NEW ISSUE S&P Insured AA- (Stable Outlook) BOOK ENTRY S&P Underlying BBB+ (Positive Outlook) See “RATINGS” herein
In the opinion of Bond Counsel, assuming continuing compliance by the Borough with certain covenants to comply with provisions of the Internal Revenue Code of 1986, as amended (the “Code”) and any applicable regulations thereunder, interest on the Bonds is not includable in gross income under Section 103(a) of the Code and interest on the Bonds is not an item of tax preference for purposes of the federal individual and corporate alternative minimum taxes, See “Tax Exemption” in this Official Statement. Other provisions of the Code may affect purchasers and holders of the Bonds. See “Federal Tax Laws” herein for a brief description of these provisions.
Under the laws of the Commonwealth of Pennsylvania, the Bonds and interest on the Bonds shall be free from taxation for State and local purposes within the Commonwealth of Pennsylvania, but this exemption does not extend to gift, estate, succession or inheritance taxes or any other taxes not levied or assessed directly on the Bonds or the interest thereon. Under the laws of the Commonwealth of Pennsylvania, profits, gains or income derived from the sale, exchange or other disposition of the Bonds shall be subject to State and local taxation within the Commonwealth of Pennsylvania.
The Borough has designated and determined under and for purposes of Section 265(b)(3) of the Code to qualify each of the Bonds as a “qualified tax-exempt obligation” as such phrase is defined in the Code.
$7,590,000 BOROUGH OF WEST READING BERKS COUNTY, PENNSYLVANIA GENERAL OBLIGATION BONDS, SERIES OF 2012
Dated: Date of Delivery Interest Payable: April 1 and October 1 Principal Due: October 1, as shown on inside cover First interest Payment: October 1, 2012 The Borough of West Reading, Berks County, Pennsylvania (the “Borough”) will issue its General Obligation Bonds, Series of 2012 (the “Bonds”), in fully registered form, without coupons in denominations of $5,000 or any integral multiples thereof. Interest on the Bonds is payable on April 1 and October 1 of each year, commencing October 1, 2012. The Bonds will initially be registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), New York, New York, an automated depository for securities and clearing house for securities transactions. Individual purchases of the Bonds will initially be made in book-entry form only in denominations of $5,000 or any integral multiples thereof under the book-entry only system maintained by DTC. Purchasers of the Bonds will not receive physical delivery of the Bonds. Transfer of the Bonds will be effected through a book-entry system as described herein. For so long as any purchaser is the beneficial owner of a Bond, that purchaser must maintain an account with a broker or a dealer who is, or acts through, a DTC Participant to receive payment of principal of and interest on the Bonds. See “BOOK-ENTRY ONLY SYSTEM” herein.
So long as DTC or its nominee, Cede & Co., is the registered owner of the Bonds, payments of the principal of and interest on the Bonds when due for payment, will be paid directly to DTC or its nominee, Cede & Co., which will in turn remit such payments to DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds. If the use of a book-entry system for the Bonds is ever discontinued, Bonds will be issued in certificated form and the principal of the Bonds will be payable when due, upon surrender of such Bonds at the designated corporate trust office of Manufacturers and Traders Trust Company, Harrisburg, Pennsylvania, as paying agent (the “Paying Agent”) (or any successor paying agent at its designated offices), interest on such Bonds will be payable by check and mailed to the persons in whose name such Bonds are registered as of the Record Date with respect to the particular interest payment date, and the Bonds will be subject to registration of transfer, exchange and payment as described herein (see “THE BONDS” herein).
The Bonds are subject to redemption prior to maturity as described herein.
The Bonds are general obligations of the Borough, payable from its tax and other general revenues. The Borough has covenanted that it will include in its budget in each fiscal year, and will appropriate from its general revenues in each fiscal year, the amount of the debt service on the Bonds for such year and will duly and punctually pay or cause to be paid, the principal of every Bond and the interest thereon at the dates and places and in the manner stated in the Bonds, and for such budgeting, appropriation and payment the Borough irrevocably has pledged its full faith, credit and taxing power, which taxing power presently includes the power to levy ad valorem taxes on all taxable property within the Borough, presently unlimited as to rate or amount for such purpose.
The proceeds of the 2012 Bonds will be used to: (1) currently refund the Borough’s outstanding General Obligation Bonds, Series of 2003; (2) provide funds for capital projects of the Borough; and (3) pay the costs and expenses related to the issuance of the 2012 Bonds. See “PLAN OF FINANCE” herein.
The scheduled payment of principal of and interest on the Bonds when due is guaranteed under a municipal bond insurance policy issued concurrently with the delivery of the Bonds by Assured Guaranty Municipal Corp. (“AGM”).
MATURITIES, AMOUNTS, RATES AND INITIAL REOFFERING PRICES/YIELDS {As shown on inside cover}
The Bonds are offered when, as and if issued by the Borough and received by Janney Montgomery Scott LLC (the “Underwriter”), subject to withdrawal or modification of the offer without notice, and subject to the approving legal opinion of Kozloff Stoudt, P.C., Wyomissing, Pennsylvania, Bond Counsel, to be furnished upon delivery of the Bonds. Certain legal matters will be passed upon for the Borough by Kozloff Stoudt, P.C., Wyomissing, Pennsylvania. Financial S&Lutions LLC, Reading, Pennsylvania, has acted as financial advisor to the Borough in connection with the issuance of the Bonds. It is expected that the Bonds will be available for delivery, through facilities of DTC, on or about July 26, 2012.
July 11, 2012
$7,590,000 BOROUGH OF WEST READING BERKS COUNTY, PENNSYLVANIA GENERAL OBLIGATION BONDS, SERIES OF 2012
Due Principal (October 1) Amount Rate Yield CUSIP No.*
2012 $125,000 2.000% 0.700% 955550DQ8 2013 75,000 2.000% 1.000% 955550DR6 2014 80,000 2.000% 1.320% 955550DS4 2015 80,000 2.000% 1.540% 955550DT2 2016 80,000 2.000% 1.740% 955550DU9 2017 80,000 2.000% 2.000% 955550DV7 2018 80,000 2.125% 2.250% 955550DW5 2019 85,000 2.375% 2.470% 955550DX3 2020 475,000 2.500% 2.700% 955550DY1 2021 485,000 2.750% 2.890% 955550DZ8 2022 495,000 3.000% 3.030% 955550EA2 2023 500,000 3.000% 3.170% 955550EB0 2024 515,000 3.125% 3.320% 955550EC8 2025 530,000 3.250% 3.430% 955550ED6 2026 545,000 3.375% 3.520% 955550EE4 2027 565,000 3.500% 3.610% 955550EF1 2028 580,000 3.500% 3.690% 955550EG9 2029 600,000 3.625% 3.760% 955550EH7 2030 620,000 3.750% 3.780% 955550EJ3 2031 645,000 3.750% 3.850% 955550EK0 2032 350,000 3.750% 3.920% 955550EL8
* CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor’s on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. CUSIP numbers are provided for convenience or reference only. Neither the Borough, the Financial Advisor nor the Underwriter take any responsibility for the accuracy of such CUSIP numbers. The CUSIP numbers for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions, including, but not limited to, a refunding in whole or in part of such maturity.
BOROUGH OF WEST READING Berks County, Pennsylvania
COUNCIL Kevin M. Conrad President James J. Gallen, Jr. Vice President Amy Good Member Elizabeth Heckler Member Deborah Hutcheson Member Nathalie Kulesa Member Philip Wert Member
MAYOR Shane J. Keller
BOROUGH MANAGER Richard Sichler
BOROUGH SOLICITOR Kozloff Stoudt Wyomissing, Pennsylvania
BOND COUNSEL Kozloff Stoudt Wyomissing, Pennsylvania
FINANCIAL ADVISOR Financial S&Lutions LLC Reading, Pennsylvania
UNDERWRITER Janney Montgomery Scott LLC Philadelphia, Pennsylvania
PAYING AGENT/BOND REGISTRAR/SINKING FUND DEPOSITARY Manufacturers and Traders Trust Company Harrisburg, Pennsylvania
BOROUGH ADDRESS 500 Chestnut Street West Reading, Pennsylvania 19611
No dealer, broker, salesperson or other person has been authorized by the Borough of West Reading, Berks County, Pennsylvania (the “Borough”) or by Janney Montgomery Scott LLC (the “Underwriter”), to give any information or to make any representations with respect to the Bonds, other than the information contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the Borough or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, and there shall not be any sale of the Bonds by any person in any state in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the Borough, The Depository Trust Company and other sources that are believed to be reliable, and is in form deemed final by the Borough for the purpose of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended, but the Underwriter does not guarantee the accuracy or completeness of such information, such information is not to be construed as a representation by the Underwriter, and except for the information concerning the Borough, such information is not to be construed as a representation by the Borough. The information contained in this Official Statement speaks as of its date, except where otherwise noted, and is subject to change without notice. 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 the affairs of the Borough since the date of this Official Statement. In making an investment decision, investors must rely on their own examination of the Borough and the terms of the offering, including the merits and risks involved.
The Bonds have not been registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended, nor has the Ordinance of the Borough adopted on June 19, 2012 been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts. The registration or qualification of the Bonds in accordance with applicable provisions of the securities laws of the states, if any, in which the Bonds have been registered or qualified and the exemption from registration or qualification in certain other states cannot be regarded as a recommendation thereof. Neither these states nor any of their agencies nor the Securities and Exchange Commission has passed upon the merits of the Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense.
In connection with the offering of the Bonds, the Underwriter may over allot or effect transactions that may stabilize or maintain the market price of such Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time without prior notice.
The order and placement of materials in this Official Statement, including the appendices, are not to be deemed to be a determination of relevance, materiality or importance, and this Official Statement, including the appendices, must be considered in its entirety. The offering of the Bonds is made only by means of this entire Official Statement.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of any of such information.
Assured Guaranty Municipal Corp. (“AGM”) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “MUNICIPAL BOND INSURANCE” and “Appendix D - Specimen Municipal Bond Insurance Policy”.
TABLE OF CONTENTS
Page
INTRODUCTION ...... 1 PLAN OF FINANCE ...... 2 SOURCES AND USES OF FUNDS ...... 2 AUTHORITY TO ISSUE ...... 2 THE BONDS ...... 2 General Description ...... 2 Transfer, Exchange and Registration ...... 3 Optional Redemption ...... 3 Mandatory Redemption ...... 3 SECURITY FOR THE BONDS ...... 4 General Obligations ...... 4 Sinking Fund ...... 4 Actions in the Event of Default ...... 4 MUNICIPAL BOND INSURANCE ...... 5 Bond Insurance Policy ...... 5 Assured Guranty Municipal Corp...... 5 BOND INSURANCE RISK FACTORS ...... 7 BOOK-ENTRY ONLY SYSTEM ...... 7 FINANCIAL STATEMENTS ...... 10 LITIGATION ...... 10 TAX MATTERS ...... 10 Federal Tax Laws ...... 10 Tax Exemption ...... 11 Regulations, Future Legislation ...... 11 Proposed Federal Tax Legislation ...... 11 CONTINUING DISCLOSURE ...... 12 UNDERWRITING ...... 14 RATINGS ...... 14 LEGAL OPINION ...... 14 FINANCIAL ADVISOR ...... 14 MISCELLANEOUS ...... 15
Appendix A – Demographic, Financial and Economic Information Relating to the Borough Appendix B – Audited Financial Statements (Fiscal Year ended December 31, 2011) Appendix C – Proposed Form of Opinion of Bond Counsel Appendix D – Specimen of Municipal Bond Insurance Policy
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$7,590,000 BOROUGH OF WEST READING BERKS COUNTY, PENNSYLVANIA GENERAL OBLIGATION BONDS, SERIES OF 2012
INTRODUCTION
This Official Statement, including the cover page and the Appendices hereto, is furnished by the Borough of West Reading, Berks County, Pennsylvania (the “Borough”), in connection with the offering of $7,590,000 aggregate principal amount of its General Obligation Bonds, Series of 2012 (the “Bonds”). The Bonds will be dated as of the date of delivery, when interest on the Bonds will begin to accrue.
The Bonds are being issued pursuant to an Ordinance of the Borough adopted on June 19, 2012 and pursuant to the Local Government Unit Debt Act of the Commonwealth of Pennsylvania, 53 Pa. C.S. Chaps. 80 through 82 (the “Debt Act”). The indebtedness represented by the Bonds constitutes non-electoral debt of the Borough under the Debt Act. Prior to delivery of the Bonds, the Department of Community and Economic Development of the Commonwealth (the “Department” or “DCED”) will issue its certificate of approval with respect to the increase of nonelectoral debt of the Borough evidenced by the Bonds. Copies of the Ordinance may be inspected at the Office of the Borough Manager, 500 Chestnut Street, West Reading, Pennsylvania 19611. Pursuant to the Ordinance, Manufacturers and Traders Trust Company, having a corporate trust office in Harrisburg, Pennsylvania, has been appointed to act as the paying agent, bond register and sinking fund depository (in each such capacity, the “Paying Agent”) for the Bonds.
The Bonds will be general obligations of the Borough and will be payable from its tax and other general revenues, including ad valorem taxes levied without limit, for debt service purposes, as to rate or amount on all taxable real property presently located in the Borough. The Borough has covenanted in the Ordinance that it will include the amount of debt service for the Bonds in its budget for each fiscal year, that it will appropriate such amounts from its general revenues for the payment of such debt service in each such fiscal year, and that it will duly and punctually pay or cause to be paid the principal of every Bond and the interest thereon at the dates and place and in the manner stated in the Bonds. For such budgeting, appropriation and payment, the Borough has irrevocably pledged its full faith, credit and taxing power, which taxing power is presently without limitation as to rate or amount for the payment of debt approved under the Debt Act. See “SECURITY FOR THE BONDS” herein.
The Borough has no power to pledge the credit or taxing power of the Commonwealth of Pennsylvania (the “Commonwealth”) or any other political subdivision thereof, nor shall the Bonds of the Borough be deemed to be obligations of the Commonwealth or any other political subdivision thereof except the Borough, nor shall the Commonwealth or any other political subdivision thereof except the Borough be liable for the payment of the principal of, premium, if any, or interest on the Bonds, nor are the members of the Council of the Borough personally liable for the Borough’s obligations. See “SECURITY FOR THE BONDS” herein.
Certain portions of the following information are summaries of the Ordinance, the Bonds and other documents relating to the issuance of the Bonds. Such summaries do not purport to be complete and reference is made to the individual documents so summarized, copies of which are on file and available for examination at the office of the Borough Manager. Neither the delivery of this Official Statement nor any sale of the Bonds made hereunder shall, under any circumstances, create any implication that there have not been any changes in the affairs of the Borough since the date of this Official Statement or the earliest date as of which certain information contained herein is given.
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PLAN OF FINANCE
The proceeds of the Bonds will be used to: (1) currently refund the Borough’s outstanding General Obligation Bonds, Series of 2003; (2) provide funds for capital projects of the Borough; and (3) pay the costs and expenses related to the issuance of the 2012 Bonds. SOURCES AND USES OF FUNDS
SOURCES OF FUNDS: BOND PROCEEDS ...... $ 7,590,000.00 NET ORIGINAL ISSUE DISCOUNT ...... (97,589.65)
TOTAL SOURCES OF FUNDS ...... $ 7,492,410.35
USES OF FUNDS: CAPITAL PROJECTS ...... $ 440,000.00 REFUNDING 2003 BONDS ...... 6,798,531.25 COSTS OF ISSUANCE(1) ...... 253,879.10
TOTAL USES OF FUNDS ...... $ 7,492,410.35 ______(1) Includes legal fees, printing fees, financial advisory fees, underwriter’s discount, rating agency fees, and other amounts incurred in connection with the issuance of the Bonds.
AUTHORITY TO ISSUE
The Borough is authorized to issue the Bonds pursuant to the Debt Act. Under the Debt Act, the General Assembly of the Commonwealth has granted full power and authority to issue Bonds to every local government unit in the Commonwealth, including the Borough, subject to certain limitations, restrictions and conditions set forth in the Debt Act. The Borough has authorized the issuance of the Bonds by enacting the Ordinance in accordance with the provisions of the Debt Act. The Bonds will be issued as nonelectoral debt of the Borough without the approval of the electorate.
As required by the Debt Act, prior to the delivery of the Bonds, the Borough will have received approval of the Department to incur the debt evidenced by the Bonds.
THE BONDS
General Description
The Bonds will be dated of the date of delivery and will bear interest from such date at the rates set forth on the inside cover page hereof, payable semi-annually on April 1 and October 1 (each an “Interest Payment Date”) of each year, commencing October 1, 2012 (until maturity or prior redemption), and will mature on the dates and in the amounts forth on the inside cover page of this Official Statement. The Bonds when issued will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds. While the Bonds are in the Book-Entry-Only System, references to the “owner” or the “registered owner” as described herein are to Cede & Co., as registered owner for DTC. Each beneficial owner of a Bond may desire to make arrangements with a DTC Participant to receive notices or communications with respect to matters described herein. See “BOOK-ENTRY ONLY SYSTEM” herein.
The Bonds will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. While all of the Bonds are held in book-entry only form, payments thereon shall be made to Cede & Co., as
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holder thereof. See “BOOK-ENTRY ONLY SYSTEM” herein. At all other times, the principal of the Bonds, and the premium, if any, payable upon redemption, are payable at the designated corporate trust office of the Paying Agent, and the interest thereon is payable by check mailed by the Paying Agent on each Interest Payment Date to the persons who were the registered owners of the Bonds on the registration books maintained by the Paying Agent, at the close of the fifteenth (15th) day (whether or not a business day) immediately preceding such interest payment date (a “Regular Record Date”), irrespective of any transfer or exchange of any Bond subsequent to such Regular Record Date and prior to such Interest Payment Date, unless the Borough defaults in the payment of interest due on such interest payment date. In the event of any such default, any defaulted interest will be payable to the persons in whose name the Bonds are registered at the close of business on a special record date for the payment of such defaulted interest established by notice mailed by the Paying Agent to the registered owners of the Bonds not fewer than ten (10) days preceding such special record date. Such notice shall be mailed to the persons in whose names the Bonds are registered at the close of business on the fifth (5) day preceding the date of mailing.
Transfer, Exchange and Registration
Subject to the provisions described below under “BOOK-ENTRY ONLY SYSTEM,” the Bonds may be transferred upon the registration books upon delivery of such Bonds to the Paying Agent, accompanied by a written instrument or instruments of transfer in form satisfactory to the Paying Agent. No transfer of any Bond will be effective until entered on the registration books.
The Borough and the Paying Agent shall not be required to issue or to register the transfer of or exchange any Bonds then considered for redemption during a period beginning at the close of business on the fifteenth (15th) day next preceding any date of selection of Bonds to be redeemed and ending at the close of business on the day of mailing of the applicable notice of redemption, or to register the transfer of or exchange any portion of any Note selected for redemption, until after the redemption date. Bonds may be exchanged for a like aggregate amount of Bonds of other authorized denominations, of the same maturity.
Bonds are transferable or exchangeable by the registered owners thereof upon surrender of Bonds to the Paying Agent, at its corporate trust office, accompanied by a written instrument or instruments in form, with instructions, and with guaranty of signature satisfactory to the Paying Agent, duly executed by the registered owner of such Note or his attorney-in-fact or legal representative. The Paying Agent shall enter any transfer of ownership of or exchange of Bonds in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new fully registered Note or Bonds of authorized denominations of the same maturity for the aggregate principal amount that the registered owner is entitled to receive. The Borough and the Paying Agent may deem and treat the registered owner of any Note as the absolute owner thereof (whether or not a Note shall be overdue) for the purpose of receiving payment of or on account of principal, premium, if any, and interest due and for all purposes, and the Paying Agent shall not be affected by any notice to the contrary.
Optional Redemption
The Bonds which are stated to mature on or after October 1, 2018, are subject to redemption prior to maturity at the option of the Borough, in whole or in part (and if in part, in such order of maturity as the Borough shall elect), on October 1, 2017, or any date thereafter, at 100% of the principal amount thereof, together with accrued interest thereon to the date fixed for redemption. In the event that less than all of the Bonds of any particular maturity are to be redeemed, the Bonds of such maturity shall be drawn by lot by the Paying Agent.
Mandatory Redemption
The Bonds are not subject to mandatory redemption prior to maturity.
Notice of Redemption: Notice of any redemption of the Bonds under the above provisions is required to be sent by first-class mail to the registered owners of the Bonds to be redeemed, at the addresses of such owners appearing in the Bond register maintained by the Paying Agent. Such notice shall be mailed not more than 45 days nor less than 30 days prior to any such redemption and shall be made in the manner and under the terms and
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conditions stated in the Bonds. No defect, whether in the notice of redemption or in the mailing thereof including failure to mail the notice, with respect to the redemption of any Bonds shall affect the validity of the redemption of other Bonds for which proper notice of redemption has been given.
SECURITY FOR THE BONDS
General Obligations
The Bonds will be general obligations of the Borough, payable from its tax and other general revenues, including ad valorem taxes, which may be levied on all taxable real property within the Borough presently without limitation as to rate or amount for the payment of debt service on the Bonds. The Borough has covenanted in the Ordinance that it will provide in its budget for each fiscal year, and will appropriate from its general revenues in each such fiscal year, the amount required to pay the debt service on the Bonds for such year and to make any other required sinking fund payments for such year. The Borough further covenants in the Ordinance that it will duly and punctually pay or cause to be paid from the Sinking Fund, or any other of its revenues or funds, the principal of every maturity of the Bonds and the interest thereon on the dates, at the place and in the manner stated in the Bonds. For such budgeting, appropriation and payment, the Borough has irrevocably pledged its full faith, credit and taxing power, which taxing power is presently without limitation as to rate or amount for the payment of debt approved under the Debt Act.
Sinking Fund
The Borough will create, pursuant to Section 8221 of the Debt Act, a sinking fund for the Bonds to be designated as the “Sinking Fund—General Obligation Bonds, Series of 2012”, under the Ordinance, to be established and administered by the Paying Agent, in its capacity as sinking fund depository, segregated from all other funds of the Borough. The Borough shall deposit in the appropriate Sinking Fund not later than each date when interest or principal is to become due on the Bonds, as applicable, an amount which, together with any other available funds then on deposit therein, will be sufficient to permit the Paying Agent to pay, in full, interest and principal then due and payable on the Bonds.
The Sinking Fund shall be held by the Paying Agent, in its capacity as sinking fund depositary, and any money in the Sinking Fund not required for prompt expenditure may, at the written direction of the Borough, be invested in securities or deposited in deposit accounts in accordance with the Debt Act. Such deposits and securities shall be in the name of the Borough but subject to withdrawal or collection only by the Paying Agent, in its capacity as sinking fund depositary, and such deposits and securities, together with the interest thereon, shall be a part of the Sinking Fund.
After such deposits by the Borough to the applicable Sinking Fund, the Paying Agent, in its capacity as sinking fund depositary, is authorized, without further authorization or direction from the Borough or any of its officials, to pay from the appropriate Sinking Fund the principal of and interest on the Bonds, as applicable, when due and payable in accordance with the terms of the Bonds, the Ordinance and the provisions of the Debt Act.
Actions in the Event of Default
The remedies available to registered owners of the Bonds upon any failure to pay principal or interest when due include those prescribed by the Act. If such failure should continue for 30 days, any registered owner will (subject to certain priorities) have the right to bring suit for the amount due such registered owner in the Court of Common Pleas of Perry County, Pennsylvania (the “Court”). If the Borough defaults in the payment of principal or interest, or if the Borough fails to comply with any provision of the Bonds or of the Ordinance, the registered owners of 25% in aggregate principal amount of the Bonds may appoint a trustee to represent the registered owners. Such trustee may, and upon written request of the registered owners of 25% in aggregate principal amount of the Bonds and being furnished with satisfactory indemnity must, take one or more of the following actions, which will preclude similar action by the individual registered owners: (i) bring suit to enforce all rights of the registered owners; (ii) bring suit on the Bonds; (iii) petition the Court to levy the amount due plus estimated costs of collection as an assessment upon all real estate and other property subject to ad valorem taxation in the Borough (any such
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assessment will have the same priority and preference as to other liens or security interests as a lien for unpaid taxes); (iv) by suit in equity, enjoin any acts and things which may be unlawful or in violation of the rights of the registered owners all as set forth more fully in the Debt Act; and (v) upon 30 days prior written notice to the Borough, and subject to any limitations in the Ordinance, declare the unpaid principal of all the Bonds immediately due and payable with interest at the rates stated in the Bonds until final payment.
Enforcement of a claim for payment of principal of or interest on the Bonds may be subject to the provisions of the federal bankruptcy laws, to the Distressed Municipalities Act, and to the provisions of other statutory laws enacted by Congress or the General Assembly of the Commonwealth of Pennsylvania and case law developed by courts having jurisdiction extending the time for payment or imposing other constraints upon enforcement insofar as such laws may be constitutionally applied.
MUNICIPAL BOND INSURANCE
Bond Insurance Policy
Concurrently with the issuance of the Bonds, Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an Appendix to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.
Assured Guaranty Municipal Corp.
AGM is a New York domiciled financial guaranty insurance company and a wholly owned subsidiary of Assured Guaranty Municipal Holdings Inc. ("Holdings"). Holdings is an indirect subsidiary of Assured Guaranty Ltd. (“AGL”), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol “AGO”. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. No shareholder of AGL, Holdings or AGM is liable for the obligations of AGM.
AGM’s financial strength is rated “AA-” (stable outlook) by Standard and Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”) and “Aa3” (on review for possible downgrade) by Moody’s Investors Service, Inc. (“Moody’s”). An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM’s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn.
Current Financial Strength Ratings
On March 20, 2012, Moody’s issued a press release stating that it had placed AGM’s “Aa3” insurance financial strength rating on review for possible downgrade. AGM can give no assurance as to any further ratings action that Moody’s may take. Reference is made to the press release, a copy of which is available at www.moodys.com, for the complete text of Moody’s comments
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On November 30, 2011, S&P published a Research Update in which it downgraded AGM’s financial strength rating from “AA+” to “AA-“. At the same time, S&P removed the financial strength rating from CreditWatch negative and changed the outlook to stable. AGM can give no assurance as to any further ratings action that S&P may take. Reference is made to the Research Update, a copy of which is available at www.standardandpoors.com, for the complete text of S&P’s comments.
For more information regarding AGM’s financial strength ratings and the risks relating thereto, see AGL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012.
Capitalization of AGM
At March 31, 2012, AGM’s consolidated policyholders’ surplus and contingency reserves were approximately $3,123,869,658 and its total net unearned premium reserve was approximately $2,275,867,231, in each case, in accordance with statutory accounting principles.
AGM’s statutory financial statements for the fiscal year ended December 31, 2011, and for the quarterly period ended March 31, 2012, which have been filed with the New York State Department of Financial Services and posted on AGL’s website at http://www.assuredguaranty.com, are incorporated by reference into this Official Statement and shall be deemed to be a part hereof.
Incorporation of Certain Documents by Reference
Portions of the following documents filed by AGL with the Securities and Exchange Commission (the “SEC”) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof:
(i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (filed by AGL with the SEC on February 29, 2012); and
(ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012 (filed by AGL with the SEC on May 10, 2012).
All information relating to AGM included in, or as exhibits to, documents filed by AGL pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC’s website at http://www.sec.gov, at AGL’s website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) 826- 0100).
Any information regarding AGM included herein under the caption “MUNICIPAL BOND INSURANCE – Assured Guaranty Municipal Corp.” or included in a document incorporated by reference herein (collectively, the “AGM Information”) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded.
Miscellaneous Matters
AGM or one of its affiliates may purchase a portion of the Bonds or any uninsured bonds offered under this Official Statement and may hold such Bonds or uninsured bonds for investment or may sell or otherwise dispose of such Bonds or uninsured bonds at any time or from time to time.
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AGM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “MUNICIPAL BOND INSURANCE”.
BOND INSURANCE RISK FACTORS
The Borough has applied for a bond insurance policy to guarantee the scheduled payment of principal and interest on the Bonds. The Borough has yet to determine whether an insurance policy will be purchased with the Bonds. If an insurance policy is purchased, the following are risk factors relating to bond insurance.
In the event of default of the payment of principal or interest with respect to the Bonds when all or some becomes due, any owner of the Bonds shall have a claim under the Bond Insurance Policy (the “Policy”) for such payments. However, in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments are to be made in such amounts and at such times as such payments would have been due had there not been any such acceleration. The Policy does not guarantee payment of redemption premium, if any. The payment of principal and interest in connection with mandatory or optional prepayment of the Bonds by the Borough which is recovered by the Borough from the bond owner as a voidable preference under applicable bankruptcy law is covered by the insurance policy, however, such payments will be made by the Insurer at such time and in such amounts as would have been due absence such prepayment by the Borough unless the Bond Insurer chooses to pay such amounts at an earlier date.
Under most circumstances, default of payment of principal and interest does not obligate acceleration of the obligations of the Bond Insurer without appropriate consent. The Bond Insurer may direct and must consent to any remedies that the Sinking Fund Depository exercises and the Bond Insurer’s consent may be required in connection with amendments to the applicable Ordinance.
In the event the Bond Insurer is unable to make payment of principal and interest as such payments become due under the Policy, the Bonds are payable by the Borough pursuant to the applicable Ordinance. In the event the Bond Insurer becomes obligated to make payments with respect to the Bonds, no assurance is given that such event will not adversely affect the market price of the Bonds or the marketability (liquidity) for the Bonds.
The long-term ratings on the Bonds are dependent in part on the financial strength of the Bond Insurer and its claim paying ability. The Bond Insurer’s financial strength and claims paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of the Bond Insurer and of the ratings on the Bonds insured by the Bond Insurer will not be subject to downgrade and such event could adversely affect the market price of the Bonds or the marketability (liquidity) for the Bonds. See description of “RATINGS” herein.
The obligations of the Bond Insurer are general obligations of the Bond Insurer and in an event of default by the Bond Insurer, the remedies available to the Sinking Fund Depository may be limited by applicable bankruptcy law or other similar laws related to insolvency.
Neither the Borough, the Financial Advisor, Bond Counsel, the Borough’s Solicitor or the Underwriter have made independent investigation into the claims paying ability of the Bond Insurer and no assurance or representation regarding the financial strength or projected financial strength of the Bond Insurer is given.
BOOK-ENTRY ONLY SYSTEM
Beneficial ownership interests in the Bonds will be available only in book-entry form. Beneficial Owners will not receive physical certificates representing their interests in the Bonds purchased. So long as DTC or its nominee is the registered owner of the Bonds, references in this Official Statement to the Owners of the Bonds shall
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mean DTC or its nominee and shall not mean the Beneficial Owners. The Ordinance contains provisions applicable to periods when DTC or its nominee is not the registered owner.
THE FOLLOWING DESCRIPTION OF DTC, OF PROCEDURES AND RECORD KEEPING ON BENEFICIAL OWNERSHIP INTERESTS IN THE BONDS, PAYMENT OF INTEREST AND OTHER PAYMENTS ON THE BONDS TO DTC PARTICIPANTS OR TO BENEFICIAL OWNERS, CONFIRMATION AND TRANSFER OF BENEFICIAL OWNERSHIP INTERESTS IN THE BONDS AND OF OTHER TRANSACTIONS BY AND BETWEEN DTC, DTC PARTICIPANTS AND BENEFICIAL OWNERS IS BASED ON INFORMATION FURNISHED BY DTC.
DTC will act as securities depository for the Bonds. The Bonds will be registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each year of maturity of the Bonds, in the aggregate principal amount of each year of maturity of the Bonds, and deposited with DTC.
DTC, the world’s largest depository, is a limited-purpose trust company organized under 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, as amended. 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 certificated Bonds. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s rating of “AA+.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each 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 purchases. 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 beneficial 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 Bonds, unless the use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds. DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
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Redemption notices shall be sent to DTC. If less than all of the Bonds of a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in the Bonds to be redeemed.
Neither DTC nor Cede & Co. (nor such 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 Paying Agent as soon as possible after the record date. The omnibus proxy assigns Cede & Co.’s consenting and voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date.
BECAUSE DTC IS TREATED AS THE OWNER OF THE BONDS FOR SUBSTANTIALLY ALL PURPOSES UNDER THE ORDINANCE, BENEFICIAL OWNERS MAY HAVE A RESTRICTED ABILITY TO INFLUENCE IN A TIMELY FASHION REMEDIAL ACTION OR THE GIVING OR WITHHOLDING OF REQUESTED CONSENTS OR OTHER DIRECTIONS. IN ADDITION, BECAUSE THE IDENTITIES OF BENEFICIAL OWNERS ARE UNKNOWN TO THE BOROUGH, TO DTC OR TO THE PAYING AGENT, IT MAY BE DIFFICULT TO TRANSMIT INFORMATION OF POTENTIAL INTEREST TO BENEFICIAL OWNERS IN AN EFFECTIVE AND TIMELY MANNER. BENEFICIAL OWNERS SHOULD MAKE APPROPRIATE ARRANGEMENTS WITH THEIR BROKER OR DEALER REGARDING DISTRIBUTION OF INFORMATION REGARDING THE BONDS THAT MAY BE TRANSMITTED BY OR THROUGH DTC.
Payments of principal, interest and any redemption premiums on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Paying Agent, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC (nor its nominee), the Paying Agent or the Borough, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the Paying Agent’s responsibility, disbursement of such payments to Direct Participants is DTC’s responsibility, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. THE BOROUGH CAN GIVE NO ASSURANCE THAT DIRECT AND INDIRECT PARTICIPANTS WILL PROMPTLY TRANSFER PAYMENTS TO BENEFICIAL OWNERS.
DTC may discontinue providing its service as depository on the Bonds at any time by giving reasonable notice to the Paying Agent or the Borough. The Borough may also determine that DTC is incapable of discharging its duties or that continuation of the book-entry system is not in the Beneficial Owners’ best interests. In either situation, if the Borough fails to identify another qualified securities depository to replace DTC, physical Bonds will be delivered to each Beneficial Owner.
THE BOROUGH AND THE PAYING AGENT HAVE NO RESPONSIBILITY OR OBLIGATION TO THE PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT OR THE MAINTENANCE OF ANY RECORDS; (2) THE PAYMENT BY DTC OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE BONDS, OR THE SENDING OF ANY TRANSACTION STATEMENTS; (3) THE DELIVERY OR TIMELINESS OF DELIVERY BY DTC OR ANY PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE ORDINANCE TO BE GIVEN TO OWNERS; (4) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENTS UPON ANY PARTIAL REDEMPTION OF THE BONDS; OR (5) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC OR ITS NOMINEE AS THE REGISTERED OWNER OF THE BONDS, INCLUDING ANY ACTION TAKEN PURSUANT TO AN OMNIBUS PROXY.
The information in this section concerning DTC and DTC’s book entry system has been extracted from materials provided by DTC for such purpose and from sources the Borough believes to be reliable, but the Borough takes no responsibility for the accuracy thereof and such information is not guaranteed as to accuracy or
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completeness and is not to be construed as a representation by the Borough, the Paying Agent, the Financial Advisor or the Underwriter.
FINANCIAL STATEMENTS
The Borough's Financial Statements for its Fiscal Year ended December 31, 2011 included in APPENDIX B to this Official Statement have been audited by Reinsel Kuntz Lesher LLP, Wyomissing, Pennsylvania, independent certified public accountants, to the extent and for the periods indicated in their report thereon. The Borough has not asked Reinsel Kuntz Lesher LLP to perform any additional review or procedures in connection with this Official Statement.
LITIGATION
There is no litigation of any nature pending or, to the knowledge of the Borough, threatened against the Borough as of the date of this Official Statement to restrain or enjoin the issuance, sale, execution or delivery of the Bonds or in any way contesting the validity of the Bonds, or any proceedings of the Borough taken with respect to the issuance or sale thereof. At the time of delivery of the Bonds, the Borough and its Solicitor will furnish a certificate to the effect that no such litigation is then pending or, if such litigation is pending, an opinion of legal counsel satisfactory to the Underwriter will be delivered to the effect that such litigation is without legal merit.
TAX MATTERS
Federal Tax Laws
Numerous provisions of the Internal Revenue Code of 1986, as amended (the “Code”), affect the issuers of state and local government bonds, such as the Borough, and impair or restrict the ability of the Borough to finance projects on a tax-exempt basis. Failure on the part of the Borough to comply with any one or more of such provisions of the Code, or any regulations under the Code, could render interest on the Bonds includable in the gross income of the owners thereof for purposes of federal income tax retroactively to the date of issuance of the Bonds. Among these provisions are more restrictive rules relating to: (a) investment of funds treated as proceeds of the Bonds; (b) the advance refunding of tax-exempt bonds; and (c) the use of proceeds of the Bonds to benefit private activities. In addition, under the Code, the Borough is required to file an information return with respect to the Bonds and, if applicable, to “rebate” to the federal government certain arbitrage profits on an ongoing basis throughout the term of the issue constituting the Bonds. Bond Counsel has not undertaken to determine (or to inform any person) whether any action taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may affect the tax status of interest on the Bonds.
Other provisions of the Code affect the purchasers and holders of certain state and local government bonds such as the Bonds. Prospective purchasers of the Bonds should be aware that: (i) Section 265 of the Code denies a deduction for interest on (a) indebtedness incurred or continued to purchase or carry certain state or local government bonds, such as the Bonds, or, (b) in the case of a financial institution, that portion of a financial institution’s interest expense allocated to interest on certain state or local government bonds, such as the Bonds, unless the issuer of the state or local government bonds designates the bonds as “qualified tax-exempt obligations” for the purpose and effect contemplated by Section 265(b)(3)(B) of the Code (the Borough has designated the Bonds as “qualified tax exempt obligations” under Section 265(b)(3)(B) of the Code, as such phrase is defined in the Code); (ii) certain corporations must take into account interest on certain state or local government bonds, such as the Bonds, in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on such corporations; (iii) with respect to insurance companies subject to the tax imposed by Section 831 of the Code, Section 832(b)(5)(B)(1) of the Code reduces the deduction for loss reserves by 15% of the sum of certain items, including interest and amounts treated as such on certain state or local government bonds, such as the Bonds; (iv) interest on certain state or local government bonds, such as the Bonds, earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by Section 884 of the Code, (v) if a Subchapter S corporation has passive investment income (which passive investment income will include interest on state and local government bonds such as the Bonds) exceeding 25% of such Subchapter S corporation’s gross receipts and if such Subchapter S corporation has Subchapter “C” earnings and profits, then interest income derived from state and local government bonds, such as the Bonds, may be subject to federal income tax under
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Section 1375 of the Code; and (vi) Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining gross income, receipts or accruals of interest on certain state or local government bonds such as the Bonds.
Tax Exemption
In the opinion of Bond Counsel, assuming continuing compliance by the Borough with certain certifications and agreements relating to the use of Bond proceeds and covenants to comply with provisions of the Code and any applicable regulations thereunder, now or hereafter enacted, interest on the Bonds is not includable in the gross income of the holders of the Bonds under Section 103(a) of the Code and interest on the Bonds is not an item of tax preference for purposes of the federal individual and corporate alternative minimum taxes, except as described under the caption “Federal Tax Laws ” above. Other provisions of the Code will affect certain purchasers and holders of the Bonds. See “Federal Tax Laws” above.
In the opinion of Bond Counsel under the laws of the Commonwealth, the Bonds and interest on the Bonds shall be free from taxation for State and local purposes within the Commonwealth, but this exemption shall not extend to gift, estate, succession or inheritance taxes or any other taxes not levied directly on the Bonds or the interest thereon. Under the laws of the Commonwealth, profits, gains or income derived from the sale, exchange or other disposition of the Bonds are subject to State and local taxation within the Commonwealth of Pennsylvania.
The Borough will issue its certificate regarding the facts, estimates and circumstances in existence on the date of delivery of the Bonds and regarding the anticipated use of the proceeds of the Bonds. The Borough will certify that, on the basis of the facts, estimates and circumstances in existence on the date of issuance of the Bonds, the Borough does not reasonably expect to use the proceeds of the Bonds in a manner that would cause the Bonds to be or become “arbitrage bonds” or “private activity bonds” as those terms are defined in Section 148 and Section 141 of the Code.
THE ABOVE SUMMARY OF POSSIBLE TAX CONSEQUENCES IS NOT EXHAUSTIVE OR COMPLETE. ALL PURCHASERS OF THE BONDS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE POSSIBLE FEDERAL, STATE AND LOCAL INCOME TAX CONSEQUENCES OF OWNERSHIP OF THE BONDS. ANY STATEMENTS REGARDING TAX MATTERS HEREIN CANNOT BE RELIED UPON BY ANY PERSON TO AVOID TAX PENALTIES.
Regulations, Future Legislation
Under the provisions of the Code, the Treasury Department is authorized and empowered to promulgate regulations implementing the intent of Congress under the Code, which could affect the tax-exemption and/or tax consequences of holding tax-exempt obligations, such as the Bonds. In addition, legislation may be introduced and enacted in the future which could change the provisions of the Code relating to tax-exempt bonds of a state or local government unit, such as the Borough, or the taxability of interest in general.
No representation is made or can be made by the Borough, or any other party associated with the issuance of the Bonds as to whether or not any other legislation now or hereafter introduced and enacted will be applied retroactively so as to subject interest on the Bonds to federal income taxes or so as to otherwise affect the marketability or market value of the Bonds.
EACH PURCHASER OF THE BONDS SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING ANY CHANGES IN THE STATUS OF PENDING OR PROPOSED FEDERAL TAX LEGISLATION.
Proposed Federal Tax Legislation
Proposals to alter or eliminate the exclusion of interest on tax-exempt bonds from gross income for some or all taxpayers have been made in the past and may be made again in the future. For example, on September 12, 2011, President Obama submitted the “American Jobs Act of 2011” (the “Jobs Act”) to Congress. While the Jobs Act was
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not enacted in its original form, certain measures in support of tax-reform continue to appear in the President’s fiscal 2013 budget request released in February 2012. The 2013 budget proposes a 28% cap on the value of tax preferences, including tax-exempt interest for municipal bonds. There is much uncertainty regarding whether any legislation to effect tax-reform will be enacted now or in the future. The impact of such legislation on the Bonds and the financial condition of the Borough cannot be predicted. Prospective purchasers of the Bonds should consult their own tax advisors regarding the potential consequences of the proposed change to the treatment of interest on the Bonds.
Future legislation, if enacted into law, or clarification of the Code may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the Code may also affect the market price for, or marketability of, the Bonds. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING ANY PROPOSED FEDERAL TAX LEGISLATION, AS TO WHICH BOND COUNSEL EXPRESSES NO OPINION.
The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the IRS or the courts.
Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds.
CONTINUING DISCLOSURE
In accordance with the requirements of Rule 15c2-12 (the “Rule”) promulgated by the Securities and Exchange Commission, the Borough (being an “obligated person”, within the meaning of the Rule) will agree:
1. To provide through the Electronic Municipal Market Access (EMMA) System through the Municipal Securities Rulemaking Board, at www.emmamsrb.com, and provide at least annually to the state information depositary for the Commonwealth of Pennsylvania, if any (the “SID”) (no such depositary has been created as of the date of this Official Statement), an annual update of the information set forth in Appendix A hereto under the headings Financial Review, Labor Relations, Borough Real Estate Collection Record, Trend in Assessed Valuations, Ten Highest Assessments, Debt Statement, Borrowing Capacity, Summary of Financial Factors, and Debt Ratio Calculations beginning with the fiscal year ending December 31, 2012, within 240 days following the end of each such fiscal year. The Borough will also disclose the following information:
a. the financial statements for the most recent fiscal year, prepared in accordance with generally accepted accounting principles for local government units and audited in accordance with generally accepted auditing standards;
b. a summary of the budget for the current fiscal year;
c. the assessed value and aggregate market value of all taxable real estate for the current fiscal year;
d. the taxes and millage rates imposed for the current fiscal year;
e. the real property tax collection results for the most recent fiscal year, including (1) the real estate levy imposed (expressed both as a millage rate and an aggregate dollar amount), (2) the dollar amount of real estate taxes collected that represented current collections (expressed both as a percentage of such fiscal year's levy and as an aggregate dollar amount), (3) the amount of real estate taxes collected that represented taxes levied in prior years (expressed as an aggregate dollar amount), and (4) the total amount of real estate taxes collected (expressed both as a percentage of the current year's levy and as an aggregate dollar amount); and
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f. a list of the ten (10) largest real estate taxpayers and, for each, the total assessed value of real estate for the current fiscal year.
2. To deliver in a timely manner not in excess of ten (10) business days after the occurrence of the event, through the Electronic Municipal Market Access (EMMA) System through the Municipal Securities Rulemaking Board, at www.emma.msrb.org, notice of the occurrence of any of the following events with respect to each series of the Bonds: (1) principal and interest payment delinquencies; (2) nonpayment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of a proposed or final determination of taxability, Notice of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) bond calls, if material; (9) defeasances; (10) release, substitution, or sale of property securing payment of the Bonds, if material; (11) rating changes; (12) tender offers for the Bonds; (13) bankruptcy, insolvency, receivership or similar events of the Borough; (14) the consummation of a merger, consolidation, or acquisition involving the Borough or the sale of all or substantially all the assets of the Borough, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (15) appointment of a successor or additional trustee, or the change of name of a trustee, if material.
3. Deliver in a timely manner, not in excess of ten (10) business days after the occurrence of the event, through the Electronic Municipal Market Access (EMMA) System through the Municipal Securities Rulemaking Board, at www.emma.msrb.org, notice of a failure to provide the required annual financial information and operating data, as applicable, specified above, on or before the date specified above.
The Borough may from time to time choose to provide notice of the occurrence of certain other events, in addition to those listed above, if, in the judgment of the Borough, such other event is material with respect to the Bonds but the Borough does not commit to provide any such notice of the occurrence of any events except those listed above.
The Borough may from time to time choose to provide notice of the occurrence of certain other events, in addition to those listed above. However, the Borough does not commit to provide any such notice of the occurrence of any events except those specifically listed above.
The Borough reserves the right to terminate its obligation to provide annual financial information and notices of material events, as set forth above, if and when the Borough no longer remains an “obligated person” with respect to the Bonds within the meaning of the Rule. The Borough acknowledges that its undertaking pursuant to the Rule described under this heading is intended to be for the benefit of the holders or beneficial owners of the Bonds and shall be enforceable by the holders or beneficial owners of such Bonds; provided that the Bondholders’ right to enforce the provisions of the undertaking shall be limited to a right to obtain specific performance of the Borough’s obligations thereunder and any failure by the Borough to comply with the provisions of the undertaking shall not be an event of default with respect to the Bonds.
The MSRB has been designated by the SEC to be the central and sole repository for continuing disclosure information filed by issuers of municipal securities since July 1, 2009. Information and notices filed by municipal issuers (and other “obligated persons” with respect to municipal securities issues) are made available through the MSRB’s Electronic Municipal Market Access (EMMA) System, which may be accessed on the internet at http://www.emma.msrb.org.
During the past five (5) years, the Borough has been in compliance with respect to all prior written undertakings under the Rule to provide continuing disclosure with respect to its outstanding securities. Prior to the issuance of the Bonds described herein, the Borough was not an “obligated person” with respect to more than
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$10,000,000 of outstanding securities and, therefore, was not obligated to make annual information filings with the MSRB or, previously, any of the “nationally recognized municipal securities information repositories” designated by the SEC under the Rule.
UNDERWRITING
The Bonds are being purchased by Janney Montgomery Scott LLC (the “Underwriter”) from the Borough, in accordance with the terms of the Purchase Contract (the “Purchase Contract”) between the Underwriter and the Borough. The purchase price for the Bonds, exclusive of accrued interest, is equal to (i) the par amount of the Bonds of $7,590,000.00, (ii) less the underwriter’s discount of $75,900.00, and (iii) less net original issue discount of $97,589.65. The obligation of the Underwriter to purchase the Bonds is subject to the terms and conditions set forth in the Purchase Contract. The Purchase Contract provides that the Underwriter will purchase all of the Bonds, if any of the Bonds are purchased, and requires the Borough to indemnify the Underwriter against losses, claims, damages and liabilities arising out of any materially incorrect or incomplete statements or information contained in this Official Statement pertaining to the Borough and the descriptions of all agreements to which the Borough is a party.
RATINGS
At the Borough’s request, Standard & Poor’s Rating Group (“S&P”) has assigned an underlying rating to the Bonds of “BBB+” (Positive Outlook).
At the Borough’s request, S&P is expected to rate the Bonds “AA-” (Stable Outlook), with the understanding that AGM will issue the Policy insuring the payment when due of the principal and interest on the Bonds simultaneously with the initial issuance and delivery of the Bonds, See “MUNICIPAL BOND INSURANCE”.
Such rating reflects only the view of the particular rating agency assigning such rating and any desired explanation of the significance of such rating should be obtained from the particular rating agency furnishing the same. Further explanation of the significance of such ratings may be obtained from S&P. The rating is not a recommendation to buy, sell or hold any of the Bonds. 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 rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by S&P, if in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. The Borough and the Underwriter have not undertaken any responsibility to maintain any particular rating on the Bonds or to advise owners of the Bonds of any change in the ratings assigned to the Bonds, except that the Borough has agreed to provide notice of rating changes as described herein under the caption “Continuing Disclosure”.
LEGAL OPINION
The issuance and delivery of the Bonds is subject to the receipt of the unqualified approving legal opinion of, Kozloff Stoudt, P.C., Wyomissing, Pennsylvania, Bond Counsel. Certain legal matters will be passed upon for the Borough by its Solicitor Kozloff Stoudt, P.C., Wyomissing, Pennsylvania.
FINANCIAL ADVISOR
Financial S&Lutions LLC, Reading, Pennsylvania, has served as financial advisor (the “Financial Advisor”) to the Borough in connection with the issuance and sale of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification, or to assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. Financial S&Lutions LLC is an independent financial advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.
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MISCELLANEOUS
The information set forth in this Official Statement has been obtained from the Borough and from other sources believed to be reliable. Insofar as any statement herein includes matters of opinion or estimates about future conditions, it is not intended as a representation of fact, and there is no guarantee that it is, or will be, realized. Summaries or descriptions of provisions of the Bonds, the Ordinance, and all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof. Reference is hereby made to the complete documents, copies of which will be furnished by the Borough upon request. The information assembled in this Official Statement is not to be construed as a contract with owners of the Bonds.
The Borough has authorized the distribution of this Official Statement.
BOROUGH OF WEST READING BERKS COUNTY, PENNSYLVANIA
By: /s/ Kevin M. Conrad President
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APPENDIX A
Demographic, Financial and Economic Information Relating to the Borough
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THE BOROUGH
Location and Character
The Borough of West Reading (the “Borough”) is governed by a seven-member Council elected for four- year staggered terms. The Borough Manager, appointed by Council, serves as chief administrative officer of the Borough.
The Borough provides a wide range of public services to its residents, including public safety, health, recreation, maintenance of streets and highways, parks and other public areas.
The Borough’s business address is 500 Chestnut Street, West Reading, Pennsylvania 19611.
Labor Relations
As of January 1, 2012, the total number of employees of the Borough was 34, including part-time and seasonal employees. The Borough characterizes its labor relations as “friendly”. There have been no strikes in recent history. Employees of the Borough are represented by the Fraternal Order of Police and the Teamsters Union as shown below:
Current Represents Contract Expires Fraternal Order of Police 13 Police Employees 12-31-2013 Teamsters Union 7 Non-uniform Employees 12-31-2013 Non-Union 6 Office Employees N/A Non-Union 2 Appointed/Mgmt Employees N/A
Source: Borough Officials
Employment
The following table shows Borough employment for the 2012 fiscal year:
Type of Personnel Number of Employees Administrative ...... 9 Police...... 18 Public Works ...... 7 Total ...... 34
Source: Borough Officials
Approximately 100% of the employees of the Borough participate in two (2) pension plans sponsored by the Borough. One plan covers members of the police department and the remaining plan covers all other employees.
Source: Borough Officials
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PENSION PLANS
Police Pension Plan
The Borough has a pension plan covering all full-time police officers. The plan provides eligible employees with retirement and disability and death benefits as define and determined in the plan. The total contribution for 2011 was $237,488. The Borough’s policy is to fund pension costs accrued. The Net Assets available for plan benefits as of January 1, 2011 were $2,451,984.
Nonuniformed Employees Pension Plan
The Borough has a pension plan covering substantially all full-time nonuniformed and nonunion employees. A pension contribution was made in the amount of $97,697 to this plan in 2011. The Borough’s policy is to fund pension costs accrued. The Net Assets available for plan benefits as of January 1, 2011 were $1,272,699.
WEST READING BOROUGH BALANCE SHEET, GENERAL FUND, MODIFIED CASH BASIS DECEMBER 31
2007 2008 2009 2010 2011 Audited Audited Audited Audited Audited ASSETS: Cash and Investments $ 510,963 $ 157,343 $ 34,606 $ 6,638 $ 203,281 Due From Other Funds 44,714 1,177 74,247 - - TOTAL ASSETS: $ 555,677 $ 158,520 $ 108,853 $ 6,638 $ 203,281
FUND BALANCES: Reserved for: General Fund $ - $ - $ - $ - $ - Due to Other Funds - - - - 42,196 Unreserved 555,677 158,520 108,853 6,638 161,085 TOTAL FUND BALANCES: $ 555,677 $ 158,520 $ 108,853 $ 6,638 $ 203,281
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WEST READING BOROUGH SUMMARY OF GENERAL FUND REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
2007 2008 2009 2010 2011 2012 Audited Audited Audited Audited Unaudited Budgeted REVENUES Taxes $ 1,974,278 $ 2,098,698 $ 2,624321 $ 2,623,456 $ 2,650,551 $ 2,623,200 Licenses and Permits 499,097 408,561 265,559 253,959 230,104 322,900 Fines and Forfeits 89,787 94,341 102,922 98,612 101,479 104,100 Interest and Rents 40,982 36,994 3,689 1,965 688 700 Intergovernmental 474,746 223,727 773,792 498,125 372,521 290,582 Charges for Services 120,766 74,271 53,572 32,964 199,474 33,050 Miscellaneous 301,733 558,963 525,245 526,119 591,955 590,100 Other Financing Sources 818,105 503,933 857,351 545,640 1,126,350 1,158,259 Unreserved Fund Balance ------TOTAL REVENUE $ 4,319,494 $ 3,999,488 $ 5,206,451 $ 4,580,840 $ 5,273,122 $ 5,122,891 EXPENDITURES General Government $ 518,077 $ 512,447 $ 479,066 $ 435,217 $ 451,876 $ 494,737 Public Safety 1,937,565 2,099,740 2,314,089 2,318,638 2,388,870 2,606,577 Public Works 726,900 706,007 689,241 727,713 716,832 863,577 Culture and Recreation 26,476 28,703 22,129 18,193 290,129 175,673 Community Development 165,022 171,811 735,510 457,558 193,690 198,590 Debt Service 36,342 44,557 62,924 38,724 49,075 22,141 Miscellaneous 335,005 402,924 338,842 407,584 497,939 473,545 Other Financing Uses 404,376 430,457 614,317 279,428 439,835 383,103 Capital Outlay ------TOTAL EXPENDITURES $ 4,149,764 $ 4,396,646 $ 5,256,118 $ 4,683,055 $ 5,028,246 $ 5,228,421 FUND BALANCES Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures and Other Uses $ 169,730 $ (397,158) $ (49,667) $ (102,215) $ 244,876 $ (105,530)
Beginning Fund Balance $ 385,947 $ 555,677 $ 158,519 $ 108,852 $ 6,637 $ 251,513 End of Year Fund Balance $ 555,677 $ 158,519 $ 108,852 $ 6,637 $ 251,513 $ 145,983
Source: Audited Annual Financial Statements of the Borough and Borough Officials
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Population
Shown below are statistics from the Bureau of Census illustrating population trends over the last decade for the Borough and comparable statistics for the Borough, Berks County (the “County”) and the Commonwealth of Pennsylvania (the “Commonwealth”).
The Borough’s population increased by 4.03% from 2000 to 2010.
% Change 2000 2010 2000-2010
West Reading Borough 4,049 4,212 4.03% Berks County 373,638 411,442 10.12 Pennsylvania 12,281,054 12,702,379 3.43 Source: US Census Bureau
Per Capita Personal Income
The following table shows the per capita income levels of the Borough, the County and the Commonwealth.
% Change 2000 2010 2000-2010 West Reading Borough $21,414 $22,345 4.35% Berks County 21,232 25,518 20.19 Pennsylvania 20,880 27,049 29.55 Source: US Census Bureau
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Taxing Powers of the Borough
Under the Borough Code, the Borough may levy an annual tax on all taxable real estate, not to exceed 30 mills, for general borough purposes (plus an additional 5 mills, for general purposed, with court approval). The council of any borough may levy different rates of taxation on all real estate classified as land exclusive of buildings thereon, and on all real estate classified as buildings on land. However, the general purpose 30 mills maximum levy cannot be exceeded without court permission. The following additional taxes may be levied:
1. Unlimited millage for debt service
2. 2 mill for pension and retirement
3. 1/10 mill for shade trees
4. 8 mills for street lighting
5. 3 mills for library purposes
6. 5 mills for a special road fund
7. Unlimited millage for parks and recreation
8. 3 mills for fire equipment and firehouses
9. 8 mills for utilities
10. 2 mills for the municipal building
11. 2 mills for ambulance and rescue service
Under an Act of the Pennsylvania General Assembly, approved December 31, 1965, P.L. 1257, effective January 1, 1966 (the “Local Tax Enabling Act”), additional taxes may be levied by cities of the second, cities of the second class A, third class, boroughs, towns, townships of the first class, townships of the second class, school districts of the second, third and fourth classes (subject to division among political subdivisions authorized to levy similar taxes on the same person, subject, business, transactions of privilege) subject to the following limitations:
Limit
Per Capita Tax $10.00 Gross receipts of wholesalers 1 mill Gross receipts of retailers 1-1/2 mills Wages, salaries, commissions and other earned income of individuals 1% Sales involving the transfer of title of real property 1% Flat rate occupation and occupational privilege tax $10.00 Admissions (except motion picture theaters) 10% Mechanical devices No Limit
2% discount is allowed for payment within 60 days of the date of notice and a penalty of 10% is imposed on payments received more than 120 days after the date of such notice.
Delinquent taxes are liened by filing in the County Tax Claim Bureau by the first Monday of May in the year following the year of levy. The Borough levies its own taxes and is independent of any other taxing authority.
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Current Tax Rates
The Borough imposes various license fees and taxes, certain of which (and their current rates) are described below:
1. Fire Equipment & Firehouses (mills) ...... 1.500 2. Mercantile/Business Privilege – Other (mills) ...... 1.500 3. Mercantile/Business Privilege – Retail (mills) ...... 750 4. Mercantile/Business Privilege – Wholesale (mills) ...... 500 5. Earned income tax on residents ...... 0.5% 6. Transfer of Title of Real Property ...... 0.5% 7. Local Services Tax ...... $47.00 8. Real Estate – General Purpose (mills) ...... 5.600
WEST READING BOROUGH TAX RATES
Real Estate Tax Local Services Earned Fire Tax Year (Mills) Tax Income Tax (Mills) 2003 4.350 $0.00 0.50% 0.000 2004 4.350 0.00 0.50 0.000 2005 4.600 47.00 0.50 0.000 2006 4.250 47.00 0.50 1.350 2007 4.250 47.00 0.50 1.350 2008 4.250 47.00 0.50 1.350 2009 5.500 47.00 0.50 1.350 2010 5.500 47.00 0.50 1.600 2011 5.600 47.00 0.50 1.500 2012 5.600 47.00 0.50 1.500
Source: Pennsylvania Department of Community and Economic Development.
COMPARATIVE REAL PROPERTY TAX RATES (Mills) 2007 2008 2009 2010 2011 2012 West Reading Borough 4.2500 4.2500 5.5000 5.5000 5.6000 5.6000 Wyomissing Area School District 25.1700 26.4125 27.1080 27.8940 28.2845 28.5673 Berks County 6.9350 6.9350 6.9350 6.9350 6.9350 6.9350
Source: Pennsylvania Department of Community and Economic Development.
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REAL PROPERTY ASSESSMENT DATA
Assessed Valuation Market Value Common Level Ratio 2002 $171,279,100 $146,883,400 116.61% 2003 170,604,100 146,274,400 116.63% 2004 171,279,500 152,869,900 112.04% 2005 173,098,700 154,781,500 111.83% 2006 172,238,300 166,578,700 103.40% 2007 172,260,900 166,626,600 103.38% 2008 175,016,700 187,187,400 93.50% 2009 177,861,100 191,447,900 92.90% 2010 180,646,100 211,952,834 85.23%
Source: State Tax Equalization Board & Borough Officials.
REAL PROPERTY ASSESSMENT DATA BY MUNICIPALITY
2009 2009 2010 2010 Market Value Assessed Value Market Value Assessed Value West Reading Borough $ 191,447,900 $ 177,861,100 $ 211,952,834 $ 180,646,100 Berks County $ 19,021,124,000 $ 18,333,213,600 $ 19,120,898,600 $ 18,427,296,900
Source: West Reading Borough - State Tax Equalization Board. Berks County – Berks County Assessment Office.
Realty Tax Collection
Real estate taxes are levied as of January 1 of each year. Taxpayers making payment by April 30 are entitled to a two percent discount. Payments made through June 30 can be made at the flat rate, and remittances made after July 1 are subject to a ten percent penalty. After May 1 of the following year, any uncollected tax bills are turned over to the Tax Claim Bureau of the County for collection.
REAL ESTATE TAX COLLECTION
Percent of Total tax Taxable Tax Rate Total Tax Current Tax Levy Total Tax Collections Year Real Estate (Mills) Levy Collections Collected Collections to Tax Levy
2002 $ 171,340,100 2.750 $ 471,185 $ 444,642 94.37% $ 453,522 96.25% 2003 170,604,100 3.250 556,630 521,897 93.76% 542,148 97.40% 2004 171,279,500 3.250 556,662 546,130 98.11% 590,282 106.04% 2005 173,098,700 3.250 562,574 539,571 95.91% 580,395 103.17% 2006 172,238,300 4.250 732,013 569,338 77.78% 573,724 78.38% 2007 172,260,900 4.250 732,110 705,161 96.32% 724,086 98.90% 2008 175,016,700 4.250 743,825 636,179 85.53% 643,048 86.45% 2009 177,861,100 5.500 978,236 916,236 93.66% 939,214 96.01% 2010 180,646,100 5.500 993,554 963,774 97.00% 998,011 100.45% 2011 179,113,700 5.500 985,125 946,331 96.06% 982,778 99.76% Source: Borough Officials
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BOROUGH OF WEST READING TEN LARGEST REAL PROPERTY TAXPAYERS, 2010
TAXPAYER ASSESSMENT % OF TOTAL
Reading Hospital & Medical Center $11,692,100 6.74% VF Corporation 7,084,400 3.92 Masonic Center Foundation 6,894,400 3.82 Spruce Manor 6,617,300 3.66 BCIDA / Leader Nursing Center 4,270,000 2.36 Scottish Rite Cathedral / Reading Lodge of Perfection 2,815,900 1.56 Berkshire Village 2,702,200 1.50 Tulpehocken Ltd. 2,324,100 1.29 RM Palmer 2,010,000 1.11 Narrow Fabric Industries 1,508,700 0.84
TOTAL $47,919,100 26.53% ______Source: Borough Officials
Employment
The table below depicts unemployment rates in the County, as compared to the Commonwealth and the United States, from 2002 through April, 2012 (not seasonally adjusted).
Unemployment Rates - 2002-2012
Year Berks County Pennsylvania United States 2002 5.9% 5.6% 5.8% 2003 6.0 5.7 6.0 2004 5.3 5.4 5.5 2005 4.9 5.0 5.1 2006 4.3 4.5 4.6 2007 4.2 4.4 4.6 2008 5.4 5.4 5.8 2009 8.6 8.0 9.3 2010 9.0 8.5 9.6 2011 8.2 7.9 8.9 2012 7.1* 7.0* 7.7*
* Preliminary as of April, 2012 Source: Bureau of Labor Statistics
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Employment The table below shows the distribution of employment by type for the Reading, PA Metropolitan Statistical Area for April, 2012 and April, 2011.
DISTRIBUTION OF EMPLOYMENT READING, PA MSA*
April April 2012 2011 Total Nonfarm 170,800 169,900 Total Private 147,500 145,400 Goods Producing 35,500 35,100 Service-Providing 137,300 134,800 Private Service Providing 112,000 110,300 Mining, Logging and Construction 7,100 7,100 Manufacturing 28,400 28,000 Durable Goods 20,000 19,500 Non-Durable Goods 8,400 8,500 Trade 33,500 33,600 Wholesale Trade 7,200 7,100 Retail Trade 19,100 19,300 Transportation 7,200 7,200 Information 1,400 1,300 Financial Activities 6,500 6,500 Professional and Business Services 20,400 19,900 Education and Health Services 28,600 27,700 Leisure and Hospitality 13,900 13,600 Other Services 7,700 7,700 Government 25,300 24,500
Source: Pennsylvania State Employment Service * Non-Agricultural Wage and Salary Employment; establishment data.
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WEST READING BOROUGH DEBT STATEMENT (estimated as of date of issuance)
Gross Outstanding Gross Outstanding Prior to Issuance After Issuance Direct Debt General Obligation Debt: General Obligation Bonds, Series of 2003 $ 6,700,000 $ 0 General Obligation Note, Series of 2005 1,541,065 1,541,065 General Obligation Note, Series of 2008 2,409,000 2,409,000 General Obligation Bonds, Series of 2012(1) 0 7,590,000 Total General Obligation Debt $ 10,650,065 $ 11,540,065
Gross Direct Debt $ 11,540,065
Less Self-Supporting Debt $ 0
Net Direct Debt $ 11,540,065
Overlapping Debt Berks County, General Obligations(2) $ 1,554,104 Wyomissing Area School District(3) 7,346,928 Total Overlapping Debt $ 8,901,032
Net Direct and Overlapping Debt $ 20,441,097
(1) The 2012 Bonds offered through this Official Statement (2) Pro rata 0.81% of outstanding general obligation debt of Berks County ($190,999,029) as of July 2012 (3) 21.52% Pro rata percent of outstanding general obligation debt of Wyomissing Area School District as of July 2012
Source: Borough’s Audited Financial Statements and Borough Officials
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Borrowing Capacity
The Debt Act establishes debt limits for local government units. The basis for determining nonelectoral borrowing capacity is related to adjusted revenues received over the most recent three fiscal years. The following is a calculation of the current “borrowing base,” which is the arithmetic average of the total revenues of the Borough after adjustments by the exclusion of certain subsidies, reimbursements, pledged revenues and non-recurring items:
Fiscal Year Ending December 31 2009 2010 2011 Net Revenues $ 10,107,432 $ 8,763,564 $ 10,171,536
Annual Arithmetic Average (Borrowing Base) $ 9,680,844
Net Nonelectoral Debt Limit: Borrowing Limit: Nonelectoral Debt (250%) $ 24,202,110 Less: Net Nonelectoral Debt 11,540,065 Remaining Nonelectoral Debt Borrowing Capacity $ 12,662,045
Net Nonelectoral Debt and Net Lease Rental Debt Limit: Borrowing Limit: Nonelectoral Debt Plus Lease Rental Debt (350%) $ 33,882,954 Less: Net Nonelectoral Debt and Net Lease Rental Debt 11,540,065 Remaining Nonelectoral and Lease Rental Debt Capacity $ 22,342,889
Source: Borough Annual Financial Reports & Borough Officials
Debt Ratio Calculations
Net Direct Debt Plus Overlapping Debt Per Capita ...... $4,853.06 Net Direct Debt Plus Overlapping Debt to Market Value ...... 9.64% Net Direct Debt Per Capita ...... $2,739.81 Net Direct Debt to Market Value ...... 5.44% Gross Direct Debt Per Capita ...... $2,739.81 Gross Direct Debt to Market Value ...... 5.44%
2010 Population ...... 4,212 2010 Market Value ...... $211,952,834 Net Direct Debt ...... $11,510,065 Gross Direct Debt ...... $11,510,065 Net Direct Debt Plus Overlapping Debt ...... $20,411,097
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APPENDIX B
Audited Financial Statements (Fiscal Year ended December 31, 2011)
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APPENDIX C
Proposed Form of Opinion of Bond Counsel
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July 26, 2012
TO THE REGISTERED OWNERS OF THE ABOVE-CAPTIONED BONDS:
Re: West Reading Borough, Berks County, Pennsylvania General Obligation Bonds, Series of 2012
We have served as Bond Counsel in connection with the issuance by the Borough of West Reading, Berks County, Pennsylvania (the “Borough”), of its Seven Million Five Hundred Ninety Thousand Dollars ($7,590,000) aggregate principal amount General Obligation Bonds, Series of 2012, dated as of the date of delivery (the “Bonds”). The Bonds are being issued, without the assent of the electors, in fully registered form, pursuant to the provisions of the Local Government Unit Debt Act of the Commonwealth of Pennsylvania, as re-enacted and amended (the “Act”) and an ordinance adopted by the Council of the Borough (the “Ordinance”) on June 19, 2012.
The Bonds are being issued to provide funds for a project of the Borough which includes: (1) the current refunding of the Borough’s General Obligation Bonds, Series of 2003; (2) the acquisition, construction, installation and improvement of various capital improvements to the Borough’s systems and facilities and the acquisition of capital equipment; and (3) to pay the costs of issuance of the Bonds.
The Borough has covenanted in the Ordinance that it will make no use of the proceeds of the Bonds and it has neither done nor suffered and will neither do nor suffer any other action which, if such use or action had been reasonably expected on the date of issue of the Bonds, would cause the Bonds to be “arbitrage bonds” as that term is defined in the Internal Revenue Code of 1986, as amended (the “Code”), and the applicable regulations thereunder. The Borough has further covenanted that it will comply with the requirements of Section 148 of the Code and with the applicable regulations thereunder throughout the term of the Bonds. The Borough has designated the Bonds as a “qualified tax-exempt obligation” within the meaning and for the purposes of Section 265(b)(3) of the Code.
In the Ordinance, the Borough has covenanted that (1) it will include in its budget in each fiscal year the amount required to pay debt service on the Bonds for such year, (2) it will appropriate from its general revenues in each such fiscal year, the amount required to pay debt service on the Bonds for such year and (3) it will duly and punctually pay or cause to be paid when due, from its sinking fund or any other of its revenues or funds, the
principal of and interest on the Bonds at the dates and place and in the manner stated therein, according to the true intent and meaning thereof. For such budgeting, appropriation and payment, the Borough has irrevocably pledged its full faith, credit and taxing power. In addition, the Borough has established with Manufacturers and Traders Trust Company (the “Paying Agent”), as paying agent and sinking fund depositary, a sinking fund, and has covenanted to deposit into such sinking fund amounts sufficient to pay the principal of and interest on the Bonds as the same shall become due and payable.
In our capacity as Bond Counsel, we have reviewed: (1) a certified copy of the Ordinance; (2) the sworn debt statement and borrowing base certificate of the Borough, filed with Department of Community and Economic Development of the Commonwealth of Pennsylvania (the “Department”) in accordance with the provisions of the Act; (3) the proceedings of the Borough and the various proofs of publication in connection with the advertisement of the Ordinance, all of which were filed with the Department as required by the provisions of the Act; (4) the approval of the Department; (5) a specimen copy of the Bonds; (6) the Nonarbitrage Certificate of the Borough executed and delivered pursuant to the provisions of the Code and the regulations applicable thereto; (7) the General Certificate signed by the officials of the Borough; (8) a completed and executed Form 8038-G to be filed with the Internal Revenue Service; (9) the opinion of the Solicitor to the Borough; and (10) the other documents, certificates and opinions executed and delivered at the closing held this day.
Based and in reliance upon our examination of the foregoing, our attendance at the closing held this day and subject to the qualifications set forth herein, it is our opinion that, as of the date hereof, under existing law:
1. The Borough is empowered under provisions of the Constitution and laws of the Commonwealth of Pennsylvania to issue the Bonds for the purposes hereinbefore set forth.
2. The Ordinance was duly adopted by the Council of the Borough and continues to be in full force and effect as of the date hereof.
3. The Bonds have been duly authorized and executed and constitute a valid and binding obligation of the Borough, enforceable in accordance with its terms, except as the enforceability thereof may be limited by (a) applicable bankruptcy, insolvency, or other laws or equitable principles now or hereafter affecting the enforcement of creditors’ rights generally, or (b) general principles of equity.
4. Interest on the Bonds is not includable in gross income for federal income tax purposes under Section 103(a) of the Code.
5. The Bonds are not required to be taken into account by “financial institutions” (as defined in Section 265 of the Code) for purposes of determining the allocation of interest expense to tax-exempt interest under Sections 265(b)(1) and (2) of the Code.
6. Under the laws of the Commonwealth of Pennsylvania, the Bonds and the interest thereon shall at all times be free from taxation for state and local purposes within the Commonwealth of Pennsylvania, but this exemption shall not extend to gift, estate, succession or inheritance taxes or other taxes not levied directly on the Bonds or the interest thereon. Under the laws of the Commonwealth of Pennsylvania, profits, gains or income derived from the sale, exchange or other disposition of certain government obligations, including the Bonds, are subject to state and local taxation within the Commonwealth of Pennsylvania.
7. We are also of the opinion that: (1) the Bonds are a valid and binding general obligation of the Borough; (2) the Borough has effectively covenanted to make payments out of its sinking fund or any other of its revenues or funds at such times and in such semi- annual amounts, specified in such covenant, as shall be sufficient for the payment of the interest agreed to be paid on the Series of 2012 Bonds and the principal thereof when due; and (3) the full faith, credit and taxing power of the Borough are pledged for payment of the principal of and interest on the Series of 2012 Bonds.
8. Under the Code, interest on the Bonds held by persons other than corporations (as defined for federal tax purposes) does not constitute an item of tax preference under Section 57 of the Code and thus is not subject to alternative minimum tax for federal income tax purposes.
9. Under the Code, interest on the Bonds held by a corporation (as defined for federal tax purposes) does not constitute an item of tax preference under Section 57 of the Code; however, corporations subject to alternative minimum tax will be required to include, among other things, interest on the Bonds as an adjustment in computing alternative minimum taxable income in the manner provided in Section 56 of the Code.
In connection with providing the foregoing opinions, we call to your attention the following:
1. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other documents, agreements, instruments, reports and certificates furnished to us at or in connection with the issuance of the Bonds without undertaking to verify the same by independent investigation. We have also relied upon the accuracy of the representations and warranties and the performance of the covenants and agreements of the Borough set forth in the Ordinance and the various certificates and other agreements delivered at or in connection with the closing held this day.
2. In providing the opinion set forth in paragraph 4 above, we have assumed continuing compliance by the Borough with the requirements of the Code and applicable regulations thereunder which must be met subsequent to the issuance of the Bonds in order that the interest thereon be and remain excluded from gross income for federal income tax purposes. Failure to comply with such requirements could cause the interest on the Bonds to be included in gross income retroactive to the date of issuance of the Bonds.
3. Except as specifically set forth above, we express no opinion regarding other federal income tax consequences arising with respect to the Bonds, including, without limitation, the treatment for federal income tax purposes of gain or loss, if any, upon the sale, redemption, or other disposition of the Bonds prior to maturity of the Bonds subject to original issue discount and the effect, if any, of certain other provisions of the Code which could result in collateral federal income tax consequences to certain investors as a result of adjustments in the computation of tax liability dependent on tax-exempt interest.
Very truly yours,
KOZLOFF STOUDT Professional Corporation
APPENDIX D
Specimen of Municipal Bond Insurance Policy
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MUNICIPAL BOND
INSURANCE POLICY
ISSUER: Policy No: -N
BONDS: $ in aggregate principal amount of Effective Date: Premium: $
ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer.
On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which AGM shall have received Notice of Nonpayment, AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of AGM under this Policy.
Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the
Page 2 of 2 Policy No. -N
United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to AGM which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.
AGM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to AGM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to AGM and shall not be deemed received until received by both and (b) all payments required to be made by AGM under this Policy may be made directly by AGM or by the Insurer's Fiscal Agent on behalf of AGM. The Insurer's Fiscal Agent is the agent of AGM only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of AGM to deposit or cause to be deposited sufficient funds to make payments due under this Policy.
To the fullest extent permitted by applicable law, AGM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to AGM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy.
This Policy sets forth in full the undertaking of AGM, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In witness whereof, ASSURED GUARANTY MUNICIPAL CORP. has caused this Policy to be executed on its behalf by its Authorized Officer.
ASSURED GUARANTY MUNICIPAL CORP.
By Authorized Officer
Form 500NY (5/90)