NEW ISSUE—BOOK ENTRY ONLY RATINGS: Fitch: AA+ Standard & Poor’s: AA (see “RATINGS” herein) In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the City, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, interest on the Series 2010C Bonds (i) is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) is not treated as a preference item in calculating the federal alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. See “TAX MATTERS – Series 2010C Bonds”.

In the opinion of Bond Counsel to the City, interest on the Series 2010D Bonds (i) is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Code, except that no opinion is expressed as to such exclusion of interest on any Series 2010D Bond for any period during which such Series 2010D Bond is held by a person who, within the meaning of Section 147(a) of the Code, is a “substantial user” of the facilities financed with the proceeds of the Series 2010D Bonds or a “related person”, and (ii) is not treated as a preference item in calculating the federal alternative minimum tax on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. See “TAX MATTERS – Series 2010D Bonds”.

In the opinion of Bond Counsel to the City, interest on the Series 2010E Bonds is included in gross income for federal income tax purposes. See “TAX MATTERS – Series 2010E Bonds”.

In the opinion of Bond Counsel to the City, under existing statutes of the Commonwealth of Virginia, interest on the Bonds is not includable in computing the Virginia income tax. $4,820,000 $5,470,000 City of Roanoke, Virginia, City of Roanoke, Virginia, General Obligation Public Improvement General Obligation Public Improvement Bonds, and Refunding Bonds, Series 2010D (Tax-Exempt – Recovery Zone Series 2010C (Tax-Exempt) Facility Bonds) $5,665,000 City of Roanoke, Virginia, General Obligation Public Improvement Bonds, Series 2010E (Taxable – Recovery Zone Economic Development Bonds) Dated: Date of Delivery Due: July 15, As Shown On Inside Cover This Official Statement has been prepared by the City of Roanoke to provide information on the Bonds. Selected information is presented on this cover page for the convenience of the reader. To make an informed decision regarding the Bonds, a prospective investor should read this Official Statement in its entirety. Purpose The proceeds of the Bonds will be used to pay the costs of various public improvement projects of and for the City and to refund on a current basis certain outstanding general obligation bonds of the City (see “INTRODUCTION” on page 1 of this Official Statement). Issued Pursuant to The Bonds will be issued in accordance with the Public Finance Act of 1991, Title 15.2, Chapter 26, of the Code of Virginia, 1950. The City Council of the City adopted resolutions on September 8, 2009, January 4, 2010, June 21, 2010 and July 19, 2010 authorizing the issuance and sale of the Bonds. Security The Bonds will be general obligations of the City, and the full faith and credit of the City will be irrevocably pledged to the punctual payment of the principal of and interest on the Bonds as they become due. Interest Payment Dates January 15 and July 15, beginning July 15, 2011. Record Dates June 30 and December 31. Redemption Provisions See inside cover. Denomination $5,000 or integral multiples thereof. Registration Book-entry only; Cede & Co., as nominee for The Depository Trust Company. Registrar/Paying Agent Regions Bank, Richmond, Virginia. Financial Advisor Public Financial Management, Inc., Arlington, Virginia. Bond Counsel Hawkins Delafield & Wood LLP, New York, New York. Underwriter’s Counsel Christian & Barton, L.L.P., Richmond, Virginia. Issuer Contact Director of Finance, City of Roanoke, (540) 853-2821.

The Bonds are offered when, as and if issued, subject to approval of their validity by Hawkins Delafield & Wood LLP, New York, New York, Bond Counsel to the City, as described herein. Certain legal matters will be passed upon for the City by William M. Hackworth, Esq., City Attorney. Certain legal matters will be passed upon for the Underwriter by its counsel, Christian & Barton, L.L.P., Richmond, Virginia. It is expected that delivery of the Bonds to DTC will be made in New York, New York, on or about August 11, 2010. BAIRD Dated: July 29, 2010

$4,820,000 City of Roanoke, Virginia, General Obligation Public Improvement and Refunding Bonds, Series 2010C (Tax-Exempt) (Base CUSIP Number 770077) Year Principal Interest CUSIP Year Principal Interest CUSIP (July 15) Amount Rate Yield Suffix** (July 15) Amount Rate Yield Suffix**

2011 $ 55,000 2.00% 0.33% M28 2019 $135,000 4.00% 2.53% N27 2012 110,000 2.00 0.45 M36 2020 135,000 4.00 2.74 N35 2013 140,000 2.00 0.70 M44 2021 135,000 4.00 2.95* N43 2014 140,000 3.00 0.92 M51 2022 135,000 3.00 3.08 N50 2015 2,350,000 3.00 1.36 M69 2023 135,000 3.125 3.20 N68 2016 135,000 3.00 1.77 M77 2024 135,000 3.25 3.37 N76 2017 135,000 3.00 2.07 M85 2025 135,000 3.375 3.48 N84 2018 135,000 4.00 2.32 M93

$270,000 3.60% Term Bonds due July 15, 2027, Priced at 98.996% to Yield 3.68%, CUSIP Number 770077 P25 $405,000 3.875% Term Bonds due July 15, 2030, Priced at 99.106% to Yield 3.94%, CUSIP Number 770077 P58 ______

*Yield to par call on July 15, 2020.

$5,470,000 City of Roanoke, Virginia, General Obligation Public Improvement Bonds, Series 2010D (Tax-Exempt – Recovery Zone Facility Bonds) (Base CUSIP Number 770077) Year Principal Interest CUSIP Year Principal Interest CUSIP (July 15) Amount Rate Yield Suffix** (July 15) Amount Rate Yield Suffix**

2011 $110,000 2.00% 0.33% P66 2019 $285,000 4.00 % 2.53% Q65 2012 225,000 2.00 0.45 P74 2020 285,000 4.00 2.74 Q73 2013 290,000 2.00 0.70 P82 2021 285,000 4.00 2.95* Q81 2014 285,000 3.00 0.92 P90 2022 285,000 3.00 3.08 Q99 2015 285,000 3.00 1.36 Q24 2023 285,000 3.125 3.20 R23 2016 285,000 3.00 1.77 Q32 2024 285,000 3.25 3.37 R31 2017 285,000 3.00 2.07 Q40 2025 285,000 3.375 3.48 R49 2018 285,000 4.00 2.32 Q57

$570,000 3.60% Term Bonds due July 15, 2027, Priced at 98.996% to Yield 3.68%, CUSIP Number 770077 R64 $855,000 3.875% Term Bonds due July 15, 2030, Priced at 99.106% to Yield 3.94%, CUSIP Number 770077 R98 ______

*Yield to par call on July 15, 2020.

$5,665,000 City of Roanoke, Virginia, General Obligation Public Improvement Bonds, Series 2010E (Taxable – Recovery Zone Economic Development Bonds) (Base CUSIP Number 770077) Year Principal Interest CUSIP Year Principal Interest CUSIP (July 15) Amount Rate Price Suffix** (July 15) Amount Rate Price Suffix**

2016 $380,000 2.90% 100% S22 2021 $380,000 4.40% 100% S71 2017 380,000 3.40 100 S30 2022 380,000 4.60 100 S89 2018 380,000 3.70 100 S48 2023 380,000 4.75 100 S97 2019 380,000 3.95 100 S55 2024 375,000 4.95 100 T21 2020 380,000 4.15 100 S63 2025 375,000 5.05 100 T39

$1,875,000 5.70% Term Bonds due July 15, 2030, Priced at 100%, CUSIP Number 770077 T47

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

CITY OF ROANOKE, VIRGINIA

CITY COUNCIL

DAVID A. BOWERS, Mayor

DAVID B. TRINKLE, Vice Mayor

WILLIAM D. BESTPITCH

RAPHAEL E. FERRIS

SHERMAN P. LEA

ANITA J. PRICE

COURT G. ROSEN

______

CITY COUNCIL APPOINTED OFFICIALS

CHRISTOPHER P. MORRILL, City Manager

ANN H. SHAWVER, Director of Finance

WILLIAM M. HACKWORTH, City Attorney

STEPHANIE M. MOON, City Clerk

TROY A. HARMON, Municipal Auditor

______

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

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

FOR ADDITIONAL INFORMATION Department of Finance, City of Roanoke 215 Church Avenue, S.W., Room 461 Roanoke, Virginia 24011 (540) 853-2821

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The Bonds will be exempt from registration under the Securities Act of 1933, as amended, as obligations of a political subdivision of the Commonwealth of Virginia. The Bonds will also be exempt from registration under the securities laws of the Commonwealth of Virginia. No broker, dealer, sales representative or any other person has been authorized by the City to give any information or to make any representation other than as contained in this Official Statement in connection with the offering described in it and, if given or made, such other information or representation must not be relied upon as having been authorized by the City or the Underwriter of the Bonds. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than those described on the cover and inside cover pages, nor shall there be any offer to sell, solicitation of an offer to buy or sale of such securities by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information contained in this Official Statement (which term shall be deemed to include all Appendices to this Official Statement and all documents incorporated herein by reference) has been obtained from the City and other sources deemed reliable. The information concerning DTC has been obtained from DTC. No representation is made, however, as to the accuracy or completeness of the information contained in this Official Statement, and nothing contained in this Official Statement is, or shall be relied upon as, a promise or representation by the City. This Official Statement is submitted in connection with the sale of the securities described in it and may not be reproduced or used, in whole or in part, for any other purpose. The information contained in this Official Statement is subject to change without notice and neither the delivery of this Official Statement nor any sale made by means of it shall, under any circumstances, create any implication that there have not been changes in the affairs of the City since the date of this Official Statement. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. ______THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS Page INTRODUCTION ...... 1 DESCRIPTION OF THE BONDS ...... 2 SECURITY FOR THE BONDS ...... 7 PLAN OF FINANCING ...... 7 PLAN OF REFUNDING ...... 7 BONDHOLDER REMEDIES IN THE EVENT OF DEFAULT ...... 7 RATINGS ...... 8 LITIGATION AND CONTINGENT LIABILITIES ...... 8 APPROVAL OF LEGAL PROCEEDINGS ...... 9 TAX MATTERS ...... 9 VERIFICATION ...... 15 FINANCIAL ADVISOR ...... 15 CONTINUING DISCLOSURE ...... 15 UNDERWRITING ...... 16 OTHER MATTERS ...... 16

Appendix A The City of Roanoke ...... A-1 Appendix B City of Roanoke, Virginia, Organizational Chart ...... B-1 Appendix C Comprehensive Annual Financial Report of the City for the Fiscal Year Ended June 30, 2009 ...... C-1 Appendix D Proposed Forms of Opinions of Bond Counsel ...... D-1 Appendix E Description of The Depository Trust Company and the Book-Entry System ...... E-1 Appendix F Proposed Form of Continuing Disclosure Certificate ...... F-1

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Official Statement Relating To The Issuance Of $15,955,000 City Of Roanoke, Virginia, General Obligation Public Improvement Bonds Consisting Of $4,820,000 $5,470,000 City of Roanoke, Virginia, City of Roanoke, Virginia, General Obligation Public Improvement General Obligation Public Improvement Bonds, and Refunding Bonds, Series 2010D (Tax-Exempt – Recovery Zone Series 2010C (Tax-Exempt) Facility Bonds)

$5,665,000 City of Roanoke, Virginia, General Obligation Public Improvement Bonds, Series 2010E (Taxable – Recovery Zone Economic Development Bonds)

INTRODUCTION

The purpose of this Official Statement, which includes the cover page and the appendices hereto, is to furnish information in connection with the sale by the City of Roanoke, Virginia (the “City”), of $15,955,000 principal amount of General Obligation Public Improvement Bonds (the “Bonds”), consisting of $4,820,000 principal amount of General Obligation Public Improvement and Refunding Bonds, Series 2010C (the “Series 2010C Bonds”), $5,470,000 principal amount of General Obligation Public Improvement Bonds, Series 2010D (Tax-Exempt – Recovery Zone Facility Bonds) (the “Series 2010D Bonds”), and $5,665,000 principal amount of General Obligation Public Improvement Bonds, Series 2010E (Taxable – Recovery Zone Economic Development Bonds) (the “Series 2010E Bonds”).

The Bonds will be issued in accordance with the Public Finance Act of 1991, Title 15.2, Chapter 26 of the Code of Virginia, 1950, as amended. The City Council of the City adopted resolutions on September 8, 2009, January 4, 2010, June 21, 2010 and July 19, 2010 authorizing the issuance and sale of the Bonds.

The Series 2010C Bonds are being issued for the purpose of providing funds (i) to finance a portion of the costs of the acquisition, construction, reconstruction, improvement, extension, enlargement and equipping of capital school improvement projects, including the replacement of school roofs, the Roanoke River Flood Reduction Project and the Digital Radio Project (comprised of an 800 MHz radio system for public safety purposes), and (ii) to refund on a current basis $2,300,000 outstanding principal amount of the City’s General Obligation Public Improvement Bonds, Series 2002A, dated February 1, 2002 and maturing on October 1, 2010 (the “Refunded Series 2002A Bonds”). See “PLAN OF REFUNDING”.

The Series 2010D Bonds are being issued for the purpose of providing funds to finance the costs of the renovation of the Market Building in the City. The Series 2010D Bonds are expected to be issued as Recovery Zone Facility Bonds under Section 1400U-3 of the Internal Revenue Code of 1986, as amended (the “Code”), which was added by the provisions of the American Recovery and Reinvestment Act of 2009 (the “ARRA”).

The Series 2010E Bonds are being issued for the purpose of providing funds to finance the costs of the acquisition, construction, reconstruction, improvement, extension, enlargement and equipping of the Roanoke River Flood Reduction Project, the National Guard Armory Project (comprised of the demolition of the existing National Guard Armory and the preparation of the site thereof for parks and recreation purposes in the South Jefferson Redevelopment area), the Bridge Renovation Project (comprised of the renovation of 104 existing bridge structures) and the Digital Radio Project in the City. The Series 2010E Bonds are expected to be issued as Recovery Zone Economic Development Bonds under Section 1400U-2 of the Code, which was added by the provisions of the ARRA. Pursuant to the ARRA, the City will receive a cash subsidy payment from the United States Treasury equal to 45% of the interest payable on the Series 2010E Bonds on each interest payment date. The cash payment does

not constitute a guarantee by the United States Treasury or a pledge of the faith and credit of the United States of America, but is required to be paid by the United States Treasury under the ARRA.

DESCRIPTION OF THE BONDS

Interest, Maturities and Places of Payment

The Bonds of each series will be dated the date of their delivery, will bear interest from their date, payable on July 15, 2011 and semiannually on each January 15 and July 15 thereafter, at the rates per annum set forth on the inside cover page of this Official Statement and will mature on July 15 in each of the years and in the aggregate principal amounts set forth on the inside cover page of this Official Statement.

Book-Entry Only Bonds

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

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

Optional Redemption of Series 2010C Bonds

The Series 2010C Bonds maturing on or before July 15, 2020 are not subject to optional redemption prior to their stated maturities. The Series 2010C Bonds maturing on and after July 15, 2021 (or portions thereof in installments of $5,000) are subject to redemption at the option of the City prior to their stated maturities, on or after July 15, 2020, in whole or in part from time to time on any date, in such order as may be determined by the City (except that if at any time less than all of the Series 2010C Bonds of a given maturity are called for redemption, the particular Series 2010C Bonds or portions thereof in installments of $5,000 of such maturity to be redeemed shall be selected by lot), at a redemption price equal to the principal amount of the Series 2010C Bonds to be redeemed, together with the interest accrued thereon to the date fixed for the redemption thereof.

Optional Redemption of Series 2010D Bonds

The Series 2010D Bonds maturing on or before July 15, 2020 are not subject to optional redemption prior to their stated maturities. The Series 2010D Bonds maturing on and after July 15, 2021 (or portions thereof in installments of $5,000) are subject to redemption at the option of the City prior to their stated maturities, on or after July 15, 2020, in whole or in part from time to time on any date, in such order as may be determined by the City (except that if at any time less than all of the Series 2010D Bonds of a given maturity are called for redemption, the particular Series 2010D Bonds or portions thereof in installments of $5,000 of such maturity to be redeemed shall be selected by lot), at a redemption price equal to the principal amount of the Series 2010D Bonds to be redeemed, together with the interest accrued thereon to the date fixed for the redemption thereof.

Optional Redemption of Series 2010E Bonds

The Series 2010E Bonds maturing on or before July 15, 2020 are not subject to optional redemption prior to their stated maturities. The Series 2010E Bonds maturing on and after July 15, 2021 (or portions thereof in installments of $5,000) are subject to redemption at the option of the City prior to their stated maturities, on or after July 15, 2020, in whole or in part from time to time on any date, in such order as may be determined by the City (except that if at any time less than all of the Series 2010E Bonds of a given maturity are called for redemption, the particular Series 2010E Bonds or portions thereof in installments of $5,000 of such maturity to be redeemed shall be selected by lot), at a redemption price equal to the principal amount of the Series 2010E Bonds to be redeemed, together with the interest accrued thereon to the date fixed for the redemption thereof.

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Extraordinary Optional Redemption of Series 2010E Bonds for Extraordinary Recovery Zone Economic Development Bond Event

The Series 2010E Bonds (or portions thereof in installments of $5,000) are subject to redemption prior to their stated maturities at the option of the City, in whole or in part from time to time on any date after the occurrence of an “Extraordinary Recovery Zone Economic Development Bond Event”, as hereinafter defined, at the redemption price (the “Extraordinary Optional Redemption Price”) equal to the greater of:

(i) 100% of the principal amount of the Series 2010E Bonds to be redeemed; and

(ii) the sum of the present value of the remaining scheduled payments of the principal and interest to the maturity date of the Series 2010E Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which the Series 2010E Bonds are to be redeemed, discounted to the date on which the Series 2010E Bonds are to be redeemed on a semiannual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate, as defined below, plus 100 basis points; plus, in each case, accrued interest on the Series 2010E Bonds to be redeemed to the date fixed for the redemption thereof.

“Treasury Rate” means, with respect to any redemption date for a particular Series 2010E Bond, the rate per annum, expressed as a percentage of the principal amount, equal to the semiannual equivalent yield to maturity or interpolated maturity of the Comparable Treasury Issue (defined below), assuming that the Comparable Treasury issue is purchased on the redemption date for a price equal to the Comparable Treasury Price (defined below), as calculated by the Designated Investment Banker (defined below).

“Comparable Treasury Issue” means, with respect to any redemption date for a particular Series 2010E Bond, the United States Treasury security or securities selected by the Designated Investment Banker that has an actual or interpolated maturity comparable to the remaining average life of the Series 2010E Bond to be redeemed, and that would be utilized in accordance with customary financial practice in pricing new issues of debt securities of comparable maturity to the remaining average life of the Series 2010E Bond to be redeemed.

“Comparable Treasury Price” means, with respect to any redemption date for a particular Series 2010E Bond, (i) if the Designated Investment Banker receives at least four Reference Treasury Dealer Quotations (defined below), the average of such quotations for such redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (ii) if the Designated Investment Banker obtains fewer than four Reference Treasury Dealer Quotations, the average of all such quotations.

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

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

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date for a particular Series 2010E Bond, the average, as determined by the Designated Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Designated Investment Banker by such Reference Treasury Dealer at 3:30 P.M., New York City time, on the third Business Day preceding such redemption date.

An “Extraordinary Recovery Zone Economic Development Bond Event” will have occurred if a material adverse change has occurred to Section 1400U-2, 54AA or 6431 of the Code (as such Sections were added by Sections 1401 and 1531 of the ARRA pertaining to “Recovery Zone Economic Development Bonds”) pursuant to which the City’s 45% cash subsidy payment from the United States Treasury in respect of the Series 2010E Bonds is reduced or eliminated.

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Determination of Certain Redemption Prices

Any Extraordinary Optional Redemption Price of Series 2010E Bonds to be redeemed pursuant to the provisions described under “Extraordinary Optional Redemption of Series 2010E Bonds for Extraordinary Recovery Zone Economic Development Bond Event” will be determined by an independent accounting firm, investment banking firm or financial advisor retained by the City to calculate such redemption price. The City may conclusively rely on the determination of such redemption price by such independent accounting firm, investment banking firm or financial advisor and will not be liable for such reliance.

Waiver of Defeasance Rights with Respect to Series 2010E Bonds

The City will not defease the Series 2010E Bonds, or cause a defeasance of the Series 2010E Bonds to occur, unless it shall have received an opinion from nationally-recognized bond counsel to the effect that (i) the owners of such Series 2010E Bonds being defeased will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance, and (ii) the defeasance will not otherwise alter those owners' United States federal income tax treatment of principal and interest payments on such Series 2010E Bonds being defeased. See “TAX MATTERS – Series 2010E Bonds – Disposition and Defeasance”.

Mandatory Sinking Fund Redemption

The Series 2010C Bonds maturing on July 15, 2027 are subject to mandatory sinking fund redemption on July 15, 2026 and to payment at maturity on July 15, 2027 in the principal amounts in each year set forth below, in the case of redemption with the particular Series 2010C Bond or Bonds or portions thereof to be redeemed to be selected by lot, upon payment of the principal amount of the Series 2010C Bonds to be redeemed, together with the interest accrued on the principal amount to be redeemed to the date fixed for the redemption thereof:

Year (July 15) Principal Amount 2026 $135,000 2027† 135,000 $270,000 ______†Stated maturity.

The City, at its option, may credit against such mandatory sinking fund redemption requirement the principal amount of any Series 2010C Bonds maturing on July 15, 2027 which have been purchased and cancelled by the City or which have been redeemed and not theretofore applied as a credit against such mandatory sinking fund redemption requirement.

The Series 2010C Bonds maturing on July 15, 2030 are subject to mandatory sinking fund redemption on July 15 in each of the years 2028 and 2029 and to payment at maturity on July 15, 2030 in the principal amounts in each year set forth below, in the case of redemption with the particular Series 2010C Bond or Bonds or portions thereof to be redeemed to be selected by lot, upon payment of the principal amount of the Series 2010C Bonds to be redeemed, together with the interest accrued on the principal amount to be redeemed to the date fixed for the redemption thereof:

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Year (July 15) Principal Amount 2028 $135,000 2029 135,000 2030† 135,000 $405,000 ______†Stated maturity.

The City, at its option, may credit against such mandatory sinking fund redemption requirement the principal amount of any Series 2010C Bonds maturing on July 15, 2030 which have been purchased and cancelled by the City or which have been redeemed and not theretofore applied as a credit against such mandatory sinking fund redemption requirement.

The Series 2010D Bonds maturing on July 15, 2027 are subject to mandatory sinking fund redemption on July 15, 2026 and to payment at maturity on July 15, 2027 in the principal amounts in each year set forth below, in the case of redemption with the particular Series 2010D Bond or Bonds or portions thereof to be redeemed to be selected by lot, upon payment of the principal amount of the Series 2010D Bonds to be redeemed, together with the interest accrued on the principal amount to be redeemed to the date fixed for the redemption thereof:

Year (July 15) Principal Amount 2026 $285,000 2027† 285,000 $570,000 ______†Stated maturity.

The City, at its option, may credit against such mandatory sinking fund redemption requirement the principal amount of any Series 2010D Bonds maturing on July 15, 2027 which have been purchased and cancelled by the City or which have been redeemed and not theretofore applied as a credit against such mandatory sinking fund redemption requirement.

The Series 2010D Bonds maturing on July 15, 2030 are subject to mandatory sinking fund redemption on July 15 in each of the years 2028 and 2029 and to payment at maturity on July 15, 2030 in the principal amounts in each year set forth below, in the case of redemption with the particular Series 2010D Bond or Bonds or portions thereof to be redeemed to be selected by lot, upon payment of the principal amount of the Series 2010D Bonds to be redeemed, together with the interest accrued on the principal amount to be redeemed to the date fixed for the redemption thereof:

Year (July 15) Principal Amount 2028 $285,000 2029 285,000 2030† 285,000 $855,000 ______†Stated maturity.

The City, at its option, may credit against such mandatory sinking fund redemption requirement the principal amount of any Series 2010D Bonds maturing on July 15, 2030 which have been purchased and cancelled by the City or which have been redeemed and not theretofore applied as a credit against such mandatory sinking fund redemption requirement.

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The Series 2010E Bonds maturing on July 15, 2030 are subject to mandatory sinking fund redemption on July 15 in each of the years 2026 through 2029, both inclusive, and to payment at maturity on July 15, 2030 in the principal amounts in each year set forth below, in the case of redemption with the particular Series 2010E Bond or Bonds or portions thereof to be redeemed to be selected by lot, upon payment of the principal amount of the Series 2010E Bonds to be redeemed, together with the interest accrued on the principal amount to be redeemed to the date fixed for the redemption thereof:

Year (July 15) Principal Amount 2026 $ 375,000 2027 375,000 2028 375,000 2029 375,000 2030† 375,000 $1,875,000 ______†Stated maturity.

The City, at its option, may credit against such mandatory sinking fund redemption requirement the principal amount of any Series 2010E Bonds maturing on July 15, 2030 which have been purchased and cancelled by the City or which have been redeemed and not theretofore applied as a credit against such mandatory sinking fund redemption requirement.

Notice of Redemption

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

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

Designation of Series 2010D Bonds as Recovery Zone Facility Bonds

The Series 2010D Bonds are expected to be issued as Recovery Zone Facility Bonds under Section 1400U-3 of the Code, which was added by the provisions of the ARRA.

Designation of Series 2010E Bonds as Recovery Zone Economic Development Bonds

The Series 2010E Bonds are expected to be issued as Recovery Zone Economic Development Bonds under Section 1400U-2 of the Code, which was added by the provisions of the ARRA. Pursuant to the ARRA, the City

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will receive a cash subsidy payment from the United States Treasury equal to 45% of the interest payable on the Series 2010E Bonds on each interest payment date. The cash payment does not constitute a guarantee by the United States Treasury or a pledge of the faith and credit of the United States of America, but is required to be paid by the United States Treasury under the ARRA.

SECURITY FOR THE BONDS

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

PLAN OF FINANCING

A portion of the proceeds of the Series 2010C Bonds will be applied to finance the costs of the acquisition, construction, reconstruction, improvement, extension, enlargement and equipping of capital school improvement projects, including the replacement of school roofs, the Roanoke River Flood Reduction Project and the Digital Radio Project (comprised of an 800 MHz radio system for public safety purposes) in the City.

A portion of the proceeds of the Series 2010D Bonds will be applied to finance the costs of the renovation of the Market Building in the City.

A portion of the proceeds of the Series 2010E Bonds will be applied to finance the costs of the acquisition, construction, reconstruction, improvement, extension, enlargement and equipping of the Roanoke River Flood Reduction Project, the National Guard Armory Project (comprised of the demolition of the existing National Guard Armory and the preparation of the site thereof for parks and recreation purposes in the South Jefferson Redevelopment area) and the Digital Radio Project in the City.

PLAN OF REFUNDING

A portion of the proceeds of the Series 2010C Bonds will be applied to refund on a current basis the Refunded Series 2002A Bonds, which are to be paid at their stated maturity on October 1, 2010. Such proceeds will be deposited with The Bank of New York Mellon Trust Company, N.A., Richmond, Virginia, as Escrow Agent (the “Escrow Agent”), under an Escrow Deposit Agreement, dated August 11, 2010 (the “Escrow Deposit Agreement”), by and between the City and the Escrow Agent. Such proceeds will be invested in Government Securities (as defined in the Escrow Deposit Agreement). The Government Securities will mature and bear interest payable at times and in amounts sufficient to pay (i) interest when due on the Refunded Series 2002A Bonds to October 1, 2010, being the stated maturity of the Refunded Series 2002A Bonds, and (ii) the principal of the Refunded Series 2002A Bonds on October 1, 2010. The City is undertaking the refunding of the Refunded Series 2002A Bonds described above in order to modify its existing annual debt service structure.

BONDHOLDER REMEDIES IN THE EVENT OF DEFAULT

Section 15.2-2659 of the Code of Virginia, 1950, provides that, upon the affidavit of any owner or any paying agent of any general obligation bonds of a political subdivision of the Commonwealth of Virginia (including the City) in default as to payment of principal or interest, the Governor shall immediately make a summary investigation and if such default is established to the Governor’s satisfaction, the Governor shall immediately make an order directing the State Comptroller to withhold all further payment to the political subdivision of all funds, or any part thereof, appropriated and payable by the Commonwealth to the political subdivision so in default for any and all purposes until such default is cured. The Governor shall, while such default continues, direct the payment of

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all such sums so withheld, or so much thereof as shall be necessary, to the owners of such bonds so in default, or the paying agent therefor, so as to cure, or to cure insofar as possible, the default on such bonds and the interest thereon. The Governor shall, as soon as practicable, give notice of such default and of the availability of funds with the paying agent or with the State Comptroller by publication one time in a daily newspaper of general circulation in the City of Richmond and, in the case of registered bonds, by mail, to the registered owners of the Bonds. The State Comptroller advises that to date no order to withhold funds pursuant to Section 15.2-2659 has ever been issued. Although the provisions of Section 15.2-2659 have never been tested in a Virginia court, the Attorney General of Virginia has ruled that appropriated funds can be withheld by the Commonwealth pursuant to that section. In the fiscal year ended June 30, 2009, total direct appropriations paid by the Commonwealth to the City amounted to approximately $71.1 million.

Neither the Bonds, nor the proceedings with respect thereto, specifically provide any remedies which would be available to owners of the Bonds if the City defaults in the payment of principal of or interest on the Bonds, nor do they contain any provisions for the appointment of a trustee to enforce the interests of the owners of the Bonds upon the occurrence of such default. Upon any default in the payment of the principal of or interest on a Bond, the owner of such Bond could, among other things, seek to obtain a writ of mandamus from a court of competent jurisdiction requiring the City Council to assess, levy and collect an ad valorem tax, unlimited as to rate or amount, upon all property in the City subject to taxation by the City, sufficient to pay the principal of and interest on the Bonds as the same shall come due and otherwise to observe the covenants contained in the Bonds and the proceedings with respect thereto. The mandamus remedy, however, may be impracticable and difficult to enforce. Further, the right to enforce payment of the principal of or interest on the Bonds may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws and equitable principles, which may limit the specific enforcement of certain remedies.

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

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

RATINGS

Fitch Ratings and Standard & Poor’s Ratings Services have assigned the Bonds the initial ratings set forth on the cover page of this Official Statement. An explanation of the significance of such ratings may only be obtained from the rating agency furnishing the same. The City furnished to such rating agencies the information contained in this Official Statement and certain publicly available materials and information about the City. Generally, rating agencies base their ratings on such materials and information, as well as investigations, studies, and assumptions of the rating agencies. Such ratings may be changed at any time, and no assurance can be given that they will not be revised downward or withdrawn entirely by either or all such rating agencies if, in the judgment of either or all, circumstances so warrant. Such circumstances may include, without limitation, changes in or unavailability of information relating to the City. Any such downward revision or withdrawal of any such ratings may have an adverse effect on the market price of the Bonds.

LITIGATION AND CONTINGENT LIABILITIES

The City Attorney reports that there is no litigation pending or, to his knowledge, threatened affecting the issuance of the Bonds or the security therefor. The City is a defendant in certain litigation arising in the ordinary

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course of operations and is subject to certain contingent liabilities, including the litigation and contingent liabilities described in Note 19 to the City’s financial statements included in Appendix C to this Official Statement. The City Attorney has reviewed the status of such litigation and is of the opinion that foreseeable liability, if any, in all of them would not have a material adverse effect upon the financial condition of the City. The City Attorney is also of the opinion that such litigation will not affect the validity of the Bonds or the ability of the City to levy ad valorem taxes for payment of the principal of and interest on the Bonds.

APPROVAL OF LEGAL PROCEEDINGS

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

Certain legal matters will be passed upon for the City by William M. Hackworth, Esq., City Attorney. Certain legal matters will be passed upon for the Underwriter by its counsel, Christian & Barton, L.L.P., Richmond, Virginia.

TAX MATTERS

Series 2010C Bonds

The information under this section applies solely to the Series 2010C Bonds.

Opinion of Bond Counsel

In the opinion of Hawkins Delafield & Wood LLP, New York, New York, Bond Counsel to the City, under existing statutes and court decisions and assuming compliance with certain tax covenants described herein, interest on the Series 2010C Bonds (i) is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Code and (ii) is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering its opinions, Bond Counsel has relied on certain representations, certifications of fact and statements of reasonable expectations made by the City in connection with the Series 2010C Bonds, and Bond Counsel has assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Series 2010C Bonds from gross income under Section 103 of the Code.

In addition, in the opinion of Bond Counsel to the City, under existing statutes of the Commonwealth of Virginia, interest on the Series 2010C Bonds is not includable in computing the Virginia income tax.

Bond Counsel expresses no opinion regarding any other federal or State tax consequences with respect to the Series 2010C Bonds. Bond Counsel renders its opinion under existing statutes and court decisions as of the issue date, and assumes no obligation to update, revise or supplement its opinion to reflect any action thereafter taken or not taken, or any facts or circumstances that may thereafter come to its attention, or changes in law or in interpretations thereof that may thereafter occur, or for any other reason. Bond Counsel expresses no opinion on the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for federal income tax purposes of interest on the Series 2010C Bonds, or under State and local tax law.

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Certain Ongoing Federal Tax Requirements and Covenants

The Code establishes certain ongoing requirements that must be met subsequent to the issuance and delivery of the Series 2010C Bonds in order that interest on the Series 2010C Bonds be and remain excluded from gross income under Section 103 of the Code. These requirements include, but are not limited to, requirements relating to use and expenditure of gross proceeds of the Series 2010C Bonds, yield and other restrictions on investments of gross proceeds and the arbitrage rebate requirement that certain excess earnings on gross proceeds be rebated to the federal government. Noncompliance with such requirements may cause interest on the Series 2010C Bonds to become included in gross income for federal income tax purposes retroactive to their issue date, without regard to the date on which such noncompliance occurs or is discovered. The City has covenanted to comply with certain applicable requirements of the Code to assure the exclusion of interest on the Series 2010C Bonds from gross income under Section 103 of the Code.

Certain Collateral Federal Tax Consequences

The following is a brief discussion of certain collateral federal income tax matters with respect to the Series 2010C Bonds. It does not purport to address all aspects of federal taxation that may be relevant to a particular owner of a Series 2010C Bond. Prospective investors, particularly those who may be subject to special rules, are advised to consult their own tax advisors regarding the federal tax consequences of owning and disposing of the Series 2010C Bonds.

Prospective owners of the Series 2010C Bonds should be aware that the ownership of such obligations may result in collateral federal income tax consequences to various categories of persons, such as corporations (including S corporations and foreign corporations), financial institutions, property and casualty and life insurance companies, individual recipients of Social Security and railroad retirement benefits, individuals otherwise eligible for the earned income tax credit and taxpayers deemed to have incurred or continued indebtedness to purchase or carry obligations the interest on which is not included in gross income for federal income tax purposes. Interest on the Series 2010C Bonds may be taken into account in determining the tax liability of foreign corporations subject to the branch profits tax imposed by Section 884 of the Code.

Original Issue Discount

“Original issue discount” (“OID”) is the excess of the sum of all amounts payable at the stated maturity of a Series 2010C Bond (excluding certain “qualified stated interest” that is unconditionally payable at least annually at prescribed rates) over the issue price of that maturity. In general, the “issue price” of a maturity means the first price at which a substantial amount of the Series 2010C Bonds of that maturity was sold (excluding sales to bond houses, brokers or similar persons acting in the capacity as underwriters, placement agents or wholesalers). In general, the issue price for each maturity of the Series 2010C Bonds is expected to be the initial public offering price set forth on the inside cover page of this Official Statement. Bond Counsel further is of the opinion that, for any Series 2010C Bonds having OID (a “Discount Bond”), OID that has accrued and is properly allocable to the owners of the Discount Bonds under Section 1288 of the Code is excludable from gross income for federal income tax purposes to the same extent as other interest on the Series 2010C Bonds.

In general, under Section 1288 of the Code, OID on a Discount Bond accrues under a constant yield method, based on periodic compounding of interest over prescribed accrual periods using a compounding rate determined by reference to the yield on that Discount Bond. An owner’s adjusted basis in a Discount Bond is increased by accrued OID for purposes of determining gain or loss on sale, exchange or other disposition of such Discount Bond. Accrued OID may be taken into account as an increase in the amount of tax-exempt income received or deemed to have been received for purposes of determining various other tax consequences of owning a Discount Bond even though there will not be a corresponding cash payment.

Owners of Discount Bonds should consult their own tax advisors with respect to the treatment of OID for federal income tax purposes, including various special rules relating thereto, and the State and local tax consequences of acquiring, holding and disposing of Discount Bonds.

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Bond Premium

In general, if an owner acquires a Series 2010C Bond for a purchase price (excluding accrued interest) or otherwise at a tax basis that reflects a premium over the sum of all amounts payable on the Series 2010C Bond after the acquisition date (excluding certain “qualified stated interest that is unconditionally payable at least annually at prescribed rates), that premium constitutes “premium” on that Series 2010C Bond (a “Premium Bond”). In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the premium over the remaining term of the Premium Bond, based on the owner’s yield over the remaining term of the Premium Bond, determined based on constant yield principles (in certain cases involving a Premium Bond callable prior to its stated maturity date, the amortization period and yield may be required to be determined on the basis of an earlier call date that result in the lowest yield on such Bond). An owner of a Premium Bond must amortize the premium by offsetting the qualified stated interest allocable to each interest accrual period under the owner’s regular method of accounting against the premium allocable to that period. In the case of a tax-exempt Premium Bond, if the premium allocable to an accrual period exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss. Under certain circumstances, the owner of a Premium Bond may realize a taxable gain upon disposition of the Premium Bond even though it is sold or redeemed for an amount less than or equal to the owner’s original acquisition cost. Owners of any Premium Bonds should consult their own tax advisors regarding the treatment of premium for federal income tax purposes, including various special rules relating thereto, and State and local tax consequences, in connection with the acquisition, ownership, amortization of premium on, sale, exchange or other disposition of Premium Bonds.

Information Reporting and Backup Withholding

Information reporting requirements apply to interest on tax-exempt obligations, including the Series 2010C Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the payor with, a Form W-9, “Request for Taxpayer Identification Number and Certification”, or if the recipient is one of a limited class of exempt recipients. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to “backup withholding”, which means that the payor is required to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a “payor” generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient.

If an owner purchasing a Series 2010C Bond through a brokerage account has executed a Form W-9 in connection with the establishment of such account, as generally can be expected, no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Series 2010C Bonds from gross income for federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner’s federal income tax once the required information is furnished to the Internal Revenue Service.

Series 2010D Bonds

The information under this section applies solely to the Series 2010D Bonds.

Opinion of Bond Counsel

In the opinion of Bond Counsel to the City, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i) interest on the Series 2010D Bonds is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Code, except that no opinion is expressed as to such exclusion of interest on any Series 2010D Bond for any period during which such Series 2010D Bond is held by a person who, within the meaning of Section 147(a) of the Code, is a “substantial user” of the facilities financed with the proceeds of the Series 2010D Bonds or a “related person” and (ii) interest on the Series 2010D Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering its opinion, Bond Counsel has relied on certain representations, certifications of fact and statements of

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reasonable expectations made by the City in connection with the Series 2010D Bonds, and Bond Counsel to the City has assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Series 2010D Bonds from gross income under Section 103 of the Code.

In addition, in the opinion of Bond Counsel to the City, under existing statutes of the Commonwealth of Virginia, interest on the Series 2010D Bonds is not includable in computing the Virginia income tax.

Bond Counsel expresses no opinion regarding any other federal or State tax consequences with respect to the Series 2010D Bonds. Bond Counsel renders its opinion under existing statutes and court decisions as of the issue date, and assumes no obligation to update its opinion after the issue date to reflect any future action, fact or circumstance, or change in law or interpretation, or otherwise. Bond Counsel expresses no opinion on the effect of any action hereafter taken or not taken in reliance upon an opinion of counsel other than itself on the exclusion from gross income for federal income tax purposes of interest on the Series 2010D Bonds, or under State and local tax law.

Certain Ongoing Federal Tax Requirements and Covenants

The Code establishes certain significant ongoing requirements that must be met subsequent to the issuance and delivery of the Series 2010D Bonds in order that interest on the Series 2010D Bonds be and remain excluded from gross income under Section 103 of the Code. These requirements include, but are not limited to, requirements relating to the use and expenditure of gross proceeds of the Series 2010D Bonds, yield and other restrictions on investments of gross proceeds, and the arbitrage rebate requirement that certain excess earnings on gross proceeds be rebated to the federal government. Noncompliance with such requirements may cause interest on the Series 2010D Bonds to become included in gross income for federal income tax purposes retroactive to their issue date, irrespective of the date on which such noncompliance occurs or is discovered. The City has covenanted to comply with certain applicable requirements of the Code to assure the exclusion of interest on the Series 2010D Bonds from gross income under Section 103 of the Code.

Certain Collateral Federal Tax Consequences

The following is a brief discussion of certain collateral federal income tax matters with respect to the Series 2010D Bonds. It does not purport to address all aspects of federal taxation that may be relevant to a particular owner of a Series 2010D Bond. Prospective investors, particularly those who may be subject to special rules, are advised to consult their own tax advisors regarding the federal tax consequences of owning and disposing of the Series 2010D Bonds.

Prospective owners of the Series 2010D Bonds should be aware that the ownership of such Series 2010D Bonds may result in collateral federal income tax consequences to various categories of persons, such as corporations (including S corporations and foreign corporations), financial institutions, property and casualty and life insurance companies, individual recipients of Social Security and railroad retirement benefits, individuals otherwise eligible for the earned income tax credit, and taxpayers deemed to have incurred or continue indebtedness to purchase or carry obligations the interest on which is excluded from gross income for federal income tax purposes. Interest on the Series 2010D Bonds may be taken into account in determining the tax liability of foreign corporations subject to the branch profits tax imposed by Section 884 of the Code.

Information Reporting and Backup Withholding

Information reporting requirements apply to interest paid on tax-exempt obligations, including the Series 2010D Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the payor with, a Form W-9, “Request for Taxpayer Identification Number and Certification”, or if the recipient is one of a limited class of exempt recipients. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to “backup withholding”, which means that the payor is required to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code. For

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the foregoing purpose, a “payor” generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient.

If an owner purchasing a Series 2010D Bond through a brokerage account has executed a Form W-9 in connection with the establishment of such account, as generally can be expected, no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Series 2010D Bonds from gross income for federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner’s federal income tax once the required information is furnished to the Internal Revenue Service.

Series 2010E Bonds

The information under this section applies solely to the Series 2010E Bonds.

In the opinion of Bond Counsel to the City, interest on the Series 2010E Bonds is included in gross income for federal income tax purposes pursuant to the Code.

In addition, in the opinion of Bond Counsel to the City, under existing statutes of the Commonwealth of Virginia, interest on the Series 2010E Bonds is not includable in computing the Virginia income tax.

The City will elect to receive cash subsidy payments equal to 45% of the interest payable on the Series 2010E Bonds from the United States Treasury. As a result of such election, holders of the Series 2010E Bonds will not be eligible to receive the tax credit otherwise permitted under Section 54AA(a) and Section 1400U-2(a) of the Code. The Code establishes certain ongoing requirements that must be met subsequent to the issuance and delivery of the Series 2010E Bonds in order for the City to continue to receive such subsidy payments. These requirements include, but are not limited to, requirements relating to use and expenditure of the available project proceeds of the Series 2010E Bonds, and the arbitrage rebate requirement that certain excess earning on gross proceeds be rebated to the federal government. Noncompliance may cause the Series 2010E Bonds to fail to qualify for the receipt of the interest subsidy payments. The City has covenanted to comply with certain applicable requirements of the Code to assure the receipt of the interest subsidy payments in respect of the Series 2010E Bonds.

The following discussion is a brief summary of the principal United States federal income tax consequences of the acquisition, ownership and disposition of Series 2010E Bonds by original purchasers of the Series 2010E Bonds who are “U.S. Holders”, as defined herein. This summary (i) is based on certain relevant provisions of the Code under existing law is subject to change at any time, possibly with retroactive effect, (ii) assumes that the Series 2010E Bonds will be held as “capital assets” and (iii) does not discuss all of the United States federal income tax consequences that may be relevant to a holder in light of its particular circumstances or to holders subject to special rules, such as insurance companies, financial institutions, tax-exempt organizations, dealers in securities or foreign currencies, persons holding the Series 2010E Bonds as a position in a “hedge” or “straddle”, or holders whose functional currency (as defined in Section 985 of the Code) is not the United States dollar, or holders who acquire Series 2010E Bonds in the secondary market.

Holders of Series 2010E Bonds should consult with their own tax advisors concerning the United States federal income tax and other consequences with respect to the acquisition, ownership and disposition of the Series 2010E Bonds as well as any tax consequences that may arise under the laws of any State, local or foreign tax jurisdiction.

Original Issue Discount

In general, if Original Issue Discount (“OID”) is greater than a statutorily defined de minimis amount, a holder of a Series 2010E Bond having a maturity of more than one year from its date of issue must include in federal gross income (for each day of the taxable year, or portion of the taxable year, in which such holder holds such Series 2010E Bond) the daily portion of OID, as it accrues (generally on a constant yield method) and regardless of the holder’s method of accounting. “OID” is the excess of (i) the “stated redemption price at maturity” over (ii) the “issue price”. For purposes of the foregoing: “issue price” means the first price at which a substantial amount of the

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Series 2010E Bond is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers); “stated redemption price at maturity” means the sum of all payments, other than “qualified stated interest”, provided by such Series 2010E Bond; “qualified stated interest” is stated interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually at a single fixed rate; and “de minimis amount” is an amount equal to 0.25 percent of the Series 2010E Bond’s stated redemption price at maturity multiplied by the number of complete years to its maturity. A holder may irrevocably elect to include in gross income all interest that accrues on a Series 2010E Bond using the constant-yield method, subject to certain modifications.

Original Issue Premium

In general, if a Series 2010E Bond is originally issued for an issue price (excluding accrued interest) that reflects a premium over the sum of all amounts payable on the Series 2010E Bond other than “qualified stated interest” (a “Taxable Premium Bond”), that Taxable Premium Bond will be subject to Section 171 of the Code, relating to bond premium. In general, if the holder of a Taxable Premium Bond elects to amortize the premium as “amortizable bond premium” over the remaining term of the Taxable Premium Bond, determined based on constant yield principles (in certain cases involving a Taxable Premium Bond callable prior to its stated maturity date, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the highest yield on such Bond), the amortizable premium is treated as an offset to interest income; the holder will make a corresponding adjustment to the holder’s basis in the Taxable Premium Bond. Any such election is generally irrevocable and applies to all debt instruments of the holder (other than tax-exempt bonds) held at the beginning of the first taxable year to which the election applies and to all such debt instruments thereafter acquired. Under certain circumstances, the holder of a Taxable Premium Bond may realize a taxable gain upon disposition of the Taxable Premium Bond even though it is sold or redeemed for an amount less than or equal to the holder’s original acquisition cost.

Disposition and Defeasance

Generally, upon the sale, exchange, redemption or other disposition (which would include a legal defeasance) of a Series 2010E Bond, a holder will recognize taxable gain or loss in an amount equal to the difference between the amount realized (other than amounts attributable to accrued interest not previously includable in income) and such holder’s adjusted tax basis in the Series 2010E Bond.

The City may cause the deposit of moneys or securities in escrow in such amount and manner as to cause the Series 2010E Bonds to be deemed to be no longer outstanding (a “defeasance”). For federal income tax purposes, such defeasance could result in a deemed exchange under Section 1001 of the Code and a recognition by such owner of taxable income or loss, without any corresponding receipt of moneys. In addition, the character and timing of receipt of payments on the Series 2010E Bonds subsequent to any such defeasance could also be affected.

Backup Withholding and Information Reporting

In general, information reporting requirements will apply to non-corporate holders with respect to payments of principal, payments of interest and the accrual of OID on a Series 2010E Bond and the proceeds of the sale of a Series 2010E Bond before maturity within the United States. Backup withholding may apply to holders of Series 2010E Bonds under Section 3406 of the Code. Any amounts withheld under the backup withholding rules from a payment to a beneficial owner, and which constitutes over-withholding, would be allowed as a refund or a credit against such beneficial owner’s United States federal income tax provided the required information is furnished to the Internal Revenue Service.

U.S. Holders

The term “U.S. Holder” means a beneficial owner of a Series 2010E Bond that is: (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or of any political subdivision thereof, (iii) an estate the income of which is subject to United States federal income taxation regardless of its source or (iv) a trust whose administration is subject to the primary

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jurisdiction of a United States court and which has one or more United States fiduciaries who have the authority to control all substantial decisions of the trust.

IRS Circular 230 Disclosure

The advice under “TAX MATTERS – Series 2010E Bonds” concerning certain income tax consequences of the acquisition, ownership and disposition of the Series 2010E Bonds was written to support the marketing of the Series 2010E Bonds. To ensure compliance with requirements imposed by the Internal Revenue Service, Bond Counsel to the City informs you that (i) any federal tax advice contained in this Official Statement (including any attachments) or in writings furnished by Bond Counsel to the City is not intended to be used, and cannot be used by any bondholder, for the purpose of avoiding penalties that may be imposed on the bondholder under the Code and (ii) the bondholder should seek advice based on the bondholder’s particular circumstances from an independent tax advisor.

Miscellaneous

Tax legislation, administrative action taken by tax authorities, and court decisions, whether at the federal or State level, (i) may adversely affect the tax-exempt status of interest on the Series 2010C Bonds and the Series 2010D Bonds under federal or State law and (ii) could affect the market price or marketability of all series of the Bonds.

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

VERIFICATION

The Arbitrage Group, Inc. will verify certain mathematical computations as to the sufficiency of the moneys and investments deposited under the Escrow Deposit Agreement to pay, when due, the interest on the Refunded Series 2002A Bonds from the date the Series 2010C Bonds are issued to October 1, 2010, being the stated maturity of the Refunded Series 2002A Bonds, and to pay the principal amount of the Refunded Series 2002A Bonds on October 1, 2010. See “PLAN OF REFUNDING”.

FINANCIAL ADVISOR

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

CONTINUING DISCLOSURE

The City will execute and deliver to the purchasers of Bonds a Continuing Disclosure Certificate, the form of which is set forth as Appendix F to this Official Statement, pursuant to which the City will covenant and agree, for the benefit of the holders of the Bonds, consistent with Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, to provide: annual financial information and operating data for the City (“Annual Reports”), including, if available, audited financial statements of the City for each fiscal year beginning on and after July 1, 2009; in a timely manner, notices of certain events with respect to the Bonds, if material, including (i) principal and interest payment delinquencies, (ii) non-payment related defaults, (iii) unscheduled draws on debt service reserves reflecting financial difficulties, (iv) unscheduled draws on credit enhancements reflecting financial difficulties, (v) substitution of credit or liquidity providers or their failure to perform, (vi) adverse tax opinions or events affecting the tax-exempt status of the Bonds, (vii) modifications to rights of Bondholders, (viii) certain bond calls, (ix) defeasances, (x) release, substitution or sale of property securing repayment of the Bonds and (xi) rating changes; and notice of any failure of the City to provide required annual financial information referred to above will be provided to the Municipal Securities Rulemaking Board. The notices of certain events referred to above will be provided to the Municipal Securities

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Rulemaking Board. The continuing obligation of the City to provide Annual Reports and notices of certain events referred to above will terminate with respect to the Bonds when the Bonds are no longer outstanding. Any failure by the City to comply with the foregoing will not constitute a default with respect to the Bonds. In the Continuing Disclosure Certificate, the City represents that, in the five previous years, it has not failed to comply in any material respect with any previous undertaking in a written contract or agreement specified in paragraph (b)(5)(i) of Rule 15c2-12.

UNDERWRITING

Robert W. Baird & Co. Incorporated (the “Underwriter”) has agreed to purchase the Bonds at an aggregate purchase price equal to the initial public offering prices of the Bonds, less an underwriting discount in the amount of $63,405.28, pursuant to the terms of a Bond Purchase Agreement (the “Bond Purchase Agreement”) by and between the City and the Underwriter. The Bond Purchase Agreement provides that the obligation of the Underwriter is subject to certain conditions precedent and that the Underwriter will be obligated to purchase all of the Bonds if any of the Bonds are purchased. The Bonds may be offered to certain dealers (including dealers depositing such Bonds into investment trusts, account or funds) and others at prices lower than the initial public offering prices. After the initial public offering the public offering prices of the Bonds may be changed from time to time by the Underwriter.

OTHER MATTERS

The City Council has by resolution authorized the distribution of the Preliminary Official Statement, dated July 21, 2010, and this Official Statement. The City deemed the Preliminary Official Statement final as of its date within the meaning of Rule 15c2-12, except for the omission of certain pricing and other information permitted to be omitted pursuant to Rule 15c2-12.

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

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

THE CITY OF ROANOKE, VIRGINIA

By: /s/ DAVID A. BOWERS Mayor

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APPENDIX A

THE CITY OF ROANOKE

General

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

Chartered as a city in 1884, Roanoke encompasses a land area of approximately 43 square miles. The City’s population of approximately 92,344 represents more than 30% of the population in its metropolitan area, which includes the neighboring City of Salem, the Town of Vinton and the Counties of Roanoke, Botetourt, Craig and Franklin.

Government

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

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

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

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

Awards and Recognition

The City continues to receive positive national publicity for the quality of life enjoyed by its citizens and potential business prospects. Roanoke has been rated in the top five areas nationwide for retirees, according to the 2007 Best Cities report published in Kiplinger’s Personal Finance magazine. Readers of Kiplinger’s Personal Finance magazine awarded Roanoke second place nationwide in the 2009 Readers’ Choice award for Best Places to Live. Expansion Management magazine’s February 2007 issue named Roanoke one of America’s fifty hottest

A-1 cities, marking the sixth time the City has been recognized by this publication as an economic hotspot. The Roanoke Police Department’s efforts to enhance traffic safety in the City were recognized in 2008 on a state and national level with first place in the Virginia Law Enforcement Challenge by the Virginia Association of Chiefs of Police and second place in the National Law Enforcement Challenge by the International Association of Chiefs of Police. The creation of the Lick Run Greenway received recognition from the Virginia Recreation and Park Society as the Best New Greenway. The Carvins Cove Conservation Easement received the Scenic Virginia Award for Scenic Water Corridor Preservation and was honored by the Western Virginia Land Trust with the 2008 A. Victor Thomas Environmental Stewardship Award. The City tied for first place in the 2008 Green Government Challenge of the Virginia Municipal League in the 90,000+ population category for its adoption of green policies and practices.

In 2009, the City was a finalist in the award for Municipal Excellence for its Clean and Green campaign according to the National League of Cities. Most recently, the Clean and Green campaign was selected as a Gold Medal Winner of the 2009 Governor’s Environmental Excellence Awards in the Environmental category. Meetings South magazine’s awarded the Hotel Roanoke & Conference Center a Best of the South award in 2008, given to hotels based on quality of meeting space, guest rooms, service, food, and amenities. The League of American Bicyclists recognized the City for its efforts toward becoming a Bicycle Friendly Community in September 2008. Finally, the Center for Digital Government has selected Roanoke as a Leading Digital City for 2009 in its population category, marking the ninth consecutive year in which it has been recognized by this organization as a top ten leader in providing technology for its citizens and the sixth time it has finished as the first-place leader.

Roanoke is one of the select few municipalities whose Fire-EMS, Police Department, and Sheriff’s Office have all been recognized with national accreditation. The Roanoke E-911 system is one of only 51 agencies out of more than 6,000 E-911 centers in the United States to earn its accreditation. The Treasurer’s Association of Virginia recognized the Office of the Treasurer for the City as fully accredited for fiscal year 2009, meeting the guidelines set forth by the Association for excellence in treasury management. The City’s Parks and Recreation Department received full accreditation from the Commission for Accreditation of Park and Recreation in fiscal year 2009.

The Governmental Financial Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Roanoke, Virginia, for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2008. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized CAFR, whose content conforms to program standards. The CAFR must satisfy both U. S. generally accepted accounting principles and applicable legal requirements. A copy of the GFOA Certificate of Achievement is included in the introductory section of the CAFR.

A Certificate of Achievement is valid for a period of one year. The City of Roanoke has received a Certificate of Achievement for the last thirty-five consecutive years (fiscal years ended 1974 - 2008). The City believes this report conforms to the Certificate of Achievement program requirements and standards, and has submitted it to the GFOA to determine its eligibility for another certificate.

In addition, the City also received the GFOA Distinguished Budget Presentation Award for its annual budget document for the fiscal year 2009-10. In order to qualify for the Distinguished Budget Presentation Award, the City’s budget document was judged to be proficient in several categories, including as a policy document, a financial plan, an operations guide and a communications device. The City has been a recipient of the Distinguished Budget Award for the last twenty-four consecutive years.

City Administrative Officials

Christopher P. Morrill, 48, assumed his duties as City Manager on March 1, 2010. Prior to that he served as the Assistant City Manager for the City of Savannah, Georgia, where he led the Management and Financial Services bureau. In this position he led the city in its efforts to reduce the property tax mileage rate by 28%, significantly reduce outstanding debt, build up reserves, and implement budgeting for outcomes. From 1999 through 2001, he served as Senior Municipal Finance Advisor to the South African National Treasury under a United States Agency for International Development project. In this position, he assisted the South African government with developing local government finance legislation, municipal budget reforms, and capacity building programs. From 1990 through 1992 and 1994 through 1999, Mr. Morrill served as Research and Budget Director for the City of Savannah, Georgia. He served from 1992 through 1994 as a U.S. Peace Corps volunteer in the

A-2 former Soviet Union, where he advised the City of Lviv, Ukraine, on finance and management issues. He co- authored The Savannah Story: The Road to Equity and Sustainable Community Development in Economic Development in American Cities: the Pursuit of an Equity Agenda. Morrill completed a three-year fellowship in the Kellogg National Leadership Program, exploring conflict resolution and community building in Peru, China, Northern Ireland, and South Africa. Morrill is an ICMA Credentialed Manager and serves on the Executive Board of the Government Finance Officers Association (GFOA). He served on the GFOA Standing Committee on Governmental Budgeting and Management and the Standing Committee on Economic Development and Capital Planning. He now serves as President of Leadership Savannah and as a board member on the United Way of the Coastal Empire, and Historic Savannah Foundation. He received a bachelor of arts in political science from the College of the Holy Cross in Worcester, Massachusetts, and a master of public administration from the University of North Carolina at Chapel Hill.

