3280000 BOROUGH of AMBRIDGE WATER AUTHORITY Beaver County, Pennsylvania Water Revenue Bonds, Series of 2014
NEW ISSUE: BOOK-ENTRY ONLY Bond Rating S&P “AA-” (Stable Outlook) (AGM Insured) S&P “A+” (Stable Outlook) (Underlying) (See “Bond Rating” herein)
In the opinion of Bond Counsel, under existing law and assuming continuing compliance by the Authority with certain covenants to comply with provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and any applicable regulations thereunder, the interest on and properly allocated accruals of original issue discount with respect to the 2014 Bonds are excluded from gross income for Federal income tax purposes and are not items of tax preference for purposes of the Federal Alternative Minimum Tax imposed on individuals and corporations; however (i) with respect to corporations such interest and accruals are taken into account in determining adjusted current earnings for purposes of computing the Alternative Minimum Tax in accordance with Section 55 of the Code and (ii) with respect to foreign corporations interest on the 2014 Bonds could be subject to a branch profits tax. See “Federal Tax Matters” herein for a brief description of these provisions.
In the opinion of Bond Counsel, interest on the 2014 Bonds is exempt under present statutory and case law from the Pennsylvania Corporate Net Income Tax and from personal income taxation by the Commonwealth of Pennsylvania, or by any of its political subdivisions, and the 2014 Bonds are likewise exempt from Pennsylvania personal property taxes. (See “State Tax Matters” herein.)
The Authority has designated each of the 2014 Bonds as a “qualified tax exempt obligation” for purposes of Section 265 of the Code (relating to deduction of interest expense allocable to tax exempt obligations held by certain financial institutions), and in the opinion of Bond Counsel the 2014 Bonds are “qualified tax-exempt obligations” within the meaning of said Section 265.
$3,280,000 BOROUGH OF AMBRIDGE WATER AUTHORITY Beaver County, Pennsylvania Water Revenue Bonds, Series of 2014
Dated: Date of Delivery Due: November 15, as shown on the inside front cover
The Water Revenue Bonds, Series of 2014 (the “2014 Bonds”), are being issued by the Borough of Ambridge Water Authority (the “Authority”) as fully registered The Water Revenue Bonds, Series of 2014 (the “2014 Bonds”), are being issued by the Borough of Ambridge Water Authority (the “Authority”) as fully registered bonds, without coupons, in denominations of $5,000 or in any integral multiple thereof within a maturity. Interest on the 2014 Bonds will be payable on May 15 and November 15 in each year, commencing with the payment due on May 15, 2014. The principal of and interest on the 2014 Bonds will be payable at the Designated Corporate Trust Office (hereinafter defined) of U.S. Bank National Association (the “Trustee”). Provided, however, that the regularly scheduled installments of interest on the 2014 Bonds will be paid, when due, by check or draft mailed to the persons who were the registered owners of the applicable 2014 Bonds as of the Regular Record Dates (hereinafter defined) corresponding to the applicable interest payment dates. The principal of the 2014 Bonds is payable when due to the registered owners thereof upon due presentation and surrender of the applicable 2014 Bonds. The transfer of 2014 Bonds will be registered at the Designated Corporate Trust Office of the Trustee.
The 2014 Bonds will be initially issued and distributed under a book-entry-only system operated by The Depository Trust Company (“DTC”), and will be registered in the name of CEDE & Co., as sole registered owner thereof and nominee for DTC, Under this system (the “DTC Book-Entry-Only System”), DTC will act as securities depository for the 2014 Bonds and individual purchasers of book-entry interests in the 2014 Bonds will not receive Authority-issued certificates representing their ownership interest in the 2014 Bonds. So long as CEDE & Co., as nominee of DTC, is the sole registered owner of the 2014 Bonds and the DTC Book-Entry-Only system is in effect for the 2014 Bonds, references herein to 2014 Bondholders and holders or owners of the 2014 Bonds should be taken in all cases to mean the owners of book-entry interests in the 2014 Bonds and not the actual holder and registered owner of the 2014 Bonds, CEDE & Co., or DTC, and each such Bondholder must maintain an account with a DTC Direct or Indirect Participant in order to receive principal or interest payments made in respect of its ownership of beneficial interest in the 2014 Bonds. See “BOOK-ENTRY-ONLY SYSTEM” herein.
MATURITY SCHEDULE (See Inside Front Cover)
Redemption: The 2014 Bonds are subject to redemption prior to maturity as more fully set forth herein.
Security: The 2014 Bonds will be issued under and secured pursuant to the terms of the Indenture hereinafter described.
THE 2014 BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE NET RECEIPTS AND REVENUES PLEDGED UNDER THE INDENTURE. NEITHER THE CREDIT NOR THE TAXING POWER OF THE BOROUGH OF AMBRIDGE, THE COUNTY OF BEAVER, THE COMMONWEALTH OF PENNSYLVANIA OR OF ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED FOR THE PAYMENT OF THE 2014 BONDS. THE AUTHORITY HAS NO TAXING POWER.
Bond Insurance: The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by ASSURED GUARANTY MUNICIPAL CORP.
The 2014 Bonds are offered, subject to prior sale, withdrawal or modification, when, as and if issued and received by the Underwriter and subject to the approving legal opinion of the Law Offices of Wayne D. Gerhold, Pittsburgh, Pennsylvania, Bond Counsel, to be furnished upon delivery of the 2014 Bonds. Certain legal matters will be passed upon for the Authority by Sainovich, Santicola & Steele P.C., Beaver, Pennsylvania, Solicitor to the Authority. CIM Investment Management, Inc., Pittsburgh, Pennsylvania, is serving as Financial Advisor to the Authority in connection with the issuance of the Bonds. The 2014 Bonds are expected to be delivered on or about February 18, 2014.
The date of this Official Statement is January 14, 2014
$3,280,000 BOROUGH OF AMBRIDGE WATER AUTHORITY Beaver County, Pennsylvania Water Revenue Bonds, Series of 2014
MATURITY SCHEDULE
Dated: Date of Delivery Due: November 15 as shown below
Interest Payable May 15 and November 15, beginning May 15, 2014 Annual Principal Interest Year Amount Rate Price* 2015 $ 20,000 0.750% 100.000% 2016 20,000 2.000 102.697*** 2017 20,000 2.000 102.732*** 2018 20,000 2.000 101.589*** 2019 35,000 2.000 99.729** 2020 250,000 2.350 99.626** 2021 250,000 2.750 99.651** 2022 260,000 3.000 99.236** 2023 265,000 3.250 100.000 2024 275,000 3.250 98.922** 2025 285,000 3.500 99.234** 2026 295,000 3.625 99.038** 2027 305,000 3.750 98.936**
2029 645,000 4.000 99.417** 2030 335,000 4.000 98.197**
* Accrued interest, if applicable, to be added. ** Original issue discount bonds (See "ORIGINAL ISSUE DISCOUNT BONDS" herein). *** Original issue premium bonds (See "PREMIUM BONDS" herein).
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BOROUGH OF AMBRIDGE WATER AUTHORITY
600 11th Street Ambridge, Pennsylvania
AUTHORITY BOARD MEMBERS
David L. Bell, Chairman Chris J. Fontana, Vice Chairman Edward J. Dzubak, Director Thomas Klinsky, Director Richard Michalik, Director
Mary W. Hrotic, Board Secretary/Treasurer/General Manager
AUTHORITY SOLICITOR
Sainovich, Santicola & Steele P.C. Beaver, Pennsylvania
AUTHORITY CONSULTING ENGINEER
NIRA Consulting Engineers, Inc. Coraopolis, Pennsylvania
BOND COUNSEL
Law Offices of Wayne D. Gerhold Pittsburgh, Pennsylvania
TRUSTEE, PAYING AGENT, REGISTRAR AND ESCROW AGENT
U.S. Bank National Association Pittsburgh, Pennsylvania
UNDERWRITER
Janney Montgomery Scott LLC Pittsburgh, Pennsylvania
FINANCIAL ADVISOR
CIM Investment Management, Inc. Pittsburgh, Pennsylvania
- ii - Assured Guaranty Municipal Corp (“AGM”) makes no representation regarding the 2014 Bonds or the advisability of investing in the 2014 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 “Bond Insurance” on the front cover hereof and in Appendix E to this Official Statement, and in the Specimen Municipal Bond Insurance Policy reproduced in Appendix F to this Official Statement.
THE INFORMATION SET FORTH HEREIN HAS BEEN OBTAINED BY THE BOROUGH OF AMBRIDGE WATER AUTHORITY, BEAVER COUNTY, PENNSYLVANIA (THE "ISSUER") FROM ITS OWN RECORDS OR FROM OTHER SOURCES IT BELIEVES TO BE RELIABLE BUT IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS BY, AND IS NOT TO BE CONSTRUED AS A REPRESENTATION OR WARRANTY OF, THE ISSUER. THE INFORMATION AND EXPRESSIONS OF OPINION HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE, AND NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER OR ANY OTHER ENTITY PROVIDING SUBSTANTIAL SECURITY PLEDGED TO THE 2014 BONDS SINCE THE DATE HEREOF.
IN ACCORDANCE WITH ITS RESPONSIBILITIES UNDER THE FEDERAL SECURITIES LAWS, THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT BUT DOES NOT GUARANTEE ITS ACCURACY OR COMPLETENESS.
THIS OFFICIAL STATEMENT, INCLUDING THE FRONT COVER AND OTHER FRONTISPAGES HEREOF AND THE APPENDICES ATTACHED HERETO (IF ANY), DOES NOT CONSTITUTE AN OFFERING OF ANY SECURITY OTHER THAN THE BONDS SPECIFICALLY OFFERED HEREBY. NO DEALER, BROKER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED BY THE ISSUER OR THE UNDERWRITER TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS OFFICIAL STATEMENT AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EITHER OF THE FOREGOING. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE 2014 BONDS, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2014 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 NOTICE.
No quotations from or summaries or explanations of the provisions of laws or documents herein purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions. This Official Statement is not to be construed as a contract or agreement between the Issuer and the purchasers or holders of any of the 2014 Bonds or any beneficial interest therein. Any statements made in this Official Statement involving estimates or matters of opinion, whether or not expressly so stated, are intended merely as estimates or matters of opinion and not as representations of fact. The front cover and other frontispages hereof, including this page, and all Appendices attached hereto (if any) are part of this Official Statement.
- iii - TABLE OF CONTENTS Page Introductory Statement ...... 1 The Authority...... 1 Purpose of the Bond Issue ...... 1 Computation of the Bond Issue...... 2 The Refunding Program ...... 2 The 2014 Bonds...... 2 Book-Entry-Only System...... 3 Redemption of the 2014 Bonds...... 3 Original Issue Discount ...... 4 Premium Bonds...... 4 Security for the 2014 Bonds...... 5 The Trust Indenture ...... 5 Limited Obligations...... 9 State Tax Matters...... 9 Federal Tax Matters...... 9 Deduction for Interest Paid by Financial Institutions ...... 11 Not Arbitrage Bonds...... 11 Negotiable Instruments...... 11 Vested Rights...... 11 No-Litigation Certificate ...... 11 Legal Matters ...... 11 Bond Rating ...... 12 Municipal Bond Insurance ...... 12 Underwriting...... 12 Financial Advisor...... 12 Disclosure Statement of the Trustee...... 12 Continuing Disclosure ...... 13 Other...... 15 Description and Economics of the Service Area...... Appendix A Description and Economics of the Area...... A-1 Statistical Data ...... A-6 The Authority...... Appendix B General Description of the Water System...... B-1 Current Water Rate Charges...... B-3 Authority Indebtedness...... B-4 Annual Debt Service Requirements ...... B-5 Ambridge Water Authority Summary Statement of Net Assets as of December 31, 2009, 2010, 2011 and 2012...... B-6 Ambridge Water Authority Summary Statement of Revenues, Expenses and Changes in Net Assets for the years ended December 31, 2009, 2010, 2011 and 2012...... B-7 Ambridge Water Authority Summary of Operating Budget for the year ending December 31, 2013 ...... B-8 Ambridge Water Authority Audit of Financial Statements for the year ended December 31, 2012 ...... Appendix C Book-Entry-Only System...... Appendix D Bond Insurance ...... Appendix E Specimen Municipal Bond Insurance Policy ...... Appendix F Series of 2014 Bonds Annual Debt Service Requirements ...... Appendix g The Table of Contents does not list all of the subjects in this Official Statement, and in all instances reference should be made to the complete Official Statement to determine the subjects set forth herein. No significance should be attached to the particular order in which subjects are set forth herein.
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(This page left blank intentionally.) OFFICIAL STATEMENT Relating to $3,280,000 BOROUGH OF AMBRIDGE WATER AUTHORITY Beaver County, Pennsylvania Water Revenue Bonds, Series of 2014
INTRODUCTORY STATEMENT This Official Statement, including the front cover and other frontispages hereof and the appendices hereto, is furnished in connection with the offering of $3,280,000 principal amount of Water Revenue Bonds, Series of 2014 (the "2014 Bonds") of the Borough of Ambridge Water Authority (the "Authority"). The issuance of the 2014 Bonds by the Authority is authorized by resolution (the "Resolution") of the Board of the Authority, its duly constituted governing body (the "Board"), duly adopted by the Board on November 19, 2013, pursuant to Chapter 56 in Title 53 of the Pennsylvania Consolidated Statutes (53 Pa.C.S. §5601 et. seq.), known as the Municipality Authorities Act (the "Act"). The 2014 Bonds will be issued under and secured pursuant to the provisions of a Trust Indenture dated as of July 1, 2008 (the "Original Indenture"), as supplemented by a First Supplemental Trust Indenture dated as of December 28, 2012 (the “First Supplemental Indenture”) and as further supplemented by a Second Supplemental Trust Indenture dated as of February 28, 2014 (the “Second Supplemental Indenture” and, together with the Original Indenture and the First Supplemental Indenture, the “Indenture”), all by and between the Authority and U.S. Bank National Association as trustee thereunder (the "Trustee"). The 2014 Bonds are secured by the pledge under the Indenture of the Receipts and Revenues of the Water System, as provided in the Indenture. (The Receipts and Revenues are primarily composed of receipts by the Authority from quarterly water service charges.)
THE AUTHORITY The Authority is a body corporate and politic created on January 4, 1951, under the Municipality Authorities Act of May 2, 1945 (the "Prior Act") and pursuant to an ordinance of the Borough of Ambridge, Beaver County, Pennsylvania (the "Borough"), and is a duly organized and validly existing municipality authority under the Act. The life of the Authority was extended to June 2, 2058 pursuant to resolutions duly adopted by the Board and the Council of the Borough on May 13, 2008.
The Authority owns and operates the Water System and provides water service within the Boroughs of Ambridge and Economy and the Township of Harmony in Beaver County, Pennsylvania and a portion of Bell Acres in Allegheny County, Pennsylvania. The Authority also sells bulk water to the Borough of Baden and to the New Sewickley Township Municipal Authority in Beaver County and to the Borough of Edgeworth Municipal Authority in Allegheny County.
The Authority is empowered to exercise any and all powers conferred by the Act necessary to the acquisition, ownership, improvement, maintenance and operation of its Water System.
(Refer to Appendix A and Appendix B hereof for a further description of the Authority and the Authority’s service area. The Authority’s Financial Statements for the year ended December 31, 2012 are included herein in Appendix C.)
PURPOSE OF THE BOND ISSUE The net proceeds of the 2014 Bonds, together with other available funds of the Authority (if any), will be used to (a) fund certain capital projects of the Authority (the “2014 Capital Improvements Program”), (b) currently refund $3,060,000 aggregate principal amount outstanding of the Authority’s Water Revenue Bonds, Series A of 2008 (the “Refunded Bonds”), (c) make any required deposit to the Debt Service Reserve Fund under the Indenture and (d) pay the costs and expenses related to the issuance of the 2014 Bonds.
1 COMPUTATION OF THE BOND ISSUE
Refunding Requirements $3,094,248.55 Capital Projects 60,000.00 Debt Service Reserve Fund Deposit 2,431.26 Costs of Issuance of the 2014 Bonds, including Legal, Trustee, Printing, Net Original Issue Discount, Financial Advisor, Verification, Advertising and Filing, Rating, CUSIP, Bond Discount, Bond Insurance and Miscellaneous 123,320.19
BOND ISSUE $3,289,000.00
THE REFUNDING PROGRAM At the time of settlement of the 2014 Bonds, the Authority will deposit with U. S. Bank National Association net proceeds of the 2014 Bonds which together with interest earned thereon will be sufficient to redeem all of the Refunded Bonds within 90 days of the day of settlement of the 2014 Bonds.
THE 2014 BONDS The 2014 Bonds are being issued as fully registered bonds, without coupons, in denominations of $5,000 principal amount or any integral multiple thereof within a maturity. The 2014 Bonds will be initially dated Date of Delivery and will bear interest from that date at the rates, and will mature in the aggregate principal amounts and on the dates, set forth on the inside front cover of this Official Statement. Interest is payable semiannually on May 15 and November 15, starting with May 15, 2014. The principal of the 2014 Bonds when due will be payable at the Designated Corporate Trust Office, hereinafter defined, of the Trustee to the registered owners thereof upon the due presentation and surrender the applicable bonds. Unless the payment of such interest is in default as hereinafter described, the interest on each 2014 Bond will be paid when due by check or draft of the Trustee mailed to the person in whose name such 2014 Bond is registered at the close of business on the first day (whether or not a business day) of the calendar month in which such interest becomes due (the "Regular Record Date" for such interest due). Such check or draft will be mailed to such person at his address as it appeared (at the close of business on the applicable Regular Record Date) on the registration books maintained by the Trustee on behalf of the Authority (the "Bond Register") irrespective of any transfer or exchange of such 2014 Bond subsequent to such Regular Record Date and prior to such interest payment date.
The term "Designated Corporate Trust Office" of the Trustee as used in this Official Statement means any corporate trust office of the Trustee, or affiliated banking institution or trust company acting in its behalf, designated from time to time by the Trustee as the place at which principal of or interest on 2014 Bonds is to be payable or at which 2014 Bonds are to be presented for payment, transfer or exchange, to the extent such designation is permissible under Pennsylvania law, and, if such designation is not made by the Trustee, a place so designated by the Authority.
