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CITY COUNCIL 08/15/2011 NOTICE OF A SPECIAL MEETING OF THE CITY COUNCIL OF THE CITY OF LAKE FOREST SPECIAL MEETING AGENDA Monday, August 15, 2011 6:00 P.M. City Council Chambers 220 East Deerpath, Lake Forest, Illinois 1. ROLL CALL 2. PLEDGE OF ALLEGIANCE 3. ORDINANCE ALLOWING AUTHORIZING GENERAL REFUNDING OF BONDS (FIRST READING) 4. CONSIDERATION OF PURCHASE OF PEDESTRIAN BRIDGE AT DALITSCH 5. REPORT ON WEST SIDE TRAIN STATION PEDESTRIAN UNDERPASS 6. OPPORTUNITY FOR PUBLIC COMMENT 7. ADJOURNMENT Office of the City Manager August 12, 2011 The City of Lake Forest is subject to the requirements of the Americans with Disabilities Act of 1990. Individuals with disabilities who plan to attend this meeting and who require certain accommodations in order to allow them to observe and/or participate in this meeting, or who have questions regarding the accessibility of the meeting or the facilities, are required to contact City Manager Robert R. Kiely, Jr., at (847) 234-2600 promptly to allow the City to make reasonable accommodations for those persons. 1 CONSIDERATION OF AN ORDINANCE AUTHORIZING THE ISSUANCE OF GENERAL OBLIGATION REFUNDING BONDS OF 2011 OF THE CITY OF LAKE FOREST, ILLINOIS AND PROVIDING FOR THE REDEMPTION OF OUTSTANDING BONDS (FIRST READING) Presented by Finance Director Kathy Reinertsen This ordinance authorizes the refunding and redemption of $26,085,000 aggregate outstanding principal amount of General Obligation Bonds and the redemption of $500,000 principal amount of General Obligation Bonds, Series 2000 of The City of Lake Forest, Illinois. A draft ordinance is attached. The bid openings are September 6, 2011 between 10:45-11:30 A.M. The final ordinance will be provided at the September 6 meeting. Recommended Action: Grant first reading to the ordinance authorizing the issuance of General Obligation Refunding Bonds of 2011 and providing for the redemption of outstanding bonds of The City of Lake Forest, Illinois. (Staff Contact person: Kathy Reinertsen 810-3612) 2 ORDINANCE NO. _______________ ORDINANCE AUTHORIZING THE ISSUANCE OF GENERAL OBLIGATION REFUNDING BONDS OF 2011 OF THE CITY OF LAKE FOREST, ILLINOIS AND PROVIDING FOR THE REDEMPTION OF OUTSTANDING BONDS BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LAKE FOREST, ILLINOIS, AS FOLLOWS: Section 1. Authority and Purposes. This ordinance is adopted pursuant to Section 6 of Article VII of the Illinois Constitution of 1970 for the purposes of providing for the redemption of $500,000 principal amount of General Obligation Bonds, Series 2000 (the “2000 Bonds”) of The City of Lake Forest, Illinois (the “City”) maturing in the year 2012, and financing the refunding and redemption of $26,085,000 aggregate outstanding principal amount of general obligation bonds (the “Prior Bonds”) of the City, which are more particularly described as follows: A. The $415,000 principal amount of General Obligation Bonds (Sales Tax Alternate Revenue Source) Series 1999, maturing in the years 2012, 2013 and 2014 (the “1999 Bonds”). 3 B. The $18,480,000 principal amount of General Obligation Bonds, Series 2002A, maturing in the years 2013 to 2023, both inclusive (the “2002A Bonds”). C. The $1,190,000 principal amount of General Obligation Bonds, Series 2003C, maturing in the years 2012 to 2020, both inclusive (the “2003C Bonds”). D. The $800,000 principal amount of General Obligation Bonds, Series 2003D, maturing in the years 2012 to 2015, both inclusive (the “2003D Bonds”). E. The $950,000 principal amount of General Obligation Bonds, Series 2004A, maturing in the years 2013 to 2023, both inclusive (the “2004A Bonds”). F. The $4,250,000 principal amount of General Obligation Bonds, Series 2004B, maturing in the years 2013 to 2023, both inclusive (the “2004B Bonds”). It is found and determined that the redemption of the 2000 Bonds and the refunding and redemption of the Prior Bonds as authorized by this ordinance are for proper public purposes. Section 2. Redemption and Refunding Plan. The City hereby determines to refund the Prior Bonds and elects to redeem (A) the 1999 Bonds, the 2003C Bonds and the 2003D Bonds (which are all currently subject to redemption) on October 18, 2011 and (B) the 2002A Bonds, the 2004A Bonds and the 2004B Bonds on December 15, 2012. Each Prior Bond shall be redeemed at a redemption price equal to the principal amount thereof to be redeemed together with interest to the redemption date. 4 Authority is hereby delegated to the Director of Finance to elect to redeem the 2000 Bonds, to select the redemption date of the 2000 Bonds and to apply $500,000 of available debt service funds of the City for the payment of the redemption price of the 2000 Bonds. The Mayor, the City Manager, the Director of Finance and the other officers and officials of the City are authorized and directed to do, or cause to be done, all things necessary to accomplish the refunding and redemption of the Prior Bonds and the redemption of the 2000 Bonds. Section 3. Appropriations. (A) The sum of $_______________ is appropriated to meet part of the costs of the refunding of the Prior Bonds including the costs of issuance of the general obligation bonds of the City authorized by this ordinance. (B) The sum of $500,000 is appropriated from available debt service funds of the City for the purpose of paying the redemption price of the 2000 Bonds called for redemption. Section 4. Authorization of Bonds. Pursuant to the home rule powers of the City to incur debt payable from ad valorem property tax receipts and for the purpose of financing the appropriation provided in paragraph (A) of Section 3 of this ordinance, unlimited tax general obligation bonds of the City are authorized to be issued and sold as two separate series in an aggregate principal amount of $______,000. Section 5. General Terms of Bonds. The bonds authorized and issued pursuant to this ordinance are herein collectively called the “2011 Bonds.” The 2011 Bonds shall be issuable in the denominations of $5,000 or any integral multiple thereof and may bear such identifying numbers or letters as shall be useful to facilitate the 5 registration, transfer and exchange of 2011 Bonds. Unless otherwise determined in the order to authenticate the 2011 Bonds, each 2011 Bond delivered upon the original issuance of the 2011 Bonds shall be dated as of its date of original issuance and delivery. Each 2011 Bond thereafter issued upon any transfer, exchange or replacement of 2011 Bonds shall be dated so that no gain or loss of interest shall result from such transfer, exchange or replacement. The principal of the 2011 Bonds shall be payable in lawful money of the United States of America upon presentation and surrender thereof at the corporate trust office of Wells Fargo Bank, N.A., in the City of Chicago, Illinois, which is hereby appointed as bond registrar and paying agent for the 2011 Bonds. Each 2011 Bond shall bear interest from its date, computed on the basis of a 360 day year consisting of twelve 30 day months and shall be payable in lawful money of the United States of America on each interest payment date to the registered owners of record thereof appearing on the registration books maintained by the City for such purpose at the corporate trust office of the bond registrar, as of the close of business on the first day of the calendar month of the applicable interest payment date. Interest on the 2011 Bonds shall be paid by check or draft mailed to such registered owners at their addresses appearing on the registration books or by wire transfer pursuant to an agreement by and between the City and the registered owner. Section 6. Terms of 2011A Bonds. A series of the 2011 Bonds shall be issued and sold in an aggregate principal amount of $______,000 for the purpose of financing the refunding of the 1999 Bonds, the 2000 Bonds, the 2003C Bonds and the 2003D Bonds and the payment of costs related thereto, and shall be designated “General Obligation Refunding Bonds, Series 2011A” (the “2011A Bonds”). 