money Investment Board. The board is comprised of the State Treasurer and four additional members appOinted by the State Governor. The board reports annually to the Kansas legislature. State pooled monies may be invested in direct obligations of, or obligations that are insured as to principal and interest by the U.S. government or any agency thereof, with maturities up to four years. No more than 10 percent of those funds may be invested in mortgage-backed securities. In addition, the State pool may invest in repurchase agreements with Kansas banks or with primary government securities dealers. The City's investment policy provides direction on concentration risk. The City policy states that funds shall be diversified to reduce the extent of losses due to having an unbalanced portfolio in terms of maturities, instrument type, and issuers. Therefore, portfolio maturities shall be staggered to avoid undue concentration of assets in a specific maturity sector. Liquidity, free of market risk, shall be assured through practices insuring that the next disbursement date and payroll date are covered through maturing investments, marketable U.S. Treasury Bills, the Municipal investment Pooi, or money market accounts. - Default risk shall be minimized by requiring that all security purchases occur on a delivery vs. payment basis, and that all securities are adequately collateralized. Risk of market price volatility shall be controlled through the adoption of a "buy and hold" strategy whereby the City holds each investment to maturity, coupled with maintenance of an adequate liquidity position to insure the ability to meet normal anticipated cash flow needs. 35 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) A. Deposits and Investments (Continued) B . When advantageous, it is allowable to sell investments to realize a gain due to price fluctuations; however, such transactions shall not be a part of the normal course of business. The City recognizes that investment risks can result from issuer defaults, market price changes or various technical complications leading to temporary illiquidity. Portfolio diversification is employed as a way to control risk due to issuer default. In the event of a default by a specific issuer, the Director of Finance and Administration shall review, and, if appropriate, proceed to liquidate securities having comparable credit risks. Custodial credit risk is the risk that in the event of a bank failure, the City's deposits may not be returned to it. The City's deposit policy for custodial credit risk require that the depository banks will maintain 100% security in the form of FDIC coverage and pledged collateral according to KSA 9-1402. Receivables . Receivables as of year end, including the applicable allowances for doubtful accounts, are as follows. Tourism and Special Bicentennial Debt General Convention Gas Center Service Subtotal Primary Government Receivables Accounts $ 2,889,545 $ 338,271 $ $ 54,966 $ -$ 3.282,782 Taxes 8,094,093 312.648 2,441,349 10,848,090 Interest 35,877 35,877 Gross receivables 11,019.515 338,271 312,648 54,966 2,441.349 14,166,749 Less allowance for uncollectibles [2,211,730] [2,211,730J Total $ 8.807,785 S, 338,271 $ 312,648 $ 54,966 $ 2,441,349 $ 11,955.019 Solid Water Other Waste and Governmental Sanitation Dlseosal Sewer Total Primary Government Receivables Accounts $ 52,151 $ 201,973 $ 231,123 $ 1489,511 5) 5,257.540 Taxes 10.848,090 Interest 16 35.893 Gross receivables 52151 201 973 231139 1489.511 16141.523 Less allowance for uncollectibles [982] r62.801J [463.147J [2,738660] Total $ 51169 $ 139,172 $ 231,'139 S 1,026,364 $ 13402.863 36 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) C. Interfund Receivables and Payables The composition of interfund balances as of December 31,2011, is as follows: Fund Types Due From General Fund $ 9,375 $ Other Government Funds 9,375 $ 9,375 $ 9,375 The City uses interfund receivables and payables as needed when pooled cash is negative within a fund until investments mature or grant proceeds are received. All payables are cleared in less than one year. 37 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) D. Capital Assets Capital asset activity for the year ended December 31, 2011, was as follows: Balance Adj Bal Balance 12/31/2010 Adlustments 12/3112010 Additions Retirements 12/3112011 City governmental activities Governmental activities Capita I assets, not bemg depreciated Construction m progress $ 32,549,155 $ 81,670 $ 32,630,825 $ 2.945,099 $ 3,021,567 $ 32.554,357 Land 22,477,191 22,477,191 22477,191 Capital assets, being depreciated Infrastructure 144,316,296 144.316,296 1.829,401 146,145,697 Buildmgs and Improvements 36.233,800 36,233,800 36,233,800 Vehicles 7,480,033 810.889 8,290,922 255,156 216,023 8.330,055 Equipment, furniture and fixtures 5,353682 92,755 5,446,437 246.676 235,912 5,457.201 Total capital assets 248410,157 985,314 249,395,471 5,276.332 3,473,502 251.198,301 Less accumulated depreciation for Infra structu re 60,603.797 [30,296] 60,573,501 2.964.133 63.537.634 BUildings and Improvements 12.609.132 10,741 12,619.873 1,023,364 13.643.237 Vehicles 5,035.374 [40.529] 4,994845 513,718 174,927 5333.636 Equipment. furniture and fixtures 4039705 89397 4129.102 228844 188.665 4.169.281 Total accumulated depreciation 82.288008 29.313 82.317321 4,730.059 363.592 86.683.788 Governmental activities capital assets net $ 166.122.149 $ 956.001 $ 167.078150 $ 546.273 $ 3109.910 $ 164,514.513 Business-type activities Capital assets. not being depreciated Construction In progress $ 1.516.604 $ $ 1.516,604 $ 10,781,482 $ 1.236,031 $ 11.062.055 Land 1,541,002 1.541,002 1,541,002 Capital assets. being depreciated Infrastructure 68.957,665 11.932 68,969,597 2.333997 71.303.594 Buildings and Improvements 22,587,106 22,587.106 22.587,106 Vehicles 2,987.740 [41,385] 2.946,355 139,452 102,647 2,983.160 Equipment. furniture and fixtures 4.376.725 27,010 4,403.735 30,824 4.434.559 Total capital assets 101,966,842 [2.443] 101,964,399 13.285,755 1.338.678 113.911,476 Less accumulated depreciation for Infrastructure 28.973.288 [34,750] 28,938.538 1,774.866 30,713 40~ Buildings and Improvements 10,241.870 17,027 10,258.897 424,276 10.683,173 Vehicles 2,084.391 9,460 2,093,851 179,756 102,647 2170.960 EqUipment, furniture and fixtures 2,394,356 36,542 2,430,898 274.294 2,705,192 Total accumulated depreciation 43.693905 28279 43.722184 2653192 102.647 46,272729 Business-type activIties capital assets net $ 58.272.937 $ [30,722) $ 58,242,215 $ 10632.563 $ 1.236.031 $ 67.638,747 38 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) D. Capital Assets (Continued) The City's depreciation expense was charged to governmental functions as follows: E. Long-Term Debt Governmental Activities: General government Public safety Public works Public health Culture and recreation Planning and development Total depreciation Business-type Activities: Solid Waste Disposal Water and Sewer Sanitation Golf Course Division Total depreciation $ 8,990 507,826 3,265,341 38,013 803,772 106,117 $ 4,730,059 $ 740,047 1,758,777 120,799 33,569 $ 2,653,192 Following is a summary of changes in long-term debt for fiscal year 2011. Balance January 1, 2011 Additions Deletions Governmental activities' General obligation bonds $ 53,120,953 $ 6,587,986 $ 4,483,269 Accrued compensation 3,230,488 440,340 581,694 Temporary notes 2,500,000 3,400,000 2,500,000 Total $ 58,851,441 $ 10,428,326 $ 7,564,963 Business-type activities. General obligation bonds $ 8,614.577 $ -$ 1,396,670 Revenue bonds 1,580,000 16,193,925 1,580,000 Accrued compensation 667,768 104,025 122,302 Total $ 10,862,345 $ 16,297,950 $ 3,098,972 39 Balance December 31, 2011 $ 55,225,670 3,089,134 3,400,000 $ 61,714,804 $ 7,217,907 16,193,925 649,491 $ 24,061,323 Amounts Due Within One Year $ 5,051,038 581,694 3,400,000 $ 9,032,732 $ 1,200,048 343,696 122,301 <t 1,666,045 '" CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) E. Long-Term Debt (Continued) The following is a detailed listing of the city's long-term debt including general obligation bonds, revenue bonds, temporary notes and loans payable: Primary Government Original Interest Bonds General Obligation Bonds Issue Rates Outstanding Internal Improvements 2002B, due 10/1/2017 $ 1,980,000 2.70% to 4.50% $ 165,000 Internal Improvements 2003A, due 10/1/2018 4,350,000 2.13% to 3.85% 1,765,000 Refunding 2004A, due 8/1/2015 5,585,000 2.10% to 4.00% 1,170,000 internal Improvements 20048, due 10/1/2019 4,053,000 3.00% to 4.00% 1,390,000 Internal Improvements 2005A, due 10/1/2020 4,210,000 2.95% to 4.25% 2,200,000 Internal Improvements 2006A, due 10/1/2026 2,200,000 3.55% to 5.50% 1,650,000 Internal Improvements 20068, due 10/1/2021 885,000 4.00% to 4.50% 535,000 Internal Improvements 2007 A, due 10/1/2027 6,545,000 4.25% to 4.625% 5,085,000 Internal Improvements 2008A, due 10/1/2023 3,720,000 3.25% to 4.00% 3,000,000 Internal Improvements 2008B, due 7/1/2028 3,525,000 3.65% to 5.00% 3,415,000 Internal Improvements 2009A, due 10/1/2029 23,695,000 2.00% to 5.00% 21,877,424 Internal Improvements 201 OA, due 10/1/2025 6,916,592 2.00% to 3.875% 6,138,819 Internal Improvements 201 OB, due 10/1/2023 7,973,044 0.50% to 3.00% 7,464,348 Internal Improvements 2011A, due 10/1/2031 6,587,985 2.00% to 5.00% 6,587,986 Total general obligation bonds $ 62,443,577 Revenue Bonds Revenue 2011, due 10/1/31 $ 16,193,925 2.00% to 4.60% $ 16,193,925 Total revenue bonds $ 16,193,925 T em porary Notes Series 2011-1, due 8/1/2012 $ 3,400,000 0.40% $ 3,400,000 Total revenue bonds $ 3,400,000 40 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) E. Long-Term Debt (Continued) Annual debt service requirements to maturity for general obligation bonds to be paid with tax levies: General Obligation -Primary Government Bonds Interest Year Outstanding Due Total 2012 $ 6,251,086 $ 2,299,881 $ 8,550,967 2013 6,286,086 2,026,639 8,312,725 2014 5,961,086 1,802,699 7,763,785 2015 5,161,086 1,611,107 6,772,193 2016 5,001,086 1,440,080 6,441,166 2017-2021 19,865,428 4,617,544 24,482,972 2022-2026 10,541,564 1,805,185 12,346,749 2027-2031 3,376,155 307,047 3,683,202 Total $ 62,443,577 $ 15,910,181 $ 78,353,758 Annual debt service requirements to maturity for revenue bonds to be paid with utility revenues: Revenue Bonds - Prima~ Government Bonds Interest Year Outstanding Due Total 2012 $ 343,696 $ 596,991 $ 940,687 2013 623,696 590,191 1,213,887 2014 633,696 577,791 1,211,487 2015 643,696 565,191 1.208,887 2016 663,696 549,191 1,212,887 2017-2021 3,638.480 2,433,862 6,072,342 2022-2026 4,323,480 1,738,821 6,062,301 2027-2031 5,323.485 743.320 6,066,805 Total $ 16,193,925 $ 7,795,358 $ 23,989,283 Annual debt service requirements to maturity for temporary notes -to be paid through the issuance of general obligation bonds: Tempora~ Notes -Primary Government Bonds Interest Year Outstanding Due Total 2012 $ 3,400,000 $ 14,204 ,;;..$ _~3,~4.,;,.14,;.:,;,2;;,;0..;,4 41 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) E. Long-Term Debt (Continued) Special assessments. As provided by Kansas statutes, projects financed in part by special assessments are financed through general obligation bonds of the City and are retired from the debt service fund. Special assessments paid prior to the issuance of bonds are recorded as revenue in the appropriate project. Special assessments received after the issuance of bonds are recorded as revenue in the debt service fund. The special assessments are not recorded as revenue when levied against the respective property owners as such amounts are not available to finance current year operations. The special assessment debt is a contingent obligation of the City to the extent of property owner defaults, which have historically been immaterial. Conduit debt. The City has entered into several conduit debt arrangements wherein the City issues industrial revenue bonds to finance a portion of the construction of facilities by private enterprises. In return, the private enterprises have executed mortgage notes or leases with the City. The City is not responsible for payment of the original bonds, but rather the debt is secured only by the cash payments agreed to be paid by the prrvate enterprises under the terms of the mortgage or lease agreements. Generally, the conduit debt is arranged so that payments required by the private enterprises are equal to the mortgage payments schedule related to the original debt. At December 31,2011, total outstanding conduit debt was $86,472,423. Defeased debt. In prior years, the City has defeased certain other outstanding debt obligations by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust accounts and the defeased bonds are not included in the City's financial statements. At December 31.2011, the City had $325,000 of outstanding defeased debt. F. Reconciliation of Transfers A reconciliation of interfund transfers follows: Transfer In Transfer Out Major Funds: General fund $ 868,838 $ 997,949 Flood and drainage improvement fund 907 TOUrism and convention fund 596,440 Special gas fund 180,000 1,836 Bicentennial center fund 872,849 Sales tax capital fund 8,558 3,501,556 Debt service 2,225,565 83,488 Capital projects fund 3,289,564 405,549 Other governmental funds 547,389 105,259 Agency funds 198,821 Solid waste disposal fund 180,000 VI! ater and sewer fund 2,030,000 Golf course fund 47,228 Central garage fund 60,000 Total Transfers $ 8,100,898 $ 8,100,898 The City uses interfund transfers to share administrative costs between funds. 42 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 5. OTHER INFORMATION A. Defined Benefit Pension Plan Plan description. The City participates in the Kansas Public Employees Retirement System (KPERS) and the Kansas Police and Firemen's Retirement System (KP&F). Both are cost-sharing multiple-employer defined benefit pension plans as provided by Kansas statutes (KSA 74-4901 et seq). KPERS and KP&F provide retirement benefits, life insurance, disability income benefits and death benefits. Kansas law established and amends benefit provisions. KPERS and KP&F issue a publicly available financial report that includes financial statements and required supplementary information. Those reports may be obtained by writing to 611 South Kansas, Suite 100; Topeka, Kansas 66603 or by calling 1-888-275-5737. Funding Policy. K.S.A. 74-4919 establishes the KPERS member-employee contribution rate at up to 6% of covered salary. K.S.A. 74-4975 establishes the KP&F member-employee contribution rate at 7% of covered salary. The employer collects and remits member-employee contributions according to the provisions of section 414 (h) of the Internal Revenue Code. State law provides that the employer contribution rates be determined annually based on the results of an annual actuarial valuation. KPERS and KP&F are funded on an actuarial reserve basis. State law sets a limitation on annual increases in the employer contribution rates. The KPERS employer rate was 6.96% from January 1 to December 31,2011. The City employer contributions to KPERS for the years ending December 31, 2011, 2010, and 2009 were $987,826, $1,039,728 and $831,493, respectively, equal to the required contributions for each year. The KP&F employer rate established for fiscal years beginning in 2011 is 17.68%. Employers participating in KP&F also make contributions to amortize the liability for past service costs, if any, which are determined separately for each participating employer. The City's contributions to KP&F for the years ended December 31, 2011, 2010, and 2009 were $1,787,801, $1,664,356 and $1,769,379, respectively, equal to the required contributions for each year. B. Deferred Compensation Plan The City offers its employees a deferred compensation plan ("Plan") created in accordance with Internal Revenue Code Section 457. The Plan, available to all City employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. Plan assets are transferred to a plan agent in a custodial trust and are not available to the claims of the City's general creditors. C Flexible Benefit Plan (!.R.e. Section 125) The City Commission has adopted by resolution a salary reduction flexible benefit plan ("Plan") under Section 125 of the Internal Revenue Code. All City employees working more than 20 hours per week are eligible to participate in the Plan beginning after two full months of employment. Each participant may elect to reduce his or her salary to purchase benefits offered through the Plan. Benefits offered through the Plan include various Insurance and disability benefits. D. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; natural disasters and other events for which the City carries commercial insurance. No significant reductions in insurance coverage from that of the prior year have occurred. Settlements have not exceeded insurance coverage for each of the past three years. 43 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 5. OTHER INFORMATION (Continued) D. Risk Management (Continued) The City has established a limited risk management program for workers' compensation. The program covers all City employees. Premiums are paid into the Workers' Compensation Reserve Fund by all other funds and are available to pay claims, claim reserves and administrative costs of the program. An excess coverage insurance policy covers individual claims in excess of $250,000 ($350,000 for claims involving employees classified as policemen or firemen). Incurred claims, including incurred but not reported claims, have been accrued based primarily upon subsequent payments. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amounts of payouts and other economic and social factors. The liability for claims and judgments is reported in the Workers' Compensation Reserve Fund because it is expected to be liquidated with expendable available financial resources. Of the liability, $172,545 is considered to be due within one year. Changes in the balances of claims liabilities during the past two years are as follows: 2011 2010 Unpaid claims, January 1 $ 425,582 $ 372,610 Incurred claims (including IBNRs) 126,625 409,801 Claim payments [230,417] [356,829] Unpaid claims, December 31 $ 321}90 $ 425,582 The City established a limited risk management program for employee health and dental insurance in 1997 The program covers eligible City employees. Premiums are paid into the health insurance fund by all other funds and are available to pay claims, claim reserves and administrative costs of the program. An excess coverage insurance policy covers individual claims in excess of $50,000. Incurred claims, including incurred but not reported claims, have been accrued based primarily upon subsequent payments. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amounts of payouts and other economic and social factors. The liability for claims and judgments in the Health Insurance Fund because it is expected to be liquidated with expendable available financial resources. Therefore, all of the liability is considered to be due within one year Changes in the balances of claims liabilities during the past two years are as follows: Unpaid claims, January 1 Incurred claims (mcludlng IBNRs) Claim payments Unpaid claims, December 31 44 2011 2010 $ 382,502 $ 421,530 4,229,571 4,198,012 [4,220,898) [4,237,040J $ 391,175 $ 382,502 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 5. OTHER INFORMATION (Continued) E. Capital Projects Capital projects often extend over two or more fiscal years. The following is a schedule, which compares the project authorization including allowable interest revenue to total project expenditures from project inception to December 31,2011. Project N Ohio Grade Separation Bicentennial Improvements Markley, Magnolia, Valleyview Sanitary Sewer Improvements and Manhole and Wastewater Pump Station Rehabilitation Grand Prairie Addition Magnolia Commons South 9th Corridor, Phase IV Scoular Addition Waterline Imp Stone Creek Addition Riffel # 2 Infrastructure East Magnolia Road Replacement Aviation Service Center FIre Station # 1 Authorization $ 6,617,581 2,500,000 5,150,000 1,618,096 3,415,564 6,500,000 75,453 440,193 977,917 4,500.000 5,500,000 1,787,000 Expenditures $ 6,523,786 2,505,636 1,070,277 1,479,406 3,003,051 6,201,014 48,673 324,404 893,024 432,128 3,737,322 226,131 Project overages in the Bicentennial Improvements project will be reImbursed by special sales tax proceeds. F. Contingent Liabilities The City receives significant financial assistance from numerous federal and state governmental agencies in the form of grants and state pass-through aid. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and is subject to audit. Any disallowed claims resulting from such audits could become a liability of the General Fund or other applicable funds. However, in the opinion of management, any such disallowed claims would not have a material effect on any of the financial statements of the City at December 31,2011. The City is a defendant in various lawsuits Although the ciutcome of these lawsuits is not presently determinable, it is the opinion of the City's legal counsel that resolution of these matters will not have a material adverse effect on the fInancial condition of the City G. MuniCIpal Solid Waste Landfill State and federal laws and regulations require the City to place a final cover on its landfill site when it stops accepting waste, and to perform certain maintenance and mOnitoring functions at the site for thirty years after closure. Although closure and postclosure care costs will be paid only near or after the date that the landfill stops accepting waste, the City reports a portion of these closure and postclosure care costs as an operating expense of the solid waste fund in each period based on landfill capacity used as of each balance sheet date. The $2,042,254 reported as landfill closure and postclosure care liability at December 31 represents the cumulative amount reported to date based on the use of 29.5% of the estimated capacity of the landfill. 45 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 5. OTHER INFORMATION (Continued) G. Municipal Solid Waste Landfill (Continued) The City's solid waste fund will recognize the remaining estimate cost of closure and postclosure care of $4,891,330 as the remaining estimated capacity is filled over the remaining life expectancy of 68.8 years. These amounts are based on what it would cost to perform all closure and postclosure care in 2011. Actual cost may be higher due to inflation, changes, in technology or changes in regulations. The City is required by State and Federal laws and regulations to provide assurances of financial responsibility for closure and post- closure care. The City has elected to utilize the Local Government Financial test promulgated by the U.S. Environmental Protection Agency (at 40 CFR 258.74(f)) and the Kansas Department 'of Health and Environment to provide these assurances. Any future closure or post-closure care costs will be provided through the normal budgeting and rate setting process, including the issuance of general obligation bonds, if necessary. H. Environmental Matters The Kansas Department of Health and Environment (KDHE) issued a report in 1994 indicating the presence of volatile organic compounds at levels requiring remediation at the Salina Public Water Supply Wells Site. The City adopted a proactive Policy and Action Plan to remedlate the groundwater contamination, and on December 7, 1994, the City and KDHE entered into a Consent Order and Settlement Agreement under which the City assumed primary responsibility for the further investigation and remediation of the groundwater contamination. Field testing work has been completed. The necessary remediation work will be conducted over the next several years at a yet undetermined cost to the City's Water and Sewer Fund. The U.S. Department of Defense transferred property located at the former Schilling Air Force Base (the Base or Site) to the City on or about September 9, 1966. The property is now known to contain areas of extensive soil and groundwater contamination, which IS a result of the use and disposal of chlorinated solvents during military operations at the Base from 1942 until Base closure in 1965. The U.S. Department of Defense is responsible for the investigation and remediation of contamination caused by military activities at current and former military bases. The U.S. Army Corps of Engineers (Corps) is the lead agency for the Department at formerly used defense sites. The Corps has investigated the soil and groundwater contamination at the Site under the regulatory oversight of the U.S. Environmental Protection Agency (EPA) and the Kansas Department of Health and Environment (KDHE). The Site is not designated as a National Priority List Superfund site, but investigation and remediation are required to be in compliance with the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Potential liability for contamination under CERCLA extends broadly to parties associated with the release or presence of hazardous substances, Including not only those entities involved with contaminant use and disposal, but in some cases other current and former owners and operators of contaminated sites. As a current owner of extensive amounts of property at the Site, the City is potentially liable under CERCLA, although the City believes that it has meritorious defenses to such liability. The City is under no administrative orders from the EPA or KDHE The City is considered to be a Potentially Responsible Party (PRP) for the Site, primarily due to its status as a property owner. The Salina Airport Authority, City of Salina, Unified School District No. 305 and the Kansas Board of Regents (Kansas State University at Salina) (collectively Salina Public Entities) currently own over 90% of the nearly 4,000 acres of the Base property. 46 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31 , 2011 Note 5. OTHER INFORMATION (Continued) H. Environmental Matters (Continued) Beginning in August 2007, the Salina Public Entities initiated settlement negotiations with the U.S. Federal Government. The negotiation objectives at that time included transferring the responsibility for completing the cleanup from the U.S. to the Salina Public Entities. The local objective was to reach a settlement agreement with the U.S. that provides the Salina Public Entities sufficient funds to complete cleanup operations over a 30-year period. During calendar year 2008, the Salina Public Entities, by and through its environmental consultant, prepared a detailed Cost to Complete Estimate (CTC). The CTC preparation included consultation with the EPA and KDHE. The Salina Public Entities' CTC was completed in June of 2008 and submitted to the Corps. Subsequently, on January 23, 2009, the Salina Public Entities delivered a demand letter to the Corps. The letter demanded that settlement negotiations begin immediately with the U.S. Department of Justice. On May 14, 2009 the City was notified that the Corp referred the Base demand letter to the U.S. Department of Justice on May 12, 2009. The Salina Public Entities delivered on or about May 10, 2010, a settlement offer and a draft of a lawsuit complaint to the attorney for the U.S. Department of Justice. The Salina Public Entities planned to file suit against the U.S. if the matter was not settled by the end of May. 2010. The Salina Public Entities did not intend to cut off settlement negotiations by the filing of suit, and this has been communicated to the U.S. No remedial action plan or record of decision has been adopted by the EPA or KDHE. On or about May 27, 2010, the Salina Public Entities filed their Complaint against ~the United States of America, the United States Department of Defense and Secretary of Defense, Robert M. Gates, in his official capacity (collectively, "Defendants"). On or about September 22, 2010, the Salina Public Entities filed their First Amended Complaint in four counts: Count I Citizen Suit Claim Pursuant to 42 U.S.C.§ 9659(a)(2), Count II Citizen Suit Claim Pursuant to 42 U.S.C.§ 9659(a)(1), Count III Claim for Recovery of Response Costs Pursuant to 42 U.S.C.§ 9607(a) and Count IV Claim for Declaratory Judgment Pursuant to 42 U.S.C.§ 9613(g)(2). On or about October 6, 2010, Defendants filed their motion to dismiss and to strike, primarily with respect to the citizen suit claims. On or about March 25, 2011, Judge Murguia entered his Memorandum and Order. The Judge granted the Defendants' motion to dismiss Counts I and II (citizen suit claims) for lack of subject matter jurisdiction. He also granted the Defendants' motion to dismiss the Salina Public Entities' requests for attorney fees, with the exception of non-litigation attorney fees. He denied the Defendants' motion to strike the Salina Public Entities' allegations of a cohflict of interest. The Salina Public Entities' claims under Counts III and IV for response costs under CERCLA 9607(a) are not affected by the Judge's rulings. The Salina PubliC Entities disagree with most of the Judge's filings and, if necessary, plan to take an interlocutory appeal to the Tenth Circuit to contest the rulings. On or about April 22, 2011, Defendants filed their Answer to First Amended Complaint and Counterclaim against the Salina Public Entities. Count I of the Counterclaim alleges a claim for contribution under CERCLA, 42 U.S.C.§ 9613(f)(1). Count II of the Counterclaim alleges a claim for cost recovery under CERCLA, 42 U.S.C.§ 9607(a)(1). Count II alleges costs incurred by the U.S. Environmental Protection Agency of approximately $1,838,241 as of September 30, 2007, and alleges costs incurred by the Corps of approximately $14,915,228 as of April 17, 2009. The Salina Public Entities intend to vigorously contest the claims brought against them and will assert, among other defenses, the third party defense under 42 U.s.C.§ 9607(b )(3). 47 CITY OF SAUNA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 5. OTHER INFORMATION (Continued) H. Environmental Matters (Continued) Since the lawsuit remains pending without a final settlement, the City intends to vigorously pursue its claims and contest the claims brought against it. Based on presently known information, the City has determined that while a possible liability exists, at this time no reasonable estimate of the possible liability can be made. Therefore, no liability related to that matter has been recorded. I. Postemployment Health Care Plan Plan Description. The City operates a single employer defined benefit healthcare plan administered by the City. The Employee Benefit Plan (the Plan) provides medical and dental benefits to eligible early retirees and their spouses. KSA 12-5040 requires all local govemmental entities in the state that provide a group health care plan to make participation available to all retirees and dependents until the retiree reaches the age of 65 years. No separate financial report is issued for the Plan. Funding Policy. The contribution requirements of plan participants and the City are established and amended by the City. The required contribution is based on projected pay-as-you-go financing requirements. Plan participants contributed approximately $229,000 to the Plan (approximately 100% of total premiums) through their required contribution of $425 per month for retiree-only coverage and $1,141 for family coverage. 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 parameters 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 (or funding excess) over a period not to exceed thirty years. The following table shows the components of the City's annual OPEB cost for the Plan for the year, the amount actually contributed to the plan, and the changes in the City's net OPEB obligation to the Plan: Annual reqUIred contribution Interest on Net OPES Obligation Adjustment to Annual ReqUired Contribution Annual OPES cost (expense) Benefit payments Change In net OPES obligation Net OPES obligation -beginning of year Net OPES obligation -end of year 48 $ 961,335 95,743 [79,786J 977,292 229,000 748.292 2.393,591 $ 3,141,883 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 5. OTHER INFORMATION (Continued) I. Postemployment Health Care Plan (Continued) The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation for the year ended December 31,2011 was as follows: Annual Fiscal Annual OPEB Net Year OPEB Cost OPES Ended Cost Contributed Obligation December 31,2008 $ 910,418 $ 96,672 $ 813,746 December 31,2009 957,353 100,000 1,671,099 December 31,2010 921,492 199,000 2,393,591 December 31,2011 977,292 229,000 3,141,883 Funding Status and Funding Progress. As of the year ended December 31, 2011, the most recent actuarial valuation date, the Plan was not funded. The actuarial accrued liability for benefits was $9,019,806 and the actuarial value of asset was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $9,019,806. The covered payroll (annual payroll of active employees cbvered by the plan) was $21,942,428, and the ratio of the UAAL to the covered payroll was 41.11 %. 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 employr:nent, 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 statement, presents multiyear trend information about whether the actuarial value of plan assets (if any) are increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan participants) and include the types of benefits provided at the time of each valuation and the historical pattem of sharing of benefit costs between the employer and plan participants 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. In the year ended December 31, 2011, actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions include a 4.00% investment rate of return, which IS the rate of the . employer's own investments as there are no plan assets and an initial annual medical and dental healthcare cost trend of 9.30%, reduced by decrements to an ultimate rate 4.70% after eighty-two years. The UAAL IS being amortized as a level dollar over an open thirty-year period. 49 REQUIRED SUPPLEMENTARY INFORMATION CITY OF SALINA, KANSAS OTHER POST-EMPLOYMENT BENEFITS REQUIRED SUPPLEMENTARY INFORMATION December 31,2011 Schedule of Employer Contributions: Annual Fiscal Annual OPEB Net Year OPES Cost OPES Ended Cost Contributed Obligation December 31,2008 $ 910,418 $ 96,672 $ 813,746 December 31,2009 957,353 100,000 1,671,099 December 31, 2010 921,492 199,000 2,393,591 December 31,2011 977,292 229,000 3,141,883 Schedule of Funding Progress: Actuarial Actuarial Actuarial Unfunded Funded Covered Valuation Value of Accrued AAL RatiO Payroll Date Assets (a} Liabilitl: (b} (b} -(a} (alb} if.} 12/31/2008 $ $ 8,917,346 $ 8,917,346 0.0% $ 21,874,112 12/31/2009 8,917,346 8,917,346 0.0% 22,397,996 12/31/2010 9,019,806 9,019,806 0.0% 22,613,236 12/31/2011 9,019,806 9,019,806 0.0% 21,942,428 50 UAAL as Percent of Payroll (b-a}/(cl 40.77% 39.81 % 39.89% 41.11% CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) GENERAL FUND For the Year Ended December 31, 2011 Budgeted Amounts Actual Onglnal Final Revenues Taxes Real estate taxes $ 7,564,507 $ 7,359,721 $ 7,359,721 Delinquent taxes 212,244 292,488 292,488 Motor vehicle taxes 723.857 937,258 937,258 General sales tax 11,767,400 11,716,000 11,716,000 Other taxes 4,221.302 4.585,000 4,585,000 Total taxes 24,489.310 24,890,467 24.890,467 Charges for services General charges 144,556 General government 340 8,912 8,912 Public safety 3465,106 4,505,812 4.505.812 Public works 261,707 156,904 156,904 Health and sanitation 51,838 62,300 62,300 Culture and recreation 1,324.551 1,295,614 1,295,614 Community and economic development 10.368 9,982 9,982 Total charges for services 5,258.466 6,039,524 6,039,524 Operating grants, restricted General grants 153.566 185,000 185.000 Public safety 631.417 837,000 837,000 Community and economic development 28.202 Total operating grants, restricted 813,185 1.022,000 1,022,000 Operating grants, unrestricted General grants 2,500 503 503 Public works 250 3,000 3,000 Culture and recreation 8,241 18,000 18.000 Total operating grants, unrestricted 10,991 21,503 21,503 Interest income General Interest 15,749 65,000 65.000 Total interest income 15.749 65,000 65,000 Interfund services provided General services 1,392,161 918,017 918,017 General government 2,532,316 1.755,876 1,755.876 Community and economic development 63,340 50.501 50,501 Total interfund services provided 3,987.817 2,724.394 2,724.394 Miscellaneous revenues General miscellaneous revenues 118,112 134,321 134.321 General government 90 Public safety 185.054 199,000 199,000 Public works 4,134 10,000 10,000 Culture and recreation 16.439 25,000 25,000 Total miscellaneous revenues 323.829 368.321 368.321 Proceeds of capital assets General sales 30,000 30,000 Public safety 200 Total proceeds of capital assets 200 30,000 30,000 Total revenues 34,899,547 35,161,209 35,161,209 See Independent auditor's report on the financial statements 51 Variance with Final Budget Positive [Negative] $ 204,786 [80,244] [213,401] 51,400 [363,698) [401.157) 144.556 [8,572] [1,040.706] 104,803 [10,462] 28,937 386 [781,058) [31.434] [205,583] 28.202 [208,815) 1,997 [2.750] [9,759J [10,512) [49.251) [49,251) 474,144 776,440 12.839 1,263.423 [16.209] 90 [13,946] [5,866] [8,561) [44,4921 [30,000J 200 [29,800) [261,662] CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) GENERAL FUND (Continued) For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final Expenditures General Government City commission $ 102,880 $ 112.383 $ 112,383 City manager 505,962 555,736 555,736 Legal 381,704 305,300 305,300 Finance 617,575 553,074 553,074 Human resources 374,387 350,007 350,007 Other g.eneral government 1.198.470 987.080 987,080 Contingencies 20,884 50,000 50,000 Total general government 3.201,862 2,913,580 2,913,580 PubliC Safety Police 8,409,519 8,307,450 8,307,450 MUnicipal court 1,430,676 1,625,516 1,625,516 Fire 8,166.268 7.763,377 7,763,377 Total public safety 18,006,463 17,696,343 17,696,343 Public Works BUildings and general Improvements 1,005,385 1,253.194 1.253,194 Englneenng 997.558 980,799 980,799 Streets 1.759,697 1.826,158 1.826,158 Flood works 203,126 221,058 221.058 TraffiC control 743.165 819,062 819.062 Parks 1,409,829 1,444,930 1,444,930 ADA compliance 6,440 15,000 15,000 Total public works 6,125,200 6,560,201 6,560.201 Public Health and Sanitation Cemetery 157,981 146,827 146,827 Health department 1,018,101 967,138 967,138 Total public health and sanitation 1.176,082 1.113.965 1.113,965 Culture and Recreation SWimming pools 430.322 419.838 419.838 Neighborhood centers 41,773 46,233 46,233 Recreation 1.810.910 1,640,473 1,640,473 Arts and humanities 1,079 Smoky Hill museum 448,463 435.263 435,263 Total culture and recreation 2,732,547 2,541,807 2.541,807 Community Development Human relations 330,092 337.809 337,809 Development services 1,215,034 1,332,930 1,332,930 Agency contracts 771.970 783,921 783.921 Total community development 2317,096 2,454,660 2,454,660 Capital Outlay Capita! outlay 867,777 876.345 876,345 Cash Reserve 4,354,391 4,354.391 Total expenditures 34,427.027 38,511,292 38,511,292 Excess [deficiency] of revenues over [under] expenditures 472,520 [3,350,083) [3,350,083] See Independent auditor's report on the financial statements 52 Variance with Final Budget Positive [Negative] $ 9,503 49,774 [76,404] [64,501] [24,380] [211,390] 29,116 [288,282) [102,069] 194,840 [402,891) [310.120) 247,809 [16,759] 66.461 17,932 75,897 35,101 8.560 435,001 [11,154] [50,963) [62,117) [10,484] 4,460 [170,437] [1,079] [13,200) [190,740) 7,717 117,896 11,951 137,564 8,568 4,354,391 4,084,265 3,822,603 CITY OF SALINA. KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) GENERAL FUND (Continued) For the Year Ended December 31,2011 Budgeted Amounts Other financing sources [uses] Transfer in Transfer [out] Total other financing sources [uses] Excess [defiCiency] of revenues and other sources over [under] expenditures and other [uses] Unreserved fund balance, January 1 Prior year cancelled encumbrances $ Actual Original 168,838 $ 500,000 [997,949J [994,358J [829,111) [494,358) [356,591] [3.844.441] 2,918.651 3,978,485 7,140 Unreserved fund balance, December 31 2,569,200 $ 134,044 Reconciliation to GAAP Interest receivable Accounts receivable Taxes receivable Inventory Deferred revenue Current year encumbrances GAAP Fund Balance, December 31 35.877 677,815 8,094,093 89.716 [7,923,279J 292.816 $ 3.836,238 See Independent auditor's report on the financial statements. 53 Final $ 500,000 [994,358J [494.358J [3,844,441] 3,978.485 $ 134.044 Variance with Final Budget Positive [Negative] $ [331,162] [3,591J [334,753J 3,487,850 [1,059,834] 7,140 $ 2.435,156 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) FLOOD AND DRAINAGE IMPROVEMENT FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final Revenues Taxes Delinquent taxes $ 6.016 $ 2,268 $ 6,020 Total taxes 6,016 2,268 6,020 Interest income General interest 138 138 Total interest income 138 138 Miscellaneous revenues General miscellaneous revenues 11,550 8,064 Total miscellaneous revenues 11,550 8,064 Total revenues 17,566 2,406 14,222 Expenditures Capital Outlay 205,823 11,130 200,000 Total expenditures 205,823 11,130 200,000 Excess [deficiency] of revenues over [under] expenditures [188,257] [8,724] [185,778] Other financing sources [uses] Transfer in 907 Excess [defiCiency] of revenues and other sources over [underj expenditures and other [uses] [187,350] [8,724J [185,778] Unreserved fund balance, January 1 187,350 8,724 187,350 Unreserved fund balance, December 31 -$ -$ 1,572 Reconciliation to GAAP Current year encumbrances 907 GAAP Fund Balance, December 31 $ 907 See independent auditor's report on the financial statements. 54 Variance with Final Budget Positive [Negative] $ [4) [4J [138) [138) 3,486 3,486 3,344 [5,823) [5,823) [2,479] 907 [1,572] $ [1,572J CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) TOURISM AND CONVENTION FUND For the Year Ended December 31,2011 Budgeted Amounts Original Final Variance with Final Budget Positive [Negative] Revenues Taxes Other taxes $ 1,332,827 $ 1,350,000 $ 1,350,000 $ [17,173] Interest income General interest Total revenues Expenditures Community Development Tourism Total expenditures Excess [deficiencyJ of revenues . over [underJ expenditures Other financing sources [usesJ Transfer [out] Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] Unreserved fund balance, January 1 143 143 1,332,970 1,350,000 1,350,000 [17,030] 736,386 751,664 751,664 15,278 736.386 751,664 751,664 15,278 596,584 598,336 598,336 [1.752] [596,440] [600,000J [600,000J 3,560 144 [1,664J [1,664J 1,808 ___ 2,,-,0_5_8 1,664 1,664 394 Unreserved fund balance, December 31 2,202 $ -$ -.;;,$=~2:;,;;.2;.;;0=-,2 Reconciliation to GAAP Accounts receivable 338,271 GAAP Fund Balance, December 31 $ 340,473 See independent auditor's report on the financial statements. 55 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) SPECIAL GAS FUND For the Year Ended December 31, 2011 Budgeted Amounts Actual Original Final Revenues Operating grants, restricted Public works $ 1,366,522 $ 1,460,382 $ 1,460,382 Interest income General interest 3.718 6,000 6,000 Total revenues 1,370,240 1,466,382 1,466,382 Expenditures Public Works Streets 426,084 425,395 425,395 Capital Outlay 1,401,756 1,886,116 1,886,116 Cash Reserve 500,000 500,000 Total expenditures 1,827,840 2,811,511 2,811,511 Excess [deficiency) of revenues over [under) expenditures [457,600J [1,345,129J [1,345,129J Other financing sources [uses] Transfer in 180,000 180,000 180,000 Transfer [out] [1,836J Total other financing sources [uses] 178,164 180,000 180,000 Excess [deficiency] of revenues and other sources over [under] [279,436] [1,165,129J [1,165.129J expenditures and other [uses] Unreserved fund balance, January 1 735,009 1,165,129 1,165,129 Prior year cancelled encumbrances 370.888 Unreserved fund balance, December 31 826,461 $ -$ - Reconciliation to GAAP Taxes receivable 312,648 Retainage payable [44,389] Current year encumbrances 323,023 GAAP Fund Balance, December 31 $ 1,417,743 See independent auditor's report on the financial statements. 56 Variance with Fjnal Budget Positive [Negative] $ [93,860) [2,282J [96,142) [689) 484,360 500,000 983,671 887,529 [1,836J [1.836J 885,693 [430,120J 370,888 $ 826,461 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) BICENTENNIAL CENTER FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final Revenues Charges for services Culture and recreation $ 772,480 $ 1,379,500 $ 1,379,500 Interest income General interest 193 3,500 3,500 Miscellaneous revenues General miscellaneous revenues 692 Total revenues 773,365 1,383,000 1,383,000 Expenditures Culture and Recreation Bicentennial Center 1,548,901 1,902,262 1,902,262 Capital Outlay 11,028 532,850 532,850 Cash Reserve 329,400 329,400 Total expenditures 1,559,929 2,764,512 2,764,512 Excess [deficiency) of revenues over [under] expenditures [786,564) [1,381,512) [1,381,512) Other financing sources [uses] Transfer in 872.849 875,000 875,000 Total other financing sources [uses] 872,849 875,000 875,000 Excess [deficiency) of revenues and other sources over [under) expenditures and other [uses] 86,285 [506,512] [506,512] Unreserved fund balance, January 1 1.630 506,512 506.512 Unreserved fund balance, December 31 87,915 $ -$ - Reconciliation to GAAP Accounts receivable 54,966 GAAP Fund Balance, December 31 $ 142,881 See independent auditor's report on the financial statements. 57 Variance with Final Budget Positive [Negative] $ [607,020) [3,307) 692 [609,635J 353,361 521,822 329,400 1,204,583 594,948 [2,151) [2,151J 592.797 [504,882] $ 87,915 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) SALES TAX CAP IT AL FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final Revenues Taxes Selective sales tax $ 3,763,045 $ 3,686,500 $ 3,686,500 Interest income General interest 5,683 20,000 20,000 Total revenues 3,768,728 3,706,500 3,706,500 Expenditures General Government Other general government 155,000 Capital Outlay 2,371,778 1,805,000 3,130,211 Cash Reserve 185,580 Total expenditures 2,371,778 1,990,580 3,285,211 Excess [deficiency] of revenues over [under] expenditures 1,396,950 1,715,920 421,289 Other financing sources [uses] Transfer in 8,558 Transfer [out] [2,367,590) [2,000,000) [2,000,000) Total other financing sources [uses] [2,359.032) [2.000,000) [2.000.000) Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] [962,082J [284,080] [1.578,711 J Unreserved fund balance. January 1 1.572,216 284.080 1,578,711 Unreserved fund balance, December 31 610,134 $ -$ - Reconciliation to GAAP Current year encumbrances 787,437 GAAP Fund Balance. December 31 $ 1,397.571 See independent auditor's report on the financial statements. 58 Variance with Final Budget Positive [Negative] $ 76,545 [14,317J 62,228 155,000 758,433 913,433 975,661 8,558 [367.590) [359,032) 616.629 [6,495) $ 610,134 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES CITY OF SALINA, KANSAS COMBINING STATEMENTS -NONMAJOR FUNDS NONMAJOR SPECIAL REVENUE FUNDS Special revenue funds are uSed to account for specific revenues that are legally restricted to expenditure for particular purposes. Business improvement district fund -State law allows businesses within an area to voluntarily establish an improvement City. This fund is used to account for the assessments made on the District. All revenues are to be used within the Business Improvement District. Neighborhood park fund -To account for fees collected from new residential building projects in Salina. Expenditures are for acquisition or development of neighborhood parks in the growing areas of the community. Special parks and recreation fund -To account for liquor tax revenues, which must be used for park maintenance and improvements. Special alcohol fund -To account for liquor tax revenues, which must be used for programs, which address prevention, education or intervention for drug and alcohol abuse. Bicentennial center event fund -To account for the revenues and expenses associated with special events (concerts, shows, etc.) at the City's convention center. HUD community development fund -To account for grants received from the state to be used for housing or economic development purposes. Community development revolving fund -To account for funds, which may be loaned for housing and economic development, purposes, to later be repaid and reused on a revolving basis. Heritage commission fund -To account for revenues and expenses associated with heritage preservation activities. Sales tax economic development fund -To account for 12.5% of the 1/4 cent sales tax designated for economic Development purposes. Fair housing fund -To account for grants received from the federal government to be used to monitor and mediate fair housing complaints. CDBG ED fund-To account for grants received from the federal government to be used for economic development loans to qualifying businesses. HOME V fund -To account for grants received from the state government to be used for housing rehabilitation. Special law enforcement fund -To account for revenues received from the sale of forfeited assets acquired during drug enforcement activities. Expenses are limited to capital Items to be used for further drug enforcement activities. Police grants fund -To account for revenues from grants, which are to be used for special police activities, including the D ARE. program DARE. donations fund -To account for donations to the DARE. program. War memorial maintenance fund -To account for monies to be used for maintenance of the local war memorial. -Arts & humanities fund -To account for revenues and expenses associated with arts and humanities activities. Federal CARE Grant -To account for revenue and expenses associated with the CARE Grant. 59 CITY OF SALINA, KANSAS COMBINING STATEMENTS -NONMAJOR FUNDS NONMAJOR PERMANENT FUNDS Permanent funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the reporting government's programs. Cemetery endowment fund -To account for amounts expended for perpetual care of the City cemetery. Interest earnings are used for cemetery maintenance. Mausoleum endowment fund -To account for amounts charged for perpetual care of the City mausoleum. Interest earnings are used for mausoleum maintenance. Tricentennial commission fund -To account for donations to be used to celebrate the nation's tricentennial in the year 2076. 60 ASSETS Cash and investments Receivables Accounts Total assets CITY OF SALINA, KANSAS COMBINING BALANCE SHEET NON MAJOR GOVERNMENTAL FUNDS December 31,2011 Total Total Nonmajor Nonmajor Special Revenue Permanent Funds Funds $ 1,790,051 $ 426,741 51,169 $ 1,841,220 $ 426,741 LIABILITIES AND FUND BALANCES liabilities: Accounts payable $ 14,039 $ - Due to other funds 9,375 Total liabilities 23,414 Fund balances: Restricted 343,255 Committed 1,424,551 426,741 Assigned 50,000 Total fund balances 1,817.806 426,741 Total liabilities and fund balances $ 1,841,220 $ 426,741 Nonmajor Debt Service Fund $ 556,603 $ 556,603 $ 8,604 8,604 547,999 547,999 $ 556,603 See independent auditor's report on the financial statements. 61 Total Nonmajor Governmental Funds $ 2,773,395 51,169 $ 2,824,564 $ 22,643 9,375 32,018 891,254 1,851,292 50,000 2.792,546 $ 2,824,564 CITY OF SALINA, KANSAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON MAJOR GOVERNMENTAL FUNDS For the Year Ended December 31,2011 Total Total Nonmajor Nonmajor Nonmajor Debt Special Revenue Permanent Service Funds Funds Fund REVENUES Taxes $ 317,297 $ -$ - Intergovernmental 520,055 205,582 Charges for services 1,115,913 9,109 Licenses and permits 6,250 Investment revenue 5,394 1,177 49 Miscellaneous 72,293 Total revenues 2,037,202 10,286 205,631 EXPENDITURES Current Culture and recreation 1,616,170 Public health and sanitation 153,730 Planning and development 288,275 Miscellaneous 35 Debt service Principal retirement 25,000 110,000 Interest and other charges 4,399 157,345 Capital outlay 529,401 Total expenditures 2,616,975 35 267.345 Excess [deficiency] of revenues over [under] expenditures [579,773J 10.251 [61,714J Other financing sources [usesJ Transfers in 547,389 Transfers [out] [105,259] Total other financing sources [usesJ 442,130 Net change in fund balance [137,643] 10,251 [61,714J Fund balance -Beginning of year 1,955,449 416,490 609,713 Fund balance -End of year $ 1,817,806 $ 426,741 $ 547,999 See independent auditor's report on the financial statements. 62 Total Nonmajor Governmental Funds $ 317,297 725,637 1,125,022 6,250 6,620 72,293 2,253,119 1,616,170 153,730 288,275 35 135,000 161,744 529,401 2,884,355 [631,236J 547,389 [105,259) 442,130 [189,106) 2,981,652 $ 2,792,546 CITY OF SALINA, KANSAS COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2011 Business Special Improvement Neighborhood Parks & Special District Park Recreation Alcohol ASSETS Cash and investments $ 1,611 $ 229,134 $ 45,236 $ 4 Receivables Accounts 51,169 Total assets $ 52,780 $ 229,134 $ 45,236 $ 4 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 1,611 $ -$ -$ Due to other funds Total liabilities 1,611 Fund balance: Restricted 51,169 45,236 4 Committed 229,134 Assigned Total fund balance [deficit] 51,169 229,134 45,236 4 Total liabilities and fund baiances $ 52,780 $ 229,134 $ 45,236 $ 4 Bicentennial HUD Comm. Sales Tax Center Community Development. Heritage Economic Event $ 98,847 $ $ 98,847 $ $ -$ 98,847 98,847 $ 98,847 $ Dev. 71,880 $ 71,880 $ -$ 71,880 71,880 71,880 $ Revolving Commission Development 173,160 $ 173,160 $ -$ 173,160 173,160 4 $ 4 $ -$ 4 4 957,112 957,112 907,112 50,000 957.112 173,160 .... $ ~ ___ 4 ..;;.$ __ 9;;..;;5;.;.7.:.,.,1;..,;1;;;;,2 See independent auditor's report on the financial statements. 63 CITY OF SALINA, KANSAS COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS (Continued) December 31, 2011 Special Fair CDBG HOME Law Housing ED Y.. Enforcement ASSETS Cash and investments $ 5,181 $ 2,472 $ -$ 2,855 Receivables Accounts Total assets $ 5,181 $ 2,472 $ -$ 2,855 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 825 $ -$ -$ Due to other funds Total liabilities 825 Fund balance. Restricted 2,472 Committed 4,356 2,855 Assigned Total fund balance [deficit] 4,356 2,472 2,855 Total liabilities and fund balances $ 5,181 $ 2,472 $ - $ 2,855 $ $ $ $ Police Grants -$ -$ 2,012 $ 8,709 10,721 [10,721] [10,721] -$ War DARE Memorial Arts & Donations Maintenance Humanities 1,742 $ 35,262 $ 165,551 $ 1,742 $ 35,262 $ 165,551 $ -$ -$ 9.591 $ 9,591 1,742 35,262 155,960 1,742 35,262 155,960 1,742 $ 35.262 $ 165,551 $ Federal CARE Grant -$ -$ -$ 666 666 [666] [666] -$ Totals 1,790,051 51,169 1,841,220 14,039 9,375 23,414 343,255 1,424,551 50,000 1,817.806 1,841,220 See independent auditor's report on the financial statements. 64 CITY OF SALINA, KANSAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON MAJOR SPECIAL REVENUE FUNDS For the Year Ended December 31,2011 Business Special Improvement Neighborhood Parks & Special District Park Recreation Alcohol Revenues Taxes $ -$ -$ -$ Intergovernmental 153,566 153,566 Charges for services 83,467 Licenses and permits 6,250 Investment revenue 20 629 220 24 Miscellaneous 1.373 Total Revenues 83,487 6,879 155,159 153,590 Expenditures Current Culture and recreation Public health and sanitation 153,730 Planning and development 84,531 Debt service Principal retirement 25,000 Interest and other charges 4.399 Capital outlay 99,817 Total Expenditures 84,531 129,216 153,730 Excess [deficiency] of revenues over [under] expenditures [1,044] 6,879 25,943 [140] Other financing sources [uses] Transfers In Transfers [out] [47,228J Total other financing sources [uses] [47,228] Net change in fund balance [1,044] 6,879 [21,285] [140] Fund balance, beginning of year 52,213 222,255 66,521 144 Fund balance, end of year $ 51.169 $ 229,134 $ 45,236 $ 4 Bicentennial Center Event $ - 663,839 663,839 670,411 670,411 [6,572J [6,572J 105.419 $ 98,847 HUD Community Community Development Development Revolving $ -$ - 200 526 200 526 200 526 [58,031) [58,031] 200 [57,505J 71,680 230.665 $ 71,880 $ 173,160 Heritage Commission $ - 4 $ 4 Sales Tax Economic Development $ $ 317,297 2,485 319,782 406,075 406,075 [86,293J [86,293J 1,043,405 957,112 See independent auditor's report on the financial statements. 65 CITY OF SALINA, KANSAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON MAJOR SPECIAL REVENUE FUNDS (Continued) For the Year Ended December 31. 2011 Special Fair CDBG HOME Law Housing ED Y.. Enforcement Revenues Taxes $ -$ -$ -$ Intergovernmental 31,203 158,238 Charges for services Licenses and permits Investment revenue 59 36 Miscellaneous Total Revenues 31,262 158,238 36 Expenditures Current Culture and recreation Public health and sanitation Planning and development 69,571 133,437 Debt service PrinCipal retirement Interest and other charges Capital outlay 18,132 Total Expenditures 69,571 133,437 18,132 Excess [deficiency] of revenues over [under] expenditures [38,309] 24,801 [18,096] Other financing sources [uses] Transfers in 58,031 Transfers [out] Total other financing sources [uses] 58,031 Net change in fund balance [38,309] 24,801 58,031 [18.096] Fund balance, beginning of year 42,665 [22,329] [58,031] 20,951 Fund balance, end of year $ 4,356 $ 2,472 $ -$ 2,855 Police Grants $ -$ 5,377 5,377 [5,377J [5,377J [5,344J $ [10.721J $ War Federal DARE Memorial Arts & Care Donations Maintenance Humanities Grant Totals -$ -$ -$ -$ 317,297 23,482 520,055 368,607 1,115,913 6,250 5 101 1,089 5,394 70 70,850 72,293 75 101 464,028 2,037,202 797 944,962 1,616,170 153,730 70 666 288,275 25,000 4,399 529,401 70 797 944,962 666 2,616,975 5 [696J [480,934J [666J [579.773J 489,358 547,389 [105,259} 489,358 442.130 5 [696] 8,424 [666J [137,643J 1,737 35,958 147,536 1.955,449 1.742 $ 35.262 $ 155,960 $ [666) $ 1,817,806 See independent auditor's report on the financial statements. 66 CITY OF SALINA, KANSAS COMBINING BALANCE SHEET NONMAJOR PERMANENT FUNDS December 31, 2011 Cemetery Mausoleum Tricentennial ASSETS Endowment Endowment Commission Cash and investments $ 419,040 $ 1,997 $ 5,704 Total assets $ 419,040 $ 1,997 $ 5,704 LIABILITIES AND FUND BALANCES Liabilities Accounts payabie $ $ $ Total liabilities Fund balances Committed 419,040 1,997 5,704 Total liabilities and fund balances $ 419,040 $ 1,997 $ 5,704 See independent auditor's report on the financial statements. 67 Total $ 426,741 $ 426,741 '" ;:p 426,741 $ 426.741 CITY OF SALINA, KANSAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON MAJOR PERMANENT FUNDS For the Year Ended December 31. 2011 Cemetery Mausoleum Tricentennial Endowment Endowment Commission Revenues Charges for services $ 9,109 $ -$ Investment revenue 1,155 6 Total revenues 10,264 6 Expenditures Miscellaneous 35 Total expenditures 35 Net change in fund balance 10,229 6 Fund balances -beginning of year 408,811 1,991 Fund balances -end of year $ 419,040 $ 1,997 $ See independent auditor's report on the financial statements. 68 - 16 16 16 5,688 5,704 Total $ 9,109 1,177 10,286 35 35 10,251 416,490 $ 426,741 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) BUSINESS IMPROVEMENT CITY FUND For the Year Ended December 31,2011 Revenues Charges for services Community and economic development Interest income General interest Total revenues Expenditures Community Development Business Improvement District Total expenditures Excess [deficiency] of revenues over [under] expenditures Unreserved fund balance, January 1 Actual $ 84,511 $ 20 84,531 84,531 84,531 Budgeted Amounts Original Final 90,000 $ 90,000 500 500 90,500 90,500 90.578 90,578 90,578 90,578 [78] [78] 78 78 Variance with Final Budget Positive [NegativeJ $ [5,489] [480J [5,969J 6,047 6,047 78 [78J Unreserved fund balance, December 31 -$ -$ -$ ..;......==== .;..==== ===== Reconciliation to GAAP Accounts receivable 51,169 GAAP Fund Balance, December 31 $ 51,169 See independent auditor's report on the financial statements. 69 Revenues Charges for services Public works Interest income General interest Total revenues Expenditures Cash reserve Total expenditures CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) NEIGHBORHOOD PARK FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final $ 6,250 $ 20,000 $ 20,000 629 4,000 4,000 6,879 24,000 24,000 258,146 258,146 258,146 258,146 Excess (deficiency] of revenues over (under] expenditures 6.879 [234,146] Unreserved fund balance, January 1 222,255 234,146 Unreserved fund balance/GAAP fund balance December 31 $ 229,134 $ - $ See independent auditor's report on the fInancial statements. 70 [234,146] 234,146 - Vanance with Final Budget Positive [Negative] $ [13,750] (3,371] [17,121] 258,146 258,146 241,025 (11,891J $ 229,134 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) SPECIAL PARKS AND RECREATION FUND For the Year Ended December 31,2011 Budaeted Amounts Actual Original Revenues Operating grants, restricted Culture and recreation $ 154,939 $ 160,000 $ Interest income General interest 220 4,000 Total revenues 155,159 164,000 Expenditures Debt Service Principal 25,000 10,000 Interest and other charges 4,399 Capital Outlay 93,481 100,000 Cash Reserve 131,197 Total expenditures 122,880 241,197 Excess [deficiency] of revenues over [under] expenditures 32,279 [Z7,197] Other financing sources [uses] Transfer [out] [47,228J [30,000] Total other financing sources [uses] [47,228) [30,000J Excess [deficiencyJ of revenues and other sources over [underJ expenditures and other [uses] [14,949J [107,197] Unreserved fund balance, January 1 60,185 107,197 Unreserved fund balance/GAAP fund balance December 31 $ 45,236 $ -$ See independent auditor's report on the financial statements. 71 Final 160,000 4,000 164,000 10,000 100,000 131,197 241.197 [77,197] [30,000] [30,0001 [107,197] 107,197 - Variance with Final Budget Positive [Negative] $ [5,061] [3,780J [8,841J [15,000] [4,399] 6.519 131,197 118,317 109,476 [17,228] [17228J 92,248 [47,012] $ 45.236 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) SPECIAL ALCOHOL FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Revenues Operating grants, restricted Health and sanitation 5) 153,566 $ 160,000 $ Interest income General interest 24 Total revenues 153.590 160,000 Expenditures Public Health and Sanitation . Special alcohol 153,730 170,192 Total expenditures 153,730 170.192 Excess [deficiencyJ of revenues over [under] expenditures [140] [10,192J Unreserved fund balance, January 1 144 10,192 Unreserved fund balance/GAAP fund balance December 31 $ 4 $ -$ See independent auditor's report on the financial statements. 72 Final 160,000 160,000 170,192 170.192 [10,192] 10,192 - Variance with Final Budget Positive [Negative] $ [6,434] 24 [6,41 OJ 16,462 16,462 10,052 [10,048J $ 4 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) SALES TAX ECONOMIC DEVELOPMENT FUND For the Year Ended December 31,2011 Budgeted Amounts Actua! Original Final Revenues Taxes Selective sales tax $ 317,297 $ 315,120 $ Interest income General Interest 2,485 10,000 Total revenues 319,782 325,120 Expenditures Community Development Economic development 456,075 315,444 Cash Reserve 9,676 Total expenditures 456,075 325,120 Excess [deficiencyJ of revenues over [under] expenditures [136,293] Unreserved fund balance, January 1 1,043,405 Unreserved fund balance, December 31 907,112 $ - $ Reconciliation to GAAP Current year encumbrances 50,000 GAAP Fund Balance, December 31 $ 957,112 See independent auditor's report on the financial statements. 73 315,120 10,000 325,120 315,444 9,676 325,120 - Variance with Final Budget Positive lliegative] $ 2,177 [7,515J [5,338J [140,631J 9,676 [130,955J [136,293J 1,043,405 $ 907,112 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) FAIR HOUSING FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Revenues Operating grants, restricted Community and economic development $ 31,203 $ 65,000 $ Interest income General interest 59 1,000 Total revenues 31,262 66,000 Expenditures Community Development Human relations 69,571 86,290 Total expenditures 69.571 86.290 Excess [deficiency] of revenues over [under] expenditures [38,309J [20,290J Unreserved fund balance, January 1 42,665 20,290 Unreserved fund balance/GAAP fund balance December 31 $ 4,356 $ -$ See independent auditor's report on the financial statements. 74 Final 65,000 1,000 66,000 86,290 86,290 [20,290] 20,290 - Variance with Final Budget Positive [Negative] $ [33,797] [941] [34,738J 16,719 16,719 [18,019] 22,375 $ 4,356 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) ARTS & HUMANITIES FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final Revenues Charges for services Culture and recreation $ 439,106 $ 371,904 $ 371,904 Operating grants, unrestricted Culture and recreation 23,482 18,000 18,000 Interest income General interest 1,089 2,000 2,000 Miscellaneous revenues Culture and recreation 350 20,095 20,095 Total revenues 464,027 411,999 411,999 Expenditures Culture and Recreation Arts and humanities 574,704 579,804 579,804 Smoky Hill River Festival 364,071 365,200 365,200 Capital Outlay 6,186 7,000 7,000 Cash Reserve 98,787 98,787 Total expenditures 944.961 1,050,791 1.050,791 Excess [deficiency) of revenues over [under] expenditures [480,934] [638,792) [638,792J Other financing sources [uses] Transfer In 489,358 489,358 489,358 Total other financing sources [usesJ 489,358 489,358 489,358 Excess [deficiencyJ of revenues and other sources over [under) expenditures and other [uses) 8,424 [149,434] [149,434) Unreserved fund balance, January 1 147,536 149,434 149,434 Unreserved fund balance/GAAP fund balance December 31 $ 155,960 $ -$ - See independent auditor's report on the financial statements. 75 Variance with Final Budget Positive [NegativeJ $ 67,202 5,482 [911) [19,745J 52,028 5,100 1,129 814 98,787 105,830 157,858 157,858 [1,898J $ 155,960 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) DEBT SERVICE FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Ongmal Final Revenues Taxes Real estate taxes $ 2,723,262 $ 2,595,524 $ 2,595,524 Delinquent taxes 55,583 40,000 40,000 Motor vehicle taxes 205,866 268,955 268,955 Total taxes 2,984,711 2,904,479 2,904,479 Charges for services Special assessments 1.535,487 1.349.311 1.349.311 Interest income General Interest 5,131 10,000 10,000 Miscellaneous revenues General miscellaneous revenues 12,983 140,000 140,000 Other financing sources General sources 230,131 Total revenues 4,768,443 4,403,790 4,403,790 Expenditures Debt Service PrinCipal 4,276,195 4,631,079 4,631,079 Interest and other charges 1,771,580 1,833,997 1,833,997 Cash Reserve 403,283 403,283 Total expenditures 6,047.775 6,868,359 6,868,359 Excess [deficiency] of revenues over [under] expenditures [1,279,332) [2.464,569) [2.464,569) Other finanCing sources [uses) Transfer In 2,026,973 1,800,000 1,800,000 Transfer [out) [83,488) Total other financing sources [uses] 1,943,485 1,800,000 1,800,000 Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] 664,153 [664,569] [664,569] Unreserved fund balance, January 1 571,873 664,569 664,569 Unreserved fund balance/G.AAP fund balance December 31 1,236,026 $ -$ - Reconciliation to GAAP Taxes receivable 2,441,349 Deferred revenue [2,392,245) GAAP Fund Balance, December 31 $ 1,285,130 See Independent auditor's report on the financial statements. 76 Vanance with Final Budget Positive [Negative] $ 127,738 15,583 [63,089) 80,232 186.176 [4,869] [127,017] 230,131 364.653 354,884 62,417 403,283 820,584 1,185,237 226,973 [83,488) 143,485 1,328,722 [92,696) $ 1,236,026 CITY OF SALINA. KANSAS SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN NET ASSETS -BUDGET AND ACTUAL (NON -GAAP BASIS) SOLID WASTE DISPOSAL FUND For the Year Ended December 31.2011 Budgeted Amounts Actual Onglnal Revenues Charges for services Health and sanitation $ 2,494.710 $ 2.107.000 Interest income General interest 7.000 7.000 Interfund services provided Health and sanitation 453.672 505.300 Miscellaneous revenues Health and sanitation 24,491 42.310 Total revenues 2.979.873 2.661.610 Expenditures Public Health and Sanitation Solid waste 1,746.122 2.033.262 Hazardous waste disposal 80.517 94,032 Total public health and sanitation 1.826.639 2.127.294 Debt Service PrinCipal 388.198 324.396 Interest 32.000 106,975 Total debt service 420,198 431.371 Capital Outlay 359.515 467,200 Cash Reserve 1.825.201 Total expenditures 2.606,352 4.851.066 Excess [deficiency) of revenues over [under) expenditures 373.521 [2.189,456) Other financing sources [uses] Transfers [out) [48.089) Total other financing sources [uses) [48.089) Excess [deficiency) of revenues and other sources over [under] expenditures and other [uses] 325,432 [2.189,456) Unreserved fund balances. January 1 2,490.536 2.189,456 Prior year cancelled encumbrances 8.609 Unreserved fund balances. December 31 $ 2.824.577 $ - See independent auditor's report on the financial statements 77 Final $ 2.107.000 7.000 505.300 42.310 2.661.610 2.033.262 94.032 2.127.294 324.396 106.975 431.371 467.200 1.825.201 4.851.066 [2.189,456) [2.189,456) 2.189,456 $ - Variance with Final Budget Positive [Negative] $ 387.710 [51.628) [17.819) 318.263 287.140 13.515 300.655 [63.802) 74.975 11.173 107.685 1.825,201 2.244,714 2.562.977 [48.089) [48.089) 2.514.888 301.080 8.609 $ 2.824.577 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN NET ASSETS ~ BUDGET AND ACTUAL (NON -GAAP BASIS) WATER AND SEWER FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Revenues Charges for services Water and wastewater $ 17,266,856 $ 16,321,884 Interest Income General interest 26,993 25,000 Operating grants, restricted Water and wastewater 201,700 Interfund services proVided General services 28,061 30,900 Water and wastewater 95,097 Total interfund services 123,158 30,900 Miscellaneous revenues General miscellaneous revenues 88 Water and wastewater 489,629 260,000 Total miscellaneous revenues 489,717 260,000 Total revenues 18,108,424 16,637,784 Expenditures Water and Wastewater Water 10,153,314 9,029,002 Sewer 2,705,205 2,784,556 Total water and wastewater 12,858,519 11,813,558 Capital Outlay 3,976,377 1,877,350 Cash Reserve 6,497,105 Total expenditures 16,834,896 20,188,013 Excess [defiCiency] of revenues over [under] expenditures 1,273,528 [3,550,229J Other financing sources [uses] Transfers [out] [1.005,352J [3.804,546J Total other financing sources [uses] [1,005,352J [3,804,546J Excess [defiCiency) of revenues and other sources over [under) expenditures and other [usesJ 268,176 [7,354,775J Unreserved fund balances, January 1 9,699,890 7,354,775 Prior year cancelled encumbrances 20,388 Unreserved fund balances, December 31 $ 9,988,454 $ - See independent auditor's report on the financial statements. 78 Final $ 16,321,884 25,000 30,900 30,900 260,000 260,000 16,637,784 9,029,002 2,784,556 11,813,558 1,877,350 6,497,105 20,188,013 [3,550,229J [3.804,546) [3,804,546J [7,354,775J 9,699,890 $ 2,345,115 Variance with Final Budget Positive [Negative] $ 944,972 1,993 201,700 [2,839] 95,097 92,258 88 229,629 229,717 1,470,640 [1,124,312] 79,351 [1,044,961J [2,099,027] 6,497,105 3.353,117 4,823,757 2,799,194 2,799,194 7,622,951 20,388 $ 7,643,339 Revenues CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN NET ASSETS -BUDGET AND ACTUAL (NON -GAAP BASIS) SANITATION FUND For the Year Ended December 31.2011 Budgeted Amounts Original Variance with Final Budget Positive [Negative] Charges for services Health and sanitation $ 2,342,291 $ 2,316,885 $ 2,316,885 $ 25,406 Interest income General interest Charges for services Miscellaneous revenues Total revenues Expenditures Public Health and Sanitation Sanitation Capital Outlay Cash Reserve Total expenditures Excess [deficiency] of revenues over [under] expenditures Unreserved fund balance, January 1 Unreserved fund balances, December 31 1,839 424 2,344,554 2,179,431 132,110 2,311,541 33,013 581,811 $ 614,824 3,500 3,500 2,320,385 2,320,385 2,163,312 2,163,312 158,000 158,000 525,425 525,425 2,846,737 2,846,737 [526,352] [526,352] 526,352 526,352 $ -$ - See independent auditor's report on the financial statements. 79 [1,661J 424 24,169 [16,119] 25,890 525,425 535,196 559,365 55,459 $ 614,824 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN NET ASSETS -BUDGET AND ACTUAL (NON -GAAP BASIS) GOLF COURSE FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Revenues Charges for services Culture and recreation $ 636,202 $ 777,500 $ Interest income General interest 36 200 Miscellaneous revenues General miscellaneous revenues 1,562 1,000 Culture and recreation 48,618 40,000 Total miscellaneous revenues 50,180 41,000 Total revenues 686,418 818,700 Expenditures Culture and Recreation Golf course 760,384 752,160 Debt Service 15,724 16,000 Cash Reserve 173,493 Total expenditures 776.108 941,653 Excess [deficiency] of revenues over [under] expenditures [89,690J [122,953] Other financing sources [uses] Transfers in 47,228 Total other financing sources [uses] 47,228 Excess [deficiency) of revenues and other sources over [under) expenditures and other [uses) [42,462) [122,953] Unreserved fund balances, January 1 43,462 122,953 Unreserved fund balances, December 31 $ 1.000 $ -$ See independent auditor's report on the financial statements. 80 Final 777,500 200 1,000 40,000 41,000 818,700 752,160 16,000 173,493 941,653 [122,953] [122,953] 122,953 - Variance with Final Budget Positive [Negative] $ [141,298J [1641 562 8,618 9,180 [132,282J [8,224] 276 173,493 165,545 33,263 47,228 47,228 80,491 [79,491) $ 1,000 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) RISK MANAGEMENT FUND Revenues Interest income General interest Interfund services provided General services Miscellaneous revenues General miscellaneous revenues Total revenues Expenditures Other Risk management Capital Outlay Cash Reserve Total expenditures Excess [deficiencYJ of revenues over [underJ expenditures Unreserved fund balance, January 1 For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final $ -$ 1,400 $ - 374,708 374,708 374,708 176,298 40,200 177,500 551,006 416,308 552,208 532,771 424,651 549,000 138 1,000 1,000 74,037 532,909 499,688 550,000 18,097 [83,380J 2,208 49,848 83.380 49.847 Variance with Final Budget Positive [Negative] $ [1,202J [1,202J 16,229 862 17,091 15,889 Unreserved fund balance, December 31 $ 67,945 ~$ ____ -$ 52,055 .::;,$_~15;.;..;,8;;.;;;9..;;.0 See independent auditor's report on the financial statements. 81 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) WORKERS' COMPENSATION RESERVE FUND Revenues Interest income General interest Interfund services provided General services Miscellaneous revenues General mIscellaneous revenues Total revenues Expenditures Other Worker's compensation Cash Reserve Total expenditures Excess [deficiency) of revenues over [under) expenditures Unreserved fund balance, January 1 For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final $ 1,937 $ 2,500 $ 2,500 229,452 229,435 229,435 1,444 232,833 231,935 231,935 334,210 297,762 297,762 638,936 638,936 334,210 936,698 936,698 [101,377) [704,763) [704,763) 621.629 704,763 704,763 Variance with Final Budget Positive [Negative] $ [563] 17 1,444 898 [36,448] 638,936 602,488 603,386 [83,134) Unreserved fund balance. December 31 $ 520,252 ,,;.,$ ====-,,;.,$====-~$ =,;,,52==0;..;;,2;;.;5=2 See independent auditor's report on the financial statements. 82 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) HEALTH INSURANCE FUND Revenues Interest income General interest Interfund Services Provided General services Miscellaneous revenues General miscellaneous revenues Total revenues Expenditures Other Health insurance Cash Reserve For the Year Ended December 31, 2011 Budgeted Amounts Actual Original Final $ 4,904 $ 5,000 $ 5,000 6,304,144 6,620,000 6,620,000 52,285 6,361,333 6,625,000 6,625,000 5,947,148 6,913,677 6,913,677 1,503,185 1,503,185 Variance with Final Budget Positive [Negative] $ [96] [315,856) 52,285 [263,667J 966,529 1,503,185 Total expenditures 5,947,148 8,416.862 8,416,862 2,469,714 Excess [deficiency] of revenues over [under] expenditures Unreserved fund balance, January 1 Unreserved fund balance, December 31 414,185 [1,791.862] [1,791,862] 2.206,047 1,501,522 1,791,862 1,791,862 [290,340J $ 1,915,707 $ -$ -$ 1,915,707 See independent auditor's report on the financial statements. 83 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) CENTRAL GARAGE FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final Revenues Interest income General interest $ 423 $ 4,000 $ 4,000 Interfund services provided General services 1,629,328 1,490,000 1,485,942 Miscellaneous revenues General miscellaneous revenues 22,298 4.000 138,058 Total revenues 1.652,049 1,498,000 1,628,000 Expenditures Other Central garage 1.697,373 1,454.727 1,716,068 Capital Outlay 4,495 250 Cash Reserve 161.091 Total expenditures 1.701,868 1,616,068 1,716,068 Excess [deficiency] of revenues over [under] expenditures [49,819] [118.068J [88.068) Other financing sources [uses] Transfers in 60.000 30.000 Excess [defiCiency] of revenues and other financing sources over [under] expenditures and other financing [uses] 10.181 [88,068] [88,068J Unreserved fund balance, January 1 89.819 88,068 89.889 Unreserved fund balance, December 31 $ 100,000 $ -$ 1,821 See independent auditor's report on the financial statements. 84 Variance with Final Budget Positive [Negative] $ [3,577] 143,386 [115,760) 24,049 18,695 [4,495] 14,200 38.249 60,000 98,249 [70J $ 98,179 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) INFORMATION SYSTEMS FUND For the Year Ended December 31. 2011 Budgeted Amounts Actual Original Final Revenues Charges for services General charges $ 106,305 $ 106,000 $ 106,000 Interest income General interest 1,182 500 500 Interfund services provided General services 1,237,220 1,258,760 1,258,760 Miscellaneous revenues General miscellaneous revenues 2,889 2,889 Total revenues 1,344,707 1,368,149 1,368,149 Expenditures Other Information services 1,162,756 977,978 977,978 Capital Outlay 113,789 351,000 351,000 Cash Reserve 105,703 105,703 Total expenditures 1,276,545 1,434,681 1,434,681 Excess [deficiency] of revenues over [under] expenditures 68,162 [66,532) [66,532] Unreserved fund balance, January 1 91,838 66,532 66,532 Unreserved fund balance, December 31 $ 160.000 $ -$ - See independent auditor's report on the financial statements. 85 Variance with Final Budget Positive [Negative] $ 305 682 [21,540] [2,889) [23,442) [184,778) 237,211 105,703 158.136 134,694 25,306 $ 160,000 CITY OF SALINA, KANSAS INTERNAL SERVICE FUNDS Internal service funds are used to account for the financing of goods or services provided by one agency to other departments or agencies of the government and to other governmental units on a cost reimbursement basis. Risk management fund -To account for the accumulation and allocation of costs associated with risk management activities and the purchase of various forms of insurance. Workers' compensation reserve fund -To account for the costs of providing a partially self-insured workers' compensation plan and for accumulating the necessary reserve amounts. Health insurance fund -To account for the costs of providing a partially self-insured health Insurance and for accumulating the necessary reserve amounts. Central garage fund -To account for the accumulation and allocation for costs associated with the City's centralized vehicle repair shop. Information services fund -To account for the accumulation and allocation of costs associated with electronic data processing. 86 CITY OF SALINA, KANSAS COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS December 31,2011 Workers' Risk Compensation Health ASSETS Mana\;1ement Reserve Insurance Current assets Cash and Investments $ 171,559 $ 649.238 $1,916,207 Inventory and prepaid supplies Total current assets 171,559 649,238 1,916,207 Capital assets Capital assets Less. accumulated depreciation Total capital assets Total assets $ 171,559 $ 649,238 $1.916,207 liabilities. Current liabilities (payable from current assets)' Accounts payable $ 7,351 $ $ 500 Current portion of compensated absences payable Current portion of accrued claim s payable 172.545 391.175 Total current liabilities (payable from current assets) 7.351 172.545 391.675 Noncurrent liabilities Compensated absences payable Accrued claims payable 149,245 Total noncurrent liabilities 149.245 Total liabilities $ 7.351 $ 321.790 $ 391,675 Net Assets Invested In capital assets, net of related debt $ $ $ Unrestricted 164,208 327448 1,524,532 Total net assets $ 164,208 $ 327,448 $1.524.532 See independent auditor's report on the financial statements 87 Total Internal Central Information Service Garage S~stems Funds $ 150,383 $ 201,820 $ 3,089,207 115,694 115,694 266,077 201,820 3.204,901 189.424 677.214 866,638 161.634 677.214 838,848 27,790 27,790 $ 293,867 $ 201,820 $ 3,232,691 $ 50,383 $ 41.820 $ 100,054 7,075 10,309 17,384 563,720 57,458 52,129 681.158 30,500 44,440 74,940 149.245 30,500 44440 224,185 $ 87,958 $ 96,569 $ 905.343 $ 27,790 $ -$ 27,790 178,119 105.251 2.299,558 $ 205,909 $ 105,251 $ 2.327,348 CITY OF SALINA, KANSAS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS INTERNAL SERVICE FUND For the Year Ended December 31,2011 Workers' Risk Compensation Health Central Management Reserve Insurance Garage Operating revenues Charges for services $ 374,708 $ 229,451 $ 6,304,144 $ 1,629,328 Miscellaneous 176.298 1.444 52,285 21,169 Total operating revenues 551,006 230,895 6,356,429 1,650,497 Operating expenses General government 436,645 230,417 5,955,821 1.710,911 Depreciation 4,698 Total operating expenses 436,645 230.417 5,955.821 1,715,609 Operatmg income [loss] 114,361 478 400.608 [65.112] Other operating revenues [expenses] Investment income 1.937 4.904 423 Total other operating revenues [expenses] 1,937 4.904 423 Nonoperating revenues [expenses] Gam/[Ioss] on disposal of fixed assets 1,129 Total nonoperating revenues [expenses] 1,129 Income [loss] before transfers 114.361 2.415 405,512 [63,560] Transfers from [to] other funds Transfers In 60,000 Total transfers 60,000 Change in net assets 114,361 2.415 405,512 [3.560J Net assets, January 1 49.847 325,033 1.119,020 205.887 Restatement 3,582 Net assets, January 1. restated 49,847 325,033 1,119.020 209,469 Net assets, December 31 $ 164.208 $ 327.448 $ 1.524.532 $ 205.909 See independent auditor's report on the fmancial statements. 88 Total Internal Information Service S~stems Funds $ 1,343,525 $ 9,881,156 251,196 1,343,525 10,132,352 1,277,484 9,611,278 4,698 1.277.484 9,615,976 66,041 516.376 1,182 8.446 1.182 8.446 1,129 1.129 67.223 525.951 60,000 60,000 67,223 585,951 38.028 1.737,815 3,582 38,028 1.741,397 $ 105.251 $ 2.327.348 CITY OF SALINA, KANSAS COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the Year Ended December 31,2011 Workers' Risk Compensation Health Management Reserve Insurance Cash flows from operating activities Cash received from customers and users $ 374,708 $ 125,659 $ 6,312,817 Cash paid to suppliers of goods or services [440,965] [230,417] [5,955.771] Cash paid to employees Other operating receipts 176,298 1,444 52,285 Net cash provided by [used In] operating activities 110,041 [103,314) 409,331 Cash flows from capital and related financing activities Proceeds from sale of capital assets Cash flows from investing actiVities Interest received 1,937 4.904 Cash flows from noncapltal finanCing actlvltJes Transfers In Net Increase [decrease] In cash and cash eqUivalents 110,041 [101,377] 414,235 Cash and cash eqUivalents, January 1 61.518 750.615 1,501,972 Cash and cash equivalents. December 31 $ 171.559 $ 649.238 $1,916,207 See Independent auditor's report on the financial statements 89 Total Internal Central Information Service Garage Services Funds $1,629,329 $1,343,525 $ 9,786,038 [1,462,573] [866,093] [8,955,819] [230,042] [401,446J [631,488] 21,169 251,196 [42,117) 75.986 449,927 1,129 1,129 422 1,182 8,445 60,000 60,000 19,434 77,168 519,501 130,949 124,652 2,569,706 $ 150,383 $ 201,820 $ 3,089.207 CITY OF SALINA, KANSAS COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS (Continued) For the Year Ended December 31,2011 Reconciliation of operating [loss] Income to net cash provided by [used InJ operating activities Workers' Risk Compensation Health Manaqement Reserve Insurance Total Internal Central Information Service Garaqe Services Funds Operating Income [lossJ $ 114,361 $ 478 $ 400,608 $ [65,112J $ 66,041 $ 516,376 Adjustments to reconcile operating Income [loss] to net cash provided by [used In] operating activities DepreCiation expense [Increase] decrease In Inventory Increase [decrease] In accounts payable Increase [decrease] In accrued compensated absences Increase [decreaseJ In cialms payable Net cash provided by [used inJ operating activities [4.320J $ 110,041 50 [103.792] 8,673 $ [103,314J $ 409,331 See Independent auditor's report on the financial statements 90 4,698 4,698 6,646 6,646 9,296 9,006 14.032 2,355 939 3,294 [95,119] $ [42,117] $ 75.986 $ 449.927 CITY OF SALINA, KANSAS AGENCY FUNDS Agency funds are used to account for assets held by the government as an agent for individuals, private organizations, other governments andlor other funds. Special assessment escrow agency fund -To account for property owners' prepayment on outstanding special assessments. Fire insurance proceeds agency fund -To account for insurance proceeds received for severely damaged buildings the insurance proceeds, plus interest, are returned to the property owners when the buildings are repaired or demolished. PEGS access agency fund -To account for revenues collected on behalf of the community access television system for public, educational and governmental programming. Payroll cleanng agency fund -To account for interfund payroll receivables and payables for all City funds. Court bond and restitution agency fund -To account for bonds and restitution remitted to the court and awaiting court orders for distribution. Police investigation account agency fund -To account for mOnies held by the police department for use in investigations. Fire cam agency fund -To account for donations received and used for fire equipment. Citizenship agency fund -To account for donations received and used for the citizenship fund. Section 125 plan agency fund -To account for mOnies held for the Section 125 plan. 91 Special Assessment Escrow ASSETS, Cash and Investments $ 135,344 Total assets $ 135,344 LIABILITIES: Accounts payable $ 135,344 Total liabilities $ 135,344 CITY OF SALINA, KANSAS COMBINING BALANCE SHEET AGENCY FUNDS December 31,2011 Fire Court Police Insurance PEGS Payroll Bond and Investigation Fire Proceeds Access Clearing Restitution Account Cam $ 10,316 $ 5,103 $ [251,057) $ 70,921 $ 2,125 $783 $10,316 $ 5,103 $ [251,057) $ 70,921 $ 2,125 $783 $ 10,316 $5,103 $ [251,057) $ 70,921 $ 2,125 $783 $ 10,316 $ 5,103 $ [251,057) $ 70,921 $ 2,125 $783 See Independent auditor's report on the financial statements, 92 Seclion 125 CltlzenshlQ Plan Totals $ 3,702 $ 336,063 $313,300 $ 3,702 $ 336,063 $ 313,300 $ 3,702 $ 336,063 $313,300 $ 3,702 $ 336,063 $313,300 CITY OF SALINA, KANSAS COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS For the Year Ended December 31, 2011 Balance December 31, 2010 Additions Deductions Cash and investments Special Assessment Escrow $ 328,828 $ 5,336 $ Fire Insurance Proceeds 5,062 41,952 PEGS Access 5,071 285,273 Payroll Clearing [246,521] Court Bond and Restitution 74,831 Police Investigation Account 2,307 Fire Cam Fund 780 3 Citizenship Trust 3,692 10 Section 125 Plan Fund 339,549 349,775 Total Assets $ 513,599 $ 682,349 $ Accounts Payable Special Assessment Escrow $ 328,828 $ 5,336 $ Fire Insurance Proceeds 5,062 41,952 PEGS Access 5,071 ·285,273 Payroll Clearing [246,521] Court Bond and Restitution 74,831 Police Investigation Account 2,307 Fire Cam Fund 780 3 Citizenship Trust 3,692 10 Section 125 Plan Fund 339,549 349.775 Total liabilities $ 513,599 $ 682,349 $ See independent auditor's report on the financial statements. 93 198,820 36,698 285,241 4,536 3,910 182 353,261 882,648 198,820 36,698 285,241 4,536 3,910 182 353,261 882,648 Balance Decem ber 31 , 2011 $ 135,344 10,316 5,103 [251,057] 70,921 2,125 783 3,702 336,063 $ 313,300 $ 135,344 10.316 5,103 [251,057] 70,921 2,125 783 3,702 336.063 $ 313.300 CERTIFICATE REGARDING PRELIMINARY OFFICIAL STATEMENT To: UMB Bank, N. A. Kansas City, Missouri UMB Bank, N.A. Kansas City, Missouri Country Club Bank Prairie Village, Kansas June 11,2012 Re: Approximately $2,365,000 General Obligation Internal Improvement Bonds, Series 2012-A, $3,760,000 General Obligation Refunding Bonds, Series 2012-B and $1,485,000 General Obligation Temporary Notes, Series 2012-1 The undersigneds are the duly acting Mayor and Clerk of the City of Salina, Kansas (the "Issuer"), and are authorized to deliver this Certificate to the addressees (the "Purchasers") on behalf of the Issuer. The Issuer has heretofore caused to be delivered to the Purchasers copies of the Preliminary Official Statement (the "Preliminary Official Statement") relating to the above-referenced bonds and notes (the "Obligations"). For the purpose of enabling the Purchasers to comply with the requirements of Rule 15c2- 12(b)(1) of the Securities and Exchange Commission (the "Rule"), the Issuer hereby deems the information regarding the Issuer contained in the Preliminary Official Statement to be final as of its date, except for the omission of such information as is permitted by the Rule, such as offering prices, interest rates, selling compensation, aggregate principal amount, principal per maturity, delivery dates, ratings, identity of the underwriters and other terms of the Obligations depending on such matters. CITY OF SALINA, KANSAS ~ By ~ Title: Clerk In the opinion of Gilmore & Bell, P.e., Kansas City, Missouri, Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended (the "Code "), the interest on the Notes and Bonds (including any original issue discount properzv allocable to an owner thereof) is (a) excluded ji-om gross income for federal income tax pwposes and (b) not an item of tax preference for pwposes of the federal alternative minimum tax imposed on individuals and cOlporations, but is taken into account in determining adjusted current earnings for the pwpose of computing the alternative minimum tax imposed on certain cOlporations. The interest on the Notes and Bonds is exempt ji-om income taxation by the State of Kansas. The . Notes and Bonds are "qualified tax-exempt obligations" within the meaning of Code Section 265(b)(3). See TAX MATTERS -"Opinion of Bond Counsel" herein. New Issues Book-Entry Only Bank Qualified Moody's Ratings: Notes-"MIGl" Bonds-"Aa2" CITY OF SALINA, KANSAS $1,485,000 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 $2,365,000 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A Dated: July 15, 2012 $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B Due: As Shown Herein The Series 2012-1 Notes (the "Notes") will be issued as fully registered notes in the denomination of $5,000 or any integral multIple thereof. The Notes shall be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York, to which payment of principal and interest will be made. Individual purchases of Notes will be made m book-entry form. Purchasers will not receive certificates representing their interest in the Notes purchased. Interest on the Bonds will be payable at maturity. Principal and interest on the Notes will be payable by check, draft, or wire transfer from the Treasurer of the State of Kansas (the "Note Paying Agent"). The Notes are not subject to redemption prior to maturity. The Series 2012-A Bonds (the "Series 2012-A Bonds") and the Series 2012-B Bonds (the "Series 2012-B Bonds" and, collectively with the Series 2012-A Bonds, the "Bonds") will be issued as fully registered bonds in the denomination of $5,000 or any integral multiple thereof. The Bonds shall be initially registered in the name of Cede & Co., as nominee ofDTC to which payment ofpnncipal and interest will be made. Individual purchases of Bonds will be made in book-entry only form. Purchasers will not receive certificates representing their interest in the Bonds purchased. Principal on the Bonds will be payable on each October 1 in the years shown herein. Interest on the Bonds will be payable semiannually on April 1 and October 1 of each year until maturity. commencing on April 1, 2013. The principal of and interest on the Bonds will be payable by check, draft, or wire transfer from the Treasurer of the State of Kansas (the "Bond Paying Agent"). The Bonds are subject to redemption at the option of the City as further described herein. MATURITY SCHEDULES (see inside fi'ont cover) The full faith, credit, and resources of the City are irrevocably pledged for the prompt payment of the principal and interest on the Notes and Bonds as the same becomes due. See THE NOTES -"Security" and THE BONDS -"Security" herein. The Notes and Bonds are offered when, as and if issued by the City and received by the Underwriters subject to the approval of Bond Counsel. It is expected that the Notes and Bonds will be available for delivery through the facilities ofDTC on or about July 26,2012. The date of this Official Statement is July 9, 2012 THIS COVER PAGE CONTAINS INFORMATION FOR QUICK REFERENCE ONLY ITIS NOT A SUMMARY OF THE ISSUE INVESTORS MUST READ THE ENTIRE OFFICIAL STA TEMENT TO OBTAIN INFORM A TION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTM ENT DECISION MATURITY SCHEDULES $1,485,000 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 Maturity 08-01-13 Amount $1,485,000 Rate 1.000% The Notes are not subject to redemption prior to maturity. $2,365,000 Yield 0.375% Base CUSIP(I) 794743 2L7 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A Base CUSIP(I) Maturitv Amount Rate Yield 794743 1O-01-l3 $l30,000 1.00% 0.40% 2M5 10-01-14 140,000 1.00 0.45 2N3 10-01-15 145,000 1.25 0.55 2P8 10-01-16 150,000 1.50 0.70 2Q6 10-01-17 150,000 1.50 0.85 2R4 10-01-18 155,000 1.50 1.05 2S2 10-01-19 155,000 1.50 1.20 2TO 10-01-20* 155,000 1.40 1.40 2U7 10-01-21 * 160,000 1.65 1.65 2\15 10-01-22* 160,000 1.85 1.85 2W3 10-01-23* 165,000 2.00 2.00 2X1 10-01-24* 170,000 2.10 2.15 2Y9 10-01-25* 175,000 2.20 2.25 2Z6 10-01-26* 175,000 2.35 2.40 3AO 10-01-27* 180,000 2.45 2.50 3B8 $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B Base CUSIP(I) Maturitv Amount Rate Yield 794743 1O-01-l3 $385,000 1.00% 0.40% 3C6 10-01-14 940,000 1.00 0.45 3D4 10-01-15 625,000 1.00 0.55 3E2 10-01-16 460,000 1.00 0.70 3F9 10-01-17 485,000 1.00 0.85 3G7 10-01-18 475,000 1.05 1.05 3H5 10-01-19 235,000 1.20 1.20 3Jl 10-01-20* 180,000 1.40 1.40 3K8 *The Bonds maturing on or after October 1, 2020, will be subject to redemption prior to maturity at the option of the City on October 1, 2019, and thereafter, in whole or in part on any date, in principal amounts of $5,000 or any integral multiple thereof, at a price equal to 100% of the principal amount of Bonds to be redeemed plus accrued interest to the date fixed for redemption. See THE BONDS -"Redemption Provisions" herein. (lJCUSJP numbers have been aSSIgned to thIS Issue by Standard & Poor's CUSIP ServIce Bureau, a dIVISIOn of the McGraw-Hili Companies. Inc .. and are included solely for the convenience of the Owners of the Notes and Bonds. Neither the City nor the Underwriters shall be responsible for the selection or correctness of the CUSJP numbers setforth above. CITY OF SALINA, KANSAS 300 West Ash City/County Building -Room 206 P. O. Box 736 Salina, Kansas 67402-0736 CITY COMMISSION Norman Jennings, Mayor Barb Shirley, Vice Mayor Samantha Angell, Commissioner Kaye Crawford, Commissioner Aaron Householter, Commissioner CITY STAFF Jason Gage, City Manager Mike Schrage, Deputy City Manager Rodney Franz, Director of Finance and Administration Lieu Ann Elsey, City Clerk CITY ATTORNEY Greg Bengtson Clark, Mize & Linville, Chartered Salina, Kansas BOND COUNSEL Gilmore & Bell, P.c. Kansas City, Missouri FINANCIAL ADVISOR George K. Baum & Company Kansas City, Missouri No person has been authorized by the City or the Underwriters to give any information or to make any representations with respect to the Bonds to be issued, other than those contained in this Official Statement, and if given or made, such other information or representations not so authorized must not be relied upon as having been given or authorized by the City or the Underwriters. This Official Statement is not to be used in connection with an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. All financial and other information presented herein, except for information expressly attributed to other sources, has been provided by the City from its records and is intended to show recent historic information. Such information is not guaranteed as to accuracy or completeness. All descriptions of laws and documents contained herein are only summaries and are qualified in their entirety by reference to such laws and documents. Information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale of the Bonds shall, under any circumstances, create any implication that the information contained herein has remained unchanged since the respective dates as of which such information is given. TABLE OF CONTENTS Page INTRODUCTORY STATEMENT..................................................................................................... 1 THE NOTES.............................................. ......................................................................................... 2 THE BONDS............................................... ........................................................................................ 5 THE DEPOSITORY TRUST COMP ANY ......................................................................................... 9 THE FINANCING PLAN ...................................................... ................. ............................................ 11 SOURCES AND USES OF FUNDS .................................................................................................. 12 RISK FACTORS AND INVESTMENT CONSIDERATIONS ............. .......... ... .... ...... ........... .......... 12 LEGAL MATTERS.......................................... .................................................................................. 14 TAX MATTERS............................................. .................................................................................... 14 RATINGS ........................................................................................................................................... 16 FINANCIAL ADVISOR..................................................................................................................... 16 UNDERWRITING.............................................................................................................................. 16 ABSENCE OF MATERIAL LITIGATION ....................................................................................... 17 CONTINUING DISCLOSURE .......................................................................................................... 17 CERTIFICATION OF OFFICIAL STATEMENT ............................................................................. 17 APPENDIX A: INFORMATION CONCERNING THE CITY FINANCIAL OVERVIEW OF THE CITy................................................................................... A-I GENERAL INFORMATION CONCERNING THE CITY .......................................................... A-2 ECONOMIC INFORMATION CONCERNING THE CITY ....................................................... A-6 DEBT SUMMARY OF THE CITY ............................................................................................... A-8 FINANCIAL INFORMATION CONCERNING THE CITY ....................................................... A-II APPENDIX B: CONTINUING DISCLOSURE INSTRUCTIONS APPENDIX C: AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDING DECEMBER 31, 2011 General CITY OF SALINA, KANSAS $1,485,000 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 $2,365,000 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B INTRODUCTORY STATEMENT The purpose of this Official Statement is to present certain information concerning the City of Salina, Kansas (the "City"), and the issuance of its $1,485,000 General Obligation Temporary Notes, Series 2012-1 (the "Notes"), its $2,365,000 General Obligation Internal Improvement Bonds, Series 2012-A (the "Series 2012-A Bonds"), and its $3,785,000 General Obligation Refunding Bonds, Series 2012-B (the "Series 2012-B Bonds" and collectively with the Series 2012-A Bonds, the "Bonds"), all dated July 15, 2012. The Notes and the Bonds are being issued to provide funds to finance certain water, sewer, and street improvements within the City and to refund portions of three outstanding bond issues of the City. See THE FINANCING PLAN herein. The full faith, credit, and resources of the City are irrevocably pledged for the prompt payment of the principal and interest on the Notes and Bonds as the same becomes due. See THE NOTES -"Security" and THE BONDS -"Security" herein. The Appendices are an integral part of this Official Statement and should be read in their entirety. All financial and other inforn1ation presented herein has been compiled by the City's financial advisor, George K. Baum & Company, Kansas City, Missouri (the "Financial Advisor"). Such information has been provided by the City and other sources deemed to be reliable. The presentation of information herein is intended to show recent historic information and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. Gilmore & Bell, P.C., Kansas City, Missouri, Bond Counsel, has not assisted in the preparation of this Official Statement, except for the sections titled INTRODUCTORY STATEMENT, THE NOTES, THE BONDS, LEGAL MATTERS, TAX MATTERS, CONTINUING DISCLOSURE, and APPENDIX B and, accordingly, expresses no opinion as to the accuracy or sufficiency of any other information contained herein. Definitions Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the resolution of the governing body of the City authorizing the Notes (the "Note Resolution") and in the resolutions and ordinances of the governing body ofthe City authorizing the Bonds (the "Bond Ordinances"), as applicable. Copies of the Note Resolution and the Bond Ordinances are available upon request to the City, the Financial Advisor, or Bond Counsel. Additional Information Additional information regarding the City, the Notes, or the Bonds may be obtained from George K. Baum & Company, 4801 Main Street, Kansas City, Missouri 64112, telephone 816-474-1100. THE NOTES Description The Notes shall consist of fully registered book-entry-only Notes in the denomination of $5,000 or any integral multiples thereof (the "Authorized Denomination") and shall be numbered in such manner as the Note Registrar shall determine. All of the Notes shall be dated July 15, 2012, shall become due i.Ll the amounts on the Stated Maturities, with option of prior redemption and payment prior to their Stated Maturities, and shall bear interest at the rates per annum set forth on the inside cover page of this Official Statement. The Notes shall bear interest (computed on the basis of twelve 30-day months) from the later of the Dated Date or the most recent Interest Payment Date to which interest has been paid on the Interest Payment Dates in the manner hereinafter set forth. Redemption Provisions The Notes are not subject to redemption and payment prior to maturity. Authoritv The Notes are issued pursuant to and in full compliance with the Constitution and statutes of the State of Kansas, including without limitation K.S.A. 10-101 et seq. (including particularly K.S.A. 10-123) and K.S.A. 12- 685 et seq., all as amended, and a resolution adopted by the City on July 9, 2012, authorizing the issuance of the Notes (the "Note Resolution"). Securitv The Notes shall be general obligations of the City, payable as to both principal and interest from the proceeds of general obligation bonds of the City, and if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The full faith, credit and resources of the City are hereby irrevocably pledged for the prompt payment of the principal of and interest on the Notes as the same become due. Designation of Note Paving Agent and Note Registrar The City will at all times maintain a paying agent and note registrar meeting the qualifications set forth in the Note Resolution. The City reserves the right to appoint a successor paying agent or note registrar. No resignation or removal of the paying agent or note registrar shall become effective until a successor has been appointed and has accepted the duties of paying agent or note registrar. Every paying agent or note registrar appointed by the City shall at all times meet the requirements of Kansas law. The Treasurer of the State of Kansas, Topeka, Kansas (the "Note Registrar" and "Note Paying Agent") has been designated by the City as paying agent for the payment of principal of and interest on the Notes and note registrar with respect to the registration, transfer and exchange of Notes. Registration. Transfer and Exchange of Notes As long as any of the Notes remain Outstanding, each Note when issued shall be registered in the name of the Owner thereof on the Note Register. Notes may be transferred and exchanged only on the Note Register as hereinafter provided. Upon surrender of any Note at the principal office of the Note Registrar, the Note Registrar shall transfer or exchange such Note for a new Note or Notes in any authorized denomination of the same Stated Maturity and in the same aggregate pnncipal amount as the Note that was presented for transfer or exchange. Notes presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature satisfactory to the Note Registrar, duly executed by the Owner thereof or by the Owner's duly authorized agent. 