Any interest on the 2014 Bonds which is payable, but is not punctually paid or provided for, on any interest payment date ceases to be payable to the persons who were the registered owners thereof on the relevant Regular Record Date, and such defaulted interest instead becomes payable to the persons in whose names the 2014 Bonds are registered at the close of business on a special record date (the "Special Record Date" for the payment of such interest) to be fixed by the Trustee, such date to be no more than 15 nor less than 10 days prior to the date of proposed payment. The Trustee will, at the expense of the Authority, cause notice of the proposed payment of such defaulted interest and the Special Record Date therefor to be mailed, first class postage prepaid, to each affected registered owner, at his address then appearing in the Bond Register, not less than 10 days nor more than 15 days prior to such Special Record Date, and may, in its discretion, cause a similar notice to be published once in an appropriate newspaper, but such publication is not a condition precedent to the establishment of such Special Record Date.
2 Negotiable Instruments The Act provides that bonds of Authorities created thereunder (or under the Prior Act), subject to registration provisions, have all the qualities of negotiable instruments under the law merchant and the negotiable instruments law of the Commonwealth of Pennsylvania.
NOTE: WHILE THE DTC BOOK-ENTRY-ONLY SYSTEM DESCRIBED BELOW IS IN EFFECT FOR THE 2014 BONDS, DTC OR ITS NOMINEE CEDE & CO. WILL BE THE ONLY REGISTERED OWNER OF THE 2014 BONDS AND, NOTWITHSTANDING THE FOREGOING, CERTAIN PROCEDURES REGARDING PAYMENT, PRESENTMENT, TRANSFERS AND EXCHANGE IN RESPECT OF THE 2014 BONDS WILL BE GOVERNED BY OPERATIONAL ARRANGEMENTS MADE BETWEEN THE AUTHORITY AND DTC, WHICH PROCEDURES MAY DIFFER FROM THOSE DESCRIBED ABOVE.
BOOK-ENTRY-ONLY SYSTEM
The 2014 Bonds will be initially issued, registered, owned and held pursuant to a book-entry-only system operated by The Depository Trust Company (the "DTC Book-Entry-Only System"). While the DTC Book-Entry-Only System is in effect with respect to the 2014 Bonds, certificates representing ownership of 2014 Bonds will not be issued by the Authority to, or registered by the Authority in the name of, the purchasers of beneficial ownership interests in the 2014 Bonds but, rather, The Depository Trust Company, New York, New York ("DTC"), will act as securities depository for the 2014 Bonds under the DTC Book-Entry-Only System.
A brief description of the DTC Book-Entry-Only System, supplied by DTC, is reproduced in Appendix D hereto. For a more complete explanation, reference is made to the "Rules, By-laws and Organization Certificate of the Depository Trust Company", which may currently be accessed at the Depository Trust & Clearing Corporation's website at http://www.dtcc.com.
IN RESPECT OF 2014 BONDS HELD BY DTC AS SECURITIES DEPOSITORY, WHICH WHILE THE DTC BOOK-ENTRY-ONLY SYSTEM IS IN EFFECT FOR THE 2014 BONDS WILL BE ALL OUTSTANDING 2014 BONDS, NEITHER THE AUTHORITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC'S PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR THE DIRECT PARTICIPANTS OF DTC, THE INDIRECT PARTICIPANTS OF DTC OR THE BENEFICIAL OWNERS OF SUCH 2014 BONDS, OR WITH RESPECT TO THE FINANCIAL EFFECT OF PARTIAL REDEMPTION OF 2014 BONDS ON THE BENEFICIAL OWNERS THEREOF.
Under the Indenture, payments made by the Trustee to DTC or its nominee, while the DTC Book-Entry-Only System is in effect with respect to the 2014 Bonds, satisfy the Authority’s obligation in respect of the 2014 Bonds under the Indenture to the extent of such payments.
REDEMPTION OF THE 2014 BONDS
Optional Redemption The 2014 Bonds maturing after November 15, 2019 are subject to redemption prior to maturity, at the option of the Authority, as a whole on November 15, 2019 or on any date thereafter, or in part on November 15, 2019 or on any date thereafter, in any order of maturity (and in any authorized principal amount within a maturity) selected by the Authority (and selected by lot by the Trustee in $5,000 increments within each maturity), at a redemption price equal to 100% of principal amount plus accrued interest to the date fixed for redemption.
3 Mandatory Redemption The Bonds maturing on November 15, 2029 are subject to mandatory sinking fund redemption in part, in the aggregate principal amounts and on November 15 of the years set forth below; such Bonds to be redeemed by lot within the maturity at a redemption price equal to 100% of principal plus accrued interest to the date fixed for redemption.
Aggregate November 15 Principal Redemption Amount of Bonds Date to be Redeemed 2028 315,000 2029 330,000*
* By Maturity
Notice of Redemption Notice of any redemption of 2014 Bonds will be given by mailing a notice setting forth the details of the redemption, including the date fixed therefor, by first class mail, postage prepaid, not less than 30 nor more than 45 days prior to said date fixed for redemption, to the registered owners of the 2014 Bonds to be redeemed at their addresses as they then appear in the Bond Register. Neither failure to mail such notice nor any defect in the notice so mailed or in the mailing thereof with respect to any one 2014 Bond will affect the validity of the proceedings for the redemption of any other 2014 Bond. If the Authority duly gives such notice of redemption and, on or prior to the date fixed for such redemption, deposits with the Trustee funds for the payment of the redemption price of the 2014 Bonds so called for redemption, including accrued interest thereon to the date fixed for redemption, in an amount sufficient therefor, interest on such 2014 Bonds will forever cease to accrue on the date fixed for redemption, whether or not such 2014 Bonds are then presented for payment. Such notice may state that it is, and thereby be made, conditional upon such deposit timely made; and in such event such notice will be of no effect if such deposit is not timely made.
ORIGINAL ISSUE DISCOUNT The difference between the initial public offering prices of those 2014 Bonds whose initial public offering prices are shown as less than 100% on the inside front cover hereof (collectively, the "OID Bonds"), net of accrued interest, and the principal amounts of such OID Bonds is treated as original issue discount for Federal income tax purposes. OID bonds require special Federal tax treatment, as more fully discussed hereinafter under the caption “FEDERAL TAX MATTERS”.
Owners of OID Bonds are urged to consult their own professional tax advisors on a continuing basis as to the precise determination for Federal income tax purposes of interest and original issue discount accrued with respect to their OID Bonds, particularly upon any purchase, sale, exchange, redemption or other disposition of such OID Bonds (including the maturity thereof), and as to the state and local tax consequences of owning such 2014 Bonds.
PREMIUM BONDS
The initial public offering prices of those 2014 Bonds whose initial reoffering prices are listed as more than 100% on the inside front cover hereof (the "Premium Bonds") exceed the amounts payable thereon at maturity (in each case net of any accrued interest). The existence of such excess ("Original Issue Premium") in respect of any particular Premium Bond may require special Federal tax treatment, as more fully discussed hereinafter under the caption “FEDERAL TAX MATTERS”, and owners of Premium Bonds are urged to consult with their own professional tax advisors as to the effect such Original Issue Premium may have upon their Federal income tax liability, particularly upon any purchase, sale, exchange, redemption or other disposition of Premium Bonds (including the maturity thereof), and as to the state and local tax consequences of owning such 2014 Bonds.
4 SECURITY FOR THE 2014 BONDS The 2014 Bonds are limited obligations of the Authority payable only from, and secured solely by a first lien on, and pledge and assignment under the Indenture of, the receipts and revenues of the Authority derived from the Water System after payment of operation and maintenance expenses and the establishment of reserves for said purposes.
The Authority has and will have no power at any time or in any manner to pledge the credit or taxing power of the Commonwealth of Pennsylvania or any political subdivision thereof to the payment of the principal of or interest on the 2014 Bonds, nor will the 2014 Bonds be deemed to be obligations of the Commonwealth or any of its political subdivisions, nor will the Commonwealth or any political subdivision thereof be liable for the payment of the 2014 Bonds. The 2014 Bonds and all other Outstanding Bonds (as defined in the Indenture) heretofore issued or which may be hereafter issued under the Indenture will be equally and ratably secured by the assignment and pledge under the Indenture of the net Receipts and Revenues of the Water System as provided in the Indenture.
Debt Service Reserve Fund The Indenture provides for a Debt Service Reserve Fund which is required to be funded in an amount equal to the Reserve Requirement (the Reserve Requirement means an amount equal to the maximum annual debt service payable in any single fiscal year on all Outstanding Bonds as such term is defined in the Indenture, so long as the amount does not exceed the limitations imposed by the requirements contained in the Internal Revenue Code of 1986, as amended, and applicable regulations, for tax-exempt treatment of any tax-exempt Bonds which may at any time be outstanding under the Indenture, in which case the Debt Service Reserve Requirement will be equal to such limitation). The Debt Service Reserve Fund may be funded with any combination of cash, investments or a reserve policy or surety bond meeting the requirements of the Indenture.
THE TRUST INDENTURE The following is a summary of certain provisions of the Indenture, to which reference is made for a complete statement of its provisions or contents. Words and terms used in this summary are defined in the above-mentioned document and shall have the same meanings herein as contained in that document, except as defined in this Official Statement. The following descriptions are brief summaries and do not purport to be and should not be regarded as complete statements of the terms of the Indenture or as a complete synopsis thereof. Reference is made to the document in its entirety, copies of which may be obtained from the Trustee, for a complete statement of the terms and conditions therein.
Rate Covenant The Authority has covenanted in the Indenture that it will maintain, charge and collect, so long as any of the 2014 Bonds shall remain outstanding, rates, rentals and other charges for the use of the Water System which (after making due and reasonable allowances for contingencies and a margin of error in the estimates) together with all other available moneys of the Authority, shall be at least sufficient to provide annually in each Fiscal Year of the Authority:
(1) the current expenses of the Authority for such fiscal year; and (2) an amount equal to not less than 110% of the current annual debt service requirements of all 2014 Bonds (and any other obligations on a parity with the 2014 Bonds) outstanding under the Indenture and an amount equal to at least 100% of the current annual debt service requirements on all other obligations of the Authority, if any.
5 Revenues and Funds of the Authority Funds held by the Trustee under the Indenture, or subject to the lien thereof, include the following:
(a) a “Clearing Fund,” to be held by the Trustee; (b) a “Construction Fund,” to be held by the Trustee; (c) a “Revenue Fund,” to be maintained by the Authority in one or more authorized depositories; (d) a “Debt Service Fund,” to be held by the Trustee; (e) a “Debt Service Reserve Fund,” to be held by the Trustee; (f) a “Surplus Fund,” to be held by the Trustee; (g) a “Rebate Fund,” to be held by the Trustee; (h) a “Redemption Fund,” to be held by the Trustee. Clearing Fund The proceeds of the sale of the 2014 Bonds (including any accrued interest), together with certain other funds (if any) to be provided by the Authority, will be deposited by the Trustee into the Clearing Fund established under the Indenture. Transfers from the Clearing Fund will be made as follows:
(1) the total amount required to meet all obligations of the Authority with respect to the refunding of the Refunded Bonds; (2) the amount, if any, required to be deposited in the Debt Service Reserve Fund (or to be paid as premium on a qualified surety bond or reserve policy purchased in lieu thereof), in order to bring the balance therein equal to the Reserve Requirement; (3) the amount, if any, required to be deposited in the Debt Service Fund; (4) the amount required to be deposited to the Construction Fund with respect to the Authority’s 2014 capital improvements program; and (5) the amount required to pay all costs and expenses of issuance of the 2014 Bonds.
Construction Fund A separate 2014 Project Account within the Construction Fund is created under the Indenture to provide for the payment of the amounts required to be paid from proceeds of the 2014 Bonds issued to pay costs of the construction projects funded from the proceeds of the 2014 Bonds.
A separate project account will be established by appropriate supplemental indentures for each of the Authority's Capital Additions projects financed by the proceeds of other Additional Bonds under the Indenture.
Revenue Fund All receipts and revenues derived by the Authority from the operation of its Water System will be deposited in the Revenue Fund which must be kept with a bank or trust company which qualifies as an authorized depositary under the terms of the Indenture. The Authority will pay out of the Revenue Fund all its current expenses as they become due and, after paying such current expenses, the Authority will withdraw moneys from the Revenue Fund for the purpose of making the deposits hereinafter referred to.
Debt Service Fund Quarterly withdrawals will be required to be made by the Authority from available moneys in the Revenue Fund for deposit in the Debt Service Fund for the purpose of meeting the current interest and maturing principal requirements with respect to the 2014 Bonds and all other Bonds issued and outstanding under the Indenture.
2014 Bond Sinking Fund Subject to the making of required deposits to the Debt Service Fund, the Authority will be required to withdraw quarterly from available moneys in the Revenue Fund and make deposits to the Debt Service Fund for a subsequent annual deposit to the 2014 Bond Sinking Fund in such amounts as to retire, either by purchase or redemption, the 2014 Bonds as per the mandatory redemption requirements as provided in the Indenture and as previously set forth herein.
The 2014 Bond Sinking Fund will constitute a fund established solely for the benefit of the 2014 Bonds.
6 Debt Service Reserve Fund On the date of issuance of the 2014 Bonds, there will be deposited in (or withdrawn from, as the case may be) the Debt Service Reserve Fund such amount as will result in the balance thereof being equal to the Reserve Requirement (the Reserve Requirement means an amount equal to the maximum annual debt service payable in any single fiscal year on all Outstanding Bonds, so long as the amount does not exceed the limitations imposed by the requirements contained in the Internal Revenue Code of 1986, as amended, and applicable regulations, for tax-exempt treatment of any tax-exempt Bonds which may at any time be outstanding under the Indenture, in which case the debt service reserve requirement will be equal to such limitation). The Debt Service Reserve Fund may be funded with any combination of cash, investments or a reserve policy or surety bond meeting the requirements of the Indenture.
The Authority shall transfer from its Revenue Fund, after the required transfer to the Debt Service Fund has been made, to the Debt Service Reserve Fund, such amounts as may be necessary to bring the total in the Debt Service Reserve Fund up to the amount required by the Indenture at the time.
The Trustee shall, from time to time, without direction from the Authority, use the money in the Debt Service Reserve Fund to make up any deficiency in the Debt Service Fund and to pay interest on or the principal of any Bonds outstanding under the Indenture as the same become due and payable, to the extent that the amount in the Debt Service Fund shall be insufficient for such purpose.
Surplus Fund The Authority may withdraw annually from the available moneys in the Revenue Fund all moneys therein in excess of any amount budgeted to be used to pay the current year's debt service; provided, however, that (1) all required transfers to the above-mentioned Funds must have been made and (2) no such withdrawal may cause the balance in the Revenue Fund to be less than one-fourth of the estimated current expenses of the Authority. Such excess, to the extent so withdrawn, must be deposited in the Surplus Fund. The purpose of the Surplus Fund is to enable the Authority to make additions, improvements, renewals and replacements to its Water System, and, to the extent not provided for in the current budget of current expenses, repairs to its Water System and to retire by purchase or redemption Bonds Outstanding under the Indenture and to make payments for any lawful purpose. Refunds under line deposit agreements may be also made from moneys in said Fund. In the event of any deficiency in the Debt Service Fund or the Debt Service Reserve Fund, the Trustee is authorized to transfer moneys from the Surplus Fund to cure such deficiency without further authorization from the Authority.
The Authority will have the right to direct the Trustee to apply the available moneys in the Surplus Fund to the payment of the purchase price of Bonds of such one or more series of Bonds issued and outstanding under the Indenture which the Authority may agree to purchase, provided, however, that no purchase of such Bonds shall be so made at a price in excess of the currently effective redemption price. The Authority will have the right to designate the Bonds to be redeemed with Surplus Fund moneys. In the event the Authority fails to designate particular Bonds or series of Bonds to be redeemed, the Trustee will allocate the moneys proportionately among the Bonds of each series outstanding.
Rebate Fund The Trustee shall annually transfer to the Rebate Fund the amount, if any, that the Authority determines is required to be rebated to the United States Government, in accordance with Section 148 of the Internal Revenue Code of 1986, as amended, and the rulings and decisions thereunder. The Trustee shall pay such amounts to the United States for the account of the Authority at such times and places as required. Issuance of Additional Bonds Under the Indenture, Additional Bonds may be issued for the cost of capital additions or for refunding Bonds outstanding under the Indenture. Subject to the provisions of the 2014 Bonds Sinking Fund, and the terms of any sinking fund or analogous fund established for a particular series of Bonds, all Additional Bonds to be issued shall rank equally with all other Outstanding Bonds issued under the Indenture. With respect to the issuance of Additional Bonds for Capital Additions, the Indenture requires that the Net Revenues computed in accordance with the provisions of the Indenture be equal to at least 110% of the Maximum Annual Debt Service Requirement on all Bonds which shall be Outstanding immediately after the issuance of the Additional Bonds.
7 Certain Additional Covenants The Authority is required to employ continuously a Consulting Engineer and an Independent Public Accountant. Among other things, the Indenture requires that the Consulting Engineer advise the Authority as to the proper maintenance, repair and operation of the Water System, the adequacy of the rates and charges, the capital additions that should be made, the insurance coverage that should be maintained and the budget that should be adopted by the Authority. The Independent Public Accountant is required to prepare an audit report for each fiscal year.
Events of Default and Remedies The Indenture sets forth remedies available to the Trustee and the Bondholders in the event of default under the Indenture. Among other things, events of default are defined in the Indenture, to be the failure to pay the principal and interest on the Bonds Outstanding under the Indenture when the same become due.
Under the Indenture, upon the happening of an event of default as therein defined, the Trustee may enforce, and upon the written request of AGM or the Registered Owners of not less than 51% of principal amount of the Bonds then Outstanding, accompanied by indemnity as provided in the Indenture must, enforce for the benefit of all Bondholders all their rights provided under the Indenture and the Act, including the right of entry, of bringing suit, action or proceedings at law or in equity and of having a receiver appointed. For a more precise statement of the events of default and of the rights and remedies of the Trustee and the Bondholders, reference is made to the Indenture.
