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Audit - 2009 SW ReportKANSAS DEPARTMENT OF HEALTH AND ENVIRONMENT BUREAU OF WASTE MANAGEMENT Solid Waste Form 1290 CHIEF FINANCIAL OFFICER'S LETTER FROM LOCAL GOVERNMENT To: Kansas Department of Health and Environment Attn: Bureau of Waste Management , I am the Chief Financial Officer of City of Salina a local government organized "and existing under the laws of the state of Kansas. This letter is in support of this local government's use of the local government financial test to provide financial assurance for the closure, post - closure care, corrective action costs, or any combination of these, at the municipal solid waste landfill identified in the following numbered paragraphs. 1. This local government is the owner or operator of the following municipal solid waste landfill for which financial assurance for closure, post - closure care, corrective action costs, or any combination of these, is demonstrated according to the provisions in K.A.R. 28 -29 -2110: Citeses f Salina Municipal Solid Waste landfill 4292 Rurma Road Salina, KS 67401 No. 144 Closure .493,012 Post - Closure $3,206,006 Corrective Action $ --- [List additional sites and estimates on a separate sheet identified as "Attachment A "] 2. This local government also provides financial assurance for environmental obligations, or provides environmental guarantees, to another local government entity through a financial test procedure at the following site and jurisdiction (if none, enter "None "): NONE No. Closure $ Post - Closure $ Corrective Action Jurisdiction [List additional sites, estimates and jurisdictions on a separate sheet identified as "Attachment B "] Page 1 of 4 - Chief Financial Officers Letter - Form SW1290 - August 9, 1999 This local government financial test is based upon the financial conditions existing as of the close of the latest completed fiscal year ending on 12/31/2007 The accounting books and records of this local government are maintained according to the requirements of generally accepted accounting principals (GAAP) for governments, or on a prescribed basis of accounting that demonstrates compliance with the cash basis and budget laws of the state of Kansas, which is a comprehensive basis of accounting other than GAAP for governments. In support of this local government's use of financial test, I enclose the following documents: (a) Comprehensive Annual Financial Report (CAFR), or other audited Annual Financial Statements for the latest completed fiscal year; (b) Auditor's Special Report; and (c) Calculation and accumulation details supporting financial test amounts derived from the CAFR or other audited annual financial statements. I certify that this local government: (a) Has no general obligation bonds outstanding which are rated lower than Moody's Saa or Standard & Poor's BBB; (b) Is not currently in default on payments of interest or principal on any general obligation bonds; (c) Has not operated at a deficit exceeding 5% in each of the two latest completed fiscal years, (d) Has passed the financial ratio test or the bond rating test specified for the use of local governments according to the provisions in K.A.R. 28 -29 -2110; and (e) Has not used the local government financial test to provide financial assurance for closure, post - closure, corrective action costs, or any combination of these, in excess of 43% of revenues as defined in K.A.R. 28 -29 -2110. SIGNED FOR THE LOCAL GOVERNMENT 1/21/2009 Page 2 of 4 - Chief Financial Officers Letter - Form SW1290 - August 9, 1999 KANSAS DEPARTMENT OF HEALTH AND ENVIRONMENT BUREAU OF WASTE MANAGEMENT LOCAL GOVERNMENT FINANCIAL RATIO TEST Sum of the Environmental Obligations Assured by the Test 1. Total from the Chief Financial Officer's Letter $5,699,018 Ratio Test Factors from the CAFR or Annual Financial Statements [Attach details of calculation or accumulation of amounts from CAFR or AFS] 2. Total Annual Revenues $ 63 ,179 ,171 3. Total Annual Expenditures $ 52,165,014 4. Cash plus Marketable