Industrial Development Authority of the County

NOTICE OF SALE

$26,405,000*

INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PRINCE WILLIAM Prince William County Facilities Revenue and Refunding Bonds Series 2016A (County Facilities Projects)

Electronic Bids, BiDCOMP/Parity Competitive Bidding System (“BiDCOMP/Parity”) only, will be received by the Board of Directors of the Industrial Development Authority of the County of Prince William (Virginia) (the “IDA”) until 11:00 o’clock a.m., Prince William, Virginia time, on

Tuesday March 1, 2016* for the purchase of IDA’s $26,405,000* Prince William County Facilities Revenue and Refunding Bonds Series 2016A (County Facilities Projects) (the “Bonds”), dated the date of their delivery and maturing, subject to the right of prior redemption as hereinafter set forth, on the 1st day of October in the following years and in the following amounts, respectively:

Initial Maturity Schedule*

Maturity Maturity Date Principal Date Principal (October 1) Amount (October 1) Amount 2016 $1,725,000 2026 $1,175,000 2017 1,735,000 2027 1,175,000 2018 1,750,000 2028 1,175,000 2019 1,770,000 2029 1,175,000 2020 1,800,000 2030 1,175,000 2021 1,175,000 2031 1,175,000 2022 1,175,000 2032 1,175,000 2023 1,175,000 2033 1,175,000 2024 1,175,000 2034 1,175,000 2025 1,175,000 2035 1,175,000

IDA reserves the right to change the date for receipt of bids (the “Scheduled Bid Date”) in accordance with the section of this Notice of Sale entitled “Change of Bid Date and Closing Date; Other Changes to Notice of Sale.”

* Preliminary, subject to change 1

BID PARAMETERS TABLE

INTEREST PRICING Dated Date: Date of Delivery Max. Aggregate Bid Price: 103% Anticipated Delivery Date: April 5, 2016 Min. Aggregate Bid Price: 122%

Interest Payments Dates: April 1 and October 1 High Coupon per Maturity 5.0%

Minimum Coupon per 10/1/16-10/1/26 – none First Interest: 10/1/2016 Maturity 10/1/2027-10/1/2035 3.50%

Coupon Multiples: 1/8 or 1/20 of 1%

Split Coupons: Not Allowed PROCEDURAL Bids due March 1, 2016 at PRINCIPAL Sale Date and Time: 11:00 AM Prince William, Virginia Time

On and after October 1, Electronic bids through Optional Redemption: 2027, callable on October 1, Bid Submission: PARITY Only 2026 and thereafter at par

Post-bid Principal Increases 10% All or None? Yes in Aggregate:

Post-bid Principal 10% Bid Award Method: Lowest TIC Reductions in Aggregate:

1% of aggregate par amount, Any two or more consecutive as more fully described on Term Bonds: maturities may be designated Good Faith Deposit: page 5, under "Good Faith as term bonds Deposit"

Changes to Initial Maturity Schedule

The Initial Maturity Schedule set forth above represents an estimate of the principal amount of Bonds to be sold. IDA hereby reserves the right to change the Initial Maturity Schedule, based on market conditions immediately prior to the sale, by announcing any such change not later than one hour prior to the scheduled sale time, on the date for receipt of bids via TM3 (www.tm3.com). The resulting schedule of maturities will become the “Bid Maturity Schedule.” If no such change is announced, the Initial Maturity Schedule will become the Bid Maturity Schedule.

Changes to Bid Maturity Schedule

IDA hereby further reserves the right to change the Bid Maturity Schedule after the determination of the winning bidder, by increasing or decreasing the aggregate principal amount of the Bonds, subject to the limitation of no more than a 10% increase or decrease in the aggregate principal amount of the Bonds.

THE SUCCESSFUL BIDDER MAY NOT WITHDRAW ITS BID OR CHANGE THE INTEREST RATES BID OR THE INITIAL REOFFERING TERMS (AS HEREAFTER DEFINED) AS A RESULT OF ANY CHANGES MADE TO THE PRINCIPAL AMOUNTS WITHIN THESE LIMITS. The dollar amount bid by the successful bidder will be adjusted to reflect any adjustments in the final aggregate principal amount of the Bonds. Such adjusted bid price will reflect changes in the dollar amount of the underwriters’ discount and original issue discount/premium, if any, but will not change the selling compensation per $1,000 of par amount of Bonds from the selling compensation that would have been received based on the purchase price in the winning bid and the Initial Reoffering Terms. The interest rates specified by the successful bidder for the various maturities at the Initial Reoffering Terms will not change. IDA anticipates that the final annual principal amounts and the final aggregate principal amount of the Bonds will be communicated to the successful bidder within twenty-four hours of IDA’s receipt of the initial public offering prices and yields of the Bonds (the “Initial Reoffering Terms”).

Book-Entry System

The Bonds will be issued by means of a book-entry system with no physical distribution of bond certificates made to the public. One bond certificate for each maturity will be issued to The Depository Trust Company, New York, New York (“DTC”), and immobilized in its custody. The book-entry system will evidence beneficial ownership interests of the Bonds in the principal amount of $5,000 and any multiple thereof, with transfers of beneficial ownership interests effected on the records of DTC participants and, if necessary, in turn by DTC pursuant to rules and procedures established by DTC and its participants. The successful bidder, as a condition to delivery of the Bonds, shall be required to deposit the bond certificates with DTC, registered in the name of Cede & Co., nominee of DTC. Interest on the Bonds will be payable on October 1, 2016 and semiannually thereafter on April 1 and October 1, and principal of and any redemption premium on the Bonds will be payable at maturity or upon prior redemption, to DTC or its nominee as registered owner of the Bonds. Transfer of principal, interest and any redemption premium payments to participants of DTC will be the responsibility of DTC, and transfer of principal, interest and any redemption premium payments to beneficial owners of the Bonds by participants of DTC will be the responsibility of such participants and other nominees of beneficial owners. IDA will not be responsible or liable for such transfers of payments or for maintaining, supervising or reviewing the records maintained by DTC, its participants or persons acting through such participants.

In the event that (a) DTC determines not to continue to act as securities depository for the Bonds or (b) IDA determines that continuation of the book-entry system of evidence and transfer of ownership of the Bonds would adversely affect the interests of the beneficial owners of the Bonds, IDA will discontinue the book-entry system with DTC. If IDA fails to select another qualified securities depository to replace DTC, IDA will deliver replacement Bonds in the form of fully registered certificates.

The Bonds

The Bonds are limited obligations of IDA payable solely from the revenues pledged under the provisions of a Master Trust Agreement, dated as of April 1, 2016 and a First Supplemental Trust Agreement, dated as of April 1, 2016 (collectively, the “Trust Agreement”) each between IDA and U.S. Bank National Association, as trustee. The revenues pledged are derived from installment purchase payments made by Prince William County, Virginia (the “County”), under an Installment Purchase Contract, dated as of April 1, 2016 between IDA and the County (the “Contract”) pursuant to which IDA will sell to the County IDA’s interests in (i) a project to construct a building to serve as a central district police station (the “Central District Police Station Project”) for the County, and (ii) certain projects (the “2005 COPs Projects”) refinanced by the County’s Refunding Lease Participation Certificates, Series 2005 (Prince William County Facilities) (the “2005 COPs”). The County’s obligation to make payments under the Contract in any fiscal year of the County is subject to and contingent upon the annual appropriation of funds by the Board of County Supervisors of the County for such purpose but is otherwise unconditional. Neither the faith and credit of the Commonwealth of Virginia, nor any political subdivision thereof (including IDA and the County), are pledged to the payment of the principal of or the interest or premium, if any, on the Bonds.

The Bonds are being issued by IDA to provide financing to (i) construct and equip the Central District Police Station Project, (ii) refund and redeem prior to their respective maturities certain outstanding 2005 COPs, and (iii) to pay costs of issuance for the Bonds.

Term Bonds

The successful bidder may designate two or more of the consecutive serial maturities as any number of term bond maturities equal in aggregate principal amount, and with sinking fund requirements corresponding, to such designated serial maturities.

Optional Redemption

Except under the circumstances described in the following paragraph, the Bonds maturing on or before October 1, 2026 are not subject to optional redemption prior to their stated date of maturity. The Bonds maturing after October 1, 2026 are subject to optional redemption at the option of the Authority, in whole or in part, at any time on or after October 1, 2026 at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus interest accrued thereon to the redemption date.

Extraordinary Optional Redemption

The Bonds are subject to extraordinary optional redemption, in whole or in part, at a price equal to the principal amount thereof, together with interest thereon accrued to the date of redemption, upon the exercise by the Board of County Supervisors of the County of its option to prepay all or a portion of the purchase price established in the Contract when proceeds of an insurance or condemnation award are received and such proceeds are not used to repair, reconstruct or restore the Central District Police Station Project or the 2005 COPs Projects or portions thereof that is subject of such an insurance or condemnation award.

Electronic Bidding and Bidding Procedures

Registration to Bid

All prospective bidders must be contracted customers of i-Deal LLC’s BiDCOMP/Parity Competitive Bidding System. If you do not have a contract with BiDCOMP/Parity, call (212) 404-8102 to become a customer. By submitting a bid for the Bonds, a prospective bidder represents and warrants to IDA that such bidder’s bid for the purchase of the Bonds (if a bid is submitted in connection with the sale) is submitted for and on behalf of such prospective bidder by an officer or agent who is duly authorized to bind the prospective bidder to a legal, valid and enforceable contract for the purchase of the Bonds. By contracting with BiDCOMP/Parity a prospective bidder is not obligated to submit a bid in connection with the sale.

IF ANY PROVISIONS OF THIS NOTICE OF SALE SHALL CONFLICT WITH INFORMATION PROVIDED BY BiDCOMP/Parity AS APPROVED PROVIDER OF ELECTRONIC BIDDING SERVICES, THIS NOTICE OF SALE, AS IT MAY BE AMENDED BY IDA AS DESCRIBED WITHIN, SHALL CONTROL. Further information about BiDCOMP/Parity, including any fee charged, may be obtained from BiDCOMP/Parity at (212) 404-8102.

Disclaimer

BiDCOMP/Parity are the sole responsibility of the bidders; and IDA is not responsible, directly or indirectly, for any of such costs or expenses. If a prospective bidder encounters any difficulty in registering to bid or submitting, modifying or withdrawing a bid for the Bonds, it should telephone BiDCOMP/Parity and notify Public Financial Management, Inc., the County’s financial advisor, by telephone at (703) 741-0175. After receipt of bids is closed, IDA through BiDCOMP/Parity will indicate the apparent successful bidder. Such message is a courtesy only for viewers, and does not constitute the award of the Bonds. Each bid will remain subject to review by IDA to determine its true interest cost rate and compliance with the terms of this Notice of Sale.

Bidding Procedures

Bids must be submitted electronically for the purchase of the Bonds (all or none) by means of the Industrial Development Authority of the County of Prince William AON Bid Form (the “Bid Form”) via BidCOMP/Parity. Bids must be communicated electronically to BidCOMP/Parity by 11:00 a.m., Prince William, Virginia time on the Scheduled Bid Date unless postponed as described herein (see “Change of Bid Date and Closing Date”). Prior to that time, a prospective bidder may input and save the proposed terms of its bid in BiDCOMP/Parity. Once the final bid has been saved in BiDCOMP/Parity, the bidder may select the final bid button in BiDCOMP/Parity to submit the bid to BidCOMP/Parity. Once the bids are released electronically via BidCOMP/Parity to IDA, each bid will constitute an irrevocable offer to purchase the Bonds on the terms therein provided. For purposes of the electronic bidding process, the time as maintained on BiDCOMP/Parity shall constitute the official Prince William, Virginia time. For information purposes only, bidders are requested to state in their bids the true interest cost to IDA, as described under “Award of Bonds” below, represented by the rate or rates of interest and the bid price specified in their respective bids.

No bids will be accepted in written form, by facsimile transmission or in any other medium or on any system other than by means of the Bid Form via BiDCOMP/Parity. No bid will be received after the time for receiving such bids specified above.

Good Faith Deposit

After receipt of bids is closed and prior to the award (no later than 4:00 p.m., Prince William, Virginia time), the apparent successful bidder indicated on BidCOMP/Parity must submit a good faith deposit (“Deposit”) for 1% of the amount of the Bid Maturity Schedule to the County by wire transfer. The award to the apparent successful bidder is contingent upon receipt of the Deposit and the Bonds will not be awarded to such bidder until the County has confirmation of receipt of the Deposit.

Wire instructions for the Deposit are as follows: RBK U.S. Bank N.A. ABA 091000022 ACCT 173103781824 OBI #275038000 – IDA Pr. William Rev & Ref Bds, 2016A

Beneficiary Account Address: 777 E. Wisconsin Avenue Milwaukee, WI 53202-5300 Attn: Karalee K. Herrin Award of Bonds

Award or rejection of bids will be made by IDA, with the approval of the County, prior to 4:00 p.m., Prince William, Virginia time on the date of receipt of bids. ALL BIDS SHALL REMAIN FIRM UNTIL 4:00 P.M., PRINCE WILLIAM, VIRGINIA TIME, ON THE DATE OF RECEIPT OF BIDS. An award of the Bonds, if made, will be made by IDA within such five-hour period of time (11:00 a.m. – 4:00 p.m.).

The Bonds will be awarded to the bidder offering to purchase the Bonds at the lowest “True or Canadian” interest cost, such cost to be determined by doubling the semiannual interest rate (compounded semiannually) necessary to discount to the price bid the payments of the principal of and the interest on the Bonds from their payment dates to their date of delivery.

Change of Bid Date and Closing Date; Other Changes to Notice of Sale

IDA reserves the right to postpone, from time to time, the date established for the receipt of bids and will undertake to announce any such change via TM3 (www.tm3.com).

Any postponement of the bid date will be announced via TM3 not later than one hour prior to the scheduled sale time on the announced date for receipt of the bids. An alternative bid date and time will be announced via TM3 18 hours prior to such alternative bid date.

On such alternative bid date and time, IDA will accept bids for the purchase of the Bonds, such bids to conform in all respects to the provisions of this Notice of Sale, except for the changes in the date and time for bidding and any other changes announced via TM3 at the time the bid date and time are announced.

IDA may change the scheduled delivery date for the Bonds by notice given in the same manner as set forth for a change in the date for the receipt of bids.

IDA reserves the right to otherwise change this Notice of Sale. IDA anticipates that it would communicate any such changes via TM3 by 4:00 p.m., Prince William, Virginia time on the date prior to the scheduled date for receipt of bids but no later than thirty minutes prior to the sale time on the scheduled date for receipt of bids.

Conflict Waiver Sidley Austin LLP is serving as Bond Counsel in connection with the issuance and sale of the Bonds. By placing a bid, each bidder represents that it understands that Sidley Austin LLP, in its capacity as Bond Counsel, represents the County and IDA, and the successful bidder agrees to waive any conflict of interest that Sidley Austin LLP’s involvement in connection with the issuance and sale of the Bonds to such successful bidder presents.

Undertakings of the Successful Bidder

The successful bidder shall make a bona fide public offering of all of the Bonds to the general public (excluding bond houses, brokers, or similar persons acting in the capacity of underwriters or wholesalers who are not purchasing for their own account as ultimate purchasers without a view to resell) and will, within 30 minutes after being notified of the award of the Bonds, advise IDA in writing (via facsimile transmission) of the Initial Reoffering Terms. Prior to the delivery of the Bonds, the successful bidder will furnish a certificate acceptable to Bond Counsel as to the “issue price” of the Bonds. It will be the responsibility of the successful bidder to institute such syndicate reporting requirements, to make such investigation, or otherwise to ascertain the facts necessary to enable it to make such certification with reasonable certainty.

Delivery

The Bonds will be delivered on or about April 5, 2016 in New York, New York, at DTC against payment of the purchase price therefor (less the amount of the Deposit) in Federal Reserve funds.

The approving opinion of Sidley Austin LLP, Washington, D.C., in substantially the form appearing in the Preliminary Official Statement, will be furnished without cost to the successful bidder. There will also be furnished the usual closing papers, including certifications as to the Official Statement and no-litigation.

CUSIP Numbers

CUSIP numbers are to be applied for by the successful bidder with respect to the Bonds. IDA will assume no obligation for the assignment of such numbers or for the correctness of such numbers, and no error with respect thereto shall constitute cause for failure or refusal by the successful bidder to accept delivery or make payment for the Bonds.

Official Statements

Copies of the Preliminary Official Statement may be obtained without cost via the Internet at www.i- dealprospectus.com. The Preliminary Official Statement at its date was “deemed final” by IDA for purposes of SEC Rule 15c2-12 but is subject to revision, amendment and completion.

After the award of the Bonds, IDA will prepare copies of the Official Statement (no more than 300) and will include therein such additional information concerning the reoffering of the Bonds as the successful bidder may reasonably request; provided, however, that IDA will not include in the Official Statement an “NRO” (“not reoffered”) designation with respect to any maturity of the Bonds. The successful bidder will be responsible to IDA in all respects for the accuracy and completeness of information provided by such successful bidder with respect to such reoffering. IDA expects the successful bidder to deliver copies of such Official Statement to persons to whom such bidder initially sells the Bonds and to The Electronic Municipal Market Access System (“EMMA”) administered by the Municipal Securities Rulemaking Board (“MSRB”). The successful bidder will be required to acknowledge receipt of such Official Statement, to certify that it has made delivery of the Official Statement to EMMA and to acknowledge that IDA expects the successful bidder to deliver copies of such Official Statement to persons to whom such bidder initially sells the Bonds and to certify that the Bonds will only be offered pursuant to such Official Statement and only in states where the offer is legal. The successful bidder will be responsible to IDA in all respects for the accuracy and completeness of information provided by such successful bidder with respect to such reoffering.

The Securities and Exchange Commission adopted Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (the “Rule”). In general, the Rule prohibits an underwriter from purchasing or selling municipal securities, such as the Bonds, unless it has determined that the issuer of such securities has committed to provide annually certain information, including audited financial information, and notice of various events described in the Rule, if material. The County will provide to EMMA annual information respecting the County, including audited financial statements. In addition, the County will provide to EMMA notice of the occurrence of any events described in the Rule if material.

Official Statements will be provided within seven (7) business days after the date of the award of the Bonds in such quantities as may be necessary for the successful bidder’s regulatory compliance.

Further information will be furnished upon application to Public Financial Management, Inc., at (703) 741- 0175.

Reservation of Rights

The right to reject any or all bids and to waive any irregularity or informality in any bid is reserved.

INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PRINCE WILLIAM

By: Frank J. Mejia, Chairman

7 This Preliminary Official Statement and the information contained herein are subject to completion or amendment. The Series 2016A Bonds may not be sold nor may an offer to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Series 2016A Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. read theentire OfficialStatementforinformation essentialtothemaking ofaninformedinvestment decision. April 5,2016. 2016A Bondsareexpectedto beavailablefordeliverythroughthefacilitiesofDTC inNewYork,onorabout McGuireWoods LLP, McLean, Virginia, and fortheCounty by Michelle R. Robl, Esquire, County Attorney. TheSeries by SidleyAustinLLP,Washington, D.C.,BondCounsel.Certainlegalmatterswill bepasseduponfortheAuthorityby pledged tothepaymentofSeries2016ABondsor theinterestthereon.TheAuthorityhasnotaxingpower. or restriction,noristhefullfaithandcreditof County,theAuthorityorCommonwealthofVirginia other politicalsubdivisionthereof,withinthemeaning ofanyconstitutional,charter,orstatutorydebtlimit including termssimilartotheofInstallmentPurchase Contract. bonds issuedundertheMasterTrustAgreementwillbe secured onaparitybypaymentsdueunderpaymentagreements of fundsbytheBoardCountySupervisors forsuchpurpose.TheSeries2016ABondsandanyadditional each fiscalyearoftheCountyisabsoluteandunconditional butsubjectto and contingentupontheannualappropriation and the2005COPsProjects.TheobligationofCounty tomakepaymentsundertheInstallmentPurchaseContractin pursuant towhichtheAuthorityhassoldCountyAuthority’sinterestinCentralDistrictPoliceStation Project Purchase Contract,datedasofApril1,2016,betweentheAuthorityandCounty(the“InstallmentContract”), and paycostsofissuancetheSeries2016ABonds. (Prince WilliamCountyFacilities),whichrefinanced certainCountyfacilityprojects(the“2005COPsProjects”)and (iii) Project”), (ii)refundcertainoutstandingmaturitiesoftheCounty’sRefundingLeaseParticipationCertificates,Series 2005 by PrinceWilliamCounty,Virginia(the“County”),asacentraldistrictpolicestation“CentralDistrictPolice Station and interestdueontheSeries2016ABondswillbemadedirectlytoDTC. purchased. SolongasDTCoritsnomineeistheregisteredownerofSeries2016ABonds,paymentsprincipal of Purchasers willnotreceivephysicaldeliveryofcertificatesrepresentingtheirownershipinterestintheSeries2016A Bonds Series 2016ABondswillbemadeinbook-entryformonlythedenominationof$5,000oranyintegralmultiple thereof. York, NewYork(“DTC”),whichwillactassecuritiesdepositoryfortheSeries2016ABonds.Individualpurchases ofthe fully registeredbondsinthenameofCede&Co.,asnomineeDTC,TheDepositoryTrustCompany, New U.S. BankNationalAssociation,astrustee(insuchcapacity,the“Trustee”).TheSeries2016ABondswillbe issued as April 1,2016,eachbetweentheIndustrialDevelopmentAuthorityofCountyPrinceWilliam(the“Authority”) and April 1,2016(the“MasterTrustAgreement”),assupplementedbytheFirstSupplementalAgreement,dated asof to maturityasmorefullydescribedherein. 2016A Bondsforcertainbondholders. further informationregardingcertainprovisionsoftheCodethatmayaffecttaxtreatmentinterestonSeries all taxationbytheCommonwealthofVirginiaoranypoliticalsubdivisionthereof.See“TAXMATTERS”hereinfor income, includinganyprofitmadeonthesalethereof,fromSeries2016ABondsshallatalltimesbeexempt the grossincomeofownersthereofforfederaltaxpurposes.UnderEnablingAct(asdefinedherein), subject toconditionsdescribedin“ and withtherequirementsofInternalRevenueCode1986,asamended(the“Code”),describedherein, * Preliminary, subjectto change. Dated: March_, 2016 Dated: DateofDelivery NEW ISSUES This coverpagecontainscertain informationforquickreferenceonly.Itisnotasummary ofthisissue.Investorsmust The Series2016ABondsarebeingofferedfordeliverywhen, asandifissuedsubjecttotheapprovaloflegality The Series2016ABondsarenotadebtofCounty, theAuthority,CommonwealthofVirginiaorany The Series2016ABondsarepayablefrominstallmentpaymentstobemadebytheCountyunderanInstallment The Series 2016A Bonds are being issuedto provide funds to (i) finance the improvement ofcertain propertyto beused The Series2016ABondswillbethefirstseriesofbondsissuedunderMasterTrustAgreement,dated asof The Series2016ABondsaresubjecttooptional,extraordinaryoptionalandmandatorysinkingfundredemption prior Interest ontheSeries2016ABondsispayableApril1andOctoberofeachyear,commencing1,2016. In theopinionofBondCounsel,undercurrentlawandassumingcontinuingcompliancewithcertaincovenants Industrial DevelopmentAuthorityoftheCountyPrinceWilliam(Virginia)

PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 23, 2016 Prince WilliamCountyFacilitiesRevenueandRefundingBonds

TAX MATTERS” herein,interestontheSeries2016ABondswillnotbeincludedin (County FacilitiesProjects) $26,405,000* Series 2016A Due: October1,asshownontheinsidecoverpages Fitch…………………“AA+” (See “RATINGS” herein) Standard &Poor’s..“AA+”

$26,405,000∗ Industrial Development Authority of the County of Prince William (Virginia) Prince William County Facilities Revenue and Refunding Bonds Series 2016A (County Facilities Projects)

Base CUSIP† Number 741769 Dated: Date of Delivery Due: October 1, as shown below

MATURITY, AMOUNTS, INTEREST RATES AND PRICES/YIELDS*

Maturity Principal Interest Yield or CUSIP† (October 1) Amount* Rate Price Suffix 2016 $1,725,000 % % 2017 1,735,000 2018 1,750,000 2019 1,770,000 2020 1,800,000 2021 1,175,000 2022 1,175,000 2023 1,175,000 2024 1,175,000 2025 1,175,000 2026 1,175,000 2027 1,175,000 2028 1,175,000 2029 1,175,000 2030 1,175,000 2031 1,175,000 2032 1,175,000 2033 1,175,000 2034 1,175,000 2035 1,175,000

† CUSIP® is a registered trademark of the American Bankers Association. The CUSIP numbers listed above are being provided solely for the convenience of bondholders only, and the Authority does not make any representation with respect to such numbers or undertake any responsibility for their accuracy. The CUSIP numbers are subject to being changed after the issuance of the Bonds.

∗ Preliminary, subject to change.

INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PRINCE WILLIAM

Frank J. Mejia, Chairman Patrick F. O’Leary, Vice Chairman Stephen M. Dawson, Secretary/Treasurer Brian M. Gordon, Assistant Secretary/Treasurer Traci Morris-Cole Lorna P. Wallen Laurie C. Wieder ______

COUNSEL FOR AUTHORITY McGuireWoods, LLP ______

PRINCE WILLIAM COUNTY, VIRGINIA

BOARD OF COUNTY SUPERVISORS

Corey A. Stewart, Chairman Pete K. Candland, Vice Chair Ruth M. Anderson Maureen S. Caddigan John D. Jenkins Jeanine M. Lawson Martin E. Nohe Frank J. Principi

COUNTY OFFICIALS

Christopher E. Martino, Acting County Executive Susan Roltsch, Deputy County Executive Elijah T. Johnson, Deputy County Executive Michelle L. Attreed, Director of Finance

COUNTY ATTORNEY Michelle R. Robl, Esquire, County Attorney ______FINANCIAL ADVISOR BOND COUNSEL Public Financial Management, Inc. Sidley Austin LLP Arlington, Virginia Washington, D.C.

iii

No dealer, salesman or other person has been authorized to give any information or to make any representations, other than the information contained in this Official Statement, in connection with the offering of the Series 2016A Bonds, and, if given or made, such information or representations must not be relied upon as having been authorized by the Authority, the County, or the Underwriters. The information in this Official Statement is subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the Authority or the County since the date hereof. This Official Statement does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized, or in which any 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. The information set forth herein has been obtained from the Authority or the County and other sources that are believed to be reliable.

Forward looking statements. Certain statements contained in this Official Statement that are not historical facts are forward looking statements, which are based on the Authority’s or the County’s beliefs, as well as assumptions made by, and information currently available to, them. Because the statements are based on expectations about future events and economic performance and are not statements of fact, actual results may differ materially from those projected. The words “anticipate,” “assume,” “estimate,” “expect,” “objective,” “projection,” “forecast,” “goal,” “budget,” or similar words are intended to identify forward looking statements. The words “now,” “to date,” “currently” and the like are intended to mean as of the date of this Official Statement.

The Authority has provided the following sentence for inclusion in this Official Statement. The Authority does not assume any responsibility as to the accuracy or completeness of the information contained in this Official Statement, other than that contained under the captions “THE AUTHORITY” and the first paragraph under “LITIGATION.”

The registration or qualification of the offer and sale of the Series 2016A Bonds (as distinguished from registration of the ownership of the Series 2016A Bonds) is not required under the federal Securities Act of 1933, as amended, or the Virginia Uniform Securities Act, as amended. THE AUTHORITY ASSUMES NO RESPONSIBILITY FOR QUALIFICATION OR REGISTRATION OF THE SERIES 2016A BONDS FOR SALE UNDER THE SECURITIES LAWS OF ANY JURISDICTION IN WHICH THE SERIES 2016A BONDS MAY BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED.

The Trustee has neither reviewed nor participated in the preparation of this Official Statement.

The cover and inside cover pages hereof, this page and the appendices attached hereto are integral parts of this Official Statement.

TABLE OF CONTENTS

Page Page

INTRODUCTION ...... 1 RATINGS ...... 16 THE AUTHORITY ...... 2 LEGAL MATTERS ...... 17 THE COUNTY ...... 3 LEGALITY FOR INVESTMENTS ...... 17 THE CENTRAL DISTRICT POLICE LITIGATION ...... 17 STATION PROJECT ...... 4 FINANCIAL ADVISOR ...... 17 REFUNDING PLAN ...... 4 SALE AT COMPETITIVE BIDDING ...... 17 ESTIMATED SOURCES AND USES CONTINUING DISCLOSURE OF FUNDS ...... 5 UNDERTAKING ...... 18 THE SERIES 2016A BONDS ...... 5 MISCELLANEOUS ...... 18 General ...... 5 PRELIMINARY OFFICIAL Redemption of Series 2016A Bonds ...... 5 STATEMENT DEEMED FINAL ...... 19 Book-Entry Only System ...... 7 SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016A BONDS ...... 9 APPENDIX A – Information Relating to Prince William Pledge of Trust Agreement ...... 9 County Basic Contract Payments and Additional APPENDIX B – Financial Statements of Prince William Contract Payments ...... 10 County for the Year Ended June 30, 2015, and Budget and Appropriation ...... 10 Independent Auditor’s Report APPENDIX C – Summary of Certain Documents Provisions Limited Obligations ...... 10 APPENDIX D – Form of Bond Counsel Opinion Additional Bonds ...... 11 APPENDIX E – Form of Prince William County No Reserve Fund ...... 12 Continuing Disclosure Agreement Casualty and Liability Insurance ...... 12 APPENDIX F – Notice of Sale Casualty, Condemnation ...... 12 DEBT SERVICE REQUIREMENTS ...... 13 CERTAIN INVESTMENT CONSIDERATIONS ...... 13 Non-Appropriation or Default on the Contract ...... 13 Non-Appropriation or Default on Other Payment Agreement ...... 14 TAX MATTERS ...... 14 General ...... 14 Original Issue Discount ...... 15 Bond Premium ...... 15 Backup Withholding ...... 16 Future Tax Developments ...... 16

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OFFICIAL STATEMENT $26,405,000∗ Industrial Development Authority of the County of Prince William Prince William County Facilities Revenue and Refunding Bonds Series 2016A (County Facilities Projects)

INTRODUCTION

The purpose of this Official Statement, including the cover page and the Appendices hereto, is to set forth certain information regarding $26,405,000* aggregate principal amount of Prince William County Facilities Revenue and Refunding Bonds Series 2016A (County Facilities Projects) (the “Series 2016A Bonds”) to be issued by the Industrial Development Authority of the County of Prince William (the “Authority”). The Series 2016A Bonds are being issued pursuant to the Constitution and laws of the Commonwealth of Virginia, including the Industrial Development and Revenue Bond Act, Title 15.2 Chapter 49 of the Code of Virginia, as amended, and other applicable law (the “Enabling Act”), and the provisions of a Master Trust Agreement, dated as of April 1, 2016, as supplemented by a First Supplemental Trust Agreement, dated as of April 1, 2016 (collectively, the “Trust Agreement”), each between the Authority and U.S. Bank National Association, as trustee (in such capacity, the “Trustee”). The Series 2016A Bonds, together with any Additional Bonds and Refunding Bonds issued pursuant to the Trust Agreement, are collectively referred to herein as the “Bonds.” All capitalized, undefined terms used herein shall have the meanings set forth in Appendix C, “SUMMARY OF CERTAIN DOCUMENTS PROVISIONS – Definitions.”

The Series 2016A Bonds are being issued for the purpose of providing funds (i) to finance the costs of the improvement of certain property to serve as a central district police station (the “Central District Police Station Project”) for Prince William County (the “County”), (ii) to refund and redeem prior to their respective maturities certain outstanding certificates of participation of the County’s Refunding Lease Participation Certificates, Series 2005 (Prince William County Facilities) issued to refinance certain County projects, including county office facilities, commuter parking facilities, jail facilities, park facilities, a police and fire communications center, a juvenile detention facility and a police station (the “2005 COPs Projects” together with the Central District Police Station Project, the “Projects”), and (iii) to pay costs in connection with the issuance of the Series 2016A Bonds. See “THE CENTRAL DISTRICT POLICE STATION PROJECT,” “REFUNDING PLAN” and “ESTIMATED SOURCES AND USES OF FUNDS.”

Simultaneously with the execution and delivery of the Trust Agreement, the Authority and the County will enter into an Installment Purchase Contract, dated as of April 1, 2016, with respect to the Central District Police Station Project (the “Contract”). Under the Contract, the Authority will agree (1) to sell its interests in the Projects to the County in consideration of the County’s (i) undertaking responsibility for the Central District Police Station Project, and (ii) agreement to pay a purchase price for the Projects, and interest thereon, sufficient for the Authority to pay timely the debt service on the Series 2016A Bonds and (2) to make available to the County proceeds of the Series 2016A Bonds to pay the cost of constructing and equipping the Central District Police Station Project and refund the Refunded COPs

∗ Preliminary, subject to change.

(as hereinafter defined). See Appendix C, “SUMMARY OF CERTAIN DOCUMENTS PROVISIONS – The Installment Purchase Contract.”

Under the Contract, the County has agreed to make “Basic Contract Payments” sufficient to pay the principal of and interest on the Series 2016A Bonds. Under the Contract, the County has also agreed to make “Additional Contract Payments” (together with “Basic Contract Payments,” the “Contract Payments”) in amounts sufficient, among other purposes, to pay the Authority’s expenses allocable to the Contract and for the Authority to pay timely the compensation and expenses of the Trustee. Under the Trust Agreement, the Authority has assigned its right to receive the Contract Payments (except those Additional Contract Payments required to pay certain Authority expenses) to the Trustee for the benefit of the owners of the Series 2016A Bonds. The obligation of the County to make Basic Contract Payments and Additional Contract Payments and any other payments required under the Contract in each fiscal year is a valid and binding obligation of the County but is subject to and contingent upon the annual appropriation of funds by the Board of County Supervisors of the County (the “Board of County Supervisors”) for such purpose. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016A BONDS – Basic Contract Payments and Additional Contract Payments” and “CERTAIN INVESTMENT CONSIDERATIONS.”

The Series 2016A Bonds are limited obligations of the Authority payable solely from the revenues pledged under the Trust Agreement. Neither the faith and credit of the Commonwealth of Virginia (the “State” or the “Commonwealth”), nor any political subdivision thereof (including the Authority and the County), are pledged to the payment of the principal of or the interest or premium, if any, on the Series 2016A Bonds.

The Series 2016A Bonds are not a debt of County, the Authority, the Commonwealth of Virginia or any other political subdivision thereof, within the meaning of any constitutional, charter, or statutory debt limit or restriction, nor is the full faith and credit of the County, the Authority or the Commonwealth of Virginia pledged to the payment of the Series 2016A Bonds or the interest thereon. The Authority has no taxing power.

Brief descriptions of the Authority, the County, the Projects, the Refunding Candidates (as defined herein), the Series 2016A Bonds, the security for the Series 2016A Bonds, the Trust Agreement, the Contract, and related documents are included in this Official Statement. The descriptions of the documents included in this Official Statement do not purport to be comprehensive or definitive and are qualified in their entirety by reference to such documents.

THE AUTHORITY

The Authority was created pursuant to the Enabling Act to foster and stimulate the development of industry within Prince William County and is a political subdivision of the Commonwealth. It is governed by seven commissioners appointed by the Board of County Supervisors. The Authority is empowered by the Enabling Act to, among other things, acquire, construct, own, lease and dispose of various types of facilities, including facilities for use by a county, a municipality, the Commonwealth and its agencies, or other governmental organization, and to finance the same by the issuance of its revenue bonds for such purposes. The Authority has no taxing power.

The members of the Board of Directors of the Authority and the expiration dates of their respective terms in office are set forth below:

Member Term Expires Frank J. Mejia, Chairman 9/11/2017 Patrick F. O’Leary, Vice Chairman 9/11/2018 Stephen M. Dawson, Secretary/Treasurer 9/11/2016 Brian M. Gordon, Assistant Secretary/Treasurer 9/11/2017 Traci Morris-Cole 9/11/2016 Lorna P. Wallen 9/11/2019 Laurie C. Wieder 9/11/2018

The Authority has acted as a conduit issuer of bonds other than the Series 2016A Bonds. Only Bonds outstanding under the Trust Agreement, including the Series 2016A Bonds, are payable from payments made under the Contract or other Payment Agreements (hereinafter defined) entered into upon the issuance of other Bonds under the Trust Agreement.

THE COUNTY

The County is located in the northern Virginia and encompasses a net land area of 348 square miles. The County is part of the Washington, D.C. metropolitan area, which includes jurisdictions in Maryland, the District of Columbia and Northern Virginia.

Since 1972, the County has operated under the County Executive form of government, as provided for in Sections 15.2-500 et seq. of the Code of Virginia of 1950, as amended. The governing body of the County is an eight-member Board of County Supervisors. Residents in each of the County’s seven magisterial districts elect one member of the Board of County Supervisors to serve a term of four years. The eighth member of the Board of County Supervisors is elected at-large by County residents to serve a four-year term as Chairman. The current members of the Board of County Supervisors were elected on November 3, 2015, and took office on January 1, 2016. The current terms of all Board of County Supervisors members will expire on December 31, 2019.

In Virginia, cities and counties are not overlapping units of government. There are two independent cities within the County. On May 1, 1975, the former Town of Manassas was incorporated as a city, and on June 1, 1975, the former Town of Manassas Park was incorporated as a city (collectively, the “Cities”).

Property within the Cities is not subject to taxation by the County, and the County generally is not required to provide governmental services to the residents of the Cities. The County, however, does provide library and other community services to the residents of these Cities pursuant to intergovernmental agreements, which provide for compensation to the County for these services.

Four incorporated towns are located within the County: Dumfries, Haymarket, Occoquan and Quantico (collectively, the “Towns”). Although the Towns are separate units of government, the ordinances and regulations of the County are, subject to certain limitations prescribed by Virginia law, effective therein. Property in the Towns is subject to County taxation, and the County provides certain services to the residents of the Towns. The Towns may incur general obligation bonded indebtedness without the prior approval of the County.

See Appendices A and B for further information regarding the County.

THE CENTRAL DISTRICT POLICE STATION PROJECT

The County has determined to construct a new 54,200 square foot police station to serve the central portion of the County. The Central District Police Station will be located on Davis Ford Road between Prince William County Parkway and Adsee Lane. The new Central District Police Station will contain the Office of the Police Chief, Administration, Criminal Investigation Division and personnel from the Patrol Service Bureau. It will be built to accommodate over 200 employees.

REFUNDING PLAN

The Authority will use a portion of the proceeds of the Series 2016A Bonds to provide funds, to refund all or a portion of the County’s outstanding Refunding Lease Participation Certificates, Series 2005 (Prince William County Facilities), that mature on December 1, 2016, through 2020*, inclusive and that are subject to redemption prior to maturity at the option of the County (the “Refunding Candidates”). The purpose of the refunding is to achieve present value debt service savings. The County’s decision whether to refund all or any portion any given maturity of the Refunding Candidates is subject to prevailing market conditions at the time of the sale of the Series 2016A Bonds. The County may refund only certain maturities of the Refunding Candidates if such refunding permits the County to meet certain savings targets. The Refunding Candidates, if any, that are refunded with proceeds of the Series 2016A Bonds are referred to as the “Refunded COPs.” The Authority will deposit with U.S. Bank National Association, as trustee for the Refunded COPs (in such capacity, the “2005 COPs Trustee”), an amount which will be sufficient to pay all principal, applicable redemption premium, and interest on the Refunded COPs to their redemption date. The Refunded COPs will be called for redemption on May 5, 2016, at the redemption price of 100% of their principal amount. Set forth below are the Refunding Candidates and their original CUSIP numbers.

Refunding Candidates*

Redemption Redemption CUSIP Refunded Bonds Maturities Amount Date Price Number† 2005 COPs 2016 $555,000 4/15/2016 100% 741763 DO6 2017 580,000 4/15/2016 100 741763 DR4 2018 600,000 4/15/2016 100 741763 DS2 2019 625,000 4/15/2016 100 741763 DT0 2020 655,000 4/15/2016 100 741763 DU7

* Preliminary, subject to change.

ESTIMATED SOURCES AND USES OF FUNDS

The County currently estimates that the following will be the sources and uses of the proceeds of the Series 2016A Bonds:

Sources:

Principal amount of the Series 2016A Bonds $ Net Original Issue Premium/Discount Total $

Uses:

Central District Police Station Project $ Deposit with 2005 COPs Trustee to pay Refunded COPs Costs of Issuance1 Total $

______1 Includes Underwriters’ discount, legal, accounting, printing and other costs of issuing the Series 2016A Bonds.

THE SERIES 2016A BONDS

General

The Series 2016A Bonds will be dated their date of delivery and will bear interest at the rates and mature, subject to the rights of redemption described below, in the amounts and on the dates set forth on the inside cover pages of this Official Statement. The Series 2016A Bonds will be issuable as fully registered bonds in authorized denominations of $5,000 and integral multiples thereof. The Regular Record Date for the Series 2016A Bonds will be the 15th day (whether or not a business day) of the calendar month next preceding the applicable Interest Payment Date.

Interest on the Series 2016A Bonds is payable on April 1 and October 1 of each year, commencing October 1, 2016 (each an “Interest Payment Date”). Interest is calculated based on a 360- day year consisting of twelve thirty-day months. Principal of the Series 2016A Bonds is payable at maturity, subject to prior redemption as described below under “–Redemption of Series 2016A Bonds.” The Series 2016A Bonds will be issued in a book-entry only system of registration, and so long as The Depository Trust Company, New York, New York (“DTC”), or its nominee is the registered owner of the Series 2016A Bonds, payments of the principal, of, premium, if any, and interest on the Series 2016A Bonds will be payable directly to DTC. See “–Book-Entry Only System” below.

Redemption of Series 2016A Bonds

Optional Redemption*

Except under the circumstances described in the following paragraph, the Series 2016A Bonds maturing on or before October 1, 2026, are not subject to redemption prior to their stated date of maturity.

* Preliminary, subject to change.

The Series 2016A Bonds maturing after October 1, 2026, are subject to redemption at the option of the Authority, in whole or in part, at any time on or after October 1, 2026, at a redemption price equal to the principal amount of the Series 2016A Bonds to be redeemed plus interest accrued thereon to the redemption date.

Extraordinary Optional Redemption

The Series 2016A Bonds are subject to extraordinary optional redemption, in whole or in part on any date, at a price equal to the principal amount thereof, together with interest thereon accrued to the date of redemption, upon the exercise by the Board of County Supervisors of the County of its option to prepay the purchase price or portion thereof, pursuant to the Installment Purchase Contract when proceeds of an insurance or condemnation award are received and such proceeds are not used to repair, reconstruct or restore the Central District Police Station Project or the 2005 COPs Property, as applicable. See Appendix C, “SUMMARY OF CERTAIN DOCUMENTS PROVISIONS – First Supplemental Trust Agreement – Extraordinary Optional Redemption.”

[Mandatory Sinking Fund Redemption

The Series 2016A Bonds maturing October 1, 20__, are subject to mandatory redemption in part at a price equal to the principal amount thereof, together with interest thereon accrued to the date of redemption, in accordance with the following Sinking Fund Requirements:

Series 2016A Bonds Maturing October 1, 20_ Year Principal Amount 20__ $ 20__ 20__ (final maturity)

The Series 2016A Bonds maturing October 1, 20__, are also subject to mandatory redemption in part at a price equal to the principal amount thereof, together with interest thereon accrued to the date of redemption, in accordance with the following Sinking Fund Requirements:

Series 2016A Bonds Maturing October 1, 20__ Year Principal Amount 20__ $ 20__ 20__ 20__ (final maturity)

The Trust Agreement requires funds to be provided sufficient to redeem on the dates indicated above the principal amounts of such Series 2016A Bonds set forth above (after credit, as provided in the Trust Agreement, for any such Series 2016A Bonds previously purchased or redeemed and not credited to the sinking fund obligation). See Appendix C, “SUMMARY OF CERTAIN DOCUMENTS PROVISIONS – First Supplemental Trust Agreement – Mandatory Sinking Fund Redemption.”]

Notice of Redemption. At least 30 days but not more than 90 days before the redemption date of any Series 2016A Bonds, whether in whole or in part, the Trustee will cause notice of any such redemption to be mailed by certified mail, return receipt requested, to all holders of Series 2016A Bonds to be redeemed in whole or in part. Any defect in such notice or the failure to mail such notice, shall not affect the validity of the proceedings for the redemption of other Series 2016A Bonds. While the Series 2016A Bonds are held in the name of DTC or its nominee, such redemption notices will be sent to Cede & Co. and not to the beneficial owners of the Series 2016A Bonds. See “–Book-Entry Only System” below.

Any notice of optional or extraordinary optional redemption of the Series 2016A Bonds may state that it is conditioned upon there being available on the redemption date an amount of money sufficient to pay the redemption price plus interest accrued and unpaid to the redemption date, and any conditional notice so given may be rescinded at any time before the payment of the redemption price if any such condition so specified is not satisfied. If a redemption does not occur after a conditional notice is given due to an insufficient amount of funds on deposit by the Authority, the corresponding notice of redemption shall be deemed to be revoked.

Book-Entry Only System

The following description of the procedures and recordkeeping with respect to beneficial ownership interests in the Series 2016A Bonds, payments of principal of and interest on the Series 2016A Bonds to The Depository Trust Company, New York, New York (“DTC”), its nominee, Direct Participants (as defined below) or Beneficial Owners (as defined below), confirmation and transfer of beneficial ownership interests in the Series 2016A Bonds and other bond-related transactions by and between DTC, the Direct Participants and Beneficial Owners is based solely on information furnished by DTC.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Series 2016A Bonds. The Series 2016A Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Series 2016A Bond certificate will be issued for each maturity of Series 2016A Bonds bearing interest at a specified interest rate, each in the aggregate principal amount of such Series 2016A Bonds.

DTC is a limited purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a

“clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of the Series 2016A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2016A Bonds on DTC’s records. The ownership interest of each actual purchaser of the Series 2016A Bonds (“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 interest in the Series 2016A Bonds 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 bond certificates representing their ownership interests in the Series 2016A Bonds, except in the event that use of the book entry system for the Series 2016A Bonds is discontinued.

To facilitate subsequent transfers, all Series 2016A Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Series 2016A Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2016A Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2016A Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2016A Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2016A Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Series 2016A Bond documents. For example, Beneficial Owners of the Series 2016A Bonds may wish to ascertain that the nominee holding the Series 2016A Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2016A 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 the Series 2016A Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2016A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal, premium, if any, and interest payments on the Series 2016A Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detailed information from the Authority or the Trustee, on a 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 registered in “street name,” and will be the responsibility of such Participant and not of DTC or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC), is the responsibility of the Authority or Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the 2016A Bonds at any time by giving reasonable notice to the Authority or Trustee. Under such circumstances, in the event that a successor depository is not obtained, certificates for the Series 2016A Bonds are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, certificates for the Series 2016A Bonds will be printed and delivered.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof.

The Authority may enter into amendments to the agreement with DTC, or successor agreements with a successor securities depository, relating to the book-entry system to be maintained with respect to the Series 2016A Bonds without the consent of Beneficial Owners.

SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2016A BONDS

Pledge of Trust Agreement

Under the Master Trust Agreement, the Authority will pledge and assign to the Trustee, as security for the payment of all Bonds issued under the Master Trust Agreement, all rights, title and interest of the Authority in and to the Contract, including its right to receive Basic Contract Payments and Additional Contract Payments (reserving its right to receive certain Additional Contract Payments and its rights to receive notices, reports, and other statements) under the Contract. If additional Bonds are issued

under the Master Trust Agreement, the Authority will in like manner assign to the Trustee all rights, title and interest of the Authority in and to the additional Payment Agreements between the Authority and the County, including the Authority’s rights to receive Basic Contract Payments and Additional Contract Payments (exclusive of amounts equal to the Authority’s expenses). The Authority has not previously issued any Bonds under the Master Trust Agreement. See “–Additional Bonds.”

Basic Contract Payments and Additional Contract Payments

The County is obligated under the Contract to make Basic Contract Payments that are sufficient to pay the principal of and interest due on the Series 2016A Bonds. Under the Contract, the County has agreed also agreed to make Additional Contract Payments in amounts sufficient, among other purposes, to pay the Authority’s expenses allocable to the Contract and for the Authority to pay timely the compensation and expenses of the Trustee. Under the Contract, the obligation of the County to make all Contract Payments and other payments required under the Contract in any fiscal year of the County is valid and binding but subject to and contingent upon the annual appropriation by the Board of County Supervisors of the County of funds for such purpose for such fiscal year. The failure of the County to pay all or any portion of the Contract Payments or any other amounts due under the Contract on account of a failure of the Board of County Supervisors of the County to appropriate such sums (an “Event of Nonappropriation”) would not constitute a default or an event of default under the Contract. See “CERTAIN INVESTMENT CONSIDERATIONS.”

Budget and Appropriation

The Authority has covenanted in the Trust Agreement that it will request the County annually for each fiscal year to budget, appropriate and pay to the Trustee an amount equal to the Basic Contract Payments and Additional Contract Payments payable by the County under all Payment Agreements, such as the Contract, in such fiscal year. The County has covenanted in the Contract that the County Executive shall include as a separate line item in each annual budget of revenues and disbursements presented to the Board of County Supervisors an item, appropriately designated, in an amount not less than an amount sufficient, in the judgment of the County Executive, to pay debt service on the Series 2016A Bonds and all other amounts payable during such fiscal year by the County pursuant to the Contract. Alternatively, the County Executive may include as a single line item in each annual budget of revenues and disbursements presented to the Board of County Supervisors an item designated “Basic and Additional Contract Payments – Master Trust Agreement” in an amount not less than an amount sufficient, in the judgment of the County Executive, to make all Payments scheduled to become due, and pay all other amounts payable by the County, pursuant to the Contract and all other Payment Agreements during such fiscal year.

If additional Bonds are issued under the Master Trust Agreement, the Authority will in like manner covenant in the applicable Payment Agreement that the County Executive shall include in each annual budget of revenues and disbursements presented to the Board of County Supervisors an item, appropriately designated, in an amount not less than an amount sufficient, in the judgment of the County Executive, to pay debt service on such additional Bonds and all other amounts payable during such fiscal year by the County pursuant to such Payment Agreement. See Appendix C, “SUMMARY OF CERTAIN DOCUMENTS PROVISIONS – Master Trust Agreement – Authorization and Issuance of Bonds” and “CERTAIN INVESTMENT CONSIDERATIONS.”

Limited Obligations

The Series 2016A Bonds are not a debt of the County, the Authority, the Commonwealth of Virginia or any political subdivision thereof, within the meaning of any constitutional, charter, or

statutory debt limit or restriction, nor is the full faith and credit of the County, the Authority or the Commonwealth of Virginia pledged to the payment of the Series 2016A Bonds or the interest thereon. The Authority has no taxing power.

Additional Bonds

The Authority may also issue additional Bonds on a parity with the Series 2016A Bonds under the Master Trust Agreement for the financing or refinancing of any “Project.” Project is defined to include any facility that the Authority may finance under the Enabling Act. The Authority may also issue refunding Bonds (“Refunding Bonds”) on a parity with the Series 2016A Bonds for the purpose of providing funds, together with any other funds available therefor, for refunding all or any part of the Series 2016A Bonds or other Bonds or any other indebtedness incurred to provide a facility for use by the County.

Conditions precedent under the Master Trust Agreement to the Authority’s issuance of a series of additional or refunding Bonds on a parity with the Series 2016A Bonds include, among other requirements, the following:

(1) The execution and delivery of a “Payment Agreement,” as defined within the Master Trust Agreement, as a note, loan agreement, lease agreement, installment purchase contract or other contract or obligation, or combination thereof, by the express terms of which the County shall be absolutely and unconditionally obligated to make payments on such dates and in such amounts as shall be sufficient for the Authority to make timely payment in each fiscal year of all amounts that may become due and payable on such Series of Bonds. Such payments under a Payment Agreement shall be subject only to the appropriation for such fiscal year by the Board of County Supervisors of funds for the purpose of the County’s making such payments. Each Payment Agreement shall expressly provide that the County Executive shall include in each operating budget an item, appropriately designated, in an amount not less than an amount sufficient, in the judgment of the County Executive, to pay debt service on the applicable Series of Bonds and all other amounts payable during such fiscal year by the County pursuant to the Payment Agreement. Alternatively, the County Executive may include as a single line item in each annual budget of revenues and disbursements presented to the Board of County Supervisors an item designated “Basic and Additional Contract Payments – Master Trust Agreement” in an amount not less than an amount sufficient, in the judgment of the County Executive, to make all payments scheduled to become due, and pay all other amounts payable by the County under all Payment Agreements;

(2) The providing of an opinion or opinions of counsel for the County to the effect that (i) the Payment Agreement has been duly authorized, executed and delivered by the County, is in full force and effect and is valid and binding on the County in accordance with its terms and (ii) subject to the usual qualifications and exceptions, the express terms of the Payment Agreement that providing that the County’s obligation to make payments to or for the account of the Authority on such dates and in such amounts as shall be sufficient for the Authority to make timely payment of (X) all amounts that may become due and payable on such Series of Bonds, (Y) all other amounts that may become payable under the terms of the Payment Agreement and (Z) all amounts payable under the Master Trust Agreement and the applicable Supplemental Trust Agreement to the extent not provided for in the applicable Payment Agreement or other Payment Agreements or otherwise provided for, are valid and binding subject only to the appropriation by the Board of County Supervisors of funds for the purpose of the County’s making such payments;

(3) The receipt of written confirmation from each rating agency that has rated at the County’s request any Series of outstanding Bonds that the issuance of such Series of Bonds will not cause its Credit Rating on any Series of Bonds (the underlying rating on such Bonds if such Bonds have been credit

enhanced) outstanding immediately following such issuance to be lowered or withdrawn on account of the issuance of such Series of Bonds; and

(4) The providing of a certificate of a County Representative stating that the sum of the proceeds of the Series of Bonds, together with other amounts made available for the particular Project to be financed with such Series of Bonds and the estimated investment income on such money is not less than the estimated total Cost of the Project.

See “RATINGS” herein for the initial Credit Ratings assigned to the Series 2016A Bonds. Failure by any rating agency to confirm its Credit Rating on the outstanding Bonds on account of the proposed issuance of such additional Bonds would result in a failure to satisfy the requirements described in clause (3).

See Appendix C, “SUMMARY OF CERTAIN DOCUMENTS PROVISIONS – Master Trust Agreement – Authorization and Issuance of Bonds.”

No Reserve Fund

No debt service reserve fund or other similar reserve fund has been or will be established with respect to the Series 2016A Bonds.

Casualty and Liability Insurance

The Contract requires that the County place in effect at a minimum the following insurance: (i) an “all risks” policy with coverage equal to 100% of the replacement cost value of the Central District Police Station Project and 2005 COPs Property, to be determined no less frequently than annually, and (ii) a general liability policy covering all operations and maintenance in connection with the Projects equal to $5,000,000 combined aggregate limit per occurrence for personal injury and property damage liability. All such insurance must be issued by companies licensed to do business in the Commonwealth of Virginia with the Best’s Key Rating of at least A-:VI. In the alternative the County may self insure for all or a portion of the insurance required under the Contract. See Appendix C, “SUMMARY OF CERTAIN DOCUMENTS PROVISIONS – Installment Purchase Contract – Insurance.”

Casualty, Condemnation

If all or a portion of the Central District Police Station Project is damaged or destroyed by fire or taken by condemnation, the County is obligated either to (a) repair and restore the Central District Police Station Project to substantially the same condition or utility value as existed prior to such event or (b) apply the Net Proceeds resulting from such event, together with other available moneys, to the payment of the allocable portion of the Series 2016A Bonds or in full, as applicable, either through redemption of the Series 2016A Bonds as described herein under “THE SERIES 2016A BONDS – Redemption of Series 2016A Bonds – Extraordinary Optional Redemption” or a defeasance of the Series 2016A Bonds in accordance with the Trust Agreement. See Appendix C, “SUMMARY OF CERTAIN DOCUMENTS PROVISIONS – Installment Purchase Contract – County’s Obligation to Maintain and Repair the Properties.”

If all or a portion of the 2005 COPs Property is damaged or destroyed by fire or taken by condemnation, the County is obligated either to (a) repair and restore the 2005 COPs Project to substantially the same condition or utility value as existed prior to such event or (b) apply the Net Proceeds resulting from such event, together with other available money, to the payment of the allocable portion of the Series 2016A Bonds or in full, as applicable, either through redemption of the Series 2016A

Bonds as described herein under “THE SERIES 2016A BONDS – Redemption of Series 2016A Bonds – Extraordinary Optional Redemption” or a defeasance of the Series 2016A Bonds in accordance with the Trust Agreement. See Appendix C, “SUMMARY OF CERTAIN DOCUMENTS PROVISIONS – Installment Purchase Contract – County’s Obligation to Maintain and Repair the Properties.”

DEBT SERVICE REQUIREMENTS

The following table sets forth the debt service requirements for the Series 2016A Bonds:

SERIES 2016A BONDS

Fiscal Year Ending Total June 30 Principal Interest Debt Service 2017 $ $ $ 2018 2019 2020 2021

2022 2023 2024 2025 2026

2027 2028 2029 2030 2031

2032 2033 2034 2035 2036 Total

See Appendix A, “INFORMATION RELATING TO PRINCE WILLIAM COUNTY – Section III- Debt Administration” for a description of the other tax-supported debt of the County.

CERTAIN INVESTMENT CONSIDERATIONS

The following is a summary of certain risk factors attendant to investment in the Series 2016A Bonds. In order to identify risk factors and make an informed investment decision, investors should review thoroughly all the information contained in this Official Statement.

Non-Appropriation or Default on the Contract

The County’s obligation to make Basic Contract Payments and Additional Contract Payments is subject to appropriation of funds for that purpose. The likelihood that the Board of County Supervisors

will continue to appropriate funds for Basic Contract Payments and Additional Contract Payments during each fiscal year may depend on a number of factors, including, but not limited to (a) the timely and successful completion of the construction of the Projects, (b) the continuing need of the County for the Projects, (c) political, economic and other factors affecting County government, (d) general fund revenues and expenditures, (e) economic conditions in the County, (f) the usefulness or value of the Projects and (g) the availability of alternative facilities.

Non-Appropriation or Default on Other Payment Agreement

The Series 2016A Bonds will be on a parity with any other Bonds issued under the Master Trust Agreement. Consequently, the failure of the Board of County Supervisors to appropriate funds for Basic Contract Payments and Additional Contract Payments under another Payment Agreement such as the Contract in respect of other County projects would result in a shortfall in the amounts required to pay debt service on all the Bonds outstanding under the Master Trust Agreement. Consequently, investors must consider the same factors discussed in the paragraph above not only in the context of the Contract and the Central District Police Station Project and 2005 COPs Projects, but also in the context of other Payment Agreements and other Projects and weigh the adequacy of the protection afforded by the requirements in the Master Trust Agreement for the issuance of additional Bonds. As of the date of issuance of the Series 2016A Bonds, such Series 2016A Bonds will be the only other Bonds outstanding under the Master Trust Agreement. See “SUMMARY OF CERTAIN DOCUMENTS PROVISIONS – Master Trust Agreement – Authorization and Issuance of Bonds.”

TAX MATTERS

General

The County and the Authority have covenanted to comply with applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), relating to the exclusion from gross income of the interest on the Series 2016A Bonds for purposes of federal income taxation. In the opinion of Sidley Austin LLP, Bond Counsel, under current law and assuming continuing compliance by the County and the Authority with such covenants and requirements of the Code regarding, among other matters, the use, expenditure and investment of Series 2016A Bond proceeds and the timely payment of certain investment earnings to the United States Treasury, interest on the Series 2016A Bonds will not be included in the gross income of the owners thereof for federal income tax purposes. Failure by the County or the Authority to comply with such covenants and requirements may cause interest on the Series 2016A Bonds to be includable in the gross income of the owners thereof retroactive to the date of issue of the Series 2016A Bonds. No opinion is rendered by Bond Counsel as to the effect on the exclusion from gross income of the interest on the Series 2016A Bonds for federal income tax purposes of any action taken or not taken without the approval of Bond Counsel or in reliance upon the advice or opinion of counsel other than Bond Counsel.

Interest on the Series 2016A Bonds will not be an item of tax preference for purposes of the federal individual or corporate alternative minimum tax under the Code. Interest on the Series 2016A Bonds will, however, be included in the calculation of alternative minimum tax liability imposed on corporations by the Code. The Code contains other provisions (some of which are noted below) that could result in tax consequences, as to which no opinion will be rendered by Bond Counsel, as a result of ownership of the Bonds or the inclusion in certain computations of interest that is excluded from gross income.

Ownership of tax-exempt obligations may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance

companies, certain foreign corporations doing business in the United States, certain S Corporations with excess passive income, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations and taxpayers who may be eligible for the earned income tax credit.

Under the Enabling Act, the income, including any profit made on the sale thereof, from the Series 2016A Bonds shall be exempt from all taxation by the Commonwealth or any political subdivision thereof.

Original Issue Discount

The excess, if any, of the amount payable at maturity of any maturity of the Series 2016A Bonds purchased as part of the initial public offering over the issue price thereof constitutes original issue discount. The amount of original issue discount that has accrued and is properly allocable to an owner of any maturity of the Series 2016A Bonds with original issue discount (a “Discount Bond”) will be excluded from gross income for federal income tax purposes to the same extent as interest on the Series 2016A Bonds. In general, the issue price of a maturity of the Series 2016A Bonds is the first price at which a substantial amount of Series 2016A Bonds of that maturity was sold (excluding sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers) and the amount of original issue discount accrues in accordance with a constant yield method based on the compounding of interest. A purchaser’s adjusted basis in a Discount Bond is to be increased by the amount of such accruing discount for purposes of determining taxable gain or loss on the sale or other disposition of such Discount Bonds for federal income tax purposes.

A portion of the original issue discount that accrues in each year to an owner of a Discount Bond which is a corporation will be included in the calculation of the corporation’s federal alternative minimum tax liability. In addition, original issue discount that accrues in each year to an owner of a Discount Bond is included in the calculation of the distribution requirements of certain regulated investment companies and may result in some of the collateral federal income tax consequences discussed herein. Consequently, an owner of a Discount Bond should be aware that the accrual of original issue discount in each year may result in an alternative minimum tax liability, additional distribution requirements or other collateral federal income tax consequences although the owner of such Discount Bond has not received cash attributable to such original issue discount in such year.

The accrual of original issue discount and its effect on the redemption, sale, or other disposition of a Discount Bond that is not purchased in the initial offering at the first price at which a substantial amount of such Series 2016A Bonds is sold to the public may be determined according to rules that differ from those described above. Owners of Discount Bonds should consult their tax advisors with respect to the determination for federal income tax purposes of the amount of original issue discount with respect to such Discount Bonds and with respect to state and local tax consequences of owning and disposing of such Discount Bonds.

Bond Premium

The excess, if any, of the tax basis of Series 2016A Bonds purchased as part of the initial public offering to a purchaser (other than a purchaser who holds such Series 2016A Bonds as inventory, stock in trade, or for sale to customers in the ordinary course of business) over the amount payable at maturity is “Bond Premium.” Bond Premium is amortized over the term of such Series 2016A Bonds for federal income tax purposes (or, in the case of a bond with bond premium callable prior to its stated maturity, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on such bond). Owners of such Series 2016A Bonds are required to decrease

their adjusted basis in such Series 2016A Bonds by the amount of amortizable Bond Premium attributable to each taxable year such Series 2016A Bonds are held. The amortizable bond premium on such Series 2016A Bonds attributable to a taxable year is not deductible for federal income tax purposes; however Bond Premium on such Series 2016A Bonds is treated as an offset to qualified stated interest received on such Series 2016A Bonds. Owners of such Series 2016A Bonds should consult their tax advisors with respect to the determination for federal income tax purposes of the treatment of Bond Premium upon sale, redemption or other disposition of such Series 2016A Bonds and with respect to state and local income tax consequences of owning and disposing of such Series 2016A Bonds.

Backup Withholding

Interest paid on the Series 2016A Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. While this reporting requirement does not by itself, affect the excludability of interest on the Series 2016A Bonds from gross income for federal income tax purposes, the reporting requirement causes the payment of interest on the Series 2016A Bonds to be subject to backup withholding if such interest is paid to beneficial owners who (i) are not “exempt recipients,” and (ii) either fail to provide certain identifying information (such as the beneficial owner’s taxpayer identification number) in the required manner or have been identified by the Internal Revenue Service as having failed to report all interest and dividends required to be shown on their income tax returns. Generally, individuals are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients. Amounts withheld under the backup withholding rules from a payment to a beneficial owner would be allowed as a refund or a credit against such beneficial owner’s federal income tax liability provided the required information is furnished to the Internal Revenue Service.

Future Tax Developments

Future or pending legislative proposals, if enacted, regulations, rulings or court decisions may cause interest on the Series 2016A Bonds to be subject, directly or indirectly, to federal income taxation or to state or local income taxation, or may otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. Legislation or regulatory actions and future or pending proposals may also affect the economic value of the federal or state tax exemption or the market value of the Series 2016A Bonds. Prospective purchasers of the Series 2016A Bonds should consult their tax advisors regarding any future, pending or proposed federal or state tax legislation, regulations, rulings or litigation as to which Bond Counsel expresses no opinion.

For example, various proposals have been made in Congress and by the President that would subject interest on bonds that is otherwise excludable from gross income for federal income tax purposes, including interest on the Bonds, to federal income tax payable by certain bondholders with adjusted gross income in excess of specified thresholds. Prospective purchasers should consult their tax advisors as to the effect of such proposals on their individual situations.

RATINGS

The Series 2016A Bonds have been rated “AA+” by Fitch, Inc. (“Fitch”), and “AA+” by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s”). The County requested that the Series 2016A Bonds be rated and furnished certain information to Fitch and Standard & Poor’s, including certain information that is not included in this Official Statement. These ratings are not a recommendation to buy, sell or hold the Series 2016A Bonds. Generally, rating agencies base their ratings on such materials and information, as well as investigations, studies and assumptions of the rating agencies.

Such ratings may be changed at any time and no assurance can be given that they will not be revised downward or withdrawn entirely by any or all of such rating agencies, if, in the judgment of any or all, circumstances so warrant. Such circumstances may include, without limitation, change in or unavailability of information relating to the County. Any such downward revision or withdrawal of any of such ratings may have an adverse effect on the market price of the Series 2016A Bonds.

LEGAL MATTERS

Certain legal matters relating to the authorization and validity of the Series 2016A Bonds are subject to the approving opinion of Sidley Austin LLP, Washington, D.C., Bond Counsel. Such opinion will be furnished without expense to the purchasers of the Series 2016A Bonds. Certain legal matters will be passed upon for the Authority by McGuireWoods LLP, McLean, Virginia, and for the County by Michelle R. Robl, Esquire, County Attorney.

LEGALITY FOR INVESTMENTS

Under the Enabling Act, the Series 2016A Bonds are legal and authorized investments for banks, trustees, trust companies, building and loan associations, insurance companies, fiduciaries, trustees, guardians for all public funds of the Commonwealth of Virginia or other political corporations or subdivisions of the Commonwealth of Virginia, and are eligible to secure the deposit of all public funds of cities, towns, counties, school districts or other political corporations or subdivisions of the Commonwealth of Virginia.

LITIGATION

No litigation is pending or, to the Authority’s knowledge, threatened (a) to restrain or enjoin the issuance, sale or delivery of any of the Series 2016A Bonds, the application of the proceeds thereof as provided in the Trust Agreement or the collection of revenues pledged under the Trust Agreement, (b) in any way contesting or affecting any authority for the issuance or validity of the Series 2016A Bonds or the validity of the Trust Agreement, (c) in any way contesting the creation, existence or powers of the Authority or (d) that, if determined adversely against the Authority, would have a material adverse affect on the Authority.

See Appendix A for a description of litigation affecting the County.

FINANCIAL ADVISOR

Public Financial Management, Inc., Arlington, Virginia, is serving as financial advisor to the County (the “Financial Advisor”) in connection with the issuance of the Series 2016A Bonds. Although the Financial Advisor assisted in the preparation and review of this Official Statement, the Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. The Financial Advisor is a financial advisory, investment management and consulting organization and is not engaged in the business of underwriting municipal securities.

SALE AT COMPETITIVE BIDDING

The Series 2016A Bonds will be offered for sale at competitive bidding on a date determined pursuant to the provisions of the Notice of Sale relating to the Series 2016A Bonds. After the Series 2016A Bonds have been awarded, the Authority will issue an Official Statement in final form to be dated the date of the award. The Authority will deem the Official Statement in final form as of its date, and the

Official Statement in final form will be a “Final Official Statement” within the meaning of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended. The Official Statement in final form will include, among other matters, the identity of the Underwriter, the expected selling compensation to the Underwriter and other information on the interest rates and offering prices or yields of the Series 2016A Bonds, all as supplied by the Underwriter.

CONTINUING DISCLOSURE UNDERTAKING

The Authority has determined that no financial or operating data concerning the Authority is material to any decision to purchase, hold or sell the Series 2016A Bonds, and the Authority will not provide any such information. The County has undertaken all responsibilities for continuing disclosure for the benefit of the Owners, and the Authority shall have no liability to the Owners or any other person with respect to such disclosures.

The Securities and Exchange Commission has adopted Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (the “Rule”). In general, the Rule prohibits an underwriter from purchasing or selling municipal securities such as the Series 2016A Bonds, unless it has determined that the issuer of such securities or other persons deemed to be material “obligated persons” have committed to provide to The Electronic Municipal Market Access (“EMMA”) system administered by the Municipal Securities Rulemaking Board (i) on an annual basis, certain financial information and operating data (“Annual Reports”), and, if available, audited financial statements, and (ii) notice of various events described in the Rule (“Event Notices”).

The County will covenant in the Continuing Disclosure Agreement (the form of which appears in Appendix E), to be dated the date of delivery of the Series 2016A Bonds, for the benefit of the holders of the Series 2016A Bonds, to provide Annual Reports to EMMA, annually, not later than March 31 of each year, commencing March 31, 2017. Similarly, the County will provide Event Notices with respect to the Series 2016A Bonds to EMMA.

As a condition to the issuance of various series of bonds or certificates of participation issued by Prince William County and other entities, Prince William County has agreed pursuant to several continuing disclosure undertakings entered into pursuant to the Rule (the “County’s Undertakings”) to file with EMMA the Prince William County’s Audited Financial Statements and other certain other information (collectively, the “Annual Filings”) within the designated timeframe set forth in such undertaking, and currently the earliest deadline for such filings is within 210 days of the end of each fiscal year. The required Annual Filings for the County fiscal years 2010 through 2013, inclusive, were filed pursuant to the County Undertakings but were filed in time periods ranging from 2 to 32 days after the required filing deadlines. The County has implemented procedures to ensure that future filing deadlines required by the County’s Undertakings are met.

MISCELLANEOUS

All information contained in this Official Statement is subject, in all respects, to the complete body of information contained in the original sources thereof, and no guarantee, warranty, or other representation is made concerning the accuracy or completeness of the information herein. In particular, no opinion or representation is rendered as to whether any projection will approximate actual results, and all opinions, estimates and assumptions, whether or not expressly identified as such, should not be considered statements of fact.

PRELIMINARY OFFICIAL STATEMENT DEEMED FINAL

The distribution of this Preliminary Official Statement has been duly authorized by the Authority. The Authority deems this Preliminary Official Statement final as of its date within the meaning of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended, except for the omission of certain pricing and other information permitted to be omitted by Rule 15c2-12.

INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PRINCE WILLIAM

By: ______Chairman

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APPENDIX A

CERTAIN INFORMATION REGARDING THE COUNTY OF PRINCE WILLIAM, VIRGINIA

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APPENDIX A

CERTAIN INFORMATION REGARDING THE COUNTY OF PRINCE WILLIAM, VIRGINIA

INDEX

SECTION I - THE COUNTY ...... 1 Published Financial Information ...... 32 GENERAL INFORMATION ...... 1 Recognition of Achievement for Budgeting Form and Organization of Government ..... 1 and Financial Reporting...... 32 Political Subdivisions ...... 2 GENERAL FUND FINANCIAL Boards and Authorities of the County ...... 2 OPERATIONS ...... 33 Certain County Administrative Staff Fiscal Year 2015 Financial Results...... 33 Members ...... 3 Fiscal Year 2016 Preliminary Results ..... 33 GOVERNMENTAL SERVICES ...... 5 General Fund Revenues ...... 37 General Government Administration ...... 5 General Fund Expenditures ...... 40 Public Safety ...... 6 Changes in General Fund Balance ...... 40 Public Schools ...... 7 Overview of Fiscal Years 2015 and 2016 Infrastructure/Transportation ...... 8 Adopted Budgets ...... 43 Human Services ...... 8 Overview of Expenditures and Transfers 46 Judicial Administration ...... 10 CAPITAL IMPROVEMENT PROGRAM.. 47 Planning and Development ...... 10 CASH AND INVESTMENT Parks, Recreation and Libraries ...... 11 MANAGEMENT ...... 49 Water Supply and Wastewater EMPLOYEES’ RETIREMENT PLANS ..... 50 Collection and Treatment ...... 12 OTHER POST-EMPLOYMENT DEMOGRAPHIC AND ECONOMIC BENEFITS (OPEB) ...... 51 FACTORS ...... 13 CONTINGENT LIABILITIES ...... 52 Population Characteristics ...... 13 SECTION III - DEBT Income ...... 15 ADMINISTRATION ...... 52 Commerce and Employment...... 16 DEBT OF THE COUNTY ...... 52 Assessed Value of Locally Taxed Authority to Borrow ...... 52 Property ...... 19 Limits on Indebtedness ...... 53 Commercial and Industrial Development 24 Statement of Outstanding Net Tax- Retail Sales ...... 25 Supported Indebtedness ...... 53 Housing ...... 25 Debt Service Requirements to Maturity .. 55 New Construction ...... 26 Additional Debt Information ...... 56 Economic Development ...... 27 OTHER COUNTY RELATED Tourism and Travel ...... 28 INDEBTEDNESS ...... 57 SECTION II - FINANCIAL Cities and Towns ...... 57 ADMINISTRATION ...... 30 Community Development Authorities ..... 57 CERTAIN FINANCIAL PROCEDURES. 30 Transportation System Revenue Bonds ... 58 Accounting and Financial Operations ...... 30 Northern Virginia Criminal Justice Reporting Entity ...... 30 Training Academy ...... 59 Basis of Accounting ...... 30 Water and Sewer Debt ...... 59 Basis of Presentation ...... 31 Park Authority Revenue Bonds ...... 60 Budget Adoption and Amendment Overlapping Debt ...... 61 Procedure ...... 31 Lease Commitments and Obligations ...... 61

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SECTION I - THE COUNTY

GENERAL INFORMATION

The County of Prince William, Virginia (the “County”) was organized in 1731 by the Virginia General Assembly. The County, part of the Metropolitan Washington, D.C. area, is located in Northern Virginia, less than 25 miles southwest of Washington, D.C., and encompasses an area of 348 square miles. The combined area of the County and the independent cities within its boundaries is 360 square miles. Approximately 18.7 percent of land area within the County is owned by the federal government, including the Manassas National Battlefield Park, Prince William Forest Park and a portion of Marine Corps Base Quantico.

According to the U.S. Census Bureau 2010 census, the County had the second largest population (402,002) of any county in the Commonwealth of Virginia (the “Commonwealth”) and is one of its most rapidly growing jurisdictions. The current population is estimated by the County demographer at 431,863 (as of December 31, 2015).

Form and Organization of Government

Since 1972, the County has operated under the County Executive form of government, as provided for in Sections 15.2-500 et seq. of the Code of Virginia of 1950, as amended. The governing body of the County is an eight-member Board of County Supervisors (the “Board”). Residents in each of the County’s seven magisterial districts elect one member of the Board to serve a term of four years. The eighth member of the Board is elected at-large by County residents to serve a four-year term as Chairman. The current members of the Board were elected on November 3, 2015, and took office on January 1, 2016. The current terms of all Board members will expire on December 31, 2019.

The Board appoints a County Executive to act as the County government’s chief administrative officer. The County Executive serves at the pleasure of the Board, implements its policies, provides organizational leadership for addressing major issues, directs business and administrative procedures, and recommends department heads for appointment by the Board. The County Executive is assisted by two Deputy County Executives and the Directors of each of the agencies, departments, and offices. The Board also appoints a County Attorney to provide legal advice to the Board, agencies, departments, and offices of the County government.

In addition to the members of the Board, County residents elect three constitutional officers, the Clerk of the Circuit Court for a term of eight years, the Sheriff, and the Commonwealth’s Attorney, each for terms of four years. The Judges of the Circuit Court, the General District Court, and the Juvenile and Domestic Relations District Court are elected by the Virginia General Assembly. Unlike most other Virginia counties, County residents do not elect a Treasurer or a Commissioner of the Revenue. The County Director of Finance, who is appointed by the Board, carries out the responsibilities of these officers.

The administrative offices of the County are located at 1 County Complex Court, Prince William, Virginia 22192. The central telephone number for the County’s administrative offices is (703) 792-6000. The County’s website is http://www.pwcgov.org/.

