NEW ISSUEBOOK ENTRY ONLY RATINGS: Fitch: AA+ Standard & Poor's: AA (see "RATINGS" herein)

In the opinion of Hawkins Delafield & Wood LLP, New York, New York, Bond Counsel to the City, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, interest on the Series 2013A Bonds (i) is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986 (the "Code') and (ii) is not treated as a preference item in calculating the federal alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. See " TAX MATTERS Series 2013A Bonds In the opinion of Bond Counsel to the City, interest on the Series 2013B Bonds is included in gross income for federal income tax purposes. See "TAXMAITEPS - Series 2013B Bonds In the opinion of Bond Counsel to the City, under existing statutes of the Commonwealth of Virginia, interest on the Bonds is not includable in computing the Virginia income tax.

$24,580,000 $15,350,000 City of Roanoke, Virginia, City of Roanoke, Virginia, General Obligation Public Taxable General Obligation , Improvement and Refunding Bonds, Public Improvement ROANOKE Series 2013A Refunding Bonds, (Tax-Exempt) Series 2013B

Dated: Date of Delivery Due: As Shown On Inside Cover

This Official Statement has been prepared by the City of Roanoke to provide information on the above-referenced Series 2013A Bonds and Series 2013B Bonds (collectively, the "Bonds"). Selected information is presented on this cover page for the convenience of the reader. To make an informed decision regarding the Bonds, a vospective investor should read this Official Statement in its entirety.

Purpose The proceeds of the Series 2013A Bonds will be used to pay the costs of various public improvement projects of and for the City and to refund in advance of their stated maturities certain outstanding general obligation bonds of the City. The proceeds of the Series 2013B Bonds will be used to refund in advance of their stated maturities certain outstanding general obligation bonds of the City. (See "INTRODUCTION" on page 1 of this Official Statement.)

Issued Pursuant to The Bonds will be issued in accordance with the Public Finance Act of 1991, Title 15.2, Chapter 26. of the Code of Virginia, 1950. The City Council of the City adopted resolutions on May 21, 2012 and January 7, 2013 authorizing the issuance and sale of the Bonds.

Security The Bonds will be general obligations of the City, and the full faith and credit of the City will be irrevocably pledged to the punctual payment of the principal of and interest on the Bonds as they become due.

Interest Payment Dates January 15 and July 15, beginning January 15, 2014.

Record Dates June 30 and December 31, beginning December 31, 2013.

Redemption Provisions "DESCRIPTION OF THE BONDS - Optional Redemption" and "- Mandatory Sinking Fund Redemption".

Denomination $5,000 or integral multiples thereof.

Registration Book-entry only; Cede & Co., as nominee for The Depository Trust Company.

Registrar/Paying Agent Regions Bank, Richmond, Virginia.

Financial Advisor Public Financial Management, Inc., Arlington, Virginia

Bond Counsel Hawkins Delafield & Wood LLP, New York, New York

Counsel to the Underwriters Christian & Barton, L.L.P., Richmond, Virginia.

Issuer Contact Director of Finance, City of Roanoke, (540) 853-2821.

The Bonds are offered when, as and if issued, subject to approval of their validity by Hawkins Delafield & Wood LLP, New York, New York, Bond Counsel to the City, as described herein. Certain legal matters will be passed upon for the City by Daniel J. Callaghan, Esq., City Attorney. Certain legal matters will be passed upon for the Underwriters by their Counsel, Christian & Barton, L.L.P., Richmond, Virginia. It is expected that delivery of the Bonds to DTC will be made in New York, New York, on or about February 27, 2013.

RAYMOND JAMESIMORGAN KEEGAN BB&T CAPITAL MARKETS CITIGROUP (a division of BB&T Securities, LLC)

Dated: February 13, 2013 MATURITIES, AMOUNTS, INTEREST RATES, PRICES OR YIELDS AND CUSIP NUMBERS

General Obligation Public Improvement and Refunding Bonds, Series 2013A

Year Principal Interest CUSIP (July 15) Amount Rate Yield Numbers*

2014 $ 590,000 3.00% 0.26% 770077 Y41 2015 590,000 3.00 0.40 770077 Y58 2016 590,000 3.00 0.56 770077 Y66 2017 585,000 1.00 0.74 770077 Y74 2018 590,000 3.00 0.98 770077 Y82 2019 1,915.000 1.50 1.20 770077 Y90 2020 590,000 4.00 1.44 770077 Z24 2021 2,440,000 4.00 1.63 770077 Z32 2022 3,930,000 4.00 1.83 770077 Z40 2023 3,970,000 5.00 1.99 770077 Z57 2024 2,025,000 3.00 2.15** 770077 Z65 2025 2,045,000 5.00 2.19** 770077 Z73 2026 590,000 4.00 140** 770077 Z81 2027 590,000 4.00 2.48** 770077 Z99 2028 590,000 4.00 2.55** 770077 2A2 2029 590,000 4.00 2.61** 770077 2130

$2,360,000 5.00% Term Bonds Due July 15, 2033- Yield 2.63%** - CUSIP Number 770077 2C8*

**Yield to par call on July 15, 2023.

Taxable General Obligation Public Improvement Refunding Bonds, Series 2013B Year Principal Interest CUSIP (July 15) Amount Rate Price Numbers*

2014 $ 550,000 0.370% 100.00% 770077 2D6 2015 1,325,000 0.606 100.00 770077 2E4 2016 2,585,000 0.832 100.00 770077 2F1 2017 3,220,000 1.094 100.00 770077 2G9 2018 2,865,000 1.394 100.00 770077 21-17 2019 2,885,000 1.670 100.00 770077 2J3 2020 395,000 2.020 100.00 770077 2K0 2021 115,000 2.227 100.00 7700772L8 2022 105,000 2.477 100.00 770077 2M6 2023 90,000 2.627 100.00 770077 2N4 2024 1,215,000 2.727 100.00 770077 2P9

* CUSIP numbers have been assigned by an organization not affiliated with the City and are included solely for the convenience of the holders of the Bonds. The City is not responsible for the selection or uses of these CUSIP numbers, nor is any representation made as to their correctness on the Bonds or as indicated above. CITY OF ROANOKE, VIRGINIA

CITY COUNCIL

DAVID A. BOWERS, Mayor

COURT G. ROSEN, Vice Mayor

WILLIAM D. BESTPITCH

RAPHAEL E. FERRIS

SHERMAN P. LEA

ANITA J. PRICE

DAVID B. TRINKLE

CITY COUNCIL APPOINTED OFFICIALS

CHRISTOPHER P. MORRILL, City Manager

ANN H. SHAWVER, Director of Finance

DANIEL J. CALLAGHAN, City Attorney

STEPHANIE M. MOON, City Clerk

TROY A. HARMON, Municipal Auditor

HAWKINS DELAFIELD & WOOD LLP, Bond Counsel One Chase Manhattan Plaza, 42nd Floor New York, New York 10005 (212) 820-9438

PUBLIC FINANCIAL MANAGEMENT, INC., Financial Advisor 4350 North Fairfax Drive Suite 580 Arlington, Virginia 22203 (703) 741-0175

FOR ADDITIONAL INFORMATION Department of Finance, City of Roanoke 215 Church Avenue, S.W., Room 461 Roanoke, Virginia 24011 (540) 853-2821 [This Page Intentionally Left Blank] The Bonds will be exempt from registration under the Securities Act of 1933, as amended, as obligations of a political subdivision of the Commonwealth of Virginia. The Bonds will also be exempt from registration under the securities laws of the Commonwealth of Virginia. No broker, dealer, sales representative or any other person has been authorized by the City to give any information or to make any representation other than as contained in this Official Statement in connection with the offering described in it and, if given or made, such other information or representation must not be relied upon as having been authorized by the City or the Underwriter of the Bonds. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than those described on the cover and inside cover pages, nor shall there be any offer to sell, solicitation of an offer to buy or sale of such securities by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information contained in this Official Statement (which term shall be deemed to include all Appendices to this Official Statement and all documents incorporated herein by reference) has been obtained from the City and other sources deemed reliable. The information concerning DTC has been obtained from DTC. No representation is made, however, as to the accuracy or completeness of the information contained in this Official Statement, and nothing contained in this Official Statement is, or shall be relied upon as, a promise or representation by the City. This Official Statement is submitted in connection with the sale of the securities described in it and may not be reproduced or used, in whole or in part, for any other purpose. The information contained in this Official Statement is subject to change without notice and neither the delivery of this Official Statement nor any sale made by means of it shall, under any circumstances, create any implication that there have not been changes in the affairs of the City since the date of this Official Statement. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

TABLE OF CONTENTS Page

INTRODUCTION ...... I

DESCRIPTIONOF THE BONDS ...... 2

SECURITYFOR THE BONDS ...... 5

ESTIMATED SOURCES AND USES OF FUNDS ...... 5

PLANOF FINANCING ...... 5

PLANOF REFUNDING ...... 6

BONDHOLDER REMEDIES IN THE EVENT OF DEFAULT ...... 8

RATINGS ...... 9

CERTIFICATE CONCERNING OFFICIAL STATEMENT ...... 9

LITIGATION AND CONTINGENT LIABILITIES ...... 10

APPROVALOF LEGAL PROCEEDINGS ...... 10

TAXMATTERS ...... 10

VERIFICATION ...... 13

FINANCIALADVISOR ...... 14

CONTINUINGDISCLOSURE ...... 14

UNDERWRITING ...... 15

OTHERMATTERS ...... 15

AppendixA The City of Roanoke ...... A- 1

Appendix B City of Roanoke, Virginia, Organizational Chart, ...... B-I

Appendix C Comprehensive Annual Financial Report of the City for the Fiscal Year Ended June 30, 2012 ...... C-I

Appendix D Proposed Forms of Opinions of Bond Counsel ...... 0-1

Appendix E Description of The Depository Trust Company and the Book-Entry System ...... E-1

Appendix F Proposed Form of Continuing Disclosure Certificate ...... F-I [This Page Intentionally Left Blank] Official Statement Relating To The Issuance Of $39,930,000 City Of Roanoke, Virginia, General Obligation Public Improvement Bonds Consisting Of $24,580,000 $15,350,000 City of Roanoke, Virginia, City of Roanoke, Virginia, General Obligation Public Taxable General Obligation Improvement and Refunding Bonds, Public Improvement Series 2013A Refunding Bonds, (Tax-Exempt) Series 2013B

INTRODUCTION

The purpose of this Official Statement, which includes the cover page and the appendices hereto, is to furnish information in connection with the sale by the City of Roanoke, Virginia (the "City"), of $39,930,000 principal amount of General Obligation Public Improvement Bonds (the "Bonds"), consisting of $24,580,000 principal amount of City of Roanoke, Virginia, General Obligation Public Improvement and Refunding Bonds, Series 2013A (the "Series 2013A Bonds") and $15,350,000 principal amount of City of Roanoke, Virginia, Taxable General Obligation Public Improvement Refunding Bonds, Series 2013B (the "Series 2013B Bonds").

The Bonds will be issued in accordance with the Public Finance Act of 1991, Title 15.2, Chapter 26 of the Code of Virginia, 1950, as amended. The City Council of the City adopted resolutions on May 21, 2012 and January 7, 2013 authorizing the issuance and sale of the Bonds.

The Bonds were sold at negotiated sale on February 13, 2013, to Raymond James & Associates, Inc. ("Raymond James"), BB&T Capital Markets, a division of BB&T Securities, LLC and Citigroup Global Markets Inc. See "UNDERWRITING" herein.

A portion of the proceeds of the Series 2013A Bonds, net of the costs of issuance of the Series 2013A Bonds, will be applied to the financing of a portion of the costs of the acquisition, construction, reconstruction, improvement, extension, enlargement and equipping of the public improvement projects of and for the City set forth below:

Purpose Amount

Public Schools $2,000,000 Parks and Recreation 4,925,000 Digital Radio Project 2,110,000 Bridge Renovation Projects 1,100,000 Stormwater Management Projects 1,120,000 Civic Center Improvements 1,000,000 Curbs, Gutter and Sidewalk Improvements 500,000 Streetscape Improvements 400,000 Public Libraries 210,000 Total $13,365,000

A portion of the proceeds of the Series 2013A Bonds, net of the costs of issuance of the Series 2013A Bonds, will be applied to (i) the advance refunding of $7,425,000 outstanding principal amount of the City of Roanoke, Virginia, General Obligation Public Improvement Bonds, Series 2006A, dated February 8, 2006 and maturing on February 1 in each of the years 2020 and 2023 through 2026 (the "Refunded Series 2006A Bonds"), and (ii) the advance refunding of $5,770,000 outstanding principal amount of the City of Roanoke, Virginia, General Obligation Public Improvement Bonds, Series 2008, dated February 5, 2008 and maturing on February 1 in each of the years 2022 through 2024 (the "Refunded Series 2008 Bonds").

The proceeds of the Series 2013B Bonds, net of the costs of issuance of the Series 2013B Bonds, will be applied to (i) the advance refunding of $1,940,000 outstanding principal amount of the City of Roanoke, Virginia, General Obligation Public Improvement Refunding Bonds, Series 2003, dated July 1, 2003 and maturing on August 1 in each of the years 2015 and 2024 (the "Refunded Series 2003 Bonds"), (ii) the advance refunding of $9,135,000 outstanding principal amount of the City of Roanoke, Virginia, General Obligation Public Improvement Refunding Bonds, Series 2004, dated February 1, 2004 and maturing on October 1 in each of the years 2016 through 2019 (the "Refunded Series 2004 Bonds"), (iii) the advance refunding of $640,000 outstanding principal amount of the City of Roanoke, Virginia, General Obligation Public Improvement Refunding Bonds, Series 2004A dated March 1, 2004 and maturing on August 1, 2017 (the "Refunded Series 2004A Bonds"), (iv) the current refunding of $2,120,000 outstanding principal amount of the City of Roanoke, Virginia, Taxable General Obligation Public Improvement Bonds, Series 2005, dated December 15, 2005 and subject to mandatory sinking fund redemption on December 1 in each of the years 2013 through 2019 and to payment at maturity on December 1, 2020 (the "Refunded Series 2005 Bonds"), and (v) the advance refunding of $1,925,000 outstanding principal amount of the City of Roanoke, Virginia, General Obligation Public Improvement Bonds, Series 2006B, dated February 8, 2006 and maturing on February 1 in each of the years 2019 through 2025 (the "Refunded Series 2006B Bonds").

The Refunded Series 2003 Bonds, the Refunded Series 2004 Bonds, the Refunded Series 2004A Bonds, the Refunded Series 2005 Bonds, the Refunded Series 2006A Bonds, the Refunded Series 2006B Bonds and the Refunded Series 2008 Bonds are referred to collectively herein as the "Refunded Bonds". See "PLAN OF REFUNDING" herein.

DESCRIPTION OF THE BONDS

Interest, Maturities and Places of Payment

The Bonds of each series will be dated the date of their delivery, will bear interest from their date, payable on January 15, 2014 and semiannually on each January 15 and July 15 thereafter, at the rates per annum set forth on the inside cover page of this Official Statement. The Bonds of each series will mature on July 15 in each of the years and in the aggregate principal amounts set forth on the inside cover page of this Official Statement.

The record dates for the payment of the principal of and the interest on the Bonds of each series will be December 31, 2013 and each June 30 and December 31 thereafter.

Book-Entry Only Bonds; Registrar and Paying Agent

The Bonds will be issued in fully registered form in the denominations of $5,000 or integral multiples thereof and will be held by The Depository Trust Company ("DTC"), or its nominee, as securities depository with respect to the Bonds. Purchases of beneficial ownership interest in the Bonds will be made only in book-entry form and individual purchasers will not receive physical delivery of Bond certificates. Reference is made to Appendix E for a description of DTC and DTC's book-entry system.

The Registrar and Paying Agent for the Bonds will be Regions Bank, Richmond, Virginia.

Optional Redemption

Optional Redemption of Series 2013A Bonds

The Series 2013A Bonds on or before July 15, 2023 are not subject to optional redemption prior to their stated maturities. The Series 2013A Bonds maturing on and after July 15, 2024 (or portions thereof in installments of $5,000) are subject to redemption at the option of the City prior to their stated maturities, on or after July 15, 2023, in whole or in part from time to time on any date, in such order as may be determined by the City (except that

-2- if at any time less than all of the Series 2013A Bonds of a given maturity are called for redemption, the particular Series 2013A Bonds or portions thereof in installments of $5,000 of such maturity to be redeemed shall be selected by lot), at a redemption price equal to the principal amount of the Series 2013A Bonds to be redeemed, together with the interest accrued thereon to the date fixed for the redemption thereof.

"Make- Whole" Optional Redemption of Series 2013B Bonds

The Series 2013B Bonds (or portions thereof in installments of $5,000) are subject to redemption prior to their stated maturities at the option of the City, in whole or in part from time to time on any date, at the Make-Whole Redemption Price. The "Make-Whole Redemption Price" is the greater of:

(i) 100% of the principal amount of the Series 2013B Bonds to be redeemed; and

(ii) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date or dates of the Series 2013B Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which the Series 2013B Bonds are to be redeemed, discounted to the date on which the Series 2013B Bonds are to be redeemed on a semiannual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate, as defined below, plus 25 basis points;

plus, in each case, accrued interest on the Series 2013B Bonds to be redeemed to the date fixed for the redemption thereof.

"Treasury Rate" means, with respect to any redemption date for a particular Series 2013B Bond, the rate per annum, expressed as a percentage of the principal amount, equal to the semiannual equivalent yield to maturity or interpolated maturity of the Comparable Treasury Issue (defined below), assuming that the Comparable Treasury issue is purchased on the redemption date for a price equal to the Comparable Treasury Price (defined below), as calculated by the Designated Investment Banker (defined below).

"Comparable Treasury Issue" means, with respect to any redemption date for a particular Series 2013B Bond, the United States Treasury security or securities selected by the Designated Investment Banker that has an actual or interpolated maturity comparable to the remaining average life of the Series 2013B Bond to be redeemed, and that would be utilized in accordance with customary financial practice in pricing new issues of debt securities of comparable maturity to the remaining average life of the Series 2013B Bond to be redeemed.

"Comparable Treasury Price" means, with respect to any redemption date for a particular Series 2013B Bond, (i) if the Designated Investment Banker receives at least four Reference Treasury Dealer Quotations (defined below), the average of such quotations for such redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (ii) if the Designated Investment Banker obtains fewer than four Reference Treasury Dealer Quotations, the average of all such quotations.

"Designated Investment Banker" means one of the Reference Treasury Dealers appointed by the City.

"Reference Treasury Dealer" means each of the four firms, specified by the City from time to time, that are primary United States government securities dealers in the City of New York (each a "Primary Treasury Dealer"); provided, however, that if any of them ceases to be a Primary Treasury Dealer, the City will substitute another Primary Treasury Dealer.

"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date for a particular Series 2013B Bond, the average, as determined by the Designated Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Designated Investment Banker by such Reference Treasury Dealer at 3:30 P.M., New York City time, on the third Business Day preceding such redemption date.

Any Make-Whole Redemption Price of Series 2013B Bonds to be redeemed pursuant to the provisions described under "Make-Whole' Optional Redemption of Series 2013B Bonds" will be determined by an independent accounting firm, investment banking firm or financial advisor retained by the City to calculate such redemption price. The City may conclusively rely on the determination of such redemption price by such independent accounting firm, investment banking firm or financial advisor and will not be liable for such reliance.

Mandatory Sinking Fund Redemption

Mandatory Sinking Fund Redemption of Series 2013A Bonds

The Series 2013A Bonds maturing on July 15, 2033 are subject to mandatory sinking fund redemption on July 15 in each of the years 2030 through 2032 and to payment at maturity on July 15, 2033 in the principal amounts in each year set forth below, in the case of redemption with the particular Series 2013A Bond or Series 2013A Bonds or portions thereof to be redeemed to be selected by lot, upon payment of the principal amount of the Series 2013A Bonds to be redeemed, together with the interest accrued on the principal amount to be redeemed to the date fixed for the redemption thereof:

Year (July 15) Principal Amount 2030 $590,000 2031 590,000 2032 590,000 2033t 590,000

tStated maturity.

The City, at its option, may credit against such mandatory sinking fund redemption requirement the principal amount of any Series 2013A Bonds maturing on July 15, 2033 which have been purchased and cancelled by the City or which have been redeemed and not theretofore applied as a credit against such mandatory sinking fund redemption requirement.

Notice of Redemption

If any Bond (or any portion of the principal amount thereof in installments of $5,000) shall be called for redemption, notice of the redemption thereof, specifying the date, number and maturity of such Bond, the date and place or places fixed for its redemption and if less than the entire principal amount of such Bond is to be redeemed, that such Bond must be surrendered in exchange for the principal amount thereof to be redeemed and a new Bond or Bonds of such series issued equalling in principal amount that portion of the principal amount thereof not to be redeemed, shall be mailed not less than thirty (30) days prior to the date fixed for redemption by first class mail, postage prepaid, to the registered owner of such Bond at the address of such registered owner as it appears on the books of registry kept by the Registrar for the Bonds as of the close of business on the forty-fifth (45th) day next preceding the date fixed for redemption. If notice of the redemption of any Bond (or portion thereof in installments of $5,000) shall have been given as aforesaid, and payment of the principal amount of such Bond (or the portion of the principal amount thereof to be redeemed) and of the accrued interest payable upon such redemption shall have been duly made or provided for, interest on such Bond shall cease to accrue from and after the date so specified for the redemption thereof.

Any notice of optional redemption of the Bonds may state that such redemption will be conditional upon receipt by the Registrar and Paying Agent, on or prior to the date fixed for such redemption, of moneys sufficient to pay the principal of and interest on the Bonds to be redeemed and that if such moneys have not been so received, such notice will be of no force and effect and the Bonds will not be redeemed.

So long as the Bonds are in book-entry only form, any notice of redemption will be given only to DTC or its nominee. The City shall not be responsible for providing any beneficial owner of the Bonds with any notice of redemption.

-4- SECURITY FOR THE BONDS

The Bonds are general obligations of the City, and the full faith and credit of the City are irrevocably pledged to the punctual payment of the principal of and interest on the Bonds as the same become due. In each year while the Bonds, or any of them, remain outstanding and unpaid, the City Council is authorized and required to levy and collect annually, at the same time and in the same manner as other taxes in the City are assessed, levied and collected, a tax upon all taxable property within the City, over and above all other taxes, authorized or limited by law and without limitation as to rate or amount, sufficient to pay when due the principal of and interest on the Bonds to the extent other funds of the City are not lawfully available and appropriated for such purpose.

ESTIMATED SOURCES AND USES OF FUNDS

The following table summarizes the estimated sources and uses of proceeds of the Bonds:

Series 2013A Series 2013B Bonds Bonds Total Sources Of Funds:

Bond Proceeds Par Amount of Bonds $24,580,000.00 $15,350,000.00 $39,930,000.00 Reoffering Premium 4,131,032.90 -0- 4,131,032.90 $28,711,032.90 $15,350,000.00 $44,061,032.90 Other Sources of Funds Equity Contribution* -0- 1,827.349.03 1.827,349.03 Total Sources $28,711,032.90 $17,177,349.03 $45,888,381.93

Uses Of Funds:

Deposit to Escrow Fund $15,082,649.63 $17,013,307.13 $32,095,956.76 Proceeds for City and School Projects 12,365,000.00 -0- 12,365,000.00 Proceeds for Civic Center Project 1,000,000.00 -0- 1,000,000.00 Costs of Issuance 188,667.13 117,976.64 306,643.77 Total Underwriter's Discount 74,716.14 46,065.26 120,781.40 Total Uses $28,711,032.90 $17,177,349.03 $45,888,381.93

*Equity contribution from the Western Virginia Water Authority.

PLAN OF FINANCING

A portion of the proceeds of the Series 2013A Bonds, net of the costs of issuance of the Series 2013A Bonds, will be applied to finance the costs of the acquisition, construction, reconstruction, improvement, extension, enlargement and equipping of the public school improvement projects, parks and recreation improvement projects, the digital radio project (comprised of an 800 MHz radio system for public safety purposes), bridge renovation projects, stormwater management projects, renovations to the Roanoke Civic Center, curb, gutter and sidewalk improvement projects, streetscape improvement projects and public library improvement projects.

-5- PLAN OF REFUNDING

A portion of the proceeds of the Series 2013A Bonds, net of the costs of issuance of the Series 2013A Bonds, will be applied to advance refund the Refunded Series 2006A Bonds, which are to be called for redemption and redeemed on February 1, 2016, and the Refunded Series 2008 Bonds, which are to be called for redemption and redeemed on February 1, 2018. Such proceeds will be deposited with Regions Bank, as Escrow Agent under an Escrow Deposit Agreement, dated February 27, 2013 (the "Escrow Deposit Agreement"), by and between the City and the Escrow Agent. Such proceeds will be invested in Government Securities (as defined in the Escrow Deposit Agreement). The Government Securities will mature and bear interest payable at times and in amounts sufficient to pay (i) the interest, when due, on the Refunded Series 2006A Bonds to February 1, 2016, (ii) the redemption prices of the Refunded Series 2006A Bonds upon the redemption thereof on February 1, 2016, (iii) the interest, when due, on the Refunded Series 2008 Bonds to February 1, 2018 and (iv) the redemption prices of the Refunded Series 2008 Bonds upon the redemption thereof on February 1, 2018. The City is undertaking the refunding of the Refunded Series 2006A Bonds and the Refunded Series 2008 Bonds described above in order to reduce the City's annual debt service expenditures.

The proceeds of the Series 2013B Bonds, net of the costs of issuance of the Series 2013B Bonds, will be applied to advance refund the Refunded Series 2003 Bonds, which are to be called for redemption and redeemed on August 1, 2013, to advance refund the Refunded Series 2004 Bonds, which are to be called for redemption and redeemed on October 1, 2014, to advance refund the Refunded Series 2004A Bonds, which are to be called for redemption and redeemed on August 1, 2014, to current refund the Refunded Series 2005 Bonds, which are to be called for redemption and redeemed on March 29, 2013, and to advance refund the Series 2006B Bonds, which are to be called for redemption and redeemed on February 1, 2016. Such proceeds will be deposited with the Escrow Agent under the Escrow Deposit Agreement. Such proceeds will be invested in Government Securities. The Government Securities will mature and bear interest payable at times and in amounts sufficient to pay (i) the interest, when due, on the Refunded Series 2003 Bonds to August 1, 2013, (ii) the redemption prices of the Refunded Series 2003 Bonds upon the redemption thereof on August 1, 2013, (iii) the interest when due on the Refunded Series 2004 Bonds to October 1, 2014, (iv) the redemption prices of the Refunded Series 2004 Bonds upon the redemption thereof on October 1, 2014, (v) the interest, when due, on the Refunded Series 2004A Bonds to August 1, 2014, (vi) the redemption prices of the Refunded Series 2004A Bonds upon the redemption thereof on August 1, 2014, (vii) the interest, when due, on the Refunded Series 2005 Bonds to March 29, 2013, (viii) the principal amount of the Refunded Series 2005 Bonds upon the redemption thereof on March 29, 2013, (ix) the interest, when due, on the Refunded Series 2006B Bonds to February 1, 2016, and (x) the redemption prices of the Refunded Series 2006B upon the redemption thereof on February 1, 2016. The City is undertaking the refunding of the Refunded Series 2003 Bonds, the Refunded Series 2004 Bonds, the Refunded Series 2004A Bonds, the Refunded 2005 Bonds and the Refunded Series 2006B Bonds described above in order to reduce the City's annual debt service expenditures.

The Refunded Bonds are more fully described below:

General Obligation Public Improvement Refunding Bonds, Series 2003, Dated July 1, 2003

Year of Maturity Principal Interest Redemption Redemption CUSIP (August 1) Amount Rate Date Price Numbers

2015 $ 800,000 3.25% August 1, 2013 100% 770077 W137 2024 1,140,000 4.00 August 1, 2013 100 770077 Y33 $1,940,000

-6- General Obligation Public Improvement Refunding Bonds, Series 2004, Dated February 1, 2004

Year of Maturity Principal Interest Redemption Redemption CUSIP (October 1) Amount Rate Date Price Numbers

2016 $2,130,000 5.00% October 1, 2014 101% 770077XA8 2017 2,235,000 5.00 October 1, 2014 101 770077 X136 2018 2,335,000 4.00 October 1, 2014 101 770077XC4 2019 2.435.000 4.00 October 1, 2014 101 770077 X132 $9,135,000

General Obligation Public Improvement Refunding Bonds, Series 2004A, Dated March 1, 2004

Year of Maturity Principal Interest Redemption Redemption CUSIP (August 1) Amount Rate Date _ice Numbers

2017 $640,000 3.625% August 1, 2014 101% 770077XT7

Taxable General Obligation Public Improvement Bonds, Series 2005, Dated December 15, 2005

Year of Maturity Principal Interest Redemption Redemption (December 1) Amount Rate Date Price

2013 $ 265,000* 6.25% March 29, 2013 100% 2014 265,000* 6.25 March 29,2013 100 2015 265,000* 6.25 March 29, 2013 100 2016 265,000* 6.25 March 29,2013 100 2017 265,000* 6,25 March 29, 2013 100 2018 265,000* 6.25 March 29, 2013 100 2019 265,000* 6.25 March 29,2013 100 2020 265.000** 6.25 March 29,2013 100 $2,120,000

* Mandatory sinking fund installment. **Final maturity.

General Obligation Public Improvement Bonds, Series 2006A, Dated February 8, 2006

Year of Maturity Principal Interest Redemption Redemption CUSIP (February 1) Amount Rate Date Price Numbers

2020 $1,390,000 4.00% February 1, 2016 100% 770077 ZU2 2023 1,465,000 4.20 February 1, 2016 100 770077 ZX6 2024 1,495,000 4.20 February 1, 2016 100 770077 ZY4 2025 1,525,000 4.25 February 1, 2016 100 770077 ZZ1 2026 1,550,000 4.25 February 1, 2016 100 770077 A21 $7,425,000

-7- General Obligation Public Improvement Bonds, Series 2006B, Dated February 8, 2006

Year of Maturity Principal Interest Redemption Redemption CUSIP (February 1) Amount Rate Date Price Numbers

2019 $ 275,000 5.00% February 1, 2016 100% 770077B79 2020 275,000 5.00 February 1, 2016 100 770077B87 2021 275,000 5.00 February 1, 2016 100 770077B95 2022 275,000 5.00 February 1, 2016 100 770077 C29 2023 275,000 5.00 February 1, 2016 100 770077 C37 2024 275,000 4.50 February 1, 2016 100 770077 C45 2025 275.000 4.60 February 1, 2016 100 770077 C52 $1,925,000

General Obligation Public Improvement Bonds, Series 2008, Dated February 5, 2008

Year of Maturity Principal Interest Redemption Redemption CUSIP (February 1) Amount Rate Date Price Numbers

2022 $1,915,000 4.50% February 1, 2018 100% 770077 F67 2023 1,925,000 4.50 February 1, 2018 100 770077 F75 2024 1,93,000 4.50 February 1, 2018 100 770077 F83 $5,770,000

BONDHOLDER REMEDIES IN THE EVENT OF DEFAULT

Section 15.2-2659 of the Code of Virginia, 1950, provides that, upon the affidavit of any owner or any paying agent of any general obligation bonds of a political subdivision of the Commonwealth of Virginia (including the City) in default as to payment of principal or interest, the Governor shall immediately make a summary investigation and if such default is established to the Governor's satisfaction, the Governor shall immediately make an order directing the State Comptroller to withhold all further payment to the political subdivision of all funds, or any part thereof, appropriated and payable by the Commonwealth to the political subdivision so in default for any and all purposes until such default is cured. The Governor shall, while such default continues, direct the payment of all such sums so withheld, or so much thereof as shall be necessary, to the owners of such bonds so in default, or the paying agent therefor, so as to cure, or to cure insofar as possible, the default on such bonds and the interest thereon. The Governor shall, as soon as practicable, give notice of such default and of the availability of funds with the paying agent or with the State Comptroller by publication one time in a daily newspaper of general circulation in the City of Richmond and, in the case of registered bonds, by mail, to the registered owners of the Bonds. The State Comptroller advises that to date no order to withhold funds pursuant to Section 15.2-2659 has ever been issued. Although the provisions of Section 15.2-2659 have never been ruled on by a Virginia court, the Attorney General of Virginia has ruled that appropriated funds can be withheld by the Commonwealth pursuant to that section. In the fiscal year ended June 30, 2012, total direct appropriations paid by the Commonwealth to the City amounted to approximately $66 million.

Neither the Bonds, nor the proceedings with respect thereto, specifically provide any remedies which would be available to owners of the Bonds if the City defaults in the payment of principal of or interest on the Bonds, nor do they contain any provisions for the appointment of a trustee to enforce the interests of the owners of the Bonds upon the occurrence of such default. Upon any default in the payment of the principal of or interest on a Bond, the owner of such Bond could, among other things, seek to obtain a writ of mandamus from a court of competent jurisdiction requiring the City Council to assess, levy and collect an ad valorem tax, unlimited as to rate or amount, upon all property in the City subject to taxation by the City, sufficient to pay the principal of and interest

-8- on the Bonds as the same shall come due and otherwise to observe the covenants contained in the Bonds and the proceedings with respect thereto. The mandamus remedy, however, may be impracticable and difficult to enforce. Further, the right to enforce payment of the principal of or interest on the Bonds may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws and equitable principles, which may limit the specific enforcement of certain remedies.

Although Virginia law currently does not authorize such action, future legislation may enable the City to file a petition for relief under the United States Bankruptcy Code (the "Bankruptcy Code") if it is insolvent or unable to pay its debts. Bankruptcy proceedings by the City could have adverse effects on bondholders including (a) delay in the enforcement of their remedies, (b) subordination of their claims to those supplying goods and services to the City after the initiation of bankruptcy proceedings and to the administrative expenses of bankruptcy proceedings and (c) imposition without their consent of a reorganization plan reducing or delaying payment of the Bonds. The Bankruptcy Code contains provisions intended to ensure that, in any reorganization plan not accepted by at least a majority of a class of creditors such as the holders of general obligation bonds, such creditors will have the benefit of their original claim or the "indubitable equivalent". The effect of these and other provisions of the Bankruptcy Code cannot be predicted and may be significantly affected by judicial interpretation.

The City has never defaulted in the payment of either principal of or interest on any indebtedness.

RATINGS

Fitch Ratings and Standard & Poor's Ratings Services have assigned the Bonds the initial ratings set forth on the cover page of this Official Statement. An explanation of the significance of such ratings may only be obtained from the rating agency furnishing the same. The City furnished to such rating agencies the information contained in this Official Statement and certain publicly available materials and information about the City. 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 either or all such rating agencies if, in the judgment of either or all, circumstances so warrant. Such circumstances may include, without limitation, changes in or unavailability of information relating to the City. Any such downward revision or withdrawal of any such ratings may have an adverse effect on the market price of the Bonds.

Due to the ongoing uncertainty regarding the debt of the United States of America, including, without limitation, the general economic conditions in the country, and other political and economic developments that may affect the financial condition of the United States government, the United States debt limit, and the bond ratings of the United States and its instrumentalities, obligations issued by State and local governments, such as the Bonds, could be subject to a rating downgrade. Furthermore, if a significant default or other financial crisis should occur in the affairs of the United States or of any of its agencies or political subdivisions, then such event could also adversely affect the market for and ratings, liquidity, and market value of outstanding debt obligations, such as the Bonds.

CERTIFICATE CONCERNING OFFICIAL STATEMENT

The City will furnish a certificate dated as of the date of delivery of the Bonds, signed by the City Manager and the Director of Finance, stating that the descriptions and statements contained in the Official Statement on the date of sale and on the date of delivery of the Bonds were and are, to the best of their knowledge, true and correct in all material respects and did not and do not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. In such certificate the City Manager and the Director of Finance may state that they did not independently verify the information indicated in the Official Statement as having been obtained or derived from sources other than the City but that they have no reason to believe such information is not accurate. Such certificate will also state that from the date of sale of the Bonds to the date of delivery of the Bonds there has been no material adverse change in the condition of the City (financial or otherwise) which affects the City's ability to pay principal of and interest on the Bonds or any other general obligation bonds of the City.

-9- LITIGATION AND CONTINGENT LIABILITIES

The City Attorney reports that there is no litigation pending or, to the knowledge of the City Attorney, threatened affecting the issuance of the Bonds or the security therefor. The City is a defendant in certain litigation arising in the ordinary course of operations and is subject to certain contingent liabilities, including the litigation and contingent liabilities described in Note 18 to the City's financial statements included in Appendix C to this Official Statement. The City Attorney has reviewed the status of such litigation and is of the opinion that foreseeable liability, if any, in all of them would not have a material adverse effect upon the financial condition of the City. The City Attorney is also of the opinion that such litigation will not affect the validity of the Bonds or the ability of the City to levy ad valorem taxes for payment of the principal of and interest on the Bonds.

APPROVAL OF LEGAL PROCEEDINGS

Certain legal matters relating to the authorization and validity of the Bonds are subject to the approval of Hawkins Delafield & Wood LLP, New York, New York, Bond Counsel to the City. The opinions of Bond Counsel approving the Bonds will be furnished at the expense of the City upon delivery of the Bonds and will be printed on the Bonds. The proposed forms of the opinions of Bond Counsel are set forth as Appendix D to this Official Statement. Bond Counsel has not prepared this Official Statement and has not verified its accuracy, completeness or fairness. Accordingly, Bond Counsel will express no opinion of any kind as to the Official Statement, and its opinion will be limited to matters relating to the authorization and validity of the Bonds and to the status of interest on the Bonds for purposes of federal and Commonwealth of Virginia income taxation as described herein.

Certain legal matters will be passed upon for the City by Daniel J. Callaghan, Esq., City Attorney. Certain legal matters will be passed upon for the Underwriters by their counsel, Christian & Barton, L.L.P., Richmond, Virginia.

TAX MATTERS

Series 2013A Bonds

The information under this section applies solely to the Series 2013A Bonds.

Opinion of Bond Counsel

In the opinion of Hawkins Delafield & Wood LLP, New York, New York, Bond Counsel to the City, under existing statutes and court decisions and assuming compliance with certain tax covenants described herein, interest on the Series 2013A Bonds (i) is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986 (the "Code") and (ii) is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering its opinions, Bond Counsel has relied on certain representations, certifications of fact and statements of reasonable expectations made by the City in connection with the Series 2013A Bonds, and Bond Counsel has assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Series 2013A Bonds from gross income under Section 103 of the Code.

In addition, in the opinion of Bond Counsel to the City, under existing statutes of the Commonwealth of Virginia, interest on the Series 2013A Bonds is not includable in computing the Virginia income tax.

Bond Counsel expresses no opinion regarding any other federal or State tax consequences with respect to the Series 2013A Bonds. Bond Counsel renders its opinions under existing statutes and court decisions as of the issue date, and assumes no obligation to update, revise or supplement its opinions to reflect any action thereafter taken or not taken, or any facts or circumstances that may thereafter come to its attention, or changes in law or in

-10- interpretations thereof that may thereafter occur, or for any other reason. Bond Counsel expresses no opinion on the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for federal income tax purposes of interest on the Series 2013A Bonds, or under State and local tax law.

Certain Ongoing Federal Tax Requirements and Covenants

The Code establishes certain ongoing requirements that must be met subsequent to the issuance and delivery of the Series 2013A Bonds in order that interest on the Series 2013A Bonds be and remain excluded from gross income under Section 103 of the Code. These requirements include, but are not limited to, requirements relating to use and expenditure of gross proceeds of the Series 2013A Bonds, yield and other restrictions on investments of gross proceeds and the arbitrage rebate requirement that certain excess earnings on gross proceeds be rebated to the federal government. Noncompliance with such requirements may cause interest on the Series 2013A Bonds to become included in gross income for federal income tax purposes retroactive to their issue date, without regard to the date on which such noncompliance occurs or is discovered. The City has covenanted to comply with certain applicable requirements of the Code to assure the exclusion of interest on the Series 2013A Bonds from gross income under Section 103 of the Code.

Certain Collateral Federal Tax Consequences

The following is a brief discussion of certain collateral federal income tax matters with respect to the Series 2013A Bonds. It does not purport to address all aspects of federal taxation that may be relevant to a particular owner of a Series 2013A Bond. Prospective investors, particularly those who may be subject to special rules, are advised to consult their own tax advisors regarding the federal tax consequences of owning and disposing of the Series 2013A Bonds.

Prospective owners of the Series 2013A Bonds should be aware that the ownership of such obligations may result in collateral federal income tax consequences to various categories of persons, such as corporations (including S corporations and foreign corporations), financial institutions, property and casualty and life insurance companies, individual recipients of Social Security and railroad retirement benefits, individuals otherwise eligible for the earned income tax credit and taxpayers deemed to have incurred or continued indebtedness to purchase or carry obligations the interest on which is not included in gross income for federal income tax purposes. Interest on the Series 2013A Bonds may be taken into account in determining the tax liability of foreign corporations subject to the branch profits tax imposed by Section 884 of the Code.

Original Issue Premium

In general, if an owner acquires a Series 2013A Bond for a purchase price (excluding accrued interest) or otherwise at a tax basis that reflects a premium over the sum of all amounts payable on the Series 2013A Bond after the acquisition date (excluding certain "qualified stated interest" that is unconditionally payable at least annually at prescribed rates), that premium constitutes "premium" on that Bond (a "Premium Bond"). In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the premium over the remaining term of the Premium Bond, based on the owner's yield over the remaining term of the Premium Bond, determined based on constant yield principles (in certain cases involving a Premium Bond callable prior to its stated maturity date, the amortization period and yield may be required to be determined on the basis of an earlier call date that result in the lowest yield on such Bond). An owner of a Premium Bond must amortize the premium by offsetting the qualified stated interest allocable to each interest accrual period under the owner's regular method of accounting against the premium allocable to that period. In the case of a tax-exempt Premium Bond, if the premium allocable to an accrual period exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss. Under certain circumstances, the owner of a Premium Bond may realize a taxable gain upon disposition of the Premium Bond even though it is sold or redeemed for an amount less than or equal to the owner's original acquisition cost. Owners of any Premium Bonds should consult their own tax advisors regarding the treatment of premium for federal income tax purposes, including various special rules relating thereto, and State and local tax consequences, in connection with the acquisition, ownership, amortization of premium on, sale, exchange or other disposition of Premium Bonds.

-11- Information Reporting and Backup Withholding

Information reporting requirements apply to interest on tax-exempt obligations, including the Series 2013A Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the payor with, a Form W-9, "Request for Taxpayer Identification Number and Certification", or if the recipient is one of a limited class of exempt recipients. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to "backup withholding", which means that the payor is required to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a "payor" generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient.

If an owner purchasing a Series 2013A Bond through a brokerage account has executed a Form W-9 in connection with the establishment of such account, as generally can be expected, no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Series 2013A Bonds from gross income for federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner's federal income tax once the required information is furnished to the Internal Revenue Service.

Miscellaneous

Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the federal or State level, may adversely affect the tax-exempt status of interest on the Series 2013A Bonds under federal or State law or otherwise prevent beneficial owners of the Series 2013A Bonds from realizing the full current benefit of the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed in the future, or enacted) and such decisions could affect the market price or marketability of the Series 2013A Bonds.

Prospective purchasers of the Series 2013A Bonds should consult their own tax advisors regarding the foregoing matters.

Series 2013B Bonds

The information under this section applies solely to the Series 2013B Bonds.

In the opinion of bond counsel to the City, interest on the Series 2013B Bonds is included in gross income for federal income tax purposes pursuant to the Code.

In addition, in the opinion of Bond Counsel to the City, under existing statutes of the Commonwealth of Virginia, interest on the Series 2013B Bonds is not includable in computing the Virginia income tax.

The following discussion is a brief summary of the principal United States federal income tax consequences of the acquisition, ownership and disposition of Series 2013B Bonds by original purchasers of the Series 2013B Bonds who are "U.S. Holders", as defined herein. This summary (i) is based on certain relevant provisions of the Code under existing law is subject to change at any time, possibly with retroactive effect, (ii) assumes that the Series 2013B Bonds will be held as "capital assets" and (iii) does not discuss all of the United States federal income tax consequences that may be relevant to a holder in light of its particular circumstances or to holders subject to special rules, such as insurance companies, financial institutions, tax-exempt organizations, dealers in securities or foreign currencies, persons holding the Series 2013B Bonds as a position in a "hedge" or "straddle", or holders whose functional currency (as defined in Section 985 of the code) is not the United States dollar, or holders who acquire Series 2013B Bonds in the secondary market.

Holders of Series 2013B Bonds should consult with their own tax advisors concerning the United States federal income tax and other consequences with respect to the acquisition, ownership and disposition of the Series 2013B Bonds as well as any tax consequences that may arise under the laws of any State, local or foreign tax jurisdiction.

-12- Disposition and Defeasance

Generally, upon the sale, exchange, redemption or other disposition (which would include a legal defeasance) of a Series 2013B Bond, a holder will recognize taxable gain or loss in an amount equal to the difference between the amount realized (other than amounts attributable to accrued interest not previously includable in income) and such holder's adjusted tax basis in the Series 2013B Bond.

The City may cause the deposit of moneys or securities in escrow in such amount and manner as to cause the Series 2013B Bonds to be deemed to be no longer outstanding (a "defeasance"). For federal income tax purposes, such defeasance could result in a deemed exchange under Section 1001 of the Code and a recognition by such owner of taxable income or loss, without any corresponding receipt of moneys. In addition, the character and timing of receipt of payments on the Series 2013B Bonds subsequent to any such defeasance could also be affected.

Backup Withholding and Information Reporting

In general, information reporting requirements will apply to non-corporate holders with respect to payments of principal, payments of interest and the accrual of OlD on a Series 2013B Bond and the proceeds of the sale of a Series 2013B Bond before maturity within the United States. Backup withholding may apply to holders of Series 2013B Bonds under Section 3406 of the Code. Any amounts withheld under the backup withholding rules from a payment to a beneficial owner, and which constitutes over-withholding, would be allowed as a refund or a credit against such beneficial owner's United States federal income tax provided the required information is furnished to the Internal Revenue Service.

US. Holders

The term "U.S. Holder" means a beneficial owner of a Series 2013B Bond that is: (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or of any political subdivision thereof, (iii) an estate the income of which is subject to United States federal income taxation regardless of its source or (iv) a trust whose administration is subject to the primary jurisdiction of a United States court and which has one or more United States fiduciaries who have the authority to control all substantial decisions of the trust.

IRS Circular 230 Disclosure

The advice under "TAX MATTERS - Series 2013B Bonds" concerning certain income tax consequences of the acquisition, ownership and disposition of the Series 2013B Bonds was written to support the marketing of the Series 2013B Bonds. To ensure compliance with requirements imposed by the Internal Revenue Service, Bond counsel to the city informs you that (i) any federal tax advice contained in this Official Statement (including any attachments) or in writings furnished by Bond Counsel to the City is not intended to be used, and cannot be used by any bondholder, for the purpose of avoiding penalties that may be imposed on the bondholder under the Code and (ii) the bondholder should seek advice based on the bondholder's particular circumstances from an independent tax advisor.

VERIFICATION

The Arbitrage Group, Inc. will verify certain mathematical computations as to the sufficiency of the moneys and investments deposited under the Escrow Deposit Agreement (i) to pay, when due, the interest on the Refunded Series 2006A Bonds from the date the Series 2013A Bonds are issued to February 1, 2016 and to pay the redemption prices of the Refunded Series 2006A Bonds upon the redemption thereof on February 1, 2016, (ii) to pay, when due, the interest on the Refunded Series 2008 Bonds from the date the Series 2013A Bonds are issued to February 1, 2018 and to pay the redemption prices of the Refunded Series 2008 Bonds upon the redemption thereof on February 1, 2018, (iii) to pay, when due, the interest on the Refunded Series 2003 Bonds from the date the Series 2013B Bonds are issued to August 1, 2013 and to pay the redemption prices of the Refunded Series 2003 Bonds upon the redemption thereof on August 1, 2013, (iv) to pay, when due, the interest on the Refunded Series 2004

-13- Bonds from the date the Series 2013B Bonds are issued to October 1, 2014 and to pay the redemption prices of the Refunded Series 2004 Bonds upon the redemption thereof on October 1, 2014, (v) to pay, when due, the interest on the Refunded Series 2004A Bonds from the date the Series 2013B Bonds are issued to August 1, 2014 and to pay the redemption prices of the Refunded Series 2004A Bonds upon the redemption thereof on August 1, 2014, (vi) to pay, when due, the interest on the Refunded Series 2005 Bonds from the date the Series 2013B Bonds are issued to March 29, 2013 and to pay the redemption prices of the Refunded Series 2005 Bonds upon the redemption thereof on March 29, 2013, and (vii) to pay, when due, the interest on the Refunded Series 2006B Bonds from the date the Series 2013B Bonds are issued to February 1, 2016 and to pay the redemption prices of the Refunded Series 2006B Bonds upon the redemption thereof on February 1, 2016. See "PLAN OF REFUNDING".

FINANCIAL ADVISOR

Public Financial Management, Inc., Arlington, Virginia, is employed as financial advisor to the City in connection with the issuance of the Bonds. The Financial Advisor is a financial advisory, investment management and consulting organization and is not engaged in the business of underwriting municipal securities.

CONTINUING DISCLOSURE

The City will execute and deliver to the purchasers of the Bonds a Continuing Disclosure Certificate, the form of which is set forth as Appendix F to this Official Statement, pursuant to which the City will covenant and agree, for the benefit of the holders of the Bonds, consistent with the Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, to provide to the Municipal Securities Rulemaking Board (the "MSRB") annual financial information and operating data for the City, including audited financial statements of the City, within nine (9) months after the end of each fiscal year beginning on and after July 1, 2012, and, in a timely manner not in excess of ten (10) business days after the occurrence thereof, notices of certain events with respect to the Bonds, whether relating to the City or otherwise, including (i) principal and interest payment delinquencies, (ii) non-payment related defaults, if material, (iii) unscheduled draws on debt service reserves reflecting financial difficulties, (iv) unscheduled draws on credit enhancements reflecting financial difficulties, (v) substitution of credit or liquidity providers, or their failure to perform, (vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 -TEB) or other material notices of determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds, (vii) modifications to rights of Bondholders, if material, (viii) Bond calls, if material, and tender offers, (ix) defeasances, (x) release, substitution or sale of property securing repayment of the Bonds, if material, (xi) rating changes, (xii) bankruptcy, insolvency, receivership or similar event of the City, (xiii) the consummation of a merger, consolidation or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material, and (xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material; and, in a timely manner, notice to the MSRB of any failure of the City to provide required annual financial information referred to above to the MSRB. The continuing obligation of the City to provide annual financial information and notices referred to above will terminate with respect to the Bonds when the Bonds are no longer outstanding. Any failure by the City to comply with the foregoing will not constitute a default with respect to the Bonds.

In the Continuing Disclosure Certificate, the City represents that, with the exception disclosed in the next sentence, in the five previous years, 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 Rule 15c2-12. The City, having been unable to determine whether there was a timely filing of the City's annual financial information for its fiscal year ended June 30, 2010 as required by written undertakings made by the City pursuant to Rule 15c2-12, filed such annual financial information for such fiscal year with the MSRB via the MSRB's Electronic Municipal Market Access ("EMMA") system on June 29, 2012, in order to ensure that such annual financial information for such fiscal year is on file and available to the public via the EMMA system.

-14- UNDERWRITING

The Bonds are being purchased by Raymond James & Associates, Inc., BB&T Capital Markets, a division of BB&T Securities, LLC and Citigroup Global Markets Inc. (together, the "Underwriters"), have agreed to purchase the Bonds at an aggregate purchase price equal to the initial public offering prices of the Bonds, less an underwriting discount in the amount of $120,781.40, pursuant to the terms of a Bond Purchase Agreement (the "Bond Purchase Agreement") by and between the City and the Underwriters.

The Bond Purchase Agreement provides that the obligation of the Underwriters is subject to certain conditions precedent and that the Underwriters will be obligated to purchase all of the Bonds if any of the Bonds are purchased. The Bonds may be offered to certain dealers (including dealers depositing such Bonds into investment trusts, account or funds) and others at prices lower than the initial public offering prices. After the initial public offering the public offering prices of the Bonds may be changed from time to time by the Underwriters.

Raymond James Financial, Inc. ("Raymond James Financial"), which is the parent company of Raymond James & Associates, Inc. ("Raymond James"), acquired during 2012 all of the stock of Morgan Keegan & Company, Inc. ("Morgan Keegan"). Morgan Keegan and Raymond James are each registered broker-dealers. Both Morgan Keegan and Raymond James are wholly-owned subsidiaries of Raymond James Financial and, as such, are affiliated broker-dealers that operate under the common control of Raymond James Financial and utilize the trade name Raymond James I Morgan Keegan that appears on the front cover of this Official Statement. It is anticipated that the Public Finance businesses of Raymond James and Morgan Keegan will be combined in the near future.

Raymond James has entered into a distribution agreement with Morgan Keegan for the distribution of the Bonds at the original issue prices. Such arrangement generally provides that Raymond James will share a portion of its underwriting compensation or selling concession with Morgan Keegan.

Citigroup Inc., parent company of Citigroup Global Markets Inc., an underwriter of the Bonds, has entered into a retail brokerage joint venture with Morgan Stanley Smith Barney LLC. As part of the joint venture, Citigroup Global Markets Inc. distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Citigroup Global Markets Inc. may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Bonds.

OTHER MATTERS

The City Council has by resolution authorized the distribution of the Preliminary Official Statement, dated February 5, 2013, and this Official Statement. The City deemed the Preliminary Official Statement final as of its date within the meaning of Rule 15c2-12, except for the omission of certain pricing and other information permitted to be omitted pursuant to Rule 15c2-12.

The references, excerpts and summaries of all documents referred to herein do not purport to be complete statements of the provisions of such documents, and reference is directed to all such documents for full and complete statements of all matters of fact relating to the Bonds, the security for the payment of the Bonds and the rights and obligations of the holders thereof.

-15- Additional information and copies of the City's published financial statements and budgetary documents may be obtained upon request to the office of Director of Finance, City of Roanoke, 215 Church Avenue, S.W., Room 461, Roanoke, Virginia, 24011, Telephone (540) 853-2821, or from the City's Financial Advisor, Public Financial Management, Inc., 4350 North Fairfax Drive, Suite 580, Arlington, Virginia 22203, Telephone (703) 741-0175.

THE CITY OF ROANOKE, VIRGINIA

By: Is! DAVID A. BOWERS Mayor

-16- APPENDIX A

THE CITY OF ROANOKE

General

Roanoke, the largest city in the Commonwealth of Virginia west of Richmond, is located at the southern end of the Shenandoah Valley, approximately 170 miles west of Richmond, 235 miles southwest of Washington, D.C. and 250 miles west of Norfolk. This position in the southeast gives Roanoke ready access to nearly two-thirds of the total population of the United States, all within a 500-mile radius of the city. Located at the region's crossroads of major rail and highway systems, the City serves as the principal trade, industrial, transportation, medical and cultural center of western Virginia.

Chartered as a city in 1884, Roanoke encompasses a land area of approximately 43 square miles. The City's population of approximately 97,000 represents more than 31% of the population in its metropolitan area, which includes the neighboring City of Salem, the Town of Vinton and the Counties of Roanoke, Botetourt, Craig, and Franklin.

Government

The City operates under the Council-Manager form of government. The City Council formulates policies for the administration of the City. It is comprised of seven members elected on an at-large basis to serve staggered four-year terms. Officers of the City Council are the Mayor, elected directly by the voters to a four year term, and a Vice Mayor, who is selected on the basis of the highest popular vote in council elections and serves a two-year term.

The City Council appoints the City Manager to serve as the City's chief administrative officer. The City Council also appoints the Director of Finance, the City Attorney, the City Clerk and the Municipal Auditor, each of whom reports directly to the City Council. The City Manager is responsible for implementing the policies of the City Council, directing business and administrative procedures and appointing departmental officials and certain other City employees. The City Manager is aided by two Assistant City Managers. The Director of Finance is aided by the Assistant Director of Finance. An organizational chart of the Roanoke government is included as Appendix B to this Official Statement.

The operation of the public school system in Roanoke is the responsibility of the City School Board (the "School Board"). The City Council appoints the seven members of the School Board to serve staggered three-year terms. The Superintendent of Schools is appointed by the School Board. Local funding for operating public schools in the City is provided by an appropriation from the City's General Fund to the School Board. The School Board, however, is an autonomous policy-making body in matters governing education and therefore independent of the City Council.

The City Treasurer and the Commissioner of the Revenue are local constitutional officers of the Commonwealth, elected by the residents of Roanoke. The City Treasurer is responsible for the collection of and accountability for all monies payable to the City. The Commissioner of the Revenue prepares the levy of real estate, public service, business, professional and occupational licenses and personal property taxes as well as processes City residents' Virginia income tax returns. The Sheriff, the Commonwealth's Attorney and the Clerk of the Circuit Court also are local constitutional officers elected by City residents. All constitutional officers serve four-year terms except the Clerk of Circuit Court who serves an eight-year term.

City Administrative Officials

Christopher P. Morrill, 50, assumed his duties as City Manager on March 1, 2010. Prior to that he served as the Assistant City Manager for the City of Savannah, Georgia, where he led the Management and Financial Services Bureau. From 1999 through 2001, he served as Senior Municipal Finance Advisor to the South African National Treasury under a United States Agency for International Development project. In this position, he assisted the South African government with developing local government finance legislation, municipal budget reforms, and

A-I capacity building programs. From 1990 through 1992 and 1994 through 1999, Mr. Morrill served as Research and Budget Director for the City of Savannah, Georgia. He served from 1992 through 1994 as a U.S. Peace Corps volunteer in the former Soviet Union, where he advised the City of Lviv, Ukraine, on finance and management issues. He co-authored The Savannah Story: The Road to Equity and Sustainable Community Development in Economic Development in American Cities: the Pursuit of an Equity Agenda. Morrill completed a three-year fellowship in the Kellogg National Leadership Program, exploring conflict resolution and community building in Peru, China, Northern Ireland, and South Africa. Morrill is an ICMA Credentialed Manager and currently serves as President of the Government Finance Officers Association of the US and Canada (GFOA). He served on the GFOA Standing Committees on Governmental Budgeting and Management, Economic Development and Capital Planning and Retirement and Benefits Administration. He also serves as a board member on the United Way of the Roanoke Valley. He received a Bachelor of Arts in political science from the College of the Holy Cross in Worcester, Massachusetts, and a Master of Public Administration from the University of North Carolina at Chapel Hill.

Ann H. Shawver, 45, Director of Finance, joined the City in 1994. Prior to becoming the Director of Finance in 2008, she served as Deputy Director of Finance for six years, Manager of Accounting Services for four years, and Financial Systems Accountant for four years. Prior to joining the City, she was employed by KPMG LLP for approximately four years. Ms. Shawver, a Certified Public Accountant, received a Bachelor of Business Administration with honors from James Madison University and a Masters of Business Administration from Virginia Tech. Ms. Shawver is a past President of the Virginia Government Finance Officers' Association and is current President of the Roanoke Chapter of the Virginia Society of Certified Public Accountants. She is an active member of the Government Finance Officers Association (GFOA), serving on its Economic Development and Capital Planning Committee and as a GFOA instructor. She is also a member of the Virginia Municipal League's Finance Policy Committee. In her capacity as Director of Finance, Ms. Shawver serves as Secretary/Treasurer for the City of Roanoke Pension Plan, as Treasurer to the Hotel Roanoke Conference Center Commission and is a member of the Roanoke Valley Detention Commission. Ms. Shawver also holds leadership roles in several community and volunteer organizations.

Daniel J. Callaghan, 58, has been City Attorney for the City of Roanoke since October 31, 2012. Prior to his appointment, Mr. Callaghan was in private practice for 33 years with Devine, Millimet & Branch, Professional Association, in Manchester and Concord, New Hampshire. Mr. Callaghan holds a Bachelor of Arts degree in Honors Studies from Villanova University (1976) and a Juris Doctor degree from Villanova University School of Law (1979). Mr. Callaghan was admitted to the New Hampshire Sate Bar in 1979 and the Virginia State Bar in 2012. Mr. Callaghan has been recognized by The Best Lawyers in America (Bankruptcy and Creditors' Rights / Insolvency and Reorganization) for 25 years.

Sherman M. Stovall, 54, has been the Assistant City Manager for Operations since November 2010. He has been employed by the City since 1994, serving in the positions of Budget/Management Analyst, Budget Administrator and Director of Management and Budget. Mr. Stovall received his Bachelor of Arts degree in Management from Virginia Wesleyan College and a Master's Degree in Business Administration from Marshall University. He is a member of the Government Finance Officers Association. Mr. Stovall is active in the community serving on the Roanoke City Public Schools Gifted Student Advisory Committee, the William Fleming High School Athletic Hall of Fame Committee and the Board of Trustees for the Pilgrim Baptist Church.

R. Brian Townsend, 54, was appointed in July 2007 to serve as Assistant City Manager for Community Development. Prior to this appointment, he was the Director of Planning Building and Economic Development for the City of Roanoke and served in that capacity since July 2002. Prior to joining the City, he held various positions in the Department of Planning in the City of Norfolk, Virginia, between 1989 and 2002, serving as the Manager of the Development Services Bureau between 1996 and 2002. He holds a Bachelor of Arts degree from the University of Richmond, and a Master's Degree in Urban and Regional Planning from Virginia Commonwealth University. He currently serves on the board of the United Way of Roanoke Valley. He is a former board member of Downtown Roanoke Incorporated and the Council of Community Services and a former member of the Virginia Chapter of the American Planning Association.

Andrea F. Trent, 49, Assistant Director of Finance, joined the City in 2002. Prior to joining the City, she was employed by Advance Auto Parts for three years as the Manager of Retirement Benefits. In addition, Ms. Trent was employed by First Union National Bank for thirteen years in a number of positions ending as Assistant Vice

A-2 President Capital Management Group. Ms. Trent received her Bachelor of Arts Degree from Mary Baldwin College and an Associates of Applied Science Degree in Accounting from Virginia Western Community College. She is a member of the Virginia Government Finance Officers' Association (VGFOA).

Wayne F. Bowers, 65, Director of the Department of Economic Development, has been employed by the City since December 3, 2012. Mr. Bowers has worked in local government since 1973, most recently as City Manager of the City of Greenville, North Carolina. His work experience includes serving as City Manager in Gainesville, Florida, Spartanburg, South Carolina, Huntington, West Virginia, Jacksonville Beach, Florida and Assistant City Manager in Tallahassee, Florida. Under his leadership in Greenville, North Carolina, the City of Greenville was awarded the 2011 Governor's Innovation Small Business Community Award for the small business forgivable loan program. During his leadership in Gainesville, Florida, Mr. Bowers spearheaded the development and construction of the Gainesville Technology Enterprise Center. He was also responsible for the development of an industrial park on surplus airport property in Gainesville where Nordstrom's Southeast Distribution Center became the primary tenant. Mr. Bowers received a Bachelor of Arts, Political Science degree with honors from Western Carolina University. He earned Master's Degrees in American History from the University of North Carolina at Chapel Hill and in Public Administration from the University of South Carolina.

Amelia C. Merchant, 44, Director of the Department of Management and Budget, has been employed by the City since 2001, serving in the positions of Budget/Management Analyst and Budget Administrator. Ms. Merchant received her Bachelor of Science degree in Physics from Norfolk State University through the Dozoretz National Institute for Minorities in Applied Science (DNIMAS) Program and a Master's Degree in Business Administration from Virginia Tech. She is a member of the Government Finance Officers Association and was appointed to the Committee on Governmental Budgeting and Fiscal Policy (2013-2015). She is also a member of the Virginia Government Finance Officers' Association.

Governmental Services Provided by Roanoke

Roanoke provides a wide variety of governmental services to its residents. For budgetary purposes, the City prioritizes these services as defmed during the Budgeting for Outcomes process which the City implemented for fiscal year 2012. Budgeting for Outcomes is designed to improve services while obtaining a better return on the investment of public funds. These defined priorities are Education, Safety, Human Services, Infrastructure, Livability, Economy and Good Government and are summarized below.

Education Priority: Profile of the School District

Roanoke City Public Schools (RCPS) is a progressive urban school district in the heart of the Blue Ridge Mountains in the City of Roanoke, Virginia. During the 2011-12 school year, RCPS provided a comprehensive program of study for 13,006 students in grades Kindergarten through 12 annually. In 2011-12, there were seventeen elementary schools, five middle schools, two high schools, the Roanoke Valley Governor's School for Science and Technology, a vocational school, two alternative education facilities, adult education programs and preschool programs for low income families.

Roanoke's student population represents a diversity of cultures and ethnic groups. Approximately 43% of students are black, 41% are white, and 16% are Hispanic or other.

Eighty-four percent (84%) of RCPS students passed their English SOL test in fiscal year 2012. Sixty-five percent (65%) of RCPS students passed the Math SOL test in fiscal year 2012. An increased number of students passed the writing SOL test in 2012 at eighty-three percent (83%) versus eighty-two percent (82%) in fiscal year 2011.

The Roanoke City Public Schools strategic plan for 2009-14 has affirmed that the school division's mission is to "graduate students prepared for life in a rapidly changing world." The plan also establishes RCPS' vision, which is "to be a model for urban public education." This vision means that the City of Roanoke students will have the skills to be successful and the opportunities to reach their full potential regardless of poverty, ethnicity, disabilities, or other challenges. Only a few urban places in the country have been able to achieve this and they are

A-3 usually individual schools as opposed to entire school districts. RCPS believes that setting a high bar is owed to the City's children.

The decisions, direction, and actions of RCPS are guided by eight core beliefs, as follows:

Our diversity is a source of strength Our schools must be safe All students are capable of meeting high expectations We are accountable for our students' success Every individual in RCPS contributes to our students' success We have a responsibility to work collaboratively with our families Respect, trust, and honest communication are the foundation of successful and productive relationships The vitality of our community depends on a strong school system

The School Board also established the "Strong Students. Strong Schools. Strong City." priorities for the 2011-12 school year as follows:

Achieve full state accreditation and meet federal Adequate Yearly Progress (AYP) targets. Ensure the safest schools for our students and staff. Attract, train, and retain the best staff for our Urban Division. Ensure efficient use, maintenance, and improvement of the Division's facilities and infrastructure. Enhance arts, athletics and extracurricular activities.

Narrowing the Achievement Gap. Roanoke City Public Schools is working to help all students achieve and improve with a special focus on closing achievement gaps between subgroups of students. In total for 2011-2012, 19 of 24 schools made AYP and 23 schools are fully accredited. To achieve AYP under No Child Left Behind, a school must meet 37 objectives for student achievement. State accreditation is determined by the overall percentage of students who pass SOL tests in four core subject areas: English, Math, History, and Science. Schools making AYP and/or achieving state accreditation based on 2011-12 student achievement data are listed on the following page.

A-4 ACCREDITATION & AYP STATUS According to 2011-12 Student Achievement

SCHOOL ACCREDITATION AYP* (11-12) Crystal Spring Fully Accredited Yes Fairview Fully Accredited Yes Fallon Park Fully Accredited No Fishburn Park Fully Accredited Yes Garden City Fully Accredited Yes Grandin Court Fully Accredited Yes Highland Park Fully Accredited Yes Hurt Park Fully Accredited Yes Lincoln Terrace Fully Accredited Yes Monterey Fully Accredited Yes Momingside Fully Accredited No Preston Park Fully Accredited Yes Roanoke Academy Fully Accredited No Round Hill Fully Accredited Yes Virginia Heights Fully Accredited Yes Wasena Fully Accredited Yes Westside Fully Accredited Yes Addison Fully Accredited Yes Breckinridge Fully Accredited Yes Jackson Fully Accredited Yes Madison Fully Accredited Yes Woodrow Fully Accredited Yes Patrick Henry Fully Accredited No William Fleming Warned in Mathematics, History and Graduation No

Source: Roanoke City Public Schools Comprehensive Annual Financial Report as of June 30, 2012 * Adequate Yearly Progress (AYP): A measurement defined by the United States federal No Child Left Behind Act that allows the U.S. Department of Education to determine how every public school and school district in the country is performing academically according to results on standardized tests.