William M. Hackworth, 61, has been City Attorney since July 1999. Prior to his appointment as City Attorney, Mr. Hackworth served as County Attorney for York County, Virginia for over ten years. Prior to that, he served as a law clerk to the Honorable Ted Dalton, Judge of the United States District Court for the Western District of Virginia (1973-1974) and as a trial attorney with the United States Department of Justice (1975-1977). He also served as an Assistant City Attorney for the City of Roanoke (1978-1988). He holds a Bachelor of Arts Degree in Political Science from The Ohio State University (1970), a Juris Doctorate Degree from the University of Virginia Law School (1973) and a Masters in Public Administration from the University of Virginia (1981). Mr. Hackworth was admitted to the Virginia State Bar in 1973 and is admitted to practice before the Supreme Court of the United States, the Supreme Court of Virginia, the United States Court of Appeals for the Fourth Circuit and the United States District Courts for the Eastern and Western Districts of Virginia. He is past President of the Local Government Attorneys of Virginia, past President of the York–Poquoson Bar Association, and a past member of the Board of the Roanoke Bar Association and the Board of Governors of the Local Government Section of the Virginia State Bar. Mr. Hackworth is a member of the Section on State and Local Government Law of the American Bar Association, Local Government Attorneys of Virginia, General Laws Policy Committee of the Virginia Municipal League, and the International Municipal Lawyers Association. He is a member and past chair of the Board of Virginia Western Community College, and serves or has served on the boards of the Historical Society of Western Virginia (chair, Publications Committee), Friends of the Blue Ridge Parkway, Virginia Western Community College Educational Foundation, and Western Virginia Land Trust (Stewardship Committee), among others. He has authored various articles on municipal law issues.

James Grigsby, 65, has been the Assistant City Manager for Operations since July 2005. Prior to this appointment, he was Fire-EMS Chief for the City of Roanoke and had served in that capacity since October 1995. Prior to joining the City, he was Deputy Chief of Public Safety for the City of Kalamazoo, Michigan (1988 to 1995) and Fire Chief for the City of Lee’s Summit, Missouri (1983 to 1987). He holds a Bachelor of Arts degree from Upper Iowa University (1976), a Masters of Public Administration degree from Golden Gate University (1978), and two associate’s degrees, one in Fire Science and one in Law Enforcement. He is a certified Executive Fire Officer from the National Fire Academy and is a nationally accredited Chief Fire Officer. He is also certified by the Police Executive Research Forum through Harvard University. Mr. Grigsby currently serves on the Board of Directors for the Roanoke Chapter of the American Red Cross and is a former member of the State Fire Chiefs Board of Directors.

R. Brian Townsend, 51, was appointed in July 2007 to serve as Assistant City Manager for Community Development. Prior to this appointment, he was the Director of Planning Building and Economic Development for the City of Roanoke and served in that capacity since July 2002. Prior to joining the City, he held various positions in the Department of Planning in the City of Norfolk, Virginia, between 1989 and 2002, serving as the Manager of the Development Services Bureau between 1996 and 2002. He holds a Bachelor of Arts degree from the University of Richmond (1981), and a Master’s Degree in Urban and Regional Planning from Virginia Commonwealth University (1989). He currently serves on the board of the United Way of Roanoke Valley. He is a former board member of Downtown Roanoke Incorporated and the Council of Community Services and a former member of the Virginia Chapter of the American Planning Association.

Sherman M. Stovall, 51, Director of Management and Budget, has been employed by the City since 1994, serving in the positions of Grants Monitor, Budget/Management Analyst, Planning and Support Services Supervisor, and Budget Administrator. Mr. Stovall received his Bachelor of Arts degree in Management from Virginia

A-3 Wesleyan College and a Master’s Degree in Business Administration from Marshall University. He is a member of the Government Finance Officers Association. Mr. Stovall is active in the community, serving as President of the Breckinridge Middle School Parent Teacher Association and Vice-Chairman of the Board of Trustees for the Pilgrim Baptist Church.

Ann H. Shawver, 42, Director of Finance, joined the City in 1994. Prior to becoming the Director of Finance in 2008, she served as Deputy Director of Finance for six years, Manager of Accounting Services for four years, and Financial Systems Accountant for four years. Prior to joining the City, she was employed by KPMG LLP for approximately four years. Mrs. Shawver, a Certified Public Accountant, received a Bachelor of Business Administration with honors from James Madison University in 1989 and a Masters of Business Administration from Virginia Tech in 2009. She is a member of the American Institute of Certified Public Accountants, the Virginia Society of Certified Public Accountants, the Government Finance Officers Association and the Virginia Government Finance Officers Association (VGFOA). Mrs. Shawver is a member of the Executive Board of the VGFOA and currently serves as President. She has also served as President-Elect and chaired the Education- Conferences Committee and the Memberships and Awards Committee of VGFOA. She has served on the Board of Directors for the Roanoke Chapter of the Virginia Society of Certified Public Accountants. Mrs. Shawver serves as Secretary/Treasurer for the City of Roanoke Pension Plan and is a member of the Virginia Municipal League’s Finance Policy Committee. She is on the Advisory Board of the Roanoke Valley Regional Animal Control Facility, and she served this Board as Chair from 2003 to 2005. She serves as Treasurer to the Hotel Roanoke Conference Center Commission, and is a member of the Roanoke Valley Detention Commission. Mrs. Shawver is also involved in a number of other community and volunteer activities.

Jonathan W. Bingham, 47, Assistant Director of Finance, joined the City in 2009. Prior to joining the City, he was employed by Loomis and served as an Area Controller for seven years. In addition, Mr. Bingham was employed by Cox Communications, Inc. for fifteen years serving in a number of positions ending as the Director of Business Management. Mr. Bingham, a Certified Public Accountant, received a Bachelor of Science Degree from Virginia Polytechnic Institute and State University. He is a member of the Virginia Governmental Financial Officers Association (VGFOA). Mr. Bingham is active in the community serving as the Finance Committee Chairman and Delegate to Annual Conference for Woodlawn United Methodist Church.

Andrea F. Trent, 47, Assistant Director of Finance, joined the City in 2002. Prior to joining the City, she was employed by Advance Auto Parts for 3 years as the Manager of Retirement Benefits. In addition, Ms. Trent was employed by First Union National Bank for 13 years in a number of positions ending as Assistant Vice President Capital Management Group. Ms. Trent received her Bachelor of Arts Degree from Mary Baldwin College and an Associates of Applied Science Degree in Accounting from Virginia Western Community College. She is a member of the Virginia Governmental Financial Officers Association (VGFOA).

Governmental Services Provided by Roanoke

Roanoke provides a wide variety of governmental services to its residents. For budgetary purposes, the City organizes these services into the major program classifications discussed below.

Profile of the School District

Roanoke City Public Schools (RCPS) is a progressive urban school district nestled in the heart of the Blue Ridge Mountains in the City of Roanoke, Virginia. During the 2008-09 school year, RCPS provided a comprehensive program of study for 12,303 students in grades Kindergarten through 12 annually. In 2008-09, there were twenty elementary schools, six middle schools, two high schools, the Roanoke Valley Governor’s School for Science and Technology, two alternative education facilities, adult education programs, preschool programs for low income families and a downtown program for high school students emphasizing liberal arts education (CITY School).

Roanoke’s student population represents a diversity of cultures and ethnic groups. Approximately 48% of students are black, 44% are white, 6% are Hispanic and 2% are Asian.

A-4 Eighty percent (80%) of students passed their English SOL test in 2009 up from 77% in 2008 and up from 62% just four years prior. 78% of RCPS students passed the Math SOL test in 2009, as compared to 73% the previous year. An increased number of students also passed the history SOL test in 2009: 81.9% of students passed, up over two percentage points from the prior year.

The Roanoke City Public Schools strategic plan for 2009-14 has affirmed that the school division’s mission is to “graduate students prepared for life in a rapidly changing world.” The plan also establishes RCPS’ vision, which is “to be a model for urban public education.” This vision means that our students will have the skills to be successful and the opportunities to reach their full potential regardless of poverty, ethnicity, disabilities, or other challenges. Only a few urban places in the country have been able to achieve this and they are usually individual schools as opposed to entire school districts. RCPS believes that we owe it to our children to set a very high bar.

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

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

The School Board also established the “Strong Students. Strong Schools. Strong City.” priorities for the 2008-09 school year as follows:

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

Narrowing the Achievement Gap. Roanoke City Public Schools is working to help all students achieve and improve with a special focus on closing achievement gaps between subgroups of students. In total, 14 of 28 schools made AYP and 26 schools are fully accredited. To achieve AYP under No Child Left Behind, a school must meet 29 objectives for student achievement. State accreditation is determined by the overall percentage of students who pass SOL tests in four core subject areas: English, Math, History, and Science. Schools making AYP and/or achieving state accreditation based on 2008-09 student achievement data are listed below.

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ACCREDITATION & AYP STATUS According to 2008-2009 Student Achievement

SCHOOL ACCREDITATION AYP (08-09) Crystal Spring Fully Accredited Yes Fairview Fully Accredited No Fallon Park Fully Accredited Yes Fishburn Park Fully Accredited No Garden City Fully Accredited Yes Grandin Court Fully Accredited Yes Highland Park Fully Accredited Yes Huff Lane Fully Accredited No Hurt Park Fully Accredited Yes Lincoln Terrace Fully Accredited No Monterey Fully Accredited No Morningside Fully Accredited No Oakland Fully Accredited Yes Preston Park Fully Accredited Yes Raleigh Court Fully Accredited No Roanoke Academy Fully Accredited Yes Round Hill Fully Accredited No Virginia Heights Fully Accredited Yes Wasena Fully Accredited Yes Westside Accredited with Warning: Warned with English, Math, History and Science No Addison Fully Accredited No Breckinridge Fully Accredited Yes Jackson Fully Accredited No Madison Fully Accredited No Ruffner TBD: Warned in English, Math and History Yes Woodrow Fully Accredited Yes Patrick Henry Fully Accredited No William Fleming Fully Accredited No ______Source: Roanoke City Public Schools, CAFR as of June 30, 2009.

Higher Education

Fourteen institutions of higher learning, enrolling over 66,000 students, are located within a 60-mile radius of Roanoke. Virginia Tech, which is located in Blacksburg, 35 miles from Roanoke, is a major educational institution with 28,000 students. Its College of Engineering is one of the largest in the nation and produces highly sought-after graduates. Other institutions within close proximity include Hollins University, Radford University, Roanoke College, Virginia Western Community College and the Jefferson College of Health Sciences.

The Higher Education Center is located in the downtown area and was established for the purpose of expanding access to higher education by providing undergraduate, graduate and professional programs. A variety of curricula is offered by its fourteen participating academic and training institutions.

Public Safety

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

The Police Department provides professional, efficient, and effective law enforcement services. The department has an authorized full-time staff of 259 sworn officers and 60 civilian employees. The Department has a

A-6 history and reputation of being one of the finest departments in the country and displays its “badge of professionalism” by achieving and maintaining international accreditation from the Commission on Accreditation for Law Enforcement (CALEA) since July 1994. The Department’s most recent re-accreditation, in July 2008, was one of only four known perfect re-accreditations of all CALEA agencies. Fewer than five percent of the law enforcement agencies throughout the country are accredited.

The Roanoke Police Department maintains an assertive community policing philosophy. The Police Department began active participation with community policing with the formation of the Community Oriented Police Effort (COPE) Unit in 1991. The community policing philosophy involves a greater degree of community involvement than traditional policing. This effort expanded in the summer of 2004 with the implementation of geographic policing, in which specific officers and supervisors are directly accountable for problem solving in specific areas of the City. Officers participate with individuals, community groups and other agencies to enhance community safety.

One of the most visible aspects of the Department’s community policing efforts was the opening of two satellite offices in the community. The offices, which are located in the Southeast and Northeast areas of the City, are an excellent example of partnerships with the community. A new satellite office opened in the Northwest area of the City in June 2010. These satellite offices allow officers to be more visible in the communities they police and foster open working relationships between citizens and officers. Roanoke also participates in the Officer Next Door program, which is a local program funded by HUD. Another community policing initiative is the take-home car program, which involves thirty-six vehicles. Selected officers drive their marked patrol cars home on a regular basis. The program increases visibility, deters crime, and increases availability of uniformed police personnel within the City of Roanoke.

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

In the fall of 2009, the Police Department launched the ‘Safer City’ campaign, a new crime prevention and public awareness initiative to educate Roanoke citizens on measures to prevent larceny incidents, many of which are crimes of opportunity. The campaign, developed pro-bono for the Department by Access Advertising & Public Relations is an expansion on the 2005 successful “Lock It or Lose It” campaign which saw a twenty percent decrease in larceny crime in its first year. While the City has seen a significant decrease in larceny crime, the goal is to reduce crime incidences even further. The ‘Safer City’ campaign is a proactive and aggressive new approach to empower the community to protect themselves and their possessions. The campaign appeals to multiple audiences with one simple, yet powerful reminder that the threat of theft is preventable. This is a new opportunity for the Department to engage directly with the Roanoke community for the safest city possible.

Roanoke Fire-EMS is Virginia’s Region Six hazardous materials response team. It is a full-service fire and emergency medical service agency providing fire suppression, basic and advanced pre-hospital life support, fire prevention and education programs, fire cause and origin, vehicle extrication and tactical heavy rescue. In addition to housing firefighting and EMS personnel and equipment, fire-EMS stations are neighborhood resources. Fire- EMS personnel at these sites help distribute public safety documents and teach children about fire safety and provide a safe place for lost children and adults.

Firefighter/EMTs operate out of twelve stations, seven days a week, twenty-four hours a day, with fourteen pieces of front-line fire apparatus, eight front-line EMS units, one heavy squad unit, one HazMat unit and three command officers. In May of 2007, Fire-EMS Station 1 opened at the corner of Elm Avenue and Franklin Road. This station consolidated two of Roanoke’s oldest stations and fire-EMS administration under one roof. In January

A-7 2009, Fire-EMS Station 3 was opened in the 4800 block of Williamson Road. This fire station is Leadership in Energy and Environmental Design (LEED) Gold certified and houses the fire and EMS apparatus previously assigned to the airport fire station. Roanoke Fire-EMS responds to approximately 4,500 fire and 19,500 EMS calls annually.

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

The Emergency E-911 Center provides Enhanced 911 (E-911) service 24 hours a day for wireline and wireless 911 calls. All cellular vendors provide phase II technology to assist with location information as mandated by the FCC. The E-911 Center is equipped with a Computer Aided Dispatch (CAD) System with mapping capability to assist with identifying the location of wireless callers. Upon a medical emergency, the dispatcher can provide basic medical information while sending the appropriate public safety personnel. In fiscal year 2009, 135,127 emergency E-911 calls and 134,000 non emergency calls were received and processed.

The Telecommunications Division of the Department of Technology is responsible for the implementation, installation and management of the City’s telephony and private radio network hardware and software. The Telecommunications Division consists of the Radio Shop and the Telephony sections.

Health and Human Services

The City provides a wide array of mandated and non-mandated human service programs to the citizens of Roanoke. These services include a network of protective, supportive and temporary financial services that assist citizens with achieving a realistic and attainable level of self-sufficiency. Employment Services are available to assist eligible individuals in retaining, regaining or securing employment. The Department of Human Services also administers the Regional Virginia Institute of Social Services Training Activities (VISSTA).

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

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

Parks and Recreation

The Parks and Recreation Department is committed to improving the quality of life for the citizens and visitors to Roanoke. The Department provides recreational opportunities through diverse programs, promotes environmental stewardship, and encourages positive youth development. The department consists of three Divisions Administration, Parks, Recreation/Youth Services, and consists of 55 full-time and over 127 seasonal staff members.

The City’s parks and recreation system includes many natural assets, including the 660-acre Mill Mountain Park located within the corridor of the National Park Service’s Blue Ridge Parkway. In June 2010, the City Council approved a Deed of Gift of Mill Mountain Conservation Easement from the City of Roanoke to the Virginia Outdoors Foundation and the Western Virginia Land Trust. This regional park serves as a gateway to Roanoke and

A-8 brings in nearly 300,000 Parkway visitors annually. Within the park lies the Discovery Center, an award-winning interpretive center that also serves as a National Park Service Information Center includes picnic facilities, overlooks, nature trails and the Mill Mountain Zoo. Additionally, Carvins Cove boasts a natural setting for hiking, biking, kayaking, canoeing, fishing and picnicking. In August 2009, the City Council approved a Deed of Gift of Carvins Cove Conservation Easement from the City of Roanoke to the Virginia Outdoors Foundation and the Western Virginia Land Trust. Roanoke has 14,000 acres of parkland in total with 672 acres maintained. Parkland includes 62 parks, six community centers, 53 practice and/or competitive ball fields, 60 tennis courts, 37 playgrounds, two Olympic-sized swimming pools, three gymnasiums, a skate park and the River’s Edge Sports Complex. Currently, there are over 50 miles of natural trail and fifteen miles of paved greenways, which are maintained by Parks and Recreation. Approximately 10 additional miles of greenways are under development.

The Administrative Division is responsible for the business and support services for the department. Functions include program registration, facility reservations, payroll, human resource services, and financial management including accounts receivable and accounts payable and technology. Other key businesses include park and greenway planning and major project development.

The Parks Division is responsible for the cleanliness and aesthetic appearance of the City’s parks. The Athletics/Park Maintenance staff provides turf and field maintenance for parks and athletic fields. The Horticulture division provides and maintains approximately sixty flowerbeds throughout the City. The Urban Forestry division is responsible for the maintenance of over 17,000 trees in City parks and along City streets. Due to the City’s outstanding efforts in this area, Roanoke has been named a Tree City USA for ten consecutive years.

The Recreation Division consists of five specialized programming sections: aquatics, outdoor recreation and environmental education, youth and adult athletics and team sports, youth and adult fitness and wellness, and general recreation for adults and seniors. The Recreation Division also collaborates with Roanoke County Parks, Recreation and Tourism in offering recreational programming for disabled citizens. Each year Roanoke contributes both cash and in-kind support to this program.

The Youth Services Division mission is to serve as an advocate for the needs of all youth and their families with the objectives of positive youth development through planning, collaboration, coordination and implementation of services. This division also serves as the clearinghouse to identify duplication and gaps in services, which adversely affect the quality of life for the younger citizens in the City of Roanoke. The division is tasked with the management of the community centers and generates greater community awareness and prioritizes issues relating to youth development. The division adds a new dimension to the Parks and Recreation Department, by promoting a holistic approach to the healthy development of youth and intergenerational programs.

The Parks and Recreation Department along with other municipal departments and community partner work together to create innovative prevention programs such as the Youth Summer Intern Program. The efforts of these programs are specifically targeted to the area of delinquency prevention for youth and families. The focus is to eliminate or reduce the environmental, community or policy factors leading to involvement in the juvenile justice and/or social services programs. Additionally, there is a public school and local government collaborative effort to provide after-school enrichment activities for elementary age youth and their parents.

Libraries

The City operates a central library with six branches, a law library and two e-branch libraries. In 2007, the City opened the first e-branch library at Valley View Mall and then in 2008 a second e-branch was added at the Garden City Parks and Recreation Center. Both e-branch facilities have information kiosks, lockers for item pick up, and book-drops. In 2009, extensive additions and renovations were completed at both the Jackson Park and Gainsboro branches. New community meeting rooms, tutor rooms, Teen Centers, new books, computers and furniture were added at both facilities.

The City libraries utilize a regional, automated system developed in cooperation with the City of Salem, Roanoke County and Botetourt County. The City’s library provides many resources to its citizens including free internet and free wireless access at all locations. The Library offers a wide range of information such as magazine and newspaper articles, encyclopedias and other reference works, company information and investment reports,

A-9 health and wellness information, literary criticism, and homework help, plus photos, charts, maps, diagrams, and illustrations. The Virginia Room located in the Main Branch houses one of a kind local history records, Census records and over 14,000 rare photographs of the Roanoke area. The library hosted 1,690 programs last year for citizens of all ages. In the past two years, circulation has increased 60.1% and attendance has increased 56%. Examples of programs offered include computer classes, puppet shows, preschool Storytime, numerous book clubs for all ages, café nights, an Emerging Artist series, multi-generational Summer Reading Program and programs for teens and seniors.

Public Works

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

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

Environmental Management: The Office of Environmental Management serves the City by ensuring all Department operations and activities are conducted in compliance with the applicable State and Federal environmental regulations. To that end, this office is responsible for developing and managing a variety of comprehensive programs to provide for compliance assurance, continuous improvement, internal auditing, as well as providing support for employee training and continuing education. Additionally, Environmental Management collaborates with other Departments and outside agencies, as well as civic groups, to promote sound environmental management practices throughout Roanoke. Lastly, the Office of Environmental Management pursues regulatory enforcement and/or emergency response actions, where impacts or threats to environmental and/or public health are present within the City of Roanoke.

Solid Waste Management: Once-per-week collection service is provided to 38,000 residential units and condominium associations, nightly pickup is provided in the downtown area, and Sunday morning pickup is provided to Market Square. A recycling program is offered to all of the City’s residential neighborhoods, schools and small businesses with a City-wide recycling rate of approximately 40%.

Transportation Division: The City maintains 157 signalized intersections, 57 school flashers, 26 warning beacons and 24 miles of related signal interconnect cables. The City contracts with American Electric Power to install and maintain approximately 9,800 street lights. Other services provided include pavement repair and maintenance, snow removal, structural repairs to bridges and culverts, drainage maintenance, alley maintenance, street sweeping, landscape maintenance, maintenance and repairs to traffic signs and pavement markings, plus curb, gutter and sidewalk repair for approximately 1,200 lane-miles of streets. An average of 41 lane miles of streets is resurfaced annually. Finally, the Division manages and coordinates transportation-related projects with the Virginia Department of Transportation (VDOT) for the City. VDOT projects are identified in the Department’s Six-Year Improvement Program. Recent City transportation projects include traffic operation and capacity improvements along Colonial Avenue in the vicinity of Wonju Street, reconstruction of three signalized intersections, replacement of traffic signal equipment at various intersections throughout the City, and coordination of 30 traffic signals on three major arterial streets.

Fleet Management: This department provides required preventive maintenance, service, and repairs to approximately 830 vehicles and equipment. It also manages the fuel program as well as the acquisition and disposal of all City vehicles and equipment. As part of the fuel program, Fleet Management purchases and utilizes bio-diesel fuel (in varying percentages) in all City equipment that requires diesel fuel and unleaded gasoline blended with 10% ethanol in all City vehicles that require unleaded gasoline. As part of its equipment/vehicle acquisition program, Fleet Management has purchased hybrid vehicles and all-electric vehicles. These vehicles are in daily use, and combined with the purchases and utilization of the alternative diesel and gasoline products, the City is demonstrating on a daily basis its commitment to improving and sustaining the area’s natural environment.

A-10 Department of Planning and Building Development

The Department of Planning Building and Development’s mission is to work with the community to ensure a sustainable balance of growth, public safely, good urban design and environment quality to support strong, sustainable neighborhoods where people of all backgrounds can live work and play. The Department employs 52 people in five divisions.

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

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

The Administrative and Citizen Services division oversees all clerical functions for the department, its boards and commissions, and coordinates customer service and problem-solving through the Citizen Service Center.

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

The HUD Community Resources division administers and monitors about $2.5 million in new funds annually from the US Department of Housing and Urban Development (HUD) under the Community Development Block Grant (CDBG), HOME Investment Partnerships (HOME) and Emergency Shelter Grant (ESG) programs.

Economic Development

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

Enterprises

The following facilities are operated as public enterprises:

Transit Company: The City owns the Greater Roanoke Transit Company which provides local mass transit bus service along 18 routes. During the year ended June 30, 2009, ridership totaled 2,539,745 passengers. For more information on the Greater Roanoke Transit Company, please see page A-21.

Civic Facilities: Civic Facilities include the Roanoke Civic Center Coliseum, Performing Arts Theatre, Exhibition Hall, and Special Events Center. The Special Events Center is a flexible facility that is suitable for a variety of larger events that require contiguous space such as consumer shows, trade shows, and social events and is the largest facility of its kind in southwest Virginia. The City managed the Civic Center complex until January 1, 2009, when management was outsourced to Global Spectrum, Inc., a private sector company specializing in public assembly facility management.

Parking Fund: This Fund accounts for the operating revenues and expenses of seven City-owned and/or controlled structured parking garages and six City-owned and/or controlled surface parking lots. With a capacity of

A-11 353 spaces, Campbell Garage opened in May 2008 and serves the western Church and Campbell Avenue corridors of downtown which encompass the municipal and court complexes and Jefferson Center, as well as an expanding array of residential units and small business start-ups. The Market Garage is currently undergoing a major renovation and expansion which is being funded by $5.0 million from Series 2008A VRA Bonds. In March 2010, $1.64 million of Series 2010 Bonds were issued for completion of the Market Garage.

Market Building Fund: This fund accounts for the operation of the Historic Downtown Market Building which currently houses ten retail merchants and restaurants. This structure is currently undergoing conceptual analysis for a major renovation to begin in September 2010. The cost of renovations is projected to be $7.7 million.

Recent Regional Initiatives

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

The Regional Fire-EMS Training Academy on Kessler Mill Road in Salem is the result of years of cooperative development between the City of Roanoke, County of Roanoke, City of Salem, and Town of Vinton. Officially dedicated in September 2009, the Roanoke Regional Training Center serves as the administrative headquarters for the training divisions from the four jurisdictions, and provides classrooms and support facilities for comprehensive fire-EMS academy training.

In 2008, the Roanoke Metropolitan Statistical Area (MSA) Division 6 (led by the City of Roanoke), combined resources with the MSA Division 3 (led by the City of Lynchburg) to purchase an interoperability radio system to connect 911 centers in 35 local counties and cities in the region on an as-needed basis. The system enables localities to share information more quickly and links localities directly to State Police, Federal agencies, and the National Guard. This initiative has enabled public safety agencies in Virginia to work together to improve inter- agency communications, whether to detect and prevent terrorism-related activity, to improve response to natural disasters and other emergencies, or to enhance coverage of special events. When such events occur, they require multiple agencies from different jurisdictions to communicate effectively. The new radio system has eliminated previous roadblocks between local and state agencies imposed by incompatible radio systems.

CERTAIN FINANCIAL PROCEDURES

Description of Funds

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

General Fund

The General Fund accounts for all revenues and expenditures which are not accounted for in the other funds. Included in the sources of revenue to the General Fund are general property taxes, other local taxes (including a 1% sales tax for sales tax within the City and collected by the Commonwealth and remitted to the City), fines and forfeitures, licenses, permits and privilege fees, the City’s share of certain Commonwealth collected revenues and reimbursement of certain City expenses shared by the Commonwealth.

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

A-12 Debt Service Fund

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

Capital Projects Fund

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

Enterprise Funds

These funds account for the operation, maintenance, construction and debt service related to activities that are operated in a manner similar to private business enterprises. Enterprise Funds include Greater Roanoke Transit Company (Bus Service), Civic Facilities, Parking, and Market Building. Revenues consist principally of charges for services, although subsidies are required for Greater Roanoke Transit Company, Civic Facilities and Market Building.

Internal Service Funds

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

Fiduciary Funds

These funds account for the assets held in a trustee capacity or as an agent for others. The Fiduciary Funds include Pension Trust Fund and Other Postemployment Benefits (OPEB) Trust Fund, which accounts for the operations of the City’s pension system and an Agency Fund, which accounts for assets held for the Hotel Roanoke Conference Center Commission.

Comprehensive Annual Financial Report (CAFR)

Since 1973, the City’s financial statements have been audited annually by independent certified public accountants. The most recently completed audit, for the fiscal year ended June 30, 2009, was performed by KPMG LLP, Certified Public Accountants, Roanoke, Virginia.

The accounting policies and procedures utilized by the City are in accordance with generally accepted accounting principles. Entity wide statements provide information about the City as a whole using the full accrual basis of accounting, which is the method used by most private-sector enterprises. All current year revenues and expenses are reported in the Statement of Activities regardless of when cash is received or paid. The modified accrual basis of accounting is used for the General, Debt Service, Special Revenue and Capital Projects Funds. Under this method, revenues are recognized in the accounting period in which they are objectively measurable and available. Expenditures, other than principal and interest on long-term debt and compensated absences, are recorded when the related liability is incurred. Principal and interest on long-term debt and compensated absences are recognized when due. Enterprise Funds, Internal Service Funds, Pension Trust Fund and OPEB Trust Fund are accounted for on the accrual basis of accounting. The City of Roanoke has received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association every year since fiscal year 1974.

A-13 The activities of the City of Roanoke Schools are reported in a separate School Component Unit. The School Board issues a separately published Comprehensive Annual Financial Report reflecting the operations of the public school system as a legally separate entity. The School Board’s operations are presented in the City’s annual financial report in the form of a discretely presented component unit. Although legally separate, the City must include the component units in the City’s financial reporting for fair presentation in conformity with Generally Accepted Accounting Principles.

The audited Comprehensive Annual Financial Report of the City for the fiscal year ended June 30, 2009 is set forth in Appendix C. It is available on the City’s website at www.roanokeva.gov and from the Director of Finance, Noel C. Taylor Municipal Building, Room 465, 215 Church Avenue, S.W., P.O. Box 1220, Roanoke, Virginia 24011.

Budgetary Procedures

The City Charter requires the City Manager to submit a balanced budget to the City Council at least 60 days prior to the beginning of each fiscal year. The annual budget process begins during the second quarter of the previous fiscal year with the notification to department or agency heads of the general budget development guidelines. Budget requests are then reviewed by a budget committee. Meetings between the budget committee and department heads are scheduled to review and discuss departmental requests. Upon completion of a detailed budget development process, the City Manager prepares a recommended budget for submission to the City Council. The recommended budget includes any proposed adjustments in tax rates and fees for services.

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

After a public hearing and work sessions with the City Council, the recommended budget, as may be amended, is adopted in final form by the City Council. During the fiscal year, monthly reviews of revenues and expenditures are undertaken by the Department of Finance and the Department of Management and Budget and monthly financial statements are prepared and presented to the City Council. The City of Roanoke has received the distinguished Budget Presentation Award from the Government Finance Officers Association every year since 1986.

Financial Accounting Systems

During the period from 2004 to 2013, the City has planned for many of these systems to be upgraded or replaced at a total project cost of $9 million, financed with a combination of cash and bond proceeds. The goal is to obtain enterprise functionality and to utilize technology that maximizes the user’s ability to retrieve data.

As of July 1, 2006, all financial and accounting records of the City, as well as the Schools’ capital projects, are maintained on the web-based Advantage Financial System, a product of CGI Group Inc. which is designed especially for local governments. Advantage is an integrated financial management system supporting the requirements for local government accounting and reporting established by the Governmental Accounting Standards Board (GASB).

As of July 1, 2008, all of the financial and accounting records of the City Schools are maintained on AptaFund, a product of Apta Software, which is designed specifically for meeting the business management needs for schools.

The City implemented GRM, Government Revenue Management, as the new cashiering and Real Estate tax system in March 2010. GRM is a product of Manatron, Inc. Future phases of this project are personal property, business license, and business tax. The City projects that the implementation dates of these phases will range from 2011-2013. The payroll/human resources system was replaced in April 2010 with the Lawson system, a product of Lawson Software, Inc.

A-14 The current budget preparation system was installed in 2005. It streamlined workflows and is conducive to paperless budget process. The City plans to upgrade the current budget preparation system to a web-based version, and the first phase of this is currently underway. An upgrade to the Advantage Financial System is anticipated to begin in the fall of 2010. The City also expects to begin an upgrade to GRM in 2010 for the modules that were implemented in April 2010.

Investment Management

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

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

During the fiscal year ended June 30, 2009, the City’s average portfolio size was approximately $101 million. This included investments of the governmental funds, proprietary funds and fiduciary funds, but excluded the City’s Component Unit, Pension Plan Trust Fund and OPEB Trust Fund. The funds are invested in a money market account, U.S. Treasury/Agency obligations, repurchase agreements, the Local Government Investment Pool managed by the Commonwealth of Virginia and certificates of deposit. It is the City’s policy to hold only investments rated at least AA/A1 by Standard & Poor’s, P-1 by Moody’s Investors Service, and B/C by Keefe, Bruyette & Woods, Inc.

GENERAL FUND REVENUES AND EXPENDITURES

The following is a discussion of the General Fund revenue structure and major classifications of General Fund expenditures. The information is based on audited data as of June 30, 2009. See Appendix C for the audited general purpose financial statements of the City relating to the General Fund for the fiscal year ended June 30, 2009.

Revenues

General Property Taxes. An annual ad valorem tax is levied by the City Council on the assessed value of real and personal property located within the City as of January 1 in the fiscal year preceding the fiscal year in which the tax is due. The ratio of the assessed value of real property to its estimated fair market value is 100% as required by the Code of Virginia. During a reassessment, all property values are examined and adjustments are made where necessary to guarantee all property is assessed at market value. Real property taxes are payable in two installments, on October 5 and April 5 of the fiscal year in which they are levied. Personal property taxes are due on May 31, and are prorated in cases where a taxpayer owns the property only part of the year. A portion of personal property tax is paid by the Commonwealth of Virginia in accordance with the Personal Property Tax Relief Act. For the fiscal year ended June 30, 2009, property taxes (including penalties for late payment of prior years’ taxes) represented 42% of total General Fund revenues.

Other Local Taxes. The City levies various other local taxes including sales and use taxes, a tax on consumer utility bills, business, professional and occupational license taxes, a cigarette tax, a transient lodging tax and a prepared food and beverage tax. Other local taxes represented 28% of total General Fund revenues for the year ended June 30, 2009.

Intergovernmental Revenue. The City and its School component unit receive revenue from the Commonwealth of Virginia for a portion of shared expenses including certain expenditures for social services, the operation of constitutional offices, non-categorical aid, law enforcement, highway construction, operation of jail

A-15 facilities, and for education. Revenues from the Commonwealth of Virginia and Federal government represented 24% of total General Fund revenues in the fiscal year ended June 30, 2009.

Other Revenues. Other sources of revenue represented 6% of total General Fund revenues and include permits, fees, licenses, fines, forfeitures, rents, interest, charges for services and miscellaneous revenues.

Expenditures

Costs of General City Government. Payments for the costs of the operation of the City government are made from the General Fund. Such costs include expenditures for general administration, judicial administration, public safety, public works, health and welfare services, community development, parks, recreation and cultural, and economic development. This classification represented 65% of total General Fund expenditures and transfers during the fiscal year ended June 30, 2009.

Costs of Education. A portion of the taxes levied by the City fund the operation of the City of Roanoke Public Schools. The local funding of the School Board Component Unit represented 24% of total expenditures and transfers from the General Fund in the fiscal year ended June 30, 2009.

Transfers to Debt Service Fund. Debt service requirements on City general government indebtedness are paid by a transfer from the General Fund to the Debt Service Fund. During the fiscal year ended June 30, 2009, such transfers represented 8% of total General Fund expenditures and transfers.

Transfer to Other Funds. Transfers are made to fund capital projects and provide local match on grants. Transfers are also made to proprietary funds in the form of operating subsidies or to fund capital projects. During the fiscal year ended June 30, 2009, such transfers represented 3% of the total General Fund expenditures and transfers.

SUMMARY OF GENERAL FUND REVENUES AND EXPENDITURES

Presented below are the summarized financial data for the General Fund revenues and expenditures as budgeted for the fiscal year ending June 30, 2010 and the actual amounts for the five fiscal years ended June 30, 2005 through June 30, 2009. Data for the fiscal year ending June 30, 2010 represents the initial adopted budget for the year.

Through the eleven months of fiscal year ending June 30, 2010, the City is currently projecting a revenue shortfall for fiscal year 2010 of approximately $4.4 million or 1.7%, as compared to the original adopted budget. With the lower revenue outlook for fiscal year 2010, departments made budget adjustments in order to remain at or below the revised revenue projections for the fiscal year. These adjustments are in part the result of several expenditure reduction strategies implemented earlier in the fiscal year including the deferring of planned expenditures for fleet replacement and technology capital, a hiring freeze, and managing the budget contingency conservatively.

The summary statement for the fiscal years 2005 through 2009 has been compiled from the audited general purpose financial statements. Data for the fiscal year ended June 30, 2009 should be read in conjunction with the related general purpose financial statements and notes thereto appearing in Appendix C.

A-16 General Fund (a) Initial Adopted Budget Fiscal Year Ending Fiscal Year Ended June 30 (b) June 30 (c) 2005 2006 2007 2008 2009 2010

Revenues: Local taxes $154,063,977 $164,221,726 $172,993,434 $180,842,482 $181,594,568 $181,541,000 Permits, fees and licenses 1,275,026 1,469,015 1,142,724 1,475,370 1,053,443 1,166,000 Fines and forfeitures 1,354,775 1,444,566 1,540,598 1,558,039 1,558,517 1,472,000 Rents and interest 796,688 1,462,839 1,754,383 1,022,003 885,023 550,000 Intergovernmental 49,655,137 52,296,666 57,277,325 62,681,671 63,043,911 61,269,000 Charges for services 11,114,029 11,142,081 11,656,588 11,002,723 11,667,838 10,539,000 Miscellaneous 593,786 569,281 638,600 712,979 670,344 505,000 Total revenues 218,853,418 232,606,174 247,003,652 259,295,267 260,473,644 257,042,000 Expenditures: General government 11,457,219 12,140,992 12,684,275 13,403,927 13,019,273 12,600,842 Judicial administration 6,505,813 7,054,615 8,037,973 7,993,516 8,489,493 7,877,889 Public safety 52,652,595 56,744,685 60,709,594 62,730,398 60,731,173 60,289,583 Public works 22,229,895 22,798,347 23,900,264 23,663,876 24,841,431 24,966,023 Health and welfare 32,365,693 33,598,046 37,111,973 42,206,410 42,757,293 39,592,879 Parks, recreation and cultural 8,364,754 9,669,043 10,549,196 11,086,757 10,723,453 9,775,891 Community development 5,454,055 5,677,130 5,780,439 7,238,720 6,881,431 6,978,446 Nondepartmental 125,801 10,824 8,839 13,470 15,329 3,251,034 Transfers (net): School Board Component Unit 52,676,279 55,789,730 58,669,043 62,357,663 62,506,419 63,847,461 Debt service fund (d) 9,082 17,862,787 19,134,406 18,990,690 21,431,722 22,175,753 Capital projects fund 5,294,514 3,964,724 5,092,572 5,705,216 2,449,551 1,912,205 Other funds 5,165,469 5,004,653 6,574,957 4,952,920 5,321,512 3,773,994 Total expenditures and Transfers 202,301,169 230,315,576 248,253,531 260,343,533 259,168,080 257,042,000 Net increase (decrease) in Fund Balance 16,552,249 2,290,598 (1,249,879) (1,048,266) 1,305,564 - Fund balance, beginning of year 4,498,005 21,050,254 23,340,852 22,090,973 21,042,707 22,348,271 Fund balance, end of year $ 21,050,254 $ 23,340,852 $ 22,090,973 $ 21,042,707 $ 22,348,271 $ 22,348,271 ______Notes: (a) The summary has been prepared in accordance with generally accepted accounting principles prescribed by the Governmental Accounting Standards Board (GASB). See the general purpose financial statements included in Appendix C for more detailed information. (b) The above summary presents audited actual revenues, expenditures and fund balances of the General Fund of the City for the five fiscal years ended June 30, 2005 through June 30, 2009. (c) The amounts shown for FY 2010 represent the City’s initial adopted budget. The City has reduced revenue projections for FY2010, as well as expenditures for the period, as described above. (d) 2005 amount is net of the transfer of $15,500,000 from the Debt Service Fund to the General Fund in order to create a Budget Stabilization Reserve.

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Basis of Budgeting and Accounting

The City of Roanoke’s accounting records for general governmental type funds are prepared and maintained on a modified accrual basis, which means that obligations of the city are budgeted as expenditures; however, revenues are recognized only when they are measurable and available.

♦ General Fund – Accounts for expenditures which are not accounted for in other funds; and provides for the regular day-to-day operations of the City.

♦ Proprietary Fund (fleet, technology, etc.) type funds account for operations that are operated on the accrual basis of accounting. Their expenditures are recognized when a commitment is made and revenues are recognized when they are obligated to the City.

 Enterprise Funds – Accounts whereby operating expenses are recovered in the form of charges to users for such services. Included in this category are: Civic Facilities, Market Building, and Parking.

 Internal Service Funds – Accounts for goods or services provided by one department to other departments within City government on a cost-reimbursement basis. Funds included in this category are: Fleet Management, Risk Management and Technology.

The Comprehensive Annual Financial Report (CAFR) shows the status of the City’s finances on the basis of “generally accepted accounting principles” (GAAP). In most cases, this conforms to the way the City prepares its budget. Exceptions include:

♦ For budgetary basis, encumbered and continuing appropriations are recorded as the equivalent of expenditures as apposed to a reservation of fund balance for GAAP.

♦ Accrued compensated absences are not considered to be expenditures until paid for GAAP.

♦ General staff and administrative charges are recognized as direct expenses of the Enterprise Funds as opposed to being accounted for and funded by operating transfers.

FINANCIAL POLICY STATEMENTS

Budget Policies:

1. Roanoke will adhere to all Federal, State and local legal requirements pertaining to the operating budget.

2. Roanoke will employ a structured budget preparation and formulation process that will be used by all entities receiving funding from the City. The process employed will ensure adequate citizen input and participation.

3. Roanoke will avoid budgetary procedures that balance current expenditures at the expense of meeting future years' expenses, such as postponing necessary expenditures, accruing future years' revenues or rolling over short-term debt.

4. Roanoke will maintain a budgetary control system to ensure adherence to the budget.

5. Roanoke will employ a structured expenditure and revenue forecasting system to allow for effective financial planning.

6. The budget will provide sufficient funding to cover annual debt retirement costs.

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7. Roanoke administration will prepare regular reports comparing actual revenues and expenditures to budgeted amounts.

8. An independent audit will be performed annually and a management letter received by City Council.

9. The City administration will promptly evaluate the audit management letter recommendations, determine the proper actions in response to these recommendations and complete, within established time frames, all actions that correct or otherwise resolve the matters included in the management letter.

10. The City of Roanoke will continue to annually prepare a budget consistent with the guidelines established by the Government Finance Officers Association to achieve the Distinguished Budget Award Program.

11. Roanoke will adopt a balanced budget in which operating revenues equal operating expenditures.

Revenue Policies:

1. Roanoke will take active measures to encourage economic development, thereby developing a diversified and stable revenue system to shelter it from short-run fluctuations in any one revenue source.

2. Roanoke will maintain sound appraisal procedures to keep property values current. Property will be assessed at 100% of full market value and reassessments will be made of all property annually.

3. Roanoke will follow an aggressive policy of collecting all revenues due the City. The annual level of current uncollected property taxes generally will not exceed 1% of taxes assessed.

4. Roanoke will establish all user charges and fees at a level closely related to the full cost of providing the services (i.e., direct, indirect and capital costs); taking into consideration similar charges/fees being levied by other public and private organizations.

5. Roanoke will recalculate the full costs of activities supported by user fees to identify the impact of inflation and other cost increases, and will revise user fees accordingly with review of the Council.

6. The targeting of specific revenues for special programs or projects is discouraged, as it promotes fiscal inflexibility; however, intergovernmental grant assistance will be targeted as much as possible toward capital improvements.

7. Roanoke will aggressively seek Federal and State grant and capital improvement funds and evaluate future local fiscal impact.

8. The General Fund undesignated fund balance will not be used to balance the budget. These funds will be used for non-recurring capital acquisition items.

Expenditure Policies:

1. Essential services, such as Police, Fire, Emergency Medical Services, and related public safety services, will receive first priority for funding. The City will attempt to maintain current service levels for all essential services.

2. Roanoke will identify low priority services for reduction or elimination, if necessary, before essential services.

A-19 3. Roanoke will consider the establishment of new user fees or increases in existing fees as an alternative to service reductions or elimination.

4. In all actions to balance the budget, Roanoke will attempt to avoid layoffs of permanent employees. Any personnel reductions will be scheduled to come primarily from attrition.

5. Roanoke will pay for all current expenditures with current revenues. Long-term debt and year-end undesignated fund balances will not be used for funding current expenditures.

6. The City of Roanoke will annually review capital asset acquisition, maintenance and replacement issues and provides funding as available through the undesignated fund balance.

7. Roanoke will consider as high funding priorities technological and capital investment programs which are cost effective and which will reduce operating costs.

8. Where possible, Roanoke will integrate service level measures and performance/productivity indicators with the budget.

9. Roanoke will employ a budgetary encumbrance control system to ensure proper budgetary control.

Fiscal Year 2011 Budget Summary

Revenues are projected at $253.4 million, a 1.43% decline from fiscal year 2010. While the decline is moderate, the City Council approved a 2% increase in the Prepared Food & Beverage Tax in order to provide additional funds to Roanoke City Schools where State budget reductions were significant. Without the increase in the Prepared Food & Beverage Tax increase, the revenue budget for fiscal year 2011 would decline by 3.14%.

The City expects to see a slight increase of 1% in Property Taxes primarily driven by new construction. Local taxes are projected to decline by 1.2%. For fiscal year 2011 most local taxes show declines and are largely offset by the Prepared Food & Beverage rate increase. Intergovernmental Revenue declined by 4.24% with State budget reductions. Specific areas impacted within the category include Shared Expenses from the Compensation Board to fund Constitutional Officers, street maintenance, law enforcement HB-599 and Virginia Juvenile Community Crime Control Act (VJCCCA) programs.

Expenditures are projected at $253.4 million, a decline of 1.43% from fiscal year 2010 and represent a balanced budget. With the Prepared Food & Beverage Tax increase directed to fund City Schools, program adjustments were made to ensure a balanced budget. The increased funding to City Schools represents $4.4 million.

Other expenditure costs represent an increase of $2.6 million. The largest items in this category include a state budget reduction contingency of $0.9 million, fleet management vehicle parts of $0.3 million, and a budget stabilization reserve contribution of $0.25 million and utility related expenses of $0.4 million.

Operational departments represented a decline of $9.0 million. The largest items in this category include fleet management reductions of $1.2 million in purchase of fleet vehicular equipment, human services reductions of $1.1 million due to reductions in state funding and VJCCCA, and Debt Service funding reduction of $1.2 million due to reprioritization of capital projects. There were program and service level adjustments with fifty-one positions impacted in the 2011 adopted budget.

Areas representing cost savings represent a decline or $1.7 million. The largest items in this category included a reduction in payroll base due to turnover and retirements of $0.6 million, medical insurance $0.5 million driven by a decrease in the City paid portion of employee health insurance and economic development performance agreement reductions of $0.4 million.

For more specific budget information for the fiscal year 2011 can be found on the roanokeva.gov website under the Department of Management and Budget webpage.

A-20

REVENUE AND EXPENDITURE SUMMARY

REVENUE

ADOPTED ADOPTED DOLLAR BUDGET BUDGET INCREASE GENERAL FUND FY 2009-10 FY 2010-11 (DECREASE) General Property Taxes $100,966,000 $101,962,000 $996,000 Other Local Taxes 72,499,000 71,628,000 ($871,000) Fines & Forfeitures 1,472,000 1,606,000 $134,000 Revenue-Use of Money/Property 597,000 173,000 ($424,000) Charges for Current Services 10,492,000 10,025,000 ($467,000) Intergovernmental Revenue-State/Federal 69,345,000 66,405,000 ($2,940,000) Permits, Fees & Licenses 1,166,000 1,037,000 ($129,000) Miscellaneous Revenue 505,000 527,000 $22,000 TOTAL - GENERAL FUND $257,042,000 $253,363,000 ($3,679,000)

PROPRIETARY FUNDS Enterprise Funds: Civic Facilities Fund $4,520,400 $4,598,694 $78,294 Parking Fund 3,044,100 2,763,000 (281,100) Market Building Fund 321,500 128,825 (192,675) SUBTOTAL - ENTERPRISE FUNDS $7,886,000 $7,490,519 ($395,481)

Internal Service Funds: Fleet Management Fund $7,383,906 $5,888,464 ($1,495,442) Risk Management Fund 15,776,715 14,916,409 (860,306) Technology Fund 6,919,372 5,383,027 (1,536,345) SUBTOTAL - INTERNAL SERVICE FUNDS $30,079,993 $26,187,900 ($3,892,093)

TOTAL - PROPRIETARY FUNDS $37,965,993 $33,678,419 ($4,287,574)

SCHOOL FUND * Roanoke City Public Schools $149,949,224 $143,941,146 ($6,008,078)

TOTAL OF ALL FUNDS $444,957,217 $430,982,565 ($13,974,652)

* School Fund includes the School General Fund, School Food Services Fund, and the School Athletics Fund

A-21 EXPENDITURES

ADOPTED ADOPTED DOLLAR BUDGET BUDGET INCREASE GENERAL FUND FY 2009-10 FY 2010-11 (DECREASE) Community Development $6,898,619 $5,955,587 ($943,032) General Government 12,462,402 12,348,701 (113,701) Health & Welfare 39,672,706 38,974,153 (698,553) Judicial Admin. 7,761,947 7,449,022 (312,925) Non-Departmental 24,029,140 23,568,643 (460,497) Schools 70,931,307 75,257,289 4,325,982 Parks, Recreation & Cultural 9,891,833 9,141,147 (750,686) Public Safety 60,289,583 56,990,703 (3,298,880) Public Works 25,104,463 23,677,755 (1,426,708) TOTAL - GENERAL FUND $257,042,000 $253,363,000 ($3,679,000)

PROPRIETARY FUNDS Enterprise Funds: Civic Facilities Fund $4,520,400 $4,598,694 $78,294 Parking Fund 3,044,100 2,763,000 (281,100) Market Building Fund 321,500 128,825 (192,675) SUBTOTAL - ENTERPRISE FUNDS $7,886,000 $7,490,519 ($395,481)

Internal Service Funds: Fleet Management Fund $7,383,906 $5,888,464 ($1,495,442) Risk Management Fund 15,776,715 14,916,409 (860,306) Technology Fund 6,919,372 5,383,027 (1,536,345) SUBTOTAL - INTERNAL SERVICE FUNDS $30,079,993 $26,187,900 ($3,892,093)

TOTAL - PROPRIETARY FUNDS $37,965,993 $33,678,419 ($4,287,574)

SCHOOL FUND Roanoke City Public Schools $149,949,224 $143,941,146 ($6,008,078)

TOTAL OF ALL FUNDS $444,957,217 $430,982,565 ($13,974,652)

A-22

ECONOMIC AND DEMOGRAPHIC FACTORS

Population

The City of Roanoke is the Commonwealth’s largest city west of Richmond and the economic center of western Virginia. The metropolitan statistical area, of which the City is the focal point, includes the Cities of Roanoke and Salem, the Town of Vinton, and the Counties of Roanoke, Botetourt, Craig and Franklin with a population of 290,497 (2000). Recent population statistics for the City are presented below.

Population of the City of Roanoke

1960 (U.S. Census) ...... 97,110 1970 (U.S. Census) ...... 92,115 1980 (U.S. Census) ...... 100,220 1990 (U.S. Census) ...... 96,509 2000 (U.S. Census) ...... 94,911 2001 (Weldon Cooper Center) ...... 95,000 2002 (Weldon Cooper Center) ...... 94,600 2003 (Weldon Cooper Center) ...... 93,100 2004 (Weldon Cooper Center) ...... 92,900 2005 (Weldon Cooper Center) ...... 93,700 2006 (Weldon Cooper Center) ...... 92,994 2007 (Weldon Cooper Center) ...... 92,024 2008 (Weldon Cooper Center Estimate) 92,344

2000 Population by Age

1 - 19 ...... 23,455 20 - 24 ...... 5,746 25 - 44 ...... 28,948 45 - 54 ...... 13,098 55 - 59 ...... 4,555 60 - 64 ...... 3,549 65 – 84 ...... 13,362 85 + ...... 2,198 Total ...... 94,911

2000 Population by Race

White ...... 69.40% Black ...... 26.70 Asian or other Pacific Islander ...... 2.20 Other Race ...... 1.50 American Indian, Eskimo or Aleut ...... 0.20 100.00% ______Sources: University of Virginia Weldon Cooper Center for Public Service, US Census Bureau Notes: Hispanics represent 1.5% of Roanoke’s population and are included as part of several categories.

A-23 Personal Income

Median adjusted gross income for married couples in the City and in the Commonwealth of Virginia for the fiscal years 2004 through 2008 is shown in the table below:

Median Adjusted Gross Income (Married Couples)

2004 2005 2006 2007 2008

City of Roanoke $43,084 $48,011 $49,943 $57,448 $61,244 Commonwealth of Virginia 62,109 67,160 70,335 81,782 85,642 ______Source: University of Virginia Weldon Cooper Center for Public Service.

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

Per Capita Income

2004 2005 2006 2007 2008

City of Roanoke $30,813 $32,167 $33,681 $36,840 $38,169 Commonwealth of Virginia 35,696 38,892 41,267 43,158 44,075 United States 33,090 35,424 37,698 39,392 40,166 ______Source: U.S. Bureau of Economic Analysis.

Construction Activity

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

Value of Building Permits

Commercial Residential Total Year Number Valuation Number Valuation Number Valuation

2001 572 $57,716,867 988 $45,045,159 1,560 $102,762,026 2002 499 64,101,308 875 36,855,003 1,374 100,956,311 2003 437 60,291,138 730 21,844,483 1,167 82,135,621 2004 871 57,922,598 303 17,995,045 1,174 75,917,643 2005 497 143,755,330 610 23,936,990 1,107 167,692,320 2006 512 193,157,052 673 30,206,738 1,185 223,363,790 2007 465 109,104,902 697 24,079,265 1,162 133,184,167 2008 456 233,358,448 754 29,442,647 1,210 262,801,095 2009 419 103,604,031 663 23,814,449 1,082 127,418,480 2010 467 92,266,288 709 25,004,592 1,176 117,270,880 ______Source: City of Roanoke, Department of Planning, Building and Development.

A-24

Housing

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

2005 2006 2007 2008 2009

Number of Single-Family Units 29,085 29,352 29,524 29,802 29,917 Number of Multi-Family Units 17,303 20,626 17,563 15,640 15,793 Total 46,388 49,978 47,087 45,442 45,710

Average Single-Family Unit Value $109,819 $124,709 $132,778 $132,170 $132,798 ______Source: City of Roanoke, Office of Real Estate Valuation.

The City is committed to provide housing in quality neighborhoods, an important part of economic development, by taking a multi-tiered approach to expanding its housing option and by diversifying housing opportunities. The City has designated Community Development Block Grant funds to targeted neighborhoods in an effort to maximize results on housing and urban development. Housing developments under construction include the Mountain Brook Estates, which is a development of 60 high-end to mid-range homes, Maple Leaf, a 25-unit subdivision with homes with estimated values upward of $500,000, and Willow Walk subdivisions, located on Cove Road, with values starting at $160,000. Downtown living includes newly constructed or renovated housing at Fairfax, Janette, Fulton Motor Lofts, The Candy Factory, The Hancock, and The Cotton Mill. Additionally, the 400 block of Day Avenue, previously purchased with City funds by the Roanoke Redevelopment and Housing Authority (RRHA), continues the renovation of historic houses that are available for individual ownership. RRHA also has demolished the Hurt Park housing project, with construction underway to use the site for affordable housing for at least ten years after completion. Additional plans are underway to replace the public housing units lost by the demolition with at least 50 units scattered throughout the City.

The City is committed to encouraging economic growth in green-living housing and offers a special tax rate on the use of certain energy-efficient buildings. This program is available for buildings that exceed the energy efficient standards as prescribed by the Virginia Uniform Statewide Building Code by thirty percent or more. To qualify for this special tax rate on the building, City Code indicates that certification as an energy-efficient building must be made by a qualified licensed registered design professional. Energy-efficient building means any building that exceeds the energy efficiency standards prescribed in the Virginia Uniform Statewide Building Code by thirty (30) percent. An energy-efficient building also may be any building that (i) meets or exceeds performance standards of the Green Globes Green Building Rating System of the Green Building Initiative, (ii) meets or exceeds performance standards of the Leadership in Energy and Environmental Design (LEED) Green Building Rating System of the U.S. Green Building Council, (iii) meets or exceeds performance standards or guidelines under the EarthCraft House Program, or (iv) is an Energy Star qualified home, the energy efficiency of which meets or exceeds performance guidelines for energy efficiency under the Energy Star program developed by the United States Environmental Protection Agency. Under this new program, the City has received applications from homeowners in the Colonial Green Complex and several in the State and City Condo Project and 116 Campbell Ave. Project. We currently have approximately 25 parcels that qualify for the Energy-Efficient Building Abatement.

Transportation

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

A-25 Highways

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

Railroads

Roanoke was established in the late 1800s at the junction of the Norfolk and Western (N&W) and Shenandoah Valley railroads. Over the years, N&W and Southern Railway were consolidated into Norfolk Southern (NS), now one of the nation’s largest and most prosperous transportation companies.