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Political Subdivisions

In Virginia, cities and counties are not overlapping units of government. Manassas and Manassas Park are two independent cities within the County. On May 1, 1975, the former Town of Manassas was incorporated as a city, and on June 1, 1975, the former Town of Manassas Park was incorporated as a city (collectively, the “Cities”).

Four incorporated towns are located within the County: Dumfries, Haymarket, Occoquan and Quantico (collectively, the “Towns”). Although the Towns are separate units of government, the ordinances and regulations of the County, subject to certain limitations prescribed by Virginia law, are effective therein. Property in the Towns is subject to County taxation, and the County provides certain services to the residents of the Towns. The Towns may incur general obligation bonded indebtedness without the prior approval of the County (See Section III - DEBT ADMINISTRATION - OTHER COUNTY RELATED INDEBTEDNESS).

Boards and Authorities of the County

The Board appoints members to numerous separate boards, committees, and commissions that establish policies, advise, or administer in operations of certain services, including the Prince William County Service Authority (the “Service Authority”). The Service Authority, a separate and independent entity, was created in 1983 pursuant to the Virginia Water and Waste Authorities Act to assume responsibility for water and sewer operations of several sanitary districts and is governed by an eight-member board of directors. The County’s Department of Park and Recreation (“DPR”) also has an advisory board with members appointed by the Board to assist in identifying various recreational programs for County residents.

Several sanitary districts were created in the past to provide water and sewer services to various areas of the County. These sanitary districts included the Occoquan Woodbridge/Dumfries Triangle Sanitary District (“OWDT”), the Greater Manassas Sanitary District (“GMSD”) (which included the Yorkshire Sanitary District), the Nokesville Sanitary District, the Oak Ridge Sanitary District, the Occoquan Forest Sanitary District and the Bull Run Mountain Sanitary District. The functions of these sanitary districts have been assumed by the Service Authority and although they still exist, such sanitary districts are dormant. The Dale City Sanitary District operated an indoor recreational facility which is now operated by the County DPR. The Dale City Sanitary District also still exists but is dormant. The Lake Jackson Sanitary District was established, along with the Lake Jackson Service District, to provide road maintenance in the Lake Jackson community. The governing body of all sanitary districts is the Board. A sanitary district may incur indebtedness; however, such indebtedness is not an obligation of the County, but solely of the sanitary district. The Board, as the governing body of the sanitary districts establishes charges for services provided and levies annual property taxes within the districts to fund the operations and to pay debt service on outstanding issued bonds.

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The operation of public schools in the County is vested in an eight-member, elected School Board (the “School Board”). Members of the School Board are elected for four year terms, and the terms of the current members expire December 31, 2019. The School Board does not have the authority to levy taxes or issue General Obligation bonds, and therefore, the local share of the cost of operating public schools in the County is provided by an appropriation and transfer of funds by the Board from the County’s General Fund. Operations of the School Board, however, are independent of the Board and the County administration as prescribed by Commonwealth of Virginia law. A Superintendent is appointed by the School Board to oversee the operations of the County’s public schools.

Certain County Administrative Staff Members

CHRISTOPHER E. MARTINO was appointed as Acting County Executive beginning in January 2016. Mr. Martino had served as Deputy County Executive since March 2010. In addition, he also served as the County’s Finance Director from 1996 to 2010. Before joining the County, Mr. Martino served as Comptroller of the City of Rye, New York for eight years. Mr. Martino’s professional experience also includes serving as Deputy Commissioner of Finance for the City of White Plains, New York and working as an Auditor for Ernst & Whinney and Texaco, Inc. Mr. Martino is a Certified Public Accountant. He holds a Bachelor of Accounting from Franklin & Marshall College and a Master’s of Business Administration in Finance from the Stern School of Business at New York University.

SUSAN L. ROLTSCH has served as Deputy County Executive since June 2002. In this role, she oversees County departments involved in community development-related functions, including Public Works, Transportation, Planning, Development Services and Parks and Recreation. Prior to this appointment, she held the position of Development Manager in the Department of Economic Development. She also spent several years working with the Planning Office, where she gained experience in land use planning, zoning, and development review. Prior to joining the County in 1986, she worked for Cabot Consulting Group. Ms. Roltsch holds a Bachelor of Arts in Economics from the University of Virginia, and a Master of Public Administration from George Mason University.

ELIJAH T. JOHNSON was appointed Deputy County Executive in October 2014. In this position his responsibilities include administrative oversight of all human services agencies, including Community Services, Area Agency on Aging, Department of Social Services and Housing and Community Development. Mr. Johnson also assists in the management of state- supported human services agencies providing assistance in the County, and work with the many community non-profits who provide invaluable service to the County residents. Prior to this appointment he served as the County’s Director of the Office of Housing and Community Development (OHCD) for seven years. Mr. Johnson’s professional experience includes serving as the Housing Programs Supervisor with the Alexandria Redevelopment and Housing Authority. He is a graduate of Hampton University with a B.A. in Mathematics.

MICHELLE L. ATTREED was appointed Director of Finance in May 2014. Prior to this appointment she served as the County’s Deputy Finance Director since March 2012 and has worked for the County since 1993. She oversees staff for the areas of Purchasing, Financial Reporting and Control, Payroll and Disbursements, Real Estate Assessments, Tax

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Administration, Risk Management and Treasury Management. Prior to her appointment as Deputy Finance Director in 2012, she served as the County’s Financial Reporting and Control Division Chief with responsibility over Payroll, Accounts Payable and Financial Reporting. Her professional experience includes working as a Senior Auditor with Stokes & Company, P.C. and as a staff auditor with the U.S. General Accounting Office. Ms. Attreed received her undergraduate degree from Virginia Tech and her Master of Public Administration from George Mason University, receiving the John D.R. Cole Award for Outstanding MPA Student. Ms. Attreed is a Certified Public Accountant, a member of the American Institute of Certified Public Accountants, Government Finance Officers Association, and the Virginia Government Finance Officers Association.

MICHELLE R. ROBL was appointed as County Attorney for the County by the Board of County Supervisors in December 2015. She has worked for the County in the County Attorney’s Office, since 1993. She had served as Acting County Attorney since June of 2015 and Deputy County Attorney for six years before being named Acting County Attorney. She represents the Board and various County agencies before all levels of the Commonwealth and federal courts and administrative bodies, in various local government areas such as employment discrimination and personnel law, law enforcement and internal affairs issues, child abuse and neglect law, land use, contract matters, and general liability defense. She earned her Juris Doctor degree from the George Mason University School of Law and her undergraduate degree from the Virginia Polytechnic Institute and State University (Virginia Tech). Among other affiliations, she is on the Board of Directors of the Local Government Attorneys Association of Virginia, and Past Chair, Vice-Chair and Secretary, to the Virginia State Bar Fifth District Section III Disciplinary Committee.

JEFFREY A. KACZMAREK was appointed as the County Economic Development Department Director in April 2012. Prior to this appointment he served as the President and Chief Executive Officer of the Economic Development Corporation of Kansas City, Missouri, from 2005 to 2011. He oversees an economic development agency that has in the past three years assisted in projects totaling approximately $2.2 billion in private capital investment and the creation of over 2,000 jobs. Additionally two technology entrepreneurship initiatives were successfully launched with the establishment of the Prince William Science Accelerator, a wet lab facility for life sciences companies, and the Virginia Serious Games Institute, an incubator facility for computer game design companies. He earned a Bachelor of Science in Urban Planning degree from Michigan State University and has pursued graduate work towards a Master of Urban Planning at Wayne State University. He has over 30 years of economic development experience.

STEVEN L. WALTS was appointed Superintendent of Prince William County Public Schools in April 2005 and took office in July 2005. Dr. Walts previously served as Superintendent of Schools in Greece, New York, from 1998 to 2005. He also was an Adjunct Professor and Program Coordinator for the Canisius College administrative programs taught in Greece. From 1992 to 1998, he served in Baltimore County, Maryland as the Assistant Superintendent, Northwest Area, and as the Assistant Superintendent/Executive Director, Department of Human Resources. He received his undergraduate and master’s degrees from Wichita State University. Dr. Walts received his doctorate in Education Policy and Leadership from the University of Maryland in 2002.

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GOVERNMENTAL SERVICES

The County provides a full range of local government services, reflecting both its form of government under the law of the Commonwealth and its increasingly urban character. The mission of the County Government is to provide the necessary services to protect the health, welfare, safety and environment of citizens, consistent with the community’s values and priorities. This mission is accomplished by: encouraging citizen input and involvement; preserving the County’s fiscal stability; producing effective and efficient government programs; managing the County’s resources; planning for the future; and representing citizens’ needs and desires to other levels of government. The discussion that follows outlines several services that the County provides to its citizens and services provided in conjunction with other governmental entities.

General Government Administration

Executive Management: The Office of Executive Management (“OEM”) provides leadership and executive management direction to achieve the goals and policies of the Board. The functions of this office include overall management and policy development, administrative support to the Board, dissemination of citizen information, management of the County’s human resources, administration of affirmative action and equal employment opportunity, intergovernmental relations, and coordination of appropriate federal, Commonwealth, and regional initiatives to further the County’s goals. The Office of Executive Management also is responsible for managing the County’s resources consistent with its current Fiscal Year Budget, a five year Fiscal Plan, and a six year Capital Improvement Program in addition to its Strategic Plan. To do this, the OEM develops and monitors the County’s operating and capital budgets, evaluates agency programs and operations, provides performance measurement and management reporting, provides internal audit consulting, and offers management consulting to County departments.

Financial Management: The County administers the assessing, collecting, managing and disbursing of County funds through the Department of Finance. The Department of Finance contains several offices; including: Financial Reporting and Control, which prepares and maintains the County’s financial records; Payroll and Disbursements, which coordinates disbursements to vendors and employees; Tax Administration, which is responsible for assessing personal property and gross receipts taxes, collecting, and recording all County revenues; Real Estate Assessments, which appraises all real property and administers tax relief programs; Purchasing, which administers procurement for the County, develops, and monitors compliance with purchasing regulations; Treasury Management, which provides annual revenue estimates for general County revenues, coordinates debt financing for capital projects, and manages the investment of County Funds; and Risk Management, which manages the County’s occupational safety and health, environmental, and insurance/self-insurance programs.

Legal Services: The County Attorney provides legal counsel, advice, and representation to the Board, County Executive, officers, and employees of the County in the performance of their duties. This includes matters involving land use and zoning, leases and contract negotiations, bond financing, grant applications, deed preparation and review, collection of

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delinquent County taxes and other delinquent accounts, and personnel matters, including workers’ compensation, and the drafting of ordinances, policies, and proposed legislation. Other organizations for which the County Attorney provides legal counsel, advice, and representation include the Potomac and Rappahannock Transportation Commission and the various boards and commissions appointed by the Board.

Support Services: The Department of Information Technology is responsible for providing all aspects of Information Technology across the County including strategic planning, seat management, eGovernment, Geographic Information Systems, information technology governance and policies, information security and access control, voice and data infrastructure and support, operations data center, public safety radio systems, desktop, laptop, tablet, mobile data computer devices, and full life-cycle enterprise application management.

Public Safety

Police Services: The County’s Police Department (the “Police Department”) is a law enforcement agency, nationally accredited by the Commission on Accreditation for Law Enforcement Agencies (“CALEA”), with a professionally trained force with sworn officers and full and part-time civilian staff. The Police Department is organized into five divisions: Office of the Chief, Support Services, Operations, Criminal Investigations, and Financial and Technical Services. The Office of the Chief encompasses all leadership and management oversight for the Police Department and includes Internal Affairs and public information services. The Support Services Division maintains the department’s forensic services, records, equipment, and supplies. In addition, this division coordinates and conducts all training, maintains control of evidence and recovered/confiscated property, oversees employee recruitment and selection, and enforces and coordinates animal control ordinances and services including housing unwanted animals. The Operations Division responds to citizen calls for service, performs patrol functions, executes search warrants, enforces traffic and parking regulations, and directs all special teams such as Special Weapons and Tactics, Search and Rescue Unit, Civil Disturbance Unit, Dive Team, and K-9 Unit. The Operations division also coordinates crime prevention and education activities and enforces and oversees school crossing guard services. The Criminal Investigations Division investigates all major criminal offenses including crimes against persons or property, vice and narcotics cases, crimes committed against and by children, apprehension of criminals, and manages school resource programs in the County’s schools. The Financial and Technical Services Division is responsible for coordination and management of all fiscal matters, CALEA accreditation, policy review, policy amendments, facility planning, and supports all aspects of the Police Department’s information technology needs.

Fire and Rescue Services: The Department of Fire and Rescue and the Fire and Rescue Association (consisting of career and volunteer personnel working together collaboratively) protects lives, property, and the environment through timely, professional, humanitarian services essential to the health, safety, and well-being of the community. Emergency response personnel respond to emergency fire, medical, hazardous materials and service calls for assistance. They provide pre-hospital emergency medical care and fire and hazardous materials incident mitigation. Emergency medical services, including on-the-scene medical treatment and ambulance-to-hospital monitoring of patients, are provided by trained basic and advanced life support technicians. All emergency responders receive training to provide basic life support

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services, while many are trained to perform advanced life support services. Emergency Medical Service (“EMS”) Operations personnel are responsible for the management of the EMS components of fire and rescue service. They provide appropriate training, supervision, procedures, policies and program support within the EMS system. Career and volunteer fire and rescue personnel staff twenty-one fire and rescue stations. Mutual aid agreements exist with all regional jurisdictions to provide prompt and efficient emergency services given existing resources and unit deployment. The Community Safety Section includes the Fire Marshal’s Office (“FMO”), Office of Emergency Management (“EM”), and Community Education. The FMO investigates the origin and cause of fires and explosions and conducts criminal investigations of arson. Fire Marshals inspect commercial properties and new construction sites to ensure compliance with fire codes, reviews building sites, fire suppression, and alarm system plans to ensure compliance with fire codes and building codes related to fire protection systems. EM develops and maintains disaster plans as well as coordinates and conducts exercises for all such plans in accordance with federal laws and regulations to prepare for, respond to, and recover from disasters and to mitigate community hazards. EM manages and maintains the Hazardous Materials Program, coordinates Local Emergency Management Planning Committee efforts, and provides technical support to emergency response operations. In addition, the EM develops, maintains, and exercises disaster plans in accordance with federal laws and regulations. The community safety program provides public information and public education, such as injury prevention and fire safety practices.

Public Schools

The County public school system is the second largest public school system in Virginia and the fourth largest in the Washington Metropolitan Region. It is known for its system of school based management, which places the decision making and accountability at the school level. The costs of the school system are primarily supported by appropriations from the General Fund of the County (see Section II - FINANCIAL ADMINISTRATION - GENERAL FUND FINANCIAL OPERATIONS) and from monies received from the Commonwealth and the federal government.

The overall instructional program in the County schools is implemented through a planned, systematic approach which specifies the essential skills for all students and serves as an instructional guide for teachers to assure that the essential skills are learned by every child. Programs are also available for gifted and special education students. Vocational instruction in several career areas is offered as well.

The public school system consists of 58 elementary schools, 1 elementary/middle (K-8), 16 middle schools, 11 high schools, 3 special education schools, 2 traditional schools, and 2 alternative schools. As shown in the following chart, the number of students attending the County’s public schools has grown substantially in the past ten years.

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Public School Enrollment

School Special Year Elementary Middle High Education Total % Change

2006 32,704 15,748 21,228 1,003 70,683 - 2007 33,858 16,040 21,792 964 72,654 2.8% 2008 34,428 16,273 21,930 1,027 73,658 1.4 2009 36,055 17,034 22,328 1,239 76,656 4.1 2010 37,261 17,700 22,857 1,298 79,116 3.2

2011 38,436 18,351 23,500 1,348 81,635 3.2 2012 39,269 18,902 24,015 1,365 83,551 2.3 2013 39,538 19,473 24,665 1,379 85,055 1.8 2014 39,920 19,703 25,249 1,337 86,209 1.4 2015 40,070 20,004 25,861 1,319 87,253 1.2 Source: Prince William County Schools Office of Facilities Services, October 2015.

Infrastructure/Transportation

One of the County’s strategic goal areas is Transportation Infrastructure to ensure the optimum functioning and connectivity of the community and its businesses. Over the years, the County has worked to develop a transportation network that gets people to jobs, improves safety, reduces congestion, reduces travel time and enhances the County’s economic development efforts. Citizens have supported these efforts by approving bond referenda in 1988, 1990, 1994, 1998, 2002 and 2006 totaling over $550 million to finance transportation projects. A substantial portion of the new road construction and improvements over the past 10 years has been financed by the County with a moderate amount of funding from the Commonwealth and the federal government. Once road construction projects are completed, they are accepted by the Commonwealth for future maintenance. The County’s current six-year Capital Improvement Program includes several projects that will be funded with County General Funds, proffers, and new debt—supplemented by regional, the Commonwealth, and federal funding.

Human Services

County departments and various appointed boards and commissions are responsible for overseeing and advising on the planning and delivery of the County’s numerous human services programs. Members of these boards and commissions are appointed by the Board. Various operating departments, in locations convenient to citizens, provide direct services, administration, and support. Among these departments, the services provided include the following:

Community Services: Community Services is the County’s public behavioral health entity charged with the provision of mental health, substance abuse, intellectual disability, emergency, early intervention, and prevention services for the County and the Cities of Manassas and Manassas Park. Services are community-based, provided both directly and contractually

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with private and other public service providers, and include case management, medical and therapeutic treatment, and specialized services such as psychosocial rehabilitation, vocational services, and residential support. Community Services serves residents of all ages, including early intervention services for babies and toddlers, from birth to age three who are at risk due to developmental delays. Operations are managed by an Executive Director assisted by a Community Services Board appointed by the Board. Funding for many services is through Medicaid and other Commonwealth and federal revenue sources.

Social Services: The mission of the Department of Social Services is to enhance the quality of life in the County by affording individuals and families the support, protection, and safety necessary to enable them to build self-reliant lives. This is accomplished by programs designed to protect children and vulnerable adults and includes foster care and adoption services in addition to residential services that provide court-ordered secure detention for youths, post- dispositional residential care to youths as an alternative to commitment, comprehensive services for at-risk youths, and services for persons who are homeless. Operations are managed by a Social Services Director, assisted by a Social Services Advisory Board appointed by the Board. Funding for the Department of Social Services is shared with the Commonwealth and the federal government.

Agency on Aging: The primary goals of the Area Agency on Aging are to empower independence and enhance the quality of life and enjoyment of aging individuals by offering a supportive network for older persons and their family caregivers through advocacy education, coordination, and implementation of programs and services in the tri-jurisdictional area of the County and the Cities.

Housing Opportunities and Assistance: The Office of Housing and Community Development (“OHCD”) is responsible for developing affordable housing opportunities and neighborhood resources for low and moderate-income households in the County. OHCD manages the development and implementation of the Prince William Area (the County and the Cities) Consolidated Housing and Community Development Plan to encourage and support affordable housing programs and services. OHCD primarily uses federal resources to provide housing development, rehabilitation and preservation services, home ownership financing and housing-related services, financial services to local shelters for their operation and assistance to homeless families, as well as rental assistance through the federally-funded Housing Choice Voucher Program.

Public Health Services: The Department of Public Health provides a wide range of services designed to promote and protect the health of the community and the environment. The Department is funded by the federal government, the Commonwealth, the County, the Cities, and Commonwealth and local user fees. It is responsible for the community and clinical preventive services, vital statistics, health information and environmental health services and the assurance of access to needed quality health care services. The Department of Public Health’s functions include the provision of preventive and other clinical services including: immunizations for children and adults; prenatal care; women’s wellness; sexually transmitted disease services; tuberculosis treatment and care; dental care; and nutrition services for women, infants, and children. The agency’s functions also include the issuance of death certificates; inspections of food and public establishments; inspection, testing, and permitting of water supplies and sewage

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disposal systems; and review of new development projects for environmental health impacts. Public Health interventional activities include the investigation and control of communicable disease outbreaks, rabies control, health and environmental hazard mitigation, and bioterrorism/public health emergency response.

Judicial Administration

The County administers judicial affairs through a court system consisting of the Circuit Court, the General District Court, and the Juvenile and Domestic Relations Court and through the Offices of the Clerk of the Court, the Commonwealth’s Attorney, the Community Corrections Agency, and the Office of Criminal Justice. Funding for the operations of the Clerk of the Court, the Circuit Court and other courts, the Magistrates, the Commonwealth’s Attorney, and the Sheriff’s Office is largely provided by the Commonwealth but is supplemented by the County.

The Regional Adult Detention Center (“ADC”) consists of five buildings in the County: the Main facility, the Modular building, the Central facility, the Annex for administrative and training use, and the Iron Building housing for the Work Release and Electronic Incarceration Program located in the City of Manassas. The ADC’s mission is to provide secure, safe, and cost effective inmate housing. The ADC serves the County and the Cities, and is governed by an eleven member Regional Jail Board (“Jail Board”). The Sheriff is an ex officio member by statute. The Board appoints eight members, and the Manassas City Council appoints two members to the Jail Board. The Commonwealth Department of Corrections operational capacities in the County as of December 2015 are estimated at 200 inmates in the Central Jail, 202 inmates in the Main Jail, 200 inmates in the Modular Jail, and 65 inmates in the Work Release center for a total of 667 inmates. The Jail Board, with the advice of the ADC superintendent, has set management capacities higher than operational capacities. The Central and Main facilities are double-bunked and by adding staff to manage inmates, additional inmates may be housed.

The County participates in a second regional jail facility, Peumansend Creek Regional Jail (“PCRJ”), which houses inmates from each of its six member jurisdictions. PCRJ is located on 150 acres of land in Caroline County, Virginia, and is designed with the capacity for approximately 336 minimum and medium security inmates. The County has an allocation of 75 beds at PCRJ. When needed, and if extra space is available at PCRJ, the Jail Board can house additional inmates there on a per diem basis.

Planning and Development

Transportation, Public Works, and Development Services: The Departments of Transportation, Public Works and Development Services provide services to maintain and improve the safety, quality of life and environment for County residents. These departments assist with the planning and construction of safe and adequate roadways, engineering, construction and maintenance of public facilities, historic preservation, property code enforcement protection and management of the County’s watersheds, and engineering review and inspections for site development, building construction and code compliance.

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The Department of Transportation’s goals include easing the flow of traffic and improving travel within the County for residents and visitors. Working with local, regional, Commonwealth and federal partners, this department is responsible for the construction management of the County’s new roads and other improvements not managed by the Commonwealth’s Department of Transportation.

The Department of Public Works provides internal services for construction management of capital projects, fleet maintenance of County vehicles and equipment and manages the County’s solid waste system, which includes a sanitary landfill, yard waste composting facilities, and recycling facilities. The operation of the County’s solid waste system is funded entirely through a County-wide solid waste user fee, other user fees and charges for services, and the sale of recyclable materials. The estimated useful life of the system extends to 2060.

The Department of Development Services (DDS) is the lead development agency for the County. DDS works closely with many affiliated agencies, including Planning, the Fire Marshall/Emergency Services, Public Works, Transportation, and Information Technology to assist customers with the timely development of projects and in compliance with County and state requirements. DDS is also the lead agency responsible for updating the County’s design and construction standards manual.

Land Use Planning: The Office of Planning is responsible for identifying current and future land use and public facilities needs of the County. The Office of Planning prepares and updates the Comprehensive Plan, the general guide to the location, character, and extent of proposed anticipated land use, including public facilities. The Office of Planning reviews proposals for compliance and prepares, updates and enforces the zoning ordinance. The Office of Planning also reviews and provides planning analysis of proposed zoning changes and special use permits and is responsible for the implementation of proffers.

Geographic Information: The Geographic Information System (“GIS”) Division of the Department of Information Technology manages the County’s enterprise geographic information system in order to assist the County in administering its land management responsibilities. The GIS Program prepares and maintains a multipurpose database containing specialized geographic, geodetic, and legal information for site plans and plat and are the central support for the enterprise GIS database and its associated GIS web applications, GIS desktop application and custom GIS tools. The GIS also maintains a land information and map distribution center for dissemination of land information to the general public and the GIS Division staff serves as the technical experts for the ArcGIS software for the County clients.

Parks, Recreation and Libraries

Libraries: The County’s library system provides services to the citizens of Prince William County and the Cities of Manassas and Manassas Park through its current four full- service regional libraries, two community libraries and six neighborhood libraries. The library system had 314,723 registered patrons as of the end of fiscal year 2015. In fiscal year 2015, the library circulated 3,436,567 library materials and had 5,455,218 information requests.

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Parks and Recreation: The County DPR is responsible for the development, construction, operation, and maintenance of parks and recreational facilities throughout the County. DPR currently operates 71 park and recreational areas and manages approximately 4,200 acres. Approximately one-third of the total acreage owned is developed and maintained for active recreational and leisure use. Operations are managed by the County DPR Director assisted by a Parks and Recreation Advisory Board appointed by the Board.

Water Supply and Wastewater Collection and Treatment

Prince William County Service Authority: The boundaries of its service area are coterminous with the County. All heavily developed areas of the County, with the exception of the unincorporated Dale City area in the eastern part of the County, are provided water and wastewater service by the Service Authority. The Service Authority provides service to approximately 88,000 residential and commercial accounts. Over the past five years, the Service Authority has seen a 5.2 percent increase in its customer base.

Water is supplied from a combination of sources: Service Authority-owned wells and long-term water purchase agreements with the Fairfax County Water Authority and the City of Manassas. The Service Authority’s total capacity as of December 2015 is 62.9 million gallons per day (“mgd”) and is expected to meet County water needs until the year 2034. Additional capacity will be purchased when required. During the 2015 fiscal year, the Service Authority delivered a daily average of 26.1 mgd representing 99 percent purchased water and one percent produced water from the Service Authority’s wells. The Service Authority’s water storage and distribution system consists of approximately 1,203 miles of water lines, 26.1 million gallons of water storage, and various pumping stations.

The Service Authority’s sewage treatment system consists of the H. L. Mooney Advanced Water Reclamation Facility (“Mooney AWRF”), with a current capacity of 24 mgd, and one smaller plant with a capacity of 0.08 mgd. Current capacity is expected to satisfy growth in the Service Authority’s service area until the year 2030. The Service Authority’s 1,080 miles of sewer mains transport wastewater to these facilities, as well as to the Upper Occoquan Sewage Authority (“UOSA”) Regional Facility, which provides wastewater treatment service to the Cities and to portions of Fairfax County and the County.

Under a long-term agreement with UOSA, the County’s share of the treatment capacity at the interjurisdictional UOSA plant is 19.8 mgd of the present UOSA plant capacity of 54 mgd. Current capacity, along with a planned UOSA capacity expansion, will service most of the County’s sewage treatment through the year 2026. To meet sewage treatment needs beyond that time, the Service Authority plans to further expand the capacity of the Mooney AWRF and purchase additional treatment capacity at UOSA. The UOSA facility is authorized to expand to a maximum plant build-out capacity of 80 mgd.

The Service Authority is a self-supporting enterprise fund. It derives all of its operating revenues from its customer billings. The Service Authority also collects availability fees from owners/developers to cover the cost for treatment capacity and infrastructure related to growth. The Service Authority adopts an annual operating budget and capital improvement program, sets

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rates, and may issue revenue bonds without the approval of other governmental bodies, including the Board.

Upper Occoquan Sewage Authority: UOSA was formed on March 3, 1971, by concurrent resolutions of the governing bodies of Fairfax and Prince William Counties and the Towns of Manassas and Manassas Park (now Cities), and was chartered by the Commonwealth of Virginia State Corporation Commission on April 1, 1971. The governing body of UOSA is an eight-member Board of Directors consisting of two members appointed for four-year terms by the governing body of each member jurisdiction. UOSA’s Executive Director is responsible to the Board of Directors for the day-to-day operations of UOSA. UOSA was established to acquire, finance, construct, operate, and maintain facilities for the treatment of sewage in its service area and is organized into four divisions: Operations and Maintenance, Treatment Process, Technical Services and Finance.

UOSA’s service area encompasses approximately 246 square miles and includes portions of the County, Fairfax County and the Cities. UOSA owns and operates an advanced water reclamation facility with a capacity of 54 mgd, and a regional system of sewer lines, pump stations and force mains that deliver sewage from the member jurisdictions to the treatment plant. To meet future needs from increases in population and associated wastewater flows, UOSA has developed a capital improvement program that includes a variety of major additions, extensions and improvements to its system. The existing treatment works is designed and permitted to receive and process a rolling 30-day average of 54 mgd. For the fiscal year ended June 30, 2015, the average daily flow was 32.8 mgd. The maximum 30-day rolling flow was 41.1 mgd, 76.1 percent of capacity.

DEMOGRAPHIC AND ECONOMIC FACTORS

Population Characteristics

The County’s population is concentrated in two areas of the County: the eastern section along Interstate 95, including the suburban areas of Woodbridge/Dale City, and the north central section along Interstate 66, including the suburban areas surrounding the City of Manassas. Other areas of the County have experienced new, and often rapid, population increases in the past ten years. These new growth areas include developments along the Prince William Parkway and Route 234 in the east and Linton Hall Road, Vint Hill Road, and James Madison Highway in the west. According to the 2010 census, the County was the second most populous county in the Commonwealth and one of its most rapidly growing jurisdictions. The County’s population increased from 280,813 to 402,002 between 2000 and 2010, an increase of 43.2 percent or an average annual growth of 4.3 percent. The following table provides population growth over the last four decades between 1970 and 2010 for the County, the Washington, D.C. metropolitan statistical area (MSA), and the Commonwealth.

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CENSUS POPULATION AND RATES OF CHANGE

Prince William Percentage Washington Percentage Commonwealth Percentage Year County(1) Change D.C. MSA(2) Change of Virginia Change

1970 111,102 - 2,481,489 - 4,648,494 - 1980 144,703 30.2% 3,477,972 40.2% 5,346,818 15.0% 1990 215,686 49.1 4,223,485 21.4 6,187,358 15.7 2000 280,813 30.2 4,923,153 16.6 7,078,515 14.4 2010 402,002 43.2 5,582,170 13.4 8,001,024 13.0

Source: County Demographer. Notes: (1)The geographic boundaries of the County changed between 1970-2010 period due to the Cities becoming incorporated and independent in 1977. The population figures reflect the reported Decennial Census data and reflect the County boundary as defined at that point in time. (2)The 1970 to 1990 population figures are based on the 2000 definition of the Washington, DC-VA-MD MSA.

As part of the national and regional economic downturn, the County housing market has cooled since the boom of the early 2000s. With this change in the housing market, the rapid rate of population increase in the County likewise decreased.

The following two tables show the County’s population for 2006 through 2015, forecasts for 2020 and 2030 as estimated by the County in cooperation with the Metropolitan Washington Council of Governments, and other population characteristics of the County as of 2014.

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COUNTY POPULATION

Average Annual % Growth Over Previous Time Year Population Period

July 1, 2006(1) 371,178 - July 1, 2007(1) 381,221 2.7 July 1, 2008(1) 388,269 1.8 July 1, 2009(1) 392,900 1.2 July 1, 2010(1) 403,647 2.7

July 1, 2011(1) 409,345 1.4 July 1, 2012(1) 413,396 1.0 July 1, 2013(1) 418,385 1.2 July 1, 2014(1) 422,727 1.0 July 1, 2015(1) 428,329 1.3

July 1, 2020(2) 469,783 1.9

July 1, 2030(2) 519,928 1.1 Sources: (1)County Demographer database. (2)Estimated Metropolitan Washington Council of Governments (MWCOG) Round 8.4 Cooperative Forecasts, approved July 2014.

SELECTED 2014 POPULATION CHARACTERISTICS

Prince William Characteristic County Virginia United States

Median Age 34.2 37.7 37.7 Percent Age 17 or Under 28.1% 22.4% 23.1% Percent Age 65 or Older 8.3% 13.6% 14.5% Average Number of Persons per Household 3.22 2.62 2.65 Percent with High School Degree or Higher 89.6% 88.6% 87.0% Percent with Bachelor’s Degree or Higher 39.1% 36.8% 30.1%

Source: U.S. Department of Commerce, Bureau of the Census, 2014, American Community Survey 1-Year Estimates. American Community Survey data for 2015 are not available as of the date of this Official Statement.

Income

According to the 2014 American Community Survey, the 2014 median household income in the County was $92,104. This ranks twentieth among the largest communities in the United

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States, fifth among counties and cities in the Commonwealth, and is an indication of the relative wealth of the County and the greater Washington metropolitan region, which includes eleven of the top twenty counties in the nation for median household income. Comparisons of the County’s 2014 median household income estimate are shown in the following table:

COMPARATIVE 2014 INCOME ESTIMATE

Median Household Income(1)

Prince William County $92,104 Commonwealth of Virginia 63,907 United States 53,657

Source: U.S. Census Bureau, 2014 American Community Survey, 1-Year Estimates. Data for 2015 are not available as of the date of this Official Statement. Note: (1) A household includes related individuals, unrelated individuals and single persons who are living alone.

Commerce and Employment

Major business concentrations within the County are located along the Interstate 95 and Interstate 66 corridors. Sites near Interstate 66 are particularly well-suited for industrial, high technology and service companies. Commerce and retail development are concentrated in the eastern half of the County along the Interstate 95 and Route 1 corridor and in the western portion of the County along the Sudley Road corridor between the City of Manassas and Interstate 66 as well as the Lee Highway/Route 29 corridor south of the Interstate Route 66 and Route 29 interchange. Businesses and other establishments located in the County include Sentara and Novant Hospitals, American Type Culture Collection, SFX Entertainment (Jiffy Lube Amphitheatre), Comcast Communications, Northern Virginia Community College, Federal Bureau of Investigation, George Mason University Science and Technology campus, New Horizon Security, and Minnieland Private Day School. Overall, the largest employment sectors are services, retail and government.

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Major public and private employers located within the County include:

MAJOR PUBLIC AND PRIVATE EMPLOYERS

Number of Employer(1) Ownership Employees(2) Rank

Prince William County School Board Local Government 1000 and over 1 U.S. Department of Defense Federal Government 1000 and over 2 County of Prince William Local Government 1000 and over 3 U.S. Federal Bureau of Investigation Federal Government 1000 and over 4 Wal-Mart Private 1000 and over 5 Marine Corps Base Quantico Federal Government 1000 and over 6 Sentara Healthcare (Potomac Hospital) Private 1000 and over 7 No. Virginia Community College State Government 500-999 8 Wegmans Private 500-999 9 Minnieland Private Day School Private 500-999 10

Sources: County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2015, Table 17. Notes: (1)All data provided by the Virginia Employment Commission (1st Quarter 2015). (2)The County is prohibited from publishing the actual number of employees per the Confidential Information Protection and Statistical Efficiency Act of 2002 – Title V of Public Law 107-347.

The County civilian labor force, as reported by the Virginia Employment Commission, was 230,912 as of December 2015, an increase of 1,548 (.7%) since December 2014, but an increase of 4,928 (2.2%) over the last five years. The employed labor force (222,875 in December 2015) increased by 3091 (1.4%) since December 2014, and grew by 9,035 (4.2%) in the last five years. The number of unemployed persons in the County (8,037 in December 2015) decreased by 1,543 (16.1%) since December 2014 and by 4,107 (33.8%) in the last five years. The December 2015 unemployment rate for the County was 3.5% compared to 4.2% in December 2014 and 5.4% in December 2011.

The number of jobs located in the County, or at-place employment, averaged over the three months in the first quarter of 2015 was 120,825. At-place employment in the County has increased 60.0 percent since 2000, when employment was estimated at 75,497, and 119.9 percent since 1990 when employment was estimated at 54,940. In the five-year period from 2010 to 2015, at-place employment has grown by over 20,000 jobs.

Year-over-year, from the first quarter of calendar year 2014 to the first quarter of calendar year 2015, total jobs in the County increased by over 5,100 or 4.4 percent. The following two tables provide information on the growth of jobs in the County, from 2007 to 2015, and compare the County’s employment profile from 2009 to 2015.

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PRINCE WILLIAM COUNTY EMPLOYMENT GROWTH

Calendar At Place Year Employment % Change

2007 101,947 - 2008 102,194 0.2% 2009 99,665 (2.5) 2010 99,874 0.2 2011 104,861 5.0 2012 109,886 4.8 2013 114,228 4.0 2014 115,705 1.3 2015 120,825 4.4

Source: Virginia Employment Commission. Employment data is for the 1st Quarter of each year.

PRINCE WILLIAM COUNTY PERCENT EMPLOYMENT TYPE

2009 2012 2015

Education & Health Services 23.4% 23.6% 23.3% Trade, Transportation & Utilities 25.1 24.1 23.1 Leisure & Hospitality 12.7 13.0 13.2 Professional & Business Services 13.4 13.0 12.5 Construction 9.8 9.8 10.0 Public Administration 5.9 6.6 8.5 Other Services 3.2 3.4 3.4 Financial Activities 3.0 2.9 2.9 Manufacturing 1.7 1.9 1.5 Information 1.6 1.5 1.4 Natural Resources & Mining 0.1 0.1 0.1

Source: Virginia Employment Commission. Employment data is for the 1st Quarter of each year. Data is rounded, and columns may not total to 100 percent. All numbers are percentages.

As shown in the following table, unemployment rates in the County have been consistently below Commonwealth of Virginia and national averages.

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HISTORICAL UNEMPLOYMENT RATES

Prince Calendar William Commonwealth of United Year County Virginia States

2006 2.4% 3.1% 4.6% 2007 2.5 3.0 4.6 2008 3.3 3.9 5.8 2009 5.4 6.7 9.4 2010 6.1 7.1 9.6

2011 5.7 6.6 9.0 2012 5.3 6.0 8.1 2013 5.2 5.7 7.4 2014 4.8 5.2 6.2 2015 4.2 4.5 5.3

Source: Virginia Employment Commission for all data. The rates are annualized and not calendar year end.

Assessed Value of Locally Taxed Property

The Virginia Constitution and the Code of Virginia provide that real estate and tangible personal property (except the rolling stock of public service corporations) are reserved for taxation by cities, counties, towns and other local government entities. The assessed value and the estimated market value of all taxable real estate and personal property in the County for the last ten fiscal years are presented in the following table.

Fiscal year values represent the January 1 assessed value for the prior fiscal year (e.g. fiscal year 2016 values are based on the January 1, 2015, assessment). According to the 2015 Real Estate Assessments Annual Report, the assessed value of residential property, including vacant land and excluding rental apartments, increased 7.48 percent in fiscal year 2016, which is based on assessed values as of January 1, 2015. The change in the residential real estate value is due to 6.18 percent appreciation and 1.31 percent growth.

The assessed value (without estimated supplements) for all real estate property types as of January 1, 2015, recognized as fiscal year 2016 revenue indicate an estimated increase of 7.34 percent to $53,565,755,000. The change in the real estate value is due to 5.71 percent appreciation and 1.63 percent growth.

The assessed value for fiscal year 2016 and percent increase from fiscal year 2015 is as follows: Residential (including Apartments) at $44,688,348,400 (7.86 percent increase); Commercial at $7,164,000,200 (5.64 percent increase); Public Service at $1,546,710,600 (1.00 percent increase) and Land and Other at $166,695,800 (3.75 percent increase).

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Additional information regarding real estate assessments is published in the Real Estate Assessments Office Annual Report available in October and found on the County website http://www.pwcgov.org/.

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ASSESSED AND ESTIMATED MARKET VALUE OF TAXABLE PROPERTY (1) Last Ten Fiscal Years ($000’s)

------Real Property------Personal Property(4)------Grand Total------

Total Estimated % of Assessed to Estimated Fiscal Locally Public Assessed Market Estimated Locally Public Assessed Market Year Assessed Service(2) Value Value(3) Market Value Assessed(4) Service(2) Value Value 2007 $56,300,954 $1,355,894 $57,656,848 $64,002,474 90.1 $3,608,756 $1,693 $61,267,297 $67,612,923 2008 56,842,674 1,448,737 58,291,411 61,439,875 94.9 3,717,730 2,210 62,011,351 65,159,815 2009 51,754,075 1,471,669 53,225,744 51,665,113 103.0 3,769,937 3,370 56,999,051 55,438,420 2010 38,630,962 1,360,943 39,991,906 47,228,010 84.7 3,365,319 2,550 43,359,775 50,595,879 2011 37,789,426 1,466,645 39,256,071 47,228,010 80.9 3,492,204 2,157 42,750,432 52,029,396

2012 40,181,834 1,472,610 41,654,444 49,533,872 84.1 3,754,050 5,243 45,413,737 53,293,165 2013 42,062,252 1,521,977 43,584,228 50,810,494 85.8 4,083,424 4,520 47,672,172 54,898,438 2014 44,775,834 1,501,931 46,277,765 57,109,671 81.0 4,320,401 3,401 50,601,567 61,433,473 2015 48,562,060 1,531,397 50,093,457 54,934,368 91.2 4,526,613 3,106 54,623,176 59,464,087 2016 52,166,023 1,546,711 53,712,734 57,668,313 93.1 4,975,950 3,536 58,692,220 62,647,799

Source: Prince William County, Department of Finance (2015 Real Estate Annual Report and Comprehensive Annual Financial Report, fiscal year 2015, Table 21). Fiscal year 2015 and 2016 values include estimates made by the County’s Real Estate Division for Public Service Property until information is received from the Commonwealth. Fiscal year 2016 estimated values for Personal Property are not available as of the date of this Official Statement. Fiscal year 2016 is preliminary until the Real Estate Landbook for Calendar Year 2016 is published in October 2016. Notes: (1) Fiscal year values represent the January 1 assessed value for the prior fiscal year (e.g., fiscal year 2016 values are based on the fiscal year 2015 assessment). (2) Public Service property is valued by the Virginia State Corporation Commission and the Department of Taxation at prevailing assessment ratios. (3) The Estimated Market Value of real property (including Public Service) is calculated by dividing the assessed value by the County’s assessment-to-sales price ratio as determined annually by the Virginia Department of Taxation. Since the ratios for the most current years are not available as of the date of this Official Statement, estimates from the County Real Estate Office are reported. (4) The estimated market value of personal property is assumed to equal 100% of the assessed value.

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ASSESSED VALUE OF REAL PROPERTY ($000’s)

Commercial Total Fiscal Residential Public Service And Use Value Year and Condos Apartments Property(1) Industrial All Other(2) Assessment(3)

2007 $48,617,154 $1,588,255 $1,355,894 $5,667,016 $428,530 $57,656,848 2008 48,185,629 1,759,043 1,448,737 6,592,385 305,617 58,291,411 2009 41,980,642 1,904,867 1,471,669 7,595,528 273,037 53,225,744 2010 29,888,134 1,801,532 1,360,943 6,726,623 214,673 39,991,906 2011 30,434,819 1,451,944 1,466,645 5,722,158 180,505 39,256,071

2012 32,477,281 1,642,125 1,472,610 5,899,244 163,184 41,654,444 2013 33,769,506 1,911,766 1,521,977 6,210,947 170,032 43,584,228 2014 35,821,828 2,185,291 1,501,931 6,597,590 171,126 46,277,765 2015 39,073,111 2,525,672 1,531,397 6,802,104 161,172 50,093,457 2016 41,965,588 2,850,683 1,546,711 7,182,893 166,860 53,712,734

Source: Prince William County, Department of Finance, (Real Estate Annual Report, fiscal year 2015, Table 7). Assessed values include landbook values plus all supplements. Fiscal year 2015 and 2016 values include estimates for Public Service Property until information is received from the Commonwealth.

Notes: (1) Public Service Property is valued by Commonwealth agencies and includes land and improvements owned by utilities, railroads, and natural gas and petroleum pipeline operators. The fiscal years 2015 and 2016 are estimates. (2)The All Other category consists mainly of agricultural land. (3)Figures do not include rollbacks.

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The following table presents the 25 largest taxable property owners based on assessed values for January 1, 2014, which represents fiscal year 2015 revenue.

The total assessed value of the largest 25 taxpayers was $3,163,329 representing approximately 5.9 percent of the fiscal year 2015 total taxable assessed value of real property within the County.

PRINCIPAL REAL PROPERTY TAXPAYERS 2014 Assessment Taxpayer Type of Property ($000’s)(1)

Virginia Electric & Power Company Utility $767,489 Mall at Potomac Mills LLC Shopping Center 514,705 Northern Virginia Electric Co-Op Utility 276,856 Verizon South Inc. Utility 154,434 Harbor Station Communities LLC Apartments 107,521 Washington Gas Light Company Utility 102,796 Stellar Chatsworth LLC Apartments 102,565 Kir Smoketown Station LP Shopping Center 92,041 Woodbridge Station Apartments LLC Apartments 88,236 Fairfield Potomac Club LLC Apartments 82,452 Diamond Potomac Town Center LLC Shopping Center 70,551 Westgate Apartments Lmtd Ptnshp Apartments 68,223 United Dominion Realty Trust Inc. Apartments 65,318 DCO Caroline Development LLC Apartments 61,345 LCOR Ravens Crest LLC Apartments 60,984 Windsor Potomac Vista Ltd Ptnshp Apartments 60,816 AERC Riverside Station LLC Apartments 56,672 Bayvue Apartments Joint Venture Apartments 56,419 Powerloft @ Innovation I LLC Data Center 54,354 Bull Run Plaza LLC Shopping Center 54,156 Starbridge River Oaks LLC Apartments 53,894 Westminster Presbyterian Retirement Adult Assisted Facility 53,487 AG TGD Rolling Brook Ph 1 Owner LLC Apartments 53,256 CL Misty LLC Apartments 52,553 Magazine Carlyle Station LP Apartments 52,208 Total(2) $3,163,329

Source: Prince William County, Department of Finance, Real Estate 2015 Annual Report, Table 12. Note: (1) Calendar year assessment January 2014 equates to fiscal year 2015 Revenue. (2) Total may not add up due to rounding.

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Commercial and Industrial Development

As of December 31, 2015, the total inventory of existing commercial space was approximately 44.6 million square feet. This includes 6.6 million square feet of office space, 5.1 million square feet of flex space (office and/or retail), 11.4 million square feet of industrial space and 21.5 million square feet of retail space.

A net total of 10.2 million square feet of commercial space has been added to the County’s inventory in the last ten years. This includes 2.4 million square feet of office space, 1.5 million square feet of flex space, 2.5 million square feet of industrial space and 3.8 million square feet of retail space. The annual increase in commercial space over the last ten years has averaged 3.0 percent per year. This includes an average annual increase of 5.6 percent in office space, 4.4 percent in flex space, 2.8 percent in industrial space and 2.2 percent in retail space.

In 2015, the County added a net of 303,478 (0.7 percent) square feet to its commercial inventory. This includes an increase of 46,222 square feet (.7 percent) of office space, an increase of 23,500 square feet (.5 percent) of flex space, an increase of 135,072 square feet (1.2 percent) of industrial space and an increase of 98,684 square feet (0.5 percent) of retail space. The current composition of the County’s commercial inventory is 14.8 percent office, 11.4 percent flex space, 25.6 percent industrial space, and 48.2 percent retail space. Existing and net new office space, flex space, industrial space and retail space from 2005 through 2015 are shown in the following table.

NEW COMMERCIAL, INDUSTRIAL AND RETAIL SPACE (In Square Feet)

Calendar Year Office Flex Industrial Retail Total Existing 4,245,890 3,525,107 8,971,865 17,667,816 34,410,678

2006 736,028 275,939 668,095 732,707 2,412,769 2007 716,503 444,813 468,648 583,681 2,213,645 2008 304,256 349,021 660,258 1,153,354 2,466,889 2009 323,901 206,000 56,395 271,371 857,667 2010 32,400 0 23,400 76,820 132,620

2011 83,093 0 124,800 219,955 427,848 2012 88,500 0 82,325 406,517 577,342 2013 21,619 0 248,210 168,377 438,206 2014 0 252,918 0 137,589 390,507 2015 46,222 23,500 135,072 98,684 303,478 Total 6,598,412 5,077,298 11,439,068 21,516,871 44,631,649

Source: CoStar Realty Information, Inc. Flex is defined by CoStar as a building designed to be versatile and may be used in combination with office, research and development, quasi-retail sales, industrial processing or high tech.

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Retail Sales

The following shows taxable retail sales in the County for calendar years 2005 through 2014.

TAXABLE RETAIL SALES – CALENDAR YEAR

Calendar Taxable Percentage Retail Sales Year Retail Sales ($000’s) Change Per Capita 2005 $3,674,096 - $10,888 2006 4,145,711 12.8 11,824 2007 4,190,609 1.1 11,667 2008 4,151,725 (.9) 11,281 2009 4,109,332 (1.0) 10,965

2010 4,353,168 5.9 10,829 2011 4,516,298 3.7 11,113 2012 4,882,471 8.1 11,645 2013 5,015,241 2.7 11,656 2014 5,108,150 1.9 11,647

Sources: Virginia Department of Taxation via Weldon Cooper Center for Public Service reported on calendar year basis and U.S. Department of Commerce Bureau of the Census population reported as of July 1 included in the County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2015, Table 16. Calendar year 2014 from Weldon Cooper Center is the latest data available.

The County is served by three regional shopping areas of Potomac Mills Mall (1.9 million square feet), Virginia Gateway (1.1 million square feet) and Stonebridge at Potomac Town Center (0.5 million square feet). The County is also served by many other community and neighborhood shopping centers.

Housing

The following table is presented to illustrate the change in residential housing in the County from 1980 to 2010. Nearly one out of every three houses in the County has been built since 2000.

HOUSING UNITS BY TYPE OF STRUCTURE

1980 1990 2000 2010 No. % No. % No. % No. % Single family houses 33,912 73.1 43,959 58.8 54,632 55.7 79,574 57.8 Townhouses 7,141 15.4 17,932 24.0 26,288 26.8 36,343 26.4 Multi-Family 5,335 11.5 12,868 17.2 17,132 17.5 21,668 15.8 Total 46,388 100.0 74,759 100.0 98,052 100.0 137,585 100.0

Sources: 1980-2000 U.S. Census Bureau 10-Year Censuses. 2010: U.S. Census Bureau, 2010 American Community Survey. Single family data includes mobile homes, boats, recreation vehicles, and vans used as permanent residences.

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New Construction

The following tables illustrate the County’s permit activity from 2006 through 2015.

BUILDING PERMITS FOR NEW RESIDENTIAL CONSTRUCTION

Calendar Single Year Family Townhouse Condo Apartment Total 2006 1,824 716 225 19 2,784 2007 1,295 583 582 0 2,460 2008 980 266 323 38 1,607 2009 1,121 421 386 49 1,977 2010 951 469 282 82 1,784

2011 859 274 108 65 1,306 2012 824 276 158 188 1,446 2013 760 427 264 104 1,555 2014 656 368 185 0 1,209 2015 698 450 234 24 1,406

Source: Prince William County Department of Development Services. Permits are New Residential Construction only and do not include additions and alterations.

NUMBER AND DOLLAR VALUE OF PERMITS

Industrial and Residential Properties Commercial Properties Totals Calendar # Value # Value # Value Year Permits ($000’s) Permits ($000’s) Permits ($000’s) 2006 12,586 624,608 3,210 645,434 15,796 1,270,042 2007 5,064 354,274 2,160 536,442 7,224 890,716 2008 3,577 246,256 1,783 251,409 5,360 497,665 2009 3,923 294,525 1,454 192,780 5,377 487,305 2010 3,624 285,580 1,311 166,062 4,935 451,642

2011 2,595 227,169 1,335 208,939 3,930 436,108 2012 2,700 294,714 1,559 299,857 4,259 594,571 2013 2,825 321,202 1,782 175,691 4,607 496,893 2014 2,601 206,137 1,757 290,614 4,358 496,751 2015 2,765 299,465 1,752 262,011 4,517 561,476

Source: Prince William County, Department of Development Services. Notes: Permits include new construction and occupancy permits. Residential values equal new construction only. Industrial and Commercial values include additions to existing properties. Pad permits (sites cleared and prepared for construction) were not issued after October 2005.

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Economic Development

One of the County’s strategic goals is to maintain an economic development climate that will attract and foster the expansion of industries that create high-wage jobs, diversify the non- residential tax base, and encourage people to live in, work in and visit the County. In that regard, the County’s Department of Economic Development works aggressively with targeted industries to attract new businesses and foster expansion of existing businesses. Since April 2005, new and expanding companies have announced or indicated their intention to invest approximately $4.0 billion and add more than 7,301 jobs to the County’s economy. Of these 252 projects completed from 2005 to 2015, 184 or 73 percent were targeted industry businesses.

Recognizing the particular strengths of the County and seizing upon market demands, the County has concentrated efforts within the life sciences, federal government agencies and contractors, and information technology markets. These efforts have proven successful in generating significant capital investments and job opportunities in the County. More recently, the County expanded its targeted industries to include more specifically advanced logistics, medical networks and gaming. In fact, the County is now home to the Virginia Serious Game Institute – a partnership between the County and George Mason University – which offers a host of services to schools, businesses and universities in the area of simulation, modeling and game design.

The County remains a focal point of the life sciences industry within Northern Virginia. Anchored by the George Mason University’s Science and Technology Campus, the County is home to a growing ecosystem of life sciences companies. The ground-breaking research generated by George Mason University creates community awareness and significant economic development opportunities. Since 2005, 14 of the Department of Economic Development’s projects have been locations or expansions by life sciences companies, accounting for intended investment of over $165 million and the addition of more than 310 new jobs. As a means of catalyzing additional growth, the County announced the launch of the Prince William Science Accelerator in December, 2012, and completed build out in May, 2014. The public/private facility is delivering commercially available wet lab space to the life sciences market in Northern Virginia and already has three tenants installed with indications of interest from several other life sciences companies.

With the County’s proximity to Marine Corp Base Quantico, Fort Belvoir, the National Reconnaissance Office, and Washington, D.C., along with the addition of the Federal Bureau of Investigation (“FBI”) Northern Virginia Resident Agency in the County, the federal government and contractors who support the missions of federal agencies have provided significant growth in the recent past. Since 2005, government contractors or federal agencies have announced their intent to invest and create jobs in the County on 79 occasions. Announcements total approximately $239 million in investment, and 2,474 new jobs.

The County’s competitive tax structure, power availability and rates, and fiber optic availability offering virtually zero latency, all contribute to the growing number of new and expanding data center clients located in the County. The County also offers large affordable land parcels and minimal natural disaster threats, which allows clients to meet the high security standards that today’s data center market demands. The County’s fast tracking of site and

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building plan review allows companies cost savings and expedites time to market. Currently, there are approximately 2.3 million square feet of data center facilities in the County. Cumulatively, since 2005, companies in this market have announced their intent to invest $3.2 billion and create 456 new jobs in the County.

Areas of particular interest in the County include Innovation Park (the “Park”) and the Potomac Communities. These two areas are home to approximately 37 percent of the total project announcements within the County since 2005.

The Park is anchored by George Mason University’s Science and Technology Campus. It is home to a growing life sciences cluster that, in addition to George Mason University, includes American Type Culture Collection, Corning Life Sciences, and the Mason/NIH BSL-3 Biomedical Research Laboratory as well as the Prince William Science Accelerator. Also present is an emerging forensic science/criminal justice cluster that includes the FBI Northern Virginia Resident Agency and the Virginia Department of Forensic Science’s Northern Laboratory. Since 2005, 48 companies have announced their intent to invest approximately $664 million and add 1,379 new jobs at the Park.

The Potomac Communities includes a number of office developments that cater to the growing demand to provide companies greater access to the Northern Virginia labor market while maintaining close proximity to Washington, D.C. and nearby federal facilities – such as Marine Corps Base Quantico, Fort Belvoir, and the Pentagon. With infrastructure improvements to local roadways and new commercial office space coming to market, the Potomac Communities provide several opportunities for those looking to locate or expand in the County. The Potomac Communities submarket has experienced accelerated momentum over the past few years in technology and federal government sectors culminating in 46 projects, 1,644 jobs and almost $123 million in investment since 2005.

Tourism and Travel

Located just 25 miles from the nation’s capital, the County is easily accessible via I-95 and I-66, two rapid rail lines, and three airports—the Ronald Reagan Washington National Airport, Washington Dulles Airport and Manassas Regional Airport. With major national tourist attractions and historic sites, the County continues to increase its visibility and tourist visitation.

The County is the home to the National Museum of the Marine Corps, a state-of-the-art, interactive museum that draws more than 500,000 visitors annually. It rivals Manassas National Battlefield Park and Potomac Mills Mall as the County’s most visited attractions. Regional, national and international visitors are drawn to four season recreation options including 12 golf courses open for public play, two national parks – Manassas National Battlefield Park and Prince William Forest Park, two state parks - Leesylvania State Park, Conway Robinson State Forest, the Occoquan Bay National Wildlife Refuge, 50 county and community parks, six marinas and river access, private recreational facilities and a professional minor league baseball team, the Potomac Nationals.

The County also prides itself on the arts. The Hylton Performing Arts Center, Jiffy Lube Live (a large outdoor live performance amphitheater), several professional performing arts

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organizations, an award-winning children’s theatre, and smaller venues provide a rich cultural environment.

History abounds at the 25 historic sites preserved and protected along the Prince William Civil War Heritage Trail. Fine cuisine, historic sites, and shopping are abundant within the quaint communities of Historic Downtown Manassas, Dumfries, Haymarket and Occoquan, and The Winery at La Grange, a working farm winery and vineyard, with its tasting room in a restored circa 1790s manor house.

The County offers an array of accommodations options from camp grounds to bed and breakfast properties and 46 hotels providing 4,200 rooms for guests.

Future development plans that will promote tourism to Prince William County include: a new hotel development at Virginia Gateway in Gainesville, a new hotel in Woodbridge, a new Potomac Nationals Minor League Baseball Stadium, the expansion of the National Museum of the Marine Corps, the opening of The Americans in Wartime Museum, brewery/distillery expansions and openings, a 5-star hotel waterfront resort, spa/conference center within the Potomac Shores community, a new VRE commuter rail station currently under construction, and several new entertainment venues in the Manassas Mall and the Sudley Manor area of the County. All these future developments are planned to be under construction or completed between now and the end of 2017.

According to the most current data available from the Virginia Tourism Corporation, 2014 tourism economic impacts in the County include 6,011 jobs, $525 million in expenditures, $8 million in local tax receipts, $22 million in the Commonwealth tax receipts, and $133 million in payroll.

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SECTION II - FINANCIAL ADMINISTRATION

CERTAIN FINANCIAL PROCEDURES

Accounting and Financial Operations

The accounting policies of the County, including its component units, conform to generally accepted accounting principles (“GAAP”) for governmental units as prescribed by the Governmental Accounting Standards Board (“GASB”). The County uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses. Governmental funds are used to account for most of the County’s general activities including the collection and disbursement of earmarked monies (special revenue funds) and the acquisition or construction of capital assets (capital projects funds). Proprietary funds are used to account for the County’s business-type activities (e.g., landfill) and internal service funds (fleet management, data processing, self-insurance, etc.). Maintenance of the financial accounting system is the responsibility of the Department of Finance.

Reporting Entity

The County’s reporting entity is determined by criteria set forth in promulgations of GASB. Accordingly, the County’s financial statements present the County’s primary government and component units over which the County exercises significant influence. The reporting entity includes the County Government as primary government, and the County Schools (controlled by the School Board), and the Adult Detention Center (controlled by the Regional Jail Board) as component units. The Board appoints the majority of the members to each of these boards, except for the School Board, which is elected. For fiscal year 2015, the School Board issued separately audited Component Unit Financial Statements. The Service Authority, which provides water and wastewater services in the County, issues separate financial statements and is not part of the County’s reporting entity.

Basis of Accounting

Basis of accounting refers to when revenues and expenditures/expenses are recognized in the accounts and reported in the financial statements. All Governmental (general, special revenue and capital projects), Private Purpose Trust and Agency Funds use the modified accrual basis of accounting. Revenues are recognized when susceptible to accrual, both measurable and available. Real and personal property taxes are recorded as revenues and receivables in the fiscal year for which they are billed and used as a funding source for the approved budget. For example, tax billings based on assessed values of January 1, 2015, are recognized in total as revenues in fiscal year 2016, which began on July 1, 2015. Sales and utility taxes collected by the Commonwealth or by utility companies, and subsequently remitted to the County, are recognized as revenues and receivables upon collection by the Commonwealth of Virginia or a utility. Licenses, permits, fines, and rents are recorded as revenues when received by the

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County. Intergovernmental revenues are recognized when earned or at the time of the specific expenditure. Expenditures are generally recognized under the modified accrual basis of accounting when the related liability is incurred. The exception to this general rule is that principal and interest on general obligation long-term debt is recognized when due. In addition, an encumbrance system is employed in all governmental funds to account for expenditure commitments resulting from approved purchase orders and contracts.

Proprietary Funds and the Pension Trust Fund are accounted for using the accrual basis of accounting. Under this method of accounting, revenues are recognized when earned and expenses are recognized when incurred.

Basis of Presentation

The basic financial statements include both government-wide financial statements which are based on the County as a whole, and fund financial statements which are based on major individual funds.

Budget Adoption and Amendment Procedure

The preparation and adoption of the County’s budget is guided by the County’s Financial and Program Planning Ordinance. The requirements of this ordinance determine the process, format and substance of the annual budget. Some of these requirements include the preparation of a program and activity based budget and multi-year revenue and expenditure projections. In addition, other policy-based considerations must be taken into account in preparing the annual budget. The “Principles of Sound Financial Management” adopted by the Board in 1988, and updated most recently in December 2012, establish policies and goals concerning General Fund balance, contingency reserve, Capital Improvement Program, debt management, and revenues which must be incorporated into resource allocation decisions. Taken as a whole, these planning processes, policies, and the ordinance form the conceptual parameters for the annual budget planning process. The “Principles of Sound Financial Management” are expected to be updated in the first quarter of calendar year 2016.

The County’s annual budget is based on a fiscal year commencing on July 1 and ending on June 30 of the following calendar year. The County Executive’s proposed budget for the following fiscal year is presented to the Board in February of each year. The County’s proposed budget includes recommended funding levels for County programs, estimated revenues for the fiscal year, and proposed tax rates, service charges and any new taxes or service charges sufficient to produce the revenues contemplated in the budget. The proposed budget also includes a recommended program of capital expenditures to be financed from current revenues. A separate six-year Capital Improvement Program (“CIP”) is also prepared each year (see Section II - FINANCIAL ADMINISTRATION - CAPITAL IMPROVEMENT PROGRAM). The school system’s proposed annual budget, including contemplated expenditures and estimated revenues, is submitted to the Board by the School Board.

In addition to the annual budget and the six-year CIP, every year the County Executive’s Office prepares a five year fiscal plan including revenue and expenditure projections. Every year

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of the annual five-year fiscal plan will be balanced in compliance with the County’s Principles of Sound Financial Management.

The Board holds budget work sessions and public hearings on the proposed budget, the school system’s proposed budget, and proposed tax rates in March and April. Changes in proposed appropriations and tax rates are made during this period. The Board then adopts the County’s budget, including tax rates and service charges, and the School Board’s budget in April. The Board only appropriates an amount of funding for the school system in aggregate. The School Board determines the exact use of the appropriated funds.

During the fiscal year, periodic reviews of revenues and expenditures are undertaken by the County Office of Management and Budget and the Department of Finance staffs. On the basis of these reviews, the Board may make amendments to appropriations as needed or desired.

Virginia law requires the County to maintain a balanced budget in each fiscal year. The County lacks legal authority to borrow in anticipation of future fiscal years’ revenues, except through the issuance of bonds or bond anticipation notes. While permitted under Virginia Law, the County has not issued and does not intend to issue any tax anticipation bonds or notes.

Published Financial Information

The County issues its Comprehensive Annual Financial Report (the “CAFR”) for each fiscal year ended June 30. The financial statements for fiscal year ended June 30, 2015, have been audited by the independent public accounting firm of Cherry, Bekaert, LLP, Richmond, Virginia. Sections of the CAFR corresponding to the General Purpose Financial Statements for the fiscal year ended June 30, 2015, are presented herein as Appendix B to this Official Statement. In addition to the CAFR, the County also prepares and publishes an annual budget and a six-year CIP. These documents are also available for inspection at the Department of Finance, Prince William County, One County Complex Court, Prince William, Virginia 22192. For more information about the County’s CAFR refer to Appendix B. The CAFR and the current five year budget, which is not incorporated herein, are available on the County website http://www.pwcgov.org/.

Cherry, Bekaert, LLP, the County’s independent auditor for fiscal year ended June 30, 2015, has not been engaged to perform and has not performed, since the date of its report included herein, any procedures on the financial statements addressed in that report. Cherry, Bekaert, LLP, also has not performed any procedures relating to this Official Statement, including this Appendix A.

Recognition of Achievement for Budgeting and Financial Reporting

The County has been awarded the Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association of the United States and Canada (“GFOA”) for its annual financial reports for each fiscal year since the fiscal year ended June 30, 1981. The County has also received the GFOA’s Award for Distinguished Budget Presentation for each fiscal year since the fiscal year 1988. In order to receive this award, a governmental

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unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan and as a communications medium.

GENERAL FUND FINANCIAL OPERATIONS

The General Fund is the County’s primary operating fund and is used to account for all activities of the general government not accounted for in another fund. The General Fund derives revenue from County-wide ad valorem taxes (except for those levied for fire and sanitary districts and other amounts attributable to the Special Revenue Funds), other local taxes, licenses, fees, permits, charges for services, certain revenue from federal and Commonwealth governments, and interest earned on invested cash balances. Major General Fund expenditures include the costs of general County government operations and public services and the debt service payments of the general government. A significant portion of General Fund revenues is transferred to the School Board component unit, principally to finance a portion of the operations and debt service payments for the school system.

Fiscal Year 2015 Financial Results

The financial data presented in the tables and exhibits that follow is from the County of Prince William, Virginia, Comprehensive Annual Financial Report for fiscal year ended June 30, 2015, which was published in December 2015.

The following is a summary of fiscal year 2015 General Fund financial results. General Fund Budgetary Revenue differs from General Fund actual revenue in that it excludes the effects of fair value adjustment to the carrying amounts of investments required by GAAP.

General Fund Budgetary Revenue was $971,108,000 and was over the budget of $963,457,000 by $7,651,000, or 0.8 percent. The largest variances were due to higher General Property Taxes and Other Revenue from Local Sources than budgeted.

Budgetary Expenditures were $946,903,000 and were under the budget of $979,188,000 by $32,285,000 or 3.3 percent. The major variances were in the categories of Public Safety, Public Works, Health and Welfare, and Schools.

The resulting Budgetary Revenues over budget and the Budgetary Expenditures under budget resulted in an Excess of Revenues over Expenditures of $24,205,000 versus a budgeted deficiency of $15,731,000.

Fiscal year 2015 compared to fiscal year 2014 Budgetary Revenue was higher by $45,970,000 or 4.7 percent and Budgetary Expenditures were higher by $32,918,000 or 3.5 percent.

Fiscal Year 2016 Preliminary Financial Results

A quarterly report on the status of the general fund revenue and expenditure budget and trends is presented to the Board. The first quarter general fund revenue update provided to the Board on February 12, 2016, projected $5.4 million or approximately 0.6 percent over the $887.5

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million revised adopted budget for fiscal year 2016 General Revenues. The fiscal year 2016 general revenue adopted budget of $887.5 million is approximately 3.7 percent above the fiscal year 2015 actuals. The major variances were due to higher than planned Personal Property Taxes, offset by lower than planned Communications Tax revenue. The next update to the Board is scheduled to be in May 2016.

The quarterly report of the status of the general fund expenditures and trends for the first quarter was provided to the Board on February 12, 2016. Expenditures at year end are projected to be 1.0 percent under the revised (excluding the transfer to schools, operating transfers, and restricted funds) general fund fiscal year 2016 budget of $465.9 million.

The following table summarizes revenues, expenditures, transfers, and changes in fund balance of the General Fund for fiscal years 2011 through 2015.

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GENERAL FUND REVENUES, EXPENDITURES, TRANSFERS AND CHANGES IN FUND BALANCE(1) ($000’s)

FISCAL YEAR 2015 2014 2013 2012 2011

REVENUES Taxes $785,629 $746,069 $716,726 $680,184 $655,125 Licenses & Permits 2,493 2,499 2,180 2,073 1,669 Fines & Forfeitures 3,167 3,251 3,259 3,435 3,241 Revenues from Use of Money & Property 9,081 10,465 (5,200) 9,716 4,765 Charges for Services 15,252 14,740 15,407 12,727 8,326 Total Revenue from Local Sources $815,622 $777,024 $732,372 $708,135 $673,126 Intergovernmental Revenues 144,523 143,833 140,715 142,670 151,764 Miscellaneous Revenues 13,916 8,064 21,251 8,616 7,408 Total Revenues $974,061 $928,921 $894,338 $859,421 $832,298

EXPENDITURES Education $412,007 $395,320 $385,176 $366,960 $346,314 General Government Administration 37,651 34,966 36,788 38,897 35,296 Judicial Administration 19,681 19,190 18,388 17,593 17,505 Public Safety 208,385 203,773 195,937 183,210 173,786 Public Works 30,520 30,979 30,278 30,265 27,635 Health & Welfare 80,840 76,549 75,066 75,014 76,896 Parks, Recreation & Cultural 31,085 28,507 26,550 28,357 28,571 Community Development 7,861 9,687 6,330 5,521 6,502 Debt Service(2) 118,873 115,014 111,736 117,450 110,109 Total Expenditures $946,903 $913,985 $886,249 $863,267 $822,614 Excess of Revenue Over expenditures 27,158 14,936 8,089 (3,846) 9,684

OTHER FINANCING Transfers In 28,470 27,967 21,607 22,287 18,327 Transfers Out (29,090) (54,089) (42,028) (41,144) (12,180) Non-Revenue Receipts 311 221 861 549 688 Total Other Financing Sources (Uses) 77 (25,901) (19,560) (18,308) 6,835

NET CHANGE IN FUND BALANCE 27,235 (10,965) (11,471) (22,154) 16,519

FUND BALANCE Fund Balance, beginning of year(3) $147,761 $158,726 $170,197 $185,396 $168,877 Fund Balance, end of year(3) $174,996 $147,761 $158,726 $163,242 $185,396

Source: County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2015, Exhibit 5. Notes: (1) The revenue is GAAP Revenue versus Budgetary Revenue. It includes the use of money and property, current and prior year fair value adjustments, and the effect of fair value adjustments to the carrying amounts of investments required by GAAP. (2) This category also includes debt service on school bonds issued to the Virginia Public School Authority. (3) Due to the merger of DPR into the County, ending its separate corporate existence, the County Fund Balance, fiscal year end 2012 was restated to include DPR, reference County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2013 Note 1, P. Change in Reporting Entity.

The following table summarizes fiscal year 2015 General Fund Budgetary Revenues to Budgetary Expenditures Variances.

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General Fund Budget Variance ($000’s) 2015 Budget Final 2015 Actual Variance BUDGETARY REVENUES:(1) FROM LOCAL SOURCES: General Property Taxes $659,668 $663,564 $3,896 Other Local Taxes 120,259 122,065 1,806 Permits, Privilege Fees and Regulatory Licenses 2,196 2,493 297 Fines and Forfeitures 3,096 3,167 71 Revenue from Use of Money and Property(1) 6,216 6,128 (88) Charges for Services 13,898 15,252 1,354 Total Revenue from Local Sources $805,333 $812,669 $7,336

REVENUE FROM FEDERAL GOVERNMENT: $17,337 $20,041 $2,704 REVENUE FROM THE COMMONWEALTH: Noncategorical Aid $84,206 $83,650 $(556) Shared Expenditures 4,243 4,213 (30) Categorical Aid 12,292 11,483 (809) Other Categorical Aid 18,836 17,685 (1,151) Total Revenue from the Commonwealth $119,577 $117,031 $(2,546)

LOCAL GOVERNMENTS: $7,363 $7,451 $88 MISCELLANEOUS: $13,847 $13,916 $69 Total Budgetary Revenues $963,457 $971,108 $7,651

BUDGETARY EXPENDITURES: General Governmental Administration $39,703 $37,651 $2,052 Judicial Administration 21,062 19,681 1,381 Public Safety 220,528 208,385 12,143 Public Works 33,959 30,520 3,439 Health and Welfare 84,728 80,840 3,888 Education 416,847 412,007 4,840 Parks, Recreational and Cultural 33,243 31,085 2,158 Community Development 8,182 7,861 321 Debt Service 120,936 118,873 2,063 Total Budgetary Expenditures $979,188 $946,903 $32,285 Excess (Deficiency) of Budgetary Revenues Over (Under) Budgetary Expenditures $(15,731) $24,205 $39,936

Source: County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2015, Schedule 1. Note: (1)Budgetary Revenue excludes the use of money and property, current and prior year fair value adjustments, and the effect of fair value adjustments to the carrying amounts required by GAAP.

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General Fund Revenues

General Fund revenues are derived principally of taxes and are used to support a number of government functions primarily education, public safety, and health and welfare services, and are available for payment of the debt service obligations of the County.

The following table shows the County General Fund tax revenues by source for each of the last five fiscal years. Total General Fund tax revenues increased by 5.3 percent in fiscal year 2015 compared to fiscal year 2014.

GENERAL FUND TAX REVENUES BY SOURCE ($000’s) Fiscal Year Ending June 30 2015 2014 2013 2012 2011 General Property Taxes: Real Property Taxes $541,915 $516,161 $496,742 $475,380 $459,203 Personal Property Taxes 98,157 91,017 80,247 73,192 67,639 Public Service Property Taxes 17,589 17,738 18,401 17,704 18,129 Penalties and Interest 5,903 4,996 5,268 5,146 5,002 Total General Property Taxes $663,564 $629,912 $600,658 $571,422 $549,973

Other Local Taxes: Local Sales Tax $59,709 $56,511 $55,169 $52,003 $49,554 Utility Taxes 13,974 13,766 13,490 13,075 13,190 All Other Taxes 48,382 45,880 47,409 43,684 42,408

Total Other Local Taxes $122,065 $116,157 $116,068 $108,762 $105,152 Total General Fund Taxes $785,629 $746,069 $716,726 $680,184 $655,125

Source: County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2015, Exhibit 5 and Schedule 1.

General Property Taxes: An annual ad valorem tax is levied by the County on the assessed value of residential, commercial and public service utility, real and tangible personal property located within the County as of January 1 of the calendar year in which said tax is due. The personal property tax on motor vehicles, which are moved into the County or title transferred after January 1, is prorated on a monthly basis. The ratio of the assessed value of property to its appraised value is calculated based on statutory authority equal to 100 percent of market value in the case of real property and 100 percent of average trade-in value for personal property. Real property taxes are due July 15 and December 5 of the fiscal year for which they are levied and personal property taxes are due October 5. The penalty for late payment of real or personal property tax is 10 percent of the amount due, and interest on delinquent taxes and penalties accrues at a rate of 10 percent per annum for the first year of delinquency with the interest rate for subsequent years to be based on the average prime interest rate as determined semiannually. In cases of real property on which delinquent taxes are not paid within two years, the County may sell the property at public auction to pay the amounts due or seek civil judgments immediately upon delinquency. In the fiscal year ended June 30, 2015, real, personal and public service property taxes, together with penalties and interest thereon, represented 68.3 percent of total General Fund revenues.

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The following table sets forth information concerning the County’s property tax collection rate for fiscal years 2011 through 2015.

REAL PROPERTY TAX LEVIES AND COLLECTIONS FISCAL YEARS 2011 THROUGH 2015 ($000’s except as indicated)

Total Collected Collections Adjusted during the in Percent Fiscal Tax fiscal year of Percent Subsequent Of Levy Year Levy(1) the Levy Of Levy Years Collected 2011 $511,316 $509,154 99.6 $1,871 100.0 2012 527,838 525,737 99.6 1,516 99.8 2013 553,424 551,222 99.6 1,617 99.8 2014 573,203 571,425 99.7 1,133 99.7 2015 603,171 601,267 99.7 - 99.7

Source: County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2015, Table 10. Notes: (1)Total tax levy includes gross real estate and public service taxes less adjustments to tax due made prior to payment.

There is no legal limit on property tax rates that may be levied by the County. The following table provides the real and tangible personal property tax rates per $100 of assessed value located within the County. Personal property taxes are also levied on farmers’ machinery and tools, mining and manufacturing tools, and aircraft at various rates ranging from $0.00001 to $2.00 per $100 assessed value. In addition, special categories with a reduced personal property tax rate of $0.00001 per $100 assessed value have been established for vehicles utilized by volunteer firefighters, disabled persons and for van pool vans. There are four towns within the County in which the town councils also levy real property taxes at various rates on real property in the towns, and such taxes are in addition to property taxes levied by the County in such towns.

PROPERTY TAX RATES PER $100 OF ASSESSED VALUE

Fiscal Year 2012 2013 2014 2015 2016 Real Property $1.204 $1.209 $1.181 $1.148 $1.122 Personal Property 3.70 3.70 3.70 3.70 3.70

Source: Prince William County, Department of Finance.

On April 21, 2015, the Board adopted the fiscal year 2016 real estate tax rate of $1.122 per $100 of assessed value.

In addition to the taxes levied for the General Fund shown above, the Board levies supplemental property taxes and fees for services located in specific taxing districts including volunteer fire services, highway transportation improvements, gypsy moth abatement, and water and sewer system improvements. These amounts are recorded in various Special Revenue Funds.

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The following information is for the fiscal year ended June 30, 2015.

General Sales Tax: The County, by a Board adopted ordinance, has elected to levy a one percent general retail sales tax to provide revenue for the General Fund. This tax is levied on the retail sale of rental or tangible property, excluding motor vehicle sales and trailers, vehicle rentals, boat sales, gasoline sales, natural gas, electricity, water, non-prescription drugs, and the purchases of organizations that have received tax exemption. The tax revenue is collected by the Virginia Department of Taxation, and is distributed to the County monthly. Sales taxes accounted for 6.1 percent of total General Fund budgetary revenues in fiscal year 2015.

Consumer Utility Tax: The County levies a consumer utility tax on electric and natural gas (the Commonwealth taxes telephones and the County does not tax water/sewer usage). Residential users pay a graduated tax, per utility billed, with a minimum and a maximum tax of $3 per utility billed, per month. Commercial users also pay a graduated tax per month, per utility billed, with a minimum and a maximum tax of $100 per utility billed, per month. In fiscal year 2015, utility taxes represented 1.4 percent of total General Fund budgetary revenues.

Other Taxes: Other taxes include business, professional and occupational license taxes, property recordation taxes, motor vehicle license taxes, and transient occupancy taxes charged on hotel and motel rooms. For fiscal year 2015, these taxes represented 4.6 percent of total General Fund budgetary revenues.

Licenses and Permits: The County requires that licenses and permits be obtained in order to perform certain activities in the County and fees paid for services provided by certain County Departments. For fiscal year 2015, these revenues accounted for 0.3 percent of total General Fund budgetary revenues.

Fines and Forfeitures: Court fines and some recovered costs, including those levied for traffic violations are recorded in this category. Revenues in this category accounted for 0.3 percent of total budgetary General Fund revenues for fiscal year 2015.

Revenue from Use of Money and Property: The principal source is interest on investments and gains or losses from the sale of investments. For fiscal year 2015, these revenues accounted for 0.6 percent of total General Fund budgetary revenues.

Charges for Services: Charges for services include all revenue derived from service or user charges for which the County charges a fee including County clerk fees, recreation fees, publication sales, and various other services. For fiscal year 2015, these revenues amounted to 1.6 percent of total General Fund budgetary revenues.

Intergovernmental Revenue: The County is reimbursed by the Commonwealth for a portion of shared expenses including certain expenditures for social services, the Sheriff’s Office, courts, the Office of the Commonwealth’s Attorney, and other constitutional offices. The County also receives a share of certain other Commonwealth contributions. In addition, the General Fund accounts for the receipt of certain grants for the administration of social service and other programs. For fiscal year 2015, intergovernmental revenues amounted to 14.6 percent of total General Fund budgetary revenues.

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Miscellaneous Revenue: Miscellaneous revenue includes developer cash proffers for capital improvements, donations, expenditure refunds, and other revenue. Miscellaneous revenue accounted for 1.4 percent of fiscal year 2015 total General Fund budgetary revenue.

General Fund Expenditures

Costs of General County Government: The County pays from the General Fund the costs of general County government. These costs include expenditures for general government administration, judicial administration, public safety, public works, health and welfare, parks, recreation and cultural, community development and general debt service. For fiscal year 2015, this classification represented approximately 54.81 percent of total General Fund expenditures and transfers out.

Transfer to School Fund: The County transfers money from the General Fund to the School Board component unit to pay a portion of the costs of operating public schools in the County. This transfer represented approximately 42.21 percent of total General Fund expenditures and transfers out in the fiscal year ended June 30, 2015. The transfer to the School Board component unit represents approximately 44.52 percent of total sources of the School Board’s General Fund Revenue and Transfers In. Other revenues credited directly to the School Board component unit include revenues from the federal government, the Commonwealth, and other revenue derived locally from school lunches and other charges to students. Debt service on County general obligation bonds for school purposes is paid from the County’s transfer to the School Board component unit. Revenues from the federal government and the Commonwealth which are credited directly to the School Board component unit are not available to pay debt service on County general obligation bonds.

Transfer to Capital Project Funds: The County provides for certain capital expenditures directly from the General Fund. In fiscal year 2015, transfers to the Capital Project Fund represented approximately 2.02 percent of total General Fund expenditures and transfers out.

Other Transfers Out: The County also provides for other transfers out directly from the General Fund of approximately .96 percent to Special Revenue, Internal Service and Enterprise Funds.

Changes in General Fund Balance

As shown in the following table, the County has maintained its unassigned General Fund Balance in each of the past five fiscal years consistent with its Principles of Sound Financial Management requiring an unassigned General Fund balance of not less than 7.5 percent of the General Fund revenues in each fiscal year. These Principles of Sound Financial Management were initially adopted by the Board in December 1988, and the most recent update was adopted in December 2012. The County’s goal of having an unassigned reserve of 7.5 percent by the end of fiscal year 2007 was reached a year early in fiscal year 2006 and has been maintained in each subsequent year.

In addition, but separate from the County’s unassigned General Fund Balance, the County maintains a Revenue Stabilization Fund to provide the County with sufficient working

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capital and a margin of safety to withstand local and regional economic shocks, and unexpected declines in revenue without borrowing. The Principles of Sound Financial Management require that the Revenue Stabilization Fund balance will not be less than 1.0 percent of the year’s General Fund revenues within each year of the five year fiscal planning cycle. The Revenue Stabilization Fund may be used to cover unexpected declines in General Fund revenues greater than 3.0 percent as compared to the current fiscal year adopted budget. The Revenue Stabilization Fund can only be appropriated by resolution of the Board. If the Revenue Stabilization Fund is used, the policy requires the County to take measures necessary to replenish its balance to the minimum 1.0 percent level within five years following the year(s) in which it was used.

The following table shows the County’s General Fund balance as of June 30 of the most recent five fiscal years:

GENERAL FUND BALANCES ($000’s) FISCAL YEAR ENDED JUNE 30

2015 2014 2013 2012 2011 Fund Balances

Non-spendable $178 $222 $299 $229 $224

Restricted 13,224 3,693 2,101 1,274 1,369

Committed 58,692 67,735 81,114 90,209 113,811

Assigned 29,847 6,442 8,137 7,073 7,570

Unassigned 73,055 69,669 67,075 64,457 62,422

Total General Fund Balance $174,996 $147,761 $158,726 $163,242 $185,396

Total General Fund Balance as a % of General Fund Revenues 17.97% 15.91% 17.75% 18.99% 22.28%

Unassigned General Fund Balance as a % of General Fund Revenues 7.50% 7.50% 7.50% 7.50% 7.50%

Source: Fund Balances, County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2015, Table 3.

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SUMMARY OF THE BUDGET FOR FISCAL YEAR 2016

The following table summarizes the sources and uses of funds in the fiscal year 2016 adopted budget.

GENERAL FUND BUDGET FOR FISCAL YEAR 2016 (Adopted)

Revenues And Transfers Expenditures and Transfers

General Property Taxes $747,410,235 Community Development $81,002,833 Other Local Taxes 142,753,020 General Governmental 38,313,951 Rev from Use of Money & Prop 7,563,557 Human Services 91,039,983 Intergovernmental Revenue: Public Safety 237,115,694 Revenue from Federal Gov 14,832,827 General Debt(1) 51,229,215 Revenue from Commonwealth 47,104,756 Cash Funding of Capital Construction 12,444,772 Revenue from Other Localities 7,263,991 Transfer To Schools 506,976,013 Permits, Fees & Licenses 2,043,501 Unclassified Administrative(2) 8,770,539 Fines & Forfeitures 3,095,771 Charges for Services 13,271,482 Miscellaneous Revenue 3,578,656 Transfers From Other Funds 34,808,700 Other Resources 3,174,505

Total $1,026,901,001 Total $1,026,893,000

Net Revenue & Resources Available 8,001 Source: Prince William County, fiscal year 2016 Budget. Notes: (1) Excludes debt service on general obligation school bonds (debt service for school bonds is contained in the School Board budget). (2) The adopted budget includes the majority of this amount for self-insurance costs and non-classified internal service fund costs.

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Overview of Fiscal Years 2015 and 2016 Adopted Budgets

The following shows the County’s Total Revenues and Resources and Total Expenditures Adopted Budget for fiscal year 2015 and fiscal year 2016 as originally adopted by the Board. Certain changes, approved by the Board (e.g., budget carryovers) are made after the original adopted budget is published.

The fiscal year 2016 budget was adopted by the Board, at its April 21, 2015, meeting. Additional fiscal year 2016 budget information is available on the Prince William County web site at http://www.pwcgov.org/. The fiscal year 2017 adopted budget information will not be available until April of 2016.

Fiscal Year 2015 Fiscal Year 2016 Original Original Adopted Budget Adopted Budget Revenue and Resources: General Revenue $857,387,589 $892,283,090 Agency Revenue 112,802,039 124,134,689 County Resources 19,647,416 10,483,222 Total Revenue & Resources Available $989,837,044 $1,026,901,001

Expenditures: County Government $503,163,088 $519,916,987 Transfer to Schools 486,673,956 506,976,013 Total Expenditures $989,837,044 $1,026,893,000

Total Net Revenue & Resources Available $0 $8,001

Sources: Prince William County, fiscal year 2015, 2016 Adopted Budgets.

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Fiscal Year 2016 General Fund Budget (Adopted)

Fiscal Year 2016 Expenditure by Classification: Adopted

Personal Services $232,493,955 Fringe Benefits 75,253,750 Contractual Services 29,229,581 Internal Services 37,037,847 Other Services 50,217,453 Debt Maintenance 39,272,226 Capital Outlay 5,327,023 Leases & Rentals 8,030,543 Reserves & Contingencies (21,131,764) Transfers Out(1) 571,162,386 Total General Fund Expenditures $1,026,893,000

Funding Sources: General Property Taxes $747,410,235 Other Local Taxes 142,753,020 Permits, Priv. Fees and Reg Lic 2,043,501 Fines & Forfeitures 3,095,771 Rev From Use of Money & Prop 7,563,557 Charges for Services 13,271,482 Miscellaneous 3,578,656 Rev From Other Localities 7,263,991 Rev From the Commonwealth 47,104,756 Rev From the Federal Government 14,832,827 Transfers In1 34,808,700 Total General Fund Revenue $1,023,726,496

Other Resources 3,174,505

Total General Fund Revenue and Other Resources $1,026,901,001

Revenue and Other Resources Over / (Under) Expenditures $8,001

Source: Prince William County, fiscal year 2016 Budget. Note: (1) Excludes Transfers within the General Fund.

For more information about the County’s Fiscal Year 2016 Adopted Budget (which is not incorporated herein) please refer to the County website at http://www.pwcgov.org/.

In addition to an annual budget, the County adopts a five year fiscal plan each year. The County’s General Revenue Committee considers a broad variety of national, Commonwealth, and County sources when developing a five-year revenue forecast. The fiscal years 2016-2020 forecast assumes stable growth.

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General Fund Resource and Expenditure Adopted Budget

Revenue and Resources: FY2016 FY2017 FY2018 FY2019 FY2020

General Revenue $892,283,090 $932,621,721 $975,071,270 $1,019,118,634 $1,064,947,741

Agency Revenue 124,134,689 122,899,303 123,250,455 123,072,623 122,949,130

County Resources 10,483,222 7,726,886 7,281,479 6,036,553 3,874,338 Total Revenue & Resources Available $1,026,901,001 $1,063,247,910 $1,105,603,204 $1,148,227,810 $1,191,771,209

Expenditures:

County Government $519,916,987 $533,122,840 $551,414,628 $567,743,368 $585,086,899

Transfer to Schools 506,976,013 529,987,984 554,188,576 579,300,736 605,429,726

Total Expenditures $1,026,893,000 $1,063,110,824 $1,105,603,204 $1,147,044,104 $1,190,516,625

Total Revenue & Resource Balance $8,001 $137,086 $0 $1,183,706 $1,254,584

Real Estate Tax Rate $1.122 $1.126 $1.130 $1.134 $1.138 Source: Prince William County, fiscal year 2016 Adopted Budget.

In 2014, the County’s economy, despite continued concerns over the effects of federal budgetary problems, continued to show signs of strengthening in many aspects including: improving unemployment and job creation, and very healthy household incomes. The residential real estate market began to strengthen since 2011, and continued that trend throughout 2014, with moderate increases in average sale prices and declining monthly foreclosures. However, continued sluggishness in sales volume, along with generally reduced inventories and weakness in new construction continue to negatively impact the overall market. In January 2015, assessed value of all residential properties (including apartments) was $44.82 billion, an increase of over $3.22 billion, or 7.7 percent from 2014. Residential properties (including apartments) currently account for 83.4 percent of the total Land Book assessed value. Factors contributing to the stabilization of values included an improving employment environment, continuing low interest rates and falling foreclosure rates.

The average sale price for a home in the County in October 2015 was $353,235. This represents an increase of 3.6 percent year-over-year. The number of homes sold in the County in October 2015 was 490, a decrease of 2.4 percent from October 2014. The average number of days a home in the County was on the market was 57 in October 2015, compared to 54 days a home was on the market in October 2014. The rate of foreclosures decreased dramatically in 2013 and 2014. There were 33 percent fewer foreclosures in the County during calendar year 2014 compared to 2013. This trend has continued through the first three quarters of 2015.

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Commercial real estate, particularly in terms of vacancy rates, has yet to recover fully from the recent downturn and continues to be primarily in an absorption phase. In November 2015, according to Costar Realty Group (Costar), the County commercial inventory included 44.7 million square feet (sq. ft.) of space in 1,981 buildings, with 2.95 million sq. ft. of vacant space—a vacancy rate of 6.5 percent. Since 2011, some 2.19 million sq. ft. of commercial space has been added to the inventory, a growth rate of 5.2 percent.

Retail and auto sales continued at a healthy pace through much of the year, an indication of increasing consumer confidence and buying power. In August 2015, $5.05 million of sales tax revenue was generated—a monthly year-over-year increase of 4.4 percent. Continued federal budget uncertainty notwithstanding, and despite some uneasiness during some months, the economy and consumer confidence appear to be gaining strength and retailers are hopeful of continued retail growth.

Revenue sources, such as local sales tax and Business Professional and Occupational License (“BPOL”), have seen increases over the last year as the housing market improves and lower unemployment increases consumer confidence in the County. Recordation and deed taxes are anticipated to experience modest growth as sales prices appreciate. Personal property tax revenue is improving as vehicle sales have increased in addition to the average assessed values of cars.

Consistent with its Principles of Sound Financial Management, the County actively manages its budget to ensure revenue and expenditures remain in balance. Adherence to these principles requires the County’s Five Year Fiscal Plan, fiscal years 2016-2020 to be balanced in every year. The County’s unassigned General Fund balance is budgeted to be maintained at the adopted policy level of 7.5 percent of General Fund revenue and is not included as a source of funds.

The County’s updated revenue forecast for fiscal years 2016-2020 reflects adjustments as a result of the current improving housing market.

Overview of Expenditures and Transfers

The fiscal year 2016 adopted budget for general County government services is $519.9 million or a 3.3 percent increase over the fiscal year 2015 adopted budget. The General Fund transfer to the school fund increased by 4.2 percent to $507.0 million.

The adopted fiscal year 2016 budget utilized the following strategic goals during the planning process. The County anticipates maintaining this emphasis over the next several years.

• Economic Development • Education • Human Services • Public Safety • Transportation

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The General Fund cost per capita of government services in fiscal year 2016 when adjusted for inflation is $1,893 compared to 2007’s cost per capita of $2,249, a decrease of 15.8 percent from fiscal year 2007 to fiscal year 2016. During the same 9-year period the population of the County increased 13.6 percent from 381,221 in fiscal year 2007 to a budgeted estimate of 433,090 in fiscal year 2016, an average increase of 1.5 percent per year.

On April 21, 2015, the Board adopted a real estate tax rate of $1.122 per $100 of assessed value, for the fiscal year 2016 budget, which includes $1,026.9 million in General Fund budget expenditures. The adopted tax rate will result in an average residential tax bill increase of 4.5 percent and a corresponding increase in average commercial tax bills of 1.7 percent. At the adopted $1.122 tax rate, total general revenue in fiscal year 2016 is projected to increase compared to fiscal year 2015 revenue projections, providing capacity to fund Capital Improvement Program projects. With the decrease in the real estate tax rate from $1.148 in fiscal year 2015 to the adopted rate of $1.122 in fiscal year 2016, the average residential tax bill increased $139 due to an average residential assessment increase of 6.3 percent.

CAPITAL IMPROVEMENT PROGRAM

The Board annually considers and approves a six-year Capital Improvement Program (“CIP”) as part of the budget process. The CIP is the capital infrastructure component of County’s fiscal plan, an important part of the County’s Five Year Fiscal Plan, and an implementation tool for the County’s Strategic and Comprehensive Plans. The CIP is guided by these plans and the Principles of Sound Financial Management. Together, these policy documents require that the CIP incorporate level of service standards identified in the Comprehensive Plan, the goals and strategies of the Strategic Plan, meet the debt financing policies in the Principles of Sound Financial Management and integrate County government projects with school projects, making one affordable plan. These guidelines are designed to maintain tax-supported debt expenditures at less than 10 percent of total revenues (less certain pledged revenues), and to maintain the ratio of tax-supported debt to net assessed value of property in the County at less than 3 percent.

The 2016-2021 CIP was adopted by the Board on April 21, 2015. The CIP includes several of the facilities and the amenities necessary for an improved quality of life considering the current improving economic climate. The CIP includes projects in community development, education, general government/technology, public safety, and transportation projects. Existing projects will be funded to completion and projects authorized by voters during the 2006 road, park and library bond referenda are funded in this CIP. State and federal funding is being leveraged with local funding to support road projects. Fee revenues will fund new solid waste projects, watershed projects, and a development services information technology project. Education projects continue to comprise the majority of the CIP, with over $919.5 million of expenditures planned over the plan period. The following is a summary of projects included in the 2016-2021 CIP:

• Funding for transportation projects includes Route 1 (Neabsco Mills Road to Featherstone Road and Featherstone to Marys Way), Route 28 (Linton Hall Road to Fitzwater Drive), and Minnieville Road (Spriggs Road to Route 234). Also included are the Fuller Road and Fuller Heights Road improvements, Hellwig Park entrance

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road alignment, an intersection improvement at Minnieville Road and Prince William Parkway, the Route 1/Route 234 turn lane modifications and Purcell Road intersection improvement.

• In the area of public safety, the CIP includes the construction of the Bacon Race Fire Station, the renovation of the Gainesville Fire and Rescue Station and reconstruction of the Coles and Nokesville Fire and Rescue Stations. Additionally, funding is included for the next expansion of the Adult Detention Center, a Central District Police Station and a rifle range at the Public Safety Training Center.

• Two libraries approved in the 2006 bond referendum are included in the CIP. The Montclair Community Library in the eastern part of the County and the Haymarket- Gainesville Community Library in the western part of the County. The Haymarket- Gainesville Community Library opened in the fall of 2015 and the Montclair Community Library opened in the winter of 2016.

• In the area of community development, funding for parks and recreation has been provided for the stabilization of Rollins Ford Park, improvements at Fuller Heights Park, creation of the Occoquan Riverfront Park, and improvements to several trails and sports fields throughout the County, including the water line in Long Park. The CIP programs the remaining 2006 park bond authority for the field improvement projects. Funding is allocated for drainage and stormwater improvements to the County’s watersheds and improvements to Silver Lake Dam.

• Solid waste administration projects include an Eco Park Complex, capping existing cells, creating new cells, and mitigating wetland impacts caused by the creation of new cells. In addition, a ball field redevelopment will take place at the site of the old landfill which is adjacent to the current landfill.

• Technology improvements include upgrades to cable equipment and upgrades or replacements to major technology infrastructure for finance, human resource, public safety, and development services systems.

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Fiscal Years 2016 - 2021 CIP SOURCE AND EXPENDITURE AREA SUMMARY ($000’s)

Source FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 Total

Debt $212,006 $96,910 $122,459 $67,380 $106,952 $108,551 $714,259 Schools – Cash Funded Projects 26,782 58,041 29,637 65,185 32,978 73,581 286,204 State/Federal 59,491 39,812 32,816 19,000 31,700 12,000 194,819 General Fund 17,852 5,878 6,075 99 102 5,069 35,075 Fire Levy 10,655 10,944 20 0 0 0 21,619 Solid Waste Fund 2,258 7,235 5,270 0 0 3,970 18,733 Stormwater Management Fund 3,256 3,608 2,775 3,082 2,396 3,078 18,195 Proffers 6,349 2,313 4,457 0 0 0 13,119 Capital Reserve 2,667 6,033 0 0 0 0 8,700 Cable Franchise Fee 1,649 1,210 1,210 1,585 1,210 1,210 8,074 E-911 2,624 1,000 0 0 0 0 3,624 Other 3,313 0 0 0 0 0 3,313 Technology Reserve 2,559 12 0 0 0 0 2,570 Development Fee 400 100 100 0 0 0 600

Grand Total $351,861 $233,096 $204,819 $156,331 $175,338 $207,459 $1,328,904

Expenditure Area FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 Total

Community Development $31,358 $11,564 $8,045 $3,082 $2,396 $7,048 $63,493 Education 186,113 146,780 130,449 116,957 157,031 182,132 919,462 Public Safety 33,775 28,081 21,667 15,608 2,599 0 101,730 Transportation 84,708 39,812 37,273 19,000 12,000 12,000 20,4792 General Government 15,907 6,859 7,385 1,684 1,312 6,279 39,426

Grand Total $351,861 $233,096 $204,819 $156,331 $175,338 $207,459 $1,328,904

Sources: Prince William County Capital Improvement Program, fiscal years 2016-2021, Prince William County Schools Capital Improvement Program, fiscal years 2016-2025. (Schools and Education data is a ten year plan and based on project completion dates). Includes prior year unspent appropriations. Note: Totals may not add due to rounding.

CASH AND INVESTMENT MANAGEMENT

The County maintains a cash and investment management program for the safeguarding and efficient management of its funds. The investment of funds is administered in accordance with the Code of Virginia and the County’s written Investment Policy. The day-to-day investment of funds is directed by the County’s Director of Finance. An Investment Oversight Committee (IOC) made up of citizen representatives and senior County staff members monitors the performance and structure of the County’s portfolio and reviews investment policies. A quarterly performance report on the status of the County’s investment portfolio and investment

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performance with respect to its Investment Policy is provided to the IOC, the County Executive and to the Board.

For the fiscal year ended June 30, 2015, the amortized value of the County’s General Portfolio totaled $966.7 million with maturities ranging from one day to ten years. The weighted average days to maturity of the portfolio as of June 30, 2015, was approximately 3.3 years.

The County invests funds primarily in U.S. Government Obligations, U.S. Government Sponsored Enterprises (“GSE”), corporate and municipal bonds, certificates of deposit, the Commonwealth’s Local Government Investment Pool (“LGIP”) and money market mutual funds. The County’s Investment Policy, available on the website for the County, http://www.pwcgov.org/ provides the full listing of authorized investments.

General Obligation Bond proceeds are invested in accordance with the requirements and restrictions outlined in bond documents. The majority of bond proceeds are invested in the Virginia State Non-Arbitrage Program (“SNAP”).

EMPLOYEES’ RETIREMENT PLANS

The County (including the Adult Detention Center through June 30, 2015, component unit) contributes to the Virginia Retirement System (“VRS”), a Virginia Executive Branch agency multiple-employer public employee retirement system that acts as a common investment and administrative agent for political subdivisions in the Commonwealth of Virginia. Professional and non-professional employees of the School Board are also covered by the VRS. All full time, salaried permanent employees are automatically covered by VRS upon employment. Benefits vest after five years of service credit. Benefits are actuarially reduced for retirees who retire prior to becoming eligible for full retirement benefits. VRS also provides death and disability benefits. These benefit provisions and all other requirements are established by Virginia statute. VRS issues a publicly available CAFR that includes financial statements and required supplementary information for the plans administered by VRS. The report may be obtained from the VRS website http://www.varetire.org/Default.asp or by writing to the VRS Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500.

The County also has a supplemental retirement plan for police officers and salaried Fire and Rescue employees administered by the Plan’s Board of Trustees. The plan became effective July 1, 1985, and was most recently amended on July 23, 2013. The plan, which provides retirement and death benefits to plan members and beneficiaries, is designed to provide a benefit upon the retirement of participants. The amount takes into account the length of service and the compensation paid by the County to such employees with recognition given to the benefits that will be provided by the VRS. Participants vest 100 percent in the benefit provided under the plan upon attainment of the participant’s normal retirement date. Participants are considered vested and eligible for early retirement after 20 years of credited service but the benefits are reduced.

The County Volunteer Fire and Rescue Personnel Length of Service Award Program (LoSAP Plan) was authorized by the Board effective October 22, 1991. The LoSAP Plan is a multi-employer defined benefit pension plan that includes twelve volunteer companies that

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provides retirement benefits for certain vested volunteer fire and rescue personnel who retire from their volunteer fire and rescue company. For the fiscal years ended June 30, 2015, and 2014, respectively, the County paid $940,428 and $994,688 in contributions towards the Plan while fair value of assets was $13,768,521 as of June 30, 2015. As of July 1, 2015, present value of future benefits is $16,384,838. At that time, $13,768,521 assets were available to pay pensions and $6,313 was the unfunded actuarial liability from one fire company only. The actuarially determined contributions of the plan are fully funded as of June 30, 2015.

Additional information regarding the County Employees’ Retirement Plans can be found in the County’s Comprehensive Annual Financial Report, fiscal year 2015, Note 13 and Schedules 3 through 5.

OTHER POST-EMPLOYMENT BENEFITS (OPEB)

Additionally, the County offers post-retirement medical benefits premium and medical benefits credit plans. The plans are single-employer defined benefit postemployment healthcare plans that cover eligible retired employees and Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) eligible employees of the County including all departments and agencies. Participants in the premium plan pay 100 percent of published blended rates, and as of the end of fiscal year 2015, 199 retirees and post-employed elected coverage. Coverage ends at age 65. For the retiree health insurance credit plan, the County will pay $5.50 per month, per eligible County retiree per year of service if they attained 15 or more years of service with the County. The Line of Duty Act (LODA) plan provides death, disability, and healthcare benefits for public safety employees and volunteer firefighters who hold specific hazardous duty positions and who die or become permanently disabled in the line of duty. As of the end of fiscal year 2015, the County paid $4,160,000 in medical costs less $1,975,000 premiums received from 238 retirees and paid $1,399,000 for health insurance credits to 812 eligible retirees.

The County implemented GASB 45 (Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions) in fiscal year 2008. The County and School Board contract with actuarial firms to compute the impact and costs of its OPEB liabilities on a biennial basis and the County and School Board fully fund their OPEB liabilities through the use of a trust, the OPEB Master Trust Fund. Additionally, the County implemented GASB 67 (Financial Reporting for Pension Plans) and GASB 68 (Accounting and Financial Reporting for Pensions) in fiscal year 2015.

The latest actuarial consultant valuation was as of July 1, 2014. Interim valuations for trending are provided by the County Finance Department. The County’s and Schools’ unfunded actuarial accrued OPEB liabilities were approximately $61 million as of July 1, 2014, and the actuarially determined contributions to OPEB trusts were approximately $6.0 million for fiscal year 2015. The County and School Board contributed $6.0 million to the OPEB Master Trust Fund for fiscal year 2015 which was 100 percent of the actuarially determined contribution.

Biennially calculated actuarially determined contributions are used as a guide to determine the annual OPEB cost which is calculated based on an amount actuarially determined in accordance with the parameters of GASB Statement 45. Calculation amounts are developed using the projected unit actuarial cost method for County plans and entry age actuarial cost

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method for School Board plans. The most recent biennial actuarial valuation was as of July 1, 2014. Interim valuation estimates for trending are provided by the County Finance Department.

The County provides limited post-retirement health and dental benefits as provided by Virginia law to retirees who have 15 or more years of service with the County. The retirees are granted the option to participate by paying 100 percent of their monthly health insurance premium less a $.0015 times years of service for a maximum credit of $.045 from the VRS. As of the end of the fiscal year 2015, there were 921 retirees who received the VRS health insurance credit. The insurance credit is financed by payments from the County to the VRS. For the year ended June 30, 2015, the County paid $357,000. The surplus funds (excess of actuarial estimates versus actual payments) are not considered advance funded because the County, its employees, and retirees have no vested rights to access the excess funds. GAAP does not require governments to report a liability in the financial statements in connection with an employer’s obligation to provide these benefits.

Additional information regarding the County retirees’ OPEB Plans and the County OPEB Master Trust Fund can be found in the County’s Comprehensive Annual Financial Report, fiscal year 2015, Notes 14 and 15.

CONTINGENT LIABILITIES

The County is contingently liable with respect to lawsuits and other asserted and unasserted claims that arise in the ordinary course of its operations. It is the opinion of the County’s management, and the County Attorney, that any losses that may ultimately be incurred as a result of these lawsuits and claims will not have a material adverse effect on the County’s ability to meet its financial obligations.

The County receives financial assistance from numerous federal and Commonwealth of Virginia agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreement and are subject to audit by the grantor agencies. Any disallowed expenditures resulting from such audits could become a liability of the General Fund or other applicable funds. In the opinion of County management, if any refunds result from disallowed expenditures by grantor agencies, these refunds will not have a material adverse effect on the County’s ability to meet its financial obligations.

SECTION III - DEBT ADMINISTRATION

DEBT OF THE COUNTY

Authority to Borrow

Pursuant to the Virginia Constitution and the Code of Virginia, a county in Virginia is authorized to issue general obligation bonds secured by a pledge of its full faith and credit. For the payment of such bonds the governing body of the county is required to levy, if necessary, an annual ad valorem tax on all property in the county subject to local taxation.

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Limits on Indebtedness

Although the issuance of bonds by Virginia counties is not subject to statutory limitation, counties generally are prohibited from issuing general obligation bonds unless the issuance of such bonds has been approved by public referendum. This referendum requirement does not apply to bonds for capital projects for school purposes sold to the Literary Fund or the Virginia Public School Authority (“VPSA”).

The Board also has established a self-imposed limit as part of the Principles of Sound Financial Management which provides that tax supported debt should not exceed 3 percent of the net assessed valuation of taxable property in the County, and annual debt service should not exceed 10 percent of annual combined general and special revenues (excluding certain pledged revenues). The County’s status with respect to its self-imposed limits is shown in the section “Additional Debt Information” below. Additionally, the County currently does not have any outstanding bank loans.

Statement of Outstanding Net Tax-Supported Indebtedness

The County, pursuant to its adopted debt management policy contained in the Principles of Sound Financial Management, defines net tax-supported debt as all general obligation debt plus (i) bonds issued for obligations incurred to the VPSA and the Virginia Resources Authority (VRA), (ii) Literary Fund Loans, and (iii) long-term capital leases payable in whole or in part from appropriations of tax revenue by the Board. The majority of the County’s outstanding bonds are general obligations of the County and are secured by its full faith and credit. The County’s outstanding general obligation bonds include various general purpose bonds. Debt payable from user charges or other non-tax revenue streams is considered self-supporting and is not included in net tax-supported debt. The following section “OTHER COUNTY RELATED INDEBTEDNESS” describes certain other related obligations including underlying debt of the towns and debt of which the County is not the issuer but for which the County has agreed to fund certain costs of the enterprise, including debt service, to the extent these costs are not recovered from fees and charges.

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The County’s net tax-supported indebtedness incurred for capital purposes and outstanding on June 30, 2015, was $901,247,000 as shown in the following table.

NET TAX SUPPORTED DEBT OUTSTANDING ($000’s) Outstanding on June 30, 2015 Governmental Activities General Obligation Bonds $135,507 IDA Lease Revenue Bonds 3,345 Equipment Capital Leases 432 Real Property Capital Leases(1) 131,030 Parks and Recreation - Revenue Bonds Series 2010 10,555 Equipment Capital Leases 295 Subtotal $281,164

School Board Related General Obligation Bonds(2) $628,638 Virginia Literary Fund Loans 2,000 Subtotal $630,638

Total Primary Government Debt $911,802 Less Self-Supporting Revenue and 10,555 Other Bonds Net Tax-Supported Debt $901,247

Source: County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2015, Table 11. Notes: (1) Includes Certificates of Participation, Lease Participation and Virginia Resource Authority (VRA) debt. (2) Includes general obligation bonds publicly offered by the County, sold by the County to the VPSA in connection with VPSA’s pooled bond program bond and sold by the County to the VPSA on a standalone basis.

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Debt Service Requirements to Maturity

The following table summarizes the annual principal and interest payments on the County’s outstanding tax-supported debt for fiscal year 2016 through the final maturity of all outstanding tax supported debt.

DEBT SERVICE BY FISCAL YEAR

Existing Debt Service IDA Series 2016A FY End New Total 6/30 Principal Interest Principal Interest Debt Service 2016 $78,650,000 $43,548,683 $ $ 2017 86,695,000 43,202,003 2018 83,330,000 39,500,105 2019 82,035,000 35,702,587 2020 77,990,000 32,008,314

2021 79,690,000 28,378,986 2022 73,065,000 24,773,481 2023 70,220,000 21,351,174 2024 65,565,000 18,105,798 2025 60,335,000 15,115,653

2026 52,955,000 12,483,574 2027 48,590,000 10,234,885 2028 40,590,000 7,816,934 2029 37,370,000 6,147,554 2030 31,580,000 4,666,638

2031 27,170,000 3,467,861 2032 22,170,000 2,508,553 2033 19,845,000 1,713,537 2034 16,560,000 1,026,113 2035 12,135,000 512,438

2036 8,010,000 150,188 Total $1,074,550,000 $352,415,059 $ $ $

Source: Prince William County Debt Service schedules. Notes: Does not include the Build America Bonds (BAB) or Qualified School Construction Bonds (QSCB) refundable credit payments or the VPSA Pool refunding debt service credits.

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Authorized but not issued general obligation bonds approved at the November 2006 referenda include $189,236,400 for roads and road improvements, $18,446,050 for library improvements, and $13,217,550 for park improvements.

Additional Debt Information

Information concerning the County’s net tax-supported debt is presented in the following tables. The tables reflect the ratio of net tax-supported debt of assessed value and net tax- supported debt per capita, and the ratio of debt service payments on net tax-supported debt to total government revenues.

RATIO OF NET TAX-SUPPORTED DEBT TO ASSESSED VALUE AND POPULATION Net Debt Net Tax- Net Total To Supported Fiscal Tax-Supported Assessed Assessed Debt Year Debt ($000’s)(1) Value ($000’s)(2) Value Population(3) per Capita

2011 $914,566 $42,750,432 2.1% 406,392 $2,250 2012 885,062 45,413,737 1.9 419,268 2,111 2013 880,506 47,586,736 1.9 430,289 2,046 2014 896,759 54,277,230 1.7 438,580 2,045 2015 901,247 58,095,475 1.6 446,094 2,020

Source: County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2015, Table 11. Notes: (1) Includes Capital Leases. (2) Total Assessed Value includes assessments for taxable real, personal and public service property. With the exception of land in the County’s land-use program, assessed values are calculated based on statutory authority equal to 100% of market value. Assessed values for a given fiscal year are as of the prior January. Data from the Comprehensive Annual Financial Report, fiscal year 2015, Tables 7 and 21. (3) Comprehensive Annual Financial Report, fiscal year 2015, Table 16.

RATIO OF NET TAX-SUPPORTED DEBT SERVICE TO TOTAL REVENUES

Debt Service Ratio of Debt Fiscal on Net Service to Year Tax-Supported Debt Total Revenues(1) Total Revenues

2011 $110,082,000 $1,439,786,000 7.6% 2012 117,563,000 1,460,245,000 8.1 2013 111,849,000 1,493,495,000 7.5 2014 115,515,000 1,636,801,000 7.1 2015 119,226,000 1,611,230,000 7.4

Source: County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2015, Table 14. Note: (1) Total Revenues include revenues in the General and Special Revenue Funds, including the Fire and Rescue Levy, and revenues of the School Board and Adult Detention Center Component Units.

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OTHER COUNTY RELATED INDEBTEDNESS

Cities and Towns

As independent bodies, the debt of the two cities and four towns located within the County are obligations of the respective city or town and not an obligation of the County. Incorporated cities are separate entities from the County, and there is no overlapping debt between any city and the County. The town council of each of the four towns located within the County is authorized by the Virginia Constitution and the Code of Virginia to issue general obligation bonds in the amount up to 10 percent of the assessed value of real estate within the town without holding a public referendum. Each town’s debt outstanding, in the approximate amount as of year ended June 30, 2015, is indicated in the Overlapping Debt table near the end of this section.

Community Development Authorities

The County has created Community Development Authorities (each a “CDA”) that by Virginia law and their charter may issue debt as a means of financing certain projects. CDAs allow public infrastructure within a defined district to be financed with special assessments applied within a district. There are three CDAs within the County (Virginia Gateway, Heritage Hunt, and Cherry Hill); all three have issued revenue bonds secured by CDA assessments. In accordance with the Virginia Code Section 15.2-5131, the County has no obligation to repay CDA debt, and the debt is considered overlapping debt and is not carried as a contingent obligation on the County’s financial statements.

Virginia Gateway. The Virginia Gateway CDA, which is located on 363 acres of land at the intersection of Route 29 and Route 619, was created in 1998 to develop mixed retail and light industrial and office space. Improvements funded by the CDA include road improvements and sewer and storm water facilities.

Heritage Hunt. The Heritage Hunt CDA, which is located on 810 acres at Interstate 66 and Route 29, was created in 1999 for mixed commercial and age-restricted residential development. Improvements funded by the CDA debt include road, water and sewer improvements.

Cherry Hill. The Cherry Hill CDA (also known as Harbor Station and to be known as Potomac Shores), which is located on 1,883 acres of land that surrounds Harbor Station Park, Cherry Hill Road and Congressional Way was created in 2005 to provide public infrastructure improvements in connection with the proposed development of mixed residential, retail and office space in addition to a Virginia Railway Express (VRE) rail station. In May 2013, the successor owner to the property proposed the development of a luxury resort hotel, golf course, and town square commercial facilities consisting of restaurant space and retail facilities and related public infrastructure, in addition to the other development and related public improvements for which the CDA was established. Some of the improvements will be funded by the CDA debt.

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Transportation System Revenue Bonds

Northern Virginia Transportation Authority (NVTA). The County is an active member of the multi-jurisdictional NVTA. NVTA was created in 2002 to develop and implement solutions to transportation issues across the Northern Virginia region. Under a landmark Commonwealth transportation bill (HB2313) in fiscal year 2013, $1.9 billion in new transportation funding will be available over the next six years. NVTA’s first year goal is to jumpstart congestion relief or mass transit projects that will make the most effective use of this funding. A significant part of the projects funding comes from a 0.7 percent addition to the sales tax in the region, designated for deposit to the NVTA Fund. Expected revenues are estimated to be $300 million per year and distribution of revenues are split 70 percent for regional projects and up to 30 percent for jurisdictional projects. In fiscal year 2015, the NVTA received $307.3 million of HB2313 revenues. By law, over time, each jurisdiction is required to receive back benefits equal to the amount that it contributes in regional funds. NVTA is authorized to issue bonds that would obligate NVTA, not local jurisdictions. The inaugural bond sale of $80.0 million was issued in December 2014, which included $28.0 million for a County road project.

Potomac and Rappahannock Transportation Commission (PRTC). The PRTC was created in fiscal year 1987, to help create and oversee the Virginia Railway Express (VRE) commuter rail service and also to assume responsibility for bus service implementation as its member governments saw fit. PRTC provides commuter bus service (OmniRide), to the Washington, DC metropolitan area from the County. PTRC also provides connector services to end of line Metrorail stations (Metro Direct), a cross country route, and (OmniLink), a local bus service that operates in the Counties and the Cities. In addition, the County, through its membership in the PRTC, joined with other jurisdictions through a Master Agreement to pay its share of the costs associated with operating and insuring the VRE, a commuter rail service operating between Northern Virginia and Washington, D.C. In May 2005, the Northern Virginia Transportation Commission (“NVTC”) and PRTC entered into a $25.1 million capitalized lease obligation for the purchase of bi-level, high capacity passenger rail cars.

In fiscal year 2008, NVTC entered into an agreement with the Federal Railroad Administration for a loan of up to $72.5 million to purchase 50 Gallery railcars; in fiscal year 2009 the terms were amended to include ten additional Gallery railcars. A series of sixteen promissory notes were originally authorized and during fiscal year 2012 the balances on the individual notes were combined into a consolidated note. The note is secured by revenues of VRE and the railcars.

As of June 30, 2015, the balance of the capital lease was $16.5 million and the notes payable was $59.7 million. The Master Agreement requires the County’s governmental officers charged with preparing its annual budget to include an amount equal to its pro rata share of the capital costs of the VRE. The County’s fiscal year 2015 pro rata share is 33.4 percent. Although the participating jurisdictions have declared that it is their intent to make sufficient annual appropriations to pay their pro rata share of the costs of the VRE, the participating jurisdictions have not made a binding commitment beyond their current fiscal year and each jurisdiction’s obligation to make such payments is non-binding and subject to annual appropriations. The County’s share of the outstanding debt (based on the methodology described above) is

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approximately $24.0 million. The County’s share is expected to vary over time with shifts in population and ridership and with the inclusion of additional participating jurisdictions.

In December 2012, PRTC issued the $2,335,000 Series 2012 Revenue Bonds, (through the Virginia Resources Authority) to repay proceeds from two interim notes issued in July 2010 to finance land acquisition, design, and construction and management costs associated with a new commuter parking lot and construction costs associated with expansion of the bus storage yard. Proceeds from the issuance was also used to fund certain local costs of issuance and to finance the construction of an evacuation and emergency exit gate at the bus storage yard. Principal and interest payments due in annual installments of $195,000 to $285,000 plus interest will be due through October 2022.

Membership in PRTC allows for the collection of revenues from the 2.1 percent wholesale motor fuels tax levied by the Commonwealth for the member jurisdictions. The Commonwealth levied Retail Sales Tax was initiated in August 1986 at 2.0 percent and increased to a 2.1 percent wholesale motor fuels tax in January 2010. Debt service on the Series 2012 Revenue Bonds is secured by the 2.1 percent wholesale motor fuels tax allocable to the County, the cities of Manassas and Manassas Park, and by a moral obligation pledge from these three localities to fund any shortfalls in debt service.

Northern Virginia Criminal Justice Training Academy

The Northern Virginia Criminal Justice Training Academy (“NVCJTA”) was re- chartered by the Commonwealth of Virginia in 1977. It was originally established in 1965 as the Northern Virginia Police Academy. There are four participating jurisdictions included in the financing of the new Emergency Vehicle Operations Center (“EVOC”): the County, Loudoun County, Arlington County and Alexandria City. The four jurisdictions are responsible for the debt service and the operating and capital expenditures will be charged to all participating jurisdictions on a pro-rata share basis of their participation in the EVOC. When the County withdrew from the NVCJTA, the County’s share of both the operating and debt service was set at 30 percent in a Memorandum of Understanding between NVCJTA and the County, and was approved by the Board in September 2005.

The Industrial Development Authority of Loudoun County, Virginia issued $18,650,000 of Lease Revenue Bonds in November 2006 to finance the construction and equipping of the EVOC. The 2006 Lease Revenue Bonds were refunded in September 2015. The County is responsible for debt service on $3,800,549 or 34.8 percent of the debt service on the refunded bonds.

Water and Sewer Debt

The Service Authority finances its capital needs through the issuance of debt which is not backed by the full faith and credit of the County but by revenues derived from charges for services rendered. As of June 30, 2015, the Service Authority’s outstanding debt was $155.1 million. Long-term debt consisted of four outstanding financing agreements with Virginia Resources Authority (“VRA”) related to upgrades to Mooney Advanced Water Reclamation Facility, as well as three outstanding revenue bonds that were issued in 2005, 2013, and 2015.

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On April 3, 2015, the Service Authority issued $20,955,000 in revenue bonds to refund the remaining 2005 Series bonds. These bonds and loans are payable solely from the revenues generated by the system.

UOSA has issued various regional sewage system revenue bonds to pay the costs of its sewer and sewage disposal system. UOSA’s annual debt service is funded by each of the participating jurisdictions based on their allocated capacity with certain modifications. In fiscal year 2015, the Service Authority paid approximately $10.5 million in UOSA debt service. Historically, the County made an annual fixed payment towards the UOSA debt service with the Service Authority paying the balance. Effective January 1, 2013, the Service Authority assumed the County’s obligation. See Note 18-C to the CAFR for the fiscal year ended June 30, 2015, in Appendix B.

Park Authority Revenue Bonds

The Park Authority was created by ordinance adopted by the Board on October 11, 1977. By a Board resolution approved March 13, 2012, the Park Authority, effective July 1, 2012, is no longer a separate corporate entity and is now a department within the County. On April 14, 2010, when a separate entity, the Park Authority issued $13,285,000 Prince William County Park Authority Park Facilities County Contribution Revenue Bonds Series 2010 (the “2010 Park Authority Bonds”) which together with other funds refinanced for debt service savings the Authority’s outstanding Park Facilities Revenue Refunding and Improvement Bonds, Series 1999. At that time, the County and the Park Authority entered into a Contributions Agreement by the terms of which the County agreed to make, subject to annual appropriation, contributions to the Park Authority proportionate to the debt service on the 2010 Park Authority Bonds and the Park Authority assigned its rights to receive the contributions to a paying agent. Effective July 1, 2012, with the dissolution of the Park Authority as a separate entity, the 2010 Park Authority Bonds remain a debt of the County. The County will continue to make its contributions, subject to annual appropriation of funds for the purpose, to the paying agent, in order to make the debt service payments on the bonds.

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Overlapping Debt

Three of the four towns in the County and two CDAs mentioned above have issued bonds payable from real property taxes or assessments on property within their respective boundaries and also within the boundaries of the County. In addition, the County has assumed responsibility for payments to three regional issuers for a percentage of the debt service on certain of their obligations. The amounts of these tax supported obligations are shown in the following table.

Percent Amount Percent Outstanding Applicable Applicable of County Issuer June 30, 2015 to County to County Assessed Value

Town of Dumfries $4,781,000 100.00% $4,781,000 .0089% Town of Quantico 174,000 100.00 174,000 .0003 Town of Haymarket 1,533,000 100.00 1,533,000 .0029 Heritage Hunt CDA 1,212,000 100.00 1,212,000 .0023 Virginia Gateway CDA 10,720,000 100.00 10,720,000 .0200 No.VA Transp (VRE) 73,124,000 32.32 23,633,000 .0441 No.VA EVOC-NVCJTA 11,990,000 26.56 3,185,000 .0059 UOSA(1) N/A N/A N/A N/A

Source: County of Prince William Virginia, Comprehensive Annual Financial Report, fiscal year 2015, Table 13. Also see County of Prince William Virginia, Comprehensive Annual Financial Report fiscal year 2015, Notes 10, 18 and 20. Note: (1)Until December 31, 2012, the payment to UOSA was an annual fixed payment for the County based on a 1992 agreement between the County and the Service Authority with the Service Authority paying the balance. The agreement was amended and as of January 1, 2013, the County is no longer obligated for debt service payments.

Lease Commitments and Obligations

The County leases real estate and equipment under operating and capital leases expiring at various dates through fiscal year 2023. All capital leases are non-cancelable except they are contingent upon the Board appropriating funds for each year’s payments. The County, pursuant to its adopted debt management policy contained in the Principles of Sound Financial Management, includes capital leases outstanding in its computation of net tax-supported debt as shown previously herein and in its debt-capacity calculation.

The County also has various short-term leases for real estate and equipment with initial or remaining noncancellable lease terms of less than one year. As of June 30, 2015, the County’s total rental expense under operating leases of the primary government was approximately $6,960,000. Further information concerning these obligations is included in Note 10-A to the County of Prince William, Virginia, Comprehensive Annual Financial Report for the fiscal year ended June 30, 2015, in Appendix B.

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APPENDIX B

Audited Financial Statements of Prince William County, Virginia for Fiscal Year Ended June 30, 2015

The appended General Purpose Financial Statements were reproduced from the County’s audited financial statements included in its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2015.

Additional information relative to the County’s financial operations and long-term debt is presented in Appendix A of this Official Statement.

In order to preserve cross-references within this Appendix, this Appendix has not been repaginated and, accordingly, retains the original pagination.

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ReportofIndependentAuditor

To the Board of County Supervisors County of Prince William, Virginia

ReportontheFinancialStatements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Prince William, Virginia (the “County”), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements as listed in the table of contents.

Management’sResponsibilityfortheFinancialStatements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’sResponsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Prince William County/Manassas Convention and Visitors Bureau (the “CVB”), which represents .01%, .03% and .11%, respectively of the assets, net position and revenues of the aggregate discretely presented component units. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinions, insofar as they related to the amounts included for the CVB, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the Specifications for Audits of Counties, Cities, and Towns issued by the Auditor of Public Accounts of the Commonwealth of Virginia. Those standards and specifications require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Prince William, Virginia, as of June 30, 2015, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

EmphasisofMatter

ChangeinAccountingPrinciples As discussed in Note (1)Q to the basic financial statements, the County implemented the provisions of Governmental Accounting Standards Board (“GASB”) Statement No. 68, Accounting and Financial Reporting for Pensions – an Amendment of GASB Statement No. 27, and GASB Statement No. 71, Pensions Transition for Contributions Made Subsequent to the Measurement Date – an Amendment of GASB Statement No. 68, during the year ended June 30, 2015. Our opinions are not modified with respect to this matter.

OtherMatters

Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information and schedule of funding progress as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

OtherReportingRequiredbyGovernmentAuditingStandards In accordance with Government Auditing Standards, we have also issued our report dated December 31, 2015, on our consideration of the County’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the County’s internal control over financial reporting and compliance.

Tysons Corner, Virginia December 31, 2015

MANAGEMENT’SDISCUSSIONANDANALYSIS JUNE30,2015 (amountsexpressedinmillions)

PrinceWilliamCounty’s(theCounty)2015fiscal performance continues to demonstrate the FINANCIALHIGHLIGHTS successful implementation of its System for TheCountyimplementedGASBStatementNo.68,AccountingandFinancial Results Oriented Government. This report Reporting for Pensions (an amendment of GASB Statement No. 27).Asa provides accountability to the County’s goals result of this change, the net position balances as of June 30, 2014 have and objectives defined with its citizenry and been restated to reflect the cumulative effect of recording the pension adopted by the Board of County Supervisors. expense recalculated on GASB Statement No. 68 related to prior years. This section of the annual financial report GASB Statement No. 71, Pension Transition for Contributions made Subsequent to the Measurement Date (an amendment of GASB Statement presents our discussion and analysis of the No.68)improvesfinancialreportingbystateandlocalgovernmentsintheir County’sfinancialperformanceduringthefiscal firstyearofimplementingGASBStatementNo.68. yearthatendedonJune30,2015.Pleaseread it in conjunction with the transmittal letter at Thetotalreportingentity,whichincludescomponentunits,haspositivenet the front of this report and the County’s positionof$558atJune30,2015,whichrepresents21percentincreaseof financialstatements,whichfollowthissection. $96fromtheprioryearprimarilyduetoGASBStatementNo.68changes. All amounts in the discussion and analysis, ThetotalcostoftheCounty’sprogramsincreased5percentto$1,150during unless otherwise indicated, are expressed in fiscalyear2015.TheCounty’stotalrevenuesalsoincreasedby5percent,to millionsofdollars.Throughoutthissectionof $1,159. thereport,theprimarygovernmentisreferred toasthe“County” and the “Total Reporting Netpositionofgovernmentalactivitiesincreased7percentfromtheprior Entity” is the total of the County and yearduetorevenuesexceedingcostsby$10.Programrevenuesincreased by 3%, while general revenues grew by 5 percent; these two factors component units. Due to the material contributedtooverallaveragerevenuegrowthof5percent.TheCounty’s relationship between the School Board totalcostsalsoincreased5percentfromtheprioryear. component unit and the County, the total financial reporting entity information more AtJune30,2015,theCountyhas$847ofdebtoutstandingrelatedtoassets accurately reflects the financial operations of recordedbyitscomponentunitsandotherentities.Accordingly,liabilities PrinceWilliamCounty. and deferred inflows of the County’s governmental activities at June 30, 2015exceededitsassetsanddeferredoutflowsby$135(netposition).

OVERVIEW OF THE FINANCIAL Total net position of the County’s businesstype activities decreased 3 percent to $38 due primarily to the increase in expenditures over the STATEMENTS increaseinrevenues.

The financial section of this annual report Attheendofthecurrentyear,theunassignedfundbalanceof$73inthe consists of four parts – Management’s generalfundwasmaintainedat7.5percentoftotalgeneralfundrevenues. Discussion & Analysis (MD&A), the Basic Theunassignedfundbalanceincreased4percentfromtheprioryear.The increaseisprimarilyattributedtoexpendituresavingsattheendofthefiscal Financial Statements, other Required year. Supplementary Information, and an optional sectionthatpresentscombiningstatementsfor General fund revenues exceeded the budget by $8; alternatively, nonmajorgovernmentalfunds,internalservice expendituresavings of $32under thebudget helped to provide additional funds, agency funds, discretely presented availableresourcesforfutureyears’appropriations. componentunits;budgetandactualschedules As of January 1, 2014 (the assessment date pertinent to real estate taxes for the nonmajor governmental funds; and supporting fiscal year 2015) the total assessed values of taxable property debt obligation schedules. The basic financial increased by 7 percent compared to the prior year, with increases in statements include two kinds of statements residentialvaluesaccountingfor80percentofthetotalriseinvalues.This thatpresentdifferentviewsoftheCounty: increasewaspartiallyoffsetbyadecreaseinrealestatetaxratesfrom1.181 to1.148.Realestatetaxescontributed52percentofthetotalrevenuesfor theprimarygovernmentoftheCountyduringfiscalyear2014. The first two statements are government– widefinancialstatementsthatprovideboth long–term and short–term information abouttheCounty’soverallfinancialstatus.

20 The remaining statements are fund financial statementsthat focus on individual parts of the County government, reportingtheCounty’soperationsinmoredetailthanthegovernmentwidestatements. - The governmental funds statements reflect how general government services, like public safety, were financed in the short–termas wellaswhatremainsforfuturespending. - Proprietary fund statements offer short– term and long–term financial information abouttheactivitiesthegovernmentoperates likebusinesses,suchastheLandfill. - Fiduciary fund statements provide informationaboutthefinancialrelationships– like the special welfare, community services board, and federal selfsufficiency payee programs for certain County welfare, mental health services, and federal selfsufficiency programrecipients–inwhichtheCountyacts solelyasatrusteeoragentforthebenefitof others,towhomtheresourcesbelong. The financial statements also include notes that explain some of the information in the financial statements and providemoredetaileddata.Thestatementsarefollowedbyasectionofrequiredsupplementaryinformationthat furtherexplainsandsupportstheinformationinthefinancialstatements.FigureA1showshowtherequiredpartsof thisfinancialsectionarearrangedandrelatetooneanother.Inadditiontotheserequiredelements,thefinancial statements include a section with combining statements that provide details about the County’s nonmajor governmentalfunds,internalservicefunds,agencyfundsanddiscretelypresentedcomponentunits,eachofwhich arecombinedandpresentedinsinglecolumnsinthebasicfinancialstatements.Comparativedatafromtheprior fiscalyearisalsoincludedonselectfinancialstatements.

21 Figure A2 summarizes the major features of the County’s financial statements, including the portion of the County government they cover and the types of information they contain. The remainder of this overview section of management’sdiscussionandanalysisexplainsthestructureandcontentsofeachofthestatements.

FigureA2 MajorFeaturesoftheCounty’sGovernmentwideandFundFinancialStatements FundStatements GovernmentWide Statements GovernmentalFunds ProprietaryFunds FiduciaryFunds Scope Entire County government TheactivitiesoftheCountythatare ActivitiestheCountyoperates InstancesinwhichtheCountyis (except fiduciary funds) and not proprietary or fiduciary, such as similar to private businesses the trustee or agent for theCounty’scomponentunits police, fire, and community such as, the Landfill, someone else’s resources, such development Innovation Technology Park, as the retirement plan for andParks&Recreation Countyemployees Requiredfinancial Statementofnetposition Balancesheet Statementofnetposition Statement of fiduciary net statements Statementofactivities Statementofrevenues, Statement of revenues, position expenditures,andchangesinfund expenses, and changes in Statement of changes in balances netposition fiduciarynetposition Statementofcashflows

Accountingbasisand Accrual accounting and Modified accrual accounting and Accrual accounting and Accrual accounting and measurementfocus economicresourcesfocus currentfinancialresourcesfocus economicresourcesfocus economicresourcesfocus TypeofDeferred All assets and liabilities, both Only assets expected to be used up All assets and liabilities, both All assets and liabilities, both outflowandinflow financial and capital, and and liabilities that come due during financial and capital, and shortterm and longterm; the asset/liability shorttermandlongterm the year or soonthereafter, no shorttermandlongterm County’s funds do not currently capitalassetsincluded contain capital assets although information theycan Typeof All revenues and expenses Revenues for which cash is received All revenues and expenses All revenues and expenses inflow/outflow during the year, regardless of during or soon after the end of the during the year, regardless of during the year, regardless of information whencashisreceivedorpaid year; expenditures when goods or whencashisreceivedorpaid whencashisreceivedorpaid services have been received and payment is due during the year or soonthereafter

GovernmentwideStatements

ThegovernmentwidestatementsreportinformationabouttheCountyasawholeusingaccountingmethodssimilarto thoseusedbyprivatesectorcompanies.Thestatementofnetpositionincludesallofthegovernment’sassets,deferred outflowsofresourcesandliabilities,deferredinflowsofresources.Allofthecurrentyear’srevenuesandexpensesare accountedforinthestatementofactivitiesregardlessofwhencashisreceivedorpaid.

ThetwogovernmentwidestatementsreporttheCounty’snetpositionandhowtheyhavechanged.Netposition–the differencebetweentheCounty’sassets,deferredoutflows,liabilitiesanddeferredinflows–isonewaytomeasurethe County’sfinancialhealth.

Overtime,increasesordecreasesintheCounty’snetpositionareanindicatorofwhetheritsfinancialhealthisimproving ordeteriorating,respectively.ToassesstheoverallhealthoftheCounty,oneneedstoconsideradditionalfactors,such aschangesintheCounty’spropertytaxbase.

ThegovernmentwidefinancialstatementsoftheCountyaredividedintothreecategories:

Governmentalactivities—MostoftheCounty’sbasicservicesareincludedhere,suchasthepolice,fire,publicworks, transportation, community development, and general government administration. Property and other taxes and stateandfederalgrantsaretheprimaryfundingsourceoftheseactivities.

Businesstype activities—The County charges fees to customers to help it cover the costs of certain services it provides.TheCounty’sLandfill,InnovationTechnologyPark,andParks&Recreationareincludedhere.

Componentunits—TheCountyincludesthreeotherentitiesinitsreport—thePrinceWilliamCountySchoolBoard, theAdultDetentionCenterandthePrinceWilliamCounty/ManassasConventionVisitorsBureau.Althoughlegally separate,theseareconsidered“componentunits”becausetheCountyisfinanciallyaccountableforthem.

22 FundFinancialStatements

The fund financial statements provide more detailed information about the County’s most significant funds—not the Countyasawhole.FundsareaccountingdevicesthattheCountyusestokeeptrackofspecificsourcesoffundingand spendingforparticularpurposes.TheCountyestablishesfundstocontrolandmanagemoneyforparticularpurposes (i.e.,Educationcapitalprojectsfund)ortoshowthatitisproperlyusingcertaintaxesandgrants(i.e.,Housingspecial revenuefund).

TheCountyhasthreekindsoffunds:

Governmentalfunds—MostoftheCounty’sbasicservicesareincludedingovernmentalfunds,whichfocuson:

(1)Howcashandotherfinancialassetscanreadilybeconvertedtocashflowinandout;and (2)Thebalancesleftatyearendthatareavailableforspending.

Consequently,thegovernmentalfundsstatementsprovideadetailedshorttermviewthatindicateswhetherthere are more or fewer financial resources that can be spent in the near future to finance the County’s programs. Becausethisinformationdoesnotencompasstheadditionallongtermfocusofthegovernmentwidestatements,a detailedreconciliationprovidesadditionalinformationthatexplainstherelationship(ordifferences)betweenthe statements.

- The County’s governmental fund balances are categorized into five classifications based upon constraints imposedupontheuseoftheresourcesnonspendable,restricted,committed,assignedandunassigned.

Proprietaryfunds—ServicesforwhichtheCountychargescustomersafeearegenerallyreportedinproprietaryfunds.

- TheCounty’senterprisefundsarethesameasitsbusinesstypeactivities,butprovidemoredetailandadditional information.

- TheCountyusesinternalservicefundstoreportactivitiesthatprovidesuppliesandservicesfortheCounty’s otherprogramsandactivities—suchastheCounty’sIntraCountyServicesFund.

Fiduciaryfunds—TheCountyisthetrustee,orfiduciary,foritsemployees’pensionplans.Itisalsoresponsiblefor otherassetsthroughatrustarrangementthatcanbeusedonlyforthetrustbeneficiaries.TheCountyisresponsible forensuringthattheassetsreportedinthesefundsareusedfortheirintendedpurposes.AlloftheCounty’sfiduciary activitiesarereportedinaseparatestatementoffiduciarynetpositionandastatementofchangesinfiduciarynet position.TheseactivitiesareexcludedfromtheCounty’sgovernmentwidefinancialstatements,becausetheCounty cannotusetheseassetstofinanceitsoperations.

23 FINANCIALANALYSISOFTHECOUNTYASAWHOLE

NetPosition

Thetotalreportingentitynetpositionincreased 21 percent to $558 (see Figure A3). This increase in net position demonstrates the continuing collaborative sound fiscal policies of theCountyasawhole.

GovernmentalActivities

Net position of the County’s governmental activitiesincreasedby,7percentto($135).The County’s net position in fiscal year 2014 was restatedto($145).TheCountyalsoissuesdebt Figure A-3 tofinancecapitalprojectswhicharedonatedto other entities. Therefore, while the debt is Figure A-3 reflected as an obligation of the primary government of the County, the related assets arerecordedbytheentitiestowhichthecapital projects are donated. These donations are plannedaspartoftheCounty’scapitalimprovementprogramtofurtheritseducation,transportation,publicsafety,and economicdevelopmentstrategicgoals,andtherebyincreaseservicesandimprovethequalityoflifeinPrinceWilliam County.

AsofJune30,2015,theCountyhas$847ofoutstandingdebt(comparedwith$834asofJune30,2014)relatedtoassets donatedtootherentitiesasfollows:

$631,PrinceWilliamCountySchoolBoard; $178,CommonwealthofVirginia; $20,PrinceWilliamCountyAdultDetentionCenter; $15,VolunteerFire&Rescuecompanies(various); $3,IndustrialDevelopmentAuthority;

Thisrepresents94percentoftheCounty’sTotalGeneralObligation,CapitalLeasesandotherLongTermdebt.Because theCountydoesnotretaintherelatedassets,thisdebtliability(lessanyunspentproceeds)reducestheCounty’stotal netpositionandrepresentsalessfavorablepictureascomparedtogovernmentsthatdonotextensivelyfundthecapital assetsofotherentities.

The most significant activities of this nature for the current fiscal year were the issuance of $83 of debt for school constructionprojectsand$48ofprincipalretirement.Allofthedebtlistedaboveisusedtofinancethepurchaseor constructionofassetsrecordedbyotherentitiesandresultinadeficitinnetpositionofgovernmentalactivitiesofthe County.Thisdeficitistheresultofhavinglongtermcommitmentsthataregreaterthancurrentlyavailableresources, anddoesnotmeanthattheCountyislackingtheresourcesavailabletopayitsbillsnextyearorinfutureyears.

Additionally,revenuesandexpensesoftheCounty’sgovernmentalactivitiesincreasedby5percentcomparedtothoseof the prior year. The County issued $83 of debt to support school construction projects during fiscal year 2015. The conveyanceofthesefundstothePrinceWilliamCountySchoolBoardisrecordedasanEducationexpense,andthus,the increaseindebtissuancesinthecurrentyear,combinedwiththemodestrevenueincreasesofthegeneralfundoffsetby $48ofprincipalretirementwerethemajorfactorsthatresultedina$52increaseinEducationexpenseforthecurrent year.

24 BusinessTypeActivities

The net position of the County’s businesstype activities decreased $1 during the current year, due principally to increasedexpenditures.TheCounty’sLandfillpostedpositiveresultsofoperationsof$1duringthecurrentfiscalyear, whileParks&Recreationexperiencednegativeresultsofoperationsof$2collectively,primarilyattributedtogolfcourse servicesprovided.

The $38 net position of the County’s businesstype activities will not be used to offset the net position deficit in governmentalactivities.TheCountygenerallyusesthepositivenetpositiontofinancethecontinuingoperationsofthe Landfill,InnovationTechnologyPark,andParks&Recreation.

TableA1

CountyNetPosition

Total Governmental BusinessType Total ReportingEntity Activities Activities PrimaryGovernment (includingComponentUnits)

2015 2014 2015 2014 2015 2014 2015 2014

Currentassetsandother $819 $828 21 27 $840 855 1,171 1,186

Capitalassets 515 480 54 48 569 528 1,896 1,776

Totalassets 1,334 1,308 75 75 1,409 1,383 3,067 2,962

DeferredOutflowsofResources 53 21 1 54 21 131 21

Otherliabilities 243 224 12 13 255 237 398 377

Longtermliabilities 1,042 932 26 20 1,068 952 1,880 979

Totalliabilities 1,285 1,156 38 33 1,323 1,189 2,278 1,356

DeferredInflowsofResources 237 221 237 221 362 221

Netposition:

NetInvestment

Incapitalassets 460 432 44 38 504 470 1,222 1,121

Restricted 159 140 159 140 183 169

Unrestricted (754) (620) (6) 4 (760) (616) (847) 116

CumulativeEffectofchangein (97) (3) (100) (944) accountingprinciple(GASB68)

Totalnetposition ($135) ($145) 38 39 (97) (106) 558 462

Theaforementionedfactorscontributingtochangesinthegovernmentalnetpositionandthebusinesstypenetposition oftheCountycombinedtocreateanoverallincreaseinnetpositionoftheprimarygovernmentof$9betweenfiscal years 2015 and 2014. The assets and deferred outflow of resources of the primary government are less than the liabilitiesanddeferredinflowsofresourcesby$97.

25 The component units (the Prince William County School Board, the Adult Detention Center and the Prince William County/ManassasConventionVisitorsBureau)areasignificantportionofthetotalreportingentity,theassetsofwhich representover50percentofthetotalreportingentity.Componentunitnetpositionincreased15percentto$655during 2015,principallyresultingfromtheissuanceofdebtwhichwasusedtoincreaseinvestmentsincapitalassets.Thenet positionoftheprimarygovernmentof($97)combinedwiththenetpositionofthecomponentunitsof$655resultedin totalnetpositionforthetotalreportingentityof$558.

ChangesinNetPosition

TableA2andthenarrativethatfollowsconsidertheoperationsofgovernmentalandbusinesstypeactivitiesseparately. SeeFiguresA4,A5andA6fortherevenuepercentagesandnetcostsforgovernmentalactivities.

TableA2

PrinceWilliamCounty’sChangesinNetPosition

TotalReportingEntity GovernmentalActivities BusinessTypeActivities TotalPrimaryGovernment (includingcomponentunits)

2015 2014 2015 2014 2015 2014 2015 2014

Revenues:

Programrevenues:

Chargesforservices $49 49 31 30 80 79 104 102 Operatinggrantsand 80 80 80 80 238 230 contributions Capitalgrantsandcontributions 49 43 49 43 49 43

Generalrevenues:

Taxes:

Realproperty 600 572 600 572 600 572

Personalproperty 104 96 104 96 104 96

Othertaxes 122 116 122 116 122 116 Paymentfromprimary 616 560 Government Grantsandcontributionsnot 82 82 82 82 455 442 restrictedtospecificprograms Unrestrictedinvestment 21 26 21 26 24 29 earnings

Miscellaneous 20 12 1 1 21 13 24 21

Totalrevenues 1,127 1,076 32 31 1,159 1,107 2,336 2,211

Expenses: Generalgovernment 35 35 35 35 35 35 administration Judicialadministration 20 20 20 20 20 20

Publicsafety 244 239 244 239 244 239

Publicworks 89 92 89 92 89 92

Healthandwelfare 82 77 82 77 82 77

TableA2

PrinceWilliamCounty’sChangesinNetPosition

TotalReportingEntity GovernmentalActivities BusinessTypeActivities TotalPrimaryGovernment (includingcomponentunits)

2015 2014 2015 2014 2015 2014 2015 2014

Education 513 461 513 461 513 461

Parks,recreationalandcultural 37 36 37 36 37 36

Communitydevelopment 65 59 65 59 65 59

Interestonlongtermdebt 45 48 45 48 45 48

Pension (13) (13) (13) Enterprise 33 32 33 32 33 32 ComponentUnits 1,090 1,045

Totalexpenses 1,117 1,067 33 32 1,150 1,099 2,240 2,144

Increase(Decrease)innet 10 9 (1) (1) 9 8 96 67 positionbeforetransfers

Transfers (6) 6

Increase(Decrease)in 103(1)5989667 Netposition Netposition–beginning ($145) (51) 39 37 (106) (14) 462 1,339 CumulativeEffectofchangein (97) (3) (100) (944) accountingprinciple(GASB68)

Netposition–ending ($135) ($145) 38 39 (97) (106) 558 462

Thetotalreportingentitynetpositionincreasedby$96infiscalyear2015astotalrevenuesof$2,336,6percenthigher thanfiscalyear2014,exceededtotalexpensesof$2,240,whichwere4percenthigherthanexpensesoftheprioryear. TheCounty’s(PrimaryGovernment)totalrevenuesincreased5percentto$1,159(seeTableA2).Over60percentofthe County’srevenuecomesfromadvaloremtaxes,nearly71percentofeverydollarraisedcomesfromsometypeoftax. Nearly 18 percent of revenues come from local, state and federal aid. Charges for services are 7 percent and the remaining4percentisfromothersources. ThetotalcostofallCountyprogramsandservices,increasedby$51or5percentto$1,150.TheCounty’sexpensescover arangeofservices,with66percentrelatedtopublicsafetyandeducation(seeTableA2).Educationandpublicsafety aresignificantgoalareasintheStrategicPlan. GovernmentalActivities RevenuesfortheCounty’sgovernmentalactivitiesincreased5percentto$1,127,whiletotalexpensesalsoincreased5 percentto$1,117,which,afterconsideringtheeffectoftransfers,resultedina$10increaseinnetpositionduringthe currentyear,comparedtoa$3increaseintheprioryear.74percentofrevenuesrelatedtogovernmentalactivitiesare derivedfromtaxes(seeFigureA4).Propertytaxrevenuesincreasedby$36or5percent,duemainlytoanincreasein

27 real estate tax revenues from $572 in fiscal year 2014 to $600 in fiscal year 2015. A 5 percent increase in the total taxableassessedvalueofrealestateintheCounty,coupledwitha3percentdecreaseinthetotaldirecttaxratehelped topushrealestatetaxrevenuesslightlyhigher,andoffsetaflatlevelofsupportreceivedfromboththestateandfederal government;theserevenueoutcomesmitigatedtheimpactoftherisingcostofvitalservicesprovidedbytheCounty.

FigureA4

Property tax revenues, which are largely tied to the performance of the real estate market, experienced encouraging levels of growth during the year (up 5 percent from the prior year) and, local sales tax revenues produced a similar 6 percentincreasefrom$57 in fiscal year 2014 to $60 infiscalyear2015.These Figure A-5 outcomesareattributable to a more positive real estatemarketthantheCountyhasexperiencedoverthepastfewfiscalyears,withresidentialrealestatevaluesshowing anincreaseof7percentandcommercialandindustrialvaluesshowinganincreaseof6percent.Chargesforservicesand operatinggrantsandcontributionsremainedthesamefromfiscalyear2014tofiscalyear2015.Additionally,investment gains of $21 were realized in fiscal year 2015 versus an increase of $26 in fiscal year 2014, mostly due to favorable valuationofinvestmentatyearend.Miscellaneousrevenuesalsoincreasedto$20infiscalyear2015from$13infiscal year2014. Educationremainsthebiggestexpenseforgovernmentalactivities.TheSchoolBoardreceives57.23percentofgeneral revenuespertherevenuesharingagreementwiththecounty.Studentenrollmentiscurrentlygrowingatarateof2.4% peryearwhilethetotalcountypopulationisgrowingat1.5%peryear.Theincreaseinenrollmentadds$20millionin operationcostsand$6.6millionindebtservicecostperyear. PublicSafetyexpenseincreasedby$5or2percentcomparedtofiscalyear2014. TheAdultDetentionCenterandFire& Rescuerepresentover50percentofthePublicSafetyBudget.Inmatepopulationgrowthhasincreasedbothcapitaland operating costs as planning for future housing needs includes considering additional capacity and replacement/renovationofexistingfacilities.DuringFY015,$7.5inbondsissuedfortheconstructionofNewDepartment

28 ofFire&RescueStations.TheissuanceofbondsaccountedforfiveoftheeightnewFire&Rescuestationsneededper theComprehensivePlanLevelofservicestandards.

Additionally, other functions and programs experienced significant changes from prior year levels. Community Development increased $6 from FY2014. Community development includes funding for Public Works, Transportation, Economic Development, Planning, Libraries, and the Department of Parks & Recreation. Major projects under construction for FY2015 were the Montclair and Gainesville communitylibraries.Thenetcosts Figure A-6 reflected in community developmentwereminimalduringFY2014primarilyasaresultofdeveloperdonatedinfrastructureassetssuchasstorm waterdrainsandponds,amountedto$9infiscalyear2014.ParksandRecreationexpensesgrew3percentfromthe prioryear,increasing$1astheCountycontinuestoattractnewbusinessanddevelopments.

FiguresA5andA6presentthenetcost(totalcostlessfeesgeneratedbytheactivitiesandintergovernmentalaid)of eachoftheCounty’sninefunctions/programs.ThenetcostreflectsthefinancialburdenthatwasplacedontheCounty’s taxpayersbyeachofthesefunctions.

The cost of all governmental activities this year was $1,117; however, the amount that our taxpayers paid for these activitiesthroughCountygeneralrevenueswasonly$826.Someofthecostswerepaidby:

- Thosewhodirectlybenefitedfromtheprogramsbypayingchargesforservicesof$49; - Othergovernmentsandorganizationsthatsubsidizedcertainprogramswithgrantsandcontributionsof$129; and - The$113balanceoftheexpenseswaspartiallypaidforwithotherrevenuessuchasdeveloperproffersand unrestrictedfederal,state,andotherlocalgovernmentaid,andinvestmentearnings.

BusinesstypeActivities

RevenuesoftheCounty’sbusinesstypeactivitiesincreasedfromtheprioryearby3percent,asdidexpensesof$33,3% increasefromtheprioryear(refertoTableA2).Factorscontributingtotheseresultsinclude:

Charges for services the County Landfill increased by $1 compared to prior year. Parks & Recreation charges for servicesremainedrelativelythesamefromtheprioryear.

Expensesofthelandfillwere$17,primarilyduetoclosurecostsasthecellsatmaximumcapacityarecapped.

Expenses for Parks & Recreation were $14, primarily attributable to the maintenance of the facilities for services providedtoCountycitizens.

Netpositiondecreasedfrom$39to$38asaresultoftotalexpensesexceedingtotalrevenuesandtransfersby$1.

FINANCIALANALYSISOFTHECOUNTY’SFUNDS

AstheCountycompletedtheyear,itsgovernmentalfundsreportedacombinedfundbalanceof$335,adecreaseof$12 or 3 percent from the prior year. General Fund revenues grew at a rate of 5 percent to $974, while General Fund expendituresincreasedby$33or4percentto$947.Afterconsideringtheneteffectoftransfersinandoutofother

29 fundsandothertransactions,theGeneralFundbalanceincreased$27.TheCapitalProjectsfundsbalancesdecreased slightlyby$46duringthecurrentyear,duetoavarietyoffactors.Duringthefiscalyear,theCountyexpended$58on Streets&Roadsprojects,butalsoreceived$28ofsupportfromtheStateandFederalgovernment.Additionally,the capital projects funds received funds from the general fund, special levy district, and various other capital projects. Generalfundtransfersforstreetsandroadsprojectsdecreasedincomparisontofiscalyear2014by$27.TheFireand RescueLevySpecialRevenueFundcontinuestobeamajorfundsincefiscalyear2013.FundbalancefortheFireand RescueLevyFundincreased11percent.FundbalancesforOtherGovernmentalFundsdecreased9percentfromtheprior year.TheincreaseintheFireRescueLevyFundismainlyduetotheincreaseinpropertytaxrevenues,whichincreased by5percentfrom$34intheprioryear,to$35infiscal2015coupledwitha$3increaseinexpenditures.Increasein expendituresisduetoanincreaseinpublicsafetyfrom$18intheprioryearto$21forfiscalyear2015.Asnotedearlier, theCountyusesfundaccountingtoensureanddemonstratecompliancewithfinancerelatedlegalrequirements.

The County adopted Principles ofSoundFinancialManagement in 1988 and amends its Principles through the Board of County Supervisors. Following these Principles has enhanced the County’s image and credibilitywiththepublic,credit rating agencies, and investors. Prior to fiscal year 2010, the fund balance policy was to maintain an unassigned fund balance of not less than five percent of the average of the annualgeneralrevenuesforthe five preceding fiscal years with compliance updates with the Board. Beginning in fiscal year 2010, Policy 1.04 was modified to require an unassigned fund balance of 7.5 percent of the Figure A-7 current year’s General Fund revenues. In fiscal year 2006, managementbeganmaintaininganunassignedfundbalanceof7.5percentofthecurrentyear’sGeneralFundrevenues, although,untilfiscalyear2010,noformalmodificationstothePrincipleshadbeenmade.InDecember2012theBoardof CountySupervisorsresolvedtomaintainthefiscalyear2012unassignedGeneralFundbalanceat7.5percentofGeneral Fundrevenues.ThepurposeoftheunassignedfundbalanceistoprovidetheCountywithsufficientworkingcapitaland maintainamarginofsafetytoaddressemergencyneedsorunexpecteddeclinesinrevenue.TheCountyhasdonean excellent job in achieving and maintaining its minimum balance policy requirement since establishment, and has consistentlyachievedatleast7.5percentbalance.FigureA7showstheCounty’sunassignedGeneralFundbalanceas compared to the policy requirement in effect at the time. Additions to the unassigned fund balance come from a combinationofrevenuesoverprojectionsandcurrentyearexpendituresavings.

GovernmentalFunds

ThefocusoftheCounty’sgovernmentalfundsistoprovideinformationonnearterminflows,outflows,andbalancesof expendable resources. Such information is useful in assessing the County’s financing requirements. In particular, unassignedfundbalancemayserveasausefulmeasureofagovernment’snetresourcesavailableforspendingatthe endofthefiscalyear.

TheCounty’sGeneralFundbalanceincreased$27or18percentduetofavorableactualrevenuesof5%andactual expenditureincreasesof4%.Actualrevenuesexceededthefinalbudgetprimarilyduetohigherthananticipated propertytaxrevenues,whichexperiencedgrowthasaresultofa7percentincreaseinthetaxableassessedvalueof

30 realestateduringfiscalyear2015.However,departmentalexpendituresincreased$50or5%fromtheprioryear primarilyintheareasofeducationandpublicsafety.

The financial results as detailed in the governmental funds demonstrate the County’s accountability to its five strategicgoalareasofeconomicdevelopment,publicsafety,humanservices,education,andtransportationaligned toaddresstheimpactofpopulationgrowthandincreasedneedsofthecommunity.

The County has continued to increase its investment in public safety during the current year, increasing expenditures by $5 or 2% from the prior year; public safety expenditures continue to represent approximately22percentoftotalexpendituresofgovernmentalfunds.

PartoftheCounty’stransportationgoalofalleviatingcongestionisfurtherdefinedasoneoftheinitiatives in the Letter of Transmittal. The $58 spent on the construction of various streets and roads, upon completion,willbetransferredtoandbecomeassetsoftheCommonwealthofVirginia.

TheCounty’soperatingsupporttotheSchoolBoardincreasedby$17during2015.Thisslightuptickwas the result of growth in general County revenues, per the RevenueSharing Agreement. Additionally, the supportforschoolconstructionprojectsincreasedfromtheprioryear,astheCountyissued$23moredebt duringthefiscalyear2015,andtherefore,conveyedtheincreaseinfundingrelatedtocapitalprojects.

Bondproceedsof$83forfiscalyear2015wereconveyedtothePrinceWilliamCountySchoolBoardthroughthesale ofgeneralobligationbondstotheVPSAand,arebudgetedtobespentonpartofthecostsofconstructingadditions onvariouscapitalschoolimprovementprojectsincludingrenovations,additionsandreplacementto13elementary schools,twomiddleschoolsandthreehighschools.

ProprietaryFunds

TheCounty’sproprietaryfundsprovidethesametypeofinformationfoundinthegovernmentwidefinancialstatements butinmoredetail.

UnrestrictednetpositionoftheLandfillattheendoftheyearwas$1,whileunrestrictednetpositionamountedto$7for InnovationTechnologyPark.UnrestrictednetpositionoftheLandfilldecreasedby$3fromfiscalyear2014astheCounty fundedcapitalneedswithcashintheprioryear;whileInnovationTechnologyPark’sunrestrictednetpositionstayed aboutthesame.TheParksandRecreationenterprisefundendedthefiscalyearwithadeficitunrestrictednetpositionof ($14).

GeneralFundBudgetaryHighlights

Overthecourseoftheyear,theBoardofCountySupervisorsrevisedtheCountybudgetseveraltimes.Thesebudget amendmentsfallintotwocategories:

Amendmentstoappropriationsapprovedshortlyafterthebeginningoftheyeartoreflectbudgetcarryoversfrom theprioryear.

Increasesinappropriationsbasedonsupplementalfundingsources.

After these adjustments, budgetary expenditures were $32 lower than the final budget amounts while budgetary revenues were more than the final budget by $8. These two factors, combined with the effect of transfers to other funds,resultedinanincreaseinthefundbalanceoftheGeneralFund,onabudgetarybasis,of$24duringthefiscalyear. Themostsignificantrevenuevarianceswererelatedtogeneralpropertytaxes($4higherthanfinalbudget),otherlocal taxes($2higherthanthefinalbudget)andchargesforservices($1higherthanthefinalbudget).Revenuefromtheuse ofmoneyandpropertywassubstantiallythesameasthefinalbudgetbasedontheexpectedreturnsoninvestments, whilesupportfromtheCommonwealthofVirginiafellshortofexpectationsby$3.

31 CAPITALASSETANDDEBTADMINISTRATION

CapitalAssets

Attheendoffiscalyear2015,thetotalreportingentityhadinvested$1,896inabroadrangeofcapitalassets,including land,buildings,improvements,machineryandequipment,librarycollections,infrastructure,andconstructioninprogress (seeTableA3).Thisamountrepresentsanetincrease(includingadditionsanddeductions)of$120or7percent,over fiscalyear2014.TheCountyhadinvested$569incapitalassets,netofaccumulateddepreciation,whichrepresenteda netincreaseof$41or8percent,overfiscalyear2014.MoredetailedinformationabouttheCounty’scapitalassetsis presentedinNote9tothefinancialstatements.

TableA3

County’sCapitalAssets

TotalPrimaryGovernment TotalReportingEntity

2015 2014 2015 2014

Land&ConstructioninProgress $200 170 $393 $290

Buildingsandothercapital 369 358 1,503 1,486 assets,netofdepreciation

Total $569 $528 $1,896 $1,776

MajorCapitalAssetAdditions

Thisyear’smajorCountycapitalassetadditionsincludedthefollowing:

Over$9wasspentontheCounty’scapitalprojectrelatedtothePhaseIII,LandSiteDevelopment(Wetlands)and HazardousHouseholdWaste(HHW)BuildingattheCountyLandfillduring2015.CompletiononLandfillPhaseIIIand HHW Building resulted in an increase of $9.7 in building and improvement. Additionally, expenditures related to construction of Gainesville Library,Montclair Library were $6.8 and $8.2 respectively. System implementationand replacement,includingERPFinancialInformationManagementSystem,ComputerAidedDispatch(CAD)andRecord Management Systems (RMS) totaled $14.6 on County’s capital project related to technology. The construction in progressbalanceasoftheendofthecurrentfiscalyearwas$61ingovernmentalactivitiesand$4inbusinesstype activities.

The total reporting entity capital assets increased by $120; $79 of this increase relates to component units. The growthoftheSchoolBoardcomponentunit’sassetsincreased$73forconstructioninprogressoftwonewschools andcontinuedconstructionofthreeschoolsfromtheprioryear.Inaddition,thereisotherongoingmajoradditions andrenovationsperformedatvariousschools.TheSchoolboardalsomademajorcapitalassetpurchase,including trucksandschoolbuses.Ontheotherhand,$2ofthecomponentunitassetdecreaserelatedtotheAdultDetention Centerduetodepreciation.Theremainingincreasehasbeenexplainedindetailintheprecedingparagraph.

LongtermDebtandOtherObligations

AtyearendtheCounty’sgovernmentalactivitieshadtotaldebtandotherobligationsof$1,136ofwhichbondeddebt outstanding represented $769. Of this amount, $764 comprises debt backed by the full faith and credit of the government.TheremainderoftheCounty’sbondeddebtof$5representsbondssecuredsolelybyspecifiedrevenue sources(i.e.,revenuebonds).

32 TheCounty’stotaldebtandobligationsincreasedto$1,165duringthecurrentfiscalyear.Thekeycomponentsofthe currentyearactivitiesweretheissuanceof$83ofdebtonbehalfoftheSchoolBoardandprincipalpaymentsonexisting debttotaling$48duringthefiscalyear.MoredetailedinformationabouttheCounty’slongtermdebtispresentedin Note11tothefinancialstatements.

BondRatings

TheCountymaintainsratingsofAAAfromFitchRatings,AaafromMoody’sInvestorsService,andAAAfromStandardand Poor’s.Theseratingsarethehighestratingsawardedtoalocalgovernment.

TableA4

PrinceWilliamCounty’sLongtermDebtandOtherObligations

GovernmentalActivities BusinesstypeActivities TotalPrimaryGovernment

2015 2014 2015 2014 2015 2014

Generalobligationbonds $764 745 764 745

Revenuebonds 3 4 11 11 14 15

DeferredlossonRefunding (1) (1) (1) (1)

Stateliteraryfundloans 2 2 2 2

Totalbondeddebt $769 751 10 10 779 761

Capitalleaseobligations 131 145 1 131 146

Unpaidlossesandrelatedliabilities 19 17 19 17

NetPensionObligation 101 2 3 1 104 3

Compensatedabsences 32 31 1 1 33 32

Surplusdistributionpayable 4 5 4 5

Unamortizedpremiums 80 73 80 73

Accruedclosureliability 15 13 15 13

Totallongtermdebtandotherobligations $1,136 $1,024 29 26 1,165 1,050

LimitationsonDebt

TheCountyhasnolegallimitationsontheamountofdebtitcanissue.TheBoard,however,hasadoptedcertainfinancial policieslimitingtheamountoftaxsupporteddebtoutstandingtonomorethan3percentoftheassessedvalueof taxableproperty;andannualdebtservicepaymentstonomorethan10percentofCountyrevenues.AsofJune30, 2015,theamountoftaxsupporteddebtoutstandingrepresented1.7percentofthetotalassessedvaluationoftaxable realandpersonalpropertyof$54billionatJanuary1,2014,whichisthevaluationdatetodeterminefiscalyear2014 revenues. Debtservicepaymentsrepresented7.percentofrevenuesincompliancewiththeCounty’sPrinciplesof SoundFinancialManagement.SeeTable14intheStatisticalSectionforfurtherexplanationofthecalculations.

33 FigureA8 ChangeinTaxSupportedDebtOutstandingandTaxSupportedDebtService

TaxSupportedDebtService TaxSupportedDebtService asaPercentofTotalRevenues asaPercentofAssessedValues

12.0% 3.5%

10.0% 3.0%

2.5% 8.0% 2.0% 6.0% 1.5% 4.0% 8.1% 7.6% 7.5% 7.4% 2.1% 7.1% 1.0% 2.0% 1.9% 1.7% 1.7% 2.0% 0.5%

0.0% 0.0% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

ECONOMICFACTORSANDNEXTYEAR’SBUDGETSANDRATES

ThekeyeconomicfactorsaffectingtheCountyincludedthefollowing:

TheBoardofCountySupervisorshasdecreasedtherealestatetaxrate0.026cents,or2.26percentforfiscalyear 2016to$1.122dollarsper$100dollarsofassessedvalue.

Therealestatetaxbasehasincreasedfrom$50.017billionsupportingfiscalyear2014to$53.713billionforfiscal year2015,whichisa7.39percentincrease.

Thefiscalyear2016GeneralFundbudgetis$1,026.9,whichisa3.8percentincreasefromfiscalyear2015.

Theratioofemployeesper1,000residentsforthePrimaryGovernmentoftheCountyhasdecreasedfrom8.97.In fiscalyear2004to8.79per1,000residentsinfiscalyear2015.

ThepopulationintheCountyhasgrownatanaverageannualrateof3.01percentoverthepastdecadeandthevast majorityofthoseCountyresidentsaregainfullyemployed.

TheVirginiaEmploymentCommissionestimatedtheCounty’satplaceemployment(jobslocatedintheCounty)to be116thousandduringthefirstquarterof2014.

Throughoutthepastdecade,theCounty’sunemploymentrateshavemirroredStateandU.S.trends.However,the County’srateshavebeenatconsistentlylowerlevels.TheCountyhadanunemploymentrateof4.4percentanda civilian labor force of 233,000 as of June 2015, according to Virginia Employment Commission data, representing slightimprovementsinbothcategories.AsofJune2014,theCounty’sunemploymentratewas4.8percentandits civilianlaborforcestoodat235,000.

TheCensusBureau’s2013AmericanCommunitySurveyindicatesthattheCounty’sMedianHouseholdIncomerose from$66,000in2001to$98,000in2014.

TheaforementionedfactorswereconsideredinpreparingtheCounty’sbudgetforthe2016fiscalyear.Realestatetax ratesareslightlylowerastheBoardattemptstobalancetheimpactofchangesaffectingrealestateassessmentsonits

34 citizens,whilestillprovidingthefundingrequiredtoensurethattheCountyhastheresourcesnecessarytocontinueto providevitalservicestothecommunity.FurtherdetailsoftheCounty’sbudgetcanbefoundinitsAdopted2015Fiscal Plan.

CONTACTINGTHECOUNTY’SFINANCIALMANAGEMENT

This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overviewoftheCounty’sfinancesandtodemonstratetheCounty’saccountabilityforthemoneyitreceives.Ifyouhave questionsaboutthisreportorneedadditionalfinancialinformation,contacttheOfficeoftheFinanceDirector,1County ComplexCourt,PrinceWilliam,Virginia,221929201.

35 BASIC FINANCIAL STATEMENTS

The Basic Financial Statements include all funds, discretely presented component units and notes to provide an overview of the financial position and results of operation for the County as a whole. They also serve as an introduction to the more detailed statements and schedules that follow.

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COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit1 StatementofNetPosition AsofJune30,2015 (amountsexpressedinthousands) PrimaryGovernment

Governmental BusinessType Component Total Activities Activities Total Units ReportingEntity ASSETS Equityinpooledcashandinvestments $ 670,242 10,712 680,954 245,512 926,466 Investments 21,218 21,218 21,218 Propertytaxesreceivable,net 5,109 5,109 5,109 Investmentindirectfinancingleases 16,520 16,520 16,520 Accountsreceivable,net 10,842 378 11,220 1,393 12,613 Notesreceivable 144 144 144 Duefromothergovernmentalunits 27,632 384 28,016 34,506 62,522 Duefromprimarygovernment 327 327 Internalbalances 12,041 (12,041) NetOPEBasset 2,467 2,467 Inventory 498 3,999 4,497 3,756 8,253 Prepaiditems 389 90 479 50 529 Deposits 44 NoteReceivable 1,281 1,281 1,281 Restrictedassets: Temporarilyrestricted: Restrictedcashandtemporaryinvestments 39,553 16,157 55,710 42,745 98,455 Restrictedinvestments 1,250 1,250 1 ,250 Deposits 548 548 Waterandseweravailabilitycredit 13,280 13,280 13,280 Capitalassets: Landandconstructioninprogress 171,913 28,127 200,040 193,340 393,380 Buildingsandothercapitalassets,netofdepreciation 343,437 25,888 369,325 1,133,347 1,502,672 Totalassets 1,333,924 75,119 1,409,043 1,657,995 3,067,038

DEFERREDOUTFLOWSOFRESOURCES Deferredlossonrefunding 23,555 578 24,133 24,133 Deferredoutflowsrelatedtopensions 29,328 740 30,068 77,338 107,406 Totaldeferredoutflowsofresources 52,883 1,318 54,201 77,338 131,539

LIABILITIES Accountspayable 37,140 2,195 39,335 16,474 55,809 Wagesandbenefitspayable 6,556 475 7,031 90,445 97,476 Depositsandescrows 30,388 50 30,438 30,438 Retainages 1,425 583 2,008 5,650 7,658 Accruedinterest 16,887 119 17,006 17,006 Duetoothergovernmentalunits 536 536 191 727 Duetocomponentunits 327 327 327 Unearnedrevenue 54,847 5,427 60,274 9,590 69,864 Noncurrentliabilities: Duewithinoneyear 94,580 2,592 97,172 20,874 118,046 Dueinmorethanoneyear 1,041,841 26,456 1,068,297 811,764 1,880,061 Totalliabilities 1,284,527 37,897 1,322,424 954,988 2,277,412

DEFERREDINFLOWSOFRESOURCES Prepaidtaxes 221,589 221,589 221,589 Deferredleaserevenue 3,188 3,188 3,188 Deferredinflowsrelatedtopensions 12,551 327 12,878 124,760 137,638 Totaldeferredinflowsofresources 237,328 327 237,655 124,760 362,415

NETPOSITION NetInvestmentinCapitalAssets 459,442 44,021 503,463 1,326,687 1,222,302 A Restrictedfor: Capitalprojects 26,802 26,802 37,781 21,838 A Speciallevydistricts 95,574 95,574 95,574 Otherpurposes Developmentfeeservices 5,847 5,847 5,847 Housing 1,962 1,962 1,962 Internalservicefund 2,677 2,677 2,677 Publicsafety 11,929 11,929 11,929 Debtservice 204 204 204 Developerdefaultrecoveries 1,091 1,091 1,091 WaterandseweravailabilitycreditUOSA 13,280 13,280 13,280 Education 29,101 29,101 Unrestricted (753,856) (5,808) (759,664) (737,984) (847,055) A Totalnetposition $ (135,048) 38,213 (96,835) 655,585 558,750

ThesumofthecolumnsdoesnotequaltheTotalReporting A Entitycolumnbyadifferenceof$650,593becausethedebt relatedtotheSchoolBoard The accompanying notes are an integral part of these financial statements. 37 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit2 StatementofActivities Page1of2 FortheYearEndedJune30,2015 (amountsexpressedinthousands)

ProgramRevenues Net(Expense)Revenue Operating Capital Primary Chargesfor Operating Capital Governmental BusinessType Chargesfor Grantsand Grantsand Functions/Programs Expenses Services Contributions Contributions Activities Activities PrimaryGovernment: Governmentalactivities: Generalgovernmentadministration $ 34,865 568 2,187 (32,110) Judicialadministration 20,581 4,238 3,774 ( 12,569) Publicsafety 243,870 13,249 7,701 8,908 (214,012) Publicworks 88,390 8,725 880 28,809 (49,976) Healthandwelfare 81,711 1,477 38,860 (41,374) Education 513,087 (513,087) Parks,recreationalandcultural 37,150 580 510 38 (36,022) Communitydevelopment 64,674 20,194 25,828 11,533 (7,119) Interestonlongtermdebt 45,104 ( 45,104) Pension (12,502) 12,502 Totalgovernmentalactivities 1,116,930 49,031 79,740 49,288 (938,871)

Businesstypeactivities: Landfill 17,337 18,805 1,468 Parks&Recreation 14,865 11,927 (2,938) InnovationTechnologyPark 405 64 (341) Totalbusinesstypeactivities 32,607 30,796 (1,811)

Totalprimarygovernment $ 1,149,537 79,827 79,740 49,288 (938,871) (1,811)

ComponentUnits: SchoolBoard $ 1,046,510 23,262 147,692 116 AdultDetentionCenter 42,366 533 10,657 Convention&Visitors'Bureau 1,288 Totalcomponentunits $ 1,090,164 23,795 158,349 116

Generalrevenues: Taxes: Realproperty $ 599,802 PersonalProperty 104,060 Localsales 59,709 ConsumersUtility 13,974 Business,professionalandoccupationallicense(BPOL) 24,744 Recordation 8,868 Motorvehiclelicenses 8,053 Transientoccupancy 3,425 Shorttermrental,bankstock,publicutilitygrossreceipts 3,292 Paymentfromprimarygovernment Grantsandcontributionsnotrestrictedtospecificprograms: Federalrevenue 85 Staterevenue 74,742 Localrevenue 7,451 Investmentearnings 20,548 389 Gain(Loss)ondisposalofcapitalassets Insuranceclaimsandrecoveries 10 Miscellaneous 19,304 979 Specialitem gain(loss)onsaleofassets Transfers 465 (465) Totalgeneralrevenuesandtransfers 948,532 903 Changeinnetposition 9,661 (908) Netpositionbeginning (47,739) 41,761 Cumulativeeffectofchangein accountingprinciple(GASB68) (96,970) (2,640) Netpositionendofyear $ (135,048) 38,213

The accompanying notes are an integral part of these financial statements. 38 Exhibit2 Page2of2

andChangesinNetPosition

Government TotalReporting Total ComponentUnit Entity Functions/Programs PrimaryGovernment: Governmentalactivities: (32,110) (32,110) Generalgovernmentadministration (12,569) (12,569) Judicialadministration (214,012) (31,176) (245,188) Publicsafety (49,976) (49,976) Publicworks (41,374) (41,374) Healthandwelfare (513,087) (875,440) (1,388,527) Education (36,022) (36,022) Parks,recreationalandcultural (7,119) (1,288) (8,407) Communitydevelopment (45,104) (45,104) Interestonlongtermdebt 12,502 12,502 Pension (938,871) (907,904) (1,846,775) Totalgovernmentalactivities

Businesstypeactivities: 1,468 1,468 Landfill (2,938) (2,938) ParksandRecreation (341) (341) InnovationTechnologyPark (1,811) (1,811) Totalbusinesstypeactivities

(940,682) (907,904) (1,848,586) Totalprimarygovernment

ComponentUnits: (875,440) (875,440) SchoolBoard ( 31,176) (31,176) AdultDetentionCenter (1,288) (1,288) Convention&Visitors'Bureau (907,904) (907,904) Totalcomponentunits

Generalrevenues: Taxes: 599,802 599,802 Realproperty 104,060 104,060 PersonalProperty 59,709 59,709 Localsales 13,974 13,974 ConsumersUtility 24,744 24,744 Business,professionalandoccupationallic 8,868 8,868 Recordation 8,053 8,053 Motorvehiclelicenses 3,425 3,425 Transientoccupancy 3,292 3,292 Shorttermrental,bankstock,publicutility 615,939 615,939 Paymentfromprimarygovernment Grantsandcontributionsnotrestrictedtosp 85 2,212 2,297 Federalrevenue 74,742 366,078 440,820 Staterevenue 7,451 5,035 12,486 Localrevenue 20,937 3,125 24,062 Investmentearnings (11) (11) Gain(Loss)ondisposalofcapitalassets 10 10 Insuranceclaimsandrecoveries 20,283 3,216 23,499 Miscellaneous 1515Specialitem gain(loss)onsaleofassets Transfers 949,435 995,609 1,945,044 Totalgeneralrevenuesandtransfers 8,753 87,705 96,458 Changeinnetposition (5,978) 1,412,448 1,406,470 Netpositionbeginning Cumulativeeffectofchangeinaccounting (99,610) (844,568) (944,178) principle(GASB68) (96,835) 655,585 558,750 Netpositionendofyear

The accompanying notes are an integral part of these financial statements. 39 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit3 GOVERNMENTALFUNDS Page1of2 BalanceSheet AsofJune30,2015 (amountsexpressedinthousands)

CapitalProjects Other Streetsand Capital General Roads Projects Education ASSETS Equityinpooledcashandinvestments $ 462,580 5,241 30,313 Restrictedcashandtemporaryinvestments 1,106 26,244 766 Propertytaxesreceivable,net 5,109 Accountsreceivable,net 5,842 273 111 Duefromotherfunds 12,041 Duefromothergovernmentalunits 18,872 7,988 219 Investmentindirectfinancingleases 16,520 Inventory 158 Prepaiditems 20 221 11 Totalassets $ 522,248 39,967 31,420

LIABILITIES,DEFERREDINFLOWOFRESOURCESAND FUNDBALANCE LIABILITIES Accountspayable $ 19,355 10,285 2,525 Wagesandbenefitspayable 5,767 Depositsandescrows 30,387 Duetoothergovernmentalunits 264 224 38 Retainages 14 594 706 Unearnedrevenue 49,398 Totalliabilities 105,185 11,103 3,269

DEFERREDINFLOWOFRESOURCES Prepaidtaxes 221,589 Unavailabletaxes 3,958 Unavailableleaserevenues 16,520 Totaldeferredinflowsofresources 242,067

FUNDBALANCES Nonspendable 178 221 11 Restricted 13,224 Committed 58,692 28,643 28,140 Assigned 29,847 Unassigned 73,055

Totalfundbalances 174,996 28,864 28,151 Totalliabilities,deferredinflowsofresourcesand $ fundbalances 522,248 39,967 31,420

The accompanying notes are an integral part of these financial statements. 40 Exhibit3 Page2of2

Fire& Other Total Rescue Governmental Governmental Levy Funds Funds ASSETS 86,938 18,955 604,027 Equityinpooledcashandinvestments 28,116 Restrictedcashandtemporaryinvestments 5,109 Propertytaxesreceivable,net 338 331 6,895 Accountsreceivable,net 12,041 Duefromotherfunds 549 27,628 Duefromothergovernmentalunits 16,520 Investmentindirectfinancingleases 158 Inventory 252 Prepaiditems 87,276 19,835 700,746 Totalassets

LIABILITIES,DEFERREDINFLOWOFRESOURCESAND FUNDBALANCE LIABILITIES 658 304 33,127 Accountspayable 486 6,253 Wagesandbenefitspayable 1 30,388 Depositsandescrows 1 0536 Duetoothergovernmentalunits 1,314 Retainages 2,269 51,667 Unearnedrevenue 659 3,069 123,285 Totalliabilities

DEFERREDINFLOWOFRESOURCES 221,589 Prepaidtaxes 3,958 Unavailabletaxes 16,520 Unavailableleaserevenues 242,067 Totaldeferredinflowsofresources

FUNDBALANCES 410 Nonspendable 86,617 16,766 116,607 Restricted 115,475 Committed 29,847 Assigned 73,055 Unassigned

86,617 16,766 335,394 Totalfundbalances Totalliabilities,deferredinflowsofresourcesand 87,276 19,835 700,746 fundbalances

The accompanying notes are an integral part of these financial statements. 41 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit4 ReconciliationoftheBalanceSheetofGovernmentFundstotheStatementofNetPosition AsofJune30,2015 (amountsexpressedinthousands)

Fundbalancestotalgovernmentalfunds(Exhibit3) $335,394

AmountsreportedforgovernmentalactivitiesintheStatementofNetPosition(Exhibit1)are differentbecause:

Capitalassetsusedingovernmentalactivitiesarenotfinancialresourcesand,therefore, arenotreportedinthefunds(excludes$46,508,relatedtoInternalServiceFundassets, whichisincludedinInternalServiceFundnetpositionbelow.) 468,842

Deferredoutflowofresourcesthatarenotfinancialresourcesand,thereforearenot notreportedinthefunds

Deferredlossonbondrefunding 23,555 Deferredoutflowsofpensioncontributions 28,037

Deferredinflowofresourcesarenotavailabletopayforcurrentperiodexpenditures:

DeferredinflowsofresourcesUnavailabletaxes 3,958 DeferredinflowsofresourcesUnavailableleaserevenue 13,332 Deferredinflowsofpensioncontribtuions (11,996)

InternalServiceFundsareusedbymanagementtochargecostsofcertainactivitiessuchas insurance,fleetoperations,anddataprocessingtoindividualfunds.Theassetsand liabilitiesoftheInternalServiceFundsareincludedingovernmentalactivitiesinthe StatementofNetPosition. 114,806

Interestonlongtermdebtisnotaccruedingovernmentalfunds,butrather,isrecognized asanexpenditurewhendue. (16,887)

Sewerandwateravailabilitycreditisnotrecognizedinthegovernmentalfunds,butrather, isrecognizedasanexpenditurewhenused. 13,280

Longtermliabilities,includingbondspayable,arenotdueandpayableinthecurrentperiod and,therefore,arenotreportedinthefunds(Note11):

Otherlongtermobligations (96,012) Bondspayable (138,853) Schoolbondspayable (628,637) Literaryloanspayable (2,000) Capitalleaseobligations (131,462) Compensatedabsences(excludes$1,710forInternalServiceFund) (30,458) OperatingsettlementSchools (327) Premiumonbondsissued (79,620) Totallongtermliabilities (1,107,369)

Netpositionofgovernmentalactivities(Exhibit1) $ (135,048)

The accompanying notes are an integral part of these financial statements. 42 43 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit5 GOVERNMENTALFUNDS Page1of2 StatementofRevenues,ExpendituresandChangesinFundBalances FortheYearEndedJune30,2015 (amountsexpressedinthousands)

CapitalProjects Other Streetsand Capital General Roads Projects Education REVENUES: Generalpropertytaxes $ 663,564 Otherlocaltaxes 122,065 Permits,privilegefeesandregulatorylicenses 2,493 Finesandforfeitures 3,167 Fromuseofmoneyandproperty 9,081 198 1,168 Chargesforservices 15,252 30 Intergovernmentalrevenues: Federal 20,041 2,683 15 State 117,031 22,919 964 Local 7,451 1,701 527 Donationsandcontributions 1,627 96 Miscellaneous 13,916 3,660 30 Totalrevenues 974,061 32,788 2,830

EXPENDITURES: Current: Generalgovernmentadministration 37,651 Judicialadministration 19,681 Publicsafety 208,385 Publicworks 30,520 Healthandwelfare 80,840 Education 412,007 6,217 89,792 Parks,recreationalandcultural 31,085 Communitydevelopment 7,861 Debtservice: Principalretirement 76,648 Interestandotherdebtcosts 42,225 Capitaloutlays 57,317 28,248 Totalexpenditures 946,903 57,317 34,465 89,792 Excess(deficiency)ofrevenuesover (under)expenditures 27,158 (24,529) (31,635) (89,792)

OTHERFINANCINGSOURCES(USES): Transfersin 28,470 11,359 10,010 Transfersout (29,090) (8,566) (1,970) Bonds,notesandcapitalleases 82,545 Proceedsfromrefundings 35,675 Premiumonsaleofbonds 7,247 Premiumonrefundings 6,219 Paymentstoescrowagent (41,508) Insuranceclaimsandrecoveries 10 Saleofsurplusproperty 301 Totalotherfinancingsources(uses) 77 2,793 8,040 89,792 Netchangeinfundbalances 27,235 (21,736) (23,595) FUNDBALANCE,beginningofyear 147,761 50,600 51,746 FUNDBALANCE,endofyear $ 174,996 28,864 28,151

The accompanying notes are an integral part of these financial statements. 44 Exhibit5 Page2of2

Fire& Other Total Rescue Governmental Governmental Levy Funds Funds REVENUES: 35,315 4,218 703,097 Generalpropertytaxes 122,065 Otherlocaltaxes 14,564 17,057 Permits,privilegefeesandregulatorylicenses 1 3,168 Finesandforfeitures 1,667 342 12,456 Fromuseofmoneyandproperty 13,524 28,806 Chargesforservices Intergovernmentalrevenues: 25,574 48,313 Federal 829 141,743 State 9,679 Local 1,723 Donationsandcontributions 80 397 18,083 Miscellaneous 37,062 59,449 1,106,190 Totalrevenues

EXPENDITURES: Current: 37,651 Generalgovernmentadministration 19,681 Judicialadministration 21,009 11,966 241,360 Publicsafety 337 30,857 Publicworks 80,840 Healthandwelfare 508,016 Education 31,085 Parks,recreationalandcultural 46,018 53,879 Communitydevelopment Debtservice: 102 76,750 Principalretirement 251 42,476 Interestandotherdebtcosts 85,565 Capitaloutlays 21,362 58,321 1,208,160 Totalexpenditures Excess(deficiency)ofrevenuesover 15,700 1,128 (101,970) (under)expenditures

OTHERFINANCINGSOURCES(USES): 583 4,430 54,852 Transfersin (7,570) (7,312) (54,508) Transfersout 82,545 Bonds,notesandcapitalleases 35,675 Proceedsfromrefundings 7,247 Premiumonsaleofbonds 6,219 Premiumonrefundings (41,508) Paymentstoescrowagent 10 Insuranceclaimsandrecoveries 473 8422 Saleofsurplusproperty (6,914) (2,834) 90,954 Totalotherfinancingsources(uses) 8,786 (1,706) (11,016) Netchangeinfundbalances 77,831 18,472 346,410 FUNDBALANCE,beginningofyear 86,617 16,766 335,394 FUNDBALANCE,endofyear

The accompanying notes are an integral part of these financial statements. 45 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit6 ReconciliationoftheStatementofRevenues,Expenditures,andChangesinFundBalanceofGovernmentalFunds totheStatementofActivities FortheYearEndedJune30,2015 (amountsexpressedinthousands)

Netchangeinfundbalancestotalgovernmentalfunds(Exhibit5) $ (11,016)

Amountsreportedforgovernmentalactivitiesinthestatementofactivities(Exhibit2)are differentbecause: Governmentalfundsreportcapitaloutlaysasexpenditureswhilegovernmental activitiesreportdepreciationexpensetoallocatethoseexpendituresover thelifeoftheassets: Addcapitalacquisitions 30,116 Addreceiptofdonatedlandandinfrastructureassets 11,533 Adddonatedequipmentforparks,recreational&cultural 38 Subtractdepreciation(excludes$4,213relatedtoInternalServiceFundassetsincludedin InternalServiceFundnetpositionbelow) (18,722) 22,965 Inthestatementofactivities,onlythegain(loss)oncapitalassetsisreported, whileinthegovernmentalfunds,theproceedsfromthesaleincreasefinancial resources.Thus,thechangeinnetpositiondiffersfromthechangeinfundbalance bythenetbookvalueofthecapitalassetssold. (78) Revenuesinthestatementofactivitiesthatdonotprovidecurrentfinancial resourcesarenot reportedasrevenuesinthefunds: Subtractrevenuerecognizedforthewaterandseweravailabilitycreditused (502) Addamortizedpremium 6,578 Addcurrentyear'sdeferredinflowsofresourcesrelatedtofinancingactivitiesand uncollectibletaxbillings(Note4) 17,290 Subtractprioryear'sdeferredinflowsofresourcesrelatedtofinancingactivitiesand uncollectibletaxbillings (18,450) (1,160) Addcurrentyear'snetpensionbenefitasset Subtractprioryear'snetpensionbenefitasset (8) (8) Bondproceedsprovidecurrentfinancialresourcestogovernmentalfunds,but issuingdebtincreaseslongtermliabilitiesinthestatementofnetposition. Repaymentofbondprincipalisanexpenditureinthegovernmentalfunds,butthe repaymentreduceslongtermliabilitiesinthestatementofnetposition(Note11). Also,governmentalfundsreporttheeffectofpremiums,discountsandsimilaritemswhendebt isfirstissued,whereastheseamountsaredeferredandamortizedinthestatementofactivities: Adddebtprincipalrepayment 76,750 Addpaymenttoescrowagentforrefunding 36,680 Subtractdebtproceeds (118,220) vSubtractpremiumondebt (13,466) (18,256) Someexpensesreportedinthestatementofactivitiesdonotrequiretheuse ofcurrentfinancialresourcesandthereforearenotreportedas expendituresingovernmentalfunds: Addcurrentyearrefunding 4,783 Amortizedbondrefundingloss (2,543) SubtractprioryearoperatingsettlementSchoolBoard (4,744) SubtractcurrentyearoperatingsettlementSchoolBoard (327) (5,071) Addprioryear'scompensatedabsencesliability(excludes$1,592forInternalServiceFund) 29,106 Subtractcurrentyear'scompensatedabsencesliability(excludes$1,710forInternalServiceFund) (30,458) (1,352) Addprioryear'snetpensionbenefitaccrual 1,936 Subtractcurrentyear'snetpensionreduction 12,502 14,438 Addprioryear'saccruedinterestliability 16,847 Subtractcurrentyear'saccruedinterestliability (16,887) (40) Internalservicefundsareusedbymanagementtochargethecostsof ofcertainservicestoindividualfunds.Thenetrevenue(expense)oftheinternal servicefundsisreportedwithgovernmentalactivities: Addinternalservicefunds'changeinnetposition 923 Changeinnetpositionofgovernmentalactivities(Exhibit2) $9,661 The accompanying notes are an integral part of these financial statements. 46 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit7 PROPRIETARYFUNDS StatementofFundNetPosition AsofJune30,2015 (amountsexpressedinthousands) BusinesstypeActivitiesEnterpriseFunds Governmental Innovation Activities Technology Parks& InternalService Landfill Park Recreation Totals Funds ASSETS Currentassets: Equityinpooledcashandinvestments $ 7,382 3,330 10,712 66,215 Restrictedcashandtemporaryinvestments 15,854 303 16,157 11,437 Investments 21,218 Accountsreceivable,net 185 7 186 378 3,947 Notereceivable 144 144 Duefromothergovernmentalunits 384 4384 Inventory 3 3,922 74 3,999 340 Prepaids 90 90 137 Totalcurrentassets 23,952 7,259 653 31,864 103,298 Noncurrentassets: Restrictedinvestments 1,250 Notereceivable 1,281 1,281 Capitalassets: Landandconstructioninprogress 21,292 1,084 5,751 28,127 30,719 Buildingsandothercapitalassets,netof depreciation 17,083 8,805 25,888 15,789 Totalnoncurrentassets 39,656 1,084 14,556 55,296 47,758

Totalassets 63,608 8,343 15,209 87,160 151,056

DEFERREDOUTFLOWSOFRESOURCES Deferredlossonrefunding 578 578 Deferredoutflowsrelatedtopensions 399 341 740 1,291

Totaldeferredoutflowsofresources 399 919 1,318 1,291

LIABILITIES Currentliabilities: Accountspayable 1,771 424 2,195 4,013 Wagesandbenefitspayable 90 385 475 303 Depositsandescrows 50 50 Retainages 583 583 111 Accruedinterest 31 88 119 Unpaidlosses,relatedliabilitiesandIBNR 6,706 Duetootherfunds 1,221 10,820 12,041 Unearnedrevenue 4,203 1,224 5,427 3,180 Currentportionofsurplusdistributionpayable 865 Currentportionofbondspayable 591 591 Currentaccruedclosureliability 1,756 1,756 Currentotherlongtermliabilities 196 196 Compensatedabsences 24 25 849 6 Totalcurrentliabilities 9,679 50 13,753 23,482 15,264 Noncurrentliabilities: Accruedclosureliability 12,730 12,730 Unpaidlosses,relatedliabilitiesandIBNR 12,191 Surplusdistributionpayable 3,249 Bondspayable,netofcurrentportion 9,981 9,981 Otherlongtermliabilities 1,479 1,343 2,822 4,658 Compensatedabsences 446 477 923 1,624 Totalnoncurrentliabilities 14,655 11,801 26,456 21,722

Totalliabilities 524,334 025,554 49,938 36,986

DeferredInflowsofResources Deferredinflowsrelatedtopensions 178 149 327 555 178 149 327 555

NETPOSITION Netinvestmentincapitalassets 38,375 1,084 4,562 44,021 46,508 Restrictedforselfinsurancefunds 2,677 Unrestricted 1,120 7,209 (14,137) (5,808) 65,621 Totalnetposition(deficit) $ 39,495 8,293 (9,575) 38,213 114,806

The accompanying notes are an integral part of these financial statements. 47 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit8 PROPRIETARYFUNDS StatementofRevenues,ExpensesandChangesinFundNetPosition FortheYearEndedJune30,2015 (amountsexpressedinthousands) BusinesstypeActivitiesEnterpriseFunds Governmental Innovation Activities Technology Parks& InternalService Landfill Park Recreation Totals Funds OPERATINGREVENUES: Chargesforservices $ 18,805 64 11,927 30,796 85,644 Miscellaneous 930 24 25 979 3,681 Totaloperatingrevenues 19,735 88 11,952 31,775 89,325

OPERATINGEXPENSES: Personalservices 4,306 7,436 11,742 12,952 Contractualservices 3,374 352 3,930 7,656 13,904 Materials/supplies 3,037 1,863 4,900 7,226 Depreciation 4,198 1,150 5,348 4,213 Closureexpense 2,386 2,386 Other 42 53 10 105 1,409 Claimsandpremiums 41,006 OPEBcost 4,614 Lossesandlossadjustmentexpenses 4,720 Totaloperatingexpenses 17,343 405 14,389 32,137 90,044

Operatingincome/(loss) 2,392 (317) (2,437) (362) (719)

NONOPERATINGREVENUES/(EXPENSES): Interestincome 510 62 (183) 389 1,514 Interestandotherdebtcosts (476) (476) Gainonsaleofcapitalassets 667 Totalnonoperatingrevenues/(expenses) 516 62 (659) (81) 1,521

Income/(loss)beforetransfers 2,908 (255) (3,096) (443) 802

TRANSFERS: Transfersin: Generalfund 35 1,627 1,662 2,786 Specialrevenuefunds 336 Fire&RescueLevyfunds 98 Transfersout: Generalfund (1,914) (213) (2,127) (2,763) Specialrevenuefunds (61) Capitalprojectsfunds (275) Totaltransfers (1,914) 35 1,414 (465) 121

Changeinnetposition 994 (220) (1,682) (908) 923

NETPOSITION,beginningoftheyear 39,937 8,513 (6,689) 41,761 118,380

Cumulativeeffectofchangeinaccountingprinciple(GASB68) (1,436) (1,204) (2,640) (4,497)

NETPOSITION,endoftheyear $ 39,495 8,293 (9,575) 38,213 114,806

The accompanying notes are an integral part of these financial statements. 48 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit9 PROPRIETARYFUNDS Page1of2 StatementofCashFlows FortheYearEndedJune30,2015 (amountsexpressedinthousands)

BusinesstypeActivitiesEnterpriseFunds Governmental Innovation Activities Technology Parks& Internal Landfill Park Recreation Totals ServiceFunds CASHFLOWSFROMOPERATINGACTIVITIES: Cashreceivedfromcustomers $9 18,448 011,913 30,451 69,503 CashreceivedfromCountyagencies Cashreceivedfromemployees 15,756 Cashreceivedfromotherentities 568 568 3,138 Paymentsforclaimsandpremiums (50,497) Paymentstosuppliersforgoodsandservices (5,122) (355) (4,218) (9,695) (18,925) Paymentstoemployeesforservices (4,427) (7,507) (11,934) (13,241) Paymentsofclosureexpenses (1,367) (1,367) Netcashprovided(used)byoperatingactivities 8,100 (265) 188 8,023 5,734

CASHFLOWSFROMNONCAPITALFINANCINGACTIVITIES: Surplusdistributionspaid (325) Proceedsfromnotesreceivable 156 156 Capitalgrantstootherentities Transfersin 35 1,627 1,662 3,220 Transfersout (1,914) (213) (2,127) (3,099) Netcashprovided(used)bynoncapitalfinancingactivities 3(1,758) 51,414 (309) (204)

CASHFLOWSFROMCAPITALANDRELATEDFINANCING ACTIVITIES: Acquisitionofcapitalassets (10,676) (219) (10,895) (16,705) Proceedsfromthesaleofcapitalassets 6 7 6 Principalpaidonbonds,leases,andotherdebt (882) (882) Interestpaidonbonds,leases,andotherdebt (437) (437) Netcashprovided(used)bycapitalandrelatedfinancing activities (10,670) (1,538) (12,208) (16,698)

CASHFLOWSFROMINVESTINGACTIVITIES: Proceedsfrommaturitiesofinvestments 13,181 Purchasesofinvestments (10,327) Interestanddividendsreceivedoninvestments 6452 2(159) 355 1,499 Netcashprovided(used)byinvestingactivities 6452 2(159) 355 4,353

Netdecreaseincashandcashequivalents (3,876) (168) (95) (4,139) (6,815)

CASHANDCASHEQUIVALENTS,beginningofyear 27,112 3,498 398 31,008 84,467

CASHANDCASHEQUIVALENTS,endofyear $ 23,236 3,330 303 26,869 77,652

RECONCILIATIONOFOPERATINGINCOME/(LOSS)TONETCASH PROVIDED(USED)BYOPERATINGACTIVITIES: Operatingincome/(loss) $ 2,392 (317) (2,437) (362) (719)

Adjustmentstoreconcileoperatingincome/(loss)tonetcash provided(used) byoperatingactivities: Depreciation 4,198 1,150 5,348 4,213 Changeinassets,deferredoutflowofresourcesandliabilities: (Increase)decreasein: Accountsreceivable,netofaccruedinterest 27 2 (53) (24) (1,258) Duefromothergovernmentalunits (356) (356) Inventory 8 3 11 (24) Prepaiditems 1,458 Deferredrefunding (1,291) Deferredoutflowsofpensions (399) (341) (740)

Increase(decrease)in: Accountspayableandaccruedliabilities,netofaccrued interest 846 (70) 776 746 Retainages 519 519 Unpaidlossesandrelatedexpenses 1,601 Accruedclosureliability 1,019 1,019 Duetoothergovernmentalunits 15 1,733 1,748 Unearnedrevenue (390) 14 (376) 291 Depositsandescrow 50 50 Otherlongtermliabilities 43 8 40 3162 Deferredinflowsfrompensions 178 149 327 Totaladjustments 5,708 52 2,625 8,385 1,685

Netcashprovided(used)byoperatingactivities $ 8,100 (265) 188 8,023 5,734 The accompanying notes are an integral part of these financial statements. 49 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit10 FIDUCIARYFUNDS StatementofFiduciaryNetPosition AsofJune30,2015 (amountsexpressedinthousands) Lengthof Other ServiceAward PostEmployment Supplemental Program Benefits Private PensionPlan (LoSAP) (OPEB)Master Purpose Agency TrustFund TrustFund TrustFund TrustFunds Funds ASSETS Equityinpooledcashandinvestments $ 799 504 Restrictedcash 590 Restrictedinvestments Accountsreceivable,net Employer InnovationOwnersAssociation Interestanddividends 1 6 Totalaccountsreceivables 1 6 RestrictedInvestments Moneymarketmutualfunds 78 306 Tacticalassetallocationfunds 3,146 Equitymutualfunds 17,063 40,735 Realassets 2,227 Bondmutualfunds 9,503 20,410 Lifeinsuranceannuity 13,769 LocalGovernmentInvestmentPool 256 Commonstock 301 Totalinvestments 32,318 13,769 61,707 Prepaiditems 47 Totalassets 32,908 13,769 61,707 862 504

LIABILITIES Accountspayable 33,587 Depositsandescrows 504 Totalliabilities 33,587 504

NETPOSITION Heldintrustforpensionbenefits 32,908 13,769 HeldintrustforOPEBbenefits 58,120 Heldintrustforotherpurposes 859 Totalnetposition $ 32,908 13,769 58,120 859

The accompanying notes are an integral part of these financial statements. 50 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit11 FIDUCIARYFUNDS StatementofChangesinFiduciaryNetPosition FortheYearEndedJune30,2015 (amountsexpressedinthousands) Lengthof OtherPost ServiceAward Employment Supplemental Program Benefits Private PensionPlan (LoSAP) (OPEB)Master Purpose TrustFund TrustFund TrustFund TrustFunds ADDITIONS Contributions: Member $ 1,083 5 Employer 1,083 940 5,960

Totalcontributions 2,166 940 5,9605

Donations 176

Investmentincome: Interestanddividends 738 372 1,41814 Netappreciationinfairvalueofinvestments (1,036) (420)

Totalinvestmentincome (298) 372 1998 4 Lessinvestmentexpense 41 142 Netinvestmentincome (339) 372 856 14

Totaladditions 1,827 1,312 6,816 195

DEDUCTIONS Pension/postemploymentbenefitpayments 1,883 345 3,575 Refundofmembers'contributions 97 Administrativeexpenses 83 34 11 233

Totaldeductions 2,063 379 3,586 233

Changeinnetposition (236) 933 3,230 (38)

NETPOSITION,beginningofyear 33,144 12,836 54,890 897

NETPOSITION,endofyear $ 32,908 13,769 58,120 859

The accompanying notes are an integral part of these financial statements. 51 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit12 COMPONENTUNITS CombiningStatementofNetPosition AsofJune30,2015 (amountsexpressedinthousands) Adult Convention School Detention &Visitors Board Center Bureau Totals ASSETS Equityinpooledcashandinvestments $ 234,967 10,406 139 245,512 Accountsreceivable,net 1,391 2 1,393 Duefromothergovernmentalunits 32,514 1,992 34,506 Duefromprimarygovernment 327 327 Inventory 3,756 3,756 Prepaids 550 0 NetOPEBasset 2,467 2,467 Restrictedassets: Restrictedcashandtemporaryinvestments 42,745 42,745 Deposits 548 548 Capitalassets: Landandconstructioninprogress 193,309 31 193,340 Buildingsandothercapitalassets,netofdepreciation 1,067,861 65,446 40 1,133,347

Totalassets 1,579,885 77,875 235 1,657,995

Deferredoutflowofresources Deferredoutflowsfrompensioncontributions 74,693 2,645 77,338

Totaldeferredoutflowofresources 74,693 2,645 77,338

LIABILITIES Accountspayable 16,066 365 43 16,474 Wagesandbenefitspayable 89,812 633 90,445 Retainages 5,650 5,650 Duetoothergovernmentalunits 191 191 Unearnedrevenue 9,590 9,590 Noncurrentliabilities: Duewithinoneyear 20,692 182 20,874 Dueinmorethanoneyear 798,799 12,965 811,764

Totalliabilities 940,800 414,145 3954,988

DEFERREDINFLOWSOFRESOURCES Commoditiesreceivedbutnotconsumed 123,564 1,196 124,760 Totaldeferredinflowsofresources 123,564 1,196 124,760

NETPOSITION Netinvestmentincapitalassets 1,261,170 65,477 40 1,326,687 Restrictedfor: Capitalprojects 37,781 37,781 Food&nutritionservices 23,923 23,923 Otherpurposes 5,178 5,178 Unrestricted(deficit) (737,838) (298) 152 (737,984)

Totalnetposition $ 590,214 65,179 192 655,585

The accompanying notes are an integral part of these financial statements. 52 53 COUNTYOFPRINCEWILLIAM,VIRGINIA Exhibit13 COMPONENTUNITS Page1of2 CombiningStatementofActivities FortheYearEndedJune30,2015 (amountsexpressedinthousands)

ProgramRevenues Net(Expense)

OperatingGrants Chargesfor and CapitalGrantsand School Functions/Programs Expenses Services Contributions Contributions Board

SchoolBoard Instruction $ 689,230 3,141 123,275 116 (562,698) SupportServices 356,673 19,619 24,417 (312,637) SchoolAgeChildCare 607 502 (105) AdultDetentionCenter 42,366 533 10,657 Convention&VisitorsBureau 1,288 Totalcomponentunits $ 1,090,164 23,795 158,349 116 (875,440)

Generalrevenues: Paymentfromprimarygovernment $ 589,319 PaymentfromParkConcessions Federalrevenue 2,212 Staterevenue 366,078 Localrevenue Investmentearnings 3,011 Gain(loss)ondisposalofcapitalassets Miscellaneous 3,135 Gainonsaleofcapitalassets Transfers Totalgeneralrevenues 963,755 Changeinnetposition 88,315 Netpositionbeginningofyear 1,336,790 Cumulativeeffectofchangeinaccounting principle(GASB68) (834,891) Netpositionendofyear $ 590,214

The accompanying notes are an integral part of these financial statements. 54 Exhibit13 Page2of2

RevenueandChangesinNetPosition

AdultDetention Convention& Center VisitorsBureau Totals Functions/Programs

SchoolBoard (562,698) Instruction (312,637) SupportServices (105) SchoolAgeChildCare (31,176) (31,176) AdultDetentionCenter (1,288) (1,288) Convention&VisitorsBureau (31,176) (1,288) (907,904) Totalcomponentunits

Generalrevenues: 25,408 1,212 615,939 Paymentfromprimarygovernment PaymentfromParkConcessions 2,212 Federalrevenue 366,078 Staterevenue 84,948 75,035 Localrevenue 4110 3,125 Investmentearnings (11) (11) Gain(loss)ondisposalofcapitalassets 279 3,216 Miscellaneous 15 15 Gainonsaleofcapitalassets Transfers 30,560 1,294 995,609 Totalgeneralrevenues 6(616) 87,705 Changeinnetposition 75,472 186 1,412,448 Netpositionbeginningofyear

(9,677) (844,568) Cumulativeeffectofchangeinaccountingprinciple(GASB68) 65,179 192 655,585 Netpositionendofyear

The accompanying notes are an integral part of these financial statements. 55 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 (amounts expressed in thousands, except percentages, ratios and years)

NOTE (1) - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The County of Prince William, Virginia (the County) prepares its financial statements in conformity with accounting principles generally accepted in the United States (GAAP), as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. The GASB periodically updates its codification of the existing governmental accounting and financial reporting standards which, along with subsequent GASB pronouncements (statements and interpretations), constitutes GAAP for governmental units. The accounting and reporting framework and significant accounting principles and practices utilized by the County are discussed in subsequent sections of this note. The remainder of the notes is organized to provide explanations, including required disclosures, of the County’s financial activities for the fiscal year ended June 30, 2015.

A. Principles Used to Determine the Reporting Entity

The County is organized under the County Executive form of government, as provided for by Commonwealth of Virginia (the Commonwealth) law. Under this form of government, the policies concerning the financial and business affairs of the County are determined by the Board of County Supervisors (the Board). The Board is composed of eight elected members who serve four-year terms. The Board appoints a County Executive who is the government’s chief administrative officer and executes the Board’s policies and programs. The accompanying financial statements include the County’s primary government and component units over which the County exercises significant influence. Significant influence or accountability is based primarily on operational or financial benefit/burden relationships with the County (as distinct from legal relationships).

Due to restrictions of the State Constitution relating to the issuance of municipal debt, the County created public trusts to finance County services with revenue bonds or other non-general obligation financing. Financing services provided by these public trusts are solely for the benefit of the County. Public trusts created to provide financing services are blended into the County’s primary government although retaining separate legal identity. Component units that do not meet the criteria for blending are reported discretely.

Illustration 1-1 illustrates potential component units and the reporting method in the County’s Comprehensive Annual Financial Report (CAFR).

Illustration 1-1 Potential Component Units

Potential Description of Activities and Inclusion Criteria Reporting Method Component Unit Relationship to the County

Exercise the powers and duties Financial benefit/burden Prince William enumerated in the Code of Virginia relationship exists; Two Component Unit Blended in the Parkway District related to the transportation Boards are relatively the Special Revenue Funds improvement district. same.

Authorized by the Code of Virginia and established by Board resolution. Set Financial benefit/burden Route 234 Bypass the appropriate tax rate to fund relationship exists; Two Component Unit Blended in the District improvements within the district and Boards are relatively the Special Revenue Funds act on transportation matters within same. the district.

56 Illustration 1-1 (cont’d) Potential Component Units

Potential Description of Activities and Inclusion Criteria Reporting Method Component Unit Relationship to the County

Authorized by the Code of Virginia and Self-Insurance licensed by the State Corporation Majority of Board is Group Workers’ Commission. Make available a long- appointed by County; Component Unit Blended in the Compensation term, stable source of cost-effective Financial benefit/burden Internal Service Funds Association workers’ compensation insurance relationship exists. protection for participating members.

Authorized by the Code of Virginia and licensed by the State Corporation Majority of Board is Self-Insurance Commission. Make available a long- appointed by County; Component Unit Blended in the Group Casualty term, stable source of cost-effective Financial benefit/ burden Internal Service Funds Pool casualty insurance protection for relationship exists. participating members.

Majority of Board is Authorized by the Code of Virginia. appointed by County; Establish policy for operation of Adult Detention County is able to impose Discretely Presented regional adult detention center, Center (ADC) its will; financial Component Unit providing care and confinement for all benefit/burden Counties and adjoining city prisoners. relationship exists.

Established by Board resolution. Prince William Promote and market the County and Majority of the Board is County/Manassas Manassas area as a tourism destination appointed by the County; Discretely Presented Convention & for the benefit of the tourism industry financial benefit/burden Component Unit Visitors Bureau, and the citizens of the County and the relationship exists. Inc. (CVB) City of Manassas.

Board is separately elected; Fiscal dependency exists – Authorized by the Code of Virginia and School Board cannot Discretely Presented School Board established by Board resolution. Make issue bonded debt; Two Component Unit policies governing school division. Boards are not the same; School Board provides educational services to the County.

Agreement between the five northern Virginia jurisdictions (Prince William County, Fairfax County, Loudoun District Home County, Fauquier County and City of None Jointly Governed Organization Board Alexandria) pursuant to the Code of Virginia. Establishes policy for operations of two district homes.

57 Illustration 1-1 (cont’d) Potential Component Units

Potential Description of Activities and Inclusion Criteria Reporting Method Component Unit Relationship to the County

Board resolution created a commission for the operation of a nursing home pursuant to the Code of Virginia. Develops and establishes policies for Northern Virginia the operation of a nursing home. Health Center None Jointly Governed Organization Service agreement between five Commission northern Virginia jurisdictions (Prince William County, Fairfax County, Loudoun County, Fauquier County and City of Alexandria).

Agreement between the public schools of Prince William County and the cities Northern Virginia of Manassas and Manassas Park to Special Education foster cooperation in the development None Jointly Governed Organization Regional Program and delivery of special education programs and other appropriate educational services.

Authorized by the Code of Virginia and established by interjurisdictional Upper Occoquan agreement. Acquire, finance, construct Jointly Governed Organization; Sewage Authority and maintain facilities for abatement of None Note Disclosure (UOSA) (Note 18) pollution resulting from sewage in Occoquan watershed above its confluence with Bull Run.

Agreement between the public schools of Prince William County and the cities Governor’s of Manassas and Manassas Park to School deliver an advanced and intensive None Jointly Governed Organization @Innovation program in science, technology, Park engineering, and mathematics (STEM) for selected high school juniors and seniors.

No ongoing financial Governmental entity formed to interest; Ongoing Peumansend construct and operate a regional financial responsibility Creek Regional correctional facility on property exists; No explicit and Joint Venture; Note Disclosure Jail Authority conveyed by U.S. Department of the measurable equity (Note 19) Army pursuant to Public Law 102-25 interest is deemed to and 102-484. exist.

58 Illustration 1-1 (cont’d) Potential Component Units

Potential Description of Activities and Inclusion Criteria Reporting Method Component Unit Relationship to the County

Agreement between Prince William Manassas County and the city of Manassas None Jointly Governed Organization Regional Airport establishes the operation of a regional airport

No ongoing financial Potomac & interest; Ongoing Consider and make recommendation Rappahannock financial responsibility and oversight regarding activities Transportation exists; No explicit and Joint Venture; Note Disclosure pertaining to jurisdictional Commission measurable equity transportation issues. (PRTC) (Note 19) interest is deemed to exist.

Industrial Authorized by the Code of Virginia and Development established by Board resolution. Related Organization; Note None Authority (IDA) Promote industry and develop trade by Disclosure (Note 18) inducing business to locate or remain in State and County.

Authorized by the Code of Virginia and Service Authority Related Organization; Note established by Board resolution. None (Note 18) Provide water and sewer utilities to Disclosure County residents.

Northern Virginia Criminal Justice Training Established by Board resolution. Related Organization; Note None Academy Construct an Emergency Vehicle Disclosure (NVCJTA) (Note Operations Center in which the County 18) has a 30% interest.

The Prince William Self-Insurance Group Workers’ Compensation Association (the Association) and the Prince William Self- Insurance Group Casualty Pool (the Pool), blended component units of the County, issue separately audited financial statements. Copies of these financial statements may be obtained by writing to the Prince William County Finance Department, Office of Risk Management, 4379 Ridgewood Center Drive, Prince William, Virginia 22192.

The Adult Detention Center, a discretely presented component unit of the County, does not prepare separately audited financial statements.

The School Board, a discretely presented component unit of the county, issues separately audited financial statements. Copies of these financial statements may be obtained by writing to the School Board’s Finance Division, P.O. Box 389, Manassas, Virginia 20118.

The Prince William/Manassas Convention & Visitors Bureau, Inc., a discretely presented component unit of the county, issues separately audited financial statements. Copies of these financial statements may be obtained by writing to the Prince William/Manassas Convention & Visitors Bureau, Inc., 10611 Balls Ford Road, Suite 110 Manassas, VA 20109.

All accounts of the County and its component units are reported as of and for the year ended June 30, 2015.

59 B. Basis of Presentation

The basic financial statements include both government-wide financial statements, which are based on the County as a whole, and fund financial statements, which are based on major individual funds.

Government-wide Financial Statements

The government-wide financial statements (statement of net position and statement of activities) report information on all of the non-fiduciary activities of the primary government and its component units. The focus of the government-wide financial statements is more on sustainability of the County as an entity and the change in aggregate financial position resulting from activities of the fiscal period. As a general rule, the effect of inter-fund activity has been eliminated from these statements. Governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely, to a significant extent, on fees and other charges for support. Likewise, the primary government is reported separately from the County’s discretely presented component units.

In the government-wide statement of net position, the governmental and business-type activities columns are presented on a consolidated basis by column and are presented using the economic resources measurement focus and the accrual basis of accounting, which incorporates long-term assets as well as long-term debt and obligations. Inter-fund balances between governmental funds and inter-fund balances between enterprise funds are included in the government-wide statement of net position.

The government-wide statement of activities demonstrates the degree to which the direct expenses of a given functional category (public safety, public works, etc.) or business-type activity (landfill, etc.) are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific functional category or business-type activity. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given functional category or business-type activity and 2) grants and contributions that are restricted to meet the operational or capital requirements of a particular functional category or business-type activity. Taxes and other items that are not properly included among program revenues are reported instead as general revenues.

When both restricted and unrestricted resources are available for use, it is the County’s policy to use restricted resources first, then unrestricted resources as they are needed.

Fund Financial Statements

The financial transactions of the County are recorded in individual funds. Each fund is a separate accounting entity with a self- balancing set of accounts that comprise its assets, liabilities, deferred inflows of resources, reserves, fund equity, revenues and expenditures/expenses. Emphasis is on major funds in the governmental or business-type categories. GASB Statement No. 34 sets forth minimum criteria for the determination of major funds. The County has elected to present additional funds as major due to the specific community focus. The non-major funds in each category are combined in a column in the fund financial statements and detailed in the combining and individual fund statements and schedules section.

The governmental fund financial statements are presented using a current financial resources measurement focus and the modified accrual basis of accounting. This is the manner which GAAP has prescribed as the most appropriate to (a) demonstrate legal and covenant compliance, (b) demonstrate the source and use of liquid financial resources, and (c) demonstrate how the County’s actual experience conforms to the budget fiscal plan. As the governmental fund statements are presented on a different measurement focus and basis of accounting than the government-wide statements’ governmental activities column, reconciliations are presented which briefly explain the adjustments necessary to reconcile the governmental fund financial statements to the government-wide financial statements.

The County’s internal service funds (which typically provide services to other funds of the government) are presented in a consolidated column in the proprietary fund financial statements. Since the principal users of these services are the County’s governmental activities, the financial statements of the internal service funds are consolidated into the governmental activities column in the government-wide financial statements. To the extent possible, the costs of these services are reflected in the appropriate functional category.

The County’s enterprise funds, presented in the proprietary fund financial statements, are presented using the economic resources measurement focus and the accrual basis of accounting. The County’s enterprise funds use the services of the internal service funds. Since internal service funds are combined with governmental funds to produce the government-wide statements, reconciliations are presented which briefly explain the adjustments necessary to generate the government-wide financial statements.

60 Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary fund’s principal ongoing operations. The principal operating revenues of the Landfill Fund, the Innovation Technology Park Fund and the internal service funds are charges to customers for sales and services. Operating expenses of the enterprise funds and internal service funds include the costs of providing services, such as personnel, contracting and supplies, as well as depreciation. Additionally, landfill closure costs are included in operating expenses of the Landfill Fund. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

The County’s fiduciary funds are presented in the fund financial statements by type (supplemental pension trust fund, length of service award pension trust, other post-employment benefits master trust fund, private purpose trust funds, and agency funds). Since by definition, the assets of these funds are held for the benefit of a third party (pension participants, other post- employment benefit participants, private parties, etc.) and cannot be used to satisfy obligations of the County, these funds are not incorporated into the government-wide financial statements.

The following major funds are used by the County:

Governmental Funds: The focus of governmental fund measurement in the fund financial statements is based on the determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income. The following is a description of the major governmental funds of the County:

General Fund – The General Fund accounts for numerous primary services of the County (Police, Fire, Public Works, Community Development, Debt Service, etc.) and is the primary operating unit of the County. It accounts for all financial resources of the general government, except those required to be accounted for by another fund.

Streets and Roads Capital Projects Fund – The Streets and Roads Capital Projects Fund is used to account for the resources and expenditures related to the construction of sidewalks and roads within the County.

Other Capital Projects Fund – The Other Capital Projects Fund is used to account for the resources and expenditures related to construction projects such as libraries and parks, facilities to be used by police, detention and fire and rescue agencies, and storm water management ponds and channels.

Education Capital Projects Funds – The Education Capital Projects Fund is used to account for the resources obtained exclusively for the construction of school buildings and other school projects (proceeds from bonds). Such resources are immediately provided to the School Board Component Unit to support the construction of such assets.

Fire & Rescue Levy Special Revenue Fund – The Fire & Rescue Levy Special Revenue fund is used to account for fire and rescue services. Revenues are principally derived from a tax levy and interest earnings. Expenditures consist of the cost of delivering fire and rescue services.

Proprietary Funds: The focus of proprietary fund measurement is based on the determination of operating income, changes in net position, financial position, and cash flows, which is similar to a business enterprise. The following is a description of the major proprietary funds of the County:

Landfill Fund – The Prince William County Landfill provides refuse disposal services.

Innovation Technology Park Fund – Innovation Technology Park provides land for economic development purposes.

Parks & Recreation Fund – The Prince William County Department of Parks & Recreation provides recreation services to County residents.

In addition to the major funds discussed above, the County reports on the following fund types:

Internal service funds – The County operates a construction crew, an information technology center, and a vehicle maintenance facility. In addition, the County operates four self-insurance funds – three for risk management services that provide insurance for workers’ compensation, general liability, and other insurance needs of the County, and the Adult Detention Center, and one that provides health insurance for eligible participating County employees. The effect of inter-fund activity has been eliminated from the government-wide financial statements. The excess revenues or expenses for the fund are allocated to the appropriate functional activity. The internal service funds are included in governmental activities column for government-wide reporting purposes. Inter-fund services that are provided and used are not eliminated in the process of consolidation. 61 Fiduciary Funds: Fiduciary funds are used to account for assets held by the government acting as a trustee or agent for entities external to the governmental unit. Trust funds and agency funds are the two types of fiduciary funds. The measurement focus for trust fiduciary funds is economic resources and the basis of accounting for agency fiduciary funds is cash basis, reporting resources held in a custodial capacity.

Supplemental Pension Plan trust fund – The County accounts for a defined benefit trust to provide Supplemental Pension Plan benefits to uniformed police officers and fire fighters.

LOSAP trust fund – The County accounts for a length of service award program that provides benefits for certified volunteer fire department and rescue squad members.

Other Post-Employment Benefits (OPEB) master trust fund – The County uses this fund to account for post- employment benefits other than pensions for eligible employees of the County and to account for post-employment benefits that provide death, disability, and healthcare benefits for public safety employees and volunteer fire department and rescue squad members.

Private purpose trust funds – The County accounts for the operations of a business and industrial park owners’ association, Historic Preservation Foundation and library donations.

Agency funds – The County accounts for receipts and disbursements of monies for certain County welfare, mental health service, and federal self-sufficiency program recipients.

C. Basis of Accounting

The basis of accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurements made, regardless of the measurement focus applied. The government-wide financial statements, the proprietary fund financial statements, the fiduciary fund financial statements, and the component unit financial statements are presented on an accrual basis of accounting. The governmental fund financial statements are presented on a modified accrual basis of accounting.

Accrual Basis of Accounting. Revenues are recognized when earned and expenses are recognized when incurred.

Modified Accrual Basis of Accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; both measurable and available. “Available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the County considers the availability period for all significant revenue sources to be 60 days after the end of the current fiscal period. Accordingly, real and personal property taxes are recorded as revenues and receivables when billed, net of allowances for uncollectible amounts. Property taxes due, but not collected within 60 days after year-end, are reflected as deferred inflows of resources. Derived tax revenues such as sales and utility taxes that are collected by the Commonwealth or utility companies, and subsequently remitted to the County, are recognized as revenues and receivables when the underlying exchange transaction occurs, which is generally two months preceding receipt by the County. Licenses, permits and fines are recorded as revenues when received. Intergovernmental revenues, consisting primarily of Federal, State and other grants for the purpose of funding specific expenditures, are recognized when earned or at the time of the specific expenditure. Revenues from general-purpose grants are recognized in the period to which the grant applies. Interest earnings are recorded as earned.

Expenditures are generally recognized under the modified accrual basis of accounting when the related liability is incurred. The exception to this general rule is that principal and interest on general obligation long-term debt is recognized when due.

D. Budgets and Budgetary Accounting

Formal budgetary integration is employed as a management control device during the year. Budgets for all governmental funds of the Primary Government and Discretely Presented Component Units of the County are adopted by the Board annually on a non-GAAP basis which excludes the effects of fair value adjustments to the carrying amounts of investments required by GASB Statement No. 31. Reconciliations between the non-GAAP basis amounts presented for budgetary comparisons and the GAAP basis amounts presented elsewhere in the CAFR are shown on the face of the budgetary comparison schedules (Schedules 1, 2, 9, 10, 11 and 12).

62 Project length financial plans are adopted for all capital projects funds. In late February, the County Executive submits to the Board, a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them.

The Board holds work sessions to review the proposed budget and conducts two public hearings to obtain taxpayer comments. The budget is legally adopted by the Board within the timelines stipulated by the Code of Virginia.

The Board appropriates the budget on an annual basis. During the year, several supplemental appropriations are necessary. The Board adopts resolutions for supplemental appropriations that increase or decrease the adopted budget. Departmental expenditures may not exceed Board approved appropriations, which lapse at the end of the year.

The Board appropriates available balances from one fiscal year to the next resulting from projected surplus revenues and budget savings generated during the year through departmental spending control efforts. The Board also authorizes the Director of Finance to administratively reduce the amount of available balances approved should the actual funds to support the appropriation be insufficient after completion of the County’s year end closing cycle.

The budget is controlled at certain legal as well as administrative levels. The Code of Virginia (1950), as amended (Code of Virginia) requires the County to annually adopt a balanced budget. The Board’s Annual Adopted Budget Resolution places legal restrictions on expenditures at the department level (i.e., the level at which expenditures may not legally exceed appropriations). Management approves budget transfers of any amount between major expenditure categories within departments and in certain limited cases these are reviewed by the Board. Budget transfers of twenty thousand dollars or more between departments are approved by the Board. The Board approves resolutions for supplemental appropriations that increase or decrease (amend) the original budget. Only the Board can amend the budget. All budgets and appropriations lapse at the end of each fiscal year.

Annual transfers out are appropriated in the General and Special Revenue Funds and for the component units of the County. Expenditures in all governmental funds of the County were within authorized budget limitations.

Where required, the governmental fund financial statements provide budgetary comparison schedules that demonstrate compliance at the legal level of budgetary control.

E. Encumbrances

Encumbrance accounting, the recording of purchase orders, contracts, and other mandatory commitments for the expenditure of monies to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in all governmental funds. Encumbrances outstanding at year-end are reported as restricted, committed, or assigned fund balance, depending on the source of funding and/or the specific constraints on the funds encumbered, since they do not constitute expenditures or liabilities. Encumbrances are normally re-appropriated each year by Board resolution. For more detailed information, see Note 12.

F. Cash and Investments

For purposes of the statement of cash flows, all cash on hand, deposits and highly liquid investments with original maturities of three months or less, as well as the County’s cash management pool, are grouped into equity in pooled cash and investments. These pooled cash and investments, as well as restricted cash and temporary investments are considered to be cash and cash equivalents.

The County maintains a single cash and investment pool for use by all funds and component units, except for the Supplemental Pension Plan Trust Fund, certain enterprise and internal service funds, the School Board Student Activity Fund, and the Community Services Board Payee Accounts. Each fund participates on a dollar equivalent and daily transaction basis. Interest is distributed monthly based on average daily cash balances. A “zero balance account” mechanism provides for daily sweeps of deposits made to the County’s checking accounts, resulting in an instantaneous transfer to the investment account. Hence, the majority of the County’s funds are invested at all times.

Bond proceeds are maintained to comply with the provisions of the Tax Reform Act of 1986 or as required by various bond indentures.

Investments are carried at fair value based on quoted market prices. Interest earnings are allocated monthly to the respective funds based on the percentage of each fund’s average daily balance of cash investments in the total pool.

63 G. Inventories and Prepaid items

Inventory is valued at cost for all governmental funds and at lower of cost or market for all other funds using the first-in, first- out method. Inventory in the General and certain Enterprise and Internal service funds consists of expendable supplies held for consumption and land held for resale. The cost is recorded as expenditure at the time individual inventory items are consumed. Reported inventories for governmental funds are offset equally by a non-spendable fund balance which indicates they do not constitute available expendable resources, even though they are a component of assets.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the government wide and fund financial statements. Items are expensed in the period they are used.

H. Due from Other Funds, Component Units and Governmental Units

Noncurrent portions of long-term inter-fund loans receivable (reported in due from asset accounts) and amounts due from other governments are equally offset by a committed fund balance account which indicates that they do not constitute available expendable resources and therefore are not available for appropriation.

I. Compensated Absences

In governmental fund types, the cost of vacation and sick pay benefits (compensated absences) is recognized when payments are made to employees. A liability for all governmental fund type vested accrued vacation and sick pay benefits is recorded as noncurrent liabilities in the government-wide statement of net position. Proprietary fund types accrue vacation and sick leave benefits in the period they are earned.

J. Self-Insurance and Health Insurance Long-Term Liabilities

The County, and the Adult Detention Center component unit participate in the Prince William Self-Insurance Group Casualty Pool and Workers' Compensation Association, which provide casualty insurance and workers' compensation protection for the members. Under GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, the Pool and the Association are classified as “entities other than pools” because the County and its component units are the only participants. The County provides three self-insured health insurance program options to its employees. Estimated liability for claims payable includes estimates of losses on claims reported and actuarial determinations of claims incurred but not reported.

K. Capital Assets

The cost of capital assets acquired for general government purposes is recorded as an expenditure in the governmental funds and as an asset in the government-wide financial statements to the extent the County’s capitalization threshold has been met. Capital assets acquired by proprietary funds are recorded as assets in both the government-wide financial statements and in the proprietary fund financial statements to the extent the County’s capitalization threshold has been met. The County capitalizes assets (non-software) costing at least five thousand dollars and having an estimated useful life longer than one year. The County capitalizes software costing at least one hundred thousand dollars and having an estimated useful life longer than one year. The School Board and the Prince William/Manassas Convention & Visitors Bureau, Inc. component units’ capitalization thresholds differ from the County’s. Details of their capitalization thresholds are discussed in their separately issued financial statements.

All purchased capital assets are valued at cost where historical records are available and at an estimated historical cost where no historical records exist. Donated capital assets are recorded at fair market value as of the date of donation.

Maintenance, repairs, and minor renovations, are charged to operations when incurred. Expenditures that materially increase values, change capacities, or extend useful lives are capitalized. Upon sale or retirement, the cost and related accumulated depreciation is eliminated from the respective accounts, and any resulting gain or loss is included in the determination of change in net position for the period.

In accordance with GASB Statement No. 34 and GASB Statement No. 51, the County’s infrastructure and commercial “off-the- shelf” software have been capitalized retroactively to 1980. Of the $208 million in infrastructure capitalized at June 30, 2015, approximately $159 million was valued using actual historical cost records; approximately $49 million was estimated using current replacement cost for a similar asset and deflating this cost through the use of price indices to the acquisition year. $36 million of intangible software capitalized at June 30, 2015 was valued using project costing models. The County does not capitalize streets and roads as these are transferred to and become property of the Commonwealth of Virginia upon completion.

64 Capital assets of the primary government and the Adult Detention Center component unit are depreciated using the straight- line method over the estimated useful lives of purchased, donated and leased assets as follows:

Public domain (infrastructure) 40-50 years Buildings 20-40 years Improvements to sites 2-50 years Equipment 2-20 years Vehicles 3-10 years Intangible assets 5-15 years

Depreciation on the County’s solid waste landfill liner system is calculated based on the percentage of the landfill liner’s capacity used each year.

Details of the School Board and Prince William County/Manassas Convention & Visitors Bureau, Inc. component units’ depreciation methods and estimated useful lives are discussed in their separately issued financial statements.

Impaired capital assets that are no longer used are reported at the lower of carrying value or fair value. An asset is considered impaired if both (a) the decline in service utility of the capital asset is large in magnitude and (b) the event or change in circumstance is outside the normal life of the capital asset.

L. Deferred Outflows/Inflows of Resources

In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. This separate financial element represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expenses) until then. In addition to liabilities, the Statement of Net Position and fund Balance sheets will sometimes report a separate section for deferred inflows of resources. Deferred inflows represent an acquisition of net position by the County that is applicable to a future reporting period.

M. Pensions

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Prince William County’s Defined Benefit Pension Plans and the additions to/deductions from the Prince William County’s Defined Benefit Pension Plan’s net fiduciary position have been determined on the same basis as they were reported by the Virginia Retirement System (VRS), Prince William County Supplemental Plan for Police Officers and Uniformed Fire and Rescue Personnel Plan and Prince William County Volunteer Fire and Rescue Personnel Length of Service Award Program (LoSAP). For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

N. Fund Equity

Nonspendable fund balances represent amounts that cannot be spent because they are not in spendable form. Restricted fund balances represent those portions of fund equity appropriable for expenditure or legally segregated for a specific future use. Committed and Assigned fund balances represent the County's managerial plans for future use of financial resources. Unassigned fund balance is the residual classification for the General Fund. For more detail information, see Note 1.

Policy 1.04 of the County's Principles of Sound Financial Management requires an unassigned fund balance of 7.5% of the current year’s General Fund revenues.

O. Leases

For capital leases in the governmental fund types, acquisition costs are recorded as expenditures with an offsetting entry to other financing sources.

P. Deferred Gain (Loss) on Debt Refundings

Losses resulting from advance or current refundings of debt in government-wide and proprietary statements are deferred and amortized over the shorter of the life of the new debt or the remaining life of the old debt. The amount is deferred and reported as an unamortized gain (loss) on refunding and is amortized and reported as a component of interest expense.

65 Q. Changes in Reporting Entity

Illustration 1-2 Summary of Net Position Restatements

Balances, as Cumulative effect Balances, as previously of change in restated, reported, accounting June 30, 2014 June 30, 2014 principle (GASB 68)

Enterprise Funds Landfill $ 39,937 (1,436) 38,501 Innovation Technology Park 8,513 - 8,513 Parks & Recreation (6,689) (1,204) (7,893) Total Enterprise Funds $ 41,761 (2,640) 39,121

Internal Service Funds Intra-County Services $ 82,625 (4,430) 78,195 Other Self-Insurance (13) - (13) Self-Insurance Casualty Insurance 2,078 - 2,078 Self-Insurance Workers' Compensation Association 12,308 - 12,308 Health Insurance 21,382 (67) 21,315 Total Internal Service Fund $ 118,380 (4,497) 113,883

Government-Wide Governmental Funds $ (47,739) (96,970) (144,709) Enterprise Fund 41,761 (2,640) 39,121 Component Units 1,412,448 (844,567) 567,881 Total $ 1,406,470 (944,177) 462,293

As a result of GASB Statement No. 68, the net position balances as of June 30, 2014, have been restated to reflect the cumulative effect of recording the pension expense recalculated based on GASB 68 related to prior years.

R. Governmental Accounting Standards Board (“GASB”) Pronouncements

The County implemented the following GASB pronouncements with effective implementation dates for fiscal year ended June 30, 2015:

GASB Statement No. 68, Accounting and Financial Reporting for Pensions (an amendment of GASB Statement No. 27) - This Statement improves accounting and financial reporting by state and local governments for pensions, and improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities by establishing accounting and financial reporting requirements related to pensions for governments whose employees are provided with pensions through pension plans that are covered by the scope of this Statement, as well as for non-employer governments that have a legal obligation to contribute to those plans.

GASB Statement No. 71, Pension Transition for Contributions made Subsequent to the Measurement Date (an amendment of GASB Statement No. 68) - This statement improves financial reporting by state and local governments in their first year of implementing GASB Statement No. 68. This statement requires the government to recognize a beginning deferred outflow of resources for its pension contribution, if any, make subsequent to the measurement date of the beginning net pension liability.

The GASB has issued the following statements with effective implementation dates later than the fiscal year ending June 30, 2015. The statements deemed to have a future impact on the County are as follows:

GASB Statement No. 72, Fair Value Measurement and Application – This statement improves financial report by state and local governments for certain investments and donated capital assets. It establishes a hierarchy of valuation 66 techniques used to measure fair value. The requirements of this statement will enhance the comparability of financial statements among governments by requiring measurements at fair value using a more detailed definition of fair value and accepted valuation techniques.

GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments – This statement reduces the generally accepted accounting principles (GAAP) into two categories and addresses the use of authoritative and nonauthoritative guidance when the treatment for a transaction is not specified within a source of authoritative GAAP. It will improve reporting by requiring the consideration of consistency with the GASB Concepts Statements, resulting in less variation between the comparison financial statements among governments.

GASB Statement No. 77, Tax Abatement Disclosures – This statement requires disclosures of tax abatement information about a reporting government’s owns tax abatement agreements and those that are entered into by other governments that reduces the reporting entities tax revenue. This will improve transparency of these transactions to the financial statement user.

S. Subsequent Events

The County has evaluated subsequent events (events occurring after June 30, 2015, through December 31, 2015) in connection with the preparation of these financial statements. Such events have been disclosed in Note 21.

NOTE (2) - CASH AND INVESTMENTS

A. Cash Deposits

All cash of the County is maintained in accounts collateralized in accordance with the Virginia Security for Public Deposits Act (the Act), §2.2-4400 through 2.2- 4410. of the Code of Virginia. Under the Act, Qualified public depositories shall elect to secure deposits by either the pooled method or the dedicated method. Every qualified public depository shall deposit with a qualified escrow agent eligible collateral equal to or in excess of the required collateral. If any qualified public depository fails, the collateral pool becomes available to satisfy the claims of governmental entities. The Commonwealth Treasury Board is responsible for monitoring compliance with the collateralization and reporting requirements of the Act. Funds deposited in accordance with the requirements of the Act are considered fully secured and are not subject to custodial credit risk.

B. Investments

County Investments Code of Virginia §2.2-4501 through 2.2-4600 authorizes the County to invest in obligations of the United States or agencies thereof; obligations of the Commonwealth or political subdivisions thereof; obligations of other states not in default; obligations of the International Bank for Reconstruction and Development (World Bank); the Asian Development Bank, the African Development Bank; “prime quality” commercial paper; negotiable certificates of deposits and negotiable bank notes; corporate notes.; banker's acceptances; overnight, term and open repurchase agreements; money market mutual funds; the State Treasurer's Local Government Investment Pool (LGIP), non-negotiable certificates of deposit and deposits with federally insured banks and savings institutions that are qualified to accept public deposits. However, in some instances, the County’s own investment policy is more stringent as to authorized investments as discussed below.

Bond proceeds shall be invested in accordance with the requirements and restrictions outlined in bond documents. Bond proceeds shall be invested in the Virginia State Non-Arbitrage Program (SNAP) and alternate external investment pools that provide assistance to local governments in the investment of bond proceeds and the preparation of rebate calculations in compliance with treasury arbitrage rebate regulations in accordance with the Code of Virginia requirements and the County’s own investment policy.

In accordance with State Corporation Commission of Virginia (SCC) regulations for the licensing of the Prince William County Self-Insurance Group (PWSIG) Workers' Compensation Association and Casualty Pool, the Association and the Pool are required to deposit securities with the State Treasurer. As of June 30, 2015, the Self-Insurance Workers’ Compensation Association had $ at fair value, in U.S. Government Agency Securities deposited with the State Treasurer to comply with the $750 requirement, with $250 serving as a security deposit in lieu of a surety bond. ]II ] I $8 The remainder serves as additional collateral because the Association does not maintain aggregate excess insurance. As of June 30, 2015, the Casualty Pool had $79, at fair value, in U.S. Government Agency Securities deposited with the State Treasurer to comply with the $500 requirement since the Pool does not maintain aggregate excess insurance. While these securities are held by the State Treasurer, they are in the name of the Association and the Pool and are included in the investments of those funds.

The County and its discretely presented component units’ investments are subject to interest rate, credit, custodial and concentration of credit risks as described below: 67 Interest Rate Risk – As a means of limiting its exposure to fair value losses arising from increasing interest rates, the County’s investment policy states that at the time of purchase, no more than 50% of the total portfolio shall be placed in securities maturing in more than three (3) years and the average maturity of the portfolio may not exceed seven (7) years. Further, the County may not directly invest in securities maturing in more than ten years from the date of purchase (unless the investment is maturity matched to long term cash flow requirements).

The weighted average maturity for the PWSIG Workers Compensation Association and Casualty Pool portfolios may not exceed three (3) years except where to the extent that assets are purchased specifically for collateral deposits with the Commonwealth of Virginia as required by the SCC. The final maturity of any individual security may not exceed five (5) years from the time of purchase, except where an asset is matched to a specific obligation of the PWSIG.

Illustration 2-1 reflects the fair value and the weighted average maturity (WAM) of the County’s investments as of June 30, 2015.

Illustration 2-1 Fair Value and Weighted Average Maturity of Investments at June 30, 2015 Weighted Fair Value Average Maturity (Years) Primary Government, School Board, and ADC Money Markets and Money Market Mutual Funds: Local Government Investment Pool (LGIP) $ 100,359 0.003 State Non-Arbitrage Program (SNAP) 68,456 0.003 PFM Asset Management 101,822 0.003 Other Money Markets and Money Market Mutual Funds 9,194 0.003 NOW Accounts 64,739 0.003 Certificate of Deposits 36,157 0.692 U.S. Government Agency Securities 503,338 7.197 Corporate Bonds 134,477 2.941 Municipal Bonds 32,767 5.118 Total Primary Government, School Board, and ADC 4.006 1,051,309 Convention & Visitors Bureau Component Unit Cash and Cash Equivalents 139 0.003 Total Convention & Visitors Bureau Investments 139 0.003 Total Reporting Entity Investments $ 1,051,448 4.006

WAM expresses investment time horizons, the time when investments become due and payable, in years, weighted to reflect the dollar size of the individual investments within an investment type. The portfolio’s WAM is derived by dollar-weighting the WAM for each investment type. For purposes of the WAM calculation, the County assumes that all of its investments will be held to maturity.

Credit Risk – State statutes authorize the County to invest in various instruments as described above. The County’s Investment Policy, however, does not provide for investments in obligations of other states and political subdivisions outside of the Commonwealth of Virginia. It is also County policy to invest in Negotiable Certificates of Deposits from banks with a rating of at least A-1 by Standard & Poor’s and P-1 by Moody’s Investor’s Services for maturities of one year or less. The County may also invest in corporate notes that have a rating of at least Aa by Moody’s Investor’s Services and AA by Standard & Poor’s. Furthermore, the County will only invest in money market or mutual funds with a rating of AAA by at least one nationally recognized statistical rating organization; “prime quality” commercial paper rated by at least two of the following: Moody’s Investor’s Services within its NCO/Moody’s rating of Prime 1; Standard & Poor’s within its rating of A-1; Fitch Investor’s Services within its rating of F-1 or by their corporate successors, provided that at the time of any such investment the issuing corporation has a net worth of at least $50 million and the net income of the issuing corporation has averaged $3 million per year for the previous five years and all existing senior bonded indebtedness of the issuer is rated A or its equivalent by at least two of the following: Moody’s Investor’s Services, Standard & Poor’s or Fitch Investor’s Services; and banker’s acceptances with U.S. banks or domestic offices of international banks provided that the bank’s assets exceed $500 million or $1 billion respectively.

68 Bond proceeds must be invested in accordance with the requirements and restrictions outlined in bond documents. As such, bond proceeds, per County policy, are exempt from portfolio composition, individual issuers, and maturity limitations set forth in the Investment Policy.

It is the PWSIG’s policy to invest in obligations issued or guaranteed by the U.S. government, an agency thereof, or U.S. Government Sponsored Enterprises (GSEs); repurchase agreements collateralized by obligations issued or guaranteed by the U.S. Government, an agency thereof, or GSEs; non-negotiable certificates of deposit and time deposits of Virginia banks and savings institutions federally insured to the maximum extent possible and collateralized under the Virginia Security for Public Deposits Act; municipal debt with a rating of at least AA by one nationally recognized rating agency, negotiable certificates of deposit and negotiable bank deposit notes of domestic banks and domestic offices of foreign banks with a rating of at least P-1 by Moody’s Investor’s Services and A-1 by Standard and Poor’s; bankers’ acceptances with major U.S. banks and domestic offices of international banks provided that the bank’s assets exceed $500 million or $1 billion respectively; “prime quality” commercial paper rated by at least two of the following: P-1 by Moody’s Investor’s Services, A-1 by Standard & Poor’s or F-1 by Fitch Investor’s Services; corporate notes with a minimum rating of Aa by Moody’s Investor’s Services and AA by Standard & Poor’s; money market, mutual funds or the LGIP with a minimum credit rating of AAA by at least one nationally recognized statistical rating organization. During the year, the County made investments in money market mutual funds, LGIP, SNAP, PFM Asset Management, U.S. Government Agency Securities, NOW Accounts, Certificates of Deposit, Corporate Bonds, Commercial Paper and Municipal Bonds. The County’s investment ratings as of June 30, 2015, are presented in Illustration 2-2.

Illustration 2-2 County, School Board, and ADC, Investment Credit Risk at June 30, 2015 Credit Exposure as a Credit Quality Investment Type % of Total (Rating) Investments

Money Markets and Money Market Mutual Funds: Local Government Investment Pool (LGIP) AAA 9.55% State Non-Arbitrage Program(SNAP) AAA 6.51% PFM Asset management AAA 9.69% Other Money Markets and Money Market Mutual Funds AAA 0.87% NOW Accounts Not applicable 6.16% Certificate of Deposits Not applicable 3.44% U.S. Government Agency Securities: FNMA, FHLB, FFCB and FHLMC Agency Notes AA or Higher 47.87% Corporate Bond: AA or Higher 12.79% Municipal Bond: AA or Higher 3.12% 100.00%

Custodial Credit Risk – Custodial risk is the risk that in the event of the failure of the counter party, the County will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. However, the County’s investment policy requires that all securities purchased by the County be properly and clearly labeled as an asset of Prince William County and held in safekeeping by a third party custodial bank or institution in compliance with §2.2-4515 of the Code of Virginia. Therefore, the County has no custodial credit risk.

Concentration of Credit Risk – To minimize credit risk, the County’s Investment Policy seeks to diversify its portfolio by limiting the percentage of the portfolio that may be invested in any one type of instrument at the time of purchase as follows: 100% for U.S. Agency Obligations (not to exceed 25% for any one agency); 35% for “prime quality” commercial paper (not to exceed 5% in any one issuer); 40% for negotiable certificates of deposit (not to exceed 5% for any one issuer); 40% for bankers’ acceptances (not to exceed 5% for any one issuer); 10% for U.S. Treasury Certificates; 30% for repurchase agreements (not to exceed 30% with the County’s primary bank and 10% with any other institution/dealer); 60% for money market funds (not to exceed 20% in any one money market fund); 20% for corporate notes (not to exceed 5% for any one issuer); 40% for non- negotiable certificates of deposit (not to exceed 15% for any one issuer);; and no more than 25% in Local Government Investment Pools (LGIP).

The PWSIG Investment Policy seeks to diversify its portfolio by security type and by issuer by limiting the percentage of the portfolio that may be invested at the time of purchase in any one type of instrument as follows:

100% for U.S. Treasury and Agency securities; 50% municipal debt (not to exceed 10% per issuer); 50% for repurchase agreements (not to exceed 20% per issuer); 30% for bankers’ acceptances, negotiable certificates of deposit and/or negotiable 69 bank deposit notes (not to exceed 5% per issuer); 35% for commercial paper (not to exceed 5% per issuer); 40% for non- negotiable certificates of deposit (not to exceed 10% per issuer); 25% for corporate notes (not to exceed 10% per issuer) and 80% for money market funds/investment pools (not to exceed 40% per issuer).

Supplemental Pension Plan Investments §51.1-803 of the Code of Virginia authorizes the County’s Supplemental Pension Plan to invest its funds with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with the same aims. Such investments are not subject to custodial credit risk.

The County’s Supplemental Pension Plan’s investments are subject to interest rate, credit and concentration of credit risk as described below:

Interest Rate Risk – In accordance with state statute and the policy of the Supplemental Pension Plan, investments of the Supplemental Pension Plan are diversified so as to minimize the risk of large losses unless under the circumstances it is clearly not prudent to do so. The Supplemental Pension Plan contains primarily mutual fund type assets of varying characteristics. The specific content of each fund can change daily and is managed by the director/manager of each fund. Consequently, the ability to quantify interest rate risk at the Supplemental Pension Plan level is not possible.

Illustration 2-3 reflects the fair value and the duration of the County’s Supplemental Pension Plan fixed income investments as of June 30, 2015. Weighted-average maturity expresses investment time horizons, the time when investments become due and payable, in years, weighted to reflect the dollar size of the individual investments within an investment type. Duration is a measure of a fixed income’s cash flows using present values, weighted for cash flows as a percentage of the investment’s full price. Modified duration estimates the sensitivity of a bond’s price to interest rate changes.

Illustration 2-3 Supplemental Pension Plan Fair Value and Weighted Average Maturity/Duration of Investments at June 30, 2015 Weighted-Average Maturity(a)/ Fair Value Modified Duration (b) (Years) Supplemental Pension Plan Trust Fund: Money Market Mutual Funds $ 78 0.101 (a) Tactical Asset Allocation Funds 3,146 Not applicable Equity Mutual Funds 17,063 Not applicable Real Assets 2,227 Not applicable Common Stock 301 Not applicable Bond Mutual Funds PIMCO Total Return Fund $ 4,839 5.68 (b) Brandywine Global Bond Fund 4,664 6.44 (b) Total Bond Mutual Funds 9,503 Total Supplemental Pension Plan Pension Trust Fund Investments $ 32,318

Credit Risk – The Supplemental Pension Plan investment policy is silent as to credit risk. The Board of Trustees is ultimately responsible for making the decisions that affect the Supplemental Pension Plan’s Investments. An independent investment consulting firm assists with the attainment of the Plan’s objectives and monitors the Plan’s compliance with its stated investment policies. During the year, the Plan invested in money market, fixed income bond funds and equity mutual funds.

70 The Supplemental Pension Plan’s investment rating as of June 30, 2015 is presented in Illustration 2-4.

Illustration 2-4 Supplemental Pension Plan Credit Risk at June 30, 2015 Credit Exposure as a % of Investment Type Credit Quality (Rating) Total Investments

Supplemental Pension Plan Trust Fund Investments: Money Market Mutual Funds AAA 0.24% Tactical Asset Allocation Funds Not rated 9.73% Equity Mutual Funds Not rated 52.81% Real Assets Not rated 6.89% Common Stock Not rated 0.93% Fixed Income PIMCO Total Return Fund AA 14.97% Brandywine Global Bond Fund AA - 14.43% 100.00%

Concentration of Credit Risk – The long-term objective of the Supplemental Pension Plan is to achieve a total return equivalent to or greater than the Plan’s long-term benefit obligation over the time horizon. The Board of Trustees has selected an asset allocation policy designed to achieve a return equal to or greater than the long-term objective. The excess return over the long- term objective is designed both to reduce the probability of missing the target return over the long-term and to provide for any future growth or benefit enhancements desired.

The Board of Trustees will seek to limit the overall level of risk, as defined by tracking error or the standard deviation of excess return, relative to the comparison benchmark and volatility, as measured by standard deviation, consistent with the chosen asset allocation policy.

Illustration 2-5 shows permissible asset classes, with target investment percentages.

Illustration 2-5 Statement of Investment Policy Supplemental Pension Plan Concentrations at June 30, 2015

Asset Class Policy Percent Target Range Percent

Supplemental Pension Plan Trust Fund Investments: Tactical Asset Allocation Funds PIMCO All-Asset Fund 10% 5% - 15% Equity Mutual Funds Vanguard Total Stock Market Fund 25% 20% - 30% Vanguard Developed Markets Fund 17% 15% - 25% State Street Emerging Markets Fund 7% 5% - 10% Portfolio Advisors Private Equity Fund 1% 0% - 5% Real Assets Pimco Commodity Real Return Strategy 4% 2% - 7% ASB Allegiance Real Estate Fund 6% 3% - 8% RREEF III 0% 0% - 2% Fixed Income PIMCO Total Return Fund 15% 10% - 20% Brandywine Global Bond Fund 15% 10% - 20% Cash 0% 0% - 5% 100%

71 For Domestic Equity, International Equity and REITs, the maximum weighting, on a market value basis, in any one company for active Investment Managers is 5% of the portfolio value. For domestic fixed income, international fixed income, hedge funds and cash equivalents the maximum weighting, on a market value basis, in any one security for active investment managers is 2% of the portfolio value. This does not apply to U.S. government and agency issues. The plan shall be rebalanced in the event any individual asset class differs from the permissible range described in the Asset Allocation.

Concentrations. At June 30, 2015, the Supplemental Pension Plan’s investments were in money market, bond and equity mutual funds and therefore not subject to concentration of credit risk.

Prince William County Volunteer Fire and Rescue Personnel Length of Service Award Program (LoSAP) Investments

The County has appointed a Board of Trustees to oversee certain policies and procedures related to the operation and administration of the Prince William County Volunteer Fire and Rescue Personnel Length of Service Award Program. The Board of Trustees has the authority to invest the funds in the best interest of the Trust to satisfy the purpose of the Trust.

Illustration 2-6 reflects the fair value of the County’s LoSAP Trust investments as of June 30, 2015.

Illustration 2-6 LoSAP Fair Value and Weighted Average Maturity/Duration of Investments at June 30, 2015

Weighted-Average Maturity(a)/ Fair Value Modified Duration (b) (Years)

LoSAP Pension Trust Fund Investments: Mass Mutual Annuity $ 13,769 Not Applicable

Concentrations. At June 30, 2015, the LoSAP Plan’s investments were 100% invested in an insurance annuity fund and are subject to concentration of credit risk.

Other Post-Employment Benefits (OPEB) Master Trust Investments The County has appointed a Finance Board pursuant to the Code of Virginia §15.2-1547 to oversee certain policies and procedures related to the operation and administration of the Other Post-Employment Benefits Master Trust. The Finance Board has the authority to implement the investment policy and guidelines in the best interest of the Trust to best satisfy the purposes of the Trust.

§51.1-803 of the Code of Virginia authorizes the County’s Other Post-Employment Benefits Master Trust to invest its funds with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with the same aims. Such investments are not subject to custodial credit risk.

72 Illustration 2-7 reflects the fair value of the County’s Other Post-Employment Benefits Master Trust fixed income investments as of June 30, 2015. Weighted-average maturity expresses investment time horizons, the time when investments become due and payable, in years, weighted to reflect the dollar size of the individual investments within an investment type. Duration is a measure of a fixed income’s cash flows using present values, weighted for cash flows as a percentage of the investment’s full price. Modified duration estimates the sensitivity of a bond’s price to interest rate changes.

Illustration 2-7 Other Post-Employment Benefits Fair Value and Weighted Average Maturity/Duration of Investments at June 30, 2015 Weighted- Average Maturity(a)/ Fair Value Modified Duration (b) (Years) Other Post-Employment Benefits Master Trust Fund: Local Government Investment Pool (LGIP) $ 256 0.003(a) Money Market Mutual Funds 306 0.003(a) Equity Mutual Funds 40,735 Not applicable Bond Funds Metropolitan West Total Return $ 5,112 5.00(b) Baird Core Plus 5,098 5.48(b) Double Line Core Fixed Income 3,479 5.01(b) Vanguard Intermediate-Term 3,671 5.40(b) Alliance Bernstein High Income 3,050 4.39(b) Total Bond Funds 20,410

Total Other Post-Employment Benefits Trust Fund Investments $ 61,707

The Other Post-Employment Benefits Master Trust’s rating and credit exposure as of June 30, 2015, is shown in Illustration 2-8.

Illustration 2-8 Other Post-Employment Benefits Master Trust (OPEB) Credit Risk at June 30, 2015 Credit Credit Exposure as Investment Type Quality a % of Total (Rating) Investments Other Post-Employment Benefits Master Trust Fund Investments: Local Government Investment Pool (LGIP) AAA 0.41% Money Market Mutual Funds AAA 0.50% Equity Mutual Funds Not rated 66.02% Fixed Income Metropolitan West Total Return AA 8.28% Baird Core Plus A 8.26% Double Line Core Fixed Income A 5.64% Vanguard Intermediate-Term A 5.95% Alliance Bernstein High Income BB 4.94% 100.00%

73 Concentration of credit risk:

Permissible asset classes, with target investment percentages are shown in illustration 2-9.

Illustration 2-9 OPEB Master Trust Fund Concentrations at June 30, 2015 Actual Asset Class Policy Percent Target Range Percent Percent OPEB Master Trust Fund Investments: Domestic Equity 40% 20% - 60% 43.82% International Equity 20% 0% - 40% 22.80% Other Growth Assets 0% 0% - 20% 0.00% Fixed Income 40% 0% - 60% 33.38% Other Income Assets 0% 0% - 20% 0.00% Real Return Assets 0% 0% - 20% 0.00% Cash Equivalents 0% 0% - 20% 0.00% 100% 100.00%

No more than the greater of 5% or weighting in the relevant index (Russell 3000 Index for U.S. issues and MSCI ACWI ex-U.S. for non-U.S. issues) of the total equity portfolio valued at market may be invested in the common equity of any one corporation; ownership of the shares of one company shall not exceed 5% of those outstanding; and not more than 40% of equity valued at market may be held in any one sector, as defined by the Global Industry Classification Standard (GICS). Fixed income securities of any one issuer shall not exceed 5% of the total bond portfolio at time of purchase. The 5% limitation does not apply to issues of the U.S. Treasury or other Federal Agencies. The use of direct hedge funds and fund-of-hedge funds are allowed. For purposes of asset allocation targets and limitations, single strategy hedge funds will be categorized under the specific asset class of the fund. At June 30, 2015, the OPEB Master Trust Fund’s investments were in money market, bond and equity mutual funds and therefore not subject to concentration of credit risk.

74 Reconciliation of Cash and Investments

Reconciliation of total cash and investments to the entity-wide financial statements at June 30, 2015, is shown in Illustration 2- 10.

Illustration 2-10 Reconciliation of Cash and Investments to Entity-Wide Financial Statements at June 30, 2015 Investments Primary Government and Component Units $ 1,051,448 Supplemental Pension Plan Trust Fund 32,318 LoSAP Trust Fund 13,769 Other Post-Employment Benefits (OPEB) Master Trust Fund 61,707 Total Investments 1,159,242

Add: Cash on Hand 58 Deposits 8,325 Total Cash and Investments 1,167,625 Less: Supplemental Pension Plan Trust Fund’s cash and investments (32,908) LoSAP Trust Fund cash and investments (13,769) OPEB Master Trust Fund cash and investments (61,707) Private Purpose Trust Funds (799) Agency Funds’ equity in pooled cash and investments (504) School Board Agency Funds’ cash and investments (10,549) Total Reporting Entity cash and investments $ 1,047,389

Business- Governmental Component Total Reporting Type Total Activities Units Entity Activities Primary Government: Equity in Pooled Cash and Investments $ 670,242 10,712 680,954 245,512 926,466 Investments 21,218 - 21,218 - 21,218 Restricted Cash and Temporary Investments 39,553 16,157 55,710 42,745 98,455 Restricted Investments 1,250 - 1,250 - 1,250 Total Cash and Investments $ 732,263 26,869 759,132 288,257 1,047,389

75 Restricted cash and investments consist of amounts required by bond financing terms to be segregated in a debt service reserve account, a closure fund required by the Virginia Resource Authority (VRA) for the Landfill, capitalized interest accounts required to be used for debt service, unspent debt proceeds required to be used for capital projects, and retainages as depicted in Illustration 2-11.

Illustration 2-11 Restricted Cash and Investments at June 30, 2015 Restricted Cash & Restricted Temporary Investments Investments Primary Government General Fund: IDA Lease Revenue Bonds $ 1,092 $ - Retainages 14 - Total General Fund 1,106 - Capital Projects Funds: General Obligation Bonds 23,021 - VRA Lease Revenue Bonds 2,689 - Retainages 1,300 - Total Capital Projects Funds 27,010 - Enterprise Funds: VRA Closure Fund 15,271 - Parks & Recreation 303 - Retainages 583 - Total Enterprise Funds 16,157 - Internal Service Funds: PWSIG 11,326 - Insurance Pool Collateral - 1,250 Retainages 111 - Total Internal Service Funds 11,437 1,250 Total Primary Government 55,710 1,250 Component Unit School Board: School Bonds 42,745 - Total School Board 42,745 -

Total Reporting Entity $ 98,455 $ 1,250

NOTE (3) - PROPERTY TAXES RECEIVABLE

The County's real estate and personal property taxes are levied each July 1, on the assessed value as of the prior January 1, for all property located in the County. Real estate taxes are due in two installments on July 15 and December 5 and personal property taxes are due on October 5. After October 5, personal property taxes are due 30 days following the levy date until the end of the fiscal year. Penalties and interest are assessed on taxes not paid by the due dates. Property tax levies are recorded as receivables and revenue, net of allowance for estimated uncollectibles on the payment due dates. Property taxes due, but not collected within 60 days after fiscal year-end, are reflected as deferred inflows of resources.

Assessed values are established at 100% of appraised market value. The personal property tax is limited to vehicles and all business property. A valuation of all property is completed annually. The assessed value of real and personal property at January 1, 2014, upon which the July 1, 2014, levy was based, was approximately $54 billion.

Current real estate and personal property tax collections for the year ended June 30, 2015, were 99.7% and 96.1%, respectively of the July 1, 2014, tax levy. Real property taxes attach an enforceable lien on property if not paid on the due date. Personal property taxes must be paid before the County vehicle license can be issued. Collections received on or before June 30, 2015, related to property taxes due on July 15 of the following fiscal year are recorded as deferred inflow of resources at June 30, 2015. 76 The County calculates its allowance for uncollectible accounts using historical collection data. Taxes receivable as of June 30, 2015, is detailed in Illustration 3-1.

Illustration 3-1 Property Taxes Receivable at June 30, 2015 Allowance for Gross Tax Uncollectible Net Tax Receivable Receivable Accounts Real estate taxes $ 4,385 2,335 2,050 Personal property taxes 5,658 2,599 3,059

Total $ 10,043 4,934 5,109

NOTE (4) – UNEARNED REVENUE/DEFERRED INFLOW OF RESOURCES

Unearned revenue consists of two components: unearned revenue and deferred inflows of resources. Unearned revenue, as shown in Illustration 4-1, represents amounts for which asset recognition criteria were met, but for which revenue recognition criteria were not met.

Illustration 4-1 Unearned Revenue at June 30, 2015 Primary Government Other Unearned Revenue – Prepaid recreation fees, developer fees, health $ 60,274 premiums, and other Total Primary Government 60,274 Component Unit School Board 9,590 Total Reporting Entity $ 69,864

Deferred inflow of resources, as shown in Illustration 4-2, represents amounts for which asset recognition criteria where met, but which were not available to finance expenditures of the current period under the accrual basis of accounting.

Illustration 4-2 Deferred Inflow of Resources at June 30, 2015 Primary Government Prepaid Taxes – Taxes due subsequent to June 30, 2015, but paid in advance by taxpayers $ 221,589 Deferred lease revenue – Uncollected revenues associated with direct financing leases 3,188 Deferred inflows related to pensions 12,878 Total Primary Government 237,655 Component Unit Deferred inflows related to pensions 124,760 Total Reporting Entity $ 362,415

77 Deferred inflow of resources for General fund represents amounts for which the revenue recognition were not met under the modified accrual basis of accounting for the period ended June 30, 2015.

Illustration 4-3 General Fund Deferred Inflow of Resources at June 30, 2015 General Fund Prepaid Taxes – Taxes due subsequent to June 30, 2015, but paid in advance by taxpayers $ 221,589 Unavailable taxes – Taxes not paid within sixty days of June 30, 2015 3,958 Deferred lease revenue – Uncollected revenues associated with direct financing leases 16,520 Total General Fund $ 242,067

NOTE (5) – INVESTMENT IN DIRECT FINANCING LEASES/ACCOUNTS RECEIVABLE

The County has investments in direct financing leases, consisting of financing arrangements with various volunteer fire and rescue companies and other organizations operating within the County. Under the terms of these financing arrangements, the County obtains leasehold interests in specific properties, and uses those leasehold interests as collateral to obtain financing. The County uses the proceeds from these financings to reimburse the organizations for capital expenses related to the renovation or construction of facilities. In separate-but-related agreements, the County subleases the original leasehold interests and any existing and future improvements back to the organizations; each sublease contains a clause which transfers title of the properties, as well as any existing and future improvements of the properties back to each respective organization at the time the related debt is fully extinguished.

Illustration 5-1 shows the investment in direct financing leases.

Illustration 5-1 Investment in Direct Financing Leases at June 30, 2015 Volunteer Fire & Other Total Rescue Companies Total minimum lease payments to be $ 14,824 1,696 16,520 received Less: Deferred inflow of resources 3,083 105 3,188 Net investment in direct financing leases $ 11,741 1,591 13,332

Illustration 5-2 shows the scheduled minimum lease payments as of June 30, 2015.

Illustration 5-2 Scheduled Minimum Lease Payments at June 30, 2015 Volunteer Fire & Rescue Other Total Companies FY 2016 $ 1,662 636 2,298 FY 2017 1,599 636 2,235 FY 2018 1,549 424 1,973 FY 2019 1,496 - 1,496 FY 2020 1,447 - 1,447 FY 2021-2025 5,662 - 5,662 FY 2026-2029 1,409 - 1,409 Total minimum lease payments $ 14,824 1,696 16,520

78 Accounts receivable, as shown in Illustration 5-3, are recorded at net of allowance for uncollectible accounts.

Illustration 5-3 Accounts Receivable at June 30, 2015 Component Units Convention Primary School ADC & Visitors Total Government Board Bureau Accrued interest $ 1,942 - - - 1,942 Enterprise operations 1,278 - - - 1,278 Utility/consumption taxes 1,923 - - - 1,923 Transient occupancy taxes 1,091 - - - 1,091 Stormwater management fee 275 - - - 275 Cable franchise tax 345 - - - 345 Premiums due from participants 3,704 - - - 3,704 Other 4,767 1,391 - 2 6,160 15,325 1,391 - 2 16,718 Allowance for doubtful accounts (4,105) - - - (4,105) Total $ 11,220 1,391 - 2 12,613

79 NOTE (6) - DUE FROM AND TO OTHER GOVERNMENTAL UNITS

Amounts due from other governmental units are detailed in Illustration 6-1.

Illustration 6-1 Due from Other Governmental Units at June 30, 2015 PRIMARY GOVERNMENT General Fund: From other localities $ 311 From the Commonwealth Local sales taxes 10,486 Other 8,075 $ 18,872 Total General Fund From other localities 1,872 From the Commonwealth 5,936 From the Federal Government 180 7,988 Other-Capital Projects Fund: From the Commonwealth 219 219 Nonmajor Governmental Funds: From the Federal Government 549 Landfill Enterprise Fund: From other localities 384 Internal Service Funds: From other localities 4 Total Primary Government 9,144 COMPONENT UNITS School Board: From the Commonwealth 22,963 From the Federal Government 9,878 32,841

Adult Detention Center: From other localities 1,992 Total Reporting Entity $ 43,977

80 Illustration 6-2 details the amounts due to other governmental units at June 30, 2015.

Illustration 6-2 Due to Other Governmental Units at June 30, 2015 PRIMARY GOVERNMENT General Fund: To Other Localities $ 246 To the Federal Government 18 Total General Fund $ 264 Streets and Roads – Capital Project fund: To Other Localities 224 Other - Capital Projects Fund: To the Federal Government 38 Nonmajor Governmental Funds: To the Commonwealth 10 Total Primary Government 536 COMPONENT UNIT School Board: To the Federal Government 191 Total Reporting Entity $ 727

NOTE (7) – INTER-FUND RECEIVABLES, PAYABLES AND TRANSFERS

Inter-fund balances and transfers are generally made for the purpose of providing operational support for the receiving fund. During the year ended June 30, 2015, the County did not make any significant inter-fund transfers that were not routine and not consistent with the activities of the fund making the transfer.

Illustration 7-1 details the amounts due from and due to other funds at June 30, 2015.

Illustration 7-1 Internal Balances Due from Other Funds Due to Other Funds General Fund $ 12,041 $ - Landfill - Enterprise Fund - 1,221 Parks & Recreation - Enterprise Fund - 10,820

Total Reporting Entity $ 12,041 $ 12,041

Illustration 7-2 details the transfers between funds for the year ended June 30, 2015.

Illustration 7-2 Inter-fund Transfers for the Year Ended June 30, 2015

Transfer to General Fund from: Transfer from General Fund to:

Streets and Roads – Capital Projects Fund $ 10,270 $ 11,159 Streets and Roads – Capital Projects Fund Other Capital Projects Fund . 8,541 Other Capital Projects Fund Fire& Rescue Fund 7,472 583 Fire & Rescue Levy Fund Nonmajor Governmental Funds 5,838 4,359 Nonmajor Governmental Funds Landfill Enterprise Fund 1,914 - Landfill – Enterprise Fund Internal Service Funds 2,763 2,786 Internal Service Funds Parks & Recreation – Enterprise Fund 213 1,627 Parks & Recreation – Enterprise Fund Innovation--Enterprise Fund - 35 Innovation – Enterprise Fund Total General Fund Transfers In 28,470 29,090 Total General Fund Transfers Out

81 Illustration 7-2 (cont'd) Inter-fund Transfers for the Year Ended June 30, 2015 Transfer to Streets and Roads - Capital Projects Fund Transfer from Streets and Roads - Capital Projects from: Fund to:

General Fund 11,159 8,500 General Fund Other Capital Projects Fund 200 66 Other Capital Projects Fund Total Streets and Roads – Capital Projects Fund Total Streets and Roads-- Capital Projects Fund 8,566 Transfers In 11,359 Transfers out Transfer to Other Capital Projects Fund from: Transfer from Other Capital Projects Fund to: General Fund 8,541 1,770 General Fund Streets and Roads Capital Projects Fund 66 200 Streets and Roads Capital Projects Fund Internal Service Funds 275 - Internal Service Funds Nonmajor Governmental Funds 1,128 - Nonmajor Governmental Funds Total Other Capital Projects Fund Transfers In Total Other Capital Projects Fund Transfers Out 10,010 1,970 Transfers to Fire & Rescue Levy Fund from: Transfers from Fire & Rescue Levy Fund to: General Fund 583 7,472 General Fund Internal Service Funds - 98 Internal Service Fund Total Fire & Rescue Levy Special Revenue Funds Total Fire & Rescue Levy Fund Transfers In 583 7,570 Transfers Out Transfer to Nonmajor Governmental Funds from: Transfer from Nonmajor Governmental Funds to: General Fund 4,359 5,838 General Fund Nonmajor Governmental Funds 10 10 Nonmajor Governmental Funds Other Capital Projects Fund - 1,128 Other Capital Projects Fund Internal Service Fund 61 336 Internal Service Fund Total Nonmajor Governmental Funds Transfers In Total Nonmajor Governmental Fund Transfers Out 4,430 7,312 Transfers to Landfill Enterprise Fund from: Transfers from Landfill Enterprise Fund to:

General Fund - 1,914 General Fund Total Landfill Enterprise Fund Transfers In - 1,914 Total Landfill Enterprise Fund Transfers Out Transfers to Innovation Enterprise Fund from: Transfers from Innovation Enterprise Fund to: General Fund 35 - General Fund Total Innovation Enterprise Fund Transfers In 35 - Total Innovation Enterprise Fund Transfers Out

Transfers to Parks & Recreation Enterprise Fund from: Transfers from Parks & Recreation Enterprise Fund to:

General Fund 1,627 213 General Fund Total to Parks & Recreation Enterprise Fund Transfers Transfers from Parks & Recreation Enterprise In 1,627 213 Transfers Out Transfers to Internal Service Funds from: Transfers from Internal Service Funds to: General Fund 2,786 2,763 General Fund Nonmajor Governmental Funds 336 61 Nonmajor Governmental Funds Fire& Rescue Levy Fund 98 - Fire & Rescue Levy Fund Other Capital Projects Fund - 275 Other Capital Projects Fund Total Internal Service Funds Transfers In Total Internal Service Funds Transfers Out 3,220 3,099

Total Primary Government Transfers In $ $ Total Primary Government Transfers Out 59,734 59,734

82 NOTE (8) – RECEIVABLES /PAYABLES WITH COMPONENT UNITS

Receivables/payables transactions between the primary government and component units are generally made for the purpose of providing operational support for the receiving fund. Illustration 8-1 summarizes the amounts due from the primary government and due to the component units at June 30, 2015.

Illustration 8-1 Due To Primary Government/Due From Component Units at June 30, 2015 Due from Primary Due to Component Unit Government PRIMARY GOVERNMENT Governmental Activities $ - 327 COMPONENT UNITS School Board 327 - Total Reporting Entity $ 327 327

NOTE (9) - CAPITAL ASSETS

Illustration 9-1 summarizes the changes in capital assets of the governmental activities for the year ended June 30, 2015.

Illustration 9-1 Governmental Activities – Changes in Capital Assets June 30, 2014 Additions Deletions Transfers June 30, 2015 Governmental Activities: Capital assets not being depreciated: Land $ 111,379 3 (7) - 111,375 Construction in progress 31,509 40,174 (11,145) - 60,538 Total capital assets not being depreciated 142,888 40,177 (11,152) - 171,913

Buildings and other capital assets, being depreciated: Buildings and improvements to sites 239,402 4,964 (164) - 244,202 Equipment 58,617 4,738 (1,434) (139) 61,782 Vehicles 44,119 5,416 (2,256) 40 47,319 Infrastructure 196,003 11,533 - - 207,536 Intangibles 34,594 1,414 - 139 36,147 Library collections 18,917 1,306 (2,623) - 17,600 Total buildings and other capital assets being depreciated 591,652 29,371 (6,477) 40 614,586

Less accumulated depreciation for: Buildings and improvements to sites (100,274) (7,018) 129 - (107,163) Equipment (38,754) (5,051) 1,407 - (42,398) Vehicles (31,266) (4,251) 2,236 (40) (33,321) Infrastructure (36,492) (4,253) - - (40,745) Intangibles (32,694) (942) - - (33,636) Library collections (15,088) (1,420) 2,623 - (13,885) Total accumulated depreciation (254,568) (22,935) 6,395 (40) (271,148) Buildings and other capital assets, net 337,084 6,436 (82) - 343,438 Governmental activities capital assets, net $ 479,972 46,613 (11,234) - 515,351

83 Depreciation expense was charged to the following functions of the governmental activities:

General government $ 1,062 Judicial administration 768 Public safety 6,397 Public works 531 Health and welfare 228 Parks, recreational and cultural 4,111 Community development 5,625 Capital assets held by the internal service funds are charged to the various functions based on their usage of the assets 4,213 Total $ 22,935

Illustration 9-2 summarizes the changes in capital assets of the business-type activities for the year ended June 30, 2015.

Illustration 9-2 Business-Type Activities – Changes in Capital Assets June 30, 2014 Additions Deletions Transfers June 30, 2015 Business-Type Activities: Capital assets not being depreciated: Land $ 24,195 - - - 24,195 Construction in progress 3,078 10,605 (9,751) - 3,932 Total capital assets not being depreciated 27,273 10,605 (9,751) - 28,127

Buildings and other capital assets, being depreciated Buildings and improvements to sites 87,241 9,793 - - 97,034 Equipment 5,209 248 (6) - 5,451 Vehicles 6,129 - (82) (40) 6,007 Total buildings and other capital assets being depreciated 98,579 10,041 (88) (40) 108,492

Less accumulated depreciation for: Buildings and improvements to sites (70,051) (4,590) - - (74,641) Equipment (3,421) (339) 6 - (3,754) Vehicles (3,912) (419) 82 40 (4,209)

Total accumulated depreciation (77,384) (5,348) 88 40 (82,604)

Buildings and other capital assets, net 21,195 4,693 - - 25,888

Business-type activities capital assets, net $ 48,468 15,298 (9,751) - 54,015

Depreciation expense was charged to the following business-type activities:

Landfill $ 4,198 Parks, recreational & cultural 1,150 Total $ 5,348

84 Illustration 9-3 summarizes the changes in capital assets of the Adult Detention Center component unit activities for the year ended June 30, 2015.

Illustration 9-3 Adult Detention Center Component Unit – Changes in Capital Assets June 30, 2014 Additions Deletions Transfers June 30, 2015 Adult Detention Center: Capital assets not being depreciated: Land $ 31 - - - 31 Total capital assets not being depreciated 31 - - - 31

Buildings and other capital assets, being depreciated: Buildings and improvements to 85,544 - - - 85,544 sites Equipment 770 - (44) - 726 Vehicles 874 - (146) - 728 Total buildings and other capital assets being depreciated 87,188 - (190) - 86,998

Less accumulated depreciation: Buildings and improvements to sites (18,309) (2,220) - (20,529) Equipment (461) (63) 42 - (482) Vehicles (615) (72) 146 - (541)

Total accumulated depreciation (19,385) (2,355) 188 - (21,552)

Buildings and other capital assets, net 67,803 (2,355) (2) - 65,446

Adult Detention Center capital assets, net $ 67,834 (2,355) (2) - 65,477

Depreciation expense was charged to the following Adult Detention Center activities:

Public safety $ 2,355

85 Illustration 9-4 summarizes the construction in progress at June 30, 2015.

Illustration 9-4 Construction in Progress at June 30, 2015 Amount Expended to Date Project Balance Authorized PRIMARY GOVERNMENT 800 MHz Radio Communications System $ 12,037 9,053 2,984 Financial Management System Replacement 10,300 3,783 6,517 Record Management System (RMS) Replacement 10,672 7,163 3,509 Computer-Aided Dispatch (CAD) System 6,533 5,071 1,462 Land Use Information System 4,144 2,334 1,810 Business Continuity and Disaster Recovery 2,742 1,141 1,601 Sheriff Office Information System 339 139 200 Tax Administration System Replacement 2,000 617 1,383 INET Upgrade 1,347 1,254 93 Call Center Server 33 12 21 Central District Police Station 28,600 1,771 26,829 Montclair Community Library 15,386 9,321 6,065 Gainesville - Haymarket Community Library 14,302 8,324 5,978 Chinn Library Circular Desk 100 88 12 Independent Hill Library Pavilion 35 2 33 Nokesville Fire & Rescue Reconstruction 9,220 561 8,659 Bacon Race Fire Station 11,160 570 10,590 Fire and Rescue System Vehicle Replacements 7,999 6,420 1,579 Coles Fire Station Reconstruction 5,442 540 4,902 Gainesville Fire & Rescue Station Renovation 5,075 545 4,530 Owens Building Power Redundancy 1,616 1,382 234 Facility Inspection Web and Mobile Solution 121 78 43 ADC Phase 2 Expansion 5,071 272 4,799 Molinari Juvenile Shelter Generator 32 18 14 PSTC Rifle Range 1,736 4 1,732 Rippon Lodge Restoration 90 63 27 Brentsville Jail Restoration 1,213 609 604 Fleet Calibration Building 444 73 371 Dove Landing Construct Entrance Road and Parking Lot 100 78 22 Potomac Heritage Trail 1,647 800 847 Rollins Ford Parks – Phase I 2,456 534 1,922 Lake Ridge Trail 670 64 606 Broad Run Trail 596 504 92 Long Park 736 331 405 Neabsco Trail 335 269 66 Hellwig Park Soccer Field Lights 1,100 670 430 Locust Shade Park Retaining Wall 22 16 6 Catharpin Trail 30 1 29 Veterans Park Soccer Field Lights 583 275 308 Veterans Park Restroom 300 39 261 Nokesville Park Softball Lights 650 281 369 Cloverdale Park Softball Field Lights 367 166 201 Dale City Recreation Center Ventilation Upgrade 143 143 - Total $ 167,524 60,538 106,986

The $3,932 construction in progress balance of business-type activities represents capital improvements at the landfill complex, including the construction and installation of landfill liners to improve the landfill and protect public health, groundwater and

86 the environment and is recorded in the Landfill enterprise fund. The Parks & Recreation enterprise fund did not have any construction in progress at June 30, 2015.

Illustration 9-5 summarizes the changes in capital assets of the School Board component unit activities for the year ended June 30, 2015.

Illustration 9-5 School Board Component Unit – Changes in Capital Assets Additions/ Deletions/ June 30, 2014 June 30, 2015 Transfers Transfers School Board: Capital assets not being depreciated: Land $ 67,373 - (62) 67,311 Construction in progress 52,661 105,591 (32,254) 125,998 Total capital assets not being depreciated 120,034 105,591 (32,316) 193,309

Buildings and other capital assets, being depreciated: Buildings and improvements to sites 1,334,176 32,319 - 1,366,495 Library books 3,455 827 (672) 3,610 Equipment 36,807 3,399 (227) 39,979 Intangibles 3,516 - - 3,516 Vehicles 90,052 9,326 (6,993) 92,385 Total buildings and other capital assets being depreciated 1,468,006 45,871 (7,892) 1,505,985

Less accumulated depreciation for: Buildings and improvements to site (334,453) (26,845) (361,298) Library books (2,162) (722) 671 (2,213) Equipment (20,931) (2,910) 175 (23,666) Intangibles (1,153) (502) - (1,655) Vehicles (49,442) (6,606) 6,756 (49,292)

Total accumulated depreciation (408,141) (37,585) 7,602 (438,124)

Buildings and other capital assets, net 1,059,865 8,286 (290) 1,067,861

School Board capital assets, net $ 1,179,899 113,877 (32,606) 1,261,170

Depreciation expense was charged to the following School Board component unit activities:

Instruction Regular $ 27,015 Special 363 Other 30 Support Services General administration 1,099 Student services 9 Curricular/staff development 10 Pupil transportation 6,345 Operations 38 Maintenance 141 Central business services 2,498 Food service 37 Total $ 37,585

87 Illustration 9-6 summarizes the changes in capital assets of the Convention & Visitors Bureau component unit for the year ended June 30, 2015.

Illustration 9-6 Convention & Visitors Bureau Component Unit– Changes in Capital Assets Additions/ Deletions/ June 30, 2014 June 30, 2015 Transfers Transfers Convention & Visitors Bureau: Capital assets, being depreciated: Furniture and equipment $ 143 26 (52) 117 Leasehold Improvements 13 - - 13 Telephone System 14 - (8) 6

Total capital assets being depreciated 136 170 26 (60)

Less accumulated depreciation for: Furniture and equipment (118) (10) 48 (80) Leasehold improvements (2) - - (2) Telephone system (12) (2) - (14)

Total accumulated depreciation (132) (12) 48 (96)

CVB capital assets, net $ 38 14 (12) 40

Depreciation expense was charged to the following Convention & Visitors Bureau component unit functions:

Community development $ 12

NOTE (10) - LONG-TERM DEBT

The following bonds and capital lease obligations were issued in fiscal year 2015:

On April 8, 2014, the Board of County Supervisors approved Resolution No. 14-212 authorizing the sale of General Obligation School Bonds to be sold to the Virginia Public School Authority in an amount not to exceed $91,910 for the purpose of financing various school projects. On September 23, 2014, the County sold to the Virginia Public School Authority Prince William County Special Obligation School Financing Bonds Series 2014 in the par amount of $82,545.

On October 7, 2014, the Board of County Supervisors approved Resolution No. 14-596 authorizing execution and delivery of the necessary financing and leasing documents required for the refinancing of various road and public safety projects and sale of bonds by the Virginia Resource Authority in the par amount not to exceed $46,745. On November 5, 2014, the Virginia Resource Authority sold VRA Series 2014 bonds that included $35,675 on behalf of the County.

For information on interest rates, see Schedules 25 and 26.

Bonds Payable

The majority of the County's bonds payable are general obligations of the County and are secured by its full faith and credit. Some of the County’s bonds are subject to arbitrage, and as such, actuarial calculations are made and liabilities are recorded annually.

A portion of the bonds are intended to be repaid from specific revenue sources as outlined below:

The outstanding IDA Lease Revenue Refunding Bond, Series 2005, of $3,345, is a limited obligation of the IDA, payable solely from a pledge of rent and receipts to be derived from a financing lease between the IDA and the County and certain

88 funds held under an indenture of trust, including a debt service reserve account. The balance in this reserve account at June 30, 2015, was $1,092 and is included in the restricted cash balance shown in Illustration 2-11. The outstanding Parks & Recreation enterprise fund Refunding Bonds of $10,555 are paid from revenues of Forest Greens Golf Course, Generals Ridge Golf Course, and Splashdown Water Park.

The Commonwealth imposes no legal debt limitation on counties. Except for Virginia Public School Authority general obligation issuances, a referendum must be approved by the voters prior to the issuance of general obligation bonds. The County established a self-imposed limit on its total bonded debt of 3% of the net assessed valuation of taxable property. The County includes general obligation bonds, appropriation debt supported by tax revenue, and School Board bonds and literary fund loans in its determination of total bonded debt. As of June 30, 2015, the County's total bonded debt, as defined above, was $725,865 less than the self-imposed limitation. In addition, there are a number of limitations and restrictions contained in the various bond indentures. The County is in compliance with all such limitations and restrictions.

The annual debt service requirements of general obligation and lease revenue bonds outstanding in governmental funds as of June 30, 2015, including interest payments, are shown in Illustration 10-1. Refer to Schedule 25 for information related to maturity dates and interest rates for these obligations.

Illustration 10-1 Governmental Activities – Debt Service Requirements – General Obligation and Revenue Bonds Principal Interest Total Designated for Roads, Parks & Other General County Projects Year Ending June 30: 2016 $ 12,672 5,850 18,522 2017 12,740 5,289 18,029 2018 12,700 4,759 17,459 2019 10,730 4,190 14,920 2020 10,655 3,764 14,419 2021 thru 2025 49,235 12,623 61,858 2026 thru 2030 23,430 3,883 27,313 2031 thru 2034 6,691 530 7,221 Subtotal 138,853 40,888 179,741 Designated for School Board Projects Year Ending June 30: 2016 52,428 28,206 80,634 2017 51,025 25,779 76,804 2018 50,980 23,510 74,490 2019 48,385 21,232 69,617 2020 47,630 18,948 66,578 2021 thru 2025 203,205 63,360 266,565 2026 thru 2030 125,860 23,923 149,783 2031 thru 2035 51,125 3,696 54,821 Subtotal 630,638 208,654 839,292 Total $ 769,491 249,542 1,019,033

89 The annual debt service requirements of all bonds outstanding in business-type activities as of June 30, 2015, including interest payments, are shown in Illustration 10-2.

Illustration 10-2 Business-type Activities – Debt Service Requirements – Revenue Bonds Principal Interest Total Year Ending June 30: 2016 $ 590 411 1,001 2017 610 393 1,003 2018 630 369 999 2019 650 344 994 2020 680 318 998 2021 thru 2025 3,810 1,180 4,990 2026 thru 2029 3,585 370 3,955

Subtotal 10,555 3,385 13,940 Add: unamortized premium on issuance of revenue bonds 17 Total $ 10,572

Operating and Capital Leases

The County leases real estate and equipment under operating and capital leases expiring at various dates through 2025. All leases are non-cancelable except they are contingent upon the Board appropriating funds for each year's payments. The County also has various short-term leases for real estate and equipment with initial or remaining non-cancelable lease terms of less than one year as of June 30, 2015. Total rental expense under operating leases of the primary government for the year ended June 30, 2015, was $6,960. Illustration 10-3 summarizes the minimum lease commitments under the County’s operating leases.

Illustration 10-3 Minimum Lease Commitments – Operating Leases Year Ending June 30: 2016 $ 6,443 2017 5,637 2018 5,013 2019 4,445 2020 3,032 2021-2025 3,380 Total minimum payments $ 27,950

90 Illustration 10-4 presents the assets that were acquired through capital lease obligations.

Illustration 10-4 Assets Acquired Through Capital Lease Obligations Governmental Activities ADC Component Unit Other capital assets: Buildings $ 91,537 6,459 Improvements 13,576 105 Machinery and Equipment 2,258 - Vehicles 2,578 - Less: accumulated depreciation (37,490) (3,988) Total assets acquired through capital lease obligations $ 72,459 2,576

Illustration 10-5 presents a summary of minimum lease commitments on all capital leases.

Illustration 10-5 Minimum Lease Commitments – Capital Lease Obligations Primary Government Year Ending June 30: 2016 $ 18,762 2017 19,335 2018 15,389 2019 18,101 2020 14,308 2021 thru 2025 60,927 2026 thru 2030 19,354 Total minimum payments 166,176 Less: Interest (34,714) Present value of future minimum payments $ 131,462

91 Changes in Long-Term Liabilities:

Changes in long-term liabilities of governmental activities for the year ended June 30, 2015, are shown in Illustration 10-6.

Illustration 10-6 Governmental Activities – Changes in Long-Term Liabilities Due in Beginning Ending Due within Additions Reductions More Than Balance Balance One Year One Year General obligation bonds: Designated for Roads, Parks and Other General County projects $ 154,132 - (15,279) 138,853 126,181 12,672 Designated for School Board projects 596,438 82,546 (48,346) 630,638 578,210 52,428

Subtotal 750,570 82,546 (63,625) 769,491 704,391 65,100 Capital lease obligations 145,592 35,675 (49,805) 131,462 118,470 12,992 Unpaid losses and related 17,306 39,394 (37,803) 18,897 12,191 6,706 liabilities (Note 16) Net pension liability 1,936 100,670 (1,936) 100,670 100,670 - Surplus distribution 4,982 - (868) 4,114 3,249 865 payable Compensated absences 30,698 20,103 (18,633) 32,168 30,543 1,625 Unamortized premium 72,732 13,467 (6,579) 79,620 72,328 7,292

Total $ 1,023,816 291,855 (179,249) 1,136,422 1,041,842 94,580

Long-term liabilities of governmental activities are generally liquidated by the General Fund. Funds of the Intra-County Services internal service fund are used to liquidate approximately 5% of compensated absences.

Changes in long-term liabilities of business-type activities for the year ended June 30, 2015, are shown in Illustration 10-7.

Illustration 10-7 Business-Type Activities – Changes in Long-Term Liabilities Due in More Beginning Ending Due Within Additions Reductions Than One Balance Balance One Year Year Revenue bonds $ 11,135 - (580) 10,555 9,965 590 Unamortized premium on issuance of revenue bonds 18 - (1) 17 16 1 Revenue bonds, net 11,153 (581) 10,572 9,981 591

Capital Lease obligations 596 - (301) 295 99 196 Compensated absences 884 801 (713) 972 923 49 Net pension liability - 2,723 - 2,723 2,723 - Accrued closure liability (Note 13,467 2,386 (1,367) 14,486 12,730 1,756 12) Total $ 26,100 5,910 (2,962) 29,048 26,456 2,592

92 Changes in deferred outflows of resources of business-type activities for the year ended June 30, 2015, are shown in Illustration 10-8.

Illustration 10-8 Governmental Activities – Changes in Deferred Outflow of Resources Beginning Additions Reductions Ending Balance Balance Unamortized Deferred loss on refunding $ 21,315 4,783 (2,543) 23,555 Related to pensions $ - 29,328 - 29,328

Changes in deferred outflows of resources of business-type activities for the year ended June 30, 2015, are shown in Illustration 10-9

Illustration 10-9 Business-Type Activities – Changes in Deferred Outflow of Resources Beginning Additions Reductions Ending Balance Balance

Unamortized Deferred loss on $ 628 - (50) 578 refunding Related to pensions $ - 740 - 740

Changes in long-term liabilities of the component units for the year ended June 30, 2015, is shown in Illustration 10-10.

Illustration 10-10 Component Units – Changes in Long-Term Liabilities Due in Due Beginning Ending More Additions Reductions Within Balance Balance Than One Year One Year School Board: Compensated absences $ 29,769 10,183 (10,017) 29,935 19,428 10,507 Net pension liability - 774,927 - 774,927 774,927 - Pollution remediation 449 451 (707) 193 - 193 Claims liabilities 13,637 77,547 (76,748) 14,436 4,444 9,992

Total School Board component unit 43,855 863,108 (87,472) 819,491 798,799 20,692

Adult Detention Center: Compensated absences 3,136 764 (699) 3,201 3,019 182 Net pension liability - 9,946 - 9,946 9,946 - Total Adult Detention Center component 3,136 10,710 (699) 13,147 12,965 182 unit

Total $ 46,991 873,818 (88,171) 832,638 811,764 20,874

Defeasance of Long-Term Debt

In prior years the County defeased certain bonds, some of which have been called and repaid. Accordingly, the trust account assets and the liability for the defeased bonds were not included in the County’s financial statements. At June 30, 2015, $109,992 in principal of bonds outstanding is considered defeased by the County.

93 Component Unit Debt

The Code of Virginia establishes the School Board as a legal entity holding title to all school assets but having no taxing authority. The County must issue debt through bond referendum, Virginia Public School Authority or Literary Fund. Historically, the County has reported all School Board assets along with the related debt in the School Board component unit column of its CAFR. GASB 34 provided specific guidance that requires localities to separate internal activities (within the primary government) from intra-entity activities (between the primary government and its component units). This guidance prevents local governments from allocating debt incurred “on-behalf” of school boards to the School Board component unit column.

Therefore, the School Board assets are included in the component unit column while the debts related to those assets are included in the Primary Government – Governmental Activities column on Exhibit 1. At June 30, 2015, the County has outstanding debt of $630,638 reflected in the Primary Government – Governmental Activities column on Exhibit 1 as a reduction to the unrestricted net position of the County. Similarly, assets of the Adult Detention Center are included in the component unit column, while the debts related to those assets are included in the Primary Government – Governmental Activities column on Exhibit 1. At June 30, 2015, the County has outstanding debt of $19,955 reflected in the Primary Government – Governmental Activities column on Exhibit 1 as a reduction to the unrestricted net position of the County, respectively.

To assist the readers in understanding this relationship and to more accurately reflect the total entity’s financial condition, a total Reporting Entity column has been added to match the asset and related debt information.

94 NOTE (11) – FUND BALANCES / NET POSITION llustration 11-1 details the fund balances of the County’s Governmental funds and Adult Detention Center (ADC) component unit at June 30, 2015.

Illustration 11-1 Fund Balances at June 30, 2015 Governmental Funds Fire & Capital Total ADC General Rescue Other Funds Projects Governmental Component Fund Levy Governmental Funds Funds Unit Funds Nonspendable in the form of: Inventory $ 158 - - - 158 - Prepaid expenditures 20 232 - - 252 - Restricted for: General government administration Debt service 1,091 - - - 1,091 - Defaulted subdivision 204 - - - 204 - Public safety Police 2,184 - - - 2,184 - Fire and rescue 4,464 - 86,617 - 91,081 - E911 operations 3,811 - - - 3,811 - EMS operations 1,470 - - - 1,470 - Site development - - - 3,483 3,483 - Public works Stormwater management - - - 7,568 7,568 - Transportation - - - 1,389 1,389 - Community development Development services - - - 2,364 2,364 - Housing - - - 1,962 1,962 - Committed for: General government administration General government operations 33,347 - - - 33,347 - Technology upgrades 4,280 - - - 4,280 - General government capital projects - 13,665 - - 13,665 - Judicial administration Courthouse complex master plan 224 529 - - 753 - Public safety Police operations 234 - - - 234 - AED replacement 2,422 - - - 2,422 - Public safety capital projects - 13,197 - - 13,197 - Adult detention center - - - - - 3,000 Public works Unspent bond proceeds - 25,710 - - 25,710 - Street and roads projects 5,282 3,091 - - 8,373 - Public transit 1,210 - - - 1,210 - Public works capital projects - 2,422 - - 2,422 - Health and welfare Health and welfare projects - 85 - - 85 - Parks, recreational and cultural Current parks projects 160 5,128 - - 5,288 - Future parks projects 11,056 - - - 11,056 - Libraries (48) (13,766) - - (13,814) -

95 Illustration 11-1 (cont'd) Fund Balances at June 30, 2015 Governmental Funds Fire & Capital Total ADC General Rescue Other Funds Projects GovernmentaC Component Fund Levy Governmental Funds Unit Funds Funds Community development Economic development projects - 6,722 - - 6,722 - Tourism 525 - - - 525 - Assigned for: General government administration 23,787 - - - 23,787 - Judicial administration 209 - - - 209 - Public safety 1,702 - - - 1,702 907 Public works 2,739 - - - 2,739 - Health and welfare 117 - - - 117 - Parks, recreational and cultural 1,013 - - - 1,013 - Community development 280 - - - 280 - Unassigned 73,055 - - - 73,055 7,493

Total $ 174,996 57,015 86,617 16,766 335,394 11,400

For further information about each classification of fund balance, see Note 1<.

Non-spendable Fund Balance. The amounts that are either not in spendable form or are legally or contractually required to be maintained intact.

Restricted Fund Balances. The portion of fund equity appropriated for expenditures or legally segregated for a specific future use. Committed and Assigned fund balances represent the County's managerial plans for future use of financial resources. Unassigned fund balance is the residual classification for the general fund. The County’s restricted fund balance includes amounts restricted for debt service, unspent bond proceeds, cash equivalents, grants, and related to revenues restricted in the Special Revenue funds.

Committed Fund Balance. The County’s highest level of decision-making authority is the Board of County Supervisors. The formal action required to establish, modify, or rescind a fund balance commitment is a resolution of the Board of County Supervisors.

Assigned Fund Balance. Assignment of fund balance occurs only through the encumbrance of funds for particular purposes for which there is no existing fund balance restriction or commitment. Department directors have the authority to approve such encumbrances; the County Executive has the authority to modify or rescind any fund balance assignment per §100.12.6(a) of the County’s Purchasing Regulations. Fund balance assignments resulting from the encumbrance of funds are governed through the County’s Purchasing Regulations.

Fund Balance Classification. The County considers restricted amounts to have been spent first when both restricted and unrestricted fund balance is available. When amounts from multiple fund balance classifications are eligible to be expended, the County considers the amounts to be spent first from the category with the most stringent constraints and last from the category with the least stringent constraints.

Net Position. The reporting entity reported $183,503 of restricted net position at June 30, 2015. Of this amount, $103,383 is restricted by enabling legislation.

96 Illustration 11-2 details the encumbrances of the County’s Governmental funds and Adult Detention Center (ADC) component unit at June 30, 2015.

Illustration 11-2 Encumbrances at June 30, 2015 Governmental Funds Capital Fire & Total ADC Other Funds General Fund Projects Rescue Governmental Component Governmental Funds Levy Funds Funds Unit Encumbrances $ 6,551 54,454 10,834 1,417 73,256 907

NOTE (12) – LANDFILL / CLOSURE AND POST CLOSURE CARE COST

In fiscal year 2015, the Landfill enterprise fund had no outstanding debt and there were no bond coverage requirements.

State and federal laws and regulations require the County to place a final cover on its Independent Hill landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for 30 years after closure. Although closure and post closure care costs will be paid only near or after the date that the landfill stops accepting waste, the County reports a portion of these closure and post closure care costs as an operating expense in each period based on landfill capacity used as of each financial statement date. The $14,486 reported as landfill closure and post closure care liability at June 30, 2015, represents the cumulative amount reported to date based on the use of 100% of the Phase I landfill, 30% of the Phase 2 landfill, and 42% of the total landfill capacity for the southern portion of the landfill, including Phases I, II and III. The total maximum exposure liability for closure and post closure care for all County solid waste facilities during the life of the landfill, as reported to the Virginia Department of Environmental Quality in December 2014, is $34,026. The County will recognize the remaining total estimated cost of closure and post closure care for the southern portion of the landfill of $19,540 as the remaining estimated capacity of the southern portion of the landfill is filled. These amounts are based on what it would cost to perform all closure and post closure care in 2015. The County expects to close the southern portion of the landfill site in the year 2033 and the entire landfill in 2060. The total current cost of landfill closure and post closure care is an estimate and subject to changes resulting from inflation, deflation, technology, or changes in applicable laws or regulations.

97 NOTE (13) - DEFINED BENEFIT PENSION PLANS

Illustration 13-1 Prince William County’s Defined Benefit Pension Plans Net Pension Liability Deferred Deferred Change in Outflows due to Inflows due to June 30, 2014 FY2014 Beginning FY2015 Pension actuarial actuarial Pension June 30, 2014 Employer FY2015 Net Expenditures / changes or changes or June 30, 2015 Liabilities Pension Assets Contributions position Expense: experience: experience: Ending NPL:

Virginia Retirement System $ 1,039,004 (898,044) (30,488) $ 110,472 17,000 - (13,657) $ 113,815 Police and Fire Retirement Plan 33,266 (33,144) (1,007) (885) 564 - (485) (806) Length of Service Award Program 14,651 (12,836) (2,115) (300) 562 - 68 330

Total $ 1,086,921 (944,024) (33,610) $ 109,287 18,126 - (14,074) $ 113,339

Governmental $ 928,785 (807,341) (28,971) $ 92,473 15,535 - (11,996) $ 96,012

Landfill 13,507 (11,675) (396) 1,436 221 - (178) 1,479 Dept of Parks and Rec 11,325 (9,789) (332) 1,204 189 - (149) 1,244 Internal Services - DoIT 28,469 (24,606) (835) 3,028 500 - (374) 3,154 Internal Services - Fleet 9,143 (7,903) (268) 972 146 - (120) 998 Internal Services - Construction Crew 4,052 (3,502) (119) 431 58 - (53) 436 Medical Internal Service Fund 623 (539) (18) 66 12 - (8) 70 Total proprietary funds 67,119 (58,014) (1,968) 7,137 1,126 - (882) 7,381

Adult Detention Center 91,017 (78,669) (2,671) 9,677 1,465 - (1,196) 9,946

Total $ 1,086,921 (944,024) (33,610) $ 109,287 18,126 - (14,074) $ 113,339

Note: Amounts are allocated to the funds based on proportion of pension contributions paid.

Schools $ 776,140 (58,774) (58,751) 834,891 62,660 940 (123,564) $ 774,927

98 Illustration 13-2 represents contributions into plans after the measurement date of June 30, 2014.

Illustration 13-2 Prince William County’s Defined Benefit Pension Plans Deferred Outflows Due to Contributions Made After June 30, 2014 Measurement Date

Beginning Change in Deferred Ending Deferred FY 2015 Contributions to: Deferred Outflows Outflows: Outflows

Virginia Retirement System $ - 30,690 $ 30,690 Police and Fire Retirement Plan - 1,083 1,083 Length of Service Award Program - 940 940 Total $ - 32,713 $ 32,713

Governmental $ - 28,037 $ 28,037

Landfill - 399 399 Dept of Parks and Rec - 341 341 Internal Services - DoIT - 902 902 Internal Services - Fleet - 264 264 Internal Services - Construction - 104 104 Crew Medical Internal Service Fund - 21 21 Total proprietary funds 2,031 2,031 -

Adult Detention Center - 2,645 2,645

Total $ - 32,713 $ 32,713

Schools $ - 74,693 $ 74,693

Note: Amounts are allocated to the funds based on proportion of pension contributions paid.

Virginia Retirement System

Plan Description:

The County and the Adult Detention Center component unit contribute to the Virginia Retirement System (VRS), an agent and cost-sharing, multiple-employer defined benefit pension plan administered by the VRS.

Professional and non-professional employees of the School Board are also covered by the VRS. Professional employees participate in a VRS statewide teacher cost sharing pool, and non-professional employees participate as a separate group in the agent multiple-employer retirement system. The Prince William County Public Schools retirement plans are reported separately in their audited financial statements. Copies of these financial statements may be obtained by writing to the School Board’s Finance Division at P.O. Box 389, Manassas, Virginia 20108.

All full-time, salaried permanent (professional) employees of the School Board and employees of the County and the Adult Detention Center are automatically covered by VRS upon employment. Members earn one month of service credit for each month they are employed and they and their employer are paying contributions to VRS. Members are eligible to purchase prior public service, active duty military service, certain periods of leave and previously refunded VRS service as service credit in their plan.

The VRS administers three different benefit plans for local government employees – Plan 1, Plan 2, and the Hybrid Plan. Each plan has a different eligibility and benefit structure as set out below: 99 VRS Plan 1:

VRS Plan 1 is a defined benefit plan. The retirement benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula.

Eligible Members. Employees are in VRS Plan 1 if their membership date is before July 1, 2010 and were vested as of January 1, 2013.

Hybrid Opt-In Election. VRS non-hazardous duty covered Plan 1 members were allowed to make an irrevocable decision to opt into the Hybrid Plan during a special election window held January 1 through April 30, 2014. The Hybrid Plan’s effective date for eligible VRS Plan 1 members who opted in was July 1, 2014. If eligible deferred members returned to work during the election window, they were also eligible to opt into the Hybrid Plan.

Retirement Contributions. Employees contribute up to 5% of their compensation each month to their member contribution account through a pre-tax salary reduction. The County elected to phase in the required 5% member contribution; all employees will be paying the full 5% by July 1, 2016. Member contributions are tax-deferred until they are withdrawn as part of a retirement benefit or as a refund. The County makes a separate actuarially determined contribution to VRS for all covered employees. VRS invests both member and the County’s contributions to provide funding for the future benefit payment.

Creditable Service. Creditable service includes active service. Members earn creditable service for each month they are employed in a covered position and may include credit for prior service the member has purchased or additional creditable service the member was granted. A member’s total creditable service is one of the factors used to determine eligibility for retirement and to calculate the retirement benefit and the VRS Health Insurance Credit detailed in Note 15.

Vesting. Vesting is the minimum length of service a member needs to qualify for a future retirement benefit. Members become vested when they have at least five years (60 months) of creditable service. Vesting means members are eligible to qualify for retirement if they meet the age and service requirements for the plan. Members also must be vested to receive a full refund of their member contribution account balance if they leave employment and request a refund. Members are always 100% vested in their personal contributions into the Plan.

Calculating the Benefit. The Basic Benefit is calculated based on a formula using the member’s average final compensation, a retirement multiplier and total service credit at retirement. An early retirement reduction factor is applied to the Basic Benefit if the member retires with a reduced retirement benefit or selects a benefit payout option other than the Basic Benefit.

Average Final Compensation. A member’s average final compensation is the average of the 36 consecutive months of highest compensation as a covered employee.

Service Retirement Multiplier. The retirement multiplier is a factor used in the formula to determine a final retirement benefit. The retirement multiplier for non-hazardous duty members is 1.70%. The retirement multiplier for sheriffs and regional jail superintendents is 1.85%. The retirement multiplier of eligible political subdivision hazardous duty employees other than sheriffs and regional jail superintendents is 1.70% as elected by the County.

Normal Retirement Age. Normal Retirement Age is age 65.

Earliest Unreduced Retirement Eligibility. Members who are not in hazardous duty positions are eligible for an unreduced retirement benefit at age 65 with at least five years (60 months) of creditable service or at age 50 with at least 30 years of creditable service.

Hazardous duty members are eligible for an unreduced retirement benefit at age 60 with at least five years of creditable service or age 50 with at least 25 years of creditable service.

Earliest Reduced Retirement Eligibility. Members may retire with a reduced benefit as early as age 55 with at least five years (60 months) of creditable service or age 50 with at least 10 years of creditable service.

Hazardous duty members are eligible for a reduced retirement benefit at age 50 with at least five years of creditable.

Cost-of-Living Adjustment (COLA) in Retirement. The Cost-of-Living Adjustment (COLA) matches the first 3% increase in the Consumer Price Index for all Urban Consumers (CPI-U) and half of any additional increase (up to 4%) up to a maximum COLA of 5%.

100 Eligibility for COLA. For members who retire with an unreduced benefit or with a reduced benefit with at least 20 years of creditable service, the COLA will go into effect on July 1 after one full calendar year from the retirement date. For members who retire with a reduced benefit and who have less than 20 years of creditable service, the COLA will go into effect on July 1 after one calendar year following the unreduced retirement eligibility date.

Exceptions to COLA Effective Dates. The COLA is effective July 1 following one full calendar year (January 1 to December 31) under any of the following circumstances:

[ The member is within five years of qualifying for an unreduced retirement benefit as of January 1, 2013;

[ The member retires on disability;

[ The member retires directly from short-term or long-term disability under the Virginia Sickness and Disability Program (VSDP);

[ The member Is involuntarily separated from employment for causes other than job performance or misconduct and is eligible to retire under the Workforce Transition Act or the Transitional Benefits Program; or

[ The member dies in service and the member’s survivor or beneficiary is eligible for a monthly death-in-service benefit. The COLA will go into effect on July 1 following one full calendar year (January 1 to December 31) from the date the monthly benefit begins.

Disability Coverage. Members who are eligible to be considered for disability retirement and retire on disability, the retirement multiplier is 1.70% on all service, regardless of when it was earned, purchased or granted.

VSDP members are subject to a one-year waiting period before becoming eligible for non-work-related disability benefits.

Purchase of Prior Service. Members may be eligible to purchase service from previous public employment, active duty military service, an eligible period of leave or VRS refunded service as creditable service in their plan. Prior creditable service counts toward vesting, eligibility for retirement and the health insurance credit. Only active members are eligible to purchase prior service. When buying service, members must purchase their most recent period of service first. Members also may be eligible to purchase periods of leave without pay.

VRS Plan 2:

VRS Plan 2 is a defined benefit plan. The retirement benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula.

Eligible Members. Employees are in VRS Plan 2 if their membership date is on or after July 1, 2010, or their membership date is before July 1, 2010, and they were not vested as of January 1, 2013. Employees who are covered by enhanced benefits for hazardous duty employees hired on or after July 1, 2010, or their membership date is before July 1, 2010, and they were not vested as of January 1, 2013, are also eligible to participate in Plan 2.

Hybrid Opt-In Election. VRS Plan 2 members were allowed to make an irrevocable decision to opt into the Hybrid Plan during a special election window held January 1 through April 30, 2014. The Hybrid Plan’s effective date for eligible VRS Plan 2 members who opted in was July 1, 2014. If eligible deferred members returned to work during the election window, they were also eligible to opt into the Hybrid Plan.

Retirement Contributions. Employees contribute up to 5% of their compensation each month to their member contribution account through a pre-tax salary reduction.

Creditable Service. Creditable Service is the same as VRS Plan 1.

Vesting. Vesting is the same as VRS Plan 1.

Calculating the Benefit. See the definition detailed under VRS Plan 1.

Average Final Compensation. A member’s average final compensation is the average of their 60 consecutive months of highest compensation as a covered employee.

101 Service Retirement Multiplier. The multiplier is the same as VRS Plan 1 for service earned, purchased or granted prior to January 1, 2013, which is 1.70%. For non-hazardous duty members the retirement multiplier is 1.65% for creditable service earned, purchased or granted on or after January 1, 2013. For sheriffs and regional jail superintendents, and hazardous duty employees, the multipliers are the same as VRS Plan 1.

Normal Retirement Age. The Normal Retirement Age is the Normal Social Security retirement age. Hazardous duty employees normal retirement age is the same as VRS Plan 1.

Earliest Unreduced Retirement Eligibility. Members who are not in hazardous duty positions are eligible for an unreduced retirement benefit when they reach normal Social Security retirement age and have at least five years (60 months) of creditable service or when their age and service equal 90. Hazardous duty members’ eligibility is the same as VRS Plan 1.

Earliest Reduced Retirement Eligibility. Members may retire with a reduced benefit as early as age 60 with at least five years (60 months) of creditable service. Hazardous duty members’ eligibility is the same as VRS Plan 1.

Cost-of-Living Adjustment (COLA) in Retirement. The Cost-of-Living Adjustment (COLA) matches the first 2% increase in the CPI-U and half of any additional increase (up to 2%), for a maximum COLA of 3%.

Eligibility for COLA. The eligibility for COLA increases is the same as VRS Plan 1.

Exceptions to COLA Effective Dates. The exceptions are the same as VRS Plan 1.

Disability Coverage. Members who are eligible to be considered for disability retirement and retire on disability, the retirement multiplier is 1.65% on all service, regardless of when it was earned, purchased or granted.

VSDP members are subject to a one-year waiting period before becoming eligible for non-work-related disability benefits.

Purchase of Prior Service. Purchase of Prior Service is the same as VRS Plan 1.

The Hybrid Plan:

The Hybrid Plan combines the features of a defined benefit plan and a defined contribution plan. Most members hired on or after January 1, 2014 are in this plan, as well as VRS Plan 1 and VRS Plan 2 members who were eligible and opted into the plan during a special election window. (See “Eligible Members”)

[ The defined benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula.

[ The benefit from the defined contribution component of the plan depends on the member’s and County’s contributions into the plan and the investment performance of those contributions.

[ In addition to the monthly benefit payment payable from the defined benefit plan at retirement, a member may receive distributions from the balance in the defined contribution account, reflecting the contributions, investment gains or losses, and any required fees.

Eligible employees are in the Hybrid Plan if their membership date is on or after January 1, 2014. This includes members in VRS Plan 1 or VRS Plan 2 who elected to opt into the plan during the election window held January 1-April 30, 2014; the plan’s effective date for opt-in members was July 1, 2014. Employees who are covered by enhanced benefits for hazardous duty employees are not eligible to participate in the Hybrid Plan.

Retirement Contributions. A member’s retirement benefit is funded through mandatory and voluntary contributions made by the member and the County to both the defined benefit and the defined contribution components of the plan. Mandatory contributions are based on a percentage of the employee’s creditable compensation and are required from both the member and the County. Additionally, members may choose to make voluntary contributions to the defined contribution component of the plan, and the County is required to match those voluntary contributions according to specified percentages.

Creditable Service Defined Benefit Component. Under the defined benefit component of the Hybrid Plan, creditable service includes active service. Members earn creditable service for each month they are employed in a covered position. It also may include credit for prior service the member has purchased or additional creditable service the member was granted. A 102 member’s total creditable service is one of the factors used to determine their eligibility for retirement and to calculate the retirement benefit and the VRS Health Insurance Credit.

Creditable Service Defined Contributions Component. Under the defined contribution component of the Hybrid Plan, creditable service is used to determine the member’s vesting for the County’s contribution into the Plan.

Vesting Defined Benefit Component. Defined benefit vesting is the minimum length of service a member needs to qualify for a future retirement benefit. Members are vested under the defined benefit component of the Hybrid Plan when they reach five years (60 months) of creditable service. VRS Plan 1 or VRS Plan 2 members with at least five years (60 months) of creditable service who opted into the Hybrid Plan remain vested in the defined benefit component. Members are always 100% vested in their personal contributions into the plan.

Vesting Defined Contributions Component. Defined contribution vesting refers to the minimum length of service a member needs to be eligible to withdraw the employer contributions from the defined contribution component of the plan. Members are always 100% vested in the personal contributions into the plan.

Withdrawals. Upon retirement or leaving covered employment, a member is eligible to withdraw a percentage of the County’s contributions to the defined contribution component of the plan, based on service. [ After two years, a member is 50% vested and may withdraw 50% of County contributions;

[ After three years, a member is 75% vested and may withdraw 75% of County contributions; or

[ After four or more years, a member is 100% vested and may withdraw 100% of County contributions.

Distribution is not required by law until age 70½.

Calculating the Benefit Defined Benefit Component. Calculating the benefit is the same as detailed under VRS Plan 1.

Calculating the Benefit Defined Contribution Component. The benefit is based on contributions made by the member and any matching contributions made by the County, plus net investment earnings on those contributions.

Average Final Compensation. Average final compensation is calculated the same as VRS Plan 2. It is used in the retirement formula for the defined benefit component of the plan.

Service Retirement Multiplier. The retirement multiplier is 1.00%.

For members that opted into the Hybrid from VRS Plan 1 or VRS Plan 2, the applicable multipliers for those plans will be used to calculate the retirement benefit for service credited in those plans prior to opting out.

Normal Retirement Age Defined Benefit Component. Normal retirement age is the same as VRS Plan 2.

Normal Retirement Age Defined Contribution Component. Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Earliest Unreduced Retirement Eligibility Defined Benefit Component. Eligibility for an unreduced retirement benefit is the same as VRS Plan 2.

Earliest Unreduced Retirement Eligibility Defined Contribution Component. Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Cost-of-Living Adjustment (COLA) Defined Benefit Component. COLA is the same as VRS Plan 2.

Cost-of-Living Adjustment (COLA) Defined Contribution Component. Not applicable.

Eligibility for COLA. The eligibility for COLA increases is the same as VRS Plan 1 and VRS Plan 2.

Exceptions to COLA Effective Dates. The exceptions are the same as VRS Plan 1 and VRS Plan 2.

Disability Coverage. Hybrid Plan members are eligible to participate in the County’s Local Disability Program equivalent to the Commonwealth of Virginia’s Local Disability Program (VLDP). Hybrid Plan members (including VRS Plan 1 and VRS Plan 2 opt-ins) covered under the County’s Local Disability Program are subject to a one-year waiting period before becoming eligible for non-work related disability benefits. 103 Purchase of Prior Service Defined Benefit Component. Purchase of Prior Service is the same as VRS Plan 1 with the following exceptions: Hybrid Plan members are ineligible for ported service.

The cost of purchasing refunded service is the higher of 4% of creditable compensation or average final compensation.

Plan members have one year from their date of hire or return from leave to purchase all but refunded prior service at approximate normal cost. After that one-year period, the rate for most categories of service will change to actuarial cost.

Purchase of Prior Service Defined Contribution Component. Not applicable.

Employees Covered by Benefit Terms:

As of June 30, 2013 actuarial valuation, the following County employees and members were covered by benefit terms of the VRS:

Illustration 13-3 Prince William County - Virginia Retirement System (VRS) Plan Membership as of June 30, 2013

Inactive plan members or their beneficiaries currently receiving benefits 1,627 Inactive members: Vested inactive members 523 Non-vested inactive members 912 Inactive members active elsewhere in VRS 614 Total inactive members 2,049

Active employees 3,525 Total covered members 7,201

Contributions:

The VRS contribution requirement for active employees is governed by §51.1-145 of the Code of Virginia (1950), as amended, but may be impacted as a result of funding options provided to political subdivisions by the Virginia General Assembly. Employees are required to contribute 5.00% of their compensation toward their retirement. Prior to July 1, 2012, all or part of the 5.00% member contribution was assumed by the County. Beginning July 1, 2012 new employees were required to pay the 5.00% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5.00% member contribution. The County opted to phase in over a period of five years as permitted by the Code of Virginia by providing a salary increase equal to the amount of the increase in the employee-paid member contribution. The County’s contractually required contribution rate for the fiscal year ended June 30, 2015 was 13.32% of the covered employee compensation. This rate was based on an actuarially determined rate from an actuarial valuation as of June 30, 2013.

This rate, when combined with employee contributions, was expected to finance the costs of benefits earned by the employee during the year, with an additional amount to finance any unfunded accrued liability. Contributions to the VRS from the County were $30,960 and $30,491 for the years ended June 30, 2015 and June 30, 2014, respectively.

Detailed information about the VRS’s fiduciary net position is available in the separately issued VRS comprehensive annual financial report (CAFR). The VRS issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for the plans administered by VRS. A copy of the most recent report may be obtained from the VRS website at http://www.varetire.org/Pdf/Publications/2014-annual-report.pdf, or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500.

104 Net Pension Liability:

The County’s net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation performed as of June 30, 2013, using updated actuarial assumptions, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2014.

Actuarial Assumptions:

The total pension liability for employees in the Prince William County’s VRS plan was based on an actuarial valuation as of June 30, 2013, using the Entry Age Normal actuarial cost method. The following assumptions, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2014 are detailed in Illustration 13-4 below:

Illustration 13-4 Prince William County - Virginia Retirement System Actuarial Methods and Assumptions

Valuation Date June 30, 2013 Actuarial Cost Method Entry Age Normal Asset Valuation Method Fair Market Value Investment Rate of Return 7.0% net of investment expense Inflation 2.5%

Non-LEOS: Payroll Growth 3.5% - 5.35%, including inflation Mortality Rates 14% of deaths service related Mortality Pre-Retirement RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set forward 4 years and females were set back 2 years Post-Retirement RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year Post-Disablement RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement LEOS: Payroll Growth 3.5% - 4.75%, including inflation Mortality Rates 60% of deaths service related Mortality Pre-Retirement RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set back 2 years and females set back 2 years Post-Retirement RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year Post-Disablement RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement

* Administrative expenses as a percent of the market value of assets for the last experience study were found to be approximately 0.06% of the market assets for all of the VRS plans. This would provide an assumed investment return rate for GASB purposes of slightly more than the assumed 7.0%. However, since the difference was minimal, and a more conservative 7.0% investment return assumption provided a projected plan net position that exceeded the projected benefit payments, the long-term expected rate of return on investments was assumed to be 7.0% to simplify preparation of pension liabilities.

The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period from July 1, 2008 through June 30, 2012. Changes to the actuarial assumptions as a result of the experience study are as follows:

All Non-LEOS: - Update mortality table - Decrease in rates of service retirement - Decrease in rates of disability retirement 105 - Reduce rates of salary increase by 0.25% per year

Largest 10 –LEOS: - Update mortality table - Decrease in male rates of disability - Decrease in rates of disability retirement - Reduce rates of salary increase by 0.25% per year

All Others (Non 10 Largest) – LEOS: - Update mortality table - Adjustments to rates of service retirement for females - Increase in rates of withdrawal - Decrease in male and female rates of disability

Long-Term Expected Rate of Return:

The long-term expected rate of return on the County’s VRS plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of the County’s VRS plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long- term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimate of arithmetic real rates of return for each major asset class are summarized in the following table:

Illustration 13-5 Prince William County - Virginia Retirement System Long-Term Expected Rate of Return

Arithemetic Long-Term Asset Class (Strategy) Target Allocation Expected Rate of Return Weighted Average

U.S. Equity 19.50% 6.46% 1.26% Developed Non U.S Equity 16.50% 6.28% 1.04% Emerging Market Equity 6.00% 10.00% 0.60% Fixed Income 15.00% 0.09% 0.01% Emerging Debt 3.00% 3.51% 0.11% Rate Sensitive Credit 4.50% 3.51% 0.16% Non Rate Sensitive Credit 4.50% 5.00% 0.23% Convertibles 3.00% 4.81% 0.14% Public Real Estate 2.25% 6.12% 0.14% Private Real Estate 12.75% 7.10% 0.91% Private Equity 12.00% 10.41% 1.25% Cash 1.00% -1.50% -0.02%

100.00% 5.83%

Inflation 2.50% *Expected arithmetic 8.33% nominal return

* Using stochastic projection results provides an expected range of real rates of return over various time horizons. Looking at one year results produces an expected real return of 8.33% but also has a high standard deviation, which means there is high volatility. Over larger time horizons the volatility declines significantly and provides a median return of 7.44%, including expected inflation of 2.50%.

106 Discount Rate:

The discount rate used to measure the total pension liability was 7.00%. The projection of cash flows used to determine the discount rate assumed that County’s VRS plan member contributions will be made per the VRS Statutes and the employer contributions will be made in accordance with the VRS funding policy at rates equal to the difference between actuarially determined contribution rates adopted by the VRS Board of Trustees and the member rate. Through the fiscal year ending June 30, 2018, the rate contributed by the employer for the County’s VRS plan will be subject to the portion of the VRS Board- certified rates that are funded by the Virginia General Assembly. From July 1, 2018 on, participating employers are assumed to contribute 100% of the actuarially determined contribution rates. Based on those assumptions, the VRS plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore the long-term expected rate of return was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the Net Pension Liability to Changes in the Discount Rate:

Illustration 13-6 presents the net pension liability of the County using the discount rate of 7.00%, as well as what the County’s net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.00%) or one percentage point higher (8.00%) than the current rate:

Illustration 13-6 Prince William County - Virginia Retirement System Sensitivity of Liability as of June 30, 2014 1% Decrease Current Discount Rate 1% Increase (6.0%) (7.0%) (8.0%) County's net pension liability $ 280,840 $ 140,960 $ 24,808

Fiduciary Net Position:

Specific information about the County VRS plan’s audited Fiduciary Net Position Report is located at http://www.varetire.org/pdf/publications/gasb-68-schedule-political-subdivision-retirement-plans-2014.pdf page 7. Significant accounting policies of all plans and the fiduciary net positions are stated above.

The Changes in Net Pension Liability and Related Ratios, presented as Required Supplementary Information following the Notes to the Financial Statements in Schedule 3A, presents multiyear trend information about whether the actuarial value of the plan liabilities and assets are increasing or decreasing over time relative to the actuarial accrued liability (AAL) for benefits.

107 Changes in Net Pension Liability:

Illustration 13-7 Prince William County - Virginia Retirement System Changes in Net Pension Liability Net Pension Total Pension Plan Fiduciary Liability Liability Net Position (NPL) Increase (Decrease)

Balances at June 30, 2013 $ 981,988 $ 772,912 $ 209,076

Changes for the year: Service cost 28,205 - 28,205 Interest 67,389 - 67,389 Differences between expected and actual experience - - - Contributions - employer - 30,488 (30,488) Contributions - employee - 11,385 (11,385) Net investment income - 122,481 (122,481) Benefit payments, including refunds of employee contributions (38,578) (38,578) - Administrative expenses - (651) 651 Other changes - 7 (7) Net changes 57,016 125,132 (68,116)

Balances at June 30, 2014 $ 1,039,004 $ 898,044 $ 140,960

Totals are from Schedule E Total Pension Liability and Fiduciary Net Position on pages 112, 147, 166, 183, and 204 of the GASB Statement 68 Report, located at http://www.varetire.org/pdf/publications/valuation-report-2015-gasb68.pdf and audited Fiduciary Net Position Report located at http://www.varetire.org/pdf/publications/gasb-68-schedule-political-subdivision- retirement-plans-2014.pdf page 7.

The measurement date of the net pension liability was June 30, 2014; the date of the actuarial valuation on which the total pension liability is based was June 30, 2013, and update procedures were used to roll forward the total pension liability to the measurement date. Change since the measurement date is VRS investment performance decreased over FY2015, which will result in an increase in the pension liability for FY2016 once it is measured.

108 Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions:

For the year ended June 30, 2015, the County recognized pension expense of $17,000. At June 30, 2015, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Illustration 13-8 Prince William County - Virginia Retirement System Deferred Outflows and Inflows of Resources

Deferred Outflows of Deferred Inflows of Resources Resources Differences between expected and actual experience $ - $ - Change in actuarial assumptions - - Net difference between projected and actual earnings on - 54,628 pension plan investments Subtotal - 54,628 Employer contributions subsequent to the measurement 30,690 - date Total $ 30,690 $ 54,628

$32,713 reported as deferred outflows of resources related to pensions resulting from the County’s contributions to the VRS subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Illustration 13-9 Prince William County - Virginia Retirement System Amortization of Deferred Outflows and Inflows of Resources

Deferred Outflows of Deferred Inflows of Year ended June 30, Resources Resources

2016 $ - $ 13,657 2017 - 13,657 2018 - 13,657 2019 - 13,657 Total $ - $ 54,628

Prince William County Supplemental Plan for Police Officers and Uniformed Fire and Rescue Personnel

Summary of Significant Accounting Policies:

Basis of accounting. The Prince William County Supplemental Plan for Police Officers and Uniformed Fire and Rescue Personnel (Plan) [irrevocable] Trust Fund financial statements are prepared using the accrual basis of accounting. The Plan does not issue a stand-alone financial report, and it is not included in the financial report of another entity. Member and employer contributions are recognized in the period in which the contributions are due. Benefits and refunds are recognized when due and payable in accordance with the term of the Plan.

Method used to value investments. Investments are reported at fair value. Fair value of investments is based on quoted market prices.

Plan Description:

Plan administration. The Plan is a single-employer defined benefit pension plan. Each police officer and salaried Fire & Rescue Department employee employed by Prince William County prior to July 1, 1985, is eligible to participate in the Plan as of July 1, 1985, if they were covered by and participating in the VRS and elected to participate in the Plan. Each police officer and salaried 109 Fire & Rescue Department employee, hired after June 30, 1985, becomes a participant on his or her date of employment. The Plan provides retirement and death benefits to plan members and beneficiaries.

These benefit provisions, and the contributions required to pay them, were established and may be amended by authority of the Plan’s Board of Trustees.

Benefits provided. The Plan is designed to provide a benefit upon the retirement of participants, the amount of which takes into account the length of service and the compensation paid by the County to such employees with recognition given to the benefits that will be provided by the VRS. Normal retirement date is the earlier of the participant’s 55th birthday or the completion of 25 years of credited service. Benefits, at the participants’ election, are i) the larger of 1.5% of the participant’s final average compensation times credited service or 1.65% of the final average compensation in excess of $1.2 multiplied by the years of credited service; ii) a temporary annuity of $0.54 per month for 15 years for participants who left employment prior to March 30, 2001, and then elect benefit commencement on or after such date or a temporary annuity of $0.64 per month for 15 years for participants employed on or after March 30, 2001; or iii) a lump sum benefit of the participant contribution plus the employer’s contributions during the period of employment. Final average compensation for participants hired before July 1, 2010 is the base salary of an employee for the 36 consecutive calendar months producing the highest total, selected from the 120 calendar months immediately preceding actual retirement or termination, divided by 36 (or total months of service if less). Final average compensation for participants hired after June 30, 2010 is the base salary of an employee for the 60 consecutive calendar months producing the highest total, selected from the 120 calendar months immediately preceding actual retirement or termination, divided by 60 (or total months of service if less).

Participants shall vest 100% in the benefit provided under the Plan upon attainment of the participant’s normal retirement date. Participants are considered vested and eligible for early retirement after 20 years of credited service, but the benefits are reduced 0.5% for each month the commencement date precedes the normal retirement date. As an alternative, the member may elect a temporary annuity of $0.32 thousand per month for 15 years, multiplied by the ratio of the number of completed years of service at early retirement date to 25 or the withdrawal benefit. Any participant or spouse receiving a monthly benefit for at least one year is eligible for the pension increase each July 1st. The benefit will be increased by 100% of the first 3% increase in the cost-of-living index plus 50% of the increase in the cost-of-living index in excess of 3%. Increases in the cost-of- living index in excess of 7% are not recognized. Increases do not apply to supplemental benefits or early retirement pensions.

Illustration 13-10 reflects Plan membership.

Illustration 13-10 Prince William County - Supplemental Pension Plan Plan Membership as of June 30, 2013

Inactive plan members or their beneficiaries currently receiving benefits 198 Inactive members: Vested inactive members 258 Non-vested inactive members 37 Total inactive members 295

Active employees 1,026 Total covered members 1,519

Contributions. These benefit provisions, and the contributions required to pay them, were established and may be amended by authority of the Plan’s Board of Trustees. The Board establishes rates based on an actuarially determined rate recommended by an independent actuary. The County is not required to contribute the difference between the actuarially determined rate and the contribution rate of plan members to the Plan Trust Fund. For the year ended June 30, 2015, the average active member contribution rate was 1.44% of annual pay, and the County’s average contribution rate was 1.44% of annual payroll.

This rate, when combined with employee contributions, was expected to finance the costs of benefits earned by the employee during the year, with an additional amount to finance any unfunded accrued liability. Contribution to the Plan from the County was $1,083 and $1,007 for the years ended June 30, 2015 and June 30, 2014, respectively.

The Schedule of County Contributions, presented as Required Supplementary Information following the Notes to the Financial Statements in Schedule 4B, presents multiyear trend information about yearly contributions into the Plan relative to actuarially determined contributions and total covered-employee payroll. 110 Investments:

Investment policy. The Statement of Investment Policy for the Plan is administered by the Plan Board. Any changes to the Statement of Investment Policy must be voted on by the Plan Board in order to be adopted. The last revision to the policy was August 28, 2014.

Fair value of investments is based on quoted market prices.

For Domestic Equity, International Equity and REITs, the maximum weighting, on a market value basis, in any one company for active Investment Managers is 5% of the portfolio value. For domestic fixed income, international fixed income, hedge funds and cash equivalents the maximum weighting, on a market value basis, in any one security for active Investment Managers is 2% of the portfolio value. This does not apply to U.S. government and agency issues. It is desirable to rebalance the portfolio periodically to minimize deviations from the Asset Allocation mix. The Plan shall be rebalanced in the event any individual asset class allocation differs from the permissible range described in the Asset Allocation.

Illustration 13-11 was the Board’s adopted asset allocation policy as of June 30, 2015.

Illustration 13-11 Prince William County - Supplemental Pension Plan Statement of Investment Policy Concentrations at June 30, 2015

Policy Target Range Asset Class Percent Percent Comparative Index

Supplemental Pension Plan Trust Fund Investments: Tactical Asset Allocation Funds PIMCO All-Asset Fund 10% 5% - 15% HFRI Fund of Funds Equity Mutual Funds Vanguard Total Stock Market Fund 25% 20% - 30% MSCI US Broad Market Vanguard Developed Markets Fund 17% 15% - 25% MSCI EAFE State Street Emerging Markets Fund 7% 5% - 10% MSCI EM Portfolio Advisors Private Equity Fund 1% 0% - 5% Cambridge Private Equity Real Assets Pimco Commodity Real Return Strategy 4% 2% - 7% Dow Jones USB Commodity Index ASB Allegiance Real Estate Fund 6% 3% - 8% NCREIF ODCE RREEF III 0% 0% - 2% NCREIF ODCE Fixed Income PIMCO Total Return Fund 15% 10% - 20% BC Aggregate Brandywine Global Bond Fund 15% 10% - 20% BC Global Aggregate Cash 0% 0% - 5% US Treasury Bill 100%

Concentrations. At June 30, 2015, the Plan’s investments were in money market, bond and equity mutual funds and therefore not subject to concentration of credit risk.

Rate of return. For the year ended June 30, 2015 and June 30, 2014, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was -1.12% and 15.73%, respectively. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

111 Net Pension Liability of the County:

The components of the net pension liability of the County at June 30, 2015, were as follows:

Illustration 13-12 Prince William County - Supplemental Pension Plan Net Pension Liability Plan Fiduciary Net Net Pension Net Position as % of Fiscal Year Ending: Total Pension Liability Position Liability Total Pension Liability June 30, 2015 $ 33,927 (32,908) 1,019 97.00% June 30, 2014 $ 33,265 (33,144) 121 99.64%

The County’s net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation performed as of July 1, 2013, using updated actuarial assumptions, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2014.

Actuarial assumptions. The total pension liability was determined by an actuarial valuation as of July 1, 2013, using the following actuarial assumptions, applied to all periods included in the measurement. Illustration 13-13 reflects the actuarial methods and assumptions as follows:

Illustration 13-13 Prince William County - Supplemental Pension Plan Actuarial Methods and Assumptions Valuation Date July 1, 2013 Actuarial Cost Method Entry Age Normal Asset Valuation Method Fair Market Value Investment Rate of Return 7.0% net of investment expense Payroll Growth 4.5%, including inflation Inflation 3.00% Mortality RP-2000 Combined Healthy Blue Collar tables with generational projection by Scale AA

The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2012 to June 30, 2014.

The projected return for Domestic Equity is based on the 20-year return, reduced for expected decline in profit margins, while returns for other equity classes is based on the return for domestic equity adjusted for risk. The return for Domestic Fixed Income is based on the 20-year return, reduced for anticipated increases in interest rates. Returns for other fixed income and real assets are based on the return for fixed income, adjusted for risk. Additionally, the return for diversified assets assumes a blend of equity and fixed income, enhanced due to the properties of the strategy used by Prince William County.

Return for the portfolio is based on a weighted average of these returns, with the weightings based on our asset allocation, producing a real return. The overall real return is adjusted for inflation. This expected return (50% probability) is further reduced for risk to yield a return with greater than a 50% chance of success.

112 Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2015 (see the discussion of the pension plan’s investment policy) are summarized in Illustration 13-14.

Illustration 13-14 Prince William County - Supplemental Pension Plan Asset Class, Index, Mean Expected Rate of Return at June 30, 2015

Asset Class Cap Mkt Estimates Allocation Weighted Average Diversified 6.1% 10.0% 0.6% Domestic Equity 10.5% 30.0% 3.1% International Equity Developed 7.5% 16.0% 1.2% International Equity Emerging 8.9% 7.0% 0.6% Private Equity 16.1% 1.0% 0.2%

Commodities 5.3% 0.0% 0.0% Timber 8.0% 0.0% 0.0% Real Estate 9.9% 6.0% 0.6% Farmland 12.8% 0.0% 0.0%

Fixed Income US Investment Grade 5.7% 15.0% 0.9% Fixed Income International 4.2% 15.0% 0.6% Cash 2.0% 0.0% 0.0% 100.0%

Real Return 7.8% Inflation 3.0% Return w/Inflation 10.8% Risk Adjustment -0.8% Total Expected Return 10.0%

Discount rate. The discount rate used to measure the total pension liability was 7.0%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that County contributions will be made at rates equal to the member rate. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on the Plan’s investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the net pension liability to changes in the discount rate. Illustration 13-15 presents the net pension liability of the County, calculated using the discount rate of 7.0%, as well as what the County’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.0%) or 1-percentage point higher (8.0%) than the current rate:

Illustration 13-15 Prince William County - Supplemental Pension Plan Sensitivity of Net Pension (Asset) / Liability

Current Discount Fiscal Year Ending: 1% Decrease (6.0%) Rate (7.0%) 1% Increase (8.0%) June 30, 2015 $ 3,406 $ 1,019 $ (1,157) June 30, 2014 $ 2,395 $ 121 $ (1,955)

113 Fiduciary Net Position.

Fiduciary Net Position is available on Exhibit 10 of the Basic Financial Statements. Significant accounting policies of all plans and the fiduciary net positions are stated above.

The Changes in Net Pension Liability and Related Ratios, presented as Required Supplementary Information following the Notes to the Financial Statements in Schedule 4A, presents multiyear trend information about whether the actuarial value of the plan liabilities and assets are increasing or decreasing over time relative to the actuarial accrued liability (AAL) for benefits.

Changes in Net Pension Liability.

Illustration 13-16 Prince William County - Supplemental Pension Plan Changes in Net Pension Liability

Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (NPL) Increase (Decrease)

Balances at June 30, 2013 $ 31,212 $ 28,706 $ 2,506

Changes for the year: Service cost 1,602 - 1,602 Interest 2,118 - 2,118 Differences between expected and actual experience - - - Contributions - employer - 1,007 (1,007) Contributions - employee - 1,007 (1,007) Net investment income - 4,436 (4,436) Benefit payments, including refunds of employee contributions (1,905) (1,905) - Administrative expenses - (109) 109 Other changes 239 2 237 Net changes 2,054 4,438 (2,384)

Balances at June 30, 2014 $ 33,266 $ 33,144 $ 122

The measurement date of the net pension liability was June 30, 2014; the date of the actuarial valuation on which the total pension liability is based was July 1, 2013, and update procedures were used to roll forward the total pension liability to the measurement date. Change since the measurement date is that investment performance decreased over FY2015, which will result in an increase in the pension liability for FY2016 once it is measured.

114 Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions.

For the year ended June 30, 2015, the County recognized pension expense of $564. At June 30, 2015, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Illustration 13-17 Prince William County - Supplemental Pension Plan Deferred Outflows and Inflows of Resources

Deferred Outflows of Deferred Inflows of Resources Resources

Differences between expected and actual experience $ - $ - Change in actuarial assumptions - - Net difference between projected and actual earnings on pension plan investments - 1,941 Subtotal - 1,941 Employer contributions subsequent to the measurement date 1,083 -

Total $ 1,083 $ 1,941

$1,083 reported as deferred outflows of resources related to pensions resulting from the County’s contributions to the Plan subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Illustration 13-18 Prince William County - Supplemental Pension Plan Amortization of Deferred Outflows and Inflows of Resources

Year ended June 30, Deferred Outflows of Resources Deferred Inflows of Resources

2016 $ - $ 485 2017 - 485 2018 - 485 2019 - 486 Total $ - $ 1,941

Prince William County Volunteer Fire and Rescue Personnel Length of Service Award Program (LoSAP)

Summary of Significant Accounting Policies:

Basis of accounting. The Prince William County Volunteer Fire and Rescue Personnel Length of Service Award Program (LoSAP) [irrevocable] Trust Fund financial statements are prepared using the accrual basis of accounting. The LoSAP plan does not issue a stand-alone financial report, and it is not included in the financial report of another entity. Employer contributions are recognized in the period in which the contributions are due. Benefits and refunds are recognized when due and payable in accordance with the terms of the LoSAP plan.

Method used to value investments. Investments are reported at fair value. Fair value of investments is based on quoted market prices.

115 Plan Description:

Plan administration. The LoSAP plan is a single-employer defined benefit pension plan. The LoSAP plan provides benefits for certified volunteer fire department and rescue squad members and is administered by the LoSAP’s Board of Trustees. LoSAP was authorized by the Board of County Supervisors on October 22, 1991, and became effective July 1, 1997.

Certified active duty fire department and rescue squad volunteers are eligible to participate in LoSAP upon attainment of the minimum age of 21 years, and a minimum of twelve months of creditable service, and a minimum of 360 hours of creditable service. Each certified active duty fire department and rescue squad volunteer becomes a participant on July 1 coinciding with or the next following year when all the eligibility requirements are met. The LoSAP plan provides retirement and death benefits to plan members and beneficiaries.

Benefits provided. LoSAP is designed to provide a benefit upon the retirement of participants, the amount of which takes into account the length of service. Normal retirement date is first day of the month coinciding with or next following attainment of age 60. Benefits are $0.01 monthly times years of service with a 50% joint and survivor annuity. Normal Retirement Benefit accrues based on service to date. The LoSAP plan also provides a pre-retirement death benefit or disability benefit after a minimum service of five years. The pre-retirement death benefit provides a life annuity to the surviving spouse equal to 50% of the accrued benefit. For non-married participants a life annuity to a named beneficiary equals 25% of the accrued benefit. Additional death benefit for active members, $10 is provided to designated beneficiary. The disability benefit provides an immediate annuity equal to 100% of the accrued benefit.

Participants shall vest upon termination after five years of service, a percentage, ranging from 50% for five years of service to 100% for ten or more years of service, of the accrued benefit, deferred to normal retirement date.

Illustration 13-19 reflects plan membership.

Illustration 13-19 Prince William County - LoSAP Plan Plan Membership as of June 30, 2013

Inactive plan members or their beneficiaries currently receiving benefits 121 Inactive members: Vested inactive members 982 Non-vested inactive members - Total inactive members 982

Active participants 662 Total covered members 1,765

Contributions. These benefit provisions, and the contributions required to pay them, were established and may be amended by authority of the LoSAP’s Board of Trustees. The LoSAP Board establishes rates based on an actuarially determined rate recommended by an independent actuary. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by plan members during the year. The County contributes the total actuarially determined rate which includes the difference between the discount rate and the investment rate of return to the LoSAP Trust Fund. The County paid contributions on behalf of each of the Volunteer Fire and Rescue Companies according to their respective actuarial valuations.

This rate was expected to finance the costs of benefits earned by the employee during the year, with an additional amount to finance any unfunded accrued liability. Contribution to the pension plan from the County was $949 and $2,115 for the years ended June 30, 2015 and June 30, 2014, respectively.

The Schedule of County Contributions, presented as Required Supplementary Information following the Notes to the Financial Statements in Schedule 5B, presents multiyear trend information about yearly contributions into the Plan relative to actuarially determined contributions and total covered-employee payroll.

116 Investments:

Investment policy. The investment policy for the LoSAP plan is administered by the LoSAP’s Board of Trustees. Any changes to the investment policy must be voted on by the LoSAP Board in order to be adopted. Currently, the LoSAP Fund invests 100% into an insurance annuity fund.

Fair value of investments is based on quoted market prices.

Concentrations. At June 30, 2015, the LoSAP Trust Fund’s investments were 100% invested in an insurance annuity fund and are subject to concentration of credit risk.

Rate of return. For the year ended June 30, 2015, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 2.95%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Net Pension Liability of the County:

The components of the net pension liability of the County at June 30, 2015, were as follows:

Illustration 13-20 Prince William County - LoSAP Plan Net Pension Liability

Fiscal Year Plan Fiduciary Net Net Pension Net Position as % of Total Ending: Total Pension Liability Position Liability Pension Liability June 30, 2015 $ 15,089 (13,769) 1,320 91.25% June 30, 2014 $ 14,651 (12,836) 1,815 87.61%

Actuarial assumptions. The total pension liability was determined by an actuarial valuation as of July 1, 2013, using the following actuarial assumptions, applied to all periods included in the measurement. Illustration 13-21 reflects the actuarial methods and assumptions as follows:

Illustration 13-21 Prince William County- LoSAP Plan Actuarial Methods and Assumptions Valuation Date July 1, 2013 Actuarial Cost Method Entry Age Normal Asset Valuation Method Fair Market Value Investment Rate of Return 6.0% net of investment expense Payroll Growth N/A Inflation N/A Mortality RP2000 Mortality Table projected to 2013 using Scale AA

The actuarial assumptions used in the July 1, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2012 to June 30, 2014.

Discount rate. The discount rate used to measure the total pension liability was 6.0%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that County contributions will be made at rates equal to the actuarially determined contribution amount. This amount includes an additional 3% to compensate for the annuity investment rate of return of 3%. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members until year 67, then a blend of the expected long term rate of return and a current municipal bond rate was used as the discount.

117 Sensitivity of the net pension liability to changes in the discount rate. Illustration 13-22 presents the net pension liability of the County, calculated using the discount rate of 6.0% blended with the long-term municipal bond rate of 3.66% beginning at year 67, as well as what the County’s net pension liability would be if it were calculated using a discount rate that is 1-percentage- point lower (4.99%) or 1-percentage point higher (6.99%) than the current rate:

Illustration 13-22 Prince William County - LoSAP Plan Sensitivity of Net Pension (Asset) / Liability Current Discount Rate* Fiscal Year Ending: 1% Decrease (4.99%) 1% Increase (6.99%) (5.99%) June 30, 2015 $ 4,037 $ 1,320 $ (819) June 30, 2014 $ 4,481 $ 1,815 $ (286)

*Blended rate of 6.0% and a blend of the expected long term rate of return and a current municipal bond rate of 3.66% beginning at year 67 was used.

Fiduciary Net Position.

Fiduciary Net Position is available on Exhibit 10 of the Basic Financial Statements. Significant accounting policies of all plans and the fiduciary net positions are stated above.

The Changes in Net Pension Liability and Related Ratios, presented as Required Supplementary Information following the Notes to the Financial Statements in Schedule 5A, presents multiyear trend information about whether the actuarial value of the plan liabilities and assets are increasing or decreasing over time relative to the actuarial accrued liability (AAL) for benefits.

Changes in Net Pension Liability.

Illustration 13-23 Prince William County - LoSAP Plan Changes in Net Pension Liability

Total Pension Plan Fiduciary Net Net Pension Liability Position Liability (NPL) Increase (Decrease)

Balances at June 30, 2013 $ 13,860 $ 10,766 $ 3,094

Changes for the year: Service cost 308 - 308 Interest 821 - 821 Differences between expected and actual experience - - - Contributions - employer - 2,115 (2,115) Contributions - employee - - - Net investment income - 354 (354) Benefit payments, including refunds of employee contributions (338) (338) - Administrative expenses - (61) 61 Other changes - - - Net changes 2,070 791 (1,279)

Balances at June 30, 2014 $ 14,651 $ 12,836 $ 1,815

118 The measurement date of the net pension liability was June 30, 2014; the date of the actuarial valuation on which the total pension liability is based was July 1, 2013, and update procedures were used to roll forward the total pension liability to the measurement date.

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions.

For the year ended June 30, 2015, the County recognized pension expense of $562. At June 30, 2015, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Illustration 13-24 Prince William County - LoSAP Plan Deferred Outflows and Inflows of Resources

Deferred Outflows of Deferred Inflows of Resources Resources

Employer contributions subsequent to the measurement date 940 -

Total $ 940 $ (274)

*Deferred inflows reclassification to combine investment experience with other pensions.

$949 reported as deferred outflows of resources related to pensions resulting from the County’s contributions to LoSAP subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Illustration 13-25 Prince William County - LoSAP Plan Amortization of Deferred Outflows and Inflows of Resources Deferred Outflows of Year ended June 30, Resources Deferred Inflows of Resources*

2016 $ - $ (68) 2017 - (68) 2018 - (69) 2019 - (69) Total - (274) *Deferred inflows reclassification to combine investment experience with other pensions.

119 NOTE (14) – OTHER POST-EMPLOYMENT BENEFIT PLANS

County Sponsored Plans

1. Prince William County Post-Retirement Medical Benefits Premium Plan (County Premium Plan)

Plan Description. The Prince William County Premium Plan is a single-employer defined benefit post-employment healthcare plan that covers eligible retired employees and Consolidated Omnibus Budget Reconciliation Act (COBRA) eligible employees of the County including all departments and agencies. The County Premium Plan provides limited health, dental and vision insurance benefits to eligible retirees and their eligible family members. In order to receive the subsidy, the participant must be eligible to retire or eligible for COBRA coverage and have coverage under the medical plan prior to termination. All employees who are retiree eligible or COBRA eligible have access to medical coverage. Dependents, including surviving spouses, are permitted access to medical coverage. No access to medical coverage is permitted after age 65. Eligible employees must elect coverage immediately upon retirement. Employees who terminate prior to retirement eligibility are not eligible for the Premium Plan. Terminated employees can elect COBRA coverage for up to eighteen months if previously enrolled in the County Premium Plan. As of the end of the current fiscal year, there were 168 retirees and 32 post-employed under COBRA option who participated in the County’s group insurance plans. The County Premium Plan does not issue a stand-alone financial report. Funding Policy. Article X of the Trust Agreement also assigns to the Board of County Supervisors the authority to establish and amend contribution requirements of the County with 30 days’ notice. Retired plan members and beneficiaries are required to pay 100% of published blended premium rates to the County, which totaled $1,957. The County may contribute to the Trust such amounts as it deems appropriate to pre-fund and/or pay benefits provided under a Plan it sponsors. The County is not obligated by the Trust Agreement to make any contributions. Therefore, contributions are recognized when due and the County has made a formal commitment to provide the contributions.

The County Premium Plan participates in the County Trust Fund of the OPEB Master Trust Fund. The following is a summary of the Statement of Fiduciary Net Position of the OPEB Master Trust Fund:

Illustration 14-1 Summary of the Statement of Fiduciary Net Position OPEB Master Trust Fund Total OPEB Master County Schools LODA Trust Fund Total assets $ 27,059 25,851 8,797 $ 61,707 Total liabilities 2,955 6 626 3,587 Net position $ 24,104 25,845 8,171 $ 58,120

The following is a summary of the Changes in Fiduciary Net Position of the OPEB Master Trust Fund:

Illustration 14-2 Summary of the Changes in Fiduciary Net Position OPEB Master Trust Fund Total OPEB County Schools LODA Master Trust Fund Total additions $ 3,984 1,296 1,536 $ 6,816 Total deductions 2,954 9 623 3,586 Change in Net position 1,030 1,287 913 3,230 Net position, beginning of year 23,074 24,558 7,258 54,890 Net position, end of year $ 24,104 25,845 8,171 $ 58,120

The employer contribution rate was actuarially determined. For fiscal year 2015, the County Premium Plan actuarially determined contribution amounts were contributed by the County to the Other Post-Employment Benefits (OPEB) Master Trust Fund in the amount of $1,957. When $3,510 of the benefits paid on behalf of retirees and COBRA insured by the County were

120 measured and made available, a request for reimbursement from the OPEB Master Trust Fund was made according to the Trust Agreement of $1,553.

Annual OPEB Cost. For fiscal year 2015, the County Premium Plan annual OPEB cost (expense) was equal to the actuarially determined contribution. The County Premium Plan’s annual OPEB cost, the percentage of OPEB cost contributed to the OPEB Master Trust Fund, and the net OPEB obligation for fiscal year 2015 and the two preceding years were as follows:

Illustration 14-3 Other Post-Employment Benefits – Net OPEB Obligation Premium Plan Prince William County, Including ADC Component Unit

Less NOO Pay-As- Increase Net OPEB Net OPEB Actuarially Plus Interest County Amortization Annual You-Go (Decrease) in Obligation Obligation Fiscal Year Ending: Determined Net OPEB Contribution to Plus OPEB Cost* OPEB Net OPEB (NOO) (Asset) (NOO) Contribution* Obligation Trust Fund* Adjustments Costs Obligation Beginning Ending

June 30, 2013 $2,072 - - 2,072 (2,072) - - - - June 30, 2014 $2,085 - - 2,085 (2,085) - - - - June 30, 2015 $1,567 - - 1,567 (1,567) - - - - * This includes $198, $199, and $141 respectively, allocated to ADC component unit based on proportion of ADC premiums paid budget.

Benefits paid on behalf of retirees and COBRA insured are invoiced to the OPEB Master Trust Fund, so no Net OPEB Asset exists.

Illustration 14-4 Other Post-Employment Benefits – Percentage of Annual OPEB Cost Prince William County Premium Plan, Including ADC Component Unit Percentage of Annual Net OPEB Obligation (Asset) Fiscal Year Ending: Annual OPEB Cost* OPEB Cost Contributed (NOO) Ending June 30, 2013 $ 2,072 100% $ - June 30, 2014 $ 2,085 100% $ - June 30, 2015 $ 1,567 100% $ -

* This includes $198, $199, and $141 respectively, allocated to ADC component unit based on proportion of ADC premiums paid budget.

Funded Status and Funding Progress. The funded status of the Premium Plan, as of June 30, was as follows:

Illustration 14-5 Other Post-Employment Benefits – County Sponsored Plans Schedule of Funding Progress for Prince William County Premium Plan Unfunded Actuarial Actuarial Actuarial UAAL as a Actuarial Value of Accrued Funded Covered Accrued Percentage of Valuation Date Assets Liability Ratio Payroll Liability Covered Payroll (AVA) (AAL) (UAAL) July 1, 2012 $ 10,930 21,881 10,951 50.0% $ 237,034 4.6% July 1, 2013 $ 13,908 23,873 9,965 58.3% $ 247,366 4.0% July 1, 2014 $ 13,304 20,187 6,883 65.9% $ 258,704 2.7%

The projection of future benefit payments for an ongoing plan involves 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 above, presents trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each 121 valuation and the historical pattern of sharing of benefit costs between the employer and plan members at 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 values of assets, consistent with the long-term perspective of the calculations.

Biennially calculated actuarially determined contributions are used as a guide to determine the annual OPEB cost which is calculated based on an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. Contribution amounts are developed using the projected unit credit actuarial cost method. The actuarial accrued liability was determined as part of a biennial actuarial valuation as of July 1, 2014.

Significant actuarial valuation methods and assumptions used for the premium and credit plans include (a) current marital status and elected insurance coverage assumed to continue into retirement, (b) 50% of employees elect insurance coverage at retirement, (c) a rate of return on the investment of present and future assets of 7.0% per year compounded annually, (d) projected payroll growth rate of 3.5% per year, (e) inflation rate of 2.4% and rate of increase in medical insurance claims from 5.2% decreasing each year to an ultimate rate of 4.5% per year, (f) healthy mortality based on RP2014 Combined Mortality Table (sex distinct), fully generational with scale MP2014, disabled mortality table (for all groups) was changed to match the disability mortality table used by VRS: RP2000 Disabled Mortality Table, with 3 year setback for males (g) eligible retirement and disability rates, withdrawal rates and ages of retirement based on VRS statistical tables, (h) assumed cost and retiree contributions computed using fiscal year 2015 premium rates by current enrollment, (i) gross claims weighted and projected using paid medical and prescription claims for employees pre age 65 retirees from July 1, 2013 to June 30, 2014 with a 9% annual increase to fiscal year 2015 and (j) Line of Duty (or service-related) disabilities are assumed to receive LODA benefits and hence will not receive any benefits from this plan.

2. Prince William County Post-Retirement Medical Benefits Credit Plan (RHICP)

Plan Description. The Prince William County Post-Retirement Medical Benefits Credit Plan (RHICP) is a single-employer defined benefit post-employment healthcare plan that covers eligible employees or former employees of the County including all departments and agencies. The RHICP provides $0.0055 per month, per year of service (maximum 30 years) paid for life towards the purchase of a medical insurance plan, benefit referred to as the RHICP. Disabled employees receive the full 30-year allowance. However, employees disabled in-service, where the County pays the entire cost of insurance, do not receive the subsidy. The medical insurance plan can be the County Premium Plan or any health plan of the retiree’s choosing. In order to receive the subsidy, the retiree must have 15 years of service with the County and must be receiving a pension payment from the VRS or the County lan. Terminated vested employees are allowed. The health insurance credit cannot be used for spousal coverage. The retirees are granted the option to participate by paying 100% of their monthly health insurance premium towards the County Premium Plan less $0.0055 times years of service for a maximum health insurance credit of $0.165 from the County. For the year ended June 30, 2015, the County paid $1,398 to 812 eligible retirees for the RHICP. The County RHICP does not issue a stand-alone financial report. Funding Policy. Article X of the Trust Agreement also assigns to the Board of County Supervisors the authority to establish and amend contribution requirements of the County with 30 days’ notice. Retired plan members and beneficiaries do not pay for coverage under the RHICP. The County may contribute to the Trust such amounts as it deems appropriate to pre-fund and/or pay benefits provided under a Plan it sponsors. The County is not obligated by the Trust Agreement to make any contributions. Therefore, contributions are recognized when due and the County has made a formal commitment to provide the contributions.

The County RHICP participates in the County Trust Fund of the OPEB Master Trust Fund. The following is a summary of the Statement of Fiduciary Net Position of the OPEB Master Trust Fund:

Illustration 14-6 Summary of the Statement of Fiduciary Net Position OPEB Master Trust Fund Total OPEB Master County Schools LODA Trust Fund Total assets $ 27,059 25,851 8,797 $ 61,707 Total liabilities 2,955 6 626 3,587 Net position $ 24,104 25,845 8,171 $ 58,120

122 Following is a summary of the Changes in Fiduciary Net Position of the OPEB Master Trust Fund:

Illustration 14-7 Summary of the Changes in Fiduciary Net Position OPEB Master Trust Fund

Total OPEB Master County Schools LODA Trust Fund

Total additions $ 3,984 1,296 1,536 $ 6,816 Total deductions 2,954 9 623 3,586 Change in Net position 1,030 1,287 913 3,230 Net position, beginning of year 23,074 24,558 7,258 54,890 Net position, end of year $ 24,104 25,845 8,171 $ 58,120

The employer contribution rate was actuarially determined. For fiscal year 2015, the County RHICP actuarially determined contribution amounts were contributed by the County to the OPEB Master Trust Fund in the amount of $2,023. When $1,398 of the benefits paid to the County’s retirees were measured and made available, a request for reimbursement from the OPEB Master Trust Fund was made according to the Trust Agreement of $1,398.

Annual OPEB Cost. For fiscal year 2015, the RHICP annual OPEB cost (expense) was equal to the actuarially determined contribution. The County RHICP’s annual OPEB cost, the percentage of OPEB cost contributed to the OPEB Master Trust Fund, and the net OPEB obligation for fiscal year 2015 and the two preceding years were as follows:

Illustration 14-8 Other Post-Employment Benefits – Net OPEB Obligation RHICP Prince William County, Including ADC Component Unit Less NOO Plus Pay-As- Increase Net OPEB Net OPEB Actuarially Annual County Amortization Interest You-Go (Decrease) in Obligation Obligation Fiscal Year Ending: Determined OPEB Contribution Plus Net OPEB OPEB Net OPEB (NOO) (Asset) (NOO) Contribution* Cost* to Trust Fund* Adjustments Obligation Costs Obligation Beginning Ending July 1, 2012 $ 2,082 - - 2,082 (2,082) - - - - July 1, 2013 $ 2,107 - - 2,107 (2,107) - - - - July 1, 2014 $ 2,023 - - 2,023 (2,023) - - - - * This includes $167, $170, and $161 respectively, allocated to ADC component unit based on proportion of RHICP budget.

Benefits paid to retirees are invoiced to the OPEB Master Trust Fund, so no Net OPEB Asset exists.

Illustration 14-9 Other Post-Employment Benefits – Percentage of Annual OPEB Cost Prince William County RHICP, Including ADC Component Unit Percentage of Annual Net OPEB Obligation (Asset) Fiscal Year Ending: Annual OPEB Cost* OPEB Cost Contributed (NOO) Ending June 30, 2012 $ 2,082 100% $ - June 30, 2013 $ 2,107 100% $ - June 30, 2014 $ 2,023 100% $ - * This includes $167, $170, and $161 respectively, allocated to ADC component unit based on proportion of RHICP budget.

123 Funded Status and Funding Progress. The funded status of the plan, as of June 30, was as follows:

Illustration 14-10 Other Post-Employment Benefits – County Sponsored Plans Schedule of Funding Progress for Prince William County RHICP UAAL as a Actuarial Actuarial Unfunded Actuarial Value Funded Percentage of Valuation Accrued Liability Actuarial Accrued Covered Payroll of Assets (AVA) Ratio Covered Date (AAL) Liability (UAAL) Payroll July 1, 2012 $ 6,787 26,077 19,290 26.0% $ 237,034 8.1% July 1, 2013 $ 8,195 27,378 19,183 29.9% $ 247,366 7.8% July 1, 2014 $ 9,770 27,858 18,088 35.1% $ 258,704 7.0%

The projection of future benefit payments for an ongoing plan involves 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 and mortality. 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 above, presents trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members at 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 values of assets, consistent with the long-term perspective of the calculations.

Biennially calculated actuarially determined contributions are used as a guide to determine the annual OPEB cost which is calculated based on an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. Contribution amounts are developed using the projected unit credit actuarial cost method. The actuarial accrued liability was determined as part of a biennial actuarial valuation as of July 1, 2014.

Significant actuarial valuation methods and assumptions used for the premium and credit plans include (a) 100% of employees and 100% of non-line-of-duty disability assumed to elect health insurance credit at retirement, (b) general active participants with 15 or more years of service begin Credit Plan benefits at age 65; Public Safety participants with 15 or more years of service begin at age 60, (c) a rate of return on the investment of present and future assets of 7.0% per year compounded annually, (d) projected payroll growth rate of 3.5% per year, (e) healthy mortality based on RP2014 Combined Mortality Table (sex distinct), fully generational with scale MP2014, disabled mortality table (for all groups) was changed to match the disability mortality table used by VRS: RP2000 Disabled Mortality Table, with 3 year setback for males, (f) eligible retirement and disability rates, withdrawal rates and ages of retirement based on VRS statistical tables. There is no applicable inflation or healthcare cost trend rates.

3. Prince William County Line of Duty Act Plan (LODA Plan)

The Line of Duty Act is promulgated by § 9.1-400, et. seq. of the Code of Virginia (1950), as amended. On June 5, 2012, the Board of County Supervisors authorized Resolution No. 12-588, pursuant to paragraph B2 of Item 258 of the Commonwealth Appropriations Act, to make an irrevocable election not to participate in the Commonwealth’s Line of Duty Act Fund effective July 1, 2012. The County has assumed all responsibility for existing, pending and prospective claims for benefits approved and the associated administrative costs incurred by the State Comptroller of behalf of Prince William County. Plan Description. The Prince William County LODA Plan is a single-employer defined benefit post-employment plan that provides death, disability and healthcare benefits for public safety employees and volunteer firefighters who hold specified hazardous duty positions and who die or who become permanently disabled in the line of duty. The LODA Plan includes a $100 life insurance benefit for death occurring as a direct or proximate result of duties, a $25 death benefit for death by presumptive clause within five years of retirement, and lifetime medical benefits for the disabled employee and their surviving spouse with certified children covered to age 21 or age 25 if continuously enrolled in college, comparable to the medical coverage held by the deceased or disabled employee or volunteer at the time of the qualifying incident. In order to be eligible to receive LODA benefits, the disabled or deceased employee or volunteer must be certified by the Virginia Department of Accounts. To be eligible for the healthcare benefit portion of the plan, the employee or volunteer must

124 subscribe to healthcare coverage under a medical plan prior to the date of incident. Eligible employees and/or family members are either enrolled in a County-sponsored group healthcare plan or reimbursed for their healthcare premiums. Surviving spouses who remarry or children who marry and have access to other medical insurance coverage are no longer eligible for the healthcare benefits under the LODA Plan. Certified LODA retirees and their beneficiaries are required to pay 0% of the published blended premium rate for any of the County sponsored group healthcare plans. Uncertified beneficiaries (i.e. dependent children added post LODA certification) are required to pay a differential tier rate. As of June 30, 2015, 33 retirees or survivors participated in the County’s group insurance plans and six retirees or survivors received premium reimbursements. The County LODA Plan does not issue a stand-alone financial report. Funding Policy. Article X of the Trust Agreement also assigns to the Board of County Supervisors the authority to establish and amend contribution requirements of the County with 30 days’ notice. Retired plan members and beneficiaries do not pay for coverage under the RHICP. The County may contribute to the Trust such amounts as it deems appropriate to pre-fund and/or pay benefits provided under a Plan it sponsors. The County is not obligated by the Trust Agreement to make any contributions. Therefore, contributions are recognized when due and the County has made a formal commitment to provide the contributions.

The County LODA Plan participates in the LODA Trust Fund of the OPEB Master Trust Fund. The following is a summary of the Statement of Fiduciary Net Position of the OPEB Master Trust Fund:

Illustration 14-11 Summary of the Statement of Fiduciary Net Position OPEB Master Trust Fund Total OPEB Master County Schools LODA Trust Fund Total assets $ 27,059 25,851 8,797 $ 61,707 Total liabilities 2,955 6 626 3,587 Net position $ 24,104 25,845 8,171 $ 58,120

The following is a summary of the Changes in Fiduciary Net Position of the OPEB Master Trust Fund:

Illustration 14-12 Summary of the Changes in Fiduciary Net Position at June 30, 2015 OPEB Master Trust Fund Total OPEB Master County Schools LODA Trust Fund

The employer contribution rate was actuarially determined. For fiscal year 2015, the County LODA Plan actuarially determined contribution amounts were contributed by the County to the OPEB Master Trust Fund in the amount of $1,474. Payments to the County LODA Plan on behalf of uncertified beneficiaries totaled $18 for fiscal year 2015. When $650 of benefits and administrative costs were measured and made available, a request for reimbursement from the OPEB Master Trust Fund was made according to the Trust Agreement of $632.

125 Annual OPEB Cost and Net OPEB Obligation. For fiscal year 2015, the County LODA Plan annual OPEB cost (expense) was equal to the Actuarially Determined Contribution. The County LODA Plan’s annual OPEB cost, the percentage of OPEB cost contributed to the OPEB Master Trust Fund, and the net OPEB obligation for fiscal year 2015 were as follows:

Illustration 14-13 Other Post-Employment Benefits – Net OPEB Obligation LODA Plan Prince William County, Including ADC Component Unit Net OPEB Less NOO Plus Pay-As- Increase Net OPEB Actuarially Annual County Obligation Fiscal Year Amortization Interest You-Go (Decrease) in Obligation Determined OPEB Contribution (Asset) Ending: Plus Net OPEB OPEB Net OPEB (NOO) Contribution* Cost* to Trust Fund (NOO) Adjustments Obligation Costs Obligation Beginning Ending June 30, 2013 $ 5,312 - - 5,312 - (699) 4,613 - 4,613 June 30, 2014 $ 2,778 64 323 3,165 (7,778) - (4,613) 4,613 - June 30, 2015 $ 1,474 - - 1,474 (1,474) - - - - * This includes $480, $348, and $148 respectively, allocated to the ADC component unit.

Funded Status and Funding Progress. The funded status of the plan, as of June 30, was as follows:

Illustration 14-14 Other Post-Employment Benefits – Percentage of Annual OPEB Cost Prince William County LODA Plan, Including ADC Component Unit Percentage of Annual Net OPEB Obligation (Asset) Fiscal Year Ending: Annual OPEB Cost* OPEB Cost Contributed (NOO) Ending June 30, 2013 $ 5,312 13.2% $ 4,613 June 30, 2014 $ 3,165 245.8% $ - June 30, 2015 $ 1,474 100.0% $ - * This includes $480, $348, and $148 respectively, allocated to the ADC component unit.

Illustration 14-15 Other Post-Employment Benefits – County Sponsored Plans Schedule of Funding Progress for Prince William County LODA Plan UAAL as a Actuarial Actuarial Value of Actuarial Accrued Liability Unfunded Actuarial Funded Covered Percentage of Valuation Assets (AVA) (AAL) Accrued Liability (UAAL) Ratio Payroll* Covered Date Payroll July 1, 2012 $ - 48,743 48,743 0.0%$ 68,204 71.5% July 1, 2013 $ - 24,235 24,235 0.0%$ 79,081 30.6% July 1, 2014 $ 7,258 16,386 9,128 44.3%$ 95,795 9.5%

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 members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members at 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 values of assets, consistent with the long-term perspective of the calculations.

126 Biennially calculated actuarially determined contributions are used as a guide to determine the annual OPEB cost which is calculated based on an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. Contribution amounts are developed using the projected unit credit actuarial cost method. The actuarial accrued liability was determined as part of a biennial actuarial valuation as of July 1, 2014.

Significant actuarial valuation methods and assumptions used for the County LODA Plan includes (a) current marital status and elected insurance coverage assumed to continue upon LODA certification, (b) 100% of employees elect insurance coverage upon LODA certification, (c) a rate of return on the investment of present and future assets of 7.0% per year compounded annually, (d) projected payroll growth rate of 3.5% per year, (e) inflation rate of 2.4% and rate of increase in medical insurance claims from 5.2% decreasing each year to an ultimate rate of 4.5% per year, (f) healthy mortality based on RP2014 Combined Mortality Table (sex distinct), fully generational with scale MP2014, disabled mortality table (for all groups) was changed to match the disability mortality table used by VRS: RP2000 Disabled Mortality Table, with 3 year setback for males, (g) eligible retirement and disability rates, ages of retirement based on statistical rates, (h) assumed cost contributions computed using fiscal year 2014 claims data by current certified LODA retirees and beneficiaries.

County Sponsored Plans – Health Insurance Internal Service Fund Recap

Funding Policy:

The OPEB Master Trust Fund was established as of June 30, 2009. During fiscal year 2015, the County contributed the actuarially determined contribution amounts for the County Premium Plan, County RHICP and County LODA Plan of $5,064. Plan members received $5,559 benefits and contributed $1,975 premiums, resulting in $3,584 net benefits paid by the County. The County currently pays these benefits on a pay-as-you-go basis and seeks reimbursement from the OPEB Master Trust Fund according to the Trust Agreement at year end.

Annual OPEB Cost and Net OPEB Obligation:

The County’s annual other postemployment benefits (OPEB) cost (expense) is calculated based on the actuarially determined contributions of the County, and amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The actuarially determined contributions represent a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years.

For the year ended June 30, 2015, the County’s annual OPEB cost for County Premium Plan, the County’s RHICP, and the County LODA Plan, based on the actuarially determined contribution for OPEB funding was $5,064 ($2,162 amortization, $2,902 actuarial normal cost, funded), which was equal to the actual OPEB payment of $5,064. As a result, the County recognizes a total net negative OPEB obligation (asset) of $0.

OPEB costs for retiree and COBRA claims and claims administration, net of premiums paid, of $3,584, which were fully accrued in the OPEB Master Trust Fund statements and Health Insurance Internal Service Fund statements, and were billed according to the Trust Agreement to the OPEB Master Trust Fund for reimbursement, are not included. As a result, the County recognizes pay-as-you-go OPEB Costs of $0.

127 Illustration 14-16 shows the components of the County’s annual OPEB cost for the year, the amount actually contributed to the plan, and the changes in the County’s net OPEB obligations for all County sponsored plans:

Illustration 14-16 Other Post-Employment Benefits – Net OPEB Obligation All Plans Prince William County, including ADC Component Unit Net OPEB Less NOO County Pay-As- Increase Net OPEB Actuarially Plus Interest Annual Obligation Fiscal Year Amortization Contribution You-Go (Decrease) in Obligation Determined Net OPEB OPEB (Asset) Ending: Plus to Trust OPEB Net OPEB (NOO) Contribution* Obligation Cost* (NOO) Adjustments Fund* Costs Obligation Beginning Ending June 30, 2012 $ 9,466 - - 9,466 (4,154) (699) 4,613 - 4,613 June 30, 2013 $ 6,970 64 323 7,357 (11,970) - (4,613) 4,613 - June 30, 2014 $ 5,064 - - 5,064 (5,064) - - - -

* This includes $845, $717, and $450 respectively allocated to ADC component unit based on proportion of ADC premiums paid, RHICP budget and LODA allocation.

Funded Status and Funding Progress:

The funded status of County plans as of July 1, 2014, the date of the most recent actuarial valuations, the actuarial accrued liability for benefits was $64,431 and the actuarial value of assets was $30,332, resulting in an unfunded actuarial accrued liability (UAAL) $34,099. The covered payroll (annual payroll of active employees covered by the plans) was $258,704, and the ratio of the UAAL to the covered payroll was 13.2%. The UAAL is being amortized as a level percentage of projected pay on a closed basis. The remaining amortization period at June 30, 2015 was 23 years for County Premium Plan and County RHICP, 28 years for County LODA Plan.

The Schedule of Funding Progress, presented as Required Supplementary Information following the Notes to the Financial Statements in Schedule 6, presents multiyear trend information about whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liability (AAL) for benefits.

Component Unit Sponsored Plans

4. Prince William County Public Schools Retiree Medical Program (Schools Premium Plan)

The Prince William County Public Schools Retiree Medical Program (Schools Premium Plan) is sponsored and administered by the School Board and reported separately in their audited financial statements. Copies of these financial statements may be obtained by writing to the School Board’s Finance Division at P.O. Box 389, Manassas, Virginia 20108.

VRS Health Insurance Credit Program

Plan Description:

Retirees of the County, as well as the Adult Detention Center, who have rendered at least fifteen years of total creditable service under the VRS, are granted the option to participate in the VRS Health Insurance Credit Program by paying 100% of their monthly health insurance premium less a $0.0015 times years of service for a maximum credit of $0.045 from the VRS. Title 51.1 of the Code of Virginia assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia. As of the end of the current fiscal year, there were 921 retirees that received the VRS health insurance credit. The health insurance credit is financed by payments from the County to the VRS. For the year ended June 30, 2015, the County paid $357. The surplus funds are not considered advance funded because the County, its employees, and retirees have no vested rights to access the excess funds. GAAP do not require governments to report a liability in the financial statements in connection with an employer's obligation to provide these benefits. As of June 30, 2014, the date of the most recent actuarial valuation, there were 3,248 active participants and 786 retired and deferred vested members on that date.

128 The VRS issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information. A copy of that report may be obtained by writing the VRS at P.O. Box 2500, Richmond, Virginia 23218-2500.

Funding Policy and Annual Benefit Contribution:

In accordance with Title 51.1 of the Code of Virginia the County is required to contribute an actuarial percentage of its employees’ annual reported compensation to the VRS to fund the VRS Health Insurance Credit Program. The County’s contribution rate for the fiscal year ended June 30, 2014 was 0.17% of annual covered payroll.

The required contributions for the County were determined as part of an actuarial valuation performed as of June 30, 2014 using the entry age normal actuarial cost method. The actuarial assumptions included (a) a 7.00% investment rate of return, and (b) projected payroll growth rate of 3.00%. Both (a) and (b) included an inflation component of 2.50%. The actuarial value of the County assets is equal to the market value of the assets. This method was determined using techniques that smooth the effects of short-term volatility in the market value of assets over a five-year period. The unfunded actuarial accrued liability is being amortized as a level percentage of projected pay on a closed basis. The remaining amortization period at June 30, 2014, was 20 to 29 years for the County.

Trend information:

Illustration 14-18 summarizes the required three-year trend information for the County.

Illustration 14-18 Virginia Retirement System – Health Insurance Credit Program Three Year Trend Information for Prince William County Annual Benefit Cost Percentage of ABC Fiscal Year Ending: Net Benefit Obligation (NBO) (ABC) Employer Portion Contributed June 30, 2013 $ 363 100% - June 30, 2014 $ 371 100% - June 30, 2015 $ 357 100% -

Funded Status and Funding Progress:

As of June 30, 2014, the most recent actuarial valuation date, the VRS Health Insurance Credit Program was 45.0% funded. The actuarial accrued liability for benefits was $6,512 and the actuarial value of assets was $2,927, resulting in an unfunded actuarial accrued liability (UAAL) of $3,585. The covered payroll (annual payroll of active employees of covered by the plan) was $204,740, and the ratio of the UAAL to the covered payroll was 1.8%. Covered payroll was reduced to exclude constitutional officers, employees of constitutional officers, general registrars, employees of general registrars, and local social service employees. Annual salaries of valuations prior to June 30, 2011 included all employees within Prince William County, including constitutional officers, employees of constitutional officers, general registrars, employees of general registrars, and local social service employees, whose actuarial accrued liability is not with Prince William County.

NOTE (15) – OTHER POST-EMPLOYMENT BENEFITS (OPEB) MASTER TRUST FUND

Description:

The Prince William County Other Post-Employment Benefits (OPEB) Master Trust Fund is an agent multiple-employer defined benefit post-employment benefits trust fund. As such, it is reported in accordance to GASB Statement No. 43, paragraph 13, in the aggregate. Individual plan information of the participating employer agents is reported in Note (15).

The OPEB Master Trust was established by the Prince William County Board of County Supervisors on June 23, 2009 by Resolution No. 09-544 to provide funding for benefit payments on behalf of retiree and Consolidated Omnibus Budget Reconciliation Act (COBRA) participants. On June 30, 2009, funds were transferred to establish three separate trust fund sub- accounts for County, Park Authority and Schools. Although the assets of the Trust fund are commingled for investment purposes, each plan’s assets may be used only for the payment of benefits to the members of that plan, in accordance to the 129 terms of the Trust Agreement. Assets accumulated to pay for plan costs or benefits of members from one agent employer cannot be used for plan costs or benefits of another agent employer.

On March 13, 2012, the Board of County Supervisors authorized Resolution No. 12-236 to merge the functions of the Prince William County Park Authority component unit into County Government by creating the Prince William County Department of Parks & Recreation, ending the separate corporate existence of the Park Authority on July 1, 2012 in order to provide parks and recreation services to the public by the most effective and efficient means. Participants in the Park Authority Premium Plan and Retiree Health Insurance Plan (RHICP) are participants in the County Premium Plan and RHICP, and the County has assumed all assets and liabilities connected with the plan.

The Line of Duty Act (LODA) is authorized by the Code of Virginia §9.1-400 et seq. On June 5, 2012, the Board of County Supervisors authorized Resolution No. 12-588, pursuant to paragraph B2 of Item 258 of the Commonwealth Appropriations Act, to make an irrevocable election not to participate in the Commonwealth Line of Duty Act Fund on July 1, 2012. The County has assumed all responsibility for existing, pending or prospective claims for benefits approved and associated administrative costs made by the State Comptroller of behalf of Prince William County.

On June 17, 2014, the Board of County Supervisors authorized Resolution No. 14-391 establishing the Line of Duty Act subaccount to fund covered employees and authorized annual contributions to the OPEB Master Trust Fund. The beginning liability for fiscal year 2014 was also transferred to the OPEB Master Trust Fund. Employer contributions to the OPEB Master Trust are irrevocable. Plan assets are dedicated to providing benefits to retirees and their beneficiaries in accordance with the terms of the Trust Agreement. Plan assets are legally protected from creditors of the Employers or Plan Administrators.

The OPEB Master Trust does not issue a stand-alone financial report.

The following is a summary of the Statement of Fiduciary Net Position of the OPEB Master Trust Fund:

Illustration 15-1 Summary of the Statement of Fiduciary Net Position OPEB Master Trust Fund Total OPEB Master County Schools LODA Trust Fund Total assets $ 27,059 25,851 8,797 $ 61,707 Total liabilities 2,955 6 626 3,587 Net position $ 24,104 25,845 8,171 $ 58,120

The following is a summary of the Changes in Fiduciary Net Position of the OPEB Master Trust Fund:

Illustration 15-2 Summary of the Changes in Fiduciary Net Position OPEB Master Trust Fund Total OPEB County Schools LODA Master Trust Fund Total additions $ 3,984 1,296 1,536 $ 6,816 Total deductions 2,954 9 623 3,586 Change in Net position 1,030 1,287 913 3,230 Net position, beginning of year 23,074 24,558 7,258 54,890 Net position, end of year $ 24,104 25,845 8,171 $ 58,120

Summary of Significant Accounting Policies:

Basis of Accounting. The OPEB Master Trust’s financial statements are prepared using the accrual basis of accounting. Plan members do not contribute directly to the OPEB Master Trust Fund, but pay their respective employers 100% of published blended rates for premium plans. Each Employer may contribute to the Trust such amounts as it deems appropriate to pre-fund

130 and/or pay benefits provided under a Plan it sponsors. An Employer is not obligated by the Trust Agreement to make any contributions. Therefore, contributions are recognized when due and the Employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the Trust Agreement.

Method Used to Value Investments. Investments are reported at fair value, which for OPEB Master Trust is determined by the mean and most recent bid and asked prices as obtained from dealers that make market in such securities. Securities for which market quotations are not readily available are valued at fair value as determined by the custodian under the direction of the OPEB Master Trust Fund Finance Board Trustees with assistance of a valuation service.

Contribution Information:

Illustration 15-3 summarizes the membership in the OPEB Master Trust of each plan as of July 1, 2012, the latest actuarial valuations.

Illustration 15-3 OPEB Master Trust Fund Membership Information County County LODA School Board County RHICP Premium Plan Plan Premium Plan Active plan members 2,674 3,368 2,466 10,561 Retirees and beneficiaries receiving benefits 212 831 35 441 Terminated plan members entitled to but not - - - - yet receiving benefits

Funded Status and Funding Progress – All Participating OPEB Plans:

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. Actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress, presented as Required Supplementary Information following the Notes to the Financial Statements in Schedule 6, presents multiyear trend information about whether the actuarial values of plan assets are increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Illustration 15-4 summarizes the funded status and Employer contributions of all plans as of the most recent actuarial valuation date.

Illustration 15-4 Other Post-Employment Benefits - OPEB Master Trust Fund Participating Plans Schedule of Funding Progress Unfunded Actuarial Actuarial Actuarial UAAL as a Actuarial Valuation Accrued Funded Covered Value of Accrued Percentage of Date Liability Ratio Payroll Assets (AVA) Liability Covered Payroll (AAL) (UAAL) July 1, 2012 $ 31,390 107,597 76,207 29.2% $ 783,660 9.7% July 1, 2013 $ 40,552 139,899 99,347 29.0% $ 753,326 13.2% July 1, 2014 $ 54,890 116,374 61,484 47.2% $ 774,969 7.9%

The schedule of employer contributions, shown in Illustration 15-5, presents trend information about the amounts contributed to all plans by employers in comparison to an amount that is actuarially determined in accordance to the parameters of GASB Statement No. 45. The actuarially determined contribution represents a level of funding that, if paid on an ongoing basis, is

131 projected to cover normal cost for each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

Illustration 15-5 Other Post-Employment Benefits – OPEB Master Trust Fund Participating Plans Schedule of Employer Contributions

Percentage Fiscal Year Ending: Total Actuarially Determined Contributions Contributed

June 30, 2013 $ 7,970 100% June 30, 2014 $ 15,570 109% June 30, 2015 $ 5,960 100%

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. Additional information about the actuarial methods and assumptions, as of the latest actuarial valuations, is shown in Illustration 15-6.

Illustration 15-6 Other Post-Employment Benefits – OPEB Master Trust Fund Participating Plans Actuarial Methods and Assumptions County Premium School Board County RHICP County LODA Plan Plan Premium Plan Valuation Date July 1, 2014 July 1, 2014 July 1, 2014 July 1, 2014

Projected Unit Actuarial Cost Method Projected Unit Cost Projected Unit Cost Entry Age Cost

Level % of Level % of Projected Level % of Projected Level % of Pay, Amortization Method Projected Pay, Pay, closed pay , closed closed closed

Remaining Amortization 23 years 23 years 28 years 30 years Period

Fair Market Value Fair Market Fair Market Value Fair Market Value Asset Valuation Method Value

Investment Rate of 7.0% 7.0% 7.0% 7.0% Return

Payroll Growth 3.5% 3.5% 3.5% 2.5%

Inflation 2.4% n/a 2.4% 2.5%

Healthcare Cost Trend 5.2% base, 6.2% 5.2% base, 6.2% Rate sensitivity, initial n/a sensitivity, initial 7.0% initial

4.5% base, 5.5% 4.5% base, 5.5% n/a 5.0% ultimate sensitivity, ultimate sensitivity, ultimate

132 Concentrations:

Permissible asset classes, shown with target investment percentages, include:

Illustration 15-7 OPEB Master Trust Fund Concentrations at June 30, 2015 Target Range Asset Class Policy Percent Actual Percent Percent OPEB Master Trust Fund Investments: Domestic Equity 40% 20% - 60% 43.82% International Equity 20% 0% - 40% 22.80% Other Growth Assets 0% 0% - 20% 0.00% Fixed Income 40% 0% - 60% 33.38% Other Income Assets 0% 0% - 20% 0.00% Real Return Assets 0% 0% - 20% 0.00% Cash Equivalents 0% 0% - 20% 0.00% 100% 100.00%

NOTE (16) – SELF INSURANCE

The County and Adult Detention Center are exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; the health of and injuries to its employees; and natural disasters.

The Prince William County Self-Insurance Group Casualty Pool provides coverage to the County and the Adult Detention Center. The Casualty Pool has a $750 per occurrence retention of coverage, except ambulances and fire trucks, $1,000 per occurrence retention of coverage, and it purchases commercial excess insurance with a $10,000 per occurrence and $20,000 annual aggregate limit, except for automobile liability coverage, which has a $10,000 annual aggregate limit and public official liability which has a $10,000 aggregate limit. The Prince William County Self-Insurance Group Workers’ Compensation Association provides coverage to the County and the Adult Detention Center. The Association has a $1,500 per occurrence retention, and it purchases commercial excess coverage which provides statutory limits for workers’ compensation claims and a $1,000 excess of the $1,500 per occurrence retention limit for employers’ liability coverage.

The County’s pre-65 retirees with over 15 years of service and permanent employees are eligible to enroll in one of three health insurance plans and a dental plan. All three health insurance plans include comprehensive medical, preventive care, vision, and prescription drug coverage. Three of the health insurance plans are self-insured with a $225 specific individual stop loss limit. The basis for estimating incurred but not reported (IBNR) claims at year-end is an annual analysis performed by the plan’s administrator. The County also offers an HMO option to limited employees and a dental option which are fully insured. The County expended $36,235 for claims, administration and premiums in fiscal year 2015.

The County’s Self-Insurance Group Casualty Pool, Workers’ Compensation and Other Self-Insurance plans are fully funded. Losses are charged to operations as incurred. The liability for unpaid losses for self-insurance is determined using case-basis evaluations and a provision for incurred but not reported losses that is based upon actuarial projections. Actuarial projections of ultimate losses are based on a composite of the self-insurance members’ experience and property and casualty insurance industry data, which is used to supplement the limited historical experience and includes the effects of inflation and other factors. Claims liabilities include allocated loss adjustment expenses and are reported net of estimated claims. Due to the limited historical experience of the Prince William Self-Insurance Group Casualty Pool, Workers’ Compensation and Other Self- Insurance, there exists a significant range of variability around the best estimate of the ultimate cost of settling all unpaid claims. Accordingly, the amount of the liability for unpaid losses and related expenses and the related provisions included in

133 financial statements may be more or less than the actual cost of settling all unpaid claims. Adjustments to claim liabilities are made continually, based on subsequent developments and experience, and are included in operations as made.

Illustration 16-1 presents a reconciliation of the changes in the aggregate liabilities for claims for the current and prior fiscal years. These claims liabilities are included in accrued liabilities in the accompanying statement of fund net position (Exhibit 7).

Illustration 16-1 Prince William County Self-Insurance Other Self Insurance, Casualty Pool and Workers’ Compensation Association, Health Insurance Changes in the Aggregate Liabilities for Claims Workers' Other Self- Health Casualty Pool Compensation Insurance Insurance* Association Unpaid claims June 30, 2012 $ 196 613 13,410 3,158 Total claims incurred, fiscal year 2013 - 394 4,186 28,591 Total claims paid, fiscal year 2013 (18) (379) (2,849) (28,449) Unpaid claims June 30, 2013 $ 178 628 14,747 3,300 Total claims incurred, fiscal year 2014 83 486 (592) 30,072 Total claims paid, fiscal year 2014 (17) (441) (1,366) (29,772) Unpaid claims June 30, 2014 $ 244 673 12,789 3,600 Total claims incurred, fiscal year 2014 - 349 3,631 35,414 Total claims paid, fiscal year 2014 (10) (470) (2,649) (34,674) Unpaid claims June 30, 2015 $ 234 552 13,771 4,340

*Health Insurance column excludes certain HMO, dental and vision premiums, flexible spending benefits and retiree insurance credit expenses.

NOTE (17) - INTERJURISDICTIONAL AGREEMENT

The County has entered into a contractual agreement with Fairfax County for the purpose of exchanging solid waste. The agreement allows for the sharing of solid waste facilities between counties. Revenues and expenses generated by this agreement are recorded in the Landfill enterprise fund with billing for any balances to occur during the second half of the fiscal year or reconciliation at the end the fiscal year. Neither party is obligated to make payment unless the funds have been appropriated. The agreement is cancelable by giving 120 days written notice. The amounts due from and due to Fairfax County are $384 and $0 respectively at June 30, 2015.

NOTE (18) - RELATED ORGANIZATIONS

A. Industrial Development Authority

The Prince William Industrial Development Authority (IDA) was duly created by the Board pursuant to the Industrial Development and Revenue Bond Act, Title 15.1, Chapter 33, Code of Virginia. The IDA is a political subdivision of the Commonwealth governed by seven directors appointed by the Board. The IDA is empowered, among other things, to acquire, construct, improve, maintain, equip, own, lease and dispose of parking and other facilities in the Commonwealth and to finance the same by the issuance of its revenue bonds. The IDA has no taxing power.

The Board approves the issuance of industrial development bonds solely to qualify such bonds for tax exemption. These bonds do not constitute indebtedness of the County and are secured solely by revenues received from the borrowers. The County has no financial responsibility for the day-to-day financial transactions of the IDA.

B. Service Authority

The Prince William County Service Authority (Service Authority) is authorized under the Virginia Water and Sewage Authorities Act; Title 15.1, Chapter 28 of the Code of Virginia, pursuant to resolution adopted by the Board on January 11, 1983. It was chartered by the State Corporation Commission. The members of the Service Authority are appointed by the Board; however, there is no ability of the Board to direct the members of the Service Authority with respect to carrying out the Service Authority’s fiscal and management functions. The Service Authority currently operates and sets the rates and charges for the

134 sewer system in the County. The Service Authority’s operations and capital funds are principally financed by user charges and bond issues. The Service Authority is an independent public body, who is solely responsible for all its outstanding debt.

The Prince William County Service Authority operates the sewer system in the County, including the portion of its system located in the UOSA service area. In 1992, the Service Authority contractually assumed the obligation to pay the amounts due from the County to UOSA under a Service Agreement, subject to an annual contribution to those payments by the County which declines over a period of years to zero in 2021. On December 11, 2012, the County and the Service Authority modified this agreement whereby the Service Authority assumed full responsibility for funding the County’s obligation to UOSA in the future. Furthermore, the Service Authority granted and formally acknowledged a non-cash credit of $13,782 to the County equivalent to payments the County made under the prior agreement. The County may use this credit to purchase sewer and water availability or any Service Authority asset offered for sale. The non-cash credit will be reduced by such value of any purchase of sewer and water availability or asset. The balance of the County’s unused portion of the credit at June 30, 2015 is $13,280.

C. Upper Occoquan Sewage Authority

The Upper Occoquan Sewage Authority (UOSA) was created under the provisions of the Virginia Water and Sewer Authorities Act to be the single regional entity to construct, finance and operates the regional sewage treatment facility mandated by the Occoquan policy for the upper portion of the Occoquan Watershed. UOSA is a joint venture formed on March 3, 1971, by a concurrent resolution of the governing bodies of the Counties of Fairfax and Prince William and the Cities of Manassas and Manassas Park. The governing body of UOSA is an eight person Board of Directors consisting of 2 members appointed to four year terms by the governing body of each jurisdiction. The County has an ongoing financial responsibility for its share of UOSA’s operating costs construction costs8

D. Northern Virginia Criminal Justice Training Academy-Emergency Vehicle Operations Center (EVOC)

The Northern Virginia Criminal Justice Training Academy (NVCJTA) was re-chartered by the Commonwealth of Virginia in 1997. It was originally established in 1965 as the Northern Virginia Police Academy.

In 1980, the NVCJTA entered into an agreement with the Old Dominion Speedway in Manassas for the use of the facility as an Emergency Vehicle Operations Center (EVOC). It is anticipated that access to this facility will be terminated. Therefore, the NVCJTA has entered into an agreement to lease finance the construction and equipping of a new EVOC on its property located in Nokesville, VA.

There are four participating jurisdictions included in the financing of the new EVOC: Prince William County, Loudoun County, Arlington County and Alexandria City. The four jurisdictions are responsible for the debt service, and the operating and capital expenditures will be charged to all participating jurisdictions on a pro rata share basis.

The County’s share of both operating and debt service expenditures has been set at 30 percent per the Memorandum of Understanding between NVCJTA and the County and approved by the Board of County Supervisors via Resolution No. 05-770 on September 6, 2005.

The Industrial Development Authority of Loudoun County VA issued $18,650 of Lease Revenue Bonds on November 21, 2006, to finance the construction and equipping of the EVOC. Prince William County is responsible for debt service on 30% of the total issue, or $5,505. The County’s payment for fiscal year 2015 was $442 The County’s General Fund committed share of the NVCJTA’s remaining debt service (including interest), which approximates 30% of total NVCJTA principal and interest requirements as of June 30, 2015 is shown in Illustration 18-1.

Illustration 18-1 County’s Share of NVCJTA Debt Service Requirements Year Ending June 30: 2016 $ 430 2017 418 2018 407 2019 395 2020 384 2021 thru 2025 1,740 2026 285 Total $ 4,059

135 E. Northern Virginia Transportation Authority (NVTA)

The Northern Virginia Transportation Authority (NVTA) was established under the provisions of the Code of Virginia, Title 15.2, Chapter 48.2. NVTA embraces the Counties of Arlington, Fairfax, Loudon, and Prince William, and the Cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park. It provides a technical advisory committee to provide recommendations on the development of transportation projects, funding strategies, and other matters.

NVTA is funded through an increase in sales and use tax rate of 0.3%. Per the Memorandum of Agreement between NVTA and the County, 30% of the revenues received by NVTA shall be received by the County on a prorated share. These will be used to fund additional urban or secondary road construction, for other capital improvements that reduce congestion, for other transportation capital improvements in NVTA’s most recent long range transportation plan, or for public transportation purposes. The remaining 70% of the increased sales and use tax will be distributed by NVTA to provide for regional projects across the counties and cities included within the authority.

NOTE (19) - JOINT VENTURES

A. Potomac and Rappahannock Transportation Commission

The Potomac and Rappahannock Transportation Commission (PRTC), was created in fiscal year 1987 to levy a 2% Motor Fuel Tax authorized by the Commonwealth. The PRTC is a joint venture of the contiguous jurisdictions of Prince William and Stafford Counties and the Cities of Manassas, Manassas Park, and Fredericksburg and was established to improve transportation systems, composed of transit facilities, public highways and other modes of transport. While each jurisdiction effectively controls PRTC’s use of Motor Fuel Tax proceeds from that jurisdiction, they do not have an explicit, measurable equity interest in PRTC.

The PRTC’s governing structure consists of a seventeen member board of commissioners that includes thirteen locally elected officials from the six member jurisdictions, three appointed commissioners from the General Assembly and one ex-officio representative representing from the Virginia Department of Rail and Public Transportation (VDRPT).

On December 16, 1997, the PRTC issued $7,445 in Transportation Facilities Lease Revenue Refunding Bonds, Series 1997. The 1997 Bonds were issued to refinance certain of PRTC’s outstanding indebtedness, originally incurred to finance the costs of the acquisition, design and construction of transportation facilities. The 1997 Bonds are limited obligations of PRTC payable solely from and secured by a pledge of (1) prior to March 1, 2000, a refunding escrow account, and (2) on and after March 1, 2000, (a) the County’s portion of fuel tax revenues, (b) payments by the County to PRTC pursuant to the lease, subject to appropriation, and (c) certain funds and accounts established by indenture, including a debt service reserve fund.

In addition to lease payments to be made to PRTC, the County is also required to fund its share of PRTC’s administrative expenses, certain costs of the commuter rail operations, and operating deficits of the County’s commuter bus service. Funding sources include the motor fuel tax proceeds and other appropriated County resources. The County did not appropriate resources to be paid to PRTC in fiscal year 2014. The motor fuel tax proceeds were sufficient to cover all costs.

Copies of PRTC’s financial statements may be obtained by writing to PRTC Finance Division, 14700 Potomac Mills Road, Woodbridge, Virginia 22192.

B. Peumansend Creek Regional Jail Authority

The Peumansend Creek Regional Jail Authority (the Authority) was created in fiscal year 1994 to construct and operate a 336 prisoner regional correctional facility. The Authority is a joint venture of the jurisdictions of Arlington, Caroline, Loudoun and Prince William Counties and the Cities of Alexandria and Richmond. The formation of the Authority was enabled by Public Law 102-25 and 102-484 that conveyed 150 acres at Fort A.P. Hill from the U.S. Department of the Army to Caroline County on the condition that Caroline County and at least three other jurisdictions named in the legislation construct and operate a regional correctional facility on the site. The City Manager, County Manager or County Executive of the member jurisdictions forms the Authority. The Authority has six member jurisdictions. The Authority employs a Superintendent who is responsible for the operation of the Jail. Each jurisdiction pays the per diem charge for the number of guaranteed beds set forth in the Service Agreement.

The County and the other participating jurisdictions have no explicit, measurable equity interest in the Authority, but do have an ongoing financial responsibility for their share of the Authority’s operating costs. The County made payments to the Authority in fiscal year 2015 of $902 to pay its share of the Authority’s operating costs.

On March 20, 1997, the Authority issued $10,220 Regional Jail Facility Revenue Bonds, Series 1997 and $12,000 Regional Jail Facility Grant Anticipation Notes, Series 1997. The obligations were issued for the purpose of financing the Authority’s planning, 136 design, acquisition, construction and equipping of the Regional Jail Facility; funding a debt service reserve fund for the 1997 Bonds through the purchase of a surety bond from MBIA Insurance Corporation; funding payment of interest on the 1997 Notes through April 1, 2000; funding certain working capital expenditures incident to placing the Regional Jail in operation; and paying the costs of issuing the obligations. The Authority began accepting female prisoners in September 1999, and began full operation in November 1999.

Copies of the Authority’s financial statements may be obtained by writing to Peumansend Creek Regional Jail Authority, P.O. Box 1460, Bowling Green, Virginia 22427.

NOTE (20) - COMMITMENTS AND CONTINGENCIES

Virginia Railway Express

In May 2005, NVTC and PRTC entered into a capitalized lease obligation on behalf of VRE in the amount of $25,100 for the acquisition of 11 cab cars. As of June 30, 2015, the outstanding balance on the capitalized lease was approximately $15,414.

In fiscal year 2008 VRE entered into an agreement with the Federal Railroad Administration for a loan of up to $72.5 million to purchase 50 Gallery railcars. In fiscal year 2009 the terms were amended to include ten additional Gallery railcars. A series of sixteen promissory notes were originally authorized and during fiscal year 2012 the balance on the individual notes were combined into a consolidated note. The note is secured by the revenues of VRE and the railcars. The amount of notes outstanding at June 30, 2015, was $57,710.

The County, through its membership in the PRTC, has joined with other jurisdictions through a Master Agreement to bear certain costs associated with operating and insuring the rail service as well as servicing the debt issued by NVTC. The Master Agreement requires that the County's governmental officers charged with preparing its annual budget include an amount equal to its share of the costs of the VRE. Each jurisdiction’s share is determined by a formula set out in the Master Agreement. It is estimated the County's share of this cost will be approximately $5,485 annually and will be paid with the 2.1% Motor Fuel Tax collected by the PRTC or the County's General Fund if fuel tax revenues are not sufficient.

NOTE (21) – SUBSEQUENT EVENTS

On March 18, 2015, the Board of County Supervisors approved Resolution No. 15-212 authorizing the sale of General Obligation School Bonds to be sold to the Virginia Public School Authority in an amount not to exceed $108,990 for the purpose of financing various school projects. On July 14, 2015, the County sold to the VPSA Special Obligation School Financing Bonds Series 2015 in the par amount of $98,485.

On May 19, 2015, the Board of County Supervisors approved Resolution No. 15-361 authorizing the sale of General Obligation School Bonds to be sold in an amount not to exceed $67,565 for the purpose of financing various capital improvement road project, library projects, and park projects. On July 29, 2015, the County sold to the General Obligation Public Improvement Bonds, Series 2015 in the par amount of $61,805.

On September 24, 2015, the Northern Virginia Criminal Justice Training Academy (NVCJTA) advance refunded the remaining balance of its outstanding Series 2006 Lease Revenue Bonds in the amount of $11,990. These lease revenue bonds were originally issued in November 2006 by the NVCJTA through the Loudon County Industrial Development Authority in the total amount of $18,650 to finance the Emergency Vehicle Operations Center (EVOC) located at the Public Safety Training Center. The County participated in the Series 2006 financing by committing to pay a share of the debt service on the bonds. The County will share in a proportionate share of the refunding savings.

An election was held in Prince William County on November 3, 2015, to select an at-large Chairman of the Board of County Supervisors, as well as Supervisors for each of the County’s seven magisterial districts for a four year term beginning January 1, 2016. One new member will be joining the Board to represent the Occoquan magisterial district, Ms. Ruth M. Anderson. All other incumbents were re-elected.

137 REQUIRED SUPPLEMENTARY INFORMATION

(UNAUDITED)

138 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule1 GENERALFUND Page1of5 ScheduleofBudgetaryRevenues,BudgetaryExpendituresandChangesinBudgetaryFundBalanceBudgetandActual (UNAUDITEDBUDGETPREPAREDONANONGAAPBASIS) FortheyearendedJune30,2015 (amountsexpressedinthousands)

VarianceWith FinalBudget BudgetedAmounts 2015 Positive Original Final Actual (Negative) BUDGETARYREVENUES: FROMLOCALSOURCES: GENERALPROPERTYTAXES: Realpropertytaxes $ 542,166 542,166 541,915 (251) Realandpersonalpropertytaxesofpublicservicecorporations 17,415 17,415 17,589 174 Personalpropertytaxes 148,936 94,636 98,157 3,521 Penaltiesandinterest 5,451 5,451 5,903 452 Totalgeneralpropertytaxes 713,968 659,668 663,564 3,896

OTHERLOCALTAXES: Shorttermrentaltax 247 247 191 (56) Localsalestaxes 58,525 58,525 59,709 1,184 Consumer'sutilitytaxes 13,700 13,700 13,974 274 Bankstocktaxes 1,500 1,500 1,670 170 Motorvehiclelicenses 8,240 8,240 8,053 (187) Taxesonrecordationandwills 8,747 8,747 8,868 121 Business,professionalandoccupationallicensetax 24,427 24,427 24,744 317 Publicutilitygrossreceiptstax 1,258 1,258 1,431 173 Transientoccupancytax 3,615 3,615 3,425 (190) Totalotherlocaltaxes 120,259 120,259 122,065 1,806

PERMITS,PRIVILEGEFEESAND REGULATORYLICENSES: Animallicenses 196 196 252 56 Fireprotectionpermits 319 319 469 150 Healthprotectionpermits 151 151 172 21 Cablefranchisefees 1,340 1,340 31,343 Permitsandotherlicenses 145 190 257 67 Totalpermits,privilegefeesandregulatorylicenses 2,151 2,196 2,493 297

FINESANDFORFEITURES: 3,096 3,096 73,167 1

FROMUSEOFMONEYANDPROPERTY: Useofmoney 6,738 5,082 4,664 (418) Useofproperty 1,082 1,134 1,464 330 Totalrevenuefromuseofmoneyandproperty 7,820 6,216 6,128 (88)

CHARGESFORSERVICES: Courtcosts 3,005 3,013 4,166 1,153 Correctionanddetention 925 1,079 81,168 9 Commonwealth'sAttorney 89 89 72 (17) Parksandrecreation 775 881 1,018 137 Mentalhealthandmentalretardation 740 740 1,049 309 Welfareandsocialservices 247 247 256 9 Library 664 663 550 (113) Planningandcommunitydevelopment 35 35 (35) Publicsafety 1,267 1,267 21,295 8 Ambulanceandrescue 5,312 5,312 5,110 (202) Othercharges 572 572 568 (4) Totalchargesforservices 13,631 13,898 15,252 1,354

Totalrevenuefromlocalsources 860,925 805,333 812,669 7,336

139 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule1 GENERALFUND Page2of5 ScheduleofBudgetaryRevenues,BudgetaryExpendituresandChangesinBudgetaryFundBalanceBudgetandActual (UNAUDITEDBUDGETPREPAREDONANONGAAPBASIS) FortheyearendedJune30,2015 (amountsexpressedinthousands)

VarianceWith FinalBudget BudgetedAmounts 2015 Positive Original Final Actual (Negative)

THEFEDERALGOVERNMENT: Paymentsinlieuoftaxes 70 70 85 15 Categoricalaidgrants: Agingprograms 1,065 1,156 786 (370) USDA 79 110 112 2 Welfareprograms 10,366 10,315 11,728 1,413 Mentalhealth/retardationandsubstanceabuseprograms 2,669 2,858 2,814 (44) HomelandSecurityGrants 234 565 1,553 988 Policefederalforfeituresandgrantprograms 103 198 682 484 Expenditurereimbursementforsocialservices 330 330 326 (4) Other 260 1,735 1,955 220

Totalrevenuefromthefederalgovernment 15,176 17,337 20,041 2,704

THECOMMONWEALTH: NONCATEGORICALAID: PPTRArevenue 54,300 54,288 (12) Communicationssalesandusetax 20,360 20,360 19,317 (1,043) AntiAnnexationpublicsafety 8,677 8,397 8,908 511 Mobilehometax 35 35 61 26 Rentalcartax 1,015 1,015 987 (28) Rollingstocktax 99 99 89 (10) Totalnoncategoricalaid 30,186 84,206 83,650 (556)

SHAREDEXPENDITURES: Commonwealth'sAttorney 1,365 1,365 1,758 393 Sheriff 1,730 1,682 (1,674 8) DirectorofFinance 560 543 647 104 Registrar 84 81 83 2 ClerkoftheCourt 572 572 51 (521) Totalsharedexpenditures 4,311 4,243 4,213 (30)

CATEGORICALAID: Publicsafety 970 970 561 (409) Fireprograms 949 949 1,827 878 Library 524 510 510 Publicassistanceandwelfareadministration 9,477 9,635 8,365 (1,270) Publichealth 228 228 220 (8) Totalcategoricalaid 12,148 12,292 (11,483 809)

OTHERCATEGORICALAID: Agingprogram 327 413 351 (62) Communityservices 13,555 14,490 13,617 (873) Juveniledetention 1,899 2,002 1,924 (78) Criminaljusticeservices 1,029 997 999 2 Policeextraditions 30 30 33 3 Sheriffextraditions 25 25 16 (9) Victim/witnessprogram 163 164 45 (119) Other 2,239 715 700 (15) Totalothercategoricalaid 19,267 18,836 17,685 (1,151)

TotalrevenuefromtheCommonwealth 65,912 119,577 117,031 (2,546)

140 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule1 GENERALFUND Page3of5 ScheduleofBudgetaryRevenues,BudgetaryExpendituresandChangesinBudgetaryFundBalanceBudgetandActual (UNAUDITEDBUDGETPREPAREDONANONGAAPBASIS) FortheyearendedJune30,2015 (amountsexpressedinthousands)

VarianceWith FinalBudget BudgetedAmounts 2015 Positive Original Final Actual (Negative)

LOCALGOVERNMENTS: CityofManassas 7,364 5,377 5,324 (53) CityofManassasPark 1,986 2,127 141 Totalrevenuesfromlocalgovernments 7,364 7,363 87,451 8

MISCELLANEOUS: Expenditurerefunds 561 561 604 43 DonationsProffers 12,751 12,751 DonationsOther 280 360 437 77 Insurancerecoveries 1 1 Other 175 175 123 (52) Totalmiscellaneousrevenues 1,016 13,847 613,916 9

Totalbudgetaryrevenues 950,393 963,457 971,108 7,651

BUDGETARYEXPENDITURES: GENERALGOVERNMENTALADMINISTRATION: BoardofCountySupervisors 3,570 3,420 3,099 321 CountyAttorney 3,538 3,726 3,455 271 OfficeofExecutiveManagement 8,422 8,759 8,418 341 Technologyandsupportservices 1,267 368 13 355 Finance 18,127 18,368 17,684 684 Auditservices 787 788 777 11 HumanRights 586 595 595 BoardofRegistration/Elections 2,518 2,523 52,518 Mailroomandprintshop 1,048 1,027 967 60 Contingencyreserve 750 44 Unemploymentinsurancereserves 125 125 125 Totalgeneralgovernmentaladministration 40,738 39,703 37,651 2,052

JUDICIALADMINISTRATION: CommonwealthAttorney 5,274 5,340 5,210 130 Sheriff 9,430 9,578 9,349 229 JuvenileandDomesticRelationsCourt 106 107 96 11 ClerkofCourt/JudgesChambers 4,846 5,338 4,432 906 GeneralDistrictCourt 267 266 191 75 Magistrates 222 274 255 19 LawLibrary 159 159 148 11 Totaljudicialadministration 20,304 21,062 19,681 1,381

PUBLICSAFETY: PublicWorksdevelopment 2,647 2,732 2,428 304 Police 96,290 96,068 89,288 6,780 JuvenileCourtServicesUnit 1,123 1,100 41,055 5 AdultDetentionCenter 25,518 25,408 25,408 Correctionanddetentionofyouth 5,572 5,782 5,515 267 CriminalJusticeServices 3,476 3,431 63,369 2 PublicSafetyCommunications 9,985 9,991 8,985 1,006 Fireservice 72,932 75,574 71,895 3,679 NorthernVirginiaCriminalJusticeTrainingAcademy 442 442 442 Totalpublicsafety 217,985 220,528 208,385 12,143

141 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule1 GENERALFUND Page4of5 ScheduleofBudgetaryRevenues,BudgetaryExpendituresandChangesinBudgetaryFundBalanceBudgetandActual (UNAUDITEDBUDGETPREPAREDONANONGAAPBASIS) FortheyearendedJune30,2015 (amountsexpressedinthousands)

VarianceWith FinalBudget BudgetedAmounts 2015 Positive Original Final Actual (Negative) PUBLICWORKS: Publicworks 30,145 29,659 27,342 2,317 Transportation 2,769 2,629 2,444 185 Propertyandmiscellaneousinsurance 6,701 1,671 734 937 Totalpublicworks 39,615 33,959 30,520 3,439

HEALTHANDWELFARE: SocialServices 26,890 27,297 26,122 1,175 PublicHealth 3,948 3,955 33,919 6 CommunityServicesBoard 37,882 38,763 37,020 1,743 AtRiskYouthandFamilyServices 8,942 8,741 8,549 192 OfficeonAging 5,763 5,972 5,230 742 Totalhealthandwelfare 83,425 84,728 80,840 3,888

EDUCATION: Schools 487,788 416,847 412,007 4,840

PARKS,RECREATIONALANDCULTURAL: Parksandrecreation 18,624 18,622 17,139 1,483 Library 14,556 14,621 13,946 675 Totalparks,recreationalandcultural 33,180 33,243 31,085 2,158

COMMUNITYDEVELOPMENT: OfficeofPlanning 3,442 3,415 43,369 6 Economicandcommunitydevelopment 2,791 2,610 2,420 190 Extensionandcontinuingeducation 927 945 860 85 Tourism 1,212 1,212 1,212 Totalcommunitydevelopment 8,372 8,182 7,861 321

DEBTSERVICE: Principalretirement 27,455 76,648 76,648 Interestandotherdebtcosts 17,877 44,288 42,225 2,063 Totaldebtservice 45,332 120,936 118,873 2,063

Totalbudgetaryexpenditures 976,739 979,188 946,903 32,285 Excess(deficiency)ofbudgetaryrevenuesover(under) budgetaryexpenditures (26,346) (15,731) 24,205 39,936

OTHERFINANCINGSOURCES(USES): TRANSFERSIN: Fire&rescuelevyfund 7,078 7,472 7,472 Specialrevenuefunds 5,840 5,838 5,838 Capitalprojectsfunds 1,713 10,270 10,270 Internalservicefunds 2,760 2,763 2,763 Enterprisefunds 2,126 2,127 2,127 Totaltransfersin 19,517 28,470 28,470

TRANSFERSOUT: Fire&rescuelevyfund (583) (583) Specialrevenuefunds (4,531) (4,359) (4,359) Capitalprojectsfunds (8,690) (19,700) (19,700) Internalservicefunds (2,927) (2,786) (2,786) Enterprisefunds (35) (1,662) (1,662) Totaltransfersout (16,183) (29,090) (29,090)

142 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule1 GENERALFUND Page5of5 ScheduleofBudgetaryRevenues,BudgetaryExpendituresandChangesinBudgetaryFundBalanceBudgetandActual (UNAUDITEDBUDGETPREPAREDONANONGAAPBASIS) FortheyearendedJune30,2015 (amountsexpressedinthousands)

VarianceWith FinalBudget BudgetedAmounts 2015 Positive Original Final Actual (Negative) NONREVENUERECEIPTS: Proceedsfromrefundings 35,675 35,675 Premiumonrefundings 6,219 6,219 Paymentstoescrowagent (41,508) (41,508) Claimsandjudgmentrecoveries 10 10 Saleofsurplusproperty 174 301 127 Totalnonrevenuereceipts 174 697 523

Totalotherfinancingsources(uses) 3,334 (446) 77 523

Netchangeinbudgetaryfundbalance (23,012) (16,177) 24,282 40,459 BUDGETARYFUNDBALANCE,beginningofyear 158,514 158,514 158,514 BUDGETARYFUNDBALANCE,endofyear $ 135,502 142,337 182,796 40,459

ReconciliationofBudgetaryBasistoGAAPBasis: Useofmoneyandproperty(Schedule1) $ 6,738 6,738 6,128 (610) Currentyearfairvalueadjustment 2,953 2,953 Useofmoneyandproperty(Exhibit5) 6,738 6,738 9,081 2,343

Cumulativefairvalueadjustmentsofpriorperiods (10,753) (10,753)

BUDGETARYFUNDBALANCE,endofyear 135,502 142,337 182,796 40,459 Totaladjustments (7,800) (7,800) FUNDBALANCE,endofyear $ 135,502 142,337 174,996 32,659

143 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule2 SPECIALREVENUEFUNDFire&RescueLevy ScheduleofBudgetaryRevenues,BudgetaryExpendituresandChangesinBudgetaryFundBalanceBudgetandActual (UNAUDITEDBUDGETPREPAREDONANONGAAPBASIS) FortheYearEndedJune30,2015 (amountsexpressedinthousands) VarianceWith FinalBudget BudgetedAmounts 2015 Positive Original Final Actual (Negative) BUDGETARYREVENUES: Generalpropertytaxes $ 34,470 34,470 35,315 845 Fromuseofmoneyandproperty 1,188 1,188 Miscellaneous 80 80 Totalbudgetaryrevenues 34,470 34,470 36,583 2,113

BUDGETARYEXPENDITURES: PublicsafetyFire&Rescue 54,560 26,626 21,009 5,617 Debtservice: Principalretirement 4 401 102 299 Interestandotherdebtcosts 391 102 251 (149) Totaldebtservice 395 503 353 150 Totalbudgetaryexpenditures 54,955 27,129 21,362 5,767

OTHERFINANCINGSOURCES(USES): Transfersin: Fire&rescuelevy Generalfund 583 583 583 Transfersout: Generalfund (7,113) (7,472) (7,472) Internalservicefunds (98) (98) (98) Saleofsurplusproperty 73 73 Totalotherfinancingsources(uses) (6,628) (6,987) (6,914) 73

Netchangeinbudgetaryfundbalance (27,113) 354 8,307 7,953 BUDGETARYFUNDBALANCE,beginningofyear 79,185 79,185 79,185 BUDGETARYFUNDBALANCE,endofyear $ 52,072 79,539 87,492 7,953

ReconciliationofBudgetaryBasistoGAAPBasis: Useofmoneyandproperty(Schedule2) $ 1,188 1,188 Currentyearfairvalueadjustment 479 479 Useofmoneyandproperty(Exhibit5) 1,667 1,667

Cumulativefairvalueadjustmentsofpriorperiods (1,354) (1,354)

BUDGETARYFUNDBALANCE,endofyear 52,072 79,539 87,492 7,953 Totaladjustments (875) (875) FUNDBALANCE,endofyear $ 52,072 79,539 86,617 7,078

144 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule3A ChangesinNetPensionLiabilityandRelatedRatiosPostEmploymentBenefitPlans(UNAUDITED) LastTenFiscalYears (amountsexpressedinthousands,exceptpercentageandyears)

VirginiaRetirementSystemAllPlans ChangesintheCounty'sNetPensionLiabilityandRelatedRatiosLast10FiscalYears FiscalYear 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 InformationforFY2013andearlierisnotavailable. Totalpensionliability Servicecost $ 28,205 Interest 67,389 Changesofbenefitterms Differencesbetweenexpectedandactual experience Changesofassumptions (38,578) Netchangeintotalpensionliability $ 57,016 Totalpensionliabilitybeginning 981,988 Totalpensionliabilityending(a) $ 1,039,004

Planfiduciarynetposition Contributionsemployer 30,488 Contributionsmember 11,385 Netinvestmentincome 122,481 Benefitpayments,includingrefundsof membercontributions (38,578) Administrativeexpense (651) Other 7

Netchangeinplanfiduciarynetposition $ 125,132 Planfiduciarynetpositionbeginning 772,912 Planfiduciarynetpositionending(b) $ 898,044

County'snetpensionliabilityending (a)(b) $ 140,960

Planfiduciarynetpositionasa percentageofthetotalpensionliability (b)/(a) 86.43% Coveredemployeepayroll $ 256,956 County'snetpensionliabilityasa percentageof coveredemployeepayroll 54.86% Expectedaverageremainingserviceyears ofallparticipants n/a

SeeIllustration135forweighted averagerateofreturn 8.33%

NotestoSchedule: Projectedbenefitpayments. CalculationsassumethattheCountywillcontinuetomakeallrequiredactuariallydeterminedcontributions. Basedonthatassumption,theplan'sfiduciarynetpositionisexpectedtomakeallfuturebenefitpaymentsofcurrentplanmembers. Changesofassumptions. Therearenochangesinactuarialassumptionsreflectedinthecurrentschedule.

145 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule3B ScheduleofCountyContributionPostEmploymentBenefitPlans(UNAUDITED) LastTenFiscalYears (amountsexpressedinthousands,exceptpercentage,ratiosandyears)

VirginiaRetirementSystemAllPlans ScheduleofCountyContributionsLast10FiscalYears FiscalYear 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 InformationforFY2013andearlierisnotavailable. Actuariallydeterminedcontribution $ 30,690 Contributionsinrelationtothe actuariallydeterminedcontribution 30,690 Contributiondeficiency(excess) $

Coveredemployeepayroll $ 256,956

Contributionsasapercentageof coveredemployeepayroll1 11.94%

1Theratesshownareasapercentageoftotalcoveredemployeepayroll.Contributionratesaresetandcontributedbased onpensionableearningsonly.

NotestoSchedule: Valuationdate. Actuariallydeterminedcontributionratesarecalculatedasofthebeginningofthefiscalyear(July1)forthetwo yearsimmediatelyfollowingthefiscalyear.Actuarialvaluationsareperformedeveryotheryear.

Methodsandassumptionsusedincalculationsofactuariallydeterminedcontributions: Actuarialcostmethod EntryAgeNormal Amortizationmethod Levelpercentofpay,closed Payrollgrowthrate 3.0% Remainingamortizationperiod 30years Assetvaluationmethod 5yearsmoothedmarketvalue Investmentrateofreturn 7.0%,netofpensionplaninvestmentexpense,includinginflationrateof2.5% Salaryincreases 3.5%5.35% Inflation 2.5% Costoflivingadjustments 2.25%2.5% Retirementage Ratesvarybyparticipantageandservice PreretirementbasedonRP2000EmployeeMortalityTableProjectedwithScaleAAto2020with Mortality malessetforward4yearsandfemalessetback2years PostretirementbasedonRP2000CombinedMortalityTableProjectedwithScaleAAto2020with malessetforward1year PostdisablementbasedonRP2000DisabledMortalityTableProjectedwithScaleAAto2020with malessetback3yearsandnoprovisionforfuturemortalityimprovement

146 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule4A ChangesinNetPensionLiabilityandRelatedRatiosPostEmploymentBenefitPlans(UNAUDITED) LastTenFiscalYears (amountsexpressedinthousands,exceptpercentageandyears)

PrinceWilliamCountySupplementalPlanforPoliceOfficersandUniformedFireandRescuePersonnel(SupplementalPensionPlan) ChangesintheCounty'sNetPensionLiabilityandRelatedRatiosLast10FiscalYears FiscalYear 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 InformationforFY2013andearlierisnotavailable. Totalpensionliability Servicecost $ 1,747 1,602 Interest 2,260 2,118 Changesofbenefitterms 238 Differencesbetweenexpectedandactual experience (1,365) Changesofassumptions (1,980) (1,905) Netchangeintotalpensionliability $ 662 2,053 Totalpensionliabilitybeginning 33,265 31,212 Totalpensionliabilityending(a) $ 33,927 33,265

Planfiduciarynetposition Contributionsemployer 1,083 1,007 Contributionsmember 1,083 1,007 Netinvestmentincome (339) 4,438 Benefitpayments,includingrefundsof membercontributions (1,980) (1,905) Administrativeexpense (83) (109) Other Netchangeinplanfiduciarynetposition $ (236) 4,438 Planfiduciarynetpositionbeginning 33,144 28,706 Planfiduciarynetpositionending(b) $ 32,908 33,144

County'snetpensionliabilityending(a) (b) $ 1,019 121 Planfiduciarynetpositionasapercentage ofthe totalpensionliability(b)/(a) 97.00% 99.64% Coveredemployeepayroll $ 82,543 79,192 County'snetpensionliabilityasa percentageof coveredemployeepayroll 1.23% 0.15% Expectedaverageremainingserviceyears ofallparticipants 8 8

SeeIllustration1314forweightedaverage rateofreturn 10.00% 7.00%

NotestoSchedule: Benefitchanges. TherewereseveralchangestobenefittermsreflectedinFY2014includinganincreasetotherateofemployeecontributions to1.44%andthechangetoCOLAsforparticipantshiredafterJune30,2010. Projectedbenefitpayments. CalculationsassumethattheCountywillcontinuetomakeallrequiredactuariallydeterminedcontributions. Basedonthatassumption,theplan'sfiduciarynetpositionisexpectedtomakeallfuturebenefitpaymentsofcurrentplanmembers. Changesofassumptions. Therearenochangesinactuarialassumptionsreflectedinthecurrentschedule.

147 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule4B ScheduleofCountyContributionPostEmploymentBenefitPlans(UNAUDITED) LastTenFiscalYears (amountsexpressedinthousands,exceptpercentage,ratiosandyears)

PrinceWilliamCountySupplementalPlanforPoliceOfficersandUniformedFireandRescuePersonnel(SipplementalPenionPlan) ScheduleofCountyContributionsLast10FiscalYears FiscalYear 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 InformationforFY2013andearlierisnotavailable.

Actuariallydeterminedcontribution $ 1,083 1,000

Contributionsinrelationtothe actuariallydeterminedcontribution 1,083 1,007 Contributiondeficiency(excess) $ (7)

Coveredemployeepayroll $ 82,543 79,192

Contributionsasapercentageof coveredemployeepayroll1 1.31% 1.27%

1Theratesshownareasapercentageoftotalcoveredemployeepayroll.Contributionratesaresetandcontributedbased onpensionableearningsonly.

NotestoSchedule: Valuationdate.Actuariallydeterminedcontributionratesarecalculatedasofthebeginningofthefiscalyear(July1)forthetwo yearsimmediatelyfollowingthefiscalyear.Actuarialvaluationsareperformedeveryotheryear.

Methodsandassumptionsusedtodeterminecontributionrates Actuarialcostmethod Aggregate Amortizationmethod Aggregate Remainingamortizationperiod Thebenefitsarefundedasalevelpercentofpayrollovertheexpectedfutureworking lifetimeofcurrentactiveparticipants Assetvaluationmethod 5yearsmoothedmarket Inflation 3.0% Salaryincreases 4.5%,includinginflation Investmentrateofreturn 7.0%,netofpensionplaninvestmentexpense,includinginflation Retirementage Ratesvarybyparticipantageandservice Mortality RatesbasedonRP2000tablesformalesandfemaleswith generationalmortalityimprovementsbyScaleAA

148 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule5A ChangesinNetPensionLiabilityandRelatedRatiosPostEmploymentBenefitPlans(UNAUDITED) LastTenFiscalYears (amountsexpressedinthousands,exceptpercentageandyears)

PrinceWilliamCountyVolunteerFireandRescuePersonnelLengthofServiceAwardProgram(LoSAP) ChangesintheCounty'sNetPensionLiabilityandRelatedRatiosLast10FiscalYears FiscalYear 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 InformationforFY2013andearlierisnotavailable. Totalpensionliability Servicecost $ 290 308 Interest 885 821 Changesofbenefitterms Differencesbetweenexpectedand actualexperience (392) Changesofassumptions Benefitpayments,includingrefunds ofmembercontributions (345) (338)

Netchangeintotalpensionliability $ 438 791 Totalpensionliabilitybeginning 14,651 13,860 Totalpensionliabilityending(a) $ 15,089 14,651

Planfiduciarynetposition Contributionsemployer $ 940 2,115 Contributionsmember Netinvestmentincome 372 354 Benefitpayments,includingrefunds ofmembercontributions (345) (338) Administrativeexpense (34) (61) Other Netchangeinplanfiduciarynet position $ 933 2,070 Planfiduciarynetposition beginning 12,836 10,766 Planfiduciarynetpositionending (b) $ 13,769 12,836

County'snetpensionliability ending(a)(b) $ 1,320 1,815 Planfiduciarynetpositionasa percentageofthe totalpensionliability(b)/(a) 91.25% 87.61% * Coveredemployeepayroll $ County'snetpensionliabilityasa percentageof coveredemployeepayroll N/A N/A Expectedaverageremainingservice yearsofallparticipants 3 7

Weightedaveragerateofreturn 2.95% 2.95%

NotestoSchedule: Benefitchanges. None. Projectedbenefitpayments. CalculationsassumethatallmembersandtheCountywillcontinuetomakeallrequiredactuarially Changesofassumptions. Therearenochangesinactuarialassumptionsreflectedinthecurrentschedule.

* Allvolunteersarenotcompensated.

149 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule5B ScheduleofCountyContributionPostEmploymentBenefitPlans(UNAUDITED) LastTenFiscalYears (amountsexpressedinthousands,exceptpercentage,ratiosandyears)

PrinceWilliamCountyVolunteerFireandRescuePersonnelLengthofServiceAwardProgram(LoSAP) ScheduleofCountyContributionsLast10FiscalYears FiscalYear 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 InformationforFY2013andearlierisnotavailable.

Actuariallydeterminedcontribution $ 940 2,115

Contributionsinrelationtothe actuariallydeterminedcontribution 940 2,115 Contributiondeficiency(excess) $

Coveredemployeepayroll N/A N/A

Contributionsasapercentageof coveredemployeepayroll N/A N/A

NotestoSchedule: Valuationdate. Actuariallydeterminedcontributionratesarecalculatedasofthebeginningofeachfiscalyear(July1). Actuarialvaluationsareperformedeveryyear.

Methodsandassumptionsusedtodeterminecontributionrates: Actuarialcostmethod Aggregate,leveldollar Amortizationmethod Aggregate,leveldollar Remainingamortizationperiod Thebenefitsarefundedasaleveldollaramountovertheexpectedfutureworking lifetimeofcurrentactiveparticipants Assetvaluationmethod Fairmarketvalue Inflation NotApplicable Salaryincreases NotApplicable Investmentrateofreturn 6.00% Retirementage 100%atage60 Mortality RatesbasedonRP2000MortalityTableprojectedto2014usingScaleAA

150 COUNTYOFPRINCEWILLIAM,VIRGINIA Schedule6 ScheduleofFundingProgressPostEmploymentBenefitPlans(UNAUDITED) (amountsexpressedinthousands,exceptpercentage,ratiosandyears)

OtherPostEmploymentBenefitsCountySponsoredPlans ScheduleofFundingProgress

Unfunded UAALasa Actuarial Actuarial Actuarial Percentageof Actuarial Valueof Accrued Accrued Funded Covered Covered ValuationDate Assets(AVA) Liability(AAL) Liability(UAAL) Ratio Payroll Payroll July1,2012 $ 17,717 96,701 78,984 18.3% 237,034 33.3% July1,2013 $ 22,103 75,486 53,383 29.3% 247,366 21.6% July1,2014 $ 30,332 64,431 34,099 47.1% 258,704 13.2%

OtherPostEmploymentBenefitsVirginiaRetirementSystemHealthInsuranceCreditProgram ScheduleofFundingProgress

Unfunded UAALasa Actuarial Actuarial Actuarial Percentageof Actuarial Valueof Accrued Accrued Funded Covered Covered ValuationDate Assets(AVA) Liability(AAL) Liability(UAAL) Ratio Payroll Payroll June30,2012 $ 2,230 6,005 3,775 37.1% 191,157 2.0% June30,2013 $ 2,504 6,246 3,742 40.1% 198,448 1.9% June30,2014 $ 2,927 6,512 3,585 45.0% 204,740 1.8%

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APPENDIX C

SUMMARY OF CERTAIN DOCUMENTS PROVISIONS

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APPENDIX C

SUMMARY OF CERTAIN DOCUMENTS PROVISIONS

The following is a summary of certain provisions of the Master Trust Agreement, the First Supplemental Trust Agreement and the Installment Purchase Contract not otherwise summarized in the forepart of this Official Statement. Reference is made to the respective sections in the applicable documents for a complete recitation of such provisions.

DEFINITIONS

The following are definitions of certain terms used in the Master Trust Agreement, the Third Supplemental Trust Agreement and the Installment Purchase Contract and not otherwise defined in this Official Statement:

“Additional Contract Payments” means the Additional Payments that the County has agreed to make under the Installment Purchase Contract for all other amounts (other than Basic Contract Payments) payable by the County to IDA relating to the Series 2016A Bonds, including any Bonds refunding the Series 2016A Bonds.

“Additional Payments” means the amounts payable by the County to or for the account of IDA and defined as such by the terms of each Payment Agreement entered into. Additional Contract Payments are Additional Payments.

“Allocated Bonds” means those Series 2016A Bonds allocated by the County, in a certificate of a County Representative delivered to the Trustee, to the Police Station Property or the 2005 COPs Property, as the case may be, in an event that necessitates an “Extraordinary Optional Redemption” as described in the First Supplemental Trust Agreement.

“Basic Contract Payments” means the Basic Payments that the County has agreed to make under the Installment Purchase Contract sufficient to pay the principal of and interest on the Series 2016A Bonds and any other Bonds issued to pay the costs of the Projects including any Bonds refunding the Series 2016A Bonds.

“Basic Payments” means the amounts payable by the County to or for the account of IDA and defined as such by the terms of each Payment Agreement entered into, as adjusted as provided therein.

“Board of Directors” means the governing body of IDA or any successor entity assuming the function thereof.

“Bond Registrar” means the Bond Registrar at the time serving as such under the Master Trust Agreement and performing the duties set forth in the Master Trust Agreement and in the applicable Supplemental Trust Agreement, whether the original or a successor Bond Registrar.

“Bond Year” means the period commencing on the second day of July of any calendar year and ending on the first day of July of the following calendar year or such other annual period commencing and ending on the dates specified in a Supplemental Trust Agreement.

“Bonds” as used in the Installment Purchase Contract, means the Series 2016A Bonds and any additional revenue bonds issued by IDA in accordance with the Trust Agreement to provide additional funds for the Cost of the Projects or to refund Bonds issued and outstanding under the terms of the Trust Agreement. “Bonds,” as used in the Contract, does not include “Bonds” as defined in the Master Trust Agreement that are not payable from Contract Payments under the Contract.

“Bonds” as used in the Master Trust Agreement, means the Series 2016A Bonds and all additional Bonds and all Refunding Bonds issued under the Master Trust Agreement.

“Building” means collectively, the Police Station Building and the 2005 COPs Property.

“Business Day” means any day on which the New York Stock Exchange is open, other than a Saturday or Sunday and other than a day on which commercial banks (including the Trustee, the Bond Registrar, any Credit Bank, any Insurer and any Paying Agent) are authorized to close in the Commonwealth of Virginia or in New York, New York.

“Chairman” means the Chairman or the Vice Chairman of the Board of Directors or any person succeeding to the principal functions thereof or temporarily designated by the Board to serve pro tempore as the Chairman.

“Contract” means the Installment Purchase Contract, dated as of March 1, 2016, by and between the County and IDA relating to the Projects and the Series 2016A Bonds as the same may be supplemented and amended.

“Contract Payments” means the amounts, designated as Basic Contract Payments and Additional Contract Payments, payable by the County to or for the account of IDA pursuant to the Contract.

“Construction Subfund” means the County Facilities Projects Construction Subfund created and so designated by the Master Trust Agreement.

“Cost” as applied to any Project means, without intending thereby to limit or restrict any proper definition of such word under the Enabling Act, all items of cost set forth in the Master Trust Agreement.

“County Facilities Projects Fund” means the discrete enterprise fund of IDA created by the Master Trust Agreement.

“County Representative” means each of the persons at the time designated to act on behalf of the County in a written certificate furnished to the Trustee, any Paying Agent and the Bond Registrar, which certificate contains the specimen signature(s) of such person(s) and is signed on behalf of the County by the County Executive. Such person(s) may or may not be officials or employees of the County.

“Credit Bank” means as to any particular Series of Bonds, the person (other than an Insurer) providing a letter of credit, a line of credit, a guaranty or another credit- or liquidity -enhancement facility, as designated in the Supplemental Trust Agreement providing for the issuance of such Bonds.

“Credit Facility” means as to any particular Series of Bonds, a letter of credit, a line of credit, a guaranty or another credit- or liquidity-enhancement facility (other than an insurance policy issued by an Insurer), as approved in the Supplemental Trust Agreement providing for the issuance of such Bonds.

“Credit Rating” means the rating, typically a letter or letters, such as “Aa” or “AA,” with or without a modifier such as “1” or “2” or “+” or “-”, that express the opinion of a Rating Agency as to the

C-2 credit quality of the Bonds without regard to any credit enhancement such as bond insurance, letters of credit or similar arrangements supporting the payment of debt service on the Bonds.

“Debt Service Subfund” means the County Facilities Projects Debt Service Subfund created and so designated by the Master Trust Agreement.

“[D]efault” means any condition or event that constitutes or would, after notice or lapse of time, or both, constitute an Event of Default under the Contract.

“Defaulted Interest” means any interest on any Bond that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date.

“Defeasance Obligations” means, except as otherwise provided in a Supplemental Trust Agreement for the related Series of Bonds, Government Obligations and the obligations described in clause (C) of the definition of “Investment Obligations.”

“Deposit Day” means, for the Series 2016A Bonds, the last Business Day of each March and September.

“Due Date” means the last date on which payment is due without penalty, premium or interest.

“Effective Date” means the date of delivery of the Series 2016A Bonds.

“Enabling Act” means the Industrial Development and Revenue Bond Act, Title 15.2 Chapter 49 of the Code of Virginia, as amended and other applicable law.

“Event of Default” means with respect to the Master Trust Agreement any of the events described in this Appendix under “THE TRUST AGREEMENT – Events of Default,” and with respect to the Contract means any of those events described in this Appendix under “THE INSTALLMENT PURCHASE CONTRACT – Events of Default.”

“Event of Non-Appropriation” means the event described in this Appendix under “THE INSTALLMENT PURCHASE CONTRACT – Non Appropriations.”

“First Supplemental Trust Agreement” means the First Supplemental Trust Agreement dated as of April 1, 2016, between IDA and the Trustee authorizing and securing the issuance of the Series 2016A Bonds, as the same may be supplemented and amended as permitted thereby.

“Government Obligations” means direct obligations of, or obligations the timely payment of the principal of and the interest on which are fully and unconditionally guaranteed by, the United States of America, or evidences of indirect ownership of such obligations.

“Holder” means a person in whose name a Bond (or one or more Predecessor Bonds) is registered on the registration books provided for in the Master Trust Agreement.

“IDA” or “Authority” means the Industrial Development Authority of the County of Prince William.

“IDA Liabilities” means all expenses and obligations of IDA under the Master Trust Agreement (other than the Bonds and the principal, interest and any redemption premiums thereon and amounts paid

C-3 or provided for from the proceeds of the Bonds) including, without limitation: (i) Trust Agreement Expenses and (ii) any amount payable by IDA to the United States of America as Rebate Liability.

“IDA Representative” means each of the persons at the time designated to act on behalf of IDA in a written certificate furnished to the Trustee, any Paying Agent and the Bond Registrar, which certificate is to contain the specimen of signatures of such person and be executed on behalf of IDA by the Chairman.

“Improvement Subfund” means the County Facilities Projects Improvement Subfund so created and designated by the Master Trust Agreement.

“Indebtedness” means (a) the Bonds and (b) all other indebtedness outstanding that may have been issued or incurred under the provisions of the Enabling Act and the Master Trust Agreement, whether or not issued under the provisions of the Master Trust Agreement.

“Insurer” means, as to any particular maturity or any particular Series of the Bonds, the person undertaking to insure such Bonds, as designated in the Supplemental Trust Agreement providing for the issuance of such Bonds.

“Interest” means interest on the Purchase Price of the Projects. Such interest includes interest at the same rates payable on the same dates as the interest payable and redemption premium by IDA on the Bonds.

“Interest Payment Date” means for purposes of the Series 2016A Bonds, each April 1 and October 1, commencing October 1, 2016.

“Interest Requirement” means for any Bond Year, as applied to Bonds of a Series, means the total of the sums that would be deemed to accrue on such Bonds during such Bond Year if the interest on the current interest Bonds of such Series were deemed to accrue daily during such year in equal amounts; provided, however, that interest expense is to be excluded from the determination of Interest Requirement to the extent that such interest is to be paid from the proceeds of Bonds or from investment (but not reinvestment) thereof if such proceeds have been invested in Defeasance Obligations and to the extent such earnings may be determined precisely. IDA may provide in a Supplemental Trust Agreement that interest expense on Credit Facilities drawn upon to purchase but not to retire Bonds, to the extent such interest exceeds the interest otherwise payable on such Bonds be included in the determination of Interest Requirement. If interest is not payable at a single numerical rate for the entire term of such Bonds, then “Interest Requirement” is to have the appropriate meaning assigned thereto by the applicable Supplemental Trust Agreement permitted by the Master Trust Agreement.

“Investment Obligations” means Government Obligations and, to the extent from time to time permitted by the laws of the State, (A) the obligations of (i) Export-Import Bank, (ii) Government National Mortgage Association, (iii) Federal Housing Administration, (iv) Farmers Home Administration and (v) any other agency or instrumentality of the United States of America now or hereafter created which obligations are backed by the full faith and credit of the United States of America; (B) the obligations of (i) Federal National Mortgage Association, (ii) Federal Intermediate Credit Banks, (iii) Federal Banks for Cooperatives, (iv) Federal Land Banks, (v) Federal Home Loan Banks, (vi) Federal Financing Bank, (vii) Federal Farm Credit System and (viii) Federal Home Loan Mortgage Corporation; (C) obligations of state or local government bond issuers, provision for the payment of the principal of and interest on which has been made by deposit with an escrow agent or trustee of Government Obligations the principal of and interest on which when due will be sufficient to pay the principal of and interest on such state or local government obligations when due, which obligations have been rated by

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Moody’s Investors Service and Standard & Poor’s Rating Services in one of two highest rating categories (without regard to gradations such as “plus” or “minus,” of such categories); (D) certificates of deposit or time deposits of any bank, any branch of any bank, trust company or national banking association (including any Trustee, Bond Registrar, Paying Agent and their affiliates) that has a combined capital, surplus and undivided profits not less than $50,000,000; provided, however, that such certificates of deposit or time deposits are fully secured, to the extent not secured by the Federal Deposit Insurance Corporation, by Government Obligations or by obligations described in (A) or (C) above; (E) any repurchase agreement that is with (i) a bank or trust company (including any Trustee, Bond Registrar, Paying Agent and their affiliates) that has a combined capital, surplus and undivided profits not less than $50,000,000, or (ii) a government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York for Government Obligations or obligations described in (A) above and having on the date of the repurchase agreement a fair market value equal to at least 100% of the amount of the repurchase obligation of the bank or trust company; provided, however, that such obligations purchased must be transferred to the Trustee or a third party agent by physical delivery or by an entry made on the records of the issuer of such obligations; (F) any and all investments authorized by the Investment of Public Funds Act (Section 2.2-4500 et seq. Code of Virginia, 1950, as amended) including in particular but without limitation, subject to the ratings requirements set forth below, shares in any money market mutual fund (including those of the Trustee or any of its affiliates) registered under the Investment Company Act of 1940, as amended, that have been rated “AAAm” by Standard & Poor’s Ratings Services or Aaa by Moody’s Investors Service, Inc. so long as the portfolio of such money market mutual fund is limited to Government Obligations and agreements to repurchase Government Obligations; and (G) any pooled investment fund organized in accordance with the Government Non- Arbitrage Act (Code of Virginia 2.2-4700 et seq.). Any investment in a repurchase agreement will be considered to mature on the date the bank or trust company providing the repurchase agreement is obligated to repurchase the Investment Obligations. Any investment in obligations described in (A), (B), (C) and (F) (to the extent not described in (D) or (E)) above may be made in the form of an entry made on the records of the issuer of the particular obligation.

“Late Charge Rate” means the true interest cost rates on the Bonds plus one percent (1%).

“Master Trust Agreement” means the Master Trust Agreement, dated as of April 1, 2016 between IDA and the Trustee, authorizing the issuance of Bonds, including Refunding Bonds, as supplemented and amended as permitted hereby.

“Net Proceeds,” when used with respect to any insurance or condemnation award, means the gross proceeds from the insurance or condemnation award with respect to which that term is used remaining after the payment of all out-of-pocket expenses of the applicable parties incurred in the collection of such gross proceeds.

“[O]utstanding” means all Bonds that have been authenticated and delivered by the Bond Registrar under the Master Trust Agreement, except:

(i) Bonds paid or redeemed or delivered to or acquired by the Bond Registrar for cancellation;

(ii) Bonds for which the Bond Registrar or any Trustee or Paying Agent holds sufficient money or Defeasance Obligations the principal of and the interest on which, when due and payable, will provide sufficient money to pay the principal of, and the interest and redemption premium, if any, on such Bonds to their maturity date or dates or dates fixed for redemption pursuant to Sinking Fund Requirements or to the date or dates fixed for their optional redemption; and

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(iii) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered under the Master Trust Agreement; provided, however, that in determining whether the Holders of the requisite principal amount of outstanding Bonds have given any request, demand, authorization, direction, notice, consent or waiver under the Master Trust Agreement, Bonds owned by IDA or any other obligor upon the Bonds are to be disregarded and deemed not to be outstanding, except that the term “obligor upon the Bonds” will not include any Insurer or any Credit Bank and except that, in determining whether the Bond Registrar will be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds that the Bond Registrar knows to be so owned will be so disregarded. Bonds so owned that have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Bond Registrar the pledgee’s right so to act with respect to such Bonds and that the pledgee is not IDA or any other obligor upon the Bonds except a Credit Bank or an Insurer.

“Paying Agent” means, for any Series of Bonds, the paying agent designated as such and performing the duties set forth in the Supplemental Trust Agreement providing for the issuance of such Bonds.

“Payment Agreement” means a note, loan agreement, lease agreement, installment purchase contract or other contract or obligation, or combination thereof, by the express terms of which the County will be absolutely and unconditionally obligated to make Payments on such dates and in such amounts as are sufficient for the IDA to make timely payment of all amounts that may become due and payable on a Series of Bonds, subject only to the appropriation by the Board of County Supervisors of the County of funds for the purpose of the County’s making such payments. The Payment Agreement is to expressly provide that the County Executive will include as a separate line item in each operating budget an item, appropriately designated, in an amount not less than an amount sufficient, in the judgment of the County Executive, to pay debt service on the applicable Series of Bonds and all other amounts payable during such fiscal year by the County pursuant to the Payment Agreement. Alternatively, the County Executive may include as a single line item in each annual budget of revenues and disbursements presented to the Board of Supervisors an item designated “Basic and Additional Payments – Master Trust Agreement” in an amount not less than an amount sufficient, in the judgment of the County Executive, to make all payments scheduled to become due, and pay all other amounts payable by the County under all Payment Agreements. The Contract is a Payment Agreement.

“Payment of the Allocated Bonds” means payment of the principal of and interest on all the Allocated Bonds in accordance with their terms, whether through payment at maturity or purchase and cancellation or redemption or provision for such payment in such a manner that the Bonds will be deemed to have been paid under the applicable provisions of the Master Trust Agreement.

“Payment of the Bonds” means payment of the principal of and interest on all the Bonds in accordance with their terms, whether through payment at maturity or purchase and cancellation or redemption or provision for such payment in such a manner that the Bonds will be deemed to have been paid under the applicable provisions of the Master Trust Agreement.

“Payments” means payments of money that the County is or may become obligated to make under a Payment Agreement.

“Permitted Encumbrances” has the meaning set forth in the Contract.

“Pledged Revenues,” for the Series 2016A Bonds, means, (a) all payments of Basic Payments, (b) all payments of Additional Payments except to the extent required to pay IDA Liabilities and (c) the

C-6 income from the investment under the provisions of the Master Trust Agreement of the money held for the credit of the various subfunds and accounts created under the Master Trust Agreement. Pledged Revenues will not include the proceeds of any insurance, other than as mentioned above, or any capital gifts, grants, donations or contributions or borrowed funds. Payments by any Insurer or Credit Bank with respect to debt service on the Bonds will not constitute Pledged Revenues. Any lump sum payment or prepayment received by the Trustee and not accompanied by instructions from the IDA Representative to the contrary is to be reserved by the Trustee in the County Facilities Projects Fund, disbursed to the Debt Service Subfund, and recognized as Pledged Revenues, semi-annually over the appropriate accrual period; provided, however, that if the IDA Representative directs, such lump sum payment or prepayment is to be applied to the redemption or defeasance of the Bonds in accordance with such direction.

“Police Station Building” means office building to be constructed on the Police Station Property, as the same may be improved as part of the Police Station Project, and as described in the Contract.

“Police Station Project” means the construction of the Police Station Building.

“Police Station Property” means the land and all improvements including the Police Station Building located in the County, and as described in the Contract.

“Predecessor Bonds” of any particular Bond means every previous Bond evidencing all or a portion of the same debt as that evidenced by such particular Bond. For purposes of this definition, any Bond authenticated and delivered under the Master Trust Agreement in lieu of a mutilated, destroyed, stolen or lost Bond will be deemed to evidence the same debt as the mutilated, destroyed, stolen or lost Bond.

“Principal and Interest Requirements,” for any Bond Year, means the sum of the Principal Requirement and the Interest Requirement for such year.

“Principal Payment Date,” for purposes of the Series 2016A Bonds, means October 1st upon which the principal of any Series 2016A Bonds is stated to mature or upon which the principal of any Term Bond is subject to sinking fund redemption.

“Principal Requirement” means, for any Series of Bonds and for any Bond Year the sum of the principal scheduled to become due in such Bond Year whether at stated maturity or by mandatory sinking fund redemption.

“Projects,” relating to the Series 2016A Bonds means the construction of the Police Station Building and the acquisition, for purposes of refinancing of the 2005 COPs Projects.

“Project(s),” for Bonds other than the Series 2016A Bonds, includes the acquisition, improving, equipping, furnishing and constructing of any Authority facility financed or refinanced through the issuance of Bonds.

“Properties,” means collectively, the Police Station Building Property and the 2005 COPS Property.

“Purchase Price,” with respect to the Projects for the Series 2016A Bonds, means an amount equal to the principal amount of the Series 2016A Bonds and any additional Bonds (as such term is defined in the Contract).

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“Rebate Liability” means the amount or amounts periodically determined by the firm of independent certified public accountants or other financial consultants experienced in the calculation of Rebate Liability and so designated by an IDA Representative to be set aside in the Improvement Subfund and the amount or amounts to be paid to the United States of America pursuant to Section 148(f) of the Internal Revenue Code of 1986, as amended.

“Refunding Bonds” means Bonds authorized by the Master Trust Agreement to refund Bonds or other indebtedness.

“Serial Bonds” means the Bonds that are stated to mature in consecutive annual installments and that are so designated in a Supplemental Trust Agreement.

“Series” means Bonds identified as a separate series which are authenticated and delivered on original issuance and any Bonds thereafter authenticated and delivered in lieu of or in substitution for such Bonds pursuant to any Supplemental Trust Agreement.

“Sinking Fund Requirements” means, with respect to Term Bonds of each maturity, the principal amount fixed or computed for the retirement of such Term Bonds by purchase or redemption, as contemplated in the Master Trust Agreement and any Supplemental Trust Agreement.

“State” means the Commonwealth of Virginia.

“Supplemental Trust Agreement” means an amendment or supplement, executed by IDA and the Trustee, to the Master Trust Agreement, and in conformity with the provisions of the Master Trust Agreement, providing for the issuance of a Series of Bonds and setting forth the provisions and details thereof not inconsistent therewith including any amendments and supplements thereto permitted thereby and any other such agreement permitted by the Master Trust Agreement.

“Term” means the period of time commencing on the Effective Date and ending upon the Payment of the Bonds.

“Term Bonds” means all or some of the Bonds of a Series, other than Serial Bonds, stated to be payable by their terms on one or more dates and so designated in a Supplemental Trust Agreement.

“Trust Agreement,” for purposes of the Contract, means the Master Trust Agreement as generally amended and supplemented from time to time, including by the First Supplemental Trust Agreement, and by any Supplemental Trust Agreement entered into in connection with the issuance of additional Bonds issued to provide additional funds for the Cost of the Project or to refund any of these Bonds, each between IDA and the Trustee. “Trust Agreement” will not include Supplemental Trust Agreements entered into in connection with the issuance of Additional or Refunding Bonds under the Master Trust Agreement that are not related to the Contract or the Properties.

“Trust Agreement Expenses” means those fees and expenses of the Trustee contemplated by the Master Trust Agreement and the fees and expenses of any Paying Agent and the Bond Registrar that has been approved in writing by the IDA Representative.

“Trustee” means the trustee at the time acting as such under the Master Trust Agreement and any Supplemental Trust Agreement whether the original or a successor trustee.

“2005 COPs” means the County’s outstanding Refunding Lease Participation Certificates Series 2005 (Prince William County Facilities) that mature on December 1, 2016 through 2020, inclusive.

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“2005 COPs Projects” means the county office facilities, commuter parking facilities, jail facilities, park facilities, a police and fire communications center, a juvenile detention center and a police station, all as set forth in the Contract.

“2005 COPs Property” means the land and all improvements of certain of the 2005 COPs Projects, as set forth in the Contract..

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THE MASTER TRUST AGREEMENT

Granting Clause

IDA (a) assigns all rights, title and interest of IDA in and to any and all Payment Agreements, including, without limitation, its rights to receive Basic Payments and, except to the extent required to pay IDA Liabilities, Additional Payments (reserving the rights of IDA to receive notices, reports and other statements to be given to IDA thereunder), and (b) pledges the Basic Payments and (except as reserved above) Additional Payments received pursuant to any and all Payment Agreements, all money and securities in the Debt Service Subfund and, until applied in payment of any Cost of a Project or otherwise applied as permitted under the Master Trust Agreement, all money and securities in the Construction Subfund; to the Trustee, and unto its successors and assigns, in trust, forever.

Authorization and Issuance of Bonds (Section 208)

There may be issued at one time or from time to time Series of Bonds under and secured by the Master Trust Agreement revenue bonds of IDA designated “Industrial Development Authority of Prince William County Facilities Revenue Bonds Series ….” for the purposes of providing funds, together with any other available funds, for paying all or any portion of the Cost of any Project.

The Bonds of any Series (and any Series of Refunding Bonds authorized and issued under the Master Trust Agreement) (1) may be issued as current interest Bonds, capital appreciation Bonds or zero interest rate Bonds, Serial Bonds or Term Bonds, or any combination thereof, and may convert from one to another subsequent to their date of issue, (2) are to have such Series designation or designations, be dated and be stated to mature, subject to the right of prior optional, extraordinary optional and mandatory sinking fund redemption, if any, on the dates and in the principal amounts, (3) may bear interest at a fixed rate, variable rate, or convertible rate, are to be payable on the date or dates, may contain provisions permitting or requiring that such Bonds be tendered to the IDA or another for payment or remarketing and may be subject to interest rate exchange, interest rate cap, interest rate floor agreements and other derivative agreements of any duration, (4) are to have such other details, and (5) are to be sold in such manner to such purchasers upon the payment of such purchase price, all as are to be provided by the applicable Supplemental Trust Agreement; provided, however, that in any case Bonds may be issued and secured under the Master Trust Agreement only where (Y) the County will be absolutely and unconditionally obligated by a Payment Agreement to make Payments on such dates and in such amounts as will be sufficient for the IDA to make timely payment of all amounts that may become due and payable on such Series of Bonds, subject only to the appropriation by the Board of County Supervisors of funds for the purpose of the County’s making such Payments and (Z) in the case of any derivative agreement, the Board of County Supervisors have specifically approved the terms and provisions of any derivative agreement; and provided, further, that under the applicable Payment Agreement, the County will not be scheduled to make any Basic Payments, and under the applicable Supplemental Trust Agreement, IDA will not be scheduled to make any debt service payments, prior to the first day of the third month of the County’s fiscal year.

The Supplemental Trust Agreement authorizing a Series of Bonds (and any Series of Refunding Bonds authorized and issued under the Master Trust Agreement) may provide additional security for such Series of Bonds, such as, by way of example and not limitation, a Credit Facility or derivative agreement, and the other Bonds outstanding under the Master Trust Agreement will have no right or interest in such additional security nor will such Series of Bonds have any right or interest in any additional security pledged under any other Supplemental Trust Agreement, but all Bonds outstanding under the Master Trust Agreement will have a parity pledge of and security interest in the Payments due under the Payment

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Agreements securing such Bonds and assigned by IDA to the Trustee for the equal and proportionate benefit of all Bonds secured by and outstanding under the Master Trust Agreement. Except as to any additional security provided in the Supplemental Trust Agreements and as to any differences in the rate or rates of interest, the maturities or the provisions for redemption or purchase and except for such differences, if any, respecting the use of money in various accounts in the Debt Service Subfund, all Bonds (including any Series of Refunding Bonds authorized and issued under the Master Trust Agreement), will be on a parity with and will be entitled to the same benefit and security of the Master Trust Agreement regardless of their date of issue.

Bonds, including the Series 2016A Bonds, are to be executed substantially in the form and in the manner above set forth or as provided in the Master Trust Agreement and in the applicable Supplemental Trust Agreement and are to be deposited with the Bond Registrar for authentication, but before any Series of Bonds are delivered by the Bond Registrar, there are to be filed or deposited with the Bond Registrar, as appropriate, the following:

(a) an executed counterpart, or a copy, certified by the Secretary, of the Master Trust Agreement;

(b) an executed counterpart, or a copy, certified by the Secretary, of the applicable Supplemental Trust Agreement, fixing details of such Series of Bonds, approving a Credit Facility or derivative agreement, if any, approving the sale of such series of Bonds to the purchasers thereof, and directing the authentication and delivery of such Series of Bonds to or upon the order of such purchasers upon payment of the purchase price therein set forth and any accrued interest thereon;

(c) an executed counterpart, or a copy, certified by the Clerk of the Board of Supervisors of the County and by the Secretary, of the applicable Payment Agreement;

(d) an opinion or opinions of counsel for IDA to the effect that (1) the Master Trust Agreement and the Supplemental Trust Agreement referred to in clause (b) above have each been duly authorized, executed and delivered by IDA, are in full force and effect and are valid and binding on IDA in accordance with their respective terms; (2) IDA has all necessary power and authority to apply the proceeds of such Series of Bonds to the Cost of the Projects and other purposes described in the applicable Supplemental Trust Agreement; (3) the Payment Agreement referred to in clause (c) above has been duly authorized, executed and delivered by IDA, is in full force and effect, and is valid and binding on IDA in accordance with its terms, (4) the issuance of such Series of Bonds has been duly and validly authorized and all conditions precedent to the delivery of such Series of Bonds have been fulfilled and (5) no provision of such Series of Bonds or of the Supplemental Trust Agreement authorizing such Series of Bonds results in or constitutes a default under the Master Trust Agreement or any other Supplemental Trust Agreement, any Payment Agreement or any other material agreement, indenture or other instrument to which IDA is a party or by which IDA is or may be bound;

(e) an opinion or opinions of counsel for the County to the effect that (i) the Payment Agreement referred to in clause (c) above has been duly authorized, executed and delivered by the County, is in full force and effect and is valid and binding on the County in accordance with its terms and (ii) subject to the usual qualifications and exceptions, the express terms of the Payment Agreement providing that the County’s obligation to make Payments to or for the account of the IDA on such dates and in such amounts as will be sufficient for the IDA to make timely payment of (X) all amounts that may become due and payable on such Series of Bonds, (Y) all other amounts that may become payable under the terms of the Payment Agreement and

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(Z) all amounts payable under the Master Trust Agreement and the applicable Supplemental Trust Agreement to the extent not provided for in the applicable Payment Agreement or other Payment Agreements or otherwise provided for, is valid and binding subject only to the appropriation by the Board of County Supervisors of funds for the purpose of the County’s making such Payments;

(f) a certificate signed by the Chairman or Vice Chairman of the Authority and a County Representative and dated the date of such issuance, to the effect that to the best of knowledge of the signer:

(1) upon and immediately following the issuance of such Series of Bonds, no Event of Default under the Master Trust Agreement or any Payment Agreement, and no event or condition which, with the giving of notice or lapse of time or both, would become an Event of Default under the Master Trust Agreement or any Payment Agreement, will have occurred and be continuing, or if such Event of Default or event or condition has occurred and is continuing, it will be cured upon the issuance of such Series of Bonds;

(2) all of the approvals, limitations, conditions and provisions precedent to the issuance of such Series of Bonds in accordance with the Enabling Act or otherwise have been obtained, observed, met and satisfied;

(g) except in the case of the Series 2016A Bonds, written confirmation from each Rating Agency rating the Bonds that the issuance of such Series of Bonds will not cause its Credit Rating on any Series of Bonds to remain outstanding immediately after such issuance to be lowered or withdrawn on account of the issuance of such Series of Bonds;

(h) a certificate of a County Representative, which may be based upon certificates of other County officials, to the effect that the sum of the proceeds of such Series of Bonds credited to the Project Account in the Construction Subfund, other amounts made and to be made available by the County and others, and the estimated investment income on all accounts in the Construction Subfund available for the purpose, is not less than the estimated total Cost of the Project; and

(i) any additional documents or opinions required by the provisions of the Supplemental Trust Agreement, any derivative agreement or an agreement with a Credit Bank or Insurer and any Credit Facility or insurance policy issued by an Insurer in respect of such Series of Bonds.

When the documents mentioned in paragraphs (a) to (i) above, inclusive, have been filed with the Bond Registrar and when such Series of Bonds have been executed and authenticated by the Bond Registrar upon the request of IDA, as required by the Master Trust Agreement, the Bond Registrar is to deliver such Series of Bonds to or upon the order of the purchasers named in the Supplemental Trust Agreement mentioned in paragraph (b) above, but only upon payment to the Bond Registrar, for the account of IDA, of the purchase price of such Series of Bonds and of any accrued interest thereon.

The proceeds (including accrued interest, if any) of such Series of Bonds, together with any other funds made available to IDA, will be deposited by the Bond Registrar for the account of IDA, simultaneously with the delivery of such Series of Bonds, except as otherwise provided in the applicable Supplemental Trust Agreement, as follows:

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(1) with the Trustee, to the credit of a special account in the Construction Subfund (the “Costs of Issuance Account”), an amount equal to the sum of the costs associated with the issuance of such Series of Bonds;

(2) with the Trustee, to the credit of a special account in the Debt Service Subfund (the “Accrued Interest Account”) an amount equal to the accrued interest, if any, on such Series of Bonds;

(3) with the Trustee, to the credit of a special account within the Debt Service Subfund (the “Capitalized Interest Account”), the amount, if any, provided in the applicable Supplemental Trust Agreement; and

(4) with the Trustee, to the credit of a special account in the Construction Subfund (the “Project Account”) the balance remaining after the foregoing deposits have been made.

Refunding Bonds (Section 209)

Refunding Bonds of IDA may also be issued from time to time under and secured by the Master Trust Agreement subject to the conditions described under this heading and under the heading “– Authorization and Issuance of Bonds” above for the purpose of providing funds, with any other available funds, for refunding all or any part of any Indebtedness then outstanding (including without limitation, Bonds and other indebtedness that may have been issued or incurred under the provisions of the Enabling Act and whether or not under the provisions of the Master Trust Agreement), including the payment of any redemption premium thereon and interest that will accrue on such Indebtedness to the redemption date or stated maturity date or dates and any expenses in connection with such refunding. Before any such Series of Refunding Bonds will be issued, IDA will enter into a Supplemental Trust Agreement authorizing the issuance of such Bonds and having the provisions required or permitted under the heading “– Authorization and Issuance of Bonds” above.

Such Refunding Bonds are to be deposited with the Bond Registrar for authentication, but before such Refunding Bonds are delivered by the Bond Registrar, there will be filed with the Bond Registrar items comparable to those described in paragraphs (a) through (g) and (i) under the heading “– Authorization and Issuance of Bonds” above.

When (i) the items comparable to those described in paragraph (a) through (g) and (i) under the heading “– Authorization and Issuance of Bonds” above have been filed with the Bond Registrar, and (ii) the Refunding Bonds described in the applicable Supplemental Trust Agreement have been executed by IDA and authenticated by the Bond Registrar upon the request of IDA, as required by the Master Trust Agreement, the Bond Registrar is to deliver such Series of Bonds, at one time to or upon the order of the purchasers thereof, but only upon payment to IDA of the purchase price of such Bonds and any accrued interest thereon.