Eat for Education Campaign. Roanoke City Council places education as the top priority of the government and its citizens. On July 1, 2010, City Council increased the prepared food and beverage tax from 5% to 7% for the two-year period July 1, 2010, to June 30, 2012, with the resulting revenue being solely dedicated to Roanoke Schools under the "Eat for Education" Campaign. This provided additional funding of $9.5 million to the school system during the two-year program. This resultant increase significantly offset state funding reduction allowing important programs such as summer school and early reading to continue, despite a loss of state funds.

The Eat for Education Campaign received awards from the Public Relations Society of America: The Lin Chaff Award for Creativity, the Award of Excellence in Community Relations, and the Best of Show for Public Relations Program Award in 2012.

All America City Award. The National Civic League recognized Roanoke' s "Star City Reads" Campaign with a 2012 All America City Award. The "Star City Reads" Campaign is for its Community Action Plan, a collaborative program that addresses readiness for kindergarten, absenteeism, and summer learning ensuring more Roanoke children are reading at grade level by the end of third grade. Roanoke is a six time recipient of this award - no other U.S. city has achieved this distinction. Other years the City has won include 1952, 1979, 1982, 1988, and 1996.

A-S Higher Education

Twenty two institutions of higher learning, enrolling over 91,000 students, are located within a 60-mile radius of Roanoke. Virginia Tech, which is located in Blacksburg, 35 miles from Roanoke, is a major educational institution with over 30,000 students. Virginia Tech is a leading research university, ranked 47th in the United States. Other institutions within close proximity include Hollins University, Radford University, Roanoke College, Virginia Western Community College, Virginia Tech-Carilion School of Medicine and the Jefferson College of Health Sciences.

The Roanoke Higher Education Center (RHEC) is located in the downtown area and was established for the purpose of expanding access to higher education by providing undergraduate, graduate and professional programs. RFIEC offers over 200 programs of study through the Center's partner organizations. Averett University, Bluefield College, James Madison University, Jefferson College of Health Sciences, Hollins University, Mary Baldwin College, Old Dominion University, Radford University, Roanoke College, the University of Virginia, Virginia Tech, and Virginia Western Community College offer undergraduate and graduate level courses. In addition, Total Action for Progress (TAP) offers job-training programs as a partner in the Center. The Western Virginia Workforce Development Board is also located at the Center.

Safely Priority: Public Safety

The City provides programs and activities designed to safeguard the life and property of its residents and visitors. Included among these programs are law enforcement, fire services, emergency medical services, communications and emergency preparedness.

The Police Department provides professional, efficient, and effective law enforcement services. The Department has an authorized full-time staff of 258 sworn officers and 48 civilian employees. The Department has a history and reputation of being one of the finest agencies in the country and displays its professionalism by achieving and maintaining international accreditation from the Commission on Accreditation for Law Enforcement (CALEA) since July 1994. The Department's most recent re-accreditation in November 2011 was another consecutive law enforcement re-accreditation. Additionally the Department received its recent re-accreditation with excellence. The Department also applied for and received initial accreditation for its Training Academy in 2011. As a result of the national accreditation of the Department, its Training Academy, and the E911 Communications Center, the City received CALEA's Tr-Arc award. The Police Department also received meritorious accreditation for having been accredited for fifteen continuous years. The Department is the only municipal law enforcement agency in the Commonwealth of Virginia to attain accreditation in two CALEA programs, Law Enforcement and Training Academies. Approximately five percent of the law enforcement agencies throughout the country are accredited.

The City of Roanoke was first named a Certified Crime Prevention Community by the Department of Criminal Justice Services during Fiscal Year 2001, and has maintained this status ever since. The program encourages localities to develop and implement collaborative community safety plans. To obtain this certification, the City met twelve core elements relating to different types of services that are available to citizens and businesses of the City. Roanoke is one of only two jurisdictions in Virginia to receive this prestigious award. In April 2004, Roanoke's Citizen Police Academy received recognition as the 2004 Agency of the Year by the National Citizen Police Academy Association. The Citizen Academy is a 12-week course offered twice a year at no charge to citizens ages 21 and older. The Department has implemented an Advanced Citizen Police Academy, a Senior Citizen Police Academy and Business Police Academy to enhance community involvement, public safety, and public education.

The Police Department was recognized for success in auto theft investigations. Roanoke received first place in the Help Eliminate Auto Theft (H.E.A.T.) Award. This award is sponsored by the Virginia State Police and recognizes police departments for advancements in auto theft education and in the recovery of stolen automobiles.

The Department furthered its community policing with the formation of the Community Integration and Services Enhancement (CISE) unit in 2011. One of the responsibilities of the CISE unit is community involvement and crime prevention through the use of social media. Using social media, the Department enhanced the 'Safer

A-6 City' campaign by having a multi-way interaction with citizens in a real time atmosphere. These efforts have proven successful through Department news, crime prevention tips, concerns addressed, and identification and apprehension of crime suspects.

The Roanoke Police Department was featured in the July 2011 issue of Police Chief Magazine for its advancements in social media. The article described how the department implemented an increased presence on its social media page, while educating employees on how to use social media without compromising professional integrity. This is the third time in five years that the department has been featured in Police Chief Magazine, published by the International Association of Chiefs of Police.

The Roanoke Police Department implemented Data Driven Approaches to Crime and Traffic Safety (DDACTS) in 2011 to better target its enforcement efforts to locations where crime hot spots and traffic issues overlap. By deploying its resources to the areas with the most documented issues, the Roanoke Police Department is better able to reduce crime while improving traffic safety.

In August 2012, the Roanoke Police Department received first place in the 2012 Law Enforcement Challenge. The award recognizes police departments for efforts in traffic safety enforcement and education. The department competed with other police departments state-wide that are similar in size.

Roanoke Fire-EMS is a full-service fire and emergency medical service agency providing fire suppression, basic and advanced pre-hospital life support, fire prevention and education programs, fire cause and origin, vehicle extrication and tactical heavy rescue. In addition to housing firefighting and EMS personnel and equipment, fire- EMS stations serve as a community resource center. Fire-EMS personnel at these sites help distribute public safety information, which teach children about fire safety as well as provide safe havens for those in need.

Firefighter/EMTs operate out of eleven stations, seven days a week, twenty-four hours a day, with fourteen pieces of front-line fire apparatus, eight front-line EMS units, one heavy squad unit, one HazMat unit and three command officers. In May of 2007, Fire-EMS Station 1, which opened at the corner of Elm Avenue and Franklin Road, consolidated two of Roanoke's oldest stations and Fire-EMS administration under one roof. Fire-EMS Station 3 is Leadership in Energy and Environmental Design (LEED) Gold certified and houses the fire and EMS apparatus previously assigned to the airport fire station. In June of 2010, Fire-EMS 'new' Station 5 opened and 12th consolidated 'old' Station 5 from Street N.W. and Station 9 from 24 th Street N.W. Fire Station 5 is manned with personnel reassigned from both of these closed stations and houses a new 105 ft. Pierce Ladder Truck as well as a Roanoke Police Substation. The facility is also LEED certified and offers a community room for citizens. Roanoke Fire-EMS responds to approximately 3,900 fire and 19,900 EMS calls annually.

Roanoke Fire-EMS holds a Class 2 rating from the Insurance Services Office, the highest rating given to a Virginia fire department, and holds one of only five such ratings awarded in the State. This rating helps the community by bringing lower insurance rates to homeowners and businesses. In August 2002, the department earned its national accreditation from the Commission on Fire Accreditation International. Being named a nationally accredited agency in 2002 changed both its status in the community and the nation, as Roanoke Fire-EMS was one of only six fire departments in the State to hold this distinguished status. In August 2007, Roanoke Fire- EMS was re-accredited earning International Accreditation and is now one of 113 fire departments in the nation with this status. With this accreditation, the City of Roanoke became the only city in the nation to operate nationally accredited Sheriff, Police and Fire-EMS services. The City was reaccredited in 2012.

The Emergency E-911 Center provides enhanced 911 (E-911) service 24 hours a day for wireline and wireless 911 calls. All cellular vendors provide phase II technology to assist with location information as mandated by the FCC. The E-911 Center is equipped with a Computer Aided Dispatch (CAD) System with mapping capability to assist with identifying the location of wireless callers. This enables the dispatcher to provide basic medical information while sending the appropriate public safety personnel during a medical emergency. In fiscal year 2012, 132,633 emergency E-91 1 calls and 120,465 non-emergency calls were received and processed.

A-7 Human Services Priority: Health and Human Services

The City provides a wide array of mandated and non-mandated human service programs to the citizens of Roanoke. These services include a network of protective, supportive and temporary financial services that assist citizens with achieving a realistic and attainable level of self-sufficiency. Employment services are available to assist eligible individuals in retaining, regaining or securing employment.

The City operates a Community Assessment Center for court-involved youth and an Outreach Detention Program capable of serving twenty-four juveniles, which also provides electronic monitoring services. The Community Assessment Center provides counseling as well as enhanced youth and family outreach programs.

The Department of Human Services is responsible for administering the Comprehensive Services Act, which provides for a collaborative system of child-centered, family-focused and community-based services and funding to address the strengths and needs of at-risk youths and their families. The Department of Human Services includes support for Roanoke Health Department, Blue Ridge Behavioral Healthcare and Total Action Against Poverty.

Infrastructure Priority: Public Works

The City provides for the engineering and development of physical facilities, maintenance of existing facilities and new infrastructure and services to citizens. These essential functions are performed by the following:

Engineering: The Engineering Division is involved in various stages of study, design and construction with many active projects as part of the Capital Improvement Program including the inspection, study, design and construction of bridge structures, parking structures, streets, storm drains and City owned/leased buildings.

The City of Roanoke's Department of Public Works has won the 2012 Safe and Sustainable Snowfighting award from the Salt Institute for excellence in environmental consciousness and effective management in the storage of winter road salt. Only 145 local agencies in the United States and Canada received this recognition.

Environmental Management: The Office of Environmental Management serves the City by ensuring all department operations and activities are conducted in compliance with applicable State and Federal environmental regulations. To that end, this office is responsible for developing and managing a wide variety of comprehensive programs to provide for compliance assurance, continual improvement and internal auditing, as well as providing support for employee training and continuing education. This office serves as a liaison to many controlling regulatory authorities for compliance reporting, providing input on draft environmental legislation and policy as well as serving on advisory committees. Environmental Management collaborates with other departments, neighboring local governments, outside agencies and civic groups, to promote sound environmental management practices locally and throughout the Roanoke Valley. Lastly, the Office of Environmental Management assists in regulatory enforcement and emergency response actions, if impacts or threats to the environment and/or public health occur within the City of Roanoke.

The City of Roanoke has embarked on a brownfield revitalization effort for the reuse of a rail corridor. The City was awarded a $175,000 the United States Environmental Protection Agency (EPA) Brownfields Area-Wide Planning Pilot Program grant for Roanoke's Rail Corridor Planning Area. The grant funding will be directed to brownfield-impacted sites within the corridor. The grant funding will result in an area-wide plan which will determine the issues, identify potentially interested businesses and then reclaim the brownfield properties to EPA standards. The City expects the reclamation to promote area-wide revitalization. The EPA selected 23 pilot projects across the country and the City of Roanoke is proud to be one of the recipients of this award.

Solid Waste Management: Once-per-week trash collection service is provided to 38,000 residential units and condominium associations. Nightly pickup is provided in the downtown area, and Sunday morning pickup is provided to Market district. A recycling program is offered to all of the City's residential neighborhoods, schools and small businesses with a City-wide reported recycling participation rate to the Department of Environmental Quality of 54%. Transportation Division: The City maintains 158 signalized intersections, 57 school flashers, 26 warning beacons and 24 miles of related signal interconnect cables. The City contracts with American Electric Power to install and maintain approximately 9,900 street lights. Other services provided include pavement repair and maintenance, snow removal, structural repairs to bridges and culverts, drainage maintenance, alley maintenance, street sweeping, landscape maintenance, maintenance and repairs to traffic signs and pavement markings, plus curb, gutter and sidewalk repair for approximately 1,200 lane-miles of streets. An average of 41 lane miles of streets is resurfaced annually. Additionally, the Division manages and coordinates transportation-related projects with the Virginia Department of Transportation (VDOT) for the City. VDOT projects are identified in the Department's Six- Year Improvement Program.

Upcoming VDOT projects include reconstruction of the Elm Avenue interchange with 1-581 and the completion of the partial interchange at Valley View Boulevard and 1-581. Both projects are expected to provide congestion relief as well as significant economic development benefits. Improvements at Elm Avenue will add capacity to both interstate exit ramps and is expected to relieve congestion during several hours of each day. The completion of the partial interchange at Valley View Boulevard and 1-581 will improve access to and from the north to the retail area housing Best Buy, Target, PetSmart and other stores as well as provide access to more than 100 acres of undeveloped property on the west side of the interstate. The projects are moving forward and are anticipated to be completed in 2015.

Fleet Management: This department provides required preventive maintenance, service, and repairs to approximately 800 vehicles and equipment. The Fleet Department manages the City's fuel program as well as the acquisition and disposal of all City vehicles and equipment. As part of the fuel program, Fleet Management purchases and utilizes up to 5% bio-diesel fuel in all City equipment that require diesel fuel and an unleaded gasoline blend with 10% ethanol in all City vehicles that require an unleaded gasoline. Additionally, the Department of Fleet Management has transitioned some outdoor power equipment for propane use and soon will have dual-fuel propane vehicles in its fleet. The Department of Fleet Management has purchased hybrid and all- electric vehicles as part of new initiatives regarding the use of hybrid sedans in both the Police and Fire Departments. To further reduce dependency on fossil fuels, the City is moving forward with the implementation of the use of Compressed Natural Gas (CNG) in its fleet where applicable. With the commitment to purchase and utilize alternatives to diesel and gasoline products, the City is demonstrating on a daily basis its commitment to improving and sustaining the area's natural environment.

Department of Planning and Building Development

The mission of the Department of Planning, Building and Development is to work with the community to ensure a sustainable balance of growth, public safely, good urban design and environmental quality to support strong, sustainable neighborhoods where people of all backgrounds can live, work and play. The Department employs fifty-two people in five divisions.

The Building Inspections Division ensures that construction in Roanoke complies with the Virginia Uniform Statewide Building Code. The Division reviews and approves all building plans and performs inspections on all construction in the City.

The Building Inspections Division became the first jurisdiction in the Commonwealth of Virginia and one of 13 localities nation-wide to achieve accreditation of its building department by the International Accreditation Service (lAS) in October 2012. lAS provides an independent assessment and verification that building departments operate at the highest legal, ethical, and technical standards. The City was accredited for providing its citizens with high quality permitting, plan review and inspection services as well as encouraging community development that is safe, attractive, environmentally responsible and economically vibrant.

The Building Inspections Division was also recognized in September 2012 by Harvard's Ash Center for Democratic Governance and Innovation as one of the innovative government initiatives for its 2012 Bright Ideas in Government cohort. The Online Permit Center and Quick Response codes enable contractors and applicants to access permit history and receive inspection results through the daily inspections calendar online via smartphones and tablets.

A-9 The Planning Division develops and monitors the City's comprehensive neighborhood and area plans; staffs the Architectural Review Board, Board of Zoning Appeals, and Planning Commission; administers the storm water and related land development regulations; and operates the Building and Permitting Office. The Division also works with neighborhood organizations, serves as staff to the Roanoke Neighborhood Advocates, manages the City's brownfield and housing programs and administers the Leadership College and Welcome Roanoke programs.

The Administrative Division oversees all clerical functions for the department, its boards and commissions, and coordinates customer service and problem-solving.

The Code Enforcement Division enforces graffiti, inoperable motor vehicles, zoning, building maintenance, rental inspections and weed and trash ordinances that promote a clean, safe and attractive City.

The HUD Community Resources Division administers and monitors approximately $2.0 million in new funds annually from the US Department of Housing and Urban Development (HUD) under the Community Development Block Grant (CDBG), HOME Investment Partnerships (HOME) and Emergency Shelter Grant (ESG) programs.

The National Complete Streets Coalition recognized the City of Roanoke's Complete Street Policy as one of the nation's leading examples of a safe, smart transportation policy according to its recent nationwide analysis. The National Complete Streets Coalition evaluated over 350 complete streets policies nationwide and scored them based on 10 criteria that would be part of an ideal Complete Streets Policy. Overall, the City had the 10th highest score among all Complete Street Policies based on these criteria. The City's policy was noted as being particularly strong as the result of the following:

City Council’s clear statement of intent to develop complete streets; Inclusion of all projects and phases of street development in the policy; Establishment of clear criteria and procedures for granting exceptions to the policy; Having standards for measuring implementation; and Having strong design guidelines.

Livability Priority: Libraries

The City operates a central library with six branches, a law library and two e-branch libraries. The City opened the first e-branch library at Valley View Mall and then a second e-branch was added at the Garden City Parks and Recreation Center. Both e-branch facilities have information kiosks, lockers for item pick up, and book- drops. Extensive additions and renovations have been completed at both the Jackson Park and Gainsboro branches. New community meeting rooms, tutor rooms, Teen Centers, new books, computers and furniture were added at both facilities. Branch renovations have contributed to increases in usage by the community. Jackson Park library and Gainsboro library circulation increased to 65,940 and 67,235 respectively in 2012. Overall attendance at all library locations was 660,559 and system-wide circulation was 709,308 in 2012. City Council approved a revision of the capital improvement plan for libraries in May 2012. The main library is scheduled to be renovated in July 2013.

The City libraries utilize a regional, automated system developed in cooperation with the City of Salem, Roanoke County and Botetourt County. The City's libraries provide many resources to its citizens including free internet and free wireless access at all locations. In June 2010, libraries added downloadable e-books. Over 70,000 e-books were checked out in the first year. Libraries offer a wide range of information such as magazine and newspaper articles, encyclopedias and other reference works, company information and investment reports, health and wellness information, literary criticism, and homework help, plus photos, charts, maps, diagrams, and illustrations. The Virginia Room, located in the main branch, houses one of a kind local history records, Census records and over 14,000 rare photographs of the Roanoke area. Libraries host over 800 programs for young people between the ages of 5 and 17, reaching over 12,000 youth. Last year, libraries offered 1,603 adult programs and 697 computer classes. During fiscal year 2012, libraries provided early literacy programs and materials for approximately 10,000 children under the age of five to help them become lifelong learners. Parks and Recreation

The City of Roanoke Parks and Recreation Department seeks to be positioned as a premier, "best in class," parks and recreation system that provides high quality, maintained parks, recreation facilities and programs that are accessible and cost effective. These facilities and programs are designed to support citizens' vision for cultural unity and a livable, healthy lifestyle, creating high economic impact and value for living and working in Roanoke.

The department consists of three Divisions - Administration, Parks and Recreation and is staffed by 56 full- time, over 130 seasonal staff members and a volunteer workforce of over 400.

The City's parks and recreation system includes many natural assets, including the 660-acre Mill Mountain Park located within the corridor of the National Park Service's Blue Ridge Parkway. In June 2010, the City Council approved a Deed of Gift of Easement from the City of Roanoke to the Virginia Outdoors Foundation and the Western Virginia Land Trust. This regional park serves as a gateway to Roanoke and brings in nearly 300,000 parkway visitors annually. Within the park is the Discovery Center, an award-winning interpretive center. It includes picnic facilities, overlooks, nature trails and the Mill Mountain Zoo. Additionally, the Carvins Cove Natural Reserve at 12,600+ acres provides for more than 46 miles of multi-use trails for hiking and mountain biking as well as other outdoor activities including kayaking, canoeing, fishing and picnicking. Roanoke has over 14,100 acres of parkland in total. Parkland includes 69 parks, 6 community centers, 54 practice and/or competitive ball fields, 39 outdoor basketball courts, 57.5 tennis courts, 71 playgrounds, 2 Olympic-sized swimming pools, 2 gymnasiums, a skate park and the River's Edge Sports Complex. Currently, there are over 60 miles of natural trail and fourteen miles of paved greenways managed by Parks and Recreation.

In 2012, the City of Roanoke was recognized as a bronze level Bicycle Friendly Community by the League of American Bicyclists (League). According to the League, Roanoke's Complete Streets Policy, Street Design Guidelines, greenway development, volunteer Bicycle Advisory Committee, Safe Routes to School grants, and a diverse and growing number of cyclists contributed to the award.

The Administrative Division provides operational support and directive activities consisting of planning and development for all parks, greenways, and natural resources; marketing and information services; operations management consisting of contracts, leases and agreements administration; strategic planning as well as general business functions such as program registration, facility reservations, payroll and human resource services and financial management.

The Parks Division is responsible for the cleanliness and aesthetic appearance of the City's parks. The Park Management staff provides general maintenance of park properties including shelter cleaning, trash removal and other non-routine maintenance issues. The Landscape Management section provides general turf maintenance and maintains approximately 60 flowerbeds throughout the City. The Urban Forestry section is responsible for the maintenance of over 17,000 trees in City parks and along City streets. Due to the City's outstanding efforts in this area, Roanoke has been named a Tree City USA for 16 consecutive years.

The Recreation Division offers more than 1,200 programs annually in ten specialized programming sections: adult athletics, aquatics, outdoor adventure, environmental education, tours and travel, outdoor recreation events, youth development, fitness and wellness, personal enrichment, and youth athletics. The Recreation Division also collaborates with Roanoke County Parks, Recreation and Tourism in offering recreational programming for disabled citizens. Each year, Roanoke contributes both cash and in-kind support to this program.

Major Shopping Malls and Retail Areas

Valley View Mall Area

Valley View Mall, built during the 1980s, is a dominant regional shopping center of nearly 900,000 square feet of retail space. The District at Valley View was built in 2007 to enhance the mall area. It offers eye-catching storefronts, extensive landscaping and pedestrian-friendly walkways. The two areas, combined, offer six anchor stores, over 100 specialty shops, and many restaurants. Valley View Mall is owned and operated by CBL &

A-Il Associates Properties Inc. which continues to display confidence in the Roanoke retail market. One of Roanoke's strong economic indicators is its strength in retail sales per capita. The City has historically performed very well in this indicator at both the state and national level due to its regional draw for shoppers.

This year, Valley View Mall added a major retailer, Plow & Hearth. The new store location will offer over 6,700 square feet of shopping space to the area. In addition to Plow & Hearth favorites like UGG Australia and Dansko footwear, Life is Good clothing and accessories, and hearth and garden products, the store also carries an excellent selection of toolsets, fire screens and hearth rugs and delicious assortments of gourmet foods and regional favorites. Founded in 1980 in Madison, Virginia, Plow & Hearth has grown into a trusted national catalog, retail, and internet company specializing in unique, enduring home and lifestyle products that are quality-built and guaranteed to meet customer expectations.

Crossroads Mall

Advance Auto Parts announced the addition of a Financial Services Commercial Customer Care Center to its operation and corporate headquarters in the City investing $8.0 million to support the expansion and other growth. The project is anticipated to create 75 new jobs over the next three years at the Crossroads Corporate Business Center.

Towne Suuare Shonoinm Center

Towne Square Shopping Center, near Valley View Mall, has anchors such as Sam's Wholesale Club, Books-a-Million, Bed, Bath and Beyond, Marshall's, Lowe's, Kroger, OfficeMax, Ross and more. Road improvements, totaling $2.0 million and completed by the City in the fourth quarter of 2011, improved retail access to Towne Square and the Valley View Mall area. These improvements also simplified access to the Roanoke Regional Airport, reducing travel demand on Hershberger Road.

Towers Shopping Center

Towers Shopping Center, located on Colonial Avenue, offers shoppers a multitude of small retail shops, financial institutions, and dining options in a 140,000-square-foot shopping plaza. Recent additions at Towers also included an urgent care facility - Doctor's Express. Doctor's Express, with their first Virginia franchise, invested $850,000 and hired a staff of 9 full-time employees. The popular national chain, Chipotle Mexican Grill, opened at Towers as well as Mirko Pasta. Jo-anne Fabrics & Craft Store opened in 2011 at this center, followed by Tuesday Morning, an upscale deep discount off-price retailer specializing in domestic and international, designer and name- brand closeout merchandise in third quarter of 2012.

Hunting Hills Plaza

Hunting Hills Plaza at 4210 Franklin Road attracted Kohl's Department Store, opening in the third quarter of 2011. This $2.5 million investment created 130 jobs and spurred additional development at the center. Menchie's Yogurt opened their first Virginia franchise in Hunting Hills Plaza, and Dollar Tree and Rack Room both expanded their square footage by locating to new spaces in the center.

Entertainment

Roanoke offers numerous and diverse entertainment choices which contribute to citizens' overall quality of life. The Roanoke Civic Center features the Roanoke Symphony Orchestra, a Broadway show series, and various sold-out concerts throughout the year. The Junior League of Roanoke Valley has moved their annual fundraiser, The Stocked Market, from the Salem Civic Center to this venue which has proved to be a good addition for both the organization and the City with more foot traffic, higher sales and the generation of tax revenues for the City. The Jefferson Center's Shaftman Performance Hall plays host to the Roanoke Ballet, Opera Roanoke, and an array of sell-out Jazz and Pop performances.

A- 12 The Center in the Square is currently under renovation to be completed in the Spring of 2013 Prior to the renovation, the Center drew visitors from across the region, including children from Virginia school districts. Within the Center in the Square's signature building are the Arts Council of the Blue Ridge, the Science Museum of Western Virginia, the History Museum of Western Virginia, and the Harrison Museum of African American Culture. Residents and tourists alike can also learn about the City's history through the Virginia Transportation Museum and the 0. Winston Link Museum.

The Taubman Museum of Art is a world class 81,000 square-foot center for art, entertainment, and cultural events that received the International Architecture Award from the Chicago Athenaeum. The Museum, which opened in November 2008, has a 16,000-square-foot art gallery, an atrium for musical events, an indoor café, and an education center.

Festivals such as the St. Patrick's Day Parade and the Celtic, Strawberry, Peach, and Latino Festivals, Local Colors, and Roanoke's Festival in the Park abound year-round along city streets, in Elmwood Park and in the Center in the Square offering families some free monthly activities on summer evenings. Elmwood Park is currently undergoing a $4.7 million renovation to be completed by the third quarter of 2013.

Roanoke's leisure time also includes a number of concert venues. An annual summer concert series in Elmwood Park, Party in the Park, features a variety of musical talent at weekly concerts and is sponsored by Downtown Roanoke, Inc. Another similar downtown event, First Fridays at Five, held the first and third Fridays of each of the spring and summer months, benefits local charities. "Movies in the Park" is also held during summer evenings in Elmwood Park.

The City offers its citizens a variety of recreational parks and miles of continuous greenway trails on which to walk, run or ride a bicycle along much of the Roanoke River. Outdoor recreation includes several foot races through the City. The Blue Ridge Marathon, a nationally recognized foot race held in April of each year, is one of the most challenging and beautiful marathons on the east coast attracting just over 1,000 runners. The 2012 course included 3,620 feet of total elevation gain and 7,234 feet of total elevation change. Net proceeds from this race go to Friends of the Blue Ridge Parkway - the official National Park Service Blue Ridge Parkway's 501(c)(3) membership organization for visitors to the Blue Ridge Parkway. This organization works tirelessly to protect, preserve, and enhance the Blue Ridge Parkway - a national treasure. The annual Drumstick Dash, a fundraiser for the Roanoke Rescue Mission has become a Thanksgiving Day family tradition and in 2012 attracted 16,000 participants.

Economy Priority: Economic Development

Economic Development acts as a liaison between city businesses and city government, retains and creates jobs and stimulates commercial and industrial development through the sale of property, incentives and program awareness. Economic Development also encourages retention and expansion of existing businesses through rigorous business visitation programs. Economic Development fosters downtown development and redevelopment through historic preservation and other incentives; generates revenue through working with tourism entities; helps in the creation of public facilities; provides minority and women owned business services and compiles statistics on business related information.

Enterprises

The following facilities are operated as public enterprises:

Civic Facilities: Civic Facilities include the Roanoke Civic Center Coliseum, Performing Arts Theatre, Exhibition Hall, and Special Events Center. The Special Events Center is a flexible facility that is suitable for a variety of larger events that require contiguous space such as consumer shows, trade shows, and social events and is the largest facility of its kind in southwest Virginia. Since January 1, 2009, management of the Civic Center has

A-l3 been handled by Global Spectrum, Inc., a private sector company specializing in public assembly facility management.

Parking Fund: The Parking Fund accounts for the operating revenues and expenses of seven structured parking garages and five surface parking lots. The daily parking operations are managed by Lancor Inc., a professional parking management company. The Parking Fund overall generates income sufficient to fund operations, including debt service, without a General Fund subsidy and generates sufficient working capital to fund facility improvements and repairs. In addition, on street parking enforcement and administration are recorded in the Parking Fund. The strategic decision to consolidate on and off street parking management is intended to better align parking management strategies that will encourage further downtown redevelopment, economic growth and further the goals of a strong business friendly downtown.

Regional Initiatives

Regional initiatives are utilized in the delivery of a variety of services to citizens in the Roanoke Valley. These include utilities, animal control and protection, public safety, transportation and others.

The Regional Fire-EMS Training Academy on Kessler Mill Road in Salem is the result of years of cooperative development between the City of Roanoke, County of Roanoke, City of Salem, and Town of Vinton. The Roanoke Regional Training Center serves as the administrative headquarters for the training divisions from the four jurisdictions, and provides classrooms and support facilities for comprehensive fire-EMS academy training.

The Roanoke Metropolitan Statistical Area (MSA) Division 6 (led by the City of Roanoke), combined resources with the MSA Division 3 (led by the City of Lynchburg) to purchase an interoperability radio system - COML[NC - to connect 911 centers in 34 local counties and cities in the region on an as-needed basis. The system enables localities to share information more quickly and links localities directly to State Police, Federal agencies, and the National Guard. This initiative has enabled public safety agencies in Virginia to work together to improve inter-agency communications, whether to detect and prevent terrorism-related activity, improve response to natural disasters and other emergencies, or enhance coverage of special events. When such events occur, they require multiple agencies from different jurisdictions to communicate effectively. The new radio system has improved communication between local and state agencies, eliminating issues related to disparate radio systems. Roanoke was the model for this program, which is now moving state wide.

In May of 2012, the Roanoke Regional Partnership launched a $3 million private sector campaign with an anticipatory $3 million private sector match. The campaign goals include creating over 3,200 higher wage jobs and bringing $200 million in capital investment to the area.

In November of 2012, the City, along with the counties of Roanoke and Botetourt and the Town of Vinton announced the intention to operate the Regional Center for Animal Control and Protection (RCACP) which is currently owned by the Roanoke Valley Society for the Prevention of Cruelty to Animals (RVSPCA) and operated by Animal Control Services (ACS). ACS is a wholly owned subsidiary of the RVSPCA. The intention is for the municipalities to assume operational responsibility of the animal control facility.

ECONOMIC AND DEMOGRAPHIC FACTORS

Population

The City of Roanoke is the Commonwealth's largest city west of Richmond and the economic center of western Virginia. The metropolitan statistical area, of which the City is the focal point, includes the Cities of Roanoke and Salem, the Town of Vinton, and the Counties of Roanoke, Botetourt, Craig and Franklin with a combined population of 309,802 (2011). Recent population statistics for the City are presented below.

A-14 Population of the City of Roanoke

1960 (U.S. Census) ...... 97,110 1970 (U.S. Census) ...... 92,115 1980 (U.S. Census)...... 100,220 1990 (U.S. Census) ...... 96,509 2000 (U.S. Census) ...... 94,911 2010 (U.S. Census)...... 97,032 2011 (Weldon Cooper Center) ...... 96,714 2012 (Weldon Cooper Center)...... 97,206

2011 Population by Age

1 - 19 ...... --- ...... 23,068 20-24 ...... 6,410 25 - 44 ...... 26,908 45-54 ...... 13,674 55 - 59 ...... 6,772 60-64 ...... 6,011 65-84 ...... 11,383 85+...... 2,488 Total...... 96,714

2011 Population by Race

White...... 66.3% Black...... 28.8% American Indian, Eskimo or Aleut ...... 0.3% OtherRace ...... 2.8% Asian or other Pacific Islander ...... 1.8% 100.00%

Sources: University of Virginia Weldon Cooper Center for Public Service, US Census Bureau Notes: Hispanics represent 5.6% of Roanoke's population and are included as part of several categories.

Personal Income

The following table compares per capita personal income for the City, the Commonwealth and the United States for recent calendar years:

Per Capita Income

2008 2009 2010 2011

City of Roanoke $38,276 $37,109 $38,110 $40,215 Commonwealth of Virginia 44,691 42,929 44,134 46,107 United States 40,947 38,637 39,791 41,560

Source: U.S. Bureau of Economic Analysis

A-is Construction Activity

The following table presents data on construction activity in the City during recent fiscal years:

Value of Building Permits

Commercial Residential Total Year Number Valuation Number Valuation Number Valuation

2001 572 $ 57,716,867 988 $45,045,159 1,560 $102,762,026 2002 499 64,101,308 875 36,855,003 1,374 100,956,311 2003 437 60,291,138 730 21,844,483 1,167 82,135,621 2004 871 57,922,598 303 17,995,045 1,174 75,917,643 2005 497 143,755,330 610 23,936,990 1,107 167,692,320 2006 512 193,157,052 673 30,206,738 1,185 223,363,790 2007 465 109,104,902 697 24,079,265 1,162 133,184,167 2008 456 233,358,448 754 29,442,647 1,210 262,801,095 2009 419 103,604,031 663 23,814,449 1,082 127,418,480 2010 467 92,266,288 709 25,004,592 1,176 117,270,880 2011 533 80,571,667 686 15,535,733 1,219 96,107,400 2012 538 69,398,478 678 14,628,255 1,216 84,026,733

Source: City of Roanoke, Department of Planning, Building and Development City of Roanoke, Comprehensive Annual Financial Report (CAFR)

Housing

The following data is presented to illustrate the nature of housing in Roanoke for recent fiscal years:

2008 2009 2010 2011 2012

Number of Single-Family Units 29,802 29,917 30,016 30,060 30,013 Number of Multi-Family Units 15,640 15,793 15,704 15,605 15,327 Total 45,442 45,710 45,720 45,665 45,340

Average Assessed Value - Single Family Unit Value $132,170 $132,798 $133,276 $133,340 $129,932

Source: City of Roanoke, Office of Real Estate Valuation.

The City is committed to providing housing in quality neighborhoods, an important part of economic development, by taking a multi-tiered approach to expanding its housing options and by diversifying housing opportunities. The City has designated Community Development Block Grant funds to targeted neighborhoods in an effort to maximize results on housing and urban development. This year the HUD target area is located in the West End area of the City. This area encompasses over 1,000 parcels and overlaps the Hurt Park, Mountain View and West End neighborhoods. Downtown living continues to be popular and recent renovated apartment housing this year includes the Lofts at West Station and the River House.

In the Hurt Park revitalization effort, over $6.0 million in Community Development Block Grant (CDBG) funds leveraged more than $3.0 million in cash and in-kind contributions from other public and private sources. Beginning in 2007 and winding down to completion in 2012, the Hurt Park project included such wide ranging elements as infrastructure, housing, community gardening and the recording of the oral history of the neighborhood.

The City is committed to encouraging economic growth in green-living housing and offers a special tax rate on the use of certain energy-efficient buildings. This program is available for buildings that exceed the energy

A-16 efficient standards as prescribed by the Virginia Uniform Statewide Building Code by thirty percent or more. To qualify for this special tax rate on the building, City Code indicates that certification as an energy-efficient building must be made by a qualified licensed registered design professional. An energy-efficient building may be any building that (i) meets or exceeds performance standards of the Green Globes Green Building Rating System of the Green Building Initiative, (ii) meets or exceeds performance standards of the Leadership in Energy and Environmental Design (LEED) Green Building Rating System of the U.S. Green Building Council, (iii) meets or exceeds performance standards or guidelines under the EarthCraft House Program, or (iv) is an Energy Star qualified home, the energy efficiency of which meets or exceeds performance guidelines under the Energy Star program developed by the United States Environmental Protection Agency. Under this new program, the City has received applications from homeowners in the Colonial Green Complex and several in the State and City Condo and 116 Campbell Avenue projects. The City currently has approximately 34 parcels that qualify for the Energy- Efficient Building Abatement.

Transportation

Economic activity in Roanoke is directly associated with the City's position as the major trade and transportation center in western Virginia, a position the City enjoys due to its location at the intersection of major rail and highway routes and the Roanoke Regional Airport. The following is a brief description of transportation facilities and services provided.

Highways

Located approximately equidistant between New York City and Atlanta, Georgia, Roanoke is connected to the nation's network of interstate highways by Interstate 81, which runs north and south through the Shenandoah Valley of Virginia. U.S. Route 460, connecting the City to Virginia's Tidewater port facilities and other interstate routes, provides direct east-west travel. U.S. Routes 220 and 11 provide alternate arteries for automotive traffic in the City's metropolitan statistical area. Interstate 581 connects the downtown and Roanoke Regional Airport directly with Interstate 81 and U.S. Route 220. Interstate 73, which will run from Michigan to South Carolina, is proposed to follow a route passing through Roanoke along Interstate 581.

Railroads

Roanoke was established in the late 1800s at the junction of the Norfolk and Western (N&W) and Shenandoah Valley railroads. In 1982, N&W and Southern Railway were consolidated into Norfolk Southern (NS), now one of the nation's largest and most prosperous transportation companies. Local operations of Norfolk Southern in Roanoke include Accounting, Communications and Signals, Finance and Treasury, Information Technology, Internal Audit, a Law Department for Claims, Maintenance of Way and Structures as well as Marketing, Material Management, Mechanical, Research and Tests, Safety and Environmental, and Taxation departments.

Norfolk Southern purchased land for an intermodal transportation terminal in Montgomery County, just twenty minutes southwest of the City. NS moved ahead with plans to build the necessary infrastructure to support the facility. The intermodal facility will be located near interstate 81. The terminal will transfer freight containers between truck and rail and will enhance economic development in the Roanoke region by affording local industries economical access to world markets.

Air Transport Services

As of 2012, Roanoke's Woodrum Field, which is owned and operated by the Roanoke Regional Airport Commission, is served by the regional affiliates of three major carriers including Delta Air Lines, United Airlines and US Airways and by a low cost carrier, Allegiant Air. These airlines offer 25 nonstop departure flights per day to seven major hubs, with one stop service to nearly 500 cities worldwide. Regional and/or full sized jet service is available from Roanoke to the nine destinations of Atlanta, Charlotte, Chicago, Detroit, New York, Philadelphia, Washington-Dulles, Orlando/Sanford and St. Petersburg.

A- 17 The Roanoke Regional Airport Commission, an independent subdivision of the Commonwealth of Virginia created in 1987, owns and operates the airport. The City of Roanoke and the County of Roanoke each appoint members to the Commission.

In 2011, 321,766 passengers were enplaned at the airport, and 22,574 scheduled passenger air carrier aircraft operations took place. Roanoke Regional Airport's primary and secondary passenger service areas extend outward over a 60-mile radius, encompassing at least 19 counties, including three in West Virginia. One full service and two specialty fixed base operators are located on the field, including a fully certified flight school. General aviation landings and takeoffs in 2011 totaled approximately 24,800.

In addition to air passenger carriers and general aviation users, two major air cargo companies fly into and out of the airport on a scheduled basis carrying 10,634 tons of air cargo in 2011. United States Customs provides services upon request.

The airfield consists of approximately 900 acres, with two runways. One runway is 5,810 feet long, and the other is 6,802 feet long to facilitate safe aircraft operations in adverse weather conditions. Both runways are equipped with instrument landing systems. A six-gate, 95,000-square-foot passenger terminal serves the airport.

Truck and Bus Service

A number of interstate carriers are authorized to operate in the area. Specialized trucking services in the region include hauling and rigging, tank trucks, household moving, and parcel delivery.

Passenger bus service is available via Greyhound Bus Lines, with numerous schedules daily for local and long distance travel.

The Greater Roanoke Transit Company (GRTC), which is owned by the City, provides local bus service for over 2.4 million passengers annually. GRTC provides transportation along 18 routes throughout the City and to specific destinations throughout the Roanoke Valley, the New River Valley and Lynchburg by way of the Smart Way Bus. GRTC owns and operates a state-of-the-art operation, maintenance and administrative facility and the Campbell Court Transfer Center in downtown Roanoke, which serves as the focal point for the bus routes. With a total fleet of 49 buses, GRTC operates 29 buses in the peak hours of operation and 20 buses in the non-peak hours. All of GRTC's buses are wheelchair accessible to better serve the community. The fleet consists of models dating 2001 through 2009.

A shuttle connecting Roanoke to Lynchburg's Amtrak station became a reality in July 2011 and marked the first run of the Smart Way Connector bus, operated by GRTC, between Roanoke and Lynchburg's Kemper Street Station, with a stop at the Bedford Welcome Center. The Connector is the result of more than $300,000 in federal and state grants. In addition to the Roanoke-to-Lynchburg route, the shuttle offers extended routes serving Salem, Christiansburg and Blacksburg on Fridays and weekends. Free parking is available at the Roanoke Civic Center for bus riders. The shuttle operates twice daily between Roanoke and Lynchburg's Kemper Street Station, with a stop at the Bedford Welcome Center. A one-way fare costs $4 per rider.

The City supports a long-term goal driven by the Virginia Department of Rail and Public Transportation to extend passenger rail service from Roanoke to Lynchburg and then to Washington D.C. The City is committed to doing its part by constructing a passenger rail station. As Roanoke is the largest city in Virginia without passenger rail service, the City expects that passenger rail service between Roanoke and Lynchburg will bring economic growth to the Roanoke metropolitan area.

Water and Wastewater Pollution Control

The Western Virginia Water Authority (Water Authority) was formed in July 2004 by the consolidation of the City's and the County of Roanoke's drinking water and wastewater pollution control functions. The Water Authority's mission is to ensure an adequate supply of drinking water and wastewater treatment for Roanoke Valley residents. The Water Authority provides drinking water to 155,000 citizens in the Roanoke Valley and Franklin

A-18 County, and wastewater service to more than 186,000 residents throughout the entire Roanoke Valley through contracts with other area localities. In 2009, Franklin County, Virginia joined the Authority as a member locality. The Water Authority is governed by a seven-member board, with three members appointed by the City of Roanoke, three members appointed by Roanoke County and one member appointed by Franklin County.

The Water Authority owns and operates the Carvins Cove Reservoir and Filtration Plant, the Spring Hollow Reservoir and Treatment Plant, the Crystal Spring Filtration Plant, and the Falling Creek Reservoir and Filtration Plant. The Water Authority maintains 1,093 miles of water mains, 874 miles of sewer mains and more than 5,643 fire hydrants in the City and County. It treats more than 37 million gallons of wastewater every day. The Water Authority completed an expansion to the Water Pollution Control Plant in 2007 increasing capacity to 55 million gallons per day (MGD).

Pursuant to an Operating Agreement between the City, the County, the Water Authority and the Virginia Resources Authority, the Water Authority assumed certain liabilities of the City of Roanoke and Roanoke County representing obligations secured by revenues related to the respective drinking water and wastewater utilities, and agreed to pay to the City and the County amounts equal to debt service due on the localities' liabilities not legally assumed by the Water Authority. The City's obligations not assumed by the Water Authority include the City's general obligation debt issued by the City for its Water and Water Pollution Control Enterprise functions. The Water Authority has agreed to pay to the City amounts equal to debt service on this general obligation debt. The Water Authority has covenanted under the Operating Agreement to fix, charge and collect rates, fees and charges sufficient to pay expenses of the Water Authority and pay debt service on assumed obligations and the City's affected general obligations.

Flood Remediation Efforts

In May of 2012, the City finalized the Roanoke River Flood Reduction project, a twenty year collaboration with the United States Army Corps of Engineers. This extensive project combining structural, environmental and recreational components will enable the City to reduce annual flood damage along the Roanoke River during severe weather. This was a $63.0 million dollar project of which the City contributed $19.7 million in an effort to ensure the safety and well-being of citizens, the environment and native flora and fauna.

Commerce, Industry and Employment

The economy of the City of Roanoke represents the economy of the entire Roanoke metropolitan statistical area (MSA). While the Cities of Roanoke and Salem and the Counties of Botetourt, Craig, Franklin and Roanoke have separate political identities, in economic terms they function as a single unit with the City of Roanoke as the economic hub. With an aggregate MSA population of approximately 309,000, the City of Roanoke maintains 31% of the population with 97,206 residents, followed closely by Roanoke County with 92,740 residents. It is estimated that there are upwards of 51,800 commuters into the City daily.

Roanoke's economy is well diversified, with 100% of all census-defined industries located within its boundaries. The City is home to six of the ten largest employers in the Roanoke MSA employing almost 50% of the area's employees. The economy of the City, as well as the entire Roanoke metropolitan area, is predominantly non- agricultural. The economic base consists of service industries, trade, manufacturing, public administration, construction, transportation, health services and other non-farm activities.

A-19 City of Roanoke Employment by Industrial Sector Second Quarter, 2012

Industry Employment* Health Care and Social Assistance 12,455 18.8% Retail Trade 8,512 12.9 Accommodation and Food Services 6,239 9.4 Transportation and Warehousing 4,819 7.3 Manufacturing 4,006 6.1 Construction 3,762 5.7 Educational Services 3,702 5.6 Administrative Support and Waste Management 3,478 5.3 Professional, Scientific and Technical Services 2,991 4.5 Management of Companies and Enterprises 2,881 4.4 Public Administration 2,846 4.3 Finance and Insurance 2,820 4.3 Other Services (except Public Administration) 2,590 3.9 Wholesale Trade 2,309 3.5 Information 1,000 1.5 Real Estate and Rental and Leasing 878 1.3 Arts, Entertainment and Recreation 515 0.7 Unclassified 372 0.5 Total 66,175 100.0%

Source: Virginia Employment Commission - 2d Qtr. 2012 Census of Employment and Wages * The table presents employment by industrial sector for the City based on calendar year

Annual Unemployment Rates

2008 2009 2010 2011 2012

Roanoke MSA * 3.9% 7.7% 7.4% 6.9% 6.5% Commonwealth of Virginia 4.0 6.9 6.9 6.2 5.7 United States 5.6 9.5 9.4 9.1 8.4

Source: U.S. Bureau of Labor Statistics City of Roanoke Comprehensive Annual Financial Report (CAFR) * MSA = Metropolitan Statistical Area

The largest industry, services, is mainly comprised of education and healthcare-related activities, professional and business services, leisure, hospitality, and other services and employs almost 50% of the valley's total employment, due, in part, to Roanoke's serving as the regional medical, leisure and cultural center of southwestern Virginia.

Trade also is a large industry in the region as a result of a combined population close to one million located within a one-hour drive of downtown Roanoke with effective buying income of over $10.8 billion and the fact that Roanoke is only a day's drive to two-thirds of the US population.

A-20 City of Roanoke Major Employers as of December 31, 2011 Approximate Employer Product or Industry Number of Employees Carilion Healthcare 5,000+ Roanoke City Public Schools Education 1,000+ Norfolk Southern Transportation 1,000+ City of Roanoke Governmental 1,000+ Advance Auto Parts Automotive Retail 1,000+ Anthem Health Insurance 500 to 999 Friendship Retirement Community Retirement Assisted Living 500 to 999 United States Postal Service Government 100 to 499 United Health Group Health Care 100 to 499 Steel Dynamics Metals 100 to 499

Source: Virginia Employment Commission 2 d Qtr. 2012 Census of Employment and Wages

Roanoke Metropolitan Area (Data Not Seasonally Adjusted)

December December 2010 2011 Labor Force Data (Place of Residence) Civilian Labor Force ...... 167,586 164,888 Employment ...... 155,700 154,200 Unemployment ...... 11,886 10,688 Percent of Labor Force (%) ...... 7.1 6.5 StateRate (%) ...... 7.0 6.4 NationalRate (%) ...... 9.7 9.1 Establishment Data (Place of Work) Total Employment ...... 163,300 154,800 Education Services, Health Care and Social Assistance 24,200 24,300 Government...... 22,000 21,600 Professional and Business Services ...... 20,500 20,100 RetailTrade ...... 18,600 18,600 Manufacturing ...... 15,900 16,200 Leisure and Hospitality ...... 12,800 12,800 Trade, Transportation and Utilities...... 8,900 8,700 Mining, Logging and Construction...... 8,300 8,000 Financial Activities ...... 8,000 7,600 Wholesale...... 7,600 7,600 Other Services (except public administration) ...... 6,900 6,800 Information...... 2,000 1,900

Source: Virginia Employment Commission.

Economic Development

The City of Roanoke continues to promote ongoing economic development activity with the City Council committed to creating jobs for its citizens and generating new sources of tax revenue. To accomplish these goals, the City concentrates on strengthening and diversifying the local economy. The following narrative highlights activities occurring in the City.

A-21 Site and Building Development

Riverside Centre for Research and Technology

The Riverside Centre for Research and Technology (RCRT), headquarters of several medical science entities, is a 110-acre technology park located along Jefferson Street and Reserve Avenue. Within RCRT, the Carilion Clinic completed its 110,000 square-foot office and laboratory complex headquarters building at a cost of $15 million in 2007. The outpatient medical clinic, a $70 million 250,000 square-foot facility, opened to patients in September 2009. The $59 million facility of the Virginia Tech Carilion School of Medicine and Research Institute (VTCRI), a four-year medical school and research institute, accepted its third class of forty-two students in August 2012 with a total enrollment of 126 for first, second and third year students.

The Research Institute opened its doors in September 2010 and immediately began assembling a dozen world class research teams to address some of the major health issues of our time. The mission of VTCRI is to advance the health of the nation and the world by making major scientific advances in understanding human health and developing new diagnostics, treatments and cures for disorders that limit the quality of life and the realization of full human potential. Through biomedical and behavioral research in 2010 and 2011, some of the discoveries made by the faculty, fellows, students and staff at the VTCRI have been featured in the New York Times, the Wall Street Journal, USA Today, US News, NPR, MIT press and the BBC as well as garnering major national and international awards.

In the first 21 months of operation, VTCRI had the following impact on Roanoke and is home to the world's largest longitudinal study of brain function and decision-making - the Roanoke Brain Study that will use functional imaging, genetic analysis and behavior to uncover key aspects of human brain development in health and in a wide variety of disorders.

20 research team leaders hired; plus 135 employees from 18 states and 11 countries; with payroll of $10.3 million and an average annual salary of $65,000

38 positions as teachers, scientists, artists, biotechnology entrepreneurs, coaches, engineers, business executives, physicians, counselors and editors

39 current active research grants with annual value of $12.4 million; a multi-year portfolio of $44.1 million pending; VTCRI start-up investment of $50 million; one bio-technology start-up company established in Roanoke and three in the process of starting

Creation of a well attended Distinguished Visiting Scholars and Public Lecture Series for Roanoke community and southwest Virginia

Collaborations with the Salem VA Hospital, the U.K., Norway, Korea, China, Germany, Princeton, Cal Tech, Emory, Duke, Wake Forest, UCLA and the Children's National Medical Center

Roanoke is recognized as a hub of world-wide functional brain imaging per scan network and home to the world's largest brain study

Near the center of the RCRT is a $27 million garage with a capacity of 1,500 automobiles. A rubber tired trolley, linking downtown food and retail vendors with RCRT, continues to be a popular choice for transportation between the Carilion campus, Carilion's downtown satellite offices, Jefferson College of Health and Sciences, and Roanoke's vibrant downtown.

A development team from Richmond, VA has contracted to design and construct a $100 million mixed-use development on the twenty acre site across Jefferson Street from VTCRI. The plan calls for a groundbreaking in early 2013.

A-22 Carilion Community Hospital, a former secondary hospital, discontinued inpatient services in 2010 and now serves the Jefferson College of Health Sciences with an enrollment of 1,300 students specializing in nursing, biomedical sciences, physicians, occupational therapy assistants, respiratory therapy and physician's assistant programs.

Roanoke Centre for Industry and Technology

The Roanoke Centre for Industry and Technology (RCIT) is a 496-acre City-developed business park located just minutes from Interstates 581 and 81. This industrial park was acquired, developed and marketed by the City. The City continues its excellent record of attracting top corporations, enhancing the tax base and creating jobs for its citizens. One hundred forty acres with five ready-to-go sites, ranging in size from seven to thirty-one acres, are now available. Fifty-six acres remain to be developed for future prospects.

Revenue generated from the corporations located in the RCIT exceeds the cost incurred by the City for the original site acquisition and park improvements. Present and future tax revenue will be used to continue this type of economic development.

FedEx Ground announced its relocation from Salem, expanding their Ground Division to a new 103,000 square-foot facility located in RCIT. The groundbreaking ceremony took place in 2012 and the facility is expected to open in 2013. The $12.7 million investment at RCIT is part of a nationwide expansion to boost daily package volume capacity and further enhance the speed and service capabilities of FedEx's Ground network. The new facility will be able to process 50,000 packages per day, up nearly 30,000 from its current regional facility in Salem. The facility will dispatch 80 trucks daily from the new location.

Corporations located in the RCIT currently employ in excess of 2,100 persons, have a combined investment in excess of $151 million, and occupy over 2 million square feet of space. These corporations include Crouse- Hinds, a division of Cooper Industries, R&K Engineering, Advance Auto, BellSouth Communications Systems, SEMCO, Elizabeth Arden, Orvis, Info Seal, Virginia Utility Protection Services, and Maple Leaf Bakery.

Roanoke Natural Foods Co-op, the largest cooperatively owned natural foods grocery store in Virginia, expanded their business model by starting a cooperative urban farm in Heritage Point which is also a historic area located within RCIT and hosts a restored 19th-Century cabin. The Heritage Point urban farm is approximately 25 acres and the largest contiguous farm in the United States. Roanoke Natural Foods Co-op is targeting to open a second store in downtown Roanoke in March 2013.

Deanwood Industrial Park

Deanwood Industrial Park, a 13 acre site, is located one-quarter of a mile from Interstate 581. Foot Levelers, Abal Material Handling, Azimuth, Inc., and Century Business Center have constructed facilities within the park. Foot Levelers constructed an employee wellness center and completed upgrades for their IT operations totaling approximately $1 million. Deanwood also houses Quality Coffee and Mountain Spring Water, Marco Supply Company, Hamco, and VBS Inc. Material Handling Equipment.

Downtown Development

In 2005, legislation established the Virginia Enterprise Zone program. An Enterprise Zone is a geographic area designated by the Governor. The City has two Enterprise Zones - Enterprise Zone One A, encompassing approximately 1,700 acres, qualifies for local and state incentives until December 2023. Enterprise Zone Two, approximately 1,077 acres, includes the largest inventory of vacant industrial sites in the city and qualifies for incentives until December 2015. These Enterprise Zone incentives have contributed to making downtown a vital, growing community.

The City is committed to the development of its downtown. Many renovations of downtown buildings are currently underway or recently completed, providing both retail and residential opportunities. The City issued a total of 1,216 building permits in fiscal year 2012 with a construction value of $84 million associated with those

A-23 permits. The City also issues permits for outdoor dining downtown with 18 downtown restaurants taking advantage of this opportunity.

Roanoke has seen significant residential development in the downtown area and fringe since 2001, with over 800 residential units available for lease or purchase by the summer of 2012 resulting in approximately 1,600 downtown residents. Most residential projects have included a mixed use component with retail or office development on ground floors. Recent highlighted projects include:

The Patrick Henry (132 residential units, retail/office spaces)

Big Lick Junction (15 residential units, Community High School)

West Station Lofts (72 residential units, restaurant)

Woolworth Building (12 residential units, 3 retail/office spaces)

The River House (128 luxury studios and 1 and 2 bedroom units, retail/office space/restaurant)

Roanoke businessman, Bill Elliott, purchased the former 36,000 square-foot Woolworth Building in downtown Roanoke and invested $4 million for the development of 22 parking spaces on the lower floor of the building, two commercial offices and ten residential units. The building was completed with the first tenants occupying the space in December 2011.

The River House, a 146,000 square-foot brick structure overlooking the Roanoke River opened in the third quarter of 2012 in the Wasena neighborhood of Roanoke with 128 luxury studios and 1 and 2 bedroom apartments in a location unlike any in the Roanoke Valley. This former ice house is directly adjacent to both the Roanoke River and the Roanoke Greenway, with mountain views and surrounded by city parks. The River House is a hidden oasis in the heart of the city. The River House features a full service restaurant, outdoor dining, a health club, a climbing wall and commercial retail space.

The Market Garage, which serves the Center in the Square, market plaza, and various downtown shops, has undergone a major upgrade with the development of retail space within the building. The Market Garage is designed to support additional floors and developers have recently inquired about and presented concepts for residential or mixed-use development on upper floors. The City is working with a Greenville, South Carolina based hotel developer for the design and construction of a three-story, 123 room select service hotel at the site.

The City funded $7.9 million toward the renovation of the Roanoke City Market Building, providing an improved function, appearance, and utilization of the structure. This renovation restored the historic character of the building, utilizing it to its full potential and included a third floor area, Charter Hall. The renovation was completed with a ribbon-cutting event in September 2011. Restoration of the building included replacing sewer lines beneath the main floor now graced with four mosaics by artist Cheryl Foster referencing city history. New features include longer operating hours and a rentable third-floor ballroom, Charter Hall, which includes a stage and movie projection screen. New restrooms were added to each of the three floors making the building fully accessible for handicapped visitors.

The renovation of the Roanoke City Market Building received the Public Works Project of the Year Award, a national recognition, from the American Public Works Association (APWA). The Roanoke City Market Building also received the APWA Mid-Atlantic Chapter's "Project of the Year" regional award in May 2012.

Hall Associates manages the building in conjunction with the Market Building Foundation, a seven member appointed board.

A-24 New Business - Corporate Expansions - Retention and Expansion

The following companies have established or expanded operations in Roanoke during 2011 - 2012:

National retail restaurants including Chipotle, Popeye’s, LongHorn Steakhouse, and Menchie’s opened investing more than $5 million in the City and hiring 85 full-time and 115 part-time employees.

Kohl’s Department Store invested $2.5 million and hired 130 employees.

Doctor’s Express, an urgent care facility located at Towers, chose Roanoke as their first Virginia venture, invested $850,000, and hired nine full-time employees.

Optima Health, a Sentara affiliate providing health plan coverage, opened with four full-time employees.

Days Inn Civic Center invested $2 million in renovations creating 14 new positions.

The first downtown Roanoke bed and breakfast, The Inn on Campbell, opened with three elegant suites.

16 West Marketplace, a mixed-use $4 million development, opened with a cafØ, a small grocery store, the S&W Market, Carilion's RAC Express, a chiropractic office and eight residential units.

Advance Auto Parts announced the addition of a Financial Services Commercial Customer Care Center to its operation and corporate headquarters in the City investing $8 million to support the expansion and other growth. The project will create 75 new jobs over the next three years at the Crossroads Corporate Business Center.

Corvesta Services, a dental benefits administration group announced plans to hire 35 new employees and invest $100,000 in their Roanoke location.

Mecury Data Exchange, an electronic data interchange for dental insurances, announced plans to create ten jobs and invest $100,000 in Roanoke.

The Small Cities Movement held the second City Works (X)po, an event exploring six spheres of exponential impact: Leadership & Good Government, Arts & Design, Capital & Social Entrepreneurship, Food & Drink, Outdoors & Recreation and Knowledge & New Media with over 500 attendees.

After 16 years in the Grandin Village, Reid’s Fine Furnishings expanded, adding 3,300 square feet to the Roanoke showroom and further establishing its presence as an anchor in the revitalized neighborhood.

Long-time Roanoke business owners such as Bill Johnson of Magic City Motor Corporation and Dave Booth of Quality Coffee Company passed the baton of leadership to their sons (Cameron Johnson and Brad Booth) to continue to grow business in the Roanoke Valley.

New Horizons Healthcare opened a new $10.7 million community health center building, a 32,000 square-foot facility located in northwest Roanoke.

A-25 Good Government Priority:

CERTAIN FINANCIAL PROCEDURES

Description of Funds

Roanoke's Comprehensive Annual Financial Report (CAFR) includes the funds utilized to provide financial accountability for City operations. The accounts of the City are organized on the basis of funds, each of which is considered to be a separate accounting entity. The transactions in each fund are accounted for by providing a separate set of self-balancing accounts which comprise its assets, liabilities, fund balance, retained earnings, revenues and expenditures/expenses. The following is a description of the funds included in the City's Comprehensive Annual Financial Report:

General Fund

The General Fund accounts for all revenues and expenditures which are not accounted for in the other funds. Included in the sources of revenue to the General Fund are general property taxes, other local taxes, fines and forfeitures, licenses, permits and privilege fees, the City's share of certain Commonwealth collected revenues and reimbursement of certain City expenses shared by the Commonwealth.

Major General Fund expenditures include the costs of general administration, public safety (police and fire), libraries, parks, community development, public works, health and welfare, transfers to the School Board, transfers to other funds to provide for certain capital expenditures, transfers to the Debt Service Fund to pay for debt service on general government debt, and operating transfers to Enterprise and Internal Service Funds.

Debt Service Fund

The Debt Service Fund accounts for the general long-term debt service of the City, including School debt. Bonded indebtedness related to the City's Civic Facilities and Parking Enterprise Funds is accounted for in each of its respective Enterprise Funds. Capital leases of Enterprise and Internal Service Funds are recorded in the respective funds. Receipts of the Debt Service Fund consist of transfers from the General Fund, reimbursements by the School Board, payments from the Western Virginia Water Authority and interest earnings.

Capital Projects Funds

These funds account for all transactions related to City and School capital improvement projects (other than the construction of enterprise facilities), which are financed principally through intergovernmental grants, the issuance of general obligation indebtedness, interest earnings, and transfers from the General Fund.

Enterprise Funds

Enterprise funds account for the financing of services to the general public where all or most of the operating expenses involved are recovered in the form of charges to users of such services. Enterprise Funds include Civic Facilities and Parking.

Internal Service Funds

These funds are used to account for services provided by certain departments to other departments on a cost reimbursement basis. Internal Service Funds include the Department of Technology, Fleet Management and Risk Management.

Fiduciary Funds

These funds account for the assets held in a trustee capacity or as an agent for others. The Fiduciary Funds include the Pension Trust Fund and the Other Postemployment Benefits (OPEB) Trust Fund, which account for the

A-26 operations of the City's pension system and an Agency Fund, which accounts for assets held for the Hotel Roanoke Conference Center Commission.

Comprehensive Annual Financial Report (CAFR)

Since 1973, the City's financial statements have been audited annually by independent certified public accountants. The most recently completed audit, for the fiscal year ended June 30, 2012, was performed by KPMG LLP, Certified Public Accountants, Roanoke, Virginia.

The Governmental Financial Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Roanoke, Virginia, for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2011. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized CAFR, whose content conforms to program standards. The CAFR must satisfy both U. S. generally accepted accounting principles and applicable legal requirements. A copy of the GFOA Certificate of Achievement is included in the introductory section of the CAFR.

A Certificate of Achievement is valid for a period of one year. The City of Roanoke has received a Certificate of Achievement for the last 36 consecutive years (fiscal years ended 1974 - 2011). The City believes this report conforms to the Certificate of Achievement program requirements and standards, and has submitted it to the GFOA to determine its eligibility for another certificate.

The accounting policies and procedures utilized by the City are in accordance with generally accepted accounting principles. Entity wide statements provide information about the City as a whole using the full accrual basis of accounting, which is the method used by most private-sector enterprises. All current year revenues and expenses are reported in the Statement of Activities regardless of when cash is received or paid. The modified accrual basis of accounting is used for the General, Debt Service, Special Revenue and Capital Projects Funds. Under this method, revenues are recognized in the accounting period in which they are objectively measurable and available. Expenditures, other than principal and interest on long-term debt and compensated absences, are recorded when the related liability is incurred. Principal and interest on long-term debt and compensated absences are recognized when due. Enterprise Funds, Internal Service Funds, Pension and OPEB Trust Funds are accounted for on the accrual basis of accounting.

The activities of Roanoke City Public Schools are reported as a separate School Component Unit. The School Board issues a separately published Comprehensive Annual Financial Report (CAFR) reflecting the operations of the public school system as a legally separate entity. The School Board's operations are presented in the City's CAFR in the form of a discretely presented component unit. Although legally separate, the City must include component units in the City's financial reporting for fair representation in conformity with Generally Accepted Accounting Principles.

The Greater Roanoke Transit Company (GRTC), a discretely presented component unit, has a seven member board composed of two City Council members, two City employees, one regional customer, one representative of the physically challenged community and one citizen of the community at large. GRTC issues separately published financial statements reflecting the operations of the public transit system as a legally separate entity.

The audited Comprehensive Annual Financial Report of the City for the fiscal year ended June 30, 2012 is set forth in Appendix C. It is available on the City's website at www.roanokeva.gov or from the Director of Finance, Noel C. Taylor Municipal Building, Room 465, 215 Church Avenue, S.W., P.O. Box 1220, Roanoke, Virginia 24011.

Budgetary Procedures

The City Charter requires the City Manager to submit a balanced budget to the City Council at least 60 days prior to the beginning of each fiscal year. The annual budget process begins during the second quarter of the previous fiscal year with the notification to department or agency heads of the general budget development

A-27 guidelines which utilize the Budgeting for Outcomes (BFO) process. Budget requests are then reviewed by staff in the Department of Management and Budget, Priority Teams and the Budget Committee. Following a detailed budget development process, including several Budget/Financial Planning Work Sessions with City Council, the City Manager prepares a recommended budget for submission to the City Council and citizens for input. The recommended budget includes any proposed adjustments in tax rates and fees for services.

The proposed budget of Roanoke City Public Schools, which includes local funding from the City of Roanoke, is submitted to the City Manager for incorporation into the budget development and adoption process. The City Council makes an annual appropriation of local funds to the School Fund, adopts the School Fund budget, and authorizes school capital projects.

After a public hearing and work sessions with the City Council, the recommended budget, as may be amended, is adopted in final form by the City Council. During the fiscal year, monthly reviews of revenues and expenditures are undertaken by the Department of Finance and the Department of Management and Budget and monthly financial statements are prepared and presented to the City Council.

The City received the Government Finance Officers Association (GFOA) Distinguished Budget Presentation Award for its annual budget document for the fiscal year 2011-12. In order to qualify for the Distinguished Budget Presentation Award, the City's budget document was judged to be proficient in several categories, including as a policy document, a financial plan, an operations guide and a communications device. The City has been a recipient of the Distinguished Budget Award for the last twenty-six consecutive years.

Financial Accounting Systems

All financial and accounting records of the City are maintained on the web-based Advantage Financial System, a product of CGI Group Inc. which is designed especially for local governments. Advantage is an integrated financial management system supporting the requirements for local government accounting and reporting established by the Governmental Accounting Standards Board (GASB). The City completed an upgrade to the Advantage System in October of 2011, as part of the upgrade project, increased efficiencies in administration and added a vendor self-service module to increase automation and enhance vendor access.

All of the financial and accounting records of the School Board are maintained on AptaFund, a product of Apta Software, which is designed specifically for meeting the business management needs for schools.

The City implemented GRM, Government Revenue Management, as the new cashiering and Real Estate tax system in March 2010. GRM is a product of Manatron, Inc. Future phases of revenue systems, including Personal Property Tax, Business License Tax and Trust Taxes, are currently being evaluated and will either be replaced or upgraded.

The payroll/human resources system was replaced in April 2010 with the Lawson system, a product of GGC Software Holdings, Inc., an affiliate of Golden Gate Capital and Infor. The City completed an upgrade to the Lawson system in September 2012 to make it compliant with Microsoft Windows 2008.

The City retirement system, originally developed in house, is currently being evaluated to meet expanding needs and future requirements and will either be replaced, upgraded or outsourced.

The current budget preparation system, Budgeting for Outcomes (BFO), was installed in 2010. It streamlined workflows and is conducive to a paperless budget process. The BFO system is a Net browser based application and Phase II was installed in 2011. The Department of Technology was presented with the Governor's Technology Award for Innovative Use of Technology in Local Government at the 2012 Commonwealth of Virginia's Innovative Technology Symposium (COVITS). The award recognized the Budgeting for Outcomes system as an innovative solution for achieving organizational goals and objectives.

A-28 Investment Management

The City's investment and cash management program is directed by the City's Investment Committee which is comprised of representatives from the offices of the Treasurer and the Director of Finance.

