This Preliminary Official Statement and the information herein is subject to change, completion, and amendment without notice. A definitive Official Statement will be made available prior to the delivery of these securities. See “INTRODUCTION– Changes to the Preliminary Official Statement”. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. through thefacilitiesofTheDepositoryTrustCompany inNewYork,Yorkonorabout______. & FormanLLP,Mobile,Alabama.Itisexpectedthat theWarrantsindefinitiveformwillbeavailablefordelivery Cooper &Gale,P.C.,Mobile,Alabama.Certainlegal matterswillbepassedonfortheCitybyitscounsel,Burr Cooper &Gale,P.C.,Mobile,Alabama.Certainlegal matterswillbepassedonbyDisclosureCounsel,Maynard, Warrants, see“RISKFACTORS”and“DISCLAIMERSANDOTHERMISCELLANEOUSMATTERS”. and creditareirrevocablypledged. August 15,beginningFebruary2018. New York,asdescribedmoreparticularlyherein.InterestwillbepayableontheWarrantseachFebruary 15and issued, willberegisteredinthenameofCede&Co.,asnomineeTheDepositoryTrustCompany,New York, to inthisOfficialStatementasthe“Warrants”.TheWarrantsareissuablefullyregisteredwarrantsand, when * Preliminary; subject tochange. The dateofthis OfficialStatementis______. investment decision. Investors mustreadtheentireOfficialStatementto obtaininformationessentialtothemakingofaninformed Dated: Dateofdelivery Series 2017CWarrantsandthe2017DWarrants. 2017D WARRANTS”hereinforfurtherinformationandcertainothertaxconsequencesarisingwithrespecttothe MATTERS RELATINGTOTHESERIES2017CWARRANTS”,and“TAX 2017C WarrantsandtheSeries2017DwillbeexemptfromStateofAlabamaincometaxation.See“TAX federal incometaxpurposes.BondCounselisalsooftheopinionthat,underexistinglaw,interestonSeries Counsel, underexistinglaw,interestontheSeries2017DWarrantswillnotbeexcludablefromgrossincomefor for purposesofthefederalalternativeminimumtaxonindividualsandcorporations.InopinionBond that interest thereon be and remain excludable from grossincome, and (ii) will not be an item of tax preference Internal Revenue Code that must be satisfied subsequent to the issuance ofthe Series 2017CWarrants in order excludable fromgrossincomeforfederaltaxpurposesiftheCitycomplieswithallrequirementsof NEW ISSUES(2)-BOOKENTRYONLY FOR MATURITIES,AMOUNTS,RATES,PRICES,YIELDS,ANDCUSIPNUMBERS,SEEINSIDE COVER. This cover page contains certain information for quick reference only. It is The Warrantsareofferedwhen,asandifissued,subject toapprovalofvaliditybyBondCounsel,Maynard, For a description of certain risk factors and other considerations involved in an investment in the The Warrantswillbesubjecttoredemptionpriortheirrespectivematuritiesasdescribedherein. The Warrants will constitute general obligations of the City for the payment of which its full faith The Series2017CWarrantsandthe2017Dconstituteseparateseriesaretogetherreferred In theopinionofBondCounsel,underexistinglaw,interestonSeries2017CWarrants(i)willbe HARBOR FINANCIAL RAYMOND JAMES Tax-Exempt GeneralObligation PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 8, 2017 Warrants, Series2017C THE FRAZERLANIER COMPANY,INCORPORATED
$9,045,000*
CITY OF MOBILE SECURITIES CAPITAL CORPORATION Taxable GeneralObligation Warrants, Series2017D $48,895,000* Due: February15,asshownonthe STIFEL not a summary of this issue. (See “RATINGS”herein.) RATINGS: S&PAA- inside coverpage Moody’s Aa2
______
$9,045,000* CITY OF MOBILE Tax-Exempt General Obligation Warrants, Series 2017C
MATURITIES, AMOUNTS, RATES, PRICES, YIELDS, AND CUSIP NUMBERS
Principal Interest Price or Principal Interest Price or Maturity Amount Rate Yield CUSIP Maturity Amount Rate Yield CUSIP
$______% Term Warrants maturing on ______1, ____ (Price or Yield: $______), CUSIP No.______
______
$48,895,000* CITY OF MOBILE Taxable General Obligation Warrants, Series 2017D
MATURITIES, AMOUNTS, RATES, PRICES, YIELDS, AND CUSIP NUMBERS
Principal Interest Price or Principal Interest Price or Maturity Amount Rate Yield CUSIP Maturity Amount Rate Yield CUSIP
$______% Term Warrants maturing on ______1, ____ (Price or Yield: $______), CUSIP No.______
______
*Preliminary; subject to change. ______
CITY OF MOBILE
MAYOR
William S. (Sandy) Stimpson ______
CITY COUNCIL
Fredrick D. Richardson, Jr., Councilmember, Dist. 1 Levon C. Manzie, Councilmember, Dist. 2 C.J. Small, Councilmember, Dist. 3 John C. Williams, Councilmember, Dist. 4 Joel Daves, Councilmember, Dist. 5 Bess Rich, Councilmember, Dist. 6 Gina Gregory, Councilmember, Dist. 7 ______
ADMINISTRATIVE
Paul C. Wesch, Executive Director of Finance & Acting Chief of Staff Patricia A. Aldrich, Comptroller Lisa C. Lambert, City Clerk ______
COUNSEL FOR THE CITY
Burr & Forman LLP Mobile, Alabama ______
BOND COUNSEL AND DISCLOSURE COUNSEL TO THE CITY
Maynard, Cooper & Gale, P.C. Birmingham, Alabama ______
AUDITORS
Smith, Dukes & Buckalew LLP Mobile, Alabama ______
FINANCIAL ADVISOR
PFM Financial Advisors LLC Huntsville, Alabama ______[THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS
Page
INTRODUCTION ...... 1 General ...... 1 Changes to the Preliminary Official Statement ...... 2
GLOSSARY OF TERMS USED IN OFFICIAL STATEMENT ...... 2
DESCRIPTION OF THE WARRANTS ...... 2 General Provisions...... 2 Method and Place of Payment ...... 3 Redemption of Series 2017C Warrants Prior to Maturity ...... 3 Redemption of Series 2017D Warrants Prior to Maturity ...... 4 Other Matters Related to Redemption Prior to Maturity ...... 5 Registration and Exchange ...... 6 Provision for Payment of Warrants ...... 6 Book-Entry Only System ...... 6 Authority for Issuance ...... 6
SECURITY AND SOURCE OF PAYMENT ...... 7 General ...... 7 Remedies ...... 7 The United States Bankruptcy Code ...... 7
THE PLAN OF FINANCING ...... 7 General ...... 7 Refunding Plan for the Series 2008B Warrants ...... 7 Refunding Plan for the Series 2009A Warrants ...... 8
SOURCES AND USES OF FUNDS ...... 9
DEBT SERVICE REQUIREMENTS ...... 10 Series 2017C Warrants ...... 10 Series 2017D Warrants ...... 11
THE CITY ...... 12
LITIGATION RELATING TO THE WARRANTS ...... 12
RISK FACTORS ...... 12 General ...... 12 Limitations on Rights of Holders of the Warrants/Limitations on City Revenue Increases ...... 12 The United States Bankruptcy Code ...... 12 Hurricanes and Other Severe Weather ...... 13 Tax-Exempt Status of Series 2017C Warrants ...... 13
LEGAL MATTERS ...... 13
TAX MATTERS RELATING TO THE SERIES 2017C WARRANTS ...... 14 General ...... 14 Original Issue Discount ...... 15 Premium ...... 15 No Bank Qualification ...... 15
i Verification of Certain Computations Relating to Series 2017C Warrants ...... 15
TAX MATTERS RELATING TO THE SERIES 2017D WARRANTS ...... 16 General ...... 16 Collateral Tax Consequences ...... 16 Verification of Certain Computations Relating to Series 2017D Warrants ...... 16
UNDERWRITING ...... 16
CONTINUING DISCLOSURE ...... 16 General ...... 16 Compliance with Prior Undertakings ...... 18 Implementation of Continuing Disclosure Compliance Procedures ...... 18
RATINGS ...... 18
INDEPENDENT AUDITORS ...... 19
FINANCIAL ADVISOR ...... 19
DISCLAIMERS AND OTHER MISCELLANEOUS MATTERS ...... 19
ADDITIONAL INFORMATION ...... 21
Appendix A - Information on the City of Mobile Appendix B - Audited Financial Statements of the City of Mobile for the fiscal year ended September 30, 2016 Appendix C - Book-Entry Only System Appendix D - Proposed Opinions of Bond Counsel
ii OFFICIAL STATEMENT
Regarding CITY OF MOBILE
$9,045,000∗ $48,895,000* Tax-Exempt General Obligation Taxable General Obligation Warrants, Warrants, Series 2017C Series 2017D
INTRODUCTION
General
This Official Statement is furnished in connection with the issuance by the City of Mobile (the “City”) of its Tax-Exempt General Obligation Warrants, Series 2017C (the “Series 2017C Warrants”) and its Taxable General Obligation Warrants, Series 2017D (the “Series 2017D Warrants”, together with the Series 2017C Warrants, the “Warrants”) referred to above.
The City is a municipal corporation organized under the laws of the State of Alabama. The Warrants will be issued pursuant to two separate ordinances (the “Warrant Ordinances”) adopted by the governing body of the City.
The Warrants will constitute general obligations of the City for the payment of which its full faith and credit are irrevocably pledged. See “SECURITY AND SOURCE OF PAYMENT”.
For information regarding the tax treatment of the Warrants, see “TAX MATTERS RELATING TO THE SERIES 2017C WARRANTS” and “TAX MATTERS RELATING TO THE SERIES 2017D WARRANTS”.
The Warrants are being issued for the purpose of (i) refunding certain outstanding debt of the City and (ii) paying the costs of issuing the Warrants. See “THE PLAN OF FINANCING”.
The Warrants are subject to optional and mandatory redemption at the times and under the circumstances set forth herein. See “DESCRIPTION OF THE WARRANTS - Redemption of Series 2017C Warrants Prior to Maturity” and “DESCRIPTION OF THE WARRANTS - Redemption of Series 2017D Warrants Prior to Maturity”. The Warrants are being offered in the denomination of $5,000 or any multiple thereof and may be transferred and exchanged subject to certain terms and conditions set forth herein. See “DESCRIPTION OF THE WARRANTS”
For a description of certain risk factors and other considerations involved in an investment in the Warrants, see “RISK FACTORS” and “DISCLAIMERS AND OTHER MISCELLANEOUS MATTERS”.
The City has covenanted to undertake certain continuing disclosure pursuant to Rule 15c2-12 of the Securities and Exchange Commission. See “CONTINUING DISCLOSURE”.
The Series 2017C Warrants and the Series 2017D Warrants are being issued as separate series because, as described more particularly in “TAX MATTERS RELATING TO THE SERIES 2017C WARRANTS” and “TAX MATTERS RELATING TO THE SERIES 2017D WARRANTS”, the tax attributes of the two series differ.
This Official Statement speaks only as of its date, and the information contained herein is subject to change. This introduction contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.
∗ Preliminary; subject to change. Changes to the Preliminary Official Statement
This Preliminary Official Statement and the information herein are subject to change, completion, and amendment. A final, definitive Official Statement will be made available prior to the delivery of the Warrants.
For purposes of this Preliminary Official Statement, selling compensation, delivery dates, and certain other information dependent on pricing of the Warrants have been omitted. Further, for purposes of this Preliminary Official Statement, offering prices, interest rates, aggregate principal amount, principal amount per maturity, and certain other information dependent on pricing of the Warrants have been estimated. Actual information dependent on pricing will be established after pricing of the Warrants and will be reflected in the final Official Statement. Such actual information will vary from the estimates.
Investors should check under the heading “INTRODUCTION–Changes to the Preliminary Official Statement” in the final Official Statement for guidance regarding information dependent on pricing of the Warrants and for guidance regarding other information that is changed between the date of this Preliminary Official Statement and the date of the final Official Statement.
GLOSSARY OF TERMS USED IN OFFICIAL STATEMENT
Certain capitalized terms used frequently in this Official Statement are defined in this section of the Official Statement.
“City” means the City of Mobile, a municipal corporation under the laws of the State of Alabama.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.
“Paying Agent” means Regions Bank, Birmingham, Alabama, which is the paying agent and registrar for the Warrants.
“Refunded Warrants” means those warrants discussed under “THE PLAN OF FINANCING”.
“Series 2017C Warrants” means the City’s $9,045,000∗ Tax-Exempt General Obligation Warrants, Series 2017C, which are being offered by this Official Statement.
“Series 2017D Warrants” means the City’s $48,895,000* Taxable General Obligation Warrants, Series 2017D, which are being offered by this Official Statement.
“Warrants” means the Series 2017C Warrants and the Series 2017D Warrants.
“Warrant Ordinances” means the two separate ordinances adopted by the governing body of the City authorizing the issuance of the Warrants.
DESCRIPTION OF THE WARRANTS
General Provisions
The Warrants will be fully registered warrants in the denomination of $5,000 or any multiple thereof, will be dated the date of their delivery, and will be numbered separately from 1 upward.
The Warrants will mature annually on February 15 in the amounts and years set forth on the inside cover page hereof. The Warrants will bear interest at the applicable per annum rates set forth on the inside cover page
∗ Preliminary; subject to change.
2 hereof. Interest shall be computed on the basis of a 360-day year with 12 months of 30 days each. Interest on the Warrants will be payable on each February 15 and August 15, beginning February 15, 2018.
Method and Place of Payment
The Warrants will be issued in book-entry only form, as described below under “Book-Entry Only System”, and the method and place of payment will be as provided in the book-entry only system. The provisions set forth in this section below will apply in the event that the use of the book-entry only system for the Warrants is discontinued.
Payment of interest due on each interest payment date will be made by check or draft mailed on such interest payment date to the persons who were registered holders of the Warrants on the regular record date for such interest payment date, which will be the 1st day of the month of such interest payment date. Payment of the principal of (and premium, if any, on) the Warrants and payment of accrued interest due upon redemption on any date other than an interest payment date will be made only upon surrender of the Warrants at the principal office of the Paying Agent (Regions Bank) in Birmingham, Alabama.
The holder of Warrants in an aggregate principal amount of $100,000 or more may, upon the terms and conditions of the Warrant Ordinances, request payment of debt service by wire transfer to an account of such holder maintained at a bank in the continental United States or by any other method providing for payment in same-day funds that is acceptable to the Paying Agent.
Redemption of Series 2017C Warrants Prior to Maturity
Optional Redemption. Series 2017C Warrants maturing on February 15, ______or thereafter, or any smaller principal amount of such Series 2017C Warrants that is a multiple of the smallest authorized denomination, may be redeemed at the option of the City on ______1, ____ or any date thereafter at the applicable redemption price (expressed as a percentage of principal amount) set forth in the table below plus accrued interest thereon to the redemption date:
Redemption Date Redemption Price
3 Mandatory Redemption of Term Warrants. The Series 2017C Warrants maturing on February 15, ______(the “Term Warrants”) are subject to mandatory redemption, by lot, at a redemption price equal to 100% of the principal amount thereof to be redeemed plus accrued interest thereon to the redemption date, on February 15 in years and principal amounts (after credits as provided below) as follows:
Year Amount
______
$______of the Term Warrants will be retired at maturity
Not less than 45 or more than 60 days prior to each mandatory redemption date with respect to Term Warrants, the Paying Agent shall proceed to select for redemption, by lot, Term Warrants or portions thereof in an aggregate principal amount equal to the amount required to be redeemed and shall call such Term Warrants or portions thereof for redemption on such mandatory redemption date. The City may, not less than 60 days prior to any such mandatory redemption date, direct that any or all of the following amounts be credited against the Term Warrants scheduled for redemption on such date: (i) the principal amount of Term Warrants delivered by the City to the Paying Agent for cancellation and not previously claimed as a credit; (ii) the principal amount of Term Warrants previously redeemed (other than Term Warrants redeemed pursuant to this paragraph) and not previously claimed as a credit; and (iii) the principal amount of Term Warrants otherwise deemed paid in full and not previously claimed as a credit.
Redemption of Series 2017D Warrants Prior to Maturity
Optional Redemption. Series 2017D Warrants maturing on February 15, ______or thereafter, or any smaller principal amount of such Series 2017D Warrants that is a multiple of the smallest authorized denomination, may be redeemed at the option of the City on ______1, ____ or any date thereafter at the applicable redemption price (expressed as a percentage of principal amount) set forth in the table below plus accrued interest thereon to the redemption date:
Redemption Date Redemption Price
4 Mandatory Redemption of Term Warrants. The Series 2017D Warrants maturing on February 15, ______(the “Term Warrants”) are subject to mandatory redemption, by lot, at a redemption price equal to 100% of the principal amount thereof to be redeemed plus accrued interest thereon to the redemption date, on February 15 in years and principal amounts (after credits as provided below) as follows:
Year Amount
______
$______of the Term Warrants will be retired at maturity
Not less than 45 or more than 60 days prior to each mandatory redemption date with respect to Term Warrants, the Paying Agent shall proceed to select for redemption, by lot, Term Warrants or portions thereof in an aggregate principal amount equal to the amount required to be redeemed and shall call such Term Warrants or portions thereof for redemption on such mandatory redemption date. The City may, not less than 60 days prior to any such mandatory redemption date, direct that any or all of the following amounts be credited against the Term Warrants scheduled for redemption on such date: (i) the principal amount of Term Warrants delivered by the City to the Paying Agent for cancellation and not previously claimed as a credit; (ii) the principal amount of Term Warrants previously redeemed (other than Term Warrants redeemed pursuant to this paragraph) and not previously claimed as a credit; and (iii) the principal amount of Term Warrants otherwise deemed paid in full and not previously claimed as a credit.
Other Matters Related to Redemption Prior to Maturity
Except in the case of mandatory redemption of Term Warrants, if less than all Warrants outstanding are to be redeemed, the particular Warrants to be redeemed may be specified by the City by written notice to the Paying Agent, or, in the absence of timely receipt by the Paying Agent of such notice, shall be selected by the Paying Agent by lot or by such other method as the Paying Agent shall deem fair and appropriate; provided, however, that (i) the principal amount of Warrants of each maturity to be redeemed must be a multiple of the smallest authorized denomination of Warrants, and (ii) if less than all Warrants with the same stated maturity are to be redeemed, the Warrants of such maturity to be redeemed shall be selected by lot by the Paying Agent.
Any redemption will be made upon at least 30 days’ notice by first-class mail to the holders of Warrants to be redeemed. A notice of optional redemption may state that the redemption of Warrants is contingent upon specified conditions such as receipt of a specified source of funds or the occurrence of specified events. If the conditions for such redemption are not met, the City shall not be required to redeem Warrants (or portions thereof) identified in such notice.
If a trust is established for payment of less than all Warrants of a particular maturity, the Warrants of such maturity to be paid from the trust shall be selected by the Paying Agent within 7 days after such trust is established and shall be identified by a separate CUSIP number or other designation satisfactory to the Paying Agent. The Paying Agent shall notify holders whose Warrants (or portions thereof) have been selected for payment from such trust and shall direct such holders to surrender their Warrants to the Paying Agent in exchange for Warrants with the appropriate designation.
Upon any partial redemption of a Warrant, such Warrant shall be surrendered to the Paying Agent in exchange for one or more new Warrants in authorized form for the unredeemed portion of principal.
5 Any Warrant (or portion thereof) which is to be redeemed must be surrendered to the Paying Agent for payment of the redemption price. Warrants (or portions thereof) duly called for redemption will cease to bear interest after the redemption date, unless the City defaults in payment of the redemption price.
Registration and Exchange
The Warrants will be issued in book-entry only form, as described below under “Book-Entry Only System”, and the method for registration and exchange of the Warrants will be as provided in the book-entry only system. The provisions set forth in this section below will apply in the event that the use of the book-entry only system for the Warrants is discontinued.