2 In all cases in which the privilege of transferring or exchanging Notes is exercised, the Note Registrar shall authenticate and deliver Notes in accordance with the provisions of the Note Resolution. The City shall pay the fees and expenses of the Note Registrar for the registration, transfer and exchange of Notes. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Note Registrar, are the responsibility of the Owners of the Notes. In the event any Owner fails to provide a correct taxpayer identification number to the Note Paying Agent, the Note Paying Agent may make a charge against such Owner sufficient to pay any governmental charge required to be paid as a result of such failure. The City and the Note Registrar shall not be required (a) to register the transfer or exchange of any Note that has been called for redemption after notice of such redemption has been mailed by the Note Paying Agent and during the period of 15 days next preceding the date of mailing of such notice of redemption; or (b) to register the transfer or exchange of any Note during a period beginning at the opening of business on the day after receiving written notice from the City of its intent to pay Defaulted Interest and ending at the close of business on the date fixed for the payment of Defaulted Interest. Mutilated, Lost, Stolen or Destroved Notes If (a) any mutilated Note is surrendered to the Note Registrar or the Note Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (b) there is delivered to the City and the Note Registrar such security or indemnity as may be required by each of them, then, in the absence of notice to the City or the Note . Registrar that such Note has been acquired by a bona fide purchaser, the City shall execute and, upon the City's request, the Note Registrar shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of the same Stated Maturity and of like tenor and principal amount. If any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the City, in its discretion, may pay such Note instead of issuing a new Note. Upon the issuance of any new Note, the City may require the payment by the Owner of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Note Paying Agent) connected therewith. Nonpresentment of Notes If any Note is not presented for payment when the principal thereof becomes due at Maturity, if funds sufficient to pay such Note have been made available to the Note Paying Agent all liability of the City to the Owner thereof for the payment of such Note shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Note Paying Agent to hold such funds, without liability for interest thereon, for the benefit of the Owner of such Note, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on his part under this Note Resolution or on, or with respect to, said Note. If any Note is not presented for payment within four (4) years following the date when such Note becomes due at Maturity, the Note Paying Agent shall repay to the City the funds theretofore held by it for payment of such Note, and such Note shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the City, and the Owner thereof shall be entitled to look only to the City for payment, and then only to the extent of the amount so repaid to it by the Note Paying Agent, and the City shall not be liable for any interest thereon and shall not be regarded as a trustee of such money. Method and Place of Payment of the Notes The principal of, or Redemption Price, and mterest on the Notes shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts. The principal or Redemption Price of each Note and the interest thereon shall be paid at Maturity to the Person in whose name such Note is registered on the Note RegIster at the Maturity thereof, upon presentation and surrender of such Note at the principal office of the Note Paying Agent. The interest payable on each Note on any Interest Payment Date shall be paid to the Owner of such Note as shown on the Note Register at the close of business on the Record Date for such interest (a) by check or draft mailed by the Note Paying Agent to the address of such Owner shown on the Note Register or at such other address as is 3 furnished to the Note Paying Agent in writing by such Owner; or (b) in the case of an interest payment to Cede & Co. or any Owner of $500,000 or more in aggregate principal amount of Notes, by electronic transfer to such Owner upon written notice given to the Note Registrar by such Owner, not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank, ABA routing number and account number to which such Owner wishes to have such transfer directed. Notwithstanding the foregoing, any Defaulted Interest with respect to any Note shall cease to be payable to the Owner of such Note on the relevant Record Date and shall be payable to the Owner in whose name such Note is registered at the close of business on the Special Record Date for the payment of such Defaulted Interest, which Special Record Date shall be fixed as hereinafter specified. The City shall notify the Note Paying Agent in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment (which date shall be at least 30 days after receipt of such notice by the Note Paying Agent) and shall deposit with the Note Paying Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest. Following receipt of such funds the Note Paying Agent shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment. The Note Paying Agent shall notify the City of such Special Record Date and shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, by first class mail, postage prepaid, to each Owner of a Note entitled to such notice not less than 10 days prior to such Special Record Date. SO LONG AS CEDE & CO. REMAINS THE REGISTERED OWNER OF THE NOTES, THE NOTE PAYING AGENT SHALL TRANSMIT PAYMENTS TO THE SECURITIES DEPOSITORY, WHICH SHALL REMIT SUCH PAYMENTS IN ACCORDANCE WITH ITS NORMAL PROCEDURES. See "THE NOTES -Book-Entry Notes; Securities Depository." PaYments Due on Saturdays, Sundays and Holidavs In any case where a Note Payment Date is not a Business Day, then payment of principal, Redemption Price or interest need not be made on such Note Payment Date but may be made on the next succeeding Business Day with the same force and effect as if made on such Note Payment Date, and no interest shall accrue for the period after such Note Payment Date. Book-Entrv Notes: Securities Depositorv The Notes shall initially be registered to Cede & Co., the nominee for the Securities Depository, and no Beneficial Owner will receIve certificates representing their respective interests in the Notes, except in the event the Note Registrar issues Replacement Notes. It is anticipated that during the term of the Notes, the Securities Depository will make book-entry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Notes to the Participants until and unless the Note Registrar authenticates and delivers Replacement Notes to the Beneficial Owners as described in the following paragraphs. The City may decide, subject to the requirements of the Operational Arrangements of DTC (or a successor Securities Depository), and the following provisions of this section to discontinue use of the system of book-entry transfers through DTC (or a successor Securities Depository): (a) If the City determines (1) that the Securities Depository is unable to properly discharge its responsibilities. or (2) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, or (3) that the continuation of a book-entry system to the exclusion of any Notes being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Notes; or (b) if the Note Registrar receives written notice from Participants having interest in not less than 50% of the Notes Outstanding, as shown on the records of the Securities Depository (and certified to such effect by the Securities Depository), that the continuation of a book-entry system to the exclusion of any Notes being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Notes, then the Note Registrar shall notify the Owners of such determination or such notice and of the availability of certificates to owners requesting the same, and the Note Registrar 4 shall register in the name of and authenticate and deliver Replacement Notes to the Beneficial Owners or their nominees in principal amounts representing the interest of each, making such adjustments as it may find necessary or appropriate as to accrued interest and previous calls for redemption; provided, that in the case of a determination under (a)(1) or (a)(2) of this paragraph, the City, with the consent of the Note Registrar, may select a successor securities depository in accordance with the following paragraph to effect book-entry transfers. In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Note. Upon the issuance of Replacement Notes, all references herein to obligations imposed upon or to be performed by the Securities Depository shall be deemed to be imposed upon and performed by the Note Registrar, to the extent applicable with respect to such Replacement Notes. If the Securities Depository resigns and the City, the Note Registrar or Owners are unable to locate a qualified successor of the Securities Depository, then the Note Registrar shall authenticate and cause delivery of Replacement Notes to Owners, as provided herein. The Note Registrar may rely on information from the Securities Depository and its Participants as to the names of the Beneficial Owners of the Notes. The cost of printing, registration, authentication, and delivery of Replacement Notes shall be paid for by the City. In the event the Securities Depository resigns, is unable to properly discharge its responsibilities, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, the City may appoint a successor Securities DepOSItory provided the Note Registrar receives written evidence satisfactory to the Note Registrar with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities and Exchange Act of 1934, as amended, or other applicable statute or regulation that operates a securities depository upon reasonable and customary terms. The Note Registrar upon its receipt of a Note or Notes for cancellation shall cause the delivery of the Notes to the successor Securities Depository in appropriate denominations and form as provided in the Note Resolution. THE BONDS Description The Bonds shall consist of fully registered book-entry-only bonds in the denomination of $5,000 or any integral multiples thereof (the "Authorized Denomination") and shall be numbered in such manner as the Bond Registrar shall determine. All of the Bonds will be dated July 15, 2012, shall become due in the amounts, on the Stated Maturities, and subject to redemption and payment prior to their Stated Maturities, and shall bear interest at the rates per annum set forth on the inside cover page of this Official Statement. The Bonds shall bear interest (computed on the basis of twelve 30-day months) from the later of the Dated Date or the most recent Interest Payment Date to which interest has been paid on the Interest Payment Dates in the manner hereinafter set forth. Redemption Provisions Optional Redemption. At the option of the City, Bonds or portions thereof maturing on October 1, 2020 and thereafter may be called for redemptIOn and payment prior to their Stated Maturity on October 1,2019, and thereafter as a whole or in part (selection of maturities and the amount of Bonds of each maturity to be redeemed to be determined by the City in such equitable manner as it may determine) at any time, at the Redemption Price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the Redemption Date. Selection of Bonds to be Redeemed. Bonds shall be redeemed only in an Authorized Denomination. When less than all of the Bonds are to be redeemed and paid prior to their Stated Maturity, such Bonds shall be redeemed in such manner as the City shall determine, Bonds of less than a full Stated Maturity shall be selected by the Bond Registrar in minimum Authorized Denomination in such equitable manner as the Bond Registrar may determine. In the case of a partial redemption of Bonds by lot when Bonds of denominations greater than a minimum Authorized Denomination are then Outstanding, then for all purposes in connection with such redemption each minimum Authorized Denomination of face value shall be treated as though it were a separate Bond of a minimum Authorized Denomination. If it is determined that one or more, but not all, of the minimum Authorized Denomination value represented by any Bond is selected for redemption, then upon notice of intention to redeem such minimum Authorized 5 Denomination, the Owner or the Owner's duly authorized agent shall forthwith present and surrender such Bond to the Bond Registrar: (1) for payment of the Redemption Price and interest to the Redemption Date of such minimum Authorized Denomination value called for redemption, and (2) for exchange, without charge to the Owner thereof, for a new Bond or Bonds of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Owner of any such Bond fails to present such Bond to the Bond Paying Agent for payment and exchange as aforesaid, such Bond shall, nevertheless, become due and payable on the redemption date to the. extent of the minimum Authorized Denomination value called for redemption (and to that extent only). Notice and Effect of Call for Redemption. Unless waived by any Owner of Bonds to be redeemed, if the City shall call any Bonds for redemption and payment prior to the Stated Maturity thereof, the City shall give written notice of its intention to call and pay said Bonds to the State Treasurer and the Purchaser. In addition, the City shall cause the Bond Registrar to give written notice of redemption to the Owners of said Bonds. Each of said written notices shall be deposited in the United States first class mail not less than 30 days prior to the Redemption Date. All official notices of redemption shall be dated and shall contain the following information: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption of any Bonds, the respective principal amounts) of the Bonds to be redeemed; (d) a statement that on the Redemption Date the Redemption Price will become due and payable upon each such Bond or portion thereof called for redemption and that interest thereon shall cease to accrue from and after the Redemption Date; and (e) the place where such Bonds are to be surrendered for payment of the Redemption Price, which shall be the principal office of the Bond Paying Agent. The failure of any Owner to receive notice given as heretofore provided or an immaterial defect therein shall not invalidate any redemption. Prior to any Redemption Date, the City shall deposit with the Bond Paying Agent an amount of money sufficient to pay the Redemption Price of all the Bonds or portions of Bonds that are to be redeemed on such Redemption Date. Official notice of redemption having been given as aforesaid, the Bonds or portions of Bonds to be redeemed shall become due and payable on the Redemption Date, at the Redemption Price therein specified, and from and after the Redemption Date (unless the City defaults in the payment of the Redemption Price) such Bonds or portIOn of Bonds shall cease to bear interest. For so long as the Securitles Depository is effecting book-entry transfers of the Bonds, the Bond Registrar shall provide the notices specified to the Securities Depository. It is expected that the Securities Depository shall, in turn, notify its Participants and that the Participants, in turn, will notify or cause to be notified the Beneficial Owners. Any failure on the part of the Securities Depository or a Participant, or failure on the part of a nominee of a Beneficial Owner of a Bond (having been mailed notIce from the Bond Registrar, the Securities Depository, a Participant or otherwise) to notify the Beneficial Owner of the Bond so affected, shall not affect the validity of the redemption of such Bond. In addition to the foregoing notice. the City shall provide such notices of redemption as are required by the Disclosure Instructions. The Bond Paying Agent is also directed to comply with any mandatory or voluntary standards then in effect for processmg redemptions of municipal securities established by the State or the Securities and Exchange Commission. Failure to comply with such standards shall not affect or invalidate the redemption of any Bond. Authoritv The Series 2012-A Bonds are issued pursuant to and in full compliance with the Constitution and statutes of the State of Kansas, including without limitation K.S.A. 10-101 et seq. and K.S.A. 12-6aOl et seq., all as amended, and an ordinance and resolution adopted by the City on July 9, 2012, authorizing the issuance of the Series 2012-A Bonds (jointly referred to herein as the "Series 2012-A Bond Ordinance"). The Series 2012-B Bonds are issued pursuant to and in full compliance with the Constitution and statutes of the State of Kansas, including without limitation K.S.A. 10-101 et seq. and K.S.A. 10-427 et seq., all as amended, and an ordinance and resolution adopted by the City on July 9,2012, authorizing the issuance of the Series 2012-B Bonds (jointly referred to herein as the "Series 2012-B Bond Ordinance"). 6 Security The Bonds shall be general obligations of the City, payable as to both principal and interest in part from special assessments levied upon the property benefited by the construction of certain public improvements, and if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The balance of the principal and interest on the Bonds is payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real or personal, within the territorial limits of the City. The full faith, credit and resources of the City are hereby irrevocably pledged for the prompt payment of the principal of and interest on the Bonds as the same become due. Designation of Bond Paving Agent and Bond Registrar The City will at all times maintain a paying agent and bond registrar meeting the qualifications set forth in the Bond Resolutions. The City reserves the right to appoint a successor paying agent or bond registrar. No resignation or removal of the paying agent or bond registrar shall become effective until a successor has been appointed and has accepted the duties of paying agent or bond registrar. Every paying agent or bond registrar appointed by the City shall at all times meet the requirements of Kansas law. The Treasurer of the State of Kansas, Topeka, Kansas (the "Bond Registrar" and "Bond Paying Agent") has been designated by the City as paying agent for the payment of principal of and interest on the Bonds and bond registrar with respect to the registration, transfer and exchange of Bonds. Registration, Transfer and Exchange of Bonds As long as any of the Bonds remain Outstandmg, each Bond when issued shall be registered in the name of the Owner thereof on the Bond Register. Bonds may be transferred and exchanged only on the Bond Register as hereinafter provided. Upon surrender of any Bond at the principal office of the Bond Registrar, the Bond Registrar shall transfer or exchange such Bond for a new Bond or Bonds in any authorized denomination of the same Stated Maturity and in the same aggregate prinCIpal amount as the Bond that was presented for transfer or exchange. Bonds presented for transfer or exchange shall be accompanied by a wntten instrument or instruments of transfer or authorization for exchange, in a fonn and with guarantee of signature satisfactory to the Bond Registrar, duly executed by the Owner thereof or by the Owner's duly authorized agent. In all cases in which the privilege of transferring or exchanging Bonds is exercised, the Bond Registrar shall authenticate and deliver Bonds in accordance with the provisions of the Bond Resolution. The City shall pay the fees and expenses of the Bond RegIstrar for the registration, transfer and exchange of Bonds. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Bond Registrar, are the responsibility of the Owners of the Bonds. In the event any Owner fails to provide a correct taxpayer identification number to the Bond Paying Agent, the Bond Paying Agent may make a charge agamst such Owner sufficient to pay any governmental charge required to be paid as a result of such failure. The City and the Bond Registrar shall not be required (a) to register the transfer or exchange of any Bond that has been called for redemption after notice of such redemption has been mailed by the Bond Paying Agent and during the period of 15 days next preceding the date of mailing of such notIce of redemption; or (b) to register the transfer or exchange of any Bond during a period beginning at the opening of business on the day after receiving written notice from the City of its intent to pay Defaulted Interest and ending at the close of business on the date fixed for the payment of Defaulted Interest. Method and Place of Pavment of the Bonds The principal of, or Redemption Price, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts. The principal or Redemption Price of each Bond shall be paid at Maturity to the Person in whose name such Bond is registered on the Bond Register at the Maturity thereof, upon presentation and surrender of such Bond at the principal office of the Bond Paying Agent. 7 The interest payable on each Bond on any Interest Payment Date shall be paid to the Owner of such Bond as shown on the Bond Register at the close of business on the Record Date for such interest (a) by check or draft mailed by the Bond Paying Agent to the address of such Owner shown on the Bond Register or at such other address as is furnished to the Bond Paying Agent in writing by such Owner; or (b) in the case of an interest payment to Cede & Co. or any Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Owner upon written notice given to the Bond Registrar by such Owner, not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank, ABA routing number and account number to which such Owner wishes to have such transfer directed. Notwithstanding the foregoing, any Defaulted Interest with respect to any Bond shall cease to be payable to the Owner of such Bond on the relevant Record Date and shall be payable to the Owner in whose name such Bond is registered at the close of business on the Special Record Date for the payment of such Defaulted Interest, which Special Record Date shall be fIxed as hereinafter specifIed. The City shall notify the Bond Paying Agent in writing of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment (which date shall be at least 30 days after receipt of such notice by the Bond Paying Agent) and shall deposit with the Bond Paying Agent an amount of money equal to fhe aggregate amount proposed to be paid in respect of such Defaulted Interest. Following receipt of such funds the Bond Paying Agent shall fIx a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment. The Bond Paying Agent shall notify the City of such Special Record Date and shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to bemailed.byfIrstclassmail.postageprepaid.to each Owner of a Bond entitled to such notice not less than 10 days prior to such Special Record Date. SO LONG AS CEDE & CO., REMAINS THE REGISTERED OWNER OF THE BONDS, THE BOND PAYING AGENT SHALL TRANSMIT PAYMENTS TO THE SECURITIES DEPOSITORY, WHICH SHALL REMIT SUCH PAYMENTS IN ACCORDANCE WITH ITS NORMAL PROCEDURES. PaYments Due on Saturdays, Sundays and Holidavs In any case where a Bond Payment Date is not a Business Day, then payment of principal, Redemption Price or interest need not be made on such Bond Payment Date but may be made on the next succeeding Business Day with the same force and effect as if made on such Bond Payment Date, and no interest shall accrue for the period after such Bond Payment Date. Book-Entrv Bonds; Securities Depositorv The Bonds shall initially be registered to Cede & Co., the nominee for the Securities Depository, and no BenefIcial Owner will receive certifIcates representing their respective interests in the Bonds, except in the event the Bond Registrar issues Replacement Bonds. It is anticipated that during the term of the Bonds, the Securities Depository will make book-entry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Bonds to the Participants until and unless the Bond Registrar authenticates and delivers Replacement Bonds to the BenefIcial Owners as described in the following paragraphs The City may decide, subject to the requirements of the Operational Arrangements of DTC (or a successor Securities Depository), and the following provisions of this section to discontinue use of the system of book-entry transfers through DTC (or a successor Securities Depository): (a) If the City detemlines (1) that the Securities Depository is unable to properly discharge its responsibilities, or (2) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, or (3) that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the BenefIcial Owners of the Bonds; or (b) if the Bond Registrar receives written notice from Participants having interest in not less than 50% of the Bonds Outstanding, as shown on the records ofthe Securities Depository (and certifIed to such effect by the Securities Depository), that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the 8 Beneficial Owners of the Bonds, then the Bond Registrar shall notify the Owners of such determination or such notice and of the availability of certificates to owners requesting the same, and the Bond Registrar shall register in the name of and authenticate and deliver Replacement Bonds to the Beneficial Owners or their nominees in principal amounts representing the interest of each, making such adjustments as it may find necessary or appropriate as to accrued interest and previous calls for redemption; provided, that in the case of a determination under (a)(1) or (a)(2) of this section, the City, with the consent of the Bond Registrar, may select a successor securities depository as hereinafter provided to effect book-entry transfers. In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Bond. Upon the issuance of Replacement Bonds. all references herein to obligations imposed upon or to be performed by the Securities Depository shall be deemed to be imposed upon and performed by the Bond Registrar, to the extent applicable with respect to such Replacement Bonds. If the Securities Depository resigns and the City, the Bond Registrar or Owners are unable to locate a qualified successor of the Securities Depository, then the Bond Registrar shall authenticate and cause delivery of Replacement Bonds to Owners, as provided herein. The Bond Registrar may rely on information from the Securities Depository and its Participants as to the names of the Beneficial Owners of the Bonds. The cost of printing, registration, authentication, and delivery of Replacement Bonds shall be paid for by the City. In the event the Securities Depository resigns, IS unable to properly discharge its responsibilities, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, the City may appoint a successor Securities Depository provided the Bond Registrar receives written evidence satisfactory to the Bond RegIstrar with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities and Exchange Act of 1934, as amended, or other applicable statute or regulation that operates a securities depository upon reasonable and customary terms. The Bond Registrar upon its, receipt of a Bond or Bonds for cancellation shall cause the delivery of the Bonds to the successor Securities Depository in appropriate denominations and form as provided in the Bond Resolution. THE DEPOSITORY TRUST COMPANY The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Notes and Bonds (collectively, the "Securities"). The Securities will be issued as fuIly 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 ofDTC. One fully-registered Security certificate will be issued for each maturity of such series of the Securities, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest depository, is a limited-purpose trust company orgarnzed 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 17 A 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 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. 9 Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Securities, except in the event that use of the book-entry system for the Securities is discontinued. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative ofDTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which mayor may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices 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 any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. 's consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Issuer, the Note Paying Agent, or the Bond Paying Agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Note Paying Agent, the Bond Paying Agent, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer, the Note Paying Agent or the Bond Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibilIty of Direct and Indirect Participants. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to the Note Paying Agent and the Bond Paying Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to the Note Paying Agent and the Bond Paying Agent. The requirement for physical delivery of the Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Securities to the Note Paying Agent's or Bond Paying Agent's DTC account. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the Issuer, the Note Paying Agent or the Bond Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 10 The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. THE FINANCING PLAN The Note Projects Proceeds from the sale of the Notes will be used to provide construction period financing for improvements to a main trafficway in the City and to pay the costs associated with the issuance of the Notes. The Series 2012-A Bond Projects Proceeds from the sale of the Series 20 12-A Bonds will be used to provide long term financing for certain utility and street improvements within a new commercial development within the City and to pay the costs associated with the issuance of the Series 2012-A Bonds. A portion of the cost of these improvements was originally financed by the issuance of the City' s Series 2011-1 General Obligation T emporary Notes, which will be retired with proceeds from the sale of the Series 2012-A Bonds and other available funds. The Series 2012-B Refunding Plan Proceeds from the sale of the Series 2012-B Bonds and other available funds will be used to refund the callable portions of three outstanding bond issues of the City: the General Obligation Internal Improvement Bonds, Series 2003-A; the General Obligation Internal Improvement Bonds, Series 2004-B; and the General Obligation Internal Improvement Bonds, Series 2005-A (collectively, the "Refunded Bonds"); and to pay the costs associated with the sale of the Series 2012-B Bonds. The repayment of the callable Series 2004-B Bonds is a current refunding. The repayment of the callable Series 2003-A and Series 2005-A Bonds is an advance refunding. According to the terms of the Refunding Plan, proceeds from the sale of the Series 2012-B Bonds and other available funds will be deposited into an irrevocable escrow account (the "Escrow Trust Account") which will provide funds to pay the interest due on the Refunded Bonds up to and including payments due on the Refunded Bonds' earliest optional redemption date and to redeem the prmclpal of the Refunded Bonds on such date. All Refunded Bonds will be redeemed at their first optional redemption date. All Refunded Bonds will be called at a price equal to 100% of the par value thereof, without premium. The Refunding Plan is being undertaken in order to achieve interest cost savings. The following details the Refunded Bonds: Principal Maturity Dates Refunded Amount Amount to be Redemption Bonds Outstanding to be Refunded Refunded Date 2003-A $1,765,000 $1,125,000 10-01-14 thru 10-01-18 10-01-13 2004-B 1,390,000 1,010,000 10-01-13 thru 10-01-19 10-01-12 2005-A 2,200,000 1,535,000 10-01-14 thru 10-01-20 lO-Ol-13 Escrow Trust Agreement An Escrow Trust Account will be established for the Refunded Bonds pursuant to the terms of an Escrow Trust Agreement dated as of July 15, 2012, by and between the City and UMB National Bank of America, Wichita, Kansas (the "Escrow Trustee"). 11 Proceeds from the Series 2012-B Bonds will be deposited in the Escrow Trust Account and used to acquire direct, non-callable obligations of the United States of America (the "Escrowed Securities"). The Escrowed Securities will mature at such times and in such amounts as necessary, when combined with cash balances in the Escrow Trust Account, to pay the principal of and interest on the Refunded Bonds as described in the preceding section. Mathematical Verification The mathematical accuracy of (a) the computations made by George K. Baum & Company on the adequacy of the maturing principal and interest earned on the Escrowed Securities to be purchased with the proceeds from the proceeds of the Series 2012-B Bonds, together with uninvested funds to be held by the Escrow Trustee, in accordance with the Escrow Trust Agreement, to provide for the payment of the interest on the Refunded Bonds up to and including their earliest optional redemption date, and to redeem the Refunded Bonds on such dates; and (b) the yield computations made by George K. Baum & Company supporting the conclusion by Bond Counsel that the Series 2012-B Bonds are not "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, will be verified by Robert Thomas CPA, LLC, Shawnee Mission, Kansas. SOURCES AND USES OF FUNDS Funds to be used in the Financing Plan will be provided and applied approximately as follows, exclusive of accrued interest. Series Series Series 2012-1 Notes 2012-A Bonds 2012-B Bonds Sources of Funds: Note and Bond Proceeds $1,485,000.00 $2,365,000.00 $3,785,000.00 Prepaid Assessments 0.00 664,452.10 0.00 Transfer from Prior Issue Debt Service 0.00 408,488.14 67,372.50 Bid Premium 6.088.50 0.00 15,471.43 Total Sources of Funds $1,491,088.50 $3,437,940.24 $3,867,843.93 Uses of Funds: Deposit to Improvement Fund $1,485,308.50 $3,414,204.44 $ 0.00 Deposit to Escrow Fund 0.00 0.00 3,828,959.89 Costs ofIssuance 5,780.00 23.735.80 38,884.04 Total Application of Funds $1,491,088.50 $3,437,940.24 $3.867,843.93 RISK FACTORS AND INVESTMENT CONSIDERATIONS A PROSPECTIVE PURCHASER OF THE NOTES AND BONDS (COLLECTIVELY, THE "SECURITIES',) DESCRIBED HEREIN SHOULD BE AWARE THAT THERE ARE CERTAIN RISKS ASSOCIATED WITH THE SECURITIES WHICH MUST BE RECOGNIZED. THE FOLLOWING STATEMENTS REGARDING CERTAIN RISKS ASSOCIATED WITH THE OFFERING SHOULD NOT BE CONSIDERED AS A COMPLETE DESCRIPTION OF ALL RISKS TO BE CONSIDERED IN THE DECISION TO PURCHASE THE SECURITIES. PROSPECTIVE PURCHASERS OF THE SECURITIES SHOULD ANALYZE CAREFULLY THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT AND ADDITIONAL INFORMATION IN THE FORM OF THE COMPLETE DOCUMENTS SUMMARIZED HEREIN, COPIES OF WHICH ARE AVAILABLE AND MAY BE OBTAINED FROM THE CITY OR THE UNDERWRITERS. Legal Matters Various state and federal laws, regulations and constitutional provisions apply to the obligations created by the Securities. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, provisions and regulations which would have a material effect, either directly or indirectly, on the City or the taxing authority of the City. 12 Limitations on Remedies Available to Owners of Securities The enforceability of the rights and remedies of the owners of Securities, and the obligations incurred by the City in issuing the Securities, are subject to the following: the federal Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by' the United States Constitution; and the reasonable and necessary exercise, in certain unusual situations, of the police power mherent in the State of Kansas and its governmental subdivisions in the interest of serving a legitimate and significant public purpose. Banlauptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the owners of the Securities to judicial discretion and interpretation of their rights in bankruptcy and otherwise, and consequently may involve risks of delay, limitation or modification of their rights. Taxation of Interest on the Securities An opinion of Bond Counsel will be obtained to the effect that interest earned on the Securities is excludable from gross income for federal income tax purposes under current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and applicable rulings and regulations under the Code; however, an application for a ruling has not been made and an opinion of counsel is not binding upon the Internal Revenue Service. There can be no assurance that the present provisions of the Code, or the rules and regulations thereunder, will not be adversely amended or modified, thereby rendering the interest earned on the Securities includable in gross income for federal income tax purposes. The City has covenanted in the Bond and Note Resolutions and in other documents and certificates to be delivered in connection with the issuance of the Securities to comply with the provisions of the Code, includmg those which require the City to take or omit to take certain actions after the issuance of the Securities. Because the existence and continuation of the excludability of the interest on the Securities depends upon events occurring after the date of issuance of the Securities, the opinion of Bond Counsel described under TAX MATTERS assumes the compliance by the City with the provisions of the Code described above and the regulations relating thereto. No opinion is expressed by Bond Counsel with respect to the excludability of the interest on the Securities in the event of noncompliance with such provisions. The failure of the City to comply with the provisions described above may cause the interest on the Securities to become includable in gross income as of the date of issuance. No Additional Interest or Mandatorv Redemption upon Event of Taxability The Bond and Note Resolutions do not proVIde for the payment of additional interest or penalty on the Securities or the mandatory redemption thereof if the interest thereon becomes includable in gross income for federal income tax purposes. Likewise, the Bond and Note Resolutions do not provide for the payment of any additional interest or penalty on the Securities if the interest thereon becomes includable in gross income for Kansas income tax purposes. Suitability of Investment The tax exempt feature of the Securities is more valuable to high tax bracket investors than to investors who are in low tax brackets, and so the value of the interest compensation to any particular investor will vary with individual tax rates. Each prospective investor should carefully examine this Official Statement, including the Appendices hereto, and its own financial condition to make a judgment as to its ability to bear the economic risk of such an investment, and whether or not the Securities are an appropriate investment. 13 Market for the Securities Ratings. The Securities have been assigned the fmancial ratings set forth in the section hereof titled RATINGS. There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, if in the judgment of the agency originally establishing such rating, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse affect on the market price of the Securities. Secondary Market. There is no assurance that a secondary market will develop for the purchase and sale of the Securities. Prices of securities traded in the secondary market, though, are subject to adjustment upward and downward in response to changes in the credit markets. From time to time it may be necessary to suspend indefinitely secondary market trading in the Securities as a result of financial condition or market position of broker- dealers, prevailing market conditions, lack of adequate current financial information about the City, or a material adverse change in the financial condition of the City, whether or not the Securities are in default as to principal and interest payments, and other factors which may give rise to uncertainty concerning prudent secondary market practices. Recent Legislative Proposal On September 12, 2011, the President released a legislative proposal that would, among other things, subject interest on tax-exempt securities (including the Securities) to a federal income tax for taxpayers with incomes above certain thresholds for tax years beginning after 2012. The proposal has not yet passed either of the two Houses of Congress and it is not possible to predict whether this proposal will be enacted into law. If enacted into law, such a proposal could affect the value or marketability of tax-exempt securities (including the Securities). Prospective purchasers of the Securities should consult their own tax advisers regarding the impact of any change in law on the Securities. LEGAL MATTERS All matters incident to the authorization and issuance of the Securities by the City are subject to the approval of Gilmore & Bell, P.C., Kansas City, Missouri, Bond Counsel, whose approving opinion accompanies the Notes and Bonds. The factual and financial information appearing herein has been supplied or reviewed by certain officials of the City and its certified public accountants, as referred to herein. Bond Counsel has participated in the preparation of the matters appearing in the sections of this Official Statement captioned INTRODUCTORY STATEMENT, THE NOTES, THE BONDS, LEGAL MATTERS, TAX MATTERS, CONTINUING DISCLOSURE, and APPENDIX B. TAX MATTERS General The following is a summary of the material federal and state income tax consequences of holding and disposing ofthe Notes and the Bonds (collectively referred to herein as the "Securities"). This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of holders subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Securities as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State of Kansas, does not discuss the consequences to an owner under state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Securities in the secondary market at a premium or a discount. Prospective investors are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Securities. 14 Opinion of Bond Counsel In the opinion of Bond Counsel, under the law existing as of the issue date of the Securities: Federal Tax Exemption: The interest on the Securities (including any original issue discount properly allocable to an owner thereof) is excluded from gross income for federal income tax purposes. Alternative Minimum Tax. Interest on the Securities is not an item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Bank Qualification. The Securities are "qualified tax-exempt obligations" for purposes of Code §265(b) ), and in the case of certain financial institutions (within the meaning of Code § 265(b)(5», a deduction is allowed for 80% of that portion of such financial institutions' interest expense allocable to interest on the Securities. Kansas Tax Exemption. The interest on the Securities is exempt from income taxation by the State. No Other Opinions. Bond Counsel's opinions are provided as of the date of the original issue of the Securities, subject to the condition that the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Securities in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply with all such reqUlrements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Securities in gross income for federal income tax purposes retroactive to the date of issuance of the Securities. Bond Counsel is expressmg no opinion regarding other federal, state or local tax consequences arising with respect to the Securities. Other Tax Consequences Original Issue Discount. For Federal income tax purposes, original issue discount ("OlD") is the excess of the stated redemption price at maturity of a Security over its issue price. The issue price of a Security is the first price at which a substantial amount of the Securities of that maturity have been sold (ignoring sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers). Under Code § 1288, OID on tax-exempt bonds accrues on a compound basis. The amount of OlD that accrues to an owner of a Security during any accrual period generally equals: (a) the issue price of that Security, plus the amount of OID accrued in all prior accrual periods; multiplied by (b) the yield to maturity on that Security (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period); minus (c) any interest payable on that Security during that accrual period. The amount of OID accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excludable from gross income for Federal income tax purposes. and will increase the owner's tax basis in that Security. Prospective investors should consult their own tax advisors concerning the calculation and accrual of OlD. Original Issue Premium. If a Security is issued at a price that exceeds the stated redemption price at maturity of the Security, the excess of the purchase price over the stated redemption price at maturity constitutes "premium" on that Security. Under Code § 171, the purchaser of that Security must amortize the premium over the term of the Security using constant yield principles, based on the purchaser's yield to maturity. As premium is amortized, the owner's basis in the Security and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner. This will result m an increase in the gain (or decrease in the loss) to be recognized for Federal income tax purposes on sale or disposition of the Security prior to its maturity. Even though the owner's basis is reduced, no Federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium. Sale, Exchange or Retirement of Securities. Upon the sale, exchange or retirement (including redemption) of a Security, an owner of the Security generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale. exchange or retirement of the Security (other than in respect of accrued and unpaid interest) and such owner's adjusted tax basis in the Security. To the extent the Securities are held as a capital asset, such gain or loss will be capital gain or loss 15 and will be long-term capital gain or loss if the Security has been held for more than 12 months at the time of sale, exchange or retirement. Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on Securities, and to the proceeds paid on the sale of Securities, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner's federal income tax liability. Collateral Federal Income Tax Consequences. Prospective purchasers of the Securities should be aware that ownership of the Securities may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with "excess net passive income," foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Securities. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Securities should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Securities, including the possible application of state, local, foreign and other tax laws. RATINGS The Notes and Bonds and the City's other outstanding general obligation notes and bonds have been rated "MIG I" and "Aa2", respectively, by Moody's. Any explanation of the significance of such ratings may be obtained only from said ratmg agency. There is no assurance that the ratings will remain for any given period of time or that they may not be lowered or withdrawn entirely by the rating service if, in their judgment, circumstances so warrant. Any such downward change in or withdrawal of the ratings may have an adverse effect on the market price of the Notes and Bonds. FINANCIAL ADVISOR George K. Baum & Company, Kansas City, Missouri, has acted as Financial Advisor to the City in connection with the sale of the Securities. The Financial Advisor has assisted the City in the preparation of this Official Statement and in other matters relating to the issuance of the Securities. The fees of the Financial Advisor are contingent upon the issuance of the Securities. UNDERWRITING The Notes were purchased at public sale on July 9, 2012, by Country Club Bank, Prairie Village, Kansas (the "Notes Underwriter") at a price equal to the principal amount of the Notes, plus a bid premium of $6,088.50, plus accrued interest to the date of closing. The Series 2012-A Bonds were purchased at public sale on July 9, 2012, by UMB Bank, n.a., Kansas City, Missouri (the "Series 2012-A Bonds Underwriter") at a price equal to the principal amount of the Series 20I2-A Bonds plus accrued interest to the date of closing. The Series 2012-B Bonds were purchased at public sale on July 9, 2012, by UMB Bank, n.a., Kansas City, Missouri (the "Series 2012-B Bonds Underwriter") at a price equal to the principal amount of the Series 2012-B Bonds, plus a bid premium of $15,471.43, plus accrued interest to the date of closing. The Notes Underwriter, the Series 2012-A Bonds Underwriter, and the Series 2012-B Bonds Underwriter are collectively referred to herein as (the "Underwriters"). 16 ABSENCE OF MATERIAL LITIGATION The Transcript of Proceedings will contain a certificate of non-litigation dated as of the closing date and executed by the City to the effect that there is no controversy, suit, or proceeding of any kind pending or, to the knowledge of the City, threatened wherein or whereby any question is raised, or may be raised, questioning, disputing, or affecting in any way the legal organization of the City or its boundaries or the legality of any official act shown to have been done regarding the issuance of the Notes and Bonds or the constitutionality or validity of the obhgation represented by the Bonds or the means provided for the payment of the Notes and Bonds. CONTINUING DISCLOSURE The Securities and Exchange Commission (the "SEC") has promulgated amendments to Rule 15c2-12 (the "Rule"), requiring continuous secondary market disclosure. In the Note Resolution and the Bond Resolutions, the City has covenanted to provide annually certain financial information and operating data and other information necessary to comply with the Rule, and to transmit the same or cause the same to be transmitted to certain repositories and the Municipal Securities Rulemaking Board, as applicable. This covenant is for the benefit of and is enforceable by the owners of the Notes and Bonds. See APPENDIX B for further details concerning continuing disclosure requirements. On June 28th, 2012 the City filed with the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system ("EMMA") the annual financial information and operating data required pursuant to its existing continuing disclosure undertakings and complied in a timely manner with its obligations for the fiscal year ending December 31, 2011. During the prior five years the City did not always file the annual financial informatIon and operating data within 180 days of the end of its fiscal year as required. Past failures to file the annual financial information was primarily the result of not having audited financial statements completed within 180 days of the end of the fiscal year. The required operating data was made available to the public through the City's filing of certain official statements with the MSRB in April 2011 and 2010, July 2009 and 2008 and June 2007. The City has put into place procedures to ensure continued compliance with all undertakings with respect to the City's note and bond issues including acceleration of the deadline for the completion of its annual audited financial statements and the formal adoption of a post issuance compliance policy. CERTIFICATION OF THIS OFFICIAL STATEMENT The preparation and distribution of this Official Statement has been authorized by the City. This Official Statement IS hereby duly approved by the governing body of the City as of the date on the cover page hereof. CITY OF SALINA, KANSAS By /s/ _____ --"'.R""o'-"d'-.!Fc.!r.-"anz"""-_____ _ Director of Finance and Administration ATTEST: /s/ ______ -=L=ie"-'u"-'Ann~=--"E""l""se"_'y'--_____ _ City Clerk 17 APPENDIX A FINANCIAL OVERVIEW OF THE CITY 2011 Estimated Actual Valuation (1) 2011 Assessed Valuation Outstanding General Obligation Bonds (2) Population-2010 U.S. Census Bureau Estimate General Obligation Debt Per Capita Ratio of General Obligation Debt to Estimated Actual Valuation Ratio of General Obligation Debt to Estimated Assessed Valuation Outstanding Temporary Notes (3) Outstanding Lease Purchase Obligations Outstanding Revenue Bonds Overlapping General Obligation Debt (4) Direct and Overlapping General Obligation Debt (5) Direct and Overlapping Debt Per Capita RatlO of Direct and Overlapping Debt to Estimated Actual Valuation Ratio of Direct and Overlapping Debt to Estimated Assessed Valuation $ 2,891,461,447 $ 449,760,638 $ 63,405,000 $ $ $ $ $ $ $ 47,707 1,329 2.19% 14.10% 1,485,000 0.00 16,120,000 66,357,521 131,247,521 2,751 4.54% 29.18% (1) For a further description of how Estimated Actual Valuation is calculated and additional historical figures see the section titled FINANCIAL INFORMATION -"Estimated Actual Valuation". (2) Includes the Bonds. Does not include bonds to be refunded with proceeds from the Series 2012-B Bonds. (3) Includes the Notes. Does not include notes to be retired with proceeds from the Series 2012-A Bonds. (4) For a more detailed explanation of the overlapping debt of the other jurisdictions, see DEBT SUMMARY -"Overlapping Debt". (5) Includes outstanding general obligation bonds and temporary notes of the City and overlapping jurisdictions. A-I GENERAL INFORMATION CONCERNING THE CITY Location and Size The City of Salina is located in north central Kansas, near the geographic center of the contiguous United States. It is the seventh largest city in Kansas, with a 2010 U.S. Census Bureau estimate of 47,707. The City is the county seat for Saline County which had an estimated 2010 U.S. Census Bureau population of 55,606. Situated at the intersection of Interstate Highways 70 and 135, the City of Salina serves as the industrial, medical, retail, trade and service hub for north central Kansas. Kansas City, Kansas, and Wichita, Kansas, are 175 and 95 miles away, respectively, via the direct access of these two major highways. The City encompasses a total area of approximately 23 square miles. Government The Town of Salina was organized in 1858 under the Town and Village Act in the State of Kansas. The City has had a Commission-City Manager form of government since 1921. The Commission comprises five members elected at-large. Each year the Commission chooses one member to act as Mayor. The City Manager is appointed by the Governing Body and acts as its primary agent in accordance with state statute. Other city officers and employees are appointed by the City Manager. The Governing Body is responsible for the policy determination, and the City Manager is responsible for the administration of the municipal government. Salina became a City of the first class on July 9, 1920. There are no organized city employee unions. The present elected officials of the City, along with the expiratIOn of their current terms of office, are as follows: Name Norman Jennings Barb Shirley Samantha Angell Kaye Crawford Aaron Householter Retirement Svstems Title Mayor Vice Mayor Commissioner Commissioner Commissioner Term Expires 2013 2015 2013 2013 2015 The City participates in the Kansas Public Employees Retirement System (KPERS) established in 1962, as an instrumentality of the State, pursuant to K.S.A. 74-4901 et seq., to provide retirement and related benefits to public employees in Kansas. KPERS is governed by a board of trustees consisting of nine members, including four members appointed by the Governor subject to confirmation by the State Senate, one appointed by the President of the Senate, one appointed by the Speaker of the House of Representatives, two elected by members and retirants of the retirement system, which must be members of such system, and the State Treasurer. Members of the board of trustees serve four-year terms and elect a chairperson annually. The board of trustees appoints an Executive Director to serve as the managing officer ofKPERS and employs a staff of approximately 95 people. As of June 30, 2010, KPERS serves about 277,000 members and 1,500 participating employers, including the State, school districts, counties, cities, public libraries, hospitals and other governmental units. KPERS administers the following three statewide, defined benefit retirement plans for public employees: (a) Kansas Public Employees Retirement System; (b) Kansas Police and Firemen's Retirement System; and (c) Kansas Retirement System for Judges. These three plans are separate and distinct with different membership groups, actuarial assumptions, experience, contribution rates and benefit options. The Kansas Public Employees Retirement System is the largest of the three plans, accounting for more than 95% of the members. The Kansas Public Employees Retirement System is further divided into two separate groups, as follows: A-2 (a) State/School Group -includes members employed by the State, school districts, community colleges, vocational-technical schools and educational cooperatives. The State of Kansas makes all employer contributions for this group, 85% of which comes from the State General Fund. State legislation enacted in 2003 made certain pre-1962 Board employees (which are part of a small group of pre-1962 Board and University of Kansas Hospital Authority employees known as the "TIAA Group"), special members of the State/School Group. (b) Local Group -all participating cities, counties, library boards, water districts and political subdivisions are included in this group. Local employers contribute at a different rate than the State/School Group rate. State legislation enacted in 2003 made certain pre-1962 employees of the University of Kansas Hospital Authority (which are a part of a small group of pre-1962 Board and University of Kansas Hospital Authority employees known as the "TIAA Group"), special members ofthe Local Group. KPERS is a qualified, governmental, § 401(a) defmed benefit pension plan, and has received IRS determination letters attesting to the plan's qualified status dated October 14, 1999 and March 5, 2001. KPERS is also a "contributory" defined benefit plan, meaning that employees make contributions to the plan. This contrasts it from noncontributory pension plans (more common in the private sector), which are funded solely by employer contributions. The City'S employees annually contribute: (a) 4% of their gross salary to the plan if such employees are KPERS Tier 1 members (covered employment prior to July 1, 2009), or (b) 6% of their gross salary to the plan if such employees are KPERS Tier 2 members (covered employment on or after July 1,2009). The City's contribution varies from year to year based upon the annual actuarial valuation and appraisal made by KPERS, subject to legislative caps on percentage increases. The City'S contribution is 8.54% of the employee's gross salary for calendar year 2012. The City has established membership in the Kansas Police and Fire Retirement System ("KPFRS") for its police and fire personnel. KPFRS is a division of and is administered by KPERS. Annual contributions are adjusted annually based on actuarial studies, subject to legislative caps on percentage increases. Employees contribute 7% of gross compensation and the City contributes 19.81 % of employees' gross compensation for calendar year 2012. In 2012, a number of changes to KPERS were approved, including: (a) Effective January 1,2015, the creation of a new KPERS Tier 3 ca'tegory (covered employment on or after January 1, 2015) based on a cash balance plan. Each Tier 3 participant shall have a retirement annuity account to which such participant shall contribute 6% of their gross salary to the plan. The employer or State contribution varies based on longevity of participant service: (1) 3% for less than 5 years; (2) 4% for at least 5 years but less than 12 years; (3) 5% for at least 12 years but less than 24 years; and (4) 6% for 24 or more years. Such account shall receive an interest credit of 5.25% per annum, and under certain circumstances, shall receive additional interest credits. Subject to certain exceptions, a Tier 3 participant, upon retirement, shall receive a single life annuity benefit. (b) Increasing the statutory maximum employer contribution annual increase from 0.6% per year (status quo) to 0.9% per year in 2014, 1.0% in 2015, 1.1 % in 2016 and 1.2% per year by 2017. (c) Effective January 1, 2014, providing additional contribution flexibility for Tier 1 participants with corresponding benefit adjustments. (d) Effective January 1,2014, eliminate COLA adjustments for Tier 2 participants with corresponding benefit adjustments. (e) Provide additional flexibility for alternative investments for the plan (f) Provide for a single actually-determined employer contribution rate covering all three KPERS Tiers, calculated for each KPERS group. (g) Provide new State funding sources to assist in reducing UAAL. The 2012 changes did not address the Kansas Police and Firemen's Retirement System or the Kansas Retirement System for Judges. A-3 Population The City of Salina has a population that is approaching metropolitan area status. This is defined by the U.S. Census Bureau as cities with 50,000 inhabitants or more. According to the U. S. Census Bureau, the City's citizens had a median age of36.4 years in 2010. The following table and graph show the population for the City for selected years as provided by the U.S. Census Bureau. Police and Fire Protection Year 2010 2009 2008 2007 2006 U.S. Census Bureau Population 47,707 46,180 45,998 46,025 45,898 The City of Salina provides police and fire protection services to residents of the City and surrounding areas. Firefighting services are provided from four stations located throughout the City with 92 full-time firefighters. The fire department operates 36 vehicles and provides emergency medical services. The police department employs approximately 81 full-time police officers and operates 37 police vehicles, including patrol vehicles, motorcycles, and Cushmans. Education The City of Salina has a very complete and diverse educational system from the primruy level up to its higher educational institutions. UmfiedSchool District No. 305 provides public education through its eight elementary, two middle, and two senior high schools. The District also operates alternative education, vocational- technical, and special education schools. Current enrollment is over 7,000. Additionally, there are a number of parochIal institutions that operate two grade schools, two junior high schools, and one senior high school. A military school is located in the City and operates both a grade school and high school. The City is home to five regional or private upper-level specialty schools. The Kansas Highway Patrol has a training academy located in Salina. One public library with over 230,000 volumes, two college libraries, a medical library, and a law library are located within the City. Kansas State Universitv at Salina The University offers a variety of two-and four-year aviation and technology degree programs. Areas of emphasis include civil, electrical and mechanical engineering technologies, aeronautical studies, and avionics. The campus is located entirely within the boundaries of the Salina Airport Industrial Center. Approximately 716 students are currently enrolled in the school. Kansas Weslevan University Kansas Wesleyan University was founded in 1886 and is located within the City. Currently, Kansas Wesleyan maintains an enrollment of approximately 800 students, the majority from Kansas and surrounding states. The school, based on a liberal arts foundation, offers more than 27 major programs, including graduate studies. Evening degree completion programs for adults are also available. Kansas Wesleyan is a member of the Associated Colleges of Central Kansas, a consortium of six academic institutions within 70 miles of the University through which students may enroll in courses and utilize resources. A-4 Transportation In addition to 1-70 and 1-135, US-81 and US-40 also intersect Salina. Several freight companies provide motor freight service in Salina with direct and connecting schedules to all cities in the United States. Bus service is available at regular intervals during each day in all directions. Union Pacific gives the City rail service in four directions out of the City and provides daily package-car service in and out of Salina. There are approximately 8 daily freights stopping in the City. Existing terminals have adequate capacity to handle present and greatly increased future capacity. Approximately 30 miles of storage tracks are available. The City is served by the Salina Municipal Airport and scheduled air service is provided by SeaPort Airlines, offering weekday and weekend flights to Kansas City and Denver. Utilities and Infrastructure Westar Energy supplies electricity and Kansas Gas Service provides natural gas to the City. The City owns its own water and sewage system. Additionally, the City is responsible for street maintenance and police and fire protection for the Airport. SBC provides telephone service. Two cellular phone companies provide service to the City. Health Facilities The City is served by Salina Regional Health Center ("SRHC"), a 330-bed regional facility divided between two Salina campuses. SRHC is an acute care facility for the diagnosis and treatment of all types of diseases and conditions, and includes a cancer treatment center and two medical office buildmgs. The institution is also a 50% partner in a separate surgical hospital adjacent to the Asbury campus of SRHC. Several other facilities providing mental health services, counseling, and alcohol and drug dependency treatment programs are located in the City. Financial Institutions Ten banks operating a total of 23 different facilitIes are located in the City. Five banks are headquartered in the City and reported combined deposits in excess of $2.35 billion as of December 31, 2011. A savings bank has a branch office in the City. Other Information Public recreation facilities available to city residents include 27 parks, a public golf course, baseball/softball fields, an aquatic park, an art center, a community theater, a museum, tennis courts, and ice and roller skating facilities. Two private clubs provide additional recreational opportunities for residents of the City. The Bicentennial Center, a 7,500-seat facility, with over 40,000 square feet of exhibit space, nicknamed "Mid-America's Meeting Place", provides a venue for the region's numerous concerts, exhibitions, conventions, and other events are also held in the Center. There are several radio stations in the City. Five standard television stations from Wichita serve the Salina area. Additionally, Cox Communications provides cable television and broadband internet service to subscribing customers. A-5 ECONOMIC INFORMATION CONCERNING THE CITY Economic Characteristics The City of Salina benefits from its location at the junction of Interstate Highways 70 and 135. This convenient location has drawn numerous national and regional companies to open manufacturing or distribution centers in or adjacent to the City. Such companies include Schwan's Global Supply Chain, Inc., Salina Vortex, GeoProbe, Bergkamp, Kasa Industrial Controls, Premier Pneumatics, Great Plains Manufacturing, PKM Steel, Crestwood Cabinets, McShares, Inc., Pepsi Cola, ElDorado Bus, Exide Battery, Advance Auto Parts Distribution Center, and Philips Lighting. Currently, manufacturing, retail trade, and service industries rank as the three primary employers in the City. No single industry is dominant. The government sector and wholesale trade industries make up the second tier of Salina employers. The City serves as a 24-county regional trade center for north central Kansas. Many individuals and , businesses within a 70-mile radius travel to the City to purchase consumer goods and services. This designation as a regional trade center is supported by the fact that the City had the third highest "trade pull factor" of all Kansas counties in 20 II according to Kansas State University. City trade pull factor is computed by dividing the per capita sales tax of a city by the statewide per capita sales tax. Saline County is located in the center of one of the most productive agricultural areas in the United States. In 2007-2008, 750 farms were located on 430,000 acres. Farm crops were valued at over $38 million harvested on 210,910 acres. Cattle and milk produced was valued at over $19 million. Salina is a city centered more on industry than agriculture. Currently, there are approximately 100 manufacturing and processing companies located in the City. The City, Saline County, the Chamber of Commerce, and the Salina Airport Authority have developed several economic incentives which can be offered as inducements to opening industrial facilities. These include property tax abatement for basic industry, the waiving of building pemlit and mspection fees, refunding of sales tax paid on machinery and equipment, and providmg training for employees through the Salina Area Technical College and the Kansas State UniverSIty at Salina. Additionally, a "build-to-suit-tenant" agreement is available on sites in the Airport Industrial Center that can provide 1 00% financing for land and building costs. Several major commercial projects are currently under construction in Salina. Menards home improvement store recently opened and consists of a 26,420 square-foot warehouse with 162,340 square-foot of floor space. Fed Ex, currently located in the City, is building a new distribution center. Salina Community Theater, Great Plains Manufacturing, Salina Area Technical College, and Brown Mackie are all doing major remodeling andlor expansions. The commumty has 1,200 acres of industrial sites available III North Salina, the South Industrial District, and the Airport Industrial Center. Sites range in size from I-to 240 acres, and are available for aviation, manufacturing. and distribution and warehouse businesses. The Salina Airport Authority The Salina Airport Authority is a body corporate and politic. The Authority was created by the City of Salina in April 1965 pursuant to the authority granted by the City by the surplus property and public airport authority act of the State of Kansas. The Authority was created for the purpose of accepting as surplus property portIOns of the former Schilling Air Force Base, which was closed by the United States Department of Defense in June 1965. By quitclaim deed the Authority received over 2,900 acres of land and numerous buildings for the purpose of operating and developing the Salina Municipal Airport and the Salina Airport Industrial Center. The Authority is managed and controlled by a five-member Board of Directors appointed by the Salina City Commission. The Salina Municipal Airport is the only commercial service airport serving Salina/Saline County and the 24-county area, which comprises North Central Kansas. The Airport also services the corporate, business, private aviation and flIght training needs of industry, business and individuals in the area. The Airport is also used by A-6 Kansas State University at Salina (KSUS). The campus ofKSUS is located adjacent to the Airport. The University offers degrees in professional flight training, airframe and power plant maintenance, and avionics technology. Scheduled air service is provided by SeaPort Airlines. The airline offers weekday and weekend flights to the Kansas City International hub. During 2011, the Airport enplaned 2,705 passengers and also accommodates a wide variety of aircraft including business jets, military, flight training and general aviation aircraft. During 2011, the Salina Air Traffic Control Tower logged over 69,207 aircraft operations serving the needs of over 7,000 business jets, the professional flight training department of University at Salina, general aviation and military aircraft. The two fixed base operators on the field at Salina specializing in aviation fuel delivered over 2.39 million gallons of fuel to the wide variety of aircraft utilizing the Airport during 2011. As of December 31, 2010, over 70 businesses and organizations at the Salina Municipal Airport and Airport Industrial Center employed over 3,700 employees with a combined payroll in excess of$130.4 million. One of the primary functions of the Authority is to facilitate the continued growth of jobs and payroll at the Airport and Airport Industrial Center. The Authority works in partnership with the City of Salina, Saline County, and the Salina Area Chamber of Commerce, and the Kansas Department of Commerce for the retention of existing business and industry and the recruitment of new business and industry. Major Emplovers Industrial development during the past ten years has established a broad, industrial base in and around the City. A list of the major employers is as follows. All figures represent total full-tIme employment excluding seasonal and part-time employees. Name Schwan's Food Management Salina Regional Health Center Unified School District No. 305 Exide Technologies Great Plains Manufacturing Philips Lighting Company City of Salina ElDorado National Advance Auto Parts Kasa Industrial Controls Source: Salina Chamber of Commerce Income ProductlBusiness Frozen Pizza Health Care School System Battery Manufacturer Agricultural & Landscaping Equipment Fluorescent Lamps City Government Busses/Recreational Vehic1es Distribution Center Metal and Electrical Controls Fabricator Estimated Emplovment 1,850 1,082 935 800 650 600 493 255 200 200 The following table shows the per capita personal income for residents of Saline County and the State during the years indicated: Year 2009 2008 2007 2006 2005 Source: Kansas Statistical Abstract, 2010 Saline County $38,752 39,173 37,201 36,l33 32,672 A-7 State of Kansas $39,173 40,022 37,775 35,772 33,145 Labor Force According to the Kansas Department of Labor, the following table shows the labor force figures for the City of Salina and the State of Kansas. Year 2012 (May) 2011 2010 2009 2008 Year 2012 (May) 2011 2010 2009 2008 Current Indebtedness City of Salina Total Labor Force Eml!loved Uneml!loved 26,007 24,439 1,568 26,263 24,555 1,708 26,156 24,434 1.722 26,783 25,193 1,590 26,469 25,422 1,047 State of Kansas Total Labor Force Eml!loved Uneml!loved 1,491,061 1,404, III 86,950 1,505,043 1,404,339 100,704 1,504,883 1,397,208 107,675 1,507,644 1,399,356 108,288 1,480,875 1,415,467 65,408 DEBT SUMMARY OF THE CITY Unemployment Rate 6.0% 6.5 6.6 5.9 4.0 Unemployment Rate 5.8% 6.7 7.2 7.2 4.4 The following is an overview of the City's outstanding indebtedness by classification as of the dated date of the Bonds. Figures do not include bonds for which payment has been provided through the creation of designated escrow accounts. General Obligation Bonds: Date Amount Final Amount Issued Series Purl!ose of Issue Maturity Outstanding 07-15-02 2002-B Internal Improvements $ 1,980,000 10-01-12 $ 165.000 07-15-03 2003-A Internal Improvements 4,350,000 1O-01-l3 640,000 * 05-01-04 2004-A Refunding 5,585,000 08-01-15 1,170,000 07-15-04 2004-B Internal Improvements 4,053,000 10-01-12 380,000 * 07-15-05 2005-A Internal Improvements 4,210,000 10-01-13 665,000 * 03-15-06 2006-A Internal Improvements 2,200,000 10-01-26 1,650,000 07-15-06 2006-B Internal Improvements 885,000 10-01-21 535,000 06-15-07 2007-A Internal Improvements 6,545,000 10-01-27 5,085,000 07-15-08 2008-A Internal Improvements 3,720,000 10-01-23 3,000,000 12-15-08 2008-B Internal Improvements 3,525,000 07-01-28 3,295,000 07-15-09 2009-A Internal Improvements 23,695.000 10-01-29 20,645,000 05-01-10 2010-A Refunding & Improvement 6,875,000 10-01-25 6,100,000 10-15-10 2010-B Refunding 7,860,000 10-01-23 7,360,000 07-15-11 2011-A Internal Improvements· 6,565,000 10-01-31 6,565,000 07-15-12 2012-A Internal Improvements 2,365,000 10-01-27 2,365,000 07-15-12 2012-B Refunding 3,785,000 10-01-20 3.785.000 $63,405,000 *Does not include bonds to be refunded with proceeds from the sale of the Series 2012-B Bonds. A-8 A portion of the City's outstanding general obligation bonds are payable from special assessments levied upon properties benefited by certain internal improvement projects, local option sales tax and transfers from enterprise funds of the City. If such payments are not provided in a timely manner, the principal of and interest on the bonds must then be paid from the City's ability to levy unlimited ad valorem taxes. See FINANCIAL INFORMATION -"Special Assessments" for a further description of special assessment financing. Temporary Notes: Temporary notes represent general obligation indebtedness payable ultimately from the City's ability to levy unlimited taxes upon all taxable tangible property within its territorial limits. The City customarily redeems temporary notes with proceeds from the sale of long-term general obligation bonds or other available funds. Final Original Date Maturity Note Amount Project Series Issued Date Amount Outstanding Street, Water, and Sewer 2011-1 07-15-11 08-01-12 $3,400,000 $ 0* Street, Water, and Sewer 2012-1 07-15-12 08-01-13 1,485,000 1.485.000 $1,485,000 * Amount outstanding ($3,400,000) to be redeemed with proceeds from the sale of the Series 2012-A Bonds and available cash from the City. Revenue Bonds: Revenue bonds are payable solely from the net revenues derived by the City from the operation of its combined water and sewage system. Revenue bonds do not represent a general obligation indebtedness of the City for which the City's taxing ability has been pledged. Date Issued 04-15-11 Overlapping Debt Purpose Improvements Amount of Issue $16,120,000 Final Maturitv 10-01-31 Amount Outstanding $16,120.000 According to the Saline County Clerk's office, the following table shows the overlapping general obligation indebtedness of the City. The percent of an overlapping jurisdiction's debt that is applicable to the City is calculated by dividing the assessed valuation of that portion of the jurisdiction's boundaries which overlap those of the City by the total assessed valuation of such jurisdiction. All debt outstanding is as of June 30, 2012. Jurisdiction Salina Airport Authority U.S.D. No. 305 Saline County Amount Outstanding $26,170,000 43,200,000 o A-9 Estimated Share of the City Amount $26,170,000 40,187,521 o $66,357,521 Percentage 100.00% 93.03 Annual Debt Payments The following is a list of annual debt service requirements for the City's currently outstanding general obligation bonded indebtedness. All amounts are rounded to the nearest whole dollar. Outstanding Bonds Series 2012-A Bonds Series 2012-B Bonds Year PrinciQal Interest PrinciQal Interest PrinciQal Interest Total 2012 $ 6,050,000 $ 1,054,651 $ 0 $ 0 $ 0 $ 0 $ 7,104,651 2013 5,825,000 1,891,894 130,000 49,262 385.000 47,569 8,328,725 2014 4,945,000 1,681,254 140,000 39,375 940,000 35,428 7,781,057 2015 4,475,000 1,522,566 145,000 37,975 625,000 26,028 6,831,569 2016 4,470,000 1,373,116 150,000 36,162 460,000 19,778 6,509,056 2017 4,220,000 1,222,306 150,000 33,912 485,000 15,178 6,126,396 2018 4,300,000 1,052,269 155,000 31,662 475,000 10,328 6,024,259 2019 4,415,000 871,936 155,000 29,337 235,000 5,340 5,711,613 2020 2,645,000 727,721 155,000 27,012 180,000 2,520 3,737,253 2021 2,580,000 636,776 160,000 24,843 0 0 3,401,619 2022 2,615,000 543,266 160,000 22,202 0 0 3,340,468 2023 2,380,000 445,304 165,000 19,243 0 0 3,009,547 2024 2,070,000 352,060 170,000 15,943 0 0 2,608,003 2025 1,720,000 268,366 175,000 12,373 0 0 2,175,739 2026 1,380,000 196,190 175,000 8,523 0 0 1,759,713 2027 1,080,000 136,841 180,000 4,410 0 0 1,401,251 2028 950,000 89,603 0 0 0 0 1,039,603 2029 625,000 47,878 0 0 0 0 672,878 2030 250,000 21,675 0 0 0 0 271,675 2031 260.000 11.050 0 0 0 0 271.050 $57,255,000 $14,146,722 $2,365,000 $392,234 $3,785,000 $162,169 $78,106,125 Historical Debt Information 'The following table shows historical balances of outstanding general obligation bonds for the City during the most recent five-year period. Bonds Debt to Debt to U.S. Debt Outstanding Assessed Estimated Actual Census Per Year December 31 Valuation Valuation POQulation Capita 2011 $61,045,000 13.57% 2.11% 47,707 1,279.58 2010 60,280,000 13.44 2.09 47,707 1,263.55 2009 52,900,000 11.81 l.83 46,180 1,145.52 2008 31,645,000 7.01 1.09 45,998 687.96 2007 27,650,000 6.24 0.98 46,025 600.76 Future Indebtedness The City annually prepares and adopts a five-year capital improvements plan. This plan identifies and prioritizes potential capital improvement projects within the City and includes the respective funding sources. Based on the City's last capital improvements plan, the total cost of projects the City anticipates undertaking between now and 2014 is approximately $9l.1 million, of which approximately $6.9 milhon is anticipated being financed through general obligation bonds. Borrowing requirements described above do not include future subdivision improvement projects fmanced with general obligation special assessment temporary bonds. The City typically undertakes such projects after receiving and reviewing a valid petition from property owners. See FINANCIAL INFORMATION -"Special Assessments". The City has been involved with ongoing discussions concerning contaminatIOn in certain areas within the boundaries of the Salina Airport Industrial Center. This contamination was caused by activities occurring prior to A-IO 1964, when the site served as the Shilling Air Force Base. The City, the Salina Airport Authority, and other local governmental entities are pursuing federal funds to clean up the affected areas. In the event funding cannot be secured in a timely fashion or in sufficient amounts, it may be necessary for the City to issue debt to relocate certain water wells. The exact timing and amount, if any, of such borrowing cannot be determined at this time. If City borrowing is necessary for this project, it is anticipated that utility revenue bonds will be the fIrst type of debt considered. Debt Payment Record The City has always met principal and interest payments on all outstanding bonds and temporary notes when due and payable. Legal Debt Limits Cities within Kansas are permitted to issue bonds in an aggregate amount not to exceed 30% of the total assessed valuation of the city. Bonds issued for the purpose of improving, acquiring, enlarging, or extending municipal utilities, including storm and sanitary sewer systems; bonds issued to pay the cost of improvements to intersections and streets in front of city or school district property; bonds for bridges as authorized by a vote of the electors of a city; bonds issued to refund outstanding bonds; and bonds payable from revenue sources other than the general taxing authority of the city are not included in total aggregate debt for purposes of computing a city's debt limitation. FINANCIAL INFORMATION CONCERNING THE CITY Financial Statement Summary The following is a summary of the combined revenues, expenditures, and fund balances for the City'S General Fund for the most recent available years as shown in the City's Comprehensive Annual Financial Reports. This summary has not been prepared or reviewed by the City's auditor. Audited Audited Audited Audited Revenues: 2008 2009 2010 2011 Property Taxes $ 2,546,938 $ 9,909,912 $ 8,764,040 $ 8,671A23 Sales Tax 11,985,856 11,668,987 11,117,078 11,767,400 Other Taxes 4,685,105 4,789,524 4,965,601 5,083,919 Intergovernmental 911,305 1,227,486 1,008,482 813,185 Charges for Services 5,793,253 5,375,308 7,193,831 7,822,307 Investment Revenue 244,769 0 0 28,972 Miscellaneous 496,742 356.249 352.308 501.260 Total Revenues $26,663,968 $33,327,466 $33,401,340 $34,688,466 Expenditures: General Government $ 3,336,261 $ 3,007,751 $ 3,549,487 $ 3,461,488 Public Safety 14.070,189 17,883,362 18,228,881 18,117,827 Public Works 5,239,844 6,345,981 6,245,355 6,132,020 Public Health and Sanitation 1,109,794 1,176,096 1,176,743 1,176,082 Culture and Recreation 2,297,431 2,294,894 2,599,921 2,734,957 Planning and Development 2,087,685 2,381,797 2,428,900 2,319,300 Capital Outlay 630.178 887,449 560.129 555,048 Total Expenditures $28,771,382 $33,977 ,330 $34,789,416 $34,496,722 Revenues Over (Under) Expenditures $(2,107,414) $ (649,864) $(1,388,076) $ 191,744 Other Sources (U ses) 806306 (292.278} (82,124} (129,111} Net Change in Fund Balance $(1,301,108) $ (942,142) $(1,470,200) $ (62,633) Fund Balance January 1 $ 7,330,631 $ 6,029,523 $ 5,087,381 $ 3,617,181 Restatement of prior year balance 156,424 Fund Balance December 31 $ 6,029,523 $ 5,087,381 $ 3,617,181 $ 3,836,238 A-ll Assessed Valuation According to the Saline County Clerk's Office, the following table gives the November 1 assessed valuation of the City, unless otherwise noted, in the years indicated. State Total Real Personal Assessed Motor Assessed Year Estate Pro2ertv (I} Utilities Vehicle Valuation 2011 $367,750,803 $19,918,188 $14,685,585 $47,406,062 $449,760,638 2010 364,544,771 21,488,933 14,214,579 48,184,331 448,432,614 2009 358,979,211 24,760,806 13,730,609 50,330,252 447,800,878 2008 356,678,712 28,373,980 14,929,456 51,351,656 451,333,804 2007 342,045,389 34,507,464 16,175,634 50,548,706 443,277,193 2006 321,695,326 39,691,690 16,530,171 50,551,299 428,468,486 2005 296,537,399 38,662,356 17,624,030 49,367,870 402,191,655 (1) Beginning in 2007, certain types of personal property were removed from the tax rolls. See footnote (3) to the table in FINANCIAL INFORMATION -"Property Assessment Rates". Estimated Actual Valuation Based on assessment percentages provided by Kansas Statutes, real estate equalization ratios provided by the Kansas Department of Revenue (see FINANCIAL INFORMATION -"Property Assessment Rates"), and estimated actual valuation figures provided by the Saline County Apprmser's Office, the following table provides November 1 estimated actual valuations for the City, unless otherwise noted, in the years indicated. Year 2011 2010 2009 2008 2007 2006 2005 Special Assessments Residential Real Estate Equalization Ratio 12.04% (prel.) 11.89 11.67 11.66 11.68 11.22 11.16 Estimated Actual Value $2,891,461,447 2,888,659,004 2,893,359,541 2,914,775,730 2,833,709,391 2,719,391,025 2,529,377,135 The City has pursued a policy of utilizing special benefit districts to assign the cost of certain internal improvement projects to the property that directly benefits from the construction. Kansas statutes allow for the creation of speCIal benefit districts to pay for the cost of a variety of improvements including street construction, storm water drains, sanitary sewer system improvements, street lighting, water system improvements, recreational facilities, flood control projects, bridges, and parking facilities. The City has typically utilized special benefit districts to pay for the costs associated with constructmg streets, sidewalks, curbs, gutters, and lighting in new residential developments within the City. When a developer requests the use of Special Assessments to finance public improvements, the City requires that they pay 20% of the estimated cost of the project in cash, or file a letter of credit equivalent to 35% of the estimated cost of the project. The letter of credit is released when Certificates of Occupancy have been issued for 35% of the lots in the development. Special benefit districts have also been created to pay for the cost of improvements to streets and sidewalks in the City's downtown area. The creation of special benefit districts, the determination of property benefited, and the method of allocating the cost of the improvement is at the discretion of the City. Property owners have the ability to suggest improvements through a petition process and to comment on the final amount of their assessment. The City mayor may not be included as part of the special benefit district. All property owners have the option to pay their portion of the improvement cost with a one-time payment during a 30-day assessment prepayment period or pay in annual installments with interest over a certain number of years. A-12 Upon completion of the special benefit district improvement projects and a 30-day prepayment period, the City issues general obligation bonds to provide for permanent project financing. The payment of the principal of and interest on such bonds is paid from the special assessments levied annually on the benefited property. Special assessments are paid at the same time and in the same manner as ad valorem property taxes. If at any time the special assessments received from the property owners are insufficient to provide for the payment of the principal of and interest on the bonds, the City is obligated to provide for the balance of such payments through its ability to levy unlimited ad valorem property taxes. Largest Taxpavers According to the Saline County Clerk's Office, the following table lists the largest taxpayers in the City, their November 2011 assessed valuations, and the percentage each taxpayer comprised of the total assessed valuation of the City. Companv Schwan's Sales (Tony's Pizza) Coyote Garrison Salina LLC Salina Regional Health Center Westar Energy Kansas Gas Service Gateway Adams Inc. (Midstate Plaza) Wal-Mart Stores (Includes Sam's) Southwestern Bell Telephone Great Plains Manufacturing S&B Motels Building Permits Issued Type of Business Frozen Pizza Regional Shopping Center Hospital and Medical Offices Utility Utility Shopping Center Discount Retail Utility Agricultural Equipment Hotel Assessed Valuation $ 8,189,411 6,254,037 6,234,437 4,294,726 3,762,052 3,566,208 3,465,983 2,655,148 2,074,617 2.064.471 $42,561,090 % of Total Valuation 1.82% 1.39% 1.39% 0.95% 0.84% 0.79% 0.77% 0.59% 0.46% 0.46% 9.46% Buildmg permits issued by the City currently maintain steady levels. TillS table reflects both private developments as well as the expansion to the educational facilities in the community. The five-year history of the total value of permits issued is: Tax Collections Year 2012 (thru May) 2011 2010 2009 2008 Value $19,937,316 19,752,335 52,358,547 12,192,481 18,276,022 Tax statements are mailed November 1 each year and may be paid in full or one-half on or before December 20 with the remaining one-half due on or before May lOaf the following year. Taxes that are unpaid on the due dates are penalized at a statutorily prescribed rate until paid or until the property is sold for taxes. Real estate bearing unpaid taxes is advertised for sale in July of each year and is sold by the County for taxes and all legal charges on the first Tuesday in September. Properties that are sold and not redeemed within two years after the tax sale are subject to foreclosure sale, except homestead properties which are subject to foreclosure sale after three years. Personal property taxes are assessed, due and may be paid in the same manner as real estate taxes. Motor vehicle property taxes are based on valuations provided by the Kansas Department of Revenue and the county average tax rate for the county in which the vehicle is registered. Motor vehicle taxes are payable to the county treasurer at the time of the vehicle's annual registration. Vehicle registration dates are assigned by the State in a manner such as to equal registration over a twelve-month period. Motor vehicle taxes are distributed by the county A-13 to the state, city and other taxing jurisdictions based on their proportionate tax levies. Delinquent personal and motor vehicle taxes are penalized at the same rate as delinquent real propeliy taxes. The following is a summary of tax collections for the years shown. Current Current and Delinquent Levy Tax Taxes Tax Collections Tax Collections Year Rate Levied Amount 0/0 Amount 0/0 2011 * 26.272 $10,582,043 $9,614,366 90.0% $ 9,629,140 91.00% 2010 26.022 10,425,260 9,823,578 94.2 10,118,285 97.06% 2009 25.855 10,289,701 9,831,289 95.5 10,126,228 98.41 % 2008 25.886 10,369,087 9,825,122 94.8 10,119,876 97.60% 2007 23.959 9,432,248 8,941,650 94.8 9,209,900 97.64% 2006 23.789 9,029,080 8,648,305 95.8 8,907,754 98.66% 2005 23.999 8,478,392 8,223,308 97.0 8,470,007 99.90% *Collections as of May 10, 2012 Tax Levies The City may levy taxes in accordance with the requirements of its adopted budget. The County Clerk determines property tax levies based upon the assessed valuations provided by the Appraiser and spreads the levies on the tax rolls. The following table gives the total tax levies for all taxing jurisdictions per $1,000.00 assessed valuation of the City for the last five years. 2007 2008 2009 2010 2011 Levy Levy Levy Levy Levy for for for for for 2008 2009 2010 2011 2012 Jurisdiction Budget Budget Budget Budget Budget City of Salma 23.959 25.886 25.855 26.022 26.272 Salina Library 5.242 5.419 5.413 5.372 5.292 State Education & Other 1.500 1.500 1.500 1.500 1.500 Unified School District No. 305 54.990 58.547 58.495 58.913 58.820 Airport Authority 2.877 2.877 4.315 4.055 4.007 Central Kansas Extension District l.l56 l.l75 1.173 1.204 1.179 Saline County 27.435 29.347 31.303 31.432 32.576 Total 117.159 124.751 128.054 128.498 129.646 Sales Tax Sales tax collections are the responsibility of the Kansas Department of Revenue. The Depaliment of Revenue distributes the local option countywide and citywide sales taxes on a monthly basis. Countywide sales taxes are distributed between the levying county and the cities located within the county based on popUlation and relative tax levies. Citywide local option sales taxes are distributed solely to the levying city. Statewide sales taxes are retained entirely by the state. The total sales tax for goods and services in the City is 8.20%, which consists of 6.3% imposed by the State, 1 % countywide local option sales tax, and .90% citywide local option sales tax. In 1982 the voters of Saline County, in accordance with Kansas statutes, approved a 1 % countywide local option sales tax. In 1992 voters of the City approved a local option .50% citywide sales tax for purposes of helping fund general operations expenditures of the City. In November 1998, voters within the City approved an additional .25% restricted local option sales tax to be collected through June 1,2004 and distributed to Unified School District No. 305 to fund educational technology. The voters renewed the .25% local option sales tax and are now using those collections for various city capital improvements. A-14 In November 2008, voters in the City of Salina approved a .40% citywide retailers dedicated sales tax to pay the costs of various City capital improvements including constructing, operating and maintaining a $12.5 million aquatic park. The .40% sales tax replaced the 2004.25% sales tax on Aprill, 2009 and terminates ten years after its commencement. The City of Salina deposits sales tax receipts from its 1992 tax into its General Fund. Sales tax receipts are used for funding general operating expenditures of the City and capital improvement projects. The following table lists the local-option sales tax receipts of the City of Salina in the years indicated. Year 2008 2009 2010 2011 2004 .25% Citywide Local Option Sales Tax Receipts $2,588,731 2012 (thru May) 2008 .40% Citywide Local Option Sales Tax Receipts $ 0 3,379,938 (1) 3,861,809 4,080,342 1,779,603 1992 .50% Citywide Local Option Sales Tax Receipts $5,177,462 4,987,415 4,818,398 5,076,751 2,215,817 City's Portion of 1 % Countywide Local Option Sales Tax Receipts $6,808,395 6,703,839 6,339,236 6,690,649 2,932,739 (1) The 2008 .40% sales tax became effective April 1, 2009, at which time the 2004 sales tax stopped. This figure is the combined total receipts of the 2004 sales tax and the 2008 sales tax for 2009. Source: City Clerk Budgeting Procedures Applicable Kansas statutes require that budgets be legally adopted for all funds (including debt service and enterprise funds) unless exempted by a specific statute. All budgets are prepared utilizing the modified accrual basis further modified by the encumbrance method of accounting. For example, commitments such as purchase orders and contracts, in addition to disbursements and accounts payable, are recorded as expenditures. The statutes provide that the budget for the succeeding calendar year must be prepared on or before August 1 and published on or before August 5 of each year. A public hearing is required to be held on or before August 15, with the final budget being adopted on or before August 25 of each year. Original appropriations may be modified by supplemental appropriations and transfers among budget categories. The City Commission must approve all significant changes. Kansas law prohibits cities and other governmental units from creating indebtedness unless there is money on hand in the proper fund and unencumbered by previous commitments with which to pay the indebtedness. The execution of a contract, or the issuing of a purchase order, automatically encumbers the money in the fund for the payment of the amount represented by the commitment. It makes no difference that the amount may not have to be paid until more moneys are in the fund or until the following year. An exception to this cash basis law is the issuance of debt, in the form of bonds, notes, or warrants, pursuant to statutory authority, referendum or by the State Board of Tax Appeals. In the event debt is issued, funds need not be on hand for future payments. Appraisal and Assessment Procedures The determination of appraised and assessed valuation and the collection of property taxes for all political subdivisions in the State of Kansas are the responsibility of the various counties. The Saline County appraiser annually determines the appraised valuation of property located in the City. The appraiser's determination is based on a number of criteria established by Kansas's statute. All property, with the exception of agricultural land, is appraised based on estimated fair market value. Agricultural property is appraised based on productivity value. Kansas statutes require that each parcel of real property be reviewed and inspected by the county appraiser once every four years for taxation purposes. Once appraised valuations have been determined, they are multiplied by the applicable statutory assessment rates to arrive at the assessed valuations. The total assessed valuation is then used to establish property tax rates. A-15 Property Assessment Rates In order to determine the assessed valuation of a parcel of property for taxation purposes, the county appraiser multiplies the appraised value of the parcel by the applicable assessment rate. Current property assessment rates were established in 1986, effective in 1989, and slightly modified in 1992. The most significant 1992 modifications involved lowering the assessment rate on commercial and industrial real property from 30% to 2S% and on residential property from 12% to l1.S%. The following table shows the current assessment rates for the different classes of taxable tangible property within the State of Kansas. Real Property: Residential Commercial and Industrial- Real Property Agricultural Land (1) Agricultural Improvements Vacant Lots Not-for-Profit (2) All Other Personal Property: (3) Mobile Homes Mineral Leaseholds (large) Mineral Leaseholds (small) Commercial & Industrial Machinery & Equipment All Other Utilities: Railroads All Other Public Utilities Motor Vehicles: Property Exempt: 11.5% 2S.0 30.0 2S.0 12.0 12.0 30.0 11.S% 30.0 2S.0 2S.0 30.0 federally mandated rate 33.0% 20.0% Property used for the following purposes, or portions thereof, are exempt from taxation provided certain statutory requirements are met: religious, educational, literary, scientific. benevolent, alumni associations, veterans' organizations, or charitable purposes, including parsonages and community service organizations providing humanitarian services. (1) Agricultural land is valued based on the productivity value of the property and not estimated market valuation. (2) A bill passed by the Kansas Legislature in 1994 clarified this class of property to include all property owned and operated by not-for-profit organizations not subject to federalmcome taxation pursuant to paragraphs (2), (3), (4), (7), (8), or (10) of Subsection C of Section SOl of the federal internal revenue code. This bill specifically established that private, not-for-profit country clubs would be assessed at 12% for all land that does not accommodate buildings or improvements. (3) The 2006 Kansas Legislature exempted from all property or ad valorem property taxes levied under the laws of the State, all commercial, industrial, telecommunicatlOns, and railroad machinery and equipment acquired by qualified purchase or lease after June 30, 2006 or transported into the State after June 30, 2006 for the purpose of expanding an existing business or creation of a new business. Equalization Ratios Annually, the Property Valuation Division of the Kansas Department of Revenue conducts a study to compare the assessed valuation of real property to estimated market value based on property sale prices. The study derives an equalization ratio which, when divided into assessed valuation, provides a means to approximate actual market value. According to the 2011 Preliminary Kansas Appraisal/Sales Ratio Study, the equalization ratio for residential real property in Saline County was 12.04%, and commercial and industrIal property was 28.7S%. A-16 APPENDIXB Form of Continuing Disclosure Instructions FORM OF CONTINUING DISCLOSURE INSTRUCTIONS $1,485,000 CITY OF SALINA, KANSAS GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 DATED JULY 15, 2012 THESE CONTINUING DISCLOSURE INSTRUCTIONS (the "Disclosure Instructions") are executed and delivered by the Issuer in connection with the issuance of the above-described notes (the "Notes") which are being issued simultaneously herewith pursuant to the Note Resolution, in which the Issuer covenants to enter into this undertaking to provide notice of certain material events with respect to the Notes in order to assist the Participating Underwriter in complying with the provisions of the SEC Rule. The Issuer is the only "obligated person" with responsibility for continuing disclosure with respect to the Notes. Section 1. Definitions. In addition to the definitions set fonh in the NOTe ResolutiOn, which apply to any capitalized tenn used in these Disclosure Instructions, unless otherwise defined herein, the following capitalized tenns shall have the following meanings: "Beneficial Owner" means any registered owner of any Notes and any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of. any Notes (including persons holding Notes through nommees, depositories or other intem1ediaries), or (b) is treated as the owner of any Notes for federal income tax purposes. "Designated Agent" means Gilmore & Bell, P.C. or one or more other entities designated 111 writmg by the Issuer to serve as a designated agent of the Issuer for purposes of these Disclosure InstlUctions. "Dissemination Agent" means any entlty designated in writing by the Issuer to serve as dissemlllation agent pursuant to these DIsclosure InstlUctions and which has filed with the Issuer a written acceptance of such designation substantially in the fom1 attached hereto as Exhibit A. "EMMA" means the Electronic Municipal Market Access system for municipal securities disclosures established and maintained by the MSRR which can be accessed at W,!iVi emma.msrb.on!. "Fiscal Year" means the one year period ending December 31, or such other date or dates as may be adopted by the Issuer for lts general accounting purposes. "Issuer" means the eJty of Salina. Kansas. and any successors or assigns. "Material Events" means any of the events hsted in Section 2(a) hereof. "MSRB" means the Municipal Securities Rulemaking Board. "Note Resolution" means the resolution of the goveming body of the Issuer authorizing the issuance of the Notes. "Official Statement" means the Issuer's Official Statement for the Notes. B-1 "Participating Underwriter" means any of the original underwriters of the Notes required to comply with the SEC Rule in connection with offering of the Notes. "Repository" means the MSRB via EMMA. "SEC" means the Securities and Exchange Commission of the United States. "SEC Rule" means Rule lSc2-l2(b)(S) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 2. Reporting of Material Events. (a) Pursuant to the provisions of this Section, the Issuer shall give, or cause the Dissemination Agent, if any. to give, to the Repository within 10 Business Days after the occurrence of any of the following events with respect to the Notes, notice of the following events: (J ) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (S) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions; the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form S70l-TEB) or other material notices or determinations with respect to the tax status of the Note, or other material events affecting the tax-exempt status of the Notes; (7) modificatlOns to rights of Owners, if material; (8) bond calls. if material, and tender offers; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Notes, if material; (I 1) rating changes; (J 2) bankruptcy, insolvency, receJVership or similar event of the Issuer; (13) the consummation of a merger, consolidation, or acquisItion involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of busmess, the entry mto a definitive agreement to undertake such an actlon or the tenmnation of a defimtlve agreement relating to any such actions. other than pursuant to its tenns. if material: and (14) appointment of a successor or additional Paying Agent or the change of name of the Paying Agent. if material. (b) Notwithstanding the foregoing. notice of Material Events described 111 subsectiol1S (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) 'of the underlying event is given to the Owners of affected Notes pursuant to the Note Resolution. Section 3. Dissemination Agent. (a) General. The Issuer may. from time to time, appoint or engage a Dissemination Agent to assist it in carrying out Its oblIgations under these Disclosure Instructions, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. (b ) Material Even t Notices. B-2 (1) The Dissemination Agent shall, promptly after obtaining actual knowledge of the occurrence of any event that it believes may constitute a Material Event, contact the chief financial officer of the Issuer or his or her designee, or such other person as the Issuer shall designate in vvriting to the Dissemination Agent from time to time, infonn such person of the event, and request that the Issuer promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to Section 4(c)(3). (2) The Issuer will promptly respond in writing to any such request. Whenever the Issuer obtains knowledge of the occurrence of a Material Event, because of a notice from the Dissemination Agent pursuant to this subsection (c) or otherwise, the Issuer shall promptly determine if such event constitutes a Material Event and shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to Section 4(c)(3). If the Issuer has determined that knowledge of an event is listed in (2), (7), (10) or (13) of the definition of a Material Event, is not material, the Issuer shall notify the Dissemination Agent in writing not to report the OCCUlTence pursuant to Section 4(c)(3). (3) If the Dissemination Agent has been given written instructions by the Issuer to report the occurrence of a Material Event, the Dissemination Agent shall file a notice of such occurrence with the Repository within 10 Business Days after the occurrence, with copies to the Issuer. Notwithstanding the foregoing, notice of Material Events described in Sections 3(a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Notes pursuant to the Note Resolution. (c) Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in these Disclosure Instructions, and the Issuer agrees to indemnify and save the Dissemination Agent, Its officers, directors, employees and agents. hannless against any loss, expense and liabihtles which it may incur ansmg out of or in the exercise or perfonnance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any clmm of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligatlOns of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Notes. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Issuer pursuant to these Disclosure Instructions. (d) Other Designated Agents. The Issuer may, from time to time, appoint or deSIgnate a Designated Agent to submIt Material Event notIces, and other notIces or reports pursuant to these Disclosure Instructions. The Issuer hereby appoints the Dlssemmation Agent and the Designated Agent(s) solely for the purpose of submitting Issuer-approved Material Event notices, and other notices or reports pursuant to these Disclosure Instructions. The Issuer may revoke this designation at any time upon written notice to the Designated Agent. Section 4. Termination of Reporting Obligation. The Issuer's obligations under these Disclosure Instructions shall terminate upon the legal defeasance, prior redemption or payment in full of all of the-Notes. If the Issuer's obligations hereunder are assumed in full by some other entity as pennitted in the Note Resolution, such person shall be responsible for compliance with under these Disclosure Instructions in the same manner as if it were the Issuer, and the Issuer shall have no further responsibility hereunder. If such temlination or substitution occurs prior to the final maturity of the Notes, the Issuer shall give notice of such tennination or substitution in the same manner as for a Material Event under Section 2(b). B-3 Section 5. Amendment; Waiver. Notwithstanding any other provision of these Disclosure Instructions, the Issuer and the Dissemination Agent, if any, may amend of these Disclosure Instructions (and the Dissemination Agent shall not unreasonably refuse to execute any amendment so requested by the Issuer) and any provision of these Disclosure Instructions may be waived, provided that: (a) Bond Counselor other counsel experienced in federal securities law matters provides the Issuer and the Dissemination Agent, if any, with its opinion that the undertaking of the Issuer contained herein, as so amended or after giving effect to such waiver, is in compliance with the SEC Rule and all current amendments thereto and interpretations thereof that are applicable to these Disclosure Instructions; (b) if the amendment or waiver relates to Sections 2(a), it may only be made in connection with a change in circumstances that arises from a change in law or legal requirements, or change in the identit'"j, nature or status of an obligated person with respect to the Notes, or the type of business conducted; and (c) the amendment or waiver is either 0) approved by the Owners of the Notes in the same manner as provided in the Note Resolution with consent of the Owners, or (2) does not in the opinion of Bond Counsel materially impair the interests of the Owners or Beneficial Owners of the Notes. In the event of any amendment or waiver of a prOVIsion of these Disclosure Instructions, the Issuer shall be given in the same mai"lner as for a Material Event. Section 6. Additional Information. Nothing in these Disclosure Instructions shall be deemed to prevent the Issuer from disseminating any other infonnation, using the means of dissemination set forth in these Disclosure Instructions or any other means of communication, or including any other infoTInation in any notice of occurrence of a Material Event, in addJtJOn to that which is required by these Disclosure Instructions. If the Issuer chooses to include any infom1ation in any notice of occurrence of a Material Event, in additJOn to that which is specifically required by these Disclosure Instructions, the Issuer shall have no obligation under these Disclosure instructions to update such infonnation or include Jt 111 any future notice of occurrence of a Material Event. Section 7. Noncompliance. In the event of a failure of the Issuer or the Dissemination Agent, if any, to comply with any proVIsion of these Disclosure Instructions, the PartiCIpating Underwriter or any Beneficial Owner of the Notes may take such actions as may be necessary and appropriate, including seeking mandamus or specific perfommnce by court order. to cause the Issuer or the Dissemination Agent. if any. as the case may be, to comply with its obligations under these Disclosure Instructions. Noncompliance WIth the provisions of these Disclosure Instructions shall not be deemed an Event of Default under the Note Resolution, and the sole remedy under these Disclosure Instructions 111 the event of any failure of the Issuer or the DissemmatJOn Agent. if any, to comply WIth these Disclosure Instructions shall be an action to compel perfoTI11ance. Section 8. Notices. Any notIces or communications to or among any of the parties referenced in these Disclosure Instructions may he given as follows: (a) To the Issuer at: 300 West Ash Salina, Kansas 67402 Fax: (785)309-5738 Attention: Clerk (b) To the PartiCIpating Underwriter at the address set forth in the Note Resolution or such otber address as is fumished in writing to the other parties referenced herein. B-4 (c) To the Dissemination Agent at the address set forth on Exhibit A attached hereto. Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. Section 9. Electronic Transactions. Actions taken hereunder and the arrangement described herein may be conducted and related documents may be stored by electronic means. Section 10. Beneficiaries. These Disclosure Instructions shall inure solely to the benefit of the Issuer, the Dissemination Agent, if any, the Participating UnderwTiter and Beneficial Owners from time to time of the Notes, and shall create no rights in any other person or entity. Section 11. Severability. If any provision in these Disclosure Instructions, the Note Resolution or the Notes relating hereto, shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 12. lrllverning L2W. These Disclosure Instructions shall be governed by and construed in accordance with the laws of the State of Kansas. Dated: July 26, 2012. CITY OF SALINA, KANSAS EXHIBIT A ACCEPTANCE OF DISSEMINATION AGENT Name of Issuer: Name of Note Issue: Dissemination Agent: City of Salina, Kansas $1,485,000 General Obhgation Temporary Notes, Senes 2012-1, dated as of July 15,2012 Notice Address of Dissemination Agent: ____________ , having been duly appointed by the CIty of Salina, Kansas to act ll1 the capaCIty of Dlssemmation Agent pursuant to the Contmuing Disclosure Instructions to WhICh this acceptance IS attached. accepts such duties and responsibilities set forth thereIn. Dated: B-5 FORM OF CONTINUING DISCLOSURE INSTRUCTIONS CITY OF SALINA, KANSAS $[2,365,000] GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A $[3,760,000] GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 15, 2012 THESE CONTINUING DISCLOSURE INSTRUCTIONS (the "Disclosure Instructions") are executed and delivered by the Issuer in connection with the issuance of the above-described bonds (the "Bonds") which are being issued simultaneously herewith as of July 26, 2012, pursuant to the Bond ResolutIOn, in which the Issuer covenants to enter into this undertaking to provide certain financial and other infonnation with respect to the Bonds in order to assist the Participating Underwriter in complying with the provisions of the SEC Rule. The Issuer is the only "obligated person" with responsibility for continuing disclosure WIth respect to the Bonds. Section 1. Definitions. In addition to the definitions set forth 111 the Bond ResolutIOn, which apply to any capitalized tenn used in these Disclosure Instructions, unless otherwise defined herein. the following capitalized tenns shall have the following meanings: "Annual Report" means any Annual Report filed by the Issuer pursuant to, and as described in, Section 2 of these Disclosure Instructions. "Beneficial Owner" means any registered owner of any Bonds and any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of. any Bonds (including persons holding Bonds through nominees, depositones or other intennediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. "Bond Resolution" means collectively, the ordinances and the resolutions of the governing body of the lssuer authorizing the issuance of the Bonds. "CAFR" means the Issuer's Comprehensive Annual Financial Report. "Designated Agent" means Gilmore & Bell, P.C. or one or more other entities designated in wJiting by the Issuer to serve as a designated agent of the Issuer for purposes of these Disclosure Instruct! ons. "Dissemination Agent" means any entity deSIgnated m wntmg by the issuer to serve as dissemination agent pursuant to these Disclosure IIlstructions and which has filed with the Issuer a written acceptance of such designation substantially in the fonn attached hereto as Exhibit B. B-6 "'EMMA" means the Electronic Municipal Market Access system for municipal securities disclosures established and maintained by the MSRB, which can be accessed at www.emma.msrb.on.:. "'Financial Information" means the financial infonnation of the Issuer described ll1 Section 2(a)(J) hereof. "Fiscal Year" means the one year period ending December 31, or such other date or dates as may be adopted by the Issuer for its general accounting purposes. "GAAP" means generally accepted accounting principles, as applied to governmental units, as in effect at the time of the preparation of the Financial Infonnation. "Issner" means the City of Salina, Kansas, and any successors or assigns. "Material Events" means any of the events listed in Section 3(a) hereof. "MSRB'~ means the tvlunicipal Securities P,,-u]el11ayjng Board. "Official Statement" means the Issuer's Official Statement for the Bonds. --Operating Data'" means the operating data of the Issuer described in Section 2(a)(2) hereof. "Participating Underwriter'" means any of the original underwliters of the Bonds required to comply with the SEC Rule m connection with offenng ofthe Bonds. "Repository" means the MSRB Via EMMA. "SEC" means the Securities and Exchange Commission of the United States. "SEC Rule" means Rule 15c2-12(b)(5) adopted by the SEC under the SecuritIes Exchange Act of 1934, as the same may be amended from tnne to tnne. Section 2. Provision of Annual Reports. (a) The Issuer shall. or shall cause the DIssemination Agent to, not later than 180 days after the end of the Issuer's FIscal Year. commencing WIth the FIscal Year ended 111 2012, file with the Reposltory the Issuer's CAFR. which WIll conta1l1 the Fmancial InfonnatlOD and Operating Data (collectIVely, the "Annual Report"), as follows: (1) Financial Informati(l11. The financial statements of the lssuer for such prior FIscal Year, accompamed by an audit report resulting from an audit conducted by an Independent Accountant in confonniry with generally accepted auditing standards. Such financial statements will be prepared on a modified accrual basis of accountmg other than GAAP for all govemmental funds, expendabJe truST and agency funds. The accrual basis of accounting is used for proprietary and nonexpendable trust funds. A more detailed explanation of the accountmg basis is contained in Appendix A to the Official Statement. If such audit report is not available by the time the Annual Report is required to be filed pursuant to this Section, the Annual Report shaU con tam unaudited financial statements and the audit report and accompanying financial statements shall be filed in the same manner as the Annual Report promptly after they become avaiJable. The method of preparation and basis of accounting of the Financial Infonnation may not be changed to a basis less comprehensive than contained in the Official Statement, unless the Issuer provides notice of B-7 such change in the same manner as for a Material Event under Section 3(b) hereof. (2) Operating Data. Updates as of the end of the Fiscal Year of substantially all of the infonnation and data contained in the following sections of Appendix A to the Official Statement: (i) Debt Summary (ii) Tax Levies (iii) Assessed Valuation (lv) Estimated Actual Valuation (v) Tax Collections (vi) Largest Taxpayers. together with any material adverse changes in the other portions of the section entitled "FINANCIAL INFORMATION," Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues with respect to which the Issuer is an "obligated person" (as defined by the SEC Rule), which have been filed with the Repository, the MSRB or the SEC. If the document included by reference is a final official statement, it must be available from the MSRB via EMMA. The Issuer shall clearly identify each such other document so included by reference. In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other infonnation as provided in this Section; provided that the audit report and accompanying financial statements may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are 110t available by that date. If the lssuer's Fiscal Year changes, it shall give notice of such change in the same manner as for a Material Event under Section 3(b). (b) If no Dissemmation Agent has been appointed. the Issuer shall file the Annual Report as specified by Section 2(a) hereof; or if the Annual Report is not filed within the time period specified m Section 2(a) hereof. the Issuer shall send a notice to each Repository in substantially the form attached as Exhibit A within lO Business Days after the date the Annual Report is reqUlred to be filed as set forth herein. Section 3. Reporting of Material Events. (a) Pursuant to the provisions of this SectIOn, the Issuer shall gIve, or cause the Dissemination Agent, if any, to give, to the Repository within IO Business Days after the occurrence of any of the following events with respect to the Bonds. notice of the following events: (1) pnncipal and interest payment delinquencies; (2) non-payment related defaults. ifmaterial; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financIal difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions; the issuance by the Internal Revenue Service of proposed or final detenninations of taxability, Notices of Proposed Issue (IRS Fonn 5701-TEB) or other material notices or determinations with respect to the tax status of the Bond, or other material events affecting the tax-exempt status of the Bonds; (7) modifications to rights of Owners, if material; (8) bond calls, if material, and tender offers; B-8 (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the Issuer; (13) the consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the tennination of a definitive agreement relating to any such actions, other than pursuant to its tenns, if material; and (14) appointment of a successor or additional Paying Agent or the change of name of the Paying Agent, if material. (b) Notwithstanding the foregoing, notice of Material Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Bonds pursuant to the Bond ResolutIOn. Section 4. Dissemination Agent. (a) General. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obhgations under these Disclosure Instructions, and may dlscharge any such Dissemination Agent, with or without appointing a successor DisseminatIOn Agent. (b) Annual Reports. If a Dissemination Agent is appointed, not later than 15 Business Days prior to the date specified in Section 2(a) for providing the Annual Report to the RepOSItory, the Issuer shall provide the Annual Report to the Dissemination Agent or the Repository. The DIssemination Agent shall file a report with the Issuer certifying that the Annual Report has been filed pursuant to these Disclosure Instructions, statmg the date it was filed, or that the Issuer has certified to the Dissel11l11ation Agent that the Issuer has filed the Annual Report with the Repository. If the Dissemination Agent has not received an Annual Report or has not received a \"ritten notice from the Issuer that it has filed an Annual Report with the Repository, by the date required in Section 2(a), the Dissemination Agent shall send a notice to the Repository in substantially the fonn attached as Exhibit A. (c) Material Event Notices. (1) The Dissemination Agent shall, promptly after obtainmg actual knowledge of the occurrence of any event that it believes may constitute a Material Event, contact the chief financial officer of the Issuer or his or her deSIgnee, or such other person as the Issuer shall designate in writing to the DisseminatIOn Agent from time to time, infom1 such person of the event, and request that the Issuer promptly notify the DisseminatIon Agent in writmg whether or not to report the event pursuant to Section 4(c)(3). (2) Whenever the Issuer obtains knowledge of the occurrence of an event. because of a notice from the Dissemination Agent pursuant to Section 4(c)(J) or otherwise, the Issuer shall promptly detennine if such event constitutes a Material Event and shall promptly notify the DIssemination Agent of such detennination. If appropriate, such writing shall instruct the Dissemination Agent to report the occurrence pursuant to Section 4(c)(3). (3) If the Dissemination Agent has been given written instructions by the Issuer to report the occurrence of a Material Event pursuant to Section 4(c)(2), the Dissemination Agent shall promptly file a notice of such Material Event with the Repository and provide a copy thereof to the Issuer. Notwithstanding the foregoing, notice of Material Events described in Sections B-9 3(a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Bonds pursuant to the Bond Resolution. (d) Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in these Disclosure Instructions, and the Issuer agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or perfonnance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the Issuer under this Section shall sunrive resignation or removal of the Dissemination Agent and payment of the Bonds. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Issuer pursuant to these Disclosure Instructions. (e) Other Designated Agents. The Issuer may, from time to time, appoint or designate a Designated Agent to submit Annual Reports, Material Event notices, and other notices or reports pursuant to these Disclosure Instructions. The Issuer hereby appoints the Dissemination Agent and the Designated Agent(s) solely for the purpose of submitting Issuer-approved Annual Reports, Material Event notices .. and other notices or reports pursuant to these Disclosure Instructions. The Issuer may revoke this designation at any time upon written notice to the Designated Agent. Section 5. Termination of Reporting Obligation. The Issuer's obligations under these Disclosure Instructions shall tenninate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If the Issuer's obligations hereunder are assumed in full by some other entity as pennitted in the Bond Resolutlon, such person shall be responsible for compliance with under these Disclosure Instructions in the same manner as if it were the Issuer, and the Issuer shall have no further responsibility hereunder. If such termination or substitution occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination or substitution in the same manner as for a Material Event under Section 3(b). Section 6. Amendment; Waiver. Notwithstanding any other provision of these Disclosure Instructions, the Issuer and the Dissemination Agent, if any, may amend of these Disclosure Instructions (and the Dissemmation Agent shall not unreasonably refuse to execute any amendment so requested by the Issuer) and any provislOn of these Disclosure Instructions may be waived, provided that: (a) Bond Counselor other counsel experienced in federal securities law matters provides the Issuer and the Dissemination Agent. if any, with its opinion that the undertaking of the Issuer contained herein, as so amended or after giving effect to such waJver, is in compliance with the SEC Rule and all current amendments thereto and interpretations thereof that are applicable to these Disclosure Instructions; (b) if the amendment or waiver relates to Sections 2(a) or 3(a), it may only be made 111 connection with a change 111 circumstances that arises from a change in law or legaJ requirements, or change in the identity. nature or status of an obligated person with respect to the Bonds, or the type of business conducted; and (c) the amendment or waiver is either (1) approved by the Owners of the Bonds in the same manner as provided in the Bond Resolution with consent of the Owners, or (2) does not in the opinion of Bond Counsel materially impair the interests of the Owners or Beneficial Owners of the Bonds. If there is an amendment or waiver of a provision of these Disclosure Instructions, the Issuer shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of Financial Information or Operating Data being presented by the Issuer. In addition, if the amendment relates to the accounting principJes to be followed in preparing financial statements: (a) notice of such change shall be given in the same manner as for a B-10 Material Event under Section 3(b), and (b) the Annual Report for the year in which the change is made should present a comparison (in narrative fom1 and also, if feasible, in quantitative fonn) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the fonner accounting princlples. Section 7. Additional Information. Nothing in these Disclosure Instructions shall be deemed to prevent the Issuer from disseminating any other infonnation, using the means of dissemination set forth in these Disclosure Instructions or any other means of communication. or including any other infonnation in any Annual Report or notice of occurrence of a Material Event, in addition to that which is required by these Disclosure Instructions. If the Issuer chooses to include any infonnation in any Annual Report or notice of occurrence of a Material Event. in addition to that which is specifically required by these Disclosure Instructions, the Issuer shall have no obligation under these Disclosure Instructions to update such infonnation or include it in any future Annual Report or notice of occurrence of a Material Event. Section 8. Noncompliance. In the event of a failure of the Issuer or the Dlssem111ation ~A_gent, if any, tCl cOlnply ,vith any prOVIsion of these Disclosure Instructions, the Particlpatl!lg Underwriter or any Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific perfonnance by court order, to cause the Issuer or the Dissemination Agent, if any, as the case may be, to comply with its obligatJons under these Disclosure Instructions: Noncompliance with the prOVIsions of these Dlsclosure Instructions shall not be deemed an Event of Default under the Bond ResolutJon, and the sole remedy under these Dlsclosure Instructions in the event of any failure of the Issuer or the Dissemination Agent. if any, to comply with these Dlsclosure Instructions shall be an action to compel perfonnance. Section 9. Notices. Any notJces or commul11catJons to or among any of the pames referenced 111 these Disclosure InstructJons may be gwen as follows: (a ) To the Issuer at: 300 West Ash Salina, Kansas 67402 Fax: (785)309-573~ AttentIOn: Clerk (b) To thePartlclpat1l1g Underwnter( s I at the address set forth 111 the Bond ResolutJOl1s or such other address as is fumished in wnt1l1g to the other parties referenced herein. (c) To the Dissem1l1ation Agem at the address set forth on Exhibit B attached hereto. Any person may, by wlitten notice to the other persons listed above. deSJ~'11ate a different address 0]" telephone number(s) to whicl1 ~ubsequenl notices or com111ul1Jcations should he sent Section 10. Electronic Transactions. Actions taken hereunder and the arrangement desclibed herein may be conducted and related documents may be stored by electronic means. Section 11. Beneficiaries. These Disclosure Instructions shall inure soleJy to the benefit of the Issuer, the Dissemination Agent, if any, the Participatmg UnderWrIter and Beneficial Owners fr0111 time to tnne ofthe Bonds, and shall create no rights in any other person or entity. B-11 Section 12. Severability. If any prOVISIOn in these Disclosure Instructions, the Bond Resolution or the Bonds relating hereto, shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 13. Governing Law. These Disclosure Instructions shall be governed by and construed in accordance with the laws of the State of Kansas. CITY OF SALINA, KANSAS EXHIBIT A NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name ofIssuer: Name of Bond Issue: Name of Obligated Person: Date of Issuance: City of Salina, Kansas $[2,365,000] General Obligation Internal Improvement Bonds, Series 2012-A and $[3,760.000] General Obligation Refunding Bonds, Series 20l2-B, dated as ofJuly 15,2012 City of Salina, Kansas July 26, 2012 NOTICE IS GIVEN that the City of Salina, Kansas (the "Issuer") has not provided an Annual Report with respect to the above-named Bonds as reqUIred by the Continuing Disclosure Instructions dated as of July 26. 2012. The Issuer anticipates that the Annual Report will be filed by _____ _ Dated: N arne of Issuer: Name of Bond Issue: Dissemination Agent: CITY OF SALINA, KANSAS EXHIBITB ACCEPTANCE OF DISSEMINATION AGENT City of Salina, Kansas $[2.365.000] Genera! ObligatJon Internal Improvement Bonds. Senes 2012-A and $[3.760.000] General Obligation Refunding Bonds, Series 20l2-B, dated as of.luly 15,2012 Notice Address of Dissemination Agent: _--,-_-::-__ --,-_____ ' having been duly appointed by the City of Salina, Kansas to act in the capacity of Dissemination Agent pursuant to the Continuing Disclosure Instructions to which this acceptance is attached, accepts such duties and responsibilities set forth therein. B-12 APPENDIX C Financial Statements Since 1992. the City's comprehensive annual financial reports have received the Certificate of Achievement for Excellence in FinancIal Reportmg award by the Govemment Finance Officers AssociatIOn The CertIficate of Achievement was developed to encourage govemmental umts to prepare and publIsh an easily readable and understandable financial report covenng all funds and financial transactions of the government dunng th e fi scal year. The follow111g appendIx contains audIted finanCIal statements for the CIty of Salina's pnmary governmental functJons for fiscal year endmg December 31. 2011 At the time thIS report was completed the audited financial statements of two component ul11ts/jomt ventures of the City. the Salina Airport Authority and Sal1l1a/Saline County Health Department, were not available and as a result have not been incorporated into the enclosed audit. The audned financial statements for the Salina Alrp0l1 Authority have subsequently been completed and can be found 011 the MUl11clpal Security Rulemaking Board's EMMA websne. The audIted financial statement for the Health Department have been delayed due to recent structural damage to the Health Departmen(~ adm1l11strative office:,. Upon completion of the Health Depal1ments audIt. the City will update Jts auan and release Its Comprehensive Annual F111ancIaI Report. Mayor and City Commissioners City of Salina, Kansas INDEPENDENT AUDITOR'S REPORT ON THE BASIC FINANCIAL STATEMENTS .i MIZE;-'HOUSER CXOMPANYrA 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 Salina, Kansas, as of and for the year ended December 31, 2011, which collectively comprise the basIc financial statements of the City's primary government as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility IS to express opinions on these basic 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 "Kansas Municipal Audit Guide." Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of matenal misstatement. An audit includes consideration of Internal control over financial reporting as a basis for deSigning audit procedures that are appropnate In the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City'S Internal control over financial reporting Accordingly, we express no such opinion An audit Includes examining on a test baSIS, evidence supporting the amounts and disclosures In the financial statements. An audit also Includes assessing the accounting pnnciples used and significant estimates made by management as well as evaluating tne overall baSIC financial statement presentation. We believe that our audit prOVides a reasonable baSIS for our opinions The financial statements referred to previously include only the pnmary government of the City of Salina. Kansas, which consist of all funds, organizations, Institutions, agencies, departments, and offices that comprise the City's legal entity The financial statements do not include financial data for the City's legally separate component units which accounting pnnclples generally accepted In the United States of Amenca require to be reported with the financial data of the City's primary government As a result, the primary government financial statements do not purport to. and de; not, present fairly the financial POSition of the reporting entity of the City of Sailn2 Kansas as o~ December 31 , 201 i. the changes In its financial position. or where applicable, ItS cash flows for the year ther ended In conformrty with accounting prinCiples generally accepted in the United States of America In accordance Wltl-, accounting prinCiples generally accepted in the United States of America, the City of Salina, Kansas has Issued separate reporting entity financial statements for which we have Issued our report dated June 22. 2012. lro ou: opInion the finanCia, statements t"eferred to above present fairly, in al! materl2i respects the ,espestlve finanCial POSition ot tne governmental actiVitieS, the bUSiness-type actiVities. each major fund. and the aggregate remaining fund Information of the City of Salina, Kansas, as of December 31. 2011. and the respective changes In financial position and. where applicable, cash flows thereof and the respective budgetary comparison to, the Genera! Fund, I=lood & Drainage Improvement Fund, Tourism and Convention Fund, Special Gas Func, Bicentennial Center Fund and the Sales Tax Capital Fund for the year then ended In conformity witt'-, accounting prinCiples generally accepted in the United States of America. iW.~.rh m.,.ehQIlc:;er en m == mhco@mizehouser.com 534 S Kansas Ave, SUite 700 II Topeka, KS 66603·3465 .785.233.0536 P • 785.233.1078 f 534 S Kansas Ave, Suite 400 II Topeka, KS 66603·3454 .785234,5573 P • 785.234.1037 f 7101 College Blvd, Suite 900. Overland Park, KS 66210·1984.913.4511882 P • 913.451,2211 f 120 E Ninth III Lawrence, KS 66044·2682 .785.842.8844 P II 785.842.9049 f 900 Massachusetts, SUite 30111 Lawrence, KS 66044·2868 11785.749.5050 P II 785.749.5061f Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 3 through 13 and the schedules of funding progress on page 52 be presented to supplement the basIc financial statements. Such information, although not a part of the basic financial statements, is required by the' Govemmental 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 inquines of management about the methods of preparing the information and companng 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 Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's financial statements as a whole. The Introductory section, combining and individual nonmajor fund financial statements and schedules, and statistical tables as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and Individual nonmajor fund financial statements and 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 companng and reconciling such Information directly to the underlying account 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 mformatlon IS fairly stated In all material respects in relation to the financial statements as a whole, The mtroductory and statistical sections have not been subjected to the auditing procedures applied In the audit of the~bas" fl~anCJL:t~{iC:?'Y' ::: not express an opinion or provide any assurance on them. / ' if' 1\ c/ "-') June 22, 2012 2 CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) Management Discussion and Analysis This section of the report contains an overview and analysis of the City of Salina's financial statements for the fiscal year ended December 31, 2011. The information contained here, as well as the information contained in the letter of transmittal, are intended to provide the reader of the financial statements with a well rounded picture of the City's financial condition. Financial Highlights • Net Assets increased by $5,912,298. Governmental Net Assets declined by $463,769, while Business Type Net Assets increased by $6,376,067. (After prior year adjustments) • Liabilities also increased substantially due to the issuance of $16,120,000 in Revenue Bonds. • Sales taxes grew modestly (4.1 %). a reversal of the previous two years of decline. • In Business Type Activities, the Water and Sewer fund saw asset growth, despite increases in operating expenditures, due to good revenue production. • The multi-year decline in fund balance for the General Fund was halted, with a slight recovery. • Tax delinquency rates have declined to a relatively normal level of 2.7%. • Personal property taxes continued to decline as a result of the exemption of business equipment from the tax rolls. • Investment revenues continue to be very minimal, but levels have stabilized. • The unemployment rate declined from 6.4% to 6.3%. The Basic Financial Statements The basic financial statements of the City include the government-wide financial statements and the fund finanCial statements. The notes to the financial statements follow the basic financial statements, and are essential for the reader's understanding of the financial statements. Other supplementary Information, including the combining schedules for non-major funds and the budgetary comparison reports, are at the end of this report to provide additional information for the reader. Government-wide Financial Statements The government-wide financial statements present the results of the City's operations uSing the accrual baSIS of accounting, the same baSIS as is used by private sector businesses. These statements focus on the long-term financial picture of the City as a whole The Statement of Net Assets reports all of the City's assets and liabilities Net assets. the difference between assets and liabilities, are an important measure of the City's overall financial health Net assets represent the total accumulated and unused resources available to the City for the purpose of providing services. Over time, the increases and decreases in net assets can be mOnitored to determine if the City's financial position IS improving or deteriorating. The Statement of Activities shows how the net assets have changed during the fiscal year. One unique feature of this statement is how it shows the revenues and expenses related to specific programs and how much of those programs were supported by the general taxes of the City. Since this statement is prepared on the accrual basis of accounting, all revenues and expenses are included, regardless of when cash is actually received. Both statements show the operations of the City broken down between governmental and business type activities. Governmental activities are the operations of the City generally supported by taxes, such as Publfc Safety (Police, Fire, and EMS), Public Works, Public Health, and Culture & Recreation. Business-type Activities are operations of the City that are intended to recover a significant portion of their costs through user fees and charges. These include Water and Sewer, Refuse collection, the Golf Course, and operation of the City Solid Waste Facility. 3 Fund Financial Statements CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) The City uses three types of funds to manage its resources: governmental funds, proprietary funds, and fiduciary funds. A fund is a fiscal entity with a set of self-balancing accounts recording financial resources together with all related liabilities and residual equities and balances, and the changes therein. These accounting entities are separated for the purpose of carrying on specific activities or attaining certain objectives in accordance with regulations, restrictions, or limitations. Governmental fund financial statements are prepared on a modified accrual basis. Under this basis, revenues are recognized when they become measurable and available, and expenditures are recognized when the related fund liability is incurred with the exception of long term debt and similar items which are recorded when due. The focus is on the short-term financial picture of the operations of the Individual fund, rather than long-term citywide view provided by the government-wide statements. Major Governmental Funds are presented in individual columns, while Non-major Governmental Funds are aggregated into an "Other Governmental Funds" column. A combining statemen: fo~ the Non-major fU;"1ds IS presentee as supplemen~arj informatio.-; in the back of the report. The information presented in these statements can be compared to the governmental activities information In the government-wide statements. The reconciliation at the end of the fund financial statements details the relationship between the two types of financial statements. Proprietary funds fall into two categories: enterprise funds and internal service funds. All proprietary funds are prepared on the accrual baSIS of accounting, and are used to account for bUSiness-type activities. Enterprise fund statements present the same information that is in the government-wide statements for bUSiness-type activities. but In greater detail. The City of Salina currently operates four enterprise funds: Sanitation, Solid Waste Disposal, Golf Course, and Water and Sewer Internal Service funds are used to account for the cost of operations shared by various departments of the City. The city operates five Internal service funds Three of these are for self-insurance actiVity: Risk Management. Workers' Compensation Reserve. and Health Insurance. The remaining two account for our Information Systems activity and for the Central Garage operation A combining statement for these internal service funds can be found In the supplementary information following the notes to the financial statements Fiduciary funds are used by the City to account for resources held by the City for a third party. Agency funds are a special class of Fiduciary Fund in which liabilities always equal assets, and thus there are no net assets. The City of Salina operates nine Agency funds. Schedules for these funds may be viewed in the supplementary section of thiS report. Permanent Funds are used to report resources that are legally restricted to the extent that only earnings, not pnncipal, may be used. Permanent fundS operated by the City Include the Cemetery and Mausoieum Endowments and the Tri-centennlal CommiSSion fund Notes to the FinancIal Statements The notes to the financial statements are an Integral part of the basic financial statements since they contain valuable additional Information necessary for gaining a complete understanding of the City's financial statements. Other Information In addition to the basic fmanclal statements and the notes described above, this report also presents the general fund and major special revenue fund's budgetary statements as required supplementary Information directly following the notes to the basic financial statements. The combining statements for the non-major funds are shown after the reqUired supplementary information. Finally, the statistical section inCludes selected statistical data about the City's operations and economy. The City as a Whole This section will identify, discuss, and analyze significant differences and trends that will enhance the reader's understanding of the City's financial position. 4 Tax Base and Economy CITY OF SALINA, KANSAS Year Ended December 31, 2011 (Unaudited) The City of Salina relies on three major groups of revenues to support it's operations. Each of these revenue streams has a different revenue base. In declining order of magnitude, they are charges for service, sales taxes, and property taxes. Sales taxes and property taxes apply primarily to Govemmental Activities, while charges for services apply to both Governmental (36%) and Business-type (64%) activities. Charges for Services account for about 46% ($37,249,107) of the City's revenue stream. Charges for Service depend on both the rate that is set for the activity, as well as the volume of services provided. The following table illustrates service volume and rate adjustments for some of the more significant services for the year ending December 31, 2011. Description 2010 Volume 2011 Volume Change Rate Comments Golf Course: Rounds, 18 Hole 30.420 26.782 (3.638) No fee increase Rounds, Par3 3,707 3,368 (339) No fee increase Annual Golf Members 33 18 (15) No fee increase River Festival Gate Count 64,835 72,664 7,829 $2.00 per button increase Development Services Inspections Performed 6,391 5,473 (918) Permits Issued 3,031 2,678 (353) Finance/Adm inistration EMS Runs Billed 3.473 4,003 530 Five percent increase Licenses Issued 1,296 1,358 62 Water Billings Issued 238,635 239,448 813 Water Metered (in Billion Gallons) 1.97 NA Parks and Recreation Kenwood Cove Attendance 119,000 111,063 (7,937) No fee increase Youth Teams 164 178 14 Adult Teams 300 308 8 Special Pops Programs 109 114 5 Trips/Tours offered 31 54 23 Youth Tournament Teams 424 388 (36) Adult Tournament Teams 140 164 24 Public Works Sanitation Customers 14,520 14,604 84 3% fee increase Landfill Tonnage 94,907 96,178 1,271 No fee increase Street Cut and Excavation Permits 181 201 20 Concrete Permits 155 143 (12) Water and Wastewater $2.00 per month per Water Treated (Billion Gallons) 2.30 2.30 typical user $2.00 per month per Wastewater Treated (BillIOn Gallons) 1.50 1.45 (0.05) typical user **In general, if not specified in the table, rates were adjusted an average of about 2% for most services. 5 CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) Sales taxes are the next largest component of the revenue mix, providing 20% ($15,847,742) of the total revenues. This is a slightly smaller portion than 2010 (21 %). The City receives a .90% City-wide sales tax, and also a portion of the County-wide 1 % sales tax. Forty-four percent, (a rate of .4%) of the City-wide sales tax is required to be used for special purposes. The remaining .5%, along with the City portion of the Countywide tax is available for general purposes. Total revenue from the saies tax in 2011 was. $ 15,847,742, up from $ 15,224,888 in 2010. This 4.1% increase follows a 4.7% decline (after adjustment for a change in rate) for 2010. A number of factors affect the sales tax. First are the regional and local economic conditions and relationships. These are most directly reflected in the proceeds of the City-wide tax, which grew by 5.8%. The City was unfavorably affected by the formula used to distribute the County-wide sales tax among participatmg jurisdictions (only Cities and the County participate, School and other special districts do not). The formula is based, in part, on the property tax efforts of each jurisdiction. Because the portion of the overlapping levy attributable to the City of Salina was increased for 2011. the City's allocated portion of the County-wide sales tax was decreased from 63.3% in 2010 61.85% in 2011. Total Countywide taxes received in 2011 were approximately $6.755,629. The cnange In formula thus resulted in a shift of about $158,000 from the City of Salina to Saiine County in 2011. On November 4, 2008, Salina voters approved an increase of the special purpose .25% tax to a .40% tax. The extended tax is to sunset March 31, 2018. The tax was also modestly re-purposed, for Capital and Economic Development purposes only. Property Taxes are the third major component of the revenue miX, accounting for 16% ($11,711,254) of total revenues. Property taxes consist of two components: Real estate and personal property taxes which are determined by the mill levy set by the city and the assessed value of the property; and motor vehicle taxes, which are established by a countywide average tax rate, and the assessed value of the vehicle Real estate assessed value increased by 2.4%. The total City mill levy was increased slightly, by .2%, while the overlapping levy Increased by .3% Tax delinquency decreased from 5.6% to 2.7%. Personal property value continued to slide, presumably as a result of removing business equipment from the tax base. Personal property value has now dropped to $19.9 million from It'S peak of $39 7 million In 2007 At the 2011 tax rate, this exemption is equivalent to $514,546 in lost revenue for 2011 Motor Vehicle value decreased by 5.8%. Motor vehicle taxes are distributed based on a formula using prior year's tax effort (similar to the Countywide Sales Tax Distribution). The following table summarizes the comparative property assessed values and tax levy rates: Comparative Property Values and Tax Levy Rates Fiscal (Budget) Year Real Estate and Personal Property Assessed Valuation City Mill Levy ($ per $1 ,000) Operating (General Fund) Debt Service Total City Rate Total Overlapping Levy Percent of Total Taxes Collected Ratio of Total Taxes (including delinquent collections) to taxes Motor Vehicle Valuation 2010 2011 Change $ 397,470.626 $ 402.354,576 $ 4,883,950 20.082 19.236 [0.846] 5.773 6.786 1.013 25.855 26.022 0.167 124.707 128.498 3.791 94.4% 97.3% 2.9% 97.1% 99.9% 2.8% $ 50,330,252 $ 47.406,072 $ [2,924,180] The unemployment rate in Saline County declined very slightly from 6.4% in 2010 to 6.3% In 2011, reflecting general economic conditions. This is stil! slightly below the statewide and significantly below the national unemployment rate. The total labor force increased to 26,656, a change of 1.5%. In 2011, the top ten property taxpayers accounted for 11.22% of total assessed value. This is slightly more concentrated than ten years ago (at 11.18%) 6 Statement of Net Assets CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) Net assets may, over time, provide an indicator of a government's financial position. In the case of the City of Salina, assets exceeded liabilities by $187.641,000 at December 31,2011. ThIs represents an increase in net assets of $6.519.000 over 2010. A comparative condensed Statement of Net Assets at December 31,2010 and 2011: Governmental Business-Type Activities Activities Total Pnma~ Government % of % of 2011 2010 2011 2010 2011 2010 Total 2011 Total Change Cash and Investments $ 13,935 $ 17,475 $17,530 $28,047 $ 31,465 12% $ 45,522 16% $ 14,057 Other Current Assets $ 12,309 $ 12,670 $ 2,025 $ 2,344 $ 14,334 5% $ 15,014 5% $ 680 Noncurrent (Capital) Asset $166,122 $164.515 $58,273 $67,639 $224,395 83% $ 232,154 79% $ 7,759 Total Assets $192,366 $194,660 $ 77,828 $ 98,030 $270,194 ~ $ 292,690 ~ $ 22,496 Current Liabilities $ 21,918 $ 21,687 $ 3,352 $ 2,944 $ 25,270 29% $ 24,631 23% $ (639) Noncurrent liabilities $ 52,650 $ 55,639 $10,538 $24.772 $ 63,188 71% $ 80,411 77% $ 17.223 Total Liabilities $ 74,568 $ 77,326 $13,890 $27,716 $ 88,458 ~ $105.042 ~ $ 16,584 Net Assets. Invested In capital assets. net of related debt $113,001 $109,289 $48.079 $44,227 $161,080 89% $153,516 82% $ (7,564) Restncted for Permanent Funds $ 417 $ 427 $ $ $ 417 0% $ 427 0% $ 10 Restricted for Debt SerVIcE $ 572 $ 1,285 $ 1,553 $ 1,553 $ 2,125 101 /0 $ 2,838 2% $ 713 Unrestricted $ 3.808 $ 6,333 $14,306 $24534 $ 18.114 10% $ 30,867 16% $ 12,753 Total Net Assets $117,798 $117,334 $ 63,938 $70,314 $181,736 ~ $187,648 ~ $ 5,912 Percent of Total Assets 65% 63% 35% 37% 100% 100% Cash and Investments as a percentage of current liabilities 64% 81% 523% 953% 125% 185% The largest segment of the City's net assets (82%) reflects its investment in capital assets (land, buildings, streets and drainage facilities, utility plant, vehicles, equipment, etc.), less any debt used to acquire those assets that IS still outstanding. These assets are used to provide services to citizens As a result, resources required to retire related debt can not come from liquidation of the asset. Such resources generally must be provided from other sources, such as future taxes or user charges. A small portion of net assets (2%) is restricted for debt service. The remainder (unrestricted) of net assets (16%) may be used to meet the City's obligations to citizens and creditors This IS comparable to previous years. In 2011, the amount invested in capital assets net of related debt decreased by $7,564,000. Unrestricted net assets increased by $12,573,000. These represent diverse changes throughout the financial statement: Increases in cash WI both Governmental and Business type activities, a decrease in Capital assets in Governmental Activities and an increase in Capital Assets in Business type activities. Total liabilities remained much the same in Governmental Activities, but increased significantly in Business Type Activities, attributable to the issuance of Revenue Bonds to finance the Advanced Meter Infrastructure project. During the year ended December 31, 2011, there were several significant events that changed the balance of net assets, Governmental Activities. 2011 saw an increase in cash and investments in Governmental funds, This is due to controlled expenditures for both capital and operating requirements as well as improved revenues from the Sales Tax. 7 CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) Business-type Activities: The Water and Wastewater fund has a dominant influence on the Business Type Activities net assets. The increase in net assets is due to good revenue production and controiled expenses. Statement of Activities A condensed statement of activities is shown below. Conaensed Comparitlve Statement of Activities. 2010 and 2011 (In $000'5) Governmental Buslness-T)!ee Total Primar)! Government 2010 2011 2010 2011 2010 % 2011 % 2010-2011 Program Revenues Change Charges for Services $ 12.306 $ 13.470 $ 22419 $23779 $ 34.725 48% $ 37.249 47% $ 2.524 Operating Grants and Contributions $ 3,415 $ 2.907 $ 202 $ 3.415 5% $ 3.109 4% $ (306) Capital Grants and Contributions $ 3.804 $ 0% $ 3804 5~/o $ 3.804 General Revenues Property Taxes $ 11.179 $ 11.712 $ 11.179 16% $ 11 712 15% $ 533 Sales Taxes $ 15.225 $ 15.848 $ 15.225 21% $ 15.848 20% $ 623 Other Taxes $ 6,298 $ 6.389 $ 6.298 9°/~ $ 6,389 8% $ 91 Investment Revenue $ 81 $ 77 $ 67 $ 83 5> 148 0% $ 160 0% $ 12 Other Miscellaneous $ 565 $ 872 $ 341 $ 330 S 906 1 ~t $ 1.202 2% $ 296 T olal Revenues $ 49.069 S 51.275 $ 22.827 $ 28.198 $ 71.896 100% $ 79.473 100% $ 7.577 Expenses $ General Government $ 10.845 5) 13.615 ~ 10.845 15% S 13615 18% 5; 2,770 Public Safety S 18.592 S; 18.579 $ 18.592 25% $ 18.579 25% $ ( 13) Public Works 5) 9,782 S; 9.858 S 9782 13% S 9,858 13% 76 PubliC Health and Sanitation S 1 365 S; 1.368 ~ 1.365 2% $ 1.368 2% $ 3 Culture and Recreation S 6.572 S 6.693 $ 6.572 9% $ 6693 9% ~ 121 Planning and Development Si 3.715 5; 3.450 $ 3.715 5%) $ 3.450 5% S, (2651 Solid Waste Disposal S 2.925 $ 2945 S, 2.925 4°/~ 5> 2.945 4°/0 $ 20 Water and Sewer $ 14.050 $13.597 $ 14,050 19% $ 13.597 18% S; (453) Sanitation :;; 2.261 $ 2.261 $ 2.261 3% $ 2.261 3% $ Golf Course $ 817 $ 825 $ 817 1% $ 825 1% $ 8 Interest on Long Term Debt $ 2.257 ~ 1 650 $ 2.257 3% $ 1.650 2% $ (607) Total Expenses s: 53.128 $ 55.213 ~ $19628 $ 7318'1 100% $ 74.841 100% S, 1.660 Increase In net assets before transfers $ (4.059) $ (3.938; 5) 2.774 $ 8.570 $ (1.285) $ 4.632 $ 5.917 Transfers and other extraordinary Items S 92 $ 2.362 ~) $ (2,163) £ $ 199 $ 199 Increase In Net Assets £ 13,967) $ (1.576) s: 2.682 $ 6407 $ (1.285; $ 4.83~i ~, 6 116 I\let Assets January 1 $119.854 ~117.798 $61.270 $ 63.938 S; 181.12~ S; 181.736 S 612 Pnor Period Adjustment $ '10-1-l ",--, I ' SO 1 ~ 12 ~:, LillJ ~ 1.897 $ 1.081 ~. (816' Net Assets. January 1 restated $121765 $118910 $ 61.256 £63907 $183021 $182.817 $ (204) I\let Assets December 31 $ 117.79b S, 117.3:;Li S, 63,938 £ 70.31" $18,.736 $18764b $ 5.912 Governmentai Activities. Totai expenses tor Governmental ActiVities for the year ending Decembel' 31, 2011 were $55,213,000 compared to $53.128.000 in 2010. Governmental actiVIties represent 74% of the City's total expenses. The largest element of Governmental ActiVity expense was PubliC Safety. accounting for 34% of the total. Charges for service attnbutable to GOvernmental Activities totaled $13.470.000 and operating grants for thOSe purposes were $2,907,000. The balance was funded by general revenues. Sales taxes accounted for $15,848,000 of the general revenues, With property taxes prOViding $11,712,000. Net assets decreased by $1.576,000 as a result of Governmental Activities. Business Tvpe Activities. Total expenses for Business-type ActiVities for the year were $19,628,000. or 26% of the City'S total expense The majority of thiS expense ($13,597.000) is attributable to Water and Sewer operations, with the other activities (Solid Waste Disposal, Sanitation, and Golf Course) costing a combined total of $6,031,000. These activities are primarily supported by user charges, with only $413,000 coming from general revenues, representing largely the Interest earned on fund balances held by the City. Net assets Increased by $6,407,000 as a result of BUSiness-type Activity operations. Fund Financial Analysis Governmental Funds Fund Balances: CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) The table below shows the Governmental Fund balances for major funds for the years ended December 31, 2010 and December 31,2011. Governmental Fund Balances, 2010 and 2011 Fund 2010 2011 Change General SO 3.617.181 $ 3.836.238 $ 219.057 Flood and Drainage $ 188,526 $ 907 $ (187,619) Tounsm and Convention $ 367,197 $ 340.473 $ (26,724) Special Gas $ 1,484,641 $ 1,417,743 $ (66,898) Bicentennial Center SO 46,048 $ 142,881 $ 96,833 Sales Tax Capital $ 2,154.367 SO 1,397,571 $ (756,796) Debt Service $ 571,873 $ 1,285.130 51 713,257 Capital Projects $ (2,610,001) SO 390,852 SO 3.000.853 Other Governmental Funds $ 2.981,652 SO 2.792.546 SO (189,106) Total $ 8,801,484 $ 11.604.341 SO 2,802,857 Total Governmental Fund balances Increased by $2,802,857 The reasons for these changes are vaned. The most Significant change is in the Capital Projects Fund, and is largely the result of Project finanCing activities. General Fund balances stabilized and grew slightly in 2011. The Flood and Drainage Fund was scheduled for depletion in 2011. The Special Sales Tax Capital Outlay Fund shows a significant reduction in fund balance due to an aggressive capital Improvements program, most notably the reconstruction of Marymount Road Revenues and Expenditures: The following table shows a comparison of revenues and expenditures (inc;[udlng other sources and uses) for major funas for the years ending December 31. 2010 and 2011 Consolidated Statement of Revenues and Expenditures for MaJo~ Funds. 2010 and 2011 Modified Accrual Basl~ Fund 2010 201 '. Change Revenues (Including Other Frnancrng Sources; General $ 34.303574 5: 35.557,304 $ 1.253.730 Flood and Drarnage Improvement 3i 1,312 ~ 18.473 $ 17.161 Tourism and Convention $ 1,332.671 $ 1.306,102 $ 126.569) Special Gas 5: 1.569.648 $ 1.546,045 5: (23.603) Bicentennial Center 50 1.702.066 S; 1.656762 $ (45.304) Saies Tax Capita' 50 3.8: 5966 , 3.777.286 ;;: (38680) .. Debt ServlcEo $ 794386S S. 6844.52' ~ (1 099.344; Capital Projects S; 5.552906 S 9.896198 $ 4343.292 Other Governmental Funds' :;; 2954.257 S' 2.800.508 S (153.749) Total Revenues :;, 59 176265 $ 63403199 $ 4.226.934 Less Other Source" So 12 157.28'" :r 1~.581.655 ~ 2424.371 Revenues net of other sour(;es S; 47.018981 l 48.821.54J s: 1.802.563 Expenditures (Includrng Other Frnanclng Uses': General 5: 35.773,774 S, 35494671 S; (279103) Flood and Drainage improvement, S 3.223 SO 206.092 50 202.869 TOUrism and Convention S; 1.228789 S; 1 332.826 s: 104.037 . Special Gas 51 2.138.057 $ 1.612.943 $ (525.114) Bicentennial Center $ 1 768.2~6 3: 1.559.929 $ (208.317) Sales Tax Capital s: 3.289.009 $ 4.534.082 $ 1.245.073 Debt Service $ 8.107.283 $ 6.131.264 $ (1.976,019) Capita! PiOjects $ 15.936.269 $ 6.895.345 $ (9,040.924 ) Other Governmental Funds' $ 2.829.609 S; 2.989.614 $ 160.005 Total Expenditures $ 71.074.259 $ 60.756.766 $ (10,317,493) Less Other Uses $ 4.983834 $ 5.692.077 $ 708.243 expenditures. net ot other uses $ 66.090.425 $ 55.064.689 $ (11.025.736) 9 CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) Total revenues and other sources increased by $4.226,934 from 2010 to 2011. The largest component of this change was in the Capital Projects accounts, and is related to Construction activities. Other changes include an increased General supplement for the Bi-Centennial Center and changes in temporary note activity. Expenditures generally declined, with the notable exception of the Sales Tax Capital Fund. which was committed to the Marymount Road reconstruction, along with some smaller projects. Proprietary Funds The City of Salina operates four Enterprise Funds as well as five Internal Service Funds. A summarized comparative Statement of Net Assets follows for each Enterprise Fund: Comparative Summary Statement of Net Assets; 2010 -2011 (in $OOO's) Solid Waste Disposal Water and Sewer 2010 2011 Change 2010 2011 Change Current Assets $ 3,887 $ 3,611 $ (276) $ 14,755 $ 25,988 $ 11.233 Capital Assets $ 4.211 $ 3,495 $ (716) $ 53,075 $ 63,184 $ 10,109 Total Assets $ 8,098 $ 7,106 $ (992) $ 67,830 $ 89.172 $ 21,342 Current liabilities $ 1.010 $ 528 $ (482) $ 2,091 $ 2,363 $ 272 Noncurrent liabilities $ 3,192 $ 2,868 $ (324) $ 7,161 $ 21,640 $ 14.479 Total Liabilities $ 4,202 $ 3,396 $ (806) $ 9,252 $ 24.003 $ 14.751 Assets Invested in Capital. net of related debt $ 2,294 $ 2.276 $ (18) $ 45.567 $ 40.991 $ (4.576) Restricted Net Assets $ $ $ $ 1.553 $ 1,553 $ Unrestricted Net Assets $ 1.602 $ 1.434 $ (168) $ 11.458 $ 22,625 $ 11 .167 Total Net Assets $ 3.896 $ 3,710 $ (186) $ 58,578 $ 65,169 $ 6.591 Current Assets as a percentage of current liabilIties 385% 684% 706% 1100% Sanitation Golf Course 2010 2011 Change 2010 2011 Change Current Assets $ 846 $ 761 $ (85) $ 66 $ 32 $ (34) Capital Assets $ 639 $ 646 S 7 $ 348 $ 314 $ (34) Total Assets $ 1 485 S 1.407 $ :78} 50 414 $ 346 $ (68; Current Liabilities $ 203 $ 29 s: (174) $ 48 $ 24 $ (24) Noncurrent Liabilities $ 123 $ 156 $ 33 $ 61 $ 109 $ 48 T ota I Liabilities $ 326 $ 185 s: (141 ) $ 109 $ 133 $ 24 Assets Invested in Capital, net of related debt $ 6').0 $ 646 $ -: $ 348 $ 314 C!' /")/0\ '" \"'"1"; Restricted Net Assets $ $ $ $ $ ,.. -l> Unrestricted Net Assets $ 520 $ 576 $ :::e: $ (43) $ \101 ) ([' (58, vV 'I' Total Net Assets $ 1.159 $ 1.222 $ 63 $ 305 $ 213 $ (92) Current Assets as a percentage of current liabilities 417% 2624% 138% 133% ]0 CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) The Golf Course Fund shows declines in total net assets, due primarily to a reduction in current assets, however, capital assets also decline. Unrestricted net assets in this fund reflect a $101,000 deficit balance, up from $43.000 a year ago. The Solid Waste fund shows decreases in assets as well as liabilities, the result of constructing an additional cell. The Water and Sewer fund shows a significant Increase in long term liabilities as a result of a Revenue Bond Issue. Both Current and Capital assets increase significantly within this fund. Revenues, Expenses, and Changes in Net Assets The Water and Wastewater Funds, showed healthy results from operations, with net assets increasing significantly due to a good revenue flow (attributable to both adequate rates and favorable weather conditions) and controlled expenses. The Golf Course showed a very significant loss on the year, requiring increased transfers from the General Fund to maintain cash liquidity. The Sanitation Fund is stable. Net assets declined slightly in the Solid Waste fund. Comparative Summary of Revenues, Expenses and Changes in Net Assets, 2010 and 2011 (In $OOO's) Solid Waste Disposa! Water and Sewer Operating Revenues Operating Expenses Operating Income 2010 2011 Change $ 2,878 $ 2,929 $ 51 $ 2,852 $ 2,829 $ (23) $ 26 $ 100 $ 74 2010 $ 16,789 $ 13,571 $ 3,218 Non-operating revenues (expenses) $ (55) $ (52) $ (107) ..:..$_~ (433) Income (Loss) before Transfers $ Transfers in (out) $ (29) $ (139) $ $ Capital Contributions ",,$ __ _ Change in Net Assets $ (168) $ (7) $ (180) $ $ 22 (41 ) (19) (187) ~$==,= $ 2,785 $ 77 $ $ 2,862 2011 Change $ 18,361 $ 1,572 $ 12,964 $ (607) $ 5,397 $ 2,179 $ (561 ) $ (128) $ 4.836 $ 2,051 $ (2,030) $ (2.107) $ 3,804 $ 3.804 $ 6,610 $ 3,748 Net Assets, January 1 Restatement $ 4,121 $ 3,896 $ (225) $ 55,668 $ 58,578 $ 2,910 Net Assets, January 1, restated Net Assets, December 31 Operating Revenues Operating Expenses Operating Income Non-operating revenues (expenses) Income (Loss) before Transfers Transfers in (out) Capital Contributions Change in Net Assets Net Assets, January 1 Restatement Net Assets, January 1, restated Net Assets, December 31 $ (57) $ 1 ..::...$_.......;5~8 $ 48 $ (19) $ (67) $ 4,064 $ 3,897 $ (167) $ 55,716 $ 58,559 $ 2,843 $ 3,896 $ 3,710 $ (186) $ 58,578 $ 65,169 $ 6,591 Sanitation Golf Course 2010 2011 Change 2010 2011 Change $ 2,311 $ 2,335 $ 24 $ 783 $ 687 $ (96) $ 2.276 $ 2,292 $ 16 $ 817 $ 825 $ 8 $ 35 $ 43 $ 8 $ (34) $ (138) $ (104) $ 18 $ 32 $ 14 $ $ $ $ 53 $ 75 $ 22 $ (34) $ (138) $ (104) $ (50) $ $ 50 $ 20 $ 47 $ 27 $ $ $ $ $ $ $ 3 $ 75 $ 72 $ (14) $ (91) $ (77) $ 1,166 $ 1,159 $ (7) $ 314 $ 305 $ (9) $ ~1 0) $ ~12) $ ~2) $ 5 $ ~1 ) $ {6) $ 1,156 $ 1,147 $ (9) $ 319 $ 304 $ {15) $ 1,159 $ 1.222 $ 63 $ 305 $ 213 $ (92) 11 Budgetary Highlights CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) The objective of budgetary controls is to ensure compliance with legal provIsions embodied in the annual appropriated budget approved by the City Commission. The legal level of budgetary control is maintained at the Fund level, in accordance with State Statutes. Management control is maintained at the departmental level. Within the departments, considerable discretion is permitted. The City uses an encumbrance accounting system, in which estimated purchase orders are recorded prior to the release of purchase orders to vendors. Open purchase orders are reported as reservations of budgetary basis fund balances at December 31, 2011. Formal budgetary amendments are limited to those circumstances in which the need is perceived to alter the total fund budget. Re- allocation among departments or line items are not typically recorded as budgetary amendments. However. in addition to formal amendments, departments within the City are allowed to transfer budget between line items within a department. Budgets may also be transferred from department to department within each fund. As a result of these transfers, the onglnal budget and the final budgets may not be the same for departments within a fund. There were a number of funds in which the budgets were amended, including the Flood and Drainage Improvement Fund, Sales Tax Capital Fund. Risk Management Fund, Central Garage Fund and the Water and Sewer Fund. The City experienced a number of significant vanances from budgeted items In the General Fund, however, the total fund was within budgeted expenses. Motor vehicle taxes fell short of budget due to a delayed distribution from the County. Public Safety charges for service were significantly short of budget. This includes Court Revenues and EMS fees due from Saline County. Sales taxes exceeded budgetary levels slightly. Several expenditure items were also significantly over or under budget Several Departments exceeded budgeted expenditures. In general, retirement system contributions exceeded budget Capital Assets and Debt Administration Capital Assets The total amount invested in Capital Assets for the City at December 31.2011 was $232,153,260 net of accumulated depreCiation. The following table illustrates the Capital Asset balance by various classes of assets at December 31 2010 and 2011 : Capital Asset Balances Net of Depreciation. 12/31/2010 and 12/31/2011 (In OOO'S) Governmental Activity BUSiness-type ACtiVity iota! 2010 2011 2010 2011 2010 2011 EqUipment, Furniture and Fixtures $ 1,314 $ 1,288 $ 1,982 $ 1,729 $ 3,296 $ 3,01 7 Vehicles $ 2.445 $ 2.996 $ 903 $ 812 $ 3,348 $ 3,808 Buildings and Improvements $ 23,625 $ 22,591 $ 12,345 $ 11,904 $ 35.970 $ 34.495 Land $ 22,477 $ 22,477 $ 1.541 $ 1.541 $ 24,018 $ 24.018 Infrastructure $ 83,712 $ 82,609 $ 39,985 $ 40,591 $ 123,697 $ 123,200 Construction in Progress $ 32,549 $ 32.554 $ 1,517 $ 11,062 $ 34.066 $ 43,616 Total $ 166.122 $ 164.515 $ 58.273 $ 67.639 $ 224.395 $ 232.154 * Net of Accum ulated Depreciation 12 CITY OF SALINA, KANSAS Year Ended December 31,2011 (Unaudited) Changes to capital assets may be summarized as follows: Changes to Capital Assets, 2011 (in OOO's) Governmental Business-Type Activity Activity Additions $ 547 $ 10,633 Retirements $ (3,110) $ (1,236) Adjustments $ 956 $ (31 ) Net Additions $ (1,607) $ 9.366 Total $ 11,180 $ (4,346) $ 925 $ 7,759 Depreciation Expense Applied $ 4,730 $ 2,653 ,;;.$ ==,.;,7,J,,;,3;,;;;8,;;.3 Additional information on the City's capital assets can be found in Note 4,D. of the notes to the baSIC financial statements. Debt Management The City's general policy for General Obligation Bonds is to Issue them for no more than 10 years for the City at Large portion, with some exceptions permitted for extraordinary projects. On special assessment bonds, the maturity may extend to 15 years. The outstanding General Obligation Bonds for Governmental activities at December 31.2011 totaled $55.225.670. In addition. there were temporary notes outstanding in the amount of $3,400,000. BUSiness-type activities had $16,193.925 In Revenue Bonds outstanding. as well as $7,217.907 in General Obligation Bonds. Revenues generated by user fees are pledged to retire all of the Bonds issued by Business-type activities The City engaged In several debt transactions during 2011. On August 1 st, the City issued $6,565,000 in Internal Improvement bonds. The bulk of the proceeds ($3,765,836) were used to finance an industrial fire protection system located at the Salina Airport Industrial Center. The balance of the proceeds were used to finance several residential SUbdiVISions Also on August 1 s", the City issued $3,400.000 In temporary notes to finance public facilities to serve a commercia! subdivision development. These note will be refinanced Into a long term bond issue in August. 2012 Additional Information on the CitY'S debt can be found In Note 4. E. of the notes to the basic finanCial statements. Requests for information ThiS financial report IS intended to give the reader a general overview of the City's finances. Questions about information in this report or requests for additional information should be directed to the Director of Finance, Room 206,300 West Ash Street, Salina, Kansas, 67401. BASIC FINANCIAL STATEMENTS ASSETS Current assets: Cash and Investments CITY OF SALINA, KANSAS STATEMENT OF NET ASSETS December 31,2011 Receivables (net of allowance for uncollectibles) Accounts Taxes Interest Inventory Deferred charges Total current assets Noncurrent assets' Capital assets, nondepreciable Construction in progress Land Capital assets, depreciable Less. Accumulated depreCiation Total noncurrent assets Total assets liabilities: Current liabilities. Accounts payable Retalnage payable Accrued liabilities Matured bond prinCipal and Interest Accrued Interest payable DepOSits payable Unearned revenue Current portion of compensated absences Current portion of temporary notes payable Current portion of revenue bonos payable Current portion of general obligation bonds payable Total current liabilities Noncurrent liabilities. Accrued liabilities Compensated absences Net OPES obligation Revenue bonds payable General obligation bonds payable Landfill post-closure care liabilities Total noncurrent lJabilitles Total liabilities Net Assets Invested In capital assets, net of related debt Restricted fo:- Permanent funds: Expendable Debt service Unrestncted Total net assets Total Total Governmental Business-type Activities Activities $ 17,475.299 $ 28,047,281 1,122,221 1,396,659 10,848,090 35,877 16 205,410 571,702 458,315 375,179 30 145,212 30.390,837 32,554,357 11,062,055 22.477.191 1.541,002 196,166,753 101,308,419 86,683.788 46.272,729 164.514.513 67.638.747 $ 194,659.725 $ 98029,584 $ 788.731 $ 294.449 468.309 608.219 563.720 5.145 512.680 211.291 163,904 10.315,524 581.694 122,301 3,400,000 343.696 5.051,038 1.200.048 21.686.841 2.943.908 149.245 2,507,440 527,190 2.807.425 334,458 15850.229 50.174.632 6.017.859 2,042.254 55,638.742 24.771 990 $ 77.325,583 $ 27.715,898 $ 109,288,843 $ 44,226,915 426,741 1.285.130 1.553.016 6,333,428 24,533.755 $117.334,142 $ 70,313.686 The notes to the baSIC financial statements are an Integral part of thiS statement. 14 Total Primary Government $ 45,522,580 2,518,880 10,848,090 35.893 777,112 833.494 60.536,049 43.616,412 24,018,193 297,475,172 132,956.517 232,153.260 $ 292.689.309 $ 1 083 180 1.076,528 563720 5145 723.971 163,904 10,315524 703,995 3,400.000 343.696 6,251.086 24.630.749 149.245 3034.630 3.141.883 15.850.229 56192491 2,042.254 80410,732 $ 105.041.481 $ 153,515.758 426.741 2,838,146 30.867183 $ 187.647.828 Governmental activities: General government Public safety Public works Public health and sanitation Culture and recreation Plannmg and development Interest on long-term debt Total governmental activIties Business-type activities: Solid Waste Disposal Water and Sewer Sanitation Golf Course Total business-type activities Total primary government CITY OF SALINA, KANSAS STATEMENT OF ACTIVITIES For the Year Ended December 31, 2011 Program Revenues EX!2enses $ 13,614,508 18,579,041 9,858,199 1,367,825 6,693,341 3,450,078 1,650,426 55,213,418 2,944,765 13,596,918 2,261,462 825,057 19,628.202 Charges for $ Services 6,106,067 3,766,156 261,707 42,729 3,140,025 153,675 13.470,359 2,904,371 17,904,056 2,334,119 636,202 23.778,748 Operating Capital Grants and Grants and Contributions Contnbutlons $ 359,148 $ 631,417 1,368,577 153,566 177,048 217,643 2,907,399 201,700 3,803,565 201,700 3,803,565 $ 74,841,620 $37.249107 $ 3109,099 $ 3,803,565 General Revenues: Property taxes levied for General purposes Debt service Motor vehicle tax General purposes Sales tax General purposes Selective purposes Other taxes General purposes Investment revenues Miscellaneous Transfers net Subtotal general revenues Change In net assets Net assets -beginning Prior penod adjustment Net assets -beginning, restated Net assets -ending Net [ExpensesJ Revenue and Changes -In Net Assets Total Total lotal Governmental Business-type Primary Activities Activities Government $ [7,149,293J $ $ [7,149,293J [14,181,468] [14,181,468J [8,227,915J [8,227,915J [1,171,530] [1,171,530J [3.376,268J [3,376,268J [3,078.760J [3,078,760] [1 650426] [1,650,426] [38.835.660J [38,835,660J [40,394] [40,394J 8,312,403 8,312,403 72,657 72.657 [188.855J r188.855J 8155.811 8,155.811 r38.835660J 8155,811 [30,679.849J 7.782,768 7,782,768 2.778,845 2,778,845 1149641 1,149.641 11,767,400 11,767400 4,080,342 4.080,342 6,389,878 6,389,878 77.095 83.399 160,494 871.904 330.351 1.202.255 2,361.593 [2.162.772J 198.821 37.259.466 [1.749.022J 35.510,444 [1.576.194) 6,406.789 4.830.595 117.797.911 63937619 181.735530 1,112.425 [30.722] 1,081,703 118.910,336 63.906.897 182,817.233 $ 117,334.142 $ 70,313,686 $ 187.647.828 The notes to the basic financial statements are an Integral part of thiS statement 15 CITY OF SALINA, KANSAS BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2011 Flood & Tourism Drainage and Special General Improvement Convention Gas ASSETS Cash and investments $ 3,153,960 $ 907 $ 2,202 $ 1,195,840 Receivables (net) Accounts 677,815 338,271 Taxes 8,094,093 312,648 Interest 35,877 Inventory 89.716 Due from other funds 9,375 Cash with fiscal agent Total assets $ 12,060,836 $ 907 $ 340,473 $ 1.508.488 LIABILITIES AND FUND BALANCE Liabilities Accounts payable $ 301.319 $ -$ -$ 46,356 Retainage payable 44.389 Deferred revenue 7,923.279 Due to other funds Matured principal and Interest Temporary notes payable Total liabilities 8224.598 90.745 Fund balance' hJonspendabls 8971E:: Restricted 340473 1.094.72C' Committed ASSigned 292.816 907 323.023 Unassigned 3453706 Total fund baiances 3.836.238 907 340.473 1.417.743 Total iiabJiltles and fund balance ~ '" 1.2.060.836 5) 9(17 v. $ 340.473 $ 1,508,488 Bicentennial Center $ 117,993 54,966 $ 172,959 30.078 30.078 142.881 142.881 $ 172.959 Other Total Sales Tax Debt Capital Governmental Governmental Capital Service Projects Funds Funds $ 1,397,571 $ 1,236,026 $ 4,503,053 $ 2,773,395 $ 14,380,947 51.169 1,122.221 2,441,349 10,848,090 35,877 89,716 9,375 5,145 5,145 $ 1,397,571 $ 3,682,520 $ 4,503.053 $ 2,824.564 $ 26.491.371 $ - $ -$ 288.281 $ 22,643 $ 688,677 423.920 468.309 2.392,245 10.315.524 9,375 9,375 5,145 5.145 3,400.000 3,400,000 2,397,390 4,112,201 32.018 14,887.030 89.716 i ,285.130 891,254 3.611,577 610,134 [2.4 77 ,564] 1,851.292 126.743 787,437 2,868,416 50.000 4.322,599 3,453,706 1,397.571 1,285,130 390.852 2,792.546 11,604.341 $ '! .397.571 $ 3.682,520 $ 4,503,053 $ 2,824.564 $ 26.491.371 The notes to the basic financial statements are an integral part of this statement. 16 CITY OF SALINA, KANSAS RECONCILIATION OF THE TOTAL GOVERNMENTAL FUND BALANCE TO NET ASSETS OF GOVERNMENTAL ACTIVITIES December 31,2011 Total Governmental Fund Balances Amounts reported for governmental activities in the statement of net assets are different because Bond Issuance costs are shown as current year expenditures In the funds. Bond issuance costs Capital assets used In governmental activities are not financial resources and therefore are not reported in the funds The cost of capital assets IS Accumulated depreciation IS An Internal service fund is used by the City's management to charge the costs of the worker's compensation program. The assets and liabilities of the internal service fund are Included with governmental activities The following liabilities. Including bonds payable. are not due and payable in the current period and therefore al-e not reported as liabilities in the funds These liabilities at year end consist of Compensated absences Net OPEB obligation Bonds payable Accrued Interest on the bonds Net Assets of Governmental Activities 250,331,663 85,844,940 2,996,810 2,807,425 55.225,670 512,680 The notes to the basic financial statements are an integral part of this statement. 17 $ 11,604,341 458,315 164,486,723 2,327,348 [61,542,585] $ 117,334.142 CITY OF SALINA, KANSAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS For the Year Ended December 31,2011 Flood & Tourism Drainage and Special General ImQrovement Convention Gas REVENUES, Taxes Real estate taxes $ 7,564,508 $ -$ -$ Delinquent taxes 212,244 6,016 Motor vehicle taxes 894,671 General sales taxes 11,767,400 Selective sales taxes Other taxes 5,083,919 1,305,959 Intergovernmental 813,185 1,362,327 SpeCial assessments Licenses and permits Charges for services 7,822,307 Investment revenue 28,972 143 3,718 Reimbursements Miscellaneous 501.260 11,550 Total revenues 34,688,466 17,566 1,306,102 1,366,045 EXPENDITURES Current General government 3,461,488 PubliC safety 18,117,827 Puollc works 6,132,020 9,784 427,429 PubliC health and sanitation 1 176 082 Culture and recreatlOI' 2,734,957 Planning and development 2319,300 736,386 Miscellaneous Capital outlay 555,048 196,308 1,183,678 Debt service Principal retirement Interest and other charges Total expenditures 34496,722 206,092 736,386 1,611,107 Excess [defiCiency] of revenue and other sources over [underJ expenditures and other [uses; 19~ 744 1188,5261 569716 [245,062; OTHER FINANCING SOURCES [USES] Issuance of bonds Bond premium Transfeis In 868838 907 18000C: Transfers [outJ [997,949J f5964401 [1,8361 Total other finanCing sources [uses] [129,111] 907 f596,a.40} 178,16t. r~et change In fund balance 62,633 1187,619J [26,724] f66.898] Fund balance -Beginning of year 3617,181 188,526 367,197 1,484,641 Reslatement of prior year fund balance 156.424 FUND BALANCE -Beginning of year. as restated 3.773,605 188.526 367,197 1.484.641 Fund balance -End of year $ 3,836,238 $ 907 $ 340,473 $ 1,417 743 Other Total Bicentennial Sales Tax Debt Capital Governmental Governmental Center Capital Service Prolects Funds Funds $ -$ -$ 2,723,262 $ $ -$ 10,287,770 55,583 273,843 254,970 1,149,641 11,767,400 3,763,045 317,297 4,080,342 6,389,878 725,637 2,901,149 1,535,487 1,535,487 6,250 6,250 783,028 1,125,022 9,730,357 193 5,683 13,686 9.634 6,620 68,649 32,000 32,000 692 12.983 72,293 598,778 783.913 3.768,728 4,595,971 41,634 2,253.119 48,821,544 3,461,488 18,117,827 6,569,233 153,730 1,329,812 1,548.901 1.616,170 5,900,028 288,275 3,343,961 35 35 11,028 1,032,526 6.338,741 529,401 9,846,730 4,276,195 135.000 4,411,195 '[ ,771,581 151.055 161,744 2,084,380 1.559.929 1.032.526 6.047.776 6489.796 2.884.355 55.064,689 [776016J 2736,202 [1,451,805J [6,448,162J [631,236J [6.243,145J 6,565,000 6,565,000 22,985 22,985 872.849 8.558 2,225,565 3.289,564 547.389 7,993.670 [3.501,556J [83,488J [405,549J [105,259) [5.692,077) 872.849 [3,492. 998J 2,165,062 9,449.015 442,130 8,889,578 96.833 [756.7961 713,257 3,000,853 [189,106) 2,646,433 46,048 2,154.367 571,873 [2,610,001J 2,981,652 8,801,484 156,424 46,048 2,154,367 571,873 [2,610,0011 2,981,652 8,957,908 $ 142,881 $ 1,397,571 $ 1,285,130 $ 390,852 $ 2,792,546 $ 11,604,341 The notes to the basic financial statements are an integral part of this statement. 18 CITY OF SALINA, KANSAS RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE WITH THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES For the Year Ended December 31,2011 Total Net Change In Fund Balances -Governmental Funds Amounts reported for governmental activities in the statement of activities are different because Capital outlays to purchase or build assets are reported in governmental funds as expenditures. However, for governmental activities those costs are shown in the statement of net assets and allocated over their estimated useful lives as annual depreciation expenses in the statement of activities. This IS the amount by which capital outlays exceeds depreciation In the period. Gain on sale of assets Proceeds from sale of assets Capital outlays Depreciation expense Interest on long-term debt in the statement of activities differs from the amount reported In the governmental funds because Interest is recorded as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, however, Interest expense IS recognized as the interest accrues, regardless of when it IS due. ThiS IS the amount by which interest decreased. An internal service fund is used by the city's management to charge the costs of certain activities to the individual funds. The revenues and expenses of certain Internal service fund is reported with governmental activities Some expenses reported in the statement of activities, such as compensated absences and other post employment benefits, do not require the use of current financial resources and therefore are not reported as expenditures In governmental funds. Bond and temporary note proceeds are other financing sources In the governmental funas, but they increase long-term liabilities In the statement of net assets and do not affect the statement of activities. Aiso, 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. Repayment of bond principal and bond issuance costs is an expenditure in the governmental funds, but it reduces long-term liabilities in the statement of net assets and does not affect the statement of activities. Changes In Net Assets of Governmental Activities [77,143) [10,070] 2,254,765 [4,725,361J The notes to the basic financial statements are an integra! part of this statement. 19 $ 2,646,433 [2,557,809] 314,150 584.822 [523,988] [6,570.801 J 4.530.999 $ [1,576, 194J CITY OF SALINA KANSAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31, 2011 Business-Type Activities Emerprlse Funds Solid Waste Water and ASSETS Disposal Sewer Sanitation Golf Cours8 Current assets Casn and Investments $ 3.379.526 $ 24.042117 $ 621.683 $ 3,955 Receivables (net of allowance for uncoliectlbles) Accounts 231,123 1,026,364 139,172 Interest 16 Inventory and prepaid supplies 544,052 27,650 Deferred charges 375.179 Total current assets 3,610.665 25.987712 760855 31.605 Capital assets Nondepreciable capita! assets Construction In progress 1'j .062,055 Land 682.000 844,002 15,000 Depreciable capital assets Capital assets 8.278,501 90480,372 1.557.447 992.099 Less accumulaled depreCiation 5465856 39.202,619 911 117 693.137 Total capital asselS 3.494.645 63183810 646330 313,962 Total assets $ 7105,310 $ 89171 522 $ 1 407 185 $ 345,567 liaDilltles Current liabilities Accounts payable $ 22192 262.444 S 6,859 S 2 95~ Retalnage payable 608219 Imerest payable 851.1 202777 MeIer depOSits payable 163,904 Current portion of compensated aDsences pavable 11215 68.382 22203 20 50~, Current portion of accrued claims payable Current portion of general obligation bonos payaole 486,302 713,746 Current portion of revenue bonds payable 343696 Total current liabilities 528223 2,363168 29,062 23455 Noncurrent liabilities Compensated absences payable 48.3.10 294.765 95709 88,376 Accrued ::Ialms pavable Net OPES Obligation 43944 209,872 59830 2C 81L Payable from restncted assets Genera' obligation bonds pavabls 73280c 5285053 Revenue bonds payabls 15,850,228 Landfill post-closure care liabilities 2042254 Total noncurrent liabilities 2,867344 ~1.63S.S: S 1 r::;,~ ='::!c ,-,,-,,J ....... ,-, 1:J9,1SS ., ala! liabdilies ~::; 395 567 S>:::4 00:'-08-: ,. 18460: 5 i JL c,4~ I~et Assets Invesled In capital assets. net of related oe:::>1 $ 2,275,537 $ 40 9WI.086 < 646,330 S, 313962 '" Restricted Restncted for bono rettrement ~ ,55301£ Unrestricted 1,434.206 22624,333 576.254 [1WI,038j lOla! r'let assets $ 3 709,743 $ 65.168 435 $1.222,584 $ 212924 The notes to the baSIC financial statements are an Integral part of thiS statement 20 Total Internal Enterprise Servlc8 Funds Funds $ 28,047,281 $ 3,089,207 1 396,659 16 571,702 115,694 375.179 30.390.837 3.204.901 11.062.055 1.541002 101,308419 866.636 46272,729 838,848 67638747 27790 $ 98,029,584 $ 3,232.691 S 294449 S 100 054 608.219 211.291 163,904 122301 17384 563720 1.200048 343.696 2.943,908 681 158 527.190 7.1,940 149 24~ 334458 6,017.e5S 15850,229 2,042254 24.77~ ,99:1 ,-".-,,\ ~ oc LL .... i,-,,-, :i 2~ 71j 8S0 "-9:;5,;;~:, S, .i4.226 915 ;], 27790 "I 553.0-; c 24533,755 2.299 558 ;;; 70,313,686 $ 2327 348 CITY OF SALINA, KANSAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIET ARY FUNDS For the Year Ended December 31,2011 Business-Type Activities. Enter[!rlse Funds Total Solid Waste Water and Enterprise Diseosal Sewer Sanitation Golf Course Funds Operating revenues Charges for services $ 2.904.371 $ 17,904,056 $ 2,334,119 $ 636,202 $ 23.778,748 Federal grants 201,700 Miscellaneous 24,491 255,256 424 50,180 Total operating revenues 2,928,862 18,361.012 2,334.543 686.382 Operating expenses Genera! government Public works 2,088,843 11.205.114 2 1170,663 Recreation 791.488 Depreciation 740.047 1,758,777 120,799 33.569 Total operating expenses 2.828.890 12.963.891 2.291.462 825,057 Operating Income [loss} 99972 5.397,121 43081 [138,675) Nonoperating revenues [expenses} Investment revenue 9.072 72452 1.839 36 Debt service [115.875} [632,390} Gam/floss} on disposal of fixed assets 2.550 30000 Accretion of bond premium 7.864 Amortization of bond Issuance costs [11,0511 Tota! nonoperating revenues [expenses} [106.803} [560575) 31.839 36 Income [loss} before transfers 16.831] 4.836.546 74.920 [138.639} Transfers from [to} other funds Transfers In 47.228 Transfers [out} [180.000J [2.030,000) Total transfer~ [180000J [2.030.000J 47.228 Capital contributlon~ 3.803.565 Cnange In net assets [1868311 661011 'I 7~ 920 19141 1] Net assets January 1 3895812 58578.036 1 159149 304 ,622 Restatement 762 [19712J [11 485J [287J l\jet assets, Januarv 1 restated 3896.574 58558.324 1 147664 304.335 Net assets. December 31 $3709743 5> 65,168.435 $ 1.222.584 S 212.924 The notes to the basic financial statements are an Integral part of thiS statement 21 201,700 330.351 24.310.799 15.464,620 791.488 2.653,192 18.909.300 5.401,499 83.399 [748.265} 32550 7.864 111.051) [635.503) 4.765.996 47.228 [2.210,000) [2162.7721 3803565 6406.789 63.93761 P 130.722j 63906.897 S 70.313686 Internal Service Funds $ 9,881.156 251,196 10.132,352 9.611,278 4,698 9,615.976 516,376 8446 1 129 9.575 525951 60.000 6000C 585.95'1 1737815 3.58? 1.741,397 S 2.327.348 CITY OF SALlI~A, KANSAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31.2011 Business-Type Activities Enter[!nse Funds Solid Waste Water and Dls[!osal Sewer Samtation Golf Course Cash flows from operating activities Cash received from customers and users $ 2,948,382 $ 17.850,055 $ 2,332,281 $ 636,201 Cash paid to suppliers of goods or services [1.722,492] [7,552,182] [1.616.344] [391,100J Cash paid to employees [454426] [2,945,574] [696.074] [386,401J Other operating receipts 24491 456,956 424 50.180 Net cash provided by [used InJ operating activities 795.955 7,809.255 20.287 [91,120) Cash flows from capital and related financing activities Purchase and construction of capital assets [23.446] [11.886,827J [139,452] Capital contributions 3,803,565 Debt Issuance costs Incurred [315,426J Proceeds from sale of capital assets 2,550 30.000 Pnnclpal payments -general obligation bonos [697,396] [691,410J Pnnclpal payments -revenue bonds [1,580.000J Proceeds from Issuance of revenue bonds 16,193,925 Interest paid [136908) 1496.7601 Net cash provided by [used InJ capital and related financing actiVities [857.750] 5.029,617 1109452] Cash flows from Investing activities Interest received 9.072 72.453 1839 37 Cash flows froIT' no~capltal financing actiVities Transfers Iri 47.228 Transfers [out] 1180.000] [2030.000) Net cash orovlded by [used m} noncaoltal financing actiVities 1180.0001 12030.000) 47.228 Net Increase [decrease] In casn and cash eqUivalents [232723J 10881.325 [87.326J [43,855) Cash and cash eqUivalents Cash ana cash eqUivalents January 1 3.612.249 13160792 709,009 47.810 December 31 5) 3.379.526 5) 24,042117 :;; 621.683 $ 3.955 The notes to the baSIC finanCial statements are an Integral part of thiS statement 22 Total Internal Enterprise Service Funds Funds $ 23.766,919 $ 9.786.038 [11.282118J [8,955,819J [4.482,475] [631,488J 532,051 251,196 8,534.377 449.927 [12.049,725J 3,803.565 [315,426J 32,550 1,129 [1,388,806] [1,580.000J 16,193,925 [633.668) 4.062,415 1 129 83401 8445 47.228 60000 [2.210.0001 12,162772J 60000 10517421 519501 17.529.860 2.569.706 $ 28.047.281 5) 3.089,207 CITY OF SALINA, KANSAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS (Continued) For the Year Ended December 31,2011 BUSiness-Type Activities Enterprise Funds Total Internal ReconCiliation of operating [loss) Income to net cash provided by [used in) operating activities Solid Waste Water and Enterpnse Disposal Sewer Sanitation Golf Course Funds Service Funds Operating Income [loss) $ 99,972 $ 5,397,121 $ 43,081 $ [138,675J $ 5.401.499 $ 516,376 Adjustments to reconcile operating Income [loss) to net cash provided by [used In) operating activities Depreciation expense [Increase) decrease In accounts receivable [Increase] decrease In Inventory Increase [decrease] In accounts payable Increase [decrease) In retalnage payable Increase [decrease) In accrued compensated absences Increase [decrease) In claims payable Increase [decrease) In landfill postclosure liabilities Increase [decrease) In net OBEB obligation Increase [decrease) In meter depOSits payable Net cash proVided by [used In) operating activities 5; 740,047 44,011 [218,286] [12979) [342) 133.066 10.466 795 955 $ 1,758.777 120.799 33,569 [79.017] [1.836) 31.950 [9,113} 35,620 [120.339] [1,394J 591,610 [1,806) [35.666) 19,536 49.984 14.250 4.957 25.016 7.809,255 $ 20.287 $ [91 120J The notes to the baSIC finanCial statements are an Integral part of thiS statement 23 2.653,192 4,698 [36.844) 22.837 6.646 [304,399] 1Ll ,032 578.631 [18,278) 3.294 [95,119J 133.066 79,657 25.016 $ 8.534.377 $ 449927 ASSETS CITY OF SALINA, KANSAS STATEMENT OF ASSETS AND LIABILITIES AGENCY FUNDS December 31, 2011 Cash and investments Total assets LIABILITIES AND FUND BALANCES Liabilities Accounts payable Total liabilities The notes to the basic financial statements are an integral part of this statement. 24 $ 313.300 $ 313,300 $ 313.300 $ 313,300 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Salina, Kansas (the City) is a municipal corporation governed by a mayor and a five-member commission. These financial statements present only the primary government of the City. Its component units, entities for which the government is considered to be financially accountable, are not presented within these financial statements. Component Units That Are Not Presented City of Salina Airport Authority -The Salina Airport Authority was created for the purpose of accepting as surplus property portions of the former Schilling A.F.B that was closed by the United States Department of Defense in June 1965. One of the primary functions of the Airport Authority IS to facilitate the continued growth of jobs and payroll at the Airport Industrial Center. The Airport Authority is managed and controlled by a five-member Board of Directors appointed by the Salina City Commission. Any director may be removed by a majority vote of the Salina City Commission. The Airport Authority's basic mill levy (up to 3 mills) requires the approval of the City Commission. The Commission must also approve the Issuance of general obligation debt by the Airport Authority The Airport Authority has a December 31 fiscal year end. Housing Authority of the City of Salina -The purpose of the Housing Authority of the City of Salina (Housing Authority) IS to administer Public Housing Programs authorized by the United States Housing Act of 1937. The Mayor of the City of Salina appoints the governmg board. The City Commission may remove commissioners of the Housing Authority. The City must Issue revenue bonds for the Housing Authority The financial liability of the Housing Autnonty IS essentially supported by the operating and debt service subsidies received under contract from the Federal government The Housing AuthOrity has a June 30 fiscal year end Information in the accompanying financial statements covers the fiscal year ended June 30, 2011. Complete financial statements for each of the Individual component Units may be obtained at the entity's administrative offices Salina Airport Authority 3237 Arnold Ave. Salina. KS Joint Ventures That Are Not Presented Housing Authority of the City of Salina 469 S. 5th Salina, KS The City of Salina aiso participates with Saiine County In two Joint ventures, for which financial information IS not presented The Salina-SalIne County Board of Health was organized by the City and County to promote PUblic health. The City and County organized the Salina County-City Building Authority to acquire, operate and maintain facilities for the administrative offices of both governments. The pnmary governments each have an ongoing financial responsibility for the JOint ventures. Separate financial statements are available from the governing boards of each jomt venture Complete financial statements for each of the joint ventures may be obtained at the entity's administrative offices. Salina-Saline County Board of Health 125 West Elm Street Salina, KS 25 Salina County-City Building Authority 300 West Ash Street Salina, KS CITY OF SALINA. KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Government-wide and fund financial statements The statement of net assets and the statement of activities report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Exceptions to this general rule are charges between the City's governmental and business-type activities. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government IS reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are specifically associated with a service, program or department and therefore clearly identifiable to a particular function. Program revenues Include charges paid by the recipient of the goods or services offered by the program and grants and contributions that are restricted to meeting the operational requirements of a particular program. Taxes and other items. which are not classified as program revenues, are presented as general revenues of the city. Separate 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 funds are reported as separate columns in the fund financial statements. Nonmajor funds are aggregated and presented in a single column In the fund financial statements. C Measurement Focus, Basis of Accounting and BaSIS of Presentation The government-wide financial statements are reported uSing the economic resources measurement focus and the accrual baSIS of accounting, as are the proprietary fund. 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 for which they are leVied. Grants and similar items are recognized as revenue as soon as all eligibility requirements Imposed by the proVider have been met. Governmental fund financial statements are reported uSing the current financial resources measurement focus and the modified accrual basis of accounting Revenues are recognized as soon as they are both _ measurable and available. 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 Cit)! considers revenues to be available if they are collected within 60 days of the end of the current fiscal period Expenditures generally are recorded when a liability IS incurred, as under accrual accounting However, debt service expenditures, as well as expenditures related to certain compensated absences and claims and judgments are recognized when the obligations are expected to be liquidated with expendable available financial resources. 26 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting and Basis of Presentation (Continued) Property taxes and Interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met. The City applies all applicable Governmental Accounting Standards Board (GASB) pronouncements as well as the following pronouncements issued on or before November 30. 1989. unless those pronouncements conflict with or contradict GASB pronouncements: FASB Statements and Interpretations, APB Opinions. and ARBs. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total assets Proprietary funds distinguish operating revenues and expenses from nonoperating items Operating revenues and expenses generally result from providing goods and services in connection with a proprietary fund's ongoing operations The pnnclpal operating revenues of the Clty's proprietary funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds Include the cost of sales and services. administrative expenses, and depreciation on capital assets All revenue and expenses not meeting thiS definition are reported as nonoperating revenues and expenses. The Internal service funds account for risk management. worker's compensation, health Insurance, central garage and information services that are provided to other departments or agencies of the government. or to other governments. on a cost-reimbursement basIs. Agency funds are custodial in nature and do not measure results of operations or have a measurement focus Agency funds do however use the accrual basis of accounting. Agency funds are used to account for assets held as an agent for indiViduals. other governmental units, private organizations and/or other funds The City reports the follOWing major governmental funds: General fund -To account for resources traditionally associated with government. which are not required legaliy. or by sound financial management to be accounted for In another fund Flood and drainage Improvement fund -To account for property tax revenues to be used for capital Improvements to the flood control and stormwater drainage systems. TOUrism ana convention fund -To account for transient guest tax revenues, which are specificallY restnCteo to promotion and tourism actlvltfes Special gas fund -To account for the City's Share ot motor fuel tax revenues which are legally restricted to the maintenance or Improvement of streets Within the City Bicentennial Center fund -To account for the activities of the City's convention center. Sales tax capital fund -To account for 87.5% of the 1/4 cent sales tax deSignated for capital, debt. and human services purposes. Debt service fund -To account for the accumulation of resources and payment of general obligation bond principal and interest from governmental resources and special assessment bond principal and interest from special assessment leVies when the City is obligated In some manner for the payment. 27 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note '1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus. BasIs of Accounting and BasIs of Presentation (Continued) Capital projects fund -To account for the acquisition and construction of major capital facilities other than those financed by proprietary funds and trust funds The City reports the following major proprietary funds: Sanitation fund -To account for the operations of the City's refuse collection service. Solid waste disposal fund -To account for the activities of the City's landfill. Golf course fund -To account for the operations of the muniCipal golf course. Water and sewer fund -To account for the activities of the City's water and sewer operations. D Assets, Liabilities, Fund Balance, and Net Assets 1 Pooled cash and investments The City maintains a cash and Investment pool that IS available for use by all funds managed by the city. Each fund type's portion of this pool is displayed In the finanCial statements as "Cash and Investments' The city s cash and cash equivalents are considered to be cash on hand. demand deposits and short-term Investments with original matuntles of three months or less from the date of acquisition. Investments In the Kansas MUnicipal Pool are carned at fair value Cash balances from all funds are Invested to the extent available In certificates of deposit and other authorized Investments Investments with maturity dates greater than three months are stated separately Earnings from these investments. unless specifically designated, are allocated monthly to the investing fund based on the percentage of funds invested to total Investments. All Investments are carried at fair value. 2. Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the year are referred to as either "Interfund recelvables/payables" (i.e., the current portion of Interfund loans) or "advances to/from other funds" (i.e .. the non-current portion of interfund loans). Ali other outstanding balances between funds are reponed a<, "due to/from other funds." Accounrs Receivable. The City records revenues when services are prOVided Ali receivables are shown net of an allowance for doubtful accounts. Property taxes receivable. Coliectlon of current year property tax by the County Treasurer IS not completed, apoortioned or distributed to the vanous subdivisions until the succeeding year, such procedure being In conformity with governing state statutes Consequently, current year property taxes receivable are not available as a resource that can be used to finance the current year operations of the City and, therefore, are not susceptible to accrual. Accruals of uncollected current year property taxes are offset by deferred revenue and are identical to the adopted budget for 2012. It is not practicable to apportion delinquent taxes held by the County Treasurer at the end of the accounting period, and further, the amounts thereof are not material in relationship to the finanCial statements taken as a whole. 28 CITY OF SALINA KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, liabilities and Equity (Continued) 2. Receivables and Payables (Continued) The determination of assessed valuations and the collection of property taxes for all political subdivisions in the State of Kansas are the responsibility of the various counties. The County Appraiser annually determines assessed valuations on January 1 and the County Clerk spreads the annual assessment on the tax rolls. The County Treasurer is the tax collection agent for all taxing entities within the -County. In accordance with state statutes, property taxes levied during the current year are a revenue source to be used to finance the budget of the ensuing year. Property taxes are levied and liens against property are placed on November 1 of the year prior to the fiscal year for which they are budgeted. Payments are due November 1. becoming delinquent, with penalty, December 21. Payments of 50% are accepted through December 20, with the second 50% then being due on or before May 10 of the following year. ThiS procedure eliminates the need to issue tax anticipation notes since funds will be on hand prior to the beginning of each fiscal year. The City Treasurer draws down all available funds from the County Treasurer's office In two-month intervals Taxes remaining due and unpaid at February 15 and July 1 are subject to collection procedures prescribed in state statutes 3 InventOries and Prepaid Items Inventories are valued at cost uSing the first-ln/first-out (FIFO) method The costs of governmental fund-type inventones are recorded as expenditures when consumed Certain payments to vendors reflect costs applicable to future accounting penods and are recorded as prepaid items. 4. Capital Assets Capital assets. which include property, plant, equipment and Infrastructure assets, are reported In the applicable governmental or bUSiness-type actiVities columns In the government-wide financial statements Capital assets are defined by the government as assets with an Initial. Individual cost of more than $5.00C and an estimated useful life In excess of two years Such assets are recorded at hlstoncal cost or estimated historical cost if purchased or constructed Donated capital assets are recorded at estimated fair market value at the date of donation Capital assets used In governmental fund types of the City are recorded at COS1 or estimated historical cost if purchased or constructed. Donated capital assets are recorded at their estimated fair vaiue at the date of aonation The cost of normal maintenance and repairs that dO no', add to the vaiue of the assets 0: matenally exter-n::. assets lives are not capitalized Major outlays for capital assets and Improvements are capitalized as prOjects are constructed interest incurred during the construction phase of capltai assets of bUSiness-type is included in the capitalized value of the asset constructed net of Interest earned on the Invested proceeds over the same period Property, piant and equipment of the pnmary government, are depreciated using the straight-ilne method over the following estimated useful lives. Assets Buildings Other equipment Vehicles infrastructure 29 Years 50 5 -15 6 -10 30 -50 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, Fund Balance, and Net Assets (Continued) 5. Compensated Absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. All employees of the City, except temporary and part time employees, may accumulate sick leave at a rate of 8 or 11 hours per month depending on their work duty schedule. There is no limit on the amount of sick leave that can be accumulated. Employees with more than five years of service with the City are paid for one-third of their accumulated sick leave at their current wage scale upon termination of employment in good standing. In 2001, a limited buy back policy was instituted. Ali regular employees are entitled to paid vacation time. Such leave is granted each year of employment. Employees must use 50% of leave accrued each calendar year and an employee's maximum accrued vacation leave balance cannot exceed 250 hours (or 350 hours for employees working 24 hour shifts). Employees are paid for all accumulated vacation leave at their current wage scale upon termination of employment. Vested or accumulated vacation leave that is expected to be liqUidated with expendable available financial resources IS reported as an expenditure and a fund liability in the government fund financial statements that will pay it A liability for these amounts is reported In governmental funds only if they have matured, for example, as a result of employee reSignations and retirements Vested or accumulated vacation leave of the bUSiness-type funds and government Wide financial statements are recorded as an expense and liability of those funds as the benefits accrue to employees A liability IS recorded for accumulated rights to receive sick pay benefits that are payable upon termination of employment The General Fund, Bicentennial Center Fund. Central Garage Fund. Information Systems Fund, Sanitation Fund, Solid Waste Fund, Golf Course Fund, and Water and Sewer Fund have been used in prior years to liqUidate the liability for compensated absences. 6 Temporarv Notes Upon authorization for the issuance of general obligation bonds for certain improvements, Kansas law permits the temporary finanCing of such improvements by the Issuance of temporary notes. Temporary notes issued may not exceed the aggregate amount of bonds authOrized, are interest bearing and have a maturity date not later than four years from the date of issuance of such temporary notes Temporary notes outstanding are retired from the proceeds of the sale of general obligation bonds. 7 Long-term Obllaatlons In tne government-wide financial statements. and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities business-type activities, or proprietary fund type statement of net assets Bond premiums and discounts, as well as issuance costs. are deferred and amortized over the life of the bonds uSing the effective 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 premiums and discounts, as well as 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. 30 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, Fund Balance, and Net Assets (Continued) 8. Fund Balances In the fund financial statements, governmental funds report fund balance in the following classifications: nonspendable, restricted, committed, assigned and unassigned. Nonspendable fund balance includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Restricted fund balance indicates that constraints have been placed on the use of resources either by being externally imposed by creditors. grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. Committed fund balances include amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the city commission. Assigned fund balances Include amounts that are constrained by the City management's intent to be used for specific purposes, but are neither restricted nor committed. Unassigned fund balance 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. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available restncted amounts are considered to be spent first. When an expenditure is Incurred for purposes for which committed, assigned, or unassigned fund balance is available, the following is the order in which resources will be expended: committed. assigned and unassigned The following is the detail for fund balance classifications In the financial statements: Ma!or Governmental Funds Flood & TOUrism Other Total Drarnag6 ane SpeCIal Blcentennra: Sales Tay Deb: Caoltal Governmental Governmentai General Improvement Convention Ga~ Center Caprtal Service PrOJects Fund~ FundS Fund Balances Nonspendable for Invenlory 89716 S $ $ :r. 89716 Restricted for PubliC works 1 09472C 1.094720 Public health ana sanitation Culture and recreattor 45.23€ 45.236 Plannmg and development 340472 298015 63848; Debt payments 1.285.130 547.999 1.833129 CommItted for Pubhc safety [7.866; [786E; Culture and recreano[' 14288'. 524.90' 667 782 Planning and aevelopment 6102 6102 Cemetery 421 037 421 037 Capita! Improvements 610 'r3L; [~ 477,564; 907.112 [960.318, ~slgneo far General govern mer:' 18450 1845:; Public worKs 36755 90' 32302:> 360.685 Planning and develooment 11.376 1 ~ 376 Capital Improvement£" 226.235 787437 2868416 50000 3932.08[ Unass!gnec 3452,70E 3453,70f --- --- Total Fund Balances $ 3.836.238 S 907 ~ $1417743 ~ $ 1 397.57', ~ ~ $ 2792.54€ $1'.60434~ 31 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, Fund Balance, and Net Assets (Continued) 9. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 10, Net Assets Net assets represent the difference between assets and liabilities Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net assets are reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the City or through external restnctions Imposed by creditors, grantors or laws or regulations of other governments. Note 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Information Kansas statutes require that an annual operating budget be legally adopted for the general fund, speCial revenue funds (unless specifically exempted by statute), debt service fund, and enterprise funds The statutes provide for the following sequence and timetable in the adoption of the legal annual operating budget. 1 . Preparation of the budget for the succeeding year on or before August 1 2. Publication In local newspaper of the proposed budget and notice of public heanng on the budget on or before August 5 3 Public heanng on or before August 15, but at least ten days after publication of notice of heanng. 4. Adoption of the final budget on or before August 25. Tne statutes allow the governing bOdy to Increase the Originally adopted bUdget for previously unbudgeted increases In revenue othel' than ad valorem property taxes. To do this, a notice of public hearing to amend tne budget must be published In the iocal newspaper At least ten days after pubiication the hearing may be held and the governing body may amend the budget at that time, The 2011 budget was amended for the Flood & Drainage Improvement Fund, Sales Tax Capital Fund, Water and Sewer Fund. Risk Management Fund and Central Garage Fund, 32 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABiliTY (Continued) A. Budgetary Information (Continued) The statutes permit management to transfer budgeted amounts between line items within an individual fund. However, such statutes prohibit expenditures in excess of the total amount of the adopted budget of expenditures of individual funds. Budget comparison statements are presented for each fund showing actual receipts and expenditures compared to legally budgeted receipts and expenditures. All legal annual operating budgets are prepared using the statutory basis of accounting, in which, revenues are recognized when cash is received, and expenditures Include disbursements, accounts payable, and encumbrances. Encumbrances are commitments by the municipality for future payments and are supported by a document evidencing the commitment, such as a purchase order or contract. All unencumbered appropriations (legal budget expenditure authority) lapse at year end. A legal operating budget is not required for capital projects funds, non-major debt service funds, trust funds. and the following special revenue funds: Bicentennial Center Event, HUD Community Development, Community Development Revolving, Heritage Commission, CDBG-ED, HOME V. Special Law Enforcement, Police Grants, DARE Donations, War Memorial Maintenance and Federal Care Grant. A legal operating budget IS not required for the following Enterprise funds: Solid Waste Construction, Water and Sewer Pnncipal and Interest Water and Sewer Bond Reserve, Water and Sewer Construction and Reserve funds. A legal operating budget is also not required for the Internal Service funds. Actual to budget comparisons for these funds that present budgets to the Commissioners are shown strictly for informational purposes. Spending In funds. which are not subject to the legal annual operating budget requirements are controlled by federal regulations. other statutes. or by the use of Internal soending limits established by the governing body. B. Statutory Violations Actual exceeded budgeted expenditures at December 31. 2011 In the Flood & Drainage Improvement Fund and Sales Tax Economic Development Fund, which Violates KSA 79-2935. C Legal Debt Margin The City IS subJ8ct to the municipal finance law of the state of Kansas which limits the bonded debt (exclusive of revenue bonds and speCial assessment bonds) the city may have outstanding to 30 percent of the assessed value of all tangible taxable property Within the city as certified to the county clerk on the proceedmg August 25 At December 31,2011. the statutory limit for the City was $133.379.948. providing a debt margin of 75.990.305 33 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 3. RESTATEMENT OF EQUITY The implementation of GASB 54 required the reclassification of the governmental fund balances. The following is the reclassification of fund balance as of December 31 , 2010. Fund Balance Classification As of December 31. 2010 Unreserved Reserved Total Governmental Fund General Fund $ 3,517,895 $ 99.286 $ 3,617,181 Flood & Drainage Improvement Fund 187.350 1,176 188,526 Tounsm and Convention Fund 367,197 367.197 Special Gas Fund 986,224 498,417 1,484,641 Bicentennial Center Funa 46.048 . 46,048 Sales Tax Capital Fund 1,572,216 582,151 2,154,367 Debt Service Fund 571,873 571,873 Capital Projects Fund [6.654,370) 4,044,369 [2,610,001) Other Governmental Funds 2,365,603 616.049 2.981.652 Total Governmental Funds $ 2.388.163 $ 6413.321 $ 8.801.484 Fund Balance Classification As of December 31 2010 ReclaSSified NonsQendable Restricted Committed Assigned Unassigned Total Governmental Fund General Fund S 87.238 $ $ S 99.286 $ 3430.657 $ 3.617,181 Flood & Drainage Improvement Fund 187350 1.176 188.526 Tounsm and Convention Fund 367.197 367,197 SpeCial Gas Fund 986.224 498417 1484.641 Bicentennial Center Fund 46,048 46,048 Sales Tax Capital Fund 1,572 216 582151 2,154,367 Debt Service Fund 571.873 571.873 Capital Projects Fund [6,654.370J 4.044,369 [2.610,001) Otner Governmental Funds 944.240 2.031.076 6.336 2.981,652 Total Governmental Funds £, 87.238 $ 2,869,534 S, [2,817.680) S; 5.231 735 S; 3430.657 $ 8.801.48~ Following the close of the prevIous fiscal year. It was discovered that several capital assets were mlsciasslfled or recorded incorrectly Additionally. it was discovered that accounts receivable had not been properly recorded Accordingly, the beginning net assets balances were restated, the effects of which are as follows: Net Assets/Fund Balance, December 3'1. 2010 Capital Asset Adjustment Accounts Receivable Adjustment Net Assets/Fund Balance. December 31, 2010 Restated Solid Waste Water and Golf Central Governmental General Disposal Sewer Sanitation CourSE Garage ACtiVities Fund Fund Fund Fund Fund Fund $ 117,797,911 $ 3,617,181 $ 3,895.812 $ 58,578,036 $ 1,159,149 $ 304,622 $ 205.887 956.001 762 [19,712] [11,485] [287J 3,582 156,424 156,42~ $ 118 910.336 $ 3.773.605 $ 3.896.574 $ 58.558,324 5> 1.147664 5> 304.335 5> 209 469 34 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 ~~ote 4. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments The City's cash is considered to be active funds by management and is invested according to KSA 9-1401. The statute requires that banKs eligible to hold active funds have a main or branch bank in the county in which the City is located or in a county adjacent to the City and the banks provide an acceptable rate for active funds. Various City investments are considered to be idle funds by management and are Invested according to KSA 12-1675. The statute requires that the City invest its idle funds in only temporary notes of the City, bank certificates of deposit, repurchase agreements, and if eligible banks do not offer an acceptable rate for the funds: U.S. Treasury bills or notes or the Municipal Investment Pool (KMIP). Maturities of the above investments may not exceed two years by statute. Some of the City's investments are of bond proceeds invested pursuant to KSA 10-131. This statute allows additional investment authority beyond that of KSA 12-1675. Investments of bond proceeds may follow KSA 12-1675 or include other investments such as the KMIP, direct obligations of the U.S. govemment or any agency thereof, investment agreements with a financial institution the obligations of which at the time of investment are rated in either of the three highest rating categories by Moody's Investors service or Standard and Poor's corporation, and various other Investments as specified in KSA 10-131 At December 31,2011, the City has the following investments. Investment Type Kansas Municipal Investment Pool U.S. Government Securities Total fair value Fair Value s; 305,158 22,063739 $ 22.368,897 S&P AAAf/S 1 + N/A The mUnicipal investment pool IS under the oversight of the Pooled Money Investment Board. The board IS comprised of the State Treasurer and four additional members appointed by the State Governor. The board reports annually to the Kansas legislature State pooled mOnies may be Invested in direct obligations of, 01' obligations that are insured as to pnncipal and interest by the U.S. government or any agency thereof, with maturities up to four years No more than 10 percent of those funds may be Invested in mortgage-backed securities In addilion, the State pool may invest in repurchase agreements with Kansas banks or with pnmary government seCUrities dealers. The City's Investment policy provides direction on concentration risk. The City policy states that funds shall be diversified to reduce the extent of losses due to having an unbalanced portfolio In terms of maturities, Instrument type, and Issuers. Therefore, portfoliO matunlies shall be staggered to avoid undue concentration of assets in a speCific maturity sector. Liquidity, free of market risk, shall be assured through practices insuring that the next disbursement date and payroll date are covered through matunng Investments, marketable U.S. Treasury Bills, the Municipal Investment Pool, or money market accounts. Default risk shall be minimized by requiring that all security purchases occur on a delivery vs. payment basis, and that all securities are adequately collateralized. Risk of market price volatility shall be controlled through the adoption of a "buy and hold" strategy Whereby the City holds each investment to maturity, coupled with maintenance of an adequate liquidity position to insure the ability to meet normal anticipated cash flow needs. 35 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) A. Deposits and Investments (Continued) When advantageous, it IS allowable to sell investments to realize a gain due to price fluctuations; however, such transactions shall not be a part of the normal course of business. The City recognizes that investment risks can result from issuer defaults, market price changes or vanous technical complications leading to temporary illiquidity. Portfolio diversification is employed as a way to control risk due to issuer default. In the event of a default by a specific issuer, the Director of Fmance and Administration shall review. and, if appropriate, proceed to liquidate securities haVing comparable credit risks Custodial credit risk !s the risk that In the event of a bank failure, the City's deposits may not be returned to it. The City's deposit policy for custodial credit risk require that the depository banks will maintain 100% security in the form of FDIC coverage and pledged collateral according to KSA 9-1402. B Receivables Receivables as of year end. including the applicable allowances for doubtful accounts, are as follows: Primary Government Receivables Accounts Taxes Interest Gross receivables Less allowance for uncollectlbles Total Primary Government Receivables Accounts Taxes Imeres, Gross recelvaDles Less allowance for uncoliectlbles Tota! General $ 2,889,545 8,094,092 35877 11 019,515 [2.211,730] ;; 8,807785 TOUrism and Special Convention Gas 1 338,271 ;;; 312648 338.271 312.648 ~ 338.2rl $ 312648 Olner Governmental Sanrtatlon 52151 S. 201 973 52,15~, 201 873 [982] r62801] ~ 51,169 $ 139172 36 Bicentennial Debt Center Service Subtotal $ 54966 $ $ 3,282782 2441 349 10,84809C: 35.877 54,966 2,441.349 14,166,749 [2.211 730] S 54966 S 2441.349 $ 11,955.019 Solid Water Waste and Olsposal Sewer TOt3' :i 231 123 S; 148951' S, 5257,540 10.848,090 "Ie 35892, 23', 139 '489511 16141,523 [463147J r2 738660] S 231 138 S 1.026,364 n' 13402.863 '" CITY OF SALINA. KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) C. Interfund Receivables and Payables The composition of interfund balances as of December 31,2011, is as follows: Fund Types Due From General Fund $ 9.375 $ Other Government Funds 9,375 $ 9.375 $ 9.375 The City uses interfund receivables and payabies as needed when pooled cash is negative within a fund until investments mature or grant proceeds are received. All payables are cleared In less than one year. 37 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) D. Capital Assets Capital asset activity for the year ended December 31.2011, was as follows: Balance Adj Bal Balance 12/31/2010 Adlustments 12/31/2Q10 Additions Retirements 12/31/2011 City governmental activities Governmental activities Capital asselS, not being depreciated Construction In progress $ 32.549155 $ 81,670 $ 32,630.825 $ 2945.099 $ 3.021.567 $ 32.554.357 Land 22,477 191 22.477,191 22477.191 Capital assets. being depreciated Infrastructure 144.316.296 144.316.296 1.829,401 146,145697 BUildings and improvements 36.233,800 36,233,800 36.233.800 Vehicles 7480.033 810.889 8.290.922 255.156 216.023 8,330,055 Equipment furntture and fixtures 5.353682 92.755 5.446.437 246676 235.912 5.457201 Total capital assets 248410,157 985,314 249.395471 5,276.332 3.473.502 251198.301 Less accumulated depreciation for Intra structu re 60.603797 [30.296J 60,573.501 2964.133 63.537,634 BUlldln9s and Improvements 12609.132 10.741 12.619.872 1,023,364 13.643.237 Vehicles 5035.374 140529] 4,994 845 513716 174,927 5.333,636 EqUipment. furniture and fixtures 4039705 89.397 4129102 228844 188665 4169.281 Total accumulated depreciation 82.288008 29313 82.317 321 4.730059 363592 86683788 Governmental actiVities capital assets net ~ 166.122.149 956001 $ 167.076.150 $ 546.273 ~ 3109.910 ~ 164.514513 BUSiness-type actlvilles. Capital assets not bemg depreciated Construction m progress $ 1 516.604 $ 1516,604 5; 10,781,482 1.236.031 $ 11 062,055 Land 1.541.002 1.541.002 1.5~1 ,002 Capital assets being depreciated Infrastructure 68957,66E 1193L 68.969.597 2333,997 71 302.59< BUildings and Improvement> 22,587106 2258710(, 22.587,106 Vehicles 2.987740 [4'1.385] 2 946.35~ 139,452 102.647 2983160 ~qulpment furniture and fixtures 4376725 27.010 4403735 3082L 4 434 55? Total capital assets 101 966.842 r2443; 101,964399 13285,75" 1.338,678 113911476 Less accumulated depreCiatIon tor Infrastructure 28.973,286 [:';4,750; 28.938,538 '1.774.866 30,71340, Buildtngs and Improvements 10.241.870 17.027 10,258897 424.276 10683173 Vehicles 2.084.391 9460 2.093.851 179.756 102.647 2170.960 EqUipment, furniture and fixtures 2.394.356 36.542 2430.898 274.29L, 270519L Total accumulated depreCiation 43.693905 28.279 43722184 2653192 102647 46272729 BUSiness-type actiVities capital assets net 5; 58.272937 [30722 1 $ 58.242.215 $ 10632563 $ 1 236.031 So 67638.747 38 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) D. Capital Assets (Continued) The City's depreciation expense was charged to governmental functions as follows' Governmental Activities: E. Long-Term Debt General government Public safety Public works Public health Culture and recreation Planning and development Total depreciation Business-type Activities' Solid Waste Disposal Water and Sewer Sanitalion Golf Course Division Total depreciation $ 8,990 507,826 3,265,341 38,013 803,772 106.117 $ 4.730.059 $ 740,047 1,758,777 120,799 33,569 $ 2,653,192 Following IS a summary of changes In long-term debt for fiscal year 2011 : Balance January 1, 2011 Additions Deletions Governmental activities General obligation bonds $ 53,120,953 $ 6.587,986 $ 4,483,269 Accrued compensation 3,230.482 440,340 581,694 Temporary notes 2,500.000 3400000 2.500.000 Total $ 58,851.441 $ 10428.326 $ 7564.963 BUSiness-type actiVities General Obligation bonds $ 8,614.577 $ J; 1,396.670 Revenue bonds 1,580,000 16,193,925 1,580.000 Accrued compensation 667,768 104,025 122.302 Tota! <!: 10,862,345 <!: 16,297,950 $ 3.098.972 >V >V 39 Balance December 31, 2011 $ 55,225,670 3.089,134 3400.000 $ 61,714,804 $ 7,217.907 16,193,925 649,491 $ 24,061.323 Amounts Due Within One Year $ 5,051.038 581.69" 3.400,000 $ 9.032,732 $ 1,200,048 343,696 122.301 $ 1,666,045 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) E. Long-Term Debt (Continued) The following is a detailed listing of the city's long-term debt Including general obligation bonds, revenue bonds, temporary notes and loans payable: Primary Government Original Interest Bonds General Obligation Bonds Issue Rates Outstanding Internal Improvements 2002B, due 10/1/2017 $ 1,980,000 2.70% to 4.50% $ 165,000 Internal Improvements 2003A, due -10/1/2018 4,350,000 2.13% to 3.85% 1,765,000 Refunding 2004A, due 8/1/2015 5,585.000 2.10% to 4.00% 1,170,000 Internal Improvements 20048, due 10/1/2019 4,053.000 3.00% to 4.00% 1,390,000 Internal Improvements 2005A, due 10/1/2020 4,210.000 2.95% to 4.25% 2.200,000 Internal Improvements 2006A, due 10/1/2026 2.200,000 3.55% to 5.50% 1,650,000 Internal Improvements 2006B, due 10/1/2021 885,000 4.00% to 4.50% 535,000 Internal Improvements 2007A, due 10/1/2027 6,545,000 4.25% to 4.625% 5,085.000 Internal Improvements 2008A. due 10/1/2023 3,720,000 3.25% to 4.00% 3,000,000 Internal Improvements 2008B, due 7/1/2028 3,525,000 3.65% to 5.00% 3.415,000 Internal 1m provements 2009A, due 10/1/2029 23.695,000 2.00% to 5.00% 21,877,424 Internal Improvements 2010A, due 10/1/2025 6.916592 200% to 3.875% 6,138.819 Internal Improvements 201 OB. due 10/1/2023 7.973.044 0.50% \0 3.00% 7.464.348 Internal Improvements 2011A. due 10/1/2031 6.587.985 2.00% to 5.00% 6,587.986 Total general obligation bonds $ 62.443.577 Revenue Bonds Revenue 2011, due 10/1/31 $ 16.193,925 2.00% to 4.60% $ 16.193,925 Total revenue bonds $ 16,193,925 Temporary I\lotes Series 2011-'1. due 811/2012 $ 3.400,00C o 40°1c $ 3.400.000 Total revenue bonds $ 3.400.000 40 CITY OF SALINA. KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31 , 2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) E. Long-Term Debt (Continued) Annual debt service requirements to maturity for general obligation bonds to be paid with tax levies: General Obligation -Primary Government Bonds Interest Year Outstanding Due Total 2012 $ 6.251.086 $ 2.299,881 $ 8,550,967 2013 6,286,086 2,026,639 8,312,725 2014 5,961,086 1,802,699 7,763,785 2015 5,161,086 1,61'1,107 6,772,193 2016 5,001,086 1,440,080 6,441,166 2017-2021 19,865.428 4,617,544 24,482,972 2022-2026 10,541.564 1,805,185 12,346,749 2027-2031 3.376 155 307.047 3,683,202 Total $ 62443,577 $ 15.910.181 $ 78,353,758 Annual debt service requirements to maturity for revenue bonds to be paid with utility revenues: Revenue Bonds -PrtmaCi Government Bonds Interest Year Outstandlna DUe Total 2012 $ 343.696 $ 596.991 $ 940,687 2013 623,696 590.191 1,213,887 2014 633.696 577.791 1,211.487 2015 643,696 565,191 1.208.887 2016 663696 549.191 1.212.887 2017-2021 3,638.480 2,433,862 6,072,342 2022-2026 4323.480 1.738.821 6,062,301 2027-2031 5.323.48E, 743,320 6,066.805 Tota! $ 16,193,925 $ 7.795,358 $ 23.989.283 Annual debt service requirements to maturity for Temporary notes -to be paid through the Issuance of genera! obligation bonds' TemporaCi Notes -Prtmary Government BondS Interest Outstanding Due Total 2012 $ 3,400,000 $ 14,204 .;;,$ ~......;;3;.;..4=1;...4.;;;,2;;.;O~4 41 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 4. DETAILED NOTES ON ALL FUNDS (Continued) E. Long-Term Debt (Continued) F Special assessments. As provided by Kansas statutes, projects financed in part by special assessments are financed through general obligation bonds of the Cit-J and are retired from the debt service fund. Special assessments paid prior to the issuance of bonds are recorded as revenue in the appropriate project. Special assessments received after the issuance of bonds are recorded as revenue in the debt service fund. The special assessments are not recorded as revenue when levied against the respective property owners as such amounts are not available to finance current year operations. The special assessment debt is a contingent obligation of the City to the extent of property owner defaults, which have historically been immatenal. CondUit debt. The City has entered into several conduit debt arrangements wherein the City issues industrial revenue bonds to finance a portion of the construction of facilities by private enterprises. In return, the private enterprises have executed mortgage notes or leases with the City. The City is not responsible for payment of the original bonds, but rather the debt IS secured only by the cash payments agreed to be paid by the private enterprises under the terms of the mortgage or lease agreements. Generally, the conduit debt is arranged so that payments required by the private enterprises are equal to the mortgage payments schedule related to the onglnal debt. At December 31, 2011, total outstanding condUit debt was $86,472,423. Defeased debt. In prior years. the City has defeased certam other outstanding debt obligations by plaCing the proceeds of new bonds In an Irrevocable trust to provide for all future debt service payments on the old bonds Accordingly, the trust accounts and the defeased bonds are not Included In the City's financial statements At December 31. 2011, the City had $325.000 of outstanding defeased debt Reconciliation of Transfers A reconciliation of Interfund transfers follows' Transfer In Transfer Out Major Funds: General fund $ 868,838 $ 997.949 Flood and drainage improvement fund 907 T ounsm and convention fund 596,440 SpeCial gas fund 180,000 1,836 Bicentennial center fund 872.849 Sales tax capital fund 8,558 3,501,556 Debt service 2,225,565 83,488 Capita: projects fune' 3.289,564 405.549 Other governmental funds 547,389 105.259 Agency funds 198.821 . Solid waste disposal fund 180,000 Water and sewer fund 2,030,000 Golf course fund 47.228 Centra! garage fund 60.000 Total Transfers $ 8,100.898 $ 8,100,898 The City uses Interfund transfers to share administrative costs between funds. 42 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 5. OTHER INFORMATION A. Defined Benefit Pension Plan Plan description. The City participates in the Kansas Public Employees Retirement System (KPERS) and the Kansas Police and Firemen's Retirement System (KP&F). Both are cost-sharing multiple-employer defined benefit pension plans as provided by Kansas statutes (KSA 74-4901 et seq). KPERS and KP&F provide retirement benefits, life insurance, disability income benefits and death benefits Kansas law established and amends benefit provisions. KPERS and KP&F issue a publicly available financial report that includes financial statements and required supplementary information. Those reports may be obtained by writing to 611 South Kansas, Suite 100; Topeka, Kansas 66603 or by calling 1-888-275-5737 Funding Policy. K.S.A. 74-4919 establishes the KPERS member-employee contribution rate at up to 6% of covered salary. K.S.A. 74-4975 establishes the KP&F member-employee contribution rate at 7% of covered salary. The employer collects and remits member-employee contributions according to the piOvisions of section 414 (h) of the Internal Revenue Code. State law provides that the employer contribution rates be determined annually based on the results of an annual actuanal valuation. KPERS and KP&F are funded on an actuarial reserve basis. State law sets a limitation on annual increases in the employer contribution rates. The KPERS employer rate was 6.96% from January 1 to December 31.2011 The City employer contributions to KPERS for the years ending December 31. 2011, 2010. and 2009 were $987,826, $1,039.728 and $831,493, respectively, equal to the required contributions for each year. The KP&F employer rate established for fiscal years beginning In 2011 is 17.68%. Employers participating in KP&F also make contributions to amortize the liability for past service costs, If any, which are determined separately for each participating employer The City's contributions to KP&F for the years ended December 31, 2011, 2010, and 2009 were $1,787,801, $1,664.356 and $1,769,379. respectively. equal to the required contributions for each year. B. Deferred Compensation Plan The City offers its employees a deferred compensation plan ("Plan") created In accordance with Internal Revenue Code Section 457. The Plan. available to all City employees. permits them to defer a portion of their salary until future years. The deferred compensation IS not available to employees until termination. retirement, death, or unforeseeable emergency Plan assets are transferred to a plan agent In 8 custodial trust and are not available to the claims of the City'S general creditors C. Flexible Benefit Plan (I.R.C. Section 125) The City CommiSSion has adopted by resolution a salary reduction flexible benefit plar) ("Plan") under Section 125 of the Internal Revenue Code. Ali City employees working more than 20 hours per week are eligible to participate in the Plan beginning after two full months of employment. Each participant may elect to reduce hiS or her salary to purchase benefits offered througn the Plan Benefits offered through the Plan Incluae vanous Insurance and disability benefits. D. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets, errors and omiSSions: natural disasters and other events for which the City carries commercial insurance. No significant reductions in Insurance coverage from that of the prior year have occurred. Settlements have not exceeded insurance coverage for each of the past three years. 43 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 5 OTHER INFORMATION (Continued) D. Risk Management (Continued) The City has established a limited rrsk management program for workers' compensation. The program covers all City employees. Premiums are paid into the Workers' Compensation Reserve Fund by all other funds and are available to pay claims, claim reserves and administrative costs of the program. An excess coverage Insurance policy covers individual claims in excess of $250.000 ($350,000 for claims involving employees classified as policemen or firemen). Incurred claims, including incurred but not reported claims, have been accrued based primarily upon subsequent payments. Claim liabilities are calculated considering the effects of Inflation, recent claim settlement trends Including frequency and amounts of payouts and other economic and social factors. The liability for claims and judgments IS reported in the Workers' Compensallon Reserve Fund because it IS expected to be liquidated with expendable available financial resources. Of the liability, $172.545 IS considered to be due within one year. Changes in the balances of claims liabilities during the past two years are as follows: 2011 2010 Unpaid claims, January 1 $ 425.582 $ 372.610 Incurred claims (Including IBNRs) 126.625 409,801 Claim payments [230.417] [356.829] Unpaid claims, December 31 $ 321.790 $ 425.582 The City established a limited risk management program for employee health and dental Insurance In 1997 The program covers eligible City employees, Premiums are paid into the health insurance fund by all other funds and are available to pay claims. claim reserves and administrative costs of the program. An excess coverage insurance policy covers IndiVidual claims In excess of $50,000. Incurred claims. including incurred but not reported claims, have been accrued based primarily upon subsequent payments. Claim liabilities are calculated considering the effects of Inflation, recent claim settlement trends including frequency and amounts of payouts and other economic and social factors. The liability for Claims and judgments In the Health Insurance Fund because it IS expected to be liquidated with expendable available finanCial resources Therefore. all of the liability IS considered to be due within one year Changes in the balances of claims liabilities during the past two years are as follows' 2011 2010 Unpaid claims January I $ 382502 $ 421.530 incurred claims (inciudlng IBNRs) 4.229571 4198,012 Claim payments [4.220,898] [4.237.040) Unpaid claims. December 31 $ 391 175 $ 382,502 44 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 5. OTHER INFORMATION (Continued) E Capital Projects Capital projects often extend over two or more fiscal years. The following is a schedule, which compares the project authorization including allowable interest revenue to total project expenditures from project inception to December 31, 2011. Project N Ohio Grade Separation Bicentennial Improvements Markley, Magnolia, ValleYVlew Sanitary Sewer Improvements and Manhole and Wastewater Pump Station Rehabilitation Grand Prairie Addition Magnolia Commons South 9th Corridor, Phase IV Scoular Addition Waterline Imp Stone Creek Addition Riffel # 2 Infrastructure East Magnolia Road Replacement Aviation Service Center Fire Station # 1 Authorization $ 6,617.581 2,500,000 5,150,000 1,618,096 3,415,564 6.500,000 75,453 440,193 977,917 4.500.000 5,500,000 1,787.000 Expenditures $ 6,523,786 2,505,636 1,070,277 1,479,406 3,003,051 6.201.014 48.673 324.404 893,024 432.128 3.737.322 226,131 Project overages in the Bicentennial Improvements project Will be reimbursed by speCial sales tax proceeds F. Contingent liabilities The City receives significant financial assistance from numerous federal and state governmental agencies in the form of grants and state pass-through ald. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and IS subject to audit. Any disallowed claims resulting from such audits could become a liability of the General Fund or other applicable funds. However, in the opinion of management, any such disallowed claims would not have 8 material effect on any of the financial statements of the City at December 31.2011. The City IS a defendant In vanous laWSUits Although the outcome of these lawsuits IS not presently determinable, it is the opinion of the City's legal counsel that resolution of these matters will not have a matenal adverse effect on the financial condition of the City G. Munlclpai Solid Waste Landfili State and federal laws and regulations require the City to place a final cover on its landfill site when it stops accepting waste, and to perform certain maintenance and monltonng functions at the site for thirty years after closure Although ciosure and postclosure care costs wili De paid only near or after the date that the landfili stops accepting waste, the City reports a portion of these closure and postciosure care costs as an operating expense of the solid waste fund In each period based on landfill capacity used as of each Dalance sheet date. The $2,042.254 reported as landfill closure and postciosure care liability at December 31 represents the cumulative amount reported to date based on the use of 29 5% of the estimated capacity of the landfill 45 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 5. OTHER INFORMATION (Continued) G. Municipal Solid Waste Landfill (Continued) The City's solid waste fund will recognize the remaining estimate cost of closure and postclosure care of $4,891,330 as the remaining estimated capacity is filled over the remaining life expectancy of 68.8 years. These amounts are based on what it would cost to perform all closure and postclosure care in 2011. Actual cost may be higher due to inflation, changes, in technology or changes in regulations. The City is required by State and Federal laws and regulations to provide assurances of financial responsibility for closure and post- closure care. The City has elected to utilize the Local Government Financial test promulgated by the U.S. EnVIronmental Protection Agency (at 40 CFR 258.74(f)) and the Kansas Department of Health and EnVIronment to provide these assurances. Any future closure or post-closure care costs will be provided through the normal budgeting and rate setting process. including the issuance of general obligation bonds, if necessary. H. EnVIronmental Matters The Kansas Department of Health and Environment (KDHE) issued a report In 1994 indicating the presence of volatile organic compounds at levels requiring remediation at the Salina Public Water Supply Wells Site The City adopted a proactive Policy and Action Plan to remediate the groundwater contamination, and on December 7, 1994, the City and KDHE entered Into a Consent Order and Settlement Agreement under which the City assumed primary responsibility for the further investigation and remediation of the groundwater contamination. Field testing work has been completed. The necessary remediation work will be conducted over the next several years at a yet undetermined cost to the City's Water and Sewer Fund The U.S. Department of Defense transferred property located at the former Schilling Air Force Base (the Base or Site) to the City on or about September 9, 1966. The property IS now known to contain areas of extensive soil and groundwater contamination, which is a result of the use and disposal of chlOrinated solvents dUring military operations at the Base from 1942 until Base closure In 1965. The U.S Department of Defense IS responsible for the investigation and remediation of contamination caused by military activities at current and former military bases. The U.S. Army Corps of Engineers (Corps) is the lead agency for the Department at formerly used defense sites. The Corps has investigated the soil and groundwater contamination at the Site under the regulatory overSight of the U.S. EnVIronmental Protection Agency (EPA) and the Kansas Department of Health and EnVironment (KDHE). The Site is not designated as a National Priority List Superfund site, but Investigation and remediation are reqUired to be In compliance with the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Potential liability for contamination under CERCLA extends broadly to parties associated with the release or presence of hazardous substances, including not only those entities involved with contaminant use and disposal, but In some cases other current and former owners and operators of contaminated sites. As 8 current owner of extensive amounts of property at the Site, the City IS potentially liable under CERCLA. although the City believes that It has meritorious defenses to such liability. The City is under no administrative orders from the EPA or KDHE. The City is considered to be a Potentially Responsible Party (PRP) for the Site, primarily due to its status as a property owner The Salina Airport Authority, City of Salina, Unified School District No. 305 and the Kansas Board of Regents (Kansas State University at Salina) (collectively Salina Public Entities) currently own over 90% of the neariy 4,000 acres of the Base property. 46 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 5. OTHER INFORMATION (Continued) H. Environmental Matters (Continued) Beginning in August 2007, the Salina Public Entities initiated settlement negotiations with the U.S. Federal Government. The negotiation objectives at that time included transferring the responsibility for completing the cleanup from the U.S. to the Salina Public Entities. The local objective was to reach a settlement agreement with the U.S. that provides the Salina Public Entities sufficient funds to complete cleanup operations over a 30-year period. During calendar year 2008, the Salina Public Entitles. by and through its environmental consultant, prepared a detailed Cost to Complete Estimate (CTC). The CTC preparation Included consultation with the EPA and KDHE. The Salina Public Entities' CTC was completed in June of 2008 and submitted to the Corps. Subsequently, on January 23, 2009, the Salina Public Entities delivered a demand letter to the Corps. The letter demanded that settlement negotiations begin Immediately with the U.S. Department of Justice. On May 14, 2009 the City was notified that the Corp referred the Base demand letter to the U.S. Department of Justice on May 12, 2009. The Salina Public Entities delivered on or about May 10, 2010, a settlement offer~and a draft of a lawsuit complaint to the attorney for the U.S. Department of Justice. The Salina Public Entities planned to file suit against the U.S. if the matter was not settled by the end of May, 2010 The Salina Public Entitles did not intend to cut off settlement negotiations by the filing of SUIt, and this has been communicated to the U.S. No remedial action plan or record of decision has been adopted by the EPA or KDHE. On or about May 27. 2010. the Salina Public Entities filed their Complaint against the United States of Amenca, the United States Department of Defense and Secretary of Defense, Robert M. Gates, In his official capacity (collectively, "Defendants") On or about September 22, 2010, the Salina Public Entities filed their First Amended Complaint In four counts: Count I Citizen Suit Claim Pursuant to 42 U.S.C.§ 9659(a)(2), Count II Citizen Suit Claim Pursuant to 42 U.S.C.§ 9659(a)(1), Count III Claim for Recovery of Response Costs Pursuant to 42 U.S.C.§ 9607(a) and Count IV Claim for Declaratory Judgment Pursuant to 42 U.S.C.§ 9613(g)(2). On or about October 6, 2010, Defendants filed their motion to dismiss and to strike. primarily with respect to the Citizen suit claims. On or about March 25, 2011, Judge MurgUia entered his Memorandum and Order The Judge granted the Defendants' motion to dismiss Counts I and II (citIzen suit claims) for lack of subject matter junsdlction. He also granted the Defendants' motion to dismiss the Salina Public Entities' requests for attorney fees, WIth the exception of non-litigation attorney fees. He denIed the Defendants' motion to strike the Salina Public Entities' allegations of a conflict of Interest The Salina Public Entitles' claims under Counts III and IV for response costs under CERCLA 9607(a) are not affected by the Judge's rulings The Saltna Public Entitles disagree with most of the Judge's filings and, if necessary, plan to take an interlocutory appeal to the Tenth Circuit to contest the rulings, On or about April 22. 201 i, Detendants filed their Answer to First Amended Complaint and Counterclaim against the Salina Public Entitles. Count I of the Counterclaim alleges a claim for contribution under CERCLA, 42 U.S.C.§ 9613(f)(1). Count II of the Counterclaim alleges a claim for cost recovery under CERCLA, 42 U.S.C.§ 9607(a)(1). Count " alleges costs incurred by the U.S. Environmental Protection Agency of approximately $1,838,241 as 07 September 30, 2007, and alleges costs Incurred by the Corps of approximately $14,915,228 as of April 17, 2009, The Salina Public Entities intend to vigorously contest the claims brought against them and will assert, among other defenses, the third party defense under 42 U.S,C.§ 9607(b )(3). 47 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31 , 2011 Note 5 OTHER INFORMATION (Continued) H. Environmental Matters (Continued) Since the lawsuit remains pending without a final settlement, the City intends to vigorously pursue its claims and contest the claims brought against it. Based on presently known Information, the City has determined that while a possible liability exists, at this time no reasonable estimate of the possible liability can be made. Therefore, no liability related to that matter has been recorded. I. Postemployment Health Care Plan Plan Description. The City operates a single employer defined benefit healthcare plan administered by the City. The Employee Benefit Plan (the Plan) provides medical and dental benefits to eligible early retirees and their spouses. KSA 12-5040 requires ail local govemmental entitles in the state that provide a group health care plan to make participation available to all retirees and dependents until the retiree reaches the age of 65 years No separate financial report is Issued for the Plan. Funding Policy. The contribution requirements of plan participants and the City are established and amended by the City The required contribution is based on projected pay-as-you-go finanCing requirements. Plan participants contributed approximateiy $229.000 to the Plan (approximately 100% of total premiums) through their required contribution of $425 per month for retiree-only coverage and $1.141 for family coverage Annual OPES Cost and Net OPES Obligation The City's annual other postemployment benefit (OPES) cost (expense) is calculated based on the annual required contnbutlon of the employer (ARC). an amount actuarially determined In accordance With the parameters of GASS 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 actuanaillabilities (or funding excess) over a period not to exceed thirty years. The follOWing table shows the components of the City's annual OPEB cost for the Plan for the year, the amount actually contributed to the plan, and the changes in the City's net OPEB obligation to the Plan: Annual required contribution Interest on Net OPEB Obligation Adjustment to Annual ReqUired Contribution Annual OPEB cost (expense) Benefit payments Change In net OPEB obligation Net OPEB obligation -beginning of year Net OPEB obligation -end of year 48 $ 961,335 95.743 [79,786j 977,292 229000 748.292 2.393,591 $ 3,141,883 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 5. OTHER INFORMATION (Continued) I. Postemployment Health Care Plan (Continued) The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation for the year ended December 31,2011 was as follows: Annual Fiscal Annual OPEB Net Year OPEB Cost OPEB Ended Cost Contributed Obligation December 31,2008 ct 910.418 $ 96.672 $ 813.746 '" December 31. 2009 957,353 100,000 1,671,099 December 31, 2010 921,492 199,000 2,393,591 December 31,2011 977,292 229.000 3,141,883 Funding Status and Funding Progress. As of the year ended December 31, 2011, the most recent actuarial valuation date, the Plan was not funded. The actuarial accrued liability for benefits was $9.019,806 and the actuarial value of asset was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $9,019,806. The covered payroll (annual payroll of active employees covered by the plan) was $21,942.428. and the ratio of the UAAL to the covered payroll was 41.11 %. 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 fmancial statement, presents multiyear trend information about whether the actuarial value of plan assets (if any) are increaSing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan participants) and Include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan partiCipants 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 In the year ended December 31, 2011, actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions Include a 4.00% investment rate of return, which IS the rate of the . employer's own Investments as there are no plan assets and an initial annual medical and dental healthcare cost trend of 9.30%, reduced by decrements to an ultimate rate 4.70% after eighty-two years. The UAAL IS being amortized as a level dollar over an open thirty-year period. 49 REQUIRED SUPPLEMENTARY INFORMATION CITY OF SALINA, KANSAS OTHER POST-EMPLOYMENT BENEFITS REQUIRED SUPPLEMENTARY INFORMATION December 31,2011 Schedule of Employer Contributions: Annual Fiscal Annual OPEB Net Year OPEB Cost OPEB Ended-Cost Contributed Obligation December 31,2008 $ 910,418 $ 96,672 $ 813,746 December 31,2009 957,353 100,000 1,671,099 December 31,2010 921,492 199,000 2.393.591 December 31,2011 977.292 229.000 3,141,883 Schedule of Funding Progress: Actuarial Actuarial Actuarial Unfunded Funded Covered Valuation Value of Accrued AAL Ratio Payroll Date Assets (a) Llabilit~ (b) (b) -(a) (alb) M 12/31/2008 $ $ 8,917,346 $ 8,917.346 0.0% $ 21,874,112 12/31/2009 8.917,346 8,917.346 0.0% 22.397.996 12/31/2010 9.019,806 9.019,806 0.0% 22.613.236 12/31/2011 9.019.806 9.019,806 0_0% 21.942.428 50 UAAL as Percent of Payroll (b-a)l( c) 40.77% 39_81 % 39.89% 41 11 % CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) GENERAL FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Revenues Taxes Real estate taxes $ 7.564.507 $ 7,359,721 Delinquent taxes 212,244 292488 Motor vehicle taxes 723.857 937,258 General sales tax 11,767,400 11,716,000 Other taxes 4.221.302 4.585,000 Total taxes 24,489.310 24.890467 Charges for services General charges 144,556 General government 340 8,912 PubliC safety 3465.106 4.505.812 Public works 261.707 156,904 Health and sanitation 51,838 62.300 Culture and recreation 1.324,551 1.295.614 Community and economic development 10.368 9,982 Total charges for serVlce5 5.258466 6.039.524 Operating grants restncted General grants 153566 185.000 Public safety 631 417 837.000 Community and economic deveiopment 28.202 Total operating grants. restrlctec 813185 1.022.000 Operating grants. unrestricted General grants 2.500 503 Public works 250 3,000 Culture and recreation 8,241 18,000 Total operating grants unrestricted 10991 21,503 Interest Income General Interest 15,7 49 65000 Total Interest Income 15.749 65.000 Interfund services provldee General services 1392.161 918.017 General government 2.532.316 U55.876 Community and economic aevelopment 63.340 50.501 T ella! I"nerfuno services prevloed 3987 .817 2 721l 39Ll rlilscellaneeus revenues General miscellaneous revenues 118.112 134,321 Genera! government 90 PubliC safety 185.05~ 199,000 PubliC works 4,134 10.000 Culture ana recreation 16439 25.000 Total miscellaneous revenues 323.829 368.321 Proceeds of capital assets General sales 30,000 PubliC safety 200 Total proceeds of capital assets 200 30,000 Total revenues 34,899,547 35.161.209 See Independent auditor's report on the financial statements 51 Final $ 7,359.721 292,488 937.258 11,716.000 4.585.000 24.890.467 8.912 4,505.812 156.904 62.300 1.295,614 9.982 6.039.524 185000 837.000 1.022.000 503 3.000 18.000 21,503 65.000 65000 918.017 1.755.876 50.501 2.724.394 134.321 199.000 10.000 25000 368.321 30.000 30,000 35.161.209 Vanance with Final Budget Positive [Negative] $ 204,786 [80,244] [213,401] 51,400 [363.698) [401.157) 144.556 [8,572] [1.040.706] 104,803 [10,462] 28,937 386 [781.058] [31 434] [205.583] 28.202 [208.815) 1,997 [2.750] r9,759) [10.512) [49.2511 [49.251] 474,144 776440 12839 1.263423 [16.209] 90 [13.946] [5.866] [8.561) [Ll4,492] [30,000] 200 [29,800) [261,662] CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) GENERAL FUND (Continued) For the Year Ended December 31. 2011 Budgeted Amounts Original Final Expenditures General Government City commiSSion $ 102.880 $ 112.383 $ 112.383 City manager 505.962 555.736 555,736 Legal 381,704 305.300 305,300 Finance 617,575 553.074 553.074 Human resources 374,387 350,007 350,007 Other general government 1.198.470 987,080 987.080 Contingencies 20.884 50,000 50.000 Total general government 3.201.862 2,913.580 2.913.580 Public Safety Police 8.409,519 8,307.450 8.307.450 Municipal court 1.430.676 1,625,516 1,625,516 Fire 8.166.268 7.763,377 7,763.377 Total public safety 18.006463 17.696.343 17,696343 Public Works BUildings and general Improvements 1.005.385 1,253,194 1.253.194 Englneenng 997.558 980.799 980.799 Streets 1 759.697 1.826.158 1.826158 Flood works 203,126 221,058 221 058 TraffiC control 743165 819.062 819.062 Parks 1 409.829 1.444.930 1.444.930 ADA compliance 6.440 15,000 15.000 Total public works 6.125,200 6560.201 6.560.201 Public Health and Sanitation Cemetery 157.981 146.827 146.827 Health department 1.018,101 967.138 967.138 Total public health and sanitation 1 176,082 1.113.965 1 113.965 Culture and Recreation SWimming pools 430.322 419.838 419.838 Neighborhood centers 41772 46.23:5 46.233 Recreation 1 81091(: 1.640473 1.640473 Arts and humanities 1,079 Smoky Hill museum 448463 435.263 435263 Total culture and recreation 2732.547 2.541.807 2.541.807 Community Development Human relations 330,092 337.809 337.809 Development services 1.215.034 1.332.930 1.332.930 Agency contracts 771.970 783.921 783.921 Total community development ::' 317 096 2.454.660 2.454.660 Capital Outlay Capital outlay 867777 876.345 876.345 Cash Reserve 4.354.391 4.354,391 Total expenditures 34427,027 38,511.292 38.511.292 Excess [deficiency] of revenues over [underJ expenditures 472,520 [3.350,083] [3350.083J See Independent auditor's report on the financial statements. 52 Variance with Final Budget Positive [NegatlveJ $ 9,503 49,774 [76,404] [64,501] [24,380] [21',390J 29,116 [288,282) [102,069] 194,840 [402,891) [310120) 247.809 [16.759J 66461 17.932 75.897 35.101 8.560 435,001 [11,154J [50.963) [62.117J [10.484] 4.460 [170.437J [1,079] [13.200J [190.740] 7.717 117,896 11,951 137.564 8.568 4.354.391 4.084,265 3.822.603 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) GENERAL FUND (Continued) For the Year Ended December 31. 2011 Budgeted Amounts Other financing sources [usesJ Transfer In Transfer [outJ Total other financing sources [usesJ Excess [deflclencyJ of revenues and other sources over [underJ expenditures and other [usesJ Unreserved fund balance. January 1 Prior year cancelled encumbrances $ Actual 168,838 [997.949J [829,111) [356.591J 2.918,651 7.140 Onglnal $ 500,000 [994.358J [494.358) [3.844.441J 3.978.485 Unreserved fund balance. December 31 2.569.200 S; 134.044 Reconciliation to GAAP Interest recelvabl6 Accounts receivable Taxes receivable Inventory Deferred revenue Current year encumbrances GAAP Fund Balance. December 31 35.877 677.815 8094.093 89,716 [7.923.279] 292816 S 3.836.238 See Independent auditor's report on the financial statements 53 Final 5: 500.000 [994.358J [494.358) [3,844.441 J 3,978485 $ 134.044 Vanance with Final Budget Positive [NegatlveJ ~ [331,162J " [3.591J [334,753) 3487,850 [1,059,834J 7.140 S 2435156 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) FLOOD AND DRAINAGE IMPROVEMENT FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final Revenues Taxes Delinquent taxes $ 6.016 $ 2.268 $ 6.020 Totallaxes 6.016 2,268 6,020 Interest income General Interest 138 138 Total Interest Income 138 138 Miscellaneous revenues General miscellaneous revenues 11,550 8,064 Total miscellaneous revenues 11,550 8,064 Total revenues 17.566 2,406 14.222 Expenditures Capital Outlay 205.823 11.130 200.000 Total expenditures 205.823 11,130 200.000 Excess [deficiency) of revenues over [under] expenditures [188.257] [8,724] [185.778J Other finanCing sources [uses] Transfer in 907 Excess [deficIency] of revenues and othe: sources over [under] expenditures and other [uses] [187.350] [8.724] [185.778] Unreserved fund balance. January 1 187.350 8.724 187.350 Unreserved fund balance, December 3'1 -$ -$ 1,572 Reconciliation to GAAP Current year encumbrances 907 GAAP Fund Balance, December 31 $ 907 See independent auditor's report on the financial statements. 54 Variance with Final Budget Positive [Negative] $ [4J [4) [138J [138) 3,486 3,486 3.344 [5.823J [5.823J [2,479] 907 [1.572J $ [1,572J CITY OF SALINA, KANSAS SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) TOURISM AND CONVENTION FUND For the Year Ended December 31. 2011 Budgeted Amounts Original Final Variance with Final Budget Positive [Negative] Revenues Taxes Other taxes $ 1,332,827 $ 1,350,000 $ 1,350,000 $ [17,173J Interest Income General Interest 'i43 Total revenues 1.332.970 1.350.000 1,350.000 Expenditures Community Development Tourism Total expenditures Excess [deficiency] of revenues over [under] expenditures Other finanCing sources [uses] Transfer [out] Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] Unreserved fund balance, January 1 Unreserved fund balance. December 31 Reconciliation to GAAP Accounts receivable GAAP Fund Baiance. December 31 $ 736,386 751.664 736386 751.664 596,584 598.336 [596.440J r600,000J 14"'-[1,664] 2,058 i ,664 2,202 SO 338.271 340,473 See independent auditor's report on the financial statements. 55 751.664 751.664 598,336 [600,000] [1.664J 1,664 - 143 [17.030J 15,278 15.278 [1.752J 3.560 1,808 394 $ 2.20'/ CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) SPECIAL GAS FUND For the Year Ended December 31, 2011 Revenues Operating grants, restricted Public works Interest income General interest Total revenues Expenditures Public Works Streets Capital Outlay Cash Reserve Total expenditures Excess [deficiency] of revenues over [under] expenditures Other finanCing sources [uses] Transfer In Transfer [out] Total other financing sources [uses] Excess [defiCiency) of revenues and other sources over [under') expenditures and other [uses) Unreserved fund balance January! Prior year cancelled encumbrances Unreserved fund balance. December 3~ Reconciliation to GAAP Taxes receivable Retainage payable Current year encumbrances GAAP Fund Bafance. December 31 Actual $ 1,366,522 3.718 1,370.240 426,084 1,401.756 1,827.840 [457.600J 180.000 f1.836J 178.164 [2794361 735.009 370.888 826.461 312,648 [44,389] 323,023 $ 1.417.743 Budgeted Amounts Original Final $ 1,460,382 $ 1,460.382 6.000 6.000 1.466.382 1,466,382 425.395 425,395 1.886,116 1,886,116 500,000 500.000 2.811.511 2.811 511 [1.345.129] [1.345.129] 180.000 180.000 180,000 180,000 [1,165129J [1.165.129] 1 165129 1,165129 $ -S - See Independent auditor's report on the financial statements. 55 Variance with Final Budget Positive [Negative] $ [93,860] f2.282) [96.142) [689] 484,360 500.000 983.671 887529 f1.836) [1,836) 885.693 [430 120j 370888 $ 826,461 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) BICENTENNIAL CENTER FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final Revenues Charges for services Culture and recreation $ 772,480 $ 1.379.500 $ 1,379,500 Interest income General interest 193 3.500 3.500 Miscellaneous revenues General miscellaneous revenues 692 Total revenues 773,365 1,383.000 1.383,000 Expenditures Culture and Recreation Bicentennial Center 1,548,901 1,902.262 1,902.262 Capital Outlay 11.028 532.850 532,850 Cash Reserve 329.400 329.400 Total expenditures 1.559.929 2,764.512 2 764.512 Excess [deflclencyJ of revenues over [under] expenditures [786.564) [1.381.512J [1.381,512J Other finanCing sources [uses] Transfer in 872.849 875.000 875.000 Total other finanCing sources [uses] 872.849 875.000 875,000 Excess [deficiency] of revenues and other sources over [under] expenditures and other [usesJ 86.285 [506,512J [506.512J Unreserved fund balance Januarv ~ 1,63C 506.512 506.512 Unreserved fund balance December 31 87,915 $ $ - Reconciliation to GAAP Accounts receivable 54,966 GAAP Fund Balance, December 31 $ 142.881 See independent auditor's report on the financial statements. 57 Variance with Final Budget Positive [Negative] $ [607,020J [3,307] 692 [609.635J 353,361 521,822 329.400 1.204.583 594,948 [2,151] r2151] 592.797 [504.882J $ 87,915 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) SALES TAX CAPITAL FUND For the Year Ended December 31, 2011 Budgeted Amounts Actual Original Final Revenues Taxes Selective sales tax $ 3,763,045 $ 3.686.500 $ 3,686,500 Interest Income General interest 5.683 20.000 20.000 Total revenues 3.768.728 3.706,500 3.706,500 Expenditures General Government Other general government 155.000 Capital Outlay 2.371,778 1,805,000 3,130,211 Cash Reserve 185,580 Total expenditures 2,371,778 1,990.580 2,285,211 Excess [deficiency] of revenues over [under] expenditures 1.396.950 1.715.920 421,289 Other finanCing sources [uses] Transfer In 8.558 Transfer [out] [2.367.590) [2,000.000J [2,000,000J Total other finanCing sources [uses] [2.359.032J [2.000.000J r2.000 ,000) Excess [defiCiency] of revenues and other sources over [under] expenditures and other [uses] [962.082] [284,080) [1.578.711] Unreserved fund balance, January 1 1,572.216 284080 1.578,711 Unreserved fund balance, December 31 610134 S $ - Reconciliation to GAAP Current year encumbrances 787.437 GAAP Fund Balance, Decembel' 31 $ 1.397571 See independent auditor's report on the financial statements, 58 Variance with Final Budget Positive [Negative] $ 76,545 r14.317J 62,228 155,000 758,433 913.433 975,661 8,558 [367,590J [359,032J 616,629 [6.495J $ 610.134 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES CITY OF SALINA, KANSAS COMBINING STATEMENTS -NONMAJOR FUNDS NONMAJORSPEC~LREVENUEFUNDS Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes. Business improvement district fund -State law allows businesses within an area to voluntarily establish an improvement City. This fund is used to account for the assessments made on the District. All revenues are to be used within the Business Improvement District. Neighborhood park fund -To account for fees collected from new residential building projects In Salina. Expenditures are for acquisition or development of neighborhood parks in the growing areas of the community. Special parks and recreation fund -To account for liquor tax revenues, which must be used for park maintenance and improvements. Special alcohol fund -To account for liquor tax revenues, VJhich must be used for programs, v.,rhich address prevention, education or intervention for drug and alcohol abuse. Bicentennial center event fund -To account for the revenues and expenses associated with special events (concerts, shows, etc.) at the City's convention center. HUD community development fund -To account for grants received from the state to be used for hOUSing or economic development purposes. Community development revolving fund -To account for funds. which may be loaned for housing and economic development, purposes, to later be repaid and reused on a revolving baSIS. Heritage commission fund -To account for revenues and expenses associated With heritage preservation activities Sales tax economic development fund -To account for 12.5% of the 1/4 cent sales tax deSignated for economic Development purposes. Fair housing fund -To account for grants received from the federal government to be used to monitor and mediate fair hOUSing complaints. CDBG ED fund-To account for grants received from the federal government to be used for economic development loans to qualifying bUSinesses HOME V fund -To account for grants received from the state government to be used for housing rehabilitation. Special law enforcement fund -To aCCOUnT for revenues received from the sal8 of forfeited assets acqUired dunns:; drug enforcement actiVities Expenses are limited to capital Items to be used for further drug enforcement activities. Police grants fund -To account for revenues from grants, which are to be used for special police activities, including the DAR.E. program D.A.R.E donations fund -To account for donations to the DAR.E. program. War memorial maintenance fund -To account for mOnies to be used for maintenance of the local war memorial. Arts & humanities fund -To account for revenues and expenses associated with arts and humanities activities. Federal CARE Grant -To account for revenue and expenses associated with the CARE Grant. 59 CITY OF SALINA, KANSAS COMBINING STATEMENTS -NONMAJOR FUNDS NON MAJOR PERMANENT FUNDS Permanent funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the reporting government's programs. Cemetery endowment fund -To account for amounts expended for perpetual care of the City cemetery. Interest earnings are used for cemetery maintenance. Mausoleum endowment fund -To account for amounts charged for perpetual care of the City mausoleum. Interest earnings are used for mausoleum maintenance. Tricentennlal commission fund -To account for donations to be used to celebrate the nation's tricentennial in the year 2076 60 ASSETS Cash and investments Receivables Accounts Total assets CITY OF SALINA, KANSAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS December 31, 2011 Total Total Nonmajor Nonmajor Special Revenue Permanent Funds Funds $ 1,790.051 $ 426,7 41 51.169 $ 1.841,220 $ 426,741 LIABILITIES AND FUND BALANCES liabilities' Accounts payable $ 14,039 $ - Due to other funds 9,375 Total liabilities 23,414 Fund balances: Restricted 343.255 Committed 1,424.551 426.741 Assigned 50,000 Total fund balances 1,817.806 426,741 Total liabilities and fund balances $ 1.841.220 S; 426 741 Nonmajor Debt Service Fund $ 556,603 $ 556,603 $ 8,604 8.604 547.999 547,999 $ 556.603 See independent auditor's report on the financial statements. 61 Total Nonmajor Governmenta! Funds $ 2,773,395 51,169 $ 2.824,564 $ 22.643 9.375 32.018 891.254 1.851,292 50,000 2.792,546 S; 2.824.564 CITY OF SALINA, KANSAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31,2011 Total Total Nonmajor Nonmajor NonmaJor Debt Special Revenue Permanent Service Funds Funds Fund REVENUES Taxes $ 317.297 $ -$ - Intergovernmental 520,055 205.582 Charges for services 1.115.913 9,109 licenses and permits 6,250 Investment revenue 5,394 1,177 49 Miscellaneous 72.293 Total revenues 2,037.202 10.286 205.631 EXPENDITURES Current Culture and recreation 1.616,170 Public health and sanitation 153730 Planning and development 288.275 Miscellaneous 35 Debt service Pnnclpal retirement 25,000 110.000 Interest and other charges 4,399 157,345 Capital outlay 529.401 Total expenditures 2.616.975 35 267,345 Excess [defiCiency] of revenues over [under] expenditures [579.7731 10.251 r61.714J Other finanCing sources [usesJ Transfers Iii 547.389 Transfers [out] [105,259] Total other finanCing sources [uses] 442,130 Net change in fund balance [137.643J 10.251 [61,714] Fund balance -Beginning of year 1.955,449 416.490 609,713 Fund balance -End of year $ 1.817,B06 $ 426,741 $ 547.999 See independent auditor's report on the financial statements. 62 Total Nonmajor Governmental Funds $ 317,297 725,637 1.125,022 6,250 6,620 72.293 2.253,119 1,616,170 153,730 288,275 35 135.000 161.744 529,401 2,884.355 [631.236] 547.389 [105.259J 442,130 [189.106J 2,981.652 <:: 2,792,546 '" CITY OF SALINA, KANSAS COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31,2011 Business Special Improvement Neighborhood Parks & Special District Park Recreation Alcohol ASSETS Cash and investments $ 1,611 $ 229,134 $ 45,236 $ 4 Receivables Accounts 51,169 Total assets $ 52,780 $ 229,134 $ 45.236 $ 4 LIABILITIES AND FUND BALAI'JCES Liabilities: Accounts payable $ 1,611 $ - $ -$ Due to other funds Total liabilities 1.611 Fund balance Restricted 51,169 45,236 4 Committed 229.134 ASSigned Total fund balance [deficit] 51,169 229.134 45,236 4 Total liabilities and fund balances $ 52.780 $ 229,134 $ 45.236 $ 4 Bicentennial HUD Comm. Sales Tax Center Community Development. Heritage Economic Event $ 98,847 $ $ 98,847 $ $ -$ 98,847 98,847 $ 98,847 $ Dev. Revolvino Commission Development 71,880 $ 173,160 $ 4 $ 957,112 71,880 $ 173,160 $ 4 $ 957 112 -$ -$ -$ 71,880 173,160 4 907,112 50.000 71,880 173,160 4 957,112 71.880 $ 173.160 $ 4 c;: '" 957.112 See independent auditor's report on the financial statements 63 CITY OF SALINA, KANSAS COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS (Continued) December 31, 2011 Special Fair CDBG HOME Law Housing ED Y-Enforcement ASSETS Cash and Investments $ 5,181 $ 2,472 $ -$ 2,855 Receivables Accounts Total assets $ 5,181 $ 2,472 $ -$ 2,855 LIABILITIES AI'~D FUND BALANCES liabilities: Accounts payable $ 825 $ -$ -$ Due to other funds Total liabilities 825 Fund balance. Restricted 2,472 Committed 4.356 2,855 ASSigned Total fund balance [deficit] 4.356 2,472 2,855 Total liabilities and fund balances $ 5,181 $ 2.472 $ - $ 2,855 $ $ 5) Police Grants -$ -$ 2,012 $ 8,709 10,721 [1C.721} [10.721] - $ War DARE Memorial Arts & Donations Maintenance Humanities 1,742 $ 35,262 $ 165,551 5) 1,742 $ 35.262 5) 165.551 $ -$ -$ 9.591 $ 9,591 1,742 35.262 155.960 1.742 35,262 155,960 1,742 5) 35.262 $ 165,551 $ Federal CARE Grant -$ -$ -$ 666 666 [666} r666] -$ Totals 1,790,051 51,169 1,841,220 14,039 9.375 23,414 343,255 1,424,551 50,000 1,817.806 1,841,220 See independent auditor's report on the financial statements. 64 CITY OF SALINA, KANSAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For the Year Ended December 31,2011 Business Special Improvement Neighborhood Parks & Special District Park Recreation Alcohol Revenues Taxes $ -$ -$ -$ I ntergovern mental 153,566 153,566 Charges for services 83,467 Licenses and permits 6.250 Investment revenue 20 629 220 24 Miscellaneous 1.373 Total Revenues 83,487 6,879 155.159 153,590 Expenditures Current Culture and recreation Public health and sanitation 153,730 Planning and development 8453'1 Debt service Principal retirement 25,000 Interest and other charges 4399 Capital outlay 99.817 Total Expenditures 84.531 129.216 153,730 Excess [deficiency] of revenues over [under] expenditures [1,044] 6,879 25.943 [140] Other finanCing sources [uses] Transfers in Transfers [out] f47.228J Total other finanCing sources luses] [47.2281 Net change In fund balance [1.044J 6879 [21,285J [140J Fund balance, beginning of year 52,213 222.255 66,521 144 Fund balance. end of year $ 51.169 $ 229.134 $ 45.236 $ 4 Bicentennial Center Event $ - 663,839 663.839 670.411 670.411 [6,572J [6,5721 105419 2 98.847 HUD Community Community Development Development Revolving $ -$ - 200 526 200 526 200 526 [58.031 ] [58.0311 200 [57,505J 71.680 230.665 :1 71.880 $ 173.160 Herrtage Commission $ - 4 S; 4 Sales Tax Economic Development $ $) 317,297 2.485 319,782 406.075 406.075 [86.293J [86,293] 1.04:),405 957.112 See Independent auditor's report on the financial statements. 65 CITY OF SALINA, KANSAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS (Continued) For the Year Ended December 31.2011 Special Fair CDBG HOME Law Housing ED y. Enforcement Revenues Taxes $ -$ -$ -$ Intergovernmental 31,203 158.238 Charges for services Licenses and permits Investment revenue 59 36 Miscellaneous Total Revenues 31,262 158,238 36 Expenditures Current Culture and recreation Public health and sanitation Planning and development 69.571 133437 Debt service Principal retirement Interest and other charges Capital outlay 18,132 Total Expenditures 69.571 133437 18.132 Excess [deficiency) of revenues over [under] expenditures [38,309J 24.801 [18,096J Other financing sources [usesJ Transfers in 58,031 Transfers [outJ Total other financing sources [uses] 58,031 J\jet change In fund balance [38,309J 24,801 58.031 [18.096J Fund balance, beginning of yea;' 42.665 [22,329) [58,031J 20.951 Fund balance end of year $ 4,356 $ 2.472 $ $ 2.855 Police Grants $ -$ 5.377 5.377 [5.377] [5377j i5344] $; fiO.721] <: '" War Federal DARE Memorial Arts & Care Donations Maintenance Humanities Grant Tota!s -$ -$ -$ -$ 317,297 23,482 520,055 368,607 1,115,913 6.250 5 101 1,089 5.394 70 70,850 72.293 75 101 464,028 2.037,202 797 944.962 1,616,170 153,730 70 666 288.275 25.000 4,399 529.401 70 797 944.962 666 2.616,975 5 [6961 [480.934] [666) [579.773] 489,358 547.389 [105,259J 489.358 442130 ~) [696! 842':: [666] [137,643J '1.737 35.950 147.536 ~: .955.449 "\.742 S 35.262 $ 155.960 $ f6661 S 1.817,806 See Independent auditor's report on the financial statements. 66 CITY OF SALINA, KANSAS COMBINING BALANCE SHEET NONMAJOR PERMANENT FUNDS December 31, 2011 Cemetery Mausoleum Tricentennial ASSETS Endowment Endowment Commission Cash and investments $ 419,040 $ 1,997 $ 5,704 Total assets $ 419,040 $ 1,997 $ 5,704 liABILITIES AND FUND BALANCES Liabilities Accounts payable $ $ $ Total liabilities Fund balances Committed 419,040 1.997 5.704 Total liabilities and fund balances $ 419.040 $ 1.997 $ 5.704 See independent auditor's report on the financial statements. 67 Total $ 426.741 $ 426,741 $ 426.741 $ 426.741 CITY OF SALINA. KANSAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR PERMANENT FUNDS For the Year Ended December 31.2011 Cemetery Mausoleum Tricentennial Endowment Endowment Commission Revenues Charges for services $ 9,109 $ -$ Investment revenue 1.155 6 Total revenues 10,264 6 Expenditures Miscellaneous ';lC; .......... Total expenditures 35 Net change In fund balance 10,229 6 Fund balances -beginning of year 408.811 1.991 Fund balances -end of year S; 419.040 $ 1,997 $ See Independent auditor's report on the financial statements. 68 - 16 16 16 5,688 5.704 Total $ 9,109 1,177 10,286 35 35 10,251 416.490 $ 426.741 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) BUSINESS IMPROVEMENT CITY FUND For the Year Ended December 31,2011 Budgeted Amounts Revenues Charges for services Community and economic development Interest income General interest Total revenues Expenditures Community Development Business Improvement District Total expenditures Excess [defiCiency) of revenues over [under] expenditures Unreserved fund balance, January 1 Unreserved fund balance, December 31 Reconciliation to GAAP Accounts receivable GAAP Fund Balance, December 3, $ $ Actual Original 84,511 $ 90,000 $ 20 500 84,531 90,500 84,531 90,578 84,531 90,578 [78J 78 -$ -$ 51.169 51 i 69 See independent auditor's report on the financial statements, 69 Final 90,000 500 90,500 90,578 90,578 [78J 78 - Variance with Final Budget Positive [Negative] $ [5,489) [480] [5,969J 6,047 6,047 78 [78) $ Revenues Charges for services Public works Interest Income General Interest Total revenues Expenditures Cash reserve Total expenditures CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) NEIGHBORHOOD PARK FUND For the Year Ended December 31, 2011 Budgeted Amounts Actual Original Final $ 6,250 $ 20.000 $ 20,000 6')0 ... v 4,000 4,000 6.879 24,000 24,000 258,146 258,146 258.146 258,146 Excess [aeflclency] of revenues over [under] expenditures 6.879 [234,146] Unreserved fund balance. January 1 222.255 234.146 Unreserved fund balance/GAAP fund baiance December 31 $ 229,134 $ -S; See Independent auditor's report on the financial statements. 70 [234.146J 234.146 - Variance with Final Budget ' Positive [Negative] $ [13,750] [3,371] [17,121] 258,146 258,146 241,025 [11,891J $ 229.134 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) SPECIAL PARKS AND RECREATION FUND For the Year Ended December 31,2011 Budaeted Amounts Actual Ongrnal Final Revenues Operating grants, restricted Culture and recreation S; 154,939 $ 160,000 $ Interest income General interest 220 4.000 Total revenues 155,159 164,000 Expenditures Debt Service PrinCipal 25,000 10.000 Interest and other charges 4,399 Capital Outlay 93,481 100.000 Cash Reserve 131.197 Total expenditures 122,880 241.197 Excess [deficiency] of revenues over [under] expenditures 32,279 [77,197J Other financing sources [uses] Transfer [out] [47.228] [30.000J Total other financing sources [uses] [47.2281 [30.000J Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] [14949] [107.197J Unreserved fund balance, January 1 60,185 107,197 Unreserved fund balance/GAAP fund balance December 31 $ 45.236 $ - $ See independent auditor's report on the financial statements. 71 160.000 4.000 164.000 10.000 100.000 131.197 241.197 [77.197] [30.000J [30,000J [1071971 107.197 - Variance with Final Budget Positive [Negative] $ [5,061] [3.780] [8,841] [15,000] [4.399] 6.519 131.197 118.317 109,476 [17228] [17.228J 92.248 [47,012J $ 45.236 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) SPECIAL ALCOHOL FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Revenues Operating grants, restricted Health and sanitation $ 153,566 $ 160,000 $ Interest income General interest 24 Total revenues 153.590 160.000 Expenditures Public Health and Sanitation Special alcohol 153.730 170.192 Total expenditures 153.730 170.192 Excess [deficiency) of revenues over [underJ expenditures [140J [10.192J Unreserved fund balance. January 1 144 10 192 Unreserved fund balance/GAAP fund balance December 31 S; 4 S; -S; See independent auditor's report on the financial statements 72 Final 160.000 160.000 170,192 170 192 [10.192J 10,192 - Variance with Final Budget Positive [Negative] $ [6,434) 24 [6,41 OJ 16,462 16.462 10.052 r10.048J $ 4 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) SALES TAX ECONOMIC DEVELOPMENT FUND For the Year Ended December 31, 2011 Budgeted Amounts Actual Onginal Final Revenues Taxes Selective sales tax $ 317,297 $ 315,120 $ Interest income General Interest 2.485 10.000 Total revenues 319,782 325,120 Expenditures Community Development Economic development 456,075 315,444 Cash Reserve 9.676 Total expenditures 456.075 325120 Excess [deficiency) of revenues over [under] expenditures [136.293] Unreserved fund balance. January 1 1.043.405 Unreserved fund balance, December 31 907,112 $ -S; Reconciliation to GAAP Current year encumbrances 50,000 GAAP Fund Balance. December 31 5) 957112 See Independent auditor's report on the financial statements. 73 315,120 10.000 325,120 315.444 9.676 325,120 - Variance with Final Budget Positive [Negativel $ 2,177 [7,515) [5,338] [140,631] 9.676 [130.955) [136,293J 1.043,405 $ 907,112 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) FAIR HOUSING FUND For the Year Ended December 31, 2011 Budgeted Amounts Actual Onginal Revenues Operating grants, restricted Community and economic development $ 31,203 $ 65,000 $ Interest income General interest 59 1,000 Total revenues 31,262 66.000 Expenditures Community Development Human relations 69,571 86.290 Total expenditures 69.57~ 86.290 Excess [deficiency] of revenues over [underJ expenditures [38,309J [20.290] Unreserved fund balance. January 1 42.665 20,290 Unreserved fund balance/GAAP fund balance December 31 $ 4.356 $ -$ See Independent auditor's report on the financial statements. 74 Final 65,000 1.000 66.000 86.290 86.290 [20,290J 20.290 - Variance with Final Budget Positive [Negative] $ [33,797] [941J [34,738J 16.719 16.719 [18019) 22.375 $ 4,356 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) ARTS & HUMANITIES FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Original Final Revenues Charges for services Culture and recreation $ 439,106 $ 371,904 $ 371,904 Operating grants. unrestncted Culture and recreation 23,482 18.000 18,000 Interest income General interest 1.089 2.000 2,000 Miscellaneous revenues Culture and recreation 350 20,095 20,095 Total revenues 464027 411.999 411.999 Expenditures Culture and Recreation Arts and humanities 574,704 579.804 579,804 Smoky Hill River Festival 364.071 365.200 365.200 Capital Outlay 6,186 7,000 7.000 Cash Reserve 98,787 98,787 Total expenditures 944.961 1.050.791 i .050.79~ Excess [deficiency] of revenues over [under] expenditures [480.934J [638.792) [638.792J Other finanCing sources [uses] Transfer IT: 489.358 489358 489.35E, Total other finanCing sources [uses) 489,358 489,358 489,358 Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] 8,424 [149.434] [149,434J Unreserved fund balance, January 1 147.536 149.434 149,434 Unreserved fund balance/GAAP fund balance December 31 $ 155,960 $ -$ - See independent auditor's report on the financial statements. 75 Variance with Final Budget Positive [Negative] $ 67,202 5,482 [911] [19.745J 52.028 5.100 1,129 814 98,787 105.830 157.858 157.858 [1,898] $ 155.960 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) DEBT SERVICE FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Onglnal Final Revenues Taxes Real estate taxes $ 2,723,262 $ 2,595,524 $ 2,595,524 Delinquent taxes 55,583 40,000 40,000 Motor vehicle taxes 205,866 268.955 268,955 Total taxes 2,984,711 2,904.479 2,904,4 79 Charges for services Special assessments 1.535.487 1.349.3i 1 U49.31 i Interest Income General Interest 5,131 10,000 10.000 Miscellaneous revenues General miscellaneous revenues 12,983 140,000 140,000 Other finanCing sources General sources 230.131 Total revenues 4768.443 4403,790 4403790 Expenditures Debt Service Principal 4,276,195 4,631.079 4.631,079 Interest and other charges I 771.580 1.833,997 1.833,997 Cash Reserve 403.283 403.283 Total expenditures 6.047.775 6.868.359 6,868.359 Excess [defiCiency] of revenue5 over [under] expenditures f1.279.332; [2.464,5691 f2.464.569) Other finanCing sources [uses: Transfer in 2.026,973 1.800,00G 1.800000 Transfer [out] [83,488) Total otherflnanclng sources iusesi 1 943485 1 800000 1.800000 Excess [defiCiency] of revenues and other sources over lunde~J expenditures and other [usesj 664,153 [664.569J [664.569J Unreserved fund balance. January 1 571,873 664.569 664.569 Unreserved fund balance/GAAP func balance December 31 1,236,026 $ $ - Reconciliation to G.LV"P Taxes receivable 2,441,349 Deferred revenue [2,392,245) GAAP Fund Balance, December 31 $ 1.285,130 See Independent auditor's report on the financial statements. 76 Variance with Final Budget Positive [Negative] $ 127,738 15,583 [63,089) 80.232 186.176 [4,869] [127,017] 230,131 364.653 354.884 62,417 403.283 820,584 1,185.237 226.973 [83,488) 143485 1,328,722 [92.696) $ 1,236.026 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN NET ASSETS -BUDGET AND ACTUAL (NON -GAAP BASIS) SOLID WASTE DISPOSAL FUND For the Year Ended December 31, 2011 Budgeted Amounts Actual Original Revenues Charges for services Health and sanitation $ 2,494,710 $ 2,107,000 Interest income General Interest 7,000 7,000 Interfund services provided Health and sanitation 453,672 505,300 Miscellaneous revenues Health and sanitation 24.491 42,310 Total revenues 2,979,873 2.661,610 Expenditures Public Health and Sanitation Solid waste 1,746.122 2033.262 Hazardous waste disposal 80.517 94.032 Total public health and sanitation 1,826.639 2.127.294 Debt Service PrinCipal 388,198 324,396 Interest 32,000 106.975 Total debt service 420.198 431,371 Capital Outiay 359.515 467.200 Cash Reserve 1.825,20-1 Total expenditures 2.606.352 4851.066 Excess [deficiency] of revenues over [under] expenditures 373.521 [2.189456'1 Other finanCing sources [uses] Transfers [out] [48.089) Total other finanCing sources [uses] [48.089) Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] 325,432 [2189,456] Unreserved fund balances, January 1 2,490,536 2,189,456 Prior year cancelled encumbrances 8,609 Unreserved fund balances, December 31 $ 2.824.577 $ - See independent auditor's report on the financial statements. 77 Final $ 2,107,000 7,000 505,300 42,310 2,661.610 2.033,262 94.032 2,127,294 324.396 106,975 431.371 467.200 1.825.201 4.851,066 [2.189.456J [2,189,456] 2,189,456 $ - Variance with Final Budget Positive [Negative] $ 387,710 [51,628] [17.819J 318.263 287,140 13.515 300655 [63,802] 74.975 11,173 107,685 1.825.201 2.244.714 2.562,977 148.0891 [48,0891 2.514,888 301,080 8,609 $ 2,824,577 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN NET ASSETS -BUDGET AND ACTUAL (NON -GAAP BASIS) WATER AND SEWER FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Onglnal Revenues Charges for services Water and wastewater $ 17.266,856 $ 16.321,884 Interest Income General interest 26.993 25,000 Operating grants, restncted Water and wastewater 201.700 Interfund services provided General services 28,061 30,900 Water and wastewater 95.097 Total Interfund services 123.158 30.900 Miscellaneous revenues General miscellaneous revenues 88 Water and wastewater 489,629 260.000 Total miscellaneous revenues 489717 260.000 Total revenues 18,108.424 16.637,784 Expenditures VV ater and Wastewater Water 10,153.314 9.029.002 Sewer 2.705.205 2.784,556 Total water and wastewater 12.858.519 11,813,558 Capital Outlay 3.976.377 1.877.350 Cash Reserve 6.497 ~05 Total expend itures 16.834896 20.188.013 Excess [defiCiency] of revenues over [underl expenditures 1.273.528 [3.550,229J :::ltner financing sources fuses1 Transfers [out] [-, .005.352' f3.804.546; Total other financing sources [uses] 11,005.352] [3,804,546J Excess [defiCiency] of revenues and other sources over [underJ expenditures and other [uses] 268,176 [7.354775] Unreservea funa oalances, January 1 9,699,890 7,354,775 Prior year cancelled encumbrances 20.388 Unreserved fund balances, December 31 $ 9,988,454 $ - See Independent auditor's report on the financial statements 78 Final $ 16.321.884 25,000 30,900 30,900 260,000 260,000 16.637,784 9.029.002 2.784,556 11.813.558 1,877,350 6.497.105 20.188,013 [3.550,2291 [3.804546; [3.804 546] [7,354,775] 9.699,890 $ 2,345,115 Variance with Final Budget Positive £.Negative] $ 944,972 1,993 201,700 [2,839) 95,097 92,258 88 229,629 229.717 1,470.640 [1 124,312] 79,351 [1,044,961) [2.099,027] 6,497.105 3,353.117 4 823757 2799,19-' 2,799,194 7,622,951 20,388 $ 7,643,339 Revenues CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN NET ASSETS -BUDGET AND ACTUAL (NON -GAAP BASIS) SANITATION FUND For the Year Ended December 31. 2011 Budgeted Amounts Original Final Variance with Final Budget Positive [Negative] Charges for services Health and sanitation $ 2,342,291 $ 2.316,885 $ 2,316,885 $ 25,406 Interest income General interest Charges for services Miscellaneous revenues Total revenues Expenditures Public Health and Sanitation Sanitation Capital Outlay Cash Reserve Total expenditures Excess [deficiency) of revenues over [under] expenditures Unreserved fund balance. January 'I Unreserved fund balances, December 31 1,839 424 2,344.554 2.179.431 132 110 2.311.541 33.013 581,811 S, 614.824 3,500 3,500 2,320.385 2.320.385 2.163.312 2.163.312 158,000 158,000 525,425 525,425 2.846,737 2.846,737 [526.352] [526.352] 526,352 526,352 $ - $ - See independent auditor's report on the financial statements. 79 [1,661] 424 24,169 [16,119] 25.890 525,425 535,196 559.365 55.459 $ 614.824 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN NET ASSETS -BUDGET AND ACTUAL (NON -GAAP BASIS) GOLF COURSE FUND For the Year Ended December 31. 2011 Revenues Charges for services Culture and recreation Interest income General interesi Miscellaneous revenues General miscellaneous revenues Culture and recreation Total miscellaneous revenues Total revenues Expenditures Culture and Recreation Golf course Debt Service Cash Reserve Total expenditures Excess [deficiency] of revenues over [under] expenditures Other finanCing sources [uses] Transfers in Totai other finanCing sources [uses: Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] Unreserved fund balances, January'; S; Actual 636,202 36 1,562 48.618 50,180 686,418 760,384 15,724 776.108 [89.690J 47.228 47.22e [42.462] 43.462 Budgeted Amounts Original Final $ 777,500 $ 777,500 200 200 1,000 1,000 40,000 40.000 41.000 41,000 818.700 818.700 752.160 752,160 16,000 16,000 173.493 173.493 941.653 941.653 [122.953J r122.953J [122,953] [122,953] 122.953 122,953 Variance with Final Budget Positive [Negative] $ [141,298) [1641 562 8,618 9.180 [132.282] [8224] 276 173.493 165.545 33.263 47.228 .1.7,228 80.491 [79,4911 Unreserved fund balances, December 34 5) 1.000 $ -$ -S; 1,000 ========= ========= ~====~== See independent auditor's report on the financial statements. 80 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) RISK MANAGEMENT FUND For the Year Ended December 31,2011 Revenues Interest income General interest Interfund services provided General services Miscellaneous revenues General miscellaneous revenues Total revenues Expenditures Other Risk management Capital Outlay Cash Reserve Total expenditures Excess [defiCiency) of revenues over [under] expenditures Unreserved fund balance, January! Actual $ - 374,708 176,298 551,006 532,771 138 532,909 18.097 49.848 Budgeted Amounts Onginal Final $ 1,400 $ - 374,708 374,708 40,200 177,500 416,308 552,208 424,651 549,000 1,000 1,000 74.037 499,688 550,000 [83.380] 2,208 83.380 49.847 Variance with Final Budget positive [Negative] $ [1,202) [1,202J 16.229 862 17,091 15,889 Unreserved fund balance. December 31 $ 67.945 $ -$ .::.-----52,055 $ 15.890 ,;:;".----- See independent auditor's report on the financial statements 81 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) WORKERS' COMPENSATION RESERVE FUND For the Year Ended December 31,2011 Budgeted Amounts Actual Oriainal Revenues Interest income General interest $ 1,937 $ 2.500 $ Interfund services provided General services 229.452 229.435 - Miscellaneous revenues General miscellaneous revenues 1.444 Total revenues 232,833 231.935 Expenditures Other Worker's com pensation 334.210 297,762 Cash Reserve 638.936 Total expenditures 334.210 936.698 Excess [deficiency) of revenues over [under] expenditures [101,377) [704.763) Unreserved fund balance, January 1 621 629 704.763 Unreserved fund balance. DecemDer 31 $ 520,252 $ -;p See Independent auditor's report on the financial statements 82 Final 2,500 229.435 231.935 297.762 638.936 936.698 [704,763] 704.763 - Variance with Final Budget Positive [Negative] $ [563) 17 1,444 898 [36,448] 638,936 602.488 603.386 r83.134] $ 520,252 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) HEALTH INSURANCE FUND Revenues Interest income General interest Interfund Services Provided General services Miscellaneous revenues General miscellaneous revenues Total revenues Expenditures Other Health insurance Cash Reserve For the Year Ended December 31, 2011 Budgeted Amounts Actual Original Final $ 4,904 $ 5,000 $ 5.000 6,304,144 6,620,000 6,620.000 52.285 6.361,333 6,625.000 6,625,000 5.947.148 6.913.677 6,913.677 1,503.185 1.503.185 Variance with Final Budget Positive [Negative] $ [96J [315,856J 52.285 [263,667J 966.529 1.503,185 Total expenditures 5.947.148 8.416.862 8,416,862 2.469.714 Excess [deficiency] of revenues over [underJ expenditures Unreserved fund balance, January 1 Unreserved fund balance. December 31 414.185 [1.791.862] [1.791,862] 2,206.047 1.501 522 1 }91 ,862 1 791.862 [290 340) 5) 1.915.707 $ -$ -$ 1,915.707 See independent auditor's report on the financial statements. 83 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) CENTRAL GARAGE FUND For the Year Ended December 31,2011 Budgeted Amounts Revenues Interest Income General interest Interfund services provided General services Miscellaneous revenues General miscellaneous revenues Total revenues Expenditures Other Central garagE- Capital Outlay Cash Reserve Totai expenditures Excess [defiCiency] of revenues over [under] expenditures Other finanCing sources [usesj Transfers in :::y.cess [defiCiency} of revenue~. ana other finanCing sources over [unde,: expenditures and other finanCing [uses] Unreserved fund balance. January 1 Unreserved fund baiance: December 3~ $ (J' '" Actual Onglnal 423 $ 4,000 <t 0' 1,629,328 1,490,000 22,298 4.000 1.652.0<19 1,498,000 1.697,373 1,<154.727 4495 250 161.091 1.701,868 1 616,068 [49,819j I': 'i8 068j 60000 30.000 10 181 [88063: 89.819 88,062- 100.000 $ -3) See independent auditor'S report on the financial statements 84 Final 4,000 1,485.942 138,058 1.628.000 1.716,068 1.716068 [88.068; [88,068J 89,88S 1.821 Variance with Final Budget Positive INegatlve] $ [3.577] 143,386 [115.760] 24,049 18,695 [4,495] 14.200 38.2<19 60.000 98,249 r"'7n-: (I VJ g; 98.179 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) INFORMATION SYSTEMS FUND For the Year Ended December 31.2011 Budgeted Amounts Actual Original Final Revenues Charges for services General charges $ 106,305 $ 106,000 $ 106,000 Interest income General interest 1,182 500 500 Interfund services provided General services 1,237,220 1.258,760 1,258,760 Miscellaneous revenues General miscellaneous revenues 2,889 2,889 Total revenues 1.344.707 1.368,149 1.368.149 Expenditures Other Information services 1,162.756 977,978 977,978 Capital Outlay 113.789 351,000 351.000 Cash Reserve 105.703 105,703 Total expenditures 1.276.545 1,434.681 1.434,681 Excess [deficiency) of revenues over [under] expenditures 68.162 [66,532) [66,532J Unreserved fund balance, January 1 91,838 66.532 66.532 Unreserved fund balance, December 31 $ 160.000 $ -$ - See independent auditor's report on the financial statements. 85 Variance with Final Budget Positive [Negative] $ 305 682 [21,540] [2.889] [23.442) [184.778] 237.211 105.703 158.136 134.694 25.306 $ 160,000 CITY OF SALINA, KANSAS INTERNAL SERVICE FUNDS Internal service funds are used to account for the financing of goods or services provided by one agency to other departments or agencies of the government and to other governmental units on a cost reimbursement basis. Risk management fund -To account for the accumulation and allocation of costs associated with risk management activities and the purchase of various forms of insurance. Workers' compensation reserve fund -To account for the costs of providing a partially self-insured workers' compensation plan and for accumulating the necessary reserve amounts. Health insurance fund -To account for the costs of providing a partially self-insured health insurance and for accumulating the necessary reserve amounts. Central garage fund -To account for the accumulation and allocation for costs associated with the City's centraiized vehicle repair shop. Information services fund -To account for the accumulation and allocation of costs associated with electronic data processing. 86 CITY OF SALINA KANSAS COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS December 31, 2011 Workers' Risk Compensation Health ASSETS Management Reserve Insurance Current assets Cash and Investments $ 171,559 $ 649,238 $ 1,916.207 Inventory and prepaid supplies Total current assets 171,559 649.238 1.916,207 Capital assets Capital assets Less accumulated depreCiation Total capital assets Total assets $ 171.559 $ 649,238 $ 1 916,207 Liabilities Current liabilities (payable from current assets) Accounts payable $ 7.351 $ 50 500 Current portion of compensated absences payable Current portion of accrued claims payable 172.545 391.175 Total current liabilities (payable from current assets) 7.351 172545 391.675 Noncurrent liabilities Compensated absences pavable Accrued claims payable 149.245 10tal noncurrent liabilities 149.245 Total liabilities S, 7.3:';1 S; 321.790 Si 391,675 Net Assets Invested In capital assets, net of related debt ~ ~ S; Unrestricted 164208 327448 1.524532 Total net assets 5> 164208 $ 327448 $ 1 524.532 See Independent auditor's report on the financial statements 87 Total Internal Central Information Service Garage Systems Funds $ 150.383 $ 201.820 $ 3,089,207 115.694 115.694 266,077 201.820 3.204.901 189.424 677.214 866,638 161.634 677.214 838.848 27,790 27,790 S; 293.867 5, 201.820 $ 3.232.691 $ 50.383 S 41.820 S 100.054 7.075 10,309 17.384 563,720 57458 52.129 681 158 30.500 44440 74.940 14924:'; 30.500 44440 224 185 s: 87.958 S 9656? S; 905.343 S; 27.790 $ $ 27790 178119 105 251 2299.558 $ 205.909 $ 105 251 $ 2.327.348 CITY OF SALINA, KANSAS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS INTERNAL SERVICE FUND For the Year Ended December 31. 2011 Workers' Risk Compensation Health Central Manaaement Reserve Insurance Garage Operating revenues Charges for services $ 374,708 $ 229.451 $ 6,304,144 $ 1,629.328 Miscellaneous 176.298 1.444 52,285 21.169 Total operating revenues 551,006 230,895 6.356.429 1,650.497 Operating expenses General government 436.645 230417 5.955,821 1.710.911 Depreciation 4.698 Total operating expenses 436.645 230417 5.955.821 1.715.609 Operating Income [loss] 114.361 478 400.608 [65.112] Other operating revenues [expenses] Investment Income 1937 4904 423 Total other operating revenues [expenses] "1,937 4.904 423 Nonoperating revenues [expenses] Galn/[Ioss] on disposal of fixed assets 1.129 Total nonoperating revenues [expenses] 1 129 Income [loss] before transfers 114.361 2415 405.512 [63.560] Transfers from [to] other funds T ra nsfers In 60.000 Total transfers 60.000 Change In net assets 114.361 2.415 405.512 [3560] Net assets January 1 49847 325032 , 119.02C 205.887 Restatement 3.582 Net assets January 1 restated 49.847 325032 1 '19.020 209469 l\iet assets Decembe: 3'1 '" 164.200 :t 327 44e S ~ 524.532 " 20590S See Independent auditor's report on the finanCial statements 88 Total Internal Information Service S;rstems Funds $ 1,343.525 $ 9.881,156 251.196 1.343,525 10,132.352 1.277,484 9.611,278 4,698 1.277.484 9.615,976 66.041 516.376 1 182 8446 1 182 8446 1.129 1 129 67.223 525.951 60.000 60.000 67.223 585.951 38.02(; 'i 737,81E; 3.582 38.028 1741.397 1 0~.25' 2327348 CITY OF SALINA, KANSAS COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the Year Ended December 31, 2011 Workers' Risk Compensation Health Management Reserve Insurance Cash flows from operating actiVities Cash received from customers and users S, 374,708 $ 125.659 $ 6.312,817 Cash paid to suppliers of goods or services [440,965] [230,417] [5.955,771] Cash paid to employees Other operating receipts 176.298 1444 52,285 Net cash proVided by [used In] operating acltviltes 110,041 [103,314) 409.331 Cash flows from capital and related finanCing actiVities Proceeds from sale of capital assets Cash flows from Investing actiVities Interest received 1,937 4,904 Cash flows from noncapital finanCing activities Transfers In Net Increase [decrease] In cash and cash eqUivalents 110,041 [101,377] 414.235 Cash and cash eqUivalents, January 1 61.518 750,615 1,501,972 Cash and cash eqUivalents, December 31 S, 171,559 S, 649.238 $1,916.207 See Independent auditor's report on the financial statements 89 Total internal Central Information Service Garaqe Services Funds $1,629,329 $1,343,525 $ 9.786.038 [1 ,462,573] [866,093] [8,955,819] [230.042] [401,446] [631,488] 21,169 251.196 [42.117) 75.986 449.927 1,129 1,129 422 1182 8,445 60,000 60,000 19,434 77.168 519.501 130,949 124,652 2.569,706 $ 150,383 $ 201,820 $ 3,089.207 CITY OF SALINA. KANSAS COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS (Continued) For the Year Ended December 31,2011 Reconciliation of operating [lossJ Income to net cash provided by [used InJ operating activities Workers' Risk Compensation Health Manaqement Reserve Insurance Total Internal Central Information Service Garaqe Services Funds Operating Income [lossJ $ 114.361 $ 478 $ 400,608 $ [65.112J $ 66,041 $ 516.376 Adjustments to reconcile operating Income [iossJ to net cash provided by [used InJ operating activities Depreciation expense [lncreaseJ decrease In Inventory Increase [decreaseJ In accounts payable Increase [decreaseJ In accrued compensated absences Increase [decreaseJ In claims payable Net cash provided by [used In] operating activities S [4320] 50 [103792J 8.673 110.04" S (103314) S; 409331 See Independent audltor's report on the financial statements 90 4.698 4.698 6,646 6,646 9.296 9.006 14032 2,355 939 3,294 [95119J :;; [42117) :;; 75986 $ 449927 CITY OF SALINA, KANSAS AGENCY FUNDS Agency funds are used to account for assets held by the govemment as an agent for individuals. private organizations, other governments and/or other funds. Special assessment escrow agency fund -To account for property owners' prepayment on outstanding special / assessments. Fire insurance proceeds agency fund -To account for Insurance proceeds received for severely damaged buildings the insurance proceeds, plus interest, are retumed to the property owners when the buildings are repaired or demolished. PEGS access agency fund -To account for revenues collected on behalf of the community access television system for public, educational and governmental programming. Payroll clearing agency fund -To account for interfund payroll receivables and payables for all City funds. Court bond and restitution agency fund -To account for bonds and restitution remitted to the court and awaiting court orders for distribution. Pollee Investrgatlon account agency fund -To account for monies held by the police department for use In Investigations Fire cam agency fund -To account for donations received and used for fire equipment Citizenship agency fund -To account for donations received and used for the citizenship fund. Section 125 plan agency fund -To account for monies held for the Section 125 plan 91 Special Assessment Escrow ASSETS Cash and Investments $ 135.344 Total assets $ 135,344 LIABILITIES Accounts payable Si 135,344 Total liabilities $ 135.344 CITY OF SALINA KANSAS COMBINING BALANCE SHEET AGENCY FUNDS December 31 , 2011 Fire Court Police insurance PEGS Payroll Bond and Investigation Fire Proceeds Access Clearing Restitution Account Cam $ 10.316 $ 5103 $ [251 05:0 $ 70.921 $ 2.125 $783 $ 10.316 $ 5.103 $ [251.057) $ 70.921 Si 2.125 $783 Si 10.316 $ 5103 Si [251.0571 $ 70.921 Si 2,125 $783 Si 10.316 $ 5.103 $ [251.057) Si 70.921 $ 2125 $783 See Independent auditor's report on the financial statements 92 Section 125 CltlzenshlQ Plan Totals :; 3,702 $ 336,063 Si 313300 $ 3.702 $ 336 063 $ 313.300 $ 3.702 $ 336,063 $ 313,300 $ 3702 $ 336,063 $313,300 CITY OF SALINA, KANSAS COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS For the Year Ended December 31, 2011 Balance December 31, 2010 Additions Deductions Cash and Investments Special Assessment Escrow $ 328,828 $ 5,336 $ Fire Insurance Proceeds 5,062 41,952 PEGS Access 5,071 285,273 Payroll Clearing [246,521] Court Bond and Restitution 74,831 Police Investigation Account 2,307 Fire Cam Fund 780 3 Citizenship Trust 3,692 10 Section 125 Plan Fund 339,549 349,775 Total Assets $ 513,599 $ 682,349 $ Accounts Payable Special Assessment Escrow ". 