City funds are invested in accordance with the Code of Virginia. The City has adopted an investment policy, the objectives of which are to ensure safety and repayment of principal, provide flexibility to meet cash requirements, maximize investment of all available funds, obtain the highest competitive yield on investments and ensure investments are in compliance with the Reporting and Disclosure Regulations of the Governmental Accounting Standards Board. In accordance with its investment policy, the City has never invested in instruments referred to as derivatives, or structured investment products related to sub-prime mortgages, and does not employ leverage in its investments.

During the fiscal year ended June 30, 2012, the City's average portfolio size was approximately $45.0 million. This included investments of the governmental funds, proprietary funds and fiduciary funds, but excluded the City's Component Units, Hotel Roanoke Conference Center Commission (HRCCC), Pension Plan Trust Fund and OPEB Trust Fund. The funds are invested in a money market account, U.S. Treasury/Agency obligations, repurchase agreements, the Local Government Investment Pool managed by the Commonwealth of Virginia and certificates of deposit. It is the City's policy to hold only investments rated at least AAJA1 by Standard & Poor's, P-I by Moody's Investors Service, and B/C by Keefe, Bruyette & Woods, Inc.

GENERAL FUND REVENUES AND EXPENDITURES

The following is a discussion of the General Fund revenue structure and major classifications of General Fund expenditures. The information is based on audited data as of June 30, 2012. See Appendix C for the audited general purpose financial statements of the City relating to the General Fund for the fiscal year ended June 30, 2012.

Revenues

General Property Taxes. An annual ad valorem tax is levied by the City Council on the assessed value of real and personal property located within the City as of January 1 in the fiscal year proceeding the fiscal year in which the tax is due. The ratio of the assessed value of real property to its estimated fair market value is 100% as required by the Code of Virginia. During a reassessment, all property values are examined and adjustments are made where necessary to guarantee all property is assessed at market value. Real property taxes are payable in two installments, on October 5 and April 5 of the fiscal year in which they are levied. Personal property taxes are due on May 31, and are prorated in cases where a taxpayer owns the property only part of the year. A portion of personal property tax is paid by the Commonwealth of Virginia in accordance with the Personal Property Tax Relief Act, For the fiscal year ended June 30, 2012, property taxes (including penalties for late payment of prior years' taxes) represented 31% of total General Fund revenues.

Other Local Taxes. The City levies various other local taxes including sales and use taxes, a tax on consumer utility bills, business, professional and occupational license taxes, a cigarette tax, a transient lodging tax and a prepared food and beverage tax. Other local taxes represented 25% of total General Fund revenues for the year ended June 30, 2012.

Intergovernmental Revenue. The City and its School component unit receive revenue from the Commonwealth of Virginia for a portion of shared expenses including certain expenditures for social services, the operation of constitutional offices, non-categorical aid, law enforcement, highway construction, operation of correctional facilities and for education. Revenues from the Commonwealth of Virginia and Federal government represented 19% of total General Fund revenues in the fiscal year ended June 30, 2012.

Other Revenues. Other sources of revenue represented 25% of total General Fund revenues and include permits, fees, licenses, fines, forfeitures, rents, interest, charges for services and miscellaneous revenues.

A-29 Expenditures

Costs of General City Government. Payments for the costs of the operation of the City government are made from the General Fund. Such costs include expenditures for general and judicial administration, public safety, public works, health and welfare services, community development, parks, recreation and cultural and economic development. This classification represented 67% of total General Fund expenditures and transfers during the fiscal year ended June 30, 2012.

Costs of Education. A portion of the taxes levied by the City fund the operation of the City of Roanoke Public Schools. The local funding of the School Board component unit represented 29% of total expenditures and transfers from the General Fund in the fiscal year ended June 30, 2012.

Transfer to GRTC. Transfers are made in the form of operating subsidies or to fund capital projects. During the fiscal year ended June 30, 2012, such transfers represented 0.6% of the total General Fund expenditures and transfers.

Transfers to Debt Service Fund. Debt service requirements on City general government indebtedness are paid by a transfer from the General Fund to the Debt Service Fund. During the fiscal year ended June 30, 2012, such transfers represented 5.5% of total General Fund expenditures and transfers.

Transfer to Other Funds. Transfers are made to fund capital projects and provide local match on grants. Transfers are also made to proprietary funds in the form of operating subsidies or to fund capital projects. During the fiscal year ended June 30, 2012, such transfers represented 2.7% of the total General Fund expenditures and transfers.

SUMMARY OF GENERAL FUND REVENUES AND EXPENDITURES

Presented below are the summarized financial data for the General Fund revenues and expenditures as budgeted for the fiscal year ending June 30, 2013 and the actual amounts for the five fiscal years ended June 30, 2008 through June 30, 2012. Data for the fiscal year ending June 30, 2013 represents the initial adopted budget for the year.

Through the first five months of fiscal year ending June 30, 2013, General Fund revenue performance, including Real Estate tax (the City's largest single tax source) is consistent with budget expectations. Expenditures are up but expected to remain within the adopted budget at year end.

The summary statement for the fiscal years 2008 through 2012 has been compiled from the audited general purpose financial statements. Data for the fiscal year ended June 30, 2012 should be read in conjunction with the related general purpose financial statements and notes thereto appearing in Appendix C.

A-30 General Fund (a)

Adopted Budget Fiscal Year Fiscal Year Ended June 30 (b) Ending June 30 2008 2009 2010 2011 2012 2013(g) Revenues: Local Taxes (c) $ 180,842,482 $ 181,594568 $ 179,261,545 $ 186,384,579 $ 181,456,770 $ 175,020,000 Permits and Fees 1475,370 1,053,443 880,347 969,800 857,561 1,013000 Fines and forfeitures 1,558,039 1,558,517 1,615,265 1,805083 1,531,145 1,392,000 Rental Income 885,434 840,399 491,299 210,633 117,154 145,000 Investment Income 183,956 96,420 88,136 134,519 94,987 65,000 Intergovernmental 62,681,671 63,043,911 61,354,122 57,550,971 63,605,284 64,415,000 Charges for Services 10,955,336 11,616,042 10,834,925 10,216,932 10,262,192 10,399,000 Miscellaneous 712,979 670,344 586,998 681,407 587,977 471,000 Total Revenues 259,295,267 260,473,644 255,112,637 257,953,924 258,51 3,070 252,920,000 Expenditures: General government 13,403,927 13,019,273 11,995,937 12,861,339 13,230,881 13,203,888 Judicial administration 7,993,516 8,489,493 7,262,405 7,071,343 7,728,016 7,764,983 Public safety 62,730,398 60,731,173 59,706,307 58,911,155 60,759,569 59,571,489 Public works 23,663,876 24,841,431 23,860,980 22,133,031 24,215,517 24,072,560 Health and welfare (d) 42,206,410 42,757,293 42,219,985 38,487,026 36,936,203 37,050,775 Parks, recreation and cultural 11,086,757 10,723,453 9,114,363 9,072,709 9,246,396 9,297,299 Community development 7,238,720 6,881,431 6,559,100 5,983,027 5,954,115 5,914,612 Nondepartmental 13,470 15,329 26,537 65,591 46,778 50,000 Transfers (net): School Board Component Unit (e) 62,357,633 62,506,419 63,443,415 70,232,036 78,351,405 72,770,400 Greater Roanoke Transit Co. (f) - - 1,177,324 1,654,105 1,654,105 Debt service fund 18,990,690 21,431,722 22,064,166 18,952,750 14,394,942 14,005,255 Capital projects fund 5,705,216 2,416,218 1,890,040 5,367,837 2,763,509 1,527,439 Other 4,952,920 5,321,512 4,390,386 5,684,546 4,146,028 6,037,195 Total Expenditures and Transfers 260,343,533 259,134,747 252,533,621 255,999,714 259,427,464 252,920,000 Net increase (decrease) in Fund Balance (1,048,266) 1,338,897 2,579,016 1,954,210 (914,394) - Fund balance, beginning of year 22,090,973 21,042,707 22,381,604 24,960,620 26,914,830 26,000,436 Fund balance, end of year $ 21,042,707 $ 22,381,604 $ 24,960,620 $ 26,914,830 $ 26,000,436 $ 26,000,436

Notes (a) The summary has been prepared in accordance with generally accepted accounting principles prescribed by the Governmental Accounting Standards Board (GASB). See the general purpose financial statements included in Appendix C for more detailed information. (b) The above summary presents audited actual revenues, expenditures and fund balances of the General Fund of the City for the five fiscal years ended June 30, 2008 through June 30, 2012. (c) Effective July 1, 2012 (FY 2013), the meals tax reverted from 7% to 5%. (d) In FY 2013, daycare expenditures are paid directly by the Commonwealth and are no longer paid by or reimbursed to the City. (e) Reduction of school funding is related to the reduction in the meals tax in FY 2013. (f) Greater Roanoke Transit Company was discretely presented as a component unit effective July 1, 2010 (FY 2011). (g) Through the first six months of fiscal year ending June 30, 2013, General Fund revenue performance, including Sales Tax, Meals Tax and Transient Occupancy Tax exceeds budget expectations. Expenditures are slightly up but expected to remain within the adopted budget at year end.

A-31 TAX BASE DATA

The following data are presented to illustrate the trends and characteristics of the value of taxable property in Roanoke, property tax rates, tax collection experience, the ten largest holders of real property and taxable retail sales in the City during recent years.

Assessed Value of All Taxable Property

Public Total Total Real Personal Service Assessed Estimated Actual Year Property Property Corporations Value Value

2003 ...... $4,251,342,652 $685,231,130 $320,712,924 $5,257,286,706 $5,722,328,440 2004 ...... 4,558,900,600 6757390,754 372,880,650 5,607,172,004 6,062,851,434 2005 ...... 4,912,403,589 731,086,348 333,486,044 5,9767975,981 6,469,379,840 2006...... 5,351,633,570 762,403,478 303,859,616 6,417,8967664 6,931,028,926 2007 ...... 5,834,424,939 818,058,932 310,606,990 6,963,090,861 7,513,954,307 2008...... 6,256,495,314 836,674,524 314,604,888 7,407,774,726 7,972,224,770 2009 ...... 6,564,294,962 809,722,606 335,086,164 7,709,103,732 8,255,418,861 2010 ...... 6,698,391,113 758,872,026 359,212,368 7,816,475,507 8,324,026,044 2011 ...... 6,801,971,286 769,951 7558 353,515,462 7,925,438,306 8,442,505,382 2012...... 6,794,772,298 816,148,651 360,309,314 7,971,230,263 8,515,329,364

Source: City of Roanoke, CAFR as of June 30, 2012.

Property Tax Rates (Per $100 Assessed Value)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Real Property ...... $1.21 $1.21 $1.21 $1.21 $1.19' $1.19 $1.19 $1.19 $1.19 $1.19 Personal Property ...... 3.45 3.45 3.45 3.45 3.45 3.45 3.45 3.45 3.45 3.45 Public Service Corporations 1.21 1.21 1.21 1.21 1,19 1 1.19 1.19 1.19 1.19 1.19

Source: City of Roanoke, CAFR as of June 30, 2012,

The real estate tax rate was $1.19 per $100 of assessed value effective July 1, 2006.

Assessed Value of Taxable Commercial Real Estate Property

Commercial Commercial Real Property Year Property* Property Percentage

2007 $1,931,369,600 $5,834,424,939 33.10% 2008 2,069,704,700 6,256,495,314 33.08% 2009 2,179,564,000 6,564,294,962 33.20% 2010 2,246,241,300 6,698,391,113 33.53% 2011 2,259,017,600 6,801,971,286 33.21% 2012 2,302,447,100 6,794,772,298 33.88%

Source: City of Roanoke, Office of Real Estate Valuation. *Excludes Assessed value for multi-families, residential, exempt property, and public service corporations.

A-32 General Property Tax Levies and Collections

Total Collection of % of Current Current & & Delinquent Current % of Delinquent Delinquent Collected to Year Total Levy Collections Levy Collections Taxes Tax Levy

2003 ...... $78,984,813 $76,880,908 97.34 $3,012,105 $79,893,013 101.15* 2004 ...... 82,947,318 80,387,299 96.91 2,648,525 83,035,824 100.11* 2005 ...... 88,719,548 86,637,584 97.65 2,887,966 89,525,550 100.91* 2006 ...... 94,754,245 91,692,825 96.77 2,716,537 94,409,362 99.64 2007 ...... 101,301,039 97,850,338 96.59 3,355,898 101,206,236 99.91 2008 ...... 106,316,893 103,695,405 97.53 3,362,031 107,057,436 100.70* 2009 ...... 110,034,071 106,802,761 97.06 3,450,543 110,253,304 100.20* 2010 ...... 110,098,047 108,909,000 98.92 2,186,663 111,095,663 100.91* 2011 ...... 112,560,131 110,206,115 97.91 2,333,454 112,539,569 99.98 2012 ...... 112,485,925 111,769,211 99.36 2,153,199 113,922,410 101.28*

Source: City of Roanoke, CAFR as of June 30, 2012. *Collections may exceed levies due to increased collections in the current year of amounts levied in prior years.

Ten Largest Taxpayers

The following data show the assessed value of the real and personal property of the ten largest holders of real and personal property in the City for the fiscal year ended June 30, 2012.

Percentage of 2012 Assessed Total Assessed Taxpayer Description Valuation Valuation

Carilion ...... Healthcare Provider $213,234,881 2.71% Appalachian Power ...... Public Utility 124,033,424 1.58 Norfolk Southern Railway ...... Transportation 105,738,441 1.35 Valley View Mall LLC ...... Shopping Mall 74,940,200 0.95 Verizon Virginia, Inc...... Communications 54,429,194 0.69 Roanoke Gas Company ...... Public Utility 35,676,545 0.00 Maple Leaf Bakery...... Bakery 30,796,449 0.45 Faison Roanoke Office Division Office Building 30,770,100 0.39 Advance Auto Parts ...... Auto Parts 29,092,678 0.37 Steel Dynamics Roanoke Division Primary Metals 25,038491 0.32 Total $723,750,403 9.20%

Source: City of Roanoke, CAFR as of June 30, 2012 and the City of Roanoke Commissioner of the Revenue.

A-33 Taxable Retail Sales

Calendar Year Total Retail Sales

2003 ...... $1,621,479,275 2004 ...... 1,712,570,484 2005 ...... 1,599,236,967 2006 ...... 1,876,508,609 2007 ...... 1,900,930,872 2008 ...... 1,925,487,309 2009_ ...... 1,692,267,903 2010 ...... 1,676,331,018 2011 ...... 1,649,614,469 2012 thru June ...... 859,568,776

Source: Virginia Department of Taxation, City of Roanoke, CAFR as of June 30, 2012. Notes: Data exclude prescription drug sales.

DEBT ADMINISTRATION

Pursuant to the Constitution of Virginia and the Virginia Public Finance Act of 1991 (Chapter 26 of Title 15.2, Code of Virginia, 1950 (the "Act")), a city in Virginia is authorized to issue general obligation bonds secured by a pledge of its full faith and credit. In addition to the authority to issue general obligation bonds pursuant to the Act, the City is authorized to issue bonds under its Charter provided such issuance is approved at a referendum of voters in the City. In either case, for the payment of such bonds, the governing body of the City is required to levy, if necessary, an ad valorem tax on all property in the City subject to local taxation. The issuance by cities in Virginia of bonds or other interest bearing obligations is subject to a limitation of 10% of the assessed value of real property in the city subject to taxation as shown by the last preceding assessment for taxes. In determining the limitation, certain classes of indebtedness may be excluded, including revenue bonds, general obligation bonds payable from a specific revenue producing undertaking, and revenue anticipation notes maturing in one year or less.

The City's debt policy includes the following guidelines: Net debt will not exceed 4% of the assessed value of real estate, personal property and public service corporations; tax supported general obligation debt service shall not exceed 10% of General Fund expenditures; and tax-supported debt will be structured in a manner such that not less than 60% of the aggregate outstanding tax-supported debt will be retired within ten years. The City monitors these ratios to ensure ongoing compliance with the Debt Policy. Furthermore, the annual budget and financial planning sessions held between City Council and the administration provides a forum for discussion of the City's long term capital financing plans.

A-34

The City had outstanding $260,140,493 of general obligation bonds, Virginia Public School Authority (VPSA) bonds, Qualified Zone Academy Bonds (QZAB) and literary loans as of June 30, 2012, as follows;

Public Improvements ...... $ 87,698,863

School Projects ...... 128,112,348 Public Improvements -Utilities ...... 17,558,082

Civic Facilities ...... 12,904,200

Parking Garages ...... 13,867,000

Total ...... $ 260,140,493

General Obligation Bonds to be contractually repaid by the Western Virginia Water Authority. The public improvements, Civic Facilities, and certain school indebtedness shown above are provided from the General Fund of the City. The Parking Fund covers debt service on garage facilities. If funding in an Enterprise Fund is not sufficient to pay debt service, the City Council is obligated to make such payment from the General Fund or from any other available monies.

On October 31, 2012, the City issued Qualified Zone Academy Bonds (QZAB) through the Virginia Public School Authority (VPSA). These bonds are School Tax Credit Bonds and were issued under the American Recovery and Reinvestment Act of 2009 (ARRA), in the amount of $2,014,104 on behalf of Roanoke City Public Schools. These bonds were issued for qualified school rehabilitation capital projects. There are no interest costs to the City on these bonds.

Legal Debt Margin

The City's legal debt margin at June 30, 2012 was $452,213,718 as computed below: Assessed Value of Real Estate, 2012 $ 6,794,772,298

Legal Debt Limit, 10% of $6,974,772,298 $ 679,477,230 Debt applicable to limitation: General Obligation Serial Bonds - Governmental Activities $ 170,927,717 General Obligation Serial Bonds - Western Virginia Water Authority 17,558,082 State Literary Fund Loans 2,440,000 Virginia Public School Authority (VPSA) School Bonds 40,825,297 Qualified Zone Academy Bonds (QZAB) 1,618,197 Section 108 Loan Hotel Roanoke Conference Center Commission 910,000 Civic Facilities Enterprise Fund - Business-Type Activities 12,904,200 Parking Enterprise Fund Supported Debt - Business-Type Activities 13,867,000 Deferred Bond Costs - Enterprise Fund Supported Debt (459,633) Total Bonded Debt 260,590,860 Less: Available in Debt Service Fund (1,317,554) Western Virginia Water Authority Supported Debt (WVWA) (17,558,082) Hotel Roanoke Conference Center Commission Supported Debt (910,000) Parking Enterprise Fund Supported Debt (13,867,000) Deferred Bond Costs - Parking Enterprise Fund Supported Debt 325,288 227,263,512 Legal Debt Margin $ 452,213,718

A-35 Source: City of Roanoke, CAFR as of June 30, 2012.

Amortization Schedules

Total principal and interest payments to retire all outstanding indebtedness of the City are shown in the following tables:

Tax-Supported Indebtedness*

Outstanding Prior to Current Issue** Current Issue Fiscal Year (Net of Debt Service on Refunded Bonds) Ending June 30 Principal Interest Subtotal Principal Interest Subtotal Total

2013 $ 22,232,333 $ 9,212,520 $ 31,444,853 $ - $ - $ - 31,444,853 2014 21,872,217 7,525,030 29,397,247 - 983,927 983,927 30,381,174 2015 18,439,133 6,734,887 25,174,019 1,140,000 1,104,012 2,244,012 27,418,031 2016 18,837,860 5,927,737 24,765,597 1,915,000 1,081,280 2,996,280 27,761,876 2017 14,988,113 5,272,730 20,260,843 3,175,000 1,048,811 4,223,811 24,484,654 2018 14,003,481 4,783,864 18,787,345 3,805,000 1,008,669 4,813,669 23,601,014 2019 13,450,902 4,187,597 17,638,498 3,455,000 959,312 4,414,312 22,052,810 2020 11,792,599 3,698,417 15,491,015 4,660,000 893,091 5,553,091 21,044,106 2021 12,717,720 3,168,758 15,886,478 985,000 839,899 1,824,899 17,711,377 2022 10,599,883 2,687,188 13,287,072 2,420,000 776,729 3,196,729 16,483,800 2023 6,784,177 2,282,145 9,066,322 3,725,000 655,648 4,380,648 13,446,970 2024 6,517,744 1,888,376 8,406,120 3,735,000 489,640 4,224,640 12,630,760 2025 7,643,698 1,475,775 9,119,473 3,100,000 352,492 3,452,492 12,571,965 2026 5,625,839 1,138,811 6,764,650 1,905,000 260,025 2,165,025 8,929,675 2027 5,115,173 910,465 6,025,638 590,000 200,600 790,600 6,816,238 2028 4,585,222 710,335 5,295,557 590,000 177,000 767,000 6,062,557 2029 4,242,710 520,501 4,763,211 590,000 153,400 743,400 5,506,611 2030 3,006,550 370,150 3,376,700 590,000 129,800 719,800 4,096,500 2031 2,866,550 253,606 3,120,156 590,000 103,250 693,250 3,813,406 2032 2,076,550 153,310 2,229,860 590,000 73,750 663,750 2,893,610 2033 1,681,550 66,780 1,748,330 590,000 44,250 634,250 2,382,580 2034 91,550 - 91,550 590,000 14,750 604,750 696,300 2035 91,550 - 91,550 - - - 91,550

TOTAL $ 209,263,103 $ 62,968,982 $ 272,232,084 $ 38,740,000 $ 11,350,333 $ 50,090,333 $322,322,417

* Includes Public Improvement Bonds for the City and School Board, Virginia Public School Authority Bonds, Literary Fund Loan Bonds, Qualified Zone Academy Bonds, Qualified School Construction Bonds, Civic Facilities General Obligation Bonds and Capital Leases. * * Recovery Zone Economic Development Bonds and Qualified School Construction Bonds debt service is net of interest subsidy.

A-36 Parking Enterprise Fund Supported General Obligation Indebtedness

Outstanding Prior to Current Issue Current Issue Fiscal Year (Net of Debt Ser-vice on Refunded Bonds) Endine June 30 Principal Interest Subtotal Principal Interest Subtotal Total

2013 $ 655,000 $ 584,885 $ 1,239,885 8 - $ 41,826 $ 41,826 $ 1,281,711 2014 703,900 510,226 1,214,126 - 47,350 47,350 1,261,476 2015 722,000 487,346 1,209,346 - 47,350 47,350 1,256,696 2016 843,500 455,359 1,298,859 - 47,350 47,350 1,346,209 2017 768,300 422,620 1,190,920 47,350 47,350 1,238,270 2018 796,500 395,597 1,192,097 - 47,350 47,350 1,239,447 2019 830,100 360,241 1,190,341 140,000 46,300 186,300 1,376,641 2020 713,600 329,702 1,043,302 - 45,250 45,250 1,088,552 2021 895,400 293,151 1,188,551 135,000 42,550 177,550 1,366,101 2022 783,700 255,964 1,039,664 310,00) 33,650 343,650 1,383,314 2023 450,000 224,572 674,572 325,000 19,325 344,325 1,018,897 2024 470,000 203,294 673,294 140,000 9,100 149,100 822,394 2025 650,000 180,969 830,969 140,000 3,500 143,500 974,469 2026 535,000 150,234 685,234 - - - 685,234 2027 555,000 124,913 679,913 - - - 679,913 2028 585,000 98,631 683,631 - - 683,631 2029 415,000 71,197 486,197 - - - 486,197 2030 435,000 50,253 485,253 - - - 485,253 2031 370,000 29,906 399,906 - - - 399,906 2032 390,000 10,144 400,144 - - - 400,144

TOTAL $ 12,567,000 $ 5,239,203 $ 17,806,203 $ 1,190,000 $ 478,251 $ 1,668,251 $ 19,474,454

General Obligation Indebtedness to be Paid Contracually by Western Virginia Water Authority

Outstanding Prior to Current Issue Current Issue Fiscal Year (Net of Debt Ser'ice on Refunded Bonds) Endine June 30 Principal Interest Subtotal Principal Interest Subtotal Total

2013 $ 2,373,182 $ 542,035 $ 2,915,217 $ - $ - $ $ 2,915,217 2014 2,400,000 365,032 2,765,032 - - - 2,765,032 2015 1,021,400 290,403 1,311,803 - - - 1,311,803 2016 562,700 258,364 821,064 821,064 2017 1,191,900 237,875 1,429,775 - - - 1,429,775 2018 1,210,700 216,643 1,427,343 - - 1,427,343 2019 1,233,400 189,759 1,423,159 - - - 1,423,159 2020 1,263,200 156,823 1,420,023 - - - 1,420,023 2021 1,305,400 118,921 1,424,321 - - - 1,424,321 2022 1,331,200 75,727 1,406,927 - - - 1,406,927 2023 925,000 40,765 965,765 - - - 965,765 2024 945,000 13,995 958,995 - - - 958,995

TOTAL $ 15,763,082 $ 2,506,342 $ 18,269,423 $ - $ - $ - $ 18,269,423

A-37 Debt Ratios

The following data is presented to show trends in the relationship of the net general obligation bonded indebtedness of the City to its estimated population and to the assessed value of taxable property in the City.

Ratio of Net General Obligation Bonded Debt to the Assessed Value of Taxable Property and Net Bonded Debt Per Capita Last Ten Fiscal Years

Bonds Ratio of Bonds Supported Bonds Net Supported By Western Supported Amount Bonded Net Total Gross By Virginia By Hotel Available in Debt to Bonded Fiscal Assessed Bonded Enterprise Water Roanoke, Debt Service Net Bonded Assessed Debt Per Year Population Value Debt Funds (a) Authority (b) LL() Fund (d) Debt Value c8pjia

2003 93,100 $5,257,286,706 $228,050,952 $44,517,751 $ - $ - $14,436,613 $169,096,588 2.96% $1,816.29 2004 92,900 5,607,172,004 223,671,734 41,504,678 - - 15,061,934 167,105,122 2.76% 1,798.76 2005 92,671 5,976,975,981 256,369,208 7,818,130 33,435,000 - 988,465 214,127,613 3.31 % 2,310.62 2006 92,994 6,417,896,664 281,808,817 9,863,867 31,315,992 - 1,063,737 239,565,221 3.46% 2,576.14 2007 92,024 6,963,090,861 274,026,551 9,160,142 28,924,766 - 1,021,667 234,919,976 3.13% 2,552.81 2008 93,734 7,407,774,726 298,775,968 10,974,761 26,596,538 - 1,143,782 260,060,887 3.26% 2,774,46 2009 94,482 7,709,103,732 304,071,803 15,160,308 24,255,948 - 1,161,895 263,493,652 3.19% 2,788.82 2010 97,032 7,816,475,507 283,602,637 15,632,575 21,987,683 - 1,213,260 244,769,119 2.94% 2,522.56 2011 97,206 7,925,438,306 277,658,304 14,627,811 19,875,450 1,355,000 1,133,011 240,667,032 2.85% 2,475.85 2012 97,206 7,971,230,263 260,590,860 13,541,712 17,558,082 910,000 1,317,554 227,263,512 2.68% 2,337.96

Source: City of Roanoke CAFR June 30, 2012.

(a) FY04 through FY12 amounts exclude Civic Facilities outstanding balances. Beginning FY04, Civic Facilities debt is no longer to be considered self-supporting by the Civic Facilities Fund but instead supported by the taxing power of the City. (b) The Authority was formed in July, 2004. While the City's assets related to its Water and Waste Water Enterprise Funds were transferred to the Authority, the City's related General Obligation Bonds could not be assumed by the Authority. Under an Operating Agreement with the City, the Authority agreed to pay the City amounts sufficient to pay debt service on the related General Obligation Bonds, and to fix, charge, and collect rates, fees, and charges sufficient to pay operating expenses and debt service on the City's corresponding General Obligation Bonds. (c) Effective FYI 2, Hotel Roanoke, LLC debt was excluded from total bonded debt as a result of a change in the reporting of the Hotel Roanoke, LLC Note Receivable at the entity-wide level. See footnotes 3 and 8 of the City's FYI CAFR.

(d) In FY05, excess Debt Service Fund balance was transferred to the General Fund to establish a Budget Stabilization Reserve per the City's Reserve Policy. In FYI 1, in accordance with Governmental Accounting Standards Board (GASB) Statement No. 54, the reserve was renamed the Unassigned General Fund Reserve.

A-38 CAPITAL IMPROVEMENT PROGRAM- FUTURE BORROWING REQUIREMENTS

Prior to adoption of the annual capital and operating budgets, the City Manager presents a capital improvement program ("CIP") to the City Council. In development of this plan, particular attention is focused upon the first year of the plan since it subsequently affects the City Manager's capital budget request for the ensuing fiscal year. The CIP presents information on each project in detail.

The current CIP covers the fiscal years 2013 through 2017, and provides for the following proposed expenditures and projected sources of funding as presented in the following tables:

Capital Improvement Program Fiscal Year(s) 2013-2017 Summary of Estimated Expenditures

Fiscal Year(s) Ending June 30 Project Classification 2013 2014-2017 Total Cost

Public Buildings ...... $ 207,400 $ 13,787,600 $ 13,995,000 Economic Development...... 1,195,000 600,000 1,795,000 Parks ...... 4,202,220 9,986,660 14,188,880 Public Schools...... 1,900,000 20,260,000 22,160,000 Stormwater Management ...... 2,216,599 4,518,315 6,734,914 Streets, Sidewalks and Bridges...... 5,782,555 25,753,761 31,536,316 Civic Center Facility ...... 1,456,723 6,000,000 7,456,723 Technology...... 353,532 801,858 1.155,390 $ 17,314,029 $ 81,708,194 $ 99,022,223

Sources of Funds: FY 2013 2017

Existing/Future Capital Funds ...... $ 5,357,969 Intergovernmental Funding ...... 2,984,582 GeneralRevenue ...... 1,150,619 General Obligation Bond Issues ...... 89,529,053 $ 99,022,223

Source: City of Roanoke Capital Improvement Plan FY 2013-2017

EMPLOYEE RETIREMENT PLANS

The City of Roanoke Pension Plan (Pension Plan) covers substantially all full-time regular City employees, except for employees of the Roanoke Sheriff's Department who participate in the Virginia Retirement System (VRS), and certain non-professional School Board employees. The Pension Plan is a defined benefit plan established by the City Council and is included in the City's financial statements as the Pension Trust Fund. The Pension Plan consists of the Employee's Retirement System (ERS) for employees hired before July 1, 1984 and the Employee's Supplemental Retirement System (ESRS) for employees hired on or after July 1, 1984. City employees do not contribute to the Pension Plan. The City's contribution rate is based on an actuarially determined amount. The Pension Plan received employer contributions of $9,427,062 in fiscal year 2011 and $10,337,831 in fiscal year 2012.

A-39 Contribution rates as a percentage of covered payroll for the most recent five years were as follows:

Year ended June 30, 2008 15.73%

Year ended June 30, 2009 15.42%

Year ended June 30, 2010 15.42%

Year ended June 30, 2011 15.98%

Year ended June 30, 2012 18.04%

Retirement benefits for employees who are in the ERS are determined as a percentage of the highest twelve consecutive months of salary based on years of creditable service. Normal retirement age is age 60 or 30 years of service. The Pension Plan provides for early retirement after 20 years of service whereby employees receive a reduced retirement benefit.

Retirement benefits within the ESRS are determined as a percentage of the average of the highest thirty-six consecutive months of salary based on years of creditable service. For most employees, normal retirement age is age 50 with age and service equal to 80. Normal retirement age for firefighters and police officers is age 45 with age and service equal to 70. The system also provides for early retirement. Employees are vested after five years of creditable service.

The City's policy is to fully fund actuarially determined pension costs, which include both normal costs and amortization of unfunded accrued liability. Pension Trust Fund investments are recorded at fair value. The fair value is based on quotations obtained from national security exchanges. Security transactions are recognized on the trade date which is the date the order to buy or sell is originated. Securities lending fees are included as a component of investment expenses.

The liability for unfunded accrued liabilities for the City of Roanoke Pension Plan is being amortized over a closed period of 25 years from the date of establishment. At June 30, 2012, the latest valuation date, the Plan was 81.4% funded, with an unfunded actuarial accrued liability of $73,102,484. The pension benefit obligation of $393,558,477 exceeded the market value of net assets available for benefits of $320,545,500 by $73,012,977.

The Virginia Retirement System (VRS) is administered by the Commonwealth of Virginia. Professional School Board employees and Sheriffs employees participate in VRS. Contribution rates, which are actuarially determined by the VRS, are intended to fund normal cost plus amortization of unfunded accrued liabilities over not more than a 30 year period. However, actual contribution rates are set by the General Assembly. Employee contribution rates, which are paid by the employer, remain constant at five percent of covered payroll. For the year ended June 30, 2012, the City contributed $971,795 on behalf of Sheriffs employees, and the Schools contributed $7,531,647 on behalf of its employees, representing all required employer and employee contributions.

In 2010, the City began a review of its retirement benefits, and after two years of continued efforts, amendments were adopted on July 16, 2012. The City's goals of the Pension Reform project were to provide competitive benefits to attract, motivate and retain employees, ensure that such benefits are sustainable and acceptable to the community, employees and elected officials, and maximize the return on assets to provide for a given investment. Changes include a choice of plan types, an employee contribution, and a Retirement Health Savings Account (RHSA) option. The anticipated effect of the plan reforms is to maintain the City's future contribution rate at approximately 15%.

A-40 See Note 11 to the financial statements included herein in Appendix C for more detailed information on the retirement systems as of the June 30, 2012 valuation date.

Other Post-Employment Benefit Plans

The City's Post Retirement Health Plan provides eligible City employees the opportunity to continue health insurance coverage upon retirement. The Plan was established by the City Council and is included in the City's financial statements as the Other Post-Employment Benefit Plans (OPEB) Trust Fund.

The City's policy is to fully fund actuarially determined OPEB costs, which include both normal costs and amortization of unfunded accrued liability. Assets of the OPEB Trust fund are held in the Virginia Pooled OPEB Trust Fund (OPEB Trust Fund). The OPEB Trust Fund investments are recorded at fair value. The Virginia OPEB Trust Fund Board of Trustees establishes investment objectives, risk tolerance and asset allocation policies in light of the investment policy, market and economic conditions, and generally prevailing prudent investment practices.

The City's annual OPEB cost is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liability over a period not to exceed 30 years.

Employees who retire from the City of Roanoke with 15 years of continuous service who are enrolled in the City's health plan at the date of retirement and are under the age of 65, are eligible to participate in the City's Post-Retirement Health Plan.

Retirees participating in the Post Retirement Health Plan benefit from a lower insurance rate as a result of inclusion in the plan with active City employees. This lower rate results in an implicit benefit that qualifies as an Other Post-employment Benefit as defined by GASB Statement No. 45. Although the City's annual payments were for combined participants, the share of claims related to retirees represents a higher percentage of the total claims. Accordingly, contributions reflected in the OPEB calculations have been adjusted to reflect that a portion of contributions for active employees are subsidizing the retiree claims. For the fiscal year ended June 30, 2012, the retirees contributed $1,078,000 to the City of Roanoke healthcare plan for health insurance. The City contributed $259,000 to a qualified trust as defined by GASB Statement No. 45, to fully fund the annual required contribution of $1,278,000 for fiscal year 2012. It is the City's intent to fully fund the annual required contribution each year. The City overfunded the plan in fiscal year 2012 by $62,000, which includes a net adjustment of $3,000 to the annual required contribution, as required in GASB Statement No. 45.

The Line of Duty Act (LODA) provides benefits to local government employees who hold specified hazardous duty positions (Code of Virginia §9.1-400 et seq.). By statute, LODA benefits must be provided. The Virginia Department of Accounts administers the benefit.

The Line of Duty plan is a single employer OPEB plan to provide a death benefit of $100,000 to beneficiaries of public safety officers who die in the line of duty and a death benefit of $25,000 to beneficiaries of public safety employees who die within five years of becoming disabled as a result of a qualifying illness as defined in the LODA. A medical benefit is also provided to the disabled public safety employees as well as their spouses and dependants and, if circumstances dictate, their surviving spouses and dependants. The Commonweath of Virginia has the authority to establish and amend Line of Duty Plan benefits. The City of Roanoke Line of Duty plan does not issue a stand alone financial report.

The City's annual Line of Duty cost is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The City's policy is to fully fund actuarially determined LODA costs. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liability over a period not to exceed 30 years.

A-41 Assets of the OPEB/LODA Trust fund are held in the Virginia Pooled OPEB Trust Fund (OPEB Trust Fund). The OPEB Trust Fund investments are recorded at fair value. The Virginia OPEB Trust Fund Board of Trustees establishes investment objectives, risk tolerance and asset allocation policies in light of the investment policy, market and economic conditions, and generally prevailing prudent investment practices.

For the fiscal year ended June 30, 2012, the City contributed $311,200 to a qualified trust as defined by GASB Statement No. 45, to fully fund the annual required contribution of $238,000 for fiscal year 2012, resulting in an overfunding of $72,400. It is the City's present intention to fully fund the annual required contribution each year.

A-42 APPENDIX B

~ti ~Rmmd L~7

I I Commissioner of I I Commonwealth I Clerk of Circuit I City [it Council jeriffIJaII I Treasurer J be Revenue J J L Attorn ey J Court_J

Committees, Direc Boards & City Clerk Atto] Manager] MunicipalF Auditor] School BI] Lji

Assistant City Manager Isistant City Manager Staff! Other chool Board] Function Operations Community Developme nt j tA~~ ] Fs

man Services I L_1 iat') Office of Civic Facilities] Communication Social Service]

Economic Fire I EMS Libraries Development 1

r Market General Parks& Building Services Recreation J City of Roanoke, Virginia Human Planning, Building Organizational Chart Parking -F Resources & Development J FY20 11 - 2012

Management Police 1 & Budget

Public Works Supreme Court of IudkialBraflcb Virginia Technology Circuit Court

Clerk of Circuit Court

venue & DomesticlI General District Board of Electoral Board Magistrate I I Relations Court J Court Equalization

rk of General Registrar venile & Domestic rDistrictCourt

Court Services -

mile & Dom Court Clerk [This Page Intentionally Left Blank] APPENDIX C

COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF ROANOKE, VIRGINIA, FOR THE FISCAL YEAR ENDED JUNE 30, 2012 [This Page Intentionally Left Blank]

Comprehensive

Annual Financial

Report

City of Roanoke, Virginia

Fiscal Year Ended June 30, 2012 On July 2, 2012, the National Civic League announced the selection of Roanoke, Virginia as a 2012 All-America City. This marks the sixth time Roanoke has earned this distinction – a feat achieved by no other city. Other years the city has won include 1952, 1979, 1982, 1988, and 1996. Roanoke was one of 32 finalists selected through a peer review process from a field of more than 100 entries across the country selected. In all, the National Civic League named 14 communities All-America Cities for 2012.

Each of the recognized communities submitted a “Community Solutions Action Plan” that included a broad cross-section of local partners, including schools, foundations, community service organizations, businesses and faith groups detailing how they would address school readiness, attendance and summer learning. The city’s entry was the “Star City Reads” campaign, a plan to ensure that more Roanoke children are reading at grade level by the end of third grade.

The National League of Cities (NLC) is the nation’s oldest and largest organization devoted to strengthening and promoting cities as centers of opportunity, leadership and governance. The NLC is a resource and advocate for 19,000 cities, towns and villages, representing more than 218 million Americans.

City of Roanoke, Virginia

Comprehensive Annual Financial Report

For the Fiscal Year July 1, 2011 to June 30, 2012

Prepared by the City of Roanoke Department of Finance

THIS PAGE INTENTIONALLY BLANK Table of Contents

Page Number

INTRODUCTORY SECTION (Unaudited) Letter of Transmittal ...... 1 Certificate of Achievement for Excellence in Financial Reporting ...... 21 Directory of Principal Officials...... 22 Organizational Chart...... 23

FINANCIAL SECTION

Independent Auditors’ Report...... 25 Management’s Discussion and Analysis (Required Supplementary Information) (Unaudited)...... 29

Basic Financial Statements Government-Wide Financial Statements Exhibit A Statement of Net Assets ...... 45 Exhibit B Statement of Activities...... 46

Fund Financial Statements Governmental Funds Financial Statements Exhibit C Balance Sheet...... 48 Exhibit D Reconciliation of the Balance Sheet to the Statement of Net Assets...... 49 Exhibit E Statement of Revenues, Expenditures, and Changes in Fund Balances ...... 50 Exhibit F Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities...... 51 Proprietary Funds Financial Statements Exhibit G Statement of Net Assets ...... 52 Exhibit H Statement of Revenues, Expenses, and Changes in Fund Net Assets...... 54 Exhibit I Statement of Cash Flows...... 56 Fiduciary Fund Financial Statements Exhibit J Statement of Fiduciary Net Assets ...... 58 Exhibit K Statement of Changes in Fiduciary Net Assets ...... 59 Notes to Basic Financial Statements...... 61 Page Number Required Supplementary Information (Unaudited) Budgetary Comparison Schedule – General Fund ...... 125 Infrastructure Assets Under Modified Approach...... 129 Schedules of Funding Progress - Pension ...... 130 Schedules of Funding Progress – OPEB ...... 131 Schedules of Employer Contributions – OPEB ...... 132 Note to Budgetary Comparison Schedule – General Fund ...... 133

Supplementary Information Combining and Individual Fund Financial Statements Exhibit L-1 Combining Statement of Net Assets – Internal Service Funds...... 137 Exhibit L-2 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets – Internal Service Funds ...... 138 Exhibit L-3 Combining Statement of Cash Flows – Internal Service Funds ...... 139 Exhibit M-1 Statement of Fiduciary Assets and Liabilities – Agency Fund ...... 140 Exhibit M-2 Statement of Changes in Fiduciary Assets and Liabilities – Agency Fund ...... 141

STATISTICAL SECTION (Unaudited) Table 1 Net Assets by Component...... 145 Table 2 Changes in Net Assets...... 146 Table 3 Governmental Activities Tax Revenues by Source...... 148 Table 4 Fund Balances of Governmental Funds ...... 149 Table 5 Changes in Fund Balances of Governmental Funds ...... 150 Table 6 Local Tax Revenues by Source ...... 152 Table 7 General Property Tax Levies and Collections...... 152 Table 8 Assessed and Estimated Actual Value of Taxable Property ...... 153 Table 9 Property Tax Rates and Levies ...... 153 Table 10 Principal Property Taxpayers...... 154 Table 11 Taxable Retail Sales...... 154 Table 12 Ratio of General Bonded Debt to Total Assessed Value and Bonded Debt Per Capita...... 155 Table 13 Ratios of Outstanding Debt by Type ...... 156 Page Number

Table 14 Legal Debt Margin Information...... 156 Table 15 Computation of Legal Debt Margin...... 157 Table 16 Ratio of Annual Debt Service Expenditures for General Long-Term Debt to Total General Expenditures...... 157 Table 17 Debt Service as a Percentage of Non-Capital Expenditures...... 158 Table 18 Demographic Statistics ...... 158 Table 19 Construction Statistics ...... 159 Table 20 Principal Employers ...... 159 Table 21 Full-Time Equivalent City Government Employees by Function ...... 160 Table 22 Operating Indicators by Function ...... 161 Table 23 Capital Asset Statistics by Function ...... 162

COMPLIANCE SECTION Schedule of Expenditures of Federal Awards...... 165 Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards...... Independent Auditors’ Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133...... Independent Auditors’ Report on Compliance with Commonwealth of Virginia Laws, Regulations, Contracts and Grants...... Schedule of Findings and Questioned Costs...... Summary Schedule of Prior Year Audit Findings and Questioned Costs......

THIS PAGE INTENTIONALLY BLANK INTRODUCTORY SECTION THIS PAGE INTENTIONALLY BLANK CITY OF ROANOKE DEPARTMENT OF FINANCE 215 Church Avenue, SW, Suite 461 PO Box 1220 Roanoke, Virginia 24011-1220 Telephone: (540) 853-2821 Fax: (540) 853-6142 ANDREA F. TRENT ANN H. SHAWVER, CPA Assistant Director of Finance Director of Finance

November 30, 2012

The Honorable Mayor, Members of the City Council and Citizens of Roanoke, Virginia:

In accordance with Section 25.1(f) of the Roanoke City Charter, we are pleased to present the City of Roanoke (the City) Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2012. The Charter requires the City to issue an annual report on its financial position and activity and that the financial statements included in the report be audited by an independent firm of certified public accountants. This report was prepared by the Department of Finance in conformity with U.S. generally accepted accounting principles (GAAP) as promulgated by the Governmental Accounting Standards Board (GASB), and the financial statements included in the report were audited by KPMG LLP.

Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the City’s management. The data as presented is accurate in all material respects and is reported in a manner designed to fairly set forth the financial position and results of operations of the City as measured by the financial activity of the various funds and component units. Management of the City believes that all disclosures necessary to enable the reader to gain the maximum understanding of the City's financial activity have been included.

The CAFR is presented in the following three sections: (1) Introductory Section – This section is unaudited and includes this letter of transmittal, the City’s Government Finance Officers Association of the United States and Canada (GFOA) Certificate of Achievement for Excellence in Financial Reporting, a list of the City's principal officials and an organizational chart; (2) Financial Section – This section includes the independent auditors’ report on the basic financial statements, management’s discussion and analysis (MD&A), basic financial statements, notes to the basic financial statements, required supplementary information and combining fund financial statements; (3) Statistical Section – This section is unaudited and includes selected financial and demographic

1 information, generally presented on a multi-year comparative basis.

GAAP requires that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it.

Profile of the Government Roanoke, the largest city in the Commonwealth of Virginia (Commonwealth) west of Richmond, is located at the southern end of the Shenandoah Valley, approximately 170 miles west of Richmond and 235 miles southwest of Washington, DC. Its position in the southeastern United States gives the City ready access, within a day’s drive, to nearly one-half of the total population of the United States. In addition, the City lies at the region’s crossroads of major rail and highway systems, making it the principal trade, industrial, transportation, medical and cultural center of western Virginia.

Chartered by the Commonwealth of Virginia as a city in 1882, Roanoke encompasses a land area of forty- three square miles and operates under a council-manager form of government. The City’s 2012 estimated population, 97,206 accounts for just under 31 percent of the population in its metropolitan statistical area (MSA), which includes the neighboring City of Salem, Town of Vinton, and the Counties of Roanoke, Botetourt, Craig, and Franklin.

The primary government provides a full range of services including general government administration, public safety, public works, recreational activities, judicial administration, health and welfare activities, and community development activities. The City also owns and operates a civic center, and several parking facilities including both garage and surface lots.

The financial reporting entity reflected in the CAFR, which is more fully described in Note 1 to the basic financial statements, conforms to the requirements of the Governmental Accounting Standards Board (GASB) Statement No. 14, as amended by GASB Statement No. 39. The accounting and reporting principles of the GASB are based on the fundamental concept that publicly elected officials are accountable to their constituents and the financial statements should emphasize the primary government and enable financial statement users to distinguish between the primary government and its component units. There are several commissions and authorities where the City’s accountability is limited to appointments to, or seats on, the respective boards. The City does not exercise financial or administrative control over these entities, so they are excluded from this report.

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The City’s reporting entity includes two discretely presented component units. A component unit is a legally separate entity which meets one of three conditions: the governing board is appointed by the primary government, the entity is fiscally dependent on the primary government, or excluding the entity could potentially result in misleading financial reporting. A component unit should be blended with the primary government if the entities share a governing body and if the component unit almost exclusively provides services or benefits to the primary government; otherwise, it must be presented discretely.

The City’s discretely presented component units are presented in separate columns in the government-wide financial statements to emphasize that they are legally separate from the primary government and to differentiate their financial position and results of operations from that of the primary government.  The Greater Roanoke Transit Company (Transit Company) is responsible for managing Roanoke’s mass transit system. It is overseen by a seven-member board appointed by City Council. The Board is comprised of two City Council members, two City employees, one regional customer, one representative of the physically challenged community and one citizen of the community at large. The Transit Company is wholly owned by the City of Roanoke, and it receives significant financial support from the City.  The School Board of the City of Roanoke (School Board) is comprised of seven members, appointed by City Council, to oversee operation of the City’s school system. The school system receives significant financial support from the City.

Economic Condition and Outlook Local Economy Fiscal year 2012 performance reflected continuing economic recovery for the City of Roanoke. The City reported local tax growth for the second year in a row, indicative of continued economic recovery. General Property taxes increased 1.3% while other local taxes increased 2.4%. The major contributors to local tax growth were Sales tax up nearly 3.0%, Business License tax which increased 3.9% and Prepared Food and Beverage tax which sustained strong growth of 7.4%. General Fund revenues from the Commonwealth and Federal governments declined 3.1%, mainly in the Social Services area where the Commonwealth has assumed responsibility for making direct payments for certain expenditures that were previously made by the City and reimbursed. Adjusted for this change, General Fund revenues increased 0.8%.

On the expenditure side, in fiscal year 2012, the General Fund expenditures increased only 0.9% compared to a targeted increase of 1.0% over the prior fiscal year. Almost all categories came in under budget including Health and Welfare expenditures which declined primarily due to the change in payment methodology by the

3 Commonwealth. This level of controlled spending reflects City Leadership’s commitment to sound fiscal policies and judicious budgetary control.

Unemployment remained elevated during fiscal year 2012, but levels improved compared to the prior year. The average unemployment in the Roanoke MSA for fiscal year 2012 was 6.3%, according to the Virginia Employment Commission, down from an average 7.0% in the prior fiscal year and 7.5% in fiscal year 2010. Comparatively, average unemployment in fiscal year 2012 was 6.0% at the State level and 8.5% at the national level. Roanoke’s economy is strengthened by the diversity of employment opportunities, with representation from every major type of business as defined by the U.S. Census Bureau.

Economic Development Roanoke is the center of a strong region, boasting a creative, diverse, sustainable economy. The City stimulates and supports economic development for the purpose of attracting new businesses and encouraging the expansion of existing businesses. The City’s Economic Development Department’s strategy continues to focus efforts on four core initiatives; marketing, business retention - expansion services, data collection and intelligence, and staff development. New marketing materials were created to tout Roanoke’s ever increasing assets and amenities, web-based data collection tools were implemented, and continue to be upgraded, a new real estate search program was implemented, a Facebook page implemented and staff is dedicated to teamwork and honing every skill necessary to assist the business community. As a result of this focused approach, retention, expansion and attraction efforts in fiscal year 2011-2012 yielded announcements from businesses in the industrial, information technology, healthcare, insurance and hospitality sectors totaling over $57 million in new investment and more than 450 new jobs. Some highlights include:  Advance Auto’s expansion of $4.5 million created 55 full-time positions with an additional 20 positions planned later.  New Horizons Health Care Center broke ground in the fall of 2011 with a total investment of nearly $11 million and 20 new full-time positions  Kohl’s department store opened a facility in Roanoke in the fall of 2011 in the site vacated by Walmart. Though the loss of one of the City’s two Walmarts was a negative factor for the economy, the replacement by Kohl’s brings a destination store that is being patronized by shoppers from all over the region. Kohls’ investment was approximately $3 million.  The Lofts at West Station were completed with over 70 new apartments on Salem Avenue following an investment of over $7.5 million An important part of the City’s economic development initiative is its two Enterprise Zones. Businesses located within the boundaries of Enterprise Zones may qualify for State or local incentives. Façade grant

4 funding of approximately $253,000 in fiscal year 2012 leveraged approximately $1.3 million in private investment for building façade improvements in the Enterprise Zones during the year.

A strength of the City’s economy rests in its diversity. Major components include the downtown area, now stretching southward to the Riverside Centre for Research and Technology, the Valley View Mall area, Grandin Village, and the many opportunities afforded visitors through Roanoke’s recreational and cultural offerings. Background and significant recent achievements pertaining to each of these areas follows.

Downtown The pulse in downtown Roanoke is livelier than it has been in over 40 years. Over 1,200 residents now reside in the core of the City as a result of the conversion of grand historic buildings into apartments and condominiums. Downtown Roanoke offers the oldest continuous farmer’s market in the Commonwealth which has become a landmark for visitors to the City and a regular shopping venue for residents. Roanoke restaurants, shops, and art galleries continue to open in the downtown district to compliment the newly renovated Historic City Market Building and the nearly finished cultural arts center, Center in the Square, under going a $21 million renovation. Since the $7 million Roanoke City Market Building Renovation was completed a year ago, 10 local dining establishments have opened in downtown Roanoke for residents and visitors to the City. Key construction projects culminated during the past year includes:  Sixteen West - this restoration and renovation project is now complete and the home to the former S&W cafeteria is serving food once again! Renovations retained some of the art deco style of the building and now are home to several apartments, a chiropractic office and a food court which currently houses Café 16. Soon more food vendors and a grocery store will open.  The Justice Company - this prominent family-owned business, Southern Coal Corporation, and owners of The Greenbrier Resort in White Sulpher Springs, WV, is now headquartered in the City of Roanoke. The company purchased the 28,000 square foot building at 302 Jefferson Avenue, in which Bank of America is a prime tenant, and is in the process of renovating the upper floors. The Justice Company has settled into downtown Roanoke with a total investment of $3.0 million. The downtown area also has many cultural amenities such as The Taubman Museum of Art, Center in the Square, O. Winston Link Museum, Virginia Museum of Transportation and the Jefferson Center for Performing Arts.

Riverside Centre for Research and Technology The Riverside Centre for Research and Technology (RCRT), headquarters of several medical science entities, is a 110-acre technology park located along Jefferson Street and Reserve Avenue. Within RCRT,

5 the Carilion Clinic completed its 110,000-square-foot office and laboratory complex headquarters building at a cost of $15 million in 2007. The $70 million, 250,000-square-foot outpatient medical clinic, opened to patients in September 2009.

The Virginia Tech-Carilion School of Medicine (VTC) has accepted the third class at the school, adding 42 new students in August of 2012, bringing total enrollment to 126 students. The school will be at full capacity in August 2013. The Virginia Tech-Carilion Research Institute continues to bring in new research teams and reported the following progress in the first 21 months of operation ending June 30, 2012: • 20 research team leaders hired (6 senior, 5 mid-career, 9 early career researchers); plus 135 employees from 18 states and 11 countries; a payroll of $10.3 million with average annual salary of $65,000 • 39 current active research grants with an annual value of $12.4 million; a multi-year portfolio of $44.1 million pending; VTC start up investment of $50 million; 1 bio-technology start-up company established in Roanoke and 3 in process of starting • Creation of a well attended Distinguished Visiting Scholars and Public Lecture Series for Roanoke community and southwest Virginia • Collaborations with the Salem VA Hospital, the U.K., Norway, Korea, China, Germany, Princeton, Cal Tech, Emory, Duke, Wake Forest, UCLA and the Children's National Medical Center • Roanoke recognized as a hub of world wide functional brain imaging per scan network and home to the world's largest brain study Additionally, Riverside Center continues to be conveniently serviced by an on-site hotel. Cambria Suites Hotel is a 127-room limited-service, all-suite hotel. The 1,500-space parking garage is centrally located to accommodate all present activities of the development with ample spaces to serve future tenants.

Roanoke Centre for Industry and Technology

The Roanoke Centre for Industry and Technology (RCIT) is a 496-acre City-developed business park located just minutes from Interstates 581 and 81. This industrial park was acquired, developed and marketed by the City. The City continues its excellent record of attracting top corporations, enhancing the tax base and creating jobs for its citizens. One hundred forty acres with five ready-to-go sites, ranging in size from seven to thirty-one acres, are now available. Fifty-six acres remain to be developed for future prospects.

Revenue generated from the corporations located in the RCIT exceed the cost incurred by the City for the original site acquisition and improvements to the park for infrastructure and the extension of Blue Hills Drive. Present and future tax revenue will be used to continue this type of economic development.

The corporations located in the RCIT employ in excess of 2,100 persons, have a combined investment in the

6 Centre in excess of $151 million, and occupy over 2 million square feet of space. Corporations currently in the Centre include Crouse-Hinds, a division of Cooper Industries, R&K Engineering, Advance Auto, BellSouth Communications Systems, SEMCO, Elizabeth Arden, Orvis, InfoSeal, Virginia Utility Protection Services, and Maple Leaf Bakery. Heritage Point is a historic area also located within RCIT and hosts a restored 19th-Century cabin.

Roanoke River District The City has entered into a Performance Agreement with Roanoke River Associates, LLC (RRA) and the Economic Development Authority for the City of Roanoke (EDA) for the development of approximately 22 acres located east of South Jefferson Street and adjacent to the Roanoke River. The Roanoke River District is envisioned to be a mixed-use development consisting of commercial, office, retail and residential buildings and amenities. The City will provide an initial economic development grant of $2 million to fund the installation of public infrastructure on the site. The City will also provide subsequent annual economic development grants based on amounts of actual designated revenues received by the City on the property. The project is expected to take between 15-20 years to complete and will likely exceed $100 million in investment.

Valley View Mall Area The Valley View Mall, built during the 1980s, is a dominant regional shopping center of nearly 900,000 square feet of retail space. The District at Valley View was built in 2007 to enhance the mall area. It offers eye-catching storefronts, extensive landscaping and pedestrian-friendly walkways. The two areas, combined, offer six anchor stores, over 100 specialty shops, and many restaurants. Valley View Mall is owned and operated by CBL & Associates Properties Inc. which continues to display confidence in the Roanoke retail market. One of Roanoke’s strong economic indicators is its strength in retail sales per capita, as the City has historically performed very well at both the State and national level due to its regional draw for shoppers. In 2012, Valley View Mall added a major retailer, Plow & Hearth, with over 6,700 square feet of shopping space. In addition to Plow & Hearth favorites like UGG Australia and Dansko footwear, Life is Good clothing and accessories, and hearth and garden products, the store also carries a excellent selection of toolsets, fire screens and hearth rugs. More great products include delicious assortments of gourmet foods and regional favorites. Founded in 1980 in Madison, Virginia, Plow & Hearth has grown to a trusted national catalog, retail, and internet company specializing in unique, enduring home and lifestyle products that are quality-built and guaranteed to meet customer expectations.

Grandin Village Another important retail hub is the City’s Grandin Village area. This area serves residents in the south and

7 southwest portions of Roanoke and is a draw for downtown workers. A revitalization effort took place in recent years that increased the area’s diversity of offerings and vitality. The Grandin Village is home to the Grandin Theatre as well as numerous local restaurants and specialty shops. After 16 years in the Grandin Village, Reid’s Fine Furnishings expanded, adding 3,300 square-feet to the Roanoke showroom and further establishing presence as an anchor in the revitalized neighborhood.

Tourism Roanoke is increasingly becoming a premiere tourist destination. The region offers strong facilities for recreational tournaments in softball, soccer and other sports. Roanoke has been the longtime host of the Commonwealth Games and the Miss Virginia Pageant, important statewide events that draw numerous visitors to the city annually. These events bring many youth and families to the area, and the amenities of Roanoke are very attractive even to those staying in other areas.

In October 2011, The Small Cities Movement launched the inaugural CityWorks (X)po in downtown Roanoke, an event exploring six spheres of exponential impact: Leadership & Good Government, Arts & Design, Capital & Social Entrepreneurship, Food & Drink, Outdoors & Recreation and Knowledge & New Media. Over 500 individuals attended the conference from all parts of Roanoke, the U.S. and beyond. The second CityWorks (X)po was held in October 2012. This, along with other new festivals, continues to bring visitors to the City of Roanoke to experience the best in cultural and outdoor amenities.

Long-Term Financial Planning Comprehensive Plan The City continues to plan for its future and provide the necessary funds to not only protect its current assets, but also to create new opportunities. The City of Roanoke’s Comprehensive Plan, Vision 2001 – 2020, provides goals for development of the City over a 20 year period which began in 2001. The plan supports leadership’s conviction that Roanoke’s sustainability is measured not only by the health of its economy but also by its quality of life. Economic prosperity can continue and be enhanced by supporting the City’s cultural and entertainment amenities, education, and other services. Protecting the natural environment, supporting a wide range of amenities, maintaining a first-class educational system, and providing ongoing educational opportunities will be the building blocks for attracting new residents and businesses. This planned and visionary approach has served the City well and will continue to be the basis for additional growth.

Capital Improvement Program (CIP) In conjunction with the preparation of an annual operating budget, the City prepares a five-year Capital

8 Improvement Program Update. This serves as a planning tool for efficient, effective and equitable distribution of public improvements throughout the City. The CIP represents a balance between finite resources and competing community priorities. The CIP specifies the capital improvement and construction projects that will be funded over the upcoming five-year period in order to maintain or enhance the City’s $608 million in capital assets. Detailed project descriptions, cost estimates, and funding sources are included in the CIP. The City’s Capital Improvement Program for FY 2013 through FY 2017 represents $99 million of public improvements to the City’s schools, infrastructure (streets, sidewalks, bridges and storm drains), parks, public buildings, technology, the Civic Center and various economic development projects. Resources accumulated to meet these priority needs are accounted for in the City’s Capital Projects and Proprietary Funds.

Budgeting for Outcomes Roanoke was the first city in Virginia to implement the “budgeting for outcomes” process in the development of its fiscal year 2012 budget. Budgeting for Outcomes (BFO) was designed to facilitate the alignment of resources with prioritized programs and services. City Council identified seven priority areas which guided the allocation of resources – economy, education, good government, human services, infrastructure, livability, and safety. The BFO process emphasized the allocation of resources to obtain specified outcomes. Innovation and collaboration with department and agency partners helped the organization to realize efficiencies and potentially improved services without additional resources. Improvements were monitored by performance measures and priority indicators. City leadership presented the process at the Government Finance Officers Association (GFOA) annual spring conference in fiscal year 2012 and conducted several local and regional presentations. The budget system was designed by the city’s Department of Technology (DoT) to support the BFO process. DoT was presented with the Governor’s Technology Award for Innovative Use of Technology in Local Government at the 2012 Commonwealth of Virginia’s Innovative Technology Symposium (COVITS). The award recognized the budgeting for outcomes system as an innovative solution for achieving organizational goals and objectives.

Relevant Financial Policies Financial policies serve as the framework for the financial operation of city government as well as the basis for budget development. The City’s financial policy statements in their entirety can be located in the City’s Resource Allocation Plan. Policies are in place to provide guidance in the areas of budget, expenditures, reserves, revenues, and debt management. In January 2012, City Council adopted revisions to its Reserve and Debt Management Policies to incorporate changes promulgated by the Government Accounting Standards Board (GASB) relating to fund balance.

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Reserve Policies Key components of the reserve policies are as follows:  The Unassigned General Fund Reserve target will be 10% of the budget to provide the City with sufficient working capital and margin of financial safety to address unforeseen, one-time expenditure emergencies or significant unforeseen declines in revenues in a specific fiscal year. As of June 30, 2012, the Unassigned General Fund Reserve was 10% of actual expenditures. The Unassigned General Fund Reserve is reported in the General Fund Balance Sheet in the unassigned category.  A Risk Management Reserve serves to cover some of the risk exposure the City has due to its self-insurance program. The minimum funding level for the Risk Management Reserve is: . 25% of the three-year average of self-insured claims costs, . plus 10% of the three-year average of fully insured premiums, . plus a $1 million catastrophic reserve. The City’s reserve policies call for this reserve to receive the highest priority for funding once the General Fund Unassigned Reserve met its 10% target. While this reserve is in a deficit position at June 30, 2012, as a result of increased liabilities on several large workers’ compensation claims, funding of $1.5 million was added to the reserve in fiscal year 2012. City management is carefully monitoring the liabilities associated with the risk management area and intends to continue adding increasing amounts of funding in future years until the reserve goal is met.  Once revenues return to pre-recessionary levels of fiscal year 2009, an Economic Downturn Reserve will be created to smooth financial operations in the event of an economic downturn. The Economic Downturn Reserve will be maintained in an amount up to 5% of the General Fund Expenditure budget. This reserve has not yet been established as revenues have not returned to the requisite level to trigger the funding of the reserve.  The Economic and Community Development Reserve is in the Capital Projects Fund and is intended to demonstrate a commitment to financial planning for economic and community development projects which may provide future growth opportunities and expansion of the tax base in Roanoke. The reserve is funded from interest earnings and the proceeds from the sale of general government property. The reserve floor is $1 million. As of June 30, 2012, the balance of this reserve was approximately $3.4 million. The Economic and Community Development Reserve is reported in the Capital Projects Fund Balance Sheet as Committed fund balance.

10 Reserves may only be used upon appropriation of City Council, and the reserve policies contain stipulations regarding reserve usage and replenishment.

Debt Management Policies The City’s debt policy establishes the parameters for issuing debt and managing the debt portfolio. It provides guidance to the administration regarding purposes for which debt may be issued, types and amounts of permissible debt and method of sale that may be used. The debt policy demonstrates a commitment to long-term financial planning and will be used in conjunction with the Capital Improvement Program. Adherence to this policy will help assure maintenance of the City’s positive credit ratings.

The Self-Imposed Debt Targets within the City’s debt management policies are as follows:  Net tax-supported debt as a percentage of the total taxable assessed value in the City (including real, personal property, and public service corporations) will not exceed 4%. As of June 30, 2012, net tax supported debt was 2.7%.  Net tax-supported general obligation debt service shall not exceed 10% of General Fund expenditures. As of June 30, 2012, net tax-supported general obligation debt service was 9.9% of General Fund expenditures.  Net tax-supported debt will be structured in a manner such that not less than 60% of the aggregate outstanding tax-supported debt will be retired within 10 years. As of fiscal year 2012, 88% of outstanding debt will be retired within 10 years.

The City monitors these ratios to ensure ongoing compliance with the debt policy. Additional disclosures regarding the City’s long-term obligations are provided in the notes to the financial statements.

Major Initiatives and Accomplishments Education Roanoke City Council places education as the top priority of the government and its citizens. On July 1, 2010, City Council increased the prepared food and beverage tax from 5% to 7% for the two-year period July 1, 2010, to June 30, 2012, with the resulting revenue being solely dedicated to Roanoke Schools. This provided additional funding of $4.9 million to the school system in fiscal year 2012 and a total of $9.5 million for the entire two-year program. The resultant increase significantly offset state funding reductions allowing important programs such as summer school and early reading to continue, despite a loss of state funds.

The City of Roanoke was named 2012 All-American City for its Community Action Plan, a collaborative

11 program that addresses readiness for kindergarten, absenteeism, and summer learning. This marks the sixth time Roanoke has earned this distinction. The City’s entry was the “Star City Reads” campaign, a plan to ensure that more Roanoke children are reading at grade level by the end of third grade.

Roanoke Schools have demonstrated significant performance improvements in recent years. The 2012 on- time graduation rate was 76.5%, up significantly from 59.1% in 2008. The majority of schools within the system are now academically accredited. School maintenance and capital improvement projects are underway as part of an updated Capital Improvement Program.

More information regarding the important achievements of Roanoke City Public Schools is available in the separately published School CAFR.

Virginia Western Community College is a two year public institution of higher learning established in 1966 that serves a current enrollment population of over 12,000 students. In 2013, Virginia Western will open the Center for Science and Health Professions building, the first new academic building to be constructed on campus in more than a decade. The $27.5 million project will result in a 68,000 square-foot state of the art teaching facility. Courses to be housed include nursing, dental hygiene and basic lab sciences. Enrollment is expected to increase by 500 students as a result.

Jefferson College of Health Science is a professional health science college offering masters degrees in Nursing, Physician Assistant and Occupational Therapy and ten baccalaureate and associate healthcare programs. Approximately 1,000 undergraduate and 80 graduate students are enrolled. Jefferson College of Health Science is located in the downtown area.

Public Safety Public safety is one of the top priorities of the City of Roanoke. Roanoke is in an elite group of cities with accreditation of all three of its primary public safety departments – Police, Fire-EMS and Sheriff. Each agency is committed to public safety and continuously evaluates services, community interaction, technology and initiatives in an effort to provide the most effective utilization of resources.

In 2011, the Police Department formed the Community Integration and Services Enhancement (CISE) unit. One of the responsibilities of the CISE unit is community involvement and crime prevention through the use of social media. During fiscal year 2012, Part One crimes were reduced by 1% compared to the prior year. Violent offenses declined significantly while property offenses remained relatively flat. The Roanoke Police Department has been accredited by the Commission on Accreditation for Law Enforcement Agencies

12 (CALEA) since July 30, 1994 and is the only law enforcement agency in the Commonwealth of Virginia to attain accreditation in two CALEA programs – Law Enforcement and Training Academies.

To make the most effective use of technology in its firefighting activities, Roanoke Fire-EMS is installing mobile data units in all front-line fire engines, ladder trucks, and ambulances. Roanoke Fire-EMS has been an accredited agency with the Commission on Fire Accreditation International Inc. (CFAI) since 2002, meeting the criteria established through the CFAI’s voluntary self-assessment and accreditation program. The department is one of 113 fire departments to receive international accreditation. In 2011, Fire-EMS met established response time targets which lead to a 32% reduction in the number of working fires.