Local operations of Norfolk Southern include Accounting, Communications and Signals, Finance and Treasury, Information Technology, Internal Audit, Law Department – Claims, Maintenance of Way and Structures, Marketing, Material Management, Mechanical, Research and Tests, Safety and Environmental, and Taxation departments. Norfolk Southern has expressed an interest in locating an intermodal transportation terminal in the Roanoke Valley. The terminal would transfer freight containers between truck and rail and would enhance economic development in the Roanoke region by affording local industries economical access to world markets.

Air Transport Services

Roanoke’s Woodrum Field, which is owned and operated by the Roanoke Regional Airport Commission, is served by the regional affiliates of four major carriers including Delta Air Lines, Northwest Airlines, United Airlines and US Airways. These airlines offer 26 nonstop departure flights per day to seven destinations, all of which are major hubs with hundreds of flights to cities beyond. Regional jet service is available from Roanoke to the seven destinations of Atlanta, Charlotte, Chicago, Detroit, New York, Philadelphia and Washington-Dulles. In addition, multiple flights per week are provided to Florida by Allegiant Air, a low cost carrier.

The Roanoke Regional Airport Commission owns and operates the airport. The City of Roanoke and the County of Roanoke each appoint members to the Commission.

In 2009, 297,811 passengers were enplaned at the airport, and 25,026 scheduled aircraft operations took place. Roanoke Regional Airport’s primary and secondary passenger service areas extend outward over a 60-mile radius, encompassing at least 19 counties, including three in West Virginia. The total population of this service area is over 920,000. In addition, approximately 123 general aviation aircraft are based at Roanoke. One full service and two specialty fixed base operators are located on the field, including a fully certified flight school. General aviation landings and takeoffs in 2009 totaled approximately 23,789.

In addition to air passenger carriers and general aviation users, two major air cargo companies fly into and out of the airport on a scheduled basis carrying 11,282 tons of air cargo in 2009. United States Customs provides services upon request.

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

More than $70 million in upgrades of both runways and related taxiways, as well as a full rehabilitation of the general aviation area, an expansion of the overflow parking lot, construction of an FAA air traffic control tower and rehabilitation of the passenger terminal systems have been completed in the past decade. Other projects underway include continuing redevelopment of the airport entrance and roadway and the refurbishing of the terminal public areas. In addition, a free wireless system has been installed to permit passengers’ access to the Internet and e-

A-26 mail, and a state-of-the-art FIDS system has been added to assist passengers, particularly those with visual or hearing impairments.

Truck and Bus Service

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

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

The Greater Roanoke Transit Company (GRTC), which is owned by the City, provides local bus service for over 2.5 million passengers annually. GRTC provides transportation along 18 routes throughout the City and to specific destinations throughout the Roanoke Valley and the New River Valley by way of the Smart Way Bus. The Transit Company owns and operates a state of the art operations, maintenance and administrative facility and the Campbell Court Transfer Center in Downtown Roanoke, which serves as the focal point for the bus routes. With a total fleet of forty-seven buses, the Transit Company operates thirty-two buses in the peak hours of operation and 18 buses in the non peak hours. All forty-seven of the Transit Company’s buses are wheelchair accessible to better serve the community. The fleet consists of models dating 2001 through 2009.

Water and Wastewater Pollution Control

The Western Virginia Water Authority commenced operations on July 1, 2004. Formed by the consolidation of the City’s and the County of Roanoke’s drinking water and wastewater pollution control functions, the Water Authority’s mission is to ensure an adequate supply of drinking water and wastewater treatment for Roanoke Valley residents. The Water Authority also has been equalizing water and wastewater treatment rates between City and County residents over the past six-year period. Starting January 2010, rates will be the same for both customer groups. The Water Authority provides drinking water to 157,000 citizens in the City and County, and wastewater service to more than 186,000 people throughout the entire Roanoke Valley through contracts with other area localities. The Water Authority is governed by a seven-member board, with three members appointed by the City and three members appointed by the County. On November 24, 2009, Franklin County, Virginia joined the Authority as a member locality. The expansion was approved by the Authority’s Board of Directors and the City and County governing bodies. Previous to this expansion, the Authority Board’s seventh member was appointed by the other six members and confirmed by the City and County governing bodies. The seventh member will now be selected by the Franklin County Board of Supervisors.

The Water Authority owns and operates the Carvins Cove Reservoir and Filtration Plant, the Spring Hollow Reservoir and Treatment Plant, the Crystal Spring Filtration Plant, and the Falling Creek Reservoir and Filtration Plant. The Water Authority maintains 1000 miles of water mains, 867 miles of sewer mains and more than 4,700 fire hydrants in the City and County. It treats more than 33 million gallons of wastewater every day. The Water Authority is currently making improvements to sewer interceptor lines and recently completed an expansion to the Water Pollution Control Plant increasing capacity to 55 million gallons per day (mgd).

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

A-27 Flood Remediation Efforts

The Roanoke River Flood Reduction project, which is partially funded with general obligation bond proceeds, is under construction by the United States Army Corps of Engineers. This project consists of a combination of channel widening and levy construction along nine miles of the Roanoke River within the City and will reduce annual flood damages along the Roanoke River. The project construction began in 2004 and is expected to continue until completion in 2012. These flood reduction efforts are significant to many areas of Roanoke including much of the downtown area. The project has demonstrated significant benefits with recent heavy rains in November 2009 and limited local flooding. The project is approximately 75% complete.

Commerce, Industry and Employment

The economy of the City of Roanoke represents the economy of entire Roanoke metropolitan statistical area. While the City of Roanoke and Salem and the Counties of Botetourt, Craig, Franklin and Roanoke have separate political identities, in economic terms they function as a single unit with the City of Roanoke as their economic hub. With an MSA population of 298,108, the City of Roanoke maintains 32% of the population with 92,967 residents, followed closely by Roanoke County with 90,867 residents. At the end of first quarter, 2009, the number of workers commuting into the City of Roanoke for jobs totaled 27,069 - 3,501 from Salem, 5,563 from Botetourt County, 475 from Craig County, 3,810 from Franklin County and 19,447 from Roanoke County.

Roanoke’s economy is well diversified, with 100% of all census-defined industries located within its boundaries. The City is home to six of the 10 largest employers in the Roanoke Metropolitan Statistical Area employing almost 50% of the area’s employees. The economy of the City, as well as the entire Roanoke metropolitan area, is predominantly non-agricultural. The economic base consists of service industries, trade, manufacturing, public administration, construction, transportation and other non-farm activities.

City of Roanoke Employment by Industrial Sector Fourth Quarter, 2009

Industry Employment Educational Services, Health Care and Social Assistance $16,001 23.1% Professional & Business Services 10,183 14.7 Retail Trade 8,447 12.2 Leisure 6,631 9.6 Transportation, Warehouse & Utilities 4,809 6.9 Manufacturing 4,448 6.4 Construction 4,255 6.1 FIRE (Finance, Insurance, & Real Estate) 3,624 5.2 Government 2,960 4.3 Wholesale 2,581 3.7 Other Services (except public administration) 2,335 3.4 Natural Resources 2,424 3.5 Information 507 0.7 Total $69,205 100.0% ______Source: JobsEQ.

A-28 Unemployment Rates

2006 2007 2008 2009 2010*

City of Roanoke 3.7% 3.7% 4.5% 7.6% 7.2% Commonwealth of Virginia 3.0 3.0 3.9 6.7 6.7 United States 4.6 4.6 5.8 9.7 9.1 ______Source: U.S. Bureau of Labor Statistics.

* As of May 2010, not seasonally adjusted.

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

Trade also is a large industry in the region as a result of a combined population close to one million located within a one-hour drive of downtown Roanoke with effective buying income of over $11.2 billion and the fact Roanoke is only a day’s drive to two thirds of the US population. Roanoke rose 42 positions to No. 126 out of the 200 largest US metro areas, according to the 2009 Milken Institute/Greenstreet Real Estate Partners Best-Performing Cities Index. The Roanoke Region was the highest-ranking of Virginia’s major metropolitan areas for high tech GDP growth from 2007-08.

Major Private Employers as of December 31, 2009 Approximate Employer Product or Industry Number of Employees

Roanoke Memorial Community Hospital Healthcare 1,000+ Roanoke City Public Schools Education 1,000+ City of Roanoke Government 1,000+ Carilion Services Healthcare 1,000+ United Parcel Service Package Delivery 500 to 999 Healthmarc Insurance 500 to 999 Wal-Mart Retail 500 to 999 Anthem Blue Cross/Blue Shield Insurance 500 to 999 Virginia Western Community College Education 500 to 999 Kroger Food and Beverage Stores 500 to 999

Source: Virginia Employment Commission.

Note: The Roanoke economy is diverse and has not been impacted by large layoffs by any single employer.

A-29 Roanoke Metropolitan Area (Data Not Seasonally Adjusted)

December December 2008 2009 Labor Force Data (Place of Residence) Civilian Labor Force ...... 157,243 158,253 Employment ...... 150,983 146,907 Unemployment ...... 6,260 11,346 Percent of Labor Force ...... 4.0% 7.2% State Rate (%) ...... 3.9% 6.7% National Rate (%) ...... 5.8% 9.3% Establishment Data (Place of Work) Total Employment ...... 163,300 154,800 Manufacturing ...... 16,700 14,500 Trade, Transportation and Utilities ...... 36,000 34,500 Education and Health Services ...... 23,700 24,800 Professional and Business Services ...... 21,700 20,300 Leisure and Hospitality ...... 13,700 13,200 Other Services ...... 7,100 6,900 Financial Activities ...... 8,500 8,000 Information ...... 2,400 2,100 Natural Resources and Mining and Construction ...... 10,500 8,600 Government ...... 21,900 21,900

Source: Virginia Employment Commission

Economic Development

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

Site and Building Development

Riverside Centre for Research and Technology

The Riverside Centre for Research and Technology (RCRT), headquarters of several medical science entities, is a 110-acre technology park located along Jefferson Street and Reserve Avenue. Within the RCRT, the Carilion Biomedical Institute completed its 110,000-square-foot office and laboratory complex headquarters building at a cost of $15 million in 2007. The $70 million facility of the Carilion Clinic, a 250,000-square-foot outpatient medical clinic, opened to patients in September 2009. The $59 million facility of the Virginia Tech Carilion School of Medicine and Research Institute, a four-year medical school and research institute, has accepted forty-two students for the inaugural class scheduled to begin in August 2010. Near the center of the park is a $27 million garage with a capacity of 1,500 automobiles that has recently been completed. A rubber-tired trolley, linking downtown food and retail vendors with the Riverside Centre, began service in 2008.

Nearby, Carilion completed a three-year, $105 million construction project on its main hospital. The project expanded Carilion Roanoke Memorial Hospital with a five-floor addition to its current tower and a five-floor outward expansion. Carilion Community Hospital, a secondary hospital, discontinued inpatient services and is undergoing renovations and repurposing to serve the Jefferson College of Health Sciences, allowing for expansion of the college from 650 to 1,200 students.

A-30 Roanoke Centre for Industry and Technology

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

Revenue generated from the corporations located in the RCIT exceed the cost incurred by the City for the original site acquisition and improvements to the park such as site preparation, utilities and extension of Blue Hills Drive. Present and future tax revenue will be used to continue this type of economic development. Current RCIT tax revenue exceeds $1 million annually.

The corporations located in the RCIT employ in excess of 2,100 persons, have a combined investment in the Centre in excess of $151 million, and occupy over 2 million square feet of space. Corporations currently in the Centre include Crouse-Hinds, a division of Cooper Industries, R&K Engineering, Advance Auto, BellSouth Communications Systems, Elizabeth Arden, Orvis, InfoSeal, Virginia Utility Protection Services, and Maple Leaf Bakery. Maple Leaf Bakery recently completed a $10 million addition to its freezer capacity.

Heritage Point is a historic area located within RCIT. A 19th-Century cabin has been restored, and a horse barn for the City’s Mounted Patrol is located here along with grazing areas for the horses.

Site 12 at the entrance to the park was purchased in late 2006 and will become a retail center called Blue Hills Village. The acreage here has been combined with acreage in Roanoke County to form a village setting. Planned development includes a hotel, pharmacy, bank, day care center, restaurants and small office buildings.

Deanwood Industrial Park

Deanwood Industrial Park, a thirteen-acre site, is located one-quarter of a mile from Interstate 581. Foot Levelers, Abal Material Handling, Azimuth, Inc., and Century Business Center have constructed facilities there. One of the companies is currently planning a $3.1 million expansion to house 100 additional employees. To meet the demand for industrial land in the Deanwood area, Deanwood Extension, a ten-acre tract of land with rail service available, was also developed. Quality Coffee and Mountain Spring Water completed a 12,756-square-foot addition to accommodate their growing business in 2007. This area also houses Marco Supply Company, Hamco, and VBS Inc. Material Handling Equipment.

Downtown Development

Enterprise Zone One A, encompassing the majority of downtown, was designated by Governor Warner in July 2004. Local and state incentives have contributed to making the downtown a vital, growing community.

The City promotes development of its downtown. Many renovations of downtown buildings are currently underway or recently completed, providing both retail and residential opportunities. The City issued a total of 1,082 building permits in fiscal year 2009 with a construction value of $127 million associated with those permits. The City also issues permits for outdoor dining downtown with twelve downtown restaurants taking advantage of this opportunity.

Roanoke has seen significant residential development in the downtown area and fringe since 2001, adding well over 400 residential units. Most residential projects have included a mixed use component with retail or office development on ground floors. Highlighted projects include:

• Eight Jefferson Place (87 residential units)

• Colonial Arms (12 residential units with ground floor retail)

A-31 • State and City (6 residential units with ground floor retail)

• Campbell Garage Lofts (17 residential units, 2 retail/office spaces)

• The Fairfax (39 residential units and parking garage)

• The Candy Factory (15 residential units)

• Fulton Motor Loft (22 residential units, 2 retail/office spaces)

• Cotton Mill (108 residential units)

• Davidsons (3 residential units over retail storefront)

• The Hancock Building (58 residential units)

In May 2008, The Hancock Building opened on West Campbell Avenue, one of downtown’s largest buildings with 58 units and law offices occupying the first floor. Rental rates for the apartments range from $600- $1,200 a month. At the time of opening, the building was 100 percent occupied.

Recently, a local developer purchased the eleven-story building of the former Patrick Henry Hotel and plans to rehabilitate the 131,000-square-foot building for mixed use. This project, once complete, will represent the largest rehabilitation project in downtown.

The Campbell Garage, which opened in 2008, provides 353 parking spaces within walking distance of the City Police Department, Court House, downtown offices and lofts, and municipal offices. The Campbell Garage, which cost $6 million, brought the total number of off-street parking spaces operated by the City to 4,029.

The Market Garage, which serves the Center in the Square, market plaza, and various downtown shops, is undergoing a major renovation to upgrade the facility and develop retail space within the building. The renovation of the Market Garage project is planned for completion in 2010. The Market Garage is designed to support additional floors. Concepts for residential or mixed-use development on upper floors have been developed and the City is actively recruiting a developer for the project.

The City funded $4 million toward the construction of the Taubman Museum of Art, a $66 million newly constructed building designed by emerging architect Randall Stout. The world class 81,000 square foot center for art, entertainment, and cultural events has gained widespread public interest. In November 2008, the Taubman Museum of Art drew a crowd of approximately 10,000 when it opened to the public.

The Social Security Administration Building, completed in July 2009, represents a $10 million private investment in the downtown area. The 69,000 square foot building is designed to house the Social Security regional office and other government agencies.

Renovation is under way in the Gainsboro neighborhood, Roanoke’s oldest community. Originally established in the mid-1800’s, Gainsboro was recently named to the Virginia Landmarks Register by the state Department of Historic Resources. It was a residential and cultural center for the City at one time, and the Gainsboro Neighborhood Revitalization Initiative established several major goals for the restoration of the neighborhood. The Claude Moore Education Complex, a restoration project of the former Ebony Club, provides commercial space for a culinary arts school. Renovation of the historic Hotel Dumas has provided space for the new Dumas Center for Artistic and Cultural Development and Opera Roanoke. The renovation of the historic First Street Bridge has created a walk way between the downtown area and the Higher Education Center, the Hotel Roanoke Conference Center, and other local businesses. The bridge, a memorial to Martin Luther King Jr., was unveiled in 2008. Nearby, the Hotel Roanoke and Conference Center spent $6.5 million renovating its guest rooms during 2007 and 2008.

A-32 New Business — Corporate Arrivals

The following companies have established operations in Roanoke:

Goodwill Industries of the Valleys opened a new retail center on Melrose Avenue, incurred $604,000 in renovation costs. In addition, 17 new jobs were added to staff the retail store.

Westport Axle Corporation, an automotive components manufacturer, opened a $2.5 million manufacturing facility in September of 2008. The Roanoke location, which supplies axles for the Volvo Trucks North America plant, operates in a leased 203,000 square foot building, creates 40 jobs in the area.

Boxley Materials Company, a supplier of construction materials, constructed a $1 million facility for sales staff, administrative offices, and warehouse space. In addition to the new facility, Boxley Materials Company received Green Star certification for their concrete plant, making it the only concrete company in Virginia and the twelfth nationally to receive the award.

Member One Credit Union began construction on a 16,000 square foot financial corporate building, which represents a $3.8 million investment.

Cambria Suites opened in June 2010 on Reserve Avenue, part of the Riverside Center in southwest Roanoke. Cambria Suites Roanoke is the first Cambria property in Virginia and is owned by Roanoke Hotel Group, LLC. Each of the 127 suite-rooms features individual work and living space. Cambria Suites is a member of Choice Hotels International Inc., with franchises representing more than 6,000 hotels and 485,000 rooms globally.

Existing Business — Retention and Expansion

Carilion Clinic opened in August 2009, a 250,000 square-foot outpatient medical clinic costing $70 million, including a new parking garage for 1,500 cars, and a new medical school with a research component.

Home Depot opened another store on the southern end of the City, housing a 100,000-square-foot retail store and a 28,000 square foot garden center in May 2007. This $8.5 million development also provided a new entrance to the Southern Hills neighborhood, as well as sites for a new Starbucks and Chick-Fil-A.

Roanoke Bar Division of Steel Dynamics, formerly Roanoke Electric Steel, recently finished an $11 million scrap yard. They were building a $5 million office building and planning a $22 million emissions control addition to their facility.

UnitedHealth Group, a provider of support for beneficiaries of Medicare Part D, added 575 jobs in Roanoke during 2006 and 2007 and will fill 200 more jobs by the end of 2010.

Virginia Transformer Corporation, a manufacturer of custom power transformers, is constructing a two- story addition to its plant at a cost of $300,000.

Foot Levelers, Inc., a company that specializes in custom orthotics, expanded their offices in 2009 with renovations over $1 million and an increase of 150 jobs.

Sheraton Roanoke Hotel and Conference Center completed an $18 million renovation of its 320 guest rooms and 17,000 square foot conference area.

Access Inc., an advertising and design company, invested over $1 million in renovations for a new office space. The 1930’s building was the prior site of a Buick dealership and Double Cola bottling plant.

Advance Auto Parts expanded operations at its corporate offices to include a data processing center for its on-line shopping service, a $3.6 million investment. Advance Auto Parts also expanded into a recently vacated commercial space, which will cost an estimated $5.1 million.

A-33 Maple Leaf Bakery developed a $9.5 million bagel line at its facility, which created 35 new positions in 2008. This is the fourth significant investment into the Roanoke facility, bringing the company’s total investment to $66 million.

Project Four LLC renovated a 5,000-square-foot mixed-use building downtown. The investment of 750,000 added two new businesses to the City’s warehouse Row district.

Major Shopping Malls and Retail Areas

Valley View Mall and the District at Valley View, combined, offer six anchor stores, over 100 specialty shops, and many restaurants to a trade population of 800,000. The Valley View Mall, a dominant regional mall, provides 877,000 square feet of retail space and has been a great economic boost to the area by creating a “retail power center” for shoppers. The District at Valley View, an open-air lifestyle center constructed in 2007, adds improved traffic control and expanded the shopping area 76,000 square feet with restaurants and specialty shops at a cost of over $18 million. The surrounding businesses represent a combined investment in excess of $200 million, and investment in new business continues to grow.

Crossroads Mall and Towne Square Shopping Center, near Valley View, has anchors such as Sam’s Wholesale, Books-a-Million, Comfort Rest, Bed Bath and Beyond and Lowe’s. Fashion Bug, Samuels Jewelers, Kroger, OfficeMax, Ross Dress for Less, Mattress Warehouse, Harry’s Clothing, and a wide variety of small shops and restaurants are also located in the area.

Towers Shopping Center, located on Colonial Avenue, offers shoppers a multitude of small retail shops, financial institutions, and dining options in a 140,000-square-foot shopping plaza.

As previously mentioned, Home Depot opened another store in May 2007 on the southern end of the City. The new location includes a 100,000-square-foot retail store and a 28,000-square-foot garden center. This $8.5 million development also provided a new entrance to the Southern Hills neighborhood, as well as sites for a new Starbucks and Chick-Fil-A.

Entertainment

Roanoke offers numerous and diverse entertainment choices which contribute to citizens’ overall quality of life. The Roanoke Civic Center features the Roanoke Symphony Orchestra, a Broadway show series, and various concerts during the year. A new exhibit hall, with an estimated cost of $16 million, has opened, creating more space for events. Across town, the Jefferson Center’s Shaftman Performance Hall plays host to the Roanoke Ballet and Opera Roanoke as well as other attractions.

The Center in the Square draws over 400,000 visitors annually from across the nation, including approximately 200,000 children from Virginia school districts. Within Center in the Square’s signature building are the Arts Council of the Blue Ridge, Science Museum of Western Virginia, and History Museum of Western Virginia. Residents and tourists alike can also learn about the City’s history through the Virginia Transportation Museum and O. Winston Link Museum.

Festivals such as the St. Patrick’s Day Parade and Celtic Festival, the Strawberry Festival, Local Colors, Roanoke Festival in the Park, and the Taste of the Blue Ridge Blues & Jazz Festival abound year-round along city streets, in Elmwood Park and Center in the Square. “Movies in the Park” offers families a free monthly activity on summer evenings in Elmwood Park.

Roanoke’s leisure time also includes a number of concert venues. An annual summer concert series in Elmwood Park, Party in the Park, features a variety of musical talent at weekly concerts and is sponsored by Downtown Roanoke, Inc. Another similar downtown event, First Fridays at Five, held the first and third Fridays of each of the spring and summer months, benefits local charities. The Roanoke Civic Center concert series, “Sounds at Six”, continues to feature a variety of music types in an outdoor setting on Friday evenings.

A-34 The City offers its citizens a variety of recreational parks and five miles of continuous greenway trail on which to walk, run or ride a bicycle along the Roanoke River. Plans for the extension of the greenway trail are underway for the purpose of flood reduction, beautifying the riverfront areas of the City, and providing accessible recreational space to residents. When complete, the greenway trail will stretch approximately ten miles along the Roanoke River extending from Southeast Roanoke to the City of Salem.

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

TAX BASE DATA

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

Assessed Value of All Taxable Property

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

2000 ...... $3,710,187,437 $715,763,594 $304,500,512 $4,730,451,543 $5,223,991,367 2001 ...... 3,843,131,277 737,575,710 339,256,291 4,919,963,278 5,432,186,896 2002 ...... 4,053,218,187 688,540,754 331,442,235 5,073,201,176 5,546,736,293 2003 ...... 4,251,342,652 685,231,130 320,712,924 5,257,286,706 5,722,328,440 2004 ...... 4,558,900,600 675,390,754 372,880,650 5,607,172,004 6,062,851,434 2005 ...... 4,912,403,589 731,086,348 333,486,044 5,976,975,981 6,469,379,840 2006 ...... 5,351,633,570 762,403,478 303,859,616 6,417,896,664 6,931,028,926 2007 ...... 5,834,424,939 818,058,932 310,606,990 6,963,090,861 7,513,954,307 2008 ...... 6,256,495,314 836,674,524 314,604,888 7,407,774,726 7,972,224,770 2009 ...... 6,564,294,962 809,722,606 335,086,164 7,709,103,732 8,255,418,861 ______Source: City of Roanoke, CAFR as of June 30, 2009.

Property Tax Rates (Per $100 Assessed Value)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Real Property ...... $1.2151 $1.21 $1.21 $1.21 $1.21 $1.21 $1.21 $1.192 $1.19 $1.19 Personal Property ...... 3.45 3.45 3.45 3.45 3.45 3.45 3.45 3.45 3.45 3.45 Public Service Corporations ...... 1.2151 1.21 1.21 1.21 1.21 1.21 1.21 1.192 1.19 1.19

______Source: City of Roanoke, CAFR as of June 30, 2009.

1 The real estate tax rate was $1.22 per $100 of assessed value from July 1, 1999 to December 31, 1999. Effective January 1, 2000, the rate became $1.21. 2 The real estate tax rate was $1.19 per $100 of assessed value effective July 1, 2006.

A-35 Assessed Value of Taxable Commercial Property

Commercial Real Year Property* Real Property Percent

2005 $1,650,036,700 $4,912,403,589 33.59% 2006 1,801,220,200 5,351,633,570 33.66 2007 1,931,369,600 5,834,424,939 33.10 2008 2,069,704,700 6,256,495,314 33.08 2009 2,179,564,000 6,564,294,962 33.20 ______Source: City of Roanoke, Office of Real Estate Valuation. *Excludes Assessed value for multi-families, residential, exempt property, and public service corporations.

General Property Tax Levies and Collections

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

2000 ...... $73,493,399 $70,188,175 95.50% $2,288,511 $72,476,686 98.62% 2001 ...... 76,063,428 72,776,631 95.68 2,762,725 75,539,355 99.31 2002 ...... 76,830,266 74,888,488 97.47 2,795,510 77,683,998 101.11* 2003 ...... 78,984,813 76,880,908 97.34 3,012,105 79,893,013 101.15* 2004 ...... 82,947,318 80,387,299 96.91 2,648,525 83,035,824 100.11* 2005 ...... 88,719,548 86,637,584 97.65 2,887,966 89,525,550 100.91* 2006 ...... 94,754,245 91,692,825 96.77 2,716,537 94,409,362 99.64 2007 ...... 101,301,039 97,850,338 96.59 3,355,898 101,206,236 99.91 2008 ...... 106,316,893 103,695,405 97.53 3,362,031 107,057,436 100.70* 2009 ...... 110,034,071 106,802,761 97.06 3,450,543 110,253,304 100.20* ______Source: City of Roanoke, CAFR as of June 30, 2009.

*Collections may exceed levies due to increased collections in the current year of amounts levied in prior years.

A-36 Ten Largest Taxpayers

The following data show the assessed value of the real and personal property of the ten largest holders of real and personal property in the City for the fiscal year ended June 30, 2009.

Percentage of 2009 Assessed Total Assessed Taxpayer Description Valuation Valuation

Carilion Healthcare ...... Healthcare Provider $129,599,911 1.68% Appalachian Power ...... Public Utility 104,041,819 1.35 Norfolk Southern Railway ...... Transportation 95,983,901 1.25 Valley View Mall LLC ...... Shopping Mall 74,118,147 0.96 Verizon Virginia, Inc...... Communications 55,404,937 0.72 Roanoke Electric Steel ...... Primary Metals 35,702,395 0.46 Roanoke Gas Company ...... Public Utility 30,278,088 0.39 Maple Leaf Bakery ...... Bakery 25,185,751 0.33 Times-World Corp...... Newspaper 22,438,451 0.29 Coca-Cola Bottling Company ...... Bottling Plant 16,629,391 0.22 Total ...... $589,382,791 7.64% ______Source: City of Roanoke, Commissioner of the Revenue.

Taxable Retail Sales

Calendar Year Total Retail Sales

2001 ...... 1,578,043,491 2002 ...... 1,588,424,788 2003 ...... 1,621,479,275 2004 ...... 1,712,570,484 2005 ...... 1,599,236,967 2006 ...... 1,876,508,609 2007 ...... 1,900,930,872 2008 ...... 1,925,487,309 2009 ...... 1,692,267,903

______Source: State Department of Taxation. Notes: Data exclude prescription drug sales.

DEBT ADMINISTRATION

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

A-37 obligation bonds payable from a specific revenue producing undertaking, and revenue anticipation notes maturing in one year or less.

The City’s debt policy includes the following guidelines: Net debt will not exceed 5% of assessed value of real estate, tax supported general obligation debt service shall not exceed 10% of General Fund expenditures, and tax-supported debt will be structured in a manner such that not less than 50% of the aggregate outstanding tax- supported debt will be retired within ten years. The City monitors these ratios to ensure ongoing compliance with the Debt Policy. Furthermore, the annual budget and financial planning sessions held between the City Council and the administration provides a forum for discussion of the City’s long term capital financing plans.

The City had outstanding $304,071,803 of general obligation bonds, Virginia Public School Authority (VPSA) bonds, Qualified Zone Academy Bonds (QZAB) and literary loans as of June 30, 2009, as follows:

Public Improvements ...... $96,898,285 School Projects ...... 153,567,262 Public Improvements -Utilities(1) ...... 24,255,948 Civic Facilities ...... 14,190,000 Parking Garages ...... 15,160,308 Total ...... $304,071,803* ______(1) General Obligation Bonds to be contractually repaid by the Western Virginia Water Authority.

Note: Excluded Series 2010A (Tax-Exempt) and Series 2010B (Taxable-Recovery Zone Economic Development Bonds) which were issued in March 2010.

The public improvement, Civic Facilities, and certain school indebtedness shown above are provided from the General Fund of the City. The Parking Fund covers debt service on garage facilities. If funding in an Enterprise Fund is not sufficient to pay debt service, the City Council is obligated to make such payment from the General Fund or from any other available monies.

Legal Debt Margin

The City’s legal debt margin at June 30, 2009 was $392,935,844 as computed below:

Assessed Value of Real Estate, 2009 ...... $6,564,294,962 Legal Debt Limit, 10% of $6,564,294,962 ...... 656,429,496 Debt applicable to limitation: General Obligation Serial Bonds - Governmental Activities $195,712,770 General Obligation Serial Bonds - Western Virginia Water Authority (WVWA) 24,255,948 State Literary Fund Loans 3,570,000 Virginia Public School Authority (VPSA) School Bonds 51,182,777 Civic Facilities Enterprise Fund - Business-Type Activities 14,190,000 Parking Enterprise Fund Supported Debt - Business-Type Activities 15,294,914 Deferred Bond Costs - Parking Enterprise Fund Supported Debt (134,606) Total Bonded Debt ...... 304,071,803 Less: Available in Debt Service Fund ...... (1,161,895) Western Virginia Water Authority Supported Debt (WVWA) ...... (24,255,948) Parking Enterprise Fund Supported Debt ...... (15,294,914) Deferred Bond Costs - Parking Enterprise Fund Supported Debt ...... 134,606 263,493,652 Legal Debt Margin ...... $392,935,844

______Source: City of Roanoke, CAFR as of June 30, 2009.

Note: Excluded Series 2010A (Tax-Exempt) and Series 2010B (Taxable-Recovery Zone Economic Development Bonds) which were issued in March 2010.

A-38 Bond Amortization Schedules

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

General Obligation Tax-Supported Indebtedness* Outstanding Prior to Current Issue (Net of Debt Service on Refunded Bonds) Current Issue Fiscal Year Principal Interest Subtotal Principal Interest** Subtotal Total 2010$ 21,765,897 $ 11,364,697 $ 33,130,594 $ - $ - $ - $ 33,130,594 2011 19,093,669 10,247,744 29,341,413 - - - 29,341,413 2012 20,868,663 9,360,746 30,229,409 165,000 671,230 836,230 31,065,639 2013 21,054,699 8,546,281 29,600,980 335,000 464,628 799,628 30,400,608 2014 20,753,377 7,680,027 28,433,404 430,000 456,978 886,978 29,320,382 2015 17,325,427 6,877,036 24,202,463 425,000 446,303 871,303 25,073,766 2016 15,981,474 6,090,575 22,072,049 2,298,000 405,458 2,703,458 24,775,507 2017 15,774,602 5,407,212 21,181,814 800,000 361,657 1,161,657 22,343,471 2018 15,521,093 4,804,901 20,325,994 800,000 342,474 1,142,474 21,468,468 2019 14,685,417 4,110,776 18,796,193 800,000 320,354 1,120,354 19,916,547 2020 14,449,271 3,536,257 17,985,528 800,000 295,560 1,095,560 19,081,088 2021 11,661,212 2,925,006 14,586,218 800,000 270,295 1,070,295 15,656,513 2022 11,029,193 2,464,452 13,493,645 800,000 244,561 1,044,561 14,538,206 2023 8,462,556 2,019,199 10,481,755 800,000 220,456 1,020,456 11,502,211 2024 8,404,201 1,664,132 10,068,333 800,000 197,822 997,822 11,066,155 2025 8,222,148 1,278,746 9,500,894 795,000 174,367 969,367 10,470,261 2026 5,714,289 918,419 6,632,708 795,000 150,142 945,142 7,577,850 2027 3,843,623 673,407 4,517,030 795,000 124,408 919,408 5,436,438 2028 3,313,672 515,553 3,829,225 795,000 97,532 892,532 4,721,757 2029 2,971,160 372,423 3,343,583 795,000 70,078 865,078 4,208,661 2030 1,730,000 269,353 1,999,353 795,000 42,047 837,047 2,836,400 2031 1,590,000 200,340 1,790,340 795,000 14,016 809,016 2,599,356 2032 1,590,000 133,560 1,723,560 - - - 1,723,560 2033 1,590,000 66,780 1,656,780 - - - 1,656,780 Totals 267,395,643 91,527,622 $ 358,923,265 $ 15,618,000 $ 5,370,366 $ 20,988,366 $ 379,911,631

______* Includes Public Improvement Bonds for the City and School Board, Virginia Public School Authority Bonds, Literary Fund Loan Bonds, and Qualified Zone Academy Bonds and Civic Facilities General Obligation Bonds. **Interest on Series 2010B Bonds net of federal subsidy on recovery zone economic development bonds issued under Section 1400U-2 of the Internal Revenue Code of 1986.

A-39 Parking Enterprise Fund Supported General Obligation Indebtedness

Outstanding Prior to Current Issue (Net of Debt Service on Refunded Bonds) Current Issue Fiscal Year Principal Interest Subtotal Principal Interest Subtotal Total 2010$ 950,828 $ 672,292 $ 1,623,120 $ - $ - $ - $ 1,623,120 2011 968,930 671,796 1,640,726 - - - 1,640,726 2012 1,135,156 622,173 1,757,329 - 4,536 4,536 1,761,865 2013 655,000 588,843 1,243,843 - 3,177 3,177 1,247,020 2014 703,900 565,247 1,269,147 - 3,177 3,177 1,272,324 2015 722,000 542,368 1,264,368 - 3,177 3,177 1,267,545 2016 737,600 511,969 1,249,569 105,900 1,589 107,489 1,357,058 2017 768,300 480,818 1,249,118 - - - 1,249,118 2018 796,500 453,796 1,250,296 - - - 1,250,296 2019 830,100 418,440 1,248,540 - - - 1,248,540 2020 863,600 387,901 1,251,501 - - - 1,251,501 2021 900,400 345,350 1,245,750 - - - 1,245,750 2022 933,700 307,338 1,241,038 - - - 1,241,038 2023 775,000 268,402 1,043,402 - - - 1,043,402 2024 810,000 233,619 1,043,619 - - - 1,043,619 2025 840,000 196,469 1,036,469 - - - 1,036,469 2026 725,000 158,309 883,309 - - - 883,309 2027 555,000 124,913 679,913 - - - 679,913 2028 585,000 98,631 683,631 - - - 683,631 2029 415,000 71,197 486,197 - - - 486,197 2030 435,000 50,253 485,253 - - - 485,253 2031 370,000 29,906 399,906 - - - 399,906 2032 390,000 10,144 400,144 - - - 400,144 Totals$ 16,866,014 $ 7,810,174 $ 24,676,188 $ 105,900 $ 15,656 $ 121,556 $ 24,797,744

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

Outstanding Prior to Current Issue (Net of Debt Service on Refunded Bonds) Current Issue Fiscal Year Principal Interest Subtotal Principal Interest Subtotal Total 2010$ 2,347,065 $ 973,380 $ 3,320,445 $ - $ - $ - $ 3,320,445 2011 2,103,333 851,663 2,954,996 - - - 2,954,996 2012 2,357,368 748,940 3,106,308 - 9,899 9,899 3,116,207 2013 2,373,182 646,225 3,019,407 - 6,933 6,933 3,026,340 2014 2,400,000 542,705 2,942,705 - 6,933 6,933 2,949,638 2015 1,021,400 468,076 1,489,476 - 6,933 6,933 1,496,409 2016 1,071,600 427,478 1,499,078 231,100 3,467 234,567 1,733,645 2017 1,116,900 389,798 1,506,698 - - - 1,506,698 2018 1,155,700 351,554 1,507,254 - - - 1,507,254 2019 1,198,400 308,271 1,506,671 - - - 1,506,671 2020 1,248,200 260,319 1,508,519 - - - 1,508,519 2021 1,310,400 208,145 1,518,545 - - - 1,518,545 2022 1,351,200 150,730 1,501,930 - - - 1,501,930 2023 975,000 102,100 1,077,100 - - - 1,077,100 2024 1,010,000 62,400 1,072,400 - - - 1,072,400 2025 1,055,000 21,100 1,076,100 - - - 1,076,100 2026 ------2027 ------2028 ------2029 ------2030 ------2031 ------2032 ------Totals$ 24,094,748 $ 6,512,884 $ 30,607,632 $ 231,100 $ 34,165 $ 265,265 $ 30,872,897

A-40 Debt Ratios

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

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

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

2000 94,911 $4,730,451,543 $193,100,761 $41,118,710 $ - $13,134,073 $138,847,978 2.94% $1,462.93 2001 95,000 4,919,963,278 191,284,376 39,027,391 - 13,130,315 139,126,670 2.83 1,464.49 2002 94,600 5,073,201,176 242,386,235 47,001,072 - 14,289,750 181,095,413 3.57 1,914.33 2003 93,100 5,257,286,706 228,050,952 44,517,751 - 14,436,613 169,096,588 3.22 1,816.29 2004 92,900 5,607,172,004 223,671,734 41,504,678 - 15,061,934 167,105,122 2.98 1,798.76 2005 92,671 5,976,975,981 256,369,208 7,818,130 33,435,000 988,465 214,127,613 3.58 2,310.62 2006 92,994 6,417,896,664 281,808,817 9,863,867 31,315,992 1,063,737 239,565,221 3.73 2,576.14 2007 92,024 6,963,090,861 274,026,551 9,160,142 28,924,766 1,021,667 234,919,976 3.37 2,552.81 2008 93,504 7,407,774,726 298,775,968 10,974,761 26,596,538 1,143,782 260,060,887 3.51 2,781.28 2009 92,344 7,709,103,732 304,071,803 15,160,308 24,255,948 1,161,895 263,493,652 3.42 2,853.39 ______*Source: City of Roanoke CAFR June 30, 2009.

(a) FY04 through FY09 amounts exclude Civic Facilities outstanding balances. Beginning FY04, Civic Facilities debt is no longer to be considered self-supporting by the Civic Facilities Fund but instead supported by the taxing power of the City. (b) The Authority was formed July 1, 2004. While the City’s assets related to its Water and Waste Water Enterprise Funds were transferred to the Authority, the City’s related General Obligation Bonds could not be assumed by the Authority. Under an Operating Agreement with the City, the Authority agreed to pay the City amounts sufficient to pay debt service on the related General Obligation Bonds, and to fix, charge, and collect rates, fees, and charges sufficient to pay operating expenses and debt service on the City’s corresponding General Obligation Bonds.

CAPITAL IMPROVEMENT PROGRAM- FUTURE BORROWING REQUIREMENTS

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

The current CIP covers the fiscal years 2010 through 2014, and provides for the following proposed expenditures and projected sources of funding as presented in the following tables:

A-41 Capital Improvement Program Fiscal Year(s) 2010-2014 Summary of Estimated Expenditures

Fiscal Year(s) Ending June 30

Project Classification 2010 2011-2014 Total Cost

Public Buildings ...... $8,667,177 $14,539,314 $23,206,491 Economic Development ...... 4,641,906 - 4,641,906 Flood Reduction ...... 4,890,272 789,685 5,679,957 Parks ...... 2,559,250 14,874,071 17,433,321 Public Schools ...... 23,893,726 1,110,000 25,003,726 Stormwater Management ...... 179,759 74,561 254,320 Streets, Sidewalks and Bridges ...... 8,173,692 7,713,740 15,887,432 Market Facilities ...... 700,000 7,096,533 7,796,533 Parking Facilities ...... 4,051,265 - 4,051,265 Technology ...... 1,236,285 7,671,733 8,908,018 $58,993,332 $53,869,637 $112,862,969

Sources of Funds: FY 2010 – 2014

Existing/Future Capital Funds ...... $16,001,372 Third Party ...... 230,000 State Literary Fund Loans/VPSA Bonds ...... 14,727,790 Intergovernmental Funding ...... 7,475,529 General Revenue ...... 6,304,245 General Obligation Bond Issues ...... 68,124,033 $112,862,969

The City Council approved the Capital Improvement Program (CIP) Update for FY 2010-2014 on July 20, 2009. The CIP Update was subsequently amended on August 3, 2009. On January 19, 2010, the City Council made adjustments to the timing of planned debt issuance included in the CIP Update. The Summary of Estimated Expenditures reflects the aforementioned adjustments to the timing of planned debt issuance.

EMPLOYEE RETIREMENT PLANS

The City of Roanoke Pension Plan (Pension Plan) covers all City employees except for professional School Board employees and employees of the Roanoke Sheriff’s Department who participate in the Virginia Retirement System (VRS). The Pension Plan is a defined benefit plan established by the City Council and is included in the City’s financial statements as the Pension Trust Fund. The Pension Plan consists of the Employee’s Retirement System (ERS) for employees hired before July 1, 1984 and the Employee’s Supplemental Retirement System (ESRS) for employees hired on or after July 1, 1984. City employees do not contribute to the Pension Plan. The City’s contribution rate is based on an actuarially determined amount. The Pension Plan received employer contributions of $10,081,410 in fiscal year 2008 and $9,783,450 in fiscal year 2009.

Contribution rates for the most recent five years are as follows:

Year ended June 30, 2005 ...... 9.56% Year ended June 30, 2006 ...... 12.61 Year ended June 30, 2007 ...... 15.11 Year ended June 30, 2008 ...... 15.73 Year ended June 30, 2009 ...... 15.42

Retirement benefits for employees who are in the ERS are determined as a percentage of the highest twelve consecutive months of salary based on years of creditable service. Normal retirement age is age 60 or 30 years of

A-42 service. The Pension Plan provides for early retirement after 20 years of service whereby employees receive a reduced retirement benefit.

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

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

The liability for unfunded accrued liabilities for the City of Roanoke Pension Plan is being amortized over a period of 25 years from the date of establishment. At June 30, 2009, the latest valuation date, the amount of unfunded actuarial accrued liability was $56,020,048. The pension benefit obligation of $407,170,086 exceeded the market value of net assets available for benefits of $266,428,241 by $140,741,845.

The Virginia Retirement System (VRS) is administered by the Commonwealth of Virginia. Professional School Board employees and Sheriff’s employees participate in VRS. Contribution rates, which are actuarially determined by the VRS, are intended to fund normal cost plus amortization of unfunded accrued liabilities over not more than a thirty year period. Employee contribution rates, which are paid by the employer, remain constant at five percent of covered payroll. The City assumes the employees’ share of these contributions. For the year ended June 30, 2009, the City contributed $962,792 on behalf of Sheriff’s employees, and the Schools contributed $10,315,279 on behalf of its employees, representing all required employer and employee contributions.

See Note 12 to the financial statements included herein in Appendix C for more detailed information on the retirement systems as of the June 30, 2009 valuation date.

Other Post-Employment Benefit Plans

The City’s Post Retirement Health Plan provides eligible City employees the opportunity to continue health insurance coverage upon retirement. The Plan was established by the City Council and is included in the City’s financial statements as the OPEB Trust Fund.

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

Employees who retire from the City of Roanoke with 15 years of continuous service and who are enrolled in the City’s health plan at the date of retirement and are under the age of 65, are eligible to participate in the City’s Post-Retirement Health Plan. Retirees participating in the Post Retirement Health Plan benefit from a lower insurance rate as a result of inclusion in the plan with active City employees. This lower rate results in an implicit benefit that qualifies as an Other Post-employment Benefit (OPEB) as defined by GASB Statement No. 45. The City plan is a single employer OPEB plan and is administered by the City of Roanoke to provide medical insurance to eligible retirees. The OPEB for City retirees was authorized by the City Code. The City of Roanoke healthcare plan does not issue a stand alone financial report.

The contribution requirements of the City of Roanoke healthcare plan members and the City are established and may be amended by the City Council. The required contribution is based on projected pay-as-you-go financing

A-43 requirements under which contributions are made in amounts sufficient to cover benefits paid, administrative costs, and anticipated inflationary increases. For health insurance, the retiree contributes 100% of all premium payments. For the fiscal year ended June 30, 2009, the retirees contributed $1,323,000 to the City of Roanoke healthcare plan for health insurance. The City contributed $424,000 to a qualified trust as defined by GASB Statement No. 45, to fully fund the annual required contribution of $1,747,000 for fiscal year 2009. It is the City’s intent to fully fund the annual required contribution each year. Retirees on and after January 1, 2010 pay the blended rate plus an additional contribution based on their selected benefit tier.

Effective July 1, 2007, the City’s annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liability over a period not to exceed thirty years.

The plan contains both active employees and retirees. Although the City’s annual payments were for combined participants, the share of claims related to retirees represents a higher percentage of the total claims. Accordingly, contributions reflected in the OPEB calculations have been adjusted to reflect that a portion of contributions for active employees are subsidizing the retiree claims.

The City’s Post Retirement Dental Plan provides eligible City employees the opportunity to continue dental insurance coverage upon retirement. Employees who retire from the City of Roanoke with 15 years of continuous service and who are enrolled in the City’s dental plan at the date of retirement are eligible to participate in the City’s Post-Retirement Dental Plan. Retirees participating in the Post Retirement Dental Plan benefit from the opportunity to continue coverage at a group rate. Retirees pay the full cost of the premium of the separately rated group, thus there is no subsidy provided by the City and no liability associated with this benefi

A-44 APPENDIX B

Local Government Roanoke Citizens

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

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

Billings and Schools Collections Assistant City Assistant City Staff/Other Manager for Manager for Functions Community Operations Development Real Estate Valuation

Office of Human Services/ Civic Facilities Communications Social Services

Economic Fire/EMS Libraries Development

Management and General Services Market Building Budget Organizational Chart FY 2010 – 2011 Parks and Human Resources Parking Recreation

Planning, Building Public Works & Development

Supreme Court of Virginia Judicial Branch Technology Police

Circuit Court

Clerk of Circuit Court

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

Clerk of General Registrar Juvenile & Domestic Court Services District Court

Juvenile & Domestic Court Clerk

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APPENDIX C

City of Roanoke, Virginia

Comprehensive Annual Financial Report

For the Fiscal Year July 1, 2008 to June 30, 2009

Prepared by the City of Roanoke Department of Finance

C-1 Table of Contents

Page Number

INTRODUCTORY SECTION Letter of Transmittal...... 7 Certificate of Achievement for Excellence in Financial Reporting...... 25 Directory of Principal Officials...... 26 Organizational Chart...... 27

FINANCIAL SECTION

Independent Auditors’ Report...... 31

Management’s Discussion and Analysis (Required Supplementary Information)...... 33

Basic Financial Statements Government-Wide Financial Statements Exhibit A Statement of Net Assets...... 47 Exhibit B Statement of Activities...... 48

Fund Financial Statements Governmental Funds Financial Statements Exhibit C Balance Sheet...... 50 Exhibit D Reconciliation of the Balance Sheet to the Statement of Net Assets...... 51 Exhibit E Statement of Revenues, Expenditures, and Changes in Fund Balances ...... 52 Exhibit F Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ...... 53 Proprietary Funds Financial Statements Exhibit G Statement of Net Assets...... 54 Exhibit H Statement of Revenues, Expenses, and Changes in Fund Net Assets ...... 56 Exhibit I Statement of Cash Flows ...... 58 Fiduciary Fund Financial Statements Exhibit J Statement of Fiduciary Net Assets ...... 60 Exhibit K Statement of Changes in Fiduciary Net Assets...... 61 Notes to Basic Financial Statements...... 63

C-2 Page Number Required Supplementary Information Budgetary Comparison Schedule – General Fund...... 113 Schedule of Funding Progress - VRS...... 117 Schedule of Funding Progress - OPEB ...... 118 Schedule of Funding Contributions - OPEB ...... 118 Note to Budgetary Comparison Schedule – General Fund ...... 119

Supplementary Information Combining and Individual Fund Financial Statements Exhibit L-1 Combining Statement of Net Assets – Internal Service Funds ...... 122 Exhibit L-2 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets – Internal Service Funds...... 123 Exhibit L-3 Combining Statement of Cash Flows – Internal Service Funds...... 124 Exhibit M-1 Statement of Fiduciary Assets and Liabilities – Agency Fund ...... 125 Exhibit M-2 Statement of Changes in Fiduciary Assets and Liabilities – Agency Fund ...... 126

STATISTICAL SECTION Table 1 Net Assets by Component...... 129 Table 2 Changes in Net Assets...... 130 Table 3 Governmental Activities Tax Revenues by Source...... 132 Table 4 Fund Balances of Governmental Funds ...... 132 Table 5 Changes in Fund Balances of Governmental Funds ...... 134 Table 6 Local Tax Revenues by Source ...... 136 Table 7 General Property Tax Levies and Collections...... 136 Table 8 Assessed and Estimated Actual Value of Taxable Property ...... 137 Table 9 Property Tax Rates and Levies...... 137 Table 10 Principal Property Taxpayers ...... 138 Table 11 Taxable Retail Sales ...... 138 Table 12 Ratio of General Bonded Debt to Total Assessed Value and Bonded Debt Per Capita...... 139 Table 13 Ratios of Outstanding Debt by Type...... 140 Table 14 Legal Debt Margin Information ...... 140

C-3 Page Number

Table 15 Computation of Legal Debt Margin ...... 141 Table 16 Ratio of Annual Debt Service Expenditures for General Long-Term Debt to Total General Expenditures...... 141 Table 17 Debt Service as a Percentage of Non-Capital Expenditures...... 142 Table 18 Demographic Statistics...... 142 Table 19 Construction Statistics...... 143 Table 20 Principal Employers ...... 143 Table 21 Full-Time Equivalent City Government Employees by Function...... 144 Table 22 Operating Indicators by Function ...... 145 Table 23 Capital Asset Statistics by Function ...... 146

C-4 INTRODUCTORY SECTION

5

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6 C-6 C-7 statements, notes to the basic financial statements, required supplementary information and combining fund financial statements; (3) Statistical Section – This section is unaudited and includes selected financial and demographic information, generally presented on a multi-year comparative basis.

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

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

Chartered by the Commonwealth of Virginia as a city in 1882, Roanoke encompasses a land area of forty-three square miles and operates under a council-manager form of government. The City’s 2008 estimated population, 92,344, accounts for just under 31 percent of the population in its metropolitan statistical area (MSA), which includes the neighboring Cities of Salem and Vinton; and the Counties of Roanoke, Botetourt, Craig, and Franklin.

The primary government provides a full range of services including general government administration, public safety, public works, recreational activities, judicial administration, health and welfare activities, and community development activities. The City also owns and operates a civic center, several parking facilities, and a historic market building which contains retail space and a food court.

8 C-8 The financial reporting entity reflected in the CAFR, which is more fully described in Note 1 to the basic financial statements, conforms to the requirements of the Governmental Accounting Standards Board (GASB) Statement No. 14, as amended by GASB Statement No. 39. The accounting and reporting principles of the GASB are based on the fundamental concept that publicly elected officials are accountable to their constituents, and the financial statements should emphasize the primary government and permit financial statement users to distinguish between the primary government and its component units. There are several commissions and authorities where the City’s accountability is limited to appointments to, or seats on, the respective boards. The City does not exercise financial or administrative control over these entities, so they are excluded from this report.

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

The blended component unit is the City-owned Greater Roanoke Transit Company (Transit Company) which is responsible for managing Roanoke’s mass transit system. It is reported as an enterprise fund of the primary government.

The discretely presented component unit is the School Board of the City of Roanoke (School Board). The School Board is comprised of seven members, appointed by City Council, to oversee operation of the City’s school system. The school system receives significant financial support from the City. The School Board is presented in a separate column in the government- wide financial statements to emphasize that it is legally separate from the primary government and to differentiate its financial position and results of operations from that of the primary government.

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C-9 The annual budget document contains the financial policies of the City and reflects the balance between total proposed expenditures and total anticipated revenues. As required by City Code, the City Manager submits a recommended budget to City Council at least sixty days prior to the beginning of the fiscal year beginning July 1st. After an extensive study process and a public hearing to receive citizen input, the City Council adopts the budget on or before May 15th.

Economic Condition and Outlook Fiscal year 2009 revenues reflect an established local economy, though growth has significantly slowed from the prior year due to the current economic conditions. General Fund revenues as a whole increased approximately 1% compared to FY08. The real property tax provided moderate growth in revenue, as a result of growth in assessed values. Real property taxes provide approximately 30% of total General Fund revenues. The taxable real property base grew 5% for FY09. This increase was offset by the decline in many of the City’s local tax revenues. The national economic decline in FY09 has negatively impacted local tax growth rates. Personal property tax revenue fell almost 2% during the year. The decline in this local tax occurred primarily in the vehicular area in both the quantity of vehicles and in their assessed values. Sales Tax revenues declined 5% from FY08 as a result of current economic conditions that decreased consumer spending. Prepared Food and Beverage Tax revenues dropped nearly 1% during the year. This revenue is also heavily impacted by the decline in consumer spending. Construction of residential and commercial buildings within the City also declined in FY09. The City issued a total of 1,082 building permits in fiscal year 2009 with a construction value of $127 million associated with those permits. Although the City’s General Fund revenues are expected to decline in FY10 due to national economic conditions, the City continues to plan for long-term, sustainable economic development.

Current economic trends for the U.S. economy reflect rising unemployment, decreases in new home construction, increases in food and energy costs, and decreases in retail sales and food services. These economic conditions are expected to impact future revenues of the City. The City regularly assesses the influence of economic factors and makes budgetary adjustments as necessary to ensure that key services remain uninterrupted and that the City continues to remain financially stable.

10 C-10 During fiscal year 2009, the City issued $11,950,000 of General Obligation Public Improvement Bonds, Series 2008A, to finance capital improvements for the Market Garage, construction of a Police Academy, City bridges and streetscape projects, capital improvements for City Fire/EMS Stations, and the Library Master Plan. Also during fiscal year 2009, the City issued $16,930,705 of Virginia Public School Authority Bonds, Series 2008B, to finance continued construction at William Fleming High School and capital improvements to roofs as necessary at schools throughout the City.

Roanoke’s economy is strengthened by the diversity of our employment opportunities, with representation from every major type of business as defined by the US Census Bureau. New businesses and expansion of existing businesses are discussed in a subsequent section.

Challenges the City addressed during the year included statewide budget reductions by the Commonwealth of Virginia, an increased need for unemployment services, neighborhood revitalization, flood reduction and relocation projects, and capital maintenance and equipment replacement.

As part of its fiscal year 2009 budget process, the City was again able to accommodate reduced funding from the Commonwealth and meet the goals of maintaining service levels to citizens. The City’s relative stability, coupled with program reductions, has allowed increased funding for education and economic development, continued funding for future debt service, continued funding for capital replacement and maintenance, and continued core services from public safety departments.

Major Initiatives

Employment

Roanoke is committed to creating jobs for its citizens and generating new sources of tax revenue by strengthening and diversifying the local economy. The Roanoke Metropolitan Statistical Area had an unemployment rate of 7.8% as of June 2009. This rate was lower than the federal unemployment rate and slightly higher than the state unemployment rate for this time period.

11

C-11 Employers in the City of Roanoke provided over 29% of all jobs in the Roanoke Valley as of June 2009.

In response to rising unemployment within the City and its surrounding Metropolitan Statistical Area, the City stepped up its assistance to job seekers and employers by offering job fairs in December, March, and June. Each event had an attendance of between 800 and 1,000 people.

In July 2009, the Roanoke Valley Workforce Center, Virginia’s first fully comprehensive workforce center, began offering services. The Roanoke Valley Workforce Center combines traditional workforce services offered by the Virginia Employment Commission with housing assistance, post-secondary education, and job training services from organizations such as Total Action Against Poverty. It is adjacent to the Virginia Department of Social Services and the Department for the Blind and Visually Impaired.

Economic Development The City stimulates and supports economic development for the purpose of attracting new businesses and encouraging the expansion of existing businesses. As part of that initiative, the City has two established Enterprise Zones. Businesses located within the boundaries of Enterprise Zones may qualify for state or local incentives. In calendar year 2008, Enterprise Zone applicants had spent $16 million in qualified investments and were awarded $283,966 in Enterprise Zone Grants.

