Stadium STAR Bond OS

NEW ISSUE RATING: Moody’s – Aa3 BOOK-ENTRY ONLY See “RATING” herein In the opinion of Gilmore & Bell, P.C., Bond Counsel to the City, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended, the interest on the Series 2018 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes, except as described in this Official Statement, and is not an item of tax preference for purposes of the federal alternative minimum tax. The interest on the Series 2018 Bonds is exempt from income taxation by the State of Kansas. The Series 2018 Bonds have not been designated as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. Bond Counsel expresses no other opinion as to any other federal or state tax law consequences pertaining to the Series 2018 Bonds. See “TAX MATTERS” herein and the form of opinion of Bond Counsel attached hereto as Appendix E. $42,140,000 CITY OF WICHITA, KANSAS SALES TAX SPECIAL OBLIGATION REVENUE BONDS (RIVER DISTRICT STADIUM STAR BOND PROJECT) SERIES 2018 Dated: Date of Delivery Due: As shown on inside cover page The Series 2018 Bonds are being issued by the City of Wichita, Kansas (the “City”) pursuant to a Bond Trust Indenture dated as of November 1, 2018 (the “Indenture”), by and between the City and Security Bank of Kansas City, Kansas City, Kansas, as trustee (the “Trustee”) to (i) pay a portion of the costs of the 2018 Projects (as defined herein); (ii) fund a deposit to the Capitalized Interest Fund established under the Indenture for the Series 2018 Bonds to pay interest on the Series 2018 Bonds through September 1, 2020, and (iii) pay certain costs related to the issuance of the Series 2018 Bonds. The Series 2018 Bonds are special, limited obligations of the City payable solely from and secured by a pledge of, and lien upon, certain State of Kansas (the “State”) and local sales and compensating use tax revenues generated in the herein defined District (as defined herein) and, if insufficient, from Available Local Sales Tax Funds (as defined herein) (collectively, theRevenues “ ” as more specifically described herein) and other moneys held by the Trustee pursuant to the Indenture. The application of Available Local Sales Tax Funds to the payment of the Series 2018 Bonds is subject to annual appropriation by the City, as described herein. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS” and “TAX DISTRIBUTION AGREEMENT” herein. The Series 2018 Bonds are issuable only as fully registered bonds, and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Series 2018 Bonds. Purchases of the Series 2018 Bonds will be made in book-entry form in the original denomination of $5,000 or any integral multiple of $5,000 in excess thereof (the “Authorized Denominations”). See “THE SERIES 2018 BONDS – Registration, Transfer and Exchange.” Purchasers will not receive physical certificates representing their interests in Series 2018 Bonds purchased. So long as Cede & Co. is the registered owner of the Series 2018 Bonds, as nominee of DTC, references herein to the Bondowners or Registered Owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (herein defined) of the Series 2018 Bonds. Principal of and semiannual interest on the Series 2018 Bonds will be paid from moneys available therefor under the terms of the Indenture. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to such Bondowner. DTC is expected, in turn, to remit such principal and interest to the DTC Participants (herein defined) for subsequent disbursement to the Beneficial Owners. Interest on the Series 2018 Bonds will be payable semiannually on each March 1 and September 1, beginning March 1, 2019. The Series 2018 Bonds are subject to redemption prior to maturity in certain circumstances as described herein. See “THE SERIES 2018 BONDS—Redemption Provisions” herein. MATURITY SCHEDULE—SEE INSIDE COVER PAGE THE SERIES 2018 BONDS ARE NOT GENERAL OBLIGATIONS OF THE CITY AND NEITHER THE FULL FAITH AND CREDIT NOR THE GENERAL TAXING POWER OF THE CITY, THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE SERIES 2018 BONDS. THE SERIES 2018 BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS OF THE CITY, THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. SEE “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS” HEREIN. The Series 2018 Bonds involve a degree of risk, and prospective purchasers should read the section herein captioned “BONDOWNERS’ RISKS.” This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. The Series 2018 Bonds are offered when, as and if issued by the City and received by Crews & Associates, Inc. (the “Underwriter”), subject to approval of their validity by Gilmore & Bell, P.C., Wichita, Kansas, Bond Counsel to the City, and subject to certain other conditions. Certain other legal matters will be passed upon for the City by Jennifer Magaña, Esq., Director of Law and City Attorney, and for the Underwriter by its counsel, Bryan Cave Leighton Paisner LLP, Kansas City, Missouri. It is expected the Series 2018 Bonds will be available for delivery on or about November 16, 2018.

Official Statement dated November 1, 2018

$42,140,000 CITY OF WICHITA, KANSAS SALES TAX SPECIAL OBLIGATION REVENUE BONDS (RIVER DISTRICT STADIUM STAR BOND PROJECT) SERIES 2018

MATURITY SCHEDULE

Serial Bonds

Maturity Date Principal Interest CUSIP(1) (September 1) Amount Rate Price Number 2023 $ 500,000 4.000% 106.150% 967323AF3 2024 520,000 4.000 106.426 967323AG1 2025 2,155,000 5.000 112.725 967323AH9 2026 2,265,000 5.000 113.428 967323AJ5 2027 2,375,000 5.000 113.858 967323AK2 2028 2,250,000 5.000 113.039(2) 967323AL0 2028 245,000 3.375 98.153 967323AM8 2029 1,525,000 5.000 112.389(2) 967323AN6 2029 1,090,000 3.500 98.317 967323AP1 2030 1,675,000 5.000 111.824(2) 967323AQ9 2030 1,055,000 3.500 97.631 967323AR7 2031 1,000,000 5.000 111.422(2) 967323AS5 2031 1,850,000 3.625 98.250 967323AT3 2032 2,970,000 5.000 111.022(2) 967323AU0

Term Bonds

$20,665,000 4.000% Term Bonds Due September 1, 2038; Price: 98.648%; CUSIP(1) Number: 967323AV8

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______(1) CUSIP numbers have been assigned to this issue by Standard & Poor’s CUSIP Service Bureau, a division of McGraw Hill Financial Inc., and are included solely for the convenience of the Owners of the Bonds. Neither the City nor the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers set forth above. (2) Priced to September 1, 2027 optional redemption date.

CITY OF WICHITA, KANSAS

City Hall 455 N. Main Wichita, Kansas 67202

GOVERNING BODY

Jeff Longwell, Mayor Bryan Frye, Vice Mayor (District V) Brandon Johnson, Councilmember (District I) Pete Meitzner, Councilmember (District II) James Clendenin, Councilmember (District III) Jeff Blubaugh, Councilmember (District IV) Cindy Claycomb, Councilmember (District VI)

ADMINISTRATION

Robert Layton, City Manager Scot Rigby, Assistant City Manager Shawn Henning, Director of Finance Karen Sublett, City Clerk Jennifer Magaña, Esq., Director of Law and City Attorney

BOND COUNSEL

Gilmore & Bell, P.C. Wichita, Kansas

UNDERWRITER’S COUNSEL

Bryan Cave Leighton Paisner LLP Kansas City, Missouri

TRUSTEE AND DISSEMINATION AGENT

Security Bank of Kansas City Kansas City, Kansas

UNDERWRITER

Crews & Associates, Inc. Little Rock, Arkansas

MUNICIPAL ADVISOR

Springsted Incorporated St. Paul, Minnesota

REGARDING USE OF THIS OFFICIAL STATEMENT

No dealer, broker, salesperson or other person has been authorized by the City or the Underwriter to give information or to make any representations with respect to the Series 2018 Bonds, 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 any of the foregoing. This Official Statement is being furnished by the City for the purpose of each investor’s consideration of the purchase of the Series 2018 Bonds as described herein, and is not to be used for any other purpose or made available to anyone not directly concerned with the decision regarding such purchase. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement, nor any sale hereunder implies that there has been no change in the matters described herein since the date hereof. 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 Series 2018 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. THE SERIES 2018 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND THE INDENTURE HAS NOT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE SERIES 2018 BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF SECURITIES LAWS OF ANY STATES IN WHICH THE SERIES 2018 BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE SERIES 2018 BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. THE PURCHASE OF THE SERIES 2018 BONDS IS AN INVESTMENT SUBJECT TO A DEGREE OF RISK, INCLUDING THE RISK OF NONPAYMENT. PROSPECTIVE INVESTORS SHOULD READ THE SECTION CAPTIONED “BONDOWNERS’ RISKS” HEREIN. PROSPECTIVE PURCHASERS OF THE SERIES 2018 BONDS SHOULD CAREFULLY EVALUATE THE MERITS AND RISKS OF INVESTMENT IN THE SERIES 2018 BONDS AND SHOULD CONFER WITH THEIR LEGAL AND FINANCIAL ADVISORS, AS DEEMED APPROPRIATE. ______CAUTIONARY STATEMENTS REGARDING FORWARD- LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “project,” “plan,” “expect,” “estimate,” “anticipate,” “budget,” “intent” or other similar words. Such forward looking statements include, among others, certain statements under the sections in this Official Statement captioned “BONDOWNERS’ RISKS,” “THE DISTRICT AND THE 2018 PROJECTS” and “PROJECTED CASH FLOW MODELS FOR THE SERIES 2018 BONDS” in this Official Statement. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INCLUDED IN SUCH RISKS AND UNCERTAINTIES ARE (i) THOSE RELATING TO THE POSSIBLE INVALIDITY OF THE UNDERLYING ASSUMPTIONS AND ESTIMATES, (ii) POSSIBLE CHANGES OR DEVELOPMENTS IN SOCIAL, ECONOMIC, BUSINESS, INDUSTRY, MARKET, LEGAL AND REGULATORY CIRCUMSTANCES, AND (iii) CONDITIONS AND ACTIONS TAKEN OR OMITTED TO BE TAKEN BY THIRD PARTIES, INCLUDING CUSTOMERS, SUPPLIERS, BUSINESS PARTNERS AND COMPETITORS, AND LEGISLATIVE, JUDICIAL AND OTHER GOVERNMENTAL AUTHORITIES AND OFFICIALS. ASSUMPTIONS RELATED TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE, AND MARKET CONDITIONS AND FUTURE BUSINESS DECISIONS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY. FOR THESE REASONS, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS OFFICIAL STATEMENT WILL PROVE TO BE ACCURATE.

TABLE OF CONTENTS

INTRODUCTION ...... 1 Tax Rates ...... 35 General ...... 1 Destination Sourcing Rules Relating to Kansas Sales ...... 36 The City...... 1 Sales Tax Reporting and Collection ...... 36 STAR Bonds Overview ...... 1 Deposit and Transfer of Tax Revenues ...... 36 The District and the Project ...... 2 Confidentiality of Tax Information ...... 37 The Series 2018 Bonds ...... 5 Enforcement, Penalties and Interest ...... 38 Security and Sources of Payment for the Series 2018 TAX DISTRIBUTION AGREEMENT ...... 38 Bonds ...... 5 Overview ...... 38 Bondowners’ Risks ...... 7 TDA Escrow Fund ...... 38 Definitions and Summaries of Documents ...... 7 Collection and Transfer of Incremental City Sales Tax Continuing Disclosure ...... 8 Revenues ...... 39 THE DISTRICT AND THE 2018 PROJECTS ...... 8 Collection and Transfer of Incremental State Sales Tax The Original STAR Bond District and the Original Revenues ...... 39 Project ...... 8 Application of Incremental Tax Revenues in TDA The Expanded STAR Bond District ...... 8 Escrow Fund ...... 39 The 2018 Projects ...... 9 Flow of Funds Under the Tax Distribution Agreement ..... 42 Other Anticipated Development in the District ...... 10 Reporting of City Sales Tax Revenues and State Sales Development Bordering the District ...... 11 Tax Revenues ...... 43 Principal Tax Generating Businesses within the District ... 12 Confidentiality of Tax Information ...... 43 Historical Collection of Incremental Sales Tax Reports to the City ...... 44 Revenues ...... 13 Amendments ...... 44 Projected Incremental Taxes Revenues ...... 14 PROJECTED CASH FLOW MODELS FOR THE SOURCES AND USES OF FUNDS ...... 15 SERIES 2018 BONDS ...... 44 Introduction ...... 44 DEBT SERVICE REQUIREMENTS ...... 16 Structuring Assumptions ...... 44 THE SERIES 2018 BONDS ...... 16 Projected Cash Flows ...... 45 Authorization ...... 16 CONTINUING DISCLOSURE ...... 48 Description of the Series 2018 Bonds ...... 16 Registration, Transfer and Exchange ...... 17 NO LITIGATION...... 49 Redemption Provisions ...... 18 CERTAIN LEGAL MATTERS ...... 50 Book-Entry Only System ...... 20 TAX MATTERS ...... 50 SECURITY AND SOURCES OF PAYMENT FOR Opinion of Bond Counsel ...... 50 THE SERIES 2018 BONDS ...... 22 Other Tax Consequences ...... 51 Special, Limited Obligations ...... 22 BOND RATING ...... 52 Appropriations Covenant ...... 24 MUNICIPAL ADVISOR ...... 52 Additional Bonds ...... 26 UNDERWRITING ...... 53 BONDOWNERS’ RISKS ...... 27 Special, Limited Obligations ...... 27 AUTHORIZATION ...... 54 Risk of Non-Appropriation ...... 28 APPENDIX A - DEFINITIONS Limited Sources of Debt Service and Factors Affecting APPENDIX B - SUMMARY OF THE INDENTURE Revenues ...... 28 APPENDIX C - TAX DISTRIBUTION AGREEMENT Projected Incremental Tax Revenues ...... 31 APPENDIX D - FORM OF CONTINUING DISCLOSURE Limited Collateral: No Mortgage on any Portion of the AGREEMENT Project ...... 31 APPENDIX E - FORM OF BOND COUNSEL OPINION Additional Bonds ...... 31 APPENDIX F - CERTAIN INFORMATION Legal Matters; Future Changes in the Law ...... 32 CONCERNING THE CITY OF WICHITA, Forward-Looking Statements ...... 32 KANSAS Tax-Exempt Status of the Series 2018 Bonds ...... 3 3 APPENDIX G - AUDITED FINANCIAL INFORMATION Enforceability of Remedies ...... 33 APPENDIX H - FINANCIAL INFORMATION Secondary Market for the Series 2018 Bonds ...... 3 3 Early Redemption of the Series 2018 Bonds ...... 33 In Summary ...... 33 TAX LEVY, REPORTING AND COLLECTION ...... 34 Overview ...... 34 Sales and Compensating Use Taxes ...... 34 Tax Base ...... 34

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CITY OF WICHITA, KANSAS

$42,140,000 CITY OF WICHITA, KANSAS SALES TAX SPECIAL OBLIGATION REVENUE BONDS (RIVER DISTRICT STADIUM STAR BOND PROJECT) SERIES 2018

INTRODUCTION

This introduction is only a brief description and summary of certain information contained in this Official Statement and is qualified in its entirety by reference to the more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. The order and placement of materials in this Official Statement, including the appendices, are not to be deemed a determination of relevance, materiality or relative importance, and this Official Statement, including the cover page and the appendices, must be considered in its entirety. The offering of the Series 2018 Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement that are not otherwise defined herein shall have the meaning ascribed to them in Appendix A.

General

The purpose of this Official Statement, including the cover page hereof and the appendices hereto, is to furnish certain information relating to (1) the City of Wichita, Kansas (the “City”), (2) the City’s $42,140,000 Sales Tax Special Obligation Revenue Bonds (River District Stadium STAR Bond Project), Series 2018 (the “Series 2018 Bonds” and, together with any Additional Bonds issued pursuant to the Indenture, collectively, the “Bonds”), (3) the STAR Bond Project (the “Project”) located in the Wichita River STAR Bond District (the “District”), (4) the portion of the Project to be financed with a portion of the proceeds of the Series 2018 Bonds (as hereinafter described, the “2018 Project”) and (5) the Revenues (as hereinafter defined) available to pay debt service on the Series 2018 Bonds. See “THE SERIES 2018 BONDS,” “THE PROJECT,” “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS” and “TAX DISTRIBUTION AGREEMENT” herein.

The City

The City is a municipal corporation duly organized and existing under the laws of the State of Kansas (the “State”) as a city of the first class. See “THE CITY” herein, Appendix F – “CERTAIN INFORMATION CONCERNING THE CITY OF WICHITA, KANSAS,” Appendix G – “AUDITED FINANCIAL INFORMATION” and Appendix H – “FINANCIAL INFORMATION” to this Official Statement for further information related to the City. The Series 2018 Bonds are not a general obligation of the City.

STAR Bonds Overview

“Sales tax and revenue” bonds (“STAR Bonds”) are authorized to be issued by the City pursuant to K.S.A. 12-17,160, et seq., as amended (the “STAR Bond Act”). The STAR Bond Act provides a form of tax increment financing that enables the issuance of bonds payable from certain State and local sales and compensating use tax revenues generated from STAR Bond projects constructed within a STAR Bond district.

To implement STAR Bond financing, a local government must adopt a resolution that specifies a proposed STAR Bond project district’s boundaries and describes the overall district plan, hold a public hearing on the district and the plan, and pass an ordinance that establishes the STAR Bond project district.

There may be one or more proposed STAR Bond projects within a STAR Bond project district. As with the STAR Bond project district, the local government must adopt a resolution, hold a hearing, and pass an ordinance that establishes each such STAR Bond project. Each project also must have a project plan that includes a description and map of the project area, a plan for relocating current residents and property owners, a detailed description of the proposed buildings and facilities and a feasibility study showing that the project will have a significant economic impact, generate enough tax revenues to pay off STAR Bonds proposed to be issued to finance the project, and not adversely affect existing businesses or other STAR Bonds that have already been issued. STAR Bonds can be used to pay for certain costs of a STAR Bond project, including property acquisition, site preparation, infrastructure improvements, certain hard construction costs, bond issuance costs, bond financing costs, loan financing costs, and related soft costs.

The District and the Project

In 2007, the City adopted the River District STAR Bond Project Plan (the “Original Project Plan”) for an approximately 210 acre tract known as the East Bank Redevelopment District (the “Original District” or the “Phase I Project Area”). The Original Project Plan anticipated a $155.8 million redevelopment project along the banks of the Arkansas River (the “River”) through the City’s Central Business District.

In December 2016, the City adopted an ordinance to expand the boundaries of the Original District by adding approximately 64 acres located on the west bank of the River north from Kellogg Avenue to approximately 1st Street (the “Additional Property,” the “West Bank Project Area” or the “Phase II Project Area”). The West Bank Project Area includes commercial properties, the City’s Lawrence-Dumont Baseball Stadium, the Wichita Ice Center and the Wichita Public Library’s Advanced Learning Library. The Original District, as expanded by the Additional Property, is referred to herein as the “STAR Bond District” or the “District.” A map depicting the boundaries of the District, is located on the following page.

The West Bank Project Area was added to the Original District to fund additional riverbank improvements between Douglas Avenue and the Kellogg Avenue Bridge, to install a pedestrian bridge to connect the performing arts area on the East Bank with the sports and entertainment area on the West Bank, to construct a multi-sport athletic facility that will replace the existing Lawrence-Dumont Baseball Stadium on the same site and to construct a baseball-themed sports museum in conjunction with the multi-sport athletic facility. On December 20, 2016, the Secretary of Commerce of the State of Kansas (the “Secretary”) determined that the District, as expanded by the Additional Property, is an “eligible area” within the meaning of the STAR Bond Act.

On January 3, 2017, the City adopted an ordinance to approve the Project Plan Amendment to the STAR Project Plan, dated as of December 2016 (the “STAR Bond Project Plan Amendment”). The STAR Bond Project Plan Amendment included a pedestrian bridge across the River, a baseball/sports museum, riverbank improvements and design and site work related to the baseball stadium.

Major components of the STAR Bond Project Plan Amendment and the Phase II Project Plan (the “2018 Projects”) include the following:

(i) the replacement of the City’s existing Lawrence-Dumont Baseball Stadium which is expected to be the home a Triple-A minor league affiliate of the Miami Marlins;

(ii) a museum and home of the National Baseball Congress; and

(iii) a pedestrian bridge across the River.

See the caption “THE DISTRICT AND THE 2018 PROJECTS” in this Official Statement for additional information relating to the District and the Project.

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Set forth below is a map of the District, including the original area and the additional parcels added in connection with the expansion:

The Series 2018 Bonds

The Governing Body of the City will pass an ordinance (the “Bond Ordinance”) which authorizes the issuance of the Series 2018 Bonds for the purpose of implementing the Phase II Project Plan. The Series 2018 Bonds are being issued by the City pursuant to the STAR Bond Act and a Bond Trust Indenture dated as of November 1, 2018 (as supplemented and amended from time to time, the “Indenture”), between the City and Security Bank of Kansas City, Kansas City, Kansas, as trustee (the “Trustee”).

The proceeds of the Series 2018 Bonds, along with other available funds, will be used to (i) pay a portion of the costs of the 2018 Projects; (ii) fund a deposit to the Capitalized Interest Fund established under the Indenture for the Series 2018 Bonds to be used to pay interest on the Series 2018 Bonds through September 1, 2020; and (iii) pay certain costs related to the issuance of the Series 2018 Bonds.

A description of the Series 2018 Bonds is contained in this Official Statement under the caption “THE SERIES 2018 BONDS.” All references to the Series 2018 Bonds are qualified in their entirety by the definitive form thereof and the provisions with respect thereto included in the Indenture.

The Series 2018 Bonds are subject to redemption prior to maturity as described herein. See “THE SERIES 2018 BONDS – Redemption Provisions” herein.

The City may issue one or more series of Additional Bonds which may be secured in the same manner as, and rank on a parity with (except as otherwise provided in the Indenture) the Series 2018 Bonds (the “Additional Bonds”), for the purpose of refunding the Series 2018 Bonds or paying for certain costs eligible under the STAR Bond Act to be financed with proceeds of the Bonds pursuant to the Project Plan and other costs permitted under the STAR Bond Act relating to the District. No Additional Bonds may be issued on a senior lien basis to the Series 2018 Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS – Additional Bonds” herein.

Security and Sources of Payment for the Series 2018 Bonds

Special, Limited Obligations. The Series 2018 Bonds issued under the Indenture, and the interest thereon, are special, limited obligations of the City payable (except to the extent paid out of Series 2018 Bond proceeds or the income from the temporary investment thereof) solely out of the Trust Estate, including the Revenues as defined below, and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the owners of the Series 2018 Bonds, as provided in the Indenture. The Revenues pledged as part of the Trust Estate under the Indenture to the payment of debt service on the Series 2018 Bonds and any Additional Bonds issued under the Indenture consist of:

(i) the Incremental Tax Revenues, as defined herein, transferred by the Escrow Agent to the Trustee pursuant to the Tax Distribution Agreement, as described herein; and

(ii) Available Local Sales Tax Funds, as defined herein, appropriated by the City and deposited to the Debt Service Fund. The application of Available Local Sales Tax Revenues to the payment of the Series 2018 Bonds is subject to annual appropriation by the City. There can be no assurance that the City will appropriate such revenues in any year and the Indenture does not obligate the City to do so. However, pursuant to the Indenture, the City covenants that a request for appropriation will be included in each annual budget.

See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS,” “TAX LEVY, REPORTING AND COLLECTION,” “TAX DISTRIBUTION AGREEMENT” and “THE DISTRICT AND THE 2018 PROJECTS” herein.

The Indenture and Tax Distribution Agreement, dated as of November 1, 2018 (as amended from time to time, the “Tax Distribution Agreement”) among the City, the Treasurer of the State of Kansas (the “State Treasurer”) and the Trustee, specifically define the above-described general tax revenue sources as follows:

“Revenues” means, collectively, (i) the amounts required to be transferred to the applicable Debt Service Accounts of the Debt Service Fund pursuant to the Tax Distribution Agreement; and (ii) Available Local Sales Tax Funds appropriated by the City and deposited to the Debt Service Fund pursuant to the terms of the Indenture. See “TAX DISTRIBUTION AGREEMENT” herein.

Pursuant to the Tax Distribution Agreement, the “City Sales Tax Revenues” and “State Sales Tax Revenues” generated in the District will be collected by the State. Pursuant to the terms and timing requirements for transfers set forth in the Tax Distribution Agreement, the State Treasurer will remit the Incremental City Sales Tax Revenues (as defined below) to the Escrow Agent and the Department of Revenue (the “Department”) of the State is obligated to cause the Incremental State Sales Tax Revenues (as defined below) to be credited to an account relating to the District created within the City Bond Finance Fund (the “City Bond Finance Fund”), established with the State Treasurer, until the date upon which the aggregate amount deposited therein is equal to an amount sufficient to retire the principal of and interest on the Bonds or April 30, 2038, whichever is earlier; provided, however, as described herein, City Sales Tax Revenues and State Sales Tax Revenues generated in the Phase I Project Area will not be available for the payments on the Series 2018 Bonds after October 31, 2027. The State Treasurer distributes the Incremental City Sales Tax Revenues and the Incremental State Sales Tax Revenues (collectively, the “Incremental Tax Revenues”) to the Escrow Agent who transfers required deposits to the Debt Service Fund under the Indenture in accordance with the flow of funds as provided in the Tax Distribution Agreement. The Series 2018 Bonds are secured by Incremental Tax Revenues generated solely with respect to retail sales within the District. See “TAX DISTRIBUTION AGREEMENT” herein.

The Indenture provides that the City intends, on or before the last day of each Fiscal Year, commencing with the 2020 Fiscal Year, to budget and appropriate, specifically with respect to the Indenture, Available Local Sales Tax Funds sufficient to pay all the Debt Service Requirements on the Series 2018 Bonds for the next succeeding Fiscal Year. The City also covenants in the Indenture that the Director of Finance of the City or any other officer at any time charged with the responsibility of formulating budget proposals is directed to include in the budget proposal submitted to the Governing Body for each Fiscal Year, commencing with the 2021 Fiscal Year, that the Series 2018 Bonds are Outstanding a request for an appropriation of Available Local Sales Tax Funds for transfer to the Trustee for deposit in the Debt Service Fund in the event that the Incremental Tax Revenues are insufficient to pay scheduled debt service on the Series 2018 Bonds, it being the intention of the City that the decision to appropriate or not to appropriate under the Indenture for any year shall be made solely by the Governing Body and not by any other official of the City . See “SECURITY AND SOURCES OF PAYMENT – Appropriations Covenant” herein.

“Available Local Sales Tax Funds” means gross receipts of the City under K.S.A. 12-187 et seq., as amended, and K.S.A. 12-198, as amended, from (a) the portion of any City retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments, and any successor taxes thereto (currently none), and (b) one-half of the City’s portion of the Sedgwick County, Kansas 1% retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments (currently 0.29%), and any successor taxes thereto, in each case with respect to retail sales outside the District and outside another STAR Bond district created by the City.

“Base Year City Sales Tax Revenues” means: (a) with respect to the Phase I Project Area - $185,353.00; and (b) with respect to the Phase II Project Area - $41,595.91.

“Base Year State Sales Tax Revenues” means: (a) with respect to the Phase I Project Area - $982,502.00; and (b) with respect to the Phase II Project Area - $465,157.39.

“City Sales Tax Revenues” means gross receipts of the City under K.S.A. 12-187 et seq., as amended, and K.S.A. 12-198, as amended, from (a) the portion of any City retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments, and any successor taxes thereto (currently none), and (b) one-half of the City’s portion of the Sedgwick County, Kansas 1% retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments (currently 0.29%), and any successor taxes thereto, in each case with respect to retail sales within the District: (a) with respect to the Phase I Project Area, to the extent such amounts are on deposit with the State Treasurer on or before September 30, 2027 and available for distribution to the Escrow Agent; and (b) with respect to the Phase II Project Area, to the extent such amounts are on deposit with the State Treasurer on or before March 31, 2038 and available for distribution to the Escrow Agent. City Sales Tax Revenues will be based on tax revenues received by the City from sales occurring within the District, after taking into account applicable destination-based sourcing rules of the State.

“Incremental City Sales Tax Revenues” means, for each Project Area, the difference between (i) City Sales Tax Revenues for such calendar year and (ii) the Base Year City Sales Tax Revenues.

“Incremental State Sales Tax Revenues” means, for each Project Area, the difference between (i) State Sales Tax Revenues for such calendar year and (ii) the Base Year State Sales Tax Revenues.

“State Sales Tax Revenues” means gross receipts of the State from the taxes imposed by K.S.A. 79- 3603, as amended, and K.S.A. 79-3703, as amended, with respect to retail sales within the District (currently six and five-tenths percent (6.50%)): (a) with respect to the Phase I Project Area, to the extent such amounts are on deposit with the State Treasurer on or before October 31, 2027 and available for transfer to the City Bond Finance Fund; and (b) with respect to the Phase II Project Area, to the extent such amounts are on deposit with the State Treasurer on or before April 30, 2038 and available for transfer to the City Bond Finance Fund. State Sales Tax Revenues shall be based on tax revenues received by the State from sales occurring within the District, which may include tax revenues sourced to other locations within the State under applicable destination-based sourcing rules of the State.

No Mortgage. The Series 2018 Bonds are not secured by a mortgage or any other lien on the Project, or any other property in the District.

Bondowners’ Risks

The Series 2018 Bonds involve a degree of risk, and prospective purchasers should read the section herein captioned “BONDOWNERS’ RISKS.” The Series 2018 Bonds may not be suitable investments for all persons, and prospective purchasers should carefully evaluate the risks and merits of an investment in the Series 2018 Bonds and should confer with their own legal and financial advisors before considering a purchase of the Series 2018 Bonds.

Definitions and Summaries of Documents

Definitions of certain words and terms used in this Official Statement and a summary or copy of certain provisions of the Indenture, the Tax Distribution Agreement and the Continuing Disclosure Agreement (the “Financing Documents”) are included in this Official Statement in Appendices A, B, C and D hereto. Such definitions and summaries do not purport to be comprehensive or definitive. All references herein to the Financing Documents are qualified in their entirety by reference to the definitive forms of such documents and certain other documents and information described herein, copies of which may be obtained from the Office of Economic Development of the City of Wichita, Kansas, 455 N. Main, Wichita, Kansas 67202; fax (316) 858- 7890 or email [email protected], and will be provided to any prospective purchaser by requesting the same in writing by mail, email or fax, in electronic form at no charge or otherwise upon payment by such prospective purchaser of the cost of complying with such request.

Continuing Disclosure

The City has covenanted for the benefit of the holders and beneficial owners of the Series 2018 Bonds to provide certain financial information relating to collection of the Incremental Tax Revenues in the District on a semiannual basis and certain additional information related to the City on an annual basis, and to provide notice of the occurrence of certain enumerated events all as provided in the Continuing Disclosure Undertaking, dated as of November 1, 2018 delivered by the City. Pursuant to the Continuing Disclosure Undertaking, the City has agreed to disseminate the financial information described above and notice of certain enumerated events to the Municipal Securities Rulemaking Board (“MSRB”). The Continuing Disclosure Undertaking is sometimes referred to herein as the “Continuing Disclosure Agreement.” See “CONTINUING DISCLOSURE” herein and Appendix D – “FORM OF CONTINUING DISCLOSURE AGREEMENT” attached hereto.

THE DISTRICT AND THE 2018 PROJECTS

The Original STAR Bond District and the Original Project

In 2007, the City adopted the Original Project Plan for the Original District. The Original Project Plan anticipated a $155.8 million redevelopment project along the banks of the River through the City’s Central Business District. The first phase of the project plan extended from the First/Second Street Bridge to the Central Avenue (Little Arkansas) and Seneca Street (Big Arkansas) bridges. It included upgrades to the area surrounding the Keeper of the Plains statue at the confluence of the rivers. Additional construction included a portion of the South Riverbank to the west of Exploration Place, two cable-stayed pedestrian bridges linking the Keeper of the Plains monument to the outer banks of each river, and work along the East Riverbank from Central to First Street. The first phase also included construction of the Fountains at WaterWalk, a fountain attraction incorporating programmed water jets linked to lights and music.

The East Riverbank Project was completed in 2011 as part of the Drury Plaza Hotel Broadview redevelopment. The $2,500,000 STAR revenue financed project involved extensive East Riverbank improvements north of Douglas Avenue. This project phase supported the $29 million Drury Plaza Hotel redevelopment project. Improvements included a venue space, pedestrian access from Waco Street and river overlook areas.

The recently completed West Bank Apartments Project, located within the boundaries of the Original District, included a West Riverbank promenade between Second Street and Douglas Avenue and the Chisholm Trail/McLean Memorial Fountain area, riverbank improvements with landscaping, fountains and walking/bike paths along the River. These improvements are associated with a tax increment financing and community improvement district development that includes an apartment complex, parking garage and a boat and bike rental facility. STAR Bonds financed $4,750,000 of West Riverbank improvements associated with the West Bank Apartments Project.

The Expanded STAR Bond District

In December 2016, the City adopted an ordinance to expanded the boundaries of the Original District by adding approximately 64 acres located on the west bank of the River north from Kellogg Avenue to approximately 1st Street (the “Additional Property,” the “West Bank Project Area” or the “Phase II Project Area”). The West Bank Project Area includes commercial properties, the City’s Lawrence-Dumont Baseball Stadium the Wichita Ice Center and the Wichita Public Library’s Advanced Learning Library. The Original District, as expanded by the Additional Property, is referred to herein as the “STAR Bond District” or the “District.” A map depicting the boundaries of the District, is set forth above.

The West Bank Project Area was added to the Original District to fund additional riverbank improvements between Douglas Avenue and the Kellogg Avenue Bridge, to install a pedestrian bridge to

connect the performing arts area on the East Bank with the sports and entertainment area on the West Bank, and to construct a baseball-themed sports museum on the site of the Lawrence-Dumont Baseball Stadium. On December 20, 2016, the Secretary of Commerce of the State of Kansas (the “Secretary”) determined that the District, as expanded by the Additional Property, is an “eligible area” within the meaning the of the STAR Bond Act.

The 2018 Projects

On January 3, 2017, the City adopted an ordinance adopting the STAR Bond Project Plan Amendment which provided for additional development within the District. On March 20, 2017, the Secretary took the following actions with respect to the District and the STAR Bond Project Plan Amendment:

(1) found and determined that the District, as expanded, is a major commercial entertainment and tourism area and an “eligible area” within the meaning of the STAR Bond Act;

(2) approved and designated improvements to the West Bank of the Arkansas River and enhanced public improvements within the District as part of a “STAR bond project” within the meaning of the STAR Bond Act; and

(3) approved the issuance of up to $19,500,000 (exclusive of approved financing costs) in STAR Bond financing for the improvements and amenities related to the STAR Bond Project Plan Amendment.

On May 2, 2017, the City adopted an ordinance adopting the River District Phase II STAR Bond Project Plan (the “Phase II Project Plan”) which provides for the redevelopment of the West Bank Project Area. On April 30, 2018, the Secretary took the following actions with respect to the District and the Phase II Project Plan:

(1) found and determined that the District, as expanded, includes a “major multi-sport athletic facilities” and museum components and is an “eligible area” within the meaning of the STAR Bond Act;

(2) approved and designated improvements to the East Bank of the Arkansas River and enhanced public improvements within the District as part of a “STAR bond project” within the meaning of the STAR Bond Act; and

(3) approved the issuance of up to $20,500,000 (exclusive of approved financing costs) in STAR Bond financing for the improvements and amenities related to the Phase II Project Plan.

Major components of the Phase II Project Plan (also known as the “2018 Project”) include the following:

(i) the replacement of the City’s existing Lawrence-Dumont Baseball Stadium which is expected to be the home a Triple-A minor league affiliate of the Miami Marlins;

(ii) a museum and home of the National Baseball Congress; and

(iii) a pedestrian bridge across the River.

The estimated overall plan of finance for the 2018 Projects includes the use of funds provided from other available City funds or borrowings, including proceeds of general obligation bonds and revenues from tax increment financing districts and community improvement districts, which proceeds are expected to be available in the first half of 2019. The following table provides a summary of the sources and uses of such funds:

Sources of Funds STAR Bonds $40,000,000.00 Available City Funds & Financing 43,000,000.00 Total Sources $83,000,000.00

Uses of Funds Stadium & Museum $75,000,000.00 Pedestrian Bridge 3,000,000.00 Riverbank Improvements 3,000,000.00 Parking & Infrastructure 2,000,000.00 Total Uses $83,000,000.00

The existing Lawrence-Dumont Baseball Stadium was constructed in 1934 as part of the Works Progress Administration during the Great Depression. The stadium previously served as the home to the Wichita Wranglers (Class AA: Texas League) through the 2007 baseball season. As part of the plans to continue to redevelop the City’s downtown area, the City has estimated the demolition of the current stadium by year end 2018 and completion of the new stadium by March 2020. The new facility is estimated to include 6,500 to 7,000 fixed seats, with group areas and other spaces bringing total capacity to around 10,000. The stadium will serve as the home for a to-be-named Triple A minor league affiliate of the Miami Marlins and be used to hold concerts and various high school and collegiate sporting events.

The City and the owner of the minor league team are anticipated to enter into a development agreement whereby the owner has the ability to develop approximately 15 acres of property surrounding the stadium. The development agreement is anticipated to require development to commence within 18 months of completion of the stadium and include the development of a hotel, retail spaces, restaurants and bars to complement the stadium and surrounding areas.

Other Anticipated Development in the District

Anticipated future phases of development expected to occur within the West Bank Project Area include: (i) completion of the west bank corridor improvements from Douglas Avenue south to Kellogg with an estimated $5 million in STAR Bond funded improvements for a plaza and riverbank amenities designed to complement the stadium and surrounding Delano neighborhood; (2) an East Bank Catalyst Site north of the Broadview Hotel redevelopment site and across the River from the West Bank Apartments Project (as described above), with an anticipated $40 million mixed-use development along the river that complements both the River corridor and adjacent Broadview Hotel and includes an estimated $4 million in STAR Bond financed plaza and River bank amenities; and (3) development of the area referred to as the Upper Reach, extending from the Seneca Street Bridge to Sim Park on the opposite side of the River.

The City and EPC Real Estate Group, LLC (the “Delano Catalyst Site Developer”) have entered into a Development Agreement relating to certain property within the West Bank Project Area, consisting to the property south and east of the Wichita Public Library’s Advanced Learning Library. Pursuant to the Development Agreement, the Delano Catalyst Site Developer has agreed to develop the property to include the following:

• a public greenway/gathering area on the property; • an apartment complex consisting of a minimum of 180 apartment units;

• a hotel consisting of a minimum of 90 guest rooms; • a minimum of 114 parking spaces available to the public; and • a minimum of 5,000 square feet of Class A commercial space.

The Delano Catalyst Site Developer has agreed to meet certain project milestones in connection with the development of the property, including full project completion by October 1, 2020. The following map depicts the final site plan for the property contained in the Development Agreement:

Development Bordering the District

The City has experienced a re-emergence of its downtown area over the last ten years. Public and private investment in the last ten years of the downtown area is approaching approximately $1 billion. The development of residential, commercial office space, restaurants, and retail has fueled the growth of downtown. Cargill’s North American protein business is near completion of a new 188,000 square foot headquarters facility in downtown Wichita and will begin occupying the building in November 2018. Another recently started project is the Spaghetti Works District which will transform a historic building into 41 market- rate apartments with an additional 15,000 square feet of retail/restaurant space and 45,000 square feet of office space, this project is scheduled to open fall of 2020. Located between the Cargill and Spaghetti Works projects is the Union Station Development. This is a 110,000 square foot redevelopment of the historic Union Station depot, scheduled to be complete by the end of 2020. The City also provides free bus transportation to downtown from other locations in the City to allow people the opportunity to shop, eat and enjoy the downtown area. While these developments are not located within the District, these projects help provide amenities to continue to fuel the redevelopment of the downtown area.

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Principal Tax Generating Businesses within the District

The following is a list of the tax generating retailers and businesses operating within the District in 2015, 2016 and 2017 that were included in the top 10 for any of such years, excluding Gander Mountain which closed its retail store located in the District in 2017. No assurances can be made that such retailers or businesses will remain open for business.

Broadview Hotel+ Cappuccino Connections Inc. City of Wichita+ Computer Sciences Co. Fairfield Inn & Suites+ Henry Helgerson Company Hyatt Regency Wichita+ KDOR Lump Auto Accounts Safeworks LLC Sedgwick County Treasurer SEN WICRW Special Event Signature Flight Support Corporation+ Thyssenkrupp Elevators VSM Sewing Inc. Westar Energy Inc. + WaterWalk Apartments Wichita LLC ______+ Represents a business that was included in the list of top 10 tax generating retailers and businesses operating within the District in all three years.

The top 10 taxpayers in 2015, 2016 and 2017 represented 50.3%, 59.6% and 66.6% of the total taxes generated within the District during each year.

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Historical Collection of Incremental Sales Tax Revenues

The following table outlines the historical annual collection of Incremental State Sales Tax Revenues and Incremental City Sales Tax Revenues attributable to the Original District for years 2008 through 2017 and through October 2018.

Incremental State Incremental City Total Incremental Year Sales Tax Revenues Sales Tax Revenues Sales Tax Revenues 2008 $ 964,305 $ 57,048 $1,021,353 2009 1,860,702 107,653 1,968,355 2010 2,034,347 111,174 2,145,521 2011 1,356,084 66,932 1,423,016 2012 2,008,023 98,325 2,106,348 2013 2,128,809 104,394 2,233,203 2014 2,045,799 103,117 2,148,916 2015 1,988,653 92,566 2,081,219 2016 2,038,739 91,799 2,130,538 2017 2,239,513 0(1) 2,239,513 2018(2) 1,507,609 19,562(1) 1,527,171 ______(1) Starting in 2017, an existing STAR Bond secured by revenues generated within the District was paid in full. The State inadvertently stopped forwarding Incremental City Sales Tax Revenues to the Trustee. The City is working with the State to correct the mistake and reclaim the Incremental City Sales Taxes that should have been sent to the Trustee during such period. (2) Through October, 2018.

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Projected Incremental Taxes Revenues

The following table sets forth the City’s projections of Incremental Tax Revenues attributable to the District and was prepared based on the assumptions described in the footnotes thereto. Other than the development agreement entered into with the Delano Catalyst Site Developer (see the caption “THE DISTRICT AND THE 2018 PROJECTS – Other Anticipated Development in the District”), no formal development agreement has been completed for the Phase II Project Area.

Construction Sales Year Phase I(1), (2), (4) Phase II(3), (4) Tax Revenues Total 2019 $1,585,664 $ 225,165 $ 848,396 $2,669,225 2020 1,643,379 792,000 529,831 2,965,300 2021 1,771,682 1,100,553 433,764 3,305,999 2022 1,978,707 1,371,261 828,319 4,178,287 2023 2,133,607 1,806,651 719,473 4,659,731 2024 2,481,587 2,123,614 319,784 4,924,985 2025 2,757,301 2,435,808 – 5,193,109 2026 2,931,842 2,721,300 – 5,653,142 2027 2,237,924 2,785,862 – 5,023,786 2028 – 2,988,451 – 2,988,451 2029 – 3,128,539 – 3,128,539 2030 – 3,201,245 – 3,201,245 2031 – 3,275,405 – 3,275,405 2032 – 3,351,048 – 3,351,048 2033 – 3,428,204 – 3,428,204 2034 – 3,506,903 – 3,506,903 2035 – 3,587,176 – 3,587,176 2036 – 3,669,055 – 3,669,055 2037 – 3,752,571 – 3,752,571 2038 – 941,417 – 941,417 ______(1) No Incremental State Sales Taxes generated within the Phase I Project Area and received by the State Treasurer after October 31, 2027 will be available to pay debt service on the Series 2018 Bonds; Incremental City Sales Taxes received after September 30, 2027 from sales within the Phase I Project Area will not be available for debt service. (2) In early 2017, Phase I experienced the closure of the Gander Mountain retail store. The City has attempted to factor in the loss of sales tax revenues resulting from the closure. (3) No Incremental State Sales Taxes generated within the Phase II Project Area and received by the State Treasurer after April 30, 2038 will be available to pay debt service on the Series 2018 Bonds; Incremental City Sales Taxes received after March 31, 2038 from sales within the Phase II Project Area will not be available for debt service. (4) Future development assumes that, in addition to the Delano Catalyst Site, the following will be added through 2028: a hotel, 15 restaurants/bars/clubs, and 20 small retail stores.

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THE CITY

The City is a municipal corporation duly organized and existing under the laws of the State as a city of the first class. See Appendix F – “CERTAIN INFORMATION CONCERNING THE CITY OF WICHITA, KANSAS,” Appendix G – “AUDITED FINANCIAL INFORMATION” and Appendix H – “FINANCIAL INFORMATION” to this Official Statement for further information related to the City. The Series 2018 Bonds are not a general obligation of the City.

SOURCES AND USES OF FUNDS

The following sets forth the estimated sources and uses of funds relating to the proceeds of the Series 2018 Bonds:

Sources of Funds Series 2018 Bond Principal $ 42,140,000.00 Net Original Issue Premium 1,733,967.20 Total Sources $ 43,873,967.20

Uses of Funds Deposit to Project Fund $ 40,000,000.00 Deposit to Capitalized Interest Fund 3,276,163.30 Costs of Issuance(1) 597,803.90 Total Uses $ 43,873,967.20 ______(1) Includes underwriters’ discount (see “UNDERWRITING” herein) and other costs of issuance related to the Series 2018 Bonds.

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DEBT SERVICE REQUIREMENTS

The following table sets forth the amounts required in each fiscal year ending December 31 for the payment of principal at maturity or by mandatory redemption through sinking fund payments of the Series 2018 Bonds and does not take into account any earlier redemption of the Series 2018 Bonds other than mandatory sinking fund redemption, whether through optional, special mandatory or extraordinary mandatory redemption as described under the caption “THE SERIES 2018 BONDS – Redemption Provisions” herein.

Year Principal(1) Interest Total(1) 2019 $ 0 $1,447,607(2) $1,447,607(2) 2020 0 1,828,556(2) 1,828,556(2) 2021 0 1,828,556 1,828,556 2022 0 1,828,556 1,828,556 2023 500,000 1,828,556 2,328,556 2024 520,000 1,808,556 2,328,556 2025 2,155,000 1,787,756 3,942,756 2026 2,265,000 1,680,006 3,945,006 2027 2,375,000 1,566,756 3,941,756 2028 2,495,000 1,448,006 3,943,006 2029 2,615,000 1,327,238 3,942,238 2030 2,730,000 1,212,838 3,942,838 2031 2,850,000 1,092,163 3,942,163 2032 2,970,000 975,100 3,945,100 2033 3,115,000 826,600 3,941,600 2034 3,240,000 702,000 3,942,000 2035 3,370,000 572,400 3,942,400 2036 3,505,000 437,600 3,942,600 2037 3,645,000 297,400 3,942,400 2038 3,790,000 151,600 3,941,600 ______(1) Does not reflect any special mandatory redemptions of Series 2018 Bonds (see the caption “THE SERIES 2018 BONDS – Redemption Provisions – Special Mandatory Redemption of Series 2018 Bonds” herein). (2) Interest payments in 2019 and 2020 are expected to be paid from funds on deposit in the Capitalized Interest Fund.

THE SERIES 2018 BONDS

Authorization

The Series 2018 Bonds are being issued pursuant to the Indenture and pursuant to and in full compliance with the Constitution and laws of the State, including particularly the STAR Bond Act. The City authorized the execution of the documents to which it is a party and the issuance and sale of the Series 2018 Bonds pursuant to an Ordinance passed by the Governing Body of the City, and the Indenture.

Description of the Series 2018 Bonds

The Series 2018 Bonds will be issuable in the form of fully registered bonds without coupons in Authorized Denominations. Ownership interests in the Series 2018 Bonds will be available to purchasers through book-entry only. The Series 2018 Bonds shall be dated the date of the original issuance and delivery thereof and will mature on the dates set forth on the inside cover page of the Official Statement. The Series

2018 Bonds will bear interest at the rates per annum set forth on the inside cover page hereof, which interest will be payable semiannually on March 1 and September 1 in each year (each an “Interest Payment Date”), commencing March 1, 2019. Interest and mandatory redemption payments will be payable by check or draft of the Trustee mailed to the persons who are the registered owners of the Series 2018 Bonds as of the close of business on the 15th calendar day (the “Record Date”) preceding such Interest Payment Date.

Registration, Transfer and Exchange

The Series 2018 Bonds will be issued only in fully registered form. The Trustee is appointed the “bond registrar” for the purpose of registering and transferring the Series 2018 Bonds, as provided in the Indenture. The Trustee will cause to be kept at its principal corporate trust office the “bond register” in which, subject to such reasonable regulations as it may prescribe, the Trustee will provide for the registration, transfer and exchange of Series 2018 Bonds as provided in the Indenture.

When issued, the Series 2018 Bonds will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust (“DTC”), New York, New York. DTC will act as securities depository for the Series 2018 Bonds. See the subheading below captioned “Book-Entry Only System.”

Series 2018 Bonds may be transferred or exchanged only upon the bond register maintained by the Trustee as provided in the Indenture. Upon surrender for transfer or exchange of any Series 2018 Bond at the principal corporate trust office of the Trustee, the City will execute, and the Trustee will authenticate and deliver, in the name of the designated transferee or transferees, one or more new Series 2018 Bonds of the same maturity, of any Authorized Denominations and of a like aggregate principal amount.

Every Series 2018 Bond presented or surrendered for transfer or exchange shall (if so required by the City or the Trustee, as bond registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the City and the Trustee, as bond registrar, duly executed by the owner thereof or his attorney or legal representative duly authorized in writing. All Series 2018 Bonds issued upon any transfer or exchange shall be the valid obligations of the City, evidencing the same debt, and entitled to the same security and benefits under the Indenture, as the Series 2018 Bonds surrendered upon such transfer or exchange.

No service charge shall be made for any registration, transfer or exchange of Series 2018 Bonds, but the Trustee or Depository may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Series 2018 Bonds, and such charge shall be paid by the owner thereof before any such new Series 2018 Bond shall be delivered. In the event any registered owner fails to provide a correct taxpayer identification number to the Trustee, the Trustee may impose a charge against such registered owner sufficient to pay any governmental charge required to be paid as a result of such failure. In compliance with Section 3406 of the Internal Revenue Code, such amount may be deducted by the Trustee from amounts otherwise payable to such registered owner hereunder or under the Series 2018 Bonds.

The Trustee shall not be required (a) to transfer or exchange any Series 2018 Bond during a period beginning at the opening of business 15 days before the day of the first publication or the mailing (if there is no publication) of a notice of redemption of such Series 2018 Bond and ending at the close of business on the day of such publication or mailing, or (b) to transfer or exchange any Series 2018 Bond so selected for redemption in whole or in part, during a period beginning at the opening of business on any Record Date for the Series 2018 Bonds and ending at the close of business on the relevant Interest Payment Date therefor.

The Person in whose name any Series 2018 Bond shall be registered on the bond register shall be deemed and regarded as the absolute owner thereof for all purposes, except as otherwise provided in the Indenture, and payment of or on account of the principal of, redemption premium, if any, and interest on any such Series 2018 Bond shall be made only to or upon the order of the registered owner thereof or his legal representative, but such registration may be changed as herein provided. All such payments shall be valid and

effectual to satisfy and discharge the liability upon such Series 2018 Bond to the extent of the sum or sums so paid.

The Trustee will keep on file at its principal corporate trust office a list of the names and addresses of the last known owners of all Series 2018 Bonds and the numbers of such Series 2018 Bonds held by each of such owners. At reasonable times and under reasonable regulations established by the Trustee, the list may be inspected and copied by the City and the owners of at least 10% of the Bond Obligation or the authorized representative thereof, provided that the ownership of such owner and the authority of any such designated representative shall be evidenced to the satisfaction of the Trustee.

Notwithstanding any other provision of the Indenture to the contrary, any owner of Series 2018 Bonds may pledge, assign and grant a security interest in its right, title and interest in and to such Bonds to a third party as security for an obligation of such owner to such third party.

Redemption Provisions

Optional Redemption of Series 2018 Bonds. The Series 2018 Bonds scheduled to mature on or after September 1, 2028 are subject to redemption prior to maturity, at the option of the City, on any date on and after September 1, 2027, in whole or in part at any time, at a redemption price equal to the principal amount thereof, plus accrued interest thereon to the redemption date.

Special Mandatory Redemption of Series 2018 Bonds. The Series 2018 Bonds are subject to special mandatory redemption prior to maturity in part on March 1, 2024 and each Interest Payment Date thereafter, at a redemption price equal to 100% of the principal amount thereof, in an amount equal to the Incremental Tax Revenues, if any, deposited in the Series 2018 Special Mandatory Redemption Subaccount of the Series 2018 Debt Service Account with respect to such Interest Payment Date, in accordance with the Tax Distribution Agreement. Such Incremental Tax Revenues shall be applied to the special mandatory redemption of the Series 2018 Bonds in inverse order of maturity.

In the case of any defeasance of Series 2018 Bonds in accordance with the Indenture, hereof, the expected principal amounts and maturities of Series 2018 Bonds to be redeemed pursuant to the special mandatory redemption provision describe in the preceding paragraph based upon Incremental Tax Revenues for the previous twelve-month period shall be considered for purposes of determining the schedule of payments of principal of and interest on the Series 2018 Bonds from escrowed funds.

Extraordinary Mandatory Redemption of Series 2018 Bonds From Remaining Proceeds in the Project Fund. The Series 2018 Bonds are subject to mandatory redemption in whole or in part at any time on or before September 1, 2022 at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon to the redemption date, from amounts transferred to the Series 2018 Debt Service Account of the Debt Service Fund from the Project Fund in accordance with the Indenture. Such moneys shall be applied to the extraordinary mandatory redemption of the Series 2018 Bonds on a pro rata basis among the Outstanding Bonds of each maturity.

Mandatory Sinking Fund Redemption. The Series 2018 Term Bonds are subject to mandatory redemption and payment prior to maturity as set forth below, at a Redemption Price of 100% of the principal amount thereof plus accrued interest to the date of redemption:

(a) The Term Bonds maturing September 1, 2038 are subject to mandatory redemption and payment prior to maturity on September 1 in each of the years set forth below:

Year Principal Amount 2033 $3,115,000 2034 3,240,000 2035 3,370,000 2036 3,505,000 2037 3,645,000 2038(1) 3,790,000 ______(1) Final Maturity

Selection by Trustee of Series 2018 Bonds To Be Redeemed. Series 2018 Bonds may be redeemed only in in increments of $5,000.

Except as otherwise provided above, if less than all of the Series 2018 Bonds are to be redeemed, the particular Series 2018 Bonds to be redeemed shall be selected by the Trustee from the Series 2018 Bonds that have not previously been called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions equal to $5,000 principal amount.

Notice of Redemption. Unless waived by any owner of Series 2018 Bonds to be redeemed and except as may be otherwise provided in a Supplemental Indenture authorizing a series of Bonds, official notice of any such redemption shall be given by the Trustee on behalf of the City by mailing a copy of an official redemption notice by first class mail, at least 20 days and not more than 60 days prior to the redemption date to each registered owner of the Bonds to be redeemed at the address shown on the bond register.

All official notices of redemption will be dated and will state: (a) the redemption date; (b) the redemption price; (c) the principal amount of Bonds of the series to be redeemed and, if less than all Bonds of a particular maturity of a series are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts, numbers and maturity dates) of the Bonds to be redeemed; (d) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon will cease to accrue from and after said date; and (e) the place where the Bonds to be redeemed are to be surrendered for payment of the redemption price, which place of payment will be the principal corporate trust office of the Trustee or other Paying Agent.

With respect to optional redemptions, such notice may be conditioned upon moneys being on deposit with the Trustee on or prior to the redemption date in an amount sufficient to pay the redemption price on the redemption date. If such notice is conditional and either the Trustee receives written notice from the City that moneys sufficient to pay the redemption price will not be on deposit on the redemption date, or such moneys are not received on the redemption date, then such notice will be of no force and effect, the Trustee will not redeem such Bonds and the Trustee will give notice, in the same manner in which the notice of redemption was given, that such moneys were not or will not be so received and that such Bonds will not be redeemed.

The failure of any owner of Bonds to receive notice, or any defect therein, will not affect the validity of any proceedings for the redemption of any Bonds. Any notice mailed as provided in the Indenture will be conclusively presumed to have been duly given and will become effective upon mailing, whether or not any owner receives such notice.

In addition to the foregoing notice, the Trustee shall give further notice by first class, registered or certified mail or overnight delivery service or facsimile transmission to all registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds and to one or more national information services that disseminate notices of redemption of obligations such as the Bonds. Each further notice of redemption given shall contain the information required above for an official notice of redemption plus (i) the CUSIP numbers of all Bonds being redeemed, (ii) the date of issue of the Bonds as originally issued, (iii) the rate of interest borne by each Bond being redeemed, (iv) the maturity date of each Bond being redeemed, and (v) any other descriptive information needed to identify accurately the Bonds being redeemed. No defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.

For so long as the Depository is effecting book-entry transfers of the Bonds, the Trustee shall provide the notices specified in the Indenture to the Depository. It is expected that the Depository shall, in turn, notify its Participants and that the Participants, in turn, will notify or cause to be notified the beneficial owners of the Bonds. Any failure on the part of the Depository or a Participant, or failure on the part of a nominee of a beneficial owner of a Bond (having been mailed notice from the Trustee, the Depository, a Participant or otherwise), to notify the beneficial owner of the Bond so affected, shall not affect the validity of the redemption of such Bond.

Book-Entry Only System

General. When the Series 2018 Bonds are issued, ownership interests will be available to purchasers only through a book-entry only system (the “Book-Entry Only System”) maintained by The Depository Trust Company, New York, New York. DTC will act as securities depository for the Series 2018 Bonds. Initially, the Series 2018 Bonds 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 Series 2018 Bond certificate for each maturity of the Series 2018 Bonds will be issued, in the aggregate principal amount of such maturity, and will be deposited with DTC or the Trustee as its “FAST” agent. The following discussion will not apply to any Series 2018 Bonds issued in certificate form in the event of the discontinuance of the DTC Book-Entry Only System, as described below.

DTC and its Participants. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others, such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the “Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Direct and Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchase of Ownership Interests. Purchases of the Series 2018 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2018 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2018 Bond (the “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 Series 2018 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Series 2018 Bonds, except in the event that use of the book-entry system for the Series 2018 Bonds is discontinued.

Transfers. To facilitate subsequent transfers, all Series 2018 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Series 2018 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2018 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2018 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Notices. 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 the Series 2018 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2018 Bonds, such as redemptions, defaults and proposed amendments to the Indenture. For example, Beneficial Owners of the Series 2018 Bonds may wish to ascertain that the nominee holding the Series 2018 Bonds for their benefit has agreed to obtain and transmit notices to the 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 sent directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2018 Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in Series 2018 Bonds to be redeemed.

Voting. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2018 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2018 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of Principal and Interest. All payments of principal of, premium, if any, and interest on such Series 2018 Bonds and any redemption proceeds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the Trustee, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Direct and Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Trustee or the City, subject to any statutory and regulatory requirements as may be in effect from time to time. Payment of principal of, premium, if any, and interest on the Series 2018 Bonds to Cede & Co. (or such other nominee as

may be requested by an authorized representative of DTC) is the responsibility of the City or the Trustee, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants.

Discontinuation of Book-Entry Only System. DTC may discontinue providing its services as depository with respect to the Series 2018 Bonds at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2018 Bond certificates are required to be printed and delivered.

The use of the system of book-entry-only transfers through DTC (or a successor securities depository) may be discontinued as described in the Indenture. In that event, bond certificates will be printed and delivered as described in the Indenture.

None of the Underwriter, the Trustee or the City will have any responsibility or obligations to any Direct Participants or Indirect Participants or the persons for whom they act with respect to (i) the accuracy of any records maintained by DTC or any such Direct Participant or Indirect Participant; (ii) the payment by any Participant of any amount due to any Beneficial Owner in respect of the principal of, premium, if any, or interest on the Series 2018 Bonds or any redemption proceeds; (iii) the delivery by any such Direct Participant or Indirect Participant of any notice to any Beneficial Owner that is required or permitted under the terms of the Indenture to be given to Owners of the Series 2018 Bonds; (iv) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Series 2018 Bonds; or (v) any consent given or other action taken by DTC as Bondholder.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the City believes to be reliable, but is not guaranteed as to accuracy or completeness by and is not to be construed as a representation by the City, the Trustee or the Underwriter. None of the City, the Trustee or the Underwriter make any assurances that DTC, Direct Participants, Indirect Participants or other nominees of the Beneficial Owners will act in accordance with the procedures described above or in a timely manner.

SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS

Special, Limited Obligations

The Series 2018 Bonds issued under the Indenture, and the interest thereon, are special, limited obligations of the City payable (except to the extent paid out of Series 2018 Bond proceeds or the income from the temporary investment thereof) solely out of the Trust Estate, including the Revenues, and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the owners of the Series 2018 Bonds, as provided in the Indenture.

The Incremental Tax Revenues transferred by the Escrow Agent to the Trustee pursuant to the Tax Distribution Agreement, as described herein, constitute part of the Trust Estate under the Indenture and are pledged Revenues available pursuant to the terms of the Indenture to the payment of debt service on the Series 2018 Bonds and any Additional Bonds issued under the Indenture. No Incremental City Sales Tax Revenues will be available until the Base Year City Sales Tax Revenues are collected in each calendar year. No Incremental State Sales Tax Revenues will be available until the Base Year State Sales Tax Revenues are collected in each calendar year. See the caption “THE DISTRICT AND THE 2018 PROJECTS - Historical Collection of Incremental Sales Taxes Revenues.”

No Incremental State Sales Taxes generated within the Phase I Project Area and received by the State Treasurer after October 31, 2027 will be available to pay debt service on the Series 2018 Bonds. No Incremental City Sales Taxes generated within the Phase I Project Area and received by the State Treasurer after September 30, 2027 will be available to pay debt service on the Series 2018 Bonds. No

Incremental State Sales Taxes generated within the Phase II Project Area and received by the State Treasurer after April 30, 2038 will be available to pay debt service on the Series 2018 Bonds. No Incremental City Sales Taxes generated within the Phase II Project Area and received by the State Treasurer after March 31, 2038 will be available to pay debt service on the Series 2018 Bonds.

The application of Available Local Sales Tax Funds to the payment of the Series 2018 Bonds is subject to annual appropriation by the City. There can be no assurance that the City will appropriate such revenues in any year and the Indenture does not obligate the City to do so. However, pursuant to the Indenture, the City covenants that a request for appropriations will be included in each annual budget.

Sources of Revenues. The current sales and compensating use tax revenues, from which the Available Local Sales Tax Funds and Incremental Tax Revenues are derived and available to pay debt service on the Series 2018 Bonds, generally consist of the following sources of taxes which are currently at the rates indicated:

Available for Current Taxes Revenues State Sales Tax: 6.50% 6.50% City General Sales Tax: 0.00% 0.00% City’s share of 1.0% County-Wide General Sales Tax: 1.00% 0.29%(1)

Total Sales Tax: 7.50% 6.79% ______(1) Subject to annual appropriation by the City. One-half of the City’s share of the County-wide general sales tax collected outside any STAR bond district are legally available and are expected to be the source of Available Local Sales Tax Funds. State and local sales tax revenues associated with sales occurring within the District are included in the Revenues. Local sales taxes collected within any other STAR Bond districted created by the City are not legally available for appropriation as Available Local Sales Tax Funds.

There is no guarantee that the tax rates set forth above will not be reduced in the future. See “TAX LEVY, REPORTING AND COLLECTION – Destination Sourcing Rules Relating to Kansas Sales” herein for a discussion of the general destination sourcing rules under the Kansas Law and certain exceptions thereto.

In the event that Incremental Tax Revenues are not available in sufficient amounts to pay scheduled debt service on the Series 2018 Bonds, debt service will be payable from Available Local Sales Tax Funds provided the City has appropriated funds for such purpose. “Available Local Sales Tax Funds” means gross receipts of the City under K.S.A. 12-187 et seq., as amended, and K.S.A. 12-198, as amended, from (a) the portion of any City retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments, and any successor taxes thereto (currently none), and (b) one-half of the City’s portion of the Sedgwick County, Kansas 1% retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments (currently 0.29%), and any successor taxes thereto, in each case with respect to retail sales outside the District and outside another STAR Bond district created by the City.

The Series 2018 Bonds and interest thereon shall not be deemed to constitute a debt or liability of the City, the State or of any political subdivision thereof within the meaning of any state constitutional provision or statutory limitation and shall not constitute a pledge of the full faith and credit of the City, the State or of any political subdivision thereof, but shall be payable solely from the Trust Estate. The issuance of the Series 2018 Bonds shall not, directly, indirectly or contingently, obligate the City, the State or any political

subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. The State shall not in any event be liable for the payment of the principal of, redemption premium, if any, or interest on the Series 2018 Bonds or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever which may be undertaken by the City. No breach by the City of any such pledge, mortgage, obligation or agreement may impose any liability, pecuniary or otherwise, upon the State or any charge upon its general credit or against its taxing power.

No recourse shall be had for the payment of the principal of, or premium, if any, or interest on, any of the Series 2018 Bonds or for any claim based thereon or upon any obligation, provision, covenant or agreement contained in the Series 2018 Bonds or any document to which the City is a party, against any past, present or future elected official, director, trustee, member, manager, officer, official, employee or agent of the City, or the State, as such, either directly or through such entities or any successor to such entities, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise.

Appropriations Covenant

The City intends, on or before the last day of each Fiscal Year, commencing with the 2020 Fiscal Year, to budget and appropriate, specifically with respect to the Indenture, Available Local Sales Tax Funds sufficient to pay all the Debt Service Requirements on the Series 2018 Bonds for the next succeeding Fiscal Year. The City shall deliver written notice to the Trustee no later than 15 days after the commencement of its Fiscal Year stating whether or not the Governing Body has appropriated Available Local Sales Tax Funds sufficient for the purpose of paying the Debt Service Requirements to become due on the Series 2018 Bonds during such Fiscal Year. If the Governing Body shall have made the appropriation of Available Local Sales Tax Funds necessary to pay the Debt Service Requirements to become due on the Series 2018 Bonds during such Fiscal Year, the failure of the City to deliver the foregoing notice on or before the 15th day after the commencement of its Fiscal Year shall not constitute an Event of Nonappropriation and, on failure to receive such notice 15 days after the commencement of the City’s Fiscal Year, the Trustee shall make independent inquiry of the fact of whether or not such appropriation of Available Local Sales Tax Funds has been made. If the Governing Body shall not have made the appropriation of Available Local Sales Tax Funds necessary to pay the Debt Service Requirements to become due on the Series 2018 Bonds during such succeeding Fiscal year, the failure of the City to deliver the foregoing notice on or before the 15th day after the commencement of its Fiscal Year shall constitute an Event of Nonappropriation.

Pursuant to the Indenture, the City covenants and agrees that the Director of Finance of the City or any other officer at any time charged with the responsibility of formulating budget proposals is directed to include in the budget proposal submitted to the Governing Body for each Fiscal Year, commencing with the 2021 Fiscal Year, that the Series 2018 Bonds are Outstanding a request for an appropriation of Available Local Sales Tax Funds for transfer to the Trustee at the times and in the manner provided in the Indenture, it being the intention of the City that the decision to appropriate or not to appropriate under the Indenture shall be made solely by the Governing Body and not by any other official of the City. The City intends, subject to the provisions above respecting the failure of the City to budget or appropriate Available Local Sales Tax Funds to make the Debt Service Requirements on the Series 2018 Bonds thereunder. The City reasonably believes that legally available funds in an amount sufficient to make all Debt Service Requirements on the Series 2018 Bonds during each Fiscal Year can be obtained. The City further intends to do all things lawfully within its power to obtain and maintain Available Local Sales Tax Funds from which the Debt Service Requirements on the Series 2018 Bonds may be made, including making provision for such Debt Service Requirements on the Series 2018 Bonds to the extent necessary in each proposed annual budget submitted for approval in accordance with applicable procedures of the City and to exhaust all available reviews and appeals in the event such portion of the budget is not approved. The City’s Director of Finance is directed to do all things lawfully within its power to obtain and maintain Available Local Sales Tax Funds from which the Debt Service Requirements on the Series 2018 Bonds may be paid, including making provision for such Debt Service Requirements on the Series 2018 Bonds to the extent necessary in each proposed annual budget submitted for approval or by supplemental appropriation in accordance with applicable procedures of the City and to exhaust

all available reviews and appeals in the event such portion of the budget or supplemental appropriation is not approved. Notwithstanding the foregoing, the decision to budget and appropriate funds is to be made in accordance with the City’s normal procedures for such decisions.

The City and the Trustee acknowledge and agree that the Debt Service Requirements on the Series 2018 Bonds under the Indenture shall constitute currently budgeted expenditures of the City, and shall not in any way be construed or interpreted as creating a liability or a general obligation or debt of the City in contravention of any applicable constitutional or statutory limitation or requirements concerning the creation of indebtedness by the City, nor shall anything contained herein constitute a pledge of the general credit, tax revenues (except the Revenues), funds or moneys of the City. The City’s obligations to pay Debt Service Requirements hereunder shall be from year to year only, and shall not constitute a mandatory payment obligation of the City in any ensuing Fiscal Year beyond the then current Fiscal Year. Neither the Indenture nor the issuance of the Series 2018 Bonds shall directly or indirectly obligate the City to levy or pledge any form of taxation (other than the Revenues) or make any appropriation or make any payments beyond those appropriated for the City’s then current Fiscal Year, but in each Fiscal Year the Debt Service Requirements on the Series 2018 Bonds shall be payable solely from the amounts budgeted or appropriated therefor out of the income and revenue provided for such year, plus any unencumbered balances from previous years; provided, however, that nothing in the Indenture shall be construed to limit the rights of the Series 2018 Bondowners or the Trustee to receive any amounts which may be realized from the Trust Estate pursuant to the Indenture. Failure of the City to budget and appropriate said moneys on or before December 31 of any year shall be deemed an Event of Nonappropriation.

To the extent that Available Local Sales Tax Funds are transferred to the Trustee by the City and actually applied by the Trustee to pay principal of any Bonds, the City shall be deemed to be the owner of such Bond and such deemed ownership shall be noted by the Trustee in its registration of Bond ownership. Such Bond shall: (a) be a Subordinate Lien Obligation in the principal amount of the Available Local Sales Tax Funds used to pay principal of such Bond or Bonds; (b) shall bear interest at 0% per annum; (c) shall have a stated maturity of September 1, 2038; (d) shall not be subject to the book-entry only provisions of the Indenture; (e) shall not be subject to transfer or exchange as provided in the Indenture; (f) shall not be subject to redemption prior to maturity in accordance with the provisions of the Indenture; (g) shall not be subject to the satisfaction and discharge provisions of the Indenture; (h) shall be a Bond that remains Outstanding as set forth in the subsection (e) of the definition thereof.

The Tax Distribution Agreement requires that the State Treasurer, on the 5th day of the month preceding each Interest Payment Date, notify the Trustee, as Escrow Agent for the Escrow Fund established under the Tax Distribution Agreement, of the amount on deposit in the City Bond Finance Fund and available for transfer to the Escrow Agent/Trustee. In the event that such amount on deposit is insufficient to pay the scheduled Debt Service Requirements on the Series 2018 Bonds on such Interest Payment Date, the Trustee shall, on or prior to the 10th day of the month preceding each Interest Payment Date, notify the City Representative of such insufficiency and demand that the City provide to the Trustee, not less than 15 days prior to such Interest Payment Date, the amount of such insufficiency in accordance with the provisions of the Indenture. Such transferred amounts shall be deposited into the Debt Service Fund in accordance with the Indenture.

The following chart sets forth 50% of the City’s share of 1.0% County-Wide General Sales Tax that would have been available for appropriation as Available Local Sales Tax Funds during the last ten years and through October 31 for the current fiscal year:

Fiscal Year Ended December 31 Amount 2008 $25,606,574 2009 24,722,106 2010 23,998,125 2011 24,987,675 2012 26,174,792 2013 27,071,126 2014 27,839,177 2015 28,638,617 2016 28,939,207 2017 28,557,694 2018(1) 24,796,645 ______(1) Through October 31, 2018.

The City has historically utilized Available Local Sales Tax Funds for various governmental services and projects, including street maintenance. The City anticipates locating other funding sources for various street improvements to accommodate the appropriation of funds for debt service on the Series 2018 Bonds.

Additional Bonds

The Indenture authorizes the issuance of Additional Bonds on a parity (except as otherwise provided in the Indenture) with the Series 2018 Bonds and any other Additional Bonds at any time and from time to time, upon compliance with the conditions set forth in the Indenture (as summarized below), for any of the following purposes: (1) financing a portion of the costs of the Project and other costs within the District to the extent authorized under the STAR Bond Act; (2) funding reserve deposits and capitalized interest with respect to such Bonds; (3) paying costs of issuance; and/or (4) refunding all or a portion of a series of Bonds then Outstanding or all or a portion of a series of bonds issued under a separate indenture to finance costs and facilities eligible under the STAR Bond Act to be financed within the District (herein referred to as “Refunding Bonds”), to the extent authorized under the Indenture and under the STAR Bond Act.

Before any Additional Bonds are issued under the Indenture, the following requirements shall be satisfied:

(1) The City shall adopt an ordinance (A) authorizing the issuance of such Additional Bonds, fixing the principal amount thereof and describing the purpose or purposes for which such Additional Bonds are being issued, (B) authorizing the City to enter into a Supplemental Indenture for the purpose of issuing such Additional Bonds and establishing the terms and provisions of such series of Bonds and the form of the Bonds of such series and (C) providing for such other matters as are appropriate because of the issuance of the Additional Bonds, which matters, in the judgment of the City, are not prejudicial to the City or the owners of the Bonds previously issued.

(2) The Supplemental Indenture shall contain a provision that applies the appropriations covenant contained in the Indenture to such Additional Bonds.

(3) The City shall deliver to the Trustee a certificate of a City Representative to the effect that no default in the payment of principal, premium, if any, or interest exists with respect to

any Bonds the Outstanding, unless the issuance of such Additional Bonds is required to cure such Event of Default.

(4) An Event of Nonappropriation shall not have occurred with respect to any series of Bonds then Outstanding.

(5) The annual Debt Service Requirements on any Refunding Bonds may not exceed 105% of the annual Debt Service Requirements on the Bonds to be refunded.

(6) The City shall deliver to the Trustee a certificate of a City Representative to the effect that any Rating Agency that issued a rating (without regard to any credit enhancement) on any Bonds for which an appropriations covenant contained in the Indenture is applicable that will remain Outstanding after the issuance of such Additional Bonds, has not lowered such rating as a result of the issuance of such Additional Bonds; provided that a withdrawal or reclassification, redesignation or expansion of rating emblems by a Rating Agency shall not constitute a lowering of a rating (e.g. a single rating classification being divided into subratings).

The City may issue Additional Bonds without compliance with the provisions of subsection (2) above; provided that the City obtain a written report of a Consultant evidencing the following:

(i) The Debt Service Coverage Ratio for each of the two Fiscal Years immediately preceding the issuance of such Additional Bonds, as reflected by information provided by the Trustee, shall be not less than 1.25, including the Additional Bonds proposed to be issued; and

(ii) The projected Debt Service Coverage Ratio, for each Fiscal Year for all Bonds, including the Additional Bonds proposed to be issued, are scheduled to remain Outstanding shall be not less than 1.25. The Consultant may adjust the estimated Incremental Tax Revenues in determining the projected Debt Service Coverage Ratio, by adding thereto any estimated increases or removing therefrom any estimated reductions based on information provided by the City, which, in the opinion of the Consultant, are reasonable.

Any such Additional Bonds issued pursuant to this paragraph shall have no rights in any Available Local Sales Tax Funds appropriated by the City.

Except as described above, the City will not otherwise issue any bonds or any other obligations on a parity with the Series 2018 Bonds, but the City may issue Subordinate Lien Obligations specifically subordinate and junior to the Series 2018 Bonds and payable from the Trust Estate or portions thereof; provided, such Subordinate Lien Obligations shall not be paid so long as any Series 2018 Bonds or Additional Bonds issued that meet the requirements of the Indenture remain Outstanding.

BONDOWNERS’ RISKS

The following is a discussion of certain risks that could affect payments to be made with respect to the Series 2018 Bonds. Such discussion is not, and is not intended to be, exhaustive and should be read in conjunction with all other parts of this Official Statement and should not be considered as a complete description of all risks that could affect such payments. Prospective purchasers of the Series 2018 Bonds should analyze carefully the information contained in this Official Statement, including the Appendices hereto.

Special, Limited Obligations

The Series 2018 Bonds and the interest thereon are special, limited obligations of the City payable (except to the extent paid out of Series 2018 Bond proceeds or the income from the temporary investment

thereof) solely out of the Trust Estate, including the Revenues, and are secured solely by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the owners of the Series 2018 Bonds, as provided in the Indenture. The payment of the Series 2018 Bonds is not secured by an encumbrance, mortgage, security interest or other pledge of any of the property in the Project Area or any other property of the City or the other businesses located in the District.

The Series 2018 Bonds and interest thereon shall not be deemed to constitute a debt or liability of the City, the State or any political subdivision thereof within the meaning of any state constitutional provision or statutory limitation and shall not constitute a pledge of the full faith and credit of the City, the State or any political subdivision thereof, but shall be payable solely from the Trust Estate. The issuance of the Series 2018 Bonds shall not, directly, indirectly or contingently, obligate the City, the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. The State shall not in any event be liable for the payment of the principal of, redemption premium, if any, or interest on the Series 2018 Bonds or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever which may be undertaken by the City. No breach by the City of any such pledge, mortgage, obligation or agreement may impose any liability, pecuniary or otherwise, upon the State or any charge upon the State or any charge upon its general credit or against its taxing power. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS” herein.

The Series 2018 Bonds will be secured by and payable from Revenues generated solely from businesses located in the District prior to the earlier of the date the principal of and interest on all Bonds are paid or April 30, 2038. If any Series 2018 Bonds remain Outstanding after Incremental Tax Revenues on deposit with the State Treasurer on April 30, 2038 and distributed to the Escrow Agent plus any Available Local Sales Tax Funds appropriated have been expended, the principal of and any accrued interest on such Series 2018 Bonds shall remain unpaid and the owners of such Series 2018 Bonds shall be without remedy, other than, and only to the extent of, any other funds held by the Trustee under the Indenture.

Risk of Non-Appropriation

The availability of any Available Local Sales Tax Revenue for the payment of debt service on the Series 2018 Bonds or any Additional Bonds issued under the Indenture is subject to annual appropriation by the City. Although the City has covenanted in the Indenture that the appropriation of the Available Local Sales Tax Funds will be included in the budget submitted to the City Council for each fiscal year, there can be no assurance that such appropriation will be made by the City Council, and the City Council is not legally obligated to make any such appropriation. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS – Appropriations Covenant” herein.

Limited Sources of Debt Service and Factors Affecting Revenues

Overview. The payment of the Series 2018 Bonds is solely dependent on the generation of sufficient Incremental Tax Revenues to make the payments necessary to pay principal of and interest on the Series 2018 Bonds together with any Additional Bonds issued from time to time pursuant to the Indenture.

Incremental Tax Revenues are contingent upon, and the amount generated will be affected by, a variety of factors, including the following: economic conditions within the District and the surrounding area; competition from other retail businesses and entertainment venues; suitability of the District for the local market; local unemployment, availability of transportation, neighborhood changes, crime levels in the area, vandalism, and operating costs; interruption or termination of businesses in the Project Area; completion of construction and opening for business of the businesses within the Project Area following a fire, natural disaster, strikes or similar events, among many other factors. Incremental Tax Revenues are also contingent upon the then applicable tax rates, and timely collection and transfer of tax revenues. As a result, it is not

possible to predict with certainty the amount of Incremental Tax Revenues which will be available in any year to pay debt service on the Series 2018 Bonds. Retail businesses, hotels, auto dealerships and other entertainment venues outside of the District, currently existing or which are developed after the date of this Official Statement, may be competitive with the businesses in the District and could have an adverse impact on the available amount of Incremental Tax Revenues generated within the District. In addition, substantial portions of the District are not anticipated to include components that will generate material Incremental Tax Revenues.

Achievement of Base Year Incremental Tax Revenues. Base Year City Sales Tax Revenues and Base Year State Sales Tax Revenues are historical calculations and will not change during the period that the Series 2018 Bonds are Outstanding. In the event that State, County or City sales tax rates are reduced, there is no corresponding modification of the base tax rates associated with each entity. No Incremental City Sales Tax Revenues will be available until the Base Year City Sales Tax Revenues are collected in each calendar year. No Incremental State Sales Tax Revenues will be available until the Base Year State Sales Tax Revenues are collected in each calendar year.

Certain Risks Related to Construction. The amount of Incremental Tax Revenues generated in any year will be affected by the completion of construction of components within the District. Any significant delay in completion of or failure to complete any portion of the 2018 Projects, or any failure to obtain any required building permit, license or approval, or increased or unusual user requirements or circumstances related to the 2018 Projects, will impact the amount of Incremental Tax Revenues. Construction projects are subject to cost increases and delays due to a variety of causes, including, without limitation, delay in procurement of excavation, demolition or building permits or other governmental approvals, weather, labor disputes, availability of materials or supplies, wind, fire or other casualty damages, unanticipated subsoil conditions or environmental problems, unanticipated construction difficulties and other “force majeure” occurrences or events or financial failure of or failure to perform by one or more contractor, a significant subcontractor or supplier.

The City is not obligated to issue Additional Bonds to pay any additional cost of completing the 2018 Projects and has limited ability to issue Additional Bonds under the STAR Bond Act and the Indenture. As indicated under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS – Additional Bonds,” Additional Bonds cannot be issued until, among other things, cumulative redemptions of Series 2018 Bonds at least equal to the Projected Case 1 Redemption Schedule have occurred. See “PROJECTED AVERAGE LIFE OF THE SERIES 2018 BONDS” for a description of the Projected Case 1 Redemption Schedule.

For more information on matters related to construction within the Project Area, see the discussion herein under the caption “THE PROJECT.”

Financial Feasibility. The amount of Incremental Tax Revenues generated in each year and the financial feasibility of the District depends, in part, upon the buildout and continued operation of the businesses in the District and the ability of such businesses to achieve and then to maintain substantial retail sales throughout the term of the Series 2018 Bonds. There is no guarantee that existing businesses in the District will continue to operate in the District or that any new business will open, continue to occupy and remain open within the District for the term of the Series 2018 Bonds. Failure to open new businesses, closure of existing businesses or reduction of retail sales of all businesses within the District could adversely affect the Incremental Tax Revenues available for payment of the debt service requirements on the Series 2018 Bonds.

Competition. The retailers and entertainment venues in the District face competition for sales and visitors, respectively (which, in turn, generate sales tax revenues) from other retailers and entertainment venues in the region. In addition to regional competition, retailers in the District may face increasing competition from online purchases made via the internet, which currently may not be taxed by local governments. Such competition could adversely affect the ability of the District to generate Incremental Tax Revenues in each

year in amounts sufficient to pay principal of and interest on the Series 2018 Bonds or any Additional Bonds on a timely basis or at all.

Misallocation of Incremental Tax Revenues. The payment of the Series 2018 Bonds from Incremental Tax Revenues is dependent on the proper allocation and deposit of Incremental Tax Revenues generated within the District by the State and the proper reporting of Incremental Tax Revenues by the owners of the businesses in the District. From time to time errors may occur in the reporting of Incremental Tax Revenues and the allocation of Incremental Tax Revenues to the District by the State for deposit with the Escrow Agent.

Changes to State and Local Tax Rates. The Kansas legislature has the authority to amend the provisions of State law governing the sales and use taxes imposed within the District. For example, bills have been introduced in recent legislative sessions providing for a sales tax reduction or exemption for food and food ingredients; however, none have ultimately become law. As indicated under “TAX LEVY, REPORTING AND COLLECTION – Tax Rates,” the State sales and use tax rate has been amended several times since its inception. The County sales and use taxes, a portion of the City’s share of which is anticipated to the be the source of Available Local Sales Tax Funds for appropriation to the payment of debt service on the Series 2018 Bonds, may be amended or repealed by the County’s electorate. Changes to the tax base and exemptions could also affect the amount of Incremental Tax Revenues available for payment of the Series 2018 Bonds. Any change in the current system of collection and distribution of sales taxes in the State, including without limitation the reduction or elimination of any such tax, judicial action concerning any such tax or voter initiative, referendum or action with respect to any such tax, would likely affect the amount of Incremental Tax Revenues generated in any year and could adversely affect the availability of Incremental Tax Revenues in any year in amounts sufficient to pay the principal of and interest on the Series 2018 Bonds. There can be no assurance that the current system of collection and distribution of sales taxes will not be changed by any competent authority having jurisdiction to do so, including without limitation the State, the City, the courts or the voters. See “TAX LEVY, REPORTING AND COLLECTION” herein.

Damage or Destruction of Businesses Located in the District. The partial or complete destruction of any of the businesses located within the District as a result of fire, natural disaster or similar casualty event, or the temporary or permanent closing of the any of the businesses located in the District due to strikes or business failure, would adversely affect the amount of Incremental Tax Revenues generated within the District in the years affected.

Changes in Economic and Demographic Conditions. Sales tax revenues historically have been sensitive to changes in local, regional and national economic conditions. For example, sales tax revenues have historically declined during economic recessions, when high unemployment adversely affects consumption. Demographic changes in the population of the market area for the District may adversely affect the level of sales tax revenues. A decline in population, or reductions in the level of tourism in the market area, could reduce the number and value of taxable transactions and thus reduce the amount of sales tax revenues. It is not possible to predict whether or to what extent any such changes in economic conditions, demographic characteristics, population or commercial and industrial activity will occur, and what impact any such changes would have on Incremental Tax Revenues.

Pursuant to the City Continuing Disclosure Undertaking, the City has covenanted to make available annual information regarding Incremental Tax Revenues deposited in the Escrow Fund under the Tax Distribution Agreement (herein referred to as the “TDA Escrow Fund”). Due to the confidentiality of sales tax information under State law, the City will not be permitted to disclose the aggregate Incremental Tax Revenues generated from the retailers within the District in the event such Incremental Tax Revenues are generated by five or fewer taxpayers. See the discussion herein under the caption “TAX LEVY, REPORTING AND COLLECTION - Confidentiality of Tax Information.” See Appendix D – “FORM OF CONTINUING DISCLOSURE AGREEMENT.”