328.828 $ 5.336 $ ~ Fire Insurance Proceeds 5.062 41.952 PEGS Access 5.071 285.273 Payroll Clearing [246,521 J Court Bond and Restitution 74,831 Police Investigation Account 2.307 Fire Cam Fund 780 3 Citizenship Trust 3.692 10 Section 125 Plan Fund 339.549 349.775 Total liabilities $ 513,599 $ 682.349 $ See independent auditor's report on the financial statements. 93 198,820 36,698 285,241 4,536 3,910 182 353.261 882.648 198,820 36,698 285,241 4.536 3,910 182 353,261 882.648 Balance Decem ber 31 , 2011 $ 135,344 10,316 5,103 [251.057] 70,921 2,125 783 3.702 336.063 $ 313.300 $ 135,344 10.316 5.103 [251.057J 70.921 2.125 783 3,702 336.063 $ 313.300 12-0130 12-0131 12-0132 12-0133 12-0135 CITY OF SALINA, KANSAS REGULAR MEETING OF THE BOARD OF COMMISSIONERS June 11,2012 4:00p.m. The City Commission convened at 3:00 p.m. in a Study Session on Budgetary Goals. The Regular Meeting of the Board of Commissioners was called to order at 4:00 p.m. in Room 107, City-County Building. A roll call was taken followed by the Pledge of Allegiance and a moment of silence. There were present: Mayor Norman M. Jennings, Presiding Officer; Commissioner Samantha P. Angell; Commissioner Kaye J. Crawford; Commissioner Aaron Householter; Commissioner Barb Shirley ADMINISTRATION (8.3) General Obligation Bonds and Temporary Notes (8.3a) (8.3b) (8.3c) (8.3d) Resolution No. 12-6909 formalizing and adopting a Tax and Securities Compliance Procedure. Resolution No. 12-6910 authorizing the offering for public sale of general obligation temporary notes and bonds. First reading Ordinance No. 12-10642 authorizing the issuance and delivery of general obligation bonds, Series 2012-A. First reading Ordinance No. 12-10644 authorizing the issuance and delivery of general obligation bonds, Series 2012-B. Moved by Commissioner Angell, seconded by Commissioner Crawford, to adopt Resolution No. 12- 6909. Aye: (5). Nay: (0). Motion carried. Moved by Commissioner Angell, seconded by Commissioner Shirley, to adopt Resolution No. 12-6910. Aye: (5). Nay: (0). Motion carried. Moved by Commissioner Angell, seconded by Commissioner Crawford, to pass Ordinance No. 12- 10642 on first reading. Aye: (5). Nay: (0). Motion carried. Moved by Commissioner Angell, seconded by Commissioner Shirley, to pass Ordinance No. 12-10644 on first reading. Aye: (5). Nay: (0). Motion carried. ADJOURNMENT Moved by Commissioner Householter, seconded by Commissioner Shirley, that the regular meeting of the Board of City Commissioners be adjourned. Aye: (5). Nay: (0). Motion carried. The meeting adjourned at 5:50 p.m. [SEAL] ATTEST: b/ LUu.vA vvvv E4ey Lieu Ann Elsey, CMC, City Clerk (¥I Normvwv}vf. T~ Norman M. Jennings, Mayor I hereby certify that the foregoing is a true correct excerpt of the action taken by the Governing Body at its regular meeting on June 11, 2012 regarding Resolution Numbers 12-6909 and 12-6910 and first reading of Ordinance Numbe", 12-10642 ",d 12-10644. ~ Lieu Ann Elsey, City Clerk Page 1 EXCERPT OF MINUTES OF A MEETING OF THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS HELD ON JULY 9, 2012 The governing body met in regular session at the usual meeting place in the City, at 4:00 p.m., the following members being present and participating, to-wit: Norman M. Jennings, Mayor and Samantha Angell, Barb Shirley, Kaye Crawford and Aaron Householter, Commissioners. Absent: None. The Mayor declared that a quorum was present and called the meeting to order. ************** (Other Proceedings) The Finance Director reported that pursuant to the Notice of Bond Sale heretofore duly given, bids for the purchase of General Obligation Refunding Bonds, Series 2012-B, dated July 15,2012, of the City had been received. A tabulation of said bids is set forth as EXHIBIT A hereto. Thereupon, the governing body reviewed and consIdered the bids and it was found and determined that the bid of VMB Bank, N.A. Kansas City, Missouri. was the best bid for the Bonds, a copy of which is attached hereto as EXHIBIT B. Thereupon, there was presented an Ordinance entitled: AN ORDINANCE AUTHORIZING AND PROVIDING FOR THE ISSUANCE OF GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012-B, OF THE CITY OF SALINA, KANSAS, FOR THE PURPOSE OF PROVIDING FUNDS TO REFUND A PORTION OF THE CITY'S OUTSTANDING GENERAL OBLIGATION BONDS; PROVIDING FOR THE LEVY AND COLLECTION OF AN ANNUAL TAX FOR THE PURPOSE OF PAYING THE PRINCIPAL OF AND INTEREST ON SAID BONDS AS THEY BECOME DUE; AUTHORIZING CERTAIN OTHER DOCUMENTS AND ACTIONS IN CONNECTION THEREWITH; AND MAKING CERTAIN COVENANTS WITH RESPECT THERETO. Thereupon, Commissioner Shirley moved that said Ordmance be passed. The motion was seconded by Commissioner Crawford. Said Ordinance, having been approved by a first reading on June 11,2012, was duly read and considered, and upon being put, the motion for the passage of said Ordinance was carried by the vote of the governing body, the vote being as follows: Yea: Jennings, Angell, Crawford, Householter, Shirley. Nay: None. Thereupon, the Mayor declared said Ordinance duly passed and the Ordinance was then duly numbered Ordinance No. 12-10644, was signed and approved by the Mayor and attested by the Clerk and was directed to be published one tIme in the official newspaper of the City. Thereupon, there was presented a Resolution entitled: A RESOLUTION PRESCRIBING THE FORM AND DETAILS OF AND AUTHORIZING AND DIRECTING THE SALE AND DELIVERY OF GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012-B, OF THE CITY OF SALINA, KANSAS, PREVIOUSLY AUTHORIZED BY ORDINANCE NO. 12- 10644 OF THE ISSUER; MAKING CERTAIN COVENANTS AND AGREEMENTS TO PROVIDE FOR THE PAYMENT AND SECURITY THEREOF; AND AUTHORIZING CERTAIN OTHER DOCUMENTS AND ACTIONS CONNECTED THEREWITH. Thereupon, Commissioner Angell moved that said Resolution be adopted. The motion was seconded by Commissioner Shirley. Said Resolution was duly read and considered, and upon being put, the motion for the adoption of said Resolution was carried by the vote of the governing body, the vote being as follows: Yea: Jennings, Angell, Crawford, Householter, Shirley. Nay: None. Thereupon, the Mayor declared said Resolution duly adopted and the Resolution was then duly numbered ResolutlOn No. 12-6918 and was signed by the Mayor and attested by the Clerk. ************** (Other Proceedings) [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 2 On motion duly made, seconded and carried, the meeting thereupon adjourned. CERTIFICATE I hereby certifY that the foregoing Excerpt of Minutes is a true and correct excerpt of the proceedings of the governing body of the City of Salina, Kansas, held on the date stated therein, and that the official minutes of such proceedings are on file in my office. (SEAL) ~ (Signature Page to Excerpt of Minutes -July 9,2012 -Series B) EXHIBITA BID TABULATION CITY OF SALINA, KANSAS GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B A-I PARITY Result Screen https:l/www.newissuehome.i-deal.com/Parity/asp/main.asp?frame=co ... 3:37:01 p.m. CDST Bid Results 1 of 1 Salina $3,760,000 General Obligation Refunding Bonds, Series 2012-8 The following bids were submitted using PARI-rv® and displayed ranked by lowest TIC. Click on the name of each bidder to see the respective bids. Bid Award* Bidder Name TIC 1mB UMB Bank N.A. 0.965319 Iti!I Count!}' Club Bank 1.020467 ~ FTN Financial CaQital Markets 1.127513 Ill!! RobertW. Baird & Co., Inc. 1.132043 [[IJ Hutchinson, Shockey, Erle~ & Co. 1.163405 IIllI Stifel, Nicolaus & Co., Inc. 1.223700 * Awarding the Bonds to a specific bidder will provide you with the Reoffering Prices and Yields. © 1981-2002 i-Deal LLC, All rights reserved, Trademarks 7112/20123:37 PM EXHIBITB BID OF PURCHASER B-1 PARITY Bid Form https:llwww.newissuehome.i-deal.comIParity/asp/main.asp?frame=co ... I of 1 UMB Bank N.A. -Kansas City. MO's Bid Salina $3,160,000 General Obligation Refunding Bonds, Series 2012-8 ~ For the aggregate principal amount of $3.760.000.00, we will pay you $3.775,416.00. plus accrued interest from the date of issue to the date of delivery. The Bonds are to bear interest at the following rate(s)· Maturity Date Amount $ Coupon % Bond Insurance 10/0112013 370M 1.0000 10/01/2014 935M 1.0000 10/0112015 625M 1.0000 10/01/2016 460M 1.0000 10/01/2017 485M 1.0000 10/01/2018 470M 1.0500 10/01/2019 235M 1.2000 10/01/2020 180M 1.4000 Total Interest Cost: $161.548.61 Premium: $15,416.00 Net Interest Cost: $146.132.61 TIC: 0.965319 Total Insurance Premium: $0.00 Time Last Bid Received On:07109/2012 12:49:13 COST This proposal is made sUbject to all of the terms and conditions of the Official Bid Form. the Official Notice of Sale. and the Preliminary Official Statement. ali of which are made a part hereof. Bidder: UMB Bank NA. Kansas City. MO Contact: Kristin Koziol Title: VP Telephone:816-860-7223 Fax: 816-843-4325 Issuer Name: ~aJina ~1' A=pred B~ 4ft:t df- 7' Date: Company Name: UMB Bank, n.a. Accepted By: Date: 7/9/12 C 1981-2002 ~Deal LLC, All rights reserved. Tredemarks -K .$''',,",-e.-of.:; ~12... '\~~-e.""5 O~ +~~5 f~e {;..fJ{V<-. cJ\ .. ~.,e..A A. 't... 12... *' 0 *-lu:... re ->"; "L: "1 () \-+, c... .b ~ '" ~ I r .r t..,.e. • ;> { .e.e.;.e... 5~.c.. ~~ ~*<c4..e.J. fCUJe.. .f.$),,-~ 'LJ2.<...> ~~ ~.e"..r. 7/9/2012 1:57 PM City of Salina, Kansas General Obligation Refunding Bonds Series 2012-B (Refunding) Pricing Summary Type of Maturity Maturity Bond Coupon Yield Value Price Dollar Price 10/0112013 Serial Coupon 1.000% 0,400% 385,000.00 100.705% 387,714.25 10/0112014 Serial Coupon 1.000% 0.450% 940,000.00 101.191% 951,195.40 10/0112015 Serial Coupon 1.000% 0.550% 625,000.00 101.416% 633,850.00 10/0112016 Serial Coupon 1.000% 0.700% 460,000,00 101.233% 465,671.80 10/0112017 Serial Coul!on 1.000% 0.850% 485,000.00 100.758% 488,676.30 10/0112018 Serial Coupon 1.050% 1.050% 475,000.00 100.000% 475,000.00 10/0112019 Serial Coupon 1.200% 1.200% 235,000.00 100.000% 235,000.00 10/0112020 Serial Coupon 1.400% 1.400% 180,000.00 100.000% 180,000.00 Total -- -$3,785,000.00 -53,817,107.75 Bid Information Par Amount of Bonds $3,785,000.00 Reoffering Premium or @iscount) -32,107.75 Gross Production $3,817,107.75 Total Underwriter's Discount (0.440%2 $(16,636.32) Bid (100.409%2 3,800,471.43 Accrued Interest from 07/1512012 to 0712612012 1,200.15 Total Purchase Price $3,801,671.58 Bond Year Dollars $15,139.06 Average Life 4.000 Years Average Coupon 1.0711825% Net Interest Cost (NIC) 0.9689871% True Interest Cost (TIC) 0.9646257% Series 2012 8ggregale 07-I Refunding I 7/912012 I 1:33 PM George K. Baum & Company Public Finance (BH) Page 9 ORDINANCE NO. 12-10644 OF THE CITY OF SALINA, KANSAS PASSED JULy 9, 2012 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B (PUBLISHED IN THE THE SALINA JOURNAL ON ORDINANCE NO. 12-10644 AN ORDINANCE AUTHORIZING AND PROVIDING FOR THE ISSUANCE OF GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012-B, OF THE CITY OF SALINA, KANSAS, FOR THE PURPOSE OF PROVIDING FUNDS TO REFUND A PORTION OF THE CITY'S OUTSTANDING GENERAL OBLIGATION BONDS; PROVIDING FOR THE LEVY AND COLLECTION OF AN ANNUAL TAX FOR THE PURPOSE OF PAYING THE PRINCIPAL OF AND INTEREST ON SAID BONDS AS THEY BECOME DUE; AUTHORIZING CERTAIN OTHER DOCUMENTS AND ACTIONS IN CONNECTION THEREWITH; AND MAKING CERTAIN COVENANTS WITH RESPECT THERETO. WHEREAS, the City of Salina, Kansas (the "City") is a city of the fIrst class, duly created, organized and existing under the Constitution and laws of the State; and WHEREAS; the City heretofore issued and has outstanding the Refunded Bonds and is authorized by K.S.A. 10-427 et seq. to issue general obligation refunding bonds of the City for the purpose of refunding the Refunded Bonds; and WHEREAS, in order to achieve interest cost savings through early redemption of the Refunded Bonds and provide an orderly plan of fInance for the City, it has become desirable and in the best interest of the City and its inhabitants to refund the Refunded Bonds; and WHEREAS, the governing body of the City has advertised the sale of the Bonds in accordance with the law and at a meeting held in the City on this date awarded the sale of such Bonds to the best bidder. NOW, THEREFORE, BE IT ORDAINED BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS, AS FOLLOWS: Section 1. Definitions of Words and Terms. ill addition to words and terms defIned elsewhere herein, the following words and terms in this Ordinance shall have the meanings hereinafter set forth. Unless the context shall otherwise indicate, words importing the singular number shall include the plural and vice versa, and words importing persons shall include fInns, associations and corporations, including public bodies, as well as natural persons. "Act" means the Constitution and statutes of the State including K.S.A. 10-101 to 10-125, inclusive, K.S.A. 10-427 et seq., and K.S.A. 10-620 et seq., all as amended and supplemented from time to time. "Bond and Interest Fund" means the Bond and Interest Fund of the City fo· obligation bonds. 1 "Bond Resolution" means the resolution to be adopted by the governing body of the City prescribing the terms and details of the Bonds and making covenants with respect thereto. "Bonds" means the City's General Obligation Refunding Bonds, Series 2012-B, dated July 15, 2012, authorized by this Ordinance. "City" means the City of Salina, Kansas. "Clerk" means the duly appointed and acting Clerk of the City or, in the Clerk's absence, the duly appointed Deputy, Assistant or Acting Clerk. "Mayor" means the duly elected and acting Mayor of the City or, in the Mayor's absence, the duly appointed and/or elected Vice Mayor or Acting Mayor ofthe City. "Ordinance" means this Ordinance authorizing the issuance of the Bonds. "Refunded Bonds" means collectively: (a) the Series 2003-A Bonds maturing in the years 2014 to 2018, inclusive, in the aggregate principal amount of $1,125,000; (b) the Series 2004-B Bonds maturing in the years 2013 to 2019, inclusive, in the aggregate principal amount of $1,010,000; and (c) the Series 2005-A Bonds maturing in the years 2014 to 2020, inclusive, in the aggregate principal amount of$1,S3S,000. "Series 2003-A Bonds" means the City's General Obligation Internal Improvement Bonds, Series 2003-A, dated July 15,2003. "Series 2004-B Bonds" means the City's General Obligation Internal Improvement Bonds, Series 2004-B, dated July 15,2004. "Series 2005-A Bonds" means the City's General Obligation Internal Improvement Bonds, Series 200S-A, dated July 15,2005. "State" means the State of Kansas. Section 2. Authorization of the Bonds. There shall be issued and hereby are authorized and directed to be issued the General Obligation Refunding Bonds, Series 2012-B, of the City in the principal amount of $3,785,000, for the purpose of providing funds to: (a) refund the Refunded Bonds; and (b) pay costs of issuance of the Bonds. Section 3. Security for the Bonds. The Bonds shall be general obligations of the City payable as to both principal and interest in part from special assessments levied upon the property benefited by the construction of the Improvements and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The balance of the principal and interest on the Bonds is payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The full faith, credit and resources of the City are hereby irrevocably pledged for the prompt payment of the principal of and interest on the Bonds as the same become due. Section 4. Terms, Details and Conditions of the Bonds. The Bonds shall be dated and bear interest, shall mature and be payable at such times, shall be in such forms, shall be subject to redemption and payment prior to the maturity thereof, and shall be issued and delivered in the manner prescribed and 2 subject to the provisions, covenants and agreements set forth in the Bond Resolution hereafter adopted by the governing body of the City. Section 5. Levy and Collection of Annual Tax. The governing body of the City shall annually make provision for the payment of principal of, premium, if any, and interest on the Bonds as the same become due by levying and collecting the necessary taxes and/or assessments upon all of the taxable tangible property within the City in the manner provided by law. The taxes and/or assessments above referred to shall be extended upon the tax rolls in each of the several years, respectively, and shall be levied and collected at the same time and in the same manner as the general ad valorem taxes of the City are levied and collected, shall be used solely for the payment of the principal of and interest on the Bonds as and when the same become due and the fees and expenses of the Paying Agent. The proceeds derived from said taxes and/or assessments shall be deposited in the Bond and Interest Fund. If at any time said taxes and/or assessments are not collected in time to pay the principal of or interest on the Bonds 'when due, the Treasurer is hereby authorized and directed to pay said principal or interest out of the general funds of the City and to reimburse said general funds for money so expended when said taxes and/or assessments are collected. Section 6. Further Authority. The Mayor, Clerk and other City officials are hereby further authorized and directed to execute any and all documents and take such actions as they may deem necessary or advisable in order to carry out and perform the purposes of the Ordinance, and to make alterations, changes or additions in the foregoing agreements, statements, instruments and other documents herein approved, authorized and confIrmed which they may approve, and the execution or taking of such action shall be conclusive evidence of such necessity or advisability. Section 7. Governing Law. This Ordinance and the Bonds shall be governed exclusively by and construed in accordance with the applicable laws of the State. Section 8. Effective Date. This Ordinance shall take effect and be in full force from and after its passage by the "governing body of the City, approval by the Mayor and publication in the official City newspaper. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 3 PASSED by the governing body of the City on July 9, 2012 and APPROVED AND SIGNED by the Mayor. (SEAL) ATTEST: [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] (Signature Page to Bond Ordinance -20l2-B) Publisher's Affidavit .... L ___ -"'C ... h ... r""'is>.lJt<J-y_F ... I .... · n .... k>.-____ , being duly sworn declare that r am a J,egal Coordinator of THE SALINA JOURNAL, a daIly newspaper published at Salina, Saline County, Kansas, and of general circulation in said county, which ne'wspaper has been admitted to the mails as second class matter in saId county, and continuously and uninterruptedly published for five consecuhve years pdor to first publication of attached notice, and that the Ordinance 12-10644 Notice has been correctly pubhshed in the entire Issue of said newspaper one time, publication being given in the issue of July 14, 2012 , ( ' 1',..J. '-', " ,:". ,I ~ ,:. I, \ J), 1\ &' 'l{..'\ 1 .. 'n "'-- 2012-B, -dated July 15; ther'lof,' aQd Shall be IS (Published in the Salina 2012, authorized by this sued and delivered in ,the Joumal July 14, 2014) Qrdlnance., manner pres,o,lbed and ORDINANCE NO. "Clty" means the City of subject to the provIsions, 12-10644, ' ,Salina, Kansas. oovenants ang agree· AN OcR 0'1 N~N CE . "'Clerk" means the duly ments set forth In the AUTHORIZmG AND l!Ppo'inled and acting Elond Resolution hereafter PROVIDINGFOf/ THE IS. (ller:k of the. City or, In the adopted by ttie .governing SUANCE OF GENEBALCI k' 'b th d I body of the City OBLlGA:rION REFU.NO· ',~J s a sence, ~ssYl. Seotion 5. :i.4i)lY and ING B'ON'DS SERtES Collection' Q,f Annual 2012'13. OF THE CJTV~£ " e duty' Tex. The gov,ern!ng 'body SALINA KANSAS,I7'OR .ele,ctedand,acting Mayor. 0.1 the, Clty.sha,l!'an,nuji!lIy THE PURPOSeOF,pf/O. of1toe City or, in tnll--May-'make proliisiQr! t.or the VIOlfll~:·FO~OS 4r or'$' a1Jsenc.E! the di!lY ap: payment (If. Jl/In,clpa! of, FVNlO1 Iii PORTIO pointEld andlor eleoted premium, If any, daM inter· THS'CITY'S OU VIce Mayor or Acting est on the Bon ,s as the ING GENE.flAL • Mayor of the City. same become d'ue. by TlON'.BONDS; cPR .10· "Ordinance" means thiS levying and Coll!lctlng the ING'FORTHE LEWAN!) Ordinance authOrlzing,the Ileqessary taxes and/or COLLECTION OF AN issuance of the Bonds asses$m.ent,s upon all 01 ANNUAL TAl\; /;OR,J:HE "Refunded .Bonds" the taxable tangible prop- PURPOSE"OFPAYING means collectively: (a) erty wlthm·tllllCity in the THE PRINCIPAL OF A~, Ute Series 2003~A eond~ manner,prOVlded py law. INTEREST ON SAID maturing in the years The taxes .snd/oJ assess- BONDS AS ]'HEYBE· 2014102018, InClUSive, in ments ab.oye referred to COME :OUE; .AUTHORIZ. the aggregate. princJpal shal! be extended· upon ING CERTAIN :OTHg,e amoun1 of $1,125,000; (b) the tax rolls In each of Ihe DOCUMENTS. AND AC '. tne Series 2004-B BonJJs several ye;us. respec· TfONS IN,COcfllNECT1,ON maturlQg jrj tlJp year~ lIVely; and sha,U b,Gllevled THER,EWITHi ANP f,\AI(~ . 2013 to 2019, lnclu$ive, In and colle~ElCjtlltthe same /N.C:; .. CERTAIN COVE: th.e aggregate; prinCipal tlm""and In the same m!ln- NANTS WITH RES.P~CT amount of $1,010,000; ner all·tlw gen~raLad'va­ THERE,TO. .' a%((cHhe'Serle.s ;;!005~A lor~m'tal\esQttoe'C~yare Wij.EI!IEAS, the, City Bohds rnaturjng m the leVied a~d ~ellected, shall 01 Salina, Kansas (Ihe Yllars 2Q14 10 20'20, inclu-. lJe used solely f9,r tl)e pay- "City"} Is a City of Ihe·flrs! sive In the aggregate prin-mElnt of tlre prinCipal of class, duly created, organ-Clp~1 amount 'of' and interellt on the Bonds izeeland existing !lnder $1535'000. . . as and when the same ba- the Constitution and laws "Series 200a-A Bonds" come due. and ttie fees of the State and . means the City's General llr)d 8¥penses of Ihe Pay- WHEREAS, .the C,ty Obllgation Internal 1m· dng.Agent. The p'foceeds heretofore issued and haS provement Bonds Series derived from said taxes outstanding the Relunded 2003-A dated July 15, and/or assessments shall Bonds and Is authorl.zed 2003. . be deposlled In the Bond by K.S,A, 10"427 .et seq. "Series 2004-6 Bonds" and Intere!>1 Fund. , 10 issu.e general OOllgal1911 mEj8ns the City's General If·at any time said taxes r~fundmg bond.s of Ihe Ol:>lIgatlon Internal 1m· and/or assQss!J1!l'!ts are CIty fo'.r Ihe PllrposelOf1e-provement Bonds Series ;:no:t collected ID time to 1011ding the.Ae/unded 2004.B, dated JUly Hi, pay the prlnc;lllal O,f or In- Bonds; and .. . 2004 ' terest on Ih'i' Bonds when WHEREAS, In order to "series 2005-A Bond'!" due, t.he Trel\surer I;; achieve Interest cOst sav-means Ihe City's General hereby authorizeQ and dl- Ings through early re· ObJlgation Internal 1m· rected 10 pay said princl damptlon 6tthe Refunded prOVE/menl Bonds Series pal or Interest. out at Ihe Bonds and provide an or-2005-A, dated july 15,' general funds of the City derly ·plan of finance for 2005. and to reimburse said the City, It hilS become "State" means the Stale' 'general funqs for money desirable and i~ the best of Kansas, 50 1!xpended when. Said ,nterest of the City ano ItS Section 2. Authoriza-taxes and/or asse$sments II1habitanls 10 refund the lion of the Bonds. There are collected. RefUnded Bonds; and ihaH be Issued and Sectl!,n 6 •. Further r / ADO '] WHEREAS, the govem· ,hereby are a'uthorlzed and Authority. The Mayor, da y of _, L' /' . v! . .:2 I",. Ing body 'of Ihe City has directed to be issued the Clerk and alh",r City offl ---advertIsed the sale of the GEmeral Obllgallon Re., cials are hereby further ,-. of Bonds in aocordaoca w1th' fundlng:Bonds, Series authorized and direoted to / .. If the law ·andat 'a meeting 2{)12"8 of 1heCIty in the execute any and .all doeu-. I .' { held In Ille City on this principal am,(wnl of rnents and lake .sUch ac· ----l~L\1::. I· I .f / /l ... /. ,........ such Bonds to the best pose of proYidlng funds necessary or advls!"btli In • • .. ./ .j'.. b,dder. 10[:: la\· refund theRe. order to carry ou! and"per- . If~'11 i date.awarded toe sale <i,f $j3,840,000j;.torthe pur-Ilons as theY may dee~ .---,-,--------NOW] ftindlld'SondS;'and (b) pay form the purposes of the -Notary Public IT OR BY THE costs of Issuance of the Orqln.anc;e, and to. make GaVE eoQ.Y OF 6.ond{l. a~teratio!)s. changes 0'( ad- THE cn;V.,QF SAl-INA,. Se!lIlor;l 3. SecurIty lo~ ol\l.ons tn, thl!!"~'1regolng KANSAS.,AS FOlI.;OWS~ the·Bonds. The Bonds agreements, statements, Pnnter's Fee S~71.50 Section 1. Dellnltions' shall be general obliga. Instruments and other of Words and. Terms. In lions Of llie' ClIy payable documents h~reln ap· addlhon to ~ords !lnd as to Doth principal and In-proved, a!ltl)o"~ed and lerms defined elsewhere te(\I~t in part from speCial conflrmep which ,they may ;W1.4RV PUBLIC -State 01 Kansas WENDY CHROBAK. My IIppt Exp ~;L~:~ nereln, the followln.g', .assessmenls Jevled upon approv'l,' a. nd the execu· words and terms In this" "#;1e property. benefited by lion Qr taj<lng of s~ch ac Ordinance shalf bava, the the construction of1he.lm:, liol) shall, be c.Qncluslve meanings h'lreinafler' SElt provernents and, 11 no\ so evidence 01 ~uch neces· forth. Unless the context· paid' from ad, valorem sity or adviSability. sha/l otherwise indicate, -taxes Which may be leVIed Section 7. Governing words Importing th\1 slngu-wlthout 11mltalloo as to Law. This Ordinance and lar number snail Incluce rals, or amount upon' alf the Bonds shall be gov· the plural: and vice versa, the taxable tangible prop-emed. exclUSively by and and words Importing per· .arty, 'real and personal, c,?nstrued In accordance so etYms, within the territorial IlrnltS With the applicable laws of ies, as sons. ~ ~ ~ "Act" means the Consti- tullon and statutes of the Slate Including K.S.A, 10-101 to,10,125, Inclu' sive, K,S,A. 10-427 et seq., and K.S.A. 10o.fl.20 et sQq" all as ame.nded aod ~oufl~:.mented from lime "Bond ahd Interest Fund" means Ihe Bond and Inlerest Fund of. the City tor ~s general obllga- lion bonds. "Bond Resolution" means the resolution to be adopted by the governing body of the Olty' prescrib- ing. the terms ani:! details of ·the Bonds and making covenants with respecl thereto. "Bonds" means the Ci- ty's General Obligation Refunding Bonds, Series of the City. The balance the statE!. . 0.1 the prlrlclpal and Inter-, Section. 8. E'1fectlve est 0.1\ the Bonds is pay,: Oate. ThIS Ordinance able (rom ad valorem ~ shall take effect and be 10 taxes which may be levied full force from and after. ,ts Without limitation as to passage by the !10vernlng rate 'or arnount upon all body of the City, app.roval . ttie tilxable tangible prop-~y the Mayor an~ publica- erlv, real aDd 'personlil, hon tn theofllolal City within the territorial limlls }'lew.spaper. , . of the 'Cfty, The fuilialth, PASSED by Ihe governing 'credit arid resources ot b!XiY of toe Cjty on .July 9, the City ate hereby Irr6vo-2012 and APPROVED cably pledged for the AND SIGN~D by Ihe prompt· p.ayment of the ~ayor. prfrl!:lpal of a:nd Interest on . toe Bortds,.as Ihe same Norman bacome due. M. Jennings, Mayor Section 4 Terms, D~ tails end' Conditions Cr.' the Sonds. The Bonds shl1l1 be dated and bear in- terest, shaH mature and be payable at. such times, Shall be In such forms, shall be' subJect 10 re· demptlon and payment prior to the m~llIrity (SEAL) ATIEST: Lieu Ann Elsey, Clerk (11) RESOLUTION NO. 12-6918 OF THE CITY OF SALINA, KANSAS ADOPTED JULy 9, 2012 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B Section 101. Section 201. Section 202. Section 203. Section 204. Section 205. Section 206. Section 207. Section 208. Section 209. Section 210. Section 211. Section 212. Section 213. Section 214. Section 301. Section 302. Section 303. Section 401. Section 402. Section 501. Section 502. Section 503. Section 504. Section 505. Section 506. Section 507. Section 508. TABLE OF CONTENTS ARTICLE I DEFINITIONS Definitions of Words and Terms ................................................................................... 1 ARTICLE II AUTHORIZATION AND DETAILS OF THE BONDS Authorization of the Bonds ........................................................................................... 9 Description of the Bonds ............................................................................................... 9 Designation of Paying Agent and Bond Registrar ......................................................... 9 Method and Place of Payment of the Bonds ................................................................ 10 Payments Due on Saturdays, Sundays and Holidays .................................................. 11 Registration, Transfer and Exchange of Bonds ........................................................... 11 Execution, Registration, Authentication and Delivery of Bonds ................................ 12 Mutilated, Lost, Stolen or Destroyed Bonds ............................................................... 12 Cancellation and Destruction of Bonds Upon Payment. ............................................. 13 Book-Entry Bonds; Securities Depository .................................................................. 13 Nonpresentment of Bonds ........................................................................................... 14 Preliminary and Final Official Statement. ................................................................... 14 Sale of the Bonds ......................................................................................................... 14 Authorization of Escrow Agreement. .......................................................................... 15 ARTICLE III REDEMPTION OF BONDS Redemption by Issuer. ................................................................................................. 15 Selection of Bonds to be Redeemed ............................................................................ 15 Notice and Effect of Call for Redemption ................................................................... 15 ARTICLE IV SECURITY FOR BONDS Security for the Bonds ................................................................................................. 17 Levy and Collection of Annual Tax; Transfer to Debt Service Account. ................... 17 ARTICLE V ESTABLISHMENT OF FUNDS AND ACCOUNTS DEPOSIT AND APPLICATION OF BOND PROCEEDS Creation of Funds and Accounts ................................................................................. 18 Deposit of Bond Proceeds ........................................................................................... 18 Application of Moneys in Debt Service Account... ..................................................... 19 Application of Moneys in the Rebate Fund ................................................................. 19 Deposits and Investment of Moneys ........................................................................... 19 Application of Moneys in the Costs ofIssuance Account... ........................................ 20 Application of Moneys in the Escrow Fund ................................................................ 20 Verification of Certified Public Accountant... ............................................................. 20 Section 601. Section 602. Section 603. Section 701. Section 801. Section 802. Section 901. Section 902. Section 1001. Section 1002. Section 1003. Section 1004. Section 1005. Section 1006. Section 1007. Section 1008. Section 1009. ARTICLE VI DEFAULT AND REMEDIES Remedies ..................................................................................................................... 20 Limitation on Rights of Owners ............ , ..................................................................... 21 Remedies Cumulative .................................................................................................. 21 ARTICLE VII DEFEASANCE Defeasance ................................................................................................................... 21 ARTICLE VIII TAX COVENANTS General Covenants ...................................................................................................... 22 Survival of Covenants ................................................................................................. 22 ARTICLE IX CONTINUING DISCLOSURE REQUIREMENTS Disclosure Requirements ............................................................................................. 22 Failure to Comply with Continuing Disclosure Requirements ................................... 22 ARTICLE X MISCELLANEOUS PROVISIONS Annual Audit. .............................................................................................................. 23 Amendments ....... , ........................................................................................................ 23 Notices, Consents and Other Instruments by Owners ................................................. 24 Notices ......................................................................................................................... 25 Electronic Transactions ............................................................................................... 25 Further Authority ......................................................................................................... 25 Severability .................................................................................................................. 25 Governing Law ............................................................................................................ 25 Effective Date .............................................................................................................. 25 EXHIBIT A -=-FORM OF BONDS ............................................................................................................. A-l [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 11 RESOLUTION NO. 12-6918 A RESOLUTION PRESCRIBING THE FORM AND DETAILS OF AND AUTHORIZING AND DIRECTING THE SALE AND DELIVERY OF GENERAL OBLIGATION REFUNDING BONDS, SERIES 20 12-B, OF THE CITY OF SALINA, KANSAS, PREVIOUSLY AUTHORIZED BY ORDINANCE NO. 12- 10644 OF THE ISSUER; MAKING CERTAIN COVENANTS AND AGREEMENTS TO PROVIDE FOR THE PAYMENT AND SECURITY THEREOF; AND AUTHORIZING CERTAIN OTHER DOCUMENTS AND ACTIONS CONNECTED THEREWITH. WHEREAS, the Issuer has heretofore passed the Ordinance authorizing the issuance of the Bonds; and WHEREAS, the Ordinance authorized the governing body of the Issuer to adopt a resolution prescribing certain details and conditions and to make certain covenants with respect to the issuance of the Bonds; and WHEREAS, in order to provide for the payment of the Refunded Bonds it is desirable to enter into the Escrow Agreement, by and between the Issuer and the Escrow Agent; and WHEREAS, the governing body of the Issuer hereby finds and determines that it is necessary for the Issuer to authorize the issuance and delivery of the Bonds in the principal amount of $3,785,000 to refund the Refunded Bonds. NOW, THEREFORE, BE IT RESOLVED BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS, AS FOLLOWS: ARTICLE I DEFINITIONS Section 101. Definitions of Words and Terms. In addition to words and terms defined elsewhere herein, the following words and terms as used in this Bond Resolution shall have the meanings hereinafter set forth. Unless the context shall otherwise indicate, words importing the singular number shall include the plural and vice versa, and words importing persons shall include firms, associations and corporations, including public bodies, as well as natural persons. "Act" means the Constitution and statutes of the State including K.S.A. 10-101 to 10-125, inclusive, K.S.A. 10-427 et seq., and K.S.A. 10-620 et seq., all as amended and supplemented from time to time. "Authorized Denomination" means $5,000 or any integral multiples thereof. "Beneficial Owner" of the Bonds includes any Owner of the Bonds and any other Person who, directly or indirectly has the investment power with respect to such Bonds. "Bond and Interest Fund" means the Bond and Interest Fund of the Issuer for its general obligation bonds. 1 "Bond Counsel" means the firm of Gilmore & Bell, P.C., or any other attorney or firm of attorneys whose expertise in matters relating to the issuance of obligations by states and their political subdivisions is nationally recognized and acceptable to the Issuer. "Bond Payment Date" means any date on which principal of or interest on any Bond is payable. "Bond Register" means the books for the registration, transfer and exchange of Bonds kept at the office of the Bond Registrar. "Bond Registrar" means the State Treasurer, and any successors and assigns. "Bond Resolution" means this resolution relating to the Bonds. "Bonds" means the General Obligation Refunding Bonds, Series 2012-B, authorized and issued by the Issuer pursuant to the Ordinance and this Bond Resolution. "Business Day" means a day other than a Saturday, Sunday or any day designated as a holiday by the Congress of the United States or by the Legislature of the State and on which the Paying Agent is scheduled in the normal course of its operations to be open to the public for conduct of its operations. "Cede & Co." means Cede & Co., as nominee ofDTC and any successor nominee ofDTC. "City" means the City of Salina, Kansas. "Clerk" means the du1y appointed and/or elected Clerk or, in the Clerk's absence, the duly appointed Deputy Clerk or Acting Clerk of the Issuer. "Code" means the Internal Revenue Code of 1986, as amended, and the applicable regulations promulgated thereunder by the United States Department of the Treasury. "Costs of Issuance" means all costs of issuing the Bonds, including but not limited to all publication, printing, signing and mailing expenses in connection therewith, registration fees, financial advisory fees, all legal fees and expenses of Bond Counsel and other legal counsel, expenses incurred in connection with compliance with the Code, all expenses incurred in connection with receiving ratings on the Bonds, and any premiums or expenses incurred in obtaining municipal bond insurance on the Bonds. "Costs of Issuance Account" means the Costs of Issuance Account for General Obligation Refunding Bonds, Series 2012-B created pursuant to Section 501 hereof. "Dated Date" means July 15, 2012. "Debt Service Account" means the Debt Service Account for General Obligation Refunding Bonds, Series 2012-B created within the Bond and Interest Fund pursuant to Section 501 hereof. "Debt Service Requirements" means the aggregate principal payments (whether at maturity or pursuant to scheduled mandatory sinking fund redemption requirements) and interest payments on the Bonds for the period of time for which calculated; provided, however, that for purposes of calculating such amount, principal and interest shall be excluded from the determination of Debt Service Requirements to the extent that such principal or interest is payable from amounts deposited in trust, 2 escrowed or otherwise set aside for the payment thereof with the Paying Agent or other commercial bank or trust company located in the State and having full trust powers. "Defaulted Interest" means interest on any Bond which is payable but not paid on any Interest Payment Date. "Defeasance Obligations" means any of the following obligations: (a) United States Government Obligations that are not subject to redemption in advance of their maturity dates; or (b) obligations of any state or political subdivision of any state, the interest on which is excluded from gross income for federal income tax purposes and which meet the following conditions: (1) the obligations are (i) not subject to redemption prior to maturity or (ii) the trustee for such obligations has been given irrevocable instructions concerning their calling and redemption and the issuer of such obligations has covenanted not to redeem such obligations other than as set forth in such instructions; (2) the obligations are secured by cash or United States Government Obligations that may be applied only to principal of, premium, if any, and interest payments on such obligations; (3) such cash and the principal of and interest on such United States Government Obligations (plus any cash in the escrow fund) are sufficient to meet the liabilities of the obligations; (4) such cash and United States Government Obligations serving as security for the obligations are held in an escrow fund by an escrow agent or a trustee irrevocably in trust; (5) such cash and United States Government Obligations are not available to satisfy any other claims, including those against the trustee or escrow agent; and (6) the obligations are rated in the highest rating category by Moody's (presently "Aaa") or Standard & Poor's (presently "AAA"). "Derivative" means any investment instrument whose market price is derived from the fluctuating value of an underlying asset, index, currency, futures contract, including futures, options and collateralized mortgage obligations. "Disclosure Instructions" means the Continuing Disclosure Instructions dated as of the Issue Date, attached to the Issue(s Closing Certificate, relating to certain obligations contained in the SEC Rule. "DTC" means The Depository Trust Company, a limited-purpose trust company organized under the laws of the State of New York, and its successors and assigns, including any successor securities depository duly appointed. "DTC Representation Letter" means the Blanket Letter of Representation from the Issuer and the Paying Agent to DTC which provides for a book-entry system, or any agreement between the Issuer and Paying Agent and a successor securities depository duly appointed. 3 "Escrow Agent" means UMB National Bank of America, Wichita, Kansas, and its successors and assigns. "Escrow Agreement" means the Escrow Trust Agreement, dated as ofJuly 15, 2012, between the Issuer and the Escrow Agent. "Escrow Fund" means the Escrow Fund for Refunded Bonds referred to in Section 501 hereof. "Escrowed Securities" means the direct, noncallable obligations of the United States of America, as described in the Escrow Agreement. "Event of Default" means each of the following occurrences or events: (a) Payment of the principal and of the redemption premium, if any, of any of the Bonds shall not be made when the same shall become due and payable, either at Stated Maturity or by proceedings for redemption or otherwise; (b) Payment of any installment of interest on any of the Bonds shall not be made when the same shall become due; or (c) The Issuer shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds or in this Bond Resolution (other than the covenants relating to continuing disclosure requirements contained herein and in the Disclosure Instructions) on the part of the Issuer to be performed, and such default shall continue for thirty (30) days after written notice specifying such default and requiring same to be remedied shall have been given to the Issuer by the Owner of any of the Bonds then Outstanding. "Federal Tax Certificate" means the Issuer's Federal Tax Certificate dated as of the Issue Date, as the same may be amended or supplemented in accordance with the provisions thereof. "Fiscal Year" means the twelve month period ending on December 31. "Funds and Accounts" means funds and accounts created pursuant to or referred to in Section 501 hereof. "Interest Payment Date(s)" means the Stated Maturity of an installment of interest on any Bond which shall be April 1 and October 1 of each year, commencing April 1, 2013. "Issue Date" means the date when the Issuer delivers the Bonds to the Purchaser in exchange for the Purchase Price. "Issuer" means the City and any successors or assigns. "Maturity" when used with respect to any Bond means the date on which the principal of such Bond becomes due and payable as therein and herein provided, whether at the Stated Maturity thereof or call for redemption or otherwise. "Mayor" means the duly elected and acting Mayor, or in the Mayor's absence, the duly appointed and/or elected Vice Mayor or Acting Mayor of the Issuer. 4 "Moody's" means Moody's Investors Service, a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Issuer. "Notice Address" means with respect to the following entities: (a) To the Issuer at: City of Salina, Kansas Attn: City Clerk 300 West Ash Salina, Kansas 67402 Fax: (785)309-5738 (b) To the Paying Agent at: State Treasurer of the State of Kansas Landon Office Building 900 Southwest Jackson, Suite 201 Topeka, Kansas 66612-1235 Fax: (785) 296-6976 (c) To the Purchaser: UMB Bank, N.A. 1010 Grand Boulevard, 2nd Floor Kansas City, Missouri 64106 Fax: (816) 860-4829 (d) To the Rating Agency(ies): Moody's Municipal Rating Desk 7 World Trade Center 250 Greenwich Street 23rd Floor New York, New York 10007 Standard & Poor's, a division of The McGraw-Hill Companies 55 Water Street, 38th Floor New York, New York 10004 (e) To the Escrow Agent at: 130 N. Market Wichita, Kansas 67202 Fax: (316) 264-3235 or such other address as is furnished in writing to the other parties referenced herein. 5 "Notice Representative" means: (a) With respect to the Issuer, the Clerk. (b) With respect to the Bond Registrar and Paying Agent, the Director of Bond Services. (c) With respect to any Purchaser, the manager of its Municipal Bond Department. (d) With respect to any Rating Agency, any Vice President thereof. ( e) With respect to the Escrow Agent, the Manager of the Corporate Trust Department. "Official Statement" means Issuer's Official Statement relating to the Bonds. "Ordinance" means Ordinance No. 12~10644 of the Issuer authorizing the issuance of the Bonds, as amended from time to time. "Outstanding" means, when used with reference to the Bonds, as of a particular date of determination, all Bonds theretofore authenticated and delivered, except the following Bonds: (a) Bonds theretofore canceled by the Paying Agent or delivered to the Paying Agent for cancellation; (b) Bonds deemed to be paid in accordance with the provisions of Section 701 hereof; and (c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered hereunder. "Owner" when used with respect to any Bond means the Person in whose name such Bond is registered on the Bond Register. Whenever consent of the Owners is required pursuant to the terms of this Bond Resolution, and the Owner of the Bonds, as set forth on the Bond Register, is Cede & Co., the term Owner shall be deemed to be the Beneficial Owner of the Bonds. "Participants" means those financial institutions for whom the Securities Depository effects book~entry transfers and pledges of securities deposited with the Securities Depository, as such listing of Participants exists at the time of such reference. "Paying Agent" means the State Treasurer, and any successors and assigns. "Permitted Investments" shall mean the investments hereinafter described, provided, however, no moneys or funds shall be invested in a Derivative: (a) investments authorized by K.S.A. 12-1675 and amendments thereto; (b) the municipal investment pool established pursuant to K.S.A. 12-1677a, and amendments thereto; (c) direct obligations of the United States Government or any agency thereof; (d) the Issuer's temporary notes issued pursuant to K.S.A. 10-123 and amendments thereto; (e) interest-bearing time deposits in commercial banks or trust companies located in the county or counties in which the Issuer is located which are insured by the Federal Deposit Insurance Corporation or collateralized by securities described in (c); (f) obligations of the federal national mortgage association, federal home loan banks, federal home loan mortgage corporation or government national mortgage association; (g) repurchase agreements for securities described in (c) or (f); (h) investment agreements or other obligations of a financial institution the obligations of which at the time of investment are rated in either of the three highest rating categories by Moody's or Standard & Poor's; (i) investments and shares or 6 units of a money market fund or trust, the portfolio of which is comprised entirely of securities described in (c) or (f); G) receipts evidencing ownership interests in securities or portions thereof described in (c) or (f); (k) municipal bonds or other obligations issued by any municipality of the State as defmed in K.S.A. 10-1101 which are general obligations of the municipality issuing the same; or (1) bonds of any municipality of the State as defined in K.S.A. 10-1101 which have been refunded in advance of their maturity and are fully secured as to payment of principal and interest thereon by deposit in trust, under escrow agreement with a bank, of securities described in (c) or (f), all as may be further restricted or modified by amendments to applicable State law. "Person" means any natural person, corporation, partnership, joint venture, association, firm, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof or other public body. "Purchase Price" means the principal amount of the Bonds plus accrued interest to the date of delivery, plus a bid premium of $15,471.43. "Purchaser" means UMB Bank, N.A., Kansas City, Missouri, the original purchaser of the Bonds, and any successor and assigns. "Rating Agency" means any company, agency or entity that provides, pursuant to request of the Issuer, financial ratings for the Bonds. "Rebate Fund" means the Rebate Fund for General Obligation Refunding Bonds, Series 2012-B created pursuant to Section 501 hereof. "Record Dates" for the interest payable on any Interest Payment Date means the fifteenth day (whether or not a Business Day) of the calendar month next preceding each Interest Payment Date. "Redemption Date" means, when used with respect to any Bond to be redeemed, the date fixed for the redemption of such Bond pursuant to the terms of this Bond Resolution. "Redemption Price" means, when used with respect to any Bond to be redeemed, the price at which such Bond is to be redeemed pursuant to the terms of this Bond Resolution, including the applicable redemption premium, if any, but excluding installments of interest whose Stated Maturity is on or before the Redemption Date. "Refunded Bonds" means collectively: (a) the Series 2003-A Bonds maturing in the years 2014 to 2018, inclusive, in the aggregate principal amount of $1,125,000; (b) the Series 2004-B Bonds maturing in the years 2013 to 2019, inclusive, in the aggregate principal amount of $1,010,000; and (c) '-the Series 2005-A Bonds maturing in the years 2014 to 2020, inclusive, in the aggregate principal amount of $1 ,535,000. "Refunded Bonds Paying Agent" means the respective paying agent for each series of the Refunded Bonds as designated in the respective Refunded Bonds Resolution, and any successor or successors at the time acting as paying agent for any of the Refunded Bonds. "Refunded Bonds Redemption Date" means collectively, October 1, 2013 for the Series 2003- A Bonds, October 1,2012 for the Series 2004-B Bonds and October 1, 2013 for the Series 2005-A Bonds. "Refunded Bonds Resolution" means each ordinance and resolution which authorized the Refunded Bonds. 7 "Replacement Bonds" means Bonds issued to the Beneficial Owners of the Bonds in accordance with Section 210 hereof. "SEC Rule" means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as may be amended from time to time. "Securities Depository" means, initially, DTC, and its successors and assigns. "Series 2003-A Bonds" means the Issuer's General Obligation Internal Improvement Bonds, Series 2003-A, dated July 15, 2003. "Series 2004-B Bonds" means the Issuer's General Obligation Internal Improvement Bonds, Series 2004-B, dated July 15, 2004. "Series 2005-A Bonds" means the Issuer's General Obligation Internal Improvement Bonds, Series 2005-A, dated July 15, 2005. "Series 2003-A Principal and Interest Account" means the Principal and Interest Account for the Series 2003-A Bonds. "Series 2004-B Principal and Interest Account" means the Principal and Interest Account for the Series 2004-B Bonds. "Series 2005-A Principal and Interest Account" means the Principal and Interest Account for the Series 2005-A Bonds. "Special Record Date" means the date fixed by the Paying Agent pursuant to Section 204 hereof for the payment of Defaulted Interest. "Standard & Poor's" means Standard & Poor's Ratings Services, a Division of the McGraw- Hill Companies, Inc., a corporatIon organized and existing under the laws of the State of New York, and its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, Standard & Poor's shall be deemed to refer to any other nationally recognized securities rating agency designated by the Issuer. "State" means the state of Kansas. "State Treasurer" means the duly elected Treasurer or, in the Treasurer's absence, the duly appointed Deputy Treasurer or acting Treasurer of the State. "Stated Maturity" when used with respect to any Bond or any installment of interest thereon means the date specified in such Bond and this Bond Resolution as the fixed date on which the principal of such Bond or such installment of interest is due and payable. "Treasurer" means the duly appointed and/or elected Treasurer of the Issuer or, in the Treasurer's absence, the duly appointed Deputy Treasurer or acting Treasurer of the Issuer. "United States Government Obligations" means bonds, notes, certificates of indebtedness, treasury bills or other securities constituting direct obligations of, or obligations the principal of and interest on which are fully and unconditionally guaranteed as to full and timely payment by, the United 8 States of America, including evidences of a direct ownership interest in future interest or principal payment on obligations issued by the United States of America (including the interest component of obligations of the Resolution Funding Corporation), or securities which represent an undivided interest in such obligations, which obligations are rated in the highest rating category by a nationally recognized rating service and such obligations are held in a custodial account for the benefit of the Issuer. "Verification Report" means the verification report referenced in Section 508 hereof relating to the sufficiency of money and obligations deposited in the Escrow Fund to be applied in accordance with the Escrow Agreement. ARTICLE II AUTHORlZATION AND DETAILS OF THE BONDS Section 201. Authorization of the Bonds. The Bonds have been heretofore authorized and directed to be issued pursuant to the Ordinance in the principal amount of $3,785,000, for the purpose of providing funds to: (a) refund the Refunded Bonds; and (b) pay Costs of Issuance. Section 202. Description of the Bonds. The Bonds shall consist of fully registered bonds in an Authorized Denomination, and shall be numbered in such manner as the Bond Registrar shall determine. All of the Bonds shall be dated as of the Dated Date, shall become due in the amounts, on the Stated Maturities, subject to redemption and payment prior to their Stated Maturities as provided in Article III hereof, and shall bear interest at the rates per annum as follows: [SERIAL BONDS] Stated Maturity Principal Annual Rate Stated Maturity Principal Annual Rate October 1 Amount of Interest October 1 Amount of Interest 2013 $385,000 1.000% 2017 $485,000 1.000% 2014 940,000 1.000% 2018 475,000 1.050% 2015 625,000 1.000% 2019 235,000 1.200% 2016 460,000 1.000% 2020 180,000 1.400% The Bonds shall bear interest at the above specified rates (computed on the basis of a 360-day year of twelve 30-day months) from the later of the Dated Date or the most recent Interest Payment Date to which interest has been paid on the Interest Payment Dates in the manner set forth in Section 204 hereof. Each of the Bonds, as originally issued or issued upon transfer, exchange or substitution, shall be printed in accordance with the format required by the Attorney General of the State and shall be substantially in the form attached hereto as EXHIBIT A or as may be required by the Attorney General pursuant to the Notice of Systems of Registration for Kansas Municipal Bonds, 2 Kan. Reg. 921 (1983), in accordance with the Kansas Bond Registration Law, K.S.A. 10-620 et seq. Section 203. Designation of Paying Agent and Bond Registrar. The State Treasurer is hereby designated as the Paying Agent for the payment of principal of and interest on the Bonds and Bond Registrar with respect to the registration, transfer and exchange of Bonds. The Mayor of the Issuer is hereby authorized and empowered to execute on behalf of the Issuer an agreement with the Bond Registrar and Paying Agent for the Bonds. 9 The Issuer will at all times maintain a Paying Agent and Bond Registrar meeting the qualifications herein described for the performance of the duties hereunder. The Issuer reserves the right to appoint a successor Paying Agent or Bond Registrar by (a) filing with the Paying Agent or Bond Registrar then performing such function a certified copy of the proceedings giving notice of the termination of such Paying Agent or Bond Registrar and appointing a successor, and (b) causing notice of appointment of the successor Paying Agent and Bond Registrar to be given by first class mail to each Owner. No resignation or removal of the Paying Agent or Bond Registrar shall become effective until a successor has been appointed and has accepted the duties of Paying Agent or Bond Registrar. Every Paying Agent or Bond Registrar appointed hereunder shall at all times meet the requirements ofK.S.A. 10-501 et seq. and K.S.A. 10-620 et seq., respectively. Section 204. Method and Place of Payment of the Bonds. The principal of, or Redemption Price, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts. The principal or Redemption Price of each Bond shall be paid at Maturity to the Person in whose name such Bond is registered on the Bond Register at the Maturity thereof, upon presentation and surrender of such Bond at the principal office of the Paying Agent. The interest payable on each Bond on any Interest Payment Date shall be paid to the Owner of such Bond as shown on the Bond Register at the close of business on the Record Date for such interest (a) by check or draft mailed by the Paying Agent to the address of such Owner shown on the Bond Register or at such other address as is furnished to the Paying Agent in writing by such Owner; or (b) in the case of an interest payment to Cede & Co. or any Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Owner upon written notice given to the Bond Registrar by such Owner, not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank ABA routing number and account number to which such Owner wishes to have such transfer directed. Notwithstanding the foregoing provisions of this Section, any Defaulted Interest with 'respect to any Bond shall cease to be payable to the Owner of such Bond on the relevant Record Date and shall be payable to the Owner in whose name such Bond is registered at the close of business on the Special Record Date for the payment of such Defaulted Interest, which Special Record Date shall be fixed as hereinafter specified in this paragraph. The Issuer shall notify the Paying Agen! in writing of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment (which date shall be at least 30 days after receipt of such notice by the Paying Agent) and shall deposit with the Paying Agent at the time of such notice an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Paying Agent for such deposit prior to the date of the proposed payment. Following receipt of such funds the Paying Agent shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment. The Paying Agent shall promptly notify the Issuer of such Special Record Date and, in the name and at the expense of the Issuer, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefore to be mailed, by first class mail, postage prepaid, to each Owner of a Bond entitled to such notice at the address of such Owner as it appears on the Bond Register not less than 10 days prior to such Special Record Date. The Paying Agent shall keep a record of payment of principal and Redemption Price of and interest on all Bonds and at least annually shall forward a copy or summary of such records to the Issuer. 10 Section 205. Payments Due on Saturdays, Sundays and Holidays. In any case where a Bond Payment Date is not a Business Day, then payment of principal, Redemption Price or interest need not be made on such Bond Payment Date but may be made on the next succeeding Business Day with the same force and effect as if made on such Bond Payment Date, and no interest shall accrue for the period after such Bond Payment Date. Section 206. Registration, Transfer and Exchange of Bonds. The Issuer covenants that, as long as any of the Bonds remain Outstanding, it will cause the Bond Register to be kept at the office of the Bond Registrar as herein provided. Each Bond when issued shall be registered in the name of the Owner thereof on the Bond Register. Bonds may be transferred and exchanged only on the Bond Register as provided in this Section. Upon surrender of any Bond at the principal office of the Bond Registrar, the Bond Registrar shall transfer or exchange such Bond for a new Bond or Bonds in any Authorized Denomination of the same Stated Maturity and in the same aggregate principal amount as the Bond that was presented for transfer or exchange. Bonds presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a fann and with guarantee of signature satisfactory to the Bond Registrar, duly executed by the Owner thereof or by the Owner's duly authorized agent. In all cases in which the privilege of transferring or exchanging Bonds is exercised, the Bond Registrar shall authenticate and deliver Bonds in accordance with the provisions of this Bond Resolution. The Issuer shall pay the fees and expenses of the Bond Registrar for the registration, transfer and exchange of Bonds provided for by this Bond Resolution and the cost of printing a reasonable supply of registered bond blanks. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Bond Registrar, are the responsibility of the Owners of the Bonds. In the event any Owner fails to provide a correct taxpayer identification number to the Paying Agent, the Paying Agent may make a charge against such Owner sufficient to pay any governmental charge required to be paid as a result of such failure. In compliance with Code § 3406, such amount may be deducted by the Paying Agent from amounts otherwise payable to such Owner hereunder or under the Bonds. The Issuer and the Bond Registrar shall not be required (a) to register the transfer or exchange of any Bond that has been called for redemption after notice of such redemption has been mailed by the Paying Agent pursuant to Section 303 hereof and during the period of 15 days next preceding the date of mailing of such notice of redemption; or (b) to register the transfer or exchange of any Bond during a period beginning at the opening of business on the day after receiving written notice from the Issuer of its intent to pay Defaulted Interest and ending at the close of business on the date fixed for the payment of Defaulted Interest pursuant to Section 204 hereof. The Issuer and the Paying Agent may deem and treat the Person in whose name any Bond is registered on the Bond Register as the absolute Owner of such Bond, whether such Bond is overdue or not, for the purpose of receiving payment of, or on account of, the principal or Redemption Price of and interest on said Bond and for all other purposes. All payments so made to any such Owner or upon the Owner's order shall be valid and effective to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid, and neither the Issuer nor the Paying Agent shall be affected by any notice to the contrary. 11 At reasonable times and under reasonable regulations established by the Bond Registrar, the Bond Register may be inspected and copied by the Owners (or a designated representative thereof) of 10% or more in principal amount of the Bonds then Outstanding or any designated representative of such Owners whose authority is evidenced to the satisfaction ofthe Bond Registrar. Section 207. Execution, Registration, Authentication and Delivery of Bonds. Each of the Bonds, including any Bonds issued in exchange or as substitutions for the Bonds initially delivered, shall be executed for and on behalf of the Issuer by the manual or facsimile signature of the Mayor, attested by the manual or facsimile signature of the Clerk, and the seal of the Issuer shall be affixed thereto or imprinted thereon. The Mayor and Clerk are hereby authorized and directed to prepare and execute the Bonds in the manner herein specified, and to cause the Bonds to be registered in the office of the Clerk, which registration shall be evidenced by the manual or facsimile signature of the Clerk with the seal of the Issuer affixed thereto or imprinted thereon. The Bonds shall also be registered in the office of the State Treasurer, which registration shall be evidenced by the manual or facsimile signature of the State Treasurer with the seal of the State Treasurer affixed thereto or imprinted thereon. In case any officer whose signature appears on any Bonds ceases to be such officer before the delivery of such Bonds, such signature shall nevertheless be valid and sufficient for all pUIposes, as if such person had remained in office until delivery. Any Bond may be signed by such persons who at the actual time of the execution of such Bond are the proper officers to sign such Bond although at the date of such Bond such persons may not have been such officers. The Mayor and Clerk are hereby authorized and directed to prepare and execute the Bonds as herein specified, and when duly executed, to deliver the Bonds to the Bond Registrar for authentication. The Bonds shall have endorsed thereon a certificate of authentication substantially in the form attached hereto as EXHIBIT A hereof, which shall be manually executed by an authorized officer or employee of the Bond Registrar, but it shall not be necessary that the same officer or employee sign the certificate of authentication on all of the Bonds that may be issued hereunder at anyone time. No Bond shall be entitled to any security or benefit under this Bond Resolution or be valid or obligatory for any purpose unless and until such certificate of authentication has been duly executed by the Bond Registrar. Such executed certificate of authentication upon any Bond shall be conclusive evidence that such Bond has been duly authenticated and delivered under this Bond Resolution. Upon authentication, the Bond Registrar shall deliver the Bonds to the Purchaser upon instructions of the Issuer or its representative. Section 208. Mutilated, Lost, Stolen or Destroyed Bonds. If (a) any mutilated Bond is surrendered to the Bond Registrar or the Bond Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Bond, and (b) there is delivered to the Issuer and the Bond Registrar such security or indemnity as may be required by each of them, then, in the absence of notice to the Issuer or the Bond Registrar that such Bond has been acquired by a bona fide purchaser, the Issuer shall execute and, upon the Issuer's request, the Bond Registrar shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Bond, a new Bond of the same Stated Maturity and of like tenor and principal amount. If any such mutilated, destroyed, lost or stolen Bond has become or is about to become due and payable, the Issuer, in its discretion, may pay such Bond instead of issuing a new Bond. Upon the issuance of any new Bond under this Section, the Issuer and the Paying Agent may require the payment by the Owner of a sum sufficient to cover any tax or other goverru:ilental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Paying Agent) connected therewith. 12 Every new Bond issued pursuant to this Section shall constitute a replacement of the prior obligation of the Issuer, and shall be entitled to all the benefits of this Bond Resolution equally and ratably with all other Outstanding Bonds. Section 209. . Cancellation and Destruction of Bonds Upon Payment. All Bonds that have been paid or redeemed or that otherwise have been surrendered to the Paying Agent, either at or before Maturity, shall be cancelled by the Paying Agent immediately upon the payment, redemption and surrender thereof to the Paying Agent and subsequently destroyed in accordance with the customary practices of the Paying Agent. The Paying Agent shall execute a certificate in duplicate describing the Bonds so cancelled and destroyed and shall file an executed counterpart of such certificate with the Issuer. Section 210. Book-Entry Bonds; Securities Depository. The Issuer and Paying Agent have entered into a DTC Representation Letter with DTC. The Bonds shall initially be registered to Cede & Co., the nominee for the Securities Depository, and no Beneficial Owner will receive certificates representing their respective interests in the Bonds, except in the event the Bond Registrar issues Replacement Bonds as provided in this Section. It is anticipated that during the term of the Bonds, the Securities Depository will make book-entry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Bonds to the Participants until and unless the Bond Registrar authenticates and delivers Replacement Bonds to the Beneficial Owners as described in the following paragraph. The Issuer may decide, subject to the requirements of the Operational Arrangements of DTC (or a successor Securities Depository), and the following provisions of this section to discontinue use of the system of book-entry transfers through DTC (or a successor Securities Depository): (a) If the Issuer determines (1) that the Securities Depository is unable to properly discharge its responsibilities, or (2) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, or (3) that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Bonds; or (b) if the Bond Registrar receives written notice from Participants having interests in not less than 50% of the Bonds Outstanding, as shown on the records of the Securities Depository (and certified to such effect by the Securities Depository), that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Bonds, then the Bond Registrar shall notify the Owners of such determination or such notice and of the availability of certificates to Owners requesting the same, and the Bond Registrar shall register in the name of and authenticate and deliver Replacement Bonds to the Beneficial Owners or their nominees in principal amounts representing the interest of each, making such adjustments as it may find necessary or appropriate as to accrued interest and previous calls for redemption; provided, that in the case of a determination under (a)(1) or (a)(2) of this paragraph, the Issuer, with the consent of the Bond Registrar, may select a successor securities depository in accordance with the following paragraph to effect book-entry transfers. In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Bond. Upon the issuance of Replacement Bonds, all references herein to obligations imposed upon or to be performed by the Securities Depository shall be deemed to be imposed upon and performed by the Bond Registrar, to the extent applicable with respect to such Replacement Bonds. If the Securities Depository resigns and the Issuer, the Bond Registrar or Owners are unable to locate a qualified successor of the Securities Depository in accordance with the following paragraph, then the Bond Registrar shall authenticate and cause delivery of 13 Replacement Bonds to Owners, as provided herein. The Bond Registrar may rely on information from the Securities Depository and its Participants as to the names of the Beneficial Owners of the Bonds. The cost of printing, registration, authentication, and delivery of Replacement Bonds shall be paid for by the Issuer. In the event the Securities Depository resigns, is unable to properly discharge its responsibilities, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, the Issuer may appoint a successor Securities Depository provided the Bond Registrar receives written evidence satisfactory to the Bond Registrar with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities and Exchange Act of 1934, as amended, or other applicable statute or regulation that operates a securities depository upon reasonable and customary terms. The Bond Registrar upon its receipt of a Bond or Bonds for cancellation shall cause the delivery of Bonds to the successor Securities Depository in an Authorized Denominations and form as provided herein. Section 211. Nonpresentment of Bonds. If any Bond is not presented for payment when the principal thereof becomes due at Maturity, if funds sufficient to pay such Bond have been made available to the Paying Agent all liability of the Issuer to the Owner thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Paying Agent to hold such funds, without liability for interest thereon, for the benefit of the Owner of such Bond, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on his part under this Bond Resolution or on, or with respect to, said Bond. If any Bond is not presented for payment within four (4) years following the date when such Bond becomes due at Maturity, the Paying Agent shall repay, without liability for interest thereon, to the Issuer the funds theretofore held by it for payment of such Bond, and such Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the Issuer, and the Owner thereof shall be entitled to look only to the Issuer for payment, and then only to the extent of the amount so repaid to it by the Paying Agent, and the Issuer shall not be liable for any interest thereon and shall not be regarded as a trustee of such money. Section 212. Preliminary and Final Official Statement. The Preliminary Official Statement dated June 20,2012, is hereby ratified and approved. The Official Statement is hereby authorized to be prepared by supplementing, amending and completing the Preliminary Official Statement, with such changes and additions thereto as are necessary to conform to and describe the transaction. The Mayor and chief financial officer of the Issuer are hereby authorized to execute the Official Statement as so supplemented, amended and completed, and the use and public distribution of the Official Statement by the Purchaser in connection with the reoffering of the Bonds is hereby authorized. The proper officials of the Issuer are hereby authorized to execute and deliver a certificate pertaining to such Official Statement as prescribed therein, dated as of the Issue Date. The Issuer agrees to provide to the Purchaser within seven business days of the date of the sale of Bonds sufficient copies of the Official Statement to enable the Purchaser to comply with the requirements of Rule lSc2-12(3) and (4) of the Securities and Exchange Commission and with the requirements of Rule G-32 of the Municipal Securities Rulemaking Board. Section 213. Sale of the Bonds. The sale of the Bonds to the Purchaser is hereby ratified and confirmed. The Mayor and Clerk are hereby authorized to execute the official bid form submitted by the Purchaser. Delivery of the Bonds shall be made to the Purchaser on the Issue Date (which shall be as soon as practicable after the adoption of this Bond Resolution), upon payment of the Purchase Price. 14 Section 214. Authorization of Escrow Agreement. The Issuer is hereby authorized to enter into the Escrow Agreement, and the Mayor and Clerk are hereby authorized and directed to execute the Escrow Agreement with such changes therein as such officials may deem appropriate, for and on behalf of and as the act and deed of the Issuer. The Escrow Agent is hereby authorized to carry out, on behalf of the Issuer, the duties, terms and provisions of the Escrow Agreement, and the Escrow Agent, the Purchaser and Bond Counsel are authorized to take all necessary actions for the subscription and purchase of the Escrowed Securities described therein, including the subscription for United States Treasury Securities -State and Local Government Series. ARTICLE III REDEMPTION OF BONDS Section 301. Redemption by Issuer. Optional Redemption. At the option of the Issuer, Bonds maturing on October 1 in the years 2020, and thereafter, will be subject to redemption and payment prior to their Stated Maturity on October 1, 2019, and thereafter, as a whole or in part (selection of maturities and the amount of Bonds of each maturity to be redeemed to be determined by the Issuer in such equitable manner as it may determine) at any time, at the Redemption Price of 100% (expressed as a percentage of the principal amount), plus accrued interest to the Redemption Date. Section 302. Selection of Bonds to be Redeemed. Bonds shall be redeemed only in an Authorized Denomination. When less than all of the Bonds are to be redeemed and paid prior to their Stated Maturity, such Bonds shall be redeemed in such manner as the Issuer shall determine. Bonds of less than a full Stated Maturity shall be selected by the Bond Registrar in a minimum Authorized Denomination of principal amount in such equitable manner as the Bond Registrar may determine. In the case of a partial redemption of Bonds by lot when Bonds of denominations greater than a minimum Authorized Denomination are then Outstanding, then for all purposes in connection with such redemption a minimum Authorized Denomination of face value shall be treated as though it were a separate Bond of the denomination of a minimum Authorized Denomination. If it is determined that one or more, but not all, of a minimum Authorized Denomination of face value represented by any Bond is selected for redemption, then upon notice of intention to redeem a minimum Authorized Denomination, the Owner or the Owner's duly authorized agent shall forthwith present and surrender such Bond to the Bond Registrar: (1) for payment of the Redemption Price and interest to the Redemption Date of a minimum Authorized Denomination of face value called for redemption, and (2) for exchange, without charge to the Owner thereof, for. a new Bond or Bonds of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Owner of any such Bond fails to present such Bond to the Paying Agent for payment and exchange as aforesaid, such Bond shall, nevertheless, become due and payable on the redemption date to the extent of a minimum Authorized Denomination of face value called for redemption (and to that extent only). Section 303. Notice and Effect of Call for Redemption. In the event the Issuer desires to call the Bonds for redemption prior to maturity, written notice of such intent shall be provided to the Bond Registrar in accordance with K.S.A. 10-129, as amended, not less than 45 days prior to the Redemption Date. The Bond Registrar shall call Bonds for redemption and payment and shall give notice of such redemption as herein provided upon receipt by the Bond Registrar at least 45 days prior to the Redemption Date of written instructions of the Issuer specifying the principal amount, Stated Maturities, 15 Redemption Date and Redemption Prices of the Bonds to be called for redemption. [The foregoing provisions of this paragraph shall not apply in the case of any mandatory redemption of Term Bonds hereunder, and Term Bonds shall be called by the Paying Agent for redemption pursuant to such mandatory redemption requirements without the necessity of any action by the Issuer and whether or not the Paying Agent holds moneys available and sufficient to effect the required redemption.] Unless waived by any Owner of Bonds to be redeemed, if the Issuer shall call any Bonds for redemption and payment prior to the Stated Maturity thereof, the Issuer shall give written notice of its intention to call and pay said Bonds to the Bond Registrar, the State Treasurer and the Purchaser. In addition, the Issuer shall cause the Bond Registrar to give written notice of redemption to the Owners of said Bonds. Each of said written notices shall be deposited in the United States first class mail not less than 30 days prior to the Redemption Date. All official notices of redemption shall be dated and shall contain the following information: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption of any Bonds, the respective principal amounts) of the Bonds to be redeemed; (d) a statement that on the Redemption Date the Redemption Price will become due and payable upon each such Bond or portion thereof called for redemption and that interest thereon shall cease to accrue from and after the Redemption Date; and (e) the place where such Bonds are to be surrendered for payment of the Redemption Price, which shall be the principal office of the Paying Agent. The failure of any Owner to receive notice given as heretofore provided or an immaterial defect therein shall not invalidate any redemption. Prior to any Redemption Date, the Issuer shall deposit with the Paying Agent an amount of money sufficient to pay the Redemption Price of all the Bonds or portions of Bonds that are to be redeemed on such Redemption Date. For so long as the Securities Depository is effecting book-entry transfers of the Bonds, the Bond Registrar shall provide the notices specified in this Section to the Securities Depository. It is expected that the Securities Depository shall, in turn, notify its Participants and that the Participants, in turn, will notify or cause to be notified the Beneficial Owners. Any failure on the part of the Securities Depository or a Participant, or failure on the part of a nominee of a Beneficial Owner of a Bond (having been mailed notice from the Bond Registrar, the Securities Depository, a Participant or otherwise) to notify the Beneficial Owner of the Bond so affected, shall not affect the validity of the redemption of such Bond. Official notice of redemption having been given as aforesaid, the Bonds or portions of Bonds to be redeemed shall become due and payable on the Redemption Date, at the Redemption Price therein specified, and from and after the Redemption Date (unless the Issuer defaults in the payment of the Redemption Price) such Bonds or portion of Bonds shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with such notice, the Redemption Price of such Bonds shall be paid by the Paying Agent. Installments of interest due on or prior to the Redemption Date shall be payable as herein provided for payment of interest. Upon surrender for any partial redemption of any Bond, there 16 shall be prepared for the Owner a new Bond or Bonds of the same Stated Maturity in the amount of the unpaid principal as provided herein. All Bonds that have been surrendered for redemption shall be cancelled and destroyed by the Paying Agent as provided herein and shall not be reissued. In addition to the foregoing notice, the Issuer shall provide such notices of redemption as are required by the Disclosure Instructions. Further notice may be given by the Issuer or the Bond Registrar on behalf of the Issuer as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if official notice thereof is given as above prescribed: (a) Each further notice of redemption given hereunder shall contain the information required above for an official notice of redemption plus (1) the CUSIP numbers of all Bonds being redeemed; (2) the date of issue of the Bonds as originally issued; (3) the rate of interest borne by each Bond being redeemed; (4) the maturity date of each Bond being redeemed; and (5) any other descriptive information needed to identify accurately the Bonds being redeemed. (b) Each further notice of redemption shall be sent at least one day before the mailing of notice to Owners by first class, registered or certified mail or overnight delivery, as determined by the Bond Registrar, to all registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds and to one or more national information services that disseminate notices of redemption of obligations such as the Bonds. (c) Each check or other transfer of funds issued for the payment of the Redemption Price of Bonds being redeemed shall bear or have enclosed the CUSIP number of the Bonds being redeemed with the proceeds of such check or other transfer. The Paying Agent is also directed to comply with any mandatory standards then in effect for processing redemptions of municipal securities established by the State or the Securities and Exchange Commission. Failure to comply with such standards shall not affect or invalidate the redemption of any Bond. ARTICLE IV SECURITY FOR BONDS Section 401. Security for the Bonds. The Bonds shall be general obligations of the Issuer payable as to both principal and interest in part from special assessments levied upon the property benefited by the construction of certain improvements and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The balance of the principal and interest on the Bonds is payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The full faith, credit and resources of the Issuer are hereby irrevocably pledged for the prompt payment of the principal of and interest on the Bonds as the same become due. Section 402. Levy and Collection of Annual Tax; Transfer to Debt Service Account. The governing body of the Issuer shall annually make provision for the payment of principal of, premium, if any, and interest on the Bonds as the same become due by, to the extent necessary, levying and collecting 17 the necessary taxes and/or assessments upon all of the taxable tangible property within the Issuer in the manner provided by law. The taxes and/or assessments referred to above shall be extended upon the tax rolls in each of the several years, respectively, and shall be levied and collected at the same time and in the same manner as the other ad valorem taxes of the Issuer are levied and collected. The proceeds derived from said taxes shall be deposited in the Bond and Interest Fund, shall be kept separate and apart from all other funds of the Issuer shall thereafter be transferred to the Debt Service Account and shall be used solely for the payment of the principal of and interest on the Bonds as and when the same become due, taking into account any scheduled mandatory redemptions, and the fees and expenses of the Paying Agent. If at any time said taxes and/or assessments are not collected in time to pay the principal of or interest on the Bonds when due, the Treasurer is hereby authorized and directed to pay said principal or interest out of the general funds of the Issuer and to reimburse said general funds for money so expended when said taxes are collected. ARTICLE V ESTABLISHMENT OF FUNDS AND ACCOUNTS DEPOSIT AND APPLICATION OF BOND PROCEEDS Section 501. Creation of Funds and Accounts. Simultaneously with the issuance of the Bonds, there shall be created within the Treasury of the Issuer the following Funds and Accounts: (a) Debt Service Account for General Obligation Refunding Bonds, Series 20l2-B (within the Bond and Interest Fund); and (b) Rebate Fund for General Obligation Refunding Bonds, Series 2012-B. The Funds and Accounts established herein shall be administered in accordance with the provisions of this Bond Resolution so long as the Bonds are Outstanding. In addition to the Funds and Accounts descnbed above, the Escrow Agreement establishes the following Funds and Accounts to be held and administered by the Escrow Agent in accordance with the provisions of the Escrow Agreement: (a) Escrow Fund for Refunded Bonds; and (b) Costs ofIssuance Account for General Obligation Refunding Bonds, Series 2012-B. Section 502. Deposit of Bond Proceeds. The net proceeds received from the sale of the Bonds shall be deposited simultaneously with the delivery of the Bonds as follows: (a) All accrued interest received from the sale of the Bonds shall be deposited in the Debt Service Account. (b) The sum identified in the Escrow Agreement shall be transferred to the Escrow Agent for deposit in the Escrow Fund and applied in accordance with the Escrow Agreement. 18 (c) The remaining balance of the proceeds derived from the sale of the Bonds shall be transferred to the Escrow Agent, for deposit in the Costs of Issuance Account and applied in accordance with the Escrow Agreement. Section 503. Application of Moneys in Debt Service Account. All amounts paid and credited to the Debt Service Account shall be expended and used by the Issuer for the sole purpose of paying the principal or Redemption Price of and interest on the Bonds as and when the same become due and the usual and customary fees and expenses of the Bond Registrar and Paying Agent. The Treasurer is authorized and directed to withdraw from the Debt Service Account sums sufficient to pay both principal or Redemption Price of and interest on the Bonds and the fees and expenses of the Bond Registrar and Paying Agent as and when the same become due, and to forward such sums to the Paying Agent in a manner which ensures that the Paying Agent will receive immediately available funds in such amounts on or before the Business Day immediately preceding the dates when such principal, interest and fees of the Bond Registrar and Paying Agent will become due. If, through the lapse of time or otherwise, the Owners of Bonds are no longer entitled to enforce payment of the Bonds or the interest thereon, the Paying Agent shall return said funds to the Issuer. All moneys deposited with the Paying Agent shall be deemed to be deposited in accordance with and subject to all of the provisions contained in this Bond Resolution and shall be held in trust by the Paying Agent for the benefit of the Owners of the Bonds entitled to payment from such moneys. Any moneys or investments remaining in the Debt Service Account after the retirement of the Bonds shall be transferred and paid into the Bond and Interest Fund. Section 504. Application of Moneys in the Rebate Fund. (a) There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Federal Tax Certificate. All money at any time deposited in the Rebate Fund shall be held in trust, to the extent required to satisfy the Rebate Amount (as defined in the Federal Tax Certificate), for payment to the United States of America, and neither the Issuer nor the Owner of any Bonds shall have any rights in or claim to such money. All amounts deposited into or on deposit in the Rebate Fund shall be governed by this Section and the Federal Tax Certificate. (b) The Issuer shall periodically determine the arbitrage rebate, if any, under Code § 148(f) in accordance with the Federal Tax Certificate, and the Issuer shall make payments to the United States of America at the times and in the amounts determined under the Federal Tax Certificate. Any moneys remaining in the Rebate Fund after redemption and payment of all of the Bonds and payment and satisfaction of any Rebate Amount, or provision made therefor, shall be deposited into the Bond and Interest Fund. (c) Notwithstanding any other provision of this Bond Resolution, including in particular Article VII hereof, the obligation to pay arbitrage rebate to the United States of America and to comply with all other requirements of this Section and the Federal Tax Certificate shall survive the defeasance or payment in full of the Bonds. Section 505. Deposits and Investment of Moneys. Moneys in each of the Funds and Accounts shall be deposited in accordance with laws of the State, in a bank, savings and loan association or savings bank organized under the laws of the State, any other state or the United States: (a) which has a main or branch office located in the Issuer; or (b) if no such entity has a main or branch office located in the Issuer, with such an entity that has a main or branch office located in the county or counties in which the Issuer is located. All such depositaries shall be members of the Federal Deposit Insurance Corporation, or otherwise as permitted by State law. All such deposits shall be invested in Permitted 19 Investments as set forth in this Article or shall be adequately secured as provided by the laws of the State. All moneys held in the Funds and Accounts shall be kept separate and apart from all other funds of the Issuer so that there shall be no commingling with any other funds of the Issuer. Moneys held in any Fund or Account other than the Escrow Fund may be invested in accordance with this Bond Resolution and the Federal Tax Certificate in Permitted Investments; provided, however, that no such investment shall be made for a period extending longer than to the date when the moneys invested may be needed for the purpose for which such fund was created. All earnings on any investments held in any Fund or Account shall accrue to and become a part of such Fund or Account. Section 506. Application of Moneys in the Costs of Issuance Account. Moneys in the Costs of Issuance Account shall be used by the Escrow Agent to pay the Costs of Issuance. Any funds remaining in the Costs of Issuance Account, after payment of all Costs of Issuance, but not later than the later of 30 days prior to the first Stated Maturity of principal or one year after the date of issuance of the Bonds, shall be transferred to the Issuer for deposit into the Debt Service Account. Section 507. Application of Moneys in the Escrow Fund. Under the Escrow Agreement, the Escrow Agent will apply moneys in the Escrow Fund to purchase the Escrowed Securities and to establish an initial cash balance in accordance with the Escrow Agreement. The cash and Escrowed Securities held in the Escrow Fund will be applied by the Escrow Agent solely in the manner authorized by the Escrow Agreement. All money deposited with the Escrow Agent shall be deemed to be deposited in accordance with and subject to all of the provisions contained in the Refunded Bond Resolutions and the Escrow Agreement. Section 508. Verification of Certified Public Accountant. Prior to or concurrently with the issuance and delivery of the Bonds and the creation of the Escrow Fund, the Issuer shall obtain a Verification Report from an independent certified public accountant that such accountant has verified the accuracy of the calculations that demonstrate that the money and obligations required to be deposited with the Escrow Agent pursuant to Section 502 of this Bond Resolution and the Escrow Agreement, together with the earnings to accrue thereon, will be sufficient for the timely payment of the principal of, redemption premium, if any, and interest on the Refunded Bonds in accordance with the Escrow Agreement. ARTICLE VI DEFAULT AND REMEDIES Section 601. Remedies. The provisions of the Bond Resolution, including the covenants and agreements herein contained, shall constitute a contract between the Issuer and the Owners of the Bonds. If an Event of Default occurs and shall be continuing, the Owner or Owners of not less than 10% in principal amount of the Bonds at the time Outstanding shall have the right for the equal benefit and protection of all Owners of Bonds similarly situated: (a) by mandamus or other suit, action or proceedings at law or in equity to enforce the rights of such Owner or Owners against the Issuer and its officers, agents and employees, and to require and compel duties and obligations required by the provisions of the Bond Resolution or by the Constitution and laws of the State; 20 (b) by suit, action or other proceedings in equity or at law to require the Issuer, its officers, agents and employees to account as if they were the trustees of an express trust; and (c) by suit, action or other proceedings in equity or at law to enjoin any acts or things which may be unlawful or in violation of the rights of the Owners of the Bonds. Section 602. Limitation on Rights of Owners. The covenants and agreements of the Issuer contained herein and in the Bonds shall be for the equal benefit, protection, and security of the Owners of any or all of the Bonds, all of which Bonds shall be of equal rank and without preference or priority of one Bond over any other Bond in the application of the funds herein pledged to the payment of the principal of and the interest on the Bonds, or otherwise, except as to rate of interest, date of maturity and right of prior redemption as provided in this Bond Resolution. No one or more Owners secured hereby shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security granted and provided for herein, or to enforce any right hereunder, except in the manner herein provided, and all proceedings at law or in equity shall be instituted, had and maintained for the equal benefit of all Outstanding Bonds. Section 603. Remedies Cumulative. No remedy conferred herein upon the Owners is intended to be exclusive of any other remedy, but each such remedy shall be cumulative and in addition to every other remedy and may be exercised without exhausting and without regard to any other remedy conferred herein. No waiver of any default or breach of duty or contract by the Owner of any Bond shall extend to or affect any subsequent default or breach of duty or contract or shall impair any rights or remedies thereon. No delay or omission of any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein. Every substantive right and every remedy conferred upon the Owners of the Bonds by this Bond Resolution may be enforced and exercised from time to time and as often as may be deemed expedient. If action or proceedings taken by any Owner on account of any default or to enforce any right or exercise any remedy has been discontinued or abandoned for any reason, or shall have been determined adversely to such Owner, then, and in every such case, the Issuer and the Owners of the Bonds shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies, powers and duties of the Owners shall continue as if no such suit, action or other proceedings had been brought or taken. ARTICLE VII DEFEASANCE Section 701. Defeasance. When any or all of the Bonds, redemption premium, if any, or scheduled interest payments thereon have been paid and discharged, then the requirements contained in this Bond Resolution and the pledge of the Issuer's faith and credit hereunder and all other rights granted hereby shall terminate with respect to the Bonds or scheduled interest payments thereon so paid and discharged. Bonds, redemption premium, if any, or scheduled interest payments thereon shall be deemed to have been paid and discharged within the meaning of this Bond Resolution if there has been deposited with the Paying Agent, or other commercial bank or trust company located in the State and having full trust powers, at or prior to the Stated Maturity or Redemption Date of said Bonds or the interest payments thereon, in trust for and irrevocably appropriated thereto, moneys and/or Defeasance Obligations which, together with the interest to be earned on any such Defeasance Obligations, will be sufficient for the payment of the principal of or Redemption Price of said Bonds and/or interest accrued to the Stated Maturity or Redemption Date, or if default in such payment has occurred on such date, then to the date of 21 the tender of such payments. If the amount to be so deposited is based on the Redemption Price of any Bonds, no such satisfaction shall occur until (a) the Issuer has elected to redeem such Bonds, and (b) either notice of such redemption has been given, or the Issuer has given irrevocable instructions, or shall have provided for an escrow agent to give irrevocable instructions, to the Bond Registrar to give such notice of redemption in compliance with Section 303 of this Bond Resolution. Any money and Defeasance Obligations that at any time shall be deposited with the Paying Agent or other commercial bank or trust company by or on behalf of the Issuer, for the purpose of paying and discharging any of the Bonds, shall be and are hereby assigned, transferred and set over to the Paying Agent or other bank or trust company in trust for the respective Owners of the Bonds, and such moneys shall be and are hereby irrevocably appropriated to the payment and discharge thereof. All money and Defeasance Obligations deposited with the Paying Agent or such bank or trust company shall be deemed to be deposited in accordance with and subject to all of the provisions of this Bond Resolution. ARTICLE VIII TAX COVENANTS Section 801. General Covenants. The Issuer covenants and agrees that it will comply with: (a) all applicable provisions of the Code necessary to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds; and (b) all provisions and requirements of the Federal Tax Certificate. The Mayor and Clerk are hereby authorized and directed to execute the Federal Tax Certificate in a form approved by Bond Counsel, for and on behalf of and as the act and deed of the Issuer. The Issuer will, in addition, adopt such other ordinances or resolutions and take such other actions as may be necessary to comply with the Code and with all other applicable future laws, regulations, published rulings and judicial decisions, in order to ensure that the interest on the Bonds will remain excluded from federal gross income, to the extent any such actions can be taken by the Issuer. Section 802. Survival of Covenants. The covenants contained in this Article and in the Federal Tax Certificate shall remain in full force and effect notwithstanding the defeasance of the Bonds pursuant to Article VII hereof or any other provision of this Bond Resolution until such time as is set forth in the Federal Tax Certificate. ARTICLE IX CONTINUING DISCLOSURE REQUIREMENTS Section 901. Disclosure Requirements. The Mayor and Clerk are hereby authorized and directed to execute the Disclosure Instructions in a form approved by Bond Counsel, for and on behalf of and as the act and deed of the Issuer. The Issuer hereby covenants with the Purchaser and the Beneficial Owners to provide and disseminate such information as is required by the SEC Rule and as further set forth in the Disclosure Instructions, which are incorporated herein by reference. Such covenant shall be for the benefit of and enforceable by the Purchaser and the Beneficial Owners. Section 902. Failure to Comply with Continuing Disclosure Requirements. In the event the Issuer fails to comply in a timely manner with its covenants contained in the preceding section, the Purchaser and/or any Beneficial Owner may make demand for such compliance by written notice to the Issuer. In the event the Issuer does not remedy such noncompliance within 10 days of receipt of such written notice, the Purchaser or any Beneficial Owner may in its discretion, without notice or demand, 22 proceed to enforce compliance by a suit or suits in equity for the specific performance of such covenant or agreement contained in the preceding section or for the enforcement of any other appropriate legal or equitable remedy, as the Purchaser and/or any Beneficial Owner shall deem effectual to protect and enforce any of the duties of the Issuer under such preceding section. Notwithstanding any other provision of this Bond Resolution, failure of the Issuer to comply with its covenants contained in the preceding section shall not be considered an Event of Default under this Bond Resolution. ARTICLE X MISCELLANEOUS PROVISIONS Section 1001. Annual Audit. Annually, promptly after the end of the Fiscal Year, the Issuer will cause an audit to be made ofthe financial statements of the Issuer for the preceding Fiscal Year by an Independent Accountant. Within 30 days after the completion of each such audit, a copy thereof shall be filed in the office of the Clerk. Such audit shall at all times during the usual business hours be open to the examination and inspection by any taxpayer, any Owner of any of the Bonds, or by anyone acting for or on behalf of such taxpayer or Owner. Upon payment of the reasonable cost of preparing and mailing the same, a copy of any annual audit will, upon request, be sent to any Owner or prospective Owner. As soon as possible after the completion of the annual audit, the governing body of the Issuer shall review such audit, and if the audit discloses that proper provision has not been made for all of the requirements of this Bond Resolution, the Issuer shall promptly cure such deficiency. Section 1002. Amendments. The rights and duties of the Issuer and the Owners, and the terms and provisions of the Bonds or of this Bond Resolution, may be amended or modified at any time in any respect by resolution of the Issuer with the written consent of the Owners of not less than a majority in principal amount of the Bonds then Outstanding, such consent to be evidenced by an instrument or instruments executed by such Owners and duly acknowledged or proved in the manner of a deed to be recorded, and such instrument or instruments shall be filed with the Clerk, but no such modification or alteration shall: (a) extend the maturity of any payment of principal or interest due upon any Bond; (b) effect a reduction in the amount which the Issuer is required to pay as principal of or interest on any Bond; (c) permit preference or priority of any Bond over any other Bond; or (d) reduce the percentage in principal amount of Bonds required for the written consent to any modification or alteration of the provisions of this Bond Resolution. Any provision of the Bonds or of this Bond Resolution may, however, be amended or modified by resolution duly adopted by the governing body of the Issuer at any time in any legal respect with the written consent of the Owners of all of the Bonds at the time Outstanding. Without notice to or the consent of any Owners, the Issuer may amend or supplement this Bond Resolution for the purpose of curing any formal defect, omission, inconsistency or ambiguity herein, to grant to or confer upon the Owners any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Owners, to conform this Bond Resolution to the Code or future 23 applicable federal law concerning tax-exempt obligations, or in connection with any other change therein which is not materially adverse to the interests of the Owners. Every amendment or modification of the provisions of the Bonds or of this Bond Resolution, to which the written consent of the Owners is given, as above provided, shall be expressed in a resolution adopted by the governing body of the Issuer amending or supplementing the provisions of this Bond Resolution and shall be deemed to be a part of this Bond Resolution. A certified copy of every such amendatory or supplemental resolution, if any, and a certified copy of this Bond Resolution shall always be kept on file in the office of the Clerk, and shall be made available for inspection by the Owner of any Bond or a prospective purchaser or owner of any Bond authorized by this Bond Resolution, and upon payment of the reasonable cost of preparing the same, a certified copy of any such amendatory or supplemental resolution or of this Bond Resolution will be sent by the Clerk to any such Owner or prospective Owner. Any and all modifications made in the manner hereinabove provided shall not become effective until there has been filed with the Clerk a copy of the resolution of the Issuer hereinabove provided for, duly certified, as well as proof of any required consent to such modification by the Owners of the Bonds then Outstanding. It shall not be necessary to note on any of the Outstanding Bonds any reference to such amendment or modification. The Issuer shall furnish to the Paying Agent a copy of any amendment to the Bonds or this Bond Resolution which affects the duties or obligations of the Paying Agent under this Bond Resolution. Section 1003. Notices, Consents and Other Instruments by Owners. Any notice, consent, request, direction, approval or other instrument to be signed and executed by the Owners may be in any number of concurrent writings of similar tenor and may be signed or executed by such Owners in person or by agent appointed in writing. Proof of the execution of any such instrument or of the writing appointing any such agent and of the ownership of Bonds, if made in the following manner, shall be sufficient for any of the purposes of this Bond Resolution, and shall be conclusive in favor of the Issuer and the Paying Agent with regard to any action taken, suffered or omitted under any such instrument, namely: (a) The fact and date of the execution by any person of any such instrument may be proved by a certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the person signing such instrument acknowledged before such officer the execution thereof, or by affidavit of any witness to such execution. (b) The fact of ownership of Bonds, the amount or amounts, numbers and other identification of Bonds, and the date of holding the same shall be proved by the Bond Register. In determining whether the Owners of the requisite principal amount of Bonds Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under this Bond Resolution, Bonds owned by the Issuer shall be disregarded and deemed not to be Outstanding under this Bond Resolution, except that, in determining whether the Owners shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Owners know to be so owned shall be so disregarded. Notwithstanding the foregoing, Bonds so owned which have been pledged in good faith shall not be disregarded as aforesaid if the pledgee establishes to the satisfaction of the Owners the pledgee's right so to act with respect to such Bonds and that the pledgee is not the Issuer. 