The City continues the development and expansion of two major business parks. The Riverside Centre for Research & Technology (RCRT) is a 75-acre technology park that is expanding in the South Jefferson Street corridor with a medical school, outpatient clinic, and nearby hotel. The RCRT currently houses the Carilion Biomedical Institute (CBI), Luna Innovations, and Medical Enzymatics. The Virginia Tech Carilion School of Medicine and Research Institute, a four-year medical school and research institute, has appointed 319 faculty members and received approximately 1,200 applications for the inaugural class scheduled to begin in August 2010. The $59 million facility, a joint project between Virginia Tech and Carilion Clinic, is expected to be completed in the summer of 2010. The Carilion Clinic is a $44 million facility with a 212,000

12 C-12 square foot outpatient clinic that houses various medical specialists and opened to patients in September 2009. The building is currently undergoing certification to become a Leadership in Energy & Environment Design (LEED) certified building. Nearby, a 127 room Cambria Suites Hotel, limited-service, and all-suite hotel, is currently under construction.

The Roanoke Centre for Industry and Technology (RCIT) is a City-owned industrial complex designed for light manufacturing and warehousing. Almost 2,000 employees currently work for the businesses at the RCIT, include employees of the Maple Leaf Bakery, which recently developed a $10 million bagel line at its facility. Nine sites in the park have been utilized, leaving approximately forty acres for additional development. Four new sites have been graded and are ready for development. Once these sites are full, an additional fifty-four acres will be opened for future development opportunities.

The Social Security Administration Building, completed in July 2009, represents a $10 million private investment in the downtown area. The 69,000 square foot building is designed to house the Social Security regional office and other government agencies. Advance Auto Parts expanded operations at its corporate offices to include a data processing center for its on-line shopping service, a $3.6 million investment. Advanced Auto Parts also expanded into a recently vacated commercial space that once housed the Department of Motor Vehicles, the expansion will cost an estimated $5.1 million. Member One Credit Union began construction on a 16,000 square foot financial corporate building, which represents a $3.8 million investment.

The District at Valley View, an open-air, lifestyle center constructed in 2007, enhanced the popular Valley View mall. The two areas, combined, offer six anchor stores, over 100 specialty shops, and many restaurants. The Valley View Mall, a dominant regional shopping center, provides 877,000 square feet of retail space. Valley View Mall is owned and operated by CBL Associates Properties Inc. which continues to display confidence in the Roanoke retail market through increased investment as seen recently in the ground breaking for an additional restaurant space on the mall property. The attached District of Valley View adds improved traffic control and expanded the shopping area 76,000 square feet with restaurants and specialty shops.

13

C-13 Environment The City is committed to greener living, as evidenced by its Clean and Green Campaign which implemented a number of projects aimed at reducing its carbon footprint. Effective July 1, 2007, the City offers a reduced real estate tax rate of $1.07 per $100 assessed value for energy-efficient buildings that exceed certain efficiency standards. Property owners that have demonstrated their building meets the standards receive the reduced rate for a term of five years. Other strides toward greener living include the curbside recycling program, the conversion of the City’s fleet of vehicles to bio-diesel, the purchase of electric vehicles for daily local use, construction of Fire-EMS Station #3 as the City’s first LEED-certified building, and the installment of LED lights in traffic signals at sixty major intersections. The Clean & Green Business Coalition announced in April 2009 that the businesses of the coalition collectively achieved a 13% reduction in greenhouse emissions.

Downtown Area The City also promotes development and ease of access to its downtown. The Roanoke City Market Building, a historic downtown structure that houses a variety of food vendors, has been identified for renovations totaling $10 million with construction expected to begin in fiscal year 2011. Renovations include improved vendor stalls, updates to infrastructure, and an exterior seating area. The City funded $4 million toward the construction of the Taubman Museum of Art, a world class 81,000 square foot center for art, entertainment, and cultural events. In November 2008, the Taubman Museum of Art opened in conjunction with the Roanoke Festival of the Arts. In addition to the celebration, the City and the Roanoke Arts Commission debuted eight public art pieces as part of its public arts program. The public art program is a City initiative funded by a Percent for Art Ordinance, which utilizes one percent of the budgets of certain capital improvement projects for the purpose of publicly displaying art in a manner that reflects the City’s vibrancy and heritage.

The City has worked diligently to address the parking and transportation needs of citizens and visitors in the downtown area. Valley Metro transports students under the “Students Ride Free” program. Under the program, students age 18 and under in the City are eligible for free bus fare on Valley Metro Transit buses when they present a school-issued identification card. The Star

14 C-14 Line Trolley is public transportation that serves the corridor of retail businesses, schools, libraries, restaurants, and lodging along Jefferson Street between the downtown area and Carilion Roanoke Memorial Hospital. The Trolley service began in November 2008 and is free of charge to riders. The Market Garage, which serves the Center in the Square, market plaza, and various downtown shops, is undergoing a major renovation to upgrade the facility and develop retail space within the building.

Private development has continued in the downtown area. The Cotton Mill Lofts building, formally the Virginia Mills Cotton Products plant, represents 107,000 square feet of downtown living. The private renovation created 108 apartments ranging in size from 450 square feet to more than 1,200 square feet in the downtown area. The Hancock, centrally located in the downtown area, is a four-story apartment building with 58 units that became available for lease after a major renovation to the buildings interior and façade. The Lawson Building has been transformed into a 22,000 square foot building with 22 apartments, two living/work spaces, and one commercial site within walking distance of the downtown area. These three building projects, representing 188 units of downtown living, had a consolidated occupancy rate of 99% within one month of completion. The high demand for these units indicate a growing demand for downtown housing.

Neighborhood Improvements A great deal of renovation has taken place in the Gainsboro neighborhood, Roanoke’s oldest community. Originally established in the mid-1800’s, Gainsboro was recently named to the Virginia Landmarks Register by the state Department of Historic Resources. It was a residential and cultural center for the City at one time, and the Gainsboro Neighborhood Revitalization Initiative established several major goals for the restoration of the neighborhood. In March 2009, the Gainsboro branch library celebrated the $1 million renovation that nearly doubled the historic building’s original size, renovated the interior, and updated the library with a new teen center, community room, computers, and multimedia. Other completed projects include the Claude Moore Education Complex and a culinary arts school in the former Ebony Club on Henry Street, and the Dumas Center for Artistic and Cultural Development.

15

C-15 The Roanoke River Flood Reduction project is continuing in partnership with the United States Army Corps of Engineers. The City and Federal government are expected to commit approximately $26.2 million and $46.7 million, respectively, over the duration of this project, which began in June 1990. The project consists of a combination of channel widening and levy construction along nine miles of the Roanoke River within the City. Its purpose is to reduce annual flood damage along the river by approximately 50%, which is significant to many areas of Roanoke including much of downtown. Residents located in the hardest hit flood zone have had their homes purchased through the plan and have been successfully relocated with the aid of relocation assistance funds. In addition, greenway trails are being built parallel to the bench cuts, running along the river. These trails make undeveloped space available for rising river levels when needed, beautify the riverfront areas of the City, and provide accessible recreational space to residents. When complete, the greenway trails will stretch approximately ten miles along the Roanoke River extending from Southeast Roanoke to the City of Salem.

The City is committed to expanding the community’s housing options and diversifying housing opportunities in both the market-rate and affordable sectors. For example, Colonial Green, covering twenty-three acres, will contain approximately 220 residential units, condominiums, and apartments, a large open space area, and a small site for future commercial use. At the same time, the City continues to concentrate Community Development Block Grant (CDBG) and HOME Investment Partnership Program funds in targeted neighborhoods to achieve greater impact on housing improvements and urban development. Currently, the City’s Hurt Park neighborhood is the focus of such revitalization activities. The Hurt Park/Mountain View/West End Neighborhood Plan is a component of Vision 2001-2020, the City's 20-year comprehensive plan, and provided the groundwork for implementing the revitalization effort. In developing the neighborhood plan, staff studied current neighborhood conditions, with particular emphasis on land use patterns, housing, and infrastructure needs. Residents were involved through tours and a series of workshops. Major issues identified through the process include attracting more homeowners, improving the area's appearance, infrastructure improvements, and zoning changes that will encourage the development of vacant lots and rehabilitation of substandard structures.

16 C-16 Awards The City continues to receive positive national publicity for the quality of life enjoyed by its citizens and potential business prospects. Roanoke has been rated in the top five areas nationwide for retirees, according to the 2007 Best Cities report published in Kiplinger's Personal Finance magazine. Readers of Kiplinger’s Personal Finance magazine awarded Roanoke second place nationwide in the 2009 Readers’ Choice award for Best Places to Live. Expansion Management magazine’s February 2007 issue named Roanoke one of America’s fifty hottest cities, marking the sixth time the City has been recognized by this publication as an economic hotspot. The Roanoke Police Department’s efforts to enhance traffic safety in the City were recognized in 2008 on a state and national level with first place in the Virginia Law Enforcement Challenge by the Virginia Association of Chiefs of Police and second place in the National Law Enforcement Challenge by the International Association of Chiefs of Police. The creation of the Lick Run Greenway received recognition from the Virginia Recreation and Park Society as the Best New Greenway. The Carvins Cove Conservation Easement received the Scenic Virginia Award for Scenic Water Corridor Preservation and was honored by the Western Virginia Land Trust with the 2008 A. Victor Thomas Environmental Stewardship Award. The City tied for first place in the 2008 Green Government Challenge of the Virginia Municipal League in the 90,000+ population category for its adoption of green policies and practices. In 2009, the City was a finalist in the award for Municipal Excellence for its Clean and Green campaign according to the National League of Cities. And, most recently, the Clean and Green campaign was selected as a Gold Medal Winner of the 2009 Governor’s Environmental Excellence Awards in the Environmental category. The Virginia Transit Association awarded Valley Metro, the City public transportation system, an Innovative Program Award in 2008 for its Students Ride Free Campaign. Meetings South magazine’s awarded the Hotel Roanoke & Conference Center a Best of the South award, given to hotels based on quality of meeting space, guest rooms, service, food, and activities. The League of American Bicyclists has recognized the City for its efforts toward becoming a Bicycle Friendly Community. Finally, the Center for Digital Government has selected Roanoke as a Leading Digital City for 2009 in its population category, marking the ninth consecutive year in which it has been recognized by this organization as a top ten leader in providing technology for its citizens and the sixth time it has finished as the first-place leader.

17

C-17 Roanoke is one of the select few municipalities whose Fire-EMS, Police Department, and Sheriff’s Office have all been recognized with national accreditation. The Roanoke E-911 system is one of only 51 agencies out of more than 6,000 E-911 centers in the United States to earn its accreditation. The Treasurer’s Association of Virginia recognized the Office of the Treasurer for the City as fully accredited for fiscal year 2009, meeting the guidelines set forth by the Association for excellence in treasury management. The City’s Parks and Recreation Department received full accreditation from the Commission for Accreditation of Park and Recreation in fiscal year 2009.

Prospects for the Future The City’s Comprehensive Plan, Vision 2001, was adopted to guide development decisions for our city’s future. Following the adoption of the Plan, the City adopted a major rewrite of the zoning ordinance, creating the zoning parameters necessary for village centers, live-work space, design overlays, and other elements of the Comprehensive Plan.

After concluding an 18-month comprehensive study of its public library system and developing a Library Master Plan, the City undertook several continuing improvement projects. The City has improved library services and facilities; including expansions at the Jackson Park Branch and the Gainsboro Branch libraries and the establishment of two E-Branch service points, which are an extension of the public library system through state of the art electronic kiosks, serving citizens at Valley View Mall and the Garden City Recreation Center.

The City is committed to improving its Fire-EMS and Police facilities. Construction of the Williamson Fire-EMS Station was completed in January 2009. The facility provides increased capacity to house modern firefighting equipment. Construction of the Melrose Station is underway and is part of a plan to consolidate the 12th Street and Loudon Avenue and the 24th Street stations into a new facility along with a police substation. A Roanoke Police Academy is scheduled for completion in early 2010. The new Academy, constructed under a Public-Private Educational Facilities Infrastructure Act arrangement, will provide facilities for training all sworn officers and civilian members of the Police Department.

18 C-18 The City continues to make a substantial investment in Roanoke City Public Schools, both operationally and in support of school capital projects. The recently completed William Fleming High School gives students and teachers 295,000 square feet of state of the art, effective, safe and healthy learning environments. A stadium is planned on the site of the old school and will be completed in 2010.

The City is in the planning stages of capital improvements directed at further enhancing the historic Market District as the geographic and social focal point of the Roanoke Valley. The project is a result of recommendations outlined in the Market District Plan.

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

Accounting System and Budgetary Controls The City has established a comprehensive internal control framework designed to both safeguard the government’s assets against loss from unauthorized use or theft and to properly record and adequately document transactions in order to compile information for the presentation of the City’s basic financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatement.

Within the upcoming five year period, the City plans to upgrade or replace a number of its financial systems with the goals of obtaining enterprise functionality and of utilizing technology

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C-19 that maximizes the user’s ability to retrieve data. The systems included in the scope of this project include financial, payroll/human resources, budget, and tax/treasury. All financial and accounting records of the City are currently maintained on the Advantage Financial System, a product of CGI, designed especially for local governments. Advantage is a browser based integrated financial management system supporting the requirements for local government accounting and reporting established by the GASB. This system includes the base financial system as well as the purchasing and fixed assets subsystems. The core financial system was upgraded in July 2006. Roanoke City Public Schools implemented their own ERP system in July 2008. This included Payroll, HR, Time-Entry, and Accounting modules.

The budget preparation system, which was implemented in December 2005, is scheduled to be upgraded to a web-based version for the purpose of streamlining the budget process and promote a paperless work environment. The replacement of the tax/treasury system will be completed in three phases. The first phase includes real estate taxes and cashiering functionality with implementation in 2010. Phases two and three include personal property taxes and business taxes. A contract has been signed with Lawson Software, Inc. for a new payroll/human resources system scheduled to be implemented in April 2010.

City of Roanoke Pension Plan The City of Roanoke Pension Plan is a self-administered, multiple-employer retirement plan, which covers all City employees except the Sheriff's employees, who participate in the Virginia Retirement System. The City funds the pension plan on an actuarial basis. The contribution required for the year ended June 30, 2009 was $9,823,301. This was $334,488 less than the required contribution in the preceding fiscal year. Consistent with prior years, the City continues to fully fund its pension plan at the actuarially recommended rate. As of June 30, 2009, the funded ratio of the actuarial value of assets was 86.2% of the accrued liability. Additional information is available in Note 12 to the basic financial statements and in the separately issued Comprehensive Annual Financial Report of the City of Roanoke Pension Plan.

Other Postemployment Benefits (OPEB) The City implemented GASB Statement No. 45, “Accounting and Financial Reporting by

20 C-20 Employers for Postemployment Benefits Other Than Pensions” in fiscal year 2008. This statement establishes standards for the measurement, recognition, and display of OPEB expense and related liabilities, note disclosures and other required information. As required by the statement, the City actuarially determined the total estimated future OPEB costs. The City was able to fully fund the annual required contribution for fiscal year 2009, and therefore does not have a liability to report under this requirement. Additional details of the City’s OPEB costs can be found in Note 13 to the basic financial statements.

Capital Financing and Debt Service Council has adopted a debt policy which includes the following guidelines: (a) net debt will not exceed 5% of assessed value of real estate; (b) 50% or more of aggregate outstanding principal will be redeemed within ten years; and (c) non-proprietary general obligation debt services shall not exceed 10% of General Fund expenditures. The City monitors these ratios to ensure ongoing compliance with the debt policy. Additional disclosures regarding the City’s long-term obligations are provided in the MD&A, Notes 9 and 10 to the basic financial statements, and Tables 13 through 17 in the Statistical section.

In conjunction with the preparation of an annual operating budget, the City prepares a five-year Capital Improvement Program Update. This specifies the capital improvement and construction projects which will be funded over the upcoming five-year period in order to maintain or enhance the City’s $547 million in capital assets. Detailed project descriptions, cost estimates, and funding sources are included. The City’s Capital Improvement Program for FY 2010 through FY 2014 represents $127 million of public improvements to the City’s schools, public buildings, infrastructure, parks and various economic development projects. Resources accumulated to meet these priority needs are accounted for in the Capital Projects and Proprietary Funds.

Cash Management As discussed more fully in Notes 1 and 2 to the basic financial statements, the City utilizes the pooled cash concept in order to maximize investment flexibility and achieve the best possible investment return. The City obtains the highest rate available by utilizing competitive bidding for investments among banks, professional money managers, and participation in state

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C-21 investment pools. Cash temporarily idle during the year is invested in instruments as allowed by the Code of Virginia, Chapter 3, Title 26, and in accordance with the City’s investment policy. The objectives of this policy are to invest the maximum available funds while providing sufficient flexibility to meet cash requirements. Additionally, the policy strives to assure security of principal and to obtain the highest competitive yield on investments. The Cash and Investment Committee meets at least quarterly to evaluate investment performance and possible deposit and investment risks and associated mitigating measures.

Risk Management The City’s risk management program is designed to protect against accidental losses that would affect the City’s ability to fulfill its responsibility to the taxpayers and the public. The City is self-insured for workers’ compensation and certain property and liability claims. To limit its exposure to the various risks of loss the City carries several types of insurance, including stop loss insurance to limit exposure to workers’ compensation losses. The City is self-insured for employee health insurance with stop loss provisions to limit catastrophic claims. The Risk Management Division manages the self-insurance programs with the assistance of third-party administrators. Revenues are generated through charges to employees and departments to pay for claims costs. An actuarial evaluation is performed annually by a third party actuary to ensure the City’s accrued liability for unpaid losses is adequate.

To compliment its risk management program, the City provides an extensive wellness program, including an on-site physician, coordinated by the City's Employee Health Services office. Additional disclosures regarding the City’s risk management program are provided in Note 15 to the basic financial statements.

Auditing City Charter § 25.2 provides for a Municipal Auditor appointed by City Council and reporting to the Audit Committee. The Municipal Auditor provides a continuing review of the internal controls and financial operations of the City, the Transit Company, and Roanoke City Public Schools; coordinates audit efforts; and regularly provides reports to the Audit Committee.

22 C-22 City Code § 2-297 and 2-298 establishes the Audit Committee as a permanent committee of the City Council composed of at least three members of Council. The Audit Committee acts in an advisory capacity to the City Council, the Municipal Auditor, the Director of Finance, and the City Manager. Currently, all seven council members participate on the Audit Committee.

Certificates of Achievement for Excellence The GFOA awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Roanoke, Virginia, for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2008. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized CAFR, whose content conforms to program standards. The CAFR must satisfy both U. S. generally accepted accounting principles and applicable legal requirements. A copy of the GFOA Certificate of Achievement is included in the Introductory section of the CAFR.

A Certificate of Achievement is valid for a period of one year. The City of Roanoke has received a Certificate of Achievement for the last thirty-five consecutive years (fiscal years ended 1974 - 2008). We believe this report conforms to the Certificate of Achievement program requirements and standards, and we are submitting it to the GFOA to determine its eligibility for another certificate.

In addition, the City also received the GFOA Distinguished Budget Presentation Award for its annual budget document for the fiscal year ended June 30, 2009. In order to qualify for the Distinguished Budget Presentation Award, the City’s budget document was judged to be proficient in several categories, including as a policy document, a financial plan, an operations guide and a communications device. The City has been a recipient of the Distinguished Budget Award for the last twenty-four consecutive years.

Acknowledgments We would like to express our appreciation to the staff of the Department of Finance for their dedication in assuring the financial integrity of the City and the preparation of this report.

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C-25 CITY OF ROANOKE DIRECTORY OF PRINCIPAL OFFICIALS JUNE 30, 2009

Members of City Council

David A. Bowers Mayor Sherman P. Lea Vice-Mayor M. Rupert Cutler Gwendolyn W. Mason Anita J. Price Court G. Rosen David B. Trinkle

Constitutional Officers

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

City Council Appointed Officials

Darlene L. Burcham City Manager Ann H. Shawver, CPA Director of Finance William M. Hackworth City Attorney Stephanie M. Moon City Clerk Troy A. Harmon, CPA Municipal Auditor

Other City Officials

James Grigsby Assistant City Manager R. Brian Townsend Assistant City Manager

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C-28 FINANCIAL SECTION

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C-30 KPMG LLP Suite 1710 10 S. Jefferson Street Roanoke, VA 24011-1331

Independent Auditors’ Report

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

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Roanoke, Virginia (the City), as of and for the year ended June 30, 2009, which collectively comprise the City’s basic financial statements as listed in the accompanying table of contents. These financial statements are the responsibility of the City’s management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit certain operations of the Civic Facilities fund, a major enterprise fund included in the business-type activities of the City, which represented 2.6% and 0.9% of total assets, 4.8% and 2.3% of total liabilities, 23.5% and 6.8% of total revenues, and 19.2% and 6.8% of total expenses of the Civic Facilities fund and business-type activities, respectively, as of and for the year ended June 30, 2009. Those operations were audited by other auditors, whose report has been furnished to us, and our opinions, insofar as they relate to the amounts audited by other auditors included for the Civic Facilities fund are based solely on the report of the other auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Specifications for Audits of Counties, Cities and Towns (Specifications), issued by the Auditor of Public Accounts of the Commonwealth of Virginia. Those standards and Specifications require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, based on our audits and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Roanoke, Virginia as of June 30, 2009, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with U.S. generally accepted accounting principles.

As discussed in notes 1(N) and 14 to the basic financial statements, the City adopted the provisions of GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, effective July 1, 2008.

KPMG LLP, a U.S. limited liability partnership, is the U.S. 31 member firm of KPMG International, a Swiss cooperative. C-31 The accompanying Management’s Discussion and Analysis on pages 33 through 46, the Budgetary Comparison Schedule – General Fund, the Schedules of Funding Progress, the Schedules of Employer Contributions, and the Notes to Budgetary Comparison Schedule – General Fund on pages 113 through 119 are not a required part of the basic financial statements, but are supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying introductory section, the combining and individual fund financial statements (Exhibits L-1, L-2, L-3, M-1 and M-2) and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements (Exhibits L-1, L-2, L-3, M-1 and M-2) have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and the statistical section 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 on them.

January 28, 2010

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C-32 CITY OF ROANOKE, VIRGINIA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2009

The following discussion and analysis of the City of Roanoke, Virginia’s (the City’s) financial performance provides an overview of the City’s financial activities for the fiscal year ended June 30, 2009. It should be read in conjunction with the preceding transmittal letter and the City’s basic financial statements.

FINANCIAL HIGHLIGHTS

 The City’s total net assets, excluding those of its component unit, on the government-wide basis, totaled $334,510,784 at June 30, 2009. Of this amount, $43,910,820 may be used to meet ongoing obligations to citizens and creditors, and $290,529,050 is invested in capital assets, net of related debt. Net assets of $70,914 are restricted to pay for upgrades to the wireless E911 system.  Governmental activities of the City had expenses net of program revenues of $181,410,344, which totaled $9,071,547 less than the general revenues, net of transfers of $190,481,891.  At June 30, 2009, the City’s governmental funds balance sheet reported total ending fund balances of $72,758,899. Of this amount, $54,200,381 remains in the various governmental funds of the City as unreserved.

OVERVIEW OF THE FINANCIAL STATEMENTS

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

Government-Wide Financial Statements

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

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C-33 health is improving or deteriorating. Other non-financial factors, such as changes in the City’s property tax base and the condition of the City’s infrastructure should also be considered in assessing the overall financial health of the City.

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

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

Business-type activities – The City’s Greater Roanoke Transit Company (Transit Company), Civic Facilities, Parking, and Market Building operations are reported here as the City charges fees for services to customers.

Component unit – The City includes a discretely presented component unit in this report, the School Board of the City of Roanoke (School Board). Although legally separate, the component unit is important because the City is financially accountable for it.

Fund Financial Statements

The fund financial statements begin on page 47 and provide detailed information about the most significant funds, not the City as a whole. The City has three types of funds:

Governmental funds – Most of the City’s basic services are included in governmental funds. Fund- based statements for these funds focus on how resources flow into and out of those funds and the balances left at year-end that are available for future spending. These funds are reported on the modified accrual basis of accounting, which measures cash and other liquid assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term overview that helps the reader determine the financial resources that can be spent in the near future to finance the City’s programs. The differences between governmental activities as reported in the government-wide and fund financial statements are reconciled in Exhibits D and F on pages 51 and53, respectively.

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

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

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C-34 The City uses internal service funds, another type of proprietary fund, to report activities that provide supplies and services by one City department to other City departments on a cost reimbursement basis. Internal service fund rates are evaluated annually and adjusted as considered necessary with the goal of providing adequate revenues to cover operating and capital expenditures on an ongoing basis. Funds included in this category are Department of Technology, Fleet Management, and Risk Management. Internal service fund activities are reported as governmental activities on the government-wide statements. Fiduciary funds – Resources held for other governments, individuals, or agencies not part of the City are reported as fiduciary funds. These activities are excluded from the government-wide financial statements because the City cannot use these assets to finance its operations. The accounting used for fiduciary funds is much like that used for proprietary funds. The City of Roanoke Pension Plan is reported as a pension trust fund. Additionally, the City reports assets for other postemployment benefits (OPEB) related to its healthcare plan for retirees in an OPEB trust fund, and accounts for assets held on behalf of the Hotel Roanoke Conference Center Commission as an agency fund. Agency funds are custodial in nature and do not involve measurement of results of operations.

FINANCIAL ANALYSIS OF THE CITY AS A WHOLE

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

Summary of Net Assets as of June 30, 2009 and 2008 (In Millions) Total Governmental Business-type Primary Activities Activities Government 2009 2008 2009 2008 2009 2008

Assets: Current and other assets$ 146.1 $ 160.6 $ 8.6 $ 6.6 $ 154.7 $ 167.2 Capital assets, net 467.9 440.2 79.0 77.4 546.9 517.6 Total assets 614.0 600.8 87.6 84.0 701.6 684.8

Liabilities: Other liabilities 58.7 58.3 4.7 3.9 63.4 62.2 Long-term liabilities 275.0 271.3 28.7 25.3 303.7 296.6 Total liabilities 333.7 329.6 33.4 29.2 367.1 358.8

Net assets: Invested in capital assets, net of related debt 238.4 225.5 52.1 51.6 290.5 277.1 Restricted 0.1 0.1 - - 0.1 0.1 Unrestricted 41.7 45.5 2.2 3.2 43.9 48.7 Total net assets$ 280.2 $ 271.1 $ 54.3 $ 54.8 $ 334.5 $ 325.9

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C-35 The City’s Primary Government combined net assets increased from $325.9 million to $334.5 million as a result of the increase in net assets of governmental activities of $9.1 million. Unrestricted net assets, the portion of net assets that can be used to finance the day-to-day operations of the City, totaled $43.9 million. Net assets invested in capital assets, net of related debt, totaled $290.5 million and represents the amount of capital assets owned by the City, including infrastructure, net of accumulated depreciation and any outstanding debt issued to fund the asset purchase or construction. Net assets are reported as restricted when constraints on asset use are externally imposed by creditors, grantors, contributors, regulators, or are imposed by law through constitutional provisions or enabling legislation. In fiscal year 2009, grant funds of $0.1 million received, but not yet spent, from the Virginia State Wireless E911 Services Board to complete upgrades to the wireless E911 system are reported as restricted net assets of governmental activities.

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C-36 Summary of Changes in Net Assets:

The following table shows the revenues and expenses of the government:

Summary of Changes in Net Assets For the Years Ended June 30, 2009 and 2008 (In Millions) Total Governmental Business-type Primary Activities Activities Government 2009 2008 2009 2008 2009 2008 Revenues Program Revenues: Charges for services$ 16.8 $ 16.7 $ 9.4 $ 7.3 $ 26.2 $ 24.0 Operating grants and contributions 71.0 69.3 4.4 4.1 75.4 73.4 Capital grants and contributions 0.3 4.0 1.1 0.8 1.4 4.8 General Revenues: Property taxes 101.6 98.7 - - 101.6 98.7 Local portion of state sales tax 20.5 21.6 - - 20.5 21.6 Business and professional occupational license taxes 12.5 12.5 - - 12.5 12.5 Utility taxes 9.7 9.8 - - 9.7 9.8 Prepared food and beverage taxes 11.5 11.6 - - 11.5 11.6 Commonwealth share-personal property taxes 8.1 8.1 - - 8.1 8.1 Cigarette taxes 2.6 2.9 - - 2.6 2.9 Transient room taxes 2.8 2.8 - - 2.8 2.8 Telecommunications taxes 7.1 8.0 - - 7.1 8.0 Motor vehicle license tax 1.9 1.7 - - 1.9 1.7 Other taxes 6.1 7.4 - - 6.1 7.4 Payment from Component Unit 8.9 7.7 - - 8.9 7.7 Interest and investment income 1.6 2.6 0.1 0.1 1.7 2.7 Other - - 0.1 0.2 0.1 0.2 Total Revenues 283.0 285.4 15.1 12.5 298.1 297.9

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C-37 Summary of Changes in Net Assets For the Years Ended June 30, 2009 and 2008 (In Millions) Total Governmental Business-type Primary Activities Activities Government 2009 2008 2009 2008 2009 2008 Expenses General Government $ 13.9 $ 15.0 - - $ 13.9 $ 15.0 Judicial Administration 9.2 8.9 - - 9.2 8.9 Public Safety 66.4 67.4 - - 66.4 67.4 Public Works 31.2 29.5 - - 31.2 29.5 Health and Welfare 45.8 45.3 - - 45.8 45.3 Parks, Recreation and Cultural 12.0 11.7 - - 12.0 11.7 Community Development 9.8 13.0 - - 9.8 13.0 Education 66.6 65.5 - - 66.6 65.5 Economic Development 1.5 0.7 - - 1.5 0.7 Interest and Fiscal Charges 13.1 10.7 - - 13.1 10.7 Transit Company - - 9.5 9.2 9.5 9.2 Civic Facilities - - 7.1 5.2 7.1 5.2 Parking - - 2.8 2.4 2.8 2.4 Market Building - - 0.7 0.4 0.7 0.4 Total Expenses 269.5 267.7 20.1 17.2 289.6 284.9 Increase (Decrease) in Net Assets before Transfers 13.5 17.7 (5.0) (4.7) 8.5 13.0 Transfers (4.5) (4.3) 4.5 4.3 - - Increase (Decrease) in Net Assets 9.0 13.4 (0.5) (0.4) 8.5 13.0 Net Assets, Beginning 271.2 257.7 54.8 55.2 326.0 312.9 Net Assets, Ending$ 280.2 $ 271.1 $ 54.3 $ 54.8 $ 334.5 $ 325.9

The property tax classification, which comprises approximately 37% of total revenue generated by governmental activities, includes real estate tax, the local portion of personal property tax, and public service corporation taxes. Real estate tax revenue, the largest source of revenue for the City, totaled $78.2 million. The assessed value of real property in the City increased for the 2009 calendar year as a result of a reassessment increase and new construction.

Personal property tax revenue, including the Commonwealth of Virginia (the Commonwealth) share, totaled $31.5 million. The revenue received locally from citizens totaled $23.4 million. Funding from the Commonwealth under its amended Personal Property Tax Relief Act (PPTRA) program provided revenue totaling $8.1 million. Revenue from the Commonwealth provided relief of 58.18% on the first $20,000 in vehicle value for the current fiscal year and is included in the other taxes category.

Sales taxes, business and professional occupational license taxes, prepared food and beverage taxes, utility taxes, funding from the Commonwealth under PPTRA, telecommunication taxes, cigarette taxes, and transient room taxes comprise the majority of other local taxes collected by the City. Other taxes comprise approximately 30% of total revenues generated for governmental activities.

Operating grants and contributions comprise approximately 26% of governmental activities revenues. Social service programs, street maintenance funds, reimbursement for shared expenses of the constitutional officers, reimbursement for funding received under House Bill 599 for law enforcement, and jail per diems are some of the major sources of revenue included in this category.

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C-38 Charges for services include items such as fines, court fees, inspection fees, reimbursements for housing prisoners, garbage collection fees, and recreation and other program-based fees.

Revenues generated for governmental activities (net of payments from Component Unit) are presented below as a percentage by category:

Property taxes 37%

Operating grants and contributions 26%

Charges for services 6% Other Taxes Interest and 30% investment income 1%

Public Safety expenses comprised approximately 24% of expenses of the governmental activities. Operations of the labor-intensive Jail, Police and Fire Departments are included in this category, along with expenses of Emergency Medical Services, Communications (E911 Call Center), and the cost of juvenile justice programs.

Education expenses comprise 25% of governmental activities. Funding of $66.6 million was provided to the Roanoke City School Board to support School operations.

Public Works and Health and Welfare expenses comprised approximately 12% and 17%, respectively, of governmental activities expenses. Expenses for Solid Waste Management, Building Maintenance, Street Paving, and Street Maintenance are included in the Public Works category.

The Comprehensive Services Act and social services programs incurred the majority of expenses reported in the Health and Welfare category.

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C-39 Approximately $4.5 million in transfers were made to business-type activities, which represented operating subsidies and the transfer of prior year fund balances appropriated to business-type activities.

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

Public Works 12%

Public Safety 24% Health and Welfare 17%

Parks, Recreation and Judicial Administration Cultural 3% 4% General Government Community 5% Development 4% Interest and Fiscal Education Charges 25% 5% Economic Development 1%

The net assets of governmental activities increased $9.1 million during fiscal year 2009. Significant current year activities affecting net assets include:

 A $13.0 million increase in invested in capital assets net of related debt.

 A decrease in unrestricted assets of $3.9 million, which, in part, related to investment of unrestricted assets in capital projects.

 Growth in real estate revenues led performance of local tax revenues. Due to growth in assessed values and moderate new construction, current year revenues continued to grow. Other local taxes such as the personal property, sales tax, prepared food and beverage, and cigarette tax revenues decreased as the result of current economic conditions. As a whole, the City’s local taxes increased 0.4%.

 In an effort to offset local tax revenues that fell short of their estimates, expenses of general government programs were contained well within budget. Hiring freezes, discretionary spending reductions, departmental budget reductions and a suspension of investment in certain capital assets enabled the City to curtail such expenditures.

The net assets of business-type activities decreased approximately $0.5 million during fiscal year

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C-40 2009, representing general stability in the overall business-type net assets. Significant current year activities affecting net assets include:

 The Greater Roanoke Transit Company Fund incurred a decrease in net assets of $0.4 million as operating grants, capital contributions and General Fund subsidies did not fully offset the loss from operations.

 Operating losses and interest expense in the Civic Facilities Fund offset by a General Fund subsidy intended to support the fund’s cash flow requirements resulted in a decrease in net assets of $0.2 million.

 Parking Fund net assets increased slightly while Market Building Fund net assets declined by a small amount.

FINANCIAL ANALYSIS OF THE CITY’S FUNDS

For the fiscal year ended June 30, 2009, the governmental funds reflect a total fund balance of $72,758,899. Approximately $54.2 million of this amount constitutes unreserved fund balance, which is available for spending for services and capital projects. Unreserved fund balance provides reserves for budgetary stabilization, insurance claims and future debt service as well as to pay for future years’ capital projects expenditures. Reserved fund balance is for encumbrances, which indicates that it has already been committed to liquidate contracts and purchase orders outstanding at year-end.

The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the general fund unreserved fund balance was $21,352,928, while the total fund balance was $22,381,604. As a measure of the General Fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents approximately 8.2% of the total General Fund expenditures and other financing uses, while total fund balance represents 8.6% of that same amount.

The General Fund begins each fiscal year with budgeted revenue and expenditure amounts that are equal. During the year, encumbrances unpaid at the end of the prior year are liquidated, increasing expenditures. Other budgetary adjustments are made to recognize additional sources and uses of funding or to accept donations. During the fiscal year ended June 30, 2009, the fund balance of the General Fund increased by $1,338,897. The reserve for encumbrances declined slightly from 2008 to 2009 while the unreserved fund balances grew as a result of revenues in excess of expenditures. Both the undesignated components of General Fund fund balance and the Reserve for Budget Stabilization grew during FY 2009.

Local taxes generated 67% of General Fund revenue, totaling approximately $173.5 million. A significant portion of the growth is attributable to real estate taxes, the City’s largest single source of revenue, which increased as a result of growth of approximately 3.04% in assessed values and moderate new construction.

41

C-41 Intergovernmental revenue is the second largest source of General Fund revenues, generating approximately $71.1 million in fiscal year 2009. The Commonwealth is the primary source of Intergovernmental revenue; providing revenue for social services programs, street maintenance funds, and law enforcement funding received under House Bill 599. Among these categories, in fiscal year 2009, the Commonwealth provided increased funding for social services and street maintenance but imposed funding reductions to the City that totaled $1.1 million.

The Capital Projects Fund balance decreased $14.7 million. Significant activities of the fund included capital outlay of approximately $44.3 million and proceeds from the issuance of debt of approximately $23.9 million. Transfers from the General Fund totaling $4.5 million provided cash funding to projects in the Capital Projects Fund.

GENERAL FUND BUDGETARY HIGHLIGHTS

Actual General Fund Revenues exceeded the original budgeted revenues by $612,977 but fell short of the final budgeted revenues by $3,249,165, or 1.2%. The General Fund revenue shortfall was caused by local taxes and intergovernmental revenues below budget. The intergovernmental revenues did not meet budget estimates with Social Service programs revenues 4.7% under the reimbursement-based revenue budget. In the local tax area, Sales Tax, Prepared Food and Beverage Tax, Cigarette tax and Telecommunications taxes all fell short of budget. The recession of 2008-2009 played a negative role in the performance of the City’s local taxes.

General Fund expenditures and transfers were greater than the original budget by $302,756 or 0.1% due to supplemental appropriations, but were less than the final amended budget by $5,128,383 or 1.9%. In an effort to continue to carefully manage the City’s expenditures, particularly in light of local revenues that would fail to achieve budget, spending at the departmental level was closely monitored during the fiscal year, and policies centered on maximizing salary and benefits savings during times of turnover and vacancies were continued. During fiscal year 2009, City Council amended the budget several times. These budget amendments or supplemental appropriation ordinances were primarily for the following purposes:

 To reappropriate funds to pay commitments in the form of encumbrances established prior to June 30, 2008 but not paid by that date. Encumbrances for General Fund purchase orders authorized and issued, but for which goods and services were not received or paid by June 30, 2008 totaled $1,318,997.

 To appropriate additional funds of $3,843,180 received under the Comprehensive Services Act.

CAPITAL ASSETS

As of June 30, 2009, the City’s capital assets for its governmental and business-type activities amounted to $546,913,133, net of accumulated depreciation. This investment includes land, historical treasures, construction in progress, land improvements, buildings and structures,

42

C-42 equipment and infrastructure. The total net increase (additions less retirements and depreciation) in the City’s capital assets for the current fiscal year was $29.4 million or 5.7%.

The following table shows summarized balances of major categories of capital assets as of June 30, 2009. The changes in each category of Capital Assets are presented in detail in note 6 to the Basic Financial Statements.

Capital Assets Net of Depreciation (In Millions)

Governmental Activities Business-Type Activities Total Balance Balance Balance Balance Balance Balance June 30, 2009 June 30, 2008 June 30, 2009 June 30, 2008 June 30, 2009 June 30, 2008

Land and Improvements$ 44.4 $ 43.5 $ 4.3 $ 4.2 $ 48.7 $ 47.7 Buildings and Improvements 232.3 190.1 59.5 61.0 291.8 251.1 Equipment 21.7 24.6 10.0 10.4 31.7 35.0 Infrastructure 120.4 119.6 - - 120.4 119.6 Construction in Progress 49.1 62.4 5.3 1.8 54.4 64.2 Total$ 467.9 $ 440.2 $ 79.1 $ 77.4 $ 547.0 $ 517.6

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

Renovations of the William Fleming High School continued with expenditures of $28.4 million. Other educational projects included expenditures of $2.0 million on roofing replacement and repairs for the Fairview, Forest Park and Hurt Park Schools.

Major governmental projects on facilities other than schools included continued construction of Fire/EMS Stations and the Police Academy Building resulting in current year expenditures of $2.2 million and $1.7 million, respectively. Additionally, the Roanoke River Flood Reduction project resulted in expenditures of $1.0 million. Storm drainage, traffic, streetscape, bridge maintenance and greenways projects, together, aggregated just over $1.8 million in expenditures. Library enhancements and renovations accounted for $1.7 million in capital expenditures.

Business-type capital asset activities included construction on the Market Parking Garage project, resulting in $3.5 million of current year capital additions.

Detailed information regarding capital assets is disclosed in Note 6 to the financial statements.

LONG-TERM DEBT

At June 30, 2009, the City’s long-term liabilities, excluding compensated absences and claims payable, totaled $313,997,070, comprised of $283,626,525 related to governmental activities, and $30,370,545 related to business-type activities. Total debt increased by $5,402,159 during the fiscal year. Changes in long-term debt during fiscal year 2009 resulted from payment of principal

43

C-43 on existing debt, and issuance of the General Obligation Series 2008A Bonds through the Virginia Resource Authority (VRA) to fund Police Academy construction, Library Master Plan, Fire-EMS construction, streetscape projects, bridge renovation, and Market Garage renovation.

Detailed information regarding these changes in long-term debt is disclosed in Notes 9 and 10 to the financial statements.

With its most recent rating, the City maintained ratings of AA, Aa3, and AA from Fitch Ratings, Moody’s Investor Service and Standard & Poor’s Ratings Services, respectively.

The Charter of the City of Roanoke and Code of Virginia limits the City’s net debt to 10% of the assessed valuation of real estate within the City limits. This limit applies to governmental fund supported-tax supported debt only, as some long-term liabilities of business-type funds will be met by revenues generated by those funds. The City considers long-term debt of its Parking Enterprise Fund to be self-supporting. Additionally, in accordance with its contractual agreement with the Western Virginia Water Authority, the City will receive funding from the Authority toward $24,255,948 of general obligation debt. The City’s tax-supported debt of $264,655,547 less the Debt Service Fund Balance of $1,161,895 designated for the repayment of debt service, is well below the legal debt limit of $656,429,496.

The School Board Component Unit relies upon the City to provide full faith and credit for any debt obligations incurred. Therefore, the City reports School Board Component Unit long-term liabilities, other than claims payable and compensated absences, as its own. In addition to bonded debt and capital lease obligations, the City’s long-term obligations include compensated absences and claims payable. Additional information concerning the City’s long-term liabilities is presented in notes 9 and 10 to the Basic Financial Statements.

Interest and fiscal charges for 2009 were $13.1 million, or 3.9% of total government funds expenditures.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES

The City’s MSA unemployment rate, not seasonally adjusted, was 7.8% in fiscal year 2009. Consistent with trends at state and national levels, this represents a significant increase over the prior year. For the quarter ended June 2009, Roanoke’s unemployment rate approximated the state average and was 1.9% lower than the national average. Employment in Roanoke is diverse with representation within our MSA of all census-defined industries. The industries providing the largest number of jobs in our region are health care and social assistance.

Roanoke’s estimated per capita income grew 3.4% from the fiscal year 2008 to 2009, very favorable growth despite the recession. While Roanoke’s income levels trail state and national averages, they compare quite well when adjusted for the cost of living. Fiscal year 2009 performance was indicative of a weak local economy; however, continued growth in real estate tax revenues demonstrate that the Roanoke economy is less volatile than other areas of the Commonwealth. The City’s overall General Fund revenue declined by 0.5%. Home values in

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C-44 Roanoke remained stable during fiscal year 2009 despite nationally declining values. The number of housing units increased slightly.

Important economic indicators for the City during the past year included rising unemployment and a decline in consumer spending that affected many areas of our local economy. While housing has remained much more stable for Roanoke than surrounding areas, challenges result from a lack of growth in this area. Building permits were significantly lower in fiscal year 2009 than in 2008, and this trend continues into the early months of fiscal year 2010. On a positive note, many construction projects are back underway in our downtown region indicating resumed access to credit and confidence in Roanoke’s future. Downtown housing has grown significantly in the past year and projects such as the Market Building and Center in the Square renovations will continue to encourage growth and vitality in the downtown area.

Roanoke’s strength as a retail and hospitality center is also evidenced by data related to new hires in the City as reported by the Virginia Employment Commission. New hires in the accommodation/food services, administrative and waste services, and retail trade areas far out- paced most other categories.

The General Fund adopted budget for fiscal year 2010 reflected a decline of 1.1% compared to the FY09 adopted budget. Local taxes comprise 67% of all budgeted fiscal year 2010 General Fund revenues, and the budget for this category declined approximately 1.6% compared to FY09. While growth is again expected from the real property tax, declines are anticipated in many other local taxes as a result of the recession experienced in the past year. Personal property tax, business and occupational license tax, cigarette tax, telecommunications tax and prepared food tax are among those local taxes which are likely to experience declines. At the time of budget adoption, overall funding from the Commonwealth was projected to increase. Growth was expected in the areas of street maintenance funding, jail per diems and E-911 wireless funding. However, revenue reductions were also anticipated in funding of Constitutional Offices by the State Compensation Board and in Social Services Funding. In addition, in November 2009, the Commonwealth released budget reductions that will reduce funding to the City by approximately $1.5 million. Local law enforcement funding through HB599 and funding from the Compensation Board were areas impacted by this announcement.

The City increased funding in fiscal year 2010 in several priority areas while reducing funding in many departments. Funding to the Schools increased $500,000 from the adopted level of fiscal year 2009. Despite a funding formula that would have decreased funding to the Schools following our local tax decline, City Council elected to provide additional funding to our Schools to avoid a reduction in the local level of support. Beyond this, the $500,000 increase maintained a pledge on the part of City Council to add funding every year to our Schools. Increased funding was also provided for employee medical insurance, repayment of debt service on capital projects and other areas with mandated increases. Decreased funding resulted from the reduction or elimination of a number of City services. In all, nearly seventy positions were eliminated, yet no employee layoffs took place as a result of the manner in which the City manages position reductions and utilized a hiring freeze in advance of these reductions. Services at our libraries, recreation centers, and loose leaf collection were impacted by these budget reductions. Also, employee retirement funding was reduced and the tuition reimbursement program suspended as part of the budget process. Budget reductions of over $7 million were made in balancing the 2010 budget.

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C-45 From July 1, 2009, through November 30, 2009, in fiscal year 2010, General Fund revenues have declined 1.9% compared to the same period in fiscal year 2009. Decreased local taxes and a change in revenue recognition for some charges for services revenues are the major causes of the decline. The sales tax has declined 17.7% as a result of a decline in typical retail spending and further exacerbated by unusually high sales activity in an electrical and construction area in FY09 that adversely impacts the comparison to year to date FY10. Other local tax revenues are also in decline. Examples include the transient occupancy and the telecommunications tax that are down 8.9% and 5.2%, respectively. Expenditures through November 30th of fiscal year 2010 have declined 1.0%, largely driven by decreased costs in the Public Works and Parks, Recreation, and Culture categories. In addition, several expenditure reduction strategies were implemented during the first quarter of fiscal year 2010. They include the deferring of planned expenditures for fleet replacement and technology capital, as well as a hiring freeze and across the board departmental expense reductions.

As we look to the future, challenges which are facing the City include the fact that there will be little growth in the real estate tax base in the upcoming year. While Roanoke is fortunate not to have experienced large declines as encountered in other areas of the State and nation, the lack of growth in this area significantly impacts City services and poses challenges to the budgeting process. Funding from the Commonwealth is also expected to decline in the upcoming year as the State continues to face significant budgetary challenges. Local taxes are expected to resume growth at some point in the future, however a recovery has not occurred as of almost mid-year in FY2010.

CONTACTING THE CITY’S FINANCIAL MANAGEMENT

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

46

C-46 Exhibit A

CITY OF ROANOKE, VIRGINIA STATEMENT OF NET ASSETS JUNE 30, 2009

Primary Government Governmental Business-Type Component Activities Activities Total Unit Assets Cash and Cash Equivalents$ 64,750,099 $ 5,207,546 $ 69,957,645 $ 6,306,114 Investments 24,505,658 630,326 25,135,984 - Interest and Dividends Receivable 209,772 - 209,772 - Due from Component Unit 146,624 - 146,624 - Due from Other Governments 37,279,798 1,419,471 38,699,269 12,065,275 Internal Balances (452,552) 452,552 - - Taxes and Accounts Receivable, Net 15,718,906 139,258 15,858,164 132,182 Note Receivable 2,600,020 - 2,600,020 - Inventory 56,447 375,027 431,474 - Other Assets 1,279,025 417,266 1,696,291 171,018 Capital Assets: Land, Construction in Progress, Right-of-Way, and Historical Treasures 111,708,051 9,528,024 121,236,075 - Other Capital Assets, Net 356,159,033 69,518,025 425,677,058 4,137,983 Capital Assets, Net 467,867,084 79,046,049 546,913,133 4,137,983 Total Assets$ 613,960,881 $ 87,687,495 $ 701,648,376 $ 22,812,572

Liabilities Accounts Payable and Accrued Expenses$ 16,038,137 $ 1,758,717 $ 17,796,854 $ 1,439,518 Accrued Interest Payable 4,672,783 570,854 5,243,637 - Due to Other Governments 2,877,407 4,949 2,882,356 - Due to Primary Government - - - 146,624 Unearned Revenue 3,411,198 - 3,411,198 701,521 Pollution Remediation 326,222 - 326,222 - Other Liabilities 54,730 687,057 741,787 - Long-term Liabilities Due Within One Year 31,340,133 1,677,651 33,017,784 7,082,196 Long-term Liabilities Due in More Than One Year, Net 275,009,956 28,707,798 303,717,754 4,359,260 Total Liabilities$ 333,730,566 $ 33,407,026 $ 367,137,592 $ 13,729,119

Net Assets Invested in Capital Assets, Net of Related Debt$ 238,461,970 $ 52,067,081 $ 290,529,051 $ 4,137,983 Restricted for: E911 Wireless Capital Project 70,914 - 70,914 - Unrestricted 41,697,431 2,213,388 43,910,819 4,945,470 Total Net Assets$ 280,230,315 $ 54,280,469 $ 334,510,784 $ 9,083,453

See Notes to Basic Financial Statements.