Change to Project Plan. The Project Plan, the plans and specifications for the 2018 Projects and other documents contemplate the construction of certain improvements within the Project Area, as described in this Official Statement. However, in the event of circumstances not presently anticipated, including but not limited to such things as an economic downturn, a bankruptcy of a party developing within the District, a loss of construction financing and other events which result in the current plans not being commercially feasible, there may be significant modifications to the plans for such development and resultant changes to the anticipated Incremental Tax Revenues projected to be available to pay debt service on the Series 2018 Bonds. As of the date hereof, the 2018 Projects has not commenced. There is no assurance that any anticipated development within the District will be constructed or completed in accordance with the Project Plan.

Completion of the 2018 Projects. The determination by the Secretary that the expanded STAR Bond District is an “eligible area” within the meaning of the STAR Bond Act, was based substantially on the basis that the Project would constitute “major multi-sport athletic facility” within the meaning of the STAR Bond Act. In the event that either the 2018 Projects is not constructed or does not become operational, it is uncertain whether the Secretary would attempt remedial action with respect to the “eligible area” determination and what effect such remedial action may have on the Series 2018 Bonds.

Projected Incremental Tax Revenues

The projected annual Incremental Tax Revenues included or reflected in this Official Statement are based on various assumptions concerning facts and events over which the City has no control. No representation or warranty is or can be made about the amount or timing of any future income, loss, occupancy, valuation, increased assessment or Incremental Tax Revenues, or that actual results will be consistent with the Incremental Tax Revenue projections contained therein. The information is based on various assumptions, estimates and opinions. There is no assurance that actual events will correspond with the projections or the assumptions, estimates and opinions on which they are based.

Limited Collateral: No Mortgage on any Portion of the Project

The payment of the Series 2018 Bonds is not secured by an encumbrance, mortgage, security interest or other pledge of any of the property in the Project Area or any other property of the City or the other businesses located in the District. Therefore, in the event of a default, the Trustee will not have the ability to sell any property in the District or any portion thereof to retire the Series 2018 Bonds or to any other asset or collateral to secure repayment of the Series 2018 Bonds. Further, no property of the City (other than the Revenues) shall be liable to be forfeited or taken in payment of the Series 2018 Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS – Special, Limited Obligations” herein.

Additional Bonds

The Indenture authorizes the issuance of Additional Bonds which can be issued upon satisfaction of the requirements of the STAR Bond Act and the Indenture. The Indenture provides that such Additional Bonds may be issued a parity with the Series 2018 Bonds as to the Pledge of Incremental Sales Tax Revenues and the annual appropriation covenant of Available Sales Tax Revenues, or may be issued on a parity with the Series 2018 Bonds as to the Pledge of Incremental Sales Tax Revenues but without the annual appropriation covenant. In either case, separate Debt Service Accounts will be established for the Additional Bonds. If Additional Bonds are issued, Revenues available to pay the Series 2018 Bonds may be reduced. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS - Additional Bonds” herein.

Legal Matters; Future Changes in the Law

Various state and federal laws, regulations and constitutional provisions apply to the obligations created by the Series 2018 Bonds. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, provisions and regulations which would have a material effect, either directly or indirectly, on the availability of Incremental Tax Revenues to pay the Series 2018 Bonds.

There can be no assurance that the Kansas state legislature will not enact legislation that will amend the laws governing the imposition of sales and compensating use taxes and the applicable tax rates or other laws or the Constitution of the State of Kansas resulting in a reduction of sales tax revenues, and consequently, an adverse effect on the Incremental Tax Revenues otherwise available to pay the debt service on the Series 2018 Bonds. See “Limited Sources of Debt Service and Factors Revenues – Changes to State and Local Tax Rates” above.

Forward-Looking Statements

Certain statements included in this Official Statement that are not purely historical are “forward- looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 24A of the United States Securities Act of 1933, as amended, and reflect current expectations, hopes, intentions or strategies regarding the future. Such statements may be identifiable by the terminology used such as “project,” “plan,” “expect,” “estimate,” “budget,” “intend,” “anticipate” or other similar words.

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDED IN SUCH RISKS AND UNCERTAINTIES ARE (I) THOSE RELATING TO THE POSSIBLE INVALIDITY OF THE UNDERLYING ASSUMPTIONS AND ESTIMATES, (II) POSSIBLE CHANGES OR DEVELOPMENTS IN SOCIAL, ECONOMIC, BUSINESS, INDUSTRY, MARKET, LEGAL AND REGULATORY CIRCUMSTANCES, AND (III) CONDITIONS AND ACTIONS TAKEN OR OMITTED TO BE TAKEN BY THIRD PARTIES, INCLUDING CUSTOMERS, SUPPLIERS, USERS, BUSINESS PARTNERS AND COMPETITORS OF OTHER BUSINESSES OPERATING IN THE DISTRICT, AND LEGISLATIVE, JUDICIAL AND OTHER GOVERNMENTAL AUTHORITIES AND OFFICIALS. ASSUMPTIONS RELATED TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE, AND MARKET CONDITIONS AND FUTURE BUSINESS DECISIONS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY. FOR THESE REASONS, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS OFFICIAL STATEMENT WILL PROVE TO BE ACCURATE.

UNDUE RELIANCE SHOULD NOT BE PLACED ON FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS OFFICIAL STATEMENT ARE BASED ON INFORMATION AVAILABLE ON THE DATE HEREOF, AND THE CITY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS IF OR WHEN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR OR FAIL TO OCCUR, OTHER THAN AS INDICATED UNDER THE CAPTION “CONTINUING DISCLOSURE.”

Tax-Exempt Status of the Series 2018 Bonds

The exclusion from federal gross income of interest on the Series 2018 Bonds is based on the continued compliance by the City with certain covenants relating generally to restrictions on use of the projects financed with proceeds of the Series 2018 Bonds, the repayment of Series 2018 Bonds, arbitrage limitations, and rebate of certain excess investment earnings to the federal government. Failure to comply with such covenants could cause interest on the Series 2018 Bonds to become subject to federal income taxation retroactive to the date of issuance. The Series 2018 Bonds are not subject to redemption solely as a consequence thereof. No additional interest or penalty is payable under the terms of the Indenture in the event of the taxability of interest on the Series 2018 Bonds. See “TAX MATTERS” herein.

Enforceability of Remedies

The remedies available to the Trustee, the City and the holders of the Series 2018 Bonds upon an event of default under the Indenture are in many respects dependent upon judicial actions that are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically the United States Bankruptcy Code, the remedies specified by the Indenture may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Series 2018 Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by principles of equity and by bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the rights of creditors generally. See Appendix B – “SUMMARY OF THE INDENTURE.”

Secondary Market for the Series 2018 Bonds

There is no assurance that a secondary market will develop for the purchase and sale of the Series 2018 Bonds. Prices of municipal securities in the secondary market are subject to adjustment upward and downward in response to changes in the credit markets and changes in operating performance of the entities operating the facilities subject to the municipal securities. Municipal securities are generally viewed as long- term investments, subject to material unforeseen changes in the investor’s circumstances, and may require commitment of the investor’s funds for an indefinite period of time, perhaps until maturity.

Early Redemption of the Series 2018 Bonds

After payment of Trustee, Dissemination Agent, Rebate Analyst and Escrow Agent fees (solely from Incremental City Sales Tax Revenues) and payment of principal and interest on the Series 2018 Bonds, Incremental Tax Revenues will be applied on each Interest Payment Date to the limited special mandatory redemption of the Series 2018 Bonds and any Additional Bonds issued as Term Bonds under the Indenture in the amounts indicated in the Tax Distribution Agreement, and any remaining Incremental Tax Revenues will first be reserved in an amount equal to the principal and interest due on the Series 2018 Bonds and any Additional Bonds on the next succeeding Interest Payment Date and will then be applied to the special mandatory redemption of the Series 2018 Bonds and any Additional Bonds issued as Term Bonds under the Indenture pursuant to the special mandatory redemption provisions described in this Official Statement. It is not possible to determine the actual amount of Incremental Tax Revenues that will be generated within the District. Purchasers of the Series 2018 Bonds should bear in mind that such redemption features could affect the price of the Series 2018 Bonds in the secondary market.

In Summary

THE FOREGOING STATEMENTS REGARDING BONDOWNERS’ RISKS SHOULD NOT BE CONSIDERED AS A COMPLETE DESCRIPTION OF ALL RISKS TO BE CONSIDERED IN A DECISION TO PURCHASE THE SERIES 2018 BONDS. Prospective purchasers of the Series 2018 Bonds should analyze carefully the information contained in this Official Statement (including the

Appendices hereto) and additional information in the form of the complete documents summarized herein, copies of which are available and may be obtained from the Underwriter.

TAX LEVY, REPORTING AND COLLECTION

Overview

Debt service on the Series 2018 Bonds will be payable solely from the Trust Estate, which consists primarily of Revenues. Revenues include Incremental City Sales Tax Revenues and Incremental State Sales Tax Revenues derived from retail sales generated within the District and Available Local Sales Tax Funds appropriated by the City. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS – Special, Limited Obligations” for a discussion of the components and definitions thereof of Incremental City Sales Tax Revenues and Incremental State Sales Tax Revenues. See also “TAX DISTRIBUTION AGREEMENT” herein.

The following discussion includes a description of the statutes (the “Tax Acts”) relating to the State’s collection, administration and enforcement of sales tax and compensating use tax.

Sales and Compensating Use Taxes

The Kansas retail sales tax was first enacted in 1937. The Kansas compensating use tax was enacted in 1937 for consumers and in 1945 for retailers.

Tax Base

Sales Tax. The sales tax is imposed upon the gross receipts from retail sale of tangible personal property and specified services. Gross receipts subject to tax do not include allowable discounts, rescinded sales where a complete refund is made, and trade-in allowances. Historically, this tax base has changed throughout the years to exempt or include certain property items and services. Currently, Kansas exempts prescription drugs from sales tax but imposes the tax on food. More specifically, there are approximately 65 categories of exempt sales.

Use Tax. The compensating use tax is imposed on the purchase price paid for tangible personal property used, stored or consumed within the State. The use tax does not apply to purchases of articles that are not subject to sales tax, to purchases made other than at retail, or to articles already subject to an equal or greater tax. The use tax also does not apply to articles brought into the state by nonresidents for a period not in excess of 60 days, or by a railroad or public utility for consumption or movement in interstate commerce.

Retail Sales. The Kansas sales tax generally applies to three types of transactions: (1) the retail sale, rental or lease of tangible personal property, including the sale or furnishing of utilities; (2) charges for labor services to install, apply, repair, service, alter or maintain tangible personal property; and (3) the sale of admissions to places providing amusement, entertainment or recreation services (collectively, “Retail Sales”).

Exemptions. Each Retail Sale is presumed to be taxable, but there are numerous exemptions. Some exemptions are explicitly provided for, while others are the result of exceptions to a definition of a taxable sale or of tangible personal property. Exemptions are granted on the basis of the nature of the product, the type of transaction, or the nature of the entity buying or selling the product.

The retail operators operating the retail and entertainment projects within the District will, from time to time, engage in transactions that will qualify for exemption. Given the nature of the transactions typically engaged in by establishments such as those operated by the retail operators, among the exemptions likely to be claimed may be the following:

 Sales for purposes of resale;  Sales to qualifying exempt organizations and to federal and Kansas state or local government agencies and instrumentalities;  The lease or rental of films, records, tapes or any type of sound or picture transcriptions used by motion picture exhibitors;  Sales of lottery tickets and shares made as part of a lottery operated by the State of Kansas;  Sales of drinks containing alcoholic liquor, and that are subject to the Liquor Drink Tax (meals and drinks sold to the public at restaurants are subject to sales tax, as are sales of beer); and  Sales of meals served without charge or food used in the preparation of meals to employees of any restaurant where meals or drinks are regularly sold to the public if such employees’ duties are related to the furnishing of such meals or drinks.

Tax Rates

State. The State sales and compensating use tax rate currently in effect is 6.50% of the gross receipts from taxable sales. Because the use tax is a compensating tax, its rate has historically matched the sales tax rate. These two State taxes have been in effect since 1937, when each was imposed at a rate of 2.0%. The rate was increased from 2.0% to 2.5% by the 1958 Special Session of the Kansas Legislature. The rate was further increased to 3.0% in 1965 and remained at this rate until the 1986 Kansas Legislature increased the rate to 4.0%. In 1989, the Kansas Legislature raised the rate to 4.25%. In 1992, the Kansas Legislature raised the rate to 4.9%. The 2002 Kansas Legislature increased the rate to 5.3%, effective July 1, 2002. The Kansas Legislature further increased the rate to 6.3% effective July 1, 2010, and such rate was reduced to 6.15% effective July 1, 2013. The Kansas Legislature further increased the rate to 6.50% effective July 1, 2015. The State and sales and compensating use tax is imposed at a uniform rate State-wide. The Kansas Legislature can decrease or increase the rate at any time.

City Retailers’ Tax. Kansas cities are authorized to levy retailers’ sales taxes ranging from 0.25% to 2.0%, in 0.05% increments for general purposes, on sales or transfers subject to state sales tax. In addition, cities may impose an additional retailers’ sales tax of up to 1.0% for special purposes. The City currently does not impose a local sales tax and the most recent effort to impose a citywide sales tax was defeated by the City’s electorate.

County Retailers’ Tax. Any county may levy a retailers’ sales tax of 0.25%, 0.5%, 0.75, or 1.0% for general purposes. The county tax rate can be increased or decreased with voter approval. Under State law a portion of general county sales tax is distributed to other municipalities in the county. One-half of all county general sales tax revenues are apportioned among the county and each city located in the county in the proportion that the total preceding year property tax levies made in the county represent to the total of all such levies. The remaining one half of all revenues received are apportioned to the cities and county, based on their share of total population within the county. The county population for this share of the allocation includes all population residing in the unincorporated area of the county. The percentages are adjusted on a semi-annual basis to reflect the annual certified preceding year property tax levies and current population estimates, released by the U.S. Census Bureau.

Sedgwick County (the “County”) imposes a sales and compensating use tax for general purposes, currently at the rate of 1.0%. The City has pledged one-half of the City’s portion of the 1% County sales tax received from retail sales within the District to the payment of the Series 2018 Bonds (currently, the one half

equates to a sales and compensating use tax of 0.29%). Since 2006, the City’s share of the County sales tax is adjusted semi-annually and has ranged from approximately 57.72% to approximately 59.11%.

Destination Sourcing Rules Relating to Kansas Sales

Effective January 1, 2005, all retailers were required to be in full compliance with “destination-based” sourcing provisions first effective July 1, 2003 relating to sales occurring in the State. Between July 1, 2003 and December 31, 2004, retailers were permitted to apply either the historical “origin-based” (location of the retailer) sourcing rules that applied before July 1, 2003 or the new destination-based rules. Generally, retailers now must use “destination-based” sourcing rules to correctly identify the local sales tax rate to charge on retail sales transactions. The effect of these rules is that local sales taxes collected by retailers located in the District on sales of goods delivered to purchasers outside of the District are calculated based on the local tax rates in effect at the destination of delivery. Further, the local sales tax collected on sales delivered outside of the boundaries of the City are not paid to the City but to the local taxing jurisdiction where the goods are delivered. As a result, local sales taxes collected on goods delivered outside the boundaries of the City, with the exception for auto sales as described below, are not included in calculating City Sales Tax Revenues available to pay debt service on the Bonds. The destination sourcing rules do not impact the calculation or payment of State Sales Tax Revenues.

Telecommunication Sales. The general destination sourcing rules under Kansas Law do not apply to sales of telecommunication services. Accordingly, the sales tax on the sale of telecommunication services are deemed collected at the point of delivery of such services (e.g. location of business or residence where such telecommunication services are used). Accordingly, such sales taxes are not considered Incremental Tax Revenues will not be available to pay debt service on the Bonds. However, sales taxes on personal property sold at retail locations within the District (e.g. telephones, internet modems, etc.) are considered Incremental Tax Revenues and will be available to pay debt service on the Bonds.

Auto Sales. The destination sourcing rules described above do not apply to auto sales to Kansas residents. Accordingly, the sales tax on the sale of an automobile in Kansas to a Kansas resident is collected at the point of sale at the local rate. However, sales tax on auto sales in Kansas to non-Kansas residents (even if no delivery is involved) are collected in the purchaser’s state of residence. As such, state and local sales tax on auto sales in the District to Kansas residents will be collected and available to pay debt service on the Bonds, but sales tax on auto sales in the District to non-Kansas residents will not be available to pay debt service on the Bonds. As of the date hereof, there are no commercial auto dealers located within the District.

Sales Tax Reporting and Collection

All retailers with annual sales tax liability over $3,200 are required to file tax returns reporting their sales activity for the month on or before the 25th of the following month. Retailers with lower annual sales file at different intervals specified by law. Tax payments must accompany the tax report, except that, if annual tax liability exceeds $32,000, the tax for the first 15 days of the month must be paid on or before the 25th day of that month.

Deposit and Transfer of Tax Revenues

State Sales Tax. All State sales tax revenue collected or received by the State Department of Revenue is remitted to the State Treasurer, which amounts are deposited in the State Treasury, less an amount not exceeding $100,000 for all STAR Bond projects set apart and maintained by the Director of the Department of Revenue in a “sales tax refund fund.” K.S.A. 79-3620. All such revenue received from taxpayers doing business in a redevelopment district occupied by a redevelopment project determined by the State to be of statewide as well as local importance, or that will create a major tourism area for the State, including the Project Area, is deposited to the “City Bond Finance Fund.”

All State compensating use tax revenue received by the State Department of Revenue is also remitted to the State Treasurer, less $10,000 set apart in the “compensating tax refund fund.” All such revenue received from taxpayers doing business in a redevelopment district occupied by a redevelopment project determined by the State to be of statewide as well as local importance, or that will create a major tourism area for the State, including the Project Area, is deposited to the City Bond Finance Fund.

Sales and compensating use tax receipts credited to the City Bond Finance Fund are to be distributed biannually to cities that have issued special obligation bonds to finance, in whole or in part, a STAR Bond project. The biannual distributions are on such dates as are mutually agreed by the State Treasurer and the City. The Tax Distribution Agreement sets forth the agreements of the State Treasurer with respect to the distribution of moneys in the City Bond Finance Fund to pay the STAR Bonds issued by the City for the Project Area. See the discussion herein under the caption “TAX DISTRIBUTION AGREEMENT.”

Local Sales Tax. Any county or city imposing a retailers’ sales tax is prohibited from administering or collecting the tax locally, and is required to utilize the services of the State Department of Revenue to administer, enforce and collect the tax. The Department of Revenue collects the local tax in the same manner provided for the collection of the State retailers’ sales tax. All moneys collected by the Department of Revenue from local sales taxes are credited to the “county and city retailers’ sales tax fund” established in the State Treasury. Except for local retailers’ sales tax revenue required to be deposited in the redevelopment bond fund, all local retailers’ sales tax revenues collected within any county or city are apportioned and remitted at least quarterly by the State Treasurer to the Treasurer of a county or city. Incremental sales tax revenues certified by the Department of Revenue to have been derived from taxpayers located in a STAR Bond district shall be credited by the State Treasurer to the issuer of STAR Bonds and shall be disbursed to the issuer or its designee on dates mutually agreed between the State Treasurer and the City. See the discussion under the caption “TAX DISTRIBUTION AGREEMENT.” All revenue received from a countywide retailers’ sales tax is apportioned between the applicable cities and county as follows: (1) one-half of all revenue is apportioned in the proportion that the tangible property tax levies in a county for the preceding year for all funds of each governmental unit bear to the total of all such levies made in the preceding year, and (2) one-half is apportioned first to the county in that portion of revenue equal to the proportion of that county’s population residing in the unincorporated area bears to the total population of the county, and second to the cities in proportion to the population that each city bears to the total population of the county. The City’s share of the countywide taxes is tied to the population estimates issued by the Census Bureau in the 1st and 3rd quarters of each year, and thus fluctuates over time, when computing the apportionment among the county and each city by population, as required by K.S.A. 12-192.

Confidentiality of Tax Information

Under Kansas law, all information received by the State from returns filed under the Tax Acts is confidential. It is unlawful to make a disclosure of taxpayer information except pursuant to a proper court order or a governmental exchange of information, and any person receiving tax information from the State is subject to the same confidentiality restrictions as apply to the State.

Notwithstanding these restrictions, the State is authorized to provide monthly reports upon the request of a city or county clerk or treasurer of any city or county levying a local retailer’s sales tax. The report may identify each retailer having a place of business in the taxing city or county, and the amount of tax remitted by each retailer during the prior month, as well as identifying each business location maintained by a retailer within such city or county. The information so received by a city or county remains confidential, and an unauthorized disclosure may be prosecuted as a class B misdemeanor and may lead to dismissal from office of the disclosing officer or employee. However, the Kansas Attorney General has opined that information from such reports that is further manipulated by the city or county may no longer be considered the information that was contained in the confidential reports and may not be subject to limitations on disclosure.

Moreover, in connection with a redevelopment project area or STAR Bond project relying on pledged sales and use tax revenues, upon request of the City of the related bonds, the State is required to provide copies of all retailers’ sales and use and tax returns to the bond trustee or paying agent of the City within 15 days of receipt by the Director of the Department of Revenue. The bond trustee or paying agent is required to maintain the returns and return information confidential.

Enforcement, Penalties and Interest

Penalty and interest amounts paid pursuant to the Tax Acts are not included in tax revenues. Taxes remaining unreported or unpaid after the due date accrue a penalty equal to 1% of the unpaid balance for each month or fraction of a month that the failure to file a return or pay the tax continues, not to exceed 24% in the aggregate. If a filed return is subject to a field audit, any unpaid tax amount assessed will accrue a penalty of 1% per month, but not to exceed 10% of the unpaid tax. However, if it is determined that the taxpayer made no reasonable attempt to comply with the tax law, the penalty will be 25% for taxes due. If there is a fraudulent intent to evade any tax, the penalty added will be 50% of the taxes due, imposed in addition to any other applicable penalty. A fine of $500 to $10,000 may also be imposed in addition to all other penalties where a person is convicted of other tax law violations.

Interest accrues on unpaid sales and use taxes, at a rate of 1% plus the federal tax underpayment rate in effect on July 1 of the preceding year (as determined under Internal Revenue Code section 6621). When computed monthly, the interest rate is 1/12 of the annual rate.

TAX DISTRIBUTION AGREEMENT

The discussion under this caption contains a summary of certain provisions of the Tax Distribution Agreement, but such summary does not purport to be comprehensive or definitive. All references herein to the Tax Distribution Agreement are qualified in their entirety by reference to the definitive form of such document, which is attached hereto as Appendix C.

Overview

The City has entered into the Tax Distribution Agreement pursuant to the provisions of the STAR Bond Act. The Tax Distribution Agreement provides for the deposit of all Incremental City Sales Tax Revenues and Incremental State Sales Tax Revenues (collectively, the “Incremental Tax Revenues”), generated within the District in the TDA Escrow Fund (as hereinafter defined) and the transfer of such Incremental Tax Revenues to the Trustee for further deposit in the funds and accounts established under the Indenture. The Incremental Tax Revenues will be transferred to the Escrow Agent for distribution as provided in the Tax Distribution Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2018 BONDS” herein and “Appendix C – TAX DISTRIBUTION AGREEMENT” attached hereto.

TDA Escrow Fund

Pursuant to the Tax Distribution Agreement, the Escrow Agent will establish a special and irrevocable separate trust fund to be held in the custody of the Trustee and designated as the “Incremental Tax Revenues Escrow Fund – Wichita River STAR Bond Project Area” (herein referred to as the “TDA Escrow Fund”). All Incremental Tax Revenues received by the Escrow Agent are deposited into the TDA Escrow Fund. Moneys in the TDA Escrow Fund shall be held in trust by the Escrow Agent and applied solely in accordance with the provisions of the Tax Distribution Agreement.

Collection and Transfer of Incremental City Sales Tax Revenues

The Kansas Department of Revenue (the “Department”) is responsible for administering, enforcing and collecting all City Sales Tax Revenues from taxpayers doing business within the District, and for determining the amount of Incremental City Sales Tax Revenues pursuant to the terms of the Tax Distribution Agreement. The Department advises the State Treasurer and the Escrow Agent monthly of the amount of City Sales Tax Revenues collected by the Department in the preceding calendar month and the total amount of Incremental City Sales Tax Revenues with respect to the preceding calendar month.

Pursuant to the Tax Distribution Agreement, the State Treasurer remits all Incremental City Sales Tax Revenues monthly by not later than the last Business Day of the calendar month immediately succeeding the calendar month in which such amounts were collected directly to the Escrow Agent for deposit in the TDA Escrow Fund.

Collection and Transfer of Incremental State Sales Tax Revenues

The Department is responsible for the administration, enforcement and collection of all State Sales Tax Revenues from taxpayers doing business within the District and for crediting Incremental State Sales Tax Revenues to the City Bond Finance Fund. The Department advises the State Treasurer and the Escrow Agent monthly of the total amount of State Sales Tax Revenues collected by the Department during the preceding calendar month, the total amount of Incremental State Sales Tax Revenues deposited into the City Bond Finance Fund during the preceding calendar month and the balance in the City Bond Finance Fund at the close of business on the last day of the preceding calendar month.

The State Treasurer is required to make biannual distributions of Incremental State Sales Tax Revenues from the City Bond Finance Fund established in the State Treasury pursuant to the STAR Bond Act in order to pay or reimburse debt service on the Bonds in accordance with the Tax Distribution Agreement. Pursuant to the Tax Distribution Agreement, the Incremental State Sales Tax Revenues credited to the City Bond Finance Fund shall be transferred by the State Treasurer to the Trustee semiannually not less than two (2) Business Days prior to each Interest Payment Date for deposit in the TDA Escrow Fund. Specifically, moneys in the City Bond Finance Fund may be used only to pay or reimburse principal of and interest on any series of Bonds or replenish any debt service reserve fund that was initially funded with Bond proceeds and was subsequently depleted in order to pay principal of and interest on any series of Bonds. Moneys in the City Bond Finance Fund will not be used to pay the fees and expenses of the Trustee, Dissemination Agent or Rebate Analyst. Interest earnings on amounts on deposit in the City Bond Finance Fund shall be transferred to the State general fund.

Application of Incremental Tax Revenues in TDA Escrow Fund

Pursuant to the Tax Distribution Agreement, the Escrow Agent is directed to allocate and distribute Incremental Tax Revenues in the TDA Escrow Fund not less than one (1) Business Day prior to each Interest Payment Date, in the following order of priority:

(a) Debt Service. The Escrow Agent shall transfer to the Trustee, for deposit in the applicable Debt Service Accounts established with respect to the Bonds under the Indenture, an amount equal to the sum of (i) the amount of any due and unpaid principal of, Accreted Value and interest on the Bonds (the “Past Due Debt Service”), plus (ii) the amount of principal of, Accreted Value and interest becoming due on the upcoming Interest Payment Date on the Bonds, less any amounts then on deposit in such Debt Service Accounts and the Capitalized Interest Fund, in accordance with the provisions of the Indenture (the “Current Debt Service”). Such amount shall be applied by the Trustee first, to the payment of Past Due Debt Service, and second , to the payment of Current Debt Service.

(b) Replenishing of Debt Service Reserve Accounts. If and to the extent there are moneys remaining in the TDA Escrow Fund after the transfers required under subsection (a) above have been made, the Escrow Agent shall transfer to the Trustee, for deposit in any applicable debt service reserve accounts established with respect to the Bonds, an amount equal to the amount, if any, necessary to be deposited in such debt service reserve accounts in order to cause the aggregate amount on deposit in such debt service reserve accounts as of the close of business on the upcoming Interest Payment Date to be equal to the debt service reserve requirement with respect to the Bonds (or, if applicable, to reimburse the provider of a surety bond or other credit facility satisfying the debt service reserve requirement with respect to Bonds for a prior payment of debt service on such Bonds). There is no debt service reserve account established for the Series 2018 Bonds.

(c) Reserve for Next Scheduled Debt Service Payment. If and to the extent there are moneys remaining in the TDA Escrow Fund after the transfers required under subsections (a) and (b) above have been made, the Escrow Agent shall determine the aggregate scheduled principal and Accreted Value payments (whether at maturity or upon mandatory sinking fund redemption) and interest payments required to be made with respect to the Bonds pursuant to the terms of the Indenture on the next succeeding Interest Payment Date (i.e., the Interest Payment Date immediately succeeding the upcoming Interest Payment Date), less any amounts then on deposit in the applicable Debt Service Accounts and Capitalized Interest Fund established with respect to the Bonds under the Indenture (the “Next Scheduled Debt Service Payment”) and shall reserve in the TDA Escrow Fund (or, with respect to the State Percentage of the hereinafter defined Reserved Revenues, in the City Bond Finance Fund, as provided in the last sentence of this paragraph) an aggregate amount (the “Reserved Revenues”) equal to the Next Scheduled Debt Service Payment. An amount equal to the State Percentage of the Reserved Revenues shall be retained in the City Bond Finance Fund until the next succeeding Interest Payment Date (i.e., the Interest Payment Date immediately succeeding the upcoming Interest Payment Date) and an amount equal to the City Percentage of the Reserved Revenues shall be retained in the TDA Escrow Fund until the next succeeding Interest Payment Date, at which time the Reserved Revenues shall be applied along with other amounts on deposit in the TDA Escrow Fund as provided above.

Notwithstanding anything to the contrary in this subsection (c), if the Bonds of a particular series would be paid in full on the upcoming Interest Payment Date if the portion of the Reserved Revenues allocable to such series of Bonds were available to be applied to the redemption of such Bonds pursuant to the provisions above on the upcoming Interest Payment Date, then the Escrow Agent shall transfer to the Trustee the portion of the Reserved Revenues allocable to such series of Bonds that is needed to pay such series of Bonds in full, which amount shall be applied to the redemption of such Bonds in accordance with the applicable subsection above.

(d) Special Mandatory Redemption of Bonds on the Upcoming Interest Payment Date. If and to the extent there are moneys remaining in the TDA Escrow Fund after the transfers required in subsections (a) and (b) above have been made, and the amounts to be retained in the TDA Escrow Fund under subsection (c) above has been reserved, the Escrow Agent shall transfer to the Trustee, for deposit in the applicable Special Mandatory Redemption Subaccounts of the Debt Service Accounts established with respect to any Bonds under the Indenture, an amount sufficient to redeem such outstanding Bonds pursuant to the terms of the Indenture on the upcoming Interest Payment Date. The Trustee shall use the moneys so deposited in such Special Mandatory Redemption Subaccounts to redeem such outstanding Bonds on such date. If there is more than one series of such outstanding Bonds and the moneys to be transferred pursuant to this subsection (i) are insufficient to redeem all such outstanding Bonds, such moneys shall be allocated among such outstanding Bonds in chronological order of maturity.

(e) Redemption or Prepayment of Other Bonds. If and to the extent there are moneys remaining in the TDA Escrow Fund after the transfers required under subsections (a), (b) and (d)

above have been made and amounts required under subsection (c) above have been set aside, in which case provision for payment of all Bonds shall have been made, and the amount to be retained in the TDA Escrow Fund under subsection (c) above has been reserved, then the Escrow Agent shall apply an amount sufficient to redeem, purchase, defease or prepay any outstanding Bonds pursuant to the terms of the Indenture, to the redemption, purchase, defeasance or prepayment of such Bonds in such manner, proportions and priority and on such dates as shall be determined as set forth in an amendment to the Tax Distribution Agreement to be effective at the date of issuance of the first series of Bonds that are not Series 2018 Bonds.

On the 15th day of the month prior to each Interest Payment Date, the Escrow Agent shall pay, from Incremental City Sales Tax Revenues and any investment earnings thereon on deposit in the TDA Escrow Fund: certain fees, expenses and other amounts payable to each Credit Enhancer, the Trustee, the Dissemination Agents, the Escrow Agent and the Rebate Analysts, subject to the maximum amount of such fees provided in the Tax Distribution Agreement.

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Flow of Funds Under the Tax Distribution Agreement

Note: The following chart does not take into account the Available Local Sales Tax Funds, if appropriated, which are to be deposited by the City directly with the Trustee in the event of a shortfall in Incremental Tax Revenues (see “INTRODUCTION – Security and Sources of Payment for the Series 2018 Bonds” herein).

STAR Bond District Retailers and Businesses That Collect Sales Taxes

State Tax Revenues City Sales Tax Revenues

Kansas Department of Revenue

Incremental State Tax Incremental City Revenues Tax Revenues (Sent to Escrow Agent monthly) State Treasurer for deposit to Various Fees paid City Bond Finance Fund from Incremental City (Sent to Escrow Agent Tax Revenues semi-annually at least 2 Business Days prior to each Interest Payment Date. Escrow Agent is advised monthly as to balance) Escrow Fund

Trustee 1) Past Due and Current Debt Service on Bonds 2) Replenish Debt Service Reserve Accounts for Bonds(1) 3) Fund Reserve for Next Scheduled Debt Service Payment on Bonds 4) Special Mandatory Redemption of Term Bonds on Upcoming Interest Payment Date 5) After prepayment of all Term Bonds (including the Series 2018 Bonds), Redemption or Prepayment of Other Bonds ______(1) Not applicable to the Series 2018 Bonds

Reporting of City Sales Tax Revenues and State Sales Tax Revenues

City Sales Tax Revenues. Each retailer that does business within the District is required to submit to the Kansas Department of Revenue (the “Department”), at the times specified in the applicable statutes, (i) City Sales Tax Revenues collected by such taxpayer and (ii) returns detailing the collection of such City Sales Tax Revenues. See “TAX LEVY, REPORTING AND COLLECTION” herein. The City will make commercially reasonable efforts to cause all assignees, purchasers, tenants, subtenants or any other entity acquiring property or occupancy rights in the District to be obligated by written contract (lease agreement or other enforceable document) to provide to the City Representative simultaneously with submission to the Kansas Department of Revenue the monthly sales tax returns for their facilities in the District. The Escrow Agent also may request that the City request the Department to provide, and the Department shall provide if requested, information with respect to City Sales Tax Revenues collected by any retailer that does business within the District pursuant to the provisions of K.S.A. 12-17,174.

State Sales Tax Revenues. Each retailer that does business within the District is required to submit to the Department, at the times specified in such statutes, (i) State Sales Tax Revenues collected by such taxpayer and (ii) returns detailing the collection of such State Sales Tax Revenues. See “TAX LEVY, REPORTING AND COLLECTION” herein. The City will make commercially reasonable efforts to cause all assignees, purchasers, tenants, subtenants or any other entity acquiring property or occupancy rights in the District to be obligated by written contract (lease agreement or other enforceable document) to provide to the City Representative simultaneously with submission to the Kansas Department of Revenue the monthly sales tax returns for their facilities in the District. The Escrow Agent also may request that the City request the Department to provide, and the Department shall provide if requested, information with respect to State Sales Tax Revenues collected by any retailer that does business within the District pursuant to the provisions of K.S.A. 12-17,174.

Pursuant to the Tax Distribution Agreement, the State Treasurer will request that the Department determine and advise the State Treasurer and the Escrow Agent not later than the last Business Day of each calendar month of the total amount of State Sales Tax Revenues collected by the Department during the preceding calendar month, the total amount of Incremental State Sales Tax Revenues deposited into the City Bond Finance Fund during the preceding calendar month and the balance in the City Bond Finance Fund at the close of business on the last day of the preceding calendar month.

Notices Regarding Tax Rates. Pursuant to the Tax Distribution Agreement, the State Treasurer shall request that the Department promptly advise the State Treasurer, the Escrow Agent and the City of any adjustments in State or local retail sales or use tax rates applicable with respect to retail sales within the District and any adjustments to the City’s share of the countywide retail sales and use tax.

Confidentiality of Tax Information

State statutes make it unlawful to disclose tax reports filed with the State. See “TAX LEVY, REPORTING AND COLLECTION - Confidentiality of Tax Information” herein. Pursuant to the Tax Distribution Agreement, the Escrow Agent agrees that it shall not use or communicate, publish or disclose to any third party any sales or use tax information of any individual taxpayer or group of less than five taxpayers obtained by the Escrow Agent pursuant to the Tax Distribution Agreement, for any purpose other than carrying out the Escrow Agent’s obligations under the Tax Distribution Agreement, without the prior written consent of the individual taxpayer that submitted such tax information to the Department; provided, however, that such restriction on use and disclosure shall not apply to information that, in the opinion of counsel to the Escrow Agent, is required to be disclosed by applicable law, court order or other governmental authority.

Reports to the City

Within 20 days after each June 30 and December 31, the Escrow Agent shall provide to the City by first-class or electronic mail a report containing the information required in Section 2 of the City Continuing Disclosure Undertaking. See “Exhibit D – FORM OF CONTINUING DISCLOSURE AGREEMENT.”

Upon receipt of such report, (a) the City shall compare the amount of Incremental State Sales Tax Revenues and Incremental City Sales Tax Revenues received by the Escrow Agent as set forth in such report with the copies of tax returns detailing the collection of State Sales Tax Revenues and City Sales Tax Revenues received by the City from businesses operating within the District during the same period, and (b) if any discrepancies exist, the City shall contact the Escrow Agent or the Department, as appropriate, to reconcile such discrepancies and to provide that all Incremental State Sales Tax Revenues and Incremental City Sales Tax Revenues received by the Department were properly applied and credited.

Amendments

The Tax Distribution Agreement may be amended or otherwise modified by a written instrument executed by all parties thereto; provided, however, that in the event that any modification or amendment to the Tax Distribution Agreement would have a material adverse effect on the interests of the owners of the Bonds, then, the Tax Distribution Agreement may only be amended with the prior written consent of the owners of 50% of the outstanding Bonds affected by such amendment. Notwithstanding the foregoing, the Tax Distribution Agreement may not be amended without the consent of the owner of each outstanding Bond affected by certain types of amendments identified in the Tax Distribution Agreement. See “Exhibit C – TAX DISTRIBUTION AGREEMENT.”

PROJECTED CASH FLOW MODELS FOR THE SERIES 2018 BONDS

Introduction

The following discussion describes the assumptions (the “Structuring Assumptions”) used to calculate the estimated repayment of the Series 2018 Bonds from Incremental Tax Revenues and Available Local Tax Funds (if needed and if appropriated) and the projected redemptions of Series 2018 Bonds pursuant to the special mandatory redemption provisions described under the caption “THE SERIES 2018 BONDS – Redemption Provisions – Special Mandatory Redemption of Series 2018 Bonds,” under the various scenarios described below. Potential investors are cautioned that the information in this section of the Official Statement represents “forward-looking statements” as described under the caption “BONDOWNERS’ RISKS - Forward-Looking Statements.”

Structuring Assumptions

General. The Structuring Assumptions described under this heading were prepared by the Underwriter and are believed to be reasonable. However, some assumptions inevitably will not materialize and unanticipated events and circumstances may occur. Therefore, actual results achieved will vary from the results based on the Structuring Assumptions, and the variations may be material. If actual results are materially different from those assumed, it will have a material effect on the projections set forth under this caption.

Incremental Tax Revenues. The Incremental Tax Revenues described were based on the projections for sales tax revenues from the retailers that are subject to sales taxes expected to be operating in the STAR Bond District as estimated by the City, assuming the current State sales tax rate of 6.50% and the City’s portion of the County sales tax rate of 0.29%, for a combined tax rate of 6.79%. See the caption “TAX LEVY REPORTING, AND COLLECTION – Tax Rates.

Lag. Certain lags between revenues generated and actually collected by the Trustee and available for debt service have been assumed. In addition, given the base year tax revenues associated with the sales taxes, the assumption in the below cases is that 30% of Incremental Tax Revenues for a calendar year will be available for the payment of debt service or redemption of Series 2018 Bonds on September 1st of such year and 70% of Incremental Tax Revenues for a calendar year will be available for the immediately succeeding March 1 interest payment date.

Assumed Annual Fees. Annual fees of the Trustee, Dissemination Agent, and Escrow Agent have been assumed at $10,000 per year and Rebate Analysts at $5,000 every five years. This includes fees of the Trustee and Escrow Agent at the capped amount of $10,000 per year. These amounts are payable from Incremental City Sales Tax Revenues pursuant to the Tax Distribution Agreement and applied pursuant to the Flow of Funds under the Tax Distribution Agreement.

Issue Date. The Series 2018 Bonds are assumed to be issued on the Date of Delivery.

Assumed Interest. The Series 2018 Bonds are assumed to bear interest at the rates shown on the inside cover hereof.

Beginning Balance. Since Phase I has already been established, the City currently has approximately $3,860,803 on deposit from Incremental Tax Revenues. In addition, the Series 2018 Bonds will provide capitalized interest through September 1, 2020.

Projected Cash Flows

The following tables were prepared by the Underwriter based on the Structuring Assumptions as described above. The tables show Incremental Tax Revenues (based upon the assumptions above) applied pursuant to the Flow of Funds under the Tax Distribution Agreement.

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Case I. Assumes that Incremental Tax Revenues will be received in accordance with the Projected Incremental Tax Revenues detailed on page 14.

Available Annual Local Expenses & Ser ies 2 0 1 8 Incremental Tax Revenues Sales Tax Trustee Total Scheduled Surplus Fund Date Phase I Phase II Construction Funds Fees Revenue Interest Principal Redemptions Balance 11/16/2018 ------7,136,966 3/1/2019 1,000,000 - - - - 1,000,000 533,329 - - 7,603,637 9/1/2019 475,699 70,549 254,519 - (10,000) 790,767 914,278 - - 7,480,127 3/1/2020 1,109,965 164,615 593,877 - - 1,868,457 914,278 - - 8,434,306 9/1/2020 493,014 237,627 158,949 - (10,000) 879,590 914,278 - - 8,399,617 3/1/2021 1,150,365 554,463 370,882 - - 2,075,710 914,278 - - 9,561,049 9/1/2021 531,505 330,166 130,129 - (10,000) 981,800 914,278 - - 9,628,571 3/1/2022 1,240,177 770,387 303,635 - - 2,314,199 914,278 - - 11,028,492 9/1/2022 593,612 411,378 248,496 - (10,000) 1,243,486 914,278 - - 11,357,700 3/1/2023 1,385,095 959,883 579,823 - - 2,924,801 914,278 - - 13,368,223 9/1/2023 640,082 541,995 215,842 - (15,000) 1,382,919 914,278 500,000 - 13,336,864 3/1/2024 1,493,525 1,264,656 503,631 - - 3,261,812 904,278 - 14,270,000 1,424,397 9/1/2024 744,476 637,084 95,935 - (10,000) 1,467,496 618,878 520,000 - 1,753,015 3/1/2025 1,737,111 1,486,530 223,849 - - 3,447,490 608,478 - 1,825,000 2,767,026 9/1/2025 827,190 730,742 - - (10,000) 1,547,933 571,978 2,155,000 - 1,587,981 3/1/2026 1,930,111 1,705,066 - - - 3,635,176 518,103 - 1,920,000 2,785,054 9/1/2026 879,553 816,390 - - (10,000) 1,685,943 479,703 2,265,000 - 1,726,293 3/1/2027 2,052,289 1,904,910 - - - 3,957,199 423,078 - 2,460,000 2,800,415 9/1/2027 671,377 835,759 - - (10,000) 1,497,136 373,878 2,375,000 - 1,548,672 3/1/2028 1,566,547 1,950,103 - - - 3,516,650 314,503 - 1,940,000 2,810,819 9/1/2028 - 896,535 - - (15,000) 881,535 266,953 2,495,000 - 930,401 3/1/2029 - 2,091,916 - - - 2,091,916 206,569 - - 2,815,748 9/1/2029 - 938,562 - - (10,000) 928,562 206,569 2,615,000 - 922,741 3/1/2030 - 2,189,977 - - - 2,189,977 149,369 - 80,000 2,883,350 9/1/2030 - 960,374 - - (10,000) 950,374 147,369 2,730,000 - 956,354 3/1/2031 - 2,240,872 - - - 2,240,872 87,031 - 170,000 2,940,195 9/1/2031 - 982,622 - - (10,000) 972,622 82,781 2,850,000 - 980,035 3/1/2032 - 2,292,784 - - - 2,292,784 24,250 - 970,000 2,278,568 9/1/2032 - 1,005,314 - - (15,000) 990,314 - - - 3,268,883 3/1/2033 - 2,345,734 - - - 2,345,734 - - - 5,614,616 9/1/2033 - 1,028,461 - - - 1,028,461 - - - 6,643,078 3/1/2034 - 2,399,743 - - - 2,399,743 - - - 9,042,820 9/1/2034 - 1,052,071 - - - 1,052,071 - - - 10,094,891 3/1/2035 - 2,454,832 - - - 2,454,832 - - - 12,549,723 9/1/2035 - 1,076,153 - - - 1,076,153 - - - 13,625,876 3/1/2036 - 2,511,023 - - - 2,511,023 - - - 16,136,899 9/1/2036 - 1,100,716 - - - 1,100,716 - - - 17,237,616 3/1/2037 - 2,568,338 - - - 2,568,338 - - - 19,805,954 9/1/2037 - 1,125,771 - - - 1,125,771 - - - 20,931,725 3/1/2038 - 2,626,799 - - - 2,626,799 - - - 23,558,525 9/1/2038 - 941,417 - - - 941,417 - - - 24,499,942 Totals 20,521,693 50,202,316 3,679,567 - (155,000) 74,248,576 14,745,601 18,505,000 23,635,000

Case II. Assumes that Projected Incremental Tax Revenues detailed on page 14 are modified to assume Phase I will equal 85% of projected amounts and Phase II and Construction Sales Tax will equal 75% of projected amounts.

Available Annual LocalExpenses & Ser ies 2 0 1 8 Incremental Tax Revenues Sales T ax T rustee T otal Scheduled Surplus Fund Date Phase I Phase II Construction Funds Fees Revenue Interest Principal Redemptions Balance 11/16/2018 ------7,136,966 3/1/2019 850,000 - - - - 850,000 533,329 - - 7,453,637 9/1/2019 404,344 52,912 190,889 - (10,000) 638,145 914,278 - - 7,177,505 3/1/2020 943,470 123,461 445,408 - - 1,512,339 914,278 - - 7,775,566 9/1/2020 419,062 178,220 119,212 - (10,000) 706,494 914,278 - - 7,567,782 3/1/2021 977,811 415,847 278,161 - - 1,671,819 914,278 - - 8,325,322 9/1/2021 451,779 247,624 97,597 - (10,000) 787,000 914,278 - - 8,198,044 3/1/2022 1,054,151 577,790 227,726 - - 1,859,667 914,278 - - 9,143,434 9/1/2022 504,570 308,534 186,372 - (10,000) 989,476 914,278 - - 9,218,631 3/1/2023 1,177,331 719,912 434,867 - - 2,332,110 914,278 - - 10,636,463 9/1/2023 544,070 406,496 161,881 - (15,000) 1,097,448 914,278 500,000 - 10,319,633 3/1/2024 1,269,496 948,492 377,723 - - 2,595,711 904,278 - 10,585,000 1,426,066 9/1/2024 632,805 477,813 71,951 - (10,000) 1,172,569 692,578 520,000 - 1,386,057 3/1/2025 1,476,544 1,114,897 167,887 - - 2,759,328 682,178 - 625,000 2,838,207 9/1/2025 703,112 548,057 - - (10,000) 1,241,169 669,678 2,155,000 - 1,254,698 3/1/2026 1,640,594 1,278,799 - - - 2,919,393 615,803 - 675,000 2,883,288 9/1/2026 747,620 612,293 - - (10,000) 1,349,912 602,303 2,265,000 - 1,365,897 3/1/2027 1,744,446 1,428,683 - - - 3,173,128 545,678 - 1,070,000 2,923,347 9/1/2027 570,671 626,819 - - (10,000) 1,187,490 524,278 2,375,000 - 1,211,559 3/1/2028 1,331,565 1,462,577 - - - 2,794,142 464,903 - 580,000 2,960,798 9/1/2028 - 672,401 - - (15,000) 657,401 453,303 2,495,000 - 669,896 3/1/2029 - 1,568,937 - - - 1,568,937 392,919 - - 1,845,914 9/1/2029 - 703,921 - 473,084 (10,000) 1,167,005 392,919 2,615,000 - 5,000 3/1/2030 - 1,642,483 - - - 1,642,483 335,719 - - 1,311,765 9/1/2030 - 720,280 - 1,048,674 (10,000) 1,758,954 335,719 2,730,000 - 5,000 3/1/2031 - 1,680,654 - - - 1,680,654 275,381 - - 1,410,272 9/1/2031 - 736,966 - 993,143 (10,000) 1,720,109 275,381 2,850,000 - 5,000 3/1/2032 - 1,719,588 - - - 1,719,588 216,850 - - 1,507,738 9/1/2032 - 753,986 - 940,126 (10,000) 1,684,112 216,850 2,970,000 - 5,000 3/1/2033 - 1,759,300 - - - 1,759,300 142,600 - - 1,621,700 9/1/2033 - 771,346 - 884,554 (15,000) 1,640,900 142,600 3,115,000 - 5,000 3/1/2034 - 1,799,807 - - - 1,799,807 80,300 - - 1,724,507 9/1/2034 - 789,053 - 821,740 (10,000) 1,600,793 80,300 3,240,000 - 5,000 3/1/2035 - 1,841,124 - - - 1,841,124 15,500 - - 1,830,624 9/1/2035 - 807,115 - - (15,000) 792,115 15,500 775,000 - 1,832,239 3/1/2036 - 1,883,267 - - - 1,883,267 - - - 3,715,506 9/1/2036 - 825,537 - - - 825,537 - - - 4,541,043 3/1/2037 - 1,926,254 - - - 1,926,254 - - - 6,467,297 9/1/2037 - 844,328 - - - 844,328 - - - 7,311,626 3/1/2038 - 1,970,100 - - - 1,970,100 - - - 9,281,725 9/1/2038 - 706,063 - - - 706,063 - - - 9,987,788 Totals 17,443,439 37,651,737 2,759,675 5,161,321 (190,000) 62,826,172 17,835,351 28,605,000 13,535,000

Case III. Assumes that Projected Incremental Tax Revenues detailed on page 14 are modified to assume Phase I will equal 75% of projected amounts and Phase II and Construction Sales Tax will equal 50% of projected amounts.

Available Annual LocalExpenses & Ser ies 2 0 1 8 Incremental Tax Revenues Sales T ax T rustee T otal Scheduled Surplus Fund Date Phase I Phase II Construction Funds Fees Revenue Interest Principal Redemptions Balance 11/16/2018 ------7,136,966 3/1/2019 750,000 - - - - 750,000 533,329 - - 7,353,637 9/1/2019 356,774 35,275 127,259 - (10,000) 509,309 914,278 - - 6,948,668 3/1/2020 832,474 82,308 296,939 - - 1,211,720 914,278 - - 7,246,109 9/1/2020 369,760 118,813 79,475 - (10,000) 558,048 914,278 - - 6,889,880 3/1/2021 862,774 277,231 185,441 - - 1,325,446 914,278 - - 7,301,048 9/1/2021 398,628 165,083 65,065 - (10,000) 618,776 914,278 - - 7,005,546 3/1/2022 930,133 385,194 151,817 - - 1,467,144 914,278 - - 7,558,411 9/1/2022 445,209 205,689 124,248 - (10,000) 765,146 914,278 - - 7,409,279 3/1/2023 1,038,821 479,941 289,912 - - 1,808,674 914,278 - - 8,303,675 9/1/2023 480,062 270,998 107,921 - (15,000) 843,980 914,278 500,000 - 7,733,377 3/1/2024 1,120,144 632,328 251,816 - - 2,004,287 904,278 - 7,405,000 1,428,386 9/1/2024 558,357 318,542 47,968 - (10,000) 914,867 756,178 520,000 - 1,067,075 3/1/2025 1,302,833 743,265 111,924 - - 2,158,022 745,778 - - 2,479,319 9/1/2025 620,393 365,371 - - (10,000) 975,764 745,778 2,155,000 - 554,305 3/1/2026 1,447,583 852,533 - - - 2,300,116 691,903 - - 2,162,518 9/1/2026 659,664 408,195 - - (10,000) 1,057,859 691,903 2,265,000 - 263,474 3/1/2027 1,539,217 952,455 - - - 2,491,672 635,278 - - 2,119,868 9/1/2027 503,533 417,879 - - (10,000) 911,412 635,278 2,375,000 - 21,002 3/1/2028 1,174,910 975,052 - - - 2,149,962 575,903 - - 1,595,061 9/1/2028 - 448,268 - 1,047,575 (15,000) 1,480,843 575,903 2,495,000 - 5,000 3/1/2029 - 1,045,958 - - - 1,045,958 515,519 - - 535,439 9/1/2029 - 469,281 - 2,140,799 (10,000) 2,600,080 515,519 2,615,000 - 5,000 3/1/2030 - 1,094,989 - - - 1,094,989 458,319 - - 641,670 9/1/2030 - 480,187 - 2,081,462 (10,000) 2,551,649 458,319 2,730,000 - 5,000 3/1/2031 - 1,120,436 - - - 1,120,436 397,981 - - 727,455 9/1/2031 - 491,311 - 2,044,216 (10,000) 2,525,527 397,981 2,850,000 - 5,000 3/1/2032 - 1,146,392 - - - 1,146,392 339,450 - - 811,942 9/1/2032 - 502,657 - 2,009,851 (10,000) 2,502,508 339,450 2,970,000 - 5,000 3/1/2033 - 1,172,867 - - - 1,172,867 265,200 - - 912,667 9/1/2033 - 514,231 - 1,973,302 (15,000) 2,472,533 265,200 3,115,000 - 5,000 3/1/2034 - 1,199,871 - - - 1,199,871 202,900 - - 1,001,971 9/1/2034 - 526,035 - 1,929,893 (10,000) 2,445,928 202,900 3,240,000 - 5,000 3/1/2035 - 1,227,416 - - - 1,227,416 138,100 - - 1,094,316 9/1/2035 - 538,076 - 1,895,708 (15,000) 2,418,784 138,100 3,370,000 - 5,000 3/1/2036 - 1,255,512 - - - 1,255,512 70,700 - - 1,189,812 9/1/2036 - 550,358 - 1,850,530 (10,000) 2,390,888 70,700 3,505,000 - 5,000 3/1/2037 - 1,284,169 - - - 1,284,169 600 - - 1,288,569 9/1/2037 - 562,886 - - (15,000) 547,886 600 30,000 - 1,805,855 3/1/2038 - 1,313,400 - - - 1,313,400 - - - 3,119,254 9/1/2038 - 470,708 - - - 470,708 - - - 3,589,963 Totals 15,391,270 25,101,158 1,839,784 16,973,336 (215,000) 59,090,547 20,497,551 34,735,000 7,405,000

CONTINUING DISCLOSURE

To assist the Underwriter with its obligations under Rule 15c2-12 (the “Rule”) of the Securities and Exchange Commission and for the benefit of the beneficial owners of the Series 2018 Bonds, the City has covenanted to provide certain financial information relating to collection of the Incremental Tax Revenues in the District on a semiannual basis and certain additional information related to the City on an annual basis, and to provide notice of the occurrence of certain enumerated events, all as provided in the Continuing Disclosure Undertaking, dated as of November 1, 2018 delivered by the City (the “Continuing Disclosure Undertaking”). Pursuant to the Continuing Disclosure Undertaking, the City has agreed to disseminate the financial information described above and notice of certain enumerated events to the Municipal Securities Rulemaking Board (“MSRB”) through its Electronic Municipal Market Access (“EMMA”) website. The form of the Continuing Disclosure Undertaking are attached hereto as “Appendix D – FORM OF CONTINUING DISCLOSURE AGREEMENT.” A default under the Continuing Disclosure Undertaking shall not be deemed an Event of Default under the Indenture, and the sole remedy under the Continuing Disclosure

Undertaking in the event of any failure of the City to comply with the Continuing Disclosure Undertaking shall be an action to compel performance.

Prior Continuing Disclosure Compliance. The Securities and Exchange Commission (the “SEC”) has promulgated amendments to Rule 15c2-12 (the “SEC Rule”), requiring continuous secondary market disclosure. The City has adopted ordinances establishing master undertakings to provide ongoing disclosure concerning the City in connection with its bonds and notes for the benefit of the owners of such bonds and notes (collectively, the “Disclosure Undertaking”), which amended prior ordinances that established master undertakings pursuant to the SEC Rule (the “Prior Undertakings”). In the Disclosure Undertaking, the City has covenanted to provide annually certain financial information and operating data and other information necessary to comply with the SEC Rule, and to transmit the same to the Municipal Securities Rulemaking Board (the “MSRB”). For the past five years the City has filed its Comprehensive Annual Financial Report (the “CAFR”) within the time period prescribed by the Disclosure Undertaking. The CAFRs contain the audited financial statements of, and statistical information regarding, the City. The statistical information included in certain of such CAFRs contained most, but not all, of the information described as Operating Data in Prior Undertakings. The City’s filings for such years are set forth in the table below.

Fiscal Year Filing Time CAFR Ending December 31 Period (Days) Filing Date 2013 365 06/26/2014 2014 365 06/30/2015 2015 365 06/24/2016 2016 365 06/30/2017 2017 365 06/29/2018

While the City had the filing deficiencies referred to above, it issued general obligation bonds and general obligation temporary notes in each year from 2013 - 2017. The official statements for such bonds and temporary notes were filed with the MSRB. On December 15, 2017, the Issuer filed on EMMA an Annual Operating Data and Financial Information Incorporation by Reference document providing for incorporation by reference of certain financial information and operating data contained in official statements for obligations issued during the years 2012-2017. On October 22, 2018, the Issuer filed on EMMA certain required operating data not included in the 2017 CAFR. During the past five years, the City has made filings of event notices on EMMA with respect to bond and note calls, defeasances, rating changes and updated statistical information omitted in certain CAFRs, however, during said time period, the City may not have made timely filings of event notices on EMMA relating to all bond and note calls, defeasances or rating changes. The City believes this information was disseminated or available through other sources. In particular, event notices were not timely filed on EMMA in connection with certain rating changes on various series of bonds resulting from changes in the ratings of the applicable bond insurers. Specific information about such rating changes was filed on EMMA on July 9, 2014 and revised on September 16, 2014.

NO LITIGATION

At the time of delivery of and payment for the Series 2018 Bonds, the City will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending with respect to which the City has been served with process or is otherwise aware, or, to the knowledge of the officer of the City executing such certificate, threatened against the City affecting the existence of the City or the titles of its officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Series 2018 Bonds, the application of the proceeds thereof in accordance with the Bond Ordinance and/or the Indenture, or the collection or application of the taxes provided for the payment of the Series 2018 Bonds, or in any way contesting or affecting the validity or enforceability of the Series 2018 Bonds, the Bond Ordinance, the Indenture, the agreements entered into by the City in connection with the Series 2018 Bonds, or any future action of the City contemplated by any of said documents, or the

collection or application of any tax receipts provided for the payment of the Series 2018 Bonds, or in any way contesting the completeness or accuracy of the Bond Ordinance, the Indenture or any amendments or supplements hereto, or contesting the powers of the City contemplated by any of said documents.

CERTAIN LEGAL MATTERS

Certain legal matters incident to the authorization and issuance of the Series 2018 Bonds by the City are subject to the approval of Gilmore & Bell, P.C., Wichita, Kansas, Bond Counsel to the City, whose approving opinion will be delivered with the Series 2018 Bonds. The opinion of Bond Counsel is expected to be delivered in substantially the form included as Appendix E to this Official Statement. Certain legal matters will be passed upon for the City by Jennifer Magaña, Esq., Director of Law and City Attorney, and for the Underwriter by Bryan Cave Leighton Paisner LLP, Kansas City, Missouri.

The various legal opinions to be delivered concurrently with the delivery of the Series 2018 Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by the valid exercise of the constitutional powers of the State of Kansas and the United States of America and bankruptcy, reorganization, insolvency, or other similar laws affecting the rights of creditors generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The various legal opinions to be delivered concurrently with the delivery of the Series 2018 Bonds express the professional judgment of the attorneys rendering the opinions on the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to such transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

TAX MATTERS

The following is a summary of the material federal and State of Kansas income tax consequences of holding and disposing of the Series 2018 Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of owners subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Series 2018 Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State of Kansas, does not discuss the consequences to an owner under any state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Series 2018 Bonds in the secondary market. Prospective investors are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Series 2018 Bonds.

Opinion of Bond Counsel

In the opinion of Gilmore & Bell, P.C., Bond Counsel to the Issuer, under the law existing as of the issue date of the Bonds:

Federal Tax Exemption. The interest on the Series 2018 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes.

Alternative Minimum Tax. The interest on the Series 2018 Bonds is not an item of tax preference for purposes of computing the federal alternative minimum tax.

Bank Qualification. The Series 2018 Bonds have not been designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code.

Kansas Tax Exemption. The interest on the Series 2018 Bonds is exempt from income taxation by the State of Kansas.

No Other Opinions. Bond Counsel’s opinions are provided as of the date of the original issue of the Series 2018 Bonds, subject to the condition that the City complies with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2018 Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2018 Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Bonds, but has reviewed the discussion under the heading “TAX MATTERS.”

Form of Opinion of Bond Counsel. The proposed form of Bond Counsel’s opinion is attached as Appendix E.

Other Tax Consequences

Original Issue Discount. For federal income tax purposes, original issue discount is the excess of the stated redemption price at maturity of a Series 2018 Bond over its issue price. The issue price of a Series 2018 Bond is generally the first price at which a substantial amount of the Series 2018 Bonds of that maturity have been sold to the public. Under Section 1288 of the Code, original issue discount on tax-exempt bonds accrues on a compound basis. The amount of original issue discount that accrues to an owner of a Series 2018 Bond during any accrual period generally equals (1) the issue price of that Series 2018 Bond, plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (2) the yield to maturity on that Series 2018 Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), minus (3) any interest payable on that Series 2018 Bond during that accrual period. The amount of original issue discount accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excludable from gross income for federal income tax purposes, and will increase the owner’s tax basis in that Series 2018 Bond. Prospective investors should consult their own tax advisors concerning the calculation and accrual of original issue discount.

Original Issue Premium. For federal income tax purposes, premium is the excess of the issue price of a Series 2018 Bond over its stated redemption price at maturity. The issue price of a Series 2018Bond is generally the first price at which a substantial amount of the Series 2018 Bonds of that maturity have been sold to the public. Under Section 171 of the Code, premium on tax-exempt bonds amortizes over the term of the Bond using constant yield principles, based on the purchaser’s yield to maturity. As premium is amortized, the owner’s basis in the Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner, which will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of the Bond prior to its maturity. Even though the owner’s basis is reduced, no federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium.

Sale or Exchange. Upon the sale, exchange or retirement (including redemption) of a Series 2018 Bond, an owner of the Series 2018 Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Series 2018 Bond and the owner’s adjusted tax basis in the Series 2018 Bond (other than in respect of accrued interest), determined in the manner described above. To the extent the Series 2018 Bond is held as a capital asset, the gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Series 2018 Bond has been held for more than 12 months at the time of sale, exchange or retirement.

Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on the Series 2018 Bonds, and to the proceeds paid on the sale of the Series 2018 Bonds, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner’s federal income tax liability.

Collateral Federal Income Tax Consequences. Prospective purchasers of the Series 2018 Bonds should be aware that ownership of the Series 2018 Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income,” foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Series 2018 Bonds. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Series 2018 Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Series 2018 Bonds, including the possible application of state, local, foreign and other tax laws.

BOND RATING

Moody’s Investors Service has assigned a rating of “Aa3” to the Series 2018 Bonds. Such rating reflects only the view of such rating agency, and an explanation of the significance of such rating may be obtained therefrom. No such rating constitutes a recommendation to buy, sell, or hold any obligations, including the Series 2018 Bonds, or as to the market price or suitability thereof for a particular investor. The City furnished such rating agency with certain information and materials relating to the Series Bonds that have not been included in this Official Statement. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies and assumptions by the rating agencies. There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, if in the judgment of the agency originally establishing such rating, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse effect on the market price of the Series 2018 Bonds.

MUNICIPAL ADVISOR

The City has retained Springsted Incorporated, Public Sector Advisors, of Saint Paul, Minnesota (“Springsted”), as municipal advisor in connection with certain aspects of the issuance of the Bonds. Springsted is not a public accounting firm and has not been engaged by the City to compile, review, examine or audit any information in this Official Statement in accordance with accounting standards. Springsted is an independent advisory firm, registered as a municipal advisor, and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.

Springsted is under common ownership with Springsted Investment Advisors, Inc. (“SIA”), an investment adviser registered in the states where services are provided. SIA may provide investment advisory services to the City from time to time in connection with the investment of proceeds from the Bonds as well as advice with respect to portfolio management and investment policies for the City. SIA pays Springsted, as municipal advisor, a referral fee from the fees paid to SIA by the City.

UNDERWRITING

The Series 2018 Bonds are being purchased by Crews & Associates, Inc. (the “Underwriter”) pursuant to a Purchase Contract (the “Bond Purchase Agreement”). Pursuant to the Bond Purchase Agreement, the Underwriter has agreed to purchase the Series 2018 Bonds at a purchase price of $43,673,802.20 (the principal amount of the Series 2018 Bonds, less an Underwriter’s discount of $200,165.00, and plus net original issue premium of $1,733,967.20). The initial public offering price of the Series 2018 Bonds may be changed from time to time by the Underwriter. The Bond Purchase Agreement provides that the Underwriter will purchase all the Series 2018 Bonds if any are purchased, and that the obligation to make such purchase is subject to certain terms and conditions set forth in the Bond Purchase Agreement, including, among others, the approval of certain legal matters by counsel.

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AUTHORIZATION

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. The preparation of this Official Statement and its distribution has been authorized by the governing body of the City as of the date on the cover page hereof. This Official Statement is submitted in connection with the issuance of the Series 2018 Bonds and may not be reproduced or used as a whole or in part for any other purpose. This Official Statement does not constitute a contract between the City or the Underwriter and any one or more of the purchasers, Owners or Beneficial Owners of the Series 2018 Bonds.

CITY OF WICHITA, KANSAS

By: /s/ Jeff Longwell Mayor

By: /s/ Shawn Henning Director of Finance

54 APPENDIX A

DEFINITIONS

(THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX A

DEFINITIONS

In addition to the words and terms defined elsewhere in this Official Statement, the following are definitions of certain words and terms as used in this Official Statement, the Indenture and the Tax Distribution Agreement. Reference is made to the Indenture and the Tax Distribution Agreement for a complete recital of the defined terms used therein.

“Accreted Value” means, with respect to any Additional Bonds that are Capital Appreciation Bonds, if calculated on an Interest Payment Date, total principal and interest as set forth in an exhibit to the applicable Supplemental Indenture for such Interest Payment Date and, if calculated on a date other than an Interest Payment Date, total principal and interest as set forth in such exhibit for the immediately preceding Interest Payment Date plus interest on such amount from such Interest Payment Date to the date of calculation (calculated on a straight line basis) at a rate equal to the interest rate on such Capital Appreciation Bonds as set forth in the applicable Supplemental Indenture.

“Act” means K.S.A. 12-17,160 et seq., as amended and supplemented from time to time.

“Additional Bonds” means any additional parity Bonds issued by the City pursuant to the Indenture that stand on a parity and equality under the Indenture with the Series 2018 Bonds, except as may be restricted by provisions of the Indenture.

“Authorized Denomination” means, (a) with respect to the Series 2018 Bonds, $5,000 or any integral multiple of $5,000 in excess thereof, and (b) with respect to any Additional Bonds, unless otherwise specified in the Supplemental Indenture pursuant to which such series of Additional Bonds is issued, (i) with respect to Current Interest Bonds, $5,000 or any integral multiple thereof and (ii) with respect to Capital Appreciation Bonds, $5,000 Maturity Amount or any integral multiple thereof.

“Available Local Sales Tax Funds" means gross receipts of the City under K.S.A. 12-187 et seq., as amended, and K.S.A. 12-198, as amended, from (a) the portion of any City retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments, and any successor taxes thereto (currently none), and (b) one-half of the City's portion of the Sedgwick County, Kansas 1% retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments (currently 0.29%), and any successor taxes thereto, in each case with respect to retail sales outside the District and outside another STAR Bond District created by the City.

“Base Year City Sales Tax Revenues” means: (a) with respect to the Phase I Project Area - $185,353.00; and (b) with respect to the Phase II Project Area - $41,595.91.

“Base Year State Sales Tax Revenues” means: (a) with respect to the Phase I Project Area - $982,502.00; and (b) with respect to the Phase II Project Area - $465,157.39.

“Bond” or “Bonds” means the Series 2018 Bonds and any Additional Bonds issued pursuant to the Indenture.

“Bond Obligation” means, as of any date, the sum of (a) the Outstanding principal amount of the Current Interest Bonds and (b) the Accreted Value (as of the Interest Payment Date immediately preceding the date of calculation unless the date of calculation is an Interest Payment Date, in which case as of such Interest Payment Date) of Outstanding Capital Appreciation Bonds.

“Bond Purchase Contract” means, with respect to a series of Bonds, the Bond Purchase Contract between the City and the Original Purchaser with respect to such series of Bonds.

“Bond Year” means each one-year period (or shorter period for the first Bond Year) ending September 1.

“Business Day” means any day other than (a) a day on which banks located in the cities in which the principal office of any of the Trustee, the Paying Agent, the Escrow Agent or the Credit Enhancer, if any, is located are required or authorized by law to close, or (b) a day on which the New York Stock Exchange is closed.

“Capital Appreciation Bonds” means any Additional Bonds which accrete in value based on semiannual compounding of interest on the original principal amount thereof at a rate that will result in such Bonds accreting to $5,000 Maturity Amount, or the applicable integral multiple thereof, representing total principal and interest payable at maturity.

“Capitalized Interest” means interest accruing on the outstanding principal of the Bonds during the construction and prestabilization phases of the Project.

“Capitalized Interest Fund” means the fund by that name created by the Indenture.

“City” means the City of Wichita, Kansas created pursuant to the laws of the State, and its successors and assigns or any, body, agency or instrumentality succeeding to or charged with the powers, duties and functions of the City.

“City Bond Finance Fund” means the account relating to the District created within the City Bond Finance Fund created by K.S.A. 79-3620b, as amended, and established with the State Treasurer.

“City Representative” means the Mayor, City Manager, Director of Finance or Assistant City Manager – Economic Development of the City, and any other duly authorized officer of the City whose authority to execute any particular instrument or take a particular action under the Indenture or any Financing Document shall be evidenced to the satisfaction of the Trustee.

“City Sales Tax Revenues” means gross receipts of the City under K.S.A. 12-187 et seq., as amended, and K.S.A. 12-198, as amended, from (a) the portion of any City retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments, and any successor taxes thereto (currently none), and (b) one-half of the City's portion of the Sedgwick County, Kansas 1% retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments (currently 0.29%), and any successor taxes thereto, in each case with respect to retail sales within the District: (a) with respect to the Phase I Project Area, to the extent such amounts are on deposit with the State Treasurer on or before September 30, 2027 and available for distribution to the Escrow Agent; and (b) with respect to the Phase II Project Area, to the extent such amounts are on deposit with the State Treasurer on or before March 31, 2038 and available for distribution to the Escrow Agent. City Sales Tax Revenues will be based on tax revenues received by the City from sales occurring within the District, after taking into account applicable destination-based sourcing rules of the State.

“Continuing Disclosure Agreement” means (a) with respect to the Series 2018 Bonds, (i) the Continuing Disclosure Undertaking and (b) with respect to a series of Additional Bonds, any Continuing Disclosure Undertaking of the City or Continuing Disclosure Agreement between a Disclosure Party and

A-2 the dissemination agent identified therein relating to such series of Bonds, each as may be amended form time to time in accordance with the provisions thereof.

“Continuing Disclosure Undertaking” means the Continuing Disclosure Undertaking dated as of November 1, 2018 delivered by the City, as may be from time to time amended in accordance with the provisions thereof.

“Consultant” means an independent accountant or accounting firm, or an independent consultant or firm of consultants qualified and having a favorable reputation for skill and experience in financial affairs and projections selected by the City for the purpose of carrying out the duties imposed on the Consultant by the Indenture.

“Costs of Issuance” means issuance costs with respect to the Bonds, including, but not limited to, the following:

(a) underwriter’s spread (whether realized directly or derived through purchase of Bonds at a discount below the price at which they are expected to be sold to the public);

(b) counsel fees (including bond counsel, underwriter’s counsel, City’s counsel, Credit Enhancer’s counsel, as well as any other specialized counsel fees incurred in connection with the borrowing);

(d) initial costs of the Credit Enhancement, if any;

(e) rating agency fees, if any;

(f) trustee, escrow agent and paying agent fees;

(g) accountant fees, feasibility consultant fees and other expenses related to issuance of the Bonds;

(h) printing costs (for the Bonds and of the preliminary and final official statements relating to the Bonds); and

(i) fees and expenses of the City incurred in connection with the issuance of the Bonds.

“Costs of Issuance Fund” means the fund by that name created by the Indenture.

“Costs of the Project” means all costs described in K.S.A. 12-17,162(r), as amended, and approved by the Secretary with respect to the particular series of Bonds; provided that such costs are of a type that was (at the time incurred) chargeable to a capital account for Federal income tax purposes (or would have been so chargeable with a proper election) under Federal income tax principles.

“Credit Enhancement” means with respect to the applicable series of Bonds, any insurance policy, surety bond, letter of credit, line of credit, corporate guarantee or other form of credit enhancement relating to a series of Bonds issued or provided by a Credit Enhancer in favor of the holders of such series

A-3 of Bonds for the purpose of providing a source of funds for the payment when due of the principal of, Accreted Value and interest on such series of Bonds as provided therein.

“Credit Enhancer” means the credit enhancer, if any, named with respect to a series of Additional Bonds specified in the Supplemental Indenture pursuant to which such series of Additional Bonds was issued.

“Current Interest Bonds” means all Bonds except the Capital Appreciation Bonds.

“Debt Service Fund” means the fund by that name created by the Indenture.

“Debt Service Coverage Ratio” means, for any Fiscal Year, with respect to the covenants relating to Additional Bonds, the ratio determined by dividing (a) a numerator equal to the Incremental Tax Revenues for such Fiscal Year by (b) a denominator equal to the Debt Service Requirements for such Fiscal Year on all Bonds that are not Subordinate Lien Obligations.

“Debt Service Requirements” means the aggregate scheduled principal payments (whether at maturity or pursuant to scheduled mandatory sinking fund redemption requirements) and interest payments on the Bonds for the period of time for which calculated; provided, however, that for purposes of calculating such amount, principal and interest shall be excluded from the determination of Debt Service Requirements to the extent that such principal or interest is payable from amounts deposited in trust, escrowed or otherwise set aside for the payment thereof with the Paying Agent or other commercial bank or trust company located in the State and having full trust powers.

“Defeasance Obligations” means, to the extent permitted by law:

(a) Government Obligations which are not subject to redemption prior to maturity; or

(b) cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with Government Obligations); or

(c) Pre-refunded municipal bonds rated in the highest rating category by Moody’s and Standard & Poor’s which have been refunded and defeased with obligations described in clauses (a) or (b) and which are not subject to redemption prior to the respective maturity or redemption dates of the Bonds being defeased with such pre-refunded municipal bonds.

“Department” means the Department of Revenue of the State of Kansas.

“Depository” means, initially, The Depository Trust Company, New York, New York, and its successors and assigns.

“Disclosure Party” means the City and any other Person that has agreed to provide disclosure information pursuant to a Continuing Disclosure Agreement.

“Dissemination Agents” means, collectively, each corporation or association serving as dissemination agent from time to time under the Continuing Disclosure Agreement.

“District” means the Wichita River STAR Bond District, originally created by Ordinance No. 42-966 passed by the Governing Body on December 12, 1995 and published December 15, 1995, as subsequently expanded, and as approved for STAR Bond purposes by the Secretary on October 24, 2007.

A-4

“District Plan” means the STAR bond district plan which identifies proposed STAR bond project areas and proposed buildings and facilities to be constructed or improved within the District as approved by Ordinance No. 47-518 passed July 17, 2007 and published July 20, 2007, as amended.

“Escrow Agent” means Security Bank of Kansas City, and its successor or successors at the time acting as escrow agent under the Tax Distribution Agreement.

“Escrow Fund” means the “Incremental Tax Revenues Escrow Fund – Wichita River STAR Bond District” created pursuant to the Tax Distribution Agreement.

“Event of Nonappropriation” means failure of the City to budget and appropriate on or before the last day of any Fiscal Year, moneys sufficient to pay the debt service due and payable on the Bonds during the next Fiscal Year.

“Financing Documents” means, with respect to a series of Bonds, the Indenture and any Supplemental Indenture, the Tax Distribution Agreement, the Tax Compliance Agreement, the Continuing Disclosure Agreement, the Bond Purchase Contract and Official Statement relating to such series of Bonds, and any and all other documents or instruments that evidence or are a part of the transactions referred to in the Indenture, such Supplemental Indenture or such Official Statement or contemplated by the Indenture, such Supplemental Indenture or such Official Statement with respect to such series of Bonds; and any and all future renewals and extensions or restatements of, or amendments or supplements to, any of the foregoing; provided, however, that when the words “Financing Documents” are used in the context of the authorization, execution, delivery, approval or performance of Financing Documents by a particular party, the same shall mean only those Financing Documents that provide for or contemplate authorization, execution, delivery, approval or performance by such party.

“Governing Body” means the Mayor and City Council of the City.

“Government Obligations” means the following:

(a) bonds, notes, certificates of indebtedness, treasury bills or other securities constituting direct obligations of, or obligations the principal of and interest on which are fully and unconditionally guaranteed by, the United States of America; and

(b) evidences of direct ownership of a proportionate or individual interest in future interest or principal payments on specified direct obligations of, or obligations the payment of the principal of and interest on which are unconditionally guaranteed by, the United States of America, which obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian in form and substance satisfactory to the Trustee.

“Incremental City Sales Tax Revenues” means, for each Project Area, the difference between (i) City Sales Tax Revenues for such calendar year and (ii) the Base Year City Sales Tax Revenues.

“Incremental State Sales Tax Revenues” means, for each Project Area, the difference between (i) State Sales Tax Revenues for such calendar year and (ii) the Base Year State Sales Tax Revenues.

“Incremental Tax Revenues” means, with respect to any Bond Year, the total amount of Incremental Tax Revenues (collectively, Incremental City Sales Tax Revenues and Incremental State

A-5 Sales Tax Revenues) generated by businesses operating within the District that are deposited into the Escrow Fund established under the Tax Distribution Agreement during such Bond Year.

“Indenture” means this Bond Trust Indenture as originally executed by the City and the Trustee, as from time to time amended and supplemented by Supplemental Indentures in accordance with the provisions of the Indenture.

“Interest Payment Date” or “Interest Payment Dates” means (a) with respect to the Series 2018 Bonds, each March 1 and September 1, commencing March 1, 2019, and (b) with respect to any Additional Bonds, the payment date or dates specified for such series of Bonds in the Supplemental Indenture authorizing such series of Bonds, which shall be on March 1 and September 1.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and, when appropriate, any statutory predecessor or successor thereto, and all applicable regulations (whether proposed, temporary or final) thereunder and any applicable official rulings, announcements, notices, procedures and judicial determinations relating to the foregoing.

“Maturity Amount” means, with respect to the Capital Appreciation Bonds, the total principal and interest payable at maturity.

“Moody’s” means Moody’s Investors Service, and its successors and assigns, and, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, Moody’s shall be deemed to refer to any other nationally recognized securities rating agency which shall be nationally recognized as expert in matters pertaining to the validity of obligations of governmental issuers and the exclusion from federal gross income of interest on such obligations.

“Nominee” means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant hereto, initially, Cede & Co. as nominee of DTC.

“Opinion of Bond Counsel” means a written opinion of Gilmore & Bell, P.C., or other legal counsel acceptable to the City and the Trustee who shall be nationally recognized as expert in matters pertaining to the validity of obligations of governmental issuers and the exclusion from federal gross income of interest on such obligations.

“Opinion of Counsel” means a written opinion of any legal counsel acceptable to the Trustee and the Credit Enhancer, if any, and, to the extent the City is asked to take action in reliance thereon, the City, who may be an employee of or counsel to the Trustee.

“Original Purchaser” means, (a) with respect to the Series 2018 Bonds, Crews & Associates, Inc., and (b) with respect to Additional Bonds, the Persons that agree to purchase such Additional Bonds pursuant to the related Bond Purchase Contract.

“Outstanding” means, when used with respect to the Bonds, as of the date of determination, all Bonds theretofore authenticated and delivered under the Indenture, except:

(a) Bonds theretofore cancelled by the Trustee or delivered to the Trustee for cancellation as provided in the Indenture;

(b) Bonds for whose payment or redemption money or Defeasance Obligations in the necessary amount has been deposited with the Trustee or any Paying Agent in trust for the owners

A-6 of such Bonds as provided in the Indenture, provided that, if such Bonds are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefor satisfactory to the Trustee has been made;

(d) Bonds alleged to have been destroyed, lost or stolen which have been paid as provided in the Indenture; and

(e) Bonds held by the City.

“Participant” means a member of, or a participant in, the Depository.

“Paying Agent” means the Trustee and any other commercial bank or trust institution organized under the laws of any state of the United States of America or any national banking association designated pursuant to the Indenture as paying agent for any series of Bonds at which the principal of, Accreted Value, redemption premium, if any, and interest on such Bonds shall be payable.

“Permitted Investments” means, if and to the extent the same are at the time legal for investment of funds held under the Indenture:

(a) Government Obligations.

(b) Notes, bonds, debentures, mortgages and other evidences of indebtedness issued or guaranteed at the time of investment by Fannie Mae, Federal Home Loan Mortgage Corporation, Federal Home Loan Banks, the Student Loan Marketing Association, the Federal Farm Credit System, or any other United States government sponsored agency that has been or may hereafter be created pursuant to an Act of Congress as an agency or instrumentality of the United States of America.

(c) Commercial or finance company paper rated in the highest rating category by a nationally recognized securities rating agency and which matures not more than 270 calendar days after the date of purchase.

(d) Tax-exempt obligations of any state of the United States of America or any political subdivision of any state, including any municipality, county, agency, instrumentality or local government unit of any state that is rated in either of the two highest categories by a nationally recognized securities rating agency.

(e) Money market mutual funds (i) that invest in Government Obligations or that are registered with the federal Securities and Exchange Commission (SEC), meeting the requirements of Rule 2a-7 under the Investment Company Act of 1940, and (ii) that are rated in either of the two highest categories by a nationally recognized securities rating agency.

(f) Unsecured investment agreements from a bank, registered broker/dealer, or other financial institution that has a long term debt rating, or whose parent has a long term debt rating, without regard to qualifier, in either of the two highest rating categories by a nationally recognized securities rating agency; provided however that in the event the provider of the agreement is downgraded to below the “A” category by all the rating agencies, the provider must within 14 business days from the downgrade either (i) collateralize the agreement as outlined in

A-7 (g) below, (ii) obtain a guaranty from a financial institution whose rating is at least “A” by a nationally recognized securities rating agency; or (iii) assign the agreement to a financial institution whose rating is at least “A” by a nationally recognized securities rating agency.

(g) Collateralized investment agreements (including repurchase agreements), provided by a registered broker/ dealer, subject to SIPC, collateralized by obligations described in (a) or (b) above such that value of the collateral pledged is not less than 102% of the principal balance, marked to market not less frequently than weekly. Collateral must be held by an independent third party custodian.

(h) Forward purchase agreements by a financial institution who has a long term debt rating, or whose parent has a long term debt rating, of not less than “A” by a nationally recognized securities rating agency. Securities eligible for delivery under the agreement will include those described in (a), (b), (c) or (d) above. Any forward purchase agreement must be accompanied by a bankruptcy opinion that the securities delivered will not be considered a part of the bankruptcy estate in the event of a declaration of bankruptcy or insolvency by the provider.

(i) Such other investments as are approved in writing by the Credit Enhancer, if any.

“Person” means any natural person, firm, association, corporation, partnership, limited liability company, joint stock company, joint venture, trust, unincorporated organization or firm, or a government or any agency or political subdivision thereof or other public body.

“Phase I Project Area” means that portion of the District described as such in Exhibit A to the Tax Distribution Agreement.

“Phase II Project Area” means that portion of the District described as such in Exhibit B to the Tax Distribution Agreement.

“Project Area” means collectively, the Phase I Project Area and the Phase II Project Area and individually, each such project areas.

“Phase II Project Plan” means the River District Phase II STAR Bond Project Plan, which provides for the redevelopment of property within the West Bank Project Area of the District, approved by the City by Ordinance No. 50-527, passed May 2, 2017, and a summary of which was published May 5, 2017.

“Project” means, collectively, the 2018 Projects and any other projects financed by proceeds of any Additional Bonds,

“Project Fund” means the fund by that name created by the Indenture.

“Project Plan” means, collectively, the STAR Bond Project Plan Amendment and the Phase II Project Plan.

“Rating Agency” means any company, agency or entity that provides a financial rating for any series of Bonds.

“Rebate Fund” means the fund by that name created by the Indenture.

A-8 “Record Date” means the fifteenth calendar day, whether or not a Business Day, preceding an Interest Payment Date.

“Refunding Bonds” means Bonds issued for the purpose of refunding all or a portion of a series of Bonds then Outstanding under the Indenture or all or a portion of a series of bonds issued under a separate indenture to finance costs and facilities eligible under the Act to be financed within the District.

“Revenues” means, collectively, (i) the amounts required to be transferred to the applicable Debt Service Accounts of the Debt Service Fund pursuant to the Tax Distribution Agreement; and (ii) Available Local Sales Tax Funds appropriated by the City pursuant to the Indenture and deposited to the Debt Service Fund pursuant to the terms of the Indenture.