24 Section 1004. Notices. Any notice, request, complaint, demand or other communication required or desired to be given or filed under this Bond Resolution shall be in writing, given to the Notice Representative at the Notice Address and shall be deemed duly given or filed if the same shall be: (a) duly mailed by registered or certified mail, postage prepaid; or (b) communicated via fax, with electronic or telephonic confirmation of receipt. Copies of such notices shall also be given to the Paying Agent. The Issuer, the Paying Agent and the Purchaser may from time to time designate, by notice given hereunder to the others of such parties, such other address to which subsequent notices, certificates or other communications shall be sent. All notices given by: (a) certified or registered mail as aforesaid shall be deemed duly given as of the date they are so mailed; (b) fax as aforesaid shall be deemed duly given as of the date of confirmation of receipt. If, because of the temporary or permanent suspension of regular mail service or for any other reason, it is impossible or impractical to mail any notice in the manner herein provided, then such other form of notice as shall be made with the approval of the Paying Agent shall constitute a sufficient notice. Section 1005. Electronic Transactions. The issuance of the Bonds and the transactions related thereto and described herein may be conducted and documents may be stored by electronic means. Section 1006. Further Authority. The officers and officials of the Issuer, including the Mayor and Clerk, are hereby authorized and directed to execute all documents and take such actions as they may deem necessary or advisable in order to carry out and perform the purposes of this Bond Resolution and to make ministerial alterations, changes or additions in the foregoing agreements, statements, instruments and other documents herein approved, authorized and confirmed which they may approve, and the execution or taking of such action shall be conclusive evidence of such necessity or advisability. Section 1007. Severability. If any section or other part of this Bond Resolution, whether large or small, is for any reason held invalid, the invalidity thereof shall not affect the validity of the other provisions of this Bond Resolution. Section 1008. Governing Law. This Bond Resolution shall be governed exclusively by and construed in accordance with the applicable laws of the State. Section 1009. Effective Date. This Bond Resolution shall take effect and be in full force from and after its adoption by the governing body of the Issuer. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 25 PASSED by the governing body of the City on July 9, 2012 and APPROVED AND SIGNED by the Mayor. (SEAL) ATTEST: [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] (Signature Page to Bond Ordinance -20l2-B) REGISTERED NUMBER EXHIBITA (FORM OF BONDS) REGISTERED $ Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York Corporation ("DTC"), to the Issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. Interest Rate: UNITED STATES OF AMERICA STATE OF KANSAS COUNTY OF SALINE CITY OF SALINA GENERAL OBLIGATION REFUNDING BOND SERIES 2012-B Maturity Date: Dated Date: July 15,2012 REGISTERED OWNER: PRINC~ALAMOUNT: CUSIP: KNOW ALL PERSONS BY THESE ~RESENTS: That the City of Salina, in the County of Saline, State of Kansas (the "Issuer"), for value received, hereby acknowledges itself to be indebted and promises to pay to the Registered Owner shown above, or registered assigns, but solely from the source and in the manner herein specified, the Principal Amount shown above on the Maturity Date shown above, unless called for redemption prior to said Maturity Date, and to pay interest thereon at the Interest Rate per annum shown above (computed on the basis of a 360-day year of twelve 30-day months), from the Dated Date shown above, or from the most recent date to which interest has been paid or duly provided for, payable semiannually on April 1 and October 1 of each year, commencing April I, 2013 (the "Interest Payment Dates"), until the Principal Amount has been paid. Method and Place of Payment. The principal or redemption price of this Bond shall be paid at maturity or upon earlier redemption to the person in whose name this Bond is registered at the maturity or redemption date thereof, upon presentation and surrender of this Bond at the principal office of the Treasurer of the State of Kansas, Topeka, Kansas (the "Paying Agent" and "Bond Registrar"). The interest payable on this Bond on any Interest Payment Date shall be paid to the person in whose name this Bond is registered on the registration books maintained by the Bond Registrar at the close of business on A-I the Record Date( s) for such interest, which shall be the 15th day (whether or not a business day) of the calendar month next precedillg the Interest Payment Date. Such interest shall be payable (a) by check or draft mailed by the Paying Agent to the address of such Registered Owner shown on the Bond Register or at such other address as is furnished to the Paying Agent in writing by such Registered Owner; or (b) in the case of an interest payment to Cede & Co. or any Owner of $500,000 or more in aggregate principal amount of Bonds by electronic transfer to such Owner upon written notice given to the Bond Registrar by such Registered Owner, not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank, ABA routing number and account number to which such Registered Owner wishes to have such transfer directed. The principal or redemption price of and interest on the Bonds shall be payable in any coin or currency that, on the respective dates of payment thereof, is legal tender for the payment of public and private debts. Interest not punctually paid will be paid in the manner established in the within defined Bond Resolution. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the hereinafter defmed Bond Resolution. Authorization of Bonds. This Bond is one of an authorized series of Bonds of the Issuer designated "General Obligation Refunding Bonds, Series 2012-B," aggregating the principal amount of $3,785,000 (the "Bonds") issued for the purposes set forth in the Ordinance of the Issuer authorizing the issuance' of the Bonds and the Resolution of the Issuer prescribing the form and details of the Bonds (collectively, the "Bond Resolution"). The Bonds are issued by the authority of and in full compliance with the provisions, restrictions and limitations of the Constitution and laws of the State of Kansas, including K.S.A. 10-427 et seq., as amended, and all other provisions of the laws of the State of Kansas applicable thereto. General Obligations. The Bonds constitute general obligations of the Issuer payable as to both principal and interest in part from special assessments levied upon the property benefited by the construction of certain improvements and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer, the balance being payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The full faith, credit and resources of the Issuer are hereby pledged for the payment of the principal of and interest on this Bond and the issue of which it is a part as the same respectively become due. Redemption Prior to Maturity. The Bonds are subject to redemption prior to maturity, as follows: Optional Redemption. At the option of the Issuer, Bonds maturing on October 1 in the years 2020, and thereafter, will be subject to redemption and payment prior to maturity on October 1, 2019, and thereafter, as a whole or in part (selection of maturities and the amount of Bonds of each maturity to be redeemed to be determined by the Issuer in such equitable manner as it may determine) at any time, at the redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest to the date of redemption. Redemption Denominations. Whenever the Bond Registrar is to select Bonds for the purpose of redemption, it shall, in the case of Bonds in denominations greater than a minimum Authorized Denomination, if less than all of the Bonds then Outstanding are to be called for redemption, treat each minimum Authorized Denomination of face value of each such Bond as though it were a separate Bond in the denomination of a minimum Authorized Denomination. A-2 Notice of Redemption. Notice of redemption, unless waived, shall be given by the Issuer to the State Treasurer of Kansas, the Purchaser of the Bonds and to the Bond Registrar in accordance with the Bond Resolution. The Issuer shall cause the Bond Registrar to notify each Registered Owner at the address maintained on the Bond Register, such notice to be given by mailing an official notice of redemption by fIrst class mail at least 30 days prior to the redemption date. Notice of redemption having been given as aforesaid, the Bonds or portions of Bonds to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specifIed, and from and after such date (unless the Issuer defaults in the payment of the redemption price), such Bonds or portions of Bonds shall cease to bear interest. Book-Entry System. The Bonds are being issued by means of a book-entry system with no physical distribution of bond certifIcates to be made except as provided in the Bond Resolution. One Bond certifIcate with respect to each date on which the Bonds are stated to mature or with respect to each form of Bonds, registered in the nominee name of the Securities Depository, is being issued and required to be deposited with the Securities Depository and immobilized in its custody. The book-entry system will evidence positions held in the Bonds by the Securities Depository's participants, benefIcial ownership of the Bonds in authorized denominations being evidenced in the records of such participants. Transfers of ownership shall be effected on the records of the Securities Depository and its participants pursuant to rules and procedures established by the Securities Depository and its participants. The Issuer and the Bond Registrar will recognize the Securities Depository nominee, while the Registered Owner of this Bond, as the owner of this Bond for all purposes, including (i) payments of principal of, and redemption premium, if any, and interest on, this Bond, (ii) notices and (iii) voting. Transfer of principal, interest and any redemption premium payments to participants of the Securities Depository, and transfer of principal, interest and any redemption premium payments to benefIcial owners of the Bonds by participants of the Securities Depository will be the responsibility of such participants and other nominees of such benefIcial owners. The Issuer and the Bond Registrar will not be responsible or liable for such transfers of payments or for maintaining, supervising or reviewing the records maintained by the Securities Depository, the Securities Depository nominee, its participants or persons acting through such participants. While the Securities Depository nominee is the owner of this Bond, notwithstanding the provision hereinabove contained, payments of principal of, redemption premium, if any, and interest on this Bond shall be made in accordance with existing arrangements among the Issuer, the Bond Registrar and the Securities Depository. Transfer and Exchange. EXCEPT AS OTHERWISE PROVIDED IN THE BOND RESOLUTION, TIDS GLOBAL BOND MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES DEPOSITORY OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY. This Bond may be transferred or exchanged, as provided in the Bond Resolution, only on the Bond Register kept for that purpose at the principal office of the Bond Registrar, upon surrender of this Bond, together with a written instrument of transfer or authorization for exchange satisfactory to the Bond Registrar duly executed by the Registered Owner or the Registered Owner's duly authorized agent, and thereupon a new Bond or Bonds in any Authorized Denomination of the same maturity and in the same aggregate principal amount shall be issued to the transferee in exchange therefor as provided in the Bond Resolution and upon payment of the charges therein prescribed. The Issuer shall pay all costs incurred in connection with the issuance, payment and initial registration of the Bonds and the cost of a reasonable supply of bond blanks. The Issuer and the Paying Agent may deem and treat the person in whose name this Bond is registered on the Bond Register as the absolute owner hereof for the purpose of receiving payment of, or on account of, the principal or redemption price hereof and interest due hereon and for all other purposes. The Bonds are issued in fully registered form in Authorized Denominations. A-3 Authentication. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the hereinafter defined Bond Resolution until the Certificate of Authentication and Registration hereon shall have been lawfully executed by the Bond Registrar. IT IS HEREBY DECLARED AND CERTIFIED that all acts, conditions, and things required to be done and to exist precedent to and in the issuance of this Bond have been properly done and performed and do exist in due and regular form and manner as· required by the Constitution and laws of the State of Kansas, and that the total indebtedness of the Issuer, including this series of bonds, does not exceed any constitutional or statutory limitation. IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed by the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of its Clerk, and its seal to be affixed hereto or imprinted hereon. CITY OF SALINA, KANSAS [(Facsimile Seal)] By: ______ ~(~f:~ac~s~im~l~·le~)~ ____________ _ Mayor ATTEST: By: (facsimile) Clerk A-4 CERTIFICATE OF AUTHENTICATION AND REGISTRATION This Bond is one of a series of General Obligation Refunding Bonds, Series 20l2-B, of the City of Salina, Kansas, described in the within-mentioned Bond Resolution. Registration Date _______ _ Registration Number ___________ _ Office of the State Treasurer, Topeka, Kansas, as Bond Registrar and Paying Agent By ________________ __ CERTIFICATE OF CLERK STATE OF KANSAS ) ) SS. COUNTY OF SALINE ) The undersigned, Clerk of the City of Salina, Kansas, does hereby certify that the within Bond has been duly registered in my office according to law as of July 15, 2012. WITNESS my hand and official seal. (Facsimile Seal) By: _______ ~(£=ac=s=im==il~e)~ __________ _ Clerk CERTIFICATE OF STATE TREASURER OFFICE OF THE TREASURER, STATE OF KANSAS RON ESTES, Treasurer of the State of Kansas, does hereby certify that a transcript of the proceedings leading up to the issuance of this Bond has been filed in the office of the State Treasurer, and that this Bond was registered in such office according to law on ________ _ WITNESS my hand and official seal. (Seal) By: Treasurer of the State of Kansas A-5 BOND ASSIGNMENT FOR VALUE RECEIVED, the undersigned do(es) hereby sell, assign and transfer to (Name and Address) (Social Security or Taxpayer Identification No.) the Bond to which this assignment is affixed in the outstanding principal amount of $ , standing in the name of the undersigned on the books of the Bond Registrar. The undersigned doe es) hereby irrevocably constitute and appoint as agent to transfer said Bond on the books of said Bond Registrar with full power of substitution in the premises. Dated ________ _ Name Social Security or Taxpayer Identification No. Signature (Sign here exactly as name(s) appear on the face of Certificate) Signature guarantee: By _______________________ __ LEGAL OPINION The following is a true and correct copy of the approving legal opinion of Gilmore & Bell, P.C., Bond Counsel, which was dated and issued as of the date of original issuance and delivery of such Bonds: GILMORE & BELL, P.e. Attorneys at Law 2405 Grand Boulevard Suite 1100 Kansas City, Missouri 64108 (PRINTED LEGAL OPINION) A-6 ESCROW TRUST AGREEMENT BETWEEN CITY OF SALINA, KANSAS AND UMB NATIONAL BANK OF AMERICA WICHITA, KANSAS as Escrow Agent DATED AS OF JULY 15, 2012 Entered in Connection with the Issuance of GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B EXECUTION COpy ESCROW TRUST AGREEMENT THIS ESCROW TRUST AGREEMENT, dated as of July 15,2012, by and between the City of Salina, Kansas, a municipal corporation organized and existing under the laws of the State of Kansas (the "Issuer"), and UMB National Bank of America, a national banking association with an office located in Wichita, Kansas, and having full trust powers, as Escrow Agent (the "Escrow Agent"). WITNESSETH: WHEREAS, the Issuer has heretofore duly authorized and issued the Refunded Bonds; and WHEREAS, the Refunded Bonds will mature (or will be subject to redemption prior to maturity) and will have interest payable in the amounts and at the times shown in the Verification Report; and WHEREAS, pursuant to the Bond Resolution, the Issuer authorized the issuance and delivery of the Bonds for the purpose of providing funds and investment earnings thereon, to pay the principal of, redemption premium, if any, and interest on the Refunded Bonds, including the purchase of non-callable direct obligations of the United States of America described in the Verification Report. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Definitions. In addition to the definitions contained in the Bond Resolution, the following words and terms used in this Escrow Agreement shall have the following meanings, unless the context or use indicates another or different meaning: "Agreement" means this Escrow Trust Agreement. "Bond Payment Date" means any date on which any principal of, or interest on, any of the Refunded Bonds is due and payable. "Bond Counsel" means the firm of Gilmore & Bell, P.C., or any other attorney or firm of attorneys with a nationally recognized standing in the field of municipal bond financing selected by the Issuer. "Bond Resolution" means collectively Ordinance No. 12-10644 and Resolution.No. 12-6918 of the Issuer authorizing issuance of the Bonds. "Bonds" means the General Obligation Refunding Bonds, Series 20l2-B, of the Issuer authorized by the Bond Resolution. "Code" means the Internal Revenue Code of 1986, as amended. "Escrow Agent" means UMB National Bank of America, Wichita, Kansas and its successor or successors at the time acting as the Escrow Agent under this Agreement. "Escrow Fund" means the fund by that name created in Section 3 of this Agreement. "Escrowed Securities" means the direct non-callable obligations of the United States of America listed in the Verification Report, and any Substitute Escrowed Securities. "Financial Advisor" means George K. Baum & Company, Kansas City, Missouri. "Issuer" means the City of Salina, Kansas. "Paying Agent" means the State Treasurer. "Purchaser" means UMB Bank, N.A., Kansas City, Missouri, the original purchaser of the Bonds, and any successor and assigns. "Refunded Bond Resolution" means collectively, the Series 2003-A Bond Resolution, the Series 2004-B Bond Resolution, and the Series 2005-A Bond Resolution. "Refunded Bonds" means collectively, (a) the Series 2003-A Bonds maturing in the years 2014 to 2018, inclusive, in the aggregate principal amount of $1,125,000; (b) the Series 2004-B Bonds maturing in the years 2013 to 2019, inclusive, in the aggregate principal amount of $1,010,000; and (c) the Series 2005-A Bonds maturing in the years 2014 to 2020, inclusive, in the aggregate principal amount of$1,535,000. "Redemption Date" means collectively, October 1,2013 for the Series 2003-A Bonds, October 1,2012 for the Series 2004-B Bonds and October 1, 2013 for the Series 2005-A Bonds. "Series 2003-A Bonds" means the Issuer's General Obligation Internal hnprovement Bonds, Series 2003-A, dated July 15, 2003. "Series 2004-B Bonds" means the Issuer's General Obligation Internal hnprovement Bonds, Series 2004-B, dated July 15, 2004. "Series 2005-A Bonds" means the Issuer's General Obligation Internal hnprovement Bonds, Series 2005-A, dated July 15, 2005. "Series 2003-A Bond Resolution" means collectively, the Issuer's Ordinance No. 03-10147 and Resolution No. 03-5949, which authorized the Series 2003-A Bonds. "Series 2004-B Bond Resolution" means collectively, the Issuer's Ordinance No. 04-10205 and Resolution No. 04-6089, which authorized the Series 2004-B Bonds. "Series 2005-A Bond Resolution" means collectively the Issuer's Ordinance No. 05-10282 and Resolution No. 05-6199, which authorized the Series 2005-A Bonds. "Substitute Escrowed Securities" means non-callable direct obligations of the United States of Americ.a, which have been acquired by the Escrow Agent and substituted for Escrowed Securities in accordance with Section 8 of this Agreement. "SLGS" means United States Treasury Obligations -State and Local Government Series. 2 "Verification Report" means the verification report referenced in Section 4 hereof, a copy of which is attached hereto as Schedule 1. 2. Receipt of Bond Resolutions. Receipt of an exec.uted counterpart of the Bond Resolution and copy of the Refunded Bond Resolution, certified as true and correct by the Clerk of the Issuer, is hereby acknowledged by the Escrow Agent, and reference herein to, or citation herein of, any provision of said documents shall be deemed to incorporate the same as a part hereof in the same manner and with the same effect as if they were fully set forth herein. 3. Creation of the Escrow Fund. There is hereby created and established with the Escrow Agent the following special and irrevocable separate trust fund to be held in the custody of the Escrow Agent and designated as the "Escrow Fund for General Obligation Internal Improvement Bonds, Series 2003-A, General Obligation Internal Improvement Bonds, Series 2004-B, and General Obligation Internal Improvement Bonds, Series 2005-A." 4. Verification Report. Robert Thomas CPA, LLC, Certified Public Accountants, have verified the mathematical computations performed by the Financial Advisor, which demonstrate that the cash held in the Escrow Fund, together with the maturing Escrowed Securities and interest to accrue thereon, will be sufficient to pay all principal of, redemption premium, if any, and interest on the Refunded Bonds on the respective Bond Payment Dates. A copy of such report is attached hereto as Schedule 1. 5. Deposits to the Escrow Fund. Concurreritly with the execution and delivery of this Agreement, and pursuant to the provisions of the Bond Resolution, the Issuer herewith deposits with the Escrow Agent, and the Escrow Agent acknowledges receipt and deposit into the Escrow Fund of, proceeds of the Bonds in the amount of $3,828,959.89. The Escrow Agent shall apply such amount as follows: (a) $3,828,954.00 shall be used to purchase the Escrowed Securities described m the Verification Report, which shall be delivered to and deposited in the Escrow Fund. (b) $5.89 shall be held uninvested in the Escrow Fund as a beginning balance. 6. Creation of Lien. The Escrow Fund shall be irrevocable. The owners of the Refunded Bonds are hereby granted an express lien on, and security interest in, the Escrowed Securities and the cash in the Escrow Fund and all earnings thereon until used and applied in accordance with this- Agreement. The matured principal of, and earnings on, the Escrowed Securities and any cash in the Escrow Fund are hereby pledged and assigned, and shall be applied solely for the payment of the principal of, redemption premium, if any, and interest on the Refunded Bonds. 7. Application of Cash and Escrowed Securities in the Escrow Fund. (a) Except as otherwise expressly provided in this Section or in Section 8 hereof, the Escrow Agent shall have no power or duty to invest any money held hereunder or to sell transfer or otherwise dispose of any Escrowed Securities. (b) On or prior to the Business Day preceding each Bond Payment Date, the Escrow Agent shall withdraw from the Escrow Fund an amount equal to the principal of, redemption premium, if any, and interest on the Refunded Bonds becoming due and payable on such Bond Payment Date or the Redemption Date, as set forth in the Verification Report and Schedule 2 attached hereto, and shall forward from available moneys in the Escrow Fund such amount to the offices of the respective Paying 3 Agent, so that immediately available funds will reach the offices of the Paying Agent on or before the close of business on the Business Day preceding such Bond Payment Date and the Redemption Date. In order to make the payments required by this subsection (b), the Escrow Agent is hereby authorized to redeem or otherwise dispose of Escrowed Securities in accordance with the maturity schedules in the Verification Report. The liability of the Escrow Agent to make the payments required by this subsection (b) shall be limited to the money and Escrowed Securities in the Escrow Fund. (c) Notwithstanding any other provisions of this Agreement, the Issuer and the Escrow Agent hereby covenant that no part of the proceeds of the Bonds or of the money or funds in the Escrow Fund shall be used, at any time, directly or indirectly, in a manner which, if such use had been reasonably anticipated on the date of issuance of the Bonds would have caused any of the Bonds to be an "arbitrage bond" under Section 148 of the Code. (d) Upon the payment in full of the principal of, redemption premium, if any, and interest on the Refunded Bonds, all remaining money and Escrowed Securities in the Escrow Fund, together with any interest thereon, shall be transferred to the Issuer to be applied by the Issuer in accordance with law. (e) After the transfers described in subsection (b) above, cash balances in excess of $1,000 remaining in the Escrow Fund from redemption of SLGS shall, to the extent required or permitted by applicable Treasury Regulations and to the extent that such securities are then available for purchase, be invested by the Escrow Agent in SLGS, maturing on or prior to the next interest Bond Payment Date on the Refunded Bonds, at the rate of 0.00%, in accordance with the provisions of the Verification Report. 8. Substitute Escrowed Securities. (a) In the event that any of the Escrowed Securities are not available for delivery on the date of the issuance of the Bonds, the Escrow Agent is directed to accept substitute securities in lieu thereof, provided: (1) the substitute securities are non-callable direct obligations of the United States of America, (2) the maturing principal of and interest on such substitute securities (excluding any interest after any optional call date) is equal to or greater than the maturity value of such unavailable Escrowed Securities, (3) principal of and interest on the substitute securities is payable on or before the maturity date of the unavailable Escrowed Securities, and (4) the Issuer and Bond Counsel in writing approve such substitution. If the original Escrowed Securities become available and are tendered to the Escrow Agent by or on behalf of the Financial Advisor, the Escrow Agent shall accept such Escrowed Securities, shall return the substitute securities as directed by such Financial Advisor and shall notify Bond Counsel and the Issuer of the transaction. (b) At the written request of the Issuer and upon compliance with the conditions hereinafter stated, the Escrow Agent shall have the power to sell, transfer, request the redemption of or otherwise dispose of the Escrowed Securities and to substitute for the Escrowed Securities solely cash or Substitute Escrowed Securities. The Escrow Agent shall purchase such Substitute Escrowed Securities with the proceeds derived from the sale, transfer, disposition or redemption of the Escrowed Securities together with any other funds available for such purpose. The substitution may be effected only if: (1) the substitution of the Substitute Escrowed Securities for the original Escrowed Securities occurs simultaneously; (2) the Escrow Agent shall receive from an independent certified public accountant acceptable to the Escrow Agent in its reasonable judgment a certification, satisfactory in form and substance to the Escrow Agent, to the effect that after such substitution, (A) the principal of and interest on the Escrowed Securities to be held in the Escrow Fund after the substitution (including Substitute Escrowed Securities to be acquired), together with any other money to be held in the Escrow Fund after such transaction, will be sufficient to pay all remaining principal of, redemption premium, if any, and interest on the Refunded Bonds pursuant to the Verification Report and Schedule 2 hereto, and (B) the 4 amounts and dates of the anticipated transfers from the Escrow Fund to the Paying Agent for the Refunded Bonds will not be diminished or postponed thereby; and (3) the Escrow Agent shall receive a written opinion of Bond Counsel to the effect that such substitution is permitted under this Agreement and would not cause the interest on either the Bonds or the Refunded Bonds to become included in gross income for purposes of federal income taxation under then existing law. In the event that any such substitution results in cash held in the Escrow Fund in excess of the cash required for the certification of an independent certified public accountant referred to in this subsection (b) (as evidenced by such certification), the Escrow Agent shall, at the request of the Issuer, withdraw such excess from the Escrow Fund and pay such excess to the Issuer, and the Issuer shall apply such excess as provided by law; provided that, in the written opinion of Bond Counsel delivered to the Escrow Agent, such withdrawal and application will not be contrary to State law and will not cause the interest on the Bonds or the Refunded Bonds to become included in gross income for pUrPoses of federal income taxation. 9. Redemption of Refunded Bonds. The Escrow Agent acknowledges that (a) the Issuer has notified the Escrow Agent that the Issuer has elected to call the Refunded Bonds described in Schedule 2 hereto for redemption and payment prior to maturity, on the Redemption Date, in accordance with the Refunded Bond Resolution and (b) the Issuer has directed the Escrow Agent to notify the Paying Agent not less than 45 days and not more than 90 days prior to each Redemption Date of such call for redemption so that the Paying Agent may cause notice of the call for redemption and payment of the Refunded Bonds to be given on behalf of the Issuer in the manner provided in the Refunded Bond Resolution. The Escrow Agent agrees to give notice of said redemption, in substantially the form of Exhibit A-I, A-2, and A-3 attached hereto, on behalf of the Issuer. The Escrow Agent is further directed by the Issuer to give additional notice of defeasance in substantially the form of Exhibit B-1 and B-2 attached hereto, to the Paying Agent and to: (a) Stone & Youngberg, San Francisco, California, the original purchaser of the Series 2003-A Bonds and Financial Security Assurance Inc., the Bond Insurer of the Series 2003-A Bonds; and (b) Country Club Bank, n.a., Prairie Village, Kansas, the original purchaser of the Series 2005-A Bonds, not more than 60 days after July 26, 2012. Notice shall also be given to certain repositories in order to comply with the provisions of Rule 15c2-12 of the Securities and Exchange Commission in substantially the form of Exhibit C attached hereto. Additional notice is for convenience in facilitating said redemption and defeasance; failure to give such notice as aforesaid, or any defect therein, shall not affect the validity of any proceedings for the redemption and defeasance of the Refunded Bonds. 10. Reports of the Escrow Agent. As long as any of the Refunded Bonds, together with the interest thereon, have not been paid in full, the Escrow Agent shall, at least sixty (60) days prior to each Bond Payment Date, determine the amount of money which will be available in the Escrow Fund to pay the principal of, redemption premium, if any, and interest on the Refunded Bonds on the next Bond Payment Date or Redemption Date. In the event that funds are not sufficient to make the required payments on such Bond Payment Date or Redemption Date, the Escrow Agent shall certify in writing to the Issuer (a) the amount so determined and (b) a list of the moneys and Escrowed Securities held by the Escrow Agent in the Escrow Fund on the date of such certification, including all moneys held by it which were received as interest or profit from Escrowed Securities. On or prior to the Redemption Date, the Escrow Agent shall provide to the Issuer a certificate verifying dissemination of notice to the Paying Agent as required in Section 9 hereof. 11. Liability of Escrow Agent. (a) The Escrow Agent shall not be liable for any loss resulting from any investment, sale, transfer or other disposition made pursuant to this Agreement in compliance with the provisions hereof. The Escrow Agent shall have no lien whatsoever on, or right of set-off with respect to, any of the moneys 5 or Escrowed Securities on deposit in the Escrow Fund for the payment of fees and expenses for services rendered by the Escrow Agent under this Agreement or otherwise. (b) The Escrow Agent shall not be liable for the accuracy of the calculations as to the sufficiency of the Escrowed Securities and moneys to pay the Refunded Bonds. So long as the Escrow Agent applies the Escrowed Securities and moneys held in the Escrow Fund as provided herein, the Escrow Agent shall not be liable for any deficiencies in the amounts necessary to pay the Refunded Bonds. (c) In the event of the Escrow Agent's failure to account for any of the Escrowed Securities or moneys received by it, said Escrowed Securities or moneys shall be and remain the property of the Issuer in trust for the Owners of the Refunded Bonds and if, for any reason, such Escrowed Securities or moneys are not applied as herein provided, the assets of the Escrow Agent shall be impressed with a trust for the amount thereof until the required application shall be made. (d) The Escrow Agent shall not be responsible for any action or failure to take action on the part of the Paying Agent. In event of the Escrow Agent's failure to give notice to the Paying Agent to give notice of redemption as required in Section 9 hereof, the Escrow Agent shall be liable for any loss, expense or cost to the Issuer, including the payment of additional interest on the Refunded Bonds. Notwithstanding the foregoing subsections, the Escrow Agent shall not be relieved of liability arising from, and proximate to, its failure to comply fully with the terms of this Agreement. 12. Fees and Costs. (a) The aggregate amount of the costs, fees and expenses of the Escrow Agent in connection with the creation of the escrow described in and created by this Agreement and in carrying out any of the duties, terms or provisions of this Agreement is a one-time fee in the amount of$l,OOO.OO, which amount shall be paid from money on deposit in the Costs of Issuance Account established by the Bond Resolution. Notwithstanding the preceding, the Escrow Agent shall be entitled to reimbursement from the Issuer of reasonable out-of-pocket, legal or extraordinary expenses incurred in carrying out the duties, terms or provisions of this Agreement. Claims for such reimbursement may be made to the Issuer and in no event shall such reimbursement be made from funds held by the Escrow Agent pursuant to this Agreement. (b) In addition to the amount set forth in Section 5 hereof, the Escrow Agent shall receive the sum of $38,884.04 for deposit into the Costs ofIssuance Account hereby created with the Escrow Agent. The Escrow Agent shall pay Costs of Issuance in an aggregate sum not to exceed said amount. An estimated schedule of such expenses are attached hereto as Schedule 3. The Escrow Agent is authorized to pay such costs based on receipt of invoices or statements in amounts not in excess of those estimated on Schedule 3. In the event invoices are received in excess of the estimated amounts set forth on Schedule 3, such amounts shall not be paid without written approval ofthe Issuer. Any Costs ofIssuance funds on deposit which the Issuer shall certify to the Escrow Agent are not needed to pay such expenses shall be returned to the Issuer following receipt of such certification, but in any case not later than 30 days prior to Apri11, 2013. 13. Resignation or Removal of Escrow Agent; Successor Escrow Agent. The Escrow Agent at the time acting hereunder may at any time resign and be discharged from its duties and responsibilities hereby created by giving written notice by registered or certified mail to the Issuer and the Paying Agent (who shall cause notice to be given to the Owners of the Refunded Bonds by first-class mail) not less than 60 days prior to the date when the resignation is to take effect. Such resignation shall take effect immediately upon the acceptance of the Issuer of the resignation, the appointment of a 6 successor Escrow Agent (which may be a temporary Escrow Agent) by the Issuer, the acceptance of such successor Escrow Agent of the terms, covenants and conditions of this Agreement, the transfer of the Escrow Fund, including the money and Escrowed Securities held therein, to such successor Escrow Agent and the completion of any other actions required for the principal of and interest on the Escrowed Securities to be made payable to such successor Escrow Agent rather than the resigning Escrow Agent. The Escrow Agent may be removed at any time by an instrument or concurrent instruments in writing, delivered to the Escrow Agent and the Issuer and signed by the owners of a majority in principal amount of the Refunded Bonds then outstanding; provided that written notice thereof is mailed on or before the date of such removal by first-class mail, postage prepaid, to all Owners of such Refunded Bonds, who are not parties to such instruments. The Escrow Agent may also be removed by the Issuer if the Escrow Agent fails to make timely payment of available moneys on any Bond Payment Date to the Paying Agent of the amounts required to be paid by it on such Bond Payment Date by Section 7(b) of this Agreement; provided that written notice thereof is mailed on or before the date of such removal by first- class mail, postage prepaid, to the Paying Agent and to all Owners of such Refunded Bonds, who are not parties to such instruments. Any removal pursuant to this paragraph shall become effective upon the appointment of a successor Escrow Agent (which may be a temporary successor Escrow Agent) by the Issuer, the acceptance of such successor Escrow Agent of the terms, covenants and conditions of this Agreement, the transfer of the Escrow Fund, including the money and Escrowed Securities held therein, to such successor Escrow Agent and the completion of any other actions required for the principal of and interest on the Escrowed Securities to be made payable to such successor Escrow Agent rather than the Escrow Agent being removed. If the Escrow Agent shall resign or be removed, or be dissolved, or shall be in the course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case the Escrow Agent shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, the Issuer shall appoint a temporary Escrow Agent to fill such vacancy until a successor Escrow Agent shall be appointed by the Issuer in the manner above provided, and any such temporary Escrow Agent so appointed by the Issuer shall immediately and without further act be superseded by the successor Escrow Agent so appointed. If no appointment of a successor Escrow Agent or a temporary successor Escrow Agent shall have been made by the Issuer pursuant to the foregoing provisions of this Section within 60 days after written notice of resignation of the Escrow Agent has been given to the Issuer or instrument of removal has been delivered to the Escrow Agent, the Owner of any of the Refunded Bonds or any retiring or removed Escrow Agent may apply to any court of competent jurisdiction for the appointment of a successor Escrow Agent, and such court may thereupon, after such notice, if any, as it shall deem proper, appoint a successor Escrow Agent. No successor Escrow Agent shall be appointed unless such successor Escrow Agent shall be a corporation with trust powers authorized to do business in the State of Kansas (as required by K.S.A. 10-427 et seq., as amended), and organized under the banking laws of the United States or the State of Kansas and shall have at the time of appointment capital and surplus of not less than $10,000,000. Every successor Escrow Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Issuer an instrument in writing accepting such appointment hereunder, and thereupon such successor Escrow Agent without any further act, deed or conveyance shall become fully vested with all the rights, immunities, powers, trusts, duties and obligations of its predecessor, but such predecessor shall, nevertheless, on the written request of such successor Escrow Agent or the Issuer, execute and deliver an instrument transferring to such successor Escrow Agent all the estates, properties, 7 rights, powers and trusts of such predecessor hereunder, and every predecessor Escrow Agent shall deliver all securities and money held by it to its successor. Should any transfer, assignment or instrument in writing from the Issuer be required by any successor Escrow Agent for more fully and certainly vesting in such successor Escrow Agent the estates, rights, powers and duties hereby vested or intended to be vested in the predecessor Escrow Agent, any such transfer, assignment and instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer. Any corporation into which the Escrow Agent, or any successor to it of the duties and responsibilities created by this Agreement, may be merged or converted or with which it or any successor to it may be consolidated, or any corporation resulting from any merger, conversion, consolidation or reorganization to which the Escrow Agent or any successor to it may be a party, shall, if satisfactory to the Issuer, be the successor Escrow Agent under this Agreement without the execution or filing of any paper or any other act on the part of the parties hereto, anything herein to the contrary notwithstanding. The Issuer shall immediately notify the Rating Agency upon receipt of written notice in accordance with this Section which would result in the resignation, removal, dissolution, liquidation or the incapability of action hereunder of the Escrow Agent and appointment of any successor Escrow Agent. In the event of resignation or removal of the Escrow Agent, a portion of the amount paid to the Escrow Agent pursuant to the preceding section shall be returned to the Issuer, such portion to be computed by multiplying the fee specified in the preceding section by the ratio of the number of months which the trust created by this Agreement will continue from the effective date of such resignation or removal to the entire term of such trust. 14. Amendments to this Agreement. This Agreement is made for the benefit of the Issuer and the Owners from time to time of the Refunded Bonds and it shall not be repealed, revoked, altered or amended without the written consent of all such Owners, the Escrow Agent and the Issuer; provided, however, that the Issuer and the Escrow Agent may, without the consent of, or notice to, such Owners, enter into such agreements supplemental to this Agreement as shall not adversely affect the rights of such Owners and as shall not be inconsistent with the terms and provisions of this Agreement, for anyone or more of the following purposes: (a) to cure any ambiguity or formal defect or omission in this Agreement; (b) to grant to, or confer upon, the Escrow Agent for the benefit of the Owners of the Refunded Bonds, any additional rights, remedies, powers or authority that may lawfully be granted to, or conferred upon, such Owners or the Escrow Agent; and (c) to subject to this Agreement additional funds, securities or properties. The Escrow Agent shall be entitled to rely exclusively upon an unqualified written opinion of Bond Counsel with respect to compliance with this Section, including the extent, if any, to which any change, modification, addition or elimination affects the rights of the Owners of the Refunded Bonds, or that any instrument executed hereunder complies with the conditions and provisions of this Section. The Escrow Agent shall notify the Rating Agency in writing prior to the execution of any amendment to this Agreement. 15. Indemnification. The Issuer hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and hold 8 harmless the Escrow Agent and its respective successors, assigns, agents and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including legal fees, expenses and disbursements, without limitation) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, at any time, the Escrow Agent (whether or not also indemnified against the same by the Issuer or any other person under any other agreement or instrument) and in any way relating to or arising out of the execution and delivery of this Agreement, the establishment of the Escrow Fund [or the Costs of Issuance Account] established hereunder, the acceptance of the moneys and securities deposited therein, the purchase of the Escrowed Securities, the retention of the Escrowed Securities or the proceeds thereof and any payment, transfer or other application of moneys or securities by the Escrow Agent in accordance with the provisions of this Agreement; provided however, that the Issuer shall not be required to indemnify the Escrow Agent against the Escrow Agent's own negligence or willful misconduct. In no event shall the Issuer be liable to any person by reason of the transactions contemplated hereby other than to the Escrow Agent as set forth in this Section 15. The indemnities contained in this Section 15 shall survive the termination of this Agreement. The Escrow Agent and its respective successors, assigns, agents, directors, officers, employees and servants shall not be held to any personal liability whatsoever, in tort, contract or otherwise, in connection with the execution and delivery of this Agreement, the establishment of the Escrow Fund or the Costs of Issuance Account, the acceptance of the moneys deposited therein, the purchase of the Escrowed Securities, the retention of the Escrowed Securities or the proceeds thereof or any payment, transfer or other application of the moneys or securities held by the Escrow Agent in accordance with the provisions of this Agreement or by reason of any non-negligent act, omission or error of the Escrow Agent made in good faith in the conduct of its duties. The duties and obligations of the Escrow Agent shall be determined by the express provisions of this Agreement. The Escrow Agent may consult with counsel who mayor may not be counsel to the Issuer, and in reliance upon the opinion of such counsel shall have full and complete authorization and protection in respect of any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering or omitting any action under this Agreement, such matter may be deemed to be conclusively established by a certificate signed by an authorized officer of the Issuer. 16. Notices. Except as otherwise provided herein, it shall be sufficient service of any notice, request, complaint, demand or other paper required by the Bond Resolution or this Agreement to be given to or filed with the parties hereto or any entity referenced herein if the same shall be duly mailed by certified mail, postage prepaid, return receipt requested, addressed to the Notice Representative at the Notice Address (as said terms are defined in the Bond Resolution). 17. Termination. This Agreement shall terminate when all transfers required to be made by the Escrow Agent under the provisions hereof shall have been made. 18. Severability. If anyone or more of the covenants or agreements provided in this Agreement on the part of the Issuer or the Escrow Agent to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenant or agreement shall be deemed and construed to be severable from the remaining covenants and agreements herein contained, and shall in no way affect the validity of the remaining provisions of this Agreement. 19. Successors and Assigns. All of the covenants, promises and agreements in this Agreement contained by or on behalf of the Issuer or by or on behalf of the Escrow Agent shall be binding upon, and inure to the benefit of, their respective successors and assigns, whether or not so expressed. 9 20. Governing Law. This Agreement shall be governed by, and be construed in accordance with, the laws of the State of Kansas. 21. Headings. Any headings preceding the text of the several Sections hereof or marginal notes appended to copies hereof, shall be solely for convenience of reference, and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect. 22. Counterparts. This Agreement may be executed in several counterparts, all or any of which shall be regarded, for all purposes, as one original, and shall constitute and be but one and the same instrument. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 10 IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly authorized officers or elected officials, and their corporate seals to be hereunder affixed and attested as of the date first above written. ATTEST: CITY OF SALINA, KANSAS By: ~~~~~-+~~ ______ __ Title: UMB NATIONAL B£oF AMERICA WICHITA, KANS as Escrow Agen (Signature Page to Escrow Trust Agreement) IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly authorized officers or elected officials, and their corporate seals to be reunder affixed and attested as of the date first above written. ATTEST: CITY OF SALINA, UMB NATIONAL BANK OF AMERICA WICHITA, KANSAS as Escrow Agent By: ~/J1~J. {ftYJj}UlJ Title: Bonnie Mosher, Vice President (Signature Page to Escrow Trust Agreement) SCHEDULE 1 TO ESCROW TRUST AGREEMENT VERIFICATION REPORT S-l-l Robert Thomas CPA, LLC Certified Public Accountants CITY OF SALINA, KANSAS Verification Report July 26, 2012 Robert Thomas CPA, LLC Certified Public Accountants INDEPENDENT ACCOUNTANT'S VERIFICATION REPORT July 26, 2012 City of Salina, Kansas ("Issuer") Salina, Kansas George K. Baum & Company ("Financial Advisor") Kansas City, Missouri Gilmore & Bell, P.C. ("Bond Counsel") Kansas City, Missouri UMB National Bank of America ("Escrow Trustee") Wichita, Kansas UMB Bank, NA Kansas City, Missouri Pursuant to the request of the Financial Advisor on behalf of the Issuer, we have performed certain procedures, as discussed below, in connection with the proposed delivery of $2,365,000 General Obligation Internal Improvement Bonds, Series 2012-A (the "2012-A Bonds") and $3,785,000 General Obligation Refunding Bonds, Series 2012-B (the "2012-B Bonds" and together with the 2012-A Bonds, the "Bonds"). Proceeds from the 2012-B Bonds, together with other available funds, will be used to acquire United States Treasury Obligations -State and Local Government Series (the "SLGS" or "Escrowed Securities") to provide funds to: • advance refund all of the callable maturities, comprising serial bonds maturing October 1,2014 through October 1, 2018 (the "2003-A Refunded Bonds"), of the Issuer's outstanding General Obligation Internal Improvement Bonds. Series 2003-A, dated July 15,2003 (the "2003-A Bonds"); and • currently refund all of the callable maturities, comprising serial bonds maturing October 1,2013 through October 1, 2019 (the "2004-B Refunded Bonds"), of the Issuer's outstanding General Obligation Internal Improvement Bonds. Series 2004-B, dated July 15,2004 (the "2004-B Bonds"); and • advance refund all of the callable maturities, comprising serial bonds maturing October 1 , 2014 through October 1 , 2020 (the "2005-A Refunded Bonds"), of the Issuer's outstanding General Obligation Internal Improvement Bonds. Series 2005-A, dated July 15,2005 (the "2005-A Bonds"). City of Salina, Kansas July 26,2012 Page 2 Collectively, the 2003-A Refunded Bonds, the 2004-B Refunded Bonds and the 2005-A Refunded Bonds are hereinafter referred to as the "Refunded Bonds" and, collectively, the 2003-A Bonds, the 2004-B Bonds, and the 2005-A Bonds are hereinafter referred to as the "Prior Bonds". The procedures were performed solely to assist the addressees of this report in evaluating the mathematical accuracy of certain schedules prepared by the Financial Advisor which indicate that: • there will be sufficient funds available in an escrow account (the "Escrow Fund") to be established on July 26, 2012 to pay the remaining debt service payments related to the Refunded Bonds (the "Escrow Requirements"), assuming: • the 2003-A Refunded Bonds, in the aggregate principal amount of $1,125,000, will be called and redeemed on the first optional redemption date of October 1, 2013 at 100.00 percent of the principal amount thereof, together with interest thereon; and • the 2004-B Refunded Bonds, in the aggregate principal amount of $1,010,000, will be called and redeemed on the first optional redemption date of October 1, 2012 at 100.00 percent of the principal amount thereof, together with interest thereon; and • the 2005-A Refunded Bonds, in the aggregate principal amount of $1,535,000, will be called and redeemed on the first optional redemption date of October 1, 2013 at 100.00 percent of the principal amount thereof, together with interest thereon; and • the yield on the Escrowed Securities purchased with bond proceeds (the "Escrowed Securities Purchased with Bond Proceeds") is less than the aggregate yield on the Bonds; and The procedures we performed are summarized below: 1. We independently calculated the future cash receipts from the Escrowed Securities and compared the future cash receipts to the Financial Advisor's schedules, and found the future cash receipts to be in agreement. 2. We independently calculated the Escrow Requirements related to the Refunded Bonds, using information from the respective Resolutions for the Refunded Bonds (the "Prior Bond Documents"), compared the Escrow Requirements to the Financial Advisor's schedules, and found the Escrow Requirements to be in agreement. We assume the Prior Bond Documents to be accurate. 3. Using the results of our independent calculations described in procedures 1 and 2, and assuming an initial cash deposit to the Escrow Fund in the amount of $5.89 on July 26, 2012, we prepared an Escrow Fund cash flow schedule (attached hereto as Exhibit A). The resulting cash flow schedule indicates that there will be sufficient funds available in the Escrow Fund to pay the Escrow Requirements on a timely basis. 4. We compared the interest rates for the SLGS on the final SLGS Subscription View Form (provided by the Financial Advisor and attached to this report) to the Department of the Treasury Bureau of the Public Debt SLGS Table for use on July 9,2012, and found the interest rates on the final SLGS Subscription View Form to be less than or equal to the applicable maximum allowable interest rates for use on July 9, 2012. 5. We compared the terms (Le., the principal amounts, interest rates, first interest payment dates, issue date and maturity dates) of the SLGS to be acquired on July 26,2012, as summarized herein, to the final SLGS subscription forms; we found the terms to be in agreement. City of Salina, Kansas July 26, 2012 Page 3 6. We compared pertinent terms of the Refunded Bonds (i.e., debt service payment dates, annual maturity amounts, interest rates and optional redemption provisions), as summarized herein, using information from the Prior Bond Documents, provided by the Financial Advisor; we found the terms to be in agreement. 7. We compared the maturity and interest payment dates, principal amounts, interest rates, and issue prices to the public of the Bonds, as summarized herein, to the Official Statement for the Bonds provided by the Financial Advisor; we found the terms to be in agreement. 8. We independently calculated the yield on the Escrowed Securities Purchased with Bond Proceeds and the aggregate yield on the Bonds, assuming a settlement date of July 26,2012. The term "yield," as used herein, means that yield which, when used in computing the present value of all payments of principal and interest on an obligation compounded semiannually using a 30/360-day year basis, produces an amount equal to: • in the case of the Escrowed Securities Purchased with Bond Proceeds, the purchase price of such securities; and • in the case of the Bonds, the issue price to the public plus accrued interest, on the Bonds, as represented by the Financial Advisor. The results of our yield calculations, which are listed below, were compared to the yield calculations provided by the Financial Advisor; we found the yields to be in agreement. YIELD EXHIBIT • Yield on the Escrowed Securities Purchased with Bond Proceeds • Yield on the Bonds 0.1833552% 1.3989592% B-1 D-1 Based on performing the agreed-upon procedures, we have found that those schedules provided by the Financial Advisor, when compared to those schedules prepared by us (attached hereto as Exhibits), are arithmetically accurate and reflect, based on the assumptions set forth herein, that: • there will be sufficient funds available in the Escrow Fund to pay the Escrow Requirements on a timely basis; and • the yield on the Escrowed Securities Purchased with Bond Proceeds is less than the aggregate yield on the Bonds, as described above. City of Salina, Kansas July 26,2012 Page 4 This engagement was performed in accordance with standards established by the American Institute of Certified Public Accountants (the "AICPA"). The sufficiency of these procedures is solely the responsibility of the specified users of the report. We make no representation regarding the sufficiency of the procedures summarized above, either for the purpose for which this report has been requested or for any other purpose. We were not engaged to, and did not, perform an examination, the objective of which would be the expression of an opinion on the achievability of the anticipated Escrow Fund cash sufficiency or yield calculations. Accordingly, in accordance with standards for attestation services established by the AICPA, we cannot express such an opinion. Had we performed an examination or performed additional procedures, other matters might have come to our attention that would have been reported to you. The results of our independent calculations with respect to the proposed transactions are summarized in the accompanying exhibits. The original computations, along with related characteristics and assumptions contained herein, were provided by the Financial Advisor on behalf of the Issuer. We relied solely on this information and these assumptions and limited our work to performing those procedures set forth above. This report is issued solely for the information of, and assistance to, the addressees of this report and is not to be quoted or referred to in any document, except for the required closing transaction documents. Additionally, this report should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures for their purposes. Under the terms of our engagement, we have no obligation to update this report because of events or transactions occurring subsequent to the date of this report. Shawnee Mission, Kansas APPENDIX CITY OF SALINA, KANSAS TABLE OF CONTENTS Exhibit Page A Escrow Fund Cash Flow B-1 Cash Receipts From and Yield on the Escrowed Securities 2 Purchased with Bond Proceeds B-2 Schedule of Interest Receipt and Principal Maturities on the Escrowed 3 Securities Purchased with Bond Proceeds B-3 Schedule of Interest Receipt and Principal Maturities on the Escrowed 4 Securities Purchased with Debt Service Funds B-4 Characteristics and Purchase Price of the Escrowed Securities 5 C-1 Debt Service to Maturity and Escrow Requirements 6 for the 2003-A Refunded Bonds C-2 Debt Service to Maturity and Escrow Requirements 7 for the 2004-B Refunded Bonds C-3 Debt Service to Maturity and Escrow Requirements 8 for the 2005-A Refunded Bonds D-1 Aggregate Yield on the Bonds 9 D-2 Debt Service on the 2012-A Bonds 10 D-3 Characteristics and Pricing Summary of the 2012-A Bonds 11 D-4 Debt Service on the 2012-B Bonds 12 D-5 Characteristics and Pricing Summary of the 2012-B Bonds 13 E Sources and Uses of Funds 14 Date Imtlal cash deposit on 7/26/2012 9/27/2012 10/1/2012 3127/2013 4/112013 9/27/2013 101112013 $ Cash receipts from Escrowed Securities Purchased with Bond Proceeds (Exhibit B·1) 1,009,992.77 48,881.38 2,708,880.99 3,767,755.14 CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B ESCROW FUND CASH FLOW Cash receipts from Escrowed Cash Cash Secuntles disbursements disbursements Purchased with for the 2003·A for the 2004·B Debt Service Funds Refunded Bonds Refunded Bonds (Exhibit B·3) (Exhibit C·1) (Exhibit C·2) 67,378.97 20,531.25 $ 1,028,491.25 20,531.25 1,145,531.25 67,378.97 1,186,59375 1,028,491.25 Page 1 $ $ Cash disbursements for the 2005·A Refunded Bonds (Exhibit C·3) 28,350.00 28,350.00 1,563,35000 1,620,050.00 $ EXHIBIT A Cash balance 5.89 1,077,377.63 5.13 48,886.51 5.26 2,708,886.25 5.00 EXHIBIT B-1 CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B Date 9/27/2012 3/2712013 9/27/2013 CASH RECEIPTS FROM AND YIELD ON THE ESCROWED SECURITIES PURCHASED WITH BOND PROCEEDS Cash receipts from Escrowed Securities Purchased with Bond Proceeds (Exhibit B-2) $ 1,009,992.77 48,881.38 2,708,880.99 $ 3,767,755.14 (To ExhibitA) Total purchase price of Escrowed Securities Purchased with Bond Proceeds (Exhibits B-4 and E) Page 2 Present value on 7/26/2012 using a yield of 0.1833552% $ 1,009,679.17 48,821.44 2,703,081.39 $ 3,761,582.00 $ 3,761,582.00 Payment $ date 9/27/2012 $ 3/27/2013 9/27/2013 $ CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B SCHEDULE OF INTEREST RECEIPTS AND PRINCIPAL MATURITIES ON THE ESCROWED SECURITIES PURCHASED WITH BOND PROCEEDS 9/27/2012 3/27/2013 9/27/2013 1,009,008.00 $ 46,264.00 $ 2,706,310.00 0.060% 0.150% 0.190% 1,009,112.48 $ 880.29 $ 46,310.38 2,570.99 2,708,880.99 1,009,112.48 $ 46,310.38 $ 2,712,332.28 Page 3 EXHIBIT B·2 Total $ 1,009,992.77 48,881.38 2,708,880.99 $ 3,767,755.14 (To Exhibit B·1) EXHIBIT B·3 CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B SCHEDULE OF INTEREST RECEIPTS AND PRINCIPAL MATURITIES ON THE ESCROWED SECURITIES PURCHASED WITH DEBT SERVICE FUNDS 9/27/2012 Payment $ 67,372.00 Total date 0.060% 9/27/2012 $ 67,378.97 $ 67,378.97 $ 67,378.97 $ 67,378.97 (To Exhibit A) Page 4 CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B Maturity date CHARACTERISTICS AND PURCHASE PRICE OF THE ESCROWED SECURITIES U.S. TREASURY OBLIGATIONS· STATE AND LOCAL GOVERNMENT SERIES Type Par PURCHASED WITH DEBT SERVICE FUNDS 9/27/2012 SLGS $ 67,372.00 $ 67,372.00 PURCHASED WITH BOND PROCEEDS 9/27/2012 SLGS $ 1,009,008.00 3/27/2013 SLGS 46,264.00 9/27/2013 SLGS 2,706,310.00 $ 3,761,582.00 Total Purchase Price of the Escrowed Securities $ 3,828,954.00 Page 5 (Exhibit E) (Exhibit E) EXHIBIT B-4 Coupon rate 0.060% 0.060% 0.150% 0.190% Date 10/1/2012 4/1/2013 10/1/2013 4/1/2014 10/1/2014 $ 4/1/2015 10/1/2015 4/1/2016 10/1/2016 4/1/2017 10/1/2017 4/1/2018 10/1/2018 $ CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012-B DEBT SERVICE TO MATURITY AND ESCROW REQUIREMENTS FOR THE 2003-A REFUNDED BONDS Originally Scheduled Debt Service Payments to Maturity for the Refunded Bonds (For Reference Purposes Only) Interest PrinciEal rate Interest $ 20,531.25 20,531.25 20,531.25 20,531.25 225,000 3.400% 20,531.25 16,706.25 225,000 3.550% 16,706.25 12,712.50 225,000 3.700% 12,712.50 8,550.00 225,000 3.750% 8,550.00 4,331.25 225,000 3.850% 4,331.25 1,125,000 $ 187,256.25 Page 6 Total Debt Service Pa~ments $ 20,531.25 20,531.25 20,531.25 20,531.25 245,531.25 16,706.25 241,706.25 12,712.50 237,712.50 8,550.00 233,550.00 4,331.25 229,331.25 $ 1,312,256.25 EXHIBIT C-1 Escrow requirements $ 20,531.25 20,531.25 1,145,531.25 $ 1,186,593.75 .. (To Exhibit A) Date 10/1/2012 4/1/2013 10/1/2013 $ 4/1/2014 10/1/2014 4/1/2015 10/1/2015 4/1/2016 10/1/2016 4/1/2017 10/1/2017 4/1/2018 10/1/2018 4/1/2019 10/1/2019 $ CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B DEBT SERVICE TO MATURITY AND ESCROW REQUIREMENTS FOR THE 2004-8 REFUNDED BONDS Originally Scheduled Debt Service Payments to Maturity for the Refunded Bonds (For Reference Purposes Only) Interest Princi~al rate Interest $ 18,491.25 18,491.25 380,000 3.500% 18,491.25 11,841.25 380,000 3.650% 11,841.25 4,906.25 50,000 3.750% 4,906.25 3,968.75 50,000 3.875% 3,968.75 3,000.00 50,000 4.000% 3,000.00 2,000.00 50,000 4.000% 2,000.00 1,000.00 50,000 4.000% 1,000.00 1,010,000 $ 108,906.25 Page 7 Total Debt Service Pa~ments $ 18,491.25 18,491.25 398,491.25 11,841.25 391,841.25 4,906.25 54,906.25 3,968.75 53,968.75 3,000.00 53,000.00 2,000.00 52,000.00 1,000.00 51,000.00 $ 1,118,906.25 EXHIBIT C-2 Escrow requirements $ 1,028,491.25 $ 1,028,491.25 .. (To Exhibit A) Date 10/1/2012 4/1/2013 10/1/2013 4/1/2014 10/1/2014 $ 4/1/2015 10/1/2015 4/1/2016 10/1/2016 4/1/2017 10/1/2017 4/1/2018 10/1/2018 4/1/2019 10/1/2019 4/1/2020 10/1/2020 $ CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B DEBT SERVICE TO MATURITY AND ESCROW REQUIREMENTS FOR THE 2005·A REFUNDED BONDS Originally Scheduled Debt Service Payments to Maturity for the Refunded Bonds (For Reference Purposes Only) Interest Princi~al rate Interest $ 28,350.00 28,350.00 28,350.00 28,350.00 330,000 3.450% 28,350.00 22,657.50 330,000 3.550% 22,657.50 16,800.00 175,000 3.650% 16,800.00 13,606.25 175,000 3.750% 13,606.25 10,325.00 175,000 3.850% 10,325.00 6,956.25 175,000 3.950% 6,956.25 3,500.00 175,000 4.000% 3,500.00 1,535,000 $ 289,440.00 Page 8 Total Debt Service -Pa~ments $ 28,350.00 28,350.00 28,350.00 28,350.00 358,350.00 22,657.50 352,657.50 16,800.00 191,800.00 13,606.25 188,606.25 10,325.00 185,325.00 6,956.25 " 181,956.25 3,500.00 178,500.00 $ 1,824,440.00 EXHIBIT C·3 Escrow requirements $ 28,350.00 28,350.00 1,563,350.00 $ 1,620,050.00 .. (To ExhlbltA) EXHIBIT 0·1 CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B AGGREGATE YIELD ON THE BONDS Present value on Debt Debt Service Debt Service 7/26/2012 service on the on the using a payment 2012-A Bonds 2012-B Bonds Aggregate yield of date (Exhibit D-2) (Exhibit D-4) Debt Service 1.3989592% 4/1/2013 $ 28,924.44 $ 27,930.67 $ 56,855.11 $ 56,318.25 10/1/2013 150,337.50 404,638.75 554,976.25 545,917.20 4/1/2014 19,687.50 17,713.75 37,401.25 36,535.18 10/1/2014 159,687.50 957,713.75 1,117,401.25 1,083,944.59 4/1/2015 18,987.50 13,013.75 32,001.25 30,827.45 10/1/2015 163,987.50 638,013.75 802,001.25 767,217.54 4/1/2016 18,081.25 9,888.75 27,970.00 26,571.05 10/1/2016 168,081.25 469,888.75 637,970.00 601,851.41 4/1/2017 16,956.25 7,588.75 24,545.00 22,994.55 10/1/2017 166,956.25 492,588.75 659,545.00 613,591.03 4/1/2018 15,831.25 5,163.75 20,995.00 19,396.49 10/1/2018 170,831.25 480,163.75 650,995.00 597,252.22 4/1/2019 14,668.75 2,670.00 17,338.75 15,796.86 10/1/2019 169,668.75 237,670.00 407,338.75 368,537.25 4/1/2020 13,506.25 1,260.00 14,766.25 13,266.88 10/1/2020 168,506.25 181,260.00 349,766.25 312,067.91 4/1/2021 12,421.25 12,421.25 11,005.49 10/1/2021 172,421.25 172,421.25 151,707.68 4/1/2022 11,101.25 11,101.25 9,699.77 10/1/2022 171,101.25 171,101.25 148,462.06 4/1/2023 9,621.25 9,621.25 8,290.23 10/1/2023 174,621.25 174,621.25 149,418.70 4/1/2024 7,971.25 7,971.25 6,773.41 10/1/2024 177,971.25 177,971.25 150,176.94 4/1/2025 6,186.25 6,186.25 5,183.86 10/1/2025 181,186.25 181,186.25 150,773.21 4/1/2026 4,261.25 4,261.25 3,521.35 10/1/2026 179,261.25 179,261.25 147,106.18 4/1/2027 2,205.00 2,205.00 1,796.91 10/1/2027 182,205.00 182,205.00 147,451.89 $ 2,757,234.44 $ 3,947,166.95 $ 6,704,401.36 $ 6,203,453.55 Aggregate Offering Price of the Bonds $ 6,201,010.55 Accrued Interest from 7/15/2012 to 7/26/2012 2,443.00 $ 6,203,453.55 Page 9 Debt service payment date 4/1/2013 10/1/2013 $ 4/1/2014 10/1/2014 4/1/2015 10/1/2015 4/1/2016 10/1/2016 4/1/2017 10/1/2017 4/1/2018 10/1/2018 4/1/2019 10/1/2019 4/1/2020 10/1/2020 4/1/2021 10/1/2021 4/1/2022 10/1/2022 4/1/2023 10/1/2023 4/1/2024 10/1/2024 4/1/2025 10/1/2025 4/1/2026 10/1/2026 4/1/2027 10/1/2027 $ CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B DEBT SERVICE ON THE 2012·A BONDS Interest Princi~al rate Interest $ 28,924.44 130,000 1.000% 20,337.50 19,687.50 140,000 1.000% 19,687.50 18,987.50 145,000 1.250% 18,987.50 18,081.25 150,000 1.500% 18,081.25 16,956.25 150,000 1.500% 16,956.25 15,831.25 155,000 1.500% 15,831.25 14,668.75 155,000 1.500% 14,668.75 13,506.25 155,000 1.400% 13,506.25 12,421.25 160,000 1.650% 12,421.25 11,101.25 160,000 1.850% 11,101.25 9,621.25 165,000 2.000% 9,621.25 7,971.25 170,000 2.100% 7,971.25 6,186.25 175,000 2.200% 6,186.25 4,261.25 175,000 2.350% 4,261.25 2,205.00 180,000 2.450% 2,205.00 2,365,000 $ 392,234.44 Page 10 EXHIBIT 0·2 Total debt service $ 28,924.44 150,337.50 19,687.50 159,687.50 18,987.50 163,987.50 18,081.25 168,081.25 16,956.25 166,956.25 15,831.25 170,831.25 14,668.75 169,668.75 13,506.25 168,506.25 12,421.25 172,421.25 11,101.25 171,101.25 9,621.25 174,621.25 7,971.25 177,971.25 6,186.25 181,186.25 4,261.25 179,261.25 2,205.00 182,205.00 $ 2,757,234.44 Scheduled maturity date 10/1/2013 $ 10/1/2014 10/1/2015 10/1/2016 10/1/2017 10/1/2018 10/1/2019 10/1/2020 10/1/2021 10/1/2022 10/1/2023 10/1/2024 10/1/2025 10/1/2026 10/1/2027 $ CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B CHARACTERISTICS AND PRICING SUMMARY OF THE 2012·A BONDS Yield Interest as of Princi~al Rate 7/26/2012 Price 130,000 1.000% 0.400% 100.705 140,000 1.000% 0.450% 101.191 145,000 1.250% 0.550% 102.203 150,000 1.500% 0.700% 103.290 150,000 1.500% 0.850% 103.287 155,000 1.500% 1.050% 102.685 155,000 1.500% 1.200% 102.057 155,000 1.400% 1.400% 100.000 160,000 1.650% 1.650% 100.000 160,000 1.850% 1.850% 100.000 165,000 2.000% 2.000% 100.000 170,000 2.100% 2.150% 99.465 175,000 2.200% 2.250% 99.431 175,000 2.350% 2.490% 99.400 180,000 2.450% 2.500% 99.369 2,365,000 Aggregate Offering Price of the 2012·A Bonds (Exhibit E) Par amount of the 2012·A Bonds Net original issue premium / (discount) Page 11 EXHIBIT 0·3 Gross Production $ 130,916.50 141,667.40 148,194.35 154,935.00 154,930.50 159,161.75 158,188.35 155,000.00 160,000.00 160,000.00 165,000.00 169,090.50 174,004.25 173,950.00 178,864.20 $ 2,383,902.80 $ 2,383,902.80 2,365,000.00 $ 18,902.80 Debt service payment date 4/1/2013 10/1/2013 $ 4/1/2014 10/1/2014 4/1/2015 10/1/2015 4/1/2016 10/1/2016 4/1/2017 10/1/2017 4/1/2018 10/1/2018 4/1/2019 10/1/2019 4/1/2020 10/1/2020 $ CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B DEBT SERVICE ON THE 2012·B BONDS Interest Princi~al rate Interest $ 27,930.67 385,000 1.000% 19,638.75 17,713.75 940,000 1.000% 17,713.75 13,013.75 625,000 1.000% 13,013.75 9,888.75 460,000 1.000% 9,888.75 7,588.75 485,000 1.000% 7,588.75 5,163.75 475,000 1.050% 5,163.75 2,670.00 235,000 1.200% 2,670.00 1,260.00 180,000 1.400% 1,260.00 3,785,000 $ 162,166.92 Page 12 EXHIBIT 0·4 Total debt service $ 27,930.67 404,638.75 17,713.75 957,713.75 13,013.75 638,013.75 9,888.75 469,888.75 7,588.75 492,588.75 5,163.75 480,163.75 2,670.00 237,670.00 1,260.00 181,260.00 $ 3,947,166.92 (To Exhibit 0·1) Scheduled maturity date 10/1/2013 $ 10/1/2014 10/1/2015 10/1/2016 10/1/2017 10/1/2018 10/1/2019 10/1/2020 $ CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B CHARACTERISTICS AND PRICING SUMMARY OF THE 2012-B BONDS Yield Interest as of Princi~al Rate 7/26/2012 Price 385,000 1.000% 0.400% 100.705 940,000 1.000% 0.450% 101.191 625,000 1.000% 0.550% 101.416 460,000 1.000% 0.700% 101.233 485,000 1.000% 0.850% 100.758 475,000 1.050% 1.050% 100.000 235,000 1.200% 1.200% 100.000 180,000 1.400% 1.400% 100.000 3,785,000 Aggregate Offering Price of the 2012-B Bonds (Exhibit E) Par amount of the 2012-B Bonds Net original issue premium 1 (discount) Page 13 EXHIBIT 0-5 Gross Production $ 387,714.25 951,195.40 633,850.00 465,671.80 488,676.30 475,000.00 235,000.00 180,000.00 $ 3,817,107.75 $ 3,817,107.75 3,785,000.00 $ 32,107.75 CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012·B SOURCES AND USES OF FUNDS 2012-A Bonds 2012-B Bonds Sources of Funds Par amount of the Bonds $ 2,365,000.00 $ 3,785,000.00 Net original issue premium 1 (discount) 18,902.80 32,107.75 Aggregate Offering Price of the Bonds 2,383,902.80 3,817,107.75 Assessment Prepay #1 625,000.00 Assessment Prepay #2 39,452.10 Transfers from Prior Issue Debt Service Funds 408,488.14 67,372.50 Accrued interest from 7/15/2012 to 7/26/2012 1,242.85 1,200.15 $ 3,458,085.89 $ 3,885,680.40 Uses of Funds Purchase price of Escrowed Securities: Purchased with Bond Proceeds $ 3,761,582.00 Purchased with Debt Service Funds 67,372.00 Beginning cash deposit to Escrow Fund 5.89 Total deposit to Escrow Fund 3,828,959.89 Deposit to Project Construction Fund $ 3,414,204.44 Issuance costs 23,735.80 38,884.04 Underwriter's discount 18,902.80 16,636.32 Deposit to Debt Service Fund -Accrued Interest 1,242.85 1,200.15 $ 3,458,085.89 $ 3,885,680.40 Page 14 EXHIBIT E Total $ 6,150,000.00 51,010.55 6,201,010.55 625,000.00 39,452.10 475,860.64 2,443.00 $ 7,343,766.29 $ 3,761,582.00 67,372.00 5.89 3,828,959.89 3,414,204.44 62,619.84 35,539.12 2,443.00 $ 7,343,766.29 Treasury Case Number: Program Type: Issue Amount: Issue Date: Owner Name: TIN: Rate Table Date: Status: Confirmation Date: Confirmation Time: DEPARTMENT OF THE TREASURY BUREAU OF THE PUBLIC DEBT PARKERSBURG, WV 26106-0396 SUBSCRIPTION CONFIRMATION State and Local Government Series Securities 201204556 Time Deposit $3,828,954.00 07/26/2012 Salina, Kansas 48-6017288 07109/2012 Complete 07/09/2012 03:26 PM EDT Subscription for Purchase and Issue -Time Deposit Subscription for Purchase and Issue -Time Deposit Thank you for subscribing to SLGS. The Bureau of the Public Debt has received the following subscription: Treasury Case Number 201204556 Program Type Time Deposit Issue Amount $3,828,954.00 Issue Date 07/26/2012 Owner Salina, Kansas TIN 48-6017288 Rate Table Date 07/09/2012 Status Complete Please record this information for your case file. Confirmation Date 07/09/2012 Confirmation Time 03: 26 PM EDT https://www.treasurydirect.gov/GA-SZ/jsp/subscription.jsf Page 1 of 1 7/9/2012 Subscription for Purchase and Issue -Time Deposit Subscription for Purchase and Issue -Time Deposit Treasury Case Number Status Issue Date 07/26/2012 Issue Amount $3,828,954.00 Rate Table Date 07/09/2012 Taxpayer Identification Number 48-6017288 Underlying Bond Issue General Obligation Refunding Bonds, Series 2012-B Owner Name Salina, Kansas Address Line 1 300 West Ash Line 2 PO Box 736 Line 3 City Salina State KS Zip Code 67402-0736 Contact Name Rodney Franz Telephone 785-309-5735 Fax 785-309-5738 E-mail rod.franz@salina.org ABA Routing Number 101000695 Bank Reference Number Bank Name UMB National Bank of America Address Line 1 130 N Market Line 2 Line 3 City Wichita State KS Zip Code 67202 Contact Name Bonnie Mosher Telephone 316-266-6015 Fax 316-264-3235 E-mail bonnie.mosher@umb.com ABA Routing Number 101000695 Bank Name UMB National Bank of America Contact Name Bonnie Mosher Telephone 316-266-6015 Fax 316-264-3235 E-mail bonnie.mosher@umb.com ABA Routing 101000695 Number Bank UMB National Bank of Name America Address 130 N Market Line 1 ABA Routing 101000695 Number A t Trust ccoun Clearing Name Account Account 9801018981 Number Checking https://www.treasurydirect.gov/GA-SZ/jsp/subscription_time _securities_add _ edit.jsf Page lof2 7/9/2012 Subscription for Purchase and Issue -Time Deposit Line 2 Line 3 City Wichita State KS Zip Code 67202 Contact Bonnie Mosher Name Telephone 316-266-6015 Fax 316-264-3235 E-mail bonnie.mosher@umb.com ABA/TIN 43-1661917 Account Type Organization Name George K. Baum & Company Address Line 1 4801 Main Street, #500 Line 2 Line 3 City Kansas City State MO Zip Code 64112 Contact Name Brady Hart Telephone 800-821-7195 ABA/TIN Securit~ Number 1 2 -------------3 Fax 816-283-5326 E-mail hart@gkbaum.com Organization Name Securit~ Principal ~ Amount C of I $1,076,380.00 C of I ,$46,264.00 --Note-------. --$2:io6~3io:oo -- Interest Rate 0.060000000% 0.150000000% 0.190000000% Maturity: Date 09/27/2012 --g?P?{?'<>'~~-- 09/27/2013 First Interest Pa~ment Date 09/27/2012 Page 2 of2 Securit~ DescriRtion By pressing the "Submit to Treasury" button, you agree to comply with the terms and conditions in 31 CFR Part 344 and are certifying that: > If you are an agent, you are acting under the issuer's specific authorization. If the issuer Is purchasing a SLGS security with any amount received from the sale or redemption (at the option > of the holder) before maturity of any marketable security, the yield on such SLGS security does not exceed the yield at which such marketable security was sold or redeemed. If the issuer is purchasing a SLGS security with any amount received from the redemption before maturity of a > Time Deposit security (other than a zero interest Time Deposit security), the yield on the SLGS security being purchased does not exceed the yield that was used to determine the amount of redemption proceeds for such redeemed Time Deposit security. I R:atEiTable,A'pplied:1 https:llwww.treasurydirect.gov/GA-SZ/jsp/subscription_time_securities_add_edit.jsf 7/9/2012. SCHEDULE 2 TO ESCROW TRUST AGREEMENT REDEMPTION OF REFUNDED BONDS The following maturities of the Refunded Bonds will be called for redemption and payment, prior to maturity, on the respective redemption dates and at the respective redemption prices shown below: Series Maturities Principal to be Redemption to be to be Redemption Redeemed Date Redeemed Redeemed Price 2003-A October 1, 2013 2014 to 2018 $1,125,000 $1,125,000 2004-B October 1, 2012 2013 to 2019 1,010,000 1,010,000 2005-A October 1, 2013 2014 to 2020 1,535,000 1,535,000 S-2-1 SCHEDULE 3 TO ESCROW TRUST AGREEMENT ESTIMATED COSTS OF ISSUANCE Pa"'y'ee Estimated Cost Financial Advisor $10,712.50 Bond Counsel $13,500.00 State Treasurer $2,100.00 Escrow Trustee $1,000.00 Escrow Verification $3,500.00 Rating Agency Fee $7,077.64 Attorney General $153.86 POS/Officia1 Statement $584.67 Publication $255.37 S-3-1 Treasurer of the State of Kansas Landon State Office Bldg. 900 Southwest Jackson, Suite 201 Topeka, Kansas 66612-1235 Stone & Youngberg 1 Ferry Building, Suite 275 San Francisco, California 94111 Financial Security Assurance Inc. 31 West 52nd Street New York, New York 10019 RE: EXHIBITA-I [CERTIFIED MAIL] CALL FOR REDEMPTION CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2003-A, DATED JULY 15, 2003 Notice is hereby given pursuant to K.S.A. 10-129, as amended, and pursuant to the provisions of Article III of Resolution No. 03-5949 (the "Bond Resolution") of the City of Salina, Kansas (the "Issuer"), that the above mentioned bonds described in the attached Notice of Call for Redemption (the "Called Bonds"), have been irrevocably called for redemption and payment on October 1, 2013. The Paying Agent is hereby requested to disseminate the attached Notice of Call for Redemption in accordance with K.S.A. 10-129 and the Bond Resolution. After redemption of the Called Bonds the Paying Agent is requested to complete the attached Paying Agent's Certification and forward a copy of same to the undersigned. CITY OF SALINA, KANSAS By: ____________________________ _ A-1-1 UMB National Bank of America, Wichita, Kansas, as Escro{V Agent [The form of this Notice is to be modified or amended to comply with the law and industry standards at the time of its distribution to the Owners of the Series 2003-A Bonds.] NOTICE OF CALL FOR REDEMPTION CIJY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2003-A, DATED JULy 15, 2003 Notice is hereby given to the registered owners of the above-captioned bonds (the "Bonds") that pursuant to the provisions of Article III of Resolution No. 03-5949 (the "Bond Resolution") of the City of Salina; Kansas (the "Issuer"), that the Bonds maturing October 1, and thereafter (the "Called Bonds"), have been called for redemption and payment on October 1, 2013 (the "Redemption Date"), at the principal office of the Treasurer of the State of Kansas, Topeka, Kansas (the "Bond Registrar and Paying Agent"). Maturity Principal Interest CUSIP Date (October 1) Amount Rate No. 2014 225,000 3.400 794743ZT4 2015 225,000 3.550 794743ZUl 2016 225,000 3.700 794743ZV9 2017 225,000 3.750 794743ZW7 2018 225,000 3.850 794743ZX5 On the Redemption Date there shall become due and payable, upon the presentation and surrender of each such Called Bond, the redemption price thereof equal to 100% of the principal amount thereof together with interest accrued to the Redemption Date. Interest shall cease to accrue on the Called Bonds so called for redemption from and after the Redemption Date provided such funds for redemption are on deposit with the Paying Agent. Neither the Issuer nor the Paying Agent shall be responsible for the selection or use of the CUSIP identification numbers shown above or printed on any of the Called Bonds. Said CUSIP identification numbers are included solely for the convenience of the owners of the Bonds. Under the provisions of Section 3406(a)(1) of the Internal Revenue Code of 1986, as amended, paying agents making payments of principal on municipal securities may be obligated to withhold a 28% tax on the payment of principal to registered owners who have failed to provide the paying agent with a valid taxpayer identification number. Registered Owners of the Bonds who wish to avoid the imposition of the tax should provide a certified taxpayer identification number to the Paying Agent when presenting the Bonds for payment. CITY OF SALINA, KANSAS By: ____________________________ __ Treasurer ofthe State of Kansas, Topeka, Kansas, as Paying Agent ************************ A-I-2 This Notice of Redemption shall be mailed by certified mail to the Treasurer of the State of Kansas, Topeka, Kansas, not less than 45 days prior to the Redemption Date and to Stone & Youngberg, San Francisco, California, the original purchaser and Financial Security Assurance Inc., the Bond Insurer of the Series 2003-A Bonds, not less than 30 days prior to the Redemption Date. Notice shall also be given to certain repositories in order to comply with the provisions of Rule 15c2-12 ofthe Securities and Exchange Commission. Notice may also be given in accordance with guidelines set forth in Securities and Exchange Commission Release No. 34-23856, but such notice is not required by law. The Paying Agent shall notify the registered owners of the Called Bonds as provided in K. S.A. 10-129 as amended, and the Bond Resolution. A-I-3 Treasurer of the State of Kansas Landon State Office Bldg. 900 Southwest Jackson, Suite 201 Topeka, Kansas 66612-1235 Wachovia Securities 8115 Preston Road, Suite 300 Dallas, Texas 75225 RE: EXHIBITA-2 [CERTIFIED MAIL] CALL FOR REDEMPTION CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2004-B, DATED JULY 15, 2004 Notice is hereby given pursuant to K.S.A. 10-129, as amended, and pursuant to the provisions of Article III of Resolution No. 04-6089 (the "Bond Resolution") of the City of Salina, Kansas (the "Issuer"), that the above mentioned bonds described in the attached Notice of Call for Redemption (the "Called Bonds"), have been irrevocably called for redemption and payment on October 1, 2012. The Paying Agent is hereby requested to disseminate the attached Notice of Call for Redemption in accordance with K.S.A. 10-129 and the Bond Resolution. After redemption of the Called Bonds the Paying Agent is requested to complete the attached Paying Agent's Certification and forward a copy of same to the undersigned. CITY OF SALINA, KANSAS By: __________________________ _ A-2-1 UMB National Bank of America, Wichita, Kansas, as Escrow Agent [The form of this Notice is to be modified or amended to comply with the law and industry standards at the time of its distribution to the Owners of the Series 2004-B Bonds.] NOTICE OF CALL FOR REDEMPTION CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2004-B, DATED JULY 15, 2004 Notice is hereby given to the registered owners of the above-captioned bonds (the "Bonds") that pursuant to the provisions of Article III of Resolution No. 04-6089 (the "Bond Resolution") of the City of Salina, Kansas (the "Issuer"), that the Bonds maturing October 1, and thereafter (the "Called Bonds"), have been called for redemption and payment on October 1, 2012 (the "Redemption Date"), at the principal office of the Treasurer of the State of Kansas, Topeka, Kansas (the "Bond Registrar and Paying Agent"). Maturity Principal Interest CUSIP Date (October 1) Amount Rate No. 2013 $380,000 3.500% 794743C77 2014 380,000 3.650 794743C85 2015 50,000 3.750 794743C93 2016 50,000 3.875 794743D27 2017 50,000 4.000 794743D35 2018 50,000 4.000 794743D43 2019 50,000 4.000 794743D50 On the Redemption Date there shall become due and payable, upon the presentation and surrender of each such Called Bond, the redemption price thereof equal to 100% of the principal amount thereof together with interest accrued to the Redemption Date. Interest shall cease to accrue on the Called Bonds so called for redemption from and after the Redemption Date provided such funds for redemption are on deposit with the Paying Agent. Neither the Issuer nor the Paying Agent shall be responsible for the selection or use of the CUSIP identification numbers shown above or printed on any of the Called Bonds. Said CUSIP identification numbers are included solely for the convenience of the owners of the Bonds. Under the provisions of Section 3406( a) (1 ) of the Internal Revenue Code of 1986, as amended, paying agents making payments of principal on municipal securities may be obligated to withhold a 28% tax on the payment of principal to registered owners who have failed to provide the paying agent with a valid taxpayer identification number. Registered Owners of the Bonds who wish to avoid the imposition of the tax should provide a certified taxpayer identification number to the Paying Agent when presenting the Bonds for payment. CITY OF SALINA, KANSAS By: __________________________ _ A-2-2 Treasurer of the State of Kansas, Topeka, Kansas, as Paying Agent ************************ This Notice of Redemption shall be mailed by certified mail to the Treasurer of the State of Kansas, Topeka, Kansas, not less than 45 days prior to the Redemption Date and to Wachovia Securities, Dallas, Texas, the original purchaser of the Series 2004-B Bonds, not less than 30 days prior to the Redemption Date. Notice shall also be given to certain repositories in order to comply with the provisions of Rule 15c2-12 of the Securities and Exchange Commission. Notice may also be given in accordance with guidelines set forth in Securities and Exchange Commission Release No. 34-23856, but such notice is not required by law. The Paying Agent shall notify the registered owners of the Called Bonds as provided in K.S.A. 10-129 as amended, and the Bond Resolution. A-2-3 Treasurer of the State of Kansas Landon State Office Bldg. 900 Southwest Jackson, Suite 201 Topeka, Kansas 66612-1235 Country Club Bank, n.a. 9400 Mission Road Prairie Village, Kansas 64141 RE: EXHIBITA-3 [CERTIFIED MAIL] CALL FOR REDEMPTION CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2005-A, DATED JULY 15, 2005 Notice is hereby given pursuant to K.S.A. 10-129, as amended, and pursuant to the provisions of Article III of Resolution No. 05-6199 (the "Bond Resolution") of the City of Salina, Kansas (the "Issuer"), that the above mentioned bonds described in the attached Notice of Call for Redemption (the "Called Bonds"), have been irrevocably called for redemption and payment on October 1, 2013. The Paying Agent is hereby requested to disseminate the attached Notice of Call for Redemption in accordance with K.S.A. 10-129 and the Bond Resolution. After redemption of the Called Bonds the Paying Agent is requested to complete the attached Paying Agent's Certification and forward a copy of same to the undersigned. CITY OF SALINA, KANSAS By: ________________________ ___ A-3-1 UMB National Bank of America, Wichita, Kansas, as Escrow Agent [The form of this Notice is to be modified or amended to comply with the law and industry standards at the time of its distribution to the Owners of the Series 2005-ABonds.} NOTICE OF CALL FOR REDEMPTION CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2005-A, DATED JULY 15, 2005 Notice is hereby given to the registered owners of the above-captioned bonds (the "Bonds") that pursuant to the provisions of Article III of Resolution No. 05-6199 (the "Bond Resolution") of the City of Salina, Kansas (the "Issuer"), that the Bonds maturing October 1, and thereafter (the "Called Bonds"), have been called for redemption and payment on October 1, 2013 (the "Redemption Date"), at the principal office of the Treasurer of the State of Kansas, Topeka, Kansas (the "Bond Registrar and Paying Agent"). Maturity Date (October 1) 2014 2015 2016 2017 2018 2019 2020 Principal Amount 330,000 330,000 175,000 175,000 175,000 175,000 175,000 Interest Rate 3.45 3.55 3.65 3.75 3.85 3.95 4.00 CUSIP No. 794743E75 794743E83 794743E91 794743F25 794743F33 794743F41 794743F58 On the Redemption Date there shall become due and payable, upon the presentation and surrender of each such Called Bond, the redemption price thereof equal to 100% of the principal amount thereof together with interest accrued to the Redemption Date. Interest shall cease to accrue oil the Called Bonds so called for redemption from and after the Redemption Date provided such funds for redemption are on deposit with the Paying Agent. Neither the Issuer nor the Paying Agent shall be responsible for the selection or use of the CUSIP identification numbers shown above or printed on any of the Called Bonds. Said CUSIP identification numbers are included solely for the convenience of the owners of the Bonds. Under the provisions of Section 3406(a)(1) of the Internal Revenue Code of 1986, as amended, paying agents making payments of principal on municipal securities may be obligated to withhold a 28% tax on the payment of principal to registered owners who have failed to provide the paying agent with a valid taxpayer identification number. Registered Owners of the Bonds who wish to avoid the imposition of the tax should provide a certified taxpayer identification number to the Paying Agent when presenting the Bonds for payment. CITY OF SALINA, KANSAS By: Treasurer of the State of Kansas, Topeka, Kansas, as Paying Agent ************************ A-3-2 This Notice of Redemption shall be mailed by certified mail to the Treasurer of the State of Kansas, Topeka, Kansas, not less than 45 days prior to the Redemption Date and to Country Club Bank, n.a., Prairie Village, Kansas, the original purchaser of the Series 2005-A Bonds, not less than 30 days prior to the Redemption Date. Notice shall also be given to certain repositories in order to comply with the provisions of Rule 15c2-12 of the Securities and Exchange Commission. Notice may also be given in accordance with guidelines set forth in Securities and Exchange Commission Release No. 34-23856, but such notice is not required by law. The Paying Agent shall notify the registered owners of the Called Bonds as provided in K.S.A. 10-129 as amended, and the Bond Resolution. A-3-3 EXHIBITB-J NOTICE OF DEFEASANCE OF BONDS CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2003-A, DATED JULY 15, 2003 Notice is hereby given that the City of Salina, Kansas and UMB National Bank of America, Wichita, Kansas have entered into a certain Escrow Trust Agreement dated as of July 15, 2012 which provides that the above mentioned bonds maturing October 1, and thereafter, will be called for redemption and payment on October 1, 2013 (the "Redemption Date"), at the principal office of the Treasurer of the State of Kansas, Topeka, Kansas (the "Bond Registrar and Paying Agent"). A Notice of Call for Redemption shall be disseminated prior to the Redemption Date. CITY OF SALINA, KANSAS By: UMB National Bank of America Wichita, Kansas, as Escrow Agent ************************ This Notice of Defeasance shall be mailed by first class mail to the Treasurer of the State of . Kansas, Topeka, Kansas, to Stone & Youngberg, San Francisco, California, the original purchaser and Financial Security Assurance Inc., the Bond Insurer, of the Series 2003-A Bonds not more than 60 days after July 26, 2012. Notice shall also be given to certain repositories in order to cOlJlply with the provisions of Rule 15c2-12 of the Securities and Exchange Commission. Notice may also be given in accordance with guidelines set forth in Securities and Exchange Commission Release No. 34-23856, but such notice is not required by law. B-1 EXHIBIT B-2 NOTICE OF DEFEASANCE OF BONDS CITY OF SALINA, KANSAS GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2005-A, DATED JULY 15, 2005 Notice is hereby given that the City of Salina, Kansas and UMB National Bank of America, Wichita, Kansas have entered into a certain Escrow Trust Agreement dated as of July 15, 2012 which provides that the above mentioned bonds maturing October 1, and thereafter, will be called for redemption and payment on October 1, 2013 (the "Redemption Date"), at the principal office of the Treasurer ofthe State of Kansas, Topeka, Kansas (the "Bond Registrar and Paying Agent"). A Notice of Call for Redemption shall be disseminated prior to the Redemption Date. CITY OF SALINA, KANSAS By: UMB National Bank of America Wichita, Kansas, as Escrow Agent ************************ This Notice of Defeasance shall be mailed by first class mail to the Treasurer of the State of Kansas, Topeka, Kansas, and to Country Club Bank, n.a., Prairie Village, Kansas, the original purchaser of the Series 2005-A Bonds not more than 60 days after July 26, 2012. Notice shall also be given to certain repositories in order to comply with the provisions of Rule 15c2-12 of the Securities and Exchange Commission. Notice may also be given in accordance with guidelines set forth in Securities and Exchange Commission Release No. 34-23856, but such notice is not required by law. B-2 EXHIBITC EVENT NOTICE PURSUANT TO SEC RULE 15c2-12(b)(5)(C) TO: The Municipal Securities Rulemaking Board via the Electronic Municipal Market Access system for municipal securities disclosures (www.emma.msrb.org) Issuer/Obligated Person: City of Salina, Kansas (the "Obligated Person") Issue(s) to which this Report Relates and CUSIP Base Numbers for said Issues: Description Series Dated Date General Obligation Internal 2003-A July 15, 2003 Improvement Bonds General Obligation Internal 2004-B July 15, 2004 Improvement Bonds General Obligation Internal 2005-A July 15, 2005 Improvement Bonds Maturities 2014 to 2018 2013 to 2019 2014 to 2020 Base CUSIPNo. 794743 794743 794743 Event Reported: Redemption of above-referenced Bonds on October 1, 2013 for Series 2003- A Bonds; October 1,2012 for the Series 2004-B Bonds; and October 1, 2013 for the Series 2005-A Bonds; see attached Exhibit A-I, A-2, andA-3. Defeasance of above-referenced Bonds to October 1, 2013 for Series 2003-A Bonds and Series 2005-A Bonds; see attached Exhibit B-1 and B-2. The information contained in this Notice has been submitted by the Obligated Person pursuant to contractual undertakings the Obligated Person made in accordance with SEC Rule 15c2-12. Nothing contained in the undertaking or this Notice is, or should be construed as, a representation by the Obligated Person that the information included in this Notice constitutes all of the information that may be material to a decision to invest in, hold or dispose of any of the securities listed above, or any other securities of the Obligated Person. For additional information, contact; City of Salina, Kansas 300 West Ash, Salina, Kansas 67402 Attention: Clerk Phone No. (785)309-5735; Fax No. (785)309-5738 Date Submitted: ------- Enclosure cc: Lieu Ann Elsey, Clerk Gilmore & Bell, P.c., Kansas City, Missouri C-l CITY OF SALINA, KANSAS By: UMB National Bank of America, Wichita, Kansas, as Escrow Agent Treasury Case Number: Program Type: Issue Amount: Issue Date: Owner Name: TIN: Rate Table Date: Status: Confirmation Date: Confirmation Time: DEPARTMENT OF THE TREASURY BUREAU OF THE PUBLIC DEBT PARKERSBURG, WV 26106-0396 SUBSCRIPTION CONFIRMATION State and Local Government Series Securities 201204556 Time Deposit $3,828,954.00 07/26/2012 Salina, Kansas 48-6017288 07109/2012 Complete 07109/2012 03:26 PM EDT Subscription for Purchase and Issue -Time Deposit Subscription for Purchase and Issue -Time Deposit Thank you for subscribing to SLGS. The Bureau of the Public Debt has received the following subscription: Treasury Case Number 201204556 Program Type Time Deposit Issue Amount $3,828,954.00 Issue Date 07/26/2012 Owner Salina, Kansas TIN 48-6017288 Rate Table Date 07/09/2012 Status Complete Please record this information for your case file. Confirmation Date 07/09/2012 Confirmation Time 03:26 PM EDT https;llwww.treasurydirect.gov/GA-SZ/jsp/subscription.jsf Page 1 of 1 719/2012 Subscription for Purchase and Issue -Time Deposit Subscription for Purchase and Issue -Time Deposit Treasury Case Number Status Issue Date 07/26/2012 Issue Amount $3,828,954.00 Rate Table Date 07/09/2012 Taxpayer Identification Number 48-6017288 Underlying Bond Issue General Obligation Refunding Bonds, Series 2012-B Owner Name Salina, Kansas Address Line 1 300 West Ash Line 2 PO Box 736 Line 3 City Salina State KS Zip Code 67402-0736 Contact Name Rodney Franz Telephone 785-309-5735 Fax 785-309-5738 E-mail rod.franz@sallna.org ABA Routing Number 101000695 Bank Reference Number Bank Name UMB National Bank of America Address Line 1 130 N Market Line 2 Line 3 City Wichita State KS Zip Code 67202 Contact Name Bonnie Mosher Telephone 316-266-6015 Fax 316-264-3235 E-mail bonnie.mosher@umb.com ABA Routing Number 101000695 Bank Name UMB National Bank of America Contact Name Bonnie Mosher Telephone 316-266-6015 Fax 316-264-3235 E-mail bonnle.mosher@umb.com ABA Routing 101000695 Number Bank UMB National Bank of Name America Address 130 N Market Line 1 ABA Routing 101000695 Number Trust AC~~U:! Clearing Account Account 9801018981 Number Checking https://www.treasurydirect.gov/GA-SZ/jsp/subscription_time_securities_add_edit.jsf Page 1 of2 7/9/2012 Subscription for Purchase and Issue -Time Deposit Line 2 Line 3 City Wichita State KS Zip Code 67202 Contact Bonnie Mosher Name Telephone 316-266-6015 Fax 316-264-3235 E-mail bonnie.mosher@umb.com ABA/TIN 43-1661917 Account Type Organization Name George K. Baum & Company Address Line 1 4801 Main Street, #500 Line 2 Line 3 City Kansas City State MO Zip Code 64112 Contact Name Brady Hart Telephone 800-821-7195 ABA/TIN Securi~ Number 1 2 ------------- 3 Fax 816-283-5326 E-mail hart@gkbaum.com Organization Name Securitll Principal Il£Rg Amount C of I $1,076,380.00 C of! ____ .