47

C-47 Exhibit B

CITY OF ROANOKE, VIRGINIA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2009

Program Revenues Operating Charges for Grants and Capital Grants and Functions/Programs Expenses Services Contributions Contributions Primary Government: Governmental Activities: General Government$ 13,859,060 $ 4,511,088 $ 1,125,371 $ - Judicial Administration 9,167,289 4,823,817 6,512,601 - Public Safety 66,448,271 6,453,285 14,239,237 - Public Works 31,174,272 386,445 11,400,984 265,005 Health and Welfare 45,756,887 146,338 34,842,280 - Parks, Recreation and Cultural 12,018,560 308,446 197,736 - Community Development 9,752,877 161,228 2,668,437 - Education 66,604,559 - - - Economic Development 1,535,584 4,974 - - Other 15,329 - - - Interest and Fiscal Charges 13,124,928 - - - Total Governmental Activities 269,457,616 16,795,621 70,986,646 265,005 Business-Type Activities: Transit Company 9,545,470 2,097,420 4,393,415 1,115,208 Civic Facilities 7,138,833 4,312,359 - - Parking 2,806,984 2,804,755 - - Market Building 649,874 224,637 - - Total Business-Type Activities 20,141,161 9,439,171 4,393,415 1,115,208 Total Primary Government$ 289,598,777 $ 26,234,792 $ 75,380,061 $ 1,380,213 Component Unit: School Board of the City of Roanoke$ 164,790,502 $ 5,391,504 $ 40,880,659 $ -

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

48 See Notes to Basic Financial Statements. C-48 Exhibit B

Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business-TypeComponent Activities Activities Total Unit

$ ( 8,222,601) $ - $ (8,222,601) $ - 2,169,129 - 2,169,129 - (45,755,749) - (45,755,749) - (19,121,838) - (19,121,838) - (10,768,269) - (10,768,269) - (11,512,378) - (11,512,378) - (6,923,212) - (6,923,212) - (66,604,559) - (66,604,559) - (1,530,610) - (1,530,610) - (15,329) - (15,329) - (13,124,928) - (13,124,928) - (181,410,344) - (181,410,344) -

- (1,939,427) (1,939,427) - - (2,826,474) (2,826,474) - - (2,229) (2,229) - - (425,237) (425,237) - - (5,193,367) (5,193,367) - $ (181,410,344) $ (5,193,367) $ (186,603,711) $ -

$ (118,518,339) $ - $ - $ (118,518,339)

$ 101,626,861 $ - $ 101,626,861 $ - 20,448,423 - 20,448,423 - 12,479,698 - 12,479,698 - 9,735,948 - 9,735,948 - 11,496,914 - 11,496,914 - 8,075,992 - 8,075,992 - 2,644,599 - 2,644,599 - 2,754,683 - 2,754,683 - 7,145,256 - 7,145,256 - 1,937,500 - 1,937,500 - 3,492,590 - 3,492,590 - 2,578,700 - 2,578,700 - - - - 58,370,478 - - - 62,506,419 8,930,898 - 8,930,898 - 8,379 - 8,379 25,473 1,618,541 87,552 1,706,093 86,320 - 117,823 117,823 65,477 (4,493,091) 4,493,091 - - $ 190,481,891 $ 4,698,466 $ 195,180,357 $ 121,054,167 9,071,547 (494,901) 8,576,646 2,535,828 271,158,768 54,775,370 325,934,138 6,547,625 $ 280,230,315 $ 54,280,469 $ 334,510,784 $ 9,083,453

49 C-49 Exhibit C

CITY OF ROANOKE, VIRGINIA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2009

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

Cash and Cash Equivalents$ 6,952,981 $ 1,162,694 $ 2,864,284 $ 42,432,640 $ 53,412,599 Investments 4,214,103 - - 10,302,671 14,516,774 Interest and Dividends Receivable 17,991 - 105,244 43,937 167,172 Due from Component Unit 192,488 - - - 192,488 Due from Other Governments 11,169,814 - 1,853,631 - 13,023,445 Due from Other Funds 57,240 1,092 17,911 1,300,000 1,376,243 Taxes Receivable 16,189,635 - - - 16,189,635 Accounts Receivable 3,917,269 - 349,791 263,558 4,530,618 Allowance for Uncollectible Receivables (5,024,314) - - - (5,024,314) Deposits - - - 46,152 46,152 Note Receivable - - 2,600,020 - 2,600,020 Total Assets $ 37,687,207 $ 1,163,786 $ 7,790,881 $ 54,388,958 $ 101,030,832

LIABILITIES

Accounts Payable and Accrued Expenditures$ 9,661,836 $ 1,891 $ 622,591 $ 4,820,150 $ 15,106,468 Due to Other Governments 105,771 - 2,771,636 - 2,877,407 Due to Other Funds 1,893,931 - 1,300,198 27,186 3,221,315 Pollution Remediation Liability - - - 326,222 326,222 Deferred Revenue 3,644,065 - 3,096,456 - 6,740,521 Total Liabilities$ 15,305,603 $ 1,891 $ 7,790,881 $ 5,173,558 $ 28,271,933

FUND BALANCES

Reserved for: Encumbrances$ 1,028,676 $ - $ - $ 17,529,842 $ 18,558,518 Unreserved: Designated for Debt Service - 1,161,895 - - 1,161,895 Designated for Future Years' Expenditures - - - 27,725,952 27,725,952 Designated for Self-Insured Claims 250,000 - - - 250,000 Designated for Economic and Community Development Reserve - - - 3,959,606 3,959,606 Designated for Budget Stabilization Reserve 19,155,608 - - - 19,155,608 Undesignated 1,947,320 - - - 1,947,320 Total Fund Balances 22,381,604 1,161,895 - 49,215,400 72,758,899 Total Liabilities and Fund Balances$ 37,687,207 $ 1,163,786 $ 7,790,881 $ 54,388,958 $ 101,030,832

50 See Notes to Basic Financial Statements.

C-50 Exhibit D

CITY OF ROANOKE, VIRGINIA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2009

Total Fund Balances - Governmental Funds$ 72,758,899

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

Capital assets used in governmental activities are not considered current financial resources and therefore are not reported as assets in the governmental funds. Governmental capital assets, at cost 636,298,488 Less: accumulated depreciation (189,587,121) 446,711,367

Other assets used in governmental activities are not considered current financial resources and therefore are not reported in the governmental funds. Bond issuance costs and deferred amounts on refunding 7,400,532 Less: accumulated amortization (2,797,357) Receivable from Western Virginia Water Authority 24,255,948 28,859,123

Property taxes receivable which are expected to be collected this year, but are not available soon enough to pay for the current period's expenditures, and therefore are deferred in the governmental funds. 3,338,661

Long-term liabilities, including bonds payable with related accrued interest, are not due and payable in the current period and therefore are not reported as liabilities in the governmental funds. Governmental bonds payable (275,851,490) Capital lease obligation (4,861,680) Bond premium (8,130,518) Accumulated amortization of bond premium 1,906,311 Compensated absences (6,484,594) Accrued interest payable (4,655,450) (298,077,421)

Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets and liabilities of the internal service funds are included with governmental activities in the Statement of Net Assets. 26,639,686

Total Net Assets of Governmental Activities$ 280,230,315

See Notes to Basic Financial Statements. 51

C-51 Exhibit E

CITY OF ROANOKE, VIRGINIA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Debt Special Capital Total General Service Revenue Projects Governmental Fund Fund Fund Fund Funds REVENUES Local Taxes$ 173,518,576 $ - $ - $ - $ 173,518,576 Permits, Fees and Licenses 1,053,443 - - - 1,053,443 Fines and Forfeitures 1,558,517 - - - 1,558,517 Rental Income 840,399 - - 4,974 845,373 Investment Income 96,420 26,091 48,819 1,040,389 1,211,719 Intergovernmental 71,119,903 12,341,713 9,585,850 16,850 93,064,316 Charges for Services 11,616,042 - - - 11,616,042 Miscellaneous 670,344 - - 866,360 1,536,704 Total Revenues 260,473,644 12,367,804 9,634,669 1,928,573 284,404,690 EXPENDITURES Current Operating: General Government 13,019,273 - 59,818 - 13,079,091 Judicial Administration 8,489,493 - 246,170 - 8,735,663 Public Safety 60,731,173 - 3,077,468 - 63,808,641 Public Works 24,841,431 - - - 24,841,431 Health and Welfare 42,757,293 - 2,371,240 - 45,128,533 Parks, Recreation and Cultural 10,723,453 - 30,367 - 10,753,820 Community Development 6,881,431 - 2,678,087 - 9,559,518 Education 62,506,419 - - 350,222 62,856,641 Other 15,329 - - - 15,329 Debt Service: Principal Retirement - 22,157,734 - - 22,157,734 Interest and Paying Agent Charges - 12,286,166 - - 12,286,166 Bond Issuance Cost - 79,082 - - 79,082 Capital Outlays - - - 44,299,810 44,299,810 Total Expenditures 229,965,295 34,522,982 8,463,150 44,650,032 317,601,459 Excess (Deficiency) of Revenues Over (Under) Expenditures 30,508,349 (22,155,178) 1,171,519 (42,721,459) (33,196,769) OTHER FINANCING SOURCES (USES) Issuance of Long-Term Debt - - - 23,912,613 23,912,613 Premium on Sale of Bonds - 706,843 - - 706,843 Transfers In 33,333 22,028,890 700,404 4,451,494 27,214,121 Transfers Out (29,202,785) (562,442) (1,871,923) (383,232) (32,020,382) Total Other Financing Sources (Uses) (29,169,452) 22,173,291 (1,171,519) 27,980,875 19,813,195 Net Change in Fund Balances 1,338,897 18,113 - (14,740,584) (13,383,574) Fund Balances--Beginning of Year 21,042,707 1,143,782 - 63,955,984 86,142,473 Fund Balances--End of Year$ 22,381,604 $ 1,161,895 $ - $ 49,215,400 $ 72,758,899

52 See Notes to Basic Financial Statements.

C-52 Exhibit F

CITY OF ROANOKE, VIRGINIA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2009

Total Net Change in Fund Balances - Governmental Funds$ (13,383,574)

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

Governmental Funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate the cost of those assets over the life of the asset. Expenditures for capital assets 40,930,978 Donation of capital assets (20,000) Less current year depreciation expense (11,143,933) 29,767,045

Revenues in the Statement of Activites that do not provide current financial resources are not reported as revenues in the Governmental Funds. Net change in deferred revenue related to taxes 550,451 Net principal reimbursed by Western Virginia Water Authority (2,340,590) (1,790,139)

Bond and other long term debt proceeds provide current financial resources to Governmental Funds, but issuing debt increases long-term liabilities in the Statement of Net Assets. Repayment of bond principal is an expenditure in the Governmental Funds, but the repayment reduces long-term liabilities in the Statement of Net Assets. Bond and other long term debt proceeds (23,912,613) Bond premium (706,843) Amortization of current year bond premium 425,387 Bond costs and deferred amounts 79,082 Amortization of current year bond costs and deferred amounts (502,122) Principal payments 22,157,734 (2,459,375)

Certain expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds. Change in long-term compensated absences (83,244) Change in accrued interest payable (244,981) (328,225)

Internal service funds are used by management to charge the costs of certain services to individual funds. The change in net assets of the internal service funds is reported with Governmental Activities. (2,734,185)

Total Change in Net Assets of Governmental Activities$ 9,071,547

See Notes to Basic Financial Statements. 53

C-53 Exhibit G

CITY OF ROANOKE, VIRGINIA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2009

Enterprise Funds

Transit Civic Assets Company Facilities Parking Current Assets: Cash and Cash Equivalents$ 587,203 $ 676,629 $ 3,940,469 Investments - - 580,781 Interest and Dividends Receivable - - 2,477 Due from Other Governments 1,419,471 - - Due from Other Funds - 231,788 20,000 Accounts Receivable 40,933 74,925 4,173 Inventory 375,027 - - Other Assets 133,628 98,367 176,125 Total Current Assets 2,556,262 1,081,709 4,724,025 Capital Assets: Land and Land Improvements 603,302 1,215,005 2,466,514 Buildings and Structures 10,057,981 37,162,793 39,670,041 Equipment and Other Capital Assets 15,943,581 2,425,921 104,704 Construction in Progress - 492,775 4,672,600 Less Accumulated Depreciation (12,134,370) (13,732,724) (12,114,583) Capital Assets, Net 14,470,494 27,563,770 34,799,276 Total Assets$ 17,026,756 $ 28,645,479 $ 39,523,301 Liabilities Current Liabilities: Accounts Payable and Accrued Expenses$ 656,240 $ 255,336 $ 817,917 Accrued Interest Payable - 242,781 328,073 Due to Other Governments - - 4,949 Due to Other Funds - 955 7,514 Other Liabilities 70,050 554,379 62,628 Long-Term Liabilities Due Within One Year - 730,544 947,107 Total Current Liabilities 726,290 1,783,995 2,168,188 Long-Term Liabilities: Compensated Absences Payable - - 14,904 Claims Payable - - - General Obligation Bonds Payable, Net - 14,521,806 15,432,161 Capital Lease Liability - 416,578 - Less Current Maturities - (730,544) (947,107) Total Long-Term Liabilities - 14,207,840 14,499,958 Total Liabilities$ 726,290 $ 15,991,835 $ 16,668,146 Net Assets Invested in Capital Assets, Net of Related Debt$ 14,470,494 $ 12,680,814 $ 22,703,264 Restricted for: E911 Wireless Capital Project - - - Unrestricted 1,829,972 (27,170) 151,891 Total Net Assets$ 16,300,466 $ 12,653,644 $ 22,855,155

54 See Notes to Basic Financial Statements.

C-54 Exhibit G

Enterprise Funds Internal Market Service Building Total Funds

$ 3,245 $ 5,207,546 $ 11,337,500 49,545 630,326 9,988,884 211 2,688 42,600 - 1,419,471 405 235,691 487,479 1,399,107 19,227 139,258 22,967 - 375,027 56,447 - 408,120 1,187,009 307,919 8,669,915 24,034,919

50,000 4,334,821 - 2,315,891 89,206,706 - 66,552 18,540,758 44,342,965 96,274 5,261,649 3,485,303 (316,208) (38,297,885) (26,672,551) 2,212,509 79,046,049 21,155,717 $ 2,520,428 $ 87,715,964 $ 45,190,636

$ 29,224 $ 1,758,717 $ 931,669 - 570,854 17,333 - 4,949 - 20,000 28,469 53,248 - 687,057 8,069 - 1,677,651 3,558,425 49,224 4,727,697 4,568,744

- 14,904 316,004 - - 15,922,966 - 29,953,967 1,049,343 - 416,578 252,318 - (1,677,651) (3,558,425) - 28,707,798 13,982,206 $ 49,224 $ 33,435,495 $ 18,550,950

$ 2,212,509 $ 52,067,081 $ 20,006,822

- - 70,914 258,695 2,213,388 6,561,950 $ 2,471,204 $ 54,280,469 $ 26,639,686

55

C-55 Exhibit H

CITY OF ROANOKE, VIRGINIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Enterprise Funds

Transit Civic Company Facilities Parking

Operating Revenues Charges for Services$ 2,097,420 $ 4,312,359 $ 2,804,755 Other Revenue 102,226 15,509 - Total Operating Revenues 2,199,646 4,327,868 2,804,755 Operating Expenses Personal Services 4,306,118 1,329,630 66,661 Other Services and Charges 1,950,216 3,007,079 961,485 Materials and Supplies 1,502,797 1,250,816 463,353 Depreciation 1,790,331 915,111 818,802 Total Operating Expenses 9,549,462 6,502,636 2,310,301 Operating Income (Loss) (7,349,816) (2,174,768) 494,454 Nonoperating Revenues (Expenses) Gain (Loss) on Disposal of Assets 3,992 - - Operating Grants 4,393,415 - - Investment Income 13,598 13,654 57,128 Interest Expense - (636,197) (496,683) Net Nonoperating Revenues (Expenses) 4,411,005 (622,543) (439,555) Income (Loss) Before Transfers and Contributions (2,938,811) (2,797,311) 54,899 Transfers and Contributions Capital Contributions 1,115,208 - - Transfers In 1,471,548 2,678,100 14,466 Transfers Out - (65,244) (779) Net Transfers and Contributions 2,586,756 2,612,856 13,687 Change in Net Assets (352,055) (184,455) 68,586 Net Assets - Beginning of Year 16,652,521 12,838,099 22,786,569 Net Assets - End of Year$ 16,300,466 $ 12,653,644 $ 22,855,155

56 See Notes to Basic Financial Statements.

C-56 Exhibit H

Enterprise Funds Internal Market Service Building Total Funds

$ 224,637 $ 9,439,171 $ 26,925,421 88 117,823 386,513 224,725 9,556,994 27,311,934

- 5,702,409 4,577,242 151,096 6,069,876 17,096,608 397,891 3,614,857 4,021,020 100,887 3,625,131 4,911,539 649,874 19,012,273 30,606,409 (425,149) (9,455,279) (3,294,475)

- 3,992 (51,080) - 4,393,415 - 3,172 87,552 389,859 - (1,132,880) (91,659) 3,172 3,352,079 247,120

(421,977) (6,103,200) (3,047,355)

- 1,115,208 - 395,000 4,559,114 483,942 - (66,023) (170,772) 395,000 5,608,299 313,170 (26,977) (494,901) (2,734,185) 2,498,181 54,775,370 29,373,871 $ 2,471,204 $ 54,280,469 $ 26,639,686

57

C-57 Exhibit I CITY OF ROANOKE, VIRGINIA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Enterprise Funds

Transit Civic ` Company Facilities Parking Cash Flow From Operating Activities Cash Received from Customers$ 2,097,420 $ 5,251,543 $ 2,781,146 Cash Payments to Suppliers for Goods and Services (3,324,313) (4,320,916) (942,187) Cash Payments to Other Funds for Interfund Services - (306,042) (143,448) Cash Payments to Employees (4,259,147) (1,407,057) (65,773) Cash Payments for Claims - - - Cash Received for Other Operating Revenues 113,290 15,509 - Net Cash Provided (Used) by Operating Activities (5,372,750) (766,963) 1,629,738 Cash Flow From Noncapital Financing Activities: Operating Grant Received 4,238,228 - - Transfers In 1,471,548 2,678,100 14,466 Transfers Out - (65,244) (779) Net Cash Provided by Noncapital Financing Activities 5,709,776 2,612,856 13,687 Cash Flow From Capital and Related Financing Activities: Acquisition and Construction of Capital Assets (1,200,954) (119,878) (3,816,024) Capital Grant Receipts 865,977 - - Proceeds from Sale of Capital Assets 3,992 - - Proceeds from Issuance of Bonds - - 5,040,000 Principal Paid on Bonds and Capital Lease Obligation - (681,287) (890,610) Interest Paid on Bonds and Capital Leases - (658,002) (361,706) Net Cash Used by Capital and Related Financing Activities (330,985) (1,459,167) (28,340) Cash Flow From Investing Activities: Interest Received 13,598 13,282 59,730 Purchase of Investments - - (111,713) Sale of Investments - - - Cash Provided (Used) by Investing Activities 13,598 13,282 (51,983) Net Increase (Decrease) in Cash and Cash Equivalents 19,639 400,008 1,563,102 Cash and Cash Equivalents at July 1 567,564 276,621 2,377,367 Cash and Cash Equivalents at June 30$ 587,203 $ 676,629 $ 3,940,469

Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss)$ (7,349,816) $ (2,174,768) $ 494,454 Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation 1,790,331 915,111 818,802 Changes in Assets and Liabilities: Decrease in Due From Other Governments - - - (Increase) Decrease in Due From Other Funds - 435,341 (22,599) (Increase) Decrease in Accounts Receivable 11,065 (4,263) (1,010) Decrease in Inventory 44,049 - - (Increase) Decrease in Other Assets 1,670 - - Increase (Decrease) in Accounts Payable and Accrued Expenses 116,271 (318,773) 454,748 Decrease in Due to Other Governments - - (647) Decrease in Due to Other Funds - (50,290) (115,545) Increase (Decrease) in Other Liabilities (33,291) 508,106 - Increase (Decrease) in Compensated Absences Payable 46,971 (77,427) 1,535 Increase in Claims Payable - - - Total Adjustments 1,977,066 1,407,805 1,135,284 Net Cash Provided (Used) by Operating Activities$ (5,372,750) $ (766,963) $ 1,629,738

Noncash Capital and Financing Activities: Parking Fund noncash activities in fiscal year 2009 consisted of capital asset acquisitions of $752,782 recorded as accounts payable at June 30, 2009. Market Building Fund noncash activities in fiscal year 2009 consisted of capital asset acquisitions of $5,677 recorded as accounts payable at June 30, 2009. Internal Service Funds noncash activities in fiscal year 2009 consisted of capital asset acquisitions through a capital lease obligation of $6,439

58 See Notes to Basic Financial Statements.

C-58 Exhibit I

Enterprise Funds Internal Market Service Building Total Funds

$ 146,098 $ 10,276,207 $ 26,120,930 (529,892) (9,117,308) (7,511,442) (29,474) (478,964) (580,787) - (5,731,977) (4,544,831) - - (11,424,925) 88 128,887 290,900 (413,180) (4,923,155) 2,349,845

- 4,238,228 - 235,000 4,399,114 483,942 - (66,023) (170,772) 235,000 8,571,319 313,170

(169,796) (5,306,652) (2,864,200) - 865,977 - - 3,992 - - 5,040,000 - - (1,571,897) (566,040) - (1,019,708) (115,428) (169,796) (1,988,288) (3,545,668)

3,986 90,596 407,669 - (111,713) - 30,721 30,721 (5,544,633) 34,707 9,604 (5,136,964) (313,269) 1,669,480 (6,019,617) 316,514 3,538,066 17,357,117 $ 3,245 $ 5,207,546 $ 11,337,500

$ (425,149) $ (9,455,279) $ (3,294,475)

100,887 3,625,131 4,911,539

- - 36,524 (76,509) 336,233 (832,763) (2,030) 3,762 (8,252) - 44,049 54,387 - 1,670 (1,067,721) (14,691) 237,555 (91,240) - (647) - 4,312 (161,523) (440,293) - 474,815 - - (28,921) 14,156 - - 3,067,983 11,969 4,532,124 5,644,320 $ (413,180) $ (4,923,155) $ 2,349,845

59

C-59 Exhibit J CITY OF ROANOKE, VIRGINIA STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2009

Pension OPEB Trust Trust Agency Fund Fund Funds ASSETS Cash and Cash Equivalents$ 854,136 $ 2,978,388 Investments - - 2,389,185

Receivables: Employer Contributions (Includes Due From Other Funds of $40,202) 88,530 - - Accrued Interest - - 10,189 Investment Income 56,119 - - Due from Other Governments - - 4,949 Total Receivables 144,649 - 15,138

Investments Held by Trustee, at Fair Value: Cash Equivalents 1,340,736 792,813 - Cash Collateral on Loaned Securities 24,715,735 - - Convertible Bond Mutual Funds 12,245,049 - - Common Stocks 32,750,412 - - Domestic Mutual Funds 155,814,931 - - International Mutual Funds 45,913,776 - - Real Estate Mutual Funds 17,586,900 - - Total Investments 290,367,539 792,813 -

Total Assets $ 291,366,324 $ 792,813 $ 5,382,711

LIABILITIES Accounts Payable and Accrued Expenses$ 222,348 $ - $ - Liability for Collateral on Loaned Securities 24,715,735 - - Due to Other Governments - - 5,382,711 Total Liabilities $ 24,938,083 $ - $ 5,382,711

NET ASSETS Held in Trust for Pension and Other Postemployment Benefits$ 266,428,241 $ 792,813 $ -

60 See Notes to Basic Financial Statements.

C-60 Exhibit K CITY OF ROANOKE, VIRGINIA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Pension OPEB Trust Trust Fund Fund

Additions/(Reductions) Contributions from Employer $ 11,842,752 $ 1,747,000 Investment Income (Loss) Net Appreciation (Depreciation) in Fair Value of Investments (69,643,466) 7,561 Interest and Dividends 7,014,273 91 Other 13,464 Total Investment Income (Loss) (62,615,729) 7,652 Less Investment Expenses (768,723) (930) Net Investment Income (Loss) (63,384,452) 6,722 Securities Lending Income Securities Lending Income 454,338 - Less Securities Lending Expenses (269,026) - Net Securities Lending Income 185,312 - Total Additions/(Reductions) (51,356,388) 1,753,722

Deductions Benefit Payments 26,266,843 1,323,000 Administrative Expenses 331,943 - Total Deductions 26,598,786 1,323,000

Net Increase (Decrease) in Plan Net Assets (77,955,174) 430,722 Net Assets Held in Trust for Pension and Other Postemployment Benefits - July 1 344,383,415 362,091 Net Assets Held in Trust for Pension and Other Postemployment Benefits - June 30$ 266,428,241 $ 792,813

See Notes to Basic Financial Statements. 61 C-61 THIS PAGE INTENTIONALLY BLANK

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C-62 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

(1) Summary of Significant Accounting Policies

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

A. Reporting Entity

The City of Roanoke is a municipal corporation organized under the laws of the Commonwealth of Virginia (the Commonwealth) and governed by seven elected City Council members. As required by GAAP, these financial statements present the City and its blended component unit, for which the City is considered to be financially accountable. A blended component unit, although a legally separate entity, is, in substance, part of the municipality's operations, so data from this unit is combined with data of the primary government. A discretely presented component unit is reported in a separate column in the government-wide financial statements.

Blended Component Unit

The Greater Roanoke Transit Company (Transit Company) is a public service bus company organized to provide mass transportation services to the Roanoke Valley. The Transit Company is reported as a blended component unit because it is owned by the City with City Council acting as its Board of Directors. The Transit Company's operations are reported as an Enterprise Fund, a Proprietary Fund Type.

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

Discretely Presented Component Unit

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

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

B. Financial Statement Presentation

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

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C-63 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Management’s Discussion and Analysis (MD&A) – MD&A introduces the basic financial statements and provides an analytical overview of the government’s financial activities in a narrative format. An analysis of the government’s overall financial position and results of operations is included to assist users in assessing whether financial position has improved or deteriorated as a result of the year’s activities.

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

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

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

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

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

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

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

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

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C-64 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

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

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

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

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

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

Transit Company – Provides bus service to the City and surrounding areas.

Civic Facilities Fund – Accounts for the operation of the municipal civic center. As of January 1, 2009 the City entered into a contract whereby Global Spectrum began managing the Civic Center on the City’s behalf.

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

Market Building Fund – Accounts for the operation of the Downtown Market Building which houses several retail merchants and restaurants.

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

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

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

Risk Management Fund – Finances property, workers’ compensation, employee medical, auto, and general liability insurance coverage. 65

C-65 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

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

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

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

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

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

C. Basis of Accounting

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

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

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

66

C-66 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

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

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

D. Encumbrances

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

E. Deposits and Investments

Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Cash from all funds is consolidated in one City account. Short-term investments may consist of certificates of deposit, repurchase agreements, commercial paper, investments in the Local Government Investment Pool (LGIP), and the Commonwealth Cash Reserve Fund. Cash balances, other than Transit Company balances, School Board balances, Roanoke Civic Center balances, OPEB Trust Fund balances and a portion of the Pension Trust Fund balances are deposited in a pooled account, which in turn purchases short-term investments. Interest income is allocated to the participating funds based on each fund's average daily cash balance. Cash and cash equivalents are recorded at cost, which approximates market value.

Investments are recorded at fair value. Mutual fund and common stock fair values are based on quotations obtained from national security exchanges. The fair value of underlying assets held in the Pension Trust Fund’s real estate fund is based upon independent appraisal conducted periodically throughout the year, but not less than annually. Investments of the Capital Projects Fund consist of government securities and certificates of deposits with original maturities greater then three months. Investments of the Pension Trust Fund consist of overnight investments in bank common trust funds, government securities, certificates of deposits with original maturities greater then three months, corporate bonds, stocks, and mutual funds.

F. Interfund Receivables and Payables

Outstanding balances between funds are reported as due to/from other funds. Any residual balances outstanding between the governmental and business-type activities are reported in the 67

C-67 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

government-wide statements as internal balances. Outstanding balances between the City and its component unit are reported as due to/from component unit or due to/from primary government.

G. Allowance for Uncollectible Taxes and Accounts Receivable

The City calculates its allowance for uncollectible receivables based on historical collection data and specific account analyses. At June 30, 2009, the allowance for General Fund uncollectible taxes and accounts receivable was $5,024,314, or 24.8% of the outstanding balance of taxes receivable and accounts receivable.

H. Property Taxes

Property taxes are assessed annually as of January 1. Real estate tax is payable in two equal installments, each due on or before October 5 and April 5. On April 6, real property taxes become an enforceable lien against the property. The annual assessment for real estate is based on 100% of the assessed fair market value. The tax rates are established annually, without limitation, by City Council.

Personal property tax is due on or before May 31 during the year of assessment. The tax rate for real estate was $1.19 per $100 of assessed value for the year. The personal property tax rate was $3.45 per $100 of assessed value for the year. In 1998, the Commonwealth enacted the Personal Property Tax Relief Act whereby the Commonwealth funds localities for a portion of personal property taxes billed to property owners. In 2006, the Commonwealth amended this legislation to provide for a flat amount of reimbursement to localities, thereby decreasing the percent of tax relief provided. The Commonwealth’s share of the tax was 58.18% for tax year 2009. A penalty of 10% of unpaid real estate and personal property tax is due for late payment. Interest on unpaid taxes is 10% in the first year. Thereafter, the rate is calculated at the Internal Revenue Service (IRS) rate. At June 30, 2009, the IRS rate was 6%.

The City bills and collects taxes and recognizes revenue upon levy for government-wide purposes. For the fund financial statements, the City recognizes revenue to the extent that it results in current receivables.

I. Inventory

Inventory for proprietary funds is valued at cost, determined using the moving weighted average method. Inventory consists of materials and supplies held for consumption and is adjusted to actual based on an annual physical count. The cost is recorded as an expense when individual items of inventory are used.

J. Pension Trust Fund

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

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C-68 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

K. Other Postemployment Benefits Trust Fund

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

L. Capital Assets

Capital assets acquired or constructed by the City with a value in excess of $5,000 are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets belonging to proprietary funds are also reported in the applicable fund financial statements. Capital assets are recorded at historical cost or estimated historical cost. Gifts or contributions of capital assets are recorded at fair value when received. Depreciation is recorded on a straight-line basis over the estimated useful life of each capital asset. No depreciation expense is recorded for land, construction-in-progress, or items designated as historical treasures. The estimated useful lives for capital assets are as follows:

Land Improvements 15-40 years Buildings and Structures 5-55 years Equipment 2-20 years Infrastructure 15-55 years

Pursuant to the City Charter, all real estate, including buildings and improvements thereon, financed by debt issued by the City for the purpose of public education are the property of the City.

M. Compensated Absences Payable

It is the City's policy to permit employees to accumulate earned but unused compensated absences. For government-wide reporting, a liability is recorded for compensated absences when services are rendered and employees have earned the right to receive compensation for such services.

Liabilities for compensated absences are not liquidated until leave is actually taken by employees or leave balances are paid upon termination. Accordingly, in the fund financial statements for governmental funds, no expenditure is reported for compensated absences until they are paid. Current and non-current portions of compensated absences totaling $6,484,594 are recorded for governmental activities in the government-wide statements and represent a reconciling item between the government-wide and fund presentations.

Compensated absences earned by employees and charged to proprietary funds are expensed and accrued as a liability of the appropriate fund when incurred. At June 30, 2009, the liabilities for compensated absences of the enterprise and internal service funds were $14,904 and $316,004 respectively. 69

C-69 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

N. Pollution Remediation

During fiscal year 2009, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, which addresses the requirements for reporting liabilities related to cleaning up pollution and/or contamination. The City evaluated the impact of GASB Statement No. 49 on all projects and facilities and recorded a $326,222 liability as of June 30, 2009.

(2) Deposits and Investments

Governmental Funds

The City maintains a consolidated account that is available for use by all funds, including fiduciary funds. Each fund’s portion of this account is presented in the basic financial statements as “Cash and Cash Equivalents”. The School Board component unit maintains separate cash and investment accounts consisting of $7,323,962. Investments for the Transit Company and the School Board are presented in conjunction with City investments. The Transit Company, a blended component unit, maintains separate cash and investment accounts consisting of cash and overnight repurchase agreements collateralized by government securities. The City acts as one of the fiscal agents for the Hotel Roanoke Conference Center Commission (HRCCC) and holds total cash and investments of $5,367,573 on its behalf. Investments and related disclosures for the City of Roanoke Pension Plan and the OPEB Trust Fund, which are fiduciary funds, are presented separately.

Investment Policy The City, School Board, and Transit Company adhere to a City Council adopted investment policy (Policy). The Policy, in accordance with the Code of Virginia and other applicable laws and regulations, articulates the City’s investment objectives and authorized investments and serves as a guide for asset allocation development, cash equivalent development, fixed income development and investment performance measurement. Preservation of principal is the City’s primary responsibility in making investment decisions and these decisions are made under the assumption that all investments will be held to maturity unless a specific case warrants otherwise.

The City’s policy regarding certain types of investments is as follows:

Commercial Paper: Shall be rated by the Moody's Investors Service, Inc. (Moody’s) of prime 1 and by Standard & Poor's, Inc. (S & P), within it rating of A-1. Corporate and Municipal Bonds: High quality corporate notes with a rating of at least Aa by Moody's and a rating of at least AA by S & P. Banker’s Acceptances: Must have a rating of B/C or better in the Keefe, Bruyette & Woods, Inc. ratings. Savings Accounts, Certificate of Deposits, Demand and Time Deposits: Shall not exceed the maximum Security for Public Deposits Act. Obligations of the Commonwealth: Those unconditionally guaranteed as to payment by the Commonwealth of Virginia. Obligations of the United States, etc.: Those unconditionally guaranteed as to payment by the United States. Repurchase Agreements: Collateralized by United States Treasury agency securities, shall at all times, be no less that 110% of the value of term and open repurchase agreements and 102% of the value of overnight repurchase agreements.

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C-70 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Money Market Funds: One or more open-end investment funds, provided that the funds are registered under the Securities Act of the Commonwealth of Virginia or the federal investment of such funds is restricted in investments otherwise permitted by law as set forth in Chapter 18 of Title 2.1, Code of Virginia (1950), as amended.

Investments as of June 30, 2009 consisted of the following:

Total Primary School Board Fiduciary Government Component Unit Funds Investment in pooled funds, including Virginia LGIP $ 17,905,323 $ 3,998,296 $ 1,504,241 Certificates of Deposit 33,811,321 - 3,213,779 Money Market Accounts 3,155,652 - - Repurchase Agreements 519,995 - 10,850 Mutual Funds 34,240,297 - - Federal Agency Bonds/Notes 6,407,992 - 609,083 $ 96,040,580 $ 3,998,296 $ 5,337,953

Credit risk, custodial credit risk, concentration of credit risk, and interest rate risk are addressed in the following paragraphs.

Credit Risk. State law (Code of Virginia, Chapter 3, Title 26) limits local governments and other public bodies to investing in obligations of the United States or agencies thereof, obligations of the Commonwealth of Virginia or political subdivisions thereof, obligations of the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank, the African Development Bank, “prime quality” commercial paper and certain corporate notes; bankers’ acceptances, repurchase agreements, and the State and LGIP. The State Treasurer’s Office of the Commonwealth of Virginia has regulatory oversight over the LGIP. The City’s fair value of investment in the LGIP is the same as the pooled value of its shares. It is the City’s policy to limit its investments in commercial paper to the top rating issued by nationally recognized statistical rating organizations (NRSROs).

As of June 30, 2009, investment holdings as a percentage of total investments, excluding Pension Plan and OPEB Trust Fund investments, were as follows:

School Board HRCCC Primary Component Fiduciary Credit Investment Type Government Unit Fund Rating Repurchase Agreements 0.9% 0.0% 0.5% NR Mutual Funds 58.0% 0.0% 0.0% AAAm Federal Agency Bond/Notes 10.8% 0.0% 28.7% Aaa Virginia LGIP 30.3% 100.0% 70.8% AAAm

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C-71 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Custodial Credit Risk - Investments. For an investment, custodial risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s investments as of June 30, 2009 were held in the name of the City. The City’s investment policy requires all Purchase Securities, Money Market instruments and Certificates of Deposit with maturity dates less than thirty (30) days to be held by the Bank or Securities Dealer through which they were purchased. Securities with maturity dates exceeding thirty days are electronically transferred and held by a third party.

Investments are considered to be exposed to custodial credit risk if they are uninsured and unregistered with the securities held by the counterparty or by its trust department or agent, but not in the City’s name. As of June 30, 2009, the City did not hold any investments considered to be exposed to custodial credit risk. The School Board component unit does not hold any investments exposed to custodial credit risk.

Custodial Credit Risk – Deposits. In the case of a deposit, this is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. The carrying value of the City’s deposits was $4,306,218, including Fiduciary funds of $892,250. The City’s bank balance of deposits was $4,368,742, including Fiduciary funds of $1,062,664. The carrying value of the School Board component unit’s deposits was $3,316,466. The School Board component unit’s bank balance of deposits was $6,111,831. The City’s investment policy requires all deposits to be federally secured or held in accordance with the Virginia Security for Public Deposits Act. In agreement with the policy, the entire balance was covered by federal depository insurance or collateralized in accordance with Virginia Security for Public Deposits Act.

Concentration of Credit Risk. The Policy establishes limitations on portfolio composition by issuer in order to control concentration of credit risk. No single issue shall constitute more than 5% of the total value of the portfolio, except U.S. Treasury and Federal Agency obligations. Not more than thirty-five percent of the total funds available for investment may be invested in commercial paper, and no single industry group, as defined by Standard & Poor’s, shall constitute more than 20 percent of the bond portfolio.

As of June 30, 2009, the portions of the City’s debt securities that exceed 5% of the total value, excluding certificates of deposit which were fully insured by Federal Deposit Insurance Corporation (FDIC) and the Virginia LGIP, were as follows:

Issuer % of Portfolio

Commonwealth Cash Reserve Fund 58.0% Federal Home Loan Mortgage Corporation 5.4%

As of June 30, 2009, 100% of the School Board’s investment portfolio was invested in the Virginia LGIP.

Interest Rate Risk. The City’s investment policy limits maturities to a maximum of five years as a means of managing its exposure to fair value losses arising from increasing interest rates. However, as a means of limiting its exposure to an even higher degree, the City’s investments are highly concentrated in investments of less than one year, and the City holds no investments with a maturity date of greater than three years.

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C-72 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

As of June 30, 2009, the Primary Government had the following investments and maturities:

Investment Maturity

Fair Value Less than 1 year 1-3 years Non-negotiable Certificates of Deposits$ 33,811,321 $ 33,811,321 $ - Repurchase Agreements 519,995 519,995 - Mutual Funds 34,240,297 34,240,297 - Federal Agency Bonds/Notes 6,407,992 1,374,087 5,033,905 Virginia LGIP 17,905,323 17,905,323 - TOTAL$ 92,884,928 $ 87,851,023 $ 5,033,905

As of June 30, 2009, the School Board Component Unit had the following investments and maturities:

Investment Maturity

Fair Value Less than 1 year Virginia LGIP$ 3,998,296 $ 3,998,296 TOTAL$ 3,998,296 $ 3,998,296

As of June 30, 2009, the Hotel Roanoke Conference Center Commission, a fiduciary fund, had the following investments and maturities: Investment Maturity

Fair Value Less than 1 year 1-3 years Non-negotiable Certificates of Deposits$ 3,213,779 $ 3,213,779 $ - Repurchase Agreements 10,850 10,850 - Federal Agency Bonds/Notes 609,083 130,608 478,475 Virginia LGIP 1,504,241 1,504,241 - TOTAL$ 5,337,953 $ 4,859,478 $ 478,475

Separately Presented Fiduciary Funds

Pension Trust Fund

Investment Policy. The Board of Trustees of the City of Roanoke Pension Plan (the Plan) has adopted a Statement of Investment Policy Guidelines and Objectives. The Policy articulates the Plan’s investment objectives and risk tolerance and serves as a guide for asset allocation development, investment manager and fund selection, and investment performance monitoring and evaluation. The Policy addresses credit risk, concentration risk, and foreign currency risk as outlined in the following paragraphs.

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C-73 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Investments as of June 30, 2009 consisted of the following:

Cash Equivalents$ 1,340,736 Cash Collateral on Loaned Securities 24,715,735 Convertible Bond Mutual Funds 12,245,049 Common Stocks 32,750,412 Domestic Mutual Funds 155,814,931 International Mutual Funds 45,913,776 Real Estate Mutual Funds 17,586,900 Total Investments$ 290,367,539

Credit Risk. The Plan’s investment policy limits investments in fixed income securities to issues which are rated at least BBB by the Standard and Poor’s rating system or Baa by Moody’s Investor Services. Purchases of non-U.S. government securities are restricted to issues of at least $50 million or greater. As of June 30, 2009, the Plan’s fixed income investments consisted of the following:

Moody's Investment Type Market Value Rating Bond Mutual Fund$ 35,347,173 AA Bond Mutual Fund 26,954,830 AA2 Total$ 62,302,003

Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the event of a bank failure, the Plan’s deposits may not be returned to it. The Plan’s investment policy does not specifically address custodial credit risk. The City maintains a cash and investment pool, in which the Plan is a participant. On June 30, 2009, the carrying amount and bank balance of the Plan's deposits was $2,194,872 and $2,358,007 respectively. Of the bank balance at June 30, 2009, $862,629 was covered by Federal depository insurance or collateralized pursuant to agreements with all participating financial institutions to pledge assets on a pooled basis to secure public deposits according to the Virginia Security for Public Deposits Act Regulations of the Code of Virginia.

Such collateralization qualifies as state depository insurance. Accordingly, the bank balance of $862,629 is considered to be insured. Under the Act, banks holding public deposits in excess of the amounts insured by FDIC must pledge collateral in the amount of 50% of excess deposits to a collateral pool in the name of the State Treasury Board. Savings and loan institutions are required to collateralize 100% of deposits in excess of FDIC limits. The State Treasury Board is responsible for monitoring compliance with the collateralization and reporting requirements of the Act and for notifying local governments of compliance by banks and savings and loans. The remaining bank balance of $1,340,736 is uninsured and uncollateralized.

Custodial Credit Risk – Investments. The Plan has six types of investments as of June 30, 2009: cash equivalents; convertible bond mutual funds; common stocks; and domestic, international, and real estate mutual funds. Investments in external investment pools and in open-end mutual funds are not considered to be exposed to custodial credit risk because their existence is not evidenced by securities that exist in physical or book entry form. Investments are considered to be exposed to custodial credit risk if they are uninsured and unregistered with the securities held by the counterparty or by its trust department or agent

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C-74 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

but not in the Plan's name. The Plan’s investment policy does not specifically address custodial credit risk. As of June 30, 2009, the Plan’s investments considered to be exposed to custodial credit risk consisted of the following:

Investment Type Market Value Common Stocks$ 32,750,412 Total$ 32,750,412

State Street Bank & Trust Company has a blanket insurance policy to secure trust funds for every account they hold and also pledges to the Federal Reserve Bank to cover funds on deposit with their bank. State Street Boston Corporation, the parent company, also carries a corporate blanket insurance policy. Further insurance carried by the depositories includes coverage against losses occurring on the premises or during transit.

Concentration of Credit Risk. The Plan’s investment policy prohibits the investment of more than 5% of plan assets in either fixed income or equity securities of any single issuer based on cost. Securities of the U.S. government and investment company shares (mutual funds) are exempted from this limitation. As of June 30, 2009, the Plan did not own securities of a single organization, other than positions in mutual funds, representing 5% or more of the Plan's net assets.

Interest Rate Risk. The Plan’s investment policy does not address investment maturities as a means of managing it exposure to fair value losses arising from increasing interest rates. The investment policy defines the investment objectives for both the passive and actively managed segments of the fixed income portfolio. The objective of the passive segment is to replicate the return of the Barclays Aggregate Bond Index thus providing broad diversification that would be impractical to achieve in an actively managed portfolio. The objective of the actively managed fixed income portfolio is to outperform the Lehman Aggregate Bond Index over a moving 3 – 5 year range. The market value of the Plan’s fixed income portfolio consisted of the following investment and maturities as of June 30, 2009:

Investment Maturity

Fair Value 5-10 years Bond Mutual Funds$ 57,641,939 $ 57,641,939 TOTAL$ 57,641,939 $ 57,641,939

Foreign Currency Risk. The Plan’s investment policy prohibits investment in securities that are not denominated in U.S. dollars and/or that are traded solely on exchanges outside the U.S., with the exception of international commingled funds. The Plan had no investments that were not denominated in U.S. dollars or that were traded solely on exchanges outside the U.S. as of June 30, 2009.

Securities Lending Arrangements. The Plan's Board of Trustees approved a Securities Lending Authorization Agreement allowing State Street Bank & Trust Company (Custodian) to lend the Plan’s available securities to broker-dealers and banks pursuant to a form of loan agreement. All of the Plan's securities held by the Custodian are available for securities lending, except those securities which the Plan specifically identifies in notices to the Custodian as not being available. During the fiscal year, the Plan did not exclude any securities from securities lending.

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C-75 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

The Custodian lends the securities and in exchange the borrowers are required to deliver collateral in the form of cash (United States and foreign currency), securities issued or guaranteed by the United States government, sovereign debt of foreign nations and irrevocable bank letters of credit. The Custodian does not have the ability to pledge or sell collateral securities delivered, absent a borrower default. Borrowers are required to deliver collateral for each loan in amounts equal to: (1) in the case of loaned securities denominated in United States dollars or whose primary trading market was located in the United States or sovereign debt issued by foreign governments, 102% of the market value of the loaned securities; and (2) in the case of loaned securities not denominated in United States dollars or whose primary trading market was not located in the United States, 105% of the market value of the loaned securities.

The Plan did not impose any restrictions during the fiscal year on the amount of loans the Custodian made on its behalf. The terms of the Authorization Agreement require the Custodian to indemnify the Plan in the event the borrower defaults or fails to return the securities by agreeing to purchase replacement securities, or return the cash collateral in the event the borrower failed to return the loaned security or pay distributions thereon. There were no such failures by any borrowers during the fiscal year. Moreover, there were no losses during the fiscal year resulting from a default of the borrowers or the Custodian.

The Plan and the borrowers maintain the right to terminate all securities lending transactions on demand. The cash collateral received on each loan is invested, together with the cash collateral of other qualified tax-exempt plan lenders, in a collective investment pool. As of June 30, 2009, the investment pool had a weighted maturity of 50 days with an average duration of 52 days.

Because the loans were terminable at will, their duration did not generally match the duration of the investments made with cash collateral. The Plan had no credit risk exposure to borrowers as of June 30, 2009. The following represents balances related to securities lending transactions as of June 30, 2009:

Market Value Cash Collateral Securities on Loan of Securities Investment Value Domestic Equities$ 23,954,057 $ 24,715,735 Total$ 23,954,057 $ 24,715,735

Other Risks and Uncertainties. The Plan’s investments are exposed to various risks such as interest rate, market and credit risks. Such risks, and the resulting investment security values, may be influenced by changes in economic conditions, market perceptions, and expectations. Accordingly, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and those such changes could materially affect the amounts reported in the statement of net assets available for benefits.

In fiscal year 2009, the asset back securities underlying specific investments within the plan decreased in market value as the banking crisis and declines in the equities market increased demand for liquidity. The Plan investment managers maintain fiduciary responsibility during market volatility. As a result, State Street Global Advisors, an investment manager of the Plan, restricted redemptions of investments with securities lending to 2% to 4% per month. As of June 30, 2009, $63.9 million in investments, representing 22% of the Plan’s total portfolio, were under trading restrictions related to the stabilization of the collateral pool. No underlying investments within the collateral pool defaulted.

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C-76 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

OPEB Trust Fund

The City’s OPEB Trust Fund is a participant in the Virginia Pooled OPEB Trust. Funds of participating jurisdictions are pooled and are invested in the name of the Virginia Pooled OPEB Trust. The City’s share in this pool is reported as an asset on the statement of fiduciary net assets of the OPEB Trust Fund statement (Exhibit J).

Investment Policy. The Board of Trustees of the Virginia Pooled OPEB Trust has adopted an investment policy to achieve a compound annualized total rate of return over a market cycle, including current income and capital appreciation, in excess of 5.0 percent after inflation, in a manner consistent with prudent risk-taking. Investment decisions for the funds’ assets are made by the Board of Trustees. The Board of Trustees establishes investment objectives, risk tolerance and asset allocation policies in light of the investment policy, market and economic conditions, and generally prevailing prudent investment practices. The Board of Trustees also monitors the investments to ensure adherence to the adopted policies and guidelines. In addition, the Trustees review, monitor, and evaluate the performance of the investments and its investment advisors in light of available investment opportunities, market conditions, and publicly available indices for the generally accepted evaluation and measurement of such performance.

Specific investment information for the Virginia Pooled OPEB Trust can be obtained by writing to VML/VACo Finance Program, 1108 East Main Street, Richmond, Virginia 23219.

Credit risk, custodial credit risk, concentration of credit risk, and interest rate risk are addressed in the following paragraphs.

Credit Risk. State law (Code of Virginia, Chapter 3, Title 26) limits local governments and other public bodies to investing in obligations of the United States or agencies thereof, obligations of the Commonwealth of Virginia or political subdivisions thereof, obligations of the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank, the African Development Bank, “prime quality” commercial paper and certain corporate notes; bankers’ acceptances, repurchase agreements, and the State and LGIP.

As of June 30, 2009, investment holdings as a percentage of total investments for the OPEB Trust Fund were as follows:

OPEB Trust Fiduciary Credit Investment Type Fund Rating Virginia Pooled OPEB Trust 100.0% NR

Custodial Credit Risk - Investments. For an investment, custodial risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party.

Investments are considered to be exposed to custodial credit risk if they are uninsured and unregistered with the securities held by the counterparty or by its trust department or agent, but not in the City’s name.

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C-77 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

As of June 30, 2009, the OPEB trust did not hold any investments considered to be exposed to custodial credit risk.

Concentration of Credit Risk. The Policy establishes limitations on portfolio composition by issuer in order to control concentration of credit risk. No single issue shall constitute more than 5% of the total value of the portfolio, except U.S. Treasury and Federal Agency obligations. Not more than thirty-five percent of the total funds available for investment may be invested in commercial paper, and no single industry group, as defined by Standard & Poor’s, shall constitute more than 20 percent of the bond portfolio.

As of June 30, 2009, 100% of the OPEB Trust Fund investment portfolio was invested in the Virginia Pooled OPEB Trust.

Interest Rate Risk. The City’s investment policy limits maturities to a maximum of five years as a means of managing its exposure to fair value losses arising from increasing interest rates. However, as a means of limiting its exposure to an even higher degree, the City’s investments are highly concentrated in investments of less than one year, and the City holds no investments with a maturity date of greater than three years.

As of June 30, 2009, the OPEB Trust Fund had the following investments and maturities: Investment Maturity

Fair Value 5 - 10 years Virginia Pooled OPEB Trust$ 792,813 $ 792,813

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C-78 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

(3) Receivables

Receivables as of June 30, 2009 consisted of the following:

Governmental Funds Total School Board Special Capital Internal Governmental Component Receivables General Revenue Projects Service Activities Unit Interest and Dividends$ 17,991 $ 105,244 $ 43,937 $ 42,600 $ 209,772 $ - Component Unit 192,488 - - - 192,488 -

Federal Government - 1,522,009 - - 1,522,009 9,603,551 State Government 10,611,877 331,622 - - 10,943,499 2,461,724 Other Governments 557,937 - - 405 558,342 26,712 Subtotal Governments 11,169,814 1,853,631 - 405 13,023,850 12,091,987 Taxes 16,189,635 - - - 16,189,635 - Accounts 3,917,269 349,791 263,558 22,967 4,553,585 132,182 Less: Allowance for Uncollectible Accounts (5,024,314) - - - (5,024,314) - Subtotal 15,082,590 349,791 263,558 22,967 15,718,906 132,182

Note - 2,600,020 - - 2,600,020 Governmental Fund Receivables 26,462,883 4,908,686 307,495 65,972 31,745,036 12,224,169

Enterprise Fund Receivables - - - - 1,558,729 - Due from WVWA - - - - 24,255,948 - Net Governmental Activities Receivables$ 26,462,883 $ 4,908,686 $ 307,495 $ 65,972 $ 57,559,713 $ 12,224,169

Business-Type Total Transit Civic Market Enterprise Receivables Company Facilities Parking Building Funds Federal Government$ 802,921 $ - $ - $ - $ 802,921 State Government 526,340 - - - 526,340 Other Governments 90,210 - - - 90,210 Subtotal 1,419,471 - - - 1,419,471

Accounts 40,933 74,925 4,173 19,227 139,258 Total Receivables$ 1,460,404 $ 74,925 $ 4,173 $ 19,227 $ 1,558,729 \ The taxes receivable account is largely comprised of the current and past nineteen years of uncollected tax levies on real property, the current and prior four years of uncollected tax levies for personal property, and business and professional occupational license tax. The ability to collect these accounts has been considered in the allowance for uncollectible accounts.

Net taxes and accounts receivable, as reported on the government-wide Statement of Net Assets, include taxes receivable of approximately $3.3 million that are not available to pay for current period expenditures and are accordingly recorded as deferred revenue in the governmental funds balance sheet. Additionally, a $24,255,948 receivable from the Western Virginia Water Authority (WVWA) related to long-term liabilities is reported on the Statement of Net Assets. Further details are presented in notes 9 and 17.

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C-79 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

(4) Interfund Balances and Transfers

Interfund balances consisted of the following at June 30, 2009:

DUE FROM (FUND)

Capital Special Internal Market Pension Civic General Projects Revenue Services Building Trust Facilities Parking Total General Fund$ - $ 27,186 $ - $ 22,141 - $ - $ 758 $ 7,155 $ 57,240 Civic Facilities 204,354 - - 20,976 - 6,458 - - 231,788 Parking - - - - 20,000 - - - 20,000 Capital Projects - - 1,300,000 - - - - - 1,300,000 Market Building 235,691 ------235,691 Debt Service 1,092 ------1,092 Internal Service 1,389,423 - 198 8,930 - 197 359 1,399,107 Special Revenue 17,911 ------17,911 Pension Trust 45,460 - - 1,201 - - - - 46,661

DUE TO (FUND) TOTAL $ 1,893,931 $ 27,186 $ 1,300,198 $ 53,248 $ 20,000 $ 6,458 $ 955 $ 7,514 $ 3,309,490

All interfund balances represent timing differences resulting from the difference between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments are made.

Interfund transfers consisted of the following for the year ended June 30, 2009:

TRANSFER FROM (FUND)

Debt Special Capital Internal Civic General Service Revenue Projects Parking Service Facilities Total General$ - $ - $ - $ 33,333 $ - $ - $ - $ 33,333 Debt Service 21,431,723 - 531,923 - - - 65,244 22,028,890 Special Revenue 403,134 - - 226,000 - 71,270 - 700,404 Capital Projects 2,449,550 562,442 1,340,000 - - 99,502 - 4,451,494 Civic Facilities 2,678,100 - - - - - 2,678,100 Transit Company 1,471,548 - - - - - 1,471,548 Parking 14,466 - - - - - 14,466 Market Building 275,000 - 120,000 - - - 395,000 Internal Service 479,264 - 3,899 779 - - 483,942 TOTAL $ 29,202,785 $ 562,442 $ 1,871,923 $ 383,232 $ 779 $ 170,772 $ 65,244 $ 32,257,177 TRANSFER TO (FUND) TRANSFER

Transfers are used (1) to move revenues from the funds that are required by statute or budget to collect them to the funds that are required by statute or budget to spend them, (2) to move receipts restricted for debt service from the funds collecting them to the Debt Service Fund as debt service payments become due, and (3) to move unrestricted revenues collected in the General Fund, which finance various programs accounted for in other funds in accordance with budgetary authorizations.

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C-80 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

(5) Note Receivable

Included in the Special Revenue Fund as of June 30, 2009, is a note receivable in the amount of $2,600,020 from the Hotel Roanoke, LLC. The note originally provided $6 million of the $27.5 million expended for the rehabilitation and restoration of the Hotel Roanoke. The Hotel Roanoke, LLC, is obligated to repay, in priority order, certain first mortgage loans held by banks and is then obligated to repay the note receivable and other debt. Funding for repaying this debt is available from resources of the Hotel Roanoke, LLC, generated by the operations of the Hotel Roanoke.

Principal is payable in nineteen annual installments with interest on the unpaid principal balance of the noted at a fixed rate of 4.0% per annum. Installments of principal and interest in the amount of $496,757 are due and payable on June 30 of each year until June 30, 2014. If, in any one year, full payment of principal and interest is not made, that unpaid amount is payable on any subsequent annual installment payment date. In this event, no additional interest would accrue. At June 30, 2009, unpaid installments totaling $496,757 are due from the Hotel Roanoke, LLC. This amount is comprised of unpaid principal of $391,513 and interest of $105,244. During the year ended June 30, 2009, the Hotel Roanoke, LLC made payments of $496,757.

The loan repayments to the City are considered to be program income and are to be applied toward repayment of the City’s $6 million Section 108 loan from the United States Department of Housing and Urban Development.

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C-81 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

(6) Changes in Capital Assets

Primary Government:

Changes in capital assets for the year ended June 30, 2009 consisted of the following:

Balance Balance July 1, 2008 Increases Decreases June 30, 2009 Governmental activities: Capital assets, not being depreciated: Land$ 41,923,432 $ - $ - $ 41,923,432 Infrastructure - Right of Way 20,027,512 - - 20,027,512 Construction in Process 62,427,459 43,206,915 (56,512,565) 49,121,809 Historical Treasures 655,298 - (20,000) 635,298 Total Capital assets, not being depreciated 125,033,701 43,206,915 (56,532,565) 111,708,051

Capital assets, being depreciated: Land Improvements 1,879,941 1,102,083 - 2,982,024 Accumulated Depreciation (354,939) (124,825) - (479,764) Net Land Improvements 1,525,002 977,258 - 2,502,260 - Building and Structures 295,195,061 48,026,823 (431,500) 342,790,384 Accumulated Depreciation (105,106,694) (5,452,500) 43,957 (110,515,237) Net Building & Structures 190,088,367 42,574,323 (387,543) 232,275,147

Infrastructure 166,283,972 5,475,802 - 171,759,774 Accumulated Depreciation (66,651,851) (4,766,910) - (71,418,761) Net Infrastructure 99,632,121 708,892 - 100,341,013

Equipment 60,413,689 2,890,100 (8,417,265) 54,886,524 Accumulated Depreciation (36,500,859) (5,711,237) 8,366,185 (33,845,911) Net Equipment 23,912,830 (2,821,137) (51,080) 21,040,613

Total Capital Assets Being Depreciated 523,772,663 57,494,808 (8,848,765) 572,418,706 Less: Accumulated Depreciation (208,614,343) (16,055,472) 8,410,142 (216,259,673) Net Total Capital Assets Being Depreciated 315,158,320 41,439,336 (438,623) 356,159,033 Governmental activities capital assets, net$ 440,192,021 $ 84,646,251 $ (56,971,188) $ 467,867,084

General Capital Assets, Net $ 446,711,367 Internal Service Fund Capital Assets, Net 21,155,717 Total $ 467,867,084

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C-82 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Changes in Capital Assets (Continued)

Balance Balance July 1, 2008 Increases Decreases June 30, 2009 Business-type activities:

Capital assets, not being depreciated: Land$ 4,159,387 $ 106,988 $ - $ 4,266,375 Construction in Process 1,766,654 4,274,178 (779,183) 5,261,649 Total Capital assets, not being depreciated 5,926,041 4,381,166 (779,183) 9,528,024

Capital assets, being depreciated: Land Improvements 68,446 - - 68,446 Accumulated Depreciation (54,595) (1,879) - (56,474) Net Land Improvements 13,851 (1,879) - 11,972

Building and structures 88,734,677 472,029 - 89,206,706 Accumulated Depreciation (27,684,451) (2,065,108) - (29,749,559) Net Building & Structures 61,050,226 (1,593,079) - 59,457,147

Equipment 17,330,057 1,232,640 (21,939) 18,540,758 Accumulated Depreciation (6,955,647) (1,558,144) 21,939 (8,491,852) Net Equipment 10,374,410 (325,504) - 10,048,906

Total Capital Assets Being Depreciated 106,133,180 1,704,669 (21,939) 107,815,910 Less: Accumulated Depreciation (34,694,693) (3,625,131) 21,939 (38,297,885) Net Total Capital Assets Being Depreciated 71, 438,487 (1,920,462) - 69,518,025

Business-type activities capital assets, net$ 77,364,528 $ 2,460,704 $ (779,183) $ 79,046,049

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C-83 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Changes in Capital Assets (Continued)

Depreciation was charged to functions as follows:

Governmental activities:

General Government $ 424,737 Judicial Administration 252,815 Public Safety 1,243,986 Public Works 4,932,924 Health and Welfare 316,533 Parks, Recreation and Cultural 300,633 Community Development 5,194 Education 3,667,111 Capital assets held by the government's internal service funds are charged to the various functions based on their usage of the assets 4,911,539 Total $ 16,055,472

Business-type activities:

Transit Company $ 1,790,331 Civic Facilities 915,111 Parking 818,802 Market Building 100,887 Total $ 3,625,131

School Board Component Unit: Balance Balance July 1, 2008 Increases Decreases June 30, 2009

Equipment$ 12,887,114 $ 381,208 $ (48,309) $ 13,220,013 Accumulated Depreciation (8,204,175) (922,870) 45,015 (9,082,030) Net Equipment 4,682,939 (541,662) (3,294) 4,137,983 Component unit capital assets, net$ 4,682,939 $ (541,662) $ (3,294) $ 4,137,983

Capital assets used for educational purposes totaling $186,345,667 are included with the Governmental Activities capital assets of the primary government. Depreciation expense on these assets was recorded as Education expense in the current fiscal year.