“Secretary” means the Secretary of the Kansas Department of Commerce and any other duly authorized officer of the Kansas Department of Commerce whose authority to execute any particular instrument or take a particular action under the Indenture or any Financing Document shall be evidenced to the satisfaction of the Trustee.

“Series 2018 Bond” or “Series 2018 Bonds” means any of the City’s Sales Tax Special Obligation Revenue Bonds (River District Stadium STAR Bond Project), Series 2018, in the original principal amount set forth in by the Indenture, authorized by and issued pursuant to the Indenture.

“Special Mandatory Redemption” means a mandatory redemption of Term Bonds from amounts on deposit in a Special Mandatory Redemption Subaccount of a Debt Service Account pursuant to the provisions of the Indenture or the applicable Supplemental Indenture.

“Standard & Poor’s” means S&P Global Ratings, a division of S&P Global Inc., a corporation organized and existing under the laws of the State of New York, and its successors and assigns, and, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, Standard & Poor’s shall be deemed to refer to any other nationally recognized securities rating service designated by the City, with notice to the Trustee.

“STAR Project Plan Amendment” means the STAR Bond Project Plan Amendment, dated as of December 2016 approved by the City by Ordinance No. 50-400, passed January 3, 2017, and a summary of which was published January 6, 2017.

“State” means the State of Kansas.

“State Sales Tax Revenues” means gross receipts of the State from the taxes imposed by K.S.A. 79-3603, as amended, and K.S.A. 79-3703, as amended, with respect to retail sales within the District (currently six and five-tenths percent (6.50%)): (a) with respect to the Phase I Project Area, to the extent such amounts are on deposit with the State Treasurer on or before October 31, 2027 and available for transfer to the City Bond Finance Fund; and (b) with respect to the Phase II Project Area, to the extent such amounts are on deposit with the State Treasurer on or before April 30, 2038 and available for transfer to the City Bond Finance Fund. State Sales Tax Revenues shall be based on tax revenues received by the State from sales occurring within the District, which may include tax revenues sourced to other locations within the State under applicable destination-based sourcing rules of the State.

“State Treasurer” means the State Treasurer of the State or, if the functions and duties of the State Treasurer under K.S.A. 79-3620, K.S.A. 79-3620b and K.S.A. 79-3710d shall be given by law to any other person or entity, such person or entity.

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“Subordinate Lien Obligations” means any bonds or other obligations that do not meet all of the requirements for issuance of Additional Bonds, that are payable from, and secured by a lien on the Trust Estate, which lien is junior to that of any Bonds issued pursuant to the Indenture.

“Supplemental Indenture” means any indenture supplemental or amendatory to the Indenture entered into by the City and the Trustee pursuant to the Indenture.

“Tax Compliance Agreement” means (a) with respect to the Series 2018 Bonds, the Tax Compliance Agreement dated as of November 1, 2018 between the City and the Trustee and (b) with respect to any Additional Bonds, the tax compliance agreement with respect to such Additional Bonds, each as from time to time amended in accordance with the provisions thereof.

“Tax Distribution Agreement” means the Tax Distribution Agreement dated as of November 1, 2018 among the City, the Trustee, the State Treasurer and the Escrow Agent, relating to the disbursement of Incremental Tax Revenues (as defined in the Tax Distribution Agreement) collected within the District, as such agreement may be amended from time to time.

“Tax-Exempt Bonds” means Bonds of a series the interest on which is intended to be excluded from gross income for federal income tax purposes as designated by the City at the time of issuance of a series of Bonds.

“Term Bonds” means such maturities of Bonds that are specified as “Term Bonds” in the Indenture (with respect to the Series 2018 Bonds) or the Supplemental Indenture authorizing the issuance of such Bonds (with respect to any Additional Bonds).

“Trust Estate” means the Trust Estate described in the Granting Clauses of the Indenture.

“Trustee” means Security Bank of Kansas City, Kansas City, Kansas, and its successor or successors and any other corporation or association which at any time may be substituted in its place pursuant to and at the time serving as trustee under the Indenture.

“2018 Projects” means the facilities and costs eligible to be paid under the STAR Bond Act within the District in accordance the Project Plan, to be financed with the proceeds of the Series 2018 Bonds, including land acquisition, site preparation, street construction and improvements, construction of a baseball stadium, museum, utility relocation, landscaping, parking, signage, engineering, architectural and all other costs permitted by law relating to the Project Plan.

“Value”, as of any particular time of determination, means, (a) with respect to cash, the face value thereof and (b) with respect to any investments, the lower of the cost of the investment or the market price of the investment excluding accrued interest on the date of valuation.

A-10 APPENDIX B

SUMMARY OF THE INDENTURE

(THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX B

SUMMARY OF THE INDENTURE

The following is a summary of certain provisions of the Indenture. This summary of the Indenture does not purport to be complete, and reference is made to the full text of the Indenture for a complete recital of its terms.

THE INDENTURE

Pledge of the Trust Estate

To secure the payment of all of the Bonds issued and Outstanding under the Indenture from time to time and to secure the performance and observance by the City of all the covenants, agreements and conditions contained in the Indenture and in the Bonds, the City transfers in trust, pledges and assigns to the Trustee, and grants a security interest to the Trustee in, the property described in the Trust Estate.

The Trustee shall hold in trust and administer the Trust Estate, upon the terms and conditions set forth in the Indenture for the equal and pro rata benefit and security of each and every owner of Bonds, without preference, priority or distinction as to participation in the lien, benefit and protection of the Indenture of one Bond over or from the others, except as otherwise expressly provided in the Indenture, and for the uses and purposes and upon the terms, agreements and conditions set forth in the Indenture; provided, however, that the Trustee shall apply the Incremental Tax Revenues to the payment of principal of and interest on the Bonds as set forth in the Tax Distribution Agreement.

Authorization, Amount and Title of Bonds

The City may issue Bonds in one or more series from time to time under the Indenture, but subject to the provisions of the Indenture and any Supplemental Indenture authorizing a series of Bonds. The total principal amount of Bonds, the number of Bonds and series of Bonds that may be issued under the Indenture is not limited, except as provided in the Indenture, and except as may be limited by law. The several series of Bonds may differ as between series in any respect not in conflict with the provisions of the Indenture and as may be prescribed in the Supplemental Indenture authorizing such series. The general title of all series of Bonds authorized to be issued under the Indenture shall be “Sales Tax Special Obligation Revenue Bonds (River District Stadium STAR Bond Project),” with such further appropriate particular designation added to or incorporated in such title for the Bonds of any particular series as the City may determine.

Execution and Authentication

The Bonds shall be executed in the name and on behalf of the City by the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of its Clerk, and shall have the official seal of the City affixed thereto or imprinted thereon. If any officer whose manual or facsimile signature appears on any Bonds shall cease to hold such office before the authentication and delivery of such Bonds, such signature shall nevertheless be valid and sufficient for all purposes, the same as if such person had remained in office until delivery. Any Bond may be signed by such persons as at the actual time of the execution of such Bond shall be the proper officers to sign such Bond although at the date of such Bond such persons may not have been such officers.

No Bond shall be secured by, or be entitled to any lien, right or benefit under, the Indenture or be valid or obligatory for any purpose, unless there appears on such Bond a certificate of authentication substantially in the form set forth in or fixed pursuant to the Indenture or the applicable Supplemental Indenture, executed by the Trustee by manual signature of an authorized officer or signatory of the Trustee, and such certificate upon any Bond shall be conclusive evidence, and the only evidence, that such Bond has been duly authenticated and delivered under the Indenture. At any time and from time to time after the execution and delivery of the Indenture, the City may deliver Bonds executed by the City to the Trustee for authentication and the Trustee shall authenticate and deliver such Bonds as in the Indenture provided and not otherwise.

Mutilated, Destroyed, Lost and Stolen Bonds

If (a) any mutilated Bond is surrendered to the Trustee, or the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Bond, and (b) there is delivered to the Trustee such security or indemnity as may be required by it to save the Trustee and the City harmless, then, in the absence of notice to the Trustee that such Bond has been acquired by a bona fide purchaser, the City shall execute and upon its request the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Bond, a new Bond of the same series, maturity and of like tenor and principal amount, bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Bond has become or is about to become due and payable, the City in its discretion may, instead of issuing a new Bond, direct the Trustee to pay such Bond.

Upon the issuance of any new Bond under the Indenture, the City and the Trustee may require the payment by the owner thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith.

Every new Bond issued pursuant to the Indenture in lieu of any destroyed, lost or stolen Bond, shall constitute an original additional contractual obligation of the City, whether or not the destroyed, lost or stolen Bond shall be at any time enforceable by anyone, and shall be entitled to all the security and benefits of the Indenture equally and ratably with all other Outstanding Bonds.

The provisions of the Indenture are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds.

Payments Due on Saturdays, Sundays and Holidays

In any case where the date of maturity of principal of, redemption premium, if any, or interest on the Bonds or the date fixed for redemption of any Bonds shall be a day other than a Business Day, then payment of principal, redemption premium, if any, or interest need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date.

Nonpresentment of Bonds

In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity or otherwise, or at the date fixed for redemption thereof, if funds sufficient to pay such Bond shall have been made available to the Trustee, all liability of the City to the owner thereof for the payment of such Bond, shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such funds in trust in a separate trust account, without liability for interest thereon, for the benefit of the owner of such Bond, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on his part under the Indenture or on or with respect to said Bond. If any Bond shall not be presented for payment within two years following the date when such Bond becomes due, whether by maturity or otherwise, the Trustee shall repay to the City the funds theretofore held by it for payment of such Bond without liability for interest thereon, and such Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the City, and the owner thereof shall be entitled to look only to the City for payment, and then only to the extent of the amount so repaid, and the City shall not be liable for any interest thereon and shall not be regarded as a trustee of such money.

B-2 Redemption of Bonds Generally

The Series 2018 Bonds are subject to redemption prior to maturity in accordance with their terms and the terms and provisions set forth in the Indenture. Additional Bonds shall be subject to redemption prior to maturity in accordance with the applicable terms and provisions contained in the Indenture and as may be specified in such Additional Bonds and the Supplemental Indenture authorizing such Additional Bonds.

Bonds Redeemed in Part

Any Bond which is to be redeemed only in part shall be surrendered at the place of payment therefor, and the City shall execute and the Trustee shall authenticate and deliver to the owner of such Bond, without service charge, a new Bond or Bonds of the same series and maturity of any Authorized Denomination or Denominations as requested by such owner in aggregate principal amount (in the case of Current Interest Bonds) or Maturity Amount (in the case of Capital Appreciation Bonds) equal to and in exchange for the unredeemed portion of the principal amount or Maturity Amount, as applicable, of the Bond so surrendered. If the owner of any such Bond shall fail to present such Bond to the Trustee for payment and exchange as aforesaid, said Bond shall, nevertheless, become due and payable on the redemption date to the extent of the $5,000 (or other denomination) unit or units of principal amount or Maturity Amount, as applicable, called for redemption (and to that extent only).

Subject to the approval of the Trustee, in lieu of surrender under the preceding paragraph, payment of the redemption price of a portion of any Bond may be made directly to the registered owner thereof without surrender thereof, if there shall have been filed with the Trustee a written agreement of such owner and, if such owner is a nominee, the Person for whom such owner is a nominee, that payment shall be so made and that such owner will not sell, transfer or otherwise dispose of such Bond unless prior to delivery thereof such owner shall present such Bond to the Trustee for notation thereon of the portion of the principal amount or Maturity Amount, as applicable, thereof redeemed or shall surrender such Bond in exchange for a new Bond or Bonds for the unredeemed balance of the principal amount or Maturity Amount, as applicable, of the surrendered Bond.

Creation of Funds and Accounts

There are created and ordered to be established in the custody of the Trustee the following special trust funds in the name of the City to be designated as follows:

(a) “City of Wichita, Kansas – Wichita River District STAR Bond Project - Project Fund” (the “Project Fund”), which shall consist of one or more separately held and named Project Accounts for each series of Bonds for which the City desires to establish a Project Account.

(b) “City of Wichita, Kansas - Wichita River District STAR Bond Project - Costs of Issuance Fund” (the “Costs of Issuance Fund”), which shall consist of separately held and named Costs of Issuance Accounts for each series of Bonds, including a Series 2018 Costs of Issuance Account.

(c) “City of Wichita, Kansas - Wichita River District STAR Bond Project - Debt Service Fund” (the “Debt Service Fund”), which shall consist of separately held and named Debt Service Accounts for each series of Bonds, including a Series 2018 Debt Service Account. In the event that a series of Bonds contains any Term Bonds, there shall be created and established a “Special Mandatory Redemption Subaccount” within the Debt Service Account established with respect to such series of Bonds. Accordingly, a Series 2018 Special Mandatory Redemption Subaccount shall be established within the Series 2018 Debt Service Account.

(d) “City of Wichita, Kansas - Wichita River District STAR Bond Project - Rebate Fund” (the “Rebate Fund”), which shall consist of separately held and named Rebate Accounts for each series of Tax- Exempt Bonds (or several series of Tax-Exempt Bonds in the event that such Bonds are treated as a single

B-3 bond issue under the federal arbitrage rules relating to Tax-Exempt Bonds), including a Series 2018 Rebate Fund.

(e) “City of Wichita, Kansas – Wichita River District STAR Bond Project - Capitalized Interest Fund” (the “Capitalized Interest Fund”), and within such fund separate accounts with respect to the Series 2018 Bonds and any series or subseries of Additional Bonds.

(f) “City of Wichita, Kansas – Wichita River District STAR Bond Project - Compliance Fund (the “Compliance Fund), and within such fund separate accounts with respect to the Series 2018 Bonds and any series or subseries of Additional Bonds. All funds, accounts and subaccounts shall be held by the Trustee in trust for application only in accordance with the provisions of the Indenture. The Trustee may establish separately held and named accounts within each fund in the Supplemental Indenture for each series of Bonds. In addition, the City or the Trustee may establish separate subaccounts within each account pursuant to the applicable Supplemental Indenture or Tax Compliance Agreement.

All funds, accounts and subaccounts shall be held by the Trustee in trust for application only in accordance with the provisions of this Indenture. The Trustee may establish separately held and named accounts within each fund in the Supplemental Indenture for each series of Bonds. In addition, the City or the Trustee may establish separate subaccounts within each account pursuant to the applicable Supplemental Indenture or Tax Compliance Agreement.

Project Fund

Moneys in the Project Fund shall be used solely for the purpose of paying the Costs of the Project, all in accordance with the requirements of the Financing Documents.

The Trustee shall disburse moneys on deposit in the Series 2018 Projects Account of the Project Fund established with respect to the Series 2018 Bonds from time to time to pay or as reimbursement for payment made for the Costs of the Project (other than Costs of Issuance) associated with the Project within 3 Business Days after receipt by the Trustee of written disbursement requests of the City, properly completed in all respects and in substantially the form specified in Exhibit C hereto, signed by the City Representative. Notwithstanding the foregoing, if for any reason the City should decide prior to the mailing or release of payment by the Trustee of any item not to pay such item, they shall give written notice of such decision to the Trustee and thereupon the Trustee shall not make such payment. The Trustee shall disburse moneys on deposit in a Project Account of the Project Fund established with respect to a series of Additional Bonds from time to time to pay or as reimbursement for payment made for Costs of the Project (other than Costs of Issuance) as provided in the Supplemental Indenture authorizing the issuance of the applicable series of Bonds.

In making payments from the Project Fund, the Trustee may rely upon such written requests and accompanying certificates and statements and shall not be required to make any independent investigation in connection therewith. It is expressly agreed and understood by the parties, including the City, that the Trustee shall not have any responsibility in determining if costs paid pursuant to this Section are permitted costs under the Act. If the City so requests, a copy of each written disbursement request submitted to the Trustee for payment under this Section shall be promptly provided by the Trustee to the requesting party. The Trustee shall keep and maintain adequate records pertaining to the Project Fund and all disbursements therefrom, and shall file periodic statements of activity regarding each Project Account of the Project Fund with the City.

The City, upon completion of the Project (or the portion of the Project being financed with the proceeds of a series of Bonds from amounts on deposit in a related Project Account of the Project Fund), shall deliver to the Trustee within 90 days thereafter a written certificate of the City Representative:

(1) stating that the Project (or the portion of the Project being financed with the proceeds of such series of Bonds from amounts on deposit in a related Project Account of the Project Fund) has been fully completed substantially in accordance with the plans and specifications for the Project, as

B-4 then amended, and the date of completion of the Project (or the portion of the Project being financed with the proceeds of such series of Bonds from amounts on deposit in a related Project Account);

(2) stating that he or she has made such investigation of such sources of information as are deemed by him or her to be necessary, including pertinent records of the City, and that the Costs of the Project to be financed with the proceeds of such series of Bonds have been fully paid for and no claim or claims exist against the City, or against the Project out of which a lien based on furnishing labor or material exists or might ripen; provided, however, there may be excepted from the foregoing statement any claim or claims out of which a lien exists or might ripen in the event the City, intends to contest such claim or claims in accordance with the Financing Documents, in which event such claim or claims shall be described; provided, further, that it shall be stated that moneys are on deposit in a related Project Account of the Project Fund or are available through enumerated bank loans (including letters of credit) or other sources sufficient to make payment of the full amount which might in any event be payable in order to satisfy such claim or claims; and

(3) directing the Trustee as to the application of the remaining moneys in a related Project Account of the Project Fund, as provided in the immediately succeeding paragraph.

If after payment by the Trustee of all disbursement requests theretofore tendered to the Trustee under the provisions of this Section and after receipt by the Trustee of the certificate required by the preceding paragraph of this Section and after all rebatable earnings have been transferred to the Rebate Fund, there shall remain any moneys in a Project Account of the Project Fund, such moneys shall be deposited in the related Debt Service Account of the Debt Service Fund and used to redeem Bonds of the applicable series at the earliest permissible date permitted by the Indenture and any similar provision contained in the Supplemental Indenture pursuant to which such Bonds were issued.

Capitalized Interest Fund.

Moneys in the Capitalized Interest Fund shall be held in trust and shall be applied solely in accordance with the provisions of the Indenture to pay interest on the Series 2018 Bonds during construction of the Project as the same becomes due and payable.

Debt Service Fund

The Trustee shall deposit and credit to the applicable account of the Debt Service Fund, as and when received, the following amounts:

(a) The Incremental Tax Revenues required to be transferred thereto pursuant to the Tax Distribution Agreement. Any amounts to be transferred to a Debt Service Account of the Debt Service Fund pursuant to the Tax Distribution Agreement for the special mandatory redemption of the outstanding Term Bonds shall be deposited in the Special Mandatory Redemption Subaccount established within such Debt Service Account.

(b) Any amount required to be transferred from a Project Account of the Project Fund to the related Debt Service Account of the Debt Service Fund upon completion of the portion of the Project being financed with the proceeds of the related series of Bonds pursuant to the Indenture and from the related Debt Service Reserve Account of the Debt Service Reserve Fund pursuant to the Indenture.

(c) Interest earnings and other income on Permitted Investments required to be deposited in the Debt Service Fund pursuant to the Indenture.

(d) Available Local Funds required to be deposited in the Debt Service Fund.

B-5 (e) Any amounts required by a Supplemental Indenture authorizing the issuance of Additional Bonds to be deposited in the applicable Debt Service Account of the Debt Service Fund, as specified in such Supplemental Indenture.

(f) All other moneys received by the Trustee under and pursuant to any of the provisions of the Indenture or any other Financing Document, when accompanied by directions from the person depositing such moneys that such moneys are to be paid into a Debt Service Account of the Debt Service Fund.

The moneys in the Debt Service Accounts established with respect to each series of Bonds shall be held in trust and, except as otherwise provided in the Indenture or the applicable Supplemental Indenture, shall be applied solely in accordance with the provisions of the Indenture to pay the principal of, Accreted Value and redemption premium, if any, and interest on the Bonds as the same become due and payable. Except as otherwise provided in the Indenture or the applicable Supplemental Indenture, moneys in such Debt Service Accounts shall be expended solely as follows: (1) first, to pay interest on the applicable series of Bonds as the same become due; (2) second, to pay principal and Accreted Value of the applicable series of Bonds as the same mature or become due and upon mandatory sinking fund redemption thereof; and (3) third, to pay principal of, Accreted Value and redemption premium, if any, on the applicable series of Bonds as the same become due upon redemption (other than a Special Mandatory Redemption) prior to maturity; provided, however, that moneys in the Special Mandatory Redemption Subaccounts of such Debt Service Accounts may also be expended to pay interest, principal and Accreted Value of the applicable Term Bonds upon the Special Mandatory Redemption thereof in accordance with the provisions of the Indenture.

The Trustee is authorized and directed to withdraw sufficient funds from the applicable account of the Debt Service Fund to pay principal of, Accreted Value, redemption premium, if any, and interest on the applicable series of Bonds as the same become due and payable at maturity or upon redemption and to make said funds so withdrawn available to the Trustee and any Paying Agent for the purpose of paying said principal, Accreted Value, redemption premium, if any, and interest.

The Trustee, upon the written instructions from the City, shall use excess moneys in an account of the Debt Service Fund to redeem all or part of the applicable series of Bonds Outstanding and to pay interest to accrue thereon prior to such redemption and redemption premium, if any, on the next succeeding redemption date for which the required redemption notice may be given or on such later redemption date as may be specified by the City, in accordance with the redemption provisions of the Indenture and the applicable Supplemental Indenture pursuant to which such Bonds were issued, and to the extent said moneys are in excess of the amount required for payment of such Bonds theretofore matured or called for redemption. The City may cause such excess money in an account of the Debt Service Fund or such part thereof to be applied by the Trustee on a best efforts basis to the extent practical for the purchase of the applicable series of Bonds in the open market for the purpose of cancellation at prices not exceeding the principal amount thereof plus accrued interest thereon to the date of such purchase.

After payment in full of the principal of, redemption premium, if any, and interest on the Bonds (or after provision has been made for the payment thereof as provided in the Indenture), and the reasonable fees, charges and expenses of the Trustee, any Paying Agents and the City, and any other amounts required to be paid under the Indenture and the Financing Documents, all amounts remaining in the Debt Service Fund shall be paid to the City.

Rebate Fund

There shall be deposited in the applicable account of the Rebate Fund such amounts as are required to be deposited therein pursuant to the applicable Tax Compliance Agreement. All amounts on deposit at any time in the Rebate Fund shall be held by the Trustee in trust to the extent required to pay rebatable arbitrage to the United States of America, and neither the City nor the owner of any Bonds shall have any rights in or claim

B-6 to such money. All amounts held in the Rebate Fund shall be governed by the Indenture and by the Tax Compliance Agreements.

Pursuant to the Tax Compliance Agreement, the Trustee shall remit all required rebate installments and a final rebate payment to the United States. Neither the Trustee nor the City shall have any obligation to pay any amounts required to be rebated pursuant to the Indenture and the Tax Compliance Agreement, other than from moneys held in the Rebate Fund created under the Indenture as provided in the Indenture and the Tax Compliance Agreement. Any moneys remaining in the Rebate Fund after redemption and payment of all of the Bonds and payment and satisfaction of any rebatable arbitrage shall be withdrawn and paid to the City.

The obligation to pay arbitrage rebate to the United States and to comply with all other requirements of the Indenture and the Tax Compliance Agreement shall survive the defeasance or payment in full of the Bonds until all rebatable arbitrage shall have been paid.

Records and Reports of Trustee

The Trustee agrees to maintain such records with respect to any and all moneys or investments held by the Trustee pursuant to the provisions of the Indenture as are requested in writing by the City. The Trustee shall furnish to the City quarterly on the tenth Business Day after the end of each calendar quarter, a report on the status of each of the funds, accounts and subaccounts established under the Indenture which are held by the Trustee, showing the balance in each such fund, account or subaccount as of the first day of the preceding month, the total of deposits to and the total of disbursements from each such fund, account or subaccount, the dates of such deposits and disbursements, and the balance in each such fund, account or subaccount on the last day of the preceding month. The Trustee shall render an annual accounting for each calendar year ending December 31 to the City, the Credit Enhancer, if any, and any bondowner requesting the same, showing in reasonable detail all financial transactions relating to the Trust Estate during the accounting period, including investment earnings and the balance in any funds, accounts or subaccounts created by the Indenture as of the beginning and close of such accounting period.

Moneys to be Held in Trust

All moneys deposited with or paid to the Trustee for the funds, accounts and subaccounts held under the Indenture, and all moneys deposited with or paid to any Paying Agent under any provision of the Indenture shall be held by the Trustee or Paying Agent in trust and shall be applied only in accordance with the provisions of the Indenture and the other Financing Documents, and, until used or applied as provided in the Indenture, shall (except for moneys in the Costs of Issuance Fund and the Rebate Fund) constitute part of the Trust Estate and be subject to the lien, terms and provisions of the Indenture and shall not be commingled with any other funds of the City except as otherwise provided in the Indenture for investment purposes. Neither the Trustee nor any Paying Agent shall be under any liability for interest on any moneys received under the Indenture except to the extent such moneys are invested in Permitted Investments.

Investment of Moneys

Moneys held in each of the funds, accounts and subaccounts under the Indenture shall, pursuant to written directions of the City Representative, or in the absence of such direction at the discretion of the Trustee, be invested and reinvested by the Trustee in accordance with the provisions of the Indenture and the Tax Compliance Agreements in Permitted Investments which mature or are subject to redemption by the owner thereof prior to the date such funds are expected to be needed. The Trustee may make any investments permitted by the provisions of the Indenture through its own bond department or short-term investment department or that of any affiliate of the Trustee and may pool moneys for investment purposes, except moneys held in any fund, account or subaccount that are required to be yield restricted in accordance with a Tax Compliance Agreement, which shall be invested separately. Any such Permitted Investments shall be held by or under the control of the Trustee and shall be deemed at all times a part of the fund, account or subaccount in which such moneys are originally held.

B-7

Except as may be otherwise provided in a Supplemental Indenture, the interest accruing on each fund, account or subaccount and any profit realized from such Permitted Investments (other than any amounts required to be deposited in an account of the Rebate Fund pursuant to the Indenture) shall be credited to such fund, account or subaccount, and any loss resulting from such Permitted Investments shall be charged to such fund, account or subaccount; provided, that interest accruing on amounts on deposit in an account of the Project Fund, the Escrowed Project Fund and the Debt Service Reserve Fund shall be credited to the related account of the Debt Service Fund. The Trustee shall sell or present for redemption and reduce to cash a sufficient amount of such Permitted Investments whenever it shall be necessary to provide moneys in any fund, account or subaccount for the purposes of such fund, account or subaccount and the Trustee shall not be liable for any loss resulting from such investments.

Limited Obligations

The Series 2018 Bonds and the interest thereon shall be special, limited obligations of the City payable (except to the extent paid out of Series 2018 Bond proceeds or the income from the temporary investment thereof) solely out of the Trust Estate and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the owners of the Series 2018 Bonds, as provided in this Indenture. The Trust Estate includes the Incremental Tax Revenues, and if such are insufficient to pay the Debt Service Requirements of the Series 2018 Bonds on any Interest Payment Date, the City has covenanted, subject to annual appropriation, to apply Available Local Sales Tax Funds to cure such insufficiency. The Series 2018 Bonds and interest thereon shall not be deemed to constitute a debt or liability of the City, the State or of any political subdivision thereof within the meaning of any state constitutional provision or statutory limitation and shall not constitute a pledge of the full faith and credit of the City, the State or of any political subdivision thereof, but shall be payable solely from the Trust Estate. The issuance of the Series 2018 Bonds shall not, directly, indirectly or contingently, obligate the City, the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. The State shall not in any event be liable for the payment of the principal of, redemption premium, if any, or interest on the Series 2018 Bonds or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever which may be undertaken by the City. No breach by the City of any such pledge, mortgage, obligation or agreement may impose any liability, pecuniary or otherwise, upon the State or any charge upon its general credit or against its taxing power.

The Supplemental Indenture authorizing each series of Additional Bonds shall contain a section substantially similar to this Section delineating the source of payment and security for such series of Additional Bonds.

Payment of Bonds

The City shall duly and punctually pay, but solely from the Trust Estate, the principal of, redemption premium, if any, and interest on the Bonds in accordance with the terms of the Bonds and the Indenture.

Performance of Covenants

The City shall (to the extent within its control) faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in the Indenture, in the Bonds and in all proceedings pertaining thereto.

Inspection of Books

The City covenants and agrees that all books and documents in its possession relating to the Bonds, the Indenture and the Financing Documents, and the transactions relating thereto shall at all reasonable times be open to inspection by such accountants or other agencies as the Trustee or any bondholder may from time to time designate. The Trustee covenants and agrees that all books and documents in its possession relating to

B-8 the Bonds, the Indenture and the Financing Documents, and the transactions relating thereto, shall be open to inspection by the City and any bondholder during business hours upon reasonable notice.

Enforcement of Rights

The City agrees that the Trustee, as assignee, transferee, pledgee, and owner of a security interest under the Indenture in its name or in the name of the City may enforce all rights of the City and the Trustee under and pursuant to any Financing Documents for and on behalf of the bondowners, whether or not the City is in default hereunder. Copies of the Financing Documents shall be delivered to and held by the Trustee.

Tax Covenants

The City (to the extent within its power or direction) will not use or permit the use of any proceeds of the Bond or any other funds of the City, directly or indirectly, in any manner, and will not take any action or permit any action to be taken that would adversely affect the exclusion from gross income for federal income tax purposes of the interest on any Tax-Exempt Bonds. The City will take whatever action, or refrain from whatever action, necessary to comply with the requirements of the Internal Revenue Code to maintain the exclusion from gross income for federal income tax purposes of the interest on any Tax-Exempt Bonds.

The Trustee agrees to comply with the provisions of each Tax Compliance Agreement, and may rely upon such Tax Compliance Agreements and any Opinion of Bond Counsel which sets forth such requirements, to comply with any statute, regulation or ruling that may apply to it as Trustee under the Indenture and relating to reporting requirements or other requirements necessary to preserve the exclusion from federal gross income of the interest on the Tax-Exempt Bonds. The Trustee from time to time may cause a firm of attorneys, consultants or independent accountants or an investment banking firm to supply the Trustee, on behalf of the City, with such information as the Trustee, on behalf of the City, may request in order to determine in a manner reasonably satisfactory to the Trustee, on behalf of the City, all matters relating to (a) the actuarial yield on any Tax-Exempt Bonds as the same may relate to any data or conclusions necessary to verify that such Tax-Exempt Bonds are not “arbitrage bonds” within the meaning of Section 148 of the Internal Revenue Code, and (b) compliance with rebate requirements of Section 148(f) of the Internal Revenue Code. Payment for costs and expenses incurred in connection with supplying the foregoing information shall be paid by the City.

The City may cease to comply with the foregoing tax covenants, provided it provides the Trustee with an Opinion of Bond Counsel addressed to the Trustee that the City’s failure to comply with such requirement will not adversely affect the exclusion of interest on any Tax-Exempt Bonds from gross income for federal income tax purposes.

The foregoing tax covenants of the Indenture shall remain in full force and effect notwithstanding the defeasance of the Bonds pursuant to the Indenture or any other provision of the Indenture, until the final maturity date of all Tax-Exempt Bonds Outstanding and payment thereof.

Continuing Disclosure

Under the Continuing Disclosure Agreement with respect to the Series 2018 Bonds, the City has undertaken all responsibility for compliance with continuing disclosure requirements with respect to S.E.C. Rule 15c2-12. The City covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Undertaking. Notwithstanding any other provision of the Indenture, failure of the City or the dissemination agent to comply with a Continuing Disclosure Agreement shall not be considered an event of default under the Indenture, and the sole remedy in the event of such failure shall be such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause such Person to comply with its obligations under the Continuing Disclosure Agreement.

B-9

Provisions of Tax Distribution Agreement to Control

Notwithstanding anything to the contrary contained in the Indenture, in the event of a conflict between the provisions of the Indenture and the provisions of the Tax Distribution Agreement, the provisions of the Tax Distribution Agreement shall control.

Events of Default

The term “event of default,” means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) as it applies to any one series of Bonds:

(a) default in the payment of any interest on any Bond when such interest becomes due and payable; or

(b) default in the payment of the principal of, Accreted Value, or redemption premium, if any, on any Bond when the same becomes due and payable (whether at maturity, upon proceedings for redemption or otherwise); or

(c) default of the City in the performance, or breach, of any covenant or agreement contained in this Indenture (other than a covenant or agreement a default in the performance or breach of which is specifically addressed elsewhere in this Section), and continuance of such default or breach for a period of 60 days after there has been given to the City by the Trustee or to the City and the Trustee by the owners of at least 10% of the Bond Obligation of the affected series of Bonds, a written notice specifying such default or breach and requiring it to be remedied; provided, that if such default cannot be fully remedied within such 60-day period, but can reasonably be expected to be fully remedied, such default shall not constitute an event of default if the City shall immediately upon receipt of such notice commence the curing of such default and shall thereafter prosecute and complete the same with due diligence and dispatch; provided further, that an Event of Nonappropriation shall not constitute an Event of Default.

In addition to the foregoing, the Supplemental Indenture relating to a Series of Bonds may specify additional events of default applicable only to such Series of Bonds.

Notwithstanding the foregoing, an event of default that affects only one series of Bonds shall not constitute an event of default with respect to any other series of Bonds.

Exercise of Remedies by the Trustee

Upon the occurrence and continuance of any event of default under the Indenture, unless the same is waived as provided in the Indenture, the Trustee shall have the following rights and remedies in addition to any other rights and remedies provided under the Indenture or by law:

(a) Right to Bring Suit, Etc. The Trustee may pursue any available remedy at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of the principal of, Accreted Value, redemption premium, if any, and interest on the affected series of Bonds Outstanding, including interest on overdue principal, Accreted Value and redemption premium, if any, and on overdue installments of interest, and any other sums due under the Indenture, to realize on or to foreclose any of its interests or liens under the Indenture or any other Financing Document, to enforce and compel the performance of the duties and obligations of the City as set forth in the Indenture and to enforce or preserve any other rights or interests of the Trustee under the Indenture with respect to

B-10 any of the Trust Estate, under the Tax Distribution Agreement, or otherwise existing at law or in equity.

(b) Appointment of Receiver. Upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the bondowners under the Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Trust Estate, pending such proceedings, with such powers as the court making such appointment shall confer.

(c) Suits to Protect the Trust Estate. The Trustee shall have power to institute and to maintain such proceedings as it may deem expedient to prevent any impairment of the Trust Estate by any acts which may be unlawful or in violation of the Indenture and to protect its interests and the interests of the bondowners in the Trust Estate, including power to institute and maintain proceedings to restrain the enforcement of or compliance with any governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair the security under the Indenture or be prejudicial to the interests of the bondowners or the Trustee, or to intervene (subject to the approval of a court of competent jurisdiction) on behalf of the bondowners in any judicial proceeding to which the City is a party and which in the judgment of the Trustee has a substantial bearing on the interests of the bondowners.

(d) Enforcement Without Possession of Bonds. All rights of action under the Indenture or any of the Bonds may be enforced and prosecuted by the Trustee without the possession of any of the Bonds or the production thereof in any suit or other proceeding relating thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and subject to the provisions of the Indenture, be for the equal and ratable benefit of the owners of the Bonds in respect of which such judgment has been recovered.

(e) Restoration of Positions. If the Trustee or any bondowner has instituted any proceeding to enforce any right or remedy under the Indenture by suit, foreclosure, the appointment of a receiver, or otherwise, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such bondowner, then and in every case the City, the Trustee and the bondowners shall, subject to any determination in such proceeding, be restored to their former positions and rights under the Indenture, and thereafter all rights and remedies of the Trustee and the bondowners shall continue as though no such proceeding had been instituted.

Upon the occurrence and continuance of any event of default under the Indenture, unless the same is waived as provided in the Indenture, the Trustee shall be obligated to exercise one or more of the rights and remedies conferred by the Indenture as the Trustee shall deem most expedient in the interests of the bondowners if requested in writing to do so by the owners of not less than a majority of the Bond Obligation of the affected series of Bonds and if indemnified as provided in the Indenture; provided, however, that so long as Credit Enhancement is in effect with respect to the affected Series of Bonds and the Credit Enhancer has not wrongfully failed to honor its obligations under the Credit Enhancement, the Trustee shall not exercise any such rights or remedies without the written consent or direction of the Credit Enhancer.

Trustee May File Proofs of Claim

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the City or any other obligor upon the Bonds or of such other obligor or their creditors, the Trustee (irrespective of whether the principal or Accreted Value of the Bonds shall then be due and payable, as therein expressed or by declaration or otherwise, and irrespective of whether the Trustee shall have made any demand on the City for the payment of

B-11 overdue principal, Accreted Value, redemption premium or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,

(a) to file and prove a claim for the whole amount of principal, Accreted Value, redemption premium, if any, and interest owing and unpaid in respect of the Outstanding Bonds and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the bondowners allowed in such judicial proceeding, and

(b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is authorized by each bondowner to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the bondowners, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under the Indenture.

Nothing contained in the Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any bondowner any plan of reorganization, arrangement, adjustment or composition affecting the Bonds or the rights of any owner thereof, or to authorize the Trustee to vote in respect of the claim of any bondowner in any such proceeding.

Limitation on Suits by Bondowners

No owner of any Bond shall have any right to institute any proceeding, judicial or otherwise, under or with respect to the Indenture, or for the appointment of a receiver or trustee or for any other remedy under the Indenture, unless

(a) such owner has previously given written notice to the Trustee of a continuing event of default;

(b) the owners of not less than a majority of the Bond Obligation of the affected series of Bonds shall have made written request to the Trustee to institute proceedings in respect of such event of default in its own name as Trustee under the Indenture;

(c) such owner or owners have offered to the Trustee indemnity as provided in the Indenture against the costs, expenses and liabilities to be incurred in compliance with such request;

(d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

(e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the owners of a majority of the Bond Obligation of the affected series of Bonds; it being understood and intended that no one or more owners of Bonds shall have any right in any manner whatever by virtue of, or by availing of, any provision of the Indenture to affect, disturb or prejudice the lien of the Indenture or the rights of any other owners of Bonds, or to obtain or to seek to obtain priority or preference over any other owners or to enforce any right under the Indenture, except in the manner provided in the Indenture and for the equal and ratable benefit of all Outstanding Bonds.

B-12 Notwithstanding the foregoing or any other provision in the Indenture, however, the owner of any Bond shall have the right, which is absolute and unconditional, to receive payment of the principal of, Accreted Value, redemption premium, if any, and interest on such Bond on the respective stated maturities expressed in such Bond (or, in the case of redemption, on the redemption date) solely from the Trust Estate, and nothing contained in the Indenture shall affect or impair the right of any owner to institute suit for the enforcement of any such payment.

Control of Proceedings by Bondowners

The owners of a majority of the Bond Obligation of the affected series shall have the right, during the continuance of an event of default, provided indemnity has been provided to the Trustee in accordance with the Indenture:

(a) to require the Trustee to proceed to enforce the Indenture, either by judicial proceedings for the enforcement of the payment of the Bonds and the foreclosure of the Indenture, or otherwise; and

(b) to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture, provided that

(1) such direction shall not be in conflict with any rule of law or the Indenture,

(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and

(3) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the owners not taking part in such direction.

Application of Moneys Collected

Any moneys collected by the Trustee pursuant to the Indenture (after the deductions for payment of costs and expenses of proceedings resulting in the collection of such moneys) together with any other sums then held by the Trustee as part of the Trust Estate, shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, Accreted Value, redemption premium, if any, or interest, upon presentation of the affected Bonds and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

(a) First: To the payment of certain undeducted amounts due the Trustee under the Indenture;

(b) Second: To the payment of the whole amount then due and unpaid upon the Outstanding Bonds of the affected series for principal, Accreted Value, redemption premium, if any, and interest, in respect of which or for the benefit of which such money has been collected, with interest (to the extent that such interest has been collected by the Trustee or a sum sufficient therefor has been so collected and payment thereof is legally enforceable at the respective rate or rates prescribed therefor in such Bonds) on overdue principal, Accreted Value and redemption premium, if any, and on overdue installments of interest; and in case such proceeds shall be insufficient to pay in full the whole amount so due and unpaid upon such Bonds, then to the payment of such principal, Accreted Value, redemption premium, if any, and interest, without any preference or priority of Bonds within such affected series, ratably according to the aggregate amount so due;

B-13 (c) Third: To the payment to the Credit Enhancer, if any, of any amounts due and owing to the Credit Enhancer for reimbursement of any payment of principal of, Accreted Value and interest on the Bonds made by the Credit Enhancer; and

(d) Fourth: To the payment of the remainder, if any, to the City or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

Whenever moneys are to be applied by the Trustee pursuant to the provisions of the Indenture, such moneys shall be applied by it at such times, and from time to time, as the Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall apply such moneys, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the owner of any unpaid Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid.

Notwithstanding anything in the Indenture to the contrary, Owners of Additional Bonds for which the entire Trust Estate is not pledged shall have no rights in those portions of the Trust Estate not pledged to such Additional Bonds pursuant to the Supplemental Indenture authorizing their issuance.

Rights and Remedies Cumulative

No right or remedy in the Indenture conferred upon or reserved to the Trustee or to the bondowners is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given under the Indenture or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy under the Indenture, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Delay or Omission Not Waiver

No delay or omission of the Trustee or of any owner of any Bond to exercise any right or remedy accruing upon an event of default shall impair any such right or remedy or constitute a waiver of any such event of default or an acquiescence therein. Every right and remedy given by the Indenture or by law to the Trustee or to the bondowners may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the bondowners, as the case may be.

Waiver of Past Defaults

Before any judgment or decree for payment of money due has been obtained by the Trustee as provided in the Indenture, the owners of a majority of the Bond Obligation of the affected series of Bonds may, by written notice delivered to the Trustee and the City, on behalf of the owners of all such Bonds waive any past default under the Indenture and its consequences, except a default

(a) in the payment of the principal of, Accreted Value, redemption premium, if any, or interest on any Bond, or

(b) in respect of a covenant or provision of the Indenture which cannot be modified or amended without the consent of the owner of each Outstanding Bond affected.

B-14 Notwithstanding the foregoing, so long as Credit Enhancement is in effect with respect to the affected series of Bonds, the Trustee shall not waive any event of default without the prior written consent of the Credit Enhancer.

Upon any such waiver, such default shall cease to exist, and any event of default arising therefrom shall be deemed to have been cured, for every purpose of the Indenture; but no such waiver shall extend to or affect any subsequent or other default or impair any right or remedy consequent thereon.

Acceptance of Trusts; Certain Duties and Responsibilities

The Trustee accepts and agrees to execute the trusts imposed upon it by the Indenture, but only upon the following terms and conditions:

(a) Except during the continuance of an event of default,

(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in the Indenture, and no implied covenants or obligations shall be read into the Indenture against the Trustee, and

(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of the Indenture; but in the case of any such certificates or opinions which by any provision of the Indenture are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of the Indenture.

(b) If an event of default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent corporate trustee would exercise or use under the circumstances.

(c) No provision of the Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that

(1) this subsection shall not be construed to limit the effect of subsection (a) above;

(2) the Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

(3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the owners of a majority of the Bond Obligation relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under the Indenture; and

(4) no provision of the Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the Indenture, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

B-15 (d) Whether or not therein expressly so provided, every provision of the Indenture relating to the conduct or affecting the liability of or conveying rights and duties or affording protection to the Trustee, whether in its capacity as Trustee, Paying Agent, bond registrar or any other capacity, shall be subject to the provisions of the Indenture.

Certain Rights of Trustee

Except as otherwise provided under the above caption "Acceptance of Trusts; Certain Duties and Responsibilities":

(a) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

(b) The Trustee shall be entitled to rely upon a certificate of a City Representative as to the sufficiency of any request or direction of the City mentioned herein, the existence or non-existence of any fact or the sufficiency or validity of any instrument, paper or proceeding, or that a resolution or ordinance in the form therein set forth has been duly adopted by the Governing Body, and is in full force and effect.

(c) Whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon a certificate of a City Representative.

(d) The Trustee may consult with counsel, and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Trustee hereunder in good faith and in reliance thereon.

(e) Notwithstanding anything in this Indenture to the contrary, the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture whether at the request or direction of any of the bondowners pursuant to this Indenture or otherwise, except the duty to pay the principal of, Accreted Value, redemption premium, if any, and interest on the Bonds as provided herein unless such bondowners or other party shall have offered to the Trustee reasonable security or indemnity satisfactory to the Trustee against the fees, advances, costs, expenses and liabilities (except as may result from the Trustee’s own negligence or willful misconduct) which might be incurred by it in connection with such rights or powers.

(f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the City, personally or by agent or attorney.

(g) The Trustee assumes no responsibility for the correctness of the recitals contained in this Indenture and in the Bonds, except the certificate of authentication on the Bonds. The Trustee makes no representations as to the value or condition of the Trust Estate or any part thereof, or as to the title thereto or as to the security afforded thereby or hereby, or as to the validity or sufficiency of this Indenture or of the Bonds. The Trustee shall not be accountable for the use or application by the City of any of the Bonds or the proceeds thereof or of any money paid to or upon the order of the City under any provision of this Indenture.

B-16

(h) The Trustee, in its individual or any other capacity, may become the owner or pledgee of Bonds and may otherwise deal with the City with the same rights it would have if it were not Trustee.

(i) All money received by the Trustee shall, until used or applied or invested as herein provided, be held in trust for the purposes for which they were received. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law or by this Indenture. The Trustee shall be under no liability for interest on any money received by it hereunder except as to investments authorized and directed pursuant to the Indenture.

(j) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

(k) Notwithstanding anything elsewhere in this Indenture contained, before taking any action under this Indenture other than the payment of debt service on the Bonds from monies on deposit with the Trustee, the Trustee may require that satisfactory indemnity be furnished to it for the reimbursement of all reasonable costs and expenses to which it may be put and to protect it against all liability which it may incur in or by reason of such action.

(l) The Trustee may elect not to proceed in accordance with the directions of the bondowners or the Credit Enhancer, if any, without incurring any liability to the bondowners or the Credit Enhancer, if any, if, in the opinion of the Trustee such direction may result in environmental liability to the Trustee, in its individual capacity for which the Trustee has not received indemnity pursuant to Section 802 and Section 804 hereof from the bondowners or the Credit Enhancer, if any, and the Trustee may rely upon an Opinion of Counsel addressed to the City and the Trustee in determining whether any action directed by the bondowners or the Credit Enhancer, if any, may result in such liability.

(m) The Trustee may inform the bondowners or the Credit Enhancer, if any, of environmental hazards that the Trustee has reason to believe exist, and the Trustee has the right to take no further action and, in such event no fiduciary duty exists, which imposes any obligation for further action with respect to the Trust Estate or any portion thereof if the Trustee, in its individual capacity, determines that any such action would materially and adversely subject the Trustee to environmental or other liability for which the Trustee has not received indemnity pursuant to Section 802 and Section 804 hereof.

(n) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or its willful misconduct.

(o) The Trustee shall not be required to give any bond or security in respect of the execution of the said trusts and powers or otherwise in respect to the premises.

B-17 Notice of Defaults

The Trustee shall not be required to take notice or be deemed to have notice of any default under the Indenture except failure by the City to cause to be made any of the payments to the Trustee required to be made by the Indenture, unless the Trustee shall be specifically notified in writing of such default by the City, the Credit Enhancer, if any, or the owners of at least 10% of the Bond Obligation of the affected series, and in the absence of such notice so delivered, the Trustee may conclusively assume there is no default except as aforesaid. Within 30 days after the Trustee has received notice of any default or the occurrence of any default under the Indenture of which the Trustee is deemed to have notice, the Trustee shall give written notice of such default by first class mail to all owners of Bonds of the affected series as shown on the bond register maintained by the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of, Accreted Value, redemption premium, if any, or interest on any Bond, the Trustee shall be protected in withholding such notice to such bondowners if and so long as the Trustee in good faith determines that the withholding of such notice is in the interests of the bondowners. For the purpose of this paragraph, the term “default” means any event which is, or after notice or lapse of time or both would become, an event of default as defined in the Indenture.

Corporate Trustee Required; Eligibility

There shall at all times be a Trustee under the Indenture which shall be a bank or trust company organized and doing business under the laws of the United States of America or of any state thereof, authorized under such laws to exercise corporate trust powers, subject to supervision or examination by federal or state authority, and having a combined capital and surplus of at least $50,000,000. If such bank or trust company publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then for the purposes of this paragraph, the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of the Indenture, it shall resign immediately in the manner and with the effect specified in the Indenture.

Resignation and Removal of Trustee

The Trustee may resign at any time by giving written notice thereof to the City and each owner of Bonds Outstanding as shown by the list of bondowners required by the Indenture to be kept at the office of the Trustee. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee has or shall acquire any conflicting interest, it shall, within 90 days after ascertaining that it has a conflicting interest, or within 30 days after receiving written notice from the City that it has a conflicting interest, either eliminate such conflicting interest or resign in the manner and with the effect specified in the immediately preceding paragraph.

The Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the City and the Trustee signed by the owners of a majority of the Bond Obligation or, so long as the City is not in default and no condition that with the giving of notice or passage of time, or both, would constitute a default under the Indenture, by the City. The City or any bondowner may at any time petition any court of competent jurisdiction for the removal of the Trustee for cause.

If at any time

(a) the Trustee shall fail to comply with the second paragraph under this heading "Resignation and Removal of Trustee" after written request therefor by the City or by any bondowner, or

B-18 (b) the Trustee shall cease to be eligible to serve as Trustee under the Indenture and shall fail to resign after written request therefor by the City or by any such bondowner, or

(c) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, the City may remove the Trustee or any bondowner may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

The Trustee shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the registered owners of Bonds as their names and addresses appear in the bond register maintained by the Trustee. Each notice shall include the name of the successor Trustee and the address of its principal corporate trust office.

No resignation or removal of the Trustee and no appointment of a successor Trustee shall become effective until the acceptance of appointment by the successor Trustee.

Appointment of Successor Trustee

If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the City or the owners of a majority of the Bond Obligation (if an event of default under the Indenture has occurred and is continuing), by an instrument or concurrent instruments in writing delivered to the City and the retiring Trustee, shall promptly appoint a successor Trustee. Every such successor Trustee appointed pursuant to the provisions of the Indenture shall be a bank or trust company in good standing under the law of the jurisdiction in which it was created and by which it exists, meeting the eligibility requirements of the Indenture.

Merger, Consolidation and Succession to Business

Any corporation or association into which the Trustee may be merged or with which it may be consolidated, or any corporation or association resulting from any merger or consolidation to which the Trustee shall be a party, or any corporation or association succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee under the Indenture, provided such corporation or association shall be otherwise qualified and eligible under the Indenture, and shall be vested with all of the title to the whole property or Trust Estate and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or any further act on the part of any of the parties to the Indenture.

Co-Trustees and Separate Trustees

At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any of the Trust Estate may at the time be located, or in the enforcement of any default or the exercise any of the powers, rights or remedies granted to the Trustee in the Indenture, or any other action which may be desirable or necessary in connection therewith, the Trustee shall have power to appoint, and, upon the written request of the Trustee or of the owners of at least 25% of the Bond Obligation, the City shall for such purpose join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Trustee either to act as co-trustee, jointly with the Trustee, of all or any part of the Trust Estate, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such person or persons in the capacity aforesaid, any property, title, protection, immunity, right or power deemed necessary or desirable, subject to the other provisions of the Indenture. If the City does not join in such appointment within

B-19 15 days after the receipt by it of a request so to do, or in case an event of default has occurred and is continuing, the Trustee alone shall have power to make such appointment.

Supplemental Indentures Without Consent of Bondowners

Without the consent of the owners of any Bonds, the City and the Trustee may at any time or from time to time enter into one or more Supplemental Indentures for any of the following purposes:

(a) to close the Indenture against, or provide limitations and restrictions in addition to the limitations and restrictions contained in the Indenture on, the delivery of Bonds or the issuance of other evidences of indebtedness;

(b) to add to the limitations and restrictions in the Indenture other limitations and restrictions to be observed by the City which are not contrary to or inconsistent with the Indenture as theretofore in effect;

(c) to add to the covenants and agreements of the City in the Indenture other covenants and agreements to be observed by the City which are not contrary to or inconsistent with the Indenture as theretofore in effect;

(d) to confirm, as further assurance, any pledge under, and the subjection to any lien or pledge created or to be created by, the Indenture of the Revenues or of any other moneys, securities or funds;

(e) to modify any of the provisions of the Indenture in any respect whatever, provided that such modification shall be and shall be expressed to be ineffective as to Bonds of any series Outstanding as of the date of the adoption of such Supplemental Indenture

(f) to cure any ambiguity, supply any omission or cure or correct any defect or inconsistent provision in the Indenture, including without limitation any amendments necessary to conform this Indenture to information provided in the Official Statement prepared in connection with the offering and sale of the Bonds;

(g) to insert such provisions clarifying matters or questions arising under the Indenture as are necessary or desirable and are not contrary to or inconsistent with the Indenture as theretofore in effect;

(h) to make such modifications or changes in the Indenture that are not materially adverse to the interests of any bondowner, as determined by the Trustee in its discretion (which determination shall be binding and conclusive on the City and the bondowners); or

(i) to authorize the issuance of any series of Additional Bonds and make such other provisions as provided in the Indenture.

Supplemental Indentures with Consent of Bondowners

With the written consent of the owners of not less than a majority of the Bond Obligation affected by such Supplemental Indenture, the City and the Trustee may enter into one or more Supplemental Indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the owners of the Bonds under the Indenture; provided, however, that no such Supplemental Indenture shall, without the consent of the owner of each Outstanding Bond affected thereby,

B-20 (a) change the stated maturity of the principal of, or any installment of interest on, any Bond, or change any optional redemption date thereof, or reduce the principal amount or Accreted Value thereof or the interest thereon or any premium payable upon the redemption thereof, or change any place of payment where, or the coin or currency in which, any Bond, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption, on or after the redemption date);

(b) reduce the percentage of the Bond Obligation, the consent of whose owners is required for any such Supplemental Indenture, or the consent of whose owners is required for any waiver provided for in the Indenture of compliance with certain provisions of the Indenture or certain defaults under the Indenture and their consequences; or

(d) modify any of the provisions described under this caption or the caption "Waiver of Past Defaults," except to increase any percentage provided thereby or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the owner of each Bond affected thereby; or

(e) permit the creation of any lien ranking prior to or on a parity with the lien of the Indenture with respect to any of the Trust Estate or terminate the lien of the Indenture on any property at any time subject thereto or deprive the owner of any Bond of the security afforded by the lien of the Indenture.

The Trustee in its discretion may determine whether or not any Bonds would be affected by any Supplemental Indenture and any such determination shall be conclusive upon the City and the bondowners, whether theretofore or thereafter authenticated and delivered under the Indenture. The Trustee shall not be liable for any such determination made in good faith.

A Supplemental Indenture shall not be effective unless and until there shall have been filed with the Trustee (a) an Opinion of Counsel stating that the execution and delivery of such Supplemental Indenture is authorized or permitted by the Indenture and the Act, complies with the respective terms thereof, and is valid and binding upon the City and enforceable in accordance with its terms, and (b) an Opinion of Bond Counsel to the effect that such Supplemental Indenture will not adversely affect the exclusion of interest on any Tax- Exempt Bonds from federal income taxation.

Execution of Supplemental Indentures

In executing, or accepting the additional trusts created by, any Supplemental Indenture permitted by the Indenture or the modification thereby of the trusts created by the Indenture, the Trustee and the City shall be entitled to receive, and, subject to the Indenture, shall be fully protected in relying upon, an Opinion of Bond Counsel addressed and delivered to the Trustee and the City stating that the execution of such Supplemental Indenture is permitted by and in compliance with the Indenture and the Act, and will, upon the execution and delivery thereof, be valid and binding upon the City in accordance with its terms, and that the execution and delivery thereof will not adversely affect the exclusion of interest on any Tax-Exempt Bonds from gross income for federal income tax purposes. The Trustee may, but shall not be obligated to, enter into any such Supplemental Indenture which affects the Trustee’s own rights, duties or immunities under the Indenture or otherwise.

B-21 Payment, Discharge and Defeasance of Bonds

Bonds will be deemed to be paid and discharged and no longer Outstanding under the Indenture and will cease to be entitled to any lien, benefit or security of the Indenture if the City shall pay or provide for the payment of such Bonds in any one or more of the following ways:

(a) by paying or causing to be paid the principal of, Accreted Value, redemption premium, if any, and interest on such Bonds, as and when the same become due and payable;

(b) by delivering such Bonds to the Trustee for cancellation; or

(c) by depositing in trust with the Trustee or other Paying Agent moneys and Defeasance Obligations in an amount, together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such Bonds at or before their respective maturity or redemption dates (including the payment of the principal of, Accreted Value, redemption premium, if any, and interest payable on such Bonds to the maturity or redemption date thereof); provided that, if any such Bonds are to be redeemed prior to the maturity thereof, irrevocable notice of such redemption is given in accordance with the requirements of the Indenture or provision satisfactory to the Trustee is made for the giving of such notice.

The Bonds may be defeased in advance of their maturity or redemption dates only with Defeasance Obligations pursuant to subsection (c) above, subject to receipt by the Trustee and Credit Enhancer, if any, of (1) a verification report in form and substance satisfactory to the Trustee and Credit Enhancer, if any, prepared by independent certified public accountants, or other verification agent, satisfactory to the Trustee and the Credit Enhancer, if any, and (2) an Opinion of Bond Counsel addressed and delivered to the Trustee and Credit Enhancer, if any, in form and substance satisfactory to the Trustee and Credit Enhancer, if any, to the effect that the payment of the principal of, Accreted Value, redemption premium, if any, and interest on all of the Bonds then Outstanding and any and all other amounts required to be paid under the provisions of the Indenture has been provided for in the manner set forth in the Indenture and to the effect that so providing for the payment of any Bonds will not cause the interest on any Tax-Exempt Bond to be included in gross income for federal income tax purposes, notwithstanding the satisfaction and discharge of the Indenture.

In the case of any defeasance of Series 2018 Bonds, the expected principal amounts and maturities of Series 2018 Bonds to be redeemed based upon Incremental Tax Revenues for the previous twelve-month period shall be considered for purposes of determining the schedule of payments of principal of and interest on the Series 2018 Bonds from escrowed funds.

The foregoing notwithstanding, the liability of the City in respect of such Bonds shall continue, but the owners thereof shall thereafter be entitled to payment only out of the moneys and Defeasance Obligations deposited with the Trustee as aforesaid.

Moneys and Defeasance Obligations so deposited with the Trustee pursuant to the Indenture shall not be a part of the Trust Estate but shall constitute a separate trust fund for the benefit of the Persons entitled thereto. Such moneys and Defeasance Obligations shall be applied by the Trustee to the payment (either directly or through any Paying Agent, as the Trustee may determine) to the Persons entitled thereto, of the principal of, Accreted Value, redemption premium, if any, and interest for whose payment such moneys and Defeasance Obligations have been deposited with the Trustee.

B-22 Satisfaction and Discharge of Indenture

The Indenture and the lien, rights and interests created by the Indenture shall cease, determine and become null and void (except as to any surviving rights of transfer or exchange of Bonds provided for in the Indenture) if the following conditions are met:

(a) the principal of, Accreted Value, redemption premium, if any, and interest on all Bonds has been paid or is deemed to be paid and discharged by meeting the conditions of the Indenture;

(b) all other sums payable under the Indenture with respect to the Bonds are paid or provision satisfactory to the Trustee is made for such payment; and

(c) the Trustee receives an Opinion of Counsel to the effect that all conditions precedent in the Indenture to the satisfaction and discharge of the Indenture have been complied with.

Thereupon, the Trustee shall execute and deliver to the City a termination statement and such instruments of satisfaction and discharge of the Indenture as may be necessary and shall pay, assign, transfer and deliver to the City, or other Persons entitled thereto, all moneys, securities and other property then held by it under the Indenture as a part of the Trust Estate, other than moneys or Defeasance Obligations held in trust by the Trustee as provided in the Indenture for the payment of the principal of, Accreted Value, redemption premium, if any, and interest on the Bonds.

Notwithstanding anything in the Indenture to the contrary, in the event that the principal, Accreted Value and/or interest due on a series of Bonds shall be paid by the Credit Enhancer pursuant to the Credit Enhancement, such Bonds shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid, and all covenants, agreements and other obligations of the Trustee to the registered owners shall continue to exist and shall run to the benefit of the Credit Enhancer, and the Credit Enhancer shall be subrogated to the rights of such registered owners.

Rights Retained After Discharge

Notwithstanding the satisfaction and discharge of the Indenture, the rights of the Trustee under the Indenture shall survive, and the Trustee shall retain such rights, powers and duties under the Indenture as may be necessary and convenient for the payment of amounts due or to become due on the Bonds and the registration, transfer and exchange of Bonds as provided in the Indenture. Nevertheless, any moneys held by the Trustee or any Paying Agent for the payment of the principal of, Accreted Value, redemption premium, if any, or interest on any Bond remaining unclaimed for two years after the principal and Accreted Value of all Bonds has become due and payable, whether at maturity or upon proceedings for redemption as provided in the Indenture, shall then be paid as provided in the Indenture and all liability of the Trustee or any Paying Agent or the City with respect to such moneys shall thereupon cease.

Credit Enhancement

Each Supplemental Indenture authorizing the issuance of a series of Bonds secured by a Credit Enhancement shall contain provisions relating to such Credit Enhancement, including the procedures for the payment of the principal of, Accreted Value and interest on such series of Bonds pursuant to such Credit Enhancement, any additional notices to be provided to the Credit Enhancer, any control over remedies given to the Credit Enhancer, any consent rights given to the Credit Enhancer, any rights of the Credit Enhancer to remove the Trustee, any rights of access of the Credit Enhancer to information, books and records, and any additional rights to be provided to the Credit Enhancer. The Series 2018 Bonds described in this Official Statement are not payable from any Credit Enhancement.

B-23 Immunity of Officers, Directors, Members, Employees and Agents of City

No recourse shall be had for the payment of the principal of, Accreted Value or redemption premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the Indenture against any past, present or future officer, director, member, employee or agent (including any municipal advisor, consultant, structuring agent or escrow agent) of the City, or of any successor public corporation, either directly or through the City or any successor public corporation, under any rule of law or equity, statute or constitution, or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, directors, members, employees or agents (including any municipal advisors, consultants, structuring agents or escrow agents) as such is expressly waived and released as a condition of and consideration for the execution of the Indenture and the issuance of Bonds.

Limitation on City Obligations

Any other term or provision in the Indenture or in any other Financing Documents or elsewhere to the contrary notwithstanding:

(a) Any and all obligations (including without limitation, fees, claims, demands, payments, damages, liabilities, penalties, assessments and the like) of or imposed upon the City or its members, officers, agents, employees, representatives, advisors or assigns, whether under the Indenture or any of the other Financing Documents or elsewhere and whether arising out of or based upon a claim or claims of tort, contract, misrepresentation, or any other or additional legal theory or theories whatsoever (collectively the “Obligations”), shall in all events be absolutely limited obligations and liabilities, payable solely out of the following, if any, available at the time the Obligation in question is asserted:

(1) Bond proceeds and investments therefrom; and

(2) the Revenues pledged under the Indenture (including the Trust Estate to the extent provided in the Indenture);

(the above provisions (1) and (2) being collectively referred to as the “exclusive sources of the Obligations”).

(b) The Obligations shall not be deemed to constitute a debt or liability of the City within the meaning of any state constitutional provision or statutory limitation and shall not constitute a pledge of the full faith and credit of the City, but shall be payable solely from and out of the exclusive sources of the Obligations and shall otherwise impose no liability whatsoever, primary or otherwise, upon the City or any charge upon their general credit or taxing power.

(c) In no event shall any member, officer, agent, employee, representative or advisor of the City, or any successor or assign of any such person or entity, be liable, personally or otherwise, for any Obligation.

(d) In no event shall the Indenture be construed as:

(1) depriving the City of any right or privilege; or

(2) requiring the City or any member, officer, agent, employee, representative or advisor of the City to take or omit to take, or to permit or suffer the taking of, any action by itself or by anyone else;

which deprivation or requirement would violate or result in the City’s being in violation of the Act or any other applicable state or federal law.

B-24

APPENDIX C

TAX DISTRIBUTION AGREEMENT

(THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX C

TAX DISTRIBUTION AGREEMENT

This TAX DISTRIBUTION AGREEMENT (the “Tax Distribution Agreement”) is entered into as of November 1, 2018, among the CITY OF WICHITA, KANSAS, a municipal corporation and political subdivision duly organized and existing under the laws of the State of Kansas (the “City”), SECURITY BANK OF KANSAS CITY, a state banking corporation duly organized and existing under the laws of the State of Kansas, as trustee under the herein described Indenture (the “Trustee”), the TREASURER OF THE STATE OF KANSAS (the “State Treasurer”) and SECURITY BANK OF KANSAS CITY, a state banking corporation duly organized and existing under the laws of the State of Kansas, acting as escrow agent hereunder for the benefit of the Trustee (the “Escrow Agent”).

RECITALS

1. The City created the East Bank Redevelopment District (the “TIF District”) pursuant to K.S.A. 12-1770 et seq. and Ordinance No. 42-966 passed by the governing body of the City on December 12, 1995 and published December 15, 1995, as amended by 45-339, passed June 25, 2002, and published June 29, 2002, as further amended by Ordinance No. 46-407, passed November 23, 2004, and published November 29, 2004 and Ordinance No. 49-557, passed August 13, 2013, and published August 16, 2013. 2. Pursuant to K.S.A. 12-1770 et seq., as subsequently re-codified in K.S.A. 12-17,160 et seq. (the “STAR Bond Act”) the City prepared a special bond project plan for development of the River District Corridor Improvements Project Area (the “River District Project Area”) within the TIF District, dated as of July 2007 (the “River District STAR Bond Project Plan”). Pursuant to the STAR Bond Act, the Secretary of the Kansas Department of Commerce (the “Secretary”): (a) determined that the River District Project Area in the TIF District constitutes a major commercial entertainment and tourism area and is therefore an “eligible area” under the STAR Bond Act (the “Wichita River STAR Bond District”), (b) approved and designated the improvements described in the River District STAR Bond Project Plan as a “STAR bond project” within the meaning of the STAR Bond Act and (c) approved financing of certain costs of the River District STAR Bond Project Plan with STAR bond financing. The Wichita River STAR Bond District contains multiple project areas

3 After complying with procedural requirements of the STAR Bond Act, by Ordinance No. 47-518, passed July 17, 2007, and published July 20, 2007, the City adopted the River District STAR Bond Project Plan (the “STAR Project Plan”) for the Wichita River STAR Bond District (the “District”) and adopted a STAR bond district plan (the “District Plan”).

4. The Secretary approved the River District STAR Bond Project Plan on October 24, 2007 and authorized the issuance of STAR Bonds to finance eligible project costs.

5. The City prepared a Project Plan Amendment to the STAR Project Plan, dated as of December 2016 (the “STAR Project Plan Amendment”), which modifies the scope of the major commercial entertainment and tourism area, adds a major multi-sport athletic complex and modifies related infrastructure improvements described in the STAR Project Plan.

6. Pursuant to the STAR Bond Act and Ordinance No. 50-400, passed January 3, 2017, and a summary of which was published January 6, 2017, the City approved the STAR Project Plan Amendment.

C-1 7. On March 20, 2017, the Secretary approved the STAR Project Plan Amendment and approved, subject to certain conditions, the issuance of STAR bond financing in an amount of up to $19,500,000 (exclusive of approved financing costs) to finance a portion of the costs to implement such STAR Project Plan Amendment.

8. After complying with procedural requirements of the STAR Bond Act, the City by Ordinance No. 50-375, passed December 6, 2016, and a summary thereof published December 9, 2016, added certain property (the “Additional Property”), increased the boundaries of the District and adopted a substantial change to the District Plan

9. Pursuant to the STAR Bond Act, the Secretary consented to amending the boundaries of the District for STAR bond purposes to include the Additional Property.

10. Pursuant to the STAR Bond Act, the City is authorized to undertake one or more STAR bond projects within the Additional Property added to the District (the “West Bank Project Area”), which may be implemented in separate development stages, and prepare a STAR bond project plan.

11. Pursuant to the STAR Bond Act, the City, by Ordinance No. 50-527, passed May 2, 2017, and a summary thereof published May 5, 2017, adopted the River District Phase II STAR Bond Project Plan, (the “Phase II Project Plan”) which provides for the redevelopment of property within the West Bank Project Area.

12. On April 30, 2018, , the Secretary determined that the District, including the West Bank Project Area, includes a major multi-sport athletic facility, approved the Phase II Project Plan and approved, subject to certain conditions, the issuance of STAR bond financing in an amount of up to $20,500,000 (exclusive of approved financing costs) to finance a portion of the costs to implement such Phase II Project Plan.

13. The facilities and improvements referenced in the STAR Project Plan Amendment and in the Phase II Project Plan are collectively referred to as the “2018 Projects.”

14. The City is authorized under the STAR Bond Act to issue special obligation bonds for the purpose of implementing the STAR Project Plan Amendment and the Phase II Project Plan.

15. Pursuant to the STAR Bond Act and Ordinance No. 50-884 duly passed by the City on November 6, 2018 (the “Bond Ordinance”), the City has determined to issue a series of Bonds hereunder in the original principal amount of $42,140,000 to be designated “Sales Tax Special Obligation Revenue Bonds (River District Stadium STAR Bond Project) Series 2018” (the “Series 2018 Bonds,” as more fully described herein), the proceeds of which will be used to: (a) pay a portion of the costs of the 2018 Projects, (b) fund a deposit to the Capitalized Interest Fund; and (c) pay certain costs related to the issuance of the Series 2018 Bonds (as defined herein).

20. The City, the Trustee, the State Treasurer and the Escrow Agent now desire to enter into this Tax Distribution Agreement in order to set forth procedures for the collection and distribution of certain tax revenues to pay the principal of, Accreted Value, redemption premium, if any, and interest on the Series 2018 Bonds and any other bonds that may be issued by the City in the future pursuant to the Indenture.

C-2 AGREEMENT

ARTICLE I DEFINITIONS

Section 101. Definitions of Words and Terms. For all purposes of this Tax Distribution Agreement, except as otherwise provided or unless the context otherwise requires, the following words and terms used in this Tax Distribution Agreement shall have the following meanings:

“Accreted Value” shall have the meaning given such term in the Indenture.

“Act” means K.S.A. 12-17,160, et seq., and K.S.A. 10-116a, all as amended and supplemented from time to time.

“Base Year City Sales Tax Revenues” means: (a) with respect to the Phase I Project Area - $185,353.00; and (b) with respect to the Phase II Project Area - $41,595.91.

“Base Year State Sales Tax Revenues” means: (a) with respect to the Phase I Project Area - $982,502.00; and (b) with respect to the Phase II Project Area - $465,157.39.

“Bonds” means the Series 2018 Bonds and any Additional Bonds (as defined in the Indenture) issued under the Indenture.

“Business Day” means a day on which the State Treasurer, the Escrow Agent and the Trustee shall be scheduled in the normal course of their respective operations to be open for the conduct of regular business.

“Capitalized Interest Fund” shall have the meaning given such term in the Indenture.

“City” means the City of Wichita, Kansas created pursuant to the laws of the State, and its successors and assigns or any body, agency or instrumentality succeeding to or charged with the powers, duties and functions of the City.

“City Bond Finance Fund” means the account relating to the District created within the City Bond Finance Fund created by K.S.A. 79-3620b, as amended, and established with the State Treasurer.

“Continuing Disclosure Undertaking” means the Continuing Disclosure Undertaking dated as of November 1, 2018 delivered by the City, as may be from time to time amended.

“City Percentage” means the percentage produced by the following formula:

IP = x x + y where

IP = City Percentage,

x = the sum of (i) any currently applicable city retail sales tax percentage that is not specifically dedicated to other uses by election of voters or pledged to bond repayments (currently 0%), plus (ii) 0.29%, or the portion of the countywide sales tax percentage currently allocated to the City pursuant to K.S.A. 12-192, as

C-3 amended, from retail sales and use taxes levied by Sedgwick County, Kansas pursuant to K.S.A. 12-187 et seq, as amended, that is not specifically dedicated to other uses by election of voters or pledged to bond repayments.

y = 6.50%, or the then currently applicable statewide retailers sales tax percentage pursuant to K.S.A. 79-3601 et seq., as amended.

“City Representative” means the Mayor, City Manager, Director of Finance or Assistant City Manager – Economic Development of the City, and any other duly authorized officer of the City whose authority to execute any particular instrument or take a particular action under this Tax Distribution Agreement shall be evidenced to the satisfaction of the Escrow Agent.

“City Sales Tax Revenues” means gross receipts of the City under K.S.A. 12-187 et seq., as amended, and K.S.A. 12-198, as amended, from (a) the portion of any City retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments, and any successor taxes thereto (currently none), and (b) one-half of the City's portion of the Sedgwick County, Kansas 1% retail sales and compensating use taxes that is not committed to other uses by election of voters or pledged to bond repayments (currently 0.29%), and any successor taxes thereto, in each case with respect to retail sales within the District: (a) with respect to the Phase I Project Area, to the extent such amounts are on deposit with the State Treasurer on or before September 30, 2027 and available for distribution to the Escrow Agent; and (b) with respect to the Phase II Project Area, to the extent such amounts are on deposit with the State Treasurer on or before March 31, 2038 and available for distribution to the Escrow Agent. City Sales Tax Revenues will be based on tax revenues received by the City from sales occurring within the District, after taking into account applicable destination-based sourcing rules of the State.

“Continuing Disclosure Agreement” means each Continuing Disclosure Undertaking of the City or Continuing Disclosure Agreement between a Disclosure Party (as defined in the Indenture) and a Dissemination Agent relating to a series of Bonds, as amended and supplemented from time to time.

“Department” means the Department of Revenue of the State of Kansas.

“District” means the Wichita River STAR Bond District created by the City pursuant to the STAR Bond Act, as expanded, as described as described on Exhibit A hereto and in the Indenture, consisting of the Phase I Project Area and the Phase II Project Area.

“Dissemination Agents” means, collectively, each corporation or association serving as dissemination agent from time to time under a Continuing Disclosure Agreement.

“Escrow Agent” means Security Bank of Kansas City, and its successor or successors at the time acting as escrow agent under this Tax Distribution Agreement.

“Escrow Fund” means the “Incremental Tax Revenues Escrow Fund – Wichita River STAR Bond District” created pursuant to Section 301.

“Incremental City Sales Tax Revenues” means, for each Project Area, the difference between (i) City Sales Tax Revenues for such calendar year and (ii) the Base Year City Sales Tax Revenues.

“Incremental State Sales Tax Revenues” means, for each Project Area, the difference between (i) State Sales Tax Revenues for such calendar year and (ii) the Base Year State Sales Tax Revenues.

C-4 “Incremental Tax Revenues” means, collectively, Incremental City Sales Tax Revenues and Incremental State Sales Tax Revenues.

“Indenture” means the Bond Trust Indenture dated as of November 1, 2018 between the City and the Trustee, as amended and supplemented from time to time, pursuant to which the Series 2018 Bonds were issued.

“Interest Payment Date” means March 1 and September 1 of each year, commencing March 1, 2019.

“Phase I Project Area” means that portion of the District described as such in Exhibit A-1 hereto and depicted as such on Exhibit A-2 hereto

“Phase II Project Area” means that portion of the District described as such in Exhibit A-1 hereto and depicted as such on Exhibit A-2 hereto

“Project Area” means collectively, the Phase I Project Area and the Phase II Project Area and individually, each such project areas.

“Rebate Analyst” means any firm engaged by the City to compute arbitrage rebate on any series of tax-exempt Bonds.

“Series 2018 Bonds” means the Sales Tax Special Obligation Revenue Bonds (River District Stadium STAR Bond Project) Series 2018 in the original principal amount of $42,140,000 issued by the City pursuant to the Indenture, and any bonds issued for the purpose of refunding such bonds that are identified in the trust indenture under which such refunding bonds are issued as being secured by the amounts required to be transferred to the Debt Service Account established with respect to the Series 2018 Bonds pursuant to this Tax Distribution Agreement.

“State” means the State of Kansas.

“State Percentage” means the percentage produced by the following formula:

SP = y x + y where

SP = State Percentage,

x = the sum of (i) any then currently applicable city retail sales tax percentage that is not specifically dedicated to other uses by election of voters or pledged to bond repayments (currently 0%), plus (ii) 0.29%, or the portion of the countywide sales tax percentage currently allocated to the City pursuant to K.S.A. 12-192, as amended, from retail sales and use taxes levied by Sedgwick County, Kansas pursuant to K.S.A. 12-187 et seq, as amended, that is not specifically dedicated to other uses by election of voters or pledged to bond repayments. , and

C-5

y = 6.50%, or the then currently applicable statewide retailers sales tax percentage pursuant to K.S.A. 79-3601 et seq., as amended.

“State Sales Tax Revenues” means gross receipts of the State from the taxes imposed by K.S.A. 79-3603, as amended, and K.S.A. 79-3703, as amended, with respect to retail sales within the District (currently six and five-tenths percent (6.50%)): (a) with respect to the Phase I Project Area, to the extent such amounts are on deposit with the State Treasurer on or before October 31, 2027 and available for transfer to the City Bond Finance Fund; and (b) with respect to the Phase II Project Area, to the extent such amounts are on deposit with the State Treasurer on or before April 30, 2038 and available for transfer to the City Bond Finance Fund. State Sales Tax Revenues shall be based on tax revenues received by the State from sales occurring within the District, which may include tax revenues sourced to other locations within the State under applicable destination-based sourcing rules of the State.

“State Transfer Amount” shall have the meaning set forth in Section 303(d)(iii) hereof.

“State Treasurer” means the State Treasurer of the State or, if the functions and duties of the State Treasurer under K.S.A. 79-3620, K.S.A. 79-3620b and K.S.A. 79-3710(d) shall be given by law to any other person or entity, such person or entity.

“Tax Distribution Agreement” means this Tax Distribution Agreement dated as of November 1, 2018, among the City, the Trustee, the State Treasurer and the Escrow Agent, relating to the collection and distribution of City Sales Tax Revenues and State Sales Tax Revenues, as amended and supplemented from time to time.

“Tax Revenues” means, collectively, City Sales Tax Revenues and State Sales Tax Revenues.

“Trustee” means Security Bank of Kansas City, Kansas City, Kansas, as trustee under the Indenture, and its successor or successors and any other corporation or association which at any time may be substituted in its place pursuant to and at the time serving as trustee under the Indenture.

Section 102. Rules of Construction. For all purposes of this Tax Distribution Agreement, except as otherwise expressly provided or unless the context otherwise requires, the following rules of construction apply in construing the provisions of this Tax Distribution Agreement:

(a) The terms defined in this Article include the plural as well as the singular.

(b) All references in this instrument to designated “Articles,” “Sections” and other subdivisions are to be the designated Articles, Sections and other subdivisions of this instrument as originally executed.

(c) The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Tax Distribution Agreement as a whole and not to any particular Article, Section or other subdivision.

(d) The Article and section headings herein and in the Table of Contents are for convenience only and shall not affect the construction hereof.

C-6 ARTICLE II

COLLECTION OF TAX REVENUES; REPORTING REQUIREMENTS

Section 201. Collection of City Sales Tax Revenues; Reporting by the Department. The Department, pursuant to K.S.A. 12-187 et seq., as amended, is required to administer, enforce and collect all City Sales Tax Revenues from taxpayers doing business within the District and to cause such City Sales Tax Revenues to be credited to the appropriate funds established with the State Treasurer in accordance with K.S.A. 12-189, as amended. The State Treasurer shall request that the Department determine and advise the State Treasurer and the Escrow Agent not later than the last Business Day of each calendar month of the total amount of City Sales Tax Revenues collected by the Department during the immediately preceding calendar month and the total amount of Incremental City Sales Tax Revenues with respect to the immediately preceding calendar month. Upon receipt of this information by the State Treasurer, the State Treasurer shall remit the Incremental City Sales Tax Revenues with respect to the immediately preceding calendar month to the Escrow Agent pursuant to Section 302. By way of example, no later than October 31 of each year: (a) as required by this Section 201, the Department shall determine and advise the State Treasurer and Escrow Agent of the total amount of City Sales Tax Revenues received during the immediately preceding month of September and the total amount of Incremental City Sales Tax Revenues with respect to such immediately preceding month of September, which Incremental City Sales Tax Revenues will be derived primarily from sales and compensating use within the District during the immediately preceding month of August; and (b) as required by Section 302, the State Treasurer shall remit such Incremental City Sales Tax Revenues received during the immediately preceding month of September to the Escrow Agent.

Section 202. Reporting of City Sales Tax Revenues by Retailers. Pursuant to K.S.A. 12-189, each retailer that does business within the District is required to submit to the Department, at the times specified in such statute, (i) City Sales Tax Revenues collected by such taxpayer and (ii) returns detailing the collection of such City Sales Tax Revenues. The Escrow Agent also may request that the City request the Department to provide, and the Department shall provide if requested, information with respect to City Sales Tax Revenues collected by any retailer that does business within the District pursuant to the provisions of K.S.A. 12-17,174.

Section 203. Collection of State Sales Tax Revenues; Reporting by the Department. The Department, pursuant to K.S.A. 79-3601 et seq., as amended, and K.S.A. 79-3701 et seq., is required to administer, enforce and collect all State Sales Tax Revenues from taxpayers doing business within the District and to cause the Incremental State Sales Tax Revenues to be credited to the City Bond Finance Fund pursuant to K.S.A. 79-3620(d), as amended, and K.S.A. 79-3710(d), as amended, until the date upon which the aggregate amount deposited therein is equal to an amount sufficient to retire the principal of, Accreted Value and interest on the Bonds. The State Treasurer shall request that the Department determine and advise the State Treasurer and the Escrow Agent not later than the last Business Day of each calendar month of the total amount of State Sales Tax Revenues collected by the Department during the immediately preceding calendar month, the total amount of Incremental State Sales Tax Revenues deposited into the City Bond Finance Fund during the immediately preceding calendar month and the balance in the City Bond Finance Fund at the close of business on the last day of the immediately preceding calendar month. By way of example, no later than October 31 of each year, the Department shall determine and advise the State Treasurer and Escrow Agent of the total amount of State Sales Tax Revenues received during the immediately preceding month of September and the total amount of Incremental State Sales Tax Revenues with respect to such immediately preceding month of September, which Incremental State Sales Tax Revenues will be derived primarily from sales and compensating use within the District during the immediately preceding month of August.

C-7 Section 204. Reporting of State Sales Tax Revenues by Retailers. Pursuant to K.S.A. 79-3607 and 79-3706, each retailer that does business within the District is required to submit to the Department, at the times specified in such statutes, (i) State Sales Tax Revenues collected by such taxpayer and (ii) returns detailing the collection of such State Sales Tax Revenues. Escrow Agent also may request that the City request the Department to provide, and the Department shall provide if requested, information with respect to State Sales Tax Revenues collected by any retailer that does business within the District pursuant to the provisions of K.S.A. 12-17,174.

Section 205. Information to be Provided to Escrow Agent.

(a) Notice Regarding Principal and Accreted Value Payments. Each time any principal or Accreted Value is paid with respect to Bonds of any series, the applicable Trustee shall notify the Escrow Agent of the following within two (2) Business Days of such payment: (i) the date and amount of such payment; (ii) the outstanding principal amount or Accreted Value of such series of Bonds following such payment; and (iii) the schedule for payment of principal or Accreted Value and interest on such series of Bonds following such payment.

(b) Base Year Calculations. The State Treasurer shall direct the Department to calculate the Base Year State Sales Tax Revenues and the Base Year City Sales Tax Revenues and to deliver a certificate in the form attached hereto as Exhibit B to the State Treasurer, the Escrow Agent and the Issuer certifying as to such amounts.

(c) Notices Regarding Tax Rates. The State Treasurer shall request that the Department promptly advise the State Treasurer, the Escrow Agent and the City of any adjustments in State or local retail sales or use tax rates applicable with respect to retail sales within the District and any adjustments to the City's share of the countywide retail sales and use tax.

Section 206. Semi-Annual Report to City. Within 20 days after each June 30 and December 31, the Escrow Agent shall prepare and send to the City by first class mail or electronic mail, a report containing the amount of Incremental State Sales Tax Revenues and Incremental City Sales Tax Revenues received for the most recent semi-annual period ending on each June 30 and December 31, to be incorporated into the City's semi-annual continuing disclosure report in substantially the form set forth in Exhibit B to the Continuing Disclosure Undertaking (as defined in the Indenture).

Upon receipt of such report, (a) the City shall compare the amount of Incremental State Sales Tax Revenues and Incremental City Sales Tax Revenues received by the Escrow Agent as set forth in such report with the copies of tax returns detailing the collection of State Sales Tax Revenues and City Sales Tax Revenues received by the City from businesses operating within the District during the same period, and (ii) if any discrepancies exist, the City shall contact the Escrow Agent or the Department, as appropriate, to reconcile such discrepancies and ensure that all Incremental State Sales Tax Revenues and Incremental City Sales Tax Revenues received by the Department were properly applied and credited.

Section 207. Confidentiality of Tax Information and Identity of Certain Taxpayers. The Escrow Agent hereby agrees that it shall not use or communicate, publish or disclose to any third party any sales or use tax information of any individual taxpayer or group of less than five taxpayers for any purpose other than carrying out the Escrow Agent's obligations under this Tax Distribution Agreement, without the prior written consent of the individual taxpayer that submitted such tax information to the Department; provided, however, that such restriction on use and disclosure shall not apply to information that, in the opinion of counsel to the Escrow Agent, is required to be disclosed by applicable law, court order or other governmental authority.

C-8 ARTICLE III

CREATION OF ESCROW FUND; REMITTANCE OF INCREMENTAL TAX REVENUES TO ESCROW AGENT

Section 301. Establishment of Escrow Fund. The Escrow Agent shall establish a special and irrevocable separate trust fund to be held in the custody of the Escrow Agent and designated as the “Incremental Tax Revenues Escrow Fund – Wichita River STAR Bond District” (the “Escrow Fund”). Moneys in the Escrow Fund shall be held in trust by the Escrow Agent and applied solely in accordance with the provisions of this Tax Distribution Agreement.