Modifications of Indenture Without the consent of Bondholders, the Authority and the Trustee may enter into supplemental indentures for, inter alia, the following purposes:
(a) to cure any ambiguity, formal defect or omission in the Indenture or any supplemental indenture; (b) to grant or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Bondholders or the Trustee; (c) to add to the covenants and agreements of the Authority in the Indenture contained, other covenants and agreements thereafter to be observed, or to surrender any right or power herein reserved to or conferred upon the Authority; (d) to modify any of the provisions of the Indenture or to relieve the Authority of any of the obligations, conditions or restrictions contained in the Indenture, provided that such modification or relief does not, by the express terms of the particular supplemental indenture, become effective until all Bonds outstanding on the date of execution and delivery of such supplemental indenture are no longer outstanding; (e) to make such provision in regard to matters or questions arising under the Indenture as may be necessary or desirable and not inconsistent with the Indenture; or (f) to close the Indenture against, or to restrict, in addition to the limitations and restrictions herein contained, the issuance of additional bonds thereunder, by imposing additional conditions and restrictions to be thereafter observed, whether applicable in respect of all bonds issued and to be issued thereunder or in respect of one or more series thereof or otherwise.
With the consent of the Registered Owners of not less than 66-2/3% in aggregate principal amount of the Bonds Outstanding under the Indenture and each insurer of Outstanding Bonds, the Authority and the Trustee may enter into indentures supplemental to the Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or modifying in any manner the rights of the holders of the 2014 Bonds outstanding under the Indenture provided that no such supplemental indenture may (i) extend the fixed maturity date of any Bond, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, without the consent of the Registered Owner of each Bond so affected, or (ii) permit the creation by the Authority of any lien prior to or on a parity with the lien of the Indenture upon any part of the receipts and revenues of the Authority's Water System, or (iii) reduce the aforesaid percentage of Bonds, the Registered Owners of which are required to consent to any such supplemental indenture, without the consent of the Registered Owners of all Bonds then outstanding and each insurer of Outstanding Bonds.
8 Discharge of Indenture Once the Authority has paid or caused to be paid to the registered owners of all Bonds Outstanding under the Indenture, the principal and interest to become due thereon and the premium thereon, if any, at the times and in the manner stipulated therein, then the Indenture and the estate and rights thereby granted will cease, determine and be void, and thereupon the Trustee, upon the request of the Authority, will release, cancel and discharge the lien of the Indenture, and execute and deliver to the Authority such instruments as are then requisite to satisfy the lien thereof, and reconvey to the Authority the estate and title thereby conveyed, and assign and deliver to the Authority any property at the time subject to the lien of the Indenture which may then be in the possession of the Trustee; but the Trustee will take any such action only upon the receipt of an Officers' Certificate and an opinion of Counsel, each stating in substance that in the opinion of the respective signers all conditions precedent provided for in the Indenture relating to such release, cancellation and discharge have been complied with.
LIMITED OBLIGATIONS The 2014 Bonds are limited obligations of the Authority payable solely from the net receipts and revenues pledged under the Indenture. Neither the credit nor the taxing power of the Borough of Ambridge, the County of Beaver, the Commonwealth of Pennsylvania or of any political subdivision thereof is pledged for the payment of the 2014 Bonds. The Authority has no taxing power.
STATE TAX MATTERS In the opinion of Bond Counsel, interest on the 2014 Bonds is exempt under present statutory and case law from the Pennsylvania Corporate Net Income Tax and from personal income taxation by the Commonwealth of Pennsylvania, or by any of its political subdivisions, and the 2014 Bonds are likewise exempt from Pennsylvania personal property taxes., but such exemption does not extend to gains made on the sale thereof or to gift, estate, succession or inheritance taxes or any other taxes not levied or assessed directly on the 2014 Bonds, the transfer thereof, or the income therefrom.
The residence of a holder of 2014 Bonds in a state other than Pennsylvania, or being subject to tax in a state other than Pennsylvania, may result in income or other tax liabilities being imposed by such states or their political subdivisions based on the interest or other income from the 2014 Bonds.
FEDERAL TAX MATTERS As of the date of closing, Bond Counsel will issue a legal opinion to the effect that under existing law, the interest on the 2014 Bonds (a) is excluded from gross income for Federal income tax purposes and (b) is not an item of tax preference for purposes of the Federal alternative minimum tax imposed on individuals and corporations. The interest on the 2014 Bonds, however, will be included in the "adjusted current earnings" (i.e.: alternative minimum taxable income as adjusted for certain items including those items that would be included in the calculation of a corporation's earnings and profits under Subchapter C of the Code) of certain corporations, and such corporations are required to include in the calculation of alternative minimum taxable income 75 percent of the excess of such corporation's adjusted current earnings over its alternative minimum taxable income (determined without regard to this adjustment and prior to reduction for certain net operating losses). The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for Federal income tax purposes of interest on obligations such as the 2014 Bonds. The Authority has covenanted to comply with certain requirements designed to ensure that interest paid on the 2014 Bonds will not become includable in gross income. Failure to comply with those covenants may result in interest paid on the 2014 Bonds being included in gross income from the date of issue of the 2014 Bonds regardless of the date on which the event causing such taxability occurs. The opinion of Bond Counsel assumes compliance with those covenants. The Authority has covenanted that it will make no use of the proceeds of such issue which would cause the 2014 Bonds to be arbitrage bonds, and has further covenanted to comply with the rebate and other requirements of Section 103 and 148 of the Code, and the regulations thereunder, during the term of such issue. Officers of the Authority will execute a certificate concerning the use of the 2014 Bonds in conformity with Section 103 and 141 through 150 of the Code and the regulations thereunder.
9 Although interest on the 2014 Bonds is excluded from gross income for Federal income tax purposes, the accrual or receipt of such interest may otherwise affect the Federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient's particular tax status or other items of income or deductions. Purchasers of the 2014 Bonds, particularly purchasers that are corporations (including Subchapter S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrift or other financial institutions, certain recipients of Social Security or Railroad Retirement benefits, taxpayers otherwise entitled to the earned income credit and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax- exempt obligations are advised to consult their tax advisors as to the tax consequences of purchasing or holding the 2014 Bonds. Bond Counsel expresses no opinion regarding such consequences. From time to time, there are legislative proposals in Congress that, if enacted, could alter or amend the Federal tax matters referred to above or adversely affect the market value of the 2014 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enactment. Each purchaser of the 2014 Bonds should consult his or her own tax advisor regarding any pending or proposed Federal law legislation. Bond Counsel will not express any opinion regarding any pending or proposed Federal tax legislation. The 2014 Bonds that mature on November 15, 2019 through 2022, 2024 through 2027 and 2029 through 2030 (the "Tax-Exempt Discount Bonds"), are being offered and sold to the public at original issue discount ("OID") from the amounts payable at their maturity. OID is the excess of the stated redemption price of a Tax-Exempt Discount Bond at maturity (the face amount) over the "issue price" of such Tax-Exempt Discount Bond. The issue price is the initial offering price to the public (other than to bond houses, brokers or similar persons acting in the capacity of underwriters or wholesalers) at which a substantial amount of the same maturity are sold pursuant to that initial offering. For Federal income tax purposes, OID on each Tax-Exempt Discount Bond will accrue over the term of the Tax-Exempt Discount Bond, and the amount of accretion will be based on a single rate of interest, compounded semiannually (the "yield to maturity"). The amount of OID that accrues during each semi-annual period will do so ratably over that period on a daily basis. With respect to an initial purchaser of a Tax-Exempt Discount Bond at its issue price, the portion of OID that accrues during the period that such purchaser owns such Tax-Exempt Discount Bond is added to the purchaser's tax basis for purposes of determining gain or loss at the maturity, redemption, sale, or other disposition of that Tax-Exempt Discount Bond and thus, in practical effect, is treated as stated interest, which is excludable from gross income for Federal income tax purposes. Holders of Tax-Exempt Discount Bonds should consult their own tax advisors as to the treatment of OID and the tax consequences of the purchase of such Tax-Exempt Discount Bonds other than at the issue price during the initial public offering and as to the treatment of OID for state tax purposes. The 2014 Bonds which mature on November 15 of the years 2016, 2017 and 2018 (the "Premium Bonds") were sold at an original issue premium. The amount equal to the excess of the purchase price of a Premium Bond over its stated redemption price at maturity constitutes the premium on such Premium Bond. Under the Code, the premium on the Premium Bonds is an adjustment to basis and may amortized. No deduction is allowable on account of such premium. The method of amortization may be the method regularly employed by the taxpayer if such method is reasonable but in all other cases must be the method prescribed by applicable Treasury Regulations, which provide that the amortizable bond premium is an amount which bears the same ratio to the bond premium on the Premium Bond as number of months in the taxable year during which the bond was held by the taxpayer bears to the number of months from the beginning of the taxable year (or, if the bond was acquired in the taxable year, from the date of acquisition) to the date of maturity. The basis of the Premium Bond is reduced by the amount of the amortizable bond premium. Purchasers of Premium Bonds, whether at the time of initial issuance or subsequent thereto, should consult with their own tax advisors with respect to the determination and treatment of the premium for Federal income tax purposes and with respect to state and local tax consequences of owning Premium Bonds. THE FOREGOING IS NOT INTENDED AS AN EXHAUSTIVE LIST OF THE PROVISIONS OF FEDERAL TAX LAW WHICH MAY HAVE AN EFFECT ON INDIVIDUALS AND CORPORATIONS HOLDING THE 2014 BONDS (OR BOOK-ENTRY INTERESTS THEREIN) OR RECEIVING INTEREST THEREON. PROSPECTIVE PURCHASERS SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE EFFECT HOLDING THE 2014 BONDS (OR BOOK-ENTRY INTERESTS THEREIN) OR RECEIVING INTEREST THEREON MAY HAVE ON THEIR AFFAIRS, INCLUDING, BUT NOT LIMITED TO, THE EFFECT OF STATE AND LOCAL TAX LAWS.
10 DEDUCTION FOR INTEREST PAID BY FINANCIAL INSTITUTIONS Section 265 of the Code (“Section 265”), subject to limited exceptions, denies the interest expense deduction for indebtedness incurred by a bank, thrift institution or other financial institution to the extent such interest expense is allocable to tax-exempt obligations, such as the 2014 Bonds, held by the institution. The denial to such institutions of one hundred percent (100%) of the deduction for interest expense allocable to tax-exempt obligations applies to those tax-exempt obligations acquired after August 7, 1986, for taxable years ending after December 31, 1986.
Section 265 provides an exception to the aforementioned denial in the case of bonds of the type of the 2014 Bonds that are either “deemed designated” pursuant to the provisions of Section 265 or are designated by their issuer (or are otherwise “deemed designated”) as “qualified tax-exempt obligations” of such issuer if such issuer reasonably expects at the time of its issuance thereof that the aggregate amount of certain types of debt instruments issued by such issuer and certain types of related issuers during the whole of the calendar year in which such designated (or “deemed designated”) bonds are issued will not be more than $10,000,000. The Authority (i) has, to the extent the 2014 Bonds are not “deemed designated” under the provisions of Section 265, designated the 2014 Bonds as “qualified tax-exempt obligations” within the meaning of Section 265, (ii) reasonably expects that the aggregate amount of such types of debt instruments issued and to be issued by the Authority and such types of related issuers during the whole of calendar year 2014 will not be more than $10,000,000 and (iii) will deliver at Closing a certificate to the effect that such expectation remains reasonable.
Notwithstanding the aforementioned designation of the 2014 Bonds as “qualified tax-exempt obligations” for the purposes of Section 265, Section 291 of the Code (which provides for a similar denial, but of 20% rather than 100% of interest expense deduction) will apply to the 2014 Bonds.
NOT ARBITRAGE BONDS The Authority has covenanted in the Indenture and in the Non-Arbitrage Certificate hereinafter mentioned that it will make no use of the proceeds of the 2014 Bonds which, if such use reasonably had been expected on the date of issuance of the 2014 Bonds, would have caused the 2014 Bonds to be arbitrage bonds, and has further covenanted therein to comply with the requirements of Section 148 of the Code and the regulations thereunder, during the term of the 2014 Bonds. Before delivery of the 2014 Bonds, officials of the Authority will execute the Non-Arbitrage Certificate concerning the use of the proceeds of the 2014 Bonds in conformity with regulations under Section 148 of the Code.
NEGOTIABLE INSTRUMENTS The 2014 Bonds are securities as defined in and, subject to the registration provisions described herein, are negotiable to the extent provided in the Uniform Commercial Code-Investment Securities. The Authority makes no representation as to the negotiability of book-entry or other beneficial interests in the 2014 Bonds.
VESTED RIGHTS In the Act, the Commonwealth of Pennsylvania pledges that it will not limit or alter the rights vested in the Authority until all 2014 Bonds together with the interest thereon are fully met and discharged.
NO-LITIGATION CERTIFICATE At the time of settlement of the 2014 Bonds, the Authority will certify and its Solicitor will opine that there is no litigation pending against the Authority nor, to their knowledge, threatened, which, in any way, questions or affects the validity or the security mentioned herein of the 2014 Bonds, or any proceedings or transactions relating to their issuance, sale and delivery. LEGAL MATTERS Legal matters incident to the authorization, issuance and sale of the 2014 Bonds are subject to approval of legality by the Law Offices of Wayne D. Gerhold, Pittsburgh, Pennsylvania, Bond Counsel, whose approving opinion will be printed on the 2014 Bonds. Certain legal matters relating to the Authority will be passed upon by Sainovich, Santicola & Steele, P.C., Beaver, Pennsylvania, the Authority's Solicitor.
11 BOND RATING Prior to the delivery of the 2014 Bonds, the rating agency Standard & Poor’s Ratings Services (“S&P”) is expected to have assigned its municipal bond rating of “AA-” (Stable Outlook) to the 2014 Bonds with the understanding that, upon the initial issuance and delivery of the 2014 Bonds, a municipal bond insurance policy will be issued by Assured Guaranty Municipal Corp. (“AGM”) pursuant to which AGM will insure the payment, when due, of the scheduled installments of the principal of and interest on the 2014 Bonds. S&P has also assigned an underlying rating of “A+” (Stable Outlook) to the Bonds.
Generally, rating agencies base their ratings on information and materials furnished to them and on investigations, studies and assumptions made by them. Such a rating reflects only the view of the rating agency assigning the same, and an explanation of the significance of such rating may be obtained only from such rating agency. There is no assurance that a particular rating, once assigned, will be maintained for any given period of time or that it may not be revised downward or withdrawn entirely by the rating agency assigning the same if, in its judgment, circumstances so warrant. A downward change in or withdrawal of a rating may have an adverse effect on the market price of the rated bonds. Neither the Underwriter nor the Authority has undertaken any responsibility after issuance of the 2014 Bonds to oppose a revision or withdrawal of any rating assigned to the 2014 Bonds.
MUNICIPAL BOND INSURANCE
The 2014 Bonds will be insured as to scheduled payment of principal and interest by AGM pursuant to a municipal bond insurance policy issued by AGM simultaneously with the Authority’s initial issuance of the 2014 Bonds and the delivery thereof to the Underwriter (the “Bond Insurance Policy”). See Appendix E “Bond Insurance” and Appendix F “Specimen Municipal Bond Insurance Policy.”
UNDERWRITING The 2014 Bonds are being purchased by Janney Montgomery Scott LLC, Pittsburgh, Pennsylvania (the "Underwriter"), pursuant to a purchase contract dated January 14, 2014 between the Underwriter and the Authority (the "Purchase Contract"). The Underwriter has agreed to purchase the 2014 Bonds, subject to the terms of the Purchase Contract, at an aggregate discount of $22,960 from the initial public offering prices set forth on the inside front cover of this Official Statement. The Purchase Contract provides that the Underwriter will purchase all the 2014 Bonds, if any are purchased, in accordance with the terms of the Purchase Contract. The initial public offering prices of the 2014 Bonds may be changed by the Underwriter from time to time from the levels set forth on the inside front cover hereof, without any requirement of notice. The Underwriter reserves the right to join with other dealers in offering the 2014 Bonds to the public, and 2014 Bonds may be offered to such other dealers in connection therewith at prices lower than the prices at which such 2014 Bonds are offered to the public.
FINANCIAL ADVISOR
CIM Investment Management, Inc. of Pittsburgh, Pennsylvania, is serving as financial advisor (the “Financial Advisor”) to the Authority, in connection with the authorization and issuance 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. CIM Investment Management, Inc. is an independent advisory firm and is not engaged in the business of underwriting, trading, or distributing municipal securities or other public securities.
DISCLOSURE STATEMENT OF THE TRUSTEE The following statement, constituting the remaining three paragraphs of this section, has been supplied to the Authority by the Trustee and has been included in this Official Statement at the Trustee's request. It is a statement of the Trustee and not of the Authority.
12 The Authority has appointed U.S. Bank National Association, a national banking association organized under the laws of the United States, to serve as Trustee. The Trustee is to carry out those duties assignable to it under the Indenture. Except for the contents of this section, the Trustee has not reviewed or participated in the preparation of this Official Statement.
The Indenture provides that the Trustee makes no representations as to the validity or sufficiency of the Indenture or the due execution or acknowledgement thereof or in respect of the 2014 Bonds and that the Trustee shall incur no responsibility in respect of such matters. The Indenture further provides that the Trustee shall be under no responsibility or duty with respect to the disposition of the 2014 Bonds authenticated and delivered thereunder or of any moneys deposited with the Trustee and withdrawn in the manner provided in the Indenture. The Trustee has not evaluated the risks, benefits, or propriety of any investment in the 2014 Bonds and makes no representation, and has reached no conclusions, regarding the value or condition of any assets or revenues pledged or assigned as security for the 2014 Bonds, the technical or financial feasibility of the Project, or the investment quality of the 2014 Bonds, about all of which the Trustee expresses no opinion and expressly disclaims the expertise to evaluate. Additional information about the Trustee may be found at its website at http://www.usbank.com/corporatetrust. The U.S. Bank website is not incorporated into this Official Statement by such reference and is not a part hereof. Source: U.S. Bank National Association - Corporate Trust Services, Pittsburgh, Pennsylvania office.