~--~-~~!??.4-. .9.q----- Note $2,706,310.00 Interest Rate 0.060000000% 0.150000000% ---------.---------- 0.190000000% Matyritll Date 09/27/2012 __ 9?!~?{?_o.~~ __ 09/27/2013 First Interest Pallment Date 09/27/2012 Page 2 of2 Securitll Descri~tion By pressing the "Submit to Treasury" button, you agree to comply with the terms and conditions in 31 CFR Part 344 and are certifying that: > If you are an agent, you are acting under the issuer's specific authorization. If the issuer Is purchasing a SLGS security with any amount received from the sale or redemption (at the option > of the holder) before maturity of any marketable security, the yield on such SLGS security does not exceed the yield at which such marketable security was sold or redeemed. If the issuer is purchasing a SLGS security with any amount received from the redemption before maturity of a > Time Deposit security (other than a zero interest Time Deposit security), the yield on the SLGS security being purchased does not exceed the yield that was used to determine the amount of redemption proceeds for such redeemed Time Deposit security. I Rate Tiibl'e .. Applied.! https://www.treasurydirect.gov/GA-SZ/jsp/subscription_time_securities_add_edit.jsf 7/9/2012 TRANSCRIPT CERTIFICATE $3,785,000 CITY OF SALINA, KANSAS GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 15, 2012 The undersigned Mayor and Clerk of the City of Salina, Kansas (the "Issuer"), do hereby make this certificate for inclusion in the transcript of and as a part of the proceedings authorizing and providing for the issuance of the above described bonds (the "Bonds"); and do hereby certify as of July 9,2012, as follows: 1. Meaning of Words and Terms. Capitalized words and terms used herein, unless otherwise defined herein or the context requires otherwise, shall have the same meanings ascribed to such words and terms in the hereinafter defined Bond Resolution authorizing the Bonds. 2. Organization. The Issuer is a legally constituted city of the first class organized and existing under the laws of the State of Kansas. 3. Transcript of Proceedings. The transcript of proceedings (the "Transcript") relating to the authorization and issuance of the Bonds is to the best of our knowledge, information and belief full and complete; none of such proceedings have been modified, amended or repealed, except as might be shown in the Transcript, and the facts stated in the Transcript still exist. In each and every instance where copies appear in the Transcript, such copies are true and correct duplicates of the original instruments now on file with the Clerk. 4. Newspaper. The Salina Journal was the official newspaper of the Issuer at all times during these proceedings. 5. Meetings. All of the meetings of the governing body of the Issuer at which action was taken as shown in the Transcript were either regular meetings or duly adjourned regular meetings or special meetings duly called and held in accordance with law and the ordinances and rules of the Issuer. 6. Incumbency of Officers. The following named persons were and are the duly qualified and acting officers of the Issuer at and during all the times when action was taken as indicated in the Transcript as follows: Name Title Term of Office Norman M. Jennings Mayor April 19, 2012 to Present Samantha Angell Mayor April 18, 2011 to April 19, 2012 Samantha Angell Commissioner April 13, 2009 to Present Barb Shirley Commissioner April 18, 2011 to Present Kaye Crawford Commissioner April 18, 2011 to Present Aaron Householter Commissioner April 18, 2011 to Present Norman M. Jennings Commissioner April 13, 2009 to April 19, 2012 Lieu Ann Elsey Clerk The following named persons were the duly qualified and acting officer of the Issuer at and during all time when action was taken in connection with the issuance of the Series 2003-ABonds, 2004- B Bonds and the Series 2005-ABonds: Name Title Term of Office Deborah Divine Mayor April 19, 2005 to April, 2006 Monte Shadwick Mayor April 19, 2004 to April 18, 2005 Alan E. Jilka Mayor April 14, 2003 to April 19, 2004 Donnie Marrs Vice Mayor April 19, 2005 to April, 2006 Deborah Divine Vice Mayor April 19, 2004 to April 18, 2005 AlanJilka Commissioner April 16, 2001 to April 18, 2009 Deborah Divine Commissioner April 16, 2001 to April 16, 2007 Donnie Mars Commissioner April 14, 2003 to April 16, 2007 R. Abner Perney Commissioner April 19, 2005 to April 18, 2007 John Vanier, II Commissioner Apri119, 2005 to April 18, 2009 Monte Shadwick Commissioner April 16, 2001 to April 18, 2005 Paul Webb Commissioner April 14, 2003 to Apri118, 2005 7. Execution of Bonds. The Bonds have been executed with facsimile signatures; and the facsimile signatures appearing on the face of the Bonds are facsimiles of the true and genuine signatures of the Mayor and Clerk of the Issuer; which facsimiles are ratified as a proper execution of said Bonds. Each signature has been duly filed in the office of the Secretary of State of Kansas pursuant to K.S.A. 75- 4001 et seq. A facsimile of the seal of the Issuer is affixed to or imprinted on each of the Bonds and on the reverse side of each of the Bonds at the place where the Clerk has executed by facsimile signature the Certificate of Registration; and each Bond bears a Certificate of Registration evidencing the fact that it has been registered in the office of the Clerk. A true impression of the seal is set forth adjacent to the signature of the Clerk below. The specimen bond included in the Transcript is in the form adopted by the governing body of the Issuer for the Bonds. 8. Authorization of Bonds. The Bonds are being issued pursuant to Ordinance No. 12- 10644 and Resolution No. 12-6918 (collectively, the "Bond Resolution") of the Issuer for the purpose of refunding, pursuant to K.S.A. 10-427 et seq., the following bonds of the Issuer (collectively, the "Refunded Bonds"): Description Series Dated Date Years Amount General Obligation Internal 2003-A July 15, 2003 2014 to 2018 $1,125,000 Improvement Bonds General Obligation Internal 2004-B July 15, 2004 2013 to 2019 1,010,000 Improvement Bonds General Obligation Internal 2005-A July 15,2005 2014 to 2020 1,535,000 Improvement Bonds The total principal amount of the Bonds issued to refund the Refunded Bonds does not exceed the aggregate amounts prescribed in K.S.A. 10-427, as amended. The interest rates on the Bonds on the date of the sale of the Bonds were within the maximum legal limit for interest rates under K.S.A. 10-1009, as amended. 2 9. Bonded Indebtedness. The currently outstanding applicable indebtedness of the Issuer, including the Bonds, does not exceed any applicable constitutional or statutory limitations. A Schedule of Bonded Indebtedness, which sets forth all currently outstanding general obligation indebtedness of the Issuer, is attached hereto as Exhibit A and made a part hereof by reference as though fully set out herein. 10. Valuation. The total assessed valuation of the taxable tangible property within the Issuer for the year 2011 is as follows: Equalized Assessed Valuation of Taxable Tangible Property ............................................................. . Tangible Valuation of Motor Vehicles ................................................. . Equalized Assessed Tangible Valuation for Computation of Bonded Debt Limitations .............................. .. $402,354,576 47,406,062 $449,760,638 11. Non-litigation. There is no controversy, suit or other proceedings of any kind pending or threatened wherein or whereby any question is raised or may be raised, questioning, disputing or affecting in any way: (a) the legal organization of the Issuer or its boundaries; (b) the right or title of any of its officers to their respective offices; (c) the legality of any official act shown to have been done in the Transcript; (d) the constitutionality or validity of the indebtedness represented by the Bonds shown to be authorized in the Transcript; (e) the validity of the Bonds, or any of the proceedings had in relation to the authorization, issuance or sale thereof; or (f) the levy and collection of a tax to pay the principal of and interest on the Bonds. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 3 WITNESS our true and genuine manual signatures and the seal of the Issuer. (SEAL) ~ Cler~ (Signature Page to Transcript Certificate -Series 2012-B Bonds) EXHIBITA SCHEDULE OF OUTSTANDING GENERAL OBLIGATION INDEBTEDNESS (as of July 15, 2012) General Obligation Bonds: Date Amount Final Amount Issued Series Purpose of Issue Maturity Outstanding 07-15-02 2002-B Internal Improvements $ 1,980,000 10-01-12 $ 165,000 07-15-03 2003-A Internal Improvements 4,350,000 10-01-13 640,000 * 05-01-04 2004-A Refunding 5,585,000 08-01-15 1,170,000 07-15-04 2004-B Internal Improvements 4,053,000 10-01-12 380,000 * 07-15-05 2005-A Internal Improvements 4,210,000 10-01-13 665,000 * 03-15-06 2006-A Internal Improvements 2,200,000 10-01-26 1,650,000 07-15-06 2006-B Internal Improvements 885,000 10-01-21 535,000 06-15-07 2007-A Internal Improvements 6,545,000 10-01-27 5,085,000 07-15-08 2008-A Internal Improvements 3,720,000 10-01-23 3,000,000 12-15-08 2008-B Internal Improvements 3,525,000 07-01-28 3,295,000 07-15-09 2009-A Internal Improvements 23,695,000 10-01-29 20,645,000 05-01-10 201O-A Refunding & Improvement 6,875,000 10-01-25 6,100,000 10-15-10 201O-B Refunding 7,860,000 10-01-23 7,360,000 07-15-11 2011-A Internal Improvements 6,565,000 10-01-31 6,565,000 07-15-12 2012-A Internal Improvements 2,365,000 10-01-27 2,365,000 07-15-12 2012-B Refunding 3,785,000 10-01-20 3,785,000 $63,405,000 *Does not include bonds to be refunded with proceeds from the sale of the Series 2012-B Bonds. Temporary Notes: Temporary notes represent general obligation indebtedness payable ultimately from the City's ability to levy unlimited taxes upon all taxable tangible property within its territorial limits. The City customarily redeems temporary notes with proceeds from the sale of long-term general obligation bonds or other available funds. Final Original Date Maturity Note Amount Project Series Issued Date Amount Outstanding Street, Water, and Sewer 2011-1 07-15-11 08-01-12 $3,400,000 $ 0* Street, Water, and Sewer 2012-1 07-15-12 08-01-13 1,485,000 1,485,000 $1,485,000 * Amount outstanding ($3,400,000) to be redeemed with proceeds from the sale of the Series 2012-A Bonds and available cash from the City. CERTIFICATE OF MANUAL SIGNATURE OF THE MAYOR OF THE CITY OF SALINA, KANSAS IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF KANSAS STATE OF KANSAS ) ) SS. COUNTY OF SALINE) 1, the undersigned, Norman Jennings, being duly sworn on oath certify that I am the duly qualified Mayor of the City of Salina, Kansas, and that the signature appearing below is my signature and !-file herewith this certificate pursuant to K.S.A. 75-4001 to 75-4007, inclusive. Subscribed and sworn to before me as ofJuly 9,2012. ,. --------:::-:::::-. A • LIEU ANN ELSEY ~ Notary Publi • State of Kansas My Appt. Expires Notary Public in and for said County and State (SEAL) t-{ -! {jJ -13 My commission expires: _______ _ RECEIVED JUL 1 3 2012 KRIS W. KOBACH SECRETARY OF STATE lNTliE OFl?ICE OFT.EmSECRETARY OF STATE 'OFTl:lE STAl'E OFKANSAS STATE OFKANSAS ,COUN"rY OF SAu:N:E ') ) ) .-.. ' . .. . . ss. I,. the undersigned. Lieu Ann Elsey, being duly swom, on oath sw,te that r. am the duly qualified City Clerk of the City ofS31ina; Kansas. andIllereby: certify that the signature appearlng below is !he true . , and 'genuine m.am;ml signature of the undersigned. and r file ~wilb. this certificate pw:suant to the provisions ofK.S.A. 75-4001 to 75-4001 .. fucIusive.. ' . ' " 6r . Subscribed and swom to bcforeme-this Z.E day.ofApr:U. 2004. . ~ .... ""St'l -R E c ttf(l' TfiD';' REGISTERED NUMBER! REGISTERED $385,000 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York Corporation ("DTC"), to the Issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as· requested by an authorized representative of DTC (and any payment is made de & Co. or to such other entity as is requested by an authorized represe tat e 0 DTC), ANY TRANSFER, PLEDGE OR OTHER USE HERE 0 LUE OR OTHERWISE BY OR TO ANY PERSON IS WRO FUL registered owner hereof, Cede & Co., has an interest he ei Interest Rate: 1.00% Maturity Date: October REGISTERED OWNER: CED PRINCIPAL AMOUNT: T CUSIP: 7947433C6 of a me t. The principal or redemption price of this Bond shall be paid at maturity or upon r red mpt'on 0 the person in whose name this Bond is registered at the maturity or redemption date there , pon resentation and surrender of this Bond at the principal office of the Treasurer of the Sta of Kans ,Topeka, Kansas (the "Paying Agent" and "Bond Registrar"). The interest payable on this ond a any Interest Payment Date shall be paid to the person in whose name this Bond is registered on the regIstration books maintained by the Bond Registrar at the close of business on the Record Date(s) for such interest, which shall be the' 15th day (whether or not a business day) of the calendar month next preceding the Interest Payment Date. Such interest shall be payable (a) by check or draft mailed by the Paying Agent to the address of such Registered Owner shown on the Bond Register or at such other address as is furnished to the Paying Agent in writing by such Registered Owner; or (b) in the case of an interest payment to Cede & Co. or any Owner of $500,000 or more in aggregate principal amount of Bonds by electronic transfer to such Owner upon written notice given to the Bond Registrar by such Registered Owner, not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank, ABA routing number and account number to which such Registered Owner wishes to have such transfer directed. The principal or redemption price of and interest on the Bonds shall be payable in any coin or currency that, on the spective dates of payment thereof, is legal tender for the payment of public and private debts. Inter t n punctually paid will be paid in the manner established in the within defined Bond Resolution. Definitions. Capitalized terms used herein and not othe meanings assigned to such terms in the hereinafter defined Bond Redemption follows: Option e 2020, and th reafter, ther~after, s a whol redeemed t be ete ~ the Issuer amount of redemption ~ic~ 100% ( date of redem~n. Redempt~ina ·ons. Whenever the Bond Registrar is to select Bonds for the purpose of redemption, it shall, III the c se of Bonds in denominations greater than a minimum Authorized Denomination, if less han all f the Bonds then Outstanding are to be called for redemption, treat each minimum Authorized De . ation of face value of each such Bond as though it were a separate Bond in the denomination of a minimum Authorized Denominatipn. Notice of Redemption. Notice of redemption, unless waived, shall be given by the Issuer to the State Treasurer of Kansas, the Purchaser of the Bonds and to the Bond Registrar in accordance with the Bond Resolution. The Issuer shall cause the Bond Registrar to' notify each Registered Owner at the -2- address maintained on the Bond Register, such notice to be given by mailing an official notice of redemption by first class mail at least 30 days prior to the redemption date. Notice of redemption having been given as aforesaid, the Bonds or portions of Bonds to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the Issuer defaults in the payment of the redemption price), such Bonds or portions of Bonds shall cease to bear interest. Denominations. Authentication. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the hereinafter defined Bond Resolution until the Certificate of Authentication and Registration hereon shall have been lawfully executed by the Bond Registrar. -3- IT IS HEREBY DECLARED AND CERTIFIED that all acts, conditions, and things required to be done and to exist precedent to and in the issuance of this Bond have been properly done and performed and do exist in due and regular fonn and manner as required by the Constitution and laws of the State of Kansas, and that the total indebtedness of the Issuer, including this series of bonds, does not exceed any constitutional or statutory limitation. IN WITNESS WHEREOF, the Issuer has caused this Bond to e e ecuted by the manual or facsimile signature of its Mayor and attested by the manual or facsimile igna re f its Clerk, and its seal to be affixed hereto or imprinted hereon. By: ATTEST: r BYLW -4- CERTIFICATE OF AUTHENTICATION AND REGISTRATION This Bond is one of a series of General Obligation Refunding Bonds, Series 2012-B, of the City of Salina, Kansas, described in the within-mentioned Bond Resolution. Registration Date _______ _ Registration Number 0322-085-071512-426 STATE OF KANSAS (Seal) ) ) By: _________________________ _ Treasurer of the State of Kansas -5- BOND ASSIGNMENT FOR VALUE RECEIVED, the undersigned doe es) hereby sell, assign and transfer to (Name and Address) (Social Security or Taxpayer Identifi Dated ________ _ -6- LEGAL OPINION The following is a true and correct copy of the approving legal opinion of Gilmore & Bell, P.C., Bond Counsel, which was dated and issued as of the date of original issuance and delivery of such Bonds: Governing Body City of Salina, Kansas UMB Bank, N.A. Kansas City, Missouri Re: and other certifications of p by independent investigation. GILMORE & BELL, P.C. Attorneys at Law 2405 Grand Boulevard Suite 1100 2. are p able as oth principal and interest in part from special assessments levied upon the ro e efite by the construction of certain improvements and, if not so paid, from ad valorem ~xes ich rna -P~ lev d without limitation as to rate or amount upon all the taxable tangible property, rea~nd personal, ~·t ·n t territorial limits of the Issuer. The balance of the principal and interest on the l3.o.Eds ~abl fr ad valorem taxes which may be levied without limitation as to rate or amount upon a1t11ie~able angible property, real and personal, within the territorial limits of the Issuer. The Issuer is quired b law to include in its annual tax levy the principal and interest coming due on the Bonds to t extent t at necessary funds are not provided from other sources. 3. The interest on the Bonds is: (a) excluded from gross income for federal income tax ) purposes; and (b) not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinions set forth in this paragraph are subject to the condit-ion that the Issuer comply with all -7- requirements of the Internal Revenue Code of 1986,' as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds in order to preserve the exclusion of the interest on the Bonds from gross income for federal income tax purposes. The Issuer has covenanted to comply with all of these requirements. Failure to comply with certain of these requirements may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Bonds are "qualified tax-exempt obligations" within the meaning of Section 265(b )(3) of the Code, and, in the case of certain financial institutions (within the meaning Section 265(b )(5) of the Code), a deduction is allowed for 80 percent of that portion of such financi ins ·tution's interest expense allocable to interest on the Bonds. We express no opinion regardin oth fe ral tax consequences arising with respect to the Bonds. 4. The interest on the Bonds is exempt from income xa~ We -8- e Official ted in the AGREEMENT BETWEEN ISSUER AND AGENT $3,785,000 CITY OF SALINA, KANSAS GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 15, 2012 THIS AGREEMENT, dated as of July 15, 2012, between the City of Salina, Kansas, a municipality (the "Issuer"), and the State Treasurer of Kansas, as Agent (the "Agent"). WHEREAS, for its lawful purposes, the Issuer has duly authorized the issue of the above- captioned bonds (the "Securities"), and the Issuer wishes the Agent to act as its Paying Agent, Bond Registrar, and Transfer Agent for the Securities: Now, therefore, it is hereby agreed as follows: I. APPOINTMENT Issuer hereby appoints or has heretofore appointed the State Treasurer of Kansas to act as Paying Agent, Bond Registrar and Transfer Agent for the Securities. The State Treasurer of Kansas hereby accepts its appointment as the Paying Agent, Bond Registrar and Transfer Agent. II. BASIC DUTIES A. Issuer or its duly authorized representative agrees to furnish Agent the name(s) and addressees) of the initial registered owner(s) of the Securities together with such registered owners' tax identification (social security) number(s), the maturity date(s), denomination(s) and interest rate(s) for each Security. B. Agent shall manually authenticate the originally issued Securities upon the written order of one or more authorized officers of Issuer. Thereafter, Agent shall manually authenticate all Securities resulting from transfer or exchange of Securities. C. Agent shall maintain an office in the City of Topeka, Kansas, where Securities may be presented for registration, transfer and exchange; and shall also maintain an office in the City of Topeka, Kansas, where Securities may be presented for payment. Agent shall keep a register of the Securities and their transfer and exchange. D. Agent may rely upon any document believed by it to be genuine and to have been signed or presented by the proper person. Agent need not investigate any fact or matter stated in the document. Agent undertakes to perform such duties and only such duties set forth in K.S.A. 10-620 et seq., except as specifically provided in this Agreement. E. Agent shall notify the owners of the Securities upon default in payment of principal or interest on the Securities and the Agent shall have no duties or responsibilities thereafter. ITI. COMPENSATION Issuer covenants and agrees to pay to Agent, as reasonable compensation for the services provided as Agent, an initial setup fee of $300, a registration fee of $30, plus a fee of $2,000.00, This amount will be due at the time of registration unless such fee is to be paid from the proceeds of the bond issue in which case Issuer agrees to pay such fee within two (2) business days of the closing of the bond issue. In addition to the aforementioned fee, Issuer covenants and agrees to pay to Agent the fee as stated and required by K.S.A. 10-505 for performing the duties of paying the principal of the Securities. IV. STANDARD OF PERFORMANCE Issuer shall provide, or shall cause to be provided to Agent, a designation of whether its Securities are to be issued in certificated or uncertificated form, or both. A. STATEMENTS OF OWNERSHIP Agent agrees to provide Statements of Ownership to the owner of uncertificated Securities. Such Statements shall be in accordance with the standards set forth by the Attorney General. All Statements shall be issued in the denominations of $1,000 or $5,000 or integral multiples thereof except for one additional Security in another denomination, which additional Security shall mature in the initial maturity year of the series of the Securities. Interest is computed on the basis of $1 ,000 or $5,000 units and in all transactions involving the payment of interest, fractions of a cent equalling or exceeding five mills shall be regarded as one cent; fractions of a cent less than five mills shall be disregarded. Agent shall at all times maintain an adequate supply of Statements of Ownership for any anticipated transfers or exchanges of the Statements. B. CERTIFICATED SECURITIES All certificated Securities issued by Issuer under this Agreement shall be in accordance with the standards set forth by the Attorney General and unless otherwise authorized by Agent, the principal thereof shall be payable only upon surrender of the Security to Agent. All certificates shall be issued in the denomination of $1 ,000 or $5,000 or integral multiples thereof except one authorized Security in another denomination which additional Security shall mature in the initial maturity year of the series of Securities. Interest is computed on the basis of $1,000 or $5,000 units and in all transactions involving the payment of interest, fractions of a cent equaling or exceeding five mills shall be regarded as one cent; fractions of a cent less than five mills shall be disregarded. Issuer shall at Issuer's cost provide Agent with an adequate supply of certificates for any anticipated transfers or exchanges of the certificates. Issuer shall be responsible for the payment of the printing or other expenses for such certificates. Issuer shall be responsible for obtaining appropriate "CUSIP" number(s) and shall notify Agent of each number(s) prior to the issuance of the applicable Securities. C. INTEREST CALCULATIONS Agent shall calculate interest on the basis of $1,000 and $5,000 units, or in the case of one odd denomination, calculate the unit separately. Each intermediate unit calculation is first determined, then rounded to the sixth decimal position; i.e. whenever the seventh 2 decimal place is equal to or greater than five the sixth decimal place is increased by one. The final per unit calculation is subsequently rounded to two decimal positions. (See Attachment "A" for sample calculation.) D. SURRENDER Securities surrendered for payment, cancellation or partial redemption shall be cancelled by Agent and returned to Issuer in accordance with K.S.A. 10-111. E. TRANSFERS AND EXCHANGES 1. When Securities are presented to Agent for transfer or exchange, Agent shall so transfer or exchange such Securities if the requirements of Section 8 -401 (1) of the Uniform Commercial Code are met. 2. In accordance with the authorizing Resolution or Ordinance of the Issuer (the "Bond Resolution"), payments of interest shall be made to the owner of record of each Security as of the close of business on the fifteenth day of the month preceding each interest payment date. The Agent shall make such payments to the record owner of each Security as set forth on the registration books maintained by Agent as of such date. 3. Agent shall not be required to transfer or exchange any Security during a period beginning on the day following the fifteenth day of the month preceding any interest payment date for such Securities and ending at the close of business on the interest payment date, or to .transfer or exchange any Security selected or called for redemption in whole or in part subsequent to the date notice of such redemption is given in accordance with the Bond Resolution authorizing the Securities. F. REGISTRATION DATES AND FUNDS FOR PAYMENTS Date of Registration shall be affixed on the initial Securities. Subsequent transfers or exchanges shall bear a Date of Registration as of the date that all the required documentation is received at the Agent's official place of business. Issuer will provide funds to make any interest or principal payments in accordance with K.S.A. 10-130 and amendments thereto. Agent is hereby authorized to effect any semiannual payment of interest or any principal by charging the Issuer's Fiscal Agency account with Agent. G. REPLACEMENT OF SECURITIES If the owner of a Security claims that a Security has been lost, destroyed or wrongfully taken, Issuer shall issue and Agent shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met. Only Agent shall perform this function. An indemnity bond and affidavit of loss shall be provided to Agent and Issuer at the expense of the owner of the Security. Such indemnity bond and affidavit of loss must be sufficient in the judgment of Issuer and Agent to protect Issuer and Agent from any loss which any of them may suffer if the Security is replaced. Issuer may charge the Security owner for its expenses in the replacement of a Security. 3 H. REDEMPTIONS Optional Redemption. If any Securities are to be redeemed pursuant to an optional redemption in accordance with their terms, Issuer agrees to give Agent at least fifteen (15) days written notice thereof prior to the notice to be given the Security owners. If there is no provision for notice to the Security owners, Issuer agrees to give at least thirty (30) days written notice to Agent. Notice of Redemption. Agent shall then notify, by ordinary mail, the owner of such Securities to be so redeemed. Agent shall select the Securities to be so redeemed. Agent shall not be required to exchange or register a transfer of any Security for a period of fifteen (15) days preceding the date notice is to be provided to the Security owners for the purpose of selecting Securities on a partial redemption. Further, in the event notice is given to Agent for a complete redemption of the Issue according to the terms of the Bond Resolution, Agent shall not be required to transfer or exchange any Security beginning on the day following the 15th day preceding the date set for redemption. I. MISCELLANEOUS Agent hereby acknowledges receipt of numbered Securities of Issuer (in a number equal to one Security for each maturity) for registration and exchange, and shall safeguard any "blank" Securities held for purpose of exchange or transfer. J. REPORTS Agent shall provide Issuer an annual report of the activity with respect to the issuance of Securities upon written request ofIssuer. K. CONSTRUCTION This Agreement shall be construed in accordance with the laws of the State of Kansas and also the Bond Resolution authorizing the issuance of the Securities. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 4 (SEAL) ATTEST: ~' By ----------+-11---- Clerk (SEAL) CITY OF SALINA, KANSAS OFFICE OF THE TREASURER OF THE STATE OF KANSAS (Signature Page to Agreement Between Issuer & Agent -Series 20l2-B Bonds) ATTACHMENT "A" SAMPLE $5,000.00000 ........................ Bond Unit x .06875 ........................ Interest Rate 343.750000 Rounded to six decimal places / 360 ........................ Days per year .954861 Rounded to six decimal places x 180 ........................ Day in interest period 171.874980 (Rounded to second decimal = $171.87) Unit interest is then multiplied by the number of units in the maturity. I-I l .- ....... Blanket Issuer Letter of Representations fT 0 . be Completed by Issuer) ern OF SALINA. KANSAS (Name or issuer] Ifay 30 •. 1996 .. -:: " IDate) Attention: Underwriting Department -Eligibility The Depository Tnlst Company 55 Water Street; 50th Floor Ne\\' York, NY 10041-0099 Ladies and Gentlemen: This letter sets forth our understanding with respect to all issues (the "Securities") that Issuer shall request be made eligible for deposit.by The DepositoI)' Trust Company ("DTe"). To induce DTC to accept the Securities as eligible for deposit at DTC. and to act in accorda. ce v.ith DTC's Rules v.ith respect to the Securities, Issuer represents to DTC that Issuer will oomply with the requirements stated in DTC's Operational Arrangements, as they may be amended from time to time. Note: Schedule A contains statements that DTC believes acan-ately describe DTC. the method of effecting book- ently tnliWers of securities distributed through DTC. and certain related matt=. . . Received and Accepted: THE DEPOSrrORYTRUSTCOMP~ B~·:J~ . Very truly yours, Ci.ty of Sa.1ina~ :Kansas CTypewrite Name ls: Title) 300 ll. Ash Street (Street AddreSs) Salina KS 61402-0136 ~~------~~--(City) (State) (:UP) 913-826-1240 (l'hoDe Number) SCHEDULE A (To Blanket Issuer Letter of Representations) SAMPLE OFFERING DOCUMENT LANGUAGE DESCRIBING BOOK-ENTRY-ONLY ISSUANCE (Prepared by DTC-braclceted material may be applicable only to cenain issues) 1, The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the securities (the "Securities"). The Securities will be issued' as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for [each Issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $500 million, one certificate will be issued with respect to each $500 million of p~cipal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.] . 2. 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 oftbe 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 17 A 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 ("DTee"). nTCC is the holding company for DTC, National Secu....;ties Clear.ng Corporation and Fixed Income Clearing Corporation, alI 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 thrQugh or maintain a custodial relationship with a Direct Participant, either directly or indirectly C"Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. 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.c(}m and www.dtc.org. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on InC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants'records. Beneficial Owners will not receive written confinnation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details. of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name ofDTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, 'which mayor 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. BLOR 03125108 SCHEDULE A (To Blanket Issuer Letter of Representations) 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, sUbject to any statutory or regulatory requirements as may be in effect from time to time. (Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults. and proposed amendments to the Security documents. For example. Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be' provided directly to them.] '[6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.) . 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) wil1 cC?nsent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as Inay be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from Issuer or 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 m bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption·proceeds. distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. [9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [TenderlRemarketingJ Agent, and shall effect delivery of such Securities. by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to [TenderlRemarketing] Agent. The requirement for physical delivery 'of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and fonowed by a book-entry credit of tendered Securities to [TenderlRemarketing) Agent's DTC account.] 10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of b'ook-entry-only transfers through DTe (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. BLOR 03125/08 MO'ODY'S INVESTORS SERVICE Salina's (KS) Series 201 $3.8 to $1.5 million GO Temporary Global Credit Research· 03 Jul 2012 Aa2 rating applies to $63.5 million of post-sale long-term general obligation debt outstanding SALINA (CITY OF) KS Cities (including Towns, Villages and Townships) KS Moody's Rating ISSUE General Obligation Refunding Bonds, Series 2012-B Sale Amount $3,840,000 Expected Sale Date 07/09/12 Rating Description General Obligation RATING Aa2 General Obligation Internal Improvement Bonds, Series 2012-A Aa2 Sale Amount $2,365,000 Expected Sale Date 07/09/12 Rating Description General Obligation General Obligation Temporary Notes, Series 2012-1 MIG 1 Sale Amount $1,485,000 Expected Sale Date 07/09/12 Rating Description Note: Bond Anticipation Moody's Outlook NOO Opinion NEW YORK, July 03,2012 --Moody's Investors Service has assigned aAa2 rating to the City of Salina's (KS) $2.4 million General Obligation Internal Improvement Bonds, Series 2012-Aand $3.8 million General Obligation Refunding Bonds, Series 2012-B; and a MIG 1 rating to the city's $1.5 million General Obligation Temporary Notes, Series 2012-1. Concurrently, Moody's has affirmed the Aa2 rating on the city's outstanding long-term general obligation debt. Post-sale, the city will have $63.5 million of long-term general obligation debt outstanding. SUMI\i1ARY RATINGS RATIONALE Both the bonds and notes are secured by the city's general obligation unlimited tax pledge. Proceeds of the Series 2012-A bonds will finance a variety of special assessment infrastructure projects as well as provide long-term takeout financing for the city's outstanding General Obligation Temporary Notes, Series 2011-1. Proceeds of the Series 2012-B bonds will current refund portions of the city's outstanding General Obligation Internal Improvement Bonds, Series 2003-A, General Obligation Internal Improvement Bonds, Series 2004-B, and General Obligation Internallrnprovement Bonds, Series 2005-A for an estimated savings. Proceeds of the Series 2012-1 Notes will provide interim financing for the city's share of road capital improvement projects. The Notes mature on August 1, 2013, and the MIG 1 rating is based on expected market access for the takeout financing, the city's demonstrated ability to access the market through its previous bond and note sales, and the underlying credit quality reflected by the city's long-term Aa2 rating. The Aa2 rating reflects the city's moderately-sized tax base; satisfactory financial operations characterized by a trend of declining reserves somewhat mitigated by positive operations in fiscal 2011; and manageable debt burden. STRENGTHS -Strong history of market access -Lack of levy limits provides flexibility to increase property tax levy for operations CHALLENGES -Multi-year trend of operating shortfalls leading to reduced reserve and liquidity levels -Dependence on an economically sensitive sales tax revenues for General Fund operations DETAILED CREDIT DISCUSSION EXPECTED MARKET ACCESS FOR REFINANCING The city's demonstrated ability to access the market includes multiple issues of bonds and notes borrowing in the last several years. The city expects to either repay the notes with an issuance of long-term bonds or roll over the notes for another year. City management is expected to make adequate provisions to address potential market disruptions at the time of the takeout financing, by planning to take out debt well in advance of final maturity and considering alternate back up plans if necessary. MODERATELY SIZED TAX BASE SERVES AS REGIONAL ECONOMIC CENTER We believe that due to its position as a regional retail hub, Salina should continue to enjoy relative economic stability. Located in Saline County 95 miles north of Wichita (GO rated Aa1/stable outlook), the City of Salina's 2.9 billion tax base has experienced declines in recent years associated with the broader economic recession, as well as the state's exemption of machinery and new equipment from valuations. Despite these declines in fiscal years 2009 and 2010, full value increased at an average annual rate of 1.2% from 2006 to 2011. Located at the intersection of 1-70 and 1-135, the city serves as a regional retail, commercial, industrial, and medical hub for the largely agricultural communities of north central Kansas (long-term rated Aa1/negative outlook). Residential income indices track slightly below state and national benchmarks, with 2006 -2010 median family income at 87.3% and 86.5% of state and national levels for the same time period, respectively. At 6.0% in May 2012, the city's unemployment rate tracked near the state rate (5.8%) and below the national rate (7.9%) for the same time period. STABILIZED FINANCIAL OPERATIONS IN FISCAL 2011 FOLLOWING TREND OF RESERVE DECLINES The city's restoration of positive operations in fiscal 2011 and its expectation of balanced operations moving forward pOints to the continuation of satisfactory financial operations. The city's General Fund balance declined steadily from fiscal 2007 to fiscal 2010 due to budgetary pressures in a variety of areas, including increased fuel costs, increased salary and benefit costs, and declines in economically sensitive sales tax revenues in fiscal 2010. Another factor in the General Fund balance decline is state legislation that increased property tax exemptions for new machinery and equipment. From $7.3 million in fiscal 2007, the city's General Fund reserves fell to $3.6 million in fiscal 2010. Favorably, as a result of a multi-year implementation of cost reductions such as a reduction in positions, changes to overtime policies and increased service fees, the city achieved a modest $63,000 operating surplus in fiscal 2011. The increase, combined with a fund balance restatement, increased reserves to $3.8 million, or a satisfactory 10.8% of revenues. Included in the positive fiscal 2011 results, the city executed a purchase of eight police vehicles due to available cost savings. As a result, the city will not need to purchase additional police vehicles for the next two fiscal years. Based on year to date trends, the city currently expects balanced operations in a worst-case scenario for the current fiscal year 2012. Looking ahead, the city has implemented additional cost savings measure such as contracting out the operations of its concert center in an effort to reduce the facility's reliance on General Fund support. The facility currently requires a General Fund subsidy of $600,000, and the city expects to reduce this reliance over the next several years. Typical of Kansas cities, sales tax receipts represent the city's primary operating revenue source, comprising 33% of fiscal 2011 General Fund revenues. Several different sales taxes are collected, including a 1 % Countywide Local Option Sales Tax and a 0.5% Citywide Local Option Sales Tax and do not sunset. In addition, the city passed a 0.4% local sales tax effective April 1 ,2009 which replaced a .25% local sales tax that was scheduled to sunset on June 1, 2010. Like all Kansas cities, Salina also benefits from the revenue raising flexibility due to the lack of levy limits. Future credit reviews will take into account the city's ability to maintain balanced operations, as well maintain and rebuild its reserve and liquidity levels. AVERAGE DEBT LEVELS EXPECTED TO REMAIN I'vIANAGEABLE The city's debt burden is expected to remain manageable given average principal amortization and moderate future borrowing plans. At 2.2% and 4.5% of full value, respectively, the city's direct and overall debt burdens are average. Principal amortization is average, with 79.8% of general obligation debt retired in ten years. The city generally issues long term and short term debt once or twice per year to fund projects outlined in its Capital Improvement Plan. Looking further ahead, the city expects to issue revenue debt associated with the replacement of its wastewater treatment plant in approximately five years. All of the city's debt is fixed rate, and the city is not a party to any interest rate swap agreements. WHAT COULD CHANGE THE RATING -UP -Substantial growth in the city's tax base -Substantial improvement in General Fund reserves WHAT COULD CHANGE THE RATING -DOWN -Further reductions to reserve levels due to operating deficits -Erosion of the city's tax base KEY STATISTICS 2010 Population: 47,707 (4.4% increase since 2000) 2011 Full value: $2.9 billion City of Salina unemployment rate (May 2012): 6.0% Fiscal 2011 General Fund balance: $3.8 million (10.8% of General Fund revenues) Direct debt burden: 2.2% (4.5% overall) Payout (10 Years): 79.8% Post-sale long term general obligation debt outstanding: $63.5 million PRINCIPAL METHODOLOGY The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. REGULATORY DISCLOSURES The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com. For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, and public information. Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating. Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests. Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter. Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery. Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Analysts Thomas Aaron Lead Analyst Public Finance Group Moody's Investors Service Tatiana Killen Backup Analyst Public Finance Group Moody's Investors Service Rachel Cortez Additional Contact Public Finance Group Moody's Investors Service Contacts Journalists: (212) 553-0376 Research Clients: (212) 553-1653 Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 USA MOODy'S INVESTORS SERVICE © 2012 fv1oody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES,AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FPCT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EPCH INVESTOR WILL MAKE ITS OVIIN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. ALL INFORNIATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORNIATION NlAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in aSSigning a credit rating is of sufficient quality and from sources fv1oody's considers to be reliable, including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such Information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORNIATION IS GIVEN OR ML\DE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. MIS, a wholly-owned credit rating agency subsidiary of fv1oody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -Corporate Governance -Director and Shareholder Affiliation Policy." Any publication into Australia of this document is by MOODYS affiliate, Moody's Investors Service Pty LimitedABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761 G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODYS that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761 G of the Corporations Act 2001. Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MlKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MlKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. This credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser. CLOSING CERTIFICATE $3,785,000 CITY OF SALINA, KANSAS GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 15, 2012 The undersigned Mayor and Clerk of the City of Salina, Kansas (the "Issuer"), make this Certificate for inclusion in the transcript of and as a part of the proceedings authorizing and providing for the issuance of the above described bonds (the "Bonds"); and certify as of July 26, 2012 (the "Issue Date"), as follows: 1. Meaning of Words and Terms. Capitalized words and terms used in this Certificate, unless otherwise defined in this Certificate or the context requires otherwise, have the same meanings ascribed to such words and terms in the Bond Resolution (defined below) authorizing the Bonds. 2. Transcript of Proceedings. The transcript of proceedings relating to the authorization and issuance of the Bonds (the "Transcript"), furnished to the Purchaser of the Bonds, is to the best of our knowledge, information and belief full and complete; none of such proceedings have been modified, amended or repealed, except as might be shown in the Transcript; and the facts stated in the Transcript still exist. In each instance where copies appear in the Transcript, such copies are true and correct duplicates of the original instruments now on file with the Clerk. All certifications made by the Issuer in the Transcript Certificate dated July 9,2012 are true and correct as of this date and are incorporated in this Certificate by reference. 3. The Bond Resolution. The Issuer is issuing and delivering the Bonds simultaneously with the delivery of this Certificate, pursuant to and in full compliance with the Constitution and statutes of the State, including particularly K.S.A. 10-427 et seq., as amended, Ordinance No. 10-10644 and Resolution No. 12-6918 of the Issuer duly adopted by the governing body of the Issuer on July 9,2012 (collectively, the "Bond Resolution"). 4. Purpose of the Bonds. The Bonds are being issued pursuant to the Bond Resolution for the purpose of refunding, pursuant to K.S.A. 10-427 et seq., the following bonds of the Issuer (collectively, the "Refunded Bonds"): Description Series Dated Date Years Amount General Obligation Internal 2003-A July 15,2003 2013 to 2018 $1,125,000 Improvement Bonds General Obligation Internal 2004-B July 15, 2004 2014 to 2019 1,010,000 Improvement Bonds General Obligation Internal 2005-A July 15, 2005 2013 to 2020 1,535,000 Improvement Bonds The purpose of the refunding is to achieve interest cost savings through early redemption of the Refunded Bonds, to reduce debt service requirements of the Issuer for certain years, and to provide an orderly plan of finance for the Issuer. 5. Security for the Bonds. The Bonds are general obligations of the Issuer payable in part from special assessments levied upon the property benefited by the improvements financed by the Refunded Bonds and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer, with the balance payable,] from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The full faith, credit and resources of the Issuer are pledged under the Bond Resolution to the payment of the principal.of and interest on the Bonds. In the Bond Resolution, the governing body of the Issuer has covenanted to annually make provision for the payment of principal of, premium, if any, and interest on the Bonds as the same become due by, to the extent necessary, by levying and collecting the necessary taxes and/or assessments upon all of the taxable tangible property within the Issuer in the manner provided by law. 6. Sale of Bonds. The Bonds have been sold at rates not in excess of the limitations set forth in K.S.A. 10-1009. The Notice of Bond Sale dated June 11,2012 and included in the Transcript constitutes a full true and correct copy thereof. A copy of such Notice of Bond Sale and Preliminary Official Statement was sent to prospective purchasers of the Bonds, and to all other persons and firms requesting copies of such Notice of Bond Sale and Preliminary Official Statement. 7. Official Statement. The Official Statement contained in the Transcript constitutes a full, true and correct copy of the Official Statement relating to the Bonds. To the best of our knowledge, the Official Statement, other than the sections entitled "The Depository Trust Company," "Ratings," "Legal Matters," "Tax Matters," and Appendices A and B, about which the Issuer expresses no opinion, is true in all material respects, and does not contain any untrue statement of a material fact or does not omit to state a material fact, necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. As of this date there has been no material adverse change in the financial condition or the financial affairs of the Issuer since the date of the Official Statement. No other event has occurred which is necessary to be disclosed in the Official Statement in order to make the statements therein not misleading in any material respect as of the date of this Certificate. The Issuer has previously caused to be delivered to the Purchaser copies of the Official Statement. 8. Continuing Disclosure Instructions. The Issuer, in the Bond Resolution, has covenanted to disseminate such information as is required in accordance with the provisions of the SEC Rule and the Continuing Disclosure Instructions, which are attached to this Certificate as Exhibit A, and incorporated in this Certificate by reference. 9. Non-Litigation. There is no controversy, action, suit, proceeding, or to the best of our knowledge, any inquiry or investigation at law or in equity or before or by any public board or body pending or, to the best or our knowledge, threatened against or affecting the Issuer, its officers or its property, or, to the best of our knowledge, any basis therefor questioning, disputing or affecting in any way: (a) the legal organization of the Issuer or its boundaries; (b) the right or title of any of its officers to their respective offices; (c) the legality of any official act shown to have been done in the Transcript; (d) the constitutionality or validity of the indebtedness represented by the Bonds shown to be authorized in the Transcript; (e) the validity of the Bonds, or any of the proceedings had in relation to the authorization, issuance or sale thereof; (f) the levy and collection of an ad valorem property tax to pay the principal of and interest on the Bonds; or (g) the federal or state tax-exempt status of the interest on the Bonds; wherein any unfavorable decision, ruling or finding would adversely affect the Issuer, the transactions contemplated by the Bond Resolution or the Official Statement, or the validity or enforceability of the Bonds, which are not disclosed in the final Official Statement. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 2 (SEAL) WITNESS our hands and the seal of the Issuer. Signature Official Title Mayor Clerk (Signature Page to Closing Certificate -Series 2012-B Bonds) EXHIBITA CONTINUING DISCLOSURE INSTRUCTIONS CITY OF SALINA, KANSAS $2,365,000 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 15, 2012 THESE CONTINUING DISCLOSURE INSTRUCTIONS (the "Disclosure Instructions") are executed and delivered by the Issuer in connection with the issuance of the above-described bonds (the "Bonds") which are being issued simultaneously herewith as of July 26, 2012, pursuant to the Bond Resolution, in which the Issuer covenants to enter into this undertaking to provide certain financial and other infonnation with respect to the Bonds in order to assist the Participating Underwriter in complying with the provisions of the SEC Rule. The Issuer is the only "obligated person" with responsibility for continuing disclosure with respect to the Bonds. Section 1. Definitions. In addition to the definitions set forth in the Bond Resolution, which apply to any capitalized tenn used in these Disclosure Instructions, unless otherwise defined herein, the following capitalized tenns shall have the following meanings: "Annual Report" means any Annual Report filed by the Issuer pursuant to, and as described in, Section 2 of these Disclosure Instructions. "Beneficial Owner" means any registered owner of any Bonds and any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intennediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. "Bond Resolution" means collectively, the ordinances and the resolutions of the governing body of the Issuer authorizing the issuance of the Bonds. "CAFR" means the Issuer's Comprehensive Annual Financial Report. "Designated Agent" means Gilmore & Bell, P.e. or one or more other entities designated in writing by the Issuer to serve as a designated agent of the Issuer for purposes of these Disclosure Instructions. "Dissemination Agent" means any entity designated in wntmg by the Issuer to serve as dissemination agent pursuant to these Disclosure Instructions and which has filed with the Issuer a written acceptance of such designation substantially in the fonn attached hereto as Exhibit B. A-I "EMMA" means the Electronic Municipal Market Access system for municipal secuntIes disclosures established and maintained by the MSRB, which can be accessed at www.emma.msrb.onr. "Financial Information" means the financial information of the Issuer described m Section 2(a)(J) hereof. "Fiscal Year" means the one year period ending December 31, or such other date or dates as may be adopted by the Issuer for its general accounting purposes. "GAAP" means generally accepted accounting principles, as applied to governmental units, as in effect at the time of the preparation of the Financial Information. "Issuer" means the City of Salina, Kansas, and any successors or assigns. "Material Events" means any ofthe events listed in Section 3(a) hereof. "MSRB" means the Municipal Securities Rulemaking Board. "Official Statement" means the Issuer's Official Statement for the Bonds. "Operating Data" means the operating data of the Issuer described in Section 2(a)(2) hereof. "Participating Underwriter" means any of the original underwriters of the Bonds required to comply with the SEC Rule in connection with offering of the Bonds. "Repository" means the MSRB via EMMA. "SEC" means the Securities and Exchange Commission ofthe United States. "SEC Rule" means Rule 1Sc2-12(b)(S) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 2. Provision Of Annual Reports. (a) The Issuer shall, or shall cause the Dissemination Agent to, not later than 180 days after the end of the Issuer's Fiscal Year, commencing with the Fiscal Year ended in 2012, file with the Repository the Issuer's CAFR, which will contain the Financial Information and Operating Data (collectively, the "Annual Report"), as follows: (1) Financial Information. The financial statements of the Issuer for such prior Fiscal Year, accompanied by an audit report resulting from an audit conducted by an Independent Accountant in conformity with generally accepted auditing standards. Such financial statements will be prepared on a modified accrual basis of accounting other than GAAP for all governmental funds, expendable trust and agency funds. The accrual basis of accounting is used for proprietary and nonexpendable trust funds. A more detailed explanation of the accounting basis is contained in Appendix A to the Official Statement. If such audit report is not available by the time the Annual Report is required to be filed pursuant to this Section, the Annual Report shall contain unaudited fmancial statements and the audit report and accompanying fmancial statements shall be filed in the same manner as the Annual Report promptly after they become available. The method of preparation and basis of accounting of the Financial Information may not be changed to a basis less comprehensive than contained in the Official Statement, unless the Issuer provides notice of A-2 such change in the same manner as for a Material Event under Section 3(b) hereof. (2) Operating Data. Updates as of the end of the Fiscal Year of substantially all of the information and data contained in the following sections of Appendix A to the Official Statement: (i) Debt Summary (ii) Tax Levies (iii) Assessed Valuation (iv) Estimated Actual Valuation (v) Tax Collections (vi) Largest Taxpayers. together with any material adverse changes in the other portions of the section entitled "FINANCIAL INFORMATION." Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues with respect to which the Issuer is an "obligated person" (as defmed by the SEC Rule), which have been filed with the Repository, the MSRB or the SEC. If the document included by reference is a final official statement, it must be available from the MSRB via EMMA. The Issuer shall clearly identify each such other document so included by reference. In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in this Section; provided that the audit report and accompanying financial statements may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Issuer's Fiscal Year changes, it shall give notice of such change in the same manner as for a Material Event under Section 3(b). (b) If no Dissemination Agent has been appointed, the Issuer shall file the Annual Report as specified by Section 2(a) hereof; or if the Annual Report is not filed within the time period specified in Section 2(a) hereof, the Issuer shall send a notice to each Repository in substantially the form attached as Exhibit A within 10 Business Days after the date the Annual Report is required to be filed as set forth herein. Section 3. Reporting of Material Events. (a) Pursuant to the provisions of this Section, the Issuer shall give, or cause the Dissemination Agent, if any, to give, to the Repository within 10 Business Days after the occurrence of any of the following events with respect to the Bonds, notice of the following events: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting fmancial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; A-3 (6) adverse tax opinions; the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bond, or other material events affecting the tax-exempt status ofthe Bonds; (7) modifications to rights of Owners, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds, if' material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the Issuer; (13) the consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional Paying Agent or the change of name of the Paying Agent, if material. (b) Notwithstanding the foregoing, notice of Material Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Bonds pursuant to the Bond Resolution. Section 4. Dissemination Agent. (a) General. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under these Disclosure Instructions, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. (b) Annual Reports. If a Dissemination Agent is appointed, not later than 15 Business Days prior to the date specified in Section 2(a) for providing the Annual Report to the Repository, the Issuer shall provide the Annual Report to the Dissemination Agent or the Repository. The Dissemination Agent shall file a report with the Issuer certifying that the Annual Report has been filed pursuant to these Disclosure Instructions, stating the date it was filed, or that the Issuer has certified to the Dissemination Agent that the Issuer has filed the Annual Report with the Repository. If the Dissemination Agent has not received an Annual Report or has not received a written notice from the Issuer that it has filed an Annual Report with the Repository, by the date required in Section 2(a) , the Dissemination Agent shall send a notice to the Repository in substantially the form attached as Exhibit A. (c) Material Event Notices. (1) The Dissemination Agent shall, promptly after obtaining actual knowledge of the occurrence of any event that it believes may constitute a Material Event, contact the chief financial officer of the Issuer or his or her designee, or such other person as the Issuer shall A-4 designate in writing to the Dissemination Agent from time to time, infonn such person of the event, and request that the Issuer promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to Section 4(c)(3). (2) Whenever the Issuer obtains knowledge ofthe occurrence of an event, because of a notice from the Dissemination Agent pursuant to Section 4(c)(J) or otherwise, the Issuer shall promptly detennine if such event constitutes a Material Event and shall promptly notify the Dissemination Agent of such detennination. If appropriate, such writing shall instruct the Dissemination Agent to report the occurrence pursuant to Section 4(c) (3). (3) If the Dissemination Agent has been given written instructions by the Issuer to report the occurrence of a Material Event pursuant to Section 4(c)(2), the Dissemination Agent shall promptly file a notice of such Material Event with the Repository and provide a copy thereof to the Issuer. Notwithstanding the foregoing, notice of Material Events described in Sections 3 (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Bonds pursuant to the Bond Resolution. (d) Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in these Disclosure Instructions, and the Issuer agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, hannless against any loss, expense and liabilities which it may incur arising out of or in the exercise or perfonnance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Issuer pursuant to these Disclosure Instructions. (e) Other Designated Agents. The Issuer may, from time to time, appoint or designate a Designated Agent to submit Annual Reports, Material Event notices, and other notices or reports pursuant to these Disclosure Instructions. The Issuer hereby appoints the Dissemination Agent and the Designated Agent(s) solely for the purpose of submitting Issuer-approved Annual Reports, Material Event notices, and other notices or reports pursuant to these Disclosure Instructions. The Issuer may revoke this designation at any time upon written notice to the Designated Agent. Section 5. Termination of Reporting Obligation. The Issuer's obligations under these Disclosure Instructions shall tenninate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If the Issuer's obligations hereunder are assumed in full by some other entity as pennitted in the Bond Resolution, such person shall be responsible for compliance with under these Disclosure Instructions in the same manner as if it were the Issuer, and the Issuer shall have no further responsibility hereunder. If such tennination or substitution occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such tennination or substitution in the same manner as for a Material Event under Section 3(b). Section 6. Amendment; Waiver. Notwithstanding any other provision of these Disclosure Instructions, the Issuer and the Dissemination Agent, if any, may amend of these Disclosure Instructions (and the Dissemination Agent shall not unreasonably refuse to execute any amendment so requested by the Issuer) and any provision of these Disclosure Instructions may be waived, provided that: (a) Bond Counsel or other counsel experienced in federal securities law matters provides the Issuer and the Dissemination Agent, if any, with its opinion that the undertaking of the Issuer contained herein, as so amended or after giving effect to such waiver, is in compliance with the SEC Rule and all current A-5 amendments thereto and interpretations thereof that are applicable to these Disclosure Instructions; (b) if the amendment or waiver relates to Sections 2(a) or 3(a), it may only be made in connection with a change in circumstances that arises from a change in law or legal requirements, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; and (c) the amendment or waiver is either (1) approved by the Owners of the Bonds in the same manner as provided in the Bond Resolution with consent of the Owners, or (2) does not in the opinion of Bond Counsel materially impair the interests of the Owners or Beneficial Owners of the Bonds. If there is an amendment or waiver of a provision of these Disclosure Instructions, the Issuer shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of Financial Information or Operating Data being presented by the Issuer. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements: (a) notice of such change shall be given in the same manner as for a Material Event under Section 3(b), and (b) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 7. Additional Information. Nothing in these Disclosure Instructions shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in these Disclosure Instructions or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is required by these Disclosure Instructions. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is specifically required by these Disclosure Instructions, the Issuer shall have no obligation under these Disclosure Instructions to update such information or include it in any future Annual Report or notice of occurrence of a Material Event. Section 8. Noncompliance. In the event of a failure of the Issuer or the Dissemination Agent, if any, to comply with any provision of these Disclosure Instructions, the Participating Underwriter or any Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Issuer or the Dissemination Agent, if any, as the case may be, to comply with its obligations under these Disclosure Instructions. Noncompliance with the provisions of these Disclosure Instructions shall not be deemed an Event of Default under the Bond Resolution, and the sole remedy under these Disclosure Instructions in the event of any failure of the Issuer or the Dissemination Agent, if any, to comply with these Disclosure Instructions shall be an action to compel performance. Section 9. Notices.· Any notices or communications to or among any of the parties referenced in these Disclosure Instructions may be given as follows: (a) To the Issuer at: 300 West Ash Salina, Kansas 67402 Fax: (785)309-5738 Attention: Clerk A-6 (b) To the Participating Underwriter( s) at the address set forth in the Bond Resolutions or such other address as is furnished in writing to the other parties referenced herein. (c) To the Dissemination Agent at the address set forth on Exhibit B attached hereto. Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. Section 10. Electronic Transactions. Actions taken hereunder and the arrangement described herein may be conducted and related documents may be stored by electronic means. Section 11. Beneficiaries. These Disclosure Instructions shall inure solely to the benefit of the Issuer, the Dissemination Agent, if any, the Participating Underwriter and Beneficial Owners from time to time ofthe Bonds, and shall create no rights in any other person or entity. Section 12. Severability. If any provision in these Disclosure Instructions, the Bond Resolution or the Bonds relating hereto, shall be invalid, illegal or unenforceable, the validity, legality and enforceability ofthe remaining provisions shall not in any way be affected or impaired thereby. Section 13. Governing Law. These Disclosure Instructions shall be governed by and construed in accordance with the laws of the State of Kansas. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] A-7 CITY OF SALINA, (SEAL) ~. . Clerk~ (Signature Page to Continuing Disclosure Instructions -20 12-A&B Bonds) EXHIBIT A NOTICE TO REPOSITORY OF FAll,URE TO FILE ANNUAL REPORT Name of Issuer: Name of Bond Issue: Name of Obligated Person: Date of Issuance: City of Salina, Kansas $2,365,000 General Obligation Internal Improvement Bonds, Series 2012- A and $3,785,000 General Obligation Refunding Bonds, Series 20 12-B, dated as of July 15,2012 City of Salina, Kansas July 26,2012 NOTICE IS GIVEN that the City of Salina, Kansas (the "Issuer") has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Instructions dated as of July 26,2012. The Issuer anticipates that the Annual Report will be filed by _____ _ Dated: _______ _ CITY OF SALINA, KANSAS By _____________ __ By ________________ ,as Dissemination Agent cc: City of Salina, Kansas A-I Name of Issuer: Name of Bond Issue: Dissemination Agent: EXHIBITB ACCEPTANCE OF DISSEMINATION AGENT City of Salina, Kansas $2,365,000 General Obligation Internal Improvement Bonds, Series 2012- A and $3,785,000 General Obligation Refunding Bonds, Series 2012-B, dated as ofJuly 15, 2012 Notice Address of Dissemination Agent: ___________ , having been duly appointed by the City of Salina, Kansas to act in the capacity of Dissemination Agent pursuant to the Continuing Disclosure Instructions to which this acceptance is attached, accepts such duties and responsibilities set forth therein. Dated: FEDERAL TAX CERTIFICATE Dated as of July 26, 2012 OF CITY OF SALINA, KANSAS $2,365,000 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B Section 1.01 Section 2.01 Section 2.02 Section 3.01 Section 3.02 Section 3.03 Section 3.04 Section 3.05 Section 3.06 Section 3.07 Section 3.08 Section 3.09 Section 3.10 Section 3.11 Section 3.12 Section 3.13 Section 3.14 Section 4.01 Section 4.02 Section 4.03 Section 4.04 Section 4.05 Section 4.06 Section 5.01 Section 5.02 Section 5.03 Section 5.04 Section 5.05 Section 5.06 Section 5.07 FEDERAL TAX CERTIFICATE TABLE OF CONTENTS ARTICLE I DEFINITIONS Definitions of Words and Terms .................................................................................... 1 ARTICLE II GENERAL REPRESENTATIONS AND COVENANTS Representations and Covenants of the Issuer ................................................................ 7 Continuing Application of Representations and Covenants ........................................ 10 ARTICLE III ARBITRAGE CERTIFICATIONS AND COVENANTS General. ....................................................................................................................... 10 Reasonable Expectations ............................................................................................. 10 Purpose of Financing ............................................ '" .................................................... 10 Funds and Accounts ............................................................................................ '" ...... 11 Amount and Use of Bond Proceeds and Other Money ................................................ 11 Multipurpose Issue ...................................................................................................... 12 Refunding .................................................................................................................... 12 Completion of Financed Improvements ...................................................................... 13 Sinking Funds .............................................................................................................. 13 Reserve, Replacement and Pledged Funds .................................................................. 13 Purpose Investment yield ............................................................................................ 13 Offering Prices and Yield on Bonds ............................................................................ 13 Miscellaneous Arbitrage Matters ................................................................................ 14 Conclusion ................................................................................................................... 14 ARTICLE IV TAX COMPLIANCE POLICIES AND PROCEDURES General. ....................................................................................................................... 14 Record Keeping; Use of Bond Proceeds and Use of Financed Improvements ........... 15 Restrictions on Investment Yield ................................................................................ 15 Procedures for Establishing Fair Market Value of Investments .................................. 16 Certain Gross Proceeds Exempt from the Rebate Requirement. ................................. 18 Computation and Payment of Arbitrage Rebate .......................................................... 19 ARTICLE V MISCELLANEOUS PROVISIONS Term of Tax Certificate ............................................................................................... 20 Amendments ................................................................................................................ 20 Opinion of Bond Counsel. ........................................................................................... 21 Reliance .......................................................................................... ~ ............................. 21 Severability .................................................................................................................. 21 Benefit of Certificate ................................................................................................... 21 Default, Breach and Enforcement. .............................................................................. 21 (i) Section 5.08 Governing Law ............................................................................................................ 21 Section 5.09 Electronic Transactions ............................................................................................... 21 LIST OF EXIllBITS TO FEDERAL TAX CERTIFICATE A. IRS FORM 8038-G Schedule -Attachment to Fonn 8038-G Evidence of filing B. RECEIPT FOR PURCHASE PRICE C. RECEIPT AND REPRESENTATION D. DESCRIPTION OF FINANCED IMPROVEMENTS; FINAL ALLOCATION Schedule -Attachment to Final Allocation E. SAMPLE ANNUAL COMPLIANCE CHECKLIST F. ALLOCATION OF BONDS -MULTIPURPOSE ISSUE Schedule 1 Debt Service Schedule and Proof of Yield *** (ii) FEDERAL TAX CERTIFICATE THIS FEDERAL TAX CERTIFICATE (the "Tax Certificate") is executed as of July 26,2012 (the "Issue Date"), by the City of Salina, Kansas (the "Issuer"). RECITALS 1. This Tax Certificate is being executed and delivered in connection with the issuance by the Issuer of $2,365,000 principal amount of General Obligation Internal Improvement Bonds, Series 2012-A (the "Series 2012-A Bonds") and $3,785,000 General Obligation Refunding Bonds, Series 2012- B (the "Series 2012-B Bonds," and together with the Series 2012-A Bonds, the "Bonds"), under the Bond Resolutions (as herein defined), for the purposes described in this Tax Certificate and in the Bond Resolutions. 2. The Internal Revenue Code of 1986, as amended (the "Code"), and the applicable Regulations and rulings issued by the U.S. Treasury Department (the "Regulations"), impose certain limitations on the uses and investment of the Bond proceeds and of certain other money relating to the Bonds and set forth the conditions under which the interest on the Bonds will be excluded from gross income for federal income tax purposes. 3. The Issuer is executing this Tax Certificate in order to set forth certain facts, covenants, representations, and expectations relating to the use of Bond proceeds and the property financed or refinanced with those proceeds and the investment of the Bond proceeds and of certain other related money, in order to establish and maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes and to provide guidance for complying with the arbitrage rebate provisions of Code § 148(t). 4. The Issuer adopted a Tax and Securities Compliance Procedure on June 11, 2012 (the "Tax Compliance Procedure") for the purpose of setting out general procedures for the Issuer to continuously monitor and comply with the federal income tax requirements set out in the Code and the Regulations. This Tax Certificate is entered into as required by the Tax Compliance Procedure to set out specific tax compliance procedures applicable to the Bonds. NOW, THEREFORE, in consideration of the foregoing and the mutual representations, covenants and agreements set forth in this Tax Certificate, the Issuer represents, covenants and agrees as follows: ARTICLE I DEFINITIONS Section 1.01 Definitions of Words and Terms. Except as otherwise provided in this Tax Certificate or unless the context otherwise requires, capitalized words and terms used in this Tax Certificate have the same meanings as set forth in the Bond Resolutions, and certain other words and phrases have the meanings assigned in Code §§ 103, 141-150 and the Regulations. The following words and terms used in this Tax Certificate have the following meanings: 1 "Adjusted Gross Proceeds" means the Gross Proceeds of the Project Portion or the Current Refunding Portion, as applicable, reduced by allocable amounts: (a) in a Bona Fide Debt Service Fund or a reasonably required reserve or replacement fund; (b) that as of the Issue Date, are not expected to be Gross Proceeds, but which arise after the end of the applicable spending period; and (c) representing grant repayments or sale or Investment proceeds of any purpose Investment. "Advance Refunding Portion" means the sale proceeds of the Series 2012-B Bonds identified in Section 3.06, together with the remaining Gross Proceeds of the Series 2012-B Bonds properly allocable to the refunding of the Refunded Series 2003-ABonds and the Refunded Series 2005-ABonds. "Annual Compliance Checklist" means a checklist for each of the Financed Improvements designed to measure compliance with the requirements of this Tax Certificate and the Tax Compliance Procedure after the Issue Date as further described in Section 4.02 and substantially in the form attached as Exhibit E. "Boua Fide Debt Service Fund" means a fund, which may include Bond proceeds, that: (a) is used primarily to achieve a proper matching of revenues with principal and interest payments within each Bond Year; and (b) is depleted at least once each Bond Year, except for a reasonable carryover amount not to exceed the greater of (1) the earnings on the fund for the immediately preceding Bond Year, or (2) one-twelfth of the principal and interest payments on the Bonds for the immediately preceding Bond Year. "Bond" or "Bonds" means any bond or bonds of the Series 2012-A Bonds or the Series 2012-B Bonds described in the recitals, authenticated and delivered under the Bond Resolutions. "Bond Compliance Officer" means the Issuer's Director of Finance and Administration or other person named in the Tax Compliance Procedure. "Bond Counsel" means Gilmore & Bell, P.C., or other firm of nationally recognized bond counsel acceptable to the Issuer. "Bond Resolutions" means, with respect to the Series 2012-A Bonds, Ordinance No. 12-10642 and Resolution No. 12-6917 and, with respect to the Series 2012-B Bonds, Ordinance No. 12-10644 and Resolution No. 12-6918, duly adopted by the governing body of the Issuer on July 9,2012, as originally executed by the Issuer, as amended and supplemented in accordance with the provisions of the applicable Bond Resolution. "Bond Year" means each one-year period (or shorter period for the first Bond Year) ending October 1 or another one-year period selected by the Issuer. "Code" means the Internal Revenue Code of 1986, as amended. "Computation Date" means each date on which arbitrage rebate for the Bonds is computed. The Issuer may treat any date as a Computation Date, subject to the following limits: (a) The first rebate installment payment must be made for a Computation Date not later than 5 years after the Issue Date; (b) Each subsequent rebate installment payment must be made for a Computation Date not later than 5 years after the previous Computation Date for which an installment payment was made; and 2 (c) The date the last Bond is discharged is the final Computation Date. The Issuer selects October 1, 2016 as the first Computation Date but reserves the right to select a different date consistent with the Regulations. "Current Refunding Portion" means the sale proceeds of the Series 2012-B Bonds identified in Section 3.06 together with the remaining Gross Proceeds of the Series 2012-B Bonds properly allocable to the refunding of the Refunded Series 2004-B Bonds. "Escrow Agent" means UMB National Bank of America, as escrow agent under the Escrow Agreement, and its successors and assigns. "Escrow Agreement" means the Escrow Trust Agreement, dated as of July 15, 2012, between the Issuer and the Escrow Agent, as amended and supplemented in accordance with the provisions thereof. "Escrow Fund" means the Escrow Fund for General Obligation Internal Improvement Bonds, Series 2003-A, General Obligation Internal Improvement Bonds, Series 2004-B, and General Obligation Internal Improvement Bonds, Series 2005-A, established under the Escrow Agreement. "Final Written Allocation" means the Final Written Allocation of expenditures prepared by the Bond Compliance Officer in accordance with the Tax Compliance Procedure and Section 4.02(b) of this Tax Certificate. "Financed Improvements" means the portion of the Improvements fmanced or refinanced with the proceeds of the Bonds as described in the Bond Resolutions and by the Original Obligations, all as described on Exhibit D. "Gross Proceeds" means (a) sale proceeds (any amounts actually or constructively received by the Issuer from the sale of the Bonds, including amounts used to pay underwriting discount or fees, but excluding pre-issuance accrued interest), (b) Investment proceeds (any amounts received from investing sale proceeds or other Investment proceeds), (c) any amounts held in a sinking fund for the Bonds, (d) any amounts held in a pledged fund or reserve fund for the Bonds, (e) any other replacement proceeds and (f) any transferred proceeds. Specifically, the term Gross Proceeds includes (but is not limited to) amounts held in the following funds and accounts: (1) Improvement Fund; (2) Escrow Fund; (3) Debt Service Accounts (for Series 2012-ABonds and for Series 2012-B Bonds); (4) Rebate Fund (for Series 2012-A Bonds and for Series 2012-B Bonds) to the extent funded with sale proceeds or Investment proceeds of the Bonds; (5) Costs ofIssuance Account. "Guaranteed Investment Contract" is any Investment with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate, including any agreement to supply Investments on two or more future dates (e.g., a forward supply contract). 3 "Improvements" means all of the property acquired, developed, constructed, renovated, and equipped by the Issuer using proceeds of the Bonds or the Original Obligations and other money contributed by the Issuer, as described on Exhibit D. "Investment" means any security, obligation, annuity contract or other investment-type property that is purchased directly with, or otherwise allocated to, Gross Proceeds. This term does not include a tax-exempt bond, except for "specified private activity bonds" as defined in Code § 57(a)(5)(C), but does include the investment element of most interest rate caps. "IRS" means the United States Internal Revenue Service. "Issue Date" means July 26,2012. "Issuer" means the City of Salina, Kansas, and its successors and assigns, or any body, agency or instrumentality of the State succeeding to or charged with the powers, duties and functions of the Issuer. "Management Agreement" means a legal agreement defmed in Regulations § 1.141-3(b) as a management, service, or incentive payment contract with an entity that provides services involving all or a portion of any function of the Financed Improvements, such as a contract to manage the entire Financed Improvements or a portion of the Financed Improvements. However, contracts for services that are solely incidental to the primary governmental function of the Financed Improvements (for example, contracts for janitorial, office equipment repair, billing, or similar services) are not treated as Management Agreements. "Measurement Period" means the period beginning on the later of (a) the applicable issue date of the Original Obligations or (b) the date the property was or will be placed in service, and ending on the earlier of (1) the final maturity date of the Bonds or (2) the expected economic useful life of the property. "Minor Portion" means the lesser of $1 00,000 or 5% of the sale proceeds of the Bonds. "Net Proceeds" means, when used in reference to the Bonds, the sale proceeds of the Bonds (excluding pre-issuance accrued interest), less any proceeds deposited in a reasonably required reserve or replacement fund, plus all Investment earnings on such sale proceeds. "Non-Qualified Use" means use of Bond proceeds or the Financed Improvements in a trade or business carried on by any Non-Qualified User. The rules set out in Regulations § 1.141-3 determine whether Bond proceeds or the Financed Improvements are "used" in a trade or business. Generally, ownership, a lease, or any other use that grants a Non-Qualified User a special legal right or entitlement with respect to the Financed Improvements, will constitute use under Regulations § 1.141-3. "Non-Qualified User" means any person or entity other than a Qualified User .. "Opinion of Bond Counsel" means the written opinion of Bond Counsel to the effect that the proposed action or the failure to act will not adversely affect the exclusion of the interest on the Bonds from gross income for federal income tax purposes. "Original Obligations" means the following debt obligations of the Issuer, which were the initial issues of tax-exempt governmental obligations that financed or refinanced a portion of the Financed Improvements: (a) the Series 2011-1 Notes, (b) the Series 2003 Bonds (including temporary notes refinanced by the Series 2003-A Bonds), (c) the Series 2004-B Bonds (including temporary notes 4 refinanced by the Series 2004-B Bonds) and (d) the Series 2005-A Bonds (including temporary notes refinanced by the Series 2005-A Bonds). "Output Contract" is defmed in Regulations § 1.141-7 and generally includes any contract with a Non-Qualified User that provides for the purchase ofthe output of Financed Improvements. "Post-Issuance Tax Requirements" means those requirements related to the use of proceeds of the Bonds, the use of the Financed Improvements and the investment of Gross Proceeds after the Issue Date of the Bonds. "Preliminary Expenditures" means, with respect to each issue compnsmg the Original Obligations: (a) costs incurred for architectural, engineering, surveying, soil testing, costs of issuance, and similar costs prior to commencement of acquisition, construction, or rehabilitation of the Financed Improvements, other than land acquisition, site preparation, and similar costs incident to commencement of construction of the Financed Improvements up to an amount not in excess of 20% of the sale proceeds of such issue of Original Obligations; and (b) costs incurred in an amount not in excess of the lesser of $100,000 or 5% of the sale proceeds of such issue comprising of Original Obligations. "Project Portion" means the sale proceeds of the Series 2012-A Bonds identified in Section 3.06, together with the remaining Gross Proceeds of the Bonds properly allocable to the refunding of the Refunded Series 2011-1 Notes. "Proposed Regulations" means the proposed arbitrage regulations REG 106143-07 (published at 72 Fed. Reg. 54606 (Sept. 26, 2007)). "Purchaser" means UMB Bank, N.A, Kansas City, Missouri, the original purchaser of the Bonds, and any successor and assigns. "Qualified Use Agreement" means any of the following: (a) A lease or other short-term use by members of the general public who occupy the Financed Improvements on a short-term basis in the ordinary course of the Issuer's governmental purposes. (b) Agreements with Qualified Users or Non-Qualified Users to use all or a portion of the Financed Improvements for a period up to 200 days in length pursuant to an arrangement whereby (1) the use of the Financed Improvements under the same or similar arrangements is predominantly by natural persons who are not engaged in a trade or business and (2) the compensation for the use is determined based on generally applicable, fair market value rates that are in effect at the time the agreement is entered into or renewed. Any Qualified User or Non-Qualified User using all or any portion of the Financed Improvements under this type of arrangement may have a right of first refusal to renew the agreement at rates generally in effect at the time of the renewal. (c) Agreements with Qualified Users or Non-Qualified Users to use all or a portion of the Financed Improvements for a period up to 100 days in length pursuant to arrangements whereby (1) the use of the property by the person would be general public use but for the fact that generally applicable and uniformly applied rates are not reasonably available to natural persons not engaged in a trade or business, (2) the compensation for the use under the arrangement is determined based on applicable, fair market value rates that are in effect at the time the agreement is entered into or renewed, and (3) the Financed Improvements was not constructed for a principal purpose of providing the property for use by that Qualified User or Non-Qualified User. Any Qualified User or Non-Qualified User using all or any 5 portion of the Financed Improvements under this type of arrangement may have a right of first refusal to renew the agreement at rates generally in effect at the time of the renewal. (d) Agreements with Qualified Users or Non-Qualified Users to use all or a portion of the Financed Improvements for a period up to 50 days in length pursuant to a negotiated arm's-length arrangement at fair market value so long as the Financed Improvements was not constructed for a principal purpose of providing the property for use by that person. "Qualified User" means a state, territory, possession of the United States, the District of Columbia, or any political subdivision thereof, or any instrumentality of such entity, but it does not include the United States or any agency or instrumentality of the United States. "Rebate Analyst" means Gilmore & Bell, P.C. or any successor rebate analyst selected pursuant to this Tax Certificate. "Refunded Obligations" means, collectively, the Refunded Series 2003-A Bonds, the Refunded Series 2005-A Bonds, the Refunded Series 2004-B Bonds and the Refunded Series 2011-1 Notes. "Refunded Series 2003-A Bonds" means $1,125,000 principal amount of the outstanding Series 2003-ABonds maturing in the years 2014 through 2018, inclusive. "Refunded Series 2004-B Bonds" means $1,010,000 principal amount of the outstanding Series 2004-B Bonds maturing in the years 2013 through 2019, inclusive. "Refunded Series 2005-A Bonds" means $1,535,000 principal amount of the outstanding Series 2005-A Bonds maturing in the years 2014 through 2020, inclusive. "Refunded Series 2011-1 Notes" means that portion of the Series 2011-1 Notes refunded by the Series 2012-ABonds. "Regulations" means all Regulations issued by the U.S. Treasury Department to implement the provisions of Code § § 103 and 141 through 150 and applicable to the Bonds. "Series 2003-A Bonds" means the Issuer's General Obligation Internal Improvement Bonds, Series 2003-A, issued in the original principal amount of $4,350,000, of which $1,765,000 principal amount remains outstanding. "Series 2004-B Bonds" means the Issuer's General Obligation Internal Improvement Bonds, Series 2004-B, issued in the original principal amount of $4,053,000, of which $1,010,000 principal amount remains outstanding. "Series 2005-A Bonds" means the Issuer's General Obligation Internal Improvement Bonds, Series 2005-A, issued in the original principal amount of $4,210,000, of which $2,200,000 principal amount remains outstanding. "Series 2011-1 Notes" means the Issuer's General Obligation Temporary Notes, Series 2011-1, dated July 15, 2011. "Series 2012-A Bonds" means the Issuer's General Obligation Internal Improvement Bonds, Series 2012-A, dated July 26,2012. 6 "Series 2012-B Bonds" means the Issuer's General Obligation Refunding Bonds, Series 2012-B, dated July 26,2012. "State" means the State of Kansas. "Tax Certificate" means this Federal Tax Certificate as it may from time to time be amended and supplemented in accordance with its terms. "Tax Compliance Procedure" means the Issuer's Tax and Securities Compliance Policy and Procedure, dated June 11, 2012, as amended and supplemented in accordance with the terms of the Tax Compliance Procedure. "Tax-Exempt Bond File" means documents and records for the Bonds and the Original Obligations, maintained by the Bond Compliance Officer pursuant to the Tax Compliance Procedure. "Transcript" means the Transcript of Proceedings relating to the authorization and issuance of the Bonds. "Verification Report" means the verification report of Robert Thomas CPA, LLC, Certified Public Accountants, relating to the Bonds and the Refunded Obligations. "Yield" means yield on the Bonds, computed under Regulations § 1.148-4, and yield on an Investment, computed under Regulations § 1.148-5. ARTICLE II GENERAL REPRESENTATIONS AND COVENANTS Section 2.01 Representations and Covenants of the Issuer. The Issuer represents and covenants as follows: (a) Organization and Authority. The Issuer: (1) is a city of the first class, duly created, organized and existing under the Constitution and laws of the State, (2) has lawful power and authority to issue the Bonds for the purposes set forth in the Bond Resolutions, to enter into, execute and deliver the Bond Resolutions, the Bonds, and this Tax Certificate and to carry out its obligations under this Tax Certificate and under such documents, and (3) by all necessary action has been duly authorized to execute and deliver the Bond Resolutions, the Bonds, and this Tax Certificate, acting by and through its duly authorized officials. (b) Tax-Exempt Status of Bonds-General Covenant. The Issuer (to the extent within its power or direction) will not use any money on deposit in any fund or account maintained in connection with the Bonds, whether or not such money was derived from the proceeds of the sale of the Bonds or from any other source, in a manner that would cause the Bonds to be "arbitrage bonds," within the meaning of Code § 148, and will not (to the extent within its power or direction) otherwise use or permit the use of any Bond proceeds or any other funds of the Issuer, directly or indirectly, in any manner, or take or permit to be taken any other action or actions, that would cause interest on the Bonds to be included in gross income for federal income tax purposes. 7 (c) Governmental Obligations-Use of Proceeds. Throughout the Measurement Period: (1) all of the Financed Improvements have been and are expected to be owned by the Issuer or another Qualified User; (2) no portion of the Financed hnprovements has been or is expected to be used in a Non- Qualified Use; and (3) the Issuer will not permit any Non-Qualified Use of the Financed hnprovements without first obtaining an Opinion of Bond Counsel. (d) Governmental Obligations-Private Security or Payment. As of the Issue Date, the Issuer expects that none of the principal of and interest on the Bonds will be, and the payment of principal of and interest on the Original Obligations has been, (under the terms of the Bonds or any underlying arrangement) directly or indirectly: (1) Secured by (i) any interest in property used or to be used for a private business use, or (B) any interest in payments in respect of such property; or (2) Derived from payments (whether or not such payments are made to the Issuer) in respect of property, or borrowed money, used or to be used for a private business use. For purposes of the foregoing, taxes of general application, including payments in lieu of taxes, are not treated as private payments or as private security. The Issuer will not permit any private security or payment with respect to the Bonds without first obtaining an Opinion of Bond Counsel. (e) No Private Loan, Special Assessments. Not more than 5% of the Net Proceeds of the Bonds will be loaned directly or indirectly to any Non-Qualified User. The payment of principal of and interest on the Bonds will be funded, and the payment of principal of and interest on the Original Obligations has been funded, in whole or in part from mandatory special assessments against the property benefiting from the Financed hnprovements. The use of the proceeds of the Bonds and the Original Obligations is not treated as a "loan" because: (1) the special assessments are enforced contributions for the purpose of raising revenue for specific capital improvements; (2) the assessments do not include any fee for services; (3) the imposition and collection of the assessments is not dependent upon, and does not vary depending on, whether the taxpayer engaged, or the property is used, in a trade or business; (4) the assessments are imposed to pay for an essential governmental function; and (5) the terms of payment of the assessments are the same for all owners of property benefitting from the hnprovements on which the assessments are imposed. (f) Management Agreements. As of the Issue Date, the Issuer has no Management Agreements with Non-Qualified Users. During the Measurement Period, the Issuer will not enter into or renew any Management Agreement with any Non-Qualified User without first obtaining an Opinion of Bond Counsel. (g) Leases. As of the Issue Date, the Issuer has not entered into any leases of any portion of the Financed hnprovements other than Qualified Use Agreements. During the Measurement Period, the Issuer will not enter into or renew any lease or similar agreement or arrangement other than a Qualified Use Agreement without first obtaining an Opinion of Bond Counsel. (h) Output Contracts. As of the Issue Date, the Issuer does not have any Output Contract. During the Measurement Period, the Issuer will not enter into any Output Contract without first obtaining an Opinion of Bond Counsel. (i) Limit on Maturity of Bonds. A list of the assets included in the Financed hnprovements and a computation of the "average reasonably expected economic life" is attached to this Tax Certificate as Exhibit D. Based on this computation, the "average maturity" of the Bonds of 5.704 years, as 8 computed by Bond Counsel, does not exceed 120% of the average reasonably expected economic life of the Financed Improvements. G) Reimbursement of Expenditures; Official Intent. The governing body of the Issuer adopted several resolutions declaring the intent of the Issuer to finance the Financed Improvements with tax-exempt bonds and to reimburse the Issuer for expenditures made for the Financed Improvements prior to the issuance of those bonds. The resolutions are contained in the transcripts for the Original Obligations. Except for Preliminary Expenditures or as otherwise described in the federal tax certificate or similar document for the Original Obligations, no proceeds of the Original Obligations were used to reimburse an expenditure paid by the Issuer more than 60 days prior to the date the applicable resolution was adopted, no reimbursement allocation has been or will be made for an expenditure made more than 3 years before the date of the reimbursement allocation, and no reimbursement allocation has been or will be made more than 18 months following the later of the date of the expenditure or the date that portion of the Financed Improvements was placed in service. (k) Registered Bonds. The Bond Resolutions require that all of the Bonds will be issued and held in registered form within the meaning of Code § 149(a). (1) Bonds Not Federally Guaranteed. The Issuer will not take any action or permit any action to be taken which would cause any Bond to be "federally guaranteed" within the meaning of Code § 149(b). (m) IRS Form 8038-G. Bond Counsel will prepare IRS Form 8038-G (Information Return for Tax-Exempt Governmental Obligations) based on the representations and covenants of the Issuer contained in this Tax Certificate or otherwise provided by the Issuer. Bond Counsel will sign the return as a paid preparer following completion and will then deliver copies to the Issuer for execution and for the Issuer's records. The Issuer agrees to timely execute and return to Bond Counsel the execution copy of Form 8038-G for filing with the IRS. A copy of the IRS Form 8038-G as filed with the IRS with proof of filing will be included in Exhibit A of Tax Certificate. (n) Hedge Bonds. At least 85% of the Net Proceeds (the sale proceeds less any sale proceeds invested in a reserve fund) of each issue comprising the Original Obligations were used to carry out the governmental purpose of the Original Obligations within 3 years after the applicable issue date thereof, and not more than 50% of the proceeds of each issue comprising the Original Obligations were invested in Investments having a substantially guaranteed Yield for four years or more. (0) Single Issue; No Other Issues. The Bonds constitute a single "issue" under Regulations § 1.150-1(c). No other debt obligations of the Issuer: (1) are being sold within 15 days of the sale of the Bonds, (2) are being sold under the same plan of financing as the Bonds, and (3) are expected to be paid from substantially the same source of funds as the Bonds (disregarding guarantees from unrelated parties, such as bond insurance). For purposes of the foregoing, the Issuer sold and issued its General Obligation Temporary Notes, Series 2012-1 simultaneously with the Bonds, but the Series 2012-1 Notes are not expected to be paid from substantially the same source of funds as the Bonds, and therefore are not part of the same "issue" as the Bonds under Regulations § l.150-1(c). A separate Federal Tax Certificate and IRS Form 8038-G are being executed in connection with the issuance of the Series 2012-1 Notes. (P) Interest Rate Swap. As of the Issue Date, the Issuer has not entered into an interest rate swap agreement or any other similar arrangement designed to modify its interest rate risk with respect to the Bonds.· The Issuer will not enter into any such arrangement in the future without obtaining an Opinion of Bond Counsel. 