Securities $30,380,722 5. Annual Debt Service $6,687,535 6. Long -Term Debt (Issued in the Current Year) $14,087,496 7. Non - Routine Capital Expenditures $12,088,491 [Omit Lines 6 and 7 if GAAP for Governments accounting and reporting method is used] Financial Ratio Test Calculations 8. Environmental Obligations / Total Annual Revenues (Line 1 divided by Line 2 = < 0.43) 9. Total Annual Revenues / Total Annual Expenditures (Line 2 divided by Line 3 = > 0.95) 10. Cash and Marketable Securities / Total Annual Expenditures (Line 4 divided by Line 3 = > 0.05) 11. Annual Debt Service / Total Annual Expenditures (Line 5 Divided by Line 3 = < 0.20) 12. Long -Term Debt / Non - Routine Capital Expenditures (Line 6 divided by Line 7 = < 2.00) [Omit Line 12 if GAAP for Governments accounting and reporting method is used] Page 3 of 4 - Chief Financial Officer's Letter - Form SW1290 - August 9, 1999 9.02% 121.11% 58.24% 12.82% 1.17 KANSAS DEPARTMENT OF HEALTH AND ENVIRONMENT BUREAU OF WASTE MANAGEMENT LOCAL GOVERNMENT BOND RATING TEST Sum of the Environmental Obligations Assured by the Test 1. Total from the Chief Financial Officer's Letter Ratio Test Factors from the CAFR or Annual Financial Statements [Attach details of calculation or accumulation of amounts from the CAFR or AFS] 2. Total Annual Revenues 3. Total Annual Expenditures Bond Rating Test Calculations 4. Environmental Obligations / Total Annual Revenues (Line 1 divided by Line 2 = < 0.43) 5. Total Annual Revenues / Total Annual Expenditures (Line 2 divided by Line 3 = > 0.95) Bond Rating 5,699,018 63,179,171 552,165 014 6. Amount, Description, Issue Date and Due Date of Rated General Obligation Bonds 3,600,000 2008 -B 7. Currently Assigned Bond Rating 8. Rating Agency [Attach written evidence of the current bond rating] Page 4 of 4 - Chief Financial Officer's Letter - Form SW1290 - August 9, 1999 9.02% 121.11% Aa3 Moodys LOWENTHAL SINGLETON WEBB & WILSON David A Lowenthal, CPA Patricia L. Webb, CPA P R O F E S S I O N A L A S S O C I A T I O N Audrey M. Odermann, CPA CERTIFIED PUBLIC ACCOUNTANTS 900 Massachusetts, Suite 301 Lawrence, Kansas 66044 -2868 Phone: (785) 749 -5050 Fax: (785) 749 -5061 E -mail: lswwepa@lswwepa.com Abram M. Chrislip, CPA Caroline H. Eddinger, CPA Grant A Huddin, CPA Brian W. Nyp, CPA Thomas H. Sewell, CPA Members of American Institute and Kansas Society of Certified Public Accountants Independent Accountant's Report on Applying Agreed Upon Procedures Mayor and City Commission City of Salina, Kansas We have performed the procedures enumerate below, which were agreed to by the City of Salina, Kansas, solely to assist the City in meeting the requirements of the Kansas Department of Health and Environment (KDHE), as specified in K.A.R. 28 -29 -2110, for the year ended December 31, 2007. The City is responsible for the subject matter of this engagement. This agreed upon procedures engagement was performed in accordance with standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is the responsibility of the specified users of the report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures that we performed were as follows: 1. We compared amounts and tested the computations to determine that the amounts for total annual revenues, total annual expenditures, cash plus marketable securities, annual debt service, long -term debt issued in the current year, and non - routine capital expenditures, as stated in the Financial Ratio Test section of the chief financial officer's letter dated January 21, 2009, were derived from the audited annual financial report of the City of Salina, Kansas, for the year ended December 31, 2007, and were adjusted according to the definitions in K.A.R. 28- 29- 2110(b). 2. We tested the computation of the ratios stated for liquidity and debt service and the use of funds in the Financial Ratio Test section of the chief financial officer's letter dated January 21, 2009, and found them to equal or exceed the requirements of K.A.R. 28- 29- 2110(c)(2). 