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C-84 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

(7) Construction in Progress and Contract Commitments

A summary of construction in progress by function and contract commitments (encumbrances) at June 30, 2009 is as follows:

Primary Government: Expended/Expensed Contract Required Project as of Commitments Future Governmental Activities: Authorizations June 30, 2009 (Encumbrances) Financing Function General Government$ 4,462,152 $ 2,370,801 $ 283,384 None Parks, Recreation and Cultural 3,144,081 1,180,891 85,810 $ 1,210,000 Flood Reduction 15,238,711 14,739,436 351,176 None Economic Development 557,058 288,365 650 None Community Development 7,432,760 2,772,902 33,349 None Public Safety 21,237,938 11,935,814 8,017,664 $ 3,000,000 Public Works 15,250,967 6,568,839 671,128 None Education 10,047,069 5,779,390 400,897 None Department of Technology 6,436,201 3,485,307 945,056 None Subtotal 83,806,937 49,121,745 10,789,114 Non-Capitalized Projects 42,469,808 29,068,182 404,701 None Total $ 126,276,745 $ 78,189,927 $ 11,193,815

Business-Type Activities: Fund Civic Facilities$ 1,213,976 $ 1,211,257 $ - None Parking 7,933,652 4,672,601 3,080,843 $ 1,640,000 Market Building 120,000 96,274 6,083 None Total $ 9,267,628 $ 5,980,132 $ 3,086,926

(8) Deferred Revenue

Deferred revenue represents amounts for which asset recognition criteria have been met, but for which revenue recognition criteria have not been met. Deferred revenue as reported in the governmental fund financial statements at June 30, 2009 consisted of the following:

Special General Fund Revenue Fund Total Deferred Property and Other Tax Revenue$ 3,599,218 $ - $ 3,599,218 Prepaid Property Taxes 44,847 - 44,847 Other receivables for which revenue recognition criteria have not been met - 3,096,456 3,096,456 Total $ 3,644,065 $ 3,096,456 $ 6,740,521

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C-85 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

(9) Long-Term Liabilities

General obligation bonds are direct obligations and pledge the full faith and credit of the City. These bonds are subject to the provisions of the Internal Revenue Code of 1986 related to arbitrage and interest income tax regulations under those provisions. The fund balance of the Debt Service Fund at June 30, 2009 of $1,161,895 is designated for future retirement of long-term debt. The Charter of the City of Roanoke limits the legal debt to 10% of the assessed valuation of real estate within the City limits. The City's legal debt margin at June 30, 2009 is $392,935,844. The City has no overlapping debt. The City issues general obligation bonds to provide for the acquisition and construction of major capital facilities. Outstanding long-term liabilities, gross of governmental activities deferred refunding amounts, as of June 30, 2009 are comprised of the following:

Details of Long-Term Indebtedness At June 30, 2009, the long-term indebtedness of the City consisted of the following:

Governmental Interest Rates Issue Date Maturity Date Issue Amount Activities General Obligation Bonds Series 1999A Public Improvement Bonds 3.70% - 5.00% 10/15/1999 10/1/2009$ 26,020,000 $ 1,245,002 Series 1999B Public Improvement Bonds 3.70% - 5.00% 10/15/1999 10/1/2009 10,100,000 1,075,000 Series 2002A Public Improvement Bonds 3.00% - 5.25% 2/1/2002 10/1/2021 34,130,000 23,310,000 Series 2002B Public Improvement Bonds 4.00% - 5.00% 2/1/2002 10/1/2021 12,000,000 8,205,000 Series 2003 Refunding Bonds 2.00% - 5.00% 7/1/2003 8/1/2024 12,075,000 8,445,000 Series 2004 Refunding Bonds 2.00% - 5.00% 2/25/2004 10/1/2019 46,030,000 36,265,000 Series 2004A Refunding Bonds 2.00% - 3.63% 3/11/2004 8/1/2017 7,935,000 6,140,000 Series 2004B Public Improvement Bonds 3.00% - 5.25% 11/23/2004 2/1/2025 36,105,000 28,880,000 Series 2005 Public Improvement Bonds 6.25% 12/15/2005 12/1/2020 3,975,000 3,180,000 Series 2006A Public Improvement Bonds 3.50% - 5.00% 2/8/2006 2/1/2026 20,550,000 16,290,000 Series 2006B Public Improvement Bonds 4.00% - 5.00% 2/8/2006 2/1/2026 5,500,000 4,675,000 Series 2006C Refunding Bonds 3.50% - 4.23% 5/4/2006 8/1/2012 2,975,834 2,889,137 Series 2008 Public Improvement Bonds 3.25% - 5.00% 2/8/2008 2/1/2033 43,445,000 41,670,000 Series 2008A VRA Public Improvement Bonds 3.12% - 5.37% 12/10/2008 10/1/2028 6,910,000 6,910,000 $ 189,179,139

Section 108 Loan Section 108 Loan-Hotel Roanoke Project 3.43% - 6.91% 8/1/2003 8/1/2013 6,000,000 2,170,000

General Obligation Bonds - Western Virginia Water Authority Series 2002A Water Bonds 3.00% - 5.25% 2/1/2002 10/1/2021 5,445,000 4,175,000 Series 2003 Water Pollution Control Refunding Bonds 2.00% - 5.00% 7/1/2003 8/1/2024 14,310,000 12,600,000 Series 2006C Water Refunding Bonds 3.50% - 4.65% 5/4/2006 8/1/2013 7,655,992 7,480,948 $ 24,255,948

Lease Obligations BlueEagle Building Lease 11.80% 2/1/2004 1/1/2024 4,857,000 4,358,063 Ovations Lease 3.93% 6/30/2008 6/30/2015 449,988 - Xerox Lease 12.10% 6/30/2008 6/30/2013 920,842 755,935 $ 5,113,998

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C-86 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Details of Long-Term Indebtedness (continued)

Governmental Interest Rates Issue Date Maturity Date Issue Amount Activities School Fund Bonds and Loans Virginia Public School Authority-Series 1990B Subsidized 6.40% - 7.10% 7/1/1990 7/15/2010 1,000,000 95,000 Virginia Public School Authority-Series 1991A Subsidized 6.10% - 6.60% 7/1/1991 7/15/2011 2,000,000 288,798 Virginia Public School Authority-Series 1992A Subsidized 4.90% - 6.35% 12/10/1992 7/15/2012 2,500,000 478,093 Virginia Public School Authority-Series 1994B Subsidized 6.25% - 6.75% 11/1/1994 7/15/2014 2,000,000 559,294 Virginia Public School Authority-Series 1995C Subsidized 5.10% - 6.10% 12/21/1995 7/15/2015 4,400,000 1,487,228 Virginia Public School Authority-Series 1996B Subsidized 5.10% - 6.10% 11/14/1996 7/15/2016 5,000,000 1,914,410 Virginia Public School Authority-Series 1997 Subsidized 4.35% - 5.35% 11/1/1997 7/15/2017 5,000,000 2,145,328 Virginia Public School Authority-Series 1998A Subsidized 3.60% - 5.10% 11/19/1998 7/15/2018 5,000,000 2,500,000 Virginia Public School Authority-Series 1998B Subsidized 3.60% - 5.10% 11/19/1998 7/15/2018 1,200,000 599,203 Virginia Public School Authority-Series 1999A Subsidized 5.10% - 6.10% 11/18/1999 7/15/2019 3,250,000 1,705,000 Virginia Public School Authority-Series 1999B Subsidized 5.10% - 6.10% 11/18/1999 7/15/2019 1,250,000 625,788 Virginia Public School Authority - Series 2000B Subsidized 4.97% - 5.85% 11/16/2000 7/15/2020 2,750,000 1,558,541 Virginia Public SchoolAuthority - Series 2000B Subsidized (1) 4.97% - 5.85% 11/16/2000 7/15/2020 1,900,000 1,076,810 Virginia Public SchoolAuthority - Series 2000B Subsidized (2) 4.97% - 5.85% 11/16/2000 7/15/2020 1,900,000 1,076,810 Virginia Public School Authority - Series 2001B Subsidized 3.10% - 5.35% 11/15/2001 7/15/2021 2,750,000 1,710,333 Virginia Public School Authority - Series 2001B Subsidized 3.10% - 5.35% 11/15/2001 7/15/2021 2,500,000 1,554,848 Virginia Public School Authority - Series 2003C Subsidized 3.10% - 5.35% 11/6/2003 7/15/2023 5,000,000 3,507,284 Virginia Public School Authority - Series 2004B Subsidized 4.10% - 5.60% 11/1/2004 1/15/2025 1,300,000 924,112 Virginia Public School Authority - Series 2005D Subsidized 4.60% - 5.10% 11/10/2005 7/15/2025 3,291,459 861,487 Virginia Public School Authority - Series 2005D Subsidized 4.60% - 5.10% 11/11/2005 7/15/2025 992,464 2,857,025 Virginia Public School Authority - Series 2006B Non-subsidized 4.22% - 5.10% 11/9/2006 7/15/2026 1,945,000 1,745,000 Virginia Public School Authority - Series 2006B Subsidized 4.22% - 5.10% 11/9/2006 7/15/2026 7,500,000 6,000,680 Virginia Public School Authority - Series 2007A Non-subsidized 4.10% - 5.10% 5/10/2007 7/15/2027 3,345,000 3,175,000 Virginia Public School Authority - Series 2008B Subsidized 3.60% - 5.35% 12/11/2008 7/15/2028 6,350,705 6,350,705 Virginia Public School Authority - Series 2008B Non-subsidized 3.60% - 5.35% 12/11/2008 7/15/2028 10,580,000 10,580,000 Literary Fund Loan-Highland Park Elementary School 4.00% 3/1991 5/15/2010 1,000,000 50,000 Literary Fund Loan-Morningside Elementary School 4.00% 8/1995 9/1/2015 2,200,000 770,000 Literary Fund Loan-Lucy Addison Middle School 4.00% 10/1999 10/01/2019 5,000,000 2,750,000 Qualified Zone Academy Bond- Roanoke Academy 0% 12/20/2000 12/20/2013 1,291,618 496,776 Qualified Zone Academy Bond - Lincoln Terrace 0% 11/01/2002 10/31/2016 800,000 508,048 Qualified Zone Academy Bond - Fallon Park 0% 12/29/2004 12/29/2020 439,100 346,806 Qualified Zone Academy Bond - Patrick Henry High School 0% 12/27/2006 12/27/2022 1,097,571 988,001 $ 61,286,408

Subtotal Governmental Activities $ 282,005,493 (1) Grandin Court Elementary School (2) Preston Park Elementary School

Business-Type Interest Rates Issue Date Maturity Date Issue Amount Activities Lease Obligations BlueEagle Building Lease 11.80% 2/1/2004 1/1/2024 4,857,000 - Ovations Lease 3.93% 6/30/2008 6/30/2015 449,988 393,017 Xerox Lease 12.10% 6/30/2008 6/30/2013 920,842 23,561 $ 416,578

Enterprise Fund Bonds Series 2002A Civic Facilities Bonds 3.00% - 5.25% 2/1/2002 10/1/2021 2,170,000 1,665,000 Series 2002A Parking Bonds 3.00% -5.25% 2/1/2002 10/1/2021 2,500,000 1,910,000 Series 2004B Civic Facilities Bonds 3.00% - 5.25% 11/23/2004 2/1/2025 7,895,000 6,800,000 Series 2004B Parking Bonds 3.00% - 5.25% 11/23/2004 2/1/2025 2,000,000 1,725,000 Series 2006A Civic Facilities Bonds 3.50% - 5.00% 2/8/2006 2/1/2026 6,405,000 5,725,000 Series 2006A Parking Bonds 3.50% - 5.00% 2/8/2006 2/1/2026 2,600,000 2,320,000 Series 2006C Parking Refunding Bonds 3.50% - 4.23% 5/4/2006 8/1/2011 1,893,174 1,839,914 Series 2008 Parking Bonds 3.25% - 5.00% 2/5/2008 2/1/2028 2,545,000 2,460,000 Series 2008A VRA Parking Bonds 3.12% - 5.37% 12/10/2008 10/1/2031 5,040,000 5,040,000 $ 29,484,914

Subtotal Business-Type Activities $ 29,901,492

Total Primary Government Bonded Debt $ 311,906,985

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C-87 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

The annual requirements to amortize governmental activities debt outstanding as of June 30, 2009 are as follows:

WESTERN VIRGINIA WATER GENERAL OBLIGATION AUTHORITY (WVWA) GENERAL VPSA/LITERARY FUND SERIAL BONDS OBLIGATION SERIAL BONDS LOANS FISCAL YEAR PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST

2009-10 $ 17,004,378 $ 8,065,795 $ 2,347,065 $ 973,380 $ 4,116,519 $ 2,687,087 2010-11 16,224,168 7,447,463 2,343,333 880,693 4,089,501 2,417,900 2011-12 15,892,204 6,836,623 2,357,368 780,026 4,076,460 2,208,527 2012-13 16,125,986 6,247,564 2,373,182 677,311 4,003,713 2,008,641 2013-14 15,678,754 5,581,821 2,370,000 570,941 3,903,523 1,817,006 2014-19 55,510,429 19,804,869 5,500,000 2,027,286 17,751,084 6,286,785 2019-24 37,229,851 8,881,577 5,910,000 791,650 10,839,085 2,698,842 2024-29 15,687,000 2,974,879 1,055,000 21,100 5,972,892 622,153 2029-34 6,360,000 667,800 - - - - TOTAL $ 195,712,770 $ 66,508,391 $ 24,255,948 $ 6,722,387 $ 54,752,777 $ 20,746,941

The following general obligation debt is issued to support business-type activities. The annual requirements to amortize business-type activities debt outstanding as of June 30, 2009 are as follows:

CIVIC FACILITIES FUNDPARKING FUND TOTAL SERIAL BONDS SERIAL BONDS BUSINESS-TYPE DEBT FISCAL YEAR PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST

2009-10 $ 645,000 $ 611,815 $ 950,828 $ 672,292 $ 1,595,828 $ 1,284,107 2010-11 665,000 588,565 993,930 634,720 1,658,930 1,223,285 2011-12 690,000 565,065 1,050,156 594,570 1,740,156 1,159,635 2012-13 715,000 540,749 570,000 563,471 1,285,000 1,104,220 2013-14 750,000 513,440 605,000 540,358 1,355,000 1,053,798 2014-19 4,260,000 2,044,956 3,400,000 2,289,906 7,660,000 4,334,862 2019-24 4,970,000 985,284 3,890,000 1,430,908 8,860,000 2,416,192 2024-29 1,495,000 84,751 2,720,000 598,019 4,215,000 682,770 2029-34 - - 1,115,000 88,802 1,115,000 88,802 TOTAL $ 14,190,000 $ 5,934,625 $ 15,294,914 $ 7,413,046 $ 29,484,914 $ 13,347,671

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C-88 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

TOTAL GOVERNMENTAL SECTION 108 LOAN ACTIVITIES DEBT FISCAL YEAR PRINCIPAL INTEREST PRINCIPAL INTEREST

2009-10 $ 395,000 $ 87,887 $ 23,862,962 $ 11,814,149 2010-11 420,000 71,627 23,077,002 10,817,683 2011-12 445,000 53,033 22,771,032 9,878,209 2012-13 470,000 32,203 22,972,881 8,965,719 2013-14 440,000 10,626 22,392,277 7,980,394 2014-19 - - 78,761,513 28,118,940 2019-24 - - 53,978,936 12,372,069 2024-29 - - 22,714,892 3,618,132 2029-34 - - 6,360,000 667,800

TOTAL $ 2,170,000 $ 255,376 $ 276,891,495 $ 94,233,095

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C-89 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

CHANGES IN GENERAL LONG-TERM LIABILITIES

Amounts Balance Balance Due Within July 1, 2008 Increases Decreases June 30, 2009 One Year Primary Government - Governmental Activities: General Obligation Serial Bonds$ 200,899,807 $ 11,104,000 $ 16,291,037 $ 195,712,770 $ 17,004,378 General Obligation Serial Bonds - WVWA 26,596,538 - 2,340,590 24,255,948 2,347,065 Hotel Roanoke Section 108 Loan 2,540,000 - 370,000 2,170,000 395,000 State Literary Fund Loans 3,980,000 - 410,000 3,570,000 410,000 VPSA School Bonds 41,514,862 12,736,705 3,068,790 51,182,777 3,706,519 Capital Leases 5,279,002 78,347 243,351 5,113,998 275,457 Total Bonds, Loans and Leases Payable before Deferred Amounts and Premiums 280,810,209 23,919,052 22,723,768 282,005,493 24,138,419 Deferred Amount on Refunding and Premiums 916,538 706,843 2,349 1,621,032 15,341 Total Bonds, Loans and Leases Payable 281,726,747 24,625,895 22,726,117 283,626,525 24,153,760 Claims Payable 12,854,983 17,560,891 14,492,908 15,922,966 2,718,783 Compensated Absences Payable 6,703,198 5,330,207 5,232,807 6,800,598 4,467,590 Subtotal Governmental Activities: $ 301,284,928 $ 47,516,993 $ 42,451,832 $ 306,350,089 $ 31,340,133

Primary Government - Business-Type Activities: General Obligation Serial Bonds$ 25,955,524 $ 5,040,000 $ 1,510,610 $ 29,484,914 $ 1,595,828 Capital Leases 477,865 - 61,287 416,578 64,105 Deferred Amount on Refunding and Premiums 434,775 46,410 12,132 469,053 13,098 Total Bonds, Loans and Leases Payable 26,868,164 5,086,410 1,584,029 30,370,545 1,673,031 Compensated Absences Payable 90,796 35,497 111,389 14,904 4,620 Subtotal Business-Type Activities: $ 26,958,960 $ 5,121,907 $ 1,695,418 $ 30,385,449 $ 1,677,651

Total Primary Government Long-Term Liabilit $ 328,243,888 $ 52,638,900 $ 44,147,250 $ 336,735,538 $ 33,017,784

School Board Component Unit: Claims Payable$ 5,424,565 $ 17,111,211 $ 16,011,283 $ 6,524,493 $ 6,074,493 Compensated Absences Payable 3,775,642 1,243,307 1,244,782 3,774,167 1,007,703 Other Post-Employment Benefit Liability 3,003,644 120,146 1,980,994 1,142,796 - Total School Board Component Unit $ 12,203,851 $ 18,474,664 $ 19,237,059 $ 11,441,456 $ 7,082,196

90

C-90 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

During fiscal year 2009, the Debt Service Fund was used to account for the repayment of most long-term liabilities of governmental activities as shown preceding the paragraph. However, a portion of capital leases, claims payable and compensated absences was liquidated by Internal Service Funds. The remaining portion of compensated absences was liquidated by the General Fund.

On July 1, 2004, the Western Virginia Water Authority commenced operations. In conjunction with its formation, the Authority assumed certain indebtedness of the City, and it agreed to pay the City amounts equal to debt service on Water and Water Pollution Control debt to be retained by the City. As of June 30, 2009, the City had $24,255,948 in outstanding general obligation debt which will contractually be repaid by the Water Authority over the remaining eighteen year amortization of the bonds. Further details are presented in notes 3 and 16.

On December 8, 2008, the City issued its General Obligation Series 2008A Bonds through the Virginia Resource Authority (VRA) in the amount of $11,950,000. Principal proceeds in the amount of $2,500,000 will be used for Police Academy construction, $560,000 for Library Master Plan, $1,000,000 for Fire-EMS construction, $1,150,000 for Streetscape projects, $1,700,000 for Bridge renovation, and $5,040,000 for the Market Garage renovation. The Series 2008A bonds were issued with a true interest cost of 4.888%.

On December 11, 2008, the City issued its Virginia Public School Authority Series 2008B bonds in the amount of $16,930,705. Principal proceeds in the amount of $14,493,705 will be used for continued construction at William Fleming High School and $2,437,000 for school roof repairs. The Series 2008B bonds were issued with a true interest cost of 4.7549%

(10) Capital Leases

Blue Eagle Partnership

During 2004, the City entered into an agreement with Blue Eagle Partnership to rent the third floor of a building to house the City’s Social Services Department. Under the lease agreement, the City paid monthly rent of $54,838 to Blue Eagle, representing principal and interest payments with interest at 11.80%. After 2006, the rent increase is a maximum of 2% or 50% of CPI, whichever is lower. The lease term is twenty years. Ownership of the building is retained by Blue Eagle Partnership.

Lease assets and obligations are accounted for as Governmental Activities. At June 30, 2009, the book value of the building under the capital lease totaled $4,857,000 and accumulated depreciation on the building totaled $1,213,492.

Ovations, Inc.

In July 2007, the City entered into an agreement with Ovations, Inc. to provide catering services and kitchen refurbishing and equipment to the Civic Center. The equipment and refurbishing portion of the agreement is a capital lease. Under the lease agreement, the City pays $75,000 annually to Ovations, Inc., representing principal and interest payments with interest at 3.93%. The lease term is 7 years. Ownership of the equipment and refurbishments will transfer to the City at the completion of the lease term.

Lease assets and obligations are accounted for in the Civic Facilities Fund. At June 30, 2009, the kitchen renovations, including equipment, under the capital lease totaled $393,017, and there was $44,937 of accumulated depreciation on the assets.

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C-91 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Xerox, Inc.

In June 2008, the City entered into an agreement with Xerox, Inc. to lease copy machines and related equipment. During fiscal year 2009, six amendments were made to the original lease agreement to lease additional equipment which increased the monthly payment to $20,545 to Xerox, Inc., representing principal and interest with interest at 12.1%. The lease term is 5 years. Ownership of the equipment does not transfer to the City at the completion of the lease term.

Lease assets and obligations are accounted for as Governmental Activities and in various proprietary funds. At June 30, 2009, the equipment under the capital lease totaled $779,496 and there was $168,267 of accumulated depreciation on the assets.

Future Lease Obligations for all capital leases are as follows:

Internal Total Governmental Service Governmental Enterprise Total Future Minimum Lease Payments: Funds Funds Activities Funds (Memo Only) 2010 817,294 79,907 897,201 82,464 979,665 2011 817,294 79,907 897,201 82,464 979,665 2012 817,294 79,907 897,201 82,464 979,665 2013 817,294 79,907 897,201 82,464 979,665 2014 659,665 145 659,810 75,000 734,810 2015-2019 3,290,290 - 3,290,290 75,000 3,365,290 2020-2024 3,016,099 - 3,016,099 - 3,016,099 Minimum lease payments$ 10,235,230 $ 319,773 $ 10,555,003 $ 479,856 $ 11,034,859 Less: Amounts representing interest (5,373,550) (67,455) (5,441,005) (63,278) (5,504,283) Present value of minimum lease payments 4,861,680 252,318 5,113,998 416,578 5,530,576 Less: Current portion (223,333) (52,124) (275,457) (64,105) (339,562) Long-Term Lease Obligation at June 30, 2009$ 4,638,347 $ 200,194 $ 4,838,541 $ 352,473 $ 5,191,014

(11) Fund Balances

Except for those required to comply with accounting standards, all reservations and designations of General Fund balance reflect City Code requirements or City Council action in the context of adoption of the City’s budget.

General Fund balance of $1,028,676 is reserved for goods and services ordered but not received by June 30, 2009.

General Fund designations at June 30, 2009, consisted of the following:

 Code of the City of Roanoke (1979), as amended, stipulates that, at the conclusion of each fiscal year, $250,000, to the extent available from any undesignated General Fund balance, shall be reserved for self-insured liabilities of the City. Subsequent to year end, this amount shall be transferred to the Risk Management Internal Service Fund for accumulation as a reserve for uninsured claims. The maximum balance of the reserve in the Risk Management Fund shall be 3% of total General Fund appropriations for the concluded fiscal year. As of June 30, 2009, $250,000 was reserved in the General Fund for self- insured liabilities.

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C-92 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

 $19,155,608 is designated for the budget stabilization reserve. The reserve was established to serve as a funding source for emergencies or unforeseen declines in revenues. The reserve is supported by the Budget Stabilization Policy which was adopted by City Council in May 2005. This policy states that the reserve minimum will be 5% of the General Fund budget with a target of 8%. As of June 30, 2009, this reserve is 7.45% of the fiscal year 2010 General Fund budget.

 $1,947,320 remains undesignated.

The Debt Service Fund balance of $1,161,895 is designated for future debt service payments.

The Capital Projects Fund balance of $17,529,842 is reserved for goods and services ordered but not received or paid by June 30, 2009. In addition, fund balance of $27,725,952 is designated for Future Years’ Expenditures and $3,959,606 is designated for Economic Community Development Reserve.

(12) Pensions and Deferred Compensation Plan

City employees participate in one of two different pension plans and a deferred compensation plan. The first plan is primarily for City employees, the City of Roanoke Pension Plan (Pension Plan). Sheriff's employees participate in the second plan, the Virginia Retirement System (VRS). All City employees may also participate in an Internal Revenue Code Section 457 deferred compensation plan.

Disclosure concerning these plans is as follows: City of Roanoke Pension Plan - Plan Description The Pension Plan is a cost-sharing multiple-employer defined benefit plan established by City Council and is included in the City's basic financial statements as a Pension Trust Fund. The Pension Plan was established by City Ordinance No. 8559 dated May 27, 1946, effective July 1, 1946. The Pension Plan covers substantially all employees of the City, all employees of the Roanoke Regional Airport Commission, and the Roanoke Valley Juvenile Detention Center, certain employees of the City of Roanoke School Board, the Roanoke Valley Resource Authority, and the Western Virginia Water Authority. The City is the major contributor of employer contributions to the Pension Plan. City Council appoints members of the Pension Plan Board of Trustees to administer the Pension Plan. The Pension Plan is not subject to the provisions of the Employee Retirement Income Security Act (ERISA) of 1974.

Effective July 1, 1984, the Pension Plan changed its name from the Employees’ Retirement System of the City of Roanoke, Virginia (ERS) to City of Roanoke Pension Plan. This change provided for an Employees’ Supplemental Retirement System (ESRS) which modified certain benefits as defined by the ERS. All employees covered under the provisions of the ERS at June 30, 1984, could elect to remain with the ERS or be covered under the provisions of the ESRS. Coverage under the ESRS was mandatory for all employees hired or rehired on or after July 1, 1984. On November 28, 1994, June 1, 1998, November 2, 1998, and June 5, 2000, City Council authorized the Pension Plan to offer members of the ERS an opportunity to transfer to the ESRS. The option was available from February 1, 1995 to May 16, 1995, July 1, 1998 through August 31, 1998, December 1, 1998 through December 31, 1998, and July 1, 2000 through July 31, 2000. Both the ERS and the ESRS share a common trust fund from which all benefits are paid without distinction as to the source of funds and are administered by the Board of Trustees. The Pension Plan provides retirement benefits as well as death and disability benefits.

Employees who are members of the ERS with 30 years of service or age 60 (normal retirement age) are entitled to an annual retirement benefit equal to 1/70 (1.429%) of their average final compensation (highest consecutive 12 months), excluding overtime, for each year of service. Employees may retire with 20 years of

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C-93 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

service and receive a reduced retirement benefit. For employees who are married at their retirement date, a joint and survivor annuity is payable monthly. If employees under age 60 terminate before rendering ten years of service, they forfeit the right to receive any Pension Plan benefits. There is no mandatory retirement age.

Employees who are members of the ESRS with 5 years or more of credited service and age 65 or over, general employees who have attained age 50 with age plus service equal to 80, and deputized police officers and firefighters who have attained age 45 with age plus service equal to 70, are entitled to an annual retirement benefit, payable monthly for life in an amount equal to 2.1% of their final average compensation for each year of credited service up to a maximum of 63%. Final average compensation is the employee’s average salary, excluding overtime, over the highest 36 consecutive months of credited service. Employees with 5 years of credited service may retire at age 55 and receive a reduced retirement benefit. Employees may elect to receive their retirement benefits in the form of a single life annuity or a joint and survivor annuity payable monthly from retirement. If employees under age 65 terminate before rendering five years of service, they forfeit the right to receive any Pension Plan benefits. There is no mandatory retirement age.

Effective July 1, 2000, an additional monthly supplement equal to the greater of (a) $159 or (b) 75% of the amount the City contributes toward the cost of a single active employee’s health insurance shall be paid for eligible retirees until the month in which the retiree attains age 65. Any member of the City of Roanoke Pension Plan who was an employee of one of the participating employers of the Pension Plan (not including employees of the City of Roanoke School Board) and who retired after earning 20 or more years of creditable service but prior to attaining the age of 65 is eligible for this supplement. This supplement is not available to retirees receiving the early retiree incentive plan supplement granted in 1991.

The City of Roanoke Pension Plan issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the City of Roanoke Retirement Office, Attention: Retirement Supervisor, P.O. Box 1220, Roanoke, Virginia 24006.

City of Roanoke Pension Plan - Funding Policy

The Pension Plan is noncontributory for employees. Employer contributions to the Pension Plan are based on a percentage of the annual compensation of the active members. The City’s contribution rate for the fiscal year ended June 30, 2009 was 15.42% of annual covered payroll.

City of Roanoke Pension Plan - Annual Pension Cost

For fiscal year 2009, the City’s annual pension cost of $9,783,450 was equal to the City’s required and actual contributions. As stipulated by City Code, the required contribution was determined as part of the June 30, 2007 actuarial valuation using the projected unit credit actuarial cost method. Any unfunded/(overturned) actuarial liability is amortized using the level percentage of pay amortization method over a 20-year closed amortization period. The actuarial assumptions included (a) 7.75% investment rate of return, (b) projected salary increases ranging from 3.0% to 5.5% per year, and (c) 2.0% cost-of-living adjustment effective July 1, 2007. Projected salary increases include an inflation component of 2.5%. The actuarial value of the assets is determined using a method designed to smooth the impact of market fluctuations. The actuarial value recognizes annual appreciation and depreciation over a five-year period. The following information is provided related to trend information.

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C-94 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Fiscal Year Annual Pension Percentage of APC Net Pension Ended Cost (APC) Contributed Obligation June 30, 2009 $9,783,450 100% -0- June 30, 2008 10,081,410 100% -0- June 30, 2007 9,236,475 100% -0-

Virginia Retirement System - Plan Description

The City contributes to the Virginia Retirement System, an agent and cost-sharing multiple-employer defined benefit pension plan administered by the Virginia Retirement System (VRS or the System). All full-time, salaried permanent employees of participating employers must participate in the VRS. Benefits vest after five years of service. Employees are eligible for an unreduced retirement benefit at age 65 with five years of service (age 60 with five years of service for participating local law enforcement officers, firefighters, and sheriffs) or at age 50 with at least 30 years of service if elected by the employer (age 50 with at least 25 years of service for participating local law enforcement officers, firefighters and sheriffs) payable monthly for life in an amount equal to 1.7% of their average final salary (AFS) for each year of credited service, and 1.85% of their average final salary (AFS) for each year of credited service for elected Sheriffs. Benefits are actuarially reduced for retirees who retire prior to becoming eligible for full retirement benefits. In addition, retirees qualify for annual cost-of-living increases limited to 5% per year beginning in their second year of retirement. Average final compensation is defined as the highest consecutive 36 months of salary. Participating local law enforcement officers, firefighters and sheriffs may receive a monthly benefit supplement if they retire prior to age 65. The VRS also provides death and disability benefits. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia. The System issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information for VRS. A copy of that report may be obtained by writing the System at P.O. Box 2500, Richmond, VA 23218-2500.

Virginia Retirement System - Funding Policy

Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5% of their annual salary to the VRS. This 5% member contribution may be assumed by the employer. The City has assumed the employee's 5% contribution. In addition, the City is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the Code of Virginia and approved by the VRS Board of Trustees. The City's contribution rate for the fiscal year ended June 30, 2009 was 11.27% of annual covered payroll.

Virginia Retirement System – Funded Status and Funding Progress

As of June 30, 2007, the most recent actuarial valuation date, the plan 89.16% funded. The actuarial accrued liability for benefits was $38.7 million, and the actuarial value of assets was $34.5 million, resulting in an unfunded actuarial accrued liability (UAAL) of $4.2 million. The covered payroll (annual payroll of active employees covered by the plan) was $8.4 million, and the ratio of the UAAL to the covered payroll was 50.06%.

The schedule of funding progress, presented as RSI following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.

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C-95 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Virginia Retirement System - Annual Pension Cost

For fiscal year 2009, the City’s annual pension cost of $962,792 was equal to the City’s required and actual contributions. The required contribution was determined as part of the June 30, 2006 actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 7.5% investment rate of return, (b) projected salary increases ranging from 3.75% to 5.60% per year, and (c) 2.5% per year cost-of- living adjustments. Both (a) and (b) included an inflation component of 2.5%. Any unfunded actuarial liability is amortized as a level percentage of payroll on an open basis within a period of 20 years. The actuarial value of the City's assets is equal to the modified market value of assets. This method utilizes techniques which recognize the excess (shortfall) between expected and actual investment income over a five year period, with the restriction that the actuarial asset value cannot be less than 80% or more then 120% of market value.

The following information related to trend information is provided.

Fiscal Year Annual Pension Percentage of APC Net Pension Ended Cost (APC) Contributed Obligation June 30, 2009 $962,792 100% -0- June 30, 2008 962,891 100% -0- June 30, 2007 937,184 100% -0-

Component Unit

Defined Benefit Pension Plans

The School Board participates in and contributes to three pension systems. Professional and non- professional employees of the School Board participate in the Virginia Retirement System (VRS). Professional employees participate in a VRS statewide teacher cost-sharing pool, and non-professional employees hired after July 1, 2006 participate as a separate group in the agent multiple-employer retirement system. Operational, maintenance and food service (non-professional) employees hired prior to July 1, 2006 participate in the City of Roanoke Pension Plan (Plan). Disclosure concerning these three plans is as follows:

Virginia Retirement System – Statewide Teacher Cost-Sharing Pool

A. Plan Description

The School Board contributes to a cost-sharing multiple-employer defined benefit pension plan administered by the Virginia Retirement System (System). All full-time, salaried permanent employees of participating employers, with the exception of non-professional employees must participate in this VRS plan. Benefits vest after 5 years of service. Employees are eligible for an unreduced retirement benefit at age 65 with 5 years of service and at age 50 with 30 years of service for participating employers payable monthly for life in an amount equal to 1.7 percent of their average final compensation (AFC) for each year of credited service. Benefits are actuarially reduced for retirees who retire prior to becoming eligible for full retirement benefits. In addition, retirees qualify for an annual cost-of-living adjustment (COLA) beginning in their second year of retirement. The COLA is limited to 5% per year. Average final compensation is defined as the highest consecutive 36 months of reported salary. The VRS also provides death and disability benefits. Title 51.1 of the

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C-96 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia.

The VRS issues a publicly available comprehensive annual financial report that includes basic financial statements and required supplementary information for VRS. A copy of that report may be obtained from their website at http://www.varetire.org/Pdf/Publications/2008annurept.pdf or by writing to the System’s Chief Financial Officer at P. O. Box 2500, Richmond, VA 23218-2500.

B. Funding Policies

Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5 percent of their annual reported compensation to the VRS. This 5 percent member contribution may be assumed by the employer. The Roanoke City School Board has assumed the employee's 5 percent contribution. In addition, the School Board is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the statute and approved by the VRS Board of Trustees. The School Board's contribution rate for the fiscal year ended June 30, 2009, was 13.81 percent of covered payroll (including employee share of 5% paid by their employer). The following table shows total employer and employee contributions made to the VRS statewide teacher pool for professional employees by the School System for the prior three years:

Total % of Annual Annual Covered Contributions Covered Payroll Payroll June 30, 2009 $10,315,279 13.81 $74,529,030 June 30, 2008 11,015,768 10.3 72,500,155 June 30, 2007 9,727,511 9.2 68,503,602

C. Annual Required Contribution

Public School Division professional employees participate in a VRS statewide teacher cost-sharing pool. For 2009, the School Board's annual required contribution was $10,315,279. The required contribution was based on an actuarial valuation. The contribution requirements for the School Board were equal to the actual contributions for 2009. Total School Board payroll for 2009 was $92,072,446. Payroll covered by VRS for School Board employees was $74,529,030. The following information related to trend information is provided.

Annual Required Fiscal Year Contributions Percentage of ARC Ended (ARC) Contributed June 30, 2009 $10,315,279 100% June 30, 2008 11,015,768 100% June 30, 2007 9,727,511 100%

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C-97 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Virginia Retirement System – Non-Professional’s Agent Plan

A. Funded Status and Funding Progress

As of June 30, 2008, the most recent actuarial valuation date, the plan was 256.36% funded. The actuarial accrued liability for benefits was $103,514, and the actuarial value of assets was $265,363, resulting in an unfunded (over-funded) actuarial accrued liability (UAAL) of $(161,849). The covered payroll (annual payroll of active employees covered by the plan) was $3,521,287, and the ratio of the UAAL to the covered payroll was (4.6)%.

The schedule of funding progress, presented as required supplemental information (RSI) following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liability (AAL) for benefits.

B. Annual Pension Cost

Public School Division non-professional employees hired after July 1, 2006 participate in an agent multiple-employee retirement plan. For 2008, the School Board's contributions to the plan were equal to the annual required contribution and annual pension cost for each year. The annual and required contribution was determined through a June 30, 2007 actuarial valuation using the Entry Age Normal actuarial cost method. The actuarial assumptions included a) an investment return rate of 7.5%, b) an annual cost-of-living adjustment of 2.5%, and c) salary increases ranging between 3.75% and 5.6% depending on the member’s service and classification. Total School Board payroll for 2009 was $92,072,446. Payroll covered by VRS for School Board non-professional employees was $3,521,287.

City of Roanoke Pension Plan

A. Plan Description

Effective July 1, 2006 this plan was closed to new employees. As of that date, new non-professional employees of RCPS are members of a VRS agent multiple-employer retirement plan which is described in detail in the following section.

The Pension Plan is a cost-sharing multiple-employer defined benefit plan established by City Council and is included in the City's financial statements as a Pension Trust Fund. The Pension Plan was established by City Ordinance No. 8559, dated May 27, 1946, and effective July 1, 1946. The Pension Plan covers certain non-professional employees of the School Board who were hired prior to July 1, 2006. City Council appoints the Pension Plan Board of Trustees who are responsible for administering the Pension Plan. The Pension Plan is currently not subject to the provisions of the Employee Retirement Income Security Act (ERISA) of 1974.

Effective July 1, 1984, the Pension Plan changed its name from the Employees' Retirement System of the City of Roanoke, Virginia (ERS) to City of Roanoke Pension Plan. This change provided for an Employees' Supplemental Retirement System (ESRS) which modified certain benefits as defined by the ERS. All employees covered under the provisions of the ERS at June 30, 1984, could elect to remain with the ERS or be covered under the provisions of the ESRS. Coverage under the ESRS was mandatory for all employees hired or rehired on or after July 1, 1984. On November 28, 1994, June

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C-98 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

1, 1993, November 2, 1998, and June 5, 2000, City Council authorized the Pension Plan to offer members of the ERS an opportunity to transfer to the ESRS. The option was available from February 1, 1995 to May 16, 1995, July 1, 1994 through August 31, 1998, December 1, 1998 through December 31, 1998, and July 1, 2000 through July 31, 2000. Both the ERS and the ESRS share a common trust fund from which all benefits are paid without distinction as to the source of funds and are administered by the Board of Trustees. The Pension Plan provides retirement benefits as well as death and disability benefits.

Employees who are members of the ERS with 30 years of service or age 60 (normal retirement age) are entitled to an annual retirement benefit equal to 1/70 (1.429 percent) of their average final compensation (highest consecutive 12 months), excluding overtime, for each year of service. Employees may retire with 20 years of service and receive a reduced retirement benefit. For employees who are married at their retirement date, a joint and survivor annuity is payable monthly. If employees under age 60 terminate before rendering ten years of service, they forfeit the right to receive any Pension Plan benefits. There is no mandatory retirement age.

Employees who are members of the ESRS with 5 years or more of credited service and age 65 or over, and general employees who have attained age 50 with age plus service equal to 80, are entitled to an annual retirement benefit, payable monthly for life in an amount equal to 2.1 percent of their final average compensation for each year of credited service up to a maximum of 63 percent. Final average compensation is the employee's average salary, excluding overtime, over the highest 36 consecutive months of credited service. Employees with 5 years of credited service may retire at age 50 and receive a reduced retirement benefit. Employees may elect to receive their retirement benefits in the form of a single life annuity or a joint and survivor annuity payable monthly from retirement. If employees under age 65 terminate before rendering five years of service, they forfeit the right to receive any Pension Plan benefits. There is no mandatory retirement age.

The City of Roanoke Pension Plan issues a publicly available comprehensive annual financial report that includes basic financial statements and required supplementary information. That report may be obtained by writing to the City of Roanoke Retirement Office, ATTN: Retirement Administrator, P.O. Box 1220, Roanoke, Virginia 24006.

B. Funding Policy

School Board employees do not contribute to the Pension Plan. The School Board's contribution is based on a percentage of the annual compensation of the active members. The contribution rate was 13.03% of annual covered payroll for the year ended June 30, 2009.

C. Annual Required Contribution

For fiscal year 2009, the School Board's annual required contribution was $715,080. The required contribution was based on an actuarial valuation. The contribution requirements for the School Board were equal to the actual contributions for 2009. Total School Board payroll for 2009 was $92,072,446. Payroll covered by City Retirement for School Board employees was $5,487,953.

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C-99 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Information related to trend information is provided below.

Annual Required Fiscal Year Contribution Percentage of ARC Ended (ARC) Contributed June 30, 2009 $715,080 100% June 30, 2008 799,025 100% June 30, 2007 787,184 100%

(13) Other Postemployment Benefit Plan

Primary Government

A. Plan Description

Employees, with 15 years of active service and under the age of 65, who retire from the City of Roanoke participate in the City of Roanoke healthcare plan and benefit from a lower insurance rate as a result of inclusion in the plan with active City employees. This lower rate results in an implicit benefit that qualifies as an Other Post-employment Benefit (OPEB) as defined by GASB Statement No. 45. The City plan is a single employer OPEB plan and is administered by the City of Roanoke to provide medical insurance to eligible retirees. The OPEB for City retirees was authorized by the City Code. The City of Roanoke healthcare plan does not issue a stand alone financial report.

B. Funding Policies

The contribution requirements of the City of Roanoke healthcare plan members and the City are established and may be amended by City Council. The required contribution is based on projected pay-as-you-go financing requirements under which contributions are made in amounts sufficient to cover benefits paid, administrative costs, and anticipated inflationary increases. For health insurance, the retiree contributes 100% of all premium payments. For the fiscal year ended June 30, 2009, the retirees contributed $1,323,000 to the City of Roanoke healthcare plan for health insurance. The City contributed $424,000 to a qualified trust as defined by GASB Statement No. 45, to fully fund the annual required contribution of $1,747,000 for fiscal year 2009. It is the City’s intent to fully fund the annual required contribution each year. Beginning January 1, 2010, retirees will pay the blended rate plus an additional contribution based on their selected benefit tier.

C. Annual OPEB Cost and Net OPEB Obligation

Effective July 1, 2007, the City’s annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liability over a period not to exceed thirty years.

The plan contains both active employees and retirees. Although the City’s annual payments were for combined participants, the share of claims related to retirees represents a higher percentage of the total claims. Accordingly, contributions reflected in the OPEB calculations have been adjusted to reflect that a portion of contributions for active employees are subsidizing the retiree claims.

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C-100 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

The following table shows the components of the City’s annual OPEB cost for the year, the amounts contributed to the plan, and changes in the City’s net OPEB obligation:

City of Roanoke Healthcare Plan

Annual Required Contribution$ 1,747,000 Interest on net OPEB Obligation - Adjustment to annual required contribution: - Annual OPEB Cost 1,747,000 Contributions made (1,747,000) Increase (decrease) in net OPEB obligation - Net OPEB obligation July 1, 2008 - Net OPEB obligation June 30, 2009$ -

The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the current year was as follows:

Percentage Fiscal Year Annual of Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation June 30, 2009$ 1,747,000 100.00%$ - June 30, 2008$ 1,398,000 100.00%$ -

D. Funded Status and Funding Progress

As of June 30, 2008, the most recent actuarial valuation date, the City of Roanoke healthcare plan was 4% funded. The actuarial accrued liability for benefits was $19,283,000, and the actuarial value of assets was $362,000 resulting in an unfunded actuarial accrued liability (UAAL) of $18,921,000. The covered payroll (annual payroll of active employees covered by the City plan) was $75,000,000, and the ratio of the UAAL to the covered payroll was 25.2%.

E. Actuarial Valuations

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the Plan and the annual required contributions of the City and Plan members are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress, presented as required supplementary information following these notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities.

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C-101 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

F. Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive Plan (the Plan as understood by the employer and the Plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the City and Plan members at that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the June 30, 2008 valuation, the projected unit credit cost method was used. The actuarial assumptions included a 2.5% inflation rate and a 7% rate of return (net of administrative expenses). Because the City has begun funding the plan, the rate of return was based on the projected returns of the Virginia Pooled OPEB Trust. Annual health care costs are assumed to increase 6.2% in the first year of valuation. Future annual increases are assumed to grade from 7.8% to 4.1% over an eighty year period. The UAAL is being amortized as a level percentage of projected payrolls on a closed basis. The remaining amortization period at June 30, 2008 was 30 years.

Component Unit

A. Plan Descriptions

Roanoke City Public Schools currently provides medical and dental insurance benefits to its retirees and their eligible dependents that elect to stay in the plans. At retirement, retirees may stay in a Key Care 20 plan offered by the Schools through Anthem. This plan has $20/$40 office visit co-pays and covers prescription drugs. Eligible dependents may remain on the plan as long as the retiree still subscribes and is eligible. Retirees and their spouses may be covered by the plan until age 65 or until they become eligible for Medicare. The dental plan is a comprehensive plan offered by the Schools through Delta Dental. Retirees and their spouses may stay in this for a period of up to 18 months after separation from the district or for a period of 60 months if they retire under the Early Retirement Opportunity Program (EROP). If the retiree dies before age 65, their covered dependents may stay in the plan for a period up to 36 months through COBRA.

B. Funding Policies

The contribution requirements of the Roanoke City Public Schools Healthcare Plan members and the Roanoke City Public Schools are established and may be amended by the Roanoke City School Board. The required contribution is based on projected pay-as-you-go financing requirements under which contributions are made in amounts sufficient to cover benefits paid, administrative costs, and anticipated inflationary increases. For health insurance, the School Board contributes 0% of all premium payments, and the retirees contribute 100%. Employees who retire on or before July 1, 2010, participate in the plan at a group rate which is blended with that of active employees. Employees who retire after that date will pay an unblended group rate. For the fiscal year ended June 30, 2009, the Roanoke City Public Schools retirees contributed $890,966 to the Roanoke City Public Schools. The retirees' claims amounted to $1,366,674 for the same time period.

C. Annual OPEB Cost and Net OPEB Obligation

Roanoke City Public Schools’ annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the

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parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liability over a period not to exceed thirty years.

The following table shows the components of the Roanoke City Public School’s annual OPEB cost for the year, the amounts contributed to the Plan, and changes in the City’s net OPEB obligation:

Roanoke City Public Schools Healthcare Plan

Annual Required Contribution$ (1,552,199) Interest on net OPEB Obligation 120,146 Adjustment to annual required contribution: (167,018) Annual OPEB Cost (1,599,071)

Contributions made (261,777)

Decrease in net OPEB obligation (1,860,848)

Net OPEB obligation at July 1, 2008 3,003,644

Net OPEB obligation at June 30, 2009$ 1,142,796

The Roanoke City Public Schools’ annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation for the current year were as follows:

Percentage Fiscal Year Annual Actual of Annual OPEB Net OPEB Ended OPEB Cost Contribution Cost Contributed Obligation June 30, 2009$ (1,599,071) $ 261,777 16.37%$ 1,142,796 June 30, 2008 3,259,698 256,054 7.86% 3,003,644

D. Funded Status and Funding Progress

As of June 30, 2009, the most recent actuarial valuation date, the Roanoke City Public Schools’ Healthcare Plan was 0.0% funded. The actuarial accrued liability for benefits was $ 7,964,432, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $ 7,964,432. The covered payroll was $85,979,029 and the ratio of the UAAL to the covered payroll was 9.26%.

E. Actuarial Valuations

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the Plan and the annual required contributions of the Roanoke City

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Public Schools and Plan members are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress, presented as required supplementary information following these notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities.

The actuarial valuation of the liabilities as of June 30, 2009 is based on a closed group. Current employees and retirees only are considered; no provision is made for future hires. For the five-year projection, the actuarial valuation has assumed one new entrant will enter the plan for every active employee who either retires or terminates from Roanoke City Public Schools. Therefore, the active population will remain at a constant level based on the June 30, 2008 count.

F. Actuarial Methods and Assumptions

The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the June 30, 2009 valuation, the projected unit credit actuarial cost method was used. Under this method, future benefits are projected and their present value is determined. The present value is then allocated over the period from date of hire to the full eligibility date.

The actuarial assumptions included a 4% discount rate. Annual medical rates are expected to decrease 1% each year. For 2009 the rate is 8%. Annual dental rates are expected to increase 3% each year. The UAAL is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at June 30, 2009 was 24 years.

(14) Pollution Remediation Obligation

In accordance with GASB No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, the City is obligated to address pollution remediation activities associated with the commencement of asbestos abatement as part of the major renovations of William Fleming High School, a City owned building. The renovation project began in 2006. As part of the planned renovations, floor tiles containing asbestos will be removed and abated in accordance with the federal regulations promulgated by the Environmental Protection Agency. The total cost of pollution remediation was $350,222 with an outstanding obligation of $326,222 at June 30, 2009, representing work contracted but not yet completed. The completion of the pollution remediation at the school is expected in fiscal year 2010.

(15) Risk Management

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Risk management activities are accounted for in the Risk Management Internal Service Fund.

At the conclusion of each fiscal year, $250,000 is designated in the General Fund fund balance for self- insurance. This amount is transferred to the Risk Management Fund in the subsequent year. Claims expenditures/expenses and liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. These losses include an estimate for claims that have been incurred but not reported (IBNR) based on an annual actuarial study performed by a third party.

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C-104 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

The City has general liability and automobile liability insurance through a commercial insurer. This coverage includes a $1 million deductible, per occurrence, and provides indemnity to cover settlements that exceed this amount. The amount of settlements did not exceed insurance coverage for each of the past three years.

The City has property insurance coverage with a $50,000 per occurrence deductible. This coverage also includes the property (building and contents) coverage for the Roanoke Civic Center; however, the deductible that applies to these buildings is $5,000 per occurrence. Effective as of January 1, 2009, the Civic Center is now managed by Global Spectrums, Incorporated. As a part of their contract with the City, they are responsible for securing the liability coverage to address the unique exposures of this facility and its many events. Flood insurance is purchased through the Federal Emergency Management Agency (FEMA) to protect properties that are located in designated flood zones. Boiler and machinery insurance is purchased to protect various City properties. Pollution legal liability coverage is purchased and provides coverage of up to $5 million over a three-year period with a $100,000 deductible per occurrence. The amount of insurance claims did not exceed coverage limits for each of the past three years.

The City purchases a liability policy and an accidental injury medical policy to protect up to 268 volunteers who perform tasks on behalf of the City. The City purchases medical malpractice liability insurance to protect its medical personnel. The amount of settlements did not exceed insurance coverage for each of the past three years.

The City is self-insured for employee health insurance with stop loss provisions to limit catastrophic claims. The City is self-insured for workers' compensation but, effective August 1, 2008, purchased a workers’ compensation excess policy covering any claim after that date exceeding $750,000.

Included in long-term liabilities at June 30, 2009 were claims payable of $15,922,966 as a provision for unasserted claims. The City's policy is to fully fund the liability on an ongoing basis and, as such, resources required to settle liabilities resulting from claims are available in cash and investments. Other risks insured through the City's self-insurance program adequately covered any claims incurred over each of the past three years.

Changes in the reported liability during the prior two years are shown in the following tabulation:

2008-09 2007-08 Claims liability at July 1$ 12,854,983 $ 10,091,379 Claims incurred 17,560,891 19,143,799 Claims payments (14,492,908) (16,380,195) Claims liability at June 30$ 15,922,966 $ 12,854,983

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C-105 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Surety Bond coverage (unaudited) is as follows:

Fidelity and Deposit Company of Maryland: Amount City Council $1,000,000 All City Employees – Blanket Bond 1,000,000 Clerk of the Circuit Court 100,000 Treasurer – Public Official Bond 1,000,000 Treasurer – Crime Bond 200,000 Treasurer’s Office – Crime Bond 100,000 Sheriff 80,000 Commissioner of the Revenue 3,000 Pension Plan Trustees/Administrators 2,000,000

Self-insurance program through Commonwealth of Virginia Division of Risk Management: City Treasurer’s Employees – Blanket Bond 750,000 All Other Constitutional Officers’ Employees – Blanket Bond 500,000

School Board Component Unit

The School Board is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Risk management activities are accounted for in the General Fund. Claims expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. These losses include an estimate for claims that have been incurred but not reported (IBNR) primarily based upon past claims and an estimate by a qualified claims adjuster with a third party administrator. Workers’ compensation claims have been estimated by an actuary, and in addition to the current portion of that estimate reflected in the chart below, $450,000 of unreserved fund balance has been designated for the long-term portion of that liability.

The School Board has general liability, vehicular liability, and property insurance coverage’s through commercial insurers through the Virginia Municipal Liability Pool. There have been no significant changes in insurance coverage, or settlements exceeding insurance coverage, during the past three years.

The School Board is self-insured for workers' compensation claims, as well as for health and dental insurance claims. The table on the following page shows the activity in the accounts for the past two years.

2008-09 2007-08 Claims liability at July 1 $ 5,424,565 $ 5,157,549 Claims incurred 17,111,211 18,303,345 Claims payments (16,011,283) (18,036,329) Claims liability at June 30 $ 6,524,493 $ 5,424,565

(16) Joint Ventures

Hotel Roanoke Conference Center Commission

The City is a participant with Virginia Polytechnic Institute and State University (Virginia Tech) in a joint

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venture to establish and operate a publicly-owned Conference Center in the City of Roanoke in conjunction with the Hotel Roanoke, which is adjacent to the Conference Center. The Hotel Roanoke Conference Center Commission (HRCCC) is composed of six members, three of whom are appointed by City Council and three of whom are appointed by Virginia Tech. The HRCCC has the authority to issue debt, and such debt is the responsibility of the HRCCC. The City has issued general obligation bonds in its name for its share of the Conference Center construction costs and is obligated to repay this debt.

The intention of the HRCCC is to be self-supporting through its user fees. The City and Virginia Tech share equally in any operating deficit or additional funding needed for capital expenditures. The City has no equity interest in the HRCCC; however, as previously mentioned, additional funding or subsidies may be necessary. For the fiscal year ended June 30, 2009, the City contributed $80,000 to the HRCCC. Financial statements may be obtained from the Hotel Roanoke Conference Center Commission, 106 Shenandoah Avenue, Roanoke, Virginia 24016.

Roanoke Valley Regional Fire-EMS Training Center

The City along with the County of Roanoke, City of Salem, and Town of Vinton jointly operate a fire/EMS training center (Center). The Center is governed by a committee designated by the participating jurisdictions. New fire-EMS recruits are required to take a 17 weeks training course at the facility before being assigned to a station. After completion of the training, the new recruits are state certified. Each jurisdiction is responsible for a percentage of the annual operating costs of the facility. The City is responsible for 44% of the annual operating costs. For the fiscal year ended June 30, 2009, the City paid $39,000 of the total annual operating costs and $60,000 to the Debt Service Fund for principal and interest on an inter-fund loan related to the construction of the facility. Financial statements may be obtained from the Roanoke Valley Regional Fire- EMS Training Center, 1220 Kessler Mill Road, Salem, Virginia 24153.

(17) Jointly Governed Organizations

Roanoke Valley Regional Board

The Counties of Botetourt, Craig, and Franklin, and the Cities of Roanoke and Salem jointly participate in a regional education program for severely disabled students operated by the Roanoke Valley Regional Board (Regional Board). The Regional Board is composed of five members, one from each participating locality. The City has control over budget and financing only to the extent of representation by the one board member appointed. Each locality’s financial obligation is based on its proportionate share of students attending the regional program. For the fiscal year ended June 30, 2009, the City of Roanoke School Board, a component unit of the City, remitted approximately $2,208,000 to the Regional Board for services.

Roanoke Valley Resource Authority

The City of Roanoke, the County of Roanoke, and the Town of Vinton jointly participate in the Roanoke Valley Resource Authority (Authority), which operates the regional sanitary landfill, waste collection and transfer station, and related treatment facilities. The Authority is governed by a board composed of seven members designated by the participating jurisdictions. City Council appoints two members. The City has control over the budget and financing for the Authority only to the extent of representation by the board members appointed. The participating localities are each responsible for their pro rata share, based on population, of any year-end operating deficit. For the fiscal year ended June 30, 2009, the City remitted approximately $2,091,000 to the Authority for services.

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C-107 CITY OF ROANOKE, VIRGINIA NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009

Roanoke Regional Airport Commission

The City and Roanoke County formed the Roanoke Regional Airport Commission (Airport Commission) in 1986 to own and operate a regional airport. The Airport Commission is composed of five members. Three commissioners are appointed by Roanoke City Council and two are appointed by the Roanoke County Board of Supervisors. Airport operations are financed by user fees. The City and Roanoke County are each responsible for their pro rata share, based on population, of any year-end operating deficit or unfunded capital projects if any additional funding is required. The Airport Commission may incur debt and is responsible for paying all outstanding debt. The City has control over budget and financing only to the extent of representation by the board members appointed. No subsidy has been required since inception.

Roanoke Valley Detention Commission

The Counties of Botetourt, Franklin and Roanoke and the Cities of Roanoke and Salem formed the Roanoke Valley Detention Commission (Commission) in 1998 to renovate, expand and operate a detention facility for juveniles. The Commission is governed by a six member board. Roanoke City Council appoints two members. Each locality’s financial obligation is based on the number of juveniles housed at the facility. The Commission has the authority to issue debt, and such debt is the responsibility of the Commission. For the fiscal year ended June 30, 2009, the City remitted approximately $1,586,000 to the Roanoke Valley Detention Commission in per diem charges for juveniles housed by the Commission.

Blue Ridge Behavioral Healthcare

The Counties of Botetourt, Craig and Roanoke, and the Cities of Roanoke and Salem formed the Blue Ridge Behavioral Health Care (BRBH) to provide a system of comprehensive community mental health, mental retardation and substance abuse services. BRBH is governed by a sixteen member board. City Council appoints three members. Each locality’s financial obligation is based on the type and amount of services performed for individuals in the locality. For the fiscal year ended June 30, 2009, the City remitted approximately $818,000 to BRBH.

Fifth Planning District Commission Disability Services Board

The Counties of Alleghany, Botetourt, Craig and Roanoke, the Town of Vinton, and the Cities of Roanoke, Salem and Covington jointly participate in the Fifth Planning District Disability Services Board (Board). The Board provides input to state and local agencies on service needs and priorities of persons with physical and sensory disabilities. City Council appoints one member to the sixteen member board. The City has no continuing financial obligation to the Board. The Fifth Planning District Commission Disability Services Board ceased existence effective May 2009.

Roanoke Valley Regional Animal Control Facility

The City, the Counties of Roanoke and Botetourt, and the Town of Vinton jointly participate on the Advisory Board, which is responsible for the general fiscal and management policies for the Roanoke Valley Regional Animal Control Facility (RVRACF). Both animal control and animal education facilities are adjacent to each other and owned and operated by the Roanoke Valley Society for the Prevention of Cruelty to Animals (RVSPCA). The animal control facility was financed by bonds in the amount of $3.5 million which were issued by the RVSPCA. Each participating locality pays monthly amounts for its share of operating costs, debt service, and to fund reserves for operating and maintenance needs of the RVRACF based on the locality’s average use of the facility. During the year ended June 30, 2009, the City’s share was 59%, and the City remitted approximately $641,000 for its share of RVRACF expenses. In the event the total net expenses,

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for a fiscal year, exceed the total amounts collected from the participating localities, each participating locality shall pay an amount equal to the excess of the net expenses multiplied by the use percentage for that locality.

Western Virginia Water Authority

The City and the County of Roanoke combined its water and water pollution control functions to form the Western Virginia Water Authority (WVWA) on July 1, 2004. The WVWA is responsible for the supply, treatment, distribution, and transmission of water and the collection and treatment of wastewater. The WVWA is governed by a seven member board consisting of three City appointees, three County appointees, and one additional member selected by the other six. The City has control over the budget and financing for the WVWA only to the extent of representation by the board members appointed. Upon formation of the WVWA, the City retained $35.6 million of general obligation bonds, which are contractually to be repaid by the WVWA in accordance with its operating agreement. During fiscal year 2009, $3.4 million in locality compensation payments were paid by the WVWA to the City to cover principal and interest payment on the bonds. As of June 30, 2009, the remaining principal balance of these bonds was $24.3 million and this amount was recorded as a receivable Due from Other Governments in the Statement of Net Assets of the basic financial statements. On November 5, 2009, City Council in a joint meeting with the Board of Directors of the WVWA and the Boards of Supervisors of both Roanoke and Franklin Counties, approved the reorganization of the WVWA allowing Franklin County, Virginia to join the Authority. Each participating entity concurrently adopted resolutions to the same effect.