The proceeds of such Refunding Bonds (including accrued interest, if any) and any other funds made available by IDA are to be paid to the Bond Registrar for the account of IDA and applied simultaneously with the delivery of the Refunding Bonds or at the time the refunded Bonds or other Indebtedness is no longer deemed to be outstanding, as appropriate, as follows:

(1) to the credit of the Costs of Issuance Account with the Trustee, the estimated amount of the cost of issuing such Refunding Bonds;

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(2) the accrued interest, if any, received as part of the proceeds of such Refunding Bonds is to be paid to the Trustee for deposit to the credit of the Accrued Interest Account in the Debt Service Subfund;

(3) an amount that, together with the interest that accrues on the Defeasance Obligations or other Investment Obligations acquired pursuant to this clause, will be sufficient to pay the principal of and redemption premium, if any, and the interest on the Bonds to be refunded thereunder will be paid to the Trustee or another suitable financial institution as escrow agent, for deposit to the credit of a special account, appropriately designated, to be held in trust by the Trustee or such other institution for the sole and exclusive purpose of paying such principal, redemption premium and interest; and money held for the credit of such account will, as nearly as may be practicable and reasonable, be invested and reinvested by such Trustee, as directed by IDA, in Defeasance Obligations or other Investment Obligations that mature or are subject to redemption by the holder thereof at the option of such holder, at such time or times as will be necessary or desirable to effectuate the purpose of such refunded indebtedness as stated in the applicable Supplemental Trust Agreement; and

(4) any balance of such proceeds is to be paid to the Trustee for deposit to the credit of the Debt Service Subfund.

If the Trustee determines that the balance of the credit of such subfund or account created pursuant to the Master Trust Agreement exceeds the amount required to be on deposit therein on account of all Bonds outstanding after the issuance of the Refunding Bonds, the excess may at the direction of a County Representative be transferred to the Debt Service Subfund.

Redemption Date and Price (Section 301)

The Bonds issued under the provisions of the Master Trust Agreement may be made subject to mandatory, extraordinary mandatory, extraordinary optional and optional redemption by IDA, either in whole or in part, and at such times and prices and on such terms and conditions as may be provided in the respective Supplemental Trust Agreements.

In addition, the Term Bonds are required to be redeemed to the extent of the Sinking Fund Requirements, if any, therefor established by the Supplemental Trust Agreement providing for the issuance thereof.

Construction Subfund; Accounts (Section 401)

The Master Trust Agreement establishes a special subfund within the County Facilities Project Fund designated “County Facilities Construction Subfund” to be held in trust by the Trustee. A separate account for each Series of Bonds issued pursuant to the Master Trust Agreement relating to the Costs of Project may be established (each a “Project Account”), in which case the provisions of the Master Trust Agreement will apply to each such account as though it were the entire Construction Subfund. Additionally, a separate account for each Series of Bonds issued pursuant to the Master Trust Agreement relating to the costs of issuance of such Series of bonds may be established (each a “Costs of Issuance Account”), in which case the provisions of the Master Trust Agreement will apply to each such account as though it were the entire Construction Subfund.

Payment of the Cost of the Project(s) is to be made from the Construction Subfund.

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Payments from Construction Subfund (Section 402)

(a) (1) Money in a Project Account is to be used solely to pay or reimburse the payment of any Costs of a Project and pending such use, may be invested, at the direction of a County Representative but in accordance with a schedule of estimated disbursements furnished by and updated from time to time by a County Representative, in Investment Obligations in accordance with the provisions relating to the depositing and investing of money in the Master Trust Agreement.

(2) All investment income resulting from the investment of a Project Account is to be credited to an applicable subaccount in the Project Account as realized and, except in the case of any money reserved to pay any Rebate Liability, transferred on or before each Deposit Day. A County Representative may direct the Trustee to transfer any money reserved to pay Rebate Liability to the Improvement Subfund in accordance with an applicable Supplemental Trust Agreement. Any losses resulting from the investment of the Project Account will be charged first against the investment income to the credit of the applicable subaccount in the Project Account and then against the principal to the credit of the applicable Project Account.

(3) To withdraw funds to the credit of a Project Account to pay or reimburse the payment of Costs of any Projects for which, there is to be filed with the Trustee as a condition precedent to each disbursement a requisition, signed by a County Representative, stating to the best knowledge of the signer, that (A) the obligation has been incurred by or is otherwise payable to pay Costs of a Project, (B) the item is a proper charge against the Project Account and (C) the obligation has not been the basis for a prior requisition which has been paid.

(4) If the maturities of all Bonds outstanding have been accelerated pursuant to the Master Trust Agreement, all of the money in any Project Account(s) is to be transferred to the Debt Service Subfund to be used for the payment of the principal amount and any accrued interest thereon of the Bonds for which such Project Account(s) relate to.

(b) (1) Money in the Costs of Issuance Account is to be used solely to pay or reimburse the Cost incurred in connection with the issuance of Bonds, and pending such use, may be invested, at the direction of a County Representative in Investment Obligations in accordance with the provisions relating to the depositing and investing of money in the Master Trust Agreement.

(2) All investment income resulting from the investment of the Costs of Issuance Account is to remain to the credit of such account. Any losses resulting from the investment of the Costs of Issuance Account will be charged first against the investment income to the credit of the subaccount in the Costs of Issuance Account and then against the principal to the credit of the applicable Project Account.

(3) To withdraw funds to the credit of the Costs of Issuance Account to pay or reimburse the Cost of issuance, there is to be filed with the Trustee as a condition precedent to each disbursement a requisition in the form of an exhibit to the Master Trust Agreement, signed by a County Representative, stating that, to the best knowledge of the signer, (A) the obligation has been incurred by or is otherwise payable by the Prince William County Board of County Supervisors to pay the Costs of a Project, (B) the item is a proper charge against the Costs of Issuance Account and (C) the obligation has not been the basis for a prior requisition that has been paid.

Disposition of Construction Subfund Balance (Section 404)

Any funds remaining within a Costs of Issuance Account established in connection with Bonds issued pursuant to the Master Trust Agreement will, six months from the date of issuance of the

C-15 applicable Series of Bonds, are to be transferred within the Construction Subfund to the Project Account pertaining to such Series of Bonds. Any funds remaining within a Costs of Issuance Account established in connection with Refunding Bonds issued pursuant to the Master Trust Agreement six months from the date of issuance of such Refunding Bonds, are to be transferred to the Debt Service Subfund.

When a Project has been completed, which fact is to be evidenced to IDA by a Certificate of a County Representative setting forth the date of such completion and also stating that requisitions have been made for the payment of all obligations that are payable from the Construction Subfund (the “Completion Date”), delivered to IDA, the balance in the Construction Subfund not reserved for the payment of any remaining part of the Cost of a Project completed and not required to be transferred to the Improvement Subfund for Rebate Liability is to be transferred to the Debt Service Subfund for the payment, purchase or redemption of Bonds in accordance with the provisions of the Master Trust Agreement. Such transfer is to be accompanied by an opinion of counsel nationally recognized as expert in tax matters relating to obligations of states and their political subdivisions to the effect that such proposed application of such balance will not adversely affect the federal income tax treatment of interest on any Bonds. Alternatively, if the applicable Supplemental Trust Agreement provides such balance may be applied to the Cost of another Project.

Establishment of Fund and Subfunds (Section 501)

The Master Trust Agreement establishes a County Facilities Projects Fund as a discrete, enterprise fund of IDA. In addition to the Construction Subfund, the Master Trust Agreement establishes within County Facilities Projects Fund the Debt Service Subfund and the Improvement Subfund. The money in each of such subfunds is to be held in trust by the Trustee.

Funds Received (Section 502)

Except as otherwise specifically provided by the Master Trust Agreement, all Pledged Revenues received by the Trustee are to be credited to the County Facilities Projects Fund and are to be subject to a lien and charge in favor of the Holders. Semi-annually, on or before each Deposit Day, the Trustee is to: first, set aside in the Debt Service Subfund, after first taking into account any accrued interest and capitalized interest deposited from the proceeds of any Bonds and any transfers from the Improvement Subfund, an amount equal to the interest due on the Bonds on the next Interest Payment Date, and an amount equal to the principal due on the Bonds on the next Principal Payment Date; and second, transfer into the Improvement Subfund the balance of such Pledged Revenues.

If on the Business Day next preceding an Interest Payment Date or a Principal Payment Date money to the credit of the Debt Service Subfund is not sufficient to pay the principal and interest due and payable on the Bonds the Trustee is to transfer from the Improvement Subfund if and to the extent money in the Improvement Subfund is available for such purpose an amount equal to the deficiency in the Debt Service Subfund or special account therein.

All Additional Payments received by Trustee from the County pursuant to a Payment Agreement with respect to Rebate Liability and Trust Agreement Expenses and late charges and any other money received by the Trustee pursuant to a Payment Agreement (other than Pledged Revenues and amounts received pursuant to insurance claims relating to certain irreparable damage to or condemnation of a Project as specified in the applicable Payment Agreement) are to be deposited in the Improvement Subfund.

Any money transferred to the Trustee from the Construction Subfund in accordance with the Master Trust Agreement is to be deposited to a special account in the Debt Service Subfund and applied

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Application of Money in Debt Service Subfund (Section 503)

Money in the Debt Service Subfund is to be used solely for the payment of the principal of and premium, if any, and the interest on the Bonds. On each Interest Payment Date the Trustee will withdraw from and transfer such money to the Bond Registrar or Paying Agent, which is to remit by mail to each registered owner the amounts required for paying the interest on such Bonds. On each Principal Payment Date the Trustee is to withdraw from and transfer such money to the Bond Registrar or Paying Agent, the amounts required for paying the principal of and premium, if any, on the Bonds.

The Trustee when directed by an IDA Representative, is to purchase Bonds prior to maturity at prices not to exceed the principal amount of such Bonds. No such purchase is to be made within forty- five (45) days immediately preceding any Interest Payment Date on which the Bonds are subject to call for redemption except from money other than money set aside or deposited for the redemption of Bonds.

In the case of Bonds secured by a Credit Facility, amounts on deposit in the Debt Service Subfund may be applied as provided in the applicable Supplemental Trust Agreement to reimburse the Credit Bank for amounts drawn under such Credit Facility to pay the principal of and premium, if any, of interest on the Bonds.

Application of Money in the Improvement Subfund (Section 504)

Money held in the Improvement Subfund is to be set aside and disbursed by the Trustee in accordance with written instructions of an IDA Representative for the following purposes and, except as otherwise provided in the Master Trust Agreement, in the following order of priority: (i) for paying IDA’s Rebate Liability; (ii) for paying Trust Agreement Expenses; (iii) for transfer and deposit to the Debt Service Subfund; (iv) for paying or discharging any other IDA Liabilities not otherwise paid or provided for; and (v) for paying for repairs or maintenance of the applicable Project caused by some extraordinary occurrence, all in accordance with any applicable Payment Agreement.

Disposition of Subfund Balances (Section 507)

After provision is made for the payment of all outstanding Bonds issued under the Master Trust Agreement, including the interest thereon, and for the payment of all other obligations, expenses and charges required to be paid under or in connection with the Master Trust Agreement, the Trustee is to pay all amounts in any Subfund then held by it under the Master Trust Agreement to the County.

Investment of Money (Section 602)

Money held for the credit of the Improvement Subfund and the Construction Subfund, as nearly as may be practicable, is to be invested and reinvested in Investment Obligations that mature, or are subject to redemption at the option of the holder thereof.

Money held for the credit of the Debt Service Subfund, as nearly as may be practicable, is to be invested and reinvested in Investment Obligations that mature, or that are subject to redemption at the option of the holder thereof, not later than the respective dates when the money held for the credit of said Subfund will be required.

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Valuation (Section 603)

For the purpose of determining the amount on deposit to the credit of any such Subfund or account, obligations in which money in such Subfund or account has been invested are to be valued at amortized cost.

The Trustee is to value the Investment Obligations in the Subfunds and accounts held by it at least once in every Bond Year and report such balances to IDA and the County. In addition, the Investment Obligations are to be valued by the Trustee at any time requested by an IDA Representative on reasonable notice (which period of notice may be waived or reduced by the Trustee); provided, however, that the Trustee which not be required to value the Investment Obligations more than once in any calendar month.

Payment of Principal, Interest and Premium (Section 701)

IDA covenants to pay, when due, the principal of and the premium, if any, and the interest on the Bonds at the places, on the dates and in the manner provided in the Master Trust Agreement.

The Bonds are payable solely from Pledged Revenues derived by IDA from applicable Payment Agreements and other money pledged under the Master Trust Agreement. The Bonds will not be deemed to constitute a pledge of the faith and credit of the State or of any political subdivision thereof, including IDA and the County. Neither the faith and credit of the State nor the faith and credit of IDA or the County are pledged to the payment of the principal of or premium, if any, or interest on the Bonds, and the issuance of the Bonds will not directly, indirectly or contingently obligate the State or the County to levy any taxes whatever therefor or to make any appropriation for their payment except from the revenues and receipts provided for their payment under the Master Trust Agreement.

Further Instruments and Actions (Section 704)

At the request of the Trustee, the Bond Register or any other Trustee, IDA covenants to execute and deliver such further instruments or take such further actions as may be required to carry out the purposes of the Master Trust Agreement.

Request of County to Appropriate (Section 705)

IDA covenants that it will, through its IDA Representative, request the County annually, for each fiscal year and for so long as any Bonds of any Series is outstanding, to budget, appropriate and pay to the Trustee an amount equal to the Basic Payments payable by the County under the applicable Payment Agreements in such fiscal year. IDA also hereby covenants that it will through its IDA Representative, request the County annually, for each fiscal year and for so long as any Bonds of any Series will be outstanding, to budget, appropriate and pay to the Trustee or otherwise an amount equal to the estimated Additional Payments payable by the County under the Payment Agreements in such fiscal year.

Event of Default (Section 801)

An “Event of Default” includes (i) failure to pay any installment of interest on any Bonds when due and payable; (ii) failure to pay principal or redemption premium, if any, of any Bonds when due and payable; (iii) an event of default under a Payment Agreement as specified therein; (iv) default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Master Trust Agreement or any Supplemental Trust Agreement for ninety (90) days after receipt by IDA of a written notice from the Trustee or Holders of a majority in aggregate principal amount of Bonds

C-18 then outstanding specifying such default and requiring the same to be remedied. No Event of Default will be deemed to have occurred under (i) or (ii) above where no event of default has occurred and is continuing under the applicable Payment Agreement.

Clause (iv) above is subject to the limitation, that if IDA is unable in whole or in part to carry out any of its agreements contained in the Master Trust Agreement due to any cause, circumstance or event that is not reasonably foreseeable and that is not within the control of the IDA, then such failure by IDA will not be deemed an Event of Default during the continuance of such inability, including a reasonable time for the removal of the effect thereof.

Acceleration of Maturities (Section 802)

Upon the happening and continuance of any Event of Default specified in (i) or (ii) under the heading “– Event of Default” above, the Trustee may, and upon the written request of the Holders of not less than a majority in aggregate principal amount of the Bonds then outstanding must, declare the principal of all of the Bonds then outstanding (if not then due and payable) to be due and payable immediately, and upon such declaration the same will become and be immediately due and payable, subject to the right of IDA to cure such default as provided in the Master Trust Agreement.

Enforcement of Remedies (Section 803)

Upon the happening and continuance of any Event of Default specified in the Master Trust Agreement, then and in every such case the Trustee may proceed and upon the written request of the Holders of not less than a majority in aggregate principal amount of Bonds then outstanding must proceed to protect and enforce its rights and the rights of the Holders under the laws of the State or under the Master Trust Agreement by such suits, actions or special proceedings in equity or at law, or by proceedings in the office of any board or officer having jurisdiction, either for the specific performance of any covenant or agreement contained in the Master Trust Agreement or in aid of execution of any power granted in the Master Trust Agreement or for the enforcement of any proper legal or equitable remedy, as the Trustee, being advised by counsel chosen by the Trustee or by such Holders, will deem most effectual to protect and enforce such rights.

In the enforcement of any remedy under the Master Trust Agreement, the Trustee will be entitled to sue for, enforce payment of and receive any and all amounts then or during any Event of Default becoming and remaining due from IDA for principal, interest or otherwise under any of the provisions of the Master Trust Agreement or of the Bonds, together with interest on overdue payments of principal at the rate or rates of interest payable on any Bonds outstanding and all costs and expenses of collection and of all proceedings under the Master Trust Agreement, without prejudice to any other right or remedy of the Trustee or of the Holders and to recover and enforce any judgment or decree against IDA, but solely as provided in the Master Trust Agreement, for any portion of such amounts remaining unpaid and interest, costs and expenses as above provided, and to collect (but solely from money available for such purposes), in any manner provided by law, the money adjudged or decreed to be payable.

Control of Proceedings by Holders (Section 806)

Holders of a majority in aggregate principal amount of Bonds then outstanding will have the right, subject to the provisions of the Master Trust Agreement, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all remedial proceedings to be taken by the Trustee under the Master Trust Agreement, provided that such direction is in accordance with law and the provisions of the Master Trust Agreement.

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Notice of Default (Section 811)

The Trustee is to provide to all Holders at their addresses as they appear on the registration books written notice of the occurrence of any Event of Default within thirty (30) days after the Trustee has notice of the same, that any such Event of Default has occurred.

Rights of Credit Bank and Insurer (Section 813)

Until IDA has reimbursed a Credit Bank or any Insurer for amounts paid under a Credit Facility or under an insurance policy to pay the interest on or the principal of any Bonds, such Bonds will be deemed to be outstanding and such Credit Bank or Insurer will succeed to the rights and interests of the Holders to the extent of the amounts paid under the Credit Facility or insurance policy until such amount has been reimbursed and upon presentation to the Bond Registrar, such Bond is to be registered in the name of the Credit Bank or Insurer or its nominee.

Supplemental Agreements Without Consent of Holders (Section 1101)

IDA may enter into such supplements and amendments to the Master Trust Agreement as are consistent with the terms and provisions of the Master Trust Agreement: (a) to cure any ambiguity or formal defect or omission, or to correct or supplement any provision that may be inconsistent with any other provision of the Master Trust Agreement; or (b) to grant to or confer upon the Holders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Holders; or (c) to add to the conditions, limitations and restrictions thereafter to be observed by IDA under the provisions of the Master Trust Agreement; or (d) to add to the covenants and agreements of IDA in the Master Trust Agreement other covenants and agreements thereafter to be observed by IDA or to surrender any right or power reserved to or conferred upon IDA in the Master Trust Agreement; or (e) to provide for the issuance of Bonds and to provide for such other related matters as may be required or contemplated by or appropriate under the Master Trust Agreement; or (f) to make change necessary to comply with the requirements of any Rating Agency then rating the Bonds; or (g) to make any other change that, in the judgment of IDA and the Trustee, would not materially adversely affect the security for the Bonds.

Modification of Agreements with Consent of Holders (Section 1102)

All other supplemental agreements require the written consent of Holders of not less than a majority in aggregate principal amount of Bonds then Outstanding that will be affected thereby provided, however, that no supplemental agreement is to permit (a) an extension of the maturity of the principal of or the interest on any Bonds issued under the Master Trust Agreement, or (b) a reduction in the principal amount of any Bonds or the redemption premium or the rate of interest thereon, or (c) the creation of a pledge or lien on the money credited to the Debt Service Subfund or the Construction Subfund other than the pledge and lien created by the Master Trust Agreement, or (d) a preference or priority of any Bonds over any other Bonds, or (e) a reduction in the aggregate principal amount of Bonds required for consent to such supplemental agreement.

Supplements and Amendments to the Payment Agreements Not Requiring Holders Consent (Section 1201)

IDA may enter into supplements and amendments to Payment Agreements as it deems not adverse to the interests of the Holders of the applicable Series after thirty (30) days’ prior notice to, but without the consent of, the Trustee. From time to time and at any time, IDA may enter into other supplements and amendments to such agreements, and the Trustee may consent to such amendments and

C-20 supplements to such agreements are not, in the judgment of the Trustee, materially adverse to the interests of the Holders of the applicable Series, (a) to cure any ambiguity or formal defect or omission in of such agreements or in any supplement or amendment thereto, or (b) to grant to or confer upon IDA or the Trustee, for the benefit of the Holders, any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Holders of the applicable Series or IDA or the Trustee, or (c) to make any other change in either of such agreements, provided only that no such change will be made to a Payment Agreement relating to Payments that would, in the judgment of the Trustee, be materially adverse to the interests of the Holders. Amendments or supplements to Payment Agreements pursuant to this paragraph may be made without the consent of the Holders.

Supplements and Amendments to the Payment Agreements Requiring Holders’ Consent (Section 1202)

All other supplements or amendments to Payment Agreements require notice of the execution of the proposed supplement or amendment and the consent of the Holders of more than a majority in aggregate principal amounts of the Bonds then outstanding in the same manner as provided for in the case of supplements and amendments to the Master Trust Agreement.

Defeasance (Section 1301)

When (i) Bonds secured by the Master Trust Agreement have become due and payable in accordance with their terms, and (ii) the whole amount of the principal and the interest and premium, if any, so due and payable upon all Bonds will be paid or if the Trustee, the Bond Registrar or any Paying Agent will hold sufficient moneys or Defeasance Obligations the principal of and the interest on which, when due and payable, will provide sufficient moneys to pay the principal of, and the interest and redemption premium, if any, on all Bonds then outstanding to the maturity date or dates thereof, and (iii) if Bonds are to be called for redemption in accordance with the provisions of the Master Trust Agreement prior to their maturity, IDA will have given, irrevocable instructions to call the Bonds for redemption, and (iv) sufficient provision is made for paying all other obligations payable by IDA in connection with the defeasance of said indebtedness, then and in that case the right, title and interest of the Holders in the subfunds in the Master Trust Agreement will cease and become void, and on demand of IDA and upon being furnished with an opinion, in form and substance satisfactory to the Trustee, of counsel nationally recognized as expert in legal matters relating to the obligations of states and their political subdivisions, to the effect that all conditions precedent to the release of the Master Trust Agreement have been satisfied, the Trustee is to release the Master Trust Agreement.

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FIRST SUPPLEMENTAL TRUST AGREEMENT

Application of the Proceeds of the Series 2016A Bonds (Section 2.04)

The proceeds (including any premium) of the Series 2016A Bonds are to be applied by the Trustee simultaneously with the delivery of said Series 2016A Bonds as follows:

(A) with the Trustee, to the credit of a special account created in the Construction Subfund (the “2016A Costs of Issuance Account”), the amount equal to the sum of the costs associated with the issuance of such Series of Bonds;

(B) with the Trustee, to the credit of a special account in the Construction Subfund for purposes of the constructing and equipping of the Police Station Building (the “2016A Police Station Project Account”); and

Redemption Provisions of the Series 2016A Bonds (Section 3.01)

At its option, to be exercised not less than forty-five (45) days prior to each such applicable Principal Payment Date, the IDA may (a) deposit money with the Trustee to be used to purchase Series 2016A Bonds, or direct the Trustee to cause money in the Debt Service Subfund to be used for such purchases, at a price not exceeding the principal amount thereof plus accrued interest to such applicable Principal Payment Date, or (b) receive a credit against the Sinking Fund Requirements for Series 2016A Bonds which prior to such date have been purchased by the IDA and presented to the Trustee for cancellation or redeemed (otherwise than in satisfaction of prior Sinking Fund Requirements) and canceled by the Trustee and, in either case, not theretofore applied as a credit against any Sinking Fund Requirement. Each such Series 2016A Term Bond so purchased, delivered or previously redeemed will be credited by the Trustee at 100% of the principal amount thereof against the current Sinking Fund Requirement with respect to Series 2016A Bonds due on the same date as the Term Bond so purchased, delivered or previously redeemed and canceled. Any excess over such current Sinking Fund Requirement will be credited against the future Sinking Fund Requirements of Term Bonds with the same maturity date in such manner as the IDA will determine, and the principal amount of such Series 2016A Bonds with such maturity date to be redeemed by mandatory sinking fund redemption will be reduced accordingly.

Optional Redemption. (1) The Series 2016A Bonds which are stated to mature after October 1, 2026, are subject to redemption, in the manner and under the terms and conditions provided in the Master Trust Agreement, at the option of IDA, from any money that may be made available for such purpose, either in whole or in part, as determined by the IDA, on any date not earlier than October 1, 2026, at a Redemption Price equal to 100% of the Series 2016A Bonds to be redeemed, together with the interest accrued thereon to the date fixed for redemption.

Extraordinary Optional Redemption. The Series 2016A Bonds are subject to extraordinary optional redemption, in whole or in part, on any date at a price equal to the principal amount thereof, together with interest thereon accrued to the date of redemption, upon the exercise by the County of its option to prepay the Purchase Price pursuant to the Contract when the following events occur:

(1) Circumstances Under Which County May Not Repair Damage. In the event that the Police Station Property or 2005 COPs Property, as applicable, or any portion thereof is destroyed by fire or other

C-22 casualty, the County may within 90 days after such damage or destruction, elect by written notice to IDA not to repair, reconstruct or restore the Police Station Property or 2005 COPs Property, as applicable, provided that the Net Proceeds of insurance payable as a result of such damage or destruction together with other moneys held for the payment of or as security for the Series 2016A Bonds and any additional sums paid by the County are sufficient to provide for Payment of the Allocated Bonds. In such event the County will, in its notice of election to IDA, state that such Net Proceeds and other moneys, if any, will be applied to defease the lien of the First Supplemental Trust Agreement in accordance with its terms and such Net Proceeds will be paid to IDA for the purpose of such defeasance.

(2) Condemnation. If the County determines in accordance with the provisions of the Payment Agreement that the utility of the Police Station Property or the 2005 COPs Property cannot be maintained, restored or replaced following a taking, the net proceeds payable as a result of such taking are to be paid for the account of IDA to the Trustee and the County will pay to the Trustee for the account of IDA such additional amount as will be required, together with such net proceeds and all amounts held under the Master Trust Agreement and the First Supplemental Trust Agreement and available for the purpose, for the payment of the Payment of the Allocated Bonds.

To exercise such option, the County is to give written notice to the IDA, and to the Trustee, and is to provide therein a specific direction to IDA to apply such prepayment to the purchase and cancellation, redemption, or defeasance of Bonds in accordance with their terms. The date provided as to when such prepayment is to occur may not be less than 45 days from the date such notice is mailed, and in case of a redemption of the Series 2016A Bonds in accordance with the provisions of the First Supplemental Trust Agreement will make arrangements satisfactory to the Trustee for the giving of the required notice of redemption. Upon receipt by the IDA of the Purchase Price from the County, the IDA will release the County from its obligation under the Payment Agreement or if such prepayment is only a partial amount of the amount owed under the Payment Agreement the County’s obligations under the Payment Agreement will be reduced as provided therein.

Payment of Principal, Interest and Premium (Section 7.01)

IDA is to cause to be paid, when due, the principal of (whether at maturity, by call for redemption or otherwise) and the premium, if any, and the interest on the Series 2016A Bonds at the places, on the dates and in the manner provided in the First Supplemental Trust Agreement and in the Series 2016A Bonds according to the true intent and meaning thereof.

The Series 2016A Bonds are payable, on a parity with any other outstanding Bonds, solely from Pledged Revenues derived by IDA from the Payment Agreement and other money pledged under the Master Trust Agreement and the First Supplemental Trust Agreement, including in particular amounts until paid out in accordance with the provisions of the Master Trust Agreement, amounts credited to the 2016A Police Station Project Account. The Series 2016A Bonds issued under the First Supplemental Trust Agreement and the Master Trust Agreement will not be deemed to constitute a debt or pledge of the faith and credit of the State or of any political subdivision thereof, including IDA and the County. Neither the faith and credit nor the taxing power of the State or IDA or the County or any other political subdivision is pledged to the payment of the principal of or premium, if any, or interest on the Series 2016A Bonds, and the issuance of the Series 2016A Bonds will not directly or indirectly or contingently obligate the State or the County to levy any taxes whatever therefor or to make any appropriation for their payment except from the revenues and receipts provided for their payment under the Master Trust Agreement and the First Supplemental Trust Agreement. IDA has no taxing power.

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Request of County to Appropriate (Section 7.02)

IDA covenants that it will, through an IDA Representative, request the County annually, for each fiscal year following the issuance of the Series 2016A Bonds, to budget, appropriate and pay to the Trustee an amount equal to the Basic Payments payable by the County under the Payment Agreement in such fiscal year. IDA also covenants that it will, through its IDA Representative, request the County, annually for each fiscal year following the issuance of the Series 2016A Bonds to budget, appropriate and apply as provided in the Contract, the First Supplemental Trust Agreement and the Master Trust Agreement an amount equal to the estimated Additional Payments payable by the County under the Contract in such fiscal year. Alternatively, the IDA, through its IDA Representative, may request the County to include as a single line item in its annual budget an item designated “Basic and Additional Payments – Master Trust Agreement” in an amount not less than an amount sufficient, in the judgment of the County, to make all payments scheduled to become due, and pay all other amounts payable by the County, pursuant to the Contract and all other Payment Agreements during such fiscal year.

Tax Covenants (Section 7.03)

IDA covenants that it will not take any action that would, or fail to take any action which failure would, cause interest on the Series 2016A Bonds to become includable in gross income for federal income tax purposes pursuant to the provisions of the Internal Revenue Code of 1986, as amended and regulations promulgated thereunder.

(a) As of a date not later than five years after the issue date of the Series 2016A Bonds (the “Initial Installment Computation Date”), and at least once every five years thereafter, the IDA is to cause the Rebate Liability to be computed and will deliver a copy of the calculation of the Rebate Liability to the Trustee. Amounts paid for the purpose of funding the Rebate Liability, or otherwise made available therefor, are to be deposited by the Trustee in the Improvement Subfund.

(1) not later than sixty (60) days after each Initial Installment Computation Date, IDA is to pay, or direct the Trustee to pay from amounts in the Improvement Subfund, to the United States of America at least ninety percent (90%) of the Rebate Liability as calculated with respect to such installment computation date;

(2) no later than sixty (60) days after the installment computation date that is the fifth anniversary of the Initial Installment Computation Date and no later than sixty (60) days after every fifth anniversary date thereafter until final payment of the Series 2016A Bonds, IDA is to direct the Trustee to pay from amounts in the Improvement Subfund transferred from the Construction Subfund and payments received pursuant to the Contract for Rebate Liability purposes, to the United States of America not less than the amount, if any, by which ninety percent (90%) of the Rebate Liability set forth in the most recent Rebate Liability calculation exceeds the aggregate of all such payments theretofore made to the United States of America with respect to the Series 2016A Bonds;

(3) no later than sixty (60) days after final Payment of the Series 2016A Bonds, IDA is to pay, or direct the Trustee to pay from amounts in the Improvement Subfund, to the United States of America the amount, if any, by which 100% of the Rebate Liability calculated with respect to the date of final payment of the Series 2016A Bonds exceeds the aggregate of all payments theretofore made.

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(b) IDA covenants that it will instruct the Trustee as to the final application of the amounts in the Improvement Subfund to the make payments to the United States of America of all or a portion of the Rebate Liability on such dates or amounts in order for the Authority to comply with the conditions in the First Supplemental Trust Agreement.

All such payments are to be made by, or at the direction of, an IDA Representative from any legally available source, including moneys in the Improvement Subfund.

No such Rebate Liability payment need be made if the Authority receives and delivers to the Trustee an Opinion of Bond Counsel to the effect that such payment (1) is not required under the Code to prevent the Series 2016A Bonds from becoming “arbitrage bonds” within the meaning of Section 148 of the Code, or (2) may or should be calculated and paid on some alternative basis under the Code, and the Authority complies with such alternative basis.

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THE INSTALLMENT PURCHASE CONTRACT

Agreement to Issue the Series 2016A Bonds (Section 2.01)

At the request of the County, the IDA agrees that it will use its best efforts to issue, sell and deliver to the purchasers thereof at one time or from time to time (i) the Series 2016A Bonds pursuant to Section 208 of the Trust Agreement for the purpose of paying the Cost of the Police Station Project, (ii) the Series 2016A Bonds to finance the acquisition of the 2005 COPs Projects and the refunding of the 2005 COPs, (iii) additional Bonds pursuant to the Trust Agreement for the purpose of paying all or any portion of the Cost of the Police Station Project in excess of the funds available for the purpose from the proceeds of the Series 2016A Bonds or (iv) refunding Bonds pursuant to the Trust Agreement for the purpose of refunding any Series 2016A Bonds or additional Bonds issued under (iii) above or a combination of such purposes. The proceeds of the Series 2016A Bonds will be delivered to the Trustee for application in accordance with the Trust Agreement and the First Supplemental Trust Agreement.

No Sufficiency Warranty by IDA; Limited Liability of County (Section 2.03)

The IDA does not make any warranty, either express or implied, that the money that will be paid into the Construction Subfund or any account therein will be sufficient to pay the Cost of the Projects. The obligation of the County under the Contract to pay the Cost of the Projects will be limited to the proceeds of the Series 2016A Bonds and any additional Bonds described above deposited to the credit of the 2016A Police Station Project Account in the Construction Subfund, the investment earnings thereon and any other investment earnings on the funds and accounts held by the Trustee under the Trust Agreement and transferred to the 2016A Police Station Project Account in the Construction Subfund. The County agrees, however, that if, after exhaustion of the money in the Construction Subfund, the County should pay or cause to be paid any portion of the Cost of the Police Station Project, it will not be entitled to any reimbursement therefor from IDA or from the Trustee (other than from the proceeds of any such additional Bonds), or diminution or postponement of the payments to be made pursuant to the Contract.

Sale of the Projects (Article III)

IDA agrees to sell to the County, and the County agrees to purchase from IDA, on the Effective Date, the Projects.

Payments (Section 4.01)

The County is to pay to IDA the Purchase Price in installments, with Interest thereon, in accordance with the provisions of the Contract. The Purchase Price and Interest thereon is to be paid as Basic Contract Payments in the amounts and manner that will allow IDA to pay timely the debt service on the Series 2016A Bonds.

The County may prepay the Purchase Price, in whole or in part, on not less than forty-five (45) days’ written notice to IDA, accompanied by a specific direction to IDA to apply such prepayment to the purchase and cancellation, redemption or defeasance of any Bonds. Upon such purchase and cancellation, redemption or defeasance, IDA is to credit the principal amount of the Bonds so cancelled, redeemed or defeased against the Purchase Price and reduce the Basic Contract Payments otherwise payable by an amount equal to the sum of the principal amount of the Bonds so purchased and cancelled, redeemed or defeased, the interest on the Bonds so purchased and cancelled, redeemed or defeased and as

C-26 a result of such prepayment and the interest that would have accrued on such Bonds so redeemed or defeased but for such prepayment and redemption or defeasance.

IDA is to credit appropriately against the Purchase Price and Interest and reduce the Basic Contract Payments otherwise payable on each Due Date by the amount of any investment income (a) realized from the investment and reinvestment of Bond proceeds and Basic Contract Payments or other amounts or reserves derived from Bond proceeds or Basic Contract Payments and set aside or pledged to the Bonds and (b) applied, or to be applied, to the payment of principal or interest and any redemption premiums on Bonds.

The County is also to pay to or for the account of IDA as Additional Contract Payments for the Projects all other amounts (other than Basic Contract Payments) payable by the County to IDA under the Contract, including fees and expenses of the Trustee, the Bond Registrar, any depository, any Paying Agent, and the IDA.

Net Contract (Section 4.04)

The County is to pay to IDA all Contract Payments payable to IDA free of any abatement, charges, counterclaims, assessments, set-offs, offsets, impositions or deductions. Under no circumstances or conditions will IDA be expected or required to make any payment of any kind with respect to the Properties or be under any obligation or liability except as provided in the Contract and the Trust Agreement. The County will pay directly all costs of operating, maintaining and repairing the Properties, including the costs and expenses for sewer, water, gas, electric, telephone, fuel and other utilities used or consumed in or at the Properties.

Late Charges (Section 4.05)

In the event that payment of any (i) Basic Contract Payment becomes overdue for one business day beyond the date on which it is due or (ii) Additional Contract Payments become overdue for forty- five (45) days, the sums so overdue will be payable with interest at the Late Charge Rate (computed on a 360-day year).

Obligations of County Subject to Appropriation (Section 4.06)

The obligations of the County to make any payments under the Contract are contingent upon the appropriation for each fiscal year by the Board of County Supervisors of the County of funds from which such Contract Payments can be made. The County will not be liable for any amounts that may be payable pursuant to the Contract unless and until such funds have been so appropriated for payment and then only to the extent thereof. The County and the IDA understand that nothing in the Contract will be deemed to obligate the Board of County Supervisors of the County to appropriate any sums on account of any Contract Payments to be made by the County under the Contract. The Contract will not constitute a pledge of the full faith and credit of the County or a bond or debt of the County in violation of Section 10 of Article VII of the Constitution of the State.

County Budget (Section 4.07)

The County Executive is to include as a separate line item in each annual budget of revenues and disbursements presented to the Board of Supervisors an item designated “County Services Facilities Projects Payments” in an amount not less than an amount sufficient, in the judgment of the County Executive, to make the Contract Payments and pay all other amounts payable during such fiscal year by the County pursuant to the Contract. Alternatively, the County Executive may include as a single line

C-27 item in each annual budget of revenues and disbursements presented to the Board of Supervisors an item designated “Basic and Additional Payments – Master Trust Agreement” in an amount not less than an amount sufficient, in the judgment of the County Executive, to make all Payments scheduled to become due, and pay all other amounts payable by the County, pursuant to the Contract and all other Payment Agreements referred to in the Master Trust Agreement during such fiscal year.

County’s Obligation to Maintain and Repair Properties (Section 5.01)

The County, at its sole cost and expense, throughout the Term, is to keep and maintain the Properties in good and safe order and condition in accordance with industry standards and to use all reasonable precaution to prevent, waste, damage, or injury to the Properties.

In the event the Properties or any portion thereof are damaged or destroyed by fire, flood or other casualty the County, except as otherwise provided in the Contract is to, repair, reconstruct and restore the damaged Properties as and to the extent the County deems appropriate under the circumstances. Net Proceeds of any insurance relating to such damage or destruction will be paid directly to the County and the County is to apply such Net Proceeds received solely to, and will complete, the repair, reconstruction and restoration of the Properties.

In the event that the Properties or any portion thereof are destroyed by fire or other casualty the County may, within 90 days after such damage or destruction, elect by written notice to IDA not to repair, reconstruct or restore the Properties, provided that the Net Proceeds of insurance payable as a result of such damage or destruction together with other money held for the payment of or as security for the Bonds and any additional sums paid by the County are sufficient to provide for Payment of the Bonds. In such event the County in its notice of election to IDA, is to state that the Net Proceeds of insurance will be paid to IDA for the purpose of defeasing the lien of the First Supplemental Trust Agreement securing the Series 2016A Bonds in accordance with its terms and such Net Proceeds are to be paid to IDA for the purpose of such defeasance. Alternatively, if the County determines that the destruction is limited to the Police Station Property or the 2005 COPs Property, it will constitute compliance with the provisions of the Contract if the Net Proceeds of insurance payable as a result of such damage or destruction together with other money held for the payment of or as security for the Bonds and any additional sums paid by the County are sufficient to provide for Payment of the Allocated Bonds and will be so applied.

Upon completion of the repair, reconstruction and restoration pursuant to the Contract, any excess money from the Net Proceeds of insurance is to be paid by the County to IDA and will be applied as a credit to Basic Contract Payments. In the event that the Bonds are defeased, any remaining Net Proceeds will be paid to or retained by the County.

In the event that the Properties or any portion thereof are condemned or taken for any public or quasi-public use and title vests in the party condemning or taking the same, the County is to determine in writing whether the Properties can be repaired, reconstructed and restored to such an extent that the utility of the Buildings, or any of them, can be largely maintained, restored or replaced. If the County determines that the utility of the Buildings can be maintained, restored or replaced following such a taking is to restore the Properties with the Net Proceeds resulting from such taking as nearly as practicable to substantially the same or an improved condition or utility as existed prior to the taking. The County will complete restoration of the Properties regardless of whether or not the Net Proceeds of the condemnation award received by the County for such purposes are sufficient. If the County determines that the utility of the Buildings cannot be maintained restored or replaced following such taking, the Net Proceeds payable as a result of such taking will be used for the Payment of the Bonds. Alternatively, if the County determine sthat the taking is limited to the Police Station Property or the 2005 COPs Property, it will constitute compliance with the provisions of the Contract if the Net Proceeds payable as a result of

C-28 such taking together with other money held for the payment of or as security for the Bonds issued to finance the Projects and any additional sums paid by the County are sufficient to provide for Payment of the Allocated Bonds, as applicable and will be so applied.

Any excess money from the Net Proceeds of a taking over and above the costs of repair, reconstruction and restoration prosecuted to completion in accordance with the Contract is to be paid by the County to IDA and applied as a credit against the Purchase Price and reduce the Basic Contract Payments becoming due thereafter as designated in writing by the County. In the event of Payment of the Bonds in accordance with the fifth paragraph under this heading, any remaining Net Proceeds will be retained by or paid to the County.

County’s Assumption of the Maintenance and Management of the Properties (Section 5.02)

IDA will have no duty or obligation to make any alteration, change, improvement, replacement, restoration or repair to, or to demolish, the whole or any part of the Properties. Except as otherwise provided in the Contract, as between the County and IDA, the County assumes the full and sole responsibility for the condition, operation, repair, alteration, improvement, replacement, maintenance and management of the Properties.

Insurance (Article VI)

The County is to procure and pay the requisite premiums for and maintain during the Term of the Contract the insurance described in the Contract. The insurance policies required by the Contract will name the Trustee as an additional named insured. The Contract requires that the County carry as a minimum, (i) an “all risks” policy with coverage equal to 100% of the replacement cost value of the Properties, to be determined no less frequently than annually; and (ii) a general liability policy covering all operations and maintenance in connection with the Buildings equal to a $5,000,000 combined aggregate limit per occurrence for personal injury and property damage liability. The Couny may self- insure against such risks under certain circumstances.

All such insurance will be issued by companies licensed to do business in the Commonwealth of Virginia with the Best’s Key Rating of at least A-:VI.

Title (Section 7.01)

As between the County and IDA, fee title to the Projects will vest in the County.

No Impairment of IDA’s Interests (Section 7.02)

Except for the Permitted Encumbrances described in the Contract, the County will not create or cause or suffer to be created, any lien, encumbrance or charge upon the Contract, the Properties, or any part of any of them, or IDA’s income derived from the Contract.

County Representations (Section 8.01)

Except as expressly provided in the Contract, the County warrants that no representations, statements or warranties, express or implied, have been made by or on behalf of IDA in respect of the Projects, and IDA will in no event whatsoever be liable for any latent or patent defects in the Projects or the Properties.

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The County represents that, except as permiited by the Contract, it will not use, or permit the use of, any portion of the Police Station Property or the 2005 COPs Projects by any person or entity for any private business use, other than a state or local governmental unit. The County may use, or permit the use of, any portion of the Police Station Property or the 2005 COPs Projects by any person or entity that is not a state or local governmental unit or other “exempt person” as defined in the Code for any private business use; provided that (i) not more than sixty (60) nor less thirty (30) days prior to the effective date of such proposed use, the County is to furnish or cause to be furnished to IDA a written description of the nature, scope and duration of such proposed use, and (ii) a nationally recognized bond counsel has delivered to IDA an opinion that such proposed use will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.

Release of Portions of the Properties (Section 10.03)

The County and the IDA reserve the right to amend the Contract for the purpose of effecting the release of and removal from the Contract of any part of the Properties with respect to which the County or a transferee of the County proposes to convey fee title to a public utility or public body in order that utility services or roads or other services may be provided for the Properties or any of them. If at the time any such amendment is made, any of the Bonds is outstanding and unpaid there are deposited with the Trustee the following: (i) a copy of the amendment or easement as executed; (ii) a resolution of the Board of Supervisors of the County stating that the County is not in default under any of the provisions of the Trust Agreement and IDA is not to the knowledge of the County in default under any of the provisions of the Contract, giving an adequate legal description of that portion of the Properties to be released, and stating the purpose for which the County desires the release; (iii) a certificate showing that IDA has approved such amendment and stating that IDA is not in default under any of the provisions of the Contract; and (iv) a certificate of an appropriate County Representative stating that the proposed release will not impair the usefulness of the Properties as police station facilities, general office building facilities, commuter parking facilities, or jail facilities, as appropriate, and in the case of the land that constitutes a portion of the Police Station Property or 2005 COPs Property will not destroy the means of ingress to and egress therefrom.

Notwithstanding any other provisions of the Contract, the County may sell or otherwise dispose of its interest in any unimproved parts of the Properties (on which neither the Buildings or the utilities that serve them are located); provided, that if at the time any such sale or other disposition is proposed, all or any of the Bonds is outstanding and unpaid, there will be deposited with the Trustee the following: the documents described in clauses (i), (ii) and (iii) in the paragraph above and an amount equal to $2,000,000 per acre or any fraction thereof of the unimproved land being disposed, a certificate of an appropriate County Representative, dated not more than sixty (60) days prior to the date of the disposition, stating that, in the opinion of the person signing such certificate, the release proposed to be made will not impair the usefulness of Buildings as police station facilities, general office building facilities, commuter parking facilities, or jail facilities, and will not destroy the means of ingress thereto and egress therefrom.

Granting of Easements (Section 10.04)

The County and its transferees may grant or release easements, licenses, rights of way (including the dedication of public highways) and other rights or privileges, so long as such grant or release will not materially adversely affect the usefulness of the Police Station Property as a site for a police station facility or the 2005 COPs Property as a site for a general office building, commuter parking or County jail facilities, as appropriate.

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Assignment, Leasing and Subleasing (Section 10.05)

Neither the Contract nor the rights and obligations of the County thereunder the Contract will be assigned in whole or in part without the consent of IDA. However, no assignment will relieve the County from primary liability for any of its obligations under the Contract.

Assignment of Contract by IDA (Section 10.06)

IDA will assign its interest in and pledge all money receivable under the Contract, other than the Additional Contract Payments, to the Trustee pursuant to the Trust Agreement as security for payment of the Bonds. The County agrees to make all Basic Contract Payments and payments to be credited against Basic Contract Payments directly to the Trustee for the account of IDA.

County Options to Terminate (Section 10.07)

The County may terminate the Term by paying to the Trustee, for the account of IDA, an amount that will be sufficient to purchase, redeem or defease all the outstanding Bonds under the Trust Agreement and with the provisions of the Trust Agreement, and in case of redemption, making arrangements satisfactory to the Trustee for giving the required notice of redemption.

Permitted Use (Section 11.01)

There will be no occupation or use of the Police Station Property, the 2005 COPs Property or other facilities of the 2005 COPs Projects by the County or anyone else for any purpose other than as authorized by the Contract, without the written consent of IDA and counsel to IDA.

No Illegal or Hazardous Use (Section 11.02)

The County will not use or permit the Properties or any part thereof to be used for any unlawful or illegal business, use or purpose, or in such manner as to constitute a nuisance of any kind (public or private).

Events of Default (Section 12.01)

Except in an Event of Non-Appropriation as described in the following caption, each of the following events is an “Event of Default” under the Contract: (a) if the County fails to make any Basic Contract Payment or any part thereof on the due date thereof and such failure continues for one business day; or (b) if the County fails (i) to maintain or cause to be maintained the insurance required by the Contract, or (ii) to make any Additional Contract Payment, or any other payment under the Contract, required to be paid by the County under the Contract for a period, after notice thereof from IDA to the County, of forty-five (45) days; or (c) if the County fails to observe or perform one or more of the other material terms, conditions, covenants or agreements of the Contract or any representation, and such failure or misrepresentation will continue for a period of ninety (90) days after written notice thereof; or (d) if the County admits, in writing, that it is unable to pay its debts as such become due or will make an assignment for the benefit of creditors; or (e) if the County files a voluntary petition in bankruptcy or the County is adjudicated a bankrupt or insolvent; or (f) if a bankruptcy or dissolution proceeding brought against the County will not have been dismissed, or the appointment of a trustee has not been vacated or stayed within ninety (90) days, or if, within thirty (30) days after the expiration of any such stay, such appointment has not been vacated.

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Force Majeure (Section 12.02)

Clause(c) under “Events of Default” above are limited subject to the following limitations: if by reason of Force Majeure, the County is unable in whole or in part to carry out any of its agreements herein contained, failure of the County to carry out any such agreements, will not be deemed an Event of Default Clause(c) under “Events of Default” above during the continuance of such inability, including a reasonable time for the removal of the effect thereof.

The term “Force Majeure” means, without limitation, the following:

(a) acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the government of the United States or of the State or any of their departments, agencies, political subdivisions or officials (other than the County), or any civil or military authority; war; insurrections; civil disturbances; riots; epidemics; landslides; lightning; earthquakes; fires; hurricanes; storms; droughts; floods; washouts; arrests; restraint of government and people; explosions; breakage, malfunction or accident to facilities, machinery, transmission pipes or canals; partial or entire failure of utilities; shortages of labor, materials, supplies or transportation; or

(b) any cause, circumstance or event not reasonably within the control of the County.

(c) The County agrees, however, to use commercially reasonable efforts to remedy with all reasonable dispatch the Force Majeure preventing it from carrying out its agreements; provided, that the settlement of any disputes of any nature will be entirely within the discretion of the County, and the County will not be required to make settlement or any such disputes by acceding to the demands of the opposing party or parties when such course is, in the judgment of the County Attorney for the County, unfavorable to the County.

Non Appropriations (Section 12.03)

Anything to the contrary notwithstanding elsewhere in the Contract, the failure of the County to pay all or any portion of any amount otherwise due and payable under the Contract to or for the account of IDA or the Trustee on account of the failure of the Board of County Supervisors of the County to appropriate such sum (an “Event of Non-Appropriation”) will not, to the extent of such failure, constitute a Default or an Event of Default under the Contract.

Remedies (Section 12.04)

If an Event of Default will have occurred and be continuing, IDA may, at its option, declare all installments of Basic Contract Payments for the remainder of the Term to be immediately due and payable.

In an Event of Default, IDA may take whatever action at law or in equity may appear necessary or desirable to collect the Contract Payments then due and thereafter to become due, or to enforce performance and observance of any obligation, agreement or covenant of the County under the Contract.

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No Remedy Exclusive; Agreement to Pay Attorneys’ Fees and Expenses (Sections 12.05 and 12.06)

No remedy is intended to be exclusive of any other remedy. If any Event of Default will occur or in the event the County should default under the Contract, and in any such case, IDA or the Trustee should employ attorneys or incur other expenses for the collection of Contract Payments or the enforcement of performance or observation of any obligation or agreement on the part of the County contained in the Contract, the County agrees that it will on demand therefor pay to the IDA or the Trustee the reasonable fees of such attorneys and such other expenses so incurred.

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APPENDIX D

FORM OF BOND COUNSEL OPINION

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SIDLEY AUSTIN LLP BEIJING HONG KONG SHANGHAI 1501 K STREET, N.W. BOSTON HOUSTON SINGAPORE WASHINGTON, D.C. 20005 BRUSSELS LONDON SYDNEY +1 202 736 8000 CENTURY CITY LOS ANGELES TOKYO +1 202 736 8711 FAX CHICAGO NEW YORK WASHINGTON, D.C. DALLAS PALO ALTO GENEVA SAN FRANCISCO

FOUNDED 1866

March __, 2016

Industrial Development Authority of the County of Prince William Gainesville, Virginia

We have acted as Bond Counsel to the Industrial Development Authority of the County of Prince William (“IDA”) in connection with the issuance of

$______Industrial Development Authority of the County of Prince William Prince William County Facilities Revenue and Refunding Bonds Series 2016A (County Facilities Projects) (the “Series 2016A Bonds”)

The Series 2016A Bonds are being issued pursuant Industrial Development and Revenue Bond Act, Title 15.2 Chapter 49 of the Code of Virginia, as amended, and other applicable law (collectively, the “Enabling Act”). The Series 2016A Bonds are being issued (i) to finance the costs of the improvement of certain property to serve as a central district police station (the “Central District Police Station Project”) for Prince William County (the “County”), (ii) to refund and redeem (the “Refunding”) prior to their respective maturities certain outstanding certificates of participation of the County’s Refunding Lease Participation Certificates, Series 2005 (Prince William County Facilities) issued to refinance certain County projects, including county office facilities, commuter parking facilities, jail facilities and park facilities, a police and fire communications center, a juvenile detention facility and a police station (the “2005 COPs Projects” together with the Central District Police Station Project, the “Projects”), and (iii) to pay costs in connection with the issuance of the Series 2016A Bonds.

Simultaneously with the issuance of the Series 2016A Bonds, IDA will make a portion of the proceeds of the Series 2016A Bonds available to the County for the purpose of the development and construction of the Central District Police Station Project and to effectuate the Refunding. In addition, IDA will sell its interests in the Projects to the County and agree to refinance the 2005 COPs Projects in consideration of the County’s undertaking responsibility for the Projects and the County’s agreement to pay a purchase price for the Projects and the Refunding in installments (“Payments”), sufficient to pay timely the debt service on outstanding Series 2016A Bonds, all pursuant to an Installment Purchase Contract, dated as of March 1, 2016 (the “Installment Purchase Contract”), between IDA and the County.

The Series 2016A Bonds are being issued under and secured by a Master Trust Agreement, dated as of March 1, 2016 (the “Master Trust Agreement”), as supplemented by a First Supplemental Trust Agreement, dated as of March 1, 2016 (the “First Supplemental Trust Agreement” and together with the Master Trust Agreement, the “Trust Agreement”), each between IDA and U.S. Bank National Association, as trustee (the “Trustee”), pursuant to which IDA has assigned to the Trustee substantially all of its rights under the Installment Purchase Contract, including its right to receive the Payments. Under and subject to the requirements of the Master Trust Agreement, IDA may issue additional bonds for other facilities for the County as permitted by the Enabling Act, and such additional bonds and any refunding bonds issued under the Master Trust Agreement will rank on a parity with the Series 2016A Bonds

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(together with any such additional and refunding bonds ( the “Bonds”) as to the revenues pledged under the Master Trust Agreement (“Pledged Revenues”), including the Payments to be made by the County pursuant to the Installment Purchase Contract, as security for the payment of debt service on the outstanding 2016A Bonds. IDA has not previously issued any Bonds under the Master Trust Agreement..

The Series 2016A Bonds are dated and bear interest, and are stated to mature, subject to optional redemption, extraordinary optional redemption and mandatory sinking fund redemption, all as provided in the Trust Agreement.

In our capacity as Bond Counsel, we have examined the Enabling Act and such documents, records of IDA and the County and other instruments and proofs, including counterparts or certified copies of the Trust Agreement and the Installment Purchase Contract, as we deemed necessary to enable us to express the opinions set forth below.

Based on the foregoing we are of the opinion that:

1. IDA is by the terms of the Enabling Act a political subdivision of the Commonwealth of Virginia (the “Commonwealth”) and a public instrumentality of the County duly created pursuant to the laws of the Commonwealth, including, in particular, the Enabling Act, with full authority to acquire and sell the Projects, to enter into the Trust Agreement and the Installment Purchase Contract, and to issue and sell the Series 2016A Bonds.

2. The County is a political subdivision of the Commonwealth with full authority to acquire the Projects and refinance the 2005 COPs Projects and to enter into the Installment Purchase Contract.

3. The Installment Purchase Contract has been duly authorized, executed and delivered by IDA and the County and constitutes a legal, valid and binding obligation of the parties enforceable in accordance with its terms. The obligation of the County to make the Payments under the Installment Purchase Contract is expressly therein made subject to the annual appropriation by the Board of County Supervisors of the County of funds for such purpose.

4. The Trust Agreement has been duly authorized, executed and delivered by IDA and the Trustee and constitutes a legal, valid and binding obligation of the parties enforceable in accordance with its terms. Under the Trust Agreement, IDA has validly assigned substantially all of its rights under the Installment Purchase Contract (including its rights to receive Payments) to the Trustee for the benefit of the holders of the Bonds.

5. The issuance and sale of the Series 2016A Bonds have been duly authorized by IDA, and the Series 2016A Bonds have been duly executed and delivered by IDA and constitute legal, valid and binding limited obligations of IDA payable under the Trust Agreement in accordance with their terms solely from Pledged Revenues and other money to the extent provided in the Trust Agreement. The Series 2016A Bonds shall not be deemed to constitute a debt or pledge of the faith and credit of the Commonwealth or any political subdivision thereof. None of the Commonwealth, any political subdivision thereof and IDA shall be obligated to pay the Series 2016A Bonds or the interest thereon or other costs incident thereto except from the revenues and money pledged therefor. Neither the faith and credit nor the taxing power of the Commonwealth or any political subdivision thereof is pledged to the payment of the principal of the Series 2016A Bonds or the interest thereon or other costs incident thereto.

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6. The County and the IDA have each covenanted to comply with applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), relating to the exclusion from gross income of the interest on the Bonds for purposes of federal income taxation. Assuming continuing compliance by the County and the IDA with such covenants and the requirements of the Code regarding, among other matters, the use, expenditure and investment of proceeds of the Series 2016A Bonds and the timely payment of certain investment earnings to the United States Treasury, interest on the Series 2016A Bonds is not includable in the gross income of the owners thereof for federal income tax purposes under current law. Failure by the County or the IDA to comply with such covenants and requirements may cause interest on the Series 2016A Bonds to be includable in the gross income of the owners thereof retroactive to the date of issue of such Series 2016A Bonds. We render no opinion as to the effect on the exclusion from gross income of the interest on the Series 2016A Bonds for federal income tax purposes of any action taken or not taken without our approval or in reliance upon the advice or opinion of counsel other than us. Interest on the Series 2016A Bonds is not an item of tax preference for purposes of the federal individual or corporate alternative minimum taxes but will be included in the calculation of the alternative minimum tax liability imposed on corporations by the Code.

7. As provided by the Act, the income on the Series 2016A Bonds, including any profit made on the sale thereof, is exempt from all taxation by the Commonwealth or any political subdivision thereof.

Other than as described herein, we have not addressed nor are we opining on the tax consequences to any person of the investment in, or the receipt of any interest on, the Series 2016A Bonds.

The opinions contained in paragraphs 3, 4 and 5 above are qualified to the extent that the enforceability of the Installment Purchase Contract, the Trust Agreement and the Series 2016A Bonds may be limited by bankruptcy, insolvency, moratorium, reorganization or other laws affecting creditors’ rights generally and may be subject to judicial discretion. For purposes of our opinions in paragraphs 1, 3, 4 and 5, we have relied upon the opinion of McGuire Woods LLP, respecting the existence and organization of IDA and its due authorization and execution of the Installment Purchase Contract, the Trust Agreement and the Series 2016A Bonds. For purposes of our opinions in paragraphs 2 and 3, we have relied upon the opinion of the Office of the County Attorney respecting the existence and organization of the County and its due authorization and execution of the Installment Purchase Contract.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions. Such opinions may be adversely affected by actions taken or events occurring, including a change in law, regulation or ruling (or in the application or official interpretation of any law, regulation or ruling) after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions are taken or such events occur and we have no obligation to update this opinion in light of such actions or events.

Respectfully submitted,

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APPENDIX E

FORM OF PRINCE WILLIAM COUNTY CONTINUING DISCLOSURE AGREEMENT

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CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (this “Agreement”), dated as of April _, 2016, is executed and delivered by Prince William County, Virginia (the “County”), connection with the issuance by the Industrial Development Authority of the County of Prince William, Virginia (the “Authority”) of its $______Prince William County Facilities Revenue and Refunding Bonds, Series 2016A (County Facilities Projects) (the “Bonds”) pursuant to a resolution adopted by the Board of Directors of the Authority on February, 2016 (the “Authorizing Resolution”) and under a Master Trust Agreement, dated as of April 1, 2016 as supplemented by a First Supplemental Trust Agreement, dated as of April 1, 2016 (collectively, the “Trust Agreement”), each between the Authority and U.S. Bank National Association, as trustee. The County agrees as follows:

ARTICLE I DEFINITIONS

Section 1.1. Definitions. The following terms used in this Agreement shall have the following respective meanings:

“Annual Financial Information” means, collectively, (1) the financial information and operating data with respect to the County for each fiscal year of the type described in Appendix A to the Official Statement under the captions “Assessed and Estimated Market Value of Taxable Property,” “Taxable Retail Sales,” “General Fund Revenues, Expenditures, Transfers and Changes in Fund Balance,” “General Fund Tax Revenues by Source,” “Property Tax Levies and Collections,” “Property Tax Rates per $100 of Assessed Value,” “General Fund Balances,” “Net Tax-Supported Debt Outstanding,” and “Debt Service by Fiscal Year,” and (2) information regarding any amendments to this Agreement required pursuant to Sections 4.2(c) and (d) of this Agreement. Annual Financial Information shall include Audited Financial Statements, if available, or Unaudited Financial Statements.

The descriptions contained in clause (1) above of financial information and operating data constituting Annual Financial Information are of general categories of financial information and operating data. Where such descriptions include information that no longer can be generated because the operations to which it related have been materially changed or discontinued, a statement to that effect shall be provided in lieu of such information.

“Audited Financial Statements” means the annual financial statements, if any, of the County, audited by such auditor as shall then be required or permitted by State law or the Resolution. Audited Financial Statements shall be prepared in accordance with GAAP for governmental units as prescribed by GASB; provided, however, that the County may from time to time, if required by federal or State legal requirements, modify the basis upon which its financial statements are prepared.

“Counsel” means Sidley Austin LLP, or other nationally recognized bond counsel or counsel expert in federal securities laws, in each case acceptable to the County.

“GAAP” means generally accepted accounting principles for governmental units as prescribed by the Governmental Accounting Standards Board (“GASB”).

“Material Event” means any of the following events with respect to the Bonds, whether relating to the County or otherwise:

(a) principal and interest payment delinquencies;

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(b) non-payment related defaults; if material;

(d) unscheduled draws on credit enhancements reflecting financial difficulties;

(e) substitution of credit or liquidity providers, or their failure to perform;

(f) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 570-TEB) or other material notices or determinations with respect to or events affecting the tax-exempt status of the Bonds;

(g) modifications to rights of holders, if material;

(h) bond calls, if material, and tender offers;

(i) defeasances;

(j) release, substitution, or sale of property securing repayment of the Bonds, if material;

(k) rating changes;

(l) bankruptcy, insolvency, receivership or similar event of the County; which event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the County 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 of business of the County, 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 of governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the County;

(m) the consummation of a merger, consolidation, or acquisition involving the County or the sale of all or substantially all of the assets of the County, 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 any such actions, other than pursuant to its terms, if material; and

(n) appointment of a successor or additional paying agent or the change of name of a paying agent, if material.

“Material Event Notice” means notice of a Material Event.

“MSRB” means the Municipal Securities Rulemaking Board established pursuant to the provisions of Section 15B(b)(l) of the Securities Exchange Act of 1934, as amended.

“Official Statement” means the “final official statement” with respect to the Bonds as defined in paragraph (f)(3) of the Rule.

“Repository” means The Electronic Municipal Market Access (“EMMA”) system administered by the MSRB. EMMA is recognized as a national Repository for purposes of the Rule.

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“Rule” means Rule 15c2-12 promulgated by the SEC under the Securities Exchange Act of 1934, as amended (17 CFR Part 240, § 240.15c2-12), as in effect on the date of this Agreement, including any official interpretations thereof issued either before or after the effective date of this Agreement that are applicable to this Agreement.

“SEC” means the United States Securities and Exchange Commission.

“State” means the Commonwealth of Virginia.

“Unaudited Financial Statements” has the same meaning as Audited Financial Statements, except the same shall not have been audited.

“Underwriter” means each winning bidder of the Bonds.

ARTICLE II THE UNDERTAKING

Section 2.1. Purpose. This Agreement shall constitute a written undertaking for the benefit of the holders of the Bonds, and is being executed and delivered solely to assist the Underwriter in complying with paragraph (b)(5) of the Rule.

Section 2.2. Annual Financial Information.

(a) The County shall provide Annual Financial Information for the County with respect to each fiscal year of the County, that is not later than March 31 after the end of any fiscal year (commencing with its fiscal year ending June 30, 2016), to the Repository.

(b) The County shall provide, in a timely manner, notice of any failure of the County to provide the Annual Financial Information by the date specified in subsection (a) above to the Repository.

Section 2.3. Audited Financial Statements. If not provided in conjunction with the Annual Financial Information by the dates required by Section 2.2(a) hereof, the County shall provide Audited Financial Statements, when and if available, to the Repository.

Section 2.4. Notices of Material Events.

(a) If a Material Event occurs, the County shall provide, in a timely manner not more than ten business days after the occurrence of such event, a Material Event Notice to the Repository.

(b) Upon any legal defeasance of the Bonds, the County shall provide notice of such defeasance to the Repository, which notice shall state whether the Bonds to be defeased have been defeased to maturity or to a redemption date and the timing of such maturity or redemption.

Section 2.5. Additional Disclosure Obligations. The County acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and SEC Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the County, and that under some circumstance compliance with this Agreement, without additional disclosures or other action, may not fully discharge all duties and obligations of the County under such laws.

Section 2.6. Additional Information. Nothing in this Agreement shall be deemed to prevent the County from disseminating any other information, using the means of dissemination set forth in this

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Agreement or any other means of communication, or including any other information in any Annual Financial Information or Material Event Notice, in addition to that which is required by this Agreement. If the County chooses to include any information in any Annual Financial Information or Material Event Notice in addition to that which is specifically required by this Agreement, the County shall have no obligation under this Agreement to update such information or include it in any future Annual Financial Information or Material Event Notice.

Section 2.7. No Previous Non-Compliance. The County represents that it has not failed to comply in any material respect with any previous undertaking in a written contract or agreement specified in paragraph (b)(5)(i) of the Rule.

ARTICLE III OPERATING RULES

Section 3.1. Reference to Other Documents. It shall be sufficient for purposes of Section 2.2 hereof if the County provides Annual Financial Information by specific reference to documents (i) either (1) provided to the Repository, or (2) filed with the SEC, or (ii) if such a document is an Official Statement, available from the Repository.

Section 3.2. Submission of Information. Annual Financial Information may be provided in one document or multiple documents, and at one time or in part from time to time.

Section 3.3. Material Event Notices. Each Material Event Notice shall be so captioned and shall prominently state the title, date and CUSIP numbers of the Bonds.

Section 3.4. Transmission of Information and Notices. Unless otherwise required by law and, in the County’s sole determination, subject to technical and economic feasibility, the County shall employ such methods of information and notice transmission as shall be requested or recommended by the herein-designated recipients of the County’s information and notices.

ARTICLE IV TERMINATION, AMENDMENT AND ENFORCEMENT

Section 4.1. Termination.

(a) The County’s obligations under this Agreement shall terminate upon legal defeasance, prior redemption or payment in full of all of the Bonds.

(b) This Agreement or any provision hereof shall be null and void in the event that the County (1) receives an opinion of Counsel, addressed to the County, to the effect that those portions of the Rule which require the provisions of this Agreement or any of such provisions do not or no longer apply to the Bonds, whether because such portions of the Rule are invalid, have been repealed, or otherwise, as shall be specified in such opinion, and (2) delivers copies of such opinion to the Repository.

Section 4.2. Amendment.

(a) This Agreement may be amended, by written agreement of the Director of Finance of the County, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (1) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law (including rules or regulations) or in

E-4 interpretations thereof, or a change in the identity, nature or status of the County or the type of business conducted thereby, (2) this Agreement as so amended would have complied with the requirements of the Rule as of the date of this Agreement, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, (3) the County shall have received an opinion of Counsel addressed to the County, to the same effect as set forth in clause (2) above and further to the effect that the amendment does not materially impair the interests of the holders of the Bonds and (4) the County delivers copies of such opinion and amendment to the Repository.

(b) In addition to subsection (a) above, this Agreement may be amended and any provision of this Agreement may be waived, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (1) an amendment to the Rule is adopted, or a new or modified official interpretation of the Rule is issued, after the effective date hereof that is applicable to this Agreement, (2) the County shall have received an opinion of Counsel to the effect that performance by the County under this Agreement as so amended or giving effect to such waiver, as the case may be, will not result in a violation of the Rule and (3) the County shall have delivered copies of such opinion and amendment to the Repository.

(c) To the extent any amendment to this Agreement results in a change in the types of financial information or operating data provided pursuant to this Agreement, the first Annual Financial Information provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change.

(d) If an amendment is made to the accounting principles to be followed in preparing financial statements, the Annual Financial Information for the year in which the change is made shall present, to the extent practicable, a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a qualitative and, to the extent reasonably feasible, quantitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information.

Section 4.3. Benefit; Third-Party Beneficiaries; Enforcement.

(a) The provisions of this Agreement shall constitute a contract with and inure solely to the benefit of the holders from time to time of the Bonds. Beneficial owners of Bonds shall be third-party beneficiaries of this Agreement.

(b) Except as provided in this subparagraph (b), the provisions of this Agreement shall create no rights in any person or entity. The obligations of the County to comply with the provisions of this Agreement shall be enforceable by the holders of the Bonds, including beneficial owners thereof. The rights of the holders of Bonds to enforce the provisions of this Agreement shall be limited solely to a right, by action in mandamus or for specific performance, to compel performance of the County’s obligations under this Agreement and the Resolution. In consideration of the third-party beneficiary status of beneficial owners of Bonds pursuant to subsection (a) of this Section 4.3, beneficial owners shall be deemed to be holders of Bonds for purposes of this subsection (b).

(c) Any failure by the County to perform in accordance with this Agreement shall not constitute a default under the Authorizing Resolution, the Trust Agreement or the Bonds and any rights and remedies provided by the Authorizing Resolution, the Trust Agreement or the Bonds upon the occurrence of a default shall not apply to any such failure.

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(d) This Agreement shall be construed and interpreted in accordance with the laws of the State, and any suits and actions arising out of this Agreement shall be instituted in a court of competent jurisdiction in the State; provided, however, that to the extent this Agreement addresses matters of federal securities laws, including the Rule, this Agreement shall be construed in accordance with such federal securities laws and official interpretations thereof.

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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first above written.

COUNTY OF PRINCE WILLIAM, VIRGINIA

By: Title: Director of Finance

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APPENDIX F

NOTICE OF SALE

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NOTICE OF SALE

$26,405,000*

INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PRINCE WILLIAM Prince William County Facilities Revenue and Refunding Bonds Series 2016A (County Facilities Projects)

Initial Maturity Schedule*

* Preliminary, subject to change F-1

BID PARAMETERS TABLE

INTEREST PRICING Dated Date: Date of Delivery Max. Aggregate Bid Price: 103% Anticipated Delivery Date: April 5, 2016 Min. Aggregate Bid Price: 122%

Interest Payments Dates: April 1 and October 1 High Coupon per Maturity 5.0%

10/1/16-10/1/26 – none Minimum Coupon per First Interest: 10/1/2016 10/1/2027-10/1/2035 Maturity 3.50%

Coupon Multiples: 1/8 or 1/20 of 1%

Split Coupons: Not Allowed PROCEDURAL Bids due March 1, 2016 PRINCIPAL Sale Date and Time: at 11:00 AM Prince William, Virginia Time On and after October 1, 2027, callable on October Electronic bids through Optional Redemption: Bid Submission: 1, 2026 and thereafter at PARITY Only par

Post-bid Principal 10% All or None? Yes Increases in Aggregate: Post-bid Principal 10% Bid Award Method: Lowest TIC Reductions in Aggregate:

Any two or more 1% of aggregate par consecutive maturities amount, as more fully Term Bonds: Good Faith Deposit: may be designated as term described on page 5, under bonds "Good Faith Deposit"

Changes to Initial Maturity Schedule

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Changes to Bid Maturity Schedule

Book-Entry System

The Bonds

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payments made by Prince William County, Virginia (the “County”), under an Installment Purchase Contract, dated as of April 1, 2016 between IDA and the County (the “Contract”) pursuant to which IDA will sell to the County IDA’s interests in (i) a project to construct a building to serve as a central district police station (the “Central District Police Station Project”) for the County, and (ii) certain projects (the “2005 COPs Projects”) refinanced by the County’s Refunding Lease Participation Certificates, Series 2005 (Prince William County Facilities) (the “2005 COPs”). The County’s obligation to make payments under the Contract in any fiscal year of the County is subject to and contingent upon the annual appropriation of funds by the Board of County Supervisors of the County for such purpose but is otherwise unconditional. Neither the faith and credit of the Commonwealth of Virginia, nor any political subdivision thereof (including IDA and the County), are pledged to the payment of the principal of or the interest or premium, if any, on the Bonds.

Term Bonds

Optional Redemption

Extraordinary Optional Redemption

Electronic Bidding and Bidding Procedures

Registration to Bid

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Bonds. By contracting with BiDCOMP/Parity a prospective bidder is not obligated to submit a bid in connection with the sale.

Disclaimer

Each prospective bidder shall be solely responsible to register to bid via BiDCOMP/Parity. Each qualified prospective bidder shall be solely responsible to make necessary arrangements to access BiDCOMP/Parity for purposes of submitting its bid in a timely manner and in compliance with the requirements of this Notice of Sale. Neither IDA nor BiDCOMP/Parity shall have any duty or obligation to undertake such registration to bid for any prospective bidder or to provide or assure such access to any qualified prospective bidder, and neither IDA nor BiDCOMP/Parity shall be responsible for a bidder’s failure to register to bid or for proper operation of, or have any liability for any delays or interruptions of, or any damages caused by, BiDCOMP/Parity. IDA is using BiDCOMP/Parity as a communication mechanism, and not as IDA’s agent, to conduct the electronic bidding for the Bonds. IDA is not bound by any advice and determination of BiDCOMP/Parity to the effect that any particular bid complies with the terms of this Notice of Sale and in particular the “Bid Specifications” hereinafter set forth. All costs and expenses incurred by prospective bidders in connection with their registration and submission of bids via BiDCOMP/Parity are the sole responsibility of the bidders; and IDA is not responsible, directly or indirectly, for any of such costs or expenses. If a prospective bidder encounters any difficulty in registering to bid or submitting, modifying or withdrawing a bid for the Bonds, it should telephone BiDCOMP/Parity and notify Public Financial Management, Inc., the County’s financial advisor, by telephone at (703) 741-0175. After receipt of bids is closed, IDA through BiDCOMP/Parity will indicate the apparent successful bidder. Such message is a courtesy only for viewers, and does not constitute the award of the Bonds. Each bid will remain subject to review by IDA to determine its true interest cost rate and compliance with the terms of this Notice of Sale.

Bidding Procedures

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Good Faith Deposit

Wire instructions for the Deposit are as follows: RBK U.S. Bank N.A. ABA 091000022 ACCT 173103781824 OBI #275038000 – IDA Pr. William Rev & Ref Bds, 2016A

Beneficiary Account Address: 777 E. Wisconsin Avenue Milwaukee, WI 53202-5300 Attn: Karalee K. Herrin Award of Bonds

Change of Bid Date and Closing Date; Other Changes to Notice of Sale

IDA reserves the right to postpone, from time to time, the date established for the receipt of bids and will undertake to announce any such change via TM3 (www.tm3.com).

IDA may change the scheduled delivery date for the Bonds by notice given in the same manner as set forth for a change in the date for the receipt of bids.

IDA reserves the right to otherwise change this Notice of Sale. IDA anticipates that it would communicate any such changes via TM3 by 4:00 p.m., Prince William, Virginia time on the date prior to

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the scheduled date for receipt of bids but no later than thirty minutes prior to the sale time on the scheduled date for receipt of bids.

Undertakings of the Successful Bidder

Delivery

The Bonds will be delivered on or about April 5, 2016 in New York, New York, at DTC against payment of the purchase price therefor (less the amount of the Deposit) in Federal Reserve funds.

CUSIP Numbers

Official Statements

Copies of the Preliminary Official Statement may be obtained without cost via the Internet at www.i-dealprospectus.com. The Preliminary Official Statement at its date was “deemed final” by IDA for purposes of SEC Rule 15c2-12 but is subject to revision, amendment and completion.

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successful bidder to deliver copies of such Official Statement to persons to whom such bidder initially sells the Bonds and to The Electronic Municipal Market Access System (“EMMA”) administered by the Municipal Securities Rulemaking Board (“MSRB”). The successful bidder will be required to acknowledge receipt of such Official Statement, to certify that it has made delivery of the Official Statement to EMMA and to acknowledge that IDA expects the successful bidder to deliver copies of such Official Statement to persons to whom such bidder initially sells the Bonds and to certify that the Bonds will only be offered pursuant to such Official Statement and only in states where the offer is legal. The successful bidder will be responsible to IDA in all respects for the accuracy and completeness of information provided by such successful bidder with respect to such reoffering.

Further information will be furnished upon application to Public Financial Management, Inc., at (703) 741-0175.

Reservation of Rights

The right to reject any or all bids and to waive any irregularity or informality in any bid is reserved.

INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PRINCE WILLIAM

By: Frank J. Mejia, Chairman

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Industrial Development Authority of the County of Prince William (Virginia) • Prince William County Facilities Revenue and Refunding Bonds Series 2016A (County Facilities Projects)