3. We tested the computation of the ratio of total operating revenues to total operating expenditures, and the ratio of the sum of closure and post-closure costs to total operating revenues, and found them to equal or exceed the requirements in K.A.R. 28- 29- 2110(c)(5)(C) and K.A.R. 28-29-211 0(0(1)(A) or (B). 4. We noted compliance with K.A.R. 28- 29- 2110(c)(3) in the preparation of the annual financial statements of the City of Salina, Kansas, for the year ended December 31, 2007, in conformity with generally accepted accounting principles for local governments. 5. We noted compliance with K.A.R. 28- 29- 2110(c)(5)(D) in that the report of independent certified public accountants dated December 16, 2008, included a statement to the effect that the basic financial statements for the year ended December 31, 2007, "present fairly, in all material respects," the transactions and balances of the City of Salina, Kansas, on the basis of accounting described. We were not engaged to, and did not, perform an audit, the objective of which would be the expression of an opinion on the City of Salina Chief Financial Officer's letter to KDHE dated January 21, 2009. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is solely for the use of the City of Salina, Kansas, and KDHE, and 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. Professional Association January 23, 2009 709 agre d upon pros 07,dm Expenditures 2007 2007 Capital $peclal Projects General Fund Revenue Funtls Debt service Fund fund Total Expenditures from the Combined Statement of Revenues, Expenditures. and Changes in Fund Balances (Statement 2) $ 26,001 209 $ 11,673 508 $ Less Specifically Identifiable Capital Outlays $ 807,691 $ 2.489933 Net Governmental Funds Expenditures $ 25,193,518 $ 9.183,575 $ From the Combined statement of Revenues, Expenses and Enterprise Internal Service changes in Net Assets'. Funds funds Total Operating Expenses of Enterprise Funds before depreciation $ 14,195,130 Tool Non- operating revenues (net) of Enterprise funds (if negative) $ 135,111 Total Non - operating revenues (net) of Internal Service funds (if negative) Net Proprietary Funds Expenditures /Expenses $ 14,330,241 $ Total Expenditures Revenues 3,457,681 3,45],681 2007 Totals $41.132 397 $ 3.297 624 $37834,773 $14,195,130 $ 135,111 8 $14,330,241 $52 165,014 From the Combined Statement of Revenues, Expenditures, and Changes In Fund balance (Statement 2) $ 25,597,011 $ 14.015,420 $ 2879.485 $ 627,226 Total Revenues, Governmental Funds $ 25,597,011 $ 14,015,420 $ 2,879,485 $ 627,226 $43,119,142 From the Combined statement of Revenues, Expenses and changes in Net Assets'. Total Operating Revenues of Enterprise Funds Total Non - operating revenues (net) of Enterprise funds (if positive) Total Non - operating revenues (net) of Internal Service funds (if positive) Total Proprietary Fund Revenue Total Revenue all funds Current Operating Balance Cash and Current Investments General Fund Special Revenue Funds Debt Service Funds Enterprise Funds Intemal Service Funds Total Cash and Investments Enterpnse Internal Service Funds funds $ 19,879,220 - $ 180,809 $ 19.879220 $ 180,809 2007 $ 5782,466 $ 7,486,811 $ 1,210,457 $ 12,357,493 $ 3.543,495 $ 30,380,722 S20060,029 $53 179,171 $11 014,157 solid waste financial assurances breakeven xis 1Y 0/2009 Alternative Ratios and Misc. information for 2007 IA IB II f601BCietl Allernetve 1.(a) Sum of closure costs assured by financial Teal $ 2493,012 $ 2,493.012 $ 2.493 012 1-(b) Sum of costs assured by assured test $' 3206.006 $ 3,206,006 $ 3206 006 1, c Sum of closure and post- closure costs assured by financial as closure and $ 5,699.018 $ 5,699.018 $ 5,699.018 2. Total Revenues $ 63,179,171 $ 63,179,171 $ 63,179,171 3. Total Expenditures $ 52,185014 $ 52,165,014 $ 52,165,014 4. Cash and Current Investments $ 30,380,722 $ 30,380722 $ 30,380,722 5. Debt Service on Long Term Debt (From Statement 2, 4, notes) $ 6,687,535 $ 6,687535 $ 6,687,535 6. Capital Expenditures 8 12,088,491 $ 12088,491 $ 12,088,491 7. Long term Debt issued $ 14,087,496 $ 14,087,496 $ 14,087,496 ClosurelPost Closure as a percent of revenue (Line tc/Line 2) (Must be less than 43 %) 402% 9.02% 9.02% Revenues divided by expenditures greater than .95 121.11% 121.11% 121.11% Cash divided by Expenditures greater than 5% 5824% 542d %■ Debi Service divided by total expenditures less Than 20% 12 82% 12.62% Is long tens debt divided by Capital less than 2.0 1.1] S20060,029 $53 179,171 $11 014,157 solid waste financial assurances breakeven xis 1Y 0/2009 May 15, 2008 Mr. Jim Teutsch Operations Manager Department of Public Works, General Services City of Salina 412 East Ash Street Salina, KS 67401 Subject: 2008 Closure Cost Post- closure Cost, and Landfill Life Estimates Dear Mr. Teutsch: On behalf of the City of Salina, Camp Dresser & McKee Inc. (CDM) has prepared the enclosed • 2008 Closure Cost, Post - closure Cost, and Landfill Life estimates for the City of Salina Municipal Solid Waste Landfill (MSWLF), Permit #144. The enclosed forms are required in submittals related to financial assurance plan updates and operating permit renewals. Specifically, these forms should be submitted to the Kansas Department of Health and Environment (KDHE) by June 1, 2008. Please call me at (303) 383 -2300 or Monica Williams if you have any questions regarding these costs. • Very truly yours, Jame P.E. Project Engineer Camp Dresser & McKee, Inc. cc: Ron Rouse, City of Salina, landfill file 8558 - 58456 -Tsk2 amend consulting . engineering . construction - operations 2000 Set" cost cover.doc CDM • 55517th Street Suite 1100 Denver, Colorado 80202 tel: 303 383 -2300 fax: 303 3083003 May 15, 2008 Mr. Jim Teutsch Operations Manager Department of Public Works, General Services City of Salina 412 East Ash Street Salina, KS 67401 Subject: 2008 Closure Cost Post- closure Cost, and Landfill Life Estimates Dear Mr. Teutsch: On behalf of the City of Salina, Camp Dresser & McKee Inc. (CDM) has prepared the enclosed • 2008 Closure Cost, Post - closure Cost, and Landfill Life estimates for the City of Salina Municipal Solid Waste Landfill (MSWLF), Permit #144. The enclosed forms are required in submittals related to financial assurance plan updates and operating permit renewals. Specifically, these forms should be submitted to the Kansas Department of Health and Environment (KDHE) by June 1, 2008. Please call me at (303) 383 -2300 or Monica Williams if you have any questions regarding these costs. • Very truly yours, Jame P.E. Project Engineer Camp Dresser & McKee, Inc. cc: Ron Rouse, City of Salina, landfill file 8558 - 58456 -Tsk2 amend consulting . engineering . construction - operations 2000 Set" cost cover.doc • E CJ CLOSURE COST ESTIMATE WORKSHEET FOR MSW LANDFILL FORM 1 OWNER: City of Salina, KS PERMIT NO. 144 CURRENT PERMIT RENEWAL YEAR: 2008 TOTAL PERMITTED DISPOSAL AREA: 280 ACRES AREA CURRENTLY OPEN: 29 ACRES Total Volume of Site: 24,114,000 CU. YDS. CONVERSION FACTOR: 4840.02 SO. YDSJACRE CONVERSION FACTOR: 0.3333 YDSJFT. LARGEST AREA TO EVER BE OPEN AT ANY TIME: 29 ACRES (use this area for estimating closure costs) Contact Person/Cost Estimate Prepared By: Jim Kriss. P.E.. CDM Phone Number: 303- 383 -2300 Last edit date: April 14, 1699 Id 1*2 Note: Pages 1, 2, and 3 must be Submitted at the time of renewal. POST-CLOSURE COST ESTIMATE WORKSHEET FOR MSW LANDFILL FORM 2 OWNER:—City of Salina, KS PERMIT NO._144 OURRENT PERMIT RENEWAL YEAR:-2008— TOTAL PERMITTED DISPOSAL AREA:-280— ACRES (use this area for estimating post- claure wet) Total Volume of Site:_ 24,114,000 CU. YDS. CONVERSION FACTOR: 4640.02 SQ. YDS./ACRE CONVERSION FACTOR: 0.3333 YDS./FT. Contact Person/Cost Estimate Prepared By: Jim Kdas, P.E., CDM Phone Number. 