The Warrants are transferable only on the warrant register maintained at the principal office of the Paying Agent. Upon surrender of a Warrant to be transferred, properly endorsed, a new Warrant will be issued to the designated transferee.
The Warrants will be issued in denominations of $5,000 or any multiple thereof and, subject to the provisions of the Warrant Ordinances, may be exchanged for a like aggregate principal amount of Warrants, of any authorized denominations and of the same maturity, as requested by the holder surrendering the same.
No service charge shall be made for any transfer or exchange, but the City may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Provision for Payment of Warrants
The Warrants shall, prior to the maturity or redemption date thereof, be deemed to have been paid if the Paying Agent is provided with, among other things, (1) a trust agreement between the City and any bank or other financial institution having corporate trust powers making provision for the retirement of such Warrants by creating for that purpose an irrevocable trust fund sufficient to provide for payment and retirement of such Warrants, which said trust fund shall consist of federal securities, cash, or both federal securities and cash and (2) evidence satisfactory to the Paying Agent that, if the principal of and the interest on the investments (if any) forming part of the trust fund provided for in the trust agreement are paid on the respective due dates of such principal and interest, said trust fund will produce funds sufficient to provide for the full payment and retirement of such Warrants. At such time as the Warrants shall be deemed paid as aforesaid, they shall no longer be secured by or entitled to the benefits of the Warrant Ordinances, except for the purpose of any payment from such cash and/or federal securities deposited with the Paying Agent and for the purpose of transfer and exchange as provided in the Warrant Ordinances.
Book-Entry Only System
The Warrants are issuable as fully registered warrants and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York, to which debt service payments on the Warrants will be made so long as Cede & Co. is the registered owner of the Warrants. Individual purchases of the Warrants will be made in book-entry only form, and individual purchasers (“Beneficial Owners”) of the Warrants will not receive physical delivery of bond certificates.
So long as DTC or its nominee is the registered owner of the Warrants, disbursement of debt service payments to DTC is the responsibility of the Paying Agent, disbursement of debt service payments to DTC Participants is the responsibility of DTC, and disbursement of debt service payments to the Beneficial Owner is the responsibility of DTC Participants or Indirect Participants as more fully described herein.
For more details on DTC and the book-entry only system, see Appendix C to this Official Statement.
Authority for Issuance
The Warrants are being issued by the City under the authority of the constitution and laws of the State of Alabama, including particularly Sections 11-47-2 and 11-81-4 of the Code of Alabama (1975).
6 SECURITY AND SOURCE OF PAYMENT
General
The Warrants will be general obligations of the City, for the payment of which the full faith and credit of the City will be irrevocably pledged. Revenues available to the City for payment of debt service on the Warrants include ad valorem taxes, sales and business license taxes and other general fund revenues. None of such legally available revenues are, however, specially pledged for payment of debt service on the Warrants. Information describing certain taxes and other revenues of the City is set forth in the Official Statement under the caption “FINANCIAL SYSTEM - Description of Major Sources of General Fund Revenues”.
Remedies
The Executive Director of Finance of the City is, under existing law, subject to mandamus in the event that he has money available for payment of debt service on the Warrants and does not apply such money as and to the extent provided in the Warrant Ordinances. Rights of the holders of the Warrants and the enforceability thereof may also be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights and the exercise of judicial discretion in appropriate cases, including the law-imposed requirement that the City may first use its taxes and other revenues to pay the expenses of providing necessary governmental services before paying debt service on the Warrants.
The United States Bankruptcy Code
Chapter 9 of the United States Bankruptcy Code permits municipal corporations, political subdivisions and public agencies or instrumentalities, including the City, that are insolvent or unable to meet their debts to file petitions for relief in the federal bankruptcy courts if authorized by state law. While the matter is not entirely free from doubt, prospective purchasers of the Warrants should assume that existing Alabama statutes presently authorize the City and other political subdivisions in Alabama to file such petitions for relief.
Bankruptcy proceedings by the City could have adverse effects on holders of the Warrants, including (i) delay in the enforcement of their remedies, (ii) subordination of their claims to the claims of those supplying goods and services to the City after the initiation of bankruptcy proceedings and to the administrative expenses of bankruptcy proceedings, and (iii) imposition without their consent of a reorganization plan reducing or delaying payment on the Warrants. Such a reorganization plan, when confirmed by the bankruptcy court, binds all creditors who had timely notice or actual knowledge of the petition or plan and discharges all claims against the petitioning political subdivision provided for in the plan. No plan may, however, be confirmed by the court unless, among other conditions, either the plan has been accepted in writing by 2/3 in amount and more than 50% in number of the allowed claims of each class which is impaired by the plan, or the court finds that the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims that is impaired under, and has not accepted, the plan.
THE PLAN OF FINANCING
General
The Series 2017C Warrants and the Series 2017D Warrants are being issued for the purpose of (i) refunding certain outstanding debt of the City and (ii) paying the costs of issuing such warrants.
Refunding Plan for the Series 2008B Warrants
The City has heretofore issued its $69,295,000 General Obligation Refunding and Improvement Warrants, Series 2008B (the “Series 2008B Warrants”), which are outstanding in the aggregate principal amount of $19,940,000. Series 2008B Warrants maturing in _____ and thereafter (the “Refunded 2008B Warrants”), which are outstanding in the aggregate principal amount of $______, will be refunded, on a current basis, with a portion of the proceeds of the Series 2017C Warrants. The Series 2008B Warrants with stated maturities prior to such date will not be refunded.
7 In order to effect the refunding of the Refunded 2008B Warrants, the City and Regions Bank, Birmingham, Alabama (the “Escrow Trustee”), will enter into an escrow trust agreement (the “Series 2008B Escrow Agreement”) simultaneously with the issuance of the Series 2017C Warrants. Pursuant to the Series 2008B Escrow Agreement, the City will establish an irrevocable trust fund for the benefit of the holders of the Refunded 2008B Warrants (the “Series 2008B Escrow Fund”) and will deposit therein a portion of the proceeds of the Series 2017C Warrants. The amount so deposited in the Series 2008B Escrow Fund will be used to purchase certain United States government securities. The cash flow from such securities, without reinvestment, when added to any uninvested cash in the Series 2008B Escrow Fund, will be sufficient to pay the redemption price (principal, premium, and accrued interest) of Refunded 2008B Warrants maturing in ______and thereafter, which will be called for redemption on February 15, 2018. After the Series 2008B Escrow Fund is established, the Refunded 2008B Warrants will no longer be considered outstanding.
Refunding Plan for the Series 2009A Warrants
The City has heretofore issued its $56,380,000 General Obligation Refunding Warrants, Series 2009A (the “Series 2009A Warrants”), which are outstanding in the aggregate principal amount of $55,850,000. Series 2009A Warrants maturing in ______and thereafter (the “Refunded 2009A Warrants”, together with the Refunded 2008B Warrants, the “Refunded Warrants”), which are outstanding in the aggregate principal amount of $______, will be advance refunded with a portion of the proceeds of the Series 2017D Warrants. The Series 2009A Warrants with stated maturities prior to such date will not be refunded.
In order to effect the refunding of the Refunded 2009A Warrants, the City and the Escrow Trustee will enter into an escrow trust agreement (the “Series 2009A Escrow Agreement”) simultaneously with the issuance of the Series 2017D Warrants. Pursuant to the Series 2009A Escrow Agreement, the City will establish an irrevocable trust fund for the benefit of the holders of the Refunded 2009A Warrants (the “Series 2009A Escrow Fund”) and will deposit therein a portion of the proceeds of the Series 2017D Warrants. The amount so deposited in the Series 2009A Escrow Fund will be used to purchase certain United States government securities. The cash flow from such securities, without reinvestment, when added to any uninvested cash in the Series 2009A Escrow Fund, will be sufficient to pay (i) the principal and interest requirements on the Refunded 2009A Warrants from (and including) ______through ______and (ii) the redemption price (principal, premium, and accrued interest) of Refunded 2009A Warrants maturing in ______and thereafter, which will be called for redemption on February 15, 2019. After the Series 2009A Escrow Fund is established, the Refunded 2009A Warrants will no longer be considered outstanding.
8
SOURCES AND USES OF FUNDS
The expected sources and uses of funds for the plan of financing are as follows (rounded to the nearest whole dollar):
Sources of Funds
Principal amount of Warrants ...... (Less: original issue discount) ...... Transfer from debt service fund established for benefit of Refunded Warrants ......
Total ......
Uses of Funds
Deposit to Series 2008B Escrow Fund ...... Deposit to Series 2009A Escrow Fund ...... Expenses of issuance (including underwriters’ discount, legal, accounting and other issuance expenses) ......
Total ......
9 DEBT SERVICE REQUIREMENTS
Series 2017C Warrants
The following table contains debt service requirements on the Series 2017C Warrants.
Fiscal Year Ending September 30 Principal(1)(2) Interest(2) Total
Total: $ $ $
______
(1) For purposes of this table the principal amount of Series 2017C Warrants to be retired in a fiscal year pursuant to mandatory redemption provisions is shown as maturing in that fiscal year.
(2) For purposes of this Preliminary Official Statement, principal and interest requirements have been estimated based on an assumed principal amount and principal maturities as shown and certain assumed interest rates. Actual principal amounts and maturities and actual interest rates will be established after pricing of the Series 2017C Warrants and will be reflected in the final Official Statement. Actual debt service payments will vary from this estimate.
10 Series 2017D Warrants
The following table contains debt service requirements on the Series 2017D Warrants.
Fiscal Year Ending September 30 Principal(1)(2) Interest(2) Total
Total: ______
(1) For purposes of this table the principal amount of Series 2017D Warrants to be retired in a fiscal year pursuant to mandatory redemption provisions is shown as maturing in that fiscal year.
(2) For purposes of this Preliminary Official Statement, principal and interest requirements have been estimated based on an assumed principal amount and principal maturities as shown and certain assumed interest rates. Actual principal amounts and maturities and actual interest rates will be established after pricing of the Series 2017D Warrants and will be reflected in the final Official Statement. Actual debt service payments will vary from this estimate.
11
THE CITY
City of Mobile is a municipal corporation organized under the laws of the State of Alabama. For information on the City of Mobile, see “Appendix A–Information on the City of Mobile”.
LITIGATION RELATING TO THE WARRANTS
There is no litigation pending or, to the knowledge of the City, threatened questioning the validity of the Warrants, the proceedings under which they are to be issued, the security for the Warrants provided by the Warrant Ordinances, the consummation of the transactions contemplated by the Warrant Ordinances, the organization of the City, or the election or qualification of the City’s officers. For certain additional information concerning litigation relating to the City, see Appendix A.
RISK FACTORS
General
An investment in the Warrants involves certain risks which should be carefully considered by investors. The sufficiency of revenues to pay debt service on the Warrants may be affected by events and conditions relating to, among other things, hurricanes and other severe weather, population and employment trends, and economic conditions in the City, the nature and extent of which are not presently determinable.
Prospective investors should carefully examine this Official Statement and their own financial condition in order to make a judgment as to their ability to bear the economic risk of such an investment and whether or not the Warrants are an appropriate investment for them.
The risk factors discussed herein should be considered in evaluating the City’s ability to make payments of the principal of and interest due on the Warrants. This discussion of risk factors is not intended to be exhaustive and should be read in conjunction with all other parts of this Official Statement, including Appendix A hereto.
Limitations on Rights of Holders of the Warrants/Limitations on City Revenue Increases
Holders of the Warrants should be aware that their rights and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights and the exercise of judicial discretion in appropriate cases, including the law-imposed requirement that the City may first use its taxes and other revenues to pay the expenses of providing necessary governmental services before paying debt service on the Warrants.
Holders of the Warrants also should be aware that, under present law, the rates at which Alabama property taxes are levied may be increased only after approval by the legislature and a majority vote of the qualified electors of the affected jurisdiction, and that, under applicable judicial precedents, neither Alabama general sales and use taxes nor Alabama business license taxes may be levied at rates that are confiscatory or unreasonable. Additional information on these limitations on the City’s power to increase its revenues is set forth under the caption “SECURITY AND SOURCE OF PAYMENT” and in Appendix A of this Official Statement under the captions “FINANCIAL SYSTEM OF THE CITY” and “AD VALOREM TAXATION”.
The United States Bankruptcy Code
Information describing the applicability of the United States Bankruptcy Code to the City and the Warrants is set forth in this Official Statement under the caption “SECURITY AND SOURCE OF PAYMENT”.
12 Hurricanes and Other Severe Weather
The Gulf Coast region is subject to occurrences of severe weather, including hurricanes, in which winds and tidal surges are powerful enough to cause severe destruction. The City, which is located in a coastal area, is particularly susceptible to such storms and their effects. While the City’s property and equipment is insured against damage from such weather hazards in amounts the City’s management believes to be reasonable, the City is not insured against risks like business interruption or loss of taxes and other revenues that could result from such weather hazards. There can be no assurance that the City has provided adequate financial reserve funds against such uninsured risks.
Tax-Exempt Status of Series 2017C Warrants
It is expected that the Series 2017C Warrants (but not the Series 2017D Warrants) will qualify as tax- exempt obligations for federal income tax purposes as of the date of issuance. See “TAX MATTERS RELATING TO THE SERIES 2017C WARRANTS”. It is anticipated that Bond Counsel will render an opinion with respect to the Series 2017C Warrants substantially in the form attached hereto as Appendix D, which should be read in its entirety for a complete understanding of the scope of the opinion and the conclusions expressed therein. A legal opinion expresses the professional judgment of the attorney rendering the opinion as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
The tax status of the Series 2017C Warrants could be affected by post-issuance events. There are various requirements of the Internal Revenue Code of 1986, as amended, that must be observed or satisfied after the issuance of the Series 2017C Warrants in order for the Series 2017C Warrants to qualify for, and retain, tax-exempt status. These requirements include appropriate use of the proceeds of the Series 2017C Warrants, use of the facilities financed by the Series 2017C Warrants, investment of warrant proceeds, and the rebate of so-called excess arbitrage earnings. Compliance with these requirements is the responsibility of the City.
The Internal Revenue Service conducts an audit program to examine compliance with the requirements regarding tax-exempt status. Under current IRS procedures, in the initial stages of an audit with respect to the Series 2017C Warrants, the City would be treated as the taxpayer, and the owners of the Series 2017C Warrants may have limited rights to participate in the audit process. The initiation of an audit with respect to the Series 2017C Warrants could adversely affect the market value and liquidity of the Series 2017C Warrants, even though no final determination about the tax-exempt status has been made. If an audit results in a final determination that the Series 2017C Warrants do not qualify as tax-exempt obligations, such a determination could be retroactive in effect to the date of issuance of the Series 2017C Warrants.
In addition to post-issuance compliance, a change in law after the date of issuance of the Series 2017C Warrants could affect the tax-exempt status of the Series 2017C Warrants or the effect of investing in the Series 2017C Warrants. For example, the United States Congress could eliminate or limit the exemption for interest on the Series 2017C Warrants, or it could reduce or eliminate the federal income tax, or it could adopt a so-called flat tax. It cannot be predicted whether or in what form any such change in law may be enacted or whether, if enacted, any such change in law would apply to the Series 2017C Warrants.
The Warrant Ordinances relating to the Series 2017C Warrants do not require the City to redeem the Series 2017C Warrants and do not provide for the payment of any additional interest or penalty if a determination is made that the Series 2017C Warrants do not comply with the existing requirements of the Internal Revenue Code of 1986, as amended, or if a subsequent change in law adversely affects the tax-exempt status of the Series 2017C Warrants or the effect of investing in the Series 2017C Warrants.
LEGAL MATTERS
The legality and validity of the Series 2017C Warrants and the Series 2017D Warrants will be approved by Bond Counsel, Maynard, Cooper & Gale, P.C., Mobile, Alabama. Bond Counsel has been employed primarily for
13 the purpose of preparing certain legal documents and supporting certificates, reviewing the transcript of proceedings by which the Series 2017C Warrants and the Series 2017D Warrants have been authorized to be issued, and rendering an opinion in conventional form as to (1) the validity and legality of the Series 2017C Warrants and the Series 2017D Warrants, (2) the exemption of interest on the Series 2017C Warrants (but not the Series 2017D Warrants) from federal income taxes, and (3) the exemption of interest on the Series 2017C Warrants and the Series 2017D Warrants from State of Alabama income taxes. Bond Counsel also served as Disclosure Counsel and assisted in the preparation of this Official Statement.
It is anticipated that Bond Counsel will render opinions substantially in the form attached hereto as Appendix D. In connection with the rendering of such opinions, Bond Counsel is serving as counsel to the City. Certain legal matters will be passed upon for the City by its counsel, Burr & Forman LLP, Mobile, Alabama.
The various legal opinions to be delivered concurrently with the delivery of the Series 2017C Warrants and the Series 2017D Warrants express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
TAX MATTERS RELATING TO THE SERIES 2017C WARRANTS
General
In the opinion of Bond Counsel, under existing law, interest on the Series 2017C Warrants will be excludable from gross income for federal income tax purposes if the City complies with all requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), that must be satisfied subsequent to the issuance of the Series 2017C Warrants in order that interest thereon be and remain excludable from gross income. Failure to comply with certain of such requirements could cause the interest on the Series 2017C Warrants to be included in gross income, retroactive to the date of issuance of the Series 2017C Warrants. The City has covenanted to comply with all such requirements.
Bond Counsel is also of the opinion that, under existing law, interest on the Series 2017C Warrants will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on such corporations.
Bond Counsel will express no opinion regarding federal tax consequences arising with regard to the Series 2017C Warrants other than the opinions expressed in the two preceding paragraphs. The form of Bond Counsel’s opinion is expected to be substantially as set forth in Appendix D to this Official Statement.
Prospective purchasers of the Series 2017C Warrants should be aware that ownership of the Series 2017C Warrants may result in collateral and federal and state tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income”, foreign corporations subject to a branch profits tax and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Series 2017C Warrants. Bond Counsel will not express any opinion as to such collateral tax consequences. Prospective purchasers of the Series 2017C Warrants should consult their tax advisors as to collateral tax consequences.
Bond Counsel is also of the opinion that, under existing law, interest on the Series 2017C Warrants will be exempt from State of Alabama income taxation.
14 Original Issue Discount
In the opinion of Bond Counsel, under existing law, the original issue discount in the selling price of a Series 2017C Warrant, to the extent properly allocable to each owner of such Series 2017C Warrant, is excludable from gross income for federal income tax purposes with respect to such owner. The original issue discount is the excess of the stated redemption price at maturity of such Series 2017C Warrant over the initial offering price to the public, excluding underwriters and other intermediaries, at which price a substantial amount of the Series 2017C Warrants of such maturity were sold.
Under Section 1288 of the Internal Revenue Code of 1986, as amended, original issue discount on tax- exempt bonds accrues on a compound basis. The amount of original issue discount that accrues to an owner of a Series 2017C Warrant during any accrual period generally equals (i) the issue price of such Series 2017C Warrant plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity of such Series 2017C Warrant (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest payable on such Series 2017C Warrant during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excludable from gross income for federal income tax purposes, and will increase the owner’s tax basis in such Series 2017C Warrant. Any gain realized by an owner from a sale, exchange, payment or redemption of a Series 2017C Warrant will be treated as gain from the sale or exchange of such Series 2017C Warrant.
Premium
An amount equal to the excess of the purchase price of a Series 2017C Warrant over its stated redemption price at maturity constitutes premium on such Series 2017C Warrant. A purchaser of a Series 2017C Warrant must amortize any premium over such Series 2017C Warrant’s term using constant yield principles, based on the purchaser’s yield to maturity. As premium is amortized, the purchaser’s basis in such Series 2017C Warrant is reduced by a corresponding amount, resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Series 2017C Warrant prior to its maturity. Even though the purchaser’s basis is reduced, no federal income tax deduction is allowed. Purchasers of any Series 2017C Warrants at a premium, whether at the time of initial issuance or subsequent thereto, should consult with their own tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to state and local tax consequences of owning such Series 2017C Warrants.