9 (q) Guaranteed Investment Contract. As of the Issue Date, the Issuer does not expect to enter into a Guaranteed Investment Contract for any Gross Proceeds of the Bonds. The Issuer will be responsible for complying with Section 4.04(d) hereof if it decides to enter into a Guaranteed Investment Contract at a later date. (r) Bank Qualified Tax-Exempt Obligation. The Issuer designates the Bonds as "qualified tax-exempt obligations" under Code § 265(b)(3), and with respect to this designation certifies as follows: (1) the Issuer reasonably anticipates that the amount of tax-exempt obligations (other than (A) private activity bonds that are not qualified 501(c)(3) bonds and (B) current refunding bonds to the extent not exceeding the refunded bonds) that will be issued by or on behalf of the Issuer (and all subordinate entities of the Issuer) during the calendar year that the Bonds are issued, including the Bonds, will not exceed $10,000,000; and (2) the Issuer (including all subordinate entities of the Issuer) will not issue tax- exempt obligations (other than (A) private activity bonds that are not qualified 501(c)(3) bonds and (B) current refunding bonds to the extent not exceeding the refunded bonds) during the calendar year that the Bonds are issued, including the Bonds, in an aggregate principal amount or aggregate issue price in excess of $10,000,000, without first obtaining an Opinion of Bond Counsel that the designation of the Bonds as "qualified tax-exempt obligations" will not be adversely affected. Section 2.02 Continuing Application of Representations and Covenants. All representations, covenants and certifications contained in this Tax Certificate or in any certificate or other instrument delivered by the Issuer under this Tax Certificate, will survive the execution and delivery of such documents and the issuance of the Bonds, as representations of facts existing as of the date of execution and delivery of the instruments containing such representations. The foregoing covenants of this Section will remain in full force and effect notwithstanding the defeasance of the Bonds. ARTICLE III ARBITRAGE CERTIFICATIONS AND COVENANTS Section 3.01 GeneraL The purpose of this Article is to certify, under Regulations § 1.148- 2(b), the Issuer's expectations as to the sources, uses and investment of Bond proceeds and other money, in order to support the Issuer's conclusion that the Bonds are not arbitrage bonds. The person executing this Tax Certificate on behalf of the Issuer is an officer of the Issuer responsible for issuing the Bonds. Section 3.02 Reasonable Expectations. The facts, estimates and expectations set forth in this Article are based upon and in reliance upon the Issuer's understanding of the documents and certificates that comprise the Transcript, and the representations, covenants and certifications of the parties contained therein. To the Issuer's knowledge, the facts and estimates set forth in this Tax Certificate are accurate, and the expectations of the Issuer set forth in this Tax Certificate are reasonable. The Issuer has no kllowledge that would cause it to believe that the representations, warranties and certifications described in this Tax Certificate are unreasonable or inaccurate or may not be relied upon. Section 3.03 Purpose of Financing. The Bonds are being issued for the purpose of providing funds to pay a portion of the costs of refunding the Refunded Obligations. The purpose of the Series 10 2012-A Bonds is provide permanent fmancing for certain of the Financed Improvements originally financed by the Series 2011-1 Notes, and the purpose of the Series 2012-B Bonds is to refund the Refunded Series 2003-A Bonds, the Refunded Series 2005-A Bonds and the Refunded Series 2004-B Bonds in order to achieve interest cost savings through early redemption thereof. Section 3.04 Funds and Accounts. The following funds and accounts have been established under the Bond Resolutions: ( a) Improvement Fund. (b) Debt Service Accounts (for Series 2012-ABonds and for Series 2012-B Bonds). (c) Rebate Fund (for Series 2012-ABonds and for Series 2012-B Bonds). In addition to the Funds and Accounts described above, the Escrow Agreement establishes the following funds and accounts to be held and administered by the Escrow Agent in accordance with the provisions of the Escrow Agreement: (a) Escrow Fund. (b) Costs ofIssuance Account. Section 3.05 Amount and Use of Bond Proceeds and Other Money. (a) Amount of Bond Proceeds. The total proceeds to be received by the Issuer from the sale of the Bonds are as evidenced in Exhibit B attached to this Tax Certificate. (b) Use of Series 2012-A Bond Proceeds and Other Money. The Series 2012-A Bond proceeds and other money contributed by the Issuer are expected to be allocated to expenditures as follows: (1) All accrued interest ($1,242.85) will be deposited in the 2012-A Debt Service Account and allocated to pay interest on the Series 2012-ABonds. (2) The sum of $2,365,000.00 will be deposited in the Improvement Fund, of which $23,735.80 will be used to pay costs of issuing the Series 2012-A Bonds, and the balance of $2,341,264.20, along with other amounts contributed by the Issuer (consisting of $664,452.10 from prepayments on special assessment and $408,488.14 from the debt service account for the Series 2011-1 Notes), will be paid and transferred to the paying agent for the Refunded Series 2011-1 Notes, with irrevocable instructions to apply such amount to the payment of the Refunded Series 2Dll-l Notes. (c) Use of Series 2012-B Bond Proceeds and Other Money. The Series 2012-B Bond proceeds and other money contributed by the Issuer are expected to be allocated to expenditures as follows: (1) All accrued interest ($1,200.15) will be deposited in the 2012-B Debt Service Account and allocated to pay interest on the Series 2012-B Bonds. (2) The sum of $38,884.04 will be deposited in the Costs of Issuance Account and used to pay costs of issuing the Series 2012-B Bonds. 11 (5) The sum of$3,761,587.39, along with $67,372.50 from the debt service accounts for the Refunded Series 2003-A Bonds, the Refunded Series 2005-A Bonds and the Refunded Series 2004-B Bonds, will be transferred to the Escrow Agent for deposit in the Escrow Fund to be applied as provided in the Escrow Agreement to pay the principal of and interest on the Refunded Series 2003-A Bonds, the Refunded Series 2005-A Bonds and the Refunded Series 2004-B Bonds through and including the respective redemption dates thereof. Section 3.06 Multipurpose Issue. The Issuer is applying the arbitrage rules to separate financing purposes of the issue that have the same initial temporary period as if they constitute a single issue for purposes pursuant to Regulations § 1.148-9(h)(3)(i). Under Regulations § 1.148-9(h), the Bonds will be treated as three separate issues (an Advance Refunding Portion, a Current Refunding Portion and a Project Portion) for purposes of applying certain of the arbitrage restrictions under Code § 148. Pursuant to the debt-service-savings allocation method under Regulations § 1.148-9(h)(4)(v)(B) and as shown on Exhibit F attached to this Tax Certificate, the Series 2012-B Bonds are allocated to the Advance Refunding Portion and the Current Refunding Portion, and the Series 2012-A Bonds are allocated to the Project Portion. Section 3.07 Refunding. (a) Escrow Fund. The remaining debt service requirements on the Refunded Series 2003-A Bonds, the Refunded Series 2005-A Bonds and the Refunded Series 2004-B Bonds are set forth in the Verification Report. Money in the Escrow Fund aggregating $3,828,954.00 will be used to purchase United States Treasury Securities (the "Escrowed Securities,") as described in the Verification Report, and $5.89 will be held uninvested as the initial cash balance in the Escrow Fund. The maturing principal of and interest on the Escrowed Securities and the initial cash deposit in the Escrow Fund will be expended to pay principal of and interest on the Refunded Series 2003-A Bonds, the Refunded Series 2005-A Bonds and the Refunded Series 2004-B Bonds. (1) Allocation of Sources to Investments. In addition to Bond proceeds, other money deposited in the Escrow Fund was derived from the debt service accounts for the Refunded Series 2003-A Bonds, the Refunded Series 2005-A Bonds and the Refunded Series 2004-B Bonds. As shown in the Verification Report, these amounts have been allocated to the earliest maturing Escrowed Securities in the Escrow Fund. (2) Yield On The Escrowed Securities. The Yield on the Escrowed Securities purchased with Bond proceeds (0.18335%) does not exceed the Yield on the Bonds (1.39895%), and the Yield on the Escrowed Securities allocable to other money does not exceed the Yield on the respective series of Refunded Obligations from which derived, all as shown in the Verification Report. (3) Market Prices. All of the Escrowed Securities are United States Treasury Securities State and Local Government Series purchased directly from the United States Treasury. (b) Advance Refunding -Refunded Series 2003-A Bonds; Refunded Series 2005-A Bonds (1) Limit on Number of Advance Refunding Issues. The issuance of the Advance Refunding Portion constitutes the first advance refunding of the Refunded Series 2003-A Bonds and the Refunded Series 2005-A Bonds. 12 (2) No Transferred Proceeds; Series 2003-A Bonds, Series 2005-A Bonds. There are no unspent proceeds (sale proceeds, Investment proceeds or transferred proceeds) of the Series 2003-A Bonds or the Series 2005-A Bonds, and therefore no transferred proceeds of the Advance Refunding Portion. (c) Current Refunding-Refunded Series 2004-B Bonds (1) Refunded Series 2004-B Bonds. Proceeds of the Current Refunding Portion will be used to pay principal of and interest on the Refunded Series 2004-B Bonds. All such proceeds shall be spent not later than 90 days after the Issue Date. (2) Refunded Series 2011-1 Notes. Proceeds of the Series 2012-A Bonds will be used to pay principal of and interest on the Refunded Series 2011-1 Notes. All such proceeds shall be spent not later than 90 days after the Issue Date. (3) No Transferred Proceeds; Series 2004-B Bonds, Series 2011-1 Notes. There are no unspent proceeds (sale proceeds, Investment proceeds or transferred proceeds) of the Series 2004-B Bonds or the Series 2011-1 Notes, and therefore no transferred proceeds of the Current Refunding Portion or the Series 2012-A Bonds. (d) Excess Gross Proceeds. There will be no "excess gross proceeds" of the Bonds (within the meaning of Regulations § 1.148-10(c)). Section 3.08 Completion of Financed Improvements. The Financed Improvements have previously been completed. Section 3.09 Sinking Funds. The Issuer is required to make periodic payments in amounts sufficient to pay the principal of and interest on the Bonds. Such payments will be deposited into the Debt Service Accounts. Except for the Debt Service Accounts, no sinking fund or other similar fund that is expected to be used to pay principal of or interest on the Bonds has been established or is expected to be established. The Debt Service Accounts are used primarily to achieve a proper matching of revenues with principal and interest payments on the Bonds within each Bond Year, and the Issuer expects that the Debt Service Accounts will qualify as a Bona Fide Debt Service Fund. Section 3.10 Reserve, Replacement and Pledged Funds. (a) No Reserve Fund. No reserve fund has been or will be established for the Bonds. (b) No Replacement or Pledged Funds. None of the Bond proceeds will be used as a substitute for other funds that were intended or earmarked to pay costs of the Financed Improvements, and that instead has been or will be used to acquire higher yielding Investments. Except for the Debt Service Accounts, there are no other funds pledged or committed in a manner that provides a reasonable assurance that such funds would be available for payment of the principal of or interest on the Bonds if the Issuer encounters financial difficulty. Section 3.11 Purpose Investment Yield. The proceeds of the Bonds will not be used to purchase an Investment for the purpose of carrying out the governmental purpose of the financing. Section 3.12 Offering Prices and Yield on Bonds. 13 (a) Offering Prices. On Exhibit C, the Purchaser has certified that (1) all of the Bonds have been the subject of an initial offering to the public at prices no higher than those shown on such Exhibit C, plus accrued interest (the "Offering Prices"); and (2) the Purchaser expects that at least 10% of the Bonds of each maturity will be sold to the public at initial offering prices no higher than said Offering Prices. The aggregate initial offering price of the Bonds is $6,201,010.55, plus $2,443.00 of accrued interest. (b) Bond Yield. Based on the Offering Prices, the Yield on the Bonds is 1.39895%, as shown in the Verification Report. The Issuer has not entered into an interest rate swap agreement with respect to any portion of the proceeds of the Bonds. Section 3.13 Miscellaneous Arbitrage Matters. (a) No Abusive Arbitrage Device. The Bonds are not and will not be part of a transaction or series of transactions that has the effect of (1) enabling the Issuer to exploit the difference between tax- exempt and taxable interest rates to gain a material fmancial advantage, and (2) overburdening the tax- exempt bond market. (b) No Over-Issuance. The sale proceeds of the Bonds, together with expected Investment earnings thereon and other money contributed by the Issuer, do not exceed the cost of the governmental purpose of the Bonds as described above. Section 3.14 Conclusion. On the basis of the facts, estimates and circumstances set forth in this Tax Certificate, the Issuer does not expect that the Bond proceeds will be used in a manner that would cause any Bond to be an "arbitrage bond" within the meaning of Code § 148 and the Regulations. ARTICLE IV TAX COMPLIANCE POLICIES AND PROCEDURES Section 4.01 GeneraL (a) Purpose of Article. The purpose of this Article is to supplement the Tax Compliance Procedure and to set out specific policies and procedures governing compliance with the federal income tax requirements that apply after the Bonds are issued. The Issuer recognizes that interest on the Bonds will remain excludable from gross income only if the Post-Issuance Tax Requirements are followed after the Issue Date. The Issuer further acknowledges that written evidence substantiating compliance with the Post-Issuance Tax Requirements must be retained in order to permit the Bonds to be refinanced with tax- exempt obligations and substantiate the position that interest on the Bonds is exempt from gross income in the event of an audit ofthe Bonds by the IRS. (b) Written Policies and Procedures of the Issuer. The Issuer intends for the Tax Compliance Procedure, as supplemented by this Tax Certificate, to be its primary written policies and procedures for monitoring compliance with the Post-Issuance Tax Requirements for the Bonds and to supplement any other formal policies and procedures related to the Post-Issuance Tax Requirements that the Issuer has established or establishes in the future. The provisions of this Tax Certificate are intended to be consistent with the Tax Compliance Procedure. In the event of any inconsistency between the Tax Compliance Procedure and this Tax Certificate, the terms of this Tax Certificate will govern. 14 (c) Future Action. The Issuer will, when necessary to fulfill the Post-Issuance Tax Requirements, sign Form 8038-T in connection with the payment of arbitrage rebate or yield reduction payments, participate in any federal income tax audit of the Bonds or related proceedings under a voluntary compliance agreement procedures (VCAP) or undertake a remedial action procedure pursuant to Regulations § 1.141-12. In each case, all costs and expenses incurred by the Issuer shall be treated as a reasonable cost of administering the Bonds and the Issuer shall be entitled to reimbursement and recovery of its costs to the same extent as provided in the Bond Resolutions or State law. Section 4.02 Record Keeping; Use of Bond Proceeds and Use of Financed Improvements. (a) Record Keeping. The Bond Compliance Officer will maintain the Tax-Exempt Bond File for the Bonds in accordance with the Tax Compliance Procedure. Unless otherwise specifically instructed in a written Opinion of Bond Counselor to the extent otherwise provided in this Tax Certificate, the Bond Compliance Officer shall retain records related to the Post-Issuance Tax Requirements until 3 years following the final maturity of the Bonds or any obligation issued to refund the Bonds. Any records maintained electronically must comply with Section 4.01 of Revenue Procedure 97-22, which generally provides that an electronic storage system must (1) ensure an accurate and complete transfer of the hardcopy records which indexes, stores, preserves, retrieves and reproduces the electronic records, (2) include reasonable controls to ensure integrity, accuracy and reliability of the electronic storage system and to prevent unauthorized alteration or deterioration of electronic records, (3) exhibit a high degree of legibility and readability both electronically and in hardcopy, (4) provide support for other books and records of the Issuer and (5) not be subject to any agreement that would limit the ability of the IRS to access and use the electronic storage system on the Issuer's premises. (b) Accounting and Allocation of Bond Proceeds to Expenditures. The Bond Compliance Officer will account for the investment and expenditure of proceeds of the Bonds and the Original Obligations in the level of detail required by the Tax Compliance Procedure. Bond proceeds and other money contributed by the Issuer are expected to be used as described in Sections 3.05 and 3.07 hereof. The Bond Compliance Officer will maintain accounting records showing the investment and expenditure of this money as part of the Tax-Exempt Bond File. The Bond Compliance Officer has prepared written substantiation records of the allocation of proceeds of the Original Obligations to the Financed Improvements through requisitions from the improvement funds established under the bond resolutions for the Original Obligations. This allocation is summarized on Exhibit D and is intended to constitute the final allocation of proceeds of the Original Obligations to expenditures for the Financed Improvements. (c) Annual Compliance Checklist. Attached as Exhibit E is a sample Annual Compliance Checklist for the Bonds. The Bond Compliance Officer will prepare and complete one or more Annual Compliance Checklists for the Financed Improvements at least annually in accordance with the Tax Compliance Procedure. In the event the Annual Compliance Checklist identifies a deficiency in compliance with the requirements of this Tax Certificate, the Bond Compliance Officer will take the actions identified in an Opinion of Bond Counselor Section 4.4 of the Tax Compliance Procedure to correct any deficiency. (d) Opinions of Bond Counsel. The Bond Compliance Officer is responsible for obtaining and delivering to the Issuer any Opinion of Bond Counsel required under the provisions of this Tax Certificate or the Annual Compliance Checklist. Section 4.03 Restrictions on Investment Yield. Except as described below, Gross Proceeds must not be invested at a Yield greater than the Yield on the Bonds: 15 (a) Improvement Fund; Current Refunding. Series 2012-A Bond proceeds deposited in the Improvement Fund allocable to a current refunding of the Refunded Series 20 11-1 Notes may be invested without Yield restriction for 90 days after the Issue Date. (b) Escrow Fund; Current Refunding. Series 2012-B Bond proceeds deposited in the Escrow Fund allocable to a current refunding of the Refunded Series 2004-B Bonds may be invested without Yield restriction for up to 90 days after the Issue Date. (c) Escrow Fund; Advance Refunding. Series 2012-B Bond proceeds deposited in the Escrow Fund allocable to an advance refunding of the Refunded Series 2003-A Bonds and the Refunded Series 2005-A Bonds are being invested at a Yield less than the Yield on the Bonds. (d) Cost of Issuance Account. Bond proceeds deposited in the Cost of Issuance Account and Investment earnings on those proceeds may be invested without Yield restriction for 13 months after the Issue Date. (e) Debt Service Accounts. To the extent that the Debt Service Accounts qualify as a Bona Fide Debt Service Fund, money in such account may be invested without Yield restriction for 13 months after the date of deposit. Earnings on such amounts may be invested without Yield restriction for 1 year after the date of receipt of such earnings. (f) Minor Portion. In addition to the amounts described above, Gross Proceeds not exceeding the Minor Portion may be invested without Yield restriction. Section 4.04 Procedures for Establishing Fair Market Value of Investments. (a) General. No Investment may be acquired with Gross Proceeds for an amount (including transaction costs) in excess of the fair market value of such Investment, or sold or otherwise disposed of for an amount (including transaction costs) less than the fair market value of the Investment. The fair market value of any Investment is the price a willing buyer would pay to a willing seller to acquire the Investment in a bona fide, arm's-length transaction. Fair market value will be determined in accordance with Regulations § 1.148-5. (b) Established Securities Market. Except for Investments purchased for a yield-restricted defeasance escrow, if an Investment is purchased or sold in an arm's-length transaction on an established securities market (within the meaning of Code § 1273), the purchase or sale price constitutes the fair market value. Where there is no established securities market for an Investment, market value must be established using one of the paragraphs below. The fair market value of Investments purchased for a Yield-restricted defeasance escrow must be determined in a bona fide solicitation for bids that complies with Regulations § 1.148-5. (c) Certificates of Deposit. The purchase price of a certificate of deposit (a "CD") is treated as its fair market value on the purchase date if (1) the CD has a fixed interest rate, a fixed payment schedule, and a substantial penalty for early withdrawal, (2) the Yield on the CD is not less than the Yield on reasonably comparable direct obligations of the United States, and (3) the Yield is not less than the highest Yield published or posted by the CD issuer to be currently available on reasonably comparable CDs offered to the public. (d) Guaranteed Investment Contracts. The Issuer is applying Regulations § 1.148- 5(d)(6)(iii)(A) as amended by the Proposed Regulations (relating to electronic bidding of Guaranteed 16 Investment Contracts) to the Bonds. The purchase price of a Guaranteed Investment Contract is treated as its fair market value on the purchase date if all of the following requirements are met: (1) Bona Fide Solicitation for Bids. The Issuer makes a bona fide solicitation for the Guaranteed Investment Contract, using the following procedures: (A) The bid specifications are in writing and are timely forwarded to potential providers, or are made available on an internet website or other similar electronic media that is regularly used to post bid specifications to potential bidders. A writing includes a hard copy, a fax, or an electronic e-mail copy. (B) The bid specifications include all "material" terms of the bid. A term is material if it may directly or indirectly affect the yield or the cost of the Guaranteed Investment Contract. (C) The bid specifications include a statement notifying potential providers that submission of a bid is a representation (i) that the potential provider did not consult with any other potential provider about its bid, (ii) that the bid was determined without regard to any other formal or informal agreement that the potential provider has with the Issuer, or any other person (whether or not in connection with the bond issue), and (iii) that the bid is not being submitted solely as a courtesy to the Issuer, or any other person, for purposes of satisfying the requirements of the Regulations. (D) The terms of the bid specifications are "commercially reasonable." A term is commercially reasonable if there is a legitimate business purpose for the term other than to increase the purchase price or reduce the yield of the Guaranteed Investment Contract. (E) The terms of the solicitation take into account the Issuer's reasonably expected deposit and draw-down schedule for the amounts to be invested. (F) All potential providers have an equal opportunity to bid. If the bidding process affords any opportunity for a potential provider to review other bids before providing a bid, then providers have an equal opportunity to bid only if all potential providers have an equal opportunity to review other bids. Thus, no potential provider may be given an opportunity to review other bids that is not equally given to all potential providers (that is no exclusive "last look"). (G) At least 3 "reasonably competitive providers" are solicited for bids. A reasonably competitive provider is a provider that has an established industry reputation as a competitive provider of the type of investments being purchased. (2) Bids Received. The bids received by the Issuer must meet all of the following requirements: (A) The Issuer receives at least 3 bids from providers that were solicited as described above and that do not have a "material financial interest" in the issue. For this purpose, (i) a lead underwriter in a negotiated underwriting transaction is deemed to have a material financial interest in the issue until 15 days after the issue date of the issue, (ii) any entity acting as a financial advisor with respect to the purchase of the Guaranteed Investment Contract at the time the bid specifications are forwarded to potential providers 17 has a material fmancial interest in the issue, and (iii) a provider that is a related party to a provider that has a material financial interest in the issue is deemed to have a material financial interest in the issue. (B) At least 1 of the 3 bids received is from a reasonably competitive provider, as defined above. (C) If the Issuer uses an agent or broker to conduct the bidding process, the agent or broker did not bid to provide the Guaranteed Investment Contract. (3) Winning Bid. The winning bid is the highest yielding bona fide bid (determined net of any broker's fees). (4) Fees Paid. The obligor on the Guaranteed Investment Contract certifies the administrative costs that it pays (or expects to pay, if any) to third parties in connection with supplying the Guaranteed Investment Contract. (5) Records. The Issuer retains the following records with the bond documents until 3 years after the last outstanding Bond is redeemed: (A) A copy ofthe Guaranteed Investment Contract. (B) The receipt or other record of the amount actually paid by the Issuer for the Guaranteed Investment Contract, including a record of any administrative costs paid by the Issuer, and the certification as to fees paid, described in paragraph (d)( 4) above. (C) For' each bid that is submitted, the name of the person and entity submitting the bid, the time and date of the bid, and the bid results. (D) The bid solicitation form and, if the terms of the Guaranteed Investment Contract deviated from the bid solicitation form or a submitted bid is modified, a brief statement explaining the deviation and stating the purpose for the deviation. (e) Other Investments. If an Investment is not described above, the fair market value may be established through a competitive bidding process, as follows: (1) At least 3 bids on the Investment must be received from persons with no financial interest in the Bonds (e.g., as underwriters or brokers); and (2) the Yield on the Investment must be equal to or greater than the Yield offered under the highest bid. Section 4.05 Certain Gross Proceeds Exempt from the Rebate Requirement. (a) General. A portion of the Gross Proceeds of the Bonds may be exempt from rebate pursuant to one or more of the following exceptions. The exceptions typically will not apply with respect to all Gross Proceeds of the Bonds and will not otherwise affect the application of the Investment limitations described in Section 4.03. Unless specifically noted, the obligation to compute, and if necessary, to pay rebate as set forth in Section 4.06 applies even if a portion of the Gross Proceeds of the Bonds is exempt from the rebate requirement. To the extent all or a portion of the Bonds is exempt from rebate, the Rebate Analyst may account for such fact in connection with its preparation of a rebate report 18 described in Section 4.06. The Issuer may defer the final rebate Computation Date and the payment of rebate for the Bonds to the extent permitted by Regulations §§ 1.148-7(b)(1) and 1. 148-3(e)(2) but only in accordance with specific written instructions provided by the Rebate Analyst. (b) Applicable Spending Exceptions. The following optional rebate spending exceptions can separately apply to the Project Portion, the Advance Refunding Portion and the Current Refunding Portion: (1) Project Portion: 6-month spending exception (Code § 148(f)(4)(B) and Regulations § 1.148-7(c)). (2) Current Refunding Portion: 6-month spending exception (Code § 148(f)(4)(B) and Regulations § 1.148-7(c)). (3) Advance Refunding Portion: None (c) Special Elections Made with Respect to Spending Exception Elections. No special elections are being made in connection with the application of the spending exceptions. (d) Bona Fide Debt Service Fund. To the extent that the Debt Service Accounts qualify as a Bona Fide Debt Service Fund, Investment earnings therein cannot be taken into account in computing arbitrage rebate. (e) Documenting Application of Spending Exception. At any time prior to the first Computation Date, the Issuer may engage the Rebate Analyst to determine whether one or more spending exceptions has been satisfied, and the extent to which the Issuer must continue to comply with Section 4.06. (f) General Requirements for Spending Exception. The following general requirements apply in determining whether a spending exception is met. (1) Using Adjusted Gross Proceeds to pay principal of any Bonds is not taken into account as an expenditure for purposes of meeting any of the spending tests. (2) The 6-month spending exception generally is met if all Adjusted Gross Proceeds of the Project Portion or the Current Refunding Portion, as applicable, are spent within 6 months following the Issue Date. The test may still be satisfied even if up to 5% of the sale proceeds remain at the end of the initial 6-month period, so long as this amount is spent within 1 year of the Issue Date. Section 4.06 Computation and Payment of Arbitrage Rebate. (a) Rebate Fund. The Issuer will keep the Rebate Fund separate from all other funds and will administer the Rebate Fund under this Tax Certificate. Any Investment earnings derived from the Rebate Fund will be credited to the Rebate Fund, and any Investment loss will be charged to the Rebate Fund. (b) Computation of Rebate Amount. The Issuer will provide the Rebate Analyst Investment reports relating to each fund held by it that contains Gross Proceeds of the Bonds together with copies of Investment reports for any funds containing Gross Proceeds that are held by a party other than the Issuer annually as of the end of each Bond Year and not later than 10 days following each Computation Date. 19 Each Investment report provided to the Rebate Analyst will contain a record of each Investment, including (1) purchase date, (2) purchase price, (3) information establishing the fair market value on the date such Investment was allocated to the Bonds, (4) any accrued interest paid, (5) face amount, (6) coupon rate, (7) frequency of interest payments, (8) disposition price, (9) any accrued interest received, and (10) disposition date. Such records may be supplied in electronic form. The Rebate Analyst will compute rebate following each Computation Date and deliver a written report to the Issuer together with an opinion or certificate of the Rebate Analyst stating that arbitrage rebate was determined in accordance with the Regulations. Each report and opinion will be provided not later than 45 days following the Computation Date to which it relates. In performing its duties, the Rebate Analyst may rely, in its discretion, on the correctness of fmancial analysis reports prepared by other professionals. (c) Rebate Payments. Within 60 days after each Computation Date, the Issuer will pay to the United States the rebate amount then due, determined in accordance with the Regulations. Each payment must be (1) accompanied by IRS Form 8038-T and such other forms, documents or certificates as may be required by the Regulations, and (2) mailed or delivered to the IRS at the address shown below, or to such other location as the IRS may direct: Internal Revenue Service Center Ogden, UT 84201 (d) Successor Rebate Analyst. If the firm acting as the Rebate Analyst resigns or becomes incapable of acting for any reason, or if the Issuer desires that a different firm act as the Rebate Analyst, then the Issuer by an instrument or concurrent instruments in writing delivered to the fIrm then serving as the Rebate Analyst and any other party to this Tax Certificate, will name a successor Rebate Analyst. In each case the successor Rebate Analyst must be a firm of nationally recognized bond counsel or a firm of independent certified public accountants and such firm must expressly agree to undertake the responsibilities assigned to the Rebate Analyst hereunder. (e) Filing Requirem~nts. The Issuer will file or cause to be filed with the IRS such reports or other documents as are required by the Code in accordance with an Opinion of Bond Counsel. (f) Survival after Defeasance. Notwithstanding anything in the Bond Resolutions to the contrary, the obligation to pay arbitrage rebate to the United States will survive the payment or defeasance of the Bonds. ARTICLE V MISCELLANEOUS PROVISIONS Section 5.01 Term of Tax Certificate. This Tax Certificate will be effective concurrently with the issuance and delivery of the Bonds and will continue in force and effect until the principal of, redemption premium, if any, and interest on all Bonds have been fully paid and all such Bonds are cancelled; provided that the provisions of Section 4.06 of this Tax Certificate regarding payment of arbitrage rebate and all related penalties and interest will remain in effect until all such amounts are paid to the United States and the provisions in Section 4.02 relating to record keeping shall continue in force for the period described therein for records to be retained. Section 5.02 Amendments. This Tax Certificate may be amended from time to time by the Issuer without notice to or the consent of any of the Bond owners, but only if such amendment is in writing and is accompanied by an Opinion of Bond Counsel to the effect that, under then existing law, 20 assuming compliance with this Tax Certificate as so amended and the Bond Resolutions, such amendment will not cause any Bond to be an arbitrage bond under Code § 148 or otherwise cause interest on any Bond to be included in gross income for federal income tax purposes. No amendment will become effective until the Issuer receives an Opinion of Bond Counsel, addressed to the Issuer that the amendment will not adversely affect the exclusion of the interest on the Bonds from gross income for federal income tax purposes. Section 5.03 Opinion of Bond Counsel. The Issuer may deviate from the provisions of this Tax Certificate if furnished with an Opinion of Bond Counsel to the effect that the proposed deviation will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes. The Issuer further agrees to comply with any further or different instructions provided in an Opinion of Bond Counsel to the effect that the further or different instructions need to be complied with in order to maintain the validity of the Bonds or the exclusion from gross income of interest on the Bonds. Section 5.04 Reliance. In delivering this Tax Certificate the Issuer is making only those certifications, representations and agreements as are specifically attributed to them in this Tax Certificate. The Issuer is not aware of any facts or circumstances which would cause it to question the accuracy of the facts, circumstances, estimates or expectations of any other party providing certifications as part of this Tax Certificate and, to the best of its knowledge, those facts, circumstances, estimates and expectations are reasonable. The Issuer understands that its certifications will be relied upon by Bond Counsel in rendering its opinion as to the validity of the Bonds and the exclusion from federal gross income of the interest on the Bonds. Section 5.05 Severability. If any prOVlSlon in this Tax Certificate or in the Bonds is determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not be affected or impaired. Section 5.06 Benefit of Certificate. This Tax Certificate is binding upon the Issuer, its respective successors and assigns, and inures to the benefit of the Issuer and the owners of the Bonds. Nothing in this Tax Certificate, the Bond Resolutions or the Bonds, express or implied, gives to any person, other than the Issuer, its successors and assigns, and the owners of the Bonds, any benefit or any legal or equitable right, remedy or claim under this Tax Certificate. Section 5.07 Default, Breach and Enforcement. Any misrepresentation of a party contained herein or any breach of a covenant or agreement contained in this Tax Certificate may be pursued by the Bond owners pursuant to the terms of the Bond Resolutions or any other document which references this Tax Certificate and gives remedies for a misrepresentation or breach thereof. Section 5.08 Governing Law. This Tax Certificate will be governed by and construed in accordance with the laws of the State. Section 5.09 Electronic Transactions. The transaction described in this Tax Certificate may be conducted, and related documents may be stored, by electronic means. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 21 , THE UNDERSIGNED, Mayor, Clerk and Finance Director of the Issuer, by their execution of this Tax Certificate hereby make the foregoing certifications, representations, and agreements contained in this Tax Certificate on behalf of the Issuer, as of the Issue Date. (Signature Page to Federal Tax Certificate -Series 20l2-B) EXHIBITA IRS FORM 8038-G A-I 816-221-1000 fAX:816-221-1018 WWW.GILMOREBELL.COM GILMOREBELL APROFESSIONALCORPORATION ATTORNEYSATLAW 2405GRANDBOULEVARD,SUITE1100 KANSASCITY,MISSOURI64108-2521 ST.LOUIS,MISSOURI WICHITA.KANSAS LINCOLN,NEBRASKA 8.87 1.20 0.00 10.07 SHIPPING· SPECIAL:. HANDLING· TOTAL:.0.00 Date:290ct12 Wet;1.00LBS DV: Svcs:**2DAY** TReK:531930487128 ?ef:600596.050GMR )ep; October29,2012 VIAFEDERALEXPRESS InternalRevenueServiceCenter Ogden,Utah8420I Re:CityofSalina,KansasGeneralObligationInternalImprovementBonds,Series2012-A andGeneralObligationRefundingBonds,Series2012-B LadiesandGentlemen: EnclosedforfilingpursuanttoSection149(e)oftheInternalRevenueCodeof1986isForm 8038-G,InformationReturnforTax-ExemptGovernmentalObligations,beingfiledwitbrespecttothe above-captionedtransaction. Ifyouhaveanyquestions,pleasedonothesitatetocontactme. Verytrulyyours, GinaM.Riekhof GMR:jac Enclosure FedExExpress CustomerSupportTrace 3875AirwaysBoulevard ModuleH,4thFloor Memphis,TN38116 U.S.Mail:POBox727 Memphis,TN38194-4643 Telephone:901-369-3600 October31,2012 DearCustomer: Thefollowingistheproof-of-deliveryfortrackingnumber531930487128. DeliveryInformatioh: Status: Signedforby: Servicetype: Delivered D.CHEN FedEx2DayEnvelope Deliveredto: Deliverylocation: Deliverydate: Shipping/Receiving 1973NRULONWHITE BLVD OGDEN,UT84201 Oct30,201210:14 ShippingInformation: Trackingnumber:531930487128Shipdate: Weight: Oct29,2012 0.5IbslO.2kg Recipient: INTERNALREVENUESERVICECENTER 1973N.RULONWHITEBLVD. OGDEN,UT84201US Reference ThankyouforchoosingFedEx Express. FedExWorldwideCustomerService 1.800.GoFedEx1.800.463.3339 Shipper: GILMORE&BELL,P.C. Gilmore&Bell,P.C. 2405GrandBlvd. Suite1100 KANSASCITY,MO64108US 600596.050GMR ReportingAuthority OMSNo_1545--{)720 Fo<m8038-G (Rev.September2011) DepartmentoftheTreasury Int~a1 RevenueService InformationReturnforTax-ExemptGovernmentalObligations .,..UnderInternalRevenueCode$ection149(eJ ~Seeseparateinstructions. Cautio"n:Iftheissuepn"ceisunder$100.000,use Form8038-GC. .IfAmendedReturn,Check.here.....0 1Issuer'sname City_ofsalina.KansaS 2Issuer'semployeridenlificatloflnumber(EIN) -48-6017288 3aNameofpersbn(otherthanissuer)withwhomtheIRSmaycominunicateaboutthisrel:Um(seeinstructions)3bTelephonenumberofotherpersonshownon3a 4Numberandstre;et(~P.O.boxifmailisnotdeliveredtoStreetaddress) 300W.AshStreet IRoom/suite 5Reportnumber(ForfRSUseOnly) 13~ 6Cit14to'Nn,orpostOffICe,state,andZIPcode Salina.Kansas67402. 7Dateofissue 07/2(';/2012 8NameofisSueGeneralObligationInternalfrnprovemehtBonds,series2012-A&GeneralObligation R~fu~in9BOt.t_~s>S~ries2012·B 9GUSIPnumber 7-9-4743388 10aNameandtitleofofficerorotherempfoy€eoftheissuerwhomtheIRSmaycallformoreinformation{see instructions) .1tlbTelephonenumberofofficer orofher employeeshownOIl lOa 785-309-5735Rodney Franz,Financeoireet~r ••Typeof.lssue(!>ntertheissueprice).Seetheinstructionsandattachschedule. 11Education.f-:;1:;;1+~--+__ 12Heatthandhospital~124f~~ 1~Transportation~134-+~_ 14Publicsafety.•..r14::--J~-+__ 15Environment(includingsew-agebonds)r1c:5+__~_-r__ 16Housing•16 17Utilities•r17=--t-----+-~ 18Other.Descnbe~streets,sewersystem.watersystem,publicbuildings,otherpublicimprovements186.201.011 19Ifobligationsare TANsor RANs,checkonlybox19a>--0II)Y IfobligationsareBANs,checkonlybox19b°""',11},,,,,:;;;,[; 20Ifobligationsareintheformofaleaseorinstallmentsale,checkbox0..".-j~/:~};__- /i',r, DescriptionofObligations.CompletetortheentireissueforwhichthisformisbeinR.filed. (a)Finalmafuritydate(b)Issueprice(e)StatedredemptionCd)Weighted priceatmaturityaveragematuritY(e)Yield o 1.3989% 2,443 6.201.011 6,201,011 22 23 29 30 o o vears . 98,159 3,350.943 5.704 25 24 27 28 26 10/0112027.$6.201.011'$5,150,000 UsesofProceedsofBondIssueOncludingunderwriters'discount). Proceedsusedforaccruedinterest'. Issuepric:eofentireissue(enteramouhtfromline21,column(b» Proceedsusedforbondissuance costs~ncludingunderWriters'discount). ProceedsuSed forcreditenhancement Proceedsallocatedto reasonablyrequiredreserVeorreplacementfund Proceedsusedto-currentlyrefundpriorissues Proceedsusedtoadvancerefundpriorissues Total(addJines24through28) Nonrefundingproceeds,oftheissue(subtractline29fromline23 arid€oilteramou'!t"here) DescriptionofRefundedBonds.Complete1hjspartonlyforrefundingbonds. 21 22 23 24 25 26 27 28 29 30 31Entertheremainingweighted.averagematurityoft~ebonds tobecurrentlyrefunded. 32Entertheremainingweightedaveragematurityofthebondstobeadvancerefunded. 33Enterthelastdateonwhichtherefundedbondswillbecalled(MMlDDIYYYY) 34Enterthe date(s)therefundedbondswere issued~(MMIDD!YYYY) seeattachmentyears seeattachmentyears seeattachment seeattachment ForPaperworkReductionActNotice,see-separateinstructions.Cat.No.63T13SForm8038-G(Rev.9-2011) Page2 35Entertheamountofthestatevolumecap~Uocatedto theissueundersection141(b){S) 36aEntertheamountofgrossproceedsinvestedortobeinvestedinaguaranteedinvestmentcontract (GIC)(seeinstruelions)______•......._... bEnterthefinalmaturitydateoftheGICIJ.-_ CEnterthenameoftheGICprovider'":'<;:;:-:-===:;::-==:-cc=::-;:;:c::-:::::-::c-;::::-, 37Pooledfinancings:Entertheamountoftheproceedsofthisissuethataretobeusedtomake.loans to othergovernmentalunits...,.•.......... 3&iIfthisissueisaioanmadefromtheproceedsofanothertC9<-€xemptissue,checkbox...0 anaenterthe-followinginfonnation: bEnterthedateofthemaster1>901obligation~,-:;-:-c--:----------------- CEntertheEINoftheissuer ofthemasterpooiobligation....:-_ dEnterthenameofthetSsusrofthemasterpoolobligation...."CC==--:-~~----c_c_-_,:_- 39iftheissuerhasdesignatedtMissueundersection265(b)(3)(BJO)(1I0(smaliissuerexception),checkbox~0 40Ifth~issuerhas electedtopayapenaltyinlieuofarbitragerebate,checkbox•.....0 41aIftheissuerhasidentifiedahedgEf,checkhere~D andenterthefollowinginformation~ bNameqf hedgeproviderl- eTypeofhedge~~_~~~__~_ d Termofhedge~---;-;--,-----c-;c;-'-;-'-:-c---;-~-;-:--~~--- 42Ifthe issuerhassuperinte>gratedthehedge,checkbox·.--,.-....,....•.._I>tJ 43IftheisslierhaSestablished'Writtenprocedurestoensurethatallnbnqualifiedbonds-ofthisissueareremediated aGcordingto-therequirementsundertheGodearidRegulations(see_instrucUon-s).checkbox.........[{] 44IftheissuerhasestablishedwrittenprocedurestomonitortherequirementsofsectIon148,checkbox..."!ZI 45aIfsomeportIonofthe proceedswasusedtoreimburseexpenditures,checkhere...0 and.entertheamount ofreimburseme'nt......~ bEnterthedatetheofficialfritentw.i:\sadopted'"~~~_ Fonn8038"~G(Rev.9-2011) Miscellaneous Signature and ConSent Paid Preparer UseOnly UnderPenaltiesofperjury,Ideclare"thatIhaveexamrnedthisreturnandaccompanyingschedulesandstatements.aridtothebestofmyknowJedge andbelief,theyatrue,COrii:lct,-andcomplete.JfurtherdeclarethatIconsen.ttotheIRS'sdisclosureoftheissuer'sreturninformation,asnecessaryto procisret,tothepersohthat Ihaveauthorizedabove, Phoneno. ATTACHMENTTOms FORM8038-G CITYOFSALINA,KANSAS $2,365,000 GENERALOBLIGATION INTERNALIMPROVEMENTBONDS SERIES2012-A PartV:Description ofRefundedBonds $3,785,000 GENERALOBLIGATION REFUNDINGBONDS SERIES2012-B LineDescription SeriesSeriesSeriesSeries 2003-A2004-B2005-A2011-1 BondsBondsBondsNotes 31RemainingweightedaveragematurityofN/A 2.538yearsN/A 0.014years Bondstobecurrentlyrefunded 32Remainingweightedaveragematurityof4.181years N/A 4.676years N/A Bondstobeadvancerefunded 33LastdateonwhichrefundedBondswillbe10/011201310/011201210/01/2013 08/01/2012 called 34DatesRefundedObligationswereissued07/29/200307/28/200407/28/200507/28/2011 A-2 EXHIBITB RECEIPT FOR PURCHASE PRICE $2,365,000 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A DATED JULY 26,2012 $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 26, 2012 The undersigned Director of Finance and Administration of the City of Salina, Kansas, this day received from UMB Bank, N.A., Kansas City, Missouri, the original purchaser of the above-described bonds (the "Bonds"), the full purchase price ofthe Bonds, said purchase price and net amount received by the Issuer being calculated as follows: Series 2012-A Bonds Principal Amount ............................ $2,365,000.00 Plus Accrued Interest ..................... . Less Underwriting Discount .......... . Plus Net Original Issue Premium ... . 1,242.85 (18,902.80) 18,902.80 Total Purchase Price........... $2,366,242.85 Less Good Faith Deposit................. (47,300.00) Net Amount Received ........ $2,318,942.85 DATED: July 26, 2012. Series 2012-B Bonds Principal Amount ........................... $3,785,000.00 Plus Accrued Interest ..................... 1,200.15 Less Underwriting Discount .......... (16,636.32) Plus Net Original Issue Premium... 32,107.75 Total Purchase Price........... $3,800,471.43 Less Good Faith Deposit................ (75,200.00) Net Amount Received ....... $3,725,271.43 CITY OF SALINA, KANSAS B-1 EXHIBITC RECEIPT AND REPRESENTATION $2,365,000 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A DATED JULy 26, 2012 $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULy 26,2012 This certificate is being delivered by UMB Bank, N.A., Kansas City, Missouri (the "Purchaser") in connection with the issuance of the above-described bonds (the "Bonds"), being issued on the date of this Receipt by the City of Salina, Kansas (the "Issuer"). Based on its records and information available to the undersigned which the undersigned believes to be correct, the Purchaser represents as follows: 1. Authorized Representative. The undersigned is the duly authorized representative of the Purchaser. 2. Receipt for Bonds. The Purchaser acknowledges receipt by the Depository Trust Company on behalf of the Purchaser on the Issue Date consisting of fully registered "book-entry-only" bonds in Authorized Denominations in a form acceptable to the Purchaser. 3. Public Offering. All of the Bonds have been the subject of an initial offering to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers), at prices no higher than the prices set forth on Schedule I attached to this Certificate, without accrued interest (the "Offering Prices"). On the basis of information available to us which we believe to be correct, we expect that at least 10 percent of the Bonds of each maturity will be sold to the public at offering prices no higher than said Offering Prices. 4. Reliance. The Issuer may rely on the foregoing representations in executing and delivering its Federal Tax Certificate with respect to its certification as to issue price of the Bonds under the Internal Revenue Code of 1986, as amended (the "Code"), and Gilmore & Bell, P.C., Bond Counsel, may rely on the foregoing representations in rendering its opinion relating to the exclusion from federal gross income of the interest on the Bonds under the Code. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] C-l Dated: July 26, 2012. UMB BANK, N.A. KANSAS CITY, MISSOURI ~61;PatR By:' 'A -'. . Title:~~e (Signature Page to Purchaser's Receipt) SCHEDULE I TO PURCHASER'S RECEIPT AND REPRESENTATION $2,365,000 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A DATED JULY 26,2012 Type of Maturity Dollar Maturity Bond Coupon Yield Value Price Price 10/01/2013 Serial Coupon 1000% 0.401% 130,000.00 100.705% 130,916.50 10/01/2014 Senal Coupon 1.000% 0450% 140,000.00 101.191% 141,667.40 10/0112015 Serial Coupon 1250% 0.550% 145,000 00 102.203% 148,194.35 10/01/2016 Senal Coupon 1.500% 0.700% 150,00000 103.290% 154,935.00 10/01/2017 Senal Coupon 1.500% 0.850% 150,00000 103.287% 154,930.50 10/01/2018 Serial Coupon 1.500% 1.050% 155,000.00 102.685% 159,161.75 10/01/2019 Senal Coupon 1.500% 1.200% 155,000.00 102.057% 158,188.35 10/0112020 Serial Coupon 1400% 1.400% 155,000.00 100.000% 155,00000 10/0112021 Serial Coupon 1.650% 1650% 160,000.00 100.000% 160,00000 1010112022 Senal Coupon 1.850% 1.850% 160,000.00 100.000% 160,000.00 1010112023 Senal Coupon 2.000% 2000% 165,000.00 100000% 165,000.00 10/01/2024 Senal Coupon 2.100% 2.150% 170,000.00 99.465% 169,090.50 10/01/2025 Serial Coupon 2.200% 2250% 175,00000 99.431% 174,004.25 10/01/2026 Senal Coupon 2350% 2.400% 175,000 00 99.400% 173,95000 10/0112027 Serial Coupon 2.450% 2.500% 180,000.00 99.369% 178,864 20 Total $2,365,000.00 $2,383,902.80 $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 26,2012 Type of Maturity Dollar Maturity Bond Coupon Yield Value Price Price 10/01/2013 Serial Coupon 1.000% 0401% 385,00000 100.705% 387,714.25 10/01/2014 Serial Coupon 1000% 0450% 940,000.00 101.191% 951,19540 10/01/2015 Senal Coupon 1.000% 0.550% 625,000.00 101.416% 633,85000 10/01/2016 Serial Coupon 1.000% 0700% 460,000.00 101.233% 465,671.80 10/0112017 Senal Coupon 1000% 0.850% 485,000.00 100758% 488,676.30 10/01/2018 Senal Cou~n 1050% 1.050% 475,000.00 100.000% 475,000.00 10/01/2019 Senal Coupon 1.200% 1.200% 235,000.00 100.000% 235,000.00 10/0112020 Serial Coupon 1.400% 1.400% 180,000.00 100.000% 180,000.00 Total $3,785,000.00 $3,817,107.75 EXHIBITD DESCRIPTION OF FINANCED IMPROVEMENTS; FINAL ALLOCATION $2,365,000 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULy 26, 2012 ISSUE DATE: JULy 26,2012 The Bond Compliance Officer is the person that the Issuer has identified in the Tax Compliance Procedure who is primarily responsible for the Post-Issuance Tax Requirements for the Bonds. On the Issue Date, the Issuer identified certain categories of assets financed in whole or in part by the Bonds (the "Financed Improvements"), as evidenced on Exhibit D to the Federal Tax Certificate. The Tax Compliance Procedure requires the Bond Compliance Officer to complete a Final Written Allocation of the proceeds of the Bonds, in substantially the following form, when all proceeds (including Investment earnings on proceeds) are expended, but not later than 18 months after the Financed Improvements are placed in service. A completed copy of this Final Written Allocation should be placed in the Tax-Exempt Bond File and retained in the Issuer's permanent records for at least 3 years after the final maturity of (1) the Bonds or (2) any obligation issued to refund the Bonds. The undersigned is the Bond Compliance Officer of the City of Salina, Kansas (the "Issuer") and in that capacity is authorized to execute federal income tax returns required to be filed by the Issuer and to make appropriate elections and designations regarding federal income tax matters on behalf of the Issuer. This allocation of the proceeds of the bond issue referenced above (the "Bonds") is necessary for the Issuer to satisfy ongoing reporting and compliance requirements under federal income tax laws. Purpose. This document, together with the schedules and records referred to below, is intended to memorialize allocations of Bond proceeds to expenditures for purposes of §§ 141 and 148 of the Internal Revenue Code (the "Code"). All allocations are or were previously made no later than 18 months following the date the expenditure was made by the Issuer or, if later, the date the "Financed Improvements" were "placed in service" (both as defined below), and no later than 60 days following the 5th anniversary of the issue date of the Bonds. Definitions. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Federal Tax Certificate, relating to the Bonds, dated July 26,2012 (the "Issue Date"). Background. The Bonds were issued pursuant to the Bond Resolutions in order to provide funds needed to finance the Financed Improvements and refund the Refunded Obligations. Proceeds of the Bonds were deposited into the Funds and Accounts as described in the Federal Tax Certificate. Sources Used to Fund Improvements and Allocation of Proceeds to Costs of Financed Improvements. A portion of the costs of the Improvements were paid from sale proceeds of the Bonds, earnings from the investment of those proceeds and from other money of the Issuer as shown on the attached Schedule to this Final Written Allocation. The portions of the Improvements financed with proceeds of the Bonds and from other money of the Issuer are also shown on the attached Schedule to this Final Written Allocation. D-1 Identification and Timing of Expenditures for Arbitrage Purposes. For purposes of complying with the arbitrage rules, the Issuer allocates the proceeds of the Project Portion to the various expenditures described in the invoices, requisitions or other substantiation supporting the Schedule to this Final Written Allocation. In each case, the cost requisitioned was either paid directly to a third party or reimbursed the Issuer for an amount it had previously paid or incurred. Amounts received from the sale of the Project Portion and retained as underwriters discount are allocated to that purpose and spent on the Issue Date. Amounts allocated to interest expense are treated as paid on the Interest Payment Dates for the Project Portion. Placed In Service. The Financed Improvements were "placed in service" on the dates set out on the Schedule to this Final Written Allocation. For this purpose, the assets are considered to be "placed in service" as of the date on which, based on all the facts and circumstances: (a) the constructing and equipping of the asset has reached a degree of completion which would permit its operation at substantially its design level; and (b) the asset is, in fact, in operation at that level. This allocation has been prepared based on statutes and regulations existing as of this date. The Issuer reserves the right to amend this allocation to the extent permitted by future Treasury Regulations or similar authorities. D-2 SCHEDULE TO FINAL WRITTEN ALLOCATION SOURCES AND USES; IMPROVEMENTS EXIIIBIT D TO THE FEDERAL TAX CERTIFICATE City oj Salina, Kansas Final Allocation of Bond Proceeds (Original Obligations) 2002-1 Temp Notes 2003-1 Temp Notes 2003-3 Temp Notes Senes 2003A 2004-2 Temp Notes 2004-3 Temp Notes Senes 2004B Senes 200SA Senes 2011-A Senes 2012-A ,md B Total Sources. Par AmOlmt 4,865,00000 3,800,00000 1,750,00000 4,350,000 00 775,00000 2,150,00000 4,053,00000 4,210,000 00 3,400,00000 6,215,00000 S 35,568,00000 OngmJI Issue Prenmml (Dlscmmt) 28,55755 37,772 00 51,04405 3,472 00 14,19000 23,04647 27,57385 25,18055 210,83647 Accmed Interest 3,95281 2,95556 13125 5,042 19 55972 1,25417 4,83447 5,44682 491 II 2,40793 27,07603 Pnor Issue Debt Sen Ice Funds 67,372 50 67,372 50 Pre-Paid Assessments 145,78643 625,00000 770,78643 Unspent Refunded Notes Proceeds 201,88148 441,15454 643,03602 Total 4,897,51036 3,840,72756 1,750,13125 4,406,08624 779,03172 2,165,44417 4,080,880 94 4,590,688 58 3,400,491 II 7,376,11552 $ 37,287,10745 Uses: Project Flmd 4,839,37365 3,794,51705 1,729,29500 6,24455 772,72600 2,143,00400 135,73282 32,13424 3,387,60100 16,840,62831 Escrow Fund 4,350,00000 3,879,377 78 4,488,78472 491 II 7,243,48186 19,962,13547 Debt SelVlce Fund 3,95281 36,92756 13125 5,042 19 2,90797 15,06792 4,92069 5,44682 2,40793 76,805 14 Costs ofIssuance 50,00000 5,48295 15,00000 2,27400 6,99600 37,88940 36,74895 8,03000 68,07573 230,49703 Underwnter's DlScOlmt 4,18390 3,80000 5,70500 25,79950 1,12375 37625 22,96025 27,57385 4,36900 62,15000 158,04150 Bond InsUfdl1ce Prenllum 19,00000 19,00000 Total 4,897,51036 3,840,72756 1,750,13125 4,406,08624 779,03172 2,165,44417 4,080,88094 4,590,688 58 3,400,491 11 7,376,11552 S 37,287,10745 Exhibit D to Federal Tax Certificate D-I July 26,2012 Exhibit D to FTC EXHIBIT D TO THE FEDERAL TAX CERTIFICATE Descri tion of Pro er Com risin the Financed Facili Series 2002-1 Temporary Note!> Project Estimated Elapsed E~timatcd Economic Onginal Placed in Time Remallling Cost Paid Cost Paid Life x Economic Service from Economic from Bond from Other Financed Asset Description Life Date Issue Date Life Cost Proceeds Sources Cost AcqUire Land Improvements to City's roads, sewer system, water system and other utlhtIes 30 March-02 000 3000 4,839,374 4,839,374 145,181,210 4,839,374 4,839,374 145,181,210 Less land costs Net costs, excludmg land 4,839,374 4,839,374 Senes 2002-1 Temporary Notes Ongmal Average, Reasonably Expected Economic Life 3000 years 120% ofOngmal Economic Life 120% 3600 years Issue Date of Senes 2002-1 Temporary Notes 3/28/2002 Issue Date of2003A Bonds 7/29/2003 Less Years elapsed (134) Remammg perrmtted weighted average bond matunty 34.66 years Series 2003A Project E.,timated Elapsed Estimated Economic Origillal Placed in Time Remaining Cost Paid Cost Paid Life x Economic Service from Economic from Bond from Other Fmanced Asset Description Life Date Issue Date Life Cost Proceeds Sources Cost Land Vanous bUlldmg, street, and sewer Improvements 30 Ju1y-03 000 3000 6,245 6,245 187,337 6,245 6,245 187,337 Less land costs Net costs, excludtng land 6,245 6,245 Average, Reasonably Expected EconomiC Life 3000 years 120% ofOngmal Economic LIfe 12000% 3600 years Series 2003A -Determination of Average, Reasonably Expected Economic Life of Financed Facilities ---I Refund 2002·1 Temporary Notes Sencs 2003A ProJect Total Net Uses Description 120% of Series 2003A Expected Economic Life of Facilities Financed: Usc of 120% of Series 2003A Average Proceeds Life (yr,) 4,350,000 3466 6,245 360O 4,356,245 Issue Date ofSenes 2003A Bonds 7/29/2003 Issue Date of Scnes 2012 Bonds 7/26/2012 Less Years elapsed Remaining permItted weighted average bond maturity D2 Proceeds x Life 150,771,000 224,804 150,995,804 3466 .@..2.2lyears 25.67 years ju/y26,2012 Exhibit D to FTC Descri tion of Pro ertv Com risin the Financed Facili Series 2003-1 Temporary Note<; Project!) Estimated Elapsed Estimated Onginal Placed in Time Remaming Economic Service from Economic Asset DescriptIOn Life Date Issue Date Life Cost Acqll1re Land Improvements to Schllhng Road and CentenllIal Road 20 July-03 000 2000 670,032 Improvements to Waterwell Road 20 July-03 000 2000 649,062 Improvements to City'S Solid Waste FacIlity 40 July-03 000 4000 2,475,423 3,794,517 Less land costs Net costs, exciudlOg land 3,794,517 Senes 2003-1 Temporary Notes Ongmal Average, Reasonably Expccted Economic LIfe 3305 years 120% ofOngmal EconomIC LIfe 120% 3966 years Issue Date ofSenes 2003-1 Temporary Notes 7/29/2003 Issue Date of2004B Bonds 7/28/2004 Less Years elapsed (l00) Remammg penmtted weIghted average bond matunty 38.66 years Series 2004B ProjeU Estimated Elapsed Estimated Onginal Placed in Time Remaining Economic Service from Economic Asset DescriptIOn Life Date Issue Date Life Cost Land LIberty AdditIOn 30 luly-04 000 3000 135,733 135,733 Less land costs Net costs, excludIng land 135,733 Average, Reasonably Expectcd EconomIc LIfe 3000 years 120% ofOngmal Economic Life 12000% 3600 years C Series 2004B -Determination of Average, Reasonablv Expected Economic Life of Financed Facilities Refund 2003-1 Temporary Notes Senes 2004B ProJect Total Net Uses Description 120% of Series 2004B Expected Economic Life of Facilities Financed: Use of 120% of Series 2004B Average Proceeds Life (yrs) 3,879,378 3866 135,733 3600 4,015,111 Issue Date ofSenes 2004B Bonds 7/28/2004 Issue Datc ofSenes 2012 Bonds 7/26/2012 Less Years elapsed Remaining permitted weighted average bond maturity 0.3 Proceeds x Life 149,964,494 4,886,382 154,850,876 38.57 Q12lyears 30.58 years Economic Cost Paid Cost Paid Life x from Bond from Other Financed Proceeds Sources Cost 670,032 13,400,637 649,062 12,981,243 2,475,423 99,016,924 3,794,517 125,398,803 3,794,517 Economic Cost Paid Cost Paid Life x from Bond from Other Financed Proceeds Sources Cost 135,733 4,071,990 135,733 4,071,990 135,733 JUly26,2012 Exhibit D to FTC Descri tion of Pro er Com risin the Financed Facilit Series 2011-1 Temporary Notes Pro;ea Asset Description AcqUIre Land Magnolia Commons-Street/Water/Sewer Less land costs Net costs, excludmg land Senes 2011-1 Temporary Notes Ongmal Average, Reasonably Expected EconomIc LIfe Original EconomIc Life 40 120% ofOngmal Economic Life 120% Issue Date ofSenes 2011-1 Temporary Notes 7/28/2011 Issue Date ofSenes 2012 Bonds 7/26/2012 Less Years elapsed Remammg penmttcd weighted average bond matunty Estimated Placed III Service Date July-II D-4 Elapsed Time from Issue Date 3992 years 4790 years (099) 46.91 years -008 Estimated Economic Remaimng Cost Paid Cost Paid Life x Economic from Bond from Other Financed Life Cost Proceeds Sources Cost 3992 3,387,601 3,387,601 135,233,032 3,387,601 3,387,601 135,233,032 3,387,601 3,387,601 ju1y26,20U Exhibit D to FTC Descri tion of Pro ern: Com risin the Financed Facilitv Serres 2003-3 Temp()rary Note!'> Project Asset Description AcqUire Land RIver Run SubdIVISIOn Less land costs Net costs, excluding land Senes 2003-3 Temporary Notes Ongmal Average, Reasonably Expected Economic Life Original Economic Life 30 120% of Onglnal Economic Life 120% Issue Date of Series 2003-3 Temporary Notes 12/17/2003 Issue Date ofSenes 2005A Bonds 7/28/2005 Less Years elapsed Remammg penmtted weighted average bond matunty Series 2004-2 Temporary Notes Project Asset Description AcqUire Land North Nmth Street Bndge Lakewood Bndge Soccer Fields, Bill Burke Park Less land costs Net costs, excludmg land Senes 2004-2 Temporary Notes OngInal Average, Reasonably Expected Economic Life Original Economic Life 30 30 30 120% ofOngmal EconomIC Life 120% Issue Date of Senes 2004-2 Temporary Notes 7/28/2004 Issue Date of Series Z005A Bonds 7/28/2005 Less Years elapsed Remaining penmtted weighted average bond matunty Estimated Placed III Service Date Elapsed Time from Issue Date December-03 000 Estimated Placed in Service Date luly-04 July-04 July-04 D-5 3000 years 3600 years (161) 34.39 years Elapsed Time from Issue Date 3000 years 3600 years (100) 35.00 years 000 000 000 Estimated Economic Remaining Cost Paid Cost Paid Life x Economic from Bond from Other Financed Life Cost Proceeds Sources Cost 3000 1,729,295 1,729,295 51,878,850 1,729,295 1,729,295 51,878,850 1,729,295 1,729,295 Estimated Economic Remaining Cost Paid Costllaid Life x Economic from Bond from Other Fmanced Life Cost Proceeds Sources Cost 3000 373,900 373,900 11,216,990 3000 149,560 149,560 4,486,796 3000 249,266 249,266 7,477,994 772,726 772,726 23,181,780 772,726 772,726 JuIy26,2012 Exhibit D to FTC Descri tion of Pro er Com risin the Financed Facilit Series 2004-3 Temporary Note!> Project Estimated Elapsed Estimated Origmal Placed in Time Remaining Economic Service from Economic Asset Description Life Date Issue Date Life Cost AcqUire Land Cedar Ridge Dnve Project 30 December-04 000 3000 408,666 Cedar Ridge AddItion Project 30 December-04 000 3000 588,080 Waterworks Improvements -Schilhng and Ohio 30 December-04 000 3000 299,024 Yost SubdlVlSlon Project 30 December-04 000 3000 174,431 Holly Lane Project 30 December-04 000 3000 124,593 Sahna BICentenmal Center Project 30 December-04 000 3000 299,024 South Marymount Road Project 30 December-04 000 3000 249,187 2,143,004 Less land costs Net costs, excludlllg land 2,143,004 Senes 2004-3 Temporary Notes Ongmal Average, Reasonably Expected EconomiC Life 30.00 years 120% ofOngmal Economic Life 120% 3600 years Issue Date ofSenes 2004-3 Temporary Notes 12/22/2004 Issue Date ofSenes 2005A Bonds 7/28/2005 Less Years elapsed (060) Remammg penmtted weighted average bond matunty 35.40 years Serie!> 2005A Project Estimated Elapsed Estimated Original Placed in Time Remaining Economic Service from Economic Asset Description Life Date Issue Date Life Cost ~ River Meadows 30 July-05 000 3000 32,134 32,134 Less land costs Net costs, excludmg land 32,134 Average, Reasonably Expected Economic LIfe 3000 years 120% ofOngmal Economic Life 12000% 3600 years Series 2005A -Determination of Average, Reasonably Expected Economic Life of Financed Facilities Refund 2003-3 Temporary Notes Refund 2004-2 Temporary Notes Refund 2004-3 Temporary Notes Z005A Project Total Net Uses Description l20% of Series 2005A Expected Economic Life of Facilities Financed: Use of 120% of Series 2005A Average Proceeds Life (yr,) 1,637,730 3439 725,280 3500 1,778,107 3540 32,134 3600 4,173,251 Issue Date ofSenes 2005A Bonds 7/28/2005 Issue Date of Senes 2012 Bonds 7/26/2012 Less Years elapsed Remaining permitted weighted average bond maturity 0.6 Proceeds x Life 56,321,528 25,384,812 62,944,976 1,156,833 145,808,148 34.94 12..2.2l.years 27.95 years Economic Cost Paid Cost Paid Life" from Bond from Other Financed Proceeds Sources Co~t 408,666 12,259,976 588,080 17,642,405 299,024 8,970,714 174,431 5,232,917 124,593 3,737,798 299,024 8,970,714 249,187 7,475,595 2,143,004 64,290,120 2,143,004 Economic Cost Paid Cost Paid Life x from Bond from Other Financed Proceeds Sources Cost 32,134 964,027 32,134 964,027 32,134 Ju/y26,2012 Exhibit D to FTC Descri tion of Pro ert Com risin the Financed Facili [--Series 2012AB -Determmation of Average, Reasonably Expected Economic Life of Fmanced Facilities Refund 2011-1 Temporary Notes Refund 2003A Bonds Refund 2005A Bonds Refund 2004B Bonds Total Net Uses Description 120% of Series 2012AB Expected Economic Life of Facilities Fmanced: Use of Series 2012AB Proceeds 3,414,204 1,173,825 1,601,619 1,053,834 7,243,482 D-7 120% of Average Proceeds Life (yr,) x Life 4691 160,173,987 2567 30,134,338 2795 44,763,232 3058 32,223,105 267,294,662 36,90 JuIy26,2012 EXHIBITE FORM OF ANNUAL COMPLIANCE CHECKLIST $2,365,000 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULy 26, 2012 ISSUE DATE: JULy 26, 2012 The Bond Compliance Officer is the person that the Issuer has identified in the Tax Compliance Procedure who is primarily responsible for working with other Issuer officials, departments and administrators and for consulting with Bond Counsel, other legal counsel and outside experts to the extent necessary to carry out the Post-Issuance Tax Requirements for the Bonds. On the Issue Date, the Issuer identified certain assets financed in whole or in part by the Bonds (the "Financed Improvements"), as evidenced on Exhibit D to the Federal Tax Certificate. Please complete this checklist within 90 days after the conclusion of the Issuer's Fiscal Year. Should you have questions or need assistance in completing the checklist, please contact Bond Counsel at the address below. A completed copy of this annual checklist should be placed in the Tax-Exempt Bond File and retained in the Issuer's permanent records for at least 3 years after the final maturity of (1) the Bonds or (2) any obligation issued to refund the Bonds. Bond Compliance Officer Name: L-[ _____ -' Bond Compliance Officer Signature: 1 Date of Report: [ 1 Annual Period Covered by Report: ['--____ ------' **If the answers to any of the following questions identify any compliance deficiencies, the Bond Compliance Officer should immediately contact Bond Counsel and take actions required in the Tax Compliance Procedure. ** Item Question Re~onse 1 Were all of the Financed Improvements owned by the Issuer during the DYes Ownership entire Annual Period? DNo If answer above was "No," was an Opinion of Bond Counsel obtained DYes prior to the transfer? DNo If Yes, include a copy of the Opinion in the Tax-Exempt Bond File. If No, contact Bond Counsel and include description of resolution in the Tax-Exempt Bond File. E-1 Item Question Re~onse 2 During the Annual Period, was any part of the Financed Improvements DYes Leases & leased at any time pursuant to a lease or similar agreement for more than DNo Other Rights 50 days? to Possession If answer above was "Yes," was an Opinion of Bond Counsel obtained DYes prior to entering into the lease or other arrangement? DNo If Yes, include a copy of the Opinion in the Tax-Exempt Bond File. If No, contact Bond Counsel and include description of resolution in the Tax-Exempt Bond File. 3 During the Annual Period, has the management of all or any part of the DYes Management operations of the Financed Improvements (e.g., cafeteria, gift shop, etc.) DNo or Service been assumed by or transferred to another entity? Agreements If answer above was "Yes," was an Opinion of Bond Counsel obtained DYes prior to entering into the management agreement? DNo If Yes, include a copy ofthe Opinion in the Tax-Exempt Bond File. If No, contact Bond Counsel and include description of resolution in the Tax-Exempt Bond File. 4 Was any other agreement entered into with an individual or entity that DYes Other Use grants special legal rights to the Financed Imy!ovements? DNo If answer above was "Yes," was an Opinion of Bond Counsel obtained DYes prior to entering into the agreement? DNo If Yes, include a copy of the Opinion in the Tax-Exempt Bond File. If No, contact Bond Counsel and include description of resolution in the Tax-Exempt Bond File. 5 Have any Gross Proceeds of the Bonds been invested in a Guaranteed DYes Proceeds & Investment Contract? DNo Investments Has the Issuer entered into an Interest Rate Swap Agreement with DYes respect to the Bonds? DNo Has any sinking or reserve fund for the payment of the Bonds been DYes established (other than funds and accounts created in the Bond DNo Resolutions)? Have any of the Bonds been redeemed or refunded in advance of their DYes scheduled maturities? DNo If answer to any of the above questions was "Yes," notify Bond Counsel with such information and place a copy of documentation in the Tax- Exempt Bond File. E-2 Item 6 Arbitrage & Rebate Bond Counsel: Question Have all rebate and yield reduction calculations mandated in the Federal Tax Certificate or Compliance Agreement been prepared for the current year? If No, contact Rebate Analyst and incorporate report description of resolution in the Tax-Exempt Bond File. Gilmore & Bell, P.C. 2405 Grand Blvd., Suite 1100 Kansas City, MO 64108 Phone: (816) 221-1000 Fax: (816)221-1018 Attn: Gina Riekhof Email: griekhoj@gilmorebell.com E-3 or include Response DYes DNo EXHIBITF ALLOCATION OF BONDS -MULTIPURPOSE ISSUE F-l City of Salina, Kansas ----------------------------------------- General Obligation Improvement and Refunding Bonds Series 2012-A and 2012-B Total Issue Sources And Uses : c------------------------------~--~----1 Dated 07/15/20121 Delivered 07/26/2012 I New Money Refunding Sources Of Funds Par Amount of Bonds $2,365,000.00 $3,785,000.00 Reoffenng PremIUm 18,902.80 32,10775 Accrued Interest from 07/1512012 to 07/2612012 1,242.85 1,200.15 Transfers from Pnor Issue Debt Service Fun_d_s ___________ 4_0_8 ____ ,4_88_._14. ______ 6'---7-"..,3_7_2_.5.c.0_ Assessment Prepay #1 625,000.00 Assessment Prepay #2 39,452.10 Total Sources $3,458,085.89 $3,885,680.40 Uses Of Funds Issue Summary $6,150,000.00 51,010.55 2,44300 475,860.6~ 625,000.00. 39,452.10 $7,343,766.29 Iot~~ Und~t:\\'I:lter·~.Qlscou!1t.jO.578'l-0________ _ ____ 18.';,,902.80 16,636.32 35,539.12 Costs oflssu_an_ce--,--__ 23,735.80 . __ -"--38'-'.,_88'--4_.0_4 ______ -----=6..=2'-'-.,61. 9 .84 DeposIt to Debt ?ervlce Fund c--__________ -----:_--,-1 ____ ,2-c-42.,..._85c--______ 1-"..,2_0_0_.1?____ 2,443.00 Deposit to 'proJect Construction Fund ________ 3,414,204.44 ),41_4,20~ peposlt to N~t...Qtsh Escrow F~rld__ _ ___________________ 3,828,959.89 ____ ..--l,?28,~?9.8~ Total Uses $3,458,085.89 __ -----=$:.::.3.'-',885,680.40 Senes2012AandB JlssueSummary J 7/11/2012 J 1018AM ----------~~-----------------------~--------~------------------------------ I I City of Salina, Kansas General Obligation Improvement and Refunding Bonds Series 2012-A (Project Portion) Debt Service Schedule I ~-~~~~-~.--------1 Date Principal Coupon 10/01/2012 04/0112013 10/01/2013 130,000.00 1.000% 04/0112014 10/01/2014 140,000.00 1.000% 04/0112015 10/01/2015 145,000.00 1.250% 04/0112016 10/01/2016 150,000.00 1.500% 04/0112017 10/0112017 150,000.00 1500% 04/01/2018 10/0112018 155,000.00 1.500% 04/01/2019 10/0112019 155,000.00 1.500% 04/0112020 10/0112020 155,000.00 1.400% 04/0112021 --~---'---. 10/01/2021 160,000.00 1.650% 04/0112022 10/01/2022 160,000.00 1.850% 04/0112023 10/0112023 165,000.00 2.000% 04/01/2024 10/01/2024 170,00000 2.100% 04/01/2025 10/01/2025 175,00000 2.200% 04/01/2026 10/01/2026 175,000.00 2.350% 04/0112027 ------------_.-. 10/01/2027 180,000.00 2450% Total $2,365,000.00 Yield Statistics f._c_crlJ_ed_Interest_fr_oill_07/1512012 to ::..07:.:./=.26:::../=.20:..:1.::2 _____ ~. ______ _ Bond Year Dollars ~yerage LIf(!. _____ .. __ . __ .. __ _ Average Coupon_ .. __ . ____ .. _ .. _. Interest 28,924.44 20,337.50 19,687.50 19,687.50 18,987.50 18,987.50 18,081.25 18,081.25 16,956.25 16,956.25 15,831.25 15,831.25 14,668.75 14,668.75 13,506.25 13,506.25 12,421.25 12,421.25 11,101.25 11,10125 9,621.25 9,621.25 7,971.25 7,971.25 6,186.25 6,186.25 4,261.25 4,261 25 2,20500 2,205.00 $392,234.44 Total P+I 28,924.44 150,337.50 19,687.50 159,687.50 18,9~7.50 163,987.50 18,081.25 168,081.25 16,956.25 166,956.25 15,831.25 170,831.25 14,66875 169,668.75 13,506.25 168,50625 12,421 25 172,421.25 11,101.25 171,101.25 9,621.25 174,621.25 . ____ ~21 ... 2~. 177,971.25 6,186.25 181,186.25 4,261.25 179,261.25 2,205.00 182,205.00 $2,757,234.44 __.~42.85 _~269.2! 8.571 Years 1.9351180% 1'l.eL!nterestCost (NIC)_ ... True Interest Cost (TIC) 1.9351180% _______________________________ 1_.9~2_26828% Bond Yi(:ld for ArbItrage Purpo.~._ ... ~ _. ________ _ All InclusIve Cost (AIC) IRS Form 8038 Senes2012AandB I New Money 17/11/2012 1 1015AM 1.3989592% 20532088% 1.8374440% 8.495 Years City of Salina, Kansas General Obligation Improvement and Refunding Bonds Series 2012-A (Project Portion) Pricing Summary Maturity Type of Bond 1 % 1120 13 SerIal Coupon 10/0112014 Serial Coupon 10/0112015 SerIal Coupon 10/0112016 Serial Coupon 10/0112017 Serial Coupon _ 1 % lI20 1_8 _~_ SerIal ~oupon 1 % 1120 19 Serial Coupon 10/0112020 Senal Coupon 1 % 1 /2021 Serial Coupon 10/0112022 SerIal Coupon lOI0112023 Senal Coupon ~Q/O 1I~9~_~~Ial Coupon 1 % 112025 Serial Coupon 10/0112026 Senal Coupon 10/0112027 SerIal Coupon Total Bid Information Par Amount of Bonds Gross ProductIOn Coupon 1.000% 1.000% 1.250% 1.500% 1.500% 1.500% 1.500% 1.400% 1.650% 1850% 2.000% ___ -=2.100% 2.200% 2350% 2.450% Accrued Interest from 0711512012 to 07/2612012 Yield 0.401% 0.450% 0550% 0700% 0850% 1.050% 1.200% 1.400% 1.650% 1.850% 2.000% 2.150% 2.250% 2.400% 2500% Maturity Value 130,00000 140,000.00 145,00000 150,00000 150,00000 155,000.00 155,000.00 155,00000 160,000.00 160,000.00 165,000.00 170,000.00 175,000.00 175,000.00 180,000.00 $2,365,000.00 Price 100.705% 101.191 % 102.203% 103.290% 103.287% 102.685% 102.057% 100.000% 100.000% 100.000% 100.000% 99.465% 99.431% 99.400% 99.369% Dollar Price 130,916.50 141,667.40 148,194.35 154,935.00 154,930.50 159,161.75 158,188.35 155,000.00 160,000.00 160,00000 165,000.00 169,090.50 174,004.25 173,950.00 178,864.20 $2,383,902.80 $2,365,OQO·Q9 18,902.80_ $2,383,902.~_ 1,242.85 -=T-=o-,-,tac-1 ~Pcc:ur-=ch,--a-=s~e-=-PC-'n.,-ce,---__________________________________ --'-$~2~,3_66.,242.85. Bond Year Dollars ~v_~~gt:Lrf~ _________________ _ 8 571 Years --------------------------- f.verag~<::oup~ _________ _ 1.9351180% 1.9351180% Senes 2012A and B I New Money I 7/11/2012 I 1015 AM City of Salina, Kansas ~--------------------------------- General Obligation Improvement and Refunding Bonds Series 2012-B Debt Service Schedule Date Principal Coupon Interest Total P+I 1010112012 04/0112013 27,930.67 27,930.67 1010112013 385,00000 1.000% 19,638.75 404,638.75 04/01/2014 17,713.75 17,713.75 1010112014 940,000.00 1.000% 17,713.75 957,713.75 04/0112015 13,01375 13,013.75 -~----------- 1010112015 625,000.00 1.000% 13,013.75 638,013.75 04/0112016 9,888.75 9,888.75 1010112016 460,000.00 1000% 9,888.75 469,888.75 04/0112017 7,588.75 7,588.75 1010112017 485,000.00 1.000% 7,58875 492,588.75 04/0112018 5,163.75 5,16375 -----~-~------- -------- 1010112018 475,000.00 1.050% 5,163.75 480,163.75 04/0112019 2,670.00 2,670.00 1010112019 235,00000 1.200% 2,670.00 237,670.00 04/0112020 1,260.00 1,260.00 1010112020 180,00000 1400% 1,260.00 181,260.00 Total $3,785,000.00 $162,166.92 $3,947,166.92 Yield Statistics Accrued Interest fi'om 07115/2012 to 0712612012 ------------------ Bond Year Dollars .. _----------------- ___ ~00.15 $15,1~~ 4.000 Years 1.0711825% Averag.~_Llfe Average c'0upon . ______________ ._ .. ____ . Net Il1teres!..C::ost (Nlc:_) _______________ __ 0.9689871% ------------------ J!ue Inte~est C()st (TlC2 ____ . 0.9646257% -------_._-----------------------------_. Bond YIeld for Arbitrage Purposes _________________________________________________________ -'-'1."'-3::.,:98::.::9..:::.5::..:92::-% !-II InclusIve CoS! (AIC) __________________________ 1.2311605% IRS Form 8038 Net Interest Cost 0.8521338% 3.962 Years Senes 2012A and B I Refunding I 7/11/2012 I 10'16 AM City of Salina, Kansas -------------------------------------------------------------- General Obligation Improvement and Refunding Bonds Series 2012-B PV Analysis Summary (Net to Net) ~r~s PV !)~~~~vice Savmgs _________________________________________ _ Accrue~ Int~r~s~Cr~d~L~ D~~b_~S_ervlce Fund ________________ ~ ____________________________ J.,~QOJ5 }ransfersl~·OIllJ'ri()E_!~sllel>~~ ~.rvlce Fund (67,3~.l.QL Net Present Value Benefit $236,474.52 --------------------------------- Net PV Be~t / $3 ~7(),000 Refunded Prmclpal 6.443% N et P'{}3.e~t:fil{~, 78~,g{)() R~il!..ndmg PTI~IC!CPa=I ___________ _ 6.248% Refunding Bond Information Refu_~_~gJ)ated Date ____ _ 7/15/2012 ~e.fijnclll2£}2~.Ii"_eI)'.Qate _________ __ 7/2612012 Senes 2012A and B I Refunding I 7/11/2012 I 1016 AM City of Salina, Kansas ----------------------------------------------------------------~- General Obligation Improvement and Refunding Bonds Series 2012-B Pricing Summary Type of Maturity Bond Coupon Yield 10/0112013 Senal Coupon 1.000% 0.401% 10/0112014 Senal Coupon 1.000% 0.450% 10/0112015 Serial Coupon 1.000% 0.550% 10/0112016 Serial Coupon 1.000% 0700% 10/0112017 Senal Coupon 1.000% 0.850% 10/0112018 Senal Coupon 1.050% 1.050% 10/0112019 Serial Coupon 1.200% 1.200% 10/0112020 Serial Coupon 1400% 1.400% Total Bid Information Par Amount of Bonds Maturity Value 385,000.00 940,000.00 625,000.00 460,000.00 485,000.00 475,00000 235,000.00 180,000.00 $3,785,000.00 Price Dollar Price 100.705% 387,714.25 101.191% 951,195.40 101.416% 633,850.00 101.233% 465,671.80 100.758% 488,676.30 100.000% 475,000.00 100.000% 235,000.00 100.000% 180,000.00 $3,817,107.75 ____ $3,78~..Q()Q:9_~ . __ ~ ___ 32,102:'Q Reoffenng PremitJm 0r....(Dlscount) Gross Production _____________________________________________ ----'$_3'-'.,8--'17,107.75 Total Underwri~'.s. Dis(;oun~J().440%) l3.~(1 00A09!o) _________ _ Accrued Interest fi'om 07/15/2012 to 07/26/2012 Total Purchase Pnce $(16,636.32) 3,800,47l:..'!,3. ___ ~2..20.15 $3,801,671.58 4.000 Years 1.0711825% 0.9689871% Net Interest Cost (NIC) True Interest Cost (TIC) __________________________________ . ____________________________ 0~.~96~46257% Senes2012AandB I Refunding I 7/11/2012 110 16AM SCHEDULE 1 DEBT SERVICE SCHEDULE AND PROOF OF YIELD S-l City of Salina, Kansas General Obligation hnprovement and Refunding Bonds Series 2012-A and 2012-B Debt Service Schedule Date Principal Coupon 10/01/2012 04/0112013 10/0112013 515,000.00 1.000% 04/0112014 10/0112014 1,080,000 00 1.000% 04/0112015 ... 10/01/2015 770,00000 1047% 04/0112016 1010112016 610,000.00 1.123% 04/0112017 10/0112017 635,000.00 1.118% 04/0112018 10/0112018 630,000.00 1.161 % 04/0112019 1010112019 390,000.00 1.319% 04/0112020 10/01/2020 335,000.00 1.400% 04/0112021 -----_ .. -"-~-----~-- 10/01/2021 160,000.00 1.650% 04/01/2022 10/0112022 160,00000 1.850% 04/0112023 10/01/2023 165,000.00 2000% 04/01/2024 --.--~~---------- 10/0112024 170,00000 2.100% 04/0112025 10/0112025 175,000.00 2200% 04/0112026 10/01/2026 175,000.00 2350% 04/01/2027 10/0112027 180,000.00 2.450% Total $6,150,000.00 Yield Statistics Interest 56,855.11 39,976.25 37,401.25 37,401.25 32,001.25 32,001.25 27,970.00 27,970.00 24,545.00 24,545.00 20,995.00 20,995.00 17,338.75 17,338.75 14,766.25 14,766.25 12,421.25 12,421.25 11,101.25 11,101.25 9,621.25 9,621.25 7,97125 7,971.25 6,186.25 6,186.25 4,261.25 4,261.25 2,205.00 2,205.00 $554,401.36 Accrued Interest from 07/15/2012--=t,,-o-=-07.:.c/cc.26~/cc.20~1,-2. _______________________ _ Bond Year Dollars A v~l~ge LIfe __ ... _. Total P+I 56,855.11 554,976.25 37,401.25 1,117,401.25 32,001.25 802,001.25 27,970.00 637,970.00 24,545.00 659,545.00 20,995.00 650,995.00 17,338.75 407,338.75 14,766.25 349,766.25 12,421}~ 172,421.25 11,101.25 171,101.25 9,621.25 174,621.25 .__ 7,971.25 177,971.25 6,186.25 181,186.25 4,261.25 179,261.25 2,205.00 182,205.00 $6,704,401.36 2,443.00 $35,408.33 5.757 Years ._---_. Avera!i.e .. ~o~~ ____ . _____ . _____ . ____ _ ___________________ -=-1~.5657370% Net Interest Cost (NI:.::CL) ________________________________ . __ -=Ic..:.5..::2cc.20.:....4c=2c..::.6.c..:....% .True Interest Cost (TIC) 1.5048359% _B_on_d_Y_le_ld_£_or_A_r_b_it_ra~ge_Pu_~~o_s_es ____________ . ____________________ 1.3989592% All Inclusive Cost (AIC) 1.6937123% IRS Form 8038 Net Interest Cost ----------.... --- ~eight~d J'.verage Matunt):' ___ .... ___ _ Senes 2012A and B I Issue Summary I 7/11/2012 I 10'18 AM 1.4162161 % 5.704 Years Gilmore & Bell, P.C. ; Tax and Financial Analysis Page 2 ~lty of Sali~a, Kansas ---- General Obligation Improvement and Refunding Bonds Series 2012-A and 2012-B Proof Of Bond Yield @ 1.39895920/0 Cumulative Date Cashflow PV Factor Present Value PV 07/2612012 1.0000000x 04/0112013 56,855.11 0.9905573x 56,318.25 56,318.25 10/0112013 554,976.25 0.9836767x 545,917.20 602,235.45 04/0112014 37,401.25 0.9768439x 36,535.18 638,770.63 10/0112014 1,117,401.25 0.9700585x 1,083,94459 1,722,715.22 0.9633203x 30,827.45 1,753,542.68 0.9566289x 767,217.54 _ 04/01~~ _______ __3,--2-,-,0:-0_1.-::-2_5 ------c-~--,--,-----------'-cc--------~-'--- 10/0112015 802,001.25 04/0112016 27,970.00 10/0112016 637,970.00 04/0112017 24,545.00 10/0112017 659,545.00 04/0112018 20,995.00 10/0112018 650,995.00 04/0112019 17,338.75 10/0112019 407,33875 04/0112020 14,766.25 10/0112020 349,76625 04/0112021 12,421.25 10/0112021 04/0112022 1010112022 04/0112023 172,421.25 11,101.25 171,101.25 9,621.25 10/0112023 174,621.25 0.9499839x o 9433851x 0.9368322x 0.9303247x 0.9238625x 0.9174452x 0.9110724x 0.9047439x 0.8984594x 0.8922185x 0.8860209x 0.8798665x 0.8737547x 0.8676854x 0.8616583x 0.8556731x 26,571.05 601,851.41 22,994.55 613,591.04 19,396.49 597,252.22 15,79686 368,53725 13,266.88 312,067.91 11,005.49 151,707.68 9,699.77 148,46206 8,29023 149,418.70 0.8497294x 6,773.41 __ 04/01l2024~__ _7'-',9'-'7'-=1cc:.2:.:c5 ______ ~~~_=_ ________ ~_'_=_.~_ 1010112024 177,971.25 0.8438270x 150,176.94 04/0112025 6,186.25 o 8379656x 5,183.86 10/0112025 181,186.25 0.8321449x 150,773.21 04/0112026 4,261.25 0.8263646x 3,521.35 10/0112026 179,261.25 0.8206245x 147,106.18 0.8149243x _QjlQ!120~__________ 2,205.0.0 _________ _ 1,796.91 10/0112027 182,205.00 0.8092637x 147,451.89 Total $6,704,401.36 $6,203,453.55 Derivation Of Target Amount Par Amount of Bonds Reofferi~ Pl'emlLlm or (J..)iscolll1tL_ _A~cru~ Intere~ fI'e>.m_0_7/_15120!31(jQ7/26/2012 ____________________ _ 2,520,760.22 2,547,331.27 3,149,182.68 3,172,177.22 3,785,768.26 3,805,164.75 4,402,416.97 4,418,213.83 4,786,751.08 4,800,017.96 5,112,085.87 5,123,091.:l~ 5,274,79904 5,284,498.81 5,432,960.87 5,441,251.1 0 5,590,669.80 5,597,443.20 5,747,620.15 5,752,80401 5,903,577.22 5,907,098.57 6,054,204.75 6,056,001.66 6,203,453.55 $_6,150,000.0~ 51,010.55 2,443.00 _______ $=-=6=,203,453.55 Senes 2012A and B I Issue Summary I 7/11/2012 I 10'18 AM i Gilmore & Bell, P.C. I Tax and Financial Analysis Page 4 CERTIFICATE OF FINANCIAL ADVISOR CITY OF SALINA, KANSAS $1,485,000 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 $2,365,000 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS SERIES 2012-A $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 15,2012 George K. Baum & Company, Kansas City, Missouri, is employed as financial advisor to the City of Salina, Kansas (the "Issuer") with respect to the above captioned notes (the "Notes"). 1. Duties. The Financial Advisor rendered certain professional services to the Issuer, including advising the Issuer with respect to the sale of the Notes, and assisting the Issuer with the preparation of the Preliminary Official Statement dated June 11, 2012 and the Official Statement dated July 9, 2012, (both documents referred to collectively herein as the "Official Statement"). 2. Official Statement. The Financial Advisor has read the Official Statement, but has not, however, independently verified the factual and financial information contained in the Official Statement, including the appendices attached thereto, nor have we participated in the drafting for the appendices to the Official Statement. 3. Certification. Based on the foregoing, the Financial Advisor certifies, to the best of our knowledge, information and belief, the information contained in the Official Statement (except for Appendices A and B attached to the Official Statement) are, as of its date and as of the date hereof, true and correct in all material respects, and the Official Statement does not contain any untrue statement of a material fact or omit to state a material fact where necessary to make a statement not misleading in light of the circumstances under which it was made. DATED: July 26,2012. GEORGE K. BAUM & COMPANY KANSAS CITY, MISSOURI By: ~~~~~~~~~~ Title: -===.!--,-,-~o...:..:=="------J" ESCROW AGENT'S CLOSING CERTIFICATE $3,785,000 CITY OF SALINA, KANSAS GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B DATED JULY 15, 2012 UMB National Bank of America, Wichita, Kansas, as escrow agent (the "Escrow Agent") under the Escrow Trust Agreement dated as of July 15, 2012 (the "Escrow Agreement"), between the Escrow Agent and the City of Salina, Kansas, in connection with the issuance of the above described bonds (the "Bonds"), does hereby certify as follows: 1. Power and Authority of Escrow Agent. The Escrow Agent is a national banking association duly organized and existing under the laws of the United States of America, is authorized and empowered to execute and deliver the Escrow Agreement and has full power and authority to act as Escrow Agent as provided in the Escrow Agreement. 2. Execution of Escrow Agreement. The Escrow Agreement has been duly executed on behalf of the Escrow Agent, by a duly authorized officer, who was at the time of the execution of the Escrow Agreement, and is now, the duly elected or appointed, qualified and acting incumbent of his or her respective office, and duly authorized to perform the acts referred to in this paragraph. 3. Deposit of Cash and Escrowed Securities. The Escrow Agent, in accordance with the requirements of the Escrow Agreement, has received the cash and Escrowed Securities as described in the Escrow Agreement, and deposited said cash and Escrowed Securities in the Escrow Fund created by the Escrow Agreement. DATED: July 26,2012. VMB NATIONAL BANK OF AMERICA WICHITA, KANSAS as Escrow Agent By: ~ji iI11lJ.a/u;u Title: Bonnie Mosher, Vice hesident 816-221-1000 FAX: 816-221-1018 WWW.GILMOREBELL.COM Governing Body City of Salina, Kansas UMB Bank, N.A. Kansas City, Missouri GILMORE & BELL A PROFESSIONAL CORPORATION ATTORNEYS AT LAW 2405 GRAND BOULEVARD, SUITE 1100 KANSAS CITY, MISSOURI 64108-2521 July 26,2012 ST. LOUIS, MISSOURI WICHITA, KANSAS LINCOLN, NEBRASKA Re: $3,785,000 General Obligation Refunding Bonds, Series 2012-B, of the City of Salina, Kansas, Dated July 15,2012 We have acted as Bond Counsel in connection with the issuance by the City of Salina, Kansas (the "Issuer"), of the above-captioned bonds (the "Bonds"). In this capacity, we have examined the law and the certified proceedings, certifications and other documents that we deem necessary to render this opinion. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the resolution adopted by the governing body of the Issuer prescribing the details of the Bonds. Regarding questions of fact material to our opinion, we have relied on the certified proceedings and other certifications of public officials and others furnished to us without undertaking to verify them by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The Bonds have been duly authorized, executed and delivered by the Issuer and are valid and legally binding general obligations of the Issuer. 2. The Bonds are payable as to both principal and interest in part from special assessments levied upon the property benefited by the construction of certain improvements and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The balance of the principal and interest on the Bonds is payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The Issuer is required by law to include in its annual tax levy the principal and interest coming due on the Bonds to the extent that necessary funds are not provided from other sources. 3. The interest on the Bonds is: (a) excluded from gross income for federal income tax purposes; and (b) not an Item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporatIOns, but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The opmlOns set forth in this paragraph are subject to the condition that the Issuer comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds in order to preserve the exclusion of the interest on the Bonds from gross income for federal income tax purposes. The Issuer has covenanted to comply with all of these requirements. Failure to comply with certain of these requirements may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Bonds are "qualified tax-exempt obligations" withm the meaning of Section 265(b)(3) of the Code, and, in the case of certain financial institutions (withm the meaning of Section 265(b )(5) of the Code), a deduction is allowed for 80 percent of that portion of such financial institution's interest expense allocable to interest on the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. 4. The interest on the Bonds is exempt from income taxation by the State of Kansas. We express no opinion regarding the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds (except to "the extent, if any, stated in the Official Statement). Further, we express no opinion regarding tax consequences arising with respect to the Bonds other than as expressly set forth in this opinion. The rights of the owners of the Bonds and the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and by equitable principles, whether considered at law or in equity. This opimon is given as of its date, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may come to our attention or any changes in law that may occur after the date of this opinion. Very truly yours, GILMORE & BELL, P.C. 816-221-1000 FAX: 816-221-1018 WWW.GILMOREBELL.COM Governing Body City of Salina, Kansas UMB Bank, N.A. Kansas City, Missouri UMB National Bank of America Wichita, Kansas GILMORE & BELL A PROFESSIONAL CORPORATION ATTORNEYS AT LAW 2405 GRAND BOULEVARD, SUITE 1100 KANSAS CITY, MISSOURI 64108-2521 July 26,2012 ST. LOUIS, MISSOURI WICHITA, KANSAS LINCOLN, NEBRASKA Re: City of Salina, Kansas, General Obligation Internal Improvement Bonds, Series 2003-A and General Obligation Internal Improvement Bonds, Series 2005- A This opinion is delivered to you in connection with the satisfaction, discharge and defeasance of the following described bonds originally issued by the City of Salina, Kansas (the "Issuer") (collectively, the "Defeased Bonds"): Series 2003-A 2005-A Dated Date July 15,2003 July 15,2005 Dejeased Amount $1,125,000 1,535,000 Years 2013 to 2018 2013 to 2020 Redemption Date October 1,2013 October 1, 2013 The Defeased Bonds were each issued pursuant to an ordinance and a resolution adopted by the governing body of the Issuer (collectively, the "Bond Resolution"). CapItalized terms used and not otherwise defmed herein shall have the meanings assigned to such terms in the Bond Resolution. Provision has been made for the payment of the principal, redemption price, if any, and interest due or to become due on the Defeased Bonds to the above-referenced Redemption Dates at the times and m the manner specified in the Bond Resolution, by the irrevocable deposit in trust with UMB National Bank of America, Wichita, Kansas, as escrow agent (the "Escrow Agent"), pursuant to the Escrow Trust Agreement dated as of July 15,2012 (the "Escrow Trust Agreement"), between the Issuer and the Escrow Agent, of cash and government securities that, according to the Verification Report described below, will mature as to principal and will pay interest in amounts and at times that will provide sufficient moneys to make such payments. We have examined the law, the Bond Resolution, the Escrow Trust Agreement and the other documents and certified proceedings that we deem necessary to render this opinion. Regarding questions of fact material to our opmion, we have relied on the certified proceedings and other certifications of public officials and others furnished to us without undertaking to verify them by independent investIgatIOn. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The Escrow Trust Agreement has been duly authorized, executed and delivered by the Issuer and constitutes a valid and binding agreement of the Issuer, enforceable agaIllst the Issuer except as may be limited by. bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and by equitable principles whether considered at law or in equity. 2. Provision h~s been made for payment of the Defeased Bonds in accordance with K.S.A. 10-427 et seq. All conditions precedent to the satisfaction, discharge and defeasance of the Defeased Bonds contained in the Bond Resolution have been complied with, and the Defeased Bonds are deemed to be paid and discharged under the Bond Resolution. All conditions precedent to the satisfaction, discharge and defeasance of the Bond Resolution have been complied with, and the requirements contained in the Bond Resolution and all other rights granted thereby have ceased and tenninated III accordance with the provIsions thereof. 3. Provision for the payment, discharge and defeasance of the Defeased Bonds will not, in and of itself, cause the interest on the Defeased Bonds to become included in gross income for federal income tax purposes. In rendering the: opinions set forth herein, we have relied upon the calculations and conclusions contained in the Verification Report of dated July 26,2012, of Robert Thomas CPA, LLC, certified public accountants, relating to the sufficiency of the Escrow Fund established under the Escrow Trust Agreement and certain yield calculations relating to the Issuer's General Obligation Refunding Bonds, Series 20l2-B, Dated July 15,2012 and the Defeased Bonds, without undertaking to verify the same. We express no opinion with respect to the effect on the original status of the interest on the Defeased Bonds for federal income tax purposes of any actions taken or omitted to be taken by the Issuer or its affiliates with respect to the ownership, use or operation of the facilities financed or refinanced with the proceeds of the Defeased Bonds other than as stated in this opinion. This opinion is delivered to you for your use only and may not be used or relied on by any third party for any purpose without our prior written approval in each instance. ThIS opinion is given as of its date, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may come to our attention or any changes in law that may occur after the date of this opinion. Very truly yours, Jjd~17{f ¢,&t/, I C. GILMORE & BELL, P.C. DEREK SCHfVilDT ATTOR"iEY GENERAL The Honorable Ron Estes State Treasurer July 23,2012 Landon State Office Building, Room 201 N Topeka, KS 66612 Dear Mr. Estes: MEf/IOR!f."L h,'),L~ 120 SW 10TH AVE 2ND FLOOR TOPEKA KS 66612-i 597 (7851296-2215· 'AX (7851296-6296 V/WW KSAG ORG Pursuant to K.S A. 10-108, basic or supplemental transcript material is hereby approved and you may register the following: Municipality: City of Salina, Kansas Description: General Obligation Refunding Bond Series: 2012-B Dated: July 15, 2012 Aggregate Amount: $3,785,000.00 Date of First Payment: April 1, 2013 Fiscal Agent: Kansas State Treasurer RDS: cc: Lieu Ann Elsey, City Clerk )3ilmore & Bell, Kansas City Numbered: Registered Sincerely, OFFICE OF THE ATTORNEY GENERAL DEREK SCHMIDT ,c-~7 /~'1 .~ ,~ ,'//., ,< / ~~@~~~~rlrtV/ Assistant Attorney General July 19,2012 MEMORANDUM TO: SEE DISTRIBUTION LIST FROM: DAVID ARTEBERRY TODD BURRUS RE: BOND ISSUE CLOSING ARRANGEMENTS NAME OF ISSUER: AMOUNT, NAME AND DATE OF ISSUE: City of Salina, Kansas $6, 150,000 (Aggregate) CIty of Salina, Kansas $2,365,000 General Obligation Internal Improvement Bonds Series 2012-A $3,785,000 General Obligation Refunding Bonds Series 2012-B All Dated July 15, 2012 TIME AND DATE OF CLOSING: 10:00 a.m. SETTLEMENT NUMBERS: Par Amount Thursday, July 26,2012 Via Telephone Plus Accrued Interest (July 15 to July 26) Plus Bid Premium 2012-A $2,365,000.00 1,242.85 0.00 Net Amount Due at Closing $2,366,242.85 METHOD OF FUNDS TRANSFER: Wire Transfer of Federal Funds 2012-B $3,785,000.00 1,200.15 15,471.43 $3,801,671.58 4801 Main Street. Suite 500 • Kansas City, Missouri 64112 • 816.474.1100 Total $6,150,000.00 2,443.00 15,471.43 $6,167,914.43 TRANSFER INSTRUCTIONS: (UMB Bank) (City) DISBURSEMENT OF FUNDS: (City) On Thursday, July 26,2012, UMB Bank will wire transfer an amount of $2,367,443.00 to Sunflower Bank, ABA #1011-0062-1, AC #102187275, for credit to Salina, Kansas. Attn: Dennis Zimmerman On Thursday, July 26, 2012, UMB Bank will transfer an amount of $3,800,471.43 to UMB National Bank of America, Trust Department Account #9800 006823 for further credit to City of Salina. Attn: Bonnie Mosher. On or before Thursday, July 26, 2012, the City will wire transfer an amount of $67,372.50 to UMB National Bank of America., ABA #1010-0069-5, for credit to Trust Department Account #9800006823, for further credit to the Salina, Kansas. Attn: Bonnie Mosher. Upon receipt of $2,367,443.00 from UMB Bank, plus $664,452.10 on hand from prepaid assessments, plus $408,488.14 from the debt service account ($3,440,383.24 total), the CIty will apply such funds as follows as established III the Bond ResolutIOn: 2012-B Deposit to Improvement Account Deposit to Debt Service Account Total 2012-A $3,437,940.24 1,242.85 $3,439,183.09 $ 0.00 1,200.15 $1,200.15 Total $3,437,940.24 2,443.00 $3,440,383.24 (UMB National Bank of America) Upon receipt of $3,800,471.43 from UMB Bank, plus $67,372.50 from the City ($3,867,843.93 total), UMB National Bank of America will apply such funds as follows as established in the Bond Resolution: Deposit to Escrow Fund DepOSIt to Costs ofIssuance Account Total 2012-B $3,828,959.89 38,884.04 $3,867,843.93 DELIVERY OF TRANSCRIPT AND LEGAL OPINION: DELIVERY INSTRUCTIONS: COSTS OF ISSUANCE: Upon receiving confirmation of receipt of funds Gilmore & Bell will authorize the release ofthe Bonds and e-mail a signed legal opmion to the City, George K. Baum & Company, UMB Bank, and UMB National Bank of America. Completed transcripts with original signed legal opinions will be sent to the respective parties when completed. Upon regIstratIOn, the Bonds will be delivered to the Depository Trust Company, New York, New York at least one business day prior to closing. All costs related to the issuance of the Bonds will be paid by either the City or UMB National Bank of America upon presentation of the proper invoices. CITY OF SALINA, KANSAS GENERAL OBLIGATION TEMPORARY NOTES, SERIES 2012-1 GENERAL OBLIGATION INTERNAL IMPROVEMENT BONDS, SERIES 2012-A GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012-B ISSUER City Hall 300 West Ash Salina, Kansas 67402-0736 785-309-5735 785-309-5738 (fax) Jason Gage, City Manager jason. gage@salina.org Mike Schrage mike.schrage@salina.org Rod Franz, Finance Director rod.franz@salina.org Lieu Ann Elsey, City Clerk lieuann. elsey@salina.org CITY ATTORNEY Clark, Mize & Linville 129 South 8th P. O. Box 380 Salina, Kansas 67402-0380 785-823-1868 (fax) Greg Bengtson 785-823-6325 gabengtson@cml-law.com BOND COUNSEL Gilmore & Bell, P. C. 2405 Grand Boulevard -Suite 1100 Kansas City, Missouri 64108-2521 816-221-1000 816-221-1018 (fax) Randy Irey rirey@gilmorebell.com Gina Riekhof griekhof@gilmorebell.com DISTRIBUTION LIST CITY'S BANK Sunflower Bank, NA. 2090 S. OhlO Salina, Kansas 67402 785-826-2240 (fax) Dennis Zinnnerman 785-827-5564 dennisz@sunflowerbank.com PAYING AGENT Office of the Kansas State Treasurer 900 S. W. Jackson -Room 201N Topeka, Kansas 66612-1235 785-296-7950 (fax) Carmen J. Klopping, Dir. of Bond Services 785-296-4144 carmen@treasurer.state.ks.us ESCROW TRUSTEE UMB National Bank of America 130 N. Market Street Wichita, Kansas 67202 316-267-1301 (fax) Bonnie Mosher 316-266-6015 bonnie.mosher@umb.com MATHEMATICAL VERIFICA nON Robert Thomas CPA, LLC 360 Lakeshore Drive West Shawnee Mission, Kansas 66217-8523 913-962-1312 (fax) Robert Thomas 913-362-3555 bthomas@rthomascpa.com RATING AGENCY Moody's Investors Service 100 North Riverside Plaza -Suite 2220 Chicago, Illinois 60606 312-706-9999 (fax) Thomas Aaron 312-706-9967 thomas.aaron@moodys.com NOTES UNDERWRITER Country Club Bank 9400 Mission Road Prairie Village, Kansas 66206 913-385-0105 (fax) Lisa Roberts 816-751-1420 lroberts@countryc1ubbank.com BONDS UNDERWRITER UMB Bank, n a. 1010 Grand P. O. Box 419226 Kansas City, Missouri 64141-6226 816-843-4325 (fax) Kristin Koziol 816-860-7223 kristin.koziol@umb.com FINANCIAL ADVISOR George K. Baum & Company 4801 Main Street -Suite 500 Kansas City, Missouri 64112 816-283-5326 (fax) David Arteberry 816-283-5137 arteberry@gkbaum.com Todd Burrus 816-283-5138 burrus@gkbaum.com CASSMEYER. JULIE From: WILSON, DENISE Sent: To: Thursday, July 12, 2012 1 :24 PM CASSMEYER, JULIE Subject: FW: New Bond Issued -----Original Message----- From: Rosalyn@treasurer.state.ks.us [mailto:Rosalyn@treasurer.state.ks.us] Sent: Thursday, July 12, 2012 12:14 PM To: WILSON, DENISE Cc: carmen@treasurer.state.ks.us Subject: New Bond Issued 07/12/2012 12.14:31 A new bond issue has been created in the KST Bond Registration 2.0 System. Below is the information. Registration #: 0322-085-071512-426 Municipality: SALINA Bond Counsel: GILMORE & BELL/ DENISE Paying Agent: STATE Purpose & Series: G 0 REF BD SR 2012-B Principal: 3,785,000.00 Closing Date: 07/26/2012 Please consider this notice to be your confirmation ofthe registration number assigned by this office to the above mentioned bond issue/temp note issue. Notify our office immediately of any correction or revision to the above information. 1