303.383 -2300 ' No leachale collection system In original landfill; annual leachate collection calculated for Cells 1 through 4, approximately 48 acres. Leachate hauled In quantities of 3,000 gal/trip. Last edit date: April 12, 1998 1- 95113102 Note: Pages 1, 2, and 3 must be submitted at the time of renewal. • 0 ESTIMATED LIFE WORKSHEET FOR MSW LANDFILL FORM 3 OWNER: City of Salina, KS CURRENT PERMIT RENEWAL YEAR: 2008 CONVERSION FACTOR: 4840.02 SQ. YDSJACRE CONVERSION FACTOR: 0.3333 YDS.IFT. CONVERSION FACTOR: 2000 LBSJTON Landfill Site Data QUANTITY UNITS Total Site Area 640 'ACRES 2. Name or Phase: Cell 1 and Cell 2 19 ACRES Total Area Permitted to Receive Waste 280 ACRES 4. Name or Phase: ACRES Total Area Currently Open 29 ACRES Total Area That Received Final Cover 83 ACRES Identify Cells That Received Final Cover by Name or Phase AREA UNITS 1. Name or Phase: Original Area not Subtitle-D) 62 ACRES 2. Name or Phase: Cell 1 and Cell 2 19 ACRES 3. Name or Phase: 944.5 ACRES 4. Name or Phase: ACRES Life of Cell I Landfill Data QUANTITY UNITS Annual Average Tonnage Received (A)' 100,626 Tons Average Compacted Density of Waste 944.5 Ibs /CU. YD. Soil -to -Waste Ratio (C) r 0.167 CU. YDS. Calculation for Annual Volume QUANTITY UNITS Average Annual Volume CU. YDS. A x 2000)/B] x 1 + Cl 248,662 CU. YDS. Total Volume Capacity of Oripjnal Site 24,144,000 CU. YDS. Total Remaining Volume Capacity of Site 17,540,632 CU. YDS. Remaining Life of Landfill 70.5 YEARS Contact Person/Cost Estimate Prepared By: Jim Kriss P E CDM Phone Number: 303- 383 -2300 t Based on actual 2007 quantity of waste received (data from City of Selina) 28011 used for dally and Intermediate cover occupies landfill airspace. The still- to-waste ratio accounts for the landfill apace occupied by loll. Moat soil -to -waste nation estimates range from 1:3 (33 %) to 1:10 (10 %). KDHE recommends 1:8 (10.7 %). Last edit dale: April 14, 1998 1- 05113/02 Note: P8909 1, 2, and 3 must be submitted at the time of renewal. December 16, 2008 Mr. Rodney Franz Finance Director City of Salina City Hall 300 West Ash Salina, KS 67402 Dear Mr. Franz: Moody's Investors Service 100 N. Riverside Plaza Suite 2220 Chicago, IL 60606 Henrietta Chang Vice President/Sr. Analyst Tel: 312.706.9960 Fax: 312.706.9999 E -mail: henrietta.chang@moodys.com We wish to inform you that on December 4, 2008, Moody's Rating Committee reviewed and assigned a rating of Aa3 to Salina (City of) KS's General Obligation Internal Improvement Bonds, Series 2008 -8. In order for us to maintain the currency of our ratings, we request that you provide ongoing ;disclosure, including annual financial and statistical information. Moody's will monitor this rating and reserves the right, at its sole discretion, to revise or withdraw this rating at any time in the future. The rating, as well as any revisions or withdrawals thereof, will be publicly disseminated by Moody's through normal print and electronic media and in response to verbal requests to Moody's ratings desk. Should you have any questions regarding the above, please do not hesitate to contact me or the analyst assigned to this transaction, John Humphrey, at 312- 706 -9962. Sincerely, Henrietta Chang CC: MrrpavidArtcbern',, _ - Gcorgc K 13iau11 & CC0nippne, .. .� .. . Global Credit Research Moody's Inves"M serWea New Issue: Salina (City of) KS MOODY'S ASSIGNS Aa3 RATING TO THE CITY OF SALINA'S (KS) $3.6 MILLION GO INTERNAL IMPROVEMENT BONDS, SERIES 2008 -B Aa3 AFFIRMATION AFFECTS $32.7 MILLION OF OUTSTANDING DEBT Municipality KS Moody's Rating ISSUE RATING General Obligation Internal Improvement Bonds, Series 2008 -B Aa3 Sale Amount Expected Sale Date Rating Description Opinion $3,600,000 12/08/08 General Obligation New Issue 5 DEC 2008 NEW YORK, Dec 5, 2008 — Moody's Investors Service has assigned a Aa3 rating to the City of Salina's (KS) $3.6 million General Obligation Internal Improvement Bonds, Series 2008 -B. Concurrently, Moody's has affirmed the Aa3 rating on $32.7 million of the city's long term general obligation debt. Though ultimately secured by Salina's general obligation unlimited tax pledge, the city expects debt service to be repaid from TIF revenues. Proceeds will reimburse developer costs related to site preparation and improvements allowing for a retail development to occur. Assignment of the Aa3 rating represents the city's stable tax base which serves as a regional economic center, healthy reserve levels despite some expected near term declines, and an average amount of rapidly retired debt. STABLE TAX BASE SERVES AS REGIONAL ECONOMIC CENTER Located in Saline County 95 miles north of Wichita (general obligation rated Aa2 1stable outlook), the City of Salina's large $2.9 billion tax base has grown at a steady but relatively slow pace, averaging 4.2% annual growth over the past five years. Officials expect future AV growth to be weak as the impact of the national economic condition is felt locally. That said, no significant foreclosure or delinquency issues have arisen. 