In 2010, the Roanoke City Sheriff's Office launched a Citizens' Academy, a six-week interactive program that helps participants gain an understanding of the responsibilities of the Sheriff's Office and how the department operates. The Citizens' Academy is designed to develop positive relations between deputies and the community to create a growing nucleus of responsible, well-informed citizens familiar with the services Roanoke City Sheriff's Office provides to the community. In 2011, the academy was held in the spring and 12 citizens participated in a graduation ceremony. The Roanoke City Sheriff’s Office is accredited by the Commission on Accreditation for Corrections (ACA) and received its current accreditation in April of 2012.

Human Services Roanoke’s status as the largest city west of the state capitol means that there is a high demand for human services from the community. Human Services unites public and private institutions to encourage and support caring communities by assisting individuals and families to achieve self-sufficiency and healthy lives with a variety of financial and employment programs. Human Services is committed to providing information about and creating access to fair, equitable and timely services. The focus is on prevention, reducing the need for future services, intervention and offering direct services when an individual or family is in need. Typically, services provided are paid for by the City and in part, reimbursed by various federal, state and local agencies, businesses and institutions. During fiscal year 2012, the Commonwealth began making certain service payments directly. While this change did not affect the services the City provided, it did have a negative financial impact on the amount of reimbursements for expenditures the City received.

Neighborhoods The City understands attractive, healthy and safe neighborhoods contribute to the overall welfare of the community. Promoting the development of neighborhoods into vibrant and sustainable places for people of all ages, ethnicity, lifestyles, and income translates into a quality of life with broader economic effects such as increasing property values. Community organizations in conjunction with law enforcement initiatives play

13 an important role in preventing neighborhoods from becoming environments for crime, blight and other kinds of deterioration. Residents participating in these organizations are often more in tune, and, as such, provide a great link of communication between local government and residents. The City continues to support the development of neighborhoods and those who live in them.

The City also continues to create opportunities for civic groups to enhance their neighborhood's quality of life by providing them with financial resources to undertake self-help projects through the Neighborhood Development Grant Program. In 2012, various neighborhood groups throughout the City submitted grant applications to undertake a variety of projects, including the purchase and installation of neighborhood recycling receptacles, roofing, signage, and picnic shelters. Through the Neighborhood Development Grant Program, neighborhood organization volunteers have the opportunity to build community spirit, develop leaders within the neighborhood, and actively participate in the enhancement of the quality of life within the community.

To support its neighborhoods, the City has adopted policies and programs that focus on revitalization and increasing homeownership opportunities. A revitalization effort has housing, economic, human and neighborhood development dimensions. In the Hurt Park revitalization effort, over $6.0 million in Community Development Block Grant (CDBG) funds leveraged more than $3.0 million in cash and in-kind contributions from other public and private sources. Beginning in 2007 and winding down to completion in 2012, the Hurt Park project included such wide ranging elements as infrastructure, housing, community gardening and recording the oral history of the neighborhood. While work remains in Hurt Park, the City has named the West End neighborhood as the next target area, and in July of 2012, the City’s efforts transitioned from the one target area to the other. As the City looks ahead to the new target area and supporting its neighborhoods, staff will continue to take into account existing neighborhood plans, conditions and needs, and seek to involve residents into the decision-making and evaluation processes.

The City recognizes the need to provide for a variety of City wide projects with federal and other resources. During the most recently completed fiscal year, the City's Down Payment Assistance Program enabled 42 more families to become homeowners in neighborhoods of their choosing. CDBG funds also assisted local neighborhood organizations to conduct numerous community betterment projects such as period lighting, gateway signs, and home and community center improvements. CDBG and local City resources have contributed to neighborhood crime reduction, enhanced human services and other needs of residents.

14 Recreational and Outdoor Opportunities The City is branded by its unique combination of urban amenities surrounded by significant natural beauty and outdoor and recreational activities. The Appalachian Trail and Blue Ridge Parkway surround the city. The Carvins Cove Natural Reserve provides nearly 13,000 acres of park land available for a wide variety of recreational uses. The City’s greenway system continues to grow and develop. More than 14 miles of paved trails currently exist with an additional 10 miles under development. The Lick Run, Tinker Creek, Murray Run, Mill Mountain, and Roanoke River greenways serve thousands of patrons annually. Additional green space is expected as a result of the Countryside Master Plan which outlines property uses including recreational, open space, and greenways.

Roanoke was selected as a “Bicycle Friendly Community” by the League of American Bicyclists. There has been a diverse and growing number of cyclists and interest in bicycling in Roanoke. Bike shops in the community reported rising bike sales as miles of pathways increase. A group of cyclists sponsored the City’s first Ciclovia event last summer, and the City will sponsor a second and expanded Ciclovia as part of Bike Month. There are also numerous support organizations involved in biking education. RIDE Solutions (alternative transportation), National Mountain Bike Patrol, Pathfinders for Greenways and the Blue Ridge Bicycle Club sponsor weekly rides, competitive cycling events including a Junior Racing Team, commuter information, and involvement in trail maintenance and development and safety support.

Arts and Cultural Activities Arts and cultural opportunities abound in Roanoke through private sector opportunities such as the Taubman Museum of Art, the Jefferson Center for Performing Arts and others. The City places an emphasis on arts and culture. The Roanoke Civic Center and the City’s public art program are two important components of arts and culture in Roanoke.

The Roanoke Civic Center continues to reach new successes each year under management by Global Spectrum which has been operating the City-owned facility since 2009. Highlights for fiscal year 2012 included return performances of Cirque du Soleil and the Harlem Globetrotters as well as the Blue Man Group and several sold-out country singer concerts.

For more than 100 years, Elmwood Park has evolved from the distinguished home and gardens of P. L. Terry, one of Roanoke's founding citizens, to downtown’s premier green space. Today, over 50 groups use the park with events scheduled throughout much of the year. The City has moved forward with the Elmwood Park improvement plan – A Playground for All Ages - which incorporates adult and child friendly features as well as cultural and environmental aspects. The plan includes an enhanced performance venue

15 and concessions plaza, terraced ‘green’ seating, Art Walk and Rain Garden as well as interactive children’s areas and fountain. The Park is scheduled to re-open in the summer of 2013.

Roanoke’s public art program is overseen by the Roanoke Arts Commission (RAC). The art program enhances the quality of life for Roanoke’s citizens by creating a heightened sense of place and community identity and visually enhanced public space. Currently, the RAC is working to develop a virtual walking tour of the City’s collection of nearly 100 pieces of art.

Libraries The City of Roanoke promotes lifelong learning for all citizens. The Library Master Plan includes projects to enhance the delivery of programs and services throughout the community. In recent years, the City has completed expansion and renovation of the Gainsboro and Jackson Park branch libraries. The City’s libraries provide many resources to citizens including free internet and free wireless access at all locations. In 2011, Libraries hosted approximately 1,500 adult programs, over 800 programs for young people between the ages of 5 and 17 and Early Literacy programs for children under the age of 5. Libraries are an important way the City supports the public education programs of Roanoke City Schools.

Transportation and Parking Economic activity is directly associated with the City’s position as the major trade and transportation center in Western Virginia. The City is located at the intersection of major rail and highway routes. Current developments relate to proposals by the Virginia Department of Transportation for construction of improvements at two interchanges along I-581. Improvements at Elm Avenue will add capacity to both interstate exit ramps and is expected to relieve congestion during several hours of each day. The project was awarded in July of 2012 to American Infrastructure-VA Inc. Work is expected to be completed by 2015. Improvements at the existing Valley View Boulevard interchange will complete the existing partial interchange. This will improve access to and from the north to the retail area housing Best Buy, Target, PetSmart and other stores as well as provide access to more than 100 acres of undeveloped property on the west side of the interstate. The master planning process and coordination with adjacent neighborhood groups was initiated in the summer of 2011 using citizen input sessions to begin planning the future of this area, referred to as Evans Spring. The project is moving forward and construction could begin in 2013. This work is also expected to be completed in 2015.

The City has worked diligently to address the transportation and parking needs of citizens and visitors in the downtown area. Valley Metro transports Medicare card holders, persons age 65 or older, disabled persons, and youth under 18 who present a school-issued identification card at a discount rate of one half the regular

16 fare. Younger students are free, but must be accompanied by a paying adult passenger. The Star Line Trolley is public transportation initiated in 2008 that serves the corridor of retail businesses, schools, libraries, restaurants, and lodging along Jefferson Street between the downtown area and Carilion Roanoke Memorial Hospital.

Important initiatives of the City as provided by the Transit Company have included regional connections that will pave the way for passenger rail at a time in the future. The Smart Way Bus is a regional transportation service operated by Valley Metro which links the Roanoke Valley and the New River Valley. The Smart Way Connector is a regional transportation service which links the Roanoke Valley and New River Valley to the Amtrak Passenger Rail Station in Lynchburg.

The City’s public parking system includes seven garages and five surface lots. The parking systems offer competitive daily, weekly and monthly rates, and, at many locations, free after hours and weekend parking. Windsor-Aughtry, a Greenville, South Carolina based development company has purchased the first floor and upper story air rights to the City Market Garage to build a 132 room Hampton Inn. This new hotel in downtown Roanoke will support the Convention Center and build Roanoke’s brand as a tourist destination.

Environmental Leadership The City’s position of environmental leadership continues as evidenced by the receipt of a ‘Platinum Certification’ from the Virginia Municipal League Green Government Challenge 2012. Roanoke government is committed to the protection of the environment while providing first class municipal services to citizens and visitors. Education and training, pollution control, reduction of the carbon footprint, reduction of solid and hazardous waste and improving the environmental management system are components of this program.

The City is committed to encouraging economic growth in green living housing and offers a 10% reduction in the real estate rate for five years following investments by home owners that increase energy efficiency. The City also offers a 10% credit to the personal property tax for qualifying clean special fuel vehicles.

In May of 2012, the City finalized the Roanoke River Flood Reduction project, a twenty year collaboration with the United States Army Corps of Engineers. This extensive project combining structural, environmental and recreational components will enable the City to reduce annual flood damage along the Roanoke River during severe weather. This was a $63.0 million dollar project of which the City contributed $19.7 million in an effort to ensure the safety and well being of citizens, the environment and native flora and fauna.

17 The City has embarked on a brownfield revitalization effort for the reuse of a rail corridor. The City was awarded a $175,000 EPA Brownfields Area-Wide Planning Pilot Program grant for Roanoke's "Rail Corridor Planning Area". The grant funding will be directed to brownfield-impacted sites within the corridor. The grant funding will result in an area-wide plan which will determine the issues, identify potentially interested businesses and then reclaim the brownfield properties to EPA standards. The City expects the reclamation to promote area-wide revitalization. The EPA selected 23 pilot projects across the country and the City of Roanoke is proud to be one of the recipients of this award.

Regional Cooperation City leadership appreciates the importance of regional cooperation in promoting economic development. The Roanoke Valley has numerous successful regional ventures in place as detailed in the footnotes to these financial statements. These initiatives provide services to citizens in the areas of utilities, animal control and protection, public safety, transportation and others. In May of 2012, the Roanoke Regional Partnership launched a $3 million private sector campaign with an anticipatory $3 million private sector match. The campaign goals include creating over 3,200 higher wage jobs and bringing $200 million in capital investment to the area. The Roanoke Valley Consortium obtains dental insurance for a large pool of valley employees and works collaboratively to explore purchasing opportunities for new benefit programs and/or services.

Future Challenges Current economic trends for the U.S. economy reflect continuing unemployment rates that exceed historic averages, limited housing activity and decreases in values of residential properties. These economic conditions have and will continue to provide challenges to the City. For the first time in its history, the City experienced a slight decline of 1.2% in the assessed value of real property effective with fiscal year 2013. Assessed values may experience little or no growth in the near term. Given the importance of real estate tax revenues to the City’s budget, this will pose challenges for the City and School Board as a significant portion of school funding is derived from general property taxes.

Challenges exist at the Federal and State levels as budget balancing and deficit management continues to impact funding to localities. The specter of the Federal sequester with its mandatory $1.2 trillion in cuts over the next ten years will have an impact on the economic recovery and unemployment. Funding at the Federal level will continue to be diverted to support increasing health care costs and debt service. More and more, Federal and State governments are imposing mandates to local governments. Localities continue to be asked to do more with less. The challenge for local governments is how to maintain service levels with reduced available funding. The City regularly assesses the influence of economic factors and makes budgetary adjustments as necessary to minimize the impact to key services and ensure that the City continues to remain

18 financially sound.

Awards and Acknowledgements The GFOA awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Roanoke, Virginia, for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2011. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized CAFR, whose content conforms to program standards. The CAFR must satisfy both U.S. generally accepted accounting principles and applicable legal requirements. A copy of the GFOA Certificate of Achievement is included in the Introductory section of the CAFR.

A Certificate of Achievement is valid for a period of one year. The City of Roanoke has received a Certificate of Achievement for the last 37 consecutive years (fiscal years ended 1974 - 2011). It is believed this report conforms to the Certificate of Achievement program requirements and standards, and will be submitted to the GFOA to determine its eligibility for another certificate.

In addition, the City also received the GFOA Distinguished Budget Presentation Award for its annual budget document for the fiscal year ended June 30, 2012. In order to qualify for the Distinguished Budget Presentation Award, the City’s budget document was judged to be proficient in several categories, including as a policy document, a financial plan, an operations guide and a communications device. The City has been a recipient of the Distinguished Budget Presentation Award for the last 27 consecutive years.

Other Awards and Recognitions  Six time recipient of the All America City award – no other city has achieved this distinction.  Selected as one of “America’s Most Livable Communities” by the national non-profit organization Partners for Livable Communities.  The City’s “Eat for Education” campaign received three awards from the Public Relations Society of America.  The City’s historic Market Building renovation received the Public Works Project of the Year award, a national recognition from the American Public Works Association (APWA).  Roanoke ranked in the Top 10 Digital Cities for the tenth consecutive year.  Roanoke’s Fleet Management department was recognized as one of the best 100 fleets in North America.  Roanoke City Manager Chris Morrill was elected President of the Government Finance Officers Association of the U.S. and Canada.

19 20 21 CITY OF ROANOKE DIRECTORY OF PRINCIPAL OFFICIALS JUNE 30, 2012

Members of City Council

David A. Bowers Mayor David B. Trinkle Vice-Mayor William D. Bestpitch Raphael “Ray” E. Ferris Sherman P. Lea Anita J. Price Court G. Rosen

Constitutional Officers

Brenda L. Hamilton Clerk of Circuit Court Octavia L. Johnson Sheriff Donald S. Caldwell Commonwealth's Attorney Evelyn W. Powers Treasurer Sherman A. Holland Commissioner of the Revenue

City Council Appointed Officials

Christopher P. Morrill City Manager Ann H. Shawver, CPA Director of Finance Timothy R. Spencer Acting City Attorney Stephanie M. Moon City Clerk Troy A. Harmon, CPA Municipal Auditor

Other City Officials

Sherman M. Stovall Assistant City Manager R. Brian Townsend Assistant City Manager

22 Citizens

Commissioner of Commonwealth Clerk of Circuit City City Council Sheriff /Jail Treasurer The Revenue Attorney Court

Committees, Director of City Manager Municipal Auditor School Board Boards & City Clerk City Attorney Finance Commissions

Staff / Other Assistant City Manager Billings & Assistant City Manager School Board Function Operations Community Development Collections

Real Estate Office of Human Services / Civic Facilities Valuation Communication Social Services

Economic Fire / EMS Libraries Development

Market General Parks & Building Services Recreation

Human Planning, Building Parking Resources & Development

Management Police & Budget

Public Works Supreme Court of Virginia

Technology Circuit Court

Clerk of Circuit Court

Juvenile & Domestic General District Board of Electoral Board Magistrate Relations Court Court Equalization

Clerk of General Registrar Juvenile & Domestic District Court Court Services

Juvenile & Domestic Court Clerk

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24

KPMG LLP Suite 1010 10 S. Jefferson Street Roanoke, VA 24011-1331

Independent Auditors’ Report

The Honorable Members of City Council City of Roanoke, Virginia:

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Roanoke, Virginia (the City), as of and for the year ended June 30, 2012, which collectively comprise the City’s basic financial statements as listed in the accompanying table of contents. These financial statements are the responsibility of the City’s management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the School Board of the City of Roanoke, Virginia (the School Board), a discretely presented component unit of the City, constituting 100% of the total assets, net assets, revenues and expenses of the discretely presented component unit as of and for the year ended June 30, 2012. We also did not audit certain operations of the Civic Facilities fund, a major enterprise fund included in the business-type activities of the City, constituting 6.4% and 2.7% of total assets, 3.6% and 1.8% of total liabilities, 53.0% and 42.3% of total revenues, and 65.1% and 36.8% of total expenses of the Civic Facilities fund and business-type activities, respectively, as of and for the year ended June 30, 2012. The financial statements of the School Board and certain operations of the Civic Facilities fund were audited by other auditors whose reports have been furnished to us, and our opinions, insofar as they relate to the amounts included for the School Board and the amounts included for the Civic Facilities fund audited by other auditors are based solely on the reports 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 Specifications for Audits of Counties, Cities and Towns (Specifications), 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, based on our audit and the reports of the 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 discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Roanoke, Virginia as of June 30, 2012, and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended in conformity with U.S. generally accepted accounting principles.

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity. 25

In accordance with Government Auditing Standards, we have also issued a report dated November 30, 2012 on our consideration of the City’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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

U.S. generally accepted accounting principles require that the Management’s Discussion and Analysis on pages 29 through 44, the Budgetary Comparison Schedule – General Fund, the Infrastructure Assets Under Modified Approach, the Schedules of Funding Progress, the Schedules of Employer Contributions, and the Notes to Budgetary Comparison Schedule – General Fund on pages 127 through 136 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.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying combining and individual fund financial statements (Exhibits L-1, L-2, L-3, M-1 and M-2) and the Schedule of Expenditures of Federal Awards, as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The combining and individual fund financial statements (Exhibits L-1, L-2, L-3, M-1 and M-2) and the Schedule of Expenditures of Federal Awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements (Exhibits L-1, L-2, L-3, M-1 and M-2) and the Schedule of Expenditures of Federal Awards are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The Introductory Section and the Statistical Section are presented for the purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.

November 30, 2012

26 FINANCIAL SECTION

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28 CITY OF ROANOKE, VIRGINIA MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) YEAR ENDED JUNE 30, 2012

The following discussion and analysis of the City of Roanoke, Virginia’s (the City’s) financial performance provides an overview of the City’s financial activities for the fiscal year ended June 30, 2012. It should be read in conjunction with the preceding transmittal letter and the City’s basic financial statements.

FINANCIAL HIGHLIGHTS

 The City’s total net assets, excluding those of its component units, on the government-wide basis, totaled $393,818,181 at June 30, 2012. Of this amount, $30,059,961 may be used to meet ongoing obligations to citizens and creditors, and $363,758,220 is invested in capital assets, net of related debt.  Governmental activities of the City had expenses net of program revenues of $203,384,176 which totaled $44,529,202 less than the general revenues, net of transfers of $247,913,378.  At June 30, 2012, the City’s governmental funds balance sheet reported total ending fund balances of $48,902,461.

OVERVIEW OF THE FINANCIAL STATEMENTS

Our discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s financial statements present two types of statements, each with a different focus on the City’s finances. The focus is on both the City as a whole (government- wide) and the fund financial statements. The government-wide financial statements provide both short-term and long-term information about the City’s overall financial status. The fund financials focus on the individual parts of City government, reporting the City’s operations in more detail than the government-wide statements, which present a longer-term view. Presentation of both perspectives provides the user a broader overview, enhances the basis for comparisons, and better reflects the City’s accountability.

Government-Wide Financial Statements

The government-wide financial statements include the Statement of Net Assets (Exhibit A) and the Statement of Activities (Exhibit B). These statements provide information about the City as a whole using the full accrual basis of accounting, which is the method used by most private-sector enterprises. All current year revenues and expenses are reported in the Statement of Activities regardless of when cash is received or paid. These statements allow readers to answer the question, “Is the City’s financial position, as a whole, better or worse as a result of the year’s activities?” One of the main goals of these two statements is to report the City’s net assets and changes that affected net assets during the fiscal year. The change in the City’s net assets, the difference between assets and liabilities, is one way to measure the City’s financial position. Increases or decreases in net assets are indicators of whether the City’s financial position is improving or deteriorating. Other non-financial factors, such as changes in the City’s property tax base and the condition of the City’s infrastructure should also be considered in assessing the overall financial position of the City. 29

In the Statement of Net Assets and the Statement of Activities, the City’s fund-based activity is classified as follows:

Governmental activities – Most of the City’s basic services are reported here, including general government, judicial administration, public safety, public works, health and welfare, parks, recreation, and culture, and community development departments. Property taxes, other local taxes, and federal and state grants finance most of these activities.

Business-type activities – The City’s Civic Facilities and Parking operations are reported here as the City charges fees for services to customers.

Component units – The City includes two discretely presented component units in this report, the School Board of the City of Roanoke (School Board) and the Greater Roanoke Transit Company (GRTC). Although legally separate, the component units are important because the City is financially accountable for them.

Fund Financial Statements

The fund financial statements begin on page 45 and provide detailed information about the most significant funds, not the City as a whole. The City has three types of funds:

Governmental funds – Most of the City’s basic services are included in governmental funds. Fund based statements focus on how resources flow into and out of those funds and the balances left at year-end that are available for future spending. These funds are reported on the modified accrual basis of accounting, which measures cash and other liquid assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term overview that helps the reader determine the financial resources that can be spent in the near future to finance the City’s programs. The differences between governmental activities as reported in the government-wide and fund financial statements are reconciled in Exhibits D and F on pages 49 and 51, respectively.

Proprietary funds – When the City charges customers for the services it provides, whether to outside customers or to other units of the City, these services are generally reported in proprietary funds. Proprietary funds, like the government-wide statements, utilize the full accrual basis of accounting, and their statements provide both short and long-term financial information.

The City’s enterprise funds, one type of proprietary fund, are accounted for in the same manner as the government-wide business-type activities; however, the fund financial statements provide more detail and additional information, such as cash flows. The City’s enterprise funds include the Civic Facilities and Parking funds.

The City uses internal service funds, another type of proprietary fund, to report activities that provide supplies and services by one City department to other City departments on a cost reimbursement basis. Internal service fund rates are evaluated annually and adjusted as considered necessary with the goal of providing adequate revenues to cover operating and capital expenditures on an ongoing basis. Funds included in this category are Department of Technology, Fleet Management, and Risk Management.

30

Internal service fund activities are reported as governmental activities on the government-wide statements.

Fiduciary funds – Resources held for other governments, individuals, or agencies not part of the City are reported as fiduciary funds. These activities are excluded from the government- wide financial statements because the City cannot use these assets to finance its operations. The accounting used for fiduciary funds is much like that used for proprietary funds. The City of Roanoke Pension Plan is reported as a pension trust fund. Additionally, the City reports assets for other post-employment benefits (OPEB) related to its healthcare plan for retirees and line of duty benefits for its public safety employees in an OPEB trust fund. The City reports assets held on behalf of the Hotel Roanoke Conference Center Commission as an agency fund. Agency funds are custodial in nature and do not involve measurement of results of operations.

31 FINANCIAL ANALYSIS OF THE CITY AS A WHOLE

A comparative analysis of government-wide information is as follows:

Summary of Net Assets as of June 30, 2012 and 2011 (In Millions) Total Governmental Business-type Primary Activities Activities Government 2012 2011 2012 2011 2012 2011

Current and other assets$ 108.1 112.9$ $ 3.2 $ 2.5 $ 111.3 $ 115.4 Capital assets, net 540.0 498.1 60.8 62.5 600.8 560.6 Total assets 648.1 611.0 64.0 65.0 712.1 676.0

Other liabilities 50.8 48.4 2.7 2.9 53.5 51.3 Long-term liabilities 238.6 248.4 26.2 27.0 264.8 275.4 Total liabilities 289.4 296.8 28.9 29.9 318.3 326.7

Net assets: Invested in capital assets, net of related debt 329.5 270.0 34.2 34.0 363.7 304.0 Unrestricted 29.2 44.2 0.9 1.1 30.1 45.3 Total net assets $ 358.7 $ 314.2 $ 35.1 $ 35.1 $ 393.8 $ 349.3

The City’s Primary Government combined net assets increased from $349.3 million to $393.8 million as a result of the increase in net assets of governmental activities of $44.5 million related to capital assets. Unrestricted net assets, the portion of net assets that can be used to finance the day-to-day operations of the City, totaled $30.1 million. Net assets invested in capital assets, net of related debt, totaled $363.7 million and represents the amount of capital assets owned by the City, including infrastructure, net of accumulated depreciation and any outstanding debt issued to fund the asset purchase or construction. Net assets are reported as restricted when constraints on asset use are externally imposed by creditors, grantors, contributors, regulators, or are imposed by law through constitutional provisions or enabling legislation. As of June 30, 2012 and 2011, the City did not have any restricted net assets as presented in the governmental-wide financial statements.

32 Summary of Changes in Net Assets:

The following tables show the revenues and expenses of the government:

Summary of Changes in Net Assets For the Years Ended June 30, 2012 and 2011 (In Millions)

Governmental Business-type Total Primary Activities Activities Government 2012 2011 2012 2011 2012 2011 Revenues Program Revenues: Charges for services $ 13.2 $ 18.0 $ 5.9 $ 5.3 $ 19.1 23.3$ Operating grants and contributions 64.5 68.6 - - 64.5 68.6 Capital grants and contributions 3.7 5.7 - - 3.7 5.7 General Revenues: Property taxes 105.6 107.3 - - 105.6 107.3 Local portion of state sales tax 19.1 18.6 - - 19.1 18.6 Business and professional occupational license taxes 11.8 11.3 - - 11.8 11.3 Utility taxes 9.6 9.9 - - 9.6 9.9 Prepared food and beverage taxes 17.2 16.0 - - 17.2 16.0 Commonwealth share-personal property taxes 8.1 8.1 - - 8.1 8.1 Cigarette taxes 2.5 2.3 - - 2.5 2.3 Transient room taxes 3.0 2.9 - - 3.0 2.9 Telecommunications taxes 7.1 7.2 - - 7.1 7.2 Motor vehicle license tax 2.1 2.0 - - 2.1 2.0 Local Aid to the Commonwealth (1.4) (1.4) - - (1.4) (1.4) Other 4.3 4.2 - - 4.3 4.2 Payment from Component Unit 16.4 9.8 - - 16.4 9.8 Interest and investment income 1.1 1.0 0.1 0.1 1.2 1.1 Special Item - Donated Assets 43.3 - - - 43.3 - Total Revenues 331.2$ $ 291.5 $ 6.0 5.4$ $ 337.2 $ 296.9

(Continued)

33 Summary of Changes in Net Assets - Continued For the Years Ended June 30, 2012 and 2011 (In Millions)

Governmental Business-type Total Primary Activities Activities Government 2012 2011 2012 2011 2012 2011 Expenses General Government $ 15.2 $ 13.9 $ - $ - $ 15.2 $ 13.9 Judicial Administration 8.8 7.7 - - 8.8 7.7 Public Safety 69.9 63.3 - - 69.9 63.3 Public Works 28.7 18.7 - - 28.7 18.7 Health and Welfare 41.1 42.1 - - 41.1 42.1 Parks, Recreation and Cultural 13.3 11.4 - - 13.3 11.4 Community Development 9.5 10.7 - - 9.5 10.7 Transit Co 1.7 1.2 - 1.7 1.2 Education 83.1 74.8 - - 83.1 74.8 Economic Development 2.0 3.9 - - 2.0 3.9 Interest and Fiscal Charges 11.6 12.0 - - 11.6 12.0 Civic Facilities - - 4.5 4.5 4.5 4.5 Parking - - 3.5 2.8 3.5 2.8 Market Building - - - 0.2 - 0.2 Total Expenses 284.7 259.7 8.0 7.5 292.7 267.2 Increase (Decrease) in Net Assets before Transfers 46.5 31.8 (2.0) (2.1) 44.5 29.7 Transfers (2.0) (0.6) 2.0 0.6 (0.0) - Special Items - (3.5) - (3.2) - (6.7) Increase in Net Assets 44.5 27.7 - (4.7) 44.4 23.0 Net Assets, Beginning 314.2 286.5 35.1 39.8 349.3 326.3 Net Assets, Ending $ 358.7 $ 314.2 $ 35.1 $ 35.1 $ 393.8 $ 349.3

The net assets of governmental activities increased $44.5 million during fiscal year 2012. Significant current year activities affecting net assets include:

 A $43.3 million donation from the United States Army Corps of Engineers resulting in an increase in capital assets net of related debt, related to Infrastructure – the capitalization of the Roanoke River Flood Reduction project.

 Growth in the prepared food and beverage tax and personal property tax led performance of local tax revenues. Total property tax revenues increased 1.3%. The remaining local taxes such as sales tax, business license, transient occupancy, and cigarette tax revenues increased as the result of local improvement in economic conditions. As a whole, the City’s local taxes increased 1.8%.

 The City continued to maintain and implement financial controls to ensure expenditures of general government programs were contained within budget. Staffing levels were reduced based on program changes, planned departmental budget reductions were maintained and minimized investment in certain capital assets enabled the City to complete the year well within the budget.

34  The City overfunded the OPEB Trust and thus recognized an asset in the governmental Statement of Net Assets of $0.4 million.

 The net assets of business-type activities remained relatively flat during fiscal year 2012. Current year activities affecting net assets include:

 The Parking Fund net assets remained relatively stable with a slight decrease in operating income.

 The Civic Center Fund net assets remained stable due to a transfer from the General Fund of $2.0 million.

Revenues generated for governmental activities are presented below by category:

Property taxes 33%

Operating grants and Other Taxes contributions 25% 19%

Charges for services Interest and 4% Other investment income 19% 0%

The property tax classification, which comprises approximately 33% of total revenue generated by governmental activities, includes real estate tax, the local portion of personal property tax, and public service corporation taxes. Real estate tax revenue, the largest source of revenue for the City, totaled $80.8 million. The assessed value of real property in the City decreased slightly for the 2012 calendar year as a result of reassessments. The reduction in assessed value was offset by lower allowable real estate tax credits.

Personal property tax revenue, including the Commonwealth share, totaled $32.9 million. The revenue received locally from citizens totaled $24.8 million. Funding from the Commonwealth under its amended Personal Property Tax Relief Act (PPTRA) program provided revenue totaling $8.1 million. Revenue from the Commonwealth provided relief of 64.75% on the first $20,000 in vehicle value for the current fiscal year and is included in the other taxes category.

35 Sales taxes, prepared food and beverage taxes, business and professional occupational license taxes, utility taxes, funding from the Commonwealth under PPTRA, telecommunication taxes, transient room taxes and cigarette taxes comprise the majority of other local taxes collected by the City. Other taxes comprise approximately 25% of total revenues generated for governmental activities.

Operating grants and contributions comprise approximately 19% of governmental activities revenues. Social service programs, street maintenance funds, reimbursement for shared expenses of constitutional officers, reimbursement for funding received under House Bill 599 for law enforcement, and jail per diems are some of the major sources of revenue included in this category.

Other of 19% includes donated assets to the City from the U.S. Army Corps of Engineers of $43.3 million for the Roanoke River Flood Reduction project.

Charges for services include items such as fines, court fees, inspection fees, reimbursements for housing prisoners, garbage collection fees, and recreation and other program-based fees.

Expenses of the governmental activities are shown below by functional area:

Interest and Fiscal Charges General Government 4% 5% Judicial Administration Economic Development 3% 1%

Education Public Safety 29% 25%

Community Development 3% Public Works Parks, Recreation and Health and Welfare 10% Cultural 15% 5%

Education expenses comprise 29% of governmental activities. Funding of $78.4 million was provided to the Roanoke City School Board to support School operations and debt service.

36 Public Safety expenses comprised approximately 25% of expenses of the governmental activities. Operations of the City Jail, Police and Fire Departments are included in this category, along with expenses of Emergency Medical Services, Communications (E911 Call Center), and the cost of juvenile justice programs.

Public Works and Health and Welfare expenses comprised approximately 10% and 15%, respectively, of governmental activities expenses. Expenses for Solid Waste Management, Building Maintenance, Street Paving, and Street Maintenance are included in the Public Works category. The Comprehensive Services Act and social services programs were the majority of expenses reported in the Health and Welfare category.

FINANCIAL ANALYSIS OF THE CITY’S FUNDS

For the fiscal year ended June 30, 2012, the governmental funds reflect a total fund balance of $48,902,461. Approximately $26.0 million of this amount constitutes unassigned fund balance and consists of the Unassigned General Fund Reserve. The Reserve provides the City with sufficient working capital and margin of financial safety to address unforeseen, one-time expenditure emergencies or declines in revenues for which there is no other budgetary resource or other designations of fund balance available to satisfy the funding need. Committed fund balance of approximately $18.2 million consists of funding for outstanding purchase commitments, future debt service, and future years’ capital project expenditures. The remaining fund balance of approximately $4.7 million is restricted and consists of funds, provided by bonded debt, for future capital project expenditures.

During fiscal year 2011, the City implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The new standard replaces the prior reporting fund balance categories with five classifications based upon constraints placed on the use of resources as well as revised fund type definitions. See note 1 for additional information on the fund balance categories.

The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the general fund unassigned fund balance was $26.0 million while the total fund balance was $27.1 million. As a measure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents approximately 10.0% of the total General Fund expenditures and other financing uses, while total fund balance represents 10.5% of that same amount.

The General Fund begins each fiscal year with budgeted revenue and expenditure amounts that are equal. During the year, encumbrances unpaid at the end of the prior year are liquidated, increasing expenditures. Other budgetary adjustments are made to recognize additional sources and uses of funding or to accept donations. During the fiscal year ended June 30, 2012, the fund balance of the General Fund increased by $0.2 million. The committed balance to cover outstanding purchase commitments at the end of the year decreased from 2011 to 2012 while the unassigned fund balances grew as a result of revenues in excess of expenditures.

Local taxes generated 70% of General Fund revenue, totaling approximately $181.5 million. The most significant portion of the current year growth was attributable to the food and beverage tax followed by personal property taxes. Real estate taxes, the City’s largest single

37 source of revenue, also increased by 0.3%. Current real estate tax revenues actually increased 0.8% but were offset by reduced delinquent tax collections.

Intergovernmental revenue is the second largest source of General Fund revenues, generating approximately $63.6 million in fiscal year 2012. The Commonwealth is the primary source of Intergovernmental revenue; providing revenue for social services programs, street maintenance funds, and law enforcement funding received under House Bill 599.

In fiscal year 2012, reductions in Commonwealth supported social service revenues declined as a result of changes in payment methodology whereby the Commonwealth paid for some services directly instead of reimbursing the City. The total reduction in funding from the Commonwealth in fiscal year 2012 compared to fiscal year 2011 was approximately $2.6 million or 8.7%. This reduction in revenue resulted in a corresponding decrease in expenditures as the City was no longer paying for these services as a result of the change.

The Capital Projects Fund balance increased $0.4 million. Contributing to the increase of the fund were revenues from the Economic Development Authority relating to unused Market Building renovation funds.

GENERAL FUND BUDGETARY HIGHLIGHTS

Actual General Fund Revenues were slightly lower than original budgeted revenues by $0.2 million or 0.06% and fell short of the final budgeted revenues by $0.1 million or 0.03%. Changes to the revenue budget late in the year narrowed the gap between actual revenue performance and the final budget estimate. The General Fund revenue decrease was driven by lower reimbursement-based intergovernmental revenues.

In the local tax area, real estate, personal property, business license, sales, meals and transient occupancy taxes exceeded budget. The economic recession of 2008-2010 negatively impacted the prior year results and led to the development of a conservative 2012 budget. The performance of local taxes improved throughout the year as economic conditions improved.

The intergovernmental revenue performance was driven by a change in payment methodology by the Commonwealth whereby the Commonwealth began making certain social services related payments directly instead of reimbursing the City. This eliminated the necessity of the City making these payments and as a result, correspondingly reduced Social Services expenditures.

General Fund expenditures and transfers were greater than the original budget by $0.7 million or 0.3% due to supplemental appropriations, but were less than the final amended budget by $0.6 million or 0.2%. Efforts continued to manage the City’s expenditures. Spending at the departmental level was closely monitored during the fiscal year, and policies centered on maximizing savings were continued.

During fiscal year 2012, City Council amended the budget several times. These budget amendments or supplemental appropriation ordinances were primarily for the following purposes:

38  To re-appropriate funds to pay commitments in the form of encumbrances established prior to June 30, 2012 but not paid by that date. Encumbrances for General Fund purchase orders authorized and issued, but for which goods and services were not received or paid by June 30, 2012 totaled $1.1 million.

 To appropriate excess local revenues to increase funding for Roanoke City Public Schools in the amount of $0.6 million.

 To de-appropriate funding from the Commonwealth of Virginia for Social Services payments now made directly by the Commonwealth of $1.9 million.

CAPITAL ASSETS

As of June 30, 2012, the City’s capital assets for its governmental and business-type activities amounted to $600,804,541, net of accumulated depreciation. This investment includes land, historical treasures, construction in progress, land improvements, buildings and structures, equipment and infrastructure. The City’s capital assets increased year over year by $40.2 million or 7.2%. The primary driver of this increase was a donation of a portion of the Roanoke River Flood Reduction project from the federal government of $43.3 million.

In fiscal year 2012, the City adopted the Modified Approach as outlined in GASB Statement No. 34 for certain infrastructure assets deemed inexhaustible. Under the Modified Approach, inexhaustible assets are not depreciated but are required to be maintained at a specified condition level through the use of structured and periodic assessments. The Roanoke River Flood Reduction project, a collaborative effort between the City and the United States Army Corps of Engineers (USACE) was completed in May of 2012. The infrastructure assets of the project, which totaled $48.1 million, were capitalized under the Modified Approach. It is the City’s policy to conduct bi-annual assessments ensuring a minimum condition rating level of two (Fair) or higher on a scale of one (Poor) to three (Good), through the use of a USACE provided assessment report. Every three years, the USACE will conduct an independent assessment ensuring the City is maintaining the asset at the agreed upon condition level. The USACE initial assessment which was conducted in conjunction with City personnel indicated the condition level of the flood reduction infrastructure assets was Good. In fiscal year 2012, the City incurred $97,370 in preservation costs to maintain the flood reduction infrastructure assets at the current condition level.

The following table shows summarized balances of major categories of capital assets as of June 30, 2012. The changes in each category of Capital Assets are presented in detail in note 5 to the Basic Financial Statements.

39 Capital Assets Net of Depreciation (In Millions)

Governmental Activities Business-Type Activities Total Balance Balance Balance Balance Balance Balance June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011

Land and Improvements $ 46.7 $ 45.6 $ 3.6 $ 3.6 $ 50.3 $ 49.2 Buildings and Improvements 263.2 261.6 56.6 49.9 319.8 311.5 Equipment 27.4 21.2 0.6 0.7 28.0 21.9 Infrastructure 189.7 124.8 - - 189.7 124.8 Construction in Progress 13.0 44.9 - 8.3 13.0 53.2 Total $ 540.0 $ 498.1 $ 60.8 $ 62.5 $ 600.8 $ 560.6

Major capital asset additions during the fiscal year included the following:

 The Roanoke River Flood Reduction project, finalized in May 2012, was capitalized at $63.0 million and included infrastructure, recreational and equipment assets.

 A Digital Radio project, a collaborative effort with surrounding localities, was capitalized at a cost of $5.8 million

Detailed information regarding capital assets is disclosed in Note 5 to the financial statements.

LONG-TERM DEBT

At June 30, 2012, the City’s long-term liabilities, excluding compensated absences and claims payable, totaled $267,919,570, comprised of $240,314,557 related to governmental activities, and $27,605,013 related to business-type activities. Total debt decreased by $16,981,235 during the fiscal year. Changes in long-term debt during fiscal year 2012 resulted from payment of principal on existing debt, issuance of the General Obligation Public Improvement Bonds, Series 2012A, General Obligation Public Improvement and Refunding Bonds, Series 2012B and General Obligation Public Improvement and Refunding Bonds, Series 2012C. Series 2012A bonds were used to finance capital improvements for school improvement projects, parks and recreation improvement projects, storm drain improvement projects, public bridge renovation projects, renovations to the Roanoke Civic Center, and the Digital Radio Project. Series 2012B bonds were used to refund a portion of outstanding Series 2002B bonds and Series 2003 bonds. Series 2012C bonds were used to refund a portion of outstanding Series 2004B bonds and Series 2006A bonds. The City realized present value savings from the issuance of Series 2012B Refunding bonds and Series 2012C Refunding Bonds which were used in the refinancing of outstanding Series 2002B bonds, Series 2003 bonds, Series 2004B bonds and Series 2006A bonds.

Detailed information regarding these changes in long-term debt is disclosed in Notes 8 and 9 to the Basic Financial Statements.

40 The City’s most recent ratings obtained in February 2012 were AA+ and AA from Fitch Ratings and Standard & Poor’s Ratings Services, respectively.

The Charter of the City of Roanoke and Code of Virginia limits the City’s net debt to 10% of the assessed valuation of real estate within the City limits. The limit applies to tax supported debt paid by the governmental funds. Long-term liabilities of business-type funds will be met by revenues generated by those funds. The City considers long-term debt of its Parking Enterprise Fund to be self-supporting. Additionally, in accordance with its contractual agreement with the Western Virginia Water Authority, the City will receive funding from the Authority toward $17,558,082 of general obligation debt. The City’s tax-supported debt of $228,581,066 less the Debt Service Fund Balance of $1,317,554 designated for the repayment of debt service is well below the legal debt limit of $679,477,230.

The School Board Component Unit relies upon the City to provide full faith and credit for any debt obligations incurred. Therefore, the City reports School Board Component Unit long- term liabilities, other than claims payable and compensated absences, as its own. In addition to bonded debt and capital lease obligations, the City’s long-term obligations include compensated absences and claims payable. Additional information concerning the City’s long- term liabilities is presented in notes 8 and 9 to the Basic Financial Statements.

Interest and fiscal charges for 2012 were $11,737,801, or 4.0% of total governmental funds’ expenditures.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES

The City’s Metropolitan Statistical Area (MSA) unemployment rate, not seasonally adjusted, was 6.5% as of June 30, 2012. Consistent with trends at the state level, this represents a decrease of 0.4% from the prior year. The City’s MSA unemployment rate was above the state unemployment rate of 6.0% but below the national unemployment rate of 8.4%. Employment in Roanoke is diverse with representation within the MSA of all census-defined industries. The industries providing the largest number of jobs in the region are health care and social assistance.

Roanoke’s income levels trail the state and national averages, however they compare quite well when adjusted for the cost of living. Fiscal year 2012 financial performance was indicative of an improving local economy. However, the City anticipates lingering effects of the economic downturn as the local real estate market remains depressed and the volume of property sales remains at lower than normal levels.

The City’s General Fund revenue increased in fiscal year 2012 by 0.2% primarily due to increases in a number of local taxes. The growth in local taxes offset declines driven by a decrease in Social Services reimbursements from the Commonwealth. The Roanoke economy is less volatile than other areas of the Commonwealth. The City experienced modest growth in many local taxes and, with tight expenditure controls, was able to fund additional capital projects in the public safety and economic development areas as well as add to the risk management reserve. In addition, the General Fund unassigned fund balance increased by $0.4 million maintaining the required funding level according to the City’s reserve policy.

41 Important economic indicators for the City during the past year included a decrease in unemployment and an increase in consumer spending that affected many areas of our local economy. The fact that unemployment remains at a heightened level is a continuing concern.

Housing values have remained stable for Roanoke longer than other localities around the state but in fiscal year 2012, fell almost 2.6% to an average assessed value of $129,900. The volume of commercial construction permits remained flat although the value of permits issued decreased in 2012 by 13.9% compared to 2011. The value of residential construction permits declined only 5.8% in 2012 compared to 2011. Construction efforts have been strained by tight credit markets in both commercial and residential sectors.

During fiscal year 2012, the Commonwealth of Virginia (the Commonwealth) implemented a number of budget reduction strategies in response to the slow economic recovery. Among these budget reduction strategies approved by the General Assembly, were changes impacting the funding for localities participating in the Virginia Retirement System (VRS). Employees of the City of Roanoke Sheriff’s Department and the School Board of the City of Roanoke participate in the Virginia Retirement System.

The VRS Board of Trustees approved changes to certain actuarial assumptions resulting in an increase in funding rates for participating localities. The General Assembly deferred the pension contribution rate increases request by the VRS Board of Trustees, and similarly allowed participating school divisions and political subdivisions the opportunity to defer their share of the increase in the contribution rate. The enabling legislation requires that the impact of the deferral of the rate increase be replenished beginning in fiscal year 2013 and continuing until fully replenished in fiscal year 2021. The School Board of the City of Roanoke elected to defer the rate increase. Ultimately, it is likely that there will be significant increases in the School Board’s costs in order to meet the future payment obligations required of the VRS Plan.

In addition to the deferral of contribution rate increases, the General Assembly approved legislation requiring contributions from employees of school divisions and political subdivisions, on a salary reduction basis, where previously, the school division or political subdivision paid the member contributions on behalf of the employee. The legislation further required that the participating school division or political subdivision provide an offsetting pay increase equal to the required employee contribution. The legislation provided for a “phase in” option with a minimum 1% member contribution to be implemented over the next 5 years to reach the required 5% member contribution level by fiscal year 2017.

For fiscal year 2013, the City of Roanoke elected to implement the full 5% required employee contribution and offsetting pay increase effective July 1, 2013 for employees of the City of Roanoke Sheriff’s Department. The School Board of the City of Roanoke elected the phase in option requiring a 1% member contribution with an offsetting 1% salary increase. The implementation of the required employee contribution and shared-cost of retirement benefits will result in long-term savings for both the City of Roanoke and the School Board.

In fiscal year 2012, the City increased funding of education by 11.6%. This increase was a result of a change in the funding formula to 40% of local tax revenues. In fiscal year 2011, the funding formula was a combination of a percent of a derived tax base, specific funding and the 2% food and beverage tax increase. The change in formula did not increase funding overall to the Schools in that the Schools became responsible for reimbursing the City for debt service

42 that was previously paid by the City on the Schools behalf. However, funding to the Schools increased $1.6 million from the fiscal year 2012 adopted budget. The increase was provided by the improved performance in local taxes primarily in the food and beverage and property and taxes.

Fiscally responsible budgeting for fiscal year 2012 provided for expanded programming levels for services compared to fiscal year 2011 and resulted in slightly higher expenditures in fiscal year 2012. Increases in the priorities for Safety and Infrastructure were the primary drivers offset by the expected decrease in Social Services for payments now made directly by the Commonwealth.

The General Fund adopted budget for fiscal year 2013 decreased by 2.2% compared to the fiscal year 2012 adopted budget. The decrease was primarily related to the reduction in the food and beverage tax rate from 7% to 5% effective July 1, 2012 as well as the reduction of reimbursements from the Commonwealth related to a change in payment methodology. Adjusted for these changes, budgeted revenues increased 0.7%. Local taxes comprise 69.2% of all budgeted fiscal year 2013 General Fund revenues, and the budget for this category decreased approximately 1.6% compared to the fiscal year 2012 adopted budget. Despite the overall reduction, growth is projected in sales, business license, transient occupancy and, adjusted for the change in tax rate, food and beverage taxes. Funding to Schools, related to the food and beverage tax rate reduction effective July 1, 2012, will also decrease.

As the City looks further ahead toward fiscal 2014, another difficult budget process is anticipated. The City expects it will be several years before economic performance returns to previous growth levels. Strategic focus areas include providing capital investment to maintain City assets and operations, funding of the School Board for education of students, increased local funding of state mandated programs as state funding is reduced and funding of employee compensation to motivate and retain a quality workforce. The priorities are challenging given the potential of lower local revenues due in part, to reduced assessments of real estate property.

The real estate market in the City has continued to lag during the past year. In addition, the ratio of assessed value to sales price has continued to rise which indicates a potential need to lower assessed values of real property in some areas again for the second consecutive year. The City is monitoring the situation carefully and expects information early in the budgeting process for fiscal year 2014. The real estate assessment process aligns well with the budgeting process in that real estate assessments are established in January of each year with an effective date of July 1st of the same year. This allows the City to plan and revise programs as needed to maintain a balanced budget as real estate tax revenues are known and defined.

The Roanoke economy appears to be slowly rebounding from the recession. Local taxes indicate increased economic activity. Management believes that the current fiscal year 2013 revenue estimates will be met. Challenges exist in predicting the timing and rate of improvement moving forward. With state budget constraints and uncertainties, and the looming specter of federal sequestration, it is difficult to anticipate the level of funding from the Commonwealth and federal governments in upcoming years. There will continue to be significant pressure on local governments to fund programs previously funded by these government entities in areas such as public education and social services.

43 CONTACTING THE CITY’S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the City’s finances and to demonstrate the City’s accountability for the resources it receives and their uses. Questions concerning this report or requests for additional information should be directed to the Director of Finance, PO Box 1220, Roanoke, Virginia 24006, telephone (540) 853-2821 or email [email protected]. The City’s website address is www.roanokeva.gov.

44 Exhibit A

CITY OF ROANOKE, VIRGINIA STATEMENT OF NET ASSETS JUNE 30, 2012

Primary Government School Board GRTC Governmental Business-Type Component Component Activities Activities Total Unit Unit Assets Cash and Cash Equivalents$ 34,568,629 $ 2,312,420 $ 36,881,049 $ 36,965,385 $ 792,068 Investments 26,895,796 604,837 27,500,633 - - Interest and Dividends Receivable 28,517 609 29,126 - - Due from City of Roanoke - - - 910,419 - Due from Other Governments 27,522,315 - 27,522,315 8,027,667 480,629 Internal Balances 133,176 (133,176) - - - Taxes and Accounts Receivable, Net 16,635,278 96,690 16,731,968 39,595 155,511 Note Receivable 1,433,046 - 1,433,046 495,000 - Inventory 61,068 - 61,068 - 458,677 Other Assets 483,756 289,342 773,098 1,043,259 65,490 OPEB Overfunding 404,400 - 404,400 - - Capital Assets: Land, Construction in Progress, Right-of-Way, and Historical Treasures 125,558,086 3,638,674 129,196,760 - 720,724 Other Capital Assets, Net 414,413,269 57,194,512 471,607,781 2,787,940 11,806,305 Capital Assets, Net 539,971,355 60,833,186 600,804,541 2,787,940 12,527,029 Total Assets 648,137,336 64,003,908 712,141,244 50,269,265 14,479,404

Liabilities Accounts Payable and Accrued Expenses 11,330,924 342,781 11,673,705 2,015,007 902,953 Accrued Interest Payable 3,640,373 348,048 3,988,421 - - Due to Component Unit 900,292 - 900,292 - - Due to Other Governments 1,502,160 42,040 1,544,200 - - Unearned Revenue 666,833 - 666,833 1,019,232 149,088 Other Liabilities 404,400 560,769 965,169 - - Long-term Liabilities Due Within One Year 32,348,249 1,395,356 33,743,605 5,834,320 - Long-term Liabilities Due in More Than One Year, Net 238,631,182 26,209,656 264,840,838 5,735,242 - Total Liabilities 289,424,413 28,898,650 318,323,063 14,603,801 1,052,041

Net Assets Invested in Capital Assets, Net of Related Debt 329,493,504 34,264,716 363,758,220 2,787,940 12,527,029 Unrestricted 29,219,419 840,542 30,059,961 32,877,524 900,334 Total Net Assets $ 358,712,923 $ 35,105,258 $ 393,818,181 $ 35,665,464 $ 13,427,363

See Notes to Basic Financial Statements.

45 Exhibit B CITY OF ROANOKE, VIRGINIA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2012

Program Revenues Operating Charges for Grants and Capital Grants and Functions/Programs Expenses Services Contributions Contributions Primary Government: Governmental Activities: General Government $ 15,192,371 $ 3,700,916 $ 996,079 $ 336,120 Judicial Administration 8,777,516 3,782,588 8,040,967 - Public Safety 69,882,446 4,702,979 8,930,578 - Public Works 28,672,051 340,438 12,355,511 1,902,751 Health and Welfare 41,124,917 93,991 29,916,683 - Parks, Recreation and Cultural 13,301,508 414,693 620,545 1,438,488 Community Development 9,452,579 154,041 3,597,325 - Greater Roanoke Transit Company 1,654,105 - - - Education 83,072,419 - - - Economic Development 2,022,694 - - - Other 4,595 - - - Interest and Fiscal Charges 11,551,668 - - - Total Governmental Activities 284,708,869 13,189,646 64,457,688 3,677,359 Business-Type Activities: Civic Facilities 4,509,327 2,559,400 - - Parking 3,483,658 3,316,277 - - Total Business-Type Activities 7,992,985 5,875,677 - - Total Primary Government$ 292,701,854 $ 19,065,323 $ 64,457,688 $ 3,677,359 Component Unit: Greater Roanoke Transit Company$ 10,701,358 $ 2,131,743 $ - $ - School Board of the City of Roanoke$ 170,989,194 $ 4,908,968 $ 50,542,428 $ -

General Revenues: Taxes: General Property - Real Estate and Personal Property Local Portion of State Sales Business and Professional Occupational License Utility Prepared Food and Beverage Commonwealth Share - Personal Property Cigarette Transient Room Telecommunication Motor Vehicle License Recovered Costs Other State Aid Not Restricted to a Specific Program Payment from City of Roanoke Payment from Component Unit Grants and Contributions Not Restricted to Specific Programs Interest and Investment Income Miscellaneous Capital Contribution Special Item: Donated Assets Transfers Total General Revenues and Transfers Change in Net Assets

Net Assets at Beginning of Year Net Assets at End of Year

See Notes to Basic Financial Statements.

46 Exhibit B

Net (Expense) Revenue and Changes in Net Assets Primary Government School Board GRTC Governmental Business-Type Component Component Activities Activities Total Unit Unit

$ (10,159,256) $ - $ (10,159,256) $ - $ - 3,046,039 - 3,046,039 - - (56,248,889) - (56,248,889) - - (14,073,351) - (14,073,351) - - (11,114,243) - (11,114,243) - - (10,827,782) - (10,827,782) - - (5,701,213) - (5,701,213) - - (1,654,105) - (1,654,105) - - (83,072,419) - (83,072,419) - - (2,022,694) - (2,022,694) - - (4,595) - (4,595) - - (11,551,668) - (11,551,668) - - (203,384,176) - (203,384,176) - -

- (1,949,927) (1,949,927) - - - (167,381) (167,381) - - - (2,117,308) (2,117,308) - - $ (203,384,176) $ (2,117,308) $ (205,501,484) $ - $ -

$ - $ - $ - $ - $ (8,569,615) $ - $ - $ - $ (115,537,798) $ -

$ 105,653,485 $ - $ 105,653,485 $ - $ - 19,147,211 - 19,147,211 - - 11,769,433 - 11,769,433 - - 9,584,366 - 9,584,366 - - 17,216,380 - 17,216,380 - - 8,075,992 - 8,075,992 - - 2,456,680 - 2,456,680 - - 2,983,586 - 2,983,586 - - 7,096,425 - 7,096,425 - - 2,130,312 - 2,130,312 - - 798,839 - 798,839 - - 2,212,277 - 2,212,277 - 351,026 - - - 49,125,626 - - - - 78,351,405 - 16,373,216 - 16,373,216 - - - - - 18,695 6,183,264 1,071,384 170,902 1,242,286 35,626 - - - - 1,253,544 - - - - - 389,023 43,322,018 - 43,322,018 - - (1,978,226) 1,978,226 - - - $ 247,913,378 $ 2,149,128 $ 250,062,506 $ 128,784,896 $ 6,923,313 44,529,202 31,820 44,561,022 13,247,098 (1,646,302)

314,183,721 35,073,438 349,257,159 22,418,366 15,073,665 $ 358,712,923 $ 35,105,258 $ 393,818,181 $ 35,665,464 $ 13,427,363

47 Exhibit C

CITY OF ROANOKE, VIRGINIA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2012

Debt Special Capital Total General Service Revenue Projects Governmental Fund Fund Fund Fund Funds ASSETS

Cash and Cash Equivalents$ 10,661,099 $ 1,502,452 1,190,805$ $ 12,142,933 $ 25,497,289 Investments 9,870,040 - - 7,183,403 17,053,443 Interest and Dividends Receivable 11,391 - - 7,226 18,617 Due from Other Governments 9,399,580 - 545,829 - 9,945,409 Due from Other Funds 170,418 76,090 5,479 2,672,945 2,924,932 Taxes Receivable 17,549,179 - - - 17,549,179 Accounts Receivable 4,623,297 - 73,771 62,066 4,759,134 Allowance for Uncollectible Receivables (5,746,184) - - - (5,746,184) Deferred Charges 37,020 - - 46,152 83,172 Total Assets $ 46,575,840 $ 1,578,542 1,815,884$ $ 22,114,725 $ 72,084,991

LIABILITIES

Accounts Payable and Accrued Expenditures$ 8,579,907 $ 189,759 635,175$ $ 994,762 $ 10,399,603 Due to Other Governments 534,395 - 967,765 - 1,502,160 Due to Other Funds 5,906,292 71,229 2,108 66,247 6,045,876 Due to Component Unit 346,686 - - 553,606 900,292 Deferred Revenue 4,123,763 - 210,836 - 4,334,599 Total Liabilities 19,491,043 260,988 1,815,884 1,614,615 23,182,530

FUND BALANCES

Restricted - - - 4,686,212 4,686,212 Committed 1,084,361 1,317,554 - 15,813,898 18,215,813 Unassigned 26,000,436 - - - 26,000,436 Total Fund Balances 27,084,797 1,317,554 - 20,500,110 48,902,461 Total Liabilities and Fund Balances$ 46,575,840 $ 1,578,542 1,815,884$ $ 22,114,725 $ 72,084,991

See Notes to Basic Financial Statements

48 Exhibit D

CITY OF ROANOKE, VIRGINIA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2012

Total Fund Balances - Governmental Funds$ 48,902,461

Amounts reported for governmental activities in the Statement of Net Assets are different due to:

Capital assets used in governmental activities are not considered current financial resources and therefore are not reported as assets in the governmental funds. Governmental capital assets, at cost 724,874,855 Less: accumulated depreciation (209,504,647) 515,370,208

Other assets used in governmental activities are not considered current financial resources and therefore are not reported in the governmental funds. Bond issuance costs and deferred amounts on refunding 15,083,588 Less: accumulated amortization (6,655,803) Note Receivable - Hotel Roanoke, LLC 1,433,046 Receivable from Western Virginia Water Authority 17,558,082 27,418,913

Property taxes receivable which are expected to be collected this year, but are not available soon enough to pay for the current period's expenditures, and therefore are deferred in the governmental funds. 3,792,457

Long-term liabilities, including bonds payable with related accrued interest, are not due and payable in the current period and therefore are not reported as liabilities in the governmental funds. Governmental bonds payable (229,885,814) Capital lease obligation (4,103,485) Bond premium (13,905,642) Accumulated amortization of bond premium 3,621,097 Compensated absences payable (6,357,302) Accrued interest payable (3,565,804) (254,196,950)

Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets, liabilities and net assets of the internal service funds are included with governmental activities in the Statement of Net Assets. 17,425,834

Total Net Assets of Governmental Activities$ 358,712,923

See Notes to Basic Financial Statements.

49 Exhibit E

CITY OF ROANOKE, VIRGINIA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2012

Debt Special Capital Total General Service Revenue Projects Governmental Fund Fund Fund Fund Funds REVENUES Local Taxes $ 181,456,770 $ - $ - $ - $ 181,456,770 Permits, Fees and Licenses 857,561 - - - 857,561 Fines and Forfeitures 1,531,145 - - - 1,531,145 Rental Income 117,154 - - - 117,154 Investment Income 94,987 - 2,115 39,175 136,277 Intergovernmental 63,605,284 19,489,423 9,506,768 3,341,239 95,942,714 Charges for Services 10,262,192 - - - 10,262,192 Miscellaneous 587,977 102,570 10,839 1,200,651 1,902,037 Total Revenues 258,513,070 19,591,993 9,519,722 4,581,065 292,205,850 EXPENDITURES Current Operating: General Government 13,108,728 - 311,913 - 13,420,641 Judicial Administration 7,699,377 - 376,369 - 8,075,746 Public Safety 60,624,597 - 2,129,297 - 62,753,894 Public Works 23,696,320 - - - 23,696,320 Health and Welfare 36,883,907 - 2,799,830 - 39,683,737 Parks, Recreation and Cultural 9,165,589 - 467,226 - 9,632,815 Community Development 5,854,596 - 3,190,767 - 9,045,363 Greater Roanoke Transit Company 1,654,105 - - - 1,654,105 Education 78,351,405 - - - 78,351,405 Debt Service: Principal Retirement - 23,426,997 - - 23,426,997 Interest and Paying Agent Charges - 10,936,143 - - 10,936,143 Bond Issuance Cost - 801,658 - - 801,658 Capital Outlays - - - 12,373,816 12,373,816 Total Expenditures 237,038,624 35,164,798 9,275,402 12,373,816 293,852,640 Excess (Deficiency) of Revenues Over (Under) Expenditures 21,474,446 (15,572,805) 244,320 (7,792,751) (1,646,790) OTHER FINANCING SOURCES (USES) Issuance of Bonds - - - 5,533,829 5,533,829 Issuance of Refunding Bonds - 25,125,000 - - 25,125,000 Payment to Refunded Bond Escrow Agent - (27,734,307) - - (27,734,307) Premium on Sale of Bonds - 3,371,482 - - 3,371,482 Transfers In 7,752 14,995,425 313,713 2,771,513 18,088,403 Transfers Out (21,312,231) (252) (558,033) (120,460) (21,990,976) Total Other Financing Sources (Uses) (21,304,479) 15,757,348 (244,320) 8,184,882 2,393,431 Net Change in Fund Balances 169,967 184,543 - 392,131 746,641 Fund Balances--Beginning of Year 26,914,830 1,133,011 - 20,107,979 48,155,820 Fund Balances--End of Year $ 27,084,797 $ 1,317,554 $ - $ 20,500,110 $ 48,902,461

See Notes to Basic Financial Statements.

50 Exhibit F

CITY OF ROANOKE, VIRGINIA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2012

Total Net Change in Fund Balances - Governmental Funds$ 746,641

Amounts reported for Governmental Activities in the Statement of Activities are different due to:

Governmental Funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate the cost of those assets over the life of the asset. Expenditures for capital assets 10,456,003 Donation of capital assets 43,322,018 Less current year depreciation expense (16,706,919) 37,071,102

Revenues in the Statement of Activites that do not provide current financial resources are not reported as revenues in the Governmental Funds. Net change in deferred revenue related to taxes (192,933) Note Receivable - Hotel Roanoke, LLC (441,007) Net principal reimbursed by Western Virginia Water Authority (2,317,368) (2,951,308)

Bond and other long term debt proceeds provide current financial resources to Governmental Funds, but issuing debt increases long-term liabilities in the Statement of Net Assets. Repayment of bond principal is an expenditure in the Governmental Funds but the repayment reduces long-term liabilities in the Statement of Net Assets Bond and other long term debt proceeds (30,150,000) Bond premium (3,488,047) Amortization of current year bond premium 838,196 Bond costs and deferred amounts 2,909,694 Amortization of current year bond costs and deferred amounts (800,381) Principal payments 48,366,996 17,676,458

Certain expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds. Change in long-term compensated absences (512,883) Change in accrued interest payable 593,086 80,203

Internal service funds are used by management to charge the costs of certain services to individual funds. The change in net assets of the internal service funds is reported with Governmental Activities. (8,093,894)

Total Change in Net Assets of Governmental Activities $ 44,529,202

See Notes to Basic Financial Statements.

51 Exhibit G

CITY OF ROANOKE, VIRGINIA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2012

Enterprise Funds

Civic Assets Facilities Parking Current Assets: Cash and Cash Equivalents$ 1,730,883 $ 581,537 Investments 8,688 596,149 Interest and Dividends Receivable 9 600 Due from Other Governments - - Due from Other Funds 48,191 - Accounts Receivable 87,344 9,346 Inventory - - Other Assets 127,195 162,147 Total Current Assets 2,002,310 1,349,779 Capital Assets: Land and Land Improvements 1,215,005 2,466,514 Buildings and Structures 38,004,406 47,947,494 Equipment and Other Capital Assets 2,434,201 115,444 Construction in Progress - 18,719 Less Accumulated Depreciation (16,468,256) (14,900,340) Capital Assets, Net 25,185,356 35,647,831 Total Assets 27,187,666 36,997,610 Liabilities Current Liabilities: Accounts Payable and Accrued Expenses 233,931 108,850 Accrued Interest Payable 172,208 175,840 Due to Other Governments 42,040 - Due to Other Funds 82,264 99,104 Deferred Revenue 560,769 - Long-Term Liabilities Due Within One Year 730,874 664,482 Total Current Liabilities 1,822,086 1,048,276 Long-Term Liabilities: Compensated Absences Payable - - Claims Payable - - General Obligation Bonds Payable, Net 13,292,092 14,097,837 Capital Lease Obligations 215,083 - Less Current Maturities (730,874) (664,482) Total Long-Term Liabilities 12,776,301 13,433,355 Total Liabilities 14,598,387 14,481,631 Net Assets Invested in Capital Assets, Net of Related Debt 12,552,577 21,712,139 Unrestricted 36,702 803,840 Total Net Assets $ 12,589,279 $ 22,515,979

See Notes to Basic Financial Statements

52 Exhibit G

Enterprise Funds Internal Service Total Funds

$ 2,312,420 $ 9,071,340 604,837 9,842,353 609 9,900 - 18,824 48,191 3,492,261 96,690 73,150 - 61,068 289,342 397,805 3,352,089 22,966,701

3,681,519 - 85,951,900 - 2,549,645 63,541,056 18,719 1,712,913 (31,368,596) (40,652,822) 60,833,187 24,601,147 64,185,276 47,567,848

342,781 931,321 348,048 74,569 42,040 - 181,368 235,362 560,769 - 1,395,356 3,013,858 2,870,362 4,255,110

- 315,591 - 23,991,979 27,389,929 4,518,171 215,083 75,021 (1,395,356) (3,013,858) 26,209,656 25,886,904 29,080,018 30,142,014

34,264,716 19,940,419 840,542 (2,514,585) $ 35,105,258 $ 17,425,834

53 Exhibit H

CITY OF ROANOKE, VIRGINIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2012

Enterprise Funds

Civic Facilities Parking

Operating Revenues Charges for Services $ 2,559,400 $ 2,898,872 Other Revenue - 417,405 Total Operating Revenues 2,559,400 3,316,277 Operating Expenses Personal Services 1,221,552 - Other Services and Charges 1,825,626 1,113,511 Materials and Supplies - 476,704 Depreciation 910,086 1,153,121 Total Operating Expenses 3,957,264 2,743,336 Operating Income (Loss) (1,397,864) 572,941 Nonoperating Revenues (Expenses) Loss on Disposal of Assets - - Investment Income 95,602 75,300 Interest Expense (552,063) (740,322) Net Nonoperating Expenses (456,461) (665,022) Income (Loss) Before Transfers and Contributions (1,854,325) (92,081) Transfers and Contributions Transfers In 2,032,022 6,154 Transfers Out (42,450) (17,500) Net Transfers and Contributions 1,989,572 (11,346) Change in Net Assets 135,247 (103,427) Net Assets - Beginning of Year 12,454,032 22,619,406 Net Assets - End of Year $ 12,589,279 $ 22,515,979

See Notes to Basic Financial Statements

54 Exhibit H

Enterprise Funds Internal Service Total Funds

$ 5,458,272 $ 27,134,939 417,405 313,113 5,875,677 27,448,052

1,221,552 3,897,382 2,939,137 23,277,059 476,704 4,890,204 2,063,207 5,303,944 6,700,600 37,368,589 (824,923) (9,920,537)

- (22,894) 170,902 39,414 (1,292,385) (114,224) (1,121,483) (97,704)

(1,946,406) (10,018,241)

2,038,176 1,924,347 (59,950) - 1,978,226 1,924,347 31,820 (8,093,894) 35,073,438 25,519,728 $ 35,105,258 $ 17,425,834

55 Exhibit I CITY OF ROANOKE, VIRGINIA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2012

Enterprise Funds

Civic Facilities Parking Cash Flow From Operating Activities Cash Received from Customers$ 2,883,033 $ 2,897,180 Cash Payments to Suppliers for Goods and Services (1,729,260) (1,581,636) Cash Received from Other Funds for Interfund Services - - Cash Payments to Other Funds for Interfund Services (88,308) (88,557) Cash Payments to Employees (1,244,584) - Cash Payments for Claims - - Cash Received from Other Operating Revenues - 417,405 Net Cash Provided (Used) by Operating Activities (179,119) 1,644,392 Cash Flow From Noncapital Financing Activities: Transfers In 2,032,022 6,154 Transfers Out (42,450) (17,500) Net Cash Provided (Used) by Noncapital Financing Activities 1,989,572 (11,346) Cash Flow From Capital and Related Financing Activities: Acquisition and Construction of Capital Assets (348,838) (51,621) Proceeds from Issuance of Bonds 685,000 - Proceeds from Sale of Refunding Bonds 3,345,000 900,000 Principal Paid to Refunded Bond Escrow Agent (3,505,000) (950,000) Principal Paid on Bonds and Capital Lease Obligations (760,283) (1,133,985) Interest Paid on Bonds and Capital Lease Obligations (414,024) (665,773) Net Cash Used by Capital and Related Financing Activities (998,145) (1,901,379) Cash Flow From Investing Activities: Interest Received 95,476 75,990 Purchase of Investments 44,939 77,121 Cash Provided (Used) by Investing Activities 140,415 153,111 Net Increase/(Decrease) in Cash and Cash Equivalents 952,723 (115,222) Cash and Cash Equivalents at July 1 778,160 696,759 Cash and Cash Equivalents at June 30$ 1,730,883 $ 581,537

Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss)$ (1,397,864) $ 572,941 Depreciation 910,086 1,153,121 Increase in Due From Other Governments - - (Increase) Decrease in Due From Other Funds 94,433 (690) (Increase) Decrease in Accounts Receivable (1,923) (1,002) Decrease in Inventory - - Increase (Decrease) in Accounts Payable and Accrued Expenses 27,482 (27,139) Increase in Due to Other Governments (23,032) - Increase (Decrease) in Due to Other Funds (19,424) (52,839) Increase in Compensated Absences Payable - - Increase in Deferred Revenue 231,123 - Decrease in Claims Payable - - Total Adjustments 1,218,745 1,071,451 Net Cash Provided (Used) by Operating Activities $ (179,119) $ 1,644,392

Noncash Capital and Financing Activities: Civic Facilities Fund noncash activities in fiscal year 2012 consisted of capital asset acquisitions of $12,469 recorded as accounts payable at June 30, 2012. Internal Service Funds noncash activities in fiscal year 2012 consisted of capital asset acquisitions of $185,904 recorded as accounts payable at June 30, 201 See Notes to Basic Financial Statements

56 Exhibit I

Enterprise Funds Internal Service Total Funds

$ 5,780,213 $ 27,533,570 (3,310,896) (6,478,763) - 241,993 (176,865) (148,894) (1,244,584) (3,862,390) - (14,092,846) 417,405 313,113 1,465,273 3,505,783

2,038,176 1,924,347 (59,950) - 1,978,226 1,924,347

(400,459) (10,092,333) 685,000 2,027,149 4,245,000 - (4,455,000) - (1,894,268) (68,714) (1,079,797) (201,290) (2,899,524) (8,335,188)

171,466 51,410 122,060 2,070,517 293,526 2,121,927 837,501 (783,131) 1,474,919 9,854,471 $ 2,312,420 $ 9,071,340

$ (824,923) $ (9,920,537) 2,063,207 5,303,944 - (8,491) 93,743 261,098 (2,925) 146,024 - (6,033) 343 310,700 (23,032) - (72,263) 136,980 - 7,614 231,123 - - 7,274,484 2,290,196 13,426,320 $ 1,465,273 $ 3,505,783

12.