Section 302. Remittance of Incremental City Sales Tax Revenues to Escrow Agent; Deposit Into Escrow Fund. The City hereby directs, and the State Treasurer hereby covenants and agrees, that all Incremental City Sales Tax Revenues collected by the Department and credited to the appropriate funds established with the State Treasurer pursuant to Section 201 shall be remitted directly to the Escrow Agent for deposit in the Escrow Fund monthly by not later than the last Business Day of the calendar month immediately succeeding the calendar month in which such amounts were collected. The Escrow Agent shall provide a monthly report to the City by not later than the 10th day of each month stating the amount of Incremental City Sales Tax Revenues remitted to the Escrow Agent by the State Treasurer during the immediately preceding month and deposited to the Escrow Fund. By way of example, (a) no later than October 31 of each year the State Treasurer shall remit the Incremental City Sales Tax Revenues received during the immediately preceding month of September to the Escrow Agent, which Incremental City Sales Tax Revenues will be derived primarily from sales and compensating use within the District during the immediately preceding month of August; and (b) no later than November 10 of each year, the Escrow Agent shall provide a monthly report to the City stating the amount of such Incremental City Sales Tax Revenues remitted to the Escrow Agent by the State Treasurer during the preceding month of October.

Section 303. Application of Moneys in City Bond Finance Fund.

(a) The State Treasurer shall cause the Incremental State Sales Tax Revenues credited to the City Bond Finance Fund pursuant to K.S.A. 79-3620(d), as amended, and K.S.A. 79-3710(d), as amended, to be transferred biannually to the Escrow Agent for deposit in the Escrow Fund to (i) pay or reimburse principal or Accreted Value of (whether by maturity, mandatory sinking fund redemption or Special Mandatory Redemption) and interest on any series of Bonds, or (ii) replenish any debt service reserve fund that was initially funded with Bond proceeds and was subsequently depleted in order to pay principal of, Accreted Value or interest on a series of Bonds, all in accordance with this Tax Distribution Agreement. Moneys in the City Bond Finance Fund shall not be used to (A) pay the fees and expenses of the Credit Enhancers, if any, the Trustee, the Escrow Agent, the Dissemination Agents or the Rebate Analysts, (B) pay any premium payable on any Bonds upon the redemption or purchase thereof or (C) pay any fees or other transaction costs relating to the redemption, purchase or defeasance of any Bonds. Interest earnings on amounts on deposit in the City Bond Finance Fund shall be transferred to the State general fund.

(b) The sum of $3,860,802.88 on deposit in the City Bond Finance Fund on the issue date of the Series 2018 Bonds and future collections of Incremental Tax Revenues after the issue date of the Series 2018 Bonds shall be retained in such fund until amounts in the Capitalized Interest Fund funded from proceeds of the Series 2018 Bonds are exhausted and thereafter transferred to the Trustee in accordance with the provisions of the remaining subsections of this Section 303.

(i) The State Treasurer shall advise the Escrow Agent of the amount then on deposit in the City Bond Finance Fund.

C-9

(ii) The Trustee shall advise the Escrow Agent of the following: (A) the amount of any due and unpaid principal of, Accreted Value and interest on each series of Bonds issued under the Indenture; (B) the amount of principal of, Accreted Value and interest becoming due at maturity, Special Mandatory Redemption or upon mandatory sinking fund redemption on the upcoming Interest Payment Date on each series of Bonds issued under the Indenture (less any amounts that will be on deposit in the applicable Debt Service Accounts on such Interest Payment Date, after making transfers, if any, from the applicable Capitalized Interest Fund established under the Indenture); and (C) the extent, if any, to which the amounts on deposit in any debt service reserve account established with respect to a series of Bonds issued under the Indenture is less than the required amount required by the Indenture with respect to such series of Bonds.

(d) On or prior to the 10th day of the month preceding each Interest Payment Date, the Escrow Agent shall take the following actions:

(i) The Escrow Agent shall make a determination of the allocation and distribution on the upcoming Interest Payment Date of available Incremental Tax Revenues with respect to such upcoming Interest Payment Date pursuant to the provisions of Section 401.

(ii) The Escrow Agent shall advise the Trustee of the allocation and distribution of the moneys on deposit in the Escrow Fund on the upcoming Interest Payment Date, including each payment or transfer to be made on the upcoming Interest Payment Date with respect to Bonds. The Trustee shall in turn give notice of any redemption of Bonds issued pursuant to the trust indenture under which it serves as trustee to the owners of such Bonds as required by the provisions of such trust indenture.

(iii) The Escrow Agent shall advise the State Treasurer of the amount of Incremental State Sales Tax Revenues on deposit in the City Bond Finance Fund to be transferred to the Escrow Agent for deposit in the Escrow Fund to pay or reimburse debt service on the Bonds on the upcoming Interest Payment Date (the “State Transfer Amount”). Such amount shall be equal to the lesser of (A) the amount on deposit in the City Bond Finance Fund on the 5th day of the month preceding each Interest Payment Date and (B) the amount that will be used on the upcoming Interest Payment Date to pay or reimburse principal of, Accreted Value and interest on the Bonds (whether by maturity, mandatory sinking fund redemption, Special Mandatory Redemption, optional redemption, defeasance or purchase) and to replenish any debt service reserve accounts pursuant to the provisions of Section 401.

(e) Not less than two (2) Business Days prior to each Interest Payment Date, the State Treasurer shall transfer the State Transfer Amount to the Escrow Agent for deposit in the appropriate accounts of the Escrow Fund.

(f) The Escrow Agent shall provide to the City, by not later than 20 days after each Interest Payment Date, a report stating the amount of the State Transfer Amount remitted by the State Treasurer prior to the upcoming Interest Payment Date and deposited to the Escrow Fund.

Section 304. Allocation of Incremental State Sales Tax Revenues and Incremental City Sales Tax Revenues. In making distributions of Incremental State Sales Tax Revenues and Incremental City Sales Tax Revenues pursuant to Article IV:

(a) first, all Incremental State Sales Tax Revenues shall be allocated (i) first, to pay or reimburse principal or Accreted Value (whether by maturity, mandatory sinking fund redemption, Special Mandatory Redemption, optional redemption, defeasance or purchase) and interest on Bonds and (ii)

C-10 second, to replenish debt service reserve funds that were initially funded with Bond proceeds and were subsequently depleted in order to pay principal of, Accreted Value or interest on a series of Bonds; and

(b) second, the Incremental City Sales Tax Revenues and any investment earnings thereon shall be allocated (i) first, to pay the fees and expenses of each Credit Enhancer, if any, the Trustee, the Escrow Agent, the Dissemination Agents and the Rebate Analysts, (ii) second, to pay any premium payable on any Bonds upon the redemption or purchase thereof, (iii) third, to pay any fees or other transaction costs relating to the redemption, purchase or defeasance of any Bonds, (iv) fourth, to replenish debt service reserve funds that were initially funded with Bond proceeds and were subsequently depleted in order to pay principal of, Accreted Value or interest on a series of Bonds; and (v) fifth, to pay or reimburse principal or Accreted Value (whether by maturity, mandatory sinking fund redemption, Special Mandatory Redemption, optional redemption, defeasance or purchase) and interest on Bonds.

Section 305. Investment of Moneys. Moneys held in the Escrow Fund shall, pursuant to written directions of the City Representative, or in the absence of such direction at the discretion of the Escrow Agent, be invested and reinvested by the Escrow Agent in Permitted Investments (as defined in the Indenture) which mature or are subject to redemption by the owner thereof prior to the date such funds are expected to be used or transferred as provided in this Tax Distribution Agreement. The Escrow Agent may make any investments permitted by the provisions of this Section through its own bond department or short-term investment department or that of any affiliate of the Escrow Agent and may pool moneys for investment purposes. Any such Permitted Investments shall be held by or under the control of the Escrow Agent and shall be deemed at all times a part of the account in which such moneys are originally held.

The interest accruing on the Escrow Fund and any profit realized from such Permitted Investments shall be credited to the Escrow Fund and any loss from such Permitted Investment shall be charged to the Escrow Fund. The Escrow Agent shall sell or present for redemption and reduce to cash a sufficient amount of Permitted Investments whenever it shall be necessary to use or transfer moneys in any account pursuant to the provisions of this Tax Distribution Agreement and the Escrow Agent shall not be liable for any loss resulting from such investments.

ARTICLE IV

APPLICATION OF MONEYS ON DEPOSIT IN ESCROW FUND

Section 401. Application of Incremental Tax Revenues in Escrow Fund Prior to Each Interest Payment Date. Not less than one (1) Business Day prior to each Interest Payment Date, the Escrow Agent shall allocate and distribute Incremental Tax Revenues on deposit in the Escrow Fund in the following order of priority:

(a) Debt Service. The Escrow Agent shall transfer to the Trustee, for deposit in the applicable Debt Service Accounts established with respect to the Bonds under the Indenture, an amount equal to the sum of (i) the amount of any due and unpaid principal or Accreted Value and interest on the Bonds (the “Past Due Debt Service”), plus (ii) the amount of principal or Accreted Value and interest becoming due on the upcoming Interest Payment Date on the Bonds, less any amounts then on deposit in such Debt Service Accounts and the Capitalized Interest Fund, in accordance with the provisions of the Indenture (the “Current Debt Service”). Such amount shall be applied by the Trustee first, to the payment of Past Due Debt Service, and second, to the payment of Current Debt Service.

(b) Replenishing of Debt Service Reserve Accounts. If and to the extent there are moneys remaining in the Escrow Fund after the transfers required under subsection (a) of this Section 401 have

C-11 been made, the Escrow Agent shall transfer to the Trustee, for deposit in any applicable debt service reserve accounts established with respect to the Bonds under the Indenture, an amount equal to the amount, if any, necessary to be deposited in such debt service reserve accounts in order to cause the aggregate amount on deposit in such debt service reserve accounts as of the close of business on the upcoming Interest Payment Date to be equal to the aggregate debt service reserve requirement with respect to the Bonds (or, if applicable, to reimburse the provider of a surety bond or other credit facility satisfying the debt service reserve requirement with respect to Bonds for a prior payment of debt service on such Bonds).

(c) Reserve for Next Scheduled Debt Service Payment. If and to the extent there are moneys remaining in the Escrow Fund after the transfers required under subsections (a) and (b) of this Section 401 have been made, the Escrow Agent shall determine the aggregate scheduled principal or Accreted Value payments (whether at maturity or upon mandatory sinking fund redemption) and interest payments required to be made with respect to the Bonds pursuant to the terms of the Indenture on the next succeeding Interest Payment Date (i.e., the Interest Payment Date immediately succeeding the upcoming Interest Payment Date), less any amounts then on deposit in the applicable Debt Service Accounts and Capitalized Interest Fund established with respect to the Bonds under the Indenture (the “Next Scheduled Debt Service Payment”) and shall reserve in the Escrow Fund (or, with respect to the State Percentage of the hereinafter defined Reserved Revenues, in the City Bond Finance Fund, as provided in the last sentence of this subsection (c)) an aggregate amount (the “Reserved Revenues”) equal to the Next Scheduled Debt Service Payment. An amount equal to the State Percentage of the Reserved Revenues shall be retained in the City Bond Finance Fund until the next succeeding Interest Payment Date (i.e., the Interest Payment Date immediately succeeding the upcoming Interest Payment Date) and an amount equal to the City Percentage of the Reserved Revenues shall be retained in the Escrow Fund until such next succeeding Interest Payment Date, at which time the Reserved Revenues shall be applied along with other amounts on deposit in the Escrow Fund as provided in this Section 401.

Notwithstanding anything to the contrary in this subsection (c), if the Bonds of a particular series would be paid in full on the upcoming Interest Payment Date if the portion of the Reserved Revenues allocable to such series of Bonds were available to be applied to the redemption of such Bonds pursuant to the provisions of this Section 401 on the upcoming Interest Payment Date, then the Escrow Agent shall transfer to the Trustee the portion of the Reserved Revenues allocable to such series of Bonds that is needed to pay such series of Bonds in full, which amount shall be applied to the redemption of such Bonds in accordance with the applicable subsection of this Section 401.

(d) Special Mandatory Redemption of Bonds on the Upcoming Interest Payment Date. If and to the extent there are moneys remaining in the Escrow Fund after the transfers required in subsections (a) and (b) of this Section 401 have been made, and the amount to be retained in the Escrow Fund under subsection (c) of this Section 401 has been reserved, the Escrow Agent shall transfer to the Trustee, for deposit in the applicable Special Mandatory Redemption Subaccounts of the Debt Service Accounts established with respect to any Bonds under the Indenture, an amount sufficient to redeem such outstanding Bonds pursuant to the terms of the Indenture on the upcoming Interest Payment Date. The Trustee shall use the moneys so deposited in such Special Mandatory Redemption Subaccounts to redeem such outstanding Bonds on such date. If there is more than one series of such outstanding Bonds and the moneys to be transferred pursuant to this subsection (d) are insufficient to redeem all such outstanding Bonds, such moneys shall be allocated among such outstanding Bonds in inverse order of maturity.

(e) Payment of Junior or Subordinate Lien Obligations. If and to the extent there are moneys remaining in the Escrow Fund after the transfers required under subsections (a), (b) and (d) of this Section 401 have been made, in which case provision for payment of all Bonds shall have been made, then the Escrow Agent shall apply such remaining moneys to the payment of any obligations issued under the Indenture that are subordinate and junior to the Bonds and payable from the Revenues (as defined in the Indenture) in such manner, proportions and priority and on such dates as shall be determined as set forth in

C-12 an amendment to this Tax Distribution Agreement to be effective at the date of issuance of the first series of such obligations.

(f) Payments to State Treasurer and City. If and to the extent there are moneys remaining in the Escrow Fund after the transfers required under subsections (a), (b), (d) and (e) of this Section 401 have been made, in which case no Bonds or other obligations will be outstanding under the Indenture at the close of business on the upcoming Interest Payment Date, the Escrow Agent shall (1) transfer to the State Treasurer, for deposit in the State general fund, an amount equal to the State Percentage of such remaining moneys, and (2) transfer to the City an amount equal to the City Percentage of such remaining moneys.

Section 402. Application of Incremental City Sales Tax Revenues to Payment of Certain Fees. On the 15th day of the month prior to each Interest Payment Date, unless prepaid from Series 2018 Bond proceeds, the Escrow Agent shall, from Incremental City Sales Tax Revenues and any investment earnings thereon on deposit in the Escrow Fund:

(a) first, pay to each Credit Enhancer, the sum of (i) such Credit Enhancer's semiannual fees and expenses due on such date, as provided in the related reimbursement agreement, (ii) any due and unpaid fees and expenses of such Credit Enhancer, and (iii) any other amounts due and payable to such Credit Enhancer under the related reimbursement agreement (other than reimbursement of such Credit Enhancer for payment of the principal or Accreted Value and interest on the related series of Bonds);

(b) second, pay to the Trustee the sum of (i) the Trustee's fees and expenses due on such date, as provided in the Indenture (including a semiannual payment in an amount not to exceed $3,000 for the Trustee's fees and ordinary expenses with respect to the Series 2018 Bonds), and (ii) any due and unpaid fees and expenses of the Trustee;

(c) third, pay to itself, as Escrow Agent, the sum of (i) the Escrow Agent's fees and expenses due on such date, as provided in Section 503 (including a semiannual payment in an amount not to exceed $1,000 for its fees and ordinary expenses hereunder) and (ii) any due and unpaid fees and expenses of the Escrow Agent, to the extent such fees and expenses were determined on the date originally due to be payable from moneys on deposit in the Escrow Fund pursuant to this Section 402; and

(d) fourth, pay to the Rebate Analysts, the sum of (i) the Rebate Analysts' fees and expenses due on such date, if any, and (ii) any due and unpaid fees and expenses of the Rebate Analysts.

Section 403. Limitation on Tax Revenues to be Transferred to Trustee in the Event that a Series of Bonds Will be Paid in Full on an Interest Payment Date. On any Interest Payment Date on which all of the outstanding Bonds of a series can be paid in full with the sum of (a) moneys on deposit in any debt service reserve account established with respect to such series of Bonds, and (b) Tax Revenues available on such Interest Payment Date pursuant to the provisions of Section 401 for the payment of the principal or Accreted Value and interest on such Bonds (whether by maturity, mandatory sinking fund redemption, Special Mandatory Redemption, optional redemption, defeasance or purchase), the Escrow Agent, in making the calculations required by Section 401, shall assume that all of the moneys on deposit in any such debt service reserve account shall be applied to the payment of the principal or Accreted Value and interest on such Bonds on such Interest Payment Date (whether by maturity, mandatory sinking fund redemption, Special Mandatory Redemption, optional redemption, defeasance or purchase) prior to the allocation of any Tax Revenues to the payment of such Bonds pursuant to Section 401, in which case the amount of Tax Revenues to be transferred to the Trustee, with respect to such series of Bonds, shall not exceed the difference between (i) the amount of money necessary to pay all of the outstanding Bonds of such series in full and (ii) the amount on deposit in any such debt service reserve account.

C-13 ARTICLE V

THE ESCROW AGENT

Section 501. Duties of Escrow Agent. The Escrow Agent agrees to perform the duties imposed upon it by this Tax Distribution Agreement, but only upon the following terms and conditions:

(a) The Escrow Agent undertakes to perform such duties and only such duties as are specifically set forth in this Tax Distribution Agreement, and no implied covenants or obligations shall be read into this Tax Distribution Agreement against the Escrow Agent.

(b) No provision of this Tax Distribution Agreement shall be construed to relieve the Escrow Agent from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i) the Escrow Agent shall not be liable for any error of judgment made in good faith by an authorized officer of the Escrow Agent, unless it shall be proved that the Escrow Agent was negligent in ascertaining the pertinent facts; and

(ii) no provision of this Tax Distribution Agreement shall require the Escrow Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

Section 502. Certain Rights of Escrow Agent.

(a) The Escrow Agent may rely and shall be protected in acting or refraining from acting upon any certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

(b) The Escrow Agent may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Escrow Agent hereunder in good faith and in reliance thereon.

(c) The Escrow Agent shall not be bound to make any investigation into the facts or matters stated in any certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, or other paper or document, but the Escrow Agent, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit.

(d) The Escrow Agent, in its individual or any other capacity, may become the owner or pledgee of Bonds and may otherwise deal with the City with the same rights it would have if it were not Escrow Agent.

(e) All money received by the Escrow Agent shall, until used or applied or invested as herein provided, be held in trust for the purposes for which they were received. Money held by the Escrow Agent in trust hereunder need not be segregated from other funds except to the extent required by law or by this Tax Distribution Agreement. The Escrow Agent shall be under no liability for interest on any money received by it hereunder except as to investments authorized and directed pursuant to Section 305 of this

C-14 Tax Distribution Agreement. The liability of the Escrow Agent to make the payments required by this Tax Distribution Agreement shall be limited to the money and Permitted Investments within the Escrow Fund.

(f) The Escrow Agent may perform any duties hereunder either directly or by or through agents or attorneys and the Escrow Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

Section 503. Compensation. The Escrow Agent shall be entitled to payment and reimbursement, unless prepaid from Series 2018 Bond proceeds, as follows:

(a) on the 15th day of the month preceding each Interest Payment Date, commencing with the initial Interest Payment Date, a reasonable semiannual fee for its services rendered hereunder not to exceed $1,000 for each semiannual fee; and

(b) upon its request, payment or reimbursement of all reasonable expenses, disbursements and advances incurred or made by the Escrow Agent in accordance with any provision of this Tax Distribution Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to the Escrow Agent's negligence or bad faith.

All such payments and reimbursements shall be made only from amounts in the Escrow Fund as provided herein.

Section 504. Corporate Escrow Agent Required; Eligibility. There shall at all times be an Escrow Agent hereunder which shall be a bank or trust company organized and doing business under the laws of the United States of America or of any state thereof, authorized under such laws to exercise corporate trust powers, subject to supervision or examination by federal or state authority, and having a combined capital and surplus of at least $50,000,000. If such bank or trust company publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Escrow Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect specified in this Article.

Section 505. Resignation and Removal of Escrow Agent.

(a) The Escrow Agent may resign at any time by giving written notice thereof to the City, the Trustee and the State Treasurer. If an instrument of acceptance by a successor Escrow Agent shall not have been delivered to the Escrow Agent within 60 days after the giving of such notice of resignation, the resigning Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor Escrow Agent.

(b) If the Escrow Agent has or shall acquire any conflicting interest, it shall, within 90 days after ascertaining that it has a conflicting interest, or within 30 days after receiving written notice from the City that it has a conflicting interest, either eliminate such conflicting interest or resign in the manner and with the effect specified in subsection (a).

(c) The Escrow Agent may be removed at any time by an instrument in writing delivered to the Escrow Agent by the City. The Trustee may at any time petition any court of competent jurisdiction for the removal of the Escrow Agent for cause.

C-15

(d) The Escrow Agent shall give notice of each resignation and each removal of the Escrow Agent and each appointment of a successor Escrow Agent by mailing written notice of such event by first- class mail, postage prepaid, to the City, the Trustee, and the State Treasurer. Each notice shall include the name and address of the successor Escrow Agent and the address of its principal corporate trust office.

(e) No resignation or removal of the Escrow Agent and no appointment of a successor Escrow Agent pursuant to this Article shall become effective until the acceptance of appointment by the successor Escrow Agent under Section 507.

Section 506. Appointment of Successor Escrow Agent. If the Escrow Agent shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Escrow Agent for any cause, the City, by an instrument in writing delivered to the retiring Escrow Agent, shall promptly appoint a successor Escrow Agent. If, within 30 days after such resignation, removal or incapability or the occurrence of such vacancy, a successor Escrow Agent shall be appointed in the manner herein provided, the successor Escrow Agent so appointed shall, forthwith upon its acceptance of such appointment, become the successor Escrow Agent and supersede the retiring Escrow Agent. If no successor Escrow Agent shall have been so appointed and accepted appointment in the manner herein provided, the Trustee may petition any court of competent jurisdiction for the appointment of a successor Escrow Agent, until a successor shall have been appointed as above provided. The successor so appointed by such court shall immediately and without further act be superseded by any successor appointed as above provided. Every such successor Escrow Agent appointed pursuant to the provisions of this Section shall be a bank or trust company in good standing under the law of the jurisdiction in which it was created and by which it exists, meeting the eligibility requirements of this Article.

Section 507. Acceptance of Appointment by Successor Escrow Agent. Every successor Escrow Agent appointed hereunder shall execute, acknowledge and deliver to the City and to the retiring Escrow Agent an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Escrow Agent shall become effective and such successor Escrow Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Escrow Agent and the duties and obligations of the retiring Escrow Agent shall cease and terminate; but, on request of the City or the successor Escrow Agent, such retiring Escrow Agent shall, upon payment of its charges, execute and deliver an instrument conveying and transferring to such successor Escrow Agent upon the trusts herein expressed all the rights, powers and trusts of the retiring Escrow Agent, and shall duly assign, transfer and deliver to such successor Escrow Agent all property and money held by such retiring Escrow Agent hereunder. Upon request of any such successor Escrow Agent, the City shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Escrow Agent all such estates, properties, rights, powers and trusts.

No successor Escrow Agent shall accept its appointment unless at the time of such acceptance such successor Escrow Agent shall be qualified and eligible under this Article.

Section 508. Merger, Consolidation and Succession to Business. Any corporation or association into which the Escrow Agent may be merged or with which it may be consolidated, or any corporation or association resulting from any merger or consolidation to which the Escrow Agent shall be a party, or any corporation or association succeeding to all or substantially all of the corporate trust business of the Escrow Agent, shall be the successor of the Escrow Agent hereunder, provided such corporation or association shall be otherwise qualified and eligible under this Article, and shall be vested with all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or any further act on the part of any of the parties hereto.

C-16 Section 509. Representations of the Escrow Agent. The Escrow Agent hereby represents and warrants to the City, the Trustee and the State Treasurer as follows:

(a) The Escrow Agent is a state banking corporation duly organized and existing under the laws of the State of Kansas, is authorized and empowered to execute and deliver this Tax Distribution Agreement and has full power and authority to act as Escrow Agent as provided in this Tax Distribution Agreement.

(b) This Tax Distribution Agreement has been duly executed and delivered on behalf of the Escrow Agent by the duly authorized officer of the Escrow Agent. The execution and delivery by the Escrow Agent of this Tax Distribution Agreement and the performance by the Escrow Agent of its express duties under this Tax Distribution Agreement has been duly authorized by all necessary action on the part of the Escrow Agent. This Tax Distribution Agreement constitutes the valid and binding obligation of the Escrow Agent, enforceable in accordance with its terms.

ARTICLE VI

MISCELLANEOUS PROVISIONS

Section 601. Non-Business Days. If any provision of this Tax Distribution Agreement provides that an action shall be performed on a day other than a Business Day, such action need not be performed on such day but instead may be performed on the next succeeding Business Day.

Section 602. Notices. All notices, certificates or other communications required or desired to be given hereunder shall be in writing and shall be deemed duly given when mailed by first class, registered or certified mail, postage prepaid, or by facsimile transmission, addressed as follows:

(a) To the City at:

City of Wichita Attn: City Manager City Hall, 13th Floor 455 N. Main Wichita, Kansas 67202 Email: [email protected]

With a copy to:

City of Wichita Department of Economic Development Attention: Scot Rigby, Assistant City Manager City Hall, 13th Floor 455 N. Main Wichita, Kansas 67202 Email: [email protected]

and

C-17

City of Wichita Department of Law Attention: City Attorney City Hall, 13th Floor 455 N. Main Wichita, Kansas 67202 Email: [email protected]

(b) To the Trustee at:

Security Bank of Kansas City, as Trustee One Security Plaza 701 Minnesota Kansas City, Kansas 66101 Attention: Corporate Trust Department

State Treasurer of Kansas 900 S.W. Jackson, Suite 201 Topeka, Kansas 66612 Attention: State Treasurer

(d) To the Department at:

Department of Revenue 915 S.W. Harrison Topeka, Kansas 66625 Attention: Director of Taxation

(e) To the Escrow Agent at:

Security Bank of Kansas City, as Escrow Agent One Security Plaza 701 Minnesota, Suite 206 Kansas City, Kansas 66101 Attention: Corporate Trust Department

A duplicate copy of each notice, certificate or other communication given hereunder by the City, the Trustee, the State Treasurer or the Escrow Agent to any other shall also be given to the Department. The City, the Trustee, the State Treasurer and the Escrow Agent may from time to time designate, by notice given hereunder to the other such parties, another address to which subsequent notices, certificates or other communications shall be sent.

Section 603. Amendments.

(a) Amendments Without Consent of Bondowners. This Tax Distribution Agreement may be amended or otherwise modified by a written instrument executed by all parties hereto for any one or more of the following purposes, at any time or from time to time:

C-18 (i) to add to the limitations and restrictions herein other limitations and restrictions to be observed by the other parties to this Tax Distribution Agreement which are not contrary to or inconsistent with this Tax Distribution Agreement as theretofore in effect;

(ii) to add to the covenants and agreements of any of the other parties hereto other covenants and agreements to be observed by such parties which are not contrary to or inconsistent with this Tax Distribution Agreement as theretofore in effect;

(iii) to cure any ambiguity, supply any omission or cure or correct any defect or inconsistent provision in this Tax Distribution Agreement;

(iv) to insert such provisions clarifying matters or questions arising hereunder as are necessary or desirable and are not contrary to or inconsistent with this Tax Distribution Agreement as theretofore in effect; and

(v) to make such modifications or changes herein that are not materially adverse to the interests of the owner of any outstanding Bond, as determined by the Escrow Agent its discretion (which determination shall be binding and conclusive on the City and the owners of the outstanding Bonds).

(b) Amendments With Consent of Bondowners. This Tax Distribution Agreement may be amended or otherwise modified by a written instrument executed by all parties hereto at any time or from time to time for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Tax Distribution Agreement with the written consent of the owners of not less than a majority of the Bond Obligation affected by such amendment; provided, however, that no such amendment shall, without the consent of the owner of each outstanding Bond affected thereby:

(i) affect the amount of Incremental Tax Revenues to be transferred from the Escrow Agent to the Trustee pursuant to this Tax Distribution Agreement; or

(ii) reduce the percentage of the Bond Obligation, the consent of whose owners is required for any such amendment.

The Trustee in its discretion may determine whether or not any Bonds would be affected by any such amendment to this Tax Distribution Agreement and any such determination shall be conclusive upon the City and the owners of the Bonds, whether theretofore or thereafter authenticated and delivered hereunder. The Trustee shall not be liable for any such determination made in good faith.

Section 604. Governing Law. This Tax Distribution Agreement shall be construed in accordance with and governed by the laws of the State of Kansas.

Section 605. Severability. If for any reason any provision of this Tax Distribution Agreement shall be determined to be invalid or unenforceable, the validity and enforceability of the other provisions hereof shall not be affected thereby.

Section 606. Binding Effect; Benefit of Tax Distribution Agreement. This Tax Distribution Agreement shall inure to the benefit of and shall be binding upon the City, the Trustee, the State Treasurer and the Escrow Agent and their respective successors and assigns, subject, however, to the limitations contained herein. With the exception of rights expressly conferred in this Tax Distribution Agreement, nothing in this Tax Distribution Agreement, express or implied, shall give to any person, other than the

C-19 parties hereto and their successors and assigns hereunder and the owners of outstanding Bonds, any benefit or any legal or equitable right, remedy or claim under this Tax Distribution Agreement.

Section 607. Electronic Transactions. The transaction described herein may be conducted and related documents may be sent, received or stored by electronic means. Copies, telecopies, facsimiles, electronic files and other reproductions of original executed documents shall be deemed to be authentic and valid counterparts of such original documents for all purposes, including the filing of any claim, action or suit in the appropriate court of law.

Section 608. Execution in Counterparts. This Tax Distribution Agreement may be executed simultaneously in several counterparts, each of which shall be deemed to be an original and all of which shall constitute but one and the same instrument.

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C-20

EXHIBIT A-1

LEGAL DESCRIPTION OF THE DISTRICT

WICHITA RIVER STAR BOND DISTRICT LEGAL DESCRIPTION

Project Area I:

An area including the following additions, lots and parcels all located in Wichita, Sedgwick County, Kansas:

Two Rivers Addition; Exploration Place Addition; Lot 1, Block 3, and Reserves H and I, Park Plaza 1st Addition; Farm Credit Banks of Wichita Addition; Church Park Addition; River Vista Village Addition; a parcel described as beginning at the southeast corner of Lot 17, Waco Avenue, Waterman’s Addition to Watermans Addition to Wichita, Sedgwick County, Kansas now platted as Block 1, Church Park Addition to Wichita, Sedgwick County, Kansas thence south along the west line of Waco Avenue to the north line of the Missouri Pacific Railroad right-of-way; thence west along the north line of said right-of-way to the left or east bank of the Arkansas River; thence north along the east or left bank of said river to the south line of said Lot 17; thence east along the south line of said Lot 17 to the point of beginning except therefrom right-of-way dedicated for First Street as recorded on Film 160, Page 425 and Film 218, Page 59; that portion of the former Missouri Pacific Railroad, later Union Pacific Railroad Company, right-of-way lying between Waco Avenue and the Arkansas River; a parcel described as beginning commencing at the Southeast Corner of Holmes’ Addition to Wichita, Kansas, thence N 00°00’00” E along the East line of said Addition, said line also being the West line of Waco Avenue, a distance of 307.09 feet; thence continuing along said line N 00°00’00” E (Assumed), a distance of 84.00 feet to the Point of Beginning; thence S 66°10’26” W, a distance of 190.86 feet; thence S 00°42’43” E, a distance of 7.95 feet; thence N 89°39’27” E, a distance of 50.23 feet; thence along a curve to the left, having a radius of 69.50 feet, a chord bearing of N 58°21’33” E, a chord distance of 72.21 feet, for an arc length of 75.93 feet; thence along a curve to the right, having a radius of 70.5 feet, a chord bearing of N 58°31’51” E, a chord distance of 73.61 feet, for an arc length of 77.45 feet to a point on said west line; thence N 00°00’00” E along said West line a distance of 8.43 feet to the Point of Beginning; a parcel described as beginning at the Southeast corner of Lot 1, Holmes Addition to Wichita, Kansas thence N 00 o00’00” E (assumed) along the West right-of-way of Waco Avenue, a distance of 307.08 feet to the South line of the former Missouri Pacific Railroad property described as “Commencing at the Southeast Corner of Holmes’ Addition to Wichita, Kansas, thence N 00°00’00” E along the East line of said Addition, said line also being the West line of Waco Avenue, a distance of 307.09 feet; thence continuing along said line N 00°00’00” E (Assumed), a distance of 84.00 feet to the Point of Beginning; thence S 66°10’26” W, a distance of 190.86 feet; thence S 00°42’43” E, a distance of 7.95 feet; thence N 89°39’27” E, a distance of 50.23 feet; thence along a curve to the left, having a radius of 69.50 feet, a chord bearing of N 58°21’33” E, a chord distance of 72.21 feet, for an arc length of 75.93 feet; thence along a curve to the right, having a radius of 70.5 feet, a chord bearing of N 58°31’51” E, a chord distance of 73.61 feet, for an arc length of 77.45 feet to a point on said west line; thence N 00°00’00” E along said West line a distance of 8.43 feet to the Point of Beginning” thence S 890 39’27” W, along the South line of said parcel a distance of 174.49 feet; thence S 67o15’40” W, along the South line, a distance of 167.79 feet to the approximate location of the East bank of the Arkansas River; thence S 11o26’35” E, along said East Bank, a distance of 223.57 feet; thence S 26045’11” E continuing along said East bank, a distance of 105.33 feet to the Southwest corner of Lot 10, Holmes Addition to Wichita, Sedgwick County, Kansas; thence N 89054’22” E, along the South line of said Addition, also being the North line of Douglas Avenue, a distance of 52.00 feet; thence N 73054’33” E along said North line, a distance of 43.57 feet; thence N 67022’33” E, a distance of 155.60 feet to the Point of Beginning; East Bank Development Addition; Lot 1 and Lot 2, Block 1, Civic Center South Addition; Lots 79, 81, 83, 85 and 87,

C-21

Douglas Avenue, Greiffentstein’s Addition; Lot 1, except that part platted as East Bank Development Addition, Block 2, Civic Center South Addition; Lot 1, except the west 133. 76 feet, Block 3, Civic Center South Addition; Waterwalk Phase 2 Addition; Waterwalk Phase 1 Addition; Lots 111 and 113, Main Street, Greiffenstein’s 3rd Addition; a tract of land in the Southeast ¼ S 20-T 27- R 1E beginning at the Northwest corner of Lot 1, Eastbank First Addition thence southerly to the South line of said Southeast ¼ thence west to the east bank of the Arkansas River; thence Northerly along said East bank to a point West of the point of beginning except the North 125 feet thereto and the except the Easterly 16 feet and except Kellogg right of way on the south; Waterwalk West Addition; Lots 1, 2 and 3 and the East ½ of the vacated street adjacent on the West, Shirks 1st Subdivision; that part of Reserve A, Winne’s Addition to Wichita, Sedgwick County, Kansas lying north of Kellogg (US Highway 54) right of way and except that part platted as Waterwalk West Addition and that part condemned in CC A-60844; all public streets and rights of way contiguous to the above described parcels including parcels condemned in CC A-60844 and any portions of the Big Arkansas River lying contiguous to the above described parcels

Subject to survey and all easements and restriction of record.

Project Area II:

An area including the following additions, lots and parcels all located in Wichita, Sedgwick County, Kansas: Advanced Learning Library Addition; Sycamore Addition;Odd Lots 21 to 51 on Oak Street and half of vacated Pearl on the south, West Wichita Addition; Even Lots 22 to 52 on Oak Street and half of vacated Pearl on the south, West Wichita Addition; Odd Lots 21 to 51 on Sycamore Street and half of vacated Pearl on the south, West Wichita Addition; Odd Lots 101 to 143 on Chicago, now Douglas Avenue, West Wichita Addition; Even Lots 102 to 140 and the West 5 feet of Lot 142 on Chicago, now Douglas Avenue, West Wichita Addition; Even Lots 144 to 160 and the East 20 feet of Lot 140 and the vacated alley adjacent on the South on Chicago, now Douglas Avenue, West Wichita Addition; Reserve A, West Wichita Addition except that part lying east of the center line of the railroad right-of-way and except the northwest 10 feet taken for alley and except that part replatted as part of Payne’s Park Addition; Payne’s Park Addition; that part of the Southwest ¼ of Section 20-Township 27-Range 1 East of the 6th P.M. lying South of Reserve A, West Wichita Addition and East of Payne’s Park Addition and lying north of the South line of Lot 9, Block 6, Payne’s Park Addition extended East to the center line of the railroad right-of-way and except that part dedicated for street; Wichita Ice Center Addition;

All public streets and rights of way contiguous to the above described parcels including parcels condemned in CC A-60844; and any portions of the Big Arkansas River lying contiguous to the above described parcels.

Subject to survey and all easements and restriction of record.

C-22

EXHIBIT A-2

WICHITA RIVER STAR BOND DISTRICT MAP OF PROJECT AREAS

Wichita River STAR Bond District Boundaries

Project Area I

Project Area II

C-23

EXHIBIT B

CERTIFICATE OF BASE YEAR TAX REVENUES

The undersigned authorized representative of the State of Kansas Department of Revenue (the "Department") hereby certifies as follows, pursuant to Section 205 of the Tax Distribution Agreement dated as of November 1, 2018 (the "Tax Distribution Agreement") among the City of Wichita, Kansas, the Treasurer of the State of Kansas and Security Bank of Kansas City, as trustee and escrow agent:

1. The amount of the Base Year State Sales Tax Revenues, as calculated by the Department in accordance with the provisions of the Tax Distribution Agreement, is:

Project Area I: $ 982,502.00 Project Area II: 465,157.39 Total: $1,447,659.39

2. The amount of the Base Year City Sales Tax Revenues, as calculated by the Department in accordance with the provisions of the Tax Distribution Agreement, is:

Project Area I: $185,353.00 Project Area II: 41,595.91 Total: $226,948.91

3. The aggregate amount of the Base Year Sales Tax Revenues, as calculated by the Department in accordance with the provisions of the Tax Distribution Agreement, is:

Project Area I: State Sales Tax Revenues: $ 982,502.00 City Sales Tax Revenues: 185,353.00 Total: $1,167,855.00

Project Area II: State Sales Tax Revenues: $465,157.39 City Sales Tax Revenues: 41,595.91 Total: $506,753.30

Capitalized terms used but not defined herein shall have the meanings assigned such terms in the Tax Distribution Agreement.

Dated: November __, 2018

STATE OF KANSAS DEPARTMENT OF REVENUE

By: Name: Amy Kramer Title: Financial Economist

C-24

APPENDIX D

FORM OF CONTINUING DISCLOSURE AGREEMENT

(THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX D

FORM OF CONTINUING DISCLOSURE AGREEMENT

CONTINUING DISCLOSURE UNDERTAKING

This Continuing Disclosure Undertaking dated as of November 1, 2018 (the “Continuing Disclosure Undertaking”) is executed and delivered by the City of Wichita, Kansas (the “City”).

RECITALS

1. This Continuing Disclosure Undertaking is executed and delivered in connection with the issuance by the City of its $42,140,000 Sales Tax Special Obligation Revenue Bonds (River District Stadium STAR Bond Project), Series 2018 (the “Series 2018 Bonds”) pursuant to a Bond Trust Indenture, dated as of November 1, 2018 (the “Indenture”), between the City and Security Bank of Kansas City, as trustee (the “Trustee”). The Series 2018 Bonds are to be issued by the City, pursuant to and in accordance with the provisions of K.S.A. 12-17,160 et seq., as amended and supplemented from time to time (the ”STAR Bond Act”).

2. The City, the Trustee, the Treasurer of the State of Kansas and Security Bank of Kansas City, as Escrow Agent, have entered into the Tax Distribution Agreement dated as of November 1, 2018 (the “Tax Distribution Agreement”) providing for the distribution of certain sales tax revenues and transient guest tax revenues, including Incremental City Sales Tax Revenues and Incremental State Sales Tax Revenues (collectively, the “Incremental Tax Revenues”), as further defined and described in the Tax Distribution Agreement and in the Indenture, for the benefit of the owners of the Series 2018 Bonds and any Additional Bonds, as defined in the Indenture.

3. The City has pledged Available Local Sales Tax Funds to the payment of the Series 2018 Bonds pursuant to the terms of the Indenture.

4. The City is entering into this Continuing Disclosure Undertaking for the benefit of the Beneficial Owners of the Series 2018 Bonds and in order to assist the Participating Underwriter in complying with Rule 15c2-12, promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the ”Rule”). The City acknowledges that it is an “obligated person” with responsibility for continuing disclosure as set forth herein.

In accordance with the Indenture and in consideration of the mutual covenants and agreements herein, the City covenants as follows:

Section 1. Definitions. In addition to the definitions set forth in the Official Statement (defined herein), the Indenture and the Tax Distribution Agreement, which apply to any capitalized term used in this Continuing Disclosure Undertaking unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Beneficial Owner” means any registered owner of any of the Series 2018 Bonds and any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2018 Bonds (including persons holding Series 2018 Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series 2018 Bonds for federal income tax purposes.

“Business Day” means a day other than a Saturday, Sunday or holiday on which the Trustee is scheduled in the normal course of its operations to be open to the public for conduct of its operations. “Department of Revenue” shall mean the Department of Revenue of the State of Kansas, or such other department, bureau or other division of the State of Kansas assuming the role of the Department of Revenue relating to the collection of sales taxes within the City and State of Kansas.

“Disclosure Representative” shall mean the City Manager or the Finance Director of the City, or such other person as the City shall designate in writing from time to time.

“EMMA” means the Electronic Municipal Market Access system for municipal securities disclosures operated by the MSRB, which can be accessed at www.emma.msrb.org.

“Fiscal Year” means the fiscal year of the City, which as of the date hereof is January 1 through December 31 of each year.

“Incremental Tax Revenues” means, collectively, the Incremental City Sales Tax Revenues and the Incremental State Sales Tax Revenues as such terms are defined in the Tax Distribution Agreement.

“Material Events” means any of the events listed in Section 3(a) of this Continuing Disclosure Undertaking.

“MSRB” means the Municipal Securities Rulemaking Board, or any successor repository designated as such by the Securities and Exchange Commission in accordance with the Rule.

“Official Statement” means the Official Statement dated November 1, 2018 used in connection with the offering and sale of the Series 2018 Bonds.

“Participating Underwriter” means Crews & Associates, Inc. as the underwriter of the Series 2018 Bonds required to comply with the Rule in connection with offering of the Series 2018 Bonds.

“Semi-Annual Report” means any Semi-Annual Report provided by the City pursuant to, and as described in, Section 2 of this Continuing Disclosure Undertaking and in substantially the form as set forth in Exhibit B.

“Semi-Annual Report Date” means each date which is the last day of the second calendar month following each Fiscal Year end and each date which is the last day of the eighth calendar month following each Fiscal Year end.

“Semi-Annual Reporting Period” means the semi-annual period from the first day of the Fiscal Year through the last day of the sixth calendar month of the Fiscal Year and the first day of the seventh calendar month of the Fiscal Year through the last day of the Fiscal Year of each Fiscal Year.

Section 2. Provision of Reports.

(a) The City shall, not later than each Semi-Annual Report Date, commencing with the first Semi-Annual Report Date following the issuance of the Series 2018 Bonds, provide to the MSRB, via EMMA, a Semi-Annual Report.

(b) Not later than the Semi-Annual Report Date that is the last day of the eighth calendar month following the end of the Fiscal Year of each year, the City shall also provide to the MSRB the following: (i) the financial statements of the City prepared in accordance with generally accepted accounting principles as applied to governmental units (“GAAP”) for the previous Fiscal Year, accompanied by an audit report resulting from an audit conducted by an independent accountant in conformity with generally accepted auditing standards; and (ii)

D-2 updates, as of the end of the most recent Fiscal Year, to the tables set forth in Appendix H of the Official Statement under the headings “FINANCIAL INFORMATION – Assessed Valuation,” “Assessed Value and Estimated Actual Value of Taxable Property,” “Property Tax Levies and Collections – General and Debt Service Funds,” “Tax Increment Financing Districts,” “Special Assessment Levies and Collections” and “Statement of Outstanding Debt.”. The foregoing may be satisfied by filing the City’s Comprehensive Annual Financial Report (“CAFR”), provided such documents contains all of the information set forth above.

(c) Any or all of the items listed in subsections (a) and (b) above may be included by specific reference to other documents, including official statements of debt issues with respect to which the City is an “obligated person” (as defined by the Rule), which have been filed with the MSRB and are available in a timely manner through EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB on EMMA. The City shall clearly identify each such other document so included by reference. In each case, the Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in this Section. The Semi-Annual Report shall be provided to the MSRB in such manner and format as prescribed by the MSRB.

(d) If the City fails to provide the Semi-Annual Report to the MSRB, via EMMA, by the applicable Semi-Annual Report Date, the City shall send a notice to the Participating Underwriter and to the MSRB, via EMMA, in substantially the form attached as Exhibit A hereto.

(e) The City shall file a report with the Trustee and the Participating Underwriter certifying that the required Semi-Annual Report has been provided to the MSRB, via EMMA, pursuant to this Continuing Disclosure Undertaking, and stating the date it was filed with the MSRB.

Section 3. Reporting of Material Events.

(a) No later than ten (10) Business Days after the occurrence of any of the following events, the City shall give notice of the occurrence of any of the following events with respect to the Series 2018 Bonds (“Material Events”):

(1) principal and interest payment delinquencies;

(2) non-payment related defaults, if material;

(3) unscheduled draws on debt service reserves reflecting financial difficulties;

(4) unscheduled draws on credit enhancements reflecting financial difficulties;

(5) substitution of credit or liquidity providers, or their failure to perform;

(6) adverse tax opinions; the issuance by the Internal Revenue Service of 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 Series 2018 Bonds, or other material events affecting the tax status of the Series 2018 Bonds;

(7) modifications to rights of bondowners, if material;

D-3 (8) bond calls, if material, and, whether or not material, tender offers;

(9) defeasances;

(10) release, substitution or sale of property securing repayment of the Series 2018 Bonds, if material;

(11) rating changes;

(12) bankruptcy, insolvency, receivership or similar event of the City;

(13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, or 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, in each case if material; or

(14) the appointment of a successor or additional trustee, whether or not material, or the change of name of a trustee, if material.

(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall report the occurrence to the MSRB pursuant to subsection 3(a) so that notice is given within ten (10) Business Days after the occurrence of the event.

(c) Notwithstanding the foregoing, notice of Material Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the registered owners of affected Series 2018 Bonds pursuant to the Indenture.

Section 4. Termination of Reporting Obligation. The City’s obligations under this Continuing Disclosure Undertaking shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Series 2018 Bonds. If the City’s obligations under this Continuing Disclosure Undertaking or the Indenture are assumed in full by some other entity, such person shall be responsible for compliance with this Continuing Disclosure Undertaking in the same manner as if it were the City, and the City shall have no further responsibility hereunder. If such termination or substitution occurs prior to the final maturity of the Series 2018 Bonds, the City shall give notice of such termination or substitution in the same manner as for a Material Event under Section 3(d).

Section 5. Dissemination Agent. The City may, from time to time, appoint or engage a dissemination agent to assist it in carrying out its obligations under this Continuing Disclosure Undertaking, and may discharge any such dissemination agent, with or without appointing a successor dissemination agent. Any such dissemination agent may resign at any time upon giving 30 days prior written notice to the City. The dissemination agent shall not be responsible in any manner for the content of any notice or report (including, without limitation, any Semi-Annual Report) prepared by the City pursuant to this Continuing Disclosure Undertaking.

Section 6. Amendment; Waiver. Notwithstanding any other provision of this Continuing Disclosure Undertaking, the City may amend this Continuing Disclosure Undertaking and any provision of this Continuing Disclosure Undertaking may be waived, provided that Bond Counsel or other counsel experienced in federal securities law matters provides the City with its written opinion that the undertaking of the City contained herein, as so amended or after giving effect to such waiver, is in compliance with the

D-4 Rule and all current amendments thereto and interpretations thereof that are applicable to this Continuing Disclosure Undertaking.

In the event of any amendment or waiver of a provision of this Continuing Disclosure Undertaking, the City shall (a) provide notice of such amendment or waiver in the same manner as for a Material Event under Section 3 of this Continuing Disclosure Undertaking, and (b) describe such amendment or waiver in the next Semi-Annual Report. Both the notice of amendment or waiver and the description of any amendment or waiver in the next Semi-Annual Report required pursuant to (a) and (b) in the preceding sentence, respectively, shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, the Semi-Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 7. Additional Information. Nothing in this Continuing Disclosure Undertaking shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Continuing Disclosure Undertaking or any other means of communication, or including any other information in any Semi-Annual Report or notice of occurrence of a Material Event, in addition to that which is required by this Continuing Disclosure Undertaking. If the City chooses to include any information in any Semi-Annual Report or notice of occurrence of a Material Event, in addition to that which is specifically required by this Continuing Disclosure Undertaking, the City shall have no obligation under this Continuing Disclosure Undertaking to update such information or include it in any future Semi- Annual Report or notice of occurrence of a Material Event.

Section 8. Default. In the event of a failure of the City to comply with any provision of this Continuing Disclosure Undertaking, the Trustee may (and, at the request of the Participating Underwriter or the owners of at least 25% of the aggregate principal amount of Outstanding Series 2018 Bonds, upon receipt of satisfactory indemnity, shall), or any Beneficial Owner of the Series 2018 Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the City to comply with its obligations under this Continuing Disclosure Undertaking. A default under this Continuing Disclosure Undertaking shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Continuing Disclosure Undertaking in the event of any failure of the City to comply with this Continuing Disclosure Undertaking shall be an action to compel performance.

Section 9. Notices. Any notices or other communications to the City shall be sufficiently given and shall be deemed given upon receipt if delivered in person or by overnight courier, if given by facsimile, receipt confirmed by telephone, or if mailed by registered certified mail, return receipt requested, postage prepaid, and will be deemed given on the second day following the date on which such notice or communication is so mailed, addressed, as follows:

City of Wichita, Kansas City Hall, 13th Floor 455N. Main Wichita, Kansas 67202 Attention: City Manager

Any person may, by written notice to the other persons listed above, designate a different address to which subsequent notices or communications should be sent.

D-5 Section 10. Beneficiaries. This Continuing Disclosure Undertaking shall inure solely to the benefit of the City, the Trustee, the Participating Underwriter, and Beneficial Owners from time to time of the Series 2018 Bonds, and shall create no rights in any other person or entity.

Section 11. Severability. If any provision in this Continuing Disclosure Undertaking shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 12. Governing Law. This Continuing Disclosure Undertaking shall be governed by and construed in accordance with the laws of the State of Kansas.

Section 13. Electronic Transactions. The arrangement described herein may be conducted and related documents may be stored by electronic means. Copies, telecopies, facsimiles, electronic files and other reproductions of original documents shall be deemed to be authentic and valid counterparts of such original documents for all purposes, including the filing of any claim, action or suit in the appropriate court of law.

CITY OF WICHITA, KANSAS

By: Jeff Longwell, Mayor

By: Shawn Henning, Director of Finance

D-6 EXHIBIT A

NOTICE OF FAILURE TO FILE SEMI-ANNUAL REPORT

Name of Issuer: City of Wichita, Kansas (the “City”)

Name of Issue: $42,140,000 Sales Tax Special Obligation Revenue Bonds (River District Stadium STAR Bond Project), Series 2018 the (“Series 2018 Bonds”)

Date of Issuance: November 16, 2018

NOTICE IS HEREBY GIVEN that the City has not provided a Semi-Annual Report with respect to the above-named Series 2018 Bonds as required by the Continuing Disclosure Undertaking dated as of November 1, 2018. The City anticipates that a Semi-Annual Report will be filed by ______.

Dated:______

CITY OF WICHITA, KANSAS

By: Title:

D-7 EXHIBIT B

FORM OF SEMI-ANNUAL REPORT

Name of Issuer/ City of Wichita, Kansas (the “City”) Obligated Person:

Name of Issue: $42,140,000 Sales Tax Special Obligation Revenue Bonds (River District Stadium STAR Bond Project), Series 2018 (the “Series 2018 Bonds”)

CUSIP Numbers: 967323AF3, 967323AG1, 967323AH9, 967323AJ5, 967323AK2, 967323AL0, 967323AM8, 967323AN6, 967323AP1, 967323AQ9, 967323AR7, 967323AS5, 967323AT3, 967323AU0 and 967323AV8

Date of Issuance: November 16, 2018

Date of Report: , 20__

This Semi-Annual Report relates only to the City’s continuing disclosure obligation undertaken in connection with the delivery of the Series 2018 Bonds pursuant to SEC Rule 15c2-12. The City may have additional continuing disclosure obligations in connection with other municipal debt that are not covered by this Semi-Annual Report. Capitalized terms not otherwise defined herein, shall have the meanings ascribed thereto in the Continuing Disclosure Undertaking to this Exhibit is attached.

For the Semi-Annual Reporting Period ended [June 30][December 31], 20___:

1. The amount of Incremental City Sales Tax Revenues, as reported to the City by the Department of Revenue for the semi-annual period ending [June 30][December 31], received was $______; and

2. The amount of Incremental State Sales Tax Revenues for the semi-annual period ending [June 30][December 31], as reported to the City by the Department of Revenue, received was $______.

3. To the extent received by the City from the Department of Revenue, and based solely on such information received, the following retailers in the STAR Bond District provided Incremental Tax Revenues to the State of Kansas:

[insert list of retailers or, if information was not timely received by the City from the Department of Revenue, insert “information not received”]

During the period from the issuance date of the Series 2018 Bonds to the end of the Semi-Annual Reporting Period ended [June 30][December 31], 20___, the amount of principal on the Series 2018 Bonds paid from Revenues on each Interest Payment Date, including scheduled principal payments and principal payments made pursuant to the special mandatory redemption provisions of the Indenture, and the interest paid on each Interest Payment Date, as reported to the City by the Trustee, was as follows:

[insert or attach table with payment information]

D-8 The Series 2018 Bonds were outstanding in the principal amount of $______at the end of the Semi-Annual Reporting Period ended [June 30][December 31], 20______, as reported to the City by the Trustee.

4. The amount of Available Local Sales Tax Funds applied to the payment of debt service on the Bonds for the semi-annual period ending [June 30][December 31], was $______.

Dated: ______, 20___

CITY OF WICHITA, KANSAS

By: Title:

D-9

(THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX E

FORM OF BOND COUNSEL OPINION

(THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX E

FORM OF BOND COUNSEL OPINION

GILMORE & BELL, P.C. Attorneys at Law 100 N. Main Suite 800 Wichita, Kansas 67202

November 16, 2018 City of Wichita, Kansas Wichita, Kansas

Crews & Associates, Inc. Little Rock, Arkansas

Security Bank of Kansas City, as Trustee Kansas City, Kansas

Re: City of Wichita, Kansas Sales Tax Special Obligation Revenue Bonds (River District Stadium STAR Bond Project), Series 2018

Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the issuance by the City of Wichita, Kansas (the "Issuer") of its Sales Tax Special Obligation Revenue Bonds (River District Stadium STAR Bond Project), Series 2018 (the "Bonds"). The Bonds have been authorized and issued under and pursuant to K.S.A. 12-17,160 et seq., as amended (the "Act") and the Bond Trust Indenture dated as of November 1, 2018 (the "Indenture") between the Issuer and Security Bank of Kansas City, as trustee (the "Trustee"). All capitalized terms not otherwise defined herein shall have the meanings set forth in the Indenture.

We have examined the law and such certified proceedings and other documents as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Issuer contained in the Indenture, the Tax Distribution Agreement, the Tax Compliance Agreement and the other financing documents and the certified proceedings and other certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation.

In our capacity as Bond Counsel, we have examined a certified transcript of proceedings relating to the authorization and issuance of the Bonds. We have also examined the Constitution and statutes of the State of Kansas, insofar as the same relate to the authorization and issuance of the Bonds and the authorization, execution and delivery of the Indenture, the Tax Distribution Agreement and the Tax Compliance Agreement.

Based upon such examination, we are of the opinion, as of the date hereof, as follows:

1. The Bonds are in proper form and have been duly authorized and issued in accordance with the Constitution and statutes of the State of Kansas, including the Act.

E-1 2. The Bonds and the interest thereon are special, limited obligations of the Issuer secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the owners of the Bonds, which includes a pledge of the Revenues and the Issuer's rights under the Financing Documents (including, without limitation, the right to receive Incremental Tax Revenues in the order of priority set forth in the Tax Distribution Agreement). The Bonds and interest thereon shall not be deemed to constitute a debt or liability of the State of Kansas or of any political subdivision thereof within the meaning of any state constitutional provision or statutory limitation and shall not constitute a pledge of the full faith and credit of the State of Kansas or of any political subdivision thereof, but shall be payable solely from the Trust Estate. The issuance of the Bonds shall not, directly, indirectly or contingently, obligate the State of Kansas, the Issuer or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. The State of Kansas shall not in any event be liable for the payment of the principal of, redemption premium, if any, or interest on the Bonds or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach by the Issuer of any such pledge, mortgage, obligation or agreement may impose any liability, pecuniary or otherwise, upon the State of Kansas or any charge upon its general credit or against its taxing power.

3. The Indenture and the Tax Distribution Agreement have been duly authorized, executed and delivered by the Issuer and constitute valid and legally binding agreements of the Issuer enforceable in accordance with the provisions thereof.

4. The interest on the Bonds (including any original issue discount properly allocable to an owner of a Bond) is: (a) excludable 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. The opinions set forth in this paragraph are subject to the condition that the Issuer comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The Issuer has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Bonds have not been designated as "qualified tax-exempt obligations" for purposes of Section 265(b) of the Code. We express no opinion regarding other federal tax consequences arising with respect to the Bonds.

5. The interest on the Bonds is exempt from Kansas income taxes.

We express no opinion regarding the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds (except to the extent, if any, stated in the Official Statement).

The rights of the owners of the Bonds and the enforceability of the Bonds, the Indenture, the Tax Distribution Agreement and the Tax Compliance Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and by equitable principles, whether considered at law or in equity.

This opinion is given as of its date, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may come to our attention or any changes in law that may occur after the date of this opinion.

GILMORE & BELL, P.C

E-2

APPENDIX F

CERTAIN INFORMATION CONCERNING THE CITY OF WICHITA, KANSAS

(THIS PAGE INTENTIONALLY LEFT BLANK) CITY OF WICHITA, KANSAS

GENERAL INFORMATION

Location

Wichita, the largest City in Kansas, population 390,5911, is the county seat of Sedgwick County. Major highways, including the Kansas Turnpike and Interstate I-35, link the City with a large trade area that encompasses a population of more than one million people2 within a 100-mile radius. The nearest large cities are Denver to the west, Kansas City to the northeast and Oklahoma City and Tulsa to the south and southeast.

Historical Background

Wichita became a town in 1868, was incorporated in 1870, and has been a City of the first class since 1886. The original stimulus to the City's economic development was the extension of the Santa Fe Railway into Wichita in 1872. The City's early growth paralleled the expanding agricultural productivity of the central plains states, and by 1900 the City was an important regional center for the processing of agricultural products and the distribution of farm equipment. In 1914, the discovery of oil broadened the economic base, drawing numerous services, distributive enterprises and metal-working industries to the City. From the earliest days of the aircraft industry, Wichita has been a leading producer of general aviation and commercial aircraft. McConnell Air Force Base was activated in 1951 and has remained an important factor in the community.

Government

In 1917, Wichita became one of the first municipalities in the United States to adopt the Commission-Manager form of government. Effective April 14, 1987, the title "City Commission" was changed to "City Council" and instead of being elected at-large, five council members were nominated by district and elected at-large. In November 1988, Wichita voters

1Source: U.S. Census Bureau, 2017 Census Population Estimates. 2Source: Estimated by the Center for Economic Development and Business Research, W. Frank Barton School of Business, Wichita State University, based on Nielsen 2013 population estimates. Estimate includes Kansas population only; not the portion of population within the 100-mile radius located in Oklahoma. F-1 approved a referendum to elect a five-member City Council by pure district elections and a full-time Mayor by city-at-large elections. On February 10, 1989, Charter Ordinance 115 was adopted and provided for the five council member seats to be increased to six by subdividing the City into six districts based on the 1990 Census. The six Council members and the Mayor serve four-year terms with the Council members' terms being overlapping. The City Council and Mayor conduct all legislative functions for the City of Wichita and establish general policies, which are executed by the City Manager.

Employees

Total authorized positions for 20183 for the City of Wichita are as follows: Full-Time Full-Time Equivalents Total Employees 3,144 3,209

Kansas law prohibits strikes by public employees and provides procedures for the resolution of disputes. In the event an agreement cannot be reached between the City and a public employees union, an impasse is declared. Upon declaration of an impasse in the negotiations, the State’s Public Employee Relations Board appoints an independent arbitrator. The arbitrator's recommendations are not binding upon the parties to the negotiations, and all contracts must be approved by the City Council.

Medical Care

First class medical care is the standard in Wichita’s medical community. Because of a heavy emphasis on research and training, Wichita has emerged as a nationally recognized, state-of-the-art health care center. The Wichita MSA4 (Metropolitan Statistical Area) boasts 18 acute care and freestanding specialty hospitals, providing the community with approximately 2,050 licensed beds. There are approximately 130 nursing homes and assisted living facilities, 1,300 physicians and 260 dentists in the five-county area5. Local hospitals employ 9,700 workers in the MSA, and the larger health care and social assistance industry employs 38,400 employees.6 In addition, there are several research institutions in the area. Numerous health care and specialty clinics provide comprehensive patient care and same-day surgery. There are at least seven emergency centers in the Wichita area that provide medical care with no appointments and offer extended hours, including the freestanding Kansas Medical Center Emergency Department in northeast Wichita, which opened in early 2018. Several medical referral services and a complete 911 emergency medical service are available throughout Sedgwick County.

Cultural and Recreational Facilities

Wichita has developed into a civic center that offers many cultural and recreational opportunities. The Riney Fine Arts Gallery, Edwin A. Ulrich Museum of Art, Mary R Koch Arts Center, and the Wichita Art Museum all house fine art collections. Quality theater groups, such as the Wichita Community Theatre, Music Theatre Wichita, Wichita Children’s Theatre and Dance Center, and Music Theatre for Young People, visit the Wichita stages throughout the year. Diverse museums, such as the Wichita-Sedgwick County Historical Museum, the Mid-America All-Indian Center, the Old Cowtown Museum, the Kansas Aviation Museum, the Museum of World Treasures, the Great Plains Transportation Museum, the Kansas Sports Hall of Fame, and the Kansas African American Museum, reveal their perspectives on the past.

Exploration Place, the Sedgwick County science and discovery center, hosts permanent and traveling exhibits, summer camps and Wichita Regional Science and Engineering Fairs, all of which encourage a deeper interest in science for all ages. The $20 million Mary R Koch Arts Center, home of MARK Arts, opened in January 2018. The facility features an events center, gallery space for national exhibits, a sculpture garden, and spaces for studio artists and youths. Many of Wichita’s private air galleries participate in the city’s monthly Final Friday event, a gallery crawl throughout the city’s downtown featuring over two dozen locations, including the Studio School, a converted public school building that hosts a gallery and art collective which opened in 2018. As the largest art museum in the state of Kansas, 2018 is the Wichita Art Museum’s 83rd year of preserving, collecting, and promoting art.

Built in 1969, Century II is the performing arts and convention headquarters downtown, containing a concert hall, convention hall, exhibition hall, and an expo hall. Another downtown venue, the INTRUST Bank Arena, opened its doors to the public on January 2, 2010. In Pollstar Magazine’s 2018 1st Quarter Top 200 Arena Rankings, INTRUST Bank Arena

3Source: City of Wichita 2018-2019 Adopted Budget, p. 323. 4The Wichita MSA is comprised of Butler, Harvey, Kingman, Sedgwick and Sumner counties. This metropolitan statistical area delineation was issued by The Office of Management and Budget in February 2013. 5 Source: Kansas Statistical Abstract (2016), Section 17. 6Source: Kansas Department Of Labor, Current Employment Statistics data, November 2017. Employment number is for the five-county MSA. F-2 ranked as the 39th busiest arena in the United States based on tickets sold for shows that played in the first quarter of 2018.7 The arena completed $1.6 million in renovations in 2017 to provide improved free Wi-Fi to the arena and expand the north entrance to reduce crowding in that area. Wichita’s first dedicated outdoor performance venue, the $3.1 million 3,300 square foot Wave, is under construction near the Old Town district and is expected to be completed in October 2018.

Recreational opportunities abound in and around Wichita. Inside the city are 144 municipal parks and public open spaces covering more than 5,000 acres. Botanica, the Wichita Gardens, is the city’s living museum of plants and flowers. Construction is currently ongoing for a $3 million pavilion and carousel restoration, which is expected to open at Botanica by the end of 2018. Sedgwick County Zoo is nationally acclaimed in natural habitat design and has become one of the top zoos in the world. The zoo added a new elephant exhibit in 2016, which is the third largest elephant exhibit in the country. The city's compact size allows minimal travel time (average 30 minutes) to outlying areas with open prairies and lakes.

Wichita is home to a number of professional and college sports teams, including the Wichita Thunder hockey team, the Wichita Wingnuts baseball team, the Wichita Force indoor football team, and the FC Wichita soccer team. The Wichita State Shockers men’s college basketball program consistently attracts sell-out crowds to Charles Koch Arena. The team qualified for the NCAA men’s basketball tournament in each of the last seven seasons and in 2017 joined the American Athletic Conference. The INTRUST Bank Arena was host to first and second round NCAA men’s basketball tournament games in 2018, with over 40,000 tickets sold, and the Arena is scheduled to host NCAA men’s basketball tournament games again in 2021.

The city approved almost $60 million in financing for a new baseball stadium and improvements for the surrounding area to replace the current Lawrence-Dumont Stadium, which will be closing after the 2018 season completes. The twin-sheet ice skating arena, Wichita Ice Center, is available for public skating, as well as figure skating, hockey lessons and league play. Wichita has five city-owned golf courses, two other golf courses for public play and four membership-only courses.

Water sports and fishing are available on two federal reservoirs and one county lake that are within 30 minutes of Wichita. Additionally, eighteen recreational areas are within a 200-mile radius of the city. Because Wichita lies within the central waterfowl flyway, huge flocks of waterfowl are a common sight in our area during the spring and fall. Deer, pheasant, quail, wild turkey and ducks are just a few examples of wild game available in the area.

Public Air Transportation

Wichita Dwight D. Eisenhower National Airport (formerly Wichita Mid-Continent Airport), the largest commercial air carrier and general aviation complex in Kansas, provides accommodations for all aircraft. Dwight D. Eisenhower National Airport's campus of 3,300 acres is home to more than 65 tenants including air cargo; general aviation businesses; airport concessions (restaurants, hotel, ground transportation); rental car companies; fixed-base operators; corporate hangars; government, including control tower, weather services, Federal Aviation Administration, and the Transportation Security Administration; and two aircraft manufacturers.

Col. James Jabara Airport, a general aviation airport, consists of 855 acres and includes a 6,100-foot runway, an instrument landing system, associated taxiways and aprons, four corporate hangars, as well as a first-class fixed base operation complete with T-hangar storage.

Jabara is also home to the National Center for Aviation Training (NCAT), which is located just north of the airport’s campus. NCAT is a first-rate training facility focusing on general aviation manufacturing and aircraft and power plant mechanics. NCAT was made possible by the following funding sources: Sedgwick County, the State of Kansas, the U.S. Economic Development Association, the U.S. Small Business Administration, and the U.S. Department of Housing & Urban Development. Wichita State University’s Campus of Applied Sciences and Technology (formerly Wichita Area Technical College) serves as the managing partner for the Center, collaborating with Wichita State University's National Institute for Aviation Research (NIAR), to provide industry-driven training courses.

Passenger service in Wichita is available through the following airlines – Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Southwest Airlines and United Airlines. In April 2017, Alaska Airlines began service in Wichita, offering a nonstop flight to Seattle, and Frontier Airlines will become the seventh airline offering service to Wichita in August 2018, with flights from Wichita to Denver. Four major carriers, DHL, Federal Express, UPS Supply Chain Solutions, and UPS, provide cargo service.

General aviation is served by specialized retailers who provide aircraft related accessories, service, rental, storage and flight

7INTRUST Bank Arena Ranked as 39th Busiest Arena in the U.S. Through First Quarter, http://www.intrustbankarena.com/arena_info/media_center/news?r=6864 F-3 training. Since its inception, the Wichita Airport System, consisting of both Dwight D. Eisenhower National Airport and Colonel James Jabara Airport, has been operated and developed without local tax support.

In May 2010, Wilbur Smith Associates, Inc., with assistance from Burns & McDonnell, completed the Kansas Aviation Economic Impact Study for the Kansas Department of Transportation’s Division of Aviation. That study revealed that Wichita Dwight D. Eisenhower National Airport and Col. James Jabara Airport contributed approximately $5.6 billion to the Kansas economy in 2009 from total combined output (direct, indirect and induced) related to on-airport activities, government tenants, visitor spending and payroll spending. The number of jobs resulting from the two airports’ activities totaled 23,051, with total payroll of more than $1.2 billion.

On June 3rd, 2015, Wichita Eisenhower National Airport opened their new $160 million terminal, and it has served over 4.6 million passengers in its first three years of operation. The 273,000 square foot state-of-the-art facility modernizes the airport and allows for easy continued expansion for air service in Wichita, with capabilities of accommodating over 2 million passengers annually. In 2011, the then-proposed terminal won the “Gold Award in the Unbuilt Category” from the International Interior Design Association, an organization that strives to enhance quality of life by encouraging excellence in design.

The local share of financing major airport improvements has been derived from the sale of general obligation bonds and passenger facility charges. These bonds have either been retired or are currently being repaid from airport revenues. Federal grants, general obligation bonds, and passenger facility charges, along with airport revenues, will finance the majority of planned improvements.

Military Installations

McConnell Air Force Base borders southeast Wichita. The host unit is the 22nd Air Refueling Wing flying KC-135 Stratotankers, supporting worldwide air-to-air refueling and airlift. McConnell is a total force base, housing tenant units, which include the Air Force reserve’s 931st Air Refueling Group and the Air National Guard’s 184th Intelligence Wing. McConnell has 2,898 active-duty personnel, and total force strength of 6,342 active, guard, reserve and civilian personnel. The total impact of McConnell Air Force Base on the local economy in fiscal year 2016 was $596.1 million, within a 50-mile radius of the base.8 After being selected in 2014 as the first active duty KC-46A Pegasus main operating base and $267 million in facility upgrades, McConnell will receive its first KC-46A in October 20189. McConnell will eventually be the operating base to 36 KC-46A planes, which will replace the current KC-135 Stratotankers. The Friends of McConnell community support group received the 2017 Abilene Trophy, a national award for the community that provides the strongest support to its Air Force Base.10

Education Institutions

The City of Wichita is served by eight unified school districts (USDs). USD 259 Wichita Public Schools, the largest district in the area, operates approximately 85 schools, including elementary, middle and high schools, as well as alternative, magnet, and special schools. In fall 2017, Wichita USD enrollment remained relatively flat compared to 2016, with 50,416 students. Total enrollment at USD 259 has increased 4 percent since 2007.

In addition to the public schools, there are dozens of private and parochial schools serving preschool through high school students, as well as those needing special education. Post-secondary educational opportunities abound, including numerous private and public technical education institutions.

Twelve colleges and universities in the local area serve Wichita, including Wichita State University, University of Kansas School of Medicine, Friends University and Newman University. In fall 2017, Wichita Area Technical College set a new enrollment record for the second straight year, with 4,267 students. As of July 1st, 2018, Wichita Area Technical College became the Wichita State University Campus of Applied Sciences and Technology, a formalization of the partnership between two campuses. Wichita State University also experienced a large increase in enrollment, with 15,081 total students, and the largest freshman class in school history in the fall of 2017. Wichita State University is currently constructing several new buildings as part of their new “Innovation Campus” initiative, with a new focus on technology transfer, licensing and start-ups. The university completed construction on several new buildings in the Innovation Campus, including the Experiential Engineering building, the Airbus partnership building, a new apartment complex, and the Wichita-Sedgwick

8McConnell AFB, 22nd Air Refueling Wing, 2016 Economic Impact Analysis. 9 McCoy, Daniel. “McConnell AFB: Bring on the tanker”, Wichita Business Journal, June 26, 2018. https://www.bizjournals.com/wichita/news/2018/06/26/mcconnell-afb-bring-on-the-tanker.html 10 Source: Alanis, Kaitlyn. “Friends of McConnell gets national award for support of air base”, Wichita Eagle, May 28, 2017. http://www.kansas.com/news/local/article153168444.html F-4 County Law Enforcement Training Center in 2017, along with a second partnership building in 2018. An experiential learning elementary school, an additional apartment building, and two developer owned retail and restaurant buildings are still under construction on the campus. Future construction plans include a new business school, a new student health and wellness center and six additional business partnership buildings, which will provide students with unique learning experiences, collaborating with firms partnered on campus.

ENROLLMENT FIGURES

School Year 2017/18 2016/17 2015/16 2014/15 2013/14 2012/13

USD 25911 High School 13,128 13,013 13,113 13,002 12,809 12,807 Middle School 10,351 10,167 10,138 10,171 10,345 10,289 Elementary 26,365 26,883 27,048 26,982 26,856 26,596 Non-Graded 572 503 689 817 739 665 Total 50,416 50,566 50,988 50,972 50,749 50,357

PAROCHIAL12 Total 8,127 8,152 8,201 8,135 8,116 8,228

UNIVERSITIES13 Wichita State University 15,081 14,474 14,495 15,003 14,550 14,898 Friends University 1,762 2,100 2,032 2,800 2,178 2,500 Newman University 3,378 3,170 3,595 3,687 3,736 3,108

Growth

Increases in land area and in the number and size of manufacturing firms have contributed to the City's growth. This growth is reflected in annexations which have increased the City's total land area from 22 square miles in 1940, to 165 square miles in 2018. World War II, with its enormous demand for aircraft production, brought about a 50 percent increase in the City's population. Continued diversification of industry since then, mixed with abundant resources and a skilled labor force, have contributed to economic growth in the area.

Demographic Trends

The metropolitan statistical area (MSA) includes Butler, Harvey, Kingman, Sedgwick and Sumner counties.14 Its 2017 population totaled 645,628.15 Sedgwick County represents the largest portion of the area's population with an estimated 513,687 residents in 2017.16 Since 2010, the Wichita MSA’s population has grown 2.2 percent, while Sedgwick County has grown 2.9 percent. While these growth rates are slower than the national average, both the metropolitan area and the county have grown more rapidly than average for the state of Kansas.

International migration contributed to the Wichita metropolitan area’s growth in recent years, with positive net international migration of over 7,500 individuals since 201017. In 2016, over 15 percent of Wichita residents moved to a new residence, and over 5 percent moved to Wichita from a different county, state, or country18.

While the city’s population has grown, the city's population density has decreased by nearly 50 percent in the past few decades as increases to the geographic size of the city have outpaced population growth. Today there are approximately 2,368 persons per square mile in Wichita, compared to 4,625 per square mile in 1960 when density within the city limits peaked. In recent years, the majority of the population and housing growth has occurred along the far west/northwest and far

11Fall enrollment numbers from USD 259. Elementary includes grades K though 5, middle school includes grades 6 through 8 and high school includes grades 9 through 12. 12Parochial fall enrollment figures furnished by the Catholic School Office (7,169 for all of Sedgwick County, excluding Pre-K, and 958 for Wichita Collegiate School, including two years old through high school in 2017). 13Fall enrollment numbers. 14This metropolitan statistical area delineation was issued by The Office of Management and Budget in February 2013. At that time Kingman County was added to the Wichita MSA. 15Source: U.S. Census Bureau, 2017 Metropolitan Statistical Area Population Estimates. 16Source: U.S. Census Bureau, 2017 County Population Estimates. 17Source: U.S. Census Bureau, 2017 Metropolitan Statistical Area Population Estimates. 18Source: U.S. Census Bureau, 2016 American Community Survey 1-Year Estimates. F-5 east/northeast peripheries of the city, and into the unincorporated portions of the county, and these growth trends are expected to continue.

The racial and ethnic composition of Wichita's population is comparable to that of the nation, with an age distribution younger than the U.S. population as a whole. The median age in the City of Wichita is 34.7 years, younger than Sedgwick County’s median age of 35.1 years and the nation’s 37.9 years. Among Wichita’s population 25 years and over, 87.6 percent are high school graduates and 30.1 percent have a bachelor’s degree or higher.19

In 2016, median household income was estimated to be $53,663 for the Wichita MSA, with approximately 9.7 percent of families living in poverty.

Population Growth Trends

Year City of Wichita Percentage Change Sedgwick County Percentage Change 1950 168,300 46.4% 222,300 55.1% 1960 254,700 51.3% 343,200 54.4% 1970 276,600 8.6% 350,700 2.2% 1980 279,300 1.0% 367,100 4.7% 1990 304,000 8.8% 403,700 10.0% 2000 344,300 13.3% 452,900 12.2% 2010 382,368 11.1% 498,365 10.0% Source: U.S. Bureau of the Census, Population of the 100 Largest Cities and Other Urban Places in the United States: 1790 to 1990, Working Population Paper No. 27, 2000 and 2010 population counts from the respective decennial census.

Age Distribution

City of Wichita Wichita Percent of Total Sedgwick County Percent of Total MSA* Percent of Total Under 5 years 29,970 7.2% 37,131 7.3% 45,286 7.0% Age 5 to 9 29,684 7.6% 39,880 7.8% 47,869 7.4% Age 10 to 14 25,792 6.6% 34,840 6.8% 45,867 7.1% Age 15 to 19 24,973 6.4% 34,092 6.7% 44,428 6.9% Age 20 to 24 30,402 7.8% 35,947 7.0% 43,697 6.8% Age 25 to 29 29,656 7.6% 36,826 7.2% 43,934 6.8% Age 30 to 34 28,213 7.2% 36,219 7.1% 44,212 6.8% Age 35 to 39 31,731 6.1% 31,731 6.2% 39,903 6.2% Age 40 to 44 22,485 5.8% 30,163 5.9% 37,448 5.8% Age 45 to 49 22,061 5.7% 29,537 5.8% 38,263 5.9% Age 50 to 54 23,431 6.0% 31,973 6.2% 40,144 6.2% Age 55 to 59 24,994 6.4% 33,879 6.6% 44,150 6.8% Age 60 to 64 24,042 6.2% 30,598 6.0% 39,051 6.1% Age 65 to 69 24,941 5.0% 24,941 4.9% 32,409 5.0% Age 70 to 74 11,984 3.1% 15,717 3.1% 19,906 3.1% Age 75 to 79 7,872 2.0% 10,429 2.0% 14,005 2.2% Age 80 to 84 5,562 1.4% 8,113 1.6% 11,081 1.7% Age 85 and older 7,430 1.9% 9,979 1.9% 13,794 2.1% Total population all ages 389,927 100.0% 511,995 100.0% 645,447 100.0% Median Age (years) 34.7 35.1 34.9 Source: U.S. Census Bureau, 2016 American Community Survey 1-Year Estimates. Columns may not sum to totals due to rounding. *The Wichita MSA includes Butler, Harvey, Kingman, Sedgwick and Sumner counties. In February 2013, Kingman County was added to the Wichita MSA.

19Source: U.S. Census Bureau, 2016 American Community Survey 1-Year Estimates. F-6 Local Industry

Wichita is a manufacturing city with a diverse economic base and growing service sector. The approximately 670 Wichita metropolitan area manufacturers20 produce a wide variety of products from computers to aircraft. Approximately 80 percent of all manufacturing establishments are small firms employing fewer than 50 workers, while 11 Wichita area manufacturing establishments employ greater than 500 employees.21 Manufacturing employees comprised 17.5 percent of total employment in the metropolitan area in 2017, compared to 8.5 percent nationally. Local aircraft manufacturers are among the largest employers in Wichita and combine to produce a significant number of the world's general aviation and commercial aircraft. Service-related firms, particularly regional health care and professional service firms, are also important contributors to Wichita’s long-term growth. Private service sector employment, excluding the trade and transportation sectors, comprises 45.8 percent of total Wichita employment, and that share has consistently risen since the early 2000s as the Wichita economy diversifies. These strengths, combined with a skilled labor force and the City's central location, establish Wichita's prominence as a regional market.

Largest Industries by Employment: Wichita Metro Area22

Annual Average Annual Average Percent of Industry 2016 2017 2017 Total Total employment, all industries 291,138 288,861 100.0% Local government 29,649 29,764 10.3% Transportation equipment manufacturing (Suppressed Data) 27,401 9.5% Food services and drinking places 24,242 24,288 8.4% Administrative and support services 18,484 17,481 6.1% Ambulatory health care services (Suppressed Data) 13,535 4.7% Professional and technical services 11,068 11,320 3.9% Specialty trade contractors 9,945 9,990 3.5% Hospitals 10,030 9,684 3.4% General merchandise stores 6,977 6,651 2.3% Machinery manufacturing 6,115 6,086 2.1%

Largest Employers Wichita Metro Area23

Company Full-Time Employees Spirit AeroSystems, Inc 10,700 Textron Aviation 9,300 McConnell Air Force Base 6,807 USD 259 Wichita 5,489 Via Christi Health 4,654 State of Kansas 4,494 Koch Industries 3,240 City of Wichita 2,831 U.S. Government 2,673 Sedgwick County 2,563

20Source: U.S. Department of Commerce, Bureau of the Census, “2016 MSA Business Patterns, NAICS.” 21Source: U.S. Department of Commerce, Bureau of the Census, “2016 MSA Business Patterns, NAICS.” 22Source: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages, total employment includes private industry and government. 23Source: “Largest Employers in the Wichita Area”, Wichita Business Journal, July 14, 2017. F-7 Goods-Producing Industries

Aircraft Manufacturing Wichita has a rich history in aviation and has one of the highest concentrations of aircraft manufacturing in the world. The local aircraft companies have a diversified mix between military, commercial and general aviation products and services, which are supported by divisions specializing in research and development, new production, modernization (refurbishing), training, subcontract work and computer services. In 2017, the Wichita metropolitan area had a location quotient of 25.18 for aerospace product and parts manufacturing employment, indicating an aerospace manufacturing cluster in the Wichita area over 25 times as concentrated as the national average.

Agriculture The South Central Kansas Farm, Crop, and Livestock District, which includes Wichita, lies in the heart of the winter wheat belt. In 2016, Kansas ranked second in the nation in wheat exports, with a value of approximately $845 million. The state also ranked third in beef and veal exports, as well as fourth in exports of hides and skins, for a total value of approximately $975 million. Overall, Kansas exported over $8.3 billion in agricultural products, the ninth-most in the nation.24 By virtue of being Kansas' largest city and transportation hub, Wichita plays an important role in the agricultural and agri-related business sector, including being the home of Cargill’s Protein Group headquarters.

Petroleum Wichita is located near the center of the mid-continent petroleum field. Even though the petroleum industry is a small portion of the total economy, Wichita is the headquarters for several companies engaged in oil and natural gas production and industrial oil and grease manufacturing. Koch Industries, one of the largest privately held companies in the United States, performs a variety of petroleum-related manufacturing and transportation activities throughout the world from its Wichita headquarters. In June 2015, Koch Industries completed a 210,000 square foot expansion of their headquarters in Wichita with the capacity to hold up to 885 employees.

Economic Outlook25

Introduction26 Employment in Wichita and the rest of the United States has experienced moderate growth during the recovery from the 2008 recession and the expansion that has followed. In 2017, the Wichita area employment is estimated to have declined by approximately 2,500 workers, primarily due to declines in employment in the retail trade sector. By May 2018, total employment in the area has recovered to near 2016 levels and is forecast to continue to grow.

Wichita’s employment growth has, with the exception of 2017, been between 0.5 and 1 percent annually, and 2018 growth is expected to return near to that trend. Wichita’s total nonfarm employment is projected to increase by 0.4 percent in 2018, adding almost 1,200 jobs. The service sector is projected to have the fastest growth in Wichita, adding more than 900 jobs with growth of 0.7 percent. The production sector is projected to remain approximately flat, with construction employment forecast to grow 0.3 percent while manufacturing employment is forecast to decline 0.1 percent. The trade, transportation and utilities sector is expected to rebound in 2018, adding approximately 200 new jobs, and the government sector is forecast to expand by more than 100 jobs.

Economic Indicators

Wichita GDP and Exports

After growth of 6.1 percent in 2015, real gross domestic product (GDP) declined 1.4 percent in 2016 in the Wichita metropolitan area. The largest GDP decline by sector was in durable goods manufacturing, which declined by $400 million in 2016, but this was largely offset by an increase of approximately $300 million in the nondurable goods manufacturing sector. Since 2009, the Wichita metropolitan area has averaged annual real GDP growth of 1.6 percent.

In 2016, Wichita’s real exports totaled $6.7 billion, an increase of $1 billion since 2003. Wichita’s export share of GDP was 21.1 percent, the highest among major metropolitan areas in the United States, indicating Wichita’s interconnectedness with the global economy. Almost 17,000 jobs are directly supported by exports in the Wichita area27.

24Source: U.S. Agricultural Exports, Commodity Detail by State, U.S. Department of Agriculture, Economic Research Service. 25Sources: Wichita State University, W. Frank Barton School of Business, Center for Economic Development and Business Research. See their Kansas economic data website at http://www.kansaseconomy.org for the latest economic indicators. 26Throughout this section, unless otherwise noted, the data presented are for the Wichita MSA (Metropolitan Statistical Area), which includes Butler, Harvey, Kingman, Sedgwick and Sumner counties. 27 Brookings Institution, Export Monitor 2017, https://www.brookings.edu/research/export-nation-2017/. F-8 Retail Sales and Cost of Living

After increasing 0.9 percent in 2016, nominal taxable retail sales in the Wichita area declined by 1.4 percent in 2017. In recent years, growth in local retail sales has lagged behind growth in personal income locally, likely due in part to the increasing prevalence of online retail sales, which grew from 4 percent to 9 percent of all retail sales nationally from 2009 to 201728. For 2018, Wichita area nominal taxable retail sales are projected to increase by 0.5 percent.

The cost of living index for Wichita in 2017 was 92.2, which was 7.8 percent below the average of the 269 major United States metropolitan areas surveyed. Inexpensive housing was the primary reason for Wichita’s modest cost of living.29

Consumer Confidence and Local Indices

Following the 2008 recession, the national Index of Consumer Confidence has been on a consistent upwards trend from 2010 through 2017. The index increased by 8.4 points from December 2016 to December 2017, and in May 2018 was near its highest level in 18 years. Similarly, the national University of Michigan Consumer Sentiment survey has continued to increase, exceeding its pre-recession peak in 2017, and, in April 2018, consumer sentiment had increased 1.8 index points compared to one year earlier.

CEDBR’s Wichita Current Index modestly declined by 0.6 index points to 94.9 in 2017 after seven consecutive years of growth. The mixed results in 2017 were caused by continued decreases in the unemployment rate, along with a small decline in overall employment and average weekly earnings for the area. In April 2018, the index increased to 95.2 index points, a sign of continued improvement in local economic conditions.30

The CEDBR Wichita Leading Index’s annual average increased to 95.3 index points in 2017, an increase of 0.5 index points compared to 2016. This is the index’s highest annual average value since 2009, a sign of the expectation of continued economic growth in the area. The index’s growth has been led by increases in the Kansas Leading Index and National Industrial Production Index.

In 2017, Wichita continued to have a lower Misery Index value than the national average. The Misery Index measures the economic misery caused by high housing prices, inflation and unemployment rates, with lower index values indicating less misery caused by these factors. Wichita has outperformed the nation on the Misery Index for every year since 2006, reflective of the inexpensive housing and low unemployment in the area.

Business Establishment Growth Following the 2008 recession, the number of business establishments in the Wichita MSA declined and reached its post- recession nadir in 2011 with 14,404 establishments. Since 2011, the number of business establishments in the Wichita MSA has grown 3.8 percent through 2016. In 2016 alone, the number of establishments increased by almost 300, the largest one year increase since 2005, with the fastest growth among establishments with 1 to 4 employees and 50 to 99 employees. Wichita MSA business establishment growth exceeded the national average in 2016, despite slower than average population growth for Wichita in 2016.31

Since 2011, Wichita has experienced employment growth among firms of all sizes, with the largest employment growth concentrated in firms with 500 or more employees and firms with 50 to 249 employees, which grew 7.6 percent and 4 percent, respectively, through 2017. Similar to national trends, the majority of Wichita’s employment growth is from firms with over 500 employees.32

Looking at business firms by their age, since 2011 employment growth in Wichita has been typically been driven by older, established firms that are 11 years old or older, similar to national trends. In 2017, Wichita experienced a large increase in employment at firms aged four or five years and a corresponding similarly sized decrease in employment at firms aged 11 years or more.33

28 Source: U.S. Census Bureau, Quarterly Retail E-Commerce Sales. 29 Source: C2ER, ACCRA Cost of Living Index, 2017 Annual Average. 30 Source: CEDBR Local Indices, http://kansaseconomy.org/local-indices 31 Source: U.S. Census Bureau, 2016 County Business Patterns. 32 Source: U.S. Census Bureau, 2017 Quarterly Workforce Indicators Data. 33Source: U.S. Census Bureau, 2017 Quarterly Workforce Indicators Data. F-9 Labor Market

Employment After the 2008 recession, the Wichita MSA’s unemployment rate peaked in 2010 at 8.6 percent. Since then, the unemployment rate for the MSA has consistently fallen, reaching an average of 4.1 percent in 2017. The MSA has had an unemployment rate lower than the national average since 2006. The City of Wichita’s unemployment rate peaked at 9.5 percent in 2010, and it has followed a similar pattern, declining consistently over the past seven years to a low of 4.4 percent in 2017.

The total civilian labor force in 2017 for the five-county Wichita MSA was 307,708 people. Of that total, 294,953 were employed. In the city of Wichita, the total civilian labor force in 2017 numbered 185,587, with 177,439 employed.

Since 2010, annual new hires have increased by 25.1 percent through 2017 as hiring has recovered from its recessionary lows. Following the recession, job destruction at the firm level declined and through 2017 has remained near its post- recession low, while job separations and transitions have increased in the area, an indication of a robust and tightening local labor market.34

Wages & Hours Worked The recession of 2008 impacted total wages in the Wichita MSA significantly in 2009 with a decrease of 5.6 percent, which was followed by another decline of 1.9 percent in 2010. In 2011, wages began to rebound, and they have averaged 2 to 3 percent growth each year following through 2015. In 2016, total wages remained approximately flat, and in 2017 total wages grew 0.7 percent for the MSA.

The average weekly hours worked in the Wichita area typically exceeds that of the national average. Private-industry average weekly hours worked of all employees increased 0.5 hours in 2017, relative to 2016, to 34.8 hours worked per week. Wichita’s average weekly hours of production employees in the manufacturing sector increased 0.4 hours per week in 2017 to 43.4 hours, which was 1.5 hours per week higher than the national average.

Commuting Patterns In 2016, approximately 56,600 workers commuted into the City of Wichita, primarily residents from elsewhere in the Wichita MSA, while approximately 33,500 employed residents of the city commuted out to work outside of the city. This makes the City of Wichita a net importer of labor from the surrounding communities, a sign of Wichita’s status as a regional economic and commercial hub. Approximately 82.3 percent of employed City of Wichita residents worked in the city, while 17.7 percent worked outside of the city, the vast majority of which worked elsewhere in the Wichita MSA.

Housing and Construction The value of total building permits in Wichita has increased each year since 2012, and this trend continued into 2017. The real value of non-residential permits increased 117 percent in 2017, with much of the increase from several large permits for remodels and additions. The real value of residential permits declined by 4.8 percent, leading the overall level of permits to increase by 68 percent. The Center for Economic Development and Business Research (CEDBR) projects that, for 2018, the overall value of permits will decline by 1.5 percent compared to the record-setting 2017 levels, which would remain a 57.6 percent increase over 2016 levels.

Both home prices and home sales have been increasing in Wichita since 2014, indicating increased demand for housing in the area. Stanley Longhofer, director of the Wichita State University Center for Real Estate, forecasts that home prices in Wichita would continue with consistent growth in 2017 and 2018, expanding 4.1 and 3.7 percent, respectively. Total home sales are expected to increase 1.5 percent in 2018.35 The commercial real estate market has continued to tighten as well. The vacancy rates for office and retail space continued to decline in the fourth quarter of 2017 to 19.6 and 11.2 percent, respectively36.

In addition to increasing home prices and increasing commercial lease rates, major projects are underway to continue revitalizing the downtown area. Cargill is planning to open their new $60 million Cargill Protein Group headquarters downtown in 2018. The facility has room to house up to 950 workers when completed. In June 2016, the first phase of the $54 million Union Station renovation project finished, and the Grand Hotel and Rock Island Depot within the station opened. Building permits were issued in April 2018 for the second phase of the project, which will transform the primary Union Station terminal into 150,000 square feet of office space. The Douglas, a pair of luxury apartment buildings downtown,

34Source: U.S. Census Bureau, 2017 Quarterly Workforce Indicators Data. 35 Longhofer, Stanley, 2017 Kansas Housing Markets Forecast: Wichita Housing Forecast, Center for Real Estate, W. Frank Barton School of Business, Wichita State University. 36Source: NAIMartens, Year-End 2017 Wichita Market Report. F-10 completed construction in 2017 after $37 million in renovations, and River Vista, a $38.4 million 202-unit downtown residential development, began leasing apartments in April 2018. The new $33 million Central Library and Advanced Learning Center downtown held its grand opening in June of 2018.

Since 2011, the natural resources, mining, and construction sector has expanded by over 11.6 percent, and growth in the sector is expected to continue in 2018, with an expansion in employment of 0.3 percent.

Manufacturing The manufacturing sector is the largest single sector in the Wichita economy in terms of both employment and GDP, employing approximately 17.5 percent of Wichita workers and comprising 24.6 percent of Wichita GDP. Approximately 83.6 percent of those workers manufacture durable goods, with aerospace products and parts being the largest component of the durable goods manufactured. Aerospace products and parts jobs represent approximately 52.4 percent of all manufacturing jobs in the Wichita area.

The manufacturing sector in the United States lost approximately 1.7 million jobs between 2008 and 2011, for a 12.5 percent decline. During that same period, the Wichita MSA lost 15,300 manufacturing jobs, for a 22.7 percent decline. Since 2011, employment in the non-aerospace portion of Wichita’s manufacturing sector has grown 10.4 percent, while aerospace manufacturing employment has declined 10.6 percent.

While aerospace manufacturing remains the largest single component of manufacturing in Wichita, the area’s manufacturing base has diversified in recent years, with increases in employment in both non-durable and non-aerospace durable manufacturing employment since 2011. The machinery manufacturing sector has expanded by 27 percent over this period, adding 2,300 jobs, and the non-durable sector has added 1,000 jobs since 2010, a 13.5 percent expansion.

Wichita’s largest manufacturers are optimistic about the future, with planned expansions to both their production abilities and employment levels. In December 2017, Spirit AeroSystems announced plans to add over 1,000 workers to their Wichita facilities over the next two years, and the company also plans to spend over $1 billion on new capital improvements to its Wichita facilities. Bombardier will be moving interior and flight testing work on their Global 5000 jet to Wichita in 2018, creating over 100 new jobs in the area. Textron Aviation’s sales backlog grew by a third in the first quarter of 2018, and the firm also announced plans to produce their new SkyCourier cargo plane in Wichita, for which they will be adding an as of yet unspecified number of new workers. Cargill began construction in 2017 on a $90 million biodiesel plant that is expected to open in early 2019.

Employment in the manufacturing sector is projected to remain relatively stable in 2018 with an overall decline of fewer than 100 jobs.

Trade, Transportation, and Utilities The trade, transportation, and utilities sector has flattened recently after several years of consistent growth through 2015, similar to national trends, caused largely by slow or declining growth in the retail subsector. In 2018, the sector is expected to gain approximately 200 jobs. The gains are projected to primarily be in the transportation and utilities subsector, while retail and wholesale trade employment are projected to remain relatively flat. For 2018, nominal taxable retail sales are forecast to increase 0.5 percent in the area.

The retail offerings throughout the city have continued to grow with both construction on the periphery and revitalization of downtown retail areas. In 2017, Stein Mart, H&M, Athleta, Ross Dress for Less, Sprouts Market, Mardel, and Home Goods all opened new stores in the Wichita area. New Market North, a 120,000 square foot expansion to the New Market Square outdoor marketplace, opened several new buildings in 2017, and a 17,000 square foot expansion to the Waterfront development was completed. The 28,000 square foot Tyler Pointe shopping center opened in 2017 and is home to several retailers and restaurants. A planned $23 million downtown development will bring additional retail to the downtown area in 2018 or 2019, along with 41 apartments and new office space. The Delano and Old Town districts have continued to expand their retail offerings, including a $50 million mixed-use development in the Delano district approved in 2017 and several new restaurants and entertainment options in the Old Town district. Construction on a total of 26 new buildings was completed in 2017, adding over 337,000 square feet to Wichita’s retail market.37

Information Services The information industry, at both the local and national levels, has seen a long-term downward trend in the 2000s. In 2008, there were 6,600 information positions in the Wichita MSA. By the end of 2013, the industry had lost 2,300 jobs in Wichita, for a 35 percent decline, and a similar pattern occurred at the national level. Nationally, information employment peaked at

37 Source: NAIMartens, Year-End 2017 Wichita Market Report. F-11 3.6 million jobs in 2000 but declined to 2.7 million by the end of 2011, a 26 percent loss. Since 2011, the information sector has been relatively flat in terms of employment changes both nationally and locally. In 2017, the Wichita Eagle, Wichita’s daily newspaper, moved its primary offices, with approximately 100 employees, to the Old Town district. Employment is forecast to remain relatively flat in the information sector in Wichita in 2018, expanding by fewer than 100 employees.

Financial Services The financial industry in the Wichita MSA lost 2,400 jobs from 2001 through 2013, for an 18 percent decline. The sector added 800 jobs from 2014 to 2016, and employment growth flattened in 2017. In 2018, the sector is projected to decline by fewer than 100 jobs.

Professional and Business Services Professional and business services have been one of the fastest growing sectors in the Wichita area since 2009, adding 3,600 jobs in that time. In 2017, the sector declined by 400 jobs after growing in 2016. The professional, scientific and technical services subsector has grown in Wichita every year but one since 2007; in 2017 the subsector added 200 new jobs.

The sector is projected to grow 0.3 percent in 2018, adding approximately 100 jobs.

Educational and Health Care Services Education and health care services are one of the largest sectors of the local economy, with approximately 14.8 percent of the total employment in the local economy. Growth in this sector has been primarily driven in recent years by the continued expansion of employment in non-hospital health care facilities such as physicians’ offices and residential care facilities. A new freestanding full-service emergency room opened in the spring of 2018 in northeast Wichita, and Via Christi Hospital St Joseph, one of Wichita’s largest hospitals, is currently undergoing a $50 million renovation that should be fully completed in the first quarter of 2019. The long-term outlook for the healthcare sector remains bright in the area due to both the aging and continued population growth in the Wichita MSA. From 2010 to 2017, the population in the Wichita MSA grew 2.2 percent, with the growth concentrated in Sedgwick County, the core county of the metropolitan area.

Policy uncertainty is expected to continue to surround the Affordable Care Act’s individual insurance marketplaces and the Medicaid program in Kansas in 2018, potentially leading to lower investment in the short-term in the sector. The longer- term trends of a growing elderly population in Kansas and increased medical innovation have led and will likely continue to lead to increased demand for health care services. Employment in the education and health care sector is projected to have declined by 700 workers in 2017, and the sector is forecast to add approximately 100 jobs in 2018 for 0.2 percent growth.

Leisure and Hospitality Services Economic indicators for the travel and tourism industry have rebounded in 2017 after a mixed 2016. The total number of passengers at Wichita’s Dwight D. Eisenhower National Airport increased 0.7 percent in 2017 after 2016 was the second busiest year to date for the airport. Transient guest taxes increased 3.2 percent in the first eleven months of fiscal year 2018 relative to the first eleven months of fiscal year 2017.

Wichita Riverfest, the largest annual festival in Wichita, increased its attendance to 460,000 in 2018, from 410,000 in 2017. The value of sponsorships and in-kind support for the event also increased by 2.6 percent, and food and beverage sales from the event are expected to be at near record levels.38

Other Services The other services sector continued to grow in 2017, adding 200 new jobs. The sector has expanded in each of the last three years, adding 900 new jobs since 2014. In 2018 that trend is expected to continue, with the sector adding approximately 100 new jobs.

Government The governmental sector added 100 jobs in 2017, concentrated primarily in the local government sector. Since 2011 in Wichita, the local government sector has added 600 new jobs, while the state government sector contracted by 200 workers and the federal government sector contracted by 1,700 workers. State and federal government employment have flattened in 2016 and 2017, which has led to overall growth in government employment in Wichita in those years. CEDBR projects an increase of approximately 100 jobs in the government sector for 2018.

38 “Concerts and Popular Events Drive Big Numbers at Riverfest 2018”, Wichita Festivals, Inc. http://wichitariverfest.com/riverfest_info.php?page=news- media_news, June 10, 2018. F-12 Wichita MSA Forecast Summary

Wichita MSA Employment by Industry Summary* 2017-2018 2017-2018 Level Percent 2016 (a) 2017 (e) 2018 (f) Change Change Total Nonfarm 297,221 294,717 295,905 1,188 0.4% Production Sectors 68,230 67,731 67,699 -33 0.0% Natural Resources, Mining & Cons. 16,446 16,265 16,306 41 0.3% Manufacturing 51,784 51,467 51,393 -74 -0.1% Trade, Transportation & Utilities 52,592 51,200 51,405 204 0.4% Service Sectors 135,732 134,992 135,897 905 0.7% Information and Other Services 14,701 14,609 14,653 44 0.3% Financial Activities 11,492 11,508 11,455 -53 -0.5% Professional & Business Services 33,027 32,578 32,676 98 0.3% Education & Health Services 44,252 43,621 43,708 88 0.2% Leisure & Hospitality Services 32,259 32,676 33,404 728 2.2% Government 40,667 40,793 40,905 112 0.3% *Annual values are derived from average quarterly observations and projections. (a) actual (e) estimated (f) forecasted

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F-13

(THIS PAGE INTENTIONALLY LEFT BLANK) CITY OF WICHITA, KANSAS WICHITA RETIREMENT SYSTEMS The Wichita Employees' Retirement System, the Wichita Employees' Retirement System Plan 3b and the Police and Fire Retirement System of Wichita are reported as pension trust funds of the City of Wichita, Kansas and its component units (the reporting entity). The plans consist of two single-employer defined benefit pension plans and a single-employer defined contribution plan, covering all full-time employees.

The defined benefit plans include the Wichita Employees' Retirement System (WERS) and the Police and Fire Retirement System (PFRS). A separate Board of Trustees administers each System. The single employer defined contribution plan consists of the Wichita Employees' Retirement System Plan 3b, which is also administered by the WERS Board of Trustees.

The WERS Board of Trustees and the PFRS Board of Trustees combined their assets into a joint fund for investment purposes on October 1, 1999. A Joint Investment Committee (JIC) comprised of members of both boards and a City Manager appointee was established to manage these assets. The Boards of Trustees have adopted a Strategic Plan and Investment Policies Statement which address specific asset allocation, manager structure, rebalancing, restrictions and liquidity. The purpose of the policies is to support strategic decision making to enable the Fund to generate rates of return at reasonable and controlled levels of risk that enable the Fund to pay all pension benefit and expense obligations when due. The JIC engages professional money managers to invest the assets of the joint fund in a diversified mix of domestic and international equities, domestic fixed income, real estate, timber, commodities and cash equivalents. The Fund generated a total return of 17.76% for the year ended December 31, 2017, which outperformed the benchmark return of 16.23%. Over the last three and five year periods the annual rate of return was 8.21% and 9.97%, respectively, compared to the benchmarks of 7.77% and 9.01%, respectively. The Boards of Trustees engage an independent investment consultant to implement a performance measurement and evaluation process that examines rates of return for the Trust in total, as well as by asset class and manager. The Boards compare the returns of the Fund to broad market indices and relevant “peer groups” of investment managers with similar investment styles. Callan LLC, operating out of Denver, Colorado, is currently serving as the Fund’s investment consultant. The Boards also retain Cavanaugh Macdonald Consulting, LLC, out of Bellevue, Nebraska, as the Systems’ consulting actuary. The most recent actuarial valuation covers the year ending December 31, 2017. In addition to annual actuarial valuations, Cavanaugh Macdonald is also engaged to perform periodic experience studies to update the assumptions used in the valuations. The most recent experience study, dated April 17, 2018, covered the three-year period ending December 31, 2016. It should be noted that (i) the information included in this section relies on information produced by the pension plans and their independent actuaries, (ii) actuarial assessments are “forward looking” information that reflect the judgement of the fiduciaries of the pension plans and (iii) actuarial assessments are based on a variety of assumptions, one or more of which may prove to be inaccurate or be changed in the future, and which will change with future experience of the pension plans. Assumptions utilized in the actuarial valuations performed are outlined in the Notes to the Financial Statements on pages B-60, B-62 and B-63 of this report. Actual investment returns in future years will influence the Systems’ funding status, the magnitude of any unfunded actuarial liability and any changes in contribution rates.

F-14 The City established a pension reserve fund in 1999 to provide additional funds to help meet the City’s actuarial required contributions to fund the Systems on a current basis. In years when the actuarially determined contribution rates decrease, the City may elect to divert contributions in excess of the required rate to the pension reserve fund to restore the balance in the fund. Conversely, as actuarially determined contribution rates increase, the City may elect to utilize resources held in the pension reserve fund to offset the increase. The balance in the Pension Reserve Fund amounted to $3.7 million as of December 31, 2017. A table of historical balances of the Pension Reserve Fund is provided on page A-18. Wichita Employees’ Retirement System Plan description: The Wichita Employees’ Retirement System is comprised of Plans 1, 2 and 3. Together, these plans cover all full-time civilian employees of the City. Plan 1 was established by City Ordinance on January 1, 1948, and became closed to new entrants prior to July 18, 1981. With the initiation of Plan 2, which was established by City Ordinance on July 18, 1981, all covered employees of Plan 1 were given the option of converting to the new plan. Plan 2 was closed to new entrants, except by conversion, by City Ordinance effective January 1, 1994 with the establishment of Plan 3, a defined contribution plan. However, upon completion of seven years of service, employees participating in Plan 3 may convert to participation in Plan 2. If Plan 3 members make an irrevocable election to remain in Plan 3 after seven years of service they are converted to Plan 3b. The schedule for vesting in employer contributions under Plan 3 is staggered at 25% after 3 years, 50% after 5 years and 100% after seven years. Funding policy: Members of Plan 1 contribute 6.4% of covered salaries. Members of Plan 2 and Plan 3 contribute 4.7% of covered salaries. The City matches all employer contributions into Plan 3 at 4.7% of covered salaries. As a result of the December 31, 2017 actuarial valuation, the City’s actuarially determined contribution rate for Plans 1 and 2 decreased from 12.8% of annual covered payroll for 2018 to 12.1% for 2019. Benefit provisions: Under the provisions of Plan 1, the normal retirement age is 60 with vesting at seven years of actual service. The retirement benefit is based on creditable service, which is actual service plus accumulated sick leave, and computed at 2.5% per year of creditable service multiplied by final average salary from the highest three consecutive years within the last ten years of service. Early retirement is permitted between the ages of 55 and 60, but benefits are reduced for those with less than 30 years of service. Members with 30 years of service may retire regardless of age at the maximum of 75% of final average salary. There is an annual 3% non-compounded post-retirement adjustment to the base pension beginning 12 months after retirement. The normal retirement age under Plan 2 is 62, with vesting at seven years of actual service. The retirement benefit is based on creditable service, which is actual service plus accumulated sick leave, and computed at 2.25% per year of creditable service multiplied by final average salary from the highest three consecutive years within the last ten years of service. Early retirement is permitted between the ages of 55 and 62, but benefits are reduced for each month under the age 62. The maximum retirement benefit under Plan 2 is 75% of final average salary. There is an annual 2% non-compounded post-retirement adjustment to the base pension beginning 12 months after retirement.

F-15 Deferred Retirement Option Plan (DROP) Provision: The benefit structure of the Wichita Employees’ Retirement System includes a Deferred Retirement Option Plan (DROP). Both Plan 1 and Plan 2 provide a DROP provision. Members must be eligible to receive a service retirement benefit as of the DROP retirement date to participate in the DROP. The DROP period is one to sixty months. The monthly benefit amount is computed as of the DROP election date based on the final average salary and years of service as of that date. The benefit is paid into the member’s notional DROP account during the deferral or DROP period. The member and City both continue to make the required contributions during the deferral period. These contributions are not credited to the member’s DROP account, but are credited to general Plan assets to improve the System’s funding. Interest at an annual rate of 5.0%, compounded monthly, is credited to the notional DROP account. Voluntary termination of employment during the DROP period results in loss of accrued interest. When the member terminates employment, the balance of the DROP account is paid as a lump sum and future monthly benefits are paid to the member.

Participant data and financial information: As of December 31, 2017, there were 1,541 active members (3 under Plan 1, 891 under Plan 2 and 647 under Plan 3). Of these active members, 67 were participants in the DROP. There were 1,416 retirees, including survivors, receiving benefits and 144 deferred retirees. For the year ended December 31, 2017, Wichita Employees’ Retirement System disbursed $38,668,712 of pension benefits to retirees. The Wichita Employees’ Retirement System is a fully mature system. Mature retirement systems operate in a negative cash-flow environment, which means that the total of annual benefits and expenses paid is greater than the aggregate amount of annual employer and employee contributions. Therefore, investment earnings are withdrawn from the trust to meet the expenditure requirements. During 2017, $3.9 million dollars was withdrawn from the trust to pay administrative and operating expenses. Net position of the WERS, including Plan 3 assets, available at December 31, 2017 was $614,778,032, an increase of $65.0 million or 11.8% from December 31, 2016. Police and Fire Retirement System Plan description: The Police and Fire Retirement System (PFRS) consists of three plans: Plan A, Plan B and Plan C-79. Plans A and B were established by City Ordinance on January 1, 1965 and Plan C-79 was established January 1, 1979 by City Ordinance. Plan B was closed to new entrants as of January 1, 1965 and Plan A was closed to new entrants as of December 31, 1978. Funding policy: Members contribute 7% or 8% of covered payroll, depending upon the plan to which they belong. As a result of the December 31, 2017 actuarial valuation, the City’s actuarially determined contribution decreased from 19.9% of annual covered payroll for 2018 to 18.9% for 2019. Benefit provisions: The “20 and Out” plan was adopted on June 11, 1975 for Plans A and B. This provision permits commissioned police and fire personnel to retire after 20 years of actual service, regardless of age, at 50% of final average salary plus 2.5% per year of creditable service, which is actual service plus accumulated sick leave, above 20 years, to a maximum of 75% of final average salary for 30 years of service. Final average salary is calculated based on the highest three consecutive years within the last ten years of service. Members under 55 years old with at least 10 years, but less than 20 years of actual service, will have their pension payments deferred until age 55 and receive no survivor benefits. The vesting requirement is 10 years.

F-16 Members of Plan C-79 are eligible for retirement after 20 years of service. Payment of pension benefits is generally deferred until age 50; however, no age limits apply with completion of 30 years of service. The formula for calculating pensions is the same as Plans A and B. Members under 55 years old with at least 10 years, but less than 20 years of actual service, will have their pension payments deferred until age 55 and receive no survivor benefits. The vesting requirement is 10 years. Backward Deferred Retirement Option Plan (DROP) Provision: The benefit structure of the Wichita Police and Fire Retirement System includes a Backward Deferred Retirement Option Plan (DROP). The Backward DROP is available to Plan A and Plan C-79 members. Members must be eligible to receive a service retirement benefit as of the Backward DROP retirement date. The DROP period is one to sixty months. The DROP period is the time between the Backward DROP retirement date and the date the employee terminates service. The retirement benefit is calculated as of the day prior to the Backward DROP retirement date. The employee’s monthly retirement benefits (for the DROP period) plus applicable post retirement adjustments and interest at an annual rate of 5.0%, compounded monthly, is payable upon the employee’s termination of service. When the member terminates employment, the balance of the DROP account is paid as a lump sum and the member begins to receive monthly retirement benefits on the month following termination of service. Participant data and financial information: As of December 31, 2017, there were 1,082 active members in the Plan (2 in Plan A and 1,080 in Plan C-79). Of these active members, 630 were police officers and 452 were fire officers. There were a total of 1,000 retirees, including survivors receiving pension benefits and 33 deferred retirees. For the year ended December 31, 2017, the PFRS disbursed $36,756,558 of pension benefits to retirees. The Police and Fire Retirement System of Wichita Kansas is a fully mature system. Mature retirement systems operate in a negative cash-flow environment, which means that the total of annual benefits and expenses paid is greater than the aggregate amount of annual employer and employee contributions. Investment earnings are withdrawn from the trust to meet the expenditure requirements. During 2017, $4.2 million dollars was withdrawn from the trust to pay administrative and operating expenses. Net position of the PFRS available at December 31, 2017 was $698,083,949, an increase of $84.0 million or 13.7% from December 31, 2016.

F-17 WICHITA RETIREMENT SYSTEMS TEN-YEAR TREND INFORMATION

Wichita Employees' Retirement System: SUMMARY FINANCIAL INFORMATION Actuarial Rate of Assumed Rate Fiscal Year Employer Employee Net Investment Return on of Return on Ending Contributions Contributions Income (Loss) Net Position Investments Investments 12/31/2008 $ 3,834,270 $ 4,005,184 $ (154,321,647) $ 385,599,194 (28.1) % 7.75 % 12/31/2009 3,887,085 3,980,834 80,125,125 444,447,344 22.0 7.75 12/31/2010 6,689,450 4,824,304 56,900,072 480,691,409 13.6 7.75 12/31/2011 7,695,317 3,636,633 2,725,334 458,827,503 0.8 7.75 12/31/2012 7,503,003 3,375,221 59,838,228 494,716,075 13.8 7.75 12/31/2013 8,939,922 3,253,901 95,000,494 564,203,801 20.2 7.75 12/31/2014 9,414,347 3,394,658 28,677,047 566,807,293 5.6 7.75 12/31/2015 9,031,463 3,574,026 13,380 541,247,503 0.2 7.75 12/31/2016 8,946,064 3,642,007 35,956,780 549,786,949 7.3 7.75 12/31/2017 9,642,540 3,682,056 91,773,973 614,778,032 17.8 7.75

F-18 WICHITA RETIREMENT SYSTEMS TEN-YEAR TREND INFORMATION

Police and Fire Retirement System:

SUMMARY FINANCIAL INFORMATION

Actuarial Rate of Assumed Rate Fiscal Year Employer Employee Net Investment Return on of Return on Ending Contributions Contributions Income (Loss) Net Position Investments Investments 12/31/2008 $ 10,549,401 $ 4,277,247 $ (140,686,744) $ 356,056,234 (28.1) % 7.75 % 12/31/2009 11,034,552 4,443,524 75,500,370 422,379,231 22.0 7.75 12/31/2010 13,119,984 4,467,983 54,963,698 467,487,721 13.6 7.75 12/31/2011 13,806,880 4,403,425 2,404,099 460,840,745 0.8 7.75 12/31/2012 14,113,014 4,543,523 60,619,414 511,492,439 13.8 7.75 12/31/2013 14,889,714 4,607,691 99,494,232 598,458,276 20.2 7.75 12/31/2014 14,464,181 4,529,895 30,596,067 611,091,056 5.6 7.75 12/31/2015 13,964,379 4,603,331 (163,702) 592,883,226 0.2 7.75 12/31/2016 12,585,895 4,776,958 39,901,640 614,047,281 7.3 7.75 12/31/2017 13,369,785 4,915,378 103,236,679 698,083,949 17.8 7.75

Wichita Retirement Systems (total trust):

PENSION RESERVE FUND BALANCE

Fiscal Year Ending Balance 12/31/2008 $ 8,063,749 12/31/2009 8,741,272 12/31/2010 7,501,175 12/31/2011 5,451,175 12/31/2012 4,726,175 12/31/2013 4,026,175 12/31/2014 3,026,175 12/31/2015 2,626,175 12/31/2016 3,729,625 12/31/2017 3,729,677

F-19 Wichita Employees' Retirement System: SCHEDULE OF FUNDING PROGRESS Based on actuarial value of plan assets (Dollar amounts in thousands) Actuarial Actuarial Unfunded Annual UAAL as a Actuarial Value of Accrued Liability AAL Funded Covered Percentage of Valu at io n Assets (AAL) Entry Age (UAAL) Ratio Payroll Covered Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 12/31/2008 $ 512,853 $ 512,374 $ (479) 100.1 % $ 81,580 (0.6) % 12/31/2009 509,494 529,271 19,777 96.3 82,704 23.9 12/31/2010 516,308 540,436 24,128 95.5 79,636 30.3 12/31/2011 513,298 555,174 41,876 92.5 75,444 55.5 12/31/2012 520,320 571,805 51,485 91.0 70,783 72.7 12/31/2013 542,157 582,386 40,229 93.1 70,953 56.7 12/31/2014 560,032 590,115 30,083 94.9 71,391 42.1 12/31/2015 568,464 605,855 37,391 93.8 74,078 50.5 12/31/2016 575,971 620,219 44,248 92.9 77,121 57.4 12/31/2017 598,793 634,907 36,114 94.3 78,395 46.1

Wichita Employees' Retirement System: SCHEDULE OF FUNDING PROGRESS Based on fair value of plan assets (Dollar amounts in thousands) Fair Actuarial Unfunded Annual UAAL as a Actuarial Value of Accrued Liability AAL Funded Covered Percentage of Valu at io n Assets (AAL) Entry Age (UAAL) Ratio Payroll Covered Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 12/31/2008 $ 385,599 $ 512,374 $ 126,775 75.3 % $ 81,580 155.4 % 12/31/2009 444,447 529,271 84,824 84.0 82,704 102.6 12/31/2010 480,691 540,436 59,745 88.9 79,636 75.0 12/31/2011 458,828 555,174 96,346 82.6 75,444 127.7 12/31/2012 494,713 571,805 77,092 86.5 70,783 108.9 12/31/2013 564,204 582,386 18,182 96.9 70,953 25.6 12/31/2014 566,807 590,115 23,308 96.1 71,391 32.6 12/31/2015 541,248 605,855 64,607 89.3 74,078 87.2 12/31/2016 549,787 620,219 70,432 88.6 77,121 91.3 12/31/2017 614,778 634,907 20,129 96.8 78,395 25.7

Wichita Employees' Retirement System: NET PENSION LIABILITY OF THE CITY Actuarial Total Valu at io n Pension Fiduciary Net Net Pension Ratio of FNP Date * Liability (TPL) Position (FNP) Liability (NPL) to TPL 12/31/2014 $ 590,115,082 $ 566,807,293 $ 23,307,789 96.05 % 12/31/2015 596,977,187 541,247,503 55,729,684 90.66 12/31/2016 610,111,147 549,786,949 60,324,198 90.11 12/31/2017 625,461,450 614,778,032 10,683,418 98.29

* Schedule is intended to show 10-year trend. Additional years will be reported as they become available.

F-20 Police and Fire Retirement System: SCHEDULE OF FUNDING PROGRESS Based on actuarial value of plan assets (Dollar amounts in thousands) Actuarial Actuarial Unfunded Annual UAAL as a Actuarial Value of Accrued Liability AAL Funded Covered Percentage of Valuation Assets (AAL) Entry Age (UAAL) Ratio Payroll Covered Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 12/31/2008 $ 472,345 $ 496,561 $ 24,216 95.1 % $ 60,282 40.2 % 12/31/2009 480,556 519,934 39,378 92.4 63,055 62.5 12/31/2010 497,926 536,908 38,982 92.7 63,077 61.8 12/31/2011 510,946 562,488 51,542 90.8 62,759 82.1 12/31/2012 533,381 589,074 55,693 90.5 64,150 86.8 12/31/2013 571,262 617,748 46,486 92.5 65,306 71.2 12/31/2014 600,860 631,904 31,044 95.1 64,572 48.1 12/31/2015 620,149 655,136 34,987 94.7 65,560 53.4 12/31/2016 640,509 681,644 41,135 94.0 66,946 61.4 12/31/2017 677,616 710,017 32,401 95.4 69,634 46.5

Police and Fire Retirement System: SCHEDULE OF FUNDING PROGRESS Based on fair value of plan assets (Dollar amounts in thousands) Fair Actuarial Unfunded Annual UAAL as a Actuarial Value of Accrued Liability AAL Funded Covered Percentage of Valuation Assets (AAL) Entry Age (UAAL) Ratio Payroll Covered Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 12/31/2008 $ 356,056 $ 496,561 $ 140,505 71.7 % $ 60,282 233.1 % 12/31/2009 422,379 519,934 97,555 81.2 63,055 154.7 12/31/2010 467,487 536,908 69,421 87.1 63,077 110.1 12/31/2011 460,840 562,488 101,648 81.9 62,759 162.0 12/31/2012 511,492 589,074 77,582 86.8 64,150 120.9 12/31/2013 598,458 617,748 19,290 96.9 65,306 29.5 12/31/2014 611,091 631,904 20,813 96.7 64,572 32.2 12/31/2015 592,883 655,136 62,253 90.5 65,560 95.0 12/31/2016 614,047 681,644 67,597 90.1 66,946 101.0 12/31/2017 698,084 710,017 11,933 98.3 69,634 17.1

Police and Fire Retirement System: NET PENSION LIABILITY OF THE CITY Actuarial Total Valuation Pension Fiduciary Net Net Pension Ratio of FNP Date * Liability (TPL) Position (FNP) Liability (NPL) to TPL 12/31/2014 $ 631,904,401 $ 611,091,056 $ 20,813,345 96.71 % 12/31/2015 644,264,654 592,883,226 51,381,428 92.02 12/31/2016 670,427,649 614,047,281 56,380,368 91.59 12/31/2017 698,423,311 698,083,949 339,362 99.95

* Schedule is intended to show 10-year trend. Additional years will be reported as they become available.

F-21 WICHITA RETIREMENT SYSTEMS TEN-YEAR TREND INFORMATION

Wichita Employees' Retirement System: SCHEDULE OF EMPLOYER CONTRIBUTIONS (Dollar amounts in thousands)

Actuarially Annual Contributions Determined Actual Contribution Covered as a Percentage Fiscal Year Employer Employer Deficiency Employee of Covered Ending Contributions Contributions (Excess) Payroll Employee Payroll 12/31/2008 $ 3,834 $ 3,834 $ - $ 81,580 4.7 % 12/31/2009 3,887 3,887 - 82,704 4.7 12/31/2010 6,689 6,689 - 79,636 8.4 12/31/2011 7,695 7,695 - 75,444 10.2 12/31/2012 7,503 7,503 - 70,783 10.6 12/31/2013 8,940 8,940 - 70,953 12.6 12/31/2014 9,424 9,424 - 71,391 13.2 12/31/2015 9,031 9,031 - 74,028 12.2 12/31/2016 8,946 8,946 - 77,121 11.6 12/31/2017 9,643 9,643 - 78,395 12.3

Police and Fire Retirement System: SCHEDULE OF EMPLOYER CONTRIBUTIONS (Dollar amounts in thousands)

Actuarially Annual Contributions Determined Actual Contribution Covered as a Percentage Fiscal Year Employer Employer Deficiency Employee of Covered Ending Contributions Contributions (Excess) Payroll Employee Payroll 12/31/2008 $ 10,549 $ 10,549 $ - $ 60,282 17.5 % 12/31/2009 11,035 11,035 - 63,055 17.5 12/31/2010 13,120 13,120 - 63,077 20.8 12/31/2011 13,807 13,807 - 62,759 22.0 12/31/2012 14,113 14,113 - 64,150 22.0 12/31/2013 14,890 14,890 - 65,306 22.8 12/31/2014 14,464 14,464 - 64,572 22.4 12/31/2015 13,964 13,964 - 65,560 21.3 12/31/2016 12,586 12,586 - 66,946 18.8 12/31/2017 13,370 13,370 - 69,634 19.2

F-22 CITY OF WICHITA, KANSAS

HISTORICAL SUMMARY OF ECONOMIC INDICATORS

2008 2009 2010 2011 Economic Base Demographics Population Wichita 1 373,694 380,115 382,743 383,663 MSA2 609,250 619,330 631,789 633,118 Population profile (MSA) Total Gross Domestic Product (in millions of $) 3 Nominal $ 28,332 $ 25,651 $ 28,309 $ 28,841 Real4 28,489 25,651 27,820 27,711 Gross Domestic Product, per capita (in dollars) 3 Nominal $ 45,908 $ 40,897 $ 44,800 $ 45,547 Real4 46,162 40,897 44,026 43,762 Banking and finance5 Commercial banks, Sedgwick County Deposits (in thousands of $) $ 6,280,000 $ 6,788,000 $ 7,758,000 $ 7,784,000 Number of institutions 36 35 35 35 Number of offices (branches) 140 143 142 144

Tax Base Assessed valuation (in thousands of dollars) Assessed value (total equalized) $ 3,145,832 $ 3,151,655 $ 3,150,148 $ 3,151,989 Real property 2,827,209 2,875,134 2,904,055 2,916,488 Tangible personal property 212,829 177,540 147,887 136,190 Property assessed by State 105,794 98,981 98,206 99,311 Tangible valuation of motor vehicles 401,805 396,701 387,036 381,608 Local source of revenue (in dollars)10 Taxes $ 120,921,994 $ 125,833,535 $ 124,135,356 $ 124,028,374 Special assessment taxes 32,572,786 33,887,081 34,251,394 33,647,870 Franchise fees 34,272,504 33,720,386 36,923,114 36,778,909 Local sales taxes 51,255,304 49,444,212 48,239,962 54,919,387 Intergovernmental 94,087,216 74,089,262 72,227,757 64,002,864 Licenses and permits 6,511,130 5,892,074 6,647,443 6,735,050 Fines and penalties 9,443,776 10,429,819 10,640,805 10,345,485 Rentals 5,571,106 4,445,629 4,578,091 4,266,032 Sale of property - - - - Interest earnings 8,159,766 3,594,268 2,160,107 1,022,318 Charges for services and sales 10,747,517 10,541,570 10,672,877 12,018,549 Other 19,565,851 35,208,572 23,219,430 21,282,560 Total $393,108,950 $387,086,408 $373,696,336 $369,047,398

1 Source: U.S. Department of Commerce, Bureau of the Census. 2 Source: U.S. Department of Commerce, Bureau of the Census, MSA population for 2008-2009 is based on the four-county MSA delineation; 2010-2017 population is based on the five-county delineation, which includes Kingman County, which was added in February 2013. 3 Source: U.S. Department of Commerce, Bureau of Economic Analysis. 4 Real dollars are calculated using millions of chained 2009 dollars 5 FDIC (for the most up-to-date information see the FDIC's home page at http://www.fdic.gov). 6 Office of Central Inspection, City of Wichita. 7 Derived from Kansas Department of Revenue Tax Collection reports by the Center for Economic Development and Business Research, Wichita State University. 8 Kansas Department of Labor, Labor Market Information Services. 9 The service industries include information, finance, professional and business services, educational and health services, leisure and hospitality and other services. Industry sector data may not equal total employment for all industries due to rounding. 10 Includes all govenmental funds. 11 Includes all long-term general obligation debt. 12 2006-2009 and 2011-2015 are based on the U.S. Census Bureau's population estimates; 2010 is based on the Decennial Census population; all data are for the five-county Wichita MSA.

F-23 2012 2013 2014 2015 2016 2017

385,720 387,178 388,333 389,081 390,116 390,591 636,015 638,177 640,429 642,782 644,680 645,628

$ 30,014 $ 28,700 $ 30,104 $ 32,109 $ 32,022 $ N/A 28,346 26,528 27,335 28,995 28,592 N/A

$ 47,187 $ 44,971 $ 46,995 $ 49,935 $ 49,672 $ N/A 44,565 41,568 42,672 45,092 44,351 N/A

$ 9,445,000 $ 9,752,000 $ 10,056,000 $ 10,489,000 $ 10,772,339 $10,967,542 36 39 39 39 39 39 145 150 149 146 146 143

$ 3,111,573 $ 3,124,331 $ 3,148,264 $ 3,191,582 $ 3,270,190 $ 3,365,221 2,889,209 2,910,786 2,963,148 3,008,647 3,091,273 3,188,988 125,492 118,751 93,990 83,860 76,025 67,904 96,872 94,794 91,126 99,075 102,892 108,329 385,358 396,435 404,427 417,145 428,945 436,201

$ 125,089,390 $ 126,105,605 $ 127,140,299 $ 128,692,340 $ 131,148,813 $ 133,427,373 33,327,280 33,668,720 31,509,150 29,797,352 28,665,373 28,990,731 37,406,752 39,282,857 41,863,247 44,304,262 44,766,245 45,563,488 54,095,496 58,519,220 56,142,981 57,958,523 58,659,642 57,682,854 61,056,534 59,822,985 57,529,602 70,185,255 82,920,600 93,655,892 7,427,342 7,468,455 7,241,204 7,732,458 8,096,332 2,856,696 10,475,820 9,391,142 9,857,494 9,766,868 9,120,868 8,270,546 4,737,173 4,400,154 4,203,402 6,227,393 4,328,376 4,215,848 - - 82,197 236,469 1,304,552 - 551,058 850,546 1,456,138 1,725,123 2,255,499 3,921,036 10,647,415 11,052,211 12,121,800 21,947,389 23,524,718 19,926,598 12,985,783 13,354,297 22,034,542 13,503,498 13,937,326 20,794,850 $357,800,043 $363,916,192 $371,182,056 $392,076,930 $408,728,344 $419,305,912

F-24 CITY OF WICHITA, KANSAS

HISTORICAL SUMMARY OF ECONOMIC INDICATORS (CONTINUED)

2008 2009 2010 2011 Construction (MSA)6 New dwelling units single family homes 1,013 642 522 409 Value of construction permits (in dollars) $ 514,553,353 $ 440,256,156 $ 462,259,482 $ 451,016,853 New residential 174,509,993 81,497,241 69,009,542 70,951,826 Non-residential 188,118,374 212,166,613 168,317,469 175,589,218 Additions, remodels and repairs 151,924,985 146,592,303 224,932,472 204,475,809 Mill levy per $1,000 Assessed valuation 117.050 117.242 120.360 120.059

Retail Sales (MSA)7 Annually (in millions of $) Nominal $ 8,557.2 $ 8,089.2 $ 8,069.7 $ 8,415.3 Real 4 3,974.5 3,770.5 3,700.9 3,741.2 Per capita Nominal12 $ 14,046 $ 13,061 $ 12,952 $ 13,455

Employment Base(MSA)8 Total civilian labor force 321,841 326,679 319,314 314,443 Unemployment rate 4.5 8.2 8.6 7.7

Employment - all industries (establishment data)9 310,400 295,000 285,600 285,200 Manufacturing 67,700 58,300 52,900 52,400 Services 132,300 129,000 126,700 126,800 All others 110,400 107,700 106,000 106,000

Bonded Debt (in dollars) Gross bonded debt11,13 $ 432,681,285 $ 466,110,861 $ 518,189,355 $ 525,794,000 Debt service monies available 6,231,047 22,221,043 29,586,463 23,648,000 Debt payable from proprietary/component unit revenues 12,491,836 20,100,610 26,723,006 40,681,000 Debt payable from special assessments 227,550,000 241,420,000 255,270,000 269,630,000 Debt payable from local sales tax 129,165,000 119,540,000 130,730,000 123,455,000 Debt payable from transient guest tax 4,638,543 3,737,066 2,847,155 1,956,000 Net bonded debt 52,604,859 59,092,142 73,032,731 66,424,000 Ratio of bonded debt to market value (%) Net bonded debt 0.25 0.28 0.35 0.32 Special assessment debt 1.10 1.15 1.22 1.28 Bonded debt per capita (Wichita)($) Net bonded debt $ 143.79 $ 158.77 $ 190.75 $ 173.06 Special assessment debt 622.00 648.65 666.72 702.49

1 Source: U.S. Department of Commerce, Bureau of the Census. 2 Source: U.S. Department of Commerce, Bureau of the Census. 3 Source: U.S. Department of Commerce, Bureau of the Census. 4 Real dollars are calculated using the Consumer Price Index for All Urban Consumers. U.S. city average (1982-84 = 100). 5 FDIC (for the most up-to-date information see the FDIC's home page at http://www.fdic.gov). 6 Office of Central Inspection, City of Wichita. 7 Derived from Kansas Department of Revenue Tax Collection reports by the Center for Economic Development and Business Research, Wichita State University. 8 Kansas Department of Labor, Labor Market Information Services. 9 The service industries include information, finance, professional and business services, educational and health services, leisure and hospitality and other services. Industry sector data may not equal total employment for all industries due to rounding. 10 General, Special Revenue (excluding Federal and State Assistance Funds) and Debt Service Funds. 11 Includes all long-term general obligation debt. 12 2008-2009 and 2011-2017 are based on the U.S. Census Bureau's population estimates; 2010 is based on the Decennial Census population; Data from 2013 to 2017 are using five-county Wichita MSA. 13 In 2016, includes all long-term general obligation debt repayable from governmental and proprietary funds and related premiums/discounts per GASB 62.

F-25 2012 2013 2014 2015 2016 2017

418 538 550 568 594 597 $ 356,622,263 $ 478,581,745 $ 494,552,439 $ 595,471,431 $ 594,552,737 $ 998,801,774 98,155,489 143,865,046 134,658,241 204,641,931 200,016,627 195,388,209 82,628,001 134,812,174 182,064,671 170,790,897 202,868,607 154,312,776 175,838,773 199,904,526 177,829,526 220,038,604 191,667,504 649,100,790

120.305 120.602 120.601 119.847 - -

$ 8,831.6 $ 9,189.1 $ 9,483.2 $ 9,701.8 $ 9,790.8 $ 9,654.5 3,846.6 3,944.5 4,005.8 4,093.3 4,079.4 3,938.3

$ 14,058 $ 14,403 $ 14,386 $ 15,053 $ 15,187 $ 14,953

311,051 310,035 310,660 310,754 311,160 307,708 6.7 6.0 5.2 4.6 4.6 4.1

287,400 289,900 292,400 295,500 297,200 294,700 53,300 53,200 52,400 52,000 51,800 51,500 127,600 129,500 131,700 134,000 135,800 135,000 106,500 107,200 108,300 109,500 109,600 108,200

$ 558,037,000 $ 480,004,999 $ 630,375,000 $ 682,625,000 $ 668,347,000 $ 651,740,000 18,325,000 26,142,122 29,684,595 5,992,000 14,795,000 18,137,000 48,360,000 44,285,000 184,285,076 270,056,374 259,062,976 267,717,958 254,955,000 216,625,000 192,575,000 181,733,151 167,574,036 172,706,820 152,390,000 122,195,000 148,770,000 131,560,000 114,035,000 96,275,000 1,064,000 167,425 2,485,000 2,485,000 2,485,000 2,480,000 82,943,000 70,590,452 72,575,329 90,798,475 110,394,988 94,423,222

0.40 0.34 0.34 0.43 0.50 0.42 1.23 1.04 0.92 0.85 0.77 0.76

$ 214.95 $ 182.21 $ 186.66 $ 232.84 $ 283.09 $ 241.74 660.74 559.15 495.29 466.02 429.72 442.17

F-26

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APPENDIX G

AUDITED FINANCIAL INFORMATION

(THIS PAGE INTENTIONALLY LEFT BLANK)

Management’s Responsibility for the Financial Statements

Auditor’s Responsibility Kansas Municipal Audit and Accounting GuideGovernment Auditing Standards

Opinions

G-1 Other Matters

Required Supplementary Information

Supplementary and Other Information Code of Federal RegulationsUniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards Passenger Facility Charge Audit Guide for Public Agencies

Passenger Facility Charge Audit Guide for Public Agencies

Government Auditing Standards

Government Auditing Standards Government Auditing Standards

Allen, Gibbs & Houlik, L.C.

CITY OF WICHITA,KANSAS MANAGEMENT DISCUSSION AND ANALYSIS

This management discussion and analysis provides an overview of the City’s financial activities and performance for the fiscal year ended December 31, 2017. The management discussion and analysis is presented in conjunction with the transmittal letter at the front of this report and the City of Wichita’s financial statements, which follow this section. FINANCIAL HIGHLIGHTS The City’s net position increased $25.4 million during 2017 (excluding prior period adjustments). The most significant increases in net position occurred in the Water, Sewer and Stormwater Utility Funds. The decrease in net position for governmental activities included a $29.7 million charge to highways and streets expense due to a change in estimate, described in more detail in Note 22 - Change in Accounting Estimate. Approximately 78% of the City’s total assets are held in capital assets. The cost of governmental activities was $409.2 million in 2017 compared to $342.5 million in 2016, an increase of $66.7 million or 19.5%. This change was primarily due to a higher level of 2017 expenses reported in highways and streets and general government functions as compared to the prior year, which includes the $29.7 million change in estimate in the highways and streets function. This expense was recorded for improvements which were not eligible for capitalization, mostly representing the City’s contribution for infrastructure improvements that will be maintained by other entities. The cost of business-type activities was $197.7 million in 2017 compared to $191.7 million in 2016, an increase of $6.0 million or 3.1%, due primarily to increased personnel services, depreciation and other non-operating expenses. Property tax revenue increased $2.4 million or 2.2% in 2017 from the prior year. In 2017, bonded debt increased by $24.2 million, primarily due to the issuance of bonds to fund Sewer Utility projects. In governmental activities, capital grants and contributions increased $25.8 million in 2017 due primarily to: (1) STAR bonds of $21.1 million, payable by the State of Kansas, which are dedicated to the construction of an additional youth multi-sports complex and (2) the State Office Building parking garage, valued at $7.8 million, which was assigned to the City pursuant to the dissolution of the Wichita Public Building Commission (WPBC) in 2017. On a budgetary basis, the General Fund reported $1.8 million of revenue and other sources in excess of expenditures and other uses for 2017. On December 31, 2017, the General Fund reported a budgetary fund balance of 19.6% of the 2018 Adopted Budget, including appropriated reserves of $25 million.

OVERVIEW OF THE FINANCIAL STATEMENTS The Comprehensive Annual Financial Report consists of four major sections: the Introductory, Financial, Statistical and Single Audit Sections. The financial statements include government-wide financial statements, fund financial statements and notes to the financial statements. Other supplementary information, provided in addition to the basic financial statements, is located in the sections titled Additional Information, Statistical and Water Utilities. The Water Utilities Section provides specific information for water and sewer revenue bondholders. The City presents two kinds of statements, each providing a different perspective of the City’s finances. The reporting focus is on both the City as a whole (government-wide) and the fund financial statements. The government-wide financial statements provide both long-term and short-term information about the City’s overall financial status. The fund financial statements focus on the individual parts of the City government, reporting the City’s operations in more detail than the government-wide statements. Both perspectives allow the user to address relevant questions, broaden the basis of comparison and enhance the City’s accountability. Government-wide Financial Statements The government-wide statements are prepared using accounting methods similar to those used by private-sector companies. The Statement of Net Position presents information on all of the City’s assets, liabilities, and deferred inflows/outflows of resources with the difference reported as net position. Over time, increases or decreases in net position will serve as a useful indicator of whether or not the financial position of the City is improving or deteriorating, absent extraordinary events. The Statement of Activities reports how the government’s net position changed during the most recent fiscal year. All changes in net position (current year’s revenues and expenses) are taken into account regardless of

-3 CITY OF WICHITA,KANSAS MANAGEMENT DISCUSSION AND ANALYSIS when cash is received or paid. Thus, revenues and expenses are reported in the Statement of Activities for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). The government-wide statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from functions that are intended to recover all or a portion of their costs through user fees and charges (business-type activities), and from the City’s discretely presented component unit, the Wichita Public Building Commission. Governmental activities of the City include general government, public safety, highways and streets, sanitation, health and welfare, and culture and recreation. Business-type activities include the water utility, sewer utility, airport authority, stormwater utility, golf course system and transit. Fund Financial Statements A fund is a group of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Wichita, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The fund financial statements provide more information about the City’s individual funds - not the City as a whole. All of the funds of the City of Wichita can be segregated into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Governmental fund financial statements focus on cash flows and other financial assets that can be readily converted to cash and are available in the near future to finance the City’s programs. The differences between the short-term view of governmental fund statements and the long-term view of the governmental activities on the entity-wide financial statements are provided in reconciliations on pages A-17 and A-19. Primary differences are the impact of accounting for capital assets and long-term obligations. The City maintains 24 individual governmental funds. Information is presented separately on the governmental fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances for the funds considered major funds. Information for 20 nonmajor governmental funds is combined into a single, aggregated presentation. Individual fund data for each nonmajor governmental fund is provided in the form of combining statements beginning on page B-1. The City of Wichita adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund on page A-21, demonstrating compliance with the appropriated budget. For the purposes of this report, the General Fund consists of several separately appropriated subfunds. Budgetary compliance with the appropriated subfunds of the General Fund is provided in the Governmental Funds Section of this report, which begins on page B-1. A more detailed budgetary statement of the General Fund, as appropriated, is also provided in the Governmental Funds Section, along with other supplementary budgetary governmental fund statements. Proprietary funds, which include enterprise and internal service funds, account for services for which the City charges customers a fee. Enterprise funds account for water utility, sewer utility, airport authority, stormwater utility, golf course system, and transit operations. Internal service funds are used to accumulate and allocate costs internally among the City’s various functions. Internal service funds account for the City’s information technology, fleet and self insurance programs. Because internal services primarily benefit governmental rather than business-type functions, the assets and activities of the internal service funds have predominately been included with governmental activities in the government-wide financial statements. Proprietary funds report the same types of information as the government-wide financial statements, but in greater detail. The proprietary fund financial statements provide separate information for the Water, Sewer and Stormwater Utilities and the Airport Authority Funds, all of which are considered to be major funds of the City. The nonmajor funds are consolidated into an aggregated presentation on the proprietary fund financial statements, as are the internal service funds. Individual fund data for proprietary funds (enterprise and internal service funds) is provided in the form of combining statements beginning on pages C-1and D-1of this report. Fiduciary funds are used to account for activities for which the City is the trustee or fiduciary, and like proprietary funds, present information based on the full accrual basis of accounting. Fiduciary funds include the City’s pension plans, a private purpose trust fund and other agency funds which may only be used for specified purposes due to trust arrangements. -4 CITY OF WICHITA,KANSAS MANAGEMENT DISCUSSION AND ANALYSIS

The City is responsible for ensuring that the assets reported in fiduciary funds are used for the intended purposes only. Activities conducted in a fiduciary capacity are excluded from the City’s government-wide financial statements because the City is prohibited from using fiduciary assets to finance its operations. Other Financial Information As mentioned previously, the Comprehensive Annual Financial Report includes other information in addition to the basic financial statements, as follows: Notes to the financial statements provide information essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements immediately follow the basic financial statements. Required Supplementary Information is presented following the notes to the financial statements, and includes information concerning the City’s pension plans and other post-employment benefits. Additional Information is presented beginning on page G-1 and includes supplementary schedules pertaining to long-term debt obligations and insurance policies in force as of December 31, 2017. The Statistical Section, presented beginning on page H-1, provides detailed information as a context for understanding what the information in the financial statements, note disclosures and required supplementary information says about the City’s overall financial health. The Statistical Section provides information about financial trends, revenue capacity, debt capacity, demographic and economic indicators, as well as other operating information. The Single Audit Section of this report includes information about federal participation in various projects and programs of the City and relevant reports of the City’s independent auditor. The Water Utilities Section provides for the specific informational needs of water and sewer revenue bondholders. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net Position of the Primary Government and Component Unit The net position of the primary government, which can serve as a useful indicator of a government’s financial position over time, shows an increase of $25.4 million for 2017 (excluding prior period adjustments). Approximately 79% of the City’s net position consists of its net investment in capital assets (e.g., land, buildings, improvements, equipment), net of related debt. The City uses capital assets to provide services to citizens; consequently, capital assets are not available for future spending. An additional portion of the net position represents resources with external restrictions dedicated to specific purposes. The unrestricted portion of the net position that may be used for the government’s ongoing operations is $106 million. Net Position – Primary Government As of December 31, (in millions) Governmental Activities Business-type Activities Total Primary Government 2017 2016 2017 2016 2017 2016 Current and other assets $ 525.4 $ 511.9 $ 291.4 $ 235.1 $ 816.8 $ 747.0 Capital assets 1,290.5 1,287.0 1,683.4 1,671.3 2,973.9 2,958.3 Total assets 1,815.9 1,798.9 1,974.8 1,906.4 3,790.7 3,705.3 Total deferred outflows of resources 85.2 96.3 32.4 35.1 117.6 131.4

Non-current liabilities 545.1 559.1 779.9 725.9 1,325.0 1,285.0 Other liabilities 119.0 94.2 31.3 50.4 150.3 144.6 Total liabilities 664.1 653.3 811.2 776.3 1,475.3 1,429.6 Total deferred inflows of resources 128.2 127.5 3.5 3.8 131.7 131.3 Net position: Net investment in capital assets 860.2 831.1 966.4 956.4 1,826.6 1,787.5 Restricted net position 228.1 244.9 140.6 132.5 368.7 377.4 Unrestricted net position 20.5 38.4 85.5 72.5 106.0 110.9 Total net position $ 1,108.8 $ 1,114.4 $ 1,192.5 $ 1,161.4 $ 2,301.3 $ 2,275.8

-5 CITY OF WICHITA,KANSAS MANAGEMENT DISCUSSION AND ANALYSIS

The following table summarizes the revenues and expenses that contributed to the increase in the net position of the primary government. For the primary government, total revenues increased by $6.3 million while expenses increased $72.7 million from the prior year. Changes in Net Position – Primary Government For the Year Ended December 31, (in millions) Governmental Activities Business-type Activities Total Primary Government 2017 2016 2017 2016 2017 2016 Revenues Program revenues Charges for services $ 42.2 $ 58.6 $ 187.6 $ 175.7 $ 229.8 $ 234.3 Operating grants and contributions 49.2 49.0 6.8 7.4 56.0 56.4 Capital grants and contributions 76.8 51.0 22.3 33.5 99.1 84.5 General revenues Property taxes 110.6 108.2 - - 110.6 108.2 Sales taxes 57.7 58.7 - - 57.7 58.7 Franchise taxes 45.6 44.8 - - 45.6 44.8 Motor vehicle taxes 15.7 15.7 - - 15.7 15.7 Transient guest taxes 7.1 7.2 - - 7.1 7.2 Investment earnings 3.9 2.2 0.4 0.1 4.3 2.3 Miscellaneous 5.7 12.6 0.7 1.3 6.4 13.9 Total revenues 414.5 408.0 217.8 218.0 632.3 626.0

Expenses General government 62.7 47.6 - - 62.7 47.6 Public safety 150.5 151.4 - - 150.5 151.4 Highways and streets 101.1 44.7 - - 101.1 44.7 Sanitation 5.0 5.0 - - 5.0 5.0 Health and welfare 33.4 35.0 - - 33.4 35.0 Culture and recreation 45.2 43.9 - - 45.2 43.9 Interest on long-term debt 11.3 14.9 - - 11.3 14.9 Water Utility - - 77.8 75.3 77.8 75.3 Sewer Utility - - 50.0 48.5 50.0 48.5 Airport Authority - - 39.9 38.7 39.9 38.7 Stormwater Utility - - 9.9 10.1 9.9 10.1 Golf Course System - - 5.3 5.0 5.3 5.0 Transit - - 14.8 14.1 14.8 14.1 Total expenses 409.2 342.5 197.7 191.7 606.9 534.2

Excess before transfers, special item and period adjustments 5.3 65.5 20.1 26.3 25.4 91.8

Special item – loss on sale of Hyatt Hotel - (11.8) - - - (11.8) Transfers (11.0) (4.1) 11.0 4.1 - - Increase in net position (5.7) 49.6 31.1 30.4 25.4 80.0

Net position, beginning of year 1,114.4 1,044.5 1,161.4 1,119.9 2,275.8 2,164.4 Prior period adjustments 0.1 20.3 - 11.1 0.1 31.4

Net position, end of year $ 1,108.8 $ 1,114.4 $ 1,192.5 $ 1,161.4 $ 2,301.3 $ 2,275.8

-6 CITY OF WICHITA,KANSAS MANAGEMENT DISCUSSION AND ANALYSIS

2017 REVENUES OF THE PRIMARY GOVERNMENT 2017 EXPENSES OF THE PRIMARY GOVERNMENT ($632.3 MILLION TOTAL REVENUES) ($606.9 MILLION TOTAL EXPENSES) Franchise taxes Transient guest Motor vehicle Transit 2.4% Golf 0.90% Sales taxes 7.2% taxes 2.5% taxes 1.1% Stormwater General 9.1% Airport 6.60% 1.60% government Other 1.7% 10.30% Property Sewer 8.20% Public safety taxes 17.5% Charges for services 36.3% Water 12.80% 24.80%

Interest 1.90%

Capital grants & Culture & Highways & contributions Operating recreation streets 16.70% 15.7% grants 8.9% 7.50% Sanitation Health & 0.80% welfare 5.50%

Governmental activities: The net position of governmental activities decreased $5.7 million in 2017 (excluding prior period adjustments). Governmental revenues, excluding transfers, were $6.5 million higher in 2017 as compared to 2016. The most significant increase in revenues was in capital grants and contributions, which recorded a $25.8 million increase over 2016. Property taxes also increased $2.4 million in 2017 over 2016. These increases were offset by a $16.4 million decrease in charges for services. This decrease was primarily related to the allocation of the revenue and expense of the internal service funds to governmental activities. The internal service funds reported an increase in net position of $0.3 million in 2017, compared to an increase of $6.7 million in 2016. The $66.7 million increase in expenses from the prior year for governmental activities largely consists of a $56.4 million increase in highways and streets and a $15.1 million increase in general government expenses. These changes are related primarily to an increased level of non-capital expenses, including outlays for assets which will be maintained by other entities, such as freeways, which are reported in those functions. The net investment in governmental capital assets increased $29.1 million through a combination of capital additions, offset by reductions in long-term debt. Cash and cash equivalents were $21 million higher at the close of 2017 due primarily to funds held in escrow for STAR bond projects. Business-type activities: A $31.1 million increase in the net position of business-type activities (excluding prior period adjustments) was recorded in 2017. The greatest increase in net position resulted from activities in the Sewer Utility Fund, followed by activities in the Water Utility and Stormwater Utility Funds. Each of the utilities implemented rate increases in 2017, which contributed to the overall increase for charges for services of $11.9 million for business-type activities. Additionally, the total number of customers of utilities also increased during 2017. Discretely presented component unit: The Wichita Public Building Commission (WPBC) is a discretely presented component unit of the City of Wichita that acquires and finances assets for the City of Wichita or other governmental units. In November 2017, the WPBC Board dissolved the WPBC and assigned all of its assets, including a parking garage, proceeds from the sale of the State Office Building and the State Office Building fund balance to the City of Wichita.

ANALYSIS OF THE GOVERNMENT’S FUNDS Governmental Funds The City of Wichita uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements and budgetary compliance. The focus of the governmental funds is to provide information on near-term inflows, outflows and spendable resources. The governmental funds reported a combined ending fund balance of $94.1 million in 2017 as compared to $103.5 million at the close of 2016. The $9.4 million decrease in fund balance largely results from outlays in the capital projects funds offset by increases in the Debt Service Fund related to the issuance of long-term debt.

-7 CITY OF WICHITA,KANSAS MANAGEMENT DISCUSSION AND ANALYSIS

The General Fund is the major operating and taxing fund of the City of Wichita. At the close of 2017, the unassigned General Fund Revenues fund balance of the General Fund and its combined (in millions) subfunds was $33.3 million compared to $36.4 million last $230 year. Revenue of the General Fund and its subfunds, $220 excluding transfers, was $2.9 million above last year, with $210 expenditures also $3.1 million higher than last year. $200 Millions The increase in revenues primarily resulted from a $1.8 $190 million increase in investment earnings due to changing $180 market conditions, as well as a $1.5 million increase in 2012 2013 2014 2015 2016 2017 property taxes and a $1.9 million increase in other revenues. General Fund Expenditures by Function Fiscal years 2013 through 2017 (dollars in millions) 2017 Percent 2013 2014 2015 2016 2017 of Total General government $ 32.0 $ 32.3 $ 33.1 $ 34.3 $ 34.6 15.5% Public safety 119.6 120.8 121.9 126.2 128.0 57.5% Highways and streets 16.7 18.4 20.3 19.8 20.2 9.1% Sanitation 2.6 2.7 2.7 2.7 2.7 1.2% Health and welfare 3.8 3.6 3.7 4.0 4.0 1.8% Culture and recreation 27.5 27.9 30.2 32.7 33.3 14.9% Total expenditures $ 202.2 $ 205.7 $ 211.9 $ 219.7 $ 222.8 100.0%

The fund balance of the Debt Service Fund and its subfunds increased $20.3 million in 2017, primarily related to the issuance of long-term debt. In the Street Improvement Fund, ongoing expenditures for street and arterial improvements contributed to the $9.9 million decrease in fund balance during 2017. The fund balance will be restored when permanent financing for those projects is issued. Capital expenditures of $68.6 million were recorded in the Street Improvement Fund in 2017, representing an increase of $4 million from the prior year. In the Public Improvement Construction Fund, fund balance decreased $7.7 million during 2017. Capital expenditures of $38.4 million increased $21.3 million from 2016 and included $18.5 million for the Advanced Learning Library. Fund balance in the nonmajor governmental funds declined $12.5 million from 2016, excluding prior period adjustments. The majority of the decrease was due to a higher level of transfers made from the Local Sales Tax CIP Fund to the Street Improvement Fund to fund expenditures for freeway improvements in 2017 as compared to 2016. Proprietary Funds The increase in net position from operations of the Enterprise Funds totaled $30.6 million in 2017, primarily due to operating income reported by the Water, Sewer and Stormwater Utility Funds. The Water Utility, which accounts for the operation and maintenance of the water supply system, implemented a rate increase at the beginning of 2017 to ensure adequate resources for operations, capital maintenance and capital investments, resulting in an increase in net position of $9 million. The Sewer Utility, which accounts for the wastewater treatment system, also implemented a 2017 rate increase which contributed to higher revenues of $2.8 million. The operating income of $15.2 million, combined with nonoperating expenses and capital contributions, yielded a $12.2 million increase in the net position of the Sewer Utility. The Airport Authority Fund captures the financial activity for the Dwight D. Eisenhower National Airport, serving commercial airlines, as well as Jabara Airport which serves smaller aircraft. The net position of the Airport Authority Fund increased approximately $1.1 million during 2017, compared to an increase of $8.7 million in 2016. This change was primarily due to a decrease in capital contributions of $9.1 million compared to 2016.

-8 CITY OF WICHITA,KANSAS MANAGEMENT DISCUSSION AND ANALYSIS

The Stormwater Utility is funded from fees paid by Net Position of Proprietary Funds customers. The Utility operates eleven pump stations, (dollars in thousands) which move excess surface water from heavy rains. The 2017 2016 Utility also maintains the Wichita-Valley Center Water Utility $ 469,752 $ 460,763 Floodway, a levee system that redirects excess river Sewer Utility 320,595 308,423 water around the city. The net position of the Stormwater Airport Authority 208,850 207,761 Utility Fund increased $5.9 million in 2017. In April 2017, Stormwater Utility 164,615 158,717 the City Council approved a monthly base fee and new Golf Course System (2,140) (1,203) fee structure for residential customers to address equity Transit 26,374 22,994 concerns and to provide additional resources for capital Total $ 1,188,046 $ 1,157,455 improvements. Operating revenues of the utility increased $2.7 million, while operating expenses of the utility decreased approximately $0.7 million. In the nonmajor enterprise funds, the net position of the Golf Fund continued to decline by $0.9 million resulting in a negative net position of $2.1 million. To provide financial assistance to the fund, an interfund loan with a long-term repayment plan is recorded. Also in the nonmajor enterprise funds, the Transit Fund has benefited from temporary loans to strengthen the fund’s financial position. A loss of $6.1 million before capital contributions and operating transfers was recognized for 2017. With capital contributions of $4.7 million and transfers of $4.8 million, the net position of the Transit Fund increased $3.4 million in 2017. On December 31, 2017, $1 million in interfund loans were outstanding. Additionally, as cash needs fluctuate, operations are augmented with the City’s pooled funds to address temporary cash deficiencies. General Fund Budgetary Highlights Total revenues at year-end fell short of projections in the original and final General Fund Balance budgets, but were $3.4 million higher than 2016. Actual $60 25% expenditures were $3.6 million below the final budget and 20% were 1.5% higher than 2016 expenditures. After $40 15% transfers, the General Fund unencumbered fund balance

Millions 10% increased $1.8 million in 2017. $20 5% In 2016, the fund balance of the General Fund increased $0 0% $21.5 million, mostly due to the sale of the Hyatt Hotel for 2012 2013 2014 2015 2016 2017 $20 million. Expenditures increased $3.2 million from 2016, with public safety expenditures increasing $2.2 Fund Balance % of Next Year's Budget million. Police and Fire represent the bulk of public safety services and comprise the largest portion of General Fund expenditures. The higher cost of personnel is the most significant reason for the increase in expenditures for most functions within the General Fund. On a budgetary basis, the General Fund ended 2017 with a fund balance of $51.3 million, or 19.6% of the 2018 Adopted Budget, which includes an appropriated reserve of $25 million for emergency needs.

CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of 2017, the City of Wichita reported $3 billion in capital assets net of depreciation, which is comparable to the amount reported at the end of 2016. Assets are acquired through the City’s direct investments, capital contributions, grants and from street and right-of-way dedications. The net investment in capital assets includes land, buildings, machinery, equipment, vehicles, parks, roads, water and sewer treatment facilities, airports, golf courses and many other assets. Additional information on changes in capital assets can be found in Note 6 to the financial statements.

-9 CITY OF WICHITA,KANSAS MANAGEMENT DISCUSSION AND ANALYSIS

Capital Assets Net of Depreciation As of December 31, (in thousands) Governmental Activities Business-type Activities Total Primary Government Percent 2017 2016 2017 2016 2017 2016 Change

Land $ 294.3 $ 289.9 $ 43.1 $ 43.1 $ 337.4 $ 333.0 1.3% Airfields - - 36.0 40.2 36.0 40.2 (10.4%) Buildings and improvements 217.9 193.4 1,390.5 1,386.2 1,608.4 1,579.6 1.8% Equipment 31.0 35.3 104.1 112.1 135.1 147.4 (8.3%) Infrastructure 620.5 617.7 - - 620.5 617.7 0.5% Construction in progress 126.8 150.7 109.7 89.7 236.5 240.4 (1.6%) Total $ 1,290.5 $ 1,287.0 $ 1,683.4 $ 1,671.3 $ 2,973.9 $ 2,958.3 0.5%

Major capital outlays in the City’s governmental activities during 2017 included the following projects: Major freeway and arterial streets totaling approximately $58.7 million, including East Kellogg improvements of $27.5 million and Pawnee, Hydraulic to Grove improvements of $4.6 million. A portion of these outlays represent amounts expended for projects which will be contributed to other entities and will therefore not be capitalized by the City. Bridge improvements totaling $3 million. Neighborhood paving projects totaling $6.9 million. Various improvements of park facilities and playgrounds totaling $2 million. Central Library relocation investment totaling $18.5 million. Contributions toward the construction of the Law Enforcement Training Center of $5 million. Replacement of fleet vehicles totaling $4 million.

The most significant capital asset investments in 2017 for the business-type activities are listed below: Transit bus and van purchases for public transportation totaling $3 million. Automated water meter project totaling $1.3 million. Improvements to the City’s water utility infrastructure totaling approximately $24.3 million, including repairs and rehabilitation of water mains of $1.6 million. Improvements to the City’s sewer utility infrastructure totaling approximately $18.1 million, including sanitary sewer reconstruction and rehabilitation totaling $3.8 million, improvements to the Four Mile Creek Wastewater Plant of $7.7 million and force main rehabilitation and improvements of $3 million. Dwight D. Eisenhower Airport improvements totaling $6.7 million.

Long-term Debt The City primarily finances capital projects with general obligation bonds/notes, revenue bonds, grants, capital contributions and cash. The most significant of the financing tools are general obligation bonds based on the full faith and credit of the City and revenue bonds based on the future earnings of the business-type activities. Projects that rely most heavily upon property taxes for repayment of general obligation bonds include arterial streets, bridges, parks and other public improvements. General obligation bonds issued for neighborhood improvements are repaid from special assessments that are levied on properties benefiting from such improvements. Capital financing costs are also repaid from enterprise, internal service and capital project funds, using a combination of resources, including a dedicated portion of the county-wide local sales tax.

The City adopts a ten-year Capital Improvement Program (CIP). The first two years of the plan serve as a capital budget for purposes of project initiation and the remaining period is a planning tool. The City of Wichita holds a rating of AA+ from Standard and Poor’s and a rating of Aa1 from Moody’s Investor Service. The Water and Sewer Utilities hold a rating of AA- from Standard and Poor’s. At year-end, the City had $1.04 billion in outstanding bonds. Of this amount, outstanding general obligation bonds payable from governmental activities revenue sources totaled $337.1 million. The City also held $90.3 million in general obligation temporary notes. The most significant temporary notes outstanding were $84.9 million in governmental capital project funds. Bonded debt of the City of Wichita increased by $24.2 million in 2017. -10 CITY OF WICHITA,KANSAS MANAGEMENT DISCUSSION AND ANALYSIS

General Obligation and Revenue Bonds As of December 31, (in millions) Governmental Activities Business-type Activities Total Primary Government Revenue source 2017 2016 2017 2016 2017 2016 Ad valorem property taxes $ 47.6 $ 58.2 $ - $ - $ 47.6 $ 58.2 Special assessments 172.7 167.6 - - 172.7 167.6 Tax increment financing 18.0 20.8 - - 18.0 20.8 Transient guest tax 2.5 2.5 - - 2.5 2.5 Local sales tax 99.4 115.5 - - 99.4 115.5 Enterprise funds - - 699.9 651.3 699.9 651.3 Total $ 340.2 $ 364.6 $ 699.9 $ 651.3 $ 1,040.1 $ 1,015.9 Kansas state statutes limit the amount of general obligation bonds a City can issue to 30% of the equalized tangible valuation. The 2017 limitation for the City was $1.1 billion, with a legal debt margin of $833.8 million. More detailed information regarding long-term debt is located in Note 9 to the financial statements, the Additional Information Section, as well as the Statistical Section of this report.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET1 The unemployment rate declined in 2017 in the Wichita area, which was the seventh consecutive year unemployment either declined or held steady in the local economy after peaking in 2010. The Wichita MSA has had a lower unemployment rate than the City of Wichita during this period, though the gap between the two has narrowed as the economy nears full employment. In the coming year, the unemployment rate is expected to modestly decline, with large decreases unlikely due to the already low level of unemployment in the area. While still unlikely in the next 12 months, the risk of recession, nationally and locally, continues to increase as the current expansion lengthens, now in its eighth year.

Other economic indicators suggest that the local economy will likely Average Annual Unemployment Rates2 continue to grow as well. The Wichita Leading Index, a measure of Wichita the expected performance of the economy over the next six months, Wichita MSA Nation improved in 2017 to 96.4 index points, a 1.3% increase over its 2014 5.6% 5.2% 6.2% 2016 level. In December 2017, the index reached its highest value 2015 5.0% 4.6% 5.3% since the 2008 recession, due to improvements in aircraft 2016 4.8% 4.6% 4.9% production levels and the overall Kansas economy. 2017 4.4% 4.2% 4.4% Housing demand has continued to grow, with 2017 total home sales nearing their pre-recession peak from 2006 and the median sales price reaching a new high in 2017. The number of building permits for new single-family dwellings increased 0.5% in 2017 relative to 2016 levels, and the value of those permits increased 10.3%. The number of permits is only just over a third of the level averaged in the pre-recession years of 2004 to 2007 and is lower than any pre-2009 total dating back to 1975. The apartment vacancy rate increased slightly from 6.4% to 6.6% as over 1,000 new units were added to the local market in 2017. Over 1,000 additional units are expected to be added to the market within the next two years as demand for apartments remains high in the city. Continued demand for homes and apartments should help fuel increases in construction activity in 2018 and beyond. The nonresidential real estate market also continued to improve in 2017. The value of nonresidential building permits in 2017 was more than double that of 2016, with several large remodeling and renovation projects causing much of the increase. Declining vacancy rates and increased rents are indicators of the improving market conditions and increased demand in the office, retail and industrial markets. The overall office vacancy rate fell from 21.3% to 19.6% while the asking rents increased by 2% in Class A spaces. In the retail market, rents increased by 6.1% while the vacancy rate declined by 3%. The non-aircraft industrial market had the largest improvement in its vacancy rate, which declined from 9.6% in 2016 to 4.5% in 2017 while rents increased

1 Economic information was compiled by Center for Economic Development and Business Research, W. Frank Barton School of Business, Wichita State University. 2 Unemployment statistics reflect revisions made by the Kansas Department of Labor to the data as originally reported.

-11 CITY OF WICHITA,KANSAS MANAGEMENT DISCUSSION AND ANALYSIS by 2.8%3. The aircraft industry has also seen positive signs in the past year, with Spirit AeroSystems committing over $1 billion to improvements to their Wichita facilities. The Wichita economy has several positive indicators that suggest the Wichita economy is likely to continue to grow in 2018. Low unemployment and tightening markets in residential and commercial real estate are both signs that the local economy is thriving and reaching its full potential. The local economy still has several risk factors for the coming years, including exposure to potential recessions at the national level, the Wichita manufacturing’s heavy concentration in the business jet market, and state and national policy uncertainty. Unless these risk factors substantially slow growth in the local economy, the Wichita area economy is expected to continue its modest, consistent growth in 2018.

CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is designed to provide a general overview of the City of Wichita’s finances for individuals with such an interest. Additional information is provided within the notes to the financial statements. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director of Finance, City of Wichita, Kansas, 455 North Main Street, 12th Floor, Wichita, KS 67202.

3 NAI Martens, 2018 Forecast. http://www.naimartens.com/Portals/227/2018%20Forecast.pdf

-12 CITY OF WICHITA, KANSAS

STATEMENT OF NET POSITION

December 31, 2017

Primary Government Component Unit Wichita Public Governmental Business-type Building Activities Activities Total Commission ASSETS Cash and cash equivalents $ 174,740,929 $ 77,784,445 $ 252,525,374 $ - Investments 3,349,763 - 3,349,763 - Receivables, net: Due from other agencies 6,349,862 4,570,069 10,919,931 - Accounts receivable 276,966,975 25,287,216 302,254,191 - Notes receivable 1,462,821 - 1,462,821 - Internal balances 3,023,287 (3,023,287) - - Inventories 1,035,660 2,657,576 3,693,236 - Prepaid items 2,102,059 825,981 2,928,040 - Restricted assets: Temporarily restricted: Cash and cash equivalents 54,998,941 177,926,874 232,925,815 - Investments 1,086,000 - 1,086,000 - Net investment in direct financing leases - 5,460,000 5,460,000 - Permanently restricted: Investments 235,437 - 235,437 - Capital assets: Land and construction in progress 421,085,054 152,821,905 573,906,959 - Other capital assets, net 869,462,033 1,530,534,595 2,399,996,628 - Total capital assets 1,290,547,087 1,683,356,500 2,973,903,587 - Total assets 1,815,898,821 1,974,845,374 3,790,744,195 -

DEFERRED OUTFLOWS OF RESOURCES Unamortized refunding costs 693,100 18,019,592 18,712,692 - Deferred outflows related to pensions 84,553,629 14,355,346 98,908,975 - Total deferred outflows of resources 85,246,729 32,374,938 117,621,667 -

LIABILITIES Accounts payable and other liabilities 30,430,180 12,501,646 42,931,826 - Accrued interest payable 2,738,932 5,695,696 8,434,628 - Temporary notes payable 84,900,772 5,439,228 90,340,000 - Deposits 787,105 4,484,509 5,271,614 - Unearned revenue 66,603 3,142,110 3,208,713 - Due to other agencies 104,230 - 104,230 - Noncurrent liabilities, including claims payable: Due within one year 67,404,648 39,740,234 107,144,882 - Due in more than one year 477,698,549 740,199,450 1,217,897,999 - Total liabilities 664,131,019 811,202,873 1,475,333,892 -

DEFERRED INFLOWS OF RESOURCES Deferred revenue 102,879,719 - 102,879,719 - Deferred inflows related to pensions 25,348,596 3,469,669 28,818,265 - Total deferred inflows of resources 128,228,315 3,469,669 131,697,984 -

NET POSITION Net investment in capital assets 860,154,726 966,424,643 1,826,579,369 - Restricted for: Capital projects 14,593,731 9,554,131 24,147,862 - Highways and streets 2,957,568 - 2,957,568 - Debt service 180,661,179 - 180,661,179 - Revenue bond covenants - 131,054,513 131,054,513 - Cemetery: Expendable 1,265,719 - 1,265,719 - Nonexpendable 235,437 - 235,437 - Other purposes 28,371,809 - 28,371,809 - Unrestricted 20,546,047 85,514,483 106,060,530 - Total net position $ 1,108,786,216 $ 1,192,547,770 $ 2,301,333,986 $ -

The accompanying notes to the financial statements are an integral part of this statement.

-13 CITY OF WICHITA, KANSAS

STATEMENT OF ACTIVITIES

For the year ended December 31, 2017

Program Revenues

Charges for Operating Grants Capital Grants Expenses Services and Contributions and Contributions FUNCTIONS/ PROGRAMS Primary government: General government $ 62,657,254 $ 24,336,947 $ 2,843,469 $ 9,087,653 Public safety 150,547,674 3,243,946 2,534,245 241,189 Highways and streets 101,126,962 3,584,711 15,127,235 46,202,852 Sanitation 5,034,804 4,709,688 - - Health and welfare 33,392,159 2,590,218 26,224,990 49,174 Culture and recreation 45,189,422 3,706,770 2,488,171 21,210,600 Interest on long-term debt 11,258,183 - - - Total governmental activities 409,206,458 42,172,280 49,218,110 76,791,468

Business-type activities: Water Utility 77,795,021 81,026,150 - 4,135,514 Sewer Utility 49,942,503 57,409,205 - 1,681,498 Airport Authority 39,887,132 31,011,350 - 9,931,783 Stormwater Utility 9,936,548 11,896,611 - 1,856,267 Golf Course System 5,295,809 4,352,014 - - Transit 14,828,929 1,908,095 6,781,410 4,684,621 Total business-type activities 197,685,942 187,603,425 6,781,410 22,289,683

Total primary government $ 606,892,400 $ 229,775,705 $ 55,999,520 $ 99,081,151

Component unit: Wichita Public Building Commission $ 708,582 $ - $ - $ -

General revenues: Property taxes Sales taxes Franchise taxes Motor vehicle taxes Transient guest taxes Interest and investment earnings Miscellaneous Transfers Total general revenues and transfers

Change in net position

Net position - beginning, as previously reported Prior period adjustment Net position - beginning, restated

Net position - ending

The accompanying notes to the financial statements are an integral part of this statement.