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. Management reports that the city's retail operations draw on an eight to ten county region extending west serving approximately 1.4 million residents. The Salina Airport Industrial Center is home to 80 organizations, with an aggregate 4,600 employees. Currently enjoying an occupancy rate of more than 90%, officials estimate that over 400 developable acres remain. Tenants include the Kansas Military Board, Hawker Beechcraft Corporation, and a campus of Kansas State University. Aviation related employment has seen some losses and though Salina does not have any direct Big 3 auto exposure, it does have several industries which are dependant on the auto industry in general. The city's population has increased in recent decades: the 2000 census population was 8% greater than the 1990 census population, and the 2006 estimated population of 46,458 was 1.7% greater than the 2000 census population. Income levels are below state and national medians and have declined in relative comparison in recent decades. Moody's believes that while the city's AV will likely grow at a weak pace, growth rates should remain positive, and given the city's position as a regional retail hub, Salina should continue to enjoy a level of economic stability. RESERVE LEVELS EXPECTED TO REMAIN WITHIN LEVELS COMMENSURATE WITH RATING CATEGORY DESPITE NEAR TERM REDUCTION With sound management, Moody's expects the city's financial health to remain satisfactory, despite revenue pressures and General Fund balance declines. The city posted a $1.2 million General Fund operating surplus in fiscal 2006, due in part to favorable interest income and unfilled vacancies in the police department. The fiscal 2006 ending General Fund balance of $8.2 million was a healthy 32% of General Fund revenues. Historically, the city has maintained General Fund balances near 30% of revenues and has a formal policy of keeping an unreserved General Fund balance of 15% to 20% of annual revenues. Audited 2007 results are still not available, owing to delays from a component of the city, but officials do not expect any changes form earlier projections which showed a General Fund decline in 2007 by approximately $1.1 million (on a cash basis), largely due to costs associated with two floods and an ice storm. The city expects FEMA reimbursement for a significant portion of the costs which it already has begun to receive The General Fund balance is projected to further decrease in fiscal 2008 and 2009 by $1.4 million and $200,000, respectively (these estimated draw downs are on a cash basis and do not factor in the FEMA reimbursement). The projected declines in reserves are due to expenditure pressures associated with increased fuel costs (which have eased some), increases in employee salaries and benefits (city employees are not unionized), and decreases in staff vacancies. Another factor in the projected General Fund balance declines is recent state legislation that increased property tax exemptions for new machinery and equipment. The new legislation, which took effect in 2006, is projected to shift some of the tax burden despite expected state aid that will make up a portion of the cuts (although this state aid is not on a one -to -one basis). This state aid will decline annually before phasing out completely in several years. Favorably, city officials have implemented and will continue to consider