57 Exhibit J

CITY OF ROANOKE, VIRGINIA STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2012

Pension OPEB Trust Trust Agency Fund Fund Funds ASSETS Cash and Cash Equivalents$ 1,062,668 $ - $ 1,207,961 Investments - - 4,003,246

Receivables: Employer Contributions (Includes Net Due To Other Funds of $2,778) 71,654 - - Accrued Interest 719,910 - 24,330 Due from Other Governments - - 18 Total Receivables 791,564 - 24,348

Investments Held by Trustee, at Fair Value: Cash Equivalents 3,787,455 - - Government Securities 9,074,879 - - Municipal and Agency Bonds 4,901,277 - - Corporate Bonds 17,587,845 - - Convertible Bond Mutual Funds 12,230,878 - - Common Stocks 61,519,151 - - Domestic Mutual Funds 133,968,485 - - International Mutual Funds 58,460,022 - - Real Estate Mutual Funds 7,815,248 - - Infrastructure Funds 9,769,970 - - Investment in Pooled Funds - 2,115,317 - Total Investments 319,115,210 2,115,317 -

Total Assets 320,969,442 2,115,317 5,235,555

LIABILITIES Accounts Payable and Accrued Expenses 423,942 - - Due to Other Governments - - 5,235,555 Total Liabilities 423,942 - 5,235,555

NET ASSETS Held in Trust for Pension and Other Postemployment Benefits $ 320,545,500 $ 2,115,317 $ -

See Notes to Basic Financial Statements

58 Exhibit K

CITY OF ROANOKE, VIRGINIA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2012

Pension OPEB Trust Trust Fund Fund

Additions/(Reductions) Contributions from Employer $ 12,273,266 $ 1,648,200 Investment Income Net Appreciation in Fair Value of Investments 1,556,862 (18,984) Interest and Dividends 7,244,489 - Other 7,828 - Total Investment Income 8,809,179 (18,984) Less Investment Expenses (1,240,760) (2,380) Net Investment Income 7,568,419 (21,364) Securities Lending Income Securities Lending Income 182,295 - Less Securities Lending Expenses (100,655) - Net Securities Lending Income 81,640 - Total Additions 19,923,325 1,626,836

Deductions Benefit Payments 29,426,310 1,150,400 Administrative Expenses 367,624 - Total Deductions 29,793,934 1,150,400

Net Increase/(Decrease) in Plan Net Assets (9,870,609) 476,436 Net Assets Held in Trust for Pension and Other Postemployment Benefits - July 1 330,416,109 1,638,881 Net Assets Held in Trust for Pension and Other Postemployment Benefits - June 30 $ 320,545,500 $ 2,115,317

See Notes to Basic Financial Statements.

59 THIS PAGE INTENTIONALLY BLANK

60 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

(1) Summary of Significant Accounting Policies

The accounting policies of the City of Roanoke, Virginia (the City) conform to U.S. generally accepted accounting principles (GAAP) as applicable to governments.

A. Reporting Entity

The City of Roanoke is a municipal corporation organized under the laws of the Commonwealth of Virginia (the Commonwealth) and governed by seven elected City Council members. The City’s reporting entity consists of the Primary Government, as well as its component units, which are legally separate organizations for which the elected officials of the Primary Government are financially accountable. Financially accountable is defined as appointment of a voting majority of the component unit’s board, and either (a) the ability to impose will by the Primary Government, or (b) the possibility that the component unit will provide a financial benefit or impose a financial burden on the Primary Government.

The accompanying financial statements present the City and its component units. The financial data of the component units are included in the City’s reporting entity because of the significance of their operational or financial relationship with the City.

Discretely Presented Component Units

The School Board of the City of Roanoke, Virginia (School Board) is a legally separate entity which operates seventeen elementary schools, five middle schools, and two high schools for students residing in the City. School Board members are appointed by City Council. City Council also provides fiscal guidance because it levies taxes to fund School Board's operations and issues debt for its capital projects. In accordance with GAAP, the City reports the School Board as a discretely presented component unit. Certain note disclosures are included in the City’s Comprehensive Annual Financial Report for component unit transactions which are material. Additional disclosures are available in the separately published School Board Component Unit Comprehensive Annual Financial Report.

Complete financial statements for this discretely presented component unit may be obtained by writing to the School Board of the City of Roanoke, P.O. Box 13145, Roanoke, Virginia 24031.

The Greater Roanoke Transit Company (GRTC) is a public service bus company organized to provide mass transportation services to the Roanoke Valley. GRTC, known locally as Valley Metro, is a private, non-profit, public service organization wholly owned by the City of Roanoke. Operations began in 1975 when the privately owned transit system, the Roanoke City Lines, went public. GRTC is dependent on various operating grants to subsidize operations. The City provides financial support to GRTC through annual appropriations for the GRTC operating budget.

61 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Complete financial statements for this discretely presented component unit may be obtained by writing to the Greater Roanoke Transit Company, P.O. Box 13247, Roanoke, Virginia 24032.

B. Financial Statement Presentation

The City’s financial statements have been prepared in accordance with Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments, as amended. GASB Statement No. 34 was developed to make annual reports easier to understand and more useful to people who use governmental financial information to make decisions. GASB Statement No. 34, as amended, includes:

Government-Wide Financial Statements – Financial statements are prepared using the economic resources measurement focus and full accrual accounting for all of the government’s activities. These statements include all assets, liabilities, revenues and expenses of the primary government and its component units, excluding fiduciary activities.

The effect of interfund activity, other than service provided and used, has been eliminated from these statements. Excess revenues or expenses of the internal service funds are allocated to the appropriate governmental functional activity. The City does not allocate indirect expenses. The government-wide statements segregate governmental activities, which are normally supported by taxes and intergovernmental revenues, and business- type activities, which rely on user fees and charges for support. The Roanoke City Public Schools and Greater Roanoke Transit Company, which are legally separate discretely presented component units, are segregated accordingly.

Statement of Net Assets – presents both governmental and business-type activities on the full accrual, economic resource basis of accounting, which incorporates long-term assets and receivables, as well as long-term debt and obligations.

Statement of Activities – presents the net cost of each individual function. Program revenues are presented as a reduction of the total cost of providing program services. Program revenues include charges for services, operating grants and contributions and capital grants that are directly associated with a specific function. Taxes and other revenue sources not reported as program revenue are included as general revenue.

Fund Financial Statements – These financial statements are organized on the basis of funds, each of which is considered to be a separate accounting entity. The emphasis is on major governmental and enterprise funds. The operation of each fund is accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund balances or net assets, revenues, and expenditures or expenses, as appropriate.

62 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped in the basic financial statements into three broad fund categories as follows:

Governmental Funds account for expendable financial resources, other than proprietary fund types. Governmental fund types use the flow of current financial resources measurement focus. The major governmental funds are:

General Fund – Accounts for all revenues and expenditures which are not accounted for in other funds. The General Fund finances the regular day-to-day operations of the City.

Debt Service Fund – Accounts for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and fiscal charges not being financed by proprietary funds.

Special Revenue Fund – Accounts for the proceeds of specific revenue sources (other than expendable trusts or funds for major capital projects) that are legally restricted to expenditures for specified purposes. The Special Revenue Fund provides accounting for certain federal and state grants awarded to the City.

Capital Projects Fund – Accounts for financial resources to be used for the acquisition or construction of major capital facilities, other than those financed by proprietary funds.

Proprietary Funds account for operations that are financed and operated in a manner similar to private business enterprises. The proprietary fund measurement focus is on the flow of economic resources. Operating revenues include charges for services and other revenue. Operating expenses include personal services, as well as other services and charges, materials and supplies and depreciation. All revenues and expenses, excluding capital contributions and transfers, not meeting these definitions are reported as non- operating revenues and expenses. The proprietary fund types are:

Enterprise Funds – Account for the financing of services to the general public where all or most of the operating expenses involved are recovered in the form of charges to users of such services. All funds included in this category are major funds and are as follows:

Civic Facilities Fund – Accounts for the operation of the Roanoke Civic Center. Global Spectrum, Inc. manages the civic center operations on the City’s behalf.

Parking Fund – Accounts for the operation of seven parking garages and several parking lots.

63 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Internal Service Funds – Account for the financing of goods or services provided by one department primarily or solely to other departments within the City government on a cost-reimbursement basis. Funds included in this category are:

Department of Technology Fund – Provides implementation and maintenance of data processing systems and provides workstation support.

Fleet Management Fund – Owns and maintains the City vehicle fleet and related supplies.

Risk Management Fund – Finances property, workers’ compensation, employee medical, auto, and general liability insurance coverage.

In accordance with GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the City has selected one of the two options available for proprietary fund reporting. The City applies all appropriate GASB pronouncements and all Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins issued on or before November 30, 1989, unless they conflict with or contradict GASB pronouncements.

Fiduciary Funds account for assets held by the City in a trustee capacity or as an agent for individuals, other governmental units, or other funds. The fiduciary funds are:

Pension Trust Fund – Accounts for the operations of the City's Pension Fund. It is accounted for in the same manner as a proprietary fund type. Measurement focus is upon determination of the change in net assets and financial position.

OPEB Trust Fund – Accounts for the assets held for, and costs of, other post- employment benefits (OPEBs). It is accounted for in the same manner as a proprietary fund type. Measurement focus is upon determination of the change in net assets and financial position.

Agency Fund – Accounts for assets held for, and due to the Hotel Roanoke Conference Center Commission. This fund is custodial in nature and does not involve measurement of results of operations.

C. Basis of Accounting

Basis of accounting refers to the point at which revenues and expenditures or expenses are recognized in the accounts and reported in the basic financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied.

64 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Governmental activities in the government-wide statements are presented using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary and fiduciary fund financial statements. Revenues are recognized when earned and expenses are recognized when a liability has been incurred, regardless of the timing of related cash flows.

Governmental funds are accounted for using the modified accrual basis of accounting. Revenues are recognized when they become measurable and available. General fund tax revenues are considered measurable when they have been levied. To be considered available and thus susceptible to accrual, taxes must be collected with the City’s period of availability of 60 days. Uncollected taxes at the end of this period are reported as deferred revenues. Interest income and intergovernmental receivables (state and federal grants to the extent of allowable expenditures) are considered susceptible to accrual. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. However, debt service expenditures as well as expenditures related to compensated absences are recorded only when payment is due.

The City generally uses restricted assets first for expenses incurred for which both restricted and unrestricted assets are available. The City may defer the use of restricted assets based on a review of the specific situation.

As a result of the different measurement focus and basis of accounting used in preparing the government-wide statements, a reconciliation between the government-wide and fund financial statements is necessary. Exhibit D presents a reconciliation of the net assets as reported on the Statement of Net Assets (Exhibit A) to total governmental fund balance as reported on the Balance Sheet - Governmental Funds (Exhibit C). Exhibit F presents a reconciliation of the total change in net assets as reported on the Statement of Activities (Exhibit B) and the total net change in fund balances as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds (Exhibit E).

D. Encumbrances

Encumbrance accounting, under which purchase orders, contracts, and other commitments are recorded in order to reserve the applicable appropriation, is employed as an extension of formal budgetary integration in the General Fund. Encumbrances outstanding at year-end are reported as Committed Fund Balance since they do not constitute current year expenditures or liabilities and as such, are approved by Council for inclusion in the next fiscal year budget. Encumbrances are reported as expenditures using the budgetary basis of accounting. Unspent appropriations lapse at year-end. These encumbrances are subject to re-appropriation by City Council in the succeeding fiscal year.

65 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

E. Deposits and Investments

Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Cash from all funds is consolidated in one City account. Short-term investments may consist of certificates of deposit, repurchase agreements, commercial paper, investments in the Local Government Investment Pool (LGIP), and the Commonwealth Cash Reserve Fund. Cash balances, other than Greater Roanoke Transit Company balances, Roanoke City Public Schools balances, Roanoke Civic Center balances, OPEB Trust Fund balances and a portion of the Pension Trust Fund balances are deposited in a pooled account, which in turn purchases short-term investments. Interest income is allocated to the participating funds based on each fund's average daily cash balance. Cash and cash equivalents are recorded at cost, which approximates market value.

Investments are recorded at fair value. Mutual fund and common stock fair values are based on quotations obtained from national security exchanges. The fair value of underlying assets held in the Pension Trust Fund’s real estate fund is based upon independent appraisal conducted periodically throughout the year, but not less than annually. Investments of the Capital Projects Fund consist of government securities and certificates of deposits with original maturities greater than three months. Investments of the Pension Trust Fund consist of overnight investments in bank common trust funds, government securities, certificates of deposits with original maturities greater than three months, corporate bonds, stocks, and mutual funds.

F. Interfund Receivables and Payables

Outstanding balances between funds are reported as due to/from other funds. Any residual balances outstanding between the governmental and business-type activities are reported in the government-wide statements as internal balances. Outstanding balances between the City and its component units are reported as due to/from component unit or due to/from primary government.

G. Allowance for Uncollectible Taxes and Accounts Receivable

The City calculates its allowance for uncollectible receivables based on historical collection data and specific account analyses. At June 30, 2012, the allowance for General Fund uncollectible taxes and accounts receivable was $5,746,184 or 25% of the outstanding balance of taxes receivable and accounts receivable.

H. Property Taxes

Property taxes are assessed annually as of January 1. Real estate tax is payable in two equal installments, each due on or before October 5 and April 5. On April 6, real property taxes become an enforceable lien against the property. The annual assessment for real estate is based on 100% of the assessed fair market value. The tax rates are established annually, without limitation, by City Council. The tax rate for real estate was $1.19 per $100 of assessed value for the year.

66 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Personal property tax is due on or before May 31 during the year of assessment. The personal property tax rate was $3.45 per $100 of assessed value for the year. The Commonwealth funds localities for a portion of the personal property taxes billed to property tax owners. The Personal Property Tax Relief Act as amended provides a flat amount of reimbursement to localities, such as the City of Roanoke, thereby altering the percent of tax relief provided. The Commonwealth’s share of the tax was 64.75% for tax year 2012. A penalty of 10% of unpaid real estate and personal property tax is due for late payment. Interest on unpaid taxes is 10% in the first year. Thereafter, the interest is calculated using the Internal Revenue Service (IRS) rate. At June 30, 2012, the IRS rate was 3%.

The City bills and collects taxes and recognizes revenue upon levy for government-wide purposes. For the fund financial statements, the City recognizes revenue to the extent that it results in current receivables.

I. Inventory

Inventory for proprietary funds is valued at cost, determined using the moving weighted average method. Inventory consists of materials and supplies held for consumption and are adjusted to actual based on an annual physical count. The cost is recorded as an expense when individual items of inventory are used.

J. Pension Trust Fund

The City's policy is to fully fund actuarially determined pension costs, which include both normal costs and amortization of unfunded accrued liability. Pension Trust Fund investments are recorded at fair value. The fair value is based on quotations obtained from national security exchanges. Security transactions are recognized on the trade date which is the date the order to buy or sell is originated. Securities lending fees are included as a component of investment expenses.

K. Other Postemployment Benefits Trust Fund

The City's policy is to fully fund actuarially determined Other Postemployment Benefits (OPEB) costs, which include both normal costs and amortization of unfunded accrued liability, by contributing to the Virginia Pooled OPEB Trust Fund (OPEB Trust Fund). The OPEB Trust Fund investments are recorded at fair value. The Trust Board of Trustees establishes investment objectives, risk tolerance and asset allocation policies in light of the investment policy, market and economic conditions, and generally prevailing prudent investment practices. OPEB includes retirement benefits and line of duty benefits other than pension costs.

67 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

L. Capital Assets

Capital assets acquired or constructed by the City with a value in excess of $5,000 are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets belonging to proprietary funds are also reported in the applicable fund financial statements. Capital assets are recorded at historical cost or estimated historical cost. Gifts or contributions of capital assets are recorded at fair value when received. Depreciation is recorded on a straight-line basis over the estimated useful life of each depreciable capital asset. No depreciation expense is recorded for land, inexhaustible infrastructure (e.g., flood reduction), construction-in- progress, or items designated as historical treasures. The estimated useful lives for depreciable capital assets are as follows:

Land Improvements 15-40 years Buildings and Structures 5-50 years Equipment 2-20 years Infrastructure 15-50 years Software 3 years

In fiscal year 2012, the City adopted the Modified Approach under GASB statement No. 34 for certain infrastructure capital assets determined to be ‘inexhaustible’. Assets in this category are characterized as those whose economic benefit or service potential is used up so slowly that the estimated useful life is extraordinarily long. Assets of this nature are not depreciated, but instead are required to be maintained at a certain condition level. See note 5 for additional information regarding the City’s application of the Modified Approach.

Pursuant to the City Charter, all real estate, including buildings and improvements thereon, financed by debt issued by the City for the purpose of public education on behalf of the School Board component unit are the property of the City.

M. Compensated Absences Payable

It is the City's policy to permit employees to accumulate earned but unused compensated absences. For government-wide reporting, a liability is recorded for compensated absences when services are rendered and employees have earned the right to receive compensation for such services.

Liabilities for compensated absences are not liquidated until leave is actually taken by employees or leave balances are paid upon termination. Accordingly, in the fund financial statements for governmental funds, no expenditure is reported for compensated absences until they are paid. Current and non-current portions of compensated absences totaling $6,357,302 are recorded for governmental activities in the government-wide statements and represent a reconciling item between the government-wide and governmental fund presentations.

68 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

N. Fund Balances

In fiscal year 2011, the City implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. Under this statement, fund balance is divided into five classifications based upon the extent to which the City is bound to observe constraints imposed upon the use of the resources in the governmental funds. The classifications are as follows:

Nonspendable The nonspendable fund balance category includes amounts that cannot be spent because they are not in spendable form, or legally or contractually required to be maintained intact. The “not in spendable form” criterion includes items that are not expected to be converted to cash. It also includes the long-term amount of interfund loans.

Restricted Fund balance is reported as restricted when constraints placed on the use of resources is either externally imposed by creditors, grantors, constitutional provisions or enabling legislation (City ordinances). Enabling legislation authorizes the City to assess, levy, charge, or otherwise mandates payment of resources and includes a legally enforceable requirement that those resources be used only for the specific purposes stipulated in the legislation. Legal enforceability means that the City can be compelled by an external party such as citizens, public interest groups, or the judiciary to use resources created by enabling legislation only for the purposes specified by the legislation.

Committed The committed fund balance classification includes amounts that can be used only for specific purposes imposed by formal action such as ordinance or resolution of City Council. Those committed amounts cannot be used for any other purpose unless City Council removes or changes the specified use by taking the same type of action it employed to previously commit those amounts. In contrast to fund balance that is restricted by enabling legislation, committed fund balance classification may be redeployed for other purposes with appropriate due process. Constraints imposed on the use of committed amounts are imposed by City Council, separate from the authorization to raise the underlying revenue; therefore, compliance with these constraints are not considered to be legally enforceable. Committed fund balance also incorporates contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.

Assigned Amounts in the assigned fund balance classification are intended to be used by the City for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds other than the general fund, assigned fund balance represents the remaining amount that is not restricted or committed. In the general fund, assigned amounts represent intended uses established by City Council or a City official delegated that authority by City Charter or ordinance, or by State Statute.

69 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Unassigned Unassigned fund balance is the residual classification for the general fund and includes all spendable amounts not contained in the other classifications. In other governmental funds, the unassigned classification is used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed, or assigned.

The City applies restricted resources first when expenditures are incurred for purposes for which either restricted or unrestricted (committed, assigned, and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed amounts are reduced first followed by assigned, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used. See note 10 for further information regarding the City’s fund balances pursuant to GASB Statement No. 54.

The City maintains fund balance reserve policies to ensure sound financial management, protecting the City’s credit ratings, ensuring prudent use of the City’s debt issuance authority and guiding the City and its managers in policy and debt issuance decisions. Key components of the reserve policies are as follows:

The Unassigned General Fund Reserve target will be 10% of the budget to provide the City with sufficient working capital and margin of financial safety to address unforeseen, one-time expenditure emergencies or significant unforeseen declines in revenues in a specific fiscal year.

A Risk Management Reserve serves to cover the risk exposure the City has relating to its self-insurance program. The minimum funding level for the Risk Management Reserve is 25% of the three-year average of self-insured claims costs, plus 10% of the three-year average of fully insured premiums, plus a $1 million catastrophic reserve.

Once revenues return to pre-recessionary levels of fiscal year 2009, as adjusted for inflation, an Economic Downturn Reserve will be created to smooth the City’s financial operations in the event of an economic downturn. The Economic Downturn Reserve will be maintained in an amount up to 5% of the General Fund Expenditure budget. As of June 30, 2012, this reserve had not been created since revenues had not returned to the level to trigger establishment of the reserve.

The Economic and Community Development Reserve is in the Capital Projects Fund and is intended to demonstrate a commitment to financial planning for economic and community development projects which may provide future growth opportunities and expansion of the tax base in Roanoke. The reserve is funded from interest earnings and the proceeds from the sale of general government property, and the reserve floor is $1 million.

The fund balance reserves may only be used upon appropriation by City Council, and the reserve policies contain stipulations regarding reserve usage and replenishment.

70 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

O. Use of Estimates

Management of the City has made use of estimates and assumptions relating to the reporting of assets, liabilities, revenues, expenditures/expenses and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with GAAP. Actual results could differ from those estimates.

P. Future Accounting Pronouncements

GASB pronouncements are reviewed upon issuance to determine applicability and adoption. The following pronouncements have been analyzed by the City and will be adopted in the fiscal year ending June 30, 2013. GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, was issued to improve financial reporting by addressing issues related to service concession arrangements (SCAs) which are a type of public-private or public-public partnership. GASB Statement No. 61, The Financial Reporting Entity: Omnibus – an amendment of GASB Statement No. 14 and No.34, was issued to improve financial reporting for a governmental financial reporting entity. GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, was issued to incorporate into the GASB’s authoritative literature certain accounting and financial reporting guidance that is included in the pronouncements of the Financial Accounting Standards Board (FASB), Accounting Principles Board Opinions and Accounting Research Bulletins of the American Institute of Certified Public Accountants’ (AICPA) Committee on Accounting Procedure. GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, was issued to provide financial reporting guidance for deferred outflows of resources and deferred inflows of resources. GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, was issued to establish accounting and financial reporting standards that reclassify certain items that were previously reported as assets and liabilities, as outflows and deferred outflows of resources or inflows and deferred inflows of resources, GASB Statement No. 66, Technical Corrections – 2012 – an amendment of GASB Statements No. 10 and No. 62, was issued to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicted guidance that resulted from the issuance of GASB Statements Nos. 54 and 62.

GASB Statement No. 67, Financial Reporting for Pension Plans, was issued to improve the financial reporting by local government pension plans. The City will adopt this pronouncement in the fiscal year ending June 30, 2014. GASB Statement No. 68, Accounting and Financial Reporting for Pensions, was issued to improve the accounting and financial reporting by state and local government employers sponsoring pension plans. The City will adopt this pronouncement in the fiscal year ending June 30, 2015.

71 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

(2) Deposits and Investments

Governmental Funds

The City maintains a consolidated account that is available for use by all funds, including fiduciary funds. Each fund’s portion of this account is presented in the basic financial statements as “Cash and Cash Equivalents”. The School Board component unit maintains separate cash and investment accounts with a combined balance as of June 30, 2012 of $36,965,385. The GRTC component unit maintains separate cash and investment accounts consisting of cash and overnight repurchase agreements collateralized by government securities. Investments for GRTC and the School Board are presented in conjunction with City investments. The City Civic Center Facilities are managed by Global Spectrum which holds a portion of cash in the amount of $940,668 on the City’s behalf. The City acts as one of the fiscal agents for the Hotel Roanoke Conference Center Commission (HRCCC) and holds total cash and investments of $5,235,537 on HRCCC’s behalf. Investments and related disclosures for the City of Roanoke Pension Plan and the OPEB Trust Fund, which are fiduciary funds, are presented separately.

Investment Policy The City, School Board, and GRTC adhere to a City Council adopted investment policy (Policy). The Policy, in accordance with the Code of Virginia and other applicable laws and regulations, articulates the City’s investment objectives and authorized investments and serves as a guide for asset allocation development, cash equivalent development, fixed income development and investment performance measurement. Preservation of principal is the City’s primary responsibility in making investment decisions, and these decisions are made under the assumption that all investments will be held to maturity unless a specific case warrants otherwise.

The City’s policy regarding certain types of investments is as follows:

Commercial Paper: Shall be rated by the Moody's Investors Service, Inc., within its NCO/Moody’s rating of prime 1 and by Standard & Poor’s, Inc., within its rating of A-1. Corporate and Municipal Bonds: High quality corporate notes with a rating of at least Aa by Moody's and a rating of at least AA by S & P. Banker’s Acceptances: Must have a rating of B/C or better in the Keefe, Bruyette & Woods, Inc. ratings. Savings Accounts, Certificate of Deposits, Demand and Time Deposits: Shall not exceed the maximum Security for Public Deposits Act. Obligations of the Commonwealth: Those unconditionally guaranteed as to payment by the Commonwealth of Virginia. Obligations of the United States, etc.: Those unconditionally guaranteed as to payment by the United States. Repurchase Agreements: Collateralized by United States Treasury agency securities, shall at all times, be no less than 110% of the value of term and open repurchase agreements and 102% of the value of overnight repurchase agreements. Money Market Funds: One or more open-end investment funds, provided that the funds are registered under the Securities Act of the Commonwealth of Virginia or, the federal investment of such funds is restricted to investments otherwise permitted by law as set forth in Chapter 18 of Title 2.1, Code of Virginia (1950), as amended.

72 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Investments as of June 30, 2012 consisted of the following:

Total Primary School Board GRTC Fiduciary Government Component Unit Component Unit Funds Investment in pooled funds, including Virginia LGIP $ 14,512,194 $ 36,240,701 $ - $ 3,454,525 Certificates of Deposit 34,511,575 - - 4,003,246 Money Market Accounts 792,944 - - - Repurchase Agreements - - 465,277 - Mutual Funds 10,127,809 - - - Federal Agency Bonds/Notes 5,998,888 - - - Total $ 65,943,410 $ 36,240,701 $ 465,277 $ 7,457,771

Credit risk, custodial credit risk, concentration of credit risk, and interest rate risk are addressed in the following paragraphs.

Credit Risk. State law (Code of Virginia, Chapter 3, Title 26) limits local governments and other public bodies to investing in obligations of the United States or agencies thereof, obligations of the Commonwealth of Virginia or political subdivisions thereof, obligations of the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank, the African Development Bank, “prime quality” commercial paper and certain corporate notes, bankers’ acceptances, repurchase agreements, The Virginia Local Government Investment Pool (LGIP). The State Treasurer’s Office of the Commonwealth of Virginia has regulatory oversight over the LGIP. The City’s fair value of investment in the LGIP is the same as the pooled value of its shares. It is the City’s policy to limit its investments in commercial paper to the top rating issued by nationally recognized statistical rating organizations (NRSROs).

As of June 30, 2012, investment holdings as a percentage of total investments, excluding OPEB Trust Fund investments, were as follows:

School Board GRTC Primary Component Component Fiduciary Credit Investment Type Government Unit Unit Fund Rating Repurchase Agreements 0.0% 0.0% 100.0% 0.0% NR Mutual Funds 33.0% 0.0% 0.0% 0.0% AAAm Federal Agency Bond/Notes 19.8% 0.0% 0.0% 0.0% Aaa Virginia LGIP 47.2% 100.0% 0.0% 100.0% AAAm Total Investment Percentage 100.0% 100.0% 100.0% 100.0%

73 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Custodial Credit Risk - Investments. For an investment, custodial risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s investments as of June 30, 2012 were held in the name of the City. The City’s investment policy requires all Purchase Securities, Money Market instruments and Certificates of Deposit with maturity dates less than thirty (30) days to be held by the Bank or Securities Dealer through which they were purchased. Securities with maturity dates exceeding thirty days are electronically transferred and held by a third party.

Investments are considered to be exposed to custodial credit risk if they are uninsured and unregistered with the securities held by the counterparty or by its trust department or agent, but not in the City’s name. As of June 30, 2012, the City did not hold any investments considered to be exposed to custodial credit risk. The School Board and GRTC component units do not hold any investments exposed to custodial credit risk.

Custodial Credit Risk – Deposits. In the case of a deposit, this is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. The carrying value of the City’s deposits was $3,054,968, including Fiduciary HRCCC Funds of $866,323. The City’s bank balance of deposits was $3,140,104. The City’s investment policy requires all deposits to be federally secured or held in accordance with the Virginia Security for Public Deposits Act. In agreement with the policy, the entire balance was covered by federal depository insurance or collateralized in accordance with Virginia Security for Public Deposits Act.

Concentration of Credit Risk. The City’s investment policy establishes limitations on portfolio composition by issuer in order to control concentration of credit risk. No single issue shall constitute more than 5% of the total value of the portfolio, except U.S. Treasury and Federal Agency obligations. Not more than 35% of the total funds available for investment may be invested in commercial paper, and no single industry group, as defined by Standard & Poor’s, shall constitute more than 5% of the bond portfolio.

As of June 30, 2012, the portions of the City’s debt securities that exceed 5% of the total value, excluding certificates of deposit which were fully insured by Federal Deposit Insurance Corporation (FDIC) and the Virginia LGIP, were as follows:

Percent of Portfolio Issuer Primary Government Commonwealth Cash Reserve Fund 32.6% Federal Home Loan Bank 12.8%

As of June 30, 2012, 100% of the School Board’s investment portfolio was invested in the Virginia LGIP.

74 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Interest Rate Risk. The City’s investment policy limits maturities to a maximum of five years as a means of managing its exposure to fair value losses arising from increasing interest rates. However, as a means of limiting its exposure to an even higher degree, the City’s investments are highly concentrated in investments of less than one year, and the City holds no investments with a maturity date of greater than three years.

As of June 30, 2012, the Primary Government had the following investments and maturities:

Investment Maturity

Fair Value Less than 1 year 1-3 years Non-negotiable Certificates of Deposits$ 34,511,575 $ 34,511,575 $ - Repurchase Agreements - - - Mutual Funds 10,127,809 10,127,809 - Federal Agency Bonds/Notes 5,998,888 - 5,998,888 Virginia LGIP 14,512,194 14,512,194 - TOTAL $ 65,150,466 $ 59,151,578 $ 5,998,888

As of June 30, 2012, the School Board Component Unit had the following investments and maturity: Investment Maturity

Fair Value Less than 1 year Virginia LGIP$ 36,240,701 $ 36,240,701 TOTAL$ 36,240,701 $ 36,240,701

As of June 30, 2012, the Hotel Roanoke Conference Center Commission, a fiduciary fund, had the following investments and maturities:

Investment Maturity

Fair Value Less than 1 year 1-3 years Non-negotiable Certificates of Deposits $ 4,003,246 $ 3,003,246 $ 1,000,000 Virginia LGIP 341,638 341,638 - TOTAL $ 4,344,884 $ 3,344,884 $ 1,000,000

75 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Separately Presented Fiduciary Funds

Pension Trust Fund

Investment Policy. The Board of Trustees of the City of Roanoke Pension Plan (the Plan) has adopted a Statement of Investment Policy Guidelines and Objectives. The Policy articulates the Plan’s investment objectives and risk tolerance and serves as a guide for asset allocation development, investment manager and fund selection, and investment performance monitoring and evaluation. The Policy addresses credit risk, concentration risk, and foreign currency risk as outlined in the following paragraphs.

Investments as of June 30, 2012 consisted of the following:

Cash Equivalents $ 3,787,455 Investment in pooled funds, including Virginia LGIP 997,570 U.S Government Securities 9,074,879 Municipal and Agency Bonds 4,901,277 Corporate Bonds 17,587,845 Convertible Bond Mutual Funds 12,230,878 Common Stocks 61,519,151 Domestic Mutual Funds 133,968,485 International Mutual Funds 58,460,022 Real Estate Mutual Funds 7,815,248 Infrastructure Funds 9,769,970 Total Investments $ 320,112,780

Credit Risk. The Plan’s investment policy limits investments in fixed income securities to issues which are rated at least Baa or BBB by either Moody’s or Standard and Poor’s. Below investment grade fixed income securities may be purchased and held in accounts specifically selected to hold such issues. Purchases of non-U.S. government securities are restricted to issues of $50 million or greater. The State Treasurer’s Office of the Commonwealth of Virginia has regulatory oversight over the LGIP. The City’s fair value of investment in the LGIP is the same as the pooled value of its shares.

76 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

As of June 30, 2012, the Plan’s pooled and fixed income investments consisted of the following:

Market Value S&P Rating 2012 Muncipal and Agency Bonds AAA $ 713,789 AA 1,655,910 A 494,697 NR 2,036,881 $ 4,901,277

Corporate Bonds AAA $ 263,231 AA 3,815,189 A 8,939,671 BBB 4,068,372 BB 501,382 $ 17,587,845

Domestic Bond Mutual Funds Aa2 1 $ 2,269,544 B1 1,2 14,239,278 NA 3 22,092,011 $ 38,600,833

Investment in Pooled Funds AAAm $ 997,570 A-1 3,488,532 $ 4,486,102

1 Moody’s credit rating 2 This domestic mutual fund is an alternative asset within the Plan. Alternative assets must meet additional investment criteria under the Plan’s investment policy. 3 This category includes a domestic mutual fund passive investment that emulates the Barclays Capital Aggregate Bond Index and other mutual funds that are not rated on an individual fund basis.

Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the event of a bank failure, the Plan’s deposits may not be returned to it. The Plan’s investment policy does not specifically address custodial credit risk. The City maintains a cash and investment pool, in which the Plan is a participant. On June 30, 2012, the carrying amount and bank balance of the Plan's deposits were $3,852,553 and $3,854,553, respectively. Of the bank balance at June 30, 2012, $67,098 was covered by Federal depository insurance or collateralized pursuant to agreements with all participating financial institutions to pledge assets on a pooled basis to secure public deposits according to the Virginia Security for Public Deposits Act Regulations of the Code of Virginia (ACT).

77 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Such collateralization qualifies as state depository insurance. Accordingly, the bank balance of $67,068 is considered to be insured. Under the Act, banks holding public deposits in excess of the amounts insured by FDIC must pledge collateral in the amount of 50% of excess deposits to a collateral pool in the name of the State Treasury Board. Savings and loan institutions are required to collateralize 100% of deposits in excess of FDIC limits. The State Treasury Board is responsible for monitoring compliance with the collateralization and reporting requirements of the Act and for notifying local governments of compliance by banks and savings and loans. The remaining bank balance of $3,787,455 is uninsured and uncollateralized.

Custodial Credit Risk – Investments. The Plan has ten types of investments as of June 30, 2012: cash equivalents; U.S. government securities; agency and municipal bonds; corporate bonds; convertible bond mutual funds; common stocks; domestic, international, and real estate mutual funds; and infrastructure commingled funds. Investments in external investment pools and in open-end mutual funds are not considered to be exposed to custodial credit risk because their existence is not evidenced by securities that exist in physical or book entry form. Investments are considered to be exposed to custodial credit risk if they are uninsured and unregistered with the securities held by the counterparty or by its trust department or agent but not in the Plan's name. The Plan’s investment policy does not specifically address custodial credit risk. As of June 30, 2012, the Plan’s investments considered to be exposed to custodial credit risk consisted of the following:

Investment Type Market Value U.S Government Bonds $ 9,074,879 Municipal and Agency Bonds 4,901,277 Corporate Bonds 17,587,845 Common Stocks 61,519,151 Total $ 93,083,152

State Street Bank & Trust Company has a blanket insurance policy to secure Trust Funds for every account they hold and also pledges to the Federal Reserve Bank to cover funds on deposit with their bank. State Street Boston Corporation, the parent company, also carries a corporate blanket insurance policy. Comerica Bank carries Banker’s Professional Liability insurance that insures the Bank against errors made in providing professional services that result in a financial loss to a client and an Employee Fidelity Bond, which insures against employee wrong-doing that results in a financial loss to a client. Further insurance carried by the depositories includes coverage against losses occurring on the premises or during transit.

Concentration of Credit Risk. The Plan’s investment policy prohibits the investment of more than 5% of plan assets in either fixed income or equity securities of any single issuer based on cost. Securities of the U.S. government and investment company shares (mutual funds) are exempted from this limitation. As of June 30, 2012, the Plan did not own securities of a single organization, other than positions in mutual funds, representing 5% or more of the Plan's net assets.

78 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Interest Rate Risk. The Plan’s investment policy does not address investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The investment policy defines the investment objectives for both the passive and actively managed segments of the fixed income portfolio. The objective of the passive segment is to replicate the return of the Barclays Aggregate Bond Index thus providing broad diversification that would be impractical to achieve in an actively managed portfolio. The objective of the actively managed fixed income portfolio is to outperform the Barclays Aggregate Bond Index over a moving 3 – 5 year range, with the exception of long duration fixed income, which has an object of outperforming the Barclays Capital Long Government/Credit Index over a moving 3 – 5 year range.

The market value of the Plan’s fixed income portfolio consisted of the following investment and maturities as of June 30, 2012:

Orginal Investment Maturities (In Years)

Investment Type Fair Value <5 5-10 >10 U.S. Government Securities$ 9,074,879 $ 139,619 $ - $ 8,935,260 Municipal and Agency Bonds 4,901,277 - 995,558 3,905,719 Corporate Bonds 17,587,845 - 5,001,998 12,585,847 Bond Mutual Funds 38,600,833 - 38,600,833 - TOTAL $ 70,164,834 $ 139,619 $ 44,598,389 $ 25,426,826

The City maintains a cash and investment pool, in which the Plan is a participant. The fair value of the Plan’s investment that were a result of participating in that cash and investment pool as of June 30, 2012:

Fiscal Year Ended June 30, 2012 Investment Type Fair Value <5 Virginia LGIP $ 997,570 $ 997,570 TOTAL $ 997,570 $ 997,570

Foreign Currency Risk. The Plan’s investment policy prohibits investment in securities that are not denominated in U.S. dollars and/or that are traded solely on exchanges outside the U.S., with the exception of international commingled funds. As of June 30, 2012 the Plan had no investments that were not denominated in U.S. dollars or that were traded solely on exchanges outside the U.S.

Securities Lending Arrangements. The Plan's Board of Trustees approved a Securities Lending Authorization Agreement allowing State Street Bank & Trust Company (Custodian) to lend the Plan’s available securities to broker-dealers and banks pursuant to a form of loan agreement. During the period of July 1, 2011 through May 31, 2012, the Plan's securities held by the Custodian were available for securities lending, except those securities which the Plan specifically identified in notices to the Custodian as not being available. During the fiscal year ended June 30, 2012, the Plan did not exclude any securities from securities lending.

79 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

The Custodian lends the securities and in exchange, the borrowers are required to deliver collateral in the form of cash (United States and foreign currency), securities issued or guaranteed by the United States government, sovereign debt of foreign nations and irrevocable bank letters of credit. The Custodian does not have the ability to pledge or sell collateral securities delivered, absent a borrower default. Borrowers are required to deliver collateral for each loan in amounts equal to: (1) in the case of loaned securities denominated in United States dollars or whose primary trading market was located in the United States or sovereign debt issued by foreign governments, 102% of the market value of the loaned securities; and (2) in the case of loaned securities not denominated in United States dollars or whose primary trading market was not located in the United States, 105% of the market value of the loaned securities.

The Plan did not impose any restrictions during the fiscal year on the amount of loans the Custodian made on its behalf. The terms of the Authorization Agreement require the Custodian to indemnify the Plan in the event the borrower defaults or fails to return the securities by agreeing to purchase replacement securities, or return the cash collateral in the event the borrower fails to return the loaned security or pay distributions thereon. There were no such failures by any borrowers during the fiscal year. Moreover, there were no losses during the fiscal year resulting from a default of the borrowers or the Custodian.

The Plan and the borrowers maintain the right to terminate all securities lending transactions on demand. The cash collateral received on each loan is invested, together with the cash collateral of other qualified tax-exempt plan lenders, in a collective investment pool. Because the loans were terminable at will, their duration did not generally match the duration of the investments made with cash collateral. On June 1, 2012, the Plan transitioned custodian trust services from State Street Bank & Trust to Comercia Bank. The Board of Trustees did not approve a Securities Lending Authorization Agreement allowing Comerica to lend the Plan’s available securities to broker-dealers and banks. As a result, the Plan did not participate in any securities lending for the period of June 1, 2012 to June 30, 2012 and no assets were on loan as of June 30, 2012.

Other Risks and Uncertainties. The Plan’s investments are exposed to various risks such as interest rate, market and credit risks. Such risks, and the resulting investment security values, may be influenced by changes in economic conditions, market perceptions, and expectations. Accordingly, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and such changes could materially affect the amounts reported in the statement of net assets available for benefits.

OPEB Trust Fund

The City’s OPEB Trust Fund is a participant in the Virginia Pooled OPEB Trust. Funds of participating jurisdictions are pooled and are invested in the name of the Virginia Pooled OPEB Trust. The City’s share in this pool is reported as an asset on the statement of fiduciary net assets of the OPEB Trust Fund statement (Exhibit J).

80 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Investment Policy. The Board of Trustees of the Virginia Pooled OPEB Trust has adopted an investment policy to achieve a compound annualized total rate of return over a market cycle, including current income and capital appreciation, in excess of 5% after inflation, in a manner consistent with prudent risk-taking. Investment decisions for the funds’ assets are made by the Board of Trustees. The Board of Trustees establishes investment objectives, risk tolerance and asset allocation policies in light of the investment policy, market and economic conditions, and generally prevailing prudent investment practices. The Board of Trustees also monitors the investments to ensure adherence to the adopted policies and guidelines. In addition, the Trustees review, monitor, and evaluate the performance of the investments and the Board’s investment advisors in light of available investment opportunities, market conditions, and publicly available indices for the generally accepted evaluation and measurement of such performance.

Specific investment information for the Virginia Pooled OPEB Trust can be obtained by writing to VML/VACo Finance, 919 East Main Street, Suite 1100, Richmond, Virginia 23219.

Credit risk, custodial credit risk, concentration of credit risk, and interest rate risk are addressed in the following paragraphs.

Credit Risk. State law (Code of Virginia, Chapter 3, Title 26) limits local governments and other public bodies to investing in obligations of the United States or agencies thereof, obligations of the Commonwealth of Virginia or political subdivisions thereof, obligations of the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank, the African Development Bank, “prime quality” commercial paper and certain corporate notes, bankers’ acceptances, repurchase agreements, and the Virginia LGIP. As of June 30, 2012, the OPEB Trust Fund was exclusively invested in the Virginia Pooled OPEB Trust.

Custodial Credit Risk - Investments. For an investment, custodial risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Investments are considered to be exposed to custodial credit risk if they are uninsured and unregistered with the securities held by the counterparty or by its trust department or agent but not in the City’s name. As of June 30, 2012, the OPEB Trust Fund did not hold any investments considered to be exposed to custodial credit risk.

Concentration of Credit Risk. The OPEB investment policy establishes limitations on portfolio composition by issuer in order to control concentration of credit risk. No single issue shall constitute more than 5% of the total value of the portfolio, except U.S. Treasury and Federal Agency obligations. Not more than 35% of the total funds available for investment may be invested in commercial paper, and no single industry group, as defined by Standard & Poor’s, shall constitute more than 5% of the bond portfolio.

81 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

As of June 30, 2012, the OPEB Trust Fund did not own securities other than the Virginia Pooled OPEB Trust. As of June 30, 2012, investment holdings as a percentage of total investments for the OPEB Trust were as follows:

OPEB Trust Credit Investment Type Fiduciary Fund Rating Virginia Pooled OPEB Trust 100% NR

The market value of the OPEB Trust Fund’s fixed income holdings within the Virginia Pooled OPEB Trust consisted of the following investments and maturities as of June 30, 2012:

Investment Maturity Fair Value < 5 years 5 - 10 years Virginia Pooled OPEB Trust Bond Mutual Funds$ 773,411 $ - $ 773,411 Short Term Investment Funds 107,649 107,649 - $ 881,060 $ 107,649 $ 773,411

Interest Rate Risk. The investment policy of the Virginia Pooled OPEB Trust does not address investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

82 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

(3) Receivables

Receivables as of June 30, 2012 consisted of the following:

Governmental Funds Total School Board GRTC Special Capital Internal Governmental Component Component Receivables General Revenue Projects Service Activities Unit Unit Interest and Dividends $ 11,391 $ - $ 7,226 $ 9,900 $ 28,517 $ - $ -

Federal Government - 263,622 - - 263,622 5,502,947 241,080 State Government 9,014,680 282,207 - - 9,296,887 2,524,720 203,951 City of Roanoke - - - - - 910,419 - Other Governments 384,900 - - 18,824 403,724 - 35,598 Subtotal Governments 9,399,580 545,829 - 18,824 9,964,233 8,938,086 480,629 Taxes 17,549,179 - - - 17,549,179 - - Accounts 4,623,297 73,771 62,066 73,150 4,832,284 39,595 155,511 Less: Allowance for Uncollectible Accounts (5,746,184) - - - (5,746,184) - - Subtotal 16,426,292 73,771 62,066 73,150 16,635,279 39,595 155,511

Governmental Fund Receivables 25,837,263 619,600 69,292 101,874 26,628,029 8,977,681 636,140

Enterprise Fund Receivables - - - - 96,690 - - Due from WVWA - - - - 17,558, 082 - - Note Receivable - - - - 1,433,046 495,000 - Total Receivables $ 25,837,263 $ 619,600 $ 69,292 101,874$ $ 45,715,847 $ 9,472,681 $ 636,140

Business-Type Total Civic Enterprise Receivables Facilities Parking Funds Accounts$ 87,344 9,346$ $ 96,690 Total Receivables $ 87,344 9,346$ $ 96,690

The taxes receivable account is largely comprised of the current and past nineteen years of uncollected tax levies on real property, the current and prior four years of uncollected tax levies for personal property, and business and professional occupational license tax. The ability to collect these accounts has been considered in the allowance for uncollectible accounts.

Net taxes and accounts receivable, as reported on the government-wide Statement of Net Assets, include taxes receivable of approximately $3.8 million that are not available to pay for current period expenditures and are accordingly recorded as deferred revenue in the governmental funds balance sheet. A $17,558,082 receivable from the Western Virginia Water Authority (WVWA) related to long-term liabilities is reported on the Statement of Net Assets.

83 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Similarly, the City carries a Note Receivable from the Hotel Roanoke, LLC with a balance as of June 30, 2012 of $1,433,046 which is related to a long term Section 108 loan. Principal is payable in nineteen annual installments with interest on the unpaid principal balance of the note at a fixed rate of 4.0% per annum. Installments of principal and interest in the amount of $496,757 are due and payable on June 30 of each year until June 30, 2014. If, in any one year, full payment of principal and interest is not made, that unpaid amount is payable on any subsequent annual installment payment date. In this event, no additional interest would accrue. At June 30, 2012, unpaid installments totaling $496,757 are due from the Hotel Roanoke, LLC. This amount is comprised of unpaid principal of $441,007 and interest of $55,750. Further details are presented in note 8.

(4) Interfund Balances and Transfers

Interfund balances consisted of the following for the year ended June 30, 2012:

DUE FROM (FUND)

Civic Capital Debt Internal Special Pension General Facilities Projects Service Services Revenue Trust Parking Total General Fund$ - $ 74,800 $ - -$ $ - $ - $ 1,695 $ 93,923 $ 170,418 Civic Facilities - - - 48,191 - - - - 48,191 Capital Projects 2,438,947 - - - 233,998 - - - 2,672,945 Debt Service 56,259 - 16,171 - - - - 3,660 76,090 Internal Service 3,405,607 7,464 50,076 23,038 1,364 2,108 1,083 1,521 3,492,261 Special Revenue 5,479 ------5,479 Pension Trust ------

DUE TO (FUND) TO DUE TOTAL $ 5,906,292 82,264$ $ 66,247 $ 71,229 $ 235,362 2,108$ $ 2,778 $ 99,104 $ 6,465,384

All interfund balances represent timing differences resulting from the difference between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments are made. As of the fiscal year end, the City has a reported Due To Component Unit (School Board) balance of $900,292. In comparison, the School Board has a Due From Primary Government balance of $910,419 (see Exhibit A). The $10,127 Due To/Due From difference is related to timing differences in the recording of transactions by the City and the School Board.

84 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Interfund transfers consisted of the following for the year ended June 30, 2012:

TRANSFER FROM (FUND)

Civic Capital Debt Internal Special General Facilities Parking Projects Service Service Revenue Total General$ - $ - $ - $ 7,752 $ - $ - $ - $ 7,752 Civic Facilities 1,977,100 - - 54,922 - - - 2,032,022 Parking - - - 6,154 - - - 6,154 Capital Projects 2,771,261 - - - 252 - - 2,771,513 Debt Service 14,394,942 42,450 - - - - 558,033 14,995,425 Internal Service 1,855,215 - 17,500 51,632 - - - 1,924,347 Special Revenue 313,713 ------313,713

TRANSFER (FUND)TO TOTAL $ 21,312,231 $ 42,450 $ 17,500 $ 120,460 $ 252 $ - $ 558,033 $ 22,050,926

Transfers are used (1) to move revenues from the funds that are required by statute or budget to collect them to the funds that are required by statute or budget to spend them, (2) to move receipts restricted for debt service from the funds collecting them to the Debt Service Fund as debt service payments become due, and (3) to move unrestricted revenues collected in the General Fund, which finance various programs accounted for in other funds in accordance with budgetary authorizations. In fiscal year 2012, in addition to debt service, the City transferred funding for an annual operating subsidy for the Civic Center, capital projects, internal services provided as well as required /matching funding for grants in the Special Revenue fund.

85 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

(5) Changes in Capital Assets

Primary Government:

Changes in capital assets for the year ended June 30, 2012 consisted of the following:

Balance Balance July 1, 2011 Increases Decreases June 30, 2012 Governmental activities: Capital assets, not being depreciated: Land $ 43,450,131 $ - $ - $ 43,450,131 Infrastructure - Right of Way 20,035,826 - - 20,035,826 Infrastructure - Inexhaustible - 47,995,346 - 47,995,346 Construction in Process 44,918,091 16,157,696 (48,106,070) 12,969,717 Historical Treasures 635,298 - - 635,298 Total Capital assets, not being depreciated 109,039,346 64,153,042 (48,106,070) 125,086,318

Capital assets, being depreciated: Land Improvements 2,998,634 2,209,681 - 5,208,315 Accumulated Depreciation (854,078) (1,122,607) - (1,976,685) Net Land Improvements 2,144,556 1,087,074 - 3,231,630

Building and Structures 374,724,012 10,767,758 (13,444,467) 372,047,303 Accumulated Depreciation (113,108,255) (7,104,236) 11,402,455 (108,810,036) Net Building & Structures 261,615,757 3,663,522 (2,042,012) 263,237,267

Infrastructure 186,501,021 24,254,459 - 210,755,480 Accumulated Depreciation (81,751,783) (7,323,745) - (89,075,528) Net Infrastructure 104,749,238 16,930,714 - 121,679,952

Equipment 64,819,575 12,651,671 (439,838) 77,031,408 Accumulated Depreciation (44,233,712) (6,460,275) 398,767 (50,295,220) Net Equipment 20,585,863 6,191,396 (41,071) 26,736,188

Total Capital Assets Being Depreciated 629,043,242 49,883,569 (13,884,305) 665,042,506 Less: Accumulated Depreciation (239,947,828) (22,010,863) 11,801,222 (250,157,469) Net Total Capital Assets Being Depreciated 389,095,414 27,872,706 (2,083,083) 414,885,037 Governmental activities capital assets, net $ 498,134,760 $ 92,025,748 $ (50,189,153) $ 539,971,355

General Capital Assets, Net $ 515,370,208 Internal Service Fund Capital Assets, Net 24,601,147 Total $ 539,971,355

Capital assets used for educational purposes totaling $193,784,345 are included with the Governmental Activities capital assets of the primary government. Depreciation expense on these assets was recorded as Education expense in the current fiscal year.

86 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

In fiscal year 2012, the City, in collaboration with the United States Army Corps of Engineers (USACE), completed the Roanoke River Flood Reduction project, which was subsequently added as a capital asset. The project was capitalized at $63.0 million, of which $19.7 million was paid by the City and $43.3 million was paid and donated by the USACE. The project was capitalized as flood reduction infrastructure of $48.0 million, greenway trails of $12.7 million, parking lots of $2.2 million and equipment at $0.1 million. Each asset type was capitalized in accordance with the City’s Fixed Asset Policy and depreciated over the assets’ associated useful lives with the exception of the flood reduction infrastructure asset.

The flood reduction infrastructure asset was determined to have an extraordinarily long useful life defined as “inexhaustible” per the GASB Comprehensive Implementation Guide. As a result, the asset was capitalized using the Modified Approach, as outlined in GASB Statement No. 34, and is not being depreciated. A requirement of this guidance is that the asset be evaluated periodically to ensure that it is being maintained at or above its current condition level. For more information regarding the assessment requirement, see Required Supplementary Information (RSI) table two.

Changes in capital assets for Business-type activities for the year ended June 30, 2012 consisted of the following:

Balance Balance July 1, 2011 Increases Decreases June 30, 2012 Business-type activities:

Capital assets, not being depreciated: Land $ 3,613,073 $ - $ - $ 3,613,073 Construction in Process 8,272,817 400,459 (8,654,557) 18,719 Total Capital assets, not being depreciated 11,885,890 400,459 (8,654,557) 3,631,792

Capital assets, being depreciated: Land Improvements 68,446 - - 68,446 Accumulated Depreciation (60,238) (1,326) - (61,564) Net Land Improvements 8,208 (1,326) - 6,882

Building and structures 77,325,609 8,626,291 - 85,951,900 Accumulated Depreciation (27,425,470) (1,952,476) - (29,377,946) Net Building & Structures 49,900,139 6,673,815 - 56,573,954

Equipment 2,538,905 28,268 (17,528) 2,549,645 Accumulated Depreciation (1,837,210) (109,404) 17,528 (1,929,086) Net Equipment 701,695 (81,136) - 620,559

Total Capital Assets Being Depreciated 79,932,960 8,654,559 (17,528) 88,569,991 Less: Accumulated Depreciation (29,322,917) (2,063,207) 17,528 (31,368,596) Net Total Capital Assets Being Depreciated 50,610,043 6,591,352 - 57,201,395

Business-type activities capital assets, net $ 62,495,933 $ 6,991,811 $ (8,654,557) $ 60,833,187

87 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Depreciation was charged to functions as follows:

Governmental activities:

General Government $ 831,208 Judicial Administration 254,738 Public Safety 1,389,391 Public Works 6,214,695 Health and Welfare 327,188 Parks, Recreation and Cultural 2,856,876 Community Development 104,848 Economic Development 6,961 Education 4,721,014 Capital assets held by the government's internal service funds are charged to the various functions based on their usage of the assets 5,303,944 Total $ 22,010,863

Business-type activities:

Civic Facilities $ 910,086 Parking 1,153,121 Total $ 2,063,207

School Board Component Unit: Balance Balance July 1, 2011 Increases Decreases June 30, 2012

Equipment $ 7,592,531 $ 654,810 $ (815,953) $ 7,431,388 Accumulated Depreciation (4,793,205) (614,204) 763,961 (4,643,448) Net Equipment 2,799,326 40,606 (51,992) 2,787,940 Component unit capital assets, net $ 2,799,326 $ 40,606 $ (51,992) $ 2,787,940

GRTC Component Unit: Balance Balance July 1, 2011 Increases Decreases June 30, 2012

Capital assets, not being depreciated: Land $ 720,724 $ - $ - $ 720,724

Capital assets, being depreciated: Building and Structures 10,562,254 92,783 - 10,655,037 Equipment 18,170,965 321,268 (426,017) 18,066,216 Less: Accumulated Depreciation (15,404,160) (1,936,805) 426,017 (16,914,948) Subtotal 13,329,059 (1,522,754) - 11,806,305 Component unit capital assets, net $ 14,049,783 $ (1,522,754) $ - $ 12,527,029

88 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

(6) Construction in Progress and Contract Commitments

A summary of construction in progress by function and contract commitments (encumbrances) at June 30, 2012 is as follows:

Primary Government: Expended/Expensed Contract Required Project as of Commitments Future Governmental Activities: Authorizations June 30, 2012 (Encumbrances) Financing Function General Government $ 378,949 $ 83,745 $ 71,650 None Parks, Recreation and Cultural 8,393,880 3,815,744 389,837 $ 4,925,000 Flood Reduction - - - None Economic Development 316,980 177,268 - None Community Development 230,000 8,784 8,515 $ 210,000 Public Safety 101,000 67,757 34,905 None Public Works 15,880,152 4,782,920 1,160,843 $ 3,120,000 Education 5,121,950 2,318,368 2,502,854 $ 2,000,000 Department of Technology 2,381,004 1,695,100 33,946 $ 1,612,167 Subtotal 32,803,915 12,949,686 4,202,550 Non-Capitalized Projects 41,261,368 40,522,381 268,627 None Total $ 74,065,283 $ 53,472,067 $ 4,471,177

Business-Type Activities: Fund Civic Facilities $ - $ - $ - $ 1,000,000 Parking 340,914 18,720 7,280 None Total $ 340,914 $ 18,720 $ 7,280

(7) Deferred Revenue

Deferred revenue represents amounts for which asset recognition criteria have been met, but for which revenue recognition criteria have not been met. Deferred revenue as reported in the governmental and proprietary funds financial statements at June 30, 2012 consisted of the following: Governmental activities: Special General Fund Revenue Fund Total Deferred Property and Other Tax Revenue$ 4,123,763 $ - $ 4,123,763 Other receivables for which revenue recognition criteria have not been met - 210,836 210,836 Total $ 4,123,763 $ 210,836 $ 4,334,599

Business-type activities: Civic Facilities Fund Deferred Ticket and Other Event Revenue$ 560,769 Total $ 560,769

89 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

(8) Long-Term Liabilities

General obligation bonds are direct obligations and pledge the full faith and credit of the City. These bonds are subject to the provisions of the Internal Revenue Code of 1986 related to arbitrage and interest income tax regulations under those provisions. The fund balance of the Debt Service Fund at June 30, 2012 of $1,317,554 was committed for future retirement of long-term debt. The Charter of the City of Roanoke limits the legal debt to 10% of the assessed valuation of real estate within the City limits. The City's legal debt margin at June 30, 2012 was $679,477,230. The City has no overlapping debt. The City issues general obligation bonds to provide for the acquisition and construction of major capital facilities. Outstanding long-term liabilities, gross of governmental activities deferred refunding amounts, as of June 30, 2012 were comprised of the following:

Details of Long - Term Indebtedness At June 30, 2012, the long-term indebtedness of the City consisted of the following:

Governmental Interest Rates Issue Date Maturity Issue Amount Activities General Obligation Bonds 2002A Public Improvement Bonds 3.00% - 5.25% 2/21/2002 10/1/2021 34,130,000 $ 1,855,000 2002B Public Improvement Bonds 4.00% - 5.00% 2/21/2002 10/1/2012 12,000,000 655,000 2003 Refunding Bonds 2.00% - 5.00% 7/1/2003 8/1/2024 12,075,000 4,200,000 2004 Refunding Bonds 2.00% - 5.00% 2/25/2004 10/1/2019 46,030,000 23,460,000 2004A Refunding Bonds 2.00% - 3.63% 3/11/2004 8/1/2017 7,935,000 3,990,000 2004B Public Improvement Bonds 3.00% - 5.25% 11/23/2004 2/1/2015 36,105,000 5,415,000 2005 Public Improvement Bonds (Taxable) 6.25% 12/15/2005 12/1/2020 3,975,000 2,385,000 2006A Public Improvement Bonds 3.50% - 5.00% 2/8/2006 2/1/2026 17,950,000 8,075,000 2006B Public Improvement Bonds (Subject to AMT) 4.00% - 5.00% 2/8/2006 2/1/2026 5,500,000 3,850,000 2006C Public Improvement Bonds 3.50% - 4.23% 5/4/2006 8/1/2012 2,975,834 711,817 2008 Public Improvement Bonds 3.25% - 5.00% 2/5/2008 2/1/2033 43,445,000 31,025,000 2008A VRA Public Improvement Bonds 3.12% - 5.37% 12/10/2008 10/1/2028 6,910,000 5,900,000 2010A Refunding Bonds 2.00% - 5.00% 3/11/2010 10/1/2021 32,792,400 32,792,400 2010B Public Improvement Bonds 1.25% - 5.80% 3/11/2010 10/1/2029 2,680,000 2,535,000 2010C Refunding Bonds 2.00% - 4.00% 8/11/2010 7/15/2015 1,786,500 1,786,500 2010C Public Improvement Bonds 2.00% - 4.00% 8/11/2010 7/15/2030 2,605,000 2,550,000 2010D Public Improvement Bonds (Market Bldg.) 2.00% - 4.00% 8/11/2010 7/15/2030 5,470,000 5,360,000 2010E Public Improvement Bonds 2.90% - 5.70% 8/11/2010 7/15/2030 5,665,000 5,665,000 2012A Public Improvement Bonds 2.00% - 5.00% 3/14/2012 2/1/2032 6,925,000 6,925,000 2012B Refunding Bonds 0.43% - 2.96% 3/14/2012 10/1/2023 6,880,000 6,880,000 2012C Refunding Bonds 4.00% - 5.00% 3/14/2012 2/1/2025 11,140,000 11,140,000 $ 167,155,717 Section 108 Loan Section 108 Loan-Hotel Roanoke Project 3.43% - 6.91% March, 1994 8/1/2013 6,000,000 $ 910,000

General Obligation Bonds-Western Virginia Water Authority 2002A Public Improvement Bonds - Water (WVWA) 3.00% - 5.25% 2/1/2002 10/1/2012 5,445,000 $ 270,000 2003 Refunding Bonds - Water (WVWA) 2.00% - 5.00% 7/1/2003 8/1/2024 14,310,000 3,805,000 2006C Refunding Bonds - Water (WVWA) 3.50% - 4.65% 5/4/2006 8/1/2013 7,655,992 2,883,182 2010A Refunding Bonds - Water (WVWA) 2.00% - 5.00% 3/4/2010 10/1/2021 3,263,800 3,263,800 2010C Refunding Bonds - Water (WVWA) 3.00% 8/11/2010 7/15/2015 231,100 231,100 2012B Refunding Bonds - Sewer (WVWA) 1.15% - 2.96% 3/14/2012 10/1/2023 7,105,000 7,105,000 $ 17,558,082

Lease Obligations Social Services Building Lease 11.80% 2/1/2004 1/1/2024 4,857,000 $ 3,952,828 Xerox Lease - General, Department of Technology and Fleet 12.10% 6/30/2008 6/30/2014 892,965 225,677 $ 4,178,505

90 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Details of Long-Term Indebtedness (continued) Governmental Interest Rates Issue Date Maturity Issue Amount Activities School Fund Bonds and Loans (1) 1992A VPSA Subsidized Forest Park 4.90% - 6.35% 12/10/1992 7/15/2012 2,500,000 $ 123,480 1994B VPSA Subsidized Virginia Heights 6.25% - 6.75% 11/1/1994 7/15/2014 2,000,000 289,071 1995C VPSA Subsidized Wasena & Jackson 5.10% - 6.10% 12/21/1995 7/15/2015 4,400,000 861,925 1996B VPSA Subsidized Breckenridge 5.10% - 6.10% 11/14/1996 7/15/2016 5,000,000 1,214,897 1997 VPSA Subsidized Woodrow Wilson 4.35% - 5.35% 11/1/1997 7/15/2017 5,000,000 1,450,834 1998A VPSA Subsidized Addison 3.60% - 5.10% 11/19/1998 7/15/2018 5,000,000 1,750,000 1998B VPSA Subsidized Huff Lane 3.60% - 5.10% 11/19/1998 7/15/2018 1,200,000 423,079 1999A VPSA Subsidized Governor's School 5.10% - 6.10% 11/18/1999 7/15/2019 3,250,000 1,240,000 1999B VPSA Subsidized Hurt Park 5.10% - 6.10% 11/18/1999 7/15/2019 1,250,000 464,468 2000B VPSA Subsidized Garden City 4.97% - 5.85% 11/16/2000 7/15/2020 2,750,000 1,184,670 2000B VPSA Subsidized Grandin Court 4.97% - 5.85% 11/16/2000 7/15/2020 1,900,000 818,498 2000B VPSA Subsidized Preston Park 4.97% - 5.85% 11/16/2000 7/15/2020 1,900,000 818,498 2001B VPSA Subsidized Fairview 3.10% - 5.35% 11/15/2001 7/15/2021 2,750,000 1,329,629 2001B VPSA Subsidized Fishburn Park 3.10% - 5.35% 11/15/2001 7/15/2021 2,500,000 1,208,753 2003C VPSA Subsidized Roanoke Academy 3.10% - 5.35% 11/6/2003 7/15/2023 5,000,000 2,839,271 2004B VPSA Subsidized Lincoln Terrace 4.10% - 5.60% 11/1/2004 7/15/2024 1,300,000 768,032 2005D VPSA Subsidized Fallon Park 4.60% - 5.10% 11/10/2005 7/15/2025 992,464 724,208 2005D VPSA Subsidized Westside 4.60% - 5.10% 11/10/2005 7/15/2025 3,291,459 2,401,754 2006B VPSA Non-Subsidized Monterey 4.22% - 5.10% 11/9/2006 7/15/2026 1,945,000 1,445,000 2006B VPSA Subsidized Patrick Henry 4.22% - 5.10% 11/9/2006 7/15/2026 7,500,000 5,099,603 2007A VPSA Non-Subsidized Patrick Henry 4.10% - 5.10% 5/10/2007 7/15/2027 3,345,000 2,665,000 2008B VPSA Subsidized William Fleming 3.60% - 5.35% 12/11/2008 7/15/2028 6,350,705 5,481,627 2008B VPSA Non-Subsidized William Fleming/Roofs 3.60% - 5.35% 12/11/2008 7/15/2028 10,580,000 8,990,000 2010 VPSA Qualified School Construction Bonds (QSCB) 0.00% 7/8/2010 6/1/2027 1,135,000 1,005,000 Literary Fund Loan-Morningside Elementary School 4.00% 8/1/1995 9/1/2015 2,200,000 440,000 Literary Fund Loan-Lucy Addison Middle School 4.00% 10/1/1999 10/1/2019 5,000,000 2,000,000 Qualified Zone Academy Bond-Roanoke Academy 0% 12/20/2000 12/20/2013 1,291,618 198,710 Qualified Zone Academy Bond-Lincoln Terrace 0% 11/1/2002 10/31/2016 800,000 333,460 Qualified Zone Academy Bond-Fallon Park 0% 12/29/2004 12/29/2020 439,100 272,574 Qualified Zone Academy Bond-Patrick Henry High School 0% 12/27/2006 12/27/2022 1,097,571 813,453 $ 48,655,494

Subtotal Governmental Activities $ 238,457,798

Business-Type Interest Rates Issue Date Maturity Issue Amount Activities Enterprise Fund Bonds: 2002A Civic Facilities Bonds 3.00% - 5.25% 2/1/2002 10/1/2012 2,170,000 $ 105,000 2004B Civic Facilities Bonds 3.00% - 5.25% 11/23/2004 2/1/2015 7,895,000 1,060,000 2006A Civic Facilities Bonds 3.50% - 5.00% 2/8/2006 2/1/2026 6,405,000 3,235,000 2010A Civic Facilities Refunding Bonds 2.00% - 5.00% 3/4/2010 10/1/2021 4,382,700 4,382,700 2010C Civic Facilities Refunding Bonds 2.00% - 4.00% 8/11/2010 7/15/2015 91,500 91,500 2012A Civic Facilities Bonds 4.00% - 5.00% 3/14/2012 2/1/2032 685,000 685,000 2012C Civic Facilities Refunding Bonds 4.00% - 5.00% 3/14/2012 2/1/2025 3,345,000 3,345,000 2002A Parking Bonds-Gainsboro 3.00% - 5.25% 2/1/2002 10/1/2012 2,500,000 120,000 2004B Parking Bonds-Campbell Avenue 3.00% - 5.25% 11/23/2004 2/1/2015 2,000,000 270,000 2006A Parking Bonds-Campbell Avenue 3.50% - 5.00% 2/8/2006 2/1/2026 2,600,000 1,320,000 2008 Parking Bonds-Campbell Avenue 3.25% - 5.00% 2/5/2008 2/1/2028 2,545,000 1,795,000 2008A VRA Parking Bonds-Market 3.12% - 5.37% 12/10/2008 10/1/2031 5,040,000 5,040,000 2010A Parking Refunding Bonds-Gainsboro & Campbell Ave. 2.00% - 5.00% 3/4/2010 10/1/2021 2,861,100 2,861,100 2010A Parking Bonds-Market 2.00% - 5.00% 3/4/2010 10/1/2029 1,625,000 1,455,000 2010C Parking Refunding Bonds-Gainsboro 2.00% - 4.00% 8/11/2010 7/15/2015 105,900 105,900 2012C Parking Refunding Bonds-Campbell Avenue 4.00% - 5.00% 3/14/2012 2/1/2025 900,000 900,000 $ 26,771,200 Lease Obligations Ovations Lease 3.93% 7/1/2008 6/30/2015 449,988 208,087 Xerox Lease - Civic Facilities 12.10% 6/30/2008 6/30/2014 27,877 6,996 $ 215,083

Subtotal Business-Type Activities $ 26,986,283

Total Primary Governmental Bonded Debt $ 265,444,081

(1) VPSA = Virginia Public School Authority

91 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

The annual Requirements to amortize governmental activities debt outstanding as of June 30, 2012 are as follows:

WESTERN VIRGINIA WATER GENERAL OBLIGATION AUTHORITY (WVWA) GENERAL VPSA/LITERARY FUND SERIAL BONDS OBLIGATION SERIAL BONDS LOANS FISCAL YEAR PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST

2012-13$ 16,740,986 $ 6,434,427 $ 2,373,182 $ 542,035 $ 4,278,713 $ 2,241,011 2013-14 16,817,554 5,876,172 2,400,000 431,282 4,178,523 2,041,293 2014-15 13,310,038 5,308,504 1,021,400 356,653 4,204,689 1,840,473 2015-16 13,744,435 4,741,237 1,302,700 312,589 4,131,639 1,640,149 2016-17 12,284,972 4,262,432 1,191,900 280,075 3,824,330 1,442,866 2017-22 52,988,993 14,816,831 6,343,900 968,871 15,004,692 4,734,638 2022-27 27,146,937 6,589,968 2,925,000 160,262 9,464,879 1,864,271 2027-32 14,150,000 1,983,800 - - 1,949,831 95,425 2032-37 1,590,000 66,780 - - - -

TOTAL$ 168,773,915 $ 50,080,151 $ 17,558,082 $ 3,051,767 $ 47,037,296 $ 15,900,126

The following general obligation debt is issued to support business-type activieis. The annual requirements to amortize business-type activies debt outstanding as of June 30, 2012 are as follows:

CIVIC FACILITIES FUND PARKING FUND TOTAL SERIAL BONDS SERIAL BONDS BUSINESS-TYPE DEBT FISCAL YEAR PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST

2012-13$ 745,000 $ 499,440 $ 655,000 $ 584,885 $ 1,400,000 $ 1,084,325 2013-14 787,300 493,682 703,900 566,056 1,491,200 1,059,738 2014-15 810,700 466,478 722,000 543,176 1,532,700 1,009,654 2015-16 953,400 422,936 843,500 511,189 1,796,900 934,125 2016-17 910,300 384,245 768,300 478,450 1,678,600 862,695 2017-22 4,977,500 1,437,459 4,304,300 1,902,205 9,281,800 3,339,664 2022-27 3,500,000 428,785 3,675,000 981,560 7,175,000 1,410,345 2027-32 220,000 34,250 2,195,000 260,131 2,415,000 294,381

TOTAL$ 12,904,200 $ 4,167,275 $ 13,867,000 $ 5,827,652 $ 26,771,200 $ 9,994,927

92 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

TOTAL GOVERNMENTAL SECTION 108 LOAN ACTIVITIES DEBT FISCAL YEAR PRINCIPAL INTEREST PRINCIPAL INTEREST

2012-13 $ 470,000 $ 32,203 $ 23,862,881 $ 9,249,676 2013-14 440,000 10,626 23,836,077 8,359,373 2014-15 - - 18,536,127 7,505,630 2015-16 - - 19,178,774 6,693,975 2016-17 - - 17,301,202 5,985,373 2017-22 - - 74,337,585 20,520,340 2022-27 - - 39,536,816 8,614,501 2027-32 - - 16,099,831 2,079,225 2032-37 - - 1,590,000 66,780

TOTAL $ 910,000 $ 42,829 $ 234,279,293 $ 69,074,873

93 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

CHANGES IN GENERAL LONG-TERM LIABILITIES

Amounts Balance Balance Due Within June 30, 2011 Increases Decreases June 30, 2012 One Year Primary Government - Governmental Activities: General Obligation Serial Bonds $ 181,468,118 $ 24,945,000 $ 33,867,204 $ 172,545,914 $ 16,740,985 General Obligation Serial Bonds - WVWA 19,875,450 7,105,000 9,422,368 17,558,082 2,373,182 Hotel Roanoke Section 108 Loan 1,355,000 - 445,000 910,000 470,000 State Literary Fund Loans 2,800,000 - 360,000 2,440,000 360,000 VPSA School Bonds 44,816,757 - 3,991,460 40,825,297 3,918,713 Capital Lease Obligations 4,525,356 - 346,851 4,178,505 393,986 Total Bonds, Loans and Leases Payable before Deferred Amounts and Premiums 254,840,681 32,050,000 48,432,883 238,457,798 24,256,866 Deferred Amount on Refunding and Premiums 1,316,220 819,334 278,795 1,856,759 83,622 Total Bonds, Loans and Leases Payable 256,156,901 32,869,334 48,711,678 240,314,557 24,340,488 Claims Payable 16,717,495 7,276,062 1,578 23,991,979 2,577,571 Compensated Absences Payable 6,152,769 6,606,713 6,086,588 6,672,894 5,430,190 Subtotal Governmental Activities: $ 279,027,165 $ 46,752,109 $ 54,799,844 $ 270,979,430 $ 32,348,249

Primary Government - Business-Type Activities: General Obligation Serial Bonds $ 28,121,356 $ 4,930,000 $ 6,280,156 $ 26,771,200 $ 1,400,000 Capital Lease Obligations 285,366 - 70,283 215,083 73,649 Deferred Amount on Refunding and Premiums 337,182 419,174 137,626 618,730 78,293 Total Bonds, Loans and Leases Payable 28,743,904 5,349,174 6,488,065 27,605,013 1,551,942 Compensated Absences Payable - - - - - Subtotal Business-Type Activities: $ 28,743,904 $ 5,349,174 $ 6,488,065 $ 27,605,013 $ 1,551,942

Total Primary Government Long-Term Liabilities $ 307,771,069 $ 52,101,283 $ 61,287,909 $ 298,584,443 $ 33,900,191

School Board Component Unit: Claims Payable $ 7,404,325 $ 15,361,351 $ 14,861,070 $ 7,904,606 $ 5,008,506 Compensated Absences Payable 3,165,328 2,873,821 2,969,213 3,069,936 825,814 Other Post-Employment Benefit Obligations 1,129,105 - 534,085 595,020 - Total School Board Component Unit $ 11,698,758 $ 18,235,172 $ 18,364,368 $ 11,569,562 $ 5,834,320

During fiscal year 2012, the Debt Service Fund was used to account for the repayment of most long-term liabilities of governmental activities as shown in the tables preceding this paragraph. However, a portion of capital lease obligations, claims payable and compensated absences were liquidated by Internal Service Funds. The remaining portion of compensated absences was liquidated by the General Fund.

On March 14, 2012, the City issued $36,980,000 principal amount of General Obligation Public Improvement Bonds consisting of $7,610,000 principal amount of General Obligation Public Improvement Bonds, Series 2012A (Tax-Exempt), $13,985,000 principal amount of General Obligation Public Improvement Refunding Bonds, Series 2012B (Taxable Bonds) and $15,385,000 principal amount of General Obligation Public Improvement Bonds, Series 2012C (Tax-Exempt).

94 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

The Series 2012A Bonds were issued for the purpose of providing funds to finance a portion of the costs of school improvement projects, parks and recreation improvement projects, storm drain improvement projects, public bridge renovation projects, renovations to the Roanoke Civic Center, and the Digital Radio Project (comprised of an 800 MHz radio system for public safety purposes).

The Series 2012B Bonds were issued with a true interest cost of 2.1638%. The bond proceeds were used to advance refund on a current basis $13,215,000 outstanding principal amount of the City’s General Obligation Public Improvement Bonds, Series 2002B, dated February 1, 2002, and Series 2003, dated July 1, 2003 (of which $7,065,000 were the ultimate responsibility of the Western Virginia Water Authority).

The proceeds committed from the Series 2012B Bonds of $13,985,000 were applied to refund on a current basis the Refunded Series 2002B Bonds, which are to be paid at their call date on October 1, 2012, and the Refunded Series 2003 Bonds, which are to be paid on their call date on August 1, 2013.

The proceeds of the Refunding Series 2012B Bonds were deposited with Regions Bank, Richmond, Virginia, as Escrow Agent (the “Escrow Agent”), under an Escrow Deposit Agreement, dated March 14, 2012, by and between the City and the Escrow Agent. The proceeds were invested in Government Securities (as defined in the Escrow Deposit Agreement). The Government Securities will mature and bear interest payable at times and in amounts sufficient to pay (i) interest due on the Refunded Series 2002B Bonds to October 1, 2012, (ii) the principal due of the Refunded Series 2002B Bonds on October 1, 2012, (iii) interest on the Refunded Series 2003 Bonds to August 1, 2013, and (iv) the principal due of the Refunded Series 2003 Bonds on August 1, 2013. The City undertook the refunding of the Refunded Series 2002B Bonds and the Refunded Series 2003 Bonds described above in order to achieve debt service savings.

The Series 2002B bonds mature annually through October 1, 2021. The stated interest rates ranged from 4.75% to 5.00%. The amounts maturing on October 1 in each of the years 2013 through 2021 were subject to redemption and are to be redeemed on October 1, 2012.

The Series 2003 bonds mature annually through August 1, 2024. The stated interest rates ranged from 3.50% to 4.00%. The amounts maturing on August 1 in each of the years 2016 through 2024 were subject to redemption and are to be redeemed on August 1, 2013.

The Series 2012C Bonds were issued with a true interest cost of 2.3127%. The bond proceeds were used to advance refund $16,180,000 from General Obligation Public Improvement Bonds Series 2004B, dated on November 15, 2004, and Series 2006A bonds, dated on February 8, 2006.

The proceeds committed from the Series 2012C Bonds of $15,385,000 were applied to refund on a current basis the Refunded Series 2004B Bonds, which are to be paid at their call date on February 1, 2015, and the Refunded Series 2006A Bonds, which are to be paid on their call date on February 1, 2016.

95 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

The proceeds of the Refunding Series 2012C Bonds were deposited with the Escrow Agent under an Escrow Deposit Agreement dated March 14, 2012. Such proceeds were invested in Government Securities (as defined in the Escrow Deposit Agreement). The Government Securities will mature and bear interest payable at times and in amounts sufficient to pay (i) interest due on the Refunded Series 2004B bonds to February 1, 2015, (ii) the principal due of the Refunded Series 2004B bonds on February 1, 2015, (iii) interest on the Refunded Series 2006A bonds to February 1, 2016, and (iv) the principal due of the Refunded Series 2006A bonds on February 1, 2016. The City undertook the refunding of the Refunded Series 2004B bonds and the Refunded Series 2006A bonds described above in order to achieve debt service savings.

The Series 2004B bonds mature annually through February 1, 2025. The stated interest rates ranged from 4.00% to 5.00%. The amounts maturing on February 1 in each of the years 2020 through 2025 were subject to redemption and are to be redeemed on February 1, 2015.

The Series 2006A bonds mature through February 1, 2022. The stated interest rate was 4.125%. The amount maturing on February 1, 2022 was subject to redemption and is to be redeemed on February 1, 2016.

In prior years, the City defeased various bond issues by creating separate irrevocable trust funds. New debt was issued and the proceeds were used to purchase U.S. Government Securities that were placed in these trust funds. The investments and fixed earnings from the investments are sufficient to fully service the defeased debt until the debt is called or matures. For financial reporting purposes, the debt was considered defeased and therefore removed as a liability from the City’s government-wide financial statements. As of June 30, 2012, the amount of defeased debt outstanding was $71,685,000 and consisted of maturities from the City’s 2002A, 2002B, 2003, 2004B, 2006A and 2008 bond series.

The City advance refunded the Series 2002B, 2004B, and 2006A bonds for the purpose of realizing interest savings due to the decline in municipal bond interest rates. The final maturity of the bonds was not extended as a result of this refunding. Principal payments on the refunding bonds range from $880,000 to $3,745,000 and are due annually through 2025.

The transactions also resulted in an economic gain of approximately $2,102,200 and a reduction of approximately $2,376,000 in future debt service payments.

On July 1, 2004, the Western Virginia Water Authority commenced operations. In conjunction with its formation, the Authority assumed certain indebtedness of the City, and it agreed to pay the City amounts equal to debt service on Water and Water Pollution Control debt to be retained by the City. As of June 30, 2012, the City had $17,558,082 in outstanding general obligation debt which will contractually be repaid by the Water Authority over the remaining twelve year amortization of the bonds. Further details are presented in notes 3 and 15.

96 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

The Hotel Roanoke LLC assumed certain indebtedness of the City and agreed to pay the City amounts equal to debt service on Hotel Roanoke LLC debt retained by the City. As of June 30, 2012, the City had $910,000 in outstanding debt which will contractually be repaid by the Hotel Roanoke, LLC. The note originally provided $6 million of the $27.5 million expended for the rehabilitation and restoration of the Hotel Roanoke. The Hotel Roanoke, LLC, is obligated to repay, in priority order, certain first mortgage loans held by banks and is then obligated to repay the note receivable and other debt. Funding for repaying this debt is available from resources of the Hotel Roanoke, LLC, generated by the operations of the Hotel Roanoke.

The loan repayments to the City are considered to be program income and are to be applied toward repayment of the City’s $6 million Section 108 loan from the United States Department of Housing and Urban Development.

(9) Capital Leases

Blue Eagle Partnership

During 2004, the City entered into an agreement with Blue Eagle Partnership to rent the third floor of a building to house the City’s Social Services Department. Under the lease agreement, the City pays monthly rent in the range of $52,300 to $53,300 to Blue Eagle, representing principal and interest payments with interest at 11.80%. After 2006, the rent increase is a maximum of 2% or 50% of CPI, whichever is lower. The lease term is twenty years. Ownership of the building is retained by Blue Eagle Partnership.

Lease assets and obligations are accounted for as Governmental Activities. At June 30, 2012, the original cost of the building under the capital lease totaled $4,857,000 and accumulated depreciation on the building totaled $1,942,329.

Ovations, Inc.

In July 2007, the City entered into an agreement with Ovations, Inc. to provide catering services and kitchen refurbishing and equipment to the Civic Center. The equipment and refurbishing portion of the agreement is a capital lease. Under the lease agreement, the City pays $75,000 annually to Ovations, Inc., representing principal and interest payments with interest at 3.93%. The lease term is 7 years. Ownership of the equipment and refurbishments will transfer to the City at the completion of the lease term.

Lease assets and obligations are accounted for in the Civic Facilities Fund. At June 30, 2012, the original cost of the kitchen renovations, including equipment, under the capital lease totaled $449,988, and there was $179,995 of accumulated depreciation on the assets.

Xerox, Inc.

In June 2008, the City entered into an agreement with Xerox, Inc. to lease copy machines and related equipment. Under the current lease agreement, the City pays $38,954 monthly to Xerox, Inc. representing principal and interest with interest at 12.1%. The lease term is 5 years. Ownership of the equipment does not transfer to the City at the completion of the lease term.

97 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Lease assets and obligations are accounted for as Governmental Activities and in various proprietary funds. At June 30, 2012, the original cost of the equipment under the capital lease totaled $920,842 and there was $721,026 of accumulated depreciation on the assets.

Future Lease Obligations for all capital leases are as follows:

Internal Total Governmental Serivice Governmental Enterprise Total Future M inimum Le as e Payme nts : Funds Funds Activities Funds (Memo Only) 2013$ 842,916 $ 79,907 $ 922,823 $ 82,464 $ 1,005,287 2014 698,960 145 699,105 75,000 774,105 2015 711,301 - 711,301 75,000 786,301 2016 725,527 - 725,527 - 725,527 2017 740,037 - 740,037 - 740,037 2018-2022 3,928,207 - 3,928,207 - 3,928,207 2023-2027 1,326,809 - 1,326,809 - 1,326,809 Minimum lease payments$ 8,973,757 $ 80,052 $ 9,053,809 $ 232,464 $ 9,286,273 Less: Amounts representing interest (4,870,272) (5,032) (4,875,304) (17,381) (4,892,685) Present value of minimum lease payments 4,103,485 75,020 4,178,505 215,083 4,393,588 Less: Current portion (319,109) (74,877) (393,986) (73,649) (467,635) Long-Term Lease Obligation at Jun 30, 2012$ 3,784,376 $ 143 $ 3,784,519 $ 141,434 $ 3,925,953

(10) Fund Balances

All classifications of Governmental Fund balances reflect City Code requirements or City Council action in the context of adoption of the City’s budget except for those required to comply with accounting standards. The City Council approved changes to financial policies in November of 2011 which reorganized and strengthened prior policies. The policies were revised again in January of 2012. The January revisions included policies on the classification of fund balances which were implemented in fiscal year 2011. Additional information regarding these reserve policies may be found in the City of Roanoke’s Reserve and Debt Management Policies.

As discussed in Note 1 (N), the City implemented GASB Statement No. 54 for fund balance reporting purposes in fiscal year 2011.

All fiscal year 2012 outstanding purchase commitments were re-appropriated to the 2012-13 fiscal year by City Council on May 14, 2012.

The General Fund balance of $27,084,797 is categorized as committed or unassigned. The City committed funds of $1,084,361 for outstanding purchase commitments for goods and services ordered but not received by June 30, 2012. The remaining fund balance of $26,000,436 is unassigned.

The Debt Service Fund balance of $1,317,554 is committed for future debt service payments.

98 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

The Capital Projects Fund balance of $20,500,110 is comprised of $4,686,212, related to outstanding bond proceeds and is categorized as restricted; committed funds of $4,675,001 for outstanding purchase commitments for goods and services ordered but not received by June 30, 2012; $7,709,820 committed for Future Years’ Expenditures; $3,429,077 committed for the Economic Community Development Reserve.

(11) Pensions and Deferred Compensation Plan

City employees participate in one of two different pension plans and may participate in a deferred compensation plan. The first plan is primarily for City employees, the City of Roanoke Pension Plan (Pension Plan). Sheriff's employees participate in the second plan, the Virginia Retirement System (VRS). All City employees may also participate in an Internal Revenue Code Section 457 deferred compensation plan.

Disclosure concerning these plans is as follows: City of Roanoke Pension Plan - Plan Description The Pension Plan is a cost-sharing multiple-employer defined benefit plan established by City Council and is included in the City's basic financial statements as a Pension Trust Fund. The Pension Plan was established by City Ordinance No. 8559 dated May 27, 1946, effective July 1, 1946. The Pension Plan covers substantially all employees of the City, all employees of the Roanoke Regional Airport Commission, and the Roanoke Valley Juvenile Detention Center, as well as certain employees of the City of Roanoke School Board, the Roanoke Valley Resource Authority, and the Western Virginia Water Authority. The City is the major contributor of employer contributions to the Pension Plan. City Council appoints members of the Pension Plan Board of Trustees to administer the Pension Plan. The Pension Plan is not subject to the provisions of the Employee Retirement Income Security Act (ERISA) of 1974.

Effective July 1, 1984, the Pension Plan changed its name from the Employees’ Retirement System of the City of Roanoke, Virginia (ERS) to City of Roanoke Pension Plan. This change provided for an Employees’ Supplemental Retirement System (ESRS) which modified certain benefits as defined by the ERS. All employees covered under the provisions of the ERS at June 30, 1984, could elect to remain with the ERS or be covered under the provisions of the ESRS. Coverage under the ESRS was mandatory for all employees hired or rehired on or after July 1, 1984. On November 28, 1994, June 1, 1998, November 2, 1998, and June 5, 2000, City Council authorized the Pension Plan to offer members of the ERS an opportunity to transfer to the ESRS. The option was available from February 1, 1995 to May 16, 1995, July 1, 1998 through August 31, 1998, December 1, 1998 through December 31, 1998, and July 1, 2000 through July 31, 2000. Both the ERS and the ESRS share a common trust fund from which all benefits are paid without distinction as to the source of funds and are administered by the Board of Trustees. The Pension Plan provides retirement benefits as well as death and disability benefits.

Employees who are members of the ERS with 30 years of service or age 60 (normal retirement age) are entitled to an annual retirement benefit equal to 1/70 (1.429%) of their average final compensation (highest consecutive 12 months), excluding overtime, for each year of service. Employees may retire with 20 years of service and receive a reduced retirement benefit. For employees who are married at their retirement date, a joint and survivor annuity is payable monthly. If employees under age 60 terminate before rendering ten years of service, they forfeit the right to receive any Pension Plan benefits. There is no mandatory retirement age.

99 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Employees who are members of the ESRS with 5 years or more of credited service and age 65 or over, general employees who have attained age 50 with age plus service equal to 80, and deputized police officers and firefighters who have attained age 45 with age plus service equal to 70, are entitled to an annual retirement benefit, payable monthly for life in an amount equal to 2.1% of their final average compensation for each year of credited service up to a maximum of 63%. Final average compensation is the employee’s average salary, excluding overtime, over the highest 36 consecutive months of credited service. Employees with 5 years of credited service may retire at age 55 and receive a reduced retirement benefit. Employees may elect to receive their retirement benefits in the form of a single life annuity or a joint and survivor annuity payable monthly from retirement. If employees terminate before rendering five years of service, they forfeit the right to receive any Pension Plan benefits. There is no mandatory retirement age.

Effective July 1, 2000, an additional monthly supplement equal to the greater of (a) $159 or (b) 75% of the amount the City contributes toward the cost of a single active employee’s health insurance shall be paid for eligible retirees until the month in which the retiree attains age 65. Any member of the City of Roanoke Pension Plan who was an employee of one of the participating employers of the Pension Plan (not including employees of the City of Roanoke School Board) and who retired after earning 20 or more years of creditable service but prior to attaining the age of 65 is eligible for this supplement. This supplement is not available to retirees receiving the early retiree incentive plan supplement granted in 1991.

The City of Roanoke Pension Plan issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the City of Roanoke Retirement Office, Attention: Retirement Supervisor, P.O. Box 1220, Roanoke, Virginia 24006.

City of Roanoke Pension Plan - Funding Policy

The Pension Plan is noncontributory for employees. Employer contributions to the Pension Plan are based on a percentage of the annual compensation of the active members. The City’s contribution rate for the fiscal year ended June 30, 2012 was equal to the required contribution of 18.04%.

City of Roanoke Pension Plan - Annual Pension Cost

For fiscal year 2012, the City’s annual pension cost of $10,337,831 was equal to the City’s required and actual contributions. As stipulated by City Code, the required contribution was determined as part of the June 30, 2010 actuarial valuation using the projected unit credit actuarial cost method. Any unfunded/(overturned) actuarial liability is amortized using the level percentage of pay amortization method over a 25 year closed amortization period. The actuarial assumptions included (a) 7.75% investment rate of return, and (b) projected salary increases ranging from 3.0% to 5.5% per year. Projected salary increases include an inflation component of 2.5%. The actuarial value of the assets is determined using a method designed to smooth the impact of market fluctuations. The actuarial value recognizes annual appreciation and depreciation over a five-year period. The following information is provided related to trend information.

100 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Trend Information City of Roanoke, Virginia Fiscal Year Annual Pension Percentage of APC Net Pension Ended Cost (APC) Contributed Obligation June 30, 2012 $10,337,831 100% -0- June 30, 2011 9,427,062 103% -0- June 30, 2010 8,576,364 107% -0-

Virginia Retirement System - Plan Description

The City contributes to the Virginia Retirement System, an agent and cost-sharing multiple- employer defined benefit pension plan administered by the Virginia Retirement System (VRS or the System). All full-time, salaried permanent employees of participating employers must participate in the VRS. Benefits vest after five years of service. Employees are eligible for an unreduced retirement benefit at age 65 with five years of service (age 60 with five years of service for participating local law enforcement officers, firefighters, and sheriffs) or at age 50 with at least 30 years of service if elected by the employer (age 50 with at least 25 years of service for participating local law enforcement officers, firefighters and sheriffs) payable monthly for life in an amount equal to 1.7% of their average final salary (AFS) for each year of credited service, and 1.85% of their average final salary (AFS) for each year of credited service for elected Sheriffs. Benefits are actuarially reduced for retirees who retire prior to becoming eligible for full retirement benefits. In addition, retirees qualify for annual cost-of-living increases limited to 5% per year beginning in their second year of retirement. Average final compensation is defined as the highest consecutive 36 months of salary. Participating local law enforcement officers, firefighters and sheriffs may receive a monthly benefit supplement if they retire prior to age 65. The VRS also provides death and disability benefits. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia. The System issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information for VRS. A copy of that report may be obtained from their website at the following address: http://www.varetire.org/Pdf/Publications/2010-annual-report.pdf or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA 23218-2500.

Virginia Retirement System - Funding Policy

Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5% of their annual salary to the VRS. This 5% member contribution may be assumed by the employer. The City has assumed the employee's 5% contribution. In addition, the City is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the Code of Virginia and approved by the VRS Board of Trustees. The City's contribution rate for the fiscal year ended June 30, 2012 was 12.12% of annual covered payroll.

101 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Virginia Retirement System – Funded Status and Funding Progress

As of June 30, 2011, the most recent actuarial valuation date, the plan was 77.97% funded. The actuarial accrued liability for benefits was $50.5 million, and the actuarial value of assets was $39.4 million, resulting in an unfunded actuarial accrued liability (UAAL) of $11.1 million. The covered payroll (annual payroll of active employees covered by the plan) was $8.0 million, and the ratio of the UAAL to the covered payroll was 139.56%.

The schedule of funding progress, presented as RSI following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.

Virginia Retirement System - Annual Pension Cost

For fiscal year 2012, the City’s annual pension cost of $971,795 was equal to the City’s required and actual contributions. The required contribution was determined as part of the June 30, 2009 actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 7.5% investment rate of return, (b) projected salary increases ranging from 3.75% to 5.60% per year, and (c) 2.5% per year cost-of-living adjustments. Both (a) and (b) included an inflation component of 2.5%. Any unfunded actuarial liability is amortized as a level percentage of payroll on an open basis within a period of 20 years. The actuarial value of the City's assets is determined based upon a five year smoothed market value designed to smooth the impact of market fluctuations. This method utilizes techniques which recognize the excess (shortfall) between expected and actual investment income over a five-year period.

The following information related to trend information is provided.

Fiscal Year Annual Pension Percentage of Net Pension Ended Cost (APC) APC Contributed Obligation June 30, 2012 $ 971,795 100% -0- June 30, 2011 980,415 100% -0- June 30, 2010 917,884 100% -0-

School Board Component Unit

Defined Benefit Pension Plans

The School Board participates in and contributes to three pension systems. Professional and non-professional employees of the School Board participate in the Virginia Retirement System (VRS). Professional employees participate in a VRS statewide teacher cost-sharing pool, and non-professional employees hired after July 1, 2006 participate as a separate group in the agent multiple-employer retirement system. Operational, maintenance and food service (non- professional) employees hired prior to July 1, 2006 participate in the City of Roanoke Pension Plan (Plan). Disclosure concerning these three plans is as follows:

102 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Virginia Retirement System – Statewide Professional Cost-Sharing Pool

A. Plan Description The School Board contributes to a cost-sharing and agent multiple-employer defined benefit pension plan (Plan 1 and Plan 2) administered by the Virginia Retirement System (System). All full-time, salaried permanent employees of participating employers must participate in one VRS cost sharing plan. Benefits vest after 5 years of service. Employees are eligible for an unreduced retirement benefit when they meet the age and service requirements for their plan. The plans also provide for a reduced benefit based on age and service requirements specific to each plan. The unreduced benefit is actuarially reduced to calculate the reduced benefit amount. A cost-of-living adjustment (COLA) based on changes in the Consumer Price Index for all Urban Consumers is granted on July 1 of the second calendar year after retirement and is effective each July 1 thereafter, when provided. The VRS also provides death and disability benefits. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia. The VRS issues a publicly available comprehensive annual financial report that includes basic financial statements and required supplementary information for VRS. A copy of that report may be obtained from their website at the following address: http://www.varetire.org/Pdf/Publications/2010-annual-report.pdf or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA 23218-2500.

B. Funding Policies

Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5 percent of their annual reported compensation to the VRS. This 5% member contribution may be assumed by the employer. Effective July 1, 2012, all employees must pay at least 1% of the employee 5% contribution amount. The Roanoke City School Board has assumed the employee's 5% contribution in full for the year ended June 30, 2012. In addition, the School Board is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the statute and approved by the VRS Board of Trustees. The School Board's contribution rate for the fiscal year ended June 30, 2012, was 11.33% (for the period of July of 2011 through June of 2012) of covered payroll including the employee share of 5% paid by their employer. The following table shows total employer and employee contributions made to the VRS statewide teacher pool for professional employees by the School System for the prior three years:

Percentage of Total Annual Covered Annual Covered Contributions Payroll Payroll June 30, 2012 $ 7,531,647 11.33% $ 66,367,331 June 30, 2011 6,052,585 9.00% 67,221,089 June 30, 2010 7,803,829 11.28% 69,128,529

103 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

C. Annual Required Contribution

Public School Division professional employees participate in a VRS statewide teacher cost-sharing pool. For fiscal year 2012, the School Board's annual required contribution was $7,531,647. The required contribution was based on an actuarial valuation. The contribution requirements for the School Board were equal to the actual contributions for 2012. Total School Board payroll for 2012 was $83,137,834. Payroll covered by VRS for School Board employees was $66,367,331. The following table related to trend information is provided:

Annual Required Fiscal Year Contributions Percentage of ARC Ended (ARC) Contributed June 30, 2012 $ 7,531,647 100% June 30, 2011 6,052,585 100% June 30, 2010 7,803,829 100%

Virginia Retirement System – Non-Professional’s Agent Plan

A. Funded Status and Funding Progress

As of June 30, 2011, the most recent actuarial valuation date, the plan was 133.4% funded. The actuarial accrued liability for benefits was $710,365 and the actuarial value of assets was $947,844, resulting in an unfunded (over-funded) actuarial accrued liability (UAAL) of ($237,479). The covered payroll (annual payroll of active employees covered by the plan) was $1,225,391, and the ratio of the over funded actuarial accrued liability to the covered payroll was (19.4%).

The valuation reflects the following changes in benefit provisions:

Effective June 30, 2010, all new members on and after this date participate in Plan 2. The provisions of Plan 2 that differ from Plan1 are noted throughout this footnote. There were no changes in the benefit provisions since the last actuarial valuation that had a financial impact on the Plan.

The schedule of funding progress, presented as required supplemental information (RSI) following the notes to the financial statements, 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.

104 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

B. Annual Pension Cost

Public School Division non-professional employees hired after July 1, 2006 participate in an agent multiple-employee retirement plan. For fiscal year 2012, the School Board's contributions to the plan were equal to the annual required contribution and annual pension cost for each year. The annual and required contribution was determined through a June 30, 2009 actuarial valuation using the Entry Age Normal actuarial cost method. The actuarial assumptions included a) an investment return rate of 7.5%, b) an annual cost-of-living adjustment of 2.5% for Plan 1 members and 2.25% for Plan 2 members, and c) salary increases ranging between 3.75% and 5.6% depending on the member’s service and classification. Both the investment rate of return and the projected salary increases also include an inflation component of 2.5%. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period for the June 30, 2009 actuarial valuation was 20 years. Total School Board payroll for 2012 was $83,137,834. Payroll covered by VRS for School Board non-professional employees was $1,225,391.

City of Roanoke Pension Plan

A. Plan Description

Effective July 1, 2006 this plan was closed to new employees. As of that date, new non- professional employees of RCPS are members of a VRS agent multiple-employer retirement plan which is described in detail in the following section.

The Pension Plan is a cost-sharing multiple-employer defined benefit plan established by City Council and is included in the City's financial statements as a Pension Trust Fund. The Pension Plan was established by City Ordinance No. 8559, dated May 27, 1946, and effective July 1, 1946. The Pension Plan covers certain non-professional employees of the School Board who were hired prior to July 1, 2006. City Council appoints the Pension Plan Board of Trustees who are responsible for administering the Pension Plan. The Pension Plan is currently not subject to the provisions of the Employee Retirement Income Security Act (ERISA) of 1974.

105 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Effective July 1, 1984, the Pension Plan changed its name from the Employees' Retirement System of the City of Roanoke, Virginia (ERS) to City of Roanoke Pension Plan. This change provided for an Employees' Supplemental Retirement System (ESRS) which modified certain benefits as defined by the ERS. All employees covered under the provisions of the ERS at June 30, 1984, could elect to remain with the ERS or be covered under the provisions of the ESRS. Coverage under the ESRS was mandatory for all employees hired or rehired on or after July 1, 1984. On November 28, 1994, June 1, 1998, November 2, 1998, and June 5, 2000, City Council authorized the Pension Plan to offer members of the ERS an opportunity to transfer to the ESRS. The option was available from February 1, 1995 to May 16, 1995, July 1, 1998 through August 31, 1998, December 1, 1998 through December 31, 1998, and July 1, 2000 through July 31, 2000. Both the ERS and the ESRS share a common trust fund from which all benefits are paid without distinction as to the source of funds and are administered by the Board of Trustees. The Pension Plan provides retirement benefits as well as death and disability benefits.

Employees who are members of the ERS with 30 years of service or age 60 (normal retirement age) are entitled to an annual retirement benefit equal to 1/70 (1.429%) of their average final compensation (highest consecutive 12 months), excluding overtime, for each year of service. Employees may retire with 20 years of service and receive a reduced retirement benefit. For employees who are married at their retirement date, a joint and survivor annuity is payable monthly. If employees under age 60 terminate before rendering ten years of service, they forfeit the right to receive any Pension Plan benefits. There is no mandatory retirement age.

Employees who are members of the ESRS with 5 years or more of credited service and age 65 or over, and general employees who have attained age 50 with age plus service equal to 80 are entitled to an annual retirement benefit, payable monthly for life in an amount equal to 2.1 percent of their final average compensation for each year of credited service up to a maximum of 63 percent. Final average compensation is the employee's average salary, excluding overtime, over the highest 36 consecutive months of credited service. Employees with 5 years of credited service may retire at age 50 and receive a reduced retirement benefit. Employees may elect to receive their retirement benefits in the form of a single life annuity or a joint and survivor annuity payable monthly from retirement. If employees terminate before rendering five years of service, they forfeit the right to receive any Pension Plan benefits. There is no mandatory retirement age.

The City of Roanoke Pension Plan issues a publicly available comprehensive annual financial report that includes basic financial statements and required supplementary information. That report may be obtained by writing to the City of Roanoke Retirement Office, Attention: Retirement Supervisor, P.O. Box 1220, Roanoke, Virginia 24006.

B. Funding Policy

School Board employees do not contribute to the Pension Plan. The School Board's contribution is based on a percentage of the annual compensation of the active members. The contribution rate was 15.4% of annual covered payroll for the year ended June 30, 2012.

106 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

C. Annual Required Contribution

For fiscal year 2012, the School Board's annual required contribution was $598,352. The required contribution was based on an actuarial valuation. The School Board’s actual contribution was $587,437. Total School Board payroll for 2012 was $83,137,834. Payroll covered by City Retirement for School Board employees was $3,885,403. Information related to trend information is provided below.

Annual Required Fiscal Year Ended Contribution Percentage of ARC (ARC) Contributed June 30, 2012 $ 598,352 98.2%

June 30, 2011 572,600 100%

June 30, 2010 562,315 109%

(12) Other Postemployment Benefit Plans

Primary Government – OPEB Employees’ Post-Retirement Health Plan

A. Plan Description

Employees with 15 years of active service and under the age of 65 who retire from the City of Roanoke may participate in the Employees’ Post-Retirement Health Plan and benefit from a lower insurance rate as a result of inclusion in the plan with active City employees. This lower rate results in an implicit benefit that qualifies as an Other Post- employment Benefit (OPEB) as defined by GASB Statement No. 45. The City plan is a single employer OPEB plan and is administered by the City of Roanoke to provide medical insurance to eligible retirees. The OPEB for City retirees was authorized by the City Council. The City of Roanoke healthcare plan does not issue a stand alone financial report.

B. Funding Policies

The contribution requirements of the City of Roanoke healthcare plan members and the City are established and may be amended by City Council. The required contribution is based on projected pay-as-you-go financing requirements under which contributions are made in amounts sufficient to cover benefits paid, administrative costs, and anticipated inflationary increases. For health insurance, the employees retiring prior to January 1, 2010, contribute 100% of the retirees’ premium payment. For the fiscal year ended June 30, 2012, the retirees contributed $1,078,000 to the City of Roanoke healthcare plan for health insurance. The City contributed $259,000 to a qualified trust as defined by GASB Statement No. 45, to fund the annual required contribution of $1,278,000 for fiscal year 2012. The City overfunded the plan in fiscal year 2012 by $62,000 which includes a net adjustment of $3,000 for the requisite ARC actuarial adjustment and interest as per GASB Statement No. 45.

107 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

It is the City’s intent to fully fund the annual required contribution each year. Effective January 1, 2010, retirees began paying the blended rate plus an additional contribution based on their selected benefit tier.

C. Annual OPEB Cost and Net OPEB Obligation

The City’s annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liability over a period not to exceed thirty years.

The plan contains both active employees and retirees. Although the City’s annual payments were for combined participants, the share of claims related to retirees represents a higher percentage of the total claims. Accordingly, contributions reflected in the OPEB calculations have been adjusted to reflect that a portion of contributions for active employees are subsidizing the retiree claims. As of the June 30, 2012 actuarial valuation, there were 1,644 active participants, 161 retired participants, and 25 spouses of retired participants in the plan.

The following table shows the components of the City’s annual OPEB cost for the year, the amounts contributed to the plan, and changes in the City’s net OPEB asset:

City of Roanoke Healthcare Plan

Annual Required Contribution$ 1,278,000 Less interest on beginning Net OPEB asset (19,000) Add ARC adjustment 16,000 Annual OPEB Cost 1,275,000 Contributions made (1,337,000) Increase in Net OPEB asset (62,000) Net OPEB Asset at July 1, 2011 (270,000) Net OPEB Asset at June 30, 2012$ (332,000)

108 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the current year was as follows:

Percentage Overfunded Fiscal Year Annual of Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Asset June 30, 2012$ 1,275,000 105%$ 332,000 June 30, 2011 1,235,000 106% 267,000 June 30, 2010 1,528,000 113% 196,000

D. Funded Status and Funding Progress

As of July 1, 2012, the most recent biannual actuarial valuation date, the City of Roanoke healthcare plan was 19.3% funded. The actuarial accrued liability for benefits was $9,728,000, and the actuarial value of assets was $1,877,000, resulting in an unfunded actuarial accrued liability (UAAL) of $7,851,000. The covered payroll (annual payroll of active employees covered by the City plan) was $68,086,000, and the ratio of the UAAL to the covered payroll was 11.5%.

E. Actuarial Valuations

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the Plan and the annual required contributions of the City and Plan members 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 these notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities.

F. 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 City 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 value of assets, consistent with the long-term perspective of the calculations.

109 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

In the July 1, 2010 valuation, the projected unit credit cost method was used. The actuarial assumptions included a 2.5% inflation rate and a 7% rate of return (net of administrative expenses). Because the City has begun funding the plan, the rate of return was based on the projected returns of the Virginia Pooled OPEB Trust. The healthcare trend rate is based on the Getzen Trend Model and projects increases from 8.3% graded to 4.4% over an eighty five year period. The UAAL is being amortized as a level percentage of projected payrolls on a closed basis. The remaining amortization period at June 30, 2012 was 26 years.

Primary Government – OPEB Line of Duty Benefits

A. Plan Description

The Line of Duty Act (LODA) provides benefits to local government employees who hold specified hazardous duty positions (Code of Virginia §9.1-400 et seq.). By statute, LODA benefits must be provided. The Virginia Department of Accounts administers the benefit. As of July 1, 2011, the General Assembly shifted the financial responsibility from the state government to local governments. The Line of Duty plan is a single employer OPEB plan to provide a death benefit of $100,000 to beneficiaries of public safety officers who die in the line of duty and a death benefit of $25,000 to beneficiaries of public safety employees who die within five years of becoming disabled as a result of a qualifying illness as defined in the LODA. A medical benefit is also provided to the disabled public safety employees, their surviving spouses, and their dependants. The Commonweath of Virginia has the authority to establish and amend Line of Duty Plan benefits. The City of Roanoke Line of Duty plan does not issue a stand alone financial report.

B. Funding Policies

The contribution requirements of the City of Roanoke public safety plan members and the City are established and may be amended by the Commonwealth of Virginia. The required contribution is based on projected pay-as-you-go financing requirements under which contributions are made in amounts sufficient to cover benefits paid, administrative costs, and anticipated inflationary increases. For the fiscal year ended June 30, 2012, members of the plan did not contribute. The City contributed $72,400 to the Line of Duty plan for death benefits and health insurance based on projected pay-as-you-go financing. The City also contributed $238,800 to a qualified trust as defined by GASB Statement No. 45, to fund the annual required contribution of $238,800 for fiscal year 2012. It is the City’s intent to fully fund the annual required contribution each year.

C. Annual Line of Duty Cost and Net Line of Duty Obligation

The City’s annual Line of Duty cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liability over a period not to exceed thirty years.

110 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

The plan contains public safety employees, their surviving spouses, and their dependent children. As of the June 30, 2011 actuarial valuation, there were 700 active participants, 2 retirees, 1 eligible terminated participant, 5 spouses and surviving spouses, and 2 lifetime dependent children in the plan.

The following table shows the components of the City’s annual Line of Duty cost for the year, the amounts contributed to the plan, and changes in the City’s net Line of Duty related OPEB asset:

City of Roanoke Healthcare Plan

Annual Required Contribution$ 238,800 Annual OPEB Cost 238,800 Contributions made (311,200) Increase in Net OPEB asset (72,400) Net OPEB Asset at July 1, 2011 - Net OPEB Asset at June 30, 2012 $ (72,400)

The City’s annual Line of Duty cost, the percentage of annual Line of Duty cost contributed to the plan, and the net Line of Duty obligation for the current year was as follows:

Percentage Overfunded Fiscal Year Annual of Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Asset June 30, 2012$ 238,800 (1) 130% $ 72,400

(1) Establishment of the Line of Duty OPEB occurred July 1, 2011.

D. Funded Status and Funding Progress

As of July 1, 2011, the most recent biannual actuarial valuation date, the City of Roanoke Line of Duty plan was not funded. The actuarial accrued liability and unfunded actuarial accrued liability (UAAL) for benefits was $2,119,200. The required annual contribution as a cost per active member was $341. The UAAL as a cost per active member was $3,027.

111 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

E. Actuarial Valuations

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the Plan and the annual required contributions of the City and Plan members 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 these notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities.

F. 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 City 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 value of assets, consistent with the long-term perspective of the calculations.

In the July 1, 2011 valuation, the projected unit credit cost method was used. The actuarial assumptions included a 2.5% inflation rate and a 7% rate of return (net of administrative expenses). Because the City has begun funding the plan, the rate of return was based on the projected returns of the Virginia Pooled OPEB Trust. The healthcare trend rate is based on the Getzen Trend Model and projects increases from 8.3% graded to 4.4% over an eighty five year period. The UAAL is being amortized as a level percentage of projected payrolls on a closed basis. The remaining amortization period at June 30, 2012 was 26 years.

School Board Component Unit

A. Plan Descriptions

Roanoke City Public Schools currently provides medical and dental insurance benefits to its retirees and their eligible dependents that elect to stay in the plan. The plan is a single employer defined benefit plan. Retirees who retired prior to July 1, 2010 as of July 1, 2011 may choose from three plan options, Traditional PPO, Health Reimbursement Account or a Health Savings Account which offers both provider and prescription drug coverage. Eligible dependents may remain on the plan as long as the retiree still subscribes and is eligible. Retirees and their spouses may be covered by the plan until age 65 or until they become eligible for Medicare. The dental plan is a comprehensive plan offered by the Schools through Delta Dental.

112 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Retirees and their spouses may stay in this plan for a period of up to 18 months after separation from the school system or for a period of 60 months if they retire under the Early Retirement Opportunity Program (EROP). If the retiree dies before age 65, their covered dependents may stay in the plan for a period up to 36 months through the Consolidated Omnibus Budget Reconciliation Act (COBRA).

B. Funding Policies

The contribution requirements of the Roanoke City Public Schools Healthcare Plan members and the Roanoke City Public Schools are established and may be amended by the Roanoke City School Board. The required contribution is based on projected pay-as- you-go financing requirements under which contributions are made in amounts sufficient to cover benefits paid, administrative costs, and anticipated inflationary increases. For health and dental insurance, the School Board contributes 0 percent of all premium payments, and the retirees contribute 100 percent. Employees who retired on or before July 1, 2010, participate in the plan at a group rate which is blended with that of active employees. Employees who retire after that date will pay an unblended group rate. For the fiscal year ended June 30, 2012, the Roanoke City Public Schools retirees contributed $1,049,480 to the Roanoke City Public Schools Healthcare Plan. The retiree’s claims amounted to $1,643,778 for the same time period.

C. Annual OPEB Cost and Net OPEB Obligation

Roanoke City Public Schools’ annual OPEB cost is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liability over a period not to exceed thirty years.

The following table shows the components of the Roanoke City Public School’s annual OPEB cost for the year, the amounts contributed to the Plan, and changes in the City’s net OPEB obligation: Roanoke City Public Schools Healthcare Plan

Annual Required Contribution$ 244,094 Interest on net OPEB Obligation 45,164 Adjustment to annual required contribution (108,724) Annual OPEB Cost 180,534

Contributions made (714,619)

Decrease in net OPEB obligation (534,085)

Net OPEB obligation at July 1, 2011 1,129,105

Net OPEB obligation at June 30, 2012 $ 595,020

113 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

The Roanoke City Public Schools’ annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation for the current year were as follows:

Percentage Fiscal Year Annual of Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation June 30, 2012$ 180,534 395.8%$ 595,020 June 30, 2011 289,043 209.6% 1,129,105 June 30, 2010 684,706 55.8% 1,445,797

D. Funded Status and Funding Progress

As of June 30, 2012, the most recent actuarial valuation date, the Roanoke City Public Schools’ Healthcare Plan was 0.0% funded. The actuarial accrued liability for benefits was $2,166,661, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $2,166,661. The covered payroll was $0. The plan does not have separately issued financial statements.

E. Actuarial Valuations

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the Plan and the annual required contributions of the Roanoke City Public Schools and Plan members 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 these notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities.

The actuarial valuation of the liabilities as of June 30, 2012 is based on a closed group. Current retirees only are considered; no provision is made for future hires as they are not eligible to enter the plan. For the five-year projection, the actuarial valuation has assumed no new entrants. Therefore, the active population will decline each year as the exiting group ages out of coverage.

F. Actuarial Methods and Assumptions

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.

114 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

In the June 30, 2012 valuation, the projected unit credit actuarial cost method was used. Past service liability is amortized over a level, open 25 year period as of July 1, 2009, that declines one per year. The remaining amortization period at July 1, 2012 was 22 years.

The actuarial assumptions included a 4% discount rate. Annual medical rates are expected to increase at an annual trend rate of 9.50% for the year ending June 30, 2012. The UAAL is being amortized as a level percentage of projected payrolls on an open basis.

(13) Risk Management

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Risk management activities are accounted for in the Risk Management Internal Service Fund.

Claims expenditures/expenses and liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. These losses include an estimate for claims that have been incurred but not reported (IBNR) based on an annual actuarial study performed by a third party.

The City self insures general liability and automotive liability insurance with a self insured retention of $1,000,000 per occurrence. The City purchases excess coverage to cover settlements that exceed the amount of the self insured retention. The amount of settlements did not exceed insurance coverage for each of the past four years.

The City has property insurance coverage that includes boiler and machinery with a $50,000 per occurrence deductible. This coverage also includes the property (building and contents) coverage. Effective January 1, 2009, the Civic Center has been managed by Global Spectrum, Incorporation. As a part of its contract with the City, Global Spectrum is responsible for securing the liability coverage to address the unique exposures of this facility and its many events. Flood insurance is purchased through the Federal Emergency Management Agency (FEMA) to protect properties that are located in designated flood zones. Pollution legal liability coverage is purchased and provides coverage of up to $5 million over a three-year period with a $100,000 deductible per occurrence. The amount of insurance claims did not exceed coverage limits for each of the past four years.

The City purchases a liability policy and an accidental injury medical policy to protect up to 268 volunteers who perform tasks on behalf of the City. Due to the high cost of malpractice insurance, the Nurses and Nurse Practitioner of the City’s Employee Health Clinic, purchase their own malpractice insurance. The City pays the premium. The amount of settlements did not exceed insurance coverage for each of the past four years. The City is self-insured for employee health insurance and worker’s compensation with stop loss provisions to limit catastrophic claims exceeding $1,000,000.

115 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Included in long-term liabilities at June 30, 2012 were claims payables of $23,991,979 as a provision for unasserted claims. Other risks insured through the City's self-insurance program adequately covered any claims incurred over each of the past four years.

Changes in the reported liability during the past two years are shown in the following tabulation:

2011-12 2010-11 Claims liability at July 1 $ 16,717,495 $ 17,368,281 Claims incurred 28,641,814 12,963,400 Claims payments (21,367,330) (13,614,186) Claims liability at June 30 $ 23,991,979 $ 16,717,495

Surety Bond coverage is as follows (unaudited):

Company: Amount Travelers Property Casualty Insurance Company: Public Employee Pension/Crime/Dishonesty $1,000,000

NGM Insurance Company: Treasurer – Public Official Bond 1,000,000

Self-insurance program through Commonwealth of Virginia Division of Risk Management All Other Constitutional Officers’ Employees Liability Insurance 1,000,000 City Treasurer’s Bond 500,000 City Sheriff Bond 30,000 Commissioner of Revenue Bond 3,000 Clerk of Circuit Court Bond 3,000,000

Governmental Accounting Standards Board (GASB) Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, addresses the requirements for reporting liabilities related to cleaning up pollution and/or contamination. The City evaluated the impact of GASB Statement No. 49 as of June 30, 2012 and determined the City had no outstanding liability.

During fiscal year 2011, the City adopted financial policies, effective November 1, 2011, that included a Risk Management Reserve. The purpose of the reserve is to cover risk exposure of the City due to its self-insurance program. The City is currently self insured for health insurance, workers’ compensation, general liability and automotive claims.

The minimum funding level for The Risk Management Reserve is: - 25% of the three year average of self-insured claims costs - plus 10% of the three year average of fully insured premiums - plus a $1 million to cover catastrophic claims

116 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

The Risk Management Reserve has a deficit balance as of June 30, 2012 of $6,162,642 and is underfunded by $10,802,193 compared to the computed minimum funding level of $4,639,551. This is a result of a significant increase in liabilities during the current fiscal year. While the reserve is in a deficit position, the City added funding of $1.5 million during fiscal year 2012.

School Board Component Unit

The School Board is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The school division, through a competitive procurement process is using the professional services of a firm to assist in determining appropriate levels of insurance coverage. Further, the firm assists with the placement of coverage with third party providers, including the Virginia Municipal Liability Pool as noted below. Risk management activities are accounted for in the General Fund of the School Board Component Unit. Claims expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. These losses include an estimate for claims that have been incurred but not reported (IBNR) primarily based upon past claims and an estimate by a qualified claims adjuster with a third party administrator. Workers’ compensation claims have been estimated by an actuary.

In previous years, the School Board changed health care providers from Anthem to United Healthcare. At the end of fiscal year 2011, there was a balance of $99,699 remaining with Anthem for unreported claims. As of June 30, 2012, all claims have been reported and there is no balance remaining for unpaid claims.

The School Board has general liability, vehicular liability, and property insurance coverages through commercial insurers through the Virginia Municipal Liability Pool. There have been no significant changes in insurance coverage, or settlements exceeding insurance coverage, during the past three years. At Morningside Elementary school, a vendor hired to replace the roof on this building and the School Board is in dispute regarding both reimbursement for damages and payments for services.

The School Board is self-insured for workers' compensation claims, as well as for health insurance claims. The table on the following page shows the activity in the accounts for the past two years.

2011-12 2010-11 Claims liability at July 1 $ 7,404,325 $ 6,941,228 Claims incurred 15,361,351 14,855,846 Claims payments (14,861,070) (14,392,749) Claims liability at June 30 $ 7,904,606 $ 7,404,325

117 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

(14) Joint Ventures

Hotel Roanoke Conference Center Commission

The City is a participant with Virginia Polytechnic Institute and State University (Virginia Tech) in a joint venture to establish and operate a publicly-owned Conference Center in the City of Roanoke in conjunction with the Hotel Roanoke, which is adjacent to the Conference Center. The Hotel Roanoke Conference Center Commission (HRCCC) is composed of six members, three of whom are appointed by City Council and three of whom are appointed by Virginia Tech. The HRCCC has the authority to issue debt, and such debt is the responsibility of the HRCCC. The City has issued general obligation bonds in its name for its share of the Conference Center construction costs and is obligated to repay this debt.

The intention of the HRCCC is to be self-supporting through its user fees. The City and Virginia Tech share equally in any operating deficit or if additional funding is needed for capital expenditures. The City has no equity interest in the HRCCC; however, as previously mentioned, additional funding or subsidies may be necessary to support on going operations. For the fiscal year ended June 30, 2012, the City contributed $80,000 to the HRCCC. Financial statements may be obtained from the Hotel Roanoke Conference Center Commission, 106 Shenandoah Avenue, Roanoke, Virginia 24016.

Roanoke Valley Regional Fire-EMS Training Center

The City along with the County of Roanoke, City of Salem, and Town of Vinton jointly operate a Fire-EMS training center (Center). The Center is governed by a committee designated by the participating jurisdictions. New fire-EMS recruits are required to take a 17 week training course at the facility before being assigned to a station. Upon completion of the training, the new recruits are state certified. Each jurisdiction is responsible for a percentage of the annual operating costs of the facility. The City is responsible for 44% of the annual operating costs. For the fiscal year ended June 30, 2012, the City paid $39,000 of the total annual operating costs and $60,000 to the Debt Service Fund for principal and interest on an inter-fund loan related to the construction of the facility. Financial statements may be obtained from the Roanoke Valley Regional Fire-EMS Training Center, 1220 Kessler Mill Road, Salem, Virginia 24153.

118 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

(15) Jointly Governed Organizations

Regional Center for Animal Control and Protection

The City of Roanoke along with the Counties of Roanoke and Botetourt, and the Town of Vinton jointly participate on the Advisory Board, which is responsible for the general fiscal and management policies for the Regional Center for Animal Control and Protection (RCACP). The regional control center is comprised of an animal control and animal education facility that are adjacent to each other and are owned and operated by the Roanoke Valley Society for the Prevention of Cruelty to Animals, Inc. (RVSPCA). The animal control facility was financed by bonds in the amount of $3.5 million which were issued by the RVSPCA. Each participating locality pays monthly amounts for its share of operating costs, debt service, and to fund reserves for operating and maintenance needs of the RCACP based on the locality’s average use of the facility. During the year ended June 30, 2012, the City’s share was 59%, and the City remitted approximately $567,000 for its share of RCACP expenses. In the event total net expenses, for a fiscal year, exceed the total amounts collected from the participating localities, each participating locality shall pay an amount equal to the excess of the net expenses multiplied by the use percentage for that locality.

Roanoke Valley Regional Board

The Counties of Botetourt, Craig, and Franklin, and the Cities of Roanoke and Salem jointly participate in a regional education program for severely disabled students operated by the Roanoke Valley Regional Board (Regional Board). The Regional Board is composed of five members, one from each participating locality. The City has control over budget and financing only to the extent of representation by the one board member appointed. Each locality’s financial obligation is based on its proportionate share of students attending the regional program. For the fiscal year ended June 30, 2012, the City of Roanoke School Board, a component unit of the City, remitted $2,983,683 to the Regional Board for services.

Roanoke Valley Resource Authority

The City of Roanoke, the County of Roanoke, and the Town of Vinton jointly participate in the Roanoke Valley Resource Authority (Authority), which operates the regional sanitary landfill, waste collection and transfer station, and related treatment facilities. The Authority is governed by a board composed of seven members designated by the participating jurisdictions. Roanoke City Council appoints two members. The City has control over the budget and financing for the Authority only to the extent of representation by the board members appointed. The participating localities are each responsible for their pro rata share, based on population, of any year-end operating deficit. For the fiscal year ended June 30, 2012, the City remitted approximately $1,971,000 to the Authority for services.

119 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Roanoke Regional Airport Commission

The City and Roanoke County formed the Roanoke Regional Airport Commission (Airport Commission) in 1987 to own and operate a regional airport. The Airport Commission is composed of five members. Three commissioners are appointed by Roanoke City Council and two are appointed by the Roanoke County Board of Supervisors. Airport operations are financed by user fees. The City and Roanoke County are each responsible for their pro rata share, based on population, of any year-end operating deficit or unfunded capital projects if any additional funding is required. The Airport Commission may incur debt and is responsible for paying all outstanding debt. The City has control over budget and financing only to the extent of representation by the board members appointed. No subsidy has been required since inception.

Roanoke Valley Detention Commission

The Counties of Botetourt, Franklin and Roanoke and the Cities of Roanoke and Salem formed the Roanoke Valley Detention Commission (Commission) in 1998 to renovate, expand and operate a detention facility for juveniles. The Commission is governed by a six member board. Roanoke City Council appoints two members. Each locality’s financial obligation is based on the number of juveniles housed at the facility. The Commission has the authority to issue debt, and such debt is the responsibility of the Commission. For the fiscal year ended June 30, 2012, the City remitted approximately $932,000 to the Roanoke Valley Detention Commission in per diem charges for juveniles housed by the Commission.

Blue Ridge Behavioral Healthcare

The Counties of Botetourt, Craig and Roanoke, and the Cities of Roanoke and Salem formed Blue Ridge Behavioral Health Care (BRBH) to provide a system of comprehensive community mental health, mental retardation and substance abuse services. BRBH is governed by a sixteen member board. Roanoke City Council appoints three members. Each locality’s financial obligation is based on the type and amount of services performed for individuals in the locality. For the fiscal year ended June 30, 2012, the City remitted approximately $578,000 to BRBH.

Western Virginia Water Authority

The City and the County of Roanoke combined its water and water pollution control functions to form the Western Virginia Water Authority (WVWA). The WVWA is responsible for the supply, treatment, distribution, and transmission of water and the collection and treatment of wastewater. In November 2009, Franklin County joined the WVWA to provide services to the western side of the County. The WVWA is governed by a seven member board consisting of three City of Roanoke appointees, three County of Roanoke appointees, and one Franklin County appointee. The City has control over the budget and financing for the WVWA only to the extent of representation by the board members appointed. Upon formation of the WVWA, the City retained $38 million of general obligation bonds, which are to be repaid contractually by the WVWA in accordance with its operating agreement. During fiscal year 2012, $3.1 million in locality compensation payments were paid by the WVWA to the City to cover principal and interest payment on the bonds. As of June 30, 2012, the remaining principal balance of these bonds was approximately $17.6 million and this amount was recorded as a receivable Due from Other Governments in the Statement of Net Assets of the basic financial statements.

120 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

Virginia’s First Regional Industrial Facility Authority

The Cities of Radford, Roanoke and Salem; the Counties of Bland, Craig, Giles, Montgomery, Pulaski, Roanoke and Wythe; and the Towns of Christiansburg, Dublin, Narrows, Pearisburg and Pulaski all participate in the Virginia’s First Regional Industrial Facility Authority (Authority). The Authority promotes economic development in Virginia’s First Region and is governed by a board composed of twenty-nine members, two of which are appointed by Roanoke City Council. The City has control over the budget and financing for the Authority only to the extent of representation by the board members appointed. Each locality is obligated to annual dues of $5,000. Authority member localities, who are also participants in the Regional Commerce Park like the City, are obligated to an annual amount based on the number of shares owned. The City owns 10,000 shares and has an annual obligation of $27,500. For the fiscal year ended June 30, 2012, the City remitted $27,500 to Virginia’s First Regional Industrial Facility Authority.

(16) Related Organizations

Economic Development Authority of the City of Roanoke, Virginia

The Economic Development Authority issues low-interest, tax-free industrial revenue bonds in its name to acquire and improve property that is sold or leased to enterprises locating to or remaining in the City. City Council is responsible for appointing the seven member board; however, the City, the state, and any political subdivision thereof are not obligated in any manner for the repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of June 30, 2012, there were ten series of Industrial Revenue Bonds outstanding, with an aggregate principal amount payable of approximately $494 million.

Roanoke Redevelopment and Housing Authority

The Roanoke Redevelopment and Housing Authority (Housing Authority) is a political subdivision of the State created to provide low income and subsidized housing. Commissioners of the Housing Authority are appointed by City Council. The Housing Authority is financially independent of the City and has administrative control of its operations, but its overall housing plans require the approval of City Council. The City provides a financial benefit through federal pass-through grant funds awarded to the Housing Authority on a contractual basis to implement certain grant programs. The Housing Authority also directly receives other federal and state subsidies and rents for operating its housing programs. During the year ended June 30, 2012, the City remitted approximately $9,064 to the Housing Authority.

121 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012

(17) Subsequent Events

Bond Issuance - On October 31, 2012, the City issued Qualified Zone Academy Bonds (QZAB) through the Virginia Public School Authority (VPSA). These bonds are School Tax Credit Bonds and were issued under the American Recovery and Reinvestment Act of 2009 (ARRA), in the amount of $2,014,104 on behalf of Roanoke City Public Schools. These bonds were issued for qualified school rehabilitation capital projects. There are no interest costs to the City on these bonds.

In November of 2012, the City, along with the Counties of Roanoke and Botetourt and the Town of Vinton announced the intention to operate the Regional Center for Animal Control and Protection (RCACP) which is currently owned by the Roanoke Valley Society for the Prevention of Cruelty to Animals (RVSPCA) and operated by Animal Control Services (ACS). ACS is a wholly owned subsidiary of the RVSPCA. The intention is for the participating municipalities to assume operational responsibility of the animal control facility.

(18) Commitments, Contingencies and Other Matters

Litigation The City is named as a defendant in litigation involving claims for personal injury or property damages. City officials estimate that any ultimate liability not covered by insurance would not have a material effect on the City’s financial position.

Grants Federal grant programs in which the City participates have been audited in accordance with the provisions of the Office of Management and Budget Circular A-133. In addition, these grant programs are subject to financial and compliance audits by the federal government, which may result in disallowed expenditures. Based on prior experience, City management believes such disallowances, if any, would not have a material effect on the City’s financial position.

Other Matters The City has no knowledge of any other matters that may materially affect the City’s financial position.

122 REQUIRED SUPPLEMENTARY INFORMATION

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124 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2012 (UNAUDITED)

(1) Budgetary Comparison Schedule - General Fund

Actual Variance from Original Final (Budgetary Final Budget Budget Budget Basis) Over/(Under) Budgetary Fund Balance, July 1 $ 26,914,830 $ 26,914,830 $ 26,914,830 $ - Resources (Inflows): General Property Taxes $ 103,575,000 $ 104,146,212 $ 105,846,418 $ 1,700,206 Other Local Taxes 74,365,000 74,365,000 75,610,352 1,245,352 Permits, Fees, and Licenses 1,053,000 1,057,000 857,561 (199,439) Fines and Forfeitures 1,171,000 1,171,000 1,531,145 360,145 Revenue from Use of Money and Property 172,000 174,000 212,141 38,141 Charges for Services 10,080,000 10,683,000 10,262,192 (420,808) Intergovernmental 67,722,000 66,424,973 63,605,284 (2,819,689) Miscellaneous 559,000 559,000 587,977 28,977 Transfers from Other Funds - 7,752 7,752 - Amounts Available for Appropriation $ 285,611,830 $ 285,502,767 $ 285,435,652 $ (67,115)

Charges to Appropriations (Outflows): General Government City Treasurer $ 1,018,560 $ 1,097,960 $ 1,097,943 $ (17) Commissioner of the Revenue 1,000,133 1,040,733 1,040,720 (13) City Council 216,085 245,976 233,342 (12,634) City Council - Mayor Bowers 13,875 13,875 9,129 (4,746) City Council - Vice Mayor Trinkle 4,516 5,010 4,897 (113) City Council - Council Member Lea 4,516 6,211 5,794 (417) City Council - Council Member Bestpitch 4,516 4,564 1,204 (3,360) City Council - Council Member Ferris 4,516 4,516 1,089 (3,427) City Council - Council Member Price 9,942 10,060 5,738 (4,322) City Council - Council Member Rosen 4,691 4,691 1,986 (2,705) City Council - Council Member Cutler - - City Attorney 972,042 986,058 968,918 (17,140) City Clerk 481,940 479,085 469,946 (9,139) Municipal Auditing 646,929 667,713 667,577 (136) Department of Finance 2,085,575 2,214,168 2,214,152 (16) Office of Billings and Collections 817,429 817,481 817,470 (11) Real Estate Valuation 1,006,404 1,004,885 1,004,883 (2) Board of Equalization 11,569 10,869 10,081 (788) Electoral Board 327,016 504,533 485,050 (19,483) Office of Communications 418,978 411,053 407,509 (3,544) City Manager 782,505 794,065 794,033 (32) Human Resources 981,303 1,045,858 1,045,823 (35) Employee Health Services 592,000 580,904 580,789 (115) Department of Management and Budget 471,157 527,111 527,102 (9) Purchasing 381,136 399,096 399,055 (41) Director of General Services 168,535 191,905 191,904 (1) Management Services 61,675 37,635 31,502 (6,133) Environmental Management 184,699 219,408 213,245 (6,163)

See Accompanying Note to Budgetary Comparison Schedule See Accompanying Independent Auditors' Report (Continued)

125 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2012 (UNAUDITED)

Actual Variance from Original Final (Budgetary Final Budget Budget Budget Basis) Over/(Under)

Judicial Administration Clerk of Circuit Court$ 1,531,706 $ 1,557,106 $ 1,555,784 $ (1,322) Juvenile and Domestic Relations Court Services 1,389,286 1,139,832 1,132,755 (7,077) Juvenile and Domestic Relations Court Clerk 30,136 28,359 26,940 (1,419) Magistrates Office 4,735 4,735 4,359 (376) General District Court 31,519 29,250 29,234 (16) Circuit Court 532,537 562,711 562,664 (47) Sheriff 2,607,059 2,643,866 2,637,287 (6,579) Commonwealth's Attorney 1,577,800 1,579,100 1,578,370 (730) Cost Collection Unit 83,305 84,305 83,368 (937) Law Library 117,684 117,907 117,255 (652) Public Safety Jail 13,795,612 13,891,232 13,888,746 (2,486) E911 2,311,038 2,265,594 2,256,246 (9,348) E911 - Wireless 608,000 330,991 327,384 (3,607) Fire - Administration 636,669 634,073 634,049 (24) Fire - Support 1,033,649 1,072,621 1,072,597 (24) Fire - Operations 15,166,912 16,252,323 16,252,319 (4) Fire - Airport Rescue - 67,700 67,640 (60) Emergency Management 102,665 111,817 105,762 (6,055) Emergency Medical Services 1,506,675 1,496,600 1,492,019 (4,581) Building Inspections 722,024 752,360 751,044 (1,316) Outreach Detention 249,502 264,091 263,792 (299) Youth Haven I 625,645 640,811 640,811 - Crisis Intervention - - - - Police - Administration 660,163 669,863 663,484 (6,379) Police - Investigation 3,534,647 4,004,515 3,985,539 (18,976) Police - Patrol 13,011,752 13,902,441 13,902,441 - Police - Services 2,506,285 2,664,839 2,632,433 (32,406) Police - Training 521,436 660,486 644,405 (16,081) Police - Animal Control 1,106,408 1,183,762 1,178,858 (4,904) Public Works Custodial Services 703,588 659,439 656,281 (3,158) Building Maintenance 4,564,171 4,378,767 4,370,895 (7,872) Director of Public Works 150,911 151,418 151,417 (1) Transportation - Streets and Traffic 4,989,869 5,288,390 5,285,152 (3,238) Transportation - Paving Program 2,882,111 2,906,668 2,906,667 (1) Transportation - Snow Removal 110,281 80,413 79,992 (421) Transportation - Street Lighting 1,155,989 1,163,126 1,162,944 (182) Transportation - Engineering and Operations 1,776,378 1,744,747 1,744,320 (427) Solid Waste Management 6,405,052 6,394,643 6,394,638 (5) Engineering 1,450,437 1,473,703 1,463,211 (10,492)

See Accompanying Note to Budgetary Comparison Schedule See Accompanying Independent Auditors' Report (Continued)

126 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2012 (UNAUDITED)

Actual Variance from Original Final (Budgetary Final Budget Budget Budget Basis) Over/(Under)

Health and Welfare Human Services Support$ 280,546 $ 329,464 $ 322,507 $ (6,957) Health Department 1,412,257 1,344,319 1,344,109 (210) Blue Ridge Behavioral Health Care 448,890 448,890 448,890 - Human Services Committee 430,582 430,582 430,582 - Social Services - Administration 1,869,128 1,923,037 1,863,343 (59,694) Social Services - Benefits 5,574,468 5,505,902 5,498,884 (7,018) Social Services - Services 18,075,801 14,968,489 14,965,499 (2,990) Social Services - ARRA - - - - Employment Services 1,578,029 1,493,329 1,478,512 (14,817) Foster Parent Training 135,458 143,258 129,219 (14,039) VISSTA - 27,571 27,506 (65) Comprehensive Services Act 10,676,087 10,294,087 10,292,810 (1,277) Comprehensive Services Act - Administration 165,497 155,997 134,342 (21,655) Parks, Recreation and Cultural Roanoke Arts Commission 280,437 280,437 275,971 (4,466) Roanoke Arts Festival - 125th Anniversary - - - - Recreation 1,467,631 1,591,774 1,573,311 (18,463) Parks 2,874,002 2,919,384 2,910,610 (8,774) Parks & Recreation - Administration 1,265,274 1,197,059 1,193,760 (3,299) Parks & Recreation - Youth Services - - - - School Playground Maintenance 114,433 108,033 106,168 (1,865) Libraries 3,189,466 3,212,118 3,186,576 (25,542) Community Development Memberships and Affiliations 1,530,536 1,728,746 1,727,446 (1,300) Economic Development 1,699,418 1,469,793 1,469,316 (477) Planning, Building and Development 1,213,562 1,146,265 1,146,221 (44) Neighborhood Support 97,031 105,342 105,342 - Citizens Service Center - 150 138 (12) Neighborhood Services 1,252,067 1,460,273 1,452,327 (7,946) Virginia Cooperative Extension 68,300 70,501 53,325 (17,176) Nondepartmental Residual Fringe Benefits 2,816,666 - - - Transfers to Other Funds 4,195,240 5,417,289 5,417,289 - Transfers to Debt Service Fund 14,191,207 14,552,573 14,394,942 (157,631) Transfers to Component Unit 78,425,019 80,005,510 80,005,510 - Miscellaneous 100,000 46,858 46,778 (80) Personnel Lapse (1,812,526) - - - Funding for Reserves 500,000 1,500,000 1,500,000 - Contingency 1,716,616 - - - Total Charges to Appropriations 258,697,000 260,057,057 259,435,216 (621,841) Budgetary Fund Balance, June 30 $ 26,914,830 $ 25,445,710 $ 26,000,436 $ 554,726

See Accompanying Note to Budgetary Comparison Schedule See Accompanying Independent Auditors' Report (Continued)

127 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2012 (UNAUDITED)

Explanation of Differences between Budgetary Inflows and Outflows and GAAP Revenues and Expenditures:

Sources/Inflows of Resources: Actual amounts (budgetary basis) "available for appropriation" from the budgetary comparison schedule. 285,435,652 The fund balance at the beginning of the year is a budgetary resource but is not a current year revenue for financial reporting purposes (Exhibit E). (26,914,830) Transfers from other funds are a budgetary resource but not a revenue for financial reporting purposes (Exhibit E) 7,752 Total general fund revenues as reported on the statement of revenues, expenditures, and changes in fund balances (Exhibit E). $ 258,513,070 Uses/Outflows of Resources: Actual amounts (budgetary basis) "total charges to appropriations" from the budgetary comparison schedule. $ 259,435,216 Transfers to other funds are outflows of budgetary resources but are not expenditures for financial reporting purposes (Exhibit E). (21,312,231) Encumbrances for goods and services ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year goods and services are received for GAAP purposes (Exhibit C). (1,084,361) Total general fund expenditures as reported on the statement of revenues, expenditures, and changes in fund balances (Exhibit E).$ 237,038,624

128 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2012 (UNAUDITED)

(2) Infrastructure Assets Under Modified Approach

INFRASTRUCTURE – FLOOD REDUCTION

Effective fiscal year 2012, with the adoption of the modified approach for certain infrastructure assets, the City is required to conduct an biannual (January and July) assessment of the condition level of 100% of the Flood Reduction infrastructure asset. The assessment is based on the United States Army Corps of Engineers (USACE) ‘Inspection, Maintenance and Operational Report’ and is conducted twice a year by City personnel based on criteria contained within the inspection report. The individual components assessed are the bench cuts (14) and training walls (2), which directly impact the level of flood reduction the asset provides. These are evaluated by examining the number of obstructions or damage observed, and to what extent. These individual assessments are then used to determine on overall condition rating as defined below. Independent evaluations are conducted periodically by the USACE using the same assessment criteria. City and USACE policy require the condition level to be maintained at or above a Fair (2) rating. Any deficiencies discovered by either party that would cause the condition level to fall below Fair (2), are the responsibility of the City and will be addressed prior to the next July assessment.

Condition Rating

Good 3 Fair 2 Poor 1

Assessment Ratings of Infrastructure Components

Number Assessed 2012 Rating Training Walls 2 3 Bench Cuts 14 3

As of June 30, 2012, the infrastructure as a whole had an assessment rating of 3 (Good).

Comparison of Estimated to Actual Maintenance Costs

2012

Estimated $97,370 Actual $97,370

See Accompanying Independent Auditors’ Report

129 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2012 (UNAUDITED)

(3) Schedules of Funding Progress - Pension

City - Virginia Retirement System Schedule of Funding Progress

(a) (b) (b-a) (a/b) (c) (b-a) / (c)

Actuarial Funded UAAL Actuarial Actuarial Accrued Ratio Assets Annual as a % Valuation Value of Liability Unfunded as a % Covered of Covered Date Assets (AAL) AAL of AAL Payroll Payroll 6/30/2011$ 39,390,635 $ 50,522,039 $ 11,131,404 77.97%$ 7,975,869 139.56% 6/30/2010 38,578,435 48,126,459 9,548,024 80.16% 8,031,938 118.88% 6/30/2009 38,685,812 43,883,043 5,197,231 88.16% 8,483,464 61.26% 6/30/2008 38,079,256 42,499,150 4,419,894 89.60% 8,586,861 51.47% 6/30/2007 34,499,166 38,692,867 4,193,701 89.16% 8,377,002 50.06% 6/30/2006 30,539,557 33,495,408 2,955,851 91.18% 8,127,839 36.37%

School Board - Virginia Retirement System Schedule of Funding Progress Non-Professional's Multi-Employer Retirement Plan

(a) (b) (b-a) (a/b) (c) (b-a) / (c)

Actuarial Funded OAAL Actuarial Actuarial Accrued Ratio Assets Annual as a % Valuation Value of Liability Over funded as a % Covered of Covered Date Assets (AAL) AAL of AAL Payroll Payroll 6/30/2011 $ 947,844 $ 710,365 $ (237,479) 133.40%$ 1,225,391 (19.40%) 6/30/2010 784,752 514,460 (270,292) 152.54% 1,071,610 (25.20%) 6/30/2009 808,508 722,986 (85,522) 111.83% 3,583,415 (2.40%) 6/30/2008 265,363 103,514 (161,849) 256.40% 3,114,481 (5.20%) 6/30/2007 23,341 5,536 (17,805) 421.60% 368,136 (4.80%)

Six years of data is not available, as the Plan originated in 2007. Data will accumulate over time.

See Accompanying Independent Auditors' Report

130 CITY OF ROANOKE, VIRGINIA REQUIRED SUPLLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2012 (UNAUDITED)

(4) Schedules of Funding Progress - OPEB

City - Other Postemployment Benefits (OPEB) Schedule of Funding Progress

(a) (b) (b-a) (a/b) (c) (b-a) / (c)

Actuarial UAAL as a Actuarial Actuarial Accrued Unfunded Percentage Valuation Value of Liability AAL Funded Covered of Covered Date Assets (AAL) (UAAL) Ratio Payroll Payroll 7/1/2012(1) $ 1,877,000 $ 9,728,000 $ 7,851,000 19.3% $ 68,089,000 11.53% 7/1/2011(1) 1,639,000 13,190,000 11,551,000 12.4% 68,089,000 16.96% 7/1/2010(1) 1,141,000 12,816,000 11,675,000 8.9% 69,600,000 16.77% 7/1/2009 793,000 16,958,000 16,165,000 4.7% 69,600,000 23.23% 7/1/2008 362,000 19,283,000 18,921,000 1.9% 75,000,000 25.23% 7/1/2007 - 15,840,000 15,840,000 0.0% 65,100,000 24.33%

City - Other Postemployment Benefits - Line of Duty (OPEB - LODA) Schedule of Funding Progress (a) (b) (b-a) (a/b)

Actuarial Actuarial Actuarial Unfunded Valuation Value of Accrued AAL Funded Date Assets Liability (UAAL) Ratio 7/01/2011 - $ 2,119,200 $ 2,119,200 0.00%

(1) Based on the July 01, 2010 and 2012 actuarial valuations, there was a significant decrease in the acturarial accrued liability. The liability was reduced by retirement trends that changed slightly upon implementation of policy and workforce reductions in the past several fiscal years due to budgetary constraints. Other Policy changes following implementation of GASB 45 limited retirees’ ability to make healthcare plan changes after initial date of retirement which also contibuted to a decline in the liability.

School Board - Other Postemployment Benefits (OPEB) Schedule of Funding Progress (a) (b) (b-a) (a/b) (c) (b-a) / (c)

Actuarial UAAL as a Actuarial Actuarial Accrued Unfunded Percentage Valuation Value of Liability AAL Funded Covered of Covered Date Assets (AAL) - (UAAL) Ratio Payroll Payroll

6/30/2011 $ - $ 2,437,419 $ 2,437,419 0.00% $ 70,193,034 3.47% 6/30/2010 - 4,083,544 4,083,544 0.00% 70,113,034 5.82% 6/30/2009 - 7,964,432 7,964,432 0.00% 85,979,029 9.26% 6/30/2008 - 20,074,254 20,074,254 0.00% 83,474,785 24.05%

See Accompanying Independent Auditors' Report

131 CITY OF ROANOKE, VIRGINIA REQUIRED SUPLLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2012 (UNAUDITED)

(5) Schedules of Employer Contributions - OPEB

City - Other Postemployment Benefits (OPEB) Schedule of Employer Contributions

Annual Year Ended Required Percentage June 30 Contribution Contributed 2012$ 1,278,000 105.00% 2011 1,235,000 106.00% 2010 1,528,000 113.00% 2009 1,747,000 100.00% 2008 1,398,000 100.00%

The City of Roanoke implementeed GASB 45 in fiscal year 2008; therefore, six years of data is not available, but will be accumulated over time.

City - Other Postemployment Benefits (OPEB - LODA) Schedule of Employer Contributions

Annual Year Ended Required Percentage June 30 Contribution Contributed 2012$ 238,800 100.00%

School Board - Other Postemployment Benefits (OPEB) Schedule of Employer Contributions

Annual Year Ended Required Percentage June 30 Contribution Contributed 2011$ 289,043 209.57% 2010 684,706 55.75% 2009 (1,599,071) -16.37% 2008 3,259,698 7.86%

Roanoke City Public Schools implementeed GASB 45 in fiscal year 2008; therefore, six years of data is not available, but will be accumulated over time.

See Accompanying Independent Auditors' Report

132 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2012 (UNAUDITED)

(6) Note to Budgetary Comparison Schedule – General Fund

(A) Budgets and Budgetary Accounting

The City adheres to the following procedures in establishing the budgetary data reflected in the Budgetary Comparison Schedule located in the Required Supplementary Information:

1. Proposal – At least sixty days prior to June 30, the City Manager submits to City Council a proposed operating budget for the fiscal year commencing July 1. The operating budget includes proposed expenditures and the means of financing them.

2. Projects and Grants – The capital projects budget is prepared on a project length basis under which the total outlay for each project is estimated for the length of the project. The Special Revenue Fund budget is adopted on a grant length basis as grants are received by the City. Grant budgets are not legally enacted on an annual period basis; therefore, a budgetary comparison statement is not presented for the Special Revenue Fund.

3. Adoption – Public hearings are conducted to obtain citizen comments on the proposed budget. Prior to May 15, the budget is legally adopted at the departmental level through passage of an appropriation ordinance by City Council.

4. Amendment – The City Manager is authorized to transfer amounts not exceeding $75,000 between departments beginning July through March and to transfer any amount between departments beginning April through June. The City Manager also has the authority to make transfers of any amount within a given department. All other transfers or supplemental appropriations must be approved by City Council. During the year, $1,360,057 in supplemental appropriations were approved by City Council. These amendments consisted primarily of appropriations of prior year encumbrances, the appropriation of restricted, committed or assigned fund balance, and the appropriation of additional intergovernmental grants received during the year.

5. Integration – Formal budgetary integration is employed as a management control device during the year for the General and Capital Projects Funds. Formal budgetary integration is not employed for the Debt Service Fund because effective budgetary control is alternatively achieved through budgeted transfers from the General Fund to the Debt Service Fund for debt payments.

133 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2012 (UNAUDITED)

6. Legal Compliance – Actual expenditures and operating transfers out may not legally exceed budget appropriations for each department. City Council legally adopts an annual budget for the General Fund. Its budget is adopted on a basis consistent with accounting principles generally accepted in the United States of America except for the recognition of encumbrances, the classification of certain transfers as expenditures, and the consideration of beginning fund balance as a budgetary resource. A reconciliation of the actual General Fund uses of financial resources presented in accordance with generally accepted accounting principles is presented as part of the Budgetary Comparison Schedule located in the Required Supplementary Information.

134 SUPPLEMENTARY INFORMATION

135 THIS PAGE INTENTIONALLY BLANK

136 Exhibit L-1

CITY OF ROANOKE, VIRGINIA COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS JUNE 30, 2012

Department Total of Fleet Risk Internal Technology Management Management Service Funds Assets Current Assets: Cash and Cash Equivalents$ 2,191,919 $ 148,666 $ 6,730,755 $ 9,071,340 Investments 384,825 927,102 8,530,426 9,842,353 Interest and Dividends Receivable 387 933 8,580 9,900 Due from Other Governments 3,076 15,748 - 18,824 Due from Other Funds 330,214 686,360 2,475,687 3,492,261 Accounts Receivable (net of allowance 50,887 17,632 4,631 73,150 for uncollectibles) Inventory - 61,068 - 61,068 Other Assets 67,805 - 330,000 397,805 Total Current Assets 3,029,113 1,857,509 18,080,079 22,966,701 Capital Assets: Equipment and Other Capital Assets 28,353,781 35,187,275 - 63,541,056 Construction in Progress 1,712,913 - - 1,712,913 Less Accumulated Depreciation (15,667,391) (24,985,431) - (40,652,822) Capital Assets, Net 14,399,303 10,201,844 - 24,601,147 Total Assets 17,428,416 12,059,353 18,080,079 47,567,848 Liabilities Current Liabilities: Accounts Payable and Accrued Expenses 385,061 535,419 10,841 931,321 Accrued Interest Payable 74,569 - - 74,569 Due to Other Funds 925 - 234,437 235,362 Long-Term Liabilities Due Within One Year 398,411 32,412 2,583,035 3,013,858 Total Current Liabilities 858,966 567,831 2,828,313 4,255,110 Long-Term Liabilities: Compensated Absences Payable 227,223 82,904 5,464 315,591 Claims Payable - - 23,991,979 23,991,979 General Obligation Bonds Payable, Net 4,518,171 - - 4,518,171 Capital Lease Obligations 71,625 3,396 - 75,021 Less Current Maturities (398,411) (32,412) (2,583,035) (3,013,858) Total Long-Term Liabilities 4,418,608 53,888 21,414,408 25,886,904 Total Liabilities 5,277,574 621,719 24,242,721 30,142,014 Net Assets Invested in Capital Assets, Net of Related Debt 9,741,701 10,198,718 - 19,940,419 Unrestricted 2,409,141 1,238,916 (6,162,642) (2,514,585) Total Net Assets/(Deficit) $ 12,150,842 $ 11,437,634 $ (6,162,642) $ 17,425,834

See Accompanying Independent Auditors' Report.

137 Exhibit L-2

CITY OF ROANOKE, VIRGINIA COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2012

Department Total of Fleet Risk Internal Technology Management Management Service Funds Operating Revenues Charges for Services $ 5,406,386 $ 6,558,094 $ 15,170,459 $ 27,134,939 Other Revenue 15,000 298,113 - 313,113 Total Operating Revenues 5,421,386 6,856,207 15,170,459 27,448,052

Operating Expenses Personal Services 2,365,549 1,328,673 203,160 3,897,382 Other Services and Charges 1,023,203 426,907 21,826,949 23,277,059 Materials and Supplies 797,675 3,200,897 891,632 4,890,204 Depreciation 3,431,982 1,871,962 - 5,303,944 Total Operating Expenses 7,618,409 6,828,439 22,921,741 37,368,589 Operating Income/(Loss) (2,197,023) 27,768 (7,751,282) (9,920,537) Nonoperating Revenues (Expenses) Loss on Disposal of Assets (22,894) - - (22,894) Investment Income - 4,317 35,097 39,414 Interest Expense (113,670) (554) - (114,224) Net Nonoperating Revenues (Expenses) (136,564) 3,763 35,097 (97,704) Loss Before Transfers and Contributions (2,333,587) 31,531 (7,716,185) (10,018,241)

Transfers and Contributions Transfers In 281,188 119,659 1,523,500 1,924,347 Net Transfers and Contributions 281,188 119,659 1,523,500 1,924,347 Change in Net Assets (2,052,399) 151,190 (6,192,685) (8,093,894) Net Assets - Beginning of Year 14,203,241 11,286,444 30,043 25,519,728 Net Assets/(Deficit) - End of Year $ 12,150,842 $ 11,437,634 $ (6,162,642) $ 17,425,834

See Accompanying Independent Auditors' Report.

138 Exhibit L-3

CITY OF ROANOKE, VIRGINIA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2012

Department Total of Fleet Risk Internal Technology Management Management Service Funds Cash Flows From Operating Activities: Cash Received from Customers$ 5,357,398 $ 7,337,559 $ 14,838,613 $ 27,533,570 Cash Payments to Suppliers for Goods and Services (1,740,721) (3,342,339) (1,395,703) (6,478,763) Cash Received from Other Funds for Interfund Services - - 241,993 241,993 Cash Payments to Other Funds for Interfund Services (95,446) (41,767) (11,681) (148,894) Cash Payments to Employees (2,345,266) (1,321,625) (195,499) (3,862,390) Cash Payments for Claims - - (14,092,846) (14,092,846) Cash Received From Other Operating Revenue 15,000 298,113 - 313,113 Net Cash Provided (Used) by Operating Activities 1,190,965 2,929,941 (615,123) 3,505,783 Cash Flows From Noncapital Financing Activities: Transfers In 281,188 119,659 1,523,500 1,924,347 Net Cash Provided by Noncapital Financing Activities 281,188 119,659 1,523,500 1,924,347 Cash Flows From Capital and Related Financing Activities: Acquisition and Construction of Capital Assets (5,795,350) (4,296,983) - (10,092,333) Principal Paid on Bonds and Capital Lease Obligations (65,705) (3,009) - (68,714) Proceeds from Issuance of Bonds 2,027,149 - - 2,027,149 Interest Paid on Bonds and Capital Lease Obligations (200,736) (554) - (201,290) Net Cash Used by Capital and Related Financing Activities (4,034,642) (4,300,546) - (8,335,188) Cash Flows From Investing Activities: Interest Received 1,315 5,412 44,683 51,410 Purchase of Investments 1,631,598 579,499 (140,580) 2,070,517 Cash Used by Investing Activities 1,632,913 584,911 (95,897) 2,121,927 Net Decrease in Cash and Cash Equivalents (929,576) (666,035) 812,480 (783,131) Cash and Cash Equivalents at July 1 3,121,495 814,701 5,918,275 9,854,471 Cash and Cash Equivalents at June 30 $ 2,191,919 $ 148,666 $ 6,730,755 $ 9,071,340 Reconciliation of Operating Loss to Net Cash Provided (Used) by Operating Activities: Operating Income\(Loss) $ (2,197,023) $ 27,768 $ (7,751,282) $ (9,920,537) Depreciation 3,431,982 1,871,962 - 5,303,944 Increase in Due From Other Governments (811) (7,680) - (8,491) (Increase) Decrease in Due From Other Funds (25,219) 726,299 (439,982) 261,098 (Increase) Decrease in Accounts Receivable (22,958) 60,846 108,136 146,024 Increase in Inventory - (6,033) - (6,033) Increase (Decrease) in Accounts Payable and Accrued Expenses 83,832 275,112 (48,244) 310,700 Increase (Decrease) in Due to Other Funds (85,611) (19,402) 241,993 136,980 Increase (Decrease) in Compensated Absences Payable 6,773 1,069 (228) 7,614 Decrease in Claims Payable - - 7,274,484 7,274,484 Total Adjustments 3,387,988 2,902,173 7,136,159 13,426,320 Net Cash Provided (Used) by Operating Activities $ 1,190,965 $ 2,929,941 $ (615,123) $ 3,505,783

See Accompanying Independent Auditors' Report.

139 Exhibit M-1

CITY OF ROANOKE, VIRGINIA STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES AGENCY FUND JUNE 30, 2012

Hotel Roanoke Conference Center Commission Assets Cash and Cash Equivalents $ 1,207,961 Investments 4,003,246 Accrued Interest Receivable 24,330 Due from Other Governments 18 Total Assets $ 5,235,555

Liabilities Due to Other Governments $ 5,235,555 Total Liabilities $ 5,235,555

See Accompanying Independent Auditors' Report. 140 Exhibit M-2

CITY OF ROANOKE, VIRGINIA STATEMENT OF CHANGES IN FIDUCIARY ASSETS AND LIABILITIES AGENCY FUND FOR THE YEAR ENDED JUNE 30, 2012

Balance Balance July 1, 2011 Additions Deletions June 30, 2012

Assets Cash and Cash Equivalents $ 2,290,589 $ 3,071,795 $ 4,154,423 $ 1,207,961 Investments 2,820,053 4,088,585 2,905,392 4,003,246 Accrued Interest Receivable 7,173 24,330 7,173 24,330 Due from Other Governments - 114,029 114,011 18 Total Assets $ 5,117,815 $ 7,298,739 $ 7,180,999 $ 5,235,555

Liabilities Due to Other Governments $ 5,117,815 $ 7,298,739 $ 7,180,999 $ 5,235,555 Total Liabilities $ 5,117,815 $ 7,298,739 $ 7,180,999 $ 5,235,555

See Accompanying Independent Auditors' Report. 141 THIS PAGE INTENTIONALLY BLANK

142 STATISTICAL SECTION

This part of the City of Roanoke, Virginia's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information indicates about the government's overall financial condition.

Contents Page

Financial Trends 145 These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time.

Revenue Capacity 152 These schedules contain information to help the reader assess the City's most significant local revenue source, property taxes.

Debt Capacity 155 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future.

Demographic and Economic Indicators 158

These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place.

Operating Information 160 These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs.

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year.

143 THIS PAGE INTENTIONALLY BLANK

144 Table 1 Unaudited CITY OF ROANOKE, VIRGINIA NET ASSETS BY COMPONENT LAST TEN FISCAL YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

Governmental Activities Invested in Capital Assets, Net of Related Debt$ 329,493,504 $ 269,948,200 $ 260,869,253 $ 238,461,969 $ 225,501,044 $ 200,914,327 $ 190,962,494 $ 187,115,017 $ 164,108,469 $ 149,855,237 Restricted for: Capital Projects - - 46,777 70,914 105,323 139,732 205,752 276,133 215,691 51,846 Unrestricted 29,219,419 44,235,521 25,539,839 41,697,432 45,552,401 56,691,884 52,348,145 30,519,227 45,098,238 48,331,857 Total Governmental Activities Net Assets 358,712,923 314,183,721 286,455,869 280,230,315 271,158,768 257,745,943 243,516,391 217,910,377 209,422,398 198,238,940

Business-Type Activities Invested in Capital Assets, Net of Related Debt $ 34,264,716 $ 33,964,073 $ 51,750,741 $ 52,067,081 $ 51,594,498 $ 50,696,302 $ 38,113,702 $ 42,009,100 $ 157,247,149 $ 150,015,105 Unrestricted 840,542 1,109,365 4,678,494 2,213,388 3,180,872 4,454,864 11,034,165 4,909,789 21,240,298 19,409,253 Total Business-Type Activities Net Assets 35,105,258 35,073,438 56,429,235 54,280,469 54,775,370 55,151,166 49,147,867 46,918,889 178,487,447 169,424,358 (1) (1) Primary Government Invested in Capital Assets, Net of Related Debt $ 363,758,220 $ 303,912,273 $ 312,619,994 $ 290,529,050 $ 277,095,542 $ 251,610,629 $ 229,076,196 $ 229,124,117 $ 321,355,618 $ 299,870,342 Restricted for: Capital Projects - - 46,777 70,914 105,323 139,732 205,752 276,133 215,691 51,846 Unrestricted 30,059,961 45,344,886 30,218,333 43,910,820 48,733,273 61,146,748 63,382,310 35,429,016 66,338,536 67,741,110 Total Primary Government Net Assets $ 393,818,181 $ 349,257,159 $ 342,885,104 $ 334,510,784 $ 325,934,138 $ 312,897,109 $ 292,664,258 $ 264,829,266 $ 387,909,845 $ 367,663,298

Information is presented on a full accrual basis of accounting.

(1) Effective in fiscal year 2011, Greater Roanoke Transit Company (GRTC) was reported as a discretely presented component unit. Accordingly, the fiscal year 2010 net assets included $16.7 million whereas in fiscal year 2011, GRTC net assets are no longer reported as a business-type activity. Fiscal year 2010 also included net assets of $4.6 million for the City's Market Building Fund which was discontinued in fiscal year 2011. 145 Table 2 Unaudited CITY OF ROANOKE, VIRGINIA CHANGES IN NET ASSETS 146 LAST TEN FISCAL YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 Expenses Governmental Activities: General Government$ 15,192,371 $ 13,934,968 $ 12,224,830 $ 13,859,060 $ 14,951,184 $ 11,273,712 $ 13,060,424 $ 12,505,925 $ 12,129,739 $ 12,332,759 Judicial Administration 8,777,516 7,644,774 7,786,140 9,167,289 8,881,939 8,696,783 7,759,108 7,093,904 6,563,999 6,716,171 Public Safety 69,882,446 63,287,015 63,976,863 66,448,271 67,457,297 63,824,918 60,338,648 56,027,791 52,085,243 49,526,672 Public Works 28,672,051 18,654,587 28,126,031 31,174,272 29,493,501 29,322,095 25,396,344 25,413,778 27,619,650 27,024,931 Health and Welfare 41,124,917 42,111,631 45,995,109 45,756,887 45,287,639 39,755,942 36,851,200 35,063,221 31,985,929 28,920,553 Parks, Recreation and Cultural 13,301,508 11,420,919 10,559,350 12,018,560 11,718,909 12,328,684 10,671,914 9,269,834 6,063,700 5,360,979 Community Development 9,452,579 10,706,299 10,010,970 9,752,877 13,009,501 11,847,813 10,388,248 9,849,351 9,601,301 11,063,836 Greater Roanoke Transit Company (GRTC) 1,654,105 1,177,324 ------Education 83,072,419 74,772,599 67,945,097 66,604,559 65,494,065 61,335,067 57,899,575 54,737,434 51,458,092 49,368,594 Economic Development 2,022,694 3,904,121 3,510,831 1,535,584 657,348 613,075 3,046,343 7,175,953 1,160,036 5,248,229 Other 4,595 98,494 - 15,329 13,470 31,575 66,967 125,801 90,903 73,633 Interest and Fiscal Charges 11,551,668 12,002,689 13,538,201 13,124,928 10,710,840 11,916,375 11,588,440 11,652,145 8,598,701 9,404,874 Total Governmental Activities Expenses 284,708,869 259,715,420 263,673,422 269,457,616 267,675,693 250,946,039 237,067,211 228,915,137 207,357,293 205,041,231 Business-Type Activities: Transit Company - - 9,474,181 9,545,470 9,195,709 8,403,369 7,850,064 7,609,131 7,078,272 6,448,413 Water ------11,101,776 13,683,991 Water Pollution Control ------10,801,834 10,179,089 Civic Facilities 4,509,327 4,511,711 4,302,258 7,138,833 5,259,155 4,694,186 5,066,942 4,610,356 5,077,678 4,914,679 Parking 3,483,658 2,755,253 3,030,494 2,806,984 2,396,330 2,894,630 2,036,575 2,002,110 1,927,191 2,288,392 Market Building - 163,992 384,331 649,874 379,828 390,098 368,090 506,894 492,795 151,438 Total Business-Type Activities Expenses 7,992,985 7,430,956 17,191,264 20,141,161 17,231,022 16,382,283 15,321,671 14,728,491 36,479,546 37,666,002 Total Primary Government Expenses 292,701,854 267,146,376 280,864,686 289,598,777 284,906,715 267,328,322 252,388,882 243,643,628 243,836,839 242,707,233 Program Revenues Governmental Activities: Charges for Services: General Government 3,700,916 6,035,893 4,152,979 4,511,088 4,467,706 4,228,015 3,234,836 3,038,133 6,839,246 3,899,448 Judicial Administration 3,782,588 3,755,301 3,734,589 4,823,817 4,594,962 5,445,812 5,132,780 5,334,458 2,131,060 1,824,615 Public Safety 4,702,979 5,323,523 6,203,883 6,453,285 6,632,394 5,894,930 5,086,196 4,768,397 5,191,798 7,354,677 Public Works 340,438 2,168,980 347,422 386,445 445,191 523,344 458,882 445,256 781,285 552,404 Health and Welfare 93,991 131,520 127,834 146,338 196,110 172,703 584,149 595,797 517,697 - Parks, Recreation and Cultural 414,693 399,968 367,143 308,446 155,799 132,728 413,090 372,186 62,309 290,935 Community Development 154,041 167,314 166,176 161,228 165,144 199,255 170,493 131,038 151,933 136,396 Economic Development - - - 4,974 83,541 - - - - - Operating Grants and Contributions 64,457,688 68,572,662 70,252,704 70,986,646 69,257,682 63,164,087 59,245,639 56,208,537 51,329,015 47,692,239 Capital Grants and Contributions 3,677,359 5,665,618 718,580 265,005 3,975,312 289,043 102,934 239,246 736,337 2,126,873 Total Governmental Activities Program Revenues 81,324,693 92,220,779 86,071,310 88,047,272 89,973,841 80,049,917 74,428,999 71,133,048 67,740,680 63,877,587 Business-Type Activities: Charges for Services Transit Company - - 2,046,752 2,097,420 2,033,024 1,819,053 1,779,619 1,565,511 1,439,067 1,410,041 Water ------13,383,297 11,671,313 Water Pollution Control ------11,159,513 10,966,478 Civic Facilities 2,559,400 2,405,370 1,966,484 4,312,359 2,248,649 2,413,877 2,995,440 2,788,081 3,403,360 3,412,975 Parking 3,316,277 2,840,685 2,733,270 2,804,755 2,809,958 2,686,301 2,683,159 2,600,415 2,645,977 2,231,038 Market Building - 10,452 198,022 224,637 255,476 268,340 277,886 308,366 256,015 134,868 Operating Grants and Contributions - - 4,139,626 4,393,415 4,071,749 3,896,866 3,395,701 3,252,566 2,843,449 2,611,895 Capital Grants and Contributions - - 2,348,098 1,115,208 769,852 5,783,634 1,357,967 1,010,893 4,698,459 644,069 Total Business-Type Activities Program Revenues 5,875,677 5,256,507 13,432,252 14,947,794 12,188,708 16,868,071 12,489,772 11,525,832 39,829,137 33,082,677 Total Primary Government Program Revenues 87,200,370 97,477,286 99,503,562 102,995,066 102,162,549 96,917,988 86,918,771 82,658,880 107,569,817 96,960,264 Net (Expense)/Revenue: Governmental Activities (203,384,176) (167,494,641) (177,602,112) (181,410,344) (177,701,852) (170,896,122) (162,638,212) (157,782,089) (139,616,613) (141,163,644) Business-Type Activities (2,117,308) (2,174,449) (3,759,012) (5,193,367) (5,042,314) 485,788 (2,831,899) (3,202,659) 3,349,591 (4,583,325) Total Primary Government Net Expense $ (205,501,484) $ (169,669,090) $ (181,361,124) $ (186,603,711) $ (182,744,166) $ (170,410,334) $ (165,470,111) $ (160,984,748) $ (136,267,022) $ (145,746,969) Table 2 Unaudited (continued) CITY OF ROANOKE, VIRGINIA CHANGES IN NET ASSETS LAST TEN FISCAL YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 General Revenues and Other Changes in Net Assets Governmental Activities: Taxes General Property - Real Estate and Personal Property$ 105,653,485 $ 107,328,296 $ 100,801,682 $ 101,626,861 $ 98,714,420 $ 93,361,362 $ 86,651,722 $ 81,071,535 $ 75,186,290 $ 71,672,690 Local Portion of State Sales 19,147,211 18,602,105 18,095,643 20,448,423 21,571,956 21,987,443 20,637,376 19,663,577 19,225,559 17,466,450 Business and Professional Occupational License 11,769,433 11,276,263 11,588,503 12,479,698 12,536,783 12,690,668 12,893,280 11,335,221 10,828,304 10,584,716 Utility 9,584,366 9,937,596 9,557,889 9,735,948 9,825,738 11,409,106 13,234,488 13,857,552 13,823,643 13,749,522 Prepared Food and Beverage 17,216,380 16,030,878 11,159,911 11,496,914 11,560,944 11,061,948 10,635,894 7,995,551 7,690,950 7,247,472 Commonwealth Share - Personal Property 8,075,992 8,075,992 8,075,992 8,075,992 8,073,460 8,121,547 7,962,068 8,325,821 7,689,531 8,043,897 Cigarette 2,456,680 2,338,732 2,515,209 2,644,599 2,882,612 2,401,764 2,133,150 1,889,419 1,895,533 1,920,939 Transient Room 2,983,586 2,918,631 2,636,536 2,754,683 2,814,253 2,666,253 2,529,645 2,250,249 2,232,754 2,101,878 Telecommunications 7,096,425 7,247,911 7,383,848 7,145,256 7,978,786 3,421,394 - - - - Motor Vehicle License Tax 2,130,312 2,002,299 1,951,813 1,937,500 1,682,310 1,795,365 1,783,689 1,761,745 1,736,858 1,733,605 Other 3,011,116 2,810,326 4,344,857 6,071,290 7,412,254 11,727,231 7,359,754 7,111,634 8,213,700 6,345,237 State Aid Not Restricted to a Specific Program ------7,776,432 - - 76,454 Payment from Component Unit 16,373,216 9,752,655 10,020,049 8,930,898 7,752,288 1,300,000 - - - - Grants and Contributions Not Restricted to Specific Program - 2,880 11,226 8,379 3,372 3,107 - 239,988 274,714 - Interest and Investment Income 1,071,384 960,375 1,246,826 1,618,541 2,644,762 3,737,732 3,187,105 2,387,866 1,265,367 1,865,333 Miscellaneous - - 130,702 - - 4,471,167 4,005,203 6,754,063 5,790,943 5,470,988 Special Item 43,322,018 (3,492,982) - - - - (1,575,776) - - - Transfers (1,978,226) (569,468) (5,693,020) (4,493,091) (4,339,261) (5,030,413) (3,062,423) (2,882,183) (4,892,800) (3,013,537) Transfers - Capital Assets ------(1,726,651) - (161,275) (289,220) Total Governmental Activities 247,913,378 195,222,489 183,827,666 190,481,891 191,114,677 185,125,674 174,424,956 161,762,038 150,800,071 144,976,424 Business-Type Activities: Interest and Investment Income 170,902 112,028 80,077 87,552 140,247 228,058 163,638 92,195 224,589 276,000 Gain (Loss) on Sale of Assets ------(293,213) 9,896 16,325 (10,653) Miscellaneous - - 134,681 117,823 187,010 259,040 401,378 522,955 418,509 382,403 Special Item - (3,204,514) ------Transfers 1,978,226 569,468 5,693,020 4,493,091 4,339,261 5,030,413 3,062,423 2,882,183 4,892,800 3,013,537 Transfers - Capital Assets ------1,726,651 - 161,275 289,220 Total Business-Type Activities 2,149,128 (2,523,018) 5,907,778 4,698,466 4,666,518 5,517,511 5,060,877 3,507,229 5,713,498 3,950,507 Total Primary Government $ 250,062,506 $ 192,699,471 $ 189,735,444 $ 195,180,357 $ 195,781,195 $ 190,643,185 $ 179,485,833 $ 165,269,267 $ 156,513,569 $ 148,926,931

Change in Net Assets Governmental Activities $ 44,529,202 $ 27,727,848 $ 6,225,554 $ 9,071,547 $ 13,412,825 $ 14,229,552 $ 11,786,744 $ 3,979,949 $ 11,183,458 $ 3,812,780 Business-Type Activities 31,820 (4,697,467) 2,148,766 (494,901) (375,796) 6,003,299 2,228,978 304,570 9,063,089 (632,818) Total Primary Government $ 44,561,022 $ 23,030,381 $ 8,374,320 $ 8,576,646 $ 13,037,029 $ 20,232,851 $ 14,015,722 $ 4,284,519 $ 20,246,547 $ 3,179,962

Information is presented on a full accrual basis of accounting. 147 Table 3 Unaudited CITY OF ROANOKE, VIRGINIA GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE 148 LAST TEN FISCAL YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 General Property Tax-Real Estate and Personal Property$ 105,653,485 $ 107,328,296 $ 100,801,682 $ 101,626,861 $ 98,714,420 $ 93,361,362 $ 86,651,722 $ 81,071,535 $ 75,186,290 $ 71,672,690 Sales Tax 19,147,211 18,602,105 18,095,643 20,448,423 21,571,956 21,987,443 20,637,376 19,663,577 19,225,559 17,466,450 Occupational License Tax 11,769,433 11,276,263 11,588,503 12,479,698 12,536,783 12,174,159 12,893,280 11,335,221 10,828,304 10,584,716 Utility Consumer Tax 9,584,366 9,937,596 9,557,889 9,735,948 9,825,738 11,925,615 13,234,488 13,857,552 13,823,643 13,749,522 Prepared Food & Beverage Tax (2) 17,216,380 16,030,878 11,159,911 11,496,914 11,560,944 11,061,948 10,635,894 7,995,551 7,690,950 7,247,472 Commonwealth Share Personal Property Tax 8,075,992 8,075,992 8,075,992 8,075,992 8,073,460 8,121,547 7,962,068 8,325,821 7,689,531 8,043,897 Cigarette Tax 2,456,680 2,338,732 2,515,209 2,644,599 2,882,612 2,401,764 2,133,150 1,889,419 1,895,533 1,920,939 Transient Room Tax 2,983,586 2,918,631 2,636,536 2,754,683 2,814,253 2,666,253 2,529,645 2,250,249 2,232,754 2,101,878 Telecommunications (1) 7,096,425 7,247,911 7,383,848 7,145,256 7,978,786 3,421,394 - - - - Motor Vehicle License Tax 2,130,312 2,002,299 1,951,813 1,937,500 1,682,310 1,795,365 1,783,689 1,761,745 1,736,858 1,733,605 Other Taxes 3,011,116 2,810,326 4,344,857 6,071,290 7,412,254 11,727,231 7,359,754 7,111,634 8,213,700 6,345,237 Total Governmental Activities Tax Revenues $ 189,124,986 $ 188,569,029 $ 178,111,883 $ 184,417,164 $ 185,053,516 $ 180,644,081 $ 165,821,066 $ 155,262,304 $ 148,523,122 $ 140,866,406

Information is presented on a full accrual basis of accounting. (1) On January 1, 2007, the State began the new Telecommunications Tax which replaces the Telephone Surcharge as well as Cable TV Franchise Tax, and Telephone and Cellular Utility Taxes. (2) Effective July 1, 2010, the Prepared Food and Beverage Tax increased from 5% to 7%. The tax rate reverted to 5% on July 1, 2012. Table 4 Unaudited CITY OF ROANOKE, VIRGINIA FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 General Fund Restricted$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Committed 1,084,361 1,379,076 ------Assigned - 1,407,485 ------Unassigned 26,000,436 25,535,754 ------Reserved - - 598,753 1,028,676 1,318,997 743,092 1,219,270 1,389,488 1,552,656 1,967,992 Unreserved - - 24,361,867 21,352,928 19,723,710 21,347,881 22,121,582 19,660,766 2,945,349 4,586,865 Total General Fund$ 27,084,797 $ 28,322,315 $ 24,960,620 $ 22,381,604 $ 21,042,707 $ 22,090,973 $ 23,340,852 $ 21,050,254 $ 4,498,005 $ 6,554,857

All Other Governmental Funds Restricted$ 4,686,212 $ 3,465,004 $ - $ - $ - $ - $ - $ - $ - $ - Committed 17,131,452 16,368,501 ------Assigned ------Unassigned ------Reserved - - 6,146,088 17,529,842 36,500,585 14,814,335 22,669,544 19,200,210 14,068,820 19,288,996 Unreserved, reported in: ------Debt Service Fund - - 1,213,260 1,161,895 1,143,782 1,021,667 1,063,737 988,465 15,061,934 14,436,613 Capital Projects Fund - - 6,121,743 31,685,558 27,455,399 26,591,510 37,744,826 39,994,304 37,069,596 42,487,398 Total All Other Governmental Funds$ 21,817,664 $ 19,833,505 $ 13,481,091 $ 50,377,295 $ 65,099,766 $ 42,427,512 $ 61,478,107 $ 60,182,979 $ 66,200,350 $ 76,213,007

Information is presented on a modified accrual basis of accounting. 149 Table 5 Unaudited CITY OF ROANOKE, VIRGINIA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 Revenues Local Taxes 181,456,770 $ 178,308,587 $ 171,185,553 $ 173,518,576 $ 172,769,022 Permits, Fees and Licenses 857,561 969,800 880,347 1,053,443 1,475,370 Fines and Forfeitures 1,531,145 1,805,083 1,615,265 1,558,517 1,558,039 Rental Income 117,154 210,633 550,191 845,373 968,975 Investment Income 136,277 177,577 251,970 1,211,719 2,241,720 Intergovernmental 95,942,714 91,502,519 93,250,211 93,064,316 96,691,241 Charges for Services 10,262,192 11,624,417 10,834,925 11,616,042 10,955,336 Miscellaneous 1,902,037 4,717,123 703,626 1,536,704 1,336,850 Total Revenues $ 292,205,850 $ 289,315,739 $ 279,272,088 $ 284,404,690 $ 287,996,553

Expenditures Current Operating: General Government 13,420,641 $ 13,043,582 $ 12,671,590 $ 13,094,420 $ 13,614,281 Judicial Administration 8,075,746 7,336,125 7,503,476 8,735,663 8,441,872 Public Safety 62,753,894 60,845,503 61,821,748 63,808,641 64,859,294 Public Works 23,696,320 22,133,031 23,860,980 24,841,431 23,663,876 Health and Welfare 39,683,737 41,755,947 45,439,356 45,128,533 44,626,860 Parks, Recreation and Cultural 9,632,815 10,314,592 9,192,283 10,753,820 11,165,097 Community Development 9,045,363 10,481,809 9,931,020 9,559,518 11,473,754 Greater Roanoke Transit Company 1,654,105 1,177,324 - - - Education 78,351,405 70,232,036 63,443,415 62,856,641 62,392,633 Debt Service: Principal Retirement 23,426,997 20,778,546 23,566,295 22,157,734 19,822,282 Interest and Paying Agent Charges 10,936,143 11,479,778 12,768,787 12,286,166 11,343,116 Bond Issuance Cost 801,658 204,463 317,494 79,082 - Capital Outlays 12,373,816 13,251,045 40,276,382 44,299,810 35,471,132 Total Expenditures $ 293,852,640 $ 283,033,781 $ 310,792,826 $ 317,601,459 $ 306,874,197 Excess (Deficiency) of Revenues Over (Under) Expenditures (1,646,790) 6,281,958 (31,520,738) (33,196,769) (18,877,644)

Other Financing Sources (Uses) Issuance of Bonds 5,533,829 7,121,925 2,661,171 23,912,613 43,967,698 Capital Lease - - - - - Issuance of Refunding Bonds 25,125,000 2,017,600 36,056,200 - - Payment to Refunded Bond Escrow Agent (27,734,307) (2,136,507) (39,056,309) - - Premium on Sale of Bonds 3,371,482 248,563 3,669,899 706,843 1,199,155 Transfers In 18,088,403 26,925,336 25,536,867 27,214,121 26,430,553 Transfers Out (21,990,976) (30,744,766) (31,664,278) (32,020,382) (31,095,774) Total Other Financing Sources (Uses) 2,393,431 3,432,151 (2,796,450) 19,813,195 40,501,632 Net Change in Fund Balances 746,641 9,714,109 (34,317,188) (13,383,574) 21,623,988 Fund Balances--Beginning of Year 48,155,820 38,441,711 72,758,899 86,142,473 64,518,485 Fund Balances--End of Year $ 48,902,461 $ 48,155,820 $ 38,441,711 $ 72,758,899 $ 86,142,473

Information is presented on an modified accrual basis of accounting.

150 Table 5 Unaudited (continued)

2006-07 2005-06 2004-05 2003-04 2002-03

$ 164,871,887 $ 156,259,656 $ 145,738,157 $ 138,027,923 $ 131,372,049 1,142,724 1,469,016 1,275,026 1,026,606 909,669 1,540,598 1,444,566 1,354,775 1,365,502 1,244,283 1,032,990 1,462,840 796,688 682,798 1,114,804 3,460,986 1,978,325 1,794,290 949,912 1,557,228 85,531,788 79,661,592 74,579,619 68,418,569 66,118,526 11,611,220 11,142,081 11,237,776 11,544,955 6,657,533 2,897,616 2,543,147 820,779 1,369,767 502,712 $ 272,089,809 $ 255,961,223 $ 237,597,110 $ 223,386,032 $ 209,476,804

$ 12,782,063 $ 12,214,535 $ 11,677,301 $ 11,822,041 $ 11,711,800 8,438,366 7,347,752 6,736,070 6,355,497 6,237,314 61,964,362 58,192,222 53,777,319 50,733,282 45,540,774 23,900,264 22,798,347 22,229,895 24,688,073 23,184,404 39,290,415 36,105,373 34,754,917 31,888,121 28,761,343 10,724,981 9,697,644 8,434,669 5,318,074 4,565,865 9,074,244 9,701,539 9,066,266 8,859,741 8,733,633 - - - - - 58,669,043 55,789,730 52,676,279 49,520,072 47,408,556

19,119,311 17,140,653 14,785,327 11,543,107 12,283,145 11,103,323 11,270,985 10,084,588 8,541,638 9,863,967 - 141,334 104,034 241,850 - 44,308,692 38,370,611 40,808,400 28,606,142 20,115,347 $ 299,375,064 $ 278,770,725 $ 265,135,065 $ 238,117,638 $ 218,406,148

(27,285,255) (22,809,502) (27,537,955) (14,731,606) (8,929,344)

12,961,171 31,708,923 37,662,856 4,595,399 800,000 - - - 4,857,000 - - 10,631,826 - 66,040,000 - - (10,705,136) - (68,189,271) - 407,950 705,605 1,460,022 2,971,027 - 25,211,822 30,811,378 37,134,208 21,215,612 23,543,433 (31,596,162) (36,757,368) (42,034,253) (28,827,670) (28,548,892) 6,984,781 26,395,228 34,222,833 2,662,097 (4,205,459) (20,300,474) 3,585,726 6,684,878 (12,069,509) (13,134,803) 84,818,959 81,233,233 74,548,355 82,767,864 95,902,667 $ 64,518,485 $ 84,818,959 $ 81,233,233 $ 70,698,355 $ 82,767,864

151 Table 6 Unaudited CITY OF ROANOKE, VIRGINIA LOCAL TAX REVENUES BY SOURCE 152 LAST TEN FISCAL YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

General Property Tax$ 105,846,418 $ 104,463,578 $ 103,019,671 $ 102,177,312 $ 98,983,976 $ 93,084,689 $ 86,447,295 $ 81,199,730 $ 75,346,292 $ 71,849,116 Sales Tax 19,147,211 18,602,105 18,095,643 20,448,423 21,571,956 21,987,443 20,637,376 19,663,577 19,225,559 17,466,450 Utility Consumer Tax (1) 9,115,344 9,433,181 9,072,887 9,245,881 9,317,726 11,409,106 13,234,488 13,349,039 13,321,752 13,248,053 Cigarette Tax 2,456,680 2,338,732 2,515,209 2,644,599 2,882,612 2,401,764 2,133,150 1,889,419 1,895,533 1,920,939 Recordation and Probate Tax 880,865 740,733 781,542 777,182 1,243,373 1,416,300 1,314,804 1,116,447 835,561 734,345 Business, Professional, and Occupational License Tax 12,238,455 11,780,678 12,073,505 12,969,765 13,044,796 12,690,668 12,893,280 11,843,734 11,330,195 11,086,185 Transient Room Tax 2,983,586 2,918,631 2,636,536 2,754,683 2,814,252 2,666,253 2,529,645 2,250,249 2,232,754 2,101,878 Admissions Tax 433,932 422,279 442,030 476,491 443,664 457,454 456,048 448,312 530,712 504,298 Telecommunications/Telephone Surcharge - E911 (1) 7,096,448 7,247,927 7,383,848 7,145,256 7,979,032 4,127,361 1,431,406 1,603,863 1,340,847 1,180,840 Motor Vehicle License Tax 2,130,313 2,002,299 1,951,813 1,937,500 1,682,310 1,795,365 1,783,689 1,761,745 1,736,858 1,733,605 Franchise Tax (1) 447,420 474,064 579,288 483,724 504,370 1,000,718 1,456,085 1,500,624 1,554,297 1,491,601 Prepared Food and Beverage Tax (2) 17,216,380 16,030,878 11,159,911 11,496,914 11,560,944 11,061,948 10,635,894 7,995,551 7,690,950 7,247,472 Bank Stock Tax 1,463,718 1,853,502 1,473,670 960,846 740,011 772,818 1,306,496 1,115,867 986,613 807,267 Total Local Taxes $ 181,456,770 $ 178,308,587 $ 171,185,553 $ 173,518,576 $ 172,769,022 $ 164,871,887 $ 156,259,656 $ 145,738,157 $ 138,027,923 $ 131,372,049

(1) On January 1, 2007, the State began the new Telecommunications Tax which replaced the Telephone Surcharge as well as Cable TV Franchise Tax, and Telephone and Cellular Utility Taxes. (2) Effective July 1, 2010, the Prepared Food and Beverage Tax increased from 5% to 7%. The tax rate reverted to 5% on July 1, 2012.

Table 7 Unaudited CITY OF ROANOKE, VIRGINIA GENERAL PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

Total Tax Levies $ 112,485,925 $ 112,560,131 $ 110,098,047 $110,034,071 $106,316,893 $ 101,301,039 $ 94,754,245 $ 88,719,548 $ 82,947,318 $ 78,984,813 Current Tax Collections 103,693,219 102,130,123 100,833,008 98,726,769 95,621,945 89,761,174 83,902,929 78,489,950 72,835,920 68,960,191 Current Tax Collections - State Share (1) 8,075,992 8,075,992 8,075,992 8,075,992 8,073,460 8,089,164 7,789,896 8,147,634 7,551,379 7,920,717 Delinquent Tax Collections 2,153,199 2,333,454 2,186,663 3,450,543 3,362,031 3,323,515 2,544,365 2,709,780 2,510,372 2,888,925 Delinquent Tax Collections - State Share (1) - - - - - 32,383 172,172 178,186 138,153 123,180 Total Tax Collections $ 113,922,410 $ 112,539,569 $ 111,095,663 $ 110,253,304 $ 107,057,436 $ 101,206,236 $ 94,409,362 $ 89,525,550 $ 83,035,824 $ 79,893,013 Current Tax Collections As Percent of Levies 99.36% 97.91% 98.92% 97.06% 97.53% 96.59% 96.77% 97.65% 96.91% 97.34% Total Tax Collections As Percent of Levies (2) 101.28% 99.98% 100.91% 100.20% 100.70% 99.91% 99.64% 100.91% 100.11% 101.15%

(1) In fiscal year 1999, the State began the Personal Property Tax Relief Act. As a result, a portion of the City's total Personal Property tax levy is received from the Commonwealth. The State share is shown here but is not classified as a local tax. (2) Total tax collections as percent of levies may be greater than 100% due to delinquent tax collections in a given fiscal year for prior fiscal year levies. Table 8 Unaudited CITY OF ROANOKE, VIRGINIA ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN YEARS

REAL PROPERTY PERSONAL PROPERTY PUBLIC SERVICE CORPORATIONS Percentage Percentage Total Total Assessed Percentage Estimated Assessment Assessed Growth Estimated Assessment Assessed Growth Estimated Assessment Assessed Estimated Year Value Growth Actual Value Ratio Value (Decline) Actual Value Ratio Value (Decline) Actual Value Ratio Value Actual Value

2003 4,251,342,652 4.89% 4,251,342,652 1.00 685,231,130 (0.48%) 1,142,051,883 0.60 320,712,924 3.24% 328,933,905 0.975 5,257,286,706 5,722,328,440 2004 4,558,900,600 7.23% 4,558,900,600 1.00 675,390,754 (1.44%) 1,125,651,256 0.60 372,880,650 16.27% 378,299,578 0.986 5,607,172,004 6,062,851,434 2005 4,912,403,589 7.75% 4,912,403,589 1.00 731,086,348 8.25% 1,218,477,246 0.60 333,486,044 (10.56%) 338,499,005 0.985 5,976,975,981 6,469,379,840 2006 5,351,633,570 8.94% 5,351,633,570 1.00 762,403,478 4.28% 1,270,672,463 0.60 303,859,616 (8.88%) 308,722,893 0.984 6,417,896,664 6,931,028,926 2007 5,834,424,939 9.02% 5,834,424,939 1.00 818,058,932 7.30% 1,363,431,553 0.60 310,606,990 2.22% 316,097,815 0.983 6,963,090,861 7,513,954,307 2008 6,256,495,314 7.23% 6,256,495,314 1.00 836,674,524 2.28% 1,394,457,540 0.60 314,604,888 1.29% 321,271,916 0.979 7,407,774,726 7,972,224,770 2009 6,564,294,962 4.92% 6,564,294,962 1.00 809,722,606 (3.22%) 1,349,537,677 0.60 335,086,164 6.51% 341,586,222 0.981 7,709,103,732 8,255,418,861 2010 6,698,391,113 2.04% 6,698,391,113 1.00 758,872,026 (6.28%) 1,264,786,710 0.60 359,212,368 7.20% 360,848,221 0.995 7,816,475,507 8,324,026,044 2011 6,801,971,286 1.55% 6,801,971,286 1.00 769,951,558 1.46% 1,283,252,597 0.60 353,515,462 (1.59%) 357,281,499 0.989 7,925,438,306 8,442,505,382 2012 6,794,772,298 (0.11%) 6,794,772,298 1.00 816,148,651 6.00% 1,360,247,752 0.60 360,309,314 1.92% 360,309,314 1.000 7,971,230,263 8,515,329,364

Table 9 Unaudited CITY OF ROANOKE, VIRGINIA PROPERTY TAX RATES AND TAX LEVIES LAST TEN YEARS PUBLIC SERVICE REAL PROPERTY PERSONAL PROPERTY CORPORATIONS

Direct Direct Direct Total Tax Rate Tax Rate Tax Rate Total Direct Year Per $100 Levy Per $100 Levy Per $100 Levy Tax Levies Rate

2003 1.21 51,440,874 3.45 23,640,474 (1) 1.21 3,903,465 78,984,813 1.88 2004 1.21 55,162,380 3.45 23,300,981 (1) 1.21 4,483,957 82,947,318 1.84 2005 1.21 59,439,602 3.45 25,222,479 (1) 1.21 4,057,467 88,719,548 1.85 2006 1.21 64,754,545 3.45 26,302,920 (1) 1.21 3,696,780 94,754,245 1.83 2007 1.19 (2) 69,429,439 3.45 28,163,083 (1), (3) 1.19 (2) 3,708,517 101,301,039 1.82 2008 1.19 74,451,741 3.45 28,100,133 (1) 1.19 3,765,019 106,316,893 1.79 2009 1.19 78,114,892 3.45 27,925,972 (1) 1.19 3,993,207 110,034,071 1.76 2010 1.19 79,710,636 3.45 26,141,385 (1) 1.19 4,246,026 110,098,047 1.73 2011 1.19 80,943,458 3.45 27,385,166 (1) 1.19 4,231,507 112,560,131 1.74 2012 1.19 80,857,790 3.45 27,311,532 (1) 1.19 4,316,603 112,485,925 1.74 106,316,893 153 (1) In fiscal year 1999, the State initiated the Personal Property Tax Relief Act. The levy includes the state portion. (2) Effective July 1, 2006, the rate became $1.19. (3) The Personal Property Tax Relief changed from a percentage relief to a fixed block grant in the amount of $8,075,992. Table 10 Unaudited CITY OF ROANOKE, VIRGINIA PRINCIPAL PROPERTY TAXPAYERS COMPARISON OF JUNE 30, 2012 AND JUNE 30, 2003

2012 2003 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Description Value Rank Value Value Rank Value Carilion Healthcare Healthcare Provider$ 213,234,881 1 2.71% $ - - - Appalachian Power Public Utility 124,033,424 2 1.58% 71,301,361 2 1.36% Norfolk Southern Railway Transportation 105,738,441 3 1.35% 69,094,970 3 1.32% Valley View Mall LLC (Formerly Hersh, Ltd) Shopping Mall 74,940,200 4 0.95% 49,747,070 4 0.95% Verizon Virginia, Inc Communications 54,429,194 5 0.69% 79,437,253 1 1.51% Roanoke Gas Company Public Utility 35,676,545 6 0.45% 23,453,924 7 0.45% Maple Leaf Bakery Bakery 30,796,449 7 0.39% - - - Faison Roanoke Office Limited Office Building 30,770,100 8 0.0 26,563,400 6 0.51% Advance Auto Parts Auto Parts 29,092,678 9 0.37% - - - Steel Dynamics Roanoke Division Primary Metals 25,038,491 10 0.32% 20,606,223 9 0.39% Mozart Investments Inc. Aircraft - - 0.00% - - - Spectacle Lens Eyecare Professionals - - - 29,081,589 5 0.55% Hotel Roanoke Hotel - - - 20,662,713 8 0.39% IHC (Wyndham) Hotel - - - 18,100,500 10 0.34% $ 723,750,403 9.20%$ 408,049,003 7.77%

Source: City of Roanoke, Commissioner of the Revenue

Table 11 Unaudited CITY OF ROANOKE, VIRGINIA TAXABLE RETAIL SALES LAST TEN CALENDAR YEARS

Calendar Year Total Retail Sales (1)

2003 ...... 1,621,479,275

2004 ...... 1,712,570,484

2005 ...... 1,599,236,967

2006 ...... 1,876,508,609

2007 ...... 1,900,930,872

2008 ...... 1,925,487,309

2009 ...... 1,692,267,903

2010 ...... 1,676,331,018

2011 ...... 1,649,614,469

2012 thru June ...... 859,568,776

(1) Source: State Department of Taxation. Data excludes prescription drug sales.

154 Table 12 Unaudited CITY OF ROANOKE, VIRGINIA RATIO OF GENERAL BONDED DEBT TO TOTAL ESTIMATED ACTUAL VALUE AND BONDED DEBT PER CAPITA LAST TEN FISCAL YEARS

Bonds Bonds Bonds Amount Ratio of Net Supported by Supported By Supported By Available Net Bonded Debt to Net Bonded Fiscal Total Estimated Gross Bonded Enterprise Western Virginia Hotel in Debt Bonded Total Estimated Debt Per Year Population (A) Actual Value Debt (D) Funds (C) (D) Water Authority Roanoke, LLC (E) Service Fund Debt Actual Value Capita

2003 93,100 5,722,328,440 228,050,952 44,517,751 - - 14,436,613 169,096,588 2.96% 1,816.29

2004 92,900 6,062,851,434 223,671,734 41,504,678 - - 15,061,934 167,105,122 2.76% 1,798.76

2005 92,671 6,469,379,840 256,369,208 7,818,130 33,435,000 - 988,465 (B) 214,127,613 3.31% 2,310.62

2006 92,994 6,931,028,926 281,808,817 9,863,867 31,315,992 - 1,063,737 239,565,221 3.46% 2,576.14

2007 92,024 7,513,954,307 274,026,551 9,160,142 28,924,766 - 1,021,667 234,919,976 3.13% 2,552.81

2008 93,734 7,972,224,770 298,775,968 10,974,761 26,596,538 - 1,143,782 260,060,887 3.26% 2,774.46

2009 94,482 8,255,418,861 304,071,803 15,160,308 24,255,948 - 1,161,895 263,493,652 3.19% 2,788.82

2010 97,032 8,324,026,044 283,602,637 15,632,575 21,987,683 - 1,213,260 244,769,119 2.94% 2,522.56

2011 97,206 (est.) 8,442,505,382 277,658,304 14,627,811 19,875,450 1,355,000 1,133,011 240,667,032 2.85% 2,475.85

2012 97,206 (est.) 8,486,017,306 260,590,860 13,541,712 17,558,082 910,000 1,317,554 227,263,512 2.68% 2,337.96

Source - (A) Weldon - Cooper Center for Public Service (B) In FY05, there was a $15.5 million transfer of fund balance from the Debt Service Fund to the General Fund to establish the Budget Stabilization Reserve. (C) FY04 through FY12 amounts exclude Civic Facilities Fund outstanding balances. (D) Includes Deferred Bond Costs and excludes Unamortized Bond Premium of the Enterprise Funds. (E) Effective FY12, Hotel Roanoke, LLC debt was excluded from total bonded debt as a result of a change in the reporting of the Hotel Roanoke, LLC Note Receivable at the entity-wide level 155 156 Table 13 Unaudited CITY OF ROANOKE, VIRGINIA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS

Governmental Activities Business-Type Activities General General Total Percentage Fiscal Obligation Capital Obligation Capital Primary of Personal Year Bonds Leases Bonds Leases Government Income (1) Per Capita (1)

2002-03 184,429,342 3,208,859 45,865,711 3,164,721 236,668,633 9.58% 2,824 2003-04 182,118,717 6,797,976 45,865,218 - 234,781,911 8.10% 2,540 2004-05 241,280,405 (2) 5,648,433 17,876,626 (2) - 264,805,464 8.90% 2,863 2005-06 258,928,015 4,643,001 26,096,945 - 289,667,961 9.29% 3,074 2006-07 252,341,409 4,551,467 24,782,063 - 281,674,939 8.18% 2,968 2007-08 275,531,207 5,279,002 25,955,524 477,865 307,243,598 8.38% 3,207 2008-09 276,891,495 5,113,998 29,484,914 416,578 311,906,985 8.57% 3,215 2009-10 256,564,731 4,838,541 29,667,886 352,473 291,423,631 7.81% 3,009 2010-11 250,315,325 4,528,184 28,121,356 285,366 283,250,231 7.59% 2,924 2011-12 234,279,293 4,178,505 26,771,200 215,083 265,444,081 7.11% 2,741

(1) See Table 18 for Personal Income and Population data. (2) The Western Virginia Water Authority was created in FY 05, resulting in associated bonds moving from business-type activities to governmental activities.