-14 Net (Expense) Revenue and Changes in Net Position Primary Government Component Unit Wichita Governmental Business-type Public Building Activities Activities Total Commission

$ (26,389,185) $ - $ (26,389,185) $ - (144,528,294) - (144,528,294) - (36,212,164) - (36,212,164) - (325,116) - (325,116) - (4,527,777) - (4,527,777) - (17,783,881) - (17,783,881) - (11,258,183) - (11,258,183) - (241,024,600) - (241,024,600) -

- 7,366,643 7,366,643 - - 9,148,200 9,148,200 - - 1,056,001 1,056,001 - - 3,816,330 3,816,330 - - (943,795) (943,795) - - (1,454,803) (1,454,803) - - 18,988,576 18,988,576 -

(241,024,600) 18,988,576 (222,036,024) -

- - -(708,582)

110,623,765 - 110,623,765 - 57,682,854 - 57,682,854 - 45,563,488 - 45,563,488 - 15,738,434 - 15,738,434 - 7,065,174 - 7,065,174 - 3,921,036 428,282 4,349,318 - 5,720,002 714,314 6,434,316 708,582 (11,017,470) 11,017,470 - - 235,297,283 12,160,066 247,457,349 708,582

(5,727,317) 31,148,642 25,421,325 -

1,114,461,934 1,161,399,128 2,275,861,062 - 51,599 - 51,599 - 1,114,513,533 1,161,399,128 2,275,912,661 -

$ 1,108,786,216 $ 1,192,547,770 $ 2,301,333,986 $ -

-15 CITY OF WICHITA, KANSAS

BALANCE SHEET GOVERNMENTAL FUNDS

December 31, 2017

Street Public Other Total General Debt Service Improvement Improvement Governmental Governmental Fund Fund Fund Construction Funds Funds ASSETS Cash and cash equivalents $ 67,562,171 $-18,136,636 $-$ $ 60,585,994 $ 146,284,801 Cash with fiscal agent - 24,062,984 46,491 30,710,502 - 54,819,977 Investments - -- - 4,671,200 4,671,200 Receivables, net: Property taxes 76,170,644 26,709,075 - - - 102,879,719 Special assessments - 160,351,268 - - - 160,351,268 Due from other agencies - - 5,951,723 - 398,139 6,349,862 Accounts receivable 2,580,467 44,527 2,683,784 - 6,323,119 11,631,897 Notes receivable - 762,821 - - 700,000 1,462,821 Due from other funds 800,000 5,668,420 - - 24,687,486 31,155,906 Inventories 45,649 - -- 47,283 92,932 Prepaid items 4,900 - -- 86,217 91,117 Total assets $ 147,163,831 $ 235,735,731 $ 8,681,998 $ 30,710,502 $ 97,499,438 $ 519,791,500

LIABILITIES Accounts payable and other liabilities $ 14,110,502 $ 1,521,714 $ 7,133,449 $ 3,509,584 $ 1,344,878 $ 27,620,127 Accrued interest payable - -106,770 117,881 36,426 261,077 Temporary notes payable - - 31,677,530 42,857,196 10,366,046 84,900,772 Deposits - 293,247 63,002 - 197,490 553,739 Unearned revenue 66,603 - -- - 66,603 Due to other agencies - - -- 104,230 104,230 Due to other funds - - 21,353,523 17,616,717 6,650,665 45,620,905 Total liabilities 14,177,105 1,814,961 60,334,274 64,101,378 18,699,735 159,127,453

DEFERRED INFLOWS OF RESOURCES Unavailable revenue: Property taxes 76,170,644 26,709,075 - - - 102,879,719 Special assessments - 160,351,268 - - - 160,351,268 Other - 762,821 - - 2,605,564 3,368,385 Total deferred inflows of resources 76,170,644 187,823,164 - - 2,605,564 266,599,372

FUND BALANCES (DEFICITS) Nonspendable 850,549 - -- 368,937 1,219,486 Restricted - 46,097,606 - - 75,111,957 121,209,563 Committed 19,000,000 - -- 17,101,345 36,101,345 Assigned 3,703,977 - -- 850,243 4,554,220 Unassigned 33,261,556 - (51,652,276) (33,390,876) (17,238,343) (69,019,939) Total fund balances (deficits) 56,816,082 46,097,606 (51,652,276) (33,390,876) 76,194,139 94,064,675

Total liabilities, deferred inflows of resources and fund balances (deficits)$ 147,163,831 $ 235,735,731 $ 8,681,998 $ 30,710,502 $ 97,499,438 $ 519,791,500

The accompanying notes to the financial statements are an integral part of this statement.

16 CITY OF WICHITA, KANSAS

RECONCILIATION OF THE BALANCE SHEET OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION

December 31, 2017

Amounts reported for governmental activities in the Statement of Net Position are different because:

Total fund balance - governmental funds $ 94,064,675

Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the fund financial statements. Cost $ 1,827,034,528 Accumulated depreciation (546,008,996) 1,281,025,532

Certain items, which result in a consumption of net position applicable to a future reporting period, are recognized as prepaid assets in the government-wide financial statements. Prepaid operating lease 1,882,042

Certain items, which result in a consumption of net position applicable to a future reporting period, are recognized as deferred outflows of resources in the government-wide financial statements. Unamortized deferred refunding costs 693,100 Deferred outflows related to pensions 81,191,799 81,884,899

Liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. General obligation bonds payable 164,410,222 Special assessment bonds payable 172,706,820 Sales tax revenue bonds payable 3,044,724 Premium on bonds payable 29,770,288 Accrued interest on bonds payable 2,477,855 Compensated absences 10,075,969 Net pension liability 94,072,770 Other post employment benefits 17,858,581 Environmental remediation liability 16,105,539 Liability for future landfill closure and post-closure costs 11,359,306 Legal liability 1,368,047 (523,250,121)

Certain items, which result in an acquisition of net position applicable to a future reporting period, are recognized as deferred inflows of resources in the government-wide financial statements. Deferred inflows related to pensions (24,600,687)

Accounts receivable not considered available to liquidate liabilities of the current period are deferred in the funds. They are recorded as revenue in the government-wide statements. 3,368,385

Special assessments are not considered available to liquidate liabilities of the current period, and, therefore, are deferred in the funds. However, they are properly recognized as revenue in the government-wide statements as soon as the related improvement is completed. 160,351,268

Internal service funds are used to charge the cost of certain activities, such as insurance, to individual funds. The assets and liabilities of internal service funds are included in governmental activities in the Statement of Net Position. 34,060,223

Total net position - governmental activities $ 1,108,786,216

The accompanying notes to the financial statements are an integral part of this statement.

-17 CITY OF WICHITA, KANSAS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS

For the year ended December 31, 2017

Street Public Other Total General Debt Service Improvement Improvement Governmental Governmental Fund Fund Fund Construction Funds Funds REVENUES Property taxes $ 76,625,353 $ 29,513,206 $ - $ - $ 4,485,206 $ 110,623,765 Motor vehicle taxes 11,621,335 4,091,442 - - 25,657 15,738,434 Transient guest taxes - - - - 7,065,174 7,065,174 Special assessments - 28,343,388 78,445 - 568,898 28,990,731 Franchise taxes 45,563,488 - -- - 45,563,488 Local sales tax 28,557,694 302,529 - - 28,822,631 57,682,854 Intergovernmental 17,201,970 - 23,075,759 21,210,600 32,167,563 93,655,892 Licenses and permits 2,818,831 - -- 37,865 2,856,696 Fines and penalties 8,270,546 - -- - 8,270,546 Rentals 2,840,793 22,755 - - 1,352,300 4,215,848 Interest and investment earnings 3,782,188 59,238 - 2,786 76,824 3,921,036 Charges for services and sales 16,449,203 - - - 3,477,395 19,926,598 Other revenue 9,765,252 493,936 1,079,363 1,367,944 8,088,355 20,794,850 Total revenues 223,496,653 62,826,494 24,233,567 22,581,330 86,167,868 419,305,912

EXPENDITURES Current: General government 34,598,083 41,815 - - 3,603,076 38,242,974 Public safety 128,061,639 - - - 8,274,611 136,336,250 Highways and streets 20,216,848 - - - - 20,216,848 Sanitation 2,660,584 - - - 2,010,316 4,670,900 Health and welfare 3,952,491 - - - 31,435,601 35,388,092 Culture and recreation 33,266,537 - - - 3,751,366 37,017,903 Debt service: Principal retirement - 57,587,498 - - - 57,587,498 Interest and fiscal charges - 13,845,802 1,145,215 355,694 128,609 15,475,320 Other debt service - 559,786 - - - 559,786 Capital outlay - - 68,552,003 38,426,240 11,092,822 118,071,065 Total expenditures 222,756,182 72,034,901 69,697,218 38,781,934 60,296,401 463,566,636

Excess (deficiency) of revenues over (under) expenditures 740,471 (9,208,407) (45,463,651) (16,200,604) 25,871,467 (44,260,724)

OTHER FINANCING SOURCES (USES) Proceeds from issuance of bonds - 23,039,724 6,105,302 - 5,224,698 34,369,724 Premiums on bonds sold - 4,089,306 828,520 - 711,480 5,629,306 Payments to escrow agent on refunded bonds - (1,406,316) - - - (1,406,316) Transfers from other funds 6,073,192 24,908,501 30,049,610 8,539,365 14,985,407 84,556,075 Transfers to other funds (6,554,228) (21,086,216) (1,391,448) - (59,300,435) (88,332,327) Total other financing sources (uses) (481,036) 29,544,999 35,591,984 8,539,365 (38,378,850) 34,816,462

Net change in fund balance 259,435 20,336,592 (9,871,667) (7,661,239) (12,507,383) (9,444,262)

Fund balances (deficits) - beginning, as previously reported 56,556,647 25,761,014 (41,780,609) (25,729,637) 88,649,923 103,457,338 Prior period adjustment - - - - 51,599 51,599 Fund balances (deficits) - beginning, restated 56,556,647 25,761,014 (41,780,609) (25,729,637) 88,701,522 103,508,937

Fund balances (deficits) - ending $ 56,816,082 $ 46,097,606 $ (51,652,276) $ (33,390,876) $ 76,194,139 $ 94,064,675

The accompanying notes to the financial statements are an integral part of this statement.

-18 CITY OF WICHITA, KANSAS

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES

For the year ended December 31, 2017

Amounts reported for governmental activities in the Statement of Net Position are different because:

Net change in fund balance - governmental funds $ (9,444,262)

Governmental funds report capital asset acquisitions, excluding non-cash donations, as expenditures. However, in the Statement of Activities, the cost of assets capitalized is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital asset acquisitions exceeded depreciation in the current period. Depreciation expense $ (34,528,728) Net capital asset acquisition 36,485,689 1,956,961

IntheStatementofActivities,thegainorlossfromthesaleofcapitalassetsisreported,whereasinthegovernmental funds,onlycashproceedsfromthesaleincreasefinancialresources.Thus,thechangeinnetpositiondiffersfromthe change in fund balance by the cost of capital assets sold. (1,031,000)

In the Statement of Activities, transfers of capital assets from governmental activities to business-type activities are reportedastransfers,whereasinthegovernmentalfunds,thereisnoeventtoreportastherewasnooutwardflowof current financial resources. (6,228,390)

RevenuesintheStatementofActivitiesthatdonotprovidecurrentfinancialresourcesarenotreportedasrevenuein the funds. Receivables not received within 60 days of fiscal year end (9,135,397) Non-cash capital contributions 8,680,789 (454,608)

Debt proceeds provide current financial resources of governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position. Special assessment bonds payable (31,325,000) Sales tax revenue bonds payable (3,044,724) Premium on bonds payable (5,629,306) (39,999,030)

Repayment of bond principal is reported as an expenditure in the governmental funds, but the payment reduces long- term liabilities in the Statement of Net Position. General obligation bonds payable 31,112,766 Special assessment bonds payable 26,192,216 Sales tax revenue bonds payable 1,497,150 58,802,132

The amortization of bond premiums and discounts affects long-term liabilities on the Statement of Net Position, but does not provide or consume current financial resources of the governmental funds. 4,486,778

Deferred refunding costs reduce current financial resources of governmental funds, but do not decrease long-term liabilities in the Statement of Net Position. 102,800

Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. Accrued interest on bonds payable 379,027 Compensated absences (365,117) Net pension liability (894,337) Other post employment benefits (1,720,279) Environmental remediation liability 789,565 Liability for future landfill closure and post-closure costs 955,326 Legal liability 130,930 (724,885)

Some long-term assets reported in the Statement of Net Position require the use of current financial resources when purchased and, therefore, are reported as expenditures in the governmental funds immediately. However, these long- term assets will be shown as an expense over the term of the agreement in the Statement of Activities. Prepaid operating lease 1,882,042

The amortization of collective deferred outflows and inflows of resources related to pensions affects the change in net position, but does not provide or use current financial resources in the governmental funds. Deferred outflows related to pensions (21,858,405) Deferred inflows related to pensions 7,056,946 (14,801,459)

Internal service funds are used to charge the cost of certain activities, such as insurance, to the individual funds. Net revenue (expense) of certain internal service funds is reported within governmental activities. (274,396)

Change in net position - governmental activities $ (5,727,317)

The accompanying notes to the financial statements are an integral part of this statement.

-19

-20 CITY OF WICHITA, KANSAS

GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL - BUDGETARY BASIS

For the year ended December 31, 2017 (with comparative totals for the year ended December 31, 2016)

Variance with Budgeted Amounts Final Budget 2016 Positive Actual Original Final Actual Amounts (Negative) Year to Date

REVENUES General property taxes $ 75,644,021 $ 76,111,355 $ 76,625,353 $ 513,998 $ 75,174,948 Franchise taxes 48,382,844 46,140,275 45,563,488 (576,787) 44,766,245 Motor vehicle taxes 11,677,933 11,940,721 11,621,335 (319,386) 11,587,301 Local sales tax 30,453,231 29,372,262 28,557,694 (814,568) 28,939,207 Intergovernmental 16,996,712 17,247,625 17,201,970 (45,655) 16,953,856 Licenses and permits 2,947,234 3,011,677 2,818,831 (192,846) 2,649,957 Fines and penalties 10,878,801 8,650,350 8,270,546 (379,804) 9,120,404 Charges for services and sales 17,532,440 17,764,522 16,430,349 (1,334,173) 18,342,146 Rental income 2,393,751 2,371,934 2,335,423 (36,511) 2,347,885 Interest and investment earnings 1,200,000 2,670,000 3,782,188 1,112,188 1,980,147 Other revenues 7,970,799 7,628,465 9,853,043 2,224,578 7,752,640 Revised budget adjustment - 2,566,516 - (2,566,516) -

Total revenues 226,077,766 225,475,702 223,060,220 (2,415,482) 219,614,736

EXPENDITURES Current: General government 33,428,580 32,284,071 33,065,290 (781,219) 32,416,281 Public safety 129,218,988 128,480,714 128,024,383 456,331 125,852,115 Highways and streets 21,978,105 21,358,537 19,990,614 1,367,923 20,585,198 Sanitation 2,945,279 2,860,224 2,660,583 199,641 2,695,127 Health and welfare 4,040,298 4,144,187 4,027,049 117,138 4,009,693 Culture and recreation 33,274,422 33,614,440 32,974,014 640,426 31,982,181 Contingency - 1,566,516 - 1,566,516 -

Total expenditures 224,885,672 224,308,689 220,741,933 3,566,756 217,540,595

Excess of revenues over expenditures 1,192,094 1,167,013 2,318,287 1,151,274 2,074,141

OTHER FINANCING SOURCES (USES) Transfers from other funds 5,000,750 5,602,814 6,073,192 470,378 4,874,946 Transfers to other funds (6,192,844) (6,769,827) (6,554,228) 215,599 (5,416,857)

Total other financing uses (1,192,094) (1,167,013) (481,036) 685,977 (541,911)

SPECIAL ITEM Sale of Hyatt Hotel - - - - 20,002,631

Net change in fund balance - - 1,837,251 1,837,251 21,534,861

Unencumbered fund balance, beginning 27,950,798 27,950,798 49,485,659 21,534,861 27,950,798

Unencumbered fund balance, ending $ 27,950,798 $ 27,950,798 $ 51,322,910 $ 23,372,112 $ 49,485,659

The 2017 certified expenditure budget is $249,078,516, including an appropriated reserve of $18,000,000.

The accompanying notes to the financial statements are an integral part of this statement.

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-25 CITY OF WICHITA, KANSAS

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS

For the year ended December 31, 2017

Business-type Activities Enterprise Funds Water Sewer Airport Utility Utility Authority OPERATING REVENUES Charges for services and sales $ 80,534,472 $ 57,391,918 $ 4,526,598 Fees 453,247 - 3,571,076 Rentals 38,431 14,558 22,858,553 Employer contributions - - - Employee contributions - - - Other operating revenues 467,612 105,892 63,981 Total operating revenues 81,493,762 57,512,368 31,020,208

OPERATING EXPENSES Personnel services 12,024,528 11,711,720 10,743,468 Contractual services 12,528,039 8,470,808 5,336,914 Materials and supplies 5,351,412 4,120,054 5,101,733 Other operating expenses 4,263,428 2,793,199 990,929 Administrative charges 827,756 314,741 248,532 Payments in lieu of franchise taxes 4,015,852 2,800,633 - Depreciation 26,091,997 12,111,833 11,947,908 Employee benefits - - - Insurance claims - - - Total operating expenses 65,103,012 42,322,988 34,369,484

Operating income (loss) 16,390,750 15,189,380 (3,349,276)

NON-OPERATING REVENUES (EXPENSES) Interest and investment earnings 66,578 212,425 149,279 Intergovernmental grants - - - Other expenses (538,178) (979,065) (221,804) Interest expense (14,410,498) (8,173,380) (5,679,990) Gain (loss) on sale of assets (120,327) 2,729 55,123 Bond premium amortization 2,158,445 1,452,008 204,121 Total non-operating revenues (expenses) (12,843,980) (7,485,283) (5,493,271)

Income (loss) before capital contributions and transfers 3,546,770 7,704,097 (8,842,547)

CAPITAL CONTRIBUTIONS AND OPERATING TRANSFERS Capital contributions - cash 3,964,429 1,685,083 9,931,783 Capital contributions - non cash 1,477,181 2,783,267 - Transfers from other funds - - - Transfers to other funds - - - Total capital contributions and operating transfers 5,441,610 4,468,350 9,931,783

Change in net position 8,988,380 12,172,447 1,089,236

Net position - beginning 460,763,121 308,423,045 207,760,630

Net position - ending $ 469,751,501 $ 320,595,492 $ 208,849,866

The accompanying notes to the financial statements are an integral part of this statement.

-26

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-30

-31 CITY OF WICHITA, KANSAS

STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS

December 31, 2017

WAMPO Pension Private Purpose Trust Funds Trust Fund Agency Funds ASSETS Cash and temporary investments $ 72,728 $ 10,274 $ 4,205,919 Receivables: Investment sales pending 42,617,128 - - Interest and dividends 2,120,275 - - Due from other agencies - 221,146 - Other receivables 1,818,825 - - Total receivables 46,556,228 221,146 - Investments, at fair value: Government short-term investment fund 31,504,160 - - Equity Common stock 517,343,625 - - Common stock unit 986,684 - - Depository receipts 12,707,360 - - Limited partnership units 72,699,603 - - Mutual funds 282,782,888 - - Non-security asset-stock 82,237,413 - - Preferred stock 1,110,425 - - Real estate investment trust 78,110,755 - - Warrants 1,910 - - Commodities 38,235,302 - - Fixed income Auto loan receivable 3,289,337 - - CMO 16,659,279 - - Corporate bonds 86,586,307 - - Credit default swap (84,184) - - FHLMC 11,554,870 - - FNMA 24,406,019 - - GNMA I 1,002,290 - - GNMA II 5,362,988 - - Government issues 58,671,090 - - Interest rate swap 61,772 - - Municipals 537,815 - - Other asset backed 6,099,145 - - Options Fixed income (11,961) - - Foreign currency 74,098 - - Future 68,436 - - Total investments 1,331,997,426 - - Capital assets: Pension software 1,282,828 - - Accumulated depreciation (1,282,828) - - Capital assets, net - - - Total assets 1,378,626,382 231,420 4,205,919

LIABILITIES Accounts payable and other liabilities 1,563,126 35,509 667,225 Investment purchases pending 55,705,081 - - Deposits - -3,538,694 Total liabilities 57,268,207 35,509 4,205,919

NET POSITION Restricted for: Pensions 1,321,358,175 - - Other organizations - 195,911 - Total net position $ 1,321,358,175 $ 195,911 $ -

The accompanying notes to the financial statements are an integral part of this statement.

-32 CITY OF WICHITA, KANSAS

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS

For the year ended December 31, 2017

WAMPO Pension Private Purpose Trust Funds Trust Fund ADDITIONS Contributions: Employer $ 23,212,328 $ - Employee 8,797,437 - Intergovernmental - 1,130,984 Private contributions - 6,600 Total contributions 32,009,765 1,137,584

Investment income: From investing activities: Net appreciation in the fair value of investments 181,636,081 - Interest 8,569,010 - Dividends 12,525,295 - Commission recapture 25,521 - Total investing activity income 202,755,907 - Less investment expense 6,823,873 - Net income from investing activities 195,932,034 -

From securities lending activities: Securities lending income 553,014 - Less securities lending expenses: Borrower rebates 244,050 - Management fees 74,154 - Total securities lending expenses 318,204 - Net income from securities lending activities 234,810 - Total net investment income 196,166,844 -

Reclassifications due to participant conversion 191,292 - Total additions 228,367,901 1,137,584

DEDUCTIONS Pension benefits 75,425,270 - Administrative expenses 1,197,745 1,219 Employee contributions refunded 1,136,353 - Reclassifications due to participant conversion 191,292 - Program outlays - 995,756 Total deductions 77,950,660 996,975

Net increase in net position 150,417,241 140,609

Net position - beginning, as previously reported 1,170,940,934 - Prior period adjustment - 55,302 Net position - beginning, restated 1,170,940,934 55,302

Net position - ending $ 1,321,358,175 $ 195,911

The accompanying notes to the financial statements are an integral part of this statement.

-33 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

Table of Contents

1. Summary of Significant Accounting Policies...... -35

2. Budgetary Control ...... -41

3. Budgetary Basis of Accounting...... -42

4. Fund Balance/Net Position Deficits ...... -42

5. Cash, Investments and Securities Lending ...... -42

6. Capital Assets ...... -56

7. Retirement Funds...... -57

8. Self Insurance Fund ...... -64

9. Long-term Obligations ...... -67

10. Defeasance of Debt...... -77

11. Temporary Notes Payable...... -77

12. Leases...... -78

13. Conduit Debt Obligations...... -79

14. Interfund Transfers ...... -80

15. Interfund Receivables and Payables ...... -80

16. Fund Balance Restrictions and Other Reservations...... -80

17. Passenger Facility Charges...... -82

18. Landfill Closure and Post-Closure Care ...... -82

19. Tax Abatements ...... -82

20. Contingencies and Commitments...... -84

21. Prior Period Adjustment...... -85

22. Change in Accounting Estimate ...... -85

23. Subsequent Events ...... -85

-34 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies A. Reporting Entity The City of Wichita is a municipal corporation governed by an elected mayor and six-member council. The accompanying financial statements present the government and its component units. Component units are legally separate entities for which the government is financially accountable or other entities whose nature and significant relationship with the government are such that exclusion would cause the government’s financial statements to be misleading. A blended component unit, although a legally separate entity, is, in substance, part of the government’s operations and so data from the blended component unit is combined with data of the primary government. A discretely presented component unit, on the other hand, is reported in a separate column in the combined financial statements to emphasize that it is legally separate from the government. The City has both blended and discretely presented component units.

Blended Component Unit: The Airport Authority serves all citizens of the government and is governed by a board comprised of the government’s elected council. Bond issuance authorizations are approved by the governing body of the primary government and the legal liability for the general obligation portion of the Authority’s debt remains with the government. The Airport Authority is reported as an enterprise fund. Separate audited financial statements are not prepared by the Airport Authority.

Discretely Presented Component Unit: The Wichita Public Building Commission (WPBC) acquires and finances assets for the City of Wichita or other local, state and federal agencies; school districts; and the Wichita State University Board of Trustees. The nine-member board is appointed by the Mayor and City Council. Of the nine members, one member is recommended for appointment by the County Commissioners of Sedgwick County, Kansas, and one by the President of Wichita State University. The Kansas Secretary of Administration and the Superintendent of Unified School District Number 259 serve as provisional members of the board of the WPBC. Members of the WPBC Board may only be removed for just cause. The City of Wichita provides staff support and legal representation by the Department of Law. The WPBC is presented as a proprietary fund type. Separate audited financial statements are not prepared by the Wichita Public Building Commission. In November 2017, the WPBC Board dissolved the WPBC and assigned all of its assets, including a parking garage, proceeds from the sale of the State Office Building and the State Office Building fund balance to the City of Wichita.

B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position on page A-13 and the Statement of Activities on page A-14 and A-15) report information about all of the nonfiduciary activities of the primary government and its component units. As a general rule, the effect of interfund activity has been eliminated from these financial statements. Exceptions to this rule are payments in lieu of taxes where amounts are reasonably equivalent in value to the interfund services provided and other charges between the enterprise funds and other various functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported discretely from the legally separate component unit for which the primary government is financially accountable. The government-wide Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items that do not meet the definition of program revenues are reported as general revenues.

-35 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

Governmental fund financial statements distinguish revenues and expenditures from other financing sources and uses. Other financing resources and uses are increases or decreases in the fund balance of a governmental fund that are not considered revenues or expenditures. Only items identified as other financing sources and uses by authoritative standards may be classified as such (e.g. proceeds from the issuance of long-term debt and transfers between funds). Proprietary fund financial statements distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary funds’ principal ongoing operations. Principal operating revenues of the proprietary funds are primarily comprised of charges to customers for sales and services. Operating expenses for enterprise and internal service funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting these criteria are reported as non-operating revenues and expenses. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if collected within 60 days of the end of the current fiscal period. Expenditures are generally recorded when a liability is incurred, as under accrual accounting. However, expenditures related to long-term obligations, such as, debt service on long-term debt, compensated absences and claims and judgments, are recorded only when the payment is due. Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. Special assessments receivable that are not due within the current fiscal period and not susceptible to accrual are recorded as unavailable revenue. All other revenue items are considered to be measurable and available only when cash is received. The government reports the following major governmental funds:

The General Fund is the principal fund of the City that accounts for all financial transactions not accounted for in other funds. The majority of current operating expenditures of the City, other than proprietary fund activities, are financed through revenues received by the General Fund. The Economic Development Fund is certified to the State of Kansas and reported as a subfund of the General Fund. Schedules for the certified fund and subfund are presented as supplemental information in the Governmental Funds Section of this report.

The Debt Service Fund accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. The Street Improvement Fund accounts for capital improvements related to street, arterial and freeway projects that are financed through the issuance of general obligation bonds, special assessments, local sales tax, grants and other City funds. The Public Improvement Construction Fund accounts for capital improvements relating to projects that benefit the public that are financed through the issuance of general obligation bonds, special assessments, local sales tax, grants and other City funds.

-36 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

The government reports the following major proprietary funds: The Water Utility Fund accounts for the operation and maintenance of the water supply and distribution component of the combined utility. The Sewer Utility Fund accounts for the operation and maintenance of the wastewater collection and treatment component of the combined utility, including wastewater treatment plants, sewer laterals and mains. The Airport Authority Fund accounts for the provision of air transportation services for the public, business and industry. The Stormwater Utility Fund accounts for the acquisition, design, construction, maintenance and operation of the City’s surface drainage system. The government also reports the following non-major fund types: Special revenue funds account for the proceeds from specific revenue sources that are restricted or committed to expenditures for specified purposes. Capital project funds account for all resources received and used for the acquisition or development of capital improvements, except those financed primarily by proprietary funds. Financing for these capital improvements primarily come from the City’s general obligation bond issues, special assessments, local sales tax and grants.

A permanent fund is used to report resources that are restricted for the maintenance and perpetual care of municipal cemeteries and mausoleums. Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises. The intent of the City is that the costs required to provide these goods and services are financed from fees and charges from external users, issuance of bonds (revenue and general obligation), grants and other City funds.

Internal service funds are used to account for information technology services, fleet management and risk management services (including claims for worker’s compensation, general liability and employee health insurance) provided by one department to other departments of the City on a cost reimbursement basis. Pension trust funds account for the activities of the Wichita Employees’ Retirement System, Wichita Police and Fire Retirement System and the Wichita Employees’ Retirement System Plan 3b, all of which accumulate resources for pension benefits for qualified employees. Private purpose trust funds account for all trust arrangements, other than those properly reported in pension trust funds or investment trust funds, under which the principal and income benefit individuals, private organizations or other governments.

Agency funds are used to report resources held by the City in a custodial capacity for remittance of fiduciary resources to individuals, private organizations or other governments. D. Pooled Cash and Temporary Investments Cash resources of the individual funds are combined to form a pool of cash and temporary investments, which is managed by the Director of Finance (except for investments of the pension trust funds). The pool has the general characteristics of demand deposit accounts, in that each fund may deposit additional cash at any time and also may withdraw cash at any time without prior notice or penalty. Investments of the pooled accounts consist primarily of certificates of deposits and U.S. government and agency securities. Interest income earned is allocated to contributing funds based on average daily cash balances and in accordance with the adopted budget, if greater than internal management fee. E. Investments Investments of the government are reported at fair value, which is based on quoted market prices in all instances in which they are available. For all investments other than those in the pension trust funds, level 2 fair value measurements are based on other observable inputs including benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. -37 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

The pension trust funds invest in real estate through real estate investment trusts, timber through limited partnerships, commodities, Treasury strips and various asset backed securities, such as collateralized mortgage obligations and credit card trusts. Short-term investments are reported at cost plus accrued interest, which approximates fair value. Investments traded on national or international exchanges are valued at the last trade price of the day. If no close price exists, then a bid price is used. Mortgages are valued on the basis of future principal and interest payments and are discounted at prevailing interest rates for similar investments. The fair value of real estate and timber investments are estimated using the net asset value of the shares owned in each fund. Investments that do not have an established market are reported at their estimated fair value. F. Property Taxes and Other Receivables In accordance with governing state statutes, property taxes levied during the current year are a revenue source to be used to finance the budget of the ensuing year. Taxes are assessed as of January 1 and become a lien on the property on November 1 of each year. The County Treasurer is the tax collection agent for all taxing entities within the County. Property owners have the option of paying one-half or the full amount of the taxes levied on or before December 20th during the year levied, with the balance to be paid on or before May 10th of the ensuing year. State statutes prohibit the County Treasurer from distributing taxes collected in the year levied prior to January 1 of the ensuing year. Consequently, for revenue recognition purposes, the taxes levied during the current year are not due and receivable until the ensuing year. At December 31st, such taxes are a lien on the property and are recorded as taxes receivable, net of anticipated delinquencies, with a corresponding amount recorded as deferred inflows of resources on the balance sheet of the appropriate funds. It is not practicable to apportion delinquent taxes held by the County Treasurer at the end of the year and, further, the amounts thereof are not material in relationship to the financial statements taken as a whole. Recognized state-shared taxes represent payments received during the current fiscal period. State statutes specify distribution dates for such shared taxes. For revenue recognition purposes, amounts collected and held by the state on behalf of the City at year-end are not due and receivable until the ensuing year. Federal and state grant aid is reported as revenue when the related reimbursable expenditures are incurred. Unrestricted aid is reported as revenue in the fiscal year the entitlement is received. G. Revenue Recognition for Proprietary Funds The proprietary funds recognize revenue on sales when services are rendered. The Water, Sewer and Stormwater Utilities recognize revenues for unbilled services. All users, including other City departments, are charged for services provided by the respective proprietary fund. Accounts receivable represent uncollected charges (both billed and unbilled) as of December 31, net of amounts estimated to be uncollectible. H. Special Assessments Kansas statutes require projects financed in part by special assessments to be financed through the issuance of general obligation bonds, which are secured by the full faith and credit of the City. Special assessments paid prior to the issuance of general obligation bonds are recorded as revenue in the appropriate project. Special assessments received after the issuance of general obligation bonds are recorded as revenue in the Debt Service Fund or a liability in a City of Wichita revocable escrow account for prepaid special assessments. The escrow is revocable and, therefore, not technically public funds. The amount of any interest earnings plus prepayment equals the amount of debt service paid on outstanding bonds. State statutes allow levying additional ad valorem property taxes in the City's Debt Service Fund to finance delinquent special assessments receivable, if necessary. Special assessments receivable are accounted for within the Debt Service Fund. Special assessments are levied over a fifteen to twenty year period and the annual installments are due and payable with annual ad valorem property taxes. Delinquent assessments against property benefited by special assessments constitute a lien against such property. When assessments are two years in arrears, the assessments may be collected by foreclosure. On December 31st, the special assessment taxes levied are a lien on the property and are recorded as special assessments receivable in the debt service fund with a corresponding amount recorded as a deferred inflow of resources.

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I. Inventories and Prepaid Expenses Inventories and prepaid expenses that benefit future periods, other than those recorded in the proprietary funds, are recorded as expenditures during the year of purchase. In proprietary funds, the cost of inventories is recorded as expense when consumed. Inventories are valued utilizing the average unit cost method. J. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined as assets with an initial individual minimum cost ranging from $5,000 to $100,000, depending on the type of asset. Capital assets are valued at acquisition value, or estimated acquisition value (if actual acquisition value is not available). Donated capital assets are valued at their estimated acquisition value on the date donated. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of an asset are not capitalized.

Major outlays for capital assets and improvements are Estimated capitalized as projects are constructed. For capital assets Asset Classifications Useful Life and improvements constructed by a proprietary fund, Buildings and improvements 1-100 interest costs incurred to bring certain assets to the Improvements other than buildings 1-85 condition and location necessary for their intended use are Equipment 1-33 capitalized as part of the historical cost of acquiring the Vehicles 1-20 assets. Additionally, in situations involving the acquisition of certain assets financed with the proceeds of tax-exempt Public domain infrastructure 15-60 borrowing, any interest earned on related interest-bearing Airfields 1-20 investments from such proceeds are offset against the related interest costs in determining either capitalization rates or limitations on the amount of interest costs to be capitalized. Capital assets of the primary government and its component unit are depreciated using the straight-line method. Estimated useful lives of asset categories are listed in the accompanying table. K. Franchise Taxes Franchise taxes are collected from utilities for the use of right-of-ways. Annually, the Water Utility and Sewer Utility pay to the General Fund of the City amounts in lieu of franchise taxes in an amount not to exceed 5% of gross revenues for the preceding year, which is appropriated by the City and included in the annual budget. L. Compensated Absences The City’s policy permits employees to accumulate earned but unused vacation and sick pay benefits. The City does not have a policy to pay accumulated sick pay benefits upon termination of employment; consequently, there is no liability for unpaid accumulated sick leave. Vacation pay is accrued when incurred in the government-wide, proprietary and fiduciary fund financial statements. A liability for vacation pay is reported in governmental funds only if it has matured, for example, as a result of employee terminations and retirements. M. Statement of Cash Flows The reporting entity defines cash and cash equivalents used in the statement of cash flows as all cash and temporary investments (both restricted and unrestricted). N. Deferred Outflows and Inflows of Resources In addition to assets, the statement of financial position may report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City reports deferred charges on refunding in the government-wide and proprietary fund statements of net position. The deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. The amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The City also reports a collective deferred outflow of resources related to pensions, which is described in more detail in Note 7 - Retirement Funds.

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In addition to liabilities, the statement of financial position may report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to future periods and will not be recognized as an inflow of resources (revenue) until that time. Unavailable revenue, which arises only under a modified accrual basis of accounting, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenue from several sources: long-term accounts receivable and special assessments. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. Deferred revenues are reported in both the government-wide statement of net position and the governmental funds balance sheet for property taxes receivable. Property taxes are not recognized as revenue until the period for which they are levied. Additionally, the City reports a collective deferred inflow of resources related to pensions, which is described in more detail in Note 7 - Retirement Funds. O. Estimates Preparation of financial statements in conformity with GAAP requires making estimates and assumptions that affect: (1) the reported amounts of assets, deferred outflows of resources, liabilities and deferred inflows of resources; (2) disclosures, such as contingencies; and (3) the reported amounts of revenues and expenditures or expenses included in the financial statements. Actual results could differ from those estimates. P. Net Position and Fund Balance Net position in the government-wide and proprietary fund financial statements are classified as net investment in capital assets, restricted and unrestricted.

Net Investment in Capital Assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction or improvements of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction or improvements of those assets or related debt also should be included in this component of net position. If there are significant unspent related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds is not included in the calculation of net investment in capital assets.

Restricted Net Position represent constraints on resources that are either externally imposed by creditors, grantors, contributors or laws and regulations of other governments imposed by law through state statute. Unrestricted Net Position consists of assets, deferred outflows of resources, liabilities and deferred inflows of resources that are not included in the “restricted” or “net investment in capital assets” components of net position. In the governmental fund financial statements, fund balance is composed of five classifications designed to disclose the hierarchy of constraints placed on how the fund balance can be spent. The governmental fund types classify fund balance as follows:

Nonspendable Fund Balance includes amounts that cannot be spent because they are either (a) not in a spendable form or (b) legally or contractually required to be maintained intact. Restricted Fund Balance includes amounts that are restricted to specific purposes externally imposed by creditors, grantors, contributors or laws and regulations of other governments imposed by law through state statute. Committed Fund Balance includes amounts that can only be used for the specific purposes determined by a formal action of the City’s highest level of decision-making authority. The City Council is the highest level of decision-making authority that can, by adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation.

Assigned Fund Balance is the portion of the fund balance which the City intends to use for a specified purpose as directed by the City Council. The portion of the fund balance that is appropriated by the City Council for the next year’s budget that is not already restricted or committed is considered assigned. Encumbrances, which can be approved by the designated senior staff, are included in assigned fund balances. Additional information on encumbrance balances is provided in Note 20D - Encumbrances. -40 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

Unassigned Fund Balance represents the portion of fund balance that has not otherwise been restricted, committed or assigned to specific purposes. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the City of Wichita considers to have spent restricted funds first. When an expenditure is incurred for which committed, assigned or unassigned fund balances are available, the City considers amounts to have been spent first from the committed funds, then assigned funds and finally unassigned funds, unless the City Council has provided otherwise in its commitment or assignment action. The City of Wichita has adopted a minimum fund balance policy for the General Fund which instructs management to conduct business of the City in a manner such that available fund balance is at least equal to or greater than 10% of the next year’s budgeted expenditures. Q. Implementation of New Accounting Principles In 2017, the City implemented the following accounting principles: GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, improves the usefulness of information about postemployment benefits other than pension (other postemployment benefits or OPEB) included in the general purpose external financial reports of state and local governmental OPEB plans for making decisions and assessing accountability. This statement replaces Statements No. 43 and 57. This statement covers OPEB plans administered through trusts that meet certain criteria. GASB Statement No. 81, Irrevocable Split-Interest Agreements, improves accounting and financial reporting for irrevocable split-interest agreements by providing recognition measurement guidance for situations in which a government is a beneficiary of the agreement. Split-interest agreements are a type of giving agreement used by donors to provide resources to two or more beneficiaries, including governments. The implementation of GASB Statements No. 74 and 81 did not impact the City’s financial statements.

2. Budgetary Control Applicable Kansas statutes require that annual budgets be legally adopted for all funds (including proprietary funds) unless exempted by a specific statute. Specific funds exempted from legally adopted budgets are all Grant Assistance Fund, all capital projects funds (including capital projects of proprietary funds), the Airport Authority, Golf Course System, Transit and all trust and agency funds. The component unit (Wichita Public Building Commission) is also exempt from legally adopted budgets. Controls over spending in funds and the component unit that are not subject to legal budgets are maintained by the use of internal spending limits established by management. K.S.A. 79-2926 et. seq. provides the following sequence and timetable for adoption of budgets: 1. Preparation of budget for the succeeding calendar year on or before August 1 of each year. 2. Publication of proposed budget on or before August 5 of each year. A minimum of ten days’ notice of public hearing, published in local newspaper, on or before August 15 of each year. 3. Adoption of final budget on or before August 25 of each year. K.S.A. 79-2927 requires that all money to be raised by taxation and from all other sources for the ensuing budget year be appropriated. The law does not permit an appropriation for sundry or miscellaneous purposes in excess of 10% of the total. The budget for each fund may include a non-appropriated balance not to exceed 5% of the total of each fund. The City of Wichita appropriates amounts for fund balance reserves in the various governmental funds on a budgetary basis. Appropriated fund balance reserves are not intended to finance routine expenditures and are reflected in the budgets only to the extent utilized. Kansas statutes prohibit creating expenditures in excess of the total amount of the adopted expenditure budget of individual funds. In accordance with Kansas statutes, the legal level of control for the City is established at the individual fund level. Kansas statutes permit the transfer of budgeted amounts from one object or purpose to another and allow original budgets to be increased for previously unbudgeted increases in revenue other than ad valorem property taxes. The City must first publish a notice of hearing to amend the budget. Ten days after publication, a public hearing is held at which time the governing body may amend the budget.

-41 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

3. Budgetary Basis of Accounting Budgets are prepared on a budgetary basis, which is a basis that differs from generally accepted accounting principles (GAAP basis). For budgeting, revenues are recognized when they become both measurable and available to finance expenditures of the current period, except for special assessments of the debt service fund that are recognized on the cash basis. The major difference between GAAP basis and budgetary basis is the reporting of encumbrances, (purchase orders, contracts, and other commitments) as expenditures for budgetary purposes. Adjustments necessary to convert the net change in fund balances and the ending fund balances from GAAP basis to budgetary basis for the General Fund are provided in the accompanying table.

Net Change in Fund Balances Fund Balance at End of Year General Fund - GAAP basis $ 259,435 $ 56,816,082 Increase (decrease) affecting basis: Expenditures due to prior year encumbrances 1,546,129 (217,106) Cancellation of prior year encumbrances 606,600 - Expenditures due to current year encumbrances (1,223,783) (1,223,783) Less subfund balances included for GAAP Permanent Reserve Subfund* - (1,821,848) Economic Development Subfund 648,870 (2,230,435) General Fund - budgetary basis $ 1,837,251 $ 51,322,910 *Budget authority was not established for the Permanent Reserve Subfund for 2017. Therefore, a budgetary comparison schedule is not presented.

4. Fund Balance/ Net Position Deficits At December 31, 2017, fund balance net position deficits are shown in the accompanying table. The fund deficits for the Street Improvement Fund, Public Improvement Fund and other nonmajor governmental capital projects funds will primarily be financed through the sale of bonds authorized by the City Council but not yet sold as of December 31, 2017. The City Finance Department is continuing to work with the City Council to evaluate options to address the deficit net position in the Golf Course System Fund.

Fund Balance/ Net Position Primary Government Deficits Governmental funds: Street Improvement Fund $ 51,652,276 Public Improvement Construction Fund 33,390,876 Water Main Extension Fund 2,333,865 Park Bond Construction Fund 2,950,925 Sewer Construction Fund 11,953,553 Business-type funds: Golf Course System Fund 2,140,290 Total reporting entity $ 104,421,785

5. Cash, Investments and Securities Lending A. Cash Deposits with Financial Institutions

Custodial Credit Risk for deposits: In the case of deposits, custodial credit risk is the risk that in the event of a bank failure the City’s deposits may not be returned to it. The City requires compliance with the provisions of state law for the collateralization of all deposits. Allowable securities and forms of collateral acceptable to

-42 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

the City are limited to the following: 1. Direct obligations of, or obligations insured as to principal and interest by, the United States of America or any agency thereof; 2. Obligations and securities of U.S. sponsored corporations, which under federal Law, may be accepted as security for public funds; 3. Bonds of any Kansas municipality which have been refunded and are fully secured as to payment of principal and interest by direct obligations or obligations which are unconditionally guaranteed by the United States of America; 4. Bonds of the State of Kansas; 5. General obligation bonds of any Kansas municipality; 6. Revenue bonds of any Kansas municipality, if they meet approval by the Commissioner; 7. General obligation temporary notes of any Kansas municipality; 8. No-fund warrants of any Kansas municipality; 9. Certain Kansas municipality sponsored revenue bonds rated Aa or higher by Moody’s Investor Service or AA by Standard & Poor’s Corp.; 10. Commercial paper that does not exceed 270 days to maturity and which has received one of the two highest commercial paper credit ratings by a nationally recognized investment rating firm; 11. Corporate surety bonds approved by the Commissioner and in the standard format acceptable to the City of Wichita as follows: a)The issuer of the surety bond shall be admitted and licensed to issue surety bonds in Kansas; b)The City of Wichita shall be designated as the insured public depositor; c) The issuer and depository bank are required to notify the City of Wichita by certified or registered mail no fewer than 90 days prior to non-renewal and no fewer than 45 days prior to a bond’s cancellation; d) The claims-paying ability of the issuer must be rated and remain in the highest rated rating category of one of the nationally recognized rating agencies (“A++” or “A+” from A.M. Best Company or “AAA” from Standard & Poor’s). Within 48 hours of discovery of a downgrade by a rating agency or notice of financial regulatory action by any jurisdiction in which the issuer is licensed, notice must be given to the City Treasurer by the issuer in the form of certified or registered mail; e)No more than $5 million per depository bank or an aggregate of $20 million for all depository banks can be collateralized in the form of surety bonds; and f) The issuer is required to send quarterly reports to the Office of the City Treasurer listing all depository banks that have purchased surety bonds for deposits, the insured amounts covering deposits of the City of Wichita and the total insured amount per depository bank in Sedgwick County. 12. A letter of credit (LOC) issued by a U.S. sponsored enterprise that under federal law may be accepted as security for public funds, subject to additional requirements. Financial institutions are required to pledge or assign for the City’s benefit sufficient securities, the market value of which is at least 105% of the total deposits. As of December 31, 2017, the City had deposits in five banks totaling $28,381,215 with assets pledged by the banks as collateral with a fair value of $52,743,000. B. Pooled Investments of the Primary Government The City of Wichita has adopted a formal investment policy. The primary objectives of the investment activities are, in priority order, safety of principal, liquidity and yield. The standard of care to be used by investment officials shall be the “prudent investor rule” as set forth in the Uniform Prudent Investors Act, K.S.A. 58-24a01 et seq. and amendments thereto and shall be applied in the context of managing an overall portfolio. In accordance with state law (K.S.A. 12-1675 and 12-1677b), the City’s investment policy allows monies, not otherwise regulated by statute, to be invested in the following instruments:

United States Treasury and Agency Securities: The City may invest in direct obligations of, or obligations that are insured as to principal and interest by, the United States of America or any agency thereof and obligations and securities of United States sponsored enterprises which under federal law may be accepted as security for public funds, except that such investments shall not be in mortgage-backed securities.

Repurchase Agreements (Repo): The City may invest in repurchase agreements with banks, savings and loan associations and savings banks which have main or branch offices located in the City of Wichita, or with a primary government securities dealer which reports to the market reports division of the Federal Reserve Bank of New York. -43 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

Collateralized Public Deposits (Certificates of Deposit): The City may invest in instruments issued by any bank, savings and loan association or savings bank which has main or branch offices located within the City of Wichita. Temporary Notes or No-Fund Warrants: The City may invest in temporary notes or no-fund warrants issued by the City of Wichita. Kansas Municipal Investment Pool: The City may invest in a pool of funds that is managed by and under the authority of the Pooled Money Investment Board established by K.S.A. 12-1677a and amendments thereto. Multiple Municipal Client Investment Pools: The City may invest with trust departments of banks which have main or branch offices located in Sedgwick County, or with trust companies incorporated under the laws of Kansas which have contracted to provide trust services under the provisions of K.S.A. 9-2107 and amendments thereto.

On December 31, 2017, the City’s pooled funds were invested as follows: Modified Duration Percent of Total Investment Type Fair Value (Years) Pooled Funds

U.S. agency coupon securities $ 149,418,347 0.705 42.3% U.S. agency callable securities 27,015,124 1.826 7.7% U.S. agency discount securities 64,608,344 0.387 18.3% U.S. Treasury 59,856,754 0.561 17.0% U.S. Treasury discount 9,964,270 0.235 2.8% Kansas Municipal Investment Pool 21,904,312 - 6.2% Collateralized deposits 20,114,667 - 5.7% Total value $ 352,881,818 100.0% Portfolio weighted average maturity 0.695

Interest Rate Risk: In accordance with its Pooled Funds Investment Policy, the City of Wichita manages its exposure to declines in fair value due to changes in general interest rates by: 1. Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; 2. Investing funds primarily in shorter-term securities; and 3. Diversifying investments by investing among a variety of securities offering independent returns. The investment policy also requires that portfolio maturities be staggered in a way that avoids undue concentration of assets in a specific maturity range, and that the investment portfolio remain sufficiently liquid to enable the City to meet all operating requirements which might reasonably be anticipated. Additionally, the investment policy limits investments to a maximum stated maturity of four years and establishes a requirement that the weighted average maturity of the portfolio must range from 125 to 400 days and the modified duration of the portfolio must range from 0.3 to 1.4 years.

Credit Risk: As described earlier in this section, state law limits the types of investments that can be made by the City of Wichita. The City’s investment policy further limits allowable investments by excluding municipal bonds. On December 31, 2017, the City’s investments in U.S. agency obligations not directly guaranteed by the U.S. Government included only instruments rated Aaa by Moody’s. The City also held a position in the Kansas Municipal Investment Pool (KMIP), which restricts its investments to those rated A1/P1 or better. As of 2017, the KMIP is no longer rated by S&P based on a cost-benefit decision by the Kansas Pooled Money Investment Board (KMIB).

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Concentration of Credit Risk: The City’s investment policy limits the concentration of investments that can be placed with a single U.S. agency issuer to 40% of the total portfolio. Maximum limits, by instrument, are also established for the City’s investments of pooled funds and provided in the accompanying table.

To allow efficient and effective placement of Instrument Maximum bond proceeds, the limit of repurchase Demand deposits/ repurchase agreement 5% agreements and deposits with the Municipal Kansas Municipal Investment Pool 15% Investment Pool may be exceeded up to 50% for Certificates of deposit 100% a maximum of ten days following receipt of Temporary notes 10% proceeds during adverse market conditions. U.S. Treasury securities 100% Additionally, to allow for investment maturity U.S. agency obligations 95% timing prior to bond payment dates, the limit on Bullet/ discount 95% repurchase agreements and Municipal Agency callable 30% Investment Pool deposits may be exceeded up Agency floater 10% to the amount of the bond payment for a maximum of five days prior to a bond payment date.

Custodial Credit Risk for Investments: For an investment, custodial credit risk is the risk that in the event of a failure of an investment counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City requires that all investment transactions be settled delivery versus payment with an independent third party safekeeping agent under contract with the City.

Fair Value Measurements: The City categorizes its fair value measurements within the fair value hierarchy established by Generally Accepted Accounting Principles. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. Fair value measurement hierarchy information is not provided for the City’s deposits in the Municipal Investment Pool or collateralized deposits, which include cash and certificates of deposit held in local financial institutions. The investments below are classified either as (1) Level 1 of the fair value hierarchy and are valued using quoted prices in active markets for identical securities or (2) Level 2 of the fair value hierarchy and are valued using benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. The fair value measurements for the City’s pooled investments on December 31, 2017 are listed in the accompanying table.

Percent of Total Investment Type Fair Value Level 1 Inputs Level 2 Inputs Pooled Funds U.S. Treasury securities $ 59,856,754 $ 59,856,754 $ - 19.3% U.S. Treasury discount 9,964,270 9,964,270 - 3.2% Federal Farm Credit Bank 78,507,378 - 78,507,378 25.3% Federal Home Loan Bank 51,857,855 - 51,857,855 16.7% Federal Home Loan Mortgage Corp. 62,647,279 - 62,647,279 20.0% Federal National Mortgage Assoc. 48,029,303 - 48,029,303 15.5% Total value $ 310,862,839 $ 69,821,024 $ 241,041,815 100.0%

C. Investments of the Primary Government Not Pooled Proceeds from the Issuance of Debt Instruments: State law (K.S.A. 10-131) allows investment of the proceeds of bonds and temporary notes in: 1. Investments authorized by K.S.A. 12-1675, and amendments thereto; 2. The municipal investment pool established pursuant to K.S.A. 12-1677a, and amendments thereto; 3. Direct obligations of the U.S. Government or any agency thereof; 4. Temporary notes of the City of Wichita issued pursuant to K.S.A. 10-123, and amendments thereto; 5. Interest bearing time deposits in commercial banks located in Sedgwick County; 6. Obligations of FNMA, FHLB, FHLMC and GNMA that are not derivatives;

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7. Repurchase agreements for direct obligations of the U.S. Government or any agency thereof; 8. Investment agreements with, or other obligations, of a financial institution whose obligations are rated in one of the three highest rating categories by either Moody's investors service or Standard & Poor’s; 9. Investments in shares of a money market fund or trust consisting entirely of obligations of the U.S. Government or any agency thereof; and/or 10. Certain Kansas municipal bonds.

Although individual bond covenants include certain restrictive provisions regarding the types of investments and their maturities, the City does not have a formal investment policy that addresses interest rate risk, credit risk or concentration of credit risk for the investment of bond proceeds. On December 31, 2017, revenue bond proceeds for debt service reserve funds of the Water and Sewer Utility Funds were invested as follows: Percent of Modified Duration Bond Proceeds Investment Type Fair Value (Years) Investments U.S. Treasury securities $ 17,732,426 0.094 100.0% Total value $ 17,732,426 100.0% Total weighted average maturity 0.094

The fair value measurements for the Water and Sewer Utilities revenue bond reserve investments on December 31, 2017 are classified as Level 1 of the fair value hierarchy and are valued using quoted prices in active markets for identical securities. The Series 2017A revenue refunding bonds had advanced proceeds for two specific major sewer projects. As of December 31, 2017, $40,179,520 is being held in an individual account in the Kansas Municipal Investment Pool. As of December 31, 2017, $32,780,952 of these funds represent unspent proceeds and interest earnings on the unspent proceeds which are restricted by bond covenants to be spent on the two specific major sewer projects. Additionally, proceeds related to Sales Tax Special Obligation Revenue Bonds (STAR bonds) issued to finance improvements within authorized STAR bond districts in the City of Wichita are held by an escrow agent on behalf of the City. Pursuant to issuance of the STAR bonds, the City and State of Kansas entered into a STAR Bond Tax Distribution Agreement. The agreement provides that the principal and interest on the STAR bonds will be paid proportionally by the City and the State of Kansas, based on each entity’s respective share of sales tax generated within the District. The City’s proportional share of the debt is approximately 4.27%. As a result, the City has only recorded its proportionate share of the balance in the escrow account for the developer project and has recorded 100% of the escrow for the City’s project. As of December 31, 2017, the proceeds from STAR bonds were invested in money market accounts and the total reported by the City amounted to $22,596,081. As of December 31, 2017, $23,811,584 in proceeds from the issuance of Series 2017A general obligation refunding bonds are held by an escrow agent for the defeasance of the refunded bonds. At year-end, those proceeds were invested in U.S. Treasury notes which are classified as Level 1 securities and are valued using quoted prices in active markets for identical securities.

Passenger Facility Charges: The City does not maintain a formal investment policy pertaining to investments held in the Airport Authority Fund. However, in accordance with the Code of Federal Regulations, unexpended Passenger Facility Charges (PFC) revenue of the Airport Authority is held in separate interest bearing instruments. As of December 31, 2017, $21,650,790 was invested with the Kansas Municipal Investment Pool. The weighted average maturity of the Kansas Municipal Investment Pool was 26.2 days at December 31, 2017.

Group Life Insurance Fund: City Ordinance (47-721; section 2.52.100) authorizes the Group Life Insurance Fund to hold investments in the following categories: 1. U.S. Government securities; 2. Corporate bonds of A quality or better, as listed in Moody's or Standard & Poor’s; and/or 3. Not more than 50% may be invested in equity mutual funds.

-46 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

The City of Wichita uses a duration methodology to construct a portfolio of bonds to fund its future cash needs and utilizes a modified duration to disclose the portfolio’s exposure to changes in interest rates. The City seeks to limit the modified duration of the Group Life Insurance portfolio to five years. On December 31, 2017, no investments were held directly by the Group Life Insurance Fund and all cash was invested in the City’s pooled investment portfolio.

Other Investments of the Primary Government Not Pooled: The City does not maintain a formal investment policy pertaining to investments held in the Cemetery Fund or the Grant Assistance Fund for the Wichita Housing Authority. Funds for which a formal investment policy is not maintained are authorized to be prudently invested at the discretion of the City’s Director of Finance. On December 31, 2017, these funds were invested as follows: Modified Duration Investment Type Fair Value (Years) Percent of Total Equity securities $ 923,225 - 16.7% U.S. Treasury securities 398,212 0.574 7.2% Collateralized deposits 4,206,236 - 76.1% Total value $ 5,527,673 100.0% Portfolio weighted average maturity 0.041

Equity securities held in the Cemetery Fund’s portfolio, with a fair value of $923,225 as of December 31, 2017, are classified as Level 1 of the fair value hierarchy and are valued using quoted prices in active markets for identical securities. U.S. Treasury securities held in the Cemetery Fund’s portfolio, with a fair value of $398,212 as of December 31, 2017, are classified as Level 1 of the fair value hierarchy and are valued using quoted prices in active markets for identical securities. D. Investments of the Pension Trust Funds City Ordinance (49-036; section 2.28.090) authorizes the Wichita Employees' Retirement System and City Charter Ordinance (215, section 12) authorizes the Police and Fire Retirement System to invest trust fund assets in accordance with the prudent person rule, subject to the following limitations: (1) the proportion of funds invested in corporate preferred and common stock shall not exceed 70% and (2) the proportion of funds invested in foreign securities shall not exceed 35%. Additionally, the Systems are not permitted to invest directly or indirectly in any: 1. Real estate, except in certain pooled arrangements with the amount of such investment not to exceed 10% of the Fund; 2. Private equity, except in a commingled fund-of-funds vehicle operated by a registered investment advisor or a bank with the amount of such investment not to exceed 10% of the Fund; 3. Timber, except in a commingled fund vehicle operated by a registered investment advisor or a bank. The amount of such investment shall not exceed 10% of the Fund; 4. Mortgages secured by real estate, except insured mortgages under Titles 203, 207, 220 and 221 of the Federal Housing Act; 5. Oil and gas leases or royalties; 6. Commodities (including, but not limited to, wheat, gold, gasoline, options or financial futures); provided however, that the restriction on investments contained in this paragraph shall not apply to funds which are invested in a mutual fund, separate account or commingled fund operated by a registered investment advisor or insurance company; or 7. Letter stocks.

With the exception of the $72,728 held in the City’s pooled funds, as of December 31, 2017, all of the deposits and investments of the Wichita Employees’ and Police and Fire Retirement Systems are held in a joint investment fund that is invested by outside money managers and are held under a custodial agreement. The Pension Boards have adopted the Strategic Plan and Investment Policies which set forth in detail the asset allocation for the fund and restrictions applicable to specific investment types to mitigate risk. The policies permit investment in six asset types: domestic equities, international equities, fixed income, real estate, timber and commodities. The Investment Policy is reviewed annually by the Joint Investment Committee. During 2017, there were neither any asset allocation changes, nor any significant investment policy changes.

-47 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

The investments of the Wichita Retirement Type of Investment Fair Value Systems (WRS) on December 31, 2017 are Government short-term investment fund $ 31,504,160 listed in the accompanying table. Common stock 517,343,625 The pension funds invest in various asset- Common stock unit 986,684 backed securities such as collateralized Depository receipts 12,707,360 mortgage obligations (CMOs) and credit card Limited partnership units 72,699,603 trusts to maximize yields and reduce the impact Mutual funds 282,782,888 of interest rate changes. These securities are Non-security asset-stock 82,237,413 based on cash flows from principal and interest Preferred stock 1,110,425 payments on the underlying assets. For Real estate investment trusts 78,110,755 example, CMOs break up the cash flows from Warrants 1,910 mortgages into categories with defined risk and Commodities 38,235,302 return characteristics called tranches. The Auto loan receivable 3,289,337 tranches are differentiated based on when the principal payments are received from the CMO 16,659,279 mortgage pool. Changes in interest and Corporate bonds 86,586,307 mortgage prepayment rates may affect the Credit default swaps, net (84,184) amount and timing of cash flows, which would FHLMC 11,554,870 also affect the reported estimated fair values. FNMA 24,406,019 The pension funds utilize a combination of GNMA I 1,002,290 asset-backed securities, which vary in their GNMA II 5,362,988 degree of volatility. Although considerable Government issues 58,671,090 variability is inherent in such estimates, Interest rate swaps, net 61,772 management believes the estimated fair values Municipals 537,815 are reasonable estimates. Other asset-backed 6,099,145 The pension funds also invest in real estate Fixed income options (11,961) through real estate investment trusts (REIT’S). Foreign currency options 74,098 The fair values of these investments are Future options 68,436 estimated using the net asset value of the Total investments $ 1,331,997,426 Systems’ shares owned in each trust. Market conditions have had an impact on the estimated fair value of real estate investments. Restrictions on the availability of real estate financing, as well as economic uncertainties, have affected the volume of purchase and sale transactions. As a result, the estimates and assumptions used in determining the fair values of the real estate investments are inherently subject to uncertainty.

Fair Value Measurement: As a retirement defined benefit pension plan, the Systems hold significant amounts of investments that are measured at fair value on a recurring basis. The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices for identical assets in active markets that can be assessed at the measurement date (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy under GASB Statement No. 72 are described as follows: Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that a government can access at the measurement date. Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets for liabilities. Level 3: Unobservable inputs which are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Specific investments that are measured using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. Such investments are identified in the accompanying tables as being measured as Net Asset Value (NAV).

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The plan categorizes its fair value measurements within the fair value hierarchy established by Generally Accepted Accounting Principles (GAAP). The fair value measurements for the investments of the Wichita Retirement Systems (WRS) on December 31, 2017 are listed in the table below.

Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs Investments by fair value level: Cash equivalents: STIF-type instruments $ 30,244,895 $ - $ 30,244,895 $ - Foreign currency 1,259,265 1,259,265 - - Total cash equivalents 31,504,160 1,259,265 30,244,895 - Equities: Common stock 517,343,625 517,343,625 - - Common stock unit 986,684 986,684 - - Commodities 38,235,302 - 38,235,302 - Depository receipts 12,707,360 12,707,360 - - Limited partnership units 72,699,603 1,123,037 - 71,576,566 Mutual funds 230,266,887 1,185,564 229,081,323 - Preferred stock 1,110,425 1,110,425 - - Real estate investment trust 35,006,935 9,041,350 - 25,965,585 Warrants 1,910 1,910 - - Total equities 908,358,731 543,499,955 267,316,625 97,542,151 Fixed Income: Auto loan receivable 3,289,337 - 3,173,717 115,620 CMO 16,659,279 - 16,659,279 - Corporate bonds 86,586,307 - 86,586,307 - FHLMC 11,554,870 - 11,554,870 - FNMA 24,406,019 - 24,406,019 - GNMA I 1,002,290 - 1,002,290 - GNMA II 5,362,988 - 5,362,988 - Government issues 58,671,090 - 58,671,090 - Municipals 537,815 - 537,815 - Other asset-backed 6,099,145 - 6,099,145 - Total fixed income 214,169,140 - 214,053,520 115,620 Total investments by fair value level 1,154,032,031 $ 544,759,220 $ 511,615,040 $ 97,657,771 Investments measured at the net asset value (NAV): Mutual funds 52,516,001 Non-security asset-stock 82,237,413 Real estate investment trust 43,103,820 Total investments measured at NAV 177,857,234

Investment derivative instruments: Credit default swaps, net (84,184) $ - $ (84,184) $ - Interest rate swaps, net 61,772 - 61,772 - FX forwards (11,961) - (11,961) - Foreign currency options 74,098 - 74,098 - Futures options 68,436 68,436 - - Total investment derivative instruments 108,161 $ 68,436 $ 39,725 $ - Total investments $ 1,331,997,426

Debt, equity and other securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities.

-49 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

Equity securities classified as Level 2 of the fair value hierarchy are traded on inactive markets or valued by reference to similar instruments using (1) marked based-factors such as credit, liquidity and interest rate conditions, and (2) issuer-specific factors, such as creditworthiness of the issuer and likelihood of full repayment at maturity. Fixed income securities classified as Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. Equity securities classified as Level 3 of the fair value hierarchy are primarily made up of timber or real estate investments. Limited partnership units and real estate investment trusts are valued based upon recent independent valuations prepared by outside appraisers. The outside appraisers utilized the cost, sales comparison and income capitalization approaches to estimate the fair value of the timber or real estate investments. The significant unobservable inputs utilized in the appraisals are primarily related to the discount rates used to discount the projected future cash flows as related to land and timber prices or mortgage loans. Fixed income securities classified as Level 3 are those in inactive markets where prices have been determined to be stale and do not meet observable Level 2 criteria. Derivative instruments classified as Level 1 of the fair value hierarchy include forwards and options which are traded on active exchanges. Derivative instruments classified as Level 2 of the fair value hierarchy are valued using a market approach. Options contracts derive their value from underlying asset prices, indices, reference rates and other inputs or a combination of these factors. These contracts are normally valued on the basis of pricing service providers or broker dealer quotations. Depending on the product and the terms of the transaction, the value of the financial derivative instruments can be estimated by a pricing service provider using a series of techniques, including simulation pricing models. The pricing models are inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates, yield curves and exchange rates. For centrally cleared credit default swaps, the clearing facility requires its members to provide actionable price levels across complete term structures. These levels along with external third party prices are used to produce daily settlement prices. Centrally cleared interest rate swaps are valued using a pricing model that references the underlying rates including the overnight index swap rate and London Interbank Offered Rate (“LIBOR”) forward rate to produce the daily settlement price.

Investments measured at Unfunded Redemption Redemption net asset value (NAV) Fair Value Commitments Frequency Notice Period Mutual fund $ 52,516,001 $ - 1st day of month 7 business days Non-security asset-stock 82,237,413 - 15th day of month 15 calendar days Real estate investment trust 43,103,820 - Quarterly 45 days Total investments measured at the NAV $ 177,857,234 $ -

Net Asset Value: The Wichita Retirement Systems (WRS) reports the following types of investments valued at Net Asset Value (NAV). Mutual fund: The Systems have one fund manager that holds mutual fund investments measured at the NAV. This investment is an international small cap equity strategy that seeks long-term capital appreciation by investing primarily in equity securities on non-U.S. issuers with equity market capitalizations of $2.5 billion or less at the time of purchase. Diversification percentages are maintained and measurement is done at the time of purchase. Non-security asset-stock: This includes one fund manager whose non-security asset-stock investment objective is to outperform the MSCI Emerging Markets Index (the “Benchmark”) by an average of 250 basis points per year (gross of fees) over a full market cycle. Real estate investment trusts: The Systems have one fund manager that holds real estate investment trust (REIT) investments measured at the NAV. The REITs apply a focused Sustainability & Environmental, Social and Governance (“Sustainability & ESG”) investment strategy designed to manage risk, increase efficiency and satisfy tenants.

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Custodial Credit Risk: The custodial credit risk for deposits is the risk that in the event of a bank failure, the WRS’ deposits may not be recovered. On December 31, 2017, the WRS’ cash deposits in the amount of $72,728 were included in the City’s pooled cash and temporary investments. Amounts held in the City’s pooled cash and temporary investments were fully collateralized as of December 31, 2017. The WRS’ debt securities investments were registered in the name of WRS and were held in the possession of the WRS’ custodial bank, State Street.

Interest Rate Risk: Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Interest rate risk is managed using the modified duration methodology. Duration is a measure of a fixed income’s cash flow using present values, weighted for cash flows as a percentage of the investment’s full price. The modified duration methodology estimates the sensitivity of a bond’s price to interest rate changes. The WRS manage their exposure to fair value loss arising from increasing interest rates by complying with the following policies:

1. Fixed income managers have full discretion over the issuers selected and may hold any mix of fixed income securities and cash equivalents. 2. Portfolio duration for nominal fixed income managers must not be less than 80% or more than 120% of the duration of the Barclays Capital Aggregate Bond Index, unless the Joint Investment Committee prospectively grants a written exception. As of December 31, 2017, the duration of the Index was 5.98 years, which equated to a minimum and maximum range for each fixed income portfolio of 4.78 years and 7.18 years, respectively. The modified duration of investments on December 31, 2017 is as follows:

Percent of all Weighted Average Fixed Income Modified Duration Investment Type Fair Value Assets (Years) Government securities, long-term $ 71,268,199 28.0% 9.1 Corporate debt instruments, long-term 33,731,053 13.3% 8.1 Mortgage and asset-backed securities 61,303,528 24.1% 3.4 Global fixed income 47,974,521 18.8% 7.3 Actively managed investments 214,277,301 84.2% 6.9 Government short-term investment fund 31,504,160 12.4% - Pooled high-yield fixed income securities 7,927,398 3.1% 3.2 Pooled international fixed income securities 825,290 0.3% 1.6 Total investment in debt securities $ 254,534,149 100.0%

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Credit Risk of Debt Securities: Credit risk is the Total Debt risk that an issuer of an investment will not fulfill Quality Rating Securities its obligations. The WRS manages exposure to investment credit risk by adhering to the following AAA $ 12,763,494 AA+ 85,660,515 policies: (1) for active core domestic fixed income AA 7,387,435 investments, at the time of purchase, bonds and AA- 6,969,627 preferred stocks must be rated at least “A2/A/A” A+ 10,510,438 or higher using the middle rating of Moody’s, A14,709,325 Standard and Poor’s and Fitch after dropping the A- 20,095,882 highest and lowest available ratings. When a BBB+ 18,835,138 rating from only two agencies is available, the BBB 9,275,953 lower (“more conservative”) rating is used. When BBB- 8,452,002 a rating from only one agency is available, that BB+ 5,304,783 rating is used to determine credit quality; and (2) BB 3,252,784 for core-plus domestic fixed income investments, BB- 9,660,059 the weighted average credit quality of the B+ 2,329,538 portfolio will not fall below “A2/A/A” or equivalent; B 253,525 when determining credit quality, the middle rating B- 1,404,718 of Moody’s, Standard and Poor’s and Fitch is CCC+ 57,324 used after dropping the highest and lowest CCC 1,136,077 available ratings. When a rating from only two CCC- 274,182 agencies is available, the lower (“more CC 358,896 conservative”) rating is used. When a rating from C 352,556 only one agency is available, that rating is used D 378,890 to determine credit quality. Throughout 2017, no Not rated 3,606,848 securities were purchased that were below the Total credit risk debt securities 223,029,989 established credit quality minimum in the active Government short-term investment fund* 31,504,160 core portfolio and the weighted average credit Total investment in debt securities $ 254,534,149 quality of the active core plus portfolio did not fall * While the government short-term investment fund itself is not rated, below the established credit quality rating. The the average quality of the holdings of the government short-term investment fund on December 31, 2017 was A1+P1. accompanying table shows the debt investments held by the WRS on December 31, 2017 and their respective ratings by Standard and Poor’s or an equivalent nationally recognized statistical rating organization.

Credit risk for investment derivative instruments results from counterparty risk assumed by the WRS. This is essentially the risk that the counterparty to a WRS’ transaction will be unable to meet its obligation. Information regarding the WRS’ credit risk related to derivatives is found in the derivatives disclosure that follows.

Concentration of Credit Risk: Concentration of credit risk is the risk of loss that may be attributed to the magnitude of an entity’s investment with a single issuer. The WRS’ investment in debt securities had no single issuer of investments that represented 5% or more of the plan assets, with exception of investments issued or implicitly guaranteed by the U.S. government and investments in mutual funds, as delineated in the WRS’ investment policy.

Rate of Return: The annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 17.4% for the year ended December 31, 2017. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for changing amounts actually invested.

Derivatives: Investment derivative instruments are financial contracts for which the value of the contract is dependent on the values of one or more underlying asset, reference rate or financial index. They include futures contracts, swap contracts, options contracts, rights and forward foreign currency exchanges. While the WRS has no formal policy specific to investment derivatives, the WRS, through its external investment managers, held a variety of these instruments as of December 31, 2017. The WRS enters into these investment derivative instruments primarily to enhance the performance, reduce the volatility of its investment portfolio and to manage interest rate risk. The investment derivative instruments held by the WRS on and

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during the year ended December 31, 2017 are shown on the following page. The notional values associated with these derivative instruments are generally not recorded in the financial statements; however, the exposure amounts on these instruments are included in the fair value of investments in the Statement of Fiduciary Net Position and the total changes in fair value for the year are included as investment income (loss) in the Statement of Changes in Fiduciary Net Position. The fair value of derivative investments is based on the exchanges when available. When an exchange is not available, estimated fair values are determined in good faith by using information from J.P. Morgan traders and other market participants, including methods and assumptions considering market conditions and risks existing at the date of the Statement of Fiduciary Net Position. Such methods and assumptions incorporate standard valuation conventions and techniques, such as discounted cash flow analysis and option pricing models. All methods utilized to estimate fair values result only in general approximations of value.

Change in Notional Exposure/ Counterparty Classification and Type Fair Value Value Fair Value (Counterparty Rating) Investment revenue: Credit default swaps written $ 15,985 $ 3,420,000 $ 76,840 Goldman Sachs CME (BBB+) Credit default swaps written 5,524 - - JPMorgan Chase Bank (A+) Credit default swaps written 2,082 130,000 3,069 N/A Fixed income futures long 1,033,079 36,522,814 - N/A Fixed income options written 19,249 (1,400,000) (18,200) N/A Foreign currency options written 121,120 (3,192,386) (10,358) N/A Futures options written 190,716 (153,500) (20,184) N/A FX forwards 172 - - Brown Brothers Harriman + CO (NR) FX forwards 354 - - Morgan Stanley Capital Services Inc Pay fixed interest rate swaps 41,220 - - Bank of America CME (A-) Rights 155 - - N/A Investment loss: Credit default swaps bought (4,025) - - Bank of America ICE (A-) Credit default swaps bought (17,884) 1,990,000 (164,093) Goldman Sachs CME (BBB+) Fixed income futures short (274,293) (68,255,717) - N/A Fixed income options bought (37,199) 2,700,000 6,239 N/A Foreign currency futures long (75) - - N/A Foreign currency futures short (47,513) (375,000) - N/A Foreign currency options bought (86,813) 5,970,348 84,456 N/A Future options bought (234,489) 288,000 88,620 N/A FX forwards (59,675) 2,594,057 41,996 Bank of America, N.A. (A+) FX forwards (117,292) 4,231,576 (266,543) Barclays Bank PLC Wholesale (A) FX forwards (6,224) - - BNP Paribas SA (A) FX forwards (129,762) 6,521,183 7,875 Citibank N.A. (A+) FX forwards (1,790) - - Credit Suisse International (A) FX forwards (738,318) 12,912,257 (179,030) Goldman Sachs Bank USA (BBB+) FX forwards (35,239) 1,773,320 (7,650) HSBC Bank USA (AA-) FX forwards (430,311) 9,262,204 (141,774) JP Morgan Chase Bank (A+) FX forwards (131,672) 667,039 (20,719) JP Morgan Chase Bank N.A. (A+) FX forwards (6) 5,050 (6) Royal Bank of Canada UK (AA-) FX forwards (431,064) - - UBS AG (A+) Pay fixed interest rate swaps - 2,434,950 - Bank of America Intl NY United States (A-) Pay fixed interest rate swaps - 2,528,244 - Bank of America LCH (A-) Pay fixed interest rate swaps (21,663) 3,992,604 57,644 Goldman Sachs CME (BBB+) Receive fixed interest rate swaps (64,982) - - Bank of America CME (A-) Receive fixed interest rate swaps (2,713) 2,769,604 4,128 Goldman Sachs CME (BBB+) Warrants (454,118) 218 1,910 N/A $ (1,897,464) $ 27,336,865 $ (455,780)

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Foreign Currency Risk: Currency risk arises due to foreign exchange rate fluctuations. The WRS’ investment policies manage the exposure to foreign currency risk by allowing international securities investment managers to enter into forward exchange or future contracts on foreign currency provided such contracts have a maturity of less than one year. Currency contracts are only to be utilized for the settlement of securities transactions and defensive hedging of currency positions. The WRS’ exposure to foreign currency risk on December 31, 2017 is presented in the accompanying table.

Cash and Cash Fixed Currency Equivalents Income Equities Argentine peso $ 17,629 $ 1,063,418 $ - Austrailian dollar 30 1,268,972 10,803,965 Brazilian real - 1,402,631 - Canadian dollar 21,540 1,671,718 - Chilean peso - 266,355 - Danish krone - - 3,836,661 Euro 327,916 8,265,910 51,242,253 Hong Kong dollar - - 5,235,209 Indian rupree - 84,291 - Japanese yen 32,806 - 35,128,445 Mexican peso 288,503 2,389,450 - New Zealand dollar 14,222 2,023,541 928,079 Norwegian krone 191 (3,542) 1,255,910 Polish zloty 16,404 - - Pound sterling 28,525 1,547,780 26,695,552 Russian ruble 20,672 549,458 - Singapore dollar - - 937,231 South African rand 34,915 1,345,830 - Swedish krona 37,345 880,814 1,571,918 Swiss franc - - 10,363,771 Turkist lira 5,461 425,276 - Uruguayan peso - 279,074 - Yuan renminbi 25,449 358,592 - International mutual funds (various currencies) - 2,320,173 - Total subject to foreign currency risk $ 871,608 $ 26,140,371 $ 147,998,994

All forward foreign currency contracts are carried at fair value by the WRS. As of December 31, 2017, the Systems held forward currency contracts with an unrealized loss of $565,851. If held, sales of forward currency contracts are receivables and are reported as investment sales pending in the financial statements.

Securities Lending Transactions: Policies of the Board of Trustees for the Wichita Employees’ Retirement and Police and Fire Retirement Systems permit the lending of securities to broker-dealers and other entities (borrowers) with a simultaneous agreement to return the collateral for the same securities in the future. The WRS’ custodial bank, State Street, is the lending agent for the Systems’ domestic securities for initial collateral of 102% of the fair value of the loaned securities, international equity securities for initial collateral of 105% of the fair value of such securities and the initial collateral received for loans of United Kingdom (UK) Gilts shall have a value of at least 102.5% of the fair value of such UK Gilts. Collateral may consist of cash (U.S. and foreign currency), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, irrevocable bank letters of credit issued by a person other than the securities borrower or affiliate, if determined appropriate by the agent under the securities lending programs it administers and such other collateral as the parties may agree to in writing.

-54 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

The collateral securities cannot be pledged or sold by the WRS unless the borrower defaults. The lending agent shall require additional collateral from the borrower whenever the value of loaned securities exceeds the value of the collateral in the agent’s possession, so that collateral always equals or exceeds 100% of the fair value of the loaned securities. Contracts with the lending agent require them to indemnify the WRS, if the borrowers fail to return the securities (and if the collateral is inadequate to replace the securities lent) or fail to pay the WRS for income distributions by the securities’ issuers while the securities are on loan. As of December 31, 2017, the Systems had no securities lending transactions due to the program being wound down in preparation for the Systems’ transition to a new custodial bank in 2018.

Other Risk Information: Recent market conditions have resulted in an unusually high degree of volatility and increased risks associated with certain investments held by the City, the Wichita Employees’ Retirement System and the Police and Fire Retirement System. As a result, it is at least reasonably possible that changes in the fair values of investment securities will occur in the near term and such changes could materially affect the amounts reported in the financial statements. In addition, declines in the fair values of Plan assets could ultimately affect the funded status of the Plans. The ultimate impact on the funded status will be determined based upon market conditions in effect when the annual valuation is performed.

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6. Capital Assets Capital asset activity of the primary government for the year ended December 31, 2017 is presented in the following table (expressed in thousands of dollars): Beginning Balance Increases Decreases Transfers Ending Balance Governmental Activities: Capital assets, not being depreciated: Land $ 289,872 $ 5,293 $ (835) $ - $ 294,330 Construction in progress 150,716 82,281 (106,242) - 126,755 Total capital assets, not being depreciated 440,568 87,574 (107,077) - 421,085 Capital assets, being depreciated: Buildings 251,836 23,886 (24) - 275,701 Improvements other than buildings 106,185 13,772 - (6,070) 113,887 Machinery, equipment and other assets 122,795 4,946 (6,410) (193) 121,138 Infrastructure 914,884 25,199 - - 940,083 Total capital assets being depreciated 1,395,703 67,803 (6,434) (6,263) 1,450,809 Less accumulated depreciation for: Buildings (121,244) (3,550) 21 - (124,773) Improvements other than buildings (43,348) (3,554) - - (46,902) Machinery, equipment and other assets (87,484) (8,600) 5,903 - (90,181) Infrastructure (297,181) (22,310) - - (319,491) Total accumulated depreciation (549,257) (38,014) 5,924 - (581,347) Total capital assets, being depreciated, net 846,446 (29,789) (510) (6,263) 869,462 Governmental activities capital assets, net $ 1,287,034 $ 117,363 $ (107,587) $ (6,263) $ 1,290,547 Business-type Activities: Capital assets, not being depreciated: Land $ 43,104 $ 18 $ (29) $ - $ 43,093 Construction in progress 89,699 57,019 (36,989) - 109,729 Total capital assets, not being depreciated 132,803 57,037 (37,018) - 152,822

Capital assets, being depreciated: Airfields 165,718 - - - 165,718 Buildings 453,045 3,134 (408) - 455,771 Improvements other than buildings 1,378,858 27,891 (286) 6,070 1,412,533 Machinery, equipment and other assets 252,888 11,319 (8,037) 193 256,363 Total capital assets being depreciated 2,250,509 42,344 (8,731) 6,263 2,290,385 Less accumulated depreciation for: Airfields (125,548) (4,219) - - (129,767) Buildings (109,876) (8,335) 203 - (118,008) Improvements other than buildings (335,769) (24,041) - - (359,810) Machinery, equipment and other assets (140,823) (19,247) 7,805 - (152,265) Total accumulated depreciation (712,016) (55,842) 8,008 - (759,850) Total capital assets, being depreciated, net 1,538,493 (13,498) (723) 6,263 1,530,535 Business-type activities capital assets, net $ 1,671,296 $ 43,539 $ (37,741) $ 6,263 $ 1,683,357

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Beginning Balance Increases Decreases Transfers Ending Balance Fiduciary Activities: Capital assets, being depreciated: Machinery, equipment and other assets $ 1,283 $ - $ - $ - $ 1,283 Less accumulated depreciation for: Machinery, equipment and other assets (1,283) - - - (1,283) Total capital assets, being depreciated, net ---- - Fiduciary activities capital assets, net $ - $ - $ - $ - $ -

Depreciation expense was charged to function/ programs of the primary government as follows (in thousands of dollars):

Current Year Depreciation Governmental Activities: General government $ 2,359 Public safety 3,520 Highways and streets1 23,303 Sanitation 404 Health and welfare 658 Culture and recreation 4,284 Internal service funds2 3,486 Total depreciation expense - governmental activities $ 38,014

Business-type Activities: Water Utility Fund $ 26,092 Sewer Utility Fund 12,112 Airport Authority Fund 11,948 Stormwater Utility Fund 3,069 Nonmajor enterprise funds 2,621 Total depreciation expense - business-type activities $ 55,842

Fiduciary Activities Pension trust funds $-

1 Includes the depreciation expense of general infrastructure assets. 2 Capital assets held by the government’s internal services are charged to the various functions based on their usage of the assets.

7. Retirement Funds The reporting entity contributes to two single-employer defined benefit pension plans and a single-employer defined contribution plan, covering all full-time employees. The defined benefit plans include the Wichita Employees' Retirement System (WERS) and the Police and Fire Retirement System (PFRS). Each system is governed by a separate Board of Trustees. Benefit and contribution provisions for the City’s retirement plans are established by City Ordinance. Establishment of, and amendments to, benefit provisions are authorized by the City Council. The WERS Board of Trustees is comprised of 16 members including the City Manager or the City Manager’s designee, one employee appointed by the City Manager, seven members appointed by the City Council and seven employees elected by the WER employee members. The single-employer defined contribution plan consists of the Wichita Employees' Retirement System Plan 3b which is also governed by the Wichita Employees' Retirement System Board of Trustees. The PFRS Board of Trustees is comprised of 16 members including the -57 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

City Manager or the City Manager’s designee, the Chief of the Police Department, the Chief of the Fire Department, seven members appointed by the City Council, three fire officers elected by PFRS employee members in the fire department or the airport and three police officers elected by PFRS employee members in the police department. The Wichita Retirement Systems (WRS) issue a publicly available Comprehensive Annual Financial Report (CAFR) that includes financial statements and required supplementary information for WERS and PFRS. The financial report may be obtained by writing to the WRS, City Hall, 12th Floor, 455 N. Main, Wichita, KS 67202 or online at http://www.wichita.gov/Finance/Pages/Pension.aspx.

Summary of Significant Accounting Policies and Plan Asset Matters

Basis of Accounting: The Wichita Employees' Retirement System, the Police and Fire Retirement System and the Wichita Employees’ Retirement System Plan 3b are reported as pension trust funds in the City's financial statements and using the economic resources measurement focus and the accrual basis of accounting. Employee and employer contributions are recognized as revenues in the period in which employee services are performed. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan.

Method Used to Value Investments: Investments are reported at fair value. Short-term investments are reported at cost plus accrued interest, which approximates fair value. Securities traded on national or international exchanges are valued at the last trade price of the day. If no close price exists, then a bid price is used. Mortgages are valued on the basis of future principal and interest payments, and are discounted at prevailing interest rates for similar investments. The fair value of real estate and timber investments are estimated using the net asset value of the shares owned in each fund. Investments that do not have an established market are reported at their estimated fair value.

Management of Plan Assets: The Boards of Trustees of the Systems have contractual arrangements with independent money managers for investment of the assets of the Systems. The firms have been granted discretionary authority concerning purchases and sales of investments within guidelines established by City Ordinances and the Strategic Plan and Investment Policies adopted by the Boards of Trustees. The Boards of Trustees of the Systems also have contractual arrangements with independent firms which monitor the investment decisions of the Systems’ investment managers. Net Pension Liability, Pension Expense and Deferred Outflows and Inflows of Resources Related to Pensions: For the year ended December 31, 2017, the City had a total net pension liability of $116,704,566 which was comprised of WERS and PFRS having net pension liabilities of $60,324,198 and $56,380,368, respectively. The City recognized a combined net pension expense of $42,369,210 for the defined benefit plans it administers with $19,310,840 for the Wichita Employees' Retirement System and $23,058,370 for the Police and Fire Retirement System. As of December 31, 2017, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ - $ 14,773,305 Changes of assumptions 124,097 13,869,016 Net difference between projected and actual earnings on pension plan investments 75,596,609 - City contributions subsequent to the measurement date 23,012,325 - Changes in proportion of the total net pension liability since the prior measurement date Change in proportion - governmental activities 30,478 94,771 Change in proportion - business-type activities 145,466 81,173 Total $ 98,908,975 $ 28,818,265

Deferred Deferred Outflows of Inflows of Resources Resources Deferred amounts reported in governmental activities $ 84,553,629 $ 25,348,596 Deferred amounts reported in business-type activities 14,355,346 3,469,669 Total $ 98,908,975 $ 28,818,265

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The $23,012,325 reported as deferred outflows of resources related to pensions resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability for the year ended December 31, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Deferred Deferred Year Ending Outflows of Inflows of December 31, Resources Resources 2018 $ 26,429,367 $ 8,603,560 2019 26,429,368 8,126,454 2020 20,593,160 6,976,380 2021 2,442,819 4,428,816 2022 1,936 683,055 Totals $ 75,896,650 $ 28,818,265

A. Wichita Employees' Retirement System Plan Description: The WERS was established to provide retirement and survivor annuities, disability benefits, death benefits and other benefits for all regular full-time civilian employees of the reporting entity and their dependents. Plan 1 was established by City Ordinance on January 1, 1948 and became closed to new entrants as of July 19, 1981. With the initiation of Plan 2, which was established by City Ordinance on July 18, 1981, all covered employees of Plan 1 were given the option of converting to the new plan. Plan 2 was closed to new entrants with the establishment of Plan 3 by City Ordinance, effective January 1, 1994.

Plan 3 was established by City Ordinance on April 9, 1993 and amended on February 8, 2000. The reporting entity's contributions and earnings for each employee are 25% vested after three years of service, 50% vested after five years and are fully vested after seven years of service. Upon completion of seven years of service, employees participating in Plan 3 automatically convert to participation in Plan 2 unless they make an irrevocable election to convert to Plan 3b, a defined contribution plan, within 90 days thereafter. Establishment of and amendments to the benefit provisions for the WERS are authorized by the City Council.

Benefits Provided: The primary benefits provided are retirement benefits. However, the System also provides ancillary benefits in the event of pre-retirement death, disability or termination of employment prior to meeting the eligibility requirements to retire. Plan 1 members are eligible to retire at age 60 with seven years of service or at any age with 30 years of service. Plan 2 members may retire at age 62 with seven years of service. Benefits for Plan 1 members are calculated using Final Average Salary (FAS), which is the member’s compensation for the three highest consecutive years of service within the last 10 years, multiplied by the total years of creditable service and a factor of 2.5%, subject to a maximum of 75% of the FAS. Benefits for Plan 2 members are the same as Plan 1 except they are calculated using a factor of 2.25% instead of 2.5%. Benefits vest with seven years of service. The calculation varies with early retirement. When a Plan 1 member has been retired for 12 months, they will receive an annual adjustment to their benefit of 3% of the original base amount of the benefit. The annual post-retirement adjustment for Plan 2 members is 2%. As of December 31, 2017, the WERS defined benefit plan membership consisted of the following:

Member Category Plan 1 Plan 2 Plan 3 Total Inactive employees or beneficiaries currently receiving benefits 691 725 - 1,416 Inactive employees entitled to, but not yet receiving benefits - 144 - 144 Active employees 3 891 647 1,541 Total membership 694 1,760 647 3,101

Deferred Retirement Option Plan (DROP) Provision: The benefit structure of the Wichita Employees’ Retirement System includes a Deferred Retirement Option Plan (DROP). Both Plan 1 and Plan 2 provide a

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DROP provision. Members must be eligible to receive a service retirement benefit as of the DROP retirement date to participate in the DROP. The DROP period is one to 60 months. The monthly benefit amount is computed as of the DROP election date based on the final average salary and years of service as of that date. The benefit is paid into the member’s notional DROP account during the deferral or DROP period. The member and City both continue to make the required contributions during the deferral period. These contributions are not credited to the member’s DROP account, but are credited to general Plan assets to improve the System’s funding. Interest at an annual rate of 5.0%, compounded monthly, is credited to the notional DROP account. Voluntary termination of employment during the DROP period results in loss of accrued interest. When the member terminates employment, the balance of the DROP account is paid as a lump sum and future monthly benefits are paid to the member. The balance of the notional DROP accounts as of December 31, 2017 is $4,928,981.

Funding Policy: The contribution requirements of plan members and the reporting entity are established by City Ordinance and may be amended by the governing body. Members of Plan 1 and 2 are required to contribute 6.4% and 4.7% of covered salaries, respectively. Members of Plan 3 are required to contribute 4.7% of covered salaries. From its various operating funds, the City is required to contribute at an actuarially determined rate; the rate for 2017 was 12.3% of annual covered payroll for Plans 1, 2 and 3 (excluding compensation attributable to members who have made an irrevocable election to remain in the defined contribution plan after fully vesting at seven years of service). The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded liability. The City may provide for pension expenses by levying ad valorem property taxes each year in the amount necessary to meet its obligation as determined by the WERS consulting actuary. For the year ended December 31, 2017, WRS received $9,642,540 in contributions from the employer.

Actuarial Assumptions: The total pension liability in the December 31, 2016 actuarial valuation was determined using the actuarial assumptions summarized in the accompanying table, applied to all periods included in the measurement. The actuarial assumptions used in the December 31, 2016 valuation were based on the results of the most recent experience study, which covered the five-year period ending December 31, 2013. The experience report is dated July 15, 2014.

Price inflation 3.25% Wage inflation 4.00% Salary increases, including wage inflation 4.25% - 7.20% Long-term rate of return, net of investment expense, including price inflation 7.90% Pre-retirement mortality rates Based on the RP-2000 Employee Table (ages set forward 2 years for males, 0 for females) with adjustments for mortality improvements based on Scale AA. Post-retirement mortality rates Based on the RP-2000 Healthy Annuitant Table (ages set forward 2 years for males, 0 for females) with adjustments for mortality improvements based on Scale AA. Disabled mortality rates Based on the RP-2000 Disabled Table for males and females, as appropriate, with adjustments for mortality improvements based on Scale AA.

Changes in Actuarial Assumptions: There were no changes to the assumptions used for the actuarial valuation performed as of the year ended December 31, 2016. Actuarial Rate of Return Assumption: The long-term expected rate of return on pension plan investments is reviewed as part of the regular experience study prepared for the System. Several factors are considered in evaluating the long-term rate of return assumption, including long term historical data, estimates inherent in current market data and an analysis in which best-estimate ranges of expected future real rates of return (expected return, net of investment expense and inflation), along with estimates of variability and correlations for each asset class. These ranges were combined to develop the long-term expected rate of return by weighting the expected future real rates of return by targeting the asset allocation percentage and then adding expected inflation. The long-term rate of return assumption is intended to be a long-term assumption (30 to 50 years) and is not expected to change absent a significant change in the asset allocation, a change in the

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inflation assumption or a Target Long-Term Expected fundamental change in the market Asset Class Allocation Real Rate of Return* that alters expected returns in future Large cap equity 31% 4.50% years. The target asset allocation Small cap equity 8% 4.75% and best estimates of geometric real International equity 26% 4.50% rates of return (net of 2.25% inflation assumption) for each major asset Fixed Income 19% 0.75% class are summarized in the Real estate 7% 3.50% accompanying table. Timber 5% 3.75% Commodities 3% 0.40% Discount Rate: The fiduciary net Cash 1% 0.00% position is not projected to become depleted; therefore, a Municipal Total 100% Bond Index Rate was not used in *Geometric mean, net of investment expenses the determination of the Single Equivalent Interest Rate (SEIR) for the December 31, 2016 valuation. Thus, the discount rate, or SEIR, is equal to the long-term assumed rate of return on investments, as determined in the last experience study. The discount rate used to measure the total pension liability as of the December 31, 2016 valuation is 7.90% which is consistent with the previous valuation’s discount rate.

The projection of cash flows used to determine the discount rate assumed the employee contributions will be made at the current contribution rate and that the City contributions will be made at rates equal to the difference between the actuarially determined contribution rates and the employee rate. Projected future benefit payments for all current plan members were projected through 2116. Based on those assumptions, the pension plan’s fiduciary net position is projected to be available to make all projected future payments of current and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Net Pension Liability: Detailed information about the pension plan’s fiduciary net position used in calculating the net pension liability is available in the separately issued WRS financial report. The City’s net pension liability was measured as of December 31, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The accompanying table presents changes in the total pension liability, fiduciary net position and the net pension liability.

Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability (a) Net Position (b) Liability (a) - (b) Balance as of December 31, 2015 $ 596,977,187 $ 541,247,503 $ 55,729,684 Changes for the year: Service cost 9,679,684 - 9,679,684 Interest on total pension liability 45,634,881 - 45,634,881 Differences between expected and actual experience (2,791,029) - (2,791,029) Employer contributions - 8,946,064 (8,946,064) Employee contributions - 3,642,007 (3,642,007) Reclassifications due to participant conversion (244,793) (244,793) - Net investment income - 35,956,780 (35,956,780) Benefit payments, including member refunds (39,144,783) (39,144,783) - Administrative expenses - (615,829) 615,829 Net Changes 13,133,960 8,539,446 4,594,514 Balance as of December 31, 2016 $ 610,111,147 $ 549,786,949 $ 60,324,198

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B. Police and Fire Retirement System Plan Description: The PFRS consists of three plans: Plan A, Plan B and Plan C 79. The plans were established to provide retirement and survivor annuities, disability benefits, death benefits and other benefits for police and fire officers of the reporting entity and their dependents. All full-time active “commissioned” Police and Fire Department personnel are required to participate in the plans. Plans A and B were established by City Ordinance on January 1, 1965 and Plan C 79 was established January 1, 1979 by City Ordinance. Plan B was closed to new entrants as of January 1, 1965 and Plan A was closed to new entrants as of December 31, 1978. Establishment of and amendments to the benefit provisions for the PFRS are authorized by the City Council. Benefits Provided: The primary benefits provided are retirement benefits. However, the System also provides ancillary benefits in the event of pre-retirement death, disability or termination of employment prior to meeting the eligibility requirements to retire. Plan A and Plan B members are eligible to retire at 20 years of service regardless of age. Plan C members are eligible to retire at 30 years of service regardless of age, 20 years of service at age 50 or 10 years of service at age 55. Benefits are calculated using Final Average Salary (FAS), which is the member’s compensation for the three highest consecutive years of service within the last 10 years, multiplied by the total years of creditable service and a factor of 2.5%, subject to a maximum of 75% of the FAS. Benefits vest after 10 years of service. When a member has been retired for 36 months, they will receive an annual adjustment to their benefit of 2% of the original base amount of the benefit. As of December 31, 2017, the PFRS defined benefit plan membership consisted of the following:

Member Category Plan A Plan B Plan C-79 Total Inactive employees or beneficiaries currently receiving benefits 439 191 370 1,000 Inactive employees entitled to, but not yet receiving benefits - - 33 33 Active employees 2 - 1,080 1,082 Total membership 441 191 1,483 2,115

Backward Deferred Retirement Option Plan (DROP) Provision: The benefit structure of the Wichita Police and Fire Retirement System includes a Backward Deferred Retirement Option Plan (DROP). The Backward DROP is available to plan C-79 members. Members must be eligible to receive a service retirement benefit as of the backward DROP retirement date. The DROP period is one to 60 months. The DROP period is the time between the backward DROP retirement date and the date the employee terminates service. The retirement benefit is calculated as of the day prior to the backward DROP retirement date. The employee’s monthly retirement benefits (for the DROP period) plus applicable post retirement adjustments and interest at an annual rate of 5.0%, compounded monthly, is payable upon the employee’s termination of service. When the member terminates employment, the balance of the DROP account is paid as a lump sum and the member begins to receive monthly retirement benefits on the month following termination of service.

Funding Policy: The contribution requirements of plan members and the reporting entity are established by City Ordinance and may be amended by the governing body. PFRS members are required to contribute 6% to 8% of covered salaries. From its various operating funds, the City is required to contribute at an actuarially determined rate; the rate for 2017 was 19.2% of annual covered payroll. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded liability. The City may provide for pension expenses by levying ad valorem property taxes each year in the amount necessary to meet its obligation as determined by the PFRS consulting actuary. For the year ended December 31, 2017, PFRS received $13,369,785 in contributions from the employer.

Actuarial Assumptions: The total pension liability in the December 31, 2016 actuarial valuation was determined using the actuarial assumptions summarized in the table on the following page, applied to all periods included in the measurement. The actuarial assumptions used in the December 31, 2016 valuation were based on the results of the most recent experience study, which covered the five-year period ending December 31, 2013. The experience report is dated July 15, 2014.

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Price inflation 3.25% Wage inflation 4.00% Salary increases, including wage inflation 5.00% - 6.75% Long-term rate of return, net of investment expense, including price inflation 7.90% Pre-retirement mortality rates Based on the RP-2000 Employee Table for males and females using scale AA for generational mortality projections. Post-retirement mortality rates Based on the RP-2000 Healthy Annuitant Table for males and females using Scale AA for generational mortality projections. Disabled mortality rates Based on the RP-2000 Disabled Table for males and females using Scale AA for generational mortality projections.

Changes in Actuarial Assumptions: There were no changes to the assumptions used for the actuarial valuation performed as of the year ended December 31, 2016. Actuarial Rate of Return Assumption and Discount Rate: Information about the actuarial rate of return assumption and the discount rate is disclosed in Note 7A - Wichita Employees' Retirement System. Because the assets of the plans are pooled for investment purposes, the assumptions for the Police and Fire Retirement System are identical to those of the Wichita Employees’ Retirement System.

Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability (a) Net Position (b) Liability (a) - (b) Balance as of December 31, 2015 $ 644,264,654 $ 592,883,226 $ 51,381,428 Changes for the year: Service cost 14,772,379 - 14,772,379 Interest on total pension liability 49,519,284 - 49,519,284 Differences between expected and actual experience (2,576,401) - (2,576,401) Employer contributions - 12,585,895 (12,585,895) Employee contributions - 4,776,958 (4,776,958) Reclassifications due to participant conversion - 39,901,640 (39,901,640) Net investment income (35,552,267) (35,552,267) - Benefit payments, including member refunds - (548,171) 548,171 Net Changes 26,162,995 21,164,055 4,998,940 Balance as of December 31, 2016 $ 670,427,649 $ 614,047,281 $ 56,380,368

Sensitivity Analysis: The accompanying table presents the City’s Net net pension liability of the City using the discount rate of Rate Pension Liability 7.90%, as well as what the net pension liability (asset) would 1% decrease 6.90% $ 137,461,499 be if it were calculated using a discount rate that is 1% lower Current rate 7.90% 56,380,368 (6.90%) or 1% higher (8.90%) than the current rate. 1% increase 8.90% (11,126,261) C. Wichita Employees’ Retirement System Plan 3b The City contributes to Wichita Employees' Retirement System Plan 3, a defined contribution pension plan, for all of its full-time civilian employees hired or rehired on or after January 1, 1994. Benefits depend solely on amounts contributed to the plan plus investment earnings. Plan 3, established by City Ordinance on April 9, 1993 and amended on February 8, 2000, requires that both the employee and the reporting entity contribute an amount equal to 4.7% covered salaries. The reporting entity's contributions and earnings for each employee are 25% vested after three years of service, 50% vested after five years and are fully vested after seven years of service. -63 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

Upon completion of seven years of service, employees participating in the Plan will be converted to WERS Plan 2, a defined benefit plan, unless they make an irrevocable election to remain in the defined contribution plan within 90 days thereafter. If an employee converts to Plan 2, the employee's Plan 3 account balance becomes part of WERS assets available to pay future benefits of WERS defined benefit plan members. For this reason, Plan 3 members who have not made an irrevocable election to remain in the defined contribution plan are reported with the WERS defined benefit plan. Further, any contributions of the reporting entity and any related earnings which are forfeited by employees who leave employment before becoming fully vested are used to reduce the reporting entity's contribution requirements related to the WERS defined benefit plan. Fully vested Plan 3 members who elect to remain in the defined contribution plan are referred to as Plan 3b members and are reported as a separate plan on the combining pension trust fund financial statements beginning on page E-1. Fully vested employees who elect to continue participation in Plan 3b may contribute additional amounts into the plan as permitted by the rules of the Internal Revenue Code in effect at the time of the contribution. Benefit terms, including contribution requirements, are established and may be amended by the City Council. For the year ending December 31, 2017, employee and employer contributions to Plan 3b each totaled $200,003. As of December 31, 2017, there were 88 members covered under the defined contribution Plan 3b.

8. Self Insurance Fund The City established the Self Insurance Fund in 1987 to account for self insurance programs of workers' compensation, group health insurance, group life insurance, employee liability, property damage, auto liability and general liability for the reporting entity. Since its original inception, the City uses this fund to cover costs associated with a fully-insured property policy and a special excess general liability insurance policy. For funds paying insurance costs, the contributions are recorded as expenses in the paying fund and revenues in the Self Insurance Fund. The City records liabilities for known claims and estimated liabilities incurred but not reported at year-end which are reflected under accounts payable and accrued liabilities and claims payable, respectively, in the internal service funds. There were no settlements in excess of the insurance coverage in any of the three prior fiscal years. A. Health Insurance The employee health insurance program is offered to all full-time employees of the reporting entity and their dependents. The health insurance program is open to retirees and dependents up to 65 years of age. The City self-insures health benefits up to $450,000 per member, with a stop-loss secondary coverage for costs in excess of $450,000 with the exception of one member for which the City self-insures up to $1 million. The self-insured prescription drug plan is included in the monthly premium. At December 31, 2017, the City recorded a liability of $3,157,945 for estimated claims pending and net position totaled $13,479,982. B. Workers’ Compensation The workers' compensation program is a partially self-funded program covering substantially all full-time and part-time employees of the reporting entity. The annual requirements of the workers’ compensation program are determined based on current claims outstanding and estimates of future liability based on pending claims, recorded at a confidence level of 85%. The City has reinsured for liabilities exceeding $750,000 per occurrence with coverage provided through Safety National Casualty Corporation. The retention is taken into consideration in actuarial projections of the City’s liability. The City maintains a reserve to meet state and actuarial requirements and to provide contingency funding. At December 31, 2017, the City recorded a liability of $9,284,230 for estimated probable claims pending and net position totaled $6,823,913. C. Life Insurance The life insurance program offered by the City is a fully insured program administered by Standard Insurance Company with benefit levels based on employee compensation. All full-time employees of the reporting entity are eligible to participate in the plans of the program. The program provides basic life, dependent life and accidental death and dismemberment with conversion privileges to participants.

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The cost of basic employee life insurance is funded approximately one third by the employee and two thirds by the City. The City offers additional supplemental, voluntary accidental death and dismemberment insurance for employees and eligible dependents, the total cost of which is paid by the employee. Contributions (employee and employer), plus interest earned on investments, are used for premium payments. Coverage is terminated if the participant fails to make contributions toward the cost of insurance, if the participant terminates employment with the City and does not elect the conversion or portability option, or if the plan is terminated. At December 31, 2017, net position totaled $728,089. D. General Liability The City's general liability program provides for legal defense and claims against employees of the reporting entity when an incident arises out of City operations. The general liability program also includes vehicle liability and building and content insurance. The City maintains a property insurance policy for all City owned buildings and contents. The deductible portion of the building and content insurance coverage is paid from the Self Insurance Fund. The deductible is $100,000 per occurrence for most covered losses, except wind and hail, which is $750,000 per occurrence. The City is self-insured for tort liability claims against the reporting entity. The Kansas Tort Claims Act provides a liability limitation of $500,000 per occurrence. The City maintains an excess policy of insurance for federal actions because the limitations under the Kansas Tort Claims Act do not apply to federal actions. The policy provides coverage of $20 million per occurrence limit and a $2 million self-insured retention. At December 31, 2017, the City recorded a liability of $7,036,805 for pending tort claims at a confidence level of 85% and to provide for the loss of excess liability coverage and potential environmental liability exposure. At December 31, 2017, net position totaled $4,553,652. Changes in the balances of claims liabilities during the past two years are as follows:

Changes in Beginning Actuarial Ending Short-term Fund Claims Paid Balance Estimate Balance Portion Worker’s Compensation 2016 $ 2,228,361 $ 8,092,880 $ (534,795) $ 7,558,085 $ 1,787,930 2017 2,958,077 7,558,085 1,726,145 9,284,230 2,153,620

General Liability 2016 4,031,179 5,355,477 2,015,078 7,370,555 2,634,247 2017 2,144,399 7,370,555 (333,750) 7,036,805 2,744,431

Health Insurance 2016 35,296,701 4,566,905 (1,481,007) 3,085,898 3,085,898 2017 40,905,362 3,085,898 72,047 3,157,945 3,157,945

E. Other Post Employment Healthcare Benefits Description: Kansas statute provides that post employment healthcare benefits be extended to retired employees who have met age and/or service eligibility requirements until the individuals become eligible for Medicare coverage at age 65. The City provides healthcare benefits for retired employees and their dependents through a single-employer defined benefit plan. The health insurance benefit provides the same coverage for retirees and their dependents as for active employees and their dependents. The benefit is available for selection at retirement and is extended to retirees and their dependents until the individuals become eligible for Medicare at age 65. The accounting for the health insurance for retirees is included in the City’s Self Insurance Fund, with the subsidy provided from the Self Insurance Fund. Separate audited financial statements are not prepared by the Plan.

-65 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

Funding Policy: The City provides health insurance benefits to retirees and their dependents in accordance with Kansas law (K.S.A. 12-5040). Kansas statute, which may be amended by the state legislature, establishes that participating retirees may be required to contribute to the employee group health benefits plan, including administrative costs at an amount not to exceed 125% of the premium cost for other similarly situated employees. The City requires participating retirees to contribute 100% of the blended premium cost of active employees up to age 60 (including the employer and employee share). Participating retirees between the ages of 60 and 65 are required to contribute 75% of the blended premium cost of active employees (including the employer and employee share).

The City appropriates funds annually for the costs associated with this retirement benefit and provides funding for the expenditures on a pay-as-you-go basis through the Self Insurance Fund. In 2017, retired plan members receiving benefits contributed $2,347,612 to the plan compared to City’s contribution of $2,062,252.

Annual OPEB Cost and Net OPEB OPEB Component Amount Obligation: The City’s annual OPEB (other Annual required contribution-amortized liability $ 4,070,278 post employment benefit) cost is calculated Interest on net OPEB obligation 645,532 based on the annual required contribution Adjustment to annual required contribution (933,279) (ARC) of the employer, an amount Annual OPEB cost (expense) 3,782,531 actuarially determined in accordance with Contributions made (2,062,252) the parameters of GASB Statement No. 45. Increase in net OPEB obligation 1,720,279 The ARC represents a level of funding that, Net OPEB obligation January 1, 2017 16,138,302 if paid on an ongoing basis, is projected to Net OPEB obligation December 31, 2017 $ 17,858,581 cover normal cost each year and amortize any unfunded actuarial liabilities over a period of not to exceed thirty years. The accompanying table presents the components of the City’s annual OPEB cost for the year, the amount contributed to the plan and changes in the City’s net OPEB obligation. The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation are shown in the table below.

Funded Status and Funding Progress: As of January 1, 2017, the date of the most recent the actuarial valuation, the actuarial accrued liability for benefits was $35,102,854. The covered payroll (annual payroll of active employees covered by the plan) was $161.7 million, and the ratio of the unfunded actuarial accrued liability (UAAL) to the covered payroll was 21.7%. The City’s Fiscal Year Annual Percentage of Annual Net OPEB policy is to fund the benefits Ended OPEB Cost OPEB Cost Contributed Obligation on a pay-as-you-go basis 2015 $ 3,780,265 65.0% $ 14,572,684 from the Self Insurance Fund, 2016 3,756,701 58.3% 16,138,302 resulting in an UAAL of 2017 3,782,531 54.5% 17,858,581 $35,102,854.

Actuarial valuations of the ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. The valuation includes, for example, assumptions about future employment, mortality and the healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with the past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, will present multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of benefits provided at the time of valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and actuarial value of assets, consistent with the long-term perspective of the calculations.

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The January 1, 2017 actuarial valuation applied the projected unit credit method with linear proration to decrement. The actuarial assumptions included a 3.0% inflation rate implicitly included in the 4.0% rate of return, which is a blended rate of the expected long-term investment returns on the City’s pooled funds and investments. The valuation assumed annual healthcare cost trend rates of 9.0%, declining to an ultimate rate of 5.0% for 2026 and beyond. The valuation did not include changes in the benefits over the valuation period. The valuation followed Generally Accepted Actuarial Methods and included tests as considered necessary to assure the accuracy of the results. The 2017 UAAL is being amortized on a level dollar basis utilizing an open thirty year period.

9. Long-Term Obligations A. General Obligation Bonds General obligation bonds are issued to provide funds for the acquisition and construction of major capital facilities. General obligation bonds are direct obligations of the City and pledge the full faith and credit of the government. The bonds generally are issued as 10-year, 15-year or 20-year serial bonds. Annual debt service requirements to maturity for general obligation bonds are presented in the accompanying tables. General Obligation Bonds Outstanding on December 31, 2017 (dollars in thousands) Payable From Interest Rates Amount Governmental activities: Ad valorem property taxes 1.50% - 5.00% $ 47,633 Transient guest tax 3.00% - 5.00% 2,480 Tax increment financing 1.05% - 5.00% 18,022 Local sales tax 2.125% - 5.00% 96,275 Total governmental activities 164,410

Business-type activities: Airport Authority Fund 3.00% - 5.60% 129,100 Stormwater Utility Fund 1.50% - 5.00% 17,873 Water Utility Fund 3.00% - 5.00% 120,745 Total business-type activities 267,718 Total general obligation bonds $ 432,128

Annual Debt Service Requirements General Obligation Bonds (dollars in thousands) Year ending Governmental Activities Business-type Activities December 31, Principal Interest Principal Interest 2018 $ 28,154 $ 5,987 $ 9,785 $ 11,061 2019 25,411 4,840 10,210 10,608 2020 19,334 3,899 10,593 10,133 2021 16,482 3,155 10,463 9,641 2022 16,980 2,550 10,846 9,152 2023 – 2027 44,593 6,268 58,991 38,009 2028 – 2032 11,651 975 62,780 26,722 2033 – 2037 1,805 98 43,385 15,048 2038 – 2042 - - 33,420 7,826 2043 – 2047 - - 17,245 1,339 Totals $ 164,410 $ 27,772 $ 267,718 $ 139,539

The City of Wichita also issues special assessment bonds to provide funds for the construction of infrastructure in residential developments. Special assessment bonds will be repaid from amounts levied against the property owners benefited by the new infrastructure. In the event that a deficiency exists because of unpaid or delinquent special assessments at the time a debt service payment is due, the government must provide resources to cover the deficiency until other resources, for example, foreclosure proceeds, are received.

-67 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

Annual Debt Service Requirements Special Assessment Bonds (dollars in thousands)

Year ending Governmental Activities December 31, Principal Interest 2018 $ 19,936 $ 7,122 2019 18,430 6,203 2020 18,408 5,391 2021 16,925 4,668 2022 14,968 3,950 2023 – 2027 55,961 11,560 2028 – 2032 25,524 2,236 2033 – 2037 2,555 148 Totals $ 172,707 $ 41,278

B. Revenue Bonds Revenue bonds are also issued by the City of Wichita, where income derived from the acquired or constructed assets is pledged to pay debt service. A summary of revenue bonds outstanding is presented in the following table. Revenue Bonds Outstanding on December 31, 2017 (dollars in thousands) Final Maturity Interest Rates Date Amount Governmental activities 2017 K-96 Greenwich STAR Bond Project 3.00% - 4.625% 2033 $ 3,045 Total governmental activities 3,045

Business-type activities Water utilities: 2009B Water & Sewer 4.27% - 5.36% 2019 3,125 2010B Water & Sewer 3.30% - 5.35% 2030 12,675 2011A Water & Sewer Refunding 3.00% - 5.00% 2028 72,180 2012A Water & Sewer 3.00% - 4.00% 2032 13,580 2014A Water & Sewer 3.00% - 5.00% 2030 26,735 2014B Water & Sewer 2.50% - 5.00% 2034 11,370 2015B Water & Sewer Refunding 2.38% - 5.00% 2031 33,630 2015C Water & Sewer 2.50% - 5.00% 2035 23,020 2015D Water & Sewer Refunding 2.50% - 5.00% 2032 21,345 2016A Water & Sewer 2.00% - 5.00% 2036 23,115 2016B Water & Sewer Refunding 2.00% - 5.00% 2039 98,340 2017A Water & Sewer 3.00% - 5.00% 2037 65,500 2017B Water & Sewer Refunding 1.63% - 5.00% 2030 22,140 Airport authority: Yingling Aircraft – Series 2001 7.50% 2021 1,300 FlightSafety – Series A 2003 Variable* 2031 2,660 Yingling Aircraft – Series A 2005 6.00% 2025 1,500 Total business-type activities 432,215 Total revenue bonds $ 435,260 *The FlightSafety – Series A, 2003 bonds have a variable interest rate, adjustable weekly based on the rate at which the bonds can be remarketed at par, as determined by a remarketing agent, with an interest rate ceiling of 15%. The interest rate utilized to calculate the debt service requirements was the effective rate on December 31, 2017 of 0.93%.

-68 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

Sales Tax Special Obligation Revenue (STAR) Bonds: In 2013, the City issued $36,325,000 of Sales Tax Special Obligation Revenue Bonds (STAR bonds) in connection with an approved STAR Bond District under K.S.A. 12-17, 160 et al., known as the STAR Bonds Financing Act. In 2017, the City issued $71,305,000 in STAR Bonds in connection with the approved STAR Bond District under K.S.A. 12-17, 160, to (1) advance refund the remaining $33,270,000 in outstanding principal of the 2013 bonds, (2) fund a portion of the 2017 Project, (3) fund a deposit into the Debt Service Reserve Fund for the 2017 bonds and (4) pay certain costs related to the issuance of the 2017 bonds. The advance refunding of the 2013 bonds resulted in an in- substance defeasance. Pursuant to issuance of the STAR bonds, the City and State of Kansas entered into a STAR Bond Tax Distribution Agreement. The agreement provides that the principal and interest on the STAR bonds will be paid proportionally by the City and the State of Kansas, based on each entity’s respective share of sales tax generated within the District. As of December 31, 2017, the City’s proportional share is approximately 4.27%. This proportional share may change in the future if the sales taxes assessed by the local or state governments are modified.

These bonds are special, limited obligations of the City payable solely from revenues generated within the STAR Bond District. The bonds do not constitute a pledge of the full faith and credit of the City, and do not obligate the City to levy any form of taxation or to make any appropriation for their payment. As such, the City has only recorded 4.27%, its proportional share of the outstanding obligation, for this bond issue. As of December 31, 2017, the City recorded STAR bonds outstanding in the amount of $3,044,724.

Pledged Revenue: The City has pledged specific revenue streams to secure the repayment of its revenue bonds. The following table lists those revenues and corresponding revenue bonds along with the amount and term of the pledge remaining, the current fiscal year debt service, the amount of pledged revenue recognized during the fiscal year and the percentage of the revenue stream that has been committed.

Pledged Revenue for Revenue Bond Debt Service Requirements (dollars in thousands) 2017 Percent of 2017 Pledged Amount of Term of Revenue Principal Revenues Pledge Type of Pledged Revenue Commitment Pledged & Interest Recognized Water & Sewer Utility Revenue Bonds: $ 568,235 Utility revenues Through 2039 100% $ 46,594 $ 139,006 Airport Authority Special Facility Revenue Bonds: $ 6,768 Direct financing leases Through 2031 100% $ 209 $ 209 Sales Tax Special Obligation Revenue (STAR) Bonds: $ 3,744 Sales tax revenues Through 2033 100% $ 339 $ 303

Revenue bond debt service requirements to maturity are presented in the following table. Annual Debt Service Requirements - Revenue Bonds (dollars in thousands) Year ending Business-type Activities Governmental Activities December 31, Principal Interest Principal Interest 2018 $ 28,255 $ 17,819 $ 178 $ 121 2019 25,675 16,580 287 114 2020 26,255 15,375 306 105 2021 28,700 14,036 316 96 2022 28,115 12,675 330 83 2023 – 2027 134,625 43,451 1,628 181 2028 – 2032 108,990 18,013 - - 2033 – 2037 47,935 4,674 - - 2038 – 2039 3,665 164 - - Totals $ 432,215 $ 142,787 $ 3,045 $ 700

-69 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

C. Capital Leases The City entered into a five-year lease in 2013 with a principal total of $463,180 to fund printers, copiers and related software at an interest rate of 3.963%. An additional three-year lease was entered into in 2015 with a principal total of $21,482 at an interest rate of 6.753%. On December 31, 2017, debt service requirements to maturity consist of principal payments totaling $64,219 and interest payments totaling $901. Additional information on the operating portion of the lease is reported in Note 12 - Leases. D. Other Long-Term Liabilities The City’s municipal solid waste facility, Brooks Landfill, closed operations October 9, 2001. Kansas and federal laws and regulations require the City to perform maintenance and monitoring functions at the site for thirty years after the regulatory closure date of July 25, 2003. Beginning July 1, 2017, the Kansas Department of Health and Environment (KDHE)’s policy concerning the post-closure and closure (PCC) estimate was revised, stating the PCC must be calculated using 30 years initially and then drop each year until 20 years. A rolling 20 years is then required until a demonstration can be made that the landfill conditions are moving towards either equilibrium or stabilization. Estimated post-closure costs for the remaining 20 years total $8,991,451 or $449,573 annually. Accordingly, a liability of $8,991,451 for post-closure care has been reported as a long-term liability of governmental activities on the Statement of Net Position as of December 31, 2017. The City’s Chapin municipal solid waste facility closed operations December 19, 1980. Kansas and federal laws and regulations require the City to perform certain maintenance and monitoring functions at the site for thirty years after the regulatory closure date of July 1, 1989. In June 2008, landfill gas was determined to have migrated off-site from the Chapin Landfill. The estimated additional post-closure care for the remaining 1.48 years is $142,123 or $96,029 annually. Accordingly, a liability of $142,123 for post-closure care has been reported as a long-term liability of the governmental activities on the Statement of Net Position as of December 31, 2017. Additionally, the City operates three limited landfills, all located at the Brooks Landfill site. Kansas and federal laws and regulations require the City to place a final cover when the landfills close and perform certain maintenance and monitoring functions for thirty years after regulatory closure. Beginning July 1, 2017, the Kansas Department of Health and Environment (KDHE)’s policy concerning the post-closure and closure (PCC) estimate was revised, stating the PCC must be calculated using 30 years initially and then drop each year until 20 years. A rolling 20 years is then required until a demonstration can be made that the landfill conditions are moving towards either equilibrium or stabilization. Based on the capacity used in each landfill, the accumulated closure and post-closure costs, as applicable, for each of the landfills is recorded as a long- term liability of the governmental activities on the Statement of Net Position as of December 31, 2017. During 2001, the City was granted permission to operate a construction and demolition landfill. The landfill began operation on October 1, 2001. The City’s construction and demolition landfill has cumulative closure costs of $2,060,354 on December 31, 2017, based on the use of 97% of the estimated capacity. The City will recognize the remaining closure costs of $55,000 as the remaining capacity is filled. Based on activity to date, the City expects the landfill to close in approximately 2018, or as capacity is reached. In May 2002, the City began operation of an industrial monofill landfill for asbestos waste. The City’s industrial monofill landfill for asbestos waste has cumulative closure and post-closure costs of $165,378 on December 31, 2017, based on the use of 28.3% of the estimated capacity. The City will recognize the remaining closure and post-closure costs of $425,215 as the remaining capacity is filled. Based on activity to date, the industrial monofill landfill is expected to close in approximately 2063, or as capacity is reached. In March 2008, the City began operation of a composting facility for yard waste at the existing Brooks Landfill site for which the capacity used was too small to measure, as yard waste moves in and compost moves out. As of December 31, 2017, the capacity used was too small to estimate, thus the total estimated closure and post-closure care of $39,375 will be recognized as capacity is filled. As of December 31, 2017, the accumulated costs for the landfills are recorded as a long-term liability in the governmental activities on the Statement of Net Position. The costs will be liquidated from prior years’ landfill fees accumulated in the Landfill Post-Closure Fund. Note 18 - Landfill Closure and Post-Closure Care provides further disclosure.

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E. Refunding of Long-Term Debt Current and Crossover Advance Refundings: For reporting purposes of a crossover advance refunding bond issue, the original issue is not considered defeased until the bonds are retired. As with advance refunding bond issues, the proceeds from the crossover advance refunding bonds are placed into an escrow account. However, unlike other types of advance refundings, the escrowed funds in a crossover advance refunding are not immediately dedicated to debt service principal and interest payments on the refunded debt. Instead the resources in the escrow account are temporarily used to meet debt service requirements on the refunding bonds. At a later date, known as the “crossover date”, the resources in the escrow account are dedicated exclusively for the payment of principal and interest on the refunded debt. Crossover refundings do not result in the defeasance of debt prior to the crossover date.

On December 1, 2017, the City issued Series 2017A general obligation refunding bonds in the amount of $19,995,000 with a net interest cost of 2.58% for the total issue. The 2017A bonds have multiple crossover dates resulting in crossover advance refundings for $22,655,000 in principal for several previous issues as shown in the following table. The City completed the refundings to reduce its total debt service payments by $1,783,176 and to obtain an economic gain (the difference between the present value of the old and new debt service payments) of $1,646,842. None of the crossover dates had occurred as of December 31, 2017 and the City has recorded both the outstanding debt of both the refunding issue and the refunded issues, which are not considered defeased. In addition, the related funds in escrow have been recorded as ‘cash with fiscal agent. Principal Crossover Refunding Issue Issue Advance Refunded Refunded Date General Obligation, Series 2017A General Obligation, Series 792A $ 2,015,000 9/1/2018 General Obligation, Series 2017A General Obligation, Series 794A 2,415,000 9/1/2018 General Obligation, Series 2017A General Obligation, Series 796A 5,800,000 9/1/2019 General Obligation, Series 2017A General Obligation, Series 798A 4,565,000 12/1/2019 General Obligation, Series 2017A General Obligation, Series 800A 7,860,000 6/1/2020 $ 22,655,000

Advance Refunding: On August 1, 2017, the City issued 2017 Sales Tax Special Obligation Revenue (STAR) Bonds in the amount of $71,305,000 with a net interest cost of 4.28% due on September 1, 2033. The bond proceeds were used to (1) advance refund the remaining $33,270,000 in outstanding principal of the 2013 STAR bonds, (2) fund a portion of the 2017 Project, (3) fund a deposit into the Debt Service Reserve Fund for the 2017 bonds and (4) pay certain costs related to the issuance of the 2017 bonds. The City’s portion of the 2013 debt was $1,497,150 at the time of refunding. Net proceeds of $39,551,094 were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on the Series 2013 STAR bonds. As a result, the Series 2017 STAR bonds are considered to be defeased and the liability for those bonds has been removed from the Statement of Net Position on the government-wide financial statements. The City and State of Kansas completed the refunding to reduce the total debt service payments by $10,907,869 with an economic loss (the difference between the present value of the old and new debt service payments) of $293,755. The City reduced its total debt service payments by approximately $466,000 with an economic loss of approximately $12,500, based upon the City’s share of 4.27% of the 2017 STAR Bonds. See Note 9B - Revenue Bonds for further information.

On December 1, 2017, the City issued Series 2017B Water and Sewer Utility Refunding Revenue Bonds in the amount of $22,140,000 with a net interest cost of 2.63% due October 1, 2030. The bond proceeds were used to advance refund $22,990,000 of Series 2010A Water and Sewer Utility Revenue Bonds. The net proceeds related to the advance refunding of the 2010A bonds of $24,394,250 were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on the Series 2010A bonds. As a result, the Series 2010A bonds are considered to be defeased and the liability for those bonds has been removed from the Statement of Net Position. The City completed the refunding to reduce its total debt service payments by $1,032,195 and to obtain an economic gain (the difference between the present value of the old and new debt service payments) of $962,493.

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F. Environmental Remediation Obligations Gilbert and Mosley Groundwater Contamination (Plumes ABE): In the late 1980s and early 1990s, under a Cooperative Agreement with the U.S. Environmental Protection Agency (EPA), the Kansas Department of Health and Environment (KDHE) conducted a preliminary assessment and investigation of an area near the City’s downtown, known as the Gilbert and Mosley site. The studies identified contaminates of volatile organic compounds and the concentrations of the compounds. On March 26, 1991, the City and KDHE finalized a “Settlement Agreement for Remedial Investigation and Feasibility Study, and for Certain Remedial Actions to be Determined Following Opportunity for Public Involvement” (Settlement Agreement).

The City performed the Remedial Investigation (RI) and the Feasibility Study (FS) with final reports approved by KDHE in September 1994. In 1999, the City issued an RI/FS addendum and with subsequent investigations, identified the nature, extent and sources of contamination. In October 2000, KDHE approved the final design for a pump-and-treat alternative to address the site-wide groundwater contamination (Plumes ABE). In 2002, the City completed the installation of the extraction wells, piping and treatment facility. The system has been in continuous operation since December 30, 2002. The City has ongoing costs associated with the operations, maintenance, monitoring and reporting activities for the groundwater remediation system for the Plumes ABE contamination. Accordingly, a liability of $7,027,120 has been recorded in the government-wide financial statements, in addition to a receivable of $2,205,564 for settlements from potentially responsible parties. The liability and recovery amounts are based on an engineering estimate which was defended in the United States District Court (United States District Court Case No. 98-1360-MLB), as well as based on actual costs incurred. The potential for change to the liability is moderate, due to the potential of reducing the groundwater contamination plume to acceptable concentrations prior to the 70-year projection contained in the engineering estimate, offset with future inflationary cost increases. The probability of continued operation of the treatment system after 40 years of operations is estimated to be 30%.

Harcross/TriState Central Site: Within the Gilbert and Mosley District, some specific source areas have been identified as requiring source control measures. The Harcross/TriState Central site has been identified as contaminated by volatile organic compounds (VOCs) resulting from various industrial spills and processes, in addition to contamination from food grade chemicals. Some reported contaminant concentrations have exceeded KDHE standards. Based on the Gilbert and Mosley Settlement Agreement, the City is responsible for cleanup of the site. The City has performed a site investigation and is in the process of implementing the remediation which consists of two vapor mitigation systems which were installed in residential properties in September 2005. An additional vapor mitigation system was installed in a third residential property in 2006, in conjunction with offsite excavations of soil. An air sparge/soil vapor extraction system was installed in each of the sources in 2007 and those units are still in operation. Remediation operations are expected to continue into 2018 or 2019.

The City has ongoing costs associated with the remediation of the Harcross/TriState Central site. The estimated liability is based on engineering estimates and actual costs incurred since the beginning of the project to the present. A liability of $1,130,503 has been recorded in the government-wide financial statements for the ongoing remediation costs. The potential for changes in the liability is low with any changes likely to be immaterial.

WaterWalk Site: Within the Gilbert & Mosley district, the WaterWalk site has been identified as contaminated by total petroleum hydrocarbons (TPH) and metals in soils and groundwater above KDHE standards. The contamination is being addressed under the Gilbert and Mosley Settlement Agreement. The City has submitted a draft Comprehensive Investigation Work Plan, which has been approved by KDHE, to delineate the horizontal and vertical extent of the contamination. A utility corridor excavated on the site in 2006 resulted in excavated soils being screened and segregated based on contaminate and concentration. Lead-impacted soils were landfilled and petroleum-impacted soils were treated at a local asphalt plant until the soils reached residential contact standards for TPH. As of December 31, 2017, a liability of $5,077 has been recorded in the government-wide financial statements. The potential for changes to the liability is moderate pending completion of the investigation.

South Washington and English Site (SWE): The SWE site has soil and groundwater contaminated by chlorinated solvents associated with dry cleaning and other industrial processes. The impacted areas have

-72 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

concentrations that exceed KDHE standards. The City is responsible for cleanup of the site based on the Gilbert and Mosley Settlement Agreement. The City performed a site investigation and selected a remediation plan consisting of excavation and offsite disposal of select soils, electrical resistance heating of subsurface soils and soil vapor extraction. Remedial action was initiated in 2010 including excavation and disposal of contaminated soils, the initiation of the electrical resistance heating design and additional investigation. As a result of the need to secure the property for remediation, property was purchased which was initially planned to be sold after the remediation process was complete. Proceeds from the sale of the property were estimated to be approximately $200,000. In 2014, it was determined that the costs associated with the implementation of electrical resistance heating remedy for the entire area required by KDHE was not economically feasible. As a result, alternative remedial activities including injection of an oxidizing compound into the contaminated zone were evaluated by both the City and KDHE. In late 2017, the City agreed to demolish the building purchased in 2010 to facilitate the installation of a driveway for a parking garage for a corporate building being constructed on the former Wichita Eagle property to the west/northwest of the SWE site. As a result the City had to temporarily halt remediation efforts which are expected to be resumed in 2018 and will coordinate efforts with KDHE. The City anticipates a revised remediation approach will be approved by KDHE in 2018 and implemented in either late 2018 or early 2019. The City recorded a net liability for remediation and monitoring activities of $830,432 in the government-wide financial statements, based on engineering estimates and actual costs incurred from the start of the project to the present. The potential for change is moderate as the City is still negotiating with KDHE.

APCO Chemical Company (APCO): The APCO site has been identified as contaminated by chlorinated volatile organic compounds (VOCs) and petroleum related hydrocarbons. Soil and groundwater concentrations exceed KDHE standards and require remediation efforts. The KDHE Underground Storage Tank Trust Fund (UST Trust) has installed an air sparging/soil vapor extraction system to address the petroleum hydrocarbon contamination. Based on the Settlement Agreement, KDHE identified the City as the responsible party for cleanup of the chlorinated VOCs associated with the site when the responsible party declared bankruptcy in 2005. As a result of the 2008 APCO Trust Bankruptcy Trial, the City of Wichita received a $450,000 judgment against APCO Trust for remediation at this site. Payment of that judgment was received in early 2014.

The City has performed a site investigation and KDHE completed its remediation program of the petroleum contamination. Testing conducted by KDHE and the site-wide monitoring program indicated that the UST remediation program may have also remediated the chlorinated solvents related to the APCO release. In 2015, the City hired a consultant to conduct an updated investigation of the APCO site to determine whether any additional remediation efforts are necessary. A work plan to conduct the investigation was submitted and approved by KDHE in 2016 and the field investigation was conducted in 2017. The investigation revealed that very little groundwater contamination is present at the site. The City and contractor are working to obtain a ‘No Further Action’ determination from KDHE in 2018. The City has recorded a liability of $1,057,936 for future costs based on an engineering estimate and actual costs incurred. The potential for changes to the liability is relatively high, pending the results of KDHE’s 2017 investigation. Based on current data, additional remediation efforts may not be required which should result in a significant reduction or elimination of the estimated liability.

Automotive Fleet Services, Inc. (AFS): The AFS site, within the Gilbert and Mosley district, has been identified as contaminated by volatile organic compounds (VOCs) related to vehicle maintenance with reported contaminant concentrations in groundwater exceeding KDHE standards. Based on the Gilbert and Mosley Settlement Agreement, the City is responsible for cleanup of the site. In 2015, the City hired a consultant to conduct a Comprehensive Investigation (CI) and Corrective Action Study (CAS) and a work plan was submitted and approved by KDHE in 2016. In 2017, the investigation was conducted and the findings indicated that no remedial activities are necessary. KDHE is in the process of evaluating the data and a determination is expected in 2018.

The City has ongoing costs for investigation, remediation and monitoring. A liability is recorded in the amount of $383,722 in the government-wide financial statements. The liability is based on a 2005 engineering

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estimate and actual costs incurred from the start of the project to the present, adjusted for inflation. There is a high likelihood that KDHE will not require remedial action activities for this site. There is a moderately high likelihood that KDHE will issue a ‘No Further Action’ determination which would eliminate the remaining liability for the site.

Reid Supply, Inc. (RSI): The RSI site, within the Gilbert and Mosley district, has been identified as contaminated by chlorinated solvents with some contaminant concentrations exceeding KDHE soil and groundwater standards. RSI has been named as the responsible party for cleanup of the site; however, the City may be named as partially or fully responsible at a future date. The City has hired a consultant to conduct a CI/CAS program of the site to determine whether a remedial action is necessary. A workplan to conduct the CI/CAS has been submitted to KDHE for review and approval in 2018. Results of the CI/CAS program are anticipated to be available in 2018.

An estimated liability, based on a 2002 engineering estimate and actual costs incurred from the start of the project to the present, has been recorded in the government-wide financial statements in the amount of $1,036,749. The potential for change to the liability is moderate due to the need for additional investigations.

LORAC Company (LORAC): The LORAC site, within the Gilbert and Mosley district, has been identified as contaminated by chlorinated solvents with some contaminant concentrations exceeding KDHE soil and groundwater standards. The property owners signed an agreement with KDHE in 2008 to conduct a site investigation which was subsequently completed in 2009. The current property owner has indicated to KDHE that they have limited capacity to pay for a full scale Comprehensive Investigation (CI) and Corrective Action Study (CAS). As a result, the City has agreed to conduct the CI/CAS program as part of the Gilbert and Mosley Settlement Agreement and in 2015, the City hired a consultant to conduct the program. A work plan to conduct the CI/CAS has been submitted to KDHE for review and approval in 2018. Because the City has not been named either partially or fully responsible for the site, a remediation option has not been selected.

An estimated liability, based on contractual obligations for the CI/CAS and actual costs incurred from the start of the project to the present, has been recorded in the government-wide financial statements in the amount of $29,961. The potential for change to the liability is moderate due to the need for additional investigations and the likelihood that the City may have to take on the responsibility of implementing required remedial actions.

North Industrial Corridor (NIC) Site-wide Groundwater Contamination: In the 1980s, the Environmental Protection Agency identified the presence of volatile organic compounds in groundwater produced from two industrial wells. Subsequent investigations revealed widespread contamination in the groundwater in what is known as the North Industrial Corridor. In 1987, the Wichita North Industrial District Group (WNID Group) organized with the City as a member. The WNID Group entered into a consent agreement with KDHE September 1989. A portion of the NIC site was listed on the National Priorities List by the EPA in February 1990. In 1994, the City petitioned for the removal of the site from the National Priorities List. The EPA published notice of removal in April 1996.

To restore economic viability to the area, the City signed a “Settlement Agreement for Remedial Investigation and Feasibility Study for Certain Remedial Actions to be Determined Following Opportunity for Public Involvement” (NIC Settlement Agreement) in 1995. In May 1996, the City entered into a participation agreement with potentially responsible parties for the NIC contamination. The remedial investigation report was completed in June 2004, with an addendum to the report completed in 2005. The reports were approved by KDHE in March 2007. KDHE approved the feasibility study in 2011 and in March 2012, issued a Final Corrective Action Decision for interim groundwater remediation. The North Industrial Corridor site has been divided into six groundwater units for evaluation and remedial actions. The Corrective Action Decision focuses on the remedial action alternatives within Groundwater Units 1 through 4. Groundwater Units 5 and 6 are being remediated by the responsible parties under separate consent orders with KDHE. The Final Corrective Action Decision (CAD) includes pre-design data acquisition, long-term groundwater remediation and surface water monitoring, five-year reviews and institutional controls for each groundwater unit. Pre-design Data Acquisition (PDA) was conducted to optimize the selected remedy and evaluate the need for contingency implementation. PDA activities were initiated in 2014 and completed in 2016 and additional studies required by the CAD were also completed in 2016. A Remedial Designs (RD) report will be prepared in 2018 and will present the final site-wide groundwater remediation program for the site and will

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be followed by an Engineer’s Estimate for the site-wide remediation program. A comprehensive groundwater and surface water monitoring plan will be developed to evaluate performance of the remedy applied and monitor contaminant migration. Five-year reviews will be conducted as long as contamination remains at the site at concentrations above levels which will permit unrestricted use. The reviews will provide an opportunity to review the overall effectiveness of the remedial strategy. Continued enforcement of City of Wichita ordinances which prohibit the installation of new water wells and use of pre-existing water wells for personal use in contaminated areas will help ensure protection of human health until the site cleanup is complete. KDHE approved remedial action provides multiple alternatives to be implemented in each groundwater unit. The alternative actions delineated in the KDHE Final Corrective Action Decision may be effected individually or multiple alternatives may be required to achieve acceptable results. Cost estimates for each remediation alternative were developed based on standardized engineering practices and expected cash flows. For each approved remediation alternative, the expected cash flow technique method was applied. Cost estimates for construction of the required system should be refined in 2018 or 2019 during the remedial design or remedial action phase. Based on current cost commitments and cost estimates of the preferred remediation action, the net present value of the liability for site-wide costs and the site specific remediation preferred remediation has been estimated at $45.3 million. The liability could change over time due to changes in costs of goods and services, changes in remediation technology or changes in laws and regulations. Estimated recoveries from potentially responsible parties are estimated at $40.3 million, resulting in a net liability of $4,577,840 on the entity-wide financial statements. At the end of 2017, the City settled with three NIC Participants and recognized $1.6 million in revenue. The net liability was not reduced by this amount as those recoveries were included in the projected recoveries of $40.3 million. The recoveries will be accounted for once a new engineer’s estimate is acquired. Actual costs of remedial actions and anticipated recoveries are expected to be within a range of minus 30% and plus 50% over a period of 70 years.

John’s Sludge Pond: The John’s Sludge Pond site was formerly used for disposal of waste oil and oily sludge generated in the recycling/reclamation process of an oil refinery. A portion of the site was purchased by the City in 1983 to provide drainage for the interstate highway. A private estate owns the remainder of the site. Investigations by the City of Wichita found the sludge and water in the pond to be very acidic and the sludge was found to contain elevated concentrations of lead, low levels of PCBs, other metals and organics.

The site was placed on the National Priorities List (NPL) by the EPA in 1983. Remedial actions consisted of stabilizing the sludge with pozzolanic material and capping the site in 1985. The site was removed from the NPL in 1992 but is still being monitored because the waste was capped in place. The EPA performs project reviews every five years. In 2017, the EPA review determined that the City could reduce its monitoring frequency to every five years instead of every year. The next scheduled sampling event is 2021. The City has ongoing costs associated with monitoring of the site. A liability of $18,699 has been recorded in the government-wide financial statements. The City does not have current bids on the reduced monitoring program or updated site maintenance. Thus, the liability has not been adjusted for the reduced monitoring. The 2018 liability will be adjusted as appropriate to account for the reduced monitoring program once the City contractor provides updated costs.

Mid-town Bike Path: A portion of the City’s Mid-town Bike Path was acquired from the abandoned Union Pacific Railroad line in north central Wichita. The City has converted a portion of the abandoned rail line into a bicycle pathway. The shallow soils along the proposed pathway are impacted by total petroleum hydrocarbons (TPH) and metals (lead and arsenic). As part of the remedial strategy, the impacted soils were capped with clean soils to prevent dermal contact and limit potential infiltration and leaching of the materials to the groundwater. KDHE requires an annual inspection of the conditions and maintenance of the site. The City has recorded a liability of $2,500 for costs associated with monitoring and reporting.

Wichita Mid-Continent Airport Fuel and Fire Training Facility Site: Contaminates of petroleum related volatile organic compounds were found in solid samples collected between 1989 and 1993. Due to the low level of contaminates reported in the groundwater at the Fuel Farm and the absence of contaminates in the groundwater at the nearby Fire Training Facility, KDHE requires monitoring of groundwater only. Annual monitoring of the site is completed in compliance with KDHE requirements. The City has recorded a liability of $5,000 for costs associated with site monitoring and reporting.

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G. Revenue Bond Ordinance Provisions and Reserve Requirements Revenue bond ordinances related to the issuance of revenue bonds of the respective enterprise funds provide for specific deposits to debt service and other related bond reserve and maintenance accounts. At December 31, 2017, the City was in compliance with all significant reserve requirements of the respective Water and Sewer Utility revenue bond resolutions and ordinances. H. Liquidation of Other Long-Term Liabilities Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities of the internal service funds are included as part of the totals for governmental activities as presented in the table below. At year-end, compensated absences of $444,389 related to internal service funds were included in the governmental amounts below. Compensated absences for the governmental funds are generally liquidated by the General Fund. Claims payable are liquidated from the Self Insurance Fund. Post employment benefits other than pensions are recorded at the entity-wide level and are generally liquidated from the Self Insurance Fund. Net Pension Liability will ultimately be satisfied through charges related to payroll and such liabilities are generally liquidated using the resources of the funds from which the liabilities originated. Environmental remediation liabilities are recorded at the government-wide level and are generally liquidated from the Environmental TIF Funds. Long-term liabilities activity for the year ended December 31, 2017, (expressed in thousands of dollars) is summarized in the following table:

Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental Activities Bonds payable: General obligation bonds $ 58,251 $ - $ (10,618) $ 47,633 $ 11,076 With government commitment: Special assessment 167,574 31,325 (26,192) 172,707 19,936 Tax increment financing 20,752 - (2,730) 18,022 2,793 Transient guest tax 2,485 - (5) 2,480 5 Local sales tax 114,035 - (17,760) 96,275 14,280 Unamortized premium 28,654 5,629 (4,513) 29,770 - Revenue bonds: Sales tax special obligation 1,497 3,045 (1,497) 3,045 178 Unamortized discount (26) - 26 - - Total bonds payable 393,222 39,999 (63,289) 369,932 48,268 Capital lease 171 - (107) 64 64 Compensated absences 10,143 17,526 (17,149) 10,520 9,311 Claims payable 18,261 48,129 (46,911) 19,479 8,056 Net pension liability 90,463 103,629 (95,676) 98,416 - Other post employment benefits 16,138 3,783 (2,062) 17,859 - Environmental remediation 16,895 308 (1,097) 16,106 1,029 Landfill closure/ post-closure 12,315 4 (960) 11,359 546 Legal liability 1,499 - (131) 1,368 131 Total long-term liabilities - governmental activities $ 559,107 $ 213,378 $ (227,382) $ 545,103 $ 67,405

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Beginning Ending Due Within Balance Additions Reductions Balance One Year Business-type Activities Bonds payable: General obligation bonds $ 259,063 $ 17,735 $ (9,080) $ 267,718 $ 9,785 Unamortized premium 17,559 505 (929) 17,135 - Revenue bonds 392,240 87,640 (47,665) 432,215 28,255 Unamortized premium 38,472 8,477 (4,274) 42,675 - Total bonds payable 707,334 114,357 (61,948) 759,743 38,040 Compensated absences 1,884 3,812 (3,787) 1,909 1,700 Net pension liability 16,649 17,535 (15,896) 18,288 - Environmental remediation -5(5)-- Total long-term liabilities - business-type activities $ 725,867 $ 135,709 $ (81,636) $ 779,940 $ 39,740

10. Defeasance of Debt In 2017, the City defeased $22,990,000 in outstanding principal of the 2010A Water and Sewer Utility Revenue Bonds and $1,497,150 in outstanding principal of the 2013 Sales Tax Special Obligation Revenue (STAR) Bonds, the City’s portion, by placing a portion of the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the financial statements of the reporting entity. These amounts were considered defeased at the time of refunding. Additionally, $6,485,000 in refunded bonds related to crossover advanced refunding bonds that were issued in prior years were defeased during 2017.

11. Temporary Notes Payable Kansas Statutes permit the issuance of temporary notes to finance certain capital improvement projects that will be refinanced with general obligation bonds. Prior to the issuance of temporary notes, the governing body must take necessary legal steps to authorize the issuance of general obligation bonds. Temporary notes issued may not exceed the aggregate amount of bonds authorized, are interest bearing and have a maturity date not later than four years from the date of issuance. During 2017, the City issued $90,340,000 and retired $97,470,000 in temporary notes for various capital improvements. Temporary notes outstanding at December 31, 2017 are payable as follows:

Beginning Ending Balance Additions Reductions Balance Governmental activities $ 70,030,818 $ 84,900,772 $ ( 70,030,818) $ 84,900,772

Business-type activities Airport Authority Fund 25,472,252 4,178,830 (25,472,252) 4,178,830 Stormwater Utility Fund 1,966,930 1,260,398 (1,966,930) 1,260,398 Total business-type activities 27,439,182 5,439,228 (27,439,182) 5,439,228

Total temporary notes $ 97,470,000 $ 90,340,000 $ ( 97,470,000) $ 90,340,000

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On December 31, 2017, the Airport Authority Fund held proceeds totaling $123,927 from the issuance of general obligation temporary notes for future capital construction. Temporary notes also replace operating cash which has been used to finance capital construction in other funds as provided in the table below. Some construction costs may have occurred in prior periods.

Interest Amount Maturity Series Rate Outstanding Date Governmental activities: Capital project funds: Street Improvement Fund 284 1.500% $ 9,566,317 04/13/18 Street Improvement Fund 286 1.100% 21,916,754 10/13/18 Street Improvement Fund 256 1.875% 194,459 10/13/18 Water Main Extension Fund 284 1.500% 656,281 04/13/18 Water main extension Fund 286 1.100% 668,524 10/13/18 Park Bond Construction Fund 284 1.500% 414,175 04/13/18 Park Bond Construction Fund 286 1.100% 1,271,968 10/13/18 Public Improvement Construction Fund 284 1.500% 7,548,621 04/13/18 Public Improvement Construction Fund 286 1.100% 32,623,034 10/13/18 Public Improvement Construction Fund 256 1.875% 2,685,541 10/13/18 Sewer Construction Fund 284 1.500% 2,509,606 04/13/18 Sewer Construction Fund 286 1.100% 4,845,492 10/13/18 Total governmental activities 84,900,772 Business-type activities: Enterprise funds: Airport Authority Fund 286 1.100% 563,830 10/13/18 Airport Authority Fund 288 1.750% 3,615,000 10/13/18 Stormwater Utility Fund 286 1.100% 1,260,398 10/13/18 Total business-type activities 5,439,228 Total temporary notes payable $ 90,340,000

12. Leases

Rents Receivable under Operating Leases: The Airport Minimum Rentals Authority leases facilities and land to airlines, of Non-cancelable concessionaires, commercial entities and others. The Year Ending December 31, Operating Leases leases are for varying periods, from one month to 41 years, 2018 $ 10,260,255 and require the payment of minimum annual rentals. The 2019 4,997,760 future minimum rentals of non-cancelable operating leases 2020 4,275,440 are reflected in the accompanying table. The future value 2021 3,592,482 of operating leases does not include contingent rentals that 2022 3,307,187 may be received under certain leases. Such contingent 2023 – 2027 12,330,312 rentals totaled $4,102,642 in 2017. 2028 – 2032 6,673,441 Direct Financing Leases: The Airport Authority has 2033 – 2037 4,953,363 authorized the construction of buildings on Authority-owned 2038 – 2042 3,934,961 land by 46 tenants, some of which the Airport Authority has 2043 – 2047 2,094,558 assisted in financing through the issuance of Airport Facility 2048 – thereafter 3,576,522 Bonds. Tenants lease the land from the Airport Authority for Total minimum future rentals $ 59,996,281 periods ranging from one month to 41 years with renewal options ranging from one year to 27 years.

The financing of the facilities by the Airport Authority represents direct financing leases. Accordingly, the net investments of such leases are recorded on the enterprise fund balance sheet as restricted assets. The tables presented on the following page provide the components of the net investment in direct financing leases as of December 31, 2017 and the future minimum lease rentals to be received under the leases.

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Future Minimum Lease Rentals Investments in Direct Financing Leases Under Direct Financing Leases As of December 31, 2017 As of December 31, 2017 Airport Year ending Airport Authority December 31, Authority Total minimum lease payments to be received $ 6,767,646 2018 $ 212,205 Less: unearned income (1,307,646) 2019 212,205 Net investment in direct financing leases $ 5,460,000 2020 212,206 2021 1,434,476 2022 114,705 2023 – 2027 1,823,027 2028 – 2031 2,758,822 Total minimum future rentals $ 6,767,646

Rentals Payable under Operating Leases: The City entered into a five-year lease agreement in 2013 and an additional three year lease in 2015 in which the City is the lessee of printers, software and accessories. The operating lease is a component of the lease agreement that is disclosed in Note 9C - Capital Leases. On December 31, 2017, the future minimum lease payments totaled $52,199 with the lease expiring in 2018.

Prepaid Long-term Operating Lease: As of December 31, 2017, the City has recorded a prepaid lease in the amount of $1,882,042. This amount represents costs that have been reimbursed for the construction of a parking facility in the City’s Old Town District under a development agreement with Cargill Meat Solutions Corporation. Additional information about this agreement is disclosed in Note 20E - Economic Development Activities.

The City will record additions to this prepaid amount as it continues to reimburse construction costs under the agreement. When construction is completed, the facility will be available to the public during designated hours for a period of 15 years. The cost of the lease will be recognized on a straight line basis over the term of the agreement.

13. Conduit Debt Obligations From time to time the City has issued industrial revenue bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The industrial revenue bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. The City is not obligated in any manner for the repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. At December 31, 2017, 73 series of industrial revenue bonds were outstanding, with an aggregate principal amount payable of $1,314,683,380. Special facility revenue bonds have been issued by the Airport Authority to provide for the construction of buildings on Authority-owned land. The bonds are special limited obligations of the Authority, payable solely from and secured by a pledge of rentals to be received from lease agreements between the Authority and various tenants. The bonds do not constitute a debt or pledge of the faith and credit of the City or the Airport Authority. At December 31, 2017, three series of special facility revenue bonds totaling $5,460,000 are reported as a long-term liability of the Airport Authority. Note 9B - Revenue Bonds provides additional disclosure on the long-term debt. Note 12 - Leases provides further disclosure on the direct financing leases.

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14. Interfund Transfers

Interfund transfers reflect the flow of Summary of Interfund Transfers resources from one fund to another fund, For Year Ended December 31, 2017 generally from the fund in which the Fund Transfers Out Transfers In resources are received or reside to the fund Major funds: in which the resources will be expended. General Fund $ 6,554,228 $ 6,073,192 During the year ended December 31, 2017, Debt Service Fund 21,086,216 24,908,501 transfer revenue and transfer expenditures Street Improvement Fund 1,391,448 30,049,610 each totaled $89,345,155. Public Improvement Fund - 8,539,365 Of routine nature are the Debt Service Fund Nonmajor governmental funds 59,300,435 14,985,407 transfers of $17.4 million to the Street Nonmajor enterprise funds - 4,789,080 Improvement Fund and other capital project Internal service funds 1,012,828 - funds to retire temporary notes and cash fund Total transfers $ 89,345,155 $ 89,345,155 projects. Also routine were transfers from the Sales Tax Construction Pledge Fund to the Debt Service Fund of $22.1 million and $9.7 million to the Local Sales Tax CIP Fund to cash fund freeway and major arterial projects.

15. Interfund Receivables and Payables Interfund receivables and payables result from the provision of products or services or loans between funds. As of December 31, 2017 interfund receivables and payables totaled $53,211,413, including a long-term Golf Course System Fund payable to the Debt Service Fund to assist with the restructuring of long-term debt. In addition, temporary loans from the General Fund-Permanent Reserve Subfund and Self Insurance Fund to the Transit Fund have been extended until transit operations recover from the recent years of capital replacement and expansion. Other interfund balances are used to offset temporary cash deficits. Individual fund receivable and payable balances at December 31, 2017 are presented in the following tables.

Interfund Receivables Interfund Payables As of December 31, 2017 As of December 31, 2017 Fund Receivables Fund Payables Major funds: Major funds: General Fund $ 800,000 Street Improvement Fund $ 21,353,523 Debt Service Fund 5,668,420 Public Improvement Fund 17,616,717 Nonmajor governmental funds: Nonmajor governmental funds: Landfill Post-Closure Fund 24,255 Homelessness Assistance Fund 24,255 Local Sales Tax CIP Fund 24,663,231 Water Main Extension Fund 985,651 Enterprise funds: Park Bond Construction Fund 1,196,045 Transit Fund 65,368 Sewer Construction Fund 4,444,714 Internal service funds: Nonmajor Enterprise funds: Self Insurance Fund 21,990,139 Golf Course System Fund 5,668,420 Total interfund receivables $ 53,211,413 Transit Fund 1,922,088 Total interfund payables $ 53,211,413 16. Fund Balance Restrictions and Other Reservations Governmental fund balance designations denote portions of the fund balance that are either (1) non-spendable due to form, legal or contractual constraints; (2) restricted under an externally imposed constraint; (3) committed to a specific purpose by the City Council; (4) assigned with intentions for a specific purpose; or (5) unassigned without any constraints. The City maintains the Cemetery Fund, a permanent fund for the perpetual care of the Jamesburg, Highland and Pierpoint Cemeteries, as well as the Old Mission Mausoleum. The non-expendable portion of the fund balance is $235,437. The remainder is expendable for care of the cemeteries. In the governmental funds, fund balance designations are reported in the table on the following page.

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Governmental Fund Balance Designations As of December 31, 2017

Major Governmental Funds Street Public Nonmajor Total General Debt Service Improvement Improvement Governmental Governmental Fund Fund Fund Fund Funds Funds Nonspendable: Inventories and prepaids $ 50,549 $ - $ - $ - $ 133,500 $ 184,049 Receivables, long-term 800,000 - - - - 800,000 Permanent fund principal - - - - 235,437 235,437 Restricted for: City manager - - - - 270,729 270,729 Planning - - - - 60,954 60,954 Cemetery - - - - 1,265,719 1,265,719 Police - - - - 1,120,193 1,120,193 Flood control - - - - 86,375 86,375 Street maintenance - - - - 24,663,231 24,663,231 Housing services - - - - 3,955,182 3,955,182 Community health - - - - 31,003,795 31,003,795 Career development - - - - 35,044 35,044 Alcohol and drug programs - - - - 1,189,695 1,189,695 Tourism and convention - - - - 3,786,528 3,786,528 Libraries - - - - 242,967 242,967 Parks - - - - 120,322 120,322 Debt service - 46,097,606 - - 7,311,223 53,408,829 Committed to: City manager - - - - 2,367,103 2,367,103 Central inspection - - - - 1,250,344 1,250,344 General government 6,000,000 - - - - 6,000,000 Street maintenance 10,000,000 - - - - 10,000,000 Landfill - - - - 13,483,898 13,483,898 Transit 3,000,000 - - - - 3,000,000 Assigned to: City manager 64,458 - - - - 64,458 Economic development 2,230,436 - - - - 2,230,436 Finance 117,480 - - - - 117,480 Law 32,298 - - - - 32,298 Municipal court 33,330 - - - - 33,330 General government 64,874 - - - - 64,874 Building services 56,578 - - - - 56,578 Police 25,642 - - - - 25,642 Traffic control maintenance 11,953 - - - - 11,953 Street maintenance 879,191 - - - - 879,191 Landfill - - - - 850,243 850,243 Housing services 50,845 - - - - 50,845 Community health 45,024 - - - - 45,024 Libraries 9,896 - - - - 9,896 Cultural arts facilities 34,272 - - - - 34,272 Parks 37,541 - - - - 37,541 Recreation 10,159 - - - - 10,159 Unassigned: 33,261,556 - (51,652,276) (33,390,876) (17,238,343) (69,019,939) Total $ 56,816,082 $ 46,097,606 $ (51,652,276) $ (33,390,876) $ 76,194,139 $ 94,064,675

-81 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

17. Passenger Facility Charges

In 1994, the Airport Authority first received approval from the Federal Aviation Administration to impose and use a passenger facility charge (PFC) of $3 for each eligible passenger utilizing Mid-Continent Airport, effective December 1, 1994. The first funds were received by the Airport Authority in January 1995. On May 1, 2005 the PFC increased to $4.50 for each eligible passenger. The charge is collected by all carriers and remitted to the Airport Authority, less a $0.08 per passenger handling fee prior to April 2004. Beginning May 1, 2004, the handling fee increased to $0.11 per passenger. The proceeds from the PFC are restricted for certain FAA approved capital improvement projects. As of December 31, 2017 the Airport Authority has submitted and received approval on seven applications. The approved applications represent a total amended authorized amount of $199,528,281. The charge expiration date for the current program is estimated to be May 1, 2046.

18. Landfill Closure and Post-Closure Care Information about the landfills operated by the City and the related liabilities is provided in Note 9D - Other Long- Term Liabilities. The cost estimates used to develop the recorded liabilities are subject to change due to inflation, deflation, technology, laws, and regulations. Financial assurance for closure and post-closure care costs of the landfills has been demonstrated by the local government financial test, as specified in 40 CFR 258.74(f), adopted by reference for use in Kansas by K.A.R. 28-29-98. The Landfill Post-Closure Fund and landfill tipping fees will provide the primary source of funding for the City landfills’ closure and post-closure costs. Additional financing needs beyond those met by the fund and user fees will potentially require the sale of bonds.

19. Tax Abatements The City of Wichita’s Office of Economic Development offers a variety of incentive programs designed to broaden and diversify the tax base, encourage capital investment, create employment opportunities and provide for the economic growth and welfare of the region. The Wichita City Council, in conjunction with Sedgwick County, has adopted an economic development policy which governs the use of these incentives. The policy defines eligibility criteria, including the required economic impact and return on investment; the implementation process; the types of incentives available; and compliance for the incentive programs. The policy is available online at http://www.wichita.gov/Economic/Pages/Incentives.aspx. GASB Statement No. 77 defines a tax abatement as a reduction in tax revenues that results from an agreement between one or more governments and an individual or entity in which (a) one or more governments promise to forgo tax revenues to which they are otherwise entitled and (b) the individual or entity promises to take a specific action after the agreement has been entered into that contributes to economic development or otherwise benefits the governments or citizens of those governments. The City offers three economic development incentive programs that qualify as tax abatements under GASB Statement No. 77: (1) Industrial Revenue Bonds (IRB), (2) Economic Development Exemptions (EDX) and (3) Community Improvement Districts (CID).

Industrial Revenue Bonds (IRB) Program: The City has issued industrial revenue bonds to provide financial assistance to private-sector entities for the acquisition, construction, improvement and equipping of industrial and commercial facilities deemed to be in the public interest. The industrial revenue bonds are purchased by investors (e.g. banks, private investors or the entity participating in the IRB Program) and the bonds are secured by the property financed and payable solely from payments received on the underlying mortgage loans. See further information on IRBs, including the amount outstanding at December 31, 2017, at Note 13 - Conduit Debt Obligations.

Through the IRB Program, entities can obtain lower interest rate financing and tax abatements (sales and/or property and ad valorem taxes). Under the Sales Tax Act (K.S.A. 79-3601 et seq.), the sales of tangible personal property or services purchased in connection with the construction of the projects financed by industrial revenue bonds are entitled to exemption from sales tax after a proper application for the exemption is made. Further, all or any property constructed or purchased with the proceeds of revenue bonds may be exempt from property and ad valorem taxation for up to a period of ten calendar years after the calendar year in which the bonds were issued (K.S.A. 79-201(a)).

-82 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

The City Council approves all Letters of Intent (LOI), issuances and tax abatements related to the IRB Program. A Cost/ Benefit Study is performed for each project that is to be funded by an IRB issuance to assist the City in determining whether or not to approve the requesting entity for the IRB Program for a particular project. To be eligible for a tax abatement, the project must have a cost/ benefit ratio of 1.3 to 1 for the City. The property or ad valorem taxes abated affect other governments, such as Sedgwick County, the State of Kansas and various school districts. The percentage of property or ad valorem taxes abated is based on capital investment and job creation, for which the majority of the goods or services sold must be destined for customers outside of the Wichita Metropolitan Statistical Area (MSA). The property or ad valorem tax abatements can be up to 100% of the taxes on the property constructed, improved or purchased with the proceeds of the industrial revenue bonds for up to two five year periods, with a review by the City Council after the first five year period. Typically, the entity participating in the program must meet its commitments by the end of the first five year period, unless extended by the City Council or otherwise stated in the agreement. These commitments are usually in the form of acquisition, construction, improvement or equipping of industrial or commercial facilities, job creation and sustained employment, including the new jobs created, in the Wichita MSA for the term of the agreement, which is typically ten years. The job creation commitment includes paying average wages equal to or greater than the average wages for the industry within the Wichita MSA. Further, pursuant to the City’s economic development policy, clawback provisions relating to the repayment or cessation of incentives are to be included in all incentive agreements. These clawback provisions allow the City to require repayment of a portion or all of the abatement if the entity does not meet its commitments. For the year ended December 31, 2017, the City’s property and sales tax revenues were reduced by approximately $3.8 million and $0.3 million, respectively, under agreements entered into pursuant to the City’s IRB Program.

Economic Development Exemptions (EDX) Program: Economic Development Exemptions are used to encourage manufacturing, research and development and warehousing/distribution companies to grow in Wichita. Property or ad valorem taxes on improvements to land and buildings can be exempted for up to ten years pursuant to Article 11, Section 13, of the Kansas Constitution by the governing body of the City. Under the EDX Program, the percentage of taxes abated is based upon job creation and capital investment and is for up to two five year periods, with a review by the City Council after the first five year period.

Typically, the entity participating in the program must meet its commitments by the end of the first five year period, unless extended by the City Council or otherwise stated in the agreement. These commitments are usually in the form of job creation and sustained employment, including the new jobs created, in the Wichita MSA for the term of the agreement, which is typically ten years. The job creation commitment typically includes paying average wages equal to or greater than the average wages for the industry within the Wichita MSA. Also, pursuant to the City’s economic development policy, clawback provisions relating to the repayment or cessation of incentives are to be included in all incentive agreements and can allow the City to recapture up to 100% of the abatement if all of the commitments are not fully met. For the year ended December 31, 2017, the City’s property tax revenues were reduced by approximately $264,500 under agreements entered into pursuant to the City’s EDX Program.

Community Improvement Districts (CID) Program: In 2009, the Kansas Legislature enacted the Community Improvement District Act (the CID Act), pursuant to which municipalities may create districts in which certain special taxes are imposed and the revenue generated by these special taxes is used to fund certain public and private improvements, including certain ongoing operating costs, within the geographic bounds of the district. The City has a CID policy which outlines the local eligibility criteria, sources of funding, eligible CID costs, and the CID process, including creating and terminating a CID. This policy is available online, under the Community Improvement Districts section at http://www.wichita.gov/Economic/Pages/Incentives.aspx. The CID must further the economic development of the City and support projects with total costs of not less than $2 million for bonded projects or $500,000 for pay-as-you-go projects. The City utilizes the provision of the CID Act to assist private developers by providing financing for commercial, industrial and mixed-use projects. The sources of the funding for the CID program is either through special assessments on all property within the district, or an additional retail sales tax up to 2%, which may be imposed for up to 22 years. For the year ended December 31, 2017, additional sales tax revenues of the City of approximately $924,000 were reduced via the CID Program.

-83 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

20. Contingencies and Commitments A. Legal Matters The reporting entity generally follows the practice of recording liabilities resulting from claims and legal actions only when it is probable that a liability has been incurred and the amount can be reasonably estimated. The reporting entity is vigorously defending its interest in all of the various legal actions and claims against the reporting entity presently pending involving personal injury (including workers’ compensation claims), property damages, civil rights complaints and other claims. Under Kansas Statutes, should the courts sustain any litigation against the reporting entity, the City may issue no-fund warrants to cover any resulting over-expenditures not anticipated in the current year budget. The City is then required to levy sufficient ad valorem property taxes in the first levying period following issuance to retire such warrants. This tax levy is without limitation. B. Grant Programs The City participates in a number of federal and state assisted grant programs, which are subject to financial and compliance requirements with each applicable grant. Any disallowed costs resulting from financial and compliance audits could become a liability of the City. In the opinion of management, any such disallowed costs will not have a material effect on the basic financial statements of the City at December 31, 2017. C. Construction and Capital Commitments The City has outstanding construction and capital commitments for freeway and arterial street construction and other capital purchases and improvements of $83.2 million in the governmental funds, $55.8 million in the enterprise funds and $0.4 million in the internal service funds. D. Encumbrances Encumbrances included in fund balances as of December 31, 2017 are reported in the accompanying table:

Fund Encumbrances Major funds: General Fund $ 1,507,643 Street Improvement Fund 74,407,391 Public Improvement Fund 15,167,349 Water Utility Fund 22,663,185 Sewer Utility Fund 39,364,519 Airport Authority Fund 1,163,389 Stormwater Utility Fund 980,213 Nonmajor governmental funds 5,769,646 Nonmajor enterprise funds 617,166 Internal service funds 878,346 Total Reporting Entity $ 162,518,847

E. Economic Development Activities The City has established tax increment financing districts to support economic development activities. The City’s contributions to these projects include streets, stormwater drainage, public art, water features and public parking, which are financed through the issuance of bonds of which $18 million are outstanding. In the event that property and guest tax revenues generated by the tax increment financing districts and other revenue sources are not available, under Kansas State Law, the City would be required to levy additional property tax on all taxable tangible property in the City to meet debt service requirements for these projects. During 2017, the City entered into a development agreement with Cargill Meat Solutions Corporation related to the construction of a parking facility in the City’s Old Town District. Under this agreement, the City has agreed to contribute funding of up to 50% of qualifying construction costs plus an additional $3,000,000. In

-84 CITY OF WICHITA KANSAS NOTES TO THE FINANCIAL STATEMENTS

exchange, the parking facility will be available for public use during designated hours for a term of 15 years beginning when construction is completed. The City has set aside $10,288,700 in an escrow account, which represents the City’s estimated contribution to the project. As of December 31, 2017, the City has reimbursed $1,882,042 in construction costs. Construction of the facility is expected to be completed late in 2018.

21. Prior Period Adjustment During 2017, changes in the organizational structure and legal status of the Wichita Area Metropolitan Planning Organization (WAMPO) resulted in a determination that the organization, which was formerly reported partially as a special revenue fund and partially as an agency fund, should be reported as a private purpose trust fund going forward. As of December 31, 2016, the special revenue fund reported a deficit fund balance of $51,599. This amount is presented as a prior period adjustment in the governmental fund statements and the entity-wide Statement of Activities. Because a portion of the activities were reported in an agency fund for 2016, no fund balance was reported. However, conversion of the underlying accounting information from agency fund presentation to private purpose trust fund presentation resulted in a beginning net position of $106,901. The combination of the special revenue fund deficit fund balance of $51,599 and the beginning net position of $106,901 results in a prior period adjustment in the private purpose trust fund of $55,302.

22. Change in Accounting Estimate For 2017, highways and streets expense on the Statement of Activities includes approximately $29.7 million which represents infrastructure assets that had previously been capitalized as construction in progress. During 2017, the City received communication from the State of Kansas indicating that those assets would be owned and maintained by the State. As a result, an accounting entry was made to eliminate the infrastructure assets from construction in progress thereby increasing expenses in the highways and streets function.

23. Subsequent Events On April 13, 2018, the City issued $74,635,000 General Obligation Temporary Notes, Series 290 with a stated maturity of April 13, 2019 at 1.75% interest. On April 25, 2018, the City entered into an Interlocal Cooperation Agreement with Sedgwick County to form a separate legal entity known as the Eclipse Investment Authority. The Interlocal Cooperation Agreement was made pursuant to a development agreement between the City, County and Spirit Aerosystems, Inc. effective on the same date. Under the development agreement, the City contributed $3 million in cash as well as other consideration with a value of approximately $4.5 million. Likewise, the County contributed $7 million in cash. The purpose of the development agreement is to construct a facility on Spirit’s campus. In addition to the $10 million capitalized by Eclipse Investment Authority, Spirit will provide sufficient funds to complete the construction of the facility, which is estimated to be approximately $13 million. Spirit must meet certain performance requirements over the 20-year term of the agreement. If Spirit fails to meet those requirements, it will be subject to liquidated damages in an amount up to $10 million. In order to secure payment of any liquidated damages related to Spirit’s non-performance, a mortgage of $10 million has been granted to the Eclipse Investment Authority. The ongoing purpose of the Investment Authority is to hold the mortgage on the facility and to evaluate Spirit’s performance over the 20-year term of the agreement.

-85 CITY OF WICHITA, KANSAS

PENSION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE EMPLOYER'S NET PENSION LIABILITY AND RELATED RATIOS WICHITA EMPLOYEES' RETIREMENT SYSTEM

For the year ended December 31, 20171

2017 2 2016 2 2015 2 TOTAL PENSION LIABILITY Service cost $ 9,679,684 $ 9,644,456 $ 9,278,998 Interest 45,634,881 44,305,832 43,680,283 Benefit term changes - - - Differences between expected and actual experience (2,791,029) (656,102) (3,427,255) Assumption changes - (8,877,507) (3,550,489) Reclassification due to conversion of members to Plan 3b (244,793) (465,171) (571,242) Benefit payments, including member refunds (39,144,783) (37,089,403) (37,681,042)

Net change in total pension liability 13,133,960 6,862,105 7,729,253

Total pension liability - beginning 596,977,187 590,115,082 582,385,829 Total pension liability - ending (a) $ 610,111,147 $ 596,977,187 $ 590,115,082

PLAN FIDUCIARY NET POSITION Employer contributions $ 8,946,064 $ 9,031,463 $ 9,423,640 Employee contributions 3,642,007 3,574,026 3,394,544 Reclassification due to conversion of members to Plan 3b (244,793) (465,171) (571,242) Net investment income 35,956,780 13,380 28,659,491 Benefit payments, including member refunds (39,144,783) (37,089,403) (37,681,042) Administrative expenses (615,829) (624,085) (621,460)

Net change in Plan fiduciary net position $ 8,539,446 $ (25,559,790) $ 2,603,931

Plan fiduciary net position - beginning 541,247,503 566,807,293 564,203,362 Plan fiduciary net position - ending (b) $ 549,786,949 $ 541,247,503 $ 566,807,293

Net pension liability - ending (a) - (b) $ 60,324,198 $ 55,729,684 $ 23,307,789

Fiduciary net position as a percentage of total pension liability 90.11% 90.66% 96.05%

Covered payroll $ 77,121,241 $ 74,028,385 $ 71,391,212

Employer's net pension liability as a percentage of covered payroll 78.22% 75.28% 32.65%

-8 NOTES TO SCHEDULE:

Benefit changes : • There have been no changes to the plan provisions in the last ten years.