No Bank Qualification
The City will not designate the Series 2017C Warrants as “qualified tax-exempt obligations” under Section 265(b) of the Internal Revenue Code. As a result, the Series 2017C Warrants may not be treated by financial institutions as though they were acquired on August 7, 1986, and there may not be allowed to such financial institutions that purchase the Series 2017C Warrants a deduction of up to 80% of the interest paid to depositors that is allocable to the Series 2017C Warrants by such financial institutions.
Verification of Certain Computations Relating to Series 2017C Warrants
The accuracy of (i) the arithmetical computations of the adequacy of the payments of principal and interest on the securities being held in the Series 2008B Escrow Fund, together with the initial cash balance in the Series 2008B Escrow Fund, to provide for the payment or redemption of the Refunded 2008B Warrants as contemplated by the Series 2008B Escrow Agreement, and (ii) the mathematical computations supporting the conclusion of Bond Counsel that the Series 2017C Warrants are not “arbitrage bonds” under the applicable provisions of the Internal Revenue Code, will be verified by The Arbitrage Group, Inc., independent certified public accountants, Tuscaloosa, Alabama. Such verification will be based, in part, upon information supplied to such accountants by the Underwriters.
15 TAX MATTERS RELATING TO THE SERIES 2017D WARRANTS
General
In the opinion of Bond Counsel, under existing law, interest on the Series 2017D Warrants will not be excludable from gross income for federal income tax purposes. However, Bond Counsel is of the opinion that, under existing law, interest on the Series 2017D Warrants will be exempt from State of Alabama income taxation.
Collateral Tax Consequences
Except as expressly stated above, Bond Counsel expresses no opinion regarding any other federal or state tax consequences of acquiring, carrying, owning, or disposing of the Series 2017D Warrants. Prospective purchasers of the Series 2017D Warrants should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Series 2017D Warrants, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements.
Verification of Certain Computations Relating to Series 2017D Warrants
The accuracy of the arithmetical computations of the adequacy of the payments of principal and interest on the securities being held in the Series 2009A Escrow Fund, together with the initial cash balance in the Series 2009A Escrow Fund, to provide for the payment or redemption of the Refunded 2009A Warrants as contemplated by the Series 2009A Escrow Agreement will be verified by The Arbitrage Group, Inc., independent certified public accountants, Tuscaloosa, Alabama. Such verification will be based, in part, upon information supplied to such accountants by the Underwriters.
UNDERWRITING
The Series 2017C Warrants are being purchased from the City by Raymond James & Associates, Inc., The Frazer Lanier Company Incorporated, Stifel, Nicolaus & Company, Incorporated, Harbor Financial Services, LLC, and Securities Capital Corporation (the “Underwriters”). The Underwriters have agreed to purchase the Series 2017C Warrants for an aggregate purchase price of $______(which represents the face amount of the Series 2017C Warrants less underwriters’ discount of $______and original issue discount of $______). The initial public offering price set forth on the inside cover page may be changed by the Underwriters, and the Underwriters may offer and sell the Series 2017C Warrants to certain dealers (including dealers depositing the Series 2017C Warrants into investment trusts) and others at prices lower than the offering price set forth on the inside cover page. The Underwriters will purchase all the Series 2017C Warrants if any are purchased.
The Series 2017D Warrants are being purchased from the City by the Underwriters. The Underwriters have agreed to purchase the Series 2017D Warrants for an aggregate purchase price of $______(which represents the face amount of the Series 2017D Warrants less underwriters’ discount of $______). The initial public offering price set forth on the inside cover page may be changed by the Underwriters, and the Underwriters may offer and sell the Series 2017D Warrants to certain dealers (including dealers depositing the Series 2017D Warrants into investment trusts) and others at prices lower than the offering price set forth on the inside cover page. The Underwriters will purchase all the Series 2017D Warrants if any are purchased.
CONTINUING DISCLOSURE
General
The City has covenanted for the benefit of the holders of the Warrants to provide the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System (“EMMA”) with (i) certain financial information and operating data relating to the City on an annual basis (the “Annual Financial Information”) within 270 days after
16 the end of its fiscal year and (ii) notices (“Material Event Notices”) of the occurrence of the following events in a timely manner not in excess of 10 business days after the occurrence of the event:
1. A delinquency in payment of principal of or interest on the Warrants.
2. Non-payment related defaults under the proceedings of the City authorizing the Warrants, whether or not such defaults constitute an event of default thereunder, if material.
3. Unscheduled draws on any debt service reserve fund reflecting financial difficulties of the City.
4. Unscheduled draws on any credit enhancement or liquidity facility with respect to the Warrants reflecting financial difficulties of the City.
5. Substitution of a credit enhancer for the one originally described in the Official Statement (if any), or the failure of any credit enhancer respecting the Warrants to perform its obligations under the agreement between the City and such credit enhancer.
6. The existence of any adverse tax opinion with respect to the Warrants, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 TEB) or other material notices or determinations with respect to the tax status of the Warrants, or other material events affecting the tax status of the Warrants.
7. Any modification of the rights of the registered owners of the Warrants, if material.
8. Redemption of any of the Warrants prior to the stated maturity or mandatory redemption date thereof, if material, and tender offers with respect to the Warrants.
9. Defeasance of the lien of any of the Warrants or the occurrence of circumstances which, pursuant to such authorizing proceedings, would cause the Warrants, or any of them, to be no longer regarded as outstanding thereunder.
10. The release, substitution or sale of the property securing repayment of the Warrants, if material.
11. Any changes in published ratings affecting the Warrants.
12. Bankruptcy, insolvency, receivership or similar event of the City.
13. 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.
14. Appointment of a successor or additional trustee or the change of name of a trustee, if material.
In addition, the City has covenanted to provide in a timely manner to EMMA notice of the City’s failure to provide the Annual Financial Information on or before the date specified herein.
The Annual Financial Information will include financial information and operating data relating to the City of the type found in the section of this Official Statement called “RESULTS OF OPERATIONS” in Appendix A. In addition, the City will provide to EMMA, when and if available, audited financial statements prepared in accordance with accounting principles described in the audited financial statements included in this Official Statement as an appendix.
The City shall never be subject to money damages for its failure to comply with its obligations to provide the required information. The only remedy available to the holders of the Warrants for breach by the City of its
17 obligations to provide the required information shall be the remedy of specific performance or mandamus against appropriate officials of the City. The failure by the City to provide the required information shall not be an event of default with respect to the Warrants under the Warrant Ordinances. A failure by the City to comply with its obligations to provide the required information must be reported as described above and must be considered by any broker, dealer, or municipal securities dealer before recommending the purchase or sale of the Warrants in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Warrants and their market price.
No person other than the City shall have any liability or responsibility for compliance by the City with its obligations to provide information. The Paying Agent has not undertaken any responsibility with respect to any required reports, notices or disclosures.
The City retains the right to modify its obligations described above as long as such modification is done in a manner consistent with Rule 15c2-12 of the Securities and Exchange Commission.
Compliance with Prior Undertakings
For its fiscal years ended September 30, 2012, 2015, and 2016, the City failed to file its Annual Financial Information with EMMA on or before the due date as required by Rule 15c2-12 and the terms of continuing disclosure agreements executed by the City in connection with the issuance of certain of its existing indebtedness. The City also did not file a notice in accordance with Rule 15c2-12 with respect to its failure to provide its annual financial information for the fiscal years noted above.
In each of the last five years, although available publicly, the City failed to file its Annual Financial Information with EMMA as required by the terms of the City’s continuing disclosure agreement executed by the City in connection with the issuance of its $10,665,000 Limited Obligation Tax Increment Warrants, Series 2002; the City also did not file a notice in accordance with Rule 15c2-12 with respect to its failure to provide its annual financial information for such fiscal years. The City has now filed such information.
In each of the last five years, the City omitted certain of the information in its Annual Financial Information with EMMA as required by the terms of continuing disclosure agreements executed by the City in connection with the issuance of certain of its existing indebtedness. The City has now filed such information.
On September 12, 2014, Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc., downgraded from “AA-” to “A+” its rating of the City’s obligations secured by the full faith and credit of the City. The City failed to file a notice on EMMA reporting this downgrade. The City has now filed such notice. On November 3, 2016, S&P upgraded from “A+” to “AA-” its rating of the City’s obligations secured by the full faith and credit of the City; on November 10, 2016, the City filed a notice on EMMA reporting this upgrade.
Certain outstanding indebtedness of the City has been secured by various forms of credit enhancement, including bond insurance. The ratings of the providers of this credit enhancement have been downgraded at various times in the past five years. Information about the downgrades was publicly reported. The City did not file a notice in accordance with Rule 15c2-12 with respect to each downgrade.
Implementation of Continuing Disclosure Compliance Procedures
The City has adopted procedures (including implementation of the financial disclosure email reminder service provided by EMMA) to ensure the timely filing of information required by Rule 15c2-12 of the Securities and Exchange Commission and the continuing disclosure agreements described in this Official Statement.
RATINGS
Moody’s Investors Service, Inc., and Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc., have assigned ratings to the Warrants as indicated on the cover page.
18 Any definitive explanation of the significance of any such ratings may be obtained only from the appropriate rating agency. The City furnished to each rating agency the information contained in this Official Statement and certain other information respecting the City and the Warrants. Generally, rating agencies base their ratings on such materials and information, as well as on their own investigations, studies and assumptions.
The above ratings are not recommendations to buy, sell or hold the Warrants, and any such ratings may be subject to revision or withdrawal at any time by any such rating agency. Any downward revision or withdrawal of any or all of such ratings may have an adverse effect on the market price of the affected Warrants. Except as may be required in connection with the obligations described under the heading “CONTINUING DISCLOSURE”, neither the City nor the Underwriters have undertaken any responsibility either to bring to the attention of the Warrantholders any proposed revision, suspension or withdrawal of a rating or to oppose any such revision, suspension or withdrawal.
INDEPENDENT AUDITORS
The financial statements of the City included in Appendix B to this Official Statement have been audited by Smith, Dukes & Buckalew LLP, Mobile, Alabama, independent certified public accountants, as stated in their report appearing herein as Appendix B to this Official Statement. Such financial statements speak only as of September 30, 2016 and have been included as a matter of public record. Smith, Dukes & Buckalew LLP (1) has not been engaged to perform, and has not performed, any procedures with respect to such financial statements since the date of its report on such financial statements and (2) has not performed any procedures relating to this Official Statement. The permission of Smith, Dukes & Buckalew LLP for the use herein of its report on such financial statements has been sought and obtained.
FINANCIAL ADVISOR
PFM Financial Advisors LLC, Huntsville, Alabama (the “Financial Advisor”) is serving as financial advisor to the City in connection with the issuance of the Warrants. The Financial Advisor assisted in the preparation of this Official Statement and in other matters relating to the planning, structuring and issuance of the Warrants, and provided other advice to the City. The Financial Advisor will not engage in any underwriting activities with regard to the issuance and sale of the Warrants. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement, and is not obligated to review or ensure compliance with the undertaking by the City to provide continuing secondary market disclosure.
DISCLAIMERS AND OTHER MISCELLANEOUS MATTERS
This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or holders of any of the Warrants.
All quotations from and summaries and explanations of provisions of laws and documents herein do not purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions.
The order and placement of material in this Official Statement, including its appendices, are not to be deemed a determination of relevance, materiality or importance, and all material in this Official Statement, including its appendices, must be considered in its entirety.
The information in this Official Statement has been obtained from sources which are considered dependable and which are customarily relied upon in the preparation of similar official statements, but such information is not guaranteed as to accuracy or completeness.
19 The delivery of this Official Statement at any time does not imply that any information herein is correct as of any time subsequent to the date of this Official Statement.
All estimates and assumptions contained herein are believed to be reliable, but no representation is made that such estimates or assumptions are correct or will be realized.
No person, including any broker, dealer or salesman, has been authorized to give any information or to make any representation other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the City.
The Warrants will not be registered under the Securities Act of 1933, as amended, or any state securities laws and will not be listed on any stock or other securities exchange, and neither the Securities and Exchange Commission nor any federal, state, municipal or other governmental agency will pass upon the accuracy, completeness or adequacy of this Official Statement. Any representation to the contrary is a criminal offense. The Warrant Ordinances have not been qualified under the Trust Indenture Act of 1939, as amended.
Any information or expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create an implication that there has been no change as to the affairs of the City since the date hereof.
This Official Statement may contain forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the City’s current beliefs, expectations, and assumptions regarding the future of the City’s operations, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Forward-looking statements can be identified by words such as: “anticipate”, “intend”, “plan”, “goal”, “seek”, “believe”, “project”, “estimate”, “expect”, “strategy”, “future”, “likely”, “may”, “should”, “will”, and similar references to future periods. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of the City’s control. The City’s actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, prospective investors should not place undue reliance on these forward-looking statements. Important factors that could cause the City’s actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, population trends and political and economic developments that could adversely impact the collection of revenues and those factors described in this Official Statement under “RISK FACTORS”. Any forward-looking statement made by the City in this Official Statement is based only on information currently available to the City and speaks only as of the date on which it is made. The City undertakes no obligation to publicly update any forward-looking statement whether as a result of new information, future developments, or otherwise.
In connection with this offering, the Underwriters may over allot or effect transactions which stabilize or maintain the market price of the Warrants offered hereby at a level above that which might otherwise prevail in the open market, and such stabilizing, if commenced, may be discontinued at any time. The prices and other terms of the offering and sale of the Warrants may be changed from time to time by the Underwriters after the Warrants are released for sale, and the Warrants may be offered and sold at prices other than the initial offering prices, including sales to dealers, without prior notice.
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, its responsibilities to investors under the 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.
This Official Statement is being provided to prospective purchasers either in bound printed format or in electronic format. This Official Statement may be relied upon only if it is in its bound printed format or as printed in its entirety in such electronic format.
20 ADDITIONAL INFORMATION
For further information during the initial offering period with respect to the Warrants, contact Paul Wesch, Executive Director of Finance, City of Mobile, 205 Government Street, Mobile, Alabama 36602, telephone number (251) 208-7164, or Phil Dotts, Managing Director, PFM Financial Advisors LLC, 116 Jefferson Street South, Suite 301, Huntsville, AL 35801, telephone number (256) 536-3035.
4138504.6
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APPENDIX A
Information on the City of Mobile
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TABLE OF CONTENTS
Page
THE CITY ...... A-1 General ...... A-1 Governance and Administration ...... A-1 Executive, Legislative and Administrative Officials ...... A-1 City Services and Functions ...... A-3 Services and Functions Provided by Other Entities ...... A-4 Summary Table of Services and Functions ...... A-5 Employee Relations ...... A-6 Personnel ...... A-6 Retirement Systems ...... A-6 Other Post-Employment Benefits ...... A-7
FINANCIAL SYSTEM ...... A-7 General ...... A-7 Description of Major Sources of Revenues ...... A-7
RECENT DEVELOPMENTS ...... A-8 Airbus Facility ...... A-8 Downtown Development ...... A-9 Other Developments ...... A-9
RESULTS OF OPERATIONS ...... A-9 General ...... A-9 Comparative Statement of General Fund Revenues and Expenditures ...... A-9
BUDGET INFORMATION ...... A-11 City Budgeting Process ...... A-11 FY2017 and FY2018 General Fund Budget Information ...... A-11 Fiscal Year 2017 General Fund Financial Results ...... A-12
DEBT MANAGEMENT ...... A-12 General ...... A-12 Outstanding Indebtedness ...... A-13 Capital Leases ...... A-13 Other Indebtedness ...... A-13 Anticipated Indebtedness ...... A-14 Constitutional Debt Limit ...... A-14 Debt Service Requirements on General Obligation Debt ...... A-16 Direct and Overlapping Debt ...... A-16 Debt Ratios ...... A-17
AD VALOREM TAXATION ...... A-18 General ...... A-18 Classification of Taxable Property ...... A-18 Assessment Ratio Adjustment ...... A-18 Rate Adjustments...... A-19 Ceiling on Ad Valorem Taxes ...... A-19 Ad Valorem Tax Rates ...... A-20 Assessed Valuation of Taxable Property ...... A-20 Largest Ad Valorem Taxpayers ...... A-21
A-i LITIGATION RELATING TO THE CITY ...... A-22
ECONOMIC AND DEMOGRAPHIC INFORMATION ...... A-22 General ...... A-22 Population ...... A-22 Employment ...... A-22 Major Employers ...... A-24 Income Levels ...... A-24 Retail Sales ...... A-25 Housing and Construction ...... A-25 Education ...... A-27 Health Care Services ...... A-28 Utilities and Media ...... A-29 Recreation ...... A-29 Transportation ...... A-29 Financial Institutions ...... A-31
A-ii THE CITY
General
The City is a municipal corporation organized under the laws of the State of Alabama. The City is located in Mobile County, Alabama, approximately 194 miles southwest of the geographical center of Alabama. The population of the City is 192,904 according to the most recent estimate (2016) by the U.S. Census Bureau. The corporate limits of the City encompass approximately 180 square miles.
Governance and Administration
The City is governed under the mayor-council form of government. The Mayor is elected on an at-large basis for a 4-year term and seven Council members are elected from single-member districts, each for a 4-year term. The Mayor serves as chief executive officer of the City and is responsible for the daily operations of all departments of the City. The Council acts as the legislative branch of the City. The Council elects one of its members to serve as President and one as Vice President for the four-year term. The Mayor has the power to veto resolutions or ordinances of the Council, but the Council may override his veto by a vote of two-thirds of the Council members. The Council may override a veto of the budget by a simple majority.
The City is divided into three divisions: Public Works, Finance, and Public Safety. Each division may have an executive director appointed by the Mayor with the approval of a vote of five members of the Council.
Both the City of Mobile and Mobile County have administrative offices at Mobile Government Plaza, a 581,000 square feet office building and courthouse completed in 1994. The Plaza includes a parking garage and is located in downtown Mobile.
Executive, Legislative and Administrative Officials
Executive
WILLIAM S. (SANDY) STIMPSON was elected to serve as the 108th Mayor of the City in the fall of 2013. Upon graduating from the University of Alabama in 1975 with a bachelor’s degree in civil engineering, Mr. Stimpson returned to his hometown of Mobile, and began a nearly 40-year career in his family’s lumber manufacturing business serving ultimately as CFO and later its Executive Vice President. Mr. Stimpson’s business and civic endeavors are numerous and varied. He has served on the board of the Boy’s and Girl’s Club, Alabama Wildlife Federation, Governor’s Conservation Advisory Board, Partners for Environmental Progress, the Mobile Area Chamber of Commerce, where he served as Chair in 2009, and the Business Council of Alabama, where he served as chair in 2010. In addition, he has been the chairman and a long serving board member of both UMS- Wright Preparatory School and Prichard Preparatory School. Mr. Stimpson is also a member of the University of Alabama’s President’s Cabinet and a member of the Board of Trustees of the University of South Alabama. Mr. Stimpson will face re-election in August of 2021.
Legislative
Date of Expiration Present Business Name/District of Current Term Occupation
Fredrick D. Richardson, Jr. November 2021 Retired United States Postal Councilmember, Dist. 1 Service
Levon C. Manzie November 2021 Assistant Pastor of St. Joseph Councilmember, Dist. 2 Missionary Baptist Church
A-1 C.J. Small November 2021 Owner/Operator of Small’s Councilmember, Dist. 3 Mortuary and Cremation Service
John C. Williams November 2021 Retired Colonel U.S. Army Councilmember, Dist. 4
Joel Daves November 2021 Retired Attorney and Banking Councilmember, Dist. 5 Executive at Regions Bank
Bess Rich November 2021 Retired Educator Councilmember, Dist. 6
Gina Gregory November 2021 Public Relations and Councilmember, Communications Consultant Dist. 7
Administrative
PAUL C. WESCH is the Executive Director of Finance and Acting Chief of Staff for the City, appointed to that position in November 2013 by Mayor William “Sandy” Stimpson. In that capacity, he manages the fiscal affairs of the City, including financial planning, budgetary preparation and compliance, accounting, revenue collection and audit, procurement, capital projects accounting, treasury, human resources and payroll. Before joining Mayor Stimpson’s staff, Mr. Wesch was a director, executive vice president and general counsel for The Mitchell Company, a southeastern regional real estate development firm. He remains a member of the board of directors of The National Security Group, an Alabama-based property and casualty and life insurance company. In addition, Mr. Wesch has served in a number of capacities with governmental and affiliated boards and commissions, including, as trustee for both the Mobile police and firefighters pension plan and the Mobile transit workers pension plan. He also currently a member of The University of Alabama President’s Cabinet and is a graduate of Leadership Mobile. Mr. Wesch holds an undergraduate degree in political science, a juris doctorate in law and an L.L.M. in taxation, all conferred by The University of Alabama. He is a member of the Alabama State Bar and Mobile County Bar Association and is admitted to practice before the United States District Court, the U.S. Court of Federal Claims and the U.S. Tax Court.
RICARDO WOODS is the City Attorney for the City and a law partner at Burr & Forman, LLP, a national full-service law firm, headquartered in Birmingham, Alabama. He was appointed to the City Attorney position by Mayor William S. Stimpson in 2013. In his government service capacity, Mr. Woods acts as general counsel for the City, serves as chief legal advisor to Mayor Stimpson, manages the municipality’s outside litigation and performs the duties of executive officer in the City’s internal legal department. In addition to his governmental practice, Mr. Woods continues his trial practice with Burr & Forman where he is senior member of the law firm’s Tort Insurance & Product Liability (TIPS) group. As an attorney with Burr & Forman, Mr. Woods has represented a number of the Mobile metro area’s largest employers and manufacturers. He is licensed to practice law in both Alabama and Mississippi in both state and federal courts, respectively. Mr. Woods’ civic endeavors are numerous and varied. In 2009, Mr. Woods was recognized as one of “Mobile’s Top 40 Under 40”, a distinction that recognizes the 40 outstanding community leaders under the age of 40 who demonstrate excellence in their respective disciplines. Mr. Woods is a native of Natchez, Mississippi; he received his Bachelor of Arts in Political Science from the University of Southern Mississippi, and earned his J.D. from Cumberland School of Law.
WILLIAM (BILL) J. HARKINS, JR. is currently the Executive Director of Public Works for the City. He was appointed to the position by Mayor William “Sandy” Stimpson in 2014. As Executive Director of Public Works, Mr. Harkins manages all departments and programs under him, which include Public Works, Parks and Recreation, Equipment Services, Traffic Engineer, Electrical Department and Keep Mobile Beautiful. Mr. Harkins transitioned to this role in Mobile’s city government after having previously served as the CitiSmart Coordinator from 2006-2014 where he oversaw the performance measurement of all departments in the City. A native of Mobile, Alabama, he received his Bachelor of Science from the University of South Alabama before being
A-2 commissioned a Second Lieutenant in the U.S. Marine Corps in 1985. He is also a graduate of the University of Oklahoma, earning a Master of Public Administration degree in 1997 and Master of Arts in Theology degree from Springhill College in 2016. After twenty-one years of active duty, most of that time spent serving as a Military Police Officer at U.S. Marine Corps bases throughout world, Mr. Harkins retired as a Lieutenant Colonel in 2006. His military awards include the Bronze Star, four Meritorious Service Medals, the Afghanistan Campaign Medal and the Humanitarian Service Medal.
DIANNE K. IRBY joined the Mayor’s Executive Staff in February 2014 as Executive Director of Engineering and Development. She has overall responsibility for several departments including Engineering, Real Estate Asset and Management, and Environmental Services. This includes some of the Mayor’s key initiatives: development of a multi-year capital improvement plan for infrastructure; storm water management planning; and development of a comprehensive long-range master plan for the City. Prior to joining the Mayor’s team, Ms. Irby served as managing director of the Southeast Infrastructure markets for KBR (Kellogg Brown & Root), a global engineering and construction company. She spent over 30 years with the company in leadership roles both in Houston, Texas, and later in Mobile, Alabama. In her civic capacity, Mr. Irby has served in leadership roles for several charities. Most notably, she was elected to serve as Executive Director for the United Way of Southeast Alabama; in addition, she was the first woman to chair the Board of Directors for the Mobile Area Chamber of Commerce in 2000. Ms. Irby is a graduate of Auburn University, graduating Magna Cum Laude and inducted into the Phi Kappa Phi National Scholastic Honor Society.
City Services and Functions
Major governmental services and functions performed by the City are summarized below. The following summaries are illustrative only, and the obligations and practices of the City in performing those functions are qualified by specific legal, organizational, accounting and managerial requirements.
Engineering and Development. Through its Engineering and Development Department, the City manages the planning and delivery of infrastructure improvements, including streets, sidewalks and drainage facilities. The Engineering and Development Department is also responsible for the construction, repair and maintenance of City buildings, such as police and fire stations, museums and libraries. As of September 30, 2017, the Engineering and Development Department had 116 employees.
Public Works. Through its Public Works Department, the City maintains streets, sidewalks, street lighting, storm drainage sewers, pipes, and ditches. The Public Works Department of the City is also responsible for the fleet maintenance, removal and disposal of refuse and garbage, street cleaning and similar activities. As of September 30, 2017 the Public Works Department had 342 employees.
Revenues of the Public Works Department are derived, in part, from the City’s General Fund, which provides funding for health and sanitation purposes, and from the City’s Capital Improvements Fund, which consists of revenues generated from the issuance of long-term securities and certain taxes. Capital improvements for Public Works financed with proceeds of long-term debt of the City are accounted for in separate capital funds and are not reflected in General Fund Public Works revenues and expenditures.
Protection and Safety. Fire and police protection services are provided by the City’s Fire Department and Police Department. The City has eighteen fire stations throughout the City and four police buildings. As of September 30, 2017 the Fire Department had 471 employees and the Police Department had 695 employees.
The revenues and expenditures of the Fire and Police Departments are accounted for in the General Fund, the Strategic Plan Fund and the Advanced Life Support Enterprise Fund. Other protection and safety functions of the City, such as land use/code administration and municipal court systems, are also accounted for in the General Fund as a protection and safety function.
Solid Waste Disposal. The Public Works Department of the City provides weekly curbside waste pickup for approximately 72,000 residential customers. Pursuant to ordinance, the City has delegated responsibility for disposal of this waste stream to the City of Mobile Solid Waste Authority, a public corporation created for the purpose of owning and operating the Chastang Landfill, the only waste disposal facility used by, or available to, the City.
A-3 Chastang Landfill is managed pursuant to a solid waste management contract between the Solid Waste Authority and an affiliate of Waste Management, Inc., Houston, Texas (the “Contractor”). Pursuant to the contract, the Contractor will manage the Authority’s landfill for the greater of 20 years or the life of the Chastang Landfill. During the term of the contract, the Contractor is required to receive, process, dispose of, and otherwise handle waste generated by the City and in the unincorporated areas of Mobile County. The Contractor is also responsible for the construction of Subtitle D cells and for closure and post-closure costs for existing and future sites. The Solid Waste Authority retains title to the existing landfill and all improvements thereto.
Cultural and Recreational. The City-owned civic center, convention center, recreation facilities and public libraries are among the major undertakings of the City in this category. Fort Conde, a replica of a French fort on its original site, was reconstructed in 1975 near the Municipal Civic Center. An art museum and gallery, tennis center, baseball stadium, theater venue, maritime museum, science museum, and public parks are also provided by the City.
Transportation. On February 26, 1999, the Mobile Transit Authority, the public corporation organized for the purpose of operating the City’s bus system, was dissolved and its assets were transferred to the City. Since that time, the City has contracted with private corporations to manage the day-to-day operations of the bus system. At present, the City has a contract for the management of its transit system, the WAVE, with McDonald Transit Associates, Inc., which operates the WAVE through a wholly owned subsidiary, Mobile Transit Management, Inc. The primary revenues for operation of the system consist of passenger fare revenues, federal government subsidies and contributions from the City into an enterprise fund.
Services and Functions Provided by Other Entities
Board of Water and Sewer Commissioners of the City of Mobile. The Board of Water and Sewer Commissioners of the City of Mobile (“MAWSS”) is a public corporation formed pursuant to an ordinance of the City adopted in 1952. The members of the governing body of MAWSS are appointed by the City. MAWSS has the powers, among others, to acquire, construct, improve, operate and maintain any water system or any sewer system within or without the corporate limits of the City and to issue revenue bonds for any of the corporate purposes. The City exercises no oversight responsibility over MAWSS.
Education. As described more particularly in “ECONOMIC AND DEMOGRAPHIC INFORMATION”, the Mobile County Board of School Commissioners administers and supervises public schools in the City.
Gas and Electric. Spire, Inc., an investor-owned utility, provides natural gas service in the City and Alabama Power Company, an investor-owned utility, provides electrical service in the City.
Mobile Housing Board. The Mayor of the City appoints the members to the Mobile Housing Board (the “Housing Board”) and can remove members for cause. The Mayor’s appointments are subject to confirmation by a vote of five City Council members. The Housing Board has complete legislative and administrative authority. The Housing Board’s primary sources of revenues come from rents and federal government subsidies. The Housing Board currently has outstanding bonds that are not obligations of the City.
Mobile Airport Authority. The Mayor of the City appoints members of the governing board of the Mobile Airport Authority (the “Airport Authority”) and can remove members for cause. The Mayor’s appointments are subject to confirmation by a vote of five City Council members. The City has no other oversight responsibility. The Airport Authority has complete legislative and administrative authority. The Airport Authority has the ability to issue revenue obligations which are not obligations of the City, and its operations are financed through various sources of revenue.
Mobile Public Library. The Mobile Public Library (the “Library”) has its own governing body which is appointed by the City Council. The City contributes financial support to the Library on an annual basis. The Library’s other sources of revenue come from state and federal financial assistance, other municipalities, Mobile County and user fees. The Library is a component unit of the City of Mobile.
Mobile Museum Board. The City appropriates funds to the Mobile Museum Board (the “Museum Board”) to carry out its goals but has no legal obligation to continue funding the activities. The City Council appoints the
A-4 members of the Museum Board. The City has no other financial, operational or managerial control over this organization.
The Public Park and Recreation Board (Ernest F. Ladd Stadium). The City appropriates funds to the Public Park and Recreation Board for operational and capital outlay purposes. The members of the Board are appointed by the City Council. The Board’s other sources of revenue come from the rental of Ladd Stadium.
Mobile Board of Health. The Mobile Board of Health (the “Board of Health”) has 5 members. The members are elected by the Mobile County Medical Society for 5-year terms. The City is legally required to contribute financial support to the Board of Health on an annual basis. The Board of Health receives contributions from other municipalities included within Mobile County as well as from Mobile County. The Board of Health also receives state and federal financial assistance. The City has no other financial, operational or managerial control over this organization.
Mobile Civil Defense. The board members of this organization are the mayors for the municipalities in Mobile County and the President of the Mobile County Commission or their appointees. The City is legally required to contribute financial support to the Mobile Civil Defense on an annual basis. Mobile Civil Defense also receives state and federal financial assistance. The City has no other financial, operational or municipal control over this organization.
Mobile Bay Convention & Visitors Bureau. The Mobile Bay Convention & Visitors Bureau (“MBCVB”) is a private, non-profit corporation governed by a board of directors composed of fifteen members, one of which is appointed by the Mayor and seven of which are appointed by each member of the City Council. The remaining members are appointed by various organizations representing the hospitality industry in the Mobile area. The City has contracted with the MBCVB to provide services to the City related to the marketing of the City’s Convention Center and its tourist attractions. The service contract has a term for three years and automatically renews for another year at the end of each year unless the City exercises its option to allow the contract to expire at the end of the then existing three year term. The City is legally obligated pursuant to the services contract to pay the MBCVB for the services it renders under the contract. Other than the rights given to the City under its contract with the Mobile Convention and Visitors Corporation, the City exercises no oversight responsibility over it and has no financial, operational or managerial control over it.
Personnel Board for Mobile County. The five board members of the Personnel Board of Mobile County (the “Personnel Board”) are appointed by a Supervisory Committee. The Supervisory Committee consists of the mayors for all the cities in Mobile County, the County Sheriff, the County License Commissioner, the County Revenue Commissioner and various county judges. The City is legally required to contribute financial support to the Personnel Board on an annual basis. The Personnel Board also receives contributions from all municipalities included within Mobile County as well as from Mobile County. The City has no other financial, operational, or managerial control over this organization.
Summary Table of Services and Functions
The following table lists the governmental services provided by the City or other levels of government or organizations.
Governmental Services Provided by the City and Others
City County State Independent
Police protection (1) Principal Shared Shared Fire protection Exclusive Street maintenance and repair (2) Principal Shared Solid waste disposal(3) Shared Shared Water service(4) Exclusive Sanitary sewer service(4) Exclusive Storm water sewers Exclusive
A-5 Gas and electric services (5) Exclusive Courts (6) Shared Principal Road construction (7) Principal Shared Education (8) Exclusive Health (9) Shared Shared Recreation (10) Exclusive Social welfare Shared Principal Aviation (11) Exclusive Public transportation (12) Principal ______
(1) The City, the County and the State have co-extensive law enforcement jurisdiction. (2) The State is responsible for maintaining state and federal highways in the city limits. (3) The City’s Public Works Department provides weekly curbside waste pickup; the City of Mobile Solid Waste Authority owns and operates the Chastang Landfill, the only waste disposal facility used by, or available to, the City. (4) MAWSS has constructed and maintains sewer plants and trunk line sewers. MAWSS also provides water service in the City. (5) Gas service is provided by Spire, Inc., an investor-owned utility. Electric service is provided by Alabama Power Company, an investor-owned utility. (6) The City operates a municipal court, a limited jurisdiction court which is a component of the Unified Judicial System of the State. (7) The City builds and maintains streets that are not state or federal highways. (8) The Mobile County Board of School Commissioners operates public schools within the City. (9) The County, the City and other cities in the County contribute to the Mobile County Health Department. As described more particularly in “ECONOMIC AND DEMOGRAPHIC INFORMATION”, there also are numerous hospitals in the area. (10) The City finances all major public recreation facilities in its jurisdiction. (11) The state-licensed airport is operated by the Mobile Airport Authority. (12) An area bus system is operated by the City, which has contracted with a private corporation to manage the day-to-day operations of the bus system.
Employee Relations
The City considers relations with its employees to be satisfactory. Although some employees of the City are members of labor unions or similar employee organizations, the City does not bargain collectively with any labor union or employee organization.
Personnel
The City employed approximately 2,115 full-time personnel in its several departments as of a recent date. The benefits and compensation for merit system employees of the City’s several departments are established in accordance with the rules and regulations of the Personnel Board for Mobile County and are paid from the City’s General Fund.
Although some employees of the City are members of labor unions or similar employee organizations, the City does not bargain collectively with any labor union or employee organization.
Retirement Systems
ERS. Employees of the City, other than sworn police and certified fire-rescue employees, participate in a retirement system established by the Legislature of Alabama known as the Employees’ Retirement System of Alabama (“ERS”), an agency multiple-employer defined benefit pension plan. The City’s obligations under ERS are described more particularly in the audited financial statements of the City included in Appendix B to this Official Statement. As detailed in the audited financial statements, at present, the City has significant net pension liabilities with respect to ERS.
A-6 PFFRP. Sworn police and certified fire-rescue employees of the City participate in a retirement system established by the Legislature of Alabama known as the Police and Firefighters Retirement Plan (“PFFRP”), a single-employer defined benefit pension plan. The City’s obligations under PFFRP are described more particularly in the audited financial statements of the City included in Appendix B to this Official Statement. As detailed in the audited financial statements, at present, the City has significant net pension liabilities with respect to PFFRP.
TWPP. Through agreement with McDonald Transit Associates, Inc. (the private company that operates the City’s bus system), the City is obligated to reimburse Mobile Transit Management, Inc. for obligations under a retirement plan known as the Transit Workers Pension Plan (“TWPP”), a single-employer defined benefit pension plan. The City’s obligations under TWPP are described more particularly in the audited financial statements of the City included in Appendix B to this Official Statement. As detailed in the audited financial statements, at present, the City has significant net pension liabilities with respect to TWPP.
Other Post-Employment Benefits
In June 2004, the Governmental Accounting Standards Board issued Statement No. 45 (“GASB 45”), which is entitled Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions. This Statement establishes standards for the measurement, recognition and presentation of post- employment benefits other than pension benefits (“OPEB”) expenses/expenditures and related liabilities (assets), note disclosures and, if applicable, required supplemental information in the financial reports of state and local governmental employers. GASB 45 is intended to improve the relevance and usefulness of financial reporting by (a) requiring systematic, accrual-basis measurement and recognition of OPEB costs (expense) over a period that approximates employees’ years of service and (b) providing information about actuarial accrued liabilities associated with OPEB and whether and to what extent progress is being made in funding the plan.
The City’s OPEB obligations are described more particularly in the audited financial statements of the City included in Appendix B to this Official Statement. As detailed in the audited financial statements, at present, the City has significant unfunded actuarial accrued liabilities with respect to its OPEB obligations.
FINANCIAL SYSTEM
General
The City maintains a financial reporting system which provides timely and accurate reports of receipts and expenditures. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding (i) the safeguarding of assets against loss from unauthorized use or disposition, and (ii) the reliability of financial records for preparing financial statements and maintaining accountability for assets. Activities of the City are monitored internally on a monthly basis and are audited annually, as required by law, by independent certified public accountants. The report of such accountants with respect to certain of the City’s financial statements for the fiscal year ended September 30, 2016 is included as Appendix B to this Official Statement.
The City operates on a fiscal year basis beginning October 1 and ending September 30. The City prepares a budget for each fiscal year. The significant accounting practices for City finances are summarized in the audited financial statements of the City included in Appendix B to this Official Statement. All revenues and expenditures of the City are accounted for in a series of funds (including a General Fund), which are described in the City’s financial statements.
Description of Major Sources of Revenues
General. Under applicable judicial precedents, neither the general sales and use tax nor any business license tax may be levied at rates that are confiscatory or unreasonable, nor may the rate of any such taxes in the police jurisdiction of a municipality be fixed at a rate that will yield an amount in excess of the cost of furnishing police and fire protection and other essential services to the activity or person being taxed.
The City’s major sources of revenues are as follows:
A-7 Sales and Use Taxes. The City levies a sales and use tax on retail sales of personal property within city corporate limits at the general rate of 5% of the price of all purchases (2.5% of the price of all purchases outside the corporate limits of the City but within its police jurisdiction). The sales and use tax levied by the City parallels the sales and use tax of the State of Alabama. The sales and use tax is the largest source of income to the City. One percent (1%) of the general sales tax rate of 5% was implemented beginning November 1, 2012 and, unless extended, will expire on September 30, 2018. Should this one percent (1%) expire on September 30, 2018, the City expects the annual amount of the sales tax collected to decrease by approximately $31 million beginning in the City’s fiscal year ending September 30, 2019.
Business Licenses. The City levies license taxes on the privilege of engaging in certain businesses and professions within the corporate limits of the City. Most license taxes are computed as a stated amount plus a percentage of gross receipts based on a graduated scale.
Ad Valorem Taxes. Property or ad valorem taxes are levied under various provisions of the constitution and statutes of Alabama and may be used only for the purpose or purposes for which they are levied. The City levies a 7-mill tax for general municipal purposes, proceeds of which are deposited in the General Fund. Under present law, the rates at which local ad valorem taxes are levied may be increased only after approval by the legislature and a majority vote of the qualified electors of the affected jurisdiction. See “AD VALOREM TAXATION”.
Lodging and Restaurant Taxes. The City levies a gross receipts license tax against every person engaged in the business of operating hotels, motels, tourist courts, tourist cabins, lodging houses and rooming houses at the general rate of 8% (3% in the police jurisdiction). The City also levies a sales tax on food service establishments equal to 5% of the gross proceeds of sales of food and/or beverage for consumption, which requires a Board of Health permit for sale thereof, within the City.
Motor Fuel Taxes. The City levies a motor fuel tax on the sale of (1) gasoline irrespective of the use for which it is sold; (2) motor fuels, other than gasoline, when such fuels are sold for use in powering motor vehicles; and (3) other fuels of all kinds sold for use in powering jet aircraft.
Tables of Major Sources of Revenues. Tables showing certain of these revenues for recent fiscal years are included in the audited financial statements of the City included in Appendix B to this Official Statement.
RECENT DEVELOPMENTS
Airbus Facility
Airbus Group SE, the European aerospace company, recently established a major presence in the Mobile area. Airbus’ A320 family jetliner assembly facility in Mobile is the company’s first production site in America. This facility commenced aircraft assembly in July 2015 and delivered its first completed aircraft – an A321 – in April 2016 to U.S. customer JetBlue. The facility is expected to deliver four aircraft per month by the end of 2017. The $600-million, 53-acre facility, located at the Mobile Aeroplex at Brookley, manufactures and assembles the A319, A320 and A321 aircraft, all part of the Airbus A320 family. The facility is expected to employ up to 1,000 full-time workers when at full capacity.
Airbus and Canadian manufacturer Bombardier, Inc. unveiled on October 16, 2017, a new collaboration. Airbus will take a majority stake in the partnership building Bombardier’s new C Series jets and plans to build a second final assembly line at the Mobile Aeroplex at Brookley in order to serve U.S. customers.
The Mobile A320 family and C Series assembly lines build on an already strong presence of Airbus in Mobile. This presence also includes an engineering center at the Mobile Aeroplex at Brookley that employs more than 200 engineers and support staff, as well as Airbus’ North American military customer services operation near the Mobile Regional Airport.
A-8 Downtown Development
Downtown Mobile has seen significant development in recent years, including the opening of the Battle House Renaissance Hotel (238 rooms) and the RSA Battle House office tower (433,000 rentable square feet) and the relocation by Canfor Southern Pine, a Canadian forestry products company, of its U.S. headquarters to downtown Mobile. Additionally, ongoing and planned multifamily housing investments in downtown Mobile are expected to increase the residential population of downtown Mobile by 33%, helping the City create a more vibrant, 24/7 economy in the area.
Other Developments
Other recent economic development successes include (1) Amazon, which announced construction of a 350,000-square-foot sortation center in the Mobile area that is expected to employ more than 360 part-time employees and an additional 1,000 seasonal employees; and (2) Wal-Mart, which is expected to invest $135,000,000 in building a 2.5-million-square-foot direct import distribution center in Mobile. The Wal-Mart distribution facility will stock the company’s other distribution centers along the central Gulf Coast and is expected to create 550 new jobs.
RESULTS OF OPERATIONS
General
This section of the Official Statement presents certain historical financial information concerning the City. The information in this section will be updated annually and such annual report will be filed with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System in accordance with the requirements of Rule 15c2-12 of the Securities and Exchange Commission. See “CONTINUING DISCLOSURE”.
Comparative Statement of General Fund Revenues and Expenditures
The following table sets forth revenues, expenditures and changes in fund balance for the City’s General Fund for the four fiscal years ended September 30, 2013 through 2016. This information was extracted from the audited financial statements of the City for fiscal years ending September 30, 2013 through 2016. The audited financial statements for fiscal year 2016 are included in Appendix B to this Official Statement. Audited financial statements for prior fiscal years may be obtained from the City upon request or from the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System.
A-9 City of Mobile, Alabama Statements of Revenues, Expenditures and Changes in General Fund Balances
2013 2014 2015 2016 Revenues Taxes $152,093,165 $158,457,909 $184,738,770 $177,030,713 Licenses and permits 33,651,069 36,380,782 35,916,918 36,615,641 Intergovernmental 137,740 65,645 102,817 79,906 Charges for services 8,214,246 8,257,636 7,191,940 6,744,432 Fines and forfeitures 4,548,189 3,106,672 2,498,100 1,900,795 State and federal assistance 9,208,009 175,710 125,436 118,537 Investment Income 68,184 57,279 46,700 123,953 Other revenue 785,554 1,384,507 408,889 609,081 Total revenues 208,706,156 207,886,140 231,029,570 223,223,058 Expenditures Current: General government 16,795,637 15,910,198 16,284,708 13,292,931 Economic development 832,668 854,155 1,175,456 939,655 Engineering, development & build(1) - - - 11,738,404 Public safety 83,692,248 79,698,315 81,826,745 83,172,947 Public works 32,913,792 34,013,827 33,032,508 25,123,159 Culture and recreation 13,475,345 13,321,383 14,495,545 13,499,894 Finance 4,542,960 5,028,125 5,149,172 5,052,016 Nondepartmental 51,717,516 43,620,850 37,453,751 41,086,215 Debt Service: Principal payments - - - 75,000 Interest and fees 48,635 45,333 43,766 11,615 Total expenditures 204,018,801 192,492,186 189,461,651 193,991,836 Excess (deficiency) of revenue over (under) expenditures 4,687,355 15,393,954 41,567,919 29,231,222 Other Financing Sources (Uses) Transfers in 8,060,543 27,584,645 5,968,195 7,111,434 Transfers out (25,394,124) (23,574,026) (24,420,698) (44,014,048) Proceeds from disposal of assets 18,121 7,124 13,025 4,277 Total other financing sources (uses) (17,315,460) 4,017,743 (18,439,478) (36,898,337) Net change in fund balance (12,628,105) 19,411,697 23,128,441 (7,667,115) Fund balances, beginning of the year 19,839,878 3,258,018 19,230,002 42,358,442 Adjustment to beginning fund balance (3,953,755) (3,439,713) - - Fund balances, end of the year $3,258,018 $19,230,002 $42,358,442 $34,691,327 ______
(1) “Engineering, development & build” is a new category used by the City in FY2016 and pulled departments that had previously been included in Public Works, General Government, and Economic Development.
A-10
BUDGET INFORMATION
City Budgeting Process
The City follows the following procedures in establishing its budget for each fiscal year:
• Prior to August 20, the Mayor submits to the City Council a proposed current revenue and expenditure budget for the general operations of the City government for the fiscal year beginning October 1, which constitutes the General Fund budget, a capital budget and a budget message. By law, expenditures may not exceed revenues and surplus available, if any.
• A public hearing is held to obtain final taxpayer input, and necessary revisions are made not later than September 30.
• The budget is adopted by a majority vote of the City Council, and any required revenue measures are legally enacted through passage of an ordinance.
• Changes or amendments to budgeted expenditures of the City at the function and additional appropriations level must be approved by the City Council upon the recommendation of the Mayor.
• Departmental expenditures may not legally exceed budgetary appropriations for the General Fund in total, although individual departmental expenditures may exceed departmental budgets. Accordingly, the legal level of budgetary control is established by function and activity within the General Fund for administrative control at the departmental level. All unencumbered balances in the General Fund lapse at year-end.
FY2017 and FY2018 General Fund Budget Information
The table below sets forth the following budget information for the City’s General Fund: (1) approved budget for the City’s General Fund for the fiscal year ending September 30, 2017; and (2) approved budget for the City’s General Fund for the fiscal year ending September 30, 2018. The information shown below is unaudited.
City of Mobile Comparative General Fund Budgets Fiscal Years Ended September 30, 2017, and 2018
2017 Approved 2018 Approved Budget Budget Revenue and Transfers In: Taxes $186,340,467 $176,647,418 Licenses 36,641,339 36,797,315 Other 182,451 252,180 Fees 7,452,550 7,162,153 Fines & Forfeitures 3,018,500 1,935,733 Interest Income 350,000 161,288 Miscellaneous Revenues 75,000 238,237 Recycling Fees - 80,276 Sale of Assets 13,000 4,288 Transfers In 2,021,000 10,370,743
A-11 Total Revenues and Transfers In 236,094,307 233,649,631 Carryover from reserve surplus 13,232,555 8,580,051 Total Resources 249,326,862 242,229,682 Expenditures and Transfers Out: Administration 6,723,442 5,108,099 City Clerk/Council 1,721,329 1,651,892 Communications & External Affairs 657,718 692,720 Public Safety 84,838,460 83,837,536 Public Works 30,898,114 29,504,932 Parks & Recreation 12,755,014 10,795,417 Finance 5,963,465 5,911,218 Engineering & Development 11,890,766 9,673,159 Build Mobile 3,630,615 4,470,554 Neighborhood Services 112,616 1,304,594 Civic Engagement 993,514 4,089,905 Information Technology 5,011,603 4,944,881 City Hall Overhead 3,753,548 3,982,200 Reserve for Retirements 2,000,000 2,000,000 Other Cost Centers 50,889,947 54,122,657 Transfers Out 22,764,824 15,466,923 Total Exp and Transfers Out 244,604,975 237,556,687
Budgeted Reserve $4,721,887 $4,672,995
Fiscal Year 2017 General Fund Financial Results
Details regarding the City’s unaudited General Fund results, including variances to the General Fund Budget can be found in the City’s Monthly Financial Reports, which are available through the website of the City of Mobile at http://www.cityofmobile.org/financials_monthlystatement.php.
DEBT MANAGEMENT
General
The principal forms of indebtedness that the City is authorized to incur include general obligation bonds, general obligation warrants, general obligation bond anticipation notes, revenue anticipation notes, gasoline tax anticipation bonds, and various revenue anticipation bonds and warrants relating to enterprises. In addition, the City has the power to enter into certain leases which constitute a charge upon the general credit of the City and to guarantee obligations of certain public corporations affiliated with the City.
In general, the issuance of general obligation bonds requires voter approval. The following types of obligations may be issued or incurred without voter approval: (1) general obligation warrants; (2) general obligation refunding bonds; (3) certain revenue anticipation bonds, warrants and notes; (4) general and special obligation bonds financing street, sidewalk and sewer improvements supported, in whole or in part, by assessments; and (5) capitalized lease obligations that are funded on a “year-to-year basis”. The issuance by the City of its Tax-Exempt General Obligation Warrants, Series 2017C (the “Series 2017C Warrants”) and its Taxable General Obligation Warrants, Series 2017D (the “Series 2017D Warrants”, together with the Series 2017C Warrants, the “Warrants”) does not require voter approval.
The City has never defaulted in the payment of debt service on its bonds, warrants or other funded indebtedness, nor has the City ever refunded any funded indebtedness for the purpose of preventing or avoiding such a default.
A-12 Outstanding Indebtedness
Long-Term Indebtedness. Following the issuance of the Warrants, the City will have the following long- term indebtedness outstanding:
Description of Indebtedness Source of Payment Principal Balance
Tax-Exempt General Obligation Warrants, Series 2017A general obligation $64,610,000 Tax-Exempt General Obligation Warrants, Series 2017B general obligation(1) 4,430,000 Tax-Exempt General Obligation Warrants, Series 2017C general obligation 9,045,000* Taxable General Obligation Warrants, Series 2017D general obligation 48,895,000* Tax-Exempt General Obligation Warrants, Series 2016A general obligation 38,014,000 Taxable General Obligation Warrants, Series 2016C general obligation 17,735,000 Tax-Exempt General Obligation Warrants, Series 2011 general obligation 8,300,000 Tax-Exempt General Obligation Refunding Warrants, Series general obligation 2009A 9,925,000* Taxable General Obligation Build America Warrants, Series general obligation 2009B 16,765,000 Taxable General Obligation Recovery Zone Economic general obligation Development Warrants, Series 2009C 6,430,000 Tax-Exempt General Obligation Refunding and Improvement general obligation Warrants, Series 2008B 10,735,000* Tax-Exempt General Obligation Warrants, Series 2008C general obligation (AMT) 940,000 Other Long-Term Indebtedness general obligation 2,010,000 TOTAL $237,834,000 ______* Preliminary; subject to change.
(1) The Tax-Exempt General Obligation Warrants, Series 2017B are additionally secured by a pledge of certain tax increment revenues.
Short-Term Indebtedness. Other than portions of long-term indebtedness due in the current fiscal year, the City has no short-term indebtedness outstanding.
Capital Leases
From time to time, the City has entered into capital leases to finance the acquisition of computer equipment, vehicles, and other equipment. The current outstanding obligation of the City pursuant to these capital leases is $0.
Other Indebtedness
The City has previously entered into revenue-sharing arrangements intended to incentivize economic development within the City. Each of these revenue-sharing arrangements is a limited obligation of the City. In all cases, the City’s revenue-sharing obligation is payable solely out of and secured by a portion of the sales tax revenues to be derived from a new commercial project to be constructed at the expense of a third-party private entity. These revenue-sharing arrangements are more particularly described below.
McGowin Park. In 2013, the City and McGowin Park, LLC entered into a revenue-sharing arrangement intended to incentivize economic development of a shopping center within the City. The revenue-sharing arrangement is memorialized with a warrant and is a limited obligation of the City and is payable solely out of and secured by a portion of the city sales taxes collected within such shopping center for approximately 20 years, provided that the amount to be remitted shall not exceed $210,146,674.
Westwood Plaza. In 2014, the City and Westwood Plaza, LLC entered into a revenue-sharing arrangement intended to incentivize economic development of a shopping center within the City. The revenue-sharing
A-13 arrangement is memorialized with a warrant and is a limited obligation of the City and is payable solely out of and secured by a portion of the city sales taxes collected within such shopping center for approximately 15 years, provided that the amount to be remitted shall not exceed $9,250,000.
Shoppes at Bel Air. In 2016, the City and RPI Bel Air Mall, LLC entered into a revenue-sharing arrangement intended to incentivize economic development of a shopping center within the City. The revenue- sharing arrangement is memorialized with a warrant and is a limited obligation of the City and is payable solely out of and secured by a portion of the city sales taxes collected within such shopping center for approximately 15 years, provided that the amount to be remitted shall not exceed $7,500,000.
Anticipated Indebtedness
The City has no authorized but unissued debt outstanding, other than the Warrants offered by this Official Statement. The City does not expect to incur additional long-term indebtedness, other than the Warrants and other than refundings for debt service savings, within the next 12 months.
Constitutional Debt Limit
Constitutional Debt Limit—General. The City’s present constitutional debt limit is based on two provisions of the Alabama Constitution of 1901, namely, Section 225 of the Alabama Constitution of 1901 and Amendment No. 772 to the Alabama Constitution of 1901. Obligations chargeable against debt limit for purposes of Section 225 of the Alabama Constitution of 1901 are not chargeable against debt limit for purposes of Amendment No. 772 to the Alabama Constitution of 1901, and obligations chargeable against debt limit for purposes of Amendment No. 772 to the Alabama Constitution of 1901 are not chargeable against debt limit for purposes of Section 225 of the Alabama Constitution of 1901.
Constitutional Debt Limit—Section 225. Under Section 225 of the Alabama Constitution of 1901, the City’s present constitutional debt limit is an amount equal to 20% of the assessed value of the taxable property located within its corporate limits; however, under existing law, the following are not chargeable against the City’s constitutional debt limit: (1) obligations chargeable against debt limit for purposes of Amendment No. 772 to the Alabama Constitution of 1901; (2) obligations issued for the purpose of acquiring, providing or constructing schools, water works or sewers; (3) obligations incurred for street or sidewalk improvements where the costs thereof, in whole or in part, are to be assessed against the property abutting such improvements; (4) tax anticipation notes not exceeding one-fourth of general revenues; (5) revenue securities payable solely from the revenues of water, sewer, gas or electric systems; and (6) capitalized lease obligations that are funded on a “year-to-year basis”.
The following statement reflects the City’s legal debt margin under Section 225 of the Alabama Constitution of 1901 after the issuance of the Warrants:
City of Mobile Statement of Legal Debt Margin—Section 225
Assessed value of taxable property (including motor vehicles) (as of September 30, 2017) $2,448,532,160 Basic debt limit (20% of assessed value) 489,706,432 Total indebtedness: General obligation indebtedness(1) 237,834,000 Less: Non-chargeable indebtedness(2) (33,500,000) Total indebtedness chargeable against debt limit 204,334,000 Legal debt margin $285,372,432 ______(1) See “Outstanding Indebtedness”.
(2) The following indebtedness (in the amounts noted in parentheses) is not chargeable against debt limit: Tax-Exempt General Obligation Warrants, Series 2017A ($33,500,000). See “Outstanding Indebtedness”, “Funding Agreements, Capital Leases, and Related Arrangements”, and “Other Indebtedness”.
A-14 Constitutional Debt Limit—Amendment No. 772. Under Amendment No. 772 to the Alabama Constitution of 1901, the City may become indebted and issue bonds, warrants which may be payable from funds to be realized in future years, notes, or other obligations, or evidences of indebtedness to a principal amount not exceeding 50% of the assessed value of the taxable property located within its corporate limits in order to secure funds for any of the economic and industrial development powers or authorities granted in such amendment; however, under existing law, obligations chargeable against debt limit for purposes of Section 225 of the Alabama Constitution of 1901 are not chargeable against the City’s constitutional debt limit for purposes of Amendment No. 772.
The following statement reflects the City’s legal debt margin under Amendment No. 772 to the Alabama Constitution of 1901 after the issuance of the Warrants:
City of Mobile Statement of Legal Debt Margin—Amendment No. 772
Assessed value of taxable property (including motor vehicles) (as of September 30, 2017) $2,448,532,160 Basic debt limit (50% of assessed value) 1,224,266,080 Total indebtedness chargeable against debt limit(1) (260,396,674) Legal debt margin $963,869,406 ______(1) The following indebtedness (in the amounts noted in parentheses) is chargeable against debt limit for purposes of Amendment No. 772 to the Alabama Constitution of 1901: (a) Tax-Exempt General Obligation Warrants, Series 2017A ($33,500,000); (b) McGowin Park, LLC Warrant ($210,146,674); (c) Westwood Plaza, LLC Warrant ($9,250,000); and (d) RPI Bel Air Mall, LLC Warrant ($7,500,000). See “Outstanding Indebtedness”, “Funding Agreements, Capital Leases, and Related Arrangements”, and “Other Indebtedness”. Because obligations chargeable against debt limit for purposes of Section 225 of the Alabama Constitution of 1901 are not chargeable against debt limit for purposes of Amendment No. 772 to the Alabama Constitution of 1901, except for $33,500,000 of the Tax-Exempt General Obligation Warrants, Series 2017A, the indebtedness described more particularly under “Outstanding Indebtedness–Long-Term Indebtedness” is excluded from this table.
A-15 Debt Service Requirements on General Obligation Debt
The following table contains the debt service requirements on all long-term, general obligation debt of the City that will be outstanding after the issuance of the Warrants.
City of Mobile Debt Service Requirements on General Obligation Debt(1)
Fiscal Principal on General Interest on General Year Obligation Obligation Total Ended Indebtedness(1)(2)(3) Indebtedness(1) Debt Service
2018 $14,773,000.00 $8,640,418.75 $23,413,418.75 2019 14,163,000.00 8,497,550.53 22,660,550.53 2020 15,374,000.00 7,894,721.07 23,268,721.07 2021 16,725,000.00 7,271,467.65 23,996,467.65 2022 17,667,000.00 6,686,971.62 24,353,971.62 2023 18,434,000.00 6,154,703.78 24,588,703.78 2024 18,397,000.00 5,567,937.91 23,964,937.91 2025 19,088,000.00 4,888,491.72 23,976,491.72 2026 19,596,000.00 4,168,091.03 23,764,091.03 2027 19,694,000.00 3,426,376.70 23,120,376.70 2028 20,482,000.00 2,590,700.33 23,072,700.33 2029 21,301,000.00 1,633,986.70 22,934,986.70 2030 22,140,000.00 568,095.50 22,708,095.50 ______(1) For purposes of this Preliminary Official Statement, includes the current indebtedness shown under “Outstanding Indebtedness”.
2) For purposes of this table the principal amount of indebtedness to be retired in a fiscal year pursuant to mandatory redemption provisions is shown as maturing in that fiscal year. For a breakdown of debt service by principal and interest for the Warrants, see “DEBT SERVICE REQUIREMENTS”.
(3) For purposes of this Preliminary Official Statement, actual debt service on current indebtedness is shown; debt service on the Warrants is not shown. Debt service on the Warrants and debt service on the current indebtedness remaining outstanding after issuance of the Warrants will be reflected in the final Official Statement.
Direct and Overlapping Debt
The following table reflects the direct debt of the City that will be outstanding after the issuance of the Warrants and the overlapping debt of Mobile County and governmental entities subordinate to Mobile County and the City, including the Mobile County Board of School Commissioners (the “Mobile County BOE”). Debt of the State of Alabama is not included in overlapping debt, nor is debt of the Board of Water and Sewer Commissioners of the City of Mobile, the Mobile Housing Board, or the Mobile Airport Authority since their outstanding indebtedness of approximately $236,959,888 is payable out of their revenues and other sources and since the City is not responsible for payment of their obligations.
A-16
Pro Forma Direct and Overlapping Indebtedness
Percent of City’s Principal Debt Allocable Allocable Share Balance To City(1) of Debt
Direct Debt General obligation bonds or warrants(2) $237,834,000 100% $237,834,000
Overlapping Debt(3) Mobile County 149,628,649 48% 71,213,880 Mobile County BOE 314,478,461 48% 149,672,082
Total Direct and Overlapping Debt $458,719,962 ______(1) The City’s portion of the said overlapping debt of Mobile County and the Mobile County BOE is computed by using a percentage of that debt that corresponds to the percentage of total assessed value of taxable property in Mobile County that is located in the City.
(2) After giving effect to the issuance of the Warrants. See “Outstanding Indebtedness” for a description of the City’s outstanding indebtedness.
(3) Includes all general obligation debt and other Mobile County debt payable from county-wide taxes as of September 30, 2016. Includes indebtedness for the Mobile County BOE as of September 30, 2016.
Debt Ratios
The following table sets forth certain debt ratios applicable to the City:
City of Mobile Debt Ratios
Population(1) 195,111 Assessed Value of Taxable Property(2) $2,448,532,160 Estimated True Value of Taxable Property(3) $17,700,802,300 General Obligation Debt(4) $237,834,000 General Obligation Debt Per Capita $1,219 Ratio of General Obligation Debt to Assessed Value 9.71% Ratio of General Obligation Debt to Estimated True Value 1.34% Direct and Overlapping Debt(4) $458,719,962 Direct and Overlapping Debt Per Capita $2,351 Ratio of Direct and Overlapping Debt to Assessed Value 18.73% Ratio of Direct and Overlapping Debt to Estimated True Value 2.59% ______(1) Source: 2010 census of U.S. Bureau of the Census. (2) Sources: Mobile County Revenue Commissioner and Mobile County License Commissioner. (3) Sources: Mobile County Revenue Commissioner, Mobile County License Commissioner, and City of Mobile. (4) After giving effect to the issuance of the Warrants.
A-17 AD VALOREM TAXATION
General
The levy and collection of ad valorem taxes in Alabama are subject to the Alabama Constitution, which, among other things, fixes the percentage of market value at which property can be assessed for taxation, limits the tax rates that can be levied against property and places a ceiling on the aggregate ad valorem taxes that can be levied by all taxing authorities on any property in any tax year. The amount of an ad valorem tax in Alabama is computed by multiplying the applicable tax rate by the assessed value of the taxable property. The assessed value of taxable property is a specified percentage (the “assessment ratio”) of its fair and reasonable market value or, in certain circumstances, its current use value. Ad valorem tax rates are stated in terms of mills per dollar of assessed value. Each mill represents a tax equal to one-tenth of one percent of the assessed value of such property.
Classification of Taxable Property
Amendment No. 373 to the Alabama Constitution divides all taxable property into the following four classes valued for taxation according to the assessment ratios shown below:
Class I All property owned by utilities 30%
Class II All property not otherwise 20% classified
Class III All agricultural, forest and single-family, owner-occupied residential property and historic buildings and sites 10%
Class IV Private passenger automobiles and pickup trucks owned and operated by an individual for personal or private use 15%
Amendment No. 373 permits the owner of Class III property to elect to have such property appraised at its “current use value” rather than its “fair and reasonable market value”. “Current use value” has been defined statutorily as the value of such property based on the use being made of it on October 1 of the preceding year, without taking into consideration the prospective value such property might have if it were put to some other possible use.
Assessment Ratio Adjustment
The Alabama Legislature has no power to adjust assessment ratios pertaining to local (as distinguished from state) taxes but does have the power to approve or disapprove an adjustment proposed by a local taxing authority. The governing body of any county, municipality or other local taxing authority may increase or decrease the assessment ratio with respect to any class of property subject to the following conditions: (i) the governing body of such county, municipality or other taxing authority must hold a public hearing on the proposed adjustment before authorizing the adjustment, (ii) the Legislature must adopt an act approving the adjustment and (iii) a majority of the electors of such county, municipality or other taxing authority must approve the adjustment in a special election. In addition, the Legislature has placed the following restrictions on the adjustment of assessment ratios:
(1) If the total assessed value of all property of a single class located within a taxing authority’s jurisdiction exceeds 50% of the total assessed value of all taxable property located within the jurisdiction of such authority, then the assessment ratio with respect to that class of property may be decreased by no more than 5% from the ratio otherwise prescribed for such class;
(2) If the total assessed value of all properties of a single class located within the jurisdiction of a local taxing authority is less than 20% of the total assessed value of all taxable property located within such jurisdiction,
A-18 then the assessment ratio with respect to that class of property may be increased by no more than 5% from the ratio otherwise prescribed for such class; and
(3) If the total assessed value of all property of a single class located within the jurisdiction of a local taxing authority exceeds 75% of the total assessed value of all taxable property located within such jurisdiction, then (i) the assessment ratio with respect to that class of property may be decreased by no more than 5% from the ratio otherwise prescribed for such class and (ii) the prospective assessment ratio for all other classes of property may be increased by no more than 5% from the ratio otherwise prescribed for such classes.
The governing body of the City has not sought to adjust the assessment ratio applicable to any class of taxable property nor does the City have any present plan for any such adjustment.
Rate Adjustments
Amendment No. 373 authorizes any county, municipality or other local taxing authority to decrease any ad valorem tax rate at any time, provided that such decrease does not jeopardize the payment of any bonded indebtedness secured by such tax. Amendment No. 373 also permits a county, municipality or other local taxing authority to increase the rate at which any ad valorem tax is levied, but only if (i) the governing body of such county, municipality or other taxing authority holds a public hearing on the proposed increase before authorizing the increase, (ii) the Legislature adopts an act approving the increase and (iii) a majority of the electors of such county, municipality or other taxing authority subsequently approves the increase in a special election.
Ceiling on Ad Valorem Taxes
Amendment No. 373 also limits the total amount of state, county, municipal and other ad valorem taxes that may be imposed on any class of property in any one tax year. This limitation is expressed in terms of a specified percentage of the fair and reasonable market value of such property. The applicable percentages to the four classes of property are as follows:
Class I - 2% Class II - 1 1/2% Class III - 1% Class IV - 1 1/4%
If the total amount of tax otherwise payable with respect to a class of property would exceed the maximum tax limit, the millage rate of each separate tax to which such property is subject must be reduced in the same proportion that the millage levied by or for the benefit of each taxing authority bears to the total millage levied by or for the benefit of all applicable taxing authorities. This provision becomes operative as to the several classes of property only if the total tax rate exceeds the following:
Class I - 66 2/3 mills Class II - 75 mills Class III - 100 mills Class IV - 83 1/3 mills
A-19 Ad Valorem Tax Rates
Ad valorem taxes on property in the jurisdiction of the City are currently levied at the rates listed in the below table.
Taxing Authority Mills State of Alabama 6.5
Mobile County: General Fund 6.0 Road & Bridge 3.5 Special Road & Bridge 6.5 Hospital 3.5 Board of Health 1.0 Total 20.5
Schools 29.5
City of Mobile: General 7.0 Total 63.5
Source: Alabama Department of Revenue.
Assessed Valuation of Taxable Property
The total assessed valuations of taxable property in the City of Mobile have been as follows for the periods indicated:
Fiscal Year Ending Real and Personal Motor Vehicles Total City September 30 Property Assessed Value Assessed Value Assessed Value
2017 $2,169,615,160 $278,917,000 $2,448,532,160 2016 2,179,561,780 294,187,320 2,473,749,100 2015 2,031,277,160 273,833,900 2,305,111,060 2014 1,992,934,600 264,068,220 2,257,002,820 2013 1,840,218,140 270,954,700 2,111,172,840
Sources: Mobile County Revenue Commissioner and Mobile County License Commissioner.
The total assessed valuations of taxable property in Mobile County have been as follows for the periods indicated:
Fiscal Year Ending Real and Personal Motor Vehicles Total County September 30 Property Assessed Value Assessed Value Assessed Value
2017 $4,536,150,940 $608,500,060 $5,144,651,000 2016 4,540,581,600 640,868,220 5,181,449,820 2015 4,201,971,000 600,327,000 4,802,298,000 2014 4,117,498,020 587,125,160 4,704,623,180 2013 4,060,293,820 591,799,680 4,652,093,500
Sources: Mobile County Revenue Commissioner and Mobile County License Commissioner.
A-20 Largest Ad Valorem Taxpayers
Listed below are the ten largest ad valorem taxpayers in the City of Mobile and the total amount of ad valorem taxes paid by each during the tax year ended September 30, 2017 (the most recent year for which definitive information is available). The amounts shown under the heading “Total Ad Valorem Taxes Paid” represent the expected collections during the tax year ended September 30, 2017 from the total municipal levies (7 mills) on property in the City’s jurisdiction.
Total Ad Valorem Assessed Value Name of Taxpayer Business Taxes Paid of Taxpayer
Alabama Power Company Utility $497,044 $71,006,260 RPI Bel Air Mall, LLC Retail 287,789 41,112,740 Kimberly-Clark Corporation Paper Manufacturing 193,068 32,651,620 Shell Chemical Company, LP Chemical Manufacturer 166,318 23,759,640 Mobile Gas Service Corp. Natural Gas Distribution 142,647 41,337,580 Absorbents & Catalysts UOP, LLC Manufacturing 137,618 22,189,400 BellSouth Telecomm., Inc., dba AT&T Alabama Utility 79,495 20,949,400 McGowin Park, LLC Retail 78,674 11,239,120 Comcast of Alabama, Inc. Utility 75,439 10,777,060 Cooper Marine & Timberlands Corp. River Transportation 72,168 10,309,740
Source: Mobile County Revenue Commissioner.
Listed below are the ten largest ad valorem taxpayers in Mobile County and the total amount of ad valorem taxes paid by each during the tax year ended September 30, 2017 (the most recent year for which definitive information is available). The amounts shown under the heading “Total Ad Valorem Taxes Paid” represent the expected collections during the tax year ended September 30, 2017 from the total state, county, municipal and school district levies (63.5 mills) on property in the County’s jurisdiction.
Total Ad Valorem Assessed Value Name of Taxpayer Business Taxes Paid of Taxpayer
Alabama Power Company Utility $17,734,363 $340,244,720 AM/NS Calvert, LLC Steel Processing 6,892,236 261,354,060 Outokumpu Stainless USA, LLC Steel Foundries 5,856,695 224,236,380 Evonik Corporation Mfg. Industrial Organic Chemicals 3,690,886 78,732,660 Gulfstream Natural Gas Natural Gas Transmission 3,470,175 71,559,060 Florida Gas Transmission Company, LLC Natural Gas Transmission 3,074,501 63,391,780 RPI Bel Air Mall, LLC Retail 2,610,659 41,112,740 Mobile Gas Service Corp. Natural Gas Distribution 2,392,192 41,346,680 SSAB Alabama, Inc. Steel Manufacturing 1,962,954 51,753,600 Kimberly-Clark Corporation Paper Manufacturing 1,916,192 32,651,620
Source: Mobile County Revenue Commissioner.
A-21 LITIGATION RELATING TO THE CITY
The City is a defendant in several suits and has been notified of various claims against it arising from matters relating to normal operations of a municipality. The City is self-insured and has excess coverage for claims over $1 million. The City believes that any liability resulting from pending suits and claims will be covered by funds of the City which will be available to discharge such liability (or excess coverage arrangements) without impairing its ability to perform any of its other obligations.
Recent court decisions have substantially eroded the immunity from tort liability formerly enjoyed by local governmental units in Alabama; however, Chapter 93 of Title 11 of the Code of Alabama (1975) now prescribes certain limits on the liability of local governmental units for bodily injury or death and for damage or loss of property. The limits are presently $100,000 in the case of bodily injury or death of one person in any single occurrence, $300,000 in the aggregate where more than two persons have claims or judgments on account of bodily injury or death arising out of any single occurrence, and $100,000 for damage or loss of property arising out of any single occurrence. The Alabama Supreme Court has held that the limitations prescribed by Chapter 93 are constitutional.
Local governmental units throughout the country increasingly have been subjected to lawsuits - many of which claim damages in large amounts - for alleged denials of civil rights under the provisions of Section 1983 of Title 42 of the United States Code. While the question is not free from doubt, it should be assumed that existing Alabama statutory limitations on liability for personal injury would not serve to limit liability under Section 1983.
ECONOMIC AND DEMOGRAPHIC INFORMATION
General
The City is located in Mobile County, approximately 194 miles southwest of the geographical center of Alabama. The City is located approximately 346 miles southwest of Huntsville, 247 miles southwest of Birmingham, and 169 miles southwest of Montgomery.
Mobile County covers approximately 1,644 square miles. The principal agricultural and forest products of Mobile County include greenhouse, nursery and floriculture, commercial fishing and cotton. Major manufactured products of Mobile County include ships, steel, stainless steel, aircraft and aerospace components, chemicals, furniture and paper. Major mineral products of Mobile County include clay, construction sand and gravel, infusorial earth (tripolite) and sulfur (natural gas).
Population
The following table sets forth population statistics for the State of Alabama, Mobile County and the City of Mobile from 1980 to 2016.
1980 1990 2000 2010 2016*
State of Alabama 3,894,025 4,040,389 4,447,100 4,779,736 4,863,300 Mobile County 364,980 378,643 399,843 412,992 414,836 City of Mobile 200,452 196,278 198,915 195,111 192,904
Source: U.S. Census Bureau. *Estimate
Employment
The following table sets forth estimated nonagricultural wage and salary employment statistics for Mobile County as of the 4th Quarter, 2016:
A-22 Mobile County Nonagricultural Employment by Industry
Number Employed % Health Care and Social Assistance 23,330 Retail Trade 20,814 Manufacturing 19,023 Accommodation and Food Services 15,857 Public Administration 15,473 Administrative and Waste Services 11,209 Construction 9,963 Professional and Technical Services 8,730 Wholesale Trade 7,233 Transportation and Warehousing 6,721 Finance and Insurance 5,802 Other Services, Ex. Public Admin. 5,605 Real Estate, Rental and Leasing 2,695 Educational Services 2,089 Information 1,599 Arts, Entertainment and Recreation 1,557 Management of Companies and Enterprises 906 Utilities 817 Agriculture, Forestry, Fishing & Hunting 730 Mining 255
Total wage and salary employees 160,408 100% ______Source: Alabama Department of Labor.
The following table sets forth labor force estimates and employment rates for Mobile County on the dates indicated:
August 2011 2012 2013 2014 2015 2016 2017*
Civilian Labor Force 193,851 188,626 186,563 185,451 183,728 185,092 181,101 Employment 172,971 171,312 170,629 171,055 170,854 172,376 171,735 Unemployment 20,880 17,314 15,934 14,396 12,874 12,716 9,366 Rate 10.8% 9.2% 8.5% 7.8% 7.0% 6.9% 5.2% ______Source: U.S. Department of Labor, Bureau of Labor Statistics. *Preliminary; subject to change.
The following table sets forth comparative unemployment rates for Mobile County, the State of Alabama and the United States for the dates indicated:
August 2011 2012 2013 2014 2015 2016 2017*
Mobile County 10.8% 9.2% 8.5% 7.8% 7.0% 6.9% 5.2% State of Alabama 9.6 8.0 7.2 6.8 6.1 6.0 4.3 United States 8.9 8.1 7.4 6.2 5.3 4.9 4.5 ______Source: U.S. Department of Labor, Bureau of Labor Statistics. *Preliminary; subject to change.
A-23 Major Employers
The major governmental and nongovernmental employers in Mobile County, their principal activity and the number of employees of each are as follows:
Employer Product/Service Number of Employees
Mobile County Public School System Education 7,500 University of South Alabama and Education/Medical 6,000 Medical Facilities Infirmary Health System Medical 5,000 Austal Littoral Combat Ships (LCS) 4,000 City of Mobile Government 2,140 CPSI Information Technology 1,950 County of Mobile Government 1,670 Providence Hospital Medical 1,540 Springhill Medical Center Medical 1,300 AltaPointe Medical 1,170
The major manufacturing employers in Mobile County, their principal product and the number of employees of each are as follows:
Employer Product/Service Number of Employees
Austal USA Shipbuilding 4,000 AM/NS Calvert Steel 1,600 ST Aerospace Mobile Aerospace MRO 1,100 Outokumpu Stainless Steel 895 United Technology Corporation Aerospace 830 Evonik Industries Specialty Chemicals 800 Standard Furniture Furniture 650 Kimberly-Clark Corporation Paper 630 SSAB Americas Steel 580 BASF Corporation Chemicals 565
Source: Mobile Area Chamber of Commerce (Updated June 2016); Economic Development Partnership of Alabama.
Income Levels
There are two basic methods of measuring annual income: per capita income, which is the total income of all families and individuals in a given area divided by the total population of the area, and median family income above and below which there are an equal number of family incomes.
A-24 The following tables present comparative information regarding income levels in the City of Mobile, Mobile County, the State of Alabama, and the United States:
Per Capita Income
Year City of Mobile Mobile County State of Alabama United States
2015* $23,320 $22,953 $24,091 $28,930 2009 22,401 21,548 22,984 27,334 1999 18,072 17,178 18,189 21,587 1989 12,509 11,158 11,486 14,420 ______Sources: 1990, 2000 and 2010 U.S. Census of Population and Housing; 2015 American Community Survey. *Five-year Estimates (2011-2015)
Median Family Income
Year City of Mobile Mobile County State of Alabama United States
2015* $50,211 $54,215 $55,341 $66,011 2009 47,241 49,900 52,863 62,982 1999 39,752 40,378 41,657 50,046 1989 28,220 27,601 28,688 35,225 ______Sources: 1990, 2000 and 2010 U.S. Census of Population and Housing; 2015 American Community Survey. *Five-year Estimates (2011-2015)
Retail Sales
The following table shows retail sales in Mobile County and the State for the years indicated:
Total Retail Sales (000s omitted)
1997 2002 2007 2012
State of Alabama $36,623,327 $43,784,342 $57,344,851 $58,564,965 Mobile County 3,404,545 4,073,954 5,225,494 5,102,565 ______Source: 1997, 2002, 2007 and 2012 Economic Census, U.S. Census Bureau.
Housing and Construction
The following table presents certain information regarding housing characteristics in the City of Mobile:
2015* 2010 2000 1990
Total housing units 90,878 89,127 86,187 82,817 Total occupied housing units 76,170 78,959 78,480 75,442 Total owner occupied housing units 43,282 44,520 46,529 43,806 Median value of owner occupied units $120,100 $120,600 $81,400 $54,700
Sources: 1980, 1990, 2000 and 2010 U.S. Census of Population and Housing; 2015 American Community Survey. *Five-year Estimates (2011-2015)
A-25 The following table presents certain information regarding housing characteristics in Mobile County:
2015* 2010 2000 1990
Total housing units 180,932 178,196 165,101 151,220 Total occupied housing units 154,188 158,435 150,179 136,899 Total owner occupied housing units 102,608 106,079 103,391 91,513 Median value of owner occupied units $122,400 $120,700 $80,500 $53,300
Sources: 1980, 1990, 2000 and 2010 U.S. Census of Population and Housing; 2015 American Community Survey. *Five-year Estimates (2011-2015)
The following table provides the total building permits issued by the City of Mobile and the construction activity in the designated years:
NEW PRIVATELY-OWNED RESIDENTIAL BUILDING PERMITS CITY OF MOBILE Single-Family Multi-Family (Two or more families)
Permits Construction Permits Construction Year Issued Cost Issued Units Cost 2003 234 $35,278,917 1 4 $408,000 2004 191 42,870,284 11 260 18,048,200 2005 212 55,493,848 16 138 13,082,996 2006 370 71,920,796 17 258 12,358,500 2007 266 57,533,576 27 386 35,393,959 2008 248 54,431,116 40 613 37,029,436 2009 187 36,434,837 65 939 55,531,800 2010 155 28,320,413 12 131 12,467,000 2011 120 24,263,119 16 561 33,057,201 2012 106 23,065,844 14 184 16,239,679 2013 84 17,796,913 11 72 5,755,488 2014 109 22,235,253 0 0 0 2015 70 18,498,195 10 125 11,210,116 2016 92 8,487,359 (incomplete) 14 204 15,233,548 2017* 64 -- -- 252 --
Source: U.S. Census Bureau. (Effective January 31, 2017, only the permits and units information will be available on Censtats.) *YTD June, 2017
The following table provides the total building permits issued by Mobile County and the construction activity in the designated years:
NEW PRIVATELY-OWNED RESIDENTIAL BUILDING PERMITS MOBILE COUNTY Single-Family Multi-Family (Two or more families)
Permits Construction Permits Construction Year Issued Cost Issued Units Cost 2003 1,195 $94,082,529 2 10 $375,504 2004 1,250 100,906,056 13 154 5,603,534 2005 1,392 114,453,250 0 0 0 2006 1,656 140,044,086 25 148 12,931,179 2007 1,352 120,127,986 21 162 10,316,205 2008 989 86,744,140 13 287 20,905,806 2009 794 65,445,716 11 386 16,100,000
A-26 2010 638 66,360,570 0 0 0 2011 455 57,741,978 11 274 5,143,279 2012 441 58,330,442 0 0 0 2013 394 52,048,950 10 176 13,202,998 2014 397 54,238,823 0 0 0 2015 361 62,287,239 20 134 14,476,289 2016 423 51,765,321 (incomplete) 00 0 2017* 168 ------
Source: U.S. Census Bureau. (Effective January 31, 2017, only the permits and units information will be available on Censtats.) *YTD June, 2017
The above figures are for the unincorporated areas of the County and do not represent any activity that occurred in the eleven municipalities during the corresponding period.
The Mobile County Building Inspections Department issues building permits for new residences residential additions and repairs, new non-residential buildings, non-residential additions and repairs, swimming pools, electrical heating and air conditioning, mobile homes and trailers, and FHA variances. No attempt has been made to break down each of these categories to reflect the total number of building permits issued by the Mobile County Inspection Department.
Education
Primary and Secondary Education. The City is served by the State’s largest local education system, which has approximately 7,500 employees. The Mobile County Board of School Commissioners, which administers and supervises public schools in Mobile County excluding the public schools in the municipalities of Chickasaw, Saraland, and Satsuma, is composed of five elected commissioners and directs the work of the unified County school systems. The City does not have an independent school system. The County has 88 public schools with an enrollment of approximately 56,398 students, and 57 private and parochial schools with a combined enrollment of approximately 14,862 students.
Vocational training is offered in the County’s high schools in agribusiness, business and office education, consumer home economics, day trades and distributive education. Distributive education and horticulture are offered jointly through the vocational rehabilitation and special education services.
The Catholic schools in the City and County are operated by the Catholic Department of Education of the Archdiocese of Mobile. There are 9 pre/elementary schools and 1 secondary/high school in the County; approximately 4,000 students are enrolled in these Catholic schools.
Vocational and Technical Education. Bishop Community College (primarily at its Carver and Southwest campuses) and South Alabama Skills Center (a Private Industry Council/Governor’s Jobs Partnership Act funded facility) serve the Mobile area. The Carver campus of Bishop State was designed to train and prepare high school graduates and other persons sixteen years of age and older for employment in vocational, technical and industrial pursuits. The Southwest campus offers training in technical, mechanical, and non-mechanical occupations.
Higher Education. The University of South Alabama, chartered in May of 1963 by the Alabama Legislature, is a State-supported coeducational institution of higher learning, located on a 1,200 acre campus in west Mobile. Instruction began with 272 students in a single four-story combination administration, classroom and laboratory building erected by the Mobile County Foundation for Public Higher Education. The University enrolled approximately 16,443 students for day and evening courses (including students in medical schools) during 2016. The University offers programs in arts and science, education, business and management studies, medicine, health professions and engineering. The University also operates a full range clinical and teaching hospital at its medical center, which provides internship, residency and research facilities for numerous medical specialties as well as patient care and full-scale surgical and clinical disciplines.
The University of Mobile, founded in 1961 and located on an 800 acre campus ten miles from downtown Mobile, is a private four-year coeducational college of arts and sciences sponsored by the Alabama Baptist State Convention. The first classes began in 1963, and the University was accredited by the Southern Association of
A-27 Colleges and Schools in 1968. The University is the only four-year, privately supported college to be founded in Alabama during this century. The University offers programs leading to Bachelor of Arts and Bachelor of Science degrees, as well as pre-professional programs in the arts, medicine, dentistry, engineering, medical technology, nursing, law and the ministry. The University enrolled approximately 1,480 students during 2016.
Faulkner University at Mobile has been helping adult students earn degrees and advance their careers in Mobile for more than 30 years. The University is accredited by the Southern Association of Colleges and Schools to award Associate and Bachelor degrees. The University offers Associate degrees in liberal arts (Associate of Arts and Associate of Science), business administration and management, computer & information science, criminal justice, informatics and legal studies. Bachelor degrees include business administration, psychology (counseling, general/clinical, forensic, health & rehabilitation with pre-occupational therapy, industrial/organizational and sports), criminal justice and human resource management. Classes are offered during the day, evenings, weekends and online to accommodate work and family schedules. The current enrollment at the University is approximately 200-300 adult students.
Spring Hill College, founded in 1830, is the oldest institution of higher learning in Alabama. The College has been operated by the Society of Jesus (the Jesuit Fathers) since 1847 as a fully accredited senior college of arts and sciences, offering Bachelor of Arts, Bachelor of Science, Bachelor of General Studies (nursing) and Bachelor of Science in Commerce degrees. The curriculum also includes a Master of Education degree. The College has been coeducational since 1952. The College is located near the geographical center of the City on a 400-acre campus containing a natural spring-fed lake and 18-hole golf course. The College enrolled approximately 1,476 students during 2016.
Bishop State Community College is accredited by the Southern Association of Colleges and Schools and confers Associate Degrees in Science, Applied Science and Arts, and Certificates for programs requiring less than two years for completion and for short seminar courses offered as a community service. In addition to technical and vocational training, the two-year courses consist of basic general education courses as well as electives which may meet a portion of the requirements for a four-year degree. The College enrolled approximately 3,028 students during 2016.
Other institutions of higher learning serving the health-related professions in the Mobile area are: Mobile Infirmary, School of X-ray Technology, School of Medical Technology, School of Nursing, Providence Hospital, University of South Alabama, College of Medicine, School of Nursing, College of Allied Health.
Health Care Services
Mobile County and the surrounding area are served by five general hospitals, one rehabilitation hospital and one private psychiatric hospital, as well as three local and state-sponsored mental health facilities. The five general hospitals are as follows: (i) USA, a 219-bed women’s and children’s general hospital; (ii) Mobile Infirmary Medical Center, a non-profit 677-bed general hospital; (iii) Providence Hospital, a non-profit Roman Catholic, 349- bed general hospital facility owned by the Daughters of Charity; (iv) Springhill Medical Center, an investor-owned, 252-bed general hospital; and (v) The University of South Alabama Medical Center, a 406-bed general hospital facility.
The University of South Alabama began developing a regional cancer research and treatment institute in 2000. In 2005 the University and Infirmary Health Systems, the operator of the Mobile Infirmary Medical Center, announced plans to cooperate in the development and construction of the Institute. In 2006 the institute was formally named the Mitchell Cancer Institute. The $100 million institute opened in 2008. With the Institute including both treatment and research areas, it is estimated to have a $1 billion economic impact on the Mobile Bay region over the next decade. It employs close to 700 professionals and focuses on serving the east-west Interstate 10 corridor. It is the only Stage II and Stage III cancer center between Houston and Tampa.
J.L. Bedsole/Rotary Rehabilitation Hospital, a 42-bed facility, affiliated with the Infirmary Health network of hospitals, provides rehabilitation for patients affected by stroke, spinal cord injury, brain injury or other neurological illnesses.
Regional mental health facilities include multiple facilities operated by AltaPointe Health Systems, Inc., a public entity serving Mobile and the surrounding counties. Other mental health related clinics serving Mobile include Anchorage-Mobile Mental Health, LeMoyne Program, Lifelines/Family Counseling Center, Mobile Association for Retarded Citizens, Mobile Mental Health Center-Adult Services, and Turning Point.
A-28 The County has approximately 1,000 practicing physicians and 235 practicing dentists to serve its local needs.
Utilities and Media
Electricity is supplied to the residents of the City by Alabama Power Company. Natural gas service is supplied by Spire, Inc. Water and sewer services are supplied by the Mobile Area Water & Sewer System. Telecommunication services are provided by AT&T, Xfinity/Comcast Cable and Mediacom. The City also has media outlets, including several weekly newspapers and magazines, 27 radio stations (10 AM and 17 FM), 7 television stations (6 network affiliates and 1 public), and several cable companies, both local and national.
Recreation
Recreational assets of the City include more than 70 parks and playgrounds offering facilities for picnicking, canoeing, biking, hiking, camping, swimming and other leisure activities. Some of the City’s featured parks include Bienville Square and Cathedral Square (a performing arts park), both of which are popular downtown spaces. Spanish Plaza features Arches of Friendship, a fountain presented to Mobile by the City of Málaga, Spain. The 720-acre Langan Park offers golf, tennis, outdoor concerts, a children’s playground, picnic areas and lakes, and contains the Mobile Museum of Art, Azalea City Golf Course, Mobile Botanical Gardens and Playhouse in the Park. Arlington Park on Mobile Bay includes a pier, a kayak launch point and picnic gazebos. Chickasabogue Park has bike and foot trails, fishing, camping, canoeing and swimming. Medal of Honor Park features a dog park and a pavilion for outdoor concerts. An 83-acre waterfront complex, 5 Rivers Delta Resource Center, provides public access to the Mobile-Tensaw Delta with hundreds of miles of rivers and wetlands and some of the South’s best freshwater fishing. The facility offers boat and adventure tours, and contains a small theater, exhibit hall, meeting facilities, walking trails, and a canoe and kayak landing. Meaher State Park also serves as a gateway to the delta, and offers swamp tours to visitors.
The City also has more than 25 golf courses in the metropolitan area. Alabama’s Robert Trent Jones Golf Trail has 2 courses in the Mobile area, Magnolia Grove and Lakewood Golf Club. The Copeland-Cox Mobile Tennis Center is the nation’s largest public facility, with 50 lighted tennis courts.
Some local attractions include the 100-acre Mobile Botanical Gardens that feature a variety of flora, with 1,000 evergreen and native azaleas and a 30-acre Longleaf Pine Habitat. Bellingrath Gardens and Home is a 65-acre botanical garden and historic 10,500-square-foot mansion that dates to the 1930s. Fort Conde is a reconstruction of the City’s original Fort Condé. It serves as the official welcome center and colonial-era living history museum. Other local attractions include the USS Alabama battleship, the Gulf Coast Exploreum, the Mobile Museum of Art, and the award-winning History Museum of Mobile. The City has more than 150 historic buildings and historic districts on the National Register of Historic Places.
The Gulf of Mexico is a short drive from the City to Dauphin Island in Mobile County, or to the shoreline of Baldwin County. The City offers sailing, boating and deep sea fishing in the Gulf of Mexico 12 months of the year. In addition, the Alabama Coastal Birding Trail spans two counties and is enhanced by directional and interpretive signage.
Transportation
Highway System. The City is adequately served by the interstate highway system, with Interstate 10 offering east-west access and Interstate 65, which originates in the City, serving northbound traffic. An extension of I-65 (I-165) connects it with I-10 in downtown Mobile. The City is also served by U.S. Highways 43, 45, 90 and 98, and State Highways 163, 193 and 213.
Freight Carriers. There are over 65 motor freight carriers certified to transport interstate shipments to and/or from the Mobile area. The majority of the carriers have a Mobile area terminal, with many carriers offering container services.
Bus. Greyhound, Trailways and Megabus Bus Lines provide bus services to the City.
A-29 Rail Service. The City is served by 5 national Class I major railway lines: Canadian National Railway, Central Gulf Railroad, CSX Transportation, Kansas City Southern Railway, and Norfolk-Southern Railway. The City is also served by 1 Class III railway line, Alabama and Gulf Coast Railway that links the City to the Burlington Northern and Santa Fe Railway (BNSF) at Amory, Mississippi. All lines provide daily direct freight and intermodal service to the Southeast and connect with other carriers to the Southwest and Midwest. Terminal switching facilities are available at the Alabama State Port Authority. Piggyback loading systems and containerized service are available. An average of 2,500 rail cars pass through Mobile daily.
Air. The City is serviced by 2 municipal airports: Mobile Downtown Airport at Brookley Field (known as Mobile Aeroplex at Brookley) and Mobile Regional Airport.
With 4 million square feet of industrial space on 1,650 acres, the Mobile Aeroplex at Brookley is one of the largest industrial parks on the Gulf Coast. Over 70 companies are located on site, employing over 3,600 people in a wide range of industries. The Aeroplex is strategically located in the following zones, which allow for enhanced business operations and attractive tax incentives: foreign trade zone number 82 and the renewal community zone. A major component of the Aeroplex is the Mobile Downtown Airport, a general aviation facility that has 2 paved and lighted runways (9,618 feet and 7,800 feet). Another major component of the Aeroplex is the new $600 million Airbus factory in Mobile that manufactures and assembles the A319, A320 and A321 aircraft, all part of the Airbus A320 family. The Airbus facility is expected to employ up to 1,000 full-time workers when at full capacity. The Airbus facility commenced aircraft assembly in July 2015 and delivered its first completed aircraft in April 2016 to U.S. customer JetBlue. The facility is expected to deliver four aircraft per month by the end of 2017.
The Mobile Regional Airport facility, providing terminal, parking areas and 8 gates, was completed in December, 1986. The facility covers an area of 1,717 acres, has 2 paved and lighted runways (8,502 feet and 4,376 feet), and 3 helipads, each 100 feet. The City is currently served by 4 commercial airlines: American Eagle, Delta Air Lines, Delta Connection and United Express, which provide approximately 23 daily departures to 5 of the nation’s largest hubs: Atlanta, GA, Charlotte, NC, Chicago, IL, Dallas/Fort Worth, TX and Houston, TX. The following table shows the number of enplaned passengers at Mobile Regional Airport:
Year Enplaned Passengers
2016 288,209 2015 278,053 2014 288,376 2013 287,661 2012 277,432 2011 288,461 2010 277,232 2009 280,491 2008 286,956 2007 303,512 2006 296,264 2005 323,209 2004 308,227 2003 302,035
Source: Federal Aviation Administration.
Water. The Tennessee-Tombigbee Waterway (the “Tenn-Tom”) opened for navigation on June 1, 1985. By providing economical barge service between the Tennessee, Mississippi and Ohio river valleys and the Port of Mobile, the Tenn-Tom offers substantial savings to shippers of a variety of commodities. Stretching some 234 miles, the Tenn-Tom Waterway connects the navigable Tennessee River near the Pickwick Lock and Dam with barge traffic on the Warrior-Tombigbee River System near Demopolis, Alabama. The waterway terminates at the deep- water Port of Mobile, Alabama. Thus, the Tenn-Tom serves as a connecting navigational artery between the Ohio, upper Mississippi and Tennessee River systems. The entire system encompasses about 16,000 miles of navigable
A-30 waterways. This new lane of commerce substantially shortens the barge route distance between numerous inland points and the Port of Mobile where export and import cargoes can be loaded and unloaded on ocean-going vessels. In all, 23 states in the central and southern regions of the nation are impacted by the Waterway.
The Intracoastal Waterway crosses the southern portion of Mobile County from east to west. It is 12 feet deep and accommodates all types of barge traffic. There is a 12 foot channel dredged to the Mobile Aeroplex at Brookley in the southern portion of the City. It is authorized to a depth of 27 feet. There is a ship channel cut from the main channel in Mobile Bay 5.3 miles to the shoreline of the County and 2 miles inland into the Theodore Industrial area. The controlling depth is 40 feet. The ship channel terminates in a 42 acre turning basin. A barge canal, 12 feet deep, extends 1.2 miles westward from the turning basin.
Port of Mobile. The Port of Mobile offers public, deepwater terminals with direct access to five Class 1 railroads, two interstate systems (I-10 and I-65), a weekly rail ferry service to Coatzacoalcos, Mexico, and 15,000 miles (2,400 km) of inland and intracoastal waterways serving the Great Lakes, Ohio and Tennessee valleys and the Gulf of Mexico.
The Alabama State Port Authority owns and operates public terminals at the Port of Mobile. These terminals handle containerized, breakbulk, coal, grain, roll-on/roll-off ships, cement, and oversized/heavy lift cargoes. This full-service seaport is currently ranked 13th in the nation based on total tonnage. The Port of Mobile is also represented by private bulk terminal operators as well as a number of highly specialized shipbuilding and repair companies, with two of the largest floating dry docks on the Gulf Coast.
Over the past decade, the Alabama State Port Authority has invested more than $700 million toward a capital expansion program establishing new facilities at the Port of Mobile, including a new container terminal, a new steel terminal, expansion at McDuffie coal terminal, a new rail ferry terminal, new warehouses, and a new turning basin.
Financial Institutions
The City has 21 banks, the largest of which are BB&T, BBVA Compass Bank, Hancock Bank, PNC Bank, Regions Bank, Trustmark National Bank and Wells Fargo. Other banks include BancorpSouth, Bank of the Ozarks, Century Bank, Coastal Bank and Trust, Commonwealth National Bank, Community Bank, First Community Bank, iBERIABANK, Merchants Bank, Oakworth Capital Bank, Renasant Bank, SB&T Bank, ServisFirst Bank and The First, a National Banking Association. The City also has 16 credit unions.
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APPENDIX B
Audited Financial Statements of the City of Mobile for the fiscal year ended September 30, 2016
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CITY OF MOBILE, ALABAMA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 2016
William S. Stimpson, Mayor Paul C. Wesch, Executive Director of Finance Patricia A. Aldrich, Comptroller WILLIAM S. STIMPSON MAYOR Part I Introductory Section CITY OF MOBILE, ALABAMA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2016
TABLE OF CONTENTS
PAGES I. INTRODUCTORY SECTION Transmittal Letter i–v GFOA Certificate of Achievement vi Organization Chart vii List of Principal Officers viii
II. FINANCIAL SECTION Independent Auditor's Report 1 – 2
A. MANAGEMENT’S DISCUSSION AND ANALYSIS 3–16
B. BASIC FINANCIAL STATEMENTS
Government-wide Financial Statements Statement of Net Position 17 Statement of Activities 18 – 19
Fund Financial Statements
Governmental Fund Financial Statements Balance Sheet 20 Reconciliation of the Balance Sheet Governmental Funds to the Statement of Net Position 21 Statement of Revenues, Expenditures, and Changes in Fund Balances 22 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 23
Proprietary Fund Financial Statements Statement of net position 24– 25 Statement of Revenues, Expenses and Changes in Fund Net Position 26 – 27 Statement of Cash Flows 28 – 29
Component Units Financial Statements Statement of Net Position 30 Statement of Activities 31 – 32
Notes to the Financial Statements 33 – 93 C. REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 94 – 96 Notes to Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 97 Schedule of Changes in Net Pension Liability and Related Ratios – Employees’ Retirement System of Alabama 98 Schedule of Employer Contributions – Employees’ Retirement System of Alabama 99 Schedule of Changes in Net Pension Liability and Related Ratios – Police and Firefighters Retirement Plan 100 Schedule of Employer Contributions – Police and Firefighters Retirement Plan 101 Schedule of Changes in Net Pension Liability and Related Ratios – Transit Workers Pension Plan 102 Schedule of Employer Contributions – Transit Workers Pension Plan 103 – 104
D. COMBINING FINANCIAL STATEMENTS Combining Balance Sheet - Non-major Governmental Funds (by fund type) 105 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Non-major Governmental Funds (by fund type) 106 Non-major Capital Projects Funds Combining Balance Sheet 107 – 108 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 109 – 110 Non-major Debt Service Funds Combining Balance Sheet 111 – 112 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 113 – 114 Non-major Special Revenue Funds Combining Balance Sheet 115 – 116 Combining Statement of Revenues, Expenditures and Changes in Fund Balance 117 – 118 Non-major Enterprise Funds Combining Statement of Net Position 119 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 120 Combining Statement of Cash Flows 121 Internal Service Funds Combining Statement of Net Position 122 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 123 Combining Statement of Cash Flows 124 E. OTHER SUPPLEMENTARY INFORMATION
General Fund Schedule of Revenues and Other Financing Sources (Uses) Budget and Actual (Budgetary Basis) 125 – 126 Capital Assets Capital Assets Used in the Operation of Governmental Activities - Schedule by Function 127
Long-Term Debt Schedule of Bonds, Warrants, and Notes Payable 128 – 129
III. STATISTICAL SECTION Net Position by Component 130 – 131 Changes in Net Position 132 – 135 Governmental Activities Tax Revenue by Source 136 – 137 Fund Balances of Governmental Funds 138 – 139 Changes in Fund Balances of Governmental Funds 140 – 141 Value of Taxable Sales 142 Sales Tax Rates Direct and Overlapping Governments 143 – 144 Principal Sales Taxpayers 145 Assessed Value and Estimated Actual Value of Taxable Property 146 – 147 Property Tax Rates Direct and Overlapping Governments 148 Principal Property Taxpayers 149 Property Tax Levies and Collections 150 Ratios of Outstanding Debt by Type 151 – 152 Ratios of General Bonded Debt Outstanding 153 Direct and Overlapping Government Debt 154 Legal Debt Margin Information 155 – 156 Pledged - Revenue Coverage 157 Demographic and Economic Statistics 158 Principal Employers 159 Full-time Equivalent City Government Employees by Function 160 Capital Asset Statistics by Function 161 Operating Indicators by Function 162 – 169
March 31, 2017
TO THE CITIZENS OF THE CITY OF MOBILE, ALABAMA:
Enclosed is the Comprehensive Annual Financial Report (CAFR) of the City of Mobile, Alabama (the City) for the fiscal year ended September 30, 2016. The CAFR is provided to give detailed information about the financial position and activities of the City to its citizens, City Council, City staff and other readers.
Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the City of Mobile management. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner designed to present fairly the financial position and results of operations of the City as a whole and the various funds of the City. All disclosures necessary to enable the reader to gain an understanding of the City’s financial activities have been included.
Alabama state law requires an annual audit of the City’s financial statements by independent certified public accountants who must conduct the audit in accordance with generally accepted auditing standards. The accounting firm of Smith, Dukes & Buckalew LLP, conducted the audit and their report on the City’s basic financial statements is included herein. The City is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The audit is underway and the separately issued Single Audit Report will be available for review at the Federal Audit Clearinghouse.
Management’s discussion and analysis (the MD&A) immediately follows the independent auditors’ report. It provides a narrative introduction, overview and analysis to accompany the basic financial statements. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it.
PROFILE OF THE CITY
Three hundred-year-old historic Mobile is the county seat of Mobile County and is located in the southwestern section of Alabama, at the head of Mobile Bay, thirty-one miles from the Gulf of Mexico.
City of Mobile | P.O. Box 1827 Mobile, Alabama 36633 | www.cityofmobile.org
i The city covers an area of 179 square miles. In 2015, the United States Census Bureau estimated that there were 194,288 people residing within the city limits of Mobile and that there were 415,395 people in Mobile County, the third largest metropolitan statistical area in Alabama. The City of Mobile, Alabama (the City) was incorporated on January 20, 1814 under the provisions of Act 1911, No. 281, page 330; Code 1940. The City operates under a Mayor and seven member council form of government, with the council members elected by district. Responsibility for day-to-day operations of the City rests with the Mayor. Various City Council committees also work closely with the Mayor and department heads.
This report includes all funds of the City. The City provides a full range of services. These services include police and fire protection; the construction and maintenance of highways, streets and infrastructure; and recreational activities and cultural events. The Mobile Public Library, the Public Parks and Recreation Board (Ladd - Peebles Stadium) and the Solid Waste Disposal Authority have met the criteria to be included in the report as discretely presented component units and are separately presented in the report. The Board of Water and Sewer Commissioners of the City of Mobile, Mobile Housing Board, Mobile Airport Authority, Mobile Board of Health, Mobile Emergency Management, Mobile Personnel Board, and Juvenile Court and Youth Center are excluded from this report. Additional information on all of these entities can be found in the notes to the financial statements (See Note 2).
Policy making and legislative authority are vested in a seven member city council which is, among other things, responsible for passing local ordinances, adopting budgets, appointing committees and board members of related organizations, and approving the appointment of executive directors of the City. The Mayor is responsible for carrying out certain ordinances of the City Council, supervising the operation of the City and appointing executive directors. The Mayor and Council members are elected to four-year terms. All council members are elected from within their respective districts.
The annual budget serves as the foundation for the City’s financial planning and control. The Mayor is required to submit a balanced budget proposal to the City Council for most of the City’s departments and funds by August 20 of each fiscal year. The Council, after public comment and evaluation, adopts the budget by October 1, the beginning of the fiscal year.
The City maintains budgetary controls to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City’s governing body. Activities of the general fund are included in the annual appropriated budget. Project-length financial plans are adopted for the capital projects funds. The comparison between the project-length basis budget to actual expenditures for the year is not meaningful and, therefore, is not presented. The level of budgetary control is on the departmental level within an individual fund for legal and administrative control. Unencumbered amounts lapse at year-end in the general fund.
FINANCIAL CONDITION
As of September 30, 2012, the unassigned fund balance of the City's general fund was $11.4 million. During Fiscal Year 2013, the general fund balance deteriorated by $15.7 million, leaving the unassigned fund balance of the general fund at a negative $4.3 million as of September 30, 2013.
ii
During Fiscal Year 2015, the City's general fund budget was amended to repair the unassigned fund balance deficit and to restore a surplus. During that year, the City experienced a $19.4 million net increase in fund balance in its general fund. During 2015, the City experienced an additional $23.1 million increase in fund balance in its general fund.
At the close of Fiscal Year 2016, the unassigned fund balance of the general fund was a positive $29.8 million following a budget amendment to transfer $10.2 million in surplus to the capital fund for, among other purposes, the construction of two fire stations and economic development. The total fund balance for the general fund, including restricted, assigned and nonspendable fund balance was $34.7 million.
ECONOMIC CONDITION
Manufacturing, higher education and medical services continue to be driving factors for the economy of Mobile.
In September, 2016 Airbus completed construction of a $600 million aircraft assembly plant in Mobile at the Brookley Aeroplex where it will employ approximately 1,000 full-time workers at full-capacity and deliver approximately four aircraft per month. The first plane was delivered in April, 2016.
Austal USA in Mobile has been commissioned by the US Navy to build twelve ships under a Spearhead-class Expeditionary Fast Transport vessel contract. Austal has constructed and delivered five 127-meter littoral combat ships to the Navy under an eleven-ship, $4.0 billion contract. In connection with the JHSV and LCS contracts, Austal employs 4,400 workers in its Mobile shipyard.
Spearhead’s economic stability is provided to Mobile with the presence of the University of South Alabama and its health care facilities, employing 5,200, and medical centers such as Infirmary Health Systems, Providence Hospital and Springhill Medical Center, together employing 7,800.
MANAGEMENT OF CITY RESOURCES
A significant factor in assessing the economic health of the City of Mobile, and the City's finances is the credit rating assigned by credit ratings agencies because of their in-depth review of economic conditions and City financial performance.
In 2014, however, both Moody's Investor Service and Standard & Poors downgraded the City’s ratings due to a rapid deterioration in general fund liquidity and reserves during fiscal 2012 and 2013. As of the dates of the downgrades, neither service was aware of the change in the City management and of the adoption of an amended 2014 budget.
In 2016, Moody’s revised its “negative” outlook to “stable” on the City’s Aa2 rating and Standard & Poors raised its rating from A+ to AA-. The services cited an improving financial position due to new budgeting practices, financial flexibility and operating surpluses and reserves. iii
RELEVANT FINANCIAL POLICIES
In order to ensure future stability in its credit ratings, the City administration adopted a reserve policy for its general fund. This policy is intended to provide resources that might be necessary to meet unexpected financial pressures due to natural or manmade disasters or recessionary decreases in consumer based tax revenues.
The City's reserve policy requires the funding of an unassigned fund balance equal to 8.33% of budgeted general fund revenues for the immediately preceding fiscal year. The current balance indicated by this policy is $20 million, a level that was reached by the end of 2015.
City management is responsible for establishing and maintaining internal control designed to ensure that the assets of the City are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. Internal controls are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management.
As a recipient of Federal and State awards, the City also is responsible for ensuring that adequate internal controls are in place to ensure compliance with applicable laws and regulations related to those programs. These internal controls are subject to periodic evaluation by the City.
As a part of the City’s Single Audit, tests are made to determine the adequacy of internal controls, including those portions related to Federal awards. Tests are also performed to evaluate the City’s compliance with federal awards.
Cash temporarily idle during the fiscal year was invested in government securities and bank certificates of deposit. The City’s investment policy is to minimize credit and market risks while maintaining a competitive yield on its portfolio. Accordingly, deposits were either insured by Federal Depository Insurance or collateralized. The deposits that were not insured by Federal Depository Insurance were covered under the Security for Alabama Funds Enhancement (SAFE) program. Each of the banks holding the City’s deposits is a certified participant in the SAFE program. Through the SAFE program, all public funds are protected through a collateral pool administered by the Alabama State Treasury.
The City is self-insured for claims and judgments, general liability and general automobile liability. These liabilities were estimated to be approximately $1,847,500 at September 30, 2016 and were accounted for in the Insurance Internal Service Fund. Claim settlement and loss expenses are accrued in this fund for estimated reported claims. Past experience indicates that incurred but not reported claims, in aggregate, do not represent a material amount and, therefore, have not been accrued at year-end. The City is also fully insured for workers’ compensation claims with a deductible of $750,000 per accident and employee health insurance claims.
iv
The City has contracted with outside third parties for claim administration. These liabilities were estimated to be approximately $14.9 million at September 30, 2016 and are accounted for in the Government-wide financial statements. The liability for employee health insurance claims of approximately $2.27 million is reported in the Employee Health Plan Fund (Internal Service Fund).
The cost of providing benefits to City retirees is a significant commitment of current and future resources. The City pays 100% of benefit costs after employee contributions and plan earnings. The City has met all of its obligations and incorporated the effect of expected benefit cost increases in making annual budget decisions. These costs have risen and are expected to continue to rise without some modifications to the plan.
During Fiscal Year 2016, City management has made modifications to its employee health plan and to its separate retiree health plans in an effort to lessen the impact to the City of rising costs.
AWARDS AND ACKNOWLEDGEMENTS
The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its September 30, 2015 comprehensive annual financial report. This report satisfied both generally accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate.
The preparation of the comprehensive annual financial report on a timely basis was made possible by the dedicated service of the entire staff of the Finance Department and especially the efforts of Patricia Aldrich, Comptroller and Rebecca Christian, Deputy Comptroller. Each member of the department has our sincere appreciation for the contributions made in preparation of this report. My sincere appreciation is also extended to our independent auditors, Smith, Dukes & Buckalew LLP, for their cooperation and technical guidance.
Sincerely,
Paul C. Wesch Executive Director of Finance
v vi City of Mobile CITY OF MOBILE CITIZENS CITY COUNCIL
Fred Richardson, Jr Gina Gregory Levon C. Manzie C.J. Small John C. Williams Joel Daves Bess Rich Sandy Stimpson Council Vice President Council President Organizational Chart District 2 District 3 District 4 District 5 District 6 Mayor District 1 District 7 Municipal Court Internal Audit Jeff Carter Holmes Whiddon, Mayor’s Colby Cooper Communications City Clerk Presiding Judge Coordinator City liaisons with: Innovation Team Chief of Staff Lisa Lambert Marion Steinfels Civic and Convention Centers Criminal Ricardo Woods Downtown Mobile District Management Corp Domestic Archives E911 Operators Environmental City Attorney Ned Harkins Emergency Management / Civil Defense Traffic Environmental Agencies for Regulatory Affairs City Clerk Dept. Exploreum Neighborhood Lisa Lambert Gulf Quest Museum Legal Department Administrator Development History Museum of Mobile Mail Room Ladd-Peebles Stadium Board Nathan Emmorey James Roberts Local, State & Federal Environmental Lisa Lambert Mobile Arts Council Mobile Bay Convention and Visitors Bureau Municipal Mobile County Public School System Court Referral Neighborhood Community and Mobile Sports Authority Program Task Force Housing Enforcement Public Library System Sammie Brown TBD Development David WAVE Transit TBD Daughenbaugh
Don Rose RADM Rich Landolt, Bill Harkins Paul Wesch Dianne Irby Shayla Beaco George Talbot Michon Trent Matthew Capps Chief Sue Farni USN (Ret.) Executive Director Executive Director Executive Director Executive Director Senior Director Senior Director Senior Director Procurement Executive Director Executive Director Public Works Finance Engineering and Development Build Mobile Communications and Civic Engagement Parks and Recreation Officer Information Technology Public Safety External Affairs Historic Equipment Services Purchasing Mobile Azalea City Golf Course Human Resources Development Geographic Greg Beckham John Paine Museum of Art Brian Aaron Leslie Rey Cart Blackwell Communications Information Systems Safety and Performance Lawrence Auer Garage Laura Byrne Deborah Velders Scott Kearney Gary Gamble Supplier Diversity Motor Pool Mobile Tennis Centers Archnique Kidd Inventory Control Police & Fire Long Range Special Events Bruce Lockette Mobile Information Pension Ann Rambeau Scott Novak Planning Technology Fire-Rescue Department Mary Berg Mobile Film Office Keep Mobile Beautiful Real Estate/ Brian Underwood Sue Farni Assistant Chief Bob Haskins Engineering Asset Management Eva Golson Move Mobile Billy Pappas Parks Nick Amberger Brad Christensen Dan Otto Planning and Anitra Henderson Administration Traffic Engineering Revenue Zoning IS Project Management Bureau of Fire Prevention Jennifer White Gwen Hall Architectural Engineering Richard Olsen Parks Maintenance Capital Projects Mobile 311 Training Kim Harden Landscaping Services Electrical Janic Terry Network & Technical Services Fire Suppression Facilities Management Operations & Cemeteries Doug Davis Build Mobile Emergency Medical Services Treasury ROW, Land TBD Telecommunications Urban Forestry Marion McElroy Pandora Disturbance, Communications Public Works Real Estate Cunningham Permitting John Windley John Olszewski Recreation Rosemary Sawyer Police Department TBD Road Maintenance Accounting/Comptroller Inspections Permitting Chief James Barber Community Centers Patricia Aldrich Environmental/ Roger Bendolph Margaret Pappas Storm/Drainage Maintenance MS4 Administrative Athletics Solid Waste/Trash Collection Services Denise Brown Boards and Commissions Appointed by Council: Field Operations Special Activities Payroll Human Relations Commission John Noletto Advisory Commission on Disabled Investigative Community Activities Keep Mobile Beautiful Ad Hoc Tax Committee on Revenue and Growth Services Mobile Regional Senior & Ladd-Peebles Stadium Board Architectural Review Board Public Library Board Support Services Community Center Board of Adjustment Mobile Conventions and Visitors Board Citizens’ Budget and Finance Advisory Committee Special Operations Mobile Museum Board, Inc. (History Museum) Citizens’ Park and Recreation Advisory Committee Mobile Museum of Art Civic Center Board Animal Shelter Old Dauphin Way Review Board Codes Advisory Committee Solid Waste Authority Ellen Lursen Commercial Development Authority South Alabama Regional Planning Commission Downtown Redevelopment Commission Tree Commission Historic Development Commission Water and Sewer Commissioners Historic Preservation Authority Youth Council Waterfront Coordinator Pat Brennan AUTHORIZATION Boards and Commissions Appointed by Mayor: Adopted July 8, 2014 Cruise Terminal (Revised 10/11/2016) Housing Authority Industrial Development Board Sheila Gurganus - Mayoral Cabinet vii Mobile Airport Authority Planning Commission William S. Stimpson - Mayor CITY OF MOBILE, ALABAMA
LIST OF PRINCIPAL OFFICIALS
AT SEPTEMBER 30, 2016
TITLE NAME
Mayor William S. Stimpson
City Council District 1 Fredrick D. Richardson, Jr. District 2 Levon C. Manzie District 3 C.J. Small District 4 John C. Williams District 5 Joel Daves District 6 Bess Rich District 7 Gina Gregory
Executive Director of Finance Paul C. Wesch
City Clerk Lisa C. Lambert
viii WILLIAM S. STIMPSON MAYOR Part II Financial Section
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council of the City of Mobile, Alabama Mobile, Alabama
Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Mobile, as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the City of Mobile’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements The City of Mobile’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of WAVE Transit and the Mobile Public Library, which represent 1.92 percent and 0.41 percent, respectively, of the assets, 5.19 percent and (0.87) percent, respectively, of the net position, and 1.30 percent and 2.67 percent, respectively, of the revenues of the City. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for WAVE Transit and the Mobile Public Library, is 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions In our opinion, based on our audit and the 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 aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Mobile, Alabama, as of September 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
1 Smith, Dukes & Buckalew LLP Mobile 3800 Airport Blvd. • Suite 101 • Mobile, Alabama 36608 • phone 251-343-1200 • fax 251-344-0966 • smithdukes.com Daphne 6475 Van Buren Ave. • Suite 200 • Daphne, Alabama 36526 • phone 251-621-9600 • fax 251-621-9608 To the Honorable Mayor and Members of the City Council of the City of Mobile, Alabama Page 2
Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and Required Supplementary Information other than MD&A, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Mobile’s basic financial statements. The Introductory Section, Combining Financial Statements, Other Supplementary Information, and Statistical Section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements.
The Combining Financial Statements and Other Supplementary Information are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has 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 basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and the other auditors. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole.
The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and, accordingly, we do not express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 31, 2017 on our consideration of the City of Mobile’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Mobile’s internal control over financial reporting and compliance.
Mobile, Alabama March 31, 2017 2