Virginia’s First Regional Industrial Facility Authority

The Cities of Roanoke, Radford, Salem; the Counties of Pulaski, Montgomery, Wythe, Bland, Roanoke, Giles, Craig, Bland; and the Towns of Pulaski, Dublin, Pearisburg and Narrows all participate in the Virginia’s First Regional Industrial Facility Authority. The Authority promotes Economic Development in Virginia’s First Region and is governed by a board composed of twenty-nine members, two of which are appointed by Roanoke City Council. The City has control over the budget and financing for the Authority only to the extent of representation by the board members appointed. Each locality is obligated to annual dues of $5,000. Authority member localities, who are also participants in the Regional Commerce Park, are obligated to an annual amount based on the number of shares owned. The City owns 10,000 shares and has an annual obligation of $27,500. For the fiscal year ended June 30, 2009, the City remitted $32,500 to Virginia’s First Regional Industrial Facility Authority.

(18) Related Organizations

Industrial Development Authority of the City of Roanoke, Virginia

The Industrial Development Authority issues low-interest, tax-free industrial revenue bonds in its name to acquire and improve property that is sold or leased to enterprises locating or remaining in the City. City Council is responsible for appointing the seven member board; however, the City, the state, and any political subdivision thereof is not obligated in any manner for the repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of June 30, 2008, there were 14 series of Industrial Revenue Bonds outstanding, with an aggregate principal amount payable of approximately $530 million. June 30, 2009 data will not be available until the next fiscal year.

Roanoke Redevelopment and Housing Authority

The Roanoke Redevelopment and Housing Authority (Housing Authority) is a political subdivision of the State created to provide low income and subsidized housing. Commissioners of the Housing Authority are

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appointed by City Council. The Housing Authority is financially independent of the City and has administrative control of its operations, but its overall housing plans require the approval of City Council. The City provides a financial benefit through federal pass-through grant funds awarded to the Housing Authority on a contractual basis to implement certain grant programs. The Housing Authority also directly receives other federal and state subsidies and rents for operating its housing programs. During the year ended June 30, 2009, the City remitted approximately $1,478,000 to the Housing Authority.

(19) Commitments, Contingencies and Other Matters

Litigation - The City is named as a defendant in litigation involving claims for personal injury or property damages. City officials estimate that any ultimate liability not covered by insurance would not have a material effect on the City’s financial position.

Grants - Federal grant programs in which the City participates have been audited in accordance with the provisions of the Office of Management and Budget Circular A-133. In addition, these grant programs are subject to financial and compliance audits by the federal government, which may result in disallowed expenditures. Based on prior experience, City management believes such disallowances, if any, would not have a material effect on the City’s financial position.

Roanoke River Flood Reduction Project - Roanoke River Flood Reduction is a significant capital project of the City that provides flood control structures along the Roanoke River as well as recreational trails. This project began in 1990 in an attempt to rectify flooding issues, and it continues today. The total project budget, including both the federal and local share, exceeds $70 million.

Project components are funded at varying shares between the local and federal government depending on the nature of the component (i.e., structural, recreational, etc.) In August 2009, the federal government detected errors in its cost allocation methodology which resulted in a shortfall of City funding to the project. Based on this finding, an additional funding requirement in the range of $1.7 million to $1.9 million is anticipated. The City and the United States Army Corps of Engineers continue to review all aspects of project cost in an effort to arrive at a settlement amount and an agreeable timeframe for repayment. No liability related to this matter has been recorded by the City as of June 30, 2009.

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C-112 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2009 (UNAUDITED)

(1) Budgetary Comparison Schedule - General Fund

Actual Variance from Original Final (Budgetary Final Budget Budget Budget Basis) Over/(Under) Budgetary Fund Balance, July 1 $ 21,042,707 $ 21,042,707 $ 21,042,707 $ - Resources (Inflows): General Property Taxes$ 101,584,000 $ 101,584,000 $ 102,177,312 $ 593,312 Other Local Taxes 74,724,000 74,724,000 71,341,264 (3,382,736) Permits, Fees, and Licenses 1,266,000 1,266,000 1,053,443 (212,557) Fines and Forfeitures 1,535,000 1,535,000 1,558,517 23,517 Revenue from Use of Money and Property 784,000 784,000 936,819 152,819 Charges for Services 10,763,000 10,905,435 11,616,042 710,607 Intergovernmental 68,716,000 72,391,374 71,119,903 (1,271,471) Miscellaneous 522,000 533,000 670,344 137,344 Transfers from Other Funds - 33,333 33,333 - Amounts Available for Appropriation $ 280,936,707 $ 284,798,849 $ 281,549,684 $ (3,249,165)

Charges to Appropriations (Outflows): General Government City Treasurer$ 1,008,320 $ 1,054,392 $ 1,048,714 $ (5,678) Commissioner of the Revenue 1,086,940 1,068,791 1,068,790 (1) City Council 180,142 211,093 211,045 (48) City Council - Mayor 6,169 5,169 4,330 (839) City Council - Vice Mayor 5,876 5,453 4,601 (852) City Council - Council Member 4,676 3,126 1,606 (1,520) City Council - Council Member 5,876 5,373 4,750 (623) City Council - Council Member 4,676 2,431 2,431 - City Council - Council Member 4,676 3,785 3,003 (782) City Council - Council Member 4,676 4,086 3,863 (223) City Council - Council Member - 901 548 (353) City Attorney 937,495 931,974 909,714 (22,260) City Clerk 571,603 557,647 552,085 (5,562) Municipal Auditing 646,428 643,695 642,360 (1,335) Department of Finance 2,116,213 2,097,628 2,097,627 (1) Office of Billings and Collections 761,573 747,214 735,733 (11,481) Real Estate Valuation 1,082,744 1,025,983 1,021,566 (4,417) Board of Equalization 11,543 12,212 11,051 (1,161) Electoral Board 324,031 374,599 374,599 - Office of Communications 652,809 646,348 625,593 (20,755) City Manager 855,992 837,827 830,497 (7,330) Human Resources 1,264,367 1,186,985 1,144,057 (42,928) Employee Health Services 576,269 540,858 473,165 (67,693) Department of Management and Budget 550,317 535,692 535,539 (153) Purchasing 374,722 312,140 312,139 (1) Director of General Services 195,448 203,416 203,311 (105) Management Services 109,486 113,227 111,596 (1,631) Environmental Management 138,644 142,076 135,518 (6,558)

(Continued)

See Accompanying Note to Budgetary Comparison Schedule 113 See Accompanying Independent Auditors’ Report

C-113 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2009 (UNAUDITED)

Actual Variance from Original Final (Budgetary Final Budget Budget Budget Basis) Over/(Under)

Judicial Administration Clerk of Circuit Court$ 1,497,583 $ 1,660,795 $ 1,654,424 $ (6,371) Juvenile and Domestic Relations Court Services 1,724,515 1,703,895 1,647,259 (56,636) Juvenile and Domestic Relations Court Clerk 24,808 24,546 20,210 (4,336) Magistrates Office 2,494 2,239 2,179 (60) General District Court 36,689 33,889 27,648 (6,241) Circuit Court 590,154 594,119 589,451 (4,668) Sheriff 2,466,695 2,651,125 2,650,993 (132) Commonwealth's Attorney 1,713,477 1,672,847 1,668,552 (4,295) Cost Collection Unit 79,279 77,309 75,886 (1,423) Law Library 153,874 157,339 155,852 (1,487) Public Safety Jail 14,178,463 11,342,697 11,342,697 - Jail - ARRA - 2,331,280 2,331,279 (1) E911 2,280,414 2,058,877 2,030,891 (27,986) E911 - Wireless 446,277 392,237 388,434 (3,803) Fire - Administration 896,886 1,047,956 1,047,856 (100) Fire - Support 1,117,380 976,867 976,850 (17) Fire - Operations 13,871,626 15,368,037 15,367,926 (111) Fire - Airport Rescue 687,124 730,628 730,164 (464) Emergency Management 89,223 94,732 92,854 (1,878) Emergency Medical Services 3,217,909 1,681,322 1,681,162 (160) Building Inspections 845,981 851,842 834,932 (16,910) Outreach Detention 255,262 256,194 255,274 (920) Youth Haven I 523,022 510,653 510,499 (154) Crisis Intervention 629,841 622,977 619,856 (3,121) Police - Administration 492,650 532,554 532,398 (156) Police - Investigation 3,557,943 3,497,863 3,465,825 (32,038) Police - Patrol 13,177,815 13,706,304 13,696,485 (9,819) Police - Services 3,668,311 3,379,568 3,322,243 (57,325) Police - Training 724,508 695,539 661,002 (34,537) Police - Animal Control 1,098,475 879,669 876,976 (2,693) Public Works Custodial Services 1,057,768 937,989 891,291 (46,698) Building Maintenance 4,508,436 4,113,529 4,055,689 (57,840) Director of Public Works 264,734 270,258 269,988 (270) Transportation - Streets and Traffic 5,443,198 5,281,148 5,212,111 (69,037) Transportation - Paving Program 3,082,111 4,200,599 4,200,599 - Transportation - Snow Removal 110,280 60,540 59,209 (1,331) Transportation - Street Lighting 955,989 1,048,841 1,048,749 (92) Transportation - Engineering and Operations 1,628,480 1,624,338 1,617,238 (7,100) Solid Waste Management 7,125,987 7,115,058 6,723,812 (391,246) Engineering 1,676,438 1,628,017 1,609,868 (18,149)

(Continued)

114 See Accompanying Note to Budgetary Comparison Schedule See Accompanying Independent Auditors’ Report C-114 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2009 (UNAUDITED)

Actual Variance from Original Final (Budgetary Final Budget Budget Budget Basis) Over/(Under)

Health and Welfare Human Services Support$ 366,960 $ 356,178 $ 352,624 $ (3,554) Health Department 1,480,864 1,401,382 1,401,382 - Blue Ridge Behavioral Health Care 448,890 448,890 448,890 - Human Services Committee 598,030 573,530 573,530 - Social Services - Administration 1,571,453 1,568,411 1,509,225 (59,186) Income Maintenance 5,807,907 5,918,666 5,701,706 (216,960) Social Services - Services 15,899,284 15,333,540 15,296,978 (36,562) Social Services - ARRA - 470,692 470,691 (1) Employment Services 1,623,735 1,578,116 1,431,431 (146,685) Foster Parent Training 139,591 117,851 99,049 (18,802) VISSTA 476,924 314,060 275,479 (38,581) Hospitalization Program 61,626 55,765 55,765 - Comprehensive Services Act 11,176,087 15,019,300 15,019,267 (33) Comprehensive Services Act - Administration 153,852 137,882 122,528 (15,354) Parks, Recreation and Cultural - - Roanoke Arts Commission 359,620 359,620 352,869 (6,751) Roanoke Arts Festival - 125th Anniversary 199,181 178,501 166,332 (12,169) Recreation 1,232,715 1,212,714 1,212,620 (94) Parks 3,548,996 3,158,409 3,147,413 (10,996) Parks & Recreation - Administration 1,642,485 1,664,374 1,664,373 (1) Parks & Recreation - Youth Services 605,926 538,522 534,046 (4,476) School Playground Maintenance - 73,865 48,288 (25,577) Libraries 3,676,239 3,640,258 3,640,257 (1) Community Development Memberships and Affiliations 1,687,663 1,778,862 1,774,837 (4,025) Economic Development 1,049,798 1,969,574 1,956,232 (13,342) Planning, Building and Development 1,526,729 1,457,302 1,441,989 (15,313) Neighborhood Partnership 107,977 108,809 102,815 (5,994) Citizens Service Center 26,870 24,751 24,457 (294) Housing and Neighborhood Services 1,593,417 1,569,895 1,550,878 (19,017) Virginia Cooperative Extension 79,827 79,827 79,827 - Nondepartmental Residual Fringe Benefits 2,046,915 - - - Transfers to Other Funds 6,753,653 7,812,573 7,771,066 (41,507) Transfers to Debt Service Fund 21,150,879 21,431,723 21,431,722 (1) Transfers to Component Unit 63,347,461 63,347,461 62,506,419 (841,042) Miscellaneous 100,000 30,454 15,329 (15,125) Personnel Lapse (2,620,026) - - - Contingency 2,588,662 2,503,045 - (2,503,045) Total Charges to Appropriations 259,894,000 265,325,139 260,196,756 (5,128,383) Budgetary Fund Balance, June 30 $ 21,042,707 $ 19,473,710 $ 21,352,928 $ 1,879,218

(Continued)

See Accompanying Note to Budgetary Comparison Schedule 115 See Accompanying Independent Auditors’ Report

C-115 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2009 (UNAUDITED)

Explanation of Differences between Budgetary Inflows and Outflows and GAAP Revenues and Expenditures:

Sources/Inflows of Resources: Actual amounts (budgetary basis) "available for appropriation" from the budgetary comparison schedule. 281,549,684 The fund balance at the beginning of the year is a budgetary resource but is not a current year revenue for financial reporting purposes (Exhibit E). (21,042,707) Total general fund revenues as reported on the statement of revenues, expenditures, and changes in fund balances (Exhibit E). $ 260,506,977 Uses/Outflows of Resources: Actual amounts (budgetary basis) "total charges to appropriations" from the budgetary comparison schedule. $ 260,196,756 Transfers to other funds are outflows of budgetary resources but are not expenditures for financial reporting purposes (Exhibit E). (29,202,785) Encumbrances for goods and services ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year goods and services are received for GAAP purposes (Exhibit C). (1,028,676) Total general fund expenditures as reported on the statement of revenues, expenditures, and changes in fund balances (Exhibit E). $ 229,965,295

116 See Accompanying Note to Budgetary Comparison Schedule See Accompanying Independent Auditors’ Report

C-116 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2009 (UNAUDITED)

(2) Schedule of Funding Progress

City - Virginia Retirement System Schedule of Funding Progress

(a) (b) (b-a) (a/b) (c) (b-a) / (c)

UAAL Actuarial Funded (OAAL) Actuarial Actuarial Accrued Unfunded Ratio Assets Annual as a % Valuation Value of Liability (Over funded) as a % Covered of Covered Date Assets (AAL) AAL of AAL Payroll Payroll 6/30/2008 $ 38,079,256 $ 42,499,150 $ 4,419,894 89.60%$ 8,586,861 51.47% 6/30/2007 34,499,166 38,692,867 4,193,701 89.16% 8,377,002 50.06% 6/30/2006 30,539,557 33,495,408 2,955,851 91.18% 8,127,839 36.37% 6/30/2005 28,648,433 31,277,669 2,629,236 91.59% 7,729,832 34.01% 6/30/2004 27,642,697 32,373,471 4,730,774 85.39% 7,631,051 61.99% 6/30/2003 27,059,171 29,452,717 2,393,546 91.87% 7,465,629 32.06%

School Board - Virginia Retirement System Schedule of Funding Progress Non-Professional's Multi-Employer Retirement Plan

(a) (b) (b-a) (a/b) (c) (b-a) / (c)

UAAL Actuarial Funded (OAAL) Actuarial Actuarial Accrued Unfunded Ratio Assets Annual as a % Valuation Value of Liability (Over funded) as a % Covered of Covered Date Assets (AAL) AAL of AAL Payroll Payroll 6/30/2008 $ 265,363 $ 103,514 $ (161,849) 256.40%$ 3,521,287 -4.60% 6/30/2007 23,341 5,536 (17,805) 421.60% 368,136 -4.80%

Six years of data is not available,as the Plan originated in 2007. Data will accumulate over time.

See Accompanying Independent Auditors' Report 117

C-117 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2009 (UNAUDITED)

(3) Schedules of Funding Progress

City - Other Postemployment Benefits Schedule of Funding Progress

(a) (b) (b-a) (a/b) (c) (b-a) / (c)

Actuarial UAAL as a Actuarial Actuarial Accrued Unfunded Percentage Valuation Value of Liability AAL Funded Covered of Covered Date Assets (AAL) (UAAL) Ratio Payroll Payroll 6/30/2008 $ 362,000 $ 16,397,000 $ 16,035,000 2.21%$ 75,000,000 21.38% 6/30/2007 - 15,840,000 15,840,000 0.00% 65,100,000 24.33%

School Board - Other Postemployment Benefits Schedule of Funding Progress (a) (b) (b-a) (a/b) (c) (b-a) / (c)

Actuarial UAAL as a Actuarial Actuarial Accrued Unfunded Percentage Valuation Value of Liability AAL Funded Covered of Covered Date Assets (AAL) - (UAAL) Ratio Payroll Payroll

6/30/2009 $ - $ 7,964,432 $ 7,964,432 0.00%$ 85,979,029 9.26% 6/30/2008 - 20,074,254 20,074,254 0.00% 83,474,785 24.05%

(4) Schedules of Employer Contributions

City - Other Postemployment Benefits Schedule of Employer Contributions

Annual Year Ended Required Percentage June 30 Contribution Contributed 2009$ 1,747,000 100.00% 2008 1,398,000 100.00%

The City of Roanoke implementeed GASB 45 in fiscal year 2008; therefore, six years of data is not available, but will be accumulated over time.

School Board - Other Postemployment Benefits Schedule of Employer Contributions

Annual Year Ended Required Percentage June 30 Contribution Contributed 2009$ (1,599,068) 16.37% 2008 3,259,698 7.86%

Roanoke City Public Schools implementeed GASB 45 in fiscal year 2008; therefore, six years of data is not available, but will be accumulated over time.

118 See Accompanying Independent Auditors’ Report C-118 CITY OF ROANOKE, VIRGINIA REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2009 (UNAUDITED)

(5) Note to Budgetary Comparison Schedule – General Fund

(A) Budgets and Budgetary Accounting

The City adheres to the following procedures in establishing the budgetary data reflected in the Budgetary Comparison Schedule located in the Required Supplementary Information:

1. Proposal – At least sixty days prior to June 30, the City Manager submits to City Council a proposed operating budget for the fiscal year commencing July 1. The operating budget includes proposed expenditures and the means of financing them.

2. Projects and Grants – The capital projects budget is prepared on a project length basis under which the total outlay for each project is estimated for the length of the project. The Special Revenue Fund budget is adopted on a grant length basis as grants are received by the City. Grant budgets are not legally enacted on an annual period basis; therefore, a budgetary comparison statement is not presented for the Special Revenue Fund.

3. Adoption – Public hearings are conducted to obtain citizen comments on the proposed budget. Prior to May 15, the budget is legally adopted at the departmental level through passage of an appropriation ordinance by City Council.

4. Amendment – The City Manager is authorized to transfer amounts not exceeding $75,000 between departments beginning July through March and to transfer any amount between departments beginning April through June. The City Manager also has the authority to make transfers of any amount within a given department. All other transfers or supplemental appropriations must be approved by City Council. During the year, $5,591,139 in supplemental appropriations were approved by City Council. These amendments consisted primarily of appropriations of prior year encumbrances, the appropriation of designated fund balance, and the appropriation of additional intergovernmental grants received during the year.

5. Integration – Formal budgetary integration is employed as a management control device during the year for the General and Capital Projects Funds. Formal budgetary integration is not employed for the Debt Service Fund because effective budgetary control is alternatively achieved through budgeted transfers from the General Fund to the Debt Service Fund for debt payments.

6. Legal Compliance – Actual expenditures and operating transfers out may not legally exceed budget appropriations for each department. City Council legally adopts an annual budget for the General Fund. Its budget is adopted on a basis consistent with accounting principles generally accepted in the United States of America except for the recognition of encumbrances, the classification of certain transfers as expenditures, and the consideration of beginning fund balance as a budgetary resource. A reconciliation of the actual General Fund uses of financial resources presented in accordance with generally accepted accounting principles is presented as part of the Budgetary Comparison Schedule located in the Required Supplementary Information.

119

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120 C-120 SUPPLEMENTARY INFORMATION

121

C-121 Exhibit L-1

CITY OF ROANOKE, VIRGINIA COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS JUNE 30, 2009

Department Total of Fleet Risk Internal Technology Management Management Service Funds Assets Current Assets: Cash and Cash Equivalents$ 3,080,516 $ 323,579 $ 7,933,405 $ 11,337,500 Investments 2,438,730 514,721 7,035,433 9,988,884 Interest and Dividends Receivable 10,400 2,195 30,005 42,600 Due from Other Governments - 405 - 405 Due from Other Funds 194,916 324,794 879,397 1,399,107 Accounts Receivable (net of allowance for uncollectibles) 9,316 13,651 - 22,967 Inventory - 56,447 - 56,447 Other Assets 9,288 742,721 435,000 1,187,009 Total Current Assets 5,743,166 1,978,513 16,313,240 24,034,919 Capital Assets: Equipment and Other Capital Assets 14,277,946 30,065,019 - 44,342,965 Construction in Progress 3,485,303 - - 3,485,303 Less Accumulated Depreciation (5,682,109) (20,990,442) - (26,672,551) Capital Assets, Net 12,081,140 9,074,577 - 21,155,717 Total Assets$ 17,824,306 $ 11,053,090 $ 16,313,240 $ 45,190,636 Liabilities Current Liabilities: Accounts Payable and Accrued Expenses 542,054 351,038 38,577 931,669 Accrued Interest Payable 17,333 - - 17,333 Due to Other Funds 43,639 7,574 2,035 53,248 Other Liabilities 8,069 - - 8,069 Long-Term Liabilities Due Within One Year 759,448 66,699 2,732,278 3,558,425 Total Current Liabilities 1,370,543 425,311 2,772,890 4,568,744 Long-Term Liabilities: Compensated Absences Payable 228,540 73,108 14,356 316,004 Claims Payable - - 15,922,966 15,922,966 General Obligation Bonds Payable, Net 1,049,343 - - 1,049,343 Capital Lease Liability 240,882 11,436 - 252,318 Less Current Maturities (759,448) (66,699) (2,732,278) (3,558,425) Total Long-Term Liabilities 759,317 17,845 13,205,044 13,982,206 Total Liabilities$ 2,129,860 $ 443,156 $ 15,977,934 $ 18,550,950 Net Assets Invested in Capital Assets, Net of Related Debt 10,943,682 9,063,141 - 20,006,823 Restricted for: E911 Wireless Capital Project 70,914 - - 70,914 Unrestricted 4,679,850 1,546,793 335,306 6,561,949 Total Net Assets$ 15,694,446 $ 10,609,934 $ 335,306 $ 26,639,686

122 See Accompanying Independent Auditors’ Report. C-122 Exhibit L-2

CITY OF ROANOKE, VIRGINIA COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Department Total of Fleet Risk Internal Technology Management Management Service Funds Operating Revenues Charges for Services$ 6,701,424 $ 5,982,313 $ 14,241,684 $ 26,925,421 Other Revenue 244,562 95,613 46,338 386,513 Total Operating Revenues 6,945,986 6,077,926 14,288,022 27,311,934 Operating Expenses Personal Services 3,092,023 1,286,465 198,754 4,577,242 Other Services and Charges 1,625,213 346,894 15,124,501 17,096,608 Materials and Supplies 470,600 2,892,857 657,563 4,021,020 Depreciation 2,772,262 2,139,277 - 4,911,539 Total Operating Expenses 7,960,098 6,665,493 15,980,818 30,606,409 Operating Loss (1,014,112) (587,567) (1,692,796) (3,294,475) Nonoperating Revenues (Expenses) Loss on Disposal of Assets - (51,080) - (51,080) Investment Income 105,357 15,816 268,686 389,859 Interest Expense (90,131) (1,528) - (91,659) Net Nonoperating Revenues 15,226 (36,792) 268,686 247,120 Loss Before Transfers and Contributions (998,886) (624,359) (1,424,110) (3,047,355) Transfers and Contributions Transfers In 142,713 91,229 250,000 483,942 Transfers Out (72,400) (98,372) - (170,772) Net Transfers and Contributions 70,313 (7,143) 250,000 313,170 Change in Net Assets (928,573) (631,502) (1,174,110) (2,734,185) Net Assets - Beginning of Year 16,623,019 11,241,436 1,509,416 29,373,871 Net Assets - End of Year$ 15,694,446 $ 10,609,934 $ 335,306 $ 26,639,686

See Accompanying Independent Auditors’ Report. 123

C-123 Exhibit L-3

CITY OF ROANOKE, VIRGINIA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2009

Department Total of Fleet Risk Internal Technology Management Management Service Funds Cash Flows From Operating Activities: Cash Received from Customers$ 6,659,121 $ 5,926,449 $ 13,535,360 $ 26,120,930 Cash Payments to Suppliers for Goods and Services (2,227,912) (3,680,052) (1,603,478) (7,511,442) Cash Payments to Other Funds for Interfund Services (445,147) (126,359) (9,281) (580,787) Cash Payments to Employees (3,058,401) (1,288,793) (197,637) (4,544,831) Cash Payments for Claims - - (11,424,925) (11,424,925) Cash Received From Other Operating Revenue 244,562 - 46,338 290,900 Net Cash Provided by Operating Activities 1,172,223 831,245 346,377 2,349,845 Cash Flows From Noncapital Financing Activities: Transfers In 142,713 91,229 250,000 483,942 Transfers Out (72,400) (98,372) - (170,772) Net Cash Provided (Used) by Noncapital Financing Activities 70,313 (7,143) 250,000 313,170 Cash Flows From Capital and Related Financing Activities: Acquisition and Construction of Capital Assets (2,063,086) (801,114) - (2,864,200) Principal Paid on Bonds and Capital Lease Obligations (563,945) (2,095) - (566,040) Interest Paid on Bonds and Capital Leases (113,900) (1,528) - (115,428) Net Cash Used by Capital and Related Financing Activities (2,740,931) (804,737) - (3,545,668) Cash Flows From Investing Activities: Interest Received 110,867 16,644 280,158 407,669 Purchase of Investments (1,243,497) (288,060) (4,013,076) (5,544,633) Cash Used by Investing Activities (1,132,630) (271,416) (3,732,918) (5,136,964) Net Decrease in Cash and Cash Equivalents (2,631,025) (252,051) (3,136,541) (6,019,617) Cash and Cash Equivalents at July 1 5,711,541 575,630 11,069,946 17,357,117 Cash and Cash Equivalents at June 30$ 3,080,516 $ 323,579 $ 7,933,405 $ 11,337,500 Reconciliation of Operating Loss to Net Cash Provided by Operating Activities: Operating Loss$ (1,014,112) $ (587,567) $ (1,692,796) $ (3,294,475) Adjustments to Reconcile Operating Loss to Net Cash Provided by Operating Activities: Depreciation 2,772,262 2,139,277 - 4,911,539 Changes in Assets and Liabilities: Decrease in Due From Other Governments 36,345 179 - 36,524 Increase in Due From Other Funds (69,332) (57,107) (706,324) (832,763) (Increase) Decrease in Accounts Receivable (9,316) 1,064 - (8,252) Decrease in Inventory - 54,387 - 54,387 Increase in Other Assets - (742,721) (325,000) (1,067,721) Increase (Decrease) in Accounts Payable and Accrued Expenses (124,454) 29,320 3,894 (91,240) Decrease in Due to Other Funds (436,936) (1,479) (1,878) (440,293) Increase (Decrease) in Compensated Absences Payable 17,766 (4,108) 498 14,156 Increase in Claims Payable - - 3,067,983 3,067,983 Total Adjustments 2,186,335 1,418,812 2,039,173 5,644,320 Net Cash Provided by Operating Activities$ 1,172,223 $ 831,245 $ 346,377 $ 2,349,845

Noncash Capital and Financing Activities: Department of Technology noncash activities in fiscal year 2009 consisted of capital asset acquisitions through a capital lease obligation of $ 6,439.

124 See Accompanying Independent Auditors’ Report.

C-124 Exhibit M-1

CITY OF ROANOKE, VIRGINIA STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES AGENCY FUND JUNE 30, 2009

Hotel Roanoke Conference Center Commission Assets Cash and Cash Equivalents$ 2,978,388 Investments 2,389,185 Accrued Interest Receivable 10,189 Due from Other Governments 4,949 Total Assets$ 5,382,711

Liabilities Due to Other Governments$ 5,382,711 Total Liabilities$ 5,382,711

See Accompanying Independent Auditors’ Report. 125

C-125 Exhibit M-2

CITY OF ROANOKE, VIRGINIA STATEMENT OF CHANGES IN FIDUCIARY ASSETS AND LIABILITIES AGENCY FUND FOR THE YEAR ENDED JUNE 30, 2009

Balance Balance July 1, 2008 Additions Deletions June 30, 2009

Assets Cash and Cash Equivalents$ 5,393,527 $ 1,278,577 $ 3,693,716 $ 2,978,388 Investments - 2,389,185 - 2,389,185 Accrued Interest Receivable - 10,189 - 10,189 Due from Other Governments 15,318 236,599 246,968 4,949 Total Assets$ 5,408,845 $ 3,914,550 $ 3,940,684 $ 5,382,711

Liabilities Due to Other Governments$ 5,408,845 $ 3,914,550 $ 3,940,684 $ 5,382,711 Total Liabilities$ 5,408,845 $ 3,914,550 $ 3,940,684 $ 5,382,711

126 See Accompanying Independent Auditors’ Report.

C-126

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127

C-127 STATISTICAL SECTION

This part of the City of Roanoke, Virginia's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information indicates about the government's overall financial condition.

Contents Page

Financial Trends 129 These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time.

Revenue Capacity 136 These schedules contain information to help the reader assess the City's most significant local revenue source, property taxes.

Debt Capacity 139 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future.

Demographic and Economic Indicators 142

These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place.

Operating Information 144 These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs.

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year.

128

C-128 Table 1 Unaudited $ $ $ $ 123,600,538 305,790 50,492,322 174,398,650 $ 146,615,680 23,441,496 $ 344,455,826 170,057,176 $ 270,216,218 305,790 73,933,818 $ $ 149,855,237 51,846 48,331,857 198,238,940 $ $ 150,015,105 19,409,253 $ $ 367,663,298 169,424,358 $ $ 299,870,342 51,846 67,741,110 $ 164,108,469 215,691 45,098,238 $ 209,422,398 157,247,149 21,240,298 $ 387,909,845 178,487,447 $ 321,355,618 215,691 66,338,536 $ 187,115,017 276,133 30,519,227 217,910,377 $ 42,009,100 $ 264,829,266 4,909,789 46,918,889 $ 229,124,117 276,133 35,429,016 $ $ 190,962,494 205,752 52,348,145 243,516,391 $ $ 38,113,702 $ $ 292,664,258 11,034,165 49,147,867 $ $ 229,076,196 205,752 63,382,310 LAST EIGHT FISCAL YEARS FISCAL EIGHT LAST NET ASSETS BY COMPONENTASSETS NET CITY OF ROANOKE, VIRGINIA OF CITY $ $ 200,914,327 139,732 56,691,884 257,745,943 $ $ 50,696,302 $ $ 312,897,109 4,454,864 55,151,166 $ $ 251,610,629 139,732 61,146,748 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 $ 225,501,044 105,323 45,552,401 271,158,768 $ 51,594,498 $ 325,934,138 3,180,872 54,775,370 $ 277,095,542 105,323 48,733,273 Related DebtRelated 238,461,969 Capital ProjectsCapital 70,914 Related DebtRelated 52,067,081 Related DebtRelated 290,529,050 Capital ProjectsCapital 70,914 Invested in Capital Assets, Net of Restricted for: Restricted Unrestricted 41,697,432 Invested in Capital Assets, Net of Unrestricted 2,213,388 Invested in Capital Assets, Net of Restricted for: Restricted Unrestricted 43,910,820 Governmental Activities Governmental Total Governmental Activities Net Assets Net Activities Governmental Total 280,230,315 Business-Type Activities Business-Type Total Primary Government Net Assets Government Primary Total 334,510,784 Total Business-Type Activities Net Assets Net Activities Business-Type Total 54,280,469 Primary Government Primary Information is presented on a full accrual basis of accounting. a full accrual basis on is presented Information year. fiscal that beginning presented is Information FY02. in 34 GASB CityThe implemented

129

C-129 Table 2 Unaudited CITY OF ROANOKE, VIRGINIA CHANGES IN NET ASSETS LAST EIGHT FISCAL YEARS

2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 Expenses Governmental Activities: General Government$ 13,859,060 $ 14,951,184 $ 11,273,712 $ 13,060,424 $ 12,505,925 $ 12,129,739 $ 12,332,759 $ 11,621,680 Judicial Administration 9,167,289 8,881,939 8,696,783 7,759,108 7,093,904 6,563,999 6,716,171 6,218,554 Public Safety 66,448,271 67,457,297 63,824,918 60,338,648 56,027,791 52,085,243 49,526,672 48,164,981 Public Works 31,174,272 29,493,501 29,322,095 25,396,344 25,413,778 27,619,650 27,024,931 26,669,142 Health and Welfare 45,756,887 45,287,639 39,755,942 36,851,200 35,063,221 31,985,929 28,920,553 27,757,901 Parks, Recreation and Cultural 12,018,560 11,718,909 12,328,684 10,671,914 9,269,834 6,063,700 5,360,979 5,298,641 Community Development 9,752,877 13,009,501 11,847,813 10,388,248 9,849,351 9,601,301 11,063,836 11,648,000 Education 66,604,559 65,494,065 61,335,067 57,899,575 54,737,434 51,458,092 49,368,594 47,048,622 Economic Development 1,535,584 657,348 613,075 3,046,343 7,175,953 1,160,036 5,248,229 8,447,969 Other 15,329 13,470 31,575 66,967 125,801 90,903 73,633 68,037 Interest and Fiscal Charges 13,124,928 10,710,840 11,916,375 11,588,440 11,652,145 8,598,701 9,404,874 8,600,684 Total Governmental Activities Expenses 269,457,616 267,675,693 250,946,039 237,067,211 228,915,137 207,357,293 205,041,231 201,544,211 Business-Type Activities: Transit Company 9,545,470 9,195,709 8,403,369 7,850,064 7,609,131 7,078,272 6,448,413 6,022,399 Water - - - - - 11,101,776 13,683,991 10,932,612 Water Pollution Control - - - - - 10,801,834 10,179,089 10,423,259 Civic Facilities 7,138,833 5,259,155 4,694,186 5,066,942 4,610,356 5,077,678 4,914,679 4,539,596 Parking 2,806,984 2,396,330 2,894,630 2,036,575 2,002,110 1,927,191 2,288,392 1,869,415 Market Building 649,874 379,828 390,098 368,090 506,894 492,795 151,438 - Total Business-Type Activities Expenses 20,141,161 17,231,022 16,382,283 15,321,671 14,728,491 36,479,546 37,666,002 33,787,281 Total Primary Government Expenses 289,598,777 284,906,715 267,328,322 252,388,882 243,643,628 243,836,839 242,707,233 235,331,492 Program Revenues Governmental Activities: Charges for Services: General Government$ 4,511,088 $ 4,467,706 $ 4,228,015 $ 3,234,836 $ 3,038,133 $ 6,839,246 $ 3,899,448 $ 3,642,814 Judicial Administration 4,823,817 4,594,962 5,445,812 5,132,780 5,334,458 2,131,060 1,824,615 1,635,114 Public Safety 6,453,285 6,632,394 5,894,930 5,086,196 4,768,397 5,191,798 7,354,677 7,665,701 Public Works 386,445 445,191 523,344 458,882 445,256 781,285 552,404 426,731 Health and Welfare 146,338 196,110 172,703 584,149 595,797 517,697 - - Parks, Recreation and Cultural 308,446 155,799 132,728 413,090 372,186 62,309 290,935 322,009 Community Development 161,228 165,144 199,255 170,493 131,038 151,933 136,396 84,674 Economic Development 4,974 83,541 ------Operating Grants and Contributions 70,986,646 69,257,682 63,164,087 59,245,639 56,208,537 51,329,015 47,692,239 46,513,642 Capital Grants and Contributions 265,005 3,975,312 289,043 102,934 239,246 736,337 2,126,873 939,828 Total Governmental Activities Program Revenues 88,047,272 89,973,841 80,049,917 74,428,999 71,133,048 67,740,680 63,877,587 61,230,513 Business-Type Activities: Charges for Services Transit Company 2,097,420 2,033,024 1,819,053 1,779,619 1,565,511 1,439,067 1,410,041 1,410,344 Water - - - - - 13,383,297 11,671,313 11,312,614 Water Pollution Control - - - - - 11,159,513 10,966,478 9,635,016 Civic Facilities 4,312,359 2,248,649 2,413,877 2,995,440 2,788,081 3,403,360 3,412,975 3,206,483 Parking 2,804,755 2,809,958 2,686,301 2,683,159 2,600,415 2,645,977 2,231,038 2,077,482 Market Building 224,637 255,476 268,340 277,886 308,366 256,015 134,868 - Operating Grants and Contributions 4,393,415 4,071,749 3,896,866 3,395,701 3,252,566 2,843,449 2,611,895 2,302,111 Capital Grants and Contributions 1,115,208 769,852 5,783,634 1,357,967 1,010,893 4,698,459 644,069 3,162,952 Total Business-Type Activities Program Revenues 14,947,794 12,188,708 16,868,071 12,489,772 11,525,832 39,829,137 33,082,677 33,107,002 Total Primary Government Program Revenues 102,995,066 102,162,549 96,917,988 86,918,771 82,658,880 107,569,817 96,960,264 94,337,515 Net (Expense)/Revenue: Governmental Activities (181,410,344) (177,701,852) (170,896,122) (162,638,212) (157,782,089) (139,616,613) (141,163,644) (140,313,698) Business-Type Activities (5,193,367) (5,042,314) 485,788 (2,831,899) (3,202,659) 3,349,591 (4,583,325) (680,279) Total Primary Government Net Expense$ (186,603,711) $ (182,744,166) $(170,410,334) $ (165,470,111) $ (160,984,748) $ (136,267,022) $ (145,746,969) $(140,993,977)

130

C-130 Table 2 Unaudited (continued) CITY OF ROANOKE, VIRGINIA CHANGES IN NET ASSETS LAST EIGHT FISCAL YEARS

2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 General Revenues and Other Changes in Net Assets Governmental Activities: Taxes General Property - Real Estate and Personal Property$ 101,626,861 $ 98,714,420 $ 93,361,362 $ 86,651,722 $ 81,071,535 $ 75,186,290 $ 71,672,690 $ 69,314,220 Local Portion of State Sales 20,448,423 21,571,956 21,987,443 20,637,376 19,663,577 19,225,559 17,466,450 17,489,437 Business and Professional Occupational License 12,479,698 12,536,783 12,690,668 12,893,280 11,335,221 10,828,304 10,584,716 11,288,674 Utility 9,735,948 9,825,738 11,409,106 13,234,488 13,857,552 13,823,643 13,749,522 13,097,155 Prepared Food and Beverage 11,496,914 11,560,944 11,061,948 10,635,894 7,995,551 7,690,950 7,247,472 7,086,162 Commonwealth Share - Personal Property 8,075,992 8,073,460 8,121,547 7,962,068 8,325,821 7,689,531 8,043,897 7,775,099 Cigarette 2,644,599 2,882,612 2,401,764 2,133,150 1,889,419 1,895,533 1,920,939 2,036,988 Transient Room 2,754,683 2,814,253 2,666,253 2,529,645 2,250,249 2,232,754 2,101,878 2,045,876 Telecommunications 7,145,256 7,978,786 3,421,394 - - - - - Motor Vehicle License Tax 1,937,500 1,682,310 1,795,365 1,783,689 1,761,745 1,736,858 1,733,605 1,766,599 Other 6,071,290 7,412,254 11,727,231 7,359,754 7,111,634 8,213,700 6,345,237 6,708,809 State Aid Not Restricted to a Specific Program - - - 7,776,432 - - 76,454 - Payment from Component Unit 8,930,898 7,752,288 1,300,000 - - - - - Grants and Contributions Not Restricted to Specific Program 8,379 3,372 3,107 - 239,988 274,714 - - Interest and Investment Income 1,618,541 2,644,762 3,737,732 3,187,105 2,387,866 1,265,367 1,865,333 2,444,945 Miscellaneous - - 4,471,167 4,005,203 6,754,063 5,790,943 5,470,988 4,287,219 Special Item - - - (1,575,776) - - - - Transfers (4,493,091) (4,339,261) (5,030,413) (3,062,423) (2,882,183) (4,892,800) (3,013,537) (3,090,557) Transfers - Capital Assets - - - (1,726,651) - (161,275) (289,220) (4,563,583) Total Governmental Activities 190,481,891 191,114,677 185,125,674 174,424,956 161,762,038 150,800,071 144,976,424 137,687,043 Business-Type Activities: Interest and Investment Income 87,552 140,247 228,058 163,638 92,195 224,589 276,000 454,764 Gain (Loss) on Sale of Assets - - - (293,213) 9,896 16,325 (10,653) 346,516 Miscellaneous 117,823 187,010 259,040 401,378 522,955 418,509 382,403 274,380 Transfers 4,493,091 4,339,261 5,030,413 3,062,423 2,882,183 4,892,800 3,013,537 3,090,557 Transfers - Capital Assets - - - 1,726,651 - 161,275 289,220 4,563,583 Total Business-Type Activities 4,698,466 4,666,518 5,517,511 5,060,877 3,507,229 5,713,498 3,950,507 8,729,800 Total Primary Government$ 195,180,357 $ 195,781,195 $ 190,643,185 $ 179,485,833 $ 165,269,267 $ 156,513,569 $ 148,926,931 $ 146,416,843

Change in Net Assets Governmental Activities$ 9,071,547 $ 13,412,825 $ 14,229,552 $ 11,786,744 $ 3,979,949 $ 11,183,458 $ 3,812,780 $ (2,626,655) Business-Type Activities (494,901) (375,796) 6,003,299 2,228,978 304,570 9,063,089 (632,818) 8,049,521 Total Primary Government$ 8,576,646 $ 13,037,029 $ 20,232,851 $ 14,015,722 $ 4,284,519 $ 20,246,547 $ 3,179,962 $ 5,422,866

Information is presented on a full accrual basis of accounting. The City implemented GASB 34 in FY02. Information is presented beginning that fiscal year.

131

C-131 Table 4 Table 3 Unaudited Unaudited $ $

$ $ $ $

$ $ $ $ 60,194,740

37,547,046 13,134,073

$ $ 9,513,621

$ $ 9,020,592

7,731,673

$ $ 1,288,919

$ $ $ $

6,708,809 $ $ 50,351,888 1,766,599 27,621,016 - 13,130,315 2,045,876 2,036,988 $ $ 9,600,557 7,775,099 7,086,162 $ $ 9,086,711 13,097,155 6,835,034 11,288,674 $ $ 2,251,677 17,489,437 $ $ 138,609,019 $ $ 69,314,220 6,345,237 $ $ 86,140,232 1,733,605 63,225,262 - 14,289,750 2,101,878 1,920,939 $ $ 8,625,220 8,043,897 7,247,472 $ $ 9,762,435 13,749,522 7,328,637 10,584,716 $ $ 2,433,798 17,466,450 $ $ 140,866,406 $ $ 71,672,690 8,213,700 $ $ 76,213,007 1,736,858 - 42,487,398 14,436,613 2,232,754 1,895,533 $ $ 19,288,996 7,689,531 $ 6,554,857 7,690,950 13,823,643 4,586,865 10,828,304 $ 1,967,992 19,225,559 $ 148,523,122 $ $ 75,186,290 ranchise Tax, and Telephone and Cellular Utility Taxes Utility Cellular and Telephone and Tax, ranchise 7,111,634 $ $ 66,200,350 1,761,745 37,069,596 - 15,061,934 2,250,249 1,889,419 $ $ 14,068,820 8,325,821 7,995,551 $ $ 4,498,005 13,857,552 2,945,349 11,335,221 $ $ 1,552,656 19,663,577 $ 155,262,304 $ $ 81,071,535 LAST TEN FISCAL YEARS 7,359,754 $ 60,182,979 1,783,689 - 39,994,304 988,465 2,529,645 2,133,150 $ 19,200,210 7,962,068 10,635,894 $ 21,050,254 13,234,488 19,660,766 12,893,280 $ $ 1,389,488 20,637,376 $ $ 165,821,066 $ 86,651,722 LAST EIGHT FISCALYEARS CITY OF ROANOKE, OF CITY VIRGINIA CITY OF ROANOKE, OF CITY VIRGINIA FUND BALANCES OF GOVERNMENTAL FUNDS GOVERNMENTAL OF BALANCES FUND 11,727,231 $ $ 61,478,107 1,795,365 37,744,826 3,421,394 1,063,737 2,666,253 2,401,764 $ $ 22,669,544 8,121,547 11,061,948 $ $ 23,340,852 11,925,615 22,121,582 12,174,159 $ $ 1,219,270 21,987,443 $ $ 180,644,081 $ $ 93,361,362 GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE REVENUES TAX ACTIVITIES GOVERNMENTAL 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 184,417,164 7,412,254 $ $ 42,427,512 1,682,310 26,591,510 7,978,786 1,021,667 2,814,253 2,882,612 $ $ 14,814,335 8,073,460 11,560,944 $ $ 22,090,973 9,825,738 21,347,881 12,536,783 $ $ 743,092 21,571,956 $ $ 185,053,516 $ $ 98,714,420 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 $ $ 65,099,766 27,455,399 1,143,782 $ $ 36,500,585 $ $ 21,042,707 19,723,710 $ $ 1,318,997 Capital Projects Fund Projects Capital 31,685,558 Debt Service FundDebt Service 1,161,895 Other TaxesOther 6,071,290 Motor Vehicle License Tax License Motor Vehicle 1,937,500 Telecommunications 7,145,256 Transient Room Tax Room Transient 2,754,683 Unreserved, reported in: reported Unreserved, Cigarette TaxCigarette 2,644,599 Reserved 17,529,842 Commonwealth Share Personal Property TaxPersonal Share Commonwealth 8,075,992 PreparedTax Food Beverage & 11,496,914 Utility Consumer Tax Consumer Utility 9,735,948 Unreserved 21,352,928 Occupational License Tax License Occupational 12,479,698 Information is presented on a full accrual basis of accounting. of basis accrual a full on presented is Information year. that fiscal presented beginning is Information FY02. 34 in GASB implemented City The TV F Cable as well as Surcharge the Telephone replaces which Tax 1, Telecommunications 2007, new the State the January began On Sales TaxSales 20,448,423 Reserved 1,028,676 Total Governmental Activities Tax Revenues Tax Activities Governmental Total General Property Tax-Real Estate and Personal Property Personal and Estate Tax-Real Property General 101,626,861 Information is presented on a modified accrual basis of accounting. of basis accrual presented modified on a is Information Total All Other Governmental Funds Other Governmental Total All 50,377,295 All OtherAll GovernmentalFunds Total General Fund 22,381,604 General Fund

132

C-132

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133

C-133 Table 5 Unaudited CITY OF ROANOKE, VIRGINIA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS

2008-09 2007-08 2006-07 2005-06 2004-05 Revenues Local Taxes$ 173,518,576 $ 172,769,022 $ 164,871,887 $ 156,259,656 $ 145,738,157 Permits, Fees and Licenses 1,053,443 1,475,370 1,142,724 1,469,016 1,275,026 Fines and Forfeitures 1,558,517 1,558,039 1,540,598 1,444,566 1,354,775 Rental Income 845,373 968,975 1,032,990 1,462,840 796,688 Investment Income 1,211,719 2,241,720 3,460,986 1,978,325 1,794,290 Intergovernmental 93,064,316 96,691,241 85,531,788 79,661,592 74,579,619 Charges for Services 11,616,042 10,955,336 11,611,220 11,142,081 11,237,776 Miscellaneous 1,536,704 1,336,850 2,897,616 2,543,147 820,779 Total Revenues$ 284,404,690 $ 287,996,553 $ 272,089,809 $ 255,961,223 $ 237,597,110

Expenditures Current Operating: General Government$ 13,079,091 $ 13,600,811 $ 12,773,224 $ 12,203,711 $ 11,551,500 Judicial Administration 8,735,663 8,441,872 8,438,366 7,347,752 6,736,070 Public Safety 63,808,641 64,859,294 61,964,362 58,192,222 53,777,319 Public Works 24,841,431 23,663,876 23,900,264 22,798,347 22,229,895 Health and Welfare 45,128,533 44,626,860 39,290,415 36,105,373 34,754,917 Parks, Recreation and Cultural 10,753,820 11,165,097 10,724,981 9,697,644 8,434,669 Community Development 9,559,518 11,473,754 9,074,244 9,701,539 9,066,266 Education 62,856,641 62,392,633 58,669,043 55,789,730 52,676,279 Other 15,329 13,470 8,839 10,824 125,801 Debt Service: Principal Retirement 22,157,734 19,822,282 19,119,311 17,140,653 14,785,327 Interest and Paying Agent Charges 12,286,166 11,343,116 11,103,323 11,270,985 10,084,588 Bond Issuance Cost 79,082 - - 141,334 104,034 Capital Outlays 44,299,810 35,471,132 44,308,692 38,370,611 40,808,400 Total Expenditures$ 317,601,459 $ 306,874,197 $ 299,375,064 $ 278,770,725 $ 265,135,065 Excess (Deficiency) of Revenues Over (Under) Expenditures (33,196,769) (18,877,644) (27,285,255) (22,809,502) (27,537,955)

Other Financing Sources (Uses) Proceeds of Long-Term Debt 23,912,613 43,967,698 12,961,171 31,708,923 37,662,856 Proceeds of Capital Lease - - - - - Proceeds from Sale of Refunding Bonds - - - 10,631,826 - Payment to Refunded Bond Escrow Agent - - - (10,705,136) - Premium on Sale of Bonds 706,843 1,199,155 407,950 705,605 1,460,022 Proceeds from Sale of Property - - - - - Transfers In 27,214,121 26,430,553 25,211,822 30,811,378 37,134,208 Transfers Out (32,020,382) (31,095,774) (31,596,162) (36,757,368) (42,034,253) Total Other Financing Sources (Uses) 19,813,195 40,501,632 6,984,781 26,395,228 34,222,833 Net Change in Fund Balances (13,383,574) 21,623,988 (20,300,474) 3,585,726 6,684,878 Fund Balances--Beginning of Year 86,142,473 64,518,485 84,818,959 81,233,233 74,548,355 Fund Balances--End of Year$ 72,758,899 $ 86,142,473 $ 64,518,485 $ 84,818,959 $ 81,233,233

Information is presented on an modified accrual basis of accounting.