implementing alternate revenue raising options, including increasing property taxes (favorably, Kansas cities do not operate under state - imposed levy limits). The 2009 budget increased the total mill rate by 2, with the increase earmarked for debt service and funding for a new public transportation service. This mill rate increase offsets the aforementioned machinery exemption. Among the expenditure reductions the city is considering are cutting non - essential services and reducing non public safety headcount. Moody's believes that city officials will make the revenue and expenditure adjustments needed to resume structurally balanced operations. However, fund balance declines that exceed projections or cause the General Fund to be out of compliance with the city's stated policy could pressure credit quality. Typical of Kansas cities, sales tax receipts represent the city's primary revenue source, comprising 43% of fiscal 2006 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, both of which Flow into the General Fund, are used for general operations, and do not sunset. Both sales taxes have increased annually except for modest declines In 2003, with average annual increases of 3% over the past five years. Officials report that both sales tax receipts are continuing to grow in 2008, based on collections through October. Current year -to -date collections are up over 4% from last year. An additional 025% citywide sales tax is dedicated to capital projects. City officials recently received voter approval to renew and increase this rate to 0.4% with the extra 0.15% allocated for a new aquatic center. AVERAGE DEBT LEVELS; RAPID PRINCIPAL AMORTIZATION Moody's believes the city's debt levels will remain manageable given rapid principal amortization and continued moderate tax base growth. At 1.3% and 3.4 %, respectively, the city's direct and overall debt burdens are average, as are the debt per capita figures of $812 and $2,126 respectively. The city's overall debt burden is driven in large part by the significant debt levels of Saline County Unified School District 305 (GO rated A1). The current borrowing is made to ease floodplain issues to allow for a retail development to move forward. Kohl's is the anchor of the new development, which has room for several other infill sites to be developed. Officials believe that the Kohl's site alone (set to open spring 2009) should enable the development to cash flow the debt service with roughly 1.2x coverage. Principal amortization of the city's direct debt is rapid, with 76.9% of general obligation debt retired in ten years. The city generally issues a long term and short term debt once or twice per year to fund projects outlined in its Capital Improvement Plan. The city plans to borrow approximately $18 million in general obligation debt through 2012 to fund the city's capital plan. The principal methodology used in rating the district's Series 2008 -A and 2008 -B Bonds was The Determinants of Credit Quality, which can be found atwww.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory. This report updates the last rating action taken July 9th, 2008 KEY STATISTICS 2007 Population (Estimate): 46,458 (1.7% increase since 2000) 2008 Full Value: $2.8 billion 2008 Full Value per Capita (Estimate): $62,654 Direct Debt: 1.3% Overall Debt: 3.4% Payout (10 Years): 76.9% 2006 General Fund Balance: $8.2 million (31.8% of revenues) Unemployment Rate (9- 2008): 4.1 % 2000 Per Capita Income as a % of State: 90.7% (86.1 % of US) 2000 Median Family Income as a % of State: 91.6% (90.8% of US) Analysts John Humphrey Analyst Public Finance Group Moody's Investors Service Beth A. 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MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,400,000. Moody's Corporation (MCO) and its wholly -owned credit rating agency subsidiary, Moody's Investors Service (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 on Moody's website at www.moodys.com under the heading "Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy."