OFFICIAL STATEMENT NEW ISSUE Standard and Poor’s Rating: “AA” FULL BOOK-ENTRY Fitch’s Rating: “AA” (See the caption “RATINGS” herein) In the opinion of K&L Preston Gates Ellis LLP, Bond Counsel, assuming compliance with certain covenants of the Municipality, interest on the Bonds is excludable from gross income for federal income tax purposes under existing law. Interest on the Bonds is not an item of tax preference for purposes of either individual or corporate alternative minimum tax. Interest on the Bonds may be indirectly subject to corporate alternative minimum tax and certain other taxes imposed on certain corporations. Interest on the Bonds is not included in taxable income for purposes of the Alaska income tax imposed on corporations. Interest on the Bonds may be indirectly subject to the Alaska alternative minimum tax imposed on corporations to the extent that interest on the Bonds is subject to the federal alternative minimum tax on corporations. See “Tax Matters” herein for a discussion of the opinion of Bond Counsel. MUNICIPALITY OF ANCHORAGE, ALASKA $60,000,000 $29,840,000 2008 General Obligation Bonds 2008 General Obligation Bonds (General Purpose) (Schools) Series A Series B Dated: Date of Delivery Due: August 1 as shown on the inside cover The Bonds of each series will be issued as fully registered bonds and, when issued, will be registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds. Individual purchases of interests in the Bonds of each series will be made in book-entry form only, in the principal amount of $5,000 or any integral multiple thereof within a single maturity. Purchasers of such interests will not receive certifi cates representing their interests in the Bonds. Principal of and interest on the Bonds of each series are payable directly to DTC by U.S. Bank National Association, as authenticating paying agent and registrar (“Registrar”) for the Bonds. Principal of the Bonds of each series is payable on the dates set forth on the inside cover. Interest on the Bonds of each series is payable on February 1, 2009, and semiannually thereafter on each February 1 and August 1. Upon receipt of payments of principal and interest, DTC will in turn remit such principal and interest to the DTC Participants (as such term is defi ned herein) for subsequent disbursement to the purchasers of benefi cial interests in the Bonds, as described in APPENDIX C—Book-Entry Only System. The Bonds of each series are subject to optional redemption prior to their respective scheduled maturities as more fully described herein under the caption “DESCRIPTION OF THE BONDS—Redemption.” The Bonds are general obligations of the Municipality of Anchorage, Alaska (the “Municipality”), and the full faith, credit and taxing power of the Municipality are pledged for the payment of the principal of and interest on the Bonds when due. The Municipality has irrevocably pledged and covenanted to levy and collect taxes upon all taxable property within the Municipality, without limitation as to rate or amount, in amounts suffi cient, together with other funds legally available therefor, to pay the principal of and interest on the Bonds when due.
MATURITY SCHEDULES Inside of Cover Page
The Bonds of each series are offered when, as and if executed and delivered by the Underwriters and are subject to the approving legal opinion of K&L Preston Gates Ellis LLP of Seattle, Washington, Bond Counsel, as to validity and the exemption of interest thereon from federal income taxation. Certain legal matters will be passed upon for the Underwriters by Birch, Horton, Bittner and Cherot of Anchorage, Alaska. It is expected that the Bonds of each series will be available for delivery through the facilities of DTC in New York, New York, by Fast Automated Securities Transfer (FAST) on or about December 11, 2008.
Merrill Lynch & Co. Morgan Stanley & Co. Incorporated Citi J.P. Morgan Goldman, Sachs & Co. Seattle-Northwest Securities Corporation Siebert Brandford Shank & Co., LLC
Dated: November 18, 2008
MUNICIPALITY OF ANCHORAGE, ALASKA
$60,000,000 2008 General Obligation Bonds, Series A (General Purpose)
Maturities, Amounts, Interest Rates and Yields or Prices (Base CUSIP¹ No. 033161)
Due Principal Interest CUSIP Due Principal Interest CUSIP August 1 Amount Rate Yield No.1 August 1 Amount Rate Yield No. 1 2009 $1,245,000 4.000% 1.420% WF3 2019* $2,960,000 5.000% 4.490% WR7 2010 1,995,000 4.000 2.370 WG1 2020* 3,110,000 5.000 4.700 WS5 2011 2,075,000 4.500 2.690 WH9 2021* 3,265,000 5.000 4.830 WT3 2012 2,170,000 4.000 3.070 WJ5 2022* 3,430,000 5.000 4.940 WU0 2013 2,255,000 5.000 3.300 WK2 2023 3,600,000 5.000 5.000 WV8 2014 2,370,000 5.000 3.470 WL0 2024 3,780,000 5.000 5.080 WW6 2015 2,490,000 4.000 3.650 WM8 2025 3,970,000 5.000 5.150 WX4 2016 2,590,000 5.000 3.860 WN6 2026 4,165,000 5.000 5.210 WY2 2017 2,720,000 4.250 4.080 WP1 2027 4,375,000 5.125 5.260 WZ9 2018 2,835,000 4.500 4.280 WQ9 2028 4,600,000 5.125 5.300 XA3
$29,840,000 2008 General Obligation Bonds, Series B (Schools)
Maturities, Amounts, Interest Rates and Yields or Prices (Base CUSIP¹ No. 033161)
Due Principal Interest CUSIP Due Principal Interest CUSIP August 1 Amount Rate Yield No. 1 August 1 Amount Rate Yield No. 1 2009 $950,000 3.000% 1.420% XB1 2019* $1,455,000 4.500% 4.490% XM7 2010 980,000 3.250 2.370 XC9 2020* 1,525,000 5.000 4.700 XN5 2011 1,015,000 3.500 2.690 XD7 2021* 1,605,000 5.250 4.830 XP0 2012 1,060,000 5.000 3.070 XE5 2022* 1,690,000 5.000 4.940 XQ8 2013 1,105,000 4.000 3.300 XF2 2023 1,775,000 5.000 5.000 XR6 2014 1,155,000 4.000 3.470 XG0 2024 1,870,000 5.000 5.080 XS4 2015 1,205,000 5.000 3.650 XH8 2025 1,965,000 5.000 5.150 XT2 2016 1,260,000 4.000 3.860 XJ4 2026 2,065,000 5.125 5.210 XU9 2017 1,320,000 5.000 4.080 XK1 2027 2,170,000 5.000 5.260 XV7 2018 1,385,000 5.000 4.280 XL9 2028 2,285,000 5.250 5.300 XW5
* Priced to par call date on August 1, 2018. 1 CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein are provided by Standard & Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers are included on the inside cover of this Official Statement for convenience of the holders and potential holders of the Bonds. No assurance can be given that the CUSIP numbers for the Bonds will remain the same after the date of issuance and delivery of the Bonds.
No dealer, broker, salesperson or other person has been authorized to give any information or make any representations, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale of the securities offered hereby shall under any circumstances create an implication that there has been no change in the affairs of the Municipality of Anchorage, or any party described herein, since the date hereof.
Neither this Official Statement nor any statement which may have been made orally or in writing is to be construed as a contract with the owners of any of the Bonds.
UPON ISSUANCE, THE BONDS WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND WILL NOT BE LISTED ON ANY STOCK OR OTHER SECURITIES EXCHANGE. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL, STATE OR OTHER GOVERNMENTAL ENTITY OR AGENCY WILL HAVE PASSED ON THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFICIAL STATEMENT OR APPROVED THE BONDS FOR SALE. THE BOND ORDINANCE WILL NOT BE QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED.
This Official Statement is submitted by the Municipality in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.
The information set forth herein has been furnished by the Municipality and other sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation, by the Underwriters. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in affairs of the Municipality since the date hereof. This Official Statement including any supplement or amendment hereto, is intended to be deposited by the Underwriters with one or more repositories.
Mikunda Cottrell & Co., Inc. the Municipality’s independent auditor, has not been engaged to perform and has not performed, since the date of its report included herein, any procedures on the financial statements addressed in that report. Mikunda Cottrell & Co., Inc. also has not performed any procedures relating to this Official Statement.
MUNICIPALITY OF ANCHORAGE
MAYOR
Mark Begich
MUNICIPAL ASSEMBLY
Matt Claman, Chair
Sheila Selkregg, Vice Chair Chris Birch Mike Gutierrez Dan Coffey Jennifer Johnston Harriet Drummond Debbie Ossiander Patrick Flynn Bill Starr Elvi Gray-Jackson
Barbara Gruenstein, Municipal Clerk
ADMINISTRATION
Michael Abbott, Municipal Manager Sharon Weddleton, Chief Fiscal Officer James Reeves, Municipal Attorney
BOND COUNSEL OFFICE OF THE MUNICIPALITY K&L Preston Gates Ellis LLP 632 West Sixth Avenue, Room 810 Seattle, Washington Anchorage, Alaska 99501 Telephone (Finance Department): (907) 343-6610 www.muni.org*
PAYING AGENT/REGISTRAR FINANCIAL ADVISOR U.S. Bank National Association First Southwest Company Seattle, Washington Anchorage, Alaska
UNDERWRITERS’ COUNSEL
Birch Horton Bittner & Cherot Anchorage, Alaska
______*This inactive textual reference to the Municipality’s website is contact information provided only for convenience. The reference is not a hyperlink and, by this reference, the Municipality’s website is not incorporated into this Official Statement.
-i - Table of Contents
OFFICIALS ...... i 2008-2013 General Government Capital INTRODUCTION ...... 1 Improvement Program ...... 17 General ...... 1 Cash Management ...... 18 Authority for Issuance of the Bonds ...... 1 ANCHORAGE SCHOOL DISTRICT ...... 20 Purpose of the Bonds ...... 2 Labor Relations ...... 22 Security for the Bonds ...... 3 Retirement Plans ...... 22 DESCRIPTION OF THE BONDS ...... 3 ANCHORAGE SCHOOL DISTRICT Redemption ...... 4 FINANCIAL INFORMATION ...... 23 Defeasance ...... 4 MUNICIPALITY OF ANCHORAGE SOURCES AND USES OF FUNDS ...... 5 DEBT SERVICE SCHEDULES ...... 24 STATE CONTRIBUTIONS TOWARD Combined Annual Debt Service SCHOOL BOND DEBT SERVICE ...... 5 Requirements ...... 24 GENERAL AND ECONOMIC State Reimbursement Program ...... 5 INFORMATION RELATING TO State Support for Education Funding ...... 6 THE MUNICIPALITY OF Outstanding School District Bonds ...... 6 ANCHORAGE ...... 26 GENERAL STATE ASSISTANCE ...... 7 Population ...... 26 MUNICIPALITY OF ANCHORAGE ...... 7 Construction Activity ...... 27 Organization ...... 7 Employment ...... 28 Administrative Officers ...... 8 Oil and Gas Industry ...... 29 Labor Relations ...... 10 Military Bases ...... 29 Labor Organizations ...... 10 Port of Anchorage ...... 30 Retirement Plans ...... 10 Transportation ...... 31 Alaska Public Employees Retirement Community Services ...... 32 System ...... 10 Media ...... 32 Insurance ...... 11 Climate...... 32 FINANCIAL INFORMATION ...... 12 LITIGATION AND CLAIMS ...... 32 Local Taxation ...... 12 CONTINUING DISCLOSURE Assessed Valuation ...... 12 UNDERTAKING ...... 32 Property Tax Collection Record ...... 12 LEGAL MATTERS ...... 34 Tax Collection Record - Municipality of Anchorage ...... 13 TAX MATTERS ...... 34 Major Taxpayers ...... 13 General ...... 34 Ten Largest Taxpayers...... 13 Original Issue Premium ...... 35 Outstanding General Obligation General Original Issue Discount ...... 35 Purpose Bonds ...... 14 RATINGS ...... 36 Revenue Bonds ...... 14 UNDERWRITING ...... 36 Other Long-Term Obligations ...... 15 FINANCIAL ADVISOR ...... 37 Authorized But Unissued General EXECUTION OF OFFICIAL Obligation Bonds ...... 15 STATEMENT ...... 37 Future Sales of General Obligations ...... 15 Basis of Accounting ...... 15 Municipality of Anchorage Funds ...... 15 APPENDIX A – FINANCIAL Summary Statement of Revenues and STATEMENTS…………………………………A-1 Expenditures ...... 16 APPENDIX B – FORM OF BOND COUNSEL Debt and Tax Limitations ...... 17 OPINION………………………………………..B-1 APPENDIX C – BOOK-ENTRY ONLY SYSTEM……...…………………………………C-1
-ii -
(THIS PAGE INTENTIONALLY LEFT BLANK)
OFFICIAL STATEMENT Relating to
$60,000,000 $29,840,000 2008 General Obligation Bonds, 2008 General Obligation Bonds, Series A (General Purpose) Series B (Schools)
INTRODUCTION
General
This Official Statement, including the cover hereof and the appendices hereto, was prepared to provide information relating to the Municipality of Anchorage, Alaska (the “Municipality”), and the Municipality’s $60,000,000 principal amount of 2008 General Obligation Bonds, Series A (General Purpose) (the “General Purpose Bonds”), and $29,840,000 principal amount of 2008 General Obligation Bonds, Series B (Schools) (the “School Bonds”) (the General Purpose Bonds and School Bonds are referred to herein, together, as the “Bonds”).
The information within this Official Statement has been compiled from official and other sources considered reliable and, while not guaranteed as to accuracy, is believed to be correct. Any statements herein involving estimates, projections or forecasts are to be construed as such rather than as statements of fact or representations that such estimates, projections or forecasts will be realized.
All of the summaries of, or references to, provisions of statutes of the State of Alaska (the “State”), ordinances, resolutions and the Home Rule Charter (the “Municipal Charter”) of the Municipality and other documents contained herein are made subject to the complete provisions thereof and do not purport to be complete statements of such provisions, copies of which are available for inspection at the office of the Municipality upon request. Certain financial information regarding the Municipality has been taken or derived from the audited financial statements and other financial reports of the Municipality. Reference should be made to the audited financial statements and other financial reports, and their accompanying bonds, for additional information. Copies thereof are available for inspection at the office of the Municipality upon request. A copy of the audited financial statements of the Municipality as of and for the year ended December 31, 2007, with an Independent Auditors’ Report, appears as Appendix A hereto. KPMG LLP, who had served as the Municipality’s independent auditor, has not been engaged to perform and has not performed, since the date of its report included herein, any procedures on the financial statements addressed in that report. KPMG LLP also has not performed any procedures relating to this Official Statement.
Summaries of, or references to, provisions of the Internal Revenue Code of 1986, as amended (the “Code”), contained herein are made subject to the complete provisions thereof and do not purport to be complete statements thereof.
Capitalized terms which are not defined herein shall have the same meanings as set forth in the hereinafter defined Bond Ordinances (see “Authority for Issuance of the Bonds” below).
Authority for Issuance of the Bonds
The Bonds are issued pursuant to Article XV of the Municipal Charter and pursuant to elections of the voters of the Municipality. The sale of the Bonds is further authorized by Ordinance No. AO 2008-108 (General Purpose) and Ordinance No. AO 2008-109 (Schools), each was passed by the Assembly on October 28, 2008 (the “Bond Ordinances”). The Bond Ordinances set forth certain details of the Bonds and authorized the Chief Fiscal Officer of the Municipality to cause the Bonds to be sold by competitive public sale or negotiated sale.
1
Purpose of the Bonds
General Purpose Bonds
The net proceeds from the sale of the General Purpose Bonds will be used to pay the costs of general purpose capital improvements (the “Projects”) within the Municipality, which include certain capital improvement projects included in Proposition 7 approved by the qualified voters of the Municipality at the general election held on April 4, 2006 and Propositions 2 and 6 approved by the qualified voters of the Municipality at the general election held on April 3, 2007 and Propositions 1, 4, 5, 6, and 7 approved by the qualified voters of the Municipality at the general election held on April 1, 2008 (collectively, the “General Purpose Propositions”). The table below outlines the General Purpose Propositions, including the current authorization, the principal amount of General Purpose Bonds to be issued from each proposition, and the amount of authorized, yet unissued General Purpose Bonds remaining after the issuance of the General Purpose Bonds. General Purpose Proposition Current Bonds to be Issued Remaining No. Project Description Authorization (this issuance) Authorization Roads and Drainage Service Area 2006-7 Road and Storm Drainage $14,040,000 $9,692,000 $4,348,000
2007-2 Anchorage Parks and Recreation $2,495,000 $0 $2,495,000
Roads and Drainage Service Area 2007-6 Road and Storm Drainage $22,935,000 $15,830,000 $7,105,000
Public Facility Major Roof 2008-1 Repair and Capital Improvement $6,900,000 $1,500,000 $5,400,000
2008-4 Area Pool Improvement $2,000,000 $500,000 $1,500,000
Roads and Drainage Service Area 2008-5 Road and Storm Drainage $44,800,000 $28,690,000 $16,110,000
Areawide Public Safety and Transportation Capital 2008-6 Improvement $1,688,000 $1,438,000 $250,000
2008-7 Fire Service Area Fire Protection $3,622,000 $2,350,000 $1,272,000 Total $98,480,000 $60,000,000 $38,480,000
The net proceeds from the sale of the General Purpose Bonds will be deposited with the Registrar to be placed in the 2008 General Obligation General Purpose Construction Fund (the “GP Construction Fund”) and used by the Municipality to pay the costs of the Projects and costs of issuance. See “SOURCES AND USES OF FUNDS” herein.
School Bonds
The net proceeds from the sale of the School Bonds will be used to finance educational capital improvement projects for the School District (the “School Projects”) included in Proposition 4 and 5 approved by the qualified voters of the Municipality at the general election held on April 3, 2007 and propositions 2 and 3 approved by the qualified voters of the Municipality at the general election held on April 1, 2008 (collectively, the “School Propositions”). The School Projects, as set forth in the School Propositions, include planning, designing, acquiring property for, site preparation, constructing, acquiring, renovating, installing, and equipping of certain educational capital improvement projects. The table below outlines the School Propositions, including the current
2 authorization, the principal amount of School Bonds to be issued from each proposition, and the amount of authorized, yet unissued School Bonds remaining after the issuance of the School Bonds.
School Bonds Proposition School Current to be Issued Remaining No. Project Description Authorization (this issuance) Authorization Educational Capital 2007-4 Improvements $14,000,000 $5,570,000 $8,430,000 Educational Capital 2007-5 Improvements $6,000,000 $3,450,000 $2,550,000 Educational Capital 2008-2 Improvements $34,300,000 $13,870,000 $20,430,000 Educational Capital 2008-3 Improvements $9,410,000 $6,950,000 $2,460,000 Total $63,710,000 $29,840,000 $33,870,000
The net proceeds from the sale of the School Bonds will be deposited with the Registrar to be placed in the 2008 General Obligation School Bond Construction Fund (the “School Construction Fund”) and used by the School District to pay the costs of the School Projects and costs of issuance. See “SOURCES AND USES OF FUNDS” herein.
Security for the Bonds
The Bonds are valid and legally binding general obligations of the Municipality, and the full faith, credit and taxing power of the Municipality are pledged for the payment of the principal of and interest on the Bonds as the same shall become due. The Municipality has irrevocably pledged and covenanted with the owners of the Bonds that it will levy and collect taxes upon all taxable property within the Municipality, without limitation as to rate or amount, in amounts sufficient, together with other funds legally available therefor, to pay the principal of and interest on the Bonds when due. See “FINANCIAL INFORMATION.”
DESCRIPTION OF THE BONDS
The Bonds will be issued as fully registered bonds under a book-entry system, registered in the name of Cede & Co., as nominee of DTC, acting as depository for the Bonds. Individual purchases of the Bonds will be made in the principal amount of $5,000, or integral multiples thereof within a single maturity and will be in book- entry form only.
Interest on the Bonds is payable semiannually on February 1 and August 1 each year, commencing February 1, 2009. Principal of the Bonds is payable on August 1 in the years and amounts shown on the inside front cover hereof. U.S. Bank National Association, as paying agent, registrar and authenticating agent (the “Registrar”) will make principal and interest payments to Cede & Co. which, in turn, will disburse such principal and interest payments to its participants (the “DTC Participants”) in accordance with DTC policies. Payments by such DTC Participants to the beneficial owners of the Bonds (the “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 DTC Participants and not of DTC, the Registrar or the Municipality. See “APPENDIX C—BOOK-ENTRY ONLY SYSTEM.”
3
Redemption
Optional Redemption
The Bonds maturing on and after August 1, 2019 are subject to redemption at the option of the Municipality on or after August 1, 2018 in whole or in part on any date, in increments of $5,000, with maturities to be selected by the Municipality, at a price of 100% of the principal amount thereof to be redeemed plus accrued interest to the date of redemption.
Selection of Bonds to be Redeemed
If fewer than all of the Bonds of like maturity are called for redemption, the particular Bonds or portions of Bonds within a maturity to be redeemed will be selected by the Registrar by lot or in such other manner as is reasonably determined by the Registrar; provided, that for so long as the book-entry system is being used, the particular Bonds or portions thereof to be redeemed within a maturity will be selected by DTC and, in turn, the DTC Participants in such manner as DTC and the DTC Participants may determine; provided further, however, that the portion of any Bond of a denomination of more than $5,000 to be redeemed will be in the principal amount of $5,000 or a multiple thereof, and that, in selecting portions of such Bonds for redemption, the Registrar, DTC and the DTC Participants will treat each such Bond as representing that number of Bonds of a $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000.
For information regarding Notice of Redemption see “APPENDIX C—BOOK-ENTRY ONLY SYSTEM—Notice of Redemption.”
Defeasance
If money and/or certain types of securities (identified in the Bond Ordinances as “Acquired Obligations”) maturing at such times and bearing interest to be earned thereon in amounts sufficient to retire any or all of the Bonds in accordance with their terms are irrevocably set aside in a special trust account to effect such retirement and are pledged for such purpose, then no further payments need to be made to pay or secure the payment of the principal of and interest on such Bonds, and such Bonds will thereafter be deemed not to be outstanding.
4
SOURCES AND USES OF FUNDS
Set forth in the following table is a summary of the estimated application of Bond proceeds associated with the execution and delivery of the Bonds.
SERIES A SERIES B GENERAL PURPOSE BONDS SCHOOL BONDS
Sources of Funds: Sources of Funds: Principal Amount of General Principal Amount of School Purpose Bonds $60,000,000.00 Bonds $29,840,000.00 Net Premium 788,975.15 Net Premium 395,334.70 Total Sources of Funds: $60,788,975.15 Total Sources of Funds: $30,235,334.70
Uses of Funds: Uses of Funds: Deposit to General Purpose $60,000,000.00 Deposit to School Construction $29,840,000.00 Construction Fund Fund Issuance Expenses 1 451,600.29 Issuance Expenses 1 224,595.87 Deposit to Debt Service Fund 337,374.86 Deposit to Debt Service Fund 170,738.83 Total Uses of Funds $60,788,975.15 Total Uses of Funds $30,235,334.70
1 Includes Legal, Ratings, and Financial Advisor Fees, Underwriters’ Discount, and contingency.
STATE CONTRIBUTIONS TOWARD SCHOOL BOND DEBT SERVICE
State Reimbursement Program
The State reimbursement program was created by State statute in 1970 (AS 14.11.100) (the “State Reimbursement Program”) and provides a system under which the State, subject to annual appropriation by legislation, will reimburse municipalities that operate school districts for the costs of qualified and approved school construction. State reimbursement applies to debt service on locally-issued general obligation school bonds for qualified projects approved by the State Commissioner of Education and Early Development. Levels of reimbursement vary from 60% to 70%, depending on authorization, issue and expenditure date.
Each school construction project must be approved by the State Department of Education and Early Development prior to bond authorization or construction in order to qualify under the State Reimbursement Program. The local district must submit the school design, schematics and contract documents to the State for approval. State and local school officials must agree on design, enrollment and distribution of space in the school to the various required uses. When State approval is received, school construction can begin. Pursuant to the State Reimbursement Program, a municipality may finance State-approved school construction projects with local general obligation school bonds the debt service of which is subject to reimbursement in the percentages and on the time schedules subject to statutory and regulatory requirements.
To obtain reimbursement, the local district must file an annual claim with the State Commissioner of Education and Early Development. Claims must be supported by a certified audit report of the municipality, including applicable school district school construction accounts, prepared in accordance with State regulations, or by a statement from paying agents of amounts paid by the local school district in the current fiscal year.
Funds to provide State aid to school construction must be appropriated annually by State legislation. There is no guarantee that the State will make appropriations to fund at any level the payments authorized under the State Reimbursement Program.
5
In the event funds are not available to fully fund the State Reimbursement Program, the funds that are available will be distributed pro rata among the eligible local governments. The following table shows total Statewide entitlements, and Anchorage School District entitlements reported by the Alaska Department of Education and Early Development for the State fiscal years ending June 30, 1999-2009. Since 1992, all entitlements have been fully funded by the State.
Fiscal Year Anchorage Ended Statewide School District June 30 Entitlement Entitlement 2009(1) $97,021,000 $43,921,944 2008 94,997,000 40,206,934 2007 87,424,109 36,980,382 2006 81,695,195 36,995,248 2005 72,025,177 34,164,929 2004 60,592,525 29,689,511 2003 51,969,968 22,941,600 2002 54,057,200 22,384,082 2001 52,098,690 17,023,498 2000 64,349,790 18,085,657 1999 61,990,844 22,887,131
(1) Projected for the fiscal year of 2009. Source: Alaska Department of Education and Early Development
State Support for Education Funding
In 2002, the State Legislature adopted two bills, HB 2002 and HB 2003, relating to State support for education funding. HB 2002, approved by the voters at a general election of the State held November 5, 2002, authorized the issuance of general obligation bonds in the amount of $236,805,441 to finance, among other things, educational capital improvements including the design, construction and major maintenance of educational facilities for schools throughout the State. HB 2003 established criteria for the receipt of the grants from state bond proceeds. These bonds were issued by the State in April, 2003. Of this total amount, the School District expects to receive approximately $12,821,521, subject to certain conditions, for educational capital improvements. As of June 30, 2008, the School District received $12,187,176.
In 2008, the State Legislature adopted HB 373, which extended the current State financial support for education by extending the State Reimbursement Program under AS 14.11 through November 30, 2010. Under the current State Reimbursement Program, school districts can apply for reimbursement for 60% or 70% of debt service on general obligation bonds issued by the taxing district for educational capital improvements approved by qualified voters of the Municipality on or after October 1, 2006 but before November 30, 2010. The amount of reimbursement is dependent on the school district meeting certain statutory eligibility requirements, as explained above.
Outstanding School District Bonds
The following table lists the outstanding School District bonds issued by the Municipality as of June 30, 2008. Certain portions of such bonds qualify for reimbursement through the State Reimbursement Program. State debt service reimbursement is subject to annual appropriation by the State Legislature.
6
Date of Date of Final Outstanding Reimbursable Outstanding Bonds Issue Maturity Principal Principal 1995 G.O. School Bonds, Series A 11/1/95 10/1/15 $ 16,935,000 $ 9,011,222 1995 G.O. Refunding School Bonds 11/1/95 10/1/10 6,815,000 2,524,271 1998 G.O. Refunding School Bonds 10/15/98 7/1/14 19,580,000 10,418,643 1999 G.O. School Bonds 2/1/99 12/1/09 5,365,000 1,943,933 2000 G.O. School Bonds, Series A 8/1/00 12/1/11 6,340,000 358,981 2000 G.O. School Bonds, Series B 10/1/00 12/1/10 10,270,000 6,864,236 2001 G.O. School Bonds, Series A 6/1/01 6/1/11 8,525,000 4,948,416 2001 G.O. School Refunding Bonds 6/1/01 7/1/13 48,290,000 18,689,476 2002 G.O. School Bonds, Series B 6/27/02 7/1/13 33,780,000 21,880,019 2002 G.O. Refunding Bonds (School) 6/27/02 7/1/15 53,885,000 20,669,666 2003 G.O. School Bonds, Series B 9/4/03 9/1/20 42,550,000 25,231,231 2004 G.O. Refunding Bonds (School), Series B 9/16/04 12/1/17 80,545,000 37,038,997 2004 G.O. Bonds (School), Series D 10/28/04 12/01/16 33,040,000 19,290,662 2005 G.O. Bonds (School), Series A 4/13/05 3/1/16 21,505,000 12,906,873 2005 G.O. Refunding Bonds (School), Series B 4/13/05 12/1/20 29,020,000 10,792,254 2005 G.O. Refunding Bonds (School), Series E 7/13/05 12/1/18 14,790,000 5,358,951 2006 G.O. Bonds (School), Series A 8/10/06 10/1/26 46,910,000 28,018,893 2006 G.O. Refunding Bonds (School), Series B 8/10/06 10/1/20 25,835,000 12,905,781 2006 G.O. Refunding Bonds (School), Series C 8/10/06 7/1/21 51,550,000 33,390,023 2007 G.O. Refunding Bonds (School), Series B 4/26/07 9/1/24 170,055,000 101,100,912 2007 G.O. Bonds (School), Series D 8/30/07 8/1/27 63,790,000 39,647,941 Total $789,375,000 $422,991,381
GENERAL STATE ASSISTANCE
Through the 1980s and 1990s, the State of Alaska shared a portion of its resource revenues with local communities. This was accomplished through established municipal assistance/revenue sharing programs. Anchorage’s annual share was used to support vital general government services and to help hold down local property taxes. In 2003, the State eliminated its municipal assistance/revenue sharing programs. Locally, this resulted in expenditure reductions as well as increases in taxes, to the extent permitted under the Municipality’s tax limitations, and non-tax revenues. The State Legislature in 2005 approved one-time funding to assist communities with mandatory, increased employer contributions to the public employee retirement system. The Legislature in 2006 approved one-time funding to assist communities with higher energy, pension and other costs. In keeping with adopted local policy, these one-time State revenues are being used for property tax relief. The Municipality of Anchorage continues to advocate for reinstatement of a sustainable State revenue sharing program.
MUNICIPALITY OF ANCHORAGE
In 1975, the citizens of the Anchorage area ratified a Home Rule Charter for a unified municipal government. Under the Municipal Charter, the City of Anchorage, incorporated in 1920, the Greater Anchorage Area Borough, incorporated in 1964, and two small incorporated communities, Girdwood and Glen Alps, were dissolved as of September 15, 1975, and the Municipality became their legal successor. The area of the Municipality is coterminous with the area of the former Greater Anchorage Area Borough and totals approximately 2,006 square miles (of which approximately 1,717 square miles is land area).
Organization
The chief executive officer of the Municipality is the Mayor, who is elected at-large to a three-year term and who may not serve more than two consecutive terms. Subject to confirmation by the Assembly, the Mayor appoints the Municipal Manager, the Municipal Attorney, the Chief Fiscal Officer and all heads of municipal departments. The Mayor may participate, but may not vote, in meetings of the Assembly. The Mayor may veto
7 ordinances passed by the Assembly, and veto, strike or reduce budget or appropriation measure line items. A minimum of eight members of the Assembly must vote to override a veto by the Mayor.
The legislative power of the Municipality is vested in the Assembly comprised of 11 members, elected by district, to three-year terms and who may not serve more than three consecutive terms. The presiding officer of the Assembly is the Chairperson, who is elected annually from and by the membership of the Assembly. The Assembly appoints the Municipal Clerk.
Municipal services in the Municipality are provided through service areas. Each service area is treated as an individual taxing unit although only the Municipality can levy taxes. Certain services of the Municipality⎯education, planning and zoning, health services, animal control, environmental quality, taxing and assessing, emergency medical service and public transportation⎯are provided area-wide. The ad valorem tax rate for these services is uniform throughout the Municipality. In addition, service areas consisting of only part of the area within the Municipality have been created for such purposes as fire protection, police protection, road maintenance, parks and recreation, building safety, etc. As a result, the total tax rate applicable to any given parcel of property is the sum of the Municipality-wide levy rates plus the rates for the special-purpose service areas within which that parcel is located.
Pursuant to the Municipal Charter, the Municipality owns and operates a number of utilities as enterprise funds. These utilities include the Electric Utility (referred to as Municipal Light and Power), Refuse Collection Utility, Solid Waste Disposal Utility, and Water Utility, and Wastewater Utility, (referred to as Anchorage Water & Wastewater Utility). The utilities finance capital expansion, in part, with the proceeds of bonds, primarily revenue bonds, the debt service on which is paid by the users of the respective utilities. The Municipality also owns and operates the Port of Anchorage and Merrill Field, the municipal airport.
Administrative Officers
Mark Begich, Mayor
Mr. Begich commenced his second 3-year term as Mayor on July 1, 2006. Mr. Begich manages, and is a partner in, a number of business enterprises in the Municipality. Mr. Begich served on the Board of the Alaska Commission on Postsecondary Education (1995 - 2002) and on the Board of the Alaska Student Loan Corporation (1994 - 2002) and was elected Chairman of the Board from June 1996 through June 1998. Mr. Begich was a member of the Municipality of Anchorage Assembly from October 1988 until April 2000 and served as chair of that body from April 1996 through April 2000. As an Assemblyman, Mr. Begich chaired both the Program and Policy Committee and the Budget and Municipal Audit Committee and participated as a member of a number of other committees. Mr. Begich was also a State Legislative Aide from 1987 until 1991 serving as staff to the Special Senate Committee on Banking and Economic Development from 1989 through 1991. The Mayor is and will continue to be a candidate for the U.S. Senate for the State of Alaska until state voting officials have counted all of the ballots and certified the election. Should he be successful in his bid for higher office, upon his resignation as Mayor, the Chair of the Municipal Assembly would become Acting Mayor until the next municipal election in April of 2009.
Michael Abbott, Municipal Manager
Mr. Abbott was promoted to Municipal Manager on January 22, 2008. He is responsible for the day-to-day oversight of 17 departments and divisions with more than 2,400 employees, 12 bargaining units, and a $250 million combined operating and capital budgets. Prior to his promotion, Mr. Abbott served as the Deputy Municipal Manager from 2003 through 2007. He has 24 years of experience working in government which includes: Legislative Director from 2000 through 2002 and Economic Development Assistant from 1997-2000 for Governor Tony Knowles and from 1990 through 1997 as the Government Relations Coordinator with Alyeska Pipeline Service Company. He earned a BA in Political Science and History from Claremont McKenna College.
8
Sharon Weddleton, C.P.A., Chief Fiscal Officer
Ms. Weddleton was appointed Chief Fiscal Officer effective October 1, 2007. Previously, she served as CFO of municipally-owned Anchorage Water and Wastewater Utility (AWWU) and as Municipal Controller. She has 20 years of experience in Financial Accounting, beginning with seven years as a CPA with KPMG LLP as a designated governmental services auditor. After her public accounting years, Ms. Weddleton transferred to private industry where she served in the banking field. She is a graduate of the University of Washington (BA in Business and an MBA). In 2005, Ms. Weddleton successfully completed the program for Utility Managers at the Water and Wastewater Leadership School of the University of North Carolina - Chapel Hill. She serves on the Boards of AWWU, the Cooperative Services Authority and the Anchorage Community Development Authority.
James Reeves, Municipal Attorney
Mr. Reeves was appointed as the Municipal Attorney, effective September 1, 2006. Mr. Reeves is admitted to the bar in Alaska where he has been an attorney for 35 years. He holds a BA (English) from Dartmouth College and a JD from the University of Minnesota Law School. He was in private practice in Anchorage from 1978 to 2006. During this time he was a partner in Bogle & Gates PLLC from 1981 to 1999 and a partner in Dorsey & Whitney LLP from 1999 to 2006. Prior to entering private practice, he was an Assistant Attorney General for the State of Alaska from 1971 to 1978, a Senior Fellow at the East-West Center in 1977 and a law clerk for the U.S. District Court in 1970 through 1971. In private practice, his principal areas of concentration were civil litigation, natural resources and environmental law, and commercial transactions for a wide range of clients.
Ross Risvold, Director of Public Finance
Mr. Risvold joined the Municipality in October 2004. He has over twenty years of financial management experience in both the public and private sectors. His experience includes fourteen years at the Alaska Housing Finance Corporation (“AHFC”) where as a Finance Officer he was responsible for managing the daily operations of the Corporation’s portfolios of trusted and unrestricted assets. Mr. Risvold was also involved in the design and maintenance of methods of capital acquisition in the domestic and international short and long term capital markets with debt securities offered publicly as well as privately placed. Mr. Risvold also worked in the telecommunications industry for Sprint PCS for four years where his roles included fraud identification and investigation, auditing, compliance, consulting and training. He earned an MBA in Finance from the University of Minnesota and a BS from the University of Wyoming.
Richard Whitehead, Municipal Debt Officer
Mr. Whitehead has served as the Municipal Debt Officer since August of 2001. Prior to working for the Municipality, Mr. Whitehead worked 12 years for AHFC as a Finance Officer with responsibilities involving the debt, investment and cash management of the Corporation. Before working for AHFC, Mr. Whitehead worked in the private sector as a financial consultant. Mr. Whitehead earned a BS in Financial Planning from Brigham Young University.
Qianyu Sun, CFA, Cash Management & Investments Officer
Ms. Sun assumed the duties of Cash Management and Investments Officer with the Municipality in August 2008. Prior to that, she worked six years for the Anchorage School District as a Senior Financial Analyst, advising the District on cash management, debt service and investment decision making. Additionally, she conducted financial analyses on pending policy proposals, made financial forecasts for budgetary purposes, and played an essential role in soliciting financial service contracts for the District. Before moving to Alaska in 2002, Ms. Sun was employed with Parsons Brinckerhoff, Inc. as a consultant to the Maryland Aviation Administration, mainly responsible for fiscal studies and compliance audits. Ms. Sun earned a BA in Economics from the Institute of International Relations in Beijing, China, and an MBA in Finance from the University of Delaware. She holds the Chartered Financial Analyst designation and is an active member of the CFA Institute.
9
Labor Relations
Labor Organizations
The Municipality had 3,009 employees, excluding School District personnel, as of January 11, 2008.
Employees of the Municipality are represented by the labor organizations shown in the following table. Management of the Municipality believes its relations with employees in the past have been satisfactory. There have been no work stoppages or strikes by employees of the Municipality in general government in the last five years.
Labor Organization Expiration Membership(1) Anchorage Municipal Employees Association 12/31/07 617 Anchorage Police Department Employees Association 06/30/09 524 International Association of Fire Fighters 06/30/09 373 International Brotherhood of Electrical Workers/NECA 10/31/08 243 International Union of Operating Engineers 06/30/08 149 Laborers 06/30/08 32 Plumbers and Pipefitters 06/30/10 144 Teamsters 08/31/07 116 Non Represented/Executive & Assembly Employees N/A 811
(1) As of January 11, 2008.
Retirement Plans
Permanent employees of the Municipality participate in one of the following retirement plans, all of which are subject to regular actuarial review:
Alaska Public Employees Retirement System Anchorage Police and Fire Retirement Plan I, II or III International Brotherhood of Electrical Workers Pension Plan International Union of Operating Engineers Local 302
Participants in the Alaska Public Employees’ Retirement System (“PERS”) Tiers I, II and III, a defined benefit retirement plan, contribute 6.75 percent of their salaries to PERS on a pre-tax basis. In 2008, the State Legislature adopted SB 125 which changed the PERS to a cost-sharing plan where the assets and liabilities are shared among all participating employers and where each employer pays a single uniform contribution rate of 22%. From July 1 2007 to June 30, 2008 the actuarially calculated employer rate was 21.32% and 32.16% for Peace Officers/Firefighters and all other employees, respectively, which includes provision for the amortization of unfunded liabilities. SB 125 also provides that the State will fund on-behalf of the employer the difference between the actuarially determined employer normal cost rate and the 22 percent employer contribution rate. In PERS, assets and liabilities were identified separately as to each participating employer until July 1, 2008, when PERS was restructured. Beginning July 1, 2008, PERS assets and liabilities are not identified separately as to each participating employer.
Employees hired on or after July 1, 2006 participate in a defined contribution retirement plan with a component of defined benefit postemployment health care, PERS IV Peace Officer/Firefighter or PERS Tier IV All Other. The mandatory employee contribution is 8% on a pre-tax basis for both employee groups. From July 1, 2007 through June 30, 2008, the Municipality’s effective minimum contribution rates are 21.32% for PERS Tier IV Peace Officer/Firefighter and 22% for PERS Tier IV All Others. This contribution includes pension, retiree medical, occupation death and disability, and health reimbursement arrangements. If the amount paid by the employer exceeds the calculated amount for the defined contribution, the balance will be applied to the defined benefit unfunded liability account. As of July 1, 2008 the State’s restructuring of PERS changes all employer contribution rates to 22% of covered payroll.
10
The Anchorage Police and Fire Retirement Plan became effective January 1, 1968. Members employed prior to July 1, 1977, are members of Plan I, members employed between July 1, 1977 and April 16, 1984 are members of Plan II, and members employed after April 16, 1984 are members of Plan III. Members of Plan I were permitted to elect into Plan II, and members of Plans I and II were permitted to elect into Plan III. Command personnel hired after May 23, 1994, fire personnel hired after July 17, 1994 and police personnel hired after October 5, 1994 are enrolled in the PERS system.
Members of the Anchorage Police and Fire Retirement Plan participate in one of two post-retirement health care benefit plans. For individuals who retired prior to January 1, 1995, the Municipality pays 100% of the premium for health insurance coverage of all members, as well as audio and vision coverage premiums for retired police officers. For individuals who retire after January 1, 1995, the Municipality provides a benefit of $490 per retiree per month (in base year 1995), adjusted upwards for retirement age, years of service at retirement, and annual CPI factors. Police and fire employees hired after December 1, 1994 participate in the PERS system. Through 2006, the Municipality has accumulated $32.6 million to fund the plan through a pre-funding program. All future payments of this obligation are expected to be fully funded by the year 2014.
Employees who are members of the International Brotherhood of Electrical Workers (“IBEW”) participate in the IBEW Pension Plan to which the Municipality contributes at the rate of $3.67 per compensable employee- hour as part of the IBEW labor agreement. Total employer contributions for 2006 were $5,252,704 and total employer contributions for 2005 were $4,745,261. The Municipality’s obligation for IBEW is limited to the amount paid to the Alaska Electrical Trust Fund.
Local 302 members participate in a union sponsored cost-sharing defined benefit plan. Employer contributions are determined from compensable work hours and the contractual employer contribution rate in effect. The current agreement provides for contributions of $3.50 per hour. Total employer contributions for 2006 were $976,169 and total employer contributions for 2005 were $948,004. The Municipality’s obligation for Local 302 employees’ retirement is limited to the amount paid to the Local 302 International Operating Engineers-Employers Construction Industry Retirement Fund.
Insurance
Property Insurance
The Municipality maintains replacement cost of “all-risk” insurance on all of its properties through contracts with FM Global. The deductible per occurrence is $100,000 and the maximum payment per occurrence is $500 million. The total property covered, including property of the Municipality and of the School District (consolidated to obtain cost efficiency), is currently in excess of $3.6 billion. Certain perils are not covered by the Municipality’s policies, including flood and earthquake. Flood coverage is not deemed to be cost-effective, since most Municipality property lies at a significant elevation. Earthquake coverage is also deemed to be not cost- effective given the expense, high deductibles and low policy limits of such coverage. The large dollar value and disbursement of these assets throughout the Municipality make this type of coverage not cost effective.
Liability Insurance
The Municipality also maintains commercial coverage for torts and worker’s compensation claims. The torts policies are provided by Colony Insurance (policy limit of $10 million per occurrence), Everest National (policy limit of $10 million per occurrence) and ARCH (policy limit of $5 million per occurrence), with a self- insured retention of $2 million per occurrence and an aggregate of $25 million policy limit per occurrence excess of self-insured retention. The worker’s compensation policy is provided by Employer’s Reinsurance with a self-insured retention of $1,000,000 per occurrence with statutory excess coverage. The Municipality maintains a self-insurance fund in order to pay known and actuarially anticipated claims. The amount retained in the self-insurance fund is determined by the Municipality’s risk manager as advised annually by external insurance consultants. The most recent study completed in 2006, by Willis Corroon Advanced Risk Management Services, set forth Low, Expected and High loss amounts. The self-insurance reserve is maintained at a level adequate to meet
11 claims with a reasonable Low of $10,235,336 and a High of $14,657,336. The Expected loss amount has been estimated to be $12,242,362.
FINANCIAL INFORMATION
Local Taxation
The principal source of local tax revenue to the Municipality is ad valorem real and personal property taxation.
Assessed Valuation
Under State law, the Municipal Assessor is required to assess all taxable property, except certain types of oil and gas properties which are assessed by the State (see “FINANCIAL INFORMATION⎯Debt and Tax Limitations”), at 100% of true market value, with certain minor exceptions. Owners of real property are notified of their individual assessments in March, and owners of personal property are notified of their timely and involuntary individual assessments in September, respectively, of each year.
The assessed valuation of the Municipality grew from $13,134,641,257 in 1998 to $29,269,105,519 for 2007 (see the table in the following subsection “Property Tax Collection Record,” for the assessed valuations of the Municipality for each year from 1998 to 2007). The Municipal Assessor believes that the assessed valuation should show additional growth for the next few years. For a discussion of specific economic factors affecting the Municipality, see “GENERAL AND ECONOMIC INFORMATION RELATING TO THE MUNICIPALITY OF ANCHORAGE.”
Property Tax Collection Record
The following table sets forth the General Fund property tax levy and collection record of the Municipality for 1998 through 2007. Included are the amount and percentage of each year’s levy collected by December 31 of the year of the levy, and the amount of collections on levies of prior years during such year, as reported by the Municipality. The first half of the tax levy on real property is normally due June 15 and the second half is due August 15 each year. Personal property assessed valuations and taxes are handled on supplemental rolls subsequent to the establishment of the real property roll. Delinquent taxes are subject to a penalty charge of 10% on the amount of the tax plus interest at 8.5% per annum (State law allows a maximum penalty of 20% and a maximum interest rate of 15%). Property is also subject to foreclosure and sale for delinquent taxes. Under State law, delinquent property owners may, within ten years and before the sale by the Municipality, repurchase their property.
12
Tax Collection Record - Municipality of Anchorage
Highest Tax Year of Levy Delinquent Assessed Millage General Fund Amount Percent Amount Year Valuation Rate¹ Tax Levy Collected Collected Collected 2007 $29,269,105,519 14.70 $386,615,505 $378,829,566 98.0 N/A 2006 25,844,114,676 15.30 389,955,490 389,483,559 97.6 N/A 2005 22,089,545,903 16.29 357,895,662 353,993,904 98.9 4,716,444 2004 20,727,365,524 16.23 337,190,170 325,033,543 96.4 5,649,831 2003 19,079,921,248 16.61 315,403,940 311,915,068 98.9 6,020,000 2002 17,099,310,432 17.17 299,084,667 298,771,844 99.9 11,657,612 2001 15,660,862,612 18.03 279,861,463 277,508,664 99.2 6,091,491 2000 14,624,986,875 17.76 262,257,722 258,051,374 98.4 5,547,615 1999 13,752,485,398 18.18 258,141,619 253,456,190 98.2 5,185,635 1998 13,134,641,257 18.53 245,907,069 244,407,757 99.4 5,287,492
(1) The total tax rate applicable to any given parcel is the sum of the Municipality-wide levy rates plus the rates for special- purpose service areas within which that location is included (see “MUNICIPALITY OF ANCHORAGE⎯Organization”). The millage rates shown are for the area that had the highest total millage in each year.
Major Taxpayers
The 10 largest taxpayers within the Municipality, shown in the following table, account for approximately 4.01% of the Municipality’s 2007 assessed valuation of $29,269,105,519.
Ten Largest Taxpayers Municipality of Anchorage 2007 2007 Percentage of Assessed Total Assessed Taxpayer Type of Business Valuation* Valuation ACS of Anchorage Inc. Communications $235,792,781 0.81% Fred Meyer Stores Inc. Retail 130,784,635 0.45 GCI Communication Corp. Communications 122,018,289 0.42 Calais Co. Inc. Real Estate 118,145,504 0.40 Galen Hospital Alaska Inc. Hospital Services 111,219,490 0.38 WEC 2000A-Alaska LLC Petroleum 96,329,216 0.33 BP Exploration (Alaska) Inc. Petroleum 94,672,735 0.32 Hickel Investment Co. Property Development 90,874,907 0.31 Enstar Natural Gas Company Petroleum 89,881,836 0.31 Anchorage Fueling & Svc. Gasoline & Jet Fuel 83,151,505 0.28 TOTALS $ 1,172,870,898 4.01%
Source: Municipality of Anchorage * Includes real and personal property.
13
Outstanding General Obligation General Purpose Bonds
The following table lists the outstanding General Obligation General Purpose Bonds issued by the Municipality as of June 30, 2008.
Date of Final Outstanding Outstanding Bonds Date of Issue Maturity Principal 1993 G.O. General Purpose, Series B 6/15/93 8/1/10 $ 4,885,000 1995 G.O. General Purpose, Series B 11/1/95 10/1/12 5,715,000 1999 G.O. General Purpose, Series A 4/1/99 4/1/16 21,605,000 2000 G.O. General Purpose, Series A 9/1/00 9/1/10 12,570,000 2002 G.O. General Purpose, Series A 6/27/02 6/1/22 68,410,000 2003 G.O. General Purpose, Series A 9/4/03 9/1/23 10,470,000 2004 G.O. General Purpose, Series A 9/16/04 9/1/17 19,015,000 2004 G.O. General Purpose, Series C 10/28/04 12/1/24 46,840,000 2005 G.O. General Purpose, Series C 4/13/05 3/1/20 18,145,000 2005 G.O. General Purpose, Series D 7/13/05 6/1/20 43,110,000 2005 G.O. General Purpose, Series F 9/22/05 9/1/25 90,115,000 2007 G.O. General Purpose, Series A 4/26/07 9/1/23 31,920,000 2007 G.O. General Purpose, Series C 8/21/07 8/1/27 54,630,000 Total $ 427,430,000
Revenue Bonds
The following table lists the revenue bonds of the Municipality outstanding as of June 30, 2008.
Type of Issue Outstanding Principal AMBBA Revenue Bonds, 2004B(1) $ 5,060,000 Electric Revenue Bonds 179,055,000 Water Revenue Bonds 155,035,000 Wastewater Revenue Bonds 67,150,000 Solid Waste Disposal Utility Revenue Bonds 360,000 Total $ 406,660,000
(1) Payable solely out of payments on patron ticket surcharges from the Alaska Center for the Performing Arts.
The following table lists special limited obligations issued by the Municipality and outstanding as of June 30, 2008, but payable solely from funds from certain sources with no obligation of any funds of the Municipality:
Type of Issue Outstanding Principal Lease Revenue Bonds(1) $45,565,000 Nonrecourse Revenue Bonds(2) 2,502,505 Total $48,067,505
(1) Payable solely out of lease payments to be made by the State of Alaska Department of Administration, which are subject to annual appropriation. (2) Payable solely from payments to be made by United Way of Anchorage and Alaska Native Heritage Center (only updated yearly).
14
Other Long-Term Obligations
The following table lists other long-term obligations of the Municipality and the principal amounts outstanding as of December 31, 2007.
Purpose Final Installment Outstanding Principal ACWF Loans – Water Utility 2023 $ 41,084,185 ACWF Loans – Wastewater Utility 2023 36,461,431 ACWF Loans – Solid Waste 2019 20,464,636 Fire Dept. Lease Purchases 2013 1,558,751 Info. Tech./CSA Loans 2013 5,431,982 Total $105,000,985
Authorized But Unissued General Obligation Bonds
As of September 30, 2008, the Municipality had authorized but not issued $98,480,000 of General Obligation General Purpose bonds and $63,710,000 of General Obligation School bonds.
Future Sales of General Obligations
The Municipality reasonably expects to issue all currently authorized but unissued general obligation Bonds by December 31, 2009.
Basis of Accounting
The Municipality uses the accrual basis of accounting for its proprietary funds and pension trust funds. Proprietary funds include the various enterprise and the internal service funds. Under the accrual basis, revenues are recognized in the accounting period in which they are earned and expenses are recognized in the period in which they are incurred.
The Municipality uses the modified accrual basis of accounting for its various governmental funds. The modified accrual basis of accounting is a method of accounting in which revenues are recorded in the accounting period in which they become susceptible to accrual⎯that is, when they become both measurable and available. The major sources not considered susceptible to accrual include State shared revenues, federal impact aid and revenues from licenses and permits. All other revenue sources are considered susceptible to accrual. Expenditures are recognized in the accounting period in which the liability is incurred, if measurable, except for unmatured interest on long-term debt and certain other expenditures. Agency fund transactions are also recorded on the modified accrual basis of accounting.
Municipality of Anchorage Funds
The governmental services of the Municipality are either provided throughout the Municipality “area-wide” or within lesser service areas created to receive one or more governmental services. The following “SUMMARY STATEMENT OF REVENUES AND EXPENDITURES” includes an Area Wide Fund and the Funds for the service areas combined to reflect in the General Fund, on the modified accrual basis, the total general governmental financial activity of the Municipality.
The Municipality receives revenues from the State and the federal government through the State municipal assistance program, State and federal revenue sharing programs, the State Public School Foundation program and other programs for payment of School District operating expenses and State payments for school bond debt service. Since a substantial portion of the State’s revenue comes from oil and gas production in the form of royalties and taxes, significant reductions in the price of crude oil or decreases in production materially reduce State revenues and, together with federal budgetary constraints, will impact the level at which these State programs are funded.
15
Depending upon the purposes for which the bonds were issued, debt service on general obligation bonds is paid from taxes received by the General Fund, from road and sewer assessments, from enterprise revenues and, for school bonds, certain State funds. For example, in 2007, debt service on general obligation bonds (other than School District bonds) totaled $44,701,300, of which $529,640 was derived from enterprise activities. Additionally, $2,130,903 in Tax Anticipation Note interest was paid in 2007.
Summary Statement of Revenues and Expenditures General Fund Municipality of Anchorage
20032004200520062007 Revenues: Taxes $344,146,857 $372,606,202 $398,135,665 $427,887,141 $415,894,569 Intergovernmental 8,830,825 3,252,213 3,076,303 25,219,687 21,205,612 Licenses and Permits 11,568,910 12,624,998 13,012,040 13,840,537 12,288,396 Fines and Forfeitures 5,735,924 6,712,483 8,738,432 4,739,247 8,803,070 Charges for Services 16,383,270 19,170,939 36,597,251 24,318,623 26,540,905 Other Revenues 3,141,634 4,590,056 6,005,412 30,534,290 30,815,409 Total Revenues $389,807,420 $418,956,891 $465,565,103 $526,539,525 $515,547,961 Expenditures: General Government $20,581,819 $13,763,263 $15,057,769 $20,964,073 $20,530,642 Public Safety 113,024,623 125,178,255 138,528,852 150,573,936 167,486,589 Public Services 82,998,746 86,997,780 96,032,240 101,891,171 113,713,102 Non-Departmental Transfers and Contributions (Net) 30,383,470 37,403,973 42,519,995 43,230,246 44,245,442 School Appropriations 144,035,890 153,993,490 170,080,162 184,379,644 198,981,074 Total Expenditures $391,024,548 $417,336,761 $462,219,018 $501,039,070 $544,956,849
Excess (Deficiency) of Revenues Over Expenditures and Transfers ($1,217,128) $1,620,130 $3,346,085 $25,500,455 ($29,408,888) Beginning Fund Balances 42,512,609 41,295,481 42,915,611 46,261,696 71,762,151 Ending Fund Balance $41,295,481 $42,915,611 $46,261,696 $71,762,151 $42,353,263
¹ 2006 tax revenues, at $427.9 million are higher than 2007 tax revenues, at $415.9 million. In 2006, State of Alaska assistance was received too late in the tax billing cycle to apply it as property tax relief to the Anchorage community. In 2007, two years of State of Alaska assistance were applied in a single year as property tax relief. This total tax relief amounted to $37.1 million received from the State over two years but applied as property tax relief in 2007 only.
² Other revenues are primarily comprised of investment income and payments in lieu of taxes including Municipal Utilities Service Assessment (MUSA). Investment income has increased over the years due to a combination of a larger portfolio plus an improved investment strategy that allows extended durations and managed investing for a portion of the portfolio. As a result of these changes, general fund investment income grew from $831,000 in 2003 to $12,000,000 in 2007. MUSA revenues have increased in part due to a change in the MUSA formula. In 2003 MUSA was assessed on non-contributed plant only. Beginning in 2004, a change was phased in to instead assess MUSA on all plant. By 2007, this change increased MUSA revenues by about $6,400,000 per year above the earlier formula.
In addition to the General Fund, the Municipality maintains Special Revenue Funds to account for revenues derived from specific sources to finance special functions or activities (principally funds received from the State for School District operating expenses), Capital Project Funds to account for general governmental capital improvements, Self-Insurance Funds to account for funding and expenditures relating to the self-insurance program (automobile liability and general liability fully self-insured; worker’s compensation is fully self-insured to $1,000,000 per claim with excess covered by private carriers), the Equipment Maintenance Fund to account for vehicle maintenance and repair, Trust and Agency Funds to account primarily for Pension Trust and Employee Benefit Funds to account for debt service payments on certain general long-term obligations and Enterprise Funds to account for the enterprise operations of the Municipality: Electric, Water, Wastewater, Refuse Collection, Port, Airport, Solid Waste Disposal, Anchorage Community Development Authority (a component unit), Cooperative Services Authority (a component unit), and CIVICVentures (a component unit).
16
Debt and Tax Limitations
Neither State law nor the Municipal Code imposes any debt limit on the Municipality, although State law and the Municipal Charter require general obligation bond issues, except refunding bonds, to be authorized by a majority vote of the electorate voting on the question. There is no limitation on the rate or amount of taxes that may be levied for debt service on general obligation bonds of the Municipality.
Taxes levied by a municipality in the State for purposes other than debt service on general obligation bonds are limited by State statute (AS 29.45.090) to an amount equal to 3.0% of the assessed valuation of taxable property. In addition, a municipality may not levy taxes for purposes other than debt service on general obligation bonds in excess of the greater of (a) an amount equal to $1,500 for each person residing within the municipality or (b) an amount that is the result of the mill rate of the municipality applied to a value equal to 225% of the average per capita assessed valuation of all taxable property in the State multiplied by the number of residents within the municipality.
Property used in exploration, production or pipeline transportation of gas or unrefined oil is assessed by the Alaska Department of Revenue pursuant to AS 43.56.010 et seq. The State levies a 20-mill tax on such property. AS 29.45.080 provides that a municipality may levy and collect a property tax based on the State’s assessed valuation of property within a municipality, with tax payments made to the municipality allowed as a credit toward payments due the State. In order to restrict taxation of such properties by sparsely settled municipalities that have disproportionately large installations of oil and gas facilities within their boundaries, a local tax levied by a municipality is included within the limitations as to amount described in the preceding paragraph.
The Municipal Charter provides that the total amount of municipal tax that can be levied during a fiscal year by the Municipality may not exceed the total amount approved by the Assembly for the preceding year by more than a percentage determined by adding the percentage increase in the Federal Consumer Price Index for Anchorage from the preceding fiscal year plus the average percentage growth or loss in the population of Anchorage over the preceding five fiscal years as determined by the Alaska Department of Community and Regional Affairs.
The tax limitation contained in the Municipal Charter does not apply to:
1. Taxes on new construction or property improvements which occur during the current fiscal year. 2. Taxes required to fund additional services mandated by voter-approved ballot issues. 3. Special taxes authorized by voter-approved ballot issues. 4. Taxes required to fund the costs of judgments entered against the Municipality. 5. Taxes required to pay principal or interest on bonds, including revenue bonds. 6. Taxes required to fund the cost of an emergency ordinance enacted pursuant to the Municipal Charter.
Any tax increases that result from exceptions (1) through (3) set forth above are added to the base amount used to calculate the tax limit for the following year.
Initiative petitions have been introduced in the past that would limit the overall tax rate and collections within the State. These initiative petitions have not been approved by the voters in the past and none are currently pending.
2008-2013 General Government Capital Improvement Program
The Municipality’s six-year capital program for general government (not including the Anchorage School District) addresses capital infrastructure needs such as roadways, public safety vehicles and equipment, fire stations, parks, trails, recreational facilities and public transportation. The 2008 Capital Improvement Budget (“CIB”) focuses on the Municipality’s immediate capital needs, while the 2008-2013 Capital Improvement Program (“CIP”) addresses longer-term capital needs.
Since 1994, State capital grant funding in support of municipally-owned assets has fluctuated from $1 million to $64 million per year. Fluctuations in State grant funding generally reflect the variability of oil royalty
17 revenue available to the State in any year. The Municipality considers the level of State funding likely to be available each year and adjusts its State funding requests accordingly.
In addition to the Municipality’s capital program, the State of Alaska performs significant roadway infrastructure improvements in Anchorage on major roads and highways owned by the State. The following charts show the estimated sources and uses of funds within the CIP.
Sources of Capital Funds
SUMMARY BY FUNDING SOURCE ($000)
Year G.O. Bonds State Grants Federal Grants Other Total 2008 $ 65,983 $ 148,378 $ 2,385 $ 27,949 $ 244,695 2009 64,229 57,276 2,364 21,490 145,359 2010 66,222 48,337 3,893 19,714 138,166 2011 56,202 41,634 2,643 13,992 114,471 2012 50,196 18,350 15,848 12,137 96,531 2013 58,099 10,360 1,698 11,539 81,696 Total $ 360,931 $ 324,335 $ 28,831 $ 106,821 $ 820,918
* The funding from General Obligation General Purpose Bonds which is included in the CIP is an estimate. The Municipality does not currently have voter authorization for the entire dollar amount indicated in this source of funding. If voter approval is not obtained for the amounts indicated, then the Municipality would have to secure alternative sources of funding, and/or revise the scope and/or timing of project expenditures in the CIP.
Uses of Capital Funds by Municipal Department
Department/Program 20082009 2010 2011 2012 2013 Total Fire Department$ 8,940 $ 7,875 $ 8,075 $ 6,950 $ 6,350 $ 4,975 $ 43,165 Anchorage Parks & Recreation25,675 9,325 7,475 4,875 2,250 1,750 51,350 Police Department16,000 23,250 12,500 0 0 0 51,750 Heritage Land Bank738 222 162 162 50 50 1,384 Information Technology3,933 5,575 5,850 4,030 2,520 2,180 24,088 Maintenance & Operations31,638 13,548 13,437 12,787 10,702 7,969 90,081 Office of Economic & Community Development27,015 13,500 9,000 0 0 0 49,515 Project Management & Engineering127,610 69,100 73,745 80,745 70,350 62,650 484,200 Public Transportation3,146 2,964 7,922 4,922 4,309 2,122 25,385 TOTAL $ 244,695 $ 145,359 $ 138,166 $ 114,471 $ 96,531 $ 81,696 $ 820,918
Cash Management
The Municipality historically has used a pooled cash system allowing flexibility in cash management. Certain accounts, such as debt service reserves, have been maintained separately from the pooled system and third party trustees hold funds and investments. Beginning in 2002, the Municipality has placed the proceeds from the sale of Bonds in separate accounts held by a registrar. These funds are then requisitioned as needed to facilitate the tracking of such proceeds. The Municipality’s investment policies are applied except where an agreement, contract or other formal document supersedes them.
The Municipality hired a private consulting firm to review investment policies and practices of the Municipality and has received a Final Report dated September 19, 2006. The Report includes recommendations for updating and enhancing the investment policies and practices of the Municipality. On October 31, 2006 the Municipal Assembly approved an ordinance updating Anchorage Municipal Code regarding Investment Guidelines for Municipal Funds, which includes authorized investments. The Municipality has since hired an implementation consultant to assist staff in the implementation of other recommendations, including specific investment strategies
18 and the use of external investment managers. On June 1, 2007 the Public Finance & Investments Division of the Municipality began operation of the Municipal Cash Pool (MCP). The MCP is an aggregate of three Duration Portfolios, each separately managed by an external money manager on behalf of the Municipality. Each Duration Portfolio has a separate set of Investment Guidelines and targeted duration and performance benchmarks with respect to a specific investment industry index. Certain funds of the Municipality, including bond proceeds, debt service funds and debt service reserve funds, remain invested by internal staff under specific Investment Guidelines and credit criteria. The internally managed funds and the MCP comprise all funds of the Municipality.
Anchorage Municipal Code Section 6.50.030 (D) provides that the Municipality may invest in only the following securities: 1. Obligations issued or guaranteed by the U.S. government, U.S. agencies or U.S. government- sponsored corporations or agencies. 2. Commercial paper, including asset-backed commercial paper, rated at least “A-1” by Standard and Poor’s (S&P) or “P-1” by Moody’s or “F1” by Fitch. 3. Bank debt obligations, including unsecured certificates of deposit, notes, time deposits, and bankers’ acceptances (with maturities of not more than 365 days), and deposits with any bank, the short-term obligations of which are rated at least “A-1” by S&P or “P-1” by Moody’s or “F1” by Fitch and is either: a. Incorporated under the laws of the United States of America, or any state thereof, and subject to supervision and examination by federal or state banking authorities; or b. Issued through a foreign bank with a branch agency licensed under the laws of the United States of America, or any state thereof, or under the laws of a country with a Moody’s sovereign rating for bank deposits of “Aaa”, or an S&P sovereign rating of “AAA”, or a Fitch national rating of “AAA”, and subject to supervision and examination by federal or state banking authorities. 4. Repurchase agreements secured by obligations of the U.S. government, U.S. agencies, or U.S. government-sponsored corporations and agencies. 5. Dollar denominated corporate debt instruments rated BBB- or better by S&P’s Rating Service (investment grade) or the equivalent by another nationally recognized rating agency. 6. Dollar denominated corporate debt instruments, rated below BBB- by S&P’s Rating Service or the equivalent by another nationally recognized rating agency, including emerging markets. 7. Asset Backed Securities, other than commercial paper, collateralized by: credit cards, automobile loans, leases and other receivables which must have a credit rating of AA- or above by S&P’s Rating Service or the equivalent by another nationally recognized rating agency. 8. Mortgage Backed Securities, including generic mortgage-backed pass-through securities issued by GNMA, FHLMC, FNMA, Non-agency mortgage-backed securities, Collateralized Mortgage Obligations, or Commercial mortgage-backed securities, that must have a credit rating of AA- or better by S&P’s Rating Service or the equivalent by another nationally recognized rating agency. 9. Fixed income derivative instruments used in an un-levered manner to implement Portfolio strategies consistent with this section of the code. 10. Money Market Mutual Funds rated “Am” or better by S&P Rating Service, or the equivalent by another nationally recognized rating agency, and consisting of any or all of the securities authorized for investment in this section of the code. 11. Alaska Municipal League Investment Pool, consistent with all other provisions of this section of the code.
19
12. Mutual Fund Investments consisting of a diversified mutual fund, registered under the Securities Act of 1933 and Investment Company Act of 1940, so long as the overall nature of the fund is generally consistent with this section of the code. 13. Interfund Loans from a Municipal Cash Pool to a Municipal Fund.
The MOA Trust Fund was created in May 1999 after Anchorage voters approved the sale of Anchorage Telephone Utility. The investment objective of the Trust is to maintain the purchasing power of the Corpus and to maximize rates of return over time by utilizing a balanced investment approach, investing in both equity and fixed income instruments, within prudent levels of risk. Since inception the fund has paid cumulative dividends to the Municipality of Anchorage of approximately $71.2 million. At December 31, 2007 the Fund had a market value of $141 million.
The Anchorage Police and Fire Retirement System portfolio is managed by a board appointed by the Mayor and confirmed by the Municipal Assembly. The board establishes investment guidelines and oversees the Anchorage Police and Fire Retirement System’s investments.
Component units (as described in NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES to 2007 Financial Statements of the Municipality contained in Appendix A hereto) other than the School District and the Anchorage Community Development Authority have no formally adopted investment policies. The Anchorage Community Development Authority’s investment policies and revenue bond indenture agreements require that bond moneys be limited to certain types of investments. The School District may invest through either direct investments or the Municipality. School Board policy requires that direct investments in demand and time deposits in excess of insured amounts be collateralized with United States of America government-guaranteed securities and other types of investments be obligations of, or guaranteed by, the United States of America.
ANCHORAGE SCHOOL DISTRICT
The School District is a component unit of, and encompasses the same area as, the Municipality. The School District’s operations are governed by a board (“School Board”), comprised of seven members elected at large to three-year terms. The School Board is responsible for the formulation of policy for the operation of the schools and the general supervision of School District fiscal affairs, including the preparation of the annual budget and the six-year program for capital improvements. The budget and the capital improvement program are subject to approval by the Assembly. The Assembly has the authority to alter only the total amount of the budget. The Assembly approves the budget as amended and appropriates the necessary funds for the local share of school support at least 60 days prior to the end of the fiscal year of the School District, which is June 30. Since the School District does not have the authority to levy taxes, the taxes to provide local support of education are levied and collected by the Municipality, which then transmits funds to the School District during the fiscal year of the School District to fund the appropriation. The School District does not have the authority to issue bonds and relies upon the Municipality to issue bonds for its purposes.
The School Board appoints school personnel including the Superintendent as chief administrative officer of the School District. The School District employed a certified staff of approximately 3,701 plus an additional 2,762 classified employees as of September 15, 2008.
20
The School District operates sixty elementary schools (including five on Fort Richardson Army Base and Elmendorf Air Force Base), twenty-three secondary schools, one K-12 school, two special education schools, one secondary education career facility and eight charter schools. As of June 30, 2007, the School District had capital assets totaling $1,528,665,257 (at historical cost) compared to $1,491,098,607 a year earlier. Enrollment in grades kindergarten through 12 as of the end of September of each of the years 1999 through 2008 was as follows:
Year Enrollment 2008 48,440 2007 48,457 2006 49,068 2005 49,589 2004 49,454 2003 49,663 2002 50,029 2001 49,676 2000 49,520 1999 49,312
Carol S. Comeau, Superintendent
Mrs. Carol Comeau was appointed Superintendent on December 11, 2000. She has been a School District employee since 1974. Prior to assuming her current position, she served as the Assistant Superintendent for Instruction for seven years (September 1993 to September 2000). Her duties included responsibility for Elementary Education, Middle School Education, High School Education, Special Education, Instructional Support, Technology/Management Information Systems, Curriculum and Evaluation, Community Education, and Transportation. From 1990 to 1993, she served as the Executive Director for Elementary Education. Other positions of service in the Anchorage School District included elementary principal (1987-1989); administrative intern (1986-1987); elementary classroom teacher (1975-1986); and noon duty attendant and teacher aide (1974-1975). Mrs. Comeau was an elementary classroom teacher in Springfield, Oregon from 1963 to 1964. She is a graduate of the University of Oregon (Bachelor’s Degree in Education with a minor in Physical Education); the University of Alaska Anchorage (Master’s Degree in Public School Administration); and also has taken various post-Masters course work in curriculum, educational leadership, and instruction. Mrs. Comeau also served as the President of the Anchorage Education Association from 1984 to 1985. She has received recognition from many community groups for her service to the Anchorage community.
Janet Stokesbary, Chief Financial Officer
Ms. Stokesbary was appointed Chief Financial Officer of the School District effective October 25, 1993. Previously she served as Acting Chief Financial Officer (1992-1993); Director of Finance and Accounting (1990-1992); Manager of Accounting Services (1980-1990); Accounting Supervisor (1976-1980); and Accountant (1975-1976). Ms. Stokesbary was associated with the City of Renton, Washington, as an accountant prior to coming to Anchorage. Ms. Stokesbary is a graduate of the University of Washington (B.A., Business Administration and B.A., Education). She has given various presentations at local and state conferences and is a member of several local, state and national professional organizations.
21
Labor Relations
Employees of the School District are represented by the labor organizations shown below. The School District has experienced three work stoppages in the last 14 years: January 15-21, 1999 by Totem Association of Education Support Personnel; January 20-23, 1999 by the Teamsters (Bus Drivers and Attendants) and October 12-14, 1994 by the Anchorage Education Association. All of these labor organizations have existing contracts as indicated below.
Labor Organization Contract Expiration Membership(1) Anchorage Council of Education/American Federation of Teachers June 30, 2009 446 Anchorage Education Association June 30, 2010 3,500 Anchorage Principals’ Association June 30, 2010 144 Anchorage Public Employees Local 71 June 30, 2011 339 Food Service Association June 30, 2009 228 Teamsters (Bus Drivers and Attendants) June 30, 2009 107 Teamsters (Maintenance and Warehouse Personnel) June 30, 2011 192 Totem Association of Education Support Personnel June 30, 2009 1,421
(1) As of September 15, 2008.
Retirement Plans
Permanent employees of the School District participate in one of the following retirement plans, all of which are subject to regular actuarial review:
Alaska Public Employees’ Retirement System Alaska Teachers’ Retirement System Alaska Teamster-Employer Pension Trust Fund
Participants in the Alaska Public Employees’ Retirement System (“PERS”) Tiers I, II and III, a defined benefit retirement plan, contribute 6.75 percent of their salaries to PERS on a pre-tax basis. In 2008, the State Legislature adopted SB 125 which changed the PERS to a cost-sharing plan where the assets and liabilities are shared among all participating employers and where each employer will pay a single uniform contribution rate of 22 percent. The actuarially calculated employer rate is 35.22 percent (effective from July 1, 2008 through June 30, 2009) which includes provision for the amortization of unfunded liabilities. SB 125 also provides that the State will fund on-behalf of the employer the difference between the actuarially determined employer normal cost rate and the 22 percent employer contribution rate. In PERS, assets and liabilities were identified separately as to each participating employer until July 1, 2008, when PERS was restructured. Beginning July 1, 2008, PERS assets and liabilities are not identified separately as to each participating employer.
Participants in the Alaska Teachers’ Retirement System (“TRS”) Tiers I and II, a defined benefit retirement plan, contribute 8.65 percent of their salaries to TRS on a pre-tax basis. In TRS, assets and liabilities are shared among all participating employers. The actuarially calculated employer contribution rate is 44.17 percent (effective from July 1, 2008 through June 30, 2009), which includes provision for the amortization of unfunded liabilities. SB 125 specifies that each employer will pay a single uniform contribution rate of 12.56 percent. SB 125 also provides that the State will fund on-behalf of the employer the difference between the actuarially determined employer normal cost rate and the 12.56 percent employer contribution rate.
Eligible employees hired on or after July 1, 2006 participate in defined contribution retirement plans with a component of defined benefit postemployment health care (PERS Tier IV or TRS Tier III). The mandatory employee contribution is 8 percent on a pre-tax basis for both plans. The effective contribution rates for each employer are 22 percent for PERS Tier IV and 12.56 percent for TRS Tier III. This contribution includes pension, retiree medical, occupational death and disability, and health reimbursement arrangements. If the amount
22 contributed by the employer and the State exceeds defined contribution plan requirements, the balance will be applied to the defined benefit unfunded liability account.
Bus drivers and attendants employed by the School District participate in the Alaska Teamster-Employer Pension Trust Fund to which the School District contributes at the rate of $2.00 per employee-hour for employees with more than six years of continuous regular experience with the School District, and $1.00 per employee-hour for employees with six or fewer years of continuous regular experience with the School District.
ANCHORAGE SCHOOL DISTRICT FINANCIAL INFORMATION
The School District maintains a general fund to account for general operations, special revenue funds to account for revenues derived from specific sources to finance special functions or activities, a capital projects fund to account for the acquisition of school facilities and equipment, a debt service fund to account for the payment of debt service and related fees on school bonds and trust and agency funds to account for assets held by the School District as trustee for student organizations.
The following tables, “GENERAL REVENUES BY SOURCE” and “GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION,” summarize the combined operations of all funds of the School District, reported on the modified accrual basis, for the fiscal years ending June 30, 2004, through June 30, 2008, and are derived from the Comprehensive Annual Financial Reports of the School District.
Anchorage School District General Revenues By Source*
Year Ended Local State Federal June 30 Sources Sources Sources Total 2008 $228,551,829 $434,028,791 $61,864,635 $724,445,255 2007 211,118,561 334,381,044 60,124,838 605,624,443 2006 195,905,548 304,908,978 60,711,533 561,526,059 2005 180,891,401 280,960,065 60,793,473 522,644,939 2004 159,936,428 254,775,072 57,373,253 472,084,753
* For comparative analysis, interfund transfers and lapsing prior encumbrances have not been included.
Anchorage School District General Governmental Expenditures By Function*
Year Pupil Trans. Oper. and Ended General & Food Maintenance Community Non- June 30 Administration Instruction Service of Plant Education Departmental Debt Service Total 2008 $19,239,207 $536,523,214 $34,675,687 $26,772,621 $ 840,031 $3,144,562 $79,976,458 $701,171,780 2007 11,769,210 447,887,180 32,349,064 24,697,997 790,222 3,480,038 74,903,513 595,877,224 2006 10,962,994 418,150,467 30,301,863 22,962,874 688,032 2,940,084 76,574,207 562,580,521 2005 10,270,182 384,216,850 28,991,214 21,267,797 1,514,088 3,763,972 68,983,580 519,007,683 2004 9,516,769 358,265,412 27,390,126 19,015,616 2,068,659 3,956,112 61,045,282 481,257,976
* For comparative analysis, interfund transfers have not been included.
23
MUNICIPALITY OF ANCHORAGE DEBT SERVICE SCHEDULES
Combined Annual Debt Service Requirements
The table on the following page shows the combined annual debt service requirements, including scheduled mandatory redemption of term bonds, for all outstanding general obligation bonds of the Municipality at December 31, 2007.
24
MUNICIPALITY OF ANCHORAGE COMBINED ANNUAL DEBT SERVICE REQUIREMENTS GENERAL OBLIGATION BONDS
As of December 31, 2007
GENERAL PURPO SE BO NDS SCHO O L BO NDSTOTAL All
Fiscal Principal Total Debt Principal Total Debt Combined Total
Year Outstanding * Principal Interest Service Outstanding Principal Interest Service Requirements *
2008 437,540,000.00 26,585,000.00 19,909,768.35 46,494,768.35 794,225,000.00 46,415,000.00 37,851,270.76 84,266,270.76 130,761,039.11 2009 410,955,000.00 25,920,000.00 19,008,571.93 44,928,571.93 747,810,000.00 48,345,000.00 36,049,487.56 84,394,487.56 129,323,059.49 2010 385,035,000.00 26,400,000.00 17,844,948.17 44,244,948.17 699,465,000.00 50,580,000.00 33,896,161.30 84,476,161.30 128,721,109.47 2011 358,635,000.00 26,340,000.00 16,474,617.54 42,814,617.54 648,885,000.00 55,970,000.00 31,487,742.54 87,457,742.54 130,272,360.08 2012 332,295,000.00 26,955,000.00 15,228,857.54 42,183,857.54 592,915,000.00 53,055,000.00 29,080,780.02 82,135,780.02 124,319,637.56 2013 305,340,000.00 27,160,000.00 13,921,742.54 41,081,742.54 539,860,000.00 54,300,000.00 26,510,535.02 80,810,535.02 121,892,277.56 2014 278,180,000.00 30,095,000.00 12,615,352.54 42,710,352.54 485,560,000.00 55,700,000.00 23,775,722.52 79,475,722.52 122,186,075.06 2015 248,085,000.00 25,055,000.00 11,276,203.78 36,331,203.78 429,860,000.00 53,130,000.00 21,099,847.52 74,229,847.52 110,561,051.30 2016 223,030,000.00 27,120,000.00 10,244,006.28 37,364,006.28 376,730,000.00 53,690,000.00 18,444,872.52 72,134,872.52 109,498,878.80 2017 195,910,000.00 27,455,000.00 8,837,918.78 36,292,918.78 323,040,000.00 47,570,000.00 15,798,767.52 63,368,767.52 99,661,686.30 2018 168,455,000.00 27,540,000.00 7,423,198.78 34,963,198.78 275,470,000.00 46,450,000.00 13,419,126.26 59,869,126.26 94,832,325.04 2019 140,915,000.00 28,420,000.00 6,113,291.28 34,533,291.28 229,020,000.00 44,475,000.00 11,113,385.00 55,588,385.00 90,121,676.28 2020 112,495,000.00 29,305,000.00 4,864,341.28 34,169,341.28 184,545,000.00 46,720,000.00 8,895,072.50 55,615,072.50 89,784,413.78 2021 83,190,000.00 18,935,000.00 3,780,991.28 22,715,991.28 137,825,000.00 34,535,000.00 6,564,550.00 41,099,550.00 63,815,541.28 2022 64,255,000.00 15,350,000.00 2,947,135.02 18,297,135.02 103,290,000.00 36,325,000.00 4,842,075.00 41,167,075.00 59,464,210.02 2023 48,905,000.00 16,040,000.00 2,251,710.02 18,291,710.02 66,965,000.00 27,150,000.00 3,175,750.00 30,325,750.00 48,617,460.02 2024 32,865,000.00 14,090,000.00 1,524,728.76 15,614,728.76 39,815,000.00 18,750,000.00 1,918,275.00 20,668,275.00 36,283,003.76 2025 18,775,000.00 10,675,000.00 886,925.00 11,561,925.00 21,065,000.00 7,890,000.00 1,036,975.00 8,926,975.00 20,488,900.00 2026 8,100,000.00 3,950,000.00 405,000.00 4,355,000.00 13,175,000.00 8,290,000.00 646,850.00 8,936,850.00 13,291,850.00 2027 4,150,000.00 4,150,000.00 207,500.00 4,357,500.00 4,885,000.00 4,885,000.00 244,250.00 5,129,250.00 9,486,750.00 2028 0.00 0.00 Totals ** $ 437,540,000.00 $ 175,766,808.87 $ 613,306,808.87 $ $ 794,225,000.00 325,851,496.04$ 1,120,076,496.04$ 1,733,383,304.91
* At the beginning of the year. ** Numbers rounded to the nearest dollar. Totals may not add due to rounding.
25
GENERAL AND ECONOMIC INFORMATION RELATING TO THE MUNICIPALITY OF ANCHORAGE
Situated on a broad plain at the head of Cook Inlet in south central Alaska, the Anchorage area (now known as the Anchorage Bowl) was settled in 1915 as a construction base for the Alaska Railroad built by the federal government from the Gulf of Alaska to Fairbanks in interior Alaska. The largest of Alaskan cities, the Municipality is a modern, progressive and dynamic metropolitan center with an estimated 2008 population (Alaska Department of Labor) of 286,990.
The Municipality is the leading trade, supply, banking and communications center of Alaska as well as the headquarters city in Alaska for many of the national and international firms participating in the development of the petroleum, natural gas and other natural resources of the State. The Municipality is also an important seaport, a world air transportation center, the headquarters city for the Alaska Railroad and the site of two large and historically stable military bases⎯Fort Richardson Army Base and Elmendorf Air Force Base. Federal and State government offices and tourism are also major factors in the economic base of the Municipality.
Population
The population of the Municipality and the State is shown by the following:
Population¹
Municipality State 2008 Estimate 286,990 684,182 2007 Estimate 283,823 676,987 2006 Estimate 283,244 670,958 2005 Estimate 278,294 664,060 2004 Estimate 277,810 657,314 2003 Estimate 273,024 647,773 2002 Estimate 267,810 640,522 2001 Estimate 264,840 632,091 2000 U.S. Census 260,283 626,931 1999 Estimate 259,391 622,000 1998 Estimate 257,260 617,082 1997 Estimate 254,752 609,655 1996 Estimate 253,234 605,212 1995 Estimate 252,729 601,581 1994 Estimate 253,503 600,622 1993 Estimate 249,440 596,906 1992 Estimate 244,111 586,722 1991 Estimate 235,626 569,054 1990 U.S. Census 226,338 550,043 1980 U.S. Census 174,431 401,851 1970 U.S. Census 126,385 302,361 1960 U.S. Census 82,833 226,167 1950 U.S. Census 19,432 128,643
¹Estimates are as of October 13, 2008 from the Alaska Department of Labor and Workforce Development, Research and Analysis Section.
26 Construction Activity
New building activity in the Municipality from 1998 to 2007 is reflected in the following table that sets forth the construction value of building permits issued by the Municipality.
Municipality Construction Activity ($ in 000s)
Commercial Residential Year Permits Permits Total Permits 2007 $449,000 $161,000 $610,000 2006 584,000 217,000 801,000 2005 357,286 304,119 661,405 2004 350,809 298,606 649,415 2003 385,132 338,710 723,842 2002 282,182 305,671 587,853 2001 286,918 312,464 599,382 2000 290,864 207,444 498,308 1999 278,245 178,696 456,940 1998 272,848 236,026 508,874
Source: Municipality of Anchorage.
27
Employment
The following table shows estimated wage and salary employment (exclusive of self-employed, domestic and agricultural workers) for the Municipality area by industry.
Wage and Salary Employment by Industry
2003 2004 2005 2006 2007 2008 Goods Producing Mining (Oil/Gas) 2,000 2,100 2,100 2,200 2,600 2,825 Construction 8,600 9,100 9,600 9,600 9,300 8,900 Manufacturing 1,800 1,800 1,800 2,000 2,000 1,925 Total Goods Producing 12,400 13,000 13,500 13,800 13,900 13,650 Service Producing Transportation 10,200 10,400 10,300 11,300 11,200 11,300 Trade Wholesale 4,500 4,600 4,600 5,000 4,900 4,888 Retail 17,500 17,300 17,400 17,300 17,500 17,575 Total Trade 22,000 21,900 22,000 22,300 22,400 22,463 Finance, Insurance and Real 8,000 8,200 8,400 9,300 9,200 9,163 Estate Services & Miscellaneous 57,700 58,600 60,300 62,100 62,900 63,723 Government Federal 9,700 9,700 9,500 9,400 9,300 9,263 State 9,600 9,600 9,700 9,900 10,100 10,063 Local 10,000 9,700 10,000 10,700 10,700 10,638 Total Government 29,400 29,000 29,200 30,000 30,100 29,964 Total Service Producing 127,300 128,100 130,200 135,000 135,800 136,613 Total Goods and Service Producing 139,700 141,100 143,700 148,800 149,700 150,263
*Preliminary results as of September 30, 2008. Source: Alaska Department of Labor and Workforce Development, Research and Analysis Section. Note: Totals may not add due to rounding.
The following table shows a comparison of the annual unemployment rates for the United States, Alaska and the Municipality for the period of 2003 through 2008.
Annual Unemployment Rate 2003 2004 2005 2006 2007 2008 United States 6.0% 5.5% 5.1% 4.6% 4.6% 5.4% Alaska 7.7 7.4 6.9 6.5 6.2 6.8 Anchorage 6.2 5.9 5.5 5.2 5.0 5.6 ______Source: Alaska Department of Labor and Workforce Development, Research and Analysis Section (as of September 30, 2008).
28
Oil and Gas Industry
The following information is derived from sources believed to be reliable, but has not been independently verified, and its accuracy is not guaranteed by the Municipality or the Underwriter.
Additional information on the oil and gas industry can be located at the State of Alaska Department of Natural Resources Division of Oil and Gas website: http://www.dog.dnr.state.ak.us/oil/.
The Municipality has been the headquarters for Alaska’s oil and gas industry since the discovery in 1957 of the State’s first producing oil field in the Swanson River area of the Kenai Peninsula southwest of the Municipality. The Kenai Peninsula and Cook Inlet area oil wells produced at the rate of approximately 15,504 barrels per day in FY07. Forecast production in FY08 is 14,101 barrels per day.
Production from natural gas fields in the Cook Inlet area currently totals over 200 billion cubic feet per year. This production serves the energy needs of approximately 325,000 residential and commercial customers. Data publicly available shows a total of 1.7 trillion cubic feet of proved and probable natural gas reserves at 22 active field areas in the Cook Inlet region.
Military Bases
Elmendorf Air Force Base and Fort Richardson Army Base, two military bases located in Anchorage, are an important part of the economy of the Municipality. In 2007, average monthly employment for uniformed military in the Municipality was 22,675, representing 14.69% of total monthly employment for Anchorage. According to a June 2006 report prepared by the Alaska Department of Labor and Workforce Development, almost half of the $1.4 billion in defense expenditures in the Municipality were for wages and salaries. Approximately $506 million went directly to uniformed personnel, and approximately $112 million went to civilian employees.
Although military strength at Fort Richardson has been reduced in the past, there are no known plans to reduce military personnel below current levels. Fort Richardson is experiencing increasing strength levels related to the Department of Defense's decision to locate a Stryker Brigade in Alaska. Fort Richardson provides a number of logistical and other support functions related to the Stryker Brigade.
29
Port of Anchorage
Reliance is placed on marine transportation for movement of the great majority of goods to and from Alaska due to the great distances involved and the need for lower shipping costs. The Port of Anchorage was opened in 1961 and has become the leading general cargo port of Alaska. The Port includes a 1,011-foot general cargo terminal, a 600-foot general cargo terminal, a 610-foot general cargo terminal, a 655-foot bulk petroleum terminal and a 612-foot bulk petroleum terminal. Cargo-handling facilities include three container rail-mounted cranes. The following figures of annual tonnages handled, as reported by the Port, show Port activity from 2001 to 2007. Port of Anchorage Tonnage Year General Cargo Petroleum Total 2007 1,914,565 2,400,925 4,316,391 2006 1,878,317 2,468,971 4,347,289* 2005 2,234,247 2,867,570 5,101,816 2004 1,886,809 2,741,201 4,628,009 2003 1,829,048 2,583,579 4,412,628 2002 1,705,570 2,245,098 3,950,668 2001 1,767,385 2,229,738 3,997,123
NOTE: The increase in total tonnage in 2005 reflected an unanticipated spike in Horizon shipping, resulting in an 18.4% increase in general cargo tonnage handled by the Port. Conversely, the decline in total tonnage in 2006 reflected: a) a return to historical Horizon general cargo tonnage levels; and b) a 13.9% decline in petroleum tonnage handled, reflecting Flint Hills loss of an international contract for Naptha products which are used to make plastics.
*Source: Port of Anchorage. September, 2008.
30
Demand for Port services continues to grow, resulting in the Port expansion project that commenced in 2003 with an expected completion in 2012. The expansion underway involves two phases: (i) the road and rail project and (ii) the marine terminal expansion. The first phase of road and rail project is completed and the first phase of the marine terminal expansion began construction in 2006 with the fill of 27 acres of Tidelands. The remainder of the project is currently under 404 permit, and construction began in 2007. Construction of the Port project depends upon the receipt of monies from the federal and state governments. While the Port has contributed $54.5 million, the project has received more than $153.8 million in federal and state grants and receipt of further grant monies cannot be assured at this time.
In order to continue to maintain market dominance and increase capacity, the Port expansion underway will allow it to accommodate larger ships, unload containers using better and bigger cranes, and support new military deployment requirements. To streamline services to city businesses, citizens, and the state, the Port expansion includes transportation links that meet these increased services.
Transportation
The State operates an approximately 4,837 acre aviation complex within the Municipality that includes the Ted Stevens Anchorage International Airport (the “Airport”) and the adjoining Lake Hood Seaplane Base, one of the world’s busiest floatplane bases. Because of its crossroads location on the polar air routes connecting Europe, Asia and North America, the Airport is a major air center serving scheduled passenger and cargo carriers.
Air cargo and express package services continue to be the most significant portion of the overall activity at the Airport, accounting for over two-thirds of operating revenues in recent years. The Airport is the major air gateway to the State for both passengers and cargo, and its strategic global location has made it an important express package sorting, cargo transfer and cargo technical stop center for air cargo freighters flying between Asia and North America, between Asia and Europe, and between Europe and North America. The Airport enjoys a broad base of cargo business, as evidenced by the large number and global diversity of its cargo carriers.
The Airport air cargo facilities include over 14.0 million square feet located in four cargo parks, with an additional 6.0 million square feet available for future expansion. Federal Express and United Parcel Service use the Airport as an international sorting hub.
In terms of passenger service, the Airport serves as a hub and connecting point for Alaska Airlines, which is based in Seattle, Washington. Alaska Airlines has the largest presence of any airline in the State and is the largest carrier in terms of passengers and operations at the Airport, with a 50.3% passenger market share in fiscal year 2005.
More than 2,200 private aircraft are based in the Anchorage area and are served by 11 airfields and two floatplane bases. Merrill Field, operated by the Municipality, is the largest general aviation airport for private aircraft in the State. Its paved runways of 4,000 feet and 2,750 feet handled 171,522 take-offs and landings during 2007.
The Alaska Railroad Corporation, which maintains its headquarters and principal repair shops, warehouses and yards in Anchorage, provides freight and passenger service covering more than 600 miles and connecting over 70% of the Alaska population. The Alaska Railroad was owned and operated by the federal government from 1924 to January 1985, when ownership was transferred to the State. In 2007, the Alaska Railroad earned gross revenues of $169.3 million with expenses of $153.0 million. Major revenue categories included freight services at $91.8 million, grant revenues at $32.949 million, and record level passenger service at $23.3 million. The railroad employs approximately 800 year round employees.1
1 2007 Alaska Railroad Corporation Annual Report
31
Community Services
The following banks, three of which are headquartered in Anchorage, serve the Municipality: Alaska First Community Bank and Trust, N.A., First National Bank Alaska, N.A., KeyBank of Alaska, N.A. (an interstate branch), Northrim Bank, and Wells Fargo Bank Alaska, N.A. In addition, one state and seven federal credit unions serve the Municipality.
Media
One daily newspaper, The Anchorage Daily News, seven AM and ten FM radio stations, six television stations and one cable television company serve the Municipality. One local exchange carrier and several other companies provide long-distance, local and wireless telecommunication services and internet services in the Anchorage area.
Climate
For its northern location⎯61° latitude⎯the Municipality enjoys a relatively moderate climate. The average temperature for January and July are 13°F and 58°F, respectively. Average annual precipitation is approximately 16 inches.
LITIGATION AND CLAIMS
There is no controversy or litigation of any nature now pending or, to the knowledge of the Municipality, threatened to restrain or enjoin the sale, issuance, execution or delivery of the Bonds, or in any way contesting or affecting the validity of the Bonds or any proceedings of the Municipality taken with respect to the sale or issuance thereof, or the pledge or application of any moneys or security provided for the payment of the Bonds, or the existence or powers of the Municipality. Lawsuits and other claims incidental to the ordinary course of operations of the Municipality are largely covered by the Municipality’s self-insurance funds and insurance purchased from private insurers and will not have a materially adverse effect upon the financial position of the Municipality in the opinion of the Municipality’s management and, with respect to litigation, the Municipal Attorney.
Upon delivery of the Bonds, the Municipality will furnish a certificate, in form satisfactory to Bond Counsel, to the effect that, among other things, there is no litigation pending in any court to restrain or enjoin the issuance or delivery of the Bonds or in any way contesting the validity or enforceability of the Bonds.
CONTINUING DISCLOSURE UNDERTAKING
In accordance with Section (b)(5) of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended from time to time (the “Rule”), the Municipality has agreed in the Bond Ordinance to execute a certificate for ongoing disclosure, in which the Municipality will provide or cause to be provided each year to DisclosureUSA (for as long as it continues to be a recognized repository by the Securities and Exchange Commission) or separately to each nationally recognized municipal securities information repository (“NRMSIR”) and to the state information depository for the State (if one is created) (“SID”), in each case as designated by the Securities and Exchange Commission (the “Commission”) in accordance with the Rule, the following annual financial information and operating data for the prior fiscal year (commencing with the fiscal year ended December 31, 2008):
• Annual financial statements prepared in accordance with generally accepted accounting principles as prescribed by the Government Accounting Standards Board (or its successor) from time to time, generally of the type included in this Official Statement as Appendix A, “2007 Financial Statements of the Municipality,” including the notes thereto and the statistical data included in the Comprehensive Annual Financial Report of the Municipality for the year.
Such annual information and operating data described above will be available not later than 210 days after the end of the fiscal year. The Municipality may adjust such date if the Municipality changes its fiscal year by providing written notice of the change of fiscal year and the new reporting date to each then existing NRMSIR and 32 the SID, if any. In lieu of providing such annual financial information and operating data, the Municipality may cross-reference to other documents the Municipality provides to DisclosureUSA or separately to the NRMSIR, the SID or to the Commission and, if such document is a final official statement within the meaning of the Rule, available from the Municipal Securities Rulemaking Board (“MSRB”).
The Municipality further agrees to provide or cause to be provided, in a timely manner, to DisclosureUSA or separately to the SID, if any, and to each NRMSIR or to the MSRB notice of the occurrence of any of the following events with respect to the Bonds, if material:
• Principal and interest payment delinquencies; • Nonpayment related defaults; • Unscheduled draws on debt service reserves reflecting financial difficulties; • Unscheduled draws on credit enhancements reflecting financial difficulties; • Substitution of credit or liquidity providers, or their failure to perform; • Adverse tax opinions or events affecting the tax-exempt status of the Bonds; • Modifications to rights of owners of the Bonds; • Optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-23856; • Defeasances; • Release, substitution or sale of property securing the repayment of the Bonds; and • Rating changes.
Without intending to modify this undertaking in any regard, the Municipality confirms that there is no property securing repayment of the Bonds.
The Municipality agrees to provide or cause to be provided, in a timely manner, to DisclosureUSA or separately to each NRMSIR or to the MSRB and to the SID, if any, notice of its failure to provide the annual financial information described above on or prior to the date set forth above.
The Municipality’s obligations to provide annual financial information and notices of material events (the “Undertaking”) will terminate upon the legal defeasance (if notice of such defeasance is given as provided above), prior redemption, or payment in full of all of the Bonds. The Undertaking, or any provision thereof, will be null and void if the Municipality (1) obtains an opinion of nationally recognized bond counsel to the effect that those portions of the Rule which require the Undertaking, or any such provision, are invalid, have been repealed retroactively or otherwise do not apply to the Bonds; and (2) notifies DisclosureUSA or separately each then existing NRMSIR and the SID, if any, of such opinion and the cancellation of the Undertaking. Notwithstanding any other provision of the Bond Ordinance, the Municipality may amend the Undertaking and any provision of the Undertaking may be waived, without the consent of the registered or beneficial owners of the Bonds, provided the following conditions are satisfied (i) if the amendment or waiver relates to the submission of annual information or notices of material events described above, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; (ii) the Undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issue of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (iii) the amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the beneficial owners of the Bonds.
In the event of any amendment or waiver of a provision of the Undertaking the Municipality will describe such amendment in the next Annual Report, and will include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, or the presentation) of financial information or operating data being presented by the Municipality. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change will be given in the same manner as for a material event, and (ii) the annual report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.
33
The right of a beneficial owner of a Bond to enforce the provisions of the Undertaking will be limited to a right to obtain specific enforcement of the Municipality’s obligations thereunder, and any failure by the Municipality to comply with the provisions of the Undertaking shall not be a default with respect to the Bonds under the Bond Ordinance.
The Municipality became obligated to make annual disclosure of certain financial information by filing with each nationally recognized municipal securities information repository (“NRMSIR”) in 1997. The audited financial statements were timely filed with each NRMSIR; however, due to an administrative oversight, certain information was filed late with each NRMSIR for the fiscal years ending 2003 through 2004. The Municipality issued bonds and notes in years 2003 through 2006 and mistakenly stated in its official statements that it had been in compliance with its continuing disclosure obligations. All information has since been filed including a notice of late filing. The Municipality has implemented procedures to ensure timely filing of all future information.
LEGAL MATTERS
All legal matters incident to the authorization and issuance of the Bonds are subject to the approval of K&L Preston Gates Ellis LLP, of Seattle, Washington, Bond Counsel to the Municipality. A copy of the form of Bond Counsel’s opinion is attached as Appendix B hereto.
TAX MATTERS
General
In the opinion of Bond Counsel, interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations.
Interest on the Bonds is not included in taxable income for purposes of the Alaska income tax imposed on corporations. Interest on the Bonds may be indirectly subject to the Alaska alternative minimum tax imposed on corporations to the extent that interest on the Bonds is subject to the federal alternative minimum tax on corporations.
Federal income tax law contains a number of requirements that apply to the Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the use of proceeds of the bonds and the facilities financed with proceeds of the Bonds and certain other matters. The Municipality has covenanted to comply with all applicable requirements.
Bond Counsel’s opinion is subject to the condition that the Municipality comply with the above-referenced covenants and, in addition, will rely on representations by the Municipality and its advisors with respect to matters solely within the knowledge of the Municipality and its advisors, respectively, which Bond Counsel has not independently verified. If the Municipality fails to comply with such covenants or if the foregoing representations are determined to be inaccurate or incomplete, interest on the Bonds could be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds, regardless of the date on which the event causing taxability occurs.
Except as expressly stated above, Bond Counsel expresses no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements.
Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income,” foreign corporations subject to the branch profits tax, life insurance companies and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or 34 have paid or incurred certain expenses allocable to the Bonds. Bond Counsel expresses no opinion regarding any collateral tax consequences. Prospective purchasers of the Bonds should consult their tax advisors regarding collateral federal income tax consequences.
Payments of interest on tax-exempt obligations such as the Bonds are in many cases required to be reported to the Internal Revenue Service (the “IRS”). Additionally, backup withholding may apply to any such payments to any owner who is not an “exempt recipient” and who fails to provide certain identifying information. Individuals generally are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients.
Bond Counsel’s opinion is not a guarantee of result and is not binding on the IRS; rather, the opinion represents Bond Counsel’s legal judgment based on its review of existing law and in reliance on the representations made to Bond Counsel and the Municipality’s compliance with its covenants. The IRS has established an ongoing program to audit tax-exempt obligations to determine whether interest on such obligations is includable in gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS will commence an audit of the Bonds. Owners of the Bonds are advised that, if the IRS does audit the Bonds, under current IRS procedures, at least during the early stages of an audit, the IRS will treat the Municipality as the taxpayer, and the owners of the Bonds may have limited rights to participate in the audit. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of the ultimate outcome.
Original Issue Premium
An amount equal to the excess of the purchase price of a Bond over its stated redemption price at maturity constitutes premium on that Bond. A purchaser of a Bond must amortize any premium over that Bond’s term using constant yield principles, based on the Bond’s yield to maturity. As premium is amortized, the purchaser’s basis in the Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the purchaser. This will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of the Bond prior to its maturity. Even though the purchaser’s basis is reduced, no federal income tax deduction is allowed. Purchasers of Bonds at a premium, whether at the time of initial issuance or subsequent thereto, should consult their tax advisors with respect to the determination and treatment of premium for federal income tax purposes and the state and local tax consequences of owning such Bonds.
Original Issue Discount
The initial public offering price of certain Bonds (the "Original Issue Discount Bonds"), is less than the stated redemption price at maturity. In such case, the difference between (i) the stated amount payable at the maturity of an Original Issue Discount Bond and (ii) the initial public offering price of that Original Issue Discount Bond constitutes original issue discount with respect to that Original Issue Discount Bond in the hands of the owner who purchased that Original Issue Discount Bond at the initial public offering price in the initial public offering of the Bonds. The initial owner is entitled to exclude from gross income (as defined in Section 61 of the Code) an amount of income with respect to an Original Issue Discount Bond equal to that portion of the amount of the original issue discount allocable to the period that such Original Issue Discount Bond continues to be owned by the initial owner.
In the event of the redemption, sale or other taxable disposition of an Original Issue Discount Bond prior to its stated maturity, however, the amount realized by the initial owner in excess of the basis of the Original Issue Discount Bond in the hands of its initial owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Bond was held by the initial owner) is includable in gross income. Purchasers of Original Issue Discount Bonds should consult their tax advisors regarding the determination and treatment of original issue discount for federal income tax purposes and the state and local tax consequences of owning Original Issue Discount Bonds.
35
RATINGS
S&P, a Division of The McGraw-Hill Companies, Inc., and Fitch Ratings have assigned underlying ratings of “AA”, and “AA”, respectively to the Bonds. Such ratings reflect only the views of such organizations and any desired explanation of the significance of such ratings should be obtained from the rating agency furnishing the same, at the following addresses: S&P Inc., 55 Water Street, New York, New York 10041; and Fitch Ratings, 650 California Street, 8th Floor, San Francisco, California 94108. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating agencies, if in the judgment of such rating agencies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds.
UNDERWRITING
The Bonds are being purchased by Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of the underwriting firms identified on the cover page of this Official Statement (the “Underwriters”). The bond purchase contract provides that the Underwriters will purchase all of the Bonds, if any are purchased, at a price of $90,546,485.69 (which consists of the principal amount of the Bonds, plus a net premium of $1,184,309.85, less an Underwriters’ discount of $477,824.16). The Underwriters intend to offer the Bonds to the public at the offering prices set forth on the inside cover page of this Official Statement. The Underwriters may allow concessions from the public offering prices to certain dealers who may re-allow concessions to other dealers. After the initial public offering, the public offering prices may be varied from time to time by the Underwriters.
J.P. Morgan Securities Inc., one of the underwriters of the Bonds, has entered into an agreement (the “Distribution Agreement”) with UBS Financial Services Inc. for the retail distribution of certain municipal securities offerings, including the Bonds, at the original issue prices. Pursuant to the Distribution Agreement, J.P. Morgan Securities Inc. will share a portion of its underwriting compensation with respect to the Bonds with UBS Financial Services Inc.
36
FINANCIAL ADVISOR
First Southwest Company is employed as Financial Advisor to the Municipality in connection with the issuance of the Bonds. The Financial Advisor’s fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds. First Southwest Company has agreed, in its Financial Advisory contract, not to bid for the Bonds, either independently or as a member of a syndicate organized to submit a bid for the Bonds. First Southwest Company, in its capacity as Financial Advisor, does not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Bonds, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies.
First Southwest Company has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the Municipality and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information.
EXECUTION OF OFFICIAL STATEMENT
The execution and delivery of this Official Statement has been authorized by the Municipality.
MUNICIPALITY OF ANCHORAGE
By /s/ Sharon Weddleton Chief Fiscal Officer
37
(THIS PAGE INTENTIONALLY LEFT BLANK)
APPENDIX A - FINANCIAL STATEMENTS
MUNICIPALITY OF ANCHORAGE, ALASKA
2007
The Financial Statements include Management’s Discussion and Analysis, the Basic Financial Statements, Notes to the financial statements and Required Supplementary Information.
(THIS PAGE INTENTIONALLY LEFT BLANK)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Basic Financial Statements
(THIS PAGE INTENTIONALLY LEFT BLANK)
23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 Required Supplementary Information 127 128 129 130 131 132
(THIS PAGE INTENTIONALLY LEFT BLANK)
Supplementary Information NonMajor Governmental Funds 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 NonMajor Enterprise Funds
(THIS PAGE INTENTIONALLY LEFT BLANK)
151 152 153 154 155 156 157 158 159 160 161 162 Internal Service Funds
(THIS PAGE INTENTIONALLY LEFT BLANK)
163 164 165 166 167 168 169 170 Fiduciary and Agency Funds
(THIS PAGE INTENTIONALLY LEFT BLANK)
171 172 173 174 175 176
APPENDIX B - FORM OF BOND COUNSEL OPINION
December 11, 2008
Municipality of Anchorage Goldman, Sachs & Co. Anchorage, Alaska Seattle, Washington
Merrill Lynch, Pierce, Fenner & Smith Incorporated J.P. Morgan Securities Inc. Seattle, Washington Los Angeles, California
Morgan Stanley & Co. Incorporated Seattle-Northwest Securities Corporation San Francisco, California Seattle, Washington
Citigroup Global Markets Inc. Siebert Brandford Shank & Co., LLC Seattle, Washington Seattle, Washington
Re: Municipality of Anchorage, Alaska 2008 General Obligation Bonds, Series A (General Purpose) - $60,000,000 2008 General Obligation Bonds, Series B (Schools) - $29,840,000
Ladies and Gentlemen:
We have acted as bond counsel to the Municipality of Anchorage, Alaska (the “Municipality”), and have examined a certified transcript of the proceedings taken in the matter of the issuance by the Municipality of its 2008 General Obligation Bonds, Series A (General Purpose), in the aggregate principal amount of $60,000,000, and its 2008 General Obligation Bonds, Series B (Schools), in the aggregate principal amount of $29,840,000 (collectively, the “Bonds”), issued for the purposes of making various capital improvements and paying the costs of issuance of the Bonds. The Bonds are issued pursuant to Ordinance Nos. AO 2008-108 and AO 2008-109 passed on October 28, 2008 (collectively, the “Bond Ordinance”). Capitalized terms used in this opinion and not otherwise defined herein shall have the meanings given such terms in the Bond Ordinance.
The Bonds are subject to redemption prior to their stated maturities.
Regarding questions of fact material to our opinion, we have relied on representations of the Municipality in the Bond Ordinance and in the certified proceedings and on other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation.
B-1
Based on the foregoing, we are of the opinion that, under existing law:
1. The Bonds have been legally issued and constitute valid and binding general obligations of the Municipality, except to the extent that the enforcement of the rights and remedies of the holders and owners of the Bonds may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise of judicial discretion.
2. Both principal of and interest on the Bonds are payable out of annual levies of ad valorem taxes to be made upon all of the taxable property within the Municipality without limitation as to rate or amount and in amounts which, together with other available funds, will be sufficient to pay such principal and interest as the same shall become due.
3. Interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinion set forth in the preceding sentence is subject to the condition that the Municipality comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The Municipality has covenanted to comply with all applicable requirements. Failure to comply with certain of such covenants may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. Interest on the Bonds is not included in taxable income for purposes of the Alaska income tax imposed on corporations. Interest on the Bonds may be indirectly subject to the Alaska alternative minimum tax imposed on corporations to the extent that interest on the Bonds is subject to the federal alternative minimum tax on corporations.
The Municipality has not designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code.
Except as expressly stated above, we express no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements.
We have not been engaged nor have we undertaken to review the accuracy, completeness or sufficiency of the official statement or other offering material related to the Bonds (except to the extent, if any, stated in the official statement), and we express no opinion relating thereto, or relating to the undertaking by the Municipality to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15c2-12.
This opinion is given as of the date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.
Very truly yours,
K&L PRESTON GATES ELLIS LLP
CMW:ks K:\2015410\00079\20287_CMW\20287L25O7 B-2
APPENDIX C - BOOK-ENTRY ONLY SYSTEM
The following information has been provided by DTC. The Municipality makes no representation regarding the accuracy or completeness thereof. Beneficial Owners (as hereinafter defined) should therefore confirm the following with DTC or the Participants (as hereinafter defined).
General Description
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities 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 for each maturity of the Bonds in the principal amount of such maturity 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 securities brokers and dealers, banks and 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 S&P’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 the Bonds under the DTC system, in denominations of $5,000 or any integral multiple thereof, 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 interests in the 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 Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no 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 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.
Redemption Notices shall be sent to DTC. If less than all of the Bonds 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.
C - 1
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds, unless authorized by a Direct participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Municipality as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting 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).
Redemption proceeds, distributions, and dividend payments on the Bonds will be made to DTC. DTC’s practice is to credit Direct Participants’ accounts on payable date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with Bonds 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, the Registrar, or the Municipality, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or any other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Municipality or the Registrar, 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 Bonds depository with respect to the Bonds at any time by giving reasonable notice to the Municipality or the Registrar. Under such circumstances, in the event that a successor Bonds depository is not obtained, Bond certificates are required to be printed and delivered. The Municipality may decide to discontinue use of the system of book-entry transfers through DTC (or a successor Bonds depository). In that event, Bond certificates will be printed and delivered to DTC.
With respect to Bonds registered on the Bond Register in the name of Cede & Co., as nominee of DTC, the Municipality and the Registrar shall have no responsibility or obligation to any Participant or to any person on behalf of whom a Participant holds an interest in the Bonds with respect to (i) the accuracy of the records of DTC, Cede & Co. or any Participant with respect to any ownership interest in the Bonds; (ii) the delivery to any Participant or any other person, other than a Bond owner as shown on the Bond Register, of any notice with respect to the Bonds, including any notice of redemption; (iii) the payment to any Participant or any other person, other than a Bond owner as shown on the Bond Register, of any amount with respect to principal of, premium, if any, or interest on the Bonds; (iv) any consent given or action taken by DTC as registered owner; or (v) any other matter. The Municipality and the Registrar may treat and consider Cede & Co., in whose name each Security is registered on the Bond Register, as the holder and absolute owner of such Security for the purpose of payment of principal and interest with respect to such Security, for the purpose of giving notices of redemption and other matters with respect to such Security, for the purpose of registering transfers with respect to such Security, and for all other purposes whatsoever. For the purposes of this Official Statement, the term “Beneficial Owner” shall include the person for whom the Participant acquires an interest in the Bonds.
Notice of Redemption
For so long as the Bonds are registered in the name of DTC or its nominee, notice of intended redemption shall be given only as provided in the DTC Operational Arrangements Memorandum dated December 12, 1994 as amended to the date hereof (the “Operational Arrangements Memorandum”). The Municipality will not provide notice to any Beneficial Owners.
When the Municipality determines to redeem any Bonds, it will cause to be given notice of such redemption in the manner then provided by law, which notice will state the redemption date and identify the Bonds to be redeemed by reference to their numbers and further state that on such redemption date there will become due and payable upon each such Bond the principal amount thereof, together with interest accrued to the redemption date, and that from and after such date interest thereon will cease to accrue. Such notice will be given at least 30 days, but not more than 60 days, prior to the redemption date by first class mail, postage prepaid, to the registered owner of any Bond to be redeemed at the address of the registered owner appearing on the Bond Register; provided,
C - 2
however, that for so long as the Bonds are held in fully immobilized form by DTC and are registered in the name of Cede & Co. or its registered assigns, all notices of redemption will be given only as provided in the Operational Arrangements Memorandum. In addition to the above required mailing, the Municipality will also cause to be mailed notice of such intended redemption to the senior managing Underwriter, or its business successor, if any, by regular U.S. mail.
If the Bonds are no longer held in immobilized form by DTC, then, in addition to the foregoing notice, further notice will be given by the Registrar as provided by the Bond Ordinance, but no defect in said further notice nor failure to give all or any portion of such further notice will in any manner defeat the effectiveness of a call for redemption if notice thereof is given above as prescribed.
Unless the book-entry system will have been discontinued, the Municipality and the Registrar will recognize DTC or its nominee as the registered owner of the Bonds. Conveyance of notices and other communications by DTC to DTC Participants and by DTC Participants to Beneficial Owners will be governed by arrangements between them, subject to any statutory and regulatory requirements as may be in effect from time to time. Any failure on the part of DTC or failure on the part of a nominee of a Beneficial Owner (having received notice from a DTC Participant or otherwise) to notify the Beneficial Owner so affected will not affect the validity of the redemption.
Interest on the Bonds so called for redemption ceases to accrue on the date fixed for redemption unless the same are not redeemed upon presentation and pursuant to such call.
C - 3
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)
MUNICIPALITY OF ANCHORAGE, ALASKA 2008 GENERAL OBLIGATION BONDS (GENERAL PURPOSE) SERIES A AND 2008 GENERAL OBLIGATION BONDS (SCHOOLS) SERIES B Printed on Recycled Paper on Recycled Printed IMAGEMASTER 800.452.5152