CONTINUING DISCLOSURE
In accordance with Rule 15c2-12 (the “Rule”) under the Securities Exchange Act of 1934, as amended and in effect on the date hereof, the Authority has authorized in the Resolution the execution and delivery by the Authority of a Continuing Disclosure Agreement with the Law Offices of Wayne D. Gerhold for the benefit of the holders and beneficial owners of the 2014 Bonds. In and by the said Continuing Disclosure Agreement, the Authority will covenant to provide to the Municipal Securities Rulemaking Board (the “MSRB”), via its Electronic Municipal Market Access System (EMMA), or to such other entity as may be designated by the Securities and Exchange Commission (the “SEC”) as successor in the function, in the form and in the manner stipulated by the MSRB or such successor entity and on an annual basis, an annual financial report for the immediately preceding fiscal year of the Authority which will include, at a minimum, general purpose financial statements which present fairly, in all material respects, the financial position of the Authority at the end of such fiscal year and the results of its operations and its cash flows for such fiscal year in conformity with accounting principles generally accepted in the United States of America, or prepared on such other basis of accounting adopted by the Authority from time to time so as to bring the presentation of its financial statements more closely into conformity with U.S. generally accepted accounting principles (the "Authority Report" for such fiscal year), together with its annual budget for its fiscal year next succeeding that covered by such Authority Report (the "Authority Budget" for such succeeding fiscal year) and the most recent annual report of the Authority's consulting engineer (if any), commencing with the Authority Report and any consulting engineer's report for the Authority's fiscal year ending in 2013 and the Authority Budget for the Authority's fiscal year ending in 2014. Unless audited, such financial statements will be unaudited. The aforementioned covenant provides that Authority Reports and any consulting engineer's reports must be provided within 275 days after the end of the fiscal years to which they pertain, and Authority Budgets must be provided within 275 days after the end of the fiscal years next preceding those to which they pertain; and that, if any Authority Report so provided fails to include the Authority's independently audited financial statements for the fiscal year of the Authority to which such Authority Report pertains (or such Authority Report is not timely provided), the Authority must provide such independently audited financial statements when and if available.
The Authority will also covenant in the Continuing Disclosure Agreement to provide to the MSRB, or to such other entity as may be designated by the SEC as successor in the function, in the form and in the manner stipulated by the MSRB or such successor entity, (A) in a timely manner, notice of each failure of the Authority to provide or cause to be provided, as so required, any Authority Report, Authority Budget, consulting engineer’s report or audited financial statements in a timely manner and (B) in a timely manner, but in each case not later than the tenth business day after such occurrence, notice of each occurrence of any of the following events with respect to the 2014 Bonds (each a “Reportable Event”): (i) principal and interest payment delinquencies, (ii) non-payment related defaults, if material, (iii) unscheduled draws on debt service reserves reflecting financial difficulties, (iv) unscheduled draws on credit enhancements reflecting financial difficulties, (v)
13 substitution of credit or liquidity providers, or their failure to perform, (vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the 2014 Bonds, or other material events affecting the tax status of the 2014 Bonds, (vii) modifications to rights of the holders of the 2014 Bonds, if material, (viii) bond calls, if material, and tender offers, (ix) defeasances, (x) release, substitution or sale of property securing payment of the 2014 Bonds, if material, (xi) rating changes, (xii) bankruptcy, insolvency, receivership or similar event of the Authority (or any other entity that is an obligated person within the meaning of the Rule with respect to the 2014 Bonds), (xiii) the consummation of a merger, consolidation, or acquisition involving the Authority (or any other entity that is an obligated person within the meaning of the Rule with respect to the 2014 Bonds) or the sale of all or substantially all of the assets of the Authority or any such obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material, and (xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material*. These covenants, or any part thereof, may be revised from time to time as permitted or required by the Rule, without the consent of 2014 Bondholders, and will terminate upon the payment in full or legal defeasance of the 2014 Bonds, or any other arrangement whereby the Authority is released from any further obligation with respect to the 2014 Bonds. Except in the case of the payment of the 2014 Bonds in full according to the original schedule therefor, the Authority will promptly notify the MSRB of any revision or termination of the disclosure covenants. The Authority will also covenant in the Continuing Disclosure Agreement that it will abide by the rules of the MSRB, as promulgated by the MSRB from time to time, as to the manner in which the aforementioned Authority Reports, Authority Budgets, consulting engineer’s reports, audited financial statements and notices of Reportable Events, if any, are to be given to the MSRB.
The sole remedy for a breach by the Authority of its covenants to provide Authority Reports, Authority Budgets, consulting engineer’s reports, audited financial statements and notices of Reportable Events will be an action to compel performance of such covenants. Under no circumstances may monetary damages be assessed or recovered on the basis of such a breach, nor will any such breach constitute a default under the Indenture, the Act or the 2014 Bonds.
Except as set forth in the next paragraph, the Authority has not, within the past five years, failed to comply in any material respect with any prior such undertaking under the Rule.
On July 8, 2008, the Authority entered into a Continuing Disclosure Agreement dated as of July 1, 2008 (the “2008 Continuing Disclosure Agreement”) with a disclosure agent, relating to the Authority’s Water Revenue Bonds, Series A of 2008 and Federally Taxable Series B of 2008 (collectively the "2008 Bonds"), which agreement is of the type described in paragraph (b)(5)(i) of the Rule. By the 2008 Continuing Disclosure Agreement the Authority agreed to provide to the disclosure agent for distribution to each nationally recognized municipal securities information repository ("NRMSIR"): (1) its annual financial statements for the year ended December 31, 2008, prepared in accordance with generally accepted accounting principles and audited by an independent certified public accountant, by October 2, 2009, (2) the reports of its consulting engineer for the years ended December 31, 2008, 2010 and 2011, by October 2, 2009, 2011 and 2012, respectively, and (3) its annual budget for the years ended December 31, 2009, 2011 and 2012, by October 2, 2009, 2011 and 2012, respectively, and to give prompt notice of any failure to do so to the aforementioned disclosure agent for distribution to the NRMSIRs. The Authority did not so provide such information by such dates, nor did it give such notice of its failure to do so. The Authority's audited financial statements for the year ended December 31, 2008 (together with the required notice
* Subject to the operation of the final sentence of this paragraph, item (viii) is satisfied with respect to mandatory sinking fund redemption of 2014 Bonds (if any) by the filing of this Official Statement with the MSRB. An event described in item (xii) is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Authority or other pertinent obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or Federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Authority or such obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Authority or such obligated person.
14 of failure to timely file) were provided to the MSRB, the sole remaining NRMSIR at the time, in January of 2010, and on November 21, 2012 the aforementioned engineer’s reports and annual budgets were filed with the MSRB.
Contemporaneously with the issuance and delivery of the Authority’s Water Revenue Bonds, Series of 2012, the Authority adopted certain procedures to ensure that the Authority’s continuing disclosure obligations would be satisfied in a timely manner in the future, and timely filings have been made since then.
OTHER Officials of the Authority have furnished certain information in this Official Statement relating to the Authority, the Project and the service area.
All the summaries and descriptions of the provisions of the Act, the 2014 Bonds, the Indenture, and of legal matters and procedures hereinbefore set forth are made subject to all the detailed provisions thereof, to which reference is hereby made for further information, and do not purport to be complete statements of any or all such provisions.
For the purpose of paragraph (b)(1) of Rule 15c2-12 of the Securities and Exchange Commission, the Preliminary Official Statement dated December 5, 2013, relating to the 2014 Bonds is in a form deemed final by the Authority, as of its date.
The Authority has authorized the distribution of this Official Statement.
BOROUGH OF AMBRIDGE WATER AUTHORITY
By: /s/ David L. Bell Chairman
15
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APPENDIX A
BOROUGH OF AMBRIDGE WATER AUTHORITY
DESCRIPTION AND ECONOMICS OF THE SERVICE AREA
(This page left blank intentionally.) DESCRIPTION AND ECONOMICS OF THE AREA General
The Borough of Ambridge Water Authority provides water to a population of approximately 29,700 people in the municipalities of Ambridge, Economy and Harmony, all located in Beaver County, and the Borough of Bell Acres, located in Allegheny County. The Authority also sells bulk water to the Borough of Baden in Beaver County, the New Sewickley Township Municipal Authority in Beaver County and the Municipal Authority of the Borough of Edgeworth in Allegheny County. The Service Area is located in the southeastern corner of Beaver County and the northeastern corner of Allegheny County, Pennsylvania, approximately 15 miles from the City of Pittsburgh. The Pennsylvania Turnpike (Interstate Route 76) is five miles to the northeast and other major roadways, including Interstate Route 79 and Interstate 376, are within a ten- minute drive.
Recent and current development projects in the Authority's service area are described below.
The cleaning, demolition and development of a brownfield site near the Old Economy Village historic settlement in Ambridge is ongoing. A Bottom Dollar grocery store was built within the commercial section of New Economy Business Park. Additional renovation and expansions have taken part within the industrial section of the development. The northernmost end of Merchant Street was rebuilt, creating a more efficient and safer access into the area from the center of Ambridge. This has expanded the Business Park and increases the overall attractiveness of the campus. In January, 2010, the new Beaver County Emergency 911 Center was completed within the above area, giving the citizens of Beaver County a highly technological emergency response and preparedness center. Liberty Hills residential development in Economy and New Sewickley has continued building higher-end age- restricted housing, with over 140 completed homes in Economy Borough out of 200 planned. On the New Sewickley side, 51 of the planned 70 are complete. The development includes a clubhouse and pool, as well as open recreational areas. The Authority furnishes water to the entire development. Whispering Pines construction of 174 single-family homes was completed in 2013 in Economy Borough. This residential development is most attractive to young families with children. Villas of Economy, a gated community with single to quad housing for couples over age 55, is in the first phase of construction. This is located near State Route 65 along the Ohio River. Construction of a new Wal-Mart store on a large parcel of developable land behind the existing Northern Lights Shopping Center in Economy is underway, and completion is expected to occur in spring, 2014. The waterline construction and extension design plan has been completed by the Authority. This augments the Authority system in the area by expanding water service and installing a large, 12 inch main line. In Harmony Township, a new Railroad Hotel and Restaurant was built along Duss Avenue, in addition to Microsonics, Monarch Student Transportation and Hannon Electric Motor Repair, which are light-industrial and warehousing businesses. In Ambridge, Beemac Trucking just completed construction of a new facility to provide full service truck transportation, warehousing and materials handling. Construction of a new Ambridge Area High School campus was completed in 2009 and serves the communities of Ambridge, Harmony, and Economy. IPSCO Koppel Tubulars Corporation, which supports the oil and gas industries, is undergoing an estimated $22,750,000 expansion at its facility in Harmony Township.
The Port Ambridge Industrial Park, which is located along the Ohio River, is within the Borough of Ambridge. Approximately 800,000 square feet of the available 1.3 million square feet of space is filled with industries employing approximately 200 people, including World Class (metal processing), Ryerson (steel distribution), Pittsburgh Intermodal Terminals (shipping) and others. Direct access to the Port Ambridge site is provided by an overpass crossing the four lanes of Route 65 and Conrail's main central rail line which connects the eastern part of the United States to the western part of the United States. Conrail's second largest railroad switching yard in the mid-Atlantic area is located in Conway Borough adjacent to Ambridge.
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Old Economy Village Historic Settlement
A neighborhood of privately owned homes in Ambridge has been designated a National Register Historic District. This section of the Borough encircles the Old Economy Village historic settlement. The Village is the last of three settlements established by the Harmony Society in the United States. It was designated a National Historic Landmark District in 1966 under the name of Old Economy. The Commission offers tours, elementary and high school field trips, adult classes, archival research, and facilities rentals. The tourism draw is from the tri-state area.
Land Use by Assessment of the Boroughs of Ambridge, Baden, Economy and Bell Acres and the Townships of Harmony and New Sewickley, based on 2012 assessed values
Assessed Percentage Value Distribution Residential...... $411,667,368 80.23% Trailers...... 7,356,361 1.43 Seasonal...... 0 0.00 Lots...... 9,348,373 1.82 Industrial...... 14,822,437 2.89 Commercial ...... 46,364,324 9.04 Agriculture...... 20,616,725 4.02 Oil/Gas/Min...... 0 0.00 Land...... 2,931,755 0.57 Total...... $513,107,343 100%
Source: Pennsylvania State Tax Equalization Board.
Employment The following is a list of some of the largest employers located within and adjacent to the Authority’s service area:
Approximate Employer Number of Employees IPSCO Koppel Tubulars Corporation...... 400 Conway Switching Yards (Norfolk Southern)...... 1,108 Koppel Steel Company (seamless oil well tubing)...... 415 Ambridge Area School District...... 430 Port Ambridge Industrial Park Total...... 200 (Includes 100 at Ryerson steel distribution, 50 at World Class metals processing and others) Steel Built (manufacturer of straightwall buildings)...... 180
Source: Employers and Authority officials.
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Beaver County Since the Borough is easily accessible to the entire County of Beaver, a brief description of Beaver County is provided below. Beaver County is located in southwestern Pennsylvania northwest of the City of Pittsburgh. The county is bordered on the west by the states of Ohio and West Virginia; on the south by Washington County; on the east by Allegheny and Butler Counties; and on the north by Lawrence County. Beaver County is comprised of two third class cities and 52 boroughs and townships. The County was once dominated by the steel industry, but since the 1990's smaller manufacturing and service industries have been locating in the area. Significant commercial growth is taking place in the geographic center of the County along the Beaver Valley Expressway in Center Township.
The Pennsylvania Turnpike Commission built a $200 million extension of the Pittsburgh/Airport/ Beaver County Expressway that extends non-stop between Pittsburgh, Pittsburgh International Airport, the mainline Pennsylvania Turnpike, New Castle, PA and Youngstown, Ohio. Recently, the expressway has been upgraded to Interstate 376.
As set forth in the following list, approximately 69% of Beaver County’s land value is residential, 16% commercial and 6% industrial. The remaining 7% is a combination of land, trailers, agriculture, lots and minerals.
County of Beaver Land Use by Assessment (2012)
Assessed Percentage Value Distribution Residential ...... $1,470,139,531 69.15% Trailers...... 42,035,018 1.98 Seasonal...... 0 0.00 Lots ...... 29,109,576 1.37 Industrial...... 123,964,439 5.83 Commercial ...... 332,294,971 15.63 Agriculture...... 113,123,032 5.32 Oil/Gas/Min...... 480,200 0.02 Land...... 14,884,738 0.70 Total...... $2,126,031,505 100%
Source: Pennsylvania State Tax Equalization Board.
A-3 Employment
The following is a list of the principal employers in Beaver County:
Employer Product Heritage Valley Health System Health Care First Energy Corp. Power Plants Beaver County County Government Wal-Mart Associates, Inc. Retail Service Link Management Services Mortgage Title Services Friendship Ridge County Nursing Facility McCarls, Inc. Mechanical Contractor Passavant Memorial Homes Health Care Gateway Rehabilitation Center Health Care Anchor Hocking Glass Products Veka Plastic Extrusions IPSCO Koppel Tubulars Corporation Seamless Tubular Products Conway Switching Yards (Norfolk/Southern) Railroad Geneva College University U. S. Government Government Michael Baker Corporation Engineering and Consulting MSP Mail and Print Services Pennsylvania Cyber Charter School Education Nova Chemicals Plastic Materials Giant Eagle Food and Fuel McGuire Memorial Home Health Care, Education, Community Services
Source: Beaver County Officials. Transportation The County is traversed by several major highways including the Pennsylvania Turnpike and the Pittsburgh/Airport/Beaver County Expressway (I-376). The Beaver County Airport, located in Chippewa Township, provides facilities for private and U. S. Air Force aircraft, while the Pittsburgh International Airport provides commercial service. Railroad transportation within the County is provided by consolidated Rail Corporation. The Conway Yard complex of the Consolidated Rail Corporation, located in Conway Borough in the County, is an extensive and active freight classification yard (among the largest in the United States).
The Beaver County Transit Authority provides regular bus transportation throughout Beaver County and express bus service to the City of Pittsburgh.
Commerce The Beaver Valley Mall is located in the approximate geographical center of the County in Center Township. The complex has approximately 120 establishments, including three major department stores – Sears, Boscov’s, Macy’s and J. C. Penney. Also located on the Mall property are approximately 10 satellite stores and restaurants including Sears Automotive Center.
Also, in Center Township, and located just southeast of the Center Township Marketplace, is the new Stone Quarry Commons shopping district. This houses several larger, national retailers such as Target, Kohl’s, Ross’s Dress and Marshall’s department stores. Along with these are PetSmart, Cinemark Theater, Aldi’s Grocery and numerous other restaurants and smaller business including the Center Place Medical Offices. Pleasant Drive in the Township is the home of the Hampton Office complex, Veterinary Clinic and Animal Hospital, BCTA Expressway Transit Center, O. C. Cluss Lumber and Building supplies, Abbey Carpet, Center Exit Tire Sales and McDonald’s fast food restaurant.
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Located in Chippewa Township on Route 51 is a 24.9 acre shopping center complex with a K-Mart, Home Depot and Giant Eagle, which houses 17 stores and restaurants. Chippewa Township also has a Super WalMart and three automobile dealers: Dodge, Nissan and Kia.
In addition, a Pappan’s Plaza, located in Beaver, has seven stores, including a World Wide Auto Parts store, Rite Aid Pharmacy (stand alone), Subway restaurant, Logos Bookstore, Beltone (hearing aids), Vac Shop and Little Cesar’s Pizza. McDonald’s, Dollar General, Brighton Hot Dog and Wendy’s are located directly across the street from Pappan’s Plaza.
The Pittsburgh International Airport The Pittsburgh International Airport is located two miles from Beaver County along the Pittsburgh/Airport Beaver County Expressway (I-376). The hotel, restaurant, car rental, business area and 24-hour cargo facilities stretch north from the Airport towards Beaver County along Business Route 60. The Airport serves the tri-state area region of western Pennsylvania, eastern Ohio and northern West Virginia. It is located approximately 15 miles northwest of the City of Pittsburgh.
Banking Citizens Bank, N.A., First National Bank, PNC Bank and Huntington Bank all have branch offices in various locations in Beaver County.
Higher Education The area is served by several colleges within the County, including the Beaver Campus of Penn State University, Beaver County Community College, Geneva College and Trinity Episcopal School of Ministry (which offers a 3-year Masters Program). The area is also served by Slippery Rock University, located in adjacent Butler County, and Robert Morris University, located in adjacent Moon Township, Allegheny County. Major colleges and universities located in the City of Pittsburgh are within 30 to 60 minutes of automobile travel time from all Beaver County locations.
Recreation Beaver County owns and operates four parks which provide more than 5,000 acres of open space for various outdoor recreational activities including boating, swimming, all-weather tennis courts, ice arena and regatta facilities. Also located in Beaver County is Pennsylvania’s fifth largest state park, Raccoon Creek State Park, which encompasses more than 7,900 acres including a 100-acre lake.
Cultural institutions in Beaver County include the Merrick Art Gallery and the Brodhead Cultural Center. The Merrick Gallery, established in 1880, maintains a permanent exhibit of over 200 nineteenth century paintings by European and American artists. The Brodhead Cultural Center, which is located on a seven-acre site adjacent to the Beaver Campus of Penn State University, is a cooperative effort between the University and the local community. The Center’s functional facilities include an amphitheater, pavilion, exhibit areas, gazebo and museum.
Medical Facilities Heritage Valley Health System was formed in 1996 by consolidation of The Medical Center of Beaver County and Sewickley Valley Hospital (which, although located in Allegheny County, serves the southern part of Beaver County). Heritage Valley Health System operates a 689-bed teaching facility in Brighton Township and, together with the Sewickley facility, serves the majority of Beaver County residents. Skilled and intermediate level nursing is available in the 589-bed Friendship Ridge, which is located adjacent to Heritage Valley Medical Center in Brighton Township.
A-5
STATISTICAL DATA
Ambridge Baden Economy Harmony Bell Acres New Sewickley Borough Borough Borough Township Borough Township Total
Market Value...... $149,390,557 $127,641,748 $505,409,962 $129,751,848 $141,968,891 $385,608,372 $1,439,771,378 Assessed Valuation...... 59,148,375 40,485,765 126,950,045 40,219,288 147,549,200 98,754,670 513,107,343 Ratio of Assessed to Market Value ...... 39.59% 31.72% 25.12% 31.00% 103.93% 25.61% 35.64%
Source: Pennsylvania State Tax Equalization Board – 2012 Values
Population (U.S. Census)
2010...... 7,050 4,135 8,970 3,197 1,388 7,360 32,100 2000...... 7,769 4,377 9,363 3,373 1,382 7,076 33,340 1990...... 8,133 5,074 9,519 3,694 4,010 6,861 37,921 1980...... 9,575 5,318 9,538 3,977 2,594 7,340 38,342
Market Value Per Capita $ 21,190.15 $30,868.62 $56,344.48 $40,585.50 $102,283.06 $52,392.44 $44,852.69
Note: The Authority provides water to Ambridge, Baden, Economy, Harmony, Bell Acres and to portions of New Sewickley. The Authority also provides water to Edgeworth Borough, Leetsdale Borough and Leet Township (having a combined 2010 population of 4,467) through bulk sale to the Municipal Authority of the Borough of Edgeworth.
APPENDIX B
BOROUGH OF AMBRIDGE WATER AUTHORITY DESCRIPTION OF THE AUTHORITY’S WATER SYSTEM, INDEBTEDNESS, OPERATING INFORMATION AND FINANCIAL INFORMATION
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GENERAL DESCRIPTION OF THE WATER SYSTEM The Authority’s water storage, treatment and distribution system (the “Water System”) serves a population of approximately 29,700 people in the municipalities of Ambridge, Economy and Harmony, all located in Beaver County, and a small portion of the Borough of Bell Acres, located in Beaver and Allegheny counties. The Authority also sells bulk water to the Borough of Baden, the New Sewickley Township Municipal Authority and the Municipal Authority of the Borough of Edgeworth.
The storage system consists of 15 storage reservoirs with a combined storage capacity of 9.2 million gallons of water. The most recent storage reservoir was completed in 2008. The distribution system consists of approximately 81 miles of water mains. Ninety percent of the water mains consist of 4” to 24” cast iron or ductile iron pipe. The Authority has an agreement with the West View Water Authority which allows Ambridge Water Authority to purchase up to 720,000 gallons of water per day for emergency use.
The water treatment plant draws water from Service Creek Reservoir, a spring-fed, surface water influenced, upland reservoir containing 3.5 billion gallons of high-quality source water. This lake was created by the Authority and built in the early 1950s, and is dedicated exclusively to providing water for the Authority’s customers. The water is piped over seven miles to the treatment plant where the water propels a turbine that produces about 25% of the electricity needed to operate the plant. The plant currently has an output capacity permit for an average of 4.8 MGD and a peak of 6.6 MGD. In 2012, the average output was 4.5 MGD and the peak was 5.8 MGD. The water system is EPA compliant.
Capital Improvement Projects
Following is a description of major capital projects recently completed with the proceeds of the 2008 Series A and B Bonds: Conway-Wallrose Road Water Tank, Pump Station and Pressure Regulating Vaults – $1,244,492 total cost with $268,309 covered by bond funds and $669,000 covered by developer contribution and remaining $307,182 covered by Authority Funds. As Economy Borough adjoins Cranberry Township in Allegheny County, it enjoys a portion of the new housing market that has been so prevalent there. PaDEP indicated in 2005 that additional residential developments would require that the Authority increase storage capacity in order to maintain a satisfactory level of service. Traditions of America initially approached the Authority in 2004 and began construction on a 225-unit housing development in 2007. Due to an agreement with Traditions to contribute to the funding of a new water tank, the Authority felt that it would prove financially possible to make this improvement to the water system. The pump station and pressure regulating vaults are related to the necessary design of the pressure zone. Service Creek Intake Tower Renovations - $347,844 total cost with $263,640 covered by bond funds. This project provided for rebuilding the inside of the water intake tower at Service Creek. The intake tower allows entry of water from reservoir into the primary pump station, where it is pumped to the water purification plant. Reservoir Dredging - $2,285,361 total cost with $2,186,500 covered by bond funds. This project provided for dredging out a portion of the reservoir that had silted in and become shallow. This work helps to maintain the capacity of the reservoir. Service Creek Pump Project - $662,039 total cost with $528,915 covered by bond funds. This project provided for expanding the size of the pump station, updating control systems, and replacing two large pumps. Water Plant Sedimentation Basin Rebuilds - $833,136 total cost with $744,778 covered by bond funds. This project provided for rebuilding the interior of the clarifier basins and rerouting piping so that each of the three vaults could be pulled out of service individually for future maintenance.
B-1
Other improvements that the Authority recently completed include repairs to the Service Creek Dam, repairs to the J.C. Bacon Dam, water line relocation and Legionville Booster Station upgrades.
The Authority has begun evaluating its options as to an additional source of water as it is approaching its reservoir withdrawal limit. However, the Authority does not see a need for future borrowing over the next three years.
Water Operating Data
Number of Customers Residential and Average Daily Commercial Industrial Institutional Total Pumpage
2006...... 7,056 22 61 7,138 4,075,471 2007...... 7,056 21 51 7,126 4,421,186 2008...... 7,067 17 62 7,146 4,657,530 2009...... 7,053 19 59 7,131 3,915,501 2010...... 7,146 28 56 7,230 4,609,129 2011...... 7,167 28 56 7,251 4,561,981 2012...... 7,174 28 56 7,258 4,517, 315
Systems Interconnects: Four that are billed as wholesale customers are counted in the Industrials above. Two emergency use interconnects are not included in the totals above.
Source: Authority Officials and Authority Annual Reports
Largest Water Customers
Gallons Used Total Revenues Name 2012 2012 Edgeworth Municipal Authority ...... 277,308,000 $533,665.80 IPSCO Koppel Tubulars Corporation...... 113,975,000 349,652.68 Baden Borough...... 99,525,000 250,864.98 New Sewickley Municipal Authority ...... 35,268,000 94,874.40 Anthony Wayne Terrace Assoc...... 9,049,000 70,108.53 World Class Processing...... 38,476,000 54,071.92 New Economy Business Park ...... 17,993,000 52,576.40 Ambridge Area School District...... 11,362,000 46,968.05 Creekside Springs...... 10,726,000 33,625.72 O’Neal Metals...... 1,112,000 12,401.81
Total...... 614,794,000 $1,498,810.29
Source: Authority Officials.
B-2 CURRENT WATER RATE CHARGES Following are the Authority's current water rate charges for its direct sale customers in Ambridge Borough, Harmony Township, Economy Borough and Bell Acres Borough and for its bulk sale customers. The Authority's practice is to institute small, regular rate increases each year.
Effective January 1, 2014, the Authority will implement an Asset Replacement Charge of $7.00 per bill.
Quarterly Customer Service Charges (effective April 1, 2012)
Borough of Economy and Meter Size Ambridge Harmony Township Bell Acres Boroughs 5/8” $ 30.56 $ 39.54 $ 50.56 3/4” 30.56 39.54 50.56 1” 74.91 98.85 126.41 1-1/4” and 1-1/2” 149.81 197.71 252.81 2” 239.70 316.33 404.50 3” 449.44 593.13 758.44 4” 749.07 988.54 1,264.07 6” 1,498.14 1,977.09 2,528.14 8” 2,397.02 3,163.34 4,045.02 10” 3,445.71 4,547.30 5,814.71
Quarterly Consumption Charges/1,000 Gallons (effective April 1, 2012)
Borough of Economy and Gallons Ambridge Harmony Township Bell Acres Boroughs 1 – 200,000 $3.11 $3.57 $3.94 200,001 – 500,000 3.01 3.46 3.84 Over 500,000 2.84 3.34 3.67
Annual Private Fire/Sprinkler Connection Charges (adopted July, 2007)
Borough of Meter Size Ambridge 1-1/4 and 1-1/2 $ 63.96 2” 102.34 3” 191.91 4” 319.82 6” 639.65 8” 1,023.45 10” 1,471.21
Private Fire Hydrant Rates Adopted November 20, 2003
$125.00 per year, billed quarterly all municipalities.
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Bulk Sales to Water Haulers Adopted November 20, 2003 $35 Connect/Disconnect Fee for Fire Hydrant Meter at the Water Treatment Plant plus the applicable Ambridge Borough over 500,000 gallons rate per 1,000 gallons.
Bulk Sales to Other Governmental Units
Borough of Baden (by Agreement) Quarterly service charge for its 6" meter: $1,498.14
Quarterly consumption charges, as follows:
1 – 200,000 $3.11 200,000 – 500,000 $3.01 Over 500,000 $2.84
Municipal Authority of the Borough of Edgeworth (by Agreement) No quarterly service charge for its 6” and 10” meters.
Quarterly consumption charge: $1.80/1,000 gallons
New Sewickley Township Municipal Authority (by Agreement) Quarterly service charge for its 6" meter: $3,792.18 (including a second interconnect)
Quarterly consumption charge: $2.26/1,000 gallons
AUTHORITY INDEBTEDNESS The Authority previously issued its Water Revenue Bonds, Series A of 2008 and Taxable Series B of 2008 (the “2008 Bonds”) under a trust indenture dated as of July 1, 2008 (the “Original Indenture”). The Series A of 2008 Bonds are currently outstanding in the aggregate principal amount of $3,060,000, and the Taxable Series B of 2008 Bonds are currently outstanding in the aggregate principal amount of $2,880,000. The 2008 Bonds were issued to provide funds for capital projects of the Authority and for the refunding of its Water Revenue Bonds, Series of 1993, 1998 and 2005.
On December 28, 2012, the Authority issued its Water Revenue Bonds, Series of 2012 (the “2012 Bonds”). Proceeds of the 2012 Bonds were used to refund $5,135,000 of the Series A of 2008 Bonds and to provide funds for capital improvements to the Authority's system.
Proceeds of the 2014 Bonds will be used to refund the remaining $3,060,000 of the Series A of 2008 Bonds and to provide funds for capital improvements to the Authority's system.
The Authority has no other indebtedness.
It is expected that, concurrently with the issuance of the 2014 Bonds, the Authority will take all necessary steps to satisfy its obligations under the Original Indenture.
B-4
ANNUAL DEBT SERVICE REQUIREMENTS
Year End Series B Series of Series of Total Debt December 31 of 2008 2012 2014 Service
2014 $ 597,515.00 $ 221,378.75 $ 82,663.39 $ 901,557.14 2015 594,415.00 220,818.75 131,456.25 946,690.00 2016 598,895.00 224,218.75 131,306.25 954,420.00 2017 594,990.00 223,368.75 130,906.25 949,265.00 2018 598,310.00 221,668.75 130,506.25 950,485.00 2019 559,125.00 245,606.25 145,106.25 949,837.50 2020 --- 598,956.25 359,406.25 958,362.50 2021 594,656.25 353,531.25 948,187.50 2022 595,256.25 356,656.25 951,912.50 2023 600,056.25 353,856.25 953,912.50 2024 594,537.50 355,243.75 949,781.25 2025 598,287.50 356,306.25 954,593.75 2026 596,056.25 356,331.25 952,387.50 2027 593,587.50 355,637.50 949,225.00 2028 600,212.50 354,200.00 954,412.50 2029 595,643.75 356,600.00 952,243.75 2030 590,812.50 348,400.00 939,212.50
TOTALS $3,543,250.00 $7,915,122.50 $4,658,113.39 $16,116,485.89
B-5 BOROUGH OF AMBRIDGE WATER AUTHORITY SUMMARY STATEMENT OF NET ASSETS AS OF DECEMBER 31, 2009, 2010, 2011 AND 2012 ASSETS 2009 2010 2011 2012 Current Assets Cash and Cash Equivalents ...... $ 388,829 $ 759,022 $ 1,158,924 $ 1,115,746 Investments...... 4,010,034 3,218,894 1,210,318 680,025 Accounts Receivable –Net ...... 1,413,303 1,501,960 1,501,972 1,443,191 Inventory –Plant Materials...... 67,963 122,126 212,735 241,971 Prepaid Expenses...... 106,883 41,534 80,177 43,570 Total Current Assets...... 5,987,012 5,643,536 4,164,126 3,524,503 Restricted Assets Investments...... 1,046,905 1,047,682 1,046,902 1,263,526 Property Plant and Equipment Utility Plant in Service ...... 17,929,272 18,898,067 19,005,776 19,030,058 Service Creek Reservoir...... 3,390,538 3,390,538 4,070,130 6,358,341 Small Tools and Distribution Assets...... 61,916 112,976 112,976 138,152 Administrative Building...... 200,000 200,000 200,000 200,000 Office Furniture and Equipment ...... 287,440 287,440 287,440 287,440 21,869,166 22,889,021 23,676,322 26,013,991 Less Accumulated Depreciation ...... (8,627,840) (9,023,141) ( 9,419,147) ( 9,886,487) 13,241,326 13,865,880 14,257,175 16,127,504 Construction in Progress ...... 444,335 403,728 1,824,637 931,472 Net Property, Plant and Equipment...... 13,685,661 14,269,608 16,081,812 17,058,976 Other Assets - Cylinder Deposit ...... 1,700 1,700 1,700 1,700 TOTAL ASSETS ...... $20,721,278 $20,962,526 $21,294,540 $21,848,705 LIABILITIES Current Liabilities Accounts Payable and Retainage Payable ...... $ 195,130 $ 198,273 $ 186,305 $ 139,773 Accrued Salaries and Benefits...... 14,659 14,907 19,989 15,659 Payroll Withholdings...... 11,428 264 248 0 Customer Deposits...... 8,060 8,060 8,060 7,905 Accrued Interest Payable –Bonds ...... 75,724 73,826 71,711 54,964 Due to Other Governmental Units ...... 733,515 874,202 704,489 640,142 Water Revenue Bonds – Current Portion ...... 345,000 360,000 380,000 490,000 Total Current Liabilities ...... 1,383,516 1,529,532 1,370,802 1,348,443 Long-Term Debt and Other Liabilities Water Revenue Bonds, Series of 2012 ...... 0 0 0 6,300,000 Water Revenue Bonds –Series of 2008 ...... 12,555,000 12,210,000 11,850,000 6,335,000 Accumulated Compensated Absences ...... 136,432 146,557 139,411 149,256 Deferred Loss on Early Retirement of Debt ...... (1,450,430) (1,381,087) (1,311,744) (1,333,777) Unamortized Bond Discount and Issue Costs...... (820,714) (781,474) (742,232) (879,800) 10,420,288 10,193,996 9,935,435 10,570,679 Current Portion – Water Revenue Bonds ...... (345,000) (360,000) (380,000) (490,000) Total Long-Term Debt and Other Liabilities...... 10,075,288 9,833,996 9,555,435 10,080,679 TOTAL LIABILTIIES...... 11,458,804 11,363,528 10,926,237 11,429,122 NET ASSETS Invested in Capital Assets, Net of Related Debt...... 6,940,407 6,799,454 6,886,719 5,278,399 Restricted –Expendable...... 1,046,905 1,047,682 1,046, 902 1,263,526 Unrestricted ...... 1,275,162 1,751,862 2,434,682 3,877,658
TOTAL NET ASSETS ...... $ 9,262,474 $ 9,598,998 $10,368,303 $10,419,583 Source: Audited Financial Statements for the years ended December 31, 2009, 2010, 2011 and 2012.
B-6 BOROUGH OF AMBRIDGE WATER AUTHORITY SUMMARY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS AS OF DECEMBER 31, 2009, 2010, 2011 AND 2012
2009 2010 2011 2012 Operating Revenues Metered Sales...... $2,808,875 $3,217,773 $3,337,483 $3,233,129 Unmetered Sales ...... 59,703 59,997 59,859 60,145 Sales to Other Water Utilities...... 649,605 544,326 798,951 889,702 Total Operating Revenues...... 3,518,183 3,822,096 4,196,293 4,182,976
Operating Expenses Source of Supply ...... 291,782 236,833 231,467 249,958 Purification and Laboratory...... 555,898 502,132 559,490 573,501 Transmission and Distribution ...... 833,174 816,042 802,220 934,605 General and Administration ...... 1,018,008 998,300 971,829 1,213,657 Depreciation...... 325,096 395,301 396,006 467,340 Total Operating Expenses ...... 3,023,958 2,948,608 2,961,012 3,439,061
Net Operating Income Before Non-Operating Revenue and Expense...... 494,225 873,488 1,235,281 743,915
Non-Operating Revenue and (Expense) Interest Income ...... 13,330 12,461 5,731 2,241 Tap Fees...... 52,105 43,492 111,917 110,423 Miscellaneous Non-Operating Revenue ...... 167,458 117,670 113,448 82,894 Interest on Long Term Debt ...... (624,535) (603,901) (590,610) (780,463) Amortization of Bond Issue Costs ...... (32,220) (32,220) (32,220) (32,220) Amortization on Deferred Loss on Early Retirement of of Debt ...... (69,343) (74,466) (74,248) (69,343) Maintenance on Rental Properties/Refunds...... (1,683) 0 0 (6,168) Total Non-Operating Revenue and (Expense)...... (494,888) 536,964 (465,975) (692,635)
Net Income...... (663) 336,524 769,306 51,280
Net Assets –January 1 ...... 9,263,137 9,262,474 9,598,997 10,368,303
Net Assets –December 31 ...... $9,262,474 $ 9,598,998 $10,368,303 $10,419,583
Source: Audited Financial Statements for the years ended December 31, 2009, 2010, 2011 and 2012
B-7
BOROUGH OF AMBRIDGE WATER AUTHORITY SUMMARY OF OPERATING BUDGET AS OF DECEMBER 31, 2013
Operating Revenues Metered Sales $3,227,664 Unmetered Sales 59,032 Sales to Other Utilities 907,496
Total Operating Revenue $4,194,192
Operating and Maintenance Expense Source of Supply $ 272,407 Purification and Laboratory 645,962 Transmission and Distribution 954,057 General and Administrative 1,030,161 Depreciation 350,000 Total Operating and Maintenance Expense $3,252,587
Other Income and Expenses Other Income $ 172,750 Other Expenses (Bond Interest plus*) 681,876
Net Other Income and Expenses $ (509,126)
Net Revenue Before Debt Service $ 432,479 Debt Service (Bond Principal) (380,000)
Surplus (Deficit) $ 52,479
* Includes the following non-cash items: Amortization of Bond Issue Costs and Amortization of Deferred Loss on Early Bond Retirement.
Source: Borough of Ambridge Water Authority Annual Report for the Year 2012 and Budget for the Year 2013, dated February 19, 2013.
B-8
APPENDIX C
BOROUGH OF AMBRIDGE WATER AUTHORITY AUDIT OF FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
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BOROUGH OF AMBRIDGE WATER AUTHORITY AMBRIDGE, PENNSYLVANIA
~ ~ ~ ~ ~
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
(This page left blank intentionally.) BOROUGH OF AMBRIDGE WATER AUTHORITY AMBRIDGE, PENNSYLVANIA
FINANCIAL STATEMENTS
WITH REPORT OF
CERTIFIED PUBLIC ACCOUNTANT
FOR THE YEAR ENDED DECEMBER 31, 2012 BOROUGH OF AMBRIDGE WATER AUTHORITY AMBRIDGE, PENNSYLVANIA
TABLE OF CONTENTS
PAGE
Independent Auditor's Report ...... i-ii
Management’s Discussion and Analysis ...... iii-vii
Exhibit A – Statement of Net Position ...... 1
Exhibit B - Statement of Revenues, Expenses and Changes in Net Position ...... 2
Exhibit C - Statement of Cash Flows ...... 3
Notes to Financial Statements ...... 4-14
SUPPLEMENTARY INFORMATION:
Schedule 1 - Comparative Schedule of Detail Operating Revenues ...... 15
Schedule 2 - Comparative Schedule of Detail Operating Expenses ...... 16
Schedule 3 – Comparative Schedule of Detail Other Income and Expense ...... 17
Required Supplementary Information ...... 18-19
Mark C. Turnley
Certified Public Accountant 293 Pinney Street Rochester, Pennsylvania 15074 (724) 371-0887 FAX (724) 709-8596
Board of Directors Borough of Ambridge Water Authority Ambridge, Pennsylvania
Independent Auditor's Report
Report on Financial Statements
I have audited the accompanying financial statements of the Borough of Ambridge Water Authority as of and for the year ended December 31, 2012, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Authority’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control. Accordingly, I express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.
i
American Institute of Certified Public Accountants Pennsylvania Institute of Certified Public Accountants
Opinion
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Borough of Ambridge Water Authority, Beaver County, Pennsylvania as of December 31, 2012 and the changes in financial position and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages iii-vii be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. I have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to my inquiries, the basic financial statements, and other knowledge I obtained during my audit of the basic financial statements. I do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
My audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise Borough of Ambridge Water Authority’s basic financial statements. The supplementary information (Schedules 1 through 3) is presented for purposes of additional analysis and is not a required part of the basic financial statements.
The supplementary information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records use to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In my opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Mark C. Turnley, CPA
September 6, 2013 Ambridge, Pennsylvania
ii BOROUGH OF AMBRIDGE WATER AUTHORITY BEAVER COUNTY, PENNSYLVANIA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) December 31, 2012
The discussion and analysis of the Borough of Ambridge Water Authority’s (AWA) financial performance provides an overall review of the Authority’s financial activities for the year ended December 31, 2012. The intent of this discussion and analysis is to look at the Authority’s financial performance as a whole; readers should also review the financial statements and notes to the financial statements to enhance their understanding of the Authority’s financial performance.
The Management Discussion and Analysis (MD&A) is an element of the new reporting model adopted by the Governmental Accounting Standards Board (GASB) in their Statement No. 34 Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments issued June 1999.
FINANCIAL HIGHLIGHTS
Key financial highlights for 2012 are as follows:
• Net assets increased by $51,280 in 2012 compared to an increase of $769,306 from 2010 to 2011.
• Total operating revenues were $4,182,976 in 2012, a very slight decrease of $13,317 from 2011.
• Total operating expenses were $3,439,061 in 2012, an increase of $478,049 (17%) from 2011 due mainly to an increase in pension contributions of approximately $240,000, operations labor costs increasing by approximately $107,000 and professional fees increasing by approximately $98,000 (engineering costs).
USING THE ANNUAL FINANCIAL REPORT (GASB 34)
The Annual Financial Report consists of the Management Discussion and Analysis (this section), basic financial statements, and notes to those statements. These statements present the financial position, results of operations and cash flows of AWA for the year 2012. The primary purposes of Borough of Ambridge Water Authority’s basic financial statements are as follows:
• Exhibit A – Statement of Net Assets – Provides a view of the financial condition of the Authority including its liquidity, capital assets, long-term debt obligations and net assets. Over time, increases or decreases in the Authority’s net assets are an indication of whether its financial health is improving or deteriorating. To assess the overall health of the Authority, you need to consider additional non-financial factors, such as changes in the Authority’s customer base and the condition of the Authority’s infrastructure (water-lines).
• Exhibit B – Statement of Revenues, Expenses and Changes in Net Assets – Provides information with regard to the types of revenues earned and expenses incurred by the Authority on an annual basis. In addition, this statement indicates whether charges for services to customers were sufficient to meet the current operating costs, and potentially certain capital costs, necessary to operate the Authority, or whether the Authority had to draw on prior net asset reserves to meet its obligations.
• Exhibit C – Statement of Cash Flows – Provides relevant information about the cash receipts and cash payments of AWA during the year, specifically, how much cash was generated for operating needs, and the amount of cash required for capital needs and debt service obligations. iii
BOROUGH OF AMBRIDGE WATER AUTHORITY BEAVER COUNTY, PENNSYLVANIA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) December 31, 2012
FINANCIAL ANALYSIS OF THE AUTHORITY
A breakdown of the assets, liabilities and net assets of the Authority for the years 2012 and 2011 is as follows:
INCREASE 2012 2011
Current Liabilities $ 1,348,443 $ 1,370,802 $ (22,359) Long-term Liabilities 10,080,679 9,555,435 525,244 TOTAL LIABILITIES $ 11,429,122 $ 10,926,237 $ 502,885
Net Investment in Capital Assets $ 5,278,399 $ 6,886,719 $ (1,608,320) Restricted - Expendable 1,263,526 1,046,902 216,624 Unrestricted 3,877,658 2,434,682 1,442,976 TOTAL NET POSITION $ 10,419,583 $ 10,368,303 $ 51,280
The increase in capital assets was mainly a result of continued costs incurred to complete various capital projects. The percentage of net assets invested in capital assets (buildings, land, equipment and infrastructure) net of accumulated depreciation and related debt, compared to total net assets decreased from 67% in 2011 to 51% in 2012 as a result of the increase in debt against the capital assets. Restricted net assets represent those funds received by the Authority as a result of its Water Revenue Bond issues, which are restricted as to purpose in accordance with the terms of the Trust Indentures securing those bond issues. The remaining unrestricted net assets are undesignated.
A comparison of the Authority’s revenues, expenses and changes in net assets for the years 2012 and 2011 is as follows: INCREASE 2012 2011
NonOperating Revenues $ 195,558 $ 231,103 $ (35,545) NonOperating Expenses 888,194 697,078 191,116 NET NONOPERATING REVENUE $ (692,636) $ (465,975) $ (226,661)
CHANGE IN NET ASSETS $ 51,280 $ 769,306 $ (718,026)
iv
BOROUGH OF AMBRIDGE WATER AUTHORITY BEAVER COUNTY, PENNSYLVANIA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) December 31, 2012
FINANCIAL ANALYSIS OF THE AUTHORITY (Continued)
Actual water usage charges decreased slightly from $4,196,293 in 2011 to $4,182,976 for 2012. Water usage reports filed with the Commonwealth of Pennsylvania Department of Environmental Protection reflect a slight increase in average daily water usage (GPD) from 4,562.000 gallons in 2011 to 4,564,000 in 2012.
With regard to operating expenses, Administrative costs increased due to a voluntary extra contribution to the employee pension fund. Hiring additional personnel to replace retirements during 2010 increased Distribution expense. All other operating costs were only slightly higher during 2012.
Non-Operating revenues decreased by $35,545 from 2012 mainly as a result of a decrease in investment earnings and other non-operating income.
A detail comparison of the operating revenues and expenses of the Authority for 2012 and 2011 is as follows:
INCREASE 2012 2011
OPERATING EXPENSES: Source of Supply $ 249,958 $ 231,467 $ 18,491 Purification and Laboratory 573,501 559,490 14,011 Transmission and Distribution 934,605 802,220 132,385 General and Administrative 1,213,657 971,829 241,828 Depreciation 467,340 396,006 71,334 TOTAL OPERATING EXPENSES $ 3,439,061 $ 2,961,012 $ 478,049
CAPITAL ASSET AND DEBT ADMINISTRATION
CAPITAL ASSETS
At December 31, 2012, the Authority had $17,058,976 invested in capital assets, including land, treatment plant, furniture and equipment, vehicles and work in progress net of depreciation. This amount represents a net increase (including additions, deletions and depreciation) of $977,164, or approximately 6.1% from last year. The Authority had approximately $1,444,504 in capital additions during the 2012 year. Major projects undertaken to improve water service and availability included a project to dredge a section of the reservoir in order to maintain the volume of the impoundment, renovating the Bacon Dam upstream dam face and box culvert, and relocation of the waterline away from a geologically unstable area of Conway Wallrose Road in Economy Boro. In addition, the Authority’s Operations and Maintenance Manual and the Emergency Action Plan were updated, requiring a significant number of hours to accomplish.
v
BOROUGH OF AMBRIDGE WATER AUTHORITY BEAVER COUNTY, PENNSYLVANIA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) December 31, 2012
CAPITAL ASSET AND DEBT ADMINISTRATION (Continued)
CAPITAL ASSETS (Continued)
A summary of the Authority’s capital assets net of accumulated depreciation for the past two years is as follows:
INCREASE 2012 2011
DEBT ADMINISTRATION
As of December 31, 2012, the Authority had Water Revenue Bond principal indebtedness outstanding of $12,635,000. The Authority’s debt obligations are comprised of the following Water Revenue Bond issues:
SERIES OF 2012
Water Revenue Bonds - Series 2012 were issued under the terms of the Trust Indenture dated December 27, 2012, by and between the Authority and U.S. Bank, as Trustee, in the amount of $6,300,000. The purpose of the bond issue was to refund a portion of the outstanding balances of the Water Revenue Bonds - Series A of 2008 and to provide monies for capital improvements to the existing water system. The bonds are scheduled to mature November 15, 2030. The outstanding principal balance on this bond issue at December 31, 2012 is $6,300,000.
SERIES OF 2008
Water Revenue Bonds - Series 2008 were issued under the terms of the Trust Indenture dated July 1, 2008, by and between the Authority and U.S. Bank, as Trustee, in the amount of $12,890,000. The purpose of the bond issue was to refund the outstanding balances of the Water Revenue Bonds - Series 1993, Series 1998 and Series 2005 and to provide monies for capital improvements to the existing water system. The bonds are scheduled to mature November 15, 2030. A portion of the Series A of 2008 issue was refunded with the Series 2012 issue. The outstanding principal balance on this bond issue at December 31, 2012 is $6,335,000.
The Authority is scheduled to make principal and interest payments on this debt of approximately $946,642 during the 2013 calendar year. More detailed information regarding the Authority’s long-term debt obligations is contained in Note 8.
vi
BOROUGH OF AMBRIDGE WATER AUTHORITY BEAVER COUNTY, PENNSYLVANIA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) December 31, 2012
ECONOMIC FACTORS
Economic conditions in Beaver County unfortunately reflected the national economy in 2012. Unemployment rates in Western Pennsylvania improved somewhat and never reached a level as high as the US average.
Ambridge Water Authority has exhibited continued growth potential in its service area, mainly in Economy Borough. Several planned residential developments are in various stages of activity, most notably Liberty Hills, the Villas at Economy Phase I, and Whispering Pines Phases II and III. Liberty Hills and the Villas are age restricted, with a starting price in the $230,000 range.
In addition, within Ambridge Borough the Brownfield development continues between 11th and 19th Streets, consisting of a mix of residential and commercial properties. A grocery store was built, and several manufacturing businesses expanded their operations. An additional commercial facility was built along Duss Avenue in Harmony Township. All of these developments increase the overall number of water customers for the Authority. Bulk water sales continue to increase slightly due to expansion of residential and commercial activity within the communities served. This will help bring additional revenue to the Authority and help in spreading out the Authority’s operating costs over a larger customer base.
Also on a positive side, the Water Purification Plant settling basins project was completed. Robotic cleaning devices were previously installed in the basins, and a major rerouting of piping connecting the basins to water plant processing was completed in 2009. During 2012 the plate settling equipment installation was concluded, which will further enhance the flocculation process. These renovations are expensive but it was not necessary to raise water rates to customers. The Authority is gradually approaching full capacity with regard to the number gallons that the Authority is permitted to withdraw from the reservoir and process for sale. A PennDot $19- million Ambridge/Aliquippa Bridge renovation project offered AWA an opportunity to undertake maintenance to the 24” raw waterline that would be difficult to complete with moving traffic. New wearing plates and rollers were installed to replace the originals that cradle the waterline and permit it to move with the vibrations of the bridge. The waterline will be painted as well. Unfortunately, the bridge project is taking longer than projected, so the painting will not be completed until sometime in 2014.
During the 2012 operating year, the emergency interconnect with West View Water Authority was used only twice – once during a large waterline break and once during a long power outage at the main tank farm. This supply of water is used to service Economy Borough in the event of an emergency or during planned repairs, which then extends other storage for customers in Harmony Township and Ambridge Borough. In 2013, a bypass is planned for the Legionville Pump Station, which will allow the West View water to be brought down to service the Ambridge/Harmony portion of the AWA service area as well.
CONTACTING THE AUTHORITY FINANCIAL MANAGEMENT
Our financial report is designed to provide our customers, investors and creditors with a general overview of the Authority’s finances and to show the Board of Directors' accountability for the money they administer on behalf of the communities served by the Borough of Ambridge Water Authority. If you have questions about this report or wish to request additional financial information, please contact the Borough of Ambridge Water Authority General Manager at 600 11th Street, Ambridge, Pa. 15003, (724)-266-4847.
vii
(This page left blank intentionally.) EXHIBIT A BOROUGH OF AMBRIDGE WATER AUTHORITY STATEMENT OF NET POSITION DECEMBER 31, 2012
ASSETS LIABILITIES
CURRENT ASSETS CURRENT LIABILITIES Cash and Cash Equivalents $ 1,115,746 Accounts Payable & Retainage Payable $ 139,773 Investments 680,025 Accrued Salaries and Benefits 15,659 Accounts Receivable - Net 1,443,191 Payroll Withholdings - Inventory - Plant materials 241,971 Customer Deposits 7,905 Prepaid Expenses 43,570 Accrued Interest Payable - Bonds 54,964 TOTAL CURRENT ASSETS $ 3,524,503 Due to Other Governmental Units 640,142 Water Revenue Bonds - Current Portion 490,000 TOTAL CURRENT LIABILITIES $ 1,348,443 RESTRICTED ASSETS Investments $ 1,263,526 TOTAL RESTRICTED ASSETS $ 1,263,526
LONG-TERM DEBT AND OTHER LIABILITIES PROPERTY, PLANT, AND EQUIPMENT Water Revenue Bonds - Series of 2012 $ 6,300,000 Utility Plant in Service $ 19,030,058 Water Revenue Bonds - Series of 2008 6,335,000 Service Creek Reservoir 6,358,341 Accumulated Compensated Absences 149,256 Small Tools 61,916 Deferred Loss on Early Retirement of Debt (1,333,777) Distribution Assets 76,236 Unamortized Bond Discount & Issue Costs (879,800) Administrative Building 200,000 $ 10,570,679 Office Furniture and Equipment 287,440 Current Portion - Water Revenue Bonds (490,000) $ 26,013,991 TOTAL LONG-TERM DEBT AND OTHER Less Accumulated Depreciation (9,886,487) LIABILITIES $ 10,080,679 $ 16,127,504 TOTAL LIABILITIES $ 11,429,122 Construction in Progress 931,472 NET PROPERTY, PLANT, AND EQUIPMENT $ 17,058,976 NET POSITION OTHER ASSETS Cylinder Deposit $ 1,700 Net Investment in Capital Assets $ 5,278,399 TOTAL OTHER ASSETS $ 1,700 Restricted - Expendable 1,263,526 Unrestricted 3,877,658 TOTAL ASSETS $ 21,848,705 TOTAL NET POSITION $ 10,419,583
The accompanying notes are an integral part of these financial statements 1 EXHIBIT B
BOROUGH OF AMBRIDGE WATER AUTHORITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATING REVENUES
Metered Sales $ 3,234,432 Unmetered Sales 58,841 Sales to Other Water Utilities 889,703
TOTAL OPERATING REVENUES $ 4,182,976
OPERATING EXPENSES
Source of Supply $ 249,958 Purification and Laboratory 573,501 Transmission and Distribution 934,605 General and Administrative 1,213,657 Depreciation 467,340
TOTAL OPERATING EXPENSES $ 3,439,061
NET OPERATING INCOME BEFORE NON-OPERATING REVENUE AND EXPENSE $ 743,915
NON-OPERATING REVENUE AND (EXPENSE)
Interest Income $ 2,241 Tap Fees 110,423 Miscellaneous Non-Operating Revenue 76,727 Interest on Long-Term Debt (780,463) Amortization of Bond Issue Costs (32,220) Amortization of Deferred Loss on Early Retirement of Debt (69,343) TOTAL NON-OPERATING REVENUE AND (EXPENSE) $ (692,635)
NET INCOME $ 51,280
NET POSITION - JANUARY 1, 2012 10,368,303
NET POSITION - DECEMBER 31, 2012 $ 10,419,583
The accompanying notes are an integral part of these financial statements 2 EXHIBIT C
BOROUGH OF AMBRIDGE WATER AUTHORITY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Water Billings $ 4,241,757 Cash Paid to Employees for Salaries and Benefits (1,512,682) Cash Paid to Suppliers (1,510,149) Net Cash Provided by Operating Activities $ 1,218,926
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES (Increase) Decrease in Restricted Assets $ (216,624) Tap-in Fees Received 110,423 Water Revenue Bond Payments (380,000) Net Proceeds from Bond Issue 5,815,014 2008 Bond Refunding (5,135,000) Bond Interest Paid (590,134) Fixed asset additions/purchases (1,475,044) Net Cash (Used In) Capital and Related Financing Activities $ (1,871,365)
CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES Miscellaneous Non-Operating Revenue Received $ 76,727 Net Cash Provided By NonCapital and Related Financing Activities $ 76,727
CASH FLOWS FROM INVESTING ACTIVITIES Interest Income Received $ 2,241 (Increase) Decrease in Investments 530,293 Net Cash Provided By Investing Activities $ 532,534
Net Increase in Cash and Cash Equivalents $ (43,178)
CASH AND CASH EQUIVALENTS - JANUARY 1 1,158,924
CASH AND CASH EQUIVALENTS- DECEMBER 31 $ 1,115,746
RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Operating Income $ 743,915
Adjustments to Reconcile Net Operating Income to Net Cash Provided by Operating Activities: Depreciation 467,340 Change in Current Assets and Liabilities: (Increase) Decrease in Customer Accounts Receivable 58,781 (Increase) Decrease in Inventories (29,236) (Increase) Decrease in Prepaid Expense 36,607 Increase (Decrease) in Accounts Payable 599 Increase (Decrease) in Accrued Salaries and Benefits (4,330) Increase (Decrease) in Payroll Withholdings (248) Increase (Decrease) in Due to Other Governmental Unit (64,347) Increase (Decrease) in Accumulated Compensated Absences 9,845 Net Cash Provided by Operating Activities $ 1,218,926 The accompanying notes are an integral part of these financial statements. 3 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION AND REPORTING ENTITY
DESCRIPTION
The Borough of Ambridge Water Authority is a public corporation of the Commonwealth of Pennsylvania, organized and existing under the Municipality Authorities Act of 1945. The Authority supplies water to residential, industrial, and commercial users in the Borough of Ambridge, the Borough of Economy, and Harmony Township. Members of the Authority Board are appointed by council members of the Borough of Ambridge. The Authority has no stockholders nor equity holders, and revenue or other cash received must be disbursed for specific purposes in accordance with provisions of the Trust Indenture securing the Water Revenue Bonds – Series of 2008 and the First Supplemental Trust Indenture securing the Water Revenue Bonds - Series of 2012.
The financial statements of the Ambridge Water Authority have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental ‘enterprise (proprietary) funds’. The focus of proprietary fund measurement is upon determination of operating income, changes in net position, financial position, and cash flows. The generally accepted accounting principles applicable are those similar to businesses in the private sector. The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). The more significant accounting policies established in GAAP and used by the Authority are discussed below.
REPORTING ENTITY
A reporting entity is comprised of the primary government, component units and other organizations that are included to ensure the financial statements are not misleading. The primary government of the Ambridge Water Authority consists of all funds, departments, boards and agencies that are not legally separate from the Authority. As defined by GASB Statement No. 14, component units are legally separate entities that are included in the Authority’s reporting entity because of the significance of their operating or financial relationships with the Authority. Based on the application of this criteria, the Ambridge Water Authority has no component units.
BASIS OF ACCOUNTING
The Authority utilizes the accrual method of accounting. Under this method, revenues are recognized when earned rather than when cash is received, and expenses are recognized when an obligation is incurred rather than when cash is actually paid.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include amounts in demand deposit accounts, and any other short-term highly liquid assets with original maturity terms of less than three months.
4 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INVESTMENTS
Investments are made pursuant to Section 7.1 of the Municipal Authorities Act and can include the following:
I. U.S. Treasury Bills II. Obligations of the U.S. Government and Federal Agencies III. Certificates of Deposit, Checking and Savings Accounts insured by the FDIC or National Credit Union Share Insurance Fund (NCUSIF) IV. General obligation bonds of the federal government, Commonwealth of Pennsylvania or any state agency V. Shares of Mutual Funds whose investments are restricted to the aforementioned investments
In addition, the Board of Directors can invest the Authority’s sinking funds as authorized for local governments in the Local Government Unit Debt Act, 53 Pa.C.S. 8224. Investment of the Authority’s restricted assets are made pursuant to and restricted by the Trust Indentures securing the water revenue bond issue. Investments include mutual funds invested by U.S. Bank as Trustee for the Authority’s Water Revenue Bonds (See Restricted Assets). Unrestricted investments are monies deposited to the 2012 Construction Fund for use to complete capital projects of the Authority. Investments are stated at fair value. The Water Authority is in compliance with these restrictions as of December 31, 2012.
RESTRICTED ASSETS
In accordance with the provisions of the Trust Indenture dated July 1, 2008 and the First Supplemental Trust Indenture dated December 28, 2012, the Authority is obligated to restrict certain funds for current operating expenses, to meet debt service requirements, and to maintain surplus funds. The total of these funds is reflected in Exhibit A as 'restricted assets' and detailed in Note 2. This amount is equally offset by a restriction to net position.
ACCOUNTS RECEIVABLE
Accounts receivable are stated at net realizable value. The Authority maintains an allowance for un- collectable accounts of $29,253 based upon the specific identification method for past due accounts.
INVENTORY - PLANT MATERIALS
Inventory is stated at the lower of cost or market value using the FIFO (first-in, first-out) method as estimated by management.
5 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
PROPERTY, PLANT, AND EQUIPMENT
All assets are recorded at cost and include betterments that extend the physical or economic life of the asset. Maintenance and repair costs are charged to operations as incurred. Utility plant for reclassification on the balance sheet represents items transferred to the Water Authority from the former water department of Ambridge. Depreciation expense is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Water-line Infrastructure 60-111 Years Buildings and Improvements 25-40 Years Furniture and Equipment 5-15 Years
Depreciation expense for the year ended December 31, 2012 was $467,340. Construction in progress at December 31, 2012 represents mainly funds paid in connection with the Authority’s pulsator rebuild project, the bacon dam repairs and plant filter controls project.
NET POSITION
Net position is classified into four categories according to external donor or legal restrictions or availability of assets to satisfy Authority obligations. Net position is classified as follows:
• Net Investment in Capital Assets – This component of net position consists of capital assets net of accumulated depreciation, and reduced by the outstanding balances of debt that is attributable to the acquisition, construction and improvement of the capital assets.
• Restricted-Nonexpendable – Net position subject to externally imposed restrictions which are required to be maintained in perpetuity.
• Restricted-Expendable – Net position whose use is subject to externally imposed conditions that can be fulfilled by the actions of the Authority or by the passage of time. Restricted net position at December 31, 2012 totaled $1,263,526 and was restricted for future debt service requirements.
• Unrestricted – Consists of net position that do not meet the definition of ‘restricted’ or ‘invested in capital assets, net of related debt’.
The Authority applies restricted resources first, when available, before using unrestricted resources, to pay expenditures that can be paid from either source.
ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires the Authority's management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
6 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 2 - CASH DEPOSITS AND INVESTMENTS
CASH DEPOSITS:
At December 31, 2012, the Authority had the following carrying value on its' cash and cash equivalent accounts held with Citizens Bank:
Bank Carrying Balance Value Revenue Fund $ 848,523 $ 848,523 Payroll Fund 87,416 87,416 Petty Cash - 1,709 D/C Clearing Account 45,782 45,782 Surplus Fund 307,312 307,312 Short-Term Disabilty 40,000 40,000 Medical Reimbursement 8,472 8,472 Hydrant Maintenance 46,125 46,125 A/P - Checking 109,815 37,720 $ 1,493,445 $ 1,423,059
The difference between the bank balance and the carrying value represents reconciling items such as deposits in transit and outstanding checks. All funds in a ‘noninterest-bearing transaction account’ are insured in full by the Federal Deposit Insurance Corporation (FDIC) from December 31, 2010 through December 31, 2012. This temporary unlimited coverage is in addition to, and separate from, the coverage of at least $250,000 available to depositors under the FDIC’s general deposit insurance rules. On May 20, 2009, the FDIC extended the increased insurance limits of $250,000 until December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor.
Custodial Credit Risk:
Custodial credit risk is the risk that in the event of a bank failure, the Authority’s deposits may not be returned to it. The Authority does not have a policy for custodial credit risk. As of December 31, 2012, none of the Authority’s bank balance total is exposed to custodial credit risk.
INVESTMENTS:
The fair value and maturity term of the Authority’s investments as of December 31, 2012 is as follows:
No Stated Fair Value Maturity Unrestricted: Mutual Funds $ 680,025 $ 680,025
Restricted: Mutual Funds $ 956,214 $ 956,214
7 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 2 - CASH DEPOSITS AND INVESTMENTS
INVESTMENTS: (Continued)
Credit Risk:
Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Authority has no formal investment policy that limits its investment choices based on credit ratings by nationally recognized rating organizations.
Custodial Credit Risk:
For an investment, custodial credit risk is the risk that in the event of the failure of the counterparty, the Authority will not be able to recover the value of its investments or collateral security that are in the possession of an outside party. The Authority’s investments in mutual funds are not exposed to custodial credit risk because their existence is not evidenced by securities that exist in physical or book entry form. The Authority does not have a formal investment policy for custodial credit risk. As of December 31, 2012 investments in First American Government Obligations Money Market Funds have received an ‘Aaa-mf’ rating from Moody’s Investor Services.
Interest Rate Risk:
The Authority does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.
Concentration of Credit Risk:
The Authority places no limit on the amount it may invest in any one issuer. The Authority’s investment concentration includes 100% in US Bank Money Market Funds (mutual funds).
The Authority's restricted assets as of December 31, 2012 are comprised of the following:
Debt Service Fund $ 10 Debt Service Reserve Fund 955,995 Surplus Fund 307,521 $ 1,263,526
NOTE 3 - ACCOUNTS RECEIVABLE
Accounts receivable, as reflected in Exhibit A, is comprised of the following:
Water service billings $ 829,853 Sewer service billings (Note 5) 473,858 Trash billings (Note 5) 127,713 Debt service billings (Note 5) 41,020 Less: Reserve for doubtful accounts (29,253) $ 1,443,191
8 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 4 - COLLECTION AGREEMENTS
The Ambridge Water Authority, in addition to its water billings, bills and collects sewer, refuse and certain debt service charges for the Borough of Ambridge Municipal Authority (sewer), the Borough of Ambridge (refuse) and the Borough of Bell Acres (debt service) respectively. Cash collections received by the Water Authority as of December 31, 2012, but not as yet remitted to these other governmental units, are reflected in the accompanying financial statements in 'Cash and Cash Equivalents' with the offsetting liability reflected as 'Due to Other Governmental Units' (Note 5).
NOTE 5 - DUE TO OTHER GOVERNMENTAL UNITS
Due to Other Governmental Units, as reflected in Exhibit A, is comprised of the following at December 31, 2012 (See Note 4):
Ambridge Municipal Authority $ 504,153 Borough of Ambridge 130,555 Borough of Bell Acres 5,434 $ 640,142
NOTE 6 - PROPERTY, PLANT, AND EQUIPMENT
The following comprises the changes to the Authority's property, plant, and equipment account during 2012:
Balance Balance 1/1/12 Additions Deletions 12/31/12 Utility Plant in Service $ 19,005,776 $ 24,282 $ - $ 19,030,058 Service Creek Reservoir 4,070,130 2,288,211 - 6,358,341 Small Tools & Distribution Assets 112,976 25,176 - 138,152 Administrative Building 200,000 - - 200,000 Office Furniture & Equipment 287,440 - - 287,440 $ 22,889,021 $ 2,337,669 $ - $ 26,013,991 Less: Accumulated Depreciation (9,419,147) (467,340) - (9,886,487) $ 13,865,880 $ 1,870,329 $ - $ 16,127,504 Construction in Progress 1,824,637 1,479,340 (2,372,505) 931,472 $ 14,269,608 $ 3,349,669 $ (2,372,505) $ 17,058,976
NOTE 7 - WATER REVENUE BONDS
SERIES of 2012
Water Revenue Bonds – Series of 2012 were issued under the terms of the First Supplemental Trust Indenture dated December 28, 2012, by and between the Authority and U.S. Bank, as Trustee, in the amount of $6,300,000. The purpose of the bond issue was to partially refund the outstanding balance of the Water Revenue Bonds - Series A of 2008 and to provide monies for capital improvements to the existing water system. The bonds were issued in denominations of $5,000 with interest payable semi- annually May 1 and November 1 on the current interest bonds, and at maturity on the compound interest bonds. The bonds are scheduled to mature November 15, 2030.
9 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 7 - WATER REVENUE BONDS (Continued)
SERIES A & B OF 2008
Water Revenue Bonds – Series A and B of 2008 were issued under the terms of the Fourth Trust Indenture dated July 1, 2008, by and between the Authority and U.S. Bank, as Trustee, in the amount of $12,890,000. The purpose of the bond issue was to refund the outstanding balance of the Water Revenue Bonds - Series 1993, 1995 and 2005 and to provide monies for capital improvements to the existing water system. The bonds were issued in denominations of $5,000 with interest payable semi- annually May 1 and November 1 on the current interest bonds, and at maturity on the compound interest bonds. The Water Revenue Bonds – Series of 2012 advance refunded a portion of the Water Revenue Bonds – Series A of 2008 ($5,135,000). The remaining bonds are scheduled to mature November 15, 2030.
Under the 2008 bond trust indenture and the subsequent 2012 first supplemental trust indenture, the Authority has made certain covenants, which essentially provide that rates are to be set at levels such that system revenues together with amounts available in the revenue fund are sufficient to provide funds to pay current expenses of the Authority (without consideration of depreciation); to make transfers to the Debt Service Reserve Fund when required; and an amount equal to the maximum annual debt service requirement as related to the bonds. The Authority is in compliance with the aforementioned debt covenants for the year ended December 31, 2012.
The following summarizes the debt service obligations of the Authority as of December 31, 2012:
Year End Series A Series B 2008 2008 Series 2012 Dec 31 Principal Principal Principal Interest Total 2013 $ - $ 395,000 $ 95,000 $ 456,641 $ 946,641 2014 - 420,000 80,000 451,469 951,469 2015 - 440,000 80,000 427,809 947,809 2016 - 470,000 85,000 400,689 955,689 2017 - 495,000 85,000 370,934 950,934 2018-2022 715,000 1,055,000 1,610,000 1,382,224 4,762,224 2023-2027 1,375,000 - 2,570,000 816,385 4,761,385 2028-2030 970,000 - 1,695,000 180,094 2,845,094 $ 3,060,000 $ 3,275,000 $ 6,300,000 $ 4,486,245 $ 17,121,245
DEFERRED FINANCING COSTS
In connection the Authority’s Series of 2008 and 2012 bond issues, the Authority paid approximately $1,053,110 in bond discount and closing costs. These costs are being amortized on a straight-line basis over the life of the bond issues. The unamortized amount of bond discount and closing costs totaling $879,800 at December 31, 2012 is reflected in Exhibit A as a deduction against the Authority’s long-term debt obligations. Amortization expense was $39,240 for 2012.
10 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 7 - WATER REVENUE BONDS (Continued)
The following represents the changes in the Authority's debt obligations during 2012:
Balance Balance Due Within 1/1/12 Additions Deletions 12/31/12 One Year Bonds $ 11,850,000 $ 6,300,000 $ (5,515,000) $ 12,635,000 $ 490,000 Compensated Absences (Note 10) 139,411 9,845 - 149,256 - $ 12,356,557 $ 6,309,845 $ (5,515,000) $ 12,784,256 $ 490,000
NOTE 8 - DEFERRED LOSS ON EARLY RETIREMENT OF DEBT
In July of 2008, the Authority refunded its Water Revenue Bonds - Series of 1995, 1998 and 2005. In December of 2012 the Authority refunded a portion of the Series A of 2008 issue. The difference between the reacquisition prices (amount placed with escrow agent, U.S. Bank) and the net carrying amount of the old debt is classified as 'deferred loss on early retirement of debt' and reflected in Exhibit A as a deduction against the Authority’s long-term debt obligations. These amounts are being amortized over the remaining life of the Series of 2008 and Series of 2012 bond issues using the straight line method. The unamortized amount remaining at December 31, 2012 was $1,333,777 as reflected on Exhibit A. Amortization of the deferred loss totaled $69,343 for 2012.
