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2012-1 Temporary NotesTRANSCRIPT OF PROCEEDINGS AUTHORIZING THE ISSUANCE OF $1,485,000 CITY OF SALINA, KANSAS GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 Legal Opinion Gilmore & Bell, P.e. Kansas City, Missouri DATED JULy 15, 2012 CITY OF SALINA, KANSAS GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 DATED JULY 15, 2012 CLOSING LIST Copies of the transcript of proceedings for the above referenced issue (the "Notes"), will be prepared and distributed as follows: 1. City of Salina, Kansas (the "Issuer") 2. Attorney General of the State of Kansas 3. Country Club Bank, Prairie Village, Kansas (the "Original Purchaser") 4. George K. Baum & Company, Kansas City, Missouri (the "Financial Advisor") 5. Gilmore & Bell, P.C., Kansas City, Missouri ("Bond Counsel") Document Number PROCEEDINGS AUTHORIZING THE IMPROVEMENTS 1. East Magnolia Street Improvements PROCEEDINGS AUTHORIZING THE SALE AND ISSUANCE OF THE NOTES 2. Excerpt of Minutes of the governing body meeting evidencing adoption of Resolution No. 12-6910 3. Resolution No. 12-6910 authorizing the offering for sale ofthe Notes 4. Notice of Note Sale, Preliminary Official Statement and Certificate Deeming Preliminary Official Statement Final 5. Official Statement 6. Excerpt of Minutes of the governing body meeting evidencing acceptance of the best bid of the Original Purchaser and adoption of Resolution No. 12-6919 7. Resolution No. 12-6919 authorizing the issuance of the Notes and prescribing the form and details of the Notes CLOSING DOCUMENTS 8. Transcript Certificate Exhibit A ~ Schedule of Outstanding General Obligation Indebtedness 9. Uniform Facsimile of Signature Certificate 10. Specimen Note 11. Agreement Between Issuer and Agent 12. DTC Blanket Letter of Representations 13. Rating Letter -Moody's 14. Closing Certificate Exhibit A ~ Continuing Disclosure Instructions 15. Federal Tax Certificate with attachments as follows: ExhibitA ~ Internal Revenue Service Form 8038-G and evidence offiling Exhibit B ~ Receipt for Purchase Price Exhibit C ~ Receipt and Representation Exhibit D ~ Description of Financed Improvements Exhibit E ~ Sample Annual Compliance Checklist Exhibit F ~ Final Written Allocation Schedule 1 ~ Debt Service Schedule & Proof of Yield 16. Certificate of Financial Advisor LEGAL OPINIONS 17. Approving legal opinion of Gilmore & Bell, P.e. 18. Approval letter of Attorney General MISCELLANEOUS DOCUMENTS 19. Closing Letter 20. Letter from State Treasurer Confirming Registration Number * * * * * 11 EAST MAGNOLIA DESIGN (published in the Salina Journal on February • 2002) -- ORDINANCE NUMBER ClZ-1OOll AN ORDINANCE DESIGNATING CERTAlN STREETS AS MAIN TRAFFlCWAYS PURSUANT TO K.s.A. 12-685 AND DESIGNATING CERTAIN ADDmONAL STREETS AS TRAFFICWAY CONNEC110NS PURSUANT TO K.8.A. JU86, AND JlEPEALING ORDINANCE NUMBER 93.9561. BE IT ORDAINED by tho Governing.Body oltho City of Salina, Kansas: SectIon 1. The prirnazy function of the streets descn"bed in this section is hereby found Co be the movement of through 1raffic between areas of concentrated aeti~y within the city or between BUch meas within the oity and traffic facilities outside tho city performing the funotion of a major trafficway. based upon the following: -A. ASH STREET is a major oo11=tor street running cast from Broadway 8oulI:Vard to Ohio Street and is a principal strm carrying castlwcst ttafiie through the <:enter portion ~f the City. B. BELMONT BOULEVARD is a major arterial street running southwest fto~ Ohio Street to Ninth Street and ill 11 principal street caaying southwestlnortheast uaffic through the southeast portion otthe City. C. BROADWA Y BOULEVARD is a major arterial str~ Nnning west and south from North Ninth Street and Pacific Avenue and is Ii principal street carrying norIhIsouth traffic on the west side oCtbe City. D. CENT.ENNlAL ROAD is II major arterial street ruMing north from Waterwell Road to West Crawford Avenue and is a principal street carrying nor1hlsouth traffic tbrough the west portion of the City. E. CLOUD STREET is Il. major collector street running east from Centennial Road to the flood le\lee system east of Ohio Street and is a prinoipal street carrying cast/west traffic through the south-central portion of the City. F. COUNT.RY CLUB R.OAD is a major arterial street running west from the east city limit line Lo Marymount Road and is a principal street canying castlwcst traffic through the east-central portion of the City. G. CRAWFORD AVENUE is a Jnlijor arterial street running cast fiom one of the 1-13S interchanges into the City. to the east City limits and is a principal street carrying east/west traffic: Ihrougb. the central portion of the City. H. IRON AVENUE is a major arterlalstreet carrying traffic between the City's central and eastern commercial districts and is a principal strc:et canying eastfwest traffic through the north-cenlra1 portion of the City. 1. MAGNOUA ROAD is a major arterial street runni.o.g east from the west city limits to the east city limits and is a principal street carrying east/west traffic tbrougb the soulb. portion of the City. 1. M.ARKLEY ROAD is a major collector street running south from Crawford to Magnolia Road and is II priru;ipal street carrying northIsouth traffic through the east portion of the City. K. MARYMOUNT ROAD is a tru90r arterial street nmning II!lrtb from Cloud street 10 Country Club Road and is It princ:ipal street carrying north/south traffic through tho elISe portion o£tho City. L. NINTH STREET is a JlUIjor arterial stIcet from the north city limits, north of Interstate 10 to the south city limi1s near Waterwell Road carrying traffic between the City's nol1h central and southern commercial districts and is a principal street carrying north/south traffic through the eent:ra1 ponion of the City. M. NORTII STREET is a major arterial street running from the west city limitli to the elllt oity limits and is a principvJ strGot cenying oasVwest traffic through the north portiOt'l of the City. N. OHIO STREET is a major arterial street running south from one of the Intmtale 70 intc:rehanges to the SOl)th city limits and is the principal street canying northlsouth traffic on the east-central side of the City. O. PACIFIC AVENUE is a major arterilll street running east from Ninth Street to the east city limits and is a prinoipal street emying eastlwcst traffic through the north portion of the City. P. REPUBUC AVENUE is a major collector street rumiing cast from Centennial Road to the east city limit near the flood levee system and is a principal street canying eastlwe&t traffic through the south portion of the City. Q. SANTA FE AVENUE is a major arterial strc:ct running north from CWlin to Otis and is a principal street carrying north/south tzaffic through the centra! portion of the City. R. SCHILLING ROAD is a major arterial street numing west from Ohio Street to Arnold Avenue in the Airport Industrial Area and is a principal street carrying eastlwcst traffic through the south portion of the City. S. SOUTH STREET is a major collector street running east from Broadway Boulevard to Fourlh Street and is a principal street canying eastlwest traffic through the central ponion of the City. T . STATE STREET ls a major arterial street running east from Interstate 135 to the eentral business district and is a principal street carrying eastlwest traffic through the north portion of the City. u. WATER WELL ROAD is a major artcriaI street running west from Ninth Street through the sooth end of a mlljor industrial area to Airport Road. and is a principal street carrying east and west traffic between major industrial commereiaJ and ]nterstate 135 intc:rc:hanges. Section 1. That Ash Street, Belmont Boulevard, Broadway Boulevard, Centennial Road. Cloud Street.. Country Club Road, Crawford Avenue, [ron Avenue, Magnolia Road, MilflUey Road, Merymount Road, Ninth Street. North Street. Ohio Street, Pacific Avenue, Republic Avenue, Santa Fe Avenue, Scbilling Road. South Street, State Street, and Water Well Road arc lmcby designated and established as "main trafficways" pursuant to K.S.A. 12-68S. $eglon 3. To provide adequate COlUlectiOns with the Ohio Street main trafficway in order to relieve traffic congestion and mitigate traffic safety issues related \0 the construction of the North Ohio Railroad Overpass and related improvements it is necessary to cstablisb the foUowing as ~cweyconnectio~ A. V AN HORNE STREET -At and ncar its coNlceUon with North Ohio Street B. YORK STREET -At and near its connection with North Ohio Street. C. UNNAMED FRONTAGE ROAD -To be established on former North Ohio Streel right-of-way to connect area streets with realigned North Ohio Sueet. Section 4. Thet Ordinance Number 93-9562 is hereby repealed. Sed!oll 5. That this oniinancc shall be in full force and effect from and after its adoption and pubUcation once in the officlal city newspaper. [SEAL] A'J'TEST: Lieu Ann Nicola. City Clerk Introducec:l; FebNary II. 2002 Pasced; February 25. 2002 • Affidavit of Publication Ord. No. oz,lOO7l Following la a true and aorreot c:opy 0' __ . _________________ ..,-. _______ _ togGtller willi proof of publlcallon 01 the same. AFFIDAVIT 1. ____ -=Kim=::.,.!..N;:,:ol:!.JW~o~od=-__ • belnoduly IIWOr". declare Ihal I am Ihe A<lvettlslng Maneger 01 THE SA~INA JOURNAl.. a dailV newspaper publ/ahltd 41 SclII"a, 98111'10 Counly, Kansas, atld of 9.noral olrcul&llon In 8ald ON. No. 02-10071 has been oorrectly published 10 said newspaper __ 1 __ II~ Commission Action # CITY OF SALJNA, KANSAS REGULAR MEETING OF THE BOARD OF COMMISSIONERS February 11,2002 4:00p.m. The City Commission convened at 3:30 p.m. for a Citizen Open Forum. The Regular Meeting of the Board of Commissioners was caned 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 Kristin M. Seaton, Chainnan presiding, Commissioner Deborah P. Divine, Commissioner Don Heath, Commissioner Alan E. Jilka, Commissioner Monte D. Shadwick Absent: None. ADMINISTRATION (8.2) First reading Ordinance No. 02-1007] designating certain streets as main trafficways and designating certain additional streets as trafficway connections. 02-3184 Moved by Commissioner Shadwick, seconded by Commissioner Divine, to pass Ordinance No. 01-10071 on first reading. Aye: (5). Nay: (0). Motion carried. ADJOURNMENT 02-3191 Moved by Commissioner Shadwick, seconded by Commissioner Heath, that the Regular Meeting of the Board of Commissioners be adjourned. Aye: (5). Nay: (0). Motion carried. The meeting adjourned at 5:41 p.m. (SEAL) ATTEST: lsI Lieu Ann Nicola Lieu Ann Nicola, City Clerk l§! Kristin M. Seaton Kristin M. Seaton, Mayor I hereby certify that the foregojng is a true correct excerpt of the action taken by the Governing Body at its regular meeting on February 11,2002 regarding Ordinance No. 01-10071. Li~erk Commission Action # . CITY OF SALINA, KANSAS REGULAR MEETING OF THE BOARD OF COMMISSIONERS February 25, 2002 4:00p.m. The City Commission convened at 3:30 p.m. for a Citizen Open Forum. The City Commission also met in a Study Session after the regular meeting for a CityfUSD 305 Programs Briefing. 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 Kristin M. Seaton, Chairman presiding, Commissioner Deborah P. Divine, Commissioner Don Heath, Commissioner Alan E. Jilka, Commissioner Monte D. Shadwick Absent: None. ADMINISTRATION (8.1) Second reading Ordinance No. 02-10071 designating certain streets as main trafficways and designating certain additional streets as trafficway connections. 02-3193 Moved by Commissioner Shadwick, seconded by Commissioner Jilka, to adopt Ordiance No. 02-10071 on second reading. A roll call vote was taken. Aye: (5) Divine, Heath, Jilka, Shadwick, Seaton. Nay: (0). Motion carried. ' ADJOURNMENT 02-3198 Moved by Commissioner Jilka, seconded by Commissioner Divine, that the Regular Meeting of the Board of Commissioners be adjourned. Aye: (5). Nay: (0). Motion carried. The 0 meeting adjourned at 4:32 p.m. [SEAL] ATTEST: Lieu Ann Nicola Lieu Ann Nicola, City Clerk /s/ Kristin M. Seaton Kristin M. Seaton, 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 February 25, 2002 regarding Ordinance No. 02-10071. ~. Lieu Ann Elsey, Gity Clerk I I I RESOLUTION NUMBER 11-6812 A RESOLUTION INITIATING PROCEEDINGS BY THE GOVERNING BODY FOR STREET AND INTERSECTION IMPROVEMENTS IN THE CITY 0.F SALINA, KANSAS. WHEREAS, by the adoption of Ordinance No. 02-10071 on February 25, 2002, the Governing Body of the City of Salina, Kansas (the "City"), designated Magnolia Road as a main trafficway pursuantto K.S.A. 12-685 et seq. (the "Acq; and WHEREAS, the Governing Body of the City has determined that it is necessary to improve or reimprove portions of said main trafficway as follows: Reconstnlction of Magnolia Road from Ohio Street east to a point approximately 600 feet east of the flood protection levee, to include road bed improvements; surfacing, curb, gutter and storm drrunage imptovements; traffic control devices and improvements; and all other improvements necessary and related thereto (the "Improvements");' and WHEREAS, reports, estimates and pJ~ns have been compiled and furnished to the Governing Body of the City to provide them with sufficient information in order to enable them to commence proceedings for the construction of the lmp~ovements. NOW THEREFORE BE IT RESOL VEn by 'the Governing Body of the City of Salina, Kansas: Section 1. Proceedings are hereby initiated pursuant to the provisions of the Act for the p~rpose of proceeding with the Improvements. Section 2 .. The City Manager and other City 'staff are authorized to take all necessary actions to proceed with t~e Improvements. Section 3. It is anticipated that the cost of the Improvements shall be paid from funds of the City available for such purpose and/or by. the City-at-Iarge through the issuance of one or more series of general obligation bonds of the City as provided by the Act, and pending the issuance of said bonds, through the issuance of one or more series of temporary notes. of the City, the estimated maximum principal amount of sueh obligations being $4,500,000.00, plus costs of issuancc and plus costs of interest on any temporary fmancing. Section 4. The City expects to make capital expenditures on and after the date of adoptio'n of this Resolution in' connection with the Improvements, and intends to reimburse itself [or such :expenditures with the proceeds of one or more series of general obligation bonds and/or tcmporary notes of the-City in the estimated maximum principal amount of $4,500,000.00, plus costs of issuance and plus costs of interest on any temporary financing. Section S. This resolution shall be in full force and effect from and after its adoption. Adopted by thc Board of Commissioners and signed by the Mayor this 8th ay of March, 20 J 1. Mayor (SEAL) ATTEST: CITY OF SALINA, KANSAS REGULAR MEETING OF THE BOARD OF COMMISSIONERS March 28, 2011 4:00p.m. The City Commission convened at 2:30 p.m. in a Study Session for Financial Updates. 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 Aaron G. Peck, Presiding Officer Commissioner Samantha P. Angell Commissioner Norman Jennings Commissioner M. Luci Larson Commissioner John K Vanier comprising a quorum of the Board, also present Jason A. Gage, City Manager Greg Bengtson, City Attorney Lieu Ann Elsey, City Clerk ADMINISTRATION (8.2) Resolution No. 11-6812 initiating proceedings for sheet and intersection improvements on East Magnolia Road. 11-0088 Moved by Commissioner Angell, seconded by Commissioner Larson, to adopt Resolution No. 11- 6812. Aye: (5). Nay: (0). Motion carried. ADJOURNMENT 11-0093 Moved by Commissioner Vanier, seconded by Commissioner Larson, that the regular meeting of the Board of City Commissioners be adjourned. Aye: (4). Nay: (1) Jennings. Motion carried. The meeting adjourned at 6:04 p.m. [SEAL] ATTEST: /J/LtewA IU1/Ef4e;y Lieu Ann Elsey, CMC, City Clerk /J/S~p' Angel? Samantha P. Angell, Vice-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 March 28, 2011 regarding Resoltl-tion No. 11-6812. Page 1 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 (S.3) General Obligation Bonds and Temporary Notes (S.3a) (S.3b) (S.3c) (S.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: hi L[e{,v A vwv E'4e;y Lieu Ann Elsey, CM C, City Clerk 1M NO'V/'PU'L1I1.I fv!. ~ 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 Numbers 12-10642 and 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 20l2-A, GENERAL OBLIGATION REFUNDING BONDS, SERIES 20 12-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: OrdJRes. No. Res. 11-6812 Res. 12-6904 Res. 12-6902 Authority K.S.A. 12-685 et seq. K.S.A. 12-6aO I et seq. K.S.A. 12-6aO I et seq. 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 ofthe 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 of the 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 Ord.lRes. No. Ord.12-10633 Authority K.S.A. 12-6aOl 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 tile Bond Improvements (the "Refunded Notes"): ; and Series 2011-1 Dated Date July""i5,20 II 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 Amount Date 2003-A July 15,2003 2014 $4,350,000 $1,765,000 $1,125,000 October 1, 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 pennanentiy 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 di~tribution 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 2011-1 (the "Notes," and together with the Series 2012-A Bonds and the Series 2012-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 of the 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 su bscribe 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 11, 2012. (SEAL) ATTEST: (Signature Page to Sale Resolution) To: [Purchaser Name] [Purchaser City, State 1 [Purchaser Name 1 [Purchaser City, State 1 [Purchaser Name 1 [Purchaser City, State 1 EXHIBITA CERTIFICATE REGARDING PRELIMINARY OFFICIAL STATEMENT June 11,2012 Re: Approximately $ ____ General Obligation Internal Improvement Bonds, Series 2012- A, $ General Obligation Refunding Bonds, Series 2012-8 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 behalfofthe 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)(I) 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. Wntten 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 Clty 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 20l2-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 meanmgs 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 mcurred 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 transmir payment of principal of, premium, if any, and mterest 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, supervismg or reviewing the records maintained by DTC its participants or persons acting through such participants. In the event that: (a) DTC determmes not to continue to act as securities deposItory for the Notes, or (b) the Issuer detem1ines 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 discontmue the book-entry-only fom1 of regIstration with DTC. If the Issuer fails [0 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 fom1 of fully registered certificates. Reference is made to the Prehmmary Official Statement for further infonnatJOn 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 govemmg 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 obliganons of the Issuer payable as to both principal and interest from the proceeds of general oblIgatIOn bonds of the Issuer, and if nOI so paid. from ad valorem taxes which may be levied wlthout limitatJon as ro rate or amount upon all the taxable tangible property. real and personal. withm the territonal limits of the Issuer. The full faith. credit and resources of the Issuer are irrevocably pledged for the prompt payment of the pnncipal and imerest 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 1 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 m principal installments on October 1 in the years as follows: Year Principa} Principal Amount 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 detennined when the Bonds are sold as heremafter provided, which interest will be payable semiannually on April 1 and October 1 in each year. begJ.nning on April L 2013 (the "Interest Payment Dates"). Place of Payment. The principal of and interest on the Bonds will be payable m 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 sunender 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 Re.!:,>1stered Owner; or (b) in the case of an Interest payment to Cede & Co. or any Owner of $500,000 or more m aggregate principal amount of Bonds, by WIre transfer to such Registered Owner upon wntten notlce glven to the Paymg Agent by such Registered Owner. not less than 15 days prior to the Record Date for such interest, contammg the wire transfer address to which such Re.!:,>1stered Owner wishes to have such WIre directed. Bond Registration. The Bonds will be regJ.stered 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 incuned ill 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 beneficial owner will receive certificates representing their interests in the Bonds. During the term of the Bonds, so • Preliminary: subject to change as provided in "Adjustment ofIssue Size." herein. " .J 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 \vith 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 detennines not to continue to act as securities depository for the Bonds, or (b) the Issuer detennines that continuation of the book-entry-only fonn 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 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 Bonds in the fonn of fully registered certificates. Reference is made to the Official Statement for further infonnation 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 Authonzed Denommation, 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 Redemptiol1. At the option of the Issuer, Bonds matunng on Ocrober 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 detennined 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 Redemptio11. A bidder may elect to have all or a portion of the Series 2012-A Bonds or the Series 2012-B Bonds scheduled to mature in consecutive years issued as tem1 bonds (the "Tenn Bonds") scheduled to mature in the latest of said consecutIVe years and sub.1ect 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 converted to Teml Bonds with mandatory redemption requirements; and (b) a bidder shall make such an election by compJetmg the applicable paragraph on the Official Bid Fonn or completmg the applicable infonnation on PARITyi" Notice and Effect of Call for Redemptio11. 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 shali 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 111 United States first class mail not less than 30 days prior to the date fixed for redemption . .AJI 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 SecUlities 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 mterest on such Bond shall cease fro111 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 1 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 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 Series 20i2-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 goveming body of the Issuer (collectively the "Series 2012-B Bond Resolution") for the purpose of refundmg 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 propeny, 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 interesr on the Bonds as the same become due. THE NOTES AND THE BONDS Adjustment of Issue Size. The Issuer reserves the right to lDcrease or decrease the total pnncIpal amount of the Obligations, and the principal amount of any matunty, depending on the purchase price and mterest 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 mterest 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 princlpal amount of the Obligations or prinCIpal of any matunty as described herein, provided however that the total principal amount of each senes of Obligations will not be changed by more than J5(j'i, within consent of the Successful Bidder(s). If there is an increase or decrease in the final aggregate pnncIpal 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 111 wntmg, no later than 4:00 p.m .. central tUl1e, 011 the Sale Date. The net producllon as a percentage of the principal amount of the Obhgations generated fi'om 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 forms 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-J," "Proposal for General Obligation Internal Improvement Bonds, Series 20l2-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"" 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(j<" 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@!. lnfonnation about the electronic bidding services of PARITYO(' may be obtained from i-Deal LLC at 1359 Broadway, 2nd Floor, New York, New York 100]8, 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 mterest rate shall apply to all Bonds of the same maturity year. Each mterest rate specified shall be a mUltiple of 1/8 or 1/20 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. For the Notes: The same interest rate shall apply to all Notes. Each interest rate specified shall be a muluple of III 00 of 1 (/(1. No interest rate may exceed a rate equal to the daily yield for J O-year treasury bonds pubhshed by The Bond Buy('/' in New York. New York, on the Monday next preceding the day of which the Notes are sold. plus 6<;-i,. No bid of less than 99.25% of the principal amount of the Notes and accrued interest thereon to the date of del1very 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 term 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 infoDnation contained on the Official Bid FOl1n: the Issuer will be entitled to rely on such certIfication. Each bidder ab'Tees 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. F or 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 tenns 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 Tune on the next business day following the Sale Date. If such funds are not receJVed 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 tune the amount of said Deposit shall be returned to the Successful Bidder or deducted from the purchase pnce at the option of the Issuer. If a bid is accepted but the Issuer fails to dehver the Obligations to the Successful BIdder in accordance with the tenns 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 retamed by the Issuer as and for liquidated damages. Basis of Award. For each senes of Bonds: The award of the Bonds will be made on the basis of the lowest true mterest cost ("TlC"), which will be detennined as follows: the TIC is the discount rate (expressed as a per annum percentage rate) which. when used m computmg the present value of all payments of pnncipal and interest to be paid on the Bonds, fr0111 the payment dates to the Dated Date, produces an amount equal to the price bId, includmg any ad.lust1l1ent~ 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 respectlVe bids, which shall be considered as mfonnative only and not bmding 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 mterest 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 goveming body of the Issuer will determine which bid, if any, will be accepted, and its detem1ination 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 determination 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 shall 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 polley of municipal 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 msurer must be set forth on the bidder's Official Bid Forn1. 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. CDSIP Identification numbers will be assii:,'11ed 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 printmg of CD SIP 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 Obhgations 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 usual 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 available 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 plices 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 How; such initial offering p17ces to the public shall be provided to the Issuer or the Financial Advisor 110t more than 20 minutes after requested by the Issuer or the Financial Advisor. At the request of the Issuer, the Successful Bidder will provide information 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 reb'Ulation 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 Prelimmary Official Statement dated June 11. 2012, "deemed final" by the Issuer except for the omission of certain infonnation as provided in the Rule. copies of which may be obtamed 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 coples thereof. which may be in electronic fonnat, in order for the Successful Bidder to comply with the reqmrements of the Rule and Rule G-32. AdditJOnal copies may be ordered by the Successful Bidder at lts expense. Continuing Disclosure. In the Note Resolution and the Bond Resolutions. the Issuer has covenanted to provlde annually certam financlal mfonnatlon and operatll1g data and other infonnatJOl1 necessary to comply with the Rule, and to transmit the same to the MUllJcipal Securities Rulemaking Board. This covenant is for the benefit of and is enforceable by any Reglstered Owner of the Obhgations. For further inforn1arion. reference is made to the captJOl1 "CONTINUING DISCLOSURE" 111 the Prelnnmary 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 ............................................................ . Tangible Valuation of Motor Vehicles ................................................. . Equalized Assessed Tangible Valuation for Computation of Bonded Debt Limitations ................................ . $402,354,576 47,406,062 $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 Wi-itten 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 4801 Main Street, Suite 500 Kansas City, Missouri 64112 Attn: David Arteberry Phone No.: (816)474-1100 Email: artebelTy@gkbaum.com 10 TO: OFFICIAL BID FORM PROPOSAL FOR THE PURCHASE OF CITY OF SALINA KANSAS GENERAL OBLIGATION TEMPORARY NOTES Lieu Ann Elsey. Clerk Clty of Salma, Kansas July 9. 2012 For $1.485,000' principal amount of General Obligation Temporary Notes, Senes 2012-1. of the City of Salina, Kansas, to be dated July 15,2012, as desclibed m your NotIce of Sale dated June 11. 2012, said Notes to bear interest as follows: Maturity August 1 2013 Principal Amoun( $1.485,000 Interest Rate ---_% the undersigned will pay the purchase pnce for the Notes set forth below, plus accrued interest to the date of delivery Pnncipal Amount ..................................................................................................................................... $1.485.000.00 Less Discount (not to exceed 0.75%) ................................................................................ -_________ _ Plus Premium (if any) ......................................................................................................... _________ _ Total Purchase Price ....................................................................................................... $ __________ _ Total interest cost to matunty at the rate(s) specified ..................................................... $ __________ _ Net Interest cost ............................................................................................................... $ _________ _ Average annual net interest rate ..................................................................................................... ______ %, TIm proposal is subject to all terms and conditions conta1l1ed 111 saJd Notice of Note Sale. and if the underSIgned IS the Successful BIdder. the underSIgned will comply wIth all of the provisJOns contal11ed 111 saId Notice, The acceptance of this proposal by the Issuer shali constItute a contract between the Issuer and the Successful BIdder for purposes of complY111g wlth Rule 15c2-12 of the SecuntJes and Exchange CommISSIon, Submltled by: _____________ _ (LIST ACCOUNT MEMBERS ON REVERSE) By: _______ ----- Telephone No. ACCEPTANCE Pursuant to action duly taken by the Govemmg Body of the Cny of Salma. Kansas. the above proposal IS hereby accepted 011 July 9. 2012, Anest· Clerk Mayor NOTE No addJtlom, or alterations JJ1 the above proposal foml shall be made. and any erasurcs may causc reJectIOn oj an> blJ Scaled blds may be filed wllh the Clerk. Lieu Ann Else\,. 300 west Ash. Salma. Kansas 67402. facslllllie bld, mav be filed wnl! tne Clerk. Fax No, (nS)30Y· 573801 electromc bIds may be SUbl;1ltted via PARITY". at or prior to 2:00 r.m .. Central Tlme. -on July 9. 2012 Any bJd rGcelved afier such tJmc will not bi;; 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 Salma. 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' prmclpal amount of General ObhgatlOn Internal Improvement Bonds, Senes 2012-A. of the City of Salina. Kansas. to be dated July 15.2012. as described m the Notice of Sale dated June 11.2012. said Bonds to bear mterest as follows: Stated Annual Stated Annual Maturity Principa! Rate of Marurity Principal Rate of October 1 Amount Interest October 1 Amount Interest 2013 $130,000 0' 10 2021 $160,000 <;to 2014 140,000 '/0 2022 160.000 % 2015 145.000 o· /(l 2023 165,000 % 2016 150.000 '/0 2024 170,000 % 2017 150.000 % 2025 175,000 % 2018 155.000 OJ!) 2026 175.000 '/0 2019 155.000 <jo 2027 180,000 <;"0 2020 ISS.OOO ~o the underSIgned wi]] pay the purchase pncc for the Bonds set forth below, plus accrued mterest to the date of dehvery. Pnncipal Amount ...................................................................................................................................................... $2.365.000.00 Plus PremIum (If any) ............................................................................................................................ _________ _ Total Purchase Pnce .................................................................................................................... 5, _________ _ Total mterest cost to matunty at the rates speCIfied ........................................................................ ~ _________ _ Net mterest cost (adjusted fOl PremIum) ................................................................................ $ _________ _ True Interest Cost ...................................................................................................................... .. o The BIdder elects to purchase MUl1lclpal Bond Insurance from [Assured] [AGM] [ _______ --l] CIrcle one or complete blank o The Blddel elects to have the tollowlI1g Term Bonds: Marurity Date Years Amount" October 1. to 5> _____ _ October I. \(\ 5> _____ _ "subJect to mandatory redemptIon reqUIrements 111 the amounts and at the tlInes shown above ThiS proposal IS sublect to all tem1S and condltJons conta1l1ed 111 saId NotIce of Sale. and If the underSIgned is the Successfu I BIdder. the underSIgned WIll comply WIth all of the provISIOns contamed m saId NotIce. A. cashler's or certIfied check.. a wIre transfer or a qualIfied financial surety bond m the amount ofSi47.300.00 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 constltute a contract between the Issuer and the Successful BIdder for purposes of complymg WIth Rule 15c2-12 of the Securities and Exchange CmTI1l1lssJOnJ and a bond purchase agreement for purposes of the laws of the State of Kansas. (LIST ACCOUNT MEMBERS ON REVERSE) ACCEPTANCE SubmItted by. _______________ _ By Telephone NCI, Pursual11 to actJOn duly taken by the Governmg Body of the City of Salma. Kansa,. the above proposal IS hereby accepted on July 9. 2012. AtTest Clerk Mayor NOTE. N(' addItIons or alterations m the above proposal form 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. Salma. Kansas 67402, faCSImile bids may be filed WIth the Clerk, Fa', No. (785)309. 57311 or electrol1Jc bIds may be subnutted vIa PARlnli<. at or pnor to 1 :()() p.m.. Central TIme, on July 9, 2012 Any bid receIved after such tIme will not be accepted or shall be retumed to the bIdder. PreiJl11inary: subject to change as provided in Notice of Sale TO LIeu Ann Elsey. Clerk City of Salma, Kansas OFFICIAL BID FORM PROPOSAL FOR THE PURCHASE OF CITY OF SAUNA. KANSAS GENERAL OBLIGATION REFUNDING BONDS July 9. 2012 For £3.760.000' pnncipal amount of General Obligation Refunding Bonds, Senes 2012·B. of the City of Salina. Kansas. to be dated July 15.2012, as descnbed In the Notice of Bond Sale dated June 1 L 2012, s31d Bonds to bear Interest as follows. Stated Annual Stated Annual Maturit~ Principa! Rate of Maturity Principal Rate of October 1 Amount Interest October I Amount Interest 2013 $370,000 % 2017 $485,000 '1(1 2014 935.000 %) 2018 470,000 % 20]5 625.000 0' /0 20J 9 235.000 % 2016 460.000 <}o 2020 180.000 % the underSIgned will pay the purchase pnce for the Bonds set forth below, plus accrued mterest to the date of delivery Pnnclpal Amount .................................................................................................................................................... $3.760.000.00 Plus PremIUm (If any) ........................................................................................................................ _________ _ Total Purchase Price ......................................................................................................................... 5> _________ _ Total Interest cost to matumy at the rates specified ....... ...... .. ............... . . ... . ....................... 5, _________ _ Net mterest cost (adjusted for PremIum) .................................................................................... $ _________ _ True Interest Cost ........... ..... . .. ............. .... .. ............ . ------~() o The BIdder elects to purchase MUnICipal Bond Insurance from [Assured] [AGM] [ J Circle one or complete blanl,. o The Bidder elects to have the follOWing Tenn Bonds' Maturity Datr Years AmounF October I. to $ _____ _ Octobel I. to $ _____ _ , subject to mandatory redemption reqUIrement, In the amounts and at the tnnes shown above. Thl, proposal IS subject to all teml, and cond!l1ons contained In smd Notice of Bond Sale. and If the underSigned IS the Successful BIdder. the underSIgned will comply WIth all of the prOVISIons contamed Jl1 s31d NotIce. A cashler's or certIfied check. 3 wIre transfer or a qualified financJaI surely bond m the amount of $75.200.00 payable \(1 the order of the Issuer. accompames tillS proposal as an eVIdence of good f31th The acceptance of this proposal by the issuer shall constItute a contract between the Issuer and the Successful Bidder for purposes of complYing WIth Rule 15c2·12 of thl SecunTle" and E).change CommIssIon and ;\ bond purchase agreement for purposes of the laws of the State of Kansas (LIST ACCOUNT MEMBERS 01'\ REVERSE) ACCEPTANCE Submitted by By; Telephone 1\,0 PUlsuanc \(l action duly taken b: the G()VC1l1Jl1g Bod) (I: tile em of SaiJl1J.. Kansa" the abovc proposal IS hereby acccmed on r uiy <.J. 2012 b,.ttest Clerk Mayor NOTE' 1\,0 addit](lTIs or alteratlOD> In the above prop()~a) form shall he made. and any erasures may cause re]ect]()n 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 (n5)309· 5738 or eiectromc bIds may be submitted vIa PARITY"'. at or pnor to ] ;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 DATED JllNE 20, 2011 In the opll1ion o/Gilmore & Be!!, P.e.. Kansas City. Missouri, BOl1d Counsel. under existing law and assuming continued compliance with certain requirements of the Intcl71al Revenue Code of 1986, as amended (the "Code 'J, the interest on the Notes and Bonds [(including any original issue discount properlv allocable to an owner thereof)] is (a) excluded from gross income forfederal income tax pUiposes and 0) not an item of tax preference for pUlpOSCS of the federal alternative minimum tax imposed on individuals and cOlporations. but is taken into account in determining adjusted CUiTent eamlngs for the pUll)ose of computing the alternative minimum tax Imposed on cel1ain cOlporations. The interest on the Notes and Bonds is exempt from II1come 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 chan2:e) 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 denommation of $5,000 or any mtegral multiple thereof. The Notes shall be mlt1ally registered in the name of Cede & Co" as nominee of The Depository Trust Company ("DTC"). New Yor!.... New York. to whIch payment of pnnclpal and interest wIll be made. lndlvidual purchases of Notes will be made in book-entry foml. Purchasers wi]] not receive certificates representing their interest in the Notes purchased Interest on the Bonds wlll 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 Paymg Agent"). The Notes are not subject to redemptJOI1 pnor to matunty. The Series 2012-A Bonds (the "Senes 2012-A Bonds") and the Senes 2012-B Bonds (the "Series 2012-B Bonds" and, collectively with the Senes 2012-A Bonds, the "Bonds") Will be issued as fully registered bonds m the denommation of $5.000 or any integral multiple thereof. The Bonds shall be imtially registered m the name of Cede & Co., as nominee of DTe to which payment of prmcipal and mterest 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 herem. Interest on the Bonds will be payable semiannually on Apnl 1 and October 1 of each year until mammy. commencing on April 1. 2013 The pnnclpal of and mterest on the Bonds will be payable by check. draft.. or WHe transfer from the Treasurer of the State of Kansas (the "Bond Paying Agent"l. The Bond~ are subject to redemptlOl1 at the OptJOll of the City as further de~cribed herein. MATURITY SCHEDULES (see inside front cover) Tlie fu II falth, 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" herem. 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. 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 TI·IIS COVER PAGL CONTAINS INFORMATION FOR QUICK REFERENCE ONLY IT IS NO'[ A SUMMARY OF THE ISSUE INVESTORS MUST READ THE L"TIRr OFFICIAl STATEMENT TO OBTAIN INFORMATION ESSENTlAL TO THE MAKING or AN INFORMED INVESTME~T DEC1SIOl\ MA TURITY SCHEDULES $1,485,000 (subject to chan'ge) GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 Maturitv 08-01-13 Amount $1.485.000 The Notes are not subject to redemption pnor to maturity. $2,365,000 (subject to change) Base CUSIP(1) 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 10-01-1 g 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(1) 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 3:370.000 935.000 625.000 460.000 485.000 470,000 235.000 180,000 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 paTt 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. (/)CUSlP numbcrs h01'(" been aSSlf!'ned to tl11S Hsue 01' Standard & Poor '.I' (,US! P Sen'lce Bureau, a dl1'ISIOIl of the McGraw-Hill Compa!1les, Inc. and are /I1c1uded solelv for the con1'enlence of the Owners of the NOles and Bonds Neither the 01]' nor the Underwrllers shall be responsible for (he sdc-cllOn or correClness of the-CUS/P numbers sel forlh aho1'( 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 Fmance and AdmIl1lstratlOl1 LIeu Ann Elsey. City Clerk CITY ATTORNEY Greg Bengtson Clark, Mize & Lmville. Chartered Salina. Kansas BOND COUNSEL Gilmore & Bell. P.C Kansas CIty. Missoun FINANCIAL ADVISOR George K. Baum & Company Kansas City. MIssouri No person has been authorized 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 information or representations not so authorIzed must not be rehed 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 mformatIon presented herem, 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 summanes and are qualIfied in their entirety by reference to sud laws and documents. Information and expressions of opinion herem are subject to change without notice and neither the delIvery of this Offic1al Statement nor any sale of the Bonds shall. under any circumstances. create any 1mplication that the 1l1fonnation conta1l1ed herem has remained unchanged smce the respective dates as of which such mformation is given. TABLE OF CONTENTS Page INTRODUCTORY STATEMENT.................................................................................................... 1 THE NOTES ...................................................................................................................................... ::: 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 TAXMATTERS ........................................................................................................................... 15 RATINGS........................................................................................................................................... 16 FINANCIAL ADVISOR...................................................... .............................................................. 16 UNDERWRITING ................ ..... ........ ............................ ...... ............ ..... ........ ........... ................... ..... 1 7 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 CIT')l................. ..................................... A-6 DEBT SUMMARY OF THE CIT'/............................ ................. ....... ...... ..... ........... ........... A-8 FINANCIAL INFORMATION CONCERNING THE CITy..................................................... A-11 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 OBLIGA TION INTERNAL IMPROVEMEl\TT BONDS SERIES 2012-A $3,760,000 (subject to change) GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B n,TRODUCTORY STATEMENT The purpose of tIm Official Statement is to present certain mfonnation concermng the City of Salma, Kansas (the "City"). and the Issuance of Its $1.485,000 (subject to change) General ObligatIOn Temporary Notes. Senes 2012-1 (the "Notes"). Its $2.365.000 (subject to change) General Obligation Internal Improvement Bonds. Senes 2012-A (the "Senes 20 J:~-A Bonds"), and its $3.760.000 (subject to change) General Obliganon Refunding Bonds. Sene~ 2012-B (the "Series 2012-B Bonds" and collectIVely WIth the Senes 2012-A Bonds. the "Bonds"). all dated July 15.2012. The Notes and the Bonds are be1l1g Issued to provide funds to finance certa1l1 water. sewer. and street improvements wlthm the Cny and to refund portIOns of three outstanding bond Issues of the CIty. See THE FINANCING PLAN herem. The full faith. credit. and re<;ource5 of the CIty are irrevocably pledged for the prompt payment of the pnnclpal and mterest on the Notes and Bonds as the same becomes due. See THE NOTES -"Secunty" 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 mformatlOn presented herein has been compiled by the City"s financial advisor. George K. Baum & Company. Kansas City. Mlssoun (the "FlI1an clai Advisor") Such mformatlOn has been prOVIded by the Cny and other sources deemed to be reliable The presentatIon of mformatlOn herein is mtended to show recent histonc mformatlOn and IS not mtended to mdicate future or contlI1uing trends m the finanCial posItIOn or other affairs of the City. Gilmore & Bell. P.c.. Kansas City, Missoun, Bond Counsel, has not aSSIsted Il1 the preparatIon of this Official Statement, except for the sectIOns tItled INTRODUCTORY STA TETvfENT THF NOTES, THE BONDS. LEGAL MATTERS. TAX MATTERS, CONTINUING DISCLOSURE, and APPENDIX B and. accordmgly. expresse~ no opmion a~ te the accuracy or suffiCIency of any OTher informatIon contamed herein. Definitions CapJtalized terms nOl otherwise defined herein shall have the meanmgs ascribed thereto Jl1 the resolution of the governing body oftlle City authorizing the Notes (the "Note ResolutIOn") and 111 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 regardll1g 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 denommation of $5.000 or any integral multIples thereof (the "Authorized Denomination") and shall be. numbered 111 such manner as the Note Registrar shall detennine. All of the Notes shall be dated .Tuly 15,2012, shall become due in the amounts on the Stated MatUlitles, with option of prior redemption and payment prior to theIr Stated MatUlines, and shall bear mterest at the rates per annum set forth on the mSlde 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 heremafter set forth. Redemption Provisions The Notes are not subject to redemption and payment pnor to matunty. Authoritv The Notes are issued pursuant to and 111 full compl1ance wIth the ConstItution and statutes of the State of Kansas. includmg wIthout I1mltatlOll 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 .2012. authonzing the Issuance of the Notes (the "Note ResolutIOn"). Security The Note~ shall be general obligatJOn~ of the Cit) .. payable as to both pnncipal and 1l1lerest 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. wlthl11 the terntonal lllnits of the City. The full faith. credit and resources of the City are hereby mevocably pledged for the prompt payment of the pnncipal of and interest on the Notes as the same become due. Designation or Note Paving Agent and Note Registrar The City will at all times mamtam a paymg agent and note regIstrar meetmg the qualifications set forth in the Note ResolutIon. The City reserves the nght to appoint a successor payll1g agent or note regIstrar No resIgnatIOn or removal of the paymg agent or note regIstrar shall become effectIve until a successor has been appomted and ha~ accepted the duties of paying agent or note registrar. Every paymg agent or note registrar appomted by the City shall at all times meet the requirements of Kansas laVl The Treasurer of the State of Kansas. TopeKa. 1.:..an8a, (the "1'Jote Reglqrar" and "l-.JOle Paying Agent") ha, been deSIgnated by the City as paymg 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 remam 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 authonzed 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 wntten 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. In all cases in which the privilege of transferring or exchanging Notes is exercised, the Note Registrar shall authenticate and dehver 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 dunng 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 rece1ves eV1dence to its satisfact10n of the destruction. loss or theft of any Note, and (b) there is delivered to the City and the Note Reg1strar such security or indemnity as may be required by each of them, then, 111 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 Cay's request, the Note Registrar shall authenticate and deliver, in exchange for or in heu of any such mutilated, destroyed, lost or stolen Note, a new Note of the same Stated Matunty and of like tenor and principal amount. If any such mutilated. destroyed. lost or stolen Note has become or 1S about to become due and payable. the City. in 1ts d1scret10n. may pay such Note Il1stead of 1ssuing a new Note. Upon the 1ssuance of any ne\>" Note. the City may require the payment by the Owner of a sum suffic1e1l1 to cover any taA or other govemmental charge that may be 1mposed 111 relation thereto and any other expenses (mcludmg the fees and expenses of the Note Paymg Agent) connected therewith. Nonpresentrnent of Notes If any Note is not presented for payment when the princ1pal 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. determ111e and be completely discharged. and thereupon 11 shall be the dUTy of the Note Paymg Agent to hold such funds. w1thout lJabil1ty for interest thereon. for the benefit of the Owner of such Note. who shall thereafter be restricted exclusively to suell funds for any claim of whatever nature on h1s part under this Note Resolutlon or on. or w1th respect to. smd Note, If any Note 1S not presented for payment within four (4) years following the date when such Note becomes due at Matumy, the Note Paymg Agent shall repay to the Cny the funds theretofore held by it for payment of such Note. and such Note shalL subject to the defense of any apphcable statute of IllmtatJon. thereafter be an unsecured obligation of the Cny. and the Owner thereof shall be ent1tled to look only to the City for payment. and then only to the extent of the amount so repa1d to it by the Note PaY111g Agent, and the Cny shall not be liable for any Interest thereon and shall not be regarded as a trustee of such money. Method and Place of P avrnent of the Notes The principal of or Redemption Price, and mterest on the Notes shall be payable m any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of pubbc 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 presentat10n and surrender of such Note at the prinCipal office of the Note Paymg 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 O"''ller 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 Cny of such Special Record Date and shall cause noti ce 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 O\\lJler 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 pnncipaL RedemptIon PrIce or interest need not be made on such Note Payment Date but may be made on the next succeeding Busmess Day with the same force and effect as if made on such Note Payment Date. and no mterest shall accrue for the period 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 lllterests In the Notes. except 111 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 premlUm. if any. and mterest 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 followmg paragraphs. The City may deCIde. subject to the reqUIrements of the OperatIOnal An'angements of DTC (0;' a successor SecuritIes Depository), and the foHowmg prOVISIons of this sectIOn to dlscontmue use of the system of book-entry transfers through DTC (or a successor Securltles DeposItory): (a) If the CIty detenmnes (I) that the SecuritIes DepOSItory 15 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 contmuation 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 detenmnation 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 determmation under (a)(1) or (a)(2) of this paragraph. the City, with the consent of the Note Registrar, may select a successor secuntles depositor) 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 printmg, regIstration. authentIcation, and dehvery of Replacement Notes shall be paid for by the City. In the event the SecurItIes DeposItory resIgns. IS unable to properly dIscharge ItS responsibihtles. 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 app01l1t 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 SUCll successor SeCUrIties DepOSItory shall be a securities depository which is a registered clearing agency under the Secunties 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 appropnate denominatIons and form as provided 111 the Note Resolution. THE BONDS Description The Bonds shall consist of fully registered book-entry-only bonds 111 the denominatIOn of $5,000 or any mtegral multiples thereof (the "Authorized Denomination") and shall be numbered m such manner as the Bond RegIstrar shall determine. All of the Bonds wIll be dated July 15. 2012. shall become due 111 the amounts. 011 tbe Stated MatUrIties. and subject to redemption and payment prior to theIr Stated Maturities. and shall bear interest at the rates per annum set fOlih 011 the lI1slde cover page of this OffiCIal Statemem. 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 Imerest Payment Date to whIch Interest has been paid on the Interest Payment Dates in the manner beremafter set fOIih 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 Matunty on October L 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 determmed by the City in such equitable manner as It may determine) at any time. at the RedemptIOn Pnce of 100% (expressed as a percentage ofihe prInCipal amount), plus accrued mterest thereon to the Redemption Date. Mandatory Redemption-Series )012 Bonds. The Senes 2012-_ Bonds maturing (the "Tem1 Bond") shall be subject to mandatory redemption and payment prior to their stated maturity pursuant to the mandatory redemption requirements he,einafter 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 on 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 pnor to then-Stated Maturity, such Bonds shall be redeemed in such manner as the City shall determme. Bonds of less than a full Stated Matunty shall be selected by the Bond Registrar in minimum AuthOlized Denomination m 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 wlth such redemptlOn each mmimum Authorized Denomination of face value shall be treated as though it were a separate Bond of a minimum Authorized DenominatlOn. If 11 is detennined that one or more. but not all. of the mmimum Authorized Denomination value represented by any Bond IS selected for redemptlOn. then upon notice ofmtentlOn to redeem such minimum Authorized DenominatlOn. the Owner or the Owner's duly authorized agent shall forthwith present and surrender such Bond to the Bond Reglstrar: 0) for paymem of the Redemptlon Pnce and mterest to the RedemptlOn Date of such mmimum Authonzed Denomll1atlon value called for redemption, and (2) for exchange. without charge to the Owner thereof. for a new Bond or Bonds of the aggregate princlpal amount of the unredeemed portion of the prmclpal amount of such Bond. If the Owner of any such Bond fails to present such Bond to the Bond Paymg Agent for payment and exchange as aforesaid. such Bond shall. nevertheless. become due and payable on the redemption date to the extent of the m1l11mUm Authorized Denominanon value called for redemptlon (and to that extent only) Notice and Effect of Call for Redemptlon Unless walved by any Owner of Bonds to be redeemed. if the Clty shall call any Bonds for redemption and payment pnor to the Stated Maturity thereof the City shall give WrItten notice of its intention to call and pay sald Bonds to the State Treasurer and the Purchaser. In addltlon. the Clty shall cause the Bond Registrar to glve wntren notlce of redemptlon to the Owners of said Bonds Each of said WrItten nonces shall be deposlled in tne Ul1lted States first class mali not less than 30 days pnor to the Redemptlon Date. All official notJce, of redemptlon shall be dated and shall comall1 the followmg infonnatlon: (a) the Redemption Date. (b) the RedemptIon Pnce: (c) If les, than all Outstandll1g Bonds are to be redeemed. the identificatIon (and. in the case of pamal redemption of any Bonds. the respective pnnCIpal amounts) ofthe Bonds to he redeemed: (d) a statement that on the RedemptJOn Date the Redemption Pnce will become due and payable upon each such Bond or portlon thereof called for redemption and that interest thereon shall cease to accrue from and after the Redemptlon Date: and (e) the place where sucb Bonds are to be surrendered for payment of the RedemptJOn Pnce. whlCh shall be the pnnclpal office of the Bond PaYll1g Agent The failure of any Owner to receIve nonce glven as heretofore provlded or an llnmatenai defect tberem shall not Il1validate any redemptlon. Pnor to any RedemptJon Date the elfy shall deposJt wlth the Bond PaYll1g Agent an amoum of mone') sufficient to pay the Redempnon Pnce of all the Bonds or portlons of Bonds that are to be redeemed on such Redempnon Date. Official notice of redemption havmg been gwen as aforesaid. the Bonds or portlons of Bonds to be redeemed shall become due and payable on the Redempnon Date. at the Redemptlon Pnce therem specified. and from and after the RedemptIOn Date (unles" the C It\ defau Its lJl the payment of the RedemptJon Pnce) such Bonds or POJtlOl1 of Bonds shall cease to bear mterest. For so long as the Secuntles DeposJtory IS effectmg book-entry transfers of the Bonds. the Bond Registrar shall provide the notices specified to the Securitles DepOSItory. I1 IS expected that the Securitles DepOSItory shall. in turn. notify its Participants and that the Participants. in turn, will nonfy or cause to be nonfied the Beneficial Owners. Any failure on the pa11 of the SecurIties Depository OJ a Partlclpant. or fallure on the part of a nominee of a BeneficIal Owner of a Bond (having been mailed notIce from the Bond RegIstrar. the Secunties Depository. a Participant or otherwise) to notify the Beneficial OVl'l1er 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 provlde such notices of redemptlOl1 as are required by tbe Disclosure Instructions. The Bond Paying Agent is also dlrected to comply with any mandatory or voluntalY standards then ill effect for processing redemptlOl1s of municlpal secuntles established by the State or the Secunties al1d 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. includmg without limitation K.S.A. 10-101 et seq. and K.S.A. 12-6aOl er seq .. all as amended. and an ordinance and resolution adopted by the City on , 2012, authonzing the issuance of the Series 2012-A Bonds (jointly refen'ed 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 , 2012. authorizing the issuance of the Senes 2012-B Bonds (jointly refened to herein as the "Series 2012-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 certam publJc 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 pnncipal 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, wlthll1 the terntonal lJmlts of the City. The full faith. credit and resources of the City are hereby inevocably 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 meetll1g the qualIficatIons set forth in the Bond ResolutIOns. The City reserves the right to app01l1t 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 remam Outstanding. each Bond when issued shall be regIstered in the name of tl1e Owner thereof on the Bond Reglster. Bonds may be transfelTed and exchanged only on the Bond RegIster as hereinafter prOVided Upon sunender of any Bond at the pnnclpal office of the Bond Registrar. the Bond Registrar shall transfer or exchange such Bond for a new Bond or Bonds m any authorized denommatIOn of the same Stated MaturIty and in the same aggregate principal amount a~ 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, 111 a form and WIth guarantee of signature satisfactory to the Bond Reglstrar. duly executed by the Owner thereof or by the Owner's duly authorized agent In all cases in which the privilege of transfening or exchanging Bonds is exercised, the Bond Registrar shall authenticate and dehver 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 incuned 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 governmental 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 tbe 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 tbe day after receiving written notIce from the City of Its intent to pay Defaulted Interest and endmg at the close of business on the date fixed for the payment of Defaulted Interest. Method and Place ofPavrnent of the Bonds The principal of, or Redemption Price. and interest on the Bonds shall be payable in any coin or cunency 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 eacb Bond shall be paid at Matunty to the Person in whose name such Bond is registered on the Bond Register at the Maturity thereof, upon presentatIon and sunender 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 busmess 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) m the case of an Interest payment to Cede & Co. or any Owner of $500,000 or more in aggregate principaJ amount of Bonds, by electronic transfer to such Owner upon wntten notice gIven to the Bond Registrar by such Owner, not less than 15 days pnor to the Record Date for such interest. containing the electronic transfer mstructions mcluding the bank. ABA routing number and account number to which such Owner wishes to have such transfer dIrected. Notwithstandmg the foregomg. any Defaulted Interest with respect to any Bond ~hall cease to be payable to the Owner of such Bond on the relevant Record Date and shall be payable to the Owner 111 whose name such Bond i, regIstered at the close of bus mess on the SpeCIal Record Date for the payment of such Defaulted Interest. which Special Record Date shali be fixed a, hereinafter speCIfied The City shall notify the Bond Paying Agent in writmg 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 Paymg 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 Followmg 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 pnor to the date of the proposed payment. The Bond Paymg 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 Bond entitled to such notice not less than J 0 days prior to such SpeCial Record Date. SO LONG AS CEDE & CO., REMAINS THE REGISTERED OWNER OF THE BONDS, THE BOND PAYING AGEKT SHALL TRANSMIT PAYMENTS TO THE SECURITIES DEPOSITORY, WHICH SHALL REMIT SUCH PAYMENTS Il\ ACCORDANCE WITH ITS NORMAL PROCEDURES. Payments Due on Saturdays, Sundays and Holidavs In any case where a Bond Payment Date I" not a Busines:, Day. then payment of principaL Redemption Pnce or interest need not be made on such Bond Payment Date but may be made on the next succeedmg Busmess Day wltll the same force and effect as if made on such Bond Payment Date, and no mterest shall accrue for the penod after such Bond Payment Date Book-Entrv Bonds: Securities Depository The Bonds shall initially be registered to Cede & Co .. the nommee for the Securities DepOSItory, and no Beneticial Owner will receJve certificates representmg theIr respective mterests 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 m the following paragraphs. The City may decide, subject to the requirements of the 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 detennines (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 Bonds bemg 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 of the Securities Depository (and certified to such effect by the Securities Depository), that the contllluation 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 noti fy 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 m the name of and authenticate and deliver Replacement Bonds to the Beneficial Owners or their nominees in principal amounts representlllg 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 detennmatlon under (a)(l) 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 oblJgatlOns 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 herem. 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 Secuntles 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 secunties depository whIch is a regIstered clearing agency under the Securities and Exchange Act of J 934. as amended. or other apphcable statute or regulation that operates a secunties 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 m approprIate denommatlons and form as provided m the Bond ResolutIon. THE DEPOSITORY TRUST COMPANY The Depository Trust Company ("DTC"), New York. NY. will act as securitIes depOSItor) for the Notes and Bonds (collectively. the "SeCUrIties"). The Securities will be Issued as fully registered securities registered JJ1 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-regi stered 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 organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law; a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code; and a "cleanng 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 mumcipal debt Issues, and money market mstruments from over 100 countries that DTC's pmticipants ("Direct Participants") deposit witb 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. securitJes brokers and dealers. banks, trust compames. clearing corporations. and certain other organizations. DTC IS a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holdmg company for DTC. National Secunties Clearing CorporatJOll. and Fixed Income Clearmg Corporation, alJ 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 secunties brokers and dealers. banks. trust compames. and clearing corporations that clear through or maintam a custodial relationshIp WIth a Direct Participant. either duectly or indIrectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on flIe WIth the Securities and Exchange Commission. More informatJOn 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 wdl receive a credit for the Secuntles on DTC's records. The ownershIp mterest of each actual purchaser of each Secunty ("BeneficIal Owner") IS 111 turn to be recorded on the DIrect and IndIrect PartICIpants' records. BenefiCIal Owners will not receIve written confirmation from DTC of thell' purchase. BenefiCial Owners are., however. expected to receive wntten confirmations providing details of the transaction. as well as penodlc statements ofthelr holdings, from the Direct or Indirect PartiCIpant through whIch the Beneficial Owner entered into the transactIOn Transfers of ownership mterests in the SecuritIes are to be accomplished by entries made on the books of DIrect and IndIrect Particlpant~ acting on behalf of BenefiCial Owners BenefiCIal Owners will not receive celtificates representing their ownershIp mterests m the Secunties. except m the event that use of the book-entry system for the Securit1es IS discontmued. To facilItate subsequent transfer~. all Secunt1e~ deposIted by DIrect PartICIpant, with DTC are reglstered in the name of DTC's partnership nommee. Cede & Co .. or such other name as may be requested by an authonzed repre,entat1ve ofDTC The deposlt of Sec untIes WIth DTC and theIr regl stratJ on III the name of Cede & Co. or such other DTC nommee do not effect an) change III 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 PaJ1JCJpams will rem am responsible for keepmg account of theIr holdmgs on behalf of theIr customers. Conveyance of notice~ and other commUl11CatJOI1S by DTC to DIrect PartiCIpants. by Direct Particlpants to IndIrect PartIcipants. and by Direct Partlcipants and Indirect PartiCIpants to BenefiCIal Owners will be governed by arrangements among them. sublect to any statutory or regulatory requIrements as may be III effect from tJme to tIme RedemptIon nonce, shall be sent to DTe. If ies~ than all of the Bonds wlthlll an Issue are bemg redeemed. DTCs practlce 10 to determme b\ lot the amount of the mterest of each Dlrect Partlclpant 111 such Issue to be redeemed Neither DTC nor Cede & Co. Inor any other DTe nommee) will consent or vote WIth respect to SecuntJes unless authonzed by a DIrect Partlclpant 111 accordance WIth DTCs MMI Procedures Under Its usual procedures, DTC mai I~ an Omnibus Pro>::, \(1 the Issuel as ~o(m a~ po<;slble "fte,' the record date The Omnibw-Pro';) ass:gn, Cede & Co.', consentmg or votIng nght5 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, d1strjbutJon~. and dIVIdend payment, on the SecurItIes w!ll be made to Cede & Co .. or such other nominee as may be requested by an authonzed representatIve of DTe. DTe's practIce 1S to credIt Direct PartICIpants' accounts upon DTe's receIpt of funds and corresponding detaIl lllformation iI'om the Issuer, the Note Paymg Agent, or the Bond Paying Agent, on the payable date 111 accordance with their respective holdmgs 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 secunties held for the accounts of customers in bearer form or registered in "street name." and will be the responsibIlIty of such PartICIpant and n01 ofDTC, the Note Paying Agent. the Bond Paying Agent. or the Issuer. subject to any statutory or regulatory reqUIrements as may be III effect from tIme to time. Payment of redemption proceeds, dIstributions. and d1vidend 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 Paymg 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 Paymg 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 PaYll1g 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 Agenfs DTC account. DTC may discontll1ue providmg 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 obtamed. 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. Secunty certIficates will be pnnted and delivered. The infonnatlon m thIS sectIon concerning DTC and DTC's book-entry system has been obtall1ed 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 penod financmg for Improvements to a malll trafficway in the Cny 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 wlthm the CIty and to pay the costs assOCIated with the issuance of the SerIes 2012-A Bonds. A portIOn of the cost of tbese improvements was origmally financed by the issuance of the Cny's Senes 201 J -J General ObligatlOn Temporary Notes. which wIll be retlred WIth proceeds from the sale of the Series 2012-A Bonds and other available funds. The Series 2012-B Refunding Plan Proceeds from tbe saJe of the Senes 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, Senes 20G:\-A. the General ObligatIOn Internal Improvement Bonds. SerIes 2004-B: and tbe General ObligatIon Internal Improvement Bonds. SerIes 2005-A (collectively. the "Refunded Bonds"): and to pay the costs associated WIth the sale of the Series 20 12-B Bonds The repayment of the callable Series 2004-B Bonds j, a current refundmg. 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 mto an ifl'evocable 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. 11 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 0-0 1 -14 thru 1 0-0 1 -18 10-01-13 2004-B 1.390,000 1.010.000 10-01 -13 thru 1 0-0 1 -19 10-01 -12 2005-A 2.200.000 1,535.000 10-01-14thru 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. 201:2. by and between the City and UMB NatIonal Bank of Amenca. Wi chlt2c. Kansas (the "Escrow Trustee") Proceeds from the Senes 2012-B Bonds will be deposited in the Escrow Trust Account and used to acqUlre direct, non-callable obllgatIons of the Umted States of Amenca (the "Escrowed Secunties"J, The Escrowed Secuntie~ will mature at such times and 111 such amounts as necessary. when combmed With cash balances 111 the Escrow Trust Account. to pay the pnncipal of and interest on the Refunded Bonds as described 111 the precedmg section, Mathematical Verification The mathematlcal accuracy of (a \ the computatJons made by George K Baum &. Company on the adequacy of the matunng pnncipal and mterest earned on the Escrowed SecuntJe~ to be purchasea WIth the proceeds from the proceeds of the Senes 2012-B Bonds. together with U11111VeSled funds to be held by the Escrov. Trustee. 111 accordance WIth the Escrov-Trust Agreement to provIde for tl1e payment of the mterest on the Refunded Bonds up to and lllcludll1g theIr earlIest optIOnal redemptIon date. and to redeem the Refunded Bonds on such dates: and (b) the YIeld computations made by George K. Baum &. C ompan)' supportll1g the conclusion by Bond Counsel that the Series 20 12-B Bonds are not "arbitrage bonds" wlthIl1 the mea111ng 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 1]1 the F1l1ancll1~ Plan wlli be provIded and appi1ea aoproxlmateh' as foliow~,. e':cluSlve 01 accrued interest. Sources of Funds Note and Bond Proceeds Other Available Fund, Total Source, of Fund~ Use~ of Funds Deposll to Improvement Fund DepOSIt to Escrow Fund Costs of Issuance Total Appilcatlon 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 Ar4lARE THAT THERE ARE CERTAIN RISKS ASSOCIATED WITH THE SECURITIES WHICH MUST BE RECOGNIZED. THE FOLLOWING STATEMENTS REGARIJING 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 HEREIA', COPIES OF WHICH ARE AVAILABLE AND MAY BE OBTAINED FROM THE CITY OR THE UNDERWRITER. Legal Matters Various state and federal laws. regulatJOl1s and constItutIOnal provlsJOns apply to tbe oblIgatJOns created by the SeculitJes. There is no assurance that there will not be any change m, interpretation of. or additlDn to such applicable laws, provisions and regulatIons whIch would have a matenal effect. eIther dIrectly or mdirectly. on the CIty or the taxing authonty of the CIty 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 111 Issumg the SecunlIes. are sublect to the followll1g' the federal Bankruptcy Code and applIcable bankruptcy. insolvency, reorgal1lzatJon. moratonum. or SImilar laws relatmg to or affectmg the enforcement of creditors' nght, generally, now OJ hereaftel In effect. usual equir) pnnCIples which may lImIt the speCIfic enforcemen1 under state la\\ of certalll remedies: the exercise by the Ul1lted Sta1es of Amenca of the power, delegated to It by the United State, ConstItutIOn: and the reasonable and necessary exerCIse. 111 certam unusual sItuation~. of the police power mherent 111 the State of Kansas and It, governmental subdIVisions i]1 the interest of servmg a legItimate and SIgnificant publIC purpose Bankruptcy proceedmgs. or the exerCI,e of power, by tJ1e federal or state government. If mltJated. could sublect the owners of the Secunties to .JUdICIal dIscretion and mterpretatIOn of theIr rIghts in bankruptcy and othervilse. and consequently may involve rIsks of delay. hmJtallon or modificatIon of the]]' right,., Taxation of Interest on the Securitie, An opmIOn of Bond Counsel wIi! be' obta111ed to the effect that interest earned on the Secunne<.: I~ excludable from gross Income for federal mcome tax purposes under cun"ent prOVIsions of the Internal Revenue Code of J 986. a;; amended (tile "Code"). and appiJcabie rulmgs and regulatIons under the Code: bowever. an applIcallon for a ruling has not been made and all opimOT: of counsel I~ 1101 bmdmg UpOL the Internal Revenue ServIce There cal' be no assurance that IiK present DrOVISlom of the Code. or the rules and regulatIons thereunder. wJli not be adver5eJy amended or modJiled. tilereD) renoenng the 1l11ereSl earned on the SecunlJe~ mcludabie ]]'j gross l11come for federal mcome tax purpose, The Cny ha;:, covenanted 111 the Bond and Note Resolutions and 111 other documents and certificates to be deilvered in connectIOn wIth the Issuance of the SeCUrIties to comply wltb the prOVISIOns of the Code. includIl1g t11()Se whIch reqUlre the City to take or omIt to take cenaI11 actions after the Issuance of the SecuritIes. Becau~e thc existence and continuation of the excludabilIty of the lnterest or the Securities depend, upon events occurnng after tbe date of issuance of the SecuritIes, the OpI11IOn of Bond Counsel described under TAX MATTERS assumes the complJance by the City with the provisions of the Code described above and the regulation~ relating thereto No opmio11 IS expressed by Bond Counsel WIth respect to the excludabi!Jty of the interest on the SeCUrities in the event of noncompliance with such proviSIons. The failure of the City to comply WIth tbe proviSIOns described above may cause the interest 011 the SecuritIes to become includable 111 gross income as of the date of issuance. 13 No Additional Interest or Mandator" Redemption upon Event of Taxability The Bond and Note Resolutions do not provIde for the payment of additional interest or penalty on the Secunties or the mandatory redemptJon thereof if the Interest thereon becomes mcludable in gross income for federal income tax purposes. Likewise. the Bond and Note ResolutIons do not provIde for the payment of any additional mterest or penalty on the Securities if the interest thereon becomes mcludable in gross mcome for Kansas mcome tax purposes. Suitabilitv of Investment The tax exempt feature of the Securities is more valuable to high tax bracket mvestors than to investors who are in low tax brackets, and so the value of the interest compensatlOn to any particular investor will vary wIth indIvidual tax rates. Each prospectIve investor should carefully examme this OffiCIal Statement. mcluding the AppendIces hereto. and ns own finanCIal condltIon to make a Judgment as to ns abihty to bear the economIc nsk of such an investment and whether or not the Secuntles are an appropnate investment. Market for the Securities Ratings. The Securltles have been assigned the financml ratings set forth m the sectlOn hereof titled RATINGS. There IS no assurance that a pamcular ratmg will remam lJl effect for any gIven period of time or that it will not be revised. either downward or upward. or withdrawn em1J·ely. If m the judgment of the agency origmaliy establishlllg such ratlllg. circumstances so warrant Any downward revislOn or wIthdrawal of any rating may have an adverse affect on the market pnce of the Secuntles Secondary Market. There 1<; no assurance that a secondar) market WIll develop for the purchase and sale of the Secuntle~. Pnces of seCUl·Jtle~ traded lJi the secondar) market. though. are subject (0 adjustment upward and downward 111 response to cnange;, m the credJ1 markeb. From tIme to tJme ]( may be necessary to suspend mdefimtely secondary market trad1l1g 11l the Securines a~ a result of finanCIal conditIon or market posItIon of broker- dealen. prevaihng market conditions. lack of adequate current finanCIal mformat1On about the Cit). or a matenal adverse change m the finanCIal condinon of the eny. whether or not the Secuntles are in default as to prinCIpal and mteres( payments. and other factors whIch may give nse to uncertalllty concermng prudent secondar) market practices Recen( Legislative Proposal On September 12. 2011. the PreSIdent reiea<;ed a leglsla(lve proposal that would. among other thIng,:. subject Interest on ta);-exempt securJlJes (111cludmg tne SecurltJes) \e. a federal lllcome tax for taxpayers w!tll lllcomes above certaJJ1 threshold" for tax years beglllmng after 2012 The proposal has not yet passed eIther of the two Houses of Congress and II IS nO! possible to predlc! wnether thl~ proposal WI Ii be enacted 1I1to laVl If enacted lntn lav\, such a proposal could affec'~-the-value or lnan<.etabl11t~, of ta), exelnpt .;;ecuntles (lllcludlng the Securiue~) ProspectIve purchasers of the Secuntles sbouia consu It thell' own ta); adVIsers regardmg tne ImpaC! of any change m 13\' 011 the SecuntJe" LEGAL MATTERS AI' matters Inciden( te the autbonzatlor and issuance ef tIle SecuritIes by the City are subject to the approval of Gilmore & Bell, P.c.. Kansas Cny, Missouri. Bond Counsel. whose approvmg opimon accompanies the Notes and Bonds. The factual and financlalmformation appearing herem has been supplied or revlewed bv certain offiCIals of the CIty and Its cenrfied public accountants, as' ~eferred to herem. Bond do'unsel has partlcipat~d in the preparation of the matters appearing In the sections of thIS Official Statement captlOned INTRODUCTORY STATEMENT. THE NOTES, THE BONDS, LEGAL MATTERS. TAX MATTERS. CONTINUIl'-lG DISCLOSURE. and APPENDIX B. ],q TAX MATTERS General The followmg is a summary of the material federal and state income tax consequences of holdmg 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 orgamzatlOns, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the mcome tax laws ofthe 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 1l1vestors 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 opimon of Bond Counsel. under the law existmg as of the issue date of the Secuntles: Federal Tax Exemption: The interest on the Securities [(includmg any onginal 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 purpose5 of computing the federal alternatIve mll1lmUm tax Imposed on ll1dlviduals and corporatIOns. but IS taken Il1to account m detenninmg adjusted cun'ent earnmgs for the purpose of comput1l1g the alternative minimum tax imposed on ceJ1am corporations. Bank Qual{ficatioll. The SecuritIes are "qualified tax-exempt obligations" for purposes of Code ~265(b) ). and lTI the case of certam financial mstitutions (within the meaning of Code ~ 265(b )(5». a deductIon IS allowed for 80';"0 of that portion of such financial mstitutJOns' 1I1terest expense allocable to mterest on the Securities. Kansas Tax Exemption. The interest on the SecuritIes is exempt from income taxatIon by the State. No Other Opinions. Bond Counsel', opll1JOn, are proVIded a~ of the date of the ongmal Issue of the Securitie,. subject to the condition that the Cit) comply With all requlTements of the Code that must be satisfied subsequent to the Issuance of the Securities 111 order that interest thereon be. or contmue to be. excludable from gross ll1come for federal I11come tax purposes. The CIty has covenanted to comply WIth all such reqUlrements. FaIlure to comply WIth certalll of such reqUlrements may cause the ll1CIUSlOn of ll1tereSI on the Secuntles 111 gross mcome for federal income tax purposes retroactive to the date of Issuance of the Secul1tJes. Bond Counsel IS expressmg no opimon regardmg other federal. state or local tax consequences arismg with respect to the SecurIties Other Tax Consequences Original Issue Discount For Federal mcome tax purposes. original Issue discount ("OlD") IS the excess of the stated redemption pnce at matunty of a Secunty over Its issue price. The Issue pnce of a Secunty is the first price at which a substantial amount of the Secunties of that maturity have been sold (1gnoring sales to bond houses. brokers. or similar persons or orgamzations actmg m the capacIty of underwriters. placement agents. OT 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 mterest payable on that Security during that accrual period. The amount of OlD accrued in a paJiicular accrual period wIll be considered to be received ratably on each day of the accrual 15 peflod, will be excludable from gross income for Federal income tax purposes, and will increase the owner's tax basis in that Secunty. Prospective investors should consult their own tax advisors concernmg the calculation and accrual of OID.] Original issue Premium. If a Security is issued at a plice that exceeds the stated redemption price at maturity of the Secunty, 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 Secunty 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 recelVed will be reduced by the amount of amortIzable premium properly allocable to the owner. This will result in an mcrease in the gain (or decrease in the loss) to be recognized for Federal mcome tax purposes on sale or dispOSItion of the Secunty prior to its matunty. Even though the ov,'l1er's basis is reduced, no Federal income tax deductIon IS allowed. Prospective mvestors 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 fall' market value of any property received on the sale. exchange or retIrement of the Secunty (other than 111 respect of accrued and unpaid interest) and such owner's ad.lUsted tax baSIS m the Secunty. To the extent the SecuritIes are held as a capJtal asset. such gam or loss will be capItal gam or loss and will be long-term capital gam 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, mfonnatJon reponing reqUlrements will apply to cenam payments of pnnclpal, interest and premIum paid on Secuntles. and to the proceeds paId on the sale of Securities, other than cenall1 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 identlficatJon numbel or certification of foreIgn or other exempt status or falls to report m full dIVldend and mterest ll1come. The amount of any backup withholdmg from a payment to an owner will be aliowed as a credIt aga111st the owner's federalmcome tax liabIbty. Co/lateral Federal income Tax Comequences. ProspectlVe purchasers of the Secur1t1es should be aware that ownership of the SeCUrItIes may result 111 collateral federal income tax consequences to certaill taxpayers. 111cluding. WIthout limnatlOn. financlal mstItutlons. propeny and casualty insurance compames. l11dividual reclpients of SOCIal Secunty or Railroad RetITemem benefits. certain S corporatIons with "excess net passlve income," foreIgn corporations subJect to the branch profits tax. life msurance compames. and taxpayers who may be deemed to have incurred or continued 1l1debtedness to purchase or carry or have pald or mcurred celia1l1 expenses allocable to the Securitles. Bond Counsel expresses no opmIon regardmg these tax conseauences Purchasers of Securines should consult thelr tax advlsors as to the appiJcabillty of these tax consequences and other federal income tax consequence, of the purchase. ownershIp and dlSPOS1t1011 of the Secuntles. 111clud111g the possible applicatlOn of state. local. foreIgn and other tax laws. RATINGS The Cll) has apphed to Mood:-', Investor, Servlce for rat1l1gs on the Notes and Bond, Any explananon of tne sIgmficance of such rat1l1gs may be obta1l1ed only from sald rat1l1g agency. There IS no assurance that the ratings WIll rema1l1 for any given penod of time or that they may not be lowered o~· wlthdrawn entlrely by the rating serVlce if. 111 their judgment. cIrcumstances so warrant Any such downward change 111 or WIthdrawal of the ratings may have an adverse effect on the market pnce of the Notes and Bonds The City's other outstand1l1g general obhgatlon notes and bonds have been rated "MIG l' and "Aa2". respectlvely. by Moody's. FINANCIAL ADVISOR George K. BauIn & Company, Kansas CIty, Missouri, has acted as Fmancial Advlsor to the City in connection with the sale of the Secuntie~. The Financial AdVIsor has assisted the CIty 111 the preparatIOn OftJ1lS Official Statement and in other matters relatmg to the issuance of the Securities. The fees of the Financial Advisor are contingent upon the Issuance of the Secunties Hi 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 "Series 2012-A Bonds Successful Bidder") at a pnce 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 closmg. The Notes Successful BIdder. the Senes 2012-A Bonds Successful Bidder. and the Senes 2012-B Bonds Successful BIdder are collectIvely referred to herem as (the "Successful Bidders"). ABSENCE OF MATERIAL LITIGATION The Transcnpt of Proceedings will contam a certificate of non-litigation dated as of the closmg date and executed by the Cny to the effect that there is no controversy. suit, or proceed1l1g of any kind pendmg or. to the knowledge of the CJty. threatened wherem or whereb) any question 1" raIsed, or may be raJ sed, questJOl1mg, disputmg. or affecting in any way the legal orgamzatJOn of the City or Jts boundaries or the legallty of any offic1al act shown to have been done regarding the issuance of the Notes and Bond~ or the constItutionalJty or validity of the obliganon represented by the Bondb or the means provIded for the payment of the Notes and Bonds. CONTINUING DISCLOSURE The Securit1es and Exchange Comm1ss10n (the "SEC') has promulgated amendments to Rule 15c2-12 (the "Rule"), requiring cont1l1uous secondary market dIsclosure. In the Note Resolution and the Bond ResolutlOns, the City has covenanted to proVIde annually certam finanCIal 1I1format10n 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 certa1l1 repositones and the MUnlc1pal SecuritIes Rulemakmg Board. as appllcable. ThIS covenant is for the benefit of and IS enforceable by the owners of the Notes and Bonds. See APPENDIX B for further detaJls concermng c011tmumg disclosure reqUIrements. On June 28th, 2012 the City filed with the MunIcIpal Securities Rulemakmg Board's Electronic MunicIpai Market Access system ("EMMA") the annual financial mformatlon and operatmg data reqUIred pursuant to Its exrsting contmumg dIsclosure undertakings and complied m a timely manner with Its obhgatlOns for the fiscal year endmg December 3 J. 20 J I. Dunng the pnor five years the Cny dId not always file the annual finanCIal ll1formatJol~ and operatmg data WIthin 180 days of the end of Its fiscal year as required. Past failures to file the annual financial mformation was pnmarily the result of not havmg audited finanCial statements completed within 180 days of the end of the fiscal year. The reqUIred operatmg data was made available to the public through the C1t~I'S filmg of certain official statements with the MSRB 111 April 2011 and 20]0. July 2009 and 2008 and June 2007. The City has put 111tO place procedures to ensure continued complJance with all undertakmgs with respect to the CIty's note and bond issues lllclud1l1g acceleratJon of the deadline for the completlOn of its annual audIted finanCIal statements and the formal adoption of a post Issuance compiiance 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/s/ ______________________ _ DIrector of Fmance and AdmI11lstration ATTEST. /S/ _______________________ _ Clty Clerk 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 Esnmated Actual ValuatIon Ratio of General ObligatJOn Debt to EstImated Assessed Valuation Outstanding Temporary Notes (3) Outstanding Lease Purchase Obligations Outstandmg Revenue Bonds Overlapping General Obhgatlon Debt (4) Direct and Overlapping General Obhganon Debt (5) DIrect and Overlapping Debt Per CapIta Ratio of Direct and Overlappmg Debt to EstImated Actual ValuatJOn RatJO of DIrect and Overlappmg Debt to Estimated Assessed Valuation $ 2.89L461,447 $ 449,760,638 $ 63,380,000 $ $ $ $ $ $ $ 47,707 1.329 2.19% 14.09% 1,485.000 0.00 16.120,000 66.357.521 131.222.52J 2,751 4.54(~;) 29.18%, (I) For a further descriptJOn of how Estimated Actual ValuatIon IS calculated and additional historical figures see the section tItled FINANCIAL INFORMATION -"Estimated Actual ValuatJOn". (2) Includes the Bonds. Does not mclude bonds to be refunded WIth proceeds from the Series 2012-B Bonds (3) Includes the Notes. Does not mclude notes to be retired WIth proceeds from the Se~les 2012·A Bonds. (4) For a more detailed explanatIon of the overlappmg debt of the otber junsdictlons. see DEBT SUMMARY - "Overlapping Debt" (5) Includes outstandmg general obligatIOn bonds and temporary notes of the Cny and overlappmgjurisdlctJOI1s. A-I GENERAL INFORMATION CONCERNING THE CITY Location and Size The City of Salma is located in north central Kansas. near the geographic center of the contiguous U11lted 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 JJ1tersection 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 JJ1 the State of Kansas. The Cny has had a Comn11Ssion-Clty 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 appoJJ1ted by the Governing Body and acts as its primary agent in accordance WIth state statute. Other city officers and employees are appomted by the City Manager. The Governing Body is responsible for the pollcy determination. and the Cay Manager IS responsible for the administratIon of the mUl1lclpal government Salma became a City of the first class on July 9. 1920. There are no orgamzed city employee UDlons. The present elected offiCIals of the City. along WIth the expIration oftheJr current terms of office. are as follows. Name Norman .Jennll1g;; Barb Simle) Samantha Angel! Kaye Crawford Aaron HousellOlter Retirement SYstems Title Mayor VIce Mayor Commissione1 Commlsslone1 CommISSIoner Term Expires 2013 2015 2013 201:\ 2015 The Cny part1c1pates 111 the Kansas Publ!c Employees Retirement System (KPERS) established 111 1962. as an Instrumentality of the State. pursuant to K S.A 74-4901 el seq. to prOVIde reurement and related benefits to pubiJc employees in Kansas KPERS I,' governed by a board of trustees cons1sting of nine members. mcludmg four member, appomted by the Governor subject to confirmation by the State Senate. one appo1l11ed by the President of the Senate. one appol11ted by the Speaker of the House of Representanves. two elected by members and retJrants of the ret1remem system. whIch must be members of such system. and the State Treasurer. Members of the board of trustees serve four-year terms and eject a chall-person annually. The board of trustees appoll1ts an Executlve Dnectol to serve as the man2.gm;; officer of KPERS and emolov, a staff of approxllnately 05 people A" of June 30. 20J O. KPERS serves about 277 .000 members and 1.500 participatll1g employers. 1I1cludmg the State. school distncts. counties. cines. pubilc Ilbranes. hospItals and other goveJ11J11enta) umts KPERS admll1Jsters the followmg three statew1de. defined benefit ret1rement plan" for public employees: (a) Kansas Publlc Employees RetIrement System; (b) Kansas Police and Firemen's Retirement System: and (c) Kansas Ret1rement System for Judges. These three plans are separate and dlstmct WIth different membership groups, actuanal assumptions, expenence. contribution rates and benefit options The Kansas Publlc 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 mto 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 contributlOns for this group, 85% of which comes from the State General Fund. State legislatIon enacted in 2003 made certam 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) Loca! Group -all participating CIties. counties. library boards. water districts and polItIcal subdivisions are mcluded 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 Ul1lversity of Kansas Hospital Authority employees known as the "TlAA 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 111 the prIvate sector), whIch are funded solely by employer comributlOns. The City's employees annually contribute: (a) 4% of their gross salary to the plan if such employee, are KPERS Tier I members (covered employment pnor to July L 2009), or (b) 6(;';0 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 valuatlon 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 III the Kansas Pollce and Fm' Retirement System ("KPFRS") for ib police and fire personnel KPFRS is a dIVISIon of and IS administered by KPERS Annual contributIons are adjusted annually based on actuanal studIes. subJect to ieglslatJve caps on percentage mcreases. Employees contnbute 7% of gros:;. compensatJO!l and the City contributes] 9 81 ';0" of employees' gross compensatIon for calendar year 2012 In 2012, a number of changes to KPERS were approved. mcludmg. (a) Effective Januar~' L 2015, the creatIon of a new KPERS TIer 3 category (covered employment 011 or after January 1. 2015) based on a cash balance plan. Each TIer:) panicipanl 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 vanes based 011 longeVIty of particIpant service: (l) 3% for less than 5 years; (2) 4°/r) 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';;0 for 24 or more years. Such account shall receive an interest credit of 5.25% per annum. and under certain circumstances. shall receIve additIOnal mterest credits Subject to certam exceptions, a Tier:' pal1!CJpant. upon retIrement. shall receIve a smgie life annuity benefic. (b) Increasmg tbe statutory maxImum employer contnbutlCln annual increase from 0.6% per year (status quo) to 0.9% per year m 2014. 1.0%, in 2015, 1.1 ';.') m 20 Hi and 1.2% per year by 2017. (c) EffectIve January 1. 2014. prnvldmg addItIOnal contnbutlOn tlexibilItv for TJer 1 partlcipanls With correspondmg benefit adjustments. (d) Effective Januar~' 1. 2014, elimmate COLA adjustments for Tier 2 partiCIpants WIth cOITesponding benefit adJustments. (e) Provide addItIOnal OexibJlity for alternative II1vestmenb for the plan (f) Provide for a smgle actually-determined employer contribution rate covering all three KPERS Tiers. calculated for each KPERS group. (g) PrOVIde new State funding sources to assist II1 reducmg UAAL. The 2012 changes dId not address the Kansas Police and Firemen' s Retirement System or the Kansas Retirement System for Judges. /\.-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 mhabitants or more. According to the U. S. Census Bureau. the City's citizens had a median age of 36.4 years in 2010. The foHowing table and waph 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 protectJOn services to resIdents of the City and surrounding areas. Firefighting services are provIded from four stations located throughout the Cny with 9::' fuJ1-tllne firefighters. The fire department operates 36 vehIcles and provides emergency medIcal servIces. The pol1ce department employs approxlmatel) 81 full-time pollce officers and operates 37 police vehicles. including patrol vehIcles. motorcycles. and Cushmans. Education The Cltv of Salm3 has a very complete and dIverse educatJonai system from the pnmary level up to It, higher educatlOnal instJtutJons umfied School DIstrict No. 305 prOVIdes pubiJc education through its eight elementar). two mIddle. and two semor hIgh schools. TIle DIstrict also operates altematJve educatIon. vocatJOnal- tech11Jcai. and speCIal educatJOn schools. Cunent enrollment IS over 7.000 AddltJonally. there are a number of parochial 1l1stitutlons that operate two grade schools. two .lunior hIgh schools. and one se11lor high school A military school IS located m the Clly and operates both a grade school and hIgh school. The City IS home to five regIonal or pnvate upper-level specialty schools The Kansas HIghway Patrol has a tram1l1g academy located in Salina One publIC library w1th over 230.000 volumes. two college libranes. a medIcal library. and a 121"'" library are located with1l1 the eny Kansas State Universitv at Salina The umversny offers a vanety of two-and four-year aVlalJon and lecnnoJogy degree programs. Areas of emnnasls 1l1c!ude c1vil. electrical and mechamcai engJl1eenng technologIes. aeronautical studIes. and aVlOl11CC Tile campus IS located entIrely wlthlll the boundanes of the Sailn8 AIrpOrt Industnal Center Approxl1natel y 7 j 6 students are currently enrolled 111 the school Kansas Weslevan Vniversitv :r":'allsas VVesleyall tJniversity \vas founded Hi 1886 and 1S locatec v;lth1n the City Currently. Kansas Wesleyan maintams an enrollment of approxImately 800 students. the majonty from Kansas and surrounding state". The school. based on a liberal arts foundatlon, offers more than 27 major programs. I11ciudmg 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 withJJ1 70 miles of the University through whIch students may enroll m courses and utilize resources A-4 Transportation In addition to 1-70 and 1-135. US-Sl and US-40 also intersect Salina. Several freight companies provide motor freight service 111 Salina with direct and connecting schedules to all cities in the Umted 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 Airhnes. offering weekday and weekend flights to Kansas Cny and Denver. Utilities and Infrastructure Westar Energy supplies electriCIty and Kansas Gas Service provides natural gas to the CIty. The Oty owns lts own water and sewage system. Addmonally, the Oty 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 Sa1ma 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 mcludes a cancer treatment center and two medIcal office buildings. The mstltution IS also a 50% partner ll1 a separate surgical hospItal adjacent to the Asbury campus of SRHC. Several other facihtles providmg mental health servIces. counseill1g. and alcohol and drug dependency treatment programs are located in the CIty. Financial Institutions Ten banks operatmg a total of 23 dIfferent fac1lItles are located m the Clty FIve banks are headquartered Il1 the City and rep0l1ed combined deposits ll1 excess of$2.35 biliion a, of Decembel 31. 2011 A savings bank has a branch office in the City Other Information Pubhc recreatIon facil1tles available to cIty reSIdents mclude 27 parks. a pubhc golf course. baseball/softball fields, an aquatic park. an aJ1 center. a community theater. a museum., tennis courts, and Ice and roller skatmg facilitIes. Two pnvate clubs provide additional recreanonal 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 otber events are also held in the Center. There are several radio stations in the City. FIve standard teleVIsion stations from Wichita serve the Salma area. Additionally, Cox Communications prOVIdes cable television and broadband lI1temet service to subscribing customers. A-5 ECONOMIC INFORMATION CONCERNING THE CITY Economic Characteristics The CIty of Salma 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 center, II1 or adjacent to the City. Sucb companie, include Scbwan '5 Global Supply Chain, Inc .. Salina Vortex, GeoProbe, Bergkamp, Kasa Industrial Controls, Premier PneumatIcs. Great Plams Manufacturing, PKl\1 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 smgie industry is dominant. The government sector and wholesale trade industries make up the second tIer of Salma employers The City serves as a 24-county regional trade center for north central Kansas Many indIviduals and busmesses within a 70-mile radIUS travel to the Cny to purchase consumer goods and services. ThIS deSIgnation as a regIOnal trade center IS supported by the fact that the City had the thud highest "trade pull factor" of all Kansas countIes in 2011 accordmg to Kansas State UmversJty. Cit:, trade pull factor is computed by dIviding the per capita saies tax of a City by the statewide per capita saies tax Sahne County IS located in the center of one of the most productIVe agncuJtural 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. Salma IS a cIty centered more 0]; 111dustr) than agnculture Cunently. there are approxImately 100 manufacturing and processmg compal1les located 111 the Cny The Cltv. Saline County. the Chamber of Commerce. and the Salma AIrport Authomy have developed several economIC incentives which can be offered as ll1ducel11ents to openll1g ll1dustnal facIlItIes These mclude property tax abatement for baSIC ll1dustry. the waivmg of buildll1g penmt and ll1spection fees. refundmg of saies tm, paId on machinery and eqUIpment. and providing tralI1lJlg for employees through the Sailna Area Techl1lcal CoJiege and the Kansas State Ul1lVerslt) at Salll1a. AddltJOnally. a "buIid-to-sult-tenant'· agreement I, available on '>Ites Il~ the AIrport Industrial Center that can prOVIde 100% financ1l1g for land and bUlldmg COSts Several major commercIal projects are currently under construction 111 Salina. Menards home Improvement store recently opened and consists of a 26.420 square-fool warehouse WIth 162.34CJ ,quare-foot of floor space. Fed EA. currently located m the Cn). IS buildmg a ne", dlstnbutlon center. Salma Commul1lty Theater. Great Plam, ManufactUrIng. Sahna Area Tech11lcal College. and Brown MackIe are all d0111g major remodelmg and/or expansIons The commumt\ ha, j .200 acres of l1ldustnal site, available 111 N011h Salma. the South Industnal Distnct. and the AlIl)ort Industnal C emel SItes range 111 sIze from I -to 240 acres. and are avaIlable for aVlatlO11. manufactUrIng. and distributlOn and warehouse busmesses The Salina Airport Authorin The Salina Alrp011 Authority IS a body corporate and polmc. The Authonry was created by the CIty of Saima 111 April 1965 pursuant to the authonty granted by the City by the surplus property and pub] ic mrp01i authonty act of the State of Kansas. The Authonty was created for the purpose of accepting as surplus property portions of the former Schil1mg AIr Force Base., whIch ",'as closed by the Umted States Department of Defense 111 June 1965 By quitclaIm deed the Authonty recelVed over 2.900 acres of land and numerous buildings for the purpose of operatmg and develop111g. the Sall11a MUI1lcipal 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 COImmssiol1. The Salina MUll1cipal AilVon is the oniy commerCIal service airport servlIlg SalinalSalme County and the 24-county area. which comprIses NOIih Central Kansa:o. The AI1V0rt also services the corporate, business, private A-f aviation and flight traming needs of industry, busllless and indIviduals In the area. The Airport is also used by Kansas State UniversIty at Salina (KSUS). The campus of KSUS is located adjacent to the AIrport. The UniversJty offers degrees in profeSSIOnal flight training. airframe and power plant maintenance. and avionics technology. Scheduled air service is provided by SeaPort Airlines The aIrlllle offers weekday and weekend flights to the Kansas City International hUb. Dunng 2011. the AI11101i enplaned 2.705 passengers and also accommodates a wide vanety of aircraft lllcluding busmess jets, milltary. flight training and general aviatIOn aircraft. DUring 201l. the Salina AIr Traffic Control Tower logged over 69.207 aircraft operatIOns serving the needs of over 7,000 busmess Jets, the professional flight traimng department of UniverSIty at Salina. general avianon and military aircraft The two fixed base operators on the field at Sahna speCIalizing J11 aviatIon fuel delivered over 2.39 mllhon gallons of fuel to the wide vanety of aircraft utilizmg the Airport dUrIng 2011 As of December 31. 2010. over 70 businesses and organizations at the Sahna MUl11CJpal AIrport and AirpOJi Industrial Center employed over 3.700 employees with a combllled payroll in excess of $130.4 milhol1. One of the pnmary functIOns of the Authority IS to facilitate the continued growth of jobs and payroll at the AIrport and AIrport Industnal Center. The Authority works III partnershIp with the City of Salina. Sallne County. and the Salllla Area Chamber of Commerce. and the Kansas Department of Commerce for the retentIon of eXlstlllg busmess and llldustry and the recruitment of new bUSl11esS and mdustry. Major Emplovers Industrial development dunng the past ten years bas estabhshed a broad. llldustnal base III and around the Cny A !lst of the major employers IS as follows. All figures represent total ful1-llme employment exclud1J1g seasonal and part-lime employee,; Name Schwan's Food Management Sahna RegIOnal Health Centel Ulllfied School Dlstnct No. 305 Exide TechnologIes Great Pla1J1s Manufactunng Philips LIghtlllg Company CIty of Sal1J1a ElDorado National Advance Auto Part, Kasa lndustnal Control, Source Salina Chamber of Commerce Product/Busilles~ Frozen Pizza Health Care School System Battery Manufacturer Agnculturar& Landscaplllg EqUJpment Fluorescent Lamps Cny Government Busses/Recreational Vehlci e, DIstributIon C eme1' Metal and Electrical Controls Fabncato: Estimated Emplovment 1.850 1.082 935 800 650 600 49?- 255 20(, 20(l The following table show., the per capita Dersonal income for residents of Sal1J1e County and the State dUrJng the years indicated' Year 2009 2008 2007 2006 2005 Source: Ellll.lW Statistical Abstract. 2010 Saline .9l!!!!D: $38.752 39.173 37.20] 36.133 32.672 A-7 State of Kansas S39J 73 40,022 37.775 35.772 33.145 Labor Force Accordmg 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 200g Year 2012 (May) 2011 2010 2009 2008 Current Indebtedness Cit)' of Salina Total Labor Force EmQloved UnemQloved 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 Ka1lsas Total Labor Force Eml!loved UnemQloved 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 1.399.35(, 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% 67 7.2 .., ') 1.- 4.4 The follow1l1g IS an overview of the em"s outstandllw Illdebtedness tv clasSificatIOn as of the dated date of the Bonds. FIgures do not II)clude bonds for wl;lch payment l~as been prOVIded through the creation of designated escrov" accounts General ObliKatiol1 Bonds: Date Amount Final Amount issued Serie, Purpose of Issue Maturity Outstanding 0--15-02 2002-B Imernal Improvement, S, 1.9g0.00(l 10-01-12 S; 165.000 07-15-0" 2003-A Internal Improvement, 4.350.000 10-01 -l~ 640.000 .. 05-01-04 2004-A Refund1l1g 5.585.000 08-0J-15 1.1 70.000 0'7-15-04 2004-B Internal Improvements 4.053.000 W-OI-12 380.000 • 01-15-05 2005-A Internal Improvements 4.210.000 10-01-] :; 665.00(1 , 0::;-15-0(, 2006-/\ Inte;-nai Improvement'. 2.200.000 1 ()-OJ -2~ ; .6S0.clO(1 07-15-06 2006-B Internal Improvement;; 885,00(1 10-01-21 53S.000 06-15-0"" 2007-A internal Improvement" 6.545.000 10-01-2-:-5,085.000 07-15-0;'; 200S-A Internal Improvement~ ? nO.oocl 10-01-23 3.000.000 12-15-0;'; 2008-B lnterna I lmprovemem<, ~.525.000 07-0J -2S 3.295.000 01-15-09 2009-A Internal Improvements 23.695.000 JO-01-29 20.64S,000 05-01-10 2010-A Refundmg & Improvement 6.875.000 10-01-25 6.100.000 1C!-15-10 2010-B Refundmg 7.860,000 I G-Ol-23 7.360.000 07-1S-11 2011-A Internal Improvements 6,565,000 10-01-31 6,56S,OOO 07-15-12 2012-/\ Interna1 lInprOVelTIents 2.365.000 10-01-27 2.365~OOO 07-15-12 2012-B Refunding 3.760.000 10-01-20 3,760.000 $63.380_000 *Does not ll1clude bonds to be refunded With proceeds from the sale of the Senes 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 enterpnse 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 ofspecJaI assessment financing. Temporary Notes: Temporary notes represent general obligatIon mdebtedness 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 S; 0* Street, Water, and Sewer 2012-1 07-15-12 08-01-13 1,485,000 1.485.000 $1,485.000 *Amount outstandmg ($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 Cny from the operatIon of ItS combmed water and sewage system, Revenue bond, do not represent a general oblIgatIon mdebtedness of the CIty for whIch the ClT~ 's taxll1g abihty has been pledged, Date Issued 04-15-1 I Overlapping Debt Purpose Improvement;; Amount of Issue $16.120.000 Final Maturit\' 10-01-31 Amount Outstanding $16.120.000 Accordmg to the Salllle County Clerk' s office. the followlllg table shows the overlapping general obligatIon llldebtedne,,~ of the Cn) The percent of an overlappmg Junsdlctlon' s debt that I" apphcabie to the CJt) I, caiculated by dIVldlllg the a""essed valuatlOll of that pomon of the jurisdlctlon'~ boundanes WhICh ove:-Iap tbose of the City by the total assessed valuatlOll of Suc!1.1unsdlctlon, Ali debt outstandlllg IS as of June 30.2012. Jurisdiction Sal1l1CJ Aill)()f: Auihonl: LSD. No. 30:; Sa!me Count) Amount Outstanding $26.17(J.OOO 43.200.00(J o /\-9 Estimated Share of the eir" Amount $2(J.l 70.000 40,187.521 () $116.357.521 Percentage 1 on OO(~{' 93.03 Annual Debt Pavments The following is a Jist 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 Princi!!al Interest Princi!!al Interest Total 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 2,580.000 636.77(, 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 0 2026 1.380.000 196J 90 175.000 0 2027 1,080.000 136.841 180.000 0 20lR 950.000 89.603 0 0 2029 625.000 47.878 0 0 2030 250.000 2l.f,75 0 0 2031 260.000 J 1.050 0 0 $57.255.000 $14.146.722 $2.365.000 $3.760.000 Historical Debt Information The following table shows 11lStorical balances of outstandmg general obbgatJOn bonds for the Cn), dunng the most recent five-year penod. Bonds Debt to Debt to C.S. Debt Outstanding Assessed Estimated Actual Censm Per Year December 31 Valuation Valuation Po!!ulation Ca!!ita 2011 $61,045.000 D.57'!-" 2.11 'J(, 47.70-: l.279.5x 2010 60.280.000 J 344 2.09 47.707 :.263.55 2009 52.900.000 11 81 un 4('.180 1.145.52 2008 31.645,000 7.01 1.09 45,998 687.96 200-2~ .65(1.00(; G .:'" Ci.9g 46.025 (,00 76 Future Indebtedness The City annually prenares and adoms a five-year capnal Improvements plan. ThIS plan ldennfies and priontlzes potennal capnal nnprovement proJects wlthm 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 undertakmg between now and 2014 is approximately $91.1 million, of whIch approxImately $6.9 millIon IS antICIpated being financed through general obligation bonds. Borrowing reqUJrements 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-IO The CIty has been mvolved with ongoing discusslOns concerning contamination in certa1l1 areas within the boundaries of the Salina AIrport Industrial Center. This contamination was caused by activities occumng prior to 1964, when the site served as the Shillmg Air Force Base. The City. the Salina Airport Authonty. and other local governmental entities are pursul11g federal funds to clean up the affected areas. In the event funding cannot be secured in a tlmelv fashion or 111 sufficient amounts. Jt mav be necessarv for the ('ltV to issue debt to relocate certal11 water wells. Th; exact timing and amount. If any, of s;ch borrowing cannot be detennined at this tnne. If City borrow1l1g IS necessary for thIs proJect, It is anticipated that utility revenue bonds will be the first type of debt considered. Debt Pavment Record The City has always met pnnclpal and interest payments on all outstanding bonds and temporary notes when due and payable. Legal Debt Limits Cities wlth1l1 Kansas are permitted to Issue bonds III an aggregate amount not to exceed 30% of the total asses~ed valuation of tht C~~:, BUilds issued feY;-the purpose of improving, acquiring. enlargIng. or extendin,; muniCIpal utilities. includ1l1g storm and samtary sewer systems: bonds Issued to pay the cost of Improvements to 1I1tersectJOns and streets 111 front of city or school distnct property: bonds for bndges as authonzed by a vote of the electors of a city: bonds Issued to refund outstandlllg bonds: and bonds payable from revenue sources other than the general tax1l1g authority of the city are not ll1cluded III total aggregate debt for purpose<; of computll1g a clty's debt hmitanon. FINANCIAL INFORMA TION CONCERNING THE CITY Financial Statement Summan The following IS 2. summary of the combmed revenues. expenditures. and funci balance, for the CiTY' <; General Fund for the most recent avaIlable years as shown m the Otis Comprehenslve Annual Fmanc131 Reports Tim summary has not been prepared or revlewed by the City' s auditor Audited Audited Audited Audited Revenues' 2008 20()9 20l() 2011 Property Taxes $ 2.546.938 $ 9.909.9J 2 S; 8.704.040 S; 8.671.423 Sales Tax 11.985.856 11.668.987 J 1.l17.0n 11.767,400 Other Taxes 4.685.105 4.789.524 4.965.601 5.083.919 Intergovernment2.1 9 j UO::; l.227ASC, i .008.482 813.185 Charges fo:-Servlces 5,793.25: 5.3:S.30~ '.1 Q3D: 7.1:;22.307 Investment Revenue 244.76Y () () 28,972 Mlscellaneous 496.742 356.249 352.308 501.')60 Total Revenues $26.663.968 $3'1.327.466 5)33.40 L34() $34.688.406 Expenditures. General Government " 3.336.26 : <!' 3.0(J"7.7:' ; S 3.549.48-: :r 3.461.488 .,' d Public Safet) i 4.070.i 89 17.883.3f): j t.228,88J 18.1] 7,827 Public Works 5.239.844 6.345.981 6,245.355 6.i32.020 Pubhc Health and Sa11ltatlOll 1.109.794 1.176.096 1.176.743 1.176.082 Culture and RecreatlOll 2.297.431 2.294.894 2.599.921 2.734.957 Planning and Developmem 2,087.685 2.381.797 2.428, 'Jon 2.319.300 CaPItal Outl ay 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) $(J ,388,(l76) S, 19i.744 Other Sources (Uses) 806.j06 {'In') ")"'70\ \_7.::.. ..... /0 I 10 .... 1 ~A \ \ 0" .1"::'''''! (1'19.1 J 1) Net Change in Fund Balance $(1,301.108) $ (942.J42) $(1,470.200) 5, (62,633 ) Fund Balance January 1 5, 7,330.631 5, 6.029.523 $ 5,087,381 5) 3,617.181 Restatement of prior year balance 156.424 Fund Balance December 3 J S; 6.029.523 $ 5,087.381 $ 3.617.181 5, 3,836.238 A-1 J Assessed Valuation According to the Salme County Clerk's Office, the following table gIves the November 1 assessed valuatIOn ofthe City. unless otherwise noted, in the years indicated. Real Personal Year Estate Pr0I!ertv {l} 2011 $367.750.803 $19,918.188 2010 364,544.771 21,488.933 2009 358.979.211 24.760.806 2008 356.678,712 28.373.980 2007 342.045,389 34.507.464 2006 321.695.326 39.691.690 2005 296,537.399 38,662.356 State Assessed Utilities $14,685.585 14.214.579 13,730.609 14,929.456 16.175.634 16.530.171 17.624.030 Motor Vehicle $47.406.062 48.184.331 50.330.252 51.351.656 50.548.706 50.551.299 49.367.870 Total Assessed 'Valuation $449.760.638 448.432,614 447,800.878 451.333.804 443.277.1 93 428.468.486 402.191.655 (1) Begmnmg in 2007. certam types of personal property were removed from the tax rolls See footnote (3) to the table 111 FINANCIAL INFORMA TlON -"Property Assessment Rates". Estimated Actual Valuation Based on assessment percentages provided by Kansas Statutes. real estate equahzatlon ratios provided b;. the Kansas Depal11nent of Revenue (see FINANCIAL INFORMATION . "Property Assessment Rates"). and estimated actual valuation figures provided by the Sall11e County Appraiser's Office. the followmg table prOVIdes November 1 estImated actual valuatIons for the City. unless otherWIse noted. 1I1 the years lI1dlcated Year 2011 2010 2009 2008 2007 200n 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 2.893.3 59,541 2.914.775.730 2.833.709.391 2.719.391.025 2.529.37n35 The City has pursued a policy of utillzlI1g speCIal benefit dlstnct~ to assign the cost of certam II1ternal Improvement projects to the propertv that dlrectlv bel1efit~ from the constructJOn Kansas statutes allo\\ for the creatIon of special benefit dlstncts to pay for the cost of a vanetv of Improvements II1cludmg street constructIon. storm water drams. samtar) sewer svstem lmprovement~. street iJgl1tmg. waLer system lInprovemenb. recreatIOnal faCIlitIes. flood control projects. bndges. and parkmg facil!tles. The Clty has tYPIcally utilized speCIal benefit dlstncts to pay for the costs assocIated WIth construc11l1g streets. SIdewalks. curb". gutters, and I!gJmng 111 ne\\· reSIdential developments wlthll1 the CIty \Vhen a developer reque~ts the use of SpeCIal Asses~mems to finance p~blic Improvements. the CIty reqUlres that they pay 20% of the estimated cost of the project 111 cash. or file a letter of credIt equivalent to 35°'0 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 111 the development. Special benefit dlstncts have also been created to pay for the cost of improvements to streets and SIdewalks 111 the CIty' s downtown area. A-12 The creation of special benefit distrlcts. the determmation of property benefited. and the method of allocating the cost of the 1mprovement is at the discretion of the Oty. Property owners have the ability to suggest improvements through a petinon process and to comment on the final amount of then assessment. The City mayor may not be mcluded as part of the special benefit district. All property owners have the option to pay their portion of the improvement cost w1th a one-time payment during a 30-day assessment prepayment period or pay m 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 permanent proJect financing. The payment of the principal of and interest on such bonds is paid from the special assessments levied annuall) on the benefited property. Spec1al assessments are paid at the same time and m the same manner as ad valorem property taxes, If at any time the spec1al assessments recei ved from the property owners are msuffic1ent to provide for the payment of the principal of and interest on the bonds. the City is ob11gated to provide for the balance of such payments through its ability to levy unlim1ted ad valorem property taxe~ Largest T axpavers According to the Salme County Clerk's Office. the fol!owmg table 11sts the largest taxpayers 111 the Ot)'. their November 2011 assessed valuations. and the percentage each taxpayer compnsed of the total assessed valuatlOn of the CJty, Compam SC!l\van's Sales (Tony\ PlZZa) Coyote Garnson Salm3 LLC Salma RegIOnal Health Cemer Westar Energy Kansas Gas Serv1ce Gateway Adams Inc (Mldstate Piaza) Wal-Mart Stores (Includes Sam's) Southwestern Bell Telephone Great Plains Manufacturmg S&B Motel, Building Permit~ Issued Type of Business Frozen Plzza ReglOnal Shoppmg Cemer Hospltal and MedIcal Offices UtillT: UtiiJt\ Shoppmg Cente;- D1Scount Retail Unln)' Agricultural EqUJpment Hotel % of Assessed Total Valuation Valuation ~ 8J89.411 1.82'i-u 6.254.03'7 1.39% 6.234.437 1.39';'" 4.294.726 Q,95'/" 3.762.052 0,84'J;. 3.566.20g 0.79",,, 3.465.983 (),77";o 2.655.148 0.59% 2.074,617 0.46% '1.064.471 0.46"/0 SA2.56 i .09Ci 9.46';;" BUlldmg nerl1lJt~ l~<;ued l-v. the env CUll elltl\ mmntall' stead\ le\'el~ Till'; table reflect, both nnvate developl1lent~ a<; well a" the exnanSlOn 10 the educatlonal facilltles 111 the COl1lmunw, The five-vear history of the cOIa! val ue of permlls 1 ssued IS \ ear 2012 (ti1ru May) 20] I 2010 2009 2008 A-I 'J, Value $19.937.31f. 19,752.335 52.358.547 12J92.481 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 bealing 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 withm 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 Mawr vehicle taxes are distributed by the county to tI1e state. city and other taxmg Junsdlctions based on thelT proportionate tax levies Delinquel11 personal and motor vehicle taxes are penahzed at the same rate as delmquent real property taxes. The following IS a summary oftax collectIOns for the years shown. Current Current and Delinquent Levy Tax Taxes Tax Collections Tax Collections Year Rate Levied Amount % Amount 'Yo 2011* 26.272 $10.582.043 $9.614.366 90.0';() 5; 9,629.140 9J .00'/(1 2010 26.022 10.425.260 9.823.578 942 JO.118.285 97.06% 2009 25.855 10.289.701 9.831.289 95.5 10.126.228 98 4J °;'0 2008 25.886 10.369.087 9.825.122 94.8 J 0.119.876 97.60'/i) 2007 23.959 9.432.248 8.941.650 9U 9.209.900 CJ7.64% 2006 23.789 9.029.080 8.648.305 95.8 8.907.754 98.66°/0 2005 23.999 8.478.392 8.223.308 97.0 8.4 70.007 99.90%, *Collectlons a~ of May 10.2012 Tax Levies The CIty may levy taxes m accordance with the reqUIrements of Jt, adonted budget The County Clerk determll1es property ta)' levIes based upon the as~essed valuatlon~ prOVIded b) the Appraiser and spreads the levIes on the tax rolls The following: table gIves the total tax levIe" for all taxlllg JunsdlctlOn" per $1.000.00 a%essed valuation of the CIty for the last five year, 2007 200S 2009 2010 2011 Levy Levy Levy Levy Lev~' for for for for for 2008 200<) 20111 20ll 2012 Jurisdiction Budget Budget Budget Budget Budget CIty of Salina 23.959 25.886 25.855 26.022 26.272 Salma LIbrary 5.242 5.4J 9 5.413 5.372 5.292 State EducatlOn & Other 1.500 1.500 1.500 1.508 ] .500 Unified School District No. 305 54990 58.547 58.495 58913 58.820 Import Authority 2.877 2.877 4.315 4.055 4.007 Central Kansas Extension District 1.156 1.175 1.173 J.204 1.179 Salme 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'% lillposed by the State, 1 % countywIde local option sales tax. and .90'/'0 citywide local option sales tax. In 1982 the voters of Saline County. in accordance wIth Kansas statutes, approved a 1 % countywide local optIOn sales ta),. In 1992 voters of the Cny 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 Cny approved an additional .25% restncted local option sales tax to be collected through June 1, 2004 and distributed to Unified School Distnct No. 305 to fund educatIOnal technology. The voters renewed the .25<;'0 local optIon sales tax and are now using those coliectlOns for vanous city capItal improvements. In November 2008. voters 111 the CIty of Salma approved a .40% CItywide retailers dedIcated sales tax to pay the costs of vanous City capital improvements l11clud111g constructmg. operat111g and maintaining a $12.5 mllllOn aquatIc park. The .40% sales tax replaced the 2004 .25% sales tax on April!. 2009 and tenmnates ten years after Its commencement The City of Salma depOSIts sales tax receIpts from Its 1992 tax ll1to Its General Fund. Sales tax receipts are used for funding general operat1l1g expendItures of the CIty and capnal Improvement proJects The follow1I1g table ilsts the local-option sales tax receipts of the Cny of Salina JIl the years ll1dlcated 2004 2008 1992 City's Portion of .25% Cit~rwide .40% Citywide .50'1., Cit~rwide 1°1., Countywide Local Option Local Option Local Option Local Option Year Sales Tax ReceiQts Sales Tax ReceiQts Sales Tax ReceiQts Sales Tax ReceiQts 200g $2.588.73 I S; 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 ).076.751 6.690.649 2012 (thru May) 1.779.603 2.215,817 2,932.739 (1) ThE 200~ 40'/0 sale,. ta\ became effective Apn I . 20(lCJ. at Wi11ch time the 2004 sales tax stoppec. TIll" figure IS the combll1ed tmai recelpu, of the 2004 sales tax and the 200~ sales tax for 2009. Source: CIty Clerk Budgeting Procedures ApplIcable Kansa, statute, requIre that budgets be legally adopted for all fund~ (mcludmg debt servIce and enterpnse funds) unless exempted by a specific statute. All budget" are prepared util!zll1g the modIfied accrual baSI:' 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 provlde that the budget for the succeedmg calendar year must be prepared on or before August I and published on or before August 5 of each year. A pubhc hearing IS required to be held on or before August 15. WIth the final budget bemg adopted on or before August 25 of each year. Onginal appropriatIons may be modified by supplemental appropriatJOns and transfers among budget categones. The CIty CommlssJOn 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 mdebtedness. The executlOn 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 111 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 subdlvislOns in the State of Kansas are the responsibility of the various countie~. The Saline County appraIser annually determines the appraised valuation of property located in the City. The appraIser's determmation is based on a number of criteria established by Kansas's statute. All property. with the exceptlOn of agrIcultural land. is appraIsed based on estImated faIr market value Agncultural 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 multlpiied by the applIcable statutory assessment rates to amve 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 fOT taxatlOn purpose~. the county appraIser multlplJes the appraised value of the parcel by the appllcable assessment rate. Current property assessment rate, were established ill 1986. effectIve 111 1989. and <;lightly modJi'ied 111 1992 The most slglllficant 1992 modlficatJons lI1volved lowenng the assessment rate on commercIal and ll1dustrial real propeny from 30'!·0 to 25'j" and on reSIdentIal property from 12% to 1 1.5% The follow1l1g table shows the current assessment rate~ for the differel11 classe~ of taxable tangible property wlthll1 the State of Kansas Real Property' ResidentJal CommercIal and Industrial- Real Propen) Agncultural Land (1 ) Agricultural lmprovements Vacant Lots Not-for-Profit (2'1 All Other Personal Propert\< (3) Mobile Home" Mlll era ! Leasehold;; (iarge i Mll1eral Leaseholds \sma11) CommercIal & industrIal Machlllery & EqUIpment All Other Utihties: Railroads lJI Other Pubhc UtilitIes Motor Vehicies: Property Exempt: 11.5% 25.0 30.0 25.0 12 (j 12.0 30.0 25,0 30.CJ federallY mandated rate 33.0<J~, 20.0% Property used for the fOl!owlllg purposes. or portions thereof. are exempt from taxatIon provided certall1 statutory requIrements are met: relJgious, educational. lIterary, scientific, benevolent. alumni assoCIatIons. veterans' organizations, or charitable purposes. includll1g parsonages and community service organizations proVIding humanitarian services. (1) Agricultural land is valued based on the productivIty value of the propeliy and not estimated market valuatIon. (2) A bill passed by the Kansas Legislature 111 1994 clarified tl1JS class of property to mclude all property owned and operated by not-for-profit organizations not subject to federal mcome taxation pursuant to paragraphs (2), (3), (4), 0). (8), or (10) of SubsectJOn C of SectJOn 501 of the federal mtemal revenue code. Ti1l5 bili specIfically established that pnvate. not-for-profit country clubs would be assessed at 12% for all land that does not accommodate buildmgs 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. mdustna1. telecommumcations, 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 expandmg an eXIsting busmess or creation of a new busmess. Equalization Ratios Annually, the Property Valuanon DlvlsJOn 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 pnces. The study denves an equalIzatIon ratIo whIch. when divided mto assessed valuatJOn. provides a means to approxllnate actual market value Accordl11g to the 2011 Prehmmary Kansas AppraIsal/Sales Rano Study. the equalizatIon ratio for resldentJaI real property m Salme County was 1 ::.04%, and commercIal and mdustrial property wa~ 28.75% REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY A-17 APPENDIX B Form of Continuin~ Disclosure instructions FORM OF CONTINUING DISCLOSURE INSTRUCTIONS $1,485,000 CITY OF SALINA, KANSAS GENERA~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 matenal 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 continumg disclosure WIth respect to the Notes. Section 1. Definitions. In addinon to the definnions set fonh in the Note Resolution. which apply to any capitalized tenn used in these Disclosure Instructions. unless otherwise defined herein, the followmg capitahzed ten11S shall have the followmg meanings: "Beneficial Owner" means any repstered 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. (includl11g persons holding Notes through nom1l1ees. deposJlones or other intennediaries), or (b) is treated as the owner of any Notes for federal 1l1come taA purposes. "Designated Agent" means Gilmore & Bell. P.C or one or more other entltles deSIf:.rnated 111 writ1ng by the Issuer to serve as a deSIgnated agent of the Issuer for purposes of these DIsclosure Instructions. "Dissemination Agent'· means any entHy deSIgnated in writIng by the Issuer to serve as dissemmatlOn agent pursuant to these DIsclosure Instructlons and WhICh has filed WIth the Issuer a written acceptance of such designation substantJaiiy 111 the fonn attached hereto as Exhibit A. "EMMA" mean, the Electrol1Ic MU11JClpa1 Market Access system fa; Illu11Jcipal securnies dIsclosures established and mamtamed hy the MSRB. Wllich can he accessed a1 \VV/\i em11l8.msr'r>.oE "Fiscal Year'-means the one veal' nenod endmg December 31. or such other date or dates as mav h:: sdoDled by thE Issuer i())" Jt,~ general accountmg purposes "Material Events" means anv oftbe events lIsted in Section 2(a) hereof "l\1SRB" means tbe MUI1lcipal ~ecuritles RuJemakmg Board. "Note Resolution ~~ Dleans the reSOlution of the goven1ing body of the Issuer autholizing 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 cOill1ection with offering ofthe 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 SectlOn, 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 followmg events with respect to the Notes. notice of the following events: (1) (2) (3) principal and interest payment delinquencies: non-payment related defaults, if material: 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 opmions ; the issuance by the Intemal Revenue Service of proposed or final detenninations of taxability. Notlces of Proposed Issue (IRS Fom1 5701-TEB) or other material notlces or detenninations with respect to the tax status of the Note. or other material events affect111g the tax-exempt status of the Notes: (7) modificatlons to nghts of Owners. if matenal: (8) bond calls. if matenaL and tender offers. defeasances: (9) (10) release. substltutlOn or sale of property secunng repayment of the Notes. If materiaL ( 11 ) ratmg changes; (12) bankruptcy. 111s01vency, receivership or snnilar event of the Issuer: (13) the consummation of a merger. consolJdation. or acquisinol1 involving the Issuer or the sale of all or substantially all of the assets of the Issuer. other than 111 the ordinary course of busmess .. the entry 111tO a defimtive agreement to undertake such an actlOl1 or the tenmnatlon of a definitive agreement relating to any such actlOns. other than pursuant to Its tenns. ifmmerial: and (14) appointment of a successor or addltIonai Paymg Agent or the change of name of' the Paymg Agent if material. (b I N otwithstan dll1g the foregomg. DatI ce of Material Events described m subsectiol1s (a) (8) and (9j need not be glVen under thIS subsection any earber than the notIce (if any) of the underiymg event IS glven 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 InstructlOns. and may discharge any such Dissemination Agent, with or without appomting a successor Dissemination Agent. (b) Material Event Notices. B-2 (I) 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, infom1 such person of the event, and request that the Issuer promptly notify the Dissemination Agent in writing whether or not to report the evem 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 wnting. 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). (0) 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 Dissel~ination p~gent has been given v/litten 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 wlthm 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 underlymg event IS gIven to the Owners of affected Notes pursuant to the Note ResolutIOn. tc) Duties, Immunities and Liabilities (~f Disseminatioll Agent. The Dissemination Agent shall have only such dutIes as are speclficaliy set forth in these DIsclosure InstructIons, and the Issuer agrees to indemmfy and save the Dissemmauon Agent. Jts officers. dIrectors, employees and agents. hannless agamst any loss. expense and habllmes whicl1 it may mcur ansmg out of or m the exercise or perfonnance of its powers and duties hereunder. including the costs and expenses (mcludmg attorneys fees) of defending agamst any claim of habilit), but excludmg iIabilltles due to the Dlssemmation Agent's negligence or willful 1111sconduct. The obligations of the Issuer under this SectIOn shall survive resi~TJ1atlOn or removal of the DisseminatIOn Agent and payment of the Notes. The Dissemmation Agent shall not be responsible 111 any manner for the content of ally notIce or report prepared by the Issuer pursuant to these Disclosure Instructions. (d) Other Designated Agents. The Issuer may, from tll11e to tnne, appoll1t or deSIgnate a DeSIgnated Agent to submJ1 Matenal Event notices. and other notices or reports pursuant to these Disclosure Instructions. The Issuer hereby appomts the Dlssel11l11ation Agent and the Designated Agent(s) solely for the purpose of submItting Issuer-approved Material Event nollces. and other notIces or reports pursuant \e, these. DIsclosure InstrucclOl1S The Issuer ma) revoke thIS deSIgnation at any nme upon '''''rmen notIce to the Desl,s:naled Agent. Section 4. Termination of Reporting Obligation. The Issuer's oblIgatIOns under these DIsclosure Instrucllons shall tenninate upon the legal defeasance. pnor redemption or payment in full of a]1 of tbe Notes. If the Issuer's obhgatJons hereunder are assumed in full by some other entity 30' pennitted in the Note Resolution, sucb 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 responsibiiity hereunder. If such tennination or substitutIOn occurs pnor to the final matunty 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 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 111 complIance with the SEC Rule and all currem 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 (1) 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 shan be glven In the saIne lTIanner as for a 1\1aterial Event Section 6. Additional Information. Nothmg in these DIsclosure InstructIons shall be deemed to prevent the Issuer from disseminating any other infon11ation. using the means of dissemmatJOn set forth 111 these Disclosure Instructions or any other means of commumcation. or mcludmg any other infon11atlOn 111 any notIce of occurrence of a Matenal Event, in addition (0 that whicb IS reqUIred by these Disclosure Instructions. If tbe Issuer chooses to 1l1clude any mfo1l11ation in any notIce of occurrence of a Matenal Event. in addwon to that whIch IS specifically reqUlred by these DIsclosure Instructions. the Issuer shall have no obhgatlOn under tbese DIsclosure Instructions to update sucb mfoJ111ation or include 1\ in any future nOllce of OCCUlTence of a Matenal Event Section 7. Noncompliance. in tbe event of a failure of the Issuer or tbe DIssemination Agent. if any. to compl) wit11 any prOVISJon of these DIsclosure Instructions, the Paniclpat1l1g Underwriter or any Beneficial Owner of the Notes may take sucb actlOl1S as may be necessary and appropnate. including seeking mandamus or speCIfic perfon11ance by COUl1 order. to cause tbe Issuer or the DisseminatlOn Agent. if any. as the case may be. to compJy with its oblIgatIons under these Disclosure InstructIons. Noncompliance wl(h the provislOl1S of these DIsc!llsure Instructions shaD not be deemed an Event of Default under the Note Resolution. and the sole remed\ under these DIsclosure InstructJons 1Jl the evem of any faIlure of the Issuer or the DlssemmatlOl1 Agent. if ally. to comply WIth these Disclosure instructIons shall be an actIon [0 compel perf01111ance Section 8. Notices. Any notices or commUl1JcatlOJ1S to or amon~ am of the partlcs referenced In these [hsclosure InstructIOns may be i:!lven as follows. (oj To the Issuer at 300 West Asb Salina. Kansas 67402 Fax: (785)309-5738 Attention: Clerk (b) To the Participating Underwriter at the address set forth in the Note ResolutlOn or such other address as is fumished in wlitmg (0 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 an'angement 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 herew. shall be invalid. illegal or unenforceable, the validIty. legality and enforceabihty of the remaining provisions shall not in any way be affected or impaired thereby. Section 12. Governing L2~. These Disclosure Instructions shall be gaverrled by' anc construed in accordance with the laws ofthe State of Kansas. Dated: July 26, 2012. CITY OF SALINA, KA.NSAS EXHIEITA ACCEPTANCE OF DISSEMINATION AGENT Name of Issuer: Name of Note Issue: Dissemination Agent: Cny of SalIna. Kansas $1.485.000 General Obligatlon Temporary Notes. Series 2012-1. dated as of July 15.2012 Notice Address of Dissemination Agent: ____________ ' i1avmg been duly apPoll1ted by the Cn) of Sahm:. K.ansas to act 111 the capacilY of DlssemJl1atlOn Agent pursuant to tht' Continuing Disclosur~ lnstructlons t( WhiCh thio acceptance IS auached, accepts such dunes and responsibiliues set forth therem. Dated: 8-5 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 undertakmg to provide certain finanCial and other infonnation WIth respect to the Bonds m order to assIst the PartIcIpating Underwnter in complying with the provisions of the SEC Rule. The Issuer IS the only "oblIgated person" with responsibility for continumg dIsclosure with respect to the Bonds. Section 1. Definitions. In addition to the definitions set forth in the Bond ResolutJon, whIch apply to any capitahzed tenn used in these D1sclosure InstructlOns. unless otherWIse defined herem. the following capJtahzed tenns shall have the followmg meanmgs: ·'Annual Report" means any Annual Report filed by the Issuer pursuant to. and as described in. Section 2 of these Disclosure lnstructions. ·'Beneficial Owner'-means any regIstered owner of any Bonds and any person which (a) has the power. directly Of indirectly. to vote or consent with respect to. or to dispose of ownership of. any Bonds (mcludmg persons holdmg Bonds through ncnmnees., deposJlones or other l11tennedlaries), or (b I IS treated as the owner of any Bonds for federal income tax purposes ·'Bond Resolution" means collective!:y, the ordinances and the resolutJOns of the governing bod) of the issuer authorizing the Issuance of the Bonds "'CAFR" meam, the issuer's ComprehenslVe Annual Fmanclal Report. ·'Designated Agent" means Gilmore &. Bell. P. C. or one or more other entitles desib'11ated in wrilmg by the lssuer to serve as <1 desi~rnated agen1 of the lssuer for purposes of these Disclosure InstructlOns. ·'Dissemination Agent" means any entity designated in writing 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 designatJOI1 substantially in the fonn attached hereto as Exhibit B. B-6 "EMMA" means the Electronic Municipal Market Access system for municipal SeCUrItles disclosures established and maintained by the MSRB, which can be accessed at www.emr:1a.l11srb.on.:. "Financial Information" means the financial in fOrI11ati on of the Issuer described 111 Section 2(u)(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 pnnciples, as applJed to govel11mental umts, as In effect at the time of the preparation ofthe Financial Infol111ation. "Issuer" means the City of Sa1ma, Kansas. and any successors or assigns. "Material Events" means any of the events lIsted in Section 3 (a) hereof. "'MSRB'" Ineans the fvluniclpal SeCullties E.ulen1aking Board. "Official Statement" means the Issuer' s Officwl Statement for the Bonds. "Operating Data" means the operatmg data of the Issuer described 111 Section 2(a){2) hereof. "Participating Underwriter" means any of the original undenvliters of the Bonds required to compJy wltb the SEC Rule in connectJon wIth offenng of the Bonds. "Repository" means tlle MSRB vIa EMMA. "SEC" means the Securines and Exchange C ommlSSlOl1 of the united States "SEC Rule" means Rule 15c2-12rh )(5) adopted by the SEC under the Secuntles Exchange Act of 1934. as the same may be amended from time to time. Section 2. Provision of Annual Report~. (a i The Issuer shall. or shall cause tne DlsseminaLlOl1 Agent to. nOl late] than I XCI days aile] me end of the issuer's Flsca} )' ear. commencmg w1tb the FIscal Year ended lL 20! 2. file wlth tbf kep()sJl(lr\' the Issuer's CAFR. WhICh w111 contam the Fmanclal Infom1ation and Operatmg Dati: (COlleCllveh'. the "Annual Repon" J. as follows: , , , FinanC'ia! information The financial statement, of the Issue"~ 10:' SUC!'] pnol Flsca; Year. accompal1Jed by an audn report resultmg from an audn conductec bj an 1l1depencien~ A ccounta111 111 confol1l1lf: wn11 generally accepted auditing standards. Such financial statemenr~ will he prepared 011 a modified accruaJ baSIS of accounting other than GAAP for all governmental funds expendable trus1 and agency funds, The accrual basis of accounting lC; used fm' propnetary and nonexpendablc trust funds. A more detailed explanation of the accounting basls is conta111ed 111 Appendix A to the Officlal Statement. If such audit report is not available by the llme the Annual Report is reqUlred to be filed pursuant to this SectlOn, the Annual Report shall conta1l1 unaudited financial statements and the audit report and accompanymg financial statements shall be filed 111 the same manner as the Annual Report promptly after they become available. The method of preparanon and basis of accounting of the Financial Infol111ation may not be changed 10 a basis Jess 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 wlth any material adverse changes 111 the other portions of the section entitled "FINANClAL INFORMATION." Any or all of the ltems listed above rna)' be 111cluded by specific reference to other documents, including official statements of debt lssues with respect to which the Issuer lS 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 identlfy each such other document so 111cluded by reference. In each case, the Annual Report may be submJtted as a single document or as separate documents compnsing a package. and may cross-reference other infonnation as provided 111 this Section: provided that the audlt report and accompanying financial statements may be submJtted separately from the balance of the Annual Rep011 and later than the date reqUlred above for the fil111g of the Annual Report if they are not available by that date. If the Issuer" s Flscai '{ ear changes. Jt shall gwe notice of such change in the same manner as for a Matenal Event under Section 3(b). (b) If no Dlssemmanon Agent has been appomted. the Issuer shall file the Annual Report as specified by Section 2(a) hereof. or if the Annual Report is not filed within the tune period specified IJ1 Section 2(a) hereof. the Issuer shall send a notice to each Reposltory 111 substantially the fonn attached as Exhibit A wlthm J 0 Busmess Days after the date the Annual Report is reqUJred to be filed as set forth herem. Section 3. Reporting of Material Events. (a) Pursua111 to the provlslons of thl" SectIon. the Issuer shall gIve. or cause the Dlssemmanon Agent. if any. to give. to the ReposHory wlth111 10 Busmess Days after the occurrence of any of tho:: foJiowmg events with respect to the Bonds. nonce of the followmg events' (1) prmclpal and mterest payment deimquencles~ (2) non-payment related defaults, if marenaJ: (3) unscheduled draws on debt service reserves reflecting financial difficulties: (4) unscheduled draws on credIt enhancements reflecting financial difficultIes: (5) SUbStltutlOn of credJt or liqmdity provlders. or their failure to perfonn: (6) adverse tax opmlOns; the issuance by the Internal Revenue Servlce of proposed or [mal detenninations of taxabihty, Notlces of Proposed Issue (IRS Form 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) l110dlfications to rights of Owners. if matelial: (8) bond calls, if material, and tender offers: B-3 (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, consolidatlOl1, 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 actlOn 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 subsectlon any earlier than the notice (if any) of the underlying event is g1\len to the Owners of affected Bonds pursuant to the Bond Resolution. Section 4. Dissemination Agent. (a) General. The Issuer may. from time to time. appomt or engage a Dissemination Agent to assist it m carrying out its obhgatlOns under these Disclosure Instructions, and may discharge any such DIssemination Agent. with or without appoll1tmg a successor Dissemmation Agent. (b) Annual Reports. If a Dissemll1atlOll Agent IS appointed, not later than 15 Busmess Days pnor to the date specified In Section 2(0) 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 cerrifymg that the Annual RepoI1 has been filed pursuant to these DIsclosure InstructlOns. statmg the date It was filed. or that the Issuer has certIfied to the DissenunatJon Agent that the Issuer has filed the Annual Report with the Repository If the Dlssemmation Agent has not receJVed an Annual Report or has not receIved a wntten notice from the Issuer that 1t has filed an Annual Repon with the ReposJ(ory. by the date reqUIred in Section 2(a). the Dissemination Agent shall send a notJce to the ReposItory 111 substantially the fonn attached as Exhibit A. (c) Material Event Notices (1) The DlssemmatJon Agent shall. promptly after obtammg actual knowledge of the OCCUITence of any event that 11 beheves may constltute a Material Event. contact the chief fmanclal officer of the Issuer or 1m, or her deSIgnee. or such other person as the lssuer shall designate in writ1l1g 10 the DissemmatlOn Agel1l from Lime to time, inform such perSall of the evem. and request that the Issuer promptly nonfy tbe DISSel111l1atJO!1 Agel11 111 wntmg whether or 1101 to repm1 the event pursuant (0 Section 4(cj(3) (2) Whenever the lssuer obtains knowledge of the occurrence of an event. because of 3 notice. fro111 the DIssemination Agent pursuant to Section 4(c)(l) or otherWIse. the Issuer shall promptly detenmne if such event constItute~ a Matenal Event and shall promptly notify the DIssemmation Agent of such detenmnation. If appropriate. such \vritmg shall mstruct the Dissemination Agent to repon the occurrence pursuant to Section 4(c)(3). (3) If the Dissemmation Agent has been given ",Titten instructions by the Issuer to report the occurrence of a Material Evenl pursuant to Section 4(c)(2), the Dissemmation 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. 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 Dissemmation 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 tune to tnne. appoint or desiE,·nate a Designated Agent to submit Annual Reports, Material Event notices, and other notices or reports pursuant to these Disclosure InstructlOns. The Issuer hereby appoints the DisseminatlOn Agent and the Designated Agent(s) solely for the purpose of submittmg issuer-approved Annual Reports. Material Event notices. and other notIces or reports pursuant to these Disclosure Instructions. The Issuer may revoke thIS desi~'11ation 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 tenmnate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If the Issuer's obliganons ,hereunder are assumed in full by some other entH), as pennitted in the Bond Resolution. such person shall be responsible for compbance 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 tenmnation or substitutIOn occurs pnor to the final maturity of the Bonds, the Issuer shall gwe notice of such tenninatlon or substItution in the same manner as for a Matenal Event under Section 3(b) Section 6. Amendment: Waiver. Notwithstanding any other proviSIOn of these Disclosure Instructions, the Issuer and the DlssemmatlOlJ Agent. if any. may amend of these Disclosure instructions (and the DisseminatIOn Agent shan not unreasonably refuse w execute any amendment so requested b) the Issuer) and any prOVISIOn of these D1sclosure InstructlOns may be walved, provlded that: (a) Bond Counselor other counsel expenenced in federal secunties Jaw matters provides the Issuer and the DlsseminatJon Agent. lf any. wlth its opmion that the undertakmg of the Issuer contamed herem, as s(\ amended or after givll1g effect to such walver, IS 111 compliance wnh the SEC Rule and all current amendments thereto and mterpretatlOns thereof that are appiicable to these DIsclosure InstructIOns; (b) if the amendment or waiver relates w Sectiom 2(a) or 3(a), It may onl:), be made 1D connection w1tb 2 change in circumstances that anses from ii change iT:' law or legal requirements. or change in the ldentl1Y, nature 0;' status of an obhgated person WIth respect l(l the Bonds, or the type of busmess conducted: ana (c') the amendment or waiver is either (1) approved by the Owners of the Bonds ill the same manner as provided in the Bond Resolution with consent of the Owners. or (2) does not in the opinion of Bond Counsel matenally impair the interesTS of the Owners or Beneficial Owners of the Bonds If there 1S an amendment or waiver of a prOVIsion of these Disclosure Instructions. the Issuer shall describe such amendment in the nex1 Annual Report, and shall include. as applicable. a narrative explanatlOn of the reason for the amendment or waiver and its impact on the type (or. 111 the case of a change of accountmg principles. on the presentatIOn) of F111ancial InfonnatJOn 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-lO 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 fonner accounting principles. Section 7. Additional Information. Noth1l1g 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 includlllg any other mfonnation in any Annual Repol1 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 infonnatlOn 111 any AnnuaJ RepOl1 or notice of occun-ence 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 updare such infom1ation or include it in any future Annual RepoI1 or notice of occun'ence of a Matena] Event. Section 8. Noncompliance. In the event of a failure of the lssuer or the DlssemmatIOn Agent, if any, LO comply with any provision of these Disclosure Instructions. the ParticipatIng Undenvriter or any Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, incJudmg seeking mandamus or specIfic perfonllance by court order. to cause the Issuer or the Dissemmation Agent. if any, as the case may be. to comply with irs oblIgations under these Disclosure Instructions. NoncomplJance 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 111 the event of any failure of the Issuer or the DIssemination Agent if any, to comply with these Disclosure lnstructlons shall be an action to compel perfonnance. Section 9. Notices. Any notices or communications to or amont: any of the parties referenced 111 these Disclosure Ins[ructlol1S may be gIven as follows: (a) To the Issuer at. 300 West Ash Salina, Kansas 67402 Fax: (78S)309-573X Attention: Clerk (b) To the Partlclpaung L!nderwnter( s) at the address set forth In the Bond P .. esolutlOrJ? or such other address as IS fUl111shed 111 wfItm!:, [0 the other pames referenced herein. [C I To tbe Dissemmmiol1 Agent at the addres<; set forth on Exhibit B attached hereto Apy person may by vmtten notIce 10 the other persons listed above. deSIgnate 3 dIfferent addres5 or telephone number(s) \(, which subsequei11notlces or communications should be sent. Section 10, Electronic 1 ransactiollS. 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 solely to the benefit of the Issuer, the Dissemmation Agent, if any, the PartIcipating Underwriter and Beneficial Owners from time to tlme of the Bonds, and shall create no nghts 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 impmred 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 Sa1ma. Kansas $[2.365.000] General Obligation Internal lmprovement Bonds. Series 20l2-A and $[3.760.000J General Obligation Refundmg Bonds. Series 20 l2-B, dated as ofJuly 15. 2012 Cny of Salina, Kansas July 26. 2012 NOTICE IS GIVEl\ that the City of Salina. Kansas (the "Issuer") has nOl provided an Annual Report witb respect to the above-named Bonds as reqUlred by the Contll1Ulng Disclosure InstructIOn" dated as of Jul~ 26.2012. The Issuer antiCIpates that the Annual Report will be filed by _____ _ Dated: Name of Issuer: 1\;ame of Bond Issue: Dissemination Agent: CITY OF SALINA, KANSAS EXHIBIT B ACCEPTANCE OF DISSEMI]\A no!\: AGENT CHy of Salma. Kansas S;r2.36:;.OO()~ General Obhg-anon Internal lmprovemenT Bonde. Senec 20U-A and S;f3.760.000J Genera] ObhgatJOn Refunding Bonds. Senes 20]2-B. dated as of July 15. 2012 Notice Address of Dissemination Agent: ____________ , havmg been duly appointed by the City of Salina, Kansas to act in the capacJty 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 comprehens1ve annual finanCIal reports have rece1ved the Cemficate of AchIevement f01 Excellence III Fmancial Reporting award b) the Government Finance Officers ASSOCIatIon The Cernncate of AchIevement wa, developed to encourage governmental unm to prepare and publ1sb an easJ1;' readable and understandable finanCIal repon covenng all funds and finanCIal transactIOns of tl1e government dUring the fiscal yea! The followmg appendIX contal11S aud1ted finanCIal statement:; for the City of Salma', pnrnar~ governmental functions for fiscal year endmg December,,], 2011, A: the time thIs repon was completed the audned financial statement~ of two component ul1ltslJomt ventures of the CIty, the Salma AIrport Authority and Salma/Salme County Health Department, were not available and as a result have not been Illcorporated mto the enclosed audit Tl1e audited finanCIal statements for the Salma Alrp011 Authority have subsequently been completed and can be found on the MUl1lclpai Secunty Rulemakmg 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 adlTI1mstratlve offices ~)pon comp/etlon of the Health Departments audIt. tne Cny will update no, audn and release It<; (ompreI1em,Jvt Annual Fmanclai Repon, Mayor and City Commissioners City of Salina, Kansas INDEPENDENT AUDiTOR'S REPORT ON THE BASIC FINANCIAL STATEMENTS • tvdZE,--HOUSER (X,OMPANYr.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 Citys 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 usec and Significant estimates made by management as well as evaluating the overall baSIC financial statement presentation. We beileve 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 purpon: to and 00 no;, present fairly the finanCial POSition of the reporting entity of the City of Salina Kansas. as of uecember 3~. 201~, the changes In ItS finanCial position. Oi'. where apPlicable, ItS cash flows for the year then enoes III conformity witr, accounting prrnclPies generally accepted in ths United States of America In accordanCe witi-, accounting prrnclples generaliv acceoted In the United States or America. the City of Salina, Kansas nas Issue::: separate reporting entltl' flnancla! statements for which we have Issued ou~ report dated June 22. 2C12 l;~, ou;-ODinIO~. trls T!nanCia, statemeflT2 referreC te, a!Jove presenf. fa\rly. Ir. a\i. matena! ~es:Jects, th'S respe:::th!~ 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 change:: If" finanCial positior, anG, where applicable. casr, flows thereof and the respective budgetary compa,isor, fo, the General Fund. Floo::! 8. Drainage Improvemen~ Fund. TOUrism and Convention Fund. Spec:a! Gas Feme, 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 Amenca VJ\cvwmrzeholise:--rom == mhco@mlzehouser.com 534 S Kansas Ave, SUite 700 E Topeka, KS 66603-3465 .. 785.233,0536 P & 785.233,1078 f 534 S Kansas Ave, SUIte 400 II TopeKa, KS 66603-3454 iii: 785.234.5573 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 11 Lawrence, KS 66044-2682 • 785.842.8844 P • 785.842.9049 f 900 Massachusetts. SUIte 301& Lawrence, KS 66044-2868 .785,749.5050 P II 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 Amenca, which conSisted of inquines 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 matenal 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 the basic financial statements and, accordingly, we do not express an opinion or proVide any assurance on them. ~!~ (fk(}-?\~ v 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 Activit'les. 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 financla! 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 Fmancial Statements The government-Wide fmanclal statements present the results of the City s operations uSing the accrual baSIS of accounting. the same baSIS as IS used by private secto~ 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 o~ the Cit)' S overal! finanCial health t\let assets represent the totoi 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 mOnltoreci 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 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. Fund Fmancial 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 suppiementarf 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 ftnancial 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 legaliy 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 Integrai part of the baSIC fmanC13i statements since they eontam 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 inlstration 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 Pubilc Works Sanitation Customers iL1.520 14604 84 3% fee increase Landfil! Tonnage 94,907 96178 1.271 No fee Increase Street Cut ana ExcavaTion Permits 18': 201 20 Concrete Permits .-Ih:=" ,0_ o ,~ I~ - ( 12, Water and Wastewatel' $2 OC per month pei' Water Treated (Billion Gallons) 2.30 2.30 typical user $2.00 per month per Wastewater Treated (Billion Gallons) 1 50 145 (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, Salma 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 24%. 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 summanzes the comparative property assessed values and tax levy rates Fiscal (Budget) Year Comparative Property Values and T ax Levy Rates 2010 2011 Real Estate and Personal Property Assessed Valuation City Mill Levy ($ per $1,000) $ 397.470,626 $ 402,354.576 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 $ 20.082 5773 25.855 124707 94.4% 971% 50,330,252 19.236 6,786 26.022 128498 97.3% 99.9% $ 47.406.072 Change $ 4,883,950 [0.846] 1 013 0,167 3,791 2,9% 2,8% $ [2,924,180] The unemployment rate in Saline County declined very slightly from 6.4% in 2010 to 6.3% in 2011, reflectmg general economic conditions. This IS still slightly below the statewide and Significantly below the national unemployment rate, Tne 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: Govemmental Business-Type Activities Activities Total Pnmarv 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 (Caoital) 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 ~ $ 22496 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 $ 88458 ~ $105,042 ~ 5) 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) Restricted for Permanent Funds $ 417 $ 427 3) $ $ 417 00• '0 S; 427 00' 10 $ 10 Restricted for Debt SerVICE $ 572 $ 1285 $ 1.553 $ 1.553 3) 2.125 1 % $ 2.838 2% $ 713 Unrestricted $ 3,808 $ 6.333 $ 14.306 $ 24,534 $ 18,114 10% $ 30,867 16% $ 12.753 Total Net Assets $117.798 $ 117.334 $ 63,938 $ 70.314 $181.736 100%, $187.648 100% $ 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 aralnage facilities, utility plant. vehicles, equipment, etc.), less any debt used to acquire those assets tna! IS stil, 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) 07 net assets (15%; 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 p:-oject. 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. Conoensed Comparitive Statement of Activities. 2010 and 2011 (In $OOO's) Govemmental Buslness-Tlpe Total Pnma!:1 Government 2010 2011 2010 2011 2010 % 2011 % 2010-2011 Program Revenues Change Charges for Services $ 12.306 $ 13470 $ 22419 $23,779 $ 34725 48% $ 37.249 47% ;;; 2,524 Operating Grants and Contnbutlons $ 3,415 $ 2,907 $ 202 S, 3.415 5% $ 3.109 4% 5 (306, Capital Grants and Contnbutlons $ 3,804 S; DOAl 5 3.804 5% S; 3.804 General Revenues Property Taxes $ 11.179 S; 11.712 $ 11 179 16% $ 11 712 15% $ 533 Sales Taxes $ 15.225 $ 15.848 S; 15.225 21% $ 15.848 20% $ 623 Other Taxes $ 6.298 $ 6,389 $ 6.298 9% $ 6.389 8°/~ Ii 91 Investment Revenue $ 81 $ 77 $ 67 S; 83 $ 148 0% $ 160 0% S 12 Other Miscellaneous $ 565 $ 872 $ 341 ~. '" 330 $ 906 1 ~t S, 1.202 2°' '0 S 296 Total Revenues 5 49.069 5 51,275 $ 22 827 528.198 $ 71.896 100% S 79473 100% S 7577 Expenses S General Government :; 10.845 S; 13.615 $; 10.845 15°1c S 13.615 18% S; 2770 Public Safety $ 18,592 S 18.579 $ 18.592 25% 5, 18.579 25% S; (13 ) Public Works S 9.782 S; 9.858 $ 9.782 13% S 9,858 13% S; 76 PubliC Health and Sanitation SO 1.365 S 1.368 ~. 1,365 2°/0 :;; 1.368 2% :;; 3 Culture and Recreation 5; 6.572 $ 6.693 S; 6.572 9°/~ S 6.693 go,o S; 12'1 Planning and Development $ 3.715 $ 3450 $ 3.715 50' /0 S; 3450 5%' S; (265) Solid Waste Disposal $ 2.925 $ 2945 S 2.925 4% S 2.945 4%. S; 20 Water and Sewer $ 14.050 $13.597 $ 14.050 19% $ 13,597 18% $ (453) Sanitation $ 2.261 $ 2.261 S, 2.261 3°' /0 S 2.261 3% S Golf Course $ 817 5) 825 $ 817 1% $ 825 10/Cl S, 8 Interest on Long Term Dept $ 2.257 S 1.650 $ 2.257 3°/~ $ 1.650 2(% S (607) Total Expenses $ 53,128 S 55.213 $ 20.053 $19.628 S; 7318, 100% ~, 74.841 100% S 1.668 Increase In net assets before transfers $ (4.059) S (3.938; $ 2.774 S 8.570 S, (1.285) $ 4.632 S 5917 Transfers and other extraordinary Items £. 92 S 2.362 S (92) S, (2.163) $ :1 199 S 19" Increase In Net Assets S (3.967) S (1.576) S; 2.682 S 6407 S; (1.285) S; 4.831 $ 6116 l\let Assets January 1 S 119.85L: $ 117.798 S 61.270 $ 63.938 S; 181124 $181736 S 6-1') Prior Period Ad,ustment 5: 1 91 ~ $ "i '<-1,..., ~) LJlli 1.897 S 1.081 Sc (816, I 11"- Net Assets. January 1 restated $121.765 $118.910 S 61.256 $63.907 S; 183.021 $182,817 $ (204' r"et Assets Decembel 31 $117.798 5>117.334 $ 63.938 $70.314 :b 181.736 $187.648 3, 5.912 Governmental Activities. Total expenses for Governmental Activities for the year ending December 31,201, were $55.213,000 compared to $53.128.000 in 2010. Governmental activities represent 74% of the Citys 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 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 SAUNA, 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) Tourism and Convention 5) 367,197 5) 340473 5) (26,724) Special Gas 5) 1,484,641 ;;; 1,417,743 $ (66,898) Bicentennial Center 5) 46,048 $ 142,881 5) 96,833 Sales Tax Capital 5) 2154,367 5) 1,397,57", 5) (756,796) Debt Service $ 571,873 $ 1,285.130 $ 713,257 Capital Projects $ (2.610.001 ) 5) 390.852 $ 3.000.853 Other Governmental Funds 5) 2,981,652 ;;; 2,792.546 $ (189,106) Total $ 8.801,484 5) 1 'I .604,341 $ 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 baiance 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 201', Modified Accrual BaSIS Fund 2010 201~ 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 T ounsm and Convention $ 1,332.67'1 $ 1.306.102 $ (26.569) Special Gas ~ 1,569.648 $ 1,546,045 $ (23.603) Bicentennial Cemer So 1.702.066 $ 1.656.762 $ (45.304) Sales Tax Capital ~, 3.815 96E Z 3.777.286 S. (38680; Debt ServiCE: s: 794386E $. 6.844 52' ~, (1.099344\ Capital Projects 5, 5552906 S 9.896198 S 4343292 Other Governmental Fund~' $ 2.954.257 S. 2800.508 $ (153.7 49) Total Revenues $ 59.176.265 S, 63403 199 S; 4.226.934 Less Other Sour:::e2 ~2.~57.2I3Li s: "1~,58:.65:: ~, 2.42L.37' Revenues net of othe~ sources ~ 47.018.98~ '" 48.82: 54L ~. 1.802.562 '" .J' --- Expenditures (Including Other FinanCing Uses) General s: 35.772,771- s: 3549467', '" " (279 103) Flood and Drainage Irnprovemen: <!' 2.222 SO 20{;,092 ~ 202,869 ,j. T ounsm and Conventror S; 1.228.789 s: 1.332826 s: 104,037 Special Gas S; 2.138.057 $ 1.612.943 $ (525.114) Bicentennial Center s: 1 76824C S; 1.559.929 S; (208.317) Sales Tax Caoital $ 3.289009 $ 4.534.082 s: 1.245.073 Debt Service $ 8 107.283 $ 6.13,,264 $ (1.976,019) Capital Projects S; 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 $ 4.983.834 S; 5,692.077 S. 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 5) 14.751 p,ssets Invested In Capital. net of related dent $ 2,294 $ 2.276 $ (18) $ 45,567 $ 40,991 $ (4.576) Restncted 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 S (34: Total Assets $ 1.485 S -: 407 $ 17:=<' \ I VI S 414 S 346 $ (68\ Current Liabilities $ 203 $ 29 S; (174) $ 48 $ 24 $ (24) Noncurrent liabilities $ 123 $ 156 $ 33 $ 61 $ 109 $ 48 Total Liabilities $ 326 $ 185 S (141 ) $ 109 $ 133 5) 24 Assets Invested In Capital, net of related debt $ 639 $ 646 $ 7 $ 348 '" ')'1 A $ (34) w 01"< Restncted Net Assets $ $ $ $ $ <:: '" Unrestricted Net Assets It 520 <!' ~~co $ hCO $ (43) $ (101 ) <!' (58) '" -Ii o(v vV 'Ii 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 Disposal Water and Sewer 2010 2011 Change 2010 2011 Change Operating Revenues 5) 2,878 $ 2,929 5) 51 $ 16,789 $ 18,361 $ 1,572 Operating Expenses $ 2.852 5) 2,829 $ (23) $ 13,571 $ 12,964 $ (607) Operating Income 5) 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) 5) (139) 5) (180) 5) (41 ) $ 77 $ (2,030) $ (2,107) Capital Comributlons $ $ $ $ $ 3,804 $ 3,804 Change in Net Assets $ (168) $ (187) $ (19) $ 2,862 $ 6,610 5) 3,748 Net Assets, January 1 $ 4,121 $ 3,896 $ (225) 5) 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 Course 2010 2011 Change 2010 2011 Change Operating Revenues $ 2,31, 5) 2.335 $ 24 :;; 783 5) 687 $ (96) Operating Expenses $ 2.276 $ 2,292 $ 16 5) 817 $ 825 $ 8 Operating Income $ 35 5) 43 $ 8 $ (34) $ (138) 5) (104) Non-operating revenues (expenses) $ 18 $ 32 $ 14 $ $ $ Income (Loss) before Transfers $ 53 5) 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 5) 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 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 tell 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 contnbutlons 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 vanous 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 p,ctlvity Totai 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 $ ~2,345 $ ~ 1.904 $ 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 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 ODD's) Governmental Business-Type Activity Activity Additions $ 547 $ 10.633 Retirements $ (3,110) $ (1,236) Adjustments $ 956 $ (31 ) Net Additions $ (1.607) $ 9.366 DepreCiation Expense Applied $ 4.730 $ 2.653 Total $ 11,180 $ (4.346) $ 925 $ 7,759 $ 7,383 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 $3400.000 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 suodlvislons Also on August 1 s' the City Issued $3.400.000 In temporary notes to finance public facilities to serve" commercia! subdiVISion development These note will be refinanced Into a long term bond Issue In August. 2012 Additional Informatlor on the City s debt can be found In Note'::; E. of tne notes to the baSIC financlai statements. Requests for information This financial report IS Intended to give the reader a genera! overvlevv 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. 1 ~ -' 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 bonds 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 pavable Landfill post-closure care liabilities Total noncurrent liabilities Total liabilities l\jet Assets Invested In capital assets. net of related debt Restricted for' Permanent funds: Expendable Debt service Unrestricted 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 46.272729 164.514.513 67638747 :; 194.659.725 $ 98,029.584 $ 788,731 $ 294.449 468.309 608.219 563,720 5.145 512680 211.291 163.904 10,315.524 581 694 122.301 3.400,000 343.696 5.051.038 1.200.048 21.686841 2.943.908 149.245 2.507.440 527.190 2807425 334,458 15.850.229 50 '17463:: 6.01785S' 2.042.254 55.638742 24.771 990 5> 77.325.583 :;, 27715.898 $ 109.288,843 $ 44.226.91E 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 833494 60.536.049 43,616.412 24.018,193 297.475,172 132.956.517 232.153.260 $ 292.689.309 $ 1.083180 1.076.528 563.720 5145 723971 163.904 10.315.524 703.995 3.400,000 343.696 6.251.086 24.630749 149.24E, 3.034.630 3141.883 15.850.229 56192491 2.042.254 80410722 $ 105.041.481 $ 153.515.755 426.741 2.838,146 30.867.183 $ 187.647.828 Governmental activities: General government Public safety PUblic works Public health and sanitation Culture and recreation Plannrng and development Interest on long-term debt Total governmental activities Business-type activities: Solid Waste Disposal Water and Sewer Sanrtatlon Golf Course Total business-type aClIvltles Total pnmary government CITY OF SALINA KANSAS STATEMENT OF ACTIVITIES For the Year Ended December 31,2011 Net [ExpensesJ Revenue and Program Revenues Changes In Net Assets Operating Caoltal Total Total lotal Charges for Grants and Grants and Governmental Business-type Prrmary Exoenses Services Contributions Contributions Activities Activities Government $ 13.614508 S 6 106,067 $ 359.148 5, $ [7,149.293] 5> $ [7,149,293} 18.579,041 3,766,156 631.417 [14,181468] [14,181 468] 9,858.199 261 707 1,368,577 [8.227,915] [8.227.915J 1,367.825 42,729 153.566 [1,171,530] [1,171.530] 6,693.341 3140,025 177,048 [3,376,268] [3.376,268] 3.450.078 153.675 217.643 [3.078,760J [3,078,760] 1 650426 [1,650 426J [1 ,650,426] 55213418 13470359 2.907.399 f38835.660J [38.835.6601 2.944,765 2.904,37, 140.394] [40.394] 13.596.918 17.904.056 201,700 3803,565 8312.403 8,312.403 2,261 462 2,334119 72,657 72.657 825,057 636202 [188855] [188.855] 19.628.202 23778748 20', 70G 3803.565 8155.81', 8155811 $ 74,841.620 $ 37 249107 S 3109.099 5; 3803565 f38835.6601 815581, r30.679.849) General Revenues: Property taxes leVied for General purposes 7782.76E 7.782768 DeDt service 2778,845 2.778,845 Motor vehicle la>' General purooses 1 149.64' 1 149.641 Sales tax General purposes 11 767.40G 1'1.767.400 Selective purposes 4.080342 4.080,342 Other taxes General purpose" e.389,878 6.389.878 Investment revenues 77.095 83.399 160.494 M,scellaneou, 8rl90Ll 33035', 1.202255 Transfers ne 2.361 59:0 r2 162 772J 19882'1 Subtotal general revenue~ 3'.25846C r, 749.022; 35510.444 Change !n net assets r' 576 194' 6406789 4830.595 NeL 2sse:2 -be~linillng ~A7,7979';~ 63937 £:;' 18" 73~ 53C Prior penod adjustment ',112,425 [30 722} 1.08' .702 Net assets -beginning restated ',,8910336 63.906.897 182817.233 Net assets -ending $117.::34142 S; 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 5; 12,060,836 $ 907 5; 340473 5; 1,508488 LIABILITIES AND FUND BALANCE Liabilities' Accounts payable $ 301.319 $ - $ -5; 46.356 Retalnage payable 44,389 Deferred revenue 7,923.279 Due to other funds Matured principal and Interest Temporary notes payable Total liabilities 8.224,598 90745 Fund balance. Nonspendable 89,716 Restncted 340472, 1 .08L1 .72(,1 Committed Assigned 292.815 907 323.023 Unassigned 3.452.706 Total fund balances 3,836,238 907 340473 ;,41774::- Total liabilities and fund balance $ ;2.060.836 s: 907 $ ')AfI -17'? <:: 1,508482 "';,v.'" '-' 4' Bicentennial Center $ 117,993 54.966 $ 172,959 $ 30,078 30.078 142.881 142:,88'1 ~ 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 5) 2,824.564 $ 26.491,371 $ -5) -$ 288,281 $ 22.643 $ 688.677 423.920 468.309 2.392,245 '10,315.524 9.375 9.375 5.145 5145 3.400.000 3,400.000 2.397,390 4.112.201 32018 14.887,030 89.716 ~ .285.130 891.254 3.611.577 610 134 [2477.564] '1.851.292 126,7 43 787,437 2,868,416 50.00C) 4.322.599 3453706 j ,397.571 1,285.130 390,852 2.792.546 "1 i .604.34~ $ 1.397.571 '" J. 3.682.520 £ 4.503053 $ 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 payqble In the current penod 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 flnancia! statements are an integra! part of thiS statement. 17 $ 11,604,341 458.315 164,486,723 2.327.348 [61.542.585J 5) 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 Im12rovement 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 34.688466 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 427429 PubliC health and sanitation " 176.082 Culture and recreation 2.734.957 Planning and development 2,319.300 736.386 Miscellaneous Capital outlay 555048 196,308 1 183.678 Debt service Principal retirement Interest and other charges Total expenditures 34496722 206092 736.386 1.611.107 Excess [defiCiency] of revenUE: and otner source~ over [under] expendiwres and other [uses1 1 9~ 744 1188.5261 569.716 [245.062' OTHER FINANCING SOURCES [USES] issuance of bonds Bond premium Transfers In 868.838 90~ 180.000 Transfers [out] [9979491 f596440] [1.836) Total otherfinanclng sources [uses] r129.1111 907 [596440] 178.164 hIe! change In fund balance 62.633 rI87,619} [26.724; f66.89S} Fund balance -Beginning of year 3617,181 188526 367,197 1,484.641 Restatement of Prior year fund balance 156424 FUND BALANCE -Begmnmg 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 S; -S; -S; 2,723.262 S; -$ -S; 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 77'1,581 151,055 161.744 2,084.380 1.559 929 1 032.526 6047776 6489796 2.884.355 55064.689 in6,01e 2.736.202 [1 451.8051 r6448162J r631.2361 [6.243,145J 6,565.000 6,565000 22.985 22,985 872.849 fj.55b :::.225,565 ::: 289 564 547.389 7,993,670 [3.501 556] [83488J [405,549J [105,259) [5.692,077J 872.849 [3 Ll92.998] 2,165.062 9449.015 442130 8889.578 96.833 1756.796J 713,257 3.000,853 [189,106] 2,646.433 46,048 2,154,367 57~ ,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 8,957908 $ 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 habilities 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 prrncipal 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] [10,070J 2.254.765 [4.725,361J The notes to the basic finanCial statements are an integra! part of this statement. 19 $ 2,646,433 [2.557.809J 314.150 584,822 [523.988] [6.570,801] . 4.530,999 $ [1.576,194] CITY OF SALINA KANSAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31 , 2011 Business-Type Activities Emerorlse Funds Solid Waste Water and ASSETS Disposal Sewer Sanitation Golf Course Current assets Cash and Investments $ 3.379526 $ 24,042.117 $ 621.683 S; 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 3610.665 25987.712 760855 31605 Capital assets NondepreclaDle capital assets Construcllon In progress 1'1 062055 Land 682,000 844,002 15,000 Depreciable capital assets Capital assets 8,278,501 90.480,372 1557447 992099 Less' accumulated depreCiation 5465856 39.202.619 911.117 693.137 Total capital assets 3494.645 63183810 646.330 313.962 Total assets $ 7 105.310 $ 89.171.522 $1407.185 S; 345.567 LlaDllllles Current liabilities Accounts payable S 22192 ~ 262444 S 6.859 S 2954 Retalnage payable 608219 Imerest payable (: 5~14 202 Til Meter deposits payable 163,90t. Current portion of compensated absences payable 1 ~ 2: 5 6838::: 22203 2050': Current portion of accrued claims payable Current portion of general obligation bonds payapis 486302 713746 Current portion of revenue Donds payable 343696 Total current liabilities 528.223 2.363168 29.062 23.455 Noncurrent liabilities Compensated absences oayabls 48340 294765 95709 8837E A.ccrued Claims payabl~ Net OPEB Obligation ~3 944 20987L 59830 2081;:: Pavable from restrlctea assets Genera! obligation bonos pavaols 73~ 80s : 285 CS~ Revenue bonds pavab!e 15,850.222 Landfill post-closure care Ilabllitleo 2042254 1 ot3r noncurrent lIaD!lmes 2867 34L; 2~ 639,91 ~ /15~ 53~ 10S,"l8S -. olal iI8nll!lIer.. S 2 39:' S67 : LL C)O~ 08-0 1SJ-bC" : .....,/ C'-r ___ ' Ne! A.ssets Invested In capital assets net of related debt l L.275,537 Z, 40,99'1.086 & 646.330 S, 313962 Restrlcled Restricted for oonC! retlrernem i ,553 016 Unrestricted 1.434206 22624,333 576254 [101 038J T018i net 8ssel~. S; 3 709 743 $ 65168435 S; 1,222584 S; 2',2.924 The notes to the baSIC financial statements are an Integral part of thiS statemenl 20 Total Internal Enterprise Service Funds Funds $ 28,047,281 S; 3,089.207 1,396.659 16 571,702 115.694 375,179 30390837 3.204.901 11.062,055 1,541.002 101 308419 866.638 46.272729 838.848 67.6387t.7 277ge, $ 98,029 584 $ 3.232.69'1 £ 294449 S 10005'" 608219 211.29, 163904 122301 '138'" 563720 1.200048 343.696 2943.908 681.158 527190 74940 149.24::: 234458 60"17 B5S 15850229 204225'" 24 -;'7', 99~ .....,~' I, ... 0::: ~L, IV'-' :12~ 7~~ 89C: 9:]5 .:,~:: S, 44226915 5; 27790 ~ 553.01 E: 24 533755 2.299558. S; 70313686 $ 2.327 ::;48 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: Entert!rise Funds Solid Waste Water and Disposal Sewer Sanitation Golf Course Operating revenues Charges for services $ 2.904,371 $ 17,904,056 $ 2,334.119 $ 636.202 Federal grants 201,700 Miscellaneous 24.491 255.256 424 50.180 Total operating revenues 2.928862 18.361.012 2.334.543 686.382 Operating expenses General government Public works 2.088.843 11,205 114 2,170.663 Recreation 791.488 Depreciation 740047 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 5.397121 43081 [138.675J Nonoperating revenues [expenses] Investment revenue 9072 72452 1.839 36 Debt service [115.875] [632.390] Galn/[Ioss] on disposal of fixed assets 2.550 30000 Accretion of bond premium 7.864 Amortization of bond Issuance cost" ['11.051) Total nonoperating revenues [expenses] 1106.803J [560575] 31.839 36 Income floss] before transfers [6.831] 4.836.546 74.920 [138.639J Transfers from [to] other funds T ra nsfers In 47,228 Transfers [out] [180.000) 12.030,0001 Total transfers [180.0001 [2.030000] 4,/ .22f Sapltal contrloutlons 3.803.565 Change In net assets 11868311 6610111 74.920 191 411J Net assets January 1 3.8958,2 58.578.036 1 159149 304.622 Restatement 762 119712] [11.485; [287) Net assets. \.January 1 restated 3896574 58.558374 1 147664 304 335 l\jei assets December 31 5) 3.709.743 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 Total Internal Enterprise Service Funds Funds $ 23.778,748 $ 9.881,156 201.700 330.351 251.196 24.310.799 10.132,352 9.611.278 15.464.620 791,488 2.653,192 4.698 18.909,300 9.615.976 5401.499 516.376 83.399 8446 [748.265] 32.550 1 129 7.864 [11.051) 1635.503) 9.575 4.765.996 525.951 47.228 60.000 [2.210.000) 12 162.7721 60.000 3.803565 6406789 585.95'1 63937619 1 737.815 [30.722} 3.582 6390689, 1741.397 S; 70.313.686 5) 2.327.348 CITY OF SALINA KANSAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Enaed December 31, 2011 Business-Type Activities Enterprrse Funds Soird Waste Water and Disposal Sewer Sanrtatlon 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 [1.722.492J [7,552.182J [1,616,344] [391,100J Cash paid to employees [454.426] [2.945,574J [696.074] [386.401] 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] [11,886.827] [139.452J Capital contrrbutlons 3.803,565 Debt Issuance costs Incurred [315.426J Proceeds from sale of capital assets ') ~r::.n .:..,V-..IV 3C,OOO Principal payments -general obirgatlon bonds [697.396] [691,410J Prrnclpal payments -revenue bonds [1,580.000J Proceeds from Issuance of revenue bonds 16,193.925 Interest paid [136908) [496,760) Net cash prOVided by [used In] capital and related finanCing activities [857 750] 5029,617 [109452J Cash flows from Investing activities Interest received 9072 72453 1 839 37 Cash flows from noncapltal finanCing activities Transfers lr, 47222 Transfers [out] r1800001 [2.030000) Net cash prOVided by [used In] noncapnal finanCing aClivltles [180.000J 12030000) 47.228 Net Increase [decrease] In casil and cash eqUivalents [232723; 10.881 325 [87.326J [43,855] Cash and cash eqUivalents January 1 3.612249 13160792 709.009 47810 Casn and cash eqUivalents DecemDer 31 s: 3379 52E s: 24.042.117 S, 621 683 S. 3,955 The notes to the baSIC finanCial statements are an Integral part of thiS statement 22 Tota: Internal Enterprrse Service Funds Funds $ 23.766,919 $ 9,786,038 [11,282.118] [8,955,819] [4.482,475J [631.488] 532.051 251.196 8.534,377 449.927 [12.049.725J 3,803,565 [315.426] 32,550 1,129 [1,388,806] [1.580.000] 16.193,925 [633,668) 4 062 415 1 129 8340" 8,445 47222. 60.000 r2.210 OOOJ [2162 i72] 60 000 10.517421 519501 17.529.860 2.569706 $ 28.047.221 S 3089.207 CITY OF SALINA, KANSAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS (Continued) For the Year Ended December 31,2011 BUSiness-Type ActiVIties Enteronse 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 ~ Operating 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}58,777 120,799 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 S 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] 133066 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 flnancia! statements are an integral part of this statement. 24 $ 313,300 $ 313.300 S 313,300 S 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 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 Salina-Saline County Boare of Health was organized by the City and County to prom0l8 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 nonflduciary 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 Incluae 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 Day 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 [S Inc:urrea as under accrual accounting. However, debt service expenditures, as wei! 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 City'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 te, other governments. on a cost-reimbursement basis Agency funds are custodial in nature and do not measure results of operattons 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 organlzattons andlor other funds The City reports the follOWing major governmental funds' General fund -To account for resources traditionally assoclatec With govemment, 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 translem guest Lax revenues. whlcn are specificallY restrlctec to promotion and tourism activities. SpeCial gas fund -To account fo" the City's share of motor fuel tax revenues. which are legally restricted te 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 pnnclpal and interest from governmental resources and special assessment bond principal and interest from special assessment leVies when the City IS obilgated 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 propnetary 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. Goif 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 onglnal maturities 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 authonzed 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 eltner "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). All other Clutstanding balances between funds are reported as "due to/from other tunds ,. Accounts ReceivablE;. The City records revenues when services are prOVided AI! receivables are Sllown nei 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 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 ACCOUNTII'JG 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 penaltYI December 21. Payments of 50~/o 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 2. InventOries and Prepaid Items InventOries are valued at cost uSing the flrst-in/flrst-out (FIFO) method The costs of governmental fund-type Inventories are recorded as expenditures when consumed Certain payments to vendors refiect 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 coiumns 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 historical 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 c:: cos~ or estimated histoncal cost if purchased or constructed Donated capital assets are recorded at their estimated fair value at the date of donation ThE; cost of norma: maintenance and repairs that do nOl add to ths value 01 thE; assets or matenally exterlc assets lives are not capitalized IVlaJor outlays for caoltal 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, plant and equipment of the pnmary government, are depreciated uSing the straight-line metnod 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. 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 pnor 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 beanng and have c; 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 Lona-term Obliaatlons 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, govemmental 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 extemally imposed by creditors, grantors, contributors, or laws or regulations of other govemments 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: Maler Governmental Funds Flood & Tourism Othe' Total Drainage and Special Blcentenmal Sales T8> Debt Capital Governmental Governmental General Imorovement Convention Gas Cente: Capital ServicE: Protects Funds Fund;,.- Fund Balances Nonsoendable tor Inventory 89716 " $ 89 71f Restncted too PUDhc works 1 094720 1.094720 Pubhc health anc S8mtatlor' Culture and recreatlot' 4~.23€ 45.236 Planning ano oevelopment 340473 29801!' 638486 Debt payments 1.285130 547.999 1 832 12~ CommItted for PubliC salely [78661 [786G) Culture and recreatlor, 14288' 524 907 667 782 Plannmg and develoDmen' 6 10~ e 102 Cemetery 421 037 42'1.037 Capita! Improvements 6101.jL; {2477.564] 907 11L [960318' Assigned for General govern men Ie 45~ 184!),:) Public works 36755 907 323 02~ 360.68" Planning and development 11376 1~1 376 Capital Improvements 226.235 787437 2.86841c 50.000 3832 088 UnaSSigned 345370E ------~ 453706 --- Total Fund Balances ~ $ 907 ~ $1417743 ~ ~ ~ ~ " 2792.546 $1160434', 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 penod. 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 originaliy adopted budget fo, previously unbudgeted increases in revenue other than ad valorem property taxes. To do this, a notice of public hearing to amend tne budget must be published Wi the iocal newspaper At least ten days after publication the hearing may b8 held and the governing body may amend tne budget at that time The 2011 budget was amended for the Fiood & Drainage Improvement Fund Sales Tax Capital Fund. Wate~ 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 compansons for these funds that present budgets to the Commissioners are shown stnctly 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 propen:y 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 2 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 S; 8.801484 Fund Balance Classification As of December 31. 2010. Reclassified NonsQendable Restricted Committed Assigned UnaSSigned Total Governmental Fund Generai Fund $ 87.238 $ $ 5> 99.286 $ 3430,657 $ 3617,181 Flood & Drainage Improvement Fund 187.350 1 176 188526 Tourism and Convention Fund 367.197 367,197 Special Gas Fund 986.224 498.417 1.484,641 Bicentennial Center Fund 46048 46.048 Sales Tax Capital Fund ~I ,572 216 582.151 2.154.367 Deat Service Fund 571 87" 571 873 Capital Projects Fund [6.654370] 4044.369 [2.610001J Otner Governmental Funds 944.240 2.03,.076 6.336 2.981.652 Total Governmental Funds , 87.238 5> 2,869.534 S; [2.817.680J $ 5.231,735 S 3,430,657 5> 8.801.48~ '" Following the close of the prevIous fiscal year It was discovered that several capital assets were mlsclassified 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 tollows. Net Assets/Fund Balance, Decernaer 31, 2010 Capital Asset Adjustment Accounts Receivable Adjustment Net Assets/Fund Balance, December 31,2010, Restated Solid Wasts Water and Golf Centra: Governmental General Dlsposa! Sewer Sanlt8110r, Course Garage Activities Fund rune Fund Fwnd Func 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 [11485J [287J 3,582 156,424 156,424 $ 118,910,336 $ 3,773,605 $ 3.896,574 $ 58.558,324 S 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 eligib!e 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 $ 305,158 22,063.739 $ 22.368,897 S&P AAAf/S 1 + N/A The municipal Investment pool IS under the oversight of the Pooied Money Investment Board. The board IS comprised of the State Treasurer and four additional members appointed by the State Governor. The boare reports annually to the Kansas legislature State pooled mOnies may be Invested in direct obligations of, Oi' obilgations 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 Citys Investment policy provides direction on concentration nsk. 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. portfoiio 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 Biiis, the Municlpai investment Pool, or money market accounts. Default risk shall be minimized by requiring that all secunty 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 FU~JDS (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 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, B Receivables Receivables as of year end, including the applicable allowances for doubtful accounts, are as follows Pnmary Governme'l: Receivables Accounts Taxes Interest Gross receivables Less allowance for uncollectlbles Total Primary Governmen, Receivables .4ccounE Taxes Interes" Gross recelvaoles Less allowance for uncollectlbles Total Genera! ;;; 2889545 8094093 35,877 1, 019,515 [2.211 730J £ 8807785 Tounsm and Special Convention Gas S; 338,271 S 312,642 338.27, 312,648 ~ 338,27', ~, 3',2,648 Other Governmemal Sanltatton s: 52 1~" ;L 201,972 52 ~15-20"1 972 [982J [62,801] S, 5", 16" S 139172 36 Bicentennial Debt Center Service Subtotal S 54,966 S S 3,282782 2441,349 10,848,090 35,877 54966 2.441,349 14,166,749 [2,211 730] ~ 54966 S, 2441,349 $ 11 955,019 Solid Water Waste and Disposal Sewer Tota! ~ 231,123 S 1489.51; S 5257540 10848,09G if 35892 23", 13f ",48951', 16141522 [463147J [2738660j 23: 13e S , 026,36'; S 13402,563 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 Due To 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 m~ 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 12/31/2010 Additions Retirements 12/31/2011 City governmental aclivltles Governmental activIties Capital assets, not being depreciated Construction In progress $ 32,549,155 $ 81,670 S; 32,630,825 $ 2,945,099 3,021,567 $ 32.554,357 Land 22 477,19~ 22477,191 22477,19~; Capital assets. being depreclateo Infrastructure 144,316296 144,316.296 1 829401 146 145,697 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, furniture and fixtures 5,353682 92,75~ 5.446.437 246676 235,912 5 457.201 Total capital assets 248410,157 985,314 249,395.471 5.276,332 3473,502 251 198,301 Less accumulated depreCiation for, Infrastructure 60,603797 [30,296] 60,573,501 2964,133 63,537,634 BUildings and Improvements 12,609 132 10741 12619,87: 1,02336" 13,643.237 Vehicles 5035,374 [40,529j 4994845 513,718 174927 5333,636 EqUipment, furniture ana fixtures 4039705 89,397 412910? 228,84L 188665 4 16928', Total accumulated depreclallon 82288008 29313 82,31732'1 4730059 363 592 86 683 78e Governmental activilies capital assets ne' ~ 166 '122 149 ~ 956001 167078 150 ~ 54627:, 3109,91C S 164514,513 BUSiness-type actiVities Capllal assets not being depreciated Construction In progress 1,516604 S' 5, 1 516,604 10781 482 1 236031 $ 11,062,055 Land 1,54'1,00= 1.541,00;: 1,541002 Capital assets being depreciated Infrastructure 68957,665 1 ~ 932 68,969,597 2,323 997 71 302594 Buildings and Improvements 22,587 106 22,587,106 22,587,10t, Vehicles 2,987,748 [4'I,385j 2,946,35S ~133 402-10264/ 2,98316C Equlprnent, furniture and fixtures 4,37(; 72:: 2701C 4 40:2 73~ 30,82, 443" 558 Total capital assets 101,966,842 124431 101,964,399 13.285 755 1,338,678 113,911.476 Less accumuiateo depreCt8110r, fo" Infrastructurs 22,97~,28f ~3L,750: 28,938,53f 1 77", 86E, 3071:3 40L BUildings and Improvements 10.241.870 17027 10.258,897 424,276 10,683,173 Vehicles 2,084,39'1 8,46C 2,093 BE' 17975f 102,647 2 170,960 Eaulpment, furniture and fixtures ;:,394,35(; 3(;,5<:2 2430.89[: 27<:.29<: ::,705 1 S:: Total accurnulated depreCiation 43,693905 28,279 43,72218<1 265:~ 192 102,647 46.272 729 Buslness-tYDe actiVitIes camtal assets ne1 f)8272.937 ~ r3072/; $ 58242.215 $ 10632563 1.236031 S; 67,63R.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 Tota! 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 $ 10428,326 $ 7,564.963 BUSiness-type actiVities Genera! obligation bonds $ 86Q.577 S $ 1,396,670 Revenue bonds 1,580,000 16.193,925 1,580,000 Accrued compensation 667,768 104025 122.302 Total $ 10.862,345 $ 16,297,950 $ 3,098.972 39 Balance December 3':. 2011 $ 55,225,670 3,089,134 3,400,000 $ 61714,804 $ 7.217,907 16,193,925 649,491 $ 24.061.323 Amounts Due Within One Year $ 5,05'1,038 581.694 3,400.00C $ 9,032,732 i , ,200,046 343,696 122,301 $ 1,666 045 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 4, DETAILED NOTES m~ 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 Onginal 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% i ,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 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 1mprovements 2009A, due 10/1/2029 23.695.000 2 00% to 5.00%, 21,877,424 Internal Improvements 201 OA, due 1 Of1 12025 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 2,00ok to 5,00% 6.587.986 Total general obligation bonds SO 62443,577 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 Notes Series 2011-1, due 8/1/2012 $ 2400000 0.40% $ 3400.000 Total revenue bonds $ 3400,000 40 CITY OF SALINA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 Note 4. DETAILED NOTES m~ 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 4.323480 1.738.821 6.062.301 2027-2031 5,323.485 743.320 6,066.805 Total $ 16.193,925 $ 7,795,358 $ 23989.283 .Annual debt service requirements to maturity for temporary notes -to be paid through the issuance of genera' obligation bonds' Tempora!): I\)otes -Primary Government BondS Interest Outstanding Due T ota! 2012 $ 3,400,000 $ 14,204 .;;.$_~3~,4.,;..1;...4;,,;;.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 haye 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 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 original debt. At December 31, 2011. total outstanding conduit debt was $86,472,423. Defeased debt. In pnor 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 9(\7 VI Tounsm 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 func 3.289.564 405.549 Other governmentai funds 547,389 105.259 Agency funds 198.821 Solid waste disposal func 180.000 Water 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 partlclpattng 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 (I.R.C. Section 125) The City CommiSSion has adopted by resolution a salary reduction flexible benefit plan ("Plan") under Section 125 of the Internal Revenue Code Ail City employees working more than 20 hours per week are eligible to participate In the Plan beginning after two ful! months of employment Each partiCipant may elect to reduce hiS or her salary to purchase benefits offered through the Pian. Benefits offered through the Plan include vanous Insurance and disability benefits D Risk Management The City IS exposed to vanous 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. Nc 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 STATEfviEf'-lTS December 31,2011 Note 5. OTHER INFORMATlm~ (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 avaiiable financial resources. Of the liability, $172,545 is considered to be due within one year. Changes In the balances of claims liabilities dunng 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 [230417] r356,829] Unpaid claims, December 3'1 $ 321 790 $ 425582 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 \lnCluoing IBNRs) 4.229571 4198012 Cialm payments [4.220.898) [4.237040) 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 i ,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 8 defendant In various lawsuits, Although tne 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, 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 pnmary 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 COrDS 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 suostances Including not only tnose entities Invoived with contaminant use ano 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 EP,A, 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) (collectrvely Salina Public Entitles) 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 3D-year period. Dunng 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 Entitles filed their First Amended Complaint In four counts: Count I Citizen Suit Claim Pursuant to 42 U.S.C.§ 9659(a)(2). Count " 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" (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' alleqations of a contiict of interest. The Salina Public Entities' claims under Counts III and IV fo: response costs under CERCLA 9607(a) are not affected by the Judge's rulings The Salina Public Entitles disagree with most of the Judge's fHings and, if necessary, plan to take an Interlocutory appeal to the Tenth Circuit to contest the rulings On or about April 22, 2011, Detendants flied their Answer to First Amended Compialnt 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 ciaims 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 STATEMEt-.JTS 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 smgle 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 governmental 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 actuanally determmed 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 actuanalliabilitles (or funding excess) over a penod not to exceed thirty years. The following table shows the components of the City's annual OPEB cost for the Pian 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 Obligatlorl Adjustment to Annual Required Contribution Annual OPEB cost (expense) Benefit payments Change In net OPE8 obligation Net OPEB obligation -begmnlng of year Net OPEB obligation -end of year 48 $ 961.335 95)43 [79,786] 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 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 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 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 inciude 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 persoective 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 ievel dollar over an open thirty-year penod 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 2393,591 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} Liabilit:y (b} Ib} -(a) (alb) M 12/31/2008 $ $ 8,917,346 $ 8.917.346 00% $ 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 Ib-al/(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 Onglnal Revenues Taxes Real estate taxes $ 7.564.507 $ 7,359.721 Delinquent taxes 212,244 292.488 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 261.707 156,90,1 Health and sanitation 51.838 62.300 Culture and recreatton 1.324.551 1.295.61,1 Community and economic development 10.368 9.982 Total charges for services 5.258466 6.039.524 Operatmg grants restncted General grants 153.560 185.000 Public safety 63,417 837.000 Community and economic development 28.202 Total operating grants. restncted 813.185 1.022000 Operating grants. unrestricted General grants 2.500 503 Public works 250 3.000 Culture and recreation 8.241 18.000 Total operating grants. unrestncted 10.991 21.503 Interest Income General Interest 15749 65.00(, Total Interest Income 15749 65.000 Interfund services prOVided General services 1.39216' 918017 General government 2.532316 1.755.876 Community and economic development 63.34C 50.501 Total Interfund serVice, proVided 3.987 8' '7 2 72L 39'" Miscellaneous revenues General miscellaneous revenues 112 112 134.321 General government 90 Public safety 185.054 199.000 Public works 4.134 10.000 Culture and recreation 16.439 25.000 Total miscellaneous revenues 323829 368.321 Proceeds of capital assets General sales 30,000 Public safety 200 Total proceeds of capital assets 200 30,000 Tota! revenues 34.899.547 35161.209 See Independent auditor's report on the finanCial statements. 51 Fmal $ 7,359,721 292.488 937.258 11,716,000 4,585.000 24.890.467 8.912 4.505812 156.904 62.300 1.295.61,1 9.982 6039.524 185000 837.000 1.022.000 503 3000 18.000 21.503 65.000 65000 918.017 1.755.876 50.501 2.72".394 134.321 199.000 10,000 25.000 368321 30.000 30000 35 161.209 Variance with Final Budget Positive [Negative] $ 204,786 [80.244] [213.401] 51.400 [363,698J [401.157) 144.556 [8.572] [1.040706] 104,803 [10.462] 28,937 386 [781.058) [31 . .134] [205.583] 28.202 r208.815J 1,997 [2.750] [9.759) [10.512) [49.251] [49.251] 474144 776.440 12.839 ; .263 422 [16.209] 90 f13.946] [5,866] [8,561J [44492) [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 Actual Origmal 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 Fmance 617,575 553.074 553,074 Human resources 374,387 350.007 350.007 Other general government 1.198470 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 1,625516 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 1.253194 1.253.194 Engineering 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 819062 Parks 1,409.829 1.444.930 1.444.930 ADA compliance 6440 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 176082 1 113.965 1.113965 Culture and Recreation SWimming pools 430322 419.838 419838 Neighborhood centers 41 773 46.233 46.233 Recreation 1810.910 1.640,473 1.640,473 Arts and humanities 1,079 Smoky Hill museum 448463 435.263 435.263 Total culture and recreation 2732.547 2541.807 2.541.807 Community Development Human relations 330.092 337.809 337.809 Development services 1.215.034 1.332930 1.332.930 Agency contracts 771.970 783,921 783.921 Total community development 2.317.096 2454,660 2454.660 Capital Outlay Capital 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) [3.350.083J 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] 29116 [288.282) [102,069] 194.840 [402.891) [310.120) 247.809 [16.759] 66461 17.932 75.897 35101 8.560 435,001 [11,154] [50.9631 [62.117) [10484] 4,460 [170.437) [1.079] [13.200] [190740) 7.717 117.896 11.951 137.564 8.568 4354.391 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 otner sources over [under] expenditures and other [uses] Unreserved fund balance. January 1 Prior year cancelled encumbrances $ Actual Oriamai 168.838 $ 500.000 [997.949) [994,358) [829.111) [494.358) [356.591] [3.844441J 2.918.651 3,978,485 7.140 Unreserved fund balance December 31 2.569.200 $ 134044 Reconciliation to GAAP Interest receivable Accounts receivable Taxes receivable Inventory Deferred revenue Current year encumorances GAAP Fund Balance. December 31 35.877 677.815 8.094093 89.716 [7.923.279} 292.816 S 3.836.238 See independent auditor's report on the financial statements 53 Final S 500.000 [994.358) [494.358) [3.844.441} 3.978485 S 134.044 Variance witn Final Budget PosItive [Negative] 5: [331 162] [3.591J [334.753) 3487.850 [1,059.834] 7.140 S 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 [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 31 -$ -$ 1.572 Reconciliation to GAAP Current year encumbrances 9"'" VI GAAP Fund Balance, December 31 $ 907 See independent auditor's report on the financial statements. 54 Variance with Final Budget Positive [Negative] $ [4) [4) [138J [138) 3,486 3,486 3.344 [5.823) [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 Onginal 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 143 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 ave: [unoer] expenditures and other [uses] Unreserved fund balance. January 1 Unreserved fund balance. December 31 Reconciliation to GAAP Accounts receivable GAAP Fund Balance, December 31 736.386 751.664 736386 751.664 596.584 598,336 [596.440] r600.0001 [~ ,664J 2.058 1.664 $ 338.271 340.473 See independent auditor's report on the finanCial statements. 55 751.664 751.664 598,336 [600,000] 1 664 143 [17.030) 15,278 15.278 [1.752) 3.560 1.808 394 2.202 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 [undel'! expenditures and other [uses] Unreserved fund balance. January 1 Prior year cancelled encumbrances Unreserved fund balance. December 31 Reconciliation to GAAP Taxes receivable Retalnage payable Current year encumbrances GAAP Fund Balance, December 31 Actual $ 1.366,522 3,718 1,370.240 426.084 1.401.756 '1.827,840 [457.600] 180,000 r1.836J 178.164 [279436] 735.009 370888 826.461 312,648 [44.389J 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 1291 180.000 180,000 180,000 180,000 [1 165,129) [1.165.129] 1.165.129 1.165.129 S; -$ - See Independent auditor's report on the financial statements. 56 Variance with Final Budget Positive [Negative] $ [93.860] [2.282J [96,142J [689] 484,360 500.000 983.671 887.529 [1 836] [1.8361 885.693 [430,120] 370.882 $ 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 J 872.849 875,000 875.000 Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] 86.285 [506512] [5065;2] Umeserved tunc 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 [609,635] 353,361 521.822 329,400 1.204.583 594.948 [2151) [2.151] 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 Onginal 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 [outJ [2.367,590) [2,000.000) [2,000.0001 Total other financing sources [uses] [2.359,032) [2.000,000J [2.000,000J Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] [962,082J [284,080J [1.578.711] Unreserved fund balance. January 1 1.572.21 e 284.080 1,578.711 Unreserved fund baiance. December 31 610,134 SO -$ Reconciliation to GAAP Current year encumbrances 787437 GAAP Fund Balance, December 31 $ 1.397.571 See Independent auditor's report on the financial statements. 58 Vanance with Final Budget Positive [Negative] $ 76,545 [14,317J 62.228 155,000 758,433 913.433 975,661 8.558 [367.590J [359,032J 616.629 [6,495J $ 610.134 COMBINING AND INDIVrDUAL 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 Distnct. 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 Dolice 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 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 NONMAJOR 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 Nonmajor Debt Service Fund $ 556,603 $ 556,603 LIABILITIES AND FUND BALANCES Liabilities Accounts payable S; 14,039 S; -S; 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 1.817806 426.741 Total liabilities and fund balances S; 1,84 i .220 S; 426.741 S; See independent auditor's report on the financial statements. 61 8,604 8.604 547.999 547,999 556.603 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 FUf-.JDS 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 9109 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] exoenditures r579.773} 10.251 f61.7141 Other financing sources [uses} Transfers Ir. 547.389 T ransters [out] [105.259] Total other financing sources [uses] 442.130 r-.Jet change In fund balance [137.643J 10.251 [61.714J Fund balance -Beg!nning of year 1.955449 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 5) 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 f631.236] 547.382 f105.259j 442,130 [189,106J 2.981652 ~ 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 LlABIUTIES AND FUND BALANCES Liabilities' Accounts payable $ 1,611 $ - $ -$ Due to other funds Total liabilities 1,611 Fund balance Restricted 51,169 45,236 " '-t Committed 229 134 Assigned Total fund balance [deficit] 5'1169 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. Revolving Commission Develooment 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 $ 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 CDi3G HOME Law Housing ED 'Y Enforcement ASSETS Cash and investments $ 5,181 $ 2,472 $ -$ 2,855 Receivables Accounts Total assets $ 5.181 $ 2472 $ -$ 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 !10.721J f10,721J - $ 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 155960 1,742 35.262 155,960 1,742 $ 35.262 $ 165,551 $ Federal CARE Grant -$ -$ -$ 666 666 [666J f666J -$ Totals 1,790,051 51,169 1,841.220 14.039 9,375 23.414 343,255 1.42.::1,551 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 $ -$ -$ -$ 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] [47.2281 l'-let change In fund balance ['1,044J 6,879 [21,285J [1401 Fund balance, beginning of year 52.213 222.255 66.521 1M Fund balance. end of yeaI' $ 51.169 $ 229.134 $ 45.236 $ 4 Bicentennial Center Event $ - 663,839 663.839 670.411 670.411 [6.572J [6,572j 105.419 5; 98.847 HUD Community Community Development Development Revolving $ -$ - 200 526 200 526 200 526 [58,031 J [58.031] 20G [57,505) 71,680 230.665 s:: 71,880 $ 173.160 Heritage Commission $ - 4 S 4 Sales Tax Economic Development $ 5; 317,297 2.485 319,782 406.075 406.075 [86.293J [86.293J 1 043405 9~7 11 ') J,. j lL.. 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 Revenues Taxes I ntergovern mental Charges for services Licenses and permits Investment revenue Miscellaneous Total Revenues Expenditures Current Culture and recreation Public health and sanitation Planning and development Debt service PrinCipal retirement Interest and other charges Capital outlay Total Expenditures Excess [deficiency] of revenues over [under) expenditures Other financing sources [uses] Transfers In Transfers [out] Total other finanCing sources [uses] l\lei cnange In fund baiance Fund baiance, Deglnmng of yeal" Fund balance end of yeal" $ S; Fair CDBG Housing ED -$ -$ 31,203 158,238 59 31,262 158,238 69.571 133,437 69,571 133.437 [38.309] 24.801 [38.309] 24,80i 42,665 [22.329) 4.356 $ 2472 $ HOME y. - 58,031 58,031 58.031 [58,031] - Special Law Enforcement $ 36 36 18,132 18,132 [18,096] [18.096] 20,95'1 S; 2.855 Police Grants $ -$ 5.377 5,377 [5,377) [5,377] [5.34L1J 3; f10.721) 3; 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 [6961 [480.934J [666] [579.773) 489,358 547.388 [105259; 489.358 442.130 5 [696J 8.424 [666] [i37643} 1 737 35,958 147,536 1.955.448 1.742 $ 35.262 $ 155.960 $ r66E] $ 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 T ricentennial 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 '" .:p 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 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 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 3-1 Reconciliation to GAAP Accounts receivable GAAP Fund Balance December 31 $ Actual Original 84,511 $ 90,000 $ 20 500 84,531 90.500 84,531 90.578 84.531 90.578 [78] 78 51.169 51.169 See independent auditor's report on the financial statements. 69 Final 90,000 500 90.500 90.578 90.578 [78] 78 Variance with Final Budget Positive [NegativeJ $ [5.489] [480J [5,969) 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 $ 20,000 629 4,000 4.000 6,879 24,000 24.000 258.146 258,146 258146 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 staiements. 70 [234.146] 234.146 - Variance with Final Budget Positive INegativej $ [13,750] [3.371J [17,121J 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 Final 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 Prrnclpal 25,000 10.000 Interest and other charges 4.399 Capital Outlay 93.481 100.000 Cash Reserve 131,197 Total expenditures 122880 241.197 Excess [deflclencyJ of revenues over [under] expenditures 32.279 [77.197J Other financing sources [uses] Transfer [out] [47.228J [30.000] Total other financing sources [uses] [47.228J [30.000J Excess [deficlencyJ of revenues and other sources over [under] expenditures and other [usesJ [14.949] [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. 71 160,000 4.000 164.000 10.000 100.000 131,197 241.197 [77.197J [30.000J [30.000} [107.197] 107.197 - Variance with Final Budget Positive [Negative] $ [5.061] [3,780] [8.841J [15,000] [4,399J 6.519 131,197 118.317 109.476 [17.228J [17.228J 92.248 [47.012J 5) 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 T Olal expenditures 153.730 170.192 Excess [deficiency] of revenues over [under] expenditures [140J [10.192) Unreserved fund balance. January 1 144 10.192 Unreserved fund balance/GAAP fund balance December 31 $ 4 $ -3) 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 [10,048] $ 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! Onginal 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 [deficiency) 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 $ 957112 See independent auditor's report on the financial statements. 73 Fina! 315,120 10,000 325,120 315,444 9,676 325.120 - Variance with Final Budget Positive [Negativel $ 2,177 [7,515J [5,338J [140,631J 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 1"'0 r;-"'" 0'-',0/ i 86.290 Excess [deficlencyJ of revenues over [under) expenditures [38.309} [20.290} Unreserved fund balance. January 1 42.665 20.290 Unreserved fund balance/GAAP fund balance December 31 S; 4.356 S -$ 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 S; 4.356 CITY OF SALINA, KANSAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (NON -GAAP BASIS) ARTS & HUMAI\lITIES 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 [480.934J [638792J [638.792J Other finanCing sources [uses] Transfer In 489.358 489.358 489.358 Total other finanCing sources [uses] 489.358 489.358 489.350 Excess [deficiency] of revenues and other sources over [underJ expenditures and other [usesJ 8.424 [149,434J [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 [Negative] $ 67,202 5,482 [911 J [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 CHANG.ES IN FUND BALANCE· BUDG.ET AND ACTUAL (NON· GAAP BASIS) DEBT SERVICE FUND For the Year Ended December 31, 2011 Budgeted Amounts Actual Original 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 4768,443 4.403790 4,403,790 Expendrtures 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] [2464.569J Other finanCing sources [uses] Transfer In 2.026.973 1.80000G 1.800.000 Transfer [out] r83488J Total otherfmanclng sources [uses] 1.943.485 1.800000 1.800000 Excess [deflclencv] of revenues and other sources over [under] expenditures and other [uses] 664,153 [664,569J [664.569] Unreserved fund balance, January 1 571,873 664.569 664.569 Unreserved fund balance/GAAP 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 indepenaent auditor's report on the finanCial statements 76 Variance with Final Budget Positive [Negative] $ 127,738 15,583 f63,0891 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 r83,488~ 143,485 1.328,722 r92,696J $ 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 2,033.262 Hazardous waste disposal 80.517 94.032 Total public health and sanitation 1826,639 2127.294 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 2606.352 4851.066 Excess fdeflclency] of revenues over [under] expenditures 373,521 [2,189.456) Other finanCing sources [uses! Transfers [out] [48.089) Total other finanCing sources [uses] 148.089J Excess [deficiency] of revenues and other sources over [underj 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 94032 2,127.294 324,396 106,975 431,371 467,200 1,825,201 4851.066 [2,189,456) [2,189,456] 2,189,456 $ - Vanance with Final Budget Positive [Negative] $ 387,710 [51,628] [17,819J 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 148089J [48,089J 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 Budoeted Amounts Actual Oriolnal 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 30900 Miscellaneous revenues General miscellaneous revenues 88 Water and wastewater 489,629 260.000 Total miscellaneous revenues 489.717 260000 Total revenues 18.108.42L! 16.637.78L! Expenditures Water and Wastewater Water 10.153,31L! 9029.002 Sewer 2,705.205 2.78L!,556 Total water and wastewater 12,858,519 11,813.558 CaPital Outlay 3,976,377 1 877,350 Cash Reserve 6497105 Total expenditures 16,834.896 20.188.013 Excess [deficiency] of revenues over [under) expenditures 1.273528 [3,550.229] Other financing sources [uses] Transfers [out] [~ .005.352; ~3.80Li.5461 Total other finanCing sources [uses] [1,005.352) [3.804.546] Excess [deficiency] of revenues and other sources over [underJ expenditures and other [uses] 268.176 [7,354,775J Unreserved fund balances, January 1 9,699,890 7,354,775 Pnor 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 6497.105 20.188.013 r3550.229J 13.804.546; [3.804 5461 [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 I 470.640 [1,124,312J 79,351 [1.044.961J [2.099,027J 6.497,105 3,353.117 4823757 2799 18L 2,799.194 ;,622.954 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 Orioinal Final Variance with Final Budget Positive [Neaativel 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 '[ Unreserved fund baiances, 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 2,163312 2.163,312 158,000 158.000 525,425 525.425 2,846.737 2.846,737 [526.352J [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 interest 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 Total other financing sources [uses} Excess [defiCiency] of revenues and other sources over [under] expenditures and other [uses] 'Jn~eserved fund balances, Jam.:arj'1 $ Budgeted Amounts Actual Onginal Final 636.202 $ 777,500 $ 777,500 36 200 200 1,562 1,000 1.000 48,618 40.000 40.000 50,180 41.000 41,000 686.418 818.700 818.700 760.384 752,160 752.160 15,724 16,000 16,000 173,493 173.493 776.108 941.653 941.653 [89.690] [122.953': [122.953J 47,228 47.228 [42462J [122,953] [122,953] 43 . .162 122.953 122.953 Variance with Final Budget Positive [Negative] $ [141.298) r1641 562 8.618 9.180 [132.2821 [8.224J 276 173.493 165.545 33.263 47.228 /il r;,y ""T1.'::'4-.1,.., 80.491 Unreserved fund balances, December 31 ===1=.0=0=0 $ -$ -;;,$==,;,,1;,,;;,0,,;;,0,;;,,0 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 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 [deficlencyJ of revenues over [underj expenditures Unreserved fund balance, January 1 For the Year Ended December 31,2011 Budgeted Amounts Actual Onginal Final $ -5; 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 [t'JegativeJ $ [1,202J [1.202J 16.229 862 17,091 15,889 Unreserved fund balancE-. December 31 67,945 ..;:..$ ___ _ 52,055 ;;.$ __ 1_5_.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 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 Worker's compensation Cash Reserve Total expenditures Excess [defiCiency] of revenues over [under] expenditures Unreserved fund balance. Januar! 1 Actual $ 1,937 229,452 1.444 232,833 334.210 334.210 [101.377] 621,629 Budgeted Amounts Original Final $ 2,500 $ 2.500 229.435 229435 231.935 231.935 297,762 297,762 638,936 638.936 936,698 936,698 [704.763J [704.763] 704.763 704,763 Variance with Final Budget Positive [Negative] $ [563] 17 1,444 898 [36448] 638,936 602.488 603.386 [83,134J Unreserved fund balance, December 3i 520,252 =£ ====-.;.,$ ====-~$==5=2=O=.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 4mounts 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 1.503185 Variance with Final Budget Positive [Negative] $ [96] [315,856J 52.285 [263,667) 966.529 1,503,185 Total expenditures 5.947148 8.416.862 8.416.862 2.469.714 Excess [deficiency) of revenues over [under] expenditures Unreserved fund balance, January 1 Unreserved fund balance, Decembe~ 31 414,185 [1.791.862J [1,791.862) 2.206.047 1,501,522 1 791.862 1.791.862 [290.340J $ 1.915.707 SO -$ -$ 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 Total expenditures Excess [deficiency] of revenues over [under] expenditures Other financing sources [uses] Transfers In Excess [deflciency) Of revenues ano omer fmanclng sources over [under; expenditures and other financing fuses] Unreserved fund balance. January 1 U:::ese:ved f:Jnc bala!lce> December 3-: $ Actual Original 423 $ 4,000 $ 1,629,328 1.490,000 22,298 4.000 1.652.049 1498.000 1.697,373 1.454.727 4,495 250 161.091 1.701.868 1.616068 [49.819j [i 18.068J 60,000 30.00c) 10 181 [88.068J 89.819 88.068 100,00C $ ~---~ See Independent auditor's report on the financial statements 84 Final 4,000 1,485,942 138,058 1.628.000 1,716.068 i .716.068 [88.068J [88.068J 89,889 Variance with Final Budget $ Positive [Negative] [3,577J 143,386 [115.760) 24,049 18695 [4,495J 14.200 30.249 60,000 98.248 r7('\1 l'VJ 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 financiar statements. 85 Variance with Final Budget Positive [Negative] 5) 305 682 [21.540] [2,889J [23.442] [184,778J 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 govemment 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 aliocatlon 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 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 5> 7351 $ 5> 500 Current portion of compensated absences payable Current portion of accrued claims payable 172545 391 175 Total current liabilities (payable from current assets) 7.351 172.545 391 675 Noncurrent liabilities Compensated absences pavable Accrued claims pavable 149.245 Total noncurrent liabilities 149.245 lotai liabilities S 7.351 $ 321.790 S 391.675 Net Assets Invested In capital assets net of related debt S, S S; Unrestricted 16L1 208 327448 1.524532 Total net assets $ 164.208 S; 327 448 S; ~ .524.532 See Independent auditor's report on the finanCial statements 87 Total Internal Central Information Service Garaae Svstems Funds $ 150,383 $ 201.820 $ 3,089,207 115.694 115.69.:1 266,077 201.820 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 5> 50.383 $ 41820 $ 100,054 7.075 10.309 17.38.1 563720 57458 52129 681 158 30.500 .:144L10 7.1 940 14S 245 30500 44440 224 185 S 87.958 :;, 96.569 5> 905.343 50 27790 S; 5> 27 790 178119 105.251 2.299558 S; 205.909 5> 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 230417 5,955.821 1.715.609 Operating Income [loss] 114.361 478 400.608 [65.112) Other operating revenues [expenses] Investment Income 1.937 4.904 423 Total other operating revenues [expensesJ 1.937 4.904 423 Nonoperating revenues [expensesJ Galn/[Ioss] on disposal of fixed assets 1 129 Total nonoperating revenues [expenses] 1.129 Income [lossJ before transfers 114.361 2.415 405512 [63.560) Transfers from [to] other funds Transfers In 60.000 Total transfers 60000 Change In net assets 114.361 2415 405.512 [3.5601 l\jet assets January', 49.847 325 03~, : 119020 205,887 Restatement 3.582 Net assets January 1 restated 49.847 325033 1.119020 209469 l'>Iet assets December :::, s: 16~ .208 s: 32744(' S ~ .52Ll 522 ~ 205909 See independent auditor's report on the financial 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 8446 1 182 8.446 1.129 1 129 67.223 525.951 60.000 60.000 67223 585.951 38,021: ~ 737.81~· 3.582 38.028 1741.397 S 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' Rls\<' Compensation Health Manaqement Reserve Insurance Cash flows from operaling acltvltles Cash received from customers and users $ 374.708 $ 125.659 $ 6,312,817 Cash paid to suppliers of goods or services [440,965J [230,417J [5,955,771J Cash paid to employees Other operating receipts 176.298 1.444 52,285 Net cash provided by [used InJ operating activities 110,041 [103,314) 409,331 Cash flows from capital and related finanCing acliviltes Proceeds from sale of capital assets Cash flows from Investing activities Imerest received 1,937 4.904 Cash flows from noncapltal finanCing activities Transfers In Net Increase [decrease} In cash and cash equivalents 110,041 [101.377J 414,235 Cash and cash equivalents. January 1 61,518 750.615 1,501.972 Cash and cash equivalents. December 31 S; 171559 649238 $ 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 [1.462.573J [866,093J [8,955,819J [230,042J [401.446J [631.488J 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 In) operating activIties Workers' Risk Compensation Health Manaqement Reserve Insurance Tota; Internal Central Information Service Garaqe Services Funds Operating Income [loss) $ 114,361 $ 478 $ 400,608 $ [65.112) $ 66.041 $ 516,376 Adjustments to reconcile operating Income [loss) to net cash orovlded by [used In) operating activities Depreciation expense [Increase] decrease In Inventory Increase [decrease] In accounts payable Increase [decrease] In accrued compensated absences Increase [decrease) In claims payable Net cash provided by [used In] operating activities [4 320~ $ 110.041 50 [103792) 8.673 $ 1103.3141 $ 409.331 See Independent auditor's report on the ilnanclal statements 90 4,698 4.698 6,646 6.646 9.296 9,006 14032 2,355 939 3,294 [95.1191 $ [42117) $ 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 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 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 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. 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 tor mOnies held for the Section 125 plan 91 Special Assessment Escrow ASSETS Cash and Investments $ 135.344 To\al assets $ 135.344 LIABILITIES Accounts payable $ 135,344 Total liabilities $ 135344 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 AccDunt Cam 5) 10.316 5) 5103 5) [251 057) 5) 70.921 $ 2125 $ 783 $10,316 $ 5103 $ [251.057) 5) 70.921 $ 2,125 $783 S 10.316 $ 5.103 5) [251.057) 5) 70.921 $ 2.125 $ 783 $10.316 $ 5.103 5) [251,057) 5) 70,921 ;;; 2.125 $ 783 See Independent auditor's reoort on the financial statements 92 Section 125 CitizenshiP Plan Totals $ 3702 $ 336.063 $ 313300 $ 3.702 5) 336.063 $ 313.300 $ 3.702 $ 336,063 S 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 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 349775 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 36698 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 J' 10.316 5.103 [251.057J 70,921 2.125 783 3.702 336.063 S, 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. By: Title: By:~k&r 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 properly 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 pUlpose of computing the alternative minimum tax imposed on certain corporations. 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. Indi.vidual purchases of Notes will be made in 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 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 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 front 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 IT IS NOT A SUMMARY OF THE ISSUE INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION MATURITY SCHEDULES $1,485,000 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 Maturitv 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) MaturiIT Amount Rate Yield 794743 1O-01-l3 $l30,000 1.00% OAO% 2M5 10-01-14 140,000 1.00 OA5 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 lAO lAO 2U7 10-01-21* 160,000 1.65 1.65 2V5 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 2AO 3AO 10-01-27* 180,000 2A5 2.50 3B8 $3,785,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2012-B Base CUSIP(I) Maturitv Amount Rate Yield 794743 10-OJ -13 $385,000 1.00% OAO% 3C6 10-01-14 940,000 1.00 OA5 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 lAO lAO 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 tlus Issue by STandard & Poor's CUSJP ServIce Bureau. a dlVlslOn oJthe McGraw-HIll Companies inc .. and are mcluded solely Jar the convenience oJtlze Owners oJthe Notes and Bonds. Nellher the City nor the Underwriters shall be responsible Jar 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 Nonnan 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.e. 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 20l2-B (the "Series 20l2-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 fmance 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 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 ofthe 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 shan be numbered in such manner as the Note Registrar shall determine. All of the Notes shall be dated July 15,2012, shall become due in 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 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 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 1S 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) cOtll1ected 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 excluslVely 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 Pavment ofthe 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 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 MatUlity 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 i 0 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 succeedmg Busmess 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, excejJt 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 DIC (or a successor Securities Depository), and the following provisions of this section to discontinue use of the system of book-entry transfers through DIC (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 contmuation 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)(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 perfonried 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 mterest. 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 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 Paymg 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 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. 12-6aOI et seq., all as amended, and an ordinance and resolution adopted by the City on July 9, 2012, authorizmg the issuance of the Series 2012-A Bonds Gointly 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 Gointly.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 Outstanding, 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 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 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 against 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 Vlrith 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 Mth 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 be mailed, by fIrst class mail, postage prepaid, 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 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 Deposltory 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 of the Securities Depository (and certifIed to such effect by the Securities Depository), that the contmuation 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)(l) 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 Clty 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 Securitles 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 appropnate denominations and fonn 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 fully registered securities registered in the name of Cede & Co. (DTC's partllership 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 DTe. 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 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 DTe. DTC also facilitates the post-trade settlement among Direct Participants of sales and other secUlities 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 DTes 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 fmancing 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 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 Series 20l2-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 Temporary Notes, which will be retired with proceeds from the sale of the Series 20 12-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 lssues 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 Intemallmprovement 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. 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 10-01-13 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'J 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 inherent in the State of Kansas and Its governmental subdivisions in the interest of serving 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 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, 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 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 Mandatory 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 11lcome tax purposes. Suitabilitv 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 investlnent. 13 Market for the Securities Ratings. The Securities have been assigned the fInancial 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 fmancial 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 of the 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 tlle 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 ofthe issue date ofthe 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 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 expressing no opinion regarding other federal, state or local tax consequences arismg 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 whlch a substantial amount of the Securities of that maturity have been sold (ignoring sales to bond houses, brokers, or similar persons or organizations acting 111 the capacity of underwriters, placement agents, or wholesalers). Under Code § 1288, OlD 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 dunng 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 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 accrualofOID. 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 premlUm 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 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-tenn 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, infonnation 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 1" and "Aa2", respectively, by Moody's. Any explanation of the significance of such ratings may be obtained only from said 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 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 2012-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 coIIectively 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 obligation 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-l2 (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 mformation 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~od~F.!.:ranz~'__ _____ _ Director of Finance and Administration ATTEST: /s/ ______ -'L""i""eu-'=--'-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-20l0 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 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 $ 63,405,000 $ $ $ $ $ $ $ 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% (l) F or 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 consistmg 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 of KPERS 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 of the Local Group. KPERS is a qualified, governmental, § 401(a) defmed benefit pension plan, and has received IRS detennination 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 category (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 WhlCh 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 certam 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 of 36.4 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-tlme firefighters. The fire department operates 36 vehicles and provides emergency medical services. The police departlnent employs approximately 81 full-time police officers and operates 37 police vehIcles. including patrol vehIcles, motorcycles. and Cushmans. Education The City of Sahna has a very complete and diverse educational system from the primary level up to its hIgher educational institutions. Umfied School 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 educatlon 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 traming 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 mclude civil. electrical and mechanical engmeenng technologies, aeronautical studies, and avionics. The campus IS located entirely within the boundanes of the Salina Airport Industrial Center. ApprOXImately 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, includmg 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-8l 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 da.ily 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 CSRHC"), 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 buildings. The mstitution is also a 50% partner m 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 m 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 ofthe 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 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 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 m 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 permit and inspection fees, refundmg of sales tax paid on machinery and equipment, and providing 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 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 Community Theater, Great Plains Manufacturing, Salina Area Technical College, and Brown Mackie are all doing major remodeling and/or expansions. The community has 1,200 acres of industrial sites available in 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 Authoritv 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 vanety 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 Vehicles 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 36,133 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 Emploved Unemployed 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 Emploved Unemployed 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 outstandmg 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 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 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 descriptlOn 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. Project Street, Water, and Sewer Street, Water, and Sewer Series 2011-1 2012-1 Date Issued 07-15-11 07-15-12 Final Maturity Date 08-01-12 08-01-13 Original Note Amount $3,400,000 1,485,000 Amount Outstanding $ 0* 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 outstandmg 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 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 Princil!al 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 Sl2.365,000 Sl392,234 Sl3,785,000 Sl162,169 Sl78,106,125 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 1.83 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 $91.1 million, 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". 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-10 1964, when the site served as the Shilling Air Force Base. The City, the Salina AirpOli Authority, and other local govenunental 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 assess.ed 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 limitatlOll. 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 $ 8,671.423 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 Intergovenunental 911.305 1,227A86 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 Govemment $ 3,336,261 $ 3,007.751 $ 3,549,487 $ 3A61,488 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 (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-11 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 ill!: Estate ProQertv (1} 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 Appraiser'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 SQecial 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 constructing 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 fmal 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. Company 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% Building permits issued by the City currently maintain steady levels. This 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 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 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 propeny 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 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 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 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 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 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 ofthe 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 (mcluding 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 accountmg. 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 succeedmg calendar year must be prepared on or before August 1 and published on or before August 5 of each year. A public heanng 1S 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 issumg 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 responsibihty of the various counties. The Saline County appraiser annually determmes 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 detennine 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 25% and on residential property from 12% to 11.5%. The fonowing table shows tlle current assessment rates for the different classes of taxable tangible property within the State of Kansas. Real Propertv: 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) Conunercial & 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% Propeliy used for the following purposes, or portions tllereof, are exempt from taxatlOn provided certain statutory requirements are met: religious, educational, literary. scientific. benevolent, alumni associations, veterans' organizations, or charitable purposes, including parsonages and commumty service orgamzations providing humanitarian services. (1) Agricultural land is valued based on the productivity value oftlle 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 organizatlOns not subject to federal income taxation pursuant to paragraphs (2). (3), (4). (7). (8), or (10) of SubsectlOn C of Section 501 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 buildmgs 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, telecommunicanons, and railroad machinery and equipment acqmred by qualified purchase or lease after June 30, 2006 or transported into the State after June 30. 2006 for the purpose of expandmg 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 valuanon, provides a means to approximate actual market value. According to the 2011 Preliminary Kansas AppraisaVSales Ratio Study, tlle equalization ratio for residential real property in Saline County was 12.04%, and commercial and industrial property was 28.75%. A-16 APPENDIXB Form of Continuing Disclosure Instructions FORM OF CONTINUING DISCLOSURE INSTRllCTIONS $1,485,000 CITY OF SALINA, KANSAS GENEPJ~L OBLIGATION TEMPORARY NOTES SERIES 2012-1 DATED JULY 15, 2012 THESE CONTINUING DISCLOSURE INSTRllCTIONS (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 J-iOle Resolution, which apply to any capitalized tenn used in these Disclosure Instructions, unless otherwise defined herein, the followmg 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 mdIrectly, to vote or consent with respect to, or to dIspose of ownership of. any Notes (including persons holding Notes through nominees, depositones 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 in wntmg by the Issuer to serve as a deSIgnated agent of the Issuer for purposes of these Disclosure Instructions. "Dissemination Agent" means any entIty desib'11ated in vmtmg by the Issuer to serve as dissemmation agent pursuant to these DIsclosure Instructions and which has filed with the Issuer a written acceptance of such designation substantially m the fonn attached hereto as Exhibit A. '"EMMA" means the Electrol11c Municipal Market Access system for municipal securities disclosures established and maintained by the MSRB. wh1ch can be accessed at wwv".emm,ul1srb or~. "Fiscal Year" means the one year penod endmg December 31, or such other date or dates as may be adopted by the Issuer for 1tS general accounting purposes. "Issuer" means the CJl~ of Salma.. Kansas. and any successors or assigns. "Material Events" means any oftbe events lIsted in Section 2(a) hereof. "MSRB" means the MUl1lcipal Securities Rulemakll1g Board. "'Nete Resolution"~ 111eanS the resolution of the governing body of the Iss:ler 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 liquidtty 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 determmations with respect to the tax stams of the Note. or other material events affecting the tax-exempt status of the Notes; (7) modificatJOns to rights of Owners. if matenal: (8) bond calls. if matenal, and tender offers; (9) defeasances: (10) release. substitution or sale of propert) secunng repayment of the Notes. If materiaL (11) rating changes; (12) bankruptcy. insolvency. receivership or SImilar event of the Issuer; (13) the consummatIon of a merger, consolIdation, or acquisJtJOn involving the Issuer or the sale of all or substanttally all of the assets of the Issuer, other than in the ordinary course of busmess, the entry into a defimtlve agreement to undertake such an actJOn or the tennination of a defimtive agreement relat1l1g to any such actions, other than pursuant to its tenns, if matenal: and (14) app01l1tment of a successor or additJOnal PaY1l1g 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 Nott' 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 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) 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 giver.. 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 lssuer. 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 m these DIsclosure Instructions, and the Issuer agrees to indemnify and save the Dissemination Agent. its officers, directors, employees and agents. hanl1less against any loss, expense and liabilIties which it may incur arising out of or in the exercise or perfonl1ance of Its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claIm of liability. but excluding liabiliues 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 Instructions. (d) Other Designated Agents. The Issuer may, from time to time. appomt 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 submittmg 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 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 ternlination or substItution occurs prior to the final maturity of the Notes, the Issuer shall give notice of such tenl1ination 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 Instmctions, the Issuer and the Dissemination Agent, if any, may amend of these Disclosure instmctions (and the Dissemination Agent shall not unreasonably refuse to execute any amendment so requested by the Issuer) and any provision of these Disclosure Instmctions 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 111 compliance with the SEC Rule and all current amendments thereto and interpretations thereof that are applicable to these Disclosure Instmctions: (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 (1) 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 Instmctions. the lssuer shall be given in the same manner as for a Material Event. Section 6. Additional Information. Nothing in these Disclosure Instmctlons shall be deemed to prevent the Issuer from disseminating any other infonnation. using the means of dissemination set forth in these Disclosure Instmctions or any other means of communication. or mcluding any other infonnation in any notice of occurrence of a Material Event, in addition to that which is required by these DIsclosure Instmctions. If the Issuer chooses to mclude any infonnation 111 any notIce of occurrence of a Matena! Event.. in additIOn to that which is specifically reqUJred by these Disclosure Instructions. the Issuer shall have no obhgatlOn under these Disclosure InstructlOns to update such infonnation or Include it in any future notice of occurrence of a Matena] Event. Section 7. Noncompliance. In the event of a failure of the Issuer or the Dlssem111ation Agent. if any, to comply with any prOVIsion of these Disclosure InstmctlOns, the ParticIpat111g Underwriter or any Beneficia! Owner of the Notes may take such actions as may be necessary and appropriate, including seeking mandamus or specific perfoD11ance 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 lnstructlons. Noncompliance WIth the provisJOns of these Disclosure Instructions shall not be deemed an Event of Default under the Note Resolution, and the sole remedy under these Disclosure Instructions lD the event of any failure of the Issuer or the DlssemmatJOn Agent. If any. to comply with these Disclosure Instmctions shall be an action to compeJ perf0D11anCe Section 8. Notices. Any notices or commUlllcatlOns to or among any of the paliies referenced 111 these Dlsclosure Instructions may he given as follow~ (a) To the Issuer at: 300 West Ash Salina, Kansas 67402 Fax: (785)309-5738 Attention: Clerk (b) To the Participating UnderwTiter at the address set forth in the Note Resolution or such other address as is furnished in wliting 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 Undenvriter 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 L2'~," These Disclosure Instructions shal1 be governed by and construed in accordance with the laws of the State of Kansas. Dated: July 26, 2012. CITY OF SALINA, KA.NSAS 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 of July 15,2012 Notice Address of Dissemination Agent: ____________ ' havll1g been duly appointed by the City of Salina, Kansas to act in the capaclty of DISSel111nation Agent pursuant to the Continumg Disclosure InstructIOns to \vhich thIS acceptance IS attached, accepts such duties and responsibilities set forth therem. 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 lnstructions") are executed and delivered by the Issuer lD connect10n w1th the issuance of the above-described bonds (the "Bonds") which are being issued simultaneously herewith as of July 26, 2012, pursuant to the Bond Resolutlon, lD wh1ch the Issuer covenants to enter mto this undertaking to provide certain financial and other infonnation with respect to the Bonds lD 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 contlDuing dIsclosure w1th respect to the Bonds. Section 1. Definitions. In addJtlOn to the defimtlOl1S set forth in the Bond ResolutIon, whJCh apply to any capJtahzed tenn used in these Disclosure Instructions, unless otherwise defined herem. the following capItahzed 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 lnstructlOns. "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. deposJtones or other intennedwnes), or (b) is treated as the owner of any Bonds for federalmcome tax purposes. "Bond Resolution" means collectlvely, the ordinances and the resolunons of the governing body of the issuer authonzing 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 entitles designated in wntmg by the Issuer to serve as (I designated agent of the lssuer for pUl1)ose~ of these Disclosure Instructi ons. "Dissemination Agent" means any entity deSIgnated 111 writing by the Issuer to serve as dissemination agent pursuant to these Disciosure L'1structions 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.or!!.. "Financial Information" means the financial infonnation of the Issuer described 111 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 :tvlunicipal 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)(2J hereof. "Participating Underwriter" means any of the original underwriters of the Bonds required to comply with the SEC Rule 111 connection with offenng of the 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 wne to time. Section 2, Provision of Annual Reports. (a) The Issuer shall. or shall cause the DlssemmatJOn Agent to, not later than 180 days after the end of the Issuer's FIscal Year. commencing WHh the FIscal Year ended m 2012. file with the ReposItory the Issuer's CAFR, whIch wili contam the Fmancial Inforn1atJOn and Operating Data (colJectlvely. the "Annua! Report"). as follows: 11 J Financial information. The financial statement~ of the Issuer for such prior FIscal Year, accompamed by an audll 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 III 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 Rep0l1 shall 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 m 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 m the other portions of the section entitled "FINANCIAL INFORMATION." Any or all of the items listed above may be mcluded 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 reqUlred 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 glve notIce of such change lD the same manner as for a Matenal Event under Section 3(b). (b) If no Dissemination Agent has been appolDted. the lssuer shal1 file the Annual Report as specified by Section 2(a) hereof; or if the Annual Report is not filed w1thin the tune penod specified lD 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 reqUJred to be filed as set forth herein. Section 3. Reporting of Material Events. (a) Pursuant to the prov1sions of thIS Section, the Issuer shal1 glve, or cause the Dissem1l1ation Agent, if any, to glve, to the Repository within 10 Business Days after the occurrence of any of the followmg events w1th respect to the Bonds. notlce of the followmg events. (1) princ1pal and interest payment delmquencles: (2) non-payment related defaults, if matenal: (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduied draws on credit enhancements reflecting financ1al difficultJes: (5) substitution of credit or liquidity providers, or the1r failure to perform; (6) adverse tax opinions; the issuance by the Internal Revenue Service of proposed or final detenninations of taxability, Not1ces of Proposed Issue (IRS Forn1 570l-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, 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 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, notlce of Material Events described in subsections (a)(8) and (9) need not be given under this subsectlOn 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. Tbe 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 Busl11ess Days pnor to the date specified in Section 2(0) for providing the Annual Report to the Repository. the Issuer shall provide the Annual Report to the DisseminatlOn Agent or the ReposItory. The Dlssemmation Agent shall file a report with the issuer certifying that the Annual Rep0l1 has been filed pursuant to these DIsclosure lnstructlOns. stating the date it was filed. or that the issuer has certIfied to the Dissel11111ation Agent that the Issuer has filed the Annual Report wlth the Repository. If the Dlssemmation Agent has not received an Annual Report or has not received a \vritten notIce from the Issuer that It has filed an Annual Report with the Repository, by the date required in Section 2(0). the Dissemination Agent shall send a notIce to the Repository in substantially the fonn attached as Exhibit A. (c) Material Event Notices. (I) The DlsseminatlOn Agent shall, promptly after obtal11ing actual knowledge of the occun"ence of any event that it bebeves may constltute a Matenal Event, contact the chlef finanCIal officer of the Issuer or his or her designee, or such other person as the Issuer shall deSlf,.'1late in wntmg to the DissemmatlOn Agent from tnne to time, infoTI11 such person of the event. and request that the Issuer promptly notIfy the Dlsseminatlon Agent 111 writl11g whether or not to report the event pursuant to Section 4((')(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)(1) or otherwise, the Issuer shall promptly determine if such event constitutes a Material Event and shall promptly notify the Dissemination Agent of such determinatlOn. If appropnate. such wliting 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 Dissemmation Agent shall promptly file a notlce 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 gjven under this subsection any earlier than the notice (if any) of the underlying event is gjven 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 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 De.<iignated Agents. The Issuer may, from time to tune, appoint or designate a Designated Agent to submit Annual Reports, Material Event notices, and other notices or reports pursuant to these Disclosure lnstructions. 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 wntten 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 entny 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 lssuer shall have no further responsibility hereunder. If such tennmation 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 walVed. 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 givmg effect to such walVer, 1S in compliance with the SEC Rule and all current amendments thereto and mterpretations 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 connectJon with a change in circumstances that arises from a change 111 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 lmpact on the type (or, 111 the case of a change of accounting principles, on the presentation) of Financial Infonnation 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-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 foml 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 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 RepOli 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 mclude 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 i\genr, if any, to cOlnply ,xlltn any prOVIsion of these Disclosure InstrucIions, 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 ResolutJOn. and the sole remedy under these Disclosure InstructJons 111 the event of any failure of the Issuer or the Dissemination Agent. if any. to comply with these Disclosure InstructlOns shall be an action to compel perfonllance. Section 9. Notices. Any notIces or commul11cations to or among any of the partIes referenced in these Disclosure lnstructlons may be gJVen as follows: (a) To the Issuer at: 300 West Ash Salma, Kansas 67402 Fax: (7851309-573S AttentlOn: Clerk (b) To the Partlclpatll1g underwnter( s I at the address set forth III the Bond Resolutions or such other address as IS funllShed in writmg to the other partIes referenced herein. (c) To the Dlssemination Agent at the address set forth on Exit ibit B attached hereto. Any person may, by written notice to the other persons lIsted above. desl~'11ate a dlfferent address or telephone numhercs) to which sub~equenl notices or communicatIOns should be sent. Section 10. Electronic Transactions. Actions taken hereunder and the arrangement descnbed herem may be conducted and related documents may be stored by electronic means. Secti.on 11. Beneficiaries. These Disclosure Instructions shall inure soleiy to the benefit of the Issuer, the Dissemination Agent, if any, the Participatmg Underwriter and Beneficial Owners from time to tllne of the 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 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, Senes 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 Continumg 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 ACCEPTANCE OF DISSEMINA nON AGENT Name of Issuer: Name of Bond Issue: Dissemination Agent: CIty of Salina. Kansas $[2365.0001 General ObhgatJon Internal Improvement Bonds. Senes 2012-A and $[3,760.000] General Obhgation Refunding Bonds, Senes 2012-B. dated as ofJu1y 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 APPENDIXC Financial Statements Smce J 992. the Cny's comprehensive annual financial reports have received the Certificate of Achievement for Excellence in FinancJai Reportmg award by the Government Fmance Officers ASSOCJatlOn The Certificate of Achievement was developed to encourage governmental umts to prepare and pubbsh an easily readable and understandable financJaI report covenng all funds and financJaI transactions of the government dunng the fiscal year. The followmg appendix contains audited financial statemento for the Cny of Salma's pnmary governmental functJons for fiscal year endmg December 3 J. 201 J At the time thIS report was completed the audJted financial statements of two component UllJts~lomt ventures of the Cny. the SalJIla AIrport Authonty and Salina/Saline County Health Department. were not available and as a result have not been incorporated mto the enclosed audit. The audned financial statements for the Salina AIrport Authority have subsequently been completed and can be found on the MUI1lCIpal Secunty Rulemakmg Board' s EMMA websIte. The audIted financJaI statement for the Health Department have been delayed due to recent structural damage to the Health Department"~ admIl1JstratIve office~. Upon cOl11]!ietlOn of the Health DepaI1111ents audit. the Cny will update Jt~ audIt and release Its Comprehensive Annual Fll1anCI:l! Report. Mayor and City Commissioners City of Salina, Kansas INDEPENDENT AUDITOR'S REPORT ON THE BASIC FINANCIAL STATEMENTS III MIZE-<, HOUSER < QOMPANYr.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 pnmary 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 rn accordance with auditing standards generally accepted in the United States of Amenca 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 reportrng Accordrngly, we express no such opinion. An audit includes examining. on a test basis, eVidence supporting the amounts and disclosures rn the financial statements An audit also Includes assessing the accounting pnnclples 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 oprnlons. The frnanclal 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 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 frnanclal statements do not purport to. and do not, present fairly the frnanclal POSition of the reporting entity of the City of Sailna Kansas as 0; December 31,201 i the changes In its finanCial position, or where applicable, its cash flows for the year tnen enoes In conformity With accounting principles generally accepted in tne United States of America In accordance wltr, accountrng principles generally accepted in the United States of America, the City of Salina Kansas has Issued separate reporting entity flnancla! statements for which we have Issued our report datec June 22, 2012 in ou' opinion the financial statements referred to above present fairly, In al! matenal respects. the respective finanCial position of tne governmental activitieS, the busrness-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 comoanson for the General Fund. Flood g 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 princlpies generally accepted in the United States of America VNy"N m:,ehQIIe:c.r rom = mhco@mtzehouser.coiTi 534 S Kansas Ave, Suite 700 Ii Topeka, KS 66603-3465 11785.233.0536 P II 785.233.1078 f 534 S Kansas Ave, Suite 400 Ii Topeka, KS 66603-3454 /I 785,234,5573 P /I 785,234.1037 f 7101 College Blvd, Suite 900 II Overland Park, KS 66210-1984 11913,451.1882 P II 913.451.2211f 120 E Ninth Ii Lawrence, KS 66044-2682 11785.842.8844 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 inquJrles 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 Otis 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 otner 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 compar:ing 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 ali 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 the~bas,c fi~anClJ:nts;a:~ordlng?,y, :~ not express an opinion or prov,de any assurance on them. J ~ I, e \ ,.J June 22. 2012 2 CITY OF SAUNA. 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 A~sets 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 governrnent-wlde 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 governmentai 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 statement fc~ the Non-major f:.J:lds is presented as supplementary informatloi> in the bacf; of the repor.. 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 vanous departments of the City The city operates five Internal service funds. Three of these are for self-insurance actiVity. Rls~. 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 Salma 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 pnnclpal. may be used Permanent fundS operated by the City Inciude the Cemetery and Mausoleum 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 contam 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. Fmally, 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 inistratlon 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 T rips/T ours 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 cnange In formuia tnus resulted In a shin of about $158,000 from tne City of Saiina to Saline 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 coliectlons) to taxes Motor Vehicle Valuation 2010 2011 $ 397.470.626 $ 402.354.576 20.082 19.236 5.773 6786 25.855 26.022 124.707 128.498 94.4% 97.3% 97.1% 99.9% $ 50,330,252 $ 47.406,072 Change $ 4,883.950 [0.846J 1 01:3 0.167 3.791 2.9% 2.8% $ [2,924, 180J 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 $ 24772 $ 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) Restricted for Permanent Funds $ 417 $ 427 $ $ $ 417 0% $ 427 0% $ 10 Restricted for Debt SerVIcE $ 572 $ 1.285 $ 1.553 $ 1,553 $ 2,125 10' 10 $ 2,838 2% $ 713 Unrestricted $ 3,808 $ 6,333 $14.306 $24.534 $ 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 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 expenditure!'; 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. Conoensed Comparitlve Statement of Activities. 2010 and 2011 (In $OOO's) Governmental Busmess-T~a~e Total Pnmar~ Government 2010 2011 2010 2011 2010 % 2011 % 2010 -2011 Program Revenues' Change Charges for Services $ 12.306 S; 13470 $ 22419 $23.779 $ 34.725 48% S; 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 $ OO/~ $ 3.804 5°' ,0 S 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°' /0 $ 6389 8°' 10 S 91 Investment Revenue $ 81 $ 77 $ 67 $ 83 5) 148 Oo/~ 5) 160 0% $ 12 Other Miscellaneous $ 565 $ 872 s: 341 $ 330 $ 906 1% 5) 1.20: 2% $ 296 Total Revenues $ 49.069 $ 51.275 $ 22.827 $ 28.198 $ 71 896 100% $ 79473 100% S; 7.577 Expenses $ General Government $ 10.845 $ 13.615 S 10.845 15°/0 S 13615 18% $ 2,770 Public Safety $ 18.592 $ 18.579 £ 18.592 25% $ 18.579 25% $ (13) Public Works S; 9.782 $ 9.858 $ 9782 13% S 9.858 13% S 76 Public Health and Sanitation $ 1 365 ~ 1368 S 1.365 2% $ 1 368 2% $ 3 Culture and Recreation S 6.572 $ 6.693 $ 6.572 9% $ 6.693 9% ~ 121 Planning and Development $ 3715 $ 3450 S 3.715 5% $ 3450 5°' ,0 S (265) Solid Waste Disposal S 2.925 $ 2.945 $ 2.925 4°/~ S 2.945 4°' /0 $ 20 Water and Sewer $14.050 $13.597 $ 14.050 19% $ 13.597 18% $ (453) Sanitation S 2261 $ 2.261 :£ 2.261 3% S 2.261 3% S Golf Course $ 817 $ 825 $ 817 1% $ 825 1 %) S 8 Interest on Long Term Debt £ 2.257 S; 1.650 $ 2.257 3% $ 1.650 2% $ (607) Total Expenses $ 53128 $ 55.2,3 $ 20.053 $19.628 $ 7318, 100% $ 74.841 100% So 1660 Increase In net assets before transfers $ (4.059) $ (3.938) $ 2774 $ 8,570 s: (1.2851 $ 4.632 S 5917 Transfers and other extraordinary Items s: 92 s: 2.362 $ (92) $ (2,163) 50 So 199 $ 199 Increase In Net Assets So (3.967) S 11 576) S; 2.682 S; 6407 S; (1.285; $ 4.83'1 S' 5.11 f, l'>Jet Assets January 1 So 119.854 $ 117.798 5; 61.270 $63.938 $ 181 124 $181736 ~ 6'" ') ,"- Pnor Penod AdJustmenl S; : .911 $ 1 --c, ,IL ~~ ~) So 1.897 $ 1 081 ~: (816 ) Net Assets. January 1 restated $121765 $118.910 $ 61.256 $63907 $ 183 021 $182817 S; (204) Net Assets December 31 $117.798 $117.334 5,63,938 S; 70.314 $18,.735 $ 187648 l 5.91L Governmental Activities. Total expenses for Governmental Activities for the year ending Decembei' 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 elernent of Governmental Activity expense was Public Safety. accounting for 34% of the total. Charges for service attributable to Governrr,ental 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 0 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 S; 3.617.181 S; 3.836.238 S; 219.057 Flood and Drainage S; 188,526 $ 907 $ (187,619) Tourism and Convention $ 367,197 $ 340.473 S; (26,724) Special Gas $ 1,484,641 $ 1,417,743 S; (66,898) Bicentennial Center S; 46,048 $ 142,881 $ 96,833 Sales Tax Capital S; 2,154,367 S; 1,397,571 S; (756,796) Debt Service S; 571,873 $ 1,285.130 S; 713,257 Capital Projects $ (2610,001) S; 390,852 S; 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 Malar Funds 2010 and 2011 M8dlfled Accrual Basl~ Fund 2010 20,~ 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 :i 1.546,045 $ (23.603) Bicentennial Center S; 1.702066 S; 1.656.762 5> (45.304) Saies Tax Capltai I 3 8,5.966 c' 3.777.28c ~ (38680) , Debt SerVICe 0' 7 943 86~, S 6 844.52~ £ 1,099.344, Capital Prolects S; 5552 90E S, 9896.198 Si 4.343.292 Other Governmenta! Funds" S; 2.954.257 ~ 2.800.508 S (153.749) Total Revenues S; 59.176265 :£ 63402.198 $ 4.226.934 Less Other Sourcss S 12.157.28':: 14.58: .555 : 2.424.371 Revenues net of other source, ~ 47.01893: ; 48.82',54~ S 1802.563 - Expenditures (Includln~ Other Flnanctn9 Uses: General S; 35773774 .) 35 494 67'; S; (279103) Flood and Drainage Impmvems:;~ 3.22:' ~ 206,092 So 202.869 TOUrism and Convention S; 1.228789 S; 1 332.826 S; 104.037 SpeCial Gas $ 2.138.057 S; 1.612.943 'i: " (525.114) E3lcentennial Center $ 1.768246 $ 1,559.929 $ (208.317) Sales Tax Capital S; 3.289009 $ 4,534,082 <t 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" 5> 2.829.609 S; 2.989.614 5> 160.005 Total Expenditures $ 71,074,259 5> 60.756,766 $ (10,317,493) Less Other Uses $ 4.983.834 $ 5.692.077 $ 708.243 Expenditures. net ot other uses $ 66.090425 $ 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 includ~ 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 Intemal 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 S; 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 fl.ssets as a percentage of current liabilities 385% 684% 706% 1100% Sanitation Golf Course 2010 2011 Change 201G 201 " Change Current Assets $ 846 $ 761 $ (85) $ 66 $ 32 $ (34) Capital Assets $ 639 5) 646 S-7 $ 348 S; 314 S; (34) Total Assets $ 1 485 $ ".407 S (73~ S 414 S 346 3; (68' Current Liabilities $ 203 $ 29 ~. oJ (174) $ 48 $ 24 $ (24) Noncurrent liabilities $ 123 5) 156 $ 33 $ 61 $ 109 5) 48 Total Liabilities $ 326 $ 185 ~ (141 ) $ 109 $ 133 $ 2.1 Assets Invested In Capital, net of related debt 5) 639 $ 64(, ~ -, $ 348 $ 314 $ /').1. \ ; \J .... j Restricted Net Assets $ $ $ $ $ $ Unrestricted Net Assets It 520 $ h'7t:: $ h~ '" (43) $ (101 ) <t (58) '" "'fV ",0 ;p '" 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 sr,ows 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 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) Capital 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. Decem ber 31 $ 3,896 $ 3.710 $ (186) $ 58,578 $ 65,169 $ 6.591 Sanitation Golf Course 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) 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 withm 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 Saies taxes exceeded budgetary levels slightly Several expenditure items were also Significantly over or under budget. Several Departments exceeded budgeted expenditures. In general, retirement system contnbutions exceeded budget Capital Assets and Debt Administration Capital Assets The total amount mvested 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 vanous 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) Governmentai ActivllY BUSiness-type Activity Tota! 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 $ 1 ~ .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 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"b;,3;;,;;8~3 Additional information on the City's capital assets can be found in Note 4,0. 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 m the amount of $3400.000 BUSiness-type activities had $16.193.925 In Revenue Bonds outstanding. as well as $7,217.907 m General Obligation Bonds. Revenues generated by user fees are pledged to retire all of the Bonds Issued by BUSiness-type actiVities The City engaged m 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 mdustnal fire protection system located at the Salina Airport Industnal 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 tound In [\jote 4 E. of the notes to the baSIC finanCial statementb Requests for information This financial report IS intended to give the reader a genera! 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 uncollectlbles) 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 OPEB obligation Revenue bonds payable General obligation bonds payable Landfill post-closure care ilabllitles Total noncurrent liabilities Total liabilities Net Assets Invested In capital assets, net of related debt Restricted fa" Permanent funds' Expendable Debt service Unrestricted 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 86,683788 46.272.729 164.514.513 67,638747 $ 194,659.725 $ 98029,584 $-788.731 $ 294449 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 2807,425 334458 15850,229 50.174632 6,017.859 2,042.254 55,638.742 24,771 990 3; 77,325,583 $ 27.715,898 $ 109.288,843 $ 44,226,915 426,741 1,285.130 1,553,016 6,333428 24,533.755 $ 117.334,142 $ 70,313.686 The notes to the basic ftnancial 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 43.616,4i2 24,018,193 297,475,172 132,956.517 232.153.260 $ 292,689,309 $ 1.083180 1.076.528 563720 5145 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 SaMatlon 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 Expenses $ 13,614.508 18.579,041 9,858199 1,367,825 6,693,341 3,450,078 1.650,426 55,213418 2.944,765 13,596.918 2,261,462 825.057 19628.202 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 Contributions $ 359.148 $ 631,417 1,368,577 153.566 177,048 217,643 2.907,399 201,700 3.803,565 201,700 3803,565 $ 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 period adjustment Net assets -beginning, restatea Net assets -endmg Net [Expenses) Revenue and Changes In Net Assets Total Total lotal Governmental BUSiness-type Primary Activities Activities Government $ [7 149.293J $ $ [7,149,293) [14,181,468) [14,181,468) [8,227,915) [8,227,915] [1,171,530] [1 ,171,530] [3,376,268) [3,376,268) [3,078.760) [3,078,760) [1.650,426) [1.650,426J [38 835,660J [38,835.660J [40,394J [40,394) 8,312,403 8,312,403 72,657 72,657 [188855J r188,855] 8155.811 8.155.811 [38.835.660) 8155.811 [30.679.849) 7782.768 7,782768 2778845 2,778,845 1,149.641 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 1.202255 2.361 593 [2.162.772J 198.821 37.259466 [1,7 49,022) 35,510,444 [1576,194) 6.406.789 4.830.595 117.797911 63.937.619 : 81.735530 1.112.425 [30.722J 1.081.703 118910,336 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 Retamage payable 44.389 Deferred revenue 7.923.279 Due to other funds Matured principal and mteresi Temporary notes payable Total liabilities 8.224.598 90.745 Fund balance. l\lonspendable 89.71E: Restricted 340473 1.094.720 Committed ASSigned 292,816 907 323.023 Unassigned 3453.70f Total fund baiances 3.836.238 907 340473 '1,417,743 Total iiabilities and fund balance S 12.060.836 £: 907 $ 340473 $ 1,508,488 Bicentennial Center $ 117,993 54,966 $ 172,959 5) 30,078 30078 142,881 142.881 S 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 3.400.00b 3,400,000 2.397.390 4,112.201 32,018 14,887.030 89,716 < ,285.130 891.254 3,611,577 610,134 [2477.564J 1 851.292 126743 787.437 2.868416 50.000 4.322,599 3,453.706 ~ .397.571 1.285,130 390.852 2,792.546 11.604.341 $ '1.397.57'1 $ 3.682,520 $ 4,503,053 $ 2.824.564 $ 26.491.37i 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 governmentai 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 Ir. the current period and therefore are no! reported as liabilities in the funds. These liabilities at year end consist o~ 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 [61,542,5851 $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 Fiood & 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 1,176082 Culture and recreation 2,734,957 Planning and development 2319,300 736.386 Miscellaneous Capital outlay 555.048 196,308 1,183678 Debt service Principal retirement Interest and other charges Total expenditures 34496722 206.092 736.386 1.611 107 Excess [defiCiency) of revenue and other sources over [under) expenditures and other [uses; 19~ 74L f188.526'1 569.716 ~245 0621 OTHER FINANCING SOURCES [USES] Issuance of bonds Bond premium Transfers In 868.838 gGI 180.000 Transfers [out) [997.949] [5964401 [1.836] Total other finanCing sources [uses] [129 11 ~ 1 907 r596440] 178 164 Net change In fund balance 6r. ~~~ L.O')") i187.619J [26,724j r66.898] Fund balance -Beginning of year 3.6i7,181 188,526 367 197 1,484,641 Restatement of prior year fund balance 156424 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 $ 340473 $ 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 4,276195 135.000 4,411,195 1.771.581 151.055 161.744 2,084.380 1,559.929 1.032.526 6.047776 6489796 2,884,355 55.064,689 [776,016J 2,736.202 [1 451.805j [6448.162J [631.236) [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 [3.501,5561 [83488J [405,549J [105.2591 [5,692,077J 872.849 r3.492.998J 2165,062 9.449.015 442.130 8,889,578 96.833 r756,7961 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 [2.610,0011 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 penod. 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. Also, governmental funas 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 statemen: 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 integral part of thIS statement. 19 $ 2.646,433 [2,557,809J 314,150 584.822 [523,988] [6,570.801J 4.530,999 $ [1.576,194) CITY OF SALINA, KANSAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31 , 2011 Business-Type Acl1vltles Enterprise Funds Solid Waste Water and ASSETS Dlsoosal 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 375179 Total current assets 3,610,665 25.987.712 760855 31.605 Capital assets Nondepreciable capital assets Construcllon In progress '11 062.055 Land 682.000 844.002 15.000 Depreciable capital assets Capital assets 8.278.501 90480.372 1.557447 992.099 Less' accumulated depreciation 5465.856 39.202.619 911.117 693.137 Total capital asselS 3494645 63183810 646330 313962 Total assets $7105.310 $ 89171522 $ 1 407 185 S; 345.567 Llaoilltles Current liabilities />'ccounts payable S 22192 ~, 26244<1 S 6859 S 295<1 Retalnage payable 608219 Interest payaole e.5'1.e: 202777 Meter depOSits payable 163.904 Current portion of compensated apsences pavablE 1 ~ .2'15 68.382 22203 2050', Current portion of accrued claims payaOle Current portion of general obligation oonds pavaole 486.302 713,7 46 Current portion of revenue bonds payable 343696 Total current liabilities 528.223 2363168 29062 23455 Noncurrent liabilities Compensated absences payable 48.:3<10 294765 95709 88.37E Accrueo claims oayablf Net OPES Obligation 4:i 94<1 20987= 59830 2081L Pavable from restricted asselc General obllgallOf' borlCS pavabl" 732 SOc 5 285 052 Revenue bonds payable '15,85C.22S Landfill post-closure care liabilities 2.042.254 Tota: noncurrent liablliues 2.86734.; :~ ,S39.S:~' 15E 53S 109,100 ,olal liabillilec, S 3.38:: 567 £, ~4 0uJ,OS7 J, 104 60~ 5) ~~'"' ~/~ IJL n.,,,,, Net Assets Invested In caPlial assets net of related deb! $ 2 275.537 $ 40.991.086 5-646.330 S, 313962 Restricted Restricted for bond rellrernenl ~ ,553 01 E, Unrestricted I 434.206 22624,333 576254 l101 038) Totai net asseb $3709743 $ 65.168 435 S; 1222584 S; 21292<1 The notes to the baSIC finanCial statements are an Integral part of thiS statement 20 Totai Internal Enterprise 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 46.272.729 838.848 67638747 27.790 $ 98.029.584 $ 3.232691 S 294449 $ 100054 608219 2'11.29'; 163.904 122301 ~ 7384 563.720 1.20004e 343,696 2.943.908 681 ,15S 527 190 7<1940 149245 33445& f),(JI? 859 : 5850,229 2.042.254 24 77~ 99::J 224 ~ 3:: J. L;-;-~ S age c' "" 9:JS,3~~-J S <14.226915 S, 27790 ~ 553.01 C 24.533755 2.299 558 $ 70.313 686 S; 2.327 348 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 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 50180 Total operating revenues 2.928.862 18,361.012 2,334.543 686.382 Operating expenses General government 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 [expensesJ Investment revenue 9072 72452 1 839 36 Debt service [115.875J [632,390] Gam/[lossJ on disposal of fixed assets 2550 30000 Accretion of bond premium 7.864 Amortlzalion of bond Issuance costs 111,0511 Total nonoperating revenues [expenses] [106803J [560.575J 31.839 36 Income [lossJ before transfers [6.8311 4.836.546 74.920 [138.639] Transfers from [to] other funds Transfers In 47.225 Transfers [out] [180000) [2030.000J Total transfers [180.000J [2.030.000J 47.228 Caoltal contriPutlon~ 3.803.565 Change In net assets [186831J 6610.111 74.920 f91411', Net assets January 1 3895812 58578036 '1159149 304622 Restatement 762 [19.712J [11.485J [287J Net assets, January 1, restated 3,896574 58558.324 1 147.664 304.335 Net assets December 31 $ 3 709 743 $ 65,168435 S; 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 [748.265J 32.550 7.86L1 [11.051J [635.5031 4.765.996 47.228 [2.210.000) [2162.772j 3803.565 6.406.789 639:\7619 [30.722J 63906897 S; 70 313,686 Internal Service I=unds $ 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 60.000 585.95~1 1737,815 3.582 1 741.397 $ 2.327.348 CITY OF SALINA KANSAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31.2011 Business-Type Act,v,lies' Enterf2nse Funds Total Internal Solrd Waste Water and Enterprrse Service Dlsf20sal Sewer Sanrtatlon Golf Course Funds Funds Cash flows from operating activities Cash received from customers and users $ 2.948.382 $17,850,055 $ 2,332,281 $ 636,201 $ 23,766.919 $ 9.786.038 Cash paid to supplrers of goods or services [1,722,492J [7,552,182J [1,616.344] [391,100] [11.282.118] [8,955.819] Cash paid to employees [454,426J [2,945,574] [696074J [386,401J [4,482,475J [631,488J Other operating receipts 24491 456,956 424 50180 532,051 251.196 Net cash provided by [used rnJ operatrng activities 795,955 7.809.255 20.287 [91,120) 8,534.377 449.927 Cash flows from capital and related flnancrng activities Purchase and construclion of capital assets [23,446J [11.886,827] [139452J [12.049,725] Capital contrrbutlons 3,803,565 3,803.565 Debt Issuance costs Incurred [315,426] [315,426J Proceeds from sale of capital assets 2,550 30.000 32,550 1 ,~29 Prrnclpal payments -general oblrgatlon bonds [697.396J [691,410J [1.388,806J Prrnclpal payments -revenue bonds [1.580,000] [1,580.000J Proceeds from Issuance of revenue bonds 16.193.925 16.193,925 Interest paid [136.908) [496.760j [633.668) Net cash provided by [used InJ capital and related flnancrng aclivltles [857750J 5029,617 [109452] 4.062415 1.129 Cash flows from Investing activities Interest received 9.072 72,453 1839 37 83,401 8 44~ Cash flows from noncaPltal financing activities Transfers In 47.228 47.228 60000 Transfers [outJ 1180.000J [2030 000) 12.210.000J Net cash proVided by [used InJ noncaPltal financing activities 1180.0001 12030.000) 47.228 12.162772J 60000 Net Increase [decrease] In cash and cash equivalents [232.723J 10.881 325 [87326J [43.855J 10517421 519501 Cash and casn equivalents January 1 3.612.249 13.160.792 709,009 47810 17.529.860 2.569.70E Cash and cash eqUivalents December 31 $ 3.379.526 $ 24.042 117 $ 621.683 £ 3.955 $ 28047.281 S, 3 089 207 The notes to the baSIC frnanclal statements are an Integral part of thiS statement . 22 CITY OF SALINA, KANSAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS (Continued) For the Year Ended December 31.2011 Business-Type Activities Enterpnse Funds Total Internal Reconciliation of operating [loss] Income to net cash provided by [used in] operatrng activities Solid Waste Water and Enterpnse Disposal Sewer Sanitation Golf Course Funds Service Funds Operating Income [loss] $ 99.972 $ 5.397,121 $ 43,081 $ [138,675] $ 5,401,499 $ 516,376 Adjustments to reconcile operating Income [loss] to net cash provided by [used inJ operating actrvitles Depreciation expense [lncreaseJ decrease in accounts receivable [Increase] decrease In Inventory Increase [decrease]lf'1 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 [1,806J [35.666] 19,536 49.984 14,250 4.957 25016 7.809.255 S; 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 6646 [304,399] 14,032 578.631 [18,278] 3.294 [95,119] 133,066 79657 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 financial statements. Component Units That Are Not Presented City of Salina Airport Authority -The Salina Airport Authority was created for the purpose of acceptmg 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 admlntster Public Housing Programs authorized by the United States Housing Act of 1937. The Mayor of the City of Salina appomts 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 presentee 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 primary governments each have an ongoing financial responsibility for the joint ventures. Separate financial statements are available from the govemlng 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 Saiina, 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 Derlod 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 penod 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 Clty's proprietary funds are charges to customers for sales and services. Operating expenses for enterpnse 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 nsk management workers 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 govemmental units, private organizations and/or other funds. The City reports the following major governmental funas: General fund -To account for resources traditionally associated with government. which are not required legally, or by sound flnanclai 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 comrol and stormwater drainage systems Tourism anci convention fund -To account for translem guest tax revenues. which are speclflcal!y restrlcteo to promotion and tourism activities. Special gas fund -To account for the City's share Of motor fuei tax revenues. which are legally restricted te 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 genera! 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 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 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). All other outstanding balances between funds are reported as 'due to/from other funds ,. Accounrs Receivable The City records revenues when services are provloed. Ali receivables are shown net of an allowance for doubtful accounts. Property taxes receivabie Collection of current year property tax by the County Treasurer IS not completed, -apportioned 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 flrst-In/flrst-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 vears -Such assets are recorded at historical 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 hlstoncal cost if purchased or constructed Donateci capital assets are recorded at their estimated fair value at the date of aotlation. The COSI of normal maintenance and repairs that do no, add to the value of the assets 0: matenaliy exte,-jS assets lives are not capitalized lviajor outlays for capital assets and Improvements are capitalized as projects are constructed. Interest Incurred dUring the construction phase 0; 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, plant 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 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. 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 Lon a-term ObliQations 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 Tota! DrainagE, and SoeClal Bicentennial Sales Tay Debt Capital Governmental Governmental General Improvement Convention Gao ~ Capital Service Prolects FundS Funos Fund Balances Nonspendable tor Inventory 89.716 :£ £ :r $ :; $ 89716 Restricted for Public worr.s 1 094 72C 1 094720 PubliC health ana sannatlon 4 Culture and recreailor 4~.236 45.236 Plannmg and development 340472 298.015 638 48~ Debt payments 1.285,130 547.999 1833128 Commltred for Public safer), [7.866J [7866; Culture and recreatloP 14288" 524 907 667 78f Plannmg and oevelopment 6.102 6.102 Cemetery 421 037 421037 Capital Improvements 610 '<3, [2477 564, 907.112 [960.318; A.ssigned for Generai government 18450 18450 PubliC works 36755 907 323023 36068e Plannmg and development 11.376 1', 376 CapJtallmprovement~ 226.22.5 787437 2868416 50 ODe 3,932,O8[ Unasslgnec 3453,706 3453.70, --- Total Fund Balances $ 3.836.238 $ 907 ~ $1,417743 $ 142.881 ~ $ 1 285,130 ~ $ 2792.546 $ 1160434', 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 capita! 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. 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, Pubilc hearing 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 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 tne budget must be publisheci 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 NJD 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 Tounsm and Convention Fund 367,197 367.197 Special Gas Fund 986,224 498417 1,484,641 Bicentennial Center Fund 46.048 46.048 Sales Tax Capital Fund 1.572.216 582,151 2.154,367 Debf Service Fund 571.873 571,873 Capital Projects Fund [6,654,370] 4.044,369 [2,610,001 J Other Governmental Funds 2,365.603 616.049 2.981.652 Total Governmental Funds $ 2.388.163 5; 6.413.321 $ 8,801.484 Fund Balance Classification As of December 31 2010. Reclassified NonsQendable Restncted Committed Assigned Unassigned Total Governmental Fund General Fund 5> 87.238 ;; ;; S; 99.286 $ 3430.657 $ 3.617.181 Flood & Drainage Improvement Fund 187.350 1.176 188.526 Tounsm and Convention Fund 367.197 367197 Special Gas Fund 986.224 498.417 1484.641 Bicentennial Center Fund 46.048 46.048 Sales Tax Capital Fund 1.572216 582151 2.154.367 Debt Service Fund 571 873 571,873 Capital Projects Fund [6,654.370J 4044.369 [2.610.001] Other Governmental Funds 944.240 2.031.076 6.336 2,981.652 Total Governmental Funds S, 87.238 $ 2.869.534 $ [2.817 .680) S; 5.231.735 S, 3430.657 S; 8.801.48~ FollOWing the close of the prevIous fiscal year It was discovered that several capital assets were mlsciassifled 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 Genera: 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 956001 762 [19.712] [11485] [287] 3,582 156.424 156.424 $ 118.910.336 $ 3,773,605 $ 3.896,574 $ 58.558.324 $ 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 authonty 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 Al 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 montes 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 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 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 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 SAUNA, KANSAS NOTES TO THE BASIC FINANCIAL STATEMENTS December 31,2011 Note 4. DETAILED ~~OTES ON ALL FU~~DS (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 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 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 Governmem Receivables Accounts Taxes Interesl Gross recelvaDles Less allowance for uncoliectibles Total General $ 2.889.545 8.09d.093 35877 11 019.515 [2211.730J $ 8,80771',5 TOUrism and Conventlor :£ 338.271 $ 338.271 S 338.271 :D Otner Governments ~ S; S2,15~ S- 52.15~ [9821 51,169 S 36 SpeCial Bicentennial Debt Gas Center Service Subtotal $ 54.966 £ :£ 3,282782 312648 2441.349 10.848090 35877 312.648 54.966 2441349 1 d, 166.749 [2.21'.730J 312648 S. 54,96£ S; 2.441.349 $ 11.955019 SOIiO Wate' Waste and Sanitation Disposal Sewer Total 201.972 231 122 ~: 1 489 51 ~ $ 5.257.540 10.848.090 Ie 35892 201 972; 23"1 139 ~ ,489.511 16141 523 [62.801J [463147J 12738660] 139.17::: ~ 231 139 S 1.026.364 :D 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 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 12/31/2010 Additions Retirements 12/31/2011 City governmental activities Governmental activities' Capital assets, nO! being depreciated Construction In progress $ 32,5~9, 155 $ 81,670 $ 32,630,825 2.9~5,099 3021.567 S, 32,554,357 Land 22,477.191 22.477,191 22~77,191 Capital assets. bemg deprecl8ted Infrastructure 144,31e.296 14~,316.296 1,829.401 146145.697 BUildings and Improvements 36.233,800 36,233.800 36,233.800 Vehicles 7480.033 810.889 8,290.922 255156 216,023 8,330.055 EaUipment furniture and fixtures 5353682 92.755 5.446.437 246676 235.912 5457.201 Total capital assets 248410157 985,314 249,395.471 5276.332 3473,502 251 198.301 Less accumulated aepreclatlon for Infrastructure 60,603797 [30.296J 60.573.501 2964.133 63.537.634 BUildings and Improvements 12.609.132 10.741 12.619.872 1.023,364 13.643.237 Vehicles 5035.374 [40.529J 4.994 845 513,718 174.927 5333,636 Equipment, furniture and f,xlUres 4039705 89397 4129102 228844 188665 4 169.28'1 Total accumulated depreCiation 82.288.008 29.313 82,317.321 4 730.059 363592 86.683788 Governmental activities capital assets net 166.122149 956.001 $ 167.078150 S 546.27~ 3109.910 S, 164.514513 BUSiness-type activities Capital assets not being depreciated Construction In progress 1 516,604 $ $ 1.516.604 $ 10.781.452 $ 1.236.031 $ 11.062,055 Land 1.541 002 1.541002 1.541,002 Capital assets being depreciated Infrastructure 68,957.66t -;1932 68.969.597 2333.997 71 302.594 BUildings and Improvements 22587106 22.587106 22.587 106 Vehicles 2987740 141,385) 2.946.35E 139.452 102647 2.983 160 EqUIpment furnIturE: and fIxtures 4376725 27010 4403.735 3082L! LI 43J 55~ Total capital assets 101 966.842 r2443] 101.964399 13285,755 1 338678 113.911 475 Les~ accumulated aepl""8clatlon t,y InrraStructure 2b.97~,28b [::>4,7501 28.938,530 i .774,866 30,71340" BUildings and Improvements 10,241.870 17,027 10,258897 424.276 10.683,173 Vehicles 2,084.391 8,460 2.09385' 179,756 102.647 2170,96G EqUipment, furniture and fixtures 2.394,356 36.54:' 2,430.898 274.29~ 27051 g:: Total accumulated depreCiation 43.693905 28.279 43722184 2653192 102647 46272 729 BUSIness-type actiVities capsta: assets, net 58,272.937 S; [30.722i 58242.215 $ 1C,632563 $ ~ 236,03-: $ 67638,74"" 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 govemmental functions as follows: E. Long-Term Debt Govemmental 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 3.400000 2,500.000 Total $ 58,851441 $ 10,428,326 $ 7.564.963 BUSiness-type actiVities General obligation bonds $ 8.614577 $ $ 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 3400.000 $ 61 }14,804 S 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 ;;, 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 2004B, 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 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 6.916,592 200% 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 5) 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 Notes Series 2011-1. due 8/1/2012 $ 3.400,000 0.40% Si 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 $ 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 -Pnma~ 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 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 genera! obligation bonds: Temporary Notes -Primary Government Bonds interest Year Outstanding Due Total 2012 $ 3,400.000 $ 14,204 ;;;$=.......;3;;.;,.4,;,,1;,..4.;,;.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) F. 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 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 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. 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 8apitai projects tunc:' 3.289,564 405549 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 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 actuanal valuation KPERS and KP&F are funded on an actuarial reserve basis. State law sets a limitation on annual mcreases 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 $eneral creditors. C. Flexible Benefit Plan (I.R.C Section 125) The City Commission has adopted by resolution a salary reduction flexible benefit plan ("Plan") under Sectlo;-, 125 of the Internal Revenue Code. All City employees working more than 20 hours per week are eligible to participate in the Plan begmning 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 vanous Insurance and disability benefits o 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 liabiliry, $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 [230417] [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 consldenng 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, ali of the ilability 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 $ 382.502 $ 421.530 Incurreo claims (Including IBNRsj 4.229.571 4,198,012 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, 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 c 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 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 ana monltonng 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 landfili 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- ciosure 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 wili 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 Prlonty 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, altnough 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 transfernng 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 Entitles 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, pnmarily 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 11 (citizen suit claims) for lack of subject matter jurisdiction. He also granted the Defendants' motion to dismiss the Salina Public Entitles' 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 cO'nflict 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 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, Defendants flied 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 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 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 actuanalliabilities (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 Obligatlor, Adjustment to Annual ReqUired Contribution Annual OPEB cost (expense) Benefit payments Change m net OPEB obligation Net OPEB obligation -begmnmg of year Net OPEB obligation -end of year 48 $ 961,335 95743 [79.786) 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 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 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 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 pattern of sharing of benefit costs betweer ' 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 iiaDilities and thE:: actuarial value of assets, consistent with the iong-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) Llabiliti (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)l( cJ 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 212,244 292.488 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 24.890.467 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 services 5.258466 6039.524 Operating grants, restricted General grants 15356E 185,000 PubliC safety 631.417 837.000 Community and economic development 28202 Total operating grants. restricted 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 operaling grants. unrestricted 10.991 21.503 Interest Income Genera! Interest 15749 65.000 Total Interest Income 15749 65.000 Interfund services proVided General services 1392161 918.017 General government 2532316 1 755.876 Community and economic developmenl 63.340 50.501 T Cltalmterfund services proVided 3 987 8~7 2 72L1 394 Miscellaneous revenues General miscellaneous revenues 118.112 134,321 General government 90 Public safety 185.054 199.000 Public works 4,134 10.000 Culture and recreation 16.439 25000 T otai 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 4.505812 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 65000 65.000 918017 1 755.876 50.50', 2.72L1.39L1 134.321 199.000 10.000 25.000 3::8.321 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 [781.058J [31.434] [205.583] 28.202 [208.815J 1,997 [2.750] [9,759J [10.512J f49.251i f49,251J 474144 776440 12.839 ~'.263 423 [16.209] 90 [13,946] [5.866J [8.561J [44492J [30.000] 200 [29,800J [261.662J 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 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 18.006.463 17.696.343 17.696.343 Public Works Buildings and general Improvements 1.005.385 1,253.194 1.253.194 Engineering 997.558 980.799 980,799 Streets 1.759697 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 15000 15.000 Total pubilc works 6,125,200 6,560.201 6,560.201 Public Health and Sanitation Cemetery 157981 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 'I 810910 1 640.473 1.640473 Arts and humanities 1,079 Smoky Hill museum 448463 435.263 435.263 Total culture and recreation 2732.547 2,541.807 2.541.807 c.ommunlty Development Human relations 330,092 337.809 337.809 Development services ; .215,034 1.332.930 1 332.930 Agency contracts 771.970 783.921 783.921 Total community development 2317.096 2454.660 2.454.660 Capital Outlay Capital 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 [underJ expenditures 472.520 [3.350.0831 [3350.083) See Independent auditor's report on the finanCial statements 52 Variance with Final Budget Positive [Negative] $ 9,503 49,774 [76,404] [64,501] [24.380J [211,390] 29,116 [288,282) [102,069J 194,840 [402,891) [310.120) 247.809 [16,759J 66461 17.932 75.897 35,101 8.560 435,001 [1',154J [50.963) [62.117} [10 484J 4,460 [170.437] [1,079J [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 fmancmg sources [usesJ Transfer In Transfer [outJ Total otherflnanclng sources [usesJ Excess [deficiency) of revenues and other sources over [underJ expenditures and other [usesJ Unreserved fund balance. January 1 Pnor year cancelled encumbrances $ Actual 168,838 [997.949J [829.111) [356.591J 2.918.651 7.140 Original $ 500,000 [994.358J [494.358) [3.844.441J 3.978.485 Unreserved fund balance December 31 2.569.200 $ 134.044 Reconciliation to GAAP Interest receivable Accounts receivable Taxes recelvabie Inventory Deferred revenue Current year encumbrances GAAP Fund Balance, December 31 35.877 677 815 8.094.093 89.716 [7.923.279] 292.816 $ 3.836.238 See independent auditor's report on the financial statements. 53 Final S; 500.000 [994.358J [494.358) [3.844.441J 3,978.485 $ 134.044 Variance with Final Budget Positive [NegatlveJ $ [331.162J [3.591J [334.753) 3.487.850 [1,059834J 7140 $ 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 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 17566 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 [188.257J [8.724J [185,778] Other finanCing sources [uses] Transfer in 907 Excess [deficiency] of revenues and other sources over lunder] expenditures and other [uses] [187.350J [8}24] [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 9""7 VI GAAP Fund Balance, December 31 $ 907 See independent auditor's report on the financial statements. 54 Vanance with Final Budget Positive [Negative] $ [4) [4] [138) [138) 3.486 3,486 3,344 [5,823) [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 Onginal Final Variance with Fmal Budget Positive [Negativel 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 [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 '1 143 143 1,332.970 1.350.000 1,350.000 [17.030J 736,386 751.664 751,664 15.278 736 386 751.664 751.664 15,278 596.584 598.336 598,336 [1.752J [596,440J [600,0001 [600,000J 3.560 14.:1 [-1,664J [1.664J 1.808 2,058 ~ ,664 1,664 ---~- 394 Unreserved fund balance. December 3~ 2.202 S; $ 5; 2.202 ~===~ Reconciliation to GAAP .~ccounts 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 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 soul-ces over [under] expenditures and other [uses] Unreserved fund balance January 1 Prior year cancelled encumbrances Unreserved fund balance, December 31 Reconciliation to GAAP Taxes receivable Retainage payable Current year encumbrances GAAP Fund Balance, December 31 Actual $ 1,366,522 3.718 1,370,240 426.084 1,401.756 1.827.840 [457.600) 180,000 r1.836J 178.164 [279,436J 735009 370888 826461 312,648 [44,389] 323,023 :;; 1.4'17.743 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 165129] [1.165.129J 1 165.129 1,165.129 5, -$ - See Independent auditor's report on the financial statements. 55 Variance with Final Budget Positive [Negative] $ [93,860J r2,2821 [96.142) [689J 484,360 500.000 983.671 887.529 [1,836) [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 Revenues Charges for services Culture and recreation Interest Income General interest Miscellaneous revenues General miscellaneous revenues Total revenues Expenditures Culture and Recreation Bicentennial Center Capital Outlay Cash Reserve Total expenditures Actual $ 772,480 193 692 773.365 1.548,901 11,028 1.559.929 Original Final $ 1,379.500 $ 1,379,500 3,500 3,500 1.383.000 1.383,000 1,902.262 1,902.262 532.850 532,850 329.400 329400 2,764.512 2.764.512 Excess [deflciencyJ of revenues over [under] expenditures [786.564J [1.381.512J [1.381,512J Other financing sources [uses] Transfer in Total other financing sources [ uses] Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] unreserved fund balancE:; January I Unreserved fund balance December 31 Reconciliation to GAAP Accounts receivable GAAP Fund Balance, December 31 $ 872.849 875.000 872.848 875.000 86.285 [506.512J 1.e3C 506.~12 87,915 $ -$ 54,966 142,881 See Independent auditor's report on the financial statements. 57 875.000 875,000 [506.512J 506.51 :. - 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] [2 151] 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 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 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] [2,000.000J [2.000,000J 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] [962,082] [284,080] [1.578,711] Unreserved fund balance. January 1 1.572.216 284.080 1.578,711 Unreserved fund oalance, December 31 610,134 $ -$ Reconciliation to GAAP Current year encumbrances 787.437 GAAP Fund Balance, Decem bel' 31 $ 1.397.571 See independent auditor's report on the financial statements. 58 Variance with Final Budget Positive [Negative] $ 76,545 [14.317) 62.228 155,000 758,433 913,433 975,661 8,558 [367,590J [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 114 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. COBG ED fund-To account for grants received from the federal government to be use-d 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 a~count for revenues from grants, which are to be used for speCial police activities, Including the DAR.E. program D.A.R.E. donattons fund -To account for donations to the D.A.R.E. program War memorial maintenance fund -To account for monies to be used for maintenance of the local war memorial. Arts & humanittes 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 -NON MAJOR 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 tncentennial 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 $ 426,741 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: Restncted 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 NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2011 Total Total I\lonmajor Nonmajor Nonma]or 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 exoendltures 2.616,975 35 267.345 Excess [defiCiency] of revenues over [under] expenditures r579.7731 10.251 f61.7141 Other finanCing sources [uses] Transfers I,: 547.389 Transfers [out] [105.259J Total other finanCing sources [uses] 442.130 Net change in tund balance [137.643] 10,251 [61,714J Fund balance -Beginning of year 1.955.449 416,490 609.713 Fund balanCe -End of year C1: 1,817,806 C1: 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 529401 2.884.355 f631.236" 547389 [105.259] 442,130 [189,106] 2,981.652 $ 2,792,546 CITY OF SAUNA, KANSAS COMBINING BALANCE SHEET NON MAJOR 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 Restncted 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. Revolving 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 SJ 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 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 10.721 110.721J [10,721J -$ 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 [666J [666J -$ 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 $ -$ -$ -$ 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 [1,044J 6,879 25.943 [140J Other financing sources [usesJ Transfers in Transfers [out] [47.228J Total other financing sources [usesJ [47.228) Nel change In fund balance [1.044J 6.879 [21,285J [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 105419 s: 98.847 HUD Community Community Development Development Revolving $ -$ - 200 526 200 526 200 526 [58,031j [58.031) 200 [57,505] 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 [86.293] [86,293] 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 baiance [38309] 24.801 58.031 [18.096] Fund balance, beginning of yeai' 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 [5.377] [5,344J $ [10.721) <:- ., 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 [696J [480.934J [666J [579.773J 489,358 547.389 [105.259) 489.358 442 130 ~ [696j 8.424 [666] [137,643] '1.737 35.958 147.536 -: .955.449 1.742 <:: w 35.262 $ 155.960 $ [6661 $ 1.817.806 See independent auditor's report on the fmancial statements. 66 ASSETS Cash and investments Total assets LIABILITIES AND FUND BALANCES liabilities Accounts payabie Total liabilities Fund balances Committed Total liabilities and fund balances CITY OF SALINA, KANSAS COMBINING BALANCE SHEET NON MAJOR PERMANENT FUNDS December 31, 2011 Cemetery Mausoleum Tricentennial Endowment Endowment Commission Total $ 419,040 $ 1,997 $ 5,704 .::;..$ __ 4;.;:2:..:,.6,-.7_4_1 $ 419,040 $ 1.997 $ 5,704 ,;:;.$ __ 4.;.;;;2;.;.6.:.;., 7..;,4~1 $ -$ -$ -$ ~-------.::;..--------~-------.::;..----- 419,040 1,997 5.704 426.741 $ 419,040 $ 1,997 $ 5. 704 ~$ ~~42;;;,;6;.....' 7_4_1 See independent auditor's report on the financial statements. 67 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 ':Ie:. v"" 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 Revenues 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 Original Final Charges for services Variance with Final Budget Positive [NegativeJ Community and economic development $ 84,511 $ 90,000 $ 90.000 $ [5,489) Interest income General interest Total revenues Expenditures Community Development Business Improvement District Total expenditures Excess [deficiencyJ of revenues over [underJ expenditures Unreserved fund balance, January 1 Unreserved fund balance, December 31 Reconciliation to GAAP Accounts receivable GAAP Fund Balance, December 31 $ 20 500 84,531 90,500 84,531 90.578 84,531 90,578 [78J 78 -$ -$ 51.169 51.169 See independent auditor's report on the financial statements 69 500 r480J 90.500 [5.969J 90.578 6.047 90,578 6.047 [78J 78 78 [78J -s: 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 13.1 $ -$ See Independent auditor's report on the financial statements 70 [234.146] 234,146 - Variance with Final Budget 'Positive [Negative] $ [13,750] [3,371J [17,121J 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 5> 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 [77.197] Other financing sources [uses] Transfer [out] [47.228J [30.000] Total other finanCing sources [uses] [47.228] [30.000] Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] [14.949] [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 Final 160,000 4.000 164,000 10.000 100.000 131,197 241.197 [77.197] [30.000] [30.000} [107.197] 107,197 - Variance with Final Budget Positive [Negative] 5> [5,061] [3,780] [8,841] [15,000] [4.399] 6.519 131 197 118.317 109,476 [17.228] [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 [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 170192 [10,192J 10.192 - Vanance with Final Budget Positive [Negative] $ [6,434] 24 [6.410J 16,462 16,462 10.052 [10.048] $ 4 Revenues Taxes 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 Original Final Variance with Final Budget Positive [Negativel Selective sales tax $ 317,297 $ 315,120 $ 315,120 $ 2.177 Interest income General interest Total revenues Expenditures Community Development Economic development Cash Reserve Total expenditures Excess [deficiency] of revenues over [under) expenditures Unreserved fund balance, January 1 Unreserved fund balance, December 31 Reconciliation to GAAP Current year encumbrances GAAP Fund Balance. December 31 S; 2.485 10,000 319,782 325,120 456,075 315,444 9.676 456.075 325 120 [136,293] 1.043.405 907,112 $ 50.000 957 112 See independent auditor's report on the financial statements. 73 10,000 [7,515J 325,120 [5,338] 315.444 [140,631] 9,676 9.676 325.120 [130,955] [136.293] 1,043.405 -SO 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 Totai expenditures 69,571 86.290 Excess [deficiency] of revenues over [under] 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 [20.290] 20.290 - Variance with Final Budget Positive [Negative] $ [33,797] [941J [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] [638,792] Other finanCing sources [uses] Transfe~ If"' 489.358 489,358 489,358 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] [149,434] 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 [Negative] $ 67,202 5,482 [911] [19,745] 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 Oriainal 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 2.984711 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 TOt81 revenues 4 768,443 4403,790 4403790 Expenditures Debt Service Pnnclpal 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 rl.279.332) [2.464,5691 [2.464,5691 Other finanCing sources [uses! Transfer In 2.026.973 1.800,000 1.800 000 Transfer [out] r83,4881 Total other finanCing sources [uses] 1.943.485 1,800 000 1 800000 Excess rdeflclency] of revenues and other sources over [under} expenditures and otner [uses] 664,153 [664.569J [664,569J Unreserved fund balance. January 1 571.873 664,569 664.569 Unreserved fund balance/GAAP fund balance December 31 1,236,026 $ -$ - Reconciliation to GAAP Taxes receivable 2.441,349 Deferred revenue r2,392,2451 GAAP Fund Balance, December 31 $ 1.285,130 See Independent auditor's report on the finanCial statements 76 Vanance with Final Budget Positive [Neaatlve] $ 127,738 15,583 [63,089J 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 Original Revenues Charges for services Health and sanitat'lon $ 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 Capita', Outlay 359.515 467.200 Cash Reserve 1,825,201 Total expenditures 2606.352 4851 066 Excess [defiCiency] of revenues over [under] expenditures 373,521 [2,189456J Clther finanCing sources [uses] Transfers [out} [48.089J Total other finanCing sources fuses] [48,089) Excess [defiCiency] of revenues and other sources over [underJ expenditures and other [uses] 325,432 [2 189,456] Unreserved fund balances, January 1 2,490,536 2,189,456 Pnor year canceiied 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 43~ ,371 467.200 1,825,201 4,851,066 [2.189.456) [2, 189,456J 2,189.456 $ - Variance with Final Budget Positive INegative] $ 387,710 [51,628] [17,819J 318,263 287,140 13.515 300655 [63.802J 74,975 11,173 107,685 1.825.201 2.244.714 2.562,977 [48,089] [48,089J 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 Onginal 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 lnterfund services provided General services 28,061 30,900 Water and wastewater 95,097 Totallnterfund services 123.158 30.900 Miscellaneous revenues General miscellaneous revenues 88 Water and wastewater 489,629 260.000 TOlal miscellaneous revenues 489,717 260.000 Total revenues 18,108,424 16.637,784 Expenditures Water and Wastewater Water 10,153.314 9.029002 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 20,188013 Excess [deficiency} of revenues over [underl expenditures 1.273.528 [3.550.229) Other financing sources [usesi Transfers lout] fl.005,352i r3.804,546} Total other financing sources [uses] 11 ,005.352J [3.804.546J Excess [defiCiency] of revenues and other sources over [under] expenditures and other [uses] 268,176 [7,354775J 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 6497,105 20.188,013 [3.550.2291 [3804.546j [3.804,546J [7,354,775] 9,699,890 $ 2,345,115 Variance with Final Budget Positive It:Jegativej $ 944,972 1.993 201,700 [2,839J 95,097 92.258 88 229,629 229,717 1.470640 [1,124,312J 79,351 [1,044,961) [2.099,027J 6497.105 3,353,117 4823757 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 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 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 2163.312 2.163.312 158,000 158.000 525,425 525,425 2.846.737 2.846,737 [526.352J [526.352J 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 interest 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 lotai other financing sources [uses; Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] Unreserved fund balances, January 1 Actual $ 636,202 36 1,562 48,618 50.180 686,418 760,384 15,724 776.108 [89.690J 47.228 47.228 [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 [122.953J [122,953J [122.953] 122,953 122.953 Variance with Final Budget Positive [Negative] $ [141.298J [1641 562 8.618 9.180 [132.282J [8,224J 276 173.493 165.545 33.263 47.228 4722E 80,491 (79,Ll911 Unreserved fund balances, December 31 $ 1.000 .,;",$====-.,;",$ ====-.;;,,$==.,,;,1=,0=0.;;.0 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 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 1 For the Year Ended December 31,2011 Budgeted Amounts Actual Onginal 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 [83,380] 2,208 4984f, 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 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 [deflclencyJ of revenues over [underJ expenditures Unreserved fund balance. January i Actual $ 1,937 229.452 1.444 232,833 334.210 334.210 [101.377J 621.629 Budgeted Amounts Original Final $ 2.500 $ 2,500 229.435 229.435 231.935 231.935 297.762 297.762 638.936 638.936 936,698 936.698 [704.763J [704.163) 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 _$ ____ ==-~$ ____ ==-;;;.$ =",;5;;;:;2;;;:;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 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 Health insurance Cash Reserve Total expenditures Excess [deficiency] of revenues over [under] expenditures Unreserved fund balance, January 1 Unreserved fund balance, December 31 Actual $ 4,904 6,304,144 52.285 6.361.333 5.947.148 5,947,148 414.185 1.501.522 <!' 1,915.707 '" Budgeted Amounts Original Final $ 5,000 $ 5.000 6,620,000 6,620.000 6.625.000 6.625.000 6.913.677 6,913.677 1,503.185 1.503.185 8416,862 8,416,862 [1.791.862] [1.791.862J 1 791.862 1.791.862 $ -$ - See independent auditor's report on the financial statements. 83 Variance with Final Budget Positive [Negative] $ [96] [315,856) 52.285 [263.667J 966.529 1,503.185 2469.714 2,206.047 [290.340) $ 1.915.707 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 Revenues Interest income General interest Interfund services provided General services Miscellaneous revenues General miscellaneous revenues Total revenues Expenditures Other Ce-ntral garagE: Capital Outlay Cash Reserve Total expenditures Excess [defiCiency] of revenues over [under] expenditures Other finanCing sources [uses] Transfers In Excess [defiCiency! of revenues and other flrlanclng sources over [under: expenditures and other financing [uses] Unreserved fund balance, January i Uflreserved fund balance, December 31 Actual $ 423 1,629,328 22,298 1,652.049 1.697.373 4.495 1.701,868 [49,819j 60,000 10 18', 89219 '" ;p 100,00e Budgeted Amounts Original Final $ 4.000 5) 4,000 1,490.000 1,485.942 4.000 138,058 1,498,000 1,628.000 1,454.727 1 716,068 250 161,091 1 616.068 1,716068 [; 18.068) [88.068J 30,000 [88,068; 188.068] 88.068 89.88S ~ ,... 1,824 -\]"; 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 r"'7 r.~ [' VJ S; 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 S; 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 [deficiencyJ of revenues over [underJ expenditures 68,162 [66,532J [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] [23.442J [184,778J 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 centrailzed 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 Manaaement Reserve Insurance Current assets: Cash and Investments $ 171,559 $ 649,238 5> 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 5, 649,238 5> 1,916,207 Liabilities Current liabilities (payable from current assets) Accounts payable 5; 7,351 S $ 500 Current portion of com pen sated absences payable Current portion of accrued claims payable 172,545 391 175 Total current liabilities (payable from current assets) 7,351 172,545 391,675 Noncurrent liabilities Compensated absences pavable Accruea claims payabl.o 149,245 lo\al noncurrent liabilities 149.245 lotaillabilities S 7,3::1 $ 321 790 $ 391,675 Net Assets Invested In capital assets, net of related debt S; S, s, Unrestricted 164208 327448 1 524,532 Total net assets S 164,20S 5, 327,448 S; 1,524 532 See Independent auditor's report on the finanCial statements 87 Total Internal Central Information Service Garage Systems Funds 5> 150,383 $ 201,820 5> 3,089,207 115,694 115,69.1 266,077 201,820 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 $ 41,820 $ 100,054 7,075 10,309 17,384 563,720 57458 52,129 681,158 30,500 44440 74940 149.245 30,500 4Ll440 224 185 s: 87,958 S, 96560 $ 905,343 5; 27,790 S, $ 27790 178 119 105,251 2,299,558 S; 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 230417 5.955.821 1.710.911 Depreciation 4,698 Total operating expenses 436,645 230417 5,955.821 1.715.609 Operating income [lossJ 114.361 478 400.608 [65,112J Other operating revenues [expensesJ Investment Income 1937 4904 423 Total other operating revenues [expensesJ 1.937 4.904 423 Nonoperating revenues [expenses] Galn/[Ioss] on disposal of fixed assets 1 129 Total nonoperating revenues [expenses] 1 12S' Income [lossJ before transfers 114.361 2415 405.512 [63.560J Transfers from [to} other funds Transfers In 60000 Total transfers 60.000 Change In net assets 114.361 2.415 405.512 [3.5601 l\Iet assets. January 1 49.847 325.033 1 119020 205887 Restatement 3.582 Net assets. January 1 restated 49.847 325.032 1119,020 209.469 Net assets Decembe: 31 S 16';.205 S 327 J,48 ~ 1 524 532 So 205.909 See Independent auditor's report on the finanCial statements. 88 Total Internal Information Service Sistems 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 8446 1.129 1.129 67.223 525.951 60.000 60.000 67,223 585.951 3802[: 1.737.8E 3582 38.028 1741.397 S 105 25 1 ~. 2.32734e 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 1103.314) 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 activities Transfers In Net Increase [decrease] In cash and cash eqUivalents 110,041 [101,377] 414,235 Cash and cash eqUivalents, January 'I 61.518 750.615 1.501.972 Cash and cash eqUivalents December 3', ~ 171.559 649,238 $ 1.916.207 See Independent auditor's report on the finanCial statements 89 Total Internal Central Information Service Garaoe 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 1.182 8445 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 In] operaling activities Workers' Risk Compensation Health Central Manaqement Reserve Insurance, Garaqe Total Internal Information Service Services Funds Operating Income [loss] $ 114,361 $ 478 $ 400.608 $ [65.112] $ 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 [aecrease]In accounts payable Increase [decrease] In accruea compensated absences Increase [decrease] in claims payable Net cash provided by [used Inj operating activities [4.320] $ 110.041 50 [103792J 8.673 $ [103.314) $ 409.331 See Independent auditor's report on the finanCial statemento, 90 4,698 4.698 6,646 6,646 9.296 9.006 14.032 2,355 939 3,294 [95119] $ [42.117J 3; 75986 $ 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 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 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 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. 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 $ 10316 $5103 $ [251.057) $ 70.921 $ 2.125 $783 $ 10.316 $ 5103 $ [251.057) $ 70.921 $ 2,125 $783 $ 10.316 $ 5.103 $ [251 057) $ 70921 $ 2,125 $ 783 $ 10.316 $ 5.103 $ [251,057) $ 70,921 $ 2.125 $ 783 See Independent auditor's report on the financial statements 92 Section 125 CltlzenshlQ Plan Totals $ 3.702 $ 336.063 $ 313300 $ 3.702 $ 336063 $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 Decem ber 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 5: 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 $ 31330e 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 Note Sale heretofore duly given, bids for the purchase of General Obligation Temporary Notes, Senes 2012-1, 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 determmed that the bid of Country Club Bank, Praine Village, Kansas, was the best bld for the Notes, a copy of which is attached hereto as Exhibit B. Thereupon, there was presented a Resolution entitled: A RESOLUTION AUTHORIZING AND DIRECTING THE ISSUANCE, SALE AND DELIVERY OF GENERAL OBLIGATION TEMPORARY NOTES, SERIES 2012-1, OF THE CITY OF SALINA, KANSAS; PROVIDING FOR THE LEVY AND COLLECTION OF AN ANNUAL TAX, IF NECESSARY, FOR THE PURPOSE OF PAYING THE PRINCIPAL OF AND INTEREST ON SAID NOTES AS THEY BECOME DUE; MAKING CERTAIN COVENANTS AND AGREEMENTS TO PROVIDE FOR THE PAYMENT AND SECURITY THEREOF; AND AUTHORIZING CERTAIN OTHER DOCUMENTS AND ACTIONS CONNECTED THEREWITH. Thereupon, Commissioner Crawford moved that said Resolution be adopted. The motion was seconded by Commlssioner 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 bemg 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 Resolution No. 12-6919 and was signed by the Mayor and attested by the Clerk. ************** 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. c- ~ (SEAL) (Signature Page to Excerpt of Minutes -2012-1 Notes) EXHIBITA BID TABULATION $1,485,000 CITY OF SALINA, KANSAS GENERAL OBLIGATION TEMPORARY NOTES A-I PARITY Result Screen Bid Results 1 of 1 https:/ Iwww.newissuehome.i-deal.comlParity/asp/main.asp?frame=co ... Salina $1,485,000 General Obligation Temporary Notes Series 2012-1 The following bids were submitted using PARlriID and displayed ranked by lowest NIC. Click on the name of each bidder to see the respective bids. Amount Awarded (M) Bidder Name NIC Bid Amount Awarded Totals OM Issue Size 1,485M Country Club Bank 0.607447 Commerce Bank 0.748936 1,485M 1,485M 2,970M *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 7/12/20123:36 PM EXHIBITB BID OF PURCHASER B-1 PARITY Bid Fonn https:/Iwww.newissuehome.i-deal.comlParity/asp/main.asp?frame=co ..• 10fl Country Club Bank· Prairie Village. KS'. Bid Salina $1,485,000 General Obligation Temporary Notes Serias 2012-1 AUlrT¥'" . " . . 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, all of which are made a part hereof. Bidder: Country Club Bank, Prairie Village, 1<8 Contact: Usa Roberts Title: SrVP Telephone:816-751-1420 Fax: 913-385-0105 7-'1-l~ 71912() 12 2:11 PM RESOLUTION NO. 12-6919 OF THE CITY OF SALINA, KANSAS ADOPTED JULY 9, 2012 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 RESOLUTION TABLE OF CONTENTS ARTICLE I DEFINITIONS Section 101. Definitions of Words and Terms ......................................... : ..................................... 2 ARTICLE II AUTHORIZATION AND DETAILS OF THE NOTES Section 201. Authorization of the Notes ........................................................................................ 8 Section 202. Description of the Notes ............................................................................................ 8 'Section 203. Designation of Paying Agent and Note Registrar ..................................................... 9 Section 204. Method and Place of Payment of the Notes .............................................................. 9 . Section 205. Payments Due on Saturdays, Sundays and Holidays .............................................. 10 Section 206. Registration, Transfer and Exchange of Notes ........................................................ 10 Section 207. Execution, Registration, Authentication and Delivery of Notes ............................. 11 Section 208. Mutilated, Lost, Stolen or Destroyed Notes ............................................................ 12 Section 209. Cancellation and Destruction of Notes Upon Payment. .......................................... 12 Section 210. Book-Entry Notes; Securities Depository ............................................................... 12 Section 211. Nonpresentment of Notes ........................................................................................ 13 Section 212. Preliminary and Final Official Statement.. .............................................................. 13 Section 213. Sale of the Notes ...................................................................................................... 14 ARTICLE III REDEMPTION OF NOTES Section 301. No Redemption of Notes ......................................................................................... 14 ARTICLE IV SECURITY FOR NOTES Section 401. Security for the Notes .............................................................................................. 14 Section 402. Levy and Collection of Annual Tax ........................................................................ 14 ARTICLE V ESTABLISHMENT OF FUNDS AND ACCOUNTS DEPOSIT AND APPLICATION OF NOTE PROCEEDS Section 501. Creation of Funds and Accounts ............................................................................. 15 Section 502. Deposit of Note Proceeds ........................................................................................ 15 Section 503. Application of Moneys in the Improvement Fund .................................................. 15 Section 504. Substitution of Improvements; Reallocation of Proceeds ....................................... 15 Section 505. Application of Moneys in Debt Service Account.. .................................................. 16 Section 506. Application of Moneys in the Rebate Fund ............................................................. 16 Section 507. Deposits and Investment of Moneys ....................................................................... 16 ARTICLE VI DEFAULT AND REMEDIES Section 601. Remedies ................................................................................................................. 17 Section 602. Limitation on Rights of Owners .............................................................................. 17 Section 603. Remedies Cumulative .............................................................................................. 17 ARTICLE VII DEFEASANCE Section 70 1. Defeasance ............................................................................................................... 18 ARTICLE VIII TAX COVENANTS Section 801. General Covenants .................................................................................................. 18 Section 802. Survival of Covenants ............................................................................................. 19 ARTICLE IX CONTINUING DISCLOSURE REQUIREMENTS Section 901. Disclosure Requirements ......................................................................................... 19 Section 902. Failure to Comply with Continuing Disclosure Requirements ............................... 19 ARTICLE X MISCELLANEOUS PROVISIONS Section 1001. Annual Audit. .......................................................................................................... 19 Section 1002. Amendments ............................................................................................................ 19 Section 1003. Notices, Consents and Other Instruments by Owners ............................................. 20 Section 1004. Notices ..................................................................................................................... 21 Section 1005. Electronic Transactions ........................................................................................... 21 Section 1006. Further Authority ..................................................................................................... 21 Section 1007. Severability .............................................................................................................. 21 Section 1008. Governing Law ........................................................................................................ 22 Section 1009. Effective Date .......................................................................................................... 22 [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] ii RESOLUTION NO. 12-6919 A RESOLUTION AUTHORIZING AND DIRECTING THE ISSUANCE, SALE AND DELIVERY OF GENERAL OBLIGATION TEMPORARY NOTES, SERIES 2012-1, OF THE CITY OF SALINA, KANSAS; PROVIDING FOR THE LEVY AND COLLECTION OF AN ANNUAL TAX, IF NECESSARY, FOR THE PURPOSE OF PAYING THE PRINCIPAL OF AND INTEREST ON SAID NOTES AS THEY BECOME DUE; MAKING CERTAIN COVENANTS AND AGREEMENTS TO PROVIDE FOR THE PAYMENT AND SECURITY THEREOF; AND AUTHORIZING CERTAIN OTHER DOCUMENTS AND ACTIONS CONNECTED THEREWITH. WHEREAS, the City (the "Issuer") is a municipal corporation, duly created, organized and existing under the Constitution and laws of the State; and WHEREAS, pursuant to the provisions of the laws of the State of Kansas applicable thereto, by proceedings duly had, the governing body of the Issuer has caused the following improvements (the "Improvements") to be made in the City, to-wit: Project Description East Magnolia Road Improvements ; and Ord.lRes. No. Res. 11-6812 Authority K.S.A. 12-685 et seq. Amount $ 4,500,000.00 WHEREAS, the governing body of the Issuer is authorized by law to issue general obligation bonds to pay a portion of the costs of the 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 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 Issue pursuant to the Act; and WHEREAS, the Issuer proposes to issue its temporary notes to pay a portion of the costs of the Improvements; and WHEREAS, the governing body of the Issuer has advertised the sale of the Notes and at a meeting held in the City on this date, awarded the sale of such Notes to the best bidder; 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 Notes in the principal amount of $1 ,485,000 to pay a portion of the costs of the Improvements. NOW, THEREFORE, BE IT RESOLVED BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS, AS FOLLOWS: 1 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 Note 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, specifically including K.S.A. 10-123, K.S.A. 10-620 et seq., and K.S.A. 12-685 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 Notes includes any Owner of the Notes and any other Person who, directly or indirectly has the investment power with respect to any of the Notes. "Bond and Interest Fund" means the Bond and Interest Fund of the Issuer for its general obligation bonds. "Bond Counsel" means the firm of Gilmore & Bell, P.C., or any other attorney or finn 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. "Business Day" means a day other than a Saturday, Sunday or holiday 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. "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 of the Issuer. "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. "Costs of Issuance" means all costs of issuing the Notes, 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, and all expenses incurred in connection with receiving ratings on the Notes. "Dated Date" means July 15, 2012. "Debt Service Account" means the Debt Service Account for General Obligation Temporary Notes, Series 2012-1 (within the Bond and Interest Fund) created pursuant to Section 501 hereof. 2 "Debt Service Requirements" means the aggregate principal payments and interest payments on the Notes 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, 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 Note 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 Issuer'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. 3 "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. "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 Notes 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 Notes 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 Notes or in this Note Resolution (other than the covenants relating to continuing disclosure requirements) 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 Notes 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. "Financeable Costs" means the amount of expenditure for an Improvement which has been duly authorized by action of the governing body of the Issuer to be financed by general obligation bonds, less: (a) the amount of any temporary notes or general obligation bonds of the Issuer which are currently Outstanding and available to pay such Financeable Costs; and (b) any amount of Finance able Costs which has been previously paid by the Issuer or by any eligible source of funds unless such amounts are entitled to be reimbursed to the Issuer under State or federal law. "Fiscal Year" means the twelve month period ending on December 31. "Funds and Accounts" means funds and accounts created by or referred to in Section 501 hereof. "Improvement Fund" means the Improvement Fund for General Obligation Temporary Notes, Series 2012-1 created pursuant to Section 501 hereof. "Improvements" means the improvements referred to in the preamble to this Note Resolution and any Substitute Improvements. "Independent Accountant" means an independent certified public accountant or firm of independent certified public accountants at the time employed by the Issuer for the purpose of carrying out the duties imposed on the Independent Accountant by this Note Resolution. "Interest Payment Date(s)" means the Maturity of the Note. "Issue Date" means the date when the Issuer delivers the Notes to the Purchaser in exchange for the Purchase Price. -"Issuer" means the City and any successors or assigns. 4 "Maturity" when used with respect to any Note means the date on which the principal of such Note 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. "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. "Note Payment Date" means any date on which principal of or interest on any Note is payable. "Note Register" means the books for the registration, transfer and exchange of Notes kept at the office of the Note Registrar. "Note Registrar" means the State Treasurer and its successors and assigns. "Note Resolution" means this resolution relating to the Notes. "Notes" means the General Obligation Temporary Notes, Series 2012-1, authorized and issued by the Issuer pursuant to this Note Resolution. "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: Country Club Bank 9400 Mission Road Prairie Village, Kansas 66206 Fax: (913) 385-0105 5 (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, Inc. 55 Water Street, 38th Floor New York, New York 10004 "Notice Representative" means: (a) With respect to the Issuer, the Clerk. (b) With respect to the Note 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. "Official Statement" means Issuer's Official Statement relating to the Notes. "Outstanding" means, when used with reference to the Notes, as of a particular date of determination, all Notes theretofore authenticated and delivered, except the following Notes: (a) Notes theretofore canceled by the Paying Agent or delivered to the Paying Agent for cancellation; (b) Notes deemed to be paid in accordance with the provisions of Section 701 hereof; and (c) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered hereunder. "Owner" when used with respect to any Note means the Person in whose name such Note is registered on the Note Register. Whenever consent of the Owners is required pursuant to the terms of this Note Resolution, and the Owner of the Notes, as set forth on the Note Register, is Cede & Co., the term Owner shall be deemed to be the Beneficial Owner ofthe Notes. "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 6 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 units of a money market fund or trust, the portfolio of which is comprised entirely of securities described in (c) or (f); (j) 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 defined 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 Notes plus accrued interest to the date of delivery, plus a bid premium of $6,088.50, less an underwriting discount of $3,281.85. "Purchaser" means Country Club Bank, Prairie Village, Kansas the original purchaser of the Notes, and any successors and assigns. "Rating Agency" means any company, agency or entity that provides financial ratings for the Notes. "Rebate Fund" means the Rebate Fund for General Obligation Temporary Notes, Series 2012-1 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 such Interest Payment Date. "Redemption Date" when used with respect to any Note to be redeemed means the date fixed for the redemption of such Note pursuant to the terms of this Note Resolution. "Redemption Price" when used with respect to any Note to be redeemed means the price at which such Note is to be redeemed pursuant to the terms of this Note Resolution, including the applicable redemption premium, if any, but excluding installments of interest whose Stated Maturity is on or before the Redemption Date. "Replacement Notes" means Notes issued to the Beneficial Owners of the Notes in accordance with Section 211 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. 7 "Special Record Date" means the date fixed by the Paying Agent pursuant to Section 205 hereof for the payment of Defaulted mterest. "Standard & Poor's" means Standard & Poor's Ratings Services, a Division of the McGraw- Hill Companies, mc., 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 Note or any installment of interest thereon means the date specified in such Note and this Note Resolution as the fixed date on which the principal of such Note or such installment of interest is due and payable. "Substitute Improvements" means the substitute or additional improvements of the Issuer described in Section 504(a) hereof. "Treasurer" means the duly appointed and/or elected Treasurer 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 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. ARTICLE II AUTHORIZATION AND DETAILS OF THE NOTES Section 201. Authorization of the Notes. There shall be issued and hereby are authorized and directed to be issued the General Obligation Temporary Notes, Series 2012-1, of the Issuer in the principal amount of $1,485,000, for the purpose of providing funds to: (a) pay a portion of the costs of the Improvements; and (b) pay Costs of Issuance. Section 202. Description of the Notes. The Notes shall consist of fully registered notes in Authorized Denominations, and shall be numbered in such manner as the Note Registrar shall determine. All of the Notes shall be dated as of the Dated Date, shall become due in the amounts, on the Stated Maturity, without option of prior redemption and payment and shall bear interest at the rates per annum as follows: 8 Stated Maturity August 1 2013 Principal Amount $1,485,000 Annual Rate of Interest 1.000% The Notes 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 205 hereof. Each of the Notes, 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 Note Registrar. The State Treasurer is hereby designated as the Paying Agent for the payment of principal of and interest on the Note and Note Registrar with respect to the registration, transfer and exchange of Notes. The Mayor of the Issuer is hereby authorized and empowered to execute on behalf of the Issuer an agreement with the Note Registrar and Paying Agent for the Notes. The Issuer will at all times maintain a Paying Agent and Note 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 Note Registrar by (a) filing with the Paying Agent or Note Registrar then performing such function a certified copy of the proceedings giving notice of the termination of such Paying Agent or Note Registrar and appointing a successor, and (b) causing notice of appointment of the successor Paying Agent and Note Registrar to be given by first class mail to each Owner. 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 hereunder shall at all times meet the requirements ofK.S.A. H)-501 et seq. and K.S.A. 10-620 et seq., respectively. Section 204. Method and Place of Payment of the Notes. The principal of, or Redemption Price, if any, 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 public and private debts. The principal or Redemption Price of and interest on each Note 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 Paying Agent. Such amounts 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 Paying Agent to the address of such Owner shown on the Note Register or at such other address as is furnished to the Paying Agent in writing by such Owner; or (b) in the case of a 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 provisions of this Section, 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 9 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 in this paragraph. The Issuer shall notify the 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 45 days after receipt of such notice by the Paying Agent) and shall deposit with the Paying Agent at the time of such n()tice 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 therefor to be mailed, by first class mail, postage prepaid, to each Owner of a Note entitled to such notice at the address of such Owner as it appears on the Note 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 Notes and at least annually shall forward a copy or summary of such records to the Issuer. Section 205. 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 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. Section 206. Registration, Transfer and Exchange of Notes. The Issuer covenants that, as long as any ofthe Notes remain Outstanding, it will cause the Note Register to be kept at the office of the Note Registrar as herein provided. 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 provided in this Section. 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. 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 this Note Resolution. The Issuer shall pay the fees and expenses of the Note Registrar for the registration, transfer and exchange of Notes provided for by this Note Resolution and the cost of 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, are the responsibility of the Owners of the Notes. 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 Section 3406 of the Code, such amount may be deducted by the Paying Agent from amounts otherwise payable to such Owner hereunder or under the Notes. 10 The Issuer and the Note Registrar shall not be required 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 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 205 hereof. The Issuer and the Paying Agent may deem and treat the Person in whose name any Note is registered on the Note Register as the absolute Owner of such Note, whether such Note 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 Note 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 Note 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. At reasonable times and under reasonable regulations established by the Note Registrar, the Note Register may be inspected and copied by the Owners (or a designated representative thereof) of 10% or more in principal amount of the Notes then Outstanding or any designated representative of such Owners whose authority is evidenced to the satisfaction of the Note Registrar. Section 207. Execution, Registration, Authentication and Delivery of Notes. Each of the Notes, including any Notes issued in exchange or as substitutions for the Notes 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 Notes in the manner herein specified, and to cause the Notes 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 Notes 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. The Notes shall be countersigned by the manual or facsimile signature of the Clerk and the seal of the Issuer shall be affixed or imprinted adjacent thereto following registration of the Notes by the Treasurer of the State of Kansas. In case any officer whose signature appears on any Notes ceases to be such officer before the delivery of such Notes, such signature shall nevertheless be valid and sufficient for all purposes, as if such person had remained in office until delivery. Any Note may be signed by such persons who at the actual time of the execution of such Note are the proper officers to sign such Note although at the date of such Note such persons may not have been such officers. The Mayor and Clerk are hereby authorized and directed to prepare and execute the Notes as herein specified, and when duly executed, to deliver the Notes to the Note Registrar for authentication. The Notes 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 Note Registrar, but it shall not be necessary that the same officer or employee sign the certificate of authentication on all of the Notes that may be issued hereunder at anyone time. No Note shall be entitled to any security or benefit under this Note Resolution or be valid or obligatory for any purpose unless and until such certificate of authentication has been duly executed by the Note Registrar. Such executed certificate of authentication upon any Note shall be conclusive evidence that such Note has been duly authenticated and delivered under this Note Resolution. Upon authentication, the Note Registrar shall deliver the Notes to the Purchaser upon instructions of the Issuer or its representative. 11 Section 208. 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 Issuer and the Note Registrar such security or indemnity as may be required by each of them, then, in the absence of notice to the Issuer or the Note Registrar that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and, upon the Issuer'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 Issuer, in its discretion, may pay such Note instead of issuing a new Note. Upon the issuance of any new Note under this Section, the Issuer 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 Paying Agent) connected therewith. Every new Note 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 Note Resolution equally and ratably with all other Outstanding Notes. Section 209. Cancellation and Destruction of Notes Upon Payment. All Notes 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 Notes so cancelled and destroyed and shall file an executed counterpart of such certificate with the Issuer. Section 210. Book-Entry Notes; Securities Depository. The Issuer and Paying Agent have entered into a DTC Representation Letter with DTC. 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 as provided in this Section. 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 paragraph. The Issuer may decide, subject to the requirements of the 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 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 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 interests 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 12 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 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 Issuer, 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 Issuer, the Note Registrar or Owners are unable to locate a qualified successor of the Securities Depository in accordance with the followmg paragraph, 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 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 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 Notes to the successor Securities Depository in appropriate denominations and form as provided herein. Section 211. 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 Paying Agent all liability of the Issuer 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 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 Paying Agent shall repay, without liability for interest thereon, to the Issuer 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 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 13 to confonn to and describe the transaction. The Mayor or chief fmancial officer of the Issuer are hereby authorized to execute the final Official Statement as so supplemented, amended and completed, and the use and public distribution of the final Official Statement by the Purchaser in connection with the reoffering of the Notes 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 Notes sufficient copies of the final Official Statement to enable the Purchaser to comply with the requirements of Rule 1Sc2-12(b)(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 Notes. The sale of the Notes to the Purchaser is hereby ratified and confinned. The Mayor and Clerk are hereby authorized to execute the official bid fonn submitted by the Purchaser. Delivery of the Notes shall be made to the Purchaser on the Issue Date (which shall be as soon as practicable after the adoption of this Note Resolution), upon payment of the Purchase Price. ARTICLE III REDEMPTION OF NOTES Section 301. No Redemption of Notes. The Notes shall not be subject to optional redemption and payment prior to their Stated Maturity. ARTICLE IV SECURITY FOR NOTES Section 401. Security for the Notes. The Notes shall be general obligations of the Issuer payable as to both principal and interest from 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 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 Notes as the same become due. Section 402. Levy and Collection of Annual Tax. The governing body of the Issuer shall annually make provision for the payment of principal of, premium, if any, and interest on the Notes as the same become due, if necessary, by levying and collecting the necessary taxes upon all of the taxable tangible property within the Issuer in the manner provided by law. The taxes referred to above shall be extended upon the tax rolls 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 deposited in the Debt Service Account and shall be used solely for the payment of the principal of and interest on the Notes as and when the same become due, and the fees and expenses of the Paying Agent. If at any time said taxes are not collected in time to pay the principal of or interest on the Notes when due, the Treasurer is hereby authorized and directed to pay said principal or interest out of the 14 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 NOTE PROCEEDS Section 501. Creation of Funds and Accounts. Simultaneously with the issuance of the Notes, there shall be created within the Treasury of the Issuer the following funds and accounts: ( a) Improvement Fund for General Obligation Temporary Notes, Series 2012-1 ; (b) Debt Service Account for General Obligation Temporary Notes, Series 2012-1; and (c) Rebate Fund for General Obligation Temporary Notes, Series 2012-1. The Funds and Accounts established herein shall be administered in accordance with the provisions ofthis Note Resolution so long as the Notes are Outstanding. Section 502. Deposit of Note Proceeds. The net proceeds received from the sale of the Notes shall be deposited simultaneously with the delivery of the Notes as follows: (a) All accrued interest received from the sale of the Notes shall be deposited in the Debt Service Account. (b) The remaining balance of the proceeds derived from the sale of the Notes shall be deposited in the Improvement Fund. Section 503. Application of Moneys in the Improvement Fund. Moneys in the Improvement Fund shall be used for the sole purpose of: (a) paying the costs of the Improvements, in accordance with the plans and specifications therefor approved by the governing body of the Issuer and on file in the office of the Clerk, including any alterations in or amendments to said plans and specifications deemed advisable and approved by the governing body of the Issuer; (b) paying interest on the Notes during construction of the Improvements; (c) paying Costs of Issuance; and (d) transferring any amounts to the Rebate Fund required by Section 506 hereof. Section 504. Substitution of Improvements; Reallocation of Proceeds. (a) The Issuer may elect for any reason to substitute or add other public improvements to be financed with proceeds of the Notes 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 Issuer in accordance with the laws of the State; (2) a resolution authorizing the use of the proceeds of the Notes to pay the Financeable Costs of the Substitute Improvement has been duly adopted by the governing body of the Issuer pursuant to this Section, (3) the Attorney General of the State has approved the amendment made by such resolution to the transcript of proceedings for the Notes to include the Substitute Improvements; and (4) the use of the proceeds of the Notes to pay the Financeable Cost of the Substitute Improvement will not adversely affect the tax-exempt status of the Notes under State or federal law. 15 (b) The Issuer may reallocate expenditure of Note proceeds among all Improvements financed by the Notes; provided the following conditions are met: (1) the reallocation is approved by the governing body of the Issuer; (2) the reallocation shall not cause the proceeds of the Notes allocated to any Improvement to exceed the Financeable Costs of the Improvement; and (3) the reallocation will not adversely affect the tax-exempt status of the Notes under State or federal law. Section 505. 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 Notes as and when the same become due and the usual and customary fees and expenses of the Note 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 Notes and the fees and expenses of the Note Registrar and Paying Agent as and when the same become due, and to forward such sums to the Paying Agent, if other than the Issuer, 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 Note Registrar and Paying Agent will become due. If, through the lapse of time or otherwise, the Owners of Notes are no longer entitled to enforce payment of the Notes 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 Note Resolution and shall be held by the Paying Agent for the benefit of the Owners of the Notes entitled to payment from such moneys. Any moneys or investments remaining in the Debt Service Account after the retirement of the indebtedness for which the Notes were issued shall be transferred and paid into the Bond and Interest Fund. Section 506. 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 defmed in the Federal Tax Certificate), for payment to the United Statesof America, and neither the Issuer nor the Owner of any Notes 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) of the Code 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 Notes 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 Note 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 Notes. Section 507. 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 16 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 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 may be invested in accordance with this Note 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; provided that, during the period of construction of the Improvements, earnings on the investment of such funds may be credited to the Debt Service Account. ARTICLE VI DEFAULT AND REMEDIES Section 601. Remedies. The provisions of the Note Resolution, including the covenants and agreements herein contained, shall constitute a contract between the Issuer and the Owners of the Notes. If an Event of Default occurs and shall be continuing, the Owner or Owners of not less than 10% in principal amount of the Notes at the time Outstanding shall have the right for the equal benefit and protection of all Owners of Notes 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 Note 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 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 ofthe Notes. Section 602. Limitation on Rights of Owners. The covenants and agreements of the Issuer contained herein and in the Notes shall be for the equal benefit, protection, and security of the Owners of any or all of the Notes, all of which Notes shall be of equal rank and without preference or priority of one Note over any other Note in the application of the funds herein pledged to the payment of the principal of and the interest on the Notes, or otherwise, except as to rate of interest, date of maturity and right of prior redemption as provided in this Note 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 Notes. 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 17 conferred herein. No waiver of any default or breach of duty or contract by the Owner of any Note 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 Notes by this Note 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 Notes 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 Notes, redemption premium, if any, or scheduled interest payments thereon have been paid and discharged, then the requirements contained in this Note Resolution and the pledge of the Issuer's faith and credit hereunder and all other rights granted hereby shall terminate with respect to the Notes or scheduled interest payments thereon so paid and discharged. Notes, redemption premium, if any, or scheduled interest payments thereon shall be deemed to have been paid and discharged within the meaning of this Note 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 Notes 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 Notes 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 the tender of such payments. 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 Notes, 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 Notes, 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 Note 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 Notes; and (b) all provisions and requirements of the Federal Tax Certificate. The Mayor, Finance Director 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 18 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 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 Notes pUrsuant to Article VII hereof or any other provision of this Note 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, 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. 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 of the 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, and a duplicate copy of the audit shall be mailed to the Purchaser. 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 Notes, 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 l;>ody 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 Note 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 Notes or of this Note 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 Notes then Outstanding, such consent to be evidenced by an instrument or 19 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 Note; (b) effect a reduction in the amount which the Issuer is required to pay as principal of or interest on any Note; (c) permit preference or priority of any Note over any other Note; or (d) reduce the percentage in principal amount of Notes required for the written consent to any modification or alteration of the provisions of this Note Resolution. Any provision of the Notes or of this Note 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 Notes at the time Outstanding. Without notice to or the consent of any Owners, the Issuer may amend or supplement this Note 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 more precisely identify the Improvements, to reallocate proceeds of the Notes among Improvements, to provide for Substitute Improvements, to conform this Note Resolution to the Code or future 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 Notes or of this Note 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 Note Resolution and shall be deemed to be a part of this Note Resolution. A certified copy of every such amendatory or supplemental resolution, if any, and a certified copy of this Note 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 Note or a prospective purchaser or owner of any Note authorized by this Note 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 Note 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 Notes then Outstanding. It shall not be necessary to note on any of the Outstanding Notes any reference to such amendment or modification. The Issuer shall furnish to the Paying Agent a copy of any amendment to the Notes or this Note Resolution which affects the duties or obligations of the Paying Agent under this Note 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 Notes, if made in the following manner, shall be 20 sufficient for any of the purposes of this Note 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 Notes, the amount or amounts, numbers and other identification of Notes, and the date of holding the same shall be proved by the Note Register. In determining whether the Owners of the requisite principal· amount of Notes Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under this Note Resolution, Notes owned by the Issuer shall be disregarded and deemed not to be Outstanding under this Note 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 Notes which the Owners know to be so owned shall be so disregarded. Notwithstanding the foregoing, Notes 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 Notes and that the pledgee is not the Issuer. Section 1004. Notices. Any notice, request, complaint, demand or other communication required or desired to be given or filed under this Note 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 Notes 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 Note 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 Note 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 Note Resolution. 21 Section 1008. Governing Law. This Note Resolution shall be governed exclusively by and construed in accordance with the applicable laws of the State. Section 1009. Effective Date. This Note Resolution shall take effect and be in full force from and after its passage by the governing body of the Issuer. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 22 ADOPTED by the governing body ofthe Issuer on July 9, 2012. (SEAL) ATTEST: Clerk [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] (Signature Page to Note Resolution) REGISTERED NUMBER EXHmITA (FORM OF NOTES) 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. UNITED STATES OF AMERICA STATE OF KANSAS COUNTY OF SALINE CITY OF SALINA GENERAL OBLIGATION TEMPORARY NOTE SERIES 2012-1 Interest Rate: Maturity Date: REGISTERED OWNER: PRINCIPAL AMOUNT: Dated Date: July 15, 2012 CUSIP: KNOW ALL PERSONS BY THESE PRESENTS: 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, 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 at maturity until the Principal Amount has been paid. Method and Place of Payment. The principal or redemption price and interest thereon of this Note shall be paid at maturity or upon earlier redemption to the person in whose name this Note is registered at the maturity or redemption date thereof, upon presentation and surrender of this Note at the principal office of the Treasurer of the State of Kansas, Topeka, Kansas (the "Paying Agent" and "Note Registrar"). Such amounts shall be payable (a) by check or draft mailed by the Paying Agent to the A-I address of such Registered Owner shown on the Note 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 a payment to Cede & Co. by electronic transfer to such Owner upon written notice given to the Note 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 Notes 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 Note Resolution. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the hereinafter defined Note Resolution. Authorization of Notes. This Note is one of an authorized series of Notes of the Issuer designated "General Obligation Temporary Notes, Series 2012-1," aggregating the principal amount of $1,485,000 (the "Notes") issued for the purposes set forth in the Resolution of the Issuer authorizing the issuance of the Notes (the "Note Resolution"). The Notes 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. 10-123, and K.S.A. 12-685 et seq., as amended, and all other provisions of the laws of the State of Kansas applicable thereto. General Obligations. The Notes constitute 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, 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 Note and the issue of which it is a part as the same respectively become due. Redemption Prior to Maturity. The Notes are not subject to redemption prior to maturity. Book-Entry System. The Notes are being issued by means of a book-entry system with no physical distribution of note certificates to be made except as provided in the Note Resolution. One Note certificate with respect to each date on which the Notes are stated to mature or with respect to each form of Notes, 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 Notes by the Securities Depository's participants, beneficial ownership of the Notes 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 Note Registrar will recognize the Securities Depository nominee, while the Registered Owner of this Note, as the owner of this Note for all purposes, including (i) payments of principal of, and redemption premium, if any, and interest on, this Note, (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 Notes by participants of the Securities Depository will be the responsibility of such participants and other nominees of such beneficial owners. The Issuer and the Note 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 Note, notwithstanding the provision hereinabove contained, payments of principal of, redemption premium, if any, and interest on this Note shall be made A-2 in accordance with existing arrangements among the Issuer, the Note Registrar and the Securities Depository. Transfer and Exchange. EXCEPT AS OTHERWISE PROVIDED IN THE NOTE RESOLUTION, THIS GLOBAL NOTE 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 Note may be transferred or exchanged, as provided in the Note Resolution, only on the Note Register kept for that purpose at the principal office of the Note Registrar, upon surrender of this Note together with a written instrument of transfer or authorization for exchange satisfactory to the Note Registrar duly executed by the Registered Owner or the Registered Owner's duly authorized agent, and thereupon a new Note or Notes 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 Note 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 Notes and the cost of a reasonable supply of note blanks. The Issuer and the Paying Agent may deem and treat the person in whose name this Note is registered on the Note 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 Notes are issued in fully registered form in Authorized Denominations. Authentication. This Note shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the hereinafter defined Note Resolution until the Certificate of Authentication and Registration hereon shall have been lawfully executed by the Note 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 Note 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 notes, does not exceed any constitutional or statutory limitation. IN WITNESS WHEREOF, the Issuer has caused this Note 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: ________ ~(m==an=u=a=l~o~r=fa=c=s=im==il~~~ ____ __ Mayor ATTEST: By: ________ ~(m==an=u=a=l~o=r~fa=c=s=im==il~e)~ ____ __ Clerk This General Obligation Temporary Note shall not be negotiable unless and until countersigned below following registration by the Treasurer of the State of Kansas. (Facsimile Seal) (manual or facsimile) Clerk A-3 CERTIFICATE OF AUTHENTICATION AND REGISTRATION This Note is one of a series of General Obligation Temporary Notes, Series 2012-1, of the City of Salina, Kansas, described in the within-mentioned Note Resolution. Registration Date __________ _ Office of the State Treasurer, Topeka, Kansas, as Note Registrar and Paying Agent By ____________ __ Registration Number: ________ _ 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 Note has been duly registered in my office according to law as of July 15, 2012. WITNESS my hand and official seal. (Facsimile Seal) (facsimile) 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 Note has been filed in the office of the State Treasurer, and that this Note was registered in such office according to law on ___________ _ WITNESS my hand and official seal. (Seal) By: ________________________ __ Treasurer of the State of Kansas A-4 NOTE ASSIGNMENT FOR VALUE RECEIVED, the undersigned do(es) hereby sell, assign and transfer to (Name and Address) (Social Security or Taxpayer Identification No.) the Note to which this assignment is affixed in the outstanding principal amount of $ , standing in the name of the undersigned on the books of the Note Registrar. The undersigned do(es) hereby irrevocably constitute and appoint as agent to transfer said Note on the books of said Note 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 Notes: GILMORE & BELL, P.e. Attorneys at Law 2405 Grand Boulevard Suite 1100 Kansas City, Missouri 6;4108 (PRINTED LEGAL OPINION) A-5 TRANSCRIPT CERTIFICATE $1,485,000 CITY OF SALINA, KANSAS GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 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 notes (the "Notes"); 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 defmed Note Resolution authorizing the Notes. 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 Notes 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 ofthe 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 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 Lieu Ann Elsey Clerk · The following named persons were the duly qualified and acting officer of the Issuer on February 25,2002 and March 28,2011: Name Title Term of Office Aaron G. Peck Mayor April 19, 2010 to April 18, 2011 Kristin Seaton Mayor April 16, 2001 to April 14, 2003 Norman Jennings Commissioner April 13, 2009 to April 19, 2012 John K. Vanier II Commissioner January 26,2011 to April 18, 2011 Luci Larson Commissioner April 16, 2007 to April 18, 2011 Alan Jilka Commissioner April 16, 2001 to April, 2009 Deborah Divine Commissioner April 16,2001 to April 16,2007 Monte Shadwick Commissioner April 16,2001 to April 18,2005 Don Heath Commissioner January 14, 2002 to April 14, 2003 Kristen Seaton Commissioner April 19, 1999 to April 14, 2003 7. Execution of Notes. The Notes have been executed with manual or facsimile signatures; and the manual or facsimile signatures appelli-ing on the face of the Notes are manual or facsimiles of the true and genuine signatures of the Mayor and Clerk of the Issuer. 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 Notes and on the reverse side of each of the Notes at the place where the Clerk has executed by facsimile signature the Certificate of Registration; and each Notes 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 note included in the Transcript is in the form adopted by the governing body of the Issuer for the Notes. 8. Authorization of Notes. The Notes are being issued pursuant to Resolution No. 12-6919 (the "Note Resolution") of the Issuer pursuant to K.S.A. 10-123 for the purpose of paying a portion of the costs of certain street improvements (the "Improvements") authorized by the governing body of the Issuer pursuant to K.S.A. 12-685 et seq., as amended, and all other applicable provisions of the laws of the State of Kansas. The total principal amount of the Notes does not exceed the cost of the Improvements for which the Notes are issued. The interest rates on the Notes on the date of the sale of the Notes were within the maximum legal limit for interest rates under K.S.A. 10-1009, as amended. 9. Indebtedness. The currently outstanding applicable indebtedness of the Issuer, including the Notes, does not exceed any applicable constitutional or statutory limitations. A schedule of general obligation indebtedness 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: 2 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 Notes shown to be authorized in the Transcript; (e) the validity of the Notes, 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 Notes. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 3 WITNESS our true and genuine manual signatures and the seal of th Issuer. (SEAL) (Signature page to Transcript Certificate -Notes) 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 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. Temporary Notes: Temporary notes represent general obligation indebtedness payable ultllnately from the CIty's abihty to levy unlimited taxes upon all taxable tangible property withm Its territorial limits. The City customarily redeems temporary notes with proceeds from the sale of long-term general obligation bonds or other available funds. a) 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 outstandmg ($3,400,000) to be redeemed with proceeds from the sale of the Series 2012-A Bonds and available cash from the City. CERTIFICATE OF MANVAL SIGNATURE OF THE MAYOR OF THE CITY OF SALINA, KANSAS IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF KANSAS STATE OF KANSAS ) ) SS. COUNTY OF SALINE) I, the undersigned, Norman Jennings, being duly sworn on oath certify that I am the duly qualified Mayor of the City of Salina, Kansas, and that the signature appearing below is my signature and I file herewith this certificate pursuant to K.S.A. 75-4001 to 75-4007, inclusive. Subscribed and sworn to before me as of July 9,2012. A • LIEU ANN ELSEY ~ Notary Publi -State of Kansas My Appt Expires Notary Public in and for said County and State (SEAL) L-{ -/(p -13 My commission expires: _______ _ RECEIVED JUL 1 3 2012 KRIS W KOBACH SECRETARY OF STATE rNT1iE OFFICE OF1HE$E~Y OF~EOF'I'lmSTAl'E UFKANSAS STATE OF KANSAS COu:N'l'Y OF SA.Ll:rm SS. I,. the undersigned, Li<m.Aml Elsey, being duly swom, on oath sta,te that I.am the duly qualified City Clerk of the City ef Sa1.irl.:4 Kansas. and Ih.erehy ce:rtif.Y that the signature appeating below is fue. true _ . and 'genuine ~ signature of the undersigned, and r :file Mr'ewifu this certificate prusuant to the provisiGllSofK.S.A. 15-4001 to 75-4007 .. iliolusivc. . Subs~ed and sworn to befor~ m(;~ 2~~y. o£April. 20Q.4.. . . ~"""O¢'i -R E C<t:rIFWIfiD':' :AP~ t 'I ~ REGISTERED NUMBER 1 REGISTERED $1,485,000 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 t Ce e & Co. or to such other entity as is requested by an authorized repres tati 0 DTC), ANY TRANSFER, PLEDGE OR OTHER USE HERE R v: UE OR OTHERWISE BY OR TO ANY PERSON IS WRO the registered owner hereof, Cede & Co., has an interest he ein. Interest Rate: 1.00% Maturity (\. Date: August 1, 2013 ~ REGISTERED OWNER: CEDE & PRINCIPAL AMOUNT: Saline, State of Kansas \. D EIGHTY-FIVE CUSIP: 7947432L7 Met&"od a d Place ay ent. The principal or redemption price and interest thereon of this Note shall be~aid at maturi up n earlier redemption to the person in whose name this Note is registered at the aturi 0 red . n date thereof, upon presentation and'surrender of this Note at the principal office of t e T rer f the State of Kansas, Topeka, Kansas (the "Paying Agent" and "Note Registrar"). Such aunts shal be payable (a) by check or draft mailed by the Paying Agent to the address of such Regist ed Ow r shown on the Note Register or at such other address as is furnished to the Paying Agent in Writl such Registered Owner; or, (b) in'the case ofa payment to Cede & Co. by electronic transfer to such Owner upon written notice given to the Note 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 Notes shall be pa)'able in any coin or currency that, on the respecfive 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 Note Resolution. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the hereinafter defined Note Resolution. Authorization of Notes. This Note is one of an authorized SIS of Notes of the Issuer designated "General Obligation Temporary Notes, Series 2012-1," aggreg ting the principal amount of $1,485,000 (the "Notes") issued for the purposes set forth in the Resol 'on th Issuer authorizing the issuance of the Notes (the "Note Resolution"). The Notes are iss d b aut ority of and in full compliance with the provisions, restrictions and limitations of the stitutio dis of the State of Kansas, including K.S.A. 10-123, and K.S.A. 12-685 et seq., as , and all laws of the State of Kansas applicable thereto. Transfer and Exchange. EXCEPT AS QTHERWISE PROVIDED IN THE NOTE RESOLUTION, THIS GLOBAL NOTE 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 Note may be transferred or exchanged, as provided in the Note -2- Resolution, only on the Note Register kept for that ptirpose at the principal office of the Note Registrar, upon surrender of this Note together with a written instrument of transfer or authorization for exchange satisfactory to the Note Registrar duly executed by the Registered Owner or the Registered Owner's duly authorized agent, and thereupon a new Note or Notes 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 Note Resolution and upon payment of the charges therein prescribed. The Issuer shall pay all costs incurred in connection with the issuance, payment and initial istration of the Notes and the cost of a reasonable supply of note blanks. The Issuer and the Paying gen may deem and treat the person in whose name this Note is registered on the Note Register as tea olu owner hereof for the purpose of receiving payment of, or on account of, the principal or re em io due hereon and for all other purposes. The Notes are issued in ly regi Denominations. Authentication. This Note shall not be valid or beco e oblig ory to any security or benefit under the hereinafter defined ote Authentication and Registration hereon shall have been la be entitled ificate of e executed by the manual or 1 ile ignature of its Clerk, and its seal By: porary Note shall not be negotiable unless and until countersigned e T asurer of the State of Kansas. ~ . Clerk ~ -3- CERTIFICATE OF AUTHENTICATION AND REGISTRATION This Note is one of a series of General Obligation Temporary Notes, Series 2012-1, of the City of Salina, Kansas, described in the within-mentioned Note Resolution. Registration Date __________ _ Office of the State Treasur Topeka, Kansas, as Note Registrar and ayl By ______ -+ ____ ~~~~--__ Registration Number: 0322-085-071512-427 CERTIFIC STATE OF KANSAS ) SS. Clerk (Seal) Treasurer of the State of Kansas -4- NOTE ASSIGNMENT FOR VALUE RECENED, the undersigned do(es) hereby sell, assign and transfer to (Name and Address) Dated ________ _ -5- 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 Notes: Governing Body City of Salina, Kansas Country Club Bank Prairie Village, Kansas Re: GILMORE & BELL, P.C. Attorneys at Law 2405 Grand Boulevard Suite 1100 Kansas City, Missouri 64108 2. he -ot6 a e pa able as to both principal and interest from general obligation bonds of the Issuer aM, i ot so pai om d valorem taxes which may be levied without limitation as to rate or amount upon \11 the taxable t ·ble operty, real and personal, within the territorial limits of the Issuer. The Issuer is req1!ired ~ to ·n e in its annual tax levy the principal and interest coming due on the Notes to the extenitli'at ~ssa funds are not provided from other sources. 3. The i(er~st 0 he Notes (including any original issue discount properly allocable to an owner ofa Note) is: ~ ed 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 altern~tive minimum tax imposed on certain corporations. The opinions 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 -6- Notes in order to preserve the exclusion of the interest on the Notes 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 Notes to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Notes. The Notes 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 of Section 265(b)(5) ofthe Code), a deduction is allowed for 80 percent of that portion of such financial institution's interest expense alloc e to interest on the Notes. We express no opinion regarding other federal tax consequences arising wit res ect to the Notes. 4. The interest on the Notes is exempt from income taxa· n We express no opinion regarding the accuracy, compl te Statement or other offering material relating to the Notes (excep to the Statement). Further, we express no opinion regarding tax co other than as expressly set forth in this opinion. -7- AGREEMENT BETWEEN ISSUER AND AGENT $1,485,000 CITY OF SALINA, KANSAS GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 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 notes (the "Securities"), and the Issuer wishes the Agent to act as its Paying Agent, Note 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, Note Registrar and Transfer Agent for the Securities. The State Treasurer of Kansas hereby accepts its appointment as the Paying Agent, Note Registrar and Transfer Agent. II. BASIC DUTIES A. Issuer or its duly authorized representative agrees to furnish Agent the name(s) and address( es) 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. 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. III. 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 $250, which is based on "Book-entry Only" Securities. This amount will be due at the time of registration unless such fee is to be paid from the proceeds of the note issue in which case Issuer agrees to pay such fee within two (2) business days of the closing of the note 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 OU01ERSHIP 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 ofthe Securities. Interest is computed on the basis of $1,000 or $5,000 units and in all transactions involving the payment of interest, fractions of a cent equalling or exceeding five mills shall be regarded as one cent; fractions of a cent less than five mills shall be disregarded. Agent shall at all times maintain an adequate supply of Statements of Ownership for any anticipated transfers or exchanges of the Statements. B. CERTIFICATED SECURITIES All certificated Securities issued by Issuer under this Agreement shall be in accordance with the standards set forth by the Attorney General and unless otherwise authorized by Agent, the principal thereof shall be payable only upon surrender of the Security to Agent. All certificates shall be issued in the denomination of$I,OOO 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 celiificates. 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 2 first determined, then rounded to the sixth decimal position; i.e. whenever the seventh 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 -40 1 (1) of the Uniform Commercial Code are met. 2. In accordance with the authorizing Resolution of the Issuer (the "Note 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 Note 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 Note 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. 1l1ISCELLANEOUS 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 of Issuer. K. CONSTRUCTION This Agreement shall be construed in accordance with the laws of the State of Kansas and also the Note Resolution. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 4 By ---jr-r-=-i''''------+-----:;Ij~----- (SEAL) ATTEST: BY~ Clerk (SEAL) OFFICE OF THE TREASURER OF THE STATE OF KANSAS (Signature page to Agreement Between Issuer and Agent -Notes) 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. , .- Blanket Issuer Letter of Representations [To be Completed by Issuer] {Name of lssu~l Hay 30 •. 1996 IDate] Attention: Underwriting Department -Eligibility The Depository Trust Company 55 Water Street; 50th Floor New 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 depositb)' The Depository Trust Company (aDTC"). To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accorda. ce veith DTC's Rules v.ith respect to the Securities, Issuer represents to DTC that Issuer will comply with the requiremen~ stated in DTC's Operational Arrangements, as they may be amended from time to time. Note: Schedule A contains statements that DTe believes accurately describe DTC. the method of eff~ book. enny traitsfers of securities rlistrihuted through 0 1 C. and certain related matters. Received and Accepted: THE DEPOSrrORYTRUSTCOMP~ B~··:J~ '--.J . . Very truly yours, Ci.t:y of Sali:Da~ Kansas (lssuerl By.;/~~~ ~~SignatlU'el . Evelyn !faxwell. Kayar (T~ Name fc Title; 300 li. Ash Street (Street Ar:ldre:Ssl SaliDa ·KS 67402-0736 (Cityl 7.{,5tat::-':""e7'") ---';;;eup=-);--- 913-826-7240 SCHEDULE A (To Blanket Issuer Letter of Representations) SAMPLE OFFERING DOCUMENT LANGUAGE DESCRIBING BOOK-ENTRY-ONLY ISSUANCE (Prepared by DTC-bmcketed material may be applicable only to cennin 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 $500 million ofp$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 of the New York Banking Law, a member of the Federal ReselVe System, a "clearing corporation" within the meaning of the New York UnifOIDl 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 DYC. DTC also facilitates the post-trade Settlement among Dire~t Participants 'of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This elimmates 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, cleanng corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The DepOSitOry Trust & Clearing Corporation C"DTCe"). DTCC is the helding company for DTC, National Secu..~ties 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 Partlcipant, either directly or indirectly (·'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 mformation about DTC can be found at www.dtcc.c(}rn 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 DTC's records. The ownership interest of each actual purchaser of each Secunty ("Beneficial Owner") is 10 tum 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 mto 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 discontmued. 4. To facilitate subsequent transfers, all Secunties 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 orCede & 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 snch 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 clirectly to them.] '[6. Redemption notices shall be sent to DTC. Ifless than ail of the Securities within an issue are being redeemed, DTC's practice is to detennine 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) wiil c<?nsent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's MM1 Procedures. Under Its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possibie after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounrs Securities are credited on the record date (identified in a listmg 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 iDay 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 Benefic1al Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers ill 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 nommee 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 1ts Participant, to [TenderfRemarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest m the Securit1es, on DTC's records, to [TenderiRemarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satlsfied 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 semces 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 book-entry-only transfers through DTC (or a successor securities depository). In that event., Security certificates will be printed and delivered to DTC. 12. The infonnation in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reiiable, but Issuer takes DO responsibility for the accuracy thereof. BLOR 03125108 MOODY'S iNVESTORS SERVICE New Issue: Moody's assigns Aa2 rating City of Salina's (KS) $2.4 million Improvement Bonds, Series 2-A and $3.8 million GO Bonds, Series 2012-B; 1 to million GO Temporary Notes, Series Global Credit Research -03 Jul2012 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 Rating Description 07/09/12 General Obligation General Obligation Temporary Notes, Series 2012-1 Sale Amount $1,485,000 Expected Sale Date 07/09/12 Rating Description Note: Bond Anticipation Moody's Outlook NOO Opinion MIG 1 NEW YORK, July 03,2012 --Moody's Investors Service has assigned a Aa2 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. SUMMARY RATINGS RATIONALE Both the bonds and notes are secured by the city's general obligation unlimited tax pledge. Proceeds of the Series 2012-Abonds 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 Internal Improvement 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 fv1ANAGEABLE 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 (fv1ay 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. 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CLOSING CERTIFICATE $1,485,000 CITY OF SALINA, KANSAS GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 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 notes (the "Notes"); 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 Note Resolution (defined below) authorizing the Notes. 2. Transcript of Proceedings. The transcript of proceedings relating to the authorization and issuance of the Notes (the "Transcript"), furnished to the Purchaser of the Notes, 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 ofthis date and are incorporated in this Certificate by reference. 3. The Note Resolution. The Issuer is issuing and delivering the Notes 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. 10-123 and, K.S.A. 12-685 et seq., as amended, and Resolution No. 12-6919 of the Issuer duly adopted by the governing body of the Issuer on July 9, 2012 (the "Note Resolution"). 4. Purpose of the Notes. The Notes are being issued pursuant to the Note Resolution for the purpose of paying a portion of the costs of certain street improvements (the "Improvements"). 5. Security for the Notes. The Notes are general obligations of the Issuer payable from the proceeds of general obligation bonds of the Issuer and, if not so paid, to the extent necessary, 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 Note Resolution to the payment of the principal of and interest on the Notes. 6. Sale of Notes. The Notes have been sold at rates not in excess of the limitations set forth in K.S.A. 10-1009. The Notice of Note Sale dated June 11,2012 and included in the Transcript constitutes a full true and correct copy thereof. A copy of such Notice of Note Sale and Preliminary Official Statement was sent to prospective purchasers of the Notes, and to all other persons and firms requesting copies of such Notice of Note 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 Notes. 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 ofthe 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 Note 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 Notes shown to be authorized in the Transcript; (e) the validity of the Notes, or any of the proceedings had in relation to the authOlization, issuance or sale thereof; (t) the levy and collection of an ad valorem property tax to pay the principal of and interest on the Notes; or (g) the federal or state tax-exempt status ofthe interest on the Notes; wherein any unfavorable decision, ruling or finding would adversely affect the Issuer, the transactions contemplated by the Note Resolution or the Official Statement, or the validity or enforceability of the Notes, which are not disclosed in the final Official Statement. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 2 WITNESS our hands and the seal of the Issuer. Signature Official Title Mayor (SEAL) Clerk (Signature Page to Closing Certificate -Notes) EXHIBITA 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 forth in the Note Resolution, which apply to any capitalized term used in these Disclosure Instructions, unless otherwise defined herein, the following capitalized terms 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 nominees, depositories or other intermediaries), 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 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 form 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 www.emma.msrb.org. "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 Rulemaking Board. "Note Resolution" means the resolution of the governing body of the Issuer authorizing the issuance of the Notes. A-I "Official Statement" means the Issuer's Official Statement for the Notes. "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 fmancial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions; the issuance by the lntemal 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, if material, and tender offers; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Notes, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event ofthe 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 defmitive agreement relating to any such actions, other than pursuant to its terms, if material; and A-2 (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 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. (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) 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 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, 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, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance 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 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 A-3 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 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 permitted 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 termination or substitution occurs prior to the final maturity of the Notes, the Issuer shall give notice of such termination or substitution in the same manner as for a Material Event under Section 2(b). 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 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 (1) 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 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 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 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 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 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 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 performance. A-4 Section 8. 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 (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. (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. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] A-5 Dated: July 26,2012. (SEAL) (Signature Page to Continuing Disclosure Instructions -Notes) Name ofIssuer: Name of Note Issue: Dissemination Agent: EXHIBITA ACCEPTANCE OF 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: FEDERAL TAX CERTIFICATE Dated as of July 26, 2012 OF CITY OF SALINA, KANSAS $1,485,000 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 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 ................................................................ 6 Continuing Application of Representations and Covenants .......................................... 9 ARTICLE III ARBITRAGE CERTIFICATIONS AND COVENANTS General. ......................................................................................................................... 9 Reasonable Expectations ............................................................................................... 9 Purpose of Financing ..................................................................................................... 9 Funds and Accounts ....................................................................................................... 9 Amount and Use of Note Proceeds ............................................................................... 9 Multipurpose Issue ...................................................................................................... 1 0 No Refunding .............................................................................................................. 10 Completion of Financed Improvements ...................................................................... 1 0 Sinking Funds .............................................................................................................. 1 0 Reserve, Replacement and Pledged Funds .................................................................. 1 0 Purpose Investment yield ............................................................................................ 1 0 Offering Prices and Yield on Notes ............................................................................. 1 0 Miscellaneous Arbitrage Matters ................................................................................ 11 Conclusion ................................................................................................................... 11 ARTICLE IV TAX COMPLIANCE POLICIES AND PROCEDURES General. ....................................................................................................................... 11 Record Keeping; Use of Note Proceeds and Use of Financed Improvements ............ 12 Restrictions on Investment Yield ................................................................................ 12 Procedures for Establishing Fair Market Value of Investments .................................. 13 Certain Gross Proceeds Exempt from the Rebate Requirement.. ................................ 15 Computation and Payment of Arbitrage Rebate .......................................................... 17 ARTICLE V MISCELLANEOUS PROVISIONS Term of Tax Certificate ............................................................................................... 18 Amendments ................................................................................................................ 18 Opinion of Bond CounseL ........................................................................................... 18 Reliance ....................................................................................................................... 18 Severability .................................................................................................................. 18 Benefit Qf Certificate ................................................................................................... 18 Default, Breach and Enforcement. .............................................................................. 19 (i) Section 5.08 Section 5.09 Governing Law ............................................................................................................ 19 Electronic Transactions ............................................................................................... 19 LIST OF EXHIBITS TO FEDERAL TAX CERTIFICATE A. IRS FORM 8038-G Evidence of filing B. RECEIPT FOR PURCHASE PRICE C. RECEIPT AND REPRESENTATION D. DESCRIPTION OF FINANCED IMPROVEMENTS E. SAMPLE ANNUAL COMPLIANCE CHECKLIST F. FINAL WRITTEN ALLOCATION 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 $1,485,000 principal amount of General Obligation Temporary Notes, Series 2012-1 (the "Notes"), under Resolution No. 12-6916 duly adopted by the governing body of the Issuer on July 9, 2012 (the "Note Resolution"), for the purposes described in this Tax Certificate and in the Note Resolution. 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 Note proceeds and of certain other money relating to the Notes and set forth the conditions under which the interest on the Notes 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 Note proceeds and the property financed or refinanced with those proceeds and the investment of the Note proceeds and of certain other related money, in order to establish and maintain the exclusion of the interest on the Notes from gross income for federal income tax purposes and to provide guidance for complying with the arbitrage rebate provisions of Code § 148(f). 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 Notes. 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 Note Resolution, 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: "Adjusted Gross Proceeds" means the Gross Proceeds of the Notes reduced by amounts: (a) in a Bona Fide Debt Service Fund or a reasonably required reserve or replacement fund; (b) that as of the 1 Issue Date, are not expected to be Gross Proceeds, but which arise after the end ofthe applicable spending period; and (c) representing grant repayments or sale or Investment proceeds of any purpose Investment. "Available Construction Proceeds" means the sale proceeds of the Notes, increased by: (a) Investment earnings on the sale proceeds; (b) earnings on amounts in a reasonably required reserve or replacement fund allocable to the Notes but not funded from the Notes; and (c) earnings on such earnings, reduced by sale proceeds (1) in any reasonably required reserve fund or (2) used to pay issuance costs of the Notes. But Available Construction Proceeds do not include Investment earnings on amounts in a reasonably required reserve or replacement fund after the earlier of: (a) the second anniversary of the Issue Date; or (b) the date the Financed Improvement are substantially completed. "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. "Bona Fide Debt Service Fund" means a fund, which may include Note proceeds, that: (a) is used primarily to achieve a proper matching of revenues with principal and interest payments within each Note Year; and (b) is depleted at least once each Note Year, except for a reasonable carryover amount not to exceed the greater of (1) the earnings on the fund for the immediately preceding Not~ Year, or (2) one- twelfth ofthe principal and interest payments on the Notes for the immediately preceding Note Year. "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. "Code" means the Internal Revenue Code of 1986, as amended. "Computation Date" means each date on which arbitrage rebate for the Notes 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; and (b) the date the last Note is discharged is the final Computation Date. The Issuer selects the date the last Note is discharged as the Computation Date but reserves the right to select a different date consistent with the Regulations. "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 financed or refinanced with the proceeds of the Notes as described in the Note Resolution, 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 Notes, including amounts used to pay underwriting discount or fees, but 2 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 Notes, (d) any amounts held in a pledged fund or reserve fund for the Notes, (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) Debt Service Account; (3) Rebate Fund (to the extent funded with sale proceeds or Investment proceeds of the Notes); "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). "Improvements" means all of the prqperty acquired, developed, constructed, renovated, and equipped by the Issuer using proceeds of the Notes 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 defined 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 Issue Date 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 Notes or (2) the expected economic useful life of the property. "Minor Portion" means the lesser of$100,000 or 5% of the sale proceeds of the Notes. "Net Proceeds" means the sale proceeds of the Notes (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. 3 "Non-Qualified Use" means use of Note 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 Note 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. "Note" or "Notes" means any note or notes of the Issuer's General Obligation Temporary Notes, Series 2012-1 described in the recitals, authenticated and delivered under the Note Resolution. "Note Resolution" means Resolution No. 12-6919, 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 Note Resolution. "Note Year" means each one-year period (or shorter period for the first Note Year) ending August 1 or another one-year period selected by the Issuer. "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 Notes from gross income for federal income tax purposes. "Output Contract" is defmed in Regulations § 1.141-7 and generally includes any contract with a Non-Qualified User that provides for the purchase of the output of Financed Improvements. "Post-Issuance Tax Requirements" means those requirements related to the use of proceeds of the Notes, the use of the Financed Improvements and the investment of Gross Proceeds after the Issue Date of the Notes. "Preliminary Expenditures" means: (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 the Notes; and (b) costs incurred in an amount not in excess of the lesser of $100,000 or 5% of the sale proceeds of the Notes. "Proposed Regulations" means the proposed arbitrage regulations REG 106143-07 (published at 72 Fed. Reg. 54606 (Sept. 26, 2007)). "Purchaser" means Country Club Bank, Prairie Village, Kansas, the original purchaser of the Notes, 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 4 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 lOO 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 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. "Reasonable Retainage" means Gross Proceeds retained by the Issuer for reasonable business purposes, such as to ensure or promote compliance with a construction contract; provided that such amount may not exceed: (a) for purposes of the 18-month spending test, 5% of Net Proceeds of the Notes on the date 18 months after the Issue Date, or (b) for purposes of the 2-year spending test, 5% of the Available Construction Proceeds as of the end of the 2-year spending period. "Rebate Analyst" means Gilmore & Bell, P.C. or any successor rebate analyst selected pursuant to this Tax Certificate. "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 Notes. "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 Notes, maintained by the Bond Compliance Officer pursuant to the Tax Compliance Procedure. 5 "Transcript" means the Transcript of Proceedings relating to the authorization and issuance of the Notes. "Yield" means yield on the Notes, 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 Notes for the purposes set forth in the Note Resolution, to enter into, execute and deliver the Note Resolution, the Notes, 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 Note Resolution, the Notes, and this Tax Certificate, acting by and through its duly authorized officials. (b) Tax-Exempt Status of Notes-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 Notes, whether or not such money was derived from the proceeds of the sale of the Notes or from any other source, in a manner that would cause the Notes 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 Note 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 Notes to be included in gross income for federal income tax purposes. (c) Governmental Obligations-Use of Proceeds. Throughout the Measurement Period: (1) all of the Financed Improvements are expected to be owned by the Issuer or another Qualified User; (2) no portion of the Financed Improvements is expected to be used in a Non-Qualified Use; and (3) the Issuer will not permit any Non-Qualified Use of the Financed Improvements 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 Notes will be (under the terms of the Notes 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. 6 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 Notes without first obtaining an Opinion of Bond Counsel. (e) No Private Loan, Special Assessments. Not more than 5% of the Net Proceeds of the Notes will be loaned directly or indirectly to any Non-Qualified User. The payment of principal of and interest on the Notes will be funded in whole or in part from a mandatory special assessment against the property benefiting from the Financed Improvements. The use of the proceeds of the Notes is not treated as a "loan" because: (1) the special assessment is an enforced contribution for the purpose of raising revenue for specific capital improvements; (2) the assessment does not include any fee for services; (3) the imposition and collection of the assessment 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 assessment is imposed to pay for an essential governmental function; and (5) the terms of payment of the assessment is the same for all owners of property benefitting from the Improvements on which the assessment is 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 Improvements 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 Notes. A list of the assets included in the Financed Improvements 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 Notes of 1.014 years, as 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 a resolution 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 resolution is contained in Tab 1 of the Transcript. The Issuer will reimburse from Note proceeds approximately $1,012,863 of Improvements expenditures paid prior to the Issue Date; provided that, except for Preliminary Expenditures, no proceeds of the Notes will be used to reimburse an expenditure paid by the Issuer more than 60 days prior to the date the resolution was adopted, no reimbursement allocation will be made for an expenditure made more than 3 years before the date of the reimbursement allocation, and no reimbursement allocation 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 Note Resolution require that all of the Notes will be issued and held in registered form within the meaning of Code § 149( a). 7 (1) Notes Not Federally Guaranteed. The Issuer will not take any action or pennit any action to be taken which would cause any Note to be "federally guaranteed" within the meaning of Code § 149(b). (m) IRS Form 8038-G. Bond Counsel will prepare IRS Fonn 8038-G (Information Return for Tax-Exempt GovernmentafObligations) 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 8S% of the Net Proceeds (the sale proceeds less any sale proceeds invested. in a reserve fund) of the Notes will be used to carry out the governmental purpose of the Notes within 3 years after the Issue Date, and not more than SO% of the proceeds of the Notes will be invested in Investments having a substantially guaranteed Yield for four years or more. (0) Single Issue; No Other Issues. The Notes constitute a single "issue" under Regulations § 1.ISO-I(c). No other debt obligations of the Issuer: (1) are being sold within IS days of the sale ofthe Notes, (2) are being sold under the same plan of financing as the Notes, and (3) are expected to be paid from substantially the same source of funds as the Notes (disregarding guarantees from unrelated parties, such as bond insurance). For purposes of the foregoing, the Issuer sold and issued its General Obligation Internal Improvement Bonds, Series 2012-A and the General Obligation Refunding Bonds, Series 2012-B Bonds simultaneously with the Notes, but the Bonds are not expected to be paid from substantially the same source of funds as the Note, and therefore are not part of the same "issue" as the Notes under Regulations § 1.ISO-I(c). A separate Federal Tax Certificate and IRS Fonn 8038-G are being executed in connection with the issuance of the Bonds. (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 Notes. The Issuer will not enter into any such arrangement in the future without obtaining an Opinion of Bond Counsel. (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 Notes. 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 Notes as "qualified tax-exempt obligations" under Code § 26S(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 SOI(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 Notes are issued, including the Notes, 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 SOI(c)(3) bonds 8 and (B) current refunding bonds to the extent not exceeding the refunded bonds) during the calendar year that the Notes are issued, including the Notes, 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 Notes 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 Notes, 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 Notes. 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 Note proceeds and other money, in order to support the Issuer's conclusion that the Notes 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 Notes. 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 knowledge 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 Notes are being issued for the purpose of providing funds to pay a portion of the costs of the Improvements. Section 3.04 Funds and Accounts. The following funds and accounts have been established under the Note Resolution: (a) Improvement Fund. (b) Debt Service Account. (c) Rebate Fund. Section 3.05 Amount and Use of Note Proceeds. (a) Amount of Note Proceeds. The total proceeds to be received by the Issuer from the sale of the Notes are as evidenced in Exhibit B attached to this Tax CertifIcate. (b) Use of Note Proceeds. The Note proceeds are expected to be allocated to expenditures as follows: 9 (1) All accrued interest ($453.75) will be deposited in the Debt Service Account and allocated to pay interest on the Notes. (2) The sum of$I,491,088.50 will be deposited in the hnprovement Fund, of which $5,780.00 will be used to pay costs of issuing the Notes, and the balance of $1,485,308.50, together with interest earnings thereon, will be used to pay costs of the hnprovements. 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). Section 3.07 No Refunding. No Note proceeds will be used to pay principal of or interest on any other debt obligation. Section 3.08 Completion of Financed hnprovements. The Issuer has incurred, or will incur within 6 months after the Issue Date, a substantial binding obligation to a third party to spend at least 5% of the Net Proceeds of the Notes on the Financed Improvements. The completion of the Financed hnprovements and the allocation of the Net Proceeds of the Notes to expenditures will proceed with due diligence. At least 85% of the Net Proceeds of the Notes will be allocated to expenditures on the Financed hnprovements within 3 years after the Issue Date. 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 Notes. Such payments will be deposited into the Debt Service Account. Except for the Debt Service Account, no sinking fund or other similar fund that is expected to be used to pay principal of or interest on the Notes has been established or is expected to be established. The Debt Service Account are used primarily to achieve a proper matching of revenues with principal and interest payments on the Notes within each Note Year, and the Issuer expects that the Debt Service Account 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 Notes. (b) No Replacement or Pledged Funds. None of the Note 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 Account, 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 Notes if the Issuer encounters financial difficulty. Section 3.11 Purpose Investment Yield. The proceeds of the Notes 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 Notes. (a) Offering Prices. On Exhibit C, the Purchaser has certified that (1) all of the Notes 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 Notes will be sold to the public at initial offering prices no higher than said Offering Prices. The aggregate initial offering price of the Notes is $1,494,370.35, plus $453.75 of accrued interest. 10 (b) Note Yield. Based on the Offering Prices, the Yield on the Notes is 0.37480%, as shown on Schedule 1. The Issuer has not entered into an interest rate swap agreement with respect to any portion oftlie proceeds of the Notes. Section 3.13 Miscellaneous Arbitrage Matters. (a) No Abusive Arbitrage Device. The Notes 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 Notes, together with expected Investment earnings thereon and other money contributed by the Issuer, do not exceed the cost of the governmental purpose of the Notes 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 Note proceeds will be used in a manner that would cause any Note 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 Notes are issued. The Issuer recognizes that interest on the Notes 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 Notes to be refinanced with tax- exempt obligations and substantiate the position that interest on the Notes is exempt from gross income in the event of an audit of the Notes 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 Notes 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. (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 Notes 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 11 reasonable cost of administering the Notes and the Issuer shall be entitled to reimbursement and recovery of its costs to the same extent as provided in the Note Resolution or State law. Section 4.02 Record Keeping; Use of Note Proceeds and Use of Financed Improvements. (a) Record Keeping. The Bond Compliance Officer will maintain the Tax-Exempt Bond File for the Notes 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 Notes or any obligation issued to refund the Notes. 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 Note Proceeds to Expenditures. The Bond Compliance Officer will account for the investment and expenditure of proceeds of the Notes in the level of detail required by the Tax Compliance Procedure as part of the Tax-Exempt Bond File. The expected allocation of Note proceeds to expenditures for the Improvements is shown on Exhibit D attached to this Tax Certificate. The Bond Compliance Officer will supplement this expected allocation to expenditures for the Improvements with a Final Written Allocation as required by the Tax Compliance Procedure, a sample form of which is attached as Exhibit F. (c) Annual Compliance Checklist. Attached as Exhibit E is a sample Annual Compliance Checklist for the Notes. The Bond Compliance Officer will prepare and complete an 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 Counsel or 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 Notes: (a) Improvement Fund. Note proceeds deposited in the Improvement Fund and Investment earnings on those proceeds may be invested without Yield restriction for up to 3 years following the Issue Date. If any unspent proceeds of the Notes remain in the Improvement Fund after 3 years, those amounts may continue to be invested without Yield restriction so long as the Issuer pays to the IRS all Yield reduction payments in accordance with Regulations § 1.148-5(c). These payments are required whether or not the Notes are exempt from the arbitrage rebate requirements of Code § 148. (b) Debt Service Account. To the extent that the Debt Service Account qualifies as a Bona Fide Debt Service Fund, money in such account may be invested without Yield restriction for 13 months 12 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. (c) 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 Investment Contracts) to the Notes. 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 13 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 lnvestment Contract at the time the bid specifications are forwarded to potential providers has a material financial 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 Note is redeemed: 14 (A) A copy of the 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, ifthe 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 Notes (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 high~st bid. Section 4.05 Certain Gross Proceeds Exempt from the Rebate Requirement. (a) General. A portion of the Gross Proceeds of the Notes 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 Notes 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 Notes is exempt from the rebate requirement. To the extent all or a portion of the Notes is exempt from rebate the Rebate Analyst may account for such fact in connection with its preparation of a rebate report described in Section 4.06. The Issuer may defer the final rebate Computation Date and the payment of rebate for the Notes to the extent permitted by Regulations §§ l.I48-7(b)(1) and l.I48-3(e)(2) but only in accordance with specific written instructions provided by the Rebate Analyst. (b) Applicable Spending Exceptions. (1) The Issuer expects that at least 75% of the Available Construction Proceeds will be used for construction or rehabilitation expenditures for property owned by the Issuer. (2) The following optional rebate spending exceptions can apply to the Notes: (A) § 1.148-7(c)). (B) (C) § 1.148-7(e)). 6-month spending exception (Code § I48(f)(4)(B) and Regulations I8-month spending exception (Regulations § 1. I48-7(d)). 2-year spending exception (Code § I48(f)(4)(C) and Regulations (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. 15 (d) Bona Fide Debt Service Fund. To the extent that the Debt Service Account qualifies 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 Notes 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 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. (3) The 18-month spending exception generally is met if all Adjusted Gross Proceeds are spent in accordance with the following schedule: Time Period After the Issue Date 6 months 12 months 18 months (Final) Minimum Percentage of Adjusted Gross Proceeds Spent 15% 60% 100% (4) The 2-year spending exception generally is met if all Available Construction Proceeds are spent in accordance with the following schedule: Time Period After the Issue Date 6 months 12 months 18 months 24 months (Final) Minimum Percentage of Available Construction Proceeds Spent 10% 45% 75% 100% (5) For purposes of applying the 18-month and 2 year spending exceptions only, the failure to satisfy the final spending requirement is disregarded if the Issuer uses due diligence to complete the Financed Improvements and the failure does not exceed the lesser of 3% of the aggregate issue price the Notes or $250,000. No such exception applies for any other spending period. 16 (6) For purposes of applying the 18-month and 2-year spending exceptions only, the Notes meet the applicable spending test even if, at the end of the final spending period, proceeds not exceeding a Reasonable Retainage remain unspent, so long as such Reasonable Retainage is spent within 30 months after the Issue Date in the case of the 18-month exception or 3 years after the Issue Date in the case of the 2-year spending exception. 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 Notes 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 N ote Year and not later than 10 days following each Computation Date. 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 Notes, (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 counselor 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 Requirements. 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 Note Resolution to the contrary, the obligation to pay arbitrage rebate to the United States will survive the payment or defeasance of the Notes. 17 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 Notes and will continue in force and effect until the principal of, redemption premium, if any, and interest on all Notes have been fully paid and all such Notes 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 Note 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, assuming compliance with this Tax Certificate as so amended and the Note Resolution, such amendment will not cause any Note to be an arbitrage bond under Code § 148 or otherwise cause interest on any Note 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 Notes 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 Notes 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 Notes or the exclusion from gross income of interest on the Notes. 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 Notes and the exclusion from federal gross income of the interest on the Notes. Section 5.05 Severability. If any prOVlSlon in this Tax Certificate or in the Notes 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 Notes. Nothing in this Tax Certificate, the Note Resolution or the Notes, express or implied, gives to any person, other than the Issuer, its successors and assigns, and the owners of the Notes, any benefit or any legal or equitable right, remedy or claim under this Tax Certificate. 18 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 Note owners pursuant to the terms of the Note Resolution 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] 19 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 2012-1) EXHIBITA IRS FORM 8038-G 816-221-1000 FAX 816-221-1018 WWW GILMOREBELL COM VIA FEDERAL EXPRESS Internal Revenue Service Center Ogden, Utah 84201 GILMOREBELL A PROFESSIONAL CORPORATION ATTORNEYS AT LAW 2405 GRAND BOULEVARD, SUITE 1100 KANSAS CITY, MISSOURI 64108-2521 ~ef' 600596.051 GMR Date: 2900t12 )ep : We t: 1 00 LBS DV. Svcs: ** 2DAY ** ST LOUIS, MISSOURI WICHITA, KANSAS LINCOLN, NEBRASKA SHIPPING' SPECIAL: HANDLING: o 00 TOTAL. TReK: 5319 3048 7139 October 29,2012 Re: City of Salina, Kansas General Obligation Temporary Notes, Series 2012-1 Ladies and Gentlemen: Enclosed for filing pursuant to Section 149(e) of the Internal Revenue Code of 1986 is Form 8038-G, Infonnation Return for Tax-Exempt Governmental Obligations, being filed with respect to the above-captioned transaction. If you have any questions, please do not hesitate to contact me. GMR:jac Enclosure Very truly yours, Gina M. Riekhof 8 87 1 20 o 00 10.07 October 31 ,2012 Dear Customer: Fed Ex Express Customer Support Trace 3875 Airways Boulevard Module H, 4th Floor Memphis, TN 38116 The following is the proof-of-delivery for tracking number 531930487139. Delivery Information: Status: Signed for by: Service type: Shipping Information: Tracking number: Recipient: Delivered D.CHEN FedEx 2Day Envelope 531930487139 Delivered to: Delivery location: Delivery date: Ship date: Weight: Shipper: U.S. Mall: PO Box 727 Memphis, TN 38194-4643 Telephone: 901-369-3600 Shipping/Receiving 1973 N RULON WHITE BLVD OGDEN, UT 84201 Oct 30, 201210:14 Oct 29,2012 0.5 Ibs/0.2 kg INTERNAL REVENUE SERVICE CENTER 1973 N. RULON WHITE BLVD. OGDEN, UT 84201 US GILMORE & BELL, P.C. Gilmore & Bell, P.C. 2405 Grand Blvd. Reference Thank you for choosing FedEx Express. FedEx Worldwide Customer Service 1.800.GoFedEx 1.800.463.3339 Suite 1100 KANSAS CITY, MO 64108 US 600596.051 GMR Form B038-G Inform.ation Return for Tax~Exempt Governmental Obligations (Rev. September 2011) ~ Under Internal Revenue Code section 149(e} OMS No. 1545-0720 Department of the TreasurY ~ See separate instructions. Internal Revenue Service Caution: If the issue price is under $1 00, 000, use Form .a038-GC. .:F-Tiil. Reporting Authority If Amended Return, check here ~ 0 1 Issuer's name 2 Issuer's employer identification number (EIN) City of Salina, Kansas 48·6017288 3a Name of person (other than issuer) with whom the IRS may communicate about this return (see instruc,tions) 3b T eiephone number of other person shown on 3a 4 Number and street (or P.O. box if mail is not delivered to street address) j Room/suite 5 Report number (For IRS Use Only) I cr~t~· 300 W. Ash Street 3 ,r-;,1,f.., :'!!'rl'~ ,.;r~ ~. 6 C!ty, town. or post office, state, and ZIP code 7 Date of issue Salina; KansaS 67402 07/2612012 8 Name of issue General Obligation Temporary Notes, Series 2012-1 9 CUSIP number 7947432L7 lOa Name and title of officer or other employee of the issuer whom the IRS may call for more information (see 1Gb Telephone number'of officer or other instruotions) employee Shown on 10a ROdney Franz, Finance Director 7B5·309·5735 • :ronll Type of Issue (enter the issue price). See the instructions and attach schedule . 11 Education. 11 12 Health and hospital 12 13 Transportation . '13 14 Public safety • 14 15 Environment (including sewage bonds) 15 16 Housing .. 16 17 Utilities -. 17 18 Other. Describe ~ street improvements 18 1,494.370 19 If obligations are TANs or RANs, check only box 19a ~O rl·,· '.' ' .. :,;~:: '",.?';<, If obligations are BANs, check only box 19b ~O :,': .,. :.< ,)~'::i-t5f;·>:' -; "';v 20 If obligation:; are in the form of a lease or installment sale, check box .. 0 ';:~/ ';;~: .,:;: ~;·~~~:~It e. J~~:L ., 1~iJ! II Description of Obligations. Complete for the entire issue for which this form is being filed, . la) Final maturity date (bl Issue price (e) Stated redemption (d) Weighted (e) Yield price at maturity average maturity 21 08/01/2013 $ 1,494,370 $ 1,485,000 1.014 yearS 0.3748 % I :P.T'i1I1 ,'I Uses of Proceeds of Bond Issue (including underwriters' discount) 22 Proceeds used for accrued interest 22 454 23 Issue price of entire issue (enter amount from line 21, column (b)) 23 1,494.370 24 Proceeds used for bond issuance costs (including underwriters' discount) . 24 9,062 r::':T: 25 Proceeds used for credit enhancement 25 0 lt~ 26 Proceeds allocated to reasonably required reserve or replacement fund 26 0 27 . Proceeds used to currently refund prior issues 27 0 I;r~t:~: 28 Proceeds used to advance refund prior issues 28 0 29 Totai (add lines 24 through 28) . .. . 29 9,062 30 Nonrefunding proceeds· of th.e.issue (subtract line 29 from line 23 and enter amount here) 30 1,485,303 I.:ffi""d'. Description of Refunded Bonds. Complete this part only for refunding bonds. 31 Enter the remaining weighted average maturity of the bonds to be currently refunded . ~ years 32 Enter the remaining weighted average maturity of the bonds to be advance refunded .... years 33 Enter the last date on which the refunded bonds will be called (MM/ODIYYYy) ... 34 Enter the date(s) the refunded bonds were issued ~ (MMIDOIYYYY) For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 63773S Form 8038-G (Rev. 9-2011) Form 8038-G (Rev. 9-2011) Page 2 1::r.Tii&'J I Miscellaneous 35 Enter the amount of the state volume cap allocated to the issue under section 141 (b)(5) .' 35 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract ~~ .. ::. (GiCj (see instructions) 36a b Enter the final matur(ty date of the GIG ~ ~~D: c Enter the name of the GIC provider~ i~':t~· 37 Pooled financings: Enter the amount of the proceeds of this issue that are to be used to make loans ~ -,- to other governmental units • 37 38a If this issue is a loan made from the proceeds of another tax-exempt Jssue, check box ~ 0 and enter the following information: b Enter the date of the master pool obligation ~ _. ___________________ _ c Enter the EIN of the issuer of the master pool obligation ~ _______________ _ d Enter the name of the issuer of the master pool obligation ~ _______________ _ 39 If the issuer has designated the issue under sectia!} 2Q5(b)(3)(B)(i}(III) (small issuer exception), check box 40 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, oheck box . . 41a If the issuer has identified a hedge, check here ~ 0 and enter the following information: b Name of hedge provider ~ c Typeofhedge~ _________________ _ d Termofhedge~ _________________ _ [{] o 42 If the issuer has superintegrated the hedge, check box . •..•.... . . . . ~ 0 43 If the' issuer has established written procedures to ensure that all nonqualified bonds of this issue are remediated according to the requirements under the Code and Regulations (see instructionsj, check box . . • . . . ~ ILl 44 If the issuer has established written procedures to monitor the requirements of section 148, check box _ . 45a If some portion of the proceeds was used to reimburse expenditures, check here ~ 0 and enter the amount ~ 0 of reimbursement . . . . . . ~ $1,012,863 b Enter the date the official intent was adopted ~ ..:0..:.3.:.:(2..:8.:.:/2..:.0-=-11~ ______________ _ Signature and Consent Paid Preparer. Use Only Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they ar true, correct, and complete. I further declare that I consent to the IRS's disclosure of the issuer's return information. as necessary to hiS retu • 0 the person that J have authorized above. Firm'sname Firm's address'" 2405 Grand Boulevard, Suite 1100. Kansas City. MO 64108 Form 8038M G (Rev. 9-2011) EXHIBITB RECEIPT FOR PURCHASE PRICE $1,485,000 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 DATED JULY 26, 2012 The undersigned Director of Finance and Administration of the City of Salina, Kansas, this day received from Country Club Bank, Prairie Village, Kansas, the original purchaser of the above-described notes (the "Notes"), the full purchase price of the Notes, said purchase price and net amount received by the Issuer being calculated as follows: Principal Amount .................................. . Plus Accrued Interest ............................ . Plus Net Premium ................................. . Less Underwriting Discount.. ............... . Total Purchase Price ••••......••••••.. Less Good Faith Deposit ...................... . Net Amount Received .............. . DATED: July 26, 2012. B-1 $1,485,000.00 453.75 9,370.35 (3,281.85) $1,491,542.25 (0.00) $1,491,542.25 CITY OF SALINA, KANSAS EXHIBITC RECEIPT AND REPRESENTATION $1,485,000 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 DATED JULY 26, 2012 This certificate is being delivered by Country Club Bank, Prairie Village, Kansas (the "Purchaser") in connection with the issuance of the above-described notes (the "Notes"), being issued on the date ofthis 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 Notes. 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" notes in Authorized Denominations in a form acceptable to the Purchaser. 3. Public Offering. All of the Notes 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 Notes 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 Notes 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 Notes under the Code. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] C-I Dated: July 26,2012. COUNTRY CLUB BANK PRAIRIE VILLAGE, KANSAS By: XviA f' RM Title: ___ "",;;.e?11..t.")'I,...'1 ~.!...V....!J~eLf_,~ __ ((Signature Page to Purchaser's Receipt) Maturity 08/0112013 Total SCHEDULE I TO PURCHASER'S RECEIPT AND REPRESENTATION $1,485,000 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 Type of Bond Serial Coupon Coupon 1000% Yield 0376% Maturity Value 1,485,000.00 $1,485,000.00 Price 100.631% Dollar Price 1,494,370 35 $1,494,370.35 EXHIBITD DESCRIPTION OF FINANCED IMPROVEMENTS Series 2012-1 Project Asset Description Land East Magnolia Road Less land costs Net costs, excluding land Average, Reasonably Expected Economic Life: 120% ofOngmal Economic Life ------------ EXHIBIT D TO FEDERAL TAX CERTIFICATE Description of Property Comprising the Financed Facility Original Economic Life 20 120% Estimated Elapsed Placed in Time Service from Date Issue Date July-12 0.00 20.00 years 2400 years Estimated Remaining Economic Asset Life Type Land 20.00 Other Cost 1,455,300 1,455,300 1,455,300 Determination of Average, Reasonably Expected Economic Life of Financed Facilities Description 2012-1 Project Total Net Uses: 120% of Expected Economic Life of Facilities Financed: Exhibit D to FTC - Descriptioll of Property Comprisillg the Fillallced ImprovemelllS Use of 2012-1 Proceeds 1,455,300 1,455,300 120% of Average Proceeds Life (yrs) x Life 24.00 34,927,200 34,927,200 24.00 years D-l Cost Paid from Bond Proceeds 1,455,300 1,455,300 1,455,300 Cost Paid from Other Sources Economic Life x Financed Cost 29,106,000 29,106,000 July 26, 2012 EXHIBITE FORM OF ANNUAL COMPLIANCE CHECKLIST $1,485,000 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 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 Notes. On the Issue Date, the Issuer identified certain assets financed in whole or in part by the Notes (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 Notes or (2) any obligation issued to refund the Notes. Bond Compliance Officer Name: L-[ _____ ---'] Bond Compliance Officer Signature: ] 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 Response 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-l Item Question Response 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 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. 4 Was any other agreement entered into with an individual or entity that DYes Other Use grants special legal rights to the Financed Improvements? 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 Notes 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 Notes? DNo Has any sinking or reserve fund for the payment of the Notes been DYes established (other than funds and accounts created in the Note DNo Resolution)? Have any of the Notes 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 FINAL WRITTEN ALLOCATION $1,485,000 GENERAL OBLIGATION TEMPORARY NOTES SERIES 2012-1 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 Notes. On the Issue Date, the Issuer identified certain categories of assets financed in whole or in part by the Notes (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 Notes, 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 Notes or (2) any obligation issued to refund the Notes. . 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 notes referenced above (the "Notes") 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 Note 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 defmed below), and no later than 60 days following the 5th anniversary ofthe issue date of the Notes. Definitions. Capitalized terms not otherwise defmed herein shall have the meanings ascribed thereto in the Federal Tax Certificate, relating to the Notes, dated July 26,2012 (the "Issue Date"). Background. The Notes were issued pursuant to the Note Resolution in order to provide funds needed to finance the Financed Improvements. Proceeds of the Notes 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 Notes, earnings from the investment of those proceeds and from other money of the Issuer as shown on the attached Schedule 1 to this Final Written Allocation. Identification of Financed Improvements. The Financed Improvements are listed on Schedule 2 to this Final Written Allocation. F-1 Identification and Timing of Expenditures for Arbitrage Purposes. For purposes of complying with the arbitrage rules, the Issuer allocates the proceeds of the Notes to the various expenditures described in the invoices, requisitions or other substantiation supporting the Schedule 2 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 Notes 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 Notes. Placed In Service. The Financed Improvements were "placed in service" on the dates set out on the Schedule 2 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. CITY OF SALINA, KANSAS Date: _________ _ By: This Final Written Allocation has been prepared in the manner requirced by the Tax Compliance Procedure: [Issuer CounseVBond Counsel] Date of review: ________ _ F-2 Bond Compliance Officer SCHEDULEl TO FINAL WRITTEN ALLOCATION ALLOCATION OF SOURCES AND USES SCHEDULE 2 TO FINAL WRITTEN ALLOCATION IDENTIFICATION OF FINANCED ASSETS FROM NOTES SCHEDULE 1 DEBT SERVICE SCHEDULE AND PROOF OF YIELD S-l City of Salina, Kansas General Obligation Temporary Notes Series 2012-1 Sources & Uses Dated 07/15/20121 Delivered 07/26/2012 Sources Of Funds Par Amount of Bonds Reoffering Premium Accrued Interest from 07/15/2012 to 07/26/2012 Total Sources Uses Of Funds Total Underwriter's Discount (0.221%) Costs oflssuance Deposit to Debt Service Fund Deposit to Project Construction Fund Total Uses Senes 2012-1Temporary N I SINGLE PURPOSE I 7/11/2012 I 10:33 AM $1,485,000.00 9,370.35 453.75 $1,494,824.10 3,281.85 5,780.00 453.75 1,485,308.50 $1,494,824.10 - Gilmore & Bell, P.C. I Tax and Financial Analysis Page 1 City of Salina, Kansas General Obligation Temporary Notes Series 2012-1 Debt Service Schedule Date 08/0112012 02/0112013 08/0112013 Total Yield Statistics Principal 1,485,000.00 $1,485,000.00 Accrued Interest from 07115/2012 to 07/26/2012 Bond Year Dollars Average Life Average Coupon Net Interest Cost (NIC) True interest Cost (TIC) Bond Yield for Arbitrage Purposes All Inclusive Cost (AlC) IRS Form 8038 Net Interest Cost Weighted Average Maturity Se"es2012-1 TemporaryN I SINGLE PURPOSE I 7/11/2012 11033AM Coupon Interest Total P+I 1.000% 15,510.00 1,500,510.00 $15,510.00 $1,500,510.00 453.75 $1,551.00 1.044 Years 1.0000000% 0.6074468% 0.592lO31% 0.3748010% 0.9765571% 0.3752758% 1.014 Years - Gilmore & Bell, P.C. <, Tax and Financial Analysis Page 2 . City of Salina, Kansas General Obligation Temporary Notes Series 2012-1 Pricing Summary Maturity 08/01l20l3 Total Bid Information Type of Bond Serial Coupon Par Amount of Bonds Reoffering Premium or (Discount) Gross Production Total Underwriter's Discount (0.221%) Bid (100.410%) Coupon 1.000% Accrued Interest from 07/15/2012 to 07/26/2012 Total Purchase Price Bond Year Dollars Average Life Average Coupon Net Interest Cost (NIC) True Interest Cost (TIC) Senes 2012-1 Temporary N I SINGLE PURPOSE I 7/11/2012 I 1033 AM Yield 0.376% Maturity Value 1,485,000.00 $1,485,000.00 Price 100.631% Dollar Price 1,494,370.35 $1,494,370.35 $1,485,000.00 9,370.35 $1,494,370.35 $(3,281.85) 1,491,088.50 453.75 $1,491,542.25 $1,551.00 1.044 Years 1.0000000% 0.6074468% 0.5921031% Gilmore & Bell, P.C. < Tax and Financial Analysis Page 3 City of Salina, Kansas General Obligation Temporary Notes Series 2012-1 Proof Of Bond Yield @ 0.3748010% Date Cashflow PV Factor 07/26/2012 1.0000000x 08/0112013 1,500,510.00 0.9962107x Total $1,500,510.00 Derivation Of Target Amount Par Amount of Bonds Reoffering Premium or (Discount) Accrued Interest from 0711512012 to 07/26/2012 Original Issue Proceeds Series 2012-1 Temporary N I SINGLE PURPOSE I 7/11/2012 I 10:33 AM Cumulative Present Value PV 1,494,824.10 1,494,824.l0 $1,494,824.10 $1,485,000.00 9,370.35 453.75 $1,494,824.10 Gilmore & Bell, p.e. 'l Tax and Financial Analysis Page 4 City of Salina, Kansas General Obligation Temporary Notes Series 2012-1 Derivation Of Form 8038 Yield Statistics Issuance Issuance Maturity Value Price Price 07/2612012 08/0112013 1,485,000.00 100.631% 1,494,370.35 Total $1,485,000.00 $1,494,370.35 IRS Form 8038 Weighted Average Maturity = Bond YearslIssue Price Total Interest from Debt Service Accrued Interest from 07115/2012 to 0712612012 Reoffering (Premium) or Discount Total Interest NIC = Interest 1 (Issue Price * Average Maturity) Bond Yield for Arbitrage Purposes Senes 2012-1 Temporary N I SINGLE PURPOSE I 7/11/2012 I 10,33 AM Exponent Bond Years 1.0138889x 1,515,125.49 $1,515,125.49 1.014 Years 15,510.00 (453.75) (9,370.35) 5,685.90 0.3752758% 0.3748010% I Gilmore & Bell, P.C. , Tax and Financial Analysis Page 5 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 816-221-1000 FAX: 816-221-1018 WWW.GILMOREBELL.COM Governing Body City of Salina, Kansas Country Club Bank Prairie Village, 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: $1,485,000 General Obligation Temporary Notes, Series 2012-1, 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 notes (the "Notes"). 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 authorizing the issuance of the Notes. 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 Notes have been duly authorized, executed and delivered by the Issuer and are valid and legally binding general obligations of the Issuer. 2." The Notes are payable as to both principal and interest from 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 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 Notes to the extent that necessary funds are not provided from other sources. 3. The interest on the Notes 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 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 Notes in order to preserve the exclusion of the interest on the Notes 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 Notes to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Notes. The Notes 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 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 Notes. We express no opinion regarding other federal tax consequences arising with respect to the Notes. 4. The interest on the Notes 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 Notes (except to the extent, if any, stated in the Official Statement). Further, we express no opinion regarding tax consequences arising with respect to the Notes other than as expressly set forth in this opinion. The rights of the owners of the Notes 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 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, /~ttMIQ. GILMORE & BELL, P.C. STATE OF KANSAS OFFICE OF THE ATTORNEY GENERAL DEREK SCHMIDT ATTORNEY GENERAL The Honorable Ron Estes State Treasurer July 17, 2012 Landon State Office Building, Room 201 N Topeka, KS 66612 Dear Mr. Estes: MEMORIAL HALL 120 SW 10TH AVE, 2ND FLOOR TOPEKA, KS 66612-1597 (785) 296-2215 • FAX (785) 296-6296 WWW 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 Temporary Note Series: 2012-1 Numbered: Registered Dated: July 15, 2012 Aggregate Amount: $1,485,000.00 Date of First Payment: August 1, 2013 Fiscal Agent: Kansas State Treasurer DS:RDS: cc: Lieu Ann Elsey, City Clerk Gilmore & Bell, Kansas City Sincerely, OFFICE OF THE ATTORNEY GENERAL DEREK SCHMIDT /) A ?~.,. ,?:7 j/ // (ifc~J¥~~// A'ssista,.nt Attorney General " f July 19,2012 MEMORANDUM TO: SEE DISTRIBUTION LIST FROM: DA VID ARTEBERRY TODD BURRUS RE: NOTE ISSUE CLOSING ARRANGEMENTS NAME OF ISSUER: AMOUNT, NAME AND DATE OF ISSUE: TIME AND DATE OF CLOSING: SETTLEMENT NUMBERS: METHOD OF FUNDS TRANSFER: City of Salina, Kansas $1,485,000 City of Salina, Kansas General Obligation Temporary Notes Series 2012-1 Dated July 15, 2012 10:00 a.m. Thursday, July 26,2012 Via telephone Par Amount of Notes Plus BId Premium Plus Accrued Interest (July 15 to July 26) Net Amount Due at Closing WIre Transfer of Federal Funds $1,485,000.00 6,088.50 453.75 $1,491,542.25 4801 Main Street. Suite 500 • Kansas City, Missouri 64112 • 816.474.1100 TRANSFER INSTRUCTIONS: (Country Club Bank) DISPOSITION OF NOTE PROCEEDS: (City) DELIVERY OF TRANSCRIPT AND LEGAL OPINION: NOTE DELIVERY INSTRUCTIONS: PAYMENT OF COSTS OF ISSUANCE: On Thursday, July 26, 2012, Country Club Bank WIll wire transfer an amount of $1,491,542.25 to Sunflower Bank, ABA #1011-0062-1, AC #10218 7275 for credit to the City of Salina, Attn: Dennis Zimmerman. Upon receipt of$I,491,542.25 from Country Club Bank, the City will deposit the funds as follows: $1,485,308.50 5,780.00 453.75 $1,491,542.25 into the Improvement Fund into the Costs of Issuance Account into the Debt Service Account Upon receiving confirmation of receipt of funds Gilmore & Bell will authorize the release of the Notes and e-mail a signed legal opinion to the CIty, George K. Baum & Company, and Country Club Bank. Origmal signed legal opimons and transcripts will be mailed when completed. Notes will be delivered to the offices of the Depository Trust Company, New York, New York at least one day pnor to closing. All reimbursable costs associated wIth the issuance of the Notes will be paid after closing by the City 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. Ohio Salina, Kansas 67402 785-826-2240 (fax) Dennis Zimmerman 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 VERIFICATION 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@countryclubbank.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 :21 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 12:15 PM To: WILSON, DENISE Cc: carmen@treasurer.state.ks.us Subject: New Bond Issued 07/12/201212.15:17 A new bond issue has been created in the KST Bond Registration 2.0 System. Below is the information. Registration #: 0322-085-071512-427 Municipality: SALINA Bond Counsel: GILMORE & BELL/ DENISE Paying Agent: STATE Purpose & Series: GO TEMP NOTE SR 2012-1 Principal: 1,485,000.00 Closing Date: 07/26/2012 Please consider this notice to be your confirmation of the 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