134

C-134 Table 5 Unaudited (continued)

2003-04 2002-03 2001-02 2000-01 1999-00

$ 138,027,923 $ 131,372,049 $ 129,553,942 $ 126,439,432 $ 123,243,130 1,026,606 909,669 1,076,603 840,520 827,219 1,365,502 1,244,283 1,103,113 818,982 923,556 682,798 1,114,804 1,100,101 1,058,017 1,183,210 949,912 1,557,228 1,957,370 3,055,575 3,089,906 68,418,569 66,118,526 62,477,966 57,740,932 55,511,103 11,544,955 6,657,533 6,073,913 5,709,059 5,599,880 1,369,767 502,712 997,855 499,178 1,338,948 $ 223,386,032 $ 209,476,804 $ 204,340,863 $ 196,161,695 $ 191,716,952

$ 11,731,138 $ 11,638,167 $ 11,544,730 $ 11,670,266 $ 11,088,959 6,355,497 6,237,314 6,032,743 5,795,665 4,705,624 50,733,282 45,540,774 45,685,277 44,872,640 44,174,881 24,688,073 23,184,404 23,350,186 22,894,595 21,980,873 31,888,121 28,761,343 27,778,336 25,892,008 26,601,801 5,318,074 4,565,865 4,901,055 4,668,202 4,476,440 8,859,741 8,733,633 7,829,899 7,524,103 7,063,935 49,520,072 47,408,556 46,617,823 - - 90,903 73,633 68,037 13,075 19,402

11,543,107 12,283,145 9,166,242 5,978,148 4,866,973 8,541,638 9,863,967 7,677,659 4,940,122 4,334,675 241,850 - 190,711 - 158,694 28,606,142 20,115,347 25,316,264 20,979,518 21,197,468 $ 238,117,638 $ 218,406,148 $ 216,158,962 $ 155,228,342 $ 150,669,725

(14,731,606) (8,929,344) (11,818,099) 40,933,353 41,047,227

4,595,399 800,000 51,083,499 - 27,038,000 4,857,000 - - 700,000 - 66,040,000 - - - - (68,189,271) - - - - 2,971,027 - 652,873 - 309,115 - - - 125,100 84,577 21,215,612 23,543,433 20,533,173 17,905,736 17,631,660 (28,827,670) (28,548,892) (26,991,816) (69,440,932) (66,267,096) 2,662,097 (4,205,459) 45,277,729 (50,710,096) (21,203,744) (12,069,509) (13,134,803) 33,459,630 (9,776,743) 19,843,483 82,767,864 95,902,667 62,443,037 69,215,332 49,371,849 $ 70,698,355 $ 82,767,864 $ 95,902,667 $ 59,438,589 $ 69,215,332

135

C-135 Table 6 Table 7 Unaudited Unaudited

$

$

$

$

$ $ 67,491,996 2,271,182 1,712,232 17,607,676 17,329 1,265,285 11,719,741 $ $ 72,476,686 1,292,622 6,546,125 538,776 1,458,766 $ 123,243,130 10,537,473 $ $ 73,493,399 1,676,143 65,220,814 242,194 4,967,361 1,154,101 $ $ 67,776,339 1,770,243 2,717,996 17,676,762 44,729 1,560,424 12,633,933 $ $ 75,539,355 6,776,531 1,403,614 558,348 1,555,379 $ 126,439,432 11,444,528 $ $ 76,063,428 1,761,393 65,058,343 355,570 7,718,287 1,166,368 $ 69,908,899 1,766,599 2,655,084 17,489,436 140,426 1,657,992 13,097,155 $ 77,683,998 7,086,162 2,036,988 621,691 1,016,653 $ 129,553,942 11,288,675 $ 76,830,266 2,045,875 67,253,815 400,211 7,634,673 1,137,606 $ $ 71,849,116 2,888,925 1,733,605 17,466,450 123,180 1,491,601 13,248,053 $ $ 79,893,013 7,247,472 1,920,939 734,345 807,267 11,086,185 $ 131,372,049 $ $ 78,984,813 2,101,878 68,960,191 504,298 7,920,717 1,180,840 Tax, TV Franchise and Telephone and Cellular Utility Taxes. $ 75,346,292 2,510,372 1,736,858 19,225,559 1,554,297 138,153 13,321,752 $ 83,035,824 7,690,950 1,895,533 835,561 986,613 $ 138,027,923 11,330,195 $ 82,947,318 2,232,754 72,835,920 530,712 7,551,379 1,340,847 r for prior fiscal year fiscal levies. prior r for ied as intergovernmental. sonal Propertysonal tax levy is Thereceived from the Commonwealth. here but State share not is shown is $ 81,199,730 1,761,745 19,663,577 1,500,624 178,186 13,349,039 $ 89,525,550 7,995,551 1,889,419 1,116,447 1,115,867 11,843,734 $ 145,738,157 $ 88,719,548 2,250,249 78,489,950 448,312 8,147,634 1,603,863 2,709,780 LAST TEN YEARS TEN LAST LAST TEN FISCAL YEARS TEN FISCAL LAST CITY OF VIRGINIA CITY ROANOKE, OF VIRGINIA CITY ROANOKE, LOCAL TAX REVENUES BY SOURCE TAXLOCAL REVENUES $ $ 86,447,295 1,783,689 20,637,376 1,456,085 172,172 13,234,488 $ $ 94,409,362 10,635,894 2,133,150 1,314,804 1,306,496 12,893,280 $ $ 156,259,656 $ $ 94,754,245 2,529,645 83,902,929 456,048 7,789,896 1,431,406 2,544,365 GENERAL PROPERTY TAX LEVIES AND COLLECTIONS TAXAND PROPERTY LEVIES GENERAL $ 93,084,689 1,795,365 21,987,443 1,000,718 32,383 11,409,106 $ 101,206,236 11,061,948 2,401,764 1,416,300 772,818 12,690,668 $ 164,871,887 $ 101,301,039 2,666,253 89,761,174 457,454 8,089,164 4,127,361 3,323,515 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 $ 98,983,976 1,682,310 21,571,956 504,370 - 9,317,726 $ 107,057,436 11,560,944 2,882,612 740,011 1,243,373 13,044,796 $ 172,769,022 $ 106,316,893 2,814,252 95,621,945 443,664 8,073,460 7,979,032 3,362,031 General Property Tax (1) 102,177,312 Motor Vehicle LicenseMotor Vehicle Tax 1,937,500 Sales Tax 20,448,423 Franchise Tax (2) 483,724 Delinquent Tax - StateCollections Share (1) - Utility Tax Consumer (2) 9,245,881 Total Tax Collections 110,253,304 Prepared Food Prepared Food and Beverage Tax 11,496,914 Current Tax Collections As Collections Tax Current Percent of Levies As Total Tax Collections Percent of Levies (2)(1) In yearfiscal the 1999, began theState Property Personal Tax Relief Act. a As a result, portion of the City's total Per classified a localas tax. (2) Total tax collections as percent of levies may be greater than 100% due to delinquent tax collections in a given fiscal yea 97.06% 100.20% 97.53% 100.70% 96.59% 99.91% 96.77% 99.64% 97.65% 100.91% 96.91% 100.11% 101.15% 97.34% 101.11% 97.47% 99.31% 95.68% 98.62% 95.50% Cigarette TaxCigarette 2,644,599 Bank Stock Tax 960,846 Recordation and TaxProbate 777,182 Business, Professional, and Occupational License Taxand Occupational Professional, Business, 12,969,765 Total Local Taxes 173,518,576 Total Tax Levies 110,034,071 (1) In yearfiscal the 1999, began theState Property Personal Tax Relief act. The share of personal propertystate is classif (2) On January 2007, the 1, began theState the new Telecommunications replaces Tax which as Telephone well as Cable Surcharge Transient Room TaxTransient Room 2,754,683 Current Tax Collections 98,726,769 Admissions TaxAdmissions 476,491 Current Tax - StateCollections Share (1) 8,075,992 Telecommunications/Telephone Surcharge - E911 (2) 7,145,256 Delinquent Tax Collections 3,450,543

136

C-136 Total Table 8 Table 9 Table Unaudited Unaudited

106,316,893 0.958 0.975 0.986 0.985 0.984 5,073,201,176 0.983 5,257,286,706 0.979 5,607,172,004 0.981 5,976,975,981 6,417,896,664 6,963,090,861 7,407,774,726 7,709,103,732 76,063,428 76,830,266 78,984,813 82,947,318 88,719,548 94,754,245 101,301,039 106,316,893 110,034,071 PUBLIC SERVICE (2.30%) (3.24%) 16.27% 345,950,183 (10.56%) 328,933,905 (8.88%) 378,299,578 338,499,005 2.22% 308,722,893 1.29% 6.51% 316,097,815 321,271,916 341,586,222 (2) (2) (2) (2) (2) (2) (4) 1.21 1.21 1.21 1.21 4,114,929 1.21 4,032,132 1.21 1.19 (3) 3,903,465 4,483,957 1.19 4,057,467 3,708,517 1.19 3,696,780 3,765,019 3,993,207 0.60 0.60 0.60 0.60 0.60 304,500,512 0.60 339,256,291 0.60 331,442,235 0.60 320,712,924 9.88% 11.41% 0.60 372,880,650 0.60 333,486,044 320,864,607 359,762,769 303,859,616 310,606,990 0.949 0.943 314,604,888 335,086,164 4,730,451,543 4,919,963,278 LAST TEN YEARS LAST TEN LAST TEN YEARS LAST TEN CITY OF ROANOKE,VIRGINIA CITY OF ROANOKE,VIRGINIA PROPERTY TAX RATES AND TAX LEVIES TAX AND RATES PROPERTYTAX (6.65%) (0.48%) 1,147,567,923 (1.44%) 1,142,051,883 8.25% 1,125,651,256 4.28% 1,218,477,246 7.30% 1,270,672,463 2.28% 1,363,431,553 -3.22% 1,394,457,540 1,349,537,677 ASSESSED AND ESTIMATED ACTUAL VALUE OF ESTIMATED PROPERTY TAXABLE ASSESSED AND VALUE ACTUAL 3.45 3.45 3.45 3.45 25,446,362 3.45 23,754,656 3.45 23,640,474 3.45 23,300,981 3.45 25,222,479 3.45 26,302,920 28,163,083 28,100,133 27,925,972 REAL PROPERTY PROPERTY PERSONAL CORPORATIONS Per $100 Levy Per $100 Levy $100 Per Levy Tax Levies Tax RateTax Rate Tax Rate Tax Total 1.00 1.00 1.00 1.00 1.00 688,540,754 1.00 685,231,130 1.00 675,390,754 1.00 731,086,348 762,403,478 818,058,932 836,674,524 809,722,606 REAL PROPERTY PERSONAL PROPERTY PUBLIC SERVICE CORPORATIONS 20002001200220032004200520062007 (1) 1.215 20082009 1.21 45,092,511 1.21 1.21 1.21 1.21 46,502,137 1.21 49,043,478 (3) 1.19 51,440,874 1.19 55,162,380 1.19 59,439,602 69,429,439 3.45 64,754,545 74,451,741 24,693,844 78,114,892 (2) (1) 1.215 3,707,044 73,493,399 Year Assessed Percentage Estimated Assessment Assessed Percentage Estimated Assessment Assessed Percentage Estimated Assessment Assessed 5.47% 4.89% 7.23% 4,053,218,187 7.75% 4,251,342,652 8.94% 4,558,900,600 9.02% 4,912,403,589 7.23% 5,351,633,570 4.92% 5,834,424,939 6,256,495,314 6,564,294,962 (1) The tax rate was $1.22 from July 1, 1999 to December 31, 1999. Effective January 1, 2000, the rate became $1.21. became rate the 2000, 1, January Effective 1999. 31, December to 1999 1, July from $1.22 was rate tax The (1) includes the state portion. levy The 1999, Act. year the State initiated Relief the Personal(2) In fiscal Tax Property $1.19. became rate the 2006, 1, July Effective (3) in $8,075,992. block grant of the amount to a fixed relief a percentage from changed Relief Personal(4) The Property Tax 200020012002 3,710,187,4372003 3,843,131,2772004 4,053,218,187 2005 3.93% 4,251,342,652 2006 3.58% 4,558,900,600 2007 3,710,187,437 4,912,403,589 2008 3,843,131,277 5,351,633,570 2009 1.00 5,834,424,939 1.00 6,256,495,314 6,564,294,962 715,763,594 737,575,710 7.66% 3.05% 1,192,939,323 1,229,292,850 Year Value Growth Value Actual Ratio Value Growth Value Actual Ratio Value Growth Value Actual Ratio Value

137

C-137 Table 10 Unaudited CITY OF ROANOKE, VIRGINIA PRINCIPAL PROPERTY TAXPAYERS COMPARISON OF JUNE 30, 2009 AND JUNE 30, 2000

2009 2000 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Description Value Rank Value Value Rank Value Carilion Healthcare Healthcare Provider$ 129,599,911 1 1.68%$ - - - Appalachian Power Public Utility 104,041,819 2 1.35% 77,659,887 2 1.63% Norfolk Southern Railway Transportation 95,983,901 3 1.25% 68,975,006 3 1.45% Valley View Mall LLC Shopping Mall 74,118,147 4 0.96% 39,166,492 4 0.82% Verizon Virginia, Inc Communications 55,404,937 5 0.72% 92,819,190 1 1.95% Roanoke Electric Steel Primary Metals 35,702,395 6 0.46% 22,688,071 6 0.48% Roanoke Gas Company Public Utility 30,278,088 7 0.39% 21,844,084 7 0.46% Maple Leaf Bakery Bakery 25,185,751 8 0.33% 10,599,064 10 0.22% Times-World Corp. Newspaper 22,438,451 9 0.29% - - - Coca-Cola Bottling Company Bottling Plant 16,629,391 10 0.22% - - - Faison Roanoke Office Limited Office Building - - 25,250,100 5 0.53% Hotel Roanoke Hotel - - 20,513,461 8 0.43% Elizabeth Arden Cosmetics Manufacturer - - 16,211,588 9 0.34% $ 589,382,791 7.64%$ 395,726,943 8.31%

Source: City of Roanoke, Commissioner of the Revenue

Table 11 Unaudited CITY OF ROANOKE, VIRGINIA TAXABLE RETAIL SALES LAST TEN CALENDAR YEARS

Calendar Year Total Retail Sales (1)

2000 ...... 1,595,600,205

2001 ...... 1,578,043,491

2002 ...... 1,588,424,788

2003 ...... 1,621,479,275

2004 ...... 1,712,570,484

2005 ...... 1,599,236,967

2006 ...... 1,876,508,609

2007 ...... 1,900,930,872

2008 ...... 1,925,487,309

2009 through June...... 865,325,591

(1) Source: State Department of Taxation. Data excludes prescription drug sales.

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C-138 Table 12 Unaudited

the Budget Stabilization Reserve. 2.98% 1,798.76 2.94% 2.83% 3.57% 1,462.93 3.22% 1,464.49 1,914.33 1,816.29 3.42% 2,853.39 3.58% 3.73% 3.37% 2,310.62 3.51% 2,576.14 2,552.81 2,781.28 C) 214,127,613 ( 181,095,413 167,105,122 138,847,978 139,126,670 169,096,588 239,565,221 263,493,652 234,919,976 260,060,887 988,465 13,130,315 14,436,613 15,061,934 13,134,073 14,289,750 1,021,667 1,143,782 1,063,737 1,161,895 LAST TEN FISCAL YEARS CITY OF ROANOKE, VIRGINIA Bonds Bonds Amount Supported by Supported By Available Net Ratio of Net Net Bonded RATIO OF GENERAL BONDED DEBT RATIO TO OF GENERAL 33,435,000 - - - - - 28,924,766 26,596,538 24,255,948 31,315,992 TOTAL ASSESSED VALUE AND BONDED DEBT AND CAPITAPER ASSESSED VALUE TOTAL 7,818,130 39,027,391 44,517,751 41,504,678 41,118,710 47,001,072 9,160,142 10,974,761 15,160,308 9,863,867 256,369,208 191,284,376 228,050,952 223,671,734 193,100,761 242,386,235 274,026,551 298,775,968 304,071,803 281,808,817 (B) U.S. Census (B) U.S. to establish Fund General to the Fund Service the Debt from balance of fund transfer million a $15.5 was there FY05, (C) In balances. outstanding Facilities Fund Civic exclude amounts FY09 through (D) FY04 Funds. Enterprise of the Premium Bond Unamortized excludes and Costs Bond Deferred (E) Includes Population (A) Population 5,976,975,981 4,919,963,278 5,073,201,176 5,257,286,706 5,607,172,004 (B) 4,730,451,543 6,417,896,664 (est.) 6,963,090,861 7,407,774,726 (est.) 7,709,103,732 Source - - Source Service for Public Center Cooper - (A) Weldon 2003 93,100 2005 92,671 20012002 95,000 94,600 2004 92,900 2000 94,911 2007 92,024 2006 92,994 20082009 93,504 92,344 Year Value Debt (E) Funds (D) (E) Water Authority Service Fund Debt Assessed Value Capita Fiscal Total Assessed Gross Bonded Enterprise Western Virginia in Debt Bonded Bonded Debt to Debt Per

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C-139 Table 14 Table 13 Unaudited Unaudited $ $ $ 232,170,766 138,847,978 $ 371,018,744 $ 243,384,480 $ 384,313,128 140,928,648 $ 228,258,345 181,095,412 $ 409,353,757

s to governmental activities. tos governmental $ 257,281,114 169,096,588 $ 426,377,702 $ 284,000,700 171,889,360 $ 455,890,060 9.80% 3,378 9.46% 2,527 9.85% 3,286 9.38% 3,051 9.58% 2,542 10.50% 2,659 10.84% 3,095 8.98% 2,115 9.91% 2,714 9.47% 2,141 LAST TEN FISCAL YEARS FISCAL TEN LAST YEARS FISCAL TEN LAST CITY OF ROANOKE, VIRGINIA CITY OF ROANOKE, VIRGINIA 234,781,911 281,674,939 289,667,961 264,805,464 $ 277,112,746 214,127,613 $ 491,240,359 LEGAL DEBT MARGIN INFORMATION MARGIN DEBT LEGAL 311,906,985 307,243,598 236,668,633 200,931,996 251,526,600 203,230,048 RATIOS OF OUTSTANDING DEBT BY TYPE BY DEBT OF OUTSTANDING RATIOS siness-Type Activities siness-Type $ 239,565,221 295,598,136 $ 535,163,357 - 477,865 416,578 - 3,293,723 3,164,721 - (2) - 3,417,302 3,530,282 5,648,433 $ 348,522,518 234,919,976 $ 583,442,494 45,865,218 29,484,914 24,782,063 25,955,524 45,865,711 26,096,945 48,482,715 17,876,626 40,642,715 42,867,715 ) 40.14% 41.57% 40.26% 44.76% 43.59% 37.70% 39.66% 44.24% 36.67% 37.42% Governmental ActivitiesGovernmental Bu 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 General General Total Percentage $ 365,588,644 260,060,887 $ 625,649,531 (2 5,113,998 5,279,002 6,797,976 3,208,859 4,551,467 4,364,593 4,643,001 3,846,141 1,972,417 i Year Bonds Leases Bonds Leases Government (1) Income Per Capita (1) Fiscal ObligationFiscal Capital Obligation CapitalPersonal Primary of 2004-05 241,280,405 2007-082008-09 275,531,207 276,891,495 2003-04 182,118,717 2002-03 184,429,342 2006-07 252,341,409 2001-02 195,385,569 2005-06 258,928,015 2000-01 153,025,838 1999-00 154,859,634 Applicable to Limit as a as to Limit Applicable Lim Debt of Percentage to Limit 263,493,652 (1) See Table 18 for personal income and population data. population and income personal Table 18 for (1) See activitie business-type from moving bonds in associated created in FY04, resulting was (2) The Virginia Water Western Authority Total Net Debt Legal Debt Margin Debt Legal 392,935,844 Total Applicable Net Debt Debt Limit 656,429,496

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C-140 Table 15 Unaudited CITY OF ROANOKE, VIRGINIA COMPUTATION OF LEGAL DEBT MARGIN JUNE 30, 2009

The Charter of the City of Roanoke limits the Legal Debt to 10% of the Assessed Valuation of Real Estate within the City limits. The City has no overlapping debt.

Assessed Value of Real Estate, 2009 (1)$ 6,564,294,962 Legal Debt Limit, 10% of $6,564,294,962 656,429,496 Debt applicable to limitation: General Obligation Serial Bonds - Governmental Activities$ 195,712,770 General Obligation Serial Bonds - Western Virginia Water Authority (WVWA) 24,255,948 State Literary Fund Loans 3,570,000 Virginia Public School Authority (VPSA) School Bonds 51,182,777 Civic Facilities Enterprise Fund - Business-Type Activities 14,190,000 Parking Enterprise Fund Supported Debt - Business-Type Activities 15,294,914 Deferred Bond Costs - Parking Enterprise Fund Supported Debt (134,606) Total Bonded Debt 304,071,803 Less: Available in Debt Service Fund (1,161,895) Western Virginia Water Authority Supported Debt (WVWA) (24,255,948) Parking Enterprise Fund Supported Debt (15,294,914) Deferred Bond Costs - Parking Enterprise Fund Supported Debt 134,606 263,493,652 Legal Debt Margin $ 392,935,844

(1) Source: City of Roanoke, Commissioner of the Revenue.

Table 16 Unaudited CITY OF ROANOKE, VIRGINIA RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL LONG-TERM DEBT TO TOTAL GENERAL EXPENDITURES LAST TEN FISCAL YEARS

Percent of Debt Total Service to Fiscal Total Debt General General Year Principal (1) Interest (1) Service Expenditures (2) Expenditures

1999-00 7,201,334 6,330,514 13,531,848 223,621,661 6.1% 2000-01 9,155,832 7,457,895 16,613,727 231,372,360 7.2% 2001-02 8,916,243 7,361,801 16,278,044 246,048,365 6.6% 2002-03 12,083,145 9,681,287 21,764,432 252,841,855 8.6% 2003-04 11,255,346 7,882,228 19,137,574 268,406,972 7.1% 2004-05 12,283,849 7,860,775 20,144,624 284,024,496 7.1% 2005-06 (3) 14,765,894 9,357,973 24,123,867 298,166,075 8.1% 2006-07 17,493,085 10,549,172 28,042,257 318,422,477 8.8% 2007-08 18,181,973 9,880,643 28,062,616 334,448,507 8.4% 2008-09 20,480,823 11,121,043 31,601,866 340,360,591 9.3%

(1) Principal and interest payments include all general long term debt payments supported by tax revenues of the City. They include the Roanoke Civic Center debt payments. Debt payments made by the Roanoke City Parking Fund, Western Virginia Water Authority and the Hotel Roanoke Conference Center Commission are excluded. (2) Includes expenditures of the General Funds of the City and School Board less the transfer from the General Fund to the School Board. (3) Excludes Bond Anticipation Note of $5,000,000 which was both issued and repaid during fiscal year 2006.

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C-141 ) 7 8 d d % Table 1 Table 1 Unaudite Unaudite

$ $ (21,197,468 150,669,725 9,201,648 4,334,675 $ $ 4,866,973 129,472,257 (20,979,518) 155,228,342 10,918,270 4,940,122 $ $ 5,978,148 134,248,824 (15,866,367) 216,158,962 16,843,901 7,677,659 $ $ 9,166,242 200,292,595 (13,569,300) 218,406,148 22,147,112 9,863,967 $ 12,283,145 204,836,848 Local National (27,916,709) 238,117,638 20,084,745 8,541,638 $ 11,543,107 210,200,929 (34,734,158) 265,135,065 24,869,915 10,084,588 $ 14,785,327 230,400,907 LAST TEN FISCAL YEARS LAST TEN FISCAL YEARS DEMOGRAPHIC STATISTICS CITY OF ROANOKE, VIRGINIA CITY OF ROANOKE, VIRGINIA 12,303 7.8% 9.7% 12,286 3.9% 5.7% 12,256 3.2% 4.7% 12,587 3.2% 4.8% 12,712 3.7% 5.2% 12,861 4.0% 5.8% 13,004 4.6% 6.3% 13,263 4.4% 4.8% 13,251 3.0% 4.8% 13,175 2.4% 4.0% (37,032,175) 278,770,725 28,411,638 11,270,985 $ $ 17,140,653 241,738,550 DEBT SERVICE AS A PERCENTAGE OF NONCAPITAL EXPENDITURES (44,308,692) 299,375,064 30,222,634 11,103,323 $ 19,119,311 255,066,372 (est.) 3,184,205,808 (est.) 3,080,411,152 (est.) 3,001,767,936 (est.) 2,672,280,000 (est.) 2,563,142,400 (est.) 2,482,659,600 (est.) 2,470,408,500 (est.) 2,395,177,400 (est.) 2,238,580,000 (est.) 2,145,747,888 Per CapitaPer Personal School Unemployment Unemployment 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 (35,471,132) 306,874,197 31,011,600 11,189,318 $ $ 19,822,282 271,403,065 2008-09 92,344 (est.) 34,482 2007-08 92,344 33,358 2006-07 92,024 32,512 2005-06 92,994 28,550 2004-05 92,671 27,384 2003-04 92,900 26,724 2002-03 93,100 26,535 2001-02 94,600 25,319 2000-01 95,000 23,564 1999-00 94,911 (6) 22,608 Fiscal YearFiscal (1) Population (2) Income Income (3) Enrollment (4) Rate (5) Rate Capital OutlaysCapital (44,299,810) Total Government Funds Expenditures Funds Government Total 317,601,459 Total Debt Service Payments Service Total Debt 34,443,900 (1) Source: - CooperWeldon except Service, Centernotedas for Public (2) Source:Bureau Analysis Economic of Schools Public (3) City Source:Roanoke (Roanoke Metropolitan Commission Statistical Area) (4) Employment Source:Virginia (5) Source:Bureau Labor of Statistics Census U.S. Source: (6) Interest and Paying Agent Charges Agent Paying and Interest 12,286,166 Debt Service: RetirementPrincipal 22,157,734 Percentage of Noncapital Expenditures Noncapital of Percentage 12.60% 11.43% 11.85% 11.75% 10.79% 9.56% 10.81% 8.41% 8.13% 7.11 Total Noncapital Expenditures Noncapital Total 273,301,649 Information is presented on themodifiedaccrual basis of accounting.

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C-142 Table 19 Unaudited CITY OF ROANOKE, VIRGINIA CONSTRUCTION STATISTICS LAST TEN FISCAL YEARS

COMMERCIAL RESIDENTIAL CONSTRUCTION (1) CONSTRUCTION (1)

Fiscal Number of Number of Year Permits Value Permits Value

1999-00 575 89,654,863 1,363 31,155,220 2000-01 572 57,716,867 988 45,045,159 2001-02 499 64,101,308 875 36,855,003 2002-03 437 60,291,138 730 21,844,483 2003-04 871 57,922,598 303 17,995,045 2004-05 497 143,755,330 610 23,936,990 2005-06 512 193,157,052 673 30,206,738 2006-07 465 109,104,902 697 24,079,265 2007-08 456 233,358,448 754 29,442,647 2008-09 419 103,604,031 663 23,814,449

(1) Source: City of Roanoke, Planning, Building and Development Department

Table 20 Unaudited CITY OF ROANOKE, VIRGINIA PRINCIPAL EMPLOYERS COMPARISON AS OF DECEMBER 31, FISCAL YEARS 2009 AND 2000

December 31, 2008 December 31, 1999

Number of Number of Employer Rank Ownership Employees Rank Ownership Employees Carilion Hospitals 1 Private 1,000+ 1 Private 1,000+ Roanoke City Public Schools 2 Local Govt. 1,000+ 2 Local Govt. 1,000+ City of Roanoke 3 Local Govt. 1,000+ 3 Local Govt. 1,000+ Carilion Services 4 Private 1,000+ 9 Private 500 to 999 United Parcel Service 5 Private 500 to 999 5 Private 500 to 999 Advance Auto Parts 6 Private 500 to 999 4 Private 1,000+ Wal-Mart 7 Private 500 to 999 8 Private 500 to 999 United States Postal Service 8 Federal Govt. 500 to 999 7 Federal Govt. 500 to 999 Anthem Blue Cross/Blue Shield 9 Private 500 to 999 - - - Virginia Western Community College 10 State Govt. 500 to 999 - - - Kroger Mid-Atlantic - - - 6 Private 500 to 999 Orvis - - - 10 Private 500 to 999

Source: Virginia Employment Commission (VEC)

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C-143 Table 21 Unaudited 22 53 114 92 270 27 164 25 276 140 51 165 225 1,926 32 5 194 71 21 51 109 84 276 28 174 38 278 127 52 159 228 1,933 32 4 193 79 1,952 22 53 106 89 274 31 169 40 286 107 49 157 231 32 5 200 101 um, the outside management firm, at that time. at that firm, outside management the um, 1,903 21 51 107 82 262 31 170 34 289 103 50 155 220 31 3 199 95 1,908 157 (1) 43 21 (1) 106 84 268 31 173 42 295 105 52 208 31 3 191 98 Full-time Equivalent Employees as of December 31 as of December Employees Equivalent Full-time 1,730 152 21 - - 82 266 37 175 35 286 102 53 209 31 2 188 91 1,741 151 20 - - 79 264 35 173 41 304 85 102 54 217 31 1 184 LAST TEN CALENDAR YEARS CITY OF ROANOKE, VIRGINIA 1,766 150 17 - - 84 266 36 165 48 309 82 110 58 224 31 2 184 FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1,777 144 19 - - 83 270 (2) 31 165 47 305 92 112 59 224 31 2 193 Maintenance 132 Engineering 19 Other 76 Fire 268 Jail 164 Police 312 Transportation 86 Other 57 Sheriff 35 Other 2 Total 1,756 Public Works: Water PollutionControl - Water - Civic Facilities 25 Community DevelopmentCommunity 47 Public Safety: Parks, Recreation and CulturalParks, Recreation 112 Finance of Department Roanoke, of City Source: (1) In FY04, the Western Virginia Water Authority was formed by the City and County of Roanoke. County and City the (1) formed by In FY04, Western was Water the Virginia Authority Global of Spectr employees became workers Remaining management. private under operating Facilities began 1/1/09,(2) Civic On Health and Welfare and Health 226 Judicial Administration: Function: General Government 195

144

C-144 Table 22 Table Unaudited $ 120 10,149 59 337,450 13,175 17,594 1,124 90,380 $ 82,719 15,974 266,727 123,786 44,126 7,766 11,508 320 46,750 11,288 7,589 10,960 120 10,149 337,450 57 17,594 13,251 1,043 80,380 15,974 305,000 $ 82,719 126,250 44,126 7,766 28,424 47,000 723 26,301 7,800 $ N/A N/A 11,288 8,414 120 11,631 347,848 57 20,060 13,263 N/A N/A N/A 1,060 84,983 309,500 $ 86,404 129,750 19,291 44,566 47,000 29,000 100 26,812 7,800 11,508 $ 26,794,956 9,055 48 12,434 49 331,828 19,956 13,004 48,549 1,118 86,146 $ 93,229 151,076 426,704 16,966 44,846 28,405 4,836 22,978 250 6,900 11,222 $ 26,145,291 new County facility. County new 9,742 120 12,844 49 345,856 12,861 21,139 55,906 1,142 83,862 $ 100,707 9,714 195,000 328,228 45,051 5,760 32,054 150 25,930 7,200 $ 25,524,398 12,643 10,692 60 13,516 57 374,453 22,579 12,712 1,096 62,000 88,991 12,500 $ 109,819 434,170 7,396 213,900 33,000 100 5,352 6,900 29,500 $ 26,943,961 LAST TEN FISCAL YEARS FISCAL TEN LAST CITY OF ROANOKE, VIRGINIA OF ROANOKE, CITY 12,078 90 13,481 57 378,734 22,203 12,587 62,500 1,157 89,176 13,103 231,000 375,000 $ 124,709 18,766 37,587 5,000 200 7,200 28,544 $ 28,355,143 OPERATING INDICATORS BY FUNCTION INDICATORS OPERATING 9,799 52 10,958 51 320,249 12,256 23,686 1,193 47,089 88,022 12,790 $ 132,778 18,626 548,436 200,000 32,391 332 3,433 25,613 7,427 $ 30,487,405 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 12,358 7 11,255 46 273,897 23,369 12,286 28,888 1,188 349 89,131 14,516 $ 132,170 160,000 650,881 20,777 31,585 3,685 7,369 29,199 $ 30,005,699 * In fiscal year 2006 and after, combination permits replaced individual electrical, mechanical, and plumbing permits permits plumbing and mechanical, electrical, replaced individual permits combination after, 2006 and year fiscal In * a utilizing began and academy training basic City's the using stopped Police Department County 2008, Roanoke of February In ** housing unitshousing 132,798 Number of video materials video of Number 16,690 Number of street lights added lights street of Number 73 Number of audio materials audio of Number 10,923 Number of lane miles resurfaced miles lane of Number 43 Number of volumes of Number 410,216 Number of students of Number 12,303 Number of emergency call responses emergency of Number 23,231 Number of hours of training conducted** training of hours of Number 6,936 Number of instructional personnel instructional of Number visits personal for contacted Businesses 1,220 645 Number of assistance call responses assistance of Number 90,840 Number of criminal cases criminal of Number 14,917 Average assessed value of single-family of value assessed Average Number of traffic summons traffic of Number 22,592 visits library annual of Number 669,511 Number of participants served participants of Number 135,000 Total housing unitsTotal housing 45,710 45,442 47,087 45,978 46,388 Number of civil cases civil of Number 26,635 Number of property & building permits* building & property of Number 3,575 Number of traffic cases traffic of Number 32,377 Number of business licenses issued licenses business of Number 7,481 Levied property taxes property Levied 28,765,002 Highways and Streets and Highways Libraries Fire Sources: Various City of Roanoke departments Roanoke of City Various Sources: Education Economic Development Economic Judicial Administration Judicial Police Parks & Recreation & Parks Housing and Neighborhood Services Neighborhood and Housing Function Government General

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C-145 Table 23 Unaudited LAST TEN FISCAL YEARS FISCAL LAST TEN CITY OF ROANOKE, OF ROANOKE, VIRGINIA CITY CAPITAL ASSET STATISTICS BY FUNCTIONSTATISTICS CAPITAL ASSET 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 * Excludes non-staffed fire stations fire non-staffed Excludes * FY09. in opened Academy Park Forest and closed Elementary Park Forest ** ubro ietuk 24242323252524242329 12121213131313131414 6668888888 trucks ** stations* fire 6666666666 3222222222 centers of of schools 1111111111 7777777677 units vehicular of Number schools Number Number miles) (lane streets of Miles lights street of Number 157 recreation sitesand plazas Parks, areasPlaygrounds/play 175 fieldsFootball/soccer 997 fieldsBaseball/softball 2210000000 pools swimming Olympic-size 68 165 9,884Community 997 ** 9,811 schools Elementary 142 69Middle 997 37High 9,804 2 156 24 30Libraries 69 9,800 997Bookmobile 37Kiosks 137 2 9,758 24 30 71 997 19 37 9,710 122 2 24 995 30 71 20 9,566 39 126 995 9,509 21 2 32 71 21 123 39 9,458 995 21 32 71 2 9,458 123 21 39 992 21 32 71 21 2 39 992 21 32 71 21 2 39 21 32 71 21 38 2 21 30 21 38 2 21 33 21 2 21 Function PoliceFire Streets and Highways Recreation and Parks Education Libraries

146

C-146 Department of Finance City of Roanoke, Virginia

Ann H. Shawver, CPA Director of Finance Andrea F. Trent Assistant Director of Finance

Accounting / Accounts Payable

Kimberly H. Corpening Accounts Payable Clerk Kathryn K. Fox, CPA Accounting Supervisor Yen T. Ha Senior Accountant Cathy P. Jones Account Technician Stacy A. Kennedy Account Technician Tamara T. Landis Senior Accountant/ Accounts Payable Supervisor James J. Newman Accountant Sharon A. Shrewsbury Account Technician Jennifer D. Smith Accountant Lori C. Van Curen Senior Accountant

Administrative

Cindy M. Ayers Administrative Assistant IV Patricia A. Canady Administrative Assistant III

Payroll / Systems

Connie K. Altice Payroll Technician Suzanne F. Barnett Payroll Accountant Tasha L. Burkett Senior Financial Systems Accountant Jody A. Lawson Payroll and Systems Administrator Jennifer A. Teatino Financial Systems Accountant Paula S. Quinn Senior Payroll Technician

Retirement

Harold R. Harless, Jr. Acting Retirement Administrator Dorothy E. Hoskins Senior Accountant Belinda G. Thomas Retirement Account Technician

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C-147

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APPENDIX D

PROPOSED FORMS OF OPINIONS OF BOND COUNSEL

The Honorable Mayor and Council of the City of Roanoke, Virginia Roanoke, Virginia

Dear Mayor and Councilmembers:

CITY OF ROANOKE, VIRGINIA, GENERAL OBLIGATION PUBLIC IMPROVEMENT AND REFUNDING BONDS, SERIES 2010C, $4,820,000

At your request we have examined into the validity of an issue of Four Million Eight Hundred Twenty Thousand Dollars ($4,820,000) principal amount of General Obligation Public Improvement and Refunding Bonds, Series 2010C (the “Bonds”), of the City of Roanoke, Virginia (the “City”). The Bonds are dated their date of delivery; are issued in fully registered form in the denomination of $5,000 each or any integral multiple thereof; and are numbered from No. R-2010C-1 upwards in order of issuance. The Bonds mature on July 15 in each of the years and in the principal amounts set forth below, with the Bonds maturing in a particular year bearing interest from their date payable on July 15, 2011 and semiannually on each January 15 and July 15 thereafter at the rate per annum set forth opposite such year, to wit:

Year of Principal Interest Year of Principal Interest Maturity Amount Rate Maturity Amount Rate

2011 $ 55,000 2.00 % 2020 $135,000 4.00 % 2012 110,000 2.00 2021 135,000 4.00 2013 140,000 2.00 2022 135,000 3.00 2014 140,000 3.00 2023 135,000 3.125 2015 2,350,000 3.00 2024 135,000 3.25 2016 135,000 3.00 2025 135,000 3.375 2017 135,000 3.00 2027 270,000 3.60 2018 135,000 4.00 2030 405,000 3.875 2019 135,000 4.00

The Bonds maturing on and after July 15, 2021 are subject to redemption at the option of the City prior to their stated maturities on or after July 15, 2020 upon the terms and conditions and at the prices stated therein. The Bonds maturing on July 15, 2027 are subject to mandatory sinking fund redemption on July 15, 2026 and to payment at maturity on July 15, 2027, in the case of redemption at a redemption price equal to the principal amount to be redeemed, together with the interest accrued thereon to the date fixed for the redemption thereof. The Bonds maturing on July 15, 2030 are subject to mandatory sinking fund redemption on July 15, 2028 and on each July 15 thereafter and to payment at maturity on July 15, 2030, in the case of redemption at a redemption price equal

D-1

to the principal amount to be redeemed, together with the interest accrued thereon to the date fixed for the redemption thereof.

The Bonds recite that they are issued for the purpose of providing funds to pay the costs of acquisition, construction, reconstruction, improvement, extension, enlargement and equipping of various public improvement projects of and for the City and to refund on a current basis certain outstanding general obligation public improvement bonds of the City, under and pursuant to and in full compliance with the Constitution and statutes of the Commonwealth of Virginia, including Chapter 26 of Title 15.2 of the Code of Virginia, 1950, as amended (the same being the Public Finance Act of 1991), and resolutions and other proceedings of the Council of the City duly adopted and taken under the Public Finance Act of 1991.

We have examined (i) the Constitution and statutes of the Commonwealth of Virginia, (ii) certified copies of the aforementioned resolutions and other proceedings of the Council of the City in connection with the authorization, issuance, sale and delivery of the Bonds, (iii) such other papers, instruments, documents and proceedings as we have deemed to be necessary or advisable and (iv) an executed and authenticated Bond of such issue.

In our opinion, the Bonds have been duly authorized and issued in accordance with the Constitution and statutes of the Commonwealth of Virginia and constitute valid and legally binding obligations of the City, and the Council of the City is authorized and required to levy and collect annually, at the same time and in the same manner as other taxes of the City are assessed, levied and collected, a tax upon all taxable property within the City, over and above all other taxes, authorized or limited by law and without limitation as to rate or amount, sufficient to pay when due the principal of and interest on the Bonds to the extent other funds of the City are not lawfully available and appropriated for such purpose.

It is to be understood that the rights of the holders of the Bonds and the enforceability thereof may be subject to judicial discretion, to the exercise of the sovereign police powers of the Commonwealth of Virginia and the constitutional powers of the United States of America and to valid bankruptcy, insolvency, reorganization, moratorium and other laws affecting the relief of debtors.

In our opinion, under existing statutes and court decisions, interest on the Bonds (i) is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) is not treated as an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering our opinion, we have relied on certain representations, certifications of fact and statements of reasonable expectations made by the City in connection with the Bonds, and we have assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code.

It is also our opinion that, under the existing statutes of the Commonwealth of Virginia, interest on the Bonds is not includable in computing the Virginia income tax.

We express no opinion regarding other federal or Commonwealth of Virginia tax consequences arising with respect to the Bonds. We are rendering our opinion under existing statutes and court decisions as of the issue date of the Bonds, and we assume no obligation to update our opinion after the issue date of the Bonds to reflect any future action, fact or circumstance, or change in law or interpretation, or otherwise. We express no opinion on the effect of any action taken in reliance upon an opinion of other counsel on the exclusion from gross income for federal income tax purposes of interest on the Bonds.

Very truly yours,

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The Honorable Mayor and Council of the City of Roanoke, Virginia Roanoke, Virginia

Dear Mayor and Councilmembers:

CITY OF ROANOKE, VIRGINIA, GENERAL OBLIGATION PUBLIC IMPROVEMENT BONDS, SERIES 2010D (TAX-EXEMPT – RECOVERY ZONE FACILITY BONDS), $5,470,000

At your request we have examined into the validity of an issue of Five Million Four Hundred Seventy Thousand Dollars ($5,470,000) principal amount of General Obligation Public Improvement Bonds, Series 2010D (Tax-Exempt – Recovery Zone Facility Bonds) (the “Bonds”), of the City of Roanoke, Virginia (the “City”). The Bonds are dated their date of delivery; are issued in fully registered form in the denomination of $5,000 each or any integral multiple thereof; and are numbered from No. R-2010D-1 upwards in order of issuance. The Bonds mature on July 15 in each of the years and in the principal amounts set forth below, with the Bonds maturing in a particular year bearing interest from their date payable on July 15, 2011 and semiannually on each January 15 and July 15 thereafter at the rate per annum set forth opposite such year, to wit:

Year of Principal Interest Year of Principal Interest Maturity Amount Rate Maturity Amount Rate

2011 $110,000 2.00 % 2020 $285,000 4.00 % 2012 225,000 2.00 2021 285,000 4.00 2013 290,000 2.00 2022 285,000 3.00 2014 285,000 3.00 2023 285,000 3.125 2015 285,000 3.00 2024 285,000 3.25 2016 285,000 3.00 2025 285,000 3.375 2017 285,000 3.00 2027 570,000 3.60 2018 285,000 4.00 2030 855,000 3.875 2019 285,000 4.00

The Bonds maturing on and after July 15, 2021 are subject to redemption at the option of the City prior to their stated maturities on or after July 15, 2020 upon the terms and conditions and at the prices stated therein. The Bonds maturing on July 15, 2027 are subject to mandatory sinking fund redemption on July 15, 2026 and to payment at maturity on July 15, 2027, in the case of redemption at a redemption price equal to the principal amount to be redeemed, together with the interest accrued thereon to the date fixed for the redemption thereof. The Bonds maturing on July 15, 2030 are subject to mandatory sinking fund redemption on July 15, 2028 and on each July 15 thereafter and to payment at maturity on July 15, 2030, in the case of redemption at a redemption price equal to the principal amount to be redeemed, together with the interest accrued thereon to the date fixed for the redemption thereof.

The Bonds recite that they are issued for the purpose of providing funds to pay the costs of acquisition, construction, reconstruction, improvement, extension, enlargement and equipping of various public improvement projects of and for the City, under and pursuant to and in full compliance with the Constitution and statutes of the Commonwealth of Virginia, including Chapter 26 of Title 15.2 of the Code of Virginia, 1950, as

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amended (the same being the Public Finance Act of 1991), and resolutions and other proceedings of the Council of the City duly adopted and taken under the Public Finance Act of 1991.

We have examined (i) the Constitution and statutes of the Commonwealth of Virginia, (ii) certified copies of the aforementioned resolutions and other proceedings of the Council of the City in connection with the authorization, issuance, sale and delivery of the Bonds, (iii) such other papers, instruments, documents and proceedings as we have deemed to be necessary or advisable and (iv) an executed and authenticated Bond of such issue.

In our opinion, the Bonds have been duly authorized and issued in accordance with the Constitution and statutes of the Commonwealth of Virginia and constitute valid and legally binding obligations of the City, and the Council of the City is authorized and required to levy and collect annually, at the same time and in the same manner as other taxes of the City are assessed, levied and collected, a tax upon all taxable property within the City, over and above all other taxes, authorized or limited by law and without limitation as to rate or amount, sufficient to pay when due the principal of and interest on the Bonds to the extent other funds of the City are not lawfully available and appropriated for such purpose.

It is to be understood that the rights of the holders of the Bonds and the enforceability thereof may be subject to judicial discretion, to the exercise of the sovereign police powers of the Commonwealth of Virginia and the constitutional powers of the United States of America and to valid bankruptcy, insolvency, reorganization, moratorium and other laws affecting the relief of debtors.

In our opinion, under existing statutes and court decisions, interest on the Bonds (i) is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), except that no opinion is expressed as to such exclusion of interest on any Bond for any period during which such Bond is held by a person who, within the meaning of Section 147(a) of the Code is a “substantial user” of the facilities financed with the proceeds of the Bonds or a “related person”, and (ii) is not treated as an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering our opinion, we have relied on certain representations, certifications of fact and statements of reasonable expectations made by the City in connection with the Bonds, and we have assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code.

It is also our opinion that, under the existing statutes of the Commonwealth of Virginia, interest on the Bonds is not includable in computing the Virginia income tax.

We express no opinion regarding other federal or Commonwealth of Virginia tax consequences arising with respect to the Bonds. We are rendering our opinion under existing statutes and court decisions as of the issue date of the Bonds, and we assume no obligation to update our opinion after the issue date of the Bonds to reflect any future action, fact or circumstance, or change in law or interpretation, or otherwise. We express no opinion on the effect of any action taken in reliance upon an opinion of other counsel on the exclusion from gross income for federal income tax purposes of interest on the Bonds.

Very truly yours,

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The Honorable Mayor and Council of the City of Roanoke, Virginia Roanoke, Virginia

Dear Mayor and Councilmembers:

CITY OF ROANOKE, VIRGINIA, GENERAL OBLIGATION PUBLIC IMPROVEMENT BONDS, SERIES 2010E (TAXABLE – RECOVERY ZONE ECONOMIC DEVELOPMENT BONDS), $5,665,000

At your request we have examined into the validity of an issue of Five Million Six Hundred Sixty- Five Thousand Dollars ($5,665,000) principal amount of General Obligation Public Improvement Bonds, Series 2010E (Taxable–Recovery Zone Economic Development Bonds) (the “Bonds”) of the City of Roanoke, Virginia (the “City”). The Bonds are dated their date of delivery; are issued in fully registered form in the denomination of $5,000 each or any integral multiple thereof; and are numbered from No. R-2010E-1 upwards in order of issuance. The Bonds mature on July 15 in each of the years and in the principal amounts set forth below, with the Bonds maturing in a particular year bearing interest from their date payable on July 15, 2011 and semiannually on each January 15 and July 15 thereafter at the rate per annum set forth opposite such year, to wit:

Year of Principal Interest Year of Principal Interest Maturity Amount Rate Maturity Amount Rate

2016 $380,000 2.90% 2022 $ 380,000 4.60% 2017 380,000 3.40 2023 380,000 4.75 2018 380,000 3.70 2024 375,000 4.95 2019 380,000 3.95 2025 375,000 5.05 2020 380,000 4.15 2030 1,875,000 5.70 2021 380,000 4.40

The Bonds maturing on and after July 15, 2021 are subject to redemption at the option of the City prior to their stated maturities on or after July 15, 2020 upon the terms and conditions and at the prices stated therein. The Bonds are also subject to an extraordinary optional redemption upon the occurrence of an “extraordinary recovery zone economic development bond event” upon the terms and conditions and at the prices stated therein. The Bonds maturing on July 15, 2030 are subject to mandatory sinking fund redemption on July 15, 2026 and on each July 15 thereafter and to payment at maturity on July 15, 2030, in the case of redemption at a redemption price equal to the principal amount to be redeemed, together with the interest accrued thereon to the date fixed for the redemption thereof.

The Bonds recite that they are issued for the purpose of providing funds to pay the costs of acquisition, construction, reconstruction, improvement, extension, enlargement and equipping of various public improvement projects of and for the City, under and pursuant to and in full compliance with the Constitution and statutes of the Commonwealth of Virginia, including Chapter 26 of Title 15.2 of the Code of Virginia, 1950, as amended (the same being the Public Finance Act of 1991), and resolutions and other proceedings of the Council of the City duly adopted and taken under the Public Finance Act of 1991.

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We have examined (i) the Constitution and statutes of the Commonwealth of Virginia, (ii) certified copies of the aforementioned resolutions and other proceedings of the Council of the City in connection with the authorization, issuance, sale and delivery of the Bonds, (iii) such other papers, instruments, documents and proceedings as we have deemed to be necessary or advisable and (iv) an executed and authenticated Bond of such issue.

In our opinion, the Bonds have been duly authorized and issued in accordance with the Constitution and statutes of the Commonwealth of Virginia and constitute valid and legally binding obligations of the City, and the Council of the City is authorized and required to levy and collect annually, at the same time and in the same manner as other taxes of the City are assessed, levied and collected, a tax upon all taxable property within the City, over and above all other taxes, authorized or limited by law and without limitation as to rate or amount, sufficient to pay when due the principal of and interest on the Bonds to the extent other funds of the City are not lawfully available and appropriated for such purpose.

It is to be understood that the rights of the holders of the Bonds and the enforceability thereof may be subject to judicial discretion, to the exercise of the sovereign police powers of the Commonwealth of Virginia and the constitutional powers of the United States of America and to valid bankruptcy, insolvency, reorganization, moratorium and other laws affecting the relief of debtors.

In our opinion, interest on the Bonds is included in gross income for federal income tax purposes. This opinion is not intended or provided by Bond Counsel to be used and cannot be used by an owner of the Bonds for the purpose of avoiding penalties that may be imposed on the owner of such Bonds. The opinion set forth in this paragraph is provided to support the promotion or marketing of the Bonds. Each owner of Bonds should seek advice based on its particular circumstances from an independent tax advisor.

It is also our opinion that, under the existing statutes of the Commonwealth of Virginia, interest on the Bonds is not includable in computing the Virginia income tax.

We express no opinion regarding other federal or Commonwealth of Virginia tax consequences arising with respect to the Bonds. We are rendering our opinion under existing statutes and court decisions as of the issue date of the Bonds, and we assume no obligation to update our opinion after the issue date of the Bonds to reflect any future action, fact or circumstance, or change in law or interpretation, or otherwise.

Very truly yours,

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APPENDIX E

DESCRIPTION OF THE DEPOSITORY TRUST COMPANY AND THE BOOK-ENTRY SYSTEM

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

DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered Series 2010 Bonds registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Bond certificate will be issued in the aggregate principal amount of each maturity of each series of the Bonds and will be deposited with DTC.

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

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts

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such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on, and payment of redemption proceeds of, the Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Issuer or the Registrar and Paying Agent, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name”, and will be the responsibility of such Participant and not of DTC (nor its nominee), the Issuer or the Registrar and Paying Agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest payments and payment of redemption proceeds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Registrar and Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Registrar and Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.

The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.

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

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APPENDIX F

PROPOSED FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Certificate”), dated August 11, 2010, is executed and delivered in connection with the issuance by the City of Roanoke, Virginia (the “Issuer”), of $4,820,000 principal amount of General Obligation Public Improvement and Refunding Bonds, Series 2010C, dated August 11, 2010, $5,470,000 principal amount of General Obligation Public Improvement Bonds, Series 2010D (Recovery Zone Facility Bonds), dated August 11, 2010, and $5,665,000 principal amount of General Obligation Public Improvement Bonds, Series 2010E (Taxable–Recovery Zone Economic Development Bonds), dated August 11, 2010 (collectively, the “Bonds”), and pursuant to resolutions duly adopted by the Council of the Issuer on September 8, 2009, January 4, 2010, June 21, 2010 and July 19, 2010, respectively (such resolutions being referred to herein collectively as the “Resolution”). Capitalized terms used in this Certificate shall have the respective meanings specified above or in Article I hereof. Pursuant to the Resolution, the Issuer agrees as follows:

ARTICLE I

Definitions

SECTION 1.1. Definitions. The following terms used in this Certificate shall have the following respective meanings:

(1) “Annual Financial Information” means, collectively, (i) updated versions of the following financial information and operating data with respect to the Issuer for each fiscal year of the type contained in Appendix A to the Official Statement under the headings “GENERAL FUND REVENUES AND EXPENDITURES”, “SUMMARY OF GENERAL FUND REVENUES AND EXPENDITURES”, “TAX BASE DATA” (including the tables “Assessed Value of All Taxable Property”, “Property Tax Rates (Per $100 Assessed Value)”, “General Property Tax Levies and Collections”, “Ten Largest Taxpayers” and “Taxable Retail Sales” therein), “DEBT ADMINISTRATION” (including the information under the subheadings “Bond Amortization Schedules” and “Debt Ratios” therein), “CAPITAL IMPROVEMENT PROGRAM - FUTURE BORROWING REQUIREMENTS”, “EMPLOYEE RETIREMENT PLANS” and information contained in Appendix C to the Official Statement and (ii) information regarding amendments to this Certificate required pursuant to Sections 4.2(d) and (e) of this Certificate. Annual Financial Information shall include Audited Financial Statements, if available, or Unaudited Financial Statements.

The descriptions contained in Section 1.1(1)(i) of financial information and operating data constituting Annual Financial Information are of general categories of financial information and operating data. When such descriptions include information that no longer can be generated because the operations to which it related have been materially changed or discontinued, a statement to that effect shall be provided in lieu of such information. Any Annual Financial Information containing modified financial information or operating data shall explain, in narrative form, the reasons for the modification and the impact of the modification on the type of financial information or operating data being provided.

(2) “Audited Financial Statements” means the annual financial statements, if any, of the Issuer, audited by such auditor as shall then be required or permitted by State law or the Resolution. Audited Financial Statements shall be prepared in accordance with GAAP; provided, however, that, pursuant to Section 4.2(a) and (e) hereof, the Issuer may from time to time, if required by federal or State legal requirements, modify the accounting principles to be followed in preparing its financial statements. Notice of any such modification required by Section 4.2(a) hereof shall include a reference to the specific federal or State law or regulation requiring such accounting principles, or other description thereof.

(3) “Counsel” means Hawkins Delafield & Wood LLP or other nationally recognized bond counsel or counsel expert in federal securities laws.

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(4) “GAAP” means generally accepted accounting principles as prescribed from time to time for governmental units by Government Accounting Standards Board, the Financial Accounting Standards Board or any successor to the duties and responsibilities of either of them.

(5) “Material Event” means any of the following events with respect to the Bonds, whether relating to the Issuer or otherwise, if material:

(i) principal and interest payment delinquencies; (ii) non-payment related defaults; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (vii) modifications to rights of Bondholders; (viii) Bond calls (other than scheduled mandatory sinking fund redemptions); (ix) defeasances; (x) release, substitution or sale of property securing repayment of the Bonds; and (xi) rating changes.

(6) “Material Event Notice” means a notice of a Material Event.

(7) “MSRB” means the Municipal Securities Rulemaking Board established pursuant to the provisions of Section 15B(b)(1) of the Securities Exchange Act of 1934 or any successor thereto or to the functions of the MSRB contemplated by this Certificate.

(8) “Official Statement” means the Official Statement, dated July 29, 2010, of the Issuer relating to the Bonds.

(9) “Rule” means Rule 15c2-12 promulgated by the SEC under the Securities and Exchange Act of 1934 as amended (17 CFR Part 240, §240.15c2-12), as in effect on the date of this Certificate, including any official interpretations thereof issued either before or after the effective date of this Certificate which are applicable to this Certificate.

(10) “SEC” means the United States Securities and Exchange Commission.

(11) “State” means the Commonwealth of Virginia.

(12) “Unaudited Financial Statements” means the same as Audited Financial Statements, except the same shall not have been audited.

(13) “Underwriter” means Robert W. Baird & Co. Incorporated.

ARTICLE II

The Undertaking

SECTION 2.1. Purpose. This Certificate is being executed and delivered solely to assist the Underwriter in complying with paragraph (b)(5) of the Rule.

SECTION 2.2. Annual Financial Information. (a) The Issuer shall provide Annual Financial Information for the Issuer with respect to each fiscal year of the Issuer, commencing with fiscal year beginning July 1, 2009, by no later than six months after the end of the respective fiscal year, to the MSRB.

(b) The Issuer shall provide, in a timely manner, notice of any failure of the Issuer to provide the Annual Financial Information by the date specified in subsection (a) above to the MSRB.

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SECTION 2.3. Audited Financial Statements. If not provided as part of Annual Financial Information by the dates required by Section 2.2(a) hereof, the Issuer shall provide Audited Financial Statements, when and if available, to the MSRB.

SECTION 2.4. Material Event Notices. (a) If a Material Event occurs, the Issuer shall provide, in a timely manner, a Material Event Notice to the MSRB.

(b) Any notice of a defeasance of Bonds shall state whether the Bonds have been escrowed to maturity or to an earlier redemption date and the timing of such maturity or redemption.

SECTION 2.5. Additional Information. Nothing in this Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Certificate or any other means of communication, or including any other information in any Annual Financial Information or Material Event Notice hereunder, in addition to that which is required by this Certificate. If the Issuer chooses to do so, the Issuer shall have no obligation under this Certificate to update such additional information or include it in any future Annual Financial Information or Material Event Notice.

SECTION 2.6. Additional Disclosure Obligations. The Issuer acknowledges and understands that other State and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the Issuer, and that, under some circumstances, compliance with this Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the Issuer under such laws.

SECTION 2.7. No Previous Non-Compliance. The Issuer represents that, in the previous five years, it has not failed to comply in all material respects with any previous undertaking in a written contract or agreement specified in paragraph (b)(5)(i) of the Rule.

ARTICLE III

Operating Rules

SECTION 3.1. Reference to Other Documents. It shall be sufficient for purposes of Section 2.2 hereof if the Issuer provides Annual Financial Information by specific reference to documents (i) available to the public on the MSRB Internet Web site (currently, www.emma.msrb.org) or (ii) filed with the SEC. The provisions of this Section 3.1 shall not apply to Material Event Notices pursuant to Section 2.4 hereof.

SECTION 3.2. Submission of Information. Annual Financial Information may be provided in one document or multiple documents and at one time or in part from time to time.

SECTION 3.3. Dissemination Agents. The Issuer may from time to time designate an agent to act on its behalf in providing or filing notices, documents and information as required of the Issuer under this Certificate and revoke or modify any such designation.

SECTION 3.4. Transmission of Notices, Documents and Information. (a) Unless otherwise required by the MSRB, all notices, documents and information provided to the MSRB shall be provided to the MSRB’s Electronic Municipal Markets Access (EMMA) system, the current Internet Web address of which is www.emma.msrb.org.

(b) All notices, documents and information provided to the MSRB shall be provided in an electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 3.5. Fiscal Year. (a) The Issuer’s current fiscal year is July 1 to June 30, and the Issuer shall promptly notify the MSRB of each change in its fiscal year.

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(b) Annual Financial Information shall be provided at least annually notwithstanding any fiscal year longer than 12 calendar months.

ARTICLE IV

Effective Date, Termination, Amendment and Enforcement

SECTION 4.1. Effective Date; Termination.

(a) This Certificate shall be effective upon the issuance of the Bonds.

(b) The Issuer’s obligations under this Certificate shall terminate upon legal defeasance, prior redemption or payment in full of all of the Bonds.

(c) This Certificate or any provision hereof, shall be null and void in the event that the Issuer (i) receives an opinion of Counsel, addressed to the Issuer, to the effect that those portions of the Rule which require this Certificate, or any such provision, do not or no longer apply to the Bonds, whether because such portions of the Rule are invalid, have been repealed or otherwise, as shall be specified in such opinion, and (ii) shall have delivered copies of such opinion to the MSRB.

SECTION 4.2. Amendment. (a) This Certificate may be amended, by written certificate of the Director of Finance of the Issuer, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (i) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law (including rules or regulations) or in interpretations thereof, or a change in the identity, nature or status of the Issuer or the type of business conducted thereby, (ii) this Certificate as so amended would have complied with the requirements of the Rule as of the date of this Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, (iii) the Issuer shall have received an opinion of Counsel addressed to the Issuer, to the same effect as set forth in clause (ii) above, (iv) the Issuer shall have received an opinion of Counsel, addressed to the Issuer, or a determination by a person, in each case unaffiliated with the Issuer (such as Bond Counsel) and acceptable to the Issuer, to the effect that the amendment does not materially impair the interests of the holders of the Bonds and (v) the Issuer shall have delivered copies of such opinion and amendment to the MSRB.

(b) This Certificate may be amended, by written certificate of the Director of Finance of the Issuer, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (i) an amendment to the Rule is adopted, or a new or modified official interpretation of the Rule is issued, after the effective date hereof which is applicable to this Certificate, (ii) the Issuer shall have received an opinion of Counsel, addressed to the Issuer, to the effect that performance by the Issuer under this Certificate as so amended will not result in a violation of the Rule and (iii) the Issuer shall have delivered copies of such opinion and amendment to the MSRB.

(c) This Certificate may be amended, by written certificate of the Director of Finance of the Issuer, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (i) the Issuer shall have received an opinion of Counsel, addressed to the Issuer, to the effect that the amendment is permitted by rule, order or other official pronouncement, or is consistent with any interpretive advice or no-action positions of the Staff of the SEC and (ii) the Issuer shall have delivered copies of such opinion and amendment to the MSRB.

(d) To the extent any amendment to this Certificate results in a change in the types of financial information or operating data provided pursuant to this Certificate, the first Annual Financial Information provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

(e) If an amendment is made pursuant to Section 4.2(a) hereof to the accounting principles to be followed by the Issuer in preparing its financial statements, the Annual Financial Information for the fiscal year in which the change is made shall present a comparison between the financial statements or information prepared on

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the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a qualitative and, to the extent reasonably feasible, quantitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information.

SECTION 4.3. Benefit; Third-Party Beneficiaries; Enforcement. (a) The provisions of this Certificate shall constitute a contract with and inure solely to the benefit of the holders from time to time of the Bonds, except that beneficial owners of Bonds shall be third-party beneficiaries of this Certificate. The provisions of this Certificate shall create no rights in any person or entity except as provided in this subsection (a) and in subsection (b) of this Section 4.3.

(b) The obligations of the Issuer to comply with the provisions of this Certificate shall be enforceable by the holders of the Bonds, including beneficial owners thereof. The Bondholders’ rights to enforce the provisions of this Certificate shall be limited solely to a right, by action in mandamus or for specific performance, to compel performance of the Issuer’s obligations under this Certificate and the Resolution. In consideration of the third-party beneficiary status of the beneficial owners of the Bonds pursuant to subsection (a) of this Section 4.3, the beneficial owners shall be deemed to be holders of the Bonds for purposes of this subsection (b).

(c) Any failure by the Issuer to perform in accordance with this Certificate shall not constitute a default under the Resolution and any rights and remedies provided by the Resolution upon the occurrence of a default shall not apply to any such failure.

(d) This Certificate shall be construed and interpreted in accordance with the laws of the State, without regard to its conflict of laws rules, and any suits and actions arising out of this Certificate shall be instituted and tried only in the Circuit Court of the City of Roanoke, Virginia; provided, however, that to the extent this Certificate addresses matters of federal securities laws, including the Rule, this Certificate shall be construed in accordance with such federal securities laws and official interpretations thereof.

IN WITNESS WHEREOF, the undersigned have executed this Certificate as of the date first above written.

CITY OF ROANOKE, VIRGINIA

By: Title: City Manager

By: Title: Director of Finance

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City of Roanoke, Virginia • General Obligation Public Improvement and Refunding Bonds, Series 2010C and General Obligation Public Improvement Bonds, Series 2010D and Series 2010E