NOTE 9 - AUTHORITY PENSION PLAN
The Ambridge Water Authority established a single-employer defined benefit pension plan on September 12, 1957, as amended, to provide retirement benefits to eligible employees of the Authority.
Plan membership as of January 1, 2011 was comprised of:
Active employees 18 Retirees and beneficiaries currently receiving benefits 5 Terminated employees entitled to benefits but not yet receiving them 1 Total 24
A summary of the plan's provisions is as follows:
PARTICIPANTS - All full-time employees of the Authority with one year of full-time service and have attained age twenty-one. ELIGIBILITY - All participants are eligible for retirement benefits provided that they have attained the age of 65 or have completed 10 years of continuous service. Participants are eligible for early retirement at age 55. VESTING - Vesting occurs on a sliding scale with full vesting occurring after four years of service. BENEFITS - 1.15% of Final Average Monthly salary times years of continuous service.
11 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 9 - AUTHORITY PENSION PLAN (Continued)
DEATH BENEFIT - The plan provides for beneficiary benefits named by the participant under options as detailed in the retirement plan. FUNDING - Member contributions equal 2.0% (1/1/01) of compensation. Members contributed $11,092 to the plan during 2012. The Authority’s contribution totaled $320,686 for 2012. The investment income of the plan was used to fund administrative costs. There are no long-term contracts for contributions as of December 31, 2012. In addition, there are no assets legally reserved for purposes other than the payment of plan member benefits.
Below is the Statement of Net position Available for Benefits and the Statement of Changes in Net position Available for Benefits derived from the Plan’s financial statements for the year ended December 31, 2012.
Statement of Net position Available for Benefits
2012 2011 Assets Investments, at fair value $ 2,153,115 $ 1,681,881 Receivable, Employer Contribution - - Net Assets Available for Benefits $ 2,153,115 $ 1,681,881
Statement of Changes in Net position available for Benefits
2012 2011 Additions to Net Position: Contributions: Employer $ 320,686 $ 62,930 Employee 11,092 14,541 Total Contributions $ 331,778 $ 77,471
Interest income/gains and losses on sales $ 40,952 $ 39,524 Unrealized appreciation 123,270 38,216 Net change in fair value of investments 31,375 (56,623) Total additions $ 527,375 $ 98,588
Deductions from Net Position: Benefits paid $ (49,939) $ (50,062) Administrative fees (6,202) (6,415) Total Deductions $ (56,141) $ (56,477)
Change in net position 471,234 42,111
Net Position Available for Benefits January 1, 1,681,881 1,639,770
Net Position Available for Benefits December 31, $ 2,153,115 $ 1,681,881
12 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 9 - AUTHORITY PENSION PLAN (Continued)
As of January 1, 2011, the date of the most recent actuarial valuation, the unfunded accrued liability of the plan was as follows:
Actuarial Value of Assets $ 1,686,664 Actuarial Accrued Liability 1,967,135 Unfunded Actuarial Accrued Liability $ 280,471
The Net Pension Obligation (NPO) of the Authority is equal to zero at January 1, 2011. The Annual Pension Cost (APC) totals $70,686 for 2012. An additional deposit of $250,000 was made to pension plan in 2012. Additional trend information regarding annual pension costs, percentage contributions and any net pension obligations (NPO) is available from the Authority’s actuary.
NOTE 10 – ACCUMULATED COMPENSATED ABENCES
In accordance with the terms of the collective bargaining agreement between the Borough of Ambridge Water Authority and Local Union 1211 dated January 1, 2005, all regular full-time employees with more than one year of service may accumulate sick leave at a rate of one day per month if hired before December 31, 2004. Full-time employees hired after January 1, 2005 will be given four sick days on January 1st and four sick days on July 1st of each year. All full-time employees may accumulate an unlimited quantity of unused sick days for the total term of their employment. Sick days will be compensated at retirement or termination at the following rates:
DAYS AMOUNT 1-100 $60 per day up to 100 101-150 $70 per day up to 150 151-190 $80 per day up to 190 191-230 $90 per day up to 230 231+ $100 per day for every day from day 1
As of December 31, 2012, the value of accumulated compensated absences totaled $149,256.
NOTE 11 - RISK MANAGEMENT
The Ambridge Water Authority is exposed to various risks of loss related to tort; theft of, damage to, and destruction of assets, errors and omissions; injuries to employees; and natural disasters. These risks are covered by commercial insurance purchased from independent third parties. Settled claims for these risks have not exceeded commercial insurance coverage for the past three years.
NOTE 12– SUBSEQUENT EVENTS
Management has determined that there are no events subsequent to December 31, 2012 through the date of the financial statements that require disclosure.
13 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE 13 – PENDING GASB PRONOUNCEMENTS
In June of 2011, GASB issued Statement No. 61, The Financial Reporting Entity. The objective of this Statement is to have financial reporting entity financial statements be more relevant by improving guidance for including, presenting, and disclosing information about component units and equity interest transactions of a financial reporting entity. The provisions of this Statement are effective for the Authority’s December 31, 2013 financial statements.
In March 2012, GASB issued Statement No. 65, Items Previously Reported as Assets and Liabilities. Statement No. 65 clarifies the appropriate reporting of deferred outflows of resources and deferred inflows of resources to ensure consistency in financial reporting. The provisions of this Statement are effective for the Authority’s December 31, 2013 financial statements.
In March 2012, GASB issued Statement No. 66, Technical Corrections, an Amendment of GASB Statements No. 10 and 62. The objective of this Statement is to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted from the issuance of two pronouncements, Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, and No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre- November 30, 1989 FASB and AICPA Pronouncements. The provisions of this Statement are effective for the Authority’s December 31, 2013 financial statements.
In June 2012, GASB issued Statements No. 67 and 68, Accounting and Financial Reporting for Pensions, which amend GASB Statements Nos. 25 and 27. The primary objective of these Statements is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. The provisions of these Statements are effective for the Authority’s December 31, 2014 financial statements.
The effect of implementing GASB Statement No. 65 will be to write-off the unamortized amount of bond issuance costs against net position of the Authority as of January 1, 2013. The effects of the implementation of the other aforementioned standards on the Ambridge Water Authority’s financial statements have not yet been determined.
14
SUPPLEMENTARY INFORMATION
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BOROUGH OF AMBRIDGE WATER AUTHORITY COMPARATIVE SCHEDULE OF DETAIL OPERATING REVENUES FOR THE YEARS ENDED DECEMBER 31,
METERED SALES 2012 2011
Metered Customer Sales $ 3,233,129 $ 3,337,483
TOTAL METERED SALES $ 3,233,129 $ 3,337,483
UNMETERED SALES
Private Fire Protection - Borough of Ambridge $ 6,665 $ 6,921 Private Fire Protection - Harmony Township 4,132 4,052 Public Fire Protection - Harmony Township 12,000 12,000 Public Fire Protection - Economy Borough 34,765 34,765 Other 2,583 2,121
TOTAL UNMETERED SALES $ 60,145 $ 59,859
SALES TO OTHER WATER UTILITIES
Borough of Baden $ 325,383 $ 240,738 New Sewickley Township 94,874 88,905 Edgeworth Municipal Authority 469,445 469,308
TOTAL SALES TO OTHER WATER UTILITIES $ 889,702 $ 798,951
TOTAL OPERATING REVENUES $ 4,182,976 $ 4,196,293
The accompanying notes are an integral part of these financial statements 15 SCHEDULE 2
BOROUGH OF AMBRIDGE WATER AUTHORITY COMPARATIVE SCHEDULE OF DETAIL OPERATING EXPENSES FOR THE YEARS ENDED DECEMBER 31,
SOURCE OF SUPPLY EXPENSE 2012 2011 Maintenance of Structures and Equipment $ 3,280 $ 3,609 Professional Fees 57,243 40,363 Power Purchases 167,842 164,867 Other Direct Costs 21,593 22,628 TOTAL SOURCE OF SUPPLY EXPENSE $ 249,958 $ 231,467
PURIFICATION AND LABORATORY Operation Labor $ 274,093 $ 228,944 Maintenance of Structures and Equipment 21,721 27,278 Professional Fees 25,259 8,076 Power Purchases 74,402 72,565 Chemicals 122,675 109,493 Other Direct Costs 55,351 113,134 TOTAL PURIFICATION AND LABORATORY $ 573,501 $ 559,490
TRANSMISSION AND DISTRIBUTION Operation Labor $ 433,690 $ 371,707 Maintenance of Structures and Equipment 25,169 31,429 Professional Fees 74,042 7,260 Power Purchases 173,879 177,543 Service on Customer Premises 37,994 29,042 Tubes, Valves and Fittings 75,837 66,520 Other Direct Costs 113,994 118,719 TOTAL TRANSMISSION AND DISTRIBUTION $ 934,605 $ 802,220
GENERAL AND ADMINISTRATIVE Management Salaries $ 146,726 $ 136,386 Executive Salaries 5,750 10,857 Office Salaries and Wages 126,185 120,977 Meter Reading Salaries 10,668 45,521 Employee Benefits 521,662 281,816 Insurance 84,045 86,609 Professional Services 122,393 124,919 Payroll Taxes 84,588 79,966 Miscellaneous Expenses 111,640 84,778 TOTAL GENERAL AND ADMINISTRATIVE $ 1,213,657 $ 971,829
DEPRECIATION $ 467,340 $ 396,006
TOTAL OPERATING EXPENSES $ 3,439,061 $ 2,961,012
The accompanying notes are an integral part of these financial statements 16 SCHEDULE 3
BOROUGH OF AMBRIDGE WATER AUTHORITY COMPARATIVE SCHEDULE OF DETAIL NON-OPERATING REVENUE AND EXPENSE FOR THE YEARS ENDED DECEMBER 31,
2012 2011 NON-OPERATING REVENUE
Interest Income $ 2,241 $ 5,738 Tap Fees 110,423 111,917 Lien Letters/Turn on Fees/Property Rentals 24,325 26,665 Miscellaneous Non-Operating Income 58,569 86,783
TOTAL NON-OPERATING REVENUE $ 195,558 $ 231,103
NON-OPERATING EXPENSE
Interest on Long-Term Debt $ 780,463 $ 590,610 Amortization of Bond Issue Costs 32,220 32,220 Refund of Prior Year Receipts 6,168 - Amortization of Deferred Loss on Early Retirement of Debt 69,343 74,248
TOTAL NON-OPERATING EXPENSE $ 888,194 $ 697,078
The accompanying notes are an integral part of these financial statements 17
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REQUIRED SUPPLEMENTARY INFORMATION
Mark C. Turnley
Certified Public Accountant BOROUGH OF AMBRIDGE WATER AUTHORITY REQUIRED SUPPLEMENTARY INFORMATION DEFINED BENEFIT PENSION PLAN DECEMBER 31, 2012
SCHEDULES OF FUNDING PROGRESS:
(A) (B) (B-A) (A/B) (C) (B-A)/C (UAAL) UNFUNDED UAAL AS A ACTUARIAL ACTUARIAL ACTUARIAL ACTUARIAL % OF VALUATION VALUE OF ACCRUED ACCRUED FUNDED COVERED COVERED DATE ASSETS LIABILITY LIABILITY RATIO PAYROLL PAYROLL 1/1/01 $ 763,326 $ 760,166 (3,160) 100% $ 668,132 -0.5% 1/1/03 696,206 1,012,239 316,033 69% 685,755 46.1% 1/1/05 1,050,971 1,204,514 153,543 87% 752,573 20.4% 1/1/07 1,379,888 1,553,826 173,938 89% 799,840 21.7% 1/1/09 1,464,554 1,714,537 249,983 85% 801,349 31.2% 1/1/11 1,686,664 1,967,135 280,471 86% 766,324 36.6%
SCHEDULES OF EMPLOYER'S CONTRIBUTIONS:
2001 18,914 100% 2002 25,252 100% 2003 26,012 100% 2004 66,368 100% 2005 65,834 100% 2006 59,574 100% 2007 61,085 100% 2008 66,827 100% 2009 67,542 100% 2010 66,955 100% 2011 62,930 100% 2012 320,686 * 100%
*Authority contributed additional $250,000 above the MMO required contribution
18 BOROUGH OF AMBRIDGE WATER AUTHORITY NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2012
NOTE 1 - TREND INFORMATION
The comparability of trend information is affected by changes in actuarial assumptions, benefit provisions, actuarial funding methods, accounting policies, and other changes. Those changes usually affect trends in contribution requirements and in ratios that use the actuarial accrued liability as a factor.
Analysis of the dollar amount of the actuarial value of assets, actuarial accrued liability, and unfunded (assets in excess of) actuarial accrued liability in isolation can be misleading. Expressing the actuarial value of assets as a percentage of the actuarial accrued liability provides one indication of the plan's funding status on a going-concern basis. Analysis of this percentage, over time, indicates whether the system is becoming financially stronger or weaker. Generally, the greater this percentage, the stronger the plan.
Trends in unfunded (assets in excess of) actuarial accrued liability and annual covered payroll are both affected by inflation. Expressing the unfunded (assets in excess of) actuarial accrued liability as a percentage of annual covered payroll approximately adjusts for the effects of inflation and aids analysis of the plan's progress made in accumulating sufficient assets to pay benefits when due. Generally, where there is an unfunded actuarial accrued liability, the smaller this percentage, the stronger the plan. However, when assets are in excess of the actuarial accrued liability, the higher the bracketed percentage, the stronger the plan.
NOTE 2 - ACTUARIAL ASSUMPTIONS AND METHODS
The information presented in the preceding required supplementary information section was determined as part of the actuarial valuations dated January 1, 2011. Additional information included as part of this valuation is as follows:
Actuarial Cost Method – Entry Age Normal
Amortization Method and Remaining Amortization Period – N/A
Asset Valuation Method – Fair Value
Investment Rate of return – 7.0% per annum
Salary Increase – 4.0% per annum
19
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APPENDIX D
BOOK-ENTRY-ONLY SYSTEM
(Schedule A of DTC’s current form of Blanket Letter of Representations For Book-Entry-Only Municipal Bonds)
(This page left blank intentionally.) SCHEDULE A (To Blanket Issuer Letter of Representations) SAMPLE OFFERING DOCUMENT LANGUAGE DESCRIBING BOOK-ENTRY-ONLY ISSUANCE (Prepared by DTC--bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the securities (the "Securities"). The Securities will be issued as fully-registered securities 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 Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of[any] issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.]
2. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning oft he New York Banking Law, a member ofthe 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 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTC C 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 a 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.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC 's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities 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 Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name ofDTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners ofthe Securities; DTC's records reflect only the identity ofthe Direct Participants to whose accounts such Securities 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.
BLOR 06-2013 SCHEDULE A (To Blanket Issuer Letter of Representations)
5. 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. [Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.]
[6. Redemption notices shall be sent to DTC. Ifless than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.]
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities 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 Issuer or Agent, on payable date in accord ance with their respective holdings shown on DT C'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, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Ten der/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or am andatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent's DTC account.]
10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.
11. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
12. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
BLOR 06-2013
APPENDIX E
BOND INSURANCE
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THE FOLLOWING TEXT AND APPENDIX F TO THIS OFFICIAL STATEMENT IN ITS ENTIRETY HAS BEEN PROVIDED BY ASSURED GUARANTY MUNICIPAL CORP. FOR INCLUSION IN THIS OFFICIAL STATEMENT.
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 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. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by 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 “A2” (stable outlook) by Moody’s Investors Service, Inc. (“Moody’s”). Each rating should be evaluated independently. 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 June 12, 2013, S&P published a report in which it affirmed AGM’s “AA-“ (stable outlook) financial strength rating. AGM can give no assurance as to any further ratings action that S&P may take.
On January 17, 2013, Moody’s issued a press release stating that it had downgraded AGM’s insurance financial strength rating to “A2” (stable outlook) from “Aa3.” AGM can give no assurance as to any further ratings action that Moody’s may take.
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, 2012.
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Capitalization of AGM At September 30, 2013, AGM’s consolidated policyholders’ surplus and contingency reserves were $3,458,464,281 and its total net unearned premium reserve was $1,902,038,053, in each case, in accordance with statutory accounting principles.
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, 2012 (filed by AGL with the SEC on March 1, 2013);
(ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 (filed by AGL with the SEC on May 10, 2013);
(iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 (filed by AGL with the SEC on August 9, 2013); and
(iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013 (filed by AGL with the SEC on November 12, 2013).
All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof “furnished” under Item 2.02 or Item 7.01 of Form 8-K, 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) 974-0100). Except for the information referred to above, no information available on or through AGL’s website shall be deemed to be part of or incorporated in this Official Statement.
Any information regarding AGM included herein under the caption “Appendix E – 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 such purchases may constitute a significant proportion of the bonds offered. AGM or such affiliate 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.
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 this Appendix E.”
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APPENDIX F
SPECIMEN 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)
APPENDIX G
$3,280,000 BOROUGH OF AMBRIDGE WATER AUTHORITY Beaver County, Pennsylvania Water Revenue Bonds, Series of 2014
ANNUAL DEBT SERVICE REQUIREMENTS
Dated: Date of Delivery Due: November 15, as shown below
Interest payable May 15 and November 15, beginning May 15, 2014.
Year Ending Principal Sinking Annual Interest November 15 Amount Fund Rate Interest Total
2014 0.750% $ 82,663.39 $ 82,663.39 2015 $20,000 2.000 111,456.25 131,456.25 2016 20,000 2.000 111,306.25 131,306.25 2017 20,000 2.000 110,906.25 130,906.25 2018 20,000 2.000 110,506.25 130,506.25 2019 35,000 2.350 110,106.25 145,106.25 2020 250,000 2.750 109,406.25 359,406.25 2021 250,000 3.000 103,531.25 353,531.25 2022 260,000 3.250 96,656.25 356,656.25 2023 265,000 3.250 88,856.25 353,856.25 2024 275,000 3.500 80,243.75 355,243.75 2025 285,000 3.625 71,306.25 356,306.25 2026 295,000 3.750 61,331.25 356,331.25 2027 305,000 50,637.50 355,637.50 2028 $315,000 4.000 39,200.00 354,200.00 2029 645,000 330,000* 4.000 26,600.00 356,600.00 2030 335,000 0.750% 13,400.00 348,400.00
TOTALS $3,280,000 $1,378,113.39 $4,658,113.39
______*By Maturity
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