Table 14 Unaudited CITY OF ROANOKE, VIRGINIA LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

Debt Limit $ 679,477,230 $ 680,197,128 $ 669,839,111 $ 656,429,496 $ 625,649,531 $ 583,442,494 $ 535,163,357 $ 491,240,359 $ 455,890,060 $ 426,377,702 Total Net Debt Applicable to Limit 227,263,512 240,667,032 244,769,119 263,493,652 260,060,887 234,919,976 239,565,221 214,127,613 171,889,360 169,096,588 Legal Debt Margin $ 452,213,718 $ 439,530,096 $ 425,069,992 $ 392,935,844 $ 365,588,644 $ 348,522,518 $ 295,598,136 $ 277,112,746 $ 284,000,700 $ 257,281,114 Total Net Debt Applicable to Limit as a Percentage of Debt Limit 33.45% 35.38% 36.54% 40.14% 41.57% 40.26% 44.76% 43.59% 37.70% 39.66% Table 15 Unaudited CITY OF ROANOKE, VIRGINIA COMPUTATION OF LEGAL DEBT MARGIN JUNE 30, 2012 Table 15 Updated Need

The Charter of the City of Roanoke limits the Legal Debt to 10% of the Assessed Valuation of Real Estate within the City limits. The City has no overlapping debt.

Total Assessed Value of Real Estate, 2012 (1)$ 6,794,772,298

Legal Debt Limit: 10% of $6,794,772,298 679,477,230

Debt applicable to limitation: General Obligation Serial Bonds - Governmental Activities $ 170,927,717 General Obligation Serial Bonds - Western Virginia Water Authority (WVWA) 17,558,082 Section 108 Loan Hotel Roanoke Conference Center Commission (HRCCC) 910,000 Qualified Zone Academy Bonds (QZAB) 1,618,197 State Literary Fund Loans 2,440,000 Virginia Public School Authority (VPSA) School Bonds 40,825,297 Civic Facilities Enterprise Fund - Business-Type Activities 12,904,200 Deferred Bond Costs - Civic Facilities Enterprise Fund Debt (134,345) Parking Enterprise Fund Supported Debt - Business-Type Activities 13,867,000 Deferred Bond Costs - Parking Enterprise Fund Supported Debt (325,288) Total Debt 260,590,860 Less: Available in Debt Service Fund (1,317,554) WVWA Supported Debt (17,558,082) HRCCC Supported Debt (910,000) Parking Enterprise Fund Supported Debt (13,867,000) Deferred Bond Costs - Parking Enterprise Fund Supported Debt 325,288 227,263,512 Legal Debt Margin $ 452,213,718

(1) Source: City of Roanoke, Commissioner of the Revenue.

Table 16 Unaudited CITY OF ROANOKE, VIRGINIA RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL LONG-TERM DEBT TO TOTAL GENERAL EXPENDITURES LAST TEN FISCAL YEARS

Percent of Debt Total Service to Fiscal Total Debt General General Year Principal (1) Interest (1) Service Expenditures (2) Expenditures

2002-03 12,083,145 9,681,287 21,764,432 252,841,855 8.6% 2003-04 11,255,346 7,882,228 19,137,574 268,406,972 7.1% 2004-05 12,283,849 7,860,775 20,144,624 284,024,496 7.1% 2005-06 (3) 14,765,894 9,357,973 24,123,867 298,166,075 8.1% 2006-07 17,493,085 10,549,172 28,042,257 318,422,477 8.8% 2007-08 18,181,973 9,880,643 28,062,616 334,448,507 8.4% 2008-09 20,480,823 11,121,043 31,601,866 340,360,591 9.3% 2009-10 21,869,664 11,436,671 33,306,335 324,345,350 10.3% 2010-11 19,093,669 10,346,300 29,439,969 314,114,285 9.3% 2011-12 21,033,664 10,338,250 31,371,914 318,343,912 9.9%

(1) Principal and interest payments include all general long term debt payments supported by tax revenues of the City. Debt payments made on behalf of the Roanoke Civic Center are included. Debt payments made by the Roanoke City Parking Fund, Western Virginia Water Authority and the Hotel Roanoke Conference Center Commission are excluded. (2) Includes expenditures of the General Funds of the City and School Board less the transfer from the General Fund to the School Board. (3) Excludes Bond Anticipation Note of $5,500,000 which was both issued and repaid during fiscal year 2006.

157 158 Table 17 Unaudited CITY OF ROANOKE DEBT SERVICE AS A PERCENTAGE OF NONCAPITAL EXPENDITURES LAST TEN FISCAL YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

Debt Service: Principal Retirement$ 23,426,997 $ 20,778,546 $ 23,566,295 $ 22,157,734 $ 19,822,282 $ 19,119,311 $ 17,140,653 $ 14,785,327 $ 11,543,107 $ 12,283,145 Interest and Paying Agent Charges 10,936,143 11,372,995 12,768,787 12,286,166 11,189,318 11,103,323 11,270,985 10,084,588 8,541,638 9,863,967 Total Debt Service Payments 34,363,140 32,151,541 36,335,082 34,443,900 31,011,600 30,222,634 28,411,638 24,869,915 20,084,745 22,147,112

Total Government Funds Expenditures 293,852,640 283,033,781 310,792,826 317,601,459 306,874,197 299,375,064 278,770,725 265,135,065 238,117,638 218,406,148 Capital Outlays (10,456,003) (17,436,961) (37,764,765) (40,930,978) (31,895,657) (40,817,148) (37,032,175) (34,734,158) (27,916,709) (13,569,300) Total Noncapital Expenditures$ 283,396,637 $ 265,596,820 $ 273,028,061 $ 276,670,481 $ 274,978,540 $ 258,557,916 $ 241,738,550 $ 230,400,907 $ 210,200,929 $ 204,836,848

Percentage of Noncapital Expenditures 12.13% 12.11% 13.31% 12.45% 11.28% 11.69% 11.75% 10.79% 9.56% 10.81%

Information is presented on the modified accrual basis of accounting.

Table 18 Unaudited CITY OF ROANOKE, VIRGINIA DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS

Local National Per Capita Personal School Unemployment Unemployment Fiscal Year Population (1) Income (2) Income Enrollment (3) Rate (4) Rate (5)

2002-03 93,100 29,475 (est.) 2,470,408,500 13,004 4.6% 6.3% 2003-04 92,900 31,370 (est.) 2,900,194,000 12,861 4.0% 5.6% 2004-05 92,671 32,169 (est.) 2,975,832,000 12,712 3.7% 5.0% 2005-06 92,994 33,090 (est.) 3,118,622,000 12,587 3.3% 4.6% 2006-07 93,048 36,277 (est.) 3,443,232,000 12,256 3.2% 4.6% 2007-08 93,734 38,276 (est.) 3,667,342,000 12,286 3.9% 5.6% 2008-09 94,482 37,506 (est.) 3,638,915,000 12,303 7.7% 9.5% 2009-10 97,032 38,541 (est.) 3,732,912,000 12,266 7.4% 9.4% 2010-11 97,206 (est.) 38,541 (est.) 3,732,912,000 12,261 6.9% 9.1% 2011-12 97,206 (est.) 38,541 (est.) 3,732,912,000 13,006 6.5% 8.4%

(1) Source: Weldon - Cooper Center for Public Service, except as noted (2) Source: Bureau of Economic Analysis (3) Source: Roanoke City Public Schools (4) Source: Virginia Employment Commission (Roanoke Metropolitan Statistical Area & USA)-Month of June only (5) Source: Bureau of Labor Statistics (6) Source: U.S. Census Table 19 Unaudited CITY OF ROANOKE, VIRGINIA CONSTRUCTION STATISTICS LAST TEN FISCAL YEARS

COMMERCIAL RESIDENTIAL CONSTRUCTION (1) CONSTRUCTION (1)

Fiscal Number of Number of Year Permits Value Permits Value

2002-03 437 60,291,138 730 21,844,483 2003-04 871 57,922,598 303 17,995,045 2004-05 497 143,755,330 610 23,936,990 2005-06 512 193,157,052 673 30,206,738 2006-07 465 109,104,902 697 24,079,265 2007-08 456 233,358,448 754 29,442,647 2008-09 419 103,604,031 663 23,814,449 2009-10 467 92,266,288 709 25,004,592 2010-11 533 80,571,667 686 15,535,733 2011-12 538 69,398,478 678 14,628,255

(1) Source: City of Roanoke, Planning, Building and Development Department

Table 20 Unaudited CITY OF ROANOKE, VIRGINIA PRINCIPAL EMPLOYERS COMPARISON AS OF DECEMBER 31, FISCAL YEARS 2012 AND 2003

December 31, 2011 December 31, 2002

Number of Number of Employer Rank Ownership Employees Rank Ownership Employees Carilion 1 Private 1000+ 1 Private 1000+ Roanoke City Public Schools 2 Local Govt. 1000+ 2 Local Govt. 1000+ City of Roanoke 3 Local Govt. 1000+ 3 Local Govt. 1000+ Norfolk Southern 4 Private 1000+ 4 Private 1000+ Advance Auto Parts 5 Private 1000+ 5 Private 1000+ Walmart 6 Private 500-999 9 Private 500-999 United Parcel Service 7 Private 500-999 7 Private 500-999 Virginia Western Community College 8 State Govt. 500-999 13 State Govt. 500-999 Kroger 9 Private 500-999 10 Private 500-999 United States Postal Service 10 Federal Govt. 500-999 6 Federal Govt. 500-999 Anthem (Blue Cross & Blue Shield) - - - 8 Private 500-999

Source: Virginia Employment Commission (VEC) and Roanoke Regional Partnership

159 Table 21 Unaudited CITY OF ROANOKE, VIRGINIA 160 FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN CALENDAR YEARS

Full-time Equivalent Employees as of December 31 2011 (3) 2010 2009 2008 2007 2006 2005 2004 2003 2002 Function: General Government 218 159 178 195 193 184 184 188 191 199 Judicial Administration: Sheriff 35 33 32 35 31 31 31 31 31 31 Other 58 55 58 57 59 58 54 53 52 50 Public Safety: Police 305 284 309 312 305 309 304 286 295 289 Jail 171 161 159 164 165 165 173 175 173 170 Fire 258 259 250 268 270 266 264 266 268 262 Other 75 62 81 76 83 84 79 82 84 82 Public Works: Engineering 18 20 20 19 19 17 20 21 21 21 Maintenance 114 127 126 132 144 150 151 152 157 155 Transportation 91 86 79 86 92 82 85 91 98 95 Other - - 1 2 2 2 1 2 3 3 Health and Welfare 231 220 224 226 224 224 217 209 208 220 Parks, Recreation and Cultural 118 92 97 112 112 110 102 102 105 103 Community Development 50 42 46 47 47 48 41 35 42 34 Civic Facilities - - - (2) 25 (2) 31 36 35 37 31 31 Water ------(1) 106 107 Water Pollution Control ------(1) 43 51 Total 1,742 1,600 1,660 1,756 1,777 1,766 1,741 1,730 1,908 1,903

(1) In FY04, the Western Virginia Water Authority was formed by the City and County of Roanoke. (2) On 1/1/09, Civic Facilities began operating under private management. Remaining workers became employees of Global Spectrum, the outside management firm, at that time. (3) In calendar year 2011, the City began reporting full time equivalent positions instead of full time employees. Like data is unavailable in prior years for comparative purposes. Source: City of Roanoke, Department of Finance . Table 22 Unaudited CITY OF ROANOKE, VIRGINIA OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 Function

General Government Levied property taxes $ 30,005,358 $ 29,197,629 $ 28,773,772 $ 28,765,002 $ 30,005,699 $ 30,487,405 $ 28,355,143 $ 26,943,961 $ 25,524,398 $ 26,145,291 Number of business licenses issued 7,129 7,458 7,121 7,481 7,369 7,427 7,200 6,900 7,200 6,900 Number of property & building permits* 4,038 4,145 3,158 3,575 3,685 3,433 5,000 5,352 5,760 4,836 Police Number of traffic summons 24,111 27,425 21,997 22,592 20,777 18,626 18,766 7,396 9,714 16,966 Number of assistance call responses 93,670 89,498 89,172 90,840 89,131 88,022 89,176 88,991 83,862 86,146 Number of hours of training conducted** 48,230 34,916 19,266 10,238 28,888 47,089 62,500 62,000 55,906 48,549 Fire Number of emergency call responses 23,805 23,941 23,630 23,231 23,369 23,686 22,203 22,579 21,139 19,956 Highways and Streets Number of lane miles resurfaced 24 19 41 43 46 51 57 57 49 49 Number of street lights added 10 14 52 73 7 52 90 60 120 48 Judicial Administration Number of criminal cases 11,792 11,562 12,671 14,917 14,516 12,790 13,103 12,500 12,643 11,222 Number of traffic cases 27,975 30,555 30,335 32,377 29,199 25,613 28,544 29,500 25,930 22,978 Number of civil cases 20,919 20,292 20,668 26,635 31,585 32,391 37,587 33,000 32,054 28,405 Parks & Recreation Number of participants served 140,220 130,755 117,484 135,000 160,000 200,000 231,000 213,900 195,000 151,076 Education Number of instructional personnel 1,101 1,073 1,113 1,220 1,188 1,193 1,157 1,096 1,142 1,118 Number of students 13,006 12,261 12,266 12,303 12,286 12,256 12,587 12,712 12,861 13,004 Libraries Number of volumes 311,495 319,014 402,827 410,216 273,897 320,249 378,734 374,453 345,856 331,828 Number of audio materials 12,120 11,660 12,128 10,923 11,255 10,958 13,481 13,516 12,844 12,434 Number of video materials 21,307 18,791 16,469 16,690 12,358 9,799 12,078 10,692 9,742 9,055 Number of annual library visits 660,559 659,672 707,467 669,511 650,881 548,436 375,000 434,170 328,228 426,704 Economic Development Businesses contacted for personal visits 840 504 537 645 349 332 200 100 150 250 Housing and Neighborhood Services Total housing units 45,340 45,665 45,720 45,710 45,442 47,087 45,978 46,388 45,051 44,846 Average assessed value of single-family housing units $ 129,932 $ 133,340 $ 133,276 $ 132,798 $ 132,170 $ 132,778 $ 124,709 $ 109,819 $ 100,707 $ 93,229

Sources: Various City of Roanoke departments

* In fiscal year 2006 and after, combination permits replaced individual electrical, mechanical, and plumbing permits ** In February of 2008, Roanoke County Police Department stopped using the City's basic training academy and began utilizing a new County facility. 161 Table 23 Unaudited CITY OF ROANOKE, VIRGINIA

162 CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 Function Police Number of vehicular units 158 165 162 157 175 165 142 156 137 122 Fire Number of stations (1) 11 11 12 12 12 12 13 13 13 13 Number of fire trucks 27 28 26 24 24 23 23 25 25 24 Highways and Streets Miles of streets (lane miles) 998 998 997 997 997 997 997 997 995 995 Number of street lights 9,960 9,950 9,936 9,884 9,811 9,804 9,800 9,758 9,710 9,566 Parks and Recreation Parks, plazas and recreation sites 69 (2) 72 72 68 69 69 71 71 71 71 Playgrounds/play areas 94 (3) 39 39 37 37 37 39 39 39 39 Football/soccer fields 24 26 26 24 24 24 21 21 21 21 Baseball/softball fields 29 31 31 30 30 30 32 32 32 32 Olympic-size swimming pools 2 2 2 2 2 2 2 2 2 2 Community centers 6 6 6 6 6 6 8 8 8 8 Education Elementary schools 17 17 18 19 20 21 21 21 21 21 Middle schools 5 5 5 6 6 6 6 6 6 6 High schools 2 2 2 2 2 2 2 2 2 2 Libraries Libraries 7 7 7 7 7 7 7 7 7 7 Bookmobile - - - 1 1 1 1 1 1 1 Kiosks 2 2 2 2 2 1 - - - -

(1) Excludes non-staffed fire stations (2) Prior to fiscal year 2012, certain separate facilities located within parks were counted as individual sites. Effective fiscal year 2012, these facilities are now included as part of the park site and not a separate site. (3) Prior to fiscal year 2012, multiple play structures were considered a single unit. Effective fiscal year 2012, each play structure is now considered an individual unit.

Source: City of Roanoke - various departments and Roanoke City Public Schools COMPLIANCE SECTION

163 THIS PAGE INTENTIONALLY BLANK

164 CITY OF ROANOKE, VIRGINIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2012

Federal Federal Grantor/Pass-Through Catalogue Grantor/Grant Program Grant Number Number Expenditures

Department of Agriculture Passed Through Commonwealth of Virginia Department of Agriculture: Food Distribution - Commodities (1) - 10.555$ 2,845 Subtotal Food Distribution - Commodities 2,845

Passed Through Commonwealth of Virginia Department of Health: Summer Food Service Program for Children FY11-12 58745 10.559 51,433 Summer Food Service Program for Children FY12-13 58745 10.559 19,720 Subtotal Summer Food Service Program for Children 71,153

Passed Through Commonwealth of Virginia Department of Social Services: State Administrative Matching Grants for Food Stamp Program - 10.561 1,650,504 Subtotal Matching Grants for Food Stamp Program 1,650,504

Passed Through Commonwealth of Virginia Department of Forestry: Urban and Community Forestry FY11-Plan Update 10UCF14 10.675 2,402 Urban and Community Forestry FY11-Tree Stewards 10UCF15 10.675 2,402 Urban and Community Forestry FY12-Marketing 11UCF12 10.675 10,167 Urban and Community Forestry FY12-Tree Stewards 11UCF13 10.675 10,166 Subtotal Urban and Community Forestry 25,137 Subtotal Passed Through Commonwealth of Virginia 1,749,639 Total Department of Agriculture 1,749,639

Department of Housing and Urban Development Direct Programs: Community Development Block Grant FY04 (2) B-03-MC-51-0020 14.218 32,027 Community Development Block Grant FY06 (2) B-05-MC-51-0020 14.218 32,340 Community Development Block Grant FY07 (2) B-06-MC-51-0020 14.218 45,326 Community Development Block Grant FY08 (2) B-07-MC-51-0020 14.218 19,426 Community Development Block Grant FY09 (2) B-08-MC-51-0020 14.218 30,828 Community Development Block Grant FY10 (2) B-09-MC-51-0020 14.218 484,932 Community Development Block Grant FY11 (2) B-10-MC-51-0020 14.218 543,961 Community Development Block Grant FY12 (2) B-11-MC-51-0020 14.218 926,295 Subtotal Community Development Block Grant 2,115,135

(Continued)

See Accompanying Independent Auditors' Report 165 CITY OF ROANOKE, VIRGINIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2012

Federal Federal Grantor/Pass-Through Catalogue Grantor/Grant Program Grant Number Number Expenditures

Direct Programs: Department of Housing and Urban Development (continued): ARRA Homelessness Prevention & Rehousing FY09 S09-MY-51-0005 14.257$ 233,931 Subtotal ARRA Homelessness Prevention & Rehousing 233,931

Emergency Shelter Grant FY12 (3) S-11-MC-51-0006 14.231 81,671 Subtotal Emergency Shelter Grant 81,671

Supportive Housing Program 2011 VA0031B3F021003 14.235 114,067 Supportive Housing Program 2012 VA0031B3F021104 14.235 66,273 Subtotal Supportive Housing Program 180,340

Shelter Plus Care 2011 (4) VA0032C3F020802 14.238 9,378 Shelter Plus Care 2012 (4) VA0032C3F021003 14.238 106,522 Shelter Plus Care 2012 Rural Highlands (4) VA0169C3F021000 14.238 2,858 Subtotal Shelter Plus Care 118,758

HOME Investment in Affordable Housing 06 (5) M-05-MC-51-0206 14.239 97,328 HOME Investment in Affordable Housing 08 (5) M-07-MC-51-0206 14.239 202,045 HOME Investment in Affordable Housing 09 (5) M-08-MC-51-0206 14.239 17,948 HOME Investment in Affordable Housing 10 (5) M-09-MC-51-0206 14.239 173,273 HOME Investment in Affordable Housing 11 (5) M-10-MC-51-0206 14.239 255,583 HOME Investment in Affordable Housing 12 (5) M-11-MC-51-0206 14.239 64,722 Subtotal HOME Investment in Affordable Housing 810,899

ARRA CDBG Neighborhood Infrastructure FY09 B09-MY-51-0020 14.253 118,994 Subtotal ARRA CDBG Neighborhood Infrastructure 118,994

ARRA Lead Hazard Control VALHB0417-08 14.900 202,774 Lead Hazard Control VALHB0510-11 14.900 45,796 Subtotal ARRA Lead Hazard Control 248,570 Subtotal Department of Housing and Urban Development Direct Programs 3,908,298 Total Department of Housing and Urban Development 3,908,298

Department of Justice Direct Programs: U. S. Marshals Service FY11 Automotive JLEO-11-0210 16.xxx 2,867 U. S. Marshals Service FY12 Automotive JLEO-12-0210 16.xxx 3,183 Subtotal U. S. Marshals Service 6,050

Safe Havens Visitation Program FY11 2010-CW-AX-K005 16.527 114,867 Subtotal Safe Havens Visitation Program 114,867

(Continued)

See Accompanying Independent Auditors' Report 166 CITY OF ROANOKE, VIRGINIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2012

Federal Federal Grantor/Pass-Through Catalogue Grantor/Grant Program Grant Number Number Expenditures

Direct Programs: Department of Justice (continued): State Criminal Alien Assistance Program FY11 2010-H5741-VA-AP 16.606$ 14,439 Subtotal SCAAP Program 14,439

Bulletproof Vests FY09 (Police only) 2007BUBX07039526 16.607 190 Bulletproof Vests FY10 (Police only) 2009BUBX08044562 16.607 10,812 Bulletproof Vests FY11 (Police & Sheriff) 2010BUBX10053408 16.607 6,090 Bulletproof Vests FY12 (Police & Sheriff) 2011BUBX11058211 16.607 1,932 Subtotal Bulletproof Vests 19,024

ARRA COPS Hiring Recovery Program FY10 2009-RKWX-0850 16.710 225,568 Subtotal ARRA COPS Hiring Recovery Program 225,568

Justice Assistance Grant FY10 (Sheriff Security) 2009-DJ-BX-1510 16.738 127,500 Justice Assistance Grant FY12 (Bike Patrol/Tech Improve)) 2011-DJ-BX-2868 16.738 36,763 Justice Assistance Grant FY11 (Tech Improve Police & Sheriff) 2010-DJ-BX-1650 16.738 101,110 Justice Assistance Grant FY12 (Technology Improvement) 12-D5825CR09 16.738 41,208 Subtotal Justice Assistance 306,581

ARRA Justice Assistance Grant (Multiple Projects) FY09 2009-SB-B9-1442 16.804 155,907 Subtotal ARRA Justice Assistance 155,907 Subtotal Department of Justice Direct Programs 842,436

Passed Through Commonwealth of Virginia Department of Criminal Justice Services: Juvenile Accountability Incentive Block Grant CY11 11-M3221JB09 16.523 27,825 Juvenile Accountability Incentive Block Grant CY12 12-N3221JB10 16.523 20,284 Subtotal Juvenile Accountability Incentive Block Grant 48,109

Positive Action FY12 12-A2346JJ-10 16.540 64,935 Project Back on Track FY12 12-B2242JJ-10 16.540 55,963 Subtotal Juvenile Justice 120,898

Victim Witness Assistance FY11 11-Q8554VW10 16.575 133 Victim Witness Assistance FY12 12-R8554VW11 16.575 120,325 Subtotal Victim Witness Assistance 120,458

Data Sharing FY10 09-D5318CR08 16.579 110,305 Subtotal Data Sharing 110,305

Police Domestic Violence Unit CY11 11-M3153VA10 16.588 22,134 Police Domestic Violence Unit CY12 12-N3153VA11 16.588 22,244 Subtotal Police Domestic Violence 44,378

(Continued)

See Accompanying Independent Auditors' Report 167 CITY OF ROANOKE, VIRGINIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2012

Federal Federal Grantor/Pass-Through Catalogue Grantor/Grant Program Grant Number Number Expenditures

Passed Through Commonwealth of Virginia Department of Criminal Justice Services (continued): Intensive Supervision Juvenile Supervision FY12 12-B2134AD09 16.592$ 51,857 Subtotal Intensive Supervision 51,857 Subtotal Passed Through Commonwealth of Virginia 496,005 Total Department of Justice 1,338,441

Department of Labor Passed Through Commonwealth of Virginia Virginia Employment Commission: Workforce Investment Act FY12 Exemplary Perform - Adult LWA-03-11-INC02 17.258 2,602 Workforce Investment Act FY12 Regional Collaboration - Adult LWA-03-11-INC01 17.258 7,484 Workforce Investment Act FY11 - Adult LWA3-10-02 17.258 136,082 Workforce Investment Act FY12 - Adult LWA3-11-03 17.258 219,048 Subtotal Workforce Investment Act Adult 365,216

Workforce Investment Act FY12 Exemplary Perform - Youth LWA-03-11-INC02 17.259 2,788 Workforce Investment Act FY12 Regional Collaboration - Youth LWA-03-11-INC01 17.259 8,019 Workforce Investment Act FY11 - Youth LWA3-10-02 17.259 198,330 Workforce Investment Act FY12 - Youth LWA3-11-03 17.259 231,154 Subtotal Workforce Investment Act Youth 440,291

Workforce Investment Act FY11 - Dislocated Worker LWA3-10-02 17.278 65,655 Workforce Investment Act FY12 - Dislocated Worker LWA3-11-03 17.278 398,427 Workforce Investment Act FY12 Exemplary Perform - Dis Wkr LWA-03-11-INC02 17.278 3,903 Workforce Investment Act FY12 Regional Collaboration - Dis Wk LWA-03-11-INC01 17.278 11,227 Workforce Investment Act FY11 Rapid Response #2 - Dis Wkr LWA 03-10-01RR 17.278 107,007 Subtotal Workforce Investment Dislocated Worker 586,219 Subtotal Passed Through Commonwealth of Virginia 1,391,726 Total Department of Labor 1,391,726

Department of Transportation Direct Programs: FY08 FTA Capital Assistance (pass thru to CCTM) VA-04-0004-01 20.500 10,986 FY08 FTA Capital Assistance (pass thru to NRHS) VA-04-0009-01 20.500 32,479 FY09 FTA Capital Assistance VA-04-0027-00 20.500 49,347 FY09 FTA Capital Assistance VA-04-0046-00 20.500 3,189 Subtotal FTA Capital Assistance 96,001

(Continued)

See Accompanying Independent Auditors' Report 168 CITY OF ROANOKE, VIRGINIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2012

Federal Federal Grantor/Pass-Through Catalogue Grantor/Grant Program Grant Number Number Expenditures

Direct Programs: Department of Transportation (continued): FY07 FTA Capital Assistance VA-95-X005-00 20.507$ 22,362 FY08 FTA Capital Assistance VA-95-0019-00 20.507 40,176 FY09 FTA Capital Assistance VA-95-0051-00 20.507 127,512 FY12 FTA Operating Assistance VA-90-X373-00 20.507 2,505,536 ARRA FY10 FTA Assistance VA-96-X010-00 20.507 102,426 Subtotal FTA Operating & Capital Assistance 2,798,012

FY11 FTA Operating Assistance (pass thru from DRPT) VA-18-X031-00 20.509 38,516 FY12 FTA Operating Assistance (pass thru from DRPT) VA-18-X032-00 20.509 224,505 Subtotal FTA Operating Assistance 263,021 Subtotal Direct Programs 3,157,034

Passed Through Commonwealth of Virginia Department of Motor Vehicles: Multi-Purpose FY11 SC-2011-51359-4301 20.600 22,007 Multi-Purpose FY12 SC-2012-52288-4666 20.600 33,585 Blue Regional Crash Team FY12 K8-2012-52067-4445 20.600 168 Subtotal Highway Safety 55,760

Blue Regional DUI FY11 K8-2011-51302-4244 20.601 1,267 Blue Regional DUI FY12 K8-2012-52012-4390 20.601 1,791 Subtotal Highway Safety 3,058

Passed Through Commonwealth of Virginia Department of Transportation: ARRA Roanoke River Greenway Transportation Enhancement VDoT UPC 93201 20.205 317,385 Roanoke River Greenway TEA21 EN03-128-129 20.205 103,599 Roanoke River Greenway TEA21, #128-129 20.205 1,868,384 Virginian Railway Passenger Station TEA21 20.205 22,918 O Winston Link Museum TEA21 20.205 11,481 Subtotal Roanoke River Greenway 2,323,767 Subtotal Passed Through Commonwealth of Virginia 2,382,585 Total Department of Transportation 5,539,619

National Endowment for the Arts Direct Programs: Local Arts Agencies (Roanoke Arts Commission) 10-6200-7028 45.024 13,516 Subtotal Local Arts Agencies 13,516 Total National Endowment for the Arts 13,516

(Continued)

See Accompanying Independent Auditors' Report 169 CITY OF ROANOKE, VIRGINIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2012

Federal Federal Grantor/Pass-Through Catalogue Grantor/Grant Program Grant Number Number Expenditures

Environmental Protection Agency Direct Programs: Brownfield Area Plan Tech Assistance FY11 TR-83491601-0 66.814$ 93,200 Subtotal Brownfield Job Training 93,200

Brownfield Assessment Petroleum Based FY07 BF97346901-0 66.818 9,570 Brownfield Loan Fund FY08 BF97357101-0 66.818 186,677 Brownfield Assessment Hazardous Materials FY09 BF97370501-0 66.818 11,134 Subtotal Brownfield Remedial Programs 207,381 Subtotal Environmental Protection Agency Direct Programs 300,581 Total Department of Environmental Protection Agency 300,581

Department of Energy Direct Programs: ARRA Energy Efficiency & Conservation Block Grant FY10 DE-SC0002804 81.128 291,316 Subtotal ARRA Energy Efficiency & Conservation Block Grant 291,316 Subtotal Department of Energy Direct Programs 291,316 Total Department of Energy 291,316

Corporation for National and Community Services Passed Through Commonwealth of Virginia Department of Social Services: AmeriCorps 2010-2011 Formula 94.006 17,321 AmeriCorps 2011-2012 Formula 94.006 81,717 Subtotal AmeriCorps Program 99,038 Subtotal Passed Through Commonwealth of Virginia 99,038 Total Corporation for National and Community Services 99,038

Federal Emergency Management Agency Direct Programs: Assistance To Firefighters 2009 EMW-2008-FO-11758 97.044 11,989 Assistance To Firefighters 2011 EMW-2010-FO-07086 97.044 230,431 Subtotal Asistance to Firefighters Programs 242,420 Subtotal Federal Emergency Management Direct Programs 242,420

Passed Through Commonwealth of Virginia Department of Emergency Management: Emergency Management Assistance - 97.042 36,653 Subtotal Emergency Management Assistance Programs 36,653

(Continued)

See Accompanying Independent Auditors' Report 170 CITY OF ROANOKE, VIRGINIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2012

Federal Federal Grantor/Pass-Through Catalogue Grantor/Grant Program Grant Number Number Expenditures

Passed Through Commonwealth of Virginia Department of Emergency Management (continued): State Homeland Security Incident Response Vehicle FY10 10-A2163HS09 97.073$ 250,888 State Homeland Security Equipment Replacement FY11 11-A2312HS10 97.073 90,260 State Homeland Security Haz-Mat Team Equip FY11 2010-SHSP-HAZ-MAT 97.073 18,845 Subtotal State Homeland Security Programs 359,993 Subtotal Passed Through Commonwealth of Virginia 396,646 Total Federal Emergency Management Agency 639,066

Department of Health and Human Services Passed Through Commonwealth of Virginia Department of Social Services: Promoting Safe and Stable Families - 93.556 49,883

Temporary Assistance for Needy Families - 93.558 2,332,899

Refugee & Entrant Assistance-State Administered Program - 93.566 31,012

Low-Income Home Energy Assistance - 93.568 118,681

Child Care and Development Block Grant - 93.575 789,303

Child Care Mandatory-Child Care and Development Fund - 93.596 792,309

Education & Training Vouchers Program - 93.599 20,890

Child Welfare Services - 93.645 5,831

Foster Care Title IV-E - 93.658 1,730,535

Adoption Assistance - 93.659 2,215,310

Social Services Block Grant - 93.667 1,225,929

Foster Care Independence Program - 93.674 55,137

Children's Insurance Program - 93.767 46,444

Medical Assistance Program - 93.778 982,743 Subtotal Passed Through Commonwealth of Virginia 10,396,906 Total Department of Health and Human Services 10,396,906

Grand Total Federal Financial Assistance $ 25,668,146

(Continued)

See Accompanying Independent Auditors' Report 171 CITY OF ROANOKE, VIRGINIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2012

Federal Federal Grantor/Pass-Through Catalogue Grantor/Grant Program Grant Number Number Expenditures

Notes:

(1) The value reported for disbursements, with respect to commodities distributed by the Federal government, fair market value as furnished by the respective department of the Federal government. (2) The amount of federal funds passed through to subgrantees totals $2,115,135. (3) The amount of federal funds passed through to subgrantees totals $81,671. (4) The amount of federal funds passed through to subgrantees totals $118,758. (5) The amount of federal funds passed through to subgrantees totals $810,899.

See Accompanying Independent Auditors' Report 172

KPMG LLP Suite 1010

10 S. Jefferson Street Roanoke, VA 24011-1331

Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

The Honorable Members of City Council City of Roanoke, Virginia:

We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Roanoke, Virginia (the City), as of and for the year ended June 30, 2012, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated November 30, 2012. 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 Specifications for Audits of Counties, Cities and Towns (Specifications), issued by the Auditor of Public Accounts of the Commonwealth of Virginia. Other auditors audited the financial statements of the School Board of the City of Roanoke, Virginia (the School Board), a discretely presented component unit of the City, and certain operations of the Civic Facilities fund, a major enterprise fund included in the business-type activities of the City, as described in our report on the City’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those other auditors.

Internal Control over Financial Reporting Management of the City is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the City’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over financial reporting.

A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity. 173

consider to be material weaknesses, as defined above. However, we identified a deficiency in internal control over financial reporting that we consider to be a significant deficiency and that is described in item 12-1 in the accompanying Schedule of Findings and Questioned Costs. A significant deficiency is a deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matter that are required to be reported under Government Auditing Standards.

We noted certain matters that we reported to the City in a separate letter dated November 30, 2012.

The City’s response to the finding identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. We did not audit the City’s response and, accordingly, we express no opinion on the response.

This report is intended solely for the information and use of management, the City Council, the audit committee of the City Council, others within the entity, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

November 30, 2012

174

KPMG LLP Suite 1010

10 S. Jefferson Street Roanoke, VA 24011-1331

Independent Auditors’ Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133

The Honorable Members of City Council City of Roanoke, Virginia:

Compliance We have audited the City of Roanoke, Virginia’s (the City’s) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended June 30, 2012. The City’s major federal programs are identified in the Summary of Auditors’ Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the City’s management. Our responsibility is to express an opinion on the City’s compliance based on our audit. The City’s basic financial statements include the operations of the School Board of the City of Roanoke, Virginia (the School Board), a discretely presented component unit of the City, which received $30,108,791 in federal awards which is not included in the City’s schedule of expenditures of federal awards for the year ended June 30, 2012. Our audit, described below, did not include the operations of the School Board because the component unit engaged other auditors to perform an audit in accordance with OMB Circular A-133.

We conducted our audit of compliance 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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City’s compliance with those requirements.

In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2012.

Internal Control over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the City’s internal control over compliance with the requirements that could have a direct and material effect on a major

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity. 175

federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.

This report is intended solely for the information and use of management, the City Council, the audit committee of the City Council, others within the entity, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

November 30, 2012

176

KPMG LLP Suite 1010

10 S. Jefferson Street Roanoke, VA 24011-1331

Independent Auditors’ Report on Compliance with Commonwealth of Virginia Laws, Regulations, Contracts and Grant Agreements

The Honorable Members of City Council City of Roanoke, Virginia:

We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the remaining fund information of the City of Roanoke, Virginia (the City), as of and for the year ended June 30, 2012, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated November 30, 2012. 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 Specifications for Audits of Counties, Cities and Towns (Specifications), 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 of material misstatement. Other auditors audited the financial statements of the School Board of the City of Roanoke, Virginia (the School Board), a discretely presented component unit of the City, and certain operations of the Civic Facilities fund, a major enterprise fund included in the business-type activities of the City, as described in our report on the City’s financial statements. This report does not include the results of the other auditors’ testing of compliance that are reported on separately by those other auditors.

Compliance with Commonwealth of Virginia laws, regulations, contracts and grant agreements applicable to the City is the responsibility of the management of the City. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the City’s compliance with certain provisions of the Commonwealth of Virginia’s laws, regulations, contracts and grant agreements. However, our objective was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion. The following is a summary of the Commonwealth of Virginia laws, regulations, contracts and grant agreements, as contained in the Specifications, for which we performed tests of compliance:

Code of Virginia Budget and Appropriation Laws Cash and Investment Laws Conflicts of Interest Act Debt Provisions Retirement Systems Procurement Laws Uniform Disposition of Unclaimed Property Act

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity. 177

State Agency Requirements Comprehensive Youth Services Act Highway Maintenance Funds Personal Property Tax Relief Act Social Services

As described in item 12-2 in the accompanying Schedule of Findings and Questioned Costs, the City did not comply with certain requirements of the Conflicts of Interest Act as contained in the Specifications. With the exception of the noncompliance described in the preceding sentence, the results of our tests of compliance disclosed no other instances of noncompliance that are required to be reported under the Specifications.

The City’s response to the finding is described in the accompanying Schedule of Findings and Questioned Costs. We did not audit the City’s response and, accordingly, we express no opinion on the response.

This report is intended solely for the information and use of management, the City Council, the audit committee of the City Council, others within the entity, the Auditor of Public Accounts of the Commonwealth of Virginia, and the applicable state agencies and is not intended to be and should not be used by anyone other than these specified parties.

November 30, 2012

178 CITY OF ROANOKE, VIRGINIA Schedule of Findings and Questioned Costs Year ended June 30, 2012

(1) Summary of Auditors’ Results (a) The type of report issued on the basic financial statements: unqualified opinions.

(b) Significant deficiencies in internal control over financial reporting disclosed by the audit of the financial statements: yes, 12-1. Material weaknesses: none.

(c) Noncompliance which is material to the basic financial statements: none.

(d) Significant deficiencies in internal control over major programs: none reported. Material weaknesses: none.

(e) The type of report issued on compliance for major programs: unqualified opinion.

(f) Any audit findings which are required to be reported under Section 510(a) of OMB Circular A-133: none.

(g) Major programs:

Program CFDA

Energy Efficiency and Conservation Block Grant (CFDA #81.128); Program (EECBG)

Child Care and Development Block Grant and Child Care (CFDA #93.575 and #93.596); Mandatory and Matching Funds of the Child Care and Development Fund Grant Cluster

ARRA Federal Transit and Federal Transit – Cluster (CFDA #20.500 and #20.507);

Justice Assistance Program Grant Cluster (CFDA #16.738 and #16.804);

ARRA Lead-Based Paint Hazard Control (CFDA #14.900);

Adoption Assistance Grant (CFDA #93.659);

Highway Planning and Construction Program (CFDA #20.205);

Foster Care Title IV–E (CFDA #93.658);

Medicaid Assistance Program (CFDA #93.778);

ARRA Homelessness Prevention and Relocation Assistance (CFDA #14.257)

(h) Dollar threshold used to distinguish between Type A and Type B programs: $770,044.

(i) Auditee qualified as a low risk auditee under Section 530 of OMB Circular A-133: no.

179 CITY OF ROANOKE, VIRGINIA Schedule of Findings and Questioned Costs Year ended June 30, 2012

(2) Findings Relating to the Financial Statements Reported in Accordance with Government Auditing Standards:

Item 12-1

Condition found, including perspective: During the fiscal year ended June 30, 2012, management instituted several new capital asset policies and procedures in order to strengthen the existing internal controls over capital assets. As a result of the implementation of these policies and procedures, management found several instances in which assets that remained in the Construction in Process general ledger account should have been placed into service in prior fiscal years with the commencement of depreciation expense recorded in prior fiscal years accordingly. Upon noting these discrepancies, management performed an in depth analysis to determine the impact of depreciation which was not recorded in prior fiscal years, noting that the overall impact was not material, nor did the issue have the potential to be material to the City’s financial statements.

Possible asserted cause and effect: Management asserts that the implementation of these improved controls has allowed management to obtain a more accurate understanding of a project’s status. Specifically, management has developed a questionnaire to facilitate increased communication between the purchasing department/project managers and the finance department. This questionnaire provides criteria to help the purchasing department/project managers in accurately assessing the timing for when a project is substantially complete and placed in-service, as noted in the Governmental Accounting Standards Board (GASB) codification section 1400, Reporting Capital Assets.

Recommendation: We recommend that management continue to monitor the improved controls implemented this fiscal year to strengthen the overall internal control environment for capital assets at the City and also improve the accuracy of recording depreciation expense in the proper accounting periods.

Views of responsible officials: The policies and procedures we implemented enabled us to identify several assets completed in prior years that should have been placed into service with depreciation recorded. The changes designed to strengthen existing internal controls yielded the anticipated results and the controls appear to be working as designed. All assets completed during prior years have been identified and are now properly reported as in service and depreciation is properly being recorded. We agree with the recommendation to continue to evaluate the effectiveness of existing controls and, where necessary, modify policies and procedures accordingly to ensure accurate reporting in the appropriate period.

(3) Findings and Questioned Costs Relating to Federal Awards: None.

(4) Findings and Questioned Costs Relating to Commonwealth of Virginia Compliance: Item 12-2

180 CITY OF ROANOKE, VIRGINIA Schedule of Findings and Questioned Costs Year ended June 30, 2012

3-5 – Conflicts of Interest Act Criteria – Local officials must file an annual disclosure form (Section 2.2-3115 of the Code of Virginia) by January 15th of each year, except when the filing deadline falls on a Saturday, Sunday, or legal holiday, then the disclosure statement shall be filed on the next day that is not a Saturday, Sunday, or legal holiday. Completed forms were most recently required to be received by January 17, 2012 pursuant to Section 2.2-3115 of the Code of Virginia.

Condition – Two of forty-eight disclosures of interest in real estate located within the City of Roanoke were submitted after January 17, 2012. One of the forty-eight disclosures of interest in real estate located within the City of Roanoke was not submitted and filed until after we discovered such omission during the performance of our procedures and informed management accordingly.

Effect – Noncompliance with Commonwealth’s requirements may result in state sanctions.

Questioned Cost – None.

Recommendation – The City should establish procedures to ensure that disclosure forms for all officials required to comply with Commonwealth’s disclosure requirements are filed accurately and timely.

Management’s Response – The City Clerk will include a paragraph in communications to all appropriate individuals serving on Council-appointed authorities, boards, commissions and committees advising of the State Code statute regarding penalty for late filing or refusal to file, with a copy of the communication to the Commonwealth's Attorney Office.

181 CITY OF ROANOKE, VIRGINIA Summary Schedule of Prior Year Audit Findings and Questioned Costs Year ended June 30, 2012

Item 2011-1: Allowable Costs Status: We did not identify any findings related to the allowable use of (federal, state, and local) funds administered under the Community Oriented Police Services (COPS) Hiring Recovery Program awarded to the City of Roanoke.

Item 2011-2: Annual Disclosure Form Status: We noted an additional finding as it relates to ensuring that Annual Disclosure Forms are submitted timely by the City of Roanoke for interest in real estate located within the City of Roanoke. For considerations over the finding and management’s response for the year ended June 30, 2012, refer to item 12-2 included on the Schedule of Findings and Questioned Costs.

Item 2011-3: Business Continuity Plan Status: We did not identify any findings as it relates to ensuring that the City’s Department of Social Services has a Business Continuity Plan which addresses all requirements of the Commonwealth’s Auditor of Public Accounts. This includes the loss of services due to a reduced workforce and also prioritizing of tasks and evaluation of functioning for the specified 30-day period.

182 Department of Finance City of Roanoke, Virginia

Ann H. Shawver, CPA Director of Finance Andrea F. Trent Assistant Director of Finance Cindy M. Ayers Administrative Assistant IV

Accounting / Accounts Payable

Sharon A. Bowman Account Technician Acquenatta Jackson-Harris Accountant Kathleen A. Hylton Accountant Cathy P. Jones Account Technician Su Hyun “Esther” Kim Senior Accountant James J. Newman Accountant Mary L. Ratcliffe Senior Accountant/AP Supervisor Julie A. Ruppert Senior Accountant D. René Satterwhite Accounting Supervisor Belinda G. Thomas Account Technician

Payroll / Systems

Connie K. Altice Payroll Technician Suzanne F. Barnett Payroll Accountant Tasha L. Burkett Senior Financial Systems Accountant Kimberly H. Corpening Financial Systems Technician Jody A. Lawson Payroll and Systems Administrator Paula S. Quinn Senior Payroll Technician Regena Y. Weddle Financial Systems Accountant

Retirement

Harold R. Harless, Jr. Retirement Supervisor Dorothy E. Hoskins Senior Accountant Karen B. Mullen Retirement Account Technician

183 THIS PAGE INTENTIONALLY BLANK

184 PROPOSED FORMS OF OPINIONS OF BOND COUNSEL

The Honorable Mayor and Council of the City of Roanoke, Virginia Roanoke, Virginia

Dear Mayor and Councilmembers:

CITY OF ROANOKE, VIRGINIA, GENERAL OBLIGATION PUBLIC IMPROVEMENT AND REFUNDING BONDS, SERIES 2013A, $24,580,000

At your request we have examined into the validity of an issue of Twenty-Four Million Five Hundred Eighty Thousand Dollars ($24,580,000) principal amount of General Obligation Public Improvement and Refunding Bonds, Series 2013A (the "Bonds"), of the City of Roanoke, Virginia (the "City"). The Bonds are dated their date of delivery; are issued in fully registered form in the denomination of $5,000 each or any integral multiple thereof; and are numbered from No. R-20 1 3A- I upwards in order of issuance. The Bonds mature on July 15 in each of the years and in the principal amounts set forth below, with the Bonds maturing in a particular year bearing interest from their date payable on January 15, 2014 and semiannually on each January 15 and July 15 thereafter at the rate per annum set forth opposite such year, to wit:

Year of Principal Interest Year of Principal Interest Maturity Amount Rate Maturity Amount Rate

2014 $ 590,000 3.00% 2023 $3,970,000 5.00% 2015 590,000 3.00 2024 2,025,000 3.00 2016 590,000 3.00 2025 2,045,000 5.00 2017 585,000 1.00 2026 590,000 4.00 2018 590,000 3.00 2027 590,000 4.00 2019 1,915,000 1.50 2028 590,000 4.00 2020 590,000 4.00 2029 590,000 4.00 2021 2,440,000 4.00 2033 2,360,000 5.00 2022 3,930,000 4.00

The Bonds maturing on and after July 15, 2024 are subject to redemption at the option of the City prior to their stated maturities on or after July 15, 2023 upon the terms and conditions and at the prices stated therein.

The Bonds maturing on July 15, 2033 are subject to mandatory sinking fund redemption on July 15, 2030 and on each July 15 thereafter and to payment at maturity on July 15, 2033, in the case of redemption at a redemption price equal to the principal amount to be redeemed, together with the interest accrued thereon to the date fixed for the redemption thereof.

D- 1 The Bonds recite that they are issued for the purpose of providing funds to pay the costs of acquisition, construction, reconstruction, improvement, extension, enlargement and equipping of various public improvement projects of and for the City and to refund in advance of their stated maturities certain outstanding general obligation public improvement bonds of the City, under and pursuant to and in full compliance with the Constitution and statutes of the Commonwealth of Virginia, including Chapter 26 of Title 15.2 of the Code of Virginia, 1950 (the same being the Public Finance Act of 1991), and resolutions and other proceedings of the Council of the City duly adopted and taken under the Public Finance Act of 1991.

We have examined (i) the Constitution and statutes of the Commonwealth of Virginia, (ii) certified copies of the aforementioned resolutions and other proceedings of the Council of the City in connection with the authorization, issuance, sale and delivery of the Bonds, (iii) such other papers, instruments, documents and proceedings as we have deemed to be necessary or advisable and (iv) an executed and authenticated Bond of such issue.

In our opinion, the Bonds have been duly authorized and issued in accordance with the Constitution and statutes of the Commonwealth of Virginia and constitute valid and legally binding obligations of the City, and the Council of the City is authorized and required to levy and collect annually, at the same time and in the same manner as other taxes of the City are assessed, levied and collected, a tax upon all taxable property within the City, over and above all other taxes, authorized or limited by law and without limitation as to rate or amount, sufficient to pay when due the principal of and interest on the Bonds to the extent other funds of the City are not lawfully available and appropriated for such purpose.

It is to be understood that the rights of the holders of the Bonds and the enforceability thereof may be subject to judicial discretion, to the exercise of the sovereign police powers of the Commonwealth of Virginia and the constitutional powers of the United States of America and to valid bankruptcy, insolvency, reorganization, moratorium and other laws affecting the relief of debtors.

In our opinion, under existing statutes and court decisions, interest on the Bonds (i) is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986 (the "Code") and (ii) is not treated as an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering our opinion, we have relied on certain representations, certifications of fact and statements of reasonable expectations made by the City in connection with the Bonds, and we have assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code.

It is also our opinion that, under the existing statutes of the Commonwealth of Virginia, interest on the Bonds is not includable in computing the Virginia income tax.

We express no opinion regarding other federal or Commonwealth of Virginia tax consequences arising with respect to the Bonds. We are rendering our opinion under existing statutes and court decisions as of the issue date of the Bonds, and we assume no obligation to update our opinion after the issue date of the Bonds to reflect any future action, fact or circumstance, or change in law or interpretation, or otherwise. We express no opinion on the effect of any action taken in reliance upon an opinion of other counsel on the exclusion from gross income for federal income tax purposes of interest on the Bonds.

Very truly yours,

D-2 The Honorable Mayor and Council of the City of Roanoke, Virginia Roanoke, Virginia

Dear Mayor and Councilmembers:

CITY OF ROANOKE, VIRGINIA, TAXABLE GENERAL OBLIGATION PUBLIC IMPROVEMENT REFUNDING BONDS, SERIES 2013B, $15,350,000

At your request we have examined into the validity of an issue of Fifteen Million Three Hundred Fifty Thousand Dollars ($15,350,000) principal amount of Taxable General Obligation Public Improvement Refunding Bonds, Series 2013B (the "Bonds"), of the City of Roanoke, Virginia (the "City"). The Bonds are dated their date of delivery; are issued in fully registered form in the denomination of $5,000 each or any integral multiple thereof; and are numbered from No. R-201313- 1 upwards in order of issuance. The Bonds mature on July 15 in each of the years and in the principal amounts set forth below, with the Bonds maturing in a particular year bearing interest from their date payable on January 15, 2014 and semiannually on each January 15 and July 15 thereafter at the rate per annum set forth opposite such year, to wit:

Year of Principal Interest Maturity Amount Rate

2014 $ 550,000 0.370% 2015 1,325,000 0.606 2016 2,585,000 0.832 2017 3,220,000 1.094 2018 2,865,000 1.394 2019 2,885,000 1.670 2020 395,000 2.020 2021 115,000 2.227 2022 105,000 2.477 2023 90,000 2.627 2024 1,215,000 2.727

The Bonds are subject to "make-whole" optional redemption prior to their stated maturities upon the terms and conditions and at the prices stated therein.

The Bonds recite that they are issued for the purpose of providing funds to refund in advance of their stated maturities certain outstanding general obligation public improvement bonds of the City, under and pursuant to and in full compliance with the Constitution and statutes of the Commonwealth of Virginia, including Chapter 26 of Title 15.2 of the Code of Virginia, 1950 (the same being the Public Finance Act of 1991), and resolutions and other proceedings of the Council of the City duly adopted and taken under the Public Finance Act of 1991. We have examined (i) the Constitution and statutes of the Commonwealth of Virginia, (ii) certified copies of the aforementioned resolutions and other proceedings of the Council of the City in connection with the authorization, issuance, sale and delivery of the Bonds, (iii) such other papers, instruments, documents and proceedings as we have deemed to be necessary or advisable and (iv) an executed and authenticated Bond of such issue.

In our opinion, the Bonds have been duly authorized and issued in accordance with the Constitution and statutes of the Commonwealth of Virginia and constitute valid and legally binding obligations of the City, and the Council of the City is authorized and required to levy and collect annually, at the same time and in the same manner as other taxes of the City are assessed, levied and collected, a tax upon all taxable property within the City, over and above all other taxes, authorized or limited by law and without limitation as to rate or amount, sufficient to pay when due the principal of and interest on the Bonds to the extent other funds of the City are not lawfully available and appropriated for such purpose.

It is to be understood that the rights of the holders of the Bonds and the enforceability thereof may be subject to judicial discretion, to the exercise of the sovereign police powers of the Commonwealth of Virginia and the constitutional powers of the United States of America and to valid bankruptcy, insolvency, reorganization, moratorium and other laws affecting the relief of debtors.

In our opinion, interest on the Bonds is included in gross income for federal income tax purposes. This opinion is not intended or provided by Bond Counsel to be used and cannot be used by an owner of the Bonds for the purpose of avoiding penalties that may be imposed on the owner of such Bonds. The opinion set forth in this paragraph is provided to support the promotion or marketing of the Bonds. Each owner of Bonds should seek advice based on its particular circumstances from an independent tax advisor.

It is also our opinion that, under the existing statutes of the Commonwealth of Virginia, interest on the Bonds is not includable in computing the Virginia income tax.

We express no opinion regarding other federal or Commonwealth of Virginia tax consequences arising with respect to the Bonds. We are rendering our opinion under existing statutes and court decisions as of the issue date of the Bonds, and we assume no obligation to update our opinion after the issue date of the Bonds to reflect any future action, fact or circumstance, or change in law or interpretation, or otherwise.

Very truly yours,

WE ah; ]

DESCRIPTION OF THE DEPOSITORY TRUST COMPANY AND THE BOOK-ENTRY SYSTEM

The description which follows of the procedures and recordkeeping with respect to beneficial ownership interests in the Bonds, payments of principal and interest on the Bonds to The Depository Trust Company ("DTC"), New York, New York, its nominee, Participants, defined herein, or Beneficial Owners, defined herein, confirmation and transfer of beneficial ownership interests in the Bonds and other bond- related transactions by and between DTC, Participants and Beneficial Owners, is based solely on information furnished by DTC.

DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered Bonds 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 Bond will be issued in the aggregate principal amount of each maturity of each series of the Bonds and will be deposited with DTC.

DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal 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"). DTC is rated AA+ by Standard & Poor's. 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 and www.dtc.org.

Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 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 certificates representing their ownership interest in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all 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 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 Bonds. DTC's records reflect only the identity of the Direct Participants to whose

E- 1 accounts such 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.

Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 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 Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on, and payment of redemption proceeds of, the 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 detail information from the Issuer or the Registrar and Paying Agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of such Participant and not of DTC (nor its nominee), the Issuer or the Registrar and Paying Agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest payments and payment of redemption proceeds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Registrar and Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Registrar and Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.

The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.

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

E-2 APPENDIX F

PROPOSED FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the "Certificate"), dated February 27, 2013, is executed and delivered in connection with the issuance by the City of Roanoke, Virginia (the "Issuer"), of $24,580,000 principal amount of City of Roanoke, Virginia, General Obligation Public Improvement and Refunding Bonds, Series 2013A, dated February 27, 2013 (the "Series 2013A Bonds"), and $15,350,000 principal amount of City of Roanoke, Virginia, Taxable General Obligation Public Improvement Refunding Bonds, Series 2013B, dated February 27, 2013 (the "Series 2013B Bonds" and, collectively with the Series 2013A Bonds, the "Bonds"), and pursuant to resolutions duly adopted by the Council of the Issuer on May 21, 2012 and January 7, 2013, respectively (such resolutions being referred to herein collectively as the "Resolution"). Capitalized terms used in this Certificate shall have the respective meanings specified above or in Article I hereof. Pursuant to the Resolution, the Issuer agrees as follows:

ARTICLE I

Definitions

SECTION I.I. Definitions. The following terms used in this Certificate shall have the following respective meanings:

(1) "Annual Financial Information" means, collectively, (i) updated versions of the following financial information and operating data with respect to the Issuer for each fiscal year of the types contained in Appendix A to the Official Statement under the headings "GENERAL FUND REVENUES AND EXPENDITURES", "SUMMARY OF GENERAL FUND REVENUES AND EXPENDITURES", "TAX BASE DATA" (including the tables "Assessed Value of All Taxable Property", "Property Tax Rates (Per $100 Assessed Value)", "General Property Tax Levies and Collections", "Ten Largest Taxpayers" and "Taxable Retail Sales" therein), "DEBT ADMINISTRATION" (including the information under the subheadings "Amortization Schedules" and "Debt Ratios" therein), "CAPITAL IMPROVEMENT PROGRAM - FUTURE BORROWING REQUIREMENTS", "EMPLOYEE RETIREMENT PLANS" and information contained in Appendix C to the Official Statement and (ii) information regarding amendments to this Certificate required pursuant to Sections 4.2(d) and (e) of this Certificate. Annual Financial Information shall include Audited Financial Statements, if available, or Unaudited Financial Statements.

The descriptions contained in Section 1.1(1)(i) of financial information and operating data constituting Annual Financial Information are of general categories of financial information and operating data. When 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. Any Annual Financial Information containing modified financial information or operating data shall explain, in narrative form, the reasons for the modification and the impact of the modification on the type of financial information or operating data being provided.

(2) "Audited Financial Statements" means the annual financial statements, if any, of the Issuer, 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; provided, however, that, pursuant to Section 4.2(a) and (e) hereof, the Issuer may from time to time, if required by federal or State legal requirements, modify the accounting principles to be followed in preparing its financial statements. Notice of any such modification required by Section 4.2(a) hereof shall include a reference to the specific federal or State law or regulation requiring such accounting principles or other description thereof.

(3) "Counsel" means Hawkins Delafield & Wood LLP or other nationally recognized bond counsel or counsel expert in federal securities laws.

F-i (4) "GAAP" means generally accepted accounting principles as prescribed from time to time for governmental units by Government Accounting Standards Board, the Financial Accounting Standards Board or any successor to the duties and responsibilities of either of them.

(5) "MSRB" means the Municipal Securities Rulemaking Board established pursuant to the provisions of Section 1513(b)(1) of the Securities Exchange Act of 1934 or any successor thereto or to the functions of the MSRB contemplated by this Certificate.

(6) "Notice Event" means any of the following events with respect to the Bonds, whether relating to the Issuer or otherwise:

(i) principal and interest payment delinquencies,

(ii) nonpayment related defaults, if material,

(iii) unscheduled draws on debt service reserves reflecting financial difficulties,

(iv) unscheduled draws on credit enhancements reflecting financial difficulties,

(v) substitution of credit or liquidity providers, or their failure to perform,

(vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 570 1-TEB) or other material notices of determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds,

(vii) modifications to rights of Bondholders, if material,

(viii) Bond calls, if material, and tender offers,

(ix) defeasances,

(x) release, substitution or sale of property securing repayment of the Bonds, if material,

(xi) rating changes,

(xii) bankruptcy, insolvency, receivership or similar event of the Issuer,

Note to clause (xii): For the purposes of the event identified in clause (xii) above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Issuer in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under State or federal law in which a court or government authority has assumed jurisdiction over substantially all of the assets or business of the Issuer, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan 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 Issuer.

(xiii) the consummation of a merger, consolidation or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material, and

F-2 (xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material.

(7) "Official Statement' ' means the Official Statement, dated February 13, 2013, of the Issuer relating to the Bonds.

(8) "Rule" means Rule 15c2-12 promulgated by the SEC under the Securities and Exchange Act of 1934 as amended (17 CFR Part 240, §240.15c2-12), as in effect on the date of this Certificate, including any official interpretations thereof issued either before or after the effective date of this Certificate which are applicable to this Certificate.

(9) "SEC" means the United States Securities and Exchange Commission.

(10) "State" means the Commonwealth of Virginia.

(11) "Unaudited Financial Statements" means the same as Audited Financial Statements, except the same shall not have been audited.

(12) "Underwriters" means the underwriters of the Bonds for whom Raymond James & Associates, Inc., BB&T Capital Markets, a division of BB&T Securities, LLC and Citigroup Global Markets Inc. are serving as representatives.

ARTICLE II

The Undertaking

SECTION 2.1. Purpose. This Certificate is being executed and delivered solely to assist the Underwriters in complying with paragraph (b)(5) of the Rule.

SECTION 2.2. Annual Financial Information. (a) The Issuer shall provide Annual Financial Information for the Issuer with respect to each fiscal year of the Issuer, commencing with the fiscal year beginning July 1, 2012, by no later than nine (9) months after the end of the respective fiscal year, to the MSRB.

(b) The Issuer shall provide, in a timely manner, notice of any failure of the Issuer to provide the Annual Financial Information by the date specified in subsection (a) above to the MSRB.

SECTION 2.3. Audited Financial Statements. If not provided as part of Annual Financial Information by the dates required by Section 2.2(a) hereof, the Issuer shall provide Audited Financial Statements, when and if available, to the MSRB.

SECTION 2.4. Notice Events. (a) If a Notice Event occurs, the Issuer shall provide, in a timely manner not in excess of ten (10) business days after the occurrence of such Notice Event, notice of such Notice Event to the MSRB.

(b) Any notice of a defeasance of Bonds shall state whether the Bonds have been escrowed to maturity or to an earlier redemption date and the timing of such maturity or redemption.

SECTION 2.5. Additional Information. Nothing in this Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Certificate or any other means of communication, or including any other information in any Annual Financial Information or notice of Notice Event hereunder, in addition to that which is required by this Certificate. If the Issuer chooses to do so, the Issuer shall have no obligation under this Certificate to update such additional information or include it in any future Annual Financial Information or notice of a Notice Event hereunder.

F-3 SECTION 2.6. Additional Disclosure Obligations. The Issuer acknowledges and understands that other federal and State laws, including but not limited to the Securities Act of 1933 and Rule lOb-5 promulgated under the Securities Exchange Act of 1934, may apply to the Issuer, and that, under some circumstances, compliance with this Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the Issuer under such laws.

SECTION 2.7. No Previous Non-Compliance. The Issuer represents that, with the exception disclosed in the next sentence, in the previous five years, it has not failed to comply in all material respects with any previous undertaking in a written contract or agreement specified in paragraph (b)(5)(i) of the Rule. The Issuer, having been unable to determine whether there was a timely filing of the Issuer's annual financial information for its fiscal year ended June 30, 2010 as required by written undertakings made by the Issuer pursuant to the Rule, filed such annual financial information for such fiscal year with the MSRB via the MSRB's Electronic Municipal Market Access ("EMMA") system on June 29, 2012, in order to ensure that such annual financial information for such fiscal year is on file and available to the public via the EMMA system.

ARTICLE III

Operating Rules

SECTION 3.1. Reference to Other Documents. It shall be sufficient for purposes of Section 2.2 hereof if the Issuer provides Annual Financial Information by specific reference to documents (i) available to the public on the MSRB Internet website (currently, www.emma.msrb.org ) or (ii) filed with the SEC. The provisions of this Section 3.1 shall not apply to notice of Notice Events pursuant to Section 2.4 hereof.

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. Dissemination Agents. The Issuer may from time to time designate an agent to act on its behalf in providing or filing notices, documents and information as required of the Issuer under this Certificate and revoke or modify any such designation.

SECTION 3.4. Transmission of Notices. Documents and Information. (a) Unless otherwise required by the MSRB, all notices, documents and information provided to the MSRB shall be provided to the EMMA system, the current Internet website address of which is www.emma.msrb.org .

(b) All notices, documents and information provided to the MSRB shall be provided in an electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 3.5. Fiscal Year. (a) The Issuer's current fiscal year is July 1 to June 30, and the Issuer shall promptly notify the MSRB of each change in its fiscal year.

(b) Annual Financial Information shall be provided at least annually notwithstanding any fiscal year longer than twelve (12) calendar months.

ARTICLE IV

Effective Date, Termination, Amendment and Enforcement

SECTION 4.1. Effective Date: Termination. (a) This Certificate shall be effective upon the issuance of the Bonds.

(b) The Issuer's obligations under this Certificate shall terminate upon legal defeasance, prior redemption or payment in full of all of the Bonds.

F-4 (c) This Certificate, or any provision hereof, shall be null and void in the event that (i) the Issuer shall have received an opinion of Counsel, addressed to the Issuer, to the effect that those portions of the Rule which require this Certificate, or any such provision, 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 (ii) the Issuer shall have delivered copies of such opinion to the MSRB.

SECTION 4.2. Amendment. (a) This Certificate may be amended, by written certificate of the Director of Finance of the Issuer, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (i) 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 interpretations thereof, or a change in the identity, nature or status of the Issuer or the type of business conducted thereby, (ii) this Certificate as so amended would have complied with the requirements of the Rule as of the date of this Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, (iii) the Issuer shall have received an opinion of Counsel addressed to the Issuer, to the same effect as set forth in clause (ii) above, (iv) the Issuer shall have received an opinion of Counsel, addressed to the Issuer, or a determination by an entity, in each case unaffiliated with the Issuer (such as Bond Counsel) and acceptable to the Issuer, to the effect that the amendment does not materially impair the interests of the holders of the Bonds and (v) the Issuer shall have delivered copies of such opinion and amendment to the MSRB.

(b) This Certificate may be amended, by written certificate of the Director of Finance of the Issuer, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (i) an amendment to the Rule is adopted, or a new or modified official interpretation of the Rule is issued, after the effective date hereof which is applicable to this Certificate, (ii) the Issuer shall have received an opinion of Counsel, addressed to the Issuer, to the effect that performance by the Issuer under this Certificate as so amended will not result in a violation of the Rule and (iii) the Issuer shall have delivered copies of such opinion and amendment to the MSRB.

(c) This Certificate may be amended, by written certificate of the Director of Finance of the Issuer, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (i) the Issuer shall have received an opinion of Counsel, addressed to the Issuer, to the effect that the amendment is permitted by rule, order or other official pronouncement, or is consistent with any interpretive advice or no-action positions of the Staff of the SEC and (ii) the Issuer shall have delivered copies of such opinion and amendment to the MSRB.

(d) To the extent any amendment to this Certificate results in a change in the types of financial information or operating data provided pursuant to this Certificate, the first Annual Financial Information provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

(e) If an amendment is made pursuant to Section 4.2(a) hereof to the accounting principles to be followed by the Issuer in preparing its financial statements, the Annual Financial Information for the fiscal year in which the change is made shall present 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 Certificate shall constitute a contract with and inure solely to the benefit of the holders from time to time of the Bonds, except that beneficial owners of Bonds shall be third-party beneficiaries of this Certificate. The provisions of this Certificate shall create no rights in any person or entity except as provided in this subsection (a) and in subsection (b) of this Section 4.3.

(b) The obligations of the Issuer to comply with the provisions of this Certificate shall be enforceable by the holders of the Bonds, including beneficial owners thereof. The Bondholders' rights to enforce the provisions of this Certificate shall be limited solely to a right, by action in mandamus or for specific performance, to compel performance of the Issuer's obligations under this Certificate and the Resolution. In consideration of the third-party beneficiary status of the beneficial owners of the Bonds pursuant to subsection (a) of this Section 4.3, the beneficial owners shall be deemed to be holders of the Bonds for purposes of this subsection (b).

(c) Any failure by the Issuer to perform in accordance with this Certificate shall not constitute a default under the Resolution and any rights and remedies provided by the Resolution upon the occurrence of a default shall not apply to any such failure.

(d) This Certificate shall be construed and interpreted in accordance with the laws of the State, without regard to its conflict of laws rules, and any suits and actions arising out of this Certificate shall be instituted and tried only in the Circuit Court of the City of Roanoke, Virginia; provided, however, that to the extent this Certificate addresses matters of federal securities laws, including the Rule, this Certificate shall be construed in accordance with such federal securities laws and official interpretations thereof.

IN WITNESS WHEREOF, the undersigned have executed this Certificate as of the date first above written.

CITY OF ROANOKE, VIRGINIA

Title: City Manager

Title: Director of Finance

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