Changes in actuarial assumptions : December 31, 2015 valuation • There were no changes to the assumptions used for the funding valuation even though the SEIR at the Measurement Date was changed for the GASB 68 valuation.

December 31, 2014 valuation • Decrease in the price inflation rate from 3.50% to 3.25%. • Modify Plan 2 retirement assumption to partially reflect experience. The changes increased rates at some ages and decreased them at others. • Eliminate the disability assumption. • Change the termination of employment assumption to a pure service-based assumption. • Reduce the sick leave load from 4.0% to 2.5%. • A 20% corridor was added to the actuarial value of assets calculation.

December 31, 2009 valuation • Decrease in the price inflation rate from 4.0% to 3.5%. • Decrease in the general wage growth assumption from 4.5% to 4.0% • Modification of the retirement rates for both Plans 1 and 2 to better reflect actual experience. The changes increased rates as some ages and decreased them at others. • Increase in the rates of termination of benefits for terminated vested members from 4.5% to 4.0% to be consistent with the general wage growth assumption. • Non-disabled mortality tables were updated to reflect an additional year of mortality improvements.

1 Schedule is intended to show a 10-year trend. Additional years will be reported as they become available.

2 Information about the employer's net pension liability is presented as of a measurement date one year prior to the fiscal year end date. For example, the net pension liability reported as of December 31, 2017 is reported based on a measurement date of December 31, 2016.

-8 CITY OF WICHITA, KANSAS

PENSION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE EMPLOYER'S NET PENSION LIABILITY AND RELATED RATIOS POLICE AND FIRE RETIREMENT SYSTEM

For the year ended December 31, 20171

2017 2 2016 2 2015 2 TOTAL PENSION LIABILITY Service cost $ 14,772,379 $ 14,981,100 $ 15,894,290 Interest 49,519,284 47,600,166 46,490,734 Benefit term changes - - - Differences between expected and actual experience (2,576,401) (3,259,180) (12,040,126) Assumption changes - (10,871,013) 226,376 Benefit payments, including member refunds (35,552,267) (36,090,820) (36,415,156)

Net change in total pension liability 26,162,995 12,360,253 14,156,118

Total pension liability - beginning 644,264,654 631,904,401 617,748,283 Total pension liability - ending (a) $ 670,427,649 $ 644,264,654 $ 631,904,401

PLAN FIDUCIARY NET POSITION Employer contributions $ 12,585,895 $ 13,964,379 $ 14,464,181 Employee contributions 4,776,958 4,603,331 4,529,895 Net investment income 39,901,640 (163,702) 30,596,067 Benefit payments, including member refunds (35,552,267) (36,090,820) (36,415,156) Administrative expenses (548,171) (521,018) (542,207)

Net change in Plan fiduciary net position $ 21,164,055 $ (18,207,830) $ 12,632,780

Plan fiduciary net position - beginning 592,883,226 611,091,056 598,458,276 Plan fiduciary net position - ending (b) $ 614,047,281 $ 592,883,226 $ 611,091,056

Net pension liability - ending (a) - (b) $ 56,380,368 $ 51,381,428 $ 20,813,345

Fiduciary net position as a percentage of total pension liability 91.59% 92.02% 96.71%

Covered payroll $ 66,946,250 $ 65,560,465 $ 64,572,237

Employer's net pension liability as a percentage of covered payroll 84.22% 78.37% 32.23%

- NOTES TO SCHEDULE:

Benefit changes : • There have been no changes to the plan provisions in the last ten years.

December 31, 2014 valuation • Decrease in the price inflation rate from 3.50% to 3.25%. • Modify Plan C retirement assumption to partially reflect experience. Created separate rates for less than or more than 30 years of service. • Lower assumed disability rates. • Change the termination of employment assumption to a pure service-based assumption. • Modify the probability of electing a refund to partially reflect actual, observed experience. • Reduce the sick leave load from 4.0% to 3.0%. • A 20% corridor was added to the actuarial value of assets calculation.

December 31, 2009 valuation • Decrease in the price inflation rate from 4.0% to 3.5%. • Decrease in the general wage growth assumption from 4.5% to 4.0%. • Lower the retirement rates for Plan A and extend them to 35 years of service. • Lower the retirement rates for Plan C members at ages before 53 and ages 58 to 60 and increase rates at ages 56 and 57. • Increase the rates of termination of employment for ages under 44 and decrease rates at ages over 44. • Lower assumption for indexation of benefits for terminated vested members from 4.5% to 4.0% to be consistent with the general wage growth assumption.

1 Schedule is intended to show a 10-year trend. Additional years will be reported as they become available.

- CITY OF WICHITA, KANSAS

PENSION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF EMPLOYER CONTRIBUTIONS WICHITA EMPLOYEES' RETIREMENT SYSTEM

For the years ended December 31, 2008 through December 31, 2017 (dollars expressed in thousands)

2017 2016 2015 2014 2013 Actuarially determined employer contributions $ 9,643 $ 8,946 $ 9,031 $ 9,424 $ 8,940 Actual employer contributions 9,643 8,946 9,031 9,424 8,940

Annual contribution deficiency (excess) $ - $- $- $- $-

Covered payroll $ 78,395 $ 77,121 $ 74,028 $ 71,391 $ 70,953

Contributions as a percentage of covered payroll 12.30% 11.60% 12.20% 13.20% 12.60%

NOTES TO SCHEDULE:

ThesystemisfundedwithfixedcontributionratesformembersandactuariallydeterminedamountsfortheCityofWichita. TheActuariallyDeterminedContributionsintheScheduleofEmployerContributionsarecalculatedasofDecember31,two years prior to the end of the fiscal year in which contributions are reported.

ThefollowingactuarialmethodsandassumptionswereuseddeterminetheActuariallyDeterminedContributionreport December 31, 2017

Actuarial cost method Entry age normal

Amortization method Level percentage of payroll, open

Remaining amortization period 20 years

Asset valuation method Expected + 25% of (Market - Expected Values)

Price inflation 3.25%

Salary increases, including wage inflation 4.25% to 7.20%

Long-term rate of return, net of investment expense, and including inflation 7.75%

-9 2012 2011 2010 2009 2008

$ 7,503 $ 7,695 $ 6,689 $ 3,887 $ 3,834 7,503 7,695 6,689 3,887 3,834

$- $- $- $- $-

$ 70,783 $ 75,444 $ 79,636 $ 82,704 $ 81,580

10.60% 10.20% 8.40% 4.70% 4.70%

-9 CITY OF WICHITA, KANSAS

PENSION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF EMPLOYER CONTRIBUTIONS POLICE AND FIRE RETIREMENT SYSTEM

For the years ended December 31, 2008 through December 31, 2017 (dollars expressed in thousands)

2017 2016 2015 2014 2013 Actuarially determined employer contributions $ 13,370 $ 12,586 $ 13,964 $ 14,464 $ 14,890 Actual employer contributions 13,370 12,586 13,964 14,464 14,890

Annual contribution deficiency (excess) $ - $- $- $- $-

Covered payroll $ 69,634 $ 66,946 $ 65,560 $ 64,572 $ 65,306

Contributions as a percentage of covered payroll 19.20% 18.80% 21.30% 22.40% 22.80%

NOTES TO SCHEDULE:

The systemisfundedwith fixed contributionratesformembersand actuariallydetermined amountsfor theCityofWichita. TheActuariallyDeterminedContributionsintheScheduleofEmployerContributionsarecalculatedasofDecember31,two years prior to the end of the fiscal year in which contributions are reported.

Actuarial cost method Entry age normal

Amortization method Level percentage of payroll, open

Remaining amortization period 20 years

Asset valuation method Expected + 25% of (Market - Expected Values)

Price inflation 3.25%

Salary increases, including wage inflation 5.00% - 6.75%

Long-term rate of return, net of investment expense, and including inflation 7.75%

-9 2012 2011 2010 2009 2008

$ 14,113 $ 13,807 $ 13,120 $ 11,035 $ 10,549 14,113 13,807 13,120 11,035 10,549

$- $- $- $- $-

$ 64,150 $ 62,759 $ 63,077 $ 63,055 $ 60,282

22.00% 22.00% 20.80% 17.50% 17.50%

-9 CITY OF WICHITA, KANSAS

OTHER POST EMPLOYMENT BENEFITS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS

(dollars expressed in thousands)

Annual UAAL as a Actuarial Actuarial Value Actuarial Accrued Unfunded AAL Funded Covered Percentage of Fiscal Year Valuation of Assets Liability (AAL) (UAAL) Ratio Payroll Covered Payroll Ending Date (a) (b) (b-a) (a/b) (c) ((b-a)/c)

12/31/2017 12/31/2017 $ - $ 35,103 $ 35,103 - % $ 161,721 21.7 % 12/31/2015 12/31/2015 - 34,959 34,959 - 143,904 24.3 12/31/2013 12/31/2013 - 33,936 33,936 - 140,810 24.1

NOTES TO SCHEDULE:

Mortality assumptions have been updated for the December 31, 2017 valuation as follows:

Active employees RPH-2017 Total Dataset Mortality table fully generational using scale MP-2017 Healthy retirees RPH-2017 Total Dataset Mortality table fully generational using scale MP-2017 Disabled retirees RPH-2017 Disabled Retiree Mortality table fully generational using scale MP-2017

Termination and retirement rates have been updated to be consistent with the Wichita Employees' Retirement System and the Police and Fire Retirement System actuarial valuation for fiscal year ended December 31, 2016.

No disability decrement is assumed for civilian employees. The disability assumption for Police and Fire has been updated to be consistent with the assumptions used in the Police and Fire Retirement System actuarial valuation for the year ended December 31, 2016.

Health care trend rates have been reset to the same initial trend used in the last full valuation, starting at 9.0% decreasing by 0.5% annually to an ultimate rate of 5.0%.

-9

APPENDIX H

FINANCIAL INFORMATION

(THIS PAGE INTENTIONALLY LEFT BLANK) CITY OF WICHITA, KANSAS

FINANCIAL INFORMATION

An independent audit is conducted annually by an outside firm of certified public accountants appointed by the City Council. Their opinion is contained every year in the Comprehensive Annual Financial Report on file with the City Clerk. Some of the financial information presented in this Official Statement has been taken from the Comprehensive Annual Financial Report for the year ended December 31, 2017. However, this represents an incomplete financial statement presentation. For complete financial presentation, the City of Wichita Comprehensive Annual Financial Report is on file with the City Clerk or may be obtained online at http://wichita.gov/Government/Departments/Finance/Pages/Documents.aspx.

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Wichita for its comprehensive Annual Financial Report for the fiscal year ended December 31, 2016. The Certificate of Achievement for Excellence has been awarded to the City of Wichita for each year it has been submitted to GFOA, starting in 1955. The City anticipates receipt of the award for the fiscal year ending December 31, 2017.

In order to be awarded a Certificate of Achievement for Excellence in Financial Reporting, a governmental unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report, and contents of such report must conform to industry standards. Such reports must satisfy both generally accepted accounting principles and applicable legal requirements.

The Government Finance Officers Association of the United States and Canada (GFOA) presented an award for Distinguished Budget Presentation to the City of Wichita for its annual budget for the fiscal year beginning January 1, 2018. The Distinguished Budget Presentation Award has been awarded to the City of Wichita each year since 1989. The City anticipates receipt of the award for the fiscal year beginning January 1, 2019. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan and as a communications device.

H-1 H-2

The Government Finance Officers Associations of the United States and Canada (GFOA) presented a Distinguished Budget Presentation Award to the City of Wichita, Kansas for its annual budget for the fiscal year beginning January 1, 2018.

In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communications device.

The award is valid for a period of one year only. We believe our current budget continues to conform to program requirements, and we are submitting it to GFOA to determine eligibility for another award.

THE CITY OF WICHITA DEPARTMENT OF FINANCE HAS EARNED THE DISTINGUISHED BUDGET AWARD CONSISTENTLY FOR 30 YEARS.

H-3 CITY OF WICHITA, KANSAS

FINANCIAL INFORMATION

Assessed Valuation

All of Sedgwick County has been reappraised by an outside firm of professional appraisers as a result of a bill passed by the 1986 session of the Kansas Legislature requiring county assessors to reevaluate all real property at market value to be used for tax purposes beginning January 1, 1989.

The principal taxpayers (Sedgwick County and the City of Wichita) and their assessed valuation as of December 31, 2017 are as follows:

City of Wichita1

Percent of Total Assessed Valuation Assessed $3,801,421,2202 Valuation

1. Kansas Gas & Electric, A Westar Energy Co. 1.48 $56,094,350 2. Simon Property Group, LP/Towne West Square, LLC 0.66 25,175,808 3. Walmart/Sam’s 0.60 22,973,916 4. City of Wichita 0.56 21,465,792 5. Kansas Gas Service- A Division of Oneok 0.52 19,826,217 6. Southwestern Bell Telephone Co. 0.36 13,853,270 7. Bradley Fair One, LLC 0.31 11,826,296 8. Wesley Medical Center, LLC/Wesley Medical Endowment Found. 0.25 9,505,321 9. Ruffin Riverfront Hotel, LLC/Ruffin Epic, LLC 0.20 7,629,676 10. New Market I, LLC 0.20 7,525,725

Sedgwick County 1

Percent of Total Assessed Valuation Assessed $4,675,741,600 Valuation

1. Kansas Gas & Electric, A Westar Energy Co. 2.75 $128,394,062 2. Spirit Aerosystems, Inc. 2.24 104,777,736 3. Hawker Beechcraft Corporation 0.93 43,446,124 4. Cessna Aircraft Company, Inc. 0.91 42,535,946 5. The Boeing Company 0.76 35,635,552 6. Walmart/Sam’s 0.63 29,672,251 7. Kansas Gas Service-A Division of Oneok 0.56 26,225,849 8. Simon Property Group LP/Towne West Square, LLC 0.54 25,175,808 9. City of Wichita 0.46 21,468,741 10. Southwestern Bell Telephone Co. 0.37 17,149,419

1 Source: Sedgwick County Clerk’s Office, 2017 2 Includes motor vehicle property assessed valuation for 2017.

H-4 CITY OF WICHITA, KANSAS

FINANCIAL INFORMATION

Property Valuations

The determination of assessed valuation and the collection of property taxes for all political subdivisions in the state of Kansas is the responsibility of the various counties under the direction of state statutes. The Sedgwick County Appraiser's office determines the fair market value of all taxable property within Sedgwick County and the assessed valuation thereof that is to be used as a basis for the mill levy on property located in the Issuer.

Property subject to ad valorem taxation is divided into two classes, real property and personal property. Real property is divided into seven subclasses; there are six subclasses of personal property. The real property (Class 1) subclasses are: (i) real property used for residential purposes including multi-family mobile or manufactured homes and the real property on which such homes are located, assessed at 11.5%, (ii) agricultural land, valued on the basis of agricultural income or productivity, assessed at 30%, (iii) vacant lots, assessed at 12%, (iv) real property, owned and operated by a not-for-profit organization not subject to federal income taxation, pursuant to Code §501, assessed at 12%, (v) public utility real property, except railroad real property, assessed at the average rate that all other commercial and industrial property is assessed, assessed at 33%, (vi) real property used for commercial and industrial purposes and buildings and other improvements located on land devoted to agricultural use, assessed at 25%, and (vii) all other urban and real property not otherwise specifically classified, assessed at 30%. Tangible personal property (Class 2) subclasses are: (i) mobile homes used for residential purposes, assessed at 11.5%, (ii) mineral leasehold interests, except oil leasehold interests, the average daily production from which is 5 barrels or less, and natural gas leasehold interests, the average daily production from which is 100 mcf or less, which shall be assessed at 25%, assessed at 30%, (iii) public utility tangible personal property, including inventories thereof, except railroad personal property, including inventories thereof, which shall be assessed at the average rate all other commercial and industrial property is assessed, assessed at 33%, (iv) all categories of motor vehicles not defined and specifically valued and taxed pursuant to law enacted prior to January 1, 1985, assessed at 30%, (v) commercial and industrial machinery and equipment which if its economic life is 7 years or more, shall be valued at its retail cost, when new, less seven-year straight-line depreciation, or which, if its economic life is less than 7 years, shall be valued at its retail cost when new, less straight-line depreciation over its economic life, except that, the value so obtained for such property, notwithstanding its economic life and as long as such property is being used, shall not be less than 20% of the retail cost when new of such property, assessed at 25%, and (vi) all other tangible personal property not otherwise specifically classified, assessed at 30%. All property used exclusively for state, county, municipal, literary, educational, scientific, religious, benevolent and charitable purposes, farm machinery and equipment, merchants' and manufacturers' inventories, other than public utility inventories included in subclass (3) of class 2, livestock, and all household goods and personal effects not used for the production of income, shall be exempted from property taxation.

The Kansas Legislature (the “Legislature”) reduced the applicable assessment rates on motor vehicles from 30% of market value to 20% of market value as of January 1, 2000.

The 2006 Legislature exempted from all property or ad valorem property taxes levied under the laws of the State all commercial, industrial, telecommunications and railroad machinery and equipment acquired by qualified purchase or lease after June 30, 2006 or transported into the State after June 30, 2006 for the purpose of expanding an existing business or creation of a new business.

Tax Record

Taxes are assessed as of January 1 and become a lien on the property on November 1 of each year. The County Treasurer is the tax collection agent for all taxing entities within the County. Property owners have the option of paying one-half or the full amount of the taxes levied on or before December 20 during the year levied, with the balance to be paid on or before May 10 of the ensuing year. If the first half is not paid before December 21 and the second half before May 11, unpaid taxes accrue interest until paid. All real estate bearing unpaid taxes are subject to tax foreclosure if not paid within two years.

H-5 CITY OF WICHITA, KANSAS

FINANCIAL INFORMATION

Tax Record (continued) One-half of the tangible personal property tax, excluding vehicle tax, is due and payable by December 20. If not paid by that time, the tax is due in full plus interest and warrants will be issued for collection by the Sheriff.

1. The percent of the 2015 tax levy collected as of December 31, 2016 for 2016 operations – 95.01% current. The percent of the 2016 tax levy collected as of December 31, 2017 for 2017 operations – 95.35% current.

2. Tax limitations –

The City may levy taxes in accordance with the requirements of its adopted budget. Property tax levies are based on the adopted budget of the City and the assessed valuations provided by the County appraiser. The Kansas Legislature passed legislation in 2015 and 2016 that, among other things, imposes an additional limit on the aggregate amount of property taxes that may be imposed by cities and counties, without a majority vote of qualified electors of the city or county (the “Tax Lid”). The Tax Lid is effective on January 1, 2017, and provides that, subject to certain exceptions, no city or county may approve an appropriation or budget which provides for funding by property tax revenues in an amount exceeding that of the immediately prior year, as adjusted to reflect the average changes in the consumer price index for the preceding five calendar years and provided that such average shall not be less than zero, unless approved by a majority vote of electors. The Tax Lid does not require an election in the following situations:

“(1) Increased property tax revenues that, in the current year, are produced and attributable to the taxation of: (A) The construction of any new structures or improvements or the remodeling or renovation of any existing structures or improvements on real property, which shall not include any ordinary maintenance or repair of any existing structures or improvements on the property; (B) increased personal property valuation; (C) real property located within added jurisdictional territory; (D) real property which has changed in use; (E) expiration of any abatement of property from property tax; or (F) expiration of a tax increment financing district, rural housing incentive district, neighborhood revitalization area or any other similar property tax rebate or redirection program. (2) Increased property tax revenues that will be spent on: (A) Bond, temporary notes, no fund warrants, state infrastructure loans and interest payments not exceeding the amount of ad valorem property taxes levied in support of such payments, and payments made to a public building commission and lease payments but only to the extent such payments were obligations that existed prior to July 1, 2016; (B) payment of special assessments not exceeding the amount of ad valorem property taxes levied in support of such payments; (C) court judgments or settlements of legal actions against the city or county and legal costs directly related to such judgments or settlements; (D) expenditures of city or county funds that are specifically mandated by federal or state law with such mandates becoming effective on or after July 1, 2015, and loss of funds from federal sources after January 1, 2017, where the city or county is contractually obligated to provide a service; (E) expenses relating to a federal, state or local disaster or federal, state or local emergency, including, but not limited to, a financial emergency, declared by a federal or state official. The board of county commissioners may request the governor to declare such disaster or emergency; or (F) increased costs above the consumer price index for law enforcement, fire protection or emergency medical services. (3) Any increased property tax revenues generated for law enforcement, fire protection or emergency medical services shall be expended exclusively for these purposes but shall not be used for the construction or remodeling of buildings. (4) The property tax revenues levied by the city or county have declined: (A) In one or more of the next preceding three calendar years and the increase in the amount of funding for the budget or appropriation from revenue produced from property taxes does not exceed the average amount of funding from such revenue of the next preceding three calendar years, adjusted to reflect

H-6 changes in the consumer price index for all urban consumers as published by the United States department of labor for the preceding calendar year; or (B) the increase in the amount of ad valorem tax to be levied is less than the change in the consumer price index plus the loss of assessed property valuation that has occurred as the result of legislative action, judicial action or a ruling by the board of tax appeals.”

The Tax Lid also provides that “[w]henever a city or county is required by law to levy taxes for the financing of the budget of any political or governmental subdivision of this state that is not authorized by law to levy taxes on its own behalf, and the governing body of such city or county is not authorized or empowered to modify or reduce the amount of taxes levied therefore, the tax levies of the political or governmental subdivision shall not be included in or considered in computing the aggregate limitation upon the property tax levies of the city or county.”

Because of ambiguities in the Tax Lid, it is unclear how the various exceptions will be interpreted and how the provisions will be implemented. As a result, is unclear how the Tax Lid will impact the City.

However, as described above, the Tax Lid provides a specific exception for “[b]ond, temporary notes, no fund warrants, state infrastructure loans, and interest payments not exceeding the amount of ad valorem property taxes levied in support of such payments” as well as certain lease payments. Therefore, the City is permitted under the Tax Lid to levy unlimited ad valorem taxes as necessary to pay principal of and interest on its general obligation bonds and general obligation temporary notes, as required by the resolutions authorizing the issuance and prescribing the details of such bonds and temporary notes.

The City cannot predict the impact of the Tax Lid on the ratings of its general obligation bonds and general obligation temporary notes, or the general rating of the City; a change in the rating on such bonds or temporary notes or a change in the general rating of the City may adversely impact the market price of the such bonds or temporary notes in the secondary market.

3. Priority of tax collections – Tax collections (taxes, specials, interest and fees) are remitted in accordance with pro rata levies.

Vehicle tax is due in full and paid at the time of vehicle registration according to an alphabetical schedule.

County Sales Tax

In July 1985, the Sedgwick County voters approved a one percent (1%) County sales tax. Wichita's budgeted estimate for 2018 annual share of that tax is $58.3 million. Actual sales tax receipts may not reach budgeted estimates. The governing body of the City of Wichita, Kansas has pledged one half of any revenue received from the City of Wichita's portion of a one percent sales tax to relieve the tax levies of the City of Wichita upon the taxable tangible property within the City of Wichita and pledged the remaining one-half of the one percent of any revenues received to Wichita road, highway and bridge projects, including right-of-way acquisitions, as well as debt service.

Debt Record

The City of Wichita has never defaulted in payment of bond principal or interest. Operating deficits are prohibited under the Kansas Cash Basis Law. Ten point seven percent (10.7%) of the general obligation debt outstanding as of January 1, 2017, was retired during 2017. The City anticipates retiring 11.2% of the general obligation debt outstanding during 2018.

Capital Improvements

Each year, the City of Wichita includes as a part of its operating budget a ten-year Capital Improvement Program in order to reflect the total activities to be carried out with City funds and to relate present activities with future needs. This Capital Improvement Program functions to establish a priority system among the many-needed projects, matching the projects against available resources. The City of Wichita anticipates issuing approximately $44 million of Water and Sewer Utility Revenue Bonds in the fourth quarter of 2018. In addition, the City of Wichita is evaluating the need to issue General Obligation Local Sales Tax Bonds in late 2018/early 2019.

H-7 CITY OF WICHITA, KANSAS

PROPERTY TAX LEVIES AND COLLECTIONS GENERAL AND DEBT SERVICE FUNDS For years ended December 31, 2008 through December 31, 2017 (dollars expressed in thousands)

Current Year Collections Total Tax Collections Collections in Year Ended Percentage Subsequent Percentage of December 31 1 Taxes Levied Amount Levy Years Amount Levy

2008 $ 95,692 $ 91,161 95.27 % $ 4,256 $ 95,417 99.71 % 2009 100,840 95,255 94.46 3,595 98,850 98.03 2010 101,298 95,319 94.10 3,337 98,656 97.39 2011 100,319 95,890 95.59 2,837 98,727 98.41 2012 101,997 96,611 94.72 2,316 98,927 96.99 2013 101,036 96,596 95.61 2,072 98,668 97.66 2014 101,569 97,108 95.61 1,690 98,798 97.27 2015 102,796 97,403 94.75 1,110 98,513 95.83 2016 104,322 99,117 95.01 - 99,117 95.01 2017 106,691 101,733 95.35 - 101,733 95.35

TAX INCREMENT FINANCING DISTRICTS For years ended December 31, 2008 through December 31, 2017 (dollars expressed in thousands)

Current Year Collections Total Tax Collections Collections in Year Ended Percentage Subsequent Percentage of December 31 1 Taxes Levied2 Amount Levy Years Amount Levy2

2008 $ 7,038 $ 5,752 81.73 % $ 51 $ 5,803 82.45 % 2009 7,101 6,127 86.28 221 6,348 89.40 2010 6,196 6,372 102.84 112 6,484 104.65 2011 5,991 6,174 103.05 25 6,199 103.47 2012 6,021 5,820 96.66 181 6,001 99.67 2013 6,317 5,726 90.64 48 5,774 91.40 2014 5,732 5,921 103.30 39 5,960 103.98 2015 6,309 5,834 92.47 5 5,839 92.55 2016 5,890 5,830 98.98 - 5,830 98.98 2017 6,175 6,071 98.32 - 6,071 98.32

SPECIAL ASSESSMENT LEVIES AND COLLECTIONS

For years ended December 31, 2008 through December 31, 2017 (dollars expressed in thousands)

Current Year Collections Total Tax Collections Assessments Collections in Year Ended Certified to Percentage of Subsequent Percentage of December 31 1 County3 Amount Assessment Years Amount Assessment

2008 $ 30,871 $ 29,097 94.25 % $ 1,430 $ 30,527 98.89 % 2009 30,687 29,756 96.97 809 30,565 99.60 2010 33,314 30,934 92.86 2,103 33,037 99.17 2011 34,882 32,010 91.77 940 32,950 94.46 2012 33,088 29,296 88.54 1,612 30,908 93.41 2013 31,857 29,090 91.31 1,426 30,516 95.79 2014 29,982 27,839 92.85 864 28,703 95.73 2015 28,112 26,575 94.53 660 27,235 96.88 2016 26,819 25,341 94.49 - 25,341 94.49 2017 26,810 25,514 95.17 - 25,514 95.17

1The year shown is the year in which the collections were received. The levy or assessment is certified to the county the previous year.

2The amount reported as Taxes Levied is the estimated tax revenue from the certified budgets. Economic development tax increment financing districts collect all property taxes paid above the base year and do not have a district levy. As a result, collections may exceed the budgeted amounts.

3Special assessments of proprietary funds, advance payments and nuisance assessments are not included.

H-8 CITY OF WICHITA, KANSAS

GENERAL FUND BALANCE SHEET December 31, 2017 (with comparative figures for years ended December 31, 2014, 2015 and 2016)

2014 2015 2016 2017 ASSETS Cash $ 45,792,848 $ 47,728,144 $ 63,318,764 $ 67,562,171 Tangible property taxes receivable 70,782,960 71,848,618 73,444,021 76,170,644 Accounts receivable 2,942,194 2,423,655 2,574,419 2,580,467 Due from other funds 800,000 800,000 800,000 800,000 Inventories 78,312 76,435 53,100 45,649 Prepaid items 9,800 72,701 5,378 4,900 Total assets $ 120,406,114 $ 122,949,553 $ 140,195,682 $ 147,163,831

LIABILITIES AND FUND BALANCE Liabilities: Accounts payable and other liabilities $ 13,843,402 $ 14,922,152 $ 10,131,207 $ 14,110,502 Deposits 997,376 59,554 63,807 66,603 Due to other funds - - - - Deferred revenue 71,733,860 71,848,618 73,444,021 76,170,644

Total liabilities 86,574,638 86,830,324 83,639,035 90,347,749

Fund balance: Reserved for encumbrances - - - - Reserved for prepaid items - - - - Unreserved, designated - - - - Unreserved, undesignated - - - - Nonspendable 888,112 949,136 858,478 850,549 Committed - - 14,000,000 19,000,000 Assigned 5,384,494 6,346,582 5,249,137 3,703,977 Unassigned 27,858,870 28,823,511 36,449,032 33,261,556

Total fund balance 34,131,476 36,119,229 56,556,647 56,816,082

Total liabilities and fund balance $ 120,706,114 $ 122,949,553 $ 140,195,682 $ 147,163,831

H-9 CITY OF WICHITA, KANSAS

GENERAL FUND COMPARATIVE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY BASIS Years ended December 31, 2014, 2015, 2016 and 2017

Actuals 2014 2015 2016 2017 Revenues and other sources: Taxes $ 84,071,028 $ 84,780,653 $ 86,762,249 $ 88,246,688 Special assessments1 - - - - Franchise fees 41,863,247 44,304,262 44,766,245 45,563,488 Licenses and permits 2,504,438 2,317,736 2,649,957 2,818,831 Fines and penalties 9,850,624 9,751,773 9,120,404 8,270,546 Revenue from uses of money and property 2,129,515 2,375,230 2,347,885 2,335,423 Intergovernmental 16,302,277 16,580,270 16,953,856 17,201,970 Transfers from other funds 5,227,338 4,983,720 4,874,946 6,073,192 Charges for sales and services 8,060,216 17,759,344 18,342,146 16,430,349 Local sales tax 27,839,177 28,638,617 28,939,207 28,557,694 Other 14,603,702 7,394,099 29,735,418 13,635,231

Total revenues and other sources 212,451,562 218,885,704 244,492,313 229,133,412

Expenditures and other uses: Personal services 154,745,674 158,466,692 164,199,901 165,851,354 Contractual services 40,356,635 42,257,656 45,164,929 46,112,448 Materials and supplies 8,743,601 8,515,624 7,439,719 7,845,891 Capital outlay 80,174 1,032,376 236,482 127,204 Transfers to other funds 6,667,420 6,729,738 5,416,858 6,554,228 Other 272,901 857,951 499,563 805,036

Total expenditures and other uses 210,866,405 217,860,037 222,957,452 227,296,161

Revenues and other sources over expenditures and other uses 1,585,157 1,025,667 21,534,861 1,837,251

Unencumbered fund balance, January 1 25,339,974 26,925,131 27,950,798 49,485,659

Unencumbered fund balance, December 31 $ 26,925,131 $ 27,950,798 $ 49,485,659 $ 51,322,910

Mill Levy 24.114 24.177 24.177 24.156

1 Special Assessments from Weed Cutting, Lot Improvements, and Snow Removal.

H-10 CITY OF WICHITA, KANSAS

DEBT SERVICE FUND COMPARATIVE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY BASIS Years ended December 31, 2014, 2015, 2016 and 2017

Actuals 2014 2015 2016 2017 Revenues and other sources: Property taxes $ 25,884,330 $ 26,120,747 $ 26,418,493 $ 27,009,018 Special assessments 31,407,087 29,785,983 28,539,331 28,343,388 Motor vehicle tax 3,545,144 3,834,197 4,091,545 4,091,442 Local Sales Tax 159,088 385,803 432,276 302,529 Sale of property 82,197 18,972 - - Interest earnings 347,549 14,798 85,306 55,459 Premiums on bonds sold 146,419 487,220 2,684,593 59,989 Special obligation - STAR bonds 304,140 - - - Transfers from other funds 28,318,320 26,735,699 26,083,072 24,908,501 Issuance of refunding debt - - 13,357,447 - Other 732,925 348,778 1,370,043 6,866,150

Total revenues and other sources 90,927,199 87,732,197 103,062,106 91,636,476

Expenditures and other uses: Interest on general obligation bonds 6,250,891 9,230,263 8,013,845 7,184,431 Interest on special assessment bonds 7,818,064 7,595,411 7,048,294 6,604,854 Interest on HUD Section 108 loan - - - - Interest on STAR bonds 119,643 126,941 127,419 56,517 Retirement of general obligation bonds 25,174,716 29,920,239 30,722,056 37,597,766 Retirement of G.O. refunding bonds - - 8,570,470 - Retirement of special assessment bonds 22,285,000 21,631,849 20,131,281 19,707,216 Retirement of HUD Section 108 loan - - - - Retirement of STAR bonds - 117,175 228,420 282,516 Transfers to other funds - Retirement of temporary notes 25,251,527 42,240,774 16,731,304 20,188,689 Other 338,337 139,267 183,910 343,273

Total expenditures and other uses 87,238,178 111,001,919 91,756,999 91,965,262

Revenues and other sources over (under) expenditures and other uses 3,689,021 (23,269,722) 11,305,107 (328,786)

Unencumbered fund balance - as previously reported 30,249,054 33,938,075 10,668,353 21,973,460 Prior period adjustment - - - -

Unencumbered fund balance - beginning as restated 30,249,054 33,938,075 10,668,353 21,973,460

Unencumbered fund balance, December 31 $ 33,938,075 $ 10,668,353 $ 21,973,460 $ 21,644,674

Mill Levy 8.537 8.509 8.508 8.511

H-11 UNAUDITED CITY OF WICHITA, KANSAS

STATEMENT OF OUTSTANDING DEBT AS OF OCTOBER 15, 2018

Bonded debt - payable from property taxes $44,813,470 Series 821 $7,950,000 $52,763,470

Bonded debt - payable from other than property taxes 157,326,201 Series 822 $16,040,000 173,366,201

General obligation bonds payable from: Airport revenues 128,370,000 Freeway GO/LST 81,995,000 Storm Water Utility (SWU) 17,212,958 Tax increment financing (TIF) 15,422,371 Tax increment financing (TIF) - Series 821 1,445,000 Transient guest tax 2,475,000 Water Utility 115,850,000 362,770,329 Total general obligation debt 588,900,000 Bonded debt - revenue bonds - payable from revenue Water-Sewer Utility Revenue Bonds - 2009B 1,605,000 Water-Sewer Utility Revenue Bonds - 2010B 11,955,000 Water-Sewer Utility Refunding Revenue Bonds - 2011A 61,700,000 Water-Sewer Utility Revenue Bonds - 2012A 12,825,000 Water-Sewer Utility Refunding Revenue Bonds - 2014A 24,725,000 Water-Sewer Utility Revenue Bonds - 2014B 10,895,000 Water-Sewer Utility Refunding Revenue Bonds - 2015B 31,180,000 Water-Sewer Utility Revenue Bonds - 2015C 21,910,000 Water-Sewer Utility Refunding Revenue Bonds - 2015D 20,285,000 Water-Sewer Utility Revenue Bonds - 2016A 22,255,000 Water-Sewer Utility Refunding Revenue Bonds - 2016B 95,105,000 Water-Sewer Utility Revenue Bonds - 2017A 63,360,000 Water-Sewer Utility Refunding Revenue Bonds - 2017B 20,700,000 Sales Tax Special Obligation Revenue Bonds - 2017 2,813,290 Airport Facility Revenue Bonds 5,460,000 406,773,290 Gross City bonded debt 995,673,290 Less: Water-Sewer Utility Revenue Bonds - 2009B 1,605,000 Water-Sewer Utility Revenue Bonds - 2010B 11,955,000 Water-Sewer Utility Refunding Revenue Bonds - 2011A 61,700,000 Water-Sewer Utility Revenue Bonds - 2012A 12,825,000 Water-Sewer Utility Refunding Revenue Bonds - 2014A 24,725,000 Water-Sewer Utility Revenue Bonds - 2014B 10,895,000 Water-Sewer Utility Refunding Revenue Bonds - 2015B 31,180,000 Water-Sewer Utility Revenue Bonds - 2015C 21,910,000 Water-Sewer Utility Refunding Revenue Bonds - 2015D 20,285,000 Water-Sewer Utility Revenue Bonds - 2016A 22,255,000 Water-Sewer Utility Refunding Revenue Bonds - 2016B 95,105,000 Water-Sewer Utility Revenue Bonds - 2017A 63,360,000 Water-Sewer Utility Refunding Revenue Bonds - 2017B 20,700,000 Sales Tax Special Obligation Revenue Bonds - 2017 2,813,290 Airport Facility Revenue Bonds 5,460,000 406,773,290 General obligation temporary notes Internal Improvements - Series 290, Dated 4/13/18 65,000,000 Internal Improvements - Series 292, Dated 10/15/18 48,435,000 Internal Improvements - Series 294, Dated 10/15/18 3,630,000

Total Outstanding Debt $705,965,000

H-12 CITY OF WICHITA, KANSAS

STATEMENT OF LEGAL DEBT MARGIN AS OF OCTOBER 15, 2018

2017 taxable tangible valuation $3,365,220,341 2017 motor vehicle property assessed value 436,200,879 Equalized tangible valuation for computation of bonded indebtedness limitation $3,801,421,220

Debt limit1 $ 1,140,426,366

Bonded indebtedness 588,900,000 Temporary notes2 117,065,000 Total net debt 705,965,000

Less: Exemptions allowed by law3 Airport GO5 43,360,461 TIF 16,867,371 SA Refundings and Sewer Improvements 4 115,852,030 GO Refundings 18,952,042 Sales Tax Refundings 15,135,000 Storm Water Utility 17,212,958 Water Utility Improvements 115,850,000

Total deductions allowed by law 343,229,862

Legal debt applicable to debt limit 362,735,138 Legal debt margin $777,691,228

1 Kansas Statute 10-308 (30.0%) 2 Bond Anticipation Temporary Notes: Internal Improvements - Series 290 Dated 4/13/18 Due 4/13/19 $65,000,000 Internal Improvements - Series 292 Dated 10/15/18 Due 10/15/19 $48,435,000 Internal Improvements - Series 294 Dated 10/15/18 Due 4/15/19 $3,630,000

3 Kansas Statutes Annotated 10-307 and 10-308 4 Bonds and Notes issued for any improvement to the Sewer system, including those payable from Special Assessments. 5 Bonds and Notes issued under certain authority are exempt

H-13 UNAUDITED CITY OF WICHITA, KANSAS

STATEMENT OF DIRECT AND OVERLAPPING DEBT AS OF DECEMBER 31, 2015, 2016, 2017 AND OCTOBER 15, 2018

December 31, 2015 December 31, 2016 Percentage of City of Percentage of City of Debt Applicable Wichita Debt Applicable Wichita to City 1 Share of Debt to City 1 Share of Debt

Direct Debt: General obligation bonded debt, payable from: Ad valorem taxes $ 73,960,475 $ 58,251,131 Special assessments 181,733,151 167,574,036 Tax increment financing 22,830,000 20,751,857 Transient guest tax 2,485,000 2,485,000 Local sales tax 133,285,570 115,532,150 Premiums (discounts) 29,261,017 28,627,760 Capital lease 272,211 170,723

Total direct debt 443,827,424 393,392,657

Overlapping Debt: Sedgwick County 81.70% 184,548,980 81.60% 154,848,240 USD 259 59.70% 252,155,050 59.00% 235,926,250

Total overlapping debt 436,704,030 390,774,490

Total direct and overlapping debt $ 880,531,454 $ 784,167,147

1 Percentage of overlapping debt based on assessed valuation.

H-14 UNAUDITED

December 31, 2017 October 15, 2018 Percentage of City of Percentage of City of Debt Applicable Wichita Debt Applicable Wichita to City 1 Share of Debt to City 1 Share of Debt

$ 47,632,851 $ 52,763,470 172,706,820 173,366,201 18,022,371 16,867,371 2,480,000 2,475,000 96,275,000 81,995,000 29,770,288 26,252,136 64,219 -

366,951,549 353,719,178

81.30% 142,035,165 81.30% 133,397,040 58.50% 216,373,950 58.50% 200,631,600

358,409,115 334,028,640

$ 725,360,664 $ 687,747,818

H-15

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H-17 CITY OF WICHITA, KANSAS

ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY

For years ended December 31, 2008 through December 31, 2017 (dollars expressed in thousands)

Real Property Personal Property State Assessed Property

Assessed Estimated Assessed Estimated Assessed Estimated Year1 Value Actual Value Value Actual Value Value Actual Value

2008 $ 2,827,209 $ 19,506,118 $ 212,829 $ 871,131 $ 105,794 $ 320,589 2009 2,875,134 19,881,261 177,540 729,638 98,981 299,941 2010 2,904,055 20,011,382 147,887 612,183 98,206 297,594 2011 2,916,488 20,142,275 136,190 559,157 99,311 300,943 2012 2,889,209 19,908,386 125,492 518,004 96,872 293,550 2013 2,910,786 20,007,283 118,751 491,029 94,794 287,253 2014 2,963,148 20,364,338 93,990 404,245 91,126 276,140 2015 3,008,647 20,663,543 83,860 356,982 99,075 300,226 2016 3,091,273 21,259,793 76,025 324,973 102,892 311,793 2017 3,188,988 21,998,612 67,904 293,980 108,329 328,268

Totals Assessed Property Assessed Value as a Tangible Total Valuation Estimated Percent of Total Direct Valuation of for Bonded Debt Year Assessed Value Actual Value Actual Value Tax Rate2 Motor Vehicles Limitations

2008 $ 3,145,832 $ 20,697,838 15.20% 32.056 $ 401,805 $ 3,547,637 2009 3,151,655 20,910,840 15.07% 32.142 396,701 3,548,356 2010 3,150,148 20,921,159 15.06% 32.272 387,036 3,537,184 2011 3,151,989 21,002,375 15.01% 32.359 381,608 3,533,597 2012 3,111,573 20,719,940 15.02% 32.471 385,358 3,496,931 2013 3,124,331 20,785,565 15.03% 32.509 396,435 3,520,766 2014 3,148,264 21,044,723 14.96% 32.651 404,427 3,552,691 2015 3,191,582 21,320,751 14.97% 32.686 417,145 3,608,727 2016 3,270,190 21,896,559 14.93% 32.685 428,945 3,699,135 2017 3,365,221 22,620,860 14.88% 32.667 436,201 3,801,422

1The assessed value and tax rate of the referenced year supports the budget of the subsequent year. For example, the assessed value of 2015 multiplied by the tax rate supports the budget of fiscal 2016. Excludes valuation of motor vehicles.

2Direct tax rates are per $1,000 of actual value.

Source: Sedgwick County Clerk and Sedgwick County Appraiser

H-18

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H-19 changes to actuarial assumptions for the pension plans could have an impact on the General Fund in the future, beginning as soon as To facilitate long-term financial planning, a six-year Financial Plan is 2020. developed concurrent with the annual budget. This Financial Plan

examines the period from 2018 to 2023. The Adopted Budget pro- General Fund revenues have improved considerably from the most vides the backbone for the first three years of the Financial Plan recent recession. However, the General Fund revenue portfolio has (2018-2020). This work is then expanded outward for three more several weaknesses. One issue is that several revenues are based years (to 2023). on the 20th Century environment and technology. The sales tax

growth has been impacted by remote sales. Franchise fees in tele- In several respects, the Financial Plan is different than the Adopted communications are largely based on land-lines, and revenues Budget. While the Adopted Budget includes funding recommenda- have decreased 89% since 1999. Cable TV franchise fees are stag- tions, the Financial Plan takes the current policy direction and fore- nant, concurrent with the many alternatives to cable TV available casts the impact of those policies over a longer period of time. today. Even the gas tax and franchise fees for electricity can be im- Whereas the Adopted Budget is a very detailed plan, the Financial pacted by technological advancement. As vehicles continue to be Plan is far more conceptual. Finally, while the Adopted Budget is more fuel efficient, and as technological advances result in ever- created in conformance with State statutes, the Financial Plan is not increasingly more efficient cooling systems, lighting systems, appli- statutorily required, and does not include reserve amounts, which ances, consumption of gasoline and electric is affected. are included in Adopted Budget fund multi-year overviews for com-

pliance with State certification laws. Several revenues are largely weather dependent. This results in

volatility. Electricity franchise fees generally perform consistently, The primary purpose of the Financial Plan is to identify potential but there are fluctuations annually depending on summer weather. issues as early as possible and to address those challenges in a Water franchise fees also are highly variable dependent on the thoughtful and pragmatic manner. The City’s two taxing funds (the weather, particularly during the summer irrigation season. Finally, General Fund and Debt Service Fund) are presented in far more natural gas franchise fees are variable not only by the weather, but detail than are other funds. However, each of the City’s 26 other also by volatility in commodity prices. funds are also examined to provide a broad overview of circum-

stances, issues, and trends impacting revenues and expenditures. With economic conditions stabilized and improving, General Fund

revenues are expected to continue in the current low growth envi- The City also has other funds, such as agency funds and trust ronment. The City has a long history of controlling expenditure funds, which are not required to be budgeted by State statute, and growth; this continued diligence is expected to be even more im- which are not included in the Financial Plan. In some cases, specifi- portant in the future. Fortunately, the City has a long history of cally for Special Revenue funds that are largely pass-through funds, adapting to challenges and maintaining a balanced General Fund; the financial information is less detailed. However, for other funds, that continued adaptation to potential challenges will be required in the analysis begins with consideration of relevant legal conditions the future. that influence revenues and expenditures. Major one-time and on-

going shifts in revenues, expenditures, and fund balances are then The Debt Service Fund is expected to have less flexibility in the reviewed to help develop context for understanding the current and near future, as debt service requirements increase and fund projected status of each fund. Finally, strategies are frequently balances are spent on pay-as-you-go financing. recommended to improve or maintain the status of each fund. The Golf Fund remains challenged. Based on recommendations included in the 2019 Adopted Budget, the fund is expected to be stabilized, but with a much lower fund balance than is necessary. The City’s General Fund is forecasted to be balanced in 2018 and Challenges to this fund will remain, since industry demand has con- 2019. However, it is important to recognize the many challenges tinued to trend downward. In addition, limited or no capacity for the General Fund will face in the future. Over 73% of the General capital expenditures and reimbursements to the Debt Service Fund Fund is consumed by salary and benefit costs. These costs are in (incurred for previous capital improvements) is expected. turn driven largely by wage agreements, health insurance increases and pension rate contributions. The City has taken many steps to The Transit Fund has structural issues, and based on current mitigate the increase in health insurance cost; however, these costs operations, is not sustainable long-term. By 2022, the fund is pro- are projected to increase 8% annually. jected to be in a deficit position. However, the infusion of $1 million annually for the next four years in Hyatt sale proceeds, approved in The City has well-funded pension systems, due to the long-standing late in 2016, is designed to develop a route structure and review commitment to fully fund required annual contributions; however, operational practices to enhance the long-term viability of the fund. pension contributions are dependent on market returns and This viability is also dependent on the outlook for continued federal actuarial assumptions. The pension boards are currently reviewing funding support. the results of an experience study completed early in 2018. Any

2019-2020 Adopted Budget Wichita, Kansas

H-20 2014 2015 2016 2017 2018 GENERAL FUND ACTUAL ACTUAL ACTUAL ACTUAL REVISED

Budgeted Operating Revenues Property Taxes $73,242,447 $73,908,585 $75,174,948 $76,625,353 $78,109,874 Motor Vehicle Taxes 10,828,581 10,872,068 11,587,301 11,621,335 11,914,897 Local Sales Taxes 27,839,177 28,638,617 28,939,207 28,557,694 28,916,036 Motor Fuel Taxes 14,434,790 14,616,935 14,915,074 15,127,235 15,279,913 Liquor Taxes 1,867,487 1,963,335 2,038,782 2,074,735 2,120,720 Franchise Fees 41,863,247 44,304,262 44,766,245 45,563,488 47,008,775 Licenses and Permits 2,504,438 2,317,736 2,649,957 2,818,831 3,028,718 Charges for Services 8,060,216 15,890,254 18,342,146 16,430,349 18,200,806 Rental Income 2,129,515 2,375,230 2,347,885 2,335,423 2,285,221 Transfers In 5,227,338 4,983,720 4,874,946 6,073,192 5,966,222 Interest Earnings 846,114 1,475,455 1,980,147 3,782,188 4,500,000 Fines and Penalties 9,850,624 9,751,773 9,120,404 8,270,546 9,207,410 Administrative Charges 3,275,371 3,789,532 3,678,608 3,761,582 3,903,719 Reimbursements 10,482,217 3,998,202 4,074,032 6,091,461 5,485,921 Total Operating Revenues $212,451,562 $218,885,704 $224,489,682 $229,133,412 $235,928,232

Budgeted Operating Expenditures Wages 110,251,268 113,102,629 117,575,414 118,884,880 129,153,787 Health Insurance 19,262,356 20,419,072 21,620,036 22,313,232 26,041,007 Other Benefits 25,232,051 24,944,990 25,000,169 24,653,526 28,166,813 Contractuals 40,356,634 42,257,285 45,164,930 46,112,161 45,206,454 Commodities 8,743,602 8,515,995 7,439,719 7,845,893 8,454,344 Capital Outlay 80,174 1,032,377 236,481 127,204 184,630 Transfers 6,940,320 7,587,689 5,920,703 7,359,264 7,732,480 Shrinkage 0 0 0 0 (9,011,283) Total Operating Expenditures $210,866,405 $217,860,037 $222,957,452 $227,296,161 $235,928,232

Operating Margin $1,585,157 $1,025,667 $1,532,230 $1,837,251 $0

Unencumbered Fund Balance: January 1 $25,339,974 $26,925,131 $27,950,798 $29,485,659 $32,322,910 Liquidation of Hyatt reserve funds $0 $0 $0 $1,000,000 $0 December 31 $26,925,131 $27,950,798 $29,483,028 $32,322,910 $32,322,910 Percent of Expenditures 12.7% 12.8% 13.2% 14.2% 13.7%

Assessed Valuation $3,124,330 $3,148,264 $3,191,582 $3,270,189 $3,365,220 Increase In Assessed Valuation 0.4% 0.8% 1.4% 2.5% 2.9%

General Fund Mill Levy 24.003 24.114 24.177 24.117 24.156 Debt Service Fund Mill Levy 8.506 8.537 8.509 8.508 8.511 Total Mill Levy 32.509 32.651 32.686 32.625 32.667

Note: Amounts shown in thousands of dollars. Totals may not be exact due to rounding.

2019-2020 Adopted Budget Wichita, Kansas

H-21 2019 2020 2021 2022 2023 GENERAL FUND ADOPTED APPROVED PROJECTED PROJECTED PROJECTED

Budgeted Operating Revenues Property Taxes $84,303,187 $87,216,487 $90,064,587 $94,050,024 $97,169,797 Motor Vehicle Taxes 12,718,119 13,036,071 13,361,973 13,696,022 14,038,423 Local Sales Taxes 29,124,388 29,930,234 30,229,536 30,531,832 30,837,150 Motor Fuel Taxes 15,431,862 15,585,331 15,740,334 15,896,888 16,055,007 Liquor Taxes 2,205,548 2,293,770 2,362,583 2,433,461 2,506,464 Franchise Fees 47,661,298 48,819,707 50,027,159 51,278,529 52,561,297 Licenses and Permits 3,100,406 3,100,406 3,162,414 3,225,662 3,290,176 Charges for Services 18,381,972 18,215,678 18,494,432 18,778,641 19,068,413 Rental Income 2,362,321 2,362,321 2,409,567 2,457,759 2,506,914 Transfers In 5,591,719 5,803,147 5,973,877 6,150,647 6,333,675 Interest Earnings 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 Fines and Penalties 9,654,885 9,959,720 9,959,720 9,959,720 9,959,720 Administrative Charges 3,900,665 3,900,665 3,978,678 4,058,252 4,139,417 Reimbursements 5,276,958 5,312,302 5,456,352 5,604,458 5,756,736 Total Operating Revenues $244,213,328 $250,035,839 $255,721,213 $262,621,895 $268,723,187

Budgeted Operating Expenditures Wages 133,765,536 136,713,036 139,447,297 142,236,243 145,080,968 Health Insurance 28,014,890 30,256,081 32,676,568 35,290,693 38,113,949 Other Benefits 27,746,317 28,020,504 28,580,914 29,152,532 29,735,583 Contractual Expenditures 48,803,103 49,205,067 50,189,168 51,192,952 52,216,811 Commodities 8,307,598 8,266,618 8,349,284 8,432,777 8,517,105 Capital Outlay 147,500 147,500 148,975 150,465 151,969 Transfers 7,921,355 7,878,715 8,036,289 8,197,015 8,360,955 Shrinkage (10,492,969) (10,451,682) (10,660,716) (10,873,930) (11,091,409) Total Operating Expenditures $244,213,328 $250,035,839 $256,767,779 $263,778,747 $271,085,931

Operating Margin $0 $0 ($1,046,565) ($1,156,851) ($2,362,743)

Unencumbered Fund Balance: January 1 $32,322,910 $32,322,910 $32,322,910 $31,276,344 $30,119,492 Liquidation of Hyatt reserve funds $0 $0 $0 $0 $0 December 31 $32,322,910 $32,322,910 $31,276,344 $30,119,492 $27,756,749 Percent of Expenditures 13.2% 12.9% 12.2% 11.4% 10.2%

Assessed Valuation $3,482,010 $3,594,755 $3,709,881 $3,853,819 $3,984,861 Increase In Assessed Valuation 3.5% 3.2% 3.2% 3.9% 3.4%

General Fund Mill Levy 25.167 25.167 25.167 25.167 25.167 Debt Service Fund Mill Levy 7.500 7.500 7.500 7.500 7.500 Total Mill Levy 32.667 32.667 32.667 32.667 32.667

Note: Amounts shown in thousands of dollars. Totals may not be exact due to rounding.

2019-2020 Adopted Budget Wichita, Kansas

H-22

The General Fund is the principal fund of the City that accounts for 2018-2023 GENERAL FUND FORECAST SUMMARY all financial transactions not accounted for in other funds. The REVENUES, EXPENDITURES AND ENDING BALANCE General Fund is one of two “taxing” funds (the other is the Debt Ser- (Dollars in Millions)

vice Fund); property tax revenue accounts for approximately 35% of ENDING PERCENT YEAR REVENUE EXPENDITURES its revenues. The General Fund is authorized by KSA 79-1973. BALANCE* OF EXP.

The long-term General Fund forecast is based on a variety of 2023 268.7 271.1 27.8 10.2% assumptions and variables. The forecast is an attempt to model the 2022 262.6 263.8 30.1 11.4% potential impact of current policies into the future. No attempt is 2021 255.7 256.8 31.3 12.2% made to estimate additional expenditure savings from longer-term 2020 250.0 250.0 32.3 12.9% planned actions to continue streamlining the organizational structure. Likewise, any additional service demands that would result in 2019 244.2 244.2 32.3 13.2% additional expenditures are not included in the model. 2018 235.9 235.9 32.3 13.7% 2017 229.1 227.3 32.3 14.2% 2016 224.5 223.0 29.5 13.2% A variety of both qualitative and quantitative methods are used to 2015 218.9 217.9 27.9 12.8% estimate revenues for the General Fund. Wichita State University’s 2014 212.4 210.9 26.9 12.8% Center for Economic Development and Business Research provides data that is used for several revenue streams, primarily sales tax. In 2013 207.9 205.9 25.3 12.3% addition, a consensus approach is used in revenue streams that are 2012 206.7 206.5 23.3 11.3% specific to a department. In those cases, Finance staff will typically 2011 209.2 208.7 23.1 11.1% consult with departmental staff to develop a reasonable estimate of 2010 201.4 201.3 22.6 11.2% future revenues. 2009 198.6 198.6 22.5 11.3% For many other revenue items, qualitative professional judgment is 2008 197.7 198.3 22.5 11.3% often combined with quantitative methods, such as trend analysis 2007 188.2 188.2 23.0 12.2% and time-series forecasting. For many revenues, time-series analysis will provide a reasonable range, with judgment applied to 2006 178.2 178.0 23.0 13.0% develop the most appropriate estimate. For many of the major 2005 169.7 168.8 22.9 13.6% revenue sources noted below, time-series data is provided, along 2004 162.4 161.1 22.0 13.7% with additional details impacting the estimate. 2003 150.2 150.5 20.8 13.8%

2002 149.8 152.0 21.1 13.9% 2001 151.1 148.0 23.2 15.7% Reserve policies for the General Fund target a balance equal to 10% of expenditures as the minimum. Since 1992, the balance has * The balances shown does not include proceeds from the sale of the remained within this policy. The balance in the 2019 Adopted Hyatt hotel (which was recorded in 2016) that have been reserved by Budget would be 13.2%, which is within City Council policy. The the City Council for specific purposes. This reserved amount in- financial plan maintains a fund balance above 10% through 2019. cludes an additional $20 million in 2016 and $19 million in 2017 and Since 2008, the General Fund balance has risen from $22.5 million to $32.3 million, and the General Fund has operated with a These proceeds have been reserved for specific purposes by City budgetary surplus each year. Reserves, as a percentage of Council action and are not reflected the General Fund reserve expenditures, have increased from 11.3% in 2008 to 14.2% in 2017. levels shown above. All of these funds are expected to be trans-

ferred out of the General Fund balance by the end of 2018. The General Fund has an Economic Development subfund. For

budgetary purposes, this subfund is reported separately, and As shown in the graphic, the General Fund is projected to be struc- reserves in this subfund are not included in this discussion. The turally imbalanced beginning in 2021. If unchecked, this trend would fund balance in the Economic Development subfund totaled $2.2 erode fund balances during the planning period. Based on this million in 2017. Additionally, the City sold the Hyatt Hotel in down- scenario, the fund balance would fall to $27.8 million, or 10.2% of town Wichita in 2016. The proceeds of this sale ($20 million) have expenditures, by 2023. been recorded in the General Fund as a “special item.”

2019-2020 Adopted Budget Wichita, Kansas

H-23 The most important variable in forecasting the City’s financial posi- Overall, General Fund expenditures are forecasted to increase by tion in the future is wage growth. Total wage growth is comprised of 3.8% in 2018, 3.5% in 2019 and 2.4% in 2020. Generally, most of a number of variables, including increases in salaries, changes in the growth each year is for wage increases and health insurance pension and health insurance costs, and changes in staffing levels. costs. However, the higher growth in 2018 is driven by the shift of These increases can be offset by turnover, which usually reduces the call center (from the Water Utility), the new positons for the wage growth as long-tenured employees are replaced with Advanced Learning Library, and the implementation of Phase I of employees at beginning wage levels. the Police staffing plan. In 2019, the growth is due mostly to the shift of $4 million in street maintenance expenditures back from the Debt Prior to 2009, wage growth had been between 5% and 7% annually. Service Fund to the General Fund, and the annualization of the This growth flattened to around 1% annually from 2009-2013, as remaining costs of implementing the Police staffing plan. cost of living raises were suspended, several functions were out- Additionally, areas which will reduce the growth in 2019 include sourced, a number of General Fund positions were eliminated to savings from budget recommendations regarding libraries, align capacity with service demands and to restructure management economic development expenditures and the operation of the hierarchies, and positions were filled only after considerable study animal shelter. and review. Since 2013, growth has increased, as the City began filling positons in key service areas that had previously remained unfilled, and became much more successful at recruiting and filling commissioned positions. This has led to average growth of 2.7% Property tax revenues are the single largest component in the annually in salaries and benefits since 2013. General Fund revenue portfolio. Assessed valuation growth is anticipated to increase in the future, providing modest property tax In the 2019 Adopted Budget, wage growth and benefit growth is revenue increases. Sales tax revenue continues to be a concern, expected to average 3.6% annually. This higher than average and is projected to grow at a very slow rate. Interest earnings are growth is mostly due to the implementation of Phase I of the Police expected to increase, based on increases in short-term interest staffing plan and the shift of the Water Utility call center to the rates as a result of Federal Reserve action. Many General Fund General Fund. Generally, wage growth of 3% is forecasted in the revenue streams are increasing (although in many cases at long-term. This estimate is based on continuing benefit cost relatively low rates). increases, primarily for health insurance, modest wage adjustments for City staff, and a continued strategic evaluation process for filling vacant positions. Overall, General Fund revenues are projected to increase by 3.0% in 2018, 3.5% in 2019 and 2.4% in 2020. Property tax revenues are projected to grow, as assessed valuation continues to expand. Additionally, property tax revenue in 2019 will increase due to the 2018 –2020 shift of one mill from the Debt Service Fund to the General Fund. GENERAL FUND EXPENDITURE GROWTH COMPONENTS The majority of other growth each year is from gas tax, motor vehicle tax, and license revenues. (Dollars in Millions) ITEM 2018 2019 2020 2018 –2020 Base Wages 4.5 2.9 3.0 GENERAL FUND REVENUE GROWTH COMPONENTS Health Insurance 1.3 2.0 2.1 (Dollars in Millions) Police Staffing Plan 1.8 1.4 Pension Rates 1.1 (0.3) ITEM 2018 2019 2020 Call Center 1.3 Property Tax 1.5 6.2 2.9 Library Staffing 0.5 (0.1) (0.4) Interest Earnings 0.7 Animal Shelter (0.2) (0.2) Sales Tax 0.3 0.2 0.8 Economic Dev. Shift (0.7) Franchise Fees 1.4 0.6 1.2 Street Maintenance (4.0) 4.0 Fines and Penalties 0.9 0.4 0.3 Other 2.1 (0.5) 1.3 Other 2.0 0.9 0.6 Net Change 8.6 8.3 5.8 Net Change 6.8 8.3 5.8 Total Expenditures $235.9 $244.2 $250.0 Total Revenues $235.9 $244.2 $250.0 Percentage Increase 3.8% 3.5% 2.4% Percentage Increase 3.0% 3.5% 2.4%

2019-2020 Adopted Budget Wichita, Kansas

H-24 Property tax revenues are based on the assessed valuation of taxable property within the City limits. The appraised valuation is determined by the County Appraiser. The assessment percentage, as prescribed by the State Constitution, is applied to derive the assessed valuation. The assessed value is then multiplied by the tax rate, expressed in terms of “mills” per $1, to derive property tax revenue. Property taxes account for over one-third of the revenues to the General Fund.

Receipts are directly impacted by changes in assessed valuation. Based on the estimate provided by the County Clerk, growth of 3.5% is forecasted in 2018, with continued strength in new construction, as well as modest reappraisal growth. Growth of 3.1% to 3.2% New construction has typically been the largest component of is forecasted in the 2020-2023 timeframe. annual valuation growth. Even during the recessionary period of 2009-2013, new construction increased valuation by $260 million. Annual valuation growth has four different components. The valua- As economic conditions continue to improve, new construction is tion base for machinery and equipment is $68 million in 2018. This projected to contributed the largest portion of total valuation growth. is expected to continually erode, based on the legislative action in 2006 to exempt machinery and equipment from property taxation. The other primary component of valuation growth is reappraisal. Since 2006, this action has eroded the tax base by $209 million. From 2010 through 2014, reappraisal resulted in annual decreases Annexation can also impact valuation growth. This has had a fairly of approximately 1% each year. However, beginning in 2015 valua- insignificant impact in the last decade. No material valuation adjust- tion finally began to grow. Based on the lag often present between ments due to annexation are forecasted. economic improvement and valuation growth, reappraisal growth is expected to continue in the future. The State tax lid law limits the City’s ability to capture increased revenue from reappraisal exceed-

PROPERTY VALUATION COMPONENTS TOTAL VALUATION VALUATION GROWTH COMPONENTS (Dollars in Millions)

PERSONAL PROPERTY ANNEXATION IMPROVEMENTS REAPPRAISAL YEAR AMOUNT GROWTH AMOUNT GROWTH AMOUNT GROWTH AMOUNT GROWTH AMOUNT GROWTH 2023 $3,985 3.4% $(5) -0.1% $0 0.0% $78 1.9% $58 1.6% 2022 $3,854 3.3% $(6) -0.2% $0 0.0% $91 2.4% $59 1.6% 2021 $3,710 3.2% $(7) -0.2% $0 0.0% $64 1.8% $58 1.6% 2020 $3,595 3.2% $(9) -0.2% $0 0.0% $66 1.9% $56 1.6% 2019 $3,482 3.5% $(10) -0.3% $0 0.0% $71 2.1% $56 1.7% 2018 $3,365 2.9% $(8) -0.3% $0 0.0% $55 1.6% $48 1.5% 2017 $3,270 2.5% $(8) -0.3% $0 0.0% $46 1.3% $40 1.3% 2016 $3,192 1.4% $(13) -0.4% $1 0.0% $45 1.4% $12 0.4% 2015 $3,148 0.8% $(21) -0.6% $0 0.0% $45 1.4% $0 0.0% 2014 $3,124 0.4% $(13) -0.4% $0 0.0% $35 1.2% $(9) -0.3% 2013 $3,111 -1.3% $(7) -0.2% $0 0.0% $32 1.0% $(66) -2.1% 2012 $3,152 0.0% $(8) -0.3% $0 0.0% $33 1.0% $(23) -0.7% 2011 $3,150 0.0% $(33) -1.0% $1 0.0% $39 1.2% $(8) -0.3% 2010 $3,151 0.2% $(35) -1.1% $1 0.0% $71 2.3% $(32) -1.0% 2009 $3,146 5.1% $(31) -1.0% $13 0.4% $85 2.8% $87 2.9% 2008 $2,992 5.6% $(31) -1.1% $0 0.0% $85 3.0% $105 3.7% 2007 $2,833 6.2% $(1) 0.0% $8 0.3% $87 3.3% $71 2.7%

2019-2020 Adopted Budget Wichita, Kansas

H-25 ing a calculated CPI amount each year. For example, the CPI for Water and Sewer franchise fees are based on estimated utility rate 2019 is 1.4%. However, since there are several expenditure catego- increases through the planning period. These estimates are based ries exempted from the tax limit, the City will be well within the tax on the Cost of Service Analysis (COSA) that has been presented to lid in 2019. In future years, the tax lid could limit the ability of the the City Council annually. AT&T (formerly SBC) franchise fees are City to respond to non-public safety demands for increased service based on a fixed rate per line. The number of lines has constantly levels. decreased in recent years with the proliferation of non-land line communications. The result has been declining franchise fees. This Actual property tax revenues are based on valuation multiplied by is offset partially by stability in video franchise fees from AT&T. the mill levy. Although the total City of Wichita mill levy has essen- Overall, AT&T franchise fees are expected to decline throughout the tially been unchanged for 25 years, the levy for the General Fund planning period. has fluctuated recently. Beginning in 2009, the City began shifting a portion of the levy from the Debt Service Fund to the General Fund. This increased General Fund property tax revenues. Beginning in 2013, this trend was reversed. In both 2013 and 2014, 0.5 mills were shifted back to the Debt Service Fund. The mill levy shift, cou- pled with the low projected property valuation growth, resulted in declining General Fund property tax revenues in 2013 and 2014. This was mostly offset by higher property tax revenues for the Debt Service Fund during 2013 and 2014.

Cable TV franchise fees had been relatively flat in recent years. Technology advances have created increased competition for Cable TV providers, which has led to static City franchise fee collections. Cable TV franchise fee revenues for the City actually peaked in 2015. The forecast assumes no growth in this revenue stream from the 2017 base.

Beginning in 2015, General Fund property tax revenues began This tax is based on KSA 79-5101 et seq., which provides for 20 increasing, as valuation growth occurred. In 2019, property tax classes in which all vehicles are valued. The taxable value of the revenue in the General Fund is projected to increase by 7.9%. This vehicles is defined as 20% of the class value. Revenues are driven reflects the additional revenue due to the shift of 1 mill from the primarily from valuation, which in turn is based on the level and type Debt Service Fund in 2019. of vehicle sales.

Franchise fee revenue is based on agreements between the City and utility providers. Generally, the agreements provide long-term access to City easements in exchange for a portion of gross revenues and other considerations. Franchise fees are expected to grow by 3.2% in 2018, 1.4% in 2019, and 2.4% in 2020.

Forecasting franchise fees is complicated by several significant factors affecting utility gross revenues: weather conditions, economic activity, rate setting approvals, and the price of natural gas. Increased natural gas franchise fees are expected in 2018, based on the relatively cold winter of 2017-2018. However, longer term natural gas franchise fees are budgeted at a more conservative Motor vehicle tax receipts have historically grown at over 3% level. Electric franchise fees are significantly impacted by the annually. However, revenues tend to be economically sensitive. In weather, particularly during the summer months. Long-term growth addition, motor vehicle tax receipts are allocated among the City’s of 3% annually is expected in the future.

2019-2020 Adopted Budget Wichita, Kansas

H-26 two taxing funds based on the level of taxies levied. Organic growth is based on the taxing efforts of the 19 cities within Sedgwick in motor vehicle tax revenues is expected to be 2.5% annually. County, as well as the County itself. Any significant changes in However, with the shift of 1 mill from the Debt Service Fund to the taxing efforts in these jurisdictions could impact the City’s sales tax General Fund in 2019, motor vehicle tax revenue in 2019 is receipts. expected to grow a total of 6.7% in 2019.

The City receives state-shared revenue from three sources Sales tax revenues are generated by the City’s share of the county- currently: state motor fuel taxes, state liquor taxes, and KLINK and wide one-cent sales tax. This sales tax is the result of a referendum LINK payments. State motor fuel tax collections are based on approved by Sedgwick County voters in 1985. One cent is collected wholesale gallons sold, not the value or price of the gallons sold. county-wide, of which the City receives approximately 58.0%. The Since 2000, the number of gallons of fuel consumed in Kansas has City does not levy a City-wide sales tax. In 2017, $99.5 million was been relatively static at approximately 1.7 billion annually. The tax distributed to Sedgwick County, of which the City received $57.6 rates have also been unchanged since 2003 (rates increased from million. Of the sales tax received by the City, one-half is credited to 20 cents per gallon of gasoline in 2000, 21 cents in 2001, 23 cents the General Fund and one-half to the Sales Tax Construction in 2002, and to the current 24 cents in 2003). The state distribution Pledge Fund. This is consistent with pledges made in 1985. formula for the motor fuel tax was adjusted from 2001 to 2003, largely offsetting any benefit to City revenues from the increased tax Sales tax receipts generally have a degree of economic sensitively. rate. Since 2003, the distribution formula has remained unchanged. During recessionary periods, revenues tend to remain flat or decline slightly. In addition, fluctuations in growth can occur due to timing differences in the State distribution methodology of sales taxes collected. Longer term, sales tax revenues have grown at approximately 2.7% per year. However, beginning in the third quarter of 2016, sales tax revenue began to slow, with total growth in 2016 only 1.0%. This trend was consistent to trends at the State of Kansas. In 2017, sales tax revenue for the General Fund declined by 1.3%. The track record of sales tax receipts over the past several years is believed to be due to the significant increase in remote retail transactions—many of which are not taxed.

Based on recent trends and the expected continued erosion caused by online retailing, projected growth rates for sales tax revenues are only expected to be 1.3% in 2018 and 0.7% in 2019. However, based on the recent Supreme Court decision and the potential for Of total state motor fuel tax receipts, 33.63% is allocated for cities increased collections from remote sales in the future, the estimate and counties. Of that amount, 57% is provided to counties, and 43% for 2020 is based on a growth rate of 2.8%, closer to historic is provided to cities. The amount for cities is allocated based on the norms. ratio of city population to total population of all cities in the state. The county distributions are made with $5,000 going to each county, in addition to a proportional distribution based on motor vehicle registration fees, daily vehicle miles traveled, and total road miles. Of the amount received by Sedgwick County, 50% is distributed to the 19 cities in Sedgwick County based on population.

Motor fuel tax revenues reached $15.7 million in 2007, and has decreased since. The decrease in 2009 was largely due to action by the State Legislature that effectively reduced motor fuel tax receipts for the City of Wichita by approximately $1 million. With the moderate cost of fuel and increased economic activity, gas tax receipts have begun to increase slightly over the past several years. Growth of 1% is estimated in the 2019 Adopted Budget.

State liquor tax receipts are based on KSA 79-41a04. Per statute, Projected sales tax collections could be impacted by any legislative 70% of the liquor excise taxes collected in Wichita are redistributed changes made to the statutory exemptions from sales taxes. In to the City. One-third of the redistributed amount is credited to the addition, unanticipated changes in economic activity could City’s General Fund, with equal thirds credited to the Special negatively impact sales tax collections. Finally, the distribution ratio Alcohol Fund and the Special Park and Recreation Fund. Liquor tax

2019-2020 Adopted Budget Wichita, Kansas

H-27 receipts have historically grown around 5% each year, and tend to be counter-cyclical, as well as relatively volatile. Since 2012, Revenues from this source are based mostly on the cost allocation revenues have grown relatively consistently and with less volatility. plan performed annually by an outside consultant. This plan, Annual growth of 4% is budgeted in the 2019 Adopted Budget. required under OMB Circular A-87, allocates overhead costs of

administrative services to other funds in order to facilitate full cost accounting. The charges are reviewed annually and updated or Revenues are generated from two sources: the collection of Court changed as necessary, based on the cost allocation plan. Based on assessed fines and penalties and the collection of Library fines and the cost allocation plan completed for 2017, the revenues in 2019 fees. Court revenues can vary considerably, depending on enforce- are projected to be $3.9 million. ment activity, judicial disposition of cases, participation of defendants in diversion programs, and the collection rate of court ordered assessments. Transfers to the General Fund are typically made to reimburse the

General Fund for support provided to other services or to facilitate Court revenues totaled $8 million in 2017. However, with the crea- full cost accounting. Transfers generally fall into four categories: tion of a new centralized traffic bureau within the Police Department transfers from the Special Park and Recreation Fund to offset and an enhanced strategic effort to lower traffic fatalities and General Fund recreation costs; transfers from the Convention and crashes, Court revenues are expected to increase. A total of $9.3 Tourism Fund to offset losses at the City’s convention center; trans- million is budgeted beginning in 2018. fers from the Landfill Post Closure Fund, based on the diminishment

of the post closure liability; and other miscellaneous transfers.

City ordinances require licenses and permits for a variety of activities. Generally, these revenues fall into four categories: dog This revenue stream is largely dependent upon market rates for licenses, alarm system licenses and fees, curb cut permits, and all investments that are permitted under the City’s Investment Policy, other permits and licenses. Over the years, most of the fluctuations as well as the size of the pool of investment funds. The Federal have occurred in alarm fees and curb cut permits. Revenues are Reserve has raised rates over the past 18 months, which has expected to be $3.1 million in 2019, compared to $2.8 million col- significantly improved the City’s interest earnings. A total of $3.8 lected in 2017. Additional growth is likely in the future, as staff con- million is budgeted in 2018, increasing to $4.5 million in 2019 and tinue to examine City costs related to licensed activity, to ensure 2020. that rates are set equitably and in order to recover City costs.

The City leases a variety of real estate, including office space, Revenue from this source is derived from a number of services pro- garage space, and athletic fields. The majority of the rental income vided for a fee to citizens, as well as fees charged to City enterprise is derived from two sources: rental payments from vendors at funds. Fluctuations in this revenue source are primarily from partici- Century II and Expo Hall; and rentals offered by the Park and pation in recreation programs, changes in program fees, changes in Recreation Department (typically shelters, recreation center rooms the calculations of engineering overhead, and the number of pave- and athletic fields). These revenues are expected to be relatively ment cuts required each year. Revenues are projected to reach stable at $2.3 million. $18.4 million in 2019, with modest annual increases projected each

year.

Engineering overhead is based on prior year expenditures for engi- As the name implies, reimbursement receipts are intended to neering services related to CIP activities; hence, fluctuations in this reimburse the General Fund for activities provided for non-General source are directly related to fluctuations in expenditures. Likewise, Fund or external services. A significant reimbursement is received curb cut revenue is directly related to expenditures incurred by Pub- from the Wichita Public Schools (USD 259) for their share of the lic Works & Utilities Engineering to perform the curb cuts. This cost of Police School Resource Officer positions based on a revenue tends to fluctuate based on service demands. Memorandum of Agreement. This revenue is expected to total $449,920 in 2019, a reimbursement of 50% of the costs of seven Public safety charges are assessed to each enterprise fund opera- SRO positions. Additionally, $2.1 million is included in tion and are calculated to reimburse the General Fund for the reimbursements for positions. Other reimbursement amounts are for equivalent cost of providing public safety service to each operation. a variety of purposes and most are relatively small. Total The fees are recalculated annually based on the cost of providing reimbursement revenue is projected to be $5.3 million in 2019. public safety services in the General Fund and the valuation of each proprietary fund. For 2019, these fees are budgeted to generate $8.1 million in revenue.

2019-2020 Adopted Budget Wichita, Kansas

H-28 CITY OF WICHITA, KANSAS

RECENT GENERAL OBLIGATION BOND SALES NET COUPON INTEREST SERIES DATE OF RATE RATE NO. AMOUNT BONDS MATURITY (PERCENT) (PERCENT) 778A 565,000 08/01/04 1 to 20 yrs. 4, 4.5, 4.1, 4.2, 4.25, 4.375, 4.4, 4.5, 4.7, 4.75 4.4388

782A 1,610,000 08/01/05 1 to 20 yrs. 4, 4.25 4.1471

786A 920,000 08/01/06 1 to 20 yrs. 5.75, 5.5, 5.0, 4.5, 4.3, 4.35, 4.4, 4.45, 4.55, 4.6, 4.65, 4.7, 4.75, 4.8, 4.85 4.6861

788A 4,985,000 02/01/07 1 to 20 yrs. 4, 4.1, 4.2, 4.25, 4.625 4.2567

790A 2,575,000 08/01/07 1 to 20 yrs. 4, 4.375, 4.5, 4.6, 4.625, 4.65, 4.7, 4.75 4.5589

792A 3,390,000 02/01/08 1 to 20 yrs. 3.5, 3.75, 4, 4.1, 4.2, 4.25, 4.3, 4.35, 4.4 4.1075

794A 3,970,000 08/01/08 1 to 20 yrs. 3.25, 3.5, 3.75, 4.0, 4.125, 4.250, 4.375 4.1670

796A 9,390,000 02/01/09 1 to 20 yrs. 3.0, 3.5, 3.75, 4.0, 4.2, 4.3, 4.375, 4.5 4.0466

798A 7,650,000 08/01/09 1 to 20 yrs. 2.25, 2.5, 2.75, 3.0, 3.25, 3.5, 4.0, 4.125, 4.2, 4.25 3.7989

800A 13,125,000 03/01/10 1 to 20 yrs. 2.25, 2.5, 2.75, 3.0, 3.25, 3.5, 4.0, 4.125, 4.2, 4.25 3.5655 800B 1,630,000 03/01/10 1 to 20 yrs. 2.0, 2.25, 2.625, 2.875, 3.125, 3.25, 3.375, 3.5, 4.0 4.9945

802 6,085,000 08/01/10 1 to 15 yrs. 2.0, 2.5, 3.0, 3.125, 3.3, 3.4, 3.5 2.7891 802A 5,870,000 08/01/10 1 to 20 yrs. 2.20, 3.0, 3.125, 3.375, 3.5, 4.0 3.2914 802B 1,260,000 08/01/10 1 to 20 yrs. 3.25, 3.5, 3.75, 4.0, 4.25, 4.5, 4.6, 4.75, 4.9, 5.0, 5.15 4.5431 5.3, 5.4, 5.5, 5.6, 5.7

2010A-Refund. 21,420,000 09/15/10 1 to 8 yrs. 2.0, 2.25, 2.375, 3.0 1.7046

804 1,965,000 02/01/11 1 to 15 yrs. 2.5, 2.7, 3.0, 3.2, 3.4, 3.7, 4.0, 4.1, 4.15, 4.25 3.5522 2011A-Airport 5,715,000 02/01/11 1 to 30 yrs. 2.5, 3.0, 2.5, 3.5, 4.0, 4.125, 4.25, 4.4, 4.5, 4.6, 4.625, 5.0 4.6429 2011B-Airport 11,365,000 02/01/11 1 to 30 yrs. 1.2, 4.0, 4.25, 4.5, 4.75, 5.25, 5.0, 5.1, 5.2, 5.25, 5.3, 5.35, 5.4, 5.45, 5.5, 5.6 5.2599

806 3,480,000 08/01/11 1 to 20 yrs. 2.0, 2.25, 2.50, 2.75, 3.0, 3.25, 3.50, 3.75, 4.0 3.1136

2011C 22,585,000 09/15/11 1 to 8 yrs. 2.0, 3.0, 4.0, 5.0 1.1323

2011D 11,365,000 02/01/11 1 to 9 yrs. 3.0, 4.0, 5.0 1.6509 2011A 5,715,000 02/01/11 1 to 30 yrs. 2.5, 3.0, 3.5, 4.0, 4.125, 4.25, 4.4, 4.5, 4.6, 5.0 4.5640

803 19,265,000 02/01/12 1 to 15 yrs. 2.0, 2.25, 2.50, 3.0 2.0228 808 5,615,000 02/01/12 1 to 20 yrs. 2.0, 2.50, 3.0, 3.25 2.2766

805 11,365,000 08/01/12 1 to 15 yrs. 2.0, 3.0, 4.0 1.8297 961 1,610,000 08/01/12 1 to 11 yrs. 1.5, 1.7, 1.95, 2.25, 2.55, 2.7 2.0719 810 2,275,000 08/01/12 1 to 20 yrs. 2.0, 3.0, 3.125 2.5986

2012A-Refund. 21,250,000 11/01/12 1 to 9 yrs. 3.0, 4.0, 5.0 1.3859 2012B-Refund. 2,850,000 11/01/12 1 to 8 yrs. 1.0, 1.05, 1.25, 1.50, 1.75, 2.05, 2.25 1.6813 2012C-Refund. 4,360,000 11/01/12 1 to 8 yrs. 2.0, 3.0 1.3928 2012D-Sales Tax 17,700,000 11/01/12 1 to 15 yrs. 2.0, 2.125, 2.25, 2.5, 3.0 1.9765 2012E-S-Tax Ref. 22,865,000 11/01/12 1 to 8 yrs. 4.0, 5.0 1.3357

807 9,450,000 02/01/13 1 to 10 yrs. 2.0 1.3755 812 3,375,000 02/01/13 1 to 20 yrs. 2.0, 3.0, 4.0 2.3176

809 3,550,000 02/01/14 1 to 10 yrs. 2.0, 3.0 2.1633 809A 4,720,000 02/01/14 1 to 15 yrs. 1.0, 2.0, 3.0, 2.6, 2.8, 3.2, 3.5, 3.7, 3.75, 4.0, 4.125, 4.375 3.6092 2014A-Airport 8,010,000 02/01/14 1 to 30 yrs. 3.0, 4.0, 3.1, 3.25, 3.375, 3.5, 3.625, 3.7, 3.8, 4.125, 4.2, 4.25, 4.3 3.9041

H-29 CITY OF WICHITA, KANSAS

RECENT GENERAL OBLIGATION BOND SALES NET COUPON INTEREST SERIES DATE OF RATE RATE NO. AMOUNT BONDS MATURITY (PERCENT) (PERCENT) 2014-Sales Tax 64,785,000 09/01/14 1 to 15 yrs. 5.0, 3.0, 3.5 2.6286

811 143,995,000 10/01/14 1 to 20 yrs. 4.0, 5.0, 3.0, 3.75 3.0897 813 8,090,000 10/01/14 1 to 15 yrs. 2.0, 2.5, 3.0, 3.05, 3.2, 3.35, 3.5, 3.65, 3.75, 3.85 3.1366 814 10,610,000 10/01/14 1 to 20 yrs. 5.0, 2.25, 2.375, 2.625, 2.75, 2.875, 3.0, 3.125, 3.2, 3.25, 3.3, 3.375 2.7549 962 6,890,000 10/01/14 1 to 10 yrs. 2.0, 3.0 1.9647

2015A-Refund. 49,130,000 04/01/15 1 to 10 yrs. 5.0, 2.0 1.6862

2015A-Airport 18,235,000 06/01/15 1 to 30 yrs. 3.0, 5.0, 3.5, 3.75, 4.0 3.7565 2015B-Airport 8,685,000 06/01/15 1 to 30 yrs. 3.0, 4.0, 3.375, 3.5, 3.625 4.0600 2015C-Airport 67,615,000 06/01/15 1 to 30 yrs. 4.0, 5.0, 4.25 4.3579

815 2,835,000 10/01/15 1 to 15 yrs. 2.0, 2.25, 2.5, 3.0, 3.1, 3.4, 3.7 3.2347 816 10,145,000 10/01/15 1 to 20 yrs. 2.0, 3.0, 5.0, 3.125, 3.2, 3.25, 3.375 2.7509

817 3,670,000 10/01/16 1 to 15 yrs. 2.0, 3.0, 2.125, 2.25, 2.375 1.8636 818 6,465,000 10/01/16 1 to 20 yrs. 4.0. 5.0. 2.25. 2.375. 2.5. 2.625. 2.75 2.3600 819 3,560,000 10/01/16 1 to 10 yrs. 3.0, 2.0, 2.1 1.8311 2016A-Refund. 14,335,000 10/01/16 1 to 9 yrs. 5.0, 1.5, 4.0 1.3558

2017A-Airport 10,555,000 04/01/17 1 to 30 yrs. 5.0, 4.0, 3.0, 3.125, 3.25, 3.375, 3.5, 3.625, 3.75 3.6440 2017B-Airport 7,180,000 04/01/17 1 to 30 yrs. 5.0, 3.125, 3.375, 3.5, 3.625, 3.75, 4.0 3.9065

820 11,330,000 10/01/17 1 to 20 yrs. 5.0, 4.0, 3.0 2.5402

2017A-Refund. 19,995,000 12/01/17 1 to 13 yrs. 5.0 2.5586

H-30

CITY OF WICHITA, KANSAS • SALES TAX SPECIAL OBLIGATION REVENUE BONDS (RIVER DISTRICT STADIUM STAR BOND PROJECT), SERIES 2018