6 The 2011A Bonds shall mature on December 15 in each year shown in the following table in the respective principal amount set forth opposite each such year and the 2011A Bonds maturing in each such year shall bear interest at the respective rate per annum set forth opposite such year: Year Principal Amount Interest Rate 20__ $ ,000 % 20__ ,000 20__ ,000 20__ ,000 20__ ,000 20__ ,000 Interest on each 2011A Bond shall be payable on December 15, 2011 and semiannually thereafter on each June 15 and December 15 at the rates per annum herein determined. The 2011A Bonds maturing on December 15, 20__ shall be subject to mandatory redemption, in part and by lot, on December 15 of the years 20__ and 20__, in the following principal amounts, each constituting a sinking fund installment for the retirement of the 2011A Bonds maturing on December 15, 20__: Year Principal Amount 20__ $ ,000 20__ ,000 The final principal amount of the 2011A Bonds maturing on December 15, 20__, is $______,000. Section 7. Terms of 2011B Bonds. A series of 2011 Bonds shall be issued and sold in an aggregate principal amount of $______,000 for the purpose of financing the refunding of the 2002A Bonds, the 2004A Bonds and the 2004B Bonds and the 7 payment of the costs related thereto, and shall be designated “General Obligation Refunding Bonds, Series 2011B” (the “2011B Bonds”). The 2011B Bonds shall mature on December 15 in each year shown in the following table in the respective principal amount set forth opposite each such year and the 2011B Bonds maturing in each such year shall bear interest at the respective rate per annum set forth opposite such year: Year Principal Amount Interest Rate 20__ $ ,000 . % 20__ ,000 20__ ,000 20__ ,000 20__ ,000 20__ ,000 20__ ,000 20__ ,000 20__ ,000 20__ ,000 20__ ,000 20__ ,000 20__ ,000 Interest on each 2011B Bond shall be payable on December 15, 2011 and semiannually thereafter on each June 15 and December 15 at the rates per annum herein determined. The 2011B Bonds maturing on or after December 15, 2020 shall be subject to redemption prior to maturity at the option of the City and upon notice as herein provided, in such principal amounts and from such maturities as the City shall determine and by lot within a single maturity, on December 15, 2019 and on any date thereafter, at a redemption price equal to the principal amount thereof to be redeemed. The 2011B Bonds maturing on December 15, 20__ shall be subject to mandatory redemption, in part and by lot, on December 15 of the years 20__ and 20__, in the 8 following principal amounts, each constituting a sinking fund installment for the retirement of the 2011B Bonds maturing on December 15, 20__: Year Principal Amount 20__ $ ,000 20__ ,000 The final principal amount of the 2011B Bonds maturing on December 15, 20__, is $______,000. Section 8. Redemption Provisions. All 2011 Bonds subject to mandatory sinking fund redemption shall be redeemed at a redemption price equal to the principal amount thereof to be redeemed. The bond registrar is hereby authorized and directed to mail notice of the mandatory sinking fund redemption of the 2011 Bonds in the manner herein provided. Whenever 2011 Bonds subject to mandatory sinking fund redemption are redeemed at the option of the City, the principal amount thereof so redeemed shall be credited against the unsatisfied balance of future sinking fund installments or final principal amount established with respect to such 2011 Bonds, in such amounts and against such installments or final principal amount as shall be determined by the City in the proceedings authorizing such optional redemption or, in the absence of such determination, shall be credited pro-rata against the unsatisfied balance of the applicable sinking fund installments and final principal amount. On or prior to the 60th day preceding any sinking fund installment date, the City may purchase 2011 Bonds, which are subject to mandatory redemption on such sinking fund installment date, at such prices as the City shall determine. Any 2011 Bond so purchased shall be cancelled and the principal amount thereof so purchased shall be 9 credited against the unsatisfied balance of the next ensuing sinking fund installment of the 2011 Bonds of the same series and maturity as the 2011 Bond so purchased. In the event of the redemption of less than all the 2011 Bonds of like series and maturity, the aggregate principal amount thereof to be redeemed shall be $5,000 or an integral multiple thereof and the bond registrar shall assign to each 2011 Bond of such maturity a distinctive number for each $5,000 principal amount of such 2011 Bond and shall select by lot from the numbers so assigned as many numbers as, at $5,000 for each number, shall equal the principal amount of such 2011 Bonds to be redeemed. The 2011 Bonds to be redeemed shall be the 2011 Bonds to which were assigned numbers so selected; provided that only so much of the principal amount of each 2011 Bond shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. Notice of the redemption of 2011 Bonds shall be mailed not less than 30 days nor more than 60 days prior to the date fixed for such redemption to the registered owners of 2011 Bonds to be redeemed at their last addresses appearing on said registration books. The 2011 Bonds or portions thereof specified in said notice shall become due and payable at the applicable redemption price on the redemption date therein designated, and if, on the redemption date, moneys for payment of the redemption price of all the 2011 Bonds or portions thereof to be redeemed, together with interest to the redemption date, shall be available for such payment on said date, and if notice of redemption shall have been mailed as aforesaid (and notwithstanding any defect therein or the lack of actual receipt thereof by any registered owner) then from and after the redemption date interest on such 2011 Bonds or portions thereof shall cease to accrue and become payable. If there shall be drawn for redemption less 10 than all of a 2011 Bond, the City shall execute and the bond registrar shall authenticate and deliver, upon the surrender of such 2011 Bond, without charge to the owner thereof, in exchange for the unredeemed balance of the 2011 Bond so surrendered, 2011 Bonds of like series, maturity and interest rate and of the denomination of $5,000 or any integral multiple thereof. The bond registrar shall not be required to transfer or exchange any 2011 Bond after notice of the redemption of all or a portion thereof has been mailed. The bond registrar shall not be required to transfer or exchange any 2011 Bond during a period of 15 days next preceding the mailing of a notice of redemption that could designate for redemption all or a portion of such 2011 Bond. Section 9. Sale and Delivery. The 2011A Bonds are sold to ______________________________, as purchaser, at a price of $_______________ and accrued interest from their date to the date of delivery and payment therefor. The 2011B Bonds are sold to ______________________________, as purchaser, at a price of $_______________ and accrued interest from their date to the date of delivery and payment therefor. The Official Statement prepared with respect to the 2011 Bonds is approved and “deemed final” as of its date for purposes of Securities and Exchange Commission Rule 15c2-12 promulgated under the Securities Exchange Act of 1934. The Mayor, City Clerk and other officials of the City are authorized and directed to do and perform, or cause to be done or performed for or on behalf of the City each and every thing necessary for the issuance of the 2011 Bonds, including the proper execution and delivery of the 2011 Bonds and the Official Statement. Section 10. Execution and Authentication. Each 2011 Bond shall be executed in the name of the City by the manual or authorized facsimile signature of its 11 Mayor and the corporate seal of the City, or a facsimile thereof, shall be thereunto affixed or otherwise reproduced thereon and attested by the manual or authorized facsimile signature of its City Clerk. In case any officer whose signature, or a facsimile of whose signature, shall appear on any 2011 Bond shall cease to hold such office before the issuance of the 2011 Bond, such 2011 Bond shall nevertheless be valid and sufficient for all purposes, the same as if the person whose signature, or a facsimile thereof, appears on such 2011 Bond had not ceased to hold such office. Any 2011 Bond may be signed, sealed or attested on behalf of the City by any person who, on the date of such act, shall hold the proper office, notwithstanding that at the date of such 2011 Bond such person may not have held such office. No recourse shall be had for the payment of any 2011 Bonds against any officer who executes the 2011 Bonds. Each 2011 Bond shall bear thereon a certificate of authentication executed manually by the bond registrar. No 2011 Bond shall be entitled to any right or benefit under this ordinance or shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the bond registrar. Section 11. Transfer, Exchange and Registry. The 2011 Bonds shall be negotiable, subject to the provisions for registration of transfer contained herein. Each 2011 Bond shall be transferable only upon the registration books maintained by the City for that purpose at the corporate trust office of the bond registrar, by the registered owner thereof in person or by his attorney duly authorized in writing, upon surrender thereof together with a written instrument of transfer satisfactory to the bond registrar and duly executed by the registered owner or his duly authorized attorney. Upon the surrender for transfer of any such 2011 Bond, the City shall execute and the bond 12 registrar shall authenticate and deliver a new 2011 Bond or 2011 Bonds registered in the name of the transferee, of the same aggregate principal amount, series, maturity and interest rate as the surrendered 2011 Bond. 2011 Bonds, upon surrender thereof at the corporate trust office of the bond registrar, with a written instrument satisfactory to the bond registrar, duly executed by the registered owner or his attorney duly authorized in writing, may be exchanged for an equal aggregate principal amount of 2011 Bonds of the same series, maturity and interest rate and of the denominations of $5,000 or any integral multiple thereof. For every such exchange or registration of transfer of 2011 Bonds, the City or the bond registrar may make a charge sufficient for the reimbursement of any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer, which sum or sums shall be paid by the person requesting such exchange or transfer as a condition precedent to the exercise of the privilege of making such exchange or transfer. No other charge shall be made for the privilege of making such transfer or exchange. The provisions of the Illinois Bond Replacement Act shall govern the replacement of lost, destroyed or defaced 2011 Bonds. The City and the bond registrar may deem and treat the person in whose name any 2011 Bond shall be registered upon the registration books as the absolute owner of such 2011 Bond, whether such 2011 Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of or interest thereon and for all other purposes whatsoever, and all such payments so made to any such registered owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon such 2011 Bond to the extent of the sum or sums so paid, and neither the City nor the bond registrar shall be affected by any notice to the contrary. 13 Section 12. General Obligations. The full faith and credit of the City are hereby irrevocably pledged to the punctual payment of the principal of and interest on the 2011 Bonds. The 2011 Bonds shall be direct and general obligations of the City, and the City shall be obligated to levy ad valorem taxes upon all the taxable property in the City for the payment of the 2011 Bonds and the interest thereon, without limitation as to rate or amount. Section 13. Form of 2011A Bonds. The 2011A Bonds shall be issued as fully registered bonds and shall be in substantially the following form, the blanks to be appropriately completed when the 2011A Bonds are printed: No. ________ United States of America State of Illinois County of Lake THE CITY OF LAKE FOREST GENERAL OBLIGATION REFUNDING BOND, SERIES 2011A INTEREST RATE MATURITY DATE DATED DATE CUSIP . % December 15, 20__ __________, 2011 ______ ___ REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: THE CITY OF LAKE FOREST, a municipal corporation and a home rule unit of the State of Illinois situate in the County of Lake, acknowledges itself indebted and for value received hereby promises to pay to the registered owner of this bond, or registered assigns, the principal amount specified above on the maturity date specified 14 above, and to pay interest on such principal amount from the date hereof at the interest rate per annum specified above, computed on the basis of a 360 day year consisting of twelve 30 day months and payable in lawful money of the United States of America on December 15, 2011 and semiannually thereafter on June 15 and December 15 in each year until the principal amount shall have been paid, to the registered owner of record hereof as of the first day of the calendar month of such interest payment date, by wire transfer pursuant to an agreement by and between the City and the registered owner, or otherwise by check or draft mailed to the registered owner at the address of such owner appearing on the registration books maintained by the City for such purpose at the corporate trust office of Wells Fargo Bank, N.A., in the City of Chicago, Illinois, as bond registrar or its successor (the “Bond Registrar”). This bond, as to principal when due, will be payable in lawful money of the United States of America upon presentation and surrender of this bond at the corporate trust office of the Bond Registrar. The full faith and credit of the City are irrevocably pledged for the punctual payment of the principal of and interest on this bond according to its terms. This bond is one of a series of bonds issued in the aggregate principal amount of $______,000, which are authorized and issued under and pursuant to Section 6 of Article VII of the Illinois Constitution of 1970 and under and in accordance with an ordinance adopted by the City Council of the City on September 6, 2011 and entitled: “Ordinance Authorizing the Issuance of General Obligation Refunding Bonds of 2011 of The City of Lake Forest, Illinois and Providing for the Redemption of Outstanding Bonds.” The bonds of such series maturing in the year 20__ are subject to mandatory redemption, in part and by lot, on December 15 of the years and in the respective 15 principal amounts set forth in the following table, by the application of sinking fund installments, at a redemption price equal to the principal amount thereof to be redeemed: Year Principal Amount 20__ $ ,000 20__ ,000 Notice of the redemption of bonds will be mailed not less than 30 days nor more than 60 days prior to the date fixed for such redemption to the registered owners of bonds to be redeemed at their last addresses appearing on such registration books. The bonds or portions thereof specified in said notice shall become due and payable at the applicable redemption price on the redemption date therein designated, and if, on the redemption date, moneys for payment of the redemption price of all the bonds or portions thereof to be redeemed, together with interest to the redemption date, shall be available for such payment on said date, and if notice of redemption shall have been mailed as aforesaid (and notwithstanding any defect therein or the lack of actual receipt thereof by any registered owner) then from and after the redemption date interest on such bonds or portions thereof shall cease to accrue and become payable. This bond is transferable only upon such registration books by the registered owner hereof in person, or by his attorney duly authorized in writing, upon surrender hereof at the corporate trust office of the Bond Registrar together with a written instrument of transfer satisfactory to the Bond Registrar duly executed by the registered owner or by his duly authorized attorney, and thereupon a new registered bond or bonds, in the authorized denominations of $5,000 or any integral multiple thereof and of the same aggregate principal amount, maturity and interest rate as this bond shall be 16 issued to the transferee in exchange therefor. In like manner, this bond may be exchanged for an equal aggregate principal amount of bonds of the same maturity and interest rate and of any of such authorized denominations. The City or the Bond Registrar may make a charge sufficient for the reimbursement of any tax, fee or other governmental charge required to be paid with respect to the transfer or exchange of this bond. No other charge shall be made for the privilege of making such transfer or exchange. The City and the Bond Registrar may treat and consider the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment of, or on account of, the principal and interest due hereon and for all other purposes whatsoever. This bond shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been duly executed by the Bond Registrar. It is hereby certified, recited and declared that all acts, conditions and things required to be done, exist and be performed precedent to and in the issuance of this bond in order to make it a legal, valid and binding obligation of the City have been done, exist and have been performed in regular and due time, form and manner as required by law, and that the series of bonds of which this bond is one, together with all other indebtedness of the City, is within every debt or other limit prescribed by law. 17 IN WITNESS WHEREOF, The City of Lake Forest has caused this bond to be executed in its name and on its behalf by the manual or facsimile signature of its Mayor, and its corporate seal, or a facsimile thereof, to be hereunto affixed or otherwise reproduced hereon and attested by the manual or facsimile signature of its City Clerk. Dated: _______________, 2011 CERTIFICATE OF AUTHENTICATION This bond is one of the General Obligation Refunding Bonds, Series 2011A, described in the within mentioned Ordinance. WELLS FARGO BANK, N.A., as Bond Registrar By ____________________________ Authorized Signer THE CITY OF LAKE FOREST ________________________________ Mayor Attest: ________________________________ City Clerk 18 ASSIGNMENT For value received the undersigned sells, assigns and transfers unto _________ _____________________________________________________________________ the within bond and hereby irrevocably constitutes and appoints __________________ _____________________________________________________________________ attorney to transfer the said bond on the books kept for registration thereof, with full power of substitution in the premises. Dated ____________________ _______________________________ Signature Guarantee: _______________________________ 19 Section 14. Form of 2011B Bonds. The 2011B Bonds shall be issued as fully registered bonds and shall be in substantially the following form, the blanks to be appropriately completed when the 2011B Bonds are printed: No. ________ United States of America State of Illinois County of Lake THE CITY OF LAKE FOREST GENERAL OBLIGATION REFUNDING BOND, SERIES 2011B INTEREST RATE MATURITY DATE DATED DATE CUSIP . % December 15, 20__ __________, 2011 ______ ___ REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: THE CITY OF LAKE FOREST, a municipal corporation and a home rule unit of the State of Illinois situate in the County of Lake, acknowledges itself indebted and for value received hereby promises to pay to the registered owner of this bond, or registered assigns, the principal amount specified above on the maturity date specified above, and to pay interest on such principal amount from the date hereof at the interest rate per annum specified above, computed on the basis of a 360 day year consisting of twelve 30 day months and payable in lawful money of the United States of America on December 15, 2011 and semiannually thereafter on June 15 and December 15 in each year until the principal amount shall have been paid, to the registered owner of record hereof as of the first day of the calendar month of such interest payment date, by wire 20 transfer pursuant to an agreement by and between the City and the registered owner, or otherwise by check or draft mailed to the registered owner at the address of such owner appearing on the registration books maintained by the City for such purpose at the corporate trust office of Wells Fargo Bank, N.A., in the City of Chicago, Illinois, as bond registrar or its successor (the “Bond Registrar”). This bond, as to principal when due, will be payable in lawful money of the United States of America upon presentation and surrender of this bond at the corporate trust office of the Bond Registrar. The full faith and credit of the City are irrevocably pledged for the punctual payment of the principal of and interest on this bond according to its terms. This bond is one of a series of bonds issued in the aggregate principal amount of $______,000, which are authorized and issued under and pursuant to Section 6 of Article VII of the Illinois Constitution of 1970 and under and in accordance with an ordinance adopted by the City Council of the City on September 6, 2011 and entitled: “Ordinance Authorizing the Issuance of General Obligation Refunding Bonds of 2011 of The City of Lake Forest, Illinois and Providing for the Redemption of Outstanding Bonds.” The bonds of such series maturing on or after December 15, 2020 are subject to redemption prior to maturity at the option of the City and upon notice as herein provided, in such principal amounts and from such maturities as the City shall determine and by lot within a single maturity, on December 15, 2019 and on any date thereafter, at a redemption price equal to the principal amount thereof to be redeemed. The bonds of such series maturing in the year 20__ are subject to mandatory redemption, in part and by lot, on December 15 of the years and in the respective principal amounts set forth in the following table, by the application of sinking fund 21 installments, at a redemption price equal to the principal amount thereof to be redeemed: Year Principal Amount 20__ $ ,000 20__ ,000 Notice of the redemption of bonds will be mailed not less than 30 days nor more than 60 days prior to the date fixed for such redemption to the registered owners of bonds to be redeemed at their last addresses appearing on such registration books. The bonds or portions thereof specified in said notice shall become due and payable at the applicable redemption price on the redemption date therein designated, and if, on the redemption date, moneys for payment of the redemption price of all the bonds or portions thereof to be redeemed, together with interest to the redemption date, shall be available for such payment on said date, and if notice of redemption shall have been mailed as aforesaid (and notwithstanding any defect therein or the lack of actual receipt thereof by any registered owner) then from and after the redemption date interest on such bonds or portions thereof shall cease to accrue and become payable. This bond is transferable only upon such registration books by the registered owner hereof in person, or by his attorney duly authorized in writing, upon surrender hereof at the corporate trust office of the Bond Registrar together with a written instrument of transfer satisfactory to the Bond Registrar duly executed by the registered owner or by his duly authorized attorney, and thereupon a new registered bond or bonds, in the authorized denominations of $5,000 or any integral multiple thereof and of the same aggregate principal amount, maturity and interest rate as this bond shall be issued to the transferee in exchange therefor. In like manner, this bond may be 22 exchanged for an equal aggregate principal amount of bonds of the same maturity and interest rate and of any of such authorized denominations. The City or the Bond Registrar may make a charge sufficient for the reimbursement of any tax, fee or other governmental charge required to be paid with respect to the transfer or exchange of this bond. No other charge shall be made for the privilege of making such transfer or exchange. The City and the Bond Registrar may treat and consider the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment of, or on account of, the principal and interest due hereon and for all other purposes whatsoever. This bond shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been duly executed by the Bond Registrar. It is hereby certified, recited and declared that all acts, conditions and things required to be done, exist and be performed precedent to and in the issuance of this bond in order to make it a legal, valid and binding obligation of the City have been done, exist and have been performed in regular and due time, form and manner as required by law, and that the series of bonds of which this bond is one, together with all other indebtedness of the City, is within every debt or other limit prescribed by law. 23 IN WITNESS WHEREOF, The City of Lake Forest has caused this bond to be executed in its name and on its behalf by the manual or facsimile signature of its Mayor, and its corporate seal, or a facsimile thereof, to be hereunto affixed or otherwise reproduced hereon and attested by the manual or facsimile signature of its City Clerk. Dated: _______________, 2011 CERTIFICATE OF AUTHENTICATION This bond is one of the General Obligation Refunding Bonds, Series 2011B, described in the within mentioned Ordinance. WELLS FARGO BANK, N.A., as Bond Registrar By ____________________________ Authorized Signer THE CITY OF LAKE FOREST ________________________________ Mayor Attest: ________________________________ City Clerk 24 ASSIGNMENT For value received the undersigned sells, assigns and transfers unto _________ _____________________________________________________________________ the within bond and hereby irrevocably constitutes and appoints __________________ _____________________________________________________________________ attorney to transfer the said bond on the books kept for registration thereof, with full power of substitution in the premises. Dated ____________________ _______________________________ Signature Guarantee: _______________________________ 25 Section 15. Levy and Extension of Taxes. For the purpose of providing the money required to pay the interest on the 2011 Bonds when and as the same falls due and to pay and discharge the principal thereof (including mandatory sinking fund installments) as the same shall mature, there is hereby levied upon all the taxable property in the City, in each year while any of the 2011 Bonds shall be outstanding, a direct annual tax sufficient for that purpose in addition to all other taxes, as follows: Tax Levy Year A Tax Sufficient to Produce 2011 $ 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Interest or principal coming due at any time when there shall be insufficient funds on hand to pay the same shall be paid promptly when due from current funds on hand in advance of the collection of the taxes herein levied; and when said taxes shall have been collected, reimbursement shall be made to the said funds in the amounts thus advanced. As soon as this ordinance becomes effective, a copy thereof certified by the City Clerk, which certificate shall recite that this ordinance has been duly adopted, shall be filed with the County Clerk of Lake County, Illinois, who is hereby directed to ascertain the rate per cent required to produce the aggregate tax hereinbefore provided to be levied in the years 2011 to 2022, inclusive, and to extend the same for collection on the 26 tax books in connection with other taxes levied in said years, in and by the City for general corporate purposes of the City, and in said years such annual tax shall be levied and collected in like manner as taxes for general corporate purposes for said years are levied and collected and, when collected, such taxes shall be used for the purpose of paying the principal of and interest on the 2011 Bonds herein authorized as the same become due and payable. The City Council hereby determines that the levy and extension of taxes pursuant to this Section is a “legal requirement” within the meaning of Section Two of Ordinance Number 2008-08 of the City. Section 16. Taxes Levied for Payment of Prior Bonds. After the issuance of the 2011 Bonds, the Director of Finance of the City shall file with the County Clerk of Lake County certificates listing the Prior Bonds and the taxes theretofore levied for the payment of the principal of and interest on the Prior Bonds and said certificates shall direct the abatement of such taxes. Upon the redemption of the 2000 Bonds, the Director of Finance shall file with said County Clerk a certificate listing the 2000 Bonds and the taxes theretofore levied for the payment of the principal of and interest on the 2000 Bonds and said certificate shall direct the abatement of such taxes. Section 17. Escrow Deposit Agreement. The form of 2011 Escrow Deposit Agreement, dated as of September 1, 2011, by and between the City and Wells Fargo Bank, N.A., in the City of Chicago, Illinois, as Escrow Agent, on file in the office of the City Clerk and presented at this meeting, is hereby approved. The proper officers of the City are authorized and directed to execute and deliver the 2011 Escrow Deposit Agreement on behalf of the City. 27 Section 18. Application of Bond Proceeds. The proceeds of sale of the 2011 Bonds shall be deposited as follows: 1. To the 2011 Escrow Fund maintained under the 2011 Escrow Deposit Agreement, the amount, together with any other moneys of the City deposited therein, necessary to provide for the payment of the interest on and redemption price of the Prior Bonds. 2. To the 2011 Expense Fund established by this ordinance, the amount of such proceeds of sale remaining after making the foregoing deposit. Section 19. Debt Service Fund. Moneys derived from taxes herein levied are appropriated and set aside for the purpose of paying principal of and interest on the 2011 Bonds when and as the same come due. All of such moneys, and all other moneys to be used for the payment of the principal of and interest on the 2011 Bonds, shall be deposited in the “2011 Debt Service Fund”, which is hereby established as a special fund of the City and shall be administered as a bona fide debt service fund under the Internal Revenue Code of 1986 (the “Code”). A sum sufficient for the payment of the principal of and interest on the 2011 Bonds due December 15, 2011 is hereby appropriated for that purpose and shall be deposited into the 2011 Debt Service Fund. The moneys deposited or to be deposited into the 2011 Debt Service Fund, including the tax receipts derived from the taxes levied pursuant to this ordinance, are pledged as security for the payment of the principal of and interest on the 2011 Bonds. The pledge is made pursuant to Section 13 of the Local Government Debt Reform Act and shall be valid and binding from the date of issuance of the 2011 Bonds. All such tax receipts and the moneys held in the 2011 Debt Service Fund shall immediately be 28 subject to the lien of such pledge without any physical delivery or further act and the lien of such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the City irrespective of whether such parties have notice thereof. Section 20. Expense Fund. The “2011 Expense Fund”, is hereby established as a special fund of the City. Moneys in the 2011 Expense Fund shall be used for the payment of costs of issuance of the 2011 Bonds, but may hereafter be reappropriated and used for other purposes if such reappropriation is permitted under Illinois law and will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the 2011 Bonds. Section 21. Investment Regulations. No investment shall be made of any moneys in the 2011 Debt Service Fund, the 2011 Escrow Fund or the 2011 Expense Fund except in accordance with the tax covenants set forth in Section 22 of this ordinance. All income derived from such investments in respect of moneys or securities in any Fund shall be credited in each case to the Fund in which such moneys or securities are held. Any moneys in any Fund that are subject to investment yield restrictions may be invested in United States Treasury Securities, State and Local Government Series, pursuant to the regulations of the United States Treasury Department, Bureau of Public Debt, or in any tax-exempt bond that is not an “investment property” within the meaning of Section 148(b)(2) of the Code. The Director of Finance and agents designated by her are hereby authorized to submit, on behalf of the City, subscriptions for such United States Treasury Securities and to request redemption of such United States Treasury Securities. 29 Section 22. Tax Covenants. The City shall not take, or omit to take, any action lawful and within its power to take, which action or omission would cause interest on any 2011 Bond to become subject to federal income taxes in addition to federal income taxes to which interest on such 2011 Bond is subject on the date of original issuance thereof. The City shall not permit any of the proceeds of the 2011 Bonds, or any facilities financed with such proceeds, to be used in any manner that would cause any 2011 Bond to constitute a “private activity bond” within the meaning of Section 141 of the Code. The City shall not permit any of the proceeds of the 2011 Bonds or other moneys to be invested in any manner that would cause any 2011 Bond to constitute an “arbitrage bond” within the meaning of Section 148 of the Code or a “hedge bond” within the meaning of Section 149(g) of the Code. The City shall comply with the provisions of Section 148(f) of the Code relating to the rebate of certain investment earnings at periodic intervals to the United States of America. Section 23. Continuing Disclosure. For the benefit of the beneficial owners of the 2011 Bonds, the City covenants and agrees to provide to the Municipal Securities Rulemaking Board (the “MSRB”) for disclosure on the Electronic Municipal Market Access (“EMMA”) system, in an electronic format as prescribed by the MSRB, (i) an annual report containing certain financial information and operating data relating to the City and (ii) timely notices of the occurrence of certain enumerated events. All documents provided to the MSRB shall be accompanied by identifying information as prescribed by the MSRB. 30 The annual report shall be provided to the MSRB for disclosure on EMMA within 210 days after the close of the City’s fiscal year. The information to be contained in the annual report shall consist of the annual audited financial statement of the City and such additional information as noted in the Official Statement under the caption “Continuing Disclosure.” Each annual audited financial statement will conform to generally accepted accounting principles applicable to governmental units and will be prepared in accordance with standards of the Governmental Accounting Standards Board. If the audited financial statement is not available, then an unaudited financial statement shall be included in the annual report and the audited financial statement shall be provided promptly after it becomes available. The City, in a timely manner not in excess of ten business days after the occurrence of the event, shall provide notice to the MSRB for disclosure on EMMA of any failure of the City to provide any such annual report within the 210 day period and of the occurrence of any of the following events with respect to the 2011 Bonds: (1) principal and interest payment delinquencies; (2) non payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax-exempt status of the 2011 Bonds, or other events affecting the tax-exempt status of the 2011 Bonds; (7) modifications to rights of bondholders, if material; (8) bond calls, if material; (9) defeasances; (10) release, substitution or sale of property securing repayment of the 31 2011 Bonds, if material; (11) rating changes; (12) tender offers; (13) bankruptcy, insolvency, receivership or similar event of the City; (14) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (15) appointment of a successor or additional trustee or the change of name of a trustee, if material. For the purposes of the event identified in clause (13), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the City in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan or reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. It is found and determined that the City has agreed to the undertakings contained in this Section in order to assist participating underwriters of the 2011 Bonds and brokers, dealers and municipal securities dealers in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) promulgated under the Securities Exchange Act of 1934. The Director of Finance or his designee is authorized and directed to do and perform, or cause to be done or performed, for or on behalf of the City, each and every thing necessary to accomplish the undertakings of the City contained in this 32 Section for so long as Rule 15c2-12(b)(5) is applicable to the 2011 Bonds and the City remains an “obligated person” under the Rule with respect to the 2011 Bonds. The undertakings contained in this Section may be amended by the City upon a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the obligated person, or type of business conducted, provided that (a) the undertaking, as amended, would have complied with the requirements of Rule 15c2-12(b)(5) at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances and (b) in the opinion of nationally recognized bond counsel selected by the City, the amendment does not materially impair the interests of the beneficial owners of the 2011 Bonds. Section 24. Bond Registrar. The City covenants that it shall at all times retain a bond registrar with respect to the 2011 Bonds, that it will maintain at the designated office of such bond registrar a place where 2011 Bonds may be presented for payment and registration of transfer or exchange and that it shall require that the bond registrar maintain proper registration books and perform the other duties and obligations imposed upon the bond registrar by this ordinance in a manner consistent with the standards, customs and practices of the municipal securities business. The bond registrar shall signify its acceptance of the duties and obligations imposed upon it by this ordinance by executing the certificate of authentication on any 2011 Bond, and by such execution the bond registrar shall be deemed to have certified to the City that it has all requisite power to accept, and has accepted such duties and obligations not only with respect to the 2011 Bond so authenticated but with respect to all the 2011 Bonds. The bond registrar is the agent of the City and shall not be liable in 33 connection with the performance of its duties except for its own negligence or default. The bond registrar shall, however, be responsible for any representation in its certificate of authentication on the 2011 Bonds. The City may remove the bond registrar at any time. In case at any time the bond registrar shall resign or shall be removed or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the bond registrar, or of its property, shall be appointed, or if any public officer shall take charge or control of the bond registrar or of its property or affairs, the City covenants and agrees that it will thereupon appoint a successor bond registrar. The City shall mail notice of any such appointment made by it to each registered owner of 2011 Bonds within twenty days after such appointment. Section 25. Book-Entry System. In order to provide for the initial issuance of the 2011 Bonds in a form that provides for a system of book-entry only transfers, the ownership of one fully registered 2011 Bond for each maturity of each series, in the aggregate principal amount of such maturity, shall be registered in the name of Cede & Co., as a nominee of The Depository Trust Company, as securities depository for the 2011 Bonds. The Director of Finance is authorized to execute and deliver on behalf of the City such letters to, or agreements with, the securities depository as shall be necessary to effectuate such book-entry system. In case at any time the securities depository shall resign or shall become incapable of acting, then the City shall appoint a successor securities depository to provide a system of book-entry only transfers for the 2011 Bonds, by written notice to the predecessor securities depository directing it to notify its participants (those persons 34 for whom the securities depository holds securities) of the appointment of a successor securities depository. If the system of book-entry only transfers for the 2011 Bonds is discontinued, then the City shall issue and the bond registrar shall authenticate, register and deliver to the beneficial owners of the 2011 Bonds, bond certificates in replacement of such beneficial owners’ beneficial interests in the 2011 Bonds, all as shown in the records maintained by the securities depository. Section 26. Defeasance and Payment of Bonds. (A) If the City shall pay or cause to be paid to the registered owners of the 2011 Bonds, the principal, and interest due or to become due thereon, at the times and in the manner stipulated therein and in this ordinance, then the pledge of taxes, securities and funds hereby pledged and the covenants, agreements and other obligations of the City to the registered owners and the beneficial owners of the 2011 Bonds shall be discharged and satisfied. (B) Any 2011 Bonds or interest installments appertaining thereto, whether at or prior to the maturity or the redemption date of such 2011 Bonds, shall be deemed to have been paid within the meaning of paragraph (A) of this Section if (1) in case any such 2011 Bonds are to be redeemed prior to the maturity thereof, there shall have been taken all action necessary to call such 2011 Bonds for redemption and notice of such redemption shall have been duly given or provision shall have been made for the giving of such notice, and (2) there shall have been deposited in trust with a bank, trust company or national banking association acting as fiduciary for such purpose either (i) moneys in an amount which shall be sufficient, or (ii) “Federal Obligations” as defined in paragraph (C) of this Section, the principal of and the interest on which when due will provide moneys which, together with any moneys on deposit with such fiduciary at the 35 same time for such purpose, shall be sufficient, to pay when due the principal of and interest due and to become due on said 2011 Bonds on and prior to the applicable redemption date or maturity date thereof. (C) As used in this Section, the term “Federal Obligations” means (i) non- callable, direct obligations of the United States of America, (ii) non-callable and non- prepayable, direct obligations of any agency of the United States of America, which are unconditionally guaranteed by the United States of America as to full and timely payment of principal and interest, (iii) non-callable, non-prepayable coupons or interest installments from the securities described in clause (i) or clause (ii) of this paragraph, which are stripped pursuant to programs of the Department of the Treasury of the United States of America, or (iv) coupons or interest installments stripped from bonds of the Resolution Funding Corporation. Section 27. Ordinance to Constitute a Contract. The provisions of this ordinance shall constitute a contract between the City and the registered owners of the 2011 Bonds. Any pledge made in this ordinance and the provisions, covenants and agreements herein set forth to be performed by or on behalf of the City shall be for the equal benefit, protection and security of the owners of any and all of the 2011 Bonds of the same series. All of the 2011 Bonds, regardless of the time or times of their issuance, shall be of equal rank without preference, priority or distinction of any of the 2011 Bonds over any other thereof except as expressly provided in or pursuant to this ordinance. This ordinance shall constitute full authority for the issuance of the 2011 Bonds and to the extent that the provisions of this ordinance conflict with the provisions of any other ordinance or resolution of the City, the provisions of this ordinance shall control. If any section, paragraph or provision of this ordinance shall be held to be 36 invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any of the remaining provisions of this ordinance. In this ordinance, reference to an officer of the City includes any person holding that office on an interim basis and any person delegated the authority to act on behalf of such officer. Section 28. Publication. The City Clerk is hereby authorized and directed to publish this ordinance in pamphlet form and to file copies thereof for public inspection in her office. 37 List Names Section 29. Effective Date. This ordinance shall become effective upon its passage and approval. Passed and adopted this 6th day of September, 2011, by roll call vote as follows: Ayes: Nays: Approved: September 6, 2011 ________________________________ Mayor Published in pamphlet form: September 7, 2011 (SEAL) Attest: ________________________________ City Clerk 38 CERTIFICATE I, Cathryn Buerger, City Clerk of The City of Lake Forest, Illinois, hereby certify that the foregoing ordinance entitled: “Ordinance Authorizing the Issuance of General Obligation Refunding Bonds of 2011 of The City of Lake Forest, Illinois and Providing for the Redemption of Outstanding Bonds,” is a true copy of an original ordinance that was duly passed and adopted by the recorded affirmative votes of a majority of the members of the City Council of the City at a meeting thereof that was duly called and held at 7:30 p.m. on September 6, 2011, in the Council Chambers at City Hall, 220 East Deerpath, and at which a quorum was present and acting throughout, and that said copy has been compared by me with the original ordinance signed by the Mayor on September 6, 2011, and thereafter published in pamphlet form on September 7, 2011 and recorded in the Ordinance Book of the City and that it is a correct transcript thereof and of the whole of said ordinance, and that said ordinance has not been altered, amended, repealed or revoked, but is in full force and effect. I further certify that the agenda for said meeting included the ordinance as a matter to be considered at the meeting and that said agenda was posted at least 48 hours in advance of the holding of the meeting in the manner required by the Open Meetings Act, 5 Illinois Compiled Statutes 120. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the City, this ________ day of September, 2011. ________________________________ City Clerk (SEAL) 39 40 41 42 43 44 45 46 47 48 State And Local Government Ratings Are Not Directly Constrained By That Of The U.S. Sovereign Primary Credit Analyst: Gabriel Petek, CFA, San Francisco (1) 415-371-5042; gabriel_petek@standardandpoors.com Secondary Contacts: Robin Prunty, New York (1) 212-438-2081; robin_prunty@standardandpoors.com Steven J Murphy, New York (1) 212-438-2066; steve_murphy@standardandpoors.com Table Of Contents Ability To Maintain Stronger Credit Characteristics Than The Sovereign In A Stress Scenario A Predictable Institution Framework, Financial Flexibility, And Independent Treasury Management Criteria Support Possibility Of 'AAA' State And Local Government Ratings Related Criteria And Research August 8, 2011 www.standardandpoors.com/ratingsdirect 1 883797 | 300001317 49 State And Local Government Ratings Are Not Directly Constrained By That Of The U.S. Sovereign Despite Standard & Poor's Ratings Services' downgrade of the U.S. sovereign debt rating to AA+/Negative/A-1+, we may still assign a 'AAA' rating to some state and local governments. We do not directly link our ratings on U.S. state and local governments to that of the U.S. sovereign debt rating for reasons outlined in our criteria. However, we recognize generally that U.S. state and local governments'economic performance is frequently similar to the nation and they share responsibility for some spending items with the federal government. Yet individual state and local governments' funding interdependencies with the federal government vary considerably. A minority of state and local obligors rated by Standard & Poor's have achieved the highest long-term rating of 'AAA'. We expect that many of these obligors, particularly those with relatively low levels of funding interdependencies with the federal government or those that, in our view, are likely to manage declines in federal funding without weakening their credit profile, should be able to retain ratings above the U.S. sovereign rating if we would otherwise assign ratings above the U.S. sovereign rating based on our view of other rating factors. However, in light of the potential for common economic and credit environments between the U.S. and state and local governments, we expect that in most instances in which state and local governments have ratings above that of the U.S., the differential will be limited to one notch. Overview •It is possible for state and local governments to have higher ratings than the U.S. sovereign rating, most likely by no more than one notch. •We derive our credit ratings by evaluating a borrower's individual credit factors based on our credit rating criteria. •A factor in rating a state or local government above the U.S. is whether it is insulated from negative federal intervention in fiscal management. Our credit rating criteria allow for a higher rating on a state or local government than on the sovereign if, in our view, the state or local government demonstrates the following characteristics: •The ability to maintain stronger credit characteristics than the sovereign in a stress scenario, •An institutional framework that is predictable and that is likely to limit the risk of negative sovereign intervention, and •The projected ability to mitigate negative sovereign intervention by a high degree of financial flexibility and independent treasury management. Pursuant to our criteria, the fiscal autonomy, political independence, and generally strong credit cultures of U.S state and local governments can support ratings above that of the U.S. sovereign. Standard & Poor’s | RatingsDirect on the Global Credit Portal | August 8, 2011 2 883797 | 300001317 50 Ability To Maintain Stronger Credit Characteristics Than The Sovereign In A Stress Scenario A central feature of our U.S. public finance criteria is the independence of individual state and local governments from the federal government. In part, this is based on our view of the Tenth Amendment to the U.S. Constitution, which provides that rights not expressively given to the federal government remain with the states. Although our ratings reflect the role of the federal government in state and local finances and economies, we believe that this decentralized governmental structure in the U.S. suggests that we also analyze state and local government credit quality independent of the federal impact. When viewing credits on a standalone basis, we expect that some state and local governments in the U.S. are capable of maintaining relatively consistent credit quality even through a period of stress at the sovereign level. Compared with many of their peers on a global basis, U.S. state and local governments function with a high level of revenue independence. Specifically, most state revenues (including almost all discretionary revenue) are derived within the states themselves, i.e., they do not come from the federal government. Revenues are even less linked to the federal government at the local level (although some state-shared revenues originate with the federal government). In addition, historically we have found that state and local governments generally have distinct credit cultures backed by well-established frameworks that provide for enforcement of important public finance laws. We view this to be important in the U.S. public finance setting because we predominantly assign issue ratings as opposed to issuer credit ratings. Debt issues in the U.S. municipal market tend to be backed by dedicated taxes, revenues, or fees and include specific protections that are legally enforceable in the U.S. context. Given the depth and magnitude of the U.S. economy, state and local governments operate within a wide range of disparate economic bases throughout the country. We have found that some state or local economies regularly perform differently from that of the U.S. as a whole. Our criteria describe how we analyze the attributes of state and local economies and incorporate our analysis into our ratings. Beyond analyzing economies in isolation, however, we have observed that some state or local governments have more favorable balances between resources and responsibilities (i.e., they may be less leveraged) than the federal government. We believe that certain state and local governments have historically shown a greater commitment to fiscal discipline or a more resilient local economy, which may be reflected in ratings higher than that of the U.S. government. In a minority of cases (3.9% of U.S. public finance ratings), state and local governments currently demonstrate what we consider to be particularly strong credit characteristics consistent with our highest rating and, thus, are rated 'AAA'. Because we have assigned these ratings based on our view of individual rating factors pursuant to our criteria, we believe these ratings are appropriate notwithstanding the downgrade of the U.S. sovereign debt rating. A Predictable Institution Framework, Financial Flexibility, And Independent Treasury Management In our view, the institutional framework for U.S. public finance is among the most stable and predictable in the world. We believe this is primarily a result of the constitutional separation of power between the central and sub-national levels of government that is intended to restrain intervention in state and local government administration. U.S. state and local governments enjoy considerable financial autonomy from federal intervention. State—and in www.standardandpoors.com/ratingsdirect 3 883797 | 300001317 State And Local Government Ratings Are Not Directly Constrained By That Of The U.S. Sovereign 51 many cases local--governments have authority to establish and maintain laws pertaining to tax rates and collections, as well as the ability to add new taxes and other forms of revenue generation. In practice, receipt of federal funding typically requires a state or local government to satisfy various mandates, such as providing certain levels of service. And yet, participation in some of the programs for which federal funding is provided is voluntary. This includes Medicaid, the largest federal-state jointly financed social service. In addition, U.S. state and local governments' treasury management is independent from the U.S. federal government. Although we consider stress scenarios in which federal disbursements could be delayed or reduced, thereby inflicting cash flow disruptions, state and local government obligors with 'AAA' ratings have, in our view, strong access to liquidity, likely allowing them to bridge such episodes. Criteria Support Possibility Of 'AAA' State And Local Government Ratings Participation in the U.S. economy and legal system provides a platform in which state and local governmental obligors can generally manage their finances and debt portfolios with considerable independence and without material risk of negative sovereign intervention. In light of this independence, our ratings largely reflect our view of local economic characteristics or state-level laws that may impede or strengthen state and local credit quality to varying degrees. Credit implications from these factors are detailed in our relevant criteria documents. Related Criteria And Research •USPF Criteria: GO Debt, Oct. 12, 2006 •USPF Criteria: State Ratings Methodology, Jan. 3, 2011 •Methodology: Rating A Regional Or Local Government Higher Than Its Sovereign, Sept. 9, 2009 •Where U.S. Public Finance Ratings Could Head In The Wake Of The Federal Fiscal Crisis, July 21, 2011 •U.S. State Ratings And Outlooks: Current List Standard & Poor’s | RatingsDirect on the Global Credit Portal | August 8, 2011 4 883797 | 300001317 State And Local Government Ratings Are Not Directly Constrained By That Of The U.S. Sovereign 52 S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. 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All rights reserved. www.standardandpoors.com/ratingsdirect 5 883797 | 300001317 53 Acceptance of a Donation from the Conway Park Owners Association to be used toward the Construction of a Pedestrian Bridge at the Dalitsch Pond The City has received a donation of $30,000 from the Conway Park Owners Association (CPOA) to be used toward the construction of a pedestrian bridge within the Dalitsch Pond site located immediately north of the Municipal Services Building. Currently a walking path is being constructed around the four acre pond site and there is a need for two bridges to complete the “loop” around the pond. One bridge has already been constructed by the boy scouts (as an Eagle Scout project) which spans (12 ft.) a small creek. The bridge that the donation will go towards is a 45 ft. span constructed of laminated wood and would be delivered to the site this fall. The bridge would be placed on concrete abutments that would be installed prior to the delivery of the bridge. Since the bridge project is being managed by the City, acceptance of the donation by the City Council is required. Recommended Action: Accept a donation of $30,000 from the Conway Park Owners Association to be used toward the construction of a pedestrian bridge within the Dalitsch Pond Walking Path Project. 54 Dalitsch Pond Pedestrian Bridge 55 Dalitsch Pond